Hubei Sanonda Co., Ltd. 2013 Annual Report

2013 Annual Report of Hubei Sanonda Co., Ltd.

March 2014

1 2013 Annual Report of Hubei Sanonda Co., Ltd.

Catalogue

2013 Annual Report ......

Section I. Important Reminders, Catalogue & Explanation ...... 3

Section II. Company Profile ...... 5

Section III. Accouonting & Business Highlights ...... 7

Section IV. Report of the Board of Directors ...... 9

Section V. Significant Events ...... 29

Section VI. Change in Shares & Shareholders ...... 44

Section VII. Directors, Supervisors, Senior Management Staff & Employees ...... 52

Section VIII. Corporate Governance ...... 59

Section IX. Internal Control ...... 67

Section X. Financial Report ...... 69

Section XI. Documents Available for Reference ...... 185

2 2013 Annual Report of Hubei Sanonda Co., Ltd.

Section I. Important Reminders, Catalogue & Explanation

The Board of Directors, the Supervisory Committee, as well as all directors, supervisors and senior management staff of Hubei Sanonda Co., Ltd. (hereinafter referred to as “the Company”) warrant that this report is factual, accurate and complete without any false record, misleading statement or material omission. And they shall be jointly and severally liable for that. All directors attended the board session for reviewing this report. The Company’s profit distribution preplan upon review and approval of this board session: Based on the total shares of the Company as at 31 Dec. 2013, a cash dividend of RMB 0.50 (tax included) will be distributed for every 10 shares held by shareholders. No bonus shares will be granted and no capital reserve will be turned into share capital. Mr. Li Zuorong, person in charge of the Company, Mr. He Xuesong, person in charge of the accounting work and the accounting organization (chief of accounting), hereby confirm that the Financial Report enclosed in this report is factual, accurate and complete. Please note that the future development strategies, the work plan for 2014 and possible risks in the future are described in “Section IV. Report of the Board of Directors”—“Outlook of the Company’s future development”. The media designated for information disclosure in 2013 were China Securities Journal, Securities Times, Ta Kung Pao (HK) and www.cninfo.com.cn. And all information about the Company shall be subject to the information disclosed by the Company on the aforesaid designated media. Investors are kindly reminded to pay attention to possible investment risks. This report is prepared in both Chinese and English. Should there be any discrepancy between the two versions, the Chinese version shall prevail.

3 2013 Annual Report of Hubei Sanonda Co., Ltd.

Explanation

Refers Term Contents to

Company, the Company Refers Hubei Sanonda Co., Ltd. to

Refers CSRC Hubei The Hubei bureau of China Securities Regulatory Commission to

Refers CSRC China Securities Regulatory Commission to

Refers SSE Shenzhen Stock Exchange to

Refers Reporting period, this period, current year Year 2013 to

Refers China National Agrochemical Corporation (holding 100% equity of CNAC to Sanonda Group, the Company’s controlling shareholder)

Refers MAI Makhteshim-Agan Industries Ltd.——a subsidiary controlled by CNAC to

4 2013 Annual Report of Hubei Sanonda Co., Ltd.

Section II. Company Profile

I. Basic information of the Company

Stock abbreviation SLDA, SLDB Stock code 000553, 200553

Stock exchange listed with Shenzhen Stock Exchange

Chinese name of the Company 湖北沙隆达股份有限公司

Abbr. of the Chinese name of 沙隆达 the Company

English name of the Company HUBEI SANONDA CO., LTD. (if any)

Abbr. of the English name of SANONDA the Company (if any)

Legal representative of the Li Zuorong Company

Registered address No. 93, Beijing East Road, Jingzhou, Hubei

Postal code for the registered 434000 address

Office address No. 93, Beijing East Road, Jingzhou, Hubei

Postal code for the office 434000 address

Internet website of the http://www.sanonda.cn Company

Email address sld@agr.chemchina.com

II. Contact us

Company Secretary Securities Affairs Representative

Name Li Zhongxi Liang Jiqin

No. 93, Beijing East Road, Jingzhou, No. 93, Beijing East Road, Jingzhou, Contact address Hubei Hubei

Tel. 0716-8208632 0716-8208232

Fax 0716-8321099 0716-8321099

E-mail [email protected] [email protected]

5 2013 Annual Report of Hubei Sanonda Co., Ltd.

III. About information disclosure and where this report is placed

Newspapers designated by the Company for China Securities Journal, Securities Times, and Ta Kung Pao information disclosure

Internet website designated by CSRC for http://www.cninfo.com.cn disclosing this report

Where this report is placed Office of the Company

IV. Change of the registered information

Registration code of Registration date Registration place Business license No. Organizational code taxation

Hubei Administration for Initial registration 30 Nov. 1993 420000400004491 421001706962287 70696228-7 Industry & Commerce

At the end of the 23 May 2013 Unchanged Unchanged Unchanged Unchanged reporting period

Changes of the main business since listing Unchanged (if any)

Changes of the controlling shareholder (if Unchanged any)

V. Other information

The CPAs firm hired by the Company:

Name Ruihua Certified Public Accountants (LLP)

5-11F, West Tower, China Overseas Property Plaza, Building No. 7, Compound No. 8, Xibinhe Office address Road, Yongding Men, Dongcheng District, Beijing, P.R.C.

Signing accountants Hao Guomin, Kuang Xiaochang

Sponsor engaged by the Company to conduct sustained supervision during the reporting period □ Applicable √ Inapplicable Financial consultant engaged by the Company to conduct sustained supervision during the reporting period □ Applicable √ Inapplicable

6 2013 Annual Report of Hubei Sanonda Co., Ltd.

Section III. Accounting & Business Highlights

I. Major accounting data and financial indicators

Does the Company adjust retrospectively or restate accounting data of previous years due to change of the accounting policy or correction of any accounting error? □ Yes √ No

Increase or decrease of 2013 2012 this year over last year 2011 (%)

Operating revenue (RMB Yuan) 3,078,467,310.53 2,345,146,528.97 31.27% 1,901,075,791.57

Net profit attributable to shareholders of the Company 320,811,958.67 103,768,969.35 209.16% 52,863,980.46 (RMB Yuan) Net profit attributable to shareholders of the Company after 326,183,175.01 106,185,400.70 207.18% 50,567,266.69 extraordinary gains and losses (RMB Yuan) Net cash flows from operating 799,701,589.04 233,590,424.82 242.35% 175,416,106.94 activities (RMB Yuan)

Basic EPS (RMB Yuan/share) 0.5402 0.1747 209.22% 0.089

Diluted EPS (RMB Yuan/share) 0.5402 0.1747 209.22% 0.089

Weighted average ROE (%) 22.88% 8.62% 14.26% 4.67%

Increase or decrease of As at 31 Dec. 2013 As at 31 Dec. 2012 this year-end than last As at 31 Dec. 2011 year-end (%)

Total assets (RMB Yuan) 2,708,271,174.34 2,405,494,385.09 12.59% 2,292,650,234.81

Net assets attributable to shareholders of the Company 1,546,189,571.66 1,255,536,761.52 23.15% 1,156,347,732.27 (RMB Yuan)

II. Items and amounts of extraordinary gains and losses

Unit: RMB Yuan

Item 2013 2012 2011 Note

Gain/loss on the disposal of non-current assets (including the offset part of the asset -10,822,583.41 -3,329,557.24 561,890.24 impairment provisions)

Government grants recognized in the current 3,270,500.35 3,650,934.78 3,053,885.18

7 2013 Annual Report of Hubei Sanonda Co., Ltd. period, except for those acquired in the ordinary course of business or granted at certain quotas or amounts according to the government’s unified standards

Gain/loss on debt restructuring -152,001.61 -694,017.10

Current net gains and losses of subsidiaries acquired in business combination under the -10,395.14 same control from period-begin to combination date

Non-operating income and expense other 497,140.96 -2,834,030.14 -448,237.69 than the above

Less: Income tax effects -1,801,735.93 -801,667.43 791,884.43

Minority interests effects (after tax) -33,991.44 11,429.08 68,544.39

Total -5,371,216.34 -2,416,431.35 2,296,713.77 --

Explain the reasons if the Company classifies an item as an extraordinary gain/loss according to the definition in the Explanatory Announcement No. 1 on Information Disclosure for Companies Offering Their Securities to the Public—Extraordinary Gains and Losses, or classifies any extraordinary gain/loss item mentioned in the said explanatory announcement as a recurrent gain/loss item □ Applicable √ Inapplicable

8 2013 Annual Report of Hubei Sanonda Co., Ltd.

Section IV. Report of the Board of Directors

I. Overview

In an extremely complex macro-economic situation in 2013, the Company overcame various unfavorable factors, seized market opportunities, elaborately organized production, insisted on technology development and enhanced cost control. As a result, main production devices were working at full capacity, indicating the effective utilization of production capacity, and main economic indicators saw significant growth, representing the best in history. The production and operating tasks for 2013 were over-fulfilled. For the reporting period, the Company achieved operating revenue of RMB 3.078 billion, up by 31.27% over last year, of which export income stood at USD 270 million, up by 36.17% over last year; total profit of RMB 434 million, representing a YoY growth of 204.48%; and pesticide output of 62,100 tons, up by 25.7% over last year.

II. Main business analysis

1. Overview

2013 (RMB Ten 2012 (RMB Ten Item +/-% thousand) thousand) Operating revenues 307,847 234,515 31.27% Operating costs 234,634 195,241 20.18% Period expense 27,379 23,130 18.37% R&D input 964 886 8.8% Net cash flows from operating 79,970 23,359 242.35% activities Net cash flows from investing activities -34,349 -14,891 Net cash flows from financing -22,286 -12,946 activities (1) Operating revenues increased by 31.27% over last year mainly because both the sales volumes and prices and leading products increased. (2) Operating costs increased by 20.18% over last year mainly because operating revenues increased. (3) Period expense increased by 18.37% over last year mainly because operating revenues increased. (4) R&D input increased by 8.8% over last year mainly because the testing expenses in R&D slightly increased. (5) Net cash flows from operating activities increased by 242.35% over last year mainly because sales income and sales payments collected increased. (6) Net cash flows from investing activities decreased by RMB 194.58 million over last year mainly because the input to fixed assets increased. (7) Net cash flows from financing activities decreased by RMB 93.40 million over last year mainly because more bank loans were repaid.

9 2013 Annual Report of Hubei Sanonda Co., Ltd.

Overview of the reporting period progress of development strategies and business plans disclosed in previous periods: As its production and operating goal for 2013, the Company had planned to reach RMB 2.5 billion in sales income. And the actual figure was RMB 3.078 billion and all goals set at the year-begin were successfully fulfilled.

Major work in 2013: (1) Sales: The Company enhanced market expansion, operated under the guidance of markets, boosted production by sales and had production devices work at full capacity through the pull of the market. Meanwhile, it paid close attention to changes in competition and developments of macro-control policies; enhanced market forecast, demand analysis, sales research and price follow-up; seized opportunities to raise the product selling prices step by step as scheduled; and increased the sales volume of products. It also enhanced product registration. Registration of 24 products was renewed, 5 newly registered and another 6 newly registered abroad. (2) Production management: According to market needs, the Company elaborately organized production and made supplies in time. Main products such as spermine, orthene, PMIDA, glyphosate and paraquat were being produced at full capacity and the advantages in technological innovation and scale stood out. At the same time, it insisted on its efforts in benchmarking and energy saving, as well as the monthly “point-to-point” special conference and production and operation analysis meeting. (3) Safety and environment protection: It pushed forward the SHE system, revised its rules according to the country’s laws and regulations, and ascertained responsibilities. It also carried out checks for hidden dangers on a thorough basis, formulated and implemented the “Post Hidden Danger Check Sheet”, and enhanced post HEMP analysis. At the same time, it revised the “Contractor Management Rules” and standardized management on operation papers and operation sites. It intensified safety training and improved the quality of its teams. It enhanced environmental protection by carrying out environmental protection projects and glyphosate (PMIDA) environmental protection checks to make sure normal operation of environmental protection facilities and improve its environmental protection performance. (4) Engineering projects: It accomplished projects in relation to methanol recovery tower and spermine extraction tower technical innovation, orthene production devices, PMIDA drying facility relocation and alteration, paraquat production process improvement, 2, 4—D progression, the urethane system, etc. It started a 300,000-ton/year ion-exchange membrane caustic soda project (200,000 tons/year for the first phase). The construction commenced in May 2013 and it’s expected to be accomplished and put into production in Nov. 2014. (5) Financial management: The Company enhanced management of receivables and inventory and speeded up turnover of assets, with net operating cash flows reaching RMB 800 million, up by RMB 560 million over last year. Meanwhile, it improved the capital operation efficiency, reduced financing costs and continued to enhance internal control and risk control.

State the reasons why the Company’s actual business performance is 20% lower or higher than the earning forecast for the reporting period which has been publicly disclosed earlier: □ Applicable √ Inapplicable

2. Revenues

Explanation:

10 2013 Annual Report of Hubei Sanonda Co., Ltd.

For 2013, the Company achieved a main business income of RMB 3.033 billion, up by 31.58% over last year, with no major change occurring to the income structure when compared with last year. And the gross profit rate of sales stood at 23.79%, up by 7.07 percentage points over last year.

Is the Company’s goods selling revenue higher than the service revenue? √ Yes □ No Unit: Ton

Industry Item 2013 2012 YoY +/-%

Industry of Sales volume 146,565 125,387 16.89% manufacturing chemical Output 144,282 142,550 1.22% raw materials and chemical products Stock 8,699 10,982 -20.79%

Reasons for any over-30% YoY movement of the data above: □ Applicable √ Inapplicable Major orders on hand: □ Applicable √ Inapplicable Significant change or adjustment of the Company’s products or services during the reporting period: □ Applicable √ Inapplicable Major customers:

Total sales to the top 5 customers (RMB Yuan) 675,510,485.65

Ratio of the total sales to the top 5 customers to the 21.94% annual total sales (%)

Information about the top 5 customers: √ Applicable □ Inapplicable

Serial No. Name of customer Sales (RMB Yuan) Proportion in annual total sales (%)

1 Customer A 276,120,919.55 8.97%

2 Customer B 125,653,687.32 4.08%

3 Customer C 104,156,195.37 3.38%

4 Customer D 90,037,025.36 2.93%

5 Customer E 79,542,658.06 2.58%

Total -- 675,510,485.65 21.94%

3. Costs

Classified by industry: Unit: RMB Yuan

2013 2012 Industry Item YoY +/- (%) Amount Proportion in Amount Proportion in

11 2013 Annual Report of Hubei Sanonda Co., Ltd.

operating costs operating costs （%）（%）

Industry of manufacturing Material expenses chemical raw (procurement 1,833,568,586.60 79.33% 1,580,759,380.03 82.35% -3.02% materials and cost) chemical products

Industry of manufacturing chemical raw Labor cost 105,561,109.18 4.57% 84,754,507.04 4.42% 0.15% materials and chemical products

Industry of manufacturing chemical raw Depreciation cost 151,025,868.76 6.53% 131,816,379.38 6.87% -0.34% materials and chemical products

Classified by product: Unit: RMB Yuan

2013 2012

Proportion in Proportion in Product Item YoY +/- (%) Amount operating costs Amount operating costs （%）（%） Notes: Among total costs of the current year, material expenses accounted for 79.33%, labor cost 4.57% and depreciation cost 6.53%.

Major suppliers:

Total purchases from the top 5 suppliers （RMB Yuan） 609,102,116.21

Ratio of the total purchases from the top 5 suppliers to the 26.35% annual total purchases（%）

Information about the top 5 suppliers: √ Applicable □ Inapplicable

Procurement amount (RMB Proportion in annual total procurement Serial No. Name of supplier Yuan) amount (%)

Guang’an Honesty Chemical Engineering 1 137,318,803.42 5.94% Co., Ltd.

12 2013 Annual Report of Hubei Sanonda Co., Ltd.

Chongqing Unispendour Chemical Co., 2 127,349,319.66 5.51% Ltd.

3 Shenhua Trading Group Limited 121,375,977.74 5.25%

4 Yichang Kaitai Trade Co., Ltd. 114,061,070.09 4.93%

Qian’nan Jiaxin Commerce and Trade Co., 5 108,996,945.30 4.72% Ltd.

Total -- 609,102,116.21 26.35%

4. Expense

Unit: RMB Ten thousand Item 2013 2012 YoY +/-% Selling expenses 9,500 7,218 31.61% Administrative expenses 11,315 9,536 18.66% Financial expenses 6,565 6,377 2.95% Income tax expenses 11,439 3,823 199.2% (1) Selling expenses increased by 31.61% over last year mainly because freight charges increased due to sale of products. (2) Income tax expenses increased by 199.2% over last year mainly because total profit increased.

5. R&D expenses

In 2013, R&D expenses stood at RMB 9,641,058.87, accounting for 0.62% of net assets and 0.31% of operating revenue.

6. Cash flows

Unit: RMB Yuan

Item 2013 2012 YoY +/-（%）

Subtotal of cash inflows from 2,782,482,784.49 1,934,806,836.65 43.81% operating activities

Subtotal of cash outflows from 1,982,781,195.45 1,701,216,411.83 16.55% operating activities

Net cash flows from operating 799,701,589.04 233,590,424.82 242.35% activities

Subtotal of cash inflows from 10,941,400.93 1,003,477.86 990.35% investing activities

Subtotal of cash outflows from 354,430,049.71 149,910,066.06 136.43% investing activities

Net cash flows from investing -343,488,648.78 -148,906,588.20 -130.67%

13 2013 Annual Report of Hubei Sanonda Co., Ltd. activities

Subtotal of cash inflows from 1,332,595,618.49 868,889,970.07 53.37% financing activities

Subtotal of cash outflows from 1,555,457,301.92 998,351,974.35 55.8% financing activities

Net cash flows from financing -222,861,683.43 -129,462,004.28 -72.14% activities

Net increase in cash and cash 234,884,555.44 -44,406,322.22 628.94% equivalents

Reasons for any over-30% YoY movement of the data above: √ Applicable □ Inapplicable (1) Cash inflows from operating activities increased by 43.81% over last year mainly because both the sales volumes and prices and leading products increased. (2) Net cash flows from operating activities increased by 242.35% over last year mainly because sales income and sales payments collected increased. (3) Cash inflows from investing activities increased by 990.35% over last year mainly because cash received from disposal of subsidiaries and investment gains increased. (4) Cash outflows from investing activities increased by 136.43% over last year mainly because of the new project expense. (5) Net cash flows from investing activities decreased by 130.67% over last year mainly because of the new project expense. (6) Cash inflows from financing activities increased by 53.37% over last year mainly because borrowings increased. (7) Cash outflows from financing activities increased by 55.8% over last year mainly because the dividends paid and loans repaid increased. (8) Net cash flows from financing activities decreased by 72.14% over last year mainly because more bank loans were repaid. (9) Net increase in cash and cash equivalents increased by 628.94% over last year mainly because net cash flows from operating activities increased.

Reasons for a big difference between the operating cash flows and the net profit: √ Applicable □ Inapplicable For the reporting period, net profit stood at RMB 319.98 million and net cash flows from operating activities at RMB 799.70 million, which made their difference at RMB 479.72 million. This was mainly because depreciation & amortization increased by RMB 165.55 million, inventory decreased by RMB 105.42 million, operating payables increased by RMB 100.56 million, financial expenses increased by RMB 60.73 million and other factors had an influence of RMB 47.46 million.

III. Breakdown of main business

Unit: RMB Yuan

14 2013 Annual Report of Hubei Sanonda Co., Ltd.

Increase/decrease Increase/decrease Increase/decrease Operating Gross profit rate of operating of gross profit Operating cost of operating cost revenue (%) revenue over last rate over last year over last year (%) year (%) (%)

Classified by industry:

Industry of manufacturing chemical raw 3,032,932,276.15 2,311,453,750.97 23.79% 31.58% 20.41% 7.07% materials and chemical products

Classified by product:

New chemical materials and 15,054,769.26 8,910,224.12 40.81% 21.92% 36.89% -6.47% special chemicals

Petroleum chemical and 79,398,719.36 68,916,527.68 13.2% -20.09% -16.02% -4.2% refining products

Basic (chlor-alkali) 64,704,149.91 49,091,951.55 24.13% 10.49% 11.16% -0.45% chemical products

Agriculture-appli ed chemicals, 3,097,180,087.68 2,407,940,497.68 22.25% 32.6% 21.12% 7.36% such as fertilizer and pesticide

Internal offset -223,405,450.06 -223,405,450.06 0% 11.06% 11.06% 0% amount

Classified by region:

Domestic 1,652,090,007.69 1,268,543,722.53 23.22% 27.28% 18.93% 5.4%

Overseas 1,604,247,718.52 1,266,315,478.50 21.06% 32.79% 20.13% 8.32%

Internal offset 223,405,450.06 223,405,450.06 0% 11.06% 11.06% 0% amount Where the Company’s accounting standard of the main business data above changed during the reporting period, give the main business data of the latest year adjusted according to the accounting standard at the end of the reporting period: □ Applicable √ Inapplicable

15 2013 Annual Report of Hubei Sanonda Co., Ltd.

IV. Asset and liability analysis

1. Major changes of asset items

Unit: RMB Yuan

As at 31 Dec. 2013 As at 31 Dec. 2012 Proportio Proportion in Proportion in n change Explain any major change Amount total assets Amount total assets （%） (%) (%)

414,065,921.2 Monetary funds 15.29% 175,181,365.77 7.28% 8.01% More sales payments were collected 1

Accounts 209,166,447.1 7.72% 180,964,377.73 7.52% 0.2% Naught receivable 6

258,274,457.8 Inventories 9.54% 366,759,772.17 15.25% -5.71% Naught 8

Investing real 4,154,412.50 0.15% 4,394,812.50 0.18% -0.03% Naught estate

Long-term equity 9,153,782.63 0.34% 9,153,782.63 0.38% -0.04% Naught investment

1,324,222,385. 1,308,629,352. Fixed assets 48.9% 54.4% -5.5% Naught 03 60

Construction in 234,487,866.2 8.66% 121,263,645.49 5.04% 3.62% Naught progress 3

2. Major changes of liability items

Unit: RMB Yuan

2013 2012 Proportio Proportion in Proportion in n change Explain any major change Amount total assets Amount total assets （%） (%) (%)

Short-term 359,220,205.5 13.26% 355,708,601.70 14.79% -1.53% borrowings 5

Long-term 296,090,000.0 10.93% 80,000,000.00 3.33% 7.6% New project loans borrowings 0

V. Core competitiveness analysis

In the reporting period, centering on the main products such as orthene and paraquat, the Company enhanced the production and research cooperation with universities, pushed forward technology development, and constantly

16 2013 Annual Report of Hubei Sanonda Co., Ltd. promoted energy saving and emission reduction. As a result, the product quality was improved, the business scale was expanded, and the devices were safer to operate. To be specific, consumption of the main raw materials of orthene—crude methamidophos, acetic anhydride, dissolvant, etc.—all decreased, with significantly increased product yield and expanded production capacity. The production capacity of methomyl significantly increased, with the product yield up by nearly 2 percentage points. Also, consumption of sodium cyanide, pyridine and liquid ammonia in the production of paraquat all decreased to different extents, with expanded production capacity of the production devices. Condensation and acidification in the 2, 4—D production process were made constant. Meanwhile, the pyridine devices were put into trial production and able to produce qualified products. In 2013, the Company applied for 10 patents, including 9 invention ones. And 4 were granted, including 3 invention ones. Up to the end of 2013, the Company had 24 patents, including 16 invention ones.

VI. Investment analysis

1. Investments in equities of external parties

(1) Equity-holdings in financial enterprises

Gain/loss Initial Opening Opening Closing Closing Closing in the Enterprise Enterprise investment equity-hol equity-hol equity-hol equity-hol book value reporting Accountin Equity name variety cost (RMB dings ding ratio dings ding ratio (RMB period g title source Yuan) (share) (%) (share) (%) Yuan) (RMB Yuan)

Purchase Long-term Hubei Commerci 20,000,000 8,008,982. 4,062,224. of 20,000,000 1.18% 23,481,067 1.18% equity Bank al bank .00 63 59 corporate investment stock

20,000,000 8,008,982. 4,062,224. Total 20,000,000 -- 23,481,067 ------.00 63 59

2. Analysis to main subsidiaries and stock-participating companies

Main subsidiaries and stock-participating companies: Unit: RMB Yuan

Main Company Company Registered Operating Operating Industry products/ser Total assets Net assets Net profit name variety capital revenues profit vices

Sanonda Chemical Production (Jingzhou) raw of pesticides Pesticides material and 30000000.0 4,253,264.5 16,097,838. -3,081,090. -3,082,323. Subsidiary and 124,615.54 and chemical 0 5 75 29 45 intermediate Chemicals product s Co., Ltd. manufacturi

17 2013 Annual Report of Hubei Sanonda Co., Ltd.

ng industry

Import & Hubei export of Sanonda Trade pesticides 10000000.0 288,926,692 27,717,402. 219,445,318 2,374,517.1 1,729,833.6 Foreign Subsidiary industry and 0 .87 86 .59 7 1 Trading intermediate Co., Ltd. s

Chemical raw Production Jingzhou material and and sale of Hongxiang 40000000.0 192,362,661 16,823,958. 13,479,620. -9,234,064. -9,234,064. Subsidiary chemical chemical Chemical 0 .38 86 27 24 24 product raw Co., Ltd. manufacturi materials ng industry

Explain particulars about main subsidiaries and stock-participating companies: 1. Subsidiary Sanonda (Jingzhou) Pesticides and Chemicals Co., Ltd. is moving its production devices to the Company for the reason of environmental protection. 2. Subsidiary Jingzhou Hongxiang Chemical Co., Ltd. is being commissioned and the expense such as depreciation of some completed projects led to a loss.

Subsidiaries acquired or disposed during the reporting period: √ Applicable □ Inapplicable

Effect on the whole production Name of subsidiary Purpose of acquisition/disposal Way of acquisition/disposal and business performance

The disposal generated an Hubei Sanonda Tianmen Disposed at the requirement of By selling equities investment gain of RMB Pesticide Chemical Co., Ltd. the Group 316,688.57.

The disposal generated an Jingzhou Longhua Disposed at the requirement of By selling equities investment gain of RMB Petrochemical Co., Ltd. the Group 277,835.59.

3. Significant projects of investments with non-raised funds Unit: RMB Ten Thousand

Cumulative actual Project name Total investment Input for this period input as at the Project progress Project earnings period-end

10,000 tons/year In the process of pyridine & 16,130 2,137 13,242 100% commissioning derivatives

Ion film project 37,460 10,158 10,158 27.12% Unfinished

18 2013 Annual Report of Hubei Sanonda Co., Ltd.

Salt mine and sodium sulfate 24,702 4,266 4,266 17.27% Unfinished project (Section A)

Total 78,292 16,561 27,666 -- --

VII. Predict the operating results of Jan.-Mar. 2014

Warning of possible loss or considerable YoY change of the accumulated net profit made during the period-begin to the end of the next reporting period according to prediction, as well as explanations on the reasons: □ Applicable √ Inapplicable

VIII. Outlook of the Company’s future development

(I) Competition and development trends in the industry 1. Big picture of the agrochemical industry Judging from the sales of the global agrochemical enterprises, the combined sales of the six foreign agrochemical tycoons—Syngenta, Bayer, BASF, Dow AgroSciences, Monsanto and DuPont—account for as much as 80% of the global sales. And they are in an absolutely dominant position in technology, brand, channel, etc. Upon years of development, China has become the biggest pesticide producer and exporter in the world. However, despite an increasingly organized industry and enhanced international competitiveness, the domestic industry is still not centralized enough, with a severely excessive overall production capacity and a long-standing fierce market competition. 2. Development trends In the long run, the pesticide industry has a promising future. In 2012, the industry rebounded steadily. In 2013, thanks to the rigid growth of demand at home and abroad, industry restructuring, stricter environmental protection policies, full de-stocking, etc., the enterprise performance picked up significantly. In 2014, the prosperity in the pesticide market is expected to continue. 3. Challenges and opportunities for the pesticide industry Challenges: (1) Along with economic development and higher living standards, food security becomes a hot topic of the public. (2) Resource and environment restrictions. (3) Stricter policies of safety, environmental protection and sustainable development. (4) Patented products of multinational companies are trying to take a bigger share in the China market. (5) Oversupply, disordered competition and price battles. Opportunities: (1) Rigid demand for pesticide in food security. (2) The government’s continuous policies to create a stronger agricultural industry and benefit farmers, as well as guidance for enterprises to grow bigger and stronger via merger and reorganization. (3) Growing demand for agricultural products and biological energy. (4) Pesticide prices return to a rational level with the gradual recovery of the global economy. (5) Highly-toxic pesticide was cut down, making room for higher effective and lower toxic pesticide. (6) Increasingly high standards for market access. (II) Development strategies of the Company During the 12th five-year plan and under guidance of national industry policies and overall development strategy of CHEMCHINA and China National Agrochemical Corporation, the Company will make full use of existing resources, technology, etc. Moreover, by adhering to scientific development perspective and taking “variety scale, quality, environmental protection and benefits as center”, foreign and domestic market demands as orientation and scientific progress and technical innovation as guide, we will also set up three major business chains (the

19 2013 Annual Report of Hubei Sanonda Co., Ltd. organophosphorus chain, the phosgene chain and the pyridine chain) through establishing the phosgene series and the pyridine series, improve and expand current pesticide and chemical supporting systems, strive to develop chemical products, and build up an efficient energy supply supporting system catering to the production needs of agrochemical products. (III) Plan for operation In order to achieve realization of RMB 3 billion of sales revenues in 2014, the company will mainly focus on the following works: Firstly, to further promote the system construction, to comprehensive update the management lever and to put forth effort in security management. To improve security production responsibility system and to execute the entity responsibility of security production; to improve potential safety hazard troubleshoot system, and to execute refined management; to comprehensive carding the emergency preplan, and to improve the ability of emergency rescue; to strengthen the training system and to compact the security foundation. To accelerate the environmental governance, to further carry out the system construction, to improve the level of management information, and to strengthen the financial management and control as well as the risk management. Secondly, to make the sales as pioneer and to intensify the production, supply and marketing synergies. To carry out competitive activities of marketing, so thus to realize a good start of the first quarter; to better grasp the sales of major products, and to ensure the full load of the major production equipments; to explore the marketing mode of e-commerce; to elaborate the channel management and to make piloted direct selling; to widely seek for the direct partners and to enlarge the foreign trade exports; and continues to enlarge the overseas registration efforts. Thirdly, to promote the technology progress and to accelerate the projects construction. To speed up the construction of major projects, and make great efforts to make the operation become effective earlier; co ntinues to enlarge the technical transformation, and to ensure the stable operation of the devices; to impr ove the R&D efforts, and to strengthen the cooperation with scientific research institutions. Fourthly, to reinforce the personnel training and to improve the team qualities. To pay attention to the ta lent introduction, and to strengthen the talent echelon construction; to intensify the cadre assessment and to enhance the executive force; to improve the teams and groups construction and to carry out the job tr aining and the skills competition. Lastly, to innovate the party construction, and to enrich the corporate culture. Continues to improve the party construction; widely carry out reasonable suggestion activities; to reinforce the brand construction of Sanonda. (IV) Capital requirement plan of company In accordance with production and management, and projects planned to be constructed and under construction, it is predicted that the company needs about RMB 1.6 billion capitals in 2014. Fund sources directly come from bank loans and self-owned funds. (V) Risks of the Company Firstly, the risks of environmental protection. As the environmental protection requirements of our nation are becoming stricter and stricter, the survival risk of the pesticide industry improved. The Company reinforced the cooperation of the scientific research institutions and enlarged the environmental investment as well as strengthened the comprehensive management to ensure the standard emission. Secondly, the risks of exchange rate. The export ratio of the Company was increased and the influence of the exchange rate on the Company increased. The Company fully considered the risks of the exchange rate when signing the trade contraction with the clients, made prompt settlement of exchange and shorten the payment days; and at the same time adjusted the export products structure, to face up to the risks of refund policy adjustment. Lastly, the risks of human resources. The Company was facing with the increase of the human resources costs, and

20 2013 Annual Report of Hubei Sanonda Co., Ltd. the risks of the lack of professional talents. The Company promoted the informative construction and improved the automation level, and made great efforts to enlarge the coverage area of DCS, and at the same time improved the salary system and incentive system to attract talents.

IX. Explanation of the Board of Directors and Board of Supervisors on Non-standard Auditing Report Issued by the CPA Firm for the Reporting Period

Inapplicable

X. Explanation on Changes of Accounting Policy, Estimate and Method Compared to Previous Year’s Financial Report

Inapplicable

XI. Explanation on Retrospective Restatement of Significant Accounting Error Correction during the Reporting Period

Inapplicable

XII. Explanation on Changes of Scopes of Consolidated Statement Compared to Previous year’s Financial Report

On 31 Aug. 2013, the Company transferred the 100% equities of Hubei Sanonda Tianmen Pesticide Chemical Co., Ltd. it held to Tianmen Economy & Trade Committee State-owned Asset Management Co., Ltd., and withdrew its investment in the 65% equities of Jingzhou Longhua Petrochemical Co., Ltd. As a result, two entities were deconsolidated for the reporting period.

XIII. Profit allocation and dividend distribution

The formulation, execution or adjustment of profit distribution policy especially cash dividend policy during the reporting period √ Applicable □ Inapplicable In the reporting period, the Company strictly according to the relevant regulations and requirements in the Articles of Association, and positively done the implement ion of the profits distribution well. And fully protected the legal interest of medium and small investors, as well as declared advice through independent director. The Company’s plans for profit distribution for the reporting period were in compliance with relevant rules such as the Company’s Articles of Association.

Special explanation of cash dividend policy

Whether conformed with the regulations of the Articles of association or the requirements of the resolutions of Conformed the shareholders’ meeting:

Article 155 in the Articles of Association of the Company stipulates the Whether the dividend standard and the proportion were profits distribution policy and decision-making procedures for the definite and clear: Company, and it executes strictly. The independent directors of the Company fulfill their responsibilities diligently and issue their

21 2013 Annual Report of Hubei Sanonda Co., Ltd.

independent opinion on the profits distribution plan over the past years, so as to protect the legal interest of minority shareholders. As for the Company gained profits but didn’t issue the cash dividends distribution plan, the Board of Directors all explained on the reason of no distribution, etc., and the profit distribution plans over the past years were all reviewed and approved by the Board of Directors then submitted to the Shareholders’ General Meeting for approval.

Whether the relevant decision-making process and the Yes system were complete:

Whether the independent director acted dutifully and Yes exerted the proper function:

Whether the medium and small shareholders had the chances to fully express their suggestions and appeals, of Yes which their legal interest had gained fully protection:

Whether the conditions and the process met the regulations and was transparent of the adjustment or Inapplicable altered of the cash dividend policy:

Pre-plan or plan for profit distribution and turning capital reserve into share capital in recent 3 years (including the reporting period) Plan for profit distribution of 2011 was no distribution and no turning. Plan for profit distribution of 2012: Take the total share capital of 31 Dec. 2012 as cardinal number, the Company distributed cash bonus to the whole shareholders with every 10 shares of RMB 0.5 (including tax), and granted bonus of none (including tax), which not turned the share capital with capital reserve. Plan for profit distribution of 2013: Take the total share capital of 31 Dec. 2013 as cardinal number, the Company distributed cash bonus to the whole shareholders with every 10 shares of RMB 0.5 (including tax), and granted bonus of none (including tax), which not turned the share capital with capital reserve. Cash dividend in the recent three years Unit: RMB Yuan

The ratio accounting in net Net profit belonging to profit which belongs to Amount of cash dividend shareholders of the listed Dividend year shareholders of the listed (including tax) company in consolidated company in consolidated statement of dividend year statement (%)

2013 29,486,343.42 320,811,958.67 9.19%

2012 103,768,969.35

2011 52,863,980.46

Although the company obtains profits and the parent company’s undistributed profit is positive during the reporting period, no cash dividend distribution pre-plan is put forward. □Applicable √Inapplicable

22 2013 Annual Report of Hubei Sanonda Co., Ltd.

XIV. Preplan for profit distribution and turning capital reserve into share capital in the reporting period

Bonus shares for every 10 shares (shares) 0

Dividend for every 10 shares (RMB Yuan) 0.50 (including tax)

Equity base of the preplan for distribution (shares) 593,923,220

Total of cash bonus (RMB Yuan) (including tax) 29,696,161.00

Attributable profit (RMB Yuan) 287,157,749.50

Proportion of cash bonus in the total of profit 100% distribution (%)

Cash dividend policy:

Other

Specific explanation of preplan for profit distribution or preplan for turning capital reserve into share capital

Audited by Ruihua Certified Accountants (LLP), the net profits of 2013 that the Company realized and belongs to the parent company was of RMB 320,811,958.67, and if withdrew the statutory surplus reserves of 10% of the current net profit of the parent company, which amounted to RMB 33,654,209.17, the distributable profits of the year would be RMB 287,157,749.50. The actual accumulated distributable profits for the shareholders was of RMB 546,688,770.98, which deducted the distributed cash bonus of RMB 29,486,343.42 of 2012 and added the profits which had not distribute of RMB 289,017,364.90. In consideration of the projects in construction were still require of large sum of capital, the preplan for profit distribution and turning capital reserve into share capital of 2013 protocol led that: take the total share capital of 31 Dec. 2013 as cardinal number, the Company distributed cash bonus to the whole shareholders with every 10 shares of RMB 0.5 (including tax), and granted bonus of none (including tax), which not turned the share capital with capital reserve.

XIV. Social Responsibility

Through abiding by policy of safety, quality, environmental protection and benefit, the company carries out production operating activities in strict accordance with OHSAS18001 Occupation Health and Safety Management System, ISO14001 environment management system, ISO9001 quality management system and national cleaner production standards. Through strengthening technology improvement in the aspects of production equipments, technique and off-gas governance, the company promotes lean production, energy conservation and emission reduction, as well as educe energy and material consumption. With gradual decrease on comprehensive energy consumption and water consumption of ten thousand Yuan production value, the Company decreased 2.9% in comprehensive energy consumption of ten thousand Yuan production value of 2013. Moreover, with the increase on productivity of production equipment, the company will constantly increase investment on environmental friendly facilities such as sewage treatment plants and on management of atmospheric environment. In 2013, the company has invested 45 million Yuan to ensure production discharge standards. Meanwhile, the company continues to enhance employees’ training education and their awareness on safety and environmental protection, emphasizes improvement on actual safety of production equipments, reduces emission of pollutants and improve their own and surrounding environment so as to make positive efforts for family happiness, society stability and sustainable development.

23 2013 Annual Report of Hubei Sanonda Co., Ltd.

On the basis of increase of company benefits and sustainable development, the company has realized stable growth in employees’ income. At the same time, we reinforce investment on safety protection for employees and strive to improve their work and life environment. Our company strives to protecting consumers’ rights and interests in real sense through continuously promoting product quality and severely cracking down on counterfeit and shoddy products. We strengthen communications among customers, suppliers and other stakeholders and do great effort for realization of multi-win-win based on equality and free will. At the same time, on the basis of safeguarding sustainable development, the company attaches great importance to shareholders’ returns, participates in social welfare activities and makes social returns. The company and its subsidies have not been included in the list of heavily polluted enterprises published by environmental protection department: neither severe environmental protection problems nor other critical social security issues exist in the company.

