Shineroad International Holdings Limited — Proxy Solicitation & Information Statement 2021

Jan 25, 2021

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult a licensed securities dealer or registered institution in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in Shineroad International Holdings Limited, you should at once hand this circular to the purchaser, the transferee or to the bank, licensed securities dealer or registered institution in securities or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.

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Shineroad International Holdings Limited 欣融國際控股有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock code: 1587)

MAJOR TRANSACTION

IN RELATION TO THE ACQUISITION OF APPROXIMATELY 11.72% EQUITY INTEREST OF THE TARGET COMPANY

Capitalised terms used in this cover page shall have the same meanings as those defined in this circular.

A letter from the Board is set out on pages 4 to 14 in this circular.

The transaction being the subject matter of this circular has been approved by written shareholder’s approval pursuant to the Listing Rules and this circular is being despatched to the Shareholders for information only.

25 January 2021

CONTENTS

		Page
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		1
LETTER FROM THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		4
APPENDIX I	— FINANCIAL INFORMATION OF THE GROUP. . . . . . . . . . . . .	I-1
APPENDIX II	— FINANCIAL INFORMATION OF THE TARGET
	COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	II-1
APPENDIX III	— THE REPORT FROM ERNST & YOUNG
	IN RELATION TO THE PROFIT FORECAST. . . . . . . . . . . .	III-1
APPENDIX IV	— LETTER FROM THE BOARD
	IN RELATION TO THE PROFIT FORECAST . . . . . . . . . . .	IV-1
APPENDIX V	— GENERAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . .	V-1

– i –

DEFINITIONS

In this circular, the following expressions have the meanings set out below unless the context requires otherwise:

“Acquisition” the acquisition of the Sale Shares by the Purchaser from the Vendor pursuant to the terms and conditions under the Share Transfer Agreement “Board” the board of Directors “Company” Shineroad International Holdings Limited (欣融國際控股有 限公司), a company incorporated in the Cayman Islands with limited liability and the Shares of which are listed on the Stock Exchange (Stock Code: 1587) “Completion” completion of the Acquisition in accordance with the terms and conditions of the Share Transfer Agreement “connected person(s)” has the meanings ascribed thereto under the Listing Rules “Consideration” the consideration payable by the Purchaser to the Vendor for the Acquisition “Director(s)” the director(s) of the Company “Group” the Company and its subsidiaries from time to time “HK$” Hong Kong dollars, the lawful currency of Hong Kong “Hong Kong” Hong Kong Special Administrative Region of the PRC “Independent Third Party(ies)” any person(s) or company(ies) and their respective ultimate beneficial owner(s), to the best of the Directors’ knowledge, information and belief and having made all reasonable enquiries, are not connected persons of the Company and are third parties independent of the Company and its connected persons in accordance with the Listing Rules

– 1 –

DEFINITIONS

“Latest Practicable Date”

20 January 2021, being the latest practicable date prior to the printing of this circular for ascertaining certain information contained in this circular

• “Listing Rules”

• the Rules Governing the Listing of Securities on the Stock Exchange

• “NEEQ” The National Equities Exchange And Quotations Co., Ltd.

• “PRC”

• The People’s Republic of China, and for the purpose of this announcement, excludes Hong Kong, Macau Special Administrative Region and Taiwan

“Purchaser”

• Shanghai Shineroad Food Ingredients Co., Ltd.* (上海欣融 食品原料有限公司), a company incorporated in the PRC with limited liability and an indirect wholly owned subsidiary of the Company

• “RMB”

• Renminbi, the lawful currency in the PRC

• “Sale Shares” 28,125,200 shares held by the Vendor in the Target Company, representing approximately 11.72% equity interest in the Target Company immediately prior to the Completion

• “Share(s)” ordinary share(s) of a nominal value of HK$0.01 each in the share capital of the Company

• “Share Transfer Agreement”

• the conditional share transfer agreement and supplemental agreement both dated 28 December 2020 entered into among the Vendor and the Purchaser in relation to the Acquisition

• “Shareholder(s)” holder(s) of the Shares

• “Stock Exchange”

The Stock Exchange of Hong Kong Limited

– 2 –

DEFINITIONS

“Target Company” Tianye Innovation Corporation (田野創新股份有限公司), a company established in the PRC with limited liability and the shares of which are listed on the NEEQ (stock code: 832023) “Target Group” the Target Company and its subsidiaries “Vendor” Hefei Fangfu Equity Investment Partnership Enterprise (Limited Partnership)* (合肥方富股權投資合夥企業(有限 合夥)), a partnership registered in the PRC with limited liability “%” per cent.

In this circular, for the purpose of illustration only, amounts quoted in RMB have been converted into HK$ using the exchange rate of RMB1 to HK$1.19 unless otherwise indicated. Such exchange rate has been used, where applicable, for the purpose of illustration only and does not constitute a representation that any amount has been, could have been or may be exchanged at such a rate or at any other rates.

The English transliteration of the Chinese name(s) in this circular, where indicated with * , is included for information purpose only, and should not be regarded as the official English name(s) of such Chinese name(s).

– 3 –

LETTER FROM THE BOARD

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Shineroad International Holdings Limited 欣融國際控股有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock code: 1587)

Executive Directors Mr. Huang Haixiao (Chairman) Ms. Huang Xin Rong (Chief Executive Officer) Mr. Dai Yihui

Independent Non-executive Directors

Mr. Tan Wee Seng Mr. Chan Ka Kit Mr. Meng Yuecheng

Registered Office: Windward 3, Regatta Office Park P.O. Box 1350 Grand Cayman KY1-1108 Cayman Islands

Headquarters and Principal Place of Business in the PRC: 25th Floor South Block 1 Zhongyou Building Lane 1040 Caoyang Road Putuo District Shanghai China

Principal Place of Business in Hong Kong: Unit 6, 16/F, K. Wah Centre 191 Java Road Hong Kong

25 January 2021

To the Shareholders

Dear Sir or Madam,

MAJOR TRANSACTION

IN RELATION TO THE ACQUISITION OF APPROXIMATELY 11.72% EQUITY INTEREST OF THE TARGET COMPANY

– 4 –

LETTER FROM THE BOARD

INTRODUCTION

Reference is made to the announcements of the Company dated 28 December 2020 and the supplemental announcement dated 31 December 2020, in which the Company announced that, after trading hours on 28 December 2020, the Purchaser, a company incorporated in the PRC with limited liability and an indirect wholly owned subsidiary of the Company and the Vendor entered into the Share Transfer Agreement in relation to the Acquisition, pursuant to which the Purchaser has conditionally agreed to purchase, and the Vendor has conditionally agreed to sell, the Sale Shares, which represent approximately 11.72% of the equity interest of the Target Company at the consideration of RMB78,750,560 (equivalent to approximately HK$93.71 million).

The purpose of this circular is to provide you with, amongst other things, information on the Share Transfer Agreement and the Acquisition and other information as required under the Listing Rules.

THE ACQUISITION

Set out below are the major terms of the Share Transfer Agreement:

Date

28 December 2020

Parties

• (i) the Purchaser; and

• (ii) the Vendor.

To the best of the knowledge, information and belief of the Directors, having made all reasonable enquiries, (i) the Vendor is a limited partnership registered in the PRC and it is principally engaged in equity investment and other investment such as currency fund; and (ii) all the partners of the Vendor and their ultimate beneficial owners are Independent Third Parties.

Assets to be acquired

The Purchaser has conditionally agreed to acquire, and the Vendor has conditionally agreed to sell, the Sale Shares, which represents 11.72% of the equity interest of the Target Company. The information regarding the Target Company is set out in the section headed “Information about the Target Company” below.

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LETTER FROM THE BOARD

Consideration

Pursuant to the Share Transfer Agreement, the Consideration is RMB78,750,560 (equivalent to approximately HK$93.71 million), representing an average price of RMB2.8 per share. The Group currently expects to finance the Consideration by internal resources.

Basis of Consideration

The Consideration was determined between the Purchaser and the Vendor after arm’s length negotiation with reference to, among other things, (i) the historical financial performance of the Target Company including the net profits after tax of the Target Company for the year ended 31 December 2019; (ii) the preliminary valuation of the per share equity interest of the Target (Note 1) Company compiled by an independent valuer based on the income approach ; (iii) the prospect of the tropical fruit industry in the PRC; and (iv) the factors as set out in the section headed “Reasons for and Benefits of the Acquisition”.

Note:

• (1) As at the valuation date, the market value of the per share equity interest as appraised by the independent valuer is RMB3.06. The net asset value per share of the Target Company as at 30 June 2020 is RMB3.15. Based on the market value of the per share equity interest of the Target Company estimated by the independent valuer, the preliminary valuation of the Sale Shares (28,125,200 shares of the Target Company) is approximately RMB86.1 million.

As at the Latest Practicable Date, the closing price of the shares of the Target Company on NEEQ was RMB1.83. However, the closing price is not indicative of the value of the Target Company as the trading volume and turnover of the shares of the Target Company on NEEQ was minimal. Having regard to the factors above in determining the basis of consideration, including but not limited to the preliminary valuation prepared by the independent valuer, the Directors (including the independent non-executive Directors) consider the Consideration is fair and reasonable and on normal commercial terms and is in the interest of the Company and the Shareholders as a whole.

Principal assumptions of the valuation

An independent valuer was engaged to perform valuation of the per share equity interest of the Target Company. As the valuation was prepared based on the income approach, which involves the use of the discounted cash flow, the valuation is regarded as a profit forecast under Rule 14.61 of the Listing Rules.

– 6 –

LETTER FROM THE BOARD

The valuation was performed based on the following principal assumptions:

• The Target Company is subject to a going concern assumption.

• The projected business performances can be achieved with the effort of the managements of the Target Company.

• There will be no material change in the existing political, legal, technological, fiscal or economic conditions, which might adversely affect the business of the Target Company.

• The operational and contractual terms stipulated in the relevant contracts and agreements of the Target Company will be honoured.

• The facilities and systems proposed are sufficient for future expansion in order to realize the growth potential of the business of the Target Company and maintain a competitive edge.

• There are no hidden or unexpected conditions associated with the assets valued that might adversely affect the reported values.

• There will be no change in market conditions after the valuation date.

If any of the assumption above-mentioned changes, generally the valuation will be invalid. Ernst & Young, the reporting accountants of the Company, has reported to the Directors as required by Rule 14.62 of the Listing Rules on the arithmetical accuracy of the calculations of the discounted cash flow forecast used in the valuation. The Board confirms that it has made the profit forecast of the Target Company after due and careful enquiries. A report from Ernst & Young as required under Rule 14.62 of the Listing Rules and the letter from the Board relating to the profit forecast of the Target Company are set out in the Appendix III and Appendix IV to this circular, respectively.

Conditions precedent to Completion

Completion is subject to the following conditions precedent being fulfilled, including but not limited to:

• (a) the Purchaser and the Vendor having executed the Share Transfer Agreement;

• (b) the Vendor is the beneficial owner of the Sale Shares and the Sale Shares are fully paid;

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LETTER FROM THE BOARD

• (c) all necessary consents and approvals required to be obtained on the part of the Purchaser in respect of the Acquisition having been obtained, including the approval from its board of directors and shareholders and/or the approval from the Stock Exchange (if required);

• (d) all necessary consents and approvals required to be obtained on the part of the Vendor and the Target Company in respect of the Acquisition having been obtained, including the approval from the board of directors and the shareholders of the Target Company, the NEEQ and the China Securities Regulatory Commission (if required);

• (e) all representations, warranties and undertakings given by the Vendor remaining true, accurate and not misleading in all material aspects from the date of the Share Transfer Purchase Agreement until the date of Completion;

• (f) the Vendor diligently discharging its duties and obligations as a shareholder in accordance with the Company Law of the PRC and the articles of the Target Company without harming the Target Company’s interest prior to Completion; and

• (g) the Vendor shall not transfer any part or all of the Sale Shares to third party other than the Purchaser or have any encumbrance imposed on the Sale Shares prior to Completion.

Completion

Completion of the Acquisition is conditional upon the fulfilment of all the above conditions precedents and shall take place five business days after the despatch of this circular.

INFORMATION ABOUT THE PARTIES

The Company and the Purchaser

The Group is a distributor in the food industry with a focus on supplying food ingredients and food additives to food manufacturers. The Company acts as an investment holding company. The principal business of the Group is carried out through the Purchaser and its subsidiaries.

The Vendor

The Vendor owns 28,125,200 shares in the Target Company, representing approximately 11.72% equity interest in the Target Company as at the date of this announcement.

– 8 –

LETTER FROM THE BOARD

The Vendor is a RMB private equity investment fund registered under Asset Management Association of China. Its principal business activities include equity investment in agricultural industry such as high and new technology enterprises and agricultural service companies, and other investment such as currency fund and other investment products. The Vendor is a limited partnership registered in the PRC which is owned as to:

• approximately 54.9% by Beihai Dexingtianxia Investment Co., Ltd. (北海德行天下投 資有限公司) ( “Beihai Investment* ”);

• approximately 45.0% by Hubei Nongguchanye Equity Investment Fund Partnership Enterprise (Limited Partnership) (湖北農穀產業股權投資基金合夥企業) (“ Hubei Fund* ”); and

• approximately 0.1% by Beijing FOF Capital Co., Ltd. (“ Beijing FOF ”), respectively.

Beihai Investment and Hubei Fund are the limited partners whereas Beijing FOF is the general partner of the Vendor.

Beihai Investment is a limited company established in the PRC which is owned as to 51% by Lin Youfu and 49% by Chen Shuang.

Hubei Fund is a RMB private equity investment fund registered under Asset Management Association of China. Hubei Fund is owned as to 80% by Hubei Nonggu Modern Agricultural Industry Development Co., Ltd. and 20% by Hubei Nonggu Investment Management Co., Ltd.* (湖北農穀投資管理有限公司), both of which are ultimately owned by the State-owned Assets Supervision and Administration Commission of Jingmen Municipal Government (荊門市人民政府 國有資產監督管理委員會) of the PRC.

Beijing FOF is a PRC company listed on the NEEQ (stock code: 833962). According to the 2020 third quarter report of Beijing FOF published on the website of the NEEQ, the three largest shareholders of Beijing FOF were Wang Chao, Yu Suli and He Xiaofeng, holding approximately 24.8%, 24.8% and 15.3% of shareholding respectively.

To the best of the knowledge, information and belief of the Directors, having made all reasonable enquiries, all the partners of the Vendor and their ultimate beneficial owners are Independent Third Parties and are not connected with any of the Company’s connected persons.

– 9 –

LETTER FROM THE BOARD

The Target Company

The Target Company is a company established in the PRC with limited liability and the shares of which are listed on the NEEQ (stock code: 832023). The Target Company is principally engaged in planting, processing and sales of agricultural food including tropical fruits and vegetables.

As at the date of this announcement, the Target Company is owned by the Vendor as to approximately 11.72%. It is expected that immediately after completion of the Acquisition, the Company will, through the Purchaser, hold approximately 11.72% equity interest of the Target Company.

FINANCIAL INFORMATION OF THE TARGET GROUP

Set out below is a summary of the financial information of the Target Group for the three years ended 31 December 2019 and the six months ended 30 June 2020:

				For the
				six months
				ended
	**For the **	year ended 31 December		30 June
	2017	2018	2019	2020
	(RMB)	(RMB)	(RMB)	(RMB)
	(audited)	(audited)	(audited)	(unaudited)
Revenue	203,133,324.85	258,435,753.75	290,342,840.35	106,668,616.97
Net profit before tax	43,181,657.30	27,269,824.34	25,683,840.91	7,860,633.30
Net profit after tax	42,082,668.58	23,941,884.70	24,381,734.95	7,388,220.26

REASONS FOR AND BENEFITS OF THE ACQUISITION

The Group is principally engaged in the distribution of food ingredients and food additives in the PRC. It has been the Company’s objective to explore investment opportunities in the food industry in the PRC and other overseas countries, with an aim to deliver returns for Shareholders. The Company considers that the Acquisition is in line with the overall business direction of the Group and is a good investment opportunity to expand into the tropical fruit sector of the food industry in the PRC.

– 10 –

LETTER FROM THE BOARD

Upon Completion, it is the common understanding between the Company and the Target Company that certain products of the Target Company will be distributed through the Group’s established distribution network and thus generating revenue in future. On the other hand, as the operation of the Group in Thailand and Vietnam expands, the Target Company is also one of the potential customers for the Group’s import sales of tropical fruits sourced from Southeast Asia to the PRC market.

It is envisaged that the overall competitiveness of the Group will be further enhanced through the synergetic effect resulting from the Acquisition, which will expand channels for the growth of the Group and enhance the market competitiveness of the Group in the PRC.

Having regard to the nature and benefits of the Acquisition and the prospect of the tropical fruit industry in the PRC, the Directors believe that the Acquisition is in the interests of the Company and the Shareholders as a whole, and the terms of the Share Transfer Agreement are on normal commercial terms, fair and reasonable.

FINANCIAL IMPACT ON THE GROUP

Following the Completion, the Company will, through the Purchaser, hold approximately 11.72% equity interest of the Target Company. As the Target Company will not become a subsidiary of the Company nor its accounts will be consolidated into the accounts of the Group, the approximately 11.72% equity interest of the Target Group will be presented as financial assets at fair value through profit or loss in the Company’s financial statement. Hence, there will be no effect on earnings upon Completion. As for assets and liabilities of the Group, the financial assets at fair value will increase by approximately RMB78,751,000 while cash and cash equivalent will decrease by approximately RMB78,751,000. Therefore, there will be no impact on the net assets value.

IMPLICATIONS UNDER THE LISTING RULES

As one or more of the applicable percentage ratios (as defined in the Listing Rules) in respect of the Acquisition are more than 25% but less than 100%, the Acquisition constitutes a major transaction of the Company, and is therefore subject to reporting, announcement and Shareholders’ approval requirements under Chapter 14 of the Listing Rules.

As at the date of this announcement, to the best of the knowledge, information and belief of the Directors, after having made all reasonable enquiries, no Shareholder has any material interest in the Acquisition and is required to abstain from voting if the Company was to convene an extraordinary general meeting for approval of the Acquisition. In accordance with Rule 14.44 of the Listing Rules, in lieu of holding a general meeting for approving the Acquisition, the Company

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LETTER FROM THE BOARD

will obtain an irrevocable and unconditional written approval for the Acquisition from Shineroad Group Limited, which holds 510,000,000 Shares, representing 75.00% of the total issued Shares as at the date of this announcement. As such, no Shareholders’ meeting will be convened by the Company to approve the Acquisition after obtaining such approval from Shineroad Group Limited.

WAIVER FROM STRICT COMPLIANCE WITH RULES 14.67(6)(a)(i) AND 14.67(7) OF THE LISTING RULES

Pursuant to Rule 14.67(6)(a)(i) of the Listing Rules, this circular must contain, among others, an accountants’ report on the Target Company in accordance with Chapter 4 of the Listing Rules.

Pursuant to Rule 14.67(7) of the Listing Rules, the Company is also required to include in this circular a discussion and analysis of results of the Target Company covering all those matters set out in paragraph 32 of Appendix 16 to the Listing Rules for the period reported in the accountants’ report must be contained.

Waiver Sought

The Company has applied to the Stock Exchange for waiver from strict compliance with Rule 14.67(6)(a)(i) regarding certain disclosures under Chapter 4 of the Listing Rules on the following grounds:

• (a) the Vendor is unable to grant and the Target Company refused to grant the Company any access to the financial information and underlying books and accounts of the Target Company. Therefore, without the access to information required for preparation of accountants’ report, strict compliance with Rule 14.67(6)(a)(i) of the Listing Rules is impossible and unduly burdensome to the Company;

• (b) approximately 11.72% of the shareholding of the Target Company will be acquired by the Company. The Target Company will not become a subsidiary or an associate of the Company and the financial results of the Target Company will not be consolidated in the financial statements of the Group nor be equity accounted for in the Group’s consolidated financial statements as an associate. Requiring the Company to arrange for an accountants’ report will be out of proportion to the size of the Acquisition in terms of time and costs involved; and

• (c) the audited annual financial results and unaudited interim results of the Target Company are publicly available and will be reproduced in this circular as alternative disclosure.

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LETTER FROM THE BOARD

Since the Company is not able to obtain the necessary non-public financial information of the Target Company for the purpose of preparing the required accountants’ report for the reasons given above, the Company is similarly unable to obtain the necessary non- public financial information of the Target Company for the purpose of preparing, and itis impracticable and unduly burdensome to require the Company to prepare, the relevant management discussion and analysis. The Company has therefore applied for waiver to dispense with the requirements to comply with Rule 14.67(7) in relation to this circular.

Alternative Disclosure

In order to facilitate the shareholders and potential investors of the Company to evaluate the Acquisition, the Company will include the following in this circular to be issued:

• (1) the audited annual financial statements of the Target Company for the year ended 31 December 2017;

• (2) the audited annual financial statements of the Target Company for the year ended 31 December 2018;

• (3) the audited annual financial statements of the Target Company for the year ended 31 December 2019; and

• (4) the unaudited consolidated statement of financial position of the Target Company as at 30 June 2020, the unaudited consolidated statement of profit and loss of the Target Company for the six months ended 30 June 2020, the unaudited consolidated statement of cash flow of the Target Company for the six months ended 30 June 2020, and the notes to the unaudited consolidated financial statements of the Target Company for the six months ended 30 June 2020,

all of which were prepared in accordance with the China Accounting Standards for Business Enterprises (CASBE).

Based on the information provided by the Company and the alternative disclosure above, the Stock Exchange granted the waiver from strict compliance with Rules 14.67(6)(a)(i) and 14.67(7) under the Listing Rules.

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LETTER FROM THE BOARD

RECOMMENDATION

The Directors (including the independent non-executive Directors) are of the view that the Acquisition and the transactions contemplated thereunder are on normal commercial terms, which are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

Accordingly, should a resolution be put at a general meeting of the Company for the Shareholders to consider the same, the Directors would recommend the Shareholders to vote in favour of such resolution. As disclosed above, the Company has obtained the written approval of Shineroad Group Limited for approving the Acquisition.

ADDITIONAL INFORMATION

Your attention is also drawn to the additional information set out in the appendices to this circular.

By order of the Board Shineroad International Holdings Limited Huang Haixiao Chairman

– 14 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. FINANCIAL INFORMATION OF THE GROUP

The Company is required to set out or refer to in this circular the information for the last three financial years and the six months ended 30 June 2020 with respect to the profits and losses, financial record and position, set out as a comparative table and the latest published audited balance sheet together with the notes on the annual accounts for the last financial year for the Group. The financial information of the Group is disclosed in the following documents which have been published on the websites of the Hong Kong Stock Exchange ( http://www.hkexnews.hk ) and the Company ( http://www.shineroad.com/ ):

• The unaudited interim condensed consolidated statement of profit or loss and other comprehensive income of the Group for the six months ended 30 June 2020 are set out in the interim report of the Company (pages 15-34) published on 8 September 2020. Please also see below link to the Interim Report 2020:

https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0908/2020090800406.pdf

• The audited consolidated financial statement of the Group for the year ended 31 December 2019 are set out in the annual report of the Company (pages 72-135) published on 14 April 2020. Please also see below link to the Annual Report 2019:

https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0414/2020041400822.pdf

• The audited consolidated financial statement of the Group for the year ended 31 December 2018 are set out in the annual report of the Company (pages 73-135) published on 24 April 2019. Please also see below link to the Annual Report 2018:

https://www1.hkexnews.hk/listedco/listconews/sehk/2019/0424/ltn20190424550.pdf

• The audited consolidated financial statement of the Group for the year ended 31 December 2017 are set out in the prospectus of the Company (pages I-1-I-58) published on 14 June 2018. Please also see below link to the prospectus of the Company:

https://www1.hkexnews.hk/listedco/listconews/sehk/2018/0614/ltn20180614041.pdf

– I-1 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

2. INDEBTEDNESS

As at the close of business on 30 November 2020, the Group had the following indebtedness:

Bank borrowings

The Group did not have any bank borrowing as at 30 November 2020.

Amount due to related parties

As at 30 November 2020, the Group had outstanding amount due to related parties of approximately RMB3,282,000.

Lease liability

As at 30 November 2020, the Group had outstanding lease liability of approximately RMB1,482,000.

Save as disclosed above and apart from intra-group liabilities and normal trade and other payables, at the close of business on 30 November 2020, the Group did not have any debt securities issued and outstanding or authorized or otherwise created but unissued, term loans, bank overdrafts, liabilities under acceptances or acceptance credits, hire purchases, mortgages, charges, guarantees or material contingent liabilities.

3. WORKING CAPITAL SUFFICIENCY

After due and careful consideration, the Directors are of the opinion that, taking into account the financial resources available to the Group including cash flows to be generated from the operating activities and the available credit facilities, the Group has sufficient working capital for its requirements for at least 12 months from the date of this circular, in the absence of unforeseen circumstances.

4. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors were not aware of any material adverse change in the financial or trading position of the Group since 31 December 2019, being the date to which the latest published audited consolidated financial statements of the Group were made up.

– I-2 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

5. FINANCIAL AND TRADING PROSPECTS OF THE GROUP

The outbreak of Coronavirus Disease 2019 (“ COVID-19 ”) has caused unprecedented disruptions in economy and business operations on a global scale, including the food industry. The Group was able to swiftly respond to the situation and deployed strategic measures to stabilise the business including the management of our inventory of short life-span products. The Group will stay alert on the development of COVID-19 and continue to assess the impacts on its financial position and operating results. Going forward, it is expected the Group will continue to maintain its leading position in food ingredients and additives distribution in Asia by leveraging on the established operations in China and strong relationships with food suppliers worldwide. Through obtaining new distribution rights of different food ingredients and food additives, the Group will continue its efforts in building a broad product portfolio which in turn enhance the overall competitiveness and reputation of the Group.

Meanwhile, it is also the Group’s strategy to look for investment opportunities and business expansions in the food industry in the PRC and other overseas countries. In October 2019, the Group established its first overseas subsidiary in Ho Chi Minh City, Vietnam, a sales office fully equipped with an innovation center for developing new solution and application of food ingredients and additives. The management believes that the Group has a positive future outlook through its efforts to develop its core competitiveness as one of the leaders in the industry, and that the Group will continue to deliver encouraging results to its shareholders.

– I-3 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

The followings are the English translations of the texts of (i) audited annual financial statements of the Target Company for the year ended 31 December 2017, which were audited by Zhongxinghua Certified Public Accountants LLP (“Zhongxinghua”) in the annual report dated 16 April 2018; (ii) the audited annual financial statements of the Target Company for the year ended 31 December 2018, which were audited by Zhongxinghua in the annual report dated 24 April 2019; (iii) the audited annual financial statements of the Target Company for the year ended 31 December 2019, which were audited by Zhongxinghua in the annual report dated 5 June 2020; (iv) the unaudited consolidated statement of financial position of the Target Company as at 30 June 2020, the unaudited consolidated statement of profit and loss of the Target Company for the six months ended 30 June 2020, the unaudited consolidated statement of cash flow of the Target Company for the six months ended 30 June 2020 and the notes to the unaudited consolidated financial statements of the Target Company for the six months ended 30 June 2020 ((i) to (iv) above together, the “Financial Information on the Target Group”). For the avoidance of doubt, references in the Financial Information on the Target Group in this Appendix II to “the Company” are to Tianye Innovation Corporation and not to the Company.

The Financial Information on the Target Group was originally prepared in Chinese. The English version in this Appendix appears for information purposes only. In case of any discrepancy or inconsistency between the Chinese version and its English translation, the Chinese version shall prevail.

The Financial Information on the Target Group was not prepared for the Company or its shareholders, nor for the purpose of incorporation in this circular. Neither the Target Group nor Zhongxinghua shall take or assume any responsibility or liability for the contents of the Financial Information on the Target Group as reproduced in this circular towards the Company, its Shareholders or any other persons making use of this circular.

The contents of the Financial Information on the Target Group has also not been independently verified by the Group or any of its affiliates, advisers, agents, directors, employees, officers or representatives. Neither the Group nor any of its affiliates, advisers, agents, directors, employees, officers or representatives make any representation as to the accuracy, completeness or fairness of the contents of the Financial Information on the Target Group, nor shall take or assume any responsibility for the contents of the Financial Information on the Target Group.

– II-1 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

TIANYE INNOVATION CORPORATION

CONSOLIDATED AND PARENT COMPANY FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017 AUDITOR’S REPORT

ZXHSZ (2018) No. 010736

To all shareholders of Tianye Innovation Corporation:

I. Audit Opinions

We have audited the accompanying financial statements of Tianye Innovation Corporation (hereinafter referred to as “ the Company ”), which comprise the consolidated and the parent company’s balance sheet as at December 31, 2017, the consolidated and the parent company’s income statement, the consolidated and the parent company’s cash flow statement, the consolidated and the parent company’s statement of changes in shareholders’ equity for the year 2017 and notes to the financial statements.

In our opinion, the accompanying financial statements present fairly, in all material respects, the consolidated and the company’s financial position as at December 31, 2017, and its consolidated and the company’s financial performance and cash flows for the year 2017 in accordance with the Accounting Standards for Business Enterprises issued by the Ministry of Finance of the People’s Republic of China.

II. Basis for Formation of Audit Opinions

We conducted our audit in accordance with China Standards on Auditing for Certified Public Accountants (“ CSAs ”). 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 Tianye Innovation in accordance with the China Code of Ethics for Certified Public 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.

III. Other Information

The management of Tianye Innovation (hereinafter referred to as the management) is responsible for the other information. The other information comprises all the information included in 2017 annual report of the Company, other than 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 other information and, in doing so, consider whether other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other information; we are required to report that fact. We have nothing to report in this regard.

– II-2 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

IV. Responsibilities of the Management and the Governance for Financial Statements

The Management is responsible for preparation and fair presentation of the financial statements in accordance with the Accounting Standards for Business Enterprises, and for the design, implementation and maintenance of such internal control necessary to enable that the financial statements are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the management is responsible for assessing the Company’s ability to continue as a going to concern and using the going concern basis of accounting unless the management either intends to liquidate Tianye Innovation or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the financial report process of the Company.

V. Responsibilities of CPAs for the Audit of Financial Statements

Our objectives are to reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is high level of assurance but is not a guarantee that an audit conducted in accordance with CSAs will always detect a material misstatement when it exists. Misstatement 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 CSAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• (1) Identify and assess the risks of material misstatement of financial statements, whether due to fraud or errors, 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 from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentation, or the override of internal control.

• (2) Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.

• (3) Evaluate the appropriateness of accounting policies used and reasonableness of accounting estimates and related disclosures made by the management.

• (4) Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or; if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to continue as a going concern.

• (5) Evaluate the overall presentation, structure, and content of the financial statements, including the disclosure, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

– II-3 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

• (6) Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the financial statements. We are responsible for the instruction, supervision and execution of the audit, and assume full responsibility for the audit opinions.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control defects that we identify during our audit.

ZHONGXINGHUA CERTIFIED PUBLIC CPA: ACCOUNTANTS LLP Beijing, China CPA:

April 16, 2018

– II-4 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

CONSOLIDATED BALANCE SHEET

December 31, 2017

Prepared by: Tianye Innovation Corporation

Prepared by: Tianye Innovation Corporation Assets Notes Current assets: Monetary funds Note 1 Financial assets measured at fair value with changes included in the current profits and losses Derivative financial assets Notes receivable Note 2 Accounts receivable Note 3 Prepayments Note 4 Interests receivable Dividends receivable Other receivables Note 5 Inventories Note 6 Held-for-sale assets Non-current assets due within one year Note 7 Other current assets Note 8 Total current assets Non-current assets: Available-for-sale financial assets Held-to-maturity investment Long-term receivables Note 9 Long-term equity investment Note 10 Investment properties Fixed assets Note 11 Construction in progress Note 12 Engineering materials Liquidation of fixed assets Productive biological assets Note 13 Oil & gas assets Intangible assets Note 14 Development expenses Goodwill Note 15 Long-term deferred expenses Note 16 Deferred income tax assets Note 17 Other non-current assets Note 18 Total non-current assets Total assets	Closing balance 211,052,482.61 217,100.00 54,959,777.56 471,162.74 1,002,578.02 53,427,074.26 3,694,120.69 324,824,295.88 318,000.00 39,617,867.46 158,804,567.36 157,284,035.29 24,704,959.31 89,193,588.31 14,857,682.84 17,307,344.06 1,136,731.45 53,423,153.57 556,647,929.65 881,472,225.53	Unit: RMB Opening balance 325,379,442.47 55,869,238.59 1,653,216.96 2,968,451.98 45,632,174.54 1,056,600.00 2,003,865.53
		434,562,990.07
		318,000.00 47,594,736.95 171,294,650.87 40,037,696.21 24,049,639.04 91,423,212.07 17,607,521.44 3,888,609.02 2,019,280.17 8,736,533.77
		406,969,879.54
		841,532,869.61

(Notes to financial statements below are an integral part of the Consolidated Financial Statements)

Legal representative:

Chief Accountant: Head of Accounting Department:

– II-5 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

CONSOLIDATED BALANCE SHEET (CONT.)

