ADAMA Ltd.
Assessment Report on Internal Control for 2018
All Shareholders of ADAMA Ltd.:
We evaluated the effectiveness of the internal control for the Company as of December 31, 2018 (the base date of the internal control assessment report) in accordance with the "Basic Standards for Enterprise Internal Control", its supporting guidelines and other internal control regulatory requirements (hereinafter referred as the internal control system of enterprises), while taking into consideration the internal control mechanism and assessment methods of our Company (hereinafter referred to as “ADAMA” or the “Company") and also on the basis of daily and special supervision.
I. Important Statement
In accordance with the internal control system of enterprises, the board of directors of a company holds the responsibility to establish and improve the internal control, evaluate its effectiveness and truthfully disclose the corresponding assessment report. The board of supervisors of a company supervises the establishment and implementation of the internal control by the board of directors. The management team is responsible for initiating and organizing daily activities of the enterprise internal control. The board of directors, board of supervisors and all members thereof, including directors and supervisors, as well as the senior management of the company, confirm that the report is true, accurate and complete, does not contain any misleading statements or material omissions and assume joint and several legal liability arising therefrom.
The goal of the internal control is to ensure that the business management of a company is legitimate and compliant, thecompany’s assets are secured and that its financial reporting and related reported information are true and complete. It is also aimed at improving operational efficiency and effectiveness, and promoting the realization of development strategies. Due to the inherent limitations of an internal control, it can only provide reasonable assurance to achieve those objectives mentioned above. Moreover, changes in circumstances may cause the internal control to be inappropriate, or reduce compliance with policies and procedures. Therefore, there is a risk in speculating the effectiveness of future internal controls based on these assessment results.
II. Conclusion of the Internal Control Assessment
1. Does the company have a material deficiency in the internal control of the financial reporting on the base date of the internal control assessment report?
□ Yes√ No
2. Assessment conclusion of internal control over financial reporting
√ Valid□ Invalid
According to the internal control's criteria for identification of material deficiencies in the internal control over financial reporting, there is no such deficiency as of the base date of the internal control assessment report. The board of directors of the Company believes that the Company has managed an effective internal control of its financial report in all major aspects in accordance with the requirements of the internal control system and related regulations.
3. Whether there is any material deficiency in the internal control over non-financial reporting
□ Yes√ No
According to the internal control's criteria for identification of material deficiencies in the internal control related to non-financial reporting of the Company, no such deficiency was found on the base date of the assessment report.
4. Factors affecting the effectiveness of the assessment conclusion as of the base date until the issuance date of the assessment report of the internal control
□ Applicable√ Not Applicable
There are no factors affecting the effectiveness of the assessment conclusion as of the base date until the issuance date of the assessment report of the internal control.
5. Whether the audit opinion for the internal control is consistent with the effectiveness assessment conclusion on the internal control over financial reporting
√ Yes□ No
6. Whether the disclosure regarding material deficiencies in the internal control audit report is consistent with that of the assessment report of thecompany’s internal control
√ Yes□ No
III. Assessment of Internal Control
(I) Scope of Internal Control Assessment
The Company confirms the main units, businesses, items and highly risky areas to be included in the assessment scope according to the risk-oriented principle.
1. Main Units within the Assessment Scope include:
Major subsidiaries for the manufacturing, formulation,R&D and marketing.
2. Proportion of units within the assessment scope
|||||
|-|-|-|-|
||Index||Proportion (%)|
|Total Assets of Units within the Assessment Scope Compared to Total Assets inthe Consolidated Statements of the Company||70.33||
|Total Operating Income of Units within the Assessment Scope Compared to TotalOperating Income in the Consolidated Statements of the Company||75.34||

3. Major businesses and items within the assessment scope
Financial Reporting, ITGC, Sales, Assets, Payroll, Purchase, Inventory, Treasury, Entity-level controls, Comprehensive Budget, Research and Development, Related Parties, Contract management. 4. Highly risky areas of major concern include:
Sales, Assets, Purchase, Treasury (including derivatives)
5. The above-mentioned units, businesses, items and highly risky areas within the assessment scope cover the main aspects of the company's operation and management. Is there any material omission?
□ Yes√ No
6. Is there a statutory waiver?
□ Yes√ No
7. Other Instructions
None
(II) Work Basis of the internal control assessment and the identification standards of deficiencies The Company conducted the internal control evaluation based on the requirements of the internal control system and relevant external supervision regulations..
1. Whether there is any adjustment of the specific criteria for defining the internal control deficiency compared to previous years
□ Yes√ No
This is the first year for the Company to disclose the self-assessment report on internal control, after acquiring ADAMA Agricultural Solutions Ltd. through the major assets restructuring in 2017.
The board of directors of the Company distinguishes the internal control of financial reporting from that of non-financial reporting based on factors such as company size, industry characteristics, risk preference and tolerance according to the specific criteria of the internal control system to identify material, significant and general deficiencies.
2. Identification criteria for a deficiency in the internal control of the financial report
The quantitative criteria for deficiency assessment in the internal control of the financial reports as was determined by the Company are as follows:
|||||||||
|-|-|-|-|-|-|-|-|
||Index||Quantitative Criteria for||Quantitative Criteria for a||Quantitative Criteria|
||||a Material Deficiency||Significant Deficiency||for a General|
||||||||Deficiency|
|Misstatementin FinancialReport(usuallyrelated to netincome)||The correspondingmisstatement relates toan amount that isgreater than or equal toRMB 100 million.||The correspondingmisstatement relates to anamount that is greater than orequal to RMB 50 million, butless than RMB 100 million.||Resulting in othermisstatement relatedamounts.||

