Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report Stock Code: 603609 Stock Abbreviation (English): Wellhope Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd.
2018 Annual Report
April 2019
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report Important Statements
I. The Board of Directors, Supervisory Board, Directors, Supervisors and Senior Management of Liaoning Wellhope hereby warrant that there are no false representations, misleading statements or material omissions in this annual report, jointly and severally accept full responsibility for the truthfulness, accuracy and completeness of the contents of this report.
II. All the Board Directors attended the board meeting.
III. Jiangsu SuyaJincheng CPA LLP has issued the auditor's report with an unqualified opinion for the Company.
IV. The Company's Chairman Jin Weidong and the Director of internal audit Zhang Wenliang warrant the truthfulness, accuracy and completeness of the information presented in the financial statements in this annual report.
V. The profit distribution plan for the reporting period has been deliberated by the Board of Directors.
The 2018 profit distribution plan will be: based on the total share capital on the equity registration date when the 2018 annual profit distribution will be implemented, the Company will distribute cash dividends of RMB 1.8 yuan per 10 shares (tax included) to all shareholders, totalling RMB 166,014,791.28 yuan. This profit distribution plan has been deliberated and approved by the Board of Directors, pending submission to the Shareholders' Meeting.
VI. Risk Statement of Forward-looking Statements
The forward-looking descriptions in this report in terms of plans, development strategies and other information cannot be deemed the Company's commitment to investors. Please beware of the investment risks.
VII. There has been no occurrence of the Company's non-business capital being occupied by controlling shareholders and their related parties.
VIII. There has been no occurrence of the Company violating its decision-making procedure while providing external guarantees.
IX. Material Risk Warning
The Company describes possible risks in detail in this report. Please refer to "Possible Risks" in Section IV "Business Operations Analysis".
X. This annual report has been issued in both Chinese and English versions. In case there is any discrepancy or inconsistency between the two versions, the Chinese version shall prevail. The disclosed Chinese version of 2018 Annual Report can be obtained at: www.sse.com.cn.
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report Contents
Section I Glossary ............................................................................................................. 4 Section II Company Profile and Key Financial Information ............................................... 5 Section III Business Overview ............................................................................................ 8 Section IV Business Operations Analysis .......................................................................... 25 Section V Important Disclosures ...................................................................................... 74 Section VI Changes in Common Shares and Shareholder Information .............................92 Section VII Preference Share ............................................................................................. 95 Section VIII Directors, Supervisors, Senior Management and Employees ......................... 96 Section IX Corporate Governance .................................................................................. 105 Section X Corporate Bond ............................................................................................. 107 Section XI Financial Statements ..................................................................................... 108 Section XII Reference ...................................................................................................... 239
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report Section I Glossary
I. Glossary
||||
|-|-|-|
|CSRC|refers to|China Securities Regulatory Commission|
|SSE|refers to|Shanghai Stock Exchange|
|Wellhope,|||
|Liaoning|||
||refers to|Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd.|
|Wellhope,|||
|the Company|||
|Reporting|||
||refers to|January 1st, 2018-December 31st, 2018|
|Period|||
|||De Heus Mauritius Ltd., established in Port Louis, Mauritius,|
|De Heus|refers to||
|||one of the shareholders of Wellhope|
|||Koninklijke De Heus B.V., the parent company of De Heus|
|Royal De Heus|refers to||
|||Mauritius Ltd., the biggest feed company in the Netherlands|
|||Shenyang Wellhope Heli Investment Ltd., one of the|
|Heli Investment|refers to||
|||shareholders of Wellhope|
|Company||The Constitution of Liaoning Wellhope Agri-Tech Joint Stock|
||refers to||
|Constitution||Co., Ltd.|
|Shareholders'||The Shareholders' Meeting of Liaoning Wellhope Agri-Tech|
||refers to||
|Meeting||Joint Stock Co., Ltd.|
|Board of||The Board of Directors of Liaoning Wellhope Agri-Tech Joint|
||refers to||
|Directors||Stock Co., Ltd.|
|Supervisory||The Supervisory Board of Liaoning Wellhope Agri-Tech Joint|
||refers to||
|Board||Stock Co., Ltd.|
|Corporate Law|refers to|The Corporate Law of the People's Republic of China|
|Securities Law|refers to|The Securities Law of the People's Republic of China|
|||Also known as additive premix, it is a well-proportioned|
|||mixture prepared by two or more than two kinds of feed|
|Premix|refers to|additives and carrier or diluents according to appropriate|
|||proportion. It is a general name for compound premix,|
|||microelement premix and vitamin premix.|
|||It is a well-proportioned mixture consisted of protein feed,|
|Concentrate||mineral feed and feed additives according to appropriate|
||refers to||
|Feed||proportion, it can be made into compound feed by mixing|
|||with energy feed in a specified proportion.|
|||Based on the nutritional needs of animals, more feed raw|
|Compound||materials and feed additives are industrially processed|
||refers to||
|Feed||according to feed formula, it can be directly used for feeding|
|||animals.|

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report Section II Company Profile and Key Financial Information
I. Company Information
||||
|-|-|-|
||Company Name(English)|Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd.|
||Abbreviation(English)|Wellhope|
|Company Name(Chinese)||辽宁禾丰牧业股份有限公司|
|Abbreviation(Chinese)||禾丰牧业|
||Legal Representative|Jin Weidong|

II. Contact Person
||||
|-|-|-|
||Secretary of the Board|Representative of Securities Affairs|
|Name|Zhao Xin|Yang Guolai|
||No. 169, Huishan Street, Shenbei|No. 169, Huishan Street, Shenbei|
|Address|New District, Shenyang, Liaoning,|New District, Shenyang, Liaoning,|
||P. R. of China|P. R. of China|
|Tel|024-88082015|024-88080789|
|Fax|024-88082333|024-88082333|
|Email|hfmy@wellhope.co|hfmy@wellhope.co|

III. Basic Information of the Company
|||
|-|-|
||No. 169, Huishan Street, Shenbei New District,|
|Registered Address||
||Shenyang, Liaoning, P. R. of China|
|Postal Code|110164|
||No. 169, Huishan Street, Shenbei New District,|
|Office Address||
||Shenyang, Liaoning, P. R. of China|
|Postal Code|110164|
|Company Website|www.wellhope-ag.com|
|Email|hfmy@wellhope.co|

IV. Place where the Annual Report is prepared
|||
|-|-|
|Media Designated by the Company for|China Securities Journal,Shanghai Securities|
|Disclosing Information|News ,Securities Times|
|Website Designated by the CSRC for||
||www.sse.com.cn|
|Publishing the Annual Report||
|Place where the Company prepares its||
||Securities Department of the Company|
|Annual Report||

V. Stock Information
|||||||
|-|-|-|-|-|-|
|Stock Information||||||
|||Stock Exchange for|Stock Abbreviation|||
||Stock Type|||Stock Abbreviation|Stock Code|
|||Listing||||
|||Shanghai Stock|Wellhope(禾丰牧业)|||
|A Share||||Wellhope(禾丰牧业)|603609|
|||Exchange||||

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report VI. Other Information
||||||
|-|-|-|-|-|
|||Name|J|iangsu SuyaJincheng CPA LLP|
||Office AddressZ|||21st-23rd F, Central International Plaza, No.105-6 North|
|Accounting Firm ( Local)||||hongshan Road, Nanjing, Jiangsu Province, China|
|||Name of|Z||
|||||hou Jiawen, Wang Jin|
|||Signatory CPA|||

VII. Key Accounting Data and Financial Performance Indicators in the Latest Three Years 1. Key Accounting Data
Unit: yuan Currency: RMB
||||||
|-|-|-|-|-|
||||Year-on-Year||
|Item|2018|2017||2016|
||||Change %||
|Operating revenue|15,750,798,120.67|13,695,843,458.67|15.00|11,870,578,122.31|
|Net profit attributable to|||||
|the shareholders of the|551,928,618.35|471,024,473.92|17.18|426,978,443.55|
|Company|||||
|Net profit attributable to|||||
|the shareholders of the|||||
|Company deducting|542,459,604.74|389,607,877.28|39.23|399,573,783.81|
|non-recurring gains and|||||
|losses|||||
|Net cash flow from|||||
||501,404,915.59|611,390,370.75|-17.99|204,935,490.07|
|operating activities|||||
||As at theend of 2018|As at theend of 2017|Year-on-Year|As at the|
||||Change %|end of 2016|
|Net assets attributable to|||||
|the shareholders of the|3,851,915,758.64|3,390,304,242.88|13.62|3,006,170,941.93|
|Company|||||
|Total assets|6,930,694,562.43|5,985,861,995.54|15.78|5,169,472,910.89|

 2. Key Financial Performance Indicators
||||||||||
|-|-|-|-|-|-|-|-|-|
|||||||Year-on-Year|||
|Item||||2018|2017|||2016|
|||||||Change %|||
|Basic earnings per share (yuan per share)||||0.66|0.57|15.79||0.51|
|Diluted earnings per share (yuan per share)||||0.66|0.57|15.79||0.51|
|Basic earnings per share deducting|||||||||
|||||0.65|0.47|38.30||0.48|
|non-recurring gains and losses|||||||||
|||||||Increased 0.58|||
|Weighted average|return on equity||(%)|15.30|14.72|||15.10|
||||||||percentage points||
|Weighted average r||eturn on equity|deducting|||Increased 2.87|||
|||||15.04|12.17|||14.13|
|non-recurring gains and losses|||||||percentage points||

VIII. Key Financial Figures by Quarters in 2018
Unit: yuan Currency: RMB
||||||
|-|-|-|-|-|
|Item|Q1|Q2|Q3|Q4|
|Operating revenue|3,129,332,297.72|3,720,883,404.77|4,628,867,760.81|4,271,714,657.37|
|Net profit attributable to|||||
|the shareholders of the|91,763,985.23|72,595,125.48|240,912,462.24|146,657,045.40|
|Company|||||

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report
||||||
|-|-|-|-|-|
|Net profit attributable to|||||
|the shareholders of the|||||
|Company deducting|88,331,450.07|69,215,522.62|240,718,433.43|144,194,198.62|
|non-recurring gains and|||||
|losses|||||
|Net cash flow from|||||
||-144,835,288.11|435,094,312.29|-11,963,321.16|223,109,212.57|
|operating activities|||||

IX. Non-Recurring Gains and Losses
Unit: yuan Currency: RMB
||||||
|-|-|-|-|-|
|Item||2018|2017|2016|
|Gains or losses on disposal of non-current|||||
|||-3,713,387.32|60,743,353.24|16,686,943.30|
|assets|||||
|Government grants charged to current gains|||||
|or losses (excl. the government grants that|||||
|are closely related to the Company's ordinary|||||
|||19,471,241.10|34,132,205.99|25,071,552.60|
|course of business and gained constantly at|||||
|fixed quotas or amounts as per certain|||||
|standards based on the state polices)|||||
|Gains or losses on debt restructuring||-1,147,367.47|||
|Gain or loss on fair value changes in trading|||||
|financial assets and liabilities, and investment|||||
|income from disposal of trading financial|||||
|assets and liabilities as well as||2,821,414.45|-181,164.67|-5,945,010.13|
|available-for-sale financial assets (excl. the|||||
|effective portion of hedges that arise in the|||||
|Company's ordinary course of business)|||||
|Non-operating income and expense other|||||
|||-3,208,527.84|-1,240,061.60|-1,351,740.60|
|than those described above|||||
|Non-controlling interests effects||-590,792.81|-4,164,352.40|-2,681,266.97|
|Income tax|effects|-4,163,566.50|-7,873,383.92|-4,375,818.46|
|Total||9,469,013.61|81,416,596.64|27,404,659.74|

 X. Item Measured at Fair Value
Unit: yuan Currency: RMB
||||||
|-|-|-|-|-|
|||||Effects on Current|
|Item|Opening Balance|Closing Balance|Change||
|||||Profit|
|Derivative financial|||||
||971,380.80|2,042,527.60|1,071,146.80|-369,580.00|
|assets|||||
|Total|971,380.80|2,042,527.60|1,071,146.80|-369,580.00|

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report Section III Business Overview
I. Principal Business, Operation Model and Current Situation of the Industry in the Reporting Period
1. Principal business and operation model
Principal business of Wellhope(hereinafter referred to as "the Company") primarily consists of feed production and sale, feed raw materials trade, integrated broiler business, pig raising business and related business. All the operating segments run under the overall strategy, and carry out operation activities in their respective business areas in an orderly manner.
A. Feed and feed raw materials trade
The Company manufactures and sells animal feed for swine, poultry, ruminant, aquatic and fur-farmed animals, which are categorized into premix, concentrate and compound feed. Driven by the principle of “constantly working on new products, never following the beaten path”, it always designs tailor-made products for animals in different growth stages. Since 2006, the Company has entered a strategic cooperation with Royal De Heus, a Dutch company also a global player in animal nutrition, which is active in over 75 countries. Supported by De Heus' worldwide resources, advanced know-how and centurial business practices, whilst relying on self-owned data-based nutrition evaluation system that derives from years of researches on nutrition and raw materials, the Company is committed to supplying feed products centered on the needs of local markets and customers, to offering farmers integrated services in terms of animal raising, disease prevention and control as well as operation management, helping them to achieve the best economic benefits. The subsidiary trade companies mainly trade in feed raw materials in terms of fish meal, soybean meal and co-products of corn, also engage in feed additives including amino acid, antioxidant, mold inhibitors and vitamin. In addition, the trade companies are the sales agents of animal health products such as vaccines and veterinary medicine produced by global strategic suppliers.
Based on tremendous strength in technology, research and development (hereinafter referred to as"R&D"), seasoned talents and brand influence, the Company has created an
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report operation model of integrating science and technology, manufacture and trade for feed and feed raw materials trade businesses, serving customers and local markets through resources sharing, synergetic development and combined action. At present, the Company's feed products cover the markets in 29 provinces and regions across China, it has also built feed plants in Nepal, Indonesia and the Philippines, etc. Meanwhile, its trade business distributes in Northeast China, Northern China, Eastern China, Southwest China, Guangdong Province and other regions, feed products and raw materials have also been exported to Nepal, Mongolia and other countries.
B. Integrated broiler business
The Company's broiler integrated chain covers more than 30 holding and associated companies, which are mainly located in the provinces of Liaoning, Hebei, Henan, Jilin and Shandong, etc. It has established three business units in terms of broiler raising, raw meat processing and further processing, which contains breeding, hatching, feed producing, commercial broiler raising, slaughtering and processing of raw meat, further processing of prepared and cooked food. The integrated operation can effectively ensure the production and supply of all operating segments, and facilitate the Company to control food safety across the entire chain. Meanwhile, through standardized management and streamline operation, the Company consolidates the controls of bio-safety, drug residue and in-process hygiene to achieve traceable food safety.
 Broiler raising unit: This unit covers breeder raising, day old chick hatching and commercial broiler rearing. The Company formulates scientific and reasonable feeding programs, light programs and disease prevention system to provide qualified eggs for the hatching farms; meanwhile, it has established thorough management system in the
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report hatching process, introduced intelligent facilities that are available for hatching in batches, also equipped high-efficient and energy-saving hatcher and environment control system for supplying healthy day old chicks. Entering commercial broiler sector, the Company mainly raises broiler by self-owned farms and contract(out-sourcing) farms under the pattern of unifying nine aspects, including unified site selection and planning, unified construction standards, unified day old chicks supply, unified disease prevention, unified feed supply, unified medicine supply, unified technological guidance, unified testing and unified slaughtering and processing. Guided by scientific raising standards, all the farms apply three tiers cage system, and automate all the processes from feed intake, water temperature to moisture control, etc., meanwhile, the farms combine crop planting with animal raising to reduce manure pollution and to promote resource recycling. The delivery body weight of commercial broiler can reach over 2.8 kg, and the European production index (shortened as EPI in the following parts) can realize 380, which receive wide recognition from the cooperative farms.
Raw meat processing unit: The Company has 15 holding and associated slaughtering entities, which are equipped with state-of-the-art production lines with an annual slaughtering capacity of 550 million broilers. Driven by all-in and all-out inspection and quarantine, every single entity has established a total quality guarantee system and traceability system to monitor all the processes. Meanwhile, the Company constantly strengthens and improves slaughtering and processing techniques by ways of systematic pre-job training and skill promotion training as well as conducting "6S" management (i.e., Seiri, Seiton, Seiketsu, Shitsuke, Standard, Safety), making the killing-out percentage stand out among the companies with similar scale. The Company mainly supplies fresh and cold-storage broiler parts products, which are sold to meat processing companies, supermarkets and chain fast-food stores, major clients include Shineway Group, Jinluo Group, Yurun Group, RT-MART, McDonalds, KFC, Yoshinoya, Wallace, Dili Fresh Food, catering companies and other local fresh food markets, etc., as well as sold to other regions such as Hong Kong, Macao, and countries in terms of Mongolia and Bahrain.
Further processing unit: The Company uses high-quality chicken supplied by self-owned slaughtering entities as raw materials, at present it supplies over 100 kinds of products, which are sold to supermarkets and cooked food shops. Under the backdrop of continuous
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report expansion of consumer demand, the Company expands its exporting business of cooked food to the markets of Japan and Korea.
C. Pig raising business
The Company has entered pig raising business by self-built farms and co-invested farms that are primarily located in the provinces of Liaoning, Henan, Hebei, Heilongjiang and Anhui. In 2019, the first stage of 500,000 heads' pig project located in Fushun city of Liaoning Province was completed and came into operation in April, and the project in Gongzhuling city of Jilin Province will be finished at the end of 2019 and come into service. The Company raises breeder by self-owned farms, and rears finisher by self-owned farms together with contract(out-sourcing) family farms, following the pattern of "unifying five aspects" in terms of unified pig house standard, unified piglet supply, unified feed supply, unified feeding management and unified repurchase of commercial piglet. Among the Company's pig projects, Lingyuan breeder farm is a designated trial farm of the national pig industry system, and the pig project located in Henan Province, raises sows by its own farms, also buys piglets for contract farms, which provides effective supports for pig feed business of regional companies.
In compliance with the principle of moderate scale for every single farm along with the site planning of multi-point layout, the Company strictly controls bio-safety and adheres to the concept of environmental-friendly animal husbandry to protect environment by disposing manure in the natural method. Fushun pig project, operated in 2019, was jointly designed by famous pig raising experts and Architectural Design and Research Institute of Tsinghua University CO. LTD., setting its sights on becoming a first-rate modern pig breeding farm. Relying on high-level technique and first-class facilities, specially designed bio-safety program as well as introducing high-quality Landrace and Yorkshire to ensure the gene of grandparent stock, it is committed to supplying pure parent stock with clear family tree and providing better commercial piglet and finisher. Meanwhile, the Company helps farmers in surrounding areas to increase their incomes by offering them contracts to fatten pig, contributing to the economy development of local rural areas, whilst basing on scientific environmental protection technology, the farms combine crop planting with animal husbandry to achieve eco-friendly and recyclable agriculture.
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report D. Related business
Related business is a beneficial supplement for the whole chain of animal husbandry, mainly produces and sells animal medicine and smart livestock and poultry rearing facilities. Related products have been sold to Canada, Nepal, Indonesia, Thailand, the Philippines, Ethiopia, Mongolia, etc., and maintained stable markets in Nepal, Indonesia, Ethiopia, Mongolia, etc.
2. Development stage and cyclical characteristics of relevant industries
A. Feed industry
China's feed industry dates back to the 1970s and has undergone over 40 years of development, at present it has formed a relatively complete industrial system supported by feed manufacturing industry, raw material industry, feed additives industry, feed machinery industry, feed scientific research and education, quality and safety testing and supervision system. Feed industry in China has developed in a fast momentum along with the expansion of poultry and aquaculture industry, looking back in 1992, China became the world's second largest feed producer, and rose to the top in 2011, thereafter its feed production broke through 200 million tonnes in 2015, and entering 2018,China’s feed production took up about17% of the world's (data source: Alltech 2019 Global Feed Report), ranking the first in global feed production for eight consecutive years.
The rapid development of feed industry has led to constant expanding of feed capacity and increasing market competition, making small and medium-size feed producers that are lack of advanced technology and professional management have been gradually weeded out of the market. Whilst on the contrast, benefiting from industry consolidation and the advantage of scale, large companies have continually expanded their capacity by mergers and building new plants, which have further improved the consolidation of feed industry, and gradually steered this industry to large-scale and intensive operation. Since 2008, China's feed industry has witnessed a downward trend in the number of feed producers, and according to the
“13th
Five-Year Plan”, the number of feed producers in 2020 will be reduced to over 3000, while the companies with 1 million tonnes' capacity will be risen to 60, which will contribute towards60% of the nation's feed capacity, indicating that the consolidation of feed industry will be further improved.
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report From a long-term perspective, feed industry, as the upstream of animal raising, does not show obvious cyclical characteristics. However, the fluctuations in the inventories of animal raising industry will affect the demand of feed products to some extent, thus, different categories of animal feed have different cyclical characteristics respectively. B. White feather broiler industry
a. Cyclical characteristics of the industry
White feather broiler raising is a typical industry with cyclical fluctuations. Supply and demand relationship and the market price follow certain characteristics in the cyclical change.
In a short-term view, changes in white feather broiler price within a year mainly show seasonal fluctuations. Chinese New Year, National Day and Mid-Autumn Festival, are peak seasons of chicken consumption, the market price mainly starts to rise in fluctuation during those periods, reaches to the peak in the festival days, then slumps and falls to the bottom about two months later. Moreover, the price of commercial day old chick fluctuates with the price of broiler, which further imposes influence on the price of parent stock.
In a mid-and-long term view, the constraints in terms of broiler's production cycle, unreasonable decision caused by the "Herd Effect", capital strength and construction period can lead to the adjustment of broiler supply lagging behind--when broiler price fluctuates, the supply side often adjusts restocking for next production cycle according to current market price and profit margin, which results in a conversion of supply and demand in next cycle, and the market price flows to the reverse direction, moves in cycles, forming a "Cobweb model".
b. Development stage of the industry
China started to introduce white feather broiler in 1986, since then this industry has experienced over 30 years' development, and now China has become one of the world's key producers of white feather broiler. During the past three decades, this industry has undergone three phases, including blooming supply and demand, industry's woes and strong recovery.
Broiler products were mostly exported abroad at the very beginning, but along with the
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report spring up of fast-food driven by the leading stores like KFC and McDonalds, China's fast-food industry has replaced export to be the biggest demand side. During three decades prior to 2012, the supply and demand sides in China's broiler industry expanded simultaneously, presenting prosperities in both supply and demand. However, after 2013, this industry fell into a sluggish period in the following five years due to the oversupply caused by introducing a large number of grandparent stock and the panic of consumption affected by bird-flu. Coming to 2015 till 2018, the introduction of grandparent stock kept at a low level, the statistics of China Animal Husbandry Association indicated that, China introduced 1.5416 million sets grandparent stock in 2013, but in 2018 only 750,000 sets, less than50% of that in 2013. As the source of supply of white feather broilers, the level and duration of deficiency of grandparent stock decides where the broiler cycle can turn up to. Entering 2018, the influence of shortage of grandparent stock had transferred to the terminal market, the shrinking supply led to a quick growth of broiler price. At the same time, this industry was witnessing a strong recovery supported by the alternative consumption that triggered by African swine fever and some positive factors such as the revival of fast-food industry, etc.
China's white feather broiler industry has entered the "fast lane" with a brighter future. Firstly, regarding raising efficiency, the gene of white feather broiler decides that it grows fast with a short production cycle. Besides genetic advantage, standardized and modernized raising system also greatly improves the efficiency. Secondly, regarding production cost, feed conversion ratio of white feather broiler is much lower than that of pig or cattle, and chicken is the cheapest source of protein. Low cost decides low price, thus further ensures strong consumer demand. At last, regarding nutritional value, white feather broiler wins the favor of consumers around the world due to its nutritional advantage of high protein, low fat and cholesterol. The study results of OECD (Organization for Economic Cooperation and Development) and FAO (Food and Agriculture Organization) note that, chicken is now playing an important role as the first supplier of meat protein, accounting for28.15% of the world's meat consumption. In 2017, average American person consumed 41.7kg of chicken per year, 18kg in EU, but in China, only consumed 10.3kg per year, showing a gap comparing with the world's average level (11.7kg), so a great potential can be seen in China's white feather broiler industry.
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report To conclude, in the view of the cyclical character of broiler industry, the shrinkage of supply and the expansion of demand can lead to prosperity in this industry. Now a strong historic cycle has been coming, this industry will show a largely upper rise in the future along with continuous displaying of the advantages of white feather broiler and the releasing of development potential.
C. Pig industry
a. Cyclical characteristics of the industry
Similar to white feather broiler industry, the fluctuations of pig raising industry also fit for the "cobweb model", which present a strong characteristic of cyclical fluctuations of supply and price.
One pig production cycle includes gilt rearing, gestation, farrowing, growing and fattening, which will take about 18 months. During this period, the supply of pig cannot be adjusted promptly according to market circumstances, the increase or decrease of supply is often lagging behind. When some market factors change, the balance of supply and demand in pig market will be broken and the market price will change. Pig farms/farmers always adjust restocking according to current price and profit margin. However, because of the long production cycle, effects of supply adjustment can be presented in the next production cycle. Moreover, restrictions of unreasonable judgment, construction period and capital strength can further intensify the lag-behind in pig supply adjustment, which make the reversal of supply-demand and market price take place in the next production cycle. Constantly reversed changes in supply-demand relationship and market price form cyclical fluctuations, and the "cobweb model" can explain the mechanism of the fluctuations in a more realistic way.
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report b. Development stage of the industry
Influenced by consumers' diet habits, historic culture and feeding conditions of pig, meat consumption in China has been dominated by pork for a long time. Up to now, China is still the world's largest pork producer.
Before implementing the policy of reform and opening-up, food rationing was conducted, there was a large shortage in the supply of pig in China, and such circumstance was finally alleviated after carrying out this policy along with the upward economy. In 1985, China opened the field of pig purchasing and selling, and driven by the "Shopping Basket Program", pig raising industry developed quickly within the following two decades. According to the data from National Bureau of Statistics, China's pork production from 1985 to 2006 soared to 46.5034 million tonnes from 16.5480 million tonnes, which basically satisfied the demand of pork, and after 2007, the supply of pig continued to increase, and pork was no longer in short supply. Affected by many factors, the supply and demand relationship of pig and market price started to present cyclical fluctuations in accordance with the "cobweb model".
However, the defects of traditionally extensive pig raising started to be shown despite the quick development, including low production efficiency, high feeding cost, unstable earnings and pressures on food safety and environment, all of these had become rigid restrictions for the continued development of the industry. Meanwhile, the incident of floating pigs in Huangpu River in March 2013 pushed this industry into controversy, making the structural adjustment, industrial transformation and upgrading become extremely urgent. Under the backdrop of decreasing agricultural land, increasing labor cost and stricter policy restrictions, the intensive production and standardized raising had become the mainstream.
In 2018, the adjustment of pig raising industry had achieved initial success, it had entered a right track of “saving resource” and “standardizing environmental protection”. However, the sudden outbreak of African swine fever (referred to as ASF below) added new changes. ASF broke out in August 2018 and spread over 20 regions in half a year, which undoubtedly further put downward pressure on the decline stage of pig cycle and disrupted the stable pig industry.
On one hand, ASF speeded up the decline in pig supply, making the pig cycle bottom out in
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report advance, meanwhile, culling a large number of pigs overturned the balance of supply and demand again, resulting in an upcoming shortage in pork, there would be a strong rebound in pork price. It can be predicted that before the intervention of government, the pork price will soar in a future time and the pig price will hit a new historical height.
On the other hand, the government has issued relevant policies in response to ASF, such as imposed restrictions on long-distance distribution and transportation of pig and related products. Thereby, the original consolidated market has been fragmented into regional markets, whilst slaughtering and processing as well as transportation system will also face bold changes.
Overall, ASF has brought great impacts on pig raising industry, but whatcan’t be denied is that it will also bring historic opportunities, i.e., the rising pork price can benefit those companies that have already entered pig raising business, especially those extra large players that have newly completed projects and targeted preventing and controlling measures against ASF will be the biggest winners. At the same time, circulating with cold-chain will also face new opportunities, and it is ripe for pig raising players stepping into slaughtering and processing businesses. A new era that integrates pig raising with slaughtering and processing will be coming.
II. Core Competitiveness Analysis within the Reporting Period
Core competitiveness of the Company lies in a highly educated, experienced, loyal and stable management team, rationally planned and steady-development based corporate strategy, increasingly matured and competitive integrated operation model, systematic, scientific and continuously innovative technology system, development-oriented and strongly rooted corporate culture.
1. Highly educated, experienced, loyal and stable management team
The highly educated senior managers of the Company have professional background of over 20-year's experiences in feed and animal husbandry industries as well as business management. They are pioneers and developers of the Company, who are committed to insisting entrepreneurship, acquiring new knowledge and keeping pace with the era over the years. The seven founders of the Company always hold together and fight together, they are praised as "seven noble partners” in the industry, the high solidarity of the
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report start-up shareholders has become the Company's most significant core competitiveness, whilst “Unity is Power” is also one part of the core culture. Almost all the middle and senior managers are internally selected and cultivated by the Company, they have deep understanding and recognition of the corporate culture and operation model, they have strong sense of ownership, full sense of mission and responsibility, devoting themselves to the sustainable development of the Company. Within over 20 years, the management team has maintained high stability, almost no chief director or above level manager leaves the Company, in regard of over 100 general managers, besides those who are adjusted due to substandard performance, also few of them quit the job. Meanwhile, newly promoted members born in the 1980s and 1990s are selected from key talents' cultivation programs, such as “Seedling Plan” and “Sunflower Program”, they love the Company, highly recognize the corporate culture, become the backbone force of the management team. As a reward, the Company offers core members equity incentive policies in different ways, moreover, it also pays high attention to continuous learning and ability improvement of these managers, provides them with different training programs, including Executive Development Program, Leadership Training Camp, etc., which are conducted strict training and appraisal rules. Whilst it also organizes those managers to study from some leading companies at home and abroad to broaden their horizons and make further progress. The main reason that causes the failure of some domestic companies is attributable to “unstable and disunited management team”, in contrast, the highly educated, loyal and stable management team is one of the core competitiveness of Wellhope, making the Company having faith in future and moving forward.
2. Rationally planned and steady-development based corporate strategy
Based on comprehensive understanding of domestic and overseas political, economic and industrial trends, the Company always pays attention to its sustainable development and risk control, and focuses on its operation quality and the investment return of new projects. Driven by a stable and conscientious investment attitude, the Company always rationalizes its business distribution, develops step by step instead of investing and expanding businesses recklessly, always maintains the rationality and safety of industrial structures and avoids all kinds of risks regarding business operation.
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report Rationally planned and steady-development-based corporate strategy reflects in the following aspects:
The Company has primarily formed an industrial chain with high competitiveness and capability of risk prevention and control in the fields of raw material trade, feed manufacturing and selling, animal raising, slaughtering and further processing, which can improve its competitiveness, enable all business divisions to connect closely, reduce the cost of intermediate links, improve profit margin and greatly mitigate the risks of single operation.
Instead of rapidly covering nationwide markets supported by the success of feed business in Northeast regions and integrated broiler business, the Company, with rich experiences in market expanding, insists on exploring new markets basing on overall analysis and investigations, step by step entering the markets in Northeast, Northern China, Henan, Shandong and other areas. It moves forward steadily and purses asset-light operation, always focuses on overall operation quality and returns on investment, following the principle of “making existing businesses stronger, accumulating business practices, laying a solid foundation, seeking for the dominate position gradually”.
The sales volume and growth rate of all feed categories in terms of pig, poultry, ruminant and aquatic products are relatively balanced and each has its advantages. While constantly promoting integrated broiler business, the Company has entered pig raising business, and plans to take 5 to 8 years to craft an operation model driven by two complementary engines in terms of integrated broiler and integrated pig businesses. Such business layout, with high risk resistance, will not lead the Company to a rather high fluctuation due to a big blow or a downturn suffered by one of the business.
In 2018, the Company conducted "SWOT” analysis regarding itself on a scientific and prudent basis, finally confirmed its development goals for recent three years and next ten years, and formed a development strategy from 2019 to 2021, i.e.: "To steadily improve existing core businesses, to vigorously develop emerging strategic businesses and actively cultivate potential businesses. In the following three years, to further echelon the talents team, to unremittingly innovate technology and marketing pattern, information resources, investment and financing platform, to deeply expand international business centered on Southeast Asia, forming an operation model with "leading-edge quality and efficiency"
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report that can create synergies and reduce costs among all business divisions and provide customers and related parties (shareholders, employees, suppliers, society) products and services with brand influence, to become an enterprise with leading-edge quality and efficiency across agriculture, animal husbandry and food industries as well as a supplier of relevant services". The Company will proactively carry out all the work under overall strategies with unity and cohesion, so as to achieve the goals.
3. Increasingly matured and competitive integrated operation model
Animal husbandry industry and feed industry are experiencing big transformations and changes, feed producers gradually withdraw the leadership in the industrial chain, whilst farms and large-scale integrated groups will take the dominated position in the future. On one hand, following the trends of markets and changes of customers, the Company has implemented significant measures to improve its feed market share and overall profitability, including constantly developing new products, adjusting marketing strategy and consolidating administrative departments. On the other hand, as early as 10 years ago, the Company had planned to move into integrated broiler business, nowadays this business has developed from small to large scale, from joint venture to individual sole proprietorship, from fragmented parts to closely connected integration, which make the Company have explored a relatively matured and competitive integrated operation model. Relatively complete integrated chain: The Company is responsible for breeding, feedR&D as well as production, providing instructions of environment and small climate in the house, and monitoring all the processes relating to broiler raising. Meanwhile, the Company repurchases commercial broilers for its slaughterhouses and processes raw meat, prepared and cooked food, making all the processes of the integrated chain controllable. Modern model of self-owned farms together with large contract farms: The Company has changed its broiler raising model from “self-owned farms and family farms” to “self-owned farms together with large contact farms”, wining the priority by strategic layouts and judgments of the industry. Relying on the strength ofR&D, the Company's feed conversion ratio ranks at the first class in the industry, whilst benefiting from high standard of farm building and application of three tiers cage system, the design of ventilation and environment control also reaches higher level, hence, the Company has realized efficiency and cost leadership supported by high-standard raising and fine management conducted
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report in the slaughtering process.
Fine management conducted in the integrated chain: Driven by the principle of saving energy, reducing emission, protecting environment and providing healthy products, the Company has established stringent production access standards for the integrated chain. And now, it is forging a data sharing and collaboration platform for green manufacturing of white feather broiler chain, aiming at consolidating logistics, information flow and capital flow. Meanwhile, the Company is committed to promoting the fine management in the integrated chain, also conducting strict benchmarking management and tracing feedback by monthly meeting, field inspection and big data sharing. Ten years' dedicated researches and consecutive improvements enable the Company to achieve significant progress in the operation efficiency and cost control regarding broiler raising, feed production and slaughtering, etc., thus the competitive integrated operation model has become one of the core competitiveness of the Company. By summarizing and extracting the practices related to the chain, standards can be formed and will be easy to be copied and promoted elsewhere.
Integrated operation shows a new development direction for enterprises in agriculture and animal husbandry industry, at present many of them are searching their own experiences in this field. Wellhope has operated broiler integration for ten years, rich operation practices and the management team composed of dedicated experts serves as the core competitiveness of integrated broiler business.
4. Systematic, scientific and continuously innovativeR&D system
As a technology and innovation driven corporation, the Company strictly follows its mission described as "Using advanced technology, excellent service, and outstanding products to promote the development ofChina’s animal husbandry industry, save resources, protect the environment, provide food security and benefit the society", itsR&D team, driven by market-oriented and customer-oriented principles and the goals of “safe product, stable quality, tailor-made nutrition and powering business performance”, has always been dedicated to constantly innovating know-how and working on new products.
The Company'sR&D system applies vertical management in regard of nutritionist, product manager, formulator, field technician, quality controller, laboratory technician and other
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report related positions. Guiding by over 100 highly educated and seasoned experts, it has created a management system ofR&D and results' application, which starts from studying on demands of customers, trends of industry, to research and development of products, analysis of production demands, to transformation of achievements. Regarding technology, the Company has received certain awards and recognitions from national and local level, such as National-Recognized Enterprise Technology Center, National and Local Joint Engineering Research Center for Researching and Developing New Biological Feed and Its Application, Wellhope Feed Engineering Technology Research Center of Liaoning Province, etc. Moreover, by combining DeHeus’ global resources, leading-edge technology and centurial business practices with theCompany’s more than 20 years of researches on nutrition and raw materials, it has built a precisely data-based nutrition evaluation system, and also constantly improved its product lines, innovated databases application and animal growth model to continuously maintain and strengthen its product competence. Among the progresses, the Company has made pioneering explorations and breakthroughs in feed technology regarding "safety and high quality", "tailor-made nutrition and high efficiency", "antibiotic-free and environmental protection”, etc.
Furthermore, the Company's well-equipped testing center is one of the national key laboratories certified by CNAS (China National Accreditation Service for Conformity Assessment). By virtue of up-to-date equipment and facilities, the testing center has been capable of detecting melamine and other banned additives very early, and at present its test results can be recognized by 41 countries and 55 authorities. The Company is dedicated to guaranteeing the quality of products from micro to macro, putting the concept of safe production into every step, and it has established self-owned raw material database and also shares data resources of the Dutch partner, striving to get lower cost price of raw materials and achieving best price quality ratio relying on raw material data which calculates energy dynamics by regression equation, and on precise formulation of nutrition in accordance with production performance and feed intake.
In 2018, in response to African swine fever, the Company rapidly developed new feed products with high immune nutrition and worked out effective solutions for disease prevention. In view of fast growing beef cattle and mutton sheep markets, the Company formulated rapid fattening program for beef cattle and total mixed ration program for
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report mutton sheep; it also improved and adjusted the crushing strength for broiler feed, the control of PDI and the coating technology for liquid raw materials. In the aspect of layer feed, it independently researched and developed biological fermentation technology further improved the efficiency of feed utilization. Whilst the launching of functional feed for strengthening the liver and intestinal tract of aquatic animals has significantly enhanced the immunity function of animals and lowered the incidence of diseases, which was favored by customers. Moreover, in 2018, the Company, as a representative of China's feed enterprises, participated in formulating two community standards (i.e. Standard of Compound Feed for Layer and Broiler, Standard of Compound Feed for Piglet and Finisher) organized by China Feed Industry Association, the product named "Mrs. Pig" was awarded as one of China's top ten classic sow feed brands. In regard of antibiotic alternatives, the Company has designed more than 40 combinations of formula, which laid a technical foundation for producing lower-antibiotic diet for piglets. Up to now, the Company has set up more than 70 scientific research projects, developed more than 10 kinds of new products and new technologies average per year, now it totally possesses 40 patents for invention, 2 prizes of national science and technology progress and nearly 20 awards at ministerial and provincial level. Just in 2018, the Company was authorized and submitted 17 patents for invention.
Based on continuous improvement of feed technology and raising programs, the Company has constantly improved its technology relating to integrated broiler business, the delivery body weight of broiler can reach over 2.8kg with a livability of95% and European production index of over 380. Those indexes which directly show slaughtering technology and management ability, such as per capita daily slaughtering numbers and killing-out percentage, have stepped to the first-class level in the industry.
5. Development-oriented and strongly rooted corporate culture
After years of development, the Company has created corporate values featured by leading its business development and being understood and recognized by all employees. In 2018, while conducting SWOT analysis during Performance Excellence Management project, the Company's corporate culture was put forward as the firstly important advantage by all staff. The core culture, represented by Wellhope Vision, which is mainly described as "Always putcustomers’ needs first and constantly work on new products, never follow the beaten path, always conduct business honestly, always aim to provide value to our society and to
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report maintain sustained growth through technology, innovation, and creative work”, and by Wellhope Mission, which is primarily described as "Save resources, protect the environment, provide food security and benefit the society", plays the role of driven principles for management and the source power for ensuring the Company's sustainable development. Whilst the subculture, originated from the core culture, is the specific concept and strategy which guides management and business operation, including Technology Strategy, i.e. --No Technology, No Success, only producing reasonable and high-quality product, Marketing Strategy, i.e. --The best way to expand our business is supporting our customers growing business, providing customers not only products, but also solutions to problems, Quality Principle, i.e.--Never use unqualified raw material, Never use non-standard equipment, Never allow substandard operation, Never produce unqualified products, Never ignore unsatisfied customers, Never tolerate imperfect service, HR Policy, i.e.--Providing a fair, just, and merit-based environment for rewarding employees, continuously searching for talents and creating development space for employees, always being dedicated toemployee’s professional growth and helping them build a blessed life, Code of Conduct for Managers, i.e.--Exercising strict self-discipline, acting with integrity& honest; separating personal and corporate business, sharing achievement, showing kindness to everyone. These cultures have been constantly improved, publicized and practiced over the years, also promoted by the managers via leading by example themselves, together they make the corporate culture root in employees' blood, which constantly guide the thoughts and show the desired behaviors for all staff. In the first half of 2018, along with deeper reforms and for adapting to the changes of internal and external business environments, the Company has further summarized and refined its corporate culture, confirmed the core values as “Integrity, Responsibility and Win-win” and the management culture as “Innovation, High-efficiency and Self-discipline”. Entering 2019, the Company will continually take different ways for enhancing its culture incorporating into daily practice, promote its corporate culture to play a greater role in pushing forward the Company's development.
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report Section IV Business Operations Analysis
I. Overview
In 2018, the government gave impetus on the ongoing deleveraging, the China-US trade friction caused fluctuations in the price of feed raw materials, and the widely spreading African swine fever led to depressed pig price, the Company faced up to the dynamic market and maintained sustained and steady development, the key financial figures realized stable growth.
1. Business highlight
During the reporting period, total operating revenue of the Company realized RMB 15.75 billion yuan, the net profit attributable to the shareholders of the Company reached RMB 552 million yuan, and the net profit attributable to the shareholders deducting non-recurring gains and losses reached RMB 542 million yuan, achieving a year-on-year growth rate of15.00%,17.18% and39.23% respectively. From 2013 to 2018, the operating revenue and net profit have continuously grown with the CAGR of13% and26%, the profitability enhanced further.
CAGR (13-18)13% CAGR (13-18)26%
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report 2. Driving factors of performance growth
Feed business and integrated broiler business are the two largest contributors towards the Company's overall business performance.
During 2018, white feather broiler market was prosperous, the Company pressed on at this good opportunity, its integrated broiler business division accelerated layout and further improved internal operations and profitability, realized a vigorous growth.
The Company's feed business division, another contributor, constantly pushed forward transformation and upgrading, adjusted the structures of customer, product portfolio and personnel for facing market waves, the sales revenue and sales volume realized the year-on-year growth rate of9.24% and6.83% respectively, ruminant feed of which contributed towards17.13%(prior year14.35%) of total sales volume with a growth rate of27.54%, aquatic feed and poultry feed recorded volume growth of12.44% and15.00% respectively.
In the whole year, the Company continued to deepen internal reforms and implemented certain measures to further activate the potential of staff team, including separating the sales departments and administrative departments, innovating marketing model, benchmarking, etc., meanwhile, the enhanced fine management promoted the Company's period cost ratio decreased from prior5.55% to current4.98%.
3. Business review
Feed and integrated broiler businesses, as the Company's core divisions, created a big part of the final profit in 2018. Feed business contributed to46.36% of total sales revenue with an income of RMB 7.299 billion yuan, integrated broiler business contributed towards29.64% with an income of RMB 4.666 billion yuan, raw materials trade and other businesses contributed to24.00% and the income amounted to RMB 3.778 billion yuan. During the reporting period, the income from investment reached RMB 286 million yuan and realized a growth rate of67.15%, which mainly derived from associated companies of integrated broiler business.
 Feed business
In the reporting period, the Company's holding and associated companies totally
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report manufactured 4.24 million tonnes feed with a year-on-year growth rate of10.82%, the companies included in the consolidated financial statements sold 2.35 million tonnes feed, increased by6.83%. Detailed information for feed presented in categories list as follows:
|||||||||||
|-|-|-|-|-|-|-|-|-|-|
||||2018||2017|||||
||||||||Year-on-Year||Contribution to|
||Item||Sales volume||Sales volume|||||
||||||||Change||total sales volume|
||||(10,000tonnes)||(10,000tonnes)|||||
|Pig feed||84.41||92.57||-8.81%||35.89%||
|Poultry feed||93.38||81.20||15.00%||39.70%||
|Ruminant feed||40.29||31.59||27.54%||17.13%||
|Aquatic feed||14.64||13.02||12.44%||6.22%||
|Other feed||2.49||1.80||38.33%||1.06%||
|Total||235.21||220.18||6.83%||100.00%||

 Explain: Total feed sales volume in the table belongs to the companies included in the consolidated financial statements.
The sales volume of pig feed declined at the first time since the Company going public, which was constrained by the declining demand of pig feed affected by African swine fever. After the outbreak of African swine fever, the Company immediately organized a work group fighting with the disease, researched on specific solutions to control disease and to mitigate bio-security risks, providing assistance for farmers. TheR&D center timely developed new products with high immune nutrition to improve pig immunity and high yield.
Meanwhile, the sales volume of ruminant and aquatic feed recorded new growth in 2018. Regarding dairy cattle feed, its sales volume increased by27.08% on a year-on-year base. In the market situation where many dairy farming companies lost money and the inventories of dairy cattle reduced in 2018, based on the technology of "305-day 10tons’ Milk Program", the Company implemented highly efficient feeding program and designed relevant products for dairy cattle, which were highly recognized by the customers. Regarding beef cattle feed, the sales volume increased by33.76%, supported by the feeding programs in terms of fattening technology and TMR diet (Total Mixed Rations) and specially designed products, and got positive response from the market. Regarding aquatic feed, its sales volume recorded a growth rate of12.44%, driven by constant researches and innovations in raising mode and feeding programs, such as the newly designed “1-2-3” management model for freshwater crayfish.
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report Integrated broiler business
Relying on years of business practices, the Company's integrated broiler business has realized a leap-forward development from obscurity to over 30 holding and associated companies, becoming one of the main white feather broiler suppliers in China.
The value chain of Wellhope broiler integration
Wellhope
The Company raises broiler mainly by cooperating with out-sourcing farms via contract. Relying on scientific nutrition program, proven feeding technology and systematic training service, the average body weight of delivery broilers can reach over 5.6 jin, and the average livability can realize over95%. In the reporting period, its holding and associated companies totally raised 310 million broilers with a year-on-year growth rate of12.73%. While improving internal operation, the Company also further automated its slaughterhouses to make further improvement on production efficiency and product quality. In the reporting period, its holding and associated companies totally slaughtered 455 million broilers with a year-on-year growth rate of16.07%, increased by200% compared with 2014, and totally produced 1.13 million tonnes of meat products with a growth rate of18.70%.
In 2018, the number of broilers raised by the Company's self-owned farms and contract farms contributed to68% of its total slaughtering numbers, its internal supply of broiler has been gradually approaching the demand of slaughtering, which has further enhanced the synergies among the whole chain.
 Feed raw materials trade business:
In 2018, the Company's raw materials trade business realized a steady-state growth in its sales revenue at 3.275 billion yuan, increased by11.60%, which was linked to the Company actively expanded new markets in the South and refined product portfolio and customer structure, also strengthened internal operation and IT application. However, the China-US
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report trade friction brought an adverse impact on soybean meal, resulting in a decline in the comprehensive gross margin of the raw materials trade business.
 Pig raising business
At present, the Company has stepped into pig raising business by self-building farms or partnering with practiced partners, its pig projects are mainly located in Liaoning, Jilin, Heilongjiang, Henan, Hebei and Anhui provinces, of which, the first-stage of the newly built pig project in Fushun city with a planning of providing 500,000 heads of pig has been operated in April 2019, and the project in Gongzhuling city will be launched by the end of 2019.
4. Other work
A. Launching management improvement project based on excellent performance mode The Company launched a management improvement project based on excellent performance mode in June 2018.
Performance excellence mode is an effective method and tool for an organization's comprehensive performance management, which is widely recognized internationally. Its core is to strengthen the organization's awareness of customer satisfaction and innovative activities, and pursue excellent business performance. The purpose for the Company introducing this project is to continuously create value for customers, employees and other relevant parties, improve its overall performance and promote a sustainable development. By conducting this project, the Company has redefined its mission, vision, core values and long-term goals, also formulated the strategic plans in the next three years, whilst further optimized organizational structure, functional responsibilities, revised KPI index system, all of these laid a good foundation for realizing the goals in 2019 and in the future.
B. Completing non-public offering new stock
The application materials of the Company's non-public offering new stock were accepted by the CSRC on May 3rd, 2018, and finally received the approval on October 29th, 2018 (No. 1742 CSRC Approval[2018]). Afterwards, the Company completed related work in April 2019, totally raised funds of 778 million yuan, which would be mainly invested in pig
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report raising and broiler business. Moreover, the Company will make further efforts to build a capital operation platform, accumulate experiences and expand financing channels. In the future, it will be not ruled out that utilizing the ways of convertible bond, corporate bond, acquisition and reorganization to support its long-term development.
C. Initiating restricted stock incentive program
The Company put forward the restricted stock incentive program in November 2018 which granted 372 key managers with 14.575 million restricted shares, by doing this, the interests of shareholders, the Company and the core team could be effectively connected, which would promote the sustainable development of the Company. Following people-oriented principle, it will promote more diversified incentive programs in the future, attract and retain talents to realize its goals rapidly.
D. Fully accelerating IT application
In 2018, the Company was comprehensively accelerating its IT application in group management and control, business collaboration, marketing management,R&D innovation, etc., building a mixed cloud-based system architecture on the basis of HUAWEI cloud serving. The Company has completed IT application schemes for related sectors of integrated broiler business, including breeder raising, day old chick hatching, feed production and commercial broiler raising, also for the supply chain to finance of raw materials trade business, forging a group controlled ERP system which integrates business and finance.
II. Operations Analysis
As at December 31st, 2018, the Company's total assets recorded RMB 6.93 billion yuan, the net assets attributable to the shareholders of the Company reached RMB 3.85 billion yuan, increased by15.78% and13.62% respectively compared with the end of prior year, meanwhile, its total operating revenue realized RMB 15.75 billion yuan, and the net profit attributable to the shareholders of the Company reached RMB 552 million yuan, recorded the growth rate of15.00% and17.18% respectively.
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report 1. Analysis of primary business
A. Analysis of changes of income and cash flow
Unit: yuan Currency: RMB
|||||
|-|-|-|-|
|Item|2018|2017|Change %|
|Operating revenue|15,750,798,120.67|13,695,843,458.67|15.00|
|Operating costs|14,421,297,677.40|12,521,474,992.06|15.17|
|Sales expenses|420,646,753.59|411,506,654.06|2.22|
|Administrative expenses|227,941,858.19|225,935,973.80|0.89|
|R&D expenses|61,100,349.28|61,953,095.44|-1.38|
|Financial expenses|74,900,937.42|60,854,400.51|23.08|
|Net cash flow from operating||||
||501,404,915.59|611,390,370.75|-17.99|
|activities||||
|Net cash flow from investing||||
||-509,731,536.62|-626,407,536.20|not applicable|
|activities||||
|Net cash flow from financing||||
||166,992,723.63|49,874,197.61|234.83|
|activities||||

B. Analysis of revenue and cost
During the reporting period, the Company achieved an operating revenue of RMB 15.75 billion yuan with a growth rate of15.00%, which was mainly driven by the increased sales revenue contributed by feed, broiler integration and raw materials trade businesses; the operating cost recorded RMB 14.42 billion yuan with a growth rate of15.17%, mainly due to the increase in sales volume and sales revenue
a. Primary business analyzed by industries, product classification and regions
Unit: yuan Currency: RMB
||||||||
|-|-|-|-|-|-|-|
|Analyzed by Industries|||||||
||||||YoY|YoY change|
||||Gross|YoY|||
||Operating||||change|of gross|
|Industry||Operating cost|profit|change of|||
||revenue||||of|profit|
||||margin %|revenue %|||
||||||cost %|margin %|
|||||||decreased|
|||||||0.77|
|Feed|7,298,588,998.60|6,421,709,202.87|12.01|9.24|10.20||
|||||||percentage|
|||||||points|
|||||||increased|
|Slaughtering|||||||
|||||||1.38|
|and|3,959,758,111.87|3,763,477,475.32|4.96|35.45|33.52||
|||||||percentage|
|Processing|||||||
|||||||points|
|||||||decreased|
|Raw|||||||
|||||||0.31|
|Materials|3,274,653,471.59|3,156,964,005.28|3.59|11.60|11.96||
|||||||percentage|
|Trade|||||||
|||||||points|
|||||||increased|
|Broiler and|||||||
|||||||4.99|
|Swine|824,110,257.04|734,652,491.45|10.86|-2.15|-7.34||
|||||||percentage|
|Raising|||||||
|||||||points|
|||||||decreased|
|Related||||||3.35|
||385,681,935.32|338,541,596.12|12.22|34.92|40.28||
|Businesses||||||percentage|
|||||||points|

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report
||||||||
|-|-|-|-|-|-|-|
|Analyzed by Product Categories|||||||
||||||YoY|YoY change|
||||Gross|YoY|||
||Operating||||change|of gross|
|Product||Operating cost|profit|change of|||
||revenue||||of|profit|
||||margin %|revenue %|||
||||||cost %|margin %|
|||||||decreased|
|||||||0.77|
|Feed|7,298,588,998.60|6,421,709,202.87|12.01|9.24|10.20||
|||||||percentage|
|||||||points|
|||||||increased|
|Slaughtering|||||||
|||||||1.38|
|and|3,959,758,111.87|3,763,477,475.32|4.96|35.45|33.52||
|||||||percentage|
|Processing|||||||
|||||||points|
|||||||decreased|
|Raw|||||||
|||||||0.31|
|Materials|3,274,653,471.59|3,156,964,005.28|3.59|11.60|11.96||
|||||||percentage|
|Trade|||||||
|||||||points|
|||||||increased|
|Broiler||||||4.99|
||824,110,257.04|734,652,491.45|10.86|-2.15|-7.34||
|Raising||||||percentage|
|||||||points|
|||||||decreased|
|Related||||||3.35|
||385,681,935.32|338,541,596.12|12.22|34.92|40.28||
|Businesses||||||percentage|
|||||||points|
|Analyzed by Regions|||||||
||||||YoY|YoY change|
||||Gross|YoY|||
||Operating||||change|of gross|
|Region||Operating cost|profit|change of|||
||revenue||||of|profit|
||||margin %|revenue %|||
||||||cost %|margin %|
|||||||decreased|
|||||||1.32|
|East China|1,760,092,653.81|1,629,974,853.65|7.39|8.58|10.15||
|||||||percentage|
|||||||points|
|||||||decreased|
|||||||2.66|
|North China|2,690,525,934.06|2,500,449,362.49|7.06|33.21|37.14||
|||||||percentage|
|||||||points|
|||||||increased|
|Northeast||||||0.94|
||7,982,004,866.87|7,228,357,359.98|9.44|11.83|10.68||
|China||||||percentage|
|||||||points|
|||||||increased|
|Central and||||||2.72|
||1,878,558,077.93|1,716,503,951.19|8.63|11.14|7.93||
|South China||||||percentage|
|||||||points|
|||||||decreased|
|Southwest||||||2.78|
||626,988,915.54|612,092,141.17|2.38|35.40|39.37||
|China||||||percentage|
|||||||points|
|||||||decreased|
|Northwest||||||1.59|
||571,510,540.26|495,449,511.69|13.31|6.78|8.78||
|China||||||percentage|
|||||||points|
|||||||decreased|
|||||||9.50|
|Oversea|233,111,785.95|232,517,590.87|0.25|16.54|28.81||
|||||||percentage|
|||||||points|