December 31, 2017

Prepared by: Tianye Innovation Corporation Liabilities and shareholders’ equity Notes Current liabilities: Short-term loans Note 19 Financial liabilities measured at fair value with changes included in the current profits and losses Derivative financial liabilities Notes payable Accounts payable Note 20 Advances from customers Note 21 Payroll and employee benefits payable Note 22 Taxes payable Note 23 Interest payable Dividends payable Other payables Note 24 Holding-for-sale liabilities Current portion of non-current liabilities Other current liabilities Total current liabilities Non-current liabilities: Long-term loans Bonds payable Including: preferred stocks Including: perpetual bonds Long-term accounts payable Long-term employee compensation Special payables Estimated liabilities Deferred income Note 25 Deferred income tax liabilities Other non-current liabilities Total non-current liabilities Total liabilities	Closing balance 66,000,000.00 28,325,710.25 4,088,193.01 3,041,876.87 2,927,898.18 2,705,266.75 107,088,945.06 67,690,400.23 67,690,400.23 174,779,345.29	Unit: RMB Opening balance 81,000,000.00 18,099,982.61 1,967,071.92 2,365,223.96 6,176,547.33 1,885,584.43
		111,494,410.25
		67,868,597.70 67,868,597.70
		179,363,007.95

– II-6 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Liabilities and shareholders’ equity Notes Shareholders’ equity: Share Capital Note 26 Other equity instruments Including: preferred stocks Including: perpetual bonds Capital reserves Note 27 Less: Treasury shares Other comprehensive income Note 28 Special reserve Surplus reserve Note 29 Undistributed profits Note 30 Total shareholders’ equities attributable to parent company Minority shareholders’ equity Total shareholders’ equities Total liabilities and shareholders’ equities	Closing balance 240,000,000.00 246,300,093.95 10,523,286.40 209,869,499.89 706,692,880.24 706,692,880.24 881,472,225.53	Opening balance 240,000,000.00 246,300,093.95 -2,440,350.00 9,869,750.20 168,440,367.51 662,169,861.66
		662,169,861.66
		841,532,869.61

(Notes to financial statements below are an integral part of the Consolidated Financial Statements) Legal representative: Chief Accountant: Head of Accounting

Head of Accounting Department:

– II-7 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

CONSOLIDATED PROFIT STATEMENT

2017

Prepared by: Tianye Innovation Corporation

Prepared by: Tianye Innovation Corporation			Unit: RMB
		Amount of	Amount of
Item	Notes	current period	last period
I. Operating revenue	Note 31	203,133,324.85	220,930,657.77
Less: operating cost	Note 31	127,117,026.05	132,649,169.53
Taxes and surcharges	Note 32	2,202,858.90	1,602,529.25
Selling expenses	Note 33	8,901,681.64	7,404,044.01
General and administrative expenses	Note 34	26,811,043.61	28,804,975.89
Financial expenses	Note 35	2,539,651.74	2,475,147.33
Assets impairment loss	Note 36	2,666,168.59	1,183,667.34
Add: income from changes in fair value
Investment income	Note 37	1,152,130.51	2,727,513.27
Including: investment income from affiliates and
joint ventures			573,569.35
Assets disposal income	Note 38	69,133.72	-779,705.06
Other income	Note 39	9,774,455.20
II. Operating profit		43,890,613.75	48,758,932.63
Add: non-operating income	Note 40	33.98	8,167,002.36
Minus: non-operating expenses	Note 41	708,990.43	3,240,354.45
III. Total profits		43,181,657.30	53,685,580.54
Less: income tax expense	Note 42	1,098,988.72	5,536,908.68
IV. Net profit		42,082,668.58	48,148,671.86
(I) Classified by operation continuity
Including: net profit of continuing operation		42,082,668.58	48,148,671.86
Net profits from discontinuing operation
(II) Classified by ownership
Including: net profit attributable to the owner of
parent company		42,082,668.58	48,148,671.86
Minority gains and losses

– II-8 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Item

V. After-tax net amount of other comprehensive income

After-tax net amount of other comprehensive income attributable to the owners of parent company

• (I) Other comprehensive income not allowed to be re-classified into profits and losses in the future

• Changes from remeasuring the net liabilities or net assets of defined benefit plans

• Share of other comprehensive income not allowed to be re-classified into profit and loss of the invested company as per equity laws

	Amount of	Amount of
Notes	current period	last period
	2,440,350.00	-3,726,162.00
	2,440,350.00	-3,726,162.00
	2,440,350.00	-3,726,162.00
	2,440,350.00	-3,726,162.00

1. ⋯⋯

(II) Other comprehensive income allowed to be re-classified into profit and loss in the future

1. Share of other comprehensive income to be re-classified into profit and loss of the invested company as per equity laws

2. Gains and losses from changes in fair value of available-for-sale financial assets

3. Profits and losses of salable financial asset re-classified from the investments which will be held to their maturity

4. Losses and profits of cash flow hedging in force

5. Balance arising from the translation of foreign currency financial statements

6. Package deal disposal of income from equity investment to subsidiaries before the loss of control right

7. ⋯⋯

Net amount of other comprehensive income after tax attributable to minority shareholders

VI. Total comprehensive incomes

Net amount of other comprehensive income after tax attributable to minority shareholders VI. Total comprehensive incomes
Total comprehensive income attributable to
owners of parent company	44,523,018.58	44,422,509.86
Total comprehensive income attributable to
minority shareholders	44,523,018.58	44,422,509.86
VII. Earnings per share:
(I) Basic EPS	0.18	0.20
(II) Diluted EPS	0.18	0.20

(Notes to financial statements below are an integral part of the Consolidated Financial Statements) Legal representative: Chief Accountant: Head of Accounting Department:

– II-9 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

CONSOLIDATED STATEMENT OF CASH FLOW

2017

Prepared by: Tianye Innovation Corporation

Unit: RMB

		Amount of	Amount of
Item	Notes	current period	last period
I. Cash flows from operating activities:
Cash received from the sale of goods or rendering
of services		231,918,464.19	232,458,985.93
Tax refunds received		818,491.93	1,200,310.94
Other cash received relating to business activities	Note 43	2,470,935.31	2,895,297.38
Subtotal of cash inflow from operating activities		235,207,891.43	236,554,594.25
Cash paid for purchase of goods and services		110,174,204.06	107,710,462.59
Cash paid to and on behalf of employee		29,232,449.13	26,809,068.38
Cash paid for taxes		15,338,998.87	14,275,590.40
Cash paid related to other operating activities	Note 43	14,847,878.44	18,895,146.27
Subtotal of cash outflow from operating activities		169,593,530.50	167,690,267.64
Net cash flows from operating activities		65,614,360.93	68,864,326.61
II. Cash flows from investing activities:
Cash received from disposal of investment		12,000,000.00	210,000,000.00
Cash received from return on investment			2,153,943.92
Net cash received from disposal of fixed assets,
intangible assets and other long-term assets		454,530.00
Net cash received from disposal of subsidiaries
and other operating units
Other cash received in connection with investing
activities	Note 43		3,000,000.00
Subtotal of cash inflow from investing activities		12,454,530.00	215,153,943.92
Cash paid for purchase and construction of fixed
assets, intangible assets and other long-term
assets		180,485,800.61	107,869,890.13
Cash paid for investments			219,200,000.00
Cash Paid for disposal of subsidiaries and other
business units
Cash paid related to other investing activities
Subtotal of cash outflow from investing activities		180,485,800.61	327,069,890.13
Net cash flows from investing activities		-168,031,270.61	-111,915,946.21

– II-10 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Amount of Amount of Item Notes current period last period III. Cash flows from financing activities: Cash received from introducing investment Include: cash received by subsidiaries from absorbing minority shareholder’s investment Cash received for obtaining loans 96,000,000.00 81,000,000.00 Cash paid related to other financing activities Note 43 8,856,278.00 23,620,020.00 Subtotal of cash inflow from financing activities 104,856,278.00 104,620,020.00 Cash paid for repayment of debts 111,000,000.00 45,200,000.00 Cash paid for distribution of dividends or profits, or repayment of interest 3,471,919.98 15,406,617.24 Include: dividend and profit paid by subsidiaries to minority shareholders Other paid cash related to financing activities Note 43 2,253,547.26 1,562,126.00 Subtotal of cash outflows from financial activities 116,725,467.24 62,168,743.24 Net cash flows from financing activities -11,869,189.24 42,451,276.76 IV. Effect of exchange rate changes on cash and cash equivalents -40,860.94 144,125.17 V. Net increase of cash and cash equivalents -114,326,959.86 -456,217.67 Plus: Cash and cash equivalents at beginning of year 325,379,442.47 325,835,660.14 VI. CASH AND CASH EQUIVALENTS AT END OF YEAR 211,052,482.61 325,379,442.47

(Notes to financial statements below are an integral part of the Consolidated Financial Statements) Legal representative: Chief Accountant: Head of Accounting

Head of Accounting Department:

– II-11 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITIES 2017

Prepared by: Tianye Innovation Corporation

Unit: RMB

Item	Notes					Amount of current period	Amount of current period
					Shareholder’s equity attributable to the parent company
					Less:	Other				Minority	Total
			Other equity	Capital	Treasury	comprehensive	Special	Surplus	Undistributed	shareholders’	shareholders’
		Share capital	instruments	reserves	shares	income	reserve	reserve	profits	equity	equities
I. Closing balance of last
year		240,000,000.00		246,300,093.95		-2,440,350.00		9,869,750.20	168,440,367.51		662,169,861.66
Add: accounting policy
changes
Correction of previous errors
Business combination under
the same control
MISCELLANEOUS
II. Opening balance of
current year		240,000,000.00		246,300,093.95		-2,440,350.00		9,869,750.20	168,440,367.51		662,169,861.66
III. Increase and decrease of
current year						2,440,350.00		653,536.20	41,429,132.38		44,523,018.58
(I) Total comprehensive
profits						2,440,350.00			42,082,668.58		44,523,018.58
(II) Capital paid in and
reduced by shareholders
1. Ordinary shares paid in by
shareholders
2. Capital paid in by holders
of other equity instruments
3. Amounts of share-based
payments recognized in
shareholders’ equity
4. Others
(III) Distribution of profits								653,536.20	-653,536.20
1. Withdrawal of surplus
reserves								653,536.20	-653,536.20
2. Distribution to shareholders
3. Others
(IV) Internal carry-forward of
shareholders’ equity
1. Capital reserve converted
into capital stock
2. Surplus reserve converted
into capital stock
3. Surplus reserves for
making up losses
4. Changes of net liabilities
or net assets in defined
benefit plan of carry-over
and re-measurement.
5. Others
(V) Reasonable reserves
1. Withdraw of current period
2. Amount used in the current
period
(VI) Others
IV. Closing balance of
current year		240,000,000.00		246,300,093.95				10,523,286.40	209,869,499.89		706,692,880.24

(Notes to financial statements below are an integral part of the Consolidated Financial Statements) Legal representative: Chief Accountant: Head of Accounting Department:

– II-12 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITIES 2017

Prepared by: Tianye Innovation Corporation

Prepared by: Tianye	Innovation	Corpor	ation						Unit: RMB
Item Notes					Amount of last period
				Shareholder’s equity attributable to the parent company
				Less:	Other				Minority	Total
		Other equity	Capital	Treasury	comprehensive	Special	Surplus	Undistributed	shareholders’	shareholders’
	Share capital	instruments	reserves	shares	income	reserve	reserve	profits	equity	equities
I. Closing balance of last
year	120,000,000.00		366,042,102.87		1,285,812.00		7,103,583.07	135,057,862.78		629,489,360.72
Add: accounting policy
changes
Correction of previous errors
Business combination under
the same control
MISCELLANEOUS
II. Opening balance of
current year	120,000,000.00		366,042,102.87		1,285,812.00		7,103,583.07	135,057,862.78		629,489,360.72
III. Increase and decrease of
current year	120,000,000.00		-119,742,008.92		-3,726,162.00		2,766,167.13	33,382,504.73		32,680,500.94
(I) Total comprehensive
profits					-3,726,162.00			48,148,671.86		44,422,509.86
(II) Capital paid in and
reduced by shareholders
1. Ordinary shares paid in by
shareholders
2. Capital paid in by holders
of other equity instruments
3. Amounts of share-based
payments recognized in
shareholders’ equity
4. Others
(III) Distribution of profits							2,766,167.13	-14,766,167.13		-12,000,000.00
1. Withdrawal of surplus
reserves							2,766,167.13	-2,766,167.13
2. Distribution to shareholders								-12,000,000.00		-12,000,000.00
3. Others
(IV) Internal carry-forward of
shareholders’ equity	120,000,000.00		-120,000,000.00
1. Capital reserve converted
into capital stock	120,000,000.00		-120,000,000.00
2. Surplus reserve converted
into capital stock
3. Surplus reserves for
making up losses
4. Changes of net liabilities
or net assets in defined
benefit plan of carry-over
and re-measurement.
5. Others
(V) Reasonable reserves
1. Withdraw of current period
2. Amount used in the current
period
(VI) Others			257,991.08							257,991.08
IV. Closing balance of
current year	240,000,000.00		246,300,093.95		-2,440,350.00		9,869,750.20	168,440,367.51		662,169,861.66

(Notes to financial statements below are an integral part of the Consolidated Financial Statements) Legal representative: Chief Accountant: Head of Accounting Department:

– II-13 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

BALANCE SHEET OF THE PARENT COMPANY

December 31, 2017

Prepared by: Tianye Innovation Corporation

Prepared by: Tianye Innovation Corporation Assets Notes Current assets: Monetary funds Financial assets measured at fair value with changes included in the current profits and losses Derivative financial assets Notes receivable Accounts receivable Note 1 Prepayments Interests receivable Dividends receivable Other receivables Note 2 Inventories Held-for-sale assets Non-current assets due within one year Other current assets Total current assets Non-current assets: Available-for-sale financial assets Held-to-maturity investment Long-term receivables Long-term equity investment Note 3 Investment properties Fixed assets Construction in progress Engineering materials Liquidation of fixed assets Productive biological assets Oil & gas assets Intangible assets Development expenses Goodwill Long-term expenses to be amortized Long-term deferred expenses Other non-current assets Total non-current assets Total assets	Closing balance 102,001,263.28 22,893,672.26 176,078.72 284,122,869.33 27,562,352.76 3,292.57 436,759,528.92 143,125,234.72 83,174,647.73 11,214,729.35 355,870.51 2,315,563.50 240,186,045.81 676,945,574.73	Unit: RMB Opening balance 258,000,049.91 22,035,480.09 696,759.59 91,103,811.34 25,194,973.06 188,506.33
		397,219,580.32
		156,332,379.78 88,354,827.97 1,635,208.24 11,504,766.07 607,557.05 1,562,126.00 259,996,865.11
		657,216,445.43

(Notes to financial statements below are an integral part of the Consolidated Financial Statements) Legal representative: Chief Accountant: Head of Accounting Department:

– II-14 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

BALANCE SHEET OF THE PARENT COMPANY (CONT.)

December 31, 2017

Prepared by: Tianye Innovation Corporation Liabilities and shareholders’ equity Notes Current liabilities: Short-term loans Financial liabilities measured at fair value with changes included in the current profits and losses Derivative financial liabilities Notes payable Accounts payable Advances from customers Payroll and employee benefits payable Taxes payable Interest payable Dividends payable Other payables Holding-for-sale liabilities Current portion of non-current liabilities Other current liabilities Total current liabilities Non-current liabilities: Long-term loans Bonds payable Including: preferred stocks Including: perpetual bonds Long-term accounts payable Long-term employee compensation Special payables Estimated liabilities Deferred income Deferred income tax liabilities Other non-current liabilities Total non-current liabilities Total liabilities Shareholders’ equity: Share capital Other equity instruments Include: preferred stocks Including: perpetual bonds Capital reserves Less: Treasury shares Other comprehensive income Special reserve Surplus reserve Undistributed profits Total shareholders’ equities Total liabilities and shareholders’ equities	Closing balance 36,000,000.00 13,166,447.80 2,757,385.21 1,377,141.48 1,279,890.09 43,454,490.58 98,035,355.16 1,567,628.87 1,567,628.87 99,602,984.03 240,000,000.00 244,109,726.71 10,523,286.40 82,709,577.59 577,342,590.70 676,945,574.73	Unit: RMB Opening balance 36,000,000.00 7,418,922.19 1,623,531.46 1,067,773.20 2,117,979.98 40,161,359.92
		88,389,566.75
		460,000.00
		460,000.00
		88,849,566.75
		240,000,000.00 244,109,726.71 -2,440,350.00 9,869,750.20 76,827,751.77
		568,366,878.68
		657,216,445.43

(Notes to financial statements below are an integral part of the Consolidated Financial Statements) Legal representative: Chief Accountant: Head of Accounting Department:

– II-15 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

INCOME STATEMENT OF THE PARENT COMPANY

2017

Prepared by: Tianye Innovation Corporation

Prepared by: Tianye Innovation Corporation Item Notes I. Operating revenue Note 4 Less: operating cost Note 4 Taxes and surcharges Selling expenses General and administrative expenses Financial expenses Assets impairment loss Add: income from changes in fair value Investment income Note 5 Include: investment income from affiliates and joint ventures Assets disposal income Other income II. Operating profit Add: Non-operating income Less: non-operating expenses III. Total profits Less: Income tax expense IV. Net profit Including: net profit of continuing operation Net profits from discontinuing operation V. After-tax net amount of other comprehensive income (I) Other comprehensive income not allowed to be re-classified into profits and losses in the future 1. Changes from remeasuring the net liabilities or net assets of defined benefit plans 2. Share of other comprehensive income not allowed to be re-classified into profit and loss of the invested company as per equity laws 3. ⋯⋯ (II) Other comprehensive income allowed to be re-classified into profit and loss in the future 1. Share of other comprehensive income to be re-classified into profit and loss of the invested company as per equity laws 2. Gains and losses from changes in fair value of available-for-sale financial assets 3. Profits and losses of salable financial asset re-classified from the investments which will be held to their maturity 4. Losses and profits of cash flow hedging in force 5. Balance arising from the translation of foreign currency financial statements 6. Package deal disposal of income from equity investment to subsidiaries before the loss of control right 7. ⋯⋯ VI. Total comprehensive incomes	Amount of current period 93,159,791.94 62,035,114.85 1,222,651.51 3,043,515.89 9,911,686.56 905,197.02 10,288,676.83 1,152,130.51 1,338,913.13 8,243,992.92 550,502.99 7,693,489.93 1,158,127.91 6,535,362.02 6,535,362.02 2,440,350.00 2,440,350.00 2,440,350.00 8,975,712.02	Unit: RMB Amount of last period 103,999,173.41 71,347,955.68 978,319.64 2,271,725.21 11,898,899.34 873,777.33 -11,322,606.51 2,693,485.87 573,569.35 30,644,588.59 596,268.50 54,636.24 31,186,220.85 3,524,549.57 27,661,671.28 27,661,671.28 -3,726,162.00 -3,726,162.00 -3,726,162.00
		23,935,509.28

(Notes to financial statements below are an integral part of the Consolidated Financial Statements) Legal representative: Chief Accountant: Head of Accounting Department:

– II-16 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

CASH FLOW STATEMENT OF THE PARENT COMPANY 2017

Prepared by: Tianye Innovation Corporation

Prepared by: Tianye Innovation Corporation			Unit: RMB
		Amount of	Amount of last
Item	Notes	current period	period
I. Cash flows from operating activities:
Cash received from the sale of goods or rendering of services		108,069,283.49	112,490,776.66
Taxes refunds received		818,491.93	1,200,310.94
Other cash received relating to business activities		23,577,937.92	119,809,201.61
Subtotal of cash inflow from operating activities		132,465,713.34	233,500,289.21
Cash paid for purchase of goods and services		50,565,706.44	54,911,000.86
Cash paid to and on behalf of employee		12,980,570.78	11,106,090.72
Cash paid for taxes		9,758,387.14	7,465,730.82
Cash paid related to other operating activities		218,429,538.62	108,975,349.32
Subtotal of cash outflow from operating activities		291,734,202.98	182,458,171.72
Net cash flows from operating activities		-159,268,489.64	51,042,117.49
II. Cash flows from investing activities:
Cash received from disposal of investment		12,000,000.00	190,000,000.00
Cash received from return on investment			2,119,916.52
Net cash received from disposal of fixed assets, intangible
assets and other long-term assets
Net cash received from disposal of subsidiaries and other
operating units
Other cash received in connection with investing activities			3,000,000.00
Subtotal of cash inflow from investing activities		12,000,000.00	195,119,916.52
Cash paid for purchase and construction of fixed assets,
intangible assets and other long-term assets		1,052,056.04	3,720,628.38
Cash paid for investments		5,000,000.00	263,700,000.00
Cash Paid for disposal of subsidiaries and other business units
Cash paid related to other investing activities
Subtotal of cash outflow from investing activities		6,052,056.04	267,420,628.38
Net cash flows from investing activities		5,947,943.96	-72,300,711.86
III. Cash flows from financing activities:
Cash received from introducing investment
Cash received for obtaining loans		36,000,000.00	36,000,000.00
Cash paid related to other financing activities		1,200,000.00
Subtotal of cash inflow from financing activities		37,200,000.00	36,000,000.00
Cash paid for repayment of debts		36,000,000.00	30,000,000.00
Cash paid for distribution of dividends or profits, or
repayment of interest		1,593,795.00	13,635,331.25
Other paid cash related to financing activities		2,253,547.26	1,562,126.00
Subtotal of cash outflows from financial activities		39,847,342.26	45,197,457.25
Net cash flows from financing activities		-2,647,342.26	-9,197,457.25
IV. Effect of exchange rate changes on cash and cash
equivalents		-30,898.69	89,441.41
V. Net increase of cash and cash equivalents		-155,998,786.63	-30,366,610.21
Plus: Cash and cash equivalents at beginning of year		258,000,049.91	288,366,660.12
VI. CASH AND CASH EQUIVALENTS AT END OF YEAR		102,001,263.28	258,000,049.91

(Notes to financial statements below are an integral part of the Consolidated Financial Statements) Legal representative: Chief Accountant: Head of Accounting Department:

– II-17 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY OF THE PARENT COMPANY 2017

Prepared by: Tianye Innovation Corporation

Unit: RMB

					Amount of current period	Amount of current period
					Less:	Other				Total
			Other equity	Capital	Treasury	comprehensive	Special	Surplus	Undistributed	shareholders’
Item	Notes	Share capital	instruments	reserves	shares	income	reserve	reserve	profits	equities
I. Closing balance of last year		240,000,000.00		244,109,726.71		-2,440,350.00		9,869,750.20	76,827,751.77	568,366,878.68
Add: accounting policy changes
Correction of previous errors
MISCELLANEOUS
II. Opening balance of current year		240,000,000.00		244,109,726.71		-2,440,350.00		9,869,750.20	76,827,751.77	568,366,878.68
III. Increase and decrease of current year						2,440,350.00		653,536.20	5,881,825.82	8,975,712.02
(I) Total comprehensive profits						2,440,350.00			6,535,362.02	8,975,712.02
(II) Capital paid in and reduced by
shareholders
1. Ordinary shares paid in by shareholders
2. Capital paid in by holders of other equity
instruments
3. Amounts of share-based payments
recognized in shareholders’ equity
4. Others
(III) Distribution of profits								653,536.20	-653,536.20
1. Withdrawal of surplus reserves								653,536.20	-653,536.20
2. Distribution to shareholders
3. Others
(IV) Internal carry-forward of shareholders’
equity
1. Capital reserve converted into capital stock
2. Surplus reserve converted into capital stock
3. Surplus reserves for making up losses
4. Changes of net liabilities or net assets in
defined benefit plan of carry-over and
re-measurement.
5. Others
(V) Reasonable reserves
1. Withdraw of current period
2. Amount used in the current period
(VI) Others
IV. Closing balance of current year		240,000,000.00		244,109,726.71				10,523,286.40	82,709,577.59	577,342,590.70

– II-18 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY OF THE PARENT COMPANY 2017

Prepared by: Tianye Innovation Corporation

Unit: RMB

					Amount of last period	Amount of last period
					Less:	Other				Total
			Other equity	Capital	Treasury	comprehensive	Special	Surplus	Undistributed	shareholders’
Item	Notes	Share capital	instruments	reserves	shares	income	reserve	reserve	profits	equities
I. Closing balance of last year		120,000,000.00		364,109,726.71		1,285,812.00		7,103,583.07	63,932,247.62	556,431,369.40
Add: accounting policy changes
Correction of previous errors
MISCELLANEOUS
II. Opening balance of current year		120,000,000.00		364,109,726.71		1,285,812.00		7,103,583.07	63,932,247.62	556,431,369.40
III. Increase and decrease of current year		120,000,000.00		-120,000,000.00		-3,726,162.00		2,766,167.13	12,895,504.15	11,935,509.28
(I) Total comprehensive profits						-3,726,162.00			27,661,671.28	23,935,509.28
(II) Capital paid in and reduced by
shareholders
1. Ordinary shares paid in by shareholders
2. Capital paid in by holders of other equity
instruments
3. Amounts of share-based payments
recognized in shareholders’ equity
4. Others
(III) Distribution of profits								2,766,167.13	-14,766,167.13	-12,000,000.00
1. Withdrawal of surplus reserves								2,766,167.13	-2,766,167.13
2. Distribution to shareholders									-12,000,000.00	-12,000,000.00
3. Others
(IV) Internal carry-forward of shareholders’
equity		120,000,000.00		-120,000,000.00						0.00
1. Capital reserve converted into capital stock		120,000,000.00		-120,000,000.00
2. Surplus reserve converted into capital stock
3. Surplus reserves for making up losses
4. Changes of net liabilities or net assets in
defined benefit plan of carry-over and
re-measurement.
5. Others
(V) Reasonable reserves
1. Withdraw of current period
2. Amount used in the current period
(VI) Others
IV. Closing balance of current year		240,000,000.00		244,109,726.71		-2,440,350.00		9,869,750.20	76,827,751.77	568,366,878.68

– II-19 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

TIANYE INNOVATION CORPORATION NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017

I. GENERAL INFORMATION OF THE COMPANY

(I) Company profile

1. Limited company stage

Tianye Innovation Corporation (hereinafter referred to as “ the Company ”), formerly Beihai Tianye Food Co., Ltd., was jointly established by Guangxi Tianye Science and Technology Seed Industry Co., Ltd., Yao Jiuzhi, Huo Weidong and Liu Youqiang. On January 23, 2007, the Company obtained the Business License of Enterprise Legal Person (Q) No. 450500000005715 issued by Beihai Administration for Industry and Commerce. The registered capital is RMB2 million, and all shareholders contributed RMB2 million, accounting for 100.00% of the registered capital. The capital contribution has been verified by the Capital Verification Report (BZKYZ [2007] No. 006) issued by Beihai Zhucheng (Joint) Accounting Firm. The shareholding status of each shareholder is as follows:

Shareholder Guangxi Tianye Science and Technology Seed Industry Co., Ltd. Huo Weidong Liu Youqiang Yao Jiuzhi Total	Contribution (RMB10,000) 170.00 10.00 10.00 10.00 200.00	Proportion (%) 85.00 5.00 5.00 5.00
		100.00

On April 15, 2009, the Company’s Board of Shareholders resolved to increase the registered capital by RMB8 million, and Guangxi Tianye Science and Technology Seed Industry Co., Ltd. increased the capital by RMB8 million in cash; this capital increase has been verified by the Capital Verification Report (ZHYZ [2009] No. 210) issued by Qinzhou Zhongheng Joint Accounting Firm. The shareholding status of each shareholder after capital increase is as follows:

Shareholder Guangxi Tianye Science and Technology Seed Industry Co., Ltd. Huo Weidong Liu Youqiang Yao Jiuzhi Total	Contribution (RMB10,000) 970.00 10.00 10.00 10.00 1,000.00	Proportion (%) 97.00 1.00 1.00 1.00
		100.00

– II-20 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

On May 6, 2009, the Company’s Board of Shareholders resolved that Guangxi Tianye Science and Technology Seed Industry Co., Ltd. accepted all the equities of the Company held by Yao Jiuzhi, Huo Weidong and Liu Youqiang. The shareholding status of each shareholder after the change is as follows:

Shareholder Guangxi Tianye Science and Technology Seed Industry Co., Ltd. Total	Contribution (RMB10,000) 1,000.00 1,000.00	Proportion (%) 100.00
		100.00

On August 11, 2011, the Company’s Board of Shareholders resolved to increase the registered capital by RMB32.6 million, with Guangxi Tianye Science and Technology Seed Industry Co., Ltd. contributing RMB25 million in kind and Yao Jiuzhi contributing RMB7.6 million in cash. Among them, Yao Jiuzhi contributed RMB7.6 million in cash for the first capital increase, and Guangxi Tianye Science and Technology Seed Industry Co., Ltd. completed the capital contribution within 2 years. This capital increase has been verified by the Capital Verification Report (ZXSYZ [2011] No. 046) issued by Shenzhen Branch of Zhongxi Certified Public Accountants Co., Ltd. The above-mentioned in-kind capital contribution has been appraised by the Assets Appraisal Report (ZLPBZ [2011] No. 493) issued by China United Assets Appraisal Group Co., Ltd., and as of October 28, 2011, the property rights procedures had been changed; after that, in order to confirm the change of property rights of the in-kind contribution assets, the Shenzhen Branch of Zhongxi Certified Public Accountants Co., Ltd. issued the Capital Verification Report (ZXSYZ [2012] No. 003). After the capital increase is completed, the registered capital of the industrially and commercially registered company is RMB42.6 million, and the shareholding status of each shareholder is as follows:

Shareholder Guangxi Tianye Science and Technology Seed Industry Co., Ltd. Yao Jiuzhi Total	Contribution (RMB10,000) 3,500.00 760.00 4,260.00	Proportion (%) 82.16 17.84
		100.00

On September 2, 2011, the Company’s Board of Shareholders resolved to increase the registered capital by RMB12.4 million, which was contributed in cash by natural persons Cheng Cheng, Wu Zhonglin, Guo Shanjie, Zhang Pei, Chen Yu, Li Zhenghua, Zhang Jinfeng, Zhao Yongli, Han Kaifeng, Lv Lingling, Huang Huiqiong, Li Junli, Rao Guizhong, Zhao Fagui, Wu Dongfeng, Wu Yanping and Wu Qingwen, Chen Junrong, Zhu Rong, Wang Jianxin, Zhao Fayu, Nong Xiancheng, Wang Jianfeng; this capital increase has been verified by the Capital Verification Report (ZXSYZ [2011] No. 051) issued by Shenzhen Branch of Zhongxi Certified Public Accountants Co., Ltd. The shareholding status of each shareholder after capital increase is as follows:

Shareholder	Contribution	Proportion
	(RMB10,000)	(%)
Guangxi Tianye Science and
Technology Seed Industry Co., Ltd.	3,500.00	63.64
Yao Jiuzhi	760.00	13.82
Cheng Cheng	230.00	4.18

– II-21 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Shareholder Wu Zhonglin Chen Yu Huang Huiqiong Lv Lingling Han Kaifeng Li Zhenghua Zhang Jinfeng Zhao Yongli Li Junli Guo Shanjie Wu Dongfeng Rao Guizhong Zhao Fagui Wang Jianfeng Wu Qingwen Wang Jianxin Zhang Pei Wu Yanping Chen Junrong Zhu Rong Zhao Fayu Nong Xiancheng Total	Contribution (RMB10,000) 160.00 150.00 120.00 100.00 80.00 60.00 60.00 60.00 50.00 20.00 20.00 19.00 19.00 19.00 11.00 11.00 10.00 10.00 10.00 10.00 6.00 5.00 5,500.00	Proportion (%) 2.91 2.73 2.18 1.82 1.45 1.09 1.09 1.09 0.91 0.36 0.36 0.35 0.35 0.35 0.20 0.20 0.18 0.18 0.18 0.18 0.11 0.09
		100.00

On September 15, 2011, the Company’s Board of Shareholders resolved to approve the transfer of 1.27% equity of the Company held by Yao Jiuzhi to Li Junli, and the transfer of 3.64% equity of the Company held by Yao Jiuzhi to Beijing Zhonghe Zhengxi Investment Consulting Co., Ltd.