Does the listed company or its subsidiaries belong to the heavily polluting industries stipulated by the environmental protection authorities of the country? √Yes □ No The Company always paid full attention on the construction of environmental protection when making great efforts to develop economic all the time. 1. All the construction projects had gone through the evaluation of the environmental influence, and had passed the examination of the Principal, Municipal Environmental Protection Bureau, which agreed the approval documents of construction. Strictly carried out the three-simultaneous system of environmental protection, which stipulated the simultaneous design, the simultaneous construction, the simultaneous commissioning that ensured the volume increased without increased pollution. 2. Early in 2001, the Company took the lead in carrying out the SO14001 International Environmental Management Standards System in the same industry and received the authentication certificate, which played an important role for promoting the enterprises environmental management level and improving the enterprises environmental appearance. For guarantee the continuous improvement of the environmental performance, the Company must enact the Environmental Management Plan of Target and Indicator per year and at the same time inspect and urge the complement situation according to the standard requirements; must apply for Jingzhou Environmental Monitoring Station to take the comprehensive emission supervise of the Company and issue the supervise report. Based on the supervise results, the Company turned out to reach the up-to-standard release of the three wastes basically; must carry out the compliance review report of environmental protection laws and regulations, and the Company passed the evaluation of the certification authority (the third party) for the situation of laws and disciplines observation per year. The Company reported the Emergency Preplan for Environment to the Environmental Protection Department as reference, and organized training, maneuver per year. 3. Enlarge the investment to ensure the up-to-standard release of the three wastes. Recently the Company totally invested the amount of RMB 0.15 billion for three wastes govern, with the completed major environmental protection devices which had put into operation such as: more than fifty sets of pesticide chemical industry wastewater treatment plant; chloride wastewater of methanol recovery device; amine compound wastewater utilization device; trichlorfon tail gas absorption device; chloride methane condensing compression recovery device; chloral tail gas absorption device; sulfur phosphorus production tail gas absorption device; glyphosate ammonia tail gas recycle device of recycling companies; solid waste incineration and tail gas treatment device, which effectively guarantee the up-to-standard release of three wastes. The Company passed the examination of the up-to-standard release of the pollution source of industrial enterprises that held by the original Hubei

24 2013 Annual Report of Hubei Sanonda Co., Ltd.

Environmental Protection Agency since 2000, and turned out to be qualified. The achievements of environmental protection that the Company reached were remarkable. And the Company passed the Clean Production Audit, and did not occur any significant or serious environmental pollution accident and other unlawful act of environmental protection.

Does the listed company or its subsidiaries have any other significant social security problems?

□ Yes √ No Any administrative punishment during the reporting period? □ Yes √ No

XVI. Particulars about researches, visits and interviews received in this reporting period

Main discussion and Time of reception Place of reception Way of reception Visitor type Visitor materials provided by the Company

1. Main content of the discussion was the situation Shanghai Shenyin of the daily production & Wanguo operations. 2. The materials 7 Apr. 2013 Jingzhou Field research Institution Securities Research that the Company offered Co., Ltd. were mainly the disclosed contents of such as the periodic report.

1. Main content of the discussion was the situation of the daily production China International operations. 2. The materials 15 May 2013 Jingzhou Field research Institution Fund Management that the Company offered Co., Ltd. were mainly the disclosed contents of such as the periodic report.

The reason why the share Telephone suspended? Relevant 30 Jul. 2013 Company Individual Individual investor Communication announcements disclosed by the Company.

The reason why the share Telephone suspended? Relevant 13 Aug. 2013 Company Individual Individual investor Communication announcements disclosed by the Company.

Telephone When to carry out the 10 Oct. 2013 Company Individual Individual investor Communication tender offer? Relevant

25 2013 Annual Report of Hubei Sanonda Co., Ltd.

announcement disclosed by the Company.

How to anticipate in the events of the tender offer of Telephone the Company? The 14 Oct. 2013 Company Individual Individual investor Communication declaration announcement of the tender offer and the operating points of it.

How to anticipate in the events of the tender offer of Telephone the Company? The 15 Oct. 2013 Company Individual Individual investor Communication declaration announcement of the tender offer and the operating points of it.

How to anticipate in the events of the tender offer of Telephone the Company? The 17 Oct. 2013 Company Individual Individual investor Communication declaration announcement of the tender offer and the operating points of it.

How to anticipate in the events of the tender offer of Telephone the Company? The 18 Oct. 2013 Company Individual Individual investor Communication declaration announcement of the tender offer and the operating points of it.

How to anticipate in the events of the tender offer of Telephone the Company? The 21 Oct. 2013 Company Individual Individual investor Communication declaration announcement of the tender offer and the operating points of it.

How to anticipate in the events of the tender offer of Telephone the Company? The 22 Oct. 2013 Company Individual Individual investor Communication declaration announcement of the tender offer and the operating points of it.

How to anticipate in the Telephone events of the tender offer of 23 Oct. 2013 Company Individual Individual investor Communication the Company? The declaration announcement

26 2013 Annual Report of Hubei Sanonda Co., Ltd.

of the tender offer and the operating points of it.

How to anticipate in the events of the tender offer of Telephone the Company? The 28 Oct. 2013 Company Individual Individual investor Communication declaration announcement of the tender offer and the operating points of it.

How to anticipate in the events of the tender offer of Telephone the Company? The 29 Oct. 2013 Company Individual Individual investor Communication declaration announcement of the tender offer and the operating points of it.

How to anticipate in the events of the tender offer of Telephone the Company? The 30 Oct. 2013 Company Individual Individual investor Communication declaration announcement of the tender offer and the operating points of it.

How to anticipate in the events of the tender offer of Telephone the Company? The 31 Oct. 2013 Company Individual Individual investor Communication declaration announcement of the tender offer and the operating points of it.

How to anticipate in the events of the tender offer of Telephone the Company? The 1 Nov. 2013 Company Individual Individual investor Communication declaration announcement of the tender offer and the operating points of it.

How to anticipate in the events of the tender offer of Telephone the Company? The 4 Nov. 2013 Company Individual Individual investor Communication declaration announcement of the tender offer and the operating points of it.

How to anticipate in the Telephone events of the tender offer of 5 Nov. 2013 Company Individual Individual investor Communication the Company? The declaration announcement

27 2013 Annual Report of Hubei Sanonda Co., Ltd.

of the tender offer and the operating points of it.

How to anticipate in the events of the tender offer of Telephone the Company? The 6 Nov. 2013 Company Individual Individual investor Communication declaration announcement of the tender offer and the operating points of it.

How to anticipate in the events of the tender offer of Telephone the Company? The 7 Nov. 2013 Company Individual Individual investor Communication declaration announcement of the tender offer and the operating points of it.

How to anticipate in the events of the tender offer of Telephone the Company? The 8 Nov. 2013 Company Individual Individual investor Communication declaration announcement of the tender offer and the operating points of it.

How to anticipate in the events of the tender offer of Telephone the Company? The 11 Nov. 2013 Company Individual Individual investor Communication declaration announcement of the tender offer and the operating points of it.

When did the assets of the tender offer arrive? The Telephone 20 Nov. 2013 Company Individual Individual investor concluding announcements Communication of the tender offer disclosed by the Company.

28 2013 Annual Report of Hubei Sanonda Co., Ltd.

Section V. Significant Events

I. Significant lawsuit or arbitration

□ Applicable √ Inapplicable There was no significant lawsuit or arbitration during the reporting period. II. Media’s questions □ Applicable √ Inapplicable There was no media’s question during the reporting period.

III. Asset transactions

1. Asset acquisition

Relationsh ip between Ratio of the the net transaction Impact to Transactio profit party and Transactio Impact to the Related-pa n price contribute the Disclosure n party or Assets Progress the company’s rty Disclosure (RMB ten d by the Company date (note control purchased (note 2) company profit or transaction index thousand asset to the (applicable 5) party ( note 3) loss (note or not Yuan) Company for 4) to the total related-par profit (%) ty transaction s)

The related transaction announcement on receiving 10% 10% equity of equity of Sanonda Controllin Sanonda Sanonda Group g (jingzhou) (jingzhou) 291.37 Completed No -308,000 -0.1% Yes 5 Jul. 2013 Corporatio shareholde pesticide pesticide n r chemical co., chemical LTD and 10% co., LTD equity of Hubei Sanonda foreign trade co., LTD

29 2013 Annual Report of Hubei Sanonda Co., Ltd.

(announcement No.: 2013-3), was disclosed in http://www.cnin fo.com.cn.

The related transaction announcement on receiving 10% equity of Sanonda (jingzhou) 10% pesticide equity of Sanonda Controllin chemical co., Hubei Group g LTD and 10% Sanonda 299.3 Completed No 173,000 0.05% Yes 5 Jul. 2013 Corporatio shareholde equity of Hubei foreign n r Sanonda trade co., foreign trade LTD co., LTD (announcement No.: 2013-3), was disclosed in http://www.cnin fo.com.cn.

2. Sale of assets

Relation Net Ratio of ship profit Whether the net between contribu or not Whether profit the ted by the or not Transact contribu transacti the the asset ownersh creditor’ ion Impact ted to Related- on party from the ip of the s right Transact price to the the Pricing party and the and Asset Date of period-b asset liabilitie Disclos Disclosure ion (RMB compan Compan principl transacti Compan sold sale egin to involve s ure date index party Ten y ( note y by the e on or y involved the date d has have thousan 3) asset not (applica of sale been been d) sale to ble for fully (RMB fully transferr the total related- Ten transferr ed profit party thousan ed (%) transacti d) ons)

30 2013 Annual Report of Hubei Sanonda Co., Ltd.

Announce ment on the Tianme transform n ation of Econom 100% ic and 100% equity of Trade equity Tianmen Commit of Agroche tee 31 Aug. 1,868.7 Negotiat 24 Aug. Tianme -89.1 No 0.1% No Yes Yes mical Stated-o 2013 3 ed price 2013 n (announce wned Agroche ment No. Assets mical 2013-45), Manage was ment disclosed Co., in Ltd. http://ww w.cninfo.c om.cn.

Announce ment on the transformat ion of 100% 65% equity of equity Tianmen Longhu of Agrochemi a 31 Aug. Evaluati 24 Aug. Longhu 862.6 -226.19 No 0.09% No Yes Yes cal Petroch 2013 on price 2013 a (announce emicals Petroch ment No. emicals 2013-45), was disclosed in http://www .cninfo.co m.cn.

3. Business combination

Inapplicable

IV. Implementation and influence of equity incentive plan of the Company

31 2013 Annual Report of Hubei Sanonda Co., Ltd.

Inapplicable

V. Significant related-party transactions

1. Related-party transactions concerning routine operation

Pricing Settlemen Type of Contents Transacti principle Proportio t method the of the on Related of the n in same of the Relations related-pa related-pa Transacti amount Market Date of Index of transactio related-pa kind of related-pa hip rty rty on price （ten price disclosure disclosure n party rty transactio rty transactio transactio thousand transactio ns (%) transactio n n Yuan） n n

Bluestar (Beijing) Under Engineeri Cash Chemical the same Market Purchase ng 10.91 remittanc Machiner ultimate price materials e y Co., controller Ltd.

Bluestar (Beijing) Under Cash Chemical the same Equipmen Market Purchase 4,769.23 2.03% remittanc Machiner ultimate ts price e y Co., controller Ltd.

Sanonda Raw Cash Group Parent materials Market Purchase 419.22 0.16% remittanc Corporati company and price e on wrapping

Associate Jingzhou d Low Cash Huaxiang enterprise Market Purchase consumpt 131.09 0.06% remittanc Chemical s of price ion goods e Co., Ltd. parent company

Anhui Under Cash Chemical the same Accepting Market Purchase 18.87 0.01% remittanc Design ultimate service price e Institute controller

Haohua Under Equipmen Cash Market Engineeri the same Purchase ts and 890.66 0.38% remittanc price ng Co., ultimate service e

32 2013 Annual Report of Hubei Sanonda Co., Ltd.

Ltd. controller

Makhtesh Under im Cash the same Sales of Market Chemical Sale 1,316.92 0.43% remittanc ultimate pesticides price Works e controller Ltd.

Jiamusi Under Heilong Cash the same Sales of Market Agroche Sale 443.5 0.14% remittanc ultimate pesticides price micals e controller Co., Ltd.

Jiangsu Under Anpon Cash the same Sales of Market Electroch Sale 251.33 0.08% remittanc ultimate pesticides price emical e controller Co., Ltd.

Sanonda Cash Group Parent Raw Market Sale 284.27 0.09% remittanc Corporati company materials price e on

Associate Chemical Jingzhou d engineeri Cash Huaxiang enterprise Market Sale ng and 1,247.44 0.41% remittanc Chemical s of price power e Co., Ltd. parent products company

Under Cash FARMOZ the same Sales of Market Sale 1,535.26 0.5% remittanc PTY LTD ultimate pesticides price e controller

Shangdon g Under Cash Dacheng the same Sales of Market Sale 372.65 0.12% remittanc Agroche ultimate pesticides price e mical controller Co., Ltd.

Associate Jingzhou d Cash Huaxiang enterprise Offering Market Sale 316.03 0.1% remittanc Chemical s of service price e Co., Ltd. parent company

33 2013 Annual Report of Hubei Sanonda Co., Ltd.

Total -- -- 12,007.38 ------

Details about return of large-amount sales N/A

The routine related-party transactions for this time can give full play to the advantage Necessity and continuity of related-party of purchase and sales of Sanonda Group Corporation, so as to provide stable and transaction as well as reason of choosing reliable source of raw materials and further ensure the normal production and operation the related party (but not other transaction activities of the Company. The Company’s routine related-party transactions won’t parties) to conduct the said transaction generate negative effect on the Company and non-related party shareholders, thus such transactions will continue.

The above related transactions have no influence on the independency of the Company, Impacts of related-party transaction on thus its main business won’t form the dependency on related parties or be controlled by independency of the Company them due to such transactions.

Dependent degree of the Company on related party and relevant solutions for the N/A dependence (if any) Where the Company classifies and estimates the total amount of routine Basically within the estimated range, and the newly increased main related transactions related-party transactions for the reporting period, explain the actual implementation had been individually disclosed. during the reporting period (if any) Explain why the transaction price is greatly different from the market price (if N/A applicable)

2. Related-party transactions arising from asset acquisition or sale

Book Assessed Settleme Pricing value of Market Transacti Type of Content value of Transfer nt principle the fair on profit the of the transferr price method of the transferr value or Related Relations related-p related-p ed assets (RMB of the Disclosu Disclosure related-p ed assets (RMB loss(RM party hip arty arty (RMB Ten related-p re date index arty (RMB Ten B Ten transacti transacti Ten Thousan arty transacti Ten Thousan Thousan on on Thousan d) transacti on Thousan d) d) d)） on d)

The related transaction 10% announcem Sanonda equity of ent on Cash Group Parent Jingzhou Listing 5 Jul. receiving Purchase 50.75 291.37 291.37 291.37 remittan Corporat company Agroche price 2013 10% equity ce ion mical of Sanonda Co., Ltd (jingzhou) pesticide chemical

34 2013 Annual Report of Hubei Sanonda Co., Ltd.

co., LTD and 10% equity of Hubei Sanonda foreign trade co., LTD (announce ment No.: 2013-3), was disclosed in http://www. cninfo.com. cn.

The related transaction announcem ent on receiving 10% equity of Sanonda (jingzhou) pesticide chemical co., LTD Sanonda 10% and 10% Cash Group Parent equity of Listing 5 Jul. equity of Purchase 246.5 299.3 299.3 299.3 remittan Corporat company foreign price 2013 Hubei ce ion company Sanonda foreign trade co., LTD (announce ment No.: 2013-3), was disclosed in http://www. cninfo.com. cn.

35 2013 Annual Report of Hubei Sanonda Co., Ltd.

3. Other significant related-party transactions

Guaranteed fees Pricing 2013 2012 principle Content of the Name of the Type of of the related-party company transaction related-part Amount Proportion (%) Amount Proportion (%) transaction y transaction

Sanonda Group Guarantee Guarantee fee Negotiated 2,880,000.00 25.77 3,300,000.00 52.38 Corporation price China National Guarantee Guarantee fee Negotiated 6,000,000.00 53.69 3,000,000.00 47.62 Chemical price Agrochemical Corporation

China National Guarantee Guarantee fee Negotiated 2,295,000.00 20.54 Chemical price Corporation

The website to disclose the interim announcements on significant related-party transactions

Disclosure date of the interim Name of the interim announcement Website to disclose the interim announcement announcement

2013 routine related-party transaction 15 Mar. 2013 www.cninfo.com.cn announcement

Related transaction announcement of insurance pay to the controlling shareholder 15 Mar. 2013 www.cninfo.com.cn and related parties

Related transaction announcement of insurance pay to the China National Chemical 28 May 2013 www.cninfo.com.cn Corporation VI. Particulars about significant contracts and their fulfillment 1. Particulars about trusteeship, contract and lease (1) Trusteeship Explanation on the trusteeship Naught The trusteeship whose profits reaching more than 10% of the total profits of the Company in the reporting period □ Applicable √ Inapplicable

(2) Contract Explanation on the contract Naught

36 2013 Annual Report of Hubei Sanonda Co., Ltd.

The contract whose profits reaching more than 10% of the total profits of the Company in the reporting period □ Applicable √ Inapplicable

(3) Lease Explanation on the lease The 7th floor of the Company’s office building had rented to Sanonda Group Corporation for business operation in the reporting period with the annual rent of RMB 120,000. The lease whose profits reaching more than 10% of the total profits of the Company in the reporting period □ Applicable √ Inapplicable

2. Guarantees provided by the company

Unit: RMB Ten thousand Yuan

Guarantees provided by the company for external parties (excluding those for subsidiaries)

Disclosure date on Guarante Actual relevant Actual e for a Amount for occurrence date Type of Period of Executed Guaranteed party announcem guarantee related guarantee (date of guarantee guarantee or not ent of amount party or agreement) guaranteed not amount

Guarantees provided by the company for its subsidiaries

Hubei Sanonda 15 Mar. Joint liability Foreign Trading Co., 7,700 15 Mar. 2013 7,440 1 year No Yes 2013 guarantee Ltd.

Hubei Sanonda Joint liability Foreign Trading Co., 8 Jan. 2013 28,080 7 Feb .2013 28,080 1 year No Yes guarantee Ltd.

Total guarantee line approved for Total actual occurred amount the subsidiaries during the of guarantee for the 35,780 35,520 reporting period subsidiaries during the (B1) reporting period (B2)

Total guarantee line that has been Total actual guarantee balance 35,780 35,520 approved for the subsidiaries at for the subsidiaries at the end

37 2013 Annual Report of Hubei Sanonda Co., Ltd. the end of the reporting period of the reporting period (B4) (B3)

Total guarantee amount provided by the company (total of the above-mentioned two kinds of guarantees)

Total guarantee line approved Total actual occurred amount during the reporting period 35,780 of guarantee during the 35,520 (A1+B1) reporting period (A2+B2)

Total guarantee line that has been Total actual guarantee balance approved at the end of the 35,780 at the end of the reporting 35,520 reporting period period (A4+B4) (A3+B3)

Proportion of total guarantee amount (A4+B4) to the net assets 29.88% of the Company

Of which:

Amount of debt guarantee provided for the guaranteed party whose asset-liability ratio is not less than 70% directly or 35,520 indirectly (D)

Total amount of the above three guarantees (C+D+E) 35,520

Explanation on guarantee that adopts complex method Naught

3. Other significant contracts

Book Estimated value of value of assets assets Name of Transacti Was the Execution involved involved Base date Name of Signing evaluatio on price related-pa as of the Name of in the in the of assets Pricing Relations contractor date of n (ten rty end of the contractee contract contract evaluatio principle hip company contracts authority thousand transactio reporting (ten (ten n (if any) (if any) Yuan) n? period thousand thousand Yuan) (if Yuan) (if any) any)

4. Other significant transactions

Naught

38 2013 Annual Report of Hubei Sanonda Co., Ltd.

VII. Performance of commitments

1. Commitments made by the Company or shareholders holding over 5% of the Company’s shares in the reporting period or such commitments carried down into the reporting period

Commitment Commitment Time of Term of Commitment contents Execution items maker commitment commitment

Commitments of share - - reform

I. Commitments on avoiding horizontal competition: 1. The business of the Company’s subsidiaries-- Jiangsu Anpon Electrochemical Co., Ltd., Anhui Petroleum Chemical Group Co., Ltd., Shangdong Dacheng Agrochemical Co., Ltd. and Jiamusi Heilong Agrochemicals Co., Ltd., and Hunan Haohua Chemical Co., Ltd. and its subsidiary had the same or similar situations with the main business of Sanonda, and aimed at the domestic horizontal competition, the Company committed to gradually eliminate such kind Up to the date of of horizontal competition in the future and declaration of Commitments to fight for the internal assets the report, the made in reconstruction, to adjust the industrial plan commitments acquisition Celsius Property and business structure, to transform were being report or in 7 Sep. 2013 B.V. and MAI technology and to upgrade products, to carried out and report on divide the market so as to make each the committers changes of corporation differ in the products and its abided by the equity ultimate users according to the securities above laws and regulations and industry policy commitments. within 7 years, thus to eliminate the current domestic horizontal competition between the Company’s controlling subsidiaries and Sanonda. II. Commitments on maintaining the Company’s operation independence and specify the related transaction: 1. After the complement of the tender offer, Sanonda will continues to maintain complete purchase, production and sales system, and to gain the independent intellectual property. The Company and its direct or indirect controlling shareholders and

39 2013 Annual Report of Hubei Sanonda Co., Ltd.

Sanonda of which the personnel, assets, finance, business and institutions will be completely separated, and at the same time maintain the operation ability of Sanonda that independently face to the China agrochemical industry market. 2. The Company will avoid and reduce the related transactions with Sanonda according to the requirements stipulated by the laws, regulations and other normative documents; but for those related transactions that are inevitable or occur with reasonable cause, will have to obey the just, fair and open market principles. And to sign the agreement according to the law and to carry out legal program, and to make sure not to harm the legal interest of Sanonda and other shareholders by related transaction according to the Articles of Association of Sanonda, the relevant system about related transaction and to conduct the duty of information disclosure as well as the approval process which stipulated by the relevant regulations.

40 2013 Annual Report of Hubei Sanonda Co., Ltd.

ultimate users according to the securities laws and regulations and industry policy within 7 years, thus to eliminate the current domestic horizontal competition between the Company’s controlling subsidiaries and Sanonda. II. Commitments on maintaining the Company’s operation independence and specify the related transaction: 1. The Company will avoid and reduce the related transactions with Sanonda according to the requirements stipulated by the laws, regulations and other normative documents; but for those related transactions that are inevitable or occur with reasonable cause, will have to obey the just, fair and open market principles. And to sign the agreement according to the law and to carry out legal program, and to make sure not to harm the legal interest of Sanonda and other shareholders by related transaction according to the Articles of Association of Sanonda, the relevant system about related transaction and to conduct the duty of information disclosure as well as the approval process which stipulated by the relevant regulations.2. After the complement of the tender offer, Sanonda will continues to maintain complete purchase, production and sales system, and to gain the independent intellectual property. The Company and its direct or indirect controlling shareholders and Sanonda of which the personnel, assets, finance, business and institutions will be completely separated, and at the same time maintain the operation ability of Sanonda that independently face to the China agrochemical industry market. The Company will accord the relevant regulations of the Company Law and the Securities Law, so thus to avoid any behaviors to influence the independent operation of Sanonda.

Commitments

41 2013 Annual Report of Hubei Sanonda Co., Ltd. made at the time of assets reorganization

Commitments made in the initial public offering or refinancing

Commitments made by the company to other medium and small shareholders

Executed Yes timely or not?

Detailed reason for failing to Inapplicable execute and the next plan (if any)

VIII. Particulars about engagement and disengagement of CPAs firm CPAs firm engaged at present

Name of domestic CPA firm Ruihua Certified Public Accountants (LLP)

Remuneration for domestic CPA firm (ten thousand 85 Yuan)

Consecutive years of audit service provided by 4 years domestic CPA firm

Name of registered accountants of domestic CPA Hao Guomin and Kuang Xiaochang firm

Name of overseas CPA firm (if any) N/A

Remuneration for overseas CPA firm (ten thousand 0 Yuan) (if any)

Consecutive years of audit service provided by N/A overseas CPA firm (if any)

Name of registered accountants of overseas CPA N/A firm (if any)

Reengage the CPAs firm at current period or not? □ Yes √ No

42 2013 Annual Report of Hubei Sanonda Co., Ltd.

Particulars on engaging the audit firm for the internal control, financial adviser or sponsor √ Applicable □ Inapplicable The internal control audit firm be engaged was Ruihua Certified Public Accountants (LLP) in the reporting period. No financial adviser or sponsor.

IX. Explanation of the Board of Supervisors and Independent Directors (If Applicable) on “Non-standard Auditing Report” Issued by the CPA Firm

Inapplicable

X. Punishment and Rectification

Punishment type Conclusion (if Index of Name Type Reason Date of disclosure of investigation any) disclosure

Explanation about rectification √Applicable □Inapplicable The company received Decision on Rectification Measures Taken by Hubei Sanonda Co., Ltd. (EZJF [2013] No.1) which was issued by Hubei Regulatory Bureau of China Securities Regulatory Commission on January 17, 2013. The Board of Directors of the company attaches great importance to and thoroughly analyzes problems raised in the decision, executes self-examination for the company’s related regulations and adopts effective measures for rectification. The company reviewed and passed Hubei Sanonda Co., Ltd.’s Rectification Report on Decision of Hubei Regulatory Bureau Ordering the Company to Take Rectification Measures at the 17th Session of 6th Board of Directors on February 1, 2013. Specific contents about this report were published on www.cninfo.com.cn on February 4, 2013. Matters about that directors, supervisors, senior managers and shareholders holding more than 5% shares are suspected to be involved in illegally purchasing and selling the company’s shares and the company has disclosed the case of taking back incomes suspected to be obtained illegally. □ Applicable √ Inapplicable

XI. Explanation about other significant matters

On 30 Jul. 2013, Celsius Property B.V. (the purchaser, a subsidiary indirectly controlled by China National Agrochemical Corporation via Makhteshim-Agan Industries Ltd.) initiated a tender offer for the B shares of Sanonda. The Company disclosed the Abstract of the Report on Tender Offer for B Shares on 10 Sept. 2013, the Report on Tender Offer for B Shares on 11 Oct., and the Suggestive Announcement on the Purchaser Celsius Property B.V. Changing the Tender Offer Price and the Report on Tender Offer for B Shares (Revised) on 26 Oct. Up to 11 Nov. 2013, the tender offer expired. On 19 Nov. 2013, the purchaser purchased the 62,950,659 shares which had been accepted in advance by the shareholders according to the conditions of the tender offer terms (at the purchase price of HKD 7.00/share), and the relevant clearing and transfer formalities were already completed. (Relevant announcements disclosed on the Medias specified by the Company) Because Celsius Property B.V. owned 62,950,659 B shares of Company after the completion of tender offer, it became the second majority shareholder of the Company, with a stake of 10.60%. And the first majority shareholder was still Sanonda Group Corporation, with a stake of 20.15%.

Section VI. Changes in Share Capital and Particulars about Shareholders

I. Changes in share capital

Unit: Share

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

Capitalizat Issuance ion of Proportion Bonus Proportio Amount of new public Other Subtotal Amount (%) share n (%)) shares reserve fund

I. Shares subject to trading 30,642 0.01% 0 0 0 1,825 1,825 32,467 0.01% moratorium

1. State-owned shares 0 0% 0 0 0 0 0 0 0%

2. State-owned legal person 0 0% 0 0 0 0 0 0 0% shares

3. Other domestic shares 30,642 0.01% 0 0 0 1,825 1,825 32,467 0.01%

Including: Shares held by 0 0% 0 0 0 0 0 0 0% domestic legal persons

Shares held by domestic 30,642 0.01% 0 0 0 1,825 1,825 32,467 0.01% individuals

4. Shares held by 0 0% 0 0 0 0 0 0 0% overseas shareholders

Including: Shares held by 0 0% 0 0 0 0 0 0 0% overseas legal persons

Shares held by overseas 0 0% 0 0 0 0 0 0 0% individuals

II. Shares not subject to 593,892,5 593,890,7 99.99% 0 0 0 -1,825 -1,825 99.99% trading moratorium 78 53

1. Ordinary shares 363,892,5 363,893,8 61.27% 0 0 0 1,250 1,250 61.27% denominated in RMB 78 28

2. Domestically listed 230,000,0 229,996,9 38.73% 0 0 0 -3,075 -3,075 38.73% foreign shares 00 25

3. Overseas listed foreign 0 0% 0 0 0 0 0 0 0% shares

4. Other 0 0% 0 0 0 0 0 0 0%

593,923,2 593,923,2 III. Total of shares 100% 100% 20 20

Reasons for changes in share √ Applicable □Inapplicable In the reporting period, Deng Guobin owned the Company’s share of 4880 shares and Zhang Jianguo owned 2745 shares, and trading moratorium condition of 15,000 shares subject to trading moratorium held by Wu Hairong was cancelled after the expiration of half year of his resignation. Owning to the newly appointment of the senior executive—Liu Zhiming and overweight of the supervisor—Liu Jun, the locked shares increased of 21375 shares and 3075 shares respectively. Approval of share changes □ Applicable √ Inapplicable Transfers in share changes □ Applicable √ Inapplicable Influence of share changes towards financial indexes in the latest year and latest period such as basic EPS and diluted EPS, and net assets per share belonging to shareholder with ordinary share □ Applicable √ Inapplicable Other contents that the Company thinks necessary or is asked by securities regulators to be disclosed □ Applicable √ Inapplicable

II. Shareholders and Actual Controller

1. Number of shareholders and shareholding

Unit: Share

The total number of shareholders at the end of Total number of shareholders during 59,123 the 5th trading day prior to disclosure date of 59,709 the reporting period annual report

Shareholding of shareholders holding more than 5% shares

Number Increase Number Number of Pledged or frozen shares of and of shares shares Holding sharehold decrease held held not Name of Nature of percentage ing at the of shares subject to subject to shareholder shareholder Status of shares Number of shares (%) end of the during trading trading reporting reporting moratoriu moratoriu period period m m

SANONDA State-owned legal 119,687,2 119,687,2 GROUP 20.15% person 02 02 CORPORATION

Celsius Property Foreign legal 62,950,65 62,950,65 62,950,65 10.6% B.V. person 9 9 9

Bank of China-- Harvest Theme 16,343,03 16,343,03 Selected Mixed Other 2.75% 4 4 Securities Investment Fund

Domestic natural Song Na 1.39% 8,263,807 8,263,807 person

Agricultural Bank of China—Soochow Value Growth Other 0.98% 5,823,519 5,823,519 Dual Power Equity Securities Investment Fund

Industrial and Commercial Bank of China—Soochow Securities Other 0.96% 5,721,454 5,721,454 Selected Mixed Harvest Advance of Open Securities Investment Funds

Bank of China—Harvest Value-added Other 0.92% 5,435,617 5,435,617 Service Industry Securities Investment Funds

Bank of China－ Yinhua Quality Growth Equity Other 0.79% 4,700,000 4,700,000 Securities Investment Funds

STATE-OWNED ASSETS ADMINISTRATI Nation 0.7% 4,169,266 4,169,266 ON BUREAU OF QICHUN COUNTY

National Social Other 0.58% 3,447,022 3,447,022

Security Fund Portfolio 107

Strategic investors or the general legal person due to the placement of Inapplicable new shares become the top 10 shareholders（if any）(note 3)

Sanonda Group Corporation and Celsius Property B.V. are related parties, and under the same control of China National Chemical Agrochemical Corporation, and are acting-in-concert Explanation on associated parties as prescribed in the Administrative Methods for Acquisition of Listed Companies. It is relationship or/and persons unknown whether the other shareholders are related parties or acting-in-concert parties as prescribed in the Administrative Methods for Acquisition of Listed Companies.

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

Number of shares held not subject to trading Type of share Name of shareholder moratorium at the end of the period Type of share Number

SANONDA GROUP RMB ordinary 119,687,202 119,687,202 CORPORATION share

Domestically Celsius Property B.V. 62,950,659 listed foreign 62,950,659 share

Bank of China-- Harvest Theme RMB ordinary Selected Mixed Securities 16,343,034 16,343,034 share Investment Fund

RMB ordinary Song Na 8,263,807 8,263,807 share

Agricultural Bank of China—Soochow Value Growth RMB ordinary 5,823,519 5,823,519 Dual Power Equity Securities share Investment Fund

Industrial and Commercial Bank of China—Soochow Securities RMB ordinary 5,721,454 5,721,454 Selected Mixed Harvest Advance of share Open Securities Investment Funds

Bank of China—Harvest RMB ordinary Value-added Service Industry 5,435,617 5,435,617 share Securities Investment Funds

Bank of China－Yinhua Quality RMB ordinary Growth Equity Securities 4,700,000 4,700,000 share Investment Funds

STATE-OWNED ASSETS RMB ordinary 4,169,266 4,169,266 ADMINISTRATION BUREAU OF share

QICHUN COUNTY

National Social Securities Fund of RMB ordinary 3,447,022 3,447,022 Group 107 share

Explanation on associated relationship among the top ten shareholders of tradable share not Sanonda Group Corporation and Celsius Property B.V. are related parties, and under the same subject to trading moratorium, as control of China National Chemical Agrochemical Corporation, and are acting-in-concert well as among the top ten parties as prescribed in the Administrative Methods for Acquisition of Listed Companies. It is shareholders of tradable share not unknown whether the other shareholders are related parties or acting-in-concert parties as subject to trading moratorium and prescribed in the Administrative Methods for Acquisition of Listed Companies. top ten shareholders, or explanation on acting-in-concert

Particular about shareholder participate in the securities lending Inapplicable and borrowing business ( if any)( note 4)

Did any shareholder of the Company carry out an agreed buy-back in the reporting period? □ Yes √ No

2. Controlling shareholders of the company

Legal person

Legal Date of representative Name of actual controller establishm Code of organization Registered capital Main business /responsible ent person of unit

Pesticides and chemicals, chemical fertilizer, veterinary drug, feedstuff and chemical products; production and operation of 22 Jun. thermoelectricity; Sanonda Group Corporation Li Zuorong 17898778-9 RMB 240,061,000 1994 medical product, circulation of agricultural product, development of real estate, agent and import & export of goods and technology (excluding goods or technology

banned or limited to be imported and exported by the country)

Operating results, financial The Company realized the operation income of RMB 3,113,740,000 of 2013, the net profits of RMB situation, cash flow and 308,270,000; the total assets of RMB 2,892,800,000 of 2013, the net assets of RMB 1,404,960,000 future development strategy, and the net amount of cash flow of RMB 845,620,000. etc.

Equity of shareholding and participating shares of controlling shareholders in Inexistent other domestic and foreign listed company during the reporting period

Changes of controlling shareholders during the reporting period □ Applicable √ Inapplicable

3. Actual controller of the company

Legal person

Legal Date of representative Name of actual controller establishm Code of organization Registered capital Main business /responsible ent person of unit

State-owned Assets Supervision and - - - - - Administration Commission

Operating results, financial situation, cash flow and Inexistent future development strategy, etc.

Equity of shareholding and participating shares of actual controllers in other domestic Inexistent and foreign listed company during the reporting period

Changes on actual controller during the reporting period □ Applicable √ Inapplicable Block diagram of equity and control relationship between the company and actual controller

State-owned Assets Supervision and Administration Commission of the State Council

100%

China National Chemical Corporation

100%

China National Agrochemical Corporation

100% 100%

CNAC International Company Limited Sanonda Group Corporation

100% 20.15%

CNAC International Pte., Ltd. Hubei Sanonda Co., Ltd.

60%

Makhteshim-Agan Industries Ltd.

10.6% 100% 100%

Makhteshim Chemical Agan Chemical

Works Limited Manufacturers Ltd.

99.99% 0.01%

Celsius Property B.V.

The actual controller controls the company through trust or other assets management method. □Applicable √Inapplicable 4. Other institutional shareholders holding shares of more than 10% Legal representati Date of Main business or Name of institutional Code of ve/responsi establish Registered capital management shareholder organization ble person ment activity of the unit wholesale of base Inapplicabl 24 Dec. Celsius Property B.V. Inapplicable 18,045.45Euro and agricultural e 1987 chemical products III. Particulars on shareholding increase scheme during the reporting period proposed or implemented by the shareholders and act-in-concert persons Disclosure date Initial for the Name of Amount of Shares Shares disclosure date completion of Amount of shareholder / shares to be proportion to proportion of the implementing shares actually act-in-concert increased be increased increased shareholding the held person holding （%） actually （%） increase shareholding scheme increase scheme Celsius 148,480,805 25% 62,950,659 10.6% 11 Oct. 2013 12 Nov. 2013 Property B.V. Explanation on other situations On October 11, 2013 to November 11, China National Chemical Agrochemical Corporation indirectly controlled its subsidiary Celsius Property B.V.(buyer) , launched tender offer items to Sanonda B shares.

Section VII. Directors, Supervisors, Senior Management Staffs and Employees I. Changes in shareholding of directors, supervisors and senior management staffs Amount of Amount of shares shares Amount Shares increased decreased shares held Tenure Ending held at the Name Office title Sex Age Start date at the at the at the status date year-begin reporting reporting period-end (share) period period (share) (share) (share) Chairman Li of the Current Male 63 9 Jul. 2010 9 Jul. 2013 10,690 10,690 Zuorong Board Liu Director, Current Male 46 9 Jul. 2010 9 Jul. 2013 0 Anping GM He Director, Current Male 58 9 Jul. 2010 9 Jul. 2013 0 Xuesong CFO

Director, Yin Hong Deputy Current Male 46 9 Jul. 2010 9 Jul. 2013 0

GM Director, Xie 24 Jan. Deputy Current Male 46 9 Jul. 2013 0 Chengli 2013 GM Ai Independe Current Male 45 9 Jul. 2010 9 Jul. 2013 0 Qiuhong nt Director Zhang Independe Current Female 49 9 Jul. 2010 9 Jul. 2013 0 Huide nt Director Independe Li Dejun Current Male 56 9 Jul. 2010 9 Jul. 2013 0 nt Director Liu Assistant 11 May Current Male 35 9 Jul. 2013 0 Jianhua to GM 2012

Liu Assistant 06 Jan. Current Male 38 9 Jul. 2013 28,500 28,500 Zhiming to GM 2013

Jiang Chief of 6 Jan. 26 Feb. Chenggan the Current Male 38 0 2013 2013 g Supervisor 26 Feb. 26 Feb. Liu Jun Supervisor Current Female 52 0 4,100 4,100 2010 2013 Zhou 26 Feb. 26 Feb. Supervisor Current Male 44 0 Cheng 2010 2013 6 Jan. 26 Feb. Fu Loping Supervisor Current Male 48 0 2013 2013

Ding Supervisor Current Male 51 24 Jan. 26 Feb. 0

Shogun 2013 2013

Secretary Li Shangri to the Current Male 43 9 Jul. 2010 9 Jul. 2013 0 Board

Total ------39,190 4,100 0 43,290 II. Post-holding situation Main working experience of current directors, supervisors and senior management staffs over the past five years: Mr. Li Zuorong, has been acting as Chairman of the Board and Secretary of the CPC of the Company since Dec. 2005. Mr. Liu Anping, worked as the Director and Assistant to GM of the Company from Dec. 2005 to Aug. 2006; acted as the Director and Standing Deputy General Manager of the Company from Aug. 2006 to May 2012; and he has been the Director and GM of the Company since May 2012. Mr. He Xuesong, has been the Director and CFO of the Company since Dec. 2005. Mr. Yin Hong, acted as the Director of the Company from Aug. 2006 to Jan. 2013; and he has been the Director and Vice GM of the Company since Jan. 2013. Mr. Xie Chengli, acted as General Manager and Chairman of the Board of Directors of Hubei Sanonda Tianmen Agrochemical Co., Ltd from Jan. 2006 to Feb. 2009; worked as Assistant to General Manager of the Company from Feb. 2009 to Jan. 2013; and he has been the Director and Vice GM of the Company since Jan. 2013. Mr. Ai Qiuhong has been a teacher of Xiangtan University since 2003. From Sep. 2005 to Jun. 2008, he was a doctor scholar in Xiangtan University majored in chemical engineering and received doctor degree in Jun. 2008. He has been acted as Independent Director of the Company since Feb. 2010. Ms. Zhang Huide, associate professor of Zhongnan University of Economics and Law, supervisor of postgraduate, a CPA, member of Accounting Society of China, committee of Accounting Computerization Commission of Department of Finance of Hubei Province, training teacher for primary and intermediate accounting computerization. She is a teacher for Auditing skill applied in accounting computerization in national tax and local tax and has been involving in accounting computerization, teaching and research of ERP accounting information system as well as its actual application for many years. From Sep. 2005 to Dec 2008, she was acted as Standing Deputy General Director of accounting experiment center of Zhongnan University of Economics and Law. She has been acted as Independent Director of the Company since Jul. 2010. Mr. Li Dejun, he successively acted as Chief Officer, Deputy Chief, Chief of Research Institute of Wuhan Province Commission for Restructuring Economic System and Editor in Chief of Overview of Private Economy, Secretary General of Hubei Province Culture and Economy Research Society, Chief of Hubei Regional Economic Development Research Center as well as Independent Director of J.S. Machine, Wuchangyu, Angel Yeast, Xingfu Industry and so on. He has been acted as Independent Director of the Company since Jul. 2010. Mr. Liu Jianhua, acted as the Team Leader of the Creative Laboratory of Hanmi Pharm. Co., Ltd. from Jul. 2007 to Mar. 2008; acted as the Director of the Planning & Development Department of China National Agrochemical Corporation from Mar. 2008 to Mar. 2011; acted as the interim Secretary of CYL Committee of China National Agrochemical Corporation from Mar. 2011 to Mar.