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report Notes:
--Analyzed by different industries and product classification:
During 2018, the prosperous white feather broiler market promoted the increased price of the Company's broiler product, and its broiler business layout and structure has been improved to be more rational, as well as the slaughtering business was enhanced further, realizing a revenue growth of35.45%. In the meantime, the Company pushed forward the transformation and upgrading of its feed business, further optimized product mix, driving the feed volume and revenue to increase by6.83% and9.24% respectively.
--Analyzed by geographical region:
During the reporting period, the Company's operating revenue in North China increased by33.21%, which was mainly supported by: the Company adjusted the sales market of chicken products, and pushed forward the layout in these areas, meanwhile, the operating revenue in southwest China increased by35.40%, which was mainly owning to: the Company started to sell soybean meal in southwest China; whilst the rate of gross margin in foreign countries decreased by 9.5 percentage points, primarily because the Company needed to confirm orders one month in advance, and the rate of gross margin of its exported chicken products sharply dropped due to the fluctuation of the price of chicken meat in the international market.
b. Analysis of sales volume
||||||||
|-|-|-|-|-|-|-|
||Production|Sales||YoY change|||
||||Inventory||YoY change|YoY change|
||volume|volume||of|||
|Product|||(10,000||of sales|of|
||(10,000|(10,000||production|||
||||tonnes)||volume %|inventory %|
||tonnes)|tonnes)||volume %|||
|Feed|234.89|235.21|3.32|6.59|6.83|-8.79|

 c. Analysis of cost
Unit: yuan Currency: RMB
|||||||||
|-|-|-|-|-|-|-|-|
||||||||YoY|
|||||% of||% of||
||||||||change|
|By Industry|Item||2018|total|2017|total||
||||||||of|
|||||costs||costs||
||||||||cost %|
|Feed|raw material||6,119,294,900.03|95.63|5,613,478,574.01|95.66|9.01|
|Feed|labor cost||71,606,347.71|1.12|60,647,231.68|1.03|18.07|
|Feed|depreciation||79,320,489.62|1.24|71,198,471.38|1.21|11.41|
|||energy||||||
|Feed|(electricity, coal,||63,975,504.94|1.00|56,039,982.04|0.95|14.16|
|||steam)||||||

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report
||||||||||
|-|-|-|-|-|-|-|-|-|
||other||||||||
||manufacturing||||||||
|Feed|expenses(excl.|||64,591,463.96|1.01|66,975,309.18|1.14|-3.56|
|||energy and|||||||
||depreciation)||||||||
||total production||||||||
|Feed||||6,398,788,706.26|100.00|5,868,339,568.29|100.00|9.04|
||cost||||||||
|Slaughtering|raw material|||3,617,303,605.51|92.42|2,540,116,008.71|90.22|42.41|
|Slaughtering|labor cost|||189,652,695.41|4.85|167,526,748.62|5.95|13.21|
|Slaughtering|depreciation|||19,934,651.59|0.51|15,177,387.11|0.54|31.34|
||||energy||||||
|Slaughtering|(electricity, coal,|||36,825,872.82|0.94|37,198,676.48|1.32|-1.00|
||||steam)||||||
||other||||||||
||manufacturing||||||||
|Slaughtering|expenses(excl.|||50,422,203.90|1.29|55,484,073.31|1.97|-9.12|
|||energy and|||||||
||depreciation)||||||||
||total production||||||||
|Slaughtering||||3,914,139,029.23|100.00|2,815,502,894.23|100.00|39.02|
||cost||||||||
|||||||||YoY|
||||||% of||% of||
|||||||||change|
|By Product|Item|||2018|total|2017|total||
|||||||||of|
||||||costs||costs||
|||||||||cost %|
|Feed|raw material|||6,119,294,900.03|95.63|5,613,478,574.01|95.66|9.01|
|Feed|labor cost|||71,606,347.71|1.12|60,647,231.68|1.03|18.07|
|Feed|depreciation|||79,320,489.62|1.24|71,198,471.38|1.21|11.41|
||||energy||||||
|Feed|(electricity, coal,|||63,975,504.94|1.00|56,039,982.04|0.95|14.16|
||||steam)||||||
||other||||||||
||manufacturing||||||||
|Feed|expenses(excl.|||64,591,463.96|1.01|66,975,309.18|1.14|-3.56|
|||energy and|||||||
||depreciation)||||||||
||total production||||||||
|Feed||||6,398,788,706.26|100.00|5,868,339,568.29|100.00|9.04|
||cost||||||||
|Slaughtering|raw material|||3,617,303,605.51|92.42|2,540,116,008.71|90.22|42.41|
|Slaughtering|labor cost|||189,652,695.41|4.85|167,526,748.62|5.95|13.21|
|Slaughtering|depreciation|||19,934,651.59|0.51|15,177,387.11|0.54|31.34|
||||energy||||||
|Slaughtering|(electricity, coal,|||36,825,872.82|0.94|37,198,676.48|1.32|-1.00|
||||steam)||||||
||other||||||||
||manufacturing||||||||
|Slaughtering|expenses(excl.|||50,422,203.90|1.29|55,484,073.31|1.97|-9.12|
|||energy and|||||||
||depreciation)||||||||
||total production||||||||
|Slaughtering||||3,914,139,029.23|100.00|2,815,502,894.23|100.00|39.02|
||cost||||||||

Note:
In 2018, the production cost of the Company's slaughtering and processing business
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report increased by39.02%, mainly due to the blooming market of white feather broiler, whilst the price of raw materials (delivery broiler) increased, the slaughtering capacity of broiler continued to increase simultaneously.
d. Top 5 customers and suppliers
The sales revenue of top 5 customers reached 646.37 million yuan, contributing towards4.11% of the Company's total sales revenue, of which, the sales revenue relating selling products to the related parties reached 403.44 million yuan, accounting for2.56% of the total annual sales.
The purchase orders of top 5 suppliers reached 2.34 billion yuan, accounting for17.41% of the Company's purchase orders during the Period, of which, the orders relating purchasing products from the related parties reached 165.11 million yuan, accounting for1.23% of the total purchase orders.
Other Explanation:
Top 5 Customers
|||||
|-|-|-|-|
|Customer|Business type|Sales revenue(unit:10,000yuan)|% of total operating revenue|
|Customer 1|Delivery broiler|15,895.14|1.01|
|Customer 2|Feed raw material|14,504.00|0.92|
|Customer 3|Delivery broiler|12,728.23|0.81|
|Customer 4|Feed|11,564.53|0.73|
|Customer 5|Delivery broiler|9,945.16|0.63|
|Total||64,637.07|4.10|

 Top 5 Suppliers
|||||
|-|-|-|-|
|Supplier|Business type|Purchase Amount(unit:10,000yuan)|% of total Purchase Amount|
|Supplier 1|Raw material|152,970.42|11.36|
|Supplier 2|Raw material|29,591.66|2.20|
|Supplier 3|Raw material|18,377.57|1.36|
|Supplier 4|Raw material|16,943.60|1.26|
|Supplier 5|Delivery broiler|16,511.39|1.23|
|Total||234,394.64|17.41|

 C. Expense
Unit: yuan Currency: RMB
|||||
|-|-|-|-|
|Item|2018|2017|Change %|
|Sales expense|420,646,753.59|411,506,654.06|2.22%|
|Administrative expense|227,941,858.19|225,935,973.80|0.89%|
|R&D expense|61,100,349.28|61,953,095.44|-1.38%|
|Financial expense|74,900,937.42|60,854,400.51|23.08%|
|Total|784,589,898.48|760,250,123.81|3.20%|

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report D.R&D Input
Unit: yuan Currency: RMB
|||
|-|-|
|R&D expenditure|61,100,349.28|
|Capitalized R&D expenditure|0|
|Total R&D expenditure|61,100,349.28|
|% of total operating revenue|0.39|
|R&D headcount|162|
|% of the Company's headcount|3.37|

R&D input
“Constantly Working on New Products, Never Following the Beaten Path” has laid a foundation for Wellhope'sR&D philosophy. At present, the Company has established or designated more than 10R&D bases for conducting related trials of pig, layer, broiler, ruminant and aquatic feed, and whilst it has built a sound technology achievement transformation system. In 2018, the Company carried out nearly 100 trials for verifying feed products totally invested 61.1003 million yuan, accounting for0.39% of the operating revenue.
During the reporting period, the work relating toR&D has been further deepened and refined. Meanwhile, the Company, as an influential representative of China's feed enterprises, participated in formulating two community standards, i.e. Formula feeds for Layers and Broilers, and Formula feeds for starter and growing-finishing pigs organized by China Feed Industry Association, which have been implemented on November 1st, 2018, both of two standards have had a huge impact on the feed industry. Moreover, theCompany’s applied for the project "nutrition standard and processing technology specification of antibiotic-free feed for layers", which has been approved as the local standard of Liaoning province, the project "R&D and promotion of key technologies of pig feed series with low-nitrogen emission", won the first prize of Liaoning animal husbandry science and technology contribution award. The “research of anti-weaning stress and environmental protection of piglet creep feed” was supported by Shenyang science and technology planning project. As one of the participating units, theCompany’s"R&D and application of new products of biological feed additives" won the first prize of China industry-university-research cooperation innovation achievement award. In 2018, the
Company was authorized and submitted 17 patents for invention, including "a total mixed
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report pellet diet for fattening mutton sheep and its process", "a kind of microbial feed additive and its production method", "broiler compound premix and its production method", “a compound premix for lactation sow and its production method”, etc.
Basing on the target of product safety, quality stability, accurate nutrition and powering business performance, the Company always focuses on independent innovation and seeks innovative inspiration from the market demands and development trend, continuously accumulates the strengths of technology and product. TheR&D work in 2018 shown as follows:
a. Swine feed product:
Basing on applying net energy system, environment-friendly and energy-saving formulating technology with low-nitrogen and low-phosphorus, the Company has developed a plasma-free creep feed and high cost-effective nursery feed, and upgraded the growing-fattening products and the feed used in the pre-weaning and post-weaning periods. It has also designed nearly 40 different combinations of formulation in the field of antibiotic alternative, which realized satisfied progress and laid a foundation for further reducing the antibiotic used in piglet feed. Meanwhile, the Company has obtained clear application results and comparative data on the use of raw materials in piglets feed at the stage of pre-30kg body weight, which played a decisive role in stabilizing piglets feed products and reducing costs. In addition, the researches on functional dietary fiber used in Danbred sows have been at the domestic leading level, and the Company has developed30-32% sows concentrate feed and compound feed with highly rich fiber. In the second half of 2018, the African swine fever broke out in China, the Company rapidly planed and designed high-immunological nursery and sow feed products.
b. Broiler feed product:
Integrated broiler business has been increased substantially in 2018, making relevant feed technology being constantly facing challenges brought by changes in raising model, wide-span region, seasonal changes and different value-added range of broiler parts products. The Company's technical team conducted in-depth researches and investigations in the local farms, carefully studied the effects of feed and raising management on production performance and economic benefit. A lot ofR&D and innovation work have
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report been carried out to promote and support the development of integrated broiler business. For example, the feed product model of granular powder, the control of grinding size and PDI, the study of post-coating technique for liquid raw materials, the technology of controlling microbial contamination through feed processing, the technology of early diagnosis of digestive tract health, the precise application of broiler raw material database, and several technologies for improving the weight of gizzard.
c. Layer feed product
The Company has made full advantage of protein sources and co-product resources to reduce the use of corn and soybean meal, whilst optimized production parameters and inclusion levels to achieve higher production performance and lower costs as well as increase competitiveness of related products. Depending on evaluating the practical use of cereal co-products and corn produced in different year, it has relocated metabolic energy value, updated databases and provided scientific basis for purchasing materials and designing ration. Moreover, it has developed low cost formula of low total phosphorus to effectively reduce the amount of calcium phosphate use, whilst assessed layer premixes and provided solutions for products further improvement. It also rationally used functional products to improve intestinal health and immune function in laying hens to increase eggshell quality and color, extending the laying period. IndependentR&D of biological fermentation technology, which has been widely used in theCompany’s feed product, could improve intestinal health, disease resistance and anti-stress ability, increase feed conversion ratio, whilst by developing new products to extend the egg shelf life and quality.
d. Ruminant feed product
The Company has built several research farms and conducted field experiments for beef cattle and finishing lambs. With the research support, the technical team, including nutritionists, formulators and product managers, carried out a series of products verifying tests and put forward certain market-orientated products which could improve the carcass quality and slaughtering rate, meanwhile, it also put forward the feeding programs to shorten the fattening period of beef cattle and implemented the total mixed ration for finishing lambs, which promoted the fast progress in feeding and realizing better profit for
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report farmers.
e. Aquatic feed product
The goal forR&D in aquatic feed is to develop more stable, efficient, and highly safe feed for maintaining the health of aquatic animals, and finally ensuring the food safety. The technologies include, researching and evaluating protein-saving and amino acid balancing technology to realize low protein diets and fish meal replacement, utilizing bio-enzyme appropriable for aquatic animals to achieve low nitrogen, low phosphorus and reduce pollution emission, moreover, relying on functional additives such as biological active peptide and the technology of protecting intestinal tract and liver to guarantee the health of aquatic animals. Furthermore, the Company also put forward some management programs for raising aquatic animals in 2018, including the “1-2-3” management model for freshwater crayfish, highly efficient management model for river crab, etc., which has improved dietary efficiency and growth rate, some special commercial feed for carp, loach, channel catfish, crayfish, pacific white shrimp have been proved to be more competitive and more popular with high quality and cost price. The functional feed products represented by "Stronger Liver and Intestine" can enhance the immunity function and promote the health of cultured animals, with lower incidence of diseases and higher economic value.
E. Cash flow
Unit: yuan Currency: RMB
|||||
|-|-|-|-|
|Item|2018|2017|Change %|
|Cash inflow of operating activities|16,387,473,689.22|14,379,421,212.36|13.96%|
|Cash outflow of operating activities|15,886,068,773.63|13,768,030,841.61|15.38%|
|Net cash flow from operating activities|501,404,915.59|611,390,370.75|-17.99%|
|Cash inflow of investing activities|61,627,106.73|72,034,325.33|-14.45%|
|Cash outflow of investing activities|571,358,643.35|698,441,861.53|-18.20%|
||||Not|
|Net cash flow from investing activities|-509,731,536.62|-626,407,536.20||
||||applicable|
|Cash inflow of financing activities|1,818,096,102.83|1,634,364,154.53|11.24%|
|Cash outflow of financing activities|1,651,103,379.20|1,584,489,956.92|4.20%|
|Net cash flow from financing activities|166,992,723.63|49,874,197.61|234.83%|
|Net cash flow|148,523,982.16|33,366,297.35|345.13%|

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report 2. Assets and liabilities
Unit: yuan Currency: RMB
|||||||||
|-|-|-|-|-|-|-|-|
||Closing balance of|% of total|Closing balance of|% of total||||
|Item|||||YoY change %|Note||
||2018|assets|2017|assets||||
|Derivative||||||increase|of the position of derivative financial|
||2,042,527.60|0.03|971,380.80|0.02|110.27|||
|financial assets||||||assets||
|Prepayments|185,899,348.53|2.68|266,224,330.51|4.45|-30.17|decrease of the prepayments for raw materials||
|||||||increase of new investments and additional||
|Long-term||||||||
|||||||investments in associated companies, the number||
|equity|1,354,820,455.99|19.55|1,022,372,386.20|17.08|32.52|||
|||||||of associates accounting by equity method||
|investment||||||||
|||||||increased||
|Construction in||||||||
||255,719,188.30|3.69|122,640,897.91|2.05|108.51|increase of newly built pig farms||
|progress||||||||
|Productive||||||||
||30,484,794.88|0.44|19,281,856.15|0.32|58.10|increase of purchasing parent stock||
|biological assets||||||||
|Other||||||||
|||||||increase of prepayments for land and long-term||
|non-current|197,497,688.18|2.85|32,362,984.62|0.54|510.26|||
|||||||assets||
|assets||||||||
|||||||increase of the obligation of repurchasing the||
|Other payables|309,537,195.12|4.47|201,709,649.48|3.37|53.46|||
|||||||restricted incentive stock||
|Non-current||||||||
|||||||increase of long-term payables due within one||
|liabilities due|32,999,999.96|0.48|20,000,000.00|0.33|65.00|||
|||||||year||
|within one year||||||||
|Long-term loans|118,500,000.00|1.71|20,300,000.00|0.34|483.74|increase of long-term bank Loans||
|Long-term||||||the subsidiary conducted financial lease and need||
||23,345,833.38|0.34|0.00|0.00|-|||
|payables||||||to pay for the leased equipment||

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report 3. Analyses of agriculture, forestry, animal husbandry and fishery industries relating to business operations
A. Fundamental state of industry and the Company
a. Industrial policies and their impacts on the Company
(a) Industrial policies
 "No.1 Document issued by the CPC Central Committee" formulates the strategy for rural revitalization
On January 2, 2018, the Central Committee of the Communist Party of China (CPC) and State Council issued the Opinions of the Central Committee of the Communist Party of China and State Council on the Implementation of the Rural Revitalization Strategy ("No.1 Document issued by the CPC Central Committee" of 2018). As stated in the document, "Implementing the strategy of revitalizing the rural areas is a major decision and plan made at the 19th CPC National Congress, a major historical task for securing a decisive victory in building a moderately prosperous society in all respects and moving on to all-out efforts to build a great modern socialist country as well as a general principle for the work related to agriculture, rural areas and farmers in the new era. Compared with the "No.1 Document" issued in the past few years, the Document of 2018 is not a specific guidance for a subdivided segment of the industry, but a comprehensive coverage of the political construction, economic construction, cultural construction, social construction, ecological civilization construction and other aspects in rural areas. Meanwhile, the Document is not limited to the tactical guidance in the stage, but makes a long-term plan for the work in the coming decades from strategic level.
Agriculture in China has always been regarded as the foundation of the national economy. The release of the “No.1 Document in 2018” has once again clarified the significant importance of the work related to agriculture, farmers, and rural areas, and a series of follow-up policies also provided good opportunities for key agricultural and animal husbandry enterprises.
 The new edition of Hygienic Standard for Feed was officially launched
Approved by the General Administration of Quality Supervision, Inspection and Quarantine
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report of China and the Standardization Administration, the revised Hygienic Standard for Feed was officially promulgated and implemented on May 1st, 2018.
The revised new edition mainly focuses on the following aspects: First, it added the items on pollutants. The item on the control of toxic and hazardous substances has been expanded to 24 branches in 5 categories, including 164 technical indicators, which contain inorganic pollutants, natural plant toxins, mycotoxins, organochlorine pollutants and microorganisms,80% of which meet the world's most stringent EU standards. Second, the standard expanded the types of applicable feed categories, comprehensively covering feed raw materials, premix, concentrated feed, concentrate supplement and compound feed. Third, it refined the limitation of quantitative value of each item in different feed raw materials, different animal categories and feed products designed for different growth stages, more than 100 limitations of quantitative values were modified or supplemented. Fourth, it added and modified the detection methods of some items in combination with the progress in detection technology.
The newly edited Hygienic Standard for Feed, as a mandatory national standard, adheres to the "most stringent standards" requirements, so as to ensure the safety of animal food and consumer health from the source.
 Comprehensive promotion of reducing the use of veterinary antibiotic
On April 20th, 2018, the Ministry of Agriculture of China released two documents, Notice of Ministry of Agriculture and Rural Affairs of China on the Pilot Program for Reducing the Use of Veterinary Antibiotic and the Plan of Pilot Program. According to the plans, the pilot program for reducing the use of veterinary antibiotic during animal raising phase should try to carried out within three years, while related reduction model should be promoted and reduce the use of antimicrobial drug feed additives to achieve "zero growth" in the antibiotic, and the problems of drug residue for livestock and antimicrobial resistance should be effectively controlled.
It can be predicted that in the next few years, the progress of reducing the use of antibiotic in the feed industry will be comprehensively promoted. It has become a new challenge for feed companies to seize the commanding heights of "reducing antibiotic" and "antibiotic-free".
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report Promulgation and implementation of Environmental Protection Tax Law
From January 1st, 2018, Environmental Protection Tax Law of China officially came into effect, imposing environmental protection tax on pollution emission of large-scale livestock and poultry farms. According to the law, the farms with more than 50 heads of cow, 500 heads of pig or 5,000 broilers (ducks) would be required to pay tax for environmental protection
Other than previous administrative regulations, department rules or local regulations, the Environmental Protection Tax Law, like the Environmental Protection Law, is enacted and promulgated by the Standing Committee of the National People's Congress, which is at the forefront of China's legal system with supreme legal authority. The enactment and promulgation of the Law indicates the government's commitment to environmental regulation, while it is the practice of green development concept at the legal level, and has great significance for promoting the construction of social ecological civilization and economic green development.
(b) The impacts of industry policies on the Company and its response
In 2018, the supply-side structural reform of China's agriculture and animal husbandry industry was carried out in an orderly manner, and solid steps were taken in structural adjustment, quality and efficiency improvement. In this context, the government and the market have also put forward new standards and requirements for agriculture and animal husbandry industry, bringing both challenges and opportunities.
◆The top-level design of Rural Revitalization Plan provides key players of the industry a historic opportunity
On one hand, the successful implementation of rural revitalization strategy needs to depend on the enforcement of governmental departments and workable measures of various policies. On the other hand, it is also necessary for the key players in agriculture and animal husbandry industry to make full use of their rich social resources and business practices to drive the development of the industry. Strategic layout of rural revitalization provides a good opportunity for their business expanding.
◆Increasingly stringent standards for health and environmental protection make the
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report industry continuing to consolidate
In 2018, the new edition of Hygienical Standard for Feed and the Environmental Protection Tax Law were officially implemented, and the pilot program of "reducing the use of antibiotic" was launched, indicating that the health and environmental protection management of Chinese animal husbandry industry has entered a more rigorous new stage. This will further accelerate the consolidation in animal husbandry industry, the smaller, unqualified and polluting players will be driven out of the market or seek support from larger players, making key players' advantages in scale, technology, brand, capital and service being further highlighted.
In the face of new policies, the Company has formulated a series of strategic guidelines and business plans, as detailed in the "Company Development Strategy" and "Business Plan" sections below.
b. The position of the Company in the industry, competitive advantages and disadvantages
--The position of the Company in the industry
The Company has won many honors and titles including “Excellent National Agricultural Industrialization Leading Enterprise”, “National Accreditation of Enterprise Technology Center”, “Vice President of China Feed Industry Association”, “Well-known Trademark of China”, “High Technology Enterprise”, etc. In 2016, the Company was rated as "Top Ten Leading Feed Enterprises in China" by China Feed Industry Association. From 2015 to 2017, the Company had been listed inChina’s Fortune 500 List for three consecutive years, only five agricultural and animal husbandry enterprises were selected in 2017. From 2016 to 2017, the Company had been listed in the "Top 100 Light Industry Enterprises of China" for two consecutive years.
In the brand value evaluation results of Liaoning Province in 2018, the Company has become the highest score winner among more than 100 enterprises from nine industries by its brand strength value of 961. It is in the first-class level of the industry, and some indexes are far beyond the others within the industry, it has the brand value of RMB 1.16 billion.
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report Furthermore, the Company is the largest agricultural and animal husbandry enterprise in the Northeast China, which has a high brand influence in the North& Northwest China, Shandong Province and other places. In 2017 and 2018, the Company slaughtered 392 million and 455 million of white feather broilers respectively (including holding and associated companies), ranking the first echelon of China's white feather broiler industry. Competitive advantages:
(a) Advantage of talents
Talents are the most valuable wealth and core competitiveness of the Company, and the resource of talents has become one of the Company's strong competitive advantages. The comprehensive strength of the Company's talents team is at the forefront of the industry. The management team led by the co-founders has high academic qualification and professional background, also a deep understanding and recognition of corporate culture and management mode. They are united and stable, always fighting in the front line of markets with a strong cohesion. 70 percent of the general managers and above level managers of the subsidiaries have bachelor degree or above, and more than one-third of the young managers selected from the "Sunflower Program", which is one of the Company's most important talents reserve programs, receive masters degree or above. Meanwhile, its strongR&D team ensures the leading-edge technology and products. It also has a team of young and professional marketing and technical supporting experts who have systematic and professional knowledge and practice regarding farm management, which is the guarantee for the implementation of the Company's marketing strategy. The Company's talents advantage stems from the advanced human resources policy. In terms of talents introduction, the Company always adheres to the principle of high-standard recruitment and upholds the core culture of "knowledge is power, unity is power". In terms of talents training, it formulates dual-channel training system according to its strategic goals and staff development need, providing a targeted platform for helping the staff to grow. In terms of talents incentive, the Company continuously improves and optimizes the remuneration policy, and implements merit-based principle of remuneration, it also conducts separate performance appraisal system for the sales team and administrative departments so as to keep the team dynamic. At the same time, the
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report Company adheres to the principle of "sharing bumper harvest", shares its development achievements with employees in various ways, such as holding shares of subsidiaries and elasticity welfare. In 2018, the Company carried out the restricted stock incentive program, which 372 core talents and key position talents participated. Through this program, the interests of Company, shareholders and key-employees are combined together to ensure the sustainable and stable development of the Company and ultimately achieve a win-win situation for all.
(b) Advantage of industrial layout
The Company's advantage of industrial layout centers on the structure and geographical location.
In terms of industrial structure, the Company has primarily formed a value chain with high competitiveness and risk control in fields of raw material trade, feed, animal raising, slaughtering, food further processing, which can improve the overall competitiveness, enable all business divisions to connect closely, enhance profit margin and greatly reduce the risks of single operation. Through the integrated management of the industrial chain, the product quality can be also better managed, and the safety of products can be ensured by applying internal management and traceability system, which ultimately meet the requirements of consumers for food safety.
In terms of geographical location, the Company's headquarters is located in Shenyang of Liaoning Province, with more than 130 holding and associated companies located in over 20 provincial regions across China. These companies can quickly respond to new market situation and policy environment, which form industry linkage with regional advantages. In addition, the Company actively responds to "the Belt and Road Initiative" to vigorously expand international markets by building plants in Nepal, the Philippines, Indonesia, Russia, etc., and now it is well on its way to exploring new markets abroad.
(c) Advantage ofR&D
Regarding toR&D team, the Company has a technical team composed of more than 100 masters, doctors, professors and senior experts who have profound theories, they apply cutting-edge technologies to practice and conduct field-work in different farms. Relying on rich formulating experiences, leading database application technology and high level
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report animal growth model and other advantages, the Company has established a technological innovation system to continuously provide safe and high-quality products for the society, and offer first-class customized nutrition for the farms, which effectively enhance the added value of the products and farms' economic benefit.
Regarding toR&D achievements, the Company has over 70 kinds of scientific research programs, and each year it launches 10 new products and technologies. Now it has 40 patents invention, and has received 2 prizes of National Science and Technology Progress Awards and near 20 ministerial and provincial-level technology awards. In addition, the Company has also realized significant breakthrough and achieved good benefits in broiler raising technology and farm operation program, especially in the implementation of three tiers cage system, which drives the livability, average body weight, feed conversion ratio and other core indicators of broiler standing in the forefront of domestic industry and being recognized by cooperative farmers. In terms of know-how and management programs for large-scale farms, the minimum ventilation technology for cage-fed broilers, automatic control of house environment, ventilation and backwashing of drinking water system, weekly body weight, disease prevention& immunization, as well as the use and control of medicines, etc., have also reached the first-class level in China.
Regarding to technical cooperation, the Company cooperated with Royal De Heus in 2006, a century-old Dutch company. By combining DeHeus’ strengths with its own researches on nutrition and raw materials, the Company has formed a data-based nutrition evaluation system, continuously launched efficient and innovative solutions centered on the needs of local market and customers, among which it has made pioneering explorations and breakthroughs in "safety and high quality", "precision and efficiency" and "antibiotics-free for environmental protection" and other aspects.
(d) Advantage of product quality
The quality control team of the Company has established an excellent control system for raw materials by strict acceptance standards and high level testing technology. Whilst all the staff strictly implement the Standard of Feed Quality and Safety Management issued by the Ministry of Agriculture of China, and combine the ISO9001, ISO22000 and ISO-IEC17025 quality and food safety management systems to improve the standardized
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report process from purchasing to production, quality control then to sales, all of them are always dedicated to ensuring the safety and high quality of products.
TheR&D testing center, equipped with high-level testing equipment and facilities with 15 laboratories in terms of physicochemical testing room, microorganism testing room, etc., is one of the first testing centers capable of detecting melamine and other banned additives. Moreover, the testing center has been certified by CNAS as the key laboratory of the state, making its testing and calibration results being recognized by 41 countries and 55 authoritative institutions. In 2018, it won the first prize in the evaluation of testing technology of peer enterprises in Liaoning Province. Through comparison with SGS, Yili Group, Yihaikerry Group and other upstream and downstream enterprises and third-party enterprises, the testing results of the Company have won recognitions.
(e) Advantage of brand
The Company has always been paying great attention to brand building. The trademark "Wellhope" has been awarded many honors, such as Liaoning famous-brand product, Liaoning famous brand,China’s well-known trademark,China’s top 500 most valuable brand, the most influential brand in animal husbandry, and trusted product in China feed industry. In addition to the "Wellhope" brand, the Company also adopts the operation mode of multi-brand, which can not only cover the target market at multiple levels, but also provide customers with more choices. The cross-coverage of main and auxiliary brands has played a positive role in promoting the sales volume of the Company. As a corporate brand, Wellhope has become one of the most advantaged brands, which is widely trusted and favored by its partners, customers and suppliers. Whilst as an employer brand, Wellhope has been recognized and loved by its employees and favored by job seekers. On December 11st, 2018, the Company won the honorary title of "National model enterprise of harmonious labor relations" initiated by the Ministry of Human Resources and Social Security of China. Meanwhile, on December 18th, 2018, it was selected as one of the "Top 10 best employers of 2018 in Shenyang" from more than 30,000 enterprises in the "Best employer awards ceremony of 2018 in China" organized by zhaopin.com.
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report (f) Advantage of cost
◆Feed raw material
The Company is located in the Northeast of China, the major corn producing area featured by "high unit weight, low toxin and little moisture", which is conducive to guarantee its product quality and effectively reduce the purchasing cost of energy raw materials. Therefore, even with the same purchasing price, the Company can maintain the quality advantage of energy raw materials. In addition, the Company's headquarters has established an excellent purchasing management system: Firstly, the Company has established strategic partnership with many top domestic and foreign raw material suppliers, the purchasing mode of the Company is classified into three levels, including headquarters centralized purchasing, inter-regional price comparison purchasing and local purchasing, which can strategically decrease the purchasing cost. Secondly, the Company combines raw material trading business with purchasing management, its professional purchasing team has a long term view of raw material prices and availability, makes great efforts to reduce the purchasing cost by ways of conducting real-time tracking on the market, unified management of different varieties and buying on future markets, etc. Thirdly, the purchasing team cooperates closely with theR&D team to further optimize the purchasing cost through re-formulating the feed, such as changing the composition of the feed to use cheaper alternative raw materials while achieving the same results. Fourthly, the Company works closely together with Royal De Heus experts, the two sides have set up a sharing channel to timely share the market trends and predict prices in regard of raw materials and additives, etc., meanwhile, the two parties may carry out joint purchasing cooperation after import channels of raw materials can be broadened in the future, thus greatly enhancing the overall bargaining power.
◆Integrated broiler business
The Company has always been committed to improving the production standards of each part in the value chain of integrated broiler business by ways of constantly innovating the practical operation technology and management mode, optimizing the production and operation indicators, and enhancing staff's working efficiency to indirectly reduce the
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report overall operating costs. On the demand side, the Company has high market recognition and a large downstream customer base, which is conducive to the efficient release of its production capacity. On the supply side, the Company maintains stable capacity utilization rate, which has been at a high level for the past three years. Therefore, the marginal cost and average cost of integrated broiler business remain at a low level supported by conducting fine production management and high capacity utilization rate. In 2018, the integrated broiler business division continued to expand business and upgrade the equipment in the slaughterhouses, which further improved the automation and intelligence level, and significantly enhanced the slaughtering efficiency, guaranteed the product quality and reduced the production cost.
 Competitive disadvantages:
In recent years, due to the change of the market structure and competition mode as well as the development strategy, the Company is accelerating the layout in new fields, new regions and new projects. This process is complex and changeable with great uncertainty, and poses new challenges to the Company.
c. Company business model, upstream& downstream circumstances
 Upstream& downstream circumstances
(a) Upstream industry
The upstream raw materials relating to feed business cover corn, soybean meal, fish meal, cotton meal, rapeseed meal, amino acid, vitamin, etc., whilst the upstream products of integrated broiler business are mainly parent stock.
As for corn in 2018, China's corn planting structure was adjusted and the effect of destocking was remarkable. Meanwhile, the consumption of further processed products increased, and along with the impact of China-US trade friction, the corn price presented upward trend with fluctuations. In the first half year, corn price rose at first then fell down, and in the second half year, the expectation of sharp decline of production inChina’s major corn producing areas promoted the higher corn price, meanwhile, due to the China-US trade friction, the bullish sentiment in the corn market has determined that it was difficult for the corn price to fall in the later period.
As for soybean meal, the main trends of the market in 2018 can be divided into two
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report phases. In the first stage, the core factor was the reduction of soybean in Argentina, but it did not bring a significant increase of the soybean price under the backdrop of abundant soybean supplement in the United States and Brazil. In the second stage, the China-US trade relationship became the core factor. Affected by the trade friction, China's soybean imports dropped at the first time within the past 7 years, according to data released by the General Administration of Customs, the total soybean imports in 2018 decreased by 7.9 percent on a year-on-year base. News of trade frictions between China and the United States continued to upset market expectations, triggering wild fluctuations in soybean meal price.
As for fish meal, the price came off early highs. At the beginning of 2018, the fish meal market continued the heat of the end of the prior year. After October 2017, the nationwide fish meal inventory was less than 60,000 tonnes, the shortage of inventory and the delayed arrival of goods led to the supply fell short of demand, making the price remaining high for a period. Coming to April, the arrival of new season's fish meal brought dramatically increased supplies, and along with the impact of African swine fever on downstream demand, the price of fish meal fell sharply. Until the end of 2018, the market has been in the basic situation of oversupply.
As for other feed raw materials, China-US trade friction caused a sharp decline in soybean imports, other alternative demands of miscellaneous meals such as rapeseed meal and cotton meal increased significantly. Overall, the international situation was conducive to the domestic meals market, together with gradually improved consolidation of feed additives industry, a relatively rigid demand leads to the strengthening of market price transmission mechanism.
As for broiler, China remained a low introduction of grandparent stock in 2018. According to the statistics of China Animal Husbandry Association, the number of introducing (updating) grandparent stock in 2013 reached 1,541,600 sets, while in 2018 only 750,000 sets, which was less than50% of that in 2013. Due to the tightening introduction of grandparent and the obvious reduction of forced molting, the inventory of parent stock shows a downward trend, and the prices of parent day old chicks and commercial day old chicks are expected to keep rising, China's white feather broiler industry may continue a tight supply situation in 2019.
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report (b) Downstream industry
Feed industry is the front end of the industry chain of animal husbandry, and its downstream connects the animal raising industry, slaughtering industry and the terminal consumption of meat products. The Company primarily manufactures pig, poultry and ruminant feeds, so the feed business demand of the Company is greatly influenced by the market of pig, layer, broiler, ruminant animal and the terminal consumption structure. As for pig raising business, this industry was hit by "price drop" and ASF in 2018. In the first half of the year, the price showed a downward trend due to the large inventory of pig. In the second half of the year, ASF spread to more than 20 provincial-level administrative regions, which increased the downward pressure on the industry. ASF accelerated the progress of cutting overcapacity, and a large number of pig were culled which resulted in a huge gap in the supply of pork. The pig price cycle will be strongly rebounded after bottoming.
As for layer market, the government has set strict restrictions on food safety, and environmental protection has stepped into new normal phase. Relevant policies issued by the government on pollution prevention and animal raising area adjustment constrained the capacity of layer. Moreover, influenced by ASF, the alternative consumption of egg has increased, making the egg price in 2018 at a high level. Overall, the layer market was booming in 2018.
As for broiler market, white feather broiler was introduced to China in 1986, after more than 30 years of development, China has become one of the world's leading producers of white feather broiler. But from 2015 to 2018, the introduction of white feather broiler has been lower for four consecutive years, which led to the tight supply of parent and commercial day old chicks. Moreover, on the demand side, the spread of ASF caused a big shortage of pork, so the consumption of white feather broiler as the alternative skyrocketed. Overall, under the dual effects of sharp contraction at the supply side and moderate expansion at the demand side, the white feather broiler industry has already ushered in a historic strong period with an expectable prospect.
As for ruminant market, China is a big producer of beef and mutton. With continuously improved consumption level of residents, especially the changes in the dining table of
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report urban residents, beef and mutton consumptions have risen significantly. From the beginning of August 2018, ASF spread in many regions in China, some consumers abandoned pork and switched to other meat, which has increased domestic consumption of beef and mutton. The National Bureau of Statistics showed that, at the end of 2018, China's beef price index rose by6.0% on a year-on-year base, and the lamb price index rose by11.9%. Overall, the increases of beef and mutton consumption have become an irresistible trend, and the tight supply will not change fundamentally in the short term. As for terminal consumption, the structure of meat consumption has been gradually changing, presenting rapidly growing proportion of beef and chicken. According to statistics from the US Department of Agriculture, in 1987, the per capita consumption ratio of pork, beef and chicken in China were88.81%,3.71% and7.48% of the total of three types of meat, pork consumption was close to90%. Coming into 2018, these figures changed to be73.60%,11.22% and15.18%, pork consumption showed a downward trend. Compared with pork, beef consumption presented a small base but an obvious trend of growth, and chicken also showed a large increase.
In general, due to ASF resulted in a huge gap in the supply of pork, the pig cycle is expected to bottom out in advance and the alternative broiler and ruminant market will be leaping forward. Moreover, along with the popularization of the concept of healthy diet and due to the high fat content of pork, chicken and beef consumption will continue to be increased, and the change in the structure of meat consumption will become the general trend.
d. Primary technology
Relying on the advantages of independent research strength and combination of industry-university-research cooperation, the Company constantly pursues technological innovation in various fields. According to the circumstances of feed market and raw materials, as well as customer-based demands, the Company has integrated its know-how and product superiority with the advanced nutrition technology and service philosophy of its strategic partner Royal De Heus, refined its technology and reformulated feed products, the primary technology includes:
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report (a) Low protein diet: The resources of protein raw materials are difficult to satisfy the needs of livestock production in China, and heavily dependent on imports. The demand on protein as for poultry and pig is essentially amino acids. In the past, only the diets with higher crude protein could meet the needs of different amino acids for livestock and poultry. By way of studying on the characteristics of digestion and absorption of animals at different physiological stages and the nutritional needs of amino acids, the Company has established an ideal amino acid model, which combines with the application of industrial synthetic amino acids, so as to reduce the crude protein in the diet, save food resources, mitigate environmental pollution, and meet the needs of pig and poultry for maintaining the demand on nutrition.
(b) Exploring of antibiotic-free feed and reducing the use of antibiotic in the farm: Consumers pay great attention to the food safety, and China is now steering to the post-antibiotic era from the antibiotic era. Supported by raw materials' selection, quality control, crushing process, the use of phytase and the functional additives, the Company ensures the feed products can provide stable, balanced and highly digestible nutrition, which keep animal health and increase the immunity and anti-stress ability. Meanwhile, the Company guides the farmers continuously improving bio-safety, field management and feeding program, trying to produce antibiotic-free feed and reduce antibiotics throughout the raising process.
(c) Sow diet with functional dietary fiber: By adding a variety of non-fermentable dietary fiber and supplementing cationic salts as well as electrolysis vitamins in the diet of sows, the Company increases the proportion of dietary fiber and adjusts the electrolyte balance, so as to stimulate the intestinal tract movement, improve the health of gastrointestinal tract of sows, which can solve the constipation problem, enhance the satiety of pregnant sows, reduce stereotyped behaviors and relieve the farrowing stress. The most importance part is that, by improving the postpartum appetite, increasing the feed intake of lactating sows, it can stimulate the milk production, and sequentially improvesows’ reproductive performance, reduce the raising costs eventually in order to increase economic benefits. The effect of this technology has been proved and it is at the leading edge in this research area.
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report (d) Establishing broiler nutrition-based database: Broiler raising is mainly concentrated in the central and northeast regions of China, which are featured by wide-span and obvious seasonal variation. In addition, affected by the short feeding cycle, high raising density, especially ventilation, temperature and lighting management which can directly impact on the mortality and morbidity, as well as the market demands on raw meat which need to provide large gizzard (muscular stomach), high-quality breast and sized legs, the Company has established a nutritional requirement database for broilers, developed different types and combinations of feed and feeding program, and formulated the nutritional requirement of broilers under different external conditions, in order to meet the needs of the market and customers under different conditions, and to improve the feed conversion ratio, reduce the mortality rate, and promote the growth potential. Meanwhile, as the increasing exports of meat products bringing higher requirements on antibiotic-free or lower antibiotic, the Company has conducted more stringent control over the use of medicine added to feed, which is stricter than national standards. Raising broilers by fine nutrition and lower antibiotics can decrease the costs, reduce waste discharge and environmental pollution.
(e) Broiler feeding management: The Company carefully studies on the impacts of feed and raising process on production performance and efficiency. After years of explorations and accumulated practices, the Company's broiler feeding management and technology level, especially the application of three tiers cage system, have made significant breakthroughs and good benefits. The core indicators of commercial broilers, such as livability, average body weight and feed-meat ratio, have been in the forefront of the domestic industry and widely recognized by cooperative farms. Key technologies and management of large-scale raising, such as minimum ventilation technology for caged broilers, automatic control of raising environment, ventilation and small windows, automatic backwash of waterline system, weekly gained weight, disease prevention and control, immunization, drug use and control have also reached the first-class level in China. Whilst, its independently designed ventilation mode and solar energy utilization technology can simplify ventilation and heat preservation, reduce electricity consumption, save coal and mitigate air pollution.
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report (f) Functional feed for strengthening the liver and intestinal tract of aquatic animals: The primary metabolic, immune and digestive organs of aquatic animals include livers and intestinal tracts, which play an important role in maintaining the health. The Company has selected variety of functional additives, which are beneficial to protect and repair liver and intestine, along with using immune enhancers such as bioactive peptides, plant essential oil, probiotics and immune polysaccharide, it can improve immunity for reducing morbidity of animals and finally increase the economic benefits of aquaculture.
(g) The “1-2-3” management model for freshwater crayfish: Farmers are easy to neglect wintertime and springtime during crayfish culture. In these periods, the short of feed source and the slow ingestion of crayfish can make many troubles to crayfish because of the low water temperature in pond. Also, some mistakes exist in aquaculture management in these periods, such as selecting low grade feed or even no feeding and neglecting water quality management. As for this, the Company has developed special feed named “Kai Kou Bao” for juvenile and subadult crayfish, which has higher nutrition, stronger attractivity and better digestibility. Meanwhile, it also has developed a series of water adjusting products and biological fermentation products in order to satisfy the water quality in the low-temperature period. The use of these products can benefit to improve the water quality, fertilize the cultured water, and provide more natural food, and finally contribute to the economic benefits.
(h) The 305-day 10tons’ milk program: According to the nutrient requirements and the key management points at each stage of dairy cattle, a full series of products have been developed for calves, heifers, lactating cattle, dry cattle and close up cattle, which can improve the feed intake and the weaning weight for calves. Moreover, the Company pays more attention to the growth of heifers in terms of height, length and udder, the age of first insemination can be around 12.5 and 13.5 months. In the period of dry and close up, the nutrients have been scientifically offered to increase the dry matter intake and reduce the incidence of metabolism disease after calving. Whilst for lactating period, the nitrogen and energy have been well balanced in the compound for lactating cattle to improve the rumen environment and to increase milk yield. In addition, the Company also provides the customers farm management practice and nutrition program of 305-day 10tons’ milk.
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report (i) Feeding program for beef cattle and lambs: Basing on the nutrients requirement and physiological characters of beef cattle, the Company constantly formulates the feeding programs and technical solutions for different stage to improve the finishing performance, also launches related products based on rumen regulation techniques. Whilst according to the nutrients requirement of finishing lambs, the total mixed ration diet has designed to increase the dry matter intake and minimize the feed waste, which can help to achieve the precise feeding and the balance of nutrients.
(j) Precise and dynamic feed formulation technology and high-temperature pelleting technology: The Company has carried out active academic and technical communications with China Agricultural University as for the dynamic database of feed raw materials, which provide big data support for reducing formula cost and improving precise formulation. The high-temperature pelleting technology can reduce the risk of microbial pollution, but it has different degree of loss of temperature-sensitive nutrients. As for this, the Company is organizing research on countermeasures to improve product competitiveness and the bio-safety level of broiler and pig feed.
B. Production and sales circumstance
a. Production and sales mode
The Company carries out the system of "purchasing-producing-selling”, it implements the mode of producing feed products by orders, and conducts the sales mode of selling on commission and direct selling. Regarding small and medium farms, they buy feed from the dealers, and the large-scale farms buy the products directly from the Company.
Where a co-production mode with farmers (applicable)
The Company raised broilers by self-owned farms and contract farms. Regarding the contract farms, the Company signs contracts with the farmers to clear and definite the rights and obligations for each party, and it conducts centralized management for these farms by unified site selection and layout, unified supply of DOCs, unified disease prevention and disinfection, unified supply of feed, unified supply of animal health products, unified technical guidance, unified detection and unified slaughtering and processing. In the reporting period, the broilers raised by the contract farms meet the repurchasing standards required by the Company, no breach of contract.
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report b. Main products distribution and selling
|||||||||
|-|-|-|-|-|-|-|-|
|||Sales|Sales||YoY||YoY|
|||||Sales||YoY change||
|Main||volume|revenue||change of||change|
||Channel|||cost(10,000||of sales||
|Product||(10,000|(10,000||sales||of sales|
|||||yuan)||revenue %||
|||tons)|yuan)||volume %||cost %|
||direct|||||||
|Feed||99.61|311,346.00|272,486.14|11.07|12.62|12.72|
||selling|||||||
||selling on|||||||
|Feed||135.60|418,512.90|369,684.78|3.91|6.86|8.42|
||commission|||||||

Where adopts the mode of selling on commission
As at the end of the reporting period, the Company had nearly 10,000 dealers of feed products, which mainly adopt the mode of prepayment before delivery and delivering products after receiving the payment.
The Company provided the price list of each category to the dealers, and the settlement price of products should be determined according to the Company's sales plan and sales contract. During the reporting period, there was no violation of the agreement by dealers such as fleeing goods.
Regarding the customers with lower than 50 tonnes of delivered products per year, shall be divided as smaller individual customer. These customers buy feed from the dealers, and they can be gained by visiting the companies, product demonstration, new products promotion, training organized by dealers and animal raising technology seminar, as well as the "one-to-many" sales mode.
Driven by the Company's brand influence, good product reputation and all-round tracking and guidance service provided by the technical supporting team, the customer composition is relatively stable, the payment settlement mainly adopts the method of prepayment before delivery and delivery after receiving the payment, which has small risk of receivables collection.
In 2018, small-scale customers contributed to6.41% of the Company's total sales revenue with 468 million yuan, bringing a small impact on operation.
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report C. Information of the Company divided by industry segments
Unit: 10,000 yuan Currency: RMB
|||||||||
|-|-|-|-|-|-|-|-|
|||Number of||||Number of||
||Number of||||Gross||Inventory|
|Main||sales|Salesrevenue|||delivery||
||raising|||Sales cost|profit||(10,000|
|products||(10,000||||(10,000||
||(10,000||||margin %||broilers)|
|||broilers)||||broilers)||
||broilers)|||||||
|White||||||||
|feather|6,541|6,128|151,539.56|131,135.80|13.46|6,128|859|
|broiler||||||||

Note: Above sales revenue and sales cost are unconsolidated and offset.
Unit: 10,000 yuan Currency: RMB
|||||
|-|-|-|-|
|Feed|Volume|Payment|Average Price/ton|
|self-produced|292,413 tons|78,052.04|2,669.24|
|externally purchased|4,724 tons|1,291.34|2,733.57|

 4. Investment analysis
As at December 31st, 2018, the balance of the Company's long-term equity investment reached RMB 1.355 billion yuan, increasing by2.52% compared with the end of prior year. For details, please refer to “VII--Notes to the Items of Consolidated Financial Statements, part 9--long-term equity investment in the consolidated financial statements”.
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report 5. Main holding and associated companies
Unit: 10,000yuan
|||||||
|-|-|-|-|-|-|
|||Registered||||
|Company|Core business||Total assets|Net assets|Net profit|
|||capital||||
|Shenyang Wellhope Feed|Feed manufacturing and selling|550.00|11,716.40|10,171.83|1,604.81|
|Liaoning Expert Trading|Feed raw materials and selling|5,000.00|33,579.92|21,142.49|1,707.32|
|Beijing Sanyuan Wellhope Agri-Tech|Feed manufacturing and selling|1,000.00|20,772.68|18,561.51|824.21|
|Shenyang Wellhope Agri-Tech|Feed manufacturing and selling|8,210.00|13,421.25|11,388.99|685.81|
|Xi’an Wellhope Feed Sci-Tech|Feed manufacturing and selling|500.00|12,101.73|9,829.94|2,151.73|
|Dandong Wellhope Chengsan Agri-Tech|Broiler raising and feed|8,000.00|42,578.68|27,585.22|15,152.36|
|Dalian Chengsan Animal Husbandry|Broiler raising and feed|1,008.61|63,052.63|45,905.58|11,737.74|
|Tai’an Jiuguhe Agriculture|Broiler raising and feed|1,060.00|31,457.04|15,578.88|9,745.58|
||Broiler slaughtering, processingand selling|||||
|Anshan Jiuguhe Food||4,320.00|52,935.70|24,224.95|6,930.31|
|Linghai Jiuguhe Food|Broiler raising and feed|1,755.00|18,381.40|8,930.98|4,103.73|
|Huluodao Jiuguhe Feed|Broiler raising and feed|1,085.00|13,894.06|6,591.69|4,507.09|
||Broiler slaughtering, processingand selling|||||
|Huluodao Jiuguhe Food||7,370.00|24,381.95|15,230.53|4,249.58|

Unit: 10,000yuan
|||||||||
|-|-|-|-|-|-|-|-|
|The impact of the net profit of subsidiary or the investment income from associated company on the net profit of the Company reaching 10% or above||||||||
|||Registered||||Operating|Operating|
|Company|Core business||Total assets|Net assets|Net profit|||
|||capital||||revenue|profit|
||Feed, parent stock, day old chick, broiler|||||||
|Beipiao Hongfa Food||3,000.00|94,176.28|71,992.27|23,163.85|258,736.96|23,370.82|
||raising and slaughtering|||||||
||Feed, parent stock, day old chick, broiler|||||||
|Dalian Heyuan Agri-Tech||10,000.00|69,211.00|30,468.68|14,523.16|144,818.66|14,688.33|
||raising|||||||