On October 8, 2011, the Company’s Board of Shareholders resolved to increase the registered capital by RMB5 million, which was contributed in cash by Tongji Huacheng Venture Capital (Beijing) Co., Ltd., Su Songqing and Chen Zuren; this capital increase was verified by the Capital Verification Report (ZXSYZ [2011] No. 055) issued by Shenzhen Branch of Zhongxi Certified Public Accountants Co., Ltd. The shareholding status of each shareholder after capital increase is as follows:

Shareholder	Contribution	Proportion
	(RMB10,000)	(%)
Guangxi Tianye Science and
Technology Seed Industry Co., Ltd.	3,500.00	58.33
Yao Jiuzhi	490.00	8.17
Cheng Cheng	230.00	3.83
Beijing Zhonghe Zhengxi Investment Consulting Co., Ltd.	200.00	3.33
Tongji Huacheng Venture Capital (Beijing) Co., Ltd.	200.00	3.33
Wu Zhonglin	160.00	2.67

– II-22 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Shareholder

Shareholder Chen Yu Su Songqing Chen Zuren Huang Huiqiong Li Junli Lv Lingling Han Kaifeng Li Zhenghua Zhang Jinfeng Zhao Yongli Guo Shanjie Wu Dongfeng Rao Guizhong Zhao Fagui Wang Jianfeng Wu Qingwen Wang Jianxin Zhang Pei Wu Yanping Chen Junrong Zhu Rong Zhao Fayu Nong Xiancheng Total	Contribution (RMB10,000) 150.00 150.00 150.00 120.00 120.00 100.00 80.00 60.00 60.00 60.00 20.00 20.00 19.00 19.00 19.00 11.00 11.00 10.00 10.00 10.00 10.00 6.00 5.00 6,000.00	Proportion (%) 2.50 2.50 2.50 2.00 2.00 1.67 1.33 1.00 1.00 1.00 0.33 0.33 0.32 0.32 0.32 0.18 0.18 0.17 0.17 0.17 0.17 0.10 0.08
		100.00

On November 23, 2011, the Company’s Board of Shareholders resolved to increase the registered capital by RMB7 million, in which, RMB5 million was contributed by Beijing Qiuyin Datong Investment Management Center (L.P.) in cash and RMB2 million by Zhang Jun in cash. This capital increase has been verified by the Capital Verification Report (ZXSYZ [2011] No. 060) issued by Shenzhen Branch of Zhongxi Certified Public Accountants Co., Ltd. The shareholding status of each shareholder after capital increase is as follows:

Shareholder	Contribution	Proportion
	(RMB10,000)	(%)
Guangxi Tianye Science and
Technology Seed Industry Co., Ltd.	3,500.00	52.24
Beijing Qiuyin Datong Investment Management Center (L.P.)	500.00	7.46
Yao Jiuzhi	490.00	7.31
Cheng Cheng	230.00	3.43

– II-23 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Shareholder

Shareholder Beijing Zhonghe Zhengxi Investment Consulting Co., Ltd. Tongji Huacheng Venture Capital (Beijing) Co., Ltd. Zhang Jun Wu Zhonglin Chen Yu Su Songqing Chen Zuren Huang Huiqiong Li Junli Lv Lingling Han Kaifeng Li Zhenghua Zhang Jinfeng Zhao Yongli Guo Shanjie Wu Dongfeng Rao Guizhong Zhao Fagui Wang Jianfeng Wu Qingwen Wang Jianxin Zhang Pei Wu Yanping Chen Junrong Zhu Rong Zhao Fayu Nong Xiancheng Total	Contribution (RMB10,000) 200.00 200.00 200.00 160.00 150.00 150.00 150.00 120.00 120.00 100.00 80.00 60.00 60.00 60.00 20.00 20.00 19.00 19.00 19.00 11.00 11.00 10.00 10.00 10.00 10.00 6.00 5.00 6,700.00	Proportion (%) 2.99 2.99 2.99 2.39 2.24 2.24 2.24 1.79 1.79 1.49 1.19 0.90 0.90 0.90 0.30 0.30 0.28 0.28 0.28 0.16 0.16 0.15 0.15 0.15 0.15 0.09 0.07
		100.00

On December 16, 2011, the Company’s Board of Shareholders resolved that shareholder Wu Qingwen transferred his 0.01% equity (i.e. RMB10,000) to Zhao Fagui, Zhao Fayu transferred his 0.01% equity (i.e. RMB10,000) to Zhao Fagui, and Wang Jianxin transferred his 0.01% equity (i.e. RMB10,000) to Wang Jianfeng. It is agreed to increase the registered capital by RMB3 million,

– II-24 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

and such RMB3 million was contributed by Beijing Haiyan Lifang Venture Capital Center (Limited Partnership) in cash. This capital increase has been verified by the Capital Verification Report (ZXSYZ [2011] No. 063) issued by Shenzhen Branch of Zhongxi Certified Public Accountants Co., Ltd. The shareholding status of each shareholder after capital increase is as follows:

Shareholder Guangxi Tianye Science and Technology Seed Industry Co., Ltd. Beijing Qiuyin Datong Investment Management Center (L.P.) Yao Jiuzhi Beijing Haiyan Lifang Venture Capital Center (Limited Partnership) Cheng Cheng Beijing Zhonghe Zhengxi Investment Consulting Co., Ltd. Tongji Huacheng Venture Capital (Beijing) Co., Ltd. Zhang Jun Wu Zhonglin Chen Yu Su Songqing Chen Zuren Huang Huiqiong Li Junli Lv Lingling Han Kaifeng Li Zhenghua Zhang Jinfeng Zhao Yongli Zhao Fagui Guo Shanjie Wu Dongfeng Wang Jianfeng Rao Guizhong Wu Qingwen Wang Jianxin Zhang Pei Wu Yanping Chen Junrong Zhu Rong Zhao Fayu Nong Xiancheng Total	Contribution (RMB10,000) 3,500.00 500.00 490.00 300.00 230.00 200.00 200.00 200.00 160.00 150.00 150.00 150.00 120.00 120.00 100.00 80.00 60.00 60.00 60.00 21.00 20.00 20.00 20.00 19.00 10.00 10.00 10.00 10.00 10.00 10.00 5.00 5.00 7,000.00	Proportion (%) 50.00 7.14 7.00 4.29 3.29 2.86 2.86 2.86 2.29 2.14 2.14 2.14 1.71 1.71 1.43 1.14 0.86 0.86 0.86 0.30 0.29 0.29 0.29 0.27 0.14 0.14 0.14 0.14 0.14 0.14 0.07 0.07
		100.00

On June 27, 2012, the Company’s Board of Shareholders resolved that Wu Dongfeng transferred his 0.29% equity to Rao Guizhong, Zhao Fayu transferred his 0.07% equity to Rao Guizhong, Wu Yanping transferred his 0.14% equity to Rao Guizhong, Nong Xiancheng transferred his 0.07% equity to Rao Guizhong, Chen Junrong transferred his 0.14% equity to Rao Guizhong, Zhu Rong transferred his 0.14% equity to Rao Guizhong, Wang Jianxin transferred his 0.14%

– II-25 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

equity to Rao Guizhong, Wu Qingwen transferred his 0.14% equity to Rao Guizhong, Zhao Fagui transferred his 0.07% equity to Rao Guizhong, Zhao Fagui transferred his 0.23% equity to Lan Haikun, and Cheng Cheng transferred his 3.29% equity to Qi Xiaohong.

On June 27, 2012, the Company’s Board of Shareholders resolved to increase the registered capital by RMB15 million, which was contributed by all equities of Hainan Dachuan Food Co., Ltd. held by natural persons Shan Dan, Li Guangjiang, Li Ruiqi, Zhao Ruijun, Fan Jia, Fu Yu, Dong Ailin, Ding Zhulan, Cao Dongmei, Zeng Jun, Zhang Dewei, Wu Kaixiong, He Zhenshu, Zhou Chongyuan, Zheng Dingcheng, Fu Duanyao, Lin Xueyun, Du Jindong, Zhang Yimin, Li Xiaobei, Xiao Jin, Liu Ping, Huang Zenghua, Huang Huifang, Chen Jie and Shi Mingyuan.

The valuable consideration of this capital increase was calculated based on the Assets Appraisal Report of the Shareholders’ Equity Value Assessment Project Involved in the Capital Increase of Beihai Tianye Food Co., Ltd. (ZLPBZ [2012] No. 391) and the Assets Appraisal Report of the Proposed Equity Project by Beihai Tianye Food Co., Ltd. for Replacing Hainan Dachuan Food Co., Ltd. by Capital Increase (ZLPBZ [2012] No. 392) issued by China United Assets Appraisal Group Co., Ltd. on June 13, 2012 (the base date of appraisal: March 31, 2012).

This capital increase has been verified by the Capital Verification Report (ZXSYZ [2012] No. 024) issued by Shenzhen Branch of Zhongxi Certified Public Accountants Co., Ltd. The shareholding status of each shareholder after capital increase is as follows:

Shareholder

Shareholder	Contribution	Proportion
	(RMB10,000)	(%)
Guangxi Tianye Science and
Technology Seed Industry Co., Ltd.	3,500.00	41.18
Beijing Qiuyin Datong Investment Management Center (L.P.)	500.00	5.88
Yao Jiuzhi	490.00	5.76
Beijing Haiyan Lifang Venture Capital Center (Limited
Partnership)	300.00	3.53
Beijing Zhonghe Zhengxi Investment Consulting Co., Ltd.	200.00	2.35
Tongji Huacheng Venture Capital (Beijing) Co., Ltd.	200.00	2.35
Zhang Jun	200.00	2.35
Wu Zhonglin	160.00	1.88
Chen Yu	150.00	1.76
Su Songqing	150.00	1.76
Chen Zuren	150.00	1.76
Huang Huiqiong	120.00	1.41
Li Junli	120.00	1.41
Lv Lingling	100.00	1.18
Han Kaifeng	80.00	0.94
Li Zhenghua	60.00	0.71
Zhang Jinfeng	60.00	0.71
Zhao Yongli	60.00	0.71
Guo Shanjie	20.00	0.24
Wang Jianfeng	20.00	0.24
Rao Guizhong	104.00	1.22
Zhang Pei	10.00	0.12
Shan Dan	420.00	4.94
Li Guangjiang	205.00	2.41
Li Ruiqi	200.00	2.35
Xiao Jin	200.00	2.35
Huang Zenghua	102.00	1.20
Zhao Ruijun	100.00	1.18

– II-26 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Shareholder Huang Huifang Liu Ping Du Jindong Shi Mingyuan Zhang Yimin Li Xiaobei Fan Jia Fu Yu Chen Jie Dong Ailin He Zhenshu Ding Zhulan Cao Dongmei Zeng Jun Zhou Chongyuan Zheng Dingcheng Fu Duanyao Zhang Dewei Wu Kaixiong Lin Xueyun Lan Haikun Qi Xiaohong Total	Contribution (RMB10,000) 55.00 45.50 31.25 25.00 18.75 12.50 10.00 10.00 10.00 8.00 8.00 7.00 5.00 5.00 5.00 5.00 5.00 3.00 2.00 2.00 16.00 230.00 8,500.00	Proportion (%) 0.65 0.54 0.37 0.29 0.22 0.15 0.12 0.12 0.12 0.09 0.09 0.08 0.06 0.06 0.06 0.06 0.06 0.04 0.02 0.02 0.19 2.71
		100.00

On August 16, 2012, the Company’s Board of Shareholders resolved to approve the transfer of 1% equity of the Company held by Rao Guizhong to Yao Jiuzhi.

2. Reform of shareholding system

On September 24, 2012, the founding meeting and the first general meeting of shareholders of Tianye Innovation Corporation passed a resolution: all shareholders of Beihai Tianye Food Co., Ltd., as initiators and according to the audited net assets of RMB186,609,726.71 (i.e. 85,000,000 shares) of Beihai Tianye Food Co., Ltd. as of August 31, 2012, change the company into a joint stock limited company according to law; the term of operation of the company is changed to permanent existence. On September 24, 2012, Shenzhen Branch of Zhongxi Certified Public Accountants Co., Ltd. issued the Capital Verification Report (ZXSYZ [2012] No. 043) to verify this overall change of the capital contribution. On September 25, 2012, Tianye Innovation Corporation completed the change of industrial and commercial registration in Beihai Administration for Industry and Commerce, and obtained the Business License of Enterprise Legal Person with the registration number of 450500000005715. The shareholding status of each shareholder after the change is as follows:

		Number of
S/N	Shareholder	shares held	Proportion
		(10,000 shares)	(%)
1	Guangxi Tianye Science and Technology Seed
	Industry Co., Ltd.	3,500.00	41.18
2	Beijing Qiuyin Datong Investment Management
	Center (L.P.)	500.00	5.88
3	Yao Jiuzhi	575.00	6.76

– II-27 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

S/N Shareholder 4 Shan Dan 5 Beijing Haiyan Lifang Venture Capital Center (Limited Partnership) 6 Qi Xiaohong 7 Li Guangjiang 8 Beijing Zhonghe Zhengxi Investment Consulting Co., Ltd. 9 Tongji Huacheng Venture Capital (Beijing) Co., Ltd. 10 Zhang Jun 11 Li Ruiqi 12 Xiao Jin 13 Wu Zhonglin 14 Chen Yu 15 Su Songqing 16 Chen Zuren 17 Huang Huiqiong 18 Li Junli 19 Rao Guizhong 20 Huang Zenghua 21 Lv Lingling 22 Zhao Ruijun 23 Han Kaifeng 24 Li Zhenghua 25 Zhang Jinfeng 26 Zhao Yongli 27 Huang Huifang 28 Liu Ping 29 Du Jindong 30 Shi Mingyuan 31 Guo Shanjie 32 Wang Jianfeng 33 Zhang Yimin 34 Lan Haikun 35 Li Xiaobei 36 Zhang Pei 37 Fan Jia 38 Fu Yu 39 Chen Jie 40 Dong Ailin 41 He Zhenshu 42 Ding Zhulan 43 Cao Dongmei 44 Zeng Jun 45 Zhou Chongyuan 46 Zheng Dingcheng 47 Fu Duanyao 48 Zhang Dewei 49 Wu Kaixiong 50 Lin Xueyun Total	Number of shares held (10,000 shares) 420.00 300.00 230.00 205.00 200.00 200.00 200.00 200.00 200.00 160.00 150.00 150.00 150.00 120.00 120.00 19.00 102.00 100.00 100.00 80.00 60.00 60.00 60.00 55.00 45.50 31.25 25.00 20.00 20.00 18.75 16.00 12.50 10.00 10.00 10.00 10.00 8.00 8.00 7.00 5.00 5.00 5.00 5.00 5.00 3.00 2.00 2.00 8,500.00	Proportion (%) 4.94 3.53 2.71 2.41 2.35 2.35 2.35 2.35 2.35 1.88 1.76 1.76 1.76 1.41 1.41 0.22 1.20 1.18 1.18 0.94 0.71 0.71 0.71 0.65 0.54 0.37 0.29 0.24 0.24 0.22 0.19 0.15 0.12 0.12 0.12 0.12 0.09 0.09 0.08 0.06 0.06 0.06 0.06 0.06 0.04 0.02 0.02
		100.00

– II-28 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

On November 26, 2013, Yao Jiuzhi signed the Equity Transfer Contract with Wu Dongfeng, Wu Qingwen, Zhu Rong, Wang Jianxin, Chen Junrong, Wu Yanping, Zhao Fayu, Nong Xiancheng, Zhao Fagui and Rao Guizhong respectively, and agreed to transfer 200,000 shares to the new shareholder Wu Dongfeng, 100,000 shares to the new shareholder Wu Qingwen, 100,000 shares to the new shareholder Zhu Rong, 100,000 shares to new shareholder Wang Jianxin, 100,000 shares to the new shareholder Chen Junrong, 100,000 shares to the new shareholder Wu Yanping, 50,000 shares to the new shareholder Zhao Fayu, 50,000 shares to the new shareholder Nong Xiancheng, 40,000 shares to the new shareholder Zhao Fagui and 10,000 shares to shareholder Rao Guizhong; the Company changed the Register of Shareholders accordingly.

On December 28, 2013, Guangxi Tianye Science and Technology Seed Industry Co., Ltd. signed the Equity Transfer Contract with Yao Yuzhi, Zhao Ying, Guo Nan, Li Xingping, Li Zhiqi, Li Huiyun and Ginkgo Bo Rong (Beijing) Technology Co., Ltd., and agreed to transfer 1.6 million shares to Yao Yuzhi, 1.2 million shares to new shareholder Zhao Ying, 1.1 million shares to new stock Dong Guonan, and 111 shares. 1 million shares were transferred to the new shareholder Yinxing Borong, 1 million shares to the new shareholder Li Zhiqi and 600,000 shares to the new shareholder Li Huiyun. Each transferee completed the payment of the share transfer consideration in January 2014, and the Company changed the Register of Shareholders accordingly. The shareholding status of each shareholder after the change is as follows:

		Number of
S/N	Shareholder	shares held	Proportion
		(10,000 shares)	(%)
1	Guangxi Tianye Science and Technology Seed
	Industry Co., Ltd.	2,740.00	32.24
2	Yao Jiuzhi	650.00	7.65
3	Beijing Qiuyin Datong Investment Management
	Center (L.P.)	500.00	5.88
4	Shan Dan	420.00	4.94
5	Beijing Haiyan Lifang Venture Capital Center
	(Limited Partnership)	300.00	3.53
6	Qi Xiaohong	230.00	2.71
7	Li Guangjiang	205.00	2.41
8	Beijing Zhonghe Zhengxi Investment Consulting
	Co., Ltd.	200.00	2.35
9	Tongji Huacheng Venture Capital (Beijing) Co., Ltd.	200.00	2.35
10	Li Ruiqi	200.00	2.35
11	Xiao Jin	200.00	2.35
12	Zhang Jun	200.00	2.35
13	Wu Zhonglin	160.00	1.88
14	Chen Yu	150.00	1.76
15	Su Songqing	150.00	1.76
16	Chen Zuren	150.00	1.76
17	Huang Huiqiong	120.00	1.41
18	Li Junli	120.00	1.41
19	Zhao Ying	120.00	1.41
20	Guo Nan	110.00	1.29
21	Li Xingping	110.00	1.29
22	Huang Zenghua	102.00	1.2
23	Lv Lingling	100.00	1.18
24	Zhao Ruijun	100.00	1.18
25	Ginkgo Bo Rong (Beijing) Technology Co., Ltd.	100.00	1.18
26	Li Zhiqi	100.00	1.18
27	Han Kaifeng	80.00	0.94

– II-29 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

S/N Shareholder 28 Li Zhenghua 29 Zhang Jinfeng 30 Zhao Yongli 31 Li Huiyun 32 Huang Huifang 33 Liu Ping 34 Du Jindong 35 Shi Mingyuan 36 Guo Shanjie 37 Wang Jianfeng 38 Wu Dongfeng 39 Rao Guizhong 40 Zhang Yimin 41 Lan Haikun 42 Li Xiaobei 43 Zhang Pei 44 Chen Jie 45 Fan Jia 46 Fu Yu 47 Wu Qingwen 48 Zhu Rong 49 Wang Jianxin 50 Chen Junrong 51 Wu Yanping 52 He Zhenshu 53 Dong Ailin 54 Ding Zhulan 55 Cao Dongmei 56 Zhou Chongyuan 57 Zheng Dingcheng 58 Fu Duanyao 59 Zeng Jun 60 Zhao Fayu 61 Nong Xiancheng 62 Zhao Fagui 63 Zhang Dewei 64 Wu Kaixiong 65 Lin Xueyun Total	Number of shares held (10,000 shares) 60.00 60.00 60.00 60.00 55.00 45.50 31.25 25.00 20.00 20.00 20.00 20.00 18.75 16.00 12.50 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 8.00 8.00 7.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 4.00 3.00 2.00 2.00 8,500.00	Proportion (%) 0.71 0.71 0.71 0.71 0.65 0.54 0.37 0.29 0.23 0.23 0.23 0.23 0.22 0.19 0.15 0.12 0.12 0.12 0.12 0.12 0.12 0.12 0.12 0.12 0.09 0.09 0.08 0.06 0.06 0.06 0.06 0.06 0.06 0.06 0.05 0.04 0.02 0.02
		100.00

Zhang Dewei, a shareholder of the Company, unfortunately died of illness in February 2013. After verification by the Company, the successors first in order were only his spouse and son. On May 6, 2014, his spouse Chu Ping issued the Confirmation Letter on Inheritance of All Shares Held by Zhang Dewei in Tianye Innovation Corporation , confirming that all the 30,000 shares held by Zhang Dewei before his death were inherited by Zhang Dewei’s son Zhang Hangrui.

On June 11, 2014, Zeng Jun signed the Equity Transfer Contract with Shan Dan for transferring 50,000 shares of the Company held by him to Shan Dan, and the Company changed the Register of Shareholders accordingly.

– II-30 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

As of December 31, 2014, the equity structure of the Company was as follows:

		Number of
S/N	Shareholder	shares held	Proportion
		(10,000 shares)	(%)
1	Guangxi Tianye Science and Technology Seed
	Industry Co., Ltd.	2,740.00	32.24
2	Yao Jiuzhi	650.00	7.65
3	Beijing Qiuyin Datong Investment Management
	Center (L.P.)	500.00	5.88
4	Shan Dan	425.00	5.00
5	Beijing Haiyan Lifang Venture Capital Center
	(Limited Partnership)	300.00	3.53
6	Qi Xiaohong	230.00	2.71
7	Li Guangjiang	205.00	2.41
8	Tongji Huacheng Venture Capital (Beijing) Co., Ltd.	200.00	2.35
9	Zhang Jun	200.00	2.35
10	Beijing Zhonghe Zhengxi Investment Consulting
	Co., Ltd.	200.00	2.35
11	Li Ruiqi	200.00	2.35
12	Xiao Jin	200.00	2.35
13	Wu Zhonglin	160.00	1.88
14	Chen Yu	150.00	1.76
15	Su Songqing	150.00	1.76
16	Chen Zuren	150.00	1.76
17	Li Junli	120.00	1.41
18	Huang Huiqiong	120.00	1.41
19	Zhao Ying	120.00	1.41
20	Guo Nan	110.00	1.29
21	Li Xingping	110.00	1.29
22	Huang Zenghua	102.00	1.20
23	Lv Lingling	100.00	1.18
24	Zhao Ruijun	100.00	1.18
25	Ginkgo Bo Rong (Beijing) Technology Co., Ltd.	100.00	1.18
26	Li Zhiqi	100.00	1.18
27	Han Kaifeng	80.00	0.94
28	Li Zhenghua	60.00	0.71
29	Zhao Yongli	60.00	0.71
30	Zhang Jinfeng	60.00	0.71
31	Li Huiyun	60.00	0.71

– II-31 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

S/N Shareholder 32 Huang Huifang 33 Liu Ping 34 Du Jindong 35 Shi Mingyuan 36 Wang Jianfeng 37 Guo Shanjie 38 Rao Guizhong 39 Wu Dongfeng 40 Zhang Yimin 41 Lan Haikun 42 Li Xiaobei 43 Zhang Pei 44 Fu Yu 45 Fan Jia 46 Chen Jie 47 Wu Qingwen 48 Zhu Rong 49 Wang Jianxin 50 Chen Junrong 51 Wu Yanping 52 He Zhenshu 53 Dong Ailin 54 Ding Zhulan 55 Cao Dongmei 56 Zhou Chongyuan 57 Zheng Dingcheng 58 Fu Duanyao 59 Zhao Fayu 60 Nong Xiancheng 61 Zhao Fagui 62 Zhang Hangrui 63 Lin Xueyun 64 Wu Kaixiong Total	Number of shares held (10,000 shares) 55.00 45.50 31.25 25.00 20.00 20.00 20.00 20.00 18.75 16.00 12.50 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 8.00 8.00 7.00 5.00 5.00 5.00 5.00 5.00 5.00 4.00 3.00 2.00 2.00 8,500.00	Proportion (%) 0.65 0.54 0.37 0.29 0.23 0.23 0.23 0.23 0.22 0.19 0.15 0.12 0.12 0.12 0.12 0.12 0.12 0.12 0.12 0.12 0.09 0.09 0.08 0.06 0.06 0.06 0.06 0.06 0.06 0.05 0.04 0.02 0.02
		100.00

– II-32 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

In May 2015, according to the proposal of the Stock Issuance Plan of Tianye Innovation Corporation reviewed and approved at the 2014 Annual General Meeting of Shareholders and the revised Articles of Association, the Company issued RMB ordinary shares with unlimited sales conditions to 43 investors including Li Xingping, Li Junli, Zhang Jun, Guo Nan, Li Guangjiang, Ginkgo Bo Rong (Beijing) Technology Co., Ltd., Caida Securities Co., Ltd. and Fangfu Growth Phase II Investment Fund, totaling 35,000,000.00 shares, with par value of each share of RMB1.00, and the subscription price of each share of RMB8.50. This time, RMB297,500,000.00 was raised, and the registered capital was changed to RMB120,000,000.00. After verification by Dahua Certified Public Accountants (Special General Partnership), as of May 28, 2015, the paid-in amount of the above 43 investors was RMB297,500,000.00, and the actual net fund raised by the Company was RMB297,450,000.00, and the Capital Verification Report (DHYZ [2015] No. 000417) was issued.

As of December 31, 2015, the equity structure of the Company was as follows:

S/N Shareholder 1 Guangxi Tianye Science and Technology Seed Industry Co., Ltd. 2 Yao Jiuzhi 3 Li Ruiqi 4 Zhang Yimin 5 Beijing Qiuyin Datong Investment Management Center (L.P.) 6 Shan Dan 7 Huang Zenghua 8 Li Qing 9 Beijing Haiyan Lifang Venture Capital Center (Limited Partnership) 10 Beijing Fangfu Capital Management Co., Ltd. 11 Other investors Total	Number of shares held (10,000 shares) 1,826.70 1,513.10 521.10 518.75 500.00 425.00 413.90 380.10 300.00 287.10 5,314.25 12,000.00	Proportion (%) 15.22 12.61 4.34 4.32 4.17 3.54 3.45 3.17 2.50 2.39 44.29
		100.00

In April 2016, according to the Company’s Profit Distribution Plan for 2015 reviewed and approved at the 2015 Annual General Meeting of Shareholders, the Company distributed cash dividend RMB1 (including tax) for every 10 shares based on the total share capital of 120 million shares as of December 31, 2015, with a total cash dividend of RMB12 million, and the remaining undistributed profits were carried over to the following years. At the same time, the capital reserve was used to increase 10 shares for every 10 shares of all shareholders, and the total increased share capital was 120 million shares. The total share capital of the Company was changed to 240 million shares after the share capital increase.

As of December 31, 2016, the equity structure of the Company was as follows:

		Number of
S/N	Shareholder	shares held	Proportion
		(10,000 shares)	(%)
1	Guangxi Tianye Science and Technology Seed
	Industry Co., Ltd.	3,018.40	12.58
2	Yao Jiuzhi	3,016.10	12.57
3	Zhang Yimin	1,000.00	4.17

– II-33 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

S/N Shareholder 4 Beijing Qiuyin Datong Investment Management Center (L.P.) 5 Shan Dan 6 Huang Zenghua 7 Li Qing 8 Gongtou Zhaochen Investment Management Co., Ltd. — Huixin Investment — Quality Modern Agriculture Contractual Type Fund 9 Qi Xiaohong 10 Beijing Fangfu Capital Management Co., Ltd. 11 Other investors Total	Number of shares held (10,000 shares) 1,000.00 850.00 800.00 760.20 454.20 442.00 400.00 12,259.10 24,000.00	Proportion (%) 4.17 3.54 3.33 3.17 1.89 1.84 1.67 51.07
		100.00

As of December 31, 2017, the equity structure of the Company was as follows:

S/N Shareholder 1 Yao Jiuzhi 2 Beijing Qiuyin Datong Investment Management Center (L.P.) 3 Menghai Zhicun Gaoyuan Tea Industry Co., Ltd. 4 Zhang Yimin 5 Shan Dan 6 Yao Linhao 7 Li Qing 8 Qi Xiaohong 9 Huang Zenghua 10 Li Ruiqi 11 Other investors Total	Number of shares held (10,000 shares) 4,252.10 1,000.00 1,000.00 975.00 850.00 800.00 760.20 439.00 428.30 421.80 13,073.60 24,000.00	Proportion (%) 17.72 4.17 4.17 4.06 3.54 3.33 3.17 1.83 1.78 1.76 54.47
		100.00

Unified Social Credit Code: 914505007968370834

Registered address: Chuangye Avenue, Hepu Industrial Park, Beihai City

Legal representative: Yao Jiuzhi

(II) Business scope

The Company’s business scope: production and sales of beverages (fruit juice and vegetable juice), quick-frozen foods [quick-frozen other foods (quick-frozen fruit and vegetable products)], dried fruits and vegetables and preserved fruits; acquisition, processing and sales of agricultural and sideline products (which can only be operated after obtaining environmental impact acceptance and fire protection permit); comprehensive development of agricultural products projects; self-management and agent for import and export of various commodities and technologies (except commodities and technologies that are restricted by the state or prohibited from import and export).

– II-34 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

(III) The nature of business and main operating activities of the Company

The Company’s main products: fruit juice, quick-frozen foods, fresh fruits, etc.

The Company belongs to the “vegetable, fruit and nut processing industry” in the “agricultural and sideline food processing industry”.

(IV) Approval of the financial statements

The financial statements have been authorized for issuance by the Board of Directors of the Company on April 16, 2018.

II. SCOPE OF CONSOLIDATED FINANCIAL STATEMENTS

During the reporting period, there were 6 subsidiaries included in the scope of consolidated financial statements, including:

			Shareholding	Ratio of
Subsidiary	Subsidiary type	Level	ratio	voting right
			(%)	(%)
Hainan Dachuan Food Co.,	Wholly-owned	1	100.00	100.00
Ltd.	subsidiary
Guangxi Tianye Innovation	Wholly-owned	1	100.00	100.00
Agricultural Technology	subsidiary
Co., Ltd.
Hainan Tianye Drinks Food	Wholly-owned	1	100.00	100.00
Sales Co. Ltd.	subsidiary
Hubei Iceman Foods Co., Ltd.	Wholly-owned	1	100.00	100.00
	subsidiary
Hubei Tianye Nonggu	Wholly-owned	1	100.00	100.00
Biological Technology Co.,	subsidiary
Ltd.
Hubei Tianye Innovation	Wholly-owned	1	100.00	100.00
Nonggu Fruit & Vegetable	subsidiary
Co., Ltd.

– II-35 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

1. Subsidiaries newly incorporated into the scope of consolidation during the reporting period

Title

Reason of changes

Hubei Tianye Innovation Nonggu Fruit & Established through investment Vegetable Co., Ltd.

Note: Refer to “Note VII. Change of consolidation scope” for details of the subject of consolidation scope change.

III. BASIS FOR THE PREPARATION OF FINANCIAL STATEMENTS

(I) Basis for the preparation

The Company prepares the financial statements on the basis of going concern, according to actual transactions and events, and in accordance with the Accounting Standards for Business Enterprises — Basic Standards and concrete accounting standards, and Accounting Standards for Business Enterprises — Application Guidelines , the Accounting Standards for Business Enterprises–Interpretations issued by the Ministry of Finance and other relevant provisions (hereinafter collectively referred to as –Accounting Standards for Business Enterprises), and as well as Compilation Rules for Information Disclosure by Companies Offering Securities to the Public No. 15 — General Provisions on Financial Reports (Rev. 2014) issued by China Securities Regulatory Commission.

(II) Going concern

The Company has assessed its ability to continually operate for the next 12 months from the end of the reporting period. There are no major events that will affect the Company’s operational ability, Therefore, the financial statements are prepared on the basis of going-concern assumption.

IV. SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES

(I) Statement of compliance with Accounting Standards for Business Enterprises

The financial statements of the Company are prepared in accordance with the requirements of the Accounting Standards for Business Enterprises, which truly and completely reflect the financial status, operating results, cash flow and other relevant information of the Company in the reporting period.

(II) Accounting period

The accounting year of the Company begins on January 1 and ends on December 31 of the Gregorian calendar.

(III) Recording currency

The recording currency of the Company is RMB.

• (IV) Accounting treatment of “Business combination involving entities under common control” and “Business combination involving entities not under common control”

1. If the terms, conditions and economic impacts of each transaction conform to one or more of the following cases in the business combination step by step, these transactions shall be handled in an accounting way as a package deal:

• (1) These transactions are concluded simultaneously or after the consideration of the mutual influence;

– II-36 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

• (2) These transactions can lead to a complete commercial result only when they are in their entirety;

• (3) The occurrence of a transaction relies on the occurrence of at least another transaction;

• (4) A transaction alone is deemed uneconomic but economic when together with other transactions.

2. Business combination under same control

The assets and liabilities that the Company obtains in a business combination shall be measured on the basis of the book value of the combined party in the consolidated financial statement of the final controlling party on the combining date (including the business reputation formed after the final controlling party merges the combined party). As for the balance between the book value of the net assets obtained by the combining party and the book value of the consideration paid by it (or the total par value of the stocks issued), the share capital premium in capital reserve shall be adjusted; if the share capital premium in capital reserve is not sufficient to be offset, the retained earnings shall be adjusted.

If there is contingent consideration and the estimated liabilities or assets should be confirmed, the capital reserve (capital premium or capital stock premium) should be adjusted according to the balance between the amount of estimated liabilities or assets and settled amount of follow-up contingent consideration. If the capital reserve is insufficient, the retained income should be adjusted.

If the business combination is finally realized through various transactions and it is a “package deal”, the various transactions should have accounting treatment by regarding it as the one acquired the control right. If it is not a “package deal”, on the date of obtaining the control right, the capital reserve shall be adjusted according to the difference between initial investment cost of the long-term equity investment and the sum of the book value of long-term equity investment before combination and the book value of new paid consideration of shares that further acquired on combining date; if capital reserve is not enough for offset, the retained income shall be adjusted. For the equity investment held before the combining date, other comprehensive income calculated with the equity method or calculated and confirmed according to standards for recognition and measurement of financial instruments will not have accounting treatment until the disposal of the investment, when the accounting treatment should be conducted on the basis of same assets or liabilities handled directly by the investee. Other changes in owners’ equities in net assets of the investee except from the net profits and losses, other comprehensive income and profits accounted and confirmed with the equity method will not have accounting treatment temporarily until the it will be included in current profits and losses during the disposal of the investment.

3. Business combination not under the same control

The “acquisition date” refers to the date on which the acquirer actually obtains the control on the acquiree, i.e. the date on which the control right over the net assets or operation decisions of the acquiree is transferred to the Company. The Company deems the control right is transferred when following conditions are all met:

• ① The combination contract or agreement has passed the approval of internal authority of the Company.

• ② Matters related to business combination that require approval of relevant state authorities have been approved by relevant authorities.

– II-37 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

• ③ Necessary property right transfer formalities have been handled.

• ④ The Company has paid a large part of the combination expenses it is able to and plans to pay the rest expenses.

• ⑤ The Company has controlled the financial and operation policies of the acquiree in fact and it enjoys relevant interests and bear relevant risks.

The Company shall measure the assets given and liabilities incurred or assumed by an enterprise for a business combination at the acquisition date based on the fair values, and shall take the balances between the fair values and their book value into the profit and loss of the current period.

The Company shall recognize the positive balance between the combination costs and the fair value of the identifiable net assets it obtains from the acquiree as business reputation. The balance between the combination cost and the fair value of the identifiable net assets acquired from the acquiree in the business combination shall be included in the current profits and losses after recheck.

If the business combination not under the same control realized through disposal in steps by transactions is a package deal, the combining party shall conduct accounting treatment on all transactions by regarding it as one transaction that has acquired the control. It is not a package deal and the equity investment before the combining date is accounted with the equity method, the initial investment cost of the investment is the sum of the book value of the equity investment held by the acquiree before the acquisition date and the new investment cost on the acquisition date. For other comprehensive income of the equity investment confirmed before acquisition date, the accounting treatment shall be conducted on the same basis on which the investee directly disposes related assets or liabilities when handling the investment. For the equity investment held before the combining date that are accounted according to the standards for recognition and measurement of financial instruments, the initial investment cost on the combining date is the sum of the book value of the equity investment on the combining date and the new investment cost. For originally held equities, the difference between the book value and the fair value and the cumulative fair value included in other comprehensive income originally shall be all transferred to current investment profits on the combining date.