2012; acted as the Assistant to GM of Sanonda Group Co., Ltd. from Mar. 2012 to May 2012; and he has been the Assistant to GM of the Company since May 2012. Mr. Liu Zhiming, acted as the Factory Director and Party Branch Secretary of the Pesticide 1st Plant of the Company from Jan. 2007 to Dec. 2012; and he has been the Assistant to GM of the Company since Jan. 2013. Mr. Jiang Chenggang, acted as the Supervisor, Deputy Director of the Office and Deputy Secretaries of the Discipline Inspection Commission of the Company from Jun. 2006 to Jun. 2012; acted as the Chairman of the Labor Union, Supervisor, Deputy Director of the Office and Deputy Secretaries of the Discipline Inspection Commission of the Company from Jun. 2012 to Dec. 2012; and he has been the Chairman of the Labor Union, Supervisor and Deputy Secretaries of the Discipline Inspection Commission of the Company since Jan. 2013. Ms. Liu Jun, has acted as Deputy General Manager of Financial Company and Chief of Capital Accounting Department of the Company since Feb. 2007. She also has been Supervisor of the Company since Jun. 2003. Mr. Zhou Cheng, successively took the posts of Vice Factory Director and Factory Director of the Pesticide 5th Plant of the Company, Factory Director and Secretary of Party Branch of the Pesticide 2nd Plant of the Company from Feb. 2000 to Dec. 2009; and he acted as Employee Supervisor of the Company, Factory Director and Secretary of Party Branch of Pesticide 2nd Plant of the Company from Dec. 2009 to Dec. 2012; and he has been the Supervisor and Chief of the Scheduling Division of the Production Department of the Company since Jan. 2013. Mr. Fu Liping, acted as the Vice Factory Director and Factory Director of the Pesticide 3rd Plant of the Company from Jan. 2007 to Dec. 2012; and he has been the Employee Supervisor and Factory Director of the Pesticide 3rd Plant of the Company since Jan. 2013. Mr. Ding Shaojun, acted as the Vice GM and GM of the Sales Company of the Company from Jul. 2001 to Jun. 2009; and acted as the GM and Secretary of Party Branch of the Thermoelectricity Company of the Company from Jul. 2009 to Dec. 2012; and he has been the Supervisor of the Company, GM and Secretary of Party Branch of the Thermoelectricity Company of the Company since Jan. 2013. Mr. Li Zhongxi, has been the Secretary to the Board of Directors and the Office Chief of the Company since Feb. 2000. Post-holding in shareholders’ units √Applicable □Inapplicable Name of the Position in person holding Receives payment the Beginning date Ending date of any post in any Name of the shareholder unit from the shareholder shareholder of office term office term shareholder unit? unit unit Executive Director, GM Li Zuorong Sanonda Group Co., Ltd. and Secretary 1 May 2012 No of Secretary of CPC Vice Liu Anping Sanonda Group Co., Ltd. Secretary of 1 May 2012 No CPC Post-holding in other units

√Applicable □Inapplicable

Name of the person holding Position in Beginning date Ending date of Receives payment Name of other unit any post in other unit of office term office term from other unit? other units

Li Zuorong Sanonda Foreign Trade Co., Ltd. Director 1 Dec. 2005 No

Yin Hong Jingzhou Hong Xiang Chemical Co., Ltd. Director 1 Apr. 2007 No

Ai Qiuhong Xiangtan University Professor 1 Jan. 2003 Yes

Zhongnan University of Economics and Vice Zhang Huide 1 Oct. 2002 Yes Law Professor

Hubei Fubon Chemical Technology Co., Independent Zhang Huide 1 Nov. 2010 Yes Ltd. director

Wuhan East Lake High-tech Group Co., Independent Li Dejun 1 Jan. 2008 Yes Ltd. director

Independent Li Dejun Chutian Expressway Co., Ltd. 1 Jun. 2010 Yes director III. Remuneration for directors, supervisors and senior management staffs Decision-making procedure, determining basis and actual payment for the remuneration of directors, supervisors and senior management staffs In 2013 the second temporary shareholders' meeting the Company considered and approved The Appraisal Scheme for Implementing Remuneration of Directors, Supervisors and Senior Management Staffs drew up standing principle of the remuneration of senior management staffs, meanwhile, the appraisal index of operation achievements or management duties for senior management is in accordance with the annual operating target, while at the end of the year, the Board appraised Senior management staffs based on the work report and business achievement of Senior management staffs. Independent directors would not enjoy salary in the Company while the Company would drop annual allowance (after tax) of RMB 50,000 to independent directors respectively. Independent directors would present relevant meetings, perform responsibilities according to Articles of Association and apply for allowance factually. Annual salary for supervisors was paid according to their posts. Remuneration of the directors, supervisors and senior management staffs of the Company during the reporting period Unit：Ten thousand Yuan Total Total Actual remuneration remuneration remuneration Name Position Sex Age Tenure status gained from gained from the gained at the shareholder’s Company period-end unit Chairman of Li Zuorong Male 63 Current 36 0 36 the Board

Liu Anping Director, GM Male 46 Current 32 0 32

He Xuesong Director, CFO Male 58 Current 29 0 29

Director, Yin Hong Male 46 Current 29 0 29 Deputy GM Director, Xie Chengli Male 46 Current 29 0 29 Deputy GM Independent Ai Qiuhong Male 45 Current 5 0 5 Director Independent Zhang Huide Female 49 Current 5 0 5 Director Independent Li Dejun Male 56 Current 5 0 5 Director Assistant to Liu Jianhua Male 35 Current 22 0 22 GM Assistant to Liu Zhiming Male 38 Current 22 0 22 GM Jiang Chief of the Male 39 Current 22 0 22 Chenggang Supervisor

Liu Jun Supervisor Female 52 Current 12 0 12

Zhou Cheng Supervisor Male 44 Current 12 0 12

Fu Liping Supervisor Male 48 Current 12 0 12

Ding Shaojun Supervisor Male 51 Current 12 0 12

Secretary to the Li Zhongxi Male 43 Current 20 0 20 Board

Total ------304 0 304

Particulars about the equity incentives awarded for the directors, supervisors and senior management of the Company □ Applicable √ Inapplicable

IV. Changes in engagement and dismissal of Directors, Supervisors and Senior Management Staffs within the reporting period

Name Position Type Date Reason

Employed on the 16th meeting of the six session of the Yin Hong Deputy GM Employee 6 Jan. 2013 board of director

Elected by the Company’s Second Temporary General Xie Chengli Director Elected 24 Jan. 2013 Meeting of Shareholders in 2013

Employed on the 16th meeting of the six session of the Xie Chengli Deputy GM Employee 6 Jan. 2013 board of director

Liu Zhiming Assistant to GM Employee 6 Jan. 2013 Employed on the 16th meeting of the six session of the

board of director

Chief of the Elected on the 14th meeting of the six session of the board Jiang Chengang Elected 6 Jan. 2013 supervisor of supervisor

Elected on the 12 session of the Congress of Workers and Fu Liping supervisor Elected 6 Jan. 2013 Staff

Elected by the Company’s Second Temporary General Ding Shaojun supervisor Elected 24 Jan. 2013 Meeting of Shareholders in 2013 V. Particulars about changes in core technical team or key technicians during the reporting period (not directors, supervisors or senior management) Inapplicable VI. About employees (I) As at 31 Dec. 2013, the Company totally had 2122 employees in service, and has to undertake partial expenses for 1236 retired workers. The Company executed overall labor contract system, and carried out relevant provisions stipulated by the state as well as local laws and statutes. Expenses for retirees were all paid by society. (II) Specialty classification of employees: Specialty category Number Production personnel 1545 Technical personnel 262 Financial personnel 28 Sales personnel 62 Administrative personnel 225

Pie chart:

Sale Administrative personnel Financial personnel

Production personnel Technical personnel Technical personnel

Financial personnel

Sale personnel Production personnel Administrative personnel

(III) Education classification of employees:

Education Number Master 17 Bachelor 330 Junior college 539 Other 1236 Pie chart:

Master 0.80%

Bachelor 15.55%

Other Junior college Master

Bachelor Junior college

Other

(IV) Employee’s remuneration policy The Company firstly reset the positions and personnel as well as adjusted the wage structure, set up Salary Management Regulations of 2013 and strengthened staffs’ position performance appraisal. Secondly, adjust the basic wage and post performance salary. Thirdly, established legal holiday overtime management regulations, according to the standard prescribed by the national legal holiday overtime pay. (V) Employee’s training plan and relevant situation According to the needs of production and operation, the Company promulgated the annual training plan, held the new “three rules” training for production personnel, training for chemical analysts, pre-post training for new employees and remote training for team leader as well as started up the “S.H.E” training work; besides, it strengthened the education on safety & environmental protection for the teams of workshop and training for key position & special position, and required all the personnel in special position or operating hazardous chemicals to work with relevant certificate, so as to ensure the normal operation of the production and operation of the Company.

Section VIII. Corporate Governance

I. Basic information of corporate governance During the reporting period, the Company continuously improved the awareness of corporate governance and corporate governance structure and perfected the corporate system as well as standardized the operation of the Company, promoted internal control activities, and constantly improve the Company's management levels stringently according to requirements of relevant laws and regulations like the Company Law, Securities Law, and Corporate Governance Principle of Listed Company, as well as Rules for Listing Shares in Shenzhen Stock Exchange. During the reporting period, the Company set up “Management System of Change of Share Holding in Directors, Supervisors and Senior Managers "and" Media Questioned Response System of the Company”, and Revised the Remuneration and Appraisal Plan of Directors and Senior Management, and Perfected the Management System of Related transaction, etc according to announcement On Further Strengthening the Disclose Internal Management During the Annual Report Period and Announcement On the Requirement of the Listed Company Establishing and Improving the System of Media Questioned the Rapid Response Issued by Securities Regulatory Bureau of Hubei Province. Whether it exists any difference between the corporate governance and the Company Law and relevant rules of CSRC or not? □ Yes √ No There is no difference between the corporate governance and the Company Law and relevant rules of CSRC. Progress of corporate governance activities, promulgation and implementation of Registration System for Information Insiders During the reporting period, the Company corrected the development of corporate governance, improve corporate governance, and promptly report to the Regulatory Bureau of Hubei Province feasibly according to the relevant requirements of Announcement on Related Work about Special Activities the Company Ready to Further Promote issued by CSRC and rectification requirements of Decision About Measures of Hubei Sanonda Co., Ltd., Shall Be Ordered to Correct (Hubei Regulatory [2013] No. 1 ) Issued by Securities Regulatory Bureau of Hubei Province. On February 4, 2013, Rectification Report of the Securities Regulatory Bureau of Hubei Province‘s Decision on to Order the Company to Correct. During the reporting period, the Company actively take part in Standard operation, internal control, information disclosure etc. training activities organized by Securities Regulatory Bureau of Hubei Province, Association of Listed Company and SZSE, and continuously strengthen the learning of Directors, Supervisors and Senior Managers and information disclosure staffs, timely follow up new laws and regulations related to standardized operation of listed company, About China National Chemical Corporation’s requirement on the Company to participate in the centralized purchasing of coal related matters, the Company urged it to operate strictly in accordance with the requirements of standard operation of listed companies, and should not interfere the operation of listed companies and timely report to the Regulatory Bureau of Hubei Province. Under the attention of the Regulatory Bureau of Hubei Province，the Company continuously standardize and reduce the related transaction with the relevant indirect control shareholder and vindicate the independence of listed company . as for the inevitable related transactions, the Company strictly implemented relevant decision-making processes，ensured the

fairness of the related transactions, and implemented the information disclosure obligation. Deeply promoted internal control system construction, improve the system of process, and used the information methods to make best practices curing to the OA platform, continuously improved the Company's internal control management level. Mar. 2012, at which reviewed and approved the revised Registration System for Information Insiders, for details please refer to the announcement published on www.cninfo.com.cn dated 16 Mar. 2012. During the reporting period, the Company made detailed registration and kept the record for the information insiders according to the system while planning significant asset reorganization and preparing periodical reports. Besides, it actively organized its directors, supervisors and senior management staffs to attend relevant trainings of CSRC Hubei Bureau, meanwhile, it organized relevant staffs, who may touch the inside information, to learn relevant laws, rules and regulations, so as to increase their awareness for standardization and confidence, then it forwarded relevant documents to China National Agrochemical Corporation and the engaged CPAs firm as well as other external institutions, and standardized relevant behaviors regarding reporting relevant information to the outside and external information users using the Company’s information. After self-examination, no information insider was found to trade the Company’s shares by using the insider information or during the sensitive period. II. Particulars about annual shareholders’ general meeting and special shareholders’ general meeting held during the reporting period 1. Particulars about annual shareholders’ general meeting held during the reporting period Session Convening date Name of proposal Resolution Disclosure date Disclosure index 1. Annual Work Report of the Board 2012; 2. Annual Work Report of the Supervisory Board Announcement on 2012; 3. Annual Resolutions Made at Financial Statement the 2012 Annual Report 2012; 4. Shareholders’ Annual Report and General Meeting Its Abstract 2012; 5. 2012 Annual All the proposals are (Announcement No.: Annual Profit Shareholders’ approved at the 2013-19) was 9 Apr. 2013 Distribution Plan 10 Apr. 2013 General Meeting session published on China 2012; Securities Journal, 6. Proposal about Securities Times, Ta Provide Maximum Kung Pao and Amount Guarantee www.cninfo.com.c of 77 Million Yuan n for New Loans

Offered by Holding Equity Ratio (90%) of the Subsidiary Company Hubei Sanonda Foreign

Trade Co., Ltd., 7. Proposal about the Company’s 2013 Annual Estimated Daily Related Transactions 8. Related Transaction Management System. 2. Particulars about special shareholders’ general meeting held during the reporting period Session Convening date Name of proposal Resolution Disclosure date Disclosure index 1. Supplement Xie Chengli As A Director of Sixth Session of the Board of Director of the Company 2. Supplement Ding Shaojun As A Supervisor of Sixth Session of the Board Announcement on of Supervisor of the Resolutions Made at Company 3. the First Special Proposal on the Shareholders’ Company’s parent General Meeting for The First Special company Applying 2013 All the proposals are Shareholders’ A Bank Current (Announcement No.: approved at the General Meeting for 24 Jan. 2013 Loan & Bank 25 Jan. 2013 2013-7) was session 2013 Acceptance with the published on China

Credit Line of RMB Securities Journal, 1.548 Billion in Securities Times, Ta 2013 and Kung Pao and Authorizing the www.cninfo.com.c Chairman of the n Board of the Company to Approve Relevant Loans within the Credit Line for the Year; 4. Proposal about Provide Maximum Amount Guarantee of 280.8 Million

Yuan for the Subsidiary Company Hubei Sanonda Foreign Trade Co., Ltd. According to Holding Equity Ratio (90%).

1. Proposal on China Chemical Finance Limited Continue to Provide Financial Services for the Announcement on Company. 2. Resolutions Made at Proposal on the Second Special Investing in 300000 Shareholders’ Tons/Year (200000 General Meeting for The Second Special Tons/Year) Caustic All the proposals are 2013(Announcement Shareholders’ Soda Plant Technical approved at the No.: 2013-30) was General Meeting for 20 Jun. 2013 Renovation Projects 21 Jun. 2013 session published on China 2013 for Energy Securities Journal, Conservation and Securities Times, Ta Emissions Kung Pao and Reduction; 3. www.cninfo.com.c Proposal of the n Revising of

Remuneration and Appraisal Scheme of the Company Directors and Senior Managers.

1. Proposal of Announcement on Signed general Resolutions Made at Contracting Project the Third Special Contract with Shareholders’ Related Party about The Third Special General Meeting for 300000 Tons/Year All the proposals are Shareholders’ 2013(Announcement (200000 Tons/Year) approved at the General Meeting for 9 Aug. 2013 10 Aug. 2013 No.: 2013-40) was Caustic Soda Plant session 2013 published on China Technical Securities Journal, Renovation Projects Securities Times, Ta for Energy Kung Pao and Conservation and www.cninfo.com.c Emissions Reduction n (Ⅰ 200000

Tons/Year of Ionic Membrane Caustic Soda) Area B EPC

Announcement on 1. Proposal About Resolutions Made at Hiring Rui Hua the Forth Special Certified Public Shareholders’ The Forth Special Accountants (LLP) General Meeting for All the proposals are Shareholders’ As the Company's 2013(Announcement approved at the General Meeting for 13 Dec. 2013 2013 Annual 14 Dec. 2013 No.: 2013-69) was session 2013 Financial Statements published on China

Audit Institutions Securities Journal, and the Internal Securities Times, Ta Control Audit Kung Pao and Institutions www.cninfo.com.c n III. Performance of the Independent Directors during the Reporting Period 1. Particulars about the independent directors attending the board sessions and the shareholders’ general meetings Particulars about the independent directors attending the board sessions Failing to present Presence by Name of independent Due presence Presence in Entrusted in person for two telecommunicati Absence (times) directors (times) person (times) presence (times) consecutive on (times) sessions or not

Ai Qiuhong 11 6 4 1 0 No

Zhang Huide 11 7 4 0 0 No

Li Dejun 11 7 4 0 0 No

Presence of independent directors in shareholders’ general meeting (times) 5

Explanation on failing to present in person for two consecutive sessions Inapplicable 2. Particulars about independent directors propose objection on relevant events Whether independent directors propose objection on relevant events or not? □ Yes √ No The independent directors didn’t propose objection on relevant events during the reporting period. 3. Other explanation on performance of independent directors Whether the advices of independent directors for the Company were adopted or not? □Yes □ No Explanation on the advices of independent directors for the Company being adopted or not adopted During the reporting period, the Company’s independent director stringently according to requirements of relevant laws and regulations like Corporate Governance Principle of Listed Companies, Rules for Listing Shares in Shenzhen Stock Exchange, Company Law, the Guidance of

Establishing the Independent Director System of Listed Company, Certain Rules on Strengthening the Protection of Social Public Offerings Shareholder Rights and Interests and the Independent Director System of Listed Company actively take part in the board of directors and general meeting of shareholders and the operation of the Company. During the reporting period, the independent director issue independent and impartial opinion upon related party transaction, internal control, asset transactions, appointment or dismissal of senior executives etc that need the comment of the independent director , provide professional advice to the significant events of the Company, carried out effective supervision to the production and business operation and financial activities of the Company and safeguard the legitimate rights and interests of the Company and all shareholders. IV. Performance of the Special Committees under the Board during the reporting period (I) Duty performance of the Audit Committee under the Board: According to regulations of CSRC and Shenzhen Stock Exchange, Detailed Rules for the Implementation of the Audit Committee of the Board of the Company Based on the principle of faithfulness, give full play to the supervisory function, during the reporting period mainly fulfill the following duties: 1. Daily work A. Supervise and review the Company's financial information and its disclosure. B. Supervise the Company's internal audit system and its implementation. C. Review whether the Company’s establish a sound internal control system and its implementation. D. Supervise the communication between internal audit and external audit 2. Related work of the annual report in 2013 In the Company’s 2013 annual report audit process, the Audit Committee of the Board according to the requirements of Procedure for Audit Committee Concerning Annual Audit Work, do the following works:

A. Before the entry of the accountants, the Audit Committee of the Company reviewed the Company's financial and accounting reports which formed a preliminary examination opinion, the Audit Committee of the Company conducted full communication with the annual auditor on the audit schedule and the audit tips, etc B. After the entry of the accountants, Audit Committee of the Company conducted the on-site communication with the certified public accountants on the audit plan and problems discovered in auditing significant events, supervise and urge them to submit audit report within the prescribed time After the initial audit opinions issued by certified public accountants of the Company, the Audit Committee review the 2013 Annual Financial and Accounting Report and form the written review opinions. C. Certified public accountants issued the standard without reservations opinions of the Company’s 2013 Annual Audit Report, the Audit Committee review the audit report and held meeting again, after carefully examined, all of the Audit Committee approved the Company’s 2013 Annual Financial and Accounting Report and submitted to the Company's board of directors. (II) Duty performance of the Remuneration & Appraisal Committee under the Board: During the reporting period, the Remuneration & Appraisal Committee of the Company examined Proposal of the Remuneration of the Directors, Supervisors and Senior Management Staffs of the

Company in 2013, evaluate annual performance of their duties of the directors, supervisors and senior management staffs of the Company, put forward the Company senior management staffs performance incentives and submitted to the board of directors of the Company.

(III) Duty performance of the Nomination Committee under the Board: In accordance with the Company’s Articles of Association and Rules for Nomination Committee under the Board, the Company’s Nomination Committee carefully examined the senior management staffs engaged during the reporting period, and submitted relevant proposals to the Board of Directors for review and approval.

(IV) Duty performance of Strategy Committee under the Board: During the reporting period, the Strategy Committee studied long-term development strategic planning and put forward suggestions for the Company. V. Performance of the Supervisory Committee Whether the Supervisory Committee finds the Company existing risks or not in the supervisory activities during the reporting period? □ Yes √ No The Supervisory Committee has no objection on the supervised events during the reporting period

VI. Particulars about the Company’s “five-separation” from the controlling shareholder in respect of business, personnel, assets, organization and financing The Company totally kept separation from the controlling shareholder in respect of business, personnel, assets, organization and financing that it owned an independent and complete business as well as self-operation capability.

VII. Particulars on horizontal competition

The Company has horizontal competition against the related parties under the same control of China National Agrochemical Corporation—Shandong Dacheng Pesticide Co., Ltd. and Jiangsu Anpon Electrochemical Co., Ltd on the sales of DDVP, paraquat and chlor-alkali, etc., which amount involved accounted for a low proportion to operating revenue of the Company. Meanwhile, target sales regions of the Company differed from them, and then there was no important influence on the Company due to apparent competition. During the reporting period, Celsius Property B.V. （purchaser）implement tender offer to Sanonda B, The Company and its indirect controlling shareholders Makhteshim-Agan Industries Ltd.and China National Chemical Corporation made corresponding commitments upon events like avoiding horizontal competition and standardizing related transactions. Details are in section 5 Important Events of the report.

VIII. Performance appraisal and incentive system for senior management staffs

In respect of the appraisal for senior management staffs, the Company is mainly in accordance with the annual business performance and performance of personal duties to realize annual remuneration to senior management staffs. And the Company hasn’t conducted any equity incentive plan recently. The Company will, in line with market-oriented principles, constantly perfect appraisal and

incentive mechanism, closely link remuneration of senior management staffs with administration level and business performance, fully arouse and motivate enthusiasm and creativity of senior management staffs, and maximize shareholder’s value as a result.

Section IX. Internal Control

I. Construction of internal control of the Company During the reporting period, in accordance with the Internal Control Manual (formal version) reviewed and approved at the 16th Session of the Sixth Board of Directors of the Company on 6 Jan. 2013, the Company proceeded with the implementation of internal control, within the scope of the Company. In the process of implementation, through the implementation of on-line control platform (OA) of workflow, and in combination with the practical situation of on-line operation, the Company institutionalized, processed, and informationized all aspects of the work. At the same time, make internal control evaluation and audit work, further improve the system of internal control, and optimize the process, practically and effectively monitoring the risk of Company operation. II. Announcement from the Board to the responsibility of internal control It is the responsibility of the Board of the Company to establish, to perfect as well as to effective conduct internal control. Managers shall be responsible for the organization of the leading daily operation of Company’s internal control. The Board of the Company and all directors guaranteed that the Self-appraise Report of Internal Control for 2013 does not contain any false or misleading statements or omit any material facts and hereby accept, individually and collectively, responsibility for the truth, accuracy and completeness of the contents of this report. III. Basis on establishing the internal control for financial report The Company established the internal control for financial report according to the Enterprise Accounting Standards, Internal Control System and relevant regulations of the regulatory authorities. Besides, it’s also in accordance with the regulations and requirements of the Basic Rules for Enterprise Internal Control and Supporting Guidelines, Guideline on Internal Control for Listed Companies of Shenzhen Stock Exchange as well as the Internal Control Brochure of the Company and relevant supporting management systems and documents.

IV. Self-appraisal report on internal control Particulars about significant deficits of internal control found during the reporting period in the self-appraisal report on internal control No significant deficits were found during the reporting period. Disclosure date of the 6 Mar. 2014 Self-appraisal Report on Internal

Control Disclosure index of the Self-appraisal Report on Internal http://www.cninfo.com.cn Control V. Audit report on internal control √Applicable □ Inapplicable Audit opinion paragraphs in the Auditor’s Report on Internal Control We believe that the Company has maintained effective internal control on financial report in all significant respects according to the Basic Rules for Enterprise Internal Control and relevant regulations on 31 Dec. 2013. Disclosure date of the Auditor’s 6 Mar. 2014

Report on Internal Control

Disclosure index of the Auditor’s http://www.cninfo.com.cn Report on Internal Control Whether the CPAs firm issues an Auditor’s Report on Internal Control with non-standard opinion or not? □ Yes √ No Whether the Auditor’s Report on Internal Control from the CPAs firm is in consistent with the Self-appraisal Report from the Board or not? √ Yes □ No VI. Establishment and execution of rules of accountability for significant mistakes in annual report information disclosure The Company has established Rules of Accountability for Significant Mistakes in Annual Report Information Disclosure (reviewed and approved on the 24th Session of the 5th Board of Directors), continued to enforced training of employee’s business knowledge and awareness of responsibility, improved information transfer, review and inspection, disclosure procedure, ensured the authenticity, accuracy and completeness of disclosed information, prevented material omissions, faulty events from happening. In the reporting period, there was no particular about correction of significant accounting errors or supplementation of significant information omission or correction on prediction of business earnings.

Section X. Financial Report

I. Auditor’s Report Type of audit opinion Standard unqualified audit opinion Date for signing the auditor’s report 4 Mar. 2013 Name of the audit firm Rui Hua China Certified Public Accountants (LLP) Document Number of the auditor’s report RUIHUA Zi[2014]No. 01740005 Name of the CPA. Hao Guoming Kuang Xiaochang

Text of the Auditor’s Report

Auditor’s Report

RUIHUA Zi[2014]No. 01740005

TO THE SHAREHOLDERS OF HUBEI SANONDA CO., LTD. We have audited the accompanying financial statements of Hubei Sanonda Co., Ltd. (the “Company”) and its subsidiaries (hereinafter jointly referred to as “the Group”), which comprise the consolidated and the Company’s balance sheets as at 31 Dec. 2013, the consolidated and the Company’s income statements, the consolidated and the Company’s statements of change in equity, the consolidated and the Company’s cash flow statements for the year then ended, and notes to the financial statements. I. The management level’s responsibility for the financial statements The management of the Company is responsible for the preparation of these financial statements and fair presentation. These responsibilities include: (1) preparing financial statements according to the Accounting Standards for Business Enterprises and make them a fair presentation; and (2) designing, implementing and maintaining internal control relevant to the preparation of financial statements that are free from material misstatement, whether due to fraud or error. II. Auditor’s responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audit in accordance with Auditing Standards for CICPA. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit includes performing audit procedures, so as to obtain audit evidence to support the amounts and disclosures in the financial statements. Audit procedures are relied on the auditors’ judgments, including assessment on the risk of material misstatement of these financial statements arising from fraud or error. In risk assessment procedures, we consider internal controls relating to the preparation of these financial statements to design appropriate audit procedures. An audit also includes assessing the reasonability of accounting principles

used and significant estimates made by the management, as well as evaluating the overall financial statements presentation. We believe that the audit evidence we have obtained is sufficient and effective, providing a reasonable basis for our opinion. III. Audit opinion In our opinion, the financial statements comply with the Accounting Standards for Business Enterprises in all material respects and present fairly the Group’s consolidated financial position as at 31 Dec. 2013 and its consolidated business results and cash flows for the year then ended, as well as the Company’s financial position as at 31 Dec. 2013 and its business results and cash flows for the year then ended.

Rui Hua China Certified Public Accountants (LLP) CPA of China：Hao Guomin

Beijing·China CPA of China：Kuang Xiaochang

4 March 2013

II. Financial statements Monetary unit of notes to financial statements: RMB Yuan 1. Consolidated balance sheet Prepared by Hubei Sanonda Co., Ltd. Unit: RMB Yuan Item As of 31 Dec. 2013 As of 31 Dec. 2012 Current Assets:

Monetary funds 414,065,921.21 175,181,365.77

Settlement reserves

Intra-group lendings

Transactional financial assets

Notes receivable 41,103,985.15 23,690,345.75

Accounts receivable 209,166,447.16 180,964,377.73

Accounts paid in advance 43,042,028.26 37,505,796.88

Premiums receivable

Reinsurance premiums receivable Receivable reinsurance contract reserves Interest receivable

Dividend receivable

Other accounts receivable 7,224,391.05 18,815,365.79 Financial assets purchased under agreements to resell

Inventories 258,274,457.88 366,759,772.17

Non-current assets due within 1 year

Other current assets

Total current assets 972,877,230.71 802,917,024.09

Non-current assets: Loans by mandate and advances granted Available-for-sale financial assets

Held-to-maturity investments

Long-term accounts receivable

Long-term equity investment 9,153,782.63 9,153,782.63

Investing property 4,154,412.50 4,394,812.50

Fixed assets 1,324,222,385.03 1,308,629,352.60

Construction in progress 234,487,866.23 121,263,645.49

Engineering materials

Disposal of fixed assets

Production biological assets

Oil-gas assets

Intangible assets 137,371,149.10 143,904,010.68

R&D expense

Goodwill

Long-term deferred expenses

Deferred income tax assets 12,619,948.14 15,231,757.10

Other non-current assets 13,384,400.00

Total of non-current assets 1,735,393,943.63 1,602,577,361.00

Total assets 2,708,271,174.34 2,405,494,385.09

Current liabilities:

Short-term borrowings 359,220,205.55 355,708,601.70

Borrowings from Central Bank Customer bank deposits and due to banks and other financial institutions Intra-group borrowings

Transactional financial liabilities

Notes payable 40,000,000.00

Accounts payable 156,037,973.10 198,994,327.26

Accounts received in advance 79,437,442.04 59,448,030.30

Financial assets sold for repurchase Handling charges and commissions payable Employee’s compensation payable 25,332,986.86 7,364,901.89

Tax payable 73,337,138.50 -19,105,426.98

Interest payable

Dividend payable 250,000.00 349,463.30

Other accounts payable 34,544,608.36 31,369,677.77

Reinsurance premiums payable

Insurance contract reserves Payables for acting trading of securities Payables for acting underwriting of securities Non-current liabilities due within 1 77,390,000.00 409,550,000.00 year Other current liabilities

Total current liabilities 845,550,354.41 1,043,679,575.24

Non-current liabilities:

Long-term borrowings 296,090,000.00 80,000,000.00

Bonds payable

Long-term payables 650,000.00 650,000.00

Specific payables

Estimated liabilities

Deferred income tax liabilities

Other non-current liabilities 19,538,888.89 16,309,089.24

Total non-current liabilities 316,278,888.89 96,959,089.24

Total liabilities 1,161,829,243.30 1,140,638,664.48 Owners’ equity (or shareholders’ equity) Paid-up capital (or share capital) 593,923,220.00 593,923,220.00

Capital reserves 263,184,043.66 266,090,773.02

Less: Treasury stock

Specific reserves 16,059,288.71 13,825,364.46

Surplus reserves 126,334,248.31 92,680,039.14

Provisions for general risks

Retained profits 546,688,770.98 289,017,364.90

Foreign exchange difference

Total equity attributable to owners of 1,546,189,571.66 1,255,536,761.52 the Company Minority interests 252,359.38 9,318,959.09

Total owners’ (or shareholders’) equity 1,546,441,931.04 1,264,855,720.61 Total liabilities and owners’ (or 2,708,271,174.34 2,405,494,385.09 shareholders’) equity

Legal representative: Li Zuorong Person-in-charge of the accounting work: He Xuesong

Chief of the accounting division: He Xuesong 2. Balance sheet of the Company Prepared by Hubei Sanonda Co., Ltd. Unit: RMB Yuan Item As of 31 Dec. 2013 As of 31 Dec. 2012 Current Assets:

Monetary funds 329,849,120.35 149,485,252.01

Transactional financial assets

Notes receivable 41,103,985.15 23,690,345.75

Accounts receivable 193,013,915.85 165,720,133.59

Accounts paid in advance 42,670,595.78 26,871,248.52

Interest receivable

Dividend receivable

Other accounts receivable 144,872,701.27 146,640,832.38

Inventories 254,766,534.37 343,538,912.44

Non-current assets due within 1 year

Other current assets

Total current assets 1,006,276,852.77 855,946,724.69

Non-current assets:

Available-for-sale financial assets

Held-to-maturity investments

Long-term accounts receivable

Long-term equity investment 64,680,418.04 83,320,011.36

Investing property 4,154,412.50 4,394,812.50

Fixed assets 1,153,224,118.73 1,228,280,759.41

Construction in progress 234,487,866.23 39,081,376.28

Engineering materials

Disposal of fixed assets

Production biological assets

Oil-gas assets

Intangible assets 125,275,394.07 129,018,867.09

R&D expense

Goodwill

Long-term deferred expenses

Deferred income tax assets 7,587,719.43 10,255,355.43

Other non-current assets 13,384,400.00

Total of non-current assets 1,602,794,329.00 1,494,351,182.07

Total assets 2,609,071,181.77 2,350,297,906.76

Current liabilities:

Short-term borrowings 283,000,000.00 324,750,000.00

Transactional financial liabilities

Notes payable 40,000,000.00

Accounts payable 151,132,431.37 191,385,928.88

Accounts received in advance 49,176,997.90 63,203,757.83

Employee’s compensation payable 22,813,584.24 3,910,205.00

Tax payable 87,016,104.58 -3,364,366.14

Interest payable

Dividend payable 250,000.00 349,463.30

Other accounts payable 33,560,585.60 25,718,709.48 Non-current liabilities due within 1 77,390,000.00 409,550,000.00 year Other current liabilities

Total current liabilities 744,339,703.69 1,015,503,698.35

Non-current liabilities:

Long-term borrowings 296,090,000.00 80,000,000.00

Bonds payable

Long-term payables 650,000.00 650,000.00

Specific payables

Estimated liabilities

Deferred income tax liabilities

Other non-current liabilities 10,688,888.89 6,860,000.00

Total non-current liabilities 307,428,888.89 87,510,000.00 Owners’ equity (or shareholders’ 1,051,768,592.58 1,103,013,698.35 equity)

Paid-up capital (or share capital)

Capital reserves 593,923,220.00 593,923,220.00

Less: Treasury stock 263,799,837.18 263,799,837.18

Specific reserves

Surplus reserves 11,090,176.40 8,127,543.89

Provision for general risks 126,334,248.31 92,680,039.14

Retained profits

Foreign exchange difference 562,155,107.30 288,753,568.20

Total owners’ (or shareholders’) equity Total liabilities and owners’ (or 1,557,302,589.19 1,247,284,208.41 shareholders’) equity Owners’ equity (or shareholders’ 2,609,071,181.77 2,350,297,906.76 equity)

Legal representative: Li Zuorong Person-in-charge of the accounting work: He Xuesong

Chief of the accounting division: He Xuesong 3. Consolidated income statement Prepared by Hubei Sanonda Co., Ltd. Unit: RMB Yuan Item As of 31 Dec. 2013 As of 31 Dec. 2012 I. Total operating revenues 3,078,467,310.53 2,345,146,528.97

Including: Sales income 3,078,467,310.53 2,345,146,528.97

Interest income

Premium income Handling charge and commission income II. Total operating cost 2,640,952,274.78 2,199,281,115.61

Including: Cost of sales 2,346,340,331.58 1,952,406,666.44

Interest expenses Handling charge and commission expenses Surrenders

Net claims paid Net amount withdrawn for the insurance contract reserve Expenditure on policy dividends

Reinsurance premium

Taxes and associate charges 12,668,549.20 1,206,440.42

Selling and distribution 94,995,306.85 72,179,824.50 expenses Administrative expenses 113,149,064.68 95,355,847.53

Financial expenses 65,649,400.32 63,765,765.51

Asset impairment loss 8,149,622.15 14,366,571.21 Add: Gain/(loss) from change in fair value (“-” means loss) Gain/(loss) from investment (“-” 4,656,748.75 means loss) Including: share of profits in associates and joint ventures Foreign exchange gains (“-” means loss) III. Business profit (“-” means loss) 442,171,784.50 145,865,413.36

Add: non-operating income 3,871,274.30 4,114,770.40

Less: non-operating expense 11,672,742.17 7,321,440.10 Including: loss from non-current asset 11,450,885.91 3,684,292.94 disposal IV. Total profit (“-” means loss) 434,370,316.63 142,658,743.66

Less: Income tax expense 114,390,148.66 38,231,730.11

V. Net profit (“-” means loss) 319,980,167.97 104,427,013.55 Including: Net profit achieved by combined parties before the combinations Attributable to owners of the 320,811,958.67 103,768,969.35 Company Minority shareholders’ income -831,790.70 658,044.20

VI. Earnings per share -- --

(I) Basic earnings per share 0.5402 0.1747

(II) Diluted earnings per share 0.5402 0.1747

Ⅶ. Other comprehensive incomes

Ⅷ. Total comprehensive incomes 319,980,167.97 104,427,013.55 Attributable to owners of the 320,811,958.67 103,768,969.35 Company Attributable to minority -831,790.70 658,044.20 shareholders Where business mergers under the same control occurred in this reporting period, the net profit achieved by the merged parties before the business mergers was RMB 0.