Note: Above financial figures belong to the single subsidiary, excluding the data of the subsidiaries within consolidated scope of above companies.
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report III. Perspectives on the Company's Future Development
1. Industry structure and trend
China has always attached great importance to agriculture, in recent years, along with continuous changes in international trade, resources and environment, technical conditions, industrial structure, policies and regulations, agriculture has also stepped towards a new phase. The "No.1 Document issued by the CPC Central Committee" of 2017 put forward the idea of deepening supply-side structural reform of agriculture, the "No.1 Document" of 2018 completed the top-level design of the rural revitalization strategy, whilst the "No.1 Document" of 2019 further pointed out that under the complicated situation of increasing downward pressure on the economy and profound changes in the external environment, it had a special importance to do a good job related to “agriculture, farmers, and rural areas”. Under the background of continuous deepening of supply-side reform and gradual transformation and upgrading of the industry, animal husbandry industry has also ushered in new opportunities under numerous challenges.
A. Increasingly improved industry consolidation
Along with the fierce competition taking place in the feed industry, extra large companies constantly expand businesses, medium and large feed producers start to seek business opportunities, whilst small producers are gradually squeezed out of the market. Regarding to large companies, they utilize their advantages in technology, cost, brand, management and capital to continuously improve their total factor productivity and rapidly expand production scale and seize market shares through mergers and building new plants, those small and medium feed producers have gradually been weeded out in increasingly fierce competition due to their lower technical level, higher comprehensive costs, weaker brand reputation, insufficient management ability and enormous financial pressure. The continuous deepening of supply-side structural reform and constant transformation and upgrading of the industry will continually weed out unqualified players, which will lead to increasing improvement of industry consolidation.
B. Continuously extended industrial chain
Animal husbandry industry is consisted of feed production, animal health product, livestock and poultry raising, slaughtering and processing, etc., whilst its upstream is
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report connected to the planting industry, and downstream serves the farm and sideline food processing industry, these connected industries constitute an organic whole. Along with weeding out unqualified players, large scale animal husbandry companies are continuously expanding markets. Due to the needs of risk control, profit growth and food safety, those extra large players gradually integrate resources during their mergers and acquisitions, also expand lengthways for extending to the whole industrial chain and establishing a strong competitive edge and anti-risk capability. Impacted by development trend of “integrated industrial chain”, occupying the entire chain has become the development theme of animal husbandry industry.
C. Constantly strengthened environment protection promoting the concept of green development being practiced
In recent years, China has put forward a series of environment protection regulations, such as the revision of the Environment Protection Law, the promulgation of the Environment Protection Tax Law, and the release of the Regulations on Pollution Prevention of Scale Raising of Livestock and Poultry and the Action Plan for Pollution Prevention of the Agricultural and Rural Pollution, etc. The successive launches of relevant policies have demonstrated China's determination for increasing environment protection supervision on the animal husbandry industry, and local governments have also issued certain new regulations in regard of farm removal, ban of raising and restriction of farms, which will further weed out unqualified players and make the animal husbandry industry facing the situation of re-shuffling.
D. Great concern of food safety promoting the start-up of reducing the use of veterinary antibiotic
On April 20th, 2018, the Ministry of Agriculture released two documents in terms of Notice of Ministry of Agriculture and Rural Affairs on the Pilot Program for Reducing the Use of Veterinary Antibiotic and the Plan of Pilot Program, which pointed out that, the pilot program for reducing the use of veterinary antibiotic during animal raising should be strived to be implemented within three years, whilst related reduction model should be promoted and decrease the use of feed additives of antimicrobial drug to achieve "zero growth" in using veterinary antibiotic, and the problems of drug residues and antimicrobial
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report resistance should be effectively controlled. It can be predicted that, in the next few years, the progress of reducing the use of veterinary antibiotic in the feed industry will be comprehensively promoted. It has become a new challenge for feed enterprises to seize the commanding heights of "reducing antibiotics" and "antibiotic-free".
E. African Swine Fever driving bio-safety to become a key factor
Disease has always been one of the major risks faced by animal husbandry industry. In China, ASF was first discovered in August 2018, and spread to more than 20 provincial-level administrative regions in the next six months. In response to the ASF, the government has successively issued a series of policies, and significant changes have taken place in pig industrial pattern. Long-distance transportation of pig has been restricted, whilst the original consolidated market has been divided into regional markets. Slaughter-process and logistics systems will also undergo major changes, the timing of establishing slaughter-process projects for companies engaged in livestock raising industry is gradually ripe. The era of integrating animal raising and slaughter-process business may be fully started. In addition, although ASF has driven some small back yard farms out of the market, this does not mean that China's large scale farms have advantages in controlling ASF. On the contrary, the bio-safety measures of large scale farms in China are not mature compared withoverseas’, whilst compared with those back yard farms, large farms also have the characteristics of "more heads of pig", "more people" and "frequent economic activities", it is difficult for large farms to control once the disease outbreak. Therefore, ASF has become an obstruction for promoting large scale raising in China, which will forceChina’s pig raising industry must complete the transformation of "modernization" at first before being "large scale", whilst the boost of "large scale" is premised on‘thorough bio-safety measures and veterinaryservices’. Due to the improvement of bio-safety measures and veterinary services are restricted by "capital strength" and "construction period", for a long period of time, small back yard farms will rely on their "less investment", "small scale", "low cost" and "flexible response" to maintain their tenacious vitality.
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report F. Gradually changed consumption structure supporting an encouraging prospect of white feather broiler industry
According to statistics from the USDA, the per capita consumption ratio of pork, beef and chicken in China were88.81%,3.71% and7.48% in 1987 of the totals of three types of meat, and the pork consumption was close to90%. Coming into 2018, these figures changed to73.60%,11.22% and15.18%, the pork consumption showed a downward trend, but still huge. Compared with pork, beef consumption presented a small base but an obvious trend of growth, and chicken also showed a large increase. With the popularization of the concept of healthy diet, the proportion of chicken and beef consumption will continue to increase, especially for chicken, its nutritional characteristics of high-protein, low-fat, and low-cholesterol have been increasingly favored by Chinese residents. Moreover, in terms of growth rate and raising cost, etc., white feather broiler has greater advantages than pig and cattle. Under the dual effects of sharp contraction at the supply side and moderate expansion at the demand side, the white feather broiler industry has already ushered in a historic strong cycle, showing an encouraging prospect. 2. Development strategy of the Company
The long-term development goal of the Company is to become one of the world's top agricultural and animal husbandry enterprises, whilst in the next three years, it will be striving to become an enterprise with leading-edge quality and efficiency across agriculture, animal husbandry and food industries and a supplier of relevant service. In 2018, the Company further clarified its development strategy for the next three years, i.e., upholding the core value characterized by "integrity, responsibility andwin-win’, insisting the operation culture featured by‘innovation, efficiency and self-discipline", giving full play to the advantages of regional position and coverage effect of the brand, business scale and customer relationships, steadily improving present core businesses (feed& trade), developing emerging strategic businesses (broiler integration& pig raising), and actively cultivate potential businesses (international business& food), meanwhile, further echeloning the talents team, unremittingly innovating technology and marketing pattern, information resources, investment and financing platform, deeply expanding international business centered on Southeast Asia, and crafting an operation model with leading-edge quality and efficiency that can create synergies and reduce costs among all business
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report divisions, whilst providing customers and related parties (shareholders, employees, suppliers, society) products and services with brand influence, becoming an enterprise with leading-edge quality and efficiency across agriculture.
Following the business strategy of developing industrial chain and vertical integration, the Company will continuously increase investment in the integrated broiler business, optimize its industrial structure and conduct lean management in internal operation, further improve safety and added value of terminal broiler products, whilst it will give great impetus to raw meat and cooked food businesses, achieve the goal in ten years that “every Chinese person eats one Wellhope broiler every year". Regarding to pig business, the Company will proactively design the distribution of pig raising business, gradually realize regional covering and leading position by taking related advantages, such as geographic location, highly professional personnel. The Company plans to take 5 to 8 years creating an operation model which is driven by two complementary engines in terms of integrated broiler business and integrated pig business. Regarding to feed business, it will continue to explore new markets through the transformation and upgrading of feed plants, increase market shares and sales volume of single plant, conduct lean management to continuously reduce costs and expenses, whilst improve the operating efficiency and profitability. For trade and related businesses, it will seize the opportunities such as animal raising scale expanding, the advancement of raising technology and upgrading of bio-safety system, conduct precisely marketing and improve services, pursuing a synergetic development with the main business and multi-win. The Company will also deepen, improve, thoroughly exploit the existing overseas markets.
A. Talents leadership strategy: The Company will give full play to the existing advantages of corporate culture, employer brand and human resource management, continuously optimize organizational structure and improve management system, strengthen talent echelon construction, enhance performance appraisal management and remuneration incentive mechanism, meanwhile, it will reinforce the recruitment of outstanding talents for integrated business, promote all policies being tilted towards excellent talents, make more excellent and high-potential talents can move to the management stage, continue to cultivate required talent resources to the organization.
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report B. Technology innovation strategy: The Company will strengthen the reserve of key technical talents, improveR&D management and evaluation system, as well as establish an effective incentive mechanism. Meanwhile, it will make great efforts to provide integrated solutions for customers by virtue of precise nutrition, strict quality control and innovative services. It will also enhanceR&D expenditures in the field of broiler integration and pig raising, promote independent innovation and further exchange know-how and animal raising with Royal De Heus to ensure the leading-edge product competitiveness.
C. Corporate culture strategy: The Company will utilize the unique advantages of its corporate culture in corporate value orientation, behavioral traction and brand image-building, continuously improve strategic planning for corporate culture and its management functions, strengthen cultural publicizing and appraisal of implementation for core managers, and optimize promoting channels and further improve the ways of publicizing corporate culture, creating cohesive and highly recognized values and codes of conduct whilst forging a uniquely competitive enterprise and brand image.
D. Informatization strategy: The Company will allow fully play to the rich experience of informatization-based operation and maintenance in the feed business, help to strengthen core business and emerging strategic business, and further deepen the informatization level of feed business, rapidly promote the IT application of broiler integration and trade business, improve big data platform and training system to avoid security risks, and create an information resource management platform which will promote the Company's fine management , provide date for decision-making and expedite operating efficiency.
3. Business plan in 2019
2019 is the first year for the Company conducting strategic changing and transformation, it will leverage the strengths of culture, talents, market and brand that have been accumulated over the years. While continuing to develop feed and raw materials trade businesses, the Company will reinvest in integrated broiler business and promote its in-depth management, whilst accelerate the distribution and operation of pig raising business, taking 5 to 8 years to craft an operation model driven by two complementary engines: integrated broiler and integrated pig businesses, focusing on achieving the management strength of "leading-edge quality and efficiency" that creates synergies and
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report reduces costs among all business, becoming an top-notch enterprise with leading-edge quality and efficiency across agriculture, animal husbandry and food industries as well as a manufacturer of safe and high-quality meat product.
A. Integrated broiler business
In 2019, the Company will seize the opportunities arising from consolidated industry and its transformation and upgrading, further improve the production capacity and scale through in-depth management and mergers and acquisitions, whilst accelerate the pace of broiler raising and cooked food business, moreover, great efforts will be made to increase the volume of broiler feed, promote slaughtering business and moderately expand the hatching business, so as to further improve the chain structure, and gradually enable the capacity of broiler raising can fully meet the slaughtering needs. It will strive to achieve the goal of raising 390 million broilers and slaughtering over 500 million in 2019(holding and associated companies together).
Furthermore, it will continue to strengthen lean management, adhere to benchmarking management to continuously improve internal management, and also attach great importance to boost raising technology, bio-safety system building, etc., meanwhile, along with centering on product innovation, quality safety and marketing expansion, it will try to realize promotions in the sales of fresh raw meat, prepared and cooked food, as well as exported products. Moreover, it will continuously pursue safety and efficiency improvement in broiler raising unit, chase quality and structure improvement in slaughtering and processing unit, whilst strive to achieve further improvement in scale and quality for further processing unit.
Relying on the opportunities provided by the industry and market and self-owned advantages, Wellhope will unswervingly expand, maximize and refine integrated broiler business, partnering towards the goal of taking 10 years for slaughtering 1 billion white feather broilers and providing each Chinese person with one Wellhope broiler per year. B. Feed and raw material trade business
In response to ASF, the Company will continuously develop market-oriented feed products, increase sales of high-value products, continuously improve and innovate customer service systems, help customers to tide over the difficulties. While stabilizing pig feed, the
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report Company will seize the opportunity of structure adjustment of meat product, give full play to its brand advantage of ruminant feed, strengthen the marketing efforts of the ruminant and aquatic feed, further enhance product competitiveness and customer service quality, as well as strive to achieve a large percentage increase in ruminant and aquatic feed. Furthermore, in 2019, the Company will continuously deepen internal reform, separate the sales system and administration system of feed business, innovate incentive policies, continue to reduce production costs and period expense rate, and strengthen personnel management to ensure that the overall operation system is more efficient and competitive.
C. Pig raising business
Based on the practices accumulated from 2017 to 2018, the Company has further clarified the strategy of entering pig raising business with firm confidence. In 2019, while continuing to operate existing pig projects, the Company will give great efforts to newly started 500,000 heads pig project in Fushun city, and the pig farm in Gongzhuling city. Meanwhile, it will actively seek for cooperation and acquisition opportunities regarding pig raising and slaughtering, further strengthen professional talents team building and bio-safety management for pig farms, especially focus on pig farm and farmers' disease prevention as well as the operation cost management for pig farms. Along with carrying forward newly built projects, the capacity of pig raising will be gradually released, the Company's holding and associated companies will try to achieve the goal of providing 300,000 heads of pig in 2019 (without considering the uncertainties caused by ASF).
D. Key points of transformation and management in 2019
◇ Safety is the first priority.
◇Uphold the driven rules for operation management: "Code of conduct of managers", "Strict management regarding three aspects" (strict intracompany management, strict performance appraisal, and strict self-discipline).
◇ Continue to promote excellent performance management, deepen the reform, and complete business transformation and upgrading.
◇ Focus on talents echelon building.
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report◇ Fully conduct lean management, gradually achieve leading-edge quality and efficiency.◇ Enhance the management of financing and risk control, ensure the healthy and sustainable development.
◇ Implement brand strategy, enhance the core competitiveness.
◇ Speed up IT application, provide data for supporting decision-making.
4. Possible risks
A. Risks of fluctuations in raw material prices
Most costs of the feed business come from raw materials. The production changes in producing areas, import policies, storage and subsidies, exchange rate fluctuations, logistics costs and other factors may trigger fluctuations in the raw material market, which will affect the Company's feed business costs and gross profit margins. With deepened internationalization of the trade of agricultural products in recent years, the supply-demand relationship and trading price of raw materials have been affected by market conditions such as spot and futures at home and abroad, and the price trend has become more complex followed by increasingly fierce fluctuations, which further increases the difficulties of theCompany’s cost management. In addition, the changes in China-US trade relations, international political and economic environment and other factors have also made the purchase price of raw materials more variable.
Solutions:
(a) The Company has established strategic partnerships with many top domestic and foreign raw material suppliers, and strategically reduced purchasing costs through three-level purchasing mode in terms ofheadquarters’ centralized purchasing,regions’ price compare purchasing and localdepartments’ purchasing of different varieties.
(b) The Company combines its raw material trading business with purchasing management, i.e., the professional and practical rawmaterials’ purchasing team conducts targeted forward-looking researches and real-time tracking on the market, makes great efforts to reduce the purchasing price, such as uniformly managing different varieties, adopting spot purchasing and futures together.
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report (c) The purchasing team works closely with theR&D team to complement each other's advantages, further optimize the purchasing cost by way of re-formulating the feeds i.e., changing the composition of the feed to use cheaper alternative raw materials while achieving the same results, which can further optimize purchasing costs.
(d) The Company and Royal De Heus have set up an information sharing channel, which makes the two sides can timely share the market trends, such as raw materials, additives, etc. In addition, the two sides may carry out joint purchasing cooperation in the future, which will greatly enhance the overall bargaining power.
B. Risks of fluctuations in livestock and poultry prices
Animal husbandry industry is a typical cyclical industry, and the hysteretic nature of the adjustment of supply causes the prices fluctuating periodically. At present, China's animal husbandry industry is still dominated by back yard farms and small-scale farms, these farm owners show the character of non-rational decision-making, especially an obvious “herd effect”, which further aggravates the cyclical fluctuations in the market price.
Solutions:
(a) The Company's integrated broiler business has established an industrial chain, which can make the price fluctuations of all businesses can be fully counteracted, and then reduce the risks of price fluctuations of the whole chain.
(b) Since launching the integrated broiler business, the Company has always been committed to improving the production standards and management of each sector, reducing overall operating costs by optimizing the production and operation indicators and improving per capita efficiency. The advantage of its operating costs can mitigate the negative impacts on the Company when the industry is downward, and improve the overall profitability when the industry is booming.
C. Risks of serious animal disease
Feed and animal raising are the Company's two main businesses. Disease outbreak is one of the main risks faced by animal raising companies. Once a disease happens, it will cause panic in the market, which will reduce the demands, then lessen the production of the companies, decrease incomes and increase costs. Whilst, the feed industry mainly serves
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report downstream animal raising industry, the downstream market will directly affect the performance of feed business. As an unpredictable emergency, an explosive disease will undoubtedly have a strong impact on the Company's operations.
Solutions:
(a) Rationally optimize the industrial distribution and structural layout, disperse possible risks by the simplest and direct way.
(b) Improve the prevention and control technology of major epidemics, complete the early warning system and strive to control epidemics effectively before spreading.
(c) Set an emergency command system for major epidemics to minimize losses when they occur.
(d) Strengthen analysis and research capabilities for major epidemics, enhanceanimal’s immunity from the perspective of animal nutrition and veterinary services.
D. Risks of the industrial pattern adjustment caused by environmental protection policies
China has put forward some environmental protection regulations in recent years, such as Environmental Protection Tax Law, etc., which show the government's determination to increase environmental protection supervision in animal husbandry industry, whilst the local governments have also issued certain new regulations. It can be seen that the continuously strengthening environmental protection is the trend of the industry also an unavoidable reality, which will further weed out unqualified players and make the industry facing the situation of re-shuffling.
Solutions:
During the start-up period, the Company had input "Save Resources, Committed to Environmental Protection" as part of its Vision. For more than 20 years, the Company has always taken saving resources and protecting the environment as its important missions. (a) Regarding to raising and slaughtering, in the face of increasingly strict environmental protection requirements, the Company have comprehensively identified environmental risk points, and formulated emergency plan for environmental emergencies so as to maintain the stable operation. For the key pollutant discharge plants, the Company has
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report developed a complete self-monitoring program, which can find problems to repair, eliminate hidden dangers in a timely manner, it also continuously increases investment in environmental protection, such as personnel and funds, to ensure these plants always complying with national standards.
(b) Regarding to feed production, the Company has always implemented national environmental protection standards with the most rigorous attitude, established complete prevention and control measures for waste gas, noise, wastewater, solid waste and other pollution generated during the production process. It uses environmental-friendly raw materials and additives in feed formulations and also continuously develops safe and environment-friendly daily ration to reduce the emissions of heavy metals, nitrogen and phosphorus.
E. Risks of exchange rate fluctuations
The Company's international business started early and developed rapidly. The exchange rate fluctuations have released great influence on raw material purchasing, product export and overseas investment, presenting as follows: First, international development has made the global purchasing of raw materials becoming normally, therefore, the risks of exchange rate fluctuations are particularly evident in the raw materials which are based on oversea supply. Secondly, theCompany’s export business of broiler products is growing rapidly with customers from many countries and regions around the world, and the exchange rate fluctuations are inevitably caused by the settlements of multiple currencies. Finally, due to the large overseas investment and overseas operations, the cross-border capital transactions and settlements will also be affected by exchange rate fluctuations.
Solutions:
(a) Closely focus and study on the dynamic international foreign exchange market, enhance the awareness of preventing foreign exchange risk, and improve the research and forecasting capabilities of the foreign exchange market.
(b) Improve the bargaining power in foreign trade transaction by enhancing the competitiveness of products, and use RMB for settlement, reduce the exchange rate risks by adding insured value clause and the exchange rate risk allocation clause in the contract.
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report (c) Make full use of foreign exchange forwards, swaps and options (combination) and other instruments to maintain the exchange rate for foreign exchange exposure.
(d) According to specific conditions of different countries, based on the principle of "using foreign currencies in foreign trade", reasonably match the income and debts to control the exchange rate risks.
F. Risks of food safety
In recent years, there have been some food safety incidents in China, which affected consumers' confidence in food safety. China has continuously improved the legislation on food safety and food sources, conducted forceful measures on handling food violations. Once the food safety incident is triggered by poor quality supervision, it will directly damage the interests of consumers and cause panic, which may greatly impact the downstream demand and affect the brand and performance of the enterprises.
Solutions:
(a) Regarding to feed business, the Company has established a three-level quality management mechanism and testing system which consists of headquarters, regions and local departments, adopted ISO 9001, ISO 22000, ISO-IEC 17025 and other international standards, thoroughly implemented a series of quality standards to realize the whole process control of the products and established the traceability system. The Company works hard to popularize near-infrared detection technology, improves detection efficiency and shares data in time, by doing this, it can quickly realize risk warning and monitor heavy metals, harmful microorganisms and mycotoxins, providing an important guarantee for the feed products. In addition, by drawing on the experiences of European antibiotic-free feed, and basing on current situation in China, the Company has realized some progresses in antibiotic alternatives, at present, the feed products for finisher, sow, layer at laying period, broiler, ruminant and aquatic can realize antibiotic-free technology.
(b) Regarding to integrated broiler business, its industrial chain can fully control the forefront part of the supply of "material, medicine, day old chick" and production and sales process. Through unified operation model, standardized management and streamline operation, it can integrate bio-safety, drug residue control and hygiene management during the whole production processing to achieve food safety traceability.
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report Section V Important Disclosures
I. Common Stock Profit Distribution or Capital Reserve Converted into Share Capital 1. Cash dividend
The Company has established a sustainable, stable and scientific return system for investors basing on considering theCompany’s long-term and sustainable development, actual situation, current profit and future perspective of performance,shareholders’ willing, external financing circumstances, etc.
The Company madeThree-Year’s Shareholder Dividend Return Plan (2017-2019) in 2017, and at least every three years it will review the dividend return plan, and basing on the opinions of shareholders (especially non-controlling shareholders), independent directors and supervisory board directors, the Company will evaluate the ongoing profit distribution policy and make necessary modification.
During the reporting period, the Company conducted profit distribution for 2017 in April 2018: based on the total share capital on December 31st, 2017 as 831,176,469 shares, it distributed cash dividends of RMB 1.00 yuan per 10 shares (tax included), totalling 83,117,646.90 yuan.
The Company's 2018 profit distribution plan will be: based on the total share capital on the equity registration date when the 2018 annual profit distribution will be implemented, it will distribute cash dividends of RMB 1.8 yuan per 10 shares (tax included) to all shareholders, totalling RMB 166,014,791.28 yuan. This profit distribution plan will be submitted to the Shareholders' Meeting.
2. Plan or scheme of common stock profit distribution or capital reserve converted into share capital in the latest three years
Unit: yuan Currency:RMB
||||||
|-|-|-|-|-|
||||The net profit||
|||||Percentage of net profit|
||||attributable to the||
||Dividend per|||attributable to the|
|||Amount of cash|common||
||10 shares|||common shareholders of|
|Year||dividends|shareholders of the||
||(yuan, tax|||the Company in the|
|||(tax included)|Company in the year||
||included)|||consolidated|
||||of distributing cash||
|||||statements %|
||||dividend||
|2018|1.80|166,014,791.28|551,928,618.35|30.08|
|2017|1.00|83,117,646.90|471,024,473.92|17.65|
|2016|1.00|83,117,646.90|426,978,443.55|19.47|

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report II. Execution of Commitment
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|-|-|-|-|-|-|-|
|Background of||||Date of making|Whether|Whether|
||Type of|Commitment|||||
|making|||Content|commitment and|there is a|performs|
||commitment|party|||||
|commitment||||validity|time limit|strictly|
|||Nature person|I warrant and commit that I will not directly or indirectly develop, operate or||||
||Handling|shareholders|assist in the operation or participate in or engage in any activity that is||||
|||||March 2nd,2011,|||
||horizontal|holding more|competitive with the business of Liaoning Wellhope, if Liaoning Wellhope will||yes|yes|
|||||long-term valid|||
||competition|than 5% of the|increase any business scope after the date of signing this commitment, I promise||||
|||shares|to give up the business.||||
|||Legal person|||||
|||shareholders|Our company warrants and commits that our company will not directly or||||
||Handling|holding more|indirectly develop, operate or assist in the operation or participate in or engage in||||
|||||March 2nd,2011,|||
||related party|than 5% of the|any activity that is competitive with the business of Liaoning Wellhope, if Liaoning||yes|yes|
|||||long-term valid|||
||transaction|shares-Heli|Wellhope will increase any business scope after the date of signing this||||
|||Investment|commitment, our company promises to give up the business.||||
||||When selling shares within two years after the expiration of the lock-up period,||||
||||the selling price shall not be lower than the offering price. After going public, if||||
||||the closing price of the Company's stock of 20 consecutive trading days within 6||||
|Commitment||||April 2nd, 2014,|||
|||Jin Weidong,|months is lower than the offering price, or the closing price in the end of 6||||
|relating to IPO||||within two years|||
|||Wang Fengjiu,|months later is lower than the offering price, the above lock-up period shall be||||
|||||after the expiration|||
||Restriction of|Shao Caimei,|automatically extended for 6 months. (if the Company conducts ex-right,||yes|yes|
|||||of the lock-up|||
||selling shares|Wang Zhongtao,|ex-dividend for reasons of distributing cash dividend, capital reserve converted||||
|||||period|||
|||Ding Yunfeng|into share capital, issuing new shares, etc., the price of selling stock and closing||||
||||price shall be conducted ex-right and ex-dividend in accordance with relevant||||
||||provisions of China Securities Regulatory Commission and Shanghai Stock||||
||||Exchange.)||||
||||After IPO, if I plan to selling shares after the expiration of the lock-up period, I will||||
||||announce the selling plan prior to 3 trading days before selling shares. Specific|April 2nd, 2014,|||
|||Jin Weidong,|||||
||||arrangement will be as follows: 1. the number of selling shares: if selling shares|within two years|||
|||Wang Fengjiu,|||||
||Restriction of||within 2 years after the expiration of the lock-up, the number of selling shares will|after the expiration|||
|||Shao Caimei,|||yes|yes|
||selling shares||be no more than 5 million shares, if the Company will conduct placing, capital|of the lock-up|||
|||Wang Zhongtao,|||||
||||reserve converted into share capital, etc., which will change the share capital, the|period|||
|||Ding Yunfeng|||||
||||number of selling shares shall make corresponding adjustment; 2. Way of selling||||
||||shares: the shares shall be sold through the centralized bidding trading system||||

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report
||||||||
|-|-|-|-|-|-|-|
||||and block trading system of Shanghai Stock Exchange. If the total number of||||
||||unrestricted shares planned to be sold within the next month is expected to||||
||||exceed 1% of the total number of shares, the shares shall be transferred through||||
||||the blocking trading system. 3. Selling price: if selling shares within 2 years after||||
||||the expiration of the lock-up, the selling price shall be not lower than the IPO||||
||||price (if the Company conducts ex-right, ex-dividend for reasons of distributing||||
||||cash dividend, capital reserve converted into share capital, issuing new shares,||||
||||etc., the price of selling stock or buying stock shall be conducted ex-right and||||
||||ex-dividend in accordance with relevant provisions of China Securities Regulatory||||
||||Commission and Shanghai Stock Exchange)||||
||||4. Time limit of selling shares: the time limit of selling shares shall be within six||||
||||months from the date of announcing the selling plan. After the expiration of time||||
||||limit, if intending to continue to sell shares, shall perform the announcement of||||
||||selling shares again in accordance with the above arrangement.||||
||||If above commitments cannot be fulfilled, the proceeds from selling shares shall||||
||||belong to the Company and shall be paid to the designated account of the||||
||||Company within 5 days of receiving such income.||||
|||Jin Weidong,|||||
||||The controlling shareholder Jin Weidong and persons acting in concert with him||||
|||Wang Fengjiu,|||||
||||undertake that there are no false records, misleading statements or material||||
||Other|Shao Caimei,||long-term valid|yes|yes|
||||omissions in the prospectus of IPO and its summary, and shall bear individual and||||
|||Wang Zhongtao,|||||
||||joint legal liabilities for its authenticity, accuracy and completeness.||||
|||Ding Yunfeng|||||
||||The Company undertakes that there are no false records, misleading statements||||
|||Liaoning|||||
||Other||or material omissions in the prospectus of IPO and its abstract, and it shall bear|long-term valid|yes|yes|
|||Wellhope|||||
||||individual and joint legal liabilities for its authenticity, accuracy and completeness.||||
|Commitment|||||||
|||Liaoning||December 15th,|||
|relating to|Dividend||Liaoning Wellhope Three-Year’s Shareholder Dividend Return Plan (2017-2019)||yes|yes|
|||Wellhope||2017, three years|||
|re-Financing|||||||

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report III. Changes in Accounting Policies and Estimates made by the Company
1. The Company prepared the financial statements for 2018 in accordance with the Notice of the Ministry of Finance on the Revision and Issuance of the Format of General Corporate Financial Statements for 2018 (No. 15[2018] of the Ministry of Finance) and its interpretation as well as the requirements of Accounting Standards for Business Enterprises, such accounting policy change adopts the retroactive adjustment method. 2. The Ministry of Finance in 2017 promulgated the No. 9 Interpretation of Accounting Standards for Business Enterprises - Accounting Treatment for the Net Loss of Investment under the Equity Method, No. 10 Interpretation - Depreciation Method which Bases on the Income Generated by Fixed Assets, No. 11 Interpretation - Amortization Method which Bases on the Income Generated by Intangible Assets, No. 12 Interpretation -Whether the key management service provider and receiver is related party.
The Company has implemented above interpretations from January 1st, 2018, which had no impact on the Company's financial figures at the beginning of period.
The changes in accounting policies will not affect the Company's total assets, total liabilities, net assets and net profits in the consolidated financial statements in 2018 and before the change.
IV. Accounting Firm Engaged by the Company
Unit: 10,000 yuan Currency: RMB
|||
|-|-|
|Accounting Firm ( Local)|Jiangsu SuyaJincheng CPA LLP|
|Payment|110|
|Length of Service|8 years|

||||
|-|-|-|
||Name|Payment|
|Accounting Firm of Internal|||
||Jiangsu SuyaJincheng CPA LLP|35|
|Control|||

||||
|-|-|-|
||Name|Jiangsu SuyaJincheng CPA LLP|
|||21st-23rd F, Central International Plaza, No.105-6|
|Accounting Firm|Office Address|North Zhongshan Road, Nanjing, Jiangsu Province,|
|( Local)||China|
||Name of||
|||Zhou Jiawen, Wang Jin|
||Signed CPA||

The Company did not change the accounting firm during the reporting period.
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report V. Major litigation and Arbitration Matters
Non
VI. Statement of the Integrity of the Company, its Controlling Shareholders and Actual Controller during the Reporting Period
During the reporting period, there is no occurrence of the Company's controlling shareholders and actual controller failing to perform the effective judgment of the court, needing to pay a large amount of unliquidated debt due.
VII. Employee’s Equity Incentive Plan, Stock Ownership Plan or Other Incentive Measures and related Impacts
|||
|-|-|
|Overview|Query URLs|
||For details, please refer to The|
||Announcement of Granting Result|
|On November 21st, 2018, the Company held the||
||of Liaoning Wellhope 2018|
|7th meeting of the 6th Session of Board of||
||Restricted Stock Incentive Plan|
|Directors, deliberating and approving 2018||
||issued by the Company on the|
|Restricted Stock Incentive Plan (draft) and its||
||website of Shanghai Stock Exchange|
|Summary, and on January 9th, 2019, the Company||
||"www.sse.com.cn" on January 11st,|
|finished the registration of restricted stock.||
||2019.|
||(Announcement No. 2019-001)|

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report VIII. Significant Related Party Transaction
|||
|-|-|
|Related transactions related to|Day-to-Day Operations|

Matters do not disclose in the Company's extraordinary announcement
Unit: 10,000 yuan Currency: RMB
||||||||
|-|-|-|-|-|-|-|
|||Transaction|Transaction||Transaction||
|Related Party|Relationship|||Pricing Principle||Settlement Mode|
|||Type|Content||Amount||
||Associated|Purchasing|Feed raw|Comparable uncontrolled|||
|Suizhong Rehen Fishery|||||406.33|Transfer of account|
||company|goods|materials|price|||
||Associated|Purchasing||Comparable uncontrolled|||
|Anshan Jiuguhe Food|||Poultry product||1,060.76|Transfer of account|
||company|goods||price|||
||Associated|Purchasing||Comparable uncontrolled|||
|Dalian Chengsan Animal Husbandry|||Delivery broiler||16,511.39|Transfer of account|
||company|goods||price|||
||Associated|Purchasing||Comparable uncontrolled|||
|Huludao Jiuguhe Food|||Poultry product||543.53|Transfer of account|
||company|goods||price|||
||Associated|Purchasing||Comparable uncontrolled|||
|Schippers(Beijing)|||Other||42.82|Transfer of account|
||company|goods||price|||
||Associated|Purchasing|Feed raw|Comparable uncontrolled|||
|Guangzhou Yikun Trading|||||618.88|Transfer of account|
||company|goods|materials|price|||
|Zhangjiakou Jiahe Agriculture and|Associated|Purchasing||Comparable uncontrolled|||
||||Piglet||592.82|Transfer of account|
|Animal Husbandry|company|goods||price|||
||Associated|Purchasing||Comparable uncontrolled|||
|Tai’an Jiuguhe Agriculture|||Feed||1,242.99|Transfer of account|
||company|goods||price|||
||Associated|Purchasing||Comparable uncontrolled|||
|Linghai Jiuguhe Feed|||Other||63.86|Transfer of account|
||company|goods||price|||
|Gongzhuling Corn Purchasing and|Associated|Purchasing|Feed raw|Comparable uncontrolled|||
||||||97.08|Transfer of account|
|Storing|company|goods|materials|price|||
||Joint|||Comparable uncontrolled|||
|Nepal Wellhope Agri-tech Pvt. Ltd.||Selling goods|Feed||19.96|Transfer of account|
||venture|||price|||
||Associated||Feed raw|Comparable uncontrolled|||
|Linghai Jiuguhe Feed||Selling goods|||3,787.82|Transfer of account|
||company||materials|price|||
||Associated||Feed raw|Comparable uncontrolled|||
|Tai’an Jiuguhe Agriculture||Selling goods|||6,839.00|Transfer of account|
||company||materials|price|||
||Associated|||Comparable uncontrolled|||
|Anshan Jiuguhe Food||Selling goods|Delivery broiler||15,895.14|Transfer of account|
||company|||price|||

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report
|||||||||
|-|-|-|-|-|-|-|-|
||Associatedcompany|||Feed raw|Comparable uncontrolled|||
|Qingdao Shenfeng Agri-Tech|||Selling goods|||1,835.97|Transfer of account|
|||||materials|price|||
||Associatedcompany|||Feed raw|Comparable uncontrolled|||
|Beipiao Hongfa Food|||Selling goods|||726.01|Transfer of account|
|||||materials|price|||
||Associatedcompany||||Comparable uncontrolled|||
|Huludao Jiuguhe Food|||Selling goods|Feed||1,373.63|Transfer of account|
||||||price|||
|Dandong Wellhope Chengsan|Associatedcompany|||Feed raw|Comparable uncontrolled|||
||||Selling goods|||1,082.08|Transfer of account|
|Agri-Tech||||materials|price|||
||Associatedcompany||||Comparable uncontrolled|||
|Suizhong Rehen Fishery|||Selling goods|Feed||11.17|Transfer of account|
||||||price|||
||Associatedcompany||||Comparable uncontrolled|||
|Schippers(Beijing)|||Selling goods|Other||88.74|Transfer of account|
||||||price|||
|Zhangjiakou Jiahe Agriculture and|Associatedcompany||||Comparable uncontrolled|||
||||Selling goods|Feed||2,305.99|Transfer of account|
|Animal Husbandry|||||price|||
||Associatedcompany|||Feed raw|Comparable uncontrolled|||
|Guangzhou Yikun Trading|||Selling goods|||14,504.00|Transfer of account|
|||||materials|price|||
||Associatedcompany||||Comparable uncontrolled|||
|Jinzhou Jiufeng Food|||Selling goods|Delivery broiler||521.16|Transfer of account|
||||||price|||
||Associatedcompany||||Comparable uncontrolled|||
|Anshan Fengsheng Food|||Selling goods|Delivery broiler||9,945.16|Transfer of account|
||||||price|||
||Associatedcompany|||Feed raw|Comparable uncontrolled|||
|Dalian Chengsan Animal Husbandry|||Selling goods|||1,033.76|Transfer of account|
|||||materials|price|||
|Tailai Jiahe Agriculture and Animal|Associatedcompany||||Comparable uncontrolled|||
||||Selling goods|Feed||4,186.32|Transfer of account|
|Husbandry|||||price|||
|Total|||||/|85,336.37|/|
|Wholesale sales return||non||||||
|||The Company and its associated companies know each other better, and have maintained long-termcooperation relationships, which can strengthen the trust of products produced by partners, reducetransaction cost, improve working efficiency and avoid trading disputes. Purchasing raw materials fromrelated parties can ensure the quality. Moreover, by participating in the management and exerting influenceon related companies can help them to maintain a long-term and stable supply, also help them reduce themarketing pressure. The purpose of conducting related party transactions is to satisfy the needs of theCompany's production and operation, the purchasing or selling price is determined according to the marketprice of similar products. Such transactions do not violate relevant laws, Company Constitution, etc., and donot damage the rights and interests of shareholders.||||||
|Interpretation of related party transaction||||||||

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report IX. Circumstance of Social Responsibilities
1. Anti-poverty project of the Listed Company
A. Targeted poverty alleviation
|||
|-|-|
|The Company actively responds to the planning and requirements of the Party Central||
|Committee and governments at all levels for targeted poverty alleviation, diving by the||
|principle of the Company’s Mission—Providing Service to the Society, and taking "targeted||
|poverty alleviation " as|strategy, it formulates poverty alleviation programs|

||
|-|
|and work plans regarding to agricultural industry to facilitate targeted poverty alleviation.|
|At the same time, the Company also actively assists to education and public welfare|
|establishments to expand the scope and connotation of poverty alleviation work.|

B. Overview of targeted poverty alleviation
Lankao meat duck integration project was invested by the Company as the targeted poverty alleviation project in response to the call of Lankao County Party Committee and county government. Since 2014, Lankao County has built a total of 1,053 back yard duck houses and 58 duck farms, which used unified management in terms of unified supply of day old duckling, feed, medicine, technical service and repurchasing to ensure food safety. The farmers do not need to prepare working capital.
The Company also provides farmers with a unified veterinary drug subsidy of 0.5 yuan per duck, coal subsidy of 0.2-0.5 yuan per duck in winter and cooling subsidy of 0.3-0.5 yuan in summer and other policies, above-mentioned matters have been clearly stated in the contract. In 2018, the Company signed 2,774 contracts with 1,387 farmers, and repurchased 15.416 million meat ducks, with a total subsidy of 8.476 million yuan. The farmers realized good benefits, the average profit of farmers could reach 4 yuan per duck, achieving a bumper harvest in 2018.
C. Figures of targeted poverty alleviation
Unit: 10,000 yuan, Currency: RMB
|||
|-|-|
|Index|Details|
|1. Overall||
|of which: funds for poverty alleviation|847.60|
|2. In details||
||Targeted poverty alleviation for|
|Type of targeted poverty alleviation||
||agriculture|
|a. The number of targeted poverty alleviation||
||1|
|project||
|b. Investment amount|847.60|

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report D. Follow-up targeted poverty alleviation
The Company will continuously focus on poverty alleviation projects for agricultural industries, supporting poverty by training farmers, providing job opportunities and increasing income of farmers, it will also increase the technical service, and improvefarmers’ technology level to ensure the success of farming, achieve a win-win situation. 2. Social responsibilities
Animal husbandry is a fundamental industry that drives farmers to become richer, it is also a great industry that makes people living a happier life. There are 5 animal husbandry products in the “Vegetable Basket Project” among chickens, fish, meat, eggs, milk, vegetables and fruits. This industry is a basic guarantee for providing hygienic and nutritious animal foods and holding important missions and responsibilities. At the start-up period, the Company wrote and announced its Vision and Mission to inside and outside the industry, indicating and admonishing all employees about the Company's social responsibilities and missions during its development process. Over the years, the Company has been strictly fulfilling its commitment and practicing the corporate culture. In 2018, the Company further refined its core values characterized by "Integrity, Responsibility, Win-win", once again stressed the importance of its responsibilities.
A. Responsibilities to society and industry
 Practice of Wellhope Mission. The Company has taken “Using advanced technology, excellent service, and outstanding products to promote the development ofChina’s animal husbandry industry, save resources, protect the environment, provide food security and benefit the society” as its mission and ultimate goal since its establishment.
Saving resources: China needs to use only7% of the world's land to feed22% of the world's population. In response to increasing shortage of natural resources, the Company continues to develop new products like low-protein daily ration and biological feed, which are committed to saving resources and saving food. In terms of raising technology, the Company helps farmers to improve their raising concept and technology level so as to continuously achieve high efficiency and benefit, whilst the Company also applies relevant energy-saving technologies to improve resource utilization, for example, its original ventilation mode and solar energy utilization technology, can simplify ventilation and heat
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report preservation, reduce electricity consumption and save coal. In terms of broiler slaughtering, the Company equips high-efficient facilities and continuously improves its technology, meanwhile, through fine management, it improves slaughtering technique level and achieves efficient killing-out percentage and energy saving.
Environment Protection: Because animal husbandry has certain pollution to the environment, the Company utilizes various ways such as technological innovation and equipment investment to protect the environment. In terms of technical innovation, it applies environment-friendly raw materials and additives in feed formulations, and continuously develops safe and environment-friendly daily ration to reduce emissions of heavy metals, nitrogen and phosphorus. In terms of animal raising and slaughtering, the Company automates production lines and continuously improves the design, recycles wastes and uses the combination of planting and animal raising to realize environmental protection.
Food Safety: The Company'sR&D testing center is equipped with advanced testing equipment that comes from all over the world. Through strict quality control management, raw materials and feed products are checked at all levels to ensure the safety of feed products. For the broiler business, the Company takes all aspects of controlling of the supply of "material, medicine, day old chick" as well as production and sales process from the source. Relying on unified operation model, standardized management and streamline operation, the Company integrates bio-safety, drug residue control and processing hygiene to achieve traceable food safety.
 Honesty Driven Company. In the course of development, the Company has always conducted business driven by the principle of honesty and trustworthiness, observing the laws and compliance management, always keeps its words to employees, customers, suppliers, partners and shareholders. The Company strictly implements the regulations issued by China Securities Regulatory Commission, Shanghai Stock Exchange, its Company Constitution and other internal systems, also actively adapts to the changes in regulatory policies, and continuously improves its corporate governance and the effectiveness of information disclosure. In 2018, the Company honestly and normatively disclosed 66 temporary announcements and 4 periodic reports in the designated media, which truly and comprehensively displayed its profit status, core businesses, development plans, and
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report effectively transmitted its information to the investors, it had no violations on information disclosure. The Company's annual information disclosure work in 2017 received the A-level evaluation from Shanghai Stock Exchange. Entering 2019, it will continue to carry out the principles of honesty driven, protect the legitimate rights and interests of investors, and give play to the social responsibilities of listed company.
 Public Charity. The Company has always persisted in the principle of contributing to its motherland by operating excellent businesses and giving back to the society. Over the years, the Company has donated to disaster areas, disabled aid projects and related educational institutions directly or through the Red Cross. In recent years, the Company has continued to work with a supplier, participating in the donation activities on the World Egg Day, caring about poor primary school students' healthy growth through donating high-quality and nutritional eggs. Moreover, the Company provides awards and bursary supports to many college students in China, also gives them holiday internship opportunities and organizes summer camps. In 2018, the Company donated nearly RMB 1 million of education funds and scholarships to Nanjing Agricultural University, Shenyang Agricultural University, Gansu Agricultural University and other universities. The subsidiary companies also actively participated in charitable activities organized by local governments. Many managers of the Company also devoted themselves to public charity in different forms.
 Employment Promotion. According to the Company's development needs, it carries out social and campus recruitment every year, creating job opportunities for the society. In 2018, the Company recruited more than 300 undergraduates, masters and doctoral students from 28 universities across China, and provided systematic training to help them grow rapidly.
B. Responsibilities to employees and shareholders
a. The Company has always pursued sharing results and achieved win-win and multi-win with employees, customers, partners and shareholders. Since going public, it has implemented stable returns for investors, and madeThree-Year’s Shareholder Dividend Return Plan (2017-2019) in 2017, to guaranteeshareholders’ rights and interests. Whilst theCompany’s 2018 profit distribution plan will be: based on the total share capital on the
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report equity registration date when the 2018 annual profit distribution will be implemented, the Company will distribute cash dividends of RMB 1.8 yuan per 10 shares (tax included) to all shareholders, totalling RMB 166,014,791.28 yuan. This profit distribution plan has been deliberated and approved by the Board of Directors, pending submission to the Shareholders' Meeting. After the implementation, the Company will totally distribute cash dividends of 332 million yuan from 2016 to 2018, accounting for22.91% of the net profit attributable to the shareholders of the Company.
b. Driven by the principle of "sharing bumper harvest", the Company shares its achievements with employees in various ways, such as holding shares of subsidiaries and flexible welfare. In 2018, the Company implemented Restricted Stock Incentive Program for granting 372 key managers in key positions restricted stock, which effectively combined the interests of shareholders, the Company and the core team to promote the sustainable development of the Company and realize sharing of results.
c. In strict accordance with national laws and regulations, the Company provides social security for employees. On this basis, it provides commercial insurance to employees and benefits their family members, and it also expands welfare guarantee through internal resource sharing, pilot flexible benefits, and commendation awards to improveemployees’ happiness index. In the meantime, the Company continues to build three-level training system, fully develops and uses Wellhope E-Learning College and external resource channels to provide more time-sensitive and adaptable courses to promote the growth and value enhancement of employees. In the aspect of career development, the Company has created an “H-type” dual-channel development plan for employees. Each employee can choose a management route or a technical route according to competence and future planning. The Company targets at making great efforts to help employees to achieve their career development.
d. The internal public welfare organization -- “Wings of Love” foundation, established in 2007, continues to play the role of caring for employees. It gives certain rewards to theemployee’s children who are admitted to the universities, encouraging them to study hard and encouraging the employees to train talents for the country and society., whilst it provides financial assistance to the families of employees suffered difficulties, helping them to tide over hard time, now the Company has donated nearly RMB 4 million yuan.
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report Moreover, every year the Company organizes different forms of cultural activities to continuously enrich the work and life of employees. On December 11st, 2018, the Company won the honorary title of “National Model Enterprise with Harmonious Labor Relations” initiated byChina’s Ministry of Human Resources and Social Security, and in "2018 China Best Employers Awards Ceremony" hosted by Zhaopin.com on December 18th, 2018, the Company stood out among more than 30,000 enterprises and won the "2018 Top 10 Best Employers of Shenyang".
C. Responsibilities to customers
Driven by the concept of making progress together with customers, the Company is dedicated to providing excellent products to customers, whilst it is constantly improving and innovating customer service systems to help customers to grow and progress. The Company has developed a series of professional training programs, specialized management programs of farm environment and data management systems, etc. By ways of "five-meeting model" (new product recommendation meeting, dealer promotion meeting, product trial analysis meeting, animal raising technology seminar, dealer's training), “three on-site model” (on-site visit, on-site diagnosis, on-site plan design), expert hotline, etc., the Company helps dealers and farmers to improve their operation concept and raising technology to get better economic results. In 2018, ASF raged, which caused heavy losses to pig raising, the Company responded quickly, provided the farmers (farms) with newly developed products, online counseling and solutions to fight against the disease, it also promoted pig insurance and raising insurance. Moreover, the Company held live trainings of “Face up to ASF, Healthy Raising”, and invited domestic and foreign experts to analyze ASF and explain countermeasures from various aspects in order to help customers to prevent ASF and control losses. The highest number of online audiences reached 200,000. Moreover, its ruminant feed subsidiaries promoted custody business for cattle farms, whilst its integrated broiler business division provided contract farms with complete feeding and management solutions, to support customers growing business. 3. Environmental protection policy
A. Information of pollution discharge
Puyang Wellhope Food Co., Ltd. (hereinafter referred to as "Puyang Wellhope"), a holding
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report subsidiary of the Company, has been listed as key sewage& gas waste emission unit of Puyang City. Dalian Zhongjia Wellhope Food Co., Ltd. (hereinafter referred to as "Zhongjia Food"), a holding subsidiary of the Company, has been listed as key sewage& gas waste emission unit of Wafangdian City. Kaifeng Wellhope Meat Food Co., Ltd. (hereinafter referred to as "Kaifeng Wellhope"), a holding subsidiary of the Company, has been listed as key sewage waste emission unit of Kaifeng City. Shenyang Huakang Meat Poultry Co., Ltd. (hereinafter referred to as "Shenyang Huakang"), a holding subsidiary of the Company, has been listed as key sewage waste emission unit of Shenyang City. Details are presented as follows:
Puyang Wellhope: the main pollutants include gas waste and water waste, among which water waste mainly contains COD, ammonia nitrogen, total phosphorus, pH, suspended solids, biochemical oxygen requirement, animal and vegetable oil, total coliform group and total nitrogen. The gas waste mainly contains SO2, nitric oxide and particulate matter. Emission method: 1 sewage treatment waste water emission outlet, distributed in the southeast corner of the building of the sewage monitoring base station;1gas waste exhaust outlet, distributed in the boiler room in the northeast corner of the plant site. Puyang Wellhope strictly implements emission standards for industrial "three wastes". The emission of waste water is subject to the three-level standards in the Discharge Standard of Water Pollutants for Meat Packing Industry (GB 13457-1992), emission permit (9141092367412881xt001p), and the indirect emission limit value in the water inflow agreement of Nanle County sewage treatment Co., Ltd.(COD≤400mg/L,NH3-N≤35mg/L, total phosphorus≤2.5mg/L, BOD≤180mg/L, suspended solids≤220mg/L, totalnitrogen≤40mg/L, pH value of 6-9). The gas waste emission is subject to the concentration limit of Emission Standard of Air Pollutants for Coal-Burning Oil-Burning Gas-Fired Boiler (GB 13271-2014) and emission permit (9141092367412881xt001p) requirements, that is, the emission concentration of SO shall be
≤50mg/Nm3,
the emission concentration of 2
particulate shall be
≤20mg/Nm3
and emission concentration of NOX shall be≤150mg /Nm³. Total emission of main pollutants under the pollutant emission permit is as follows: COD 15.58 tons/year and ammonia nitrogen 2.95 tons/year. During the reporting period, the total emission of Puyang Wellhope was controlled within the permitted scope, and the "three wastes" treatment met the standard requirements without exceeding the standard.
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report Kaifeng Wellhope: the main pollutant is water waste, which mainly contains COD, ammonia nitrogen, total phosphorus, pH, suspended solids, biochemical oxygen requirements, animal and vegetable oil, total coliform group and total nitrogen. Emission method: 1 sewage treatment waste water emission outlet, distributed in the southeast of the factory. Kaifeng Wellhope strictly implements emission standards for industrial "three wastes". The emission of waste water is subject to the second-level standard in the Discharge Standard of Water Pollutants for Meat Processing Industry (GB 13457-1992), emission permit (91410212MA4057G88A001R) and the sewage emission limit in the GHPY ZI No. 2501 Environmental evaluation criteria(COD≤100mg/L,NH3-N≤20mg/L,BOD≤40/L, suspendedsolids≤100mg/L, pH value of 6-8.5, coliformnumbers≤10000). Total emission of main pollutants under the pollutant emission permit: COD 3.60 tons/year, ammonia nitrogen 0.79 tons/year. During the reporting period, the total emission of Kaifeng Wellhope was controlled within the permitted scope, and the "three wastes" treatment met the standard requirements without exceeding the standard.
Zhongjia Food: the main pollutants include gas waste and water waste, among which water waste mainly contains COD, ammonia nitrogen, total phosphorus, pH, suspended solids and total nitrogen. The gas waste mainly contains SO2, nitric oxide and particulate matter. Emission method: 1 sewage treatment waste water emission outlet, distributed in the west of the southern end of the new sewage treatment workshop; 1 gas waste exhaust outlet, distributed on the roof of the boiler room. Zhongjia Food strictly implements emission standards for industrial "three wastes", DB 21/1627-2008 Liaoning Provincial Standard-Comprehensive Sewage Emission Standard(COD≤50mg/L,NH3-N≤8mg/L, totalphosphorus≤0.5mg/L, suspendedsolids≤20mg/L, totalnitrogen≤15mg/L, pH value of 6-9). The gas waste emission is subject to gas boiler emission concentration limit of Emission Standard of Air Pollutants for Coal-Burning Oil-Burning Gas-Fired Boiler (GB 13271-2014). During the reporting period, the total emission of Zhongjia Food was controlled within the permitted scope, and the "three wastes" treatment met the standard requirements without exceeding the standard.
Shenyang Huakang: the main pollutant is water waste, which mainly contains COD, ammonia nitrogen, pH and suspended solids. Emission method: 1 sewage treatment waste water emission outlet, distributed in then northeast of the sewage treatment station.
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report Shenyang Huakang strictly implements the emission standards for industrial "three wastes". The emission of waste water is subject to the first-level standard in the Discharge Standard of Water Pollutants for Meat Processing Industry (GB 13457-1992), emission permit DB 21/1627-2008 Liaoning Provincial Standard-Comprehensive Sewage Emission Standard(COD≤50mg/L,NH3-N≤8mg/L, totalphosphorus≤0.5mg/L, suspendedsolids≤20mg/L, pH value of 6-9). The gas waste emission is subject to gas boiler emission concentration limit of Emission Standard of Air Pollutants for Coal-Burning Oil-Burning Gas-Fired Boiler (GB 13271-2014) (SO emission concentration≤200mg/Nm3, particulate 2
matter concentration≤20mg/Nm3, NOX emission concentration≤200mg/Nm3). During the reporting period, the total emission of Shenyang Huakang was controlled within the permitted scope, and the "three wastes" treatment met the standard requirements without exceeding the standard.
B. Circumstance of building and operating pollution control facilities
Puyang Wellhope:
1). Sewage treatment: Puyang Wellhope has 2000T/D sewage treatment station, which adopts the treatment process of "pretreatment plus oil separation plus A2O plus disinfection" to treat the wastewater. Its environmental protection facilities are running normally, and the pollutant emission indexes all meet the third-level standards in the Discharge Standard of Water Pollutants for Meat Processing Industry (GB 13457-1992), the emission permit (YHXKNo. 2015-001 of Puyang City) and the indirect emission limit value in the water inflow agreement of Nanle County sewage treatment Co., Ltd.
2). Waste gas treatment: the gas generated by the waste water pool of the sewage treatment station is collected and purified by activated carbon adsorption and then discharged through the 15m-high chimney in accordance with related standard; the traditional coal-fired boilers are replaced by gas-fired boilers, and all kinds of pollutants meet the gas boiler emission concentration limit of the Emission Standard of Air Pollutants for Coal-Burning Oil-Burning Gas-Fired Boiler(GB 13271-2014)and emission permit(YHXK No. 2015-001 of Puyang City) requirements with the 8-meter high chimney for reaching the emission standard, which has been fundamentally effectively treated.
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report Kaifeng Wellhope:
Sewage treatment: Kaifeng Wellhope has 1700T/D sewage treatment station, which adopts the treatment process of "air floatation plus A2O" to treat the wastewater. Its environmental protection facilities are running normally, and the pollutant emission indexes all meet the second-level standards in the Discharge Standard of Water Pollutants for Meat Packing Industry (GB 13457-1992), the emission permit (Certificate No.:91410212MA4057G88A001R) and the sewage emission limit in the GHPY ZI No. 2501 Environmental evaluation criteria.
Dalian Zhongjia:
1). Sewage treatment: Zhongjia Food has a 1200T/D sewage treatment station, which adopts the treatment process of "mechanical barrier - oil separator - regulation pool - hydrolysis pool - contact oxidation pool - sedimentation pool - sand filter" to treat the wastewater and achieve DB 21/1627-2008 Liaoning Provincial Standard - Comprehensive Sewage Emission Standard.
2). Waste gas treatment: the smoke and dust generated by 4T coal-fired boilers used for production is de-dusted by wet method and de-sulphurized by magnesium oxide. All kinds of pollutants meet the gas boiler emission concentration limit of the Emission Standard of Air Pollutants for Coal-Burning Oil-Burning Gas-Fired Boiler (GB 13271-2014).
Shenyang Huakang:
Sewage treatment: Shenyang Huakang has a 720T/D sewage treatment station, which adopts the treatment process of "pretreatment plus oil separation plus A2O plus disinfection" to treat the wastewater. Its environmental protection facilities are running normally, and the pollutant emission indexes have reached the first-level standard in the Discharge Standard of Water Pollutants for Meat Packing Industry (GB 13457-1992).
C. Environmental impact assessment of construction projects and other administrative permits for environmental protection
During the reporting period, all the construction projects of the Company met the requirements of environmental impact assessment and other environmental protection administrative licenses. The Company has strictly implemented the "three simultaneous"
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report environmental protection system.
D. Emergency plan for environmental emergencies
According to the requirements of environmental protection authorities and relevant laws and regulations, each production unit of the Company has identified the site with potential environmental risk and formulated the emergent plans of environmental pollution incident; meanwhile, related companies conducted emergency exercises, improved self-help capability, and continued to identify the hidden danger to ensure normal operations.
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report Section VI Changes in Common Shares and Shareholder Information
I. Changes in Common Shares
During the reporting period, the total number of common share and the structure of share capital of the Company did not change.
II. Shareholders and Actual Controller
1. The number of shareholders
|||
|-|-|
|Total number of common shareholder as at December||
||22,583|
|31st, 2018||
|Total number of common shareholder at the end of||
||25,118|
|March 2019||

2. Top ten shareholders and top ten shareholders holding unrestricted shares as at the end of the reporting period
Unit: share
|||||||||
|-|-|-|-|-|-|-|-|
|Shareholding of top ten shareholders||||||||
|||Total shares held||Restricted|Pledged or Frozen|||
|Name of|||||||Nature of|
||Changes|at the|%|shares||||
|shareholder|||||Status|Shares|shareholder|
|||period-end||held||||
||||||||Domestic|
|Jin Weidong||146,487,381|17.62||Pledged|53,430,000|natural|
||||||||person|
||||||||Domestic|
|Ding Yunfeng||80,398,500|9.67||Pledged|8,930,000|natural|
||||||||person|
|DE HEUS|||||||Foreign legal|
|||80,007,352|9.63|||||
|MAURITIUS|||||||person|
||||||||Domestic|
|Shao Caimei|2,648,800|54,559,878|6.56||Pledged|16,900,000|natural|
||||||||person|
||||||||Domestic|
|Wang Fengjiu||50,084,602|6.03||Pledged|10,945,000|natural|
||||||||person|
||||||||Domestic|
|Zhang||||||||
|||48,360,000|5.82||Pledged|6,970,000|natural|
|Tiesheng||||||||
||||||||person|
|Shenyang||||||||
||||||||Domestic|
|Wellhope||||||||
||||||||non-State-|
|Heli||48,360,000|5.82|||||
||||||||owned legal|
|Investment||||||||
||||||||person|
|Co., Ltd.||||||||
||||||||Domestic|
|Wang||||||||
|||47,151,000|5.67||Pledged|8,220,000|natural|
|Zhongtao||||||||
||||||||person|
||||||||Domestic|
|Gao Junsong|-767,005|15,132,184|1.82||Pledged|8,570,000|natural|
||||||||person|
||||||||Domestic|
|Wang||||||||
|||9,800,000|1.18||Pledged|1,420,000|natural|
|Zhenyong||||||||
||||||||person|