4. Expenses related to business combination

Commission fees for audit, legal services, assessment and consultation due to business combination and other directly related expenses shall be included in the current profits and losses when they occur. For the transaction expenses for the issuance of equity securities for the business combination, the part directly attributed to equity transactions can be deducted from equities.

(V) Base of consolidated financial statements

1. Consolidation scope

The scope of consolidated financial statements the Company shall be confirmed based on the control and all subsidiaries (including individual principal controlled by the Company) shall be included in the consolidation range of the consolidated financial statements.

2. Consolidation procedure

The Company shall prepare consolidated financial statements based on its and its subsidiaries’ financial statements according to other relevant data. During preparation of consolidated financial statements, the Company shall consider the whole company as an

– II-38 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

accounting entity on the basis of the recognition, measurement and presentation requirements of relevant accounting standards for business enterprises and in accordance with the unified accounting policies, reflecting the Company’s overall financial status, operating results and cash flows.

The accounting policies or accounting period adopted by the subsidiary included in the consolidation range shall be in line with the Company. If the accounting policies or accounting period adopted by the subsidiary are not in line with the Company, necessary adjustments shall be made according to the Company’s accounting policies and period when preparing consolidated financial statements.

When preparing consolidated financial statement, the effects of the offset of internal transactions between the Company and other subsidiary and the offset of internal transactions between subsidiaries to consolidated balance sheet, consolidated profit statement, consolidated statement of cash flow and consolidated statement of change in shareholders’ equity shall be recorded. If the recognition on a same transaction with the Company or its subsidiary as the accounting entity is different from the perspective of consolidated financial statement of the Company, the transaction should be adjusted from the perspective of the Company.

The owners’ equity of subsidiaries, current net profits and losses and the shares in total comprehensive income attributable to minority shareholders shall be independently listed in the “owners’ equity” in consolidated balance sheet, the “net profits” and “total comprehensive income” in consolidated income statements. If current loss shared by minority shareholders in a subsidiary exceeds the share enjoyed by minority shareholders in the subsidiary’s owner’s equity at the beginning of the period, the balance shall be written down with the minority shareholders’ equity.

If the subsidiary is acquired through combinations under common control, the adjustments are made to the consolidated financial statements based on the book value of its assets and liabilities (including the business reputation formed after the final controlling party merges the combined party) in the consolidated financial statement of the final controlling party.

For a subsidiary acquired through business combination not under the same control, its financial statements are adjusted based on the fair value of the identifiable net assets on the acquisition date.

(1) Increase of subsidiary or business

For the subsidiary or business increased under the same control due to business combination in the reporting period, the opening balance of the consolidated balance sheet shall be adjusted, and the subsidiary and the revenues, expenses and profits from the beginning to the closing period of the current business combination are incorporated into the consolidated profit statement, as well as the cash flow of the same period to the consolidated cash flow statement. Meanwhile, relevant items of the comparative statement are adjusted and the consolidated report subject is regarded to exist from the time the final control party begins to control.

If the investee under the same control can be controlled due to additional investment, it shall be deemed that all parties involved in the combination adjusted the current state/existence when the final controller began to control it. For the equity investment held before the control right over the combined party is obtained, the changes in relevant profits and losses, other comprehensive incomes and other net assets recognized from the later one of the date when the original equity is obtained and the date when the combing party and the combined party are under the same control to the combination date shall respectively be used to offset the retained income at the beginning period of the comparative statement or current profits and losses.

– II-39 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

In the reporting period, for the added subsidiary companies or businesses caused by business combination under common control, the beginning balance of the consolidated financial statement shall not be adjusted. The incomes, expenses and profits of the subsidiary or business incurred from the acquisition date to the end of reporting period shall be recorded into consolidated profit statement. The cash flow of the subsidiary or business from the acquisition date to the end of reporting period shall be included into consolidated cash flow statement.

If the investee not under the same control can be controlled due to additional investment, the Company shall measure again its equity owned from the acquiree prior to the acquisition date in accordance with the fair value of the equity at the acquisition date, and the balance between the fair value and the book value shall be taken into the investment income of the current period. For the held equity from the acquiree before the acquisition date which involves other comprehensive income under accounting with equity method, and changes of owner’s equities except from net profits and losses, other comprehensive income and distribution of profits shall be changed into the current incomes from investment on the acquisition date, except from other comprehensive income due to changes in net debt or assets caused by remeasurement and re-definition of benefit plan by the investee.

• (2) Disposal of subsidiaries or businesses

• 1) General disposal method

If the Company disposes its subsidiary or the business within the reporting period, the revenues, expenses and profits occurred from the beginning of the business to the disposal date and of the subsidiary are incorporated into the consolidated income statement and the cash flow produced from the beginning of the period to the disposal date of the subsidiary is included into the consolidated cash flow statement.

If it loses the control on the investee because of disposing part of the equity investment or due to other reasons, the disposed remaining equity investment shall be remeasured by the Company as per the fair value on the date of losing the control. The balance obtained by deducting the portion of net assets reckoned continuously since the acquisition or combination date by the original subsidiary that shall be enjoyed according to the original calculated shareholding ratio with the sum of consideration generated from the disposal and the fair value of the residual equity shall be numbered into the investment income of the current period in which the right of control is lost. Other comprehensive incomes or changes of owner’s equities except from net profits and losses, other comprehensive income and distribution of profits associated with the equity investments of the original subsidiary are turned into the current investment income at the time the right of control is lost. However, other comprehensive income due to changes in net debt or assets caused by remeasurement and re-definition of benefit plan by the investee is excluded.

2) Disposal of subsidiary in steps

For investment in subsidiary from disposal in steps by transactions to control loss, if the clauses, condition and economic impact of each transaction conform to one or more of the following cases during the disposal of equity investment to subsidiaries, it is commonly acknowledged these transactions shall be handled in an accounting way as a package deal:

• A. These transactions are concluded simultaneously or after the consideration of the mutual influence;

• B. These transactions can lead to a complete commercial result only when they are in their entirety;

• C. The occurrence of a transaction relies on the occurrence of at least another transaction;

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

• D. A transaction alone is deemed uneconomic but economic when together with other transactions.

If various transactions from disposal of subsidiary equity investment to control loss belong to package deal, these transactions shall be disposed in an accounting way as a transaction for subsidiary disposal with control loss. However, for each transaction conducted before control loss, the balance between the disposal price and corresponding net asset share of disposed investment over the subsidiary shall be recognized as other comprehensive income in the consolidated financial statement and transferred to current profits and losses at the time of control loss together.

If various transactions from disposal of subsidiary equity investment to control loss do not belong to package deal, accounting treatment shall be conducted for policies related to equity investment of the subsidiary under the condition of no control right loss. If the control right is lost, accounting treatment shall be conducted with general method for disposal of subsidiary.

(3) Purchase of minority equities in subsidiaries

The stock premium in capital reserve in consolidated balance sheet shall be adjusted for the difference between the net asset shares continuously calculated since acquisition date (or combining date) of subsidiary corporation to be enjoyed by long-term equity investment as a result of purchasing minority interest, as well as calculation on the basis of new shareholding ratio. If the stock premium in capital reserve is insufficient for offset, retained income shall be adjusted.

(4) Disposal of equity investment of subsidiary partially without losing control right

The stock premium in capital reserve in consolidated balance sheet shall be adjusted according to the difference of net assets of subsidiary as result of continuous calculation since the acquisition or combining date enjoyed during disposal of price and long-term equity investment due to the disposal of the long-term equity investment of subsidiary partially without losing its control right. If the stock premium in capital reserve is insufficient for offset, retained income shall be adjusted.

(VI) Cash and cash equivalents

The Company’s cash on hand and deposits available for payment at any time are recognized as cash when the Company prepares its cash flow statement. Any short-term (expires after three months from the purchase date generally) and highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value are confirmed as cash equivalents.

(VII) Foreign operations and foreign currency translation

1. Foreign operations

At the time of initial recognition of a foreign currency transaction, the amount shall be translated into RMB at the spot exchange rate of the transaction date.

The foreign currency monetary items shall be translated at the spot exchange rate on the balance sheet date into RMB. The balance of exchange arising from the difference of exchange rate, except from the balance of exchange arising from foreign currency borrowings for the purchase and construction or production of qualified assets which is capitalized, shall be included into profits and losses of the current period. The foreign currency non-monetary items measured at the historical cost shall still be translated at the spot exchange rate on the transaction date, of which the amount of functional currency shall not be changed.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Foreign currency non-monetary items measured at fair value shall be translated at the spot exchange rate on the date when the fair value is determined. The resulting difference shall be recognized as the fair value change in the current profit and loss. The resulting difference belonging to the non-monetary items of available-for-sale foreign currency shall be recognized as other comprehensive incomes.

2. Translation of foreign currency financial statements

The asset and liability items in the balance sheet shall be translated at spot exchange rate on the balance sheet date. Among the owner’s equity items, except items in “undistributed profits”, others shall be translated at the spot exchange rate at the time when they are incurred. The income and expense items in the profit statements shall be translated at the spot rate of the transaction date. The translation difference of foreign currency financial statements generated according to the above translation shall be included in other comprehensive income.

When disposing of overseas operations, the translation difference of foreign currency financial statements listed in other comprehensive income items in the balance sheet and related to the overseas operations shall be transferred from other comprehensive income items to the current profits and losses; when part of the equity investment is disposed of or other reasons lead to a decrease in the proportion of overseas business interests, but the right to control overseas business is not lost, the translation difference of foreign currency statements related to the disposal of the overseas business shall be attributed to minority shareholders’ interests and shall not be transferred to the current profits and losses. In case of disposal of part of equity of the associated enterprises or cooperative enterprises in the overseas business, the translation balance related to the overseas business shall be translated into the current profits and losses based on the ratio to dispose overseas business.

(VIII) Financial instruments

The financial instruments are divided into financial assets or financial liabilities and equity instruments.

1. Classification of financial instruments

According to the contract clauses related to the issued financial instruments and the economic nature they reflect rather than the only lawful form as well as the purpose of the obtaining and holding the financial assets and bearing the financial liabilities, the Company classifies the financial assets and financial liabilities at initial recognition into financial assets (or financial liabilities) which are measured at their fair values and the variation of which is recorded into the profits and losses of the current period, the investments which will be held to their maturity, account receivables, financial assets available for sale, and other financial liabilities.

2. The condition of recognition and measurement method of financial instruments

• (1) Financial assets (financial liabilities) which are measured at their fair values and the variation of which is recorded into the profits and losses of the current period

The financial assets or financial liabilities which are measured at their fair values and of which the variation is included in the current profits and losses, including transactional financial assets or financial liabilities and the designated financial assets or financial liabilities which are measured at their fair values directly and of which the variation is included in the current profits and losses.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

The transactional financial assets or financial liabilities refer to the financial assets or financial liabilities meeting any of the following requirements:

• 1) The purpose to acquire the said financial assets or financial liabilities is mainly for selling or repurchase of them in short term;

• 2) Forming a part of the identifiable combination of financial instruments, and for which there are objective evidences proving that the Company may manage the combination by way of short-term profit making in the near future;

• 3) Being a derivative instrument, excluding the designated derivative instruments which are effective hedging instruments, or derivative instruments to financial guarantee contracts, and the derivative instruments which are connected with the equity instrument investments for which there is no quoted price in the active market, whose fair value cannot be reliably measured, and which shall be settled by delivering the said equity instruments.

Only the financial assets or financial liabilities meeting any of the following requirements can be designated, when they are initially recognized, as financial assets or financial liabilities as measured at its fair value and of which the variation is included in the current profits and losses:

• 1) The designation is able to eliminate or obviously reduce the discrepancies in the recognition or measurement of relevant gains or losses arisen from the different basis of measurement of the financial assets or financial liabilities;

• 2) The official written documents on risk management or investment strategies of the Company concerned have recorded that the combination of said financial assets, the combination of said financial liabilities, or the combination of said financial assets and financial liabilities will be managed and evaluated on the basis of their fair values and be reported to the key management personnel;

• 3) The mixed instrument containing one or several embedded derivative instruments if the embedded derivative instrument does not significantly change the cash flow of the mixed instrument or the derivative instruments embedded in similar mixed instruments shall obviously not be separated from the relevant mixed instruments;

• 4) Mixed instrument that should be separated but it is impossible to make an independent measurement for embedded derivative instruments when they are obtained or subsequently on the balance sheet date.

Upon acquiring, according to the fair value (less cash dividends declared but yet to issue or bond interest up to payment period but has not claimed), financial assets or financial liabilities measured at their fair value and with their variation included in the current profits and losses shall be regarded as initial recognition cost and relevant transaction expenses are included in current profits and losses. Interest or cash dividends acquired during holding time shall be recognized as income from investment, and the variation of fair value shall be included into the current profits and losses at the end of the period. During the disposal of such financial assets, the balance between their fair value and original recorded amount shall be recognized as investment income, and meanwhile, the profits and losses of changes in fair value shall be adjusted.

(2) Accounts receivable

“Accounts receivable” refers to the non-derivative financial assets for which there is no quoted price in the active market and of which the recoverable amount is fixed or determinable.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

For the creditor’s rights receivable formed by the Company’s sale of product or provision of labor service, and creditor’s rights of other enterprises held by the Company (excluding debt instruments with an offer in the active market), including accounts receivable, other receivables, notes receivable, advance payments and long-term receivables, the Company will take them as the initial recognition amount by means of contract or agreement price receivable by the acquirer; for those with financing nature, initial recognition shall be carried out according to the present value.

During the recovery or disposal, the balance of the price acquired and the book value of the receivable shall be recorded into the profit or loss for the current period.

(3) Held-to-maturity investment

Held-to-maturity investment refers to a non-derivative financial asset with a fixed date of maturity, a fixed or determinable amount of recoverable price and which the Company holds for a definite purpose or the enterprise is able to hold until its maturity.

For the held-to-maturity investment, upon acquiring, the sum of fair value (less bond interest up to payment period but has not claimed) and relevant transaction expenses shall be regarded as initial recognition cost. The interest income of held-to-maturity investments acquired during holding time shall be calculated based on the amortized cost and effective interest rate and included in the income from investment. The actual interest is determined upon the receipt and shall be maintained within the predicted term of existence or within a shorter applicable term. During the disposal of held-to-maturity investments, the balance between the acquired price and book value of the investment shall be included in the income from investment.

If the held-to-maturity investment is disposed or reclassified to amount of other types of financial assets and such amount is considerably large as compared with the amount before such investment is sold or re-classified, the surplus of such investment shall be re-classified as a sellable financial asset. The balance between the book of the said investment on the reclassification day and the fair value shall be computed into other comprehensive income, and when the said sellable financial asset is impaired or transferred out when it is terminated from recognizing, it shall be recorded into the profits and losses of the current period. However, the following circumstances shall be excluded:

• 1) The date of sale or re-classification is quite near to the maturity date or the redemption date of the said investment(e.g., within 3 months prior to maturity) that any change of the market interest rate will produce little impact upon the fair value of the said investment.

• 2) After almost all the initial principal of the investment has been drawn back by way of repayment according to the provisions of the contract.

• 3) The sale or re-classification is caused by any independent event that the enterprise cannot control, is predicted not to occur again and is hard to be reasonably predicted.

(4) Available-for-sale financial assets

Financial assets available for sale include the non-derivative financial assets which are designated as sellable when they are initially recognized and other financial assets in addition to these mentioned above.

With regard to the measurement, upon acquiring, the sum of fair value (less cash dividends declared but yet to issue or bond interest up to payment period but has not claimed) and relevant transaction expenses shall be regarded as initial recognition cost. Interest or cash dividends acquired during holding time shall be recognized as income from investment. Gains and losses

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

resulting from the changes of the fair values of the available-for-sale financial assets shall be directly counted into other comprehensive income, excluding impairment losses and the exchange difference resulting from the foreign currency monetary financial assets. During the disposal of financial assets available for sale, the balance between the acquired price and book value of the financial assets shall be included into the investment profit and loss; moreover, the accumulated amount of changes in fair value of the other comprehensive income originally included which corresponds to the amount of disposed part shall be transferred out and recorded into the investment profit and loss.

The equity instrument investments for which there is no quotation in the active market and whose fair value cannot be measured reliably, and the derivative financial assets which are connected with the said equity instrument and must be settled by delivering the said equity instrument shall be measured on the basis of their costs.

(5) Other financial liabilities

For such financial assets, the sum of the fair value when obtained and related transaction costs shall be regarded as the initial recognition amount. The Company shall make subsequent measurement on the basis of the post-amortization costs.

3. Recognition basis and measurement method for the transfer of financial assets

For the transfer of 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 shall stop recognizing the financial asset. If it retained nearly all of the risks and rewards related to the ownership of the financial asset, it shall not derecognizing the financial asset.

For judging whether the financial assets transfer can satisfy the above termination determination condition or not, the “substance over form” principle shall be followed. The Company distinguishes the transfer of financial assets into the whole transfer and partial transfer of financial assets. When the overall transfer of financial assets meets the conditions for termination of recognition, the difference between the following two items is included in the current profits and losses:

• (1) Book value of the transferred financial asset;

• (2) Sum of the consideration received due to transfer and the accumulated amount of changes in the fair value directly reckoned in the owner’s equity (involving the occasion when the transferred financial asset is a financial asset available for sale)

If the transfer of partial financial assets satisfies the conditions to stop the recognition, the entire book value of the transferred financial asset shall, between the portion whose recognition has been stopped and the portion whose recognition has not been stopped, be apportioned according to their respective relative fair value, and the difference between the amounts of the following two items shall be included into the current profits and losses:

• (1) Book value of the part whose recognition is terminated;

• (2) Sum of the consideration of the part whose recognition is terminated and the accumulated amount of changes in fair value originally included in the owner’s equity which corresponds to the amount of the part whose recognition is terminated (involving the occasion when the transferred financial asset is a financial asset available for sale).

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

If the transferred financial asset does not satisfy the conditions for recognition, it shall continue to recognize the financial asset, and the consideration received shall be recognized as a financial liability.

4. Conditions for derecognition of financial liabilities

When current obligations of a financial liability have been wholly or partly canceled, then the financial liability or part of it shall be wholly or partly de-recognized. When the Company and the creditors sign agreements to take on new ways to replace the existing financial liabilities with new financial liabilities and the contract terms of existing financial liabilities and new financial liabilities are different in essence, recognition of the current financial liabilities shall be terminated and new financial liabilities shall be recognized at the same time.

Where an enterprise makes substantial revisions to some or all of the contractual stipulations of the existing financial liability, it shall be terminated the recognition of the existing financial liability or part of it, and at the same time recognize the financial liability after the modification of the contractual stipulations as a new financial liability.

Where the recognition of a financial liability is totally or partially terminated, the Company shall include into the profits and losses of the current period the gap between the book value of financial liabilities which recognition is terminated and the considerations it has paid (including the non-cash assets it has transferred out and the new financial liabilities it has assumed.

If the Company repurchases some financial liabilities, the overall book value of these financial liabilities will be distributed according to the relative fair value of the part which we will continue to confirm and the part which we have terminated on the repurchasing date. The Company shall include into the profits and losses of the current period the gap between the book value which has been terminated from recognition and the considerations it has paid (including the non-cash assets it has transferred out and the new financial liabilities it has assumed.

5. Methods for the determination of the fair value of financial assets and financial liabilities

As for the financial assets or financial liabilities for which there is an active market, the quoted prices in the active market shall be used to determine the fair values thereof. The quoted prices in the active market include the prices of relevant assets and liabilities that are easily available from the stock exchanges, dealers, brokers, industry associations, pricing service institutions or supervisory institutions, etc. at a fixed term, and that represent the prices which actually and frequently occurred in market transactions under fair conditions.

As for the financial assets initially obtained or produced at source and the financial liabilities assumed, the fair value thereof shall be determined on the basis of the transaction price of the market.

For those financial assets or liabilities for which there is no active market, the fair value shall be determined by means of valuation technique. During the evaluation, the Company uses the valuation technique which is applicable in the current condition and has enough available data and other information. The input value consistent with the features of assets or liabilities considered in transactions of relevant assets or liabilities with market participants and observable input value should be used with priority as far as possible. Only under the situations of relevant observable input values not obtained or non-feasible, the non-observable input values can be used.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

6. Withdrawing of impairment provision for financial assets (excluding receivables)

On the balance sheet date, the Company shall carry out an inspection, on the book value of the financial assets other than those measured at their fair values and of which the variation is recorded into the profits and losses of the current period. Where there is any objective evidence proving that such financial asset has been impaired, an impairment provision shall be made.

The objective evidences that can prove the impairment of a financial asset shall include but not limited to:

• (1) A serious financial difficulty occurs to the issuer or debtor;

• (2) The debtor breaches any of the contractual stipulations, for example, it fails to pay or delays the payment of interests or the principal, etc.;

• (3) The creditor makes any concession to the debtor which is in financial difficulties for economic or legal factors;

• (4) The debtor is likely to become bankrupt or carry out other financial reorganizations;

• (5) The financial asset can no longer continue to be traded in the active market due to serious financial difficulties of the issuer;

• (6) It is impossible to identify whether the cash flow of a certain asset within a certain combination of financial assets has decreased or not. But after making an overall appraisal according to the public data available, it is found that the predicted future cash flow of the said combination of financial assets has indeed decreased since it was initially recognized and such decrease can be measured, for example, the payment ability of the debtor of the said combination of financial assets was deteriorated, the unemployment rate of the country of region where the debtor located raised, the price in the region where the collateral located dropped significantly or the collateral industry faced a hard time;

• (7) Any seriously disadvantageous change has occurred to technical, market, economic or legal environment, etc. operated by the issuers of the equity instruments, which makes the investor of an equity instrument unable to take back its cost of investment;

• (8) Where the fair value of the equity instrument investment drops significantly or not contemporarily;

The specific depreciation method for financial assets is shown below:

• (1) Provision for impairment of available-for-sale financial assets

The Company will perform independent test for the investment of various equity instruments available for sale on the balance sheet date. If they fair value on the balance sheet date is equal to or greater than 50% (including 50%) of the cost or this condition lasts for 12 or more than 12 months, it shows that impairment occurs; if their fair value on the balance sheet date is equal to or greater than 20% (including 20%) but less than 50% of the cost, the Company will give overall consideration to other relevant factors such as price fluctuation to judge whether the investment of equity instruments is in impairment.

The cost mentioned above can be determined by deducting the recoverable principle and amortized amount based on the initial cost of available-for-sale equity instruments and the impairment losses originally included in profits and losses. For the available-for-sale equity

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

instrument investment without active market, their fair value shall be determined based on the present value determined according to the market returns of similar financial assets on future cash flow. For the available-for-sale equity instrument investment with active market and quotation, their “fair value” shall be determined according to the closing price at the end of period on stock exchange, unless the available-for-sale equity instrument investment has a restricted stock trade period. For the available-for-sale equity instrument investment with a restricted stock trade period, the impairment shall be conducted after the compensation required by the market participant who will bear the risk of the sales failure of the equity instrument in open market in a specified period is deducted from the closing balance at the end of period on stock exchange.

Where a sellable financial asset is impaired, even if the recognition of the financial asset has not been terminated, the Company will transfer out the accumulative losses arising from the decrease of the fair value of the comprehensive income which was directly included and record the same into the profits and losses of the current period. The accumulative losses that are transferred out shall be the balance obtained from the initially obtained costs of the sold financial asset after deducting the principals as taken back, the current fair value and the impairment-related losses as was recorded into the profits and losses of the current period.

As for the sellable debt instruments whose impairment-related losses have been recognized, if, within the accounting period thereafter, the fair value has risen and are objectively related to the subsequent events that occur after the originally impairment-related losses were recognized, the originally recognized impairment-related losses shall be reversed and be recorded into the profits and losses of the current period. The impairment-related losses incurred to a sellable equity instrument investment shall be reversed through equities when the value of the equities rises. However, the impairment-related losses incurred to an equity instrument investment for which there is no quoted price in the active market and whose fair value cannot be reliably measured, or incurred to a derivative financial asset which is connected with the said equity instrument and which shall be settled by delivering the said equity instrument, may not be reversed.

(2) Held-to-maturity investments depreciation reserves

Where there is any objective evidence proving that the held-to-maturity investment has been impaired, the impairment loss shall be determined according to the balance between the book value and the current value of expected future cash flow. If there is any objective evidence proving that the value of the said financial asset has been restored after withdrawal, the impairment-related loss as originally recognized shall be reversed and be recorded into the profiles and losses of the current period. However, the reversed carrying amounts shall not be more than the post-amortization costs of the said financial asset on the day of reverse under the assumption that no provision is made for the impairment.

7. Offsetting financial assets and financial liabilities

In all other situations they are presented separately in the balance sheet and are not offset. However, the net income offset shall be listed in the balance sheet when they satisfy the requirements below at the same time:

• (1) The Company is legally authorized to offset verified amount, and the legal right is executable;

• (2) The Company is planned for netting and meanwhile change the financial asset into cash and pay off the financial liability.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

• (IX) Recognition criteria and withdrawing method of provision for bad debts of receivables

1. Receivables that are individually significant and have bad debts provision separately drawn:

Recognition criteria of receivables with significant single amount and single provision for bad debts: the amount is more than RMB1 million (inclusive).

Withdrawing method for bad-debt provision of receivables with significant single amount: Impairment test shall be carried out independently and bad-debt provision shall be withdrawn according to the balance between present value of expected future cash flow and book value and included in profits and losses of current period. The accounts receivable without impairment shall be tested one by one and they shall be classified in relevant combinations for bad-debt provision withdrawing.

2. Receivables for withdrawing bad-debt provision in combination:

• (1) The basis for determining the combination of credit risk characteristics:

For the accounts receivables with non-significant single amounts, they and the accounts receivables with significant single amounts for single test without value impairment shall be divided into several combinations on the basis of credit risk features, and the bad-debt provision that shall be withdrawn shall be determined on the basis of actual loss ratio of previous receivables combinations with similar credit risk features and combining with the current conditions.

Basis for determining combination:

Item	Basis for determining combination
Combination without withdrawing	Accounts receivable between enterprises included in the
bad debts	consolidation scope of the Company
Combination of aging analysis	Including receivables other than the above-mentioned
method	combinations, the Company shall make the best estimate of
	the accrual ratio of receivables based on past historical
	experience, and classify the credit risk combinations with
	reference to the aging of receivables

(2) The accrual method determined according to the combination of credit risk characteristics:

Item	Withdrawing method for bad-debt provision
Combination without withdrawing	Bad-debt provision without withdrawing
bad debts
Combination of aging analysis	Aging analysis method
method

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

In the combination, withdraw the bad-debt provision by aging analysis method:

		Withdrawing
	Withdrawing	proportion of
	proportion of	other
Aging	receivables	receivables
	(%)	(%)
Within 1 year (including 1 year)	5	5
1-2 years	10	10
2-3 years	30	30
3-4 years	50	50
4-5 years	80	80
>5 years	100	100

3. Receivables with non-significant single amounts but with a single provision for bad debts

Reasons for single withdrawing of bad-debt provision: there is any objective evidence proving that the Company is about to fail to withdraw the found as per the original articles of accounts receivables.

Withdrawing method for bad-debt provision: withdrawn on the basis of the balance between book value and the estimated present value of future cash flow of receivables.

(X) Inventories

1. Classification of inventories

The term “inventories” refer to finished products or merchandise possessed by the Company for sale in the daily business, or work in progress in the process of production, or materials and supplies to be consumed in the process of production or offering labor service. It mainly includes raw materials, turnover materials, entrusted processing materials, in-process products and finished products (inventory goods), etc.

2. Inventory valuation method

After the inventories are obtained, its initial measurement shall be carried out based on their cost, including purchase cost, processing cost and other costs. The method of weighted mean is adopted for valuation of sending inventories.

3. Determination basis of net realizable value of inventories and method of provision for depreciation

After complete check on inventory at the end of the period, inventory falling price reserves shall be withdrawn or adjusted at the lower of inventory cost and net realizable value. For merchandise inventory which is directly for sale like finished products, commodity stocks, and material for sale, during normal production and marketing process, net realizable value of which shall be determined by subtracting estimated selling expenses and relevant taxes from the estimated sale price; for material inventory needs to be processed, during normal production and marketing process, net realizable value of which shall be determined by subtracting the cost going to happen, the estimated marketing expenses and relevant taxes from the estimated sale price of finished products; for inventory held for performing sales contract or labor contract, net realizable value of which shall be determined on the basis of contract price, if the quantity of inventory is more than the quantity purchases by sales contract, net realizable value of the surplus part shall be calculated as per average sales price.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

The inventory falling price reserves shall be withdrawn as per the single inventory item at the end of the period generally, and for inventories with large quantity and relatively low unit prices, the inventory falling price reserves shall be withdrawn according to the inventory type. For the inventories related to the series of products manufactured and sold in the same area, and of which the final use or purpose is identical or similar there to, and if it is difficult to measure them by separating them from other items, the provision for loss on decline in value of inventories shall be made on a combination basis.

If the factors causing any write-down of the inventories have disappeared, the amount of write-down shall be resumed and be reversed from the provision for the loss on decline in value of inventories that has been made. The reversed amount shall be included in the current profits and losses.

4. Inventory system for inventories

Perpetual inventory system is adopted.

5. Amortization method for low-value consumables and wrappage

• (1) One-time amortization method is adopted for the amortization of low priced and easily worn articles;

• (2) One-time amortization method is adopted for the amortization of packing materials.

• (3) Other turnover materials are amortized by one-time write-off method.

(XI) Held-for-sale assets

1. Determination standards for held-for-sale assets

The non-current assets meeting the following conditions or disposal groups shall be categorized into held-for-sale assets:

• (1) Based on the practice of selling such assets or disposal groups in similar transactions, they can be sold immediately under current conditions;

• (2) The sale is very likely to happen, that is, the Company has made a resolution on a sale plan and obtained a firm purchase commitment, and it is estimated that the sale will be completed within one year.

The confirmed purchase commitment refers to the legally binding purchase agreement signed between the Company and other parties. The agreement contains important terms such as the transaction price, time, and heavy penalty for breach of contract that lead to the smallest possibility to adjust largely or cancel the agreement.

2. Accounting method for held-for-sale assets

For held-for-sale non-current assets for which depreciation or amortization are not be carried out, if the book value is higher than the net value of fair value minus the sales expense, the book value should be written down to the nut value after the fair value minus the dales expense. The write-down amount shall be recognized as the loss of asset impairment and be recorded as the profits or losses for the current period. Simultaneously, a provision for the asset impairment shall be made accordingly.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

For the non-current assets or disposal groups classified as held-for-sale type on the obtaining date, they shall be measured at the lower one of the initially measured value when it is not classified as held-for-sale type and the net value of fair value minus the sales expense.

The principles above are applicable to all non-current assets, excluding the investment real estate adopting fair value pattern for subsequent measurement, the biological assets measured at the net value of fair value minus the sales expense, the assets formed by employee payroll, the deferred income tax assets, financial assets meeting accounting standards for financial instruments and the rights generated from the insurance contract meeting relevant accounting standards for insurance contracts.

(XII) Long-term equity investment

1. Determination of initial investment cost

• (1) For the long-term equity investment formed by business combination, please refer to Note IV/(IV) for specific accounting policies Accounting arrangement methods for business combination under and not under the same control.

• (2) Long-term equity investment formed by other modes

For long-term equity investment obtained by cash payment, the initial investment cost is the amount actually paid for the purchase. The initial cost consists of the expenses directly relevant to the obtainment of the long-term equity investment, taxes and other necessary expenses.

The initial cost of a long-term equity investment obtained on the basis of issuing equity securities shall be the fair value of the equity securities issued. Transaction costs incurred when issuing or acquiring their own equity instruments may be directly attributable to equity transactions and deducted from equity.

Under the premise that the non-monetary assets exchange is of commercial essence and the fair value of long-term equity investment received or surrendered can be reliably measured, the initial investment cost of intangible asset received during the non-monetary assets exchange shall be recognized based on the fair value of asset surrendered, unless there is any exact evidence showing that the fair value of asset received is more reliable; for the non-monetary assets exchange which fails to meet the above premise, the book value of asset surrendered and relevant taxes and dues payable shall be regarded as the initial investment cost of long-term equity investment.

The initial cost of a long-term equity investment obtained by recombination of liabilities shall be determined on the basis of fair value.

2. Subsequent measurement and profit and loss determination

(1) Cost method

The long term equity investment on the invested enterprise shall be accounted by employing the cost method and it shall be evaluated based on its initial investment cost. If there are additional investments or disinvestments, the long-term equity investment cost shall be adjusted.

Except from cost actually paid in investment and cash dividends or profits declared but not distributed included in consideration, the Company will enjoy the investment income recognized in current period according to cash dividends or profits declared to distribute by the invested company.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

(2) Equity method

Equity method shall be applied for the accounting of long-term equity investment of associated enterprise and cooperative enterprise. For equity investment of associated enterprise partially and indirectly held by the Company as a result of investment to risk investment organization, mutual fund, trust company or similar entities such as unit-linked fund, the Company shall account the indirect investment as per its fair value and record its variation into the benefits and losses.

If the initial cost of a long-term equity investment is more than the investing enterprise’ attributable share of the fair value of the invested entity’s identifiable net assets for the investment, the initial cost of the long-term equity investment may not be adjusted. If the initial cost of a long term equity investment is less than the investing enterprise’ attributable share of the fair value of the invested entity’s identifiable net assets for the investment, the difference shall be included in the current profits and losses.