The qualitative criteria for deficiency assessment in the internal control of the financial reports as was determined by the Company are as follows:
|||||
|-|-|-|-|
||Classification||Qualitative Criteria|
||by Features|||
|MaterialDeficiency||Resulting in an adverse opinion or disclaimer of opinion, by a CPA, on theCompany’s financial statements; or resulting in a material correction of theCompany’s publicly announced financial statements.||
|SignificantDeficiency||Resulting in a qualified opinion, by a CPA, on the Company’s financialstatements; or resulting in an adverse opinion or disclaimer of opinion, by aCPA, on the Company’s material subsidiaries’ (i.e. Solutions) financialstatements; or resulting in a significant correction of the Company’s materialsubsidiaries’ (i.e. Solutions) publicly announced financial statements.||
|GeneralDeficiency||Resulting in an unqualified opinion, with an explanatory paragraph, by aCPA, on the Company’s financial statements; or resulting in a qualifiedopinion, or unqualified opinion with an explanatory paragraph, by a CPA, onthe Company’s subsidiaries’ financial statements.||

3. Identification criteria for a deficiency in the internal control over non-financial reporting
The quantitative criteria for a deficiency assessment in the internal control over non-financial reporting as was determined by the Company are as follows:
|||||||||
|-|-|-|-|-|-|-|-|
||Index||Quantitative Criteria of||Quantitative Criteria of||Quantitative Criteria of|
||||Material Deficiency||Significant Deficiency||General Deficiency|
|Asset Loss||Asset Loss ≥ RMB 150million||RMB 80 million ≤ AssetLoss ≤ 150 million RMB||Asset Loss < 80 millionRMB||

The qualitative criteria for a deficiency assessment in the internal control over non-financial
reporting as was determined by the Company are as follows:
|||||
|-|-|-|-|
||Classification||Qualitative Criteria|
||by Features|||
|MaterialDeficiency||1) Fraud committed in the Company by any of its directors, supervisors andsenior management personnel;2) The Company materially violates material laws and regulations, resultingin a material effect on the Company's business;3) Material design deficiencies in the Company's relevant managementsystem;4) The Company materially violates the decision-making process therebycausing a material negative impact on the Company's business (generallyrelated to matters that need to be approved by the shareholders meeting orthe board of directors).5) Material impact to the Company’s reputation.||
|SignificantDeficiency||1) Significant fraud committed by any department head of the Company;2) Significant fraud committed by a head of any of the Company’s materialsubsidiaries;3) The Company violates significant laws and regulations, resulting insignificant fines as well as a significant effect on the Company's business ;4) Significant design deficiencies found in the Company's relevantmanagement system; Material design deficiencies are found in the relevantmanagement systems of subsidiaries;5) The Company violates material decision-making procedures, resulting in asignificant effect on the Company's business (generally referred to matterssubject to senior management's decision);6) Material Subsidiaries violate decision-making process, thereby causing amaterial negative impact on the Company's business (generally referred tomatters that need to be decided by the shareholders’ meeting or the boardof directors).7) Significant impact to the Company’s reputation.||
|GeneralDeficiency||1) Fraud committed by any other personnel in the Company;2) Fraud committed by any other personnel in material subsidiaries;3) The Company materially violates material internal regulations or non-materially violates material laws and regulations, resulting in negativefeedback from regulatory authorities;4) There are other violations of laws and regulations or internal regulationsfound in material subsidiaries.5) There are general design deficiencies in the relevant management systemof the Company; other design deficiencies exist in the relevantmanagement system of the material subsidiaries;6) The Company violates the decision-making process, resulting in a negativeimpact on the Company's business;7) Material Subsidiaries violate decision-making process, resulting in anegative impact on the Company's business.||

(III) Identification and rectification of internal control deficiencies
1. Identification and remediation of deficiencies included in the internal control deficiencies on the
financial reporting
Whether the company has a material deficiency in the internal control of the financial reporting during the reporting period
□ Yes√ No
1.2. Significant Deficiency
Whether the company has a significant deficiency in the internal control of the financial reporting during the reporting period
□Yes√ No
1.3. General Deficiency
The general internal control deficiencies identified by the Company do not affect the realization of the control objectives; the Company acknowledges with great importance the general deficiencies found during the reporting period and has proposed remediation opinions and actively formulated corresponding plans for their implementation.
1.4. After the remediation, as of the base date of the internal control assessment report, whether the company has a material deficiency in the internal control over financial reporting that has not been rectified
□Yes√ No
1.5. After the remediation, as of the base date of the internal control assessment report, whether the company has a significant deficiency in the internal control over financial reporting that has not been rectified
□Yes√No
2. Identification and Rectification of Internal Control Deficiencies over Non-Financial Reporting
2.1. Material Deficiency
Whether the company identified any material deficiency in the internal control over non-financial reporting during the reporting period
□Yes√ No
2.2 Significant Deficiency
Whether the company identified any significant deficiency in the internal control over non-financial reporting during the reporting period
□ Yes√ No
2.3. General Deficiency
The general deficiency identified by the company does not affect the realization of the control objectives; the Company acknowledges with great importance the general deficiency found during the reporting period and has proposed rectification opinions and actively formulated corresponding plans for implementation.
2.4. After the above rectification, as of the base date of the internal control assessment report, whether the company has a material deficiency in the internal control not related to financial reporting that has not been rectified
□ Yes√ No
□ Yes√ No
IV. Other important matters related to internal control
1. Rectification of internal control deficiencies in the previous year
□ Applicable√ Not Applicable
2. Internal Control Progress of the Current and the Next Years
□ Applicable√ Not Applicable
3. Other Major Items
□ Applicable√ Not Applicable
By order of the Board ADAMA Ltd. March 19, 2019