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report
|||||
|-|-|-|-|
|Top ten shareholders holding unrestricted shares||||
||Unrestricted shares|Shares by type||
|Name of shareholder||||
||held|Type|Shares|
|Jin Weidong|146,487,381|RMB common stock|146,487,381|
|Ding Yunfeng|80,398,500|RMB common stock|80,398,500|
|DE HEUS MAURITIUS|80,007,352|RMB common stock|80,007,352|
|Shao Caimei|54,559,878|RMB common stock|54,559,878|
|Wang Fengjiu|50,084,602|RMB common stock|50,084,602|
|Zhang Tiesheng|48,360,000|RMB common stock|48,360,000|
|Shenyang Wellhope Heli Investment Co., Ltd.|48,360,000|RMB common stock|48,360,000|
|Wang Zhongtao|47,151,000|RMB common stock|47,151,000|
|Gao Junsong|15,132,184|RMB common stock|15,132,184|
|Wang Zhenyong|9,800,000|RMB common stock|9,800,000|
||1. Jin Weidong, Ding Yunfeng, Wang Fengjiu, Shao Caimei and|||
||Wang Zhongtao act in concert;|||
|Relationship of above shareholders or statement|2. Jin Weidong is the actual controller of Shenyang Heli Investment|||
|made by the parties acting in concert|Co., Ltd.|||
||3. No relation or concerted action is found among other|||
||shareholders.|||

III. Controlling Shareholder and Actual Controller
1. Controlling shareholder
Natural person
|||
|-|-|
|Name|Jin Weidong|
|Nationality|China|
|Whether acquire the right of||
|abode in other countries or|No|
|regions||
||Chairman of Liaoning Wellhope Agri-Tech Joint Stock|
|Major occupation and position||
||Co., Ltd.|

Note: As at the end of the reporting period, Jin Weidong directly held 146,487,381 shares
of the Company, accounting for17.62% of the total equity, and Jin Weidong totally
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report controlled51.38% of the Company's voting rights through controlling Shenyang Heli Investment which had5.82% of the Company's voting rights, and through signing the Agreement of Acting in Concert with DingYunfeng(9.67%), WangFengjiu(6.03%), ShaoCaimei(6.56%) and WangZhongtao(5.67%) who totally controlled27.93% of the Company's voting rights. Jin Weidong is the actual controller of the Company.
2. Actual controller
Natural person
|||
|-|-|
|Name|Jin Weidong|
|Nationality|China|
|Whether acquire the right of abode in||
||No|
|other countries or regions||
||Chairman of Liaoning Wellhope Agri-Tech Joint|
|Major occupation and position||
||Stock Co., Ltd.|
|Domestic and foreign listed companies||
|once held by the actual controller in the|Non|
|past 10 years||

Note: As at the end of the reporting period, Jin Weidong directly held 146,487,381 shares of the Company, accounting for17.62% of the total equity, and Jin Weidong totally controlled51.38% of the Company's voting rights through controlling Shenyang Heli Investment which had5.82% of the Company's voting rights, and through signing the Agreement of Acting in Concert with DingYunfeng(9.67%), WangFengjiu(6.03%), Shao
Caimei(6.56%) and WangZhongtao(5.67%), who totally controlled27.93% of the
Company's voting rights. Jin Weidong is the actual controller of the Company.
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report Section VII Preference Share
Not Applicable
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report Section VIII Directors, Supervisors, Senior Management and Employees
I. Changes in Shareholdings and Remuneration
1. Changes in shareholdings and remuneration of incumbent and outgoing directors, supervisors and senior management during the reporting period
|||||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
||||||||||||||||Whether|
|||||||||||||||Pre-tax||
||||||||||||||||obtain|
|||||||||||Opening|Closing|Changes in||remuneration||
|||||||||Start of|End of||||Reason of||remuneration|
|Name|Office title|||||Gender|Age|||shareholding|shareholding|shareholding||paid by the||
|||||||||tenure|tenure||||Change||from related|
|||||||||||(shares)|(shares)|(shares)||Company||
||||||||||||||||parties of the|
|||||||||||||||(10,000 yuan)||
||||||||||||||||Company|
|Jin Weidong|Chairman|||||male|56|Feb. 3, 2015|Feb. 1, 2021|146,487,381|146,487,381|||55.12|no|
||Director and|||||||||||||||
|Ding Yunfeng||||||male|56|Feb. 3, 2015|Feb. 1, 2021|80,398,500|80,398,500|||53.00|no|
||President|||||||||||||||
|Wang Fengjiu|Vice President|||||male|50|Feb. 3, 2015|Feb. 1, 2021|50,084,602|50,084,602|||43.58|no|
||||||||||||||buying shares in|||
||Director|||and Chief||||||||||||
|Shao Caimei||||||female|53|Feb. 3, 2015|Feb. 1, 2021|51,911,078|54,559,878|2,648,800|the secondary|50.38|no|
|||Technical Officer||||||||||||||
||||||||||||||market|||
|Wang|Chairman of the|||||||||||||||
|||||||male|55|Feb. 3, 2015|Feb. 1, 2021|47,151,000|47,151,000|||50.00|no|
|Zhongtao|Supervisory Board|||||||||||||||
|Wang||||||||||||||||
||Vice President|||||male|53|Feb. 3, 2015|Feb. 1, 2021|9,800,000|9,800,000|||50.00|no|
|Zhenyong||||||||||||||||
||||||||||||||selling shares in|||
|Gao Quanli|Vice President|||||male|53|Feb. 3, 2015|Feb. 2, 2018|4,613,550|4,583,550|-30,000|the secondary|50.37|no|
||||||||||||||market|||
|Zhang|Director|||and Chief||||||||||||
|||||||male|59|Feb. 3, 2015|Feb. 1, 2021|8,565,100|8,565,100|||39.60|no|
|Wenliang||Financial Officer||||||||||||||
|Wang||||||||||||||||
||Vice President|||||male|52|Feb. 3, 2015|Feb. 2, 2018|9,380,000|9,380,000|||50.00|no|
|Xueqiang||||||||||||||||
||||||||||||||selling shares in|||
|Sun Lige|Vice President|||||male|48|Mar. 28,2016|Feb. 2, 2018|9,551,250|9,531,250|-20,000|the secondary|50.00|no|
||||||||||||||market|||
||Director,||||Board|||||||||||
|Zhao Xin||Secretary, Chief||||female|47|Feb. 3, 2015|Feb. 1, 2021|8,353,242|4,470,160|-3,883,082|equity division|50.00|no|
||||HR Officer|||||||||||||
|Di Guo|Vice President|||||male|49|Feb. 3, 2015|Feb. 2, 2018|5,108,219|5,108,219|||50.00|no|

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
|Qiu Jiahui|Vice President|male|47|Feb. 3, 2015|Feb. 1, 2021|||||50.00|no|
||Independent|||||||||||
|Zhang Shuyi||male|55|Feb. 3, 2015|Feb. 2, 2018|||||0.50|no|
||Director|||||||||||
||Independent|||||||||||
|Hu Jianmin||male|60|Feb. 3, 2015|Feb. 1, 2021|||||6.00|no|
||Director|||||||||||
||Independent|||||||||||
|Liu Huan||male|64|Feb. 3, 2015|Feb. 1, 2021|||||6.00|no|
||Director|||||||||||
||Independent|||||||||||
|Wang Zhe||female|39|Feb. 2, 2018|Feb. 1, 2021|||||5.50|no|
||Director|||||||||||
|Jacobus||||||||||||
|Johannes de|Director|male|50|Feb. 3, 2015|Feb. 1, 2021||||||no|
|Heus||||||||||||
|Marcus||||||||||||
|Leonardus|Supervisor|male|50|Feb. 3, 2015|Feb. 1, 2021||||||no|
|van der Kwaak||||||||||||
|Yuan Minger|Supervisor|female|49|Feb. 3, 2015|Feb. 1, 2021|||||14.04|no|
|Li Jun|Supervisor|male|47|Apr. 27,2016|Feb. 1, 2021|||||28.00|no|
|Wei Yanjin|Supervisor|male|61|Jul. 20, 2016|Mar. 26,2019|||||7.00|no|
|total||||||431,403,922|430,119,640|-1,284,282|/|709.09|/|

||||||
|-|-|-|-|-|
|Name|Work experience||||
||Male,|born in 1963, master's degree,|the core founder of Liaoning Wellhope, Chairman of the Board, also holds the posts of President of Liaoning||
|Jin|Feed Industry Association, member of Liaoning Province Standing Committee of the Chinese People's Political Consultative Conference, Vice||||
|Weidong|President of China Feed Industry Association, Vice President of China Animal Husbandry Industry Association, Doctoral Advisor of Shenyang||||
||Agricultural University, Guest Professor of Remin University of China, Ocean University of China and Northeast Agricultural University, etc.||||
|Ding|||||
||Male, born in 1963, bachelor's degree, one of the founders of Liaoning Wellhope, now holds the posts of board director and President.||||
|Yunfeng|||||
|Wang|||||
||Male, born in 1969, master's degree, one of the founders of Liaoning Wellhope, now holds the post of Vice President.||||
|Fengjiu|||||
||Female, born in 1966, Ph.D., one of the founders of Liaoning Wellhope, the board director and CTO, also holds the posts of|||standing director of|
|Shao|||||
||Animal Nutrition Branch of Chinese Association of Animal Science and Veterinary Medicine, member of Chinese Feed Industrial Standardization||||
|Caimei|||||
||Technical Committee, etc.||||
|Wang|||||
||Male, born in 1964, master's degree, one of the founders of Liaoning Wellhope, now holds the post of Chairman of the supervisory board.||||
|Zhongtao|||||
|Wang|||||
||Male, born in 1966, Ph.D., joined Liaoning Wellhope in 1996, now holds the post of Vice President, taking charge of international business.||||
|Zhenyong|||||

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report
||||
|-|-|-|
||Male, born in 1966, bachelor's degree, joined Liaoning Wellhope in 1996, now takes charge of feed business in regions of Central, East, North and||
|Gao Quanli|||
||Northwest China.||
|Zhang|||
||Male, born in 1960, master's degree, joined Liaoning Wellhope in 1996, now holds the posts of board director and CFO.||
|Wenliang|||
|Wang|||
||Male, born in 1967, bachelor's degree, joined Liaoning Wellhope in 1995, now takes charge of feed business in Liaoning province.||
|Xueqiang|||
|Sun Lige|Male, born in 1971, bachelor's degree, joined Liaoning Wellhope in 1997, now takes charge of purchasing business.||
|Zhao Xin|Female, born in 1972, bachelor's degree, joined Liaoning Wellhope in 1995, now holds the posts of board director,|board secretary, CHO.|
|Di Guo|Male, born in 1972, master's degree, joined Liaoning Wellhope in 1996, now takes charge of feed business in Jilin and Heilongjiang provinces.||
||Male, born in 1972, bachelor's degree, joined Liaoning Wellhope in 2000, now holds the post of Vice President, taking charge of broiler integration||
|Qiu Jiahui|||
||business division.||
|Zhang|||
||Male, born in 1964, Ph.D., Dean of School of Animal Husbandry and Veterinarian of Shenyang Agricultural University.||
|Shuyi|||
||Male, born in 1959, Ph.D., professor of School of Animal Husbandry and Veterinarian of Shenyang Agricultural University, independent director of||
|Hu Jianmin|||
||Liaoning Wellhope.||
||Male, born in 1955, Chinese nationality, CPA, professor of School of Tax Administration of Central University of Finance and Economics,||
|Liu Huan|||
||independent director of Liaoning Wellhope.||
|Jacobus|||
|Johannes|Male, born in 1969, the Dutch nationality, master's degree, CEO of Royal De Heus, board director of Liaoning Wellhope.||
|de Heus|||
|Marcus|||
|Leonardus|||
||Male, born in 1969, the Dutch nationality, master's degree, CFO of Royal De Heus, supervisor of Liaoning Wellhope.||
|van der|||
|Kwaak|||
|Yuan|||
||Female, born in 1970, bachelor's degree, supervisory board director and audit manager of Liaoning Wellhope.||
|Minger|||
||Male, born in 1972, master's degree, joined Liaoning Wellhope in 2004, now holds the posts of supervisory board director and director of raw||
|Li Jun|||
||material trade business division and general manager of Liaoning Expert Trading Co., Ltd.||
||Male, born in 1958, master's degree, joined Liaoning Wellhope in 2001, now holds the posts of supervisory board director and President of related||
|Wei Yanjin|||
||business division.||
||Female, born in 1980, Ph.D., professor and doctoral advisor of School of Animal Husbandry and Veterinarian of Shenyang Agricultural University,||
|Wang Zhe|||
||independent director of Liaoning Wellhope.||

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report II. Posts Held by Incumbent and Outgoing Directors, Supervisors and Senior Management during the Reporting Period
1. Post held in the shareholding entity
||||||
|-|-|-|-|-|
|Name|Shareholding entity|Post|Start of tenure|End of tenure|
||Shenyang Wellhope Heli Investment||||
|Wei Yanjin||executive director|2011||
||Co., Ltd.||||

2. Post held in other entity
||||||
|-|-|-|-|-|
|Name|Other entity|Post|Start of tenure|End of tenure|
|||dean of School of Animal|||
|Zhang Shuyi|Shenyang Agricultural University||2018||
|||Husbandry and Veterinarian|||
||Wuxi Kezhigan Science and Technology||||
|Zhang Shuyi||executive director|2012||
||Ltd.||||
|Hu Jianmin|Shenyang Agricultural University|professor|2000||
||Liaoning-Shenyang Agricultural||||
|Hu Jianmin||board director|2016||
||Wellhope Bio-Tech Co., Ltd.||||
||School of Tax Administration of||||
|Liu Huan|Central University of Finance and|deputy dean and professor|2010||
||Economics||||
|Jacobus Johannes de Heus|Royal De Heus|CEO|2002||
|Marcus Leonardus van der Kwaak|Royal De Heus|CFO|2001||
||Beijing BOYAR Agriculture and Animal||||
|Jin Weidong||supervisor|2010||
||Husbandry Technology Co., Ltd.||||
|Note|above posts are relevant, main posts, but not all.||||

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report III. Remuneration of Directors, Supervisors and Senior Management
|||
|-|-|
||According to the Company's performance appraisal management, related regulations and the stipulations of|
|Decision-making procedure for remuneration||
||the Remuneration and Performance Appraisal Committee of the Board of Directors.|
||According to the remuneration level in the industry, the Company's business performance, job|
||responsibilities, etc., and in accordance with the work plan made by the Board of Directors at the beginning|
|Basis for determining remuneration||
||of the year, in combination with the personal work performance and other qualitative and quantitative|
||indicators.|
||Paying in accordance with the annual performance of the Company, the work performance of senior|
|Actual payment||
||managers and management ability, etc.|
|Total remuneration during the reporting period|Totally paid 7.09 million yuan to board directors, supervisory board directors and senior managers.|

 IV. Changes of Directors, Supervisors and Senior Management
|||||
|-|-|-|-|
|Name|Office title|Change|Reason|
|Gao Quanli|vice president|outgoing|expiration of tenure|
|Wang Xueqiang|vice president|outgoing|expiration of tenure|
|Sun Lige|vice president|outgoing|expiration of tenure|
|Di Guo|vice president|outgoing|expiration of tenure|
|Zhang Shuyi|independent director|outgoing|expiration of tenure|
|Wang Zhe|independent director|new electing|new electing|

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report V. Employees of the Parent Company and Major Subsidiaries
1. Headcount
|||
|-|-|
|Full time employee of parent company|259|
|Full time employee of major subsidiaries|4,553|
|Total full time employees|4,812|
|The number of retired employees whose||
|expenses are borne by the parent company and|15|
|its major subsidiaries||
|Functions||
|Function|Employees|
|Production|1,504|
|Sales|2,015|
|R&D and Technology|621|
|Finance|320|
|Administration|352|
|Total|4,812|
|Educational backgrounds||
|Educational background|Employees|
|Master's degree and above|346|
|Bachelor's degree|1,820|
|Junior college|1,580|
|Below junior college|1,066|
|Total|4,812|

2. Remuneration policy
The Company has continuously improved its remuneration and performance management system in order to effectively absorb and retain talents and promote its sustainable development. Driven by fair and merit-based principle, it connects employee's income levels with the Company's business progress and its goal of business performance, whilst it also considers related factors such as the country's macro economy, industry situation, market competition, etc., to ensure that its remuneration policy is competitive to the outside and fair to the inside.
Meanwhile, the Company adopts three-level-management in terms of headquarters, business divisions (regions) and local subsidiaries. Targeted and differentiated remuneration incentives have been adopted for different types of employees, whilst the remuneration structure has been mainly divided into regular salary and floated salary plus
long-term incentive plan, the floated part of which is linked to the Company's business
performance and individual's performance. The remuneration system for different types of
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report employee has differences, which enhance the enthusiasm of employees and guarantee the fairness.
Moreover, the Company focuses on the incentive program for excellent employees. In 2018, it implemented the restricted stock incentive plan, which granted 372 key talents in key positions restricted stocks and signed Letter of Responsibility with them. In addition, it also adopts various methods such as holding shares of subsidiaries, flexible benefits, and promotion training to ensure that core talents can grow rapidly on a larger platform and power the Company's business progress.
Besides strictly abiding by the national laws and regulations, which provides basic guarantees for employees, like five social insurances and one housing fund, etc., the Company provides commercial insurance welfare to employees and benefits their family members. It also provides employees with necessary welfare protection through internal resource sharing, completing welfare system and pilot flexible benefits to improve employees' happiness index.
3. Training plan
Continuously cultivating talents and always devoting to theemployees’ value enhancement is part of the Company's human resources policy. Therefore, the Company's HR system formulates annual training plan to cultivate required talents and better serve to the development strategy.
First, utilizing the opportunity of "Excellent Performance Management Project", it vigorously organized trainings relating to this project, covering around 100 middle and senior managers. Since starting the project in early June to the end of the year, the Company organized 9 times of group counseling and discussion, 9 times of face-to-face training, and 12 times of task analysis combining actual work, subsequently the Company has determined its strategy, goal, vision and core values, three-year strategic plan, division of labor and functions, and preliminarily determined the KPI of each business division and business units, making the concept of excellent performance being understood and accepted by more managers. In addition to the visible results of its output, management thinking, logic concepts, tools and methods have been integrated into daily management and routine work, which promoted the management ability.
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report Second, it tried new ways of training projects. Through the network platform, the activity named “Wellhope Best Answerer”, which lasted for 5 days with 1,194 participants who answered 140,312 questions that covered various aspects of industry and professional skills, the Company promoted its employees learning actively, it also utilized the OA platform “Cloud-Hub” to realize online operation and control of onboarding training, which could timely and effectively track the learning dynamics of new staff, design the learning content in a more personalized way. The promotion of new tools, new platforms and new methods boosted its training system more efficient and promoted the employees improving competency and contributing to the business performance.
Third, it fully developed and used Wellhope E-Learning College and external resources to provide employees with more time-sensitive and more adaptable courses and learning resources. For example, the Company used the "Cloud-Hub" to regularly promote courses and to monthly select and evaluate high-quality courses, it also recommended “Weekly Lesson”, each year it develops 30 new courses, invites some external training organizations, and selects key personnel to go aboard for study, which can help employees to expand their horizons, broaden their thinking and keep pace with the times.
Fourth, it continuously strengthened three-level-training management system, clarified the work of headquarters, business divisions, subsidiaries, business units and functional departments, especially strengthened the detailing and collaboration in the fields of onboarding training, job skill training, businessunit’s manager training, etc. In 2018, the Company held the “Seedling Plan” training camp for more than 130 new graduates. In the coming year, the Company will further build its training system for leading the employees growing and maintaining talents advantage in the fierce market competition, therefore continuously make progress and keep stable and healthy development.
Fifth, it continued to develop the training programs for business divisions and functional departments according to market changes and management needs, strengthened the training management and implementation, as well as supervised and guided the trainings organized by themselves, for example, the information resource planning (IRP) project organized by the IT center, ASF training for salesman and technical supporting experts organized by the sales system, market analysis and new materials knowledge training organized by the purchasing system in response to the fluctuated markets, low-nitrogen
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report diet ration technology training organized by technical system, etc. Through various trainings, the Company can continuously improve the skills and horizons of the employees, as well as management ability and work improvement.
4. Labor outsourcing
|||
|-|-|
|The total number of working hours|2,068,736|
|Total amount of remuneration paid for outsourcing|38,418,259.15|

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report Section IX Corporate Governance
I. Overview of Corporate Governance
In accordance with the Corporation Law, the Securities Law and other laws and regulations issued by the CSRC, the Company has gradually built its corporate governance mechanism, continuously improved corporate governance structure and insisted standard operation, whilst it has formulated relevant rules of procedure and working system, also established a relatively complete internal control system, which has strengthened the protection of non-controlling interests. Meanwhile, the Company has fulfilled its obligation of information disclosure in a true, accurate, timely and complete manner in strict accordance with relevant provisions, so as to ensure that all shareholders have fair access to information.
In 2018, the Company held 3 times of shareholders' meetings, 9 times of board meetings and 8 times of supervisory board meetings. Approved by the shareholders' meeting, the Company has completed the general election of the board of directors and supervisory board directors, which re-elected Chairman of the board, member of special committees and business management team. Meanwhile, the first Extraordinary Shareholders' Meeting of the Company in 2018 deliberated and approved the proposal of amending the Company Constitution and the Rules of Procedure of the Shareholders' Meeting, which has further improved the corporate governance structure. The Company complies with the requirements of relevant documents of regulatory authorities in major governance aspects.
II. Shareholders' Meeting Convened during the Reporting Period
|||||
|-|-|-|-|
|||Query URLs of|Disclosing Date of|
|Meeting|Date|||
|||Resolution|Resolution|
|2018 Fist Extraordinary||||
||Feb. 2nd, 2018|www.sse.com.cn|Feb. 3rd, 2018|
|Shareholders' Meeting||||
|2017 Annual|Apr. 12th,|||
|||www.sse.com.cn|Apr. 13rd, 2018|
|Shareholders' Meeting|2018|||
|2018 Second||||
|Extraordinary|Dec. 7th, 2018|www.sse.com.cn|Dec.8th, 2018|
|Shareholders' Meeting||||

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report Explanation:
During the reporting period, the Company held 3 times of shareholders' meeting, which deliberated 2017 Annual Report, profit distribution plan, restricted stock incentive plan, etc. The convening, holding, voting and other related procedures of the shareholders' meeting complied with laws and regulations, Company Constitution, Rules of Procedure of the Shareholders' Meeting and other relevant provisions, ensured all shareholders, especially non-controlling shareholders enjoying equal status and fully exercising their rights.
III. Performance of Duties of the Board Director
||||||||||
|-|-|-|-|-|-|-|-|-|
|||||||||Shareholders'|
|||Attendance of Board Meeting|||||||
|||||||||Meeting|
||||||||Whether||
|||Number|||||||
||Independent||||||continually||
|||of||||||Number of|
|Name|director or|||Via||Number|fail to||
|||attended|Physical||Via|||attended|
||not|||Tele-||of|physically||
|||board|presence||proxy|||shareholders'|
|||||communi||absence|attend the||
|||meetings||||||meeting|
||||||||meeting||
|||in 2018|||||||
||||||||two times||
|Jin Weidong|no|9|9|4|0|0|no|2|
|Ding Yunfeng|no|9|9|4|0|0|no|2|
|Jacobus|||||||||
|Johannes de|no|9|9|8|0|0|no|0|
|Heus|||||||||
|Shao Caimei|no|9|9|7|0|0|no|1|
|Zhang Wenliang|no|9|9|8|0|0|no|0|
|Zhao Xin|no|9|9|3|0|0|no|3|
|Hu Jianmin|yes|9|9|3|0|0|no|2|
|Liu Huan|yes|9|9|9|0|0|no|0|
|Zhang Shuyi|yes|1|1|0|0|0|no|1|
|Wang Zhe|yes|8|8|3|0|0|no|2|

|||
|-|-|
|Number of board meetings in 2018|9|
|of which: number of assembling together at the||
||0|
|place||
|Number of holding meeting by||
||3|
|telecommunication||
|Number of holding meeting by assembling||
||6|
|together at the place and telecommunication||

IV. During the Reporting Period, the Circumstance of Establishing and Implementing Performance Appraisal System and Incentive Mechanism relating to Senior Management
The remuneration of senior management is composed of basic salary and performance
salary, the basic salary shall be paid monthly, and the performance salary will be
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report determined according to the performance appraisal result and the Company's annual operating status
V. Whether Disclosing Self-evaluation Report of the Internal Control
The Company will disclose the evaluation report of its internal control at the same time as the 2018 Annual Report. Details please refer to the website of Shanghai Stock Exchange (http://www.sse.com.cn).
VI. Explanation of Audit Report for Internal Control
Jiangsu SuyaJincheng CPA LLP issued the Audit Report of Internal Control, holding that the Company has maintained effective internal control over financial reporting in all major aspects on December 31st, 2018 in accordance with relevant regulations. Details please refer to the website of Shanghai Stock Exchange (http://www.sse.com.cn).
Section X Corporate Bond
Not applicable
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report Section XI Financial Statements
I. Audit Report
Audit Report
Suya Audit No.[2019]449
To all the shareholders of Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd.,
1. Opinion
We have audited the financial statements of Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. (hereinafter referred to as "the Company"), which comprise the statement of financial position as at December 31st, 2018, and the income statement, statement of changes in equity and cash flow statement for the year then ended, and notes to the financial statements.
In our opinion, the financial statements give a true and fair view of the financial position of the Company as at December 31st, 2018, and of its operating performance and cash flow for the year then ended, and have been properly prepared in compliance with the Accounting Standards for Business Enterprises ("the ASBE").
2. Basis for Opinion
We conducted our audits in accordance with China's CPA Auditing Standards. Our responsibilities under those standards are further described in the"Auditor’s Responsibilities for the Audit of the Financial Statements" section of our report. We are independent of the Company in accordance with China CPA's Code of Ethics for Professional Accountants ("the Code"), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
3. Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements in the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report
|||
|-|-|
|A. Assessing bad debt provisions for accounts receivable||
|Please refer to following No. V "Important Accounting Policies and Accounting Estimates" part||
|10--"Accounts Receivable", and No. VII “Notes to the Items of Consolidated Financial Statements”||
|part 3-- “Accounts Receivable”||
|Key audit matters|How our audit addressed the key audit matter|
||Our audit procedures mainly include:|
||•We tested the design of the internal control and its|
||operational effectiveness regarding the impairment test of|
||accounts receivable.|
||•We obtained the aging schedule of the accounts|
||receivable at the end of the period, and checked the|
||accuracy of the age of accounts receivable by reviewing|
||relevant records such as accounting vouchers and invoices.|
||•We conducted comprehensive review for the bad debt|
|The Company's accounts receivable as|provisions of accounts receivable of age grouping, and|
|at December 31st, 2018 reached RMB|rechecked and calculated the corresponding withdrawing|
|499.3962 million yuan, and the bad|proportion.|
|debt reserve reached RMB 101.5045|•Regarding the overdue accounts receivable, we|
|million yuan. The balance of accounts|confirmed with the management to understand the|
|receivable was significant and the|information of the principal debtors and their assessment|
|assessment of bad-debt provisions|on the collectability of these accounts. We sought the|
|involved the judgment of the|information related to the debtors or the development|
|management, thus we took it as the|situation of their business industries via open channels to|
|key audit matter for us.|identify whether there are some circumstances that affect|
||the assessment results of the bad debt provisions of the|
||accounts receivable.|
||•We selected samples and implemented the external|
||confirmation procedure for the significant accounts|
||receivable, and checked the confirmation result with the|
||amount recorded by the Company.|
||•By comparing the information disclosed by other listed|
||companies, we evaluated the overall rationality regarding|
||the percentage of bad debt provisions accounting for the|
||balance of the Company's accounts receivable.|
|B. The return on long-term equity investment recognized by the equity method.||
|Please refer to following No. V "Important Accounting Policies and Accounting Estimates" part||
|13--“Long-term Equity Investment”, and No. VII “Notes to the Items of Consolidated Financial||
|Statements” part 42—“Income from investment”||
|Key audit matters|How our audit addressed the key audit matter|
||Our audit procedures mainly include:|
||•We reviewed and evaluated the Company's internal|
||control regarding the return on long-term equity|
||investment measured by the equity method.|
|The return on long-term equity|•We obtained related investee companies' constitution,|
|investment calculated by the equity|investment agreements and other documents for|
|method in the current period reached|determining whether the Company had a significant effect|
|RMB 281.1847 million yuan, which had|on related investee companies and whether the|
|a great impact on current gains and|accounting method was correct.|
|losses, thus we took it as the key audit|•We obtained related investee companies' audit reports|
|matter for us.|and financial statements for reviewing whether the income|
||from investment calculated by the Company's equity|
||method was accurate.|
||•Regarding the investee company with large investment|
||income under the equity method, we reviewed the|

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report
||
|-|
|qualification of the audit institutions and its auditing|
|circumstance, paid attention to the professional|
|competence of other CPAs, and utilized the work and|
|reports of other CPAs; we also conducted analytical|
|procedure regarding related information of investee|
|companies, such as the operating revenue, operating costs|
|and inventory, etc., we also selected part of the investee|
|companies to physically conduct review procedures.|

4. Other Information
The management of the Company is responsible for the other information. The other information comprises information covered by the Company's 2018 Annual Report, but excludes the financial statements and our auditor's report thereon.
Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained during the audit or otherwise appears to be materially misstated.
If, based on the work we have executed, we confirm that there is a material misstatement in the other information, we are required to report the fact. We have nothing to report in this regard.
5. Responsibilities of the Management and Those Charged with Governance for Financial Statements
The management of the Company is responsible for preparing the financial statements that give a fair view in accordance with the ASBE, and for designing, executing and maintaining requisite internal control to enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the management is responsible for assessing theCompany’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the management
either intends to liquidate the Company or to cease operation, or has no realistic
alternative but to do so.
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report Those charged with governance are responsible for overseeing theCompany’s financial reporting process.
6.Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue anauditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with the auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
A. Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
B. Obtain an understanding of the internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances.
C. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the management.
D. Conclude on the appropriateness of themanagement’s use of the going concern basis of accounting and, based on the obtained audit evidence, whether a material uncertainty exists related to events or conditions that may cast significant doubt on theCompany’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required by the auditing standards to draw the statementsusers’ attention in ourauditor’s report to the related disclosures in the financial statements, or, if such
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of ourauditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern.
E. Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
F. Obtain sufficient and appropriate audit evidence regarding the financial information of related entities or business activities within the Company to express an opinion on its financial statements. We are responsible for guiding, overseeing and performing the audit of the Company, and solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timetable of the audit and significant audit findings, including any noteworthy deficiencies in the internal control that we identify during our audit.
We also provide those charged with governance with a statement to declaring that we have complied with the professional ethics related to independence, and communicate with the governance on all relationships and other matters that may reasonably be considered to affect our independence, as well as the relevant precautions.
From the matters communicated with those charged with governance, we determine which matters are the most important for the audit of the current financial statements and thus constitute the key audit matters. We describe these matters in the audit report, unless laws and regulations prohibit the public disclosure of these matters, or in rare cases, if it is reasonably expected that the negative consequences of communicating a matter in the audit report will outweigh the benefits in terms of the public interest, we determine that the matter should not be communicated in the audit report.
Jiangsu SuyaJincheng CPA LLP CPA: Zhou Jiawen(Project Partner) CPA: Wang Jin
China Nanjing April 25th, 2019
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report II. Financial Statements
Consolidated Balance Sheet
Dec. 31st, 2018
Liaoning Wellhope Unit: yuan Currency: RMB
|||||||
|-|-|-|-|-|-|
||Item||Dec. 31st, 2018||Jan. 1st, 2018|
|Current Assets:||||||
|Monetary assets||928,902,753.06||748,944,362.80||
|Derivative financial assets||2,042,527.60||971,380.80||
|Notes receivable and accountsreceivable||411,503,456.67||356,948,201.45||
|including: Notes receivable||13,611,778.44||5,010,660.00||
|Accounts receivable||397,891,678.23||351,937,541.45||
|Prepayments||185,899,348.53||266,224,330.51||
|Other receivables||98,997,213.04||99,240,703.92||
|including: Interest receivable||||||
|Dividends receivable||5,481,783.34||8,214,127.94||
|Inventory||1,410,869,192.26||1,218,001,011.96||
|Other current assets||118,636,045.77||105,903,041.75||
|Total current assets||3,156,850,536.93||2,796,233,033.19||
|Non-current assets:||||||
|Available-for-sale financial assets||3,680,000.00||3,340,000.00||
|Long-term equity investment||1,354,820,455.99||1,022,372,386.20||
|Fixed assets||1,516,702,438.29||1,537,692,913.05||
|Construction in progress||255,719,188.30||122,640,897.91||
|Productive biological assets||30,484,794.88||19,281,856.15||
|Intangible assets||206,387,940.29||209,911,332.82||
|Goodwill||290,425.67||290,425.67||
|Long-term prepaid expenses||177,903,367.82||205,261,029.88||
|Deferred income tax assets||30,357,726.08||36,475,136.05||
|Other non-current assets||197,497,688.18||32,362,984.62||
|Total non-current assets||3,773,844,025.50||3,189,628,962.35||
|Total Assets||6,930,694,562.43||5,985,861,995.54||

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report Consolidated Balance Sheet(continue) Unit: yuan Currency: RMB
|||||||
|-|-|-|-|-|-|
||Item||Dec. 31st, 2018||Jan. 1st, 2018|
|Current liabilities:||||||
|Short-term borrowings||1,347,690,168.49||1,191,240,000.00||
|Notes payable and accounts payable||572,729,779.31||524,321,952.83||
|Advance receipt||161,173,916.67||181,035,916.81||
|Payroll payable||49,731,930.35||41,249,493.29||
|Tax payable||28,744,792.72||40,336,595.39||
|Other payables||309,537,195.12||201,709,649.48||
|including: Interest payable||1,784,257.05||2,870,840.28||
|Dividends payable||526,000.00||1,470,000.00||
|Non-current liabilities due within oneyear||32,999,999.96||20,000,000.00||
|Total current liabilities||2,502,607,782.62||2,199,893,607.80||
|Non-current Liabilities:||||||
|Long-term borrowings||118,500,000.00||20,300,000.00||
|Long-term account payable||23,345,833.38||||
|Deferred income||20,252,967.41||19,404,060.24||
|Total Non-current liabilities||162,098,800.79||39,704,060.24||
|Total Liabilities||2,664,706,583.41||2,239,597,668.04||
|Owners' equity(or shareholders' equity):||||||
|Paid-up capital (or share capital)||845,751,469.00||831,176,469.00||
|Capital reserves||153,824,536.37||103,593,300.06||
|deduct: Treasury stock||70,688,750.00||||
|Other comprehensive income||-1,316,942.00||||
|Surplus reserves||272,882,920.19||232,486,459.89||
|Undistributed profits||2,651,462,525.08||2,223,048,013.93||
|Total Equity attributable to the ownersof parent company||3,851,915,758.64||3,390,304,242.88||
|Non-controlling interests||414,072,220.38||355,960,084.62||
|Total owners' equity (or shareholders'equity)||4,265,987,979.02||3,746,264,327.50||
|Total liabilities and owners' equity (orshareholders' equity)||6,930,694,562.43||5,985,861,995.54||

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report Consolidated Balance Sheet of Parent Company
Dec. 31st, 2018
Unit: yuan Currency :RMB
||||
|-|-|-|
|Item|Dec. 31st, 2018|Jan. 1st, 2018|
|Current assets ：|||
|Monetary assets|750,589,871.09|534,204,880.04|
|Derivative financial assets|2,042,527.60|971,380.80|
|Notes receivable and accounts receivable|16,033,809.05|22,133,097.07|
|including: Notes receivable|||
|Accounts receivable|16,033,809.05|22,133,097.07|
|Prepayments|2,278,798.85|4,694,018.23|
|Other receivables|869,671,230.01|1,114,239,707.67|
|including: Interest receivable|||
|Dividends receivable|15,225,270.58|8,214,127.94|
|Inventory|41,986,504.36|48,911,388.79|
|Total current assets|1,682,602,740.96|1,725,154,472.60|
|Non-current assets:|||
|Available-for-sale financial assets|3,000,000.00|2,660,000.00|
|Long-term equity investment|3,285,783,087.96|2,402,244,010.42|
|Fixed assets|73,509,615.43|80,858,510.66|
|Construction in progress|56,425,656.79|38,621,063.26|
|Intangible assets|16,169,866.87|13,960,464.95|
|Long-term prepaid expenses|854,845.30|955,852.90|
|Deferred income tax assets|9,060,127.91|6,241,701.57|
|Total non-current assets|3,444,803,200.26|2,545,541,603.76|
|Total assets|5,127,405,941.22|4,270,696,076.36|
|Current liabilities:|||
|Short-term borrowings|1,075,000,000.00|1,000,000,000.00|
|Notes payable and accounts payable|7,636,692.77|8,645,001.89|
|Advance receipt|2,690,153.80|2,851,074.45|
|Payroll payable|2,749,116.65|2,195,656.76|
|Tax payable|4,166,334.74|5,392,657.62|
|Other payables|1,026,382,418.43|662,369,470.90|
|including: Interest payable|1,601,798.61|2,624,340.28|
|Dividends payable|||
|Non-current liabilities due within one year|20,000,000.00|20,000,000.00|
|Total current liabilities|2,138,624,716.39|1,701,453,861.62|
|Non-current liabilities:|||
|Long-term borrowings|118,000,000.00|20,000,000.00|
|Deferred income|7,425,000.00|7,425,000.00|
|Total non-current liabilities|125,425,000.00|27,425,000.00|
|Total liabilities|2,264,049,716.39|1,728,878,861.62|
|Owners' equity(or shareholders' equity):|||
|Paid-up capital (or share capital)|845,751,469.00|831,176,469.00|

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report
||||
|-|-|-|
|Capital reserves|160,705,065.92|102,593,326.35|
|deduct: Treasury stock|70,688,750.00||
|Other Comprehensive income|-1,305,935.62||
|Surplus reserves|272,882,920.19|232,486,459.89|
|Undistributed profits|1,656,011,455.34|1,375,560,959.50|
|Total owners' equity|2,863,356,224.83|2,541,817,214.74|
|Total liabilities and owners' equity (or|||
||5,127,405,941.22|4,270,696,076.36|
|shareholders' equity)|||

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report Consolidated Income Statement
January-December, 2018
Liaoning Wellhope Unit: yuan Currency: RMB
|||||||
|-|-|-|-|-|-|
||Item||2018||2017|
|1. Total operating revenue||15,750,798,120.67||13,695,843,458.67||
|2. Total operating costs||15,354,766,727.04||13,338,238,708.02||
|including: Operating costs||14,421,297,677.40||12,521,474,992.06||
|Taxes and surtaxes||24,850,909.29||24,868,043.29||
|Selling expenses||420,646,753.59||411,506,654.06||
|Administrative expenses||227,941,858.19||225,935,973.80||
|R&D expenses||61,100,349.28||61,953,095.44||
|Financial expenses||74,900,937.42||60,854,400.51||
|including: Interest expenses||66,635,982.41||64,240,983.00||
|Interest income||4,414,083.01||4,594,760.63||
|Impairment losses on assets||124,028,241.87||31,645,548.86||
|add: Other income||14,165,463.22||34,675,966.99||
|Income from investment||286,014,954.24||171,116,996.23||
|including: Income frominvestments in associated companiesand joint ventures||281,184,722.32||108,860,200.54||
|Gain from changes in fair value||-369,580.00||-263,470.00||
|Gain from assets disposal||-5,252,624.79||-1,331,137.12||
|3. Operating profit||690,589,606.30||561,803,106.75||
|add: Non-operating income||10,354,127.19||22,538,686.90||
|deduct: Non-operating expenditure||9,404,244.62||3,062,409.50||
|4. Pretax profit||691,539,488.87||581,279,384.15||
|deduct: Income tax expense||86,850,335.00||81,324,570.84||
|5. Net profit||604,689,153.87||499,954,813.31||
|Net Profit from Continuing Operations||604,689,153.87||499,954,813.31||
|Net profit attributable to theshareholders of parent company||551,928,618.35||471,024,473.92||
|Non-controlling interests income||52,760,535.52||28,930,339.39||
|6. Other comprehensive income, netof tax||-1,325,947.22||||
|Attributable to owners of parentcompany||-1,316,942.00||||
|a. Other comprehensive income thatcannot be reclassified into gains orlosses||||||
|b. Other comprehensive income thatwill be reclassified into the gains or||-1,316,942.00||||

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report
|||||
|-|-|-|-|
|losses||||
|(a) Other comprehensive income thatcan be transferred in gains or lossesunder the equity method||-1,305,935.62||
||(b) Exchange differences on|-11,006.38||
||translation of foreign currency financial|||
||statements|||
|Attributable to non-controllinginterests||-9,005.22||
|7. Total comprehensive income||603,363,206.65|499,954,813.31|
|Attributable to the owners of parentcompany||550,611,676.35|471,024,473.92|
|Attributable to non-controllinginterests||52,751,530.30|28,930,339.39|
|8. EPS||||
|(1) Basic earnings per share (yuan pershare)||0.66|0.57|
|(2) Diluted earnings per share (yuanper share)||0.66|0.57|

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report Consolidated Income Statement of Parent Company
January-December, 2018
Unit: yuan Currency: RMB
||||
|-|-|-|
|Item|2018|2017|
|1. Total operating revenue|623,566,267.53|659,619,444.51|
|deduct: Operating cost|415,589,730.95|445,898,726.95|
|Taxes and surtaxes|1,514,878.36|1,642,806.10|
|Selling expenses|14,708,404.12|13,296,649.77|
|Administrative expenses|26,911,250.47|23,260,545.45|
|R&D expenses|24,141,364.43|28,012,929.33|
|Financial expenses|22,370,584.84|19,706,245.34|
|including: Interest expenses|49,300,111.55|50,420,335.67|
|Interest income|27,053,420.01|31,287,658.84|
|Impairment losses on assets|30,418,264.45|23,817,308.88|
|add: Other income|4,850,607.00|4,447,503.67|
|Income from Investment|321,116,524.32|226,927,334.76|
|including: Income from investments in|||
||283,297,787.16|107,327,562.72|
|associated companies and joint ventures|||
|Gain from changes in fair value|-369,580.00|-263,470.00|
|Gain from assets disposal||44,633.35|
|2. Operating profit|413,509,341.23|335,140,234.47|
|add: Non-operating income|3,827,456.11|5,308,387.85|
|deduct: Non-operating expenditure|705,058.28|231,521.00|
|3. Pretax profit|416,631,739.06|340,217,101.32|
|deduct: Income tax expense|12,667,136.02|15,572,329.79|
|4. Net profit|403,964,603.04|324,644,771.53|
|Net profit from continuing operations|403,964,603.04|324,644,771.53|
|5. Other comprehensive income, net of|||
||-1,305,935.62||
|tax|||
|a. Other comprehensive income that|||
|cannot be reclassified into gains or losses|||
|b. Other comprehensive income that|||
||-1,305,935.62||
|will be reclassified into gains or losses|||
|(a) Other comprehensive income that|||
|can be transferred in gains or losses under|-1,305,935.62||
|the equity method|||
|6. Total comprehensive income|402,658,667.42|324,644,771.53|

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report Consolidated Statement of Cash Flow
January-December, 2018
Liaoning Wellhope Unit: yuan Currency: RMB
|||||||
|-|-|-|-|-|-|
||Item||2018||2017|
|1. Cash flow from operating activities||||||
|Cash received by selling goods, providinglabor services||16,234,878,306.02||14,202,097,842.61||
|Tax refunds||25,981,833.91||17,826,449.30||
|Cash received from other activities related tooperating||126,613,549.29||159,496,920.45||
|Sub-total of cash inflow of operating activities||16,387,473,689.22||14,379,421,212.36||
|Cash paid for goods purchase and laborservices||14,693,894,419.34||12,690,331,070.19||
|Cash paid to and for employee||575,676,082.13||535,069,021.45||
|Tax payments||131,636,206.28||117,432,952.41||
|Cash paid to other activities related tooperating||484,862,065.88||425,197,797.56||
|Sub-total of cash outflow of operatingactivities||15,886,068,773.63||13,768,030,841.61||
|Net cash flow from operating activities||501,404,915.59||611,390,370.75||
|2. Cash flow from investing activities||||||
|Cash received from disinvestment||28,502,239.82||27,166,162.82||
|Cash received from return on investment||18,281,844.61||24,032,937.86||
|Net cash received from disposal of fixedassets, intangible assets and other long-livedassets||11,789,308.39||131,119.94||
|Net cash received from disposal ofsubsidiaries and other business units||3,053,713.91||5,464,048.04||
|Cash received from other activities related toinvestment||||15,240,056.67||
|Sub-total of cash inflow of investing activities||61,627,106.73||72,034,325.33||
|Cash paid for acquiring and building fixedassets, intangible assets and other long-livedassets||427,473,918.37||466,394,339.41||
|Cash paid for investments||143,884,724.98||231,139,288.98||
|Net cash paid for acquiring subsidiaries andother business units||||908,233.14||
|Cash paid to other activities related toinvestment||||||
|Sub-total of cash outflow of investingactivities||571,358,643.35||698,441,861.53||
|Net cash flow from investing activities||-509,731,536.62||-626,407,536.20||
|3. Cash flow from financing activities||||||
|Cash received by absorbing investments||96,474,856.62||24,064,154.53||
|including: Capital contributed bynon-controlling interests to subsidiaries||25,786,106.62||24,064,154.53||
|Cash received from borrowings||1,680,490,000.00||1,610,300,000.00||
|Cash received from other activities related to||41,131,246.21||||

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report
||||
|-|-|-|
|financing|||
|Sub-total of cash inflow of financing activities|1,818,096,102.83|1,634,364,154.53|
|Repayments of borrowings|1,469,954,166.66|1,420,000,000.00|
|Cash paid for distributing dividends, profits,or paid for interests|155,249,212.54|151,273,956.92|
|including: Dividends or profits paid bysubsidiaries to non-controlling interests|4,409,000.00|4,619,507.55|
|Cash paid to other activities related tofinancing activities|25,900,000.00|13,216,000.00|
|Sub-total of cash outflow of financingactivities|1,651,103,379.20|1,584,489,956.92|
|Net cash flow from financing activities|166,992,723.63|49,874,197.61|
|4. Effect of foreign exchange ratefluctuations on cash and cash equivalents|-10,142,120.44|-1,490,734.81|
|5. Net increase in cash and cash equivalents|148,523,982.16|33,366,297.35|
|add: Opening balance of cash and cashequivalents|740,680,891.81|707,314,594.46|
|6. Closing balance of cash and cashequivalents|889,204,873.97|740,680,891.81|

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report Consolidated Statement of Cash Flow of Parent Company
January-December, 2018
Unit: yuan Currency: RMB
||||
|-|-|-|
|Item|2018|2017|
|1. Cash flow from operating activities|||
|Cash received by selling goods, providing|||
||617,488,886.12|662,432,618.16|
|labor services|||
|Cash received from other activities related|||
||536,969,369.05|766,899,692.90|
|to operating|||
|Sub-total of cash inflow of operating|||
||1,154,458,255.17|1,429,332,311.06|
|activities|||
|Cash paid for goods purchase and labor|||
||402,821,941.75|439,118,031.87|
|services|||
|Cash paid to and for employee|25,121,026.30|20,839,121.00|
|Tax payments|17,800,791.44|18,129,343.68|
|Cash paid to other activities related to|||
||422,473,394.25|599,635,805.09|
|operating|||
|Sub-total of cash outflow of operating|||
||868,217,153.74|1,077,722,301.64|
|activities|||
|Net cash flow from operating activities|286,241,101.43|351,610,009.42|
|2. Cash flow from investing activities|||
|Cash received from disinvestment|37,848,161.29|27,394,362.82|
|Cash received from return on investment|53,246,572.37|106,677,814.68|
|Net cash received from disposal of fixed|||
|assets, intangible assets and other||68,603.12|
|long-lived assets|||
|Cash received from other activities related|||
|||9,540,056.67|
|to investment|||
|Sub-total of cash inflow of investing|||
||91,094,733.66|143,680,837.29|
|activities|||
|Cash paid for acquiring and building fixed|||
|assets, intangible assets and other|19,033,211.74|41,019,979.46|
|long-lived assets|||
|Cash paid for investments|253,599,265.53|347,880,476.19|
|Sub-total of cash outflow of investing|||
||272,632,477.27|388,900,455.65|
|activities|||
|Net cash flow from investing activities|-181,537,743.61|-245,219,618.36|
|3. Cash flow from financing activities|||
|Cash received by absorbing investments|70,688,750.00||
|Cash received from borrowings|1,450,000,000.00|1,160,000,000.00|
|Sub-total of cash inflow of financing|||
||1,520,688,750.00|1,160,000,000.00|
|activities|||
|Repayments of borrowings|1,277,000,000.00|1,110,000,000.00|
|Cash paid for distributing dividends,|||
||133,440,300.12|132,608,048.55|
|profits, or paid for interests|||
|Sub-total of cash outflow of financing|||
||1,410,440,300.12|1,242,608,048.55|
|activities|||
|Net cash flow from financing activities|110,248,449.88|-82,608,048.55|

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report
||||
|-|-|-|
|4. Effect of foreign exchange rate|||
||-1,343.50|-275.98|
|fluctuations on cash and cash equivalents|||
|5. Net increase in cash and cash|||
||214,950,464.20|23,782,066.53|
|equivalents|||
|add: Opening balance of cash and cash|||
||525,941,409.05|502,159,342.52|
|equivalents|||
|6. Closing balance of cash and cash|||
||740,891,873.25|525,941,409.05|
|equivalents|||

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report Change Statement of Owner's Equity
January-December, 2018
Unit: yuan Currency: RMB
||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|
||||2018||||||||
||||Equity Attributable to the Owners of Parent Company||||||||
|Item||||||Other|||Non-controlling|Total Owners'|
|||||Capital|Deduct:||Surplus|Undistributed|||
||||Share Capital|||Comprehensive|||Interests|Equity|
|||||Reserve|Treasury Stock||Reserve|Profits|||
|||||||Income|||||
|1. Closing balance of prior|||||||||||
||||831,176,469.00|103,593,300.06|||232,486,459.89|2,223,048,013.93|355,960,084.62|3,746,264,327.50|
|period|||||||||||
|2. Opening balance of|||||||||||
||||831,176,469.00|103,593,300.06|||232,486,459.89|2,223,048,013.93|355,960,084.62|3,746,264,327.50|
|current period|||||||||||
|3. Changes of current|||||||||||
||||14,575,000.00|50,231,236.31|70,688,750.00|-1,316,942.00|40,396,460.30|428,414,511.15|58,112,135.76|519,723,651.52|
|period|||||||||||
|A. Total comprehensive|||||||||||
|||||||-1,316,942.00||551,928,618.35|52,751,530.30|603,363,206.65|
|income|||||||||||
|B.|Capital|contributed and|||||||||
||||14,575,000.00|50,231,236.31|70,688,750.00||||8,825,605.46|2,943,091.77|
|reduced by owners|||||||||||
|a.|Common stock invested||||||||||
||||14,575,000.00|56,113,750.00|70,688,750.00||||25,786,106.62|25,786,106.62|
|by owner||s|||||||||
|b. Amount of share-based|||||||||||
|payment i||ncluded in the||1,997,989.57||||||1,997,989.57|
|owner's equity|||||||||||
|4. Other||||-7,880,503.26|||||-16,960,501.16|-24,841,004.42|
|C. Profit distribution|||||||40,396,460.30|-123,514,107.20|-3,465,000.00|-86,582,646.90|
|a. Appropriation of surplus|||||||||||
||||||||40,396,460.30|-40,396,460.30|||
|reserves|||||||||||
|b. Extraction of general risk|||||||||||
|provisions|||||||||||
|c. Profit distributed to|||||||||||
|||||||||-83,117,646.90|-3,465,000.00|-86,582,646.90|
|owners (or shareholders)|||||||||||
|4. Closing balance of|||||||||||
||||845,751,469.00|153,824,536.37|70,688,750.00|-1,316,942.00|272,882,920.19|2,651,462,525.08|414,072,220.38|4,265,987,979.02|
|current period|||||||||||

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report
||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|
||||2017||||||||
||||Equity Attributable to the Owners of Parent Company||||||||
|Item|||||Deduct:|Other|||Non-controlling|Total Owners'|
|||||Capital|||Surplus|Undistributed|||
||||Share Capital||Treasury|Comprehensive|||Interests|Equity|
|||||Reserve|||Reserve|Profits|||
||||||Stock|Income|||||
|1. Closing balance of prior|||||||||||
||||831,176,469.00|107,366,826.13|||200,021,982.74|1,867,605,664.06|314,988,438.39|3,321,159,380.32|
|period|||||||||||
|2. Opening balance of current|||||||||||
||||831,176,469.00|107,366,826.13|||200,021,982.74|1,867,605,664.06|314,988,438.39|3,321,159,380.32|
|period|||||||||||
|3. Changes of current period||||-3,773,526.07|||32,464,477.15|355,442,349.87|40,971,646.23|425,104,947.18|
|A. Total comprehensive|||||||||||
|||||||||471,024,473.92|28,930,339.39|499,954,813.31|
|income|||||||||||
|B.|Capital contributed and||||||||||
|||||-3,773,526.07|||||18,130,814.39|14,357,288.32|
|reduced by owners|||||||||||
|a.|Common stock invested by||||||||||
||||||||||24,064,154.53|24,064,154.53|
|owners|||||||||||
|b. Amount of share-based|||||||||||
|payment||included in the|||||||||
|owner's equity|||||||||||
|4. Other||||-3,773,526.07|||||-5,933,340.14|-9,706,866.21|
|C. Profit distribution|||||||32,464,477.15|-115,582,124.05|-6,089,507.55|-89,207,154.45|
|a. Appropriation of surplus|||||||||||
||||||||32,464,477.15|-32,464,477.15|||
|reserves|||||||||||
|b. Extraction of general risk|||||||||||
|provisions|||||||||||
|c. Profit distributed to owners|||||||||||
|||||||||-83,117,646.90|-6,089,507.55|-89,207,154.45|
|(or shareholders)|||||||||||
|4. Closing balance of current|||||||||||
||||831,176,469.00|103,593,300.06|||232,486,459.89|2,223,048,013.93|355,960,084.62|3,746,264,327.50|
|period|||||||||||