After long-term equity investment is acquired, the investor shall determine the return on investment and other consolidated income according to the net profits and losses and other income of the investee in the same year it shall be enjoyed and shared, and adjust the fair value of the long-term equity investment; the investor shall calculate the proportion enjoyed of the profit or cash dividend announced by the investee to be distributed, reduce the fair value of the long-term equity investment accordingly, and adjust the fair value of the long-term equity investment and include it into the owners’ equity in terms of other changes to the owners’ equity other than net profits and losses, other consolidated income, and profit distribution.

On the ground of the fair value of all identifiable assets of the investee when the Company obtains the investment, the attributable share of the net profits and losses of the investee shall be recognized after the net profits of the investee are adjusted. The Company’s entitled part of unrealized profits and losses from internal transaction between the Company and associated enterprises or cooperative enterprises shall be offset according to the Company’s entitled proportion. On such basis the investment profits/losses are confirmed.

If Company decides to share the losses of investee, deal with the matter in the following order: firstly, write down the book value of long-term equity investment. If the book value of the long-term equity investment is insufficient for offset, the recognition of the investment losses is continued based on the book value of the long-term equities of the net investment of the investee to offset the book value of long-term receivables. Finally, after the treatment above, if the investment contract or agreement agrees the enterprise shall still bear extra obligations, the accrued liabilities shall be recognized according to obligations to be shouldered and included into current investment losses.

If the investee achieves profitability in the future, Company shall deal with it in the reverse order after deducting the unconfirmed loss sharing amount, write down the book balance of confirmed accrued liabilities, recover the book value of long-term interests of net investment and long-term equity investment constituted on investee substantially and confirm the investment income.

3. Conversion of long-term equity investment by accounting method

• (1) Conversion from fair value measurement to accounting by equity method

With regard to the equity investment having accounting treatment according to financial instrument recognition and measurement standard originally held by the Company that does not have control, joint control or significant influence on the invested entity, if the Company is able to do joint control or significant influence, which does not constitute control, over the invested entity

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

as a result of additional investment or other reasons, the fair value of original equity investment added to new investment cost in accordance with the Accounting Standards for Business Enterprises No. 22 — Recognition and Measurement of Financial Instruments shall be regarded as initial investment cost measured by employing the equity method.

If the original equity investment is categorized as sellable financial assets, the difference between the fair value and the book value, along with the change in the accumulated total fair value originally included in other comprehensive income, shall be transferred to the current profit and loss accounted by the equity method which has been transferred to.

If the initial investment cost calculated with the equity method is smaller than the fair value of the net identifiable assets of the investee enjoyed on the date of increase in investment calculated and determined with the new shareholding ratio, the book value of long-term equity investment shall be adjusted with the balance and included into the current non-operating income.

• (2) Conversion from measurement based on fair value or accounting by equity method to accounting by cost method

For the equity investments held by the Company that have no control, joint control, or significant influence on the investee in accordance with the standards for recognition and measurement of financial instruments, or originally held long-term equity investments in cooperative enterprises or associated enterprises that can control the investee not under the same control due to additional investment and other reasons, in individual financial statement, the sum of book value of original equity investment and newly increased investment cost shall be regarded as the initial investment cost measured by employing the cost method.

For other comprehensive income of the equity investment confirmed before purchase date, the accounting treatment shall be conducted on the same basis on which the investee directly disposes related assets or liabilities when handling the investment.

If the equity investment held prior to the acquisition date is put under accounting treatment in accordance with the relevant provisions of Accounting Standards for Business Enterprises No. 22 — Recognition and Measurement of Financial Instruments , the accumulated fair value changes previously included in other comprehensive income are transferred to the current profit and loss after the cost method is adopted.

(3) Conversion from accounting by equity method to measurement based on fair value

If significant influence or joint control of the Company is lost due to reasons including the disposal of part of the equity investment, the residual equity after disposal shall be confirmed through financial instrument and accounted according to Accounting Standards for Business Enterprises No. 22 — Recognition and Measurement of Financial Instruments , the difference between the fair value and the book value of the remaining equity on the date of loss shall be included in the current profit and loss.

For other comprehensive income of the original equity investment recognized by the equity method, at the time that the equity method stops being employed, the accounting treatment shall be conducted on the same basis on which the investee directly disposes related assets or liabilities.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

• (4) Conversion from cost method to equity method

If the Company losses joint control of the invested company as a result of disposal of partial equity investment, and in the individual financial statement the surplus equity is able to carry out joint control and significant influences to the invested company, the equity method shall be used for accounting, and the surplus equity shall be regarded to be accounted and adjusted by equity method same to the equity originally obtained.

• (5) Conversion from measurement with cost method to measurement based on fair value

If the Company losses joint control of the invested company as a result of disposal of partial equity investment, and in the individual financial statement the surplus equity is unable to carry out joint control and significant influences to the invested company, it shall be accounted as per Accounting Standards for Business Enterprises No. 22 — Recognition and Measurement of Financial Instruments , and the difference between fair value and book value on the date when losing the joint control shall be included in the current benefits and losses.

4. Disposal of long-term equity investment

During the disposal of a long-term equity investment, the difference between its book value and the actual purchase price shall be included in the current profits and losses. For long-term equity investments checked by the equity method, when the investments are disposed of, the same basis as the investee’s direct disposal of the relevant assets or liabilities shall be used, and the part originally included in other comprehensive income is treated in accordance with the corresponding proportion.

If the clauses, condition and economic impact of each transaction conform to one or more of the following cases during the disposal of equity investment to subsidiaries, these transactions shall be handled in an accounting way as a package deal:

• (1) These transactions are concluded simultaneously or after the consideration of the mutual influence;

• (2) These transactions can lead to a complete commercial result only when they are in their entirety;

• (3) The occurrence of a transaction relies on the occurrence of at least another transaction;

• (4) A transaction alone is deemed uneconomic but economic when together with other transactions.

If the Company losses control over a subsidiary due to partial disposal of equity investment or other reasons and it is not package deal, individual financial statement and consolidated financial statement shall be distinguished for accounting treatment.

• (1) In some financial statements, for disposed equity, the difference between its book value and the actual purchase price shall be included in the current profits and losses. The remaining equity after disposing is recognized and measured by equity method if it is able to have joint control over or significant impact on the investee, and are adjusted also by equity method from the time of obtaining; In case of failing to have joint control or impact on the investee, the remaining equity is recognized according to Accounting Standards for Business Enterprises No. 22 — Recognition and Measurement of Financial Instruments , and the difference between the fair value and book value when losing the joint control occurring is included in current profits and losses.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

• (2) During preparation of consolidated financial statement, for transactions before losing the control on subsidiaries, disposal of price and long-term equity investment can enjoy the difference of net assets of subsidiary as result of continuous calculation since the date of purchasing or acquisition, the adjust capital reserve (capital premium) should be adjusted, If the capital reserve is insufficient for offset, adjust retained incomes. When the control over subsidiary is lost, the remaining equity shall be recalculated according to its fair value on control loss date. The difference between the sum of consideration received for disposal of equity interest and the fair value of remaining equity interest less the net assets attributable to the original subsidiary calculated continuously since the purchase date based on shareholding percentage before disposal are recognized in investment gain in the period when the control is lost and offset for the business reputation. Other comprehensive income related to equity investment in the subsidiary is transferred to investment gain at the time of control lost.

If the transactions from the disposal of equity investment to the subsidiary till the loss of control belong to package deal, the transactions shall have accounting treatment by taking it as a transaction that disposes the equity investment to the subsidiary and causes control loss. Individual financial statement and consolidated financial statement shall be distinguished for accounting treatment.

• (1) In individual financial statement, the balance between each disposal price and the book value of the long-term equity investment corresponding to the disposed equities is recognized as other comprehensive income and it is transferred to the profits and losses at the time of control loss.

• (2) In consolidated financial statement, the balance between each disposal price and corresponding net asset proportion of disposed investment over the subsidiary before the control loss shall be recognized as other comprehensive income and it is transferred to the profits and losses at the time of control loss.

5. Judgment standards of joint control or significant influences

If the Company controls one arrangement with other parties jointly according to regulations and the decisions having significant influences on the return from the arrangement can only exist after consensus from the parties sharing the control right is obtained, it means the arrangement is under joint control of the Company and the other parties and the arrangement is the joint venture arrangement.

If the joint venture arrangement is achieved through an independent entity, the independent entity shall be taken as joint venture when the rights of the Company on the net assets of the independent entity are judged and equity method shall be used for accounting. If it is judged the Company does not have rights on the net assets of the independent entity according to regulations, the independent entity shall confirm items related to profits from joint operation with the Company and have accounting treatment according to Accounting Standards for Business Enterprises.

Significant influence refers to the right of participation in the decisions of financial and operational policies of the investee, not including the right to control, or jointly control with other participants. The Company is judged to have significant influence on the investee through following conditions and after all facts and conditions are considered. (1) The Company has appointed representatives to the board of directors of the investee or such institutions; (2) The Company participates in the preparation of financial and operational policies of the investee; (3) The Company has important transactions with the investee; (4) The Company has appointed management personnel to the investee; and (5) The Company provides key technical data to the investee.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

(XIII) Fixed assets

1. Recognition condition of fixed assets

Fixed assets are tangible assets whose service life is in excess of one accounting year and who are held for the sake of producing commodities, rendering labor service, renting or business management. No fixed asset may be recognized unless it simultaneously meets the conditions as follows:

• (1) The economic benefits pertinent to the fixed asset are likely to flow into the enterprise; and

• (2) The cost of the fixed asset can be measured reliably.

2.

Initial measurement of fixed assets

• (1) The cost of a purchased fixed asset consists of the purchase price, the relevant taxes including import tariff, and other expenses that bring the fixed asset to the expected conditions for use and that may be relegated to the fixed asset.

• (2) The cost of a self-constructed fixed asset shall be formed by the necessary expenses incurred for bringing the asset to the expected conditions for use.

• (3) For the fixed assets invested by the investor, their value agreed in the investment contract or agreement shall be ascertained as the entry value. Those assets with unfair value as stipulated in the contract or agreement shall take fair value as the entry value.

• (4) If the payment for a fixed asset is delayed beyond the normal credit conditions and it is of financing nature in effect, the cost of the fixed asset shall be ascertained based on the current value of the purchase price. The difference between the actual payment and the current value of the purchase price shall be included in the current profits and losses within the credit period, unless it shall be capitalized.

3. Subsequent measurement and disposal of fixed assets

• (1) Depreciation of fixed assets

Fixed assets’ depreciation was calculated within estimated service life after reducing estimated net residual value from the entry value of fixed assets. For those fixed assets being provided for impairment loss, the related depreciation charge is determined based on the carrying amounts less impairment over their remaining useful lives.

Fixed assets that have been fully depreciated but are still in use shall not be depreciated.

According to the nature and use of various fixed assets, the service life and net residual value of fixed assets can be determined. And review the service life and salvage value of fixed asset as well as depreciation method at the end of the year. Make corresponding adjustment if the review results are different from the previously estimated amounts.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

The depreciation method, depreciation life and yearly depreciation of various fixed assets are as follows:

		Depreciation	Residuals	Yearly
Category	Depreciation method	Life	rate	depreciation
		(year)	(%)	(%)
Pant and buildings	Straight-line depreciation	20－30	5	3.17－4.75
Machinery and	Straight-line depreciation	5－10	5	9.50－19.00
equipment
Vehicles	Straight-line depreciation	10	5	9.50
Office equipment	Straight-line depreciation	3-5	5	19.00-31.67
Others	Straight-line depreciation	3-5	5	19.00-31.67

• (2) Subsequent expenses of fixed assets

If the subsequent expenses related to fixed assets conform to the confirmation conditions of the fixed assets, and then such subsequent expenses shall be included in the costs of the fixed assets; If not conforming to the confirmation conditions of these fixed assets, such subsequent expenses shall be included in the current profits and losses while occurred.

(3) Fixed Assets Disposal

The book values of fixed assets are derecognized when the fixed assets are disposed or no future economic benefits are expected from their use or disposal. Disposal consideration amount from sale, transfer, scrap or damage of fixed assets shall be included in current profits and losses after deducting the book value and related taxes.

4. Basis of recognition for fixed assets acquired under financial leases, valuation and depreciation methods

Where a lease satisfies one or more of the following criteria, it shall be recognized as a financial lease:

• (1) The ownership of the leased asset is transferred to the lessee when the term of lease expires.

• (2) The lessee has the option to buy the leased asset at a price which is expected to be far lower than the fair value of the leased asset at the date when the option becomes exercisable. Thus, on the lease beginning date, it can be reasonably determined that the option will be exercised.

• (3) Even if the ownership of assets is not transferred, the lease term accounts for the largest proportion of the service life of the leased asset.

• (4) In the case of the lessee, the present value of the minimum lease payments on the lease beginning date amounts to substantially all of the fair value of the leased asset on the lease beginning date.

• (5) The leased assets are of a specialized nature that only the Company can use them without making major modifications.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

With regard to the fixed assets under financing lease, a lessee shall record the lower one from the fair value of the leased asset and the present value of the minimum lease payments on the lease beginning date as the entering value in an account. The balance between the recorded amount of the leased asset and the long-term account payable shall be treated as unrecognized financing charges. The initial direct costs such as commissions, attorney’s fees and traveling expenses, stamp duties directly attributable to the leased item incurred during the process of lease negotiating and signing the leasing agreement shall be recorded in the asset value of the current period. The unrecognized financing charges shall be amortized by effective interest method during the periods within the lease term.

In calculating the depreciation of a leased asset under financial lease, the Company shall adopt a depreciation policy for leased assets consistent with that for depreciable assets which are owned by the lessee. If it is reasonable to be certain that the lessee will obtain the ownership of the leased asset when the lease term expires, the leased asset shall be fully depreciated over its service life. If it is not reasonable to be certain that the lessee will obtain the ownership of the leased asset at the expiry of the lease term, the leased asset shall be fully depreciated over the shorter one of the lease term or its useful life.

(XIV) Construction in progress

1. Types of construction in progress

The construction in progress self-constructed by the Company shall be evaluated at its actual cost. The actual cost of it shall be formed by the necessary expenses incurred for bringing the asset to the expected conditions for use, including the material cost, labor cost, relevant taxes paid, borrowing expenses to be capitalized and indirect expenses to be amortized. The construction in progress of the Company is accounted by project classification.

2. Standards and time point of carrying forward construction in progress as fixed assets

As for construction in progress, all expenses occurred during the construction period before the assets achieve the predetermined serviceable condition shall be recognized as entry value of the fixed assets. Construction of fixed assets in progress whose construction is complete and has achieved the predetermined serviceable condition, but whose final settlement of account has not been processed, shall be transferred to fixed assets by the estimated value according to the project budget, construction cost or the actual cost of the project since the date that they achieved the predetermined serviceable condition. In addition, the depreciation of these fixed assets shall be withdrawn according to the Company’s fixed asset depreciation policy. After the final settlement of account is processed, the previously estimated value shall be adjusted according to the actual cost. The previously withdrawn depreciated value shall not be adjusted.

(XV) Borrowing costs

1. Recognition principle for borrowing costs capitalization

Where the borrowing costs incurred by the Company can be directly attributed to the purchase, construction or production of assets that meet the capitalization conditions, they shall be capitalized if they meet the capitalization conditions and included in the relevant asset costs; other borrowing costs, when incurred, shall be recognized as expenses according to the amount incurred, and included in the current profits and losses.

The term “assets eligible for capitalization” refers to the fixed assets, investment real estate, inventories and other assets, of which the acquisition and construction or production may take a quite long time to get ready for its intended use or for sale.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Capitalization can only be started if the borrowing costs meet the following conditions at the same time:

• (1) The asset disbursements have already incurred, which shall include the cash, transferred non-cash assets or interest bearing debts paid for the acquisition and construction for preparing assets eligible for capitalization;

• (2) The borrowing costs have already incurred;

• (3) Purchase, construction or production activities required for the assets to fulfill the expected serviceable or salable condition have begun.

2.

Borrowing costs capitalization period

The capitalization period shall refer to the period from the commencement to the cessation of capitalization of the borrowing costs, excluding the period of suspension of capitalization of the borrowing costs.

When the qualified asset under acquisition and construction or production is ready for the intended use or sale, the capitalization of the borrowing costs shall be ceased.

When parts of the project of the qualified asset under acquisition and construction or production is ready for the intended use or sale are complete and used separately, the capitalization of the borrowing costs of these parts shall be ceased.

Where each part of an asset under acquisition and construction or production is completed separately and is ready for use or sale during the continuing construction of other parts, but it can not be used or sold until the asset is entirely completed, the capitalization of the borrowing costs shall be ceased when the asset is completed entirely.

3. Capitalization suspension period

Where the acquisition and construction or production of a qualified asset is interrupted abnormally and the interruption period lasts for more than 3 months, the capitalization of the borrowing costs shall be suspended. If the interruption is a necessary step for making the qualified asset under acquisition and construction or production ready for the intended use or sale, the capitalization of the borrowing costs shall continue. Capitalization shall resume after the borrowing costs incurred during such period are recorded into the profits and losses of the current period, and the acquisition and construction or production of the asset restarts.

4. Computation methods of capitalized amount of the borrowing costs

Specifically borrowed loans interest cost (minus the income of interests earned on the unused borrowing loans as a deposit in the bank or as a temporary investment) and auxiliary expenses shall be capitalized before the qualified asset under acquisition and construction or production is ready for the intended use or sale.

The Company shall calculate and determine the to-be-capitalized amount of interests on the general borrowing by multiplying the weighted average asset disbursement of the part of the accumulative asset disbursements minus the general borrowing by the capitalization rate of the general borrowing used. The capitalization rate shall be determined according to the weighted average interest rate of the general borrowings.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Where there is any discount or premium, the amount of discounts or premiums that shall be amortized during each accounting period shall be determined by the real interest rate method, and an adjustment shall be made to the amount of interests in each period.

(XVI) Biological assets

The Company’s biological assets include consumable biological assets and productive biological assets.

1. Recognition conditions of biological assets

No biological asset shall be recognized unless it meets the conditions as follows simultaneously:

• (1) The enterprise owns or controls the biological assets due to past transactions or events;

• (2) The economic benefits or service potential related to the biological assets are likely to flow into the enterprise;

• (3) The cost of this biological asset can be measured reliably.

2. Initial measurement of biological assets

• (1) Consumable biological assets

• ① The cost of a purchased consumable biological assets consists of the purchase price, the relevant taxes, freight, insurance premium and other expenses that may be directly attributable to the purchase of the assets.

• ② For the expendable biological assets invested by investors, the entry value of the expendable biological assets shall be the value agreed in the investment contract or agreement plus the relevant taxes and fees payable. However, if the value agreed in the contract or agreement is unfair, the actual cost shall be determined according to the fair value.

• ③ The cost of self-cultivated, propagated or farmed consumable biological assets consists of the necessary expenses such as the cost of materials including seedlings, fertilizers and pesticides consumed before harvest, labor costs and indirect expenses to be shared.

• (2) Productive biological assets

• ① The cost of purchased productive biological assets consists of the purchase price, relevant taxes, transportation fees, insurance premiums and other expenses that may be directly attributable to the purchase of the assets.

• ② For the productive biological assets invested by investors, the entry value of the productive biological assets shall be the value agreed in the investment contract or agreement plus relevant taxes and fees payable. However, if the value agreed in the contract or agreement is unfair, the actual cost shall be determined according to the fair value.

• ③ For the productive biological assets planted by the Company, the cost shall be determined according to the necessary expenses such as seedlings costs, labor costs, materials costs, fertilizers costs, land lease costs and other indirect expenses consumed before achieving the expected production and business objectives (and before harvest).

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Achieving the intended production and operation objectives means that the productive biological assets enter the normal production period, and can continuously and stably produce agricultural products, provide labor services or rent for many years. The specific conditions are as follows: starting to bear fruits and picking them as the standard for turning into maturity.

1) Accounting methods for immature productive biological assets

Necessary expenditures of immature productive biological assets during the immature period, including seedlings costs, labor costs, materials costs, fertilizers costs, land lease costs and other indirect expenses, shall be directly included in the asset cost. Among them, seedlings costs, direct labor costs, fertilizers costs and land rent costs which can be directly classified into each plot shall be collected in the subject of “productive biological assets-immature productive biological assets”, and indirect costs such as material consumption shall be collected in the “manufacturing expenses” first when they occur, and then included in each plot according to the area apportion.

2) Accounting methods for mature productive biological assets

The related expenses incurred after the mature productive biological assets, including labor costs, material costs, fertilizers costs, utilities, land lease costs and other indirect expenses, shall be collected in the subject of “production cost”; the book value of the carried-over mature productive biological assets shall be depreciated according to the depreciation period, and the depreciation expenses shall be also included in the “production cost”; after the fruits are picked, the “production cost” shall be carried over to “inventory goods”.

3. Subsequent measurement of productive biological assets

(1) Depreciation of productive biological assets

The Company accrues depreciation for productive biological assets, and the depreciation method adopts the straight-line depreciation. The Company determines the service life and estimated net residual value of productive biological assets according to their nature, usage and expected realization of relevant economic benefits. At the end of the year, the Company reviews the service life, estimated net residual value and depreciation method of productive biological assets, and make corresponding adjustments if there are differences with the original estimates.

The Company’s productive biological assets are estimated to have no net residual value, and the estimated service life and annual depreciation rate are as follows:

	Estimated	Yearly
Asset type	service life	depreciation
	(year)	(%)
Passion fruit	2	50.00
Mango	10	10.00
Pitaya	4	25.00
Pineapple	2	50.00
Banana	2	50.00
Sugarcane	2	50.00
Papaya	3	33.33
Guava	4	25.00

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

(2) Disposal of biological assets

When harvesting or selling consumable biological assets, the weighted average method is used to carry over the cost; the cost of biological assets after use conversion is determined according to the book value at the time of use conversion; when the biological assets are sold, damaged or in short supply, the balance of the disposal income after deducting the book value and related taxes and fees shall be included in the current profit and loss.

4. Impairment of biological assets

The Company shall, at least at the end of each year, review the consumptive biological assets and productive biological assets. If any well established evidence indicates that the realizable net value of any consumptive biological asset or the recoverable amount of any productive biological asset is lower than its book value as a result of natural disaster, plant diseases and insect pests or change of market demand, the enterprise shall, based on the difference between the realizable net value or the recoverable amount and the relevant book value, make provision for the loss on decline in value of or for the impairment of the biological asset and shall include it in the current profits and losses.

If the influencing factors of the impairment of consumptive biological assets have disappeared, the amount of write down shall be restored and reversed within the amount of the original provision for falling price, and the amount reversed shall be included in the current profits and losses. Once the provision for impairment of a productive biological asset is withdrawn, it shall not be reversed. On the balance sheet date, the Company measures the productive biological assets according to the lower of book value and recoverable amount, and withdraw the provision for impairment of productive biological assets according to the difference between the recoverable amount of individual assets and book value. Once the impairment loss of productive biological assets is recognized, it will not be reversed in the following accounting period.

(XVII) Intangible assets and development expenses

Intangible assets refer to the identifiable non-monetary assets possessed or controlled by the Company which have no physical shape. It includes land use right, patent right, trademark right and software, etc.

1. Initial measurement of intangible assets

Cost of the outsourcing intangible assets shall include purchase price, relevant taxes and other necessary expenditures directly attributable to intangible assets for expected purpose. The price of buying intangible assets exceeds the delayed payment at normal credit condition, which actually has a financing property, the cost of the intangible assets shall be determined based on the present value of the price.

For the intangible assets used for debt payment, the fair value of the intangible assets shall be used as basis for its entry value determination. The balance between the book value and the fair value of the intangible assets used for debt payment shall be included into current loses and gains.

Under the premise that the non-monetary assets exchange is of commercial essence and the fair value of intangible assets received or surrendered can be reliably measured, the entry value of intangible asset received during the non-monetary assets exchange shall be recognized based on the fair value of asset surrendered, unless there is any exact evidence showing that the fair value

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

of asset received is more reliable; for the non-monetary assets exchange which fails to meet the above premise, the book value of asset surrendered and relevant taxes and dues payable shall be regarded as the cost of intangible asset and no profits and losses will be recognized.

The entry value of intangible asset obtained by consolidation merger of enterprises under the same control shall be recognized based on the book value of merged enterprise; the entry value of intangible asset obtained by consolidation merger of enterprises not under the same control shall be recognized based on the fair value of merged enterprise.

The costs of internal self-developed intangible assets shall include: the cost of materials consumed, labor cost and registration charges occurred while developing the intangible assets; the amortization charge of other patents and franchises used as well as the interest cost spent to meet the capitalization requirements during the development process; as well as other direct costs attributable to intangible assets for the expected purpose.

2. Subsequent measurement of intangible assets

The Company analyzes and judges the service life of intangible assets when it obtains intangible assets and they are classified as intangible assets with limited service life and intangible assets with limited service life without undetermined service life.

(1) Intangible assets with limited service life

Intangible assets with limited service life shall be amortized by straight-line method in the period in which economic benefits are brought for the Company. Expected service life of intangible assets with limited service life and calculation basis:

Item	Expected useful life	Basis
Land use right	40 years/50 years/70	The service life is determined by the contract or
	years	by reference to the period that can bring
		economic benefits to the Company
Patent right	10 years
Trademark right	10 years
Software	3-5 years

At the end of each year, the service life and the amortization method of intangible assets with limited service life shall be rechecked. Make corresponding adjustment if the review results are different from the previously estimated amounts.

According to the review, the service life and amortization method of intangible assets at the end of this period do not differ from previous estimation.

• (2) Intangible assets with uncertain service life

During the reporting period, the Company had no intangible assets with uncertain service life.

3. Detailed standards for dividing research and development stages of internal R&D projects:

Research stage: The stage of creative and planned investigation and research to acquire and understand new scientific or technological knowledge.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Development stage: The stage that the research results or other knowledge is used for a plan or design to produce something new or substantive improved materials, devices and products before commercial production or use.

The expenditure occurred during the research stage of internal R&D project shall be included into the profits and losses of current period when it occurred.

4. Detailed conditions for the capitalization of expenses during the development stage

Expenditures incurred during the development stage of internal research and development project that simultaneously meet the following conditions shall be recognized as intangible assets:

• (1) It is feasible technically to finish intangible assets for use or sale;

• (2) It is intended to finish and use or sell the intangible assets;

• (3) The usefulness of methods for intangible assets to generate economic benefits shall be proved, including being able to prove that there is a potential market for the products manufactured by applying the intangible assets or there is a potential market for the intangible assets itself or the intangible assets will be used internally;

• (4) It is able to finish the development of the intangible assets, and able to use or sell the intangible assets, with the support of sufficient technologies, financial resources and other resources;

• (5) The development expenditures of the intangible assets can be reliably measured.

The expenditure not meeting conditions above is included into the profits and losses of current period when it occurs. Development expenses accounted into profits and losses in previous period are no longer re-confirmed as assets. Expenses at the development stage capitalized are listed as development expenses in the balance sheet, and are converted into intangible assets when the Project reaches the estimated usable conditions.

(XVIII) Impairment of long-term assets

The Company shall, on the day of balance sheet, make a judgment on whether there is any sign of possible impairment of long-term assets. If the long-term assets have sign of possible impairment, recoverable amount should be estimated by the Company based on single assets. If it is not possible to estimate the recoverable amount of single assets, the recoverable amount of the asset group to which the asset belongs is recognized.

The recoverable amount shall be determined in light of the higher one of the net amount of the fair value of the assets minus the disposal expenses and the current value of the expected future cash flow of the assets.

Where the measurement result of the recoverable amount indicates that an asset’s recoverable amount is lower than its book value, the book value of the long-term asset shall be recorded down to the recoverable amount, and the reduced amount shall be recognized as the loss of long-term asset impairment and be recorded as the profit or loss for the current period. Simultaneously, a provision for the asset impairment shall be made accordingly. Once any loss of asset impairment is recognized, it shall not be switched back in the future accounting periods.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

After the loss of asset impairment has been recognized, the depreciation or amortization expenses of the impaired asset shall be adjusted accordingly in the future periods so as to amortize the post-adjustment book value of the asset systematically (deducting the expected net residual value rate) within the residual service life of the asset.

No matter there is any sign of possible assets impairment or not, the business reputation formed by business combination and intangible assets with uncertain service life are subject to impairment test at the end of each year.

In impairment test for business reputation, book value of business reputation shall be amortized to assets groups or combination of assets groups which are expected to benefit from the synergy effect of business combination. When making an impairment test on the relevant asset groups or combination of asset groups containing business reputation, if any evidence shows that the impairment of asset groups or combinations of asset groups is possible, the enterprise shall first make an impairment test on the asset groups or combinations of asset groups not containing business reputation, calculate the recoverable amount, compare it with the relevant carrying value and recognize the corresponding impairment loss. Then the enterprise shall make an impairment test of the asset groups or combinations of asset groups containing business reputation, and compare the carrying value of these asset groups or combinations of asset groups (including the carrying value of the business reputation apportioned thereto) with the recoverable amount. Where the recoverable amount of the relevant assets or combinations of the asset groups is lower than the carrying value thereof, it shall recognize the impairment loss of the business reputation.

(XIX) Long-term unamortized expenses

1. Amortization method

Long-term unamortized expenses refer to the Company’s various costs that have occurred and are apportioned by the current and future periods which is longer than 1 year. Long-term unamortized expenses shall be amortized within benefit period by method of line.

2. Amortization life (year)

	Amortization life
Category	(year)	Remarks
Decoration and	3-5
reconstruction
expenditure
Land lease expense	Settlement period	The settlement period of the leased land of the
	agreed in the contract	Company has different settlement periods such
		as 4 years and 5 years

(XX) Employee compensation

Employee compensation refers to the remuneration or compensation offered by the Company for the purpose of acquiring the services provided by the employees or terminating labor relationships. Employee compensation includes short-term compensation, post-employment benefit, dismission benefit, and other long-term employee benefit.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

1. Short-term compensation

Short-term compensation refers to employee compensation that shall be fully paid by the Company within 12 months after annual report period of related services provided by employees, except post-employment welfare, dismission welfare. In the accounting period when the employees provide services to the Company, the short-term compensation payable shall be confirmed as liabilities, and shall be included in related asset costs and fees according to the benefit objects of the service provided by the employees.

2. Post-employment welfare

Post-employment welfare refers to the various forms of remuneration or compensation offered by the Company for the purpose of acquiring the services provided by the employees after employee retirement or termination of labor relations with the Company, except for short-term compensation and dismission welfare. The Company classifies post-employment welfare plan as defined contribution plan and defined benefit plan.

The defined contribution plan is mainly to participate in social basic endowment insurance and unemployment insurance organized and implemented by local labor and social security institutions; during the accounting period when employees provide services for the Company, the amount of deposit payable calculated according to the defined contribution plan is recognized as a liability and included in the current profits and losses or related asset costs.

After paying the above funds regularly according to the standard specified by the State, the Company will be free of other payment obligations.

3. Termination benefits

Termination benefits refers to the compensation made by the Company to the employees for the termination of the labor relationship with any employee prior to the expiration of the relevant labor contract or for encouraging the employee to accept a layoff. When the Company cannot unilaterally withdraw the dismission welfare stated on labor service relationship termination plan or layoff proposal or the Company is confirming the cost and expense in relation to the restructuring of paying dismission welfare (the earlier one shall be applied), liabilities caused by dismission welfare shall be confirmed and included in current profits and losses.

4. Other long-term employee welfare

Other long-term employee welfare refers to other employee welfare except from short-term salaries, post-employment welfare and dismission welfare.

For other long-term employee welfare conforming to defined contribution plan, within accounting period during which employees provide service for the company, the amount payable shall be determined as liability and included into current profits and losses or relevant asset cost. For other long-term employee welfare except that mentioned above, the amount shall be calculated with the expected cumulative welfare unit method on the balance sheet date and the welfare obligations produced by the defined benefit plan shall be attributed to the period during which employees provide service and be included into current profits and losses or relevant asset cost.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

(XXI) Estimated liabilities

1. Recognition principles for estimated liabilities

The obligation pertinent to contingencies shall be recognized as an estimated liability when the following conditions are satisfied simultaneously:

The obligation is the current obligation assumed by the Company;

The performance of this obligation is likely to lead to an outflow of economic interests;

The amount of the obligation can be reliably measured.

2. Measurement methods of accrued liabilities

The estimated liabilities of the Company shall be initially measured in accordance with the liability estimate of the necessary expenses for the performance of the current obligation.

The Company takes into account the contingencies related risk, uncertainty, time value of money, and other factors when determining the best estimate. If the time value of money is of great significance, the best estimate shall be determined after discounting the relevant future outflow of cash.

The best estimate shall be conducted in accordance with the following situations respectively:

If there is a continuous range (or interval) for the necessary expenses and if all the outcomes within this range are equally likely to occur, the best estimate shall be determined in accordance with the middle estimate within the range, i.e. the average number of the maximum amount and minimum amount.

In the event that there is no continuous range (or interval) or that there is a continuous range but the outcomes within this range are unlikely to occur equally, if single item is involved in the contingencies, the best estimate shall be determined based on the amount most likely to occur; and if several items are involved in the contingencies, the best estimate shall be determined based on various possible outcomes and relevant probability calculation.

If all or some of the expenses necessary for the liquidation of estimated liabilities of the Company are expected to be compensated by a third party, the compensation shall be separately recognized as an asset when it is virtually certain that the reimbursement will be obtained and the compensation recognized shall not be in excess of the estimated liability book value.

(XXII) Revenue

1. Standard for determining the time of revenue recognition from goods sales

The Company has transferred the significant risks and rewards of ownership of the goods to the buyer; the Company retains neither continuous management right that usually keeps relation with the ownership nor effective control over the sold goods; the amount of revenue can be measured in a reliable way; relevant economic benefits may flow into the Company; when relevant cost incurred or to be incurred can be reliably measured, recognize the sales revenue.

If the collection of the price as stipulated in the contract or agreement is delayed and if it has the financing nature, the revenue incurred by selling goods shall be ascertained in accordance with the fair value of the receivable price as stipulated in the contract or agreement.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Specific methods to recognize the Company’s revenue:

The Company mainly sells fruit juice, quick-frozen products, fresh fruits and other products.