Legal representative: Li Zuorong Person-in-charge of the accounting work: He Xuesong

Chief of the accounting division: He Xuesong

4. Income statement of the Company Prepared by Hubei Sanonda Co., Ltd. Unit: RMB Yuan Item As of 31 Dec. 2013 As of 31 Dec. 2012 I. Total sales 3,007,040,491.10 2,210,487,572.16

Less: cost of sales 2,300,277,619.49 1,853,397,351.30

Business taxes and surcharges 12,223,695.58 516,270.68

Distribution expenses 84,677,333.60 60,716,439.25

Administrative expenses 91,214,212.09 69,020,410.63

Financial costs 64,768,782.39 61,015,727.08

Impairment loss 3,389,750.48 7,954,200.88 Add: gain/(loss) from change in fair value (“-” means loss) Gain/(loss) from investment (“-” means 7,479,160.05 650,000.00 loss) Including: income form investment on associates and joint ventures II. Business profit (“-” means loss) 457,968,257.52 158,517,172.34

Add: non-business income 3,266,305.06 2,520,922.08

Less: non-business expense 10,604,441.91 1,584,994.00 Including: loss from non-current asset 10,599,867.26 1,584,994.00 disposal III. Total profit (“-” means loss) 450,630,120.67 159,453,100.42

Less: income tax expense 114,088,028.98 36,490,852.31

IV. Net profit (“-” means loss) 336,542,091.69 122,962,248.11

V. Earnings per share -- --

(I) Basic earnings per share 0.5666 0.207

(II) Diluted earnings per share 0.5666 0.207

VI. Other comprehensive income

VII. Total comprehensive income 336,542,091.69 122,962,248.11

Legal representative: Li Zuorong Person-in-charge of the accounting work: He Xuesong

Chief of the accounting division: He Xuesong 5. Consolidated cash flow statement Prepared by Hubei Sanonda Co., Ltd. Item As of 31 Dec. 2013 As of 31 Dec. 2012 I. Cash flows from operating activities:

Cash received from sale of 2,691,050,197.90 1,861,620,151.44

commodities and rendering of service Net increase of deposits from customers and dues from banks 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 deposits of policy holders and investment fund Net increase of disposal of tradable financial assets Cash received from interest, handling charges and commissions Net increase of intra-group borrowings Net increase of funds in repurchase business Tax refunds received 58,313,337.23 55,614,685.79 Other cash received relating to 33,119,249.36 17,571,999.42 operating activities Subtotal of cash inflows from operating 2,782,482,784.49 1,934,806,836.65 activities Cash paid for goods and services 1,613,232,068.36 1,430,361,994.48 Net increase of customer lendings and advances Net increase of funds deposited in the central bank and amount due from banks Cash for paying claims of the original insurance contracts Cash for paying interest, handling charges and commissions Cash for paying policy dividends

Cash paid to and for employees 153,583,613.11 145,434,467.86

Various taxes paid 91,706,538.73 42,290,900.19 Other cash payment relating to 124,258,975.25 83,129,049.30 operating activities Subtotal of cash outflows from 1,982,781,195.45 1,701,216,411.83 operating activities Net cash flows from operating activities 799,701,589.04 233,590,424.82

II. Cash flows from investing activities: Cash received from withdrawal of investments Cash received from return on 4,062,224.59 investments Net cash received from disposal of fixed assets, intangible assets and other 271,413.59 1,003,477.86 long-term assets Net cash received from disposal of 6,607,762.75 subsidiaries or other business units Other cash received relating to investing activities Subtotal of cash inflows from 10,941,400.93 1,003,477.86 investing activities Cash paid to acquire fixed assets, intangible assets and other long-term 354,430,049.71 149,910,066.06 assets Cash paid for investment

Net increase of pledged loans Net cash paid to acquire subsidiaries and other business units Other cash payments relating to investing activities Subtotal of cash outflows from 354,430,049.71 149,910,066.06 investing activities Net cash flows from investing activities -343,488,648.78 -148,906,588.20 III. Cash Flows from Financing

Activities: Cash received from capital contributions Including: Cash received from minority shareholder investments by subsidiaries Cash received from borrowings 1,320,595,618.49 868,889,970.07 Cash received from issuance of bonds Other cash received relating to 12,000,000.00 financing activities Subtotal of cash inflows from financing 1,332,595,618.49 868,889,970.07 activities Repayment of borrowings 1,433,154,014.64 921,320,436.75 Cash paid for interest expenses and 89,221,557.28 69,731,537.60 distribution of dividends or profit Including: dividends or profit paid 350,000.00 350,000.00

by subsidiaries to minority shareholders Other cash payments relating to 33,081,730.00 7,300,000.00 financing activities Sub-total of cash outflows from 1,555,457,301.92 998,351,974.35 financing activities Net cash flows from financing activities -222,861,683.43 -129,462,004.28 IV. Effect of foreign exchange rate 1,533,298.61 371,845.44 changes on cash and cash equivalents V. Net increase in cash and cash 234,884,555.44 -44,406,322.22 equivalents Add: Opening balance of cash and 175,181,365.77 219,587,687.99 cash equivalents VI. Closing balance of cash and cash 410,065,921.21 175,181,365.77 equivalents

Legal representative: Li Zuorong Person-in-charge of the accounting work: He Xuesong

Chief of the accounting division: He Xuesong 6. Cash flow statement of the Company Prepared by Hubei Sanonda Co., Ltd. Unit: RMB Yuan Item As of 31 Dec. 2013 As of 31 Dec. 2012 I. Cash flows from operating activities: Cash received from sale of 2,638,952,260.66 1,716,618,145.81 commodities and rendering of service Tax refunds received 32,941,659.93 37,144,382.78 Other cash received relating to 20,600,832.97 15,809,401.46 operating activities Subtotal of cash inflows from operating 2,692,494,753.56 1,769,571,930.05 activities Cash paid for goods and services 1,583,654,948.22 1,263,552,512.40

Cash paid to and for employees 138,377,629.21 126,840,799.51

Various taxes paid 86,634,370.77 34,937,986.93 Other cash payment relating to 122,211,560.29 87,057,042.83 operating activities Subtotal of cash outflows from 1,930,878,508.49 1,512,388,341.67 operating activities Net cash flows from operating activities 761,616,245.07 257,183,588.38

II. Cash flows from investing activities: Cash received from retraction of 24,313,258.78 investments Cash received from return on 4,712,224.59 650,000.00 investments

Net cash received from disposal of fixed assets, intangible assets and other 271,413.59 822,000.16 long-term assets Net cash received from disposal of subsidiaries or other business units Other cash received relating to investing activities Subtotal of cash inflows from 29,296,896.96 1,472,000.16 investing activities Cash paid to acquire fixed assets, intangible assets and other long-term 351,384,766.77 141,538,690.54 assets Cash paid for investment 5,906,730.00 6,551,300.00 Net cash paid to acquire subsidiaries and other business units Other cash payments relating to investing activities Subtotal of cash outflows from 357,291,496.77 148,089,990.54 investing activities Net cash flows from investing activities -327,994,599.81 -146,617,990.38 III. Cash Flows from Financing

Activities: Cash received from capital contributions Cash received from borrowings 939,590,000.00 660,750,000.00

Cash received from bonds issuance Other cash received relating to 12,000,000.00 financing activities Subtotal of cash inflows from financing 951,590,000.00 660,750,000.00 activities Repayment of borrowings 1,097,410,000.00 730,000,000.00 Cash paid for interest expenses and 84,215,236.42 63,612,576.90 distribution of dividends or profit Other cash payments relating to 27,175,000.00 6,300,000.00 financing activities Sub-total of cash outflows from 1,208,800,236.42 799,912,576.90 financing activities Net cash flows from financing activities -257,210,236.42 -139,162,576.90 IV. Effect of foreign exchange rate -47,540.50 25,810.79 changes on cash and cash equivalents V. Net increase in cash and cash 176,363,868.34 -28,571,168.11 equivalents Add: Opening balance of cash and 149,485,252.01 178,056,420.12 cash equivalents

VI. Closing balance of cash and cash 325,849,120.35 149,485,252.01 equivalents

Legal representative: Li Zuorong Person-in-charge of the accounting work: He Xuesong

Chief of the accounting division: He Xuesong 7. Consolidated statement of changes in owners’ equity Prepared by Hubei Sanonda Co., Ltd. Reporting period Unit: RMB Yuan Reporting period Equity attributable to owners of the Company Paid-up Item Total capital Less: General Minority Capital Specific Surplus Retaine owners’ (or treasury risk Others interests reserve reserve reserve d profit equity share stock reserve capital) I. Balance at the end of the 593,923 266,090, 13,825,3 92,680, 289,017, 9,318,959 1,264,855, previous year ,220.00 773.02 64.46 039.14 364.90 .09 720.61 Add: change of accounting policy Correction of errors in previous periods Other

II. Balance at the beginning of 593,923 266,090, 13,825,3 92,680, 289,017, 9,318,959 1,264,855, the year ,220.00 773.02 64.46 039.14 364.90 .09 720.61 III. Increase/ decrease of -2,906,7 2,233,92 33,654, 257,671, -9,066,59 281,586,21 amount in the year (“-” means 29.36 4.25 209.17 406.08 9.71 0.43 decrease) 320,811, -831,790. 319,980,16 (I) Net profit 958.67 70 7.97 (II) Other comprehensive incomes 320,811, -831,790. 319,980,16 Subtotal of (I) and (II) 958.67 70 7.97

(III) Capital paid in and -2,906,7 -7,495,16 -10,401,89 reduced by owners 29.36 6.09 5.45 1. Capital paid in by owners 2. Amounts of share-based payments recognized in owners’ equity -2,906,7 -7,495,16 -10,401,89 3. Others 29.36 6.09 5.45

33,654, -63,140, -350,000. -29,836,34 (IV) Profit distribution 209.17 552.59 00 3.42

1. Appropriations to 33,654, -33,654, surplus reserves 209.17 209.17 2. Appropriations to general risk provisions 3. Appropriations to -29,486, -350,000. -29,836,34 owners (or shareholders) 343.42 00 3.42

4. Other (V) Internal carry-forward of owners’ equity 1. New increase of capital (or share capital) from capital public reserves 2. New increase of capital (or share capital) from surplus reserves 3. Surplus reserves for making up losses 4. Other

2,233,92 -389,642. 1,844,281. (Ⅵ) Specific reserve 4.25 92 33

1. Withdrawn for the 10,036,5 326,627.8 10,363,207 period 79.50 9 .39

7,802,65 716,270.8 8,518,926. 2. Used in the period 5.25 1 06

(Ⅶ) Other

593,923 263,184, 16,059,2 126,334 546,688, 252,359.3 1,546,441, IV. Closing balance ,220.00 043.66 88.71 ,248.31 770.98 8 931.04 Last year Unit: RMB Yuan Last year

Equity attributable to owners of the Company

Item Paid-up Total Minority capital Less: General owners’ Capital Specific Surplus Retaine interests (or treasury risk Others equity reserve reserve reserve d profit share stock reserve capital) I. Balance at the end of the 593,923 266,649, 17,847,0 80,383, 197,544, 9,118,830. 1,165,466, previous year ,220.00 062.72 14.86 814.33 620.36 03 562.30

Add: retrospective adjustments due to business combinations under the same control Add: change of accounting policy Correction of errors in previous periods Other

II. Balance at the beginning of 593,923 266,649, 17,847,0 80,383, 197,544, 9,118,830. 1,165,466, the year ,220.00 062.72 14.86 814.33 620.36 03 562.30 III. Increase/ decrease of -558,28 -4,021,6 12,296, 91,472,7 200,129.0 99,389,158 amount in the year (“-” means 9.70 50.40 224.81 44.54 6 .31 decrease) 103,768, 658,044.2 104,427,01 (I) Net profit 969.35 0 3.55 (II) Other comprehensive incomes 103,768, 658,044.2 104,427,01 Subtotal of (I) and (II) 969.35 0 3.55

(III) Capital paid in and -558,28 -441,710. -1,000,000. reduced by owners 9.70 30 00 1. Capital paid in by owners 2. Amounts of share-based payments recognized in owners’ equity -558,28 -441,710. -1,000,000. 3. Others 9.70 30 00

12,296, -12,296, -350,000. -350,000.0 (IV) Profit distribution 224.81 224.81 00 0

1. Appropriations to 12,296, -12,296, surplus reserves 224.81 224.81 2. Appropriations to general risk provisions 3. Appropriations to -350,000. -350,000.0 owners (or shareholders) 00 0

4. Other (V) Internal carry-forward of owners’ equity 1. New increase of capital (or share capital) from capital public reserves

2. New increase of capital (or share capital) from surplus reserves 3. Surplus reserves for making up losses 4. Other

-4,021,6 333,795.1 -3,687,855. (Ⅵ) Specific reserve 50.40 6 24

1. Withdrawn for the 10,051,3 809,290.0 10,860,674 period 84.73 3 .76

14,073,0 475,494.8 14,548,530 2. Used in the period 35.13 7 .00

(Ⅶ) Other

593,923 266,090, 13,825,3 92,680, 289,017, 9,318,959 1,264,855, IV. Closing balance ,220.00 773.02 64.46 039.14 364.90 .09 720.61

Legal representative: Li Zuorong Person-in-charge of the accounting work: He Xuesong

Chief of the accounting division: He Xuesong 8. Statement of changes in owners’ equity of the Company Prepared by Hubei Sanonda Co., Ltd. Reporting period Unit: RMB Yuan Reporting period Paid-up Item Less: General Total capital (or Capital Specific Surplus Retained treasury risk owners’ share reserve reserve reserve profit stock reserve equity capital) I. Balance at the end of the 593,923,22 263,799,83 8,127,543. 92,680,039 288,753,56 1,247,284, previous year 0.00 7.18 89 .14 8.20 208.41 Add: change of accounting policy Correction of errors in previous periods Other

II. Balance at the beginning of 593,923,22 263,799,83 8,127,543. 92,680,039 288,753,56 1,247,284, the year 0.00 7.18 89 .14 8.20 208.41

III. Increase/ decrease of amount 2,962,632. 33,654,209 273,401,53 310,018,38 in the year (“-” means decrease) 51 .17 9.10 0.78

336,542,09 336,542,09 (I) Net profit 1.69 1.69 (II) Other comprehensive incomes

336,542,09 336,542,09 Subtotal of (I) and (II) 1.69 1.69 (III) Capital paid in and reduced by owners 1. Capital paid in by owners 2. Amounts of share-based payments recognized in owners’ equity 3. Others

33,654,209 -63,140,55 -29,486,34 (IV) Profit distribution .17 2.59 3.42

1. Appropriations to surplus 33,654,209 -33,654,20 reserves .17 9.17 2. Appropriations to general risk provisions 3. Appropriations to owners -29,486,34 -29,486,34

(or shareholders) 3.42 3.42

2,962,632. 2,962,632. (Ⅵ) Specific reserve 51 51

9,429,984. 9,429,984. 1. Withdrawn for the period 84 84

6,467,352. 6,467,352. 2. Used in the period 33 33

(Ⅶ) Other

593,923,22 263,799,83 11,090,176 126,334,24 562,155,10 1,557,302, IV. Closing balance 0.00 7.18 .40 8.31 7.30 589.19 Last year Unit: RMB Yuan Item Last year Paid-up Capital Less: Specific Surplus General Retained Total

capital (or reserve treasury reserve reserve risk profit owners’ share stock reserve equity capital) I. Balance at the end of the 593,923,22 263,799,83 12,647,237 80,383,814 178,087,54 1,128,841, previous year 0.00 7.18 .00 .33 4.90 653.41 Add: change of accounting policy Correction of errors in previous periods Other

II. Balance at the beginning of 593,923,22 263,799,83 12,647,237 80,383,814 178,087,54 1,128,841, the year 0.00 7.18 .00 .33 4.90 653.41

III. Increase/ decrease of amount -4,519,693. 12,296,224 110,666,02 118,442,55 in the year (“-” means decrease) 11 .81 3.30 5.00

122,962,24 122,962,24 (I) Net profit 8.11 8.11 (II) Other comprehensive incomes 122,962,24 122,962,24 Subtotal of (I) and (II) 8.11 8.11 (III) Capital paid in and reduced by owners 1. Capital paid in by owners 2. Amounts of share-based payments recognized in owners’ equity 3. Others

12,296,224 -12,296,22 (IV) Profit distribution .81 4.81

1. Appropriations to surplus 12,296,224 -12,296,22 reserves .81 4.81 2. Appropriations to general risk provisions 3. Appropriations to owners

(or shareholders) 4. Other (V) Internal carry-forward of owners’ equity 1. New increase of capital (or share capital) from capital public reserves 2. New increase of capital

(or share capital) from surplus

reserves 3. Surplus reserves for making up losses 4. Other

-4,519,693. -4,519,693. (Ⅵ) Specific reserve 11 11

8,396,659. 8,396,659. 1. Withdrawn for the period 59 59

12,916,352 12,916,352 2. Used in the period .70 .70

(Ⅶ) Other

593,923,22 263,799,83 8,127,543. 92,680,039 288,753,56 1,247,284, IV. Closing balance 0.00 7.18 89 .14 8.20 208.41

Legal representative: Li Zuorong Person-in-charge of the accounting work: He Xuesong Chief of the accounting division: He Xuesong

HUBEI SANONDA CO., LTD.

Notes to financial statements of 2013 （Unless otherwise specified, the unit is RMB） I. Company profile Hubei Sanonda Co., Ltd. (hereinafter referred to as "Company" or "the Company") is formerly known as Hubei Sha City Pesticides Factory, a state-run enterprise set up in 1958. As approved by the Hubei Commission for Economic System Reformation and other authorities, Hubei Sha City Pesticides Factory was reorganized as Hubei Sanonda Co., Ltd., which marked Hubei’s first large state-run industrial enterprise to adopt the stock system. On 8 Sept. 1992, upon the said reorganization, the Company was formally established. Later, as approved by the People's Government of Hubei Province and the China Securities Regulatory Commission (“CSRC”), the Company issued 30,000,000 RMB-denominated ordinary shares ("A shares") to the public in Nov. 1993. And the total share capital of the Company was 104,933,900 shares after the public offering. The Sha City Bureau for State-owned Assets Supervision and Administration is the first majority shareholder of the Company, with a capital contribution of RMB 57,467,900, accounting for 54.77% of the Company’s total share capital. On 3 Dec. 1993, shares of the Company were listed in the Shenzhen Stock Exchange. In Apr. 1994, a dividend distribution plan was reviewed and approved at the 1993 Annual Shareholders’ General Meeting. RMB 2.00 was distributed in cash for every 10 shares held by the state and two bonus shares for every 10 shares held by individuals. The bonus shares were listed in 3 May 1994. And the Company’s total share capital rose to 113,988,000 shares

after distribution of the said bonus shares, with shares held by the first majority shareholder accounting for 50.42% of the Company’s total shares. In 1994, Jingzhou City and Sha City were combined and renamed as “Jingsha City”, Jiangling County as “Jiangling District of Jingsha City”, and the Sha City Bureau for State-owned Assets Supervision and Administration and the Jiangling County Bureau for State-owned Assets Supervision and Administration (originally two shareholders of the Company) as “the Jingsha City Bureau for State-owned Assets Supervision and Administration”. As such, the 50.42% and 1.93% equity interests of the Company formerly held by the Sha City Bureau for State-owned Assets Supervision and Administration and the Jiangling County Bureau for State-owned Assets Supervision and Administration respectively were transferred to the Jingsha City Bureau for State-owned Assets Supervision and Administration, which held 52.35% of the Company’s total shares. On 9 Aug. 1995, as approved at the Company’s 1994 Annual Shareholders’ General Meeting, the Jingsha City Bureau for State-owned Assets Supervision and Administration transferred 3,002,700 shares it held in the Company (2.14% of the Company’s total shares) to the Qichun County Bureau for State-owned Assets Supervision and Administration. After the said transfer, the Jingsha City Bureau for State-owned Assets Supervision and Administration (the Company’s first majority shareholder) held 50.21% of the Company’s total shares. In Jul. 1995, the Company held the 1994 Annual Shareholders’ General Meeting, at which a share allotment plan (three shares being allotted for every ten shares) was reviewed and approved. After the said share allotment, the Company’s total number of shares rose to 139,970,500, with the Jingsha City Bureau for State-owned Assets Supervision and Administration holding 44.66%. In Nov. 1996, as approved by the “Document Zheng-Jian-Shang-Zi [1996] No.13” issued by CSRC, the Company carried out the share allotment plan (three shares being allotted for every ten shares) for the year 1996. A total of 41,991,100 shares of the Company were allotted, of which 19,552,900 shares were allotted for state-held shares and 22,438,200 shares for individual-held shares. After the said share allotment, the Company’s total number of shares rose to 181,969,600. And the shareholding ratio of every shareholder remained unchanged after the allotment. In 1996, pursuant to the “E-Zheng-Ban-Han [1995] No.92 Reply of People’s Government of Hubei Province on Authorizing Sanonda Group to Operate State-owned Assets”, in order to safeguard the state-owned shares of the Company held by it, the Jingsha City Bureau for State-owned Assets Supervision and Administration incorporated Sanonda Group and transferred the Company’s equity interests it held to Sanonda Group. As such, Sanonda Group became the Company’s first majority shareholder, holding 44.66% of the Company’s total shares. From 29 Apr. to 5 May 1997, as approved by the “Zheng-Fa (1997) No.23 Document” issued by the Securities Commission under the State Council, the Company issued 0.1 billion domestically-listed foreign shares (B shares) of RMB 1.00 par value, which were listed in the Shenzhen Stock Exchange for trading on 15 May 1997. And the Company exercised the over-allotment options of 15 million shares from 15 May to 21 May in the same year. After issuance of the said B shares, the Company’s total number of shares rose to 296,961,600

shares, and the shareholding ratio of Sanonda Group—the Company’s first majority shareholder—was changed to 27.52%. On 20 May 2005, the Jingzhou City Bureau for State-owned Assets Supervision and Administration and China National Agrochemical Corporation (a wholly-owned subsidiary under China National Chemical Corporation) signed the “Agreement on Transferring Assets of Sanonda Group”. The State-Owned Assets Supervision and Administration Commission of the People’s Government of Hubei Province issued the “E-Guo-Zi-Chan-Quan [2005] No.177 Reply on Transferring State-owned Assets of Sanonda Group with Compensation”. As a result, the People’s Government of Jingzhou City was approved to transfer all state-owned assets of Sanonda Group to China National Agrochemical Corporation with compensation, with the transfer base date on 31 Dec. 2004. After the said transfer, Sanonda Group became a wholly-owned subsidiary under China National Agrochemical Corporation. In 2006, pursuant to the “Guo-Zi-Chan-Quan [2006] No.767 Reply of State-owned Assets Supervision and Administration Commission under the State Council on Affairs Related to Share Reform of Hubei Sanonda Co., Ltd.”, the “Share Reform Plan of Hubei Sanonda Co., Ltd.” was reviewed and approved at the shareholders’ general meeting held on 8 Jul. 2006. And the share reform was completed in Aug. 2006. With the base of 296,961,600 tradable shares, 2.2 shares were paid to tradable A-share holders by non-tradable share holders as consideration for every 10 tradable A-shares, with the total number of shares paid by non-tradable share holders to tradable share holders reaching 21,391,100,000 shares. After the share reform, the total number of the Company’s shares remained unchanged, of which Sanonda Group held 61093,600 shares, accounting for 20.57% of the Company’s total shares. In Nov. 2006 and Mar. 2007, due to a dispute case concerning the provision of a loan guarantee by the Company’s first majority shareholder—Sanonda Group—for an other company, 1.25 million and 0.40 million state-owned corporate shares of the Company held by Sanonda Group were forcibly transferred and auctioned by the court. After the auctions, shares of the Company held by Sanonda Group were reduced to 59,443,600 shares, accounting for 20.02% of the Company’s total shares. In May 2007, the Company held the 2006 Annual Shareholders’ General Meeting, at which the plan for turning capital reserve to share capital was reviewed and approved. As a result, 10 shares were increased for every 10 shares held by all shareholders in Jul. 2007. After the increase, the Company’s total number of shares rose to 593,923,200 shares. The first majority shareholder—Sanonda Group—held 118,887,200 shares, accounting for 20.02% of the Company’s total shares. On 16 Nov. 2012, Sanonda Group Co., Ltd. acquired 800,000 shares of the Company held by the to-be-cancelled subsidiary—Jingzhou Sanonda Advertising Co., Ltd. through the block trading market, then it held a total of 119,687,200 shares of the Company, accounting for 20.15% of the Company’s total share capital, and up to 31 Dec. 2012, the share capital of the Company remained unchanged. As at the balance sheet date, Legal representative of the Company: Li Zuorong; Registered address: No.93, Beijing East Road, Jingzhou, Hubei Province, PRC; Stock abbreviation: Sanonda A/ Sanonda B; and Stock code: 000553/ 200553.

The Company and its subsidiaries (hereinafter referred to as “the Group”) is principally engaged in pesticide products such as orthene, paraquate, glyphosate, trichlorphon, DDVP, omethoate, triazophos, imidacloprid and carbofuran; chemical products such as spermine, liquid caustic soda, liquefied chlorine gas and hydrochloric acid. The Company has the rights of handling import and export business. And the Company has passed ISO9002 Quality System Certification and ISO14001 Environment Management System Certification. The parent company of the Group is Sanonda Group and the ultimate parent company is China National Chemical Corporation. The financial statements for 2013 have been authorized to be issued by at the board session held by the Company on 2 Mar. 2014. II. Basis for the preparation of financial statements With the going-concern assumption as the basis and based on transactions and other events that actually occurred, the Group prepared financial statements in accordance with the Basic Standard and 38 specific standards of Accounting Standards for Business Enterprises issued by Ministry of Finance of the PRC on 15 February 2006, Application Guidance of Accounting Standard for Business Enterprises, Interpretation of Accounting Standards for Business Enterprises and other regulations issued thereafter (hereinafter referred to as “the Accounting Standards for Business Enterprises”, “China Accounting Standards” or “CAS”), Rules for Preparation Convention of Disclosure of Public Offering Companies No.15 – General Regulations for Financial Reporting (revised in 2010) by China Securities Regulatory Commission. In accordance with relevant provisions of the Accounting Standards for Business Enterprises, the Group adopted the accrual basis in accounting. Except for some financial instruments, where impairment occurred on an asset, an impairment reserve was withdrawn accordingly pursuant to relevant requirements.

III. Statement of Compliance with the Accounting Standards for Business Enterprises The financial statements prepared by the Group are in compliance with in compliance with the Accounting Standards for Business Enterprises, which factually and completely present the Company’s and the Group’s financial positions as at 31 Dec. 2012, business results and cash flows for the year of 2012, and other relevant information. In addition, the Company’s and the Group’s financial statements meet the requirements of disclosing financial statements and notes thereto stated in the Rules for Preparation Convention of Disclosure of Public Offering Companies No.15 – General Regulations for Financial Reporting (revised in 2010) by China Securities Regulatory Commission. IV. The main accounting policies and accounting estimates 1. Fiscal period The Group’s fiscal periods include fiscal years and fiscal periods shorter than a complete fiscal year. The Group’s fiscal year starts on 1 Jan. and ends on 31 Dec. of every year according to the Gregorian calendar.

2. Bookkeeping base currency Renminbi is the dominant currency used in the economic circumstances where the Company and its domestic subsidiaries are involved. Therefore, the Company and its domestic subsidiaries use Renminbi as their bookkeeping base currency. And the Group adopted Renminbi as the bookkeeping base currency when preparing the financial statements for the reporting year. 3. Accounting treatment methods for business combinations Business combinations, it is refer to two or more separate enterprises merge to form a reporting entity transactions or events. Business combination is divided into under the same control and those non under the same control. (1) Business combinations under the same control A business combination under the same control is a business combination in which all of the combining enterprises are ultimately controlled by the same party or the same parties both before and after the business combination and on which the control is not temporary. In a business combination under the same control, the party which obtains control of other combining enterprise(s) on the combining date is the combining party, the other combining enterprise(s) is (are) the combined party. The “combining date” refers to the date on which the combining party actually obtains control on the combined party. The assets and liabilities that the combining party obtains in a business combination shall be measured on the basis of their carrying amount in the combined party on the combining date. As for the balance between the carrying amount of the net assets obtained by the combining party and the carrying amount of the consideration paid by it (or the total par value of the shares issued), the additional paid-in capital (share premium) shall be adjusted. If the additional paid-in capital (share premium) is not sufficient to be offset, the retained earnings shall be adjusted. The direct cost for the business combination of the combining party shall be recorded into the profits and losses at the current period. (2) Business combinations not under the same control A business combination not under the same control is a business combination in which the combining enterprises are not ultimately controlled by the same party or the same parties both before and after the business combination. In a business combination not under the same control, the party which obtains the control on other combining enterprise(s) on the purchase date is the acquirer, and other combining enterprise(s) is (are) the acquiree. For a business combination not under the same control, the combination costs shall include the fair values, on the acquisition date, of the assets paid, the liabilities incurred or assumed and the equity securities issued by the acquirer in exchange for the control on the acquiree, the expenses for audit, legal services and assessment, and other administrative expenses, which are recorded into the profits and losses in the current period. The trading expenses for the equity securities or debt securities issued by the acquirer as the combination consideration shall be recorded into the amount of initial measurement of the equity securities or debt securities. The involved contingent consideration shall be recorded into the

combination costs at its fair value on the acquiring date. Where new or further evidences emerge, within 12 months since the acquiring date, against the existing circumstances on the acquiring date and the contingent consideration thus needs to be adjusted, the combined goodwill shall be adjusted accordingly. The combination costs of the acquirer and the identifiable net assets obtained by it in the combination shall be measured according to their fair values at the acquiring date. The acquirer shall recognize the positive balance between the combination costs and the fair value of the identifiable net assets it obtains from the acquiree as business reputation. Where the combination costs are less then the fair value of the identifiable net assets it obtains from the acquiree, the acquirer shall re-examine the measurement of the fair values of the identifiable assets, liabilities and contingent liabilities it obtains from the acquiree as well as the combination costs. If, after the reexamination, the combination costs are still less than the fair value of the identifiable net assets it obtains from the acquiree, the acquirer shall record the balance into the profits and losses of the current period. As for the deductible temporary differences the acquirer obtains from the acquiree which are not recognized into deferred income tax liabilities due to their not meeting the recognition standards, if new or further information shows that the relevant situation has existed on the acquiring date and the economic benefits brought by the deductible temporary differences the acquirer obtains from the acquiree on the acquiring date can be realized, they shall be recognized into deferred income tax assets and the relevant goodwill shall be reduced. Where the goodwill is not sufficient to be offset, the difference shall be recognized into the profits and losses in the current period. In other circumstances than the above, where the deductible temporary differences are recognized into deferred income tax assets on the acquiring date, they shall be recorded into the profits and losses in the current period. In a business combination not under same control realized by two or more transactions of exchange, according to about the 5th Notice about the Treasury Issuing the Accounting Standards for Enterprises (Finance accounting) [2012] No. 19 Criterion about the " package deal" (see note 4, 4 (2)), Whether the deals are "package deal" or not, belong to the "package deal", see the previous paragraphs described in this section and note 4, 10 “long term equity investment transaction” and conduct accounting treatment, those not belong to the "package deal" distinguish between the individual financial statements and the consolidated financial statements and conduct relevant accounting treatment. In the individual financial statements, the sum of the book value and new investment cost of the Group holds in the acquiree before the acquiring date shall be considered as initial cost of the investment. Other related comprehensive gains in relation to the equity interests that the Group holds in the acquiree before the acquiring date shall be transferred into investment gains in the current period when disposing the investment. In the Group’s consolidated financial statements, as for the equity interests that the Group holds in the acquiree before the acquiring date, they shall be re-measured according to their fair values at the acquiring date; the positive difference between their fair values and carrying amounts shall be recorded into the investment gains for the period including the acquiring date; other comprehensive gains in relation to the equity interests that the Group holds in the acquiree before the acquiring date shall be transferred into investment gains in the current period. IV. Methods for preparing consolidated financial statements

(1)Principle for determining the consolidation scope The consolidation scope for financial statements is determined on the basis of control. The term “control” is the power of the Company to determine financial and business policies of an investee and obtain benefits from the investee’s operating activities. The consolidated financial statements comprise the financial statements of the Company and its subsidiaries. A subsidiary is an enterprise or entity controlled by the Company. (2) Methods for preparing the consolidated financial statements Subsidiaries are fully consolidated from the date on which the Group obtains control on their net assets and operation decision-making and are de-consolidated from the date when such control ceases. As for a disposed subsidiary, its operating results and cash flows before the disposal date has been appropriately included in the consolidated income statement and cash flow statement; and as for subsidiaries disposed in the current period, the opening items in the consolidated balance sheet are not adjusted. For a subsidiary acquired in a business combination not under the same control, its operating results and cash flows after the acquiring date have been appropriately included in the consolidated income statement and cash flow statement, and the opening items and comparative items in the consolidated financial statements are not adjusted. For a subsidiary acquired in a business combination under the same control or a combined party obtained in a takeover, its operating results and cash flows from the beginning of the reporting period of the combination to the combination date have been appropriately included in the consolidated income statement and cash flow statement, and the comparative items in the consolidated financial statements are adjusted at the same time. The financial statements of subsidiaries are adjusted in accordance with the accounting policies and accounting period of the Company during the preparation of the consolidated financial statements, where the accounting policies and the accounting periods are inconsistent between the Company and subsidiaries. For a subsidiary acquired from a business combination not under the same control, the individual financial statements of the subsidiary are adjusted based on the fair value of the identifiable net assets at the acquisition date. All significant inter-group balances, transactions and unrealized profits are offset in the consolidated financial statements. The portion of a subsidiary’s shareholders’ equity and the portion of a subsidiary’s net profits and losses for the period not held by the Company are recognized as minority interests and minority shareholder profits and losses respectively and presented separately under shareholders’ equity and net profits in the consolidation financial statements. The portion of a subsidiary’s net profits and losses for the period that belong to minority interests is presented as the item of “minority shareholder profits and losses” under the bigger item of net profits in the consolidated financial statements. Where the loss of a subsidiary shared by minority shareholders exceeds the portion enjoyed by minority shareholders in the subsidiary’s opening owners’ equity, minority interests are offset. Where the Company losses control on its original subsidiaries due to disposal of some equity investments or other reasons, the residual equity interests are re-measured according to the fair value on the date when such control ceases. The summation of the consideration obtained

from the disposal of equity interests and the fair value of the residual equity interests, minus the portion in the original subsidiary’s net assets measured on a continuous basis from the acquisition date that is enjoyable by the Company according to the original shareholding percentage in the subsidiary, is recorded in investment gains for the period when the Company’s control on the subsidiary ceases. Other comprehensive incomes in relation to the equity investment in the original subsidiary are transferred to investment gains for the period when such control ceases. And subsequent measurement is conducted on the residual equity interests according to the No.2 Accounting Standard for Business Enterprises —Long-term Equity Investments or the No.22 Accounting Standard for Business Enterprises—Recognition and Measurement of Financial Instruments. For details see note 4, 10“long term equity investment” or 7 “financial instruments”. Where the Company losses control on its original subsidiaries due to step by step disposal of equity investments through multiple transactions, it need to distinguish the Company losses control on its subsidiaries due to disposal of equity investments whether belongs to a package deal. All the transaction terms, conditions and economic impact of the disposal of subsidiaries’ equity investment are in accordance with one or more of the following conditions, which usually indicate the multiple transactions should be considered as a package deal for accounting treatment. ①These deals are at the same time or under the condition of considering the influence of each other to concluded;② These transactions only be as a whole can achieve a complete business result;③ The occurrence of a deal depends on at least one other transactions；④A deal alone is not economical, it is economical with other trading together. Those not belong to a package deal, each of them a deal depends on circumstances respectively conduct accounting treatment in accordance with the applicable principles of " part disposal of subsidiaries of a long-term equity investment under the condition of not losing control on its subsidiaries " ( see note IV 10,（2）④) and “Where the Company losses control on its original subsidiaries due to disposal of some equity investments or other reasons”（ See the front paragraph）relevant transactions of the Company losses control on its subsidiaries due to disposal of equity investments belonging to a package deal, considered as a transaction and conduct accounting treatment. However, Before losing control, every disposal cost and corresponding net assets balance of subsidiary of disposal investment are confirmed as other comprehensive income in consolidated financial statements, which together transferred into the current profits and losses in the lose of control , when the Company losing control on its subsidiary. 5. Recognition standard for cash and cash equivalents In the Group’s understanding, cash and cash equivalents include cash on hand, any deposit that can be used for cover, and 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.

6. Foreign currency businesses and translation of foreign currency financial statements (1) Accounting treatments for translation of foreign currency transactions As for a foreign currency transaction, the Company shall convert the amount in a foreign currency into amount in its bookkeeping base at the spot exchange rate of the transaction date, while 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) Accounting treatments for translation of foreign currency monetary items and non-monetary items On the balance sheet date, the foreign currency monetary items shall be translated at the spot exchange rate on the balance sheet date. The exchange difference arising from the difference between the spot exchange rate on the balance sheet date and the spot exchange rate at the time of initial recognition or prior to the balance sheet date shall be recorded in the profits and losses in the current period, excluding the following situations: ① the exchange difference arising from foreign currency loans related to acquisition of fixed assets shall be treated at the principle of capitalization of borrowing costs; ② the exchange difference arising from change in the book balance of foreign currency monetary items available for sale except the amortized costs shall be recorded into other comprehensive gains and losses. A foreign currency non-monetary item measured at the historical costs shall still be translated at the spot exchange rate on the transaction date. Where the foreign non-monetary items measured at the fair value shall be converted into amount in its bookkeeping base currency at spot exchange rate, the exchange gains and losses arising thereof shall be treated as change in fair value, and recorded into the current period gains and losses or as other comprehensive gains and losses and recorded into capital reserves. (3) Translation of foreign currency financial statements When it involves overseas business in preparing the consolidated financial statement, for the translation difference of foreign currency monetary items of net investment in overseas business arising from the change in exchange rate, it shall be recorded into the item of “difference of foreign currency financial statement translation” under the owners’ equity; and be recorded into disposal gains and losses at current period when disposing overseas business. The foreign currency financial statement of overseas business should be translated in to RMB financial statement by the following methods: The asset and liability items in the balance sheets shall be translated at a spot exchange rate on the balance sheet date. Among the owner’s equity items, except for the items as “undistributed profits”, other items shall be translated at the spot exchange rate at the time when they are incurred. The income and expense items in the profit statements shall be translated at the spot exchange rate of the transaction date. The undistributed profits at year-begin is the undistributed profits at the end of last year after the translation; undistributed profits at year-end shall be listed as various distribution items after the translation; after the translation, the balance between assets and the sum of liabilities and owners’ equities shall be recorded into other comprehensive gains and losses as difference of foreign currency translation, and individually listed under the item

of owners’ equity in the balance sheet. Where an enterprise disposes of an overseas business without the control right, it shall shift the differences, which is presented under the items of the owner’s equities in the balance sheet and which arises from the translation of foreign currency financial statements relating to this overseas business, into the disposal profits and losses of the current period by all or proportion of the disposed overseas business. Foreign cash flow shall be translated at the spot exchange rate of the date of cash flow incurred. The influence of exchange rate on the cash flow shall be adjustment item and individually listed in the cash flow statement. And the opening balance and the actual balance of last year shall be listed at the amounts after translation of foreign currency financial statement in last year.