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report Change Statement of Owner's Equity of Parent Company
January-December, 2018
Unit: yuan Currency: RMB
|||||||||||
|-|-|-|-|-|-|-|-|-|-|
||||2018|||||||
|||||||Other||||
|Item||||Capital|Deduct:|||Undistributed|Total Owners'|
||||Share Capital|||Comprehensive|Surplus Reserve|||
|||||Reserve|Treasury Stock|||Profits|Equity|
|||||||Income||||
|1. Closing balance of prior||||||||||
||||831,176,469.00|102,593,326.35|||232,486,459.89|1,375,560,959.50|2,541,817,214.74|
|period||||||||||
|2. Opening balance of||||||||||
||||831,176,469.00|102,593,326.35|||232,486,459.89|1,375,560,959.50|2,541,817,214.74|
|current period||||||||||
|3. Changes of current||||||||||
||||14,575,000.00|58,111,739.57|70,688,750.00|-1,305,935.62|40,396,460.30|280,450,495.84|321,539,010.09|
|period||||||||||
|A. Total comprehensive||||||||||
|||||||-1,305,935.62||403,964,603.04|402,658,667.42|
|income||||||||||
|B.|Capital contributed and|||||||||
||||14,575,000.00|58,111,739.57|70,688,750.00||||1,997,989.57|
|reduced by owners||||||||||
|a.|Common stock|||||||||
||||14,575,000.00|56,113,750.00|70,688,750.00|||||
|invested by owners||||||||||
|b. Amount of share-based||||||||||
|payment that||included in||1,997,989.57|||||1,997,989.57|
|the owner's equity||||||||||
|C. Profit distribution|||||||40,396,460.30|-123,514,107.20|-83,117,646.90|
|a. Appropriation of||||||||||
||||||||40,396,460.30|-40,396,460.30||
|surplus reserves||||||||||
|b. Profit distributed to||||||||||
|||||||||-83,117,646.90||
|owners (or shareholders)||||||||||
|c. Other|||||||||-83,117,646.90|
|4. Closing balance of||||||||||
||||845,751,469.00|160,705,065.92|70,688,750.00|-1,305,935.62|272,882,920.19|1,656,011,455.34|2,863,356,224.83|
|current period||||||||||

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report
|||||||||
|-|-|-|-|-|-|-|-|
||2017|||||||
||||Deduct:|Other||||
|Item||Capital|||Surplus|Undistributed|Total Owners'|
||Share Capital||Treasury|Comprehensive||||
|||Reserve|||Reserve|Profits|Equity|
||||Stock|Income||||
|1. Closing balance of prior||||||||
||831,176,469.00|102,593,326.35|||200,021,982.74|1,170,842,881.06|2,304,634,659.15|
|period||||||||
|2. Opening balance of||||||||
||831,176,469.00|102,593,326.35|||200,021,982.74|1,170,842,881.06|2,304,634,659.15|
|current period||||||||
|3. Changes of current||||||||
||||||32,464,477.15|204,718,078.44|237,182,555.59|
|period||||||||
|A. Total comprehensive||||||||
|||||||324,644,771.53|324,644,771.53|
|income||||||||
|B. Profit distribution|||||32,464,477.15|-119,926,693.09|-87,462,215.94|
|a. Appropriation of surplus||||||||
||||||32,464,477.15|-32,464,477.15||
|reserves||||||||
|b. Profit distributed to||||||||
|||||||-83,117,646.90|-83,117,646.90|
|owners (or shareholders)||||||||
|c．Other||||||-4,344,569.04|-4,344,569.04|
|4. Closing balance of||||||||
||831,176,469.00|102,593,326.35|||232,486,459.89|1,375,560,959.50|2,541,817,214.74|
|current period||||||||

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report III. Basic Information of the Company
1. Overview of the Company
Approved by the People's Government of Liaoning Province, Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. (hereinafter referred to as the Company) is a limited liability company founded by 23 natural persons, including Jin Weidong, Ding Yunfeng, etc., which was registered in Liaoning Province Administrative Bureau of Industry and Commerce on March 27th, 2003. The headquarters of the Company is located in Shenyang, currently it holds the business license with the number of 9121000074712989XU and the registered capital of RMB 845.7515 million yuan, registered address (headquarters address): No. 169, Huishan Street, Shenbei New District, Shenyang, Liaoning Province. Its legal representative is Jin Weidong.
The Company's business scope covers feed and feed additives processing, production, marketing; grain purchasing (self-use); sales of feed raw materials; poultry and livestock raising, seawater and freshwater aquaculture; agricultural and sideline products processing; ordinary road freight (regarding the business activities which need to be approved by the law, shall be approved by relevant authorities).
The financial statements have been approved to be disclosed by the Company's 9th board meeting of the 6th Session of Board of Directors on April 25th, 2019.
2. Scope of the Consolidated Financial Statements
The scope of the Company's consolidated financial statements is determined on the basis of control, all the controlled subsidiaries are included in the scope of the consolidated financial statements.
The changes in the scope of the consolidated financial statements are shown in the table below:
A. The subsidiaries which are newly included in the consolidation scope in the current period
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report
|||
|-|-|
|Company|Way of Obtaining|
|Chongqing Wellhope Agri-Tech|Invested|
|Russia Wellhope Agri-Tech|Invested|
|Dahong Agriculture and Animal Husbandry Sci-Tech|Invested|

B. The subsidiaries which are excluded from the consolidation scope in the current period
||||
|-|-|-|
||Reason of Excluding from the||
|Company|||
||Consolidation Scope||
|Panjin Wellhope Jiuguhe Food|cancelled||
|Wuwei Wellhope Feed||transferred|
|Hancheng Wellhope Feed|cancelled||
|Jingzhou Wellhope Feed|cancelled||
|Yangling Wellhope Agri-Tech|cancelled||
|Xi'an Mico Monkey E-Commerce||transferred|
|Liaoning Shennong Wellhope Bio-Tech||transferred|

IV. Basis of Preparing Financial Statements
1. Basis of preparing
The Company, on the basis of going concern operation, confirms and measures in accordance with the transactions and events actually occurred and according to the Accounting Standards for Business Enterprises -- Basic Standards and various specific accounting standards and other relevant provisions, and prepares financial statements on this basis.
2. Going concern
The Company has the ability of going concern within at least 12 months since the end of the reporting period, and there are no major issues affecting the ability of going concern. V. Important Accounting Policies and Accounting Estimates
The following important accounting policies and accounting estimates of the Company are formulated in accordance with the Accounting Standards for Business Enterprises. The
business not mentioned is subject to relevant accounting policies in Accounting Standards
for Business Enterprises.
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report 1. Declaration about compliance with Accounting Standards for Business Enterprises The financial statements prepared by the Company are in line with the requirements of Accounting Standards for Business Enterprises, which truly and completely reflect the Company's financial position, operating results, changes in owners' (shareholders') equity, cash flow and other relevant information during the reporting period.
2. Accounting period
The Financial Year of the Company starts from January 1st and ends on December 31st of the Gregorian calendar.
3. Operating cycle
The Company takes a 12-month operating cycle.
4. Bookkeeping base currency
RMB
5. Accounting treatment methods for business combination under the same control or the different control
(1) Accounting treatment methods for business combination under the same control
The Company adopts pooling of interest method to deal with the accounting of business combination, which is under the same control.
On the date of combination, the assets and liabilities acquired by the Company in business combination under the same control shall be measured according to the book value of assets and liabilities of the combining party in the consolidated financial statements of the final controlling party. The share of the book value of the owner's equity held by the combining party, which is owned, by the final controlling party in the consolidated statement of the final controlling party is regarded as the initial investment cost of long-term equity investment in the individual financial statements. The balance between initial cost of investment of long-term equity investment and paid combining consideration (including paid cash, non-cash assets transferred, book value of occurred or assumed debt as well as the total face value of issued stocks), capital reserve (equity premium or capital
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report premium) shall be adjusted; If the balance of capital reserve (equity premium or capital premium) is not sufficient for offset, the surplus reserves and undistributed profit shall be offset successively.
(2) Accounting treatment methods for business combination under the different control The Company adopts acquisition method to deal with the accounting of business combination, which is under the different control.
① The identifiable assets, liabilities and contingent liabilities acquired in the business combination under the different control are measured at fair value. Based on the fair value of assets, liabilities incurred or assumed and issued equity securities paid out as the combining consideration on the acquisition date, the balance between the fair value and the book value of the Company is included into current gains and losses.
② Combined cost shall be confirmed according to the following conditions respectively: (A) For the business combination realized by one-time transaction, the combined costs shall be confirmed by the sum of the fair values, on the acquisition date, of the assets paid, the liabilities occurred or assumed and the equity securities issued by the Company to obtain the control right on the acquiree and the contingent consideration complying with the confirmation conditions. Combined cost is initial investment cost of such long-term equity investment.
(B) For business combination realized step by step through multiple exchange transactions, the combined cost is the sum of the amount of equity investments held prior to the acquisition date that are re-measured at fair value on the acquisition date and the investment cost newly increased on the acquisition date. The long-term equity investment in individual financial statements is the sum of the book value of the equity investment held before the acquisition date and the investment cost newly increased on the acquisition date. Exclude package deal.
③ The Company allocates the combined cost between the identifiable assets and liabilities acquired on the acquisition date.
(A) Where other assets other than intangible assets obtained from the Acquiree in the business combination (not only finite to the assets which have been originally confirmed
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report by the Acquiree), the future economic benefits are expected to flow into the Company and the fair values reliably measured, they shall be separately confirmed and measured at the fair values.
(B) Where the fair value of the intangible assets of the Acquiree acquired by the Company in business combination can be reliably measured, it shall be separately confirmed and measured at the fair value.
(C) Where the acquiree's liabilities, other than contingent liabilities, acquired by the Company in business combination, are expected to result in the outflow of economic benefits from the Company and the fair value can be reliably measured, they shall be separately confirmed and measured at the fair value.
(D) Where the fair value of the contingent liabilities of the Acquiree acquired by the Company in business combination can be reliably measured, they shall be separately confirmed as liabilities and shall be measured at the fair values.
(E) When the Company allocates the cost of business combination and confirms that it has acquired identifiable assets and liabilities in the combination, it shall not consider the goodwill and deferred income tax items that have been confirmed by the Acquiree before the combination.
④ Disposal of the balance of the business combination cost and the share of the fair value of the identifiable net assets obtained from the Acquiree in the combination.
(A) The balance between the business combination costs greater than the share of fair value of the identifiable net assets obtained from the Acquiree in the combination, shall be confirmed as goodwill.
(B) The balance between the business combination cost less than the share of fair value of the identifiable net assets obtained from the Acquiree in the combination shall be disposed pursuant to the following provisions.
(a) The measurement of the fair values of the identifiable assets, liabilities and contingent liabilities obtained from the Acquiree as well as the combination costs shall be reviewed; (b) After the review, if the combined costs are still less than the fair value share of the identifiable net assets obtained from the Acquiree in the combination, the balance shall be
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report included into the current gains and losses.
(3) Disposal of relevant expenses accrued due to business combination by the Company① All direct related expenses accrued due to business combination of the Company (including audit, legal service, assessment consultation and other agency expense and other relevant administrative expenses accrued due to business combination), shall be included into current gains and losses when accruing.
② The commission and service fee paid by the Company for issuing debt securities for the merger of enterprise shall be included in the initial measurement amount of debt securities.
(A) If the bond is issued at the discount or par value, the amount of discount will be increased.
(B) If the bond is issued at premium, the premium amount shall be reduced in this part of expenses.
③ The commission and service fee paid by the Company for issuing equity securities as consideration for the business combination shall be included in the initial measurement amount of equity securities.
(A) When equity securities are issued at the premium, the cost shall be deducted from the capital reserve (equity premium).
(B) When equity securities are issued at par value or at discount, the retained earnings shall be written off from the fee.
6. Preparation methods for consolidated financial statements
(1) Uniform accounting policy and accounting period
All accounting policies and accounting period adopted by subsidiaries taking into the consolidated financial statements shall be consistent with the Company. In case of any inconsistency, adjustment according to the accounting policies and accounting period is necessary when preparing combined financial statements.
(2) Preparation methods for combined financial statements
Based on the financial statements of the Company and its subsidiaries, according to other relevant information, the parent company prepares consolidated financial statements after
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report adjusting the long-term equity investment in the subsidiaries according to the equity method to offset the impact of internal transactions among the Company and its subsidiaries on the combined financial statements.
(3) The reflection of excess deficit of subsidiaries in combined financial statements
In the consolidated financial statements, if the current loss shared by the parent company exceeds its share of the owner's equity of the subsidiary company at the beginning of the period, the rest of the reduction shall be attributed to the owner's equity of the parent company(undistributed profits). If the current loss shared by the non-controlling shareholders of the subsidiaries exceeds its share of the owner's equity of the subsidiary company at the beginning of the period, the balance shall continually offset the non-controlling interests.
(4) Disposal of increased or decreased number of subsidiary during the report period①Disposal of increased number of subsidiary during the report period
(A) Disposal of increased number of subsidiary due to business combination under the same control during the report period
During the report period, if the number of subsidiary increases due to business combination under the same control, the Company shall adjust the opening balance of consolidated balance sheet, take the income, expenses and profit of such subsidiary from the beginning to the end of combination into the consolidated income statement, and the cash flow of the subsidiary from the acquisition date to the end of the report period shall be included in the consolidated cash flow statement.
(B) Disposal of increased number of subsidiary due to business combination under the different control during the report period
During the report period, if the number of subsidiary increases due to business combination under the different control, the Company shall not adjust the opening balance of consolidated balance sheet, take the income, expenses and profit of such subsidiary from the acquisition date to the end of the report period into the consolidated income statement, and the cash flow of the subsidiary from the acquisition date to the end of the report period shall be included in the consolidated cash flow statement.
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report②Disposal of the subsidiary arrangement during the report period
Where the company disposes a subsidiary during the report period, the opening balance of the consolidated balance sheet shall not be adjusted, take the income, expenses and profit of such subsidiary from the beginning of the beginning to the disposal date into the consolidated profit statement, and include the cash flow of such subsidiary into the consolidated cash flow statement, and the cash flow of the subsidiary from the beginning to the disposal date shall be included in the consolidated cash flow statement.
7. Confirmation standard of cash and cash equivalents
Cash shall include cash on hand of the Company, as well as bank deposit and other monetary funds which can be used for payment at any time.
The investments with short term (generally refer to three months from the acquisition date), high liquidity, convenience to convert to known amount of cash and with low risk of change in value owned by Company shall be confirmed as cash equivalent.
8. Foreign currency transactions and foreign currency statement translation
(1) Accounting methods of foreign currency transactions
①Initial confirmation of foreign currency transaction
For foreign currency transactions, the Company shall convert the amount of foreign currency into the amount of the book-keeping base currency according to the spot exchange rate (intermediate price) announced by the People's Bank of China on the date of the transaction. Of which, for foreign currency exchange or related transactions, the Company shall convert according to the exchange rate on the date of the transaction.②Adjustment or settlement of balance sheet date or settlement date
On the balance sheet date or settlement date, the Company shall dispose the foreign currency monetary items and foreign currency non-monetary items according to the following methods:
(A) Accounting treatment principle for foreign currency monetary item
For foreign currency monetary items, on the balance sheet date or settlement date, the Company adopts spot exchange rate (intermediate price) for conversion on the balance sheet date or settlement date to adjust the amount of the accounting base currency of
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report foreign currency monetary items caused by exchange rate fluctuations, and treat them as exchange balances. Among them, the exchange balance between foreign currency loans related to the acquisition, construction or production of assets eligible for capitalization is included in the cost of assets eligible for capitalization. Other balance of exchange shall be included into current financial expense.
(B) Accounting treatment principle for foreign currency non-monetary item
(a) For the foreign non-monetary currency asset measured at historical cost, the Company shall convert at spot rate (intermediate price) on transaction date with unchanging its original recording currency amount and without exchange balance.
(b) For inventory measured at a lower cost between the cost and net realizable value, if the net realizable value is confirmed in foreign currency, the Company first converts the net realizable value into the accounting standard currency, and then compares it with the inventory cost reflected by the accounting standard currency when determining the end value of the inventory.
(c) For non-monetary items measured at fair values, if the fair value at the end of the period is reflected in foreign currency, the Company shall convert the foreign currency into the amount of recording currency based on the spot exchange rate on the day when fair values are confirmed, then compare them with the original amount of recording currency, and the balance shall be treated as gains and losses from the changes in fair value and included into current gains and losses.
(2) Accounting treatment methods for foreign currency statement translation
①The Company shall conduct translation of the financial statements of overseas operations as the following methods:
(A) The asset and liability items in the balance sheets shall be translated at a spot exchange rate on the balance sheet date, among the equity items of owner, except for the items as “undistributed profits”, other items shall be translated at the spot exchange rate at the time when they are incurred.
(B) The income and expense items in the profit statements shall be c translated at the spot exchange rate of the transaction date, or at a spot exchange rate which is confirmed
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report through a systematic and rational method and which is approximate to the spot exchange rate on the transaction date.
The balance in the financial statement of foreign currency translated by the above-mentioned methods shall be listed in theowners’ equity item "Other Comprehensive Income" of consolidated balance sheet.
②The Company shall translate the financial statements of overseas operations in hyperinflation economy according to the following methods:
(A) The Company shall restate the balance sheet items by utilizing the general price index, restate the items of the income statement by utilizing the variation of the general price index, and then translate them at the spot exchange rate on the recent balance sheet date.
(B) If an overseas business is no longer situated in the hyperinflationary economy, the Company shall stop the restatement and shall translate the restated financial statements at the price of the cessation date.
③When the Company disposes any overseas operation, shall translate the balance of foreign currency financial statements related to the overseas business as shown below under the owner's equity items in the balance sheet, and the balance shall be transferred from the owner's equity items and disposed as current gains and losses; When the Company disposes part of the overseas operations, shall calculate the balance according to the proportion of the disposal of foreign currency financial statements, and dispose the balance as the current gains and losses.
9. Financial Instruments
Financial instruments include financial assets, financial liabilities and equity instruments. (1) Classification of financial instruments
①Classification of financial assets
According to business characteristics, investment strategies and risk management requirements, the Company divides the acquired financial assets into the following four categories: (A) Financial asset measured by fair value and the change of which is included into current gains and losses (B) Held-to-maturity investment; (C) Loans and accounts
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report receivable; (D) Available-for-sale financial assets.
Financial assets measured by fair value and whose change is included into current gains or losses include:(A) Transactional financial assets (B) Financial assets designated to be measured in light of fair value and the change of which is included into the current gains and losses (C) The investor invests in the rights and interests of the subsidiary Company which is not included in the combined financial statements. (D) Equity investments held by venture capital institutions, mutual funds and similar entities, etc.
Equity investments that have no control, joint control or significant impact on the invested entity can be divided into financial assets that are measured at fair value and whose variation are included in current gains and losses or financial assets available for sale according to business characteristics, investment strategies and risk management requirements. In some special cases, equity investments divided into available-for-sale financial assets can be accounted for by cost method.
②Classification of financial liabilities
According to business characteristics and risk management requirements, the Company divides the financial liabilities into the following two categories: (A) The financial liabilities which are measured at their fair values and of which the change is included in the current gains and losses, including transactional financial liabilities and the designated financial liabilities which are measured at their fair values and of which the change is included in the current gains and losses; (B) Other financial liabilities.
(2) Confirmation basis and method of measurement of financial instruments
①Confirmation basis of financial instruments
When becoming one party of Financial Instrument Contract, the Company shall confirm a financial asset or financial liability.
②Measurement method of financial instruments
(A) Financial assets or financial liabilities measured by the fair value and its change is included into the current gains and losses; taking the fair value as initial measurement amount when obtained, include the transaction costs into current gains and losses when occurred. The cash dividends declared but not yet paid or the bond interest that is due but
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report has not yet been paid in the actual payment are separately confirmed as dividends receivable or interest receivable. Cash dividends or bond interest earned during the holding period shall be confirmed as investment income. On the balance sheet date, it shall be measured according to the fair value and the variation in its fair value shall be included in the gains and losses of the current period. In sale of transactional financial assets, the investment income shall be confirmed according to the balance between the actual value received (dividends receivable and interest receivable shall be deducted) and the book value of the transactional financial assets on the disposal day, and the accumulated amount previously recorded in the variation in fair value shall be transferred to the investment income.
(B) Held-to-maturity investment: The initial measurement amount shall be the sum of the fair value at the time of acquisition and the relevant transaction costs. The bond interest which has expired but has not been taken included in the actually paid price, shall be confirmed as receivable interest separately. Interest income is calculated and confirmed based on amortized cost and effective interest rate during the holding period and then is reckoned in the investment revenue. The effective interest rate shall be confirmed when obtained, and it will remain unchanged within the estimated duration or appropriate shorter period. On the balance sheet date, shall measure as per amortized cost. At disposal, the balance between the price obtained (interest receivable shall be deducted if any) and the book value of held-to-maturity investment is confirmed as investment income.
(C) Loan and receivables: Loans and receivables mainly refer to loans issued by financial enterprises and receivables formed by enterprises by selling goods or providing labor services, shall be measured at amortized cost by the effective interest method. Loans granted by financial enterprises in accordance with current market conditions shall be initially confirmed as the sum of the principal of the loans granted and related transaction costs. The receivable credit rights formed by external sales of goods or services provided by the Company are usually taken the receivable price of the contract or agreement from the Buyer as the initially confirmed amount. Interest income confirmed during the holding
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report period of loan shall be calculated on the basis of the actual interest rate. The enterprise shall include the price obtained and the balance between the loan and the book value of receivables into the current profit or loss when withdraws or disposes the loans and receivables.
(D) Available-for-sale financial assets: The sum of the fair value and related transaction expenses are taken as the initially confirmed amount. In this type of assets, 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 equity instrument and must be settled by delivering the equity instrument shall be measured subsequently on the basis of their costs. The cash dividends declared but not paid or the bond interest that is due but has not yet been paid in the actual payment are separately confirmed as dividends receivable or interest receivable. Cash dividends or bond interest earned during the holding period shall be included in investment earnings. On the balance sheet date, the financial assets available for sale shall be measured at fair value, and the changes in fair value are included in other comprehensive earnings. At disposal, the balance between the price obtained (dividends receivable and interest receivable shall be deducted if any) and the book value of available-for-sale financial assets shall be included in investment earnings. Meanwhile, the amount corresponding to disposed portion of the cumulative variation in the fair value previously included in other comprehensive earnings shall be transferred out and included in investment earnings.
(E) Other financial liabilities: With the sum of fair value at the time of occurrence and related transaction costs as the initial accounting amount, the interest costs are confirmed with the actual interest rate method, and measured according to the amortized cost on the balance sheet date.
(3) Confirmation basis and measurement methods of financial assets transfer
①Confirmation conditions for termination of financial assets
When the Company transfers financial assets, if the Company has transferred nearly all of the risks and rewards related to the ownership of the financial asset to the transferee, it
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report shall stop the confirmation of the financial asset; If it retained nearly all of the risks and rewards related to the ownership of the financial assets, it shall not terminate the confirmation of the financial assets.
When judging whether the transfer of financial assets meets the above conditions for terminating the confirmation of financial assets, the Company shall adopt the substance over form principle.
②The treatment of the financial asset transfer satisfying the termination confirmation condition
The Company classifies the transfer of financial assets into the overall transfer and partial transfer of financial assets.
(A) If the overall transfer of financial assets satisfies the conditions for termination confirmation, the Company shall include the balance between the consideration received as a result of the transfer and the book value of the transferred financial assets into the current gains and losses, and transfer the cumulative amount of changes in fair value, which is directly included in other comprehensive gains (where the transferred financial assets are available for sale), into the current gains and losses.
(B) If the partial transfer of financial assets satisfies the conditions for termination confirmation, the Company shall apportion the book value of the transferred financial assets between termination confirmation and non-termination in accordance with their respective relative fair values, and include the balance between the consideration of confirmation termination and the book value of confirmation termination of financial assets in the current gains and losses, while transferring the amount corresponding to confirmation termination of the cumulative change in fair value originally directly recorded in other comprehensive income (involving transferable financial assets available for sale) into the current gains and losses.
③The treatment of the financial asset transfers unsatisfying the termination confirmation condition
When the transfer of financial assets does not meet the confirmation termination conditions, the financial assets shall remain confirmation, and the consideration received
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report shall be confirmed as financial liabilities.
(4) Confirmation conditions for termination of financial liabilities
①If the whole or part of current obligations of the financial liabilities has been relieved, the Company shall terminate the confirmation of the whole or part of financial liabilities; in case the Company signs agreement with creditor to replace the existing financial liabilities by undertaking new financial liabilities, and the new financial liabilities differ from the existing financial liabilities substantially in terms of contractual terms, the confirmation of existing financial liabilities shall be terminated and the new financial liabilities shall be confirmed.
②Where the Company makes substantial revisions to whole or part of the contractual terms of the existing financial liabilities, it shall terminate the confirmation of the existing financial liabilities or part of it, and at the same time confirm the financial liability after revising the contractual terms as a new financial liability.
③Where financial liabilities have been fully or partially terminated for confirmation, the balance between the book value terminated for confirmation and the consideration paid (including non-cash assets transferred or undertaken new financial liabilities) shall be included in current gains and losses.
④Where the Company repurchases partial financial liabilities, it shall distribute, on the re-acquisition date, the entire book value of the financial liabilities shall be distributed in light of the relative fair value of the part whose confirmation is continued and the part whose confirmation has been terminated. The balance between the book value which is distributed to the confirmation has been terminated and the considerations has paid (including the non-cash assets it has transferred out or the new financial liabilities it has assumed) shall be included into the current gains and losses.
(5) Confirmation method of the fair value of the financial instruments
① The fair value of financial asset or financial liability for which there is an active market shall be confirmed according to the unjustified quoted price of the active market on the measurement date.
②If there is no active market, the fair value shall be confirmed by the valuation
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report technology, and the specific principles and methods shall be in accordance with the relevant provisions of Accounting Standards for Enterprises No. 39 - Fair Value Measurement.
(6) Impairment Accreditation criteria, Test Method and Withdrawing Method for Impairment provision of Financial Assets (excluding accounts receivable).
The Company shall carry out an inspection on the book value of the financial assets (including single or a group of financial asset) other than those measured at their fair values and of which the change is into the current gains and losses on the balance sheet date. Where there is any objective evidence proving that such financial asset has been impaired, the impairment loss shall be confirmed, and the impairment provision shall be withdrawn.
The objective evidence of impairment of financial assets includes serious financial difficulties of the issuer or debtor, bankruptcy or financial restructuring of the debtor, failure of the financial assets trading in the active market due to major financial difficulties of the issuer, and serious or non-temporary decline in the fair value of equity instruments investment.
①Impairment test method and withdrawing method of the provision for impairment of the held-to-maturity investment
If there is objective evidence indicating the impairment occurred in held-to-maturity investment on the balance sheet date, the Company shall calculate and confirm the impairment losses according to the balance between its book value and the present value of estimated future cash flows.
(A) The single held-to-maturity investment with significant amount shall be carried out impairment test separately, if there is objective evidence indicating that impairment has occurred, confirm the impairment loss according to the balance of the present value of future cash flow lower than the book value, and withdraw impairment provision.
(B) Non-significant held-to-maturity investment of single amount and significant held-to-maturity investment of single amount without impairment after separate testing is divided into several portfolios according to similar credit risk characteristics, and then the
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report impairment loss is calculated according to a certain proportion of balance of these portfolios on the balance sheet date, and the impairment provision is calculated.
②Impairment test method and withdrawing method of the provision for impairment of the available-for-sale financial assets
On the balance sheet date, if there is objective evidence shows that the financial assets available for sale have been impaired, the impairment provision shall be calculated and the impairment loss shall be confirmed. When comprehensive judgment is made according to the relevant factors that the decline of the fair value of the available-for-sale equity instruments investment is severe or non-temporary, it shows that the available-for-sale equity instruments investment is under impairment. Among which, “Severe decline” refers to the decline range of fair value exceeding30% accumulatively; “Non-temporary decline” refers to the constant decline of fair value exceeding 12 months. When impairment provision is withdrawn on available-for-sale financial assets, the original accumulating losses included into other comprehensive profit and caused by drop of fair value shall be transferred out and included into current gains and losses. The accumulating losses that transferred out equals to the balance derived by deducting the recovered principal, the amortized amount, the current fair value and the impairment loss that has been originally included into the gains and losses from initial acquisition cost of the available-for-sale financial assets.
After confirming the impairment losses, if there is objective evidence proving that its value has been restored, and it is objectively related to the matters occurred after confirming the losses, the originally confirmed impairment losses shall be reversed; the impairment losses of the investment of available-for-sale equity instrument are reversed and confirmed as other comprehensive incomes, and that of the available-for-sale debt instruments are included into current gains and losses.
Where an equity instrument investment for which there is no quoted price in the active market and whose fair value cannot be reliably measured, or a derivative financial asset which is connected with the equity instrument and which must be settled by delivering the equity instrument, suffers from any impairment, the balance between book value of
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report financial asset and the current value of the future cash flow discounting of similar financial assets according to the rate of market return at that time shall be confirmed as impairment losses and be included into the gains and losses of the current period. Once an impairment loss has been confirmed, it shall not be transferred back.
(7) The held-to-maturity investments that are not yet due are reclassified to accounting treatment methods of available-for-sale financial assets
Where the Company has the intention of holding or the ability to make changes so that an investment is no longer suitable to be classified as held-to-maturity investment, the investment shall be reclassified by the Company as available-for-sale financial asset. The Company will sell or reclassify part of the held-to-maturity investment, which is not caused by independent events beyond the control of the Company that are not expected to recur and are difficult to reasonably predict. It will also reclassify the remaining part of such investment into financial assets that can be sold.
10. Accounts Receivable
(1). Individual account receivable with significant amount and reserved for bad-debt separately
|||
|-|-|
|the judgment basis or||
|amount standard for||
|account receivable with||
||Receivables with an individual amount of RMB 500,000 yuan or above|
|amount that is||
||(including 500,000 yuan)|
|individually significant,||
|withdrawing bad debt||
|provision individually||
||On the balance sheet date, the Company shall conduct a separate|
||impairment test for individual account receivable with significant amount. If|
||there is objective evidence, which proves that the impairment has|
||occurred, it shall recognize the impairment loss and withdraw the bad debt|
||reserve according to the difference between the present value of future|
|withdrawing method of||
||cash flow and its book value. Where individual account receivable with|
|bad debt provision of||
||significant amount has no impairment after testing, the bad debt reserve|
|account receivable with||
||shall be calculated and drawn according to its closing balance in accordance|
|amount that is||
||with the aging portfolio.|
|individually significant,||
||Objective evidence of impairment shall include the following:|
|withdrawing bad debt||
||(1) The debtor has serious financial difficulties;|
|provision individually||
||(2) The debtor breaches the terms of the contract (such as the default or|
||overdue payment of interest or principal, etc.);|
||(3) By considering economic or legal reasons, make concessions to the|
||debtor who has financial difficulties;|
||(4) The debtor is likely to go bankrupt or carry out other debt restructuring.|

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report (2). Bad debt provision of accounts receivable is conducted according to credit risk grouping
|||
|-|-|
||The individual account receivable with significant amount does not withdraw bad debt|
||provision after single testing, adding the receivable which no longer has significant|
|age grouping||
||amount after deducting individual withdrawing of bad debt provision, shall take the|
||age of receivables as a similar credit risk characteristics of portfolio.|
|risk-free|The credit risks of receivables are classified according to the transaction objects and the|
|grouping|nature of the receivables, and there is no default risk of the receivables.|

In the grouping, the aging analysis method is adopted to calculate and withdraw the bad debt reserve
||||
|-|-|-|
||Percentage of withdrawing|Percentage of withdrawing bad|
|Age|bad debt provision of accounts|debt provision of other accounts|
||receivable %|receivable %|
|within 1 year(including 1 year)|5|5|
|1-2 years|10|10|
|2-3 years|40|40|
|over 3 years|100|100|

 11. Inventory
(1) Classification of inventory
The Company's inventory is divided into raw materials, revolving materials (including packaging and low-value consumables), in process products, finished products (inventory goods), expendable biological assets, commissioned processing materials and so on.
(2) Valuation method for delivery of inventory
The issued materials are calculated by weighted average method, and the issued goods are calculated by weighted average method.
(3) Confirmation basis of net realizable value of inventory and the withdrawal method for inventory falling price reserves
① Confirmation basis of net realizable value of inventory
(A) For merchandise inventory (or finished products) for sale including materials for direct sale, during the normal production and operation, the net realizable value shall be
confirmed by the amount of estimated sales price of the inventory deducting the
estimated selling expenses and related taxes and dues.
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report (B) The materials inventory need to be processed, during the normal process of production and management, the estimated sale price of the finished products minus the estimated costs when finished the works, the estimated selling expenses and related tax payments, the net realizable value can be confirmed.
(C) For the inventory hold to execute sale contract or labor contract, its net realizable value shall be calculated based on the contract price; In case inventory quantity hold by the Company is more than the order quantity of the sale contract, the net realizable value of the exceeding part inventory shall be calculated based on general sale price.
(D) But for materials held for production, etc., if the net realizable value of finished products made from the materials is higher than the cost, the materials shall still be measured based on the cost; If the decline of material prices indicates that the net realizable value of finished products is lower than the cost, the materials can be measured based on net realizable value.
②Withdrawing method of inventory falling price reserves
The Company shall prepare for the reduction of inventory price according to the lower price between cost and net realizable value of a single inventory item. For those inventories with large number and low unit price, the falling price reserves for inventory shall be withdrawn by the Company according to the categories.
(4) Inventory system
The Company shall adopt perpetual inventory system for the stock inventory and regularly conduct physical inventory.
(5) The amortization method for revolving materials
① The amortization method of low-value consumption goods:
The Company adopts fifty percent amortization method for ring mould and wooden pallets, and one-time amortization method for other low-value consumables.
② Amortization method of packing material
The Company shall conduct amortization by once write-off process in case of receiving packing materials.
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report 12. Available-for-sale Assets
(1) Available-for-sale
① Range of non-current assets and disposal group of available-for-sale assets
When the Company recovers its book value mainly by selling (including the exchange of non-monetary assets with commercial substance) rather than continuing to use non-current asset or disposal group, it classifies the non-current asset or disposal group as holding for sale.
Disposal group refers to a group of assets disposed of as a whole through sale or other means in transaction, and liabilities directly related to these assets transferred in the transaction.
② Confirmation condition for non-current assets and disposal group of available-for-sale assets
(A) The Company shall classify the non-current assets and the disposal group that meet the following conditions as available-for-sale assets:
According to the usual practice of selling such assets or disposal groups in similar transactions, they can be sold immediately in the current situation.
(B) They are likely to be sold, that is, the Company has made a decision on sale plan and obtained definite purchase commitment, and the sale is expected to be completed within one year. They can be sold with the approval of the relevant authority or regulatory authority of the Company.
③ Accounting treatment method and reporting for non-current assets and disposal group of available-for-sale assets.
The Company shall measure the book value of assets and liabilities in non-current assets or disposal groups according to relevant accounting standards before dividing non-current assets or disposal groups into available for sale assets for the first time.
When the Company initially measures or recalculates non-current assets or disposal groups held for sale on the balance sheet date, if its book value is higher than the net amount of fair value minus selling expenses, the book value is written down to the net amount of fair value minus selling expenses, and the amount written down is confirmed as the loss of assets impairment, which is recorded in the current gains and losses, and the
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report provision for holding impairment of assets for sale is made. For the amount of loss of impairment of assets confirmed by the disposal group held for sale, we shall first offset the book value of goodwill in the disposal group, and then offset proportionally the book value according to the proportion of the book value of each non-current asset in the disposal group. There is no depreciation or amortization of non-current assets held for sale.
The non-current assets held for sale or assets in disposal groups held for sale shall not offset each other with the liabilities in the disposal group held for sale and shall be shown as current assets and current liabilities respectively.
If the Company loses control of its subsidiary Company due to the sale of its investment in subsidiary Company or other reasons, no matter whether the enterprise retains part of equity investment after the sale, when the investment in subsidiary Company to be sold meets the conditions for the classification of categories held for sale, the investment in subsidiary Company will be divided into categories held for sale as a whole in the individual financial statements of the parent Company , and all assets and liabilities of subsidiaries will be divided into categories held for sale in the combined financial statements.
(2) Discontinuing operation
Termination of business refers to a separate component of Company that meets one of the following conditions and has been disposed of or classified as category held for sale:
① The constituent part represents an independent principal business or a principal business region;
② The constituent part is a part intended for disposal planning of a major independent business or a main business region;
③ The constituent part is a subsidiary Company specially acquired for resale.
13. Long-term equity investment
(1) Investment cost confirmation of long-term equity investment
① The confirmation of the initial investment cost of long-term equity investment formed by business combination can be seen in the accounting treatment of business combination under the same control and under the different control in Note 5.
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report② Besides the long-term equity investment formed by business combination, the initial investment cost of the long-term equity investment obtained by other means shall be confirmed in accordance with the following provisions:
(A) For long-term equity investment acquired through paying cash, the acquisition price actually paid shall be taken as the initial investment cost. The initial investment cost includes the expenses directly related to the long-term equity investment obtained, taxes and other necessary expenses.
(B) The long-term equity investment obtained by issuing equity securities (equity instruments) is regarded as its initial investment cost according to the fair value of equity securities (equity instruments) issued. If there is conclusive evidence that the fair value of long-term equity investment obtained is more reliable than that of equity securities (equity instruments) issued, the initial investment cost is confirmed on the basis of the fair value of long-term equity investment invested by investors. If the fees directly related to the issuance of equity securities (equity instruments), including service fees and commissions, are reduced by the issuance premium, and if the premium is insufficient to be reduced, the surplus reserve and undistributed profits are reduced in turn. Long-term equity investment obtained by issuing debt securities (debt instruments) shall be treated by issuing equity securities (equity instruments).
(C) For the long-term equity investment obtained through debt restructuring, the Company takes the fair value of the shares enjoyed by the creditor's rights into equity as its initial investment cost.
(D) For long-term equity investment acquired through non-monetary assets exchange, if non-monetary assets exchange is of commercial substance and fair value of converted assets can be reliably measured. The Company confirms its initial investment cost on the basis of fair value of converted assets, unless there is solid evidence that the fair value of converted assets is more reliable. If the above-mentioned conditions cannot be met, the book value of swap-out assets and related payable taxes shall be taken as the initial investment cost of swap-in long-term equity investments.
The expenses, taxes and other necessary expenses incurred by the Company directly
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report related to the acquisition of long-term equity investment are included in the initial investment cost of long-term equity investment.
No matter how the Company acquires long-term equity investment, the cash dividends or profits declared but not yet paid in actual payments or consideration shall be accounted for separately as the dividend receivable and shall not constitute the cost of long-term equity investment.
(2) The subsequent measurement and loss and profit confirmation method of long-term equity investment
① The long-term equity investment checked and calculated by cost method
(A) The Company shall adopt method to calculate the long-term equity investment can be controlled by the invested unit, that is, investment in subsidiaries.
(B) For long-term equity investment calculated by cost method, except for cash dividends or profits which have been declared but not yet paid in the actual price or consideration at the time of investment, the Company, regardless of whether it belongs to the net profits realized by the invested units before and after investment, shall recognize the investment income according to the cash dividends or profits declared by the invested units.
② The long-term equity investment checked and calculated by equity method
(A) A Company shall adopt the equity method to account for joint venture under the joint control of the invested entity or joint venture with significant influence.
(B) For long-term equity investment adopted equity method, if the initial investment cost is more than the enjoyed share of net asset fair value identified by the invested units when the investment happens, the initial investment cost of the long-term equity interest investment shall not be adjusted; If the initial investment cost is less than the enjoyed share of net asset fair value identified by the invested units when the investment happens, its balance shall be included into the current gains and losses and the initial investment cost of the long-term equity investment shall be adjusted simultaneously.
(C) After obtaining a long-term equity investment, the Company shall confirm the investment losses and profits and other comprehensive income respectively and adjust the book value of the long-term equity investment in terms of the due owned or borne share
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report of the net gains or losses and other comprehensive income achieved by the invested unit. When confirming the net loss and profit of the invested unit that shall be owned or borne, confirmation shall be conducted for the net profit of the invested unit upon adjustment based on fair value of net identifiable assets of the invested unit when obtaining the investment. However, if the Company is unable to reasonably confirm the fair value of the identifiable assets of the invested unit at the time of obtaining investment, the balance between the fair value of the identifiable assets of the invested unit at the time of investment and book value is small or it is impossible to obtain relevant information of the invested unit due to other reasons, the Company shall directly calculate and confirm the investment gains and losses on the basis of the net book gains and losses of the invested unit. The Company shall reduce correspondingly the book value of the long-term equity investment according to the deserved portion of assigning cash dividends or profit declared by the invested unit. As for other changes concerning owner's equity of the invested unit besides net profit or loss, other comprehensive income and profit distribution, the Company shall adjust the book value of the long-term equity investment and include them into the owner's equity.
When affirming the investment income generated by the investment of joint ventures, the Company offsets the unrealized internal transaction income between the Company and the joint venture which belongs to the Company according to the share-holding ratio, and affirms the investment gains and losses. The internal transaction loss occurred between the Company and invested unit belongs to assets impairment loss, which shall be confirmed in full amount. The Company shall offset the unrealized internal transaction gains and losses between subsidiaries incorporated into combination and joint ventures in accordance with the above-mentioned principles, and confirm the investment gains and losses.
When net deficiency of the invested entity that confirmed to be borne, it shall be disposed as the following orders: The book value of the long-term equity investment shall be offset at first. If the book value of long-term equity investment is not enough to be offset, the investment losses shall be confirmed continuously according to the limit that the book
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report value of other long-term equity investments substantially constitutes the net investment in the invested entity, to offset the book value of long-term receivables; After the process above, if the Company still shall share extra duty according to investment contract or the agreement, confirm beforehand liabilities according to estimated duty that shall be undertaken and include it in the current investment loss. If the invested unit realizes to be profitable in the following period, the Company shall process it in the sequence contrary to the mentioned above after deducting the contribution of loss thathasn’t been confirmed, write down the book value that has been confirmed to be estimated liabilities, resume other book values that constitute the long-term interest and long-term equity investment of the invested unit in substance and meanwhile confirm investment income.
(3) The basis confirmed to have joint control and significant influence on the invested entity
① The basis confirmed to have joint control on the invested entity
The joint control refers to the control jointly performed towards certain arrangement as per the related agreements, and the related activities thereof must be agreed by all the participants who share the control rights before making decisions. The relevant activities generally include sale and purchase of goods or labor services, management of financial assets, acquisition and disposal of asset,R&D activities and financing activities. Joint venture refers to the joint venture arrangement that the Company has the right to arrange the net assets of the Company. The joint venture arrangement in which the joint venture party enjoys assets related to arrangement and bears relevant liabilities is cooperation rather than joint venture.
② The basis confirmed to have significant influence on the invested entity
The significant influence refers to having the power to participate in the formulation of financial and operating policies of an enterprise, but cannot control or jointly control the formulation of these policies together with other parties. When the Company can exert significant influence on the invested unit, the invested unit is its joint venture.
14. Fixed assets
(1). Confirmation conditions
The fixed assets refer to the tangible assets held for commodity production, rendering
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report service, lease or operation management with a service life of more than one accounting year. The fixed assets are confirmed when the following conditions are met:
① The economic interests related to the fixed assets are likely to flow into the Company;② The costs of the fixed assets can be calculated reliably.
(2). Method of depreciation
|||||||
|-|-|-|-|-|-|
||||Period of|||
||Method of||||Yearly|
|Item|||depreciation|RM value rate||
||depreciation||||depreciation|
||||（year）|||
|||straight-line||||
|office and||||||
|||service life|10-40|3|2.43-9.70|
|buildings||||||
|||depreciation||||
|machinery||straight-line||||
||||10|3|9.70|
|equipment||depreciation||||
|transportation||straight-line||||
||||4|3|24.25|
|equipment||depreciation||||
|||straight-line||||
|other equipment|||5|3|19.40|
|||depreciation||||

(3). Confirmation basis, pricing and depreciation method of fixed assets under finance lease
①Confirmation basis of fixed assets under finance lease
At the beginning of the lease period, the Company shall recognize the leased fixed assets that meet the financial lease criteria as the financial leased fixed assets.
② Pricing method of fixed assets under finance lease
At the beginning of the lease period, the Company shall regard the lower of the fair value of leased assets and the present value of the minimum lease payment on the lease start date and the initial direct expenses incurred as the accounting value of the financing leased assets, the lowest lease payment as the value of the long-term accounts payable, and the balance between the lower of the fair value of leased assets and the present value of the minimum lease payment on the lease start date as the accounting value of the financing leased assets and the minimum rental payments as unconfirmed financing cost. Unconfirmed financial charges shall be amortized to each period in lease term according to effective interest method.
③ Method for depreciation of fixed assets under finance lease
The Company shall adopt the depreciation policy consistent with owned fixed asset to
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report withdraw leasing asset depreciation. If it is reasonable to be certain that the lessee will obtain the ownership of the leasing asset when the lease term expires, the leasing asset shall be withdrawn depreciation within its service life. If it is not reasonable to be certain that the lessee shall obtain the ownership of the leasing asset at the expiry of the lease term, the leasing asset shall be withdrawn depreciation within the shorter one between the lease term and the service life of leasing asset.
15. Construction in progress
(1) Category of construction in process
Construction in process shall be calculated separately according to the approved projects (2) The standard and time point for construction in process carried down fixed assets All expenditures of the construction in progress that incurred before it reaches the estimated serviceable condition shall be regarded as entry value of the fixed assets. The self-operating engineering shall be measured according to direct materials, direct wages, direct mechanical construction costs, etc.; Package project is measured according to the payable project price; The borrowing expenses that meet the capitalization conditions and occur before the project under borrowing reaches its intended usable state shall be capitalized and included in the cost of the project under construction.
If the fixed assets have reached the intended usable state but have not yet completed the final accounts, the Company shall, from the date of reaching the intended usable state, determine its cost according to the project budget, cost or actual cost of the project, as well as the estimated value, transfer it to the fixed assets, and calculate the depreciation of the fixed assets in accordance with the Company's fixed assets depreciation policy; After final account is completed, the Company shall adjust the original provisionally estimated value according to actual cost, but not adjust the previously accrued amount of depreciation.
16. Borrowing cost
(1) Range of the borrowing cost
The borrowing cost of the Company shall include interest on borrowings, amortization of discount or premium, auxiliary expenses, and exchange balance incurred from foreign
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report currency borrowings.
(2) Borrowing cost principle
Where the incurred borrowing cost of the Company can be directly attributable to the acquisition and construction or production of assets eligible for capitalization, it shall be capitalized and reckoned in the costs of relevant assets; Other borrowing costs shall be confirmed as costs on the basis of the actual amount accrued, and shall be included into the current gains and losses.
The term "assets eligible for capitalization" shall refer to the fixed assets, investment real estate, inventories and other assets, of which the acquisition and construction or production may take quite a long time to get ready for its intended use or for sale.
(3) Confirmation of the time period for capitalization of the borrowing cost
① Confirmation of the time point for capitalization of the borrowing cost
After assets expenditures and the borrowing expenses have happened, the necessary acquisition and construction or production activities have already started in order to reach the pre-confirmed usable or marketable state for the assets, the borrowing expenses can begin capitalization. The asset expenses shall include the cash, transferred non-cash assets or expenses that bearing debts paid for the acquisition and construction or production for assets eligible for capitalization
② Confirmation of the suspending time point for capitalization of the borrowing costs If assets eligible for capitalization is interrupted abnormally during the course of acquisition and construction or production, and the interruption lasts more than 3 months, the capitalization of borrowing costs shall be suspended. The borrowing costs occurred during the interruption shall be confirmed as current gains or losses, until the acquisition and construction or production activities of the asset restart, the capitalization of borrowing costs shall be continued. If the interruption is a necessary step for making the acquired, built or produced assets which are eligible for capitalization reaching estimated usable and marketable status, the capitalization of the borrowing costs shall be continued.③ Confirmation of the suspending time point for capitalization of the borrowing costs When the acquired, built or produced assets which are eligible for capitalization can reach
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report estimated usable and marketable state, shall stop capitalizing on borrowing costs; the borrowing costs incurred thereafter shall be confirmed as current gains and losses according to the real amount.
Where each part of the acquired, built or produced assets which are eligible for capitalization is completed separately, and every single part is available to use or sell during the continuing construction of other parts, and the acquisition and construction or production activities, which are necessary to make such part of asset reaching the estimated status of being available to use or sell, have already been completed substantially, shall stop capitalizing on the borrowing costs in relation to this part of asset. Where each part of the acquired, built or produced assets which are eligible for capitalization is completed separately and but it cannot be available to use or sell till the whole construction finishing, shall stop capitalizing on the borrowing costs when the assets can be completed entirely.
(4) The confirmation of the amount of the capitalization of borrowing costs
① The confirmation of the amount of the capitalization of borrowing interests
During the capitalization period, the interests' capitalization amount (including the amortization of discounts or premiums) in each accounting period shall be confirmed according to the following provisions:
(A) As for special borrowing costs arising from the acquisition and construction or production of assets which are eligible for capitalization, the amount shall be confirmed based on the interests cost of the special borrowings costs occurred actually in the current period deducting the interests' income earned from depositing the unused borrowing costs or the income from temporary investment.
(B) If ordinary borrowings used for acquisition and construction or production of assets which are eligible for capitalization, the interests' amount of ordinary borrowings to be capitalized shall be confirmed by the weighted average of the asset expenditures for cumulative capital expenditure that exceed the capital expenditure of specific borrowings to multiply the capitalization rate of ordinary borrowings. The capitalization rate is confirmed by the calculation of the weighted average interest rate of general borrowing
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report costs.
(C) If there is any discount or premium of the borrowings, the amount of discounts or premiums amortized during each accounting period shall be confirmed by the effective interest rate method, and an adjustment shall be made to the amount of interests in each period.
(D) Within period of the capitalization, the interest capitalization amount of each accounting period shall not exceed the amount of interest actually occurred to the relevant borrowings in the current period.
② The confirmation of the amount of the capitalization of borrowing auxiliary expenses (A) Article For the ancillary expense incurred to a specifically borrowings, those incurred before assets eligible for capitalization under acquisition, construction or production is ready for the intended use or sale shall be capitalized at the incurred amount when they are incurred, and shall be included into the costs of the asset eligible for capitalization those incurred after a qualified asset under acquisition and construction or production is ready for the intended use or sale shall be confirmed as expenses on the basis of the incurred amount when they are incurred, and shall be recorded into the gains and losses of the current period.
(B) The auxiliary expenses arising from general borrowings shall be confirmed as expenses at the time of occurrence and shall be included into the gains and losses of the current period.
③ The confirmation of the amount of the capitalization of the balance of exchange
During the period of capitalization, the exchange balance on foreign currency specific borrowings shall be capitalized, and shall be included in the cost of assets eligible for capitalization.
17. Biological assets
(1) Classification of biological assets
Biological assets refer to live animals and plants. The Company's biological assets are divided into expendable biological assets and productive biological assets.
(2) Conformation conditions of biological assets
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report The Company shall confirm the biological assets that satisfy the following conditions at the same time:
① The Company possesses or controls the biological asset as a result of past transaction or matter;
② The economic benefits or service potential concerning this biological asset are likely to flow into the Company;
③ The cost of the biological asset can be measured reliably.
(3) Depreciation of productive biological assets
The Company shall depreciate the productive biological assets that meet projected production and operation, and reasonably confirm their service life, estimated net residual value and depreciation method according to nature, usage and expected realization of the economic benefits involved.
The type, life expectancy, anticipated net residual value and yearly depreciation of the Company's productive biological assets are as follows:
|||||
|-|-|-|-|
||Life expectancy|Anticipated net||
|Type|||Depreciation method|
||(month)|residual value||
|||300.00 yuan per||
|Parent Stock-Pig|48||straight-line-method|
|||head||
|||25.00 yuan per|units-of-production|
|Parent Stock(Broiler)|10|||
|||broiler|method|

The depreciation coefficient shall be calculated according to the empirical value of egg production during the service life of parent stock(broiler) and withdrawing depreciation according to the depreciation coefficient.
The depreciation rate and depreciation amount of the productive biological assets which have been prepared for impairment are recalculated according to the book value, estimated net residual value and usable life of the productive biological assets.
The Company reviews the service life, estimated net residual value and depreciation methods of productive biological assets at regular intervals. If the expected number of service life or estimated net residual value is different from the original estimate, or if
there is any significant change in the expected realization of the economic benefits
involved, it shall be treated as change in accounting estimate.
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report 18. Intangible assets
(1). Valuation methods, service life, and impairment test
①Initial measurement of intangible assets
(A) Initial measurement of outsourcing intangible assets
The cost of outsourcing intangible assets, including acquisition price, relevant taxes and dues as well as other expenditures which is directly attributed to make intangible assets to the estimated purpose. When the payment of purchased intangible assets price exceeding normal credit conditions is delayed in payment, with financing nature in essence, the intangible assets cost shall be confirmed based on the present value of purchase price. The balance between the cost actually paid and the present value of the purchasing cost will be included into the current gains and losses during the credit period except the part that shall be capitalized.
(B) Initial calculation for independently developed intangible assets
The cost of self-developed intangible assets shall be confirmed according to the total expenditure incurred from meeting the capitalization conditions to reaching the intended purpose, and the expenditure already expended in the previous period shall not be adjusted.
For the intangible assets researched and developed by the Company, the expenditure during research stage shall be recorded into the current gains and losses as occurring; if the expenditures in development stage which don't meet the conditions of capitalization shall be included into current gains and losses when it occurs. Those meeting the condition of capitalization shall be confirmed as intangible assets. When the expenditures occur during research or development stage cannot be distinguished, all theR&D expenditures occurred shall be included into the current gains and losses.
②Subsequent measurement of intangible assets
The service life shall be analyzed and confirmed by the Company when obtaining the intangible assets. The intangible assets acquired by the Company include intangible assets with finite service life and indefinite service life.
(A) Subsequent calculation for intangible assets with finite service life
For intangible assets with limited service life, the Company will adopt the straight-line
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report method to amortize them in phases during their service life from the time they reach their intended purpose, without reserving residual value. The amortization amount of intangible assets shall be included into current gains and losses. If the economic benefits of an intangible asset are realized through product or other assets, the amortization amount shall be included into the cost of the relevant assets.
The categories of intangible assets, estimated service life, estimated net residual value and annual amortization rate are listed as follows:
|||||
|-|-|-|-|
|||Estimated net residual|Annual amortization|
|Categories|Estimated service life(year)|||
|||value %|rate %|
||according to the useful life|||
|land use rights||0|-|
||of land certificate|||
|computer software and||||
||5-10|0|10-20|
|other||||