• (1) Revenue recognition of domestic products: the products are delivered to the buyer according to the contract, and the Company recognizes the revenue according to the date of the receipt; if there is no receipt, the revenue is recognized after the acceptance objection period determined according to the contract.

• (2) Revenue recognition of export products: the export products of the Company are mainly in FOB form, and the delivery place is offshore port, and the bill of lading is obtained as the evidence for collection, and the date of customs declaration, shipment and export is taken as the time point for revenue recognition.

2. Basis of determining revenue from transferring use right of the assets

When the revenue amount can be reliably measured, it is likely that economic benefits relating to trades will flow into the company. The amount of revenue resulting from alienating asset-use right shall be determined respectively in the following situations:

• (1) The amount of interest revenue shall be measured and recognized in accordance with the length of time for which the Company’s monetary capital is used by others and the actual interest rate.

• (2) The amount of royalty revenue should be measured and confirmed in accordance with the period and method of charging as stipulated in the relevant contract or agreement.

3.

Basis and method of determining the revenue from providing labor services

If the result of the labor service transaction can be estimated reliably on the balance sheet date, the revenue from the labor service transaction shall be recognized by the completion percentage method, and the completion progress of the labor service transaction shall be determined according to the proportion of the already incurred labor cost to the estimated total cost.

The outcome of a transaction concerning the providing of labor services can be measured in a reliable way, means that the following conditions shall be met simultaneously:

• (1) The revenue amount can be measured reliably;

• (2) Relevant economic benefits are likely to flow into the Company;

• (3) The completion schedule of the transaction can be reliably determined;

• (4) The costs incurred or to be incurred in the transaction can be measured in a reliable way.

The Company ascertains the total revenue from the providing of labor services in accordance with the received or to-be-received price as stipulated in the contract or agreement, unless the received or to-be-received price as stipulated in the contract or agreement is unfair. The Company shall, on the date of the balance sheet, ascertain the current revenue from providing labor services in accordance with the amount of multiplying the total amount of revenues from providing labor services by the schedule of completion then deducting the accumulative revenues from the providing of labor services that have been recognized in the previous accounting periods. At the same time, the enterprise shall carry forward the current cost of labor services in accordance with

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

the sum of multiplying the total amount of revenues arising from the providing of labor services by the schedule of completion and then deducting the accumulative revenues from the providing of labor services.

If the Company cannot, on the date of the balance sheet, measure the result of a transaction concerning the providing of labor services in a reliable way, it shall be conducted in accordance with the following circumstances, respectively:

• (1) If the labor cost incurred is expected to be compensated, the labor service income shall be recognized according to the amount of labor service costs incurred and carried forward at the same amount.

• (2) If the cost of labor services incurred is not expected to compensate, the cost incurred shall be included in the current profits and losses, and no revenue from the rendering of service shall be recognized.

Where a contract or agreement signed between enterprises concerns selling goods and providing of labor services, if the part of sale of goods and the part of providing labor services can be distinguished from each other and can be measured respectively, the part of sale of goods shall be conducted as selling goods and the part of providing labor services shall be conducted as providing labor services. If the part of sale of goods and the part of providing labor services can be distinguished from each other and can be measured respectively, the part of sale of goods shall be conducted as selling goods and the part of providing labor services shall be conducted as providing labor services.

(XXIII) Government grants

1. Type

A government grants refers to the monetary and non-monetary assets obtained by an company from the government free of charge, excluding the capital invested by the government as the owner of the company. Based on the objects regulated by governmental documents, the government grants are classified into government grants related to assets and government grants related to income.

The Company defines the government grants for purchasing or constructing or otherwise forming long-term assets as asset-related government grants; other government grants are defined as the income-related government grants.

2. Recognition of government grants

If the Company meets the financial support policy and receives financial support funds, the government grants shall be recognized according to the actual amount received.

If a government grants is a monetary asset, it shall be measured in the light of the received or receivable amount. If a government grant is a non-monetary asset, it shall be measured at its fair value. If its fair value cannot be obtained in a reliable way, it shall be measured at its nominal amount (RMB1). The government grants measured at their nominal amounts shall be directly included in the profits and losses of current period.

3. Accounting arrangement method

The government grants pertinent to assets shall be recognized as the deferred income and they shall be included to the profits or losses on a reasonable and systematic basis within the service life of constructed or purchased assets;

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

The government grants pertinent to income and used for compensating the related future expenses or losses of an enterprise shall be recognized as deferred income and shall be included in the current profits and losses during the period when the relevant expenses or losses are recognized. The grants used for compensating the related expenses or losses of the enterprise incurred shall be directly included in the current profits and losses at receiving.

Government grants related to daily activities of the Company are included in other income and others are included in non-operating income.

The received government grants related to preferential policy loans are used to offset related borrowing costs. When the recognized government grant needs to be refunded, if there is related deferred income balance, the book balance of the deferred income shall be written down, while the excessive part shall be included in the current profits and losses; if there is no relevant deferred income, the subsidy shall be directly included in the current profits and losses.

(XXIV) Deferred tax assets and deferred tax liabilities

Deferred tax assets and deferred tax liabilities are calculated and recognized based on the differences (temporary differences) arising from the tax bases of assets and liabilities and their book value. On the balance sheet date, the deferred tax assets and deferred tax liabilities shall be measured at the tax rate applicable to the period during which the assets are expected to be recovered or the liabilities are expected to be settled.

1. Basis of recognizing deferred tax assets

The Company sets the income tax payable likely to be acquired to offset against the deductible temporary difference and deductible loss and tax credits that can be carried forward to the next year as the deadline to recognize the deferred tax assets generated by the deductible temporary difference. However, deferred tax assets arising from the initial recognition of assets or liabilities in transactions with the following characteristics shall not be recognized: (1) business combination; (2) transactions or events directly recognized in owner’s equity.

As for the deductible temporary difference of taxable relevant to the investment of associated enterprises, the corresponding deferred tax assets can be recognized when it can simultaneously meet the following the conditions: the temporary difference is likely to turn back, and the amount of the taxable can be obtained to offset the deductible temporary difference at a high possibility in the future.

2. Basis for confirming deferred tax liabilities

The Company confirms the taxable temporary differences payable but unpaid in current period and previous period as the deferred tax liabilities. but excluding:

• (1) The temporary differences generated through initial recognition of business reputation;

• (2) Transactions formed by business combination or transactions or events directly recognized in owner’s equity;

• (3) The turning-back time of the temporary difference of taxable relevant to the investment of subsidiaries and associated enterprises can be controlled, or the temporary difference will not turn back at a very high possibility in a foreseeable future.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

3. When meeting all the following conditions, the deferred tax assets and liabilities are listed as net amount after offset

• (1) The Company is entitled to settle the current income tax assets and current income tax liabilities in net amount;

• (2) The deferred tax assets and deferred tax liabilities are associated with the income tax imposed for the same subject of taxation or different subject of taxation by the same tax collection and management department. However, during each important deferred tax assets and liabilities reverse period in the future, the subject of taxation involved is intended to settle the current income tax assets and liabilities or acquiring assets to pay off debts.

(XXV) Operating lease and financing lease

If the leasing clauses transfer in substance all the risks and rewards related to the ownership of an asset to the leasee, it is a financial lease. Otherwise, it is operating lease.

1. Accounting treatment method of operating lease

• (1) Assets leased in under operating lease

Lease expense paid by the Company for leased assets should be amortized with the method of straight line within the entire lease term without deducting the rent-free period and should be included into current expenses. The initial direct costs pertinent to lease transactions paid by the Company are included into current expenses.

If the assets leasor has paid the fees pertinent to leasing that shall be paid by the Company, the Company will deduct the fees from the total rental and amortize the remaining rental within the lease term and include it into current expenses.

(2) Assets leased out under operating lease

Lease expense collected by the Company for leased assets should be amortized with the method of straight line within the entire lease term without deducting the rent-free period and should be recognized as rental income. Initial direct costs pertinent to lease transactions paid by the Company should be included into current expenses. If the amount is large, the initial direct cost should be capitalized and included into current profits on the basis of basic installation of the equal rental income within the entire lease term.

If the Company has paid the fees pertinent to leasing which shall be paid by the leasee, it will deduct the fees from total rental and amortize the remaining within the lease term.

2. Accounting arrangement method of financial lease

(1) Assets leased in under financial lease: On the lease beginning date, a lessee shall record the lower one between the fair value of the leased asset and the present value of the minimum lease payments on the lease beginning date as the entry value in an account, recognize the amount of the minimum lease payments as the entry value in an account of long-term account payable, and take their difference as unrecognized financing cost. Please see Note IV/(XIII) Fixed Assets for the conditions of recognition, valuation and depreciation methods for assets leased in under financial lease.

For the financing expenses not recognized, the Company adopts the effective interest rate method for amortization in assets leasing period and includes them to financial expenses.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

(2) Assets leasing leased out under financial lease: On the beginning date of the lease term, the leasor shall recognize the balance between the sum of receivable financial lease payment and unguaranteed residual value and the current value as unrealized financing income and recognize the rent received in the future as rental income. The initial direct expenses pertinent to leasing transaction should be included into initial measurement of receivable financial lease payment and confirmed amount of revenue received within lease term should be reduced.

(XXVI) Changes in major accounting policies and accounting estimates

1. Change in accounting policy

(1) On May 10, 2017, the Ministry of Finance announced the revised Accounting Standards for Business Enterprises No. 16-Government Subsidies , which will be implemented as of June 12, 2017. The company will adopt the future applicable law to deal with the government subsidies existing on January 1, 2017, and adjust the new government subsidies between January 1, 2017 and the implementation date of the standards according to the revised standards.

(2) On April 28, 2017, the Ministry of Finance issued Accounting Standards for Business Enterprises No. 42 — Non-current Assets Held for Sale and Discontinued Operations , which was implemented from May 28, 2017. According to the standard and the Notice on Revising and Printing the Format of General Financial Statements of Enterprises (CK [2017] No. 30) issued by the Ministry of Finance, the Company added “assets disposal income” item in income statement and had classified listing of net profits according to operation continuity. In accordance with the Accounting Standards for Business Enterprises No. 30 — Presentation of Financial Statements and other relevant regulations, the Company adjusted the comparative data of comparable periods, and the impact on various items of financial statements is as follows:

	Amount of current period	**Amount of **	last period
	Before After	Before	After
Item	change change	change	change
Financial expenses	-209,958.00
Assets disposal income	602,415.03		-779,705.06
Other incomes	9,774,455.20
Non-operating income	10,586,828.23
Non-operating expense		-779,705.06

2. Change in accounting estimates

		The time point
		when the change
		of accounting
Contents and causes of change in accounting	Approval	estimate begins to
estimates	procedure	apply	Remarks
Accounts receivable formed between related parties	It shall be put into	December 31, 2016	This change in
within the scope of consolidated statements are	effect as of the		accounting
combined according to aging, and bad debt	date of being		estimates has no
provision is calculated by aging analysis method,	adopted by		impact on the
which is changed to separate impairment test.	deliberation of		amount of the
Unless there is conclusive evidence that impairment	the Board of		Company’s
occurs, bad-debt provision is not withdrawn.	Directors.		consolidated
			statements

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

V. TAXES

(I) Main tax categories and tax rates of the Company

Tax type	Taxation basis	Tax rate
VAT (Note 1)	Sales of goods	17%, 13%, 11%
Urban maintenance and construction tax	Paid-in turnover tax	5%
Educational surcharges	Paid-in turnover tax	3%
Local educational surcharges	Paid-in turnover tax	2%
Enterprise income tax	Taxable income	15%、25%

Note 1:

• (1) According to the Provisional Regulations of the People’s Republic of China on Value-Added Tax (Order No. 538 of the State Council of the People’s Republic of China), “Article 8, (III) In addition to obtaining special VAT invoices or customs import VAT payment books, the input tax shall be calculated according to the purchase price of agricultural products and the deduction rate of 13% indicated on the agricultural product purchase invoices or sales invoices”, for the agricultural products purchased by the company and its subsidiaries before July 1, 2017, the input tax shall be calculated at a deduction rate of 13% and deducted from the output tax.

• (2) According to the Notice of the Ministry of Finance and the State Administration of Taxation on the Policy of Degenerating VAT Rate (CS [2017] No. 37), the input tax of agricultural products purchased by the company and its subsidiaries from July 1, 2017 is calculated at a deduction rate of 11% and deducted from the output tax.

• (3) According to the State Administration of Taxation Announcement No. 19, 2017, Annex 3 of the State Administration of Taxation on matters related to adjusting the VAT tax return, regarding the Adjustment of the VAT Tax Return (Applicable to General Taxpayers) and its attached information filling description, when the company and its subsidiaries will use the purchased agricultural products for production and sales or entrust the processing of goods with a tax rate of 17% from July 1, 2017, the input tax shall be calculated at a deduction rate of 11% plus 2% and deducted from the output tax.

• (4) According to CS [2009] No. 9 Notice of the Ministry of Finance and the State Administration of Taxation on the application of low VAT rate and simple measures to collect VAT policy for some goods, and the Notice of the Ministry of Finance and the State Administration of Taxation on Printing and Distributing Notes on the Taxation Scope of Agricultural Products (CSZ [1995] No. 52), the company and its subsidiaries sell frozen products at a VAT rate of 13%.

(II) Description of enterprise income tax rate of different taxpayers:

	Income tax
Name of taxpayer	rate
Tianye Innovation Corporation	15%
Hainan Dachuan Food Co., Ltd.	25%
Guangxi Tianye Innovation Agricultural Technology Co., Ltd.	25%
Hainan Tianye Drinks Food Sales Co. Ltd.	25%
Hubei Iceman Foods Co., Ltd.	25%
Hubei Tianye Nonggu Biological Technology Co., Ltd.	25%
Hubei Tianye Innovation Nonggu Fruit & Vegetable Co., Ltd.	25%

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

(III) Policies and basis of tax preference

1. VAT tax preference

According to the Provisional Regulations of the People’s Republic of China on Value-Added Tax (Order No. 538 of the State Council of the People’s Republic of China), “Article XV (I) Self-produced agricultural products sold by agricultural producers shall be exempted from value-added tax”, with the approval of Nanning State Taxation Bureau and Nanning Yongning State Taxation Bureau, Guangxi Tianye Innovation Agricultural Technology Co., Ltd., a wholly-owned subsidiary of the Company, shall be exempted from value-added tax on its own crops and fruits and vegetables, which will be implemented from January 1, 2014.

2. Tax preference for enterprise income tax

(1) Tianye Innovation Corporation

On June 25, 2012, Tianye Innovation Corporation obtained the high-tech enterprise certificate jointly approved by the Science and Technology Department of Guangxi Zhuang Autonomous Region, the Finance Department of Guangxi Zhuang Autonomous Region, the State Taxation Bureau of Guangxi Zhuang Autonomous Region and the Local Taxation Bureau of Guangxi Zhuang Autonomous Region, with the certificate number of GR201245000039, and the validity period of three years; The Company was re-examined in 2015 and obtained the certificate of high-tech enterprise on August 26, 2015, with the certificate number of GF201545000061 and the validity period of three years. From 2015 to 2017, the Company enjoyed preferential enterprise income tax for high-tech enterprises.

According to the Regulations for the Implementation of the Enterprise Income Tax Law of the People’s Republic of China (Order No. 512 of the State Council of the People’s Republic of China), the Notice of the Ministry of Finance and the State Administration of Taxation on Issuing the Scope of Primary Processing of Agricultural Products Enjoy Preferential Policies of Enterprise Income Tax (Trial) (CS [2008] No. 149) and the provisions on “primary processing of agricultural products shall be exempted from enterprise income tax”, the Company’s products (quick-frozen pineapple, corn, mango, papaya, seedless passion fruit puree) belong to the primary processing of agricultural products and are exempt from enterprise income tax. The preferential policies for reducing and exempting enterprise income tax have been audited and filed by the State Taxation Bureau of Hepu County (HGSBZ [2013] No. 201), and the preferential enterprise income tax policy has been implemented from January 1, 2012.

(2) Hainan Dachuan Food Co., Ltd.

• 1) According to Article 27 of the Enterprise Income Tax Law of the People’s Republic of China and Article 86 of its implementing regulations, CS [2008] No. 149, CS [2011] No. 26, GSBF [2011] No. 132, Announcement of State Administration of Taxation (No. 2 [2010]) and Announcement of State Administration of Taxation Announcement (No. 48 [2011]), the puree juice produced by Hainan Dachuan Food Co., Ltd., a wholly-owned subsidiary of the Company, belongs to the primary processing range of agricultural products and is exempt from enterprise income tax. The preferential reduction and exemption of enterprise income tax has been examined and approved by the State Taxation Bureau of Ding’an County, Hainan Province (DGST [2013] No. 258) and has been implemented from January 1, 2011.

• 2) According to the Notice on Issuing the Scope of Primary Processing of Agricultural Products Enjoy Preferential Policies of Enterprise Income Tax (CS [2008] No. 149) issued by the Ministry of Finance and the State Administration of Taxation, the fruit and vegetable juice products produced by Hainan Dachuan Food Co., Ltd., a wholly-owned

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

subsidiary of the Company, are primary processed products of fruits and vegetables, which have been exempted from enterprise income tax as determined by the State Taxation Bureau of Ding’an County, such exemption has been implemented from January 1, 2013.

(3) Guangxi Tianye Innovation Agricultural Technology Co., Ltd.

According to Article 27 of the Enterprise Income Tax Law of the People’s Republic of China and Article 86 of its implementing regulations, CS [2008] No. 149, GSH [2008] No. 890, GSH [2009] No. 779, CS [2011] No. 26 and Announcement of the State Administration of Taxation (No. 8 [2011]), the fruits planted by Guangxi Tianye Innovation Agricultural Technology Co., Ltd., a wholly-owned subsidiary of the Company, has been exempted from enterprise income tax. Preferential policies for reducing and exempting enterprise income tax have been audited and filed by Nanning State Taxation Bureau.

3. Tax preference for property tax and urban land use tax

According to the regulations of Notice of Hubei Local Taxation Bureau on Further Regulating Examination and Approval of Urban Real Estate Tax Exemption (EDSF [2008] No. 215) and Notice of Hubei Local Taxation Bureau on Further Regulating Examination and Approval of Difficult Exemption of Urban Land Use Tax (EDSF [2008] No. 62), Hubei Iceman Foods Co., Ltd., a subsidiary of the Company, enjoyed the tax benefits of reducing and exempting the property tax and urban land use tax in 2015 and 2016, and the local taxation bureau of Qujialing District of Jingmen City issued the Notice on Granting the Reduction and Exemption (QDSJZ [2016] No.15 and QDSJZ [2016] No.16).

VI. NOTES TO MAIN ITEMS OF THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in RMB unless otherwise stated)

Note 1. Monetary funds

Item Cash on hand Bank deposit Total	Closing balance 17,127.50 211,035,355.11 211,052,482.61	Opening balance 34,280.72 325,345,161.75
		325,379,442.47

Note: As of December 31, 2017, there was no money pledged, frozen or with potential recovery risk.

Note 2. Notes receivable

1. Categories of notes receivable

Type Trade acceptance Total	Closing balance 217,100.00 217,100.00	Opening balance

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

2. Notes receivable endorsed by the Company at the end of the period and not yet due on the balance sheet date

Item Trade acceptance Total	Closing derecognized amount Closing un-derecognized amount 462,930.00 462,930.00	Closing derecognized amount Closing un-derecognized amount 462,930.00 462,930.00

Note: As of December 31, 2017, the Company had no pledged and discounted notes receivable.

Note 3. Accounts receivable

1. Disclosure of accounts receivable by category

Category Accounts receivable with individually significant amount and individual provision for bad debt Accounts receivables with bad-debt provision withdrawn through credit risk characteristic combination Including: Accounts receivable for withdrawing bad-debt provision by aging analysis method Accounts receivable not withdrawing bad-debt provision Accounts receivable without individually significant amounts but individual provision for bad debt Total	Book balance Amount Proportion (%) 57,944,561.81 100.00 57,944,561.81 100.00 57,944,561.81 100.00	Closing balance Bad-debt provision Amount Proportion (%) 2,984,784.25 5.15 2,984,784.25 5.15 2,984,784.25 5.15	Book value 54,959,777.56 54,959,777.56
			54,959,777.56

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Opening balance Book balance Bad-debt provision Category Amount Proportion Amount Proportion (%) (%) Accounts receivable with individually significant amount and individual provision for bad debt Accounts receivables with bad-debt provision withdrawn through credit risk characteristic combination 58,810,392.20 100.00 2,941,153.61 5.00 Including: Accounts receivable for withdrawing bad-debt provision by aging analysis method 58,810,392.20 100.00 2,941,153.61 5.00 Accounts receivable not withdrawing bad-debt provision Accounts receivable without individually significant amounts but individual provision for bad debt Total 58,810,392.20 100.00 2,941,153.61 5.00 (1) Receivables for bad-debt provision by aging analysis method in combination Closing balance Aging Accounts receivable Bad-debt provision <1 year 56,196,638.71 2,809,831.94 1-2 years 1,747,523.10 174,752.31 2-3 years 3-4 years 400.00 200.00 4-5 years >5 years Total 57,944,561.81 2,984,784.25	Opening balance Book balance Bad-debt provision Category Amount Proportion Amount Proportion (%) (%) Accounts receivable with individually significant amount and individual provision for bad debt Accounts receivables with bad-debt provision withdrawn through credit risk characteristic combination 58,810,392.20 100.00 2,941,153.61 5.00 Including: Accounts receivable for withdrawing bad-debt provision by aging analysis method 58,810,392.20 100.00 2,941,153.61 5.00 Accounts receivable not withdrawing bad-debt provision Accounts receivable without individually significant amounts but individual provision for bad debt Total 58,810,392.20 100.00 2,941,153.61 5.00 (1) Receivables for bad-debt provision by aging analysis method in combination Closing balance Aging Accounts receivable Bad-debt provision <1 year 56,196,638.71 2,809,831.94 1-2 years 1,747,523.10 174,752.31 2-3 years 3-4 years 400.00 200.00 4-5 years >5 years Total 57,944,561.81 2,984,784.25	Book value 55,869,238.59 55,869,238.59
		55,869,238.59
		Proportion (%) 5.00 10.00 30.00 50.00
		5.15

– II-78 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Aging <1 year 1-2 years 2-3 years 3-4 years 4-5 years >5 years Total	Opening balance Accounts receivable Bad-debt provision 58,799,792.20 2,939,989.61 10,080.00 1,008.00 520.00 156.00 58,810,392.20 2,941,153.61	Proportion (%) 5.00 10.00 30.00
		5.00

2. Provision, recovery or reversal of provision for bad-debt in current period

The provision for bad debt in current period is RMB43,630.64.

3. There is no write-off of accounts receivable in current period.

4. Top five accounts receivable based on debtors

Organization name Dalian Yiheng Import & Export Co., Ltd. Shandong Yipintang Industrial Co., Ltd. Guangzhou Pumai Biological Technology Co., Ltd. Hainan Leye Foods Co., Ltd. Beijing Boying Tiande Trading Co., Ltd. Total	Closing balance Relationship with the Company 6,241,619.80 Non-affiliated party 5,852,007.00 Non-affiliated party 3,862,895.50 Non-affiliated party 3,015,692.20 Non-affiliated party 2,750,584.00 Non-affiliated party 21,722,798.50	Proportion in closing balance of accounts receivable (%) 10.77 10.10 6.67 5.20 4.75 37.49	Bad-debt provision 312,080.99 292,600.35 193,144.78 150,784.61 137,529.20
			1,086,139.93

– II-79 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Note 4. Prepayment

1. Disclosure of prepayments by aging

Aging <1 year 1-2 years 2-3 years >3 years Total	Closing balance Amount Proportion (%) 283,001.07 60.07 134,964.26 28.64 3,198.76 0.68 49,998.65 10.61 471,162.74 100.00	Opening Amount 1,132,725.80 460,492.51 59,998.65 1,653,216.96	balance Proportion (%) 68.52 27.85 3.63
			100.00

2. Top five prepayments based on the payers

Organization name Guangxi Hengrunjia Foods Co., Ltd. Heji Branch of Jingmen Wusan Modern Agriculture Development Co., Ltd. Liu Yulan Pan Shaomin Haikou Longhua Haixindie Management Software Service Center Total	Closing balance Relationship with the Company 110,079.66 Non-affiliated party 89,400.00 Non-affiliated party 49,998.65 Non-affiliated party 41,000.00 Non-affiliated party 30,000.00 Non-affiliated party 320,478.31	Proportion in total advance payment Reason for unsettlement (%) 23.36 Transaction pending 18.97 Transaction pending 10.61 Transaction pending 8.70 Transaction pending 6.37 Transaction pending 68.01

– II-80 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Note 5. Other receivables

1. Disclosure of other receivables by category

Category Other receivables with individually significant amount and individual provision for bad debt Other receivables with bad-debt provision withdrawn through credit risk characteristic combination Including: Other receivables for withdrawing bad-debt provision by aging analysis method Other receivables not withdrawing bad-debt provision Other receivables without individually significant amount but with individual provision for bad debt Total Category Other receivables with individually significant amount and individual provision for bad debt Other receivables with bad-debt provision withdrawn through credit risk characteristic combination Including: Other receivables for withdrawing bad-debt provision by aging analysis method Other receivables not withdrawing bad-debt provision Other receivables without individually significant amount but with individual provision for bad debt Total	Closing balance Book balance Bad-debt provision Amount Proportion Amount Proportion (%) (%) 1,178,373.54 100.00 175,795.52 14.92 1,178,373.54 100.00 175,795.52 14.92 1,178,373.54 100.00 175,795.52 14.92 Opening balance Book balance Bad-debt provision Amount Proportion Amount Proportion (%) (%) 3,324,488.55 100.00 356,036.57 10.71 3,324,488.55 100.00 356,036.57 10.71 3,324,488.55 100.00 356,036.57 10.71	Book value 1,002,578.02 1,002,578.02
		1,002,578.02
		Book value 2,968,451.98 2,968,451.98
		2,968,451.98

– II-81 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

• (1) Other receivables for bad-debt provision by aging analysis method in combination

Aging <1 year 1-2 years 2-3 years 3-4 years 4-5 years >5 years Total Aging <1 year 1-2 years 2-3 years 3-4 years 4-5 years >5 years Total	Closing balance Other receivables Bad-debt provision 888,161.66 44,408.09 14,380.69 1,438.07 204,831.19 61,449.36 5,000.00 2,500.00 66,000.00 66,000.00 1,178,373.54 175,795.52 Opening balance Other receivables Bad-debt provision 514,245.81 25,712.30 2,729,742.74 272,974.27 14,500.00 4,350.00 65,000.00 52,000.00 1,000.00 1,000.00 3,324,488.55 356,036.57	Proportion (%) 5.00 10.00 30.00 50.00 80.00 100.00
		14.92
		Proportion (%) 5.00 10.00 30.00 50.00 80.00 100.00
		10.71

2. Provision, recovery or reversal of provision for bad-debt in current period

The amount of bad-debt provision reversed in current period is RMB180,241.05.

3. There is no write-off of other receivables in current period.

4. Category of other receivables by nature

Nature of payment Transaction payment Margin Reserve fund Withholding social security, etc Scattered material purchase fund Others Total	Closing balance 316,611.88 201,000.00 554,705.48 102,840.26 3,215.92 1,178,373.54	Opening balance 2,996,942.11 1,000.00 165,255.87 97,252.47 57,981.75 6,056.35
		3,324,488.55

– II-82 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

5. Top five other receivables based on debtors

Organization name Nature of payment Zhang Yexiu Reserve fund Fang Henghui (former shareholder of Hubei Iceman Foods Co., Ltd.) Transaction payment Human Resources and Social Security Bureau of Qujialing Management District, Jingmen City Margin Zhan Tao Reserve fund Peng Zhiliang Reserve fund Total	Closing balance Relationship with the Company Aging 263,064.65 Non-affiliated party <1 year 219,211.88 Non-affiliated party <3 years 200,000.00 Non-affiliated party <1 year 134,000.00 Non-affiliated party <1 year 65,000.00 Non-affiliated party >5 years 881,276.53	Proportion in closing balance of other receivables (%) 22.32 18.60 16.97 11.37 5.52 74.78	Closing balance of bad-debt provision 13,153.23 62,887.43 10,000.00 6,700.00 65,000.00
			157,740.66

Note 6. Inventories

Item Raw materials Revolving materials Finished goods Delivered goods Outsourced materials Goods in process Total	Closing balance Amount Provision for depreciation Book value 2,772,567.73 2,772,567.73 587,087.97 587,087.97 45,326,124.56 45,326,124.56 568,525.55 568,525.55 22,446.54 22,446.54 4,150,321.91 4,150,321.91 53,427,074.26 53,427,074.26	Opening balance Amount Provision for depreciation Book value 3,516,409.75 3,516,409.75 485,876.03 485,876.03 37,259,058.72 37,259,058.72 409,678.91 409,678.91 3,961,151.13 3,961,151.13 45,632,174.54 45,632,174.54	Opening balance Amount Provision for depreciation Book value 3,516,409.75 3,516,409.75 485,876.03 485,876.03 37,259,058.72 37,259,058.72 409,678.91 409,678.91 3,961,151.13 3,961,151.13 45,632,174.54 45,632,174.54
			45,632,174.54

Note: During the inventory reporting period, there is no need to make provision for depreciation.

Note 7. Non-current assets maturing within one year

Item Land lease expense Total	Closing balance	Opening balance 1,056,600.00
		1,056,600.00

– II-83 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Note 8. Other current assets

Item Added-value tax retained Input tax with VAT to be certified Total Note 9. Long-term receivables Closing balance Nature of payment Book balance Bad-debt provision Book value Finance leases Including: unrealized financing income Merchandise paid by installment Labor services provided on installment Others 318,000.00 318,000.00 Less: long-term receivables due within one year Total 318,000.00 318,000.00	Closing balance Opening balance 2,261,266.88 1,534,481.71 1,432,853.81 469,383.82 3,694,120.69 2,003,865.53 Opening balance Range of discount rate Book balance Bad-debt provision Book value 318,000.00 318,000.00 318,000.00 318,000.00	Opening balance 1,534,481.71 469,383.82	Opening balance 1,534,481.71 469,383.82
		2,003,865.53
			Range of discount rate

Note: The closing balance of long-term receivables is RMB318,000.00, which is 300 mu of land rented by Guangxi Tianye Innovation Agricultural Technology Co., Ltd. (a wholly-owned subsidiary of the Company) from Zhangchou Village, Qujie Town, Xuwen County, Guangdong Province. The lease term is 10 years, and the lease deposit is RMB318,000.00, which will be returned after the expiration of the contract term.

Note 10. Long-term equity investment

Investee Associated enterprise: Tianjin Fangfu Tianye Investment Center (Limited Partnership) Total	Opening balance 47,594,736.95 47,594,736.95	Increase and decrease of current period Additional investment Decrease in investment Profits and losses on investments recognized under equity method Adjustment to other comprehensive incomes 12,000,000.00 1,152,130.51 2,871,000.00 12,000,000.00 1,152,130.51 2,871,000.00	Increase and decrease of current period Additional investment Decrease in investment Profits and losses on investments recognized under equity method Adjustment to other comprehensive incomes 12,000,000.00 1,152,130.51 2,871,000.00 12,000,000.00 1,152,130.51 2,871,000.00
			2,871,000.00

– II-84 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Increase and decrease of current period

Investee Associated enterprise: Tianjin Fangfu Tianye Investment Center (Limited Partnership) Total	Other equity changes	Declared cash dividend or profits	Provision for impairment	Others	Closing balance 39,617,867.46 39,617,867.46	Closing balance of provision for impairment

Notes:

• (1) On August 7, 2015, the Company held the second extraordinary general meeting of shareholders in 2015, and deliberated and approved the Proposal of Tianye Innovation Corporation on Investment and Establishment of Industrial Investment M&A Parent Fund . In order to build an industrial integration platform, optimize and upgrade the Company’s industrial layout, and enhance the Company’s investment ability in modern agriculture, large consumption and mobile internet plus industries, the Company proposed to jointly invest with Beijing Fangfu Capital Management Co., Ltd. to establish an industrial investment M&A parent fund: Tianjin Fangfu Tianye Investment Center (Limited Partnership) (hereinafter referred to as the “ Fund ”). The total capital contribution of the Fund is RMB100 million, of which RMB99 million is subscribed by the Company as a limited partner, accounting for 99.00% of the total capital contribution of the Fund; As the general partner of the fund, Fangfu Capital subscribed for a share of RMB1 million, accounting for 1% of the total capital contribution of the Fund. As of the reporting date, the Company actually contributed RMB50.7 million, accounting for 99.00% of the actual contribution, and Beijing Fangfu Capital Management Co., Ltd. actually contributed RMB512,100, accounting for 1.00% of the actual contribution.

• (2) According to the resolution of the first meeting of all partners of Tianjin Fangfu Tianye Investment Center (Limited Partnership) in 2017, it is agreed to refund the Company’s investment of RMB12 million.