7. Financial instruments (1).Determination of the fair value of main financial assets and financial liabilities Fair value refers to the price that both parties who are familiar with the situation are willing to exchange assets or reimburse 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. The quoted prices in the active market refers to the prices available from stock exchange, broker’s agencies, guilds, pricing organization and etc., which represent the actual trading price under equal transaction. 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.

(2) Classification, recognition and measurement of financial assets The purchase and sale of financial assets under the normal ways shall be recognized and stopped to be recognized respectively at the price of transaction date. 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, (b) the investments which will be held to their maturity; (c) loans and the account receivables; and (d) financial assets available for sale. The financial assets are measured by fair value for initial recognition. For 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, the related expenses shall be directly recorded into gains and losses of current period, as for other financial assets, the related transactional expenses shall be recorded into the amount of initial recognition. ① 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 designated to be measured at their fair value when they are initially recognized and of which the variation is recorded into the profits and losses of the current period; The financial assets meeting any of the following requirements shall be classified as transactional financial assets：A. The purpose to acquire the said financial assets is mainly for

selling them in the near future; B. Forming a part of the identifiable combination of financial instruments which are managed in a centralized way and for which there are objective evidences proving that the enterprise may manage the combination by way of short-term profit making in the near future; C. Being a derivative instrument, excluding the designated derivative instruments which are effective hedging instruments, or derivative instruments to financial guarantee contracts, and the derivative instruments which are connected with the equity instrument investments for which there is no quoted price in the active market, whose fair value cannot be reliably measured, and which shall be settled by delivering the said equity instruments. The financial assets meeting any of the following requirements shall be designated as 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 for initial recognition: A. the designation can eliminate or significantly reduce the difference of relevant gains and losses between recognition and measurement causing from different bases for measurement of financial assets; B. The official written documents for risk management and investment strategies of the enterprise have clearly stated that it shall ,manage, evaluate and report to important management personnel based on the fair value, about the financial assets group or the group of financial assets & liabilities which the financial assets are belong to. For 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 shall continue to be measured by fair value, gains and losses of change in fair value, dividends and interest related with these financial assets should be recorded into gains and losses of current period. ② Held-to-maturity investment The term "held-to-maturity investment" refers to a non-derivative financial asset with a fixed date of maturity, a fixed or determinable amount of repo price and which the enterprise holds for a definite purpose or the enterprise is able to hold until its maturity. For the held-to-maturity investment adopting actual interest rate method, which is measured at the post-amortization costs, the profits and losses that arise when such financial assets or financial liabilities are terminated from recognition, or are impaired or amortized, shall be recorded into the profits and losses of the current period. The actual interest rate method refers to the method by which the post-amortization costs and the interest incomes of different installments or interest expenses are calculated in light of the actual interest rates of the financial assets or financial liabilities (including a set of financial assets or financial liabilities). The actual interest rate refers to the interest rate adopted to cash the future cash flow of a financial asset or financial liability within the predicted term of existence or within a shorter applicable term into the current carrying amount of the financial asset or financial liability. When the actual interest rate is determined, the future cash flow shall be predicted on the basis of taking into account all the contractual provisions concerning the financial asset or financial liability (the future credit losses shall not be taken into account).and also the various fee charges, trading expenses, premiums or reduced values, etc., which are paid or collected by the parties to a financial asset or financial liability contract and which form a part of the actual interest rate. ③ Loans and the accounts receivables

Loans and the accounts receivables refer to non-derivative financial assets, which there is no quotation in the active market, with fixed recovery cost or recognizable. Financial assets that are defined as loans and the accounts receivables by the Group including notes receivables, accounts receivables, interest receivable, dividends receivable and other receivables etc.. Loans and the accounts receivables are made follow-up measurement on the basis of post-amortization costs employing the effective interest method. Gains or loss arising from the termination recognition, impairment occurs or amortization shall be recorded into the profits and losses of the current period. ④ Assets available for sales Assets available for sales including non-derivative financial asset that has been assigned as assets available for sales on the initial recognition and financial assets excluded those measured at fair value and of which the variation into profits and losses of the current period, they are some financial assets, loans and accounts receivables, held-to-maturity investment. The Group shall make follow-up measurement to assets available for sales employing fair value. Gains or loss in fair value changes deducted impairment loss and relevant exchange difference from monetary financial assets of foreign currency and amortized cost shall be recorded into the profits and losses of the current period, and shall be recorded into capital reserves as other comprehensive income and be carried forward when the said financial assets stopped recognition, then it shall be recorded into the profits and losses of the current period. Interest receive during the holding of assets available for sales and cash dividends with distribution announcement by invested companies, it shall be recorded into the profits and losses of the current period. (3) Financial assets impairment Except for financial assets that shall be recoded into profits and losses of the current period by measuring at fair value and variations, the Group shall carry out impairment test, on all balance sheet days, to book value of other financial assets, where there are objective evidences proving that a financial asset has been impaired, make provision for impairment for such financial asset. The Group shall carry out independent impairment test to financial assets of significant single amounts. With regard to the financial assets with insignificant single amounts, an independent impairment test shall 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. Financial assets that has conducted independent test as impairment loss shall not be included in a combination of financial assets with similar risk features so as to conduct another impairment test. ① Impairment for held-to-maturity investments, loans and accounts receivables As for a financial assets measured on the basis of cost or post-amortization cost, its book value writes down to current value of predicted future cash flow, the write down amount is recorded as impairment loss and written into profits and losses of the current period. When

the impairment loss of a financial asset is recognized, if there is objective evidence proving that value of the said financial asset is recovered and objectively relevant to events occurred after the recognition of the said loss, then reverse the recognized impairment loss. Moreover, the book value after reverse shall not over the post-amortization cost on the reverse date and under expected no-occurrence of provision for impairment. ② Impairment for available-for-sales assets When there is impairment occurred in available-for-sales assets, reversed and recorded the accumulated losses that originally recorded into capital reserve due to the fall of fair value into profits and losses of the current period. The reversed accumulated loss is the balance of the initial income cost of the said asset deducted the retracted principal, amortized amounts, current fair value as well as impairment loss originally recorded into profits and losses of current period. Where the impairment loss of a financial asset is recognized, if there is objective evidence proving that value of the financial asset is recovered and objectively relevant to events occurred after the recognition of the said loss, then reverse the recognized impairment loss. Moreover, the reverse of equity instruments available for sales is recognized as other comprehensive income and the impairment of debt instruments is recorded into profits and losses of current period. 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 not be reversed. (4) Recognition and measurement method of financial assets Financial asset that satisfies one of the following conditions, its recognition shall be stopped: ① the contracted right of receiving cash flow of the said financial assets ceases, and ② the said financial assets is transferred and nearly all of the risks and rewards related to the ownership is transferred into the carrying party, and ③ the said asset is transferred, though the corporate neither transferred, no retain nearly all of the risks and rewards related to the ownership, it gives up the control of the said asset. If the corporate neither transferred, no retain nearly all of the risks and rewards related to the ownership and it does not give up the control of the said financial asset, then the recognition of relevant asset is recorded according to the extent of its continuous involvement in the transferred financial asset. The extent of its continuous involvement in the transferred financial asset refers to the risk the corporate come across with the change in the value of financial asset. If the transfer of an entire financial asset satisfies the conditions for stopping recognition, the book value of the transferred financial asset and 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 shall be recorded in the profits and losses of the current period. 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

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apportioned according to their respective relative fair value, and the book value of the portion whose recognition has been stopped and he 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 shall be included into the profits and losses of the current period. The Group need to determine the financial asset ownership on almost all of the risks and rewards are transferred upon using ways of attached the right of recourse for the sale of financial assets or held the financial assets by the endorsement. The Group stop the recognition of the financial asset if almost all the risks and rewards of the financial asset ownership has been transferred to the transferee, don't end the recognition of the financial asset, if almost all of the risks and rewards of the financial asset ownership has been retained. For those did not been transferred or retained, the Group shall continue to determine whether the enterprise retained control of the assets, and conduct accounting treatment basing on the principle of mentioned in the previous paragraphs. (5) Classification and measurement of financial assets and financial liabilities Financial liabilities shall be classified into the financial liabilities which are measured at their fair values and of which the variation is included in the current profits and losses and other financial liabilities. The initial recognition of financial liabilities is measured on the basis of fair value. Where financial liabilities is measured on the basis fair value and of which the variation is recorded into profits and losses of the current period, relevant exchange expenses directly recorded into profits and losses of the current period. For other financial liabilities, relevant exchange expenses are recorded into initial recognition amounts.

① Financial liabilities which are measured at their fair values and of which the variation is included in the current profits and losses The condition to divide certain financial liabilities into 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 is in line with the condition to divide certain financial assets into transactional financial assets and the designated financial assets which are measured at their fair values and of which the variation is included in the current profits and losses. Financial liabilities which are measured at their fair values and of which the variation is included in the current profits and losses shall be subsequently measured at their fair values. Gains and losses formed by fair value changes, as well as dividends and interests relating to those financial assets shall be recorded into current profits and losses. ② Other financial liabilities 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. Other financial liabilities shall be subsequently measured on the basis of the post-amortization costs by adopting the actual interest rate method. Gains or losses

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arising from the termination of recognition or amortization shall be recorded into current profits and losses. ③ Financial guarantee contracts 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, as well as loan commitments to be given at an interest rate lower than the market rate which are measured at fair value and whose variations are recorded into profits and losses, they shall be initially recognized at their fair values. 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 Accounting Standards for Enterprises No. 13 - Contingencies; or ii.the surplus after accumulative amortization as determined according to the principles of the Accounting Standards for Enterprises No. 14 - Revenues is subtracted from the initially recognized amount. (6) Termination of recognition of financial liabilities Only when the prevailing obligations of a financial liability are relieved in all or in part may the recognition of the financial liability be terminated in all or partly. Where the Group enters into an agreement with a creditor so as to substitute the existing financial liabilities by way of any new financial liability, and if the contractual stipulations regarding the new financial liability is substantially different from that regarding the existing financial liability, it shall terminate the recognition of the existing financial liability, and shall at the same time recognize the new financial liability. Where the recognition of a financial liability is totally or partially terminated, the Group shall include into the profits and losses of the current period the gap between the carrying amount which has been terminated from recognition and the considerations it has paid (including the non-cash assets it has transferred out and the new financial liabilities it has assumed). (7) Derivative instruments and embedded derivative instruments Derivative instruments shall be initially measured at their values on the relating date of contract signing, and shall be subsequently measured at their fair values. Changes of fair values of derivative instruments shall be recorded into current profits and losses. Where a mixed instrument including an embedded derivative instrument fails to be designated as a financial asset or financial liability measured at its fair value and of which the variation is included in the current profits and losses, and it can simultaneously meet the following conditions, the embedded derivative instrument shall be separated from the mixed instrument and treated as an independent derivative instrument: i. Where there is no close relationship between it and the principal contract in terms of economic features and risks; and ii. Where it shares the same conditions with that of the embedded derivative instrument, and the independent instrument meets the requirements of the definition of derivative instrument. Where it is impossible to make an independent measurement when it is obtained or subsequently on the balance sheet date, the mixed instrument shall be designated entirely as a financial asset or financial liability measured at its fair value and of which the variation is included in the current profits and losses. (8) Offset of financial assets against financial liabilities

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When the Group holds the legal right to offset recognized financial assets and financial liabilities, and can execute that legal right at present, and at the same time the Group plans to settle the financial assets and liabilities with net amount, or to simultaneously realize the financial assets and pay off the financial liabilities, then the amounts of financial assets and financial liabilities after offsetting against each other shall be stated in the balance sheet. Except for that, financial assets and financial liabilities shall be separately stated in the balance sheet, with no offset against each other. (9) Equity instruments The "equity instruments" refers to the contracts which can prove that a certain enterprise holds the surplus equities of the assets after the deduction of all the debts. As for equity instruments, the owner’s equity shall be increased after deducting transaction expenses from considerations received at the time of issuance. The Group shall decrease owner’s equity on all distributions (stock dividends not included) of equity instrument holders. The Group shall not recognize the amount of changes in fair values of equity instruments. 8. Receivables Receivables include accounts receivable and other receivables, etc. (1) Recognition standards for bad debts The Group shall carry out an inspection, on the balance sheet day, on the carrying amount of receivables. Where there is any objective evidence proving that such receivable has been impaired, an impairment provision shall be made: ① A serious financial difficulty occurs to the debtor; ② The debtor breaches any of the contractual stipulations, for example, fails to pay or delays the payment of interests or the principal, etc.; ③ The debtor will probably become bankrupt or carry out other financial reorganizations; ④ Other objective evidences indicating that such receivable has been impaired. (2) Making bad debt provisions ① Defining and making bad debt provisions for accounts receivable which are individually significant and for which bad debt provisions are made individually The Company defines an account receivable equivalent to or above RMB 5 million as an account receivable which is individually significant. The Company shall carry out an independent impairment test on an account receivable which is individually significant. For a financial asset that is proved to have no signs of impairment after the independent impairment test, the Company shall put it into the financial asset group that has the similar credit risk and carry out an impairment test on the group as a whole. For an account receivable that is proved in the independent impairment test to have been impaired, the Company shall not put it into the financial asset group that has the similar credit risk and carry out an impairment test on the group as a whole. ② Defining and making bad debt provisions for accounts receivable for which bad debt provisions are made on the basis of groups classified by credit risk A. Defining groups of similar credit risk

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The Company divides into groups, according to similarity and relevance of their credit risk features, individually insignificant accounts receivable and those which are individually significant but have not been impaired as proved by independent impairment tests. Credit risk usually reflects a debtor’s ability to pay off all due amount according to the contract terms on the asset, and is related to the expected future cash flow of the tested asset. How to divide into groups: Related-party groups: Divided according to the related-party relation between the debtor and the Company (usually the Company’s actual controller and other enterprises controlled by it); Risk-free groups: Divided according to the debtor’s reputation, the nature of the account, safeguard measures, etc. (usually amounts due from the government for purchases, reserve funds for employees, deposits for contracts, accounts receivable arising from guarantee terms, etc.); Account age groups: Divided according to ages of accounts receivable. B. Making bad debt provisions for credit risk groups Related-party groups: Bad debt provisions are made according to the specific identification method. Risk-free groups: Bad debt provisions are made according to the specific identification method. Account age groups: Provision ratios are determined based on loss experience in the past, the current economic situation and the expectedly existing loss in the receivable groups. Making bad-debt provisions for group of accounts according to aging analysis: Provision ratio for accounts Provision ratio for other Account age receivable (%) receivables (%) Within 1 year (including 1 year, same below) 5 5 1-2 years 10 10 2-3 years 30 30 3-4 years 50 50 4-5 years 50 50 Over 5 years 100 100

③ Accounts receivable which are individually insignificant but individual bad-debt provisions are made for The Group carries out an independent impairment test on an account receivable which is individually insignificant but has the following feature. If there is any objective evidence proving that the asset has been impaired (for instance, receivables over which there exist disputes against the opposite parties or receivables concerning lawsuits and arbitrations; and receivables of which there are obvious signs indicating that debtors may not be able to fulfill repayment obligations), the Group recognizes impairment loss and makes bad-debt provisions according to the difference between the present value of the asset’s future cash flow and the asset’s book value.

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(3) Reversal of bad debt provisions If there is any objective evidence proving that the value of the said receivable has been restored, and it is objectively related to the events that occur after such loss is recognized, the impairment-related losses as originally recognized shall be reversed and be recorded into the profits and losses of the current period. However, the reversed carrying amount shall not be any more than the post-amortization costs of the said receivable on the day of reverse under the assumption that no provision is made for the impairment. If the Company transfers receivables to financial institutions with unattached recourse, then the difference through deducting the carrying amount of the written-off accounts receivable and relevant taxes shall be recorded into current profits and losses. 9. Inventories (1) The inventories of the Group include raw materials, goods in process, merchandise on hand, packaging materials, and 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) Bulk chemical raw materials, goods 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) Inventories shall be measured whichever is lower in accordance with the cost and the net realizable value at the period-end. 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.

10. Long-term equity investments (1) Recognition of investment costs As for long-term equity investments acquired by enterprise merger, if the merger is 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, and if

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the merger is not under the same control, the sum of paid assets, occurred or assumed liabilities, and issued equity securities by the purchasing party are included into costs of enterprise merger. Intermediary expenses, such as the expenses for audit, assessment, and legal services, along with other relevant administration fee, shall be recorded into the profits and losses of the current period. Transaction costs arising from the issuance of equity securities or debt securities as merger consideration of the purchasing party shall be recorded into the initially recognized amount of equity securities or debt securities. Other equity investments, except for the aforesaid long-term equity investments acquired by enterprises merger, are initially measured according to costs, which can, in consideration of different ways to obtain long-term equity investments, be respectively recognized by amount of cash payment actually paid by the Group, fair value of equity securities issued by the Group, value agreed upon investment contracts or investment agreements, fair value or original book value of surrendered assets in transactions of non-currency assets, and fair value of the long-term equity investment itself. Costs, taxes and other necessary expenses directly relevant to the acquirement of long-term equity investments are also recorded onto investment costs. (2) Subsequent measurement and recognition method of gains and losses Long-term equity investments, which have no joint control or significant influence over invested entities, and for which there is no offer in the active market and of which the fair value cannot be reliably measured, it shall be accounted by cost method. Long-term equity investments with joint control or significant influence over invested entities shall be accounted by equity method. Long-term equity investments, which have no control, joint control or significant influence over invested entities, nevertheless of which the fair value can be reliably measured, shall be accounted as financial assets available for sale. Besides, long-term equity investments that can implement control over invested entities are accounted by cost method in financial statements of the Company. ① Long-term equity investments accounted by cost method With the employment of cost method, long-term equity investments shall be valuated on the basis of initial investment cost. Current investment income, except for actually paid amount during the investment, and cash dividends or profits that have been declared but not yet been granted included in the consideration, shall be ascertained in accordance with enjoyed cash dividends or profits declared and granted by invested entities. ② Long-term equity investments accounted by equity method With the employment of equity method, the initial investment cost of long-term equity investment shall not be adjusted if the initial investment cost of long-term equity investment exceeds the share, which should be enjoyed, of fair value of identifiable net assets of invested entities. Cost of long-term equity investment shall be adjusted if the initial investment cost is less than the share, which should be enjoyed, of fair value of identifiable net assets of invested entities, and the balance between the two shall be recorded into profit or loss in the period in which it is incurred. With the employment of equity method, profit or loss in the period in which it is incurred is the share, which should be enjoyed or shared, of net gains and losses realized by invested entities in the current year. When recognizing the share, which should be enjoyed, of net gains and losses of invested entities, the recognition shall be implemented on the basis of fair value of all identifiable assets of invested entities during the investment and after the adjustment of net profit of invested entities during the account period with the accordance of

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accounting policies of the Group. As for gains and losses of unrealized internal transactions among associated enterprises, contractual enterprises and the Group, the part belonging to the Group after calculating by shareholding proportion shall be offset, and the investment gains and losses shall be thus recognized on that basis. Nevertheless, losses, which belong to impairment losses of transferred assets in line with provisions stipulated in the Accounting Standards for Enterprises No. 8 - Asset Impairment, of realized internal transactions between invested entities and the Group shall not be offset. As for other integrated incomes of invested entities, the book value of long-term equity investments shall be correspondently adjusted and recognized as other investment incomes，which shall thus be recorded into capital reserves. When recognizing the incurred net losses, which should be shared, of invested entities, the limit shall be the down-to-zero amount of write-down of book value of long-term equity investments and other long-term equity essentially forming net investment over invested entities. Besides, if the Group has any liability of undertaking extra losses over invested entities, then the estimated debts shall be recognized in compliance with projected undertaken duties and recorded into gains and losses of investment at the current period. If the invested entity realized net profits in subsequent period, then the Group shall resume recognition of the shared amount of incomes after making up unrecognized shared amount of losses with the shared amount incomes. For the long-term equity investment on joint venture and associate held by the Company before initially adopting the new accounting standard on 1 Jan. 2008, if there is debit balance of equity investment relevant to such investment, which shall be recognized into profit or loss in the period in which it is incurred with the amortised amount by straight-line method during the remaining period. ③ Acquisition of minority equity During the preparation of consolidated financial statements, capital reserves shall be adjusted in light of balance between long-term equity investments, which are newly increased because of the purchase of minority stakes, and the share of net assets of subsidiaries, which should be enjoyed and has been sustainably calculated since the acquisition date (or merger date) in accordance with newly increased shareholding proportion. Retained earning shall be adjusted if capital reserves are insufficient to dilute. ④ Disposal of long-term equity investments In consolidated financial statements, under the circumstance of keeping control power, the parent company shall partially dispose long-term equity investments, and the balance between the disposed price and the enjoyed net assets of subsidiaries correspondent to disposed long-term equity investment shall be recorded into owners’ equity. If the partial disposal of parent company over long-term equity investments of subsidiaries results in the loss of control over subsidiaries, in that circumstance, it shall be managed according to relevant accounting policies stated in the Preparation Method of Consolidated Financial Statements in Note IV. 4. (2). As for disposal of long-term equity investment under other circumstances, the balance between book value of disposed equity and its actually acquired price shall be included into profit or loss in the period in which it is incurred. As for long-term equity investments with the employment of equity method, other part of integrated incomes originally included in owners’ equity shall be transferred to profit or loss in the period in which it is incurred in accordance with correspondent proportion during the disposal. As for residual equity, it shall be recognized as long-term equity investments or other relevant financial assets according to

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the book value, and shall be subsequently measured according to accounting policies of the aforesaid long-term equity investments or financial assets. Residual equity concerning accounting method transferred from cost method to equity method shall be retrospectively restated and adjusted. (3) Recognition basis for joint control and significant influence over invested entities The term "control" means having the power to decide an enterprise's financial and operating policy and obtain benefits from its business activities. The term "joint control" refers to the control over an economic activity in accordance with the contracts and agreements, which does not exist unless the investing parties of the economic activity with one an assent on sharing the control power over the relevant important financial and operating decisions. The term "significant influences" refers to the power to participate in making decisions on the financial and operating policies of an enterprise, but not to control or do joint control together with other parties over the formulation of these policies. When ascertaining whether or not it is able to control or have significant influences on an invested entity, potential factors concerning the voting rights, such as investing enterprises, current convertible corporate bonds, and current executable warrants of invested entities etc. have been taken into full consideration. (4) Impairment test method and withdrawal method of impairment provision The Group shall check out whether there is any sign of impairment of long-term equity investments on each balance sheet date. Where any evidence shows that there is possible assets impairment, the recoverable amount of the assets shall be estimated. If the recoverable amount of the asset is less than its book value, then asset impairment provision will be withdrawn in line with the balance and recorded into profit or loss in the period in which it is incurred. Once the impairment losses of long-term equity investments are recognized, they can’t be reversed during the subsequent accounting period. 11. Investment real estates The term "investment real estates" refers to the real estates held for generating rent and/or capital appreciation. Investment real estates of the Group 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. The initial measurement of the investment real estate shall be made at its cost. Subsequent expenditures incurred for an investment real estate is included in the cost of the investment real estate when it is probable that economic benefits associated with the investment real estate will flow to the Group and the cost can be reliably measured, otherwise the expenditure is recognised in profit or loss in the period in which they are incurred. The Group 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 the use right of buildings or lands. For details of impairment test method and withdrawal method of impairment provision of investment real estates, please refer to Note IV. 16. Impairment of Non-current Non-financial Assets. When owner-occupied real estate or inventories are changed into investment real estate or investment real estate is changed into owner-occupied real estate, whose book value prior to

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the change shall be the entry value after the change. When an investment real estate is changed to an owner-occupied real estate, it is transferred to fixed assets or intangible assets at the date of such change. When an owner-occupied real estate is changed to be held to earn rental or for capital appreciation, the fixed asset or intangible asset is transferred to investment real estate at the date of such change. If the fixed asset or intangible asset is changed into investment real estate measured by adopting the cost pattern, whose book value prior to the change shall be the entry value after the change; if the fixed asset or intangible asset is changed into investment real estate measured by adopting the fair value pattern, whose fair value on the date of such change shall be the entry value after the change An investment real estate is derecognised on disposal or when the investment real estate is permanently withdrawn from use and no future economic benefits are expected from its disposal. The amount of proceeds on sale, transfer, retirement or damage of an investment real estate less its carrying amount and related taxes and expenses is recognised in profit or loss in the period in which it is incurred. 12. Fixed assets (1) Conditions for recognition of fixed assets 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. (2) Depreciation methods for various fixed assets The initial measurement of a fixed asset shall be made at its cost with the consideration of the effect of expected discard expenses. From the next month of bringing the fixed asset to the expected conditions for use, it shall be made the depreciation by adopting the straight-line method during its useful life. The useful life, expected net salvage value and annual depreciation ratio of various fixed assets are as follows: Depreciation life (year) Annual depreciation Category Residual ratio（%） ratio（%） House & buildings 15-24 2-4 4--6.53 Special equipment 3-15 2-4 6.4--32.67 General-purpose equipment 9-18 4 5.33--10.67 Transportation vehicles 9 2 10.89 The "expected net salvage value" refers to the expected amount that the Group may obtain from the current disposal of a fixed asset after deducting the expected disposal expenses at the expiration of its expected useful life. The Group’s 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) Impairment test method and withdrawal method of impairment provision of fixed assets For details of impairment test method and withdrawal method of impairment provision of fixed assets, please refer to Note. IV. 16. Impairment of Non-current Non-financial Assets. (4) Recognition basis and pricing method for fixed assets gained from finance lease

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The "finance lease" shall refer to a lease that has transferred in substance all the risks and rewards related to the ownership of an asset. The ownership of it may or may not eventually be transferred. In calculating the depreciation of an asset gained from finance lease, the lessee should adopt the depreciation policy for the fixed assets which are owned by the lessee. If it is reasonable to be certain that the lessee will obtain the ownership of the leased asset when the lease term expires, the leased asset shall be fully depreciated over its useful life. If it is not reasonable to be certain that the lessee will obtain the ownership of the leased asset at the expiry of the lease term, the leased asset shall be fully depreciated over the shorter one of the lease term or its useful life. (5) Other explanations Subsequent expenditures incurred for a fixed asset are included in the cost of the fixed asset when it is probable that economic benefits associated with the fixed asset will flow to the Group and its cost can be reliably measured. The carrying amount of those parts that are replaced is derecognized and all other subsequent expenditures are recognised in profit or loss in the period in which it is incurred. The amount of proceeds on sale, transfer, retirement or damage of a fixed asset net less its carrying amount and related taxes and expenses is recognised in profit or loss in the period in which it is incurred. The Group will check the useful life, expected net salvage value and depreciation method of fixed assets at least at the end of year, and there is any change, the change will be treated as the change of accounting estimation. 13. Construction in progress (1) Construction in progress of the Group 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) For details of impairment test method and withdrawal method of impairment provision of construction in progress, please refer to Note IV. 16. Impairment of Non-current Non-financial Assets.

14. Borrowing costs The borrowing costs shall include interest on borrowings, amortization of discounts or premiums on borrowings, ancillary expenses, and exchange balance on foreign currency borrowings. When the borrowing costs can be directly attributable to the construction or production of assets eligible for capitalization, and 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. 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. Other borrowing costs shall be recognized as expenses when incurred.

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The amount of interests shall be capitalized in light of the actual cost incurred of the specially borrowed loan at the current period minus the income of interests earned on the unused borrowing loans as a deposit in the bank or as a temporary investment. The to-be-capitalized amount shall be determined 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. During the period of capitalization, the exchange balance of specially borrowed loan on foreign currency shall be all capitalized, and the exchange balance of general borrowed loan on foreign currency shall be recorded into current gain and losses. Assets eligible for capitalization have to go through construction or production activities for quit some time to prepare itself for its intended use or sale as fixed assets, investment real estate assets and inventories etc. 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 till the construction or production of the asset restarts.

15. Intangible Assets (1) Intangible Assets The term "intangible asset" refers to the identifiable non-monetary assets possessed or controlled by enterprises which have no physical shape. Intangible assets are initially measured according to its costs. Expenses relating to intangible assets shall be recorded into cost of intangible assets if relevant economic profit is much likely to flow into the Group and its cost can be reliably measured. Except for that, expenses of other items shall be recorded into profit or loss in the period in which it is incurred when incurred. The acquired land use right is generally accounted as intangible asset. Expense of land use right and construction cost of buildings, relating to voluntarily developed and constructed plants and other building, shall be accounted as intangible asset and fixed asset respectively. As for outsourced housing and buildings, the relevant amount shall be allotted between land use right and buildings. If the outsourced housing and buildings can’t be rationally allotted, they shall be disposed as fixed assets. Intangible assets with limited service lives are averagely amortized by deducting the expected net salvage value and the withdrawn accumulative amount of provision for the impairment from the original value on a straight-line basis within their expected service lives beginning from the start of its usage. Intangible assets with uncertain service lives shall not be amortized. At the end of the period, service lives and amortization method for intangible assets with limited service lives shall be checked. If there’s any change, the change shall be disposed as a change of the accounting estimates. Besides, services lives amortization method for intangible assets with uncertain service lives shall be checked. If there’s any evidence proving that the period for the intangible asset to bring economic profit for the enterprise is expected, then service life of the asset shall be estimated and amortized in accordance with amortization policy for intangible assets with limited service lives. (2) R & D expenses

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The expenditures for internal research and development projects of an enterprise shall be classified into research expenditures and development expenditures. The research expenditures shall be recorded into the profit or loss for the current period. The development expenditures shall be confirmed as intangible assets when they satisfy the following conditions simultaneously, and shall be recorded into profit or loss for the current period when they don’t satisfy the following conditions. ① It is feasible technically to finish 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 shall be proved, including being able to prove that there is a potential market for the products manufactured by applying the intangible assets or there is a potential market for the intangible assets itself or 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; ⑤ The development expenditures of the intangible assets can be reliably measured. As for expenses that can’t be identified as research expenditures or development expenditures, the occurred R & D expenses shall be all included in current profits and losses. (3) Impairment test method and withdrawal method of impairment provision of intangible assets For details of impairment test method and withdrawal method of impairment provision of intangible assets, please refer to Note IV. 16 Impairment of Non-current Non-financial Assets.

16. Impairment of non-current non-financial assets As for non-current non-financial assets such as fixed assets, construction in progress, intangible assets with limited service lives, investment real estates measured by the cost pattern, as well as long-term equity investments over subsidiaries, associated enterprises and contractual enterprises, the Group shall judge whether there is sign of impairment on the balance sheet date. Where any evidence shows that there is possible assets impairment, the recoverable amount of the assets shall be estimated. Intangible assets of good will or with uncertain service lives, as well as intangible assets failing to reach the condition for use, shall be subject to impairment tests every year, no matter whether there is any sign of possible assets impairment. When impairment test result shows that the recoverable amount of the asset is lower than its book value, impairment provision shall be withdrawn in accordance with the balance and recorded into impairment loss. The recoverable amount shall be determined on the basis of the higher one of the net amount of the fair value of the asset minus the disposal expenses and the current value of the expected future cash flow of the asset. Fair value of the asset shall be determined in light of the price as stipulated in the sales agreement in the fair

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transaction. Where there is no sales agreement but there is an active market of assets, the fair value shall be determined according to the price bidden by the buyer of the asset. Where there is no sales agreement and no active market of assets, the fair value shall be estimated in light of the best information available. The disposal expenses shall include the relevant legal expenses, relevant taxes, truckage as well as the direct expenses for bringing the assets into a marketable state. The current value of the expected future cash flow of an asset shall be determined by the discounted cash with an appropriate discount rate, on the basis of the expected future cash flow generated during the continuous use or final disposal of an asset. Impairment provision of the asset shall be calculated and determined on the basis of single item asset. Where it is difficult to do so, the enterprise shall determine the recoverable amount of the group assets on the basis of the asset group to which the asset belongs. The term "group assets” refers to a minimum combination of assets that can independently generate the flow-in cash. When making an impairment test, the carrying value of the good will presented separately in financial statements shall be distributed to the asset group or combination of asset groups that can benefit from the synergy effect of enterprise merger. If the impairment test shows that the recoverable amount of the asset groups or combinations of asset groups containing good will is lower than their carrying value, then the correspondent impairment loss shall be recognized. The amount of the impairment loss shall first charge against the carrying value of the headquarter' assets and good will which are apportioned to the asset group or combination of asset groups, then charge it against the carrying value of other assets in proportion to the weight of other assets in the asset group or combination of asset groups with the good will excluded. Once the impairment losses of the aforesaid assets are recognized, they can’t be reversed during the subsequent accounting period. 17. Estimated liabilities The obligation pertinent to a contingent event shall be recognized as an estimated liability when the following conditions are satisfied simultaneously: (1) That obligation is a current obligation of the Group; (2) It is likely to cause any economic benefit to flow out of the Group as a result of performance of the obligation; (3) The amount of the obligation can be measured in a reliable way. On the balance sheet date, with full consideration of the risks, uncertainty, time value of money, and other factors pertinent to the contingent event, the estimated liabilities shall be initially measured in accordance with the best estimate of the necessary expenses for the performance of the current obligation. When all or some of the expenses necessary for the liquidation of an estimated liability of the Group is expected to be compensated by a third party, the compensation should be separately recognized as an asset only when it is virtually certain that the reimbursement will be obtained. The amount recognized for the reimbursement should not exceed the book value of the estimated liability.

18. 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

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transferred to the buyer by the Group; 2) the Group 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 enterprise; 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 Group can reliably estimate the outcome of a transaction concerning the labor services it provides. If the Group 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 enterprise; 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 Group 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. Government Subsidies A government subsidy means the monetary or non-monetary assets obtained free by the Group from the government, but excluding the capital invested by the government as the owner of the enterprise. Government subsidies consist of the government subsidies pertinent to assets and government subsidies pertinent to income. If a government subsidy is a monetary asset, it shall be measured in the light of the received or receivable amount. If a government subsidy is a non-monetary asset, it shall be measured at its fair value. If its fair value cannot be obtained in a reliable way, it shall be measured at

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its nominal amount. The government subsidies measured at their nominal amounts shall be directly included in the current profits and losses. The Group usually recognizes and measure government subsidy in accordance with the number of payments when actually received. But for the end of the reporting period, there is conclusive evidence that it is in accordance with relevant conditions prescribed by the financial support policy, and expected to receive financial support fund, measure in accordance with the amount of the receivable. those measure in accordance with the amount of the receive should meet the following conditions at the same time : (1) the amount subsidy receivable has been entitled to government departments issued confirmation, or reasonably calculated according to the official launch of the relevant provisions of the measures for the management of fiscal funds, and estimated that there is no significant uncertainty in its amount; (2) shall base on the local financial department formally issued and be in accordance with the provisions of the government information disclosure regulations and active public financial support project and its financial support measures for the management of fiscal funds, and the management measures should be universal (any enterprise conform to the requirements as prescribed can apply), rather than specific to a particular enterprise; (3) Related grant approval has a clear commitment from time limit, and the money allocated have a corresponding budget as guarantee, so it is reasonable to ensure it can be received within a prescribed period of time. The government subsidies pertinent to assets shall be recognized as deferred income, equally distributed within the useful lives of the relevant assets, and included in the current profits and losses. The government subsidies pertinent to incomes used for compensating the related future expenses or losses shall be recognized as deferred income and shall be included in the current profits and losses during the period when the relevant expenses are recognized; or those subsidies used for compensating the related expenses or losses shall be directly included in the current profits and losses. If it is necessary to refund any government subsidy which has been recognized, it shall be treated respectively in accordance with the circumstances as follows: 1) If there is the deferred income concerned, the book balance of the deferred income shall be offset against, but the excessive part shall be included in the current profits and losses; and 2) If there is no deferred income concerned to the government subsidy, it shall be directly included in the current profits and losses.

20. Deferred income tax assets / Deferred income tax liabilities (1) Current income tax On the balance sheet date, the current income tax liabilities (or assets) incurred in the current period or prior periods shall be measured on the basis of the expected payable (refundable) amount of income tax, which is calculated according to the tax law. The amount of taxable income, on which the calculation of charges of current income tax is based, shall be calculated after correspondently adjusting the pre-tax accounting profit according to the tax law. (2) Deferred income tax assets and deferred income tax liabilities As for temporary difference between the difference, which is arising between the carrying value of some assets, along with some liability items, and their tax bases, and the difference, which is arising between the carrying value of items that can’t be recognized as assets or liabilities, but of which the tax bases can be confirmed according to the tax law, the deferred

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income tax assets and deferred income tax liabilities shall be recognized by balance sheet liability method. As for taxable temporary difference relating to initial recognition of good will, and initial recognition of assets or liabilities arising from transactions which neither belongs to enterprise merger, nor influences accounting profit or taxable income (or deductible loss), the relevant deferred income tax liabilities shall not be recognized. Besides, as for taxable temporary difference relating to investments over subsidiaries, associated enterprises, and joint ventures, if the Group is capable of controlling the time for reversing temporary difference, which is much likely not to be reversed in the expected future, then relevant deferred income tax liabilities shall not be recognized either. Other than the aforesaid exceptions, the Group shall recognize all deferred income tax liabilities arising from taxable temporary difference. As for taxable temporary difference relating to initial recognition of assets or liabilities arising from transactions which neither belongs to enterprise merger, nor influences accounting profit or taxable income (or deductible loss), the relevant deferred income tax assets shall not be recognized. Besides, as for taxable temporary difference relating to investments over subsidiaries, associated enterprises, and joint ventures, if the Group is capable of controlling the time for reversing temporary difference, which is much likely not to be reversed in the expected future, then relevant deferred income tax assets shall not be recognized either. Other than the aforesaid exceptions, the Group shall recognize the deferred income tax asset arising from a 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. For any deductible loss or tax deduction that can be carried forward to the next year, the corresponding deferred income tax asset shall be determined to the extent that the amount of future taxable income to be offset by the deductible loss or tax deduction to be likely obtained. On the balance sheet date, the deferred income assets and deferred income tax liabilities shall be measured at the tax rate applicable to the period during which the relevant assets are expected to be recovered or the relevant liabilities are expected to be settled. The carrying amount of deferred income tax assets shall be reviewed at each balance sheet date. If it is unlikely to obtain sufficient taxable income to offset against the benefit of the deferred income tax asset, the carrying amount of the deferred income tax assets shall be written down. Any such write-down should be subsequently reversed where it becomes probable that sufficient taxable income will be available. (3) Income tax expenses The income tax expenses include income tax of the current period and deferred income tax. Except for other integrated incomes and the carrying value of adjusted good will of deferred income tax arising form enterprise merger, and except that the income tax in the current period and deferred income tax relating to the transactions or event directly recorded in the owner’s equities shall be recorded in other integrated incomes or owner’s equities, other income tax in the current period and deferred income tax expenses or incomes shall be recorded in profit or loss in the period in which it is incurred. (4) Offset of income tax When holding the legal right of settlement with net amount, and attempting to settle with net

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amount, or simultaneously acquiring assets and paying off liabilities, the Group shall present the income tax assets and income tax liabilities in the current period with the net amounts after offset. When the Group holds the legal right of settling income tax assets and income tax liabilities in the current period with net amount, and the income tax assets and income tax liabilities are relevant to income taxes imposed by the same taxation section for the same tax payer, yet the concerned tax payers intend to settle current income tax assets and liabilities with net amount or simultaneously acquire assets and pay off liabilities in every future term when significant deferred income tax assets and liabilities are reversed, the deferred income tax assets and deferred income tax liabilities of the Group shall be stated by the net amounts after offset. 21. Leases The "finance lease" shall refer to a lease that has transferred in substance all the risks and rewards related to the ownership of an asset. Other leases except for finance leases are operating leases. (1) Business of operating leases recorded by the Group as the lessee The rent expenses from operating leases shall be recorded by the lessee in the relevant asset costs or the profits and losses of the current period by using the straight-line method over each period of the lease term. The initial direct costs shall be recognized as the profits and losses of the current period. The contingent rents shall be recorded into the profits and losses of the current period in which they actually arise. (2) Business of operating leases recorded by the Group as the lessor The rent incomes from operating leases shall be recognized as the profits and losses of the current period by using the straight-line method over each period of the lease term. The initial direct costs of great amount shall be capitalized when incurred, and be recorded into current profits and losses in accordance with the same basis for recognition of rent incomes over the whole lease term. The initial direct costs of small amount shall be recorded into current profits and losses when incurred. The contingent rents shall be recorded into the profits and losses of the current period in which they actually arise. (3) Business of finance leases recorded by the Group as the lessee On the lease beginning date, the Group shall record the lower one of the fair value of the leased asset and the present value of the minimum lease payments on the lease beginning date as the entering value in an account, recognize the amount of the minimum lease payments as the entering value in an account of long-term account payable, and treat the balance between the recorded amount of the leased asset and the long-term account payable as unrecognized financing charges. Besides, the initial direct costs directly attributable to the leased item incurred during the process of lease negotiating and signing the leasing agreement shall be recorded in the asset value of the current period. The balance through deducting unrecognized financing charges from the minimum lease payments shall be respectively stated in long-term liabilities and long-term liabilities due within 1 year. Unrecognized financing charges shall be adopted by the effective interest rate method in the lease term, so as to calculate and recognize current financing charges. The contingent rents shall be recorded into the profits and losses of the current period in which they actually arise. (4) Business of finance leases recorded by the Group as the lessor On the beginning date of the lease term, the Group shall recognize the sum of the minimum lease receipts on the lease beginning date and the initial direct costs as the entering value in

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an account of the financing lease values receivable, and record the unguaranteed residual value at the same time. The balance between the sum of the minimum lease receipts, the initial direct costs and the unguaranteed residual value and the sum of their present values shall be recognized as unrealized financing income. The balance through deducting unrealized financing incomes from the finance lease accounts receivable shall be respectively stated in long-term claims and long-term claims due within 1 year. Unrecognized financing incomes shall be adopted by the effective interest rate method in the lease term, so as to calculate and recognize current financing revenues. The contingent rents shall be recorded into the profits and losses of the current period in which they actually arise.