The Company shall review the service life and the amortization method of intangible assets with the finite service life on the balance sheet date.
(B) The subsequent measurement for intangible assets with indefinite service life
The Company shall not amortize intangible assets with uncertain service life during the holding period.
③Estimate the service life of intangible assets
(A) The service life of the intangible asset derived from the contractual rights or other statutory rights shall be confirmed according to the limit not exceed the contractual rights or other statutory rights; If when the contract rights or other statutory rights are due, they can be extended because of renewal, and there is evidence that the Company does not need to pay a large amount of cost to renew contract, then the renewal period shall be included into the service life.
(B) If the service life is not stipulated in the contract or law, the Company shall confirm the period when intangible assets can bring economic benefits to the Company by employing relevant experts for demonstration or comparing with those in the same industry and referring to the Company's historical experience.
(C) In accordance with the above method, if it is still unable to reasonably confirm the
time limit when the intangible assets can bring economic benefits for the Company, the
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report intangible assets shall be deemed as the intangible assets with uncertain service life.
④Treatment of land use right
(A) The land use right acquired by the Company is usually confirmed as intangible assets, but if the land use right is used to earn rent or capital appreciation, it will be converted into investment real estate.
(B) If the Company develops and constructs buildings such as factory buildings, it shall treat the relevant land use rights and buildings separately.
(C) The price paid for the acquisition of land and buildings shall be allocated between the building and the right to use the land. If they cannot be reasonably distributed, they shall be confirmed as fixed assets.
(2). Accounting policies of internalR&D expenditure
①The specific standard for the partition of the research stage and development stage of the Company internalR&D project
According to the actual situation ofR&D, the Company dividesR&D projects into two stages: research stage and development stage.
(A) Research stage
Research stage refers to the stage for ingenious and planned investigation, research activities so as to acquire and understand new scientific or technical knowledge, etc.
(B) Development stage
Development stage refers to before the commercial manufacture or use, the stage for the application of research achievement and other knowledge to a certain plan or design to produce new or substantial improved materials, devices or products, etc.
The expenditure of the internalR&D projects at the research stage shall be included into current gains and losses when incurred.
②The specific standards for expenditure at development stage which meet capitalization The expenditure of the internalR&D projects at the development stage shall be confirmed as the intangible assets when meeting the following conditions simultaneously:
(A) Complete the intangible assets to make them feasible to be used or sold in technology; (B) Possess the intention to complete the intangible assets and use or sell them;
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report (C) The ways of intangible assets to generate economic benefits include the ability to prove the existence of the market where there are the products produced by the intangible assets or the existence of that of the intangible assets, and prove its usefulness if intangible assets will be used internally;
(D) There are sufficient technologies, financial resources and other resources supporting to complete the development of the intangible assets, and the Company is able to use or sell the intangible assets;
(E) Expenditures that belong to the development stage of the intangible assets can be measured reliably.
19. Impairment of long-lived assets
The impairment test shall be made to long-term equity investments, investment property measured by using the cost model, fixed assets, projects under construction, intangible assets with finite service life and other long-term assets with signs of impairment on the balance sheet date. If the impairment test result is indicated that the recoverable amount of assets is lower than its book value, it is withdrawn impairment reserves in accordance with the balance and calculated into the impairment loss. The recoverable amount shall be the higher one of the net amount of the fair value of the assets deducted by the disposal expenses and the present value of the expected future cash flow of the assets. Calculate and confirm the assets impairment reserves based on single asset; shall it be difficult to estimate the recoverable amount of single asset, the recoverable amount of the asset group shall be confirmed based on its belonging asset group. Asset group is the minimum asset portfolio that can generate cash inflow independently.
Each year, the Company performs the impairment test on the goodwill and the intangible assets with uncertain service life, no matter whether there are signs of impairment or not. When the Company conducts the impairment test on business reputation, as for the book value of goodwill formed due to the business combination, it shall be amortized to related assets groups from the acquisition date according to the reasonable methods; The part that is hard to be allocated to related assets groups shall be amortized to related combined assets groups. When apportioning the book value of the goodwill to the relevant asset
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report groups or combinations of asset groups, it shall be apportioned on the basis of the proportion of the fair value of each asset group or combination of asset groups to the total fair value of the relevant asset groups or combinations of asset groups. Where it is difficult to measure the fair value reliably, it shall be apportioned on the basis of the proportion of the carrying value of each asset group or combination of asset groups to the total carrying value of the relevant asset groups or combinations of asset groups. When making an impairment test on the relevant asset groups or combinations of asset groups including goodwill, if any evidence shows that the impairment of asset groups or combinations of asset groups is possible, the Company first makes an impairment test on the asset groups or combinations of asset groups not including goodwill, calculate the recoverable amount, compare it with the relevant carrying value and confirm the corresponding impairment losses. The Company makes an impairment test of the asset groups or combinations of asset groups containing business reputation, and compares the book value of these relevant asset groups or combinations of asset groups (including the book value of goodwill amortized thereto) and their recoverable amount. Where the recoverable amount of relevant assets or combinations of the asset groups is lower than the book value thereof, the depreciation of the goodwill losses shall be confirmed.
Once the impairment loss of above-mentioned asset is confirmed, it shall not be reversed in following accounting periods.
20. Long-term prepaid expenses
(1) Scope of long-term prepaid expense
The long-term prepaid expense refers to an expense that has incurred but shall be amortized by the current period and subsequent periods with the time limit of more than 1 year (exclusive), and includes improvement expenditures incurred in fixed assets by way of operating lease.
(2) Initial calculation for long-term prepaid expense
The long-term prepaid expense received initial calculation based on the actual cost.
(3) Amortization of long-term prepaid expense
Long-term prepaid expenses in benefit period will be of amortization average using the
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report straight-line method.
21. Employee remuneration
(1). The accounting treatment method of short-term remuneration
Short-term remuneration refers to employee remuneration that needs to be paid in full amount within 12 months after the end of annual report period that the employee provides related service, except for the remuneration given for labor relation removing with the employee.
Short-term remuneration includes: Employee salary, bonus, allowance and subsidy, employee welfare expenses, medical insurance premiums, industrial injury insurance premium, birth insurance premium and other social insurance premiums, housing accumulation fund, labor union expenditure and employee education expenditure, short-term compensated absence, short-term profit sharing plan, non-monetary welfare and other short-term remunerations.
The Company shall confirm the actual short-term remuneration accrued as liabilities and include it into current gains and losses or related asset cost during the accounting period of services provided by staff.
(2). The accounting treatment method of post-employment welfare
The Company participates in the establishment of withdrawal plans, which include basic pension insurance premiums, unemployment insurance premiums and enterprise annuity payments for employees in accordance with relevant regulations. The amount due for deposit shall be confirmed as the debt of employee remuneration on the balance sheet date in order to exchange for the service provided by employees during accounting period, and include into the current gains and losses or relevant asset cost.
(3). Accounting treatment method of dismissal welfare
Dismissal welfare refers to the remuneration for the employee when the Company terminates the labor relationship with the employee before the labor contract expires or when the Company encourages the employee to receive layoff voluntarily. If the Company provides dismissal welfare for staffs, the staff remuneration liability generating from confirming dismissal welfare on the earlier one of the following two dates shall be included into current gains and losses:
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report① When the Company cannot unilaterally withdraw the dismissal welfare provided by labor relationship relief plan or reduction suggestion.
② When the Company confirms cost or expense relevant to the restructuring involved in paying dismissal welfare.
(4). Accounting treatment method of other long-term employee benefits
Other long-term employee welfare refers to other welfares of all employees other than short-term remuneration, welfare after demission and dismisses welfare. At the end of report period, staff remuneration cost generating from other permanent staff welfare shall be confirmed to the following constituent parts:
① Cost to serve.
② Net interest amount of net liabilities or net asset of other permanent staff welfares.③ The change generating from the recalculation of net liability or net asset of other permanent staff welfares.
In order to simplify the relevant accounting treatments, the total net amount of above items is recorded into current gains and losses or relevant asset costs.
22. Estimated Liabilities
(1) Confirmation principles of estimated liabilities
When the external guarantees, pending litigation or arbitration, product quality assurance, loss of contract, the obligation of restructuring matters or the relevant business meet three of the following conditions, it shall be confirmed as estimated liabilities:
① That obligation is a current obligation undertaken by the Company;
② It is likely to cause the economic benefit to flow out of the Company due to the performance of the obligation;
③ The amount of the obligation can be measured reliably.
(2) Calculated method for estimated liabilities
The amount of the estimated liability is measured in accordance with the best estimate of the expenditure required for the contingency.
① If there is a sequent range for the necessary expenses and if all the outcomes within this range are equally likely to occur, the best estimate shall be confirmed in accordance
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report with the middle estimate within the range.
② In other cases, the best estimate shall be disposed according to the following cases respectively:
(A) If the contingencies involve a single item, it shall be confirmed according to the most likely outcome.
(B) If the contingencies involve two or more items, the best estimate shall be calculated and confirmed according to all possible outcomes and the relevant probabilities.
23. Share-based payment
The share-based payments shall consist of equity-settled share-based payments and cash-settled share-based payments.
(1) Accounting treatment on the grant date
In addition to share-based payments of the immediate vesting, regardless of equity-settled share-based payment or cash-settled share-based payment, the Company shall not accept accounting treatment on the grant date.
(2) Accounting treatment on each balance sheet date in the waiting period
In the waiting period of each balance sheet date, services acquired in hiring employees or other parties shall be included in the cost, and the owner's equity or liabilities shall be confirmed.
As for share-based payments with market conditions, as long as employees meet all other non-market conditions, the acquired service shall be confirmed. When the performance conditions are non-market conditions, after the waiting period is fixed, if the subsequent information indicates that the estimation of feasible rights needs to be adjusted, the earlier estimate shall be modified.
As for equity-settled share-based payment involving employees, according to fair value of equity instruments in the grant date, it shall be included in cost and capital reserve (other capital reserve), and its subsequent changes of fair value shall not be confirmed. As for cash-settled share-based payment involving employees, it shall be recounted according to fair value of equity instruments at each balance sheet date to recognize the cost and payable employee remuneration.
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report On each balance sheet date within the waiting period, the Company shall make the best estimates according to the newly obtained changes in exercisable right staff number variation and other follow-up information, and amend the number of equity instruments of expected exercisable right.
According to the fair value of the above-mentioned equity instruments and the number of equity instruments with predicted feasible rights, the cumulative cost and expense amount that shall be confirmed up to the current period is calculated, with the cumulative confirmed amount in the previous period subtracted, as the cost and expense amount that shall be confirmed in the current period.
(3) Accounting Treatment on the Vesting Date
① As for equity-settled share-based payment, after vesting date, the confirmed cost and the total owner equity shall no longer be adjusted. On the vesting date, the Company shall confirm the share capital and share premium according to the exercise situation, and the capital reserve (other capital reserve) in the waiting period shall be carried forward at the same time.
② As for cash-settled share-based payment, after the vesting date, the Company shall no longer confirm the cost, and changes in fair value of liabilities (staff remuneration) shall be included in current gains and losses (changes of profit or loss in fair value).
(4) Accounting treatment for using repurchased share as incentive stock option for staff Where the Company rewards its employees in the form of share repurchase, when it repurchases shares, it shall treat all the expenditures of the share repurchase as stock shares, and make a record. On each balance sheet date during the waiting period, according to the fair value of equity instruments on the granting date, the obtained staff services are included in the cost and expenses, and the capital reserve (other capital reserve) is increased. When the employee's right to purchase shares of Company receives the price, the cost of the stocks in stock delivered to the employee and the accumulated amount of capital reserve (other capital reserve) during the waiting period shall be resold, and the capital reserve (equity premium) shall be adjusted according to its balance.
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report 24. Revenue
The revenues mainly consist of the income of selling goods, providing labor services, and transferring the right to use assets. And the principles of income confirmation shall be driven as below:
(1) Confirming principle of the revenue for selling goods
The main risks and rewards of the property in the commodities have been transferred to the acquiree by the Company; The Company retains neither continuing management right related with the ownership nor effective control over the goods sold; The amount of revenue can be measured in a reliable way; The relevant economic interests may be flowed into the Company; When the relevant cost incurred or to incur can be measured reliably, it shall be confirmed as the realization of product sales income. The Company's sales revenue, mainly includes feed products, feed raw materials, poultry products and raising business. The revenue shall be confirmed after receipt of payment or completion of credit procedures and delivery of goods.
(2) Confirming principle of the revenue for providing labor services
① Principle of confirmation of labor income is to provide labor transactions in the case of reliable estimation
On the balance sheet date, when the labor service transaction results rendered can be reliably estimated, the Company shall confirm the revenue from providing labor service by the percentage-of-completion method.
When the amount of income can be reliably measured, the relevant economic benefits may flow into the Company, the completion schedule of the transaction can be reliably confirmed, and the costs that have occurred and will occur in the transaction can be reliably measured, the results of the labor transaction can be reliably estimated.
②Confirmation principle of labor income under the condition that provide labor transactions in the case of unreliable estimation
On the balance sheet date, when the labor service transaction results provided by the Company cannot be reliably measured, it shall confirm labor services income by the following three kinds of condition.
(A) If labor service cost incurred is estimated to be compensated in full amount, provision
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report of labor service income shall be confirmed according to the amount that has been regained or can be regained by estimation and carry forward the labor service cost that has accrued;
(B) If the labor cost estimation that has occurred can be compensated partly, the labor revenue shall be confirmed to provide as the labor cost amount that has occurred or can be compensated, and the occurred labor cost will be carried over;
(C) If the cost of labor services incurred is expected not to be compensated, the cost incurred shall be included into current gains and losses (main business cost), and no income from the provision of labor services will be confirmed.
(3) Confirmation principles of transferring the right to use assets
When the trade-related economic interest is likely flow into this Company, and the relevant revenue that can be reliably calculated, the realization of the revenue from transferring the right to use assets shall be confirmed.
25. Governmental grant
(1) Category of governmental grant
Government grant refers to the monetary assets or non-monetary assets that the Company obtains from the government free of charge, including the government grant related to assets and income.
The government grants pertinent to assets refer to the government assets that are obtained by enterprises used for purchase or construction, or forming the long-term assets by other ways.
The government grants related to earnings refer to the government grants besides the government grants related to assets.
(2) Confirmation principle and confirmation time-point of government grant
Confirmation principle of government grant
① The Company can meet all attached conditions for governmental grant;
② The Company is able to receive governmental grant.
Government grant may be confirmed on condition that it meets the above conditions simultaneously.
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report (3) Measurement for government grant
① If the government grants belong to monetary assets, shall be calculated according to the received or receivable amount.
② Non-monetary assets of government grants shall be measured by the fair value; if the fair value cannot be obtained reliably, it shall be measured according to the nominal amount (the nominal amount is RMB 1).
(4) Accounting treatment method for government grants
① The government grant related to assets shall, when acquired, be deducted with the book value of the relevant assets or confirmed as deferred income. If it is confirmed as deferred income, it shall be divided into gains and losses in stages according to a reasonable and systematic method during the service life of the relevant assets. The governmental grants calculated according to the nominal amount shall be directly included in the current gains and losses.
② Government grant related to the incomes shall be disposed separately according to the conditions:
(A) If the grants are used to compensate for related expenses or losses in the later period of the Company, it shall be confirmed as deferred income and included in the current gains and losses during confirmation of relevant expenses or loss
(B) Those used for compensating the related expenses or losses have been incurred shall be included in current gains and losses directly or relevant offset cost as obtaining.
③ If government grants that include both asset-related and revenue-related parts can be distinguished, they are treated separately in different parts. If it is difficult to distinguish, it shall be wholly confirmed as government grants related to incomes.
④ Government grants related to the day-to-day operation of the Company shall be accounted for as other benefits or deducted with relevant costs in accordance with the nature of its economic operations. Government grants unrelated to the daily activities of enterprise are included in the income and expenditure of non-business activities. If the finance allocates the discount funds directly to the Company, the Company will deduct the relevant borrowing costs from the corresponding discount.
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report⑤ If it is necessary to return governmental grants which have been confirmed, it shall be disposed respectively according to the following conditions:
(A) If the book value of the relevant assets is deducted at the time of initial confirmation, the book value of the assets shall be adjusted.
(B) If there is the deferred income concerned, the book balance of the deferred income shall be offset against, but the excessive part shall be included in the current gains and losses.
(C) In other circumstances, it shall be directly included in the gains and losses of the current period.
26. Deferred income tax assets/deferred income tax liabilities
The Company adopts the balance sheet debt method to calculate the income tax.
(1) Confirmation of the deferred income tax assets and the deferred income tax liabilities① When the Company obtains the assets or liabilities, it shall determine its tax basis. On the balance sheet date, the Company analyses and compares the book value of assets and liabilities with their tax basis, and the book value of assets and liabilities with their tax basis. If there is temporary balance between the book value of assets and liabilities and their tax basis, the Company shall recognize deferred income tax liabilities or deferred income tax assets respectively for taxable temporary balance or deductible temporary balance if the relevant temporary balance occurs in the current period and meets the confirmation conditions. Tax assets.
② Confirmation basis of deferred income tax assets
(A) The Company shall confirm the deferred income tax assets arising from a deductible temporary balance to the extent of the amount of the taxable income which it is likely to obtain and which can be deducted from the deductible temporary balance. The amount of taxable income likely to be obtained in the future period includes the amount of taxable income realized in normal production and operation activities in the future period, and the amount of taxable income increased due to the return of temporary balance of taxable income during the period of deductible temporary balance.
(B) As for any deductible losses and tax deduction that can be carried over to the next
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report years, the corresponding deferred income tax assets shall be confirmed to the extent that the amount of future taxable income to be offset for the deductible loss and tax to be likely obtained.
(C) On the balance sheet date, the book value of deferred income tax assets shall be re-checked. If it is unlikely to obtain sufficient taxable income to deduct from the benefit of the deferred income tax asset, the carrying amount of the deferred income tax assets shall be written down. The write-down amount shall be reversed when it is likely that the sufficient taxable income is available.
③ Confirmation basis of the deferred income tax liabilities
The Company shall confirm the current or past taxable temporary balance that shall be paid but is not paid as deferred income tax liabilities. But itdoesn’t include goodwill and transaction formed by non- business combination and the temporary balance neither affects the accounting profit nor taxable income when transaction incurred.
(2) Measurement for the deferred income tax assets and the deferred income tax liabilities① On the balance sheet date, the deferred income tax assets and deferred income tax liabilities shall be measured at the applicable tax rate of the period during which the assets are expected to be recovered or the liabilities are expected to be settled.
② If the applicable tax rate varies, the deferred income tax assets and deferred income tax liabilities which have been confirmed are re-measured, excluding the deferred income tax assets and deferred income tax liabilities arising from any transactions or events directly confirmed as the owners' equities, the amount affected by them shall be included into the income tax expenses of the current period during which the change occurs.
③ When measuring deferred income tax assets and deferred income tax liabilities, the Company adopts tax rates and tax basis consistent with the expected way of recovering assets or paying off debts.
④ The Company shall not discount any deferred income tax asset and deferred income tax liability.
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report 27. Lease
(1). Accounting treatment method of operating lease
A tenant includes the rental payment of operation lease into the relevant cost of assets or current gains and losses according to the straight-line method in each period of the lease term. The initial direct costs accrued to the Company shall be included into current gains and losses. The contingent rental shall be included into the current gains and losses when it is actually accrued.
A lessor includes the assets subject to operating lease in relevant items of its balance sheets in light of the nature of the asset. The rent in operating lease shall be confirmed as current gains and losses during each lease term according to straight-line method. The initial direct costs accrued to the Company shall be included into current gains and losses. The depreciation of fixed assets in the operation lease assets shall be withdrawn by adopting depreciation policy of similar asset; other operation lease assets shall be amortized adopting systematic and reasonable method. The contingent rental shall be included into gains and losses of the current period when it is actually accrued.
(2). Accounting treatment methods of financial lease
As tenant, on the commencement date of the lease term, the lower one between fair value of leased asset and present value of minimum lease payments as account record value of leased asset, and regard the minimum lease payments as account record value of long-term payables, and their balance shall be treated as the unconfirmed financing costs. The initial direct costs such as commissions, attorney's fees and traveling expenses, stamp duties, etc. directly attributable to the leased item incurred during the process of lease negotiating and signing the leasing agreement shall be included into the rent asset value. The unconfirmed financing costs shall be amortized during each lease term, and the current financing costs shall be confirmed adopting effective interest method. The contingent rental shall be included into gains and losses of the current period when it is actually accrued.
On the commencement date of the lease term, a lessor recognizes the sum of the minimum lease receipts on the lease commencement date and the initial direct costs as the entry value in an account of the finance lease values receivable, and record the
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report un-guaranteed residual value at the same time. The balance between the sum of the minimum lease collection amount, the initial direct expenses and the non-guaranteed residual value, and the sum of their present values shall be confirmed as the unrealized financing income. The unrealized financing income shall be allocated to each period during the lease term. The lessor shall calculate and recognize the financing income at the current period by adopting the effective interest rate method. The contingent rental shall be included into the gains and losses of the current period when it is actually accrued.
28. Changes of important accounting policies and estimates
Important accounting policies
|||
|-|-|
|Content and reason for the changes of accounting policies|Note|
|according to the Notice of the Ministry of Finance on the||
|Revision of General Financial Statement Format for Enterprises||
|in 2018 issued on June 15th, 2018, the Company has made the|See below|
|following amendments to the items listed in the financial||
|statements||

The details of the affected items in the financial statements at the beginning of the current period and prior period (December 31st, 2017/ Financial Year 2017) are as follows:
|||||
|-|-|-|-|
|Before adjustment||After adjustment||
|Item|Amount(yuan)|Item|Amount(yuan)|
|notes receivable|5,010,660.00|notes receivable and||
||||356,948,201.45|
|account receivable|351,937,541.45|account receivable||
|interest receivable||||
|dividends receivable|8,214,127.94|other receivables|99,240,703.92|
|other receivables|91,026,575.98|||
|fixed assets|1,537,692,913.05|||
|||fixed assets|1,537,692,913.05|
|disposal of fixed assets||||
|construction in||||
||122,640,897.91|construction in||
|progress|||122,640,897.91|
|||progress||
|engineering material||||
|notes payable|24,553,300.00|notes payable and||
||||524,321,952.83|
|accounts payable|499,768,652.83|accounts payable||
|interest payable|2,870,840.28|||
|dividends payable|1,470,000.00|other payables|201,709,649.48|
|other payables|197,368,809.20|||
|||administration expense|225,935,973.80|
|administration expense|287,889,069.24|||
|||R&D expense|61,953,095.44|

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report VI. Tax
1. Categories of taxes and tax rate
||||
|-|-|-|
|categories|taxation basis|tax rate|
||output VAT--deductableinput VAT||
|value-added tax||10%、11%、16%、17%( VAT on sales)|
|urban maintenance and|||
||turnover tax payable|1%、5%、7%|
|construction tax|||
|corporate income tax|income tax payable|15%、20%、25%|
|extra charges of education|||
||turnover tax payable|3%|
|funds|||
|extra charges of local|||
||turnover tax payable|2%|
|education funds|||

2. Tax preference
A. value-added tax
In accordance with the "Notice on the Exemption of Value-added Tax on Feed Products" (Finance and Taxation No.[2001] 121) and other documents, the sales of feed products of the Company and related subsidiaries are exempted from value-added tax.
According to the regulation of No.32 Document issued by the Ministry of Finance and Taxation of China in 2018, from May 1st, 2018, the VAT taxable sales of taxpayers, which were subject to the original tax rates of17% and11%, should be adjusted to16% and10% respectively.
B. corporate income tax
The Company and related subsidiaries, which are suitable to related government policies, such as receiving the certificates of High-Tech enterprise, the applicable corporate income tax rate will be15% in the valid period.
VII. Notes to the Items of Consolidated Financial Statements
1. Monetary capital
Unit: yuan Currency: RMB
||||||
|-|-|-|-|-|
|Item|||Closing balance|Opening balance|
|cash on hand|||253,687.16|3,225,842.47|
|cash at bank|||888,951,186.81|737,455,049.34|
|other monetary capital|||39,697,879.09|8,263,470.99|
|total|||928,902,753.06|748,944,362.80|
||including: the total amount of||||
||||523,693.62||
|||funds deposited abroad|||

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report Other Note:
Letter of credit guarantee deposits of other monetary capital reached RMB 29,999,881.25 yuan, futures margin reached RMB 9,697,997.84 yuan in the end of the period.
2. Derivative financial assets
Unit: yuan Currency: RMB
||||
|-|-|-|
|Item|Closing balance|Opening balance|
|futures|2,042,527.60|971,380.80|
|total|2,042,527.60|971,380.80|

 3. Notes receivable and accounts receivable
Unit: yuan Currency: RMB
||||
|-|-|-|
|Item|Closing balance|Opening balance|
|notes receivable|13,611,778.44|5,010,660.00|
|accounts receivable|397,891,678.23|351,937,541.45|
|total|411,503,456.67|356,948,201.45|

 Notes receivable
Unit: yuan Currency: RMB
||||
|-|-|-|
|Item|Closing balance|Opening balance|
|bank acceptance|6,442,013.54|4,940,660.00|
|commercial paper|851,559.80|70,000.00|
|international letter of credit|6,318,205.10||
|total|13,611,778.44|5,010,660.00|

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report Accounts receivable
a. Category of accounts receivable
Unit: yuan Currency: RMB
||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|
||Closing balance|||||Opening balance|||||
||Book balance||Bad debt provision|||Book balance||Bad debt provision|||
|Category|||||||||||
|||||Withdrawing|Book value||||Withdrawing|Book value|
||Amount|Percentage %|Amount|||Amount|Percentage %|Amount|||
|||||percentage %|||||percentage %||
|the account receivable|||||||||||
|with amount that is|||||||||||
|individually significant,|35,402,027.84|7.09|32,693,068.50|92.35|2,708,959.34|1,014,506.01|0.25|1,014,506.01|100.00||
|withdrawing bad debt|||||||||||
|provision individually|||||||||||
|withdrawing bad debt|||||||||||
|provision on the basis of|461,404,961.77|92.39|66,341,431.88|14.38|395,063,529.89|396,944,611.82|99.31|45,007,070.37|11.34|351,937,541.45|
|credit risk grouping|||||||||||
|the account receivable|||||||||||
|with amount that is not|||||||||||
|individually significant,|2,589,233.48|0.52|2,470,044.48|95.40|119,189.00|1,749,714.57|0.44|1,749,714.57|100.00||
|but withdrawing bad debt|||||||||||
|provision individually|||||||||||
|total|499,396,223.09|/|101,504,544.86|/|397,891,678.23|399,708,832.40|/|47,771,290.95|/|351,937,541.45|

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report The account receivable with amount that is individually significant, withdrawing bad debt provision individually
Unit: yuan Currency: RMB
||||||||
|-|-|-|-|-|-|-|
||Closing balance||||||
|Account|||||||
||||Withdrawing||||
|receivable|Account receivable|Bad debt provision||Withdrawing reason|||
||||percentage %||||
|Customer 1|23,998,355.83|23,998,355.83|100.00|||uncollectible|
|Customer 2|4,734,285.00|4,734,285.00|100.00|||uncollectible|
||||||according to the||
|Customer 3|2,942,919.70|882,875.91|30.00||||
||||||estimated losses||
||||||according to the||
|Customer 4|927,022.22|278,106.67|30.00||||
||||||estimated losses||
|Customer 5|801,150.00|801,150.00|100.00|||uncollectible|
|Customer 6|691,950.00|691,950.00|100.00|||uncollectible|
|Customer 7|663,606.49|663,606.49|100.00|||uncollectible|
|Customer 8|642,738.60|642,738.60|100.00|||uncollectible|
|Total|35,402,027.84|32,693,068.50|/|/|||

 Withdrawing bad debt provision according to the aging analysis method
Unit: yuan Currency: RMB
|||||
|-|-|-|-|
||Closing balance|||
|Aging|||Withdrawing|
||Account receivable|Bad debt provision||
||||percentage %|
|within 1 year|378,445,776.46|18,919,148.45|5.00|
|1-2 years|31,166,657.41|3,116,665.76|10.00|
|2-3 years|12,478,183.71|4,991,273.48|40.00|
|over 3 years|39,314,344.19|39,314,344.19|100.00|
|total|461,404,961.77|66,341,431.88|14.38|

 b. Bad debt provision of the current period
During the current period, withdrawing bad debt provision of 56,455,151.16yuan,taking back or recovering bad debts provisions of 470.20yuan.
c. The actual write-off of accounts receivable in current period
Unit: yuan Currency: RMB
|||
|-|-|
|Item|write-off amount of money|
|actual write-off of accounts receivable|2,721,427.05|

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report of which, write-off important accounts receivable
Unit: yuan Currency: RMB
|||||||
|-|-|-|-|-|-|
|||Write-off|||Whether generated by|
|Name|Nature||Reason|||
|||amount|||related party transactions|
||payment of|||uncollectible||
|Customer 1||1,373,549.24|||no|
||goods||long-term debt|||
|total|/|1,373,549.24|/||/|

d. Top 5 accounts receivable
|||||||
|-|-|-|-|-|-|
|||||% of total||
|||Amount in|||Bad debt|
|Debtor|Relationship||Period of arrears|accounts||
|||arrears|||provision|
|||||receivable||
|1|related party|29,448,163.62|within 1 year|5.90|1,472,408.18|
||non-related|||||
|2||23,998,355.83|1-2 years|4.81|23,998,355.83|
||party|||||
||non-related|||||
|3||17,245,437.57|within 1 year|3.45|862,271.88|
||party|||||
||||within 1 year: 512,200.00yuan;|||
||non-related||1-2 years: 354,260.00yuan;|||
|4||9,125,139.00||1.83|7,101,740.20|
||party||2-3years: 2,029,958.00yuan;|||
||||over 3years: 6,228,721.00yuan|||
||non-related|||||
|5||9,017,017.78|within 1 year|1.81|450,850.89|
||party|||||
|Total||88,834,113.80||17.80|33,885,626.98|

 4. Prepayments
 Aging
Unit: yuan Currency: RMB
||||||
|-|-|-|-|-|
||Closing balance||Opening balance||
|Aging|||||
||Amount|Percentage %|Amount|Percentage %|
|within 1 year|181,416,954.06|97.59|256,398,664.92|96.31|
|1-2 years|4,482,394.47|2.41|9,825,665.59|3.69|
|Total|185,899,348.53|100.00|266,224,330.51|100.00|

 Top 5 Prepayments
|||||||
|-|-|-|-|-|-|
|Company|Relationship|Amount in arear|Reason of un-settlement||Description|
|1|non-related party|10,622,876.93||not yet been delivered|goods|
|2|non-related party|9,275,184.45||not yet been delivered|goods|
|3|non-related party|7,417,368.44||not yet been delivered|goods|
|4|non-related party|7,275,500.00||not yet been delivered|goods|
|5|related party|7,200,000.00||not yet been delivered|goods|
|Total||41,790,929.82||||

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report 5. Other receivables
Unit: yuan Currency: RMB
||||
|-|-|-|
|Item|Closing balance|Opening balance|
|interest receivable|||
|dividends receivable|5,481,783.34|8,214,127.94|
|other receivables|93,515,429.70|91,026,575.98|
|Total|98,997,213.04|99,240,703.92|

 a. Dividends receivable
Unit: yuan Currency: RMB
||||
|-|-|-|
|Item|Closing balance|Opening balance|
|dividend on shares from long-term|||
|||1,500,000.00|
|investment under the cost method|||
|dividend on shares from long-term|||
||5,481,783.34|6,714,127.94|
|investment under the equity method|||
|Total|5,481,783.34|8,214,127.94|

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report b. Other receivables
Unit: yuan Currency: RMB
||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|
||Closing balance|||||Opening balance|||||
||Book balance||Bad debt provision|||Book balance||Bad debt provision|||
|Category|||||||||||
|||||Withdrawing|Book value||||Withdrawing|Book value|
||Amount of money|Percentage %|Amount|||Amount|Percentage %|Amount|||
|||||percentage %|||||percentage %||
|other receivable|||||||||||
|with amount|||||||||||
|that is|||||||||||
|individually|||||||||||
||4,181,664.67|3.85|4,181,664.67|100.00|||||||
|significant,|||||||||||
|withdrawing bad|||||||||||
|debt provision|||||||||||
|individually|||||||||||
|withdrawing bad|||||||||||
|debt provision|||||||||||
|on the basis of|103,993,471.13|95.85|10,478,041.43|10.08|93,515,429.70|96,710,506.86|100.00|5,683,930.88|5.88|91,026,575.98|
|credit risk|||||||||||
|grouping|||||||||||
|other receivable|||||||||||
|with amount|||||||||||
|that is not|||||||||||
|individually|||||||||||
||324,297.70|0.30|324,297.70|100.00|||||||
|significant, but|||||||||||
|withdrawing bad|||||||||||
|debt provision|||||||||||
|individually|||||||||||
|Total|108,499,433.50|/|14,984,003.80|/|93,515,429.70|96,710,506.86|/|5,683,930.88|/|91,026,575.98|

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report Other receivable with amount that is individually significant at period-end,
withdrawing bad debt provision individually
Unit: yuan Currency: RMB
|||||||
|-|-|-|-|-|-|
||Closing balance|||||
||Other|Bad debt|Withdrawing|Withdrawing||
|Company||||||
||receivable|provision|percentage %|reason||
|Company 1|2,014,874.40|2,014,874.40|100.00||uncollectible|
|Company 2|927,562.18|927,562.18|100.00||uncollectible|
|Company 3|700,000.00|700,000.00|100.00||uncollectible|
|Company 4|539,228.09|539,228.09|100.00||uncollectible|
|Total|4,181,664.67|4,181,664.67|/|/||

 Bad debt provision is calculated and withdrawn according to aging analysis method Unit: yuan Currency: RMB
|||||
|-|-|-|-|
||Closing balance|||
|Aging|||Withdrawing|
||Other receivable|Bad debt provision||
||||Percentage %|
|within 1 year|27,791,996.42|1,389,599.81|5.00|
|1-2 years|72,626,396.82|7,262,639.68|10.00|
|2-3 years|2,915,459.91|1,166,183.96|40.00|
|over 3 years|659,617.98|659,617.98|100.00|
|Total|103,993,471.13|10,478,041.43|10.08|

 c. Nature of other receivable
Unit:yuan Currency: RMB
||||
|-|-|-|
|Nature|Closing book balance|Opening book balance|
|general operating receivables|69,098,131.11|66,104,724.74|
|deposit and security|8,459,232.04|1,891,720.95|
|export rebates receivable|83,420.35|142,261.17|
|receivable from disposal of long-lived assets|2,386,850.00|100,000.00|
|receivable from disposal of investment|28,471,800.00|28,471,800.00|
|Total|108,499,433.50|96,710,506.86|

 d. Bad debt provision of the current period
During the current period, withdrawing bad debt provision of 9,763,541.22yuan, taking back or recovering bad debts provisions of 8,925.00yuan.
e. The actual write-off of other receivable in current period
Unit: yuan Currency: RMB
|||
|-|-|
|Item|Write-off amount of money|
|actual write-off amount|454,543.30|

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report f. Top 5 other receivables
Unit: yuan Currency: RMB
|||||||
|-|-|-|-|-|-|
|||||% of closing||
||||||Closing balance of|
|||||balance of||
|Company|Nature|Closing balance|Aging||bad debt|
|||||other||
||||||provision|
|||||receivable||
|1|temporary debit|38,067,493.00|1-2 years|35.09|3,806,749.30|
||receivable from|||||
|2|disposal of|28,471,800.00|1-2 years|26.24|2,847,180.00|
||investment|||||
|3|temporary debit|5,000,000.00|1-2 years|4.61|500,000.00|
||||less than 1|||
|4|guarantee deposit|3,900,000.00||3.59|195,000.00|
||||year|||
||receivable from||less than 1|||
|5||2,386,850.00||2.20|119,342.50|
||disposal of assets||year|||
|Total|/|77,826,143.00|/|71.73|7,468,271.80|

 6. Inventory
a. Category of inventory
Unit: yuan Currency: RMB
||||||||
|-|-|-|-|-|-|-|
||Closing balance|||Opening balance|||
||||||Falling||
|Item||Falling price|||||
||Book balance||Book value|Book balance|price|Book value|
|||reserve|||||
||||||reserve||
|raw material|597,791,390.18|2,023,583.41|595,767,806.77|562,428,180.20|1,329,982.10|561,098,198.10|
|goods in|||||||
||20,992,307.08|637,575.55|20,354,731.53|84,683,366.70||84,683,366.70|
|process|||||||
|finished|||||||
||601,323,157.89|2,482,860.62|598,840,297.27|491,938,102.91|210,251.38|491,727,851.53|
|goods|||||||
|consumptive|||||||
|biological|180,062,002.46|6,188,094.69|173,873,907.77|56,751,401.07||56,751,401.07|
|assets|||||||
|low priced|||||||
|and easily|||||||
||10,842,865.30||10,842,865.30|9,743,492.07||9,743,492.07|
|worn|||||||
|articles|||||||
|wrappage|11,189,583.62||11,189,583.62|13,996,702.49||13,996,702.49|
|Total|1,422,201,306.53|11,332,114.27|1,410,869,192.26|1,219,541,245.44|1,540,233.48|1,218,001,011.96|

 b. Inventory falling price reserves
Unit: yuan Currency: RMB
||||||
|-|-|-|-|-|
|||Increased|||
||||Reduced amount||
|||amount|||
|Item|Opening balance|||Closing balance|
||||Taking back orreselling||
|||Withdrawing|||
|raw material|1,329,982.10|693,601.31||2,023,583.41|
|goods in process||637,575.55||637,575.55|
|finished goods|210,251.38|2,272,609.24||2,482,860.62|
|consumptive biological|||||
|||6,188,094.69||6,188,094.69|
|assets|||||
|Total|1,540,233.48|9,791,880.79||11,332,114.27|

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report 7. Other current assets
Unit: yuan Currency: RMB
|||||
|-|-|-|-|
||Item|Closing balance|Opening balance|
|ap|vailable for deducting VAT and|||
|||118,636,045.77|103,903,041.75|
||repaid tax|||
|o|ther||2,000,000.00|
||Total|118,636,045.77|105,903,041.75|

 8. Available-for-sale financial assets
a. Circumstance
Unit: yuan Currency: RMB
|||||||||
|-|-|-|-|-|-|-|-|
||Closing balance|||Opening balance||||
|Item|Book|Impairmentprovision||Book|Impairment|Book value||
||||Book value|||||
||balance|||balance|provision|||
|available-for-saledebt instruments:||||||||
|available-for-saleequityinstruments:||||||||
||3,680,000.00||3,680,000.00|3,340,000.00|||3,340,000.00|
|measured at fairvalue||||||||
|measured at cost|3,680,000.00||3,680,000.00|3,340,000.00|||3,340,000.00|
|Total|3,680,000.00||3,680,000.00|3,340,000.00|||3,340,000.00|

 b. Available-for-sale financial assets measured at cost in the end of the period
Unit: yuan Currency: RMB
|||||||||
|-|-|-|-|-|-|-|-|
||Book balance||||Shareholdingof investee||Cash|
|||||||Shareholding|dividends|
|Investee|Opening|||Closing||||
|||Increase|Decrease|||of investee|in current|
||balance|||balance||||
||||||||period|
|Beijing Haobang||||||||
|Artificial||||||||
||100,000.00|||100,000.00||6.10|100,000.00|
|Insemination||||||||
|Service Co., Ltd.||||||||
|Henan Shanghui||||||||
||500,000.00|||500,000.00||1.67||
|Feed||||||||
|China-Russia||||||||
|Friendship|10,000.00|||10,000.00||33.00||
|Association||||||||
|Hengshui Hejia||||||||
|Agriculture and||||||||
||1,600,000.00|||1,600,000.00||16.00||
|Animal||||||||
|Husbandry||||||||
|Hengshui Jiarun||||||||
|Agriculture and||||||||
||1,050,000.00|||1,050,000.00||15.00||
|Animal||||||||
|Husbandry||||||||
|Shenyang||||||||
|Bonong Weite|80,000.00|||80,000.00||10.00||
|Animal Health||||||||
|Xi'an Micro||||||||
|Monkey||340,000.00||340,000.00||10.00||
|E-commerce||||||||
|Total|3,340,000.00|340,000.00||3,680,000.00||/|100,000.00|

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report 9. Long-term equity investment
Unit: yuan Currency: RMB
||||||||||
|-|-|-|-|-|-|-|-|-|
|||Changes in the current period|||||||
||||Gains or losses|||||Closing|
|||||Adjustment of|Cash||||
||||on investments|||Withdrawing||balance of|
|Investee|Opening balance|Additional||other|dividends or||Closing balance||
||||recognized|||impairment||impairment|
|||investment||comprehensive|profits||||
||||under the|||provision||provision|
|||||income|declared||||
||||equity method||||||
|I. Joint Ventures|||||||||
|Unphung Joint|||||||||
||4,167,616.44||||||4,167,616.44||
|Venture Company|||||||||
|Nepal Wellhope|||||||||
||7,501,575.10||||||7,501,575.10||
|Agri-tech Pvt. Ltd.|||||||||
|NEXUS|||||||||
|WELL-HOPE|||||||||
|AGRITECH|6,150,602.09|||||6,150,602.09||17,900,000.00|
|INTERNATIONAL|||||||||
|LIMITED|||||||||
|subtotal|17,819,793.63|||||6,150,602.09|11,669,191.54|17,900,000.00|
|II. Associates|||||||||
|Qingdao Shenfeng|17,112,831.00||1,756,652.64||3,000,000.00||15,869,483.64||
|Anshan Jiuguhe|||||||||
||72,090,706.70|17,496.00|27,389,092.80||||99,497,295.50||
|Food|||||||||
|Tai’an Jiuguhe|||||||||
||24,224,527.39|30,618.00|40,475,117.38||||64,730,262.77||
|Agriculture|||||||||
|Linghai Jiuguhe|||||||||
||18,731,645.36|1,000.00|15,205,070.45||||33,937,715.81||
|Feed|||||||||
|Huludao Jiuguhe|||||||||
||41,997,797.00|6,000.00|15,872,205.94||||57,876,002.94||
|Food|||||||||
|Dandong|||||||||
|Wellhope|31,153,202.05||3,613,007.66||||34,766,209.71||
|Chengsan Food|||||||||
|Dandong|||||||||
|Wellhope|||||||||
||24,865,722.20||30,304,710.67||||55,170,432.87||
|Chengsan|||||||||
|Agri-Tech|||||||||

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report
|||||||
|-|-|-|-|-|-|
|Haicheng New||||||
|Hongzunda|9,683,659.98||1,622,064.89||11,305,724.87|
|Agri-Tech||||||
|Beipiao Hongfa||||||
||183,100,603.27||80,999,857.31|12,127,500.00|251,972,960.58|
|Food||||||
|Jixi Haitai Food||||||
|Beijing Dahong||||||
||7,561,103.10|6,750,000.00|2,541,884.08||16,852,987.18|
|Hengfeng||||||
|Tai'an Jiufeng||||||
||768,700.85|14,574.00|-285,209.72||498,065.13|
|Agri-Tech||||||
|Schipper(Beijing)|591,971.91||489,689.39||1,081,661.30|
|Shenyang Wenjie||||||
||11,982,371.23||74,654.86||12,057,026.09|
|Bio-Tech||||||
|Huludao Jiuguhe||||||
||7,987,004.96|3,000.00|17,058,407.88||25,048,412.84|
|Feed||||||
|Jinzhou Jiufeng||||||
||27,183,550.40|11,000.00|2,807,077.05||30,001,627.45|
|Food||||||
|Zhangjiakou Jiahe||||||
|Agriculture and|62,203,890.42||-1,446,218.58||60,757,671.84|
|Animal Husbandry||||||
|Tai'an Fengjiu||||||
|||402,800.00|4,977,508.75||5,380,308.75|
|Agri-Tech||||||
|Anshan Fengsheng||||||
||18,919,272.68||778,066.92||19,697,339.60|
|Food||||||
|Dalian Chengsan||||||
||198,477,782.15||53,290,054.28||251,767,836.43|
|Animal Husbandry||||||
|Tailai Jiahe||||||
|Agriculture and|33,709,365.63||-12,554,213.55||21,155,152.08|
|Animal Husbandry||||||
|Gongzhuling Corn||||||
|Purchasing and|65,890,431.04||-4,469,304.17||61,421,126.87|
|Storing||||||
|Lankao Skyland||||||
||32,789,431.19||3,744,152.62||36,533,583.81|
|Duck Meat||||||
|Hainan Nongken||||||
|Wenfeng||||||
|||525,000.00|-123,085.01||401,914.99|
|Wenchang||||||
|Chicken||||||

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report
||||||||||
|-|-|-|-|-|-|-|-|-|
|Dunhua Wellhope|||||||||
|||3,000,000.00|434,662.23||||3,434,662.23||
|Agri-Tech|||||||||
|Dunhua Fengda|||||||||
|Agriculture and||3,000,000.00|-1,085,107.10||||1,914,892.90||
|Animal Husbandry|||||||||
|PT KARKA NUTRI|||||||||
||37,296,600.00||1,646,452.33|-1,957,754.20|||36,985,298.13||
|INDUSTRI.|||||||||
|GOLDEN|||||||||
||60,000,000.00|42,281,336.16|-1,139,942.87|686,589.74|||101,827,983.03||
|HARVESTA INC.|||||||||
|Guangrong|||||||||
|||15,090,561.00|-2,584,730.01|-34,771.16|||12,471,059.83||
|Xinchuang|||||||||
|Suizhong Rehen|||||||||
||2,926,483.65||507,265.26||||3,433,748.91||
|Fishery|||||||||
|Dalian Wellhope|||||||||
||4,823,481.30||510,212.44||||5,333,693.74||
|Fish Meal|||||||||
|Liaoning Petmate|||||||||
||3,310,685.56|2,000,000.00|-281,855.57||||5,028,829.99||
|Bio-Tech|||||||||
|Guangzhou Yikun|||||||||
||1,126,494.07||-589,043.03||||537,451.04||
|Trading|||||||||
|Guangzhou Pulihe|||||||||
||297,188.73||-69,383.66||||227,805.07||
|Trading|||||||||
|Jilin Hengfeng|||||||||
|Animal Health||714,000.00|-529,083.36||||184,916.64||
|Product|||||||||
|Shenyang Wanli|||||||||
|Sky Agriculture|||||||||
||1,020,851.71||2,657.86||||1,023,509.57||
|and Animal|||||||||
|Husbandry|||||||||
|Daqing Supply and|||||||||
|Marketing|||||||||
||2,725,237.04||241,373.28||||2,966,610.32||
|Wellhope|||||||||
|Agri-Tech|||||||||
|subtotal|1,004,552,592.57|73,847,385.16|281,184,722.34|-1,305,935.62|15,127,500.00||1,343,151,264.45||
|Total|1,022,372,386.20|73,847,385.16|281,184,722.34|-1,305,935.62|15,127,500.00|6,150,602.09|1,354,820,455.99|17,900,000.00|

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report 10. Fixed assets
Unit: yuan Currency: RMB
||||
|-|-|-|
|Item|Closing balance|Opening balance|
|fixed assets|1,516,702,438.29|1,537,692,913.05|
|disposal of fixed assets|||
|Total|1,516,702,438.29|1,537,692,913.05|

 Circumstance of fixed assets
Unit: yuan Currency: RMB
|||||||
|-|-|-|-|-|-|
||Buildings and|Machinery|Transportationequipment|Other||
|Item|||||Total|
||structures|equipment||equipment||
|1. original value||||||
|A. opening balance|1,221,370,753.80|884,156,477.32|94,574,605.36|61,142,437.70|2,261,244,274.18|
|B. increased||||||
||80,695,124.50|96,931,910.98|8,272,597.28|5,601,227.86|191,500,860.62|
|amount||||||
|a. purchased||84,578,395.62|8,272,597.28|5,601,227.86|98,452,220.76|
|b. construction in||||||
|progress transferred|80,695,124.50|12,353,515.36|||93,048,639.86|
|in||||||
|C. decreased||||||
||12,424,070.02|15,216,836.84|5,162,912.93|2,839,306.73|35,643,126.52|
|amount||||||
|a. disposed or||||||
||12,405,118.02|14,750,912.33|5,162,912.93|2,149,137.15|34,468,080.43|
|scrapped||||||
|b. business||||||
|combination|18,952.00|465,924.51||690,169.58|1,175,046.09|
|decreased||||||
|D. closing balance|1,289,641,808.28|965,871,551.46|97,684,289.71|63,904,358.83|2,417,102,008.28|
|2. accumulated||||||
|depreciation||||||
|A. opening balance|255,235,335.89|353,926,916.62|71,796,352.54|39,198,912.79|720,157,517.84|
|B. increased||||||
||54,653,271.24|80,497,617.08|8,948,992.18|6,938,912.11|151,038,792.61|
|amount||||||
|a. withdrawing|54,653,271.24|80,497,617.08|8,948,992.18|6,938,912.11|151,038,792.61|
|C. decreased||||||
||2,131,161.75|7,442,234.27|4,391,884.87|2,092,369.47|16,057,650.36|
|amount||||||
|a. disposed or||||||
||2,114,131.14|7,205,718.15|4,391,884.87|1,977,477.06|15,689,211.22|
|scrapped||||||
|b. business||||||
|combination|17,030.61|236,516.12||114,892.41|368,439.14|
|decreased||||||
|D. closing balance|307,757,445.38|426,982,299.43|76,353,459.85|44,045,455.43|855,138,660.09|
|3. impairment||||||
|provision||||||
|A. opening balance|2,739,514.01|580,583.41||73,745.87|3,393,843.29|
|B. increased||||||
||26,756,559.34|15,004,259.49|99,538.65|6,709.13|41,867,066.61|
|amount||||||
|a. withdrawing|26,756,559.34|15,004,259.49|99,538.65|6,709.13|41,867,066.61|
|C. decreased||||||

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report
||||||||
|-|-|-|-|-|-|-|
|amount|||||||
|a. disposed or|||||||
|scrapped|||||||
|D. closing balance|29,496,073.35|15,584,842.90|99,538.65|80,455.0|0|45,260,909.90|
|4. book value|||||||
|A. closing book|||||||
||952,388,289.55|523,304,409.13|21,231,291.21|19,778,448.4|0|1,516,702,438.29|
|value|||||||
|B. opening book|||||||
||963,395,903.90|529,648,977.29|22,778,252.82|21,869,779.0|4|1,537,692,913.05|
|value|||||||

11. Construction in progress
Unit: yuan Currency: RMB
||||
|-|-|-|
|Item|Closing balance|Opening balance|
|construction in progress|255,719,188.30|122,640,897.91|
|engineering material|||
|Total|255,719,188.30|122,640,897.91|

 a. Circumstance of construction in progress
Unit: yuan Currency: RMB
||||||||
|-|-|-|-|-|-|-|
||Closing balance|||Opening balance|||
|Item|||||||
|||Impairment|||Impairment||
||Book balance||Book value|Book balance||Book value|
|||provision|||provision||
|Dalian Heyuan-Dayao|||||||
||14,698,247.50||14,698,247.50|11,150,720.50||11,150,720.50|
|Hatching Farm|||||||
|Jilin Hefeng-pig farm|||||||
||11,889,319.05||11,889,319.05|11,557,389.34||11,557,389.34|
|construction|||||||
|Dalian Zhongjia|||||||
|-workshop renovation|18,742,578.01||18,742,578.01|7,022,657.55||7,022,657.55|
|project|||||||
|Wellhope-|||||||
|intelligent premix plant|89,135,356.79||89,135,356.79|38,621,063.26||38,621,063.26|
|construction|||||||
|Weifang Wellhope-|||||||
|plant, office||||22,417,652.39||22,417,652.39|
|construction|||||||
|Fushun Agriculture and|||||||
|Animal Husbandry-pig|116,448,215.28||116,448,215.28|5,638,340.00||5,638,340.00|
|farm construction|||||||
|Sheyang Wellhope|||||||
|Poultry-broiler raising||||7,081,876.12||7,081,876.12|
|project|||||||
|Other constructions|4,805,471.67||4,805,471.67|19,151,198.75||19,151,198.75|
|Total|255,719,188.30||255,719,188.30|122,640,897.91||122,640,897.91|

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report b. Changes of important constructions in progress in current period
Unit: yuan Currency: RMB
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
|||||||Percentage|||of which:|||
|||||||||||Capitalization||
|||||||of||Accumulated|amount of|||
|||||Amount||||||rate of||
|||Opening|Increased||Closing|accumulated||amount of|capitalized||Source of|
|Project|Budget|||transferred in|||Progress %|||interest for||
|||balance|amount||balance|project||capitalized|interest in||funds|
|||||fixed assets||||||the current||
|||||||input||interest|current|||
|||||||||||period %||
|||||||accunting|||period|||
|||||||for budget %||||||
|Dalian||||||||||||
|Heyuan-Dayao|50,000,000.00|11,150,720.50|3,547,527.00||14,698,247.50|29.40|30.00||||self-raised|
|Hatching Farm||||||||||||
|Jilin Hefeng-pig||||||||||||
|farm|130,000,000.00|11,557,389.34|331,929.71||11,889,319.05|9.15|10.00||||self-raised|
|construction||||||||||||
|Dalian Zhongjia||||||||||||
|-workshop||||||||||||
||40,000,000.00|7,022,657.55|27,337,518.79|15,617,598.33|18,742,578.01|85.90|85.00||||self-raised|
|renovation||||||||||||
|project||||||||||||
|Wellhope-||||||||||||
|intelligent premix||||||||||||
||100,000,000.00|38,621,063.26|50,514,293.53||89,135,356.79|89.14|95.00||||self-raised|
|plant||||||||||||
|construction||||||||||||
|Weifang||||||||||||
|Wellhope- plant,||||||||||||
||25,000,000.00|22,417,652.39|-1,860,131.92|20,557,520.47||82.23|100.00||||self-raised|
|office||||||||||||
|construction||||||||||||
|Fushun||||||||||||
|Agriculture and||||||||||||
|Animal||||||||||||
||160,000,000.00|5,638,340.00|110,809,875.28||116,448,215.28|72.78|90.00||||self-raised|
|Husbandry-pig||||||||||||
|farm||||||||||||
|construction||||||||||||
|Sheyang||||||||||||
|Wellhope broiler|13,000,000.00|7,081,876.12|5,796,233.67|12,878,109.79||99.06|100.00||||self-raised|
|raising project||||||||||||
|Total|518,000,000.00|103,489,699.16|196,477,246.06|49,053,228.59|250,913,716.63|/|/|||/|/|

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report 12. Productive biological asset
 Productive biological assets using cost measurement model
Unit: yuan Currency: RMB
|||||
|-|-|-|-|
||Animal husbandry|||
|Item|||Total|
||Parent stock(broiler)|Parent stock(pig)||
|1. original value||||
|A. opening balance|20,717,818.79|3,165,003.86|23,882,822.65|
|B. increased amount|34,602,390.55|1,219,486.71|35,821,877.26|
|a. externally purchased|34,602,390.55|1,219,486.71|35,821,877.26|
|C. decreased amount|25,621,868.41|442,330.14|26,064,198.55|
|a. disposed|25,621,868.41|442,330.14|26,064,198.55|
|D. closing balance|29,698,340.93|3,942,160.43|33,640,501.36|
|2. accumulated depreciation||||
|A. opening balance|4,180,855.15|420,111.35|4,600,966.50|
|B. increased amount|15,023,051.95|752,370.02|15,775,421.97|
|a. withdrawing|15,023,051.95|752,370.02|15,775,421.97|
|C. decreased amount|17,028,824.06|191,857.93|17,220,681.99|
|a. disposed|17,028,824.06|191,857.93|17,220,681.99|
|D. closing balance|2,175,083.04|980,623.44|3,155,706.48|
|3. impairment provision||||
|4. book value||||
|A. closing book value|27,523,257.89|2,961,536.99|30,484,794.88|
|B. opening book value|16,536,963.64|2,744,892.51|19,281,856.15|