– II-85 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Note 11. Fixed assets

1. Information about fixed assets

		Machinery
	Pant and	and		Office	Other
Item	buildings	equipment	Vehicles	equipment	equipment	Total
I. Total original book value
1. Opening balance	125,640,433.66	104,498,107.33	4,189,917.86	2,173,015.55	395,677.68	236,897,152.08
2. Increase of the current period	2,314,046.50	837,996.35		327,848.00		3,479,890.85
Acquisition	389,588.26	837,996.35		327,848.00		1,555,432.61
Transfers from construction in progress	1,924,458.24					1,924,458.24
3. Decrease of the current period		957,974.38	107,562.72	110,497.46		1,176,034.56
Disposal or scrapping		957,974.38	107,562.72	110,497.46		1,176,034.56
Other transfer-out
4. Closing balance	127,954,480.16	104,378,129.30	4,082,355.14	2,390,366.09	395,677.68	239,201,008.37
II. Accumulated depreciation
1. Opening balance	26,034,840.83	36,181,568.39	1,090,293.15	1,679,925.59	258,962.64	65,245,590.60
2. Increase of the current period	4,840,313.14	9,705,507.09	437,639.38	148,490.57	35,723.06	15,167,673.24
Withdrawal	4,840,313.14	9,705,507.09	437,639.38	148,490.57	35,723.06	15,167,673.24
3. Decrease of the current period		282,530.41	39,170.84	104,972.59		426,673.84
Disposal or scrapping		282,530.41	39,170.84	104,972.59		426,673.84
Other transfer-out
4. Closing balance	30,875,153.97	45,604,545.07	1,488,761.69	1,723,443.57	294,685.70	79,986,590.00
III. Impairment provision
1. Opening balance		329,910.73	26,999.88			356,910.61
2. Increase of the current period		52,940.40				52,940.40
Withdrawal		52,940.40				52,940.40
3. Decrease of the current period
Other transfer-out
4. Closing balance		382,851.13	26,999.88			409,851.01
IV. Total book value
1. Closing book value	97,079,326.19	58,390,733.10	2,566,593.57	666,922.52	100,991.98	158,804,567.36
2. Opening book value	99,605,592.83	67,986,628.21	3,072,624.83	493,089.96	136,715.04	171,294,650.87

2. Fixed assets that have not completed the title certificate at the end of the period

Item Book value Reasons for incomplete certificates of title Plant and buildings 6,904,299.39 Coordination in progress Total 6,904,299.39

3. Fixed assets for mortgage at the end of the period

See Note 45 for details of the fixed assets for mortgage at the end of the period.

– II-86 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Note 12. Construction in progress

1. Construction in process

Item Tianye Nonggu Science and Technology Park Project Phase I Fermented juice production line Comprehensive Office Building Reconstruction Project Supporting facilities of beverage production line Supporting facilities of characteristic agricultural demonstration area Equipment Installation and Reconstruction Project Cold Storage Project Total	Closing balance Book balance Provision for impairment 129,601,596.40 5,318,877.28 265,943.86 21,724,100.00 795,405.47 110,000.00 157,549,979.15 265,943.86	Book value 129,601,596.40 5,052,933.42 21,724,100.00 795,405.47 110,000.00 157,284,035.29	Opening balance Book balance Provision for impairment Book value 33,286,306.68 33,286,306.68 5,318,877.28 265,943.86 5,052,933.42 1,635,208.24 1,635,208.24 63,247.87 63,247.87 40,303,640.07 265,943.86 40,037,696.21	Opening balance Book balance Provision for impairment Book value 33,286,306.68 33,286,306.68 5,318,877.28 265,943.86 5,052,933.42 1,635,208.24 1,635,208.24 63,247.87 63,247.87 40,303,640.07 265,943.86 40,037,696.21
				40,037,696.21

2. Changes in significant construction in progress of the current period

Project name Tianye Nonggu Science and Technology Park Project Phase I Fermented juice production line Comprehensive Office Building Reconstruction Project Supporting facilities of characteristic agricultural demonstration area Total	Opening balance 33,286,306.68 5,318,877.28 1,635,208.24 40,240,392.20	Increase of current period 96,315,289.72 289,250.00 21,724,100.00 118,328,639.72	Decrease of current period Transferred to productive biological assets Transferred to fixed assets Others decrease 1,924,458.24 1,924,458.24	Closing balance 129,601,596.40 5,318,877.28 21,724,100.00
				156,644,573.68

– II-87 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Project name Tianye Nonggu Science and Technology Park Project Phase I Fermented juice production line Comprehensive Office Building Decoration Project Supporting facilities of characteristic agricultural demonstration area Total	Budget amount (RMB10,000) 39,739.33 537.26 192.45 2,568.17 43,037.21	Proportion of project investment in budget (%) 32.61 99.00 100.00 89.95	Construction progress (%) 32.61 99.00 100.00 89.95	Accumulated amount of capitalization of interest	Include: amount of capitalization of interest of current period	Capitalization rate of interest of current period Source of fund (%) Self-raised Self-raised Self-raised Self-raised

3. Other descriptions of construction in progress

Notes: (1) The Tianye Nonggu Science and Technology Park Project Phase I is funded by the Company, with a total investment of RMB454,899,100, including RMB104,490,400 for civil works, RMB20,362,100 for ancillary facilities and structures, RMB15,270,000 for land purchase and leveling, RMB257,270,800 for equipment and instrument purchase and installation, RMB500,000 for technology and other investment, RMB7,005,800 for preparation cost and RMB50 million for working capital. (2) The budget of Tianye Nonggu Science and Technology Park Project Phase I includes civil works investment, ancillary facilities and structures, land purchase and leveling, equipment and instrument purchase and installation fees.

Note 13. Productive biological assets

1. Productive biological assets measured by cost

			**Planting **	industry
Item	Passion fruit	Pitaya	Pineapple	Banana	Guava	Mango	Total
I. Total original book value
1. December 31, 2016	8,366,652.96	3,775,909.46	1,627,102.00	1,195,399.20	3,945,007.64	12,970,177.60	31,880,248.86
2. Increase of current period			601,326.00			5,059,717.86	5,661,043.86
Purchased
Self-planted			601,326.00			5,059,717.86	5,661,043.86
Increase in corporation merger
Invested by shareholders
Other transfer-in
3. Decrease of current period
Disposal

– II-88 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

			**Planting **	industry
Item	Passion fruit	Pitaya	Pineapple	Banana	Guava	Mango	Total
Other transfer-out
4. December 31, 2017	8,366,652.96	3,775,909.46	2,228,428.00	1,195,399.20	3,945,007.64	18,029,895.46	37,541,292.72
II. Accumulated depreciation
1. December 31, 2016	4,020,717.68	1,415,966.04		1,195,399.20	1,198,526.90		7,830,609.82
2. Increase of current period	3,075,494.31	943,977.36			986,251.92		5,005,723.59
Withdrawal	3,075,494.31	943,977.36			986,251.92		5,005,723.59
Increase in corporation merger
Other transfer-in
3. Decrease of current period
Disposal
Other transfer-out
4. December 31, 2017	7,096,211.99	2,359,943.40		1,195,399.20	2,184,778.82		12,836,333.41
III. Impairment provision
1. December 31, 2016
2. Increase of current period
Withdrawal
Increase in corporation merger
Other transfer-in
3. Decrease of current period
Disposal
Other transfer-out
4. Balance as of December 31, 2017
IV. Book value
1. December 31, 2017	1,270,440.97	1,415,966.06	2,228,428.00		1,760,228.82	18,029,895.46	24,704,959.31
2. December 31, 2016	4,345,935.28	2,359,943.42	1,627,102.00		2,746,480.74	12,970,177.60	24,049,639.04

2. During the reporting period of productive biological assets, there is no need to make provision for impairment.

– II-89 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Note 14. Intangible assets

Item	Land use right	Patent right	Trademark right	Software	Total
I. Original book value
1. Opening balance	118,854,685.51	15,485.00	10,900.00	30,540.00	118,911,610.51
2. Increase of current period	618,176.00				618,176.00
Acquisition	618,176.00				618,176.00
Internal R&D
Other transfer-in
2. Decrease of current period	1,017,520.84				1,017,520.84
Disposal	1,017,520.84				1,017,520.84
Other transfer-out
3. Ending balance	118,455,340.67	15,485.00	10,900.00	30,540.00	118,512,265.67
II. Accumulated amortisation
1. Opening balance	7,349,457.94	9,068.40	6,994.17	28,010.00	7,393,530.51
2. Increase of current period	1,842,847.60	770.00	1,090.00	2,530.00	1,847,237.60
Withdrawal	1,842,847.60	770.00	1,090.00	2,530.00	1,847,237.60
Increase in corporation merger
Other transfer-in
3. Decrease of current period	16,958.68				16,958.68
Disposal	16,958.68				16,958.68
Other transfer-out
4. Closing balance	9,175,346.86	9,838.40	8,084.17	30,540.00	9,223,809.43
III. Impairment provision
1. Opening balance	20,094,867.93				20,094,867.93
2. Increase of current period
Withdrawal
Increase in corporation merger
Other transfer-in
3. Decrease of current period
Disposal
Other transfer-out
4. Closing balance	20,094,867.93				20,094,867.93
IV. Total book value
1. Book value at end of period	89,185,125.88	5,646.60	2,815.83		89,193,588.31
2. Book value at beginning of
period	91,410,359.64	6,416.60	3,905.83	2,530.00	91,423,212.07

Note: See Note 45 for details of intangible assets for mortgage at the end of the period.

– II-90 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Note 15. Goodwill

1. The original book value of goodwill

Name of the investee or items resulting in goodwill Hubei Iceman Foods Co., Ltd. Total	Opening balance 17,607,521.44	Increase of current period Arising from business combination Others	Decrease of current period Disposal Others Closing balance 17,607,521.44 17,607,521.44	Decrease of current period Disposal Others Closing balance 17,607,521.44 17,607,521.44
	17,607,521.44			17,607,521.44

Calculation process of goodwill: In order to effectively integrate the resources and advantages of both parties, enlarge and strengthen the main business, and form a highly competitive production enterprise of fruit juice and fruit and vegetable products, the Company realized the equity acquisition and business restructuring of Hubei Iceman Foods Co., Ltd. On the purchase date (November 16, 2015); the book value of identifiable net assets of Hubei Iceman Foods Co., Ltd. was RMB-24,361,162.41; the fair value of identifiable net assets based on the purchase date was RMB-17,607,520.44. According to the Equity Merger Agreement signed between the Company and the original shareholders of Hubei Iceman Foods Co., Ltd., the consideration for equity merger was RMB1, so the goodwill formed by this merger was RMB17,607,521.44.

2. Provision for impairment of goodwill

Name of the investee or items resulting in goodwill Opening balance Hubei Iceman Foods Co., Ltd. Total	Increase of current period Provision Others 2,749,838.60 2,749,838.60	Decrease of current period Disposal Others	Closing balance 2,749,838.60
			2,749,838.60

Goodwill impairment test process, parameters and recognition method of goodwill impairment loss: Hubei Iceman Foods Co., Ltd. was taken as a separate asset group for impairment test, and the recoverable amount of goodwill impairment test was determined by fair value minus disposal expenses. According to the Appraisal Report KYPBZ [2018] No.204 issued by Kaiyuan Assets Appraisal Co., Ltd. on April 12, 2018, the base date of appraisal for goodwill impairment test was December 31, 2017, and the recoverable amount of the assets was less than the book value of the assets group including goodwill.

Note 16. Long-term deferred expenses

Item Land lease expense Plant Decoration Project Total	Opening balance 1,780,057.57 2,108,551.45 3,888,609.02	Increase in the current period 18,697,274.00 18,697,274.00	Amortization for the current period 4,830,121.62 448,417.34 5,278,538.96	Other decrease	Closing balance 15,647,209.95 1,660,134.11
					17,307,344.06

– II-91 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Note 17. Deferred tax assets and deferred tax liabilities

1. Deferred income tax assets before offset

Item Provision for impairment of assets Offset internal unrealized profits Deductible losses Government grants Changes in fair value of long-term equity investment Total	Closing balance Deductible temporary difference Deferred tax assets 2,963,550.33 622,403.48 259,175.18 64,793.80 572,141.91 143,035.48 1,701,046.3 306,498.69 5,495,913.72 1,136,731.45	Opening Deductible temporary difference 3,068,563.82 237,669.77 875,045.46 2,740,061.54 2,871,000.00 9,792,340.59	balance Deferred tax assets 649,202.94 35,650.47 218,761.37 685,015.39 430,650.00
			2,019,280.17

Note: The deductible loss in 2017 was generated by Hubei Tianye Innovation Nonggu Fruit & Vegetable Co., Ltd., a wholly-owned subsidiary of the Company, and the deductible loss in 2017 was not recognized by tax department.

2. Unrecognized deferred tax assets

Item Provision for impairment of assets Deferred income Deductible losses Total	Closing balance 197,029.44 65,586,133.20 17,412,890.79 83,196,053.43	Opening balance 851,480.83 45,652,116.16 10,555,382.66
		57,058,979.65

Note: The reason why deferred income tax assets have not been recognized for asset impairment provision was that Guangxi Tianye Venture Agricultural Technology Co., Ltd., a subsidiary of the Company, was exempt from enterprise income tax for fruit planting; the reason why deferred income tax assets have not been recognized for deferred revenue was that Hubei Iceman Food Co., Ltd., a subsidiary of the Company, was uncertain whether it could obtain enough taxable income in the future; the reason why deferred income tax assets have not been recognized for deductible losses was that Hainan Hainan Tianye Drinks Food Sales Co. Ltd., Hubei Iceman Food Co., Ltd. and Hubei Tianye Nonggu Biological Technology Co., Ltd., which were subsidiaries of the Company, were uncertain whether they could obtain enough taxable income in the future.

3 Deductible losses for which deferred tax assets are not recognised will be expired in the following year

Year 2018 2019 2020 2021 2022 Total	Closing balance 149,449.48 460,015.88 3,207,535.44 6,738,381.86 6,857,508.13 17,412,890.79	Opening balance 149,449.48 460,015.88 3,207,535.44 6,738,381.86
		10,555,382.66

– II-92 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Note 18. Other non-current assets

Item Advance payment for Tianye Nonggu Science and Technology Park Project Phase I Equipment project payment Advance payment for IPO Enterprise income tax retained Total	Closing balance 50,654,371.69 519,506.55 2,215,306.95 33,968.38 53,423,153.57	Opening balance 7,174,407.77 1,562,126.00
		8,736,533.77

Note 19. Short-term loans

Item Unsecured loans Mortgaged and guaranteed loans Total	Closing balance 36,000,000.00 30,000,000.00 66,000,000.00	Opening balance 36,000,000.00 45,000,000.00
		81,000,000.00

Note 1:

As of December 31, 2017, the short-term loan balance was RMB66 million:

• 1) In July, 2017, the Company signed a Loan Contract ((NZ) J [2017] No. 001) with Beihai Sub-branch of Industrial and Commercial Bank of China for RMB36 million, with a loan period of one year. The mortgaged properties were land use right (HGY (2012) No. 1560), industrial factory buildings and supporting houses (HFQZHPZ No. 017061-017071), and the Maximum Amount Mortgage Contract with the contract number of GYBNZDZ (2013) No. 001 was signed in 2013.

• 2) In March 2016, Hainan Dachuan Food Co., Ltd., a subsidiary of the Company, and Haikou Longhua Sub-branch of Bank of Communications signed a Revolving Loan Contract (QJY (DT) 2017 LDZ No. DC001) for RMB30 million, with the credit period from September 14, 2017 to September 14, 2019, and term of each loan was not longer than 12 months. Guarantee method: mortgage+guarantee; the mortgaged properties were the house (DCZZ No. 0005745 -0005749), the land use right (DAGY (2010) No. 253, DAGY (DC002) No. 23), machinery and equipment, and the mortgage contracts with numbers of QJY (DT) 2017 DZ No. DC001 and QJY (DT) 2017 DZ No. DC002 were signed; and the guarantee contracts with the numbers of QJY (DT) 2017 BZ No. DC001 and QJY (DT) 2017 BZ No. DC002 were signed and the guarantors were Tianye Innovation Corporation and Yao Jiuzhi respectively. The maximum creditor’s right amount of the above mortgage guarantee was RMB36 million (RMB thirty-six million only).

Note 2:

As of December 31, 2016, the ending balance of short-term loans was RMB81 million:

• 1) In June 2016, the Company signed a Loan Contract ((NZ) Z [2016] No. 001) with Beihai Sub-branch of Industrial and Commercial Bank of China for RMB36 million, with a loan period of one year. The mortgaged properties were land use right (HGY (2012) No. 1560), industrial factory buildings and supporting houses (HFQZHPZ No. 017061-017071), and the Maximum Amount Mortgage Contract with the contract number of GYBNZDZ (2013) No. 001 was signed in 2013.

• 2) In March 2016, Hainan Dachuan Food Co., Ltd., a subsidiary of the company, and Haikou Longhua Sub-branch of Bank of Communications signed a loan contract (QJY (DT) 2016 LDZ No. DC001) of RMB30 million; the loan period was one year and the guarantee method was mortgage+guarantee; the mortgaged properties were house (DCZZ No. 0005745 -0005749), land use rights (DAGY (2010) No. 253, DAGY (2008) No. 23), machinery, equipment and transportation tools; and the mortgage contracts with numbers of QJY (DT) 2016 DZ No. DC001,

– II-93 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

QJY (DT) 2016 DZ No. DC002 and QJY (DT) 2016 DZ No. DC003 were signed; and the guarantee contracts with the numbers of QJY (DT) 2016 BZ No. DC001 and QJY (DT) 2016 BZ No. DC002 were signed and the guarantors were the Company and Shan Dan respectively.

• 3) In June 2016, Hubei Iceman Foods Co., Ltd., a subsidiary of the Company, and Wusan Farm Sub-branch of Agricultural Bank of China Co., Ltd. signed a Working Capital Loan Contract (No. 42010120160001864) for RMB5 million a Working Capital Loan Contract (No. 42010120160001872) for RMB10 million, totaling RMB15 million; the loan period was one year and the guarantee method was mortgage+guarantee; the mortgaged properties were the house (JMSFQZQJLZ No. 1000330) and the land use rights (JGY (2012) No. 010005376, JGY (2012) No. 010005336-1), and the Maximum Amount Mortgage Contract with the contract number of NO.42100620160004752 was signed. The guarantee contract with the number of 20160602 was signed and the guarantor was the Company.

Note 20. Accounts payable

1. Accounts payable classified by nature

Item Material purchase payment Payment related to expenses Equipment and project purchase payment Others Total	Closing balance 16,518,206.83 1,243,499.80 10,186,321.28 377,682.34 28,325,710.25	Opening balance 13,780,701.50 487,928.78 3,751,962.55 79,389.78
		18,099,982.61

2. Significant accounts payable aged over 1 year

Organization name Xiamen Heguanxin Cryogenic Equipment Co., Ltd. Wuhan Sentai Environmental Protection Co., Ltd. Jiangsu Kaiyi Intelligent Technology Co., Ltd. Nanning Yuebo Industry Co., Ltd. Yang Deping Total	Closing balance Relationship with the Company Reasons for not been repaid or transferred 320,200.01 Non-affiliated party Uncompleted settlement 200,000.00 Non-affiliated party Uncompleted settlement 152,413.68 Non-affiliated party Uncompleted settlement 117,358.04 Non-affiliated party Uncompleted settlement 111,300.00 Non-affiliated party Uncompleted settlement 901,271.73

– II-94 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Note 21. Advances from customs

1. Disclosure of advances from customs by nature

Item Payment for goods Total	Closing balance 4,088,193.01 4,088,193.01	Opening balance 1,967,071.92
		1,967,071.92

Other descriptions of advance receipts: During the reporting period, the Company had not important advance receipts with more than one-year aging.

Note 22. Payroll and employee benefits payable

1. Payroll and employee benefits payable

Item Short-term benefits Post-employment benefits — defined contribution plan Termination benefits Total	Opening balance 2,321,973.44 43,250.52 2,365,223.96	Increase of current period 29,375,351.87 1,433,814.90 61,950.00 30,871,116.77	Decrease of current period 28,697,766.36 1,434,747.50 61,950.00 30,194,463.86	Closing balance 2,999,558.95 42,317.92
				3,041,876.87

2. Short-term benefits

Item Wages or salaries, bonuses, allowances and subsidies Employee welfare Social insurance contributions Including: basic medical insurance premium Industrial injury insurance premium Birth insurance premium Housing funds Labor union and employee education costs Total 3. Defined contribution plan Item Basic pension insurance Unemployment insurance Total	Opening balance 2,204,864.97 80,517.00 23,271.47 19,512.00 2,448.52 1,310.95 13,320.00 2,321,973.44 Opening balance 41,935.52 1,315.00 43,250.52	Increase of current period 27,192,376.19 1,125,738.59 701,208.29 597,844.80 62,011.32 41,352.17 339,348.00 16,680.80 29,375,351.87 Increase of current period 1,395,726.62 38,088.28 1,433,814.90	Decrease of current period 26,421,266.01 1,206,255.59 702,551.96 599,048.20 62,110.04 41,393.72 351,012.00 16,680.80 28,697,766.36 Decrease of current period 1,396,595.22 38,152.28 1,434,747.50	Closing balance 2,975,975.15 21,927.80 18,308.60 2,349.80 1,269.40 1,656.00
				2,999,558.95
				Closing balance 41,066.92 1,251.00
				42,317.92

– II-95 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Note 23. Taxes payable

Tax items VAT Enterprise income tax Individual income tax Urban maintenance and construction tax Building tax Land use tax Education expenses and local surcharges Stamp duties Deed tax Total	Closing balance 1,390,801.38 1,157,903.30 21,783.73 64,015.43 17,757.88 208,682.73 63,901.93 3,051.80 2,927,898.18	Opening balance 1,656,281.82 1,742,343.84 28,031.95 82,151.03 17,757.87 19,500.00 82,151.02 59,529.80 2,488,800.00
		6,176,547.33

Note 24. Other payables

Nature of payment Miscellaneous project payments Payment related to expenses Transaction payment Collection and payment Social security fund, etc Others Total	Closing balance 628,965.00 1,601,670.09 213,495.40 198,264.94 46,291.32 16,580.00 2,705,266.75	Opening balance 827,115.00 702,819.77 161,145.40 141,747.23 52,757.03
		1,885,584.43

Note 25. Deferred income

Item Government subsidy related to assets Government subsidy related to revenues Total	Opening balance 67,868,597.70 67,868,597.70	Increase of current period 8,856,278.00 33,000.00 8,889,278.00	Decrease of current period 9,067,475.47 9,067,475.47	Closing balance Causes 67,657,400.23 See Table 1 for details 33,000.00 See Table 1 for details 67,690,400.23

– II-96 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

1. Deferred revenue related to government grants

Item Financial subsidy for the development of SME in local characteristic industries in 2012 Subsidy for the construction of agricultural product standardization demonstration base Infrastructure support subsidies allocated by the government Research and application subsidy project of key technology in coconut milk production stored at room temperature Subsidy for quality and safety demonstration area of export food and agricultural products in Hainan Province Financial support for newly planted fruits Financial subsidy for special fruit planting Supporting funds for infrastructure of Nonggu Science and Technology Park Project Technical transformation funds for fruit and vegetable juice pulp production line Special funds for the development of SME in the autonomous region in 2017 Support funds for grain, agriculture and forestry characteristic industries in the autonomous region in 2016 Funds for Rural Tourism Construction Project Phase I Star Award for Xiangliuxi Tropical Fruit Industry (Core) Demonstration Zone Subsidies for purchasing agricultural machinery Research and demonstration project on key technologies of agricultural industry innovation and development in poor villages (slope) Total	Opening balance 460,000.00 538,461.54 45,252,116.16 90,000.00 592,000.00 1,609,600.00 18,926,420.00 400,000.00 67,868,597.70	Amount of subsidy increased in current period 500,000.00 1,239,386.00 1,200,000.00 300,000.00 800,000.00 4,797,362.00 19,530.00 33,000.00 8,889,278.00	Amount included in the current profits and losses 80,000.00 215,384.62 3,644,465.88 90,000.00 38,461.57 592,000.00 602,415.03 12,371.13 3,791,726.24 651.00 9,067,475.47	Other changes	Closing balance Pertinent to Assets/Income 380,000.00 Assets related 323,076.92 Assets related 41,607,650.28 Assets related Revenues related 461,538.43 Assets related Assets related 1,609,600.00 Assets related 19,563,390.97 Assets related 400,000.00 Assets related 1,187,628.87 Assets related 300,000.00 Assets related 800,000.00 Assets related 1,005,635.76 Assets related 18,879.00 Assets related 33,000.00 Revenues related 67,690,400.23

– II-97 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Note:

As of December 31, 2017, the balance of deferred revenue related to government grants was RMB67,690,400.23:

1. According to GCQ [2012] No. 128 “Notice on Issuing Development Funds for Small and Medium-sized Enterprises in Local Characteristic Industries in 2012” issued by Finance Department of Guangxi Zhuang Autonomous Region, the Company received special funds of RMB800,000 for the development of SME from Hepu County Finance Bureau on October 16, 2012 for fruit and vegetable processing projects, and amortization was divided into 10 years according to the life of asset depreciation.

2. According to NCN [2015] No. 164 “Notice of Nanning Finance Bureau on Appropriating Funds for Agricultural Products Standardization Construction Project in 2015” issued by Nanning Finance Bureau, Guangxi Tianye Innovation Agricultural Technology Co., Ltd., a subsidiary of the Company, received a subsidy of RMB700,000.00 for the construction of agricultural products standardization demonstration base from Yongning District Agriculture, Forestry and Water Conservancy Bureau of Nanning City on February 5, 2016 and April 19, 2016 respectively. After the acceptance, the remaining amortization period of productive biological assets was determined to be 39 months.

3. According to the “Letter on Subsidizing Infrastructure Support for Comprehensive Development of Production and Processing of Fruits and Vegetables and Quick-frozen Fruits and Vegetables in Hubei Iceman Foods Co., Ltd.” issued by Qujialing Management District of Jingmen City on February 9, 2012, Hubei Iceman Foods Co., Ltd., a subsidiary of the Company, received a total of RMB61,910,003.68 of government infrastructure support subsidies in 2012 and 2013, with the assets amortization life of 20 years.

4. According to QK [2016] No. 42 “Notice of Hainan Provincial Department of Science and Technology on the Project Approval of 2016 Hainan Provincial Key Research Plan” issued by Hainan Provincial Department of Science and Technology, Hainan Dachuan Food Co., Ltd., a subsidiary of the Company, received RMB300,000 of provincial key R&D plan project fund transferred by Hainan Provincial Treasury Payment Bureau in 2016 for the research and application of key technologies for coconut milk production stored at normal temperature. The project period was from January 2016 to December 2017.

5. According to QCQ [2014] No. 2041 Notice on the Allocation of Funds for the Project Construction of Hainan Export Food and Agricultural Product Quality and Safety Demonstration Zone in 2014 issued by Hainan Provincial Department of Finance, Hainan Dachuan Food Co., Ltd., a subsidiary of the Company, received a subsidy fund of RMB500,000.00 for quality and safety demonstration area of export food and agricultural products in Hainan Province on May 14, 2015. The Company amortized this government grant according to the depreciation life of assets.

6. According to the agricultural industrialization development and support work plan of Yongning District, Nanning City in 2015, Guangxi Tianye Innovation Agricultural Technology Co., Ltd., a subsidiary of the Company, received the financial subsidy fund of RMB1,184,000 for newly planted high-quality special fruits from Yongning District Agriculture, Forestry and Water Conservancy Bureau of Nanning City. After the acceptance, the remaining amortization period of productive biological assets was determined to be 14 months.

7. According to the agricultural industrialization development and support work plan of Yongning District, Nanning City in 2016, Guangxi Tianye Innovation Agricultural Technology Co., Ltd., a subsidiary of the Company, received the financial subsidy fund of RMB1,609,600 for newly planted special fruits from Pumiao Town People’s Government of Yongning District of Nanning City, which was amortized according to the mature service life of productive biological assets after acceptance.

8. According to the Interim Measures for Financial Funds to Support Industrial Development in Qujialing Management District , as of December 31, 2017, the Management Committee of Qujialing Economic Development Zone in Hubei Province had allocated a total of RMB20,165,806 for supporting infrastructure, and the project had not been completed by the end of the reporting period.

9. According to the fixed assets investment plan of Hubei Province in 2016, Hubei Iceman Foods Co., Ltd., a subsidiary of the Company, received RMB400,000.00 from the Development and Reform Bureau of Qujialing Management District of Jingmen City for technical transformation of fruit and vegetable juice pulp production line. As of the end of the reporting period, the project had not been completed.

10. According to the second batch of special funds for the development of SME in the autonomous region in 2017 (dry and preserved fruit and vegetable processing production line project) in [2017] No. 21 document of Finance Bureau of Hepu County, Guangxi Zhuang Autonomous Region and the document of Finance Department of Guangxi Zhuang Autonomous Region, the Company received a development special fund subsidy of RMB1,200,000 on December 4, 2017, and such grant was amortized according to the depreciation life of assets.

– II-98 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

1. According to GCN [2015] No. 226 “Notice on Organizing the Application of Supporting Funds for Food, Agriculture and Forestry Advantageous Industries in the Autonomous Region in 2016” issued by Region Finance Department Document of Guangxi Zhuang Autonomous, Guangxi Tianye Innovation Agricultural Technology Co., Ltd., a subsidiary of the Company, received RMB300,000 of support funds for food, agriculture and forestry advantageous industries in the autonomous region in 2016 from Yongning District Agriculture and Forestry Water Conservancy Bureau of Nanning on September 20, 2017, which was amortized according to the mature service life of productive biological assets after acceptance.

2. According to the “Notice on Printing and Distributing the Implementation Plan for the Construction of Tourist Toilets in Yongning District in 2017” issued by the Office of the People’s Government of Yongning District, Nanning City, Guangxi Tianye Innovation Agricultural Technology Co., Ltd., a subsidiary of the Company, received RMB800,000 of fund for Rural Tourism Construction Project Phase I from Nanning Yongning District Cultural Press, Publication and Sports Bureau on December 8, 2017 and December 27, 2017, which was amortized according to the assets depreciation life after acceptance.

3. According to the Implementation Plan for the Establishment of Yongning Xiangliuxi Tropical Fruit Industry (Core) Demonstration Zone (YBF [2014] No. 44), Guangxi Tianye Innovation Agricultural Technology Co., Ltd., a subsidiary of the Company, received RMB4,797,362 of fund related to construction of Xiangliuxi Tropical Fruit Industry (Core) Demonstration Zone in Yongning District, Nanning City from Yongning District Agriculture and Forestry Water Conservancy Bureau on June 7, 2017. The Company amortized such government grant according to the income and assets.

4. According to YFF [2017] No. 7 “Notice on Issuing the First Batch of Scientific Research and Technology Development Projects (Subjects) in Yongning District, Nanning City” issued by the Finance Bureau of Yongning District, Nanning City, Guangxi Tianye Innovation Agricultural Technology Co., Ltd., a subsidiary of the Company, received RMB33,000 of fund for research and demonstration project on key technologies of agricultural industry innovation and development in poor villages (slope) from the Treasury Centralized Payment Center in Yongning District, Nanning City on December 5, 2017; such fund was included in the current profits and losses after acceptance.

5. According to the document “Notice of the Office of the Agricultural Department of Hubei Province on the Implementation of Agricultural Machinery Purchase Subsidy in 2017” issued by the Office of the Agricultural Department of Hubei Province, Hubei Tianye Innovation Nonggu Fruit & Vegetable Co., Ltd., a subsidiary of the Company, received a subsidy of RMB19,530 for purchase of agricultural machinery from the Agricultural Water Bureau of Qujialing Management District of Jingmen City on December 11, 2017, and the company amortized this government grant according to the depreciation life of assets.

Note 26. Share Capital

		**Changes in the current **	**Changes in the current **	**period, increase (+) **	and decrease (-)
			Capitalization
	Opening	New shares	Share	of capital			Closing
Item	balance	issued	donation	reserve	Others	Subtotal	balance
Number of shares	240,000,000.00						240,000,000.00
Note 27. Capital reserves
			Opening	Increase of	Decrease of		Closing
Item			balance	current period	current period		balance
Capital premium			244,109,726.71			244,109,726.71
Other capital reserves			2,190,367.24				2,190,367.24
Total			246,300,093.95			246,300,093.95

– II-99 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Note 28. Other comprehensive income

Item Opening balance I. Other comprehensive incomes that will be reclassified into profit or loss in the future The share of other comprehensive incomes that will be reclassified into profit and loss in future accounting period of the investee accounted by the equity method -2,440,350.00 Total amount of other comprehensive incomes -2,440,350.00 Note 29. Surplus reserve Item Statutory surplus reserves Total	Amount of current period Closing balance Incurred amount before income tax of current period Less: transferring other comprehensive income recorded in the previous period into the losses and profits of current period Less: Income tax expenses Attributable to the parent company after tax Attributable to minority shareholders after tax 2,871,000.00 430,650.00 2,440,350.00 2,871,000.00 430,650.00 2,440,350.00 Opening balance Increase of current period Decrease of current period Closing balance 9,869,750.20 653,536.20 10,523,286.40 9,869,750.20 653,536.20 10,523,286.40	Amount of current period Closing balance Incurred amount before income tax of current period Less: transferring other comprehensive income recorded in the previous period into the losses and profits of current period Less: Income tax expenses Attributable to the parent company after tax Attributable to minority shareholders after tax 2,871,000.00 430,650.00 2,440,350.00 2,871,000.00 430,650.00 2,440,350.00 Opening balance Increase of current period Decrease of current period Closing balance 9,869,750.20 653,536.20 10,523,286.40 9,869,750.20 653,536.20 10,523,286.40	Closing balance
		10,523,286.40

Note:

The surplus reserve refers to the statutory surplus reserve accrued according to 10% of the net profit of the parent company.