22. Assets held for sale If the group has a resolution for the disposal of a non-current assets, and signed irrevocable transfer agreement with assignee, and the transfer is likely to be completed within one year, Then the non-current assets is accounted as non-current assets holds for sale, not withdraw depreciation or amortization, and accounted according to lower net between the book value and the fair value minus the disposal expenses. Held for sale of non-current assets include single item assets and group disposal, if the group disposal is a asset group, an d the Company allocate the goodwill obtaining from the merger of enterprise to it according to the Accounting Standards for Enterprises No. 8 - Asset Impairment Provision or the disposal of the asset group is a group management, then the disposal groups including the goodwill of enterprise merger. An asset or disposal group is classified as held for sale, but later no longer meet the condition of acknowledging of the non-current assets held for sale, the Group stop classifying it to held for sale, and measured according to the lower between following two amount: (1) The book value of the asset group or disposal group before classified as held for sale, is according to the amount of originally confirming the depreciation, amortization and the adjustment of impairment under the assumption that it is in the absence of classified as held for sale. (2) Recover the amount when decided not to sell. 23. Employee compensation During the accounting period of an employee’s providing services to the Group, the employee compensation payable is recognized as liabilities. The Group is involved in social security system established by government agencies for employees, mainly including basic endowment insurance, medical insurance, housing fund, and other social security systems. Correspondent expenses shall be recorded into related assets costs or current profits and losses when incurred. As for the termination of labor relations before the expiry of labor contracts of employees, or proposals on compensations for the purpose of encouraging employees to voluntarily accept the cut-down, of the Group has drawn up the plan on the cancellation of labor relationship or proposed voluntary layoff proposal and is about to implement such items, and at the same time the Group is unable to unilaterally withdraw the plan on the cancellation of labor relationship or the layoff proposal, then the expected liabilities arising from compensations due to the cancellation of labor relationship shall be recognized and recorded into current profits and losses. Internal retirement plan for employees shall be dealt with the same rules of the aforesaid retirement welfare events. From the service-termination date to the normal retirement date of

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an employee, salaries for internal retired staffs and social insurance charges to be paid by the Group shall be included into current profits and losses (retirement welfares) when such expenses are in compliance with recognition conditions of estimated debts. 24. Changes in main accounting policies and estimates Were the main accounting policies or estimates changed during the reporting period? □Yes √No (1) Change of accounting policies Were the main accounting policies changed during the reporting period? □Yes √No (2) Change of accounting estimates Were the main accounting estimates changed during the reporting period? □Yes √No 25. Correction of previous accounting errors Was any accounting error made in previous periods discovered in the reporting period? □Yes √No

26. Significant accounting judgments and estimates Due to the internal uncertainty of operating activities, the Group needs to make judgments, estimates and assumptions for carrying amounts of statement items that can’t be measured accurately during the process of applying accounting policies. Such judgments, estimates and assumptions are made on the basis of the past experience of Group’s management staffs and on the consideration of other relevant factors. Such judgments, estimates and assumptions have effect on reporting amount of incomes, expense, assets and liabilities, as well as disclosure of contingent liabilities on the balance sheet date. However, the uncertainty of such estimates may results in major adjustments of carrying amounts of assets or liabilities that will be influenced in future. The Group shall have a check on the aforesaid judgments, estimates and assumptions at fixed intervals on the basis of sustainable operation. As for the change in accounting estimates that only effects on the current period of the change, the affected amount thereof shall be recognized at current period of the change. As for accounting estimates that effects on both the current period of the change and future periods, the affected amount thereof shall be recognized at current period of the change and future periods. On balance sheet date, major fields requiring judgments, estimates and assumptions on amounts of financial statement items by the Group are as follows: (1) Classification of leases In line with rules in Accounting Standards for Enterprises No. 21 – Leases, the Group classifies leases into operating leases and finance leases. Upon the classification, the management staffs need to make analysis and judgments on whether to essentially transfer all risks and remuneration relating to the ownership of leased-out assets to the lessee, or whether the Group has essentially undertaken all risks and remuneration relating to the ownership of leased-in assets. (2) Withdrawal of bad debt provisions The Group shall, in accordance with accounting policies of receivables, calculate bad debt provisions by adopting allowance method. Impairment of accounts receivable is based on the assessment of the recovery of accounts receivable. Identification of impairment of accounts

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receivable requires judgments and estimates by management staffs. The difference between actual outcomes and originally estimated outcomes, which will influence the carrying amount of accounts receivable and bad debt provisions thereof in the estimated period of the change shall be withdrawn or reversed. (3) Inventory depreciation reserves The Group shall calculate whichever is lower between the cost and realizable net value in light of inventory accounting policies. As for inventories of which the cost is higher than the realizable net value and inventories which are obsolete and unsalable, inventory depreciation reserves shall be withdrawn. Impairment of inventories to realizable net value is based on the assessment of the marketing of inventories and realizable net value thereof. Identification of inventory impairment requires well-established evidences by management staffs, as well as judgments and estimates based on consideration of the purpose of holding inventories and other factors such as events occurring after the date of balance sheet. The difference between actual outcomes and originally estimated outcomes, which will influence the carrying amount of inventories and inventory depreciation reserves in the estimated period of the change shall be withdrawn or reversed. (4) Fair values of financial instruments As for financial instruments not existing in active trading market, the Group shall determine their fair values by all kinds of assessment methods, which include model analysis of discounted cash flow and etc. During the assessment, the Group needs to assess for respects such as future cash flows, credit risks, market volatility, correlation, and choose appropriate discount rate. Such related assumptions have uncertainty, of which the change will effect on fair values of financial instruments. (5)Impairment of financial assets available for sale To a large extent, whether the impairment of financial assets available for sale is recognized or not relies on the judgments and assumptions of the management staffs. In that way, the Group shall be certain about whether to recognize impairment losses of financial assets available for sale in the profit statement. During the process of making judgments and assumptions, the Group needs to evaluate how much the fair value of such investment is less than its cost, how long such investment will last, and the financial condition and short-term business outlook of the invested parties, which include industry status, technology transform, credit rating, default rate and risks from the opposite parties. (6) Impairment provisions of non-financial non-current assets The Group shall judge whether there is sign of impairment of non-current assets other than financial assets on balance sheet date. Intangible assets with uncertain service lives, besides being conducted with annual impairment test every year, have to accept impairment tests when there is sign of impairment. Other non-current assets except for financial assets have to accept impairment tests when there is sign indicating the carrying amount thereof is unrecoverable. When the carrying amounts of the asset or group assets are higher than the recoverable amounts, namely whichever is higher between the net amount through deducting disposal charges from the fair value and the present value of the estimated future cash flow, impairment occurs. The net amount of the fair value of an asset minus the disposal expenses shall be determined in light of the amount of the basis of the price as stipulated in the sales agreement or the

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observable market price in the fair transaction minus the incremental cost directly subject to the disposal of the asset. When estimating present value of future cash flows, it is necessary to make significant judgments on characters of the asset or asset group, such as output, sales price, related operating costs, and discount used to calculate the present value. When estimating recoverable amount, the Group shall adopt all relevant materials that can be required, including estimates relating to output, sales price and relevant operating costs judged by rational and supportable assumptions. The Group tests whether there is impairment of good will at least for every year, which requires itself to estimate the present value of the future cash flow of group assets or combination of group assets. When estimating the present value of the future cash flow, the Group needs to estimate the cash flow arising from future group assets or combination of group assets, and at the same time choose appropriate discount rate to determine the present value of the future cash flow. (7) Depreciation and amortization Upon consideration on the salvage value of investment real estates, fixed assets and intangible assets, the Group shall withdraw depreciation and amortization by straight-line method over their service lives. The Group checks on service lives at fixed intervals, so as to determine the amounts of depreciation expenses and amortization expenses at each period. Service lives are confirmed in accordance with the past experience on similar assets of the Group, along with renewed technology of expectation. If any significant change occurred to previous estimated, depreciation expenses and amortization expenses will be adjusted in future period. (8) Deferred income tax assets In a limit providing large possibility of offset losses from sufficient taxable profits, the Group shall recognize deferred income tax assets in line with all unused tax losses, which requires management staffs of the Group to estimate the time when future taxable profits occurs and the amount thereof by applying plenty of judgments and combining tax planning strategies, so as to determine the amount of the recognizable deferred income tax assets. (9) Income taxes There’s certain uncertainty of disposal and calculation of taxes of partial transactions in normal operating activities. It is uncertain whether some pre-taxed items can set aside the approvals by tax authorities or not. If there are differences between the ultimate recognition outcomes and the originally estimated amounts of such tax issues, then such differences shall effect on the current income tax and deferred income tax during the ultimate recognition period. (10) Internal welfare for retirement & care and supplementary welfare for retirement Amounts of expenses and liabilities of internal welfare for retirement & care and supplementary welfare for retirement shall be determined in light of all kinds of assumption conditions, which include discount rate, average growth rate of hospitalization costs, growth rate of subsidy for early retired employees and retired employees, and other factors. Differences between actual outcomes and assumptions shall be recognized once such differences occur and recorded into expenses of the current year. Although the management staffs consider to have adopted rational assumptions, the actual empirical values and the changes in assumptions shall still effect on the balance of expense and liabilities of internal

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welfare for retirement & care and supplementary welfare for retirement of the Group. (11) Estimated liabilities The Group shall estimate for product quality guarantee, estimated contract losses, and penalties for delay in delivery, and withdraw correspondent provisions in light of contract clauses, current knowledge, and historical experience. When such contingent event has formed a current obligation, and fulfilling that current obligation may result in outflow of economic benefits of the Group, the Group shall recognize the contingent events as estimated debts in line with the best estimate of expenses needed for fulfillment of related current obligations. The recognition and measurement of estimated debts, to a large extent, relies on the judgments of the management staffs. While making judgments, the Group needs to assess factors such as risks, uncertainty, and time value of currency relevant to such contingent events. Thereinto, the Group shall commit the estimated debts for after-sale quality maintenance provided to clients at its sales, maintenance, and transform of commodities. Data of current maintenance experience of the Group has been taken into consideration while estimating debts, but current maintenance experience may not be able to reflect future maintenance. Any increase or decrease of such provision shall possibly affect profits and losses of the coming years.

V. Ta x 1. Income tax Income tax shall be paid in light of the amount of taxable income and tax rate applicable to the current period. Income tax rate is 25%. 2. VAT (1) VAT on sales for pesticides that are produced by the Company shall be measured at tax rate of 13%, such pesticides include orthene, paraquate, glyphosate, chlorofos, DDVP, triazophos and imidacloprid, ect. (2) VAT on sales for chemical products of the Company shall be measured 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 the light of the policy of “Tax exemption, tax deduction and tax rebate”. 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 circulating tax payable of the current period. 5. Extra charges for education Extra charges for education shall be paid at 3% of circulating 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.

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VI. Business combination and consolidated financial statement

1. Subsidiaries

(1) Subsidiaries obtained by establishment and investment

Unit: RMB Ten Thousand Yuan

Actual amount Type of Registered Registered Business Type of Legal Other essential Subsidiaries Business nature Code of investments subsidiaries place capital scope enterprises representative investment at the year-end

Sanonda (Jingzhou) Production of Wholly-owned Limited 181860033 Pesticide & Chemical Co., Jingzhou Manufacturing 3,000 pesticide and Deng Guobin 3,041.37 subsidiaries company Ltd. intermediate

Import and Hubei Sanonda Foreign Wholly-owned export of Limited Zhang 706963167 Jingzhou Trading 1,000 1,199.30 Trading Co., Ltd. subsidiaries pesticide and company Shaochun intermediate

(Continued)

Balance of parent company’s Included in equity after deducting the The proportion of The proportion of voting Deductible Subsidiaries consolidated Minority interest difference that loss of minority Notes holding shares（%） rights（%） minority interests statement interests exceed equity obtained by minority shareholders

Sanonda (Jingzhou) Pesticide & Chemical 100.00 100.00 Yes Co., Ltd.

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Hubei Sanonda Foreign Trading Co., Ltd. 100.00 100.00 Yes

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(2) Subsidiary through business combination under the same control Unit: RMB Ten Thousand Yuan

Actual amount of Type of Registered Registered Type of Legal Other essential Subsidiaries Business nature Business scope Code investments subsidiaries place capital enterprises representative investment at the year-end

Production and Jingzhou Hongxiang Controlled Limited Jingzhou Manufacturing 4,000 sale of chemical Yin Hong 79877119-6 3,761.99 Chemicals Co., Ltd. subsidiary company raw materials

(Continued)

The Balance of parent company’s equity after Included in The proportion of proportion of deducting the difference that loss of Subsidiaries consolidated Minority interest Deductible minority interests Notes holding shares（%） voting rights minority interests exceed equity obtained statement （%） by minority shareholders

Jingzhou Hongxiang 98.50 98.50 Yes 25.24 Chemicals Co., Ltd.

2. Explanation on changes in consolidated scope See details in Notes VI. 3 and Notes VI. 4.

125

Notes to the Financial Statement of 2013 Annual Report of Hubei Sanonda Co., Ltd.

3. Subsidiaries that not combined into consolidation scope in the reporting period

Profits from the year-begin to the Name Net assets on the disposal date dispose date

Hubei Sanonda Tianmen Pesticide Chemical 18,370,570.21 -891,049.69 Co., Ltd.

Jingzhou Longhua Petrochemicals Co., Ltd. 12,843,329.86 -2,261,908.65

Hubei Sanonda Tianmen Pesticide Chemical Co., Ltd. (hereinafter referred to as Tianmen Pesticide Chemical) and Jingzhou

Longhua Petrochemicals Co., Ltd. (hereinafter referred to as Longhua Petrochemicals) lost the control right owning to the

selling equities, and were no more included in the consolidated scale (Notes VI. 4). 4. Subsidiaries reduced by selling equities without control right during the reporting period

Name Date of selling Confirm method of the disposal gains and losses

Confirmed the balance between the disposal considerations that minuses the disposed Hubei Sanonda Tianmen Pesticide Chemical equities which owned the corresponding value 31 Aug. 2013 Co., Ltd. that the date the Company disposed the net assets in the cover of the consolidated statement as the disposal gains and losses.

Jingzhou Longhua Petrochemicals Co., Ltd. 31 Aug. 2013 Ditto

(1) Tianmen Pesticide Chemical

On 31 Aug. 2013, the Company transferred the whole 100% equity of the Tianmen Pesticide Chemical to the Tianmen

Economic and Trade Committee Stated-owned Assets Management Co., Ltd. The selling date was the date that the Company

actually lost the control right of the net assets, financial and operation decision of Tianmen Pesticide Chemical. ① Disposal prices and cash flow were listed as follows:

Item Amount

Disposal prices 18,687,258.78

Cash and cash equivalents received by disposal 18,687,258.78

Less: Cash and cash equivalents owned by Tianmen Pesticide Chemical 14,688,258.78

Cash net amount received by disposal 3,999,000.00

② Disposal of the net assets of Tianmen Pesticide Chemical were listed as follows:

Item Net assets on the disposal date Net assets of the last year-end

Current assets 14,688,258.78 15,039,475.69

Non-current assets 3,678,542.45 4,221,225.97

Current liabilities -3,768.98 -918.24

Total of net assets 18,370,570.21 19,261,619.90

126

Notes to the Financial Statement of 2013 Annual Report of Hubei Sanonda Co., Ltd.

③ Disposal of income determination was listed as follows:

Item Amount

Disposal prices 18,687,258.78

Less: Net assets on the disposal date of Tianmen Pesticide Chemical 18,370,570.21

Add: Amount of the other comprehensive profits that transferred to the disposal gains and losses at the period which related to Tianmen Pesticide Chemical

Investment profits gained from disposal 316,688.57

④ Incomes, expenses and profits from the year-begin of disposal to the disposal date of Tianmen Pesticide Chemical were listed as follows:

Item Amount

Income

Less: Cost and expenses 891,049.69

Total of profits -891,049.69

Less: Income tax expenses

Net profits -891,049.69

(2) Longhua Petrochemicals

On 31 Aug. 2013, the Company retired the funds of the whole 65% equities of Longhua Petrochemicals. The retirement date

was the date the Company actually lost the control right of the net assets, financial and operation decision of Longhua

Petrochemical. ① Disposal prices and cash flow were listed as follows:

Item Amount

Disposal prices 8,626,000.00

Cash and cash equivalents received by disposal 5,626,000.00

Less: Cash and cash equivalents owned by Longhua Petrochemical 3,017,237.25

Cash net amount received by disposal 2,608,762.75

② Disposal of the net assets of Tianmen Pesticide Chemical were listed as follows:

Item Net assets on the disposal date Net assets of the last year-end

Current assets 32,352,870.21 27,211,307.95

Non-current assets 6,057,496.46 4,543,499.28

Current liabilities 25,567,036.81 14,538,337.54

Total of net assets 12,843,329.86 17,216,469.69

③ Disposal of income determination was listed as follows:

Item Amount

Disposal prices 8,626,000.00

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Notes to the Financial Statement of 2013 Annual Report of Hubei Sanonda Co., Ltd.

Less: Net assets on the disposal date of Longhua Petrochemical 8,348,164.41

Add: Amount of the other comprehensive profits that transferred to the disposal gains and losses at the period which related to Longhua Petrochemical

Investment profits gained from disposal 277,835.59

④ Incomes, expenses and profits from the year-begin of disposal to the disposal date of Longhua Petrochemical were listed as follows:

Item Amount

Income 83,893,572.33

Less: Cost and expenses 86,498,044.86

Total of profits -2,604,472.53

Less: Income tax expenses -342,563.88

Net profits -2,261,908.65

128

Notes to the Financial Statement of 2013 Annual Report of Hubei Sanonda Co., Ltd.

VII. Notes on major items in consolidated financial statements of the Company Below notes items (including the major items in consolidated financial statement of the Company), excluding the particular indication: 1 Jan. 2013 referred to the year-begin, 31 Dec. 2013 referred to the year-end; 2013 referred to this year and 2012 referred to the last year. 1. Monetary capital

Amount of the year-end Amount of the year-begin

Amount of Amount of Item Conversion Amount of the Conversion Amount of the foreign foreign rate RMB rate RMB currency currency

Cash on hand:

-RMB — — 1,229.00 — — 1,347.21

-USD

Deposit in bank:

-RMB — — 390,831,029.69 — — 168,531,626.60

-USD 3,154,662.62 6.0969 19,233,662.52 1,057,734.78 6.2855 6,648,391.96

Other monetary funds

-RMB — — 4,000,000.00 — —

-USD

Total 414,065,921.21 175,181,365.77

Notes: Balance of the monetary funds at the year-end was of the amount of RMB 414,065,921.21, which increased of 136.36% when compared to the last year, and mainly because of the increase of the income and the sales outstanding. Other monetary funds was the cash deposits that deposited in the bank that the Company issued externally of the bank acceptance 2. Notes receivable (1) Type

Type Amount of the year-end Amount of the year-begin

Bank acceptance 41,103,985.15 23,690,345.75

Total 41,103,985.15 23,690,345.75

Notes: Balance of the notes receivable at the year-end was of RMB 41,103,985.15, which increased of 73.51% when compared to the year-begin, and mainly because of the increase of the notes that received of this year. Balance of the endorsement transfer was of RMB 592,157,390.92 of the decreased notes receivable (the amount was of RMB 617,549,194.10 in 2012).

129

Notes to the Financial Statement of 2013 Annual Report of Hubei Sanonda Co., Ltd.

(2) There was no pledged notes receivable of the Group (3) There were no notes that transferred in to the accounts receivable owning to the drawer failed to perform of the Group (4) Explanation of the undue notes which had endorsed to other parties at the year-end (five tops of the maximum amount)

Whether was Unit Date of issue Due date Amount Notes derecognized

Xinjiang Production and Construction Group 2013/09/09 2014/03/09 2,000,000.00 Yes Agricultural Production and Supply Company

Ningbo Ulica Solar Science & Technology Co., 2013/10/29 2014/04/29 1,890,000.00 Yes Ltd.

Hangzhou Haorui Chemical Co., Ltd. 2013/12/10 2014/06/10 1,630,000.00 Yes

Shanghai Daya technology Co., Ltd. 2013/11/28 2014/05/28 1,000,000.00 Yes

Total 8,150,000.00 3. Accounts receivable (1) Accounts receivable listed by categories

Closing balance

Category Book balance Bad debt provision Proportio Proportio Amount Amount n (%) n (%) Accounts receivable with significant single amount and

individually withdrawn bad debt provision

Accounts receivable for which bad debt provisions are made on

the group basis

Including: Related-party groups

Risk-free groups

Account age groups 244,582,081.41 99.88 35,415,634.25 14.48

Subtotal of the groups 244,582,081.41 99.88 35,415,634.25 14.48

Accounts receivable with insignificant single amount and 302,796.52 0.12 302,796.52 100.00 individually withdrawn bad debt provision

Total 244,884,877.93 100.00 35,718,430.77 14.59

(Continued)

Opening balance

Category Book balance Bad debt provision Proportio Proportio Amount Amount n (%) n (%)

Accounts receivable with significant single amount and

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Notes to the Financial Statement of 2013 Annual Report of Hubei Sanonda Co., Ltd. individually withdrawn bad debt provision

Accounts receivable for which bad debt provisions are made on the group basis

Including: Related-party groups

Risk-free groups

Account age groups 214,802,076.42 100.00 33,837,698.69 15.75

Subtotal of the groups 214,802,076.42 100.00 33,837,698.69 15.75

Accounts receivable with insignificant single amount and individually withdrawn bad debt provision

Total 214,802,076.42 100.00 33,837,698.69 15.75

(2) Accounts receivable listed by account age groups

Closing balance Opening balance Item Amount Proportion (%) Amount Proportion (%)

Within 1 year 216,712,267.35 88.49 186,966,192.96 87.04

1 to 2 years 2,724,642.21 1.11 3,079,076.37 1.43

2 to 3 years 1,090,433.52 0.45 601,638.40 0.28

3 to 4 years 342,249.36 0.14 22,515.40 0.01

4 to 5 years 22,515.40 0.01 285,842.21 0.13

Over 5 years 23,992,770.09 9.80 23,846,811.08 11.11

Total 244,884,877.93 100.00 214,802,076.42 100.00

(3) Withdrawal of bad debts provision ① Accounts receivable adopting account age group to withdraw bad debts provision

Closing balance Opening balance

Aging Book balance Book balance Proportion Bad debt provision Proportion Bad debt provision Amount Amount (%) (%) Within 1 year 218,790,005.54 89.46 10,939,500.28 186,966,192.96 87.04 9,348,309.64

1 to 2 years 646,904.02 0.26 64,690.40 3,079,076.37 1.43 307,907.64

2 to 3 years 787,637.00 0.32 236,291.10 601,638.40 0.28 180,491.52

3 to 5 years 364,764.76 0.15 182,382.38 308,357.61 0.14 154,178.81

Over 5 years 23,992,770.09 9.81 23,992,770.09 23,846,811.08 11.11 23,846,811.08

Total 244,582,081.41 100.00 35,415,634.25 214,802,076.42 100.00 33,837,698.69

②Accounts receivable with insignificant single amount and individually withdrawn bad debt provision

Bad debt Content Book balance Proportion (%)) Reason provision

131

Notes to the Financial Statement of 2013 Annual Report of Hubei Sanonda Co., Ltd.

Jiangxi Nanchang Red Valley Plant Not expected to 302,796.52 100.00 302,796.52 Protection Center recover

Total 302,796.52 302,796.52

(4) No accounts receivable reversed or recovered in the reporting period (5) No significant accounts receivable reversed or recovered in the reporting period (6) Shareholders with more than 5% (including 5%) of the voting shares of the Company in accounts receivable in reporting period

Closing balance Opening balance

Unit Bad debt Bad debt Amount Amount provision provision

Makhteshim Chemical Works Ltd. 3,866,800.31 193,340.02 9,228,873.94 461,443.70

Total 3,866,800.31 193,340.02 9,228,873.94 461,443.70

(7) Accounts receivable due to the top five entities The total o f the accounts receivable due to the top five entities at the period-end was of RMB 103,117,904.47, which was 42.11% of the total of accounts receivable. (8) Accounts receivable due from related parties See details to Notes IX. 6 Accounts receivable and payable due from related parties. (9) Original foreign currency amounts receivable and discount rate:

Closing amount Opening amount

Item Foreign currency Foreign currency Rate Equivalent to RMB Rate Equivalent to RMB amount amount USD 33,519,863.46 6.0969 204,367,255.53 27,829,317.28 6.2855 174,921,173.76

4. Prepayment (1) Prepayment listed account age

Closing amount Opening amount Account age Amount Proportion (%) Amount Proportion (%)

Within 1 year 42,978,528.26 99.85 37,503,196.88 99.99

1 to 2 years 63,500.00 0.15

2 to 3 years 2,600.00 0.01

Total 43,042,028.26 100.00 37,505,796.88 100.00

(2) Information of the top 5 prepayment

Relationship with the Name of entity Amount Aging Reason for unsettled Company

Supplier A Non-related-party 22,343,809.30 Within 1 year Non-arrival products

132

Notes to the Financial Statement of 2013 Annual Report of Hubei Sanonda Co., Ltd.

Relationship with the Name of entity Amount Aging Reason for unsettled Company supplier

Non-related-party Supplier B 6,555,213.14 Within 1 year Non-arrival products supplier

Non-related-party Supplier C 5,423,000.00 Within 1 year Non-arrival products supplier

Non-related-party Supplier D 3,951,494.50 Within 1 year Non-arrival products supplier

Non-related-party Supplier E 1,100,000.00 Within 1 year Non-arrival products supplier

Total 39,373,516.94

(3) No information about amount due from shareholders or related parties with more than 5% (including 5%) of the voting shares of the Company in prepayment (4) Original foreign currency prepayment and discount rate

Closing amount Opening amount

Item Foreign currency Foreign currency Rate Equivalent to RMB Rate Equivalent to RMB amount amount

USD 60,921.53 6.0969371,432.48 748,305.57 6.2855 4,703,474.66

5. Other accounts receivable (1) Other accounts receivable disclosed by type:

Closing balance Provision for doubtful Book balance Category debts Proporti Proporti Amount Amount on (%) on (%) Other accounts receivable with significant single amount and

individually withdrawn bad debt provision

Accounts receivable for which bad debt provisions are made on the

group basis

Including: Related-party groups

Risk-free groups 2,762,341.35 21.00

Account age groups 10,389,119.97 79.00 5,927,070.27 57.05

Subtotal of the groups 13,151,461.32 100.00 5,927,070.27 45.07

Accounts receivable with insignificant single amount and individually

withdrawn bad debt provision

Total 13,151,461.32 100.00 5,927,070.27 45.07

(Continued)

133

Notes to the Financial Statement of 2013 Annual Report of Hubei Sanonda Co., Ltd.

Closing balance Provision for doubtful Book balance Category debts Proporti Proporti Amount Amount on (%) on (%) Other accounts receivable with significant single amount and

individually withdrawn bad debt provision

Accounts receivable for which bad debt provisions are made on the

group basis

Including: Related-party groups

Risk-free groups 17,549,975.58 71.09

Account age groups 7,135,825.98 28.91 5,870,435.77 82.27

Subtotal of the groups 24,685,801.56 100.00 5,870,435.77 23.78

Accounts receivable with insignificant single amount and individually

withdrawn bad debt provision

Total 24,685,801.56 100.00 5,870,435.77 23.78

Notes: Balance of other accounts receivable at the period-end was of RMB 13,151,461.32 which decreased 61.60% when compared to the year-begin, and mainly was the reduce of the export rebates which had not received at the period-end when compared to the last year. (2) Other accounts receivable listed by account age

Closing balance Opening balance Category Amount Proportion (%) Amount Proportion (%)

Within 1 year 7,119,444.27 54.13 12,852,176.77 52.06

1 to 2 years 330,784.57 2.52 5,915,356.31 23.96

2 to 3 years 11,290.00 0.09 35,290.65 0.14

Over 3 years 5,689,942.48 43.26 5,882,977.83 23.84

Total 13,151,461.32 100.00 24,685,801.56 100.00

(3) Withdrawal of bad debts provision ① In the groups, other accounts receivable adopting aging analysis method to withdraw bad debt provision:

Closing balance Opening balance

Book balance Book balance Account age Provision for Provision for Proportion Proportion (%) Amount doubtful debts Amount doubtful debts (%) Within 1 year 4,357,102.92 41.94 217,855.15 1,047,557.50 14.68 52,377.87

1 to 2 years 330,784.57 3.18 33,078.46 170,000.00 2.38 17,000.00

2 to 3 years 11,290.00 0.11 3,387.00 35,290.65 0.49 10,587.20

3 to 5 years 34,385.65 0.33 17,192.83 185,014.26 2.59 92,507.13

134

Notes to the Financial Statement of 2013 Annual Report of Hubei Sanonda Co., Ltd.

Closing balance Opening balance

Book balance Book balance Account age Provision for Provision for Proportion Proportion (%) Amount doubtful debts Amount doubtful debts (%) Over 5 years 5,655,556.83 54.44 5,655,556.83 5,697,963.57 79.86 5,697,963.57

Total 10,389,119.97 100.00 5,927,070.27 7,135,825.98 100.00 5,870,435.77

② In the groups, other accounts receivable adopting risk-free method to withdraw bad debt provision:

Name Book balance Proportion (%) Provision for doubtful debts

No risk of bad debts Export rebates 2,757,341.35 Export rebates provision and withdrawal

No risk of bad debts Petty cash 5,000.00 Petty cash provision and withdrawal

Total 2,762,341.35

(4) No other accounts receivable due from shareholders with more than 5% (including 5%) of the voting shares of the Company in the reporting period (5) Information of the top 5 other accounts receivable

Relationship Name of entity with the Amount Term Proportion (%) Company

Non-related Over 5 yea Shantou Biyue Plastic Co., Ltd. 3,125,000.00 23.76 party rs

Non-related Within 1 y Jingzhou Longhua Petrochemicals Co., Ltd. 3,000,000.00 22.81 party ear

Non-related Within 1 Export rebates 2,757,341.35 20.97 party year

Non-related Within 1 Xiao Hongbo 711,750.00 5.41 party year

Hubei Jingzhou Shashi Agricultural Production Non-related Over 5 548,500.00 4.17 Materials Co., Ltd. party years

Total 10,142,591.35 77.12

(6) Other account receivable due from related parties See details to Notes IX. 6 Accounts receivable and payable due from related parties. 6. Inventory (1) Category

Closing balance Item Book balance Impairment of Book value

135

Notes to the Financial Statement of 2013 Annual Report of Hubei Sanonda Co., Ltd.

inventories

Raw materials 57,168,007.21 145,674.50 57,022,332.71

Goods in process 66,802,557.42 552,451.70 66,250,105.72 Inventory goods 134,237,472.95 2,831,097.35 131,406,375.60

Turnover material 3,595,643.85 3,595,643.85

Total 261,803,681.43 3,529,223.55 258,274,457.88

(Continued)

Opening balance

Item Impairment of Book balance Book value inventories

Raw materials 102,562,597.33 572,297.67 101,990,299.66

Goods in process 64,515,528.92 2,345,718.73 62,169,810.19 Inventory goods 205,166,694.12 5,537,576.37 199,629,117.75

Turnover material 2,970,544.57 2,970,544.57

Total 375,215,364.94 8,455,592.77 366,759,772.17

Notes: Book value of the inventory at the period-end was of RMB 258,274,457.88, which reduced 29.58% when compared to the year-begin, and mainly because of the improvement of the sales quotation of this year and the accelerate of the inventory turnover. (2) Details of the changes of provision for falling price of inventories

Withdrawal Reducing amount Item Opening balance Closing amount amount Reversal Written off

Raw materials 572,297.67 71,274.62 497,897.79 145,674.50

Goods in process 2,345,718.73 626,892.77 2,420,159.80 552,451.70 Inventory goods 5,537,576.37 2,662,397.23 5,368,876.25 2,831,097.35

Total 8,455,592.77 3,360,564.62 8,286,933.84 3,529,223.55

(3) Reasons for the withdrawal and reversal of falling price of inventories

Item Basic Reason proportion

Inventory costs exceeded the net Raw materials realizable assets

Inventory costs exceeded the net

Goods in process realizable assets Inventory costs exceeded the net Inventory goods realizable assets

7. Long-term equity investment (1) Category

136

Notes to the Financial Statement of 2013 Annual Report of Hubei Sanonda Co., Ltd.

Item Opening balance Increase Decrease Closing balance

Other equity investment 21,144,800.00 21,144,800.00

Less: Depreciation provision of long-term equity 11,991,017.37 11,991,017.37 investment

Total 9,153,782.63 9,153,782.63

(2) List of long-term equity investment

Accounting Initial Opening Investee Increase/decrease Closing balance method investment cost balance

Hubei Bank Cost method 20,000,000.00 20,000,000.00 20,000,000.00

Hubei Shendian Mobile and Electric Cost method 564,000.00 564,000.00 564,000.00 Motor Co., Ltd.

Guangxi Zhongding Holding Co., Cost method 580,800.00 580,800.00 580,800.00 Ltd

Total 21,144,800.00 21,144,800.00

(Continued)

Explanation for Withdrawn Shareholding Voting indifferences between impairment Impairment Cash bonus in Investee percentage percentage in the shareholding provision in provision this year in investee investee percentage and voting the reporting percentage in investee period

Hubei Bank 1.18 1.18 11,991,017.37 4,062,224.59

Hubei Shendian Mobile and Electric 0.60 0.60 Motor Co., Ltd.

Guangxi Zhongding Holding 1.41 1.41 Co., Ltd

Total 11,991,017.37 4,062,224.59

(3) List of depreciation provision of long-term equity investment

Item Opening balance Increase Decrease Closing balance

Other long-term equity investment

Hubei Bank 11,991,017.37 11,991,017.37

Total 11,991,017.37 11,991,017.37

8. Investment property

(1) List of investment property

Item Opening balance Increase Decrease Closing balance

137

Notes to the Financial Statement of 2013 Annual Report of Hubei Sanonda Co., Ltd.

Investment property calculated by cost 4,394,812.50 240,400.00 4,154,412.50 method for subsequence measurement Total 4,394,812.50 240,400.00 4,154,412.50

(2) Investment property calculated by cost

Item Opening balance Increase Decrease Closing balance

I. Total original book value 6,010,000.00 6,010,000.00

Houses & buildings 6,010,000.00 6,010,000.00

Land use right

II. Accumulated depreciation and accumulated amortization 1,615,187.50 240,400.00 1,855,587.50

Houses & buildings 1,615,187.50 240,400.00 1,855,587.50

Land use right

III. Total depreciation provision

Houses & buildings

Land use right

IV. Total book value 4,394,812.50 4,154,412.50

Houses & buildings 4,394,812.50 4,154,412.50

Land use right

Notes: Amount of the accumulated depreciation and accumulated amortization was of RMB 240,400.00 in this year. The said asset is Hubei Building in Shenzhen with an area of 780 square meters. The relevant property certificate is a collective warrant, part of which belongs to the Company. Currently, the Company is unable to go through formalities for changes of the collective warrant.

9. Fixed assets

(1) Information

Item Opening balance Increase Decrease Closing balance

I. Total original book 2,021,278,707.50 195,973,399.80 92,679,816.84 2,124,572,290.46 value

Including: Houses & 681,767,539.15 15,699,454.62 13,693,287.55 683,773,706.22 buildings

General-purpose 53,647,365.68 8,887,503.79 44,759,861.89 equipments

Dedicated device 1,273,064,025.16 180,273,945.18 69,219,874.50 1,384,118,095.84

Transportation facility 12,799,777.51 879,151.00 11,920,626.51

II. Accumulated Newly increase Withdrawal depreciation

Total of accumulated 692,788,475.40 161,273,697.01 68,523,017.64 785,539,154.77 depreciation

138

Notes to the Financial Statement of 2013 Annual Report of Hubei Sanonda Co., Ltd.

Item Opening balance Increase Decrease Closing balance

Including: Houses & 148,294,758.24 28,865,507.19 5,059,196.25 172,101,069.18 buildings

General-purpose 43,749,668.07 1,693,484.98 6,823,325.29 38,619,827.76 equipments

Dedicated device 492,393,188.93 130,618,532.60 56,128,978.25 566,882,743.28

Transportation facility 8,350,860.16 96,172.24 511,517.85 7,935,514.55

III. Total of book net 1,328,490,232.10 1,339,033,135.69 value

Including: Houses & 533,472,780.91 511,672,637.04 buildings

General-purpose 9,897,697.61 6,140,034.13 equipments

Dedicated device 780,670,836.23 817,235,352.56

Transportation facility 4,448,917.35 3,985,111.96

IV. Total of depreciation 19,860,879.50 5,050,128.84 14,810,750.66 provision

Including: Houses & 7,898,332.18 5,050,128.84 2,848,203.34 buildings

General-purpose 82,995.62 82,995.62 equipments

Dedicated device 11,879,551.70 11,879,551.70

Transportation facility

V. Total of book value 1,308,629,352.60 1,324,222,385.03

Including: Houses & 525,574,448.73 508,824,433.70 buildings

General-purpose 9,814,701.99 6,057,038.51 equipments

Dedicated device 768,791,284.53 805,355,800.86

Transportation facility 4,448,917.35 3,985,111.96

Notes: Depreciation amount of this reporting period was of RMB 161,273,697.01; RMB 167,584,042.31 was transferred into fixed assets from construction project in the reporting period. (2) Information of the fixed assets of the restricted ownership On 31 Dec. 2013, the houses & buildings of which the book value was about RMB 74,215,345.10（original value of RMB 188,628,888.98）was took as the mortgage of the short-term loans.