 13. Intangible assets
Unit: yuan Currency: RMB
|||||
|-|-|-|-|
|||Computer software||
|Item|Land use rights||Total|
|||and other||
|1. original value||||
|A. opening balance|240,238,664.76|7,942,666.70|248,181,331.46|
|B. increased amount|4,375,624.14|2,716,507.21|7,092,131.35|
|a. purchased|4,375,624.14|2,716,507.21|7,092,131.35|
|C. decreased amount|3,754,400.00|1,208,165.81|4,962,565.81|
|a. disposed|3,754,400.00|43,117.26|3,797,517.26|
|b. decreased by business||||
|||1,165,048.55|1,165,048.55|
|combination||||
|D. closing balance|240,859,888.90|9,451,008.10|250,310,897.00|
|2. accumulated amortization||||
|A. opening balance|35,085,023.03|3,184,975.61|38,269,998.64|
|B. increased amount|5,020,742.86|934,973.93|5,955,716.79|
|a. withdrawing|5,020,742.86|934,973.93|5,955,716.79|
|C. decreased amount|250,293.20|52,465.52|302,758.72|
|a. disposed|250,293.20|42,756.78|293,049.98|
|b. decreased by business||||
|||9,708.74|9,708.74|
|combination||||
|D. closing balance|39,855,472.69|4,067,484.02|43,922,956.71|
|3. impairment provision||||
|4. book value||||
|A. closing book value|201,004,416.21|5,383,524.08|206,387,940.29|
|B. opening book value|205,153,641.73|4,757,691.09|209,911,332.82|

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report 14. Goodwill
 Original value of goodwill
Unit: yuan Currency: RMB
||||||
|-|-|-|-|-|
||||Decreased||
|||Increased amount|||
||||amount||
|Invested entity or|||||
||Opening balance|Formed by||Closing balance|
|matters forming goodwill|||||
|||business|Disposal||
|||combination|||
|formed by business|||||
|combination not under|290,425.67|||290,425.67|
|the same control|||||
|Total|290,425.67|||290,425.67|

 15. Long-term prepaid expenses
Unit: yuan Currency: RMB
|||||||
|-|-|-|-|-|-|
|||||Other||
||Opening|Increased|Amortized|||
|Item||||decreased|Closing balance|
||balance|amount|amount|||
|||||amount||
|broiler cages|157,550,962.21|7,111,343.09|33,258,055.69||131,404,249.61|
|land lease fee|29,198,489.06|3,267,015.00|3,553,580.96||28,911,923.10|
|fixed assets||||||
||15,542,794.30|1,755,209.56|2,791,899.84||14,506,104.02|
|improvement||||||
|other|2,968,784.31|2,658,249.48|2,047,221.55|498,721.15|3,081,091.09|
|Total|205,261,029.88|14,791,817.13|41,650,758.04|498,721.15|177,903,367.82|

 16. Deferred income tax assets/deferred income tax liabilities
a. Deferred income tax assets that are not offset
Unit: yuan Currency: RMB
||||||
|-|-|-|-|-|
||Closing balance||Opening balance||
||Deductible||Deductabletemporarydifference||
|Item||Deferred income||Deferred income|
||temporary||||
|||tax assets||tax assets|
||difference||||
|provision for the|||||
||123,490,892.94|24,192,802.11|65,292,755.35|12,744,307.64|
|impairment of assets|||||
|internal transaction|||||
||24,135,874.13|4,740,032.12|29,320,452.83|5,886,599.44|
|unrealized profit|||||
|deductible losses|||68,718,144.98|16,691,453.47|
|changes in fair value|629,750.00|94,462.50|260,170.00|39,025.50|
|deferred income|8,291,717.40|1,330,429.35|7,425,000.00|1,113,750.00|
|Total|156,548,234.47|30,357,726.08|171,016,523.16|36,475,136.05|

 b. Unrecognized deferred income tax asset details
Unit: yuan Currency: RMB
||||
|-|-|-|
|Item|Closing balance|Opening balance|
|deductible temporary difference|42,034,648.58||
|deductible losses|200,765,735.60|104,517,476.96|
|Total|242,800,384.18|104,517,476.96|

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report c. The deductible losses that were unrecognized as deferred income tax assets will be due in the following years
Unit: yuan Currency: RMB
|||||
|-|-|-|-|
|Year|Closing balance|Opening balance|Note|
|2019|30,849,456.75|24,934,700.09||
|2020|25,063,480.88|22,385,864.80||
|2021|43,093,813.02|27,219,543.49||
|2022|41,661,829.48|29,977,368.58||
|2023|51,299,045.25|||
|2027|2,082,969.89|||
|2028|6,715,140.33|||
|Total|200,765,735.60|104,517,476.96|/|

17. Other non-current assets
Unit: yuan Currency: RMB
||||
|-|-|-|
|Item|Closing balance|Opening balance|
|prepayments of long-lived assets|102,807,235.63|32,362,984.62|
|prepayments of broiler raising fees to contract farms|94,690,452.55||
|Total|197,497,688.18|32,362,984.62|

 18. Short-term borrowing
Unit: yuan Currency: RMB
||||
|-|-|-|
|Item|Closing balance|Opening balance|
|pledged loan|||
|mortgage loan|||
|guaranteed loan|100,460,168.49|20,000,000.00|
|credit loan|1,247,230,000.00|1,171,240,000.00|
|Total|1,347,690,168.49|1,191,240,000.00|

 Note: The guaranteed loan is the bank loan guaranteed by the Company for its subsidiary company, Lingyuan Wellhope Agri-Tech; the pledged loan is the balance of import bill advance of Liaoning Expert Trading Company, one of the Company's subsidiaries.
19. Notes payable and accounts payable
Unit: yuan Currency: RMB
||||
|-|-|-|
|Item|Closing balance|Opening balance|
|notes payable||24,553,300.00|
|accounts payable|572,729,779.31|499,768,652.83|
|Total|572,729,779.31|524,321,952.83|

 Notes payable
Unit: yuan Currency: RMB
||||
|-|-|-|
|Item|Closing balance|Opening balance|
|commercial paper|||
|bank acceptance|||
|letter of credit||24,553,300.00|
|Total||24,553,300.00|

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report Accounts payable
Unit: yuan Currency: RMB
||||
|-|-|-|
|Item|Closing balance|Opening balance|
|accounts payable relating to purchasing goods and expenses|541,799,353.46|479,134,295.09|
|accounts payable relating to long-lived assets|30,930,425.85|20,634,357.74|
|Total|572,729,779.31|499,768,652.83|

 20. Advance receipt
Unit: yuan Currency: RMB
||||
|-|-|-|
|Item|Closing balance|Opening balance|
|sales proceeds|161,173,916.67|181,035,916.81|
|Total|161,173,916.67|181,035,916.81|

 21. Payroll payable
a. Payroll payable list
Unit: yuan Currency: RMB
||||||
|-|-|-|-|-|
||Opening|Increased|Decreased|Closing|
|Item|||||
||balance|amount|amount|balance|
|1. short-term benefits|38,707,879.68|537,627,728.10|527,689,845.19|48,645,762.59|
|2. post-employeement benefits-|||||
||2,541,613.61|45,572,636.80|47,028,082.65|1,086,167.76|
|defined contribution plan|||||
|3. termination benefits||958,154.29|958,154.29||
|4. other benefits due within one|||||
|year|||||
|Total|41,249,493.29|584,158,519.19|575,676,082.13|49,731,930.35|

 b. Short-term benefits
Unit: yuan Currency: RMB
||||||
|-|-|-|-|-|
||Opening|Increased|Decreased|Closing|
|Item|||||
||balance|amount|amount|balance|
|1. wages, bonuses, allowances|||||
||37,698,337.56|477,332,371.83|468,565,499.28|46,465,210.11|
|and subsidies|||||
|2. staff benefits expenses||26,275,214.80|26,275,214.80||
|3. social insurance charges|520,033.49|21,936,398.40|22,024,785.61|431,646.28|
|including: medical insurance|||||
||359,093.72|18,549,540.19|18,536,979.45|371,654.46|
|premiums|||||
|occupational injury|||||
||106,265.04|1,676,152.39|1,748,485.38|33,932.05|
|insurance premium|||||
|birth insurance|||||
||54,674.73|1,710,705.82|1,739,320.78|26,059.77|
|premium|||||
|4. housing provident fund|109,257.00|7,556,449.53|7,542,673.53|123,033.00|
|5. employee labor union dues,|||||
||380,251.63|3,258,618.30|3,265,648.68|373,221.25|
|employee education expense|||||
|6. short-term paid absences|||||
|7. short-term profit sharing plan|||||
|8. other short-term benefits||1,268,675.24|16,023.29|1,252,651.95|
|Total|38,707,879.68|537,627,728.10|527,689,845.19|48,645,762.59|

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report c. Defined contribution plan
Unit: yuan Currency: RMB
||||||
|-|-|-|-|-|
||Opening|Increased|Decreased|Closing|
|Item|||||
||balance|amount|amount|balance|
|basic endowment insurance|2,426,396.50|42,967,876.44|44,334,943.77|1,059,329.17|
|unemployment insurance expense|115,217.11|2,604,760.36|2,693,138.88|26,838.59|
|enterprise annuity|||||
|Total|2,541,613.61|45,572,636.80|47,028,082.65|1,086,167.76|

 22. Tax payable
Unit: yuan Currency: RMB
||||
|-|-|-|
|Item|Closing balance|Opening balance|
|value-added tax|799,254.04|1,217,397.59|
|corporate income tax|25,166,379.53|35,737,626.45|
|individual income tax|422,794.82|1,138,812.81|
|city maintenance and construction tax|107,516.70|77,797.35|
|extra charges of education funds|78,629.58|60,938.74|
|house property tax|669,396.33|677,589.57|
|city and town land use tax|1,088,230.44|964,990.19|
|stamp tax|322,623.83|418,704.78|
|other|89,967.45|42,737.91|
|Total|28,744,792.72|40,336,595.39|

 23. Other payables
Unit: yuan Currency: RMB
||||
|-|-|-|
|Item|Closing balance|Opening balance|
|interest payable|1,784,257.05|2,870,840.28|
|dividends payable|526,000.00|1,470,000.00|
|other payables|307,226,938.07|197,368,809.20|
|Total|309,537,195.12|201,709,649.48|

 Interest payable
Unit: yuan Currency: RMB
|||||
|-|-|-|-|
|Item|Closing balance||Opening balance|
|interests on long-term loan that pay interests||||
||69,376.61||52,777.78|
|periodically and repay the principal due at maturity||||
|interest payable of short-term borrowing|1,714,880.44||2,818,062.50|
|Total|1,784,257.0|5|2,870,840.28|

 Dividends payable
Unit: yuan Currency: RMB
||||
|-|-|-|
|Item|Closing balance|Opening balance|
|common stock dividends|526,000.00|1,470,000.00|
|Total|526,000.00|1,470,000.00|

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report Other payables
a. Other payables by nature
Unit: yuan Currency: RMB
||||
|-|-|-|
|Item|Closing balance|Opening balance|
|operational payables relating toexpenses and transactions|||
||138,332,488.07|94,888,809.20|
|investment related payables|98,205,700.00|102,480,000.00|
|non-restricted stock repurchaseobligations|||
||70,688,750.00||
|Total|307,226,938.07|197,368,809.20|

 b. Important other payables with over 1 year aging
Unit: yuan Currency: RMB
||||
|-|-|-|
|Item|Closing balance|Reason|
|Xinjiang Heyin Growth Equity Investment||Not up to the agreed|
||58,205,700.00||
|Partnership||payment date|
|Total|58,205,700.00|/|

24. Non-current liability due within 1 year
Unit: yuan Currency: RMB
||||||
|-|-|-|-|-|
||Item||Closing balance|Opening balance|
||long-term borrowings due within 1 year||20,000,000.00|20,000,000.00|
|long-term payables due within 1 year||12,999,999.96|||
||Total||32,999,999.96|20,000,000.00|

 25. Long-term loan
Unit: yuan Currency: RMB
||||
|-|-|-|
|Item|Closing balance|Opening balance|
|pledged loan|||
|mortgage loan|||
|guaranteed loan|||
|credit loan|118,500,000.00|20,300,000.00|
|Total|118,500,000.00|20,300,000.00|

 26. Long-term payable
Unit: yuan Currency: RMB
||||
|-|-|-|
|Item|Closing balance|Opening balance|
|long-term payable|23,345,833.38||
|special payable|||
|Total|23,345,833.38||

 Long-term payable by nature
Unit: yuan Currency: RMB
||||
|-|-|-|
|Item|Opening balance|Closing balance|
|accrued financial lease outlay||23,345,833.38|

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report 27. Deferred income
Unit: yuan Currency: RMB
|||||||
|-|-|-|-|-|-|
||Opening|Increased|Decreased|Closing||
|Item|||||reason|
||balance|amount|amount|balance||
|government grant|19,404,060.24|3,000,000.00|2,151,092.83|20,252,967.41||
|total|19,404,060.24|3,000,000.00|2,151,092.83|20,252,967.41|/|

 Projects receiving governmentgrants：
Unit: yuan Currency: RMB
||||||||
|-|-|-|-|-|-|-|
|||Amount of|Included in|||Related to|
||Opening|newly|the non-|Included in||assets/|
|Liability item|||||Closing balance||
||balance|increased|operating|other income||related to|
|||grant|income|||income|
|grant for Lingyuan|||||||
|Wellhope 100,000||||||related to|
||4,500,000.00|||500,000.00|4,000,000.00||
|tons ruminant||||||asset|
|feed project|||||||
|grant for Lingyuan|||||||
|Wellhope corn||||||related to|
||3,000,000.00|||300,000.00|2,700,000.00||
|purchasing and||||||asset|
|storage barn|||||||
|sci-tech grant for|||||||
|Changchun||||||related to|
||1,779,060.24|||912,342.83|866,717.41||
|Wellhope feed||||||income|
|R&D project|||||||
|Shenyang city|||||||
|central industrial|||||||
|||||||related to|
|transformation|10,125,000.00|||438,750.00|9,686,250.00||
|||||||asset|
|and upgrading|||||||
|funds|||||||
|Lingyuan|||||||
|Wellhope 50,000||||||related to|
|||3,000,000.00|||3,000,000.00||
|tons organic||||||asset|
|fertilizer project|||||||
|Total|19,404,060.24|3,000,000.00||2,151,092.83|20,252,967.41|/|

 28. Share capital
Unit: yuan Currency: RMB
||||||
|-|-|-|-|-|
|||Changes(increase/decrease)|||
||Opening balance|||Closing balance|
|||Issuing new shares|Subtotal||
|Total shares|831,176,469.00|14,575,000.00|14,575,000.00|845,751,469.00|

 Note: In December 2018, the Company issued 14.575 million restricted shares to 372 natural persons at the price of 4.85 yuan per share, totally raising RMB 70,688,750.00 yuan, including RMB 14.575 million yuan of share capital and RMB 56.1138 million yuan of
capital reserve.
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report 29. Capital reserve
Unit: yuan Currency: RMB
|||||||
|-|-|-|-|-|-|
|Item||Openingbalance|Increasedamount|Decreased||
||||||Closing balance|
|||||amount||
||capital premium (stock premium)|99,261,843.96|56,113,750.00|7,880,503.26|147,495,090.70|
||other capital reserves|4,331,456.10|1,997,989.57||6,329,445.67|
||Total|103,593,300.06|58,111,739.57|7,880,503.26|153,824,536.37|

 Note: The capital premium increased in current period due to issuing restricted shares, which increased RMB 56,113,750 yuan, the decreased amount of capital premium due to the changes in the Company's equity share in its subsidiaries; the increase of other capital reserves due to stock incentive plan executed by the Company, its recognized capital reserve in current period.
30. Treasury stock
Unit: yuan Currency: RMB
||||||
|-|-|-|-|-|
|Item|Opening balance|Increased amount|Decreased amount|Closing balance|
|repurchase of|||||
|||70,688,750.00||70,688,750.00|
|restricted stock|||||
|Total||70,688,750.00||70,688,750.00|

 31. Other comprehensive income
Unit: yuan Currency: RMB
||||||||||
|-|-|-|-|-|-|-|-|-|
||||Amount of current period||||||
|||||Deduct:amount thatincluded inothercomprehensiveincome in priorperiod andtransferred incurrent gainsor losses|||||
|||||||After-tax|After-tax||
||||||Deduct:incometaxexpense||||
|||Opening||||amount|amount|Closing|
||Item||Pre-tax||||||
|||balance||||attributable|attributable to|balance|
||||amount||||||
|||||||to parent|non-controlling||
|||||||company|interest||
|iil|other||||||||
||comprehensive||||||||
||ncome that||||||||
||cannot be||||||||
||reclassified||||||||
||nto gains or||||||||
||osses||||||||
|iil|other||||||||
||comprehensive||||||||
||ncome that||||||||
||will be||-1,325,947.22|||-1,316,942.00|-9,005.22|-1,316,942.00|
||reclassified||||||||
||nto gains or||||||||
||osses||||||||
|i|ncluding:||||||||
||other||-1,305,935.62|||-1,305,935.62||-1,305,935.62|
||comprehensive||||||||

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report
||||||||
|-|-|-|-|-|-|-|
|ictgue|ncome that||||||
||an be||||||
||ransferred in||||||
||ains or losses||||||
||nder the||||||
||quity method||||||
|cdfcfs|onverted||||||
||ifference of||||||
||oreign||||||
|||-20,011.60|-11,006.38|-9,005.22|-11,006.3|8|
||urrency||||||
||inancial||||||
||tatements||||||
|Tci|otal other||||||
||omprehensive|-1,325,947.22|-1,316,942.00|-9,005.22|-1,316,942.0|0|
||ncome||||||

32. Surplus reserve
Unit: yuan Currency: RMB
|||||
|-|-|-|-|
|Opening balance|Increased amount|Decreased amount|Closing balance|
|232,486,459.89|40,396,460.30||272,882,920.19|
|232,486,459.89|40,396,460.30||272,882,920.19|

 33. Undistributed profit
Unit: yuan Currency: RMB
||||
|-|-|-|
|Item|2018|2017|
|undistributed profit at the end of prior period beforeadjustment|||
||2,223,048,013.93|1,867,605,664.06|
|adjust the total amount of undistributed profit at thebeginning of current period|||
|undistributed profit at the beginning of current periodafter adjustment|||
||2,223,048,013.93|1,867,605,664.06|
|add: net profit attributable to the owners of the parentcompany in current period|||
||551,928,618.35|471,024,473.92|
|deduct: appropriation of statutory surplus reserve|40,396,460.30|32,464,477.15|
|appropriation of discretionary surplus reserve|||
|extraction of general risk provisions|||
|common stock dividends payable|83,117,646.90|83,117,646.90|
|dividends of common stock transferred to capital|||
|undistributed profit at the end of current period|2,651,462,525.08|2,223,048,013.93|

 34. Operating revenue and operating cost
Unit: yuan Currency: RMB
||||||
|-|-|-|-|-|
||2018||2017||
|Item|||||
||operating revenue|operating cost|operating revenue|operating cost|
|core businesses|15,742,792,774.42|14,415,344,771.04|13,666,948,105.72|12,499,623,655.73|
|other businesses|8,005,346.25|5,952,906.36|28,895,352.95|21,851,336.33|
|Total|15,750,798,120.67|14,421,297,677.40|13,695,843,458.67|12,521,474,992.06|

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report 35. Taxes and surtaxes
Unit: yuan Currency: RMB
||||
|-|-|-|
|Item|2018|2017|
|city maintenance and construction tax|940,097.90|928,068.01|
|extra charges of education funds|676,683.45|716,079.93|
|house property tax|6,978,501.15|7,198,198.73|
|land use tax|10,539,729.72|11,224,445.50|
|vehicle and vessel use tax|42,942.77|188,558.20|
|stamp tax|5,211,980.74|4,567,795.72|
|environmental protection tax|460,973.56|44,897.20|
|Total|24,850,909.29|24,868,043.29|

 36. Sales expenses
Unit: yuan Currency: RMB
||||
|-|-|-|
|Item|2018|2017|
|payroll|162,608,694.49|150,135,672.01|
|travelling expense|105,628,967.15|107,316,673.52|
|transportation and handling expense and|||
||81,816,784.59|84,350,851.96|
|vehicle expense|||
|service fee|15,601,209.62|13,617,003.46|
|business entertainment expense|15,315,493.59|14,067,947.63|
|business advertising expense|10,584,270.74|9,981,841.50|
|lease expense|5,970,164.05|5,065,660.80|
|meeting expenditure|4,100,827.77|5,008,857.71|
|sales service charge|2,780,212.04|3,690,800.64|
|office and communication fee|2,704,622.28|3,259,942.14|
|subtotal of other item|13,535,507.27|15,011,402.69|
|Total|420,646,753.59|411,506,654.06|

 37. Administration expense
Unit: yuan Currency: RMB
||||
|-|-|-|
|Item|2018|2017|
|payroll|102,981,629.02|104,715,008.58|
|depreciation|35,198,583.05|35,471,714.50|
|office and communication fee|12,103,084.06|14,236,052.41|
|travelling expense|8,776,171.14|9,639,842.67|
|repair charge|5,451,152.88|8,308,731.47|
|lease expense|5,177,268.87|3,808,895.44|
|amortization of intangible assets|6,328,067.44|6,325,602.00|
|business entertainment expense|5,231,882.50|6,031,858.29|
|water and electricity|3,641,887.47|3,615,525.41|
|service fee|5,654,971.79|6,049,956.06|
|heating fee|4,116,865.94|3,224,752.80|
|other|33,280,294.03|24,508,034.17|
|Total|227,941,858.19|225,935,973.80|

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report 38.R&D expenditure
Unit: yuan Currency: RMB
||||
|-|-|-|
|Item|2018|2017|
|payroll|20,252,008.67|17,410,840.97|
|design testing fee|28,296,665.97|33,764,313.78|
|material and appliance charge|5,253,593.05|2,380,269.20|
|travel expense|3,364,720.06|3,420,910.73|
|depreciation and amortization charge|3,094,972.99|4,853,526.06|
|Subtotal of other item|838,388.54|123,234.70|
|Total|61,100,349.28|61,953,095.44|

 39. Financial expense
Unit: yuan Currency: RMB
||||
|-|-|-|
|Item|2018|2017|
|interest expenditure|66,635,982.41|64,240,983.00|
|deduct: interest income|-4,414,083.01|-4,594,760.63|
|add: exchange loss|9,638,461.65|-995,270.32|
|service charge|3,040,576.37|2,203,448.46|
|Total|74,900,937.42|60,854,400.51|

 40. Impairment loss on assets
Unit: yuan Currency: RMB
||||
|-|-|-|
|Item|2018|2017|
|bad debt losses|66,218,692.38|19,224,503.55|
|inventory falling price losses|9,791,880.79|671,647.40|
|available-for-sale financial assets impairment losses|||
|held-to-maturity investments impairment losses|||
|long-term equity investments impairment losses|6,150,602.09|11,749,397.91|
|investment property impairment losses|||
|fixed assets impairment losses|41,867,066.61||
|Total|124,028,241.87|31,645,548.86|

 41. Other income
Unit: yuan Currency: RMB
||||
|-|-|-|
|Item|2018|2017|
|government grant charged in|14,165,463.22|34,675,966.99|
|Total|14,165,463.22|34,675,966.99|

 42. Return on investment
Unit: yuan Currency: RMB
||||
|-|-|-|
|Item|2018|2017|
|return on long-term equity investment measured by the equitymethod|||
||281,184,722.34|108,860,200.54|
|income from disposal of long-term equity investment|1,374,325.45|14,084,674.20|
|income from disposal of financial assets which are measured at fairvalue and the changes included in current gains or losses|||
||3,190,994.43|82,305.33|
|income from available-for-sale financial assets, etc.|100,000.00|100,000.00|
|after losing control, gains obtained from remeasuring residual|164,912.02|11,891,683.97|

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report
||||
|-|-|-|
|equity at fair value|||
|other||36,098,132.19|
|Total|286,014,954.24|171,116,996.23|

 43. Income from changes in fair value
Unit: yuan Currency: RMB
||||
|-|-|-|
|Source of income from changes in fair value|2018|2017|
|financial assets measured at fair value and the changes|||
||-369,580.00|-263,470.00|
|included in current gains or losses|||
|including: income from the changes in fair value of derivative|||
||-369,580.00|-263,470.00|
|financial instruments|||
|Total|-369,580.00|-263,470.00|

 44. Income from assets disposal
Unit: yuan Currency: RMB
||||
|-|-|-|
|Item|2018|2017|
|gains or losses from disposal of fixed assets|-1,939,342.38|-1,331,137.12|
|gains or losses from disposal of construction in progress|-1,496,120.61||
|gains or losses from disposal of intangible assets|-1,817,161.80||
|Total|-5,252,624.79|-1,331,137.12|

 45. Non-operating Income
Unit: yuan Currency: RMB
|||||
|-|-|-|-|
||||Amount included in current|
|Item|2018|2017||
||||non-recurring gains and losses|
|Total gains or losses from||||
||247,406.47||247,406.47|
|disposal of non-current assets||||
|of which: gains or losses from||||
||247,406.47||247,406.47|
|disposal of fixed assets||||
|government grants|5,305,777.88|20,716,339.00|5,305,777.88|
|inventory profit gains|351,193.28|525,812.25|351,193.28|
|insurance indemnity income|2,001,544.16||2,001,544.16|
|other|2,448,205.40|1,296,535.65|2,448,205.40|
|Total|10,354,127.19|22,538,686.90|10,354,127.19|

 Government grants included in current gains and losses
Unit: yuan Currency: RMB
|||||
|-|-|-|-|
||||Related to|
|Item|2018|2017|assets/related|
||||to earnings|
|foreign trade industry development special|||related to|
||2,011,900.00|||
|fund of Shenyang Finance Bureau|||earnings|
||||related to|
|Shenyang Mayor Quality Award|500,000.00|||
||||earnings|
|Subtotal for other projects under 500,000|||related to|
||2,793,877.88|||
|yuan|||earnings|
|Linzhang county small and medium-sized|||related to|
|||816,339.00||
|enterprises support funds|||earnings|
|2016 Liaoning Science and Technology|||related to|
|||1,000,000.00||
|Award|||earnings|

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report
|||||
|-|-|-|-|
|Lankao County Science and Technology|||related to|
|||13,300,000.00||
|Award|||earnings|
|tax contribution grants of Shenbei New|||related to|
|||5,000,000.00||
|District|||earnings|
|commodity grain province reward funds of|||related to|
|||600,000.00||
|Jilin Province|||earnings|
|Total|5,305,777.88|20,716,339.00|/|

46. Non-operating expenditure
Unit: yuan Currency: RMB
||||||
|-|-|-|-|-|
|||||Amount included in currentnon-recurring gains and losses|
|Item||2018|2017||
|Total losses from disposal of|4,698,080.39||||
|||4,698,080.39||4,698,080.39|
|non-current assets|||||
|including: losses from disposal of|4,698,080.39||||
|||4,698,080.39||4,698,080.39|
|fixed assets|||||
|losses from debt restructuring||1,147,367.47||1,147,367.47|
|external donations||1,064,405.00|750,424.15|1,064,405.00|
|abnormal loss||590,640.65|1,213,232.32|590,640.65|
|amercement outlay||632,789.35|790,739.23|632,789.35|
|other||1,270,961.76|308,013.80|1,270,961.76|
|Total||9,404,244.62|3,062,409.50|9,404,244.62|

 47. Income tax expense
Unit: yuan Currency: RMB
||||
|-|-|-|
|Item|2018|2017|
|income tax expense|80,735,273.83|91,056,507.61|
|deferred income tax expense|6,115,061.17|-9,731,936.77|
|Total|86,850,335.00|81,324,570.84|

 Adjustment procedure for accounting profit and income tax expense
Unit: yuan Currency: RMB
|||
|-|-|
|Item|2018|
|Total profit|691,539,488.87|
|income tax expenses calculated at statutory/applicable tax rates|103,730,923.33|
|effects of subsidiaries that are subject to different tax rates|-11,184,460.11|
|effects of adjusting the income tax on previous periods|281,331.03|
|effects of non-taxable income|-42,571,261.71|
|effects of non-deductible costs, expenses and losses|3,230,600.21|
|the impact of using deductible losses of unrecognized deferredincome tax assets of prior period||
||-1,199,210.09|
|effects of deductible temporary difference or deductible loss ofunrecognized deferred income tax assets of current period||
||23,301,341.47|
|calculation and deduction of R&D expenditure|-4,416,289.76|
|effects of transferring back the deductible loss of recognized deferredincome tax assets of prior period on the income tax expense||
||15,677,360.63|
|income tax expense|86,850,335.00|

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report 48. Cash flow statement
a. Cash received from other activities related to operating
Unit: yuan Currency: RMB
||||
|-|-|-|
|Item|2018|2017|
|government grants|20,320,148.27|43,371,366.23|
|interest income|4,414,083.01|4,594,760.63|
|subtotal of transactions and other|101,879,318.01|111,530,793.59|
|Total|126,613,549.29|159,496,920.45|

 b. Cash paid to other activities related to operating
Unit: yuan Currency: RMB
||||
|-|-|-|
|Item|2018|2017|
|travelling expense|114,405,138.29|116,956,516.19|
|transportation and handling expense|||
||81,816,784.59|78,316,811.20|
|and vehicle expense|||
|R&D expenditure|37,753,367.62|40,423,338.01|
|business entertainment expense|20,547,376.09|20,099,805.92|
|office and communication fee|14,807,706.34|17,495,994.55|
|Service fee|21,256,181.41|19,666,959.52|
|other operating expenses|90,976,916.72|69,406,198.93|
|transactions and other|103,298,594.82|62,832,173.24|
|Total|484,862,065.88|425,197,797.56|

 c. Cash received from other activities related to investment
Unit: yuan Currency: RMB
||||
|-|-|-|
|Item|2018|2017|
|futures trading security deposit||2,115,056.67|
|government grants related to assets||13,125,000.00|
|finance products|||
|Total||15,240,056.67|

 d. Cash received from other activities related to financing
Unit: yuan Currency: RMB
||||
|-|-|-|
|Item|2018|2017|
|subsidiaries receive capital increase from|||
||40,000,000.00||
|non-controlling interests in advance|||
|cash received from disposal of subsidiaries'|||
||1,131,246.21||
|shareholdings|||
|Total|41,131,246.21||

e. Cash paid to other activities related to financing
Unit: yuan Currency: RMB
||||
|-|-|-|
|Item|2018|2017|
|cash paid to buying non-controlling interests of the|||
||25,900,000.00|13,216,000.00|
|subsidiary|||
|Total|25,900,000.00|13,216,000.00|

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report 49. Further information of cash flow statement
a. Further information
Unit: yuan Currency: RMB
||||
|-|-|-|
|Further information|2018|2017|
|1. adjust net profit to cash flow from operating activities|||
|Net profit|604,689,153.87|499,954,813.31|
|add: assets impairment provision|124,028,241.87|31,645,548.86|
|depreciation of fixed assets, depletion of oil and gas assets,|||
||166,814,214.58|160,997,175.49|
|depreciation of productive biological assets|||
|amortization of intangible assets|5,955,716.79|6,325,602.00|
|amortization of long-term unamortized expense|41,650,758.04|32,360,527.63|
|losses on disposal of fixed assets, intangible assets and|||
||5,252,624.79|1,331,137.12|
|other long-term assets|||
|losses on discarding of fixed assets|4,450,673.92||
|losses due to changes in fair value|369,580.00|263,470.00|
|financial expense|76,778,102.85|65,731,717.81|
|investment losses|-286,014,954.24|-171,116,996.23|
|decrease of deferred income tax assets|6,115,061.17|-9,723,473.02|
|increase of deferred income tax liabilities||-8,463.75|
|decrease of inventory|-202,815,701.27|-77,705,967.25|
|decrease of operating receivables|-168,481,074.50|-116,287,839.01|
|increase of operating receivables|60,557,196.59|189,995,794.72|
|other|62,055,321.13|-2,372,676.93|
|net cash flow from operating activities|501,404,915.59|611,390,370.75|
|2. major investing and financing activities that do not|||
|involve cash receipts and payments|||
|3. net changes in cash and cash equivalents|||
|closing balance of cash|889,204,873.97|740,680,891.81|
|deduct: opening balance of cash|740,680,891.81|707,314,594.46|
|add: closing balance of cash equivalent|||
|deduct: opening balance of cash equivalent|||
|net increase in cash and cash equivalents|148,523,982.16|33,366,297.35|

 b. Net cash received from disposal of subsidiaries in current period
Unit: yuan Currency: RMB
|||
|-|-|
||Amount|
|cash or cash equivalents received from disposal of subsidiaries||
||3,072,000.00|
|during the current period||
|including: Wuwei Wellhope Feed|12,000.00|
|Xi'an Micro Monkey E-commerce|3,060,000.00|
|deduct: cash and cash equivalents held by the subsidiary on the||
||18,286.09|
|date of losing control||
|including: Wuwei Wellhope Feed|1,048.35|
|Xi'an Micro Monkey E-commerce|17,237.74|
|add: cash or cash equivalents received in current period from||
|disposal of subsidiaries during previous periods.||
|including: Wuwei Wellhope Feed||
|Xi'an Micro Monkey E-commerce||
|net cash received from disposal of subsidiaries|3,053,713.91|

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report c. Cash and cash equivalents
Unit: yuan Currency: RMB
||||
|-|-|-|
|Item|Closing balance|Opening balance|
|1. cash|889,204,873.97|740,680,891.81|
|including: cash on hand|253,687.16|3,225,842.47|
|bank deposits available for payment at any time|888,951,186.81|737,455,049.34|
|2. cash equivalent|||
|3. closing balance of cash and cash equivalents|889,204,873.97|740,680,891.81|

 50. Assets in which ownership or use rights are restricted
Unit: yuan Currency: RMB
||||
|-|-|-|
|Item|Closing book value|Reason for restriction|
|monetary capital|9,697,997.84|futures margin|
|monetary capital|29,999,881.25|L/C guarantee deposit|
|Total|39,697,879.09|/|

51. Foreign currency monetary items
Unit: yuan
|||||
|-|-|-|-|
||||Closing balance|
||Foreign currency|Translating exchange||
|Item|||translated into|
||closing balance|rate||
||||RMB|
|monetary capital|||4,025,773.21|
|including: US dollar|244,777.55|6.8632|1,679,957.28|
|Euro|10.56|7.8473|82.90|
|Hong Kong dollar|2,079,478.90|0.8762|1,822,039.41|
|Ruble|5,311,294.28|0.0986|523,693.62|
|accounts receivable|||9,719,009.23|
|including: US dollar|49,072.00|6.8632|336,790.95|
|Hong Kong dollar|10,707,850.13|0.8762|9,382,218.28|
|short-term borrowing|||80,460,168.49|
|including: US dollar|11,723,418.88|6.8632|80,460,168.49|
|accounts payable|||479,251.69|
|including: US dollar|69,829.19|6.8632|479,251.69|

 52. Government grants
Unit: yuan Currency: RMB
|||||
|-|-|-|-|
||||Amount included|
|Category|Amount|Present item|in current gains|
||||and losses|
|grants for corn processing and storage|2,595,900.00|other income|2,595,900.00|
|grants for key technology project of safe,||||
||872,342.83|other income|872,342.83|
|efficient and antibiotic-free piglet feed||||
|grants for development project of||||
|bacteriophage preparation for intestinal|1,000,000.00|other income|1,000,000.00|
|pathogenic bacteria||||
|R&D fund for 2016 granted by Guangzhou||||
||600,000.00|other income|600,000.00|
|Sci-Tech Innovation Committee||||
|Shenyang Finance Bureau foreign trade||non-operating||
||2,011,900.00||2,011,900.00|
|industry development special fund||income||
|R&D fund for green and environmental-friendly||||
||650,000.00|other income|650,000.00|
|sow feed||||

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report
|||||
|-|-|-|-|
|||non-operating||
|Shenyang Mayor quality award|500,000.00||500,000.00|
|||income||
|grants for the invention of an emulsified piglet||||
||500,000.00|other income|500,000.00|
|pellet feed and preparation method||||
|research funds for the third batch of provincial||||
|level capital construction project in 2018 of|1,500,000.00|other income|1,500,000.00|
|Liaoning Province||||
|grants for newly approved construction of new||||
||2,000,000.00|other income|2,000,000.00|
|science and technology innovation platforms||||
|||non-operating||
|subtotal for other grants under 500,000 yuan|2,793,877.88||2,793,877.88|
|||income||
|subtotal for other grants under 500,000 yuan|2,296,127.56|other income|2,296,127.56|
|deferred income transferred in current period|2,151,092.83|other income|2,151,092.83|
|Total|19,471,241.10|/|19,471,241.10|

 VIII. Change of consolidation scope
1. Disposal of subsidiary
Unit: yuan Currency: RMB
|||||||||||
|-|-|-|-|-|-|-|-|-|-|
||||||The difference|||||
||||||of the share|||||
||||||of such|||||
||||||subsidiary's|||||
||||||net asset held|||||
||||||||Booking|||
||||||by the|||Fair value|Gains or|
|||||||Residual|value of|||
||||||Company in|||of residual|losses from|
|||Percentage of||Date of||shareholding|residual|||
||Disposal||Disposal||the|||equity on|residual|
|Subsidiary||disposed||losing||on the date|equity on|||
||price||way||consolidated|||the date of|equity|
|||shareholding %||control||of losing|the date of|||
||||||financial|||losing|remeasured|
|||||||control %|losing|||
||||||statements|||control|at fair value|
||||||||control|||
||||||which caused|||||
||||||by disposal|||||
||||||price and|||||
||||||disposal of|||||
||||||investment|||||
|Xi'an Micro||||||||||
|Monkey|3,060,000.00|90|transfer|2018-3-31|1,484,208.17|10|175,087.98|340,000.00|164,912.02|
|E-commerce||||||||||
|Wuwei||||||||||
|Wellhope|12,000.00|60|transfer|2018-5-31|-142,256.97|||||
|Feed||||||||||
|Liaoning||||||||||
|Shennong||||||||||
|||60|transfer|2018-1-31|32,374.25|||||
|Wellhope||||||||||
|Bio-Tech||||||||||

2. Change of consolidation scope caused by other reason
The Company invested to set up Chongqing Wellhope Agri-Tech Company, holding65.00% shares, established Russia Wellhope Agri-Tech Company, holding55.00% shares. Chongqing Dahong Agricultural and Animal Husbandry Company, a subsidiary of the Company, invested and established Chongqing Dahong Agriculture Sci-Tech Company, holding100.00% shares, all these companies have been included in the consolidation
scope in current period.
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report IX. Equity in other entities
1. Equity in subsidiaries
a. Composition of the Company
||||||||
|-|-|-|-|-|-|-|
||Business|Registered|Business|Shareholding %||Mode of|
|Subsidiary|||||||
||site|site|type|Direct|Indirect|acquisition|
|Haicheng Xinzhongxin|Haicheng|Haicheng|||||
||||production|51.00||investment|
|Wellhope Feed|city|city|||||
|Dalian Huakang Xinxin|||||||
||Dalian city|Dalian city|production|65.00||investment|
|Food|||||||
|Changchun Hengfeng|||||||
||Changchun|Changchun|||||
|Agriculture and Animal|||trading||51.00|investment|
||city|city|||||
|Husbandry|||||||
|Jinan Xinweita Trading|Jinan city|Jinan city|trading||76.00|investment|
|Henan Wellhope Agri-Tech|Kaifeng city|Kaifeng city|production|100.00||investment|
|Zhengzhou Wellhope|Zhengzhou|Zhengzhou|||||
||||production|70.00||investment|
|Agri-Tech|city|city|||||
|Zhumadian Wellhope|Zhumadian|Zhumadian|||||
||||production|90.00||investment|
|Agri-Tech|city|city|||||
|Jiaozuo Wellhope Feed|Jiaozuo city|Jiaozuo city|production|98.30||investment|
||Nanyang|Nanyang|||||
|Nanyang Wellhope Feed|||production|70.00||investment|
||city|city|||||
||Kaifeng|Kaifeng|||||
|Kaifeng Meat Food|||production|100.00||investment|
||county|county|||||
|Zhangwu Wellhope|Zhangwu|Zhangwu|||||
||||production|60.00||investment|
|Agriculture|county|county|||||
||Xifeng|Xifeng|||||
|Xifeng Qianyue Planting|||production||100.00|investment|
||county|county|||||
|Sanjiang Wellhope|Jixian|Jixian|||||
||||production|100.00||investment|
|Agri-Tech|county|county|||||
||Jixian|Jixian|||||
|Jixian Expert Trading|||trading||100.00|investment|
||county|county|||||
|Gongzhuling Wellhope|Gongzhuling|Gongzhuling|||||
||||production|100.00||investment|
|Agri-Tech|city|city|||||
||Shenyang|Shenyang|||||
|Shenyang Expert Trading|||trading|100.00||investment|
||city|city|||||
|Liaoning Skyland Livestock|Shenyang|Shenyang|||||
||||production|100.00||investment|
|Equipment|city|city|||||
|Shenyang Wellhope|Shenyang|Shenyang|||||
||||production|100.00||investment|
|Ruminant Feed|city|city|||||
|Shenyang Wellhope|Shenyang|Shenyang|||||
||||production|100.00||investment|
|Extruded Feed|city|city|||||
|Shenyang Wellhope|Shenyang|Shenyang|||||
||||production|100.00||investment|
|Aquatic Feed|city|city|||||
|Shenyang Jiahe Tianfeng|Shenyang|Shenyang|||||
||||trading|100.00||investment|
|Commerce and Trade|city|city|||||
|Liaoning Wellhope Food|Beipiao city|Beipiao city|production|60.00||investment|
|Haicheng Wellhope|Haicheng|Haicheng|||||
||||production|100.00||investment|
|Agri-Tech|city|city|||||
||Tai'an|Tai'an|||||
|Tai'an Wellhope Feed|||production|100.00||investment|
||county|county|||||

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report
||||||||
|-|-|-|-|-|-|-|
|Lingyuan Wellhope|Lingyuan|Lingyuan|||||
||||production|90.50||investment|
|Agri-Tech|city|city|||||
|Beijing Helai Sci-Tech|Beijing city|Beijing city|production|100.00||investment|
|Beijing Wellhope Agri-Tech|Beijing city|Beijing city|trading|100.00||investment|
|Beijing Sanyuan Wellhope|||||||
||Beijing city|Beijing city|production|70.00||investment|
|Agri-Tech|||||||
|Jilin Wellhope Agri-Tech|Jilin city|Jilin city|production|100.00||investment|
||Gongzhuling|Gongzhuling|||||
|Jilin Hefeng Pig Breeding|||production|100.00||investment|
||city|city|||||
|Harbin Weierhao Trading|Harbin city|Harbin city|trading|51.00||investment|
|Daqing Wellhope Bayi|||||||
||Daqing city|Daqing city|production|70.00||investment|
|Nongda Animal Sci-Tech|||||||
|Mudanjiang Wellhope|Mudanjiang|Mudanjiang|||||
||||production|100.00||investment|
|Agri-Tech|city|city|||||
|Jinzhou Wellhope|||||||
||Jinzhou city|Jinzhou city|production|100.00||investment|
|Agri-Tech|||||||
|Gongzhuling Wellhope|Gongzhuling|Gongzhuling|||||
||||production|100.00||investment|
|Ruminant Feed|city|city|||||
|Heilongjiang Wellhope|||||||
||Harbin city|Harbin city|production|100.00||investment|
|Agri-Tech|||||||
||Tangshan|Tangshan|||||
|Tangshan Wellhope Feed|||production|80.00||investment|
||city|city|||||
||Cangzhou|Cangzhou|||||
|Cangzhou Helai Sci-Tech|||production|70.00||investment|
||city|city|||||
|Xi'an Wellhope Feed|||||||
||Xi'an city|Xi'an city|production|85.00||investment|
|Sci-Tech|||||||
|Gansu Wellhope Agri-Tech|Wuwei city|Wuwei city|production|100.00||investment|
|Jining Wellhope Agri-Tech|Jining city|Jining city|production|70.00||investment|
||Shanghai|Shanghai|||||
|Shanghai Wellhope Feed|||production|65.00||investment|
||city|city|||||
||Shanghai|Shanghai|||||
|Shanghai Hehong Trading|||trading|32.00|42.00|investment|
||city|city|||||
|Pinghu Wellhope|||||||
||Pinghu city|Pinghu city|production|85.00||investment|
|Agri-Tech|||||||
|Huai'an Wellhope Feed|Huai'an city|Huai'an city|production|100.00||investment|
|Qingdao Wellhope|||||||
||Pingdu city|Pingdu city|trading|95.00||investment|
|Agri-Tech|||||||
|Guangzhou Xiangshun|Guangzhou|Guangzhou|||||
||||production|56.00||investment|
|Livestock Equipment|city|city|||||
|Hainan Wellhope|Chengmai|Chengmai|||||
||||production|100.00||investment|
|Agri-Tech|county|county|||||
|Fuyu Wellhope Agri-Tech|Fuyu city|Fuyu city|production|97.00||investment|
|Fuyu Wellhope Taolaizhao|||||||
||Fuyu city|Fuyu city|production|97.00||investment|
|Poultry Raising|||||||
||Nong'an|Nong'an|||||
|Changchun Wellhope Feed|||production|98.00||investment|
||county|county|||||
||Changtu|Changtu|||||
|Changtu Wellhope Feed|||production|100.00||investment|
||county|county|||||
|Lankao Wellhope|Lankao|Lankao|||||
||||production|100.00||investment|
|Agri-Tech|county|county|||||
|Tongliao Wellhope Tianyi|||||||
||Tongliao city|Tongliao city|production|51.00||investment|
|Prataculture|||||||

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report
||||||||
|-|-|-|-|-|-|-|
|Liaoning Wellhope|Shenyang|Shenyang|||||
||||trading|100.00||investment|
|Purchasing & Trading|city|city|||||
|Shenyang Wellhope|Shenyang|Shenyang|||||
||||production|100.00||investment|
|Agri-Tech|city|city|||||
|||||||combined|
||Shenyang|Shenyang||||under the|
|Liaoning Expert Trading|||trading|100.00|||
||city|city||||same|
|||||||control|
|||||||combined|
|Shenyang Fengmei|Shenyang|Shenyang||||under the|
||||production|100.00|||
|Bio-Tech|city|city||||same|
|||||||control|
|||||||combined|
|Shenyang Pufeng|Shenyang|Shenyang||||under the|
||||trading|100.00|||
|Commerce and Trade|city|city||||same|
|||||||control|
|||||||combined|
|Shenyang Huawei|Shenyang|Shenyang||||under the|
||||production||51.00||
|Pharmaceutical|city|city||||same|
|||||||control|
|||||||Combined|
|Liaoning Wellhope|||||||
||Shenyang|Shenyang||||not under|
|Agriculture and Animal|||production|100.00|||
||city|city||||the same|
|Husbandry|||||||
|||||||control|
|||||||Combined|
|||||||not under|
|Puyang Wellhope Food|Puyang city|Puyang city|production|60.00|||
|||||||the same|
|||||||control|
|Jingzhou Wellhope|||||||
||Jingzhou|Jingzhou|||||
|Agriculture and Animal|||trading|86.00||investment|
||city|city|||||
|Husbandry|||||||
|Dalian Heyuan Wellhope|||||||
||Dalian city|Dalian city|production|51.00||investment|
|Agri-Tech|||||||
|Shenyang Nongda|Shenyang|Shenyang|||||
||||production|100.00||investment|
|Wellhope Feed|city|city|||||
|Dalian Wellhope Feed|Dalian city|Dalian city|production|100.00||investment|
||Xingcheng|Xingcheng|||||
|Xingcheng Wellhope Feed|||production|100.00||investment|
||city|city|||||
||Kunming|Kunming|||||
|Yunnan Wellhope Feed|||production|96.00||investment|
||city|city|||||
|Liaoning Godaji|Shenyang|Shenyang|||||
||||trading|100.00||investment|
|E-commerce|city|city|||||
||Haozhou|Haozhou|||||
|Anhui Wellhope Agri-Tech|||production|70.00||investment|
||city|city|||||
||Yuanping|Yuanping|||||
|Shanxi Wellhope Agri-Tech|||production|100.00||investment|
||city|city|||||
|Pingyuan Wellhope Food|Handan city|Handan city|production|100.00||investment|
|Shenyang Huaweida|Shenyang|Shenyang|||||
||||trading||75.00|investment|
|Animal Health Product|city|city|||||
|||||||Combined|
|Dalian Zhongjia Food|Dalian city|Dalian city|production||100.00|not under|
|||||||the same|

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report
||||||||
|-|-|-|-|-|-|-|
|||||||control|
|Luohe Hongfeng Poultry|Luohe city|Luohe city|production|51.00||investment|
||Shenyang|Shenyang|||||
|Wellhope Food(Shenyang)|||production|100.00||investment|
||city|city|||||
|Changchun Wellhope|Changchun|Changchun|||||
||||production|85.00||investment|
|Food|city|city|||||
|Pingyuan Wellhope|||||||
||Handan city|Handan city|production||100.00|investment|
|Agri-Tech|||||||
|Puyang Wellhope|||||||
||Puyang city|Puyang city|production||100.00|investment|
|Agri-Tech|||||||
|||||||Combined|
|Chongqing Dahong|||||||
||Chongqing|Chongqing||||not under|
|Agriculture and Animal|||production||50.00||
||city|city||||the same|
|Husbandry Equipment|||||||
|||||||control|
|Dalian Tianyicheng trading|Dalian city|Dalian city|trading||50.00|investment|
|Beijing Brilliant Dragon|||||||
||Beijing city|Beijing city|trading||59.00|investment|
|Commerce and Trade|||||||
|Tangshan Hejia Agriculture|Tangshan|Tangshan|||||
||||production|65.00||investment|
|and Animal Husbandry|city|city|||||
|||||||Combined|
|Tangshan Wellhope|Tangshan|Tangshan||||not under|
||||production|70.00|||
|Sci-Tech|city|city||||the same|
|||||||control|
|Shenyang Huakang Xinxin|Shenyang|Shenyang|||||
||||production|95.00||investment|
|Food|city|city|||||
|Weifang Wellhope New|||||||
||Weifang city|Weifang city|production|51.00||investment|
|Hesheng Feed|||||||
|Kaifeng Wellhope Meat|||||||
||Kaifeng city|Kaifeng city|production||100.00|investment|
|Food|||||||
||Shenyang|Shenyang|||||
|Shenyang Huakang Broiler|||production|95.00||investment|
||city|city|||||
|Kaifeng Wellhope|||||||
|Agriculture and Animal|Kaifeng city|Kaifeng city|production||100.00|investment|
|Husbandry|||||||
|Fushun Wellhope|||||||
|Agriculture and Animal|Fushun city|Fushun city|production||100.00|investment|
|Husbandry|||||||
|Shenyang Wellhope|Shenyang|Shenyang|||||
||||production||100.00|investment|
|Polutry|city|city|||||
|Shenyang Huakang|||||||
||Shenyang|Shenyang|||||
|Agriculture and Animal|||production||100.00|investment|
||city y|city y|||||
|Husbandry|||||||
|Dehui Wellhope Agri-Tech|Dehui city|Dehui city|production||100.00|investment|
|Shenyang Tianjingde|Shenyang|Shenyang|||||
||||trading||80.00|investment|
|Trading|city|city|||||
|Chongqing Wellhope|Chongqing||||||
||||production|65.00||investment|
|Agri-Tech|city||||||
|Dahong Agriculture and|||||||
|Animal Husbandry|Chongqing||||||
||||production||100.00|investment|
|Technology Chongqing|city||||||
|Branch|||||||
|Russia Wellhope Agri-Tech|||production|55.00||investment|

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report b. Important non-wholly owned subsidiary
Unit: yuan Currency: RMB
||||||
|-|-|-|-|-|
||Shareholding|Gain or losses|||
||||Declared dividends|Closing balance of|
||of|attributable to|||
|Subsidiary|||to non-controlling|non-controlling|
||non-controlling|non-controlling|||
||||interests|interests|
||interests|interests|||
|Dalian Heyuan|||||
||49.00|67,984,614.02||171,654,722.91|
|Agri-Tech|||||
|Xi'an Wellhope|||||
||15.00|3,227,595.95||14,736,063.38|
|Feed Sci-Tech|||||
|Beijing Sanyuan|||||
|Wellhope|30.00|2,472,622.85||55,637,846.25|
|Agri-Tech|||||
|Tangshan|||||
||20.00|-2,383,511.77||14,230,771.82|
|Wellhope Feed|||||

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report c. Financial figures of important non-wholly owned subsidiary
Unit: yuan Currency: RMB
|||||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
||Closing balance||||||||Opening balance|||||||
|Subsidiary||||||||||||||||
||Current assets|Non-current asse|ts|Total assets|Current liabilities|Non-current liabiliti|es|Total liabilities|Current assets|Non-current asse|ts|Total assets|Current liabilities|Non-current liabiliti|es|
|DalianHeyuanAgri-Tech||||||||||||||||
||387,238,954.52|386,397,787.09||773,636,741.61|384,749,243.08|38,499,083.34||423,248,326.42|333,622,897.87|278,678,127.79||612,301,025.66|400,729,374.87|400,729,374.87||
|Xi'anWellhopeFeedSci-Tech||||||||||||||||
||77,754,831.17|43,262,494.18||121,017,325.35|22,717,956.94|||22,717,956.94|64,845,837.88|44,844,378.30||109,690,216.18|32,967,099.95|32,967,099.95||
|BeijingSanyuanWellhopeAgri-Tech||||||||||||||||
||180,774,234.54|26,952,555.35||207,726,789.89|22,111,712.84|||22,111,712.84|174,171,349.68|29,453,731.23||203,625,080.91|26,407,669.59|26,407,669.59||
|TangshanWellhopeFeed||||||||||||||||
||47,477,540.37|77,434,251.30||124,911,791.67|53,739,426.35|||53,739,426.35|66,009,913.28|78,949,036.23||144,958,949.51|61,887,531.58|61,887,531.58||

||||||||||
|-|-|-|-|-|-|-|-|-|
||2018||||2017||||
||||Total||||Total||
|Subsidiary|operation|||Cash flow from|operation|||Cash flow from|
|||Net profit|comprehensive|||Net profit|comprehensive||
||revenue|||operating activities|revenue|||operating activities|
||||income||||income||
|Dalian Heyuan Agri-Tech|1,805,702,344.34|138,744,110.24|138,744,110.24|99,805,558.21|1,677,552,731.83|43,182,677.31|43,182,677.31|53,479,056.49|
|Xi'an Wellhope Feed Sci-Tech|387,215,020.67|21,517,306.35|21,517,306.35|27,803,030.51|342,506,270.08|24,841,161.78|24,841,161.78|21,895,014.85|
|Beijing Sanyuan Wellhope|||||||||
||360,806,758.21|8,242,076.15|8,242,076.15|10,929,723.62|387,073,410.90|13,318,494.54|13,318,494.54|42,389,178.07|
|Agri-Tech|||||||||
|Tangshan Wellhope Feed|187,093,547.70|-11,917,558.86|-11,917,558.86|2,684,520.75|212,211,404.51|812,305.81|812,305.81|42,253,952.22|