139

Notes to the Financial Statement of 2013 Annual Report of Hubei Sanonda Co., Ltd.

(3) Fixed assets for temporarily idle

Original book Accumulated Depreciation Item Book value Remark value depreciation provision Houses & buildings 5,531,028.88 3,496,992.73 1,757,484.71 276,551.44 Total 5,531,028.88 3,496,992.73 1,757,484.71 276,551.44

(4) Fixed assets rent out by operating leasing

Type Closing book value Opening book value

No. 185 Office Building on Jiangjin Road 1,351,667.38 1,491,043.15

Total 1,351,667.38 1,491,043.15

(5) Information of fixed assets which unsettled the certificate of title N/A

140

Notes to the Financial Statement of 2013 Annual Report of Hubei Sanonda Co., Ltd.

10. Construction in progress

(1) Information

Closing balance Opening balance Item Book balance Depreciation provision Book value Book balance Depreciation provision Book value

Ionic membrane project 101,575,796.33 101,575,796.33

Engineering prepayment 57,507,628.79 57,507,628.79 21,321,291.50 21,321,291.50

Salt mine and sodium nitrate (Zone A) 42,660,410.65 42,660,410.65

Pesticide Plant III glyphosphate environmental optimization project 18,207,615.67 18,207,615.67

110KV transformer substation and exterior line (Zone A) 10,645,849.06 10,645,849.06

Pesticide Plant II dichloromethane exhaust recycling project 2,148,232.29 2,148,232.29

Pesticide Plant II acephate process optimization project 604,338.30 604,338.30

Pesticide Plant II chloral renovation 524,354.85 524,354.85

Sewage refined salt water transportation 506,802.67 506,802.67

Newly built clean-water reservoir project of the sewage treatment plant 106,837.62 106,837.62

10,000-ton / year pyridine and derivative 82,182,269.21 82,182,269.21

Salt mines sand salt 9#- 10# project 13,604,728.89 13,604,728.89

Pesticide Plant VI 4000t/a methomyl and gas extension and renovation project 2,009,361.65 2,009,361.65

Pesticide Plant I methanol recovery tower 1# renovation project 2,145,994.24 2,145,994.24

Total 234,487,866.23 234,487,866.23 121,263,645.49 121,263,645.49

Notes: Balance of construction in progress at the year-end was of RMB 234,487,866.23, which increased 93.37% when compared to the year-begin, and mainly because of the newly investment project of the 0.3 million tons of the ionic membrane and the salt mine and sodium

141

Notes to the Financial Statement of 2013 Annual Report of Hubei Sanonda Co., Ltd. nitrate. (2) Significant changes in construction in progress

Amount transferred into Other Name Budget Opening balance Increase Closing balance fixed assets decrease

Ionic membrane project 374,599,000.00 101,575,796.33 101,575,796.33

Salt mine and sodium nitrate (Zone A) 247,021,100.00 42,660,410.65 42,660,410.65

10,000-ton/year pyridine and derivative 161,300,000.00 82,182,269.21 21,370,740.29 103,553,009.50

110KV transformer substation and exterior line 89,365,800.00 10,645,849.06 10,645,849.06 (Zone A)

Pesticide Plant III glyphosphate 28,800,000.00 18,207,615.67 18,207,615.67 environmental optimization project

Salt mines sand salt 9#- 10# project 23,000,000.00 13,604,728.89 9,715,595.35 23,320,324.24

Pesticide Plant VI 4000t/a methomyl and gas 5,200,000.00 2,009,361.65 3,335,704.73 5,345,066.38 extension and renovation project

Pesticide Plant II acetyl powder production and 4,050,000.00 3,982,377.29 3,982,377.29 package plant

Pesticide Plant I 4000t/a triazophos technical 2,450,000.00 2,302,182.71 2,302,182.71 extension and renovation project

Pesticide Plant II dichloromethane exhaust 2,450,000.00 2,148,232.29 2,148,232.29 recycling project

Total 97,796,359.75 215,944,504.37 138,502,960.12 175,237,904.00

(Continued)

Accumulated amou Including: capitalization Capitalization of Project input percentage of Project Name Source of funding nt of capitalization of interest this year interest rate (%) budget (%) process

142

Notes to the Financial Statement of 2013 Annual Report of Hubei Sanonda Co., Ltd.

of interest

Loans and Ionic membrane project 1,519,148.88 1,519,148.88 6.10 27.12 27.12 self-owned funds

Salt mine and sodium nitrate (Zone A)） 17.27 17.27 Self-owned funds

Loans and 10,000-ton / year pyridine and derivative 20,196,507.57 2,817,291.11 6.10 82.10 100.00 self-owned funds

110KV transformer substation and exterior line 11.91 11.91 Self-owned funds (Zone A)

Pesticide Plant III glyphosphate Loans and 121,174.54 121,174.54 6.10 63.22 63.22 environmental optimization project self-owned funds

Loans and Salt mines sand salt 9#- 10# project 640,014.46 463,196.55 6.06 101.39 100.00 self-owned funds

Pesticide Plant VI 4000t/a methomyl and gas Loans and 146,849.46 133,213.54 6.06 102.79 100.00 extension and renovation project self-owned funds

Pesticide Plant II acetyl powder production and Loans and 117,447.14 117,447.14 6.10 98.33 100.00 package plant self-owned funds

Pesticide Plant I 4000t/a triazophos technical Loans and 73,273.26 73,273.26 6.10 93.97 100.00 extension and renovation project self-owned funds

Pesticide Plant II dichloromethane exhaust Loans and 11,349.20 11,349.20 6.10 87.68 87.68 recycling project self-owned funds

Total 22,825,764.51 5,256,094.22

143

(3) Information of procedures of significant construction in progress

Item Process Remark

Ionic membrane project 27.12 Being construction

Salt mine and sodium nitrate (Zone A) 17.27 Being construction

10,000-ton/year pyridine and derivative 100.00 Completed

110KV transformer substation and exterior line (Zone A) 11.91 Being construction

Pesticide Plant III glyphosphate environmental optimization project 63.22 Being construction

Salt mines sand salt 9#- 10# project 100.00 Completed

Pesticide Plant VI 4000t/a methomyl and gas extension and renovation project 100.00 Completed

Pesticide Plant II acetyl powder production and package plant 100.00 Completed

Pesticide Plant I 4000t/a triazophos technical extension and renovation project 100.00 Completed

Pesticide Plant II dichloromethane exhaust recycling project 87.68 Being construction

11. Intangible assets

Item Opening balance Increase Decrease Closing balance

I. Total original book value 215,899,507.03 3,242,300.00 212,657,207.03

Land use right 201,673,307.07 3,062,300.00 198,611,007.07

Non-patents 14,223,699.96 180,000.00 14,043,699.96

Patent 2,500.00 2,500.00

II. Total accumulated amortization 39,923,402.82 4,031,144.18 740,582.60 43,213,964.40

Land use right 34,365,369.61 3,358,644.18 560,582.60 37,163,431.19

Non-patents 5,555,533.21 672,500.00 180,000.00 6,048,033.21

Patent 2,500.00 2,500.00

III. Total of accumulated amount of 32,072,093.53 32,072,093.53 depreciation provision

Land use right 32,072,093.53 32,072,093.53

Non-patents

Patent

IV. Total of book value 143,904,010.68 137,371,149.10

Land use right 135,235,843.93 129,375,482.35

Non-patents 8,668,166.75 7,995,666.75

Patent

Notes: ①Amortization was of RMB 4,031,144.18 in this year. ②On 31 Dec. 2013, book value intangible assets was of RMB 36,656,695.66, of the restricted ownership because the Company mortgaged the land use right, which was of RMB 36,656,695.66 and gained the loans from bank, which was of RMB 105,000,000.00 (see

144

details in Notes VII. 16); amortization of the land use right was of RMB 919,150.10 in 2013. ③The land of provision for impairment located at Jingzhou Xuetangzhou, with an area of 400, 000 m2. It was provided by Jingzhou municipal government to offset discount amount in 2001 with an origin value of RMB 86,672,093.53. As an industrial land of fourth grade with a term of 50 years, the land has been idle since acquired. In 2007, the Company made provision for impairment totaled RMB 32,072,093.53 by taking measure and calculation of it. There were no sign of forward impairment in the reporting period. 12. Deferred tax assets (1) Deferred tax assets that already recognized ① Deferred tax assets that already recognized

Closing balance Opening balance Item Deferred tax Deductible temporary Deferred tax Deductible temporary assets difference assets difference Provision for assets 12,619,948.14 50,479,792.56 12,922,010.54 51,688,042.12 impairment

Specific reserves 2,309,746.56 9,238,986.24

Total 12,619,948.14 50,479,792.56 15,231,757.10 60,927,028.36

(2) Deferred tax assets that had not recognized

Item Closing balance Opening balance

Assets impairment loss 20,405,981.43 27,236,863.35

Total 20,405,981.43 27,236,863.35

13. Other non-current assets

Item Closing balance Opening balance

Land compensation 13,384,400.00

Total 13,384,400.00

14. List of depreciation provision of assets

Reduce Item Opening balance Withdrawal of this year Closing balance Reversal Written off

I. Bad debts provision 39,708,134.46 4,789,057.53 2,851,690.95 41,645,501.04

II. Inventory falling price reserves 8,455,592.77 3,360,564.62 8,286,933.84 3,529,223.55

III. Depreciation provision of long-term 11,991,017.37 11,991,017.37 equity investment

IV. Depreciation provision of fixed 19,860,879.50 5,050,128.84 14,810,750.66 assets

145

Reduce Item Opening balance Withdrawal of this year Closing balance Reversal Written off

V. Depreciation provision of intangible 32,072,093.53 32,072,093.53 assets

Total 112,087,717.63 8,149,622.15 16,188,753.63 104,048,586.15

Notes: Except for the actual written off amount of the bad debts of the inventory which was of RMB 5,691,039.60, the decrease of the rest of the depreciation provision of assets was due to the reduce of the corresponding depreciation provision that the Company disposed the subsidiaries of this year. 15. Restricted ownership or right of use of the assets

Item Closing balance Reason

Subtotal of the guaranteed assets:

Pledged loans gained from the bank with accounts Accounts receivable 76,220,205.55 receivable

House & buildings 74,215,345.10 Mortgage loans

Land 36,656,695.66 Mortgage loans

Total 187,092,246.31

16. Short-term loans (1) Category

Item Closing balance Opening balance

Pledged loans 76,220,205.55 60,708,601.70

Mortgage loans 105,000,000.00 25,000,000.00

Guaranteed loans 178,000,000.00 270,000,000.00

Total 359,220,205.55 355,708,601.70

Notes: Category and amount of mortgage loans please refer to the Notes VII. 15. (2) Unsettled mature short-term loan 17. Notes payable

Category Closing balance Opening balance

Bank acceptance 40,000,000.00

Total 40,000,000.00

Notes: RMB 40,000,000.00 will be due in next accounting period. 18. Accounts payable (1) List of accounts payable

Category Closing balance Opening balance

146

Within 1 year (including 1 year) 149,164,478.71 190,845,593.34

1 to 2 years (including 2 years) 3,284,355.24 4,284,922.72

2 to 3 years (including 3 years) 1,001,773.87 239,080.85

Over 3 years 2,587,365.28 3,624,730.35

Total 156,037,973.10 198,994,327.26

(2) Accounts payable to shareholders or related parties with more than 5% (including 5%) of the voting shares of the Company during the reporting period See details to Notes IX. 6 Accounts receivable and payable due from related parties (3) Notes of the accounts payable aging over one year

Whether pay back

Name of creditor Amount Unpaid reason after Balance Sheet

Date?

Yuyang Lianhua Tongda Construction Engineering Co., Ltd. 365,871.65 Unsettled No

Shanghai Accessen New Technology Co., Ltd. 210,848.00 Unsettled No

Jingzhou Yuanjie Fine Chemical Co., Ltd. 183,766.00 Unsettled No

Hubei Wuhan Youyi Packing Material Factory 173,350.74 Unsettled No

Shanxi DHE Co., Ltd. 115,560.00 Unsettled No

Total 1,049,396.39

19. Advance from customers (1) List of advance from customers

Item Closing balance Opening balance

Within 1 year (including 1 year) 77,557,371.54 57,748,349.15

1 to 2 years (including 2 years) 411,104.07 234,053.64

2 to 3 years (including 3 years) 96,865.75 127,728.32

Over 3 years 1,372,100.68 1,337,899.19

Total 79,437,442.04 59,448,030.30

Notes: Advance from customers was of RMB 79,437,442.04 at the year-end, which was increased 33.63% when compared to the year-begin, and mainly due to the increase of the advanced sales payment of goods led by the increase of the income. (2) Advanced from customers from shareholders or related parties with more than 5% (including 5%) of the voting shares of the Company See details to Notes IX. 6 Accounts receivable and payable due from related parties. (3) Notes of significant advance from customers aging over one year: As of 31 Dec. 2013, the Group didn’t have significant advance from customers aging over 147

one year. 20. Payroll payable

Item Opening balance Increase Decrease Closing balance

I. Salary, bonus, allowance, subsidy 6,510,205.00 104,143,881.55 93,604,036.55 17,050,050.00

II. Employee welfare 8,547,903.71 8,547,903.71

III. Social insurance 560,000.00 41,717,761.28 34,014,227.04 8,263,534.24

Including: 1. Medical insurance premiums 8,517,942.92 8,517,942.92

2. Basic pension benefits 20,769,647.22 20,769,647.22

3. Annuity 8,263,023.19 8,263,023.19

4. Unemployment insurance 560,000.00 2,330,200.99 2,890,200.99

5. Work-related injury insurance 1,489,227.84 1,489,227.84

6. Maternity insurance 347,719.12 347,208.07 511.05

IV. Housing fund 31,791.62 14,755,495.00 14,767,884.00 19,402.62

V. Labor union budget and employee 262,905.27 941,554.57 1,204,459.84 education budget

VI. Non-monetary benefits

VII. Termination benefits 2,314,817.24 2,314,817.24

VIII. Share-based payment settled by

cash

IX. Other

Total 7,364,901.89 172,421,413.35 154,453,328.38 25,332,986.86

Notes: ① Payroll payable was of RMB 25,332,986.86 at the year-end, which was increased 243.97% when compared to the year-begin, and mainly due to the withdrawal of executive performance bonuses, sales cash honor and year-end bonuses of middle-level cadres which had not been distributed. ② Mid-level leadership bonuses was including in the payroll payable which was of RMB 3,800,000.00 and will be distributed at the end of Jan. 2014. Executives performance award which was of RMB 3,200,000.00 will be distributed before Sep. in 2014. Sales cash honor was of RMB 6,000,000.00, of which the RMB 2,500,000.00 will be distributed at the end of Jan. 2014 and the RMB 3,500,000.00 will be distributed before Apr. 2014. 21. Taxes payable

Item Closing balance Opening balance

VAT -16,594,848.55 -42,655,212.04

Resource tax 52,102.45 54,231.71

Business tax 21,642.79 59,199.71

148

Item Closing balance Opening balance

Corporate income tax 81,062,067.94 21,307,480.29

Personal income tax 285,147.61 337,953.65

Urban maintenance and construction tax 2,955,798.06 12,579.10

Property tax 3,588,774.80 1,335,124.88

Land use tax 31,682.42 164,233.63

Other 1,934,770.98 278,982.09

Total 73,337,138.5 -19,105,426.98

Notes: Balance of taxes payable at the year-end was of RMB 73,337,138.50, which increased 483.86% when compared to the year-begin, and mainly because of ① the growing rate was comparable large when compared to the last year, which led to the increase of the income tax of the Company; ② the decrease of the mortgage VAT. 22. Dividends payable

Name of company Closing balance Opening balance Reason for unsettlement over 1 year

State-owned Assets Supervision 224,463.30 The counter-party didn’t withdraw and Administration Commission of Qichun

Jingzhou Shashi Rural Credit Union 250,000.00 125,000.00 The counter-party didn’t withdraw

Total 250,000.00 349,463.30

23. Other accounts payable (1) List of other accounts payable

Item Closing balance Opening balance

Within 1 year (including 1 year) 31,252,464.85 27,041,006.55

1 to 2 years (including 2 years) 1,394,291.20 2,302,971.21

2 to 3 years (including 3 years) 1,284,017.00 322,457.30

Over 3 years 613,835.31 1,703,242.71

Total 34,544,608.36 31,369,677.77

(2) No other accounts payable from shareholders or related parties with more than 5% (including 5%) of the voting shares of the Company (3) No other large accounts payable aging over 1 year at period-end of the Group 24. Non-current liabilities due within 1 year (1) List of non-current liabilities due within 1 year

Item Closing balance Opening balance

Long-term loans due within 1 year (Notes VII. 25) 70,400,000.00 402,560,000.00

Long-term loans due within 1 year (Notes VII. 26) 6,990,000.00 6,990,000.00

149

Item Closing balance Opening balance

Total 77,390,000.00 409,550,000.00

Notes: Balance of non-current liabilities due within 1 year was of RMB 77,390,000.00, which reduced 81.10% when compared to the year-begin, and mainly because the majority of the long-term loans of this year had been repaid at the year-begin when become due. (2) Long-term loan due within 1 year ① List of long-term loan due within 1 year

Item Closing balance Opening balance

Guaranteed loans 70,400,000.00 402,560,000.00

Total 70,400,000.00 402,560,000.00

② Top five long-term loans due within 1 year

Rate Creditor Starting date Ending date Currency Closing balance Opening balance (%)

The Export-import Bank of China 2013/01/30 2014/07/30 5.8425 CNY 49,900,000.00

China Construction Bank 2009/02/10 2014/02/09 6.40 CNY 20,000,000.00 20,000,000.00

The Export-import Bank of China 2013/09/10 2014/09/21 4.20 CNY 500,000.00

The Export-import Bank of China 2011/06/03 2013/07/06 5.35 CNY 85,000,000.00

China Construction Bank 2008/02/03 2013/02/02 6.90 CNY 72,560,000.00

The Export-import Bank of China 2011/05/06 2013/07/06 5.35 CNY 65,000,000.00

The Export-import Bank of China 2011/01/26 2013/01/26 5.535 CNY 50,000,000.00

China Construction Bank 2008/08/29 2013/08/28 6.90 CNY 40,000,000.00

Total 70,400,000.00 332,560,000.00

③ No mature loan of long-term loan due within 1 year:

(3) Long-term accounts payable due within 1 year (list of top five)

Initial Rate Accrued Borrower Term (%) Closing balance Conditions amount interest

Highly toxic pesticides Jingzhou Finance Bureau 5 years 6,990,000.00 Interest-free loan 6,990,000.00 transferring project

Total 6,990,000.00 6,990,000.00 Notes: Long-term accounts payable due within 1 year of this year had expired in 2012, which belongs to the overdue unpaid accounts payable. 25. Long-term loan (1) Category of long-term loan

Item Closing balance Opening balance

150

Guaranteed loans 366,490,000.00 482,560,000.00

Less: Long-term loans due within 1 year (Notes VII. 24) 70,400,000.00 402,560,000.00

Total 296,090,000.00 80,000,000.00

Notes: Balance of long-term was of RMB 296,090,000.00 at the year-end, which increased 270.11% when compared to the year-begin, and mainly because the new loans for the old debts in this year. There was no long-term loan aging over 1 year at period-end of the Group. (2) Top five long-term loans

Rate Opening Creditor Loans Loans Currency Closing balance (%) balance

The Export-import Bank of China 2013/09/10 2016/09/10 4.20 CNY 79,500,000.00

The Export-import Bank of China 2013/09/22 2016/09/10 4.20 CNY 70,000,000.00

The Export-import Bank of China 2013/09/29 2016/10/21 6.40 CNY 46,590,000.00

China Construction Bank 2013/10/14 2018/10/13 6.40 CNY 40,000,000.00

China Construction Bank 2013/11/01 2018/10/13 6.40 CNY 30,000,000.00

China Construction Bank 2013/12/01 2018/10/13 6.40 CNY 30,000,000.00

China Industrial Bank 2010/05/31 2015/05/31 6.90 CNY 40,000,000.00

China Construction Bank 2009/02/10 2014/02/09 6.90 CNY 20,000,000.00

China Citic Bank 2011/01/27 2014/01/27 6.15 CNY 20,000,000.00

Total 296,090,000.00 80,000,000.00

26. Long-term payable

Opening Item Closing balance balance

Loan for highly toxic pesticides 6,990,000.00 6,990,000.00 transferring project of Jingzhou Finance Bureau

Loan for glyphosate project 490,000.00 490,000.00

Borrowing for the cooperation project with Guangzhou Chemical Industry Research Institute 160,000.00 160,000.00

Less: Expired part due within 1 year (Notes VII. 24) 6,990,000.00 6,990,000.00

Total 650,000.00 650,000.00

27. Other non-current liabilities

Item Content Closing balance Opening balance

Appropriation for CTC consuming and Deferred income related to assets 599,089.24 eliminating project

Highly toxic pesticide production Line Deferred income related to assets 3,883,333.33 4,660,000.00 change and replacement project

Special fund for management of source Deferred income related to assets 1,222,222.22 1,466,666.66 of pollution

151

Item Content Closing balance Opening balance

Deferred income related to assets Subsidy for sewage treatment 666,666.67 733,333.34

Deferred income related to assets Pyridine project 8,850,000.00 8,850,000.00

Special funds of mineral resource Deferred income related to assets conservation and comprehensive 4,916,666.67 utilization

Total 19,538,888.89 16,309,089.24

Of which, the list of deferred income was as follows:

Amount accrued Whether Amount of Item Opening balance in non-business Closing balance related to newly subsidy income the assets

Pyridine project 8,850,000.00 8,850,000.00 Yes

Special funds of mineral resource conservation and 5,000,000.00 83,333.33 4,916,666.67 Yes comprehensive utilization

Highly toxic pesticide production Line 4,660,000.00 776,666.67 3,883,333.33 Yes change and replacement project

Special fund for management of source 1,466,666.66 244,444.44 1,222,222.22 Yes of pollution

Subsidy for sewage treatment 733,333.34 66,666.67 666,666.67 Yes

Appropriation for CTC consuming and 599,089.24 599,089.24 Yes eliminating project

Total 16,309,089.24 5,000,000.00 1,770,200.35 19,538,888.89

Notes: Amount received from the Finance Bureau of the special funds of mineral resource conservation and comprehensive utilization was of RMB 5 million, and was used to compensate the expenses related to the mineral resource conservation project. The part of expenses had already formed into assets so was confirmed as the government subsidy related to the assets, and had accrued into the deferred income at the reporting period and at the same accrued into non-business income by aging as well as amortization of the actual using age limit of the assets. 28. Share capital

Opening balance Increase/decrease（+ -） Closing balance

Item Issuing new Bonus Capitalization of Amount Proportion Other Subtotal Amount Proportion shares shares public reserves

I. Shares subject to trading

152

Opening balance Increase/decrease（+ -） Closing balance

Item Issuing new Bonus Capitalization of Amount Proportion Other Subtotal Amount Proportion shares shares public reserves moratorium

1. State-owned shares

2. State-owned legal person

3. Other domestic shares 30,642 0.01 1,825 1,825 32,467 0.01

Including: Shares held by domestic legal persons

Shares held by domestic 30,642 0.01 1,825 1,825 32,467 0.01 individuals

4. Shares held by overseas shareholders

Including: Shares held by overseas legal persons

Shares held by overseas individuals

Total of shares subject to 30,642 0.01 1,825 1,825 32,467 0.01 trading moratorium

II. Shares not subject to trading moratorium

1. Ordinary shares denominated 363,892,5 363,893,8 61.27 1,250 1,250 61.27 in RMB 78 28

2. Domestically listed foreign 230,000,0 229,996,9 38.72 -3,075 -3,075 38.72 shares 00 25

3. Overseas listed foreign shares

4. Other

Total of shares not subject to 593,892,5 593,890,7 99.99 -1,825 -1,825 99.99 trading moratorium 78 53

593,923,2 593,923,2 III. Total of shares 100.00 100.00 20 20

Notes: During the reporting period, shares subject to trading moratorium lifted 22,625 shares because of the three senior executives who had dismissed over half year, and at the same increased targeting shares of 21,375 shares owning to the newly hire of the senior executive—Liu Zhiming and targeting shares of 3,075 shares owning to the newly hire of the supervisor—Liu Jun who overweighed the Company shares. Total of shares subject to trading moratorium increased of 1,825 shares.

153

29. Capital reserves

Item Opening balance Increase Decrease Closing balance

Capital premium 257,595,681.30 2,906,729.36 254,688,951.94

Other comprehensive reserves

Other capital reserves 8,495,091.72 8,495,091.72

Total 266,090,773.02 2,906,729.36 263,184,043.66

Notes: The Company purchased the minority equity of Sanonda (Jingzhou) Pesticides and Chemicals Co., Ltd. and Hubei Sanonda Foreign Trade Co., Ltd.. Then the Company adjusted capital reserve (capital premium) on the difference between the new long-term equity investment acquired from purchasing minority interests and the net identifiable assets amount continued to enjoy by the Company in the subsidy accounting according to newly increase share-holding proportion since the purchase date (or the consolidation date), which led to a decrease of RMB 2,906,729.36 in the consolidated financial statement. Of which the decreased capital reserves of RMB 2,695,524.01 and RMB 211,205.35, which owned to the purchasing of Sanonda (Jingzhou) Pesticides and Chemicals Co., Ltd and Hubei Sanonda Foreign Trade Co., Ltd. respectively. 30. Specific reserves

Item Opening balance Increase Decrease Closing balance

Safty production expense 13,825,364.46 10,036,579.50 7,802,655.25 16,059,288.71

Total 13,825,364.46 10,036,579.50 7,802,655.25 16,059,288.71

31. Surplus reserves

Item Opening balance Increase Decrease Closing balance

Statutory surplus reserves 88,864,953.49 33,654,209.17 122,519,162.66

Discretional surplus reserves 3,815,085.65 3,815,085.65

Total 92,680,039.14 33,654,209.17 126,334,248.31 Notes: Based on the regulations of the Corporation Law and Constitution, the Company should withdraw 10% of the statutory surplus reserves according tot the net profits. If the accumulated amount of the statutory surplus reserves exceeded the 50% of the registered capital, the Company could no more withdraw. After the withdrawal the statutory surplus reserves, the Company could withdraw the discretional surplus reserves. Through approval, the discretional surplus reserves could be used to make up the losses of previous years or to increase the share capital. 32. Retained profits (1) List of the changes of retained profits

Item 2013 2012 Withdrawal or distributed proportion

Opening balance of retained profits before 289,017,364.90 197,544,620.36 adjustments

Total of retained profits at the year-begin

154

Item 2013 2012 Withdrawal or distributed proportion (increase +, decrease -)

Opening balance of retained profits after 289,017,364.90 197,544,620.36 adjustments

Add: Net profit attributable to owners of 320,811,958.67 103,768,969.35 the Company

Deficit coverage of surplus reserves

Other shifted into

Less: Withdrawal of statutory surplus Withdraw 10% of the net profits 33,654,209.17 12,296,224.81 reserves of the reporting period

Withdrawal of discretional surplus reserves

Dividend of common stock payable 29,486,343.42

Closing retained profits 546,688,770.98 289,017,364.90

(2) List of profit distribution According to the Profit Distribution Plan of the Company of 2012 which approved by the Board of Shareholders on 9 Apr. 2013, the Company distributed cash dividend to the whole shareholders, with RMB 0.5 of per 10 shares, which amounted to the total of RMB 29,486,343.42 according to the 593,923,220 shares of the issued capital stock. 33. Revenue and Cost of Sales (1) Revenue, Cost of Sales

Item 2013 2012

Sales of main business 3,032,932,276.15 2,304,926,650.74

Other operating income 45,535,034.38 40,219,878.23

Total of revenue of sales 3,078,467,310.53 2,345,146,528.97

Sales of main business 2,311,453,750.97 1,919,654,574.69

Other operating income 34,886,580.61 32,752,091.75

Total of cost of sales 2,346,340,331.58 1,952,406,666.44 Notes: Revenue was of RMB 3,078,467,310.53 of this year, which increased 31.27% when compared to the last year, and mainly because the recovery of the market quotation and the obvious increase of the sales price as well as the sales volume of the main products.

(2) Main business (Classified by industry)

2013 2012 Industry Revenue of sales Costs of sales Revenue of sales Costs of sales

Manufacturing of chemical raw material 3,256,337,726.21 2,534,859,201.03 2,506,076,083.04 2,120,804,006.99

155

2013 2012 Industry Revenue of sales Costs of sales Revenue of sales Costs of sales and chemicals

Subtotal 3,256,337,726.21 2,534,859,201.03 2,506,076,083.04 2,120,804,006.99

Less: Internal offset amount 223,405,450.06 223,405,450.06 201,149,432.30 201,149,432.30

Total 3,032,932,276.15 2,311,453,750.97 2,304,926,650.74 1,919,654,574.69

(3) Main business (Classified by product)

2013 2012 Product Revenue of sales Costs of sales Revenue of sales Costs of sales

New chemical materials 15,054,769.26 8,910,224.12 12,347,678.70 6,509,206.45 and special chemicals

Petrochemicals and refining 79,398,719.36 68,916,527.68 99,357,434.29 82,064,657.63 and chemical products

Basic (chlor-alkali) chemicals 64,704,149.91 49,091,951.55 58,560,184.14 44,164,515.67

Agrochemicals such as 3,097,180,087.68 2,407,940,497.68 2,335,810,785.91 1,988,065,627.24 chemical fertilizer and pesticide

Subtotal 3,256,337,726.21 2,534,859,201.03 2,506,076,083.04 2,120,804,006.99

Less: Internal offset amount 223,405,450.06 223,405,450.06 201,149,432.30 201,149,432.30

Total 3,032,932,276.15 2,311,453,750.97 2,304,926,650.74 1,919,654,574.69

(4) Main business (Classified by area)

2013 2012 Area Revenue of sales Costs of sales Revenue of sales Costs of sales

Home 1,652,090,007.69 1,268,543,722.53 1,297,984,832.58 1,066,640,208.83

Abroad 1,604,247,718.52 1,266,315,478.50 1,208,091,250.46 1,054,163,798.16

Subtotal 3,256,337,726.21 2,534,859,201.03 2,506,076,083.04 2,120,804,006.99

Less: Internal offset amount 223,405,450.06 223,405,450.06 201,149,432.30 201,149,432.30

Total 3,032,932,276.15 2,311,453,750.97 2,304,926,650.74 1,919,654,574.69

(5) The revenue of sales from the top five customers

Total of the revenue of sales from Proportion of total business revenue Term the top five customers (%)

2013 675,510,485.65 21.94

2012 465,726,853.45 19.86

34. Business tax and surcharges

Item 2013 2012

Business tax 472,305.69 354,588.05

156

Urban maintenance and construction tax 8,227,401.98 486,699.02

Education surtax 3,523,172.25 219,092.01

Local education surtax 445,669.28 146,061.34

Total 12,668,549.20 1,206,440.42 Notes: Business tax and surcharges of this year was of RMB 12,668,549.20, which increased 950.08% when compared to the last year, and mainly because the increase of the urban maintenance and construction tax and the education surtax. See details of provision of the business tax and additional tax standards in Notes V. Taxes. 35. Sales expenses

Item 2013 2012

Transport fees 42,081,166.51 27,129,526.09

Export fees 29,024,172.86 26,652,807.24

Employee’s remuneration 6,304,043.33 2,763,687.42

Packing charges 2,080,664.76 2,574,821.92

Handling charges 3,248,286.08 1,950,051.47

Business travel charges 1,806,953.90 1,659,402.70

Conference service fees 1,365,840.57 1,493,557.18

Operational funds 1,432,456.89 1,016,625.60

Advertising and general publicity expense 1,185,583.30 1,564,068.13

Other 6,466,138.65 5,375,276.75

Total 94,995,306.85 72,179,824.50

Notes: Sales expense of this year was of RMB 94,995,306.85, which increased 31.61% when compared to the last year and mainly because of the larger growth of both the domestic and overseas sales, and the increase of the corresponding transport fees as well as the export fees. 36. Administrative expenses

Item 2013 2012

Employee’s remuneration 45,587,206.09 47,511,470.27

Tax expenses 10,444,840.90 6,345,743.65

Depreciation charge 5,672,977.41 4,985,439.70

Amortization of intangible assets 4,031,144.18 4,059,141.53

Water & electricity fees 3,036,476.66 2,771,756.40

Business entertainment fees 2,970,799.43 3,265,782.71

Labor protection fees 2,220,264.67 720,241.39

Office expenses 2,183,522.30 2,458,742.13

Business travel charges 2,066,216.29 1,906,246.25

Amortization of low-price consumables 2,058,207.95 1,876,422.87

157

Item 2013 2012

Security charge 1,860,557.94 2,698,866.96

Other 31,016,850.86 16,755,993.67

Total 113,149,064.68 95,355,847.53

37. Financial expenses

Item 2013 2012

Interest expenses 59,285,750.56 69,381,537.60

Less: Interest income 5,165,866.71 3,923,358.15

Less: Amount of capitalized interest 5,905,449.90 11,382,913.97

Exchange gains and losses 7,654,208.24 736,479.88

Other 9,780,758.13 8,954,020.15

Total 65,649,400.32 63,765,765.51

38. Impairment losses

Item 2013 2012

Bad debts losses 4,789,057.53 -40,453.68

Inventory falling price losses 3,360,564.62 7,599,411.34

Impairment losses of fixed assets 6,807,613.55

Total 8,149,622.15 14,366,571.21

Notes: Withdrawal of impairment losses was of RMB 8,149,622.15, which decreased 43.27% when compared to the last year, and mainly because of the withdrawal of the impairment of fixed assets of last year. 39. Investment income (1) List of investment income

Item 2013 2012

Long-term equity investment income accounted by cost method 4,062,224.59

Investment income from the disposal of long-term equity investment 594,524.16

Total 4,656,748.75

(2) Long-term equity investment income accounted by cost method

Investee 2013 2012

Hubei Bank 4,062,224.59

Total 4,062,224.59

40. Non-operating gains

158

Amount recorded into current Item 2013 2012 non-current gains and losses

Total gains from disposal of non-current assets 33,778.34 354,735.70 33,778.34

Including: Gains from disposal of fixed assets 33,778.34 354,735.70 33,778.34

Gains from disposal of intangible assets

Gains from debt restructuring

Government grants (see details below: list of government grants) 3,270,500.35 3,650,934.78 3,270,500.35

Other 566,995.61 109,099.92 566,995.61

Total 3,871,274.30 4,114,770.40 3,871,274.30

Of which, list of the government grants:

Item 2013 2012 Related to assets/income

ECQF [2006] No. 170 government Grants for the acute toxic pesticide converting 776,666.67 776,666.66 grants for the acute toxic pesticide projects converting projects

Special treatment funds of pollution sources 244,444.44 244,444.46 JHBKW [2009]No. 15

Appropriation for CTC consuming and Environmental Protection 599,089.24 1,582,557.00 eliminating project Department

Sewage treatment subsidies 66,666.67 66,666.66 Funds for sewage treatment

Special funds of mineral resource conservation and comprehensive 83,333.33 CQ[2013] No. 34 utilization

Resettlement subsidies for the job-transfer training for staffs of Jingzhou Municipal Social 200,600.00 EZF[2008] No. 60 Security Division

Subsidies for unemployment and stable position 672,000.00 570,000.00 EZF[2012] No. 66

China National Agricultural Interests subsidies reserves in winter 828,300.00 Means of Production Group Corporation

Appropriation of innovation funds 210,000.00 ECQF[2011] No. 105

Total 3,270,500.35 3,650,934.78

41. Non-operating expenses

The amount included in the current Item 2013 2012 non-recurring gains and losses

159

The amount included in the current Item 2013 2012 non-recurring gains and losses

Loss on disposal of non-current assets 11,450,885.91 3,684,292.94 11,450,885.91

Including: Loss on disposal of fixed assets 11,450,885.91 3,684,292.94 11,450,885.91

Loss on disposal of intangible assets

Loss on debt reconstruction 152,001.61 694,017.10 152,001.61

Loss on non-currency assets exchange

External donation 2,000.00

Penalty, overdue fine 292,280.00

Other 69,854.65 2,648,850.06 69,854.65

Total 11,672,742.17 7,321,440.10 11,672,742.17 Notes: Amount of non-operating expenses of this year was of RMB 11,672,742.17, which increased 59.43% when compared to the last year, and mainly because of the scrapping of a batch of old equipments. 42. Income tax expense

Item 2013 2012

Current income tax expense accounted by tax and relevant regulations 112,562,615.47 40,434,195.34

Adjustment of income tax 1,827,533.19 -2,202,465.23

Total 114,390,148.66 38,231,730.11 Notes: Income tax expense of this year was of RMB 114,390,148.66, which increased 199.20% when compared to the last year, and mainly because of the recovery of the market quotation and the larger growth of the total of profits when compared to the last year. 43. Calculation procedure of basic earnings per share and diluted earnings per share EPS-basic refers to the current net profit attributable to common shareholders of the Company divided the weighted average amount of outstanding issued common shares. The amount of newly issued common shares is calculated from the date of consideration receivable in accordance with the detailed terms of the contract for issuing shares. The numerator of EPS-diluted is the current net profit attributable to common shareholders of the Company, which is fixed by adjusting the following factors: (1) the interest of diluted potential common shares which is recognized as the expenses of current period; (2) the gains and costs incurred from transferring the diluted potential common shares; and (3) the influence on income tax from the above adjustment. The denominator is the sum of the two items as follows: (1) the weighted average amount of common shares issued by the Parent Company in EPS-basic; (2) the increased weighted average amount of common shares assuming that diluted potential common shares were transferred to common shares. While calculating the increased weighted average amount of common shares resulting from

160

that diluted potential common shares were transferred to issued common shares, the diluted potential common shares issued in previous period are assumed to be transferred at current period; the diluted potential common shares issued in current period are assumed to be transferred on the issuing date. (1) Breakdown of basic earnings per share (EPS-basic) and diluted earnings per share (EPS-diluted) in current and previous periods.