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report 2. Transactions that change the share of owner's equity of the Company in subsidiary but the Company still controls the subsidiary
a. Circumstance of the change of owner's equity
In current period, the non-controlling shareholder of Lingyuan Wellhope Agri-Tech, Hainan Wellhope Agri-Tech, Yunnan Wellhope Feed, Liaoning Godaji E-commerce, Henan Wellhope Agri-Tech, respectively transferred15.50%,20.00%,37.80%,10.00% and30.00% of shareholdings to the Company.
The Company respectively transferred5.00% of shareholdings of Shenyang Huakang Xinxin Food, Jingzhou Wellhope Agriculture, Shenyang Huakang Broiler and Changchun Wellhope Food, non-controlling shareholder of its subsidiaries-Daqing Wellhope Bayi Nongda Animal Sci-Tech and Nanyang Wellhope Feed, increased investment by30.00% respectively.
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report b. The impact of the transaction on non-controlling interests and the equity attributable to the owners of parent company
Unit: yuan Currency: RMB
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
||||||||Daqing|||||
|||||||Shenyang||||||
||Lingyuan|Hainan|Yunnan|Liaoning|Henan||Wellhope|Nanyang|Jingzhou|Shenyang|Changchun|
|||||||Huakang||||||
||Wellhope|Wellhope|Wellhope|Godaji|Wellhope||Bayi Nongda|Wellhope|Wellhope|Huakang|Wellhope|
|||||||Xinxin||||||
||Agri-Tech|Agri-Tech|Feed|E-commerce|Agri-Tech||Animal|Feed|Agriculture|Broiler|Food|
|||||||Food||||||
||||||||Sci-Tech|||||
|cost of||||||||||||
|acquisition/disposal||||||||||||
|considerations||||||||||||
|--cash|12,400,000.00|2,000,000.00|1,890,000.00|1,000,000.00|8,610,000.00|100,000.00|4,800,000.00|3,000,000.00|2,528,571.00|100,000.00|500,000.00|
|--fair value of a||||||||||||
|non-cash asset||||||||||||
|total cost of||||||||||||
|acquisition/disposal|12,400,000.00|2,000,000.00|1,890,000.00|1,000,000.00|8,610,000.00|100,000.00|4,800,000.00|3,000,000.00|2,528,571.00|100,000.00|500,000.00|
|considerations||||||||||||
|deducting: share of||||||||||||
|net assets in the||||||||||||
|subsidiary||||||||||||
||9,604,482.11|-683,381.33|622,738.67|130,843.57|8,308,634.13|36,428.37|4,943,720.90|3,803,124.36|2,351,142.26|-290,099.65|148,075.17|
|calculated by||||||||||||
|gained or disposed||||||||||||
|shareholdings||||||||||||
|balance|2,795,517.89|2,683,381.33|1,267,261.33|869,156.43|301,365.87|63,571.63|-143,720.90|-803,124.36|177,428.74|390,099.65|351,924.83|
|of which: adjust||||||||||||
||-2,795,517.89|-2,683,381.33|-1,267,261.33|-869,156.43|-301,365.87|63,571.63|-143,720.90|-803,124.36|177,428.74|390,099.65|351,924.83|
|capital reserve||||||||||||

3. Equity in joint ventures or associated companies
a. Important joint ventures or associated companies
Unit: yuan Currency: RMB
||||||||
|-|-|-|-|-|-|-|
|||||Shareholding %|||
|Company name|Business site|Registered site|Business type|||Accounting treatment methods|
|||||Direct|Indirect||
|Beipiao Hongfa Food|Beipiao city|Beipiao city|production|35.00||equity method|
|Anshan Jiuguhe Food|Tai'an county|Tai'an county|production|41.55||equity method|
|Tai'an Jiuguhe Agriculture|Tai'an county|Tai'an county|production|41.55||equity method|
|Dalian Chengsan Animal Husbandry|Dalian city|Dalian city|production|20.00||equity method|

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report b. Financial figures of important joint ventures or associated companies
Unit: yuan Currency: RMB
||||||||||
|-|-|-|-|-|-|-|-|-|
||2018||||2017||||
||Beipiao Hongfa|Anshan Jiuguhe|Tai'an Jiuguhe|Dalian Chengsan|Beipiao Hongfa|Anshan Jiuguhe|Tai'an Jiuguhe|Dalian Chengsan|
||Food|Food|Agriculture|Animal Husbandry|Food|Food|Agriculture|Animal Husbandry|
|current assets|503,634,934.55|417,277,140.35|283,786,492.81|780,819,026.16|415,207,031.77|276,907,623.06|171,421,105.53|573,458,128.77|
|non-current assets|438,127,861.68|112,079,862.26|30,783,891.85|375,918,473.97|410,218,767.94|117,525,979.35|11,883,149.91|322,101,127.24|
|Total assets|941,762,796.23|529,357,002.61|314,570,384.66|1,156,737,500.13|825,425,799.71|394,433,602.41|183,304,255.44|895,559,256.01|
|current liabilities|174,740,051.73|274,529,095.54|157,969,045.26|353,316,814.51|250,891,563.15|219,833,080.23|126,830,248.13|399,036,298.21|
|non-current liability|47,100,000.00|12,578,401.85|812,500.00|16,328,633.74|51,600,000.00|9,784,091.71|1,091,000.00|16,365,790.09|
|Total liability|221,840,051.73|287,107,497.39|158,781,545.26|369,645,448.25|302,491,563.15|229,617,171.94|127,921,248.13|415,402,088.30|
|non-controlling|||||||||
|||||111,098,427.82||||70,613,815.00|
|interests|||||||||
|equity attributable to|||||||||
|shareholders of parent|719,922,744.50|242,249,505.22|155,788,839.40|675,993,624.06|522,934,236.56|164,816,430.47|55,383,007.31|409,543,352.71|
|company|||||||||
|share of net assets|||||||||
|calculated by|251,972,960.58|100,654,669.42|64,730,262.77|135,198,724.82|183,026,982.80|72,090,706.70|24,224,527.39|81,908,670.54|
|shareholdings|||||||||
|--goodwill||||116,569,111.61||||116,569,111.61|
|--unrealized profit of|||||||||
|||-1,157,373.92|||||||
|internal transaction|||||||||
|--other|||||73,620.47||||
|book value of equity|||||||||
|investment in joint|251,972,960.58|99,497,295.50|64,730,262.77|251,767,836.43|183,100,603.27|72,090,706.70|24,224,527.39|198,477,782.15|
|venture|||||||||
|operating revenue|2,587,369,620.08|1,856,147,804.84|1,212,886,039.39|2,550,658,470.89|2,395,113,260.68|1,292,609,019.67|750,292,809.29|711,554,035.64|
|net profit|231,638,507.94|69,303,074.75|97,455,832.09|307,020,416.94|115,577,011.85|61,098,554.92|17,245,357.86|34,128,563.28|
|other comprehensive|||||||||
|income|||||||||
|Total comprehensive|||||||||
||231,638,507.94|69,303,074.75|97,455,832.09|307,020,416.94|115,577,011.85|61,098,554.92|17,245,357.86|34,128,563.28|
|income|||||||||
|dividends received|||||||||
|from associated|12,127,500.00||||1,617,000.00|3,653,983.36|||
|companies|||||||||

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report c. Summarized financial information of unimportant joint ventures and associated companies
Unit: yuan Currency: RMB
||||
|-|-|-|
||2018|2017|
|Joint venture:|||
|Total book value of investment|11,669,191.54|17,819,793.63|
|Items calculated according to the|||
|shareholdings|||
|--net profit|4,007,001.33|6,281,680.08|
|--other comprehensive income|-2,412,673.32|3,312,229.76|
|--Total comprehensive income|1,594,328.01|9,593,909.84|
|Associated company:|||
|Total book value of investment|675,182,909.17|526,658,973.06|
|Items calculated according to the|||
|shareholdings|||
|--net profit|81,585,071.51|28,427,900.87|
|--other comprehensive income|-1,305,935.62||
|--Total comprehensive income|80,279,135.89|35,963,125.56|

 Note: Unphung Joint Venture Company, Nepal Wellhope Agri-tech Pvt. Ltd., NEXUS WELL-HOPE AGRITECH INTERNATIONAL LIMITED use cost method.
X. Risks Related to Financial Instruments
The Company's main financial instruments include equity investment, borrowing, accounts receivable and accounts payable. Detailed descriptions of various financial instruments can be found in the relevant items in Note V. The Company manages and monitors these risk exposures to ensure to control the risks above in the limited scope.
The Company's objective in risk management is to strike a balance between risks and return, minimize the negative impact of risk on the Company's operating results, and maximize the benefits of shareholders and other equity investors. Based on this risk management objective, the basic strategy of theCompany’s risk management is to identify and evaluate various risks of the Company, set up appropriate limit of risk tolerance, conduct risk management, and supervise various risks in a timely and reliable way to control risks within the limited range.
1. Market risks
A. Interest rate risk
The Company's risk of cash flow changes in financial instruments due to the changes in
interest rates mainly related to floating-rate bank loans. The Company's policy is to
maintain the floating-rate of these loans.
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report B. Foreign exchange risks
Foreign exchange risk refers to the risk of loss caused by exchange rate movement. The Company's main business activities are settled in RMB, with a small amount of import and export business, changes in exchange rate have little impact on the Company.
2. Credit risk
The maximum credit risk exposure that may cause financial losses to the Company mainly comes from financial assets loss caused by the other party of contract failed to perform duty.
In order to reduce credit risk, the Company constantly strengthens the risk management awareness of accounts receivable, and only deals with confirmed and reputable third parties. In accordance with the Company's policies, it is necessary to conduct credit audit and approval, carefully confirm the credit limit, implement other monitoring procedures and take necessary measures to recover overdue claims.
The Company reviews the recoverability of receivables on the balance sheet date to ensure adequate provision for bad debts against non-recoverable amounts. Therefore, the management of the Company believes that the credit risk taken by the Company has been greatly decreased.
3. Liquidity risk
In regard of managing liquidity risk, the Company monitors cash and cash equivalents, to satisfy its operation demand, and to reduce the influence caused by cash flow fluctuation. The management of the Company supervises the usage circumstances of bank loans and ensures the Company complying with the agreement of loan.
XI. Disclosure of fair value
1. Fair value of assets and liabilities measured at fair value in the end of period
Unit: yuan Currency: RMB
||||||
|-|-|-|-|-|
||Closing fair value||||
||The first level of|The second level of|The third level of||
|Item|||||
||fair value|fair value|fair value|Total|
||measurement|measurement|measurement||
|continuous fair value|||||
|measurement|||||
|1. financial assets measured|||||
|at fair value and changes|||||
||2,042,527.60|||2,042,527.60|
|recorded into current gains|||||
|or losses|||||

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report
||||
|-|-|-|
|A. trading financial assets|2,042,527.60|2,042,527.60|
|a. debt instrument|||
|investment|||
|b. equity instrument|||
|investment|||
|c. derivative financial assets|2,042,527.60|2,042,527.60|
|Total assets continuously|||
||2,042,527.60|2,042,527.60|
|measured at fair value|||

2. The determination basis of market price of the item measured at fair value of the sustainable and non-sustainable first level fair value measurement
The derivative financial assets of the Company are futures, which are measured by the unadjusted quoted price of the same assets or liabilities in the active market on the balance sheet date
XII. Related party and transaction
1. Snapshot of parent company
Jin Weidong is the actual controller of the Company.
2. Snapshot of joint ventures and associated companies
Please check important joint ventures and associated companies.
Circumstance of the joint ventures and associated companies, which had related transactions with the Company in the period.
|||
|-|-|
|Company|Relationship|
|Unphung Joint Venture Company|joint venture|
|Nepal Wellhope Agri-tech Pvt. Ltd.|joint venture|
|Anshan Fengsheng Food|associated company|
|Anshan Jiuguhe Food|associated company|
|Beipiao Hongfa Food|associated company|
|Dalian Chengsan Animal Husbandry|associated company|
|Dalian Wellhope Fish Meal|associated company|
|Daqing Supply and Marketing Wellhope Agri-Tech|associated company|
|Danhong Wellhope Chengsan Agri-Tech|associated company|
|Dunhua Wellhope Agri-Tech|associated company|
|Gongzhuling Corn Purchasing and Storing|associated company|
|Guangzhou Pulihe Trading|associated company|
|Guangzhou Yikun Trading|associated company|
|Haicheng New Hongzunda Agri-Tech|associated company|
|Huluodao Jiuguhe Food|associated company|
|Huluodao Jiuguhe Feed|associated company|
|Jinzhou Jiufeng Food|associated company|
|Lankao Skyland Feed|associated company|
|Lankao Skyland Duck|associated company|
|Linghai Jiuguhe Feed|associated company|
|Qingdao Shenfeng Agri-Tech|associated company|
|Shenyang Wenjie Bio-Tech|associated company|

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report
|||
|-|-|
|Schipper(Beijing)|associated company|
|Suizhong Rehen Fishery|associated company|
|Tai'an Fengjiu Agri-Tech|associated company|
|Tai'an Jiufeng Agri-Tech|associated company|
|Tai'an Jiuguhe Agriculture|associated company|
|Tailai Jiahe Agriculture and Animal Husbandry|associated company|
|Zhangjiakou Jiahe Agriculture and Animal Husbandry|associated company|
|Beijing Dahong Hengfeng Agri-Tech|associated company|

3. Snapshot of other related party
|||
|-|-|
|Related party|Relationship|
|Ding Yunfeng|The Company's shareholder, board director, President, holds 9.67% shares|
|DE HEUS MAURITIUS|The Company's shareholder, holds 9.63% shares|
|Shao Caimei|The Company's shareholder, board director, CTO, holds 6.56% shares|
|Wang Fengjiu|The Company's shareholder, Vice President, holds 6.03% shares.|
|Shenyang Heli Investment|The Company's shareholder, holds 5.82% shares.|
||The Company's shareholder, Chairman of the Supervisory Board, holds|
|Wang Zhongtao||
||5.67% shares.|

4. Snapshot of related party transaction
a. Purchasing and selling products, providing and accepting labor service
Unit: yuan Currency: RMB
|||||
|-|-|-|-|
|Relate party|Transaction|2018|2017|
|Suizhong Rehen Fishery|feed raw materials|4,063,349.71|9,658,615.20|
|Dalian Wellhope Fish Meal|feed raw materials|89,540,418.85|70,262,704.90|
|Anshan Jiuguhe Food|broiler product|10,607,617.64|2,725,178.11|
|Dalian Chengsan Animal Husbandry|delivery broiler|165,113,902.72||
|Beipiao Hongfa Food|broiler product||1,645,220.06|
|Huludao Jiuguhe Food|broiler product|5,435,308.49|9,643,224.14|
|Schipper(Beijing)|other|428,182.58||
|Guangzhou Yikun Trade|feed raw materials|6,188,772.00|11,300,153.00|
|Guangzhou Pulihe Trade|feed raw materials||1,638,896.86|
|Tai'an Fengjiu Agri-Tech|day old chick|3,350,549.01|518,424.00|
|Zhangjiakou Jiahe Agriculture and||||
||piglet|5,928,183.50|8,021,349.55|
|Animal Husbandry||||
|Tai’an Jiuguhe Agriculture|feed|12,429,921.60|2,797,279.00|
|Haicheng New Hongzunda Agri-Tech|feed|1,120,316.47|2,222,038.16|
|Shenyang Wenjie Bio-Tech|other|6,280,763.74|487,291.97|
|Jinzhou Jiufeng Food|broiler product||105,663.72|
|Daqing Supply and Marketing||||
||feed raw materials|8,880,812.73|3,960,123.42|
|Wellhope Agri-Tech||||
|Linghai Jiuguhe Feed|other|638,607.11||
|Gongzhuling Corn Purchasing and||||
||feed raw materials|970,780.18||
|Storing||||
|Total||320,977,486.33|124,986,162.09|

 Selling products or providing labor service
Unit: yuan Currency: RMB
|||||
|-|-|-|-|
|Relate party|Transaction|2018|2017|
|Nepal Wellhope Agri-tech Pvt. Ltd.|feed|199,620.44|140,200.00|
|Linghai Jiuguhe Feed|feed raw materials|37,878,202.08|18,279,127.86|
|Tai’an Jiuguhe Agriculture|feed raw materials|68,389,964.35|65,150,685.72|

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report
|||||
|-|-|-|-|
|Anshan Jiuguhe Food|broiler|158,951,429.95|181,408,642.40|
|Qingdao Shenfeng Agri-Tech|feed raw materials|18,359,677.35|29,735,587.09|
|Beipiao Hongfa Food|feed raw materials|7,260,089.78|15,239,343.97|
|Huludao Jiuguhe Food|feed|13,736,255.76|18,128,055.18|
|Haicheng New Hongzunda Agri-Tech|feed raw materials|33,009,620.76|26,115,831.31|
|Dandong Wellhope Chengsan||||
||feed raw materials|10,820,771.04|3,105,240.54|
|Agri-Tech||||
|Tai'an Jiufeng Agri-Tech|feed raw materials|1,924,877.65|739,912.58|
|Huludao Jiuguhe Feed|feed raw materials|25,481,359.12|21,502,965.81|
|Suizhong Rehen Fishery|feed|111,724.14|69,230.77|
|Schipper(Beijing)|other product|887,414.00|278,381.19|
|Zhangjiakou Jiahe Agriculture and||||
||feed|23,059,889.84|22,201,793.92|
|Animal Husbandry||||
|Dalian Wellhope Fish Meal|feed raw materials|537,672.40||
|Guangzhou Yikun Trade|feed raw materials|145,040,015.85|111,529,209.55|
|Guangzhou Pulihe Trade|feed raw materials||34,029,936.44|
|Jinzhou Jiufeng Food|broiler|5,211,589.00|154,832.00|
|Anshan Fengsheng Food|broiler|99,451,627.68|1,389,732.21|
|Dalian Chengsan Animal Husbandry|feed raw materials|10,337,579.61|10,559,059.71|
|Tailai Jiahe Agriculture and Animal||||
||feed|41,863,178.67|4,449,716.24|
|Husbandry||||
|Daqing Supply and Marketing||||
||feed raw materials|29,511,060.56|4,144,887.00|
|Wellhope Agri-Tech||||
|Lankao Skyland Duck|feed raw materials|129,207.19||
|Lankao Skyland Feed|feed raw materials|2,196,704.00||
|Dunhua Wellhope Agri-Tech|feed raw materials|5,062,091.02||
|Total||739,411,622.24|568,352,371.49|

 b. Related party guarantee
The Company acted as guarantor
Unit: yuan Currency: RMB
||||||
|-|-|-|-|-|
|||||Whether the|
||Amount of||Guarantee|guarantee|
|Guaranteed party||Guarantee date|||
||guarantee||maturity date|has been|
|||||fulfilled|
|Lingyuan Wellhope Agri-Tech|20,000,000.00|May 29th, 2018|May 24th, 2019|no|
|Liaoning Expert Trading|80,460,168.49|||no|

 c. Borrowings to related party
Unit: yuan Currency: RMB
||||||
|-|-|-|-|-|
|Related||Starting|Duedate||
||Borrowings|||Note|
|party||date|||
|||||Lankao Skyland Duck was formerly a wholly-owned|
|||||subsidiary of the Company, the Company provided|
|||||operating borrowings for it, thus forming receivable|
|Lankao||||other.|
|Skyland|5,000,000.00|||In December 2017, other shareholders of Lankao|
|Duck||||Skyland Duck increased investment in this company,|
|||||making the shareholdings of the Company being|
|||||below 50%, and Lankao Skyland Duck became an|
|||||associated company of the Company.|
|Lankao||||Lankao Skyland Feed was formerly a wholly-owned|
|Skyland|38,067,493.00|||subsidiary of the Company, the Company provided|
|Feed||||operating borrowings for it, thus forming receivable|

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report
||
|-|
|other.|
|In December 2017, other shareholders of Lankao|
|Skyland Feed increased investment in this company,|
|making the shareholdings of the Company being|
|below 50%, and Lankao Skyland Feed became an|
|associated company of the Company.|

d. Remuneration for key management
Unit: 10,000yuan Currency: RMB
||||
|-|-|-|
|Item|2018|2017|
|remuneration for key management|709.09|404.88|

 5. Related party receivables and payables
a. Receivables
Unit: yuan Currency: RMB
|||||||
|-|-|-|-|-|-|
|||Closing balance||Opening balance||
|Item|Related party||Bad debt||Bad debt|
|||Book balance||Book balance||
||||provision||provision|
|accounts|Dandong Wellhope Chengsan|||||
|||285,000.00|14,250.00|647,440.00|32,372.00|
|receivable|Agri-Tech|||||
|accounts||||||
||Anshan Jiuguhe Food|29,448,163.62|1,472,408.18|13,548,841.72|677,442.09|
|receivable||||||
|accounts||||||
||Tai’an Jiuguhe Agriculture|||4,647,449.75|232,372.49|
|receivable||||||
|accounts|Zhangjiakou Jiahe Agriculture|||||
|||4,185,015.26|209,250.76|3,871,269.00|193,563.45|
|receivable|and Animal Husbandry|||||
|accounts||||||
||Guangzhou Yikun Trade|||19,140,043.17|957,002.16|
|receivable||||||
|accounts||||||
||Qingdao Shenfeng Agri-Tech|||28,455.00|1,422.75|
|receivable||||||
|accounts||||||
||Linghai Jiuguhe Feed|||7,195.00|359.75|
|receivable||||||
|accounts||||||
||Huluodao Jiuguhe Feed|||200.00|10.00|
|receivable||||||
|accounts||||||
||Anshan Fengsheng Food|6,876,402.60|343,820.13|1,389,732.21|69,486.61|
|receivable||||||
|accounts|Dalian Chengsan Animal|||||
|||1,062,573.20|53,128.66|1,373,479.92|93,394.99|
|receivable|Husbandry|||||
|accounts|Tailai Jiahe Agriculture and|||||
|||69,020.56|3,451.03|3,769,536.24|188,476.81|
|receivable|Animal Husbandry|||||
|accounts||||||
||Dunhua Wellhope Agri-Tech|30,351.21|1,517.56|||
|receivable||||||
|accounts||||||
||Guangzhou Yikun Trade|3,492,893.69|174,644.68|||
|receivable||||||
|accounts|Daqing Supply and Marketing|||||
|||711,060.56|35,553.03|||
|receivable|Wellhope Agri-Tech|||||
|other||||||
||Lankao Skyland Duck|5,000,000.00|500,000.00|5,000,000.00|250,000.00|
|receivable||||||
|other||||||
||Lankao Skyland Feed|38,067,493.00|3,806,749.30|39,330,793.00|1,966,539.65|
|receivable||||||

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report
|||||
|-|-|-|-|
|prepayment|Dalian Wellhope Fish Meal|205,850.00|834,156.00|
|prepayment|Huluodao Jiuguhe Food||2,428,674.54|
|prepayment|Suizhong Rehen Fishery|7,200,000.20|2,709,300.20|
||Gongzhuling Corn Purchasing|||
|prepayment||1,825,000.00||
||and Storing|||

b. Payables
Unit: yuan Currency: RMB
|||||
|-|-|-|-|
|||Closing book|Opening book|
|Item|Related party|||
|||balance|balance|
|accounts payable|Dalian Wellhope Fish Meal|3,543,366.00|2,397,273.80|
|accounts payable|Anshan Jiuguhe Food|8,783,890.00||
|accounts payable|Tai’an Jiuguhe Agriculture|6,143,639.40||
|accounts payable|Shenyang Wenjie Bio-Tech|1,312,595.06||
|accounts payable|Gongzhuling Corn Purchasing and Storing|313,608.00||
|accounts payable|Suizhong Rehen Fishery|539,819.05||
|accounts payable|Dalian Chengsan Animal Husbandry|10,604,874.78||
|advance receipt|Qingdao Shenfeng Agri-Tech||147,000.00|
|advance receipt|Linghai Jiuguhe Feed||324,450.00|
|advance receipt|Huludao Jiuguhe Feed|53,613.00|463,500.00|
|advance receipt|Nepal Wellhope Agri-tech Pvt. Ltd.|38,700.00|38,700.00|
|advance receipt|Tai’an Jiuguhe Agriculture|1,502,000.00|1,240,565.00|
|advance receipt|Beijing Dahong Hengfeng Agri-Tech||810.00|
|advance receipt|Haicheng New Hongzunda Agri-Tech||463,500.00|
|advance receipt|Tai'an Jiufeng Agri-Tech|49,892.50||
|other payables|Nepal Wellhope Agri-tech Pvt. Ltd.|2,999.41|2,999.41|
|other payables|Unphung Joint Venture Company|71,682.43|71,682.43|
|other payables|Anshan Jiuguhe Food||206,191.05|

 XIII. Share-based payment
1. Circumstance of share-based payment
Unit: share Currency: RMB
|||
|-|-|
|Total amount of equity instrument granted by the Company during current period|14,575,000|
|Total amount of exercised equity instruments||

Note:
In accordance with the approved resolutions--Liaoning Wellhope 2018 Restricted Stock Incentive Plan and Its Abstract (draft), Adjusting Related Items regarding to 2018 Restricted Stock Incentive Plan, the Company issued 14.575 million restricted shares to 372 key managers at the price of 4.85 yuan per share in 2018, increased RMB 14.575 million yuan of the registered capital.
This incentive plan should be valid from the date of granting restricted shares to the date
when all restricted shares could be removed trading restrictions or repurchased and
written off by the Company, with a maximum period of no more than 48 months. The
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report restricted shares should not be transferred, used for guarantee or repaying debts before removing the trading restrictions, and the shares and dividends obtained from the restricted shares due to the Company conducting capital reserve converted to share capital, distributing share dividends, etc., should be simultaneously locked according to the incentive plan. After the expiration of restricted period, the Company shall handle related matters, such as removing trading restrictions, whilst the restricted shares held by the incentive objects who could not meet the conditions of removing restriction, should be repurchased and written off by the Company, relevant equity could not be deferred to the next period.
Arrangement of restricted shares:
||||
|-|-|-|
|Arrangement of||Percentage of|
|removing trading|Time of removing trading restrictions|unrestricted|
|restrictions||shares|
||The first trading day after 12 months from the date of||
|first unrestricted|finishing the registration of granted shares to the last||
|||30.00%|
|period|trading day within 24 months from the date of finishing||
||the registration of granted shares||
||The first trading day after 24 months from the date of||
|second unrestricted|finishing the registration of granted shares to the last||
|||30.00%|
|period|trading day within 36 months from the date of finishing||
||the registration of granted shares||
||The first trading day after 36 months from the date of||
|third unrestricted|finishing the registration of granted shares to the last||
|||40.00%|
|period|trading day within 48 months from the date of finishing||
||the registration of granted shares||

2. Equity-settled share-based payment
Unit: yuan Currency: RMB
|||
|-|-|
|confirmation method of fair value of equity instrument||
||Closing price at the grant date|
|at the grant date||
||It is expected that the exercise conditions|
|basis for determining the number of exercised equity||
||can be met and the granted objects can|
|instrument||
||exercise the equity|
|accumulated amount of equity-settled share-based||
||1,997,989.57|
|payment which recorded into capital reserve||
|Total expense recognized by equity-settled share-based||
||1,997,989.57|
|payment||

XIV. Commitment and contingency
1. Important commitment
Important commitment to external, its nature and amount existed on the balance sheet
date
As at December 31st, 2018, the operating lease contracts that the Company had signed or
Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report were ready to perform, were mainly the lease of operating site and buildings, as follows:
|||
|-|-|
|Period|Lease payable(10,000 yuan)|
|the first year after the balance sheet date|2,176.90|
|the second year after the balance sheet date|2,075.66|
|the third year after the balance sheet date|2,102.97|
|after the third year after the balance sheet date|13,778.18|

 2. Contingency
The Company has no material contingencies that need to be disclosed.
XV. Events after the balance sheet date
1. Non-adjusting event
Unit: yuan Currency: RMB
||||
|-|-|-|
|||Impact on|
|||financial|
|Event|Content|position and|
|||operating|
|||results|
||On April 18th, 2019, in accordance with the approval, the Company||
||non-public issued 76,552,927 RMB common shares at the price of||
|stock and|||
||10.16 yuan per share, totally raised funds 768,926,185.57 yuan after||
|bond||-|
|issuing|||
||deducting underwriting fees, which increased 76,552,927 yuan share||
||capital and 692,373,258.57 yuan capital reserve.||

2. Circumstance of profit distribution
Unit: yuan Currency: RMB
|||
|-|-|
|profit or dividend planned to be distributed|166,014,791.28|
|declared profit or dividend after deliberation and approval|166,014,791.28|

 XVI. Notes to major items of the parent company's financial statements
1. Notes receivable and accounts receivable
Unit: yuan Currency: RMB
||||
|-|-|-|
|Item|Closing balance|Opening balance|
|notes receivable|||
|accounts receivable|16,033,809.05|22,133,097.07|
|Total|16,033,809.05|22,133,097.07|

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report Accounts receivable
a. Category of accounts receivable
Unit: yuan Currency: RMB
||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|
||Closing balance|||||Opening balance|||||
|Category|Book balance||Bad debt provision|||Book balance||Bad debt provision|||
||||||Book value|||||Book value|
||Amount|Percentage%|Amount|Withdrawing %||Amount|Percentage%|Amount|Withdrawing %||
|the account receivable with amount|||||||||||
|that is individually significant,|||||||||||
|withdrawing bad debt provision|||||||||||
|individually|||||||||||
|withdrawing bad debt provision on the|||||||||||
||45,176,203.73|100.00|29,142,394.68|64.51|16,033,809.05|39,141,624.03|100.00|17,008,526.96|43.45|22,133,097.07|
|basis of credit risk grouping|||||||||||
|the account receivable with amount|||||||||||
|that is not individually significant, but|||||||||||
|withdrawing bad debt provision|||||||||||
|individually|||||||||||
|Total|45,176,203.73|100.00|29,142,394.68|64.51|16,033,809.05|39,141,624.03|100.00|17,008,526.96|43.45|22,133,097.07|

 Withdrawing bad debt provision according to the aging analysis method
Unit: yuan Currency: RMB
|||||
|-|-|-|-|
||Closing balance|||
|Aging||||
||Accounts receivable|Bad debt provision|% of withdrawing|
|subtotal of within 1 year|11,945,705.84|597,285.29|5.00|
|1 -2 year|3,408,692.00|340,869.20|10.00|
|2-3 years|2,291,182.00|916,472.80|40.00|
|over 3 years|27,287,767.39|27,287,767.39|100.00|
|Total|44,933,347.23|29,142,394.68|64.86|

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report b. Bad debt provision of the current period
During the current period, withdrawing bad debt provision of RMB 12,133,867.72 yuan, taking back or recovering bad debts provisions of 0 yuan.
c. Top 5 accounts receivable
|||||||
|-|-|-|-|-|-|
|||||percentage of||
|||Amount in|||Bad debt|
|Debtor|Relationship||Year of arrears|total accounts||
|||arrears|||provision|
|||||receivable %||
||||within 1 year: 512,200.00yuan;|||
||||1-2 year: 354,260.00yuan;|||
|1|non-related party|9,125,139.00||20.20|7,101,740.20|
||||2-3 years: 2,029,958.00 yuan;|||
||||over 3 years: 6,228,721.00 yuan|||
|2|non-related party|7,351,644.00|over 3 years|16.27|7,351,644.00|
|3|non-related party|7,053,335.00|over 3 years|15.61|7,053,335.00|
||||within 1 year: 2,476,139.25 yuan;|||
|4|non-related party|3,176,909.25||7.03|193,883.96|
||||1-2 year:700,770.00 yuan|||
|5|non-related party|2,997,424.50|within 1 year|6.63|149,871.23|
|Total||29,704,451.75||65.74|21,850,474.39|

 2. Other receivable
Unit: yuan Currency: RMB
||||
|-|-|-|
|Item|Closing balance|Opening balance|
|interest receivable|||
|dividends receivable|15,225,270.58|8,214,127.94|
|other receivable|854,445,959.43|1,106,025,579.73|
|Total|869,671,230.01|1,114,239,707.67|

 a. Dividends receivable
Unit: yuan Currency: RMB
|||||
|-|-|-|-|
|Item||Closing balance|Opening balance|
|dividends from long-term investmen|t|||
|||9,743,487.24|1,500,000.00|
|under cost method||||
|dividends from long-term investmen|t|||
|||5,481,783.34|6,714,127.94|
|under equity method||||
|Total||15,225,270.58|8,214,127.94|

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report Other receivable
a. Category of other receivable
Unit: yuan Currency: RMB
||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|
||Closing balance|||||Opening balance|||||
||Book balance||Bad debt provision|||Book balance||Bad debt provision|||
|Category|||||||||||
|||||% of|Book value||||% of|Book value|
||Amount|Percentage %|Amount|||Amount|Percentage %|Amount|||
|||||withdrawing|||||withdrawing||
|other receivable with amount that is|||||||||||
|individually significant, withdrawing bad|||||||||||
|debt provision individually|||||||||||
|withdrawing bad debt provision on the|||||||||||
||861,813,069.64|100.00|7,367,110.21|0.85|854,445,959.43|1,109,824,476.25|100.00|3,798,896.52|0.34|1,106,025,579.73|
|basis of credit risk grouping|||||||||||
|other receivable with amount that is not|||||||||||
|individually significant, but withdrawing|||||||||||
|bad debt provision individually|||||||||||
|Total|861,813,069.64|100.00|7,367,110.21|0.85|854,445,959.43|1,109,824,476.25|100.00|3,798,896.52|0.34|1,106,025,579.73|

 Withdrawing bad debt provision according to the aging analysis method
Unit: yuan Currency: RMB
|||||
|-|-|-|-|
||Closing balance|||
|Aging||||
||Other receivable|Bad debt provision|% of withdrawing|
|subtotal of within 1 year|932,764.96|46,638.25|5.00|
|1 -2 year|71,332,173.00|7,133,217.30|10.00|
|2-3 years|120,000.00|48,000.00|40.00|
|over 3 years|139,254.66|139,254.66|100.00|
|Total|72,524,192.62|7,367,110.21|10.16|

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report b. Categorized by nature
Unit: yuan Currency: RMB
||||
|-|-|-|
|Nature|Closing book balance|Opening book balance|
|operating receivable|784,899.62|668,768.63|
|cash pledge and guarantee deposit|200,000.00|200,000.00|
|related party- fund transfer|832,356,370.02|1,080,483,907.62|
|disposal of investment receivables|28,471,800.00|28,471,800.00|
|Total|861,813,069.64|1,109,824,476.25|

 c. Bad debt provision of the current period
During the current period, withdrawing bad debt provision of RMB 12,133,794.64 yuan, taking back or recovering bad debts provisions of 0 yuan.
d. The actual write-off of receivable other in current period
Unit: yuan Currency: RMB
|||
|-|-|
|Item|Write-off|
|actual write-off of receivable other|8,565,580.95|

 Of which, write-off important other receivable
Unit: yuan Currency: RMB
|||||||||
|-|-|-|-|-|-|-|-|
||||||||Whether the|
|||||||Procedure|payment is|
|||||Amount of||||
|Company|Type||||Reason|of|generated by|
|||||write-Off||||
|||||||write-off|related party|
||||||||transactions|
|Jingzhou Wellhope||account|||this subsidiary||yes(wholly-owned|
|||||8,144,060.95||||
|Feed||curren|t||was cancelled||subsidiary)|
|Jiangsu Oriental|||||uncollectible|||
|||account||||||
|Pearl Grain and Oil||||421,520.00|long-term||no|
|||curren|t|||||
|industry|||||arrears|||
|Total|/|||8,565,580.95|/|/|/|

e. Top 5 other receivables
Unit: yuan Currency: RMB
||||||||
|-|-|-|-|-|-|-|
||||||% of closing|Closing balance of|
|Company|Type||Closing balance|Aging|balance of|bad debt|
||||||receivables other|provision|
|1||account current|95,813,478.29|within 1 year|11.12||
|2||account current|90,230,094.40|within 1 year|10.47||
|3||account current|77,354,291.58|within 1 year|8.98||
|4||account current|66,328,454.90|within 1 year|7.70||
|5||account current|52,035,791.38|within 1 year|6.04||
|Total|/||381,762,110.55|/|44.31||

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report 3. Long-term equity investment
Unit: yuan Currency: RMB
||||||||
|-|-|-|-|-|-|-|
||Closing balance|||Opening balance|||
|Item||Impairmentprovision|||Impairment||
||Book balance||Book value|Book balance||Book value|
||||||provision||
|investments in|||||||
||1,956,908,795.47||1,956,908,795.47|1,405,216,852.54||1,405,216,852.54|
|subsidiaries|||||||
|investments in|||||||
|associates and|1,346,774,292.49|17,900,000.00|1,328,874,292.49|1,008,776,555.79|11,749,397.91|997,027,157.88|
|joint ventures (cid:13)|||||||
|Total|3,303,683,087.96|17,900,000.00|3,285,783,087.96|2,413,993,408.33|11,749,397.91|2,402,244,010.42|

 a. Investments in subsidiaries
Unit: yuan Currency: RMB
||||||
|-|-|-|-|-|
|||Increase in|Decrease in||
|Company|Opening balance|||Closing balance|
|||current period|current period||
|Haicheng Wellhope|||||
||8,000,000.00|4,526,045.83||12,526,045.83|
|Feed|||||
|Tai'an Wellhope Feed|21,000,000.00|12,004,797.91||33,004,797.91|
|Shenyang Wellhope|||||
||5,500,000.00|54,147.92||5,554,147.92|
|Ruminant Feed|||||
|Liaoning Wellhope|||||
|Agriculture and Animal|47,115,974.95|||47,115,974.95|
|Husbandry|||||
|Shenyang Nongda|||||
||44,128,263.98|103,265.19||44,231,529.17|
|Wellhope Feed|||||
|Xingcheng Wellhope|||||
||82,392,638.39|131,351.20||82,523,989.59|
|Feed|||||
|Dalian Wellhope Feed|42,006,984.38|116,319.78||42,123,304.16|
|Jinzhou Wellhope Feed|10,000,000.00|7,021,247.92||17,021,247.92|
|Changtu Wellhope Feed|3,000,000.00|||3,000,000.00|
|Shenyang Wellhope|||||
||20,000,000.00|13,003,427.08||33,003,427.08|
|Extruded Feed|||||
|Shenyang Wellhope|||||
||15,000,000.00|23,304.17||15,023,304.17|
|Aquatic Feed|||||
|Shenyang Wellhope|||||
||82,064,201.70|122,160.80||82,186,362.50|
|Agri-Tech|||||
|Shenyang Wellhope|||||
|||5,483.33||5,483.33|
|Poultry|||||
|Gongzhuling Wellhope|||||
||35,000,000.00|33,585.42||35,033,585.42|
|Agri-Tech|||||
|Jilin Wellhope Agri-Tech|10,925,000.00|5,127,135.42||16,052,135.42|
|Gongzhuling Wellhope|||||
||5,000,000.00|6,854.17||5,006,854.17|
|Ruminant Feed|||||
|Sanjiang Wellhope|||||
||4,188,747.06|17,002,056.25||21,190,803.31|
|Agri-Tech|||||
|Mudanjiang Wellhope|||||
||4,252,381.29|19,002,741.67||23,255,122.96|
|Agri-Tech|||||
|Heilongjiang Wellhope|||||
||50,000,000.00|70,073,339.58||120,073,339.58|
|Agri-Tech|||||
|Beijing Helai Sci-Tech|25,000,000.00|40,439.59||25,040,439.59|
|Beijing Wellhope|5,000,000.00|||5,000,000.00|

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report
||||||
|-|-|-|-|-|
|Agri-Tech|||||
|Huai'an Wellhope Feed|30,000,000.00|21,247.92||30,021,247.92|
|Gansu Wellhope|||||
||40,000,000.00|7,539.58||40,007,539.58|
|Agri-Tech|||||
|Henan Wellhope|||||
||14,000,000.00|38,649,754.16||52,649,754.16|
|Agri-Tech|||||
|Lankao Wellhope|||||
||10,000,000.00|33,006,854.17||43,006,854.17|
|Agri-Tech|||||
|Wuwei Wellhope Feed|300,000.00||300,000.00||
|Yangling Wellhope|||||
||5,000,000.00||5,000,000.00||
|Agri-Tech|||||
|Jingzhou Wellhope Feed|3,000,000.00||3,000,000.00||
|Shenyang Huaweida|||||
|||6,168.75||6,168.75|
|Animal Health Product|||||
|Jilin Hefeng Pig|||||
||15,000,000.00|||15,000,000.00|
|Breeding|||||
|Shenyang Expert|||||
||15,000,000.00|15,000,000.00||30,000,000.00|
|Trading|||||
|Shenyang Jiahe|||||
|Tianfeng Commerce|10,000,000.00|12,337.50||10,012,337.50|
|and Trade|||||
|Liaoning Expert Trading|20,000,000.00|30,057,575.00||50,057,575.00|
|Shenyang Pufeng|||||
||5,499,788.72|10,000,000.00||15,499,788.72|
|Commerce and Trade|||||
|Liaoning Wellhope|||||
||10,000,000.00|20,022,618.75||30,022,618.75|
|Purchasing & Trading|||||
|Hainan Wellhope|||||
||8,000,000.00|17,000,000.00||25,000,000.00|
|Agri-Tech|||||
|Liaoning Skyland|||||
||10,800,000.00|17,759,595.83||28,559,595.83|
|Livestock Equipment|||||
|Shenyang Fengmei|||||
||20,123,973.51|30,158.34||20,154,131.85|
|Bio-Tech|||||
|Xi'an Micro Monkey|||||
||5,000,000.00||5,000,000.00||
|E-commerce|||||
|Panjin Wellhope Food|50,000,000.00||50,000,000.00||
|Pingyuan Wellhope|||||
||80,000,000.00|67,273,304.17||147,273,304.17|
|Food|||||
|Pingyuan Wellhope|||||
|||21,933.33||21,933.33|
|Agri-Tech|||||
|Kaifeng Meat Food|90,000,000.00|10,000,000.00||100,000,000.00|
|Wellhope|||||
||3,000,000.00|2,741.67||3,002,741.67|
|Food(Shenyang)|||||
|Liaoning Godaji|||||
||9,000,000.00|1,009,595.83||10,009,595.83|
|E-commerce|||||
|Lingyuan Wellhope|||||
||4,250,000.00|12,421,247.91||16,671,247.91|
|Agri-Tech|||||
|Haicheng Xinzhongxin|||||
||5,892,898.56|8,910.42||5,901,808.98|
|Wellhope Feed|||||
|Fuyu Wellhope|||||
||27,160,000.00|19,403,427.08||46,563,427.08|
|Agri-Tech|||||
|Changchun Wellhope|||||
||10,000,000.00|74,313,585.41||84,313,585.41|
|Feed|||||

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report
||||||
|-|-|-|-|-|
|Daqing Wellhope Bayi|||||
||13,520,000.00|210,966.67||13,730,966.67|
|Nongda Animal Sci-Tech|||||
|Beijing Sanyuan|||||
||7,000,000.00|155,589.58||7,155,589.58|
|Wellhope Agri-Tech|||||
|Tangshan Wellhope|||||
||40,000,000.00|18,506.25||40,018,506.25|
|Feed|||||
|Cangzhou Helai Sci-Tech|3,500,000.00|10,281.25||3,510,281.25|
|Shanxi Wellhope|||||
||40,000,000.00|3,427.08||40,003,427.08|
|Agri-Tech|||||
|Tangshan Hejia|||||
|Agriculture and Animal|3,250,000.00|3,260,966.67||6,510,966.67|
|Husbandry|||||
|Tangshan Wellhope|||||
||21,000,000.00|2,741.67||21,002,741.67|
|Sci-Tech|||||
|Shanghai Wellhope|||||
||1,950,000.00|30,158.34||1,980,158.34|
|Feed|||||
|Pinghu Wellhope|||||
||850,000.00|14,393.75||864,393.75|
|Agri-Tech|||||
|Anhui Wellhope|||||
||7,000,000.00|25,208,225.00||32,208,225.00|
|Agri-Tech|||||
|Xi'an Wellhope Feed|4,250,000.00|58,945.83||4,308,945.83|
|Zhengzhou Wellhope|||||
|||3,918,966.67||3,918,966.67|
|Agri-Tech|||||
|Zhumadian Wellhope|||||
|||9,006,854.17||9,006,854.17|
|Agri-Tech|||||
|Nanyang Wellhope Feed||11,039,039.89||11,039,039.89|
|Jiaozuo Wellhope Feed||49,154,797.92||49,154,797.92|
|Jingzhou Wellhope|||||
||23,660,000.00|21,247.92|2,528,571.00|21,152,676.92|
|Agri-Sci-Tech|||||
|Qingdao Wellhope|||||
||28,500,000.00|31,529.16||28,531,529.16|
|Agri-Tech|||||
|Jining Wellhope|||||
||19,600,000.00|9,595.83||19,609,595.83|
|Agri-Tech|||||
|Yunnan Wellhope Feed|2,910,000.00|1,892,741.67||4,802,741.67|
|Fuyu Wellhope|||||
|Taolaizhao Poultry|5,626,000.00|2,741.67||5,628,741.67|
|Raising|||||
|Harbin Weierhao|||||
||2,010,000.00|1,564,112.50||3,574,112.50|
|Trading|||||
|Changchun Hengfeng|||||
|Agriculture and Animal||19,191.66||19,191.66|
|Husbandry Equipment|||||
|Beijing Brilliant Dragon|||||
|||17,820.83||17,820.83|
|Commerce and Trade|||||
|Shanghai Hehong|||||
||960,000.00|18,506.25||978,506.25|
|Trading|||||
|Jinan Xinweita Trading||13,708.33||13,708.33|
|Zhangwu Wellhope|||||
||1,800,000.00|||1,800,000.00|
|Agriculture|||||
|Tongliao Wellhope|||||
||10,200,000.00|||10,200,000.00|
|Tianyi Prataculture|||||
|Chongqing Dahong||9,595.83||9,595.83|

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report
||||||
|-|-|-|-|-|
|Agriculture and Animal|||||
|Husbandry Equipment|||||
|Guangzhou Xiangshun|||||
||2,950,000.00|4,112.50||2,954,112.50|
|Equipment|||||
|Dalian Huakang Xinxin|||||
||10,400,000.00|104,868.75||10,504,868.75|
|Food|||||
|Dalian Heyuan|||||
||51,000,000.00|56,889.58||51,056,889.58|
|Agri-Tech|||||
|Dalian Zhongjia Food||15,764.58||15,764.58|
|Shenyang Huakang|||||
||1,800,000.00|27,416.67|100,000.00|1,727,416.67|
|Broiler|||||
|Shenyang Huakang|||||
||1,800,000.00|21,933.33|100,000.00|1,721,933.33|
|Xinxin Food|||||
|Shenyang Huakang|||||
|Agriculture and Animal||61,687.50||61,687.50|
|Husbandry|||||
|Changchun Wellhope|||||
||9,000,000.00|13,708.33|500,000.00|8,513,708.33|
|Food|||||
|Dehui Wellhope|||||
|||4,112.50||4,112.50|
|Agri-Tech|||||
|Weifang Wellhope New|||||
||12,750,000.00|||12,750,000.00|
|Hesheng Feed|||||
|Puyang Wellhope Food|20,000,000.00|17,135.42||20,017,135.42|
|Luohe Hongfeng Poultry|4,080,000.00|||4,080,000.00|
|Puyang Wellhope|||||
|||4,112.50||4,112.50|
|Agri-Tech|||||
|Kaifeng Wellhope|||||
|Agriculture and Animal||4,112.50||4,112.50|
|Husbandry|||||
|Liaoning Wellhope Food|30,000,000.00|13,708.33||30,013,708.33|
|Hancheng Wellhope|||||
||3,250,000.00||3,250,000.00||
|Feed|||||
|Russia Wellhope|||||
|||1,000,000.00||1,000,000.00|
|Agri-Tech|||||
|Total|1,405,216,852.54|621,470,513.93|69,778,571.00|1,956,908,795.47|

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report b. Investments in associates and joint ventures
Unit: yuan Currency: RMB
||||||||||
|-|-|-|-|-|-|-|-|-|
|||Increase or Decrease in Current Period|||||||
||||Gains or losses|||||Closing|
|||||Adjustment of|Declaring of|Withdrawing|||
||Opening||on investments|||||balance of|
|Company||Additional||other|paying cash|of|Closing balance||
||balance||recognized|||||impairment|
|||investment||comprehensive|dividend or|impairment|||
||||under equity|||||provision|
|||||income|profit|provision|||
||||method||||||
|I. Joint Ventures|||||||||
|Unphung Joint Venture|||||||||
||4,167,616.44||||||4,167,616.44||
|Company|||||||||
|Nepal Wellhope Agri-tech|||||||||
||7,501,575.10||||||7,501,575.10||
|Pvt. Ltd.|||||||||
|NEXUS WELL-HOPE|||||||||
|AGRITECH|6,150,602.09|||||6,150,602.09||17,900,000.00|
|INTERNATIONAL LIMITED|||||||||
|subtotal|17,819,793.63|||||6,150,602.09|11,669,191.54|17,900,000.00|
|II. Associates|||||||||
|Qingdao Shenfeng|17,112,831.00||1,756,652.64||3,000,000.00||15,869,483.64||
|Anshan Jiuguhe Food|72,090,706.70|17,496.00|28,546,466.72||||100,654,669.42||
|Tai’an Jiuguhe Agriculture|24,224,527.39|30,618.00|40,475,117.38||||64,730,262.77||
|Linghai Jiuguhe Feed|18,731,645.36|1,000.00|15,205,070.45||||33,937,715.81||
|Huludao Jiuguhe Food|41,997,797.00|6,000.00|15,872,205.94||||57,876,002.94||
|Dandong Wellhope|||||||||
||31,153,202.05||3,613,007.66||||34,766,209.71||
|Chengsan Food|||||||||
|Dandong Wellhope|||||||||
||24,865,722.20||30,304,710.67||||55,170,432.87||
|Chengsan Agri-Tech|||||||||
|Haicheng New|||||||||
||9,683,659.98||1,622,064.89||||11,305,724.87||
|Hongzunda Agri-Tech|||||||||
|Beipiao Hongfa Food|183,100,603.27||80,999,857.31||12,127,500.00||251,972,960.58||
|Jixi Haitai Food|||||||||
|Beijing Dahong Hengfeng|7,561,103.10|6,750,000.00|2,541,884.08||||16,852,987.18||
|Tai'an Jiufeng Agri-Tech|768,700.85|14,574.00|-285,209.72||||498,065.13||

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report
||||||||||
|-|-|-|-|-|-|-|-|-|
|Schipper(Beijing)|591,971.91||489,689.39||||1,081,661.30||
|Shenyang Wenjie|||||||||
||11,982,371.23||74,654.86||||12,057,026.09||
|Bio-Tech|||||||||
|Huluodao Jiuguhe Feed|7,987,004.96|3,000.00|17,058,407.88||||25,048,412.84||
|Jinzhou Jiufeng Food|27,183,550.40|11,000.00|2,807,077.05||||30,001,627.45||
|Zhangjiakou Jiahe|||||||||
|Agriculture and Animal|62,203,890.42||-1,446,218.58||||60,757,671.84||
|Husbandry|||||||||
|Tai'an Fengjiu Agri-Tech||402,800.00|4,977,508.75||||5,380,308.75||
|Anshan Fengsheng Food|18,919,272.68||1,525,901.04||||20,445,173.72||
|Dalian Chengsan Animal|||||||||
||198,477,782.15||53,290,054.28||||251,767,836.43||
|Husbandry|||||||||
|Tailai Jiahe Agriculture|||||||||
||33,709,365.63||-12,554,213.55||||21,155,152.08||
|and Animal Husbandry|||||||||
|Gongzhuling Corn|||||||||
||53,998,747.07||-4,469,304.17||||49,529,442.90||
|Purchasing and Storing|||||||||
|Lankao Skyland Duck|||||||||
||35,566,308.90||3,744,152.62||||39,310,461.52||
|Meat|||||||||
|Hainan Nongken|||||||||
|Wenfeng Wenchang||525,000.00|-123,085.01||||401,914.99||
|Chicken|||||||||
|Dunhua Wellhope|||||||||
|||3,000,000.00|434,662.23||||3,434,662.23||
|Agri-Tech|||||||||
|Dunhua Fengda|||||||||
|Agriculture and Animal||3,000,000.00|-1,085,107.10||||1,914,892.90||
|Husbandry|||||||||
|PT KARKA NUTRI|||||||||
||37,296,600.00||1,646,452.33|-1,957,754.20|||36,985,298.13||
|INDUSTRI.|||||||||
|GOLDEN HARVESTA INC.|60,000,000.00|42,281,336.16|-1,139,942.87|686,589.74|||101,827,983.03||
|Guangrong Xinchuang||15,090,561.00|-2,584,730.01|-34,771.16|||12,471,059.83||
|subtotal|979,207,364.25|71,133,385.16|283,297,787.16|-1,305,935.62|15,127,500.00||1,317,205,100.95||
|Total|997,027,157.88|71,133,385.16|283,297,787.16|-1,305,935.62|15,127,500.00|6,150,602.09|1,328,874,292.49|17,900,000.00|

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report 4. Sales revenue and cost
Unit: yuan Currency: RMB
||||||
|-|-|-|-|-|
||2018||2017||
|Item|||||
||Revenue|Cost|Revenue|Cost|
|revenue from principal|||||
||622,265,592.28|414,962,519.59|658,334,951.24|445,186,050.69|
|businesses|||||
|revenue from other|||||
||1,300,675.25|627,211.36|1,284,493.27|712,676.26|
|businesses|||||
|Total|623,566,267.53|415,589,730.95|659,619,444.51|445,898,726.95|

 5. Return on investment
Unit: yuan Currency: RMB
||||
|-|-|-|
|Item|2018|2017|
|return on long-term equity investmentsunder cost method|||
||46,691,821.24|63,828,074.99|
|return on long-term equity investmentsunder equity method|||
||283,297,787.16|107,327,562.72|
|income from disposal of long-term equityinvestments|||
||-12,064,078.53|4,940,137.84|
|income from disposal of financial assetsmeasured at fair value and recorded incurrent gains and losses|||
|measured at fair value and recorded in|3,190,994.45|82,305.33|
|current gains and losses|||
|other||50,749,253.88|
|Total|321,116,524.32|226,927,334.76|

 XVII. Supplementary Information
1. Non-operating gains or losses in current period
Unit: yuan Currency: RMB
||||
|-|-|-|
|Item|Amount|Note|
|gains or Losses from disposal of non-current assets|-3,713,387.32||
|government grants charged to current gains or losses(excl. the|||
|government grants which are closely related to the Company's|||
||19,471,241.10||
|ordinary course of business and gained constantly at fixed quotas or|||
|amounts as per certain standards based on the state polices)|||
|gains or losses from debt restructuring|-1,147,367.47||
|gain or loss on fair-value changes in trading financial assets and|||
|liabilities, and investment income from disposal of trading financial|||
|assets and liabilities as well as available-for-sale financial|2,821,414.45||
|assets(excl. the effective portion of hedges that arise in the|||
|Company's ordinary course of business)|||
|non-operating income and expense other than those described|||
||-3,208,527.84||
|above|||
|non-controlling interests effects|-4,163,566.50||
|income tax effects|-590,792.81||
|Total|9,469,013.61||

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report 2. Return on equity and earnings per share
|||||
|-|-|-|-|
||Weighted average|EPS||
|Profit of reporting period||||
||ROE %|Basic EPS|Diluted EPS|
|net profit attributable to common||||
||15.30|0.66|0.66|
|shareholders of the Company||||
|net profit attributable to common||||
|shareholders of the Company after deducting|15.04|0.65|0.65|
|non-recurring gains and losses||||

Liaoning Wellhope Agri-Tech Joint Stock Co., Ltd. 2018 Annual Report Section XII Reference
|||
|-|-|
||Financial statements containing the signature and seal of the legal|
|Reference file||
||representative, the person in charge of the accounting work and the person|
|directory||
||in charge of the accounting department.|
|Reference file|The original audit report containing the seal of the accounting firm and the|
|directory|signature and seal of the CPA.|
||During the reporting period, all the original documents and original|
|Reference file||
||announcements of the Company that have been publicly disclosed in the|
|directory||
||newspapers designated by the CSRC.|

Chairman of the Board of Directors: Jin Weidong
The submission date approved by the Board of Directors: April 29th, 2019