2013 2012 Profit as of reporting period EPS-basic EPS-diluted EPS-basic EPS-diluted

Net profits attributable to common 0.5402 0.5402 0.1747 0.1747 shareholders of the Company

Net profits attributable to common shareholders of the Company after 0.5492 0.5492 0.1788 0.1788 deducting non-recurring gains and losses (2) Explanation on counting process of EPS-basic and EPS-diluted During the reporting period, there were no diluted potential common shares in the Company so that EPS-diluted equaled to EPS-basic. ①When calculated the EPS-basic, the net profits attributable to common shareholders were as follows:

Item 2013 2012

320,811,958.67 103,768,969.35

Net profit attributable to common shareholders of the Company

Of which: Net profit attributable to continual operating 320,811,958.67 103,768,969.35

Net profit attributable to discontinued operating

326,183,175.01 106,185,400.70 Net profit attributable to common shareholders of the Company after deducting non-recurring gains and losses

Of which: Net profit attributable to continual operating 326,183,175.01 106,185,400.70

②When calculated the EPS-basic, the denominator refers to the weighted average amount of outstanding issued common shares, and the accounting process as follows:

Item 2013 2012

Amount of outstanding issued common shares at period-begin 593,923,220.00 593,923,220.00

Add: Weighted average amount of common shares issued at current period

Less: Weighted average amount of common shares repurchased at current period

161

Item 2013 2012

Weighted average amount of outstanding issued common shares at 593,923,220.00 593,923,220.00 period-end

44. Supplementary information to cash flow statement (1) Other cash received relevant to operating activities

Item 2013 2012

Government grants 6,500,300.00 2,345,343.04

Interest income 5,165,866.71 3,923,358.15

Turnover accounts of Huaxiang 11,000,000.00 Company

Allowance for payment and others, etc. 10,453,082.65 11,303,298.23

Total 33,119,249.36 17,571,999.42

(2) Other cash paid relevant to operating activities

Item 2013 2012

Transport fees 38,539,213.75 27,129,526.09

Export fees 32,310,391.38 26,652,807.24

Handling charges 3,248,286.08 1,950,051.47

Entertainment expenses 3,165,201.85 3,265,782.71

Utilities fees 3,036,476.66 2,771,756.40

Office expense 2,377,924.72 2,458,742.13

Packing charges 2,080,664.76 2,574,821.92

Business travel charges 2,066,216.29 3,565,648.95

Asset insurance fees 1,857,638.01 1,694,829.29

Advertising and general publicity expense 1,185,583.30 1,564,068.13

Other 34,391,378.45 9,501,014.97

Total 124,258,975.25 83,129,049.30

(3) Other cash received relevant to financing activities

Item 2013 2012

Unfreeze reversal of margin notes 12,000,000.00

Total 12,000,000.00

(4) Other financial activities-related cash paid

Item 2013 2012

Freeze of margin notes 16,000,000.00

Loan guarantee fees paying for Sanonda Group Co., Ltd. 2,880,000.00 3,300,000.00

Loan guarantee fees paying for China National Agrochemical 6,000,000.00 3,000,000.00

162

Item 2013 2012 Corporation

Loan guarantee fees paying for ionic membrane project of China 2,295,000.00 National Chemical Corporation

Payment of the price purchasing the minority equities 5,906,730.00 1,000,000.00

Total 33,081,730.00 7,300,000.00

45. Supplementary information to cash flow statement (1) Information of net profit to net cash flows generated from operating activities

Item 2013 2012

1. Reconciliation of net profit to net cash flows generated from operating activities

① Net profit 319,980,167.97 104,427,013.55

Add: Provision for impairment of assets 8,149,622.15 14,366,571.21

Depreciation of fixed assets, of oil-gas assets, of productive biological 161,514,097.00 141,147,206.79 assets

Amortization of intangible assets 4,031,144.18 4,059,141.53

Amortization of long-term unamortized expenses

Losses on disposal of fixed assets, intangible assets and other 11,417,107.57 3,329,557.24 long-term assets (gains: negative)

Abandonment loss of fixed assets (gains: negative)

Loss from fair value changes (gains: negative)

Financial cost (gains: negative) 60,727,002.05 63,926,778.19

Investment loss (gains: negative) -4,656,748.75

Decrease in deferred income tax assets (gains: negative) 1,827,533.19 -2,202,465.23

Decrease in deferred income tax liabilities（losses: negative)

Decrease in inventory (gains: negative) 105,415,584.90 -63,763,919.22

Decrease in accounts receivable from operating activities (gains: 30,732,677.66 -78,252,503.02 negative)

Increase in payables from operating activities (decrease: negative) 100,563,401.12 46,553,043.78

Other

Net cash flows generated from operating activities 799,701,589.04 233,590,424.82 ② Investing and financing activities that do not involving cash

receipts and payment: Liabilities transferred into capital

Convertible corporation bonds due within 1 year

Financing chartered into fixed assets

③Net increase in cash and cash equivalents

163

Item 2013 2012

Closing balance of cash 410,065,921.21 175,181,365.77

Less: Opening balance of cash 175,181,365.77 219,587,687.99

Add: Closing balance of cash equivalents

Less: Opening balance of cash equivalents

Net increase in cash and cash equivalents 234,884,555.44 -44,406,322.22

(2) Relevant information gained during the report or through disposal of the subsidiary and other business company

Item 2013 2012

Relevant information on acquisition of subsidiaries

and other operation entities:

A．Price on acquisition of subsidiaries and other 27,313,258.78 operation entities

B．Cash and cash equivalents on acquisition of 24,313,258.78 subsidiaries and other operation entities

Less: Cash and cash equivalents owned by 17,705,496.03 subsidiaries and other operation entities

C．Cash net amount on acquisition of subsidiaries 6,607,762.75 and other operation entities

D．Net assets on acquisition of subsidiaries 31,213,900.07

Including: Current assets 47,041,128.99

Non-current assets 9,736,038.91

Current liabilities 25,563,267.83

Non-current liabilities

(3) Cash and cash equivalents

Item 2013 2012

① Cash 410,065,921.21 175,181,365.77

Including: Cash on hand 1,229.00 1,347.21

Bank deposit on demand 410,064,692.21 175,180,018.56

Other currency funds on demand

Central bank deposit on demand

Due from banks

Call loan to banks

② Cash equivalents

Including bond investment due within 3 months

③ Closing balance of cash and cash equivalents 410,065,921.21 175,181,365.77

164

Notes: The difference between the cash and cash equivalents and the currency assets in Notes VII. 1 was the payable margin notes that the Group deposited in bank and not for used on demand, which was not due to the cash and cash equivalents.

VIII. Accounting treatment of asset securitization business

Naught IX. Related party and related Transaction 1. Information related to parent company of the Company

Name of parent Legal Relationship Type Registered place Business scope company representative

Production and Sanonda Group State-owned operation of pesticide Parent company Jingzhou, Hubei Li Zuorong Corporation company and chemicals products

(Continued)

Proportion of share Proportion of voting The ultimate Name of parent Registered held by parent rights owned by parent controller of Organization code company capital company against the company against the the Company Company (%) Company (%)

State-owned Assets Sanonda Group Supervision 240,661,000 20.15 20.15 178987789 Corporation and Administratio n Commission

Notes: Information on the parent company: China National Chemical Corporation (hereinafter referred to as Chemical Corporation) held 100.00% equity of China National Agrochemical Corporation, while China National Agrochemical Corporation held 100.00% equity of Sanonda Group Corporation, and China National Chemical Corporation is a central enterprise under the management of State-owned Assets Supervision and Administration Commission of the State Council. 2. Subsidiaries of the Company See details to Notes VI. 1. List of subsidiaries 3. Information on the joint ventures and associated enterprises of the Company Naught 4. Information on other related parties of the Company

165

Name of other related parties Relationship with the Company Organization code

Jingzhou Sanonda Advertising Co., Ltd. Notes 706967790

Joint venture of the parent Hubei Jingzhou Huaxiang Chemical Co., Ltd. 73713373X company

Under the same control of China Jiangsu Anpon Electrochemical Co., Ltd. 139433337 National Chemical Corporation

Bluestar (Beijing) Chemical Machinery Co., Ltd. Under the same control of China 795955432 National Chemical Corporation

Under the same control of China Bluestar Environmental Engineering Co., Ltd. 71092737X National Chemical Corporation

Under the same control of China Makhteshim Chemical Works Ltd. National Chemical Corporation

Under the same control of China FARMOZ PTY LTD National Chemical Corporation

Under the same control of China Anhui Chemical Design Institute 485001756 National Chemical Corporation

Under the same control of China Haohua Engineering Co., Ltd. 777652403 National Chemical Corporation

Under the same control of China Shangdong Dacheng Agrochemical Co., Ltd. 743350546 National Chemical Corporation

Under the same control of China Jiamusi Heilong Agrochemicals Co., Ltd. 716686183 National Chemical Corporation

Under the same control of China Chemchina Finance Co., Ltd. 100019622 National Chemical Corporation

Notes: Jingzhou Sanonda Advertising Co., Ltd. and the Company were subsidiaries of Sanonda Group Corporation in 2012, and Jingzhou Sanonda Advertising Co., Ltd. had written off at the end of 2012. 5. List of related-party transactions (1) Information on acquisition of goods and reception of labor service (unit: ten thousand Yuan)

Pricing 2013 2012 principle and Content of Proportion decision-ma Proportion in Name of related party related-party in king transactions transaction Amount transactions Amount procedure of of the same of the same related-party kind kind transaction

Bluestar Environmental Engineering Co., Engineering Market price 1.15 Ltd. materials

166

Bluestar (Beijing) Chemical Machinery Engineering Market price 10.91 10.94 0.01 Co., Ltd. materials

Bluestar (Beijing) Chemical Machinery Equipments Market price 4,769.23 2.03 Co., Ltd.

China National Agrochemical Corporation Raw materials Market price 359.66 0.19

Raw materials Sanonda Group Corporation and packing Market price 419.22 0.16 374.81 0.20 materials

Packing Jingzhou Sanonda Advertising Co., Ltd. Market price 447.04 0.23 materials

Hubei Jingzhou Huaxiang Chemical Co., Low-consumpti Market price 131.09 0.06 116.88 0.06 Ltd. on goods

Accepting labor Anhui Chemical Design Institute Market price 18.87 0.01 service

Equipment and Haohua Engineering Co., Ltd. Market price 890.66 0.38 labor service

(2) Information of sales of goods and provision of labor service (unit: ten thousand Yuan)

Pricing 2013 2012 principle and Proportion Proportion Content of decision-ma in in Name of related party related-party king Amount transactions Amount transactions transaction procedure of of the same of the same related-party kind kind transaction

Sales of Makhteshim Chemical Works Ltd. Market price 1,316.92 0.43 1,190.66 0.51 pesticide

Sales of China National Agrochemical Corporation Market price 397.27 0.17 pesticide

Sales of Jiamusi Heilong Agrochemicals Co., Ltd. Market price 443.50 0.14 344.16 0.15 pesticide

Sales of Jiangsu Anpon Electrochemical Co., Ltd. Market price 251.33 0.08 299.78 0.13 pesticide

Sanonda Group Corporation Raw materials Market price 284.27 0.09 541.14 0.23

Chemical and Hubei Jingzhou Huaxiang Chemical Co., power Market price 1,247.44 0.41 939.66 0.40 Ltd. products

Sales of FARMOZ PTY LTD Market price 1,535.26 0.50 pesticide

Shangdong Dacheng Agrochemical Co., Sales of Market price 372.65 0.12

167

Hubei Jingzhou Huaxiang Chemical Co., Offering labor Market price 316.03 0.10 Ltd. service

(3) Information of related lease

The lease Category of Start date End date of Pricing evidence income Name of lessor Name of lessee leased assets of lease lease of lease income confirmed in this year

Sanonda Group 7/F of the office Hubei Sanonda Co., Ltd. 1 Jan. 2011 31 Dec. 2013 By the agreement 120,000.00 Corporation building

(4) Related-party guarantee

Execution Guarantee Guarantor Secured party Start date End date accomplished amount or not

Sanonda Group The Company 50,000,000.00 2012/10/31 2013/12/10 Yes Corporation

Sanonda Group The Company 98,000,000.00 2012/12/25 2017/12/24 No Corporation

China National Agrochemical The Company 100,000,000.00 2012/03/14 2013/11/06 Yes Corporation

China National Agrochemical The Company 300,000,000.00 2013/09/09 2016/09/09 No Corporation

China National Agrochemical The Company 100,000,000.00 2012/12/20 2016/12/20 No Corporation

China National Agrochemical The Company 50,000,000.00 2013/01/30 2016/07/30 No Corporation

China National The Company 150,000,000.00 2013/09/10 2018/09/10 No Agrochemical

168

Corporation

China National Chemical The Company 100,000,000.00 2008/07/28 2016/02/09 No Corporation

China National Chemical The Company 200,000,000.00 2013/09/25 2020/09/25 No Corporation

China National Chemical The Company 150,000,000.00 2013/10/14 2020/10/14 No Corporation

Hubei Sanonda Foreign Trading The Company 61,200,000.00 2013/01/21 2016/01/21 No Co., Ltd.

Hubei Sanonda Foreign Trading The Company 120,000,000.00 2013/06/23 2017/06/23 No Co., Ltd.

Hubei Sanonda Foreign Trading The Company 34,000,000.00 2010/12/10 2015/12/10 No Co., Ltd.

Hubei Sanonda Foreign Trading The Company 30,000,000.00 2009/12/04 2016/12/04 No Co., Ltd.

Hubei Sanonda Foreign Trading The Company 30,000,000.00 2011/03/09 2016/03/09 No Co., Ltd.

Hubei Sanonda Foreign Trading The Company 50,000,000.00 2013/01/22 2017/01/21 No Co., Ltd.

Hubei Sanonda Foreign Trading The Company 30,000,000.00 2013/03/12 2016/03/12 No Co., Ltd.

(5) Rewards for the key management personnel Total of the basic wages, bonus and all the subsidies that the Company paid to the key management personnel was of RMB 2,890,000. (6) Guaranteed fees

2013 2012 Pricing Content of Proportion in Proportion in principle of Name Type related-party transactions transactions related-party Amount Amount transaction of the same of the same transaction kind kind

Payment of Sanonda Group Negotiated Guarantee guaranteed 2,880,000.00 25.77 3,300,000.00 52.38 Corporation price fees

China National Payment of Negotiated Agrochemical Guarantee guaranteed 6,000,000.00 53.69 3,000,000.00 47.62 price Corporation fees

169

China National Payment of Negotiated Chemical Guarantee guaranteed 2,295,000.00 20.54 price Corporation fees

(7) Inter-lending between the related parties

Related party Amount Start date End date Notes

Borrowing:

Hubei Jingzhou Huaxiang 11,000,000.00 2013/01/01 2013/08/31 Chemical Co., Ltd. Notes: Loans lent to Hubei Jingzhou Huaxiang Chemical Co., Ltd. was the borrowing funds that the disposal of its subsidiary--Jingzhou Longhua Company Petrochemical Co., Ltd. of the Company. (8) Other related-party transactions ① The parent company of the Group—Sanonda Group Corporation paid & gained wages and social security through the Group with a total of RMB 1,730,396.92. ② Balance of bank deposit of Chemchina Finance Co., Ltd. of the Group at the period-end was of RMB 68,573,515.18, and balance of short-term loan was of RMB 130,000,000.00; Interest of bank deposit of this year was of RMB 1,642,021.22, and interest of the paid loan of this year was of RMB 8,460,993.34. ③ Equities purchased from the parent company—Sanonda Group Corporation that it owned of its subsidiaries

Proportion of the Payment of Name of the purchased entity Pricing method purchasing consideration

Sanonda (Jingzhou) Pesticide Chemical Co., 10% Assessed value 2,913,700.00 Ltd.

Hubei Sanonda Foreign Trading 10% Assessed value 2,993,030.00 Co., Ltd.

6. Accounts receivable and payable of related parties (1) Accounts receivable and advanced accounts of related parties

Closing balance Opening balance

Item Bad debts Bad debts Book value Book value provision provision

Accounts receivable

Makhteshim Chemical Works Ltd. 3,866,800.31 193,340.02 9,228,873.94 461,443.70

FARMOZ PTY LTD 4,419,508.68 220,975.43 1,886.88 94.34

Hubei Jingzhou Huaxiang Chemical Co., Ltd. 18,200.00 910.00

Total 8,304,508.99 415,225.45 9,230,760.82 461,538.04

170

Closing balance Opening balance

Item Bad debts Bad debts Book value Book value provision provision

Advanced engineering

Sichuan Bluestar Machinery Co., Ltd. 63,000.00

Bluestar Environmental Engineering Co., Ltd. 80,609.00

Haohua Engineering Co., Ltd. 17,760,000.00

Total 17,903,609.00

(2) Accounts payable and accounts received in advance of related parties

Item Closing balance Opening balance

Accounts payable

Bluestar (Beijing) Chemical Machinery Co., Ltd. 105,700.00 128,000.00

Total 105,700.00 128,000.00

Accounts received in advance

China National Agrochemical 35,183.75 Corporation

Shangdong Dacheng Agrochemical Co., Ltd. 2,549,000.00

Total 2,549,000.00 35,183.75

X. Share-based payments There was no share-based payment up to 31 Dec. 2013. XI. Contingent events 1. Contingent liability and financial impacts caused by provision of guarantee for other company

Current Total guarantee Overdue Guarantee status of Guarantor Secured entities amount Guarantee type amount way secured (RMB ’0000) entities

I. Guarantee for subsidiaries

Hubei Sanonda Foreign Joint Guarantee for Normal The Company Trading Co., Ltd. 35,520.00 Naught liability trade financing operation guarantee loan

Notes: The guarantee provided for Hubei Sanonda Foreign Trading Co., Ltd. (the controlling subsidiary of the Company) is the maximum security of guaranty that the Company provides for its trade financing behaviors such as opening letter of credit and bill of exchange.

171

2. Other contingent liabilities and their financial impacts The Group has no other contingent events that need to be disclosed. XII. Commitment events There was significant commitment events needed to be disclosed up to 31 Dec. 2013 XIII. Events after balance-sheet-date 1. Explanation on significant events after balance-sheet-date There was no event after balance-sheet-date up to the disclosed date of the financial statement. 2. Information on profits distribution after balance-sheet-date On 4 Mar. 2014, the Company held the 27th Session of 6th Meeting of the Board of Directors, which approved the Preplan of Profits Distribution of 2013, and based on the total share capital of 593,923,220 shares of 31 Dec. 2013, the Company distributed the cash (tax included) as per 10 shares of RMB 0.5. The Preplan of Profits Distribution needed to be approved by the general meeting of stockholders of 2013. XIV. Other significant events 1. Debts reorganization Sanonda (Jingzhou) Pesticide & Chemicals Co., Ltd. (a subsidiary of the Company) suffered a debts reorganization loss of RMB 152,001.61 in the year, causing the accounts receivable due to the Company’s relevant customers with a uncollectible risk due to various force majeure, such as long debt ages, idle goods, expired products, difficult transportation, damaged package and difficult return of goods, etc.. However, upon hard work, the Company conducted many debts reorganization negotiation with relevant customers and reached an effective debt reorganization agreement finally. According to the debt reorganization agreement, the Company reduced and exempted relevant entities’ accounts receivable with a total of RMB 152,001.61, and the remained payment for goods has been totally recovered. 2. Other events. There was no other significant event needed to be disclosed in the reporting period of the Group. XV. Explanation on major items of financial statement in parent company 1. Accounts receivable (1) Category

Closing balance

Category Book balance Bad debt provision

Amount Proportion Amount Proportio

172

(%) n (%)

Accounts receivable with significant single amount and

individually withdrawn bad debt provision

Accounts receivable for which bad debt provisions are made on

the group basis

Including: Related-party groups 190,215,339.25 94.89

Account age groups 10,236,055.25 5.11 7,437,478.65 72.66

Subtotal of the groups 200,451,394.50 99.85 7,437,478.65 3.71

Accounts receivable with insignificant single amount and 302,796.52 0.15 302,796.52 100.00 individually withdrawn bad debt provision

Total 200,754,191.02 100.00 7,740,275.17 3.86

(Continued)

Opening balance

Book balance Bad debt provision Category Proportion Proportio Amount Amount (%) n (%)

Accounts receivable with significant single amount and

individually withdrawn bad debt provision

Accounts receivable for which bad debt provisions are made on

the group basis

Including: Related-party groups 162,630,166.79 93.94

Account age groups 10,494,535.23 6.06 7,404,568.43 70.56

Subtotal of the groups 173,124,702.02 100.00 7,404,568.43 4.28

Accounts receivable with insignificant single amount and

individually withdrawn bad debt provision

Total 173,124,702.02 100.00 7,404,568.43 4.28

(2) Accounts receivable listed by account age groups

Closing balance Opening balance Item Amount Proportion (%) Amount Proportion (%)

Within 1 year 190,825,992.16 95.05 165,055,054.42 95.34

1 to 2 years 2,225,638.44 1.11 696,400.02 0.40

2 to 3 years 432,983.52 0.22 84,398.54 0.05

3 to 4 years 40,727.86 0.02

4 to 5 years 200,969.11 0.12

Over 5 years 7,228,849.04 3.60 7,087,879.93 4.09

Total 200,754,191.02 100.00 173,124,702.02 100.00

(3) Withdrawal of bad debts provision

173

① Accounts receivable adopting account age group to withdraw bad debts provision

Closing balance Opening balance

Book balance Book balance Account age group Bad debt Bad debt Proportion Proportion Amount provision Amount provision (%) (%)

Within 1 year 2,688,391.10 26.26 134,419.55 2,424,887.63 23.11 121,244.38

1 to 2 years 147,900.25 1.44 14,790.03 696,400.02 6.64 69,640.00

2 to 3 years 130,187.00 1.27 39,056.10 84,398.54 0.80 25,319.56

3 to 5 years 40,727.86 0.40 20,363.93 200,969.11 1.91 100,484.56

Over 5 years 7,228,849.04 70.63 7,228,849.04 7,087,879.93 67.54 7,087,879.93

Total 10,236,055.25 100.00 7,437,478.65 10,494,535.23 100.00 7,404,568.43

② In the groups, accounts receivable adopting related parties method to withdraw bad debt provision:

Withdrawal Name of groups Book balance Bad debt provision proportion (%)

Hubei Sanonda Foreign Trading 150,020,592.99 No withdrawal 74.73 Co., Ltd.

Jingzhou Hongxiang Chemical Co., Ltd. 40,194,746.26 No withdrawal 20.02

Total 190,215,339.25 94.75

③ Accounts receivable with insignificant single amount and individually withdrawn bad debt provision at the year-end

Content Book balance Proportion (%)) Bad debt provision Reason

Jiangxi Nanchang Red Valley Plant 302,796.52 100 302,796.52 Not expected to recover Protection Center

Total 302,796.52 302,796.52

(4) No significant accounts receivable reversed or recovered in the reporting period (5) Shareholders with more than 5% (including 5%) of the voting shares of the Company in accounts receivable in reporting period (6) Accounts receivable due to the top five entities

Occupancy rate of Relationship with the total amount of Name of company Amount Period the Company accounts receivable (%)

Subsidiary of the Within Hubei Sanonda Foreign Trading Co., Ltd. 150,020,592.99 74.73 Company one year

Jingzhou Hongxiang Chemicals Co., Ltd. Subsidiary of the 40,194,746.26 Within 20.02

174

Occupancy rate of Relationship with the total amount of Name of company Amount Period the Company accounts receivable (%) Company one year

Chongqing Yukai Agricultural Development Over 5 Non-related party 1,473,343.97 0.73 Co., Ltd. years

Guangxi Nanning Keerda Agrochemical Co., Over 5 Non-related party 1,265,810.30 0.63 Ltd. years

Within Guangdong Zhanjiang Sannong Corporation Non-related party 1,167,524.00 0.58 one year

Total 194,122,017.52 96.69

(7) Accounts receivable due from related parties

Occupancy rate of the total Relationship with the Name of entity Amount amount of accounts Company receivable (%)

Hubei Sanonda Foreign Trading Co., Subsidiary of the 150,020,592.99 74.73 Ltd. Company

Jingzhou Hongxiang Chemicals Co., Subsidiary of the 40,194,746.26 20.02 Ltd. Company

Total 190,215,339.25 94.75

2. Other accounts receivable (1) Category

Closing balance

Book balance Bad debt provision Category Proportio Proportion Amount Amount n (%) (%)

Other accounts receivable with significant single amount and individually withdrawn bad debt provision

Other accounts receivable for which bad debt provisions are made on the group basis

Including: Related-party groups 140,600,651.57 93.52

Risk-free groups

Account age groups 9,744,815.75 6.48 5,472,766.05 56.16

Subtotal of the groups 150,345,467.32 100.00 5,472,766.05 3.64

Other accounts receivable with insignificant single amount and individually withdrawn bad debt provision

Total 150,345,467.32 100.00 5,472,766.05 3.64

175

(Continued)

Closing balance

Book balance Bad debt provision Category Proportio Proportion Amount Amount n (%) (%)

Other accounts receivable with significant single amount and individually withdrawn bad debt provision

Other accounts receivable for which bad debt provisions are made on the group basis

Including: Related-party groups 145,446,597.26 95.68

Risk-free groups 63,795.01 0.04

Account age groups 6,507,313.11 4.28 5,376,873.00 82.63

Subtotal of the groups 152,017,705.38 100.00 5,376,873.00 3.54

Other accounts receivable with insignificant single amount and individually withdrawn bad debt provision

Total 152,017,705.38 100.00 5,376,873.00 3.54

(2) Other accounts receivable listed by account age

Closing balance Opening balance Item Amount Proportion (%) Amount Proportion (%)

Within 1 year 4,757,754.49 3.16 21,569,333.60 14.19

1 to 2 years 140,330,784.57 93.34 125,057,682.52 82.27

2 to 3 years 11,290.00 0.01 35,210.65 0.02

3 to 4 years 34,385.65 0.02

4 to 5 years 100,000.00 0.07

Over 5 years 5,211,252.61 3.47 5,255,478.61 3.45

Total 150,345,467.32 100.00 152,017,705.38 100.00

(3) Withdrawal of bad debts provision ① Other accounts receivable adopting account age group to withdraw bad debts provision:

Closing balance Opening balance

Book balance Book balance Account age Proportion Bad debt provision Proportion Bad debt provision Amount Amount (%) (%)

Within 1 year 4,157,102.92 42.66 207,855.15 1,016,623.85 15.62 50,831.19

1 to 2 years 330,784.57 3.39 33,078.46 100,000.00 1.54 10,000.00

2 to 3 years 11,290.00 0.12 3,387.00 35,210.65 0.54 10,563.20

176

Closing balance Opening balance

Book balance Book balance Account age Proportion Bad debt provision Proportion Bad debt provision Amount Amount (%) (%)

3 to 5 years 34,385.65 0.35 17,192.83 100,000.00 1.54 50,000.00

Over 5 years 5,211,252.61 53.48 5,211,252.61 5,255,478.61 80.76 5,255,478.61

Total 9,744,815.75 100.00 5,472,766.05 6,507,313.11 100.00 5,376,873.00

② In the groups, other accounts receivable adopting related parties method to withdraw bad debt provision:

Withdrawal proportion Name of groups Book balance Bad debt provision (%)

Sanonda (Jingzhou) Pesticide 600,651.57 No withdrawal 0.40 Chemical Co., Ltd.

Jingzhou Hongxiang Chemicals 140,000,000.00 No withdrawal 93.12 Co., Ltd.

Total 140,600,651.57 93.52

(4) Other accounts receivable due to the top five entities

Proportion in the total Relationship with the other Name of entity Amount Years Company accounts receivable (%)

Jingzhou Hongxiang Chemicals Co., Subsidiary of the Company 140,000,000.00 1-2 years 93.12 Ltd.

Shantou Biyue Plastic Co., Ltd Non-related party 3,125,000.00 Over 5 years 2.08

Jingzhou Longhua Petrochemicals Co., See Notes VI. 3 3,000,000.00 Within 1 year 2.00 Ltd.

Xiao Hongbo Staff 711,750.00 Within 1 year 0.47

Sanonda (Jingzhou) Pesticide Chemical Non-related party 600,651.57 Within 1 year 0.40 Co., Ltd.

Total 147,437,401.57 98.07

(5) Accounts receivable due to the related parties

Proportion in the total Name of entity Relationship with the Company Amount other accounts receivable (%)

Sanonda (Jingzhou) Pesticide Subsidiary of the Company 600,651.57 0.40 Chemical Co., Ltd.

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Proportion in the total Name of entity Relationship with the Company Amount other accounts receivable (%) Jingzhou Hongxiang Chemicals Subsidiary of the Company 140,000,000.00 93.12 Co., Ltd. Total 140,600,651.57 93.52 3. Long-term equity investment (1) Category

Item Opening balance Increase Decrease Closing balance

Investment in subsidiaries 98,666,228.73 5,906,730.00 24,546,323.32 80,026,635.41

Investment in joint venture

Investment in associates

Investment in other equities 21,144,800.00 21,144,800.00

Less: Depreciation provision of 36,491,017.37 36,491,017.37 long-term equity

Total 83,320,011.36 5,906,730.00 24,546,323.32 64,680,418.04

(2) List of long-term equity investment

Initial Investee Accounting method Opening balance Increase/decrease Closing balance investment cost

Sanonda (Jingzhou) Pesticide & Cost method 30,413,700.00 27,500,000.00 2,913,700.00 30,413,700.00 Chemicals Co., Ltd.

Hubei Sanonda Tianmen Cost method 7,245,023.32 21,296,323.32 -21,296,323.32 Agrochemical Co., Ltd.

Jingzhou Longhua Petrochemicals Cost method 3,250,000.00 3,250,000.00 -3,250,000.00 Co., Ltd.

Hubei Sanonda Foreign Trading Cost method 11,993,030.00 9,000,000.00 2,993,030.00 11,993,030.00 Co., Ltd.

Hubei Bank Cost method 20,000,000.00 20,000,000.00 20,000,000.00

Hubei Shendian Auto Motor Co., Cost method 564,000.00 564,000.00 564,000.00 Ltd

Guangxi Zhongding Holding Co., Cost method 580,800.00 580,800.00 580,800.00 Ltd

Jingzhou Hongxiang Chemicals Co., Cost method 37,619,905.41 37,619,905.41 37,619,905.41 Ltd.

Total 119,811,028.73 -18,639,593.32 101,171,435.41

(Continued)

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Reasons for Voting inconformity Withdrawal of Shareholding power between Cash Depreciation depreciation Investee proportion for proportion Shareholding dividends for reserves reserves for investee (%) for investee proportion and this period this period (%) Voting power proportion

Sanonda (Jingzhou) Pesticide & 100.00 100.00 24,500,000.00 Chemicals Co., Ltd.

Hubei Sanonda Tianmen

Agrochemical Co., Ltd.

Jingzhou Longhua Petrochemicals 650,000.00 Co., Ltd.

Hubei Sanonda Foreign Trading 100.00 100.00 Co., Ltd.

Hubei Bank 5.15 5.15 11,991,017.37 4,062,224.59

Hubei Shendian Auto Motor Co., 0.60 0.60 Ltd

Guangxi Zhongding Holding Co., 1.41 1.41 Ltd

Jingzhou Hongxiang Chemicals Co., 98.50 98.50 Ltd.

Total 36,491,017.37 4,712,224.59

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

Item 2013 2012

Main operation revenue 2,947,049,466.39 2,158,028,831.41

Other operation revenue 59,991,024.71 52,458,740.75

Total of operating revenue 3,007,040,491.10 2,210,487,572.16

Main operation revenue 2,250,434,591.10 1,808,052,568.51

Other operation revenue 49,843,028.39 45,344,782.79

Total of operating cost 2,300,277,619.49 1,853,397,351.30

(2) Main business (classified by industries)

2013 2012 Name of Industries Operating revenue Operating cost Operating revenue Operating cost

Manufacturing of chemical 2,947,049,466.39 2,250,434,591.10 2,158,028,831.41 1,808,052,568.51 raw material and chemicals

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2013 2012 Name of Industries Operating revenue Operating cost Operating revenue Operating cost

Total 2,947,049,466.39 2,250,434,591.10 2,158,028,831.41 1,808,052,568.51

(3) Main business (classified by products)

2013 2012 Name of Products Operating revenue Operating cost Operating revenue Operating cost

Agrochemicals such as chemical 2,932,076,049.13 2,241,605,718.98 2,145,681,152.71 1,801,543,362.06 fertilizer and pesticide

New chemical material and 14,973,417.26 8,828,872.12 12,347,678.70 6,509,206.45 special chemicals

Total 2,947,049,466.39 2,250,434,591.10 2,158,028,831.41 1,808,052,568.51

(4) Main business (classified by regions)

2013 2012 Name of region Operating revenue Operating cost Operating revenue Operating cost

Domestic 1,473,004,341.32 1,099,564,535.55 1,119,425,240.67 913,595,491.34

Overseas 1,474,045,125.07 1,150,870,055.55 1,038,603,590.74 894,457,077.17

Total 2,947,049,466.39 2,250,434,591.10 2,158,028,831.41 1,808,052,568.51

(5) Operating revenue from the top five customers of the Company

Term Total of operating revenue from the Proportion in total operating revenue top five customers (%) 2013 644,965,004.99 21.45 2012 465,726,853.45 21.07

5. Investment income (1) List of investment income

Investee 2013 2012

Long-term equity investment income accounted by cost method 4,712,224.59 650,000.00

Long-term equity investment income accounted by equity method

Investment income from the disposal of long-term equity investment 2,766,935.46

Total 7,479,160.05 650,000.00

(2) Long-term equity investment income accounted by cost method

Investee 2013 2012

Jingzhou Longhua Petrochemicals Co., Ltd. 650,000.00 650,000.00

Hubei Bank 4,062,224.59

Total 4,712,224.59 650,000.00

6. Supplementary materials of cash flow statement

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Item 2013 2012

(1) Reconciliation of net profit to net cash flows generated from operating activities

Net profit 336,542,091.69 122,962,248.11

Add: Provision for impairment of assets 3,389,750.48 7,954,200.88

Depreciation of fixed assets, of oil-gas assets, of productive biological assets 154,618,166.70 136,027,960.92

Amortization of intangible assets 3,743,473.02 3,765,139.73

Amortization of long-term unamortized expenses

Losses on disposal of fixed assets, intangible assets and other 10,566,088.92 949,938.16 long-term assets (gains: negative)

Abandonment loss of fixed assets (gains: negative)

Loss from fair value changes (gains: negative)

Financial cost (gains: negative) 60,468,811.41 62,577,213.24

Investment loss (gains: negative) -7,479,160.05 -650,000.00

Decrease in deferred income tax assets (gains: negative) 2,667,636.00 -1,402,830.62

Decrease in deferred income tax liabilities（losses: negative)

Decrease in inventory (gains: negative) 91,746,977.98 -90,000,347.72

Decrease in accounts receivable from operating activities (gains: negative) -59,139,329.84 -60,694,551.80

Increase in payables from operating activities (decrease: negative) 164,491,738.76 75,694,617.48

Other

Net cash flows generated from operating activities 761,616,245.07 257,183,588.38

(2) Investing and financing activities that do not involving cash receipts and payment:

Liabilities transferred into capital

Convertible corporation bonds due within 1 year

Financing chartered into fixed assets

(3)Net increase in cash and cash equivalents

Closing balance of cash 325,849,120.35 149,485,252.01

Less: Opening balance of cash 149,485,252.01 178,056,420.12

Add: Closing balance of cash equivalents

Less: Opening balance of cash equivalents

Net increase in cash and cash equivalents 176,363,868.34 -28,571,168.11

Notes: Balance of closing balance of cash and cash equivalents and currency assets was of RMB 400,000,000. See details to Notes VII. 1 if needed to issue the margin of bank acceptance of the Company.

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XVI. Supplementary information 1. Items and amounts of extraordinary gains and losses

Item 2013 2012

Loss and gains on disposal of non-current assets -10,822,583.41 -3,329,557.24

Occasionally tax rebates and cuts of ultra vires approval or without formal approval

Governmental subsidy included in the current profits and losses(is closely related with the business event, except for the governmental subsidy that according to the national 3,270,500.35 3,650,934.78 unity standard quota or the quantitative regal assets)

Tax for the possession of funds from the non-financial business Included in the current losses and gains

The quota of the Company receives from the subsidiaries, joint ventures and cooperative enterprises of the costs of investment is less than that of the gains produced from the investment which enjoys net assets of fair value that recognized by the investee.

Exchange gains and losses of non-monetary assets

Gains and losses of agenting others of investment or managing assets

Withdrawing impairment of assets owning of force majeure factors, including suffer from natural disasters

Gains and losses of debt restructuring -152,001.61 -694,017.10

Enterprise restructuring charges, for example, staffing costs of integration

Gains and losses produced when exchanging prices unconscionable at the fair that exceed the fair value

The current net profits and losses produced when the subsidiaries combine unde r the same control from the beginning to the combining date

Gains and losses produced from the contingency which have nothing to do with

the Company’s normal business operations

In addition to the valid hedging activity associated with the normal operation of the Company, the changes in fair value through gains or losses which arising from the holding trading financial assets and the trading financial liabilities as well as the investment income that earning from the disposal of trading financial assets, trading financial liabilities and available-for-sale financial assets

The reversal of impairment of receivables of the individual impairment test

Gains and losses from the external entrusted loans

Gains and losses for changes in fair value of investment property resulting from the subsequent measure through the fair value model

The impact of a one-time adjustment of current gains and losses according to the laws and regulations of tax, accounting and others on current gains and losses

Trustee fee income earning from the entrusted management

Income and expenses of the other operation except the mentioned above 497,140.96 -2,834,030.14

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Item 2013 2012

The other items of gains and losses conforming the definition of non-recurring gains and losses

Subtotal -7,206,943.71 -3,206,669.70

Effect of income tax -1,801,735.93 -801,667.43

Effect of minority interest (after tax) -33,991.44 11,429.08

Total -5,371,216.34 -2,416,431.35

Notes: The number + indicates gains and incomes and – indicates losses or expenses of non-recurring gains and losses. The Company confirmed the non-recurring gains and losses according to regulations of the Explanatory Announcement No. 1 on Information Disclosure for Companies Offering Their Securities to the Public—Extraordinary Gains and Losses (CSRC Announcement [2008] No. 43).

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2. Return on equity (ROE) and earnings per share (EPS)

Weighted average EPS（Yuan/share） Profit as of reporting period ROE (%) EPS-basic EPS-diluted

Net profit attributable to common shareholders of the 22.88% 0.5402 0.5402 Company

Net profit attributable to common shareholders of the 23.27% 0.5492 0.5492 Company after deduction of non-recurring profit and loss

Notes: (1) Calculation process of rate of return on net assets was listed as follows:

Item 2013

Net profit attributable to ordinary shareholders of the Company 320,811,958.67

Net profit attributable to ordinary shareholders of the Company after deducting 326,183,175.01 non-recurring gain or loss

Net profit attributable to common shareholders of the Company at the year-begin 1,255,536,761.52

Net profit attributable to common shareholders of the Company at the year-end 1,546,189,571.66

Net profit attributable to common shareholders of the Company after weighted 1,401,980,128.72 average

(2) Weighted average return on net asset =P0/（E0＋NP÷2+Ej÷2） Where: P0 is net profit attributable to ordinary shareholders of the Company or net profit attributable to ordinary shareholders of the Company after deducting non-recurring gain or loss; E0 is the year beginning equity attributable to ordinary shareholders of the Company; Ej is reduced equity attributable to ordinary shareholders of the Company due to stock repurchase or cash dividend in the reporting period. In the reporting period, there was no situation of any newly increase of issue new shares or debt-to-equity swaps, and no any decreased net profit which belongs to the common shareholders of the Company, as well as no increase or decrease situation of the net profits belongs to the common shareholders and other deals or events. (3) See details of the calculation of EPS-basic and EPS-diluted to Notes VII. 43.

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Section XI. Documents Available For Reference

(I) Financial Statements carried with signatures and seals of Legal Representative and Accounting Principal, as well as Head of the Accounting Organ;

(II) Original of the Auditor’s Report with the seals of accounting firm and the signatures and seals of certified public accountants;

(III) In the reporting period, originals of all documents of the Company ever disclosed publicly in media designated by China Securities Regulatory Commission as well as the originals of all the public notices were deposited in the office of the Company.

Hubei Sanonda Co., Ltd. Legal representative: Mr. Li Zuorong 5 March 2014

185