– II-100 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Note 30. Undistributed profits

Changes in undistributed profits

						Proportion of	Proportion of
						withdrawal or
Item				Amount		allocation
							(%)
Undistributed profits at the end of last year before				168,440,367.51			—
adjustment
Total undistributed profit at the beginning of							—
adjustment (increase +, decrease -)
Undistributed profits at the beginning	of the	period		168,440,367.51			—
after adjustment
Add: net profit attributable to owner of parent				42,082,668.58			—
company in current period
Less: withdrawal of statutory surplus reserves				653,536.20	According to		10%
						of the parent
					company’s net profit
Withdrawal of discretionary surplus reserves
Common stock dividends payable
Common stock dividends converted into share
capital
Other distributions to shareholders
Other profits distribution
Other internal carry-over of owner’s equity
Undistributed profits at the end of the	period			209,869,499.89
**Note 31. Operating incomes and operating **			costs
1. Operating income, operating expenses
	Amount of current period				Amount of last period
Item			Revenue	Cost	Revenue		Cost
Principal operating activities	202,888,674.85			126,895,163.45	220,930,657.77	132,649,169.53
Others		244,650.00		221,862.60
Total	203,133,324.85			127,117,026.05	220,930,657.77	132,649,169.53

– II-101 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

2. Principal operating activities (by products)

Product name Raw fruit juice Quick-frozen fruit and vegetable Fresh fruit Others Total	Amount of current period Operating income Operating cost 104,616,357.55 64,460,536.48 50,202,394.78 32,897,826.68 29,909,081.72 14,080,122.30 18,160,840.80 15,456,677.99 202,888,674.85 126,895,163.45	Amount of last period Operating income Operating cost 127,792,486.28 77,963,134.12 47,506,602.05 34,142,347.02 37,216,565.00 14,341,144.80 8,415,004.44 6,202,543.59 220,930,657.77 132,649,169.53	Amount of last period Operating income Operating cost 127,792,486.28 77,963,134.12 47,506,602.05 34,142,347.02 37,216,565.00 14,341,144.80 8,415,004.44 6,202,543.59 220,930,657.77 132,649,169.53
			132,649,169.53

3. Operating income of the top five customers of the Company

Customer Fresh Fruit Juice (Note) Shandong Yipintang Industrial Co., Ltd. Nongfu Spring (Note) Zhumadian Yuliang Biological Technology Co., Ltd. Wahaha (Note) Total Customer Shandong Yipintang Industrial Co., Ltd. Fresh Fruit Juice (Note) Inter Free Business Co.,Ltd Guangzhou Dajiangyuan Food Technology Co., Ltd. Wuhan Lianlianniu Fruit Industry Co., Ltd. Total	Amount of operating income in 2017 16,319,181.04 12,289,805.09 11,964,827.72 7,669,572.65 7,017,175.19 55,260,561.69 Amount of operating income in 2016 19,606,341.92 12,796,214.17 12,205,880.39 9,111,390.26 8,593,553.30 62,313,380.04	Proportion in the Company’s total operating income (%) 8.03 6.05 5.89 3.78 3.45
		27.20
		Proportion in the Company’s total operating income (%) 8.87 5.79 5.52 4.12 3.89
		28.19

Note: Fresh Fruit Juice, Nongfu Spring and Wahaha customers implemented centralized procurement, and the above sales amount includes related parties included in their centralized procurement.

– II-102 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Note 32. Taxes and surcharges

Taxes Urban construction tax Educational surcharges Local educational surcharges Stamp duties Building tax Land use tax Other taxes and costs Total	Amount of current period 546,203.12 327,699.58 218,258.16 185,120.90 582,154.47 338,574.07 4,848.60 2,202,858.90	Amount of last period 566,082.64 339,640.83 225,765.94 55,874.09 333,670.80 80,644.95 850.00
		1,602,529.25

Note 33. Selling expenses

Item Warehousing and logistics expenses Labor expenses Advertising and promotion expenses Others Total	Amount of current period 7,527,043.21 713,394.17 239,399.48 468,975.93 8,901,681.64	Amount of last period 5,943,659.34 791,540.99 348,434.58 320,409.10
		7,404,044.01

Note 34. General and administration expenses

Item Labor expenses R&D expenditures Office expense Depreciation and amortization Agency service expenses Business reception expenses Traveling expenses Taxes Others Total	Amount of current period 8,407,099.14 2,079,226.92 1,977,388.51 8,758,326.75 2,331,716.36 877,018.79 1,213,128.49 105,412.74 1,061,725.91 26,811,043.61	Amount of last period 7,566,700.08 6,428,280.00 2,093,586.94 7,807,602.17 1,515,694.37 1,072,403.58 845,970.22 464,911.64 1,009,826.89
		28,804,975.89

– II-103 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Note 35. Financial expenses

Item Interest expense Less: interest revenue Net income and loss from exchange Others Total Note 36. Losses of asset impairment Item Bad-debt loss Impairment loss on fixed assets Impairment loss on construction in progress Impairment loss on goodwill Total Note 37. Investment revenue	Amount of current period 3,261,961.98 822,098.71 66,625.45 33,163.02 2,539,651.74 Amount of current period -136,610.41 52,940.40 2,749,838.60 2,666,168.59	Amount of last period 3,406,617.24 653,328.88 -304,738.20 26,597.17
		2,475,147.33
		Amount of last period 560,812.87 356,910.61 265,943.86
		1,183,667.34

1. Details of investment revenue

Source of investment revenue Income from long-term equity investments under equity method Bank financing revenue Total	Amount of current period 1,152,130.51 1,152,130.51	Amount of last period 573,569.35 2,153,943.92
		2,727,513.27

Note: The long-term equity investment revenue accounted by the equity method is the revenue that the Company should enjoy from the investment in Tianjin Fangfu Tianye Investment Center (Limited Partnership) according to the share agreed in the partnership agreement.

– II-104 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

2. Description of investment revenue

During the reporting period, there was no significant restriction on the repatriation of investment revenue of the Company.

Note 38. Assets disposal income

Item Profits and losses from disposal of biological assets Loss on disposal of fixed assets Intangible asset disposal profit and loss Total	Amount of current period 42,750.85 26,382.87 69,133.72	Amount of last period -779,705.06
		-779,705.06

Note 39. Other incomes

1. Details of other incomes

Item Government grants Total	Amount of current period 9,774,455.20 9,774,455.20	Amount of last period

2. Governmental grants recorded into other income

	Amount of	Amount of last	Assets related
Item	current period	period	Revenues related
Financial subsidy for the development of SME in
local characteristic industries in 2012	80,000.00		Assets related
Subsidy for the construction of agricultural product
standardization demonstration base	215,384.62		Assets related
Infrastructure support subsidies allocated by the
government	3,644,465.88		Assets related
Research and application subsidy project of key
technology in coconut milk production stored at
room temperature	90,000.00		Assets related
Subsidy for quality and safety demonstration area of
export food and agricultural products in Hainan
Province	38,461.57		Assets related
Financial support for newly planted fruits	592,000.00		Assets related
Special funds for the development of SME in the
autonomous region in 2017	12,371.13		Assets related
Star Award for Xiangliuxi Tropical Fruit Industry
(Core) Demonstration Zone	3,791,726.24		Assets related
Subsidies for purchasing agricultural machinery	651.00		Assets related
Environmental impact assessment subsidy	61,500.00		Revenues related
Grants for stable position	46,542.00		Revenues related
Special funds subsidy for foreign trade and economic
development	40,000.00		Revenues related

– II-105 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Item Amount of current period Amount of last period Special funds for foreign trade and economic development subsidies for logistics projects outside the region 160,000.00 Support funds for enterprises listed in 2017 1,000,000.00 Others 1,352.76 Total 9,774,455.20 Note 40. Non-operating income Item Amount of current period Total disposal gains from non-current assets Including: gains from disposal of fixed assets Gains on disposal of intangible assets Government grants Others 33.98 Total 33.98 1. Amount included in non-recurring profits and losses of each period Item Amount of current period Total disposal gains from non-current assets Including: gains from disposal of fixed assets Gains on disposal of intangible assets Government subsidies Others 33.98 Total 33.98	Assets related Revenues related Revenues related Revenues related Revenues related Amount of last period 7,887,080.92 279,921.44
	8,167,002.36
	Amount of last period 7,887,080.92 279,921.44
	8,167,002.36

– II-106 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

2. Government grants included in current profits and losses

Subsidy item Special funds for foreign trade and economic development subsidies for logistics projects outside the region Special funds subsidy for foreign trade and economic development Awards and subsidies for high-tech enterprises Financial subsidy for the development of SME in local characteristic industries in 2012 Logistics support funds Grants for stable position Major special fund subsidies for agricultural science and technology poverty alleviation Subsidies for “Three Products and One Mark” certification registration Financial subsidy funds for newly planted high-quality special fruits Subsidy for the construction of agricultural product standardization demonstration base Infrastructure support subsidies Research and application subsidy project of key technology in coconut milk production stored at room temperature Incentive funds for agricultural brand development Special funds for intellectual property rights of innovation guidance plan Exemption of property tax and land use tax Total	Amount of current period	Amount of last period Pertinent to Assets/Income 100,000.00 Revenues related 300,000.00 Revenues related 50,000.00 Revenues related 80,000.00 Assets related 40,000.00 Revenues related 26,268.50 Revenues related 600,000.00 Revenues related 18,000.00 Revenues related 592,000.00 Assets related 161,538.46 Assets related 3,688,882.48 Assets related 210,000.00 Revenues related 250,000.00 Revenues related 14,000.00 Revenues related 1,756,391.48 Revenues related 7,887,080.92

Note 41. Non-operating expenses

Item Donation outlay Penalties and fines for delaying payment Scrap loss of current assets Scrap loss of non-current assets Natural disaster loss Others Total	Amount of current period 5,000.00 7,307.88 546,784.81 149,897.74 708,990.43	Amount of last period 61,000.00 57,016.64 3,122,337.81
		3,240,354.45

– II-107 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

1. The amounts included in the non-recurring profits and losses of each period are listed as follows:

Item Donation outlay Penalties and fines for delaying payment Scrap loss of current assets Scrap loss of non-current assets Natural disaster loss Total	Amount of current period 5,000.00 7,307.88 546,784.81 149,897.74 708,990.43	Amount of last period 61,000.00 57,016.64 3,122,337.81
		3,240,354.45

Note 42. Income tax expense

Item Current tax expenses Deferred income tax expense Total	Amount of current period 1,332,105.39 -233,116.67 1,098,988.72	Amount of last period 3,203,507.03 2,333,401.65
		5,536,908.68

1. Reconciliation of income tax expenses to the accounting profit

	Amount of	Amount of
Item	current period	last period
Total profits	43,181,657.30	53,685,580.54
Income tax expense calculated at statutory/applicable tax rate	5,435,257.60	9,204,056.09
Effect of different tax rates applicable to subsidiaries	2,854,156.07	3,204,915.30
Effect of adjustment to income tax of prior periods	-352,447.59	48,607.81
Effect of non-taxable income	-10,444,082.90	-10,157,950.55
Effect of non-deductible costs, expenses and losses	1,899,251.13	1,238,678.05
Effect of using deductible losses for which deferred tax
assets were previously not recognised
Effect of deductible temporary differences or deductible
losses unrecognized in the current period	1,706,854.41	1,998,601.98
Income tax expense	1,098,988.72	5,536,908.68

Note 43. Notes to items of cash flow statement

1. Cash received relating to other operating activities

Item Transaction payment Government grants Credit interest Total	Amount of current period 130,836.60 1,518,000.00 822,098.71 2,470,935.31	Amount of last period 1,143,700.00 1,098,268.50 653,328.88
		2,895,297.38

– II-108 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

2. Cash paid relating to other operating activities

Item Transaction payment Cash payment Reserve fund Total 3. Cash received relating to other investment activities Item Other investment funds Total 4. Cash received relating to other financing activities Item Government subsidies Total 5. Cash paid relating to other financing activities Item IPO expenses Total	Amount of current period 884,280.84 13,373,147.99 590,449.61 14,847,878.44 Amount of current period Amount of current period 8,856,278.00 8,856,278.00 Amount of current period 2,253,547.26 2,253,547.26	Amount of last period 1,142,185.69 17,452,860.58 300,100.00
		18,895,146.27
		Amount of last period 3,000,000.00
		3,000,000.00
		Amount of last period 23,620,020.00
		23,620,020.00
		Amount of last period 1,562,126.00
		1,562,126.00

Note 44. Supplementary information to the cash flow statement

1. Supplementary information to the cash flow statement

	Amount of	Amount of
Supplementary materials	current period	last period
1. Cash flows converted from net profits for business
operation activities:
Net Profit	42,082,668.58	48,148,671.86
Add: provision for asset impairment	2,666,168.59	1,183,667.34
Depreciation of fixed assets, depletion of oil and gas assets,
and depreciation of productive biological assets	20,173,396.83	25,330,270.37
Amortization of intangible assets	1,847,237.60	1,288,559.27
Amortization of long-term deferred expenses	4,517,660.52	5,317,356.97
Losses on the disposal of fixed assets, intangible assets and
other long-term assets (gain is indicated by “-”)	80,764.02	779,705.06
Losses on retirement of fixed assets (gain is indicated by “-”)
Loss on changes in fair value (gain is indicated by “-”)

– II-109 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

	Amount of	Amount of
Supplementary materials	current period	last period
Financial expenses (gain is indicated by “-”)	3,471,919.98	3,406,617.24
Losses arising from investments (gain is indicated by “-”)	-1,152,130.51	-2,727,513.27
Decrease in deferred tax assets (increase is indicated by “-”)	451,898.72	2,333,401.65
Increase in deferred tax liabilities
(decrease is indicated by “-”)
Decrease in inventory (increase is indicated by “-”)	-7,794,899.72	-1,135,031.61
Decrease in receivables from operating activities (increase is
indicated by “-”)	4,778,333.31	-6,807,681.49
Increase in payables from operating activities (decrease is
indicated by “-”)	-5,508,656.99	-8,253,696.78
Others
Net cash flows from operating activities	65,614,360.93	68,864,326.61
2. Significant investing and financing activities that do not
involve cash receipts and payments:
Conversion of debt into capital
Convertible bonds due within one year
Fixed assets acquired under finance lease
3. Net changes in cash and cash equivalents:
Closing balance of cash	211,052,482.61	325,379,442.47
Less: opening balance of cash	325,379,442.47	325,835,660.14
Add: closing balance of cash equivalents
Less: opening balance of cash equivalent
Net increase in cash and cash equivalents	-114,326,959.86	-456,217.67
2. Composition of cash and cash equivalent
	Amount of	Amount of
Item	current period	last period
I. Cash	211,052,482.61	325,379,442.47
Including: cash on hand	17,127.50	34,280.72
Bank deposit ready for payment at any time	211,035,355.11	325,345,161.75
Other monetary fund ready for payment at any time
II. Cash equivalents
Including: bond investments due in three months
III. Closing balance of cash and cash equivalents	211,052,482.61	325,379,442.47
Including: restricted cash and cash equivalents used by parent
company or subsidiaries

Note 45. Assets with restricted ownership or right of use

Item Fixed assets Intangible assets Total	Closing book value Reasons for being restricted 36,087,876.20 Mortgage loan 12,929,951.32 Mortgage loan 49,017,827.52

Note: Please refer to Note VI “Note 19 Short-term loan” for details of mortgage loan.

– II-110 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Note 46. Government grants

1. Basic information of government grants initially recognized in this period

Subsidy item Financial subsidy for the development of SME in local characteristic industries in 2012 Subsidy for the construction of agricultural product standardization demonstration base Infrastructure support subsidies allocated by the government Research and application subsidy project of key technology in coconut milk production stored at room temperature Subsidy for quality and safety demonstration area of export food and agricultural products in Hainan Province Financial support for newly planted fruits Supporting funds for infrastructure of Nonggu Science and Technology Park Project Special funds for the development of SME in the autonomous region in 2017 Star Award for Xiangliuxi Tropical Fruit Industry (Core) Demonstration Zone Subsidies for purchasing agricultural machinery Environmental impact assessment subsidy Grants for stable position Special funds subsidy for foreign trade and economic development Special funds for foreign trade and economic development subsidies for logistics projects outside the region Support funds for enterprises listed in 2017 Loan with discounted interest Others Total	Amount 80,000.00 215,384.62 3,644,465.88 90,000.00 38,461.57 592,000.00 602,415.03 12,371.13 3,791,726.24 651.00 61,500.00 46,542.00 40,000.00 160,000.00 1,000,000.00 209,958.00 1,352.76 10,586,828.23	Assets related Deferred income Offset of the book value of assets 80,000.00 215,384.62 3,644,465.88 38,461.57 592,000.00 12,371.13 3,791,726.24 651.00 8,375,060.44	Deferred income 90,000.00 602,415.03 692,415.03	Revenues related Other incomes Non- operating income 61,500.00 46,542.00 40,000.00 160,000.00 1,000,000.00 1,352.76 1,309,394.76	Amount for cost offset Actually received? Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes 209,958.00 Yes Yes 209,958.00

– II-111 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

2. Government grants included in current profits and losses

Subsidy item Type Financial subsidy for the development of SME in local characteristic industries in 2012 Financial appropriation Subsidy for the construction of agricultural product standardization demonstration base Financial appropriation Infrastructure support subsidies allocated by the government Financial appropriation Research and application subsidy project of key technology in coconut milk production stored at room temperature Financial appropriation Subsidy for quality and safety demonstration area of export food and agricultural products in Hainan Province Financial appropriation Financial support for newly planted fruits Financial appropriation Supporting funds for infrastructure of Nonggu Science and Technology Park Project Financial appropriation Special funds for the development of SME in the autonomous region in 2017 Financial appropriation Star Award for Xiangliuxi Tropical Fruit Industry (Core) Demonstration Zone Financial appropriation Subsidies for purchasing agricultural machinery Financial appropriation Environmental impact assessment subsidy Financial appropriation Grants for stable position Financial appropriation Special funds subsidy for foreign trade and economic development Financial appropriation Special funds for foreign trade and economic development subsidies for logistics projects outside the region Financial appropriation Support funds for enterprises listed in 2017 Financial appropriation Loan with discounted interest Financial discount Others Others Total	Included in other revenues 80,000.00 215,384.62 3,644,465.88 90,000.00 38,461.57 592,000.00 12,371.13 3,791,726.24 651.00 61,500.00 46,542.00 40,000.00 160,000.00 1,000,000.00 1,352.76 9,774,455.20	Included in asset disposal income 602,415.03 602,415.03	Amount for cost offset 209,958.00
			209,958.00

– II-112 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

VII. CHANGES OF THE SCOPE OF CONSOLIDATION

(I) Business combination involving entities not under common control

During the reporting period, there was no business combination involving entities not under common control.

(II) Business combination involving entities under common control

During the reporting period, there was no business combination under common control.

(III) Reverse acquisition

During the reporting period, there was no reverse acquisition.

(IV) Disposal of subsidiaries

During the reporting period, the Company did not dispose of its subsidiaries.

(V) Changes in the consolidation scope due to other reasons

In 2017, the scope of consolidation of the Company increased by one subsidiary. On May 3, 2017, Hubei Tianye Innovation Nonggu Fruit & Vegetable Co., Ltd., a wholly-owned subsidiary of the Company, was established with a registered capital of RMB5 million and enterprise credit code of 91420800MA48YQM754 and legal representative of Shan Dan.

VIII. EQUITY IN OTHER ENTITIES

(I) Equity in subsidiaries

	Main place of	Registered		**Shareholding **	ratio (%)
Subsidiary	business	address	Business nature	Directly	Indirectly	Acquisition method
Hainan Dachuan Food	Ding’an,	Ding’an,	Processing and sales	100.00		Business combination
Co., Ltd.	Hainan	Hainan	of agricultural			not under the same
			products			control
Guangxi Tianye	Nanning,	Nanning,	Agricultural planting	100.00		Established through
Innovation Agricultural	Guangxi	Guangxi	and sales,			investment
Technology Co., Ltd.			technology R&D
			promotion and
			achievement
			transfer
Hainan Tianye Drinks	Ding’an,	Ding’an,	Sales of fruit food	100.00		Established through
Food Sales Co. Ltd.	Hainan	Hainan	and drink			investment
Hubei Iceman Foods Co.,	Jingmen,	Jingmen,	Processing and sales	100.00		Business combination
Ltd.	Hubei	Hubei	of agricultural			not under the same
			products			control
Hubei Tianye Nonggu	Jingmen,	Jingmen,	R&D, production and	100.00		Established through
Biological Technology	Hubei	Hubei	sales of agricultural			investment
Co., Ltd.			products

– II-113 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Main place of Registered Shareholding ratio (%) Subsidiary business address Business nature Directly Indirectly Acquisition method Hubei Tianye Innovation Jingmen, Jingmen, Agricultural planting 100.00 Established through Nonggu Fruit & Hubei Hubei and sales investment Vegetable Co., Ltd.

(II) Equity in associates

1. Significant associates

• (1) General information

Accounting Main place of Registered Business Shareholding ratio (%) treatment for Name of associates business address nature Directly Indirectly associates Tianjin Fangfu Tianye Tianjin Tianjin Investment in modern 99.00 Equity method Investment Center agriculture, food (Limited Partnership) industry, commercial chain industry and mobile internet industry; investment consulting.

• (2) Explanation that the shareholding ratio in the associated enterprise is different from the voting right ratio

Tianjin Fangfu Tianye Investment Center (Limited Partnership) has a total investment of RMB100 million. As a limited partner, the Company contributes RMB99 million with its own funds, accounting for 99.00% of the total investment of the partnership. As a general partner, Beijing Fangfu Capital Management Co., Ltd. contributes RMB1 million, accounting for 1.00% of the total investment of the partnership. According to the partnership agreement, Tianjin Fangfu Tianye Investment Center (Limited Partnership) has set up an Investment Decision-making Committee, which consists of five members, including four representatives appointed by the general partner and one member elected by the limited partner. Investment Decision-making Committee is responsible for the final decision-making of partnership investment, and the investment decision-making can only be implemented by unanimous approval of all members. The resolutions of the Investment Decision-making Committee shall be implemented by the general partner and shall be legally binding on the partnership enterprise. The voting system of the Investment Decision-making Committee is one vote for one person, and the Investment Decision-making Committee shall implement the related party avoidance voting system in the process of investment decision-making. Therefore, the voting ratio of the Company to Tianjin Fangfu Tianye Investment Center (Limited Partnership) is different from the shareholding ratio.

– II-114 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

2. Main financial information of important associates

	December 31,	December 31,
	2017/2017	2016/2016
	Tianjin Fangfu Tianye	Tianjin Fangfu Tianye
	Investment Center	Investment Center
Item	(Limited Partnership)	(Limited Partnership)
Current assets	11,171,023.56	14,275,470.66
Non-current assets	29,200,000.00	33,800,000.00
Total assets	40,371,023.56	48,075,470.66
Current liabilities
Non-current liabilities
Total liabilities
Minority shareholders’ equity
Shareholder’s equity attributable to the
parent company	40,371,023.56	48,075,470.66
Net asset share calculated in accordance
with shareholding ratio	39,967,313.32	47,594,715.95
Adjustment items
— Goodwill
— Unrealized profits in internal
transaction
— Others	-340,174.47	21.00
Book value of equity investment in
associated enterprises	39,627,138.8	47,594,736.95
Fair value of equity investment with public
offer
Operating income
Net Profit	1,395,552.90	579,362.98
Net profits under discontinued operation
Other comprehensive income	4,810,000.00	-4,810,000.00
Total comprehensive income	6,205,552.90	-4,230,637.02
Dividends received from associated
enterprises in the current period

Note: According to the partnership agreement, the investment revenue of Tianjin Fangfu Tianye Investment Center (Limited Partnership) is distributed according to individual project, and the investment revenue of individual projects = the profit distribution part of the investee + the revenue realized by the investee, assets or shares through listing, resale, secondary acquisition, etc. — the investment cost of individual project; loss sharing: (1) If the amount of loss incurred due to normal investment matters is not greater than the actual contribution of the partner, the loss shall be borne according to the actual contribution ratio of the partner. (2) If the loss incurred due to normal investment matters is greater than the actual contribution of the partners, it shall be borne by the general partners, unless otherwise agreed by all partners. (3) All losses due to reasons other than normal investment matters shall be borne by the general partner, unless otherwise agreed by all partners.

– II-115 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

IX RISK DISCLOSURE RELATED TO FINANCIAL INSTRUMENTS

The Board of Directors of the Company is fully responsible for the determination of risk management objectives and policies, and bears the ultimate responsibility for them. The management manages and monitors these risks to ensure that the risks are controlled within a limited range. The Company’s main financial instruments include notes receivable, accounts receivable, accounts payable, loans, etc. Please refer to the relevant items in this note for details of various financial instruments. The risks related to these financial instruments and the risk management policies adopted by the Company to reduce these risks are as follows:

The Company’s business activities will face various financial risks: credit risk, liquidity risk and market risk (mainly foreign exchange risk and interest rate risk). The Company’s overall risk management plan aims at the unpredictability of the financial market and strives to reduce the potential adverse impact on the Company’s financial performance.

The objective of risk management of the Company is to strike a proper balance between risks and benefits, reduce the negative impact of risks on the operating performance of the Company to the lowest level, and maximize the interests of shareholders and other equity investors. Based on this risk management objective, the basic strategy of the Company’s risk management is to identify and analyze various risks faced by the company, establish an appropriate risk tolerance bottom line, supervise various risks in a timely and reliable manner, and formulate risk management policies to reduce risks as much as possible without excessively affecting the competitiveness and resilience of the Company.

(I) Credit risk

The credit risk of the Company mainly comes from monetary funds, notes receivable, accounts receivable and other receivables. The management has formulated appropriate credit policies and continuously monitored the exposure of these credit risks.

The monetary funds held by the Company are mainly deposited in large commercial banks and other financial institutions, and the management thinks that these commercial banks have high reputation and asset status and low credit risk.

For notes receivable, accounts receivable and other receivables, the Company sets relevant policies to control credit risk exposure. The Company evaluates the customer’s credit qualification and sets the corresponding credit period based on the customer’s financial status, the possibility of obtaining guarantee from a third party, credit history and other factors such as the current market situation. The Company will regularly monitor customer credit records to ensure that the overall credit risk of the Company is within the controllable range.

As of December 31, 2017, the accounts receivable of the top five customers of the Company accounted for 37.49% of the total accounts receivable of the Company. The maximum credit exposure of the Company is the book value of each financial asset in the balance sheet. The Company has not provided any other guarantee that may expose the Company to credit risk.

(II) Liquidity risk

Liquidity risk refers to the risk that the Company cannot obtain sufficient funds in time to meet the needs of business development or pay due debts and other payment obligations.

– II-116 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

In order to control this risk, the Company comprehensively uses various financing means such as bank loans and adopts a combination of long-term and short-term financing to optimize the financing structure and maintain the continuity and flexibility of financing. The Company has obtained bank credit lines from a number of banks to meet working capital requirements and capital expenditure.

As of December 31, 2017, the financial assets and financial liabilities of the Company are listed as follows with undiscounted contract cash flow by maturity date:

			**Closing **	balance
	Net book	Original book
Item	amount	value	<1 year	1-2 years	2-3 years	>3 years
Monetary funds	211,052,482.61	211,052,482.61	211,052,482.61
Accounts receivable	54,959,777.56	57,944,561.81	56,196,638.71	1,747,523.10		400.00
Other receivables	1,002,578.02	1,178,373.54	888,161.66	14,380.69	204,831.19	71,000.00
Subtotal	267,014,838.19	270,175,417.96	268,137,282.98	1,761,903.79	204,831.19	71,400.00
Short-term loans	66,000,000.00	66,000,000.00	66,000,000.00
Accounts payable	28,325,710.25	28,325,710.25	25,677,009.01	1,285,274.95	531,005.03	832,421.26
Other payables	2,705,266.75	2,705,266.75	1,918,180.90	506,863.22	114,510.00	165,712.63
Subtotal	97,030,977.00	97,030,977.00	93,595,189.91	1,792,138.17	645,515.03	998,133.89

As of December 31, 2016, the financial assets and financial liabilities of the Company are listed as follows with undiscounted contract cash flow by maturity date:

			**Opening **	balance
	Net book	Original book
Item	amount	value	<1 year	1-2 years	2-3 years	>3 years
Monetary funds	325,379,442.47	325,379,442.47	325,379,442.47
Accounts receivable	55,869,238.59	58,810,392.20	58,799,792.20	10,080.00	520.00
Other receivables	2,968,451.98	3,324,488.55	514,245.81	2,729,742.74	14,500.00	66,000.00
Subtotal	384,217,133.04	387,514,323.22	384,693,480.48	2,739,822.74	15,020.00	66,000.00
Short-term loans	81,000,000.00	81,000,000.00	81,000,000.00
Accounts payable	18,099,982.61	18,099,982.61	15,039,127.28	1,578,456.18	752,819.43	729,579.72
Other payables	1,885,584.43	1,885,584.43	1,465,561.58	254,350.22	20,690.00	144,982.63
Subtotal	100,985,567.04	100,985,567.04	97,504,688.86	1,832,806.40	773,509.43	874,562.35

(III) Market risk

Market risk refers to the risk that the fair value or future cash flow of financial instruments will fluctuate due to the change of market price, which mainly includes foreign exchange risk and interest rate risk.

1. Foreign exchange risk

During the reporting period, the Company’s operations gradually faced foreign countries, and its export business was mainly settled in US dollars. The foreign currency assets and liabilities and future foreign currency transactions (the foreign currency assets and liabilities and foreign currency transactions are mainly denominated in US dollars) recognized by the Company have foreign exchange risks. The financial department of the Company is responsible for monitoring the scale of foreign currency transactions and foreign currency assets and liabilities of the Company to minimize the foreign exchange risks faced; therefore, the Company may sign forward foreign exchange contracts or currency swap contracts to avoid foreign exchange risks.

– II-117 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

• (1) The Company has not signed any forward foreign exchange contracts or currency swap contracts this year;

• (2) As of December 31, 2017, the amount of foreign currency financial assets and foreign currency financial liabilities held by the Company converted into RMB is as follows:

			**Closing **	balance
Item		USD item	EUR item	HKD item	Total
Monetary	funds	1,378,205.09			1,378,205.09
Subtotal		1,378,205.09			1,378,205.09
			**Opening **	balance
Item		USD item	EUR item	HKD item	Total
Monetary	funds	571,828.91			571,828.91
Subtotal		571,828.91			571,828.91

2. Interest rate risk

The Company’s interest rate risk is mainly caused by the financial liabilities with floating interest rate of bank loans, which make the Company face cash flow interest rate risk, while the financial liabilities with fixed interest rate make the Company face fair value interest rate risk. The Company determines the relative proportion of fixed and floating interest rate contracts based on the prevailing market environment.

The financial department of the Company continuously monitors the interest rate level of the Company. Rising interest rate will increase the cost of newly added interest-bearing debt and the interest expense of the company’s unpaid interest-bearing debt with floating interest rate, and will have a significant adverse impact on the Company’s financial performance. The management will make timely adjustments according to the latest market conditions, which may be the arrangement of interest rate swap to reduce interest rate risk.

• (1) During the reporting period, the Company had no interest rate swap arrangement.

X. FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE

(I) Financial instruments measured at fair value

As of December 31, 2017, the Company had no financial instruments measured at fair value.

(II) Fair value of financial assets and financial liabilities not measured at fair value

Financial assets and liabilities not measured at fair value mainly include monetary funds, notes receivable, receivables, short-term loans, payables, non-current liabilities due within one year and long-term loans.

The difference between book value and fair value of above financial assets and financial liabilities of the Company not measured at fair value is very small.

– II-118 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

XI. RELATED PARTIES AND TRANSACTIONS

(I) Actual controller of the Company

			Shareholding
Name of the company or		Organization code or	ratio to the	Voting right ratio
natural person	Related relationship	ID number	Company	to the Company
			(%)	(%)
Yao Jiuzhi	One of the actual controllers	44522219710503****	17.7171	17.7171
Yao Linhao	One of the actual controllers	44522219670725****	3.3333	3.3333
Menghai Zhicun Gaoyuan Tea	Company controlled by Yao	915328223096945813	4.1667	4.1667
Industry Co., Ltd.	Jiuzhuang
Yao Jiuzhuang	One of the actual controllers	44522219680626****

Notes:

1. The above shareholding ratio is the shareholding ratio as of December 31, 2017.

2. Yao Jiuzhi, Yao Linhao and Yao Jiuzhuang are the actual joint controllers of the Company. Yao Jiuzhi, Yao Linhao and Yao Jiuzhuang signed the Concerted Action Agreement on September 26, 2012, in which the three parties agreed to jointly exercise major decision-making power as concerted action party. If the three parties could not reach an agreement on the matters under consideration, Yao Jiuzhi’s opinion and voting intention shall prevail.

(II) See Note VII (I) “Interests in subsidiaries” for details of subsidiaries of the Company

(III) Information on the Company’s associated enterprises

See Note VIII (II) “Interests in associated enterprises” for details of important associated enterprises of the Company.

(IV) Other related parties

Names of other related parties Relationship between other related parties and the Company Menghai Zhicun Gaoyuan Tea Company controlled by shareholders and actual controllers Industry Co., Ltd. Shan Dan Directors, general managers and shareholders Hainan Jiaozhen Biological Company in which the actual controllers participate Technology Co., Ltd. Beijing Jiaozhen Biological Subsidiary controlled by the company in which the actual Technology Co., Ltd. controllers participate

Note: Yao Jiuzhi, the actual controller, Zhang Hui, the senior executive and Li Ruiqi, the shareholder of the company have transferred all their shares in Hainan Jiaozhen Biological Technology Co., Ltd. to an unrelated third party, and handled the industrial and commercial registration formalities on November 3, 2016.

– II-119 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

(V) Related parties’ transactions

1. For the subsidiaries under control relationship and included in the scope of consolidated financial statements, the transactions among them and their parent companies have been offset.

2. Related transactions by selling products and providing labors

Connected Amount of Amount of transaction current period last period Related parties contents (including tax) (including tax) Beijing Jiaozhen Biological Juice 453,600.00 Technology Co., Ltd. Beijing Jiaozhen Biological Raw and auxiliary 54,831.00 Technology Co., Ltd. materials Total 508,431.00

3. Related transactions on purchase of goods and labor service acceptance

Connected Amount of Amount of transaction current period last period Related parties contents (including tax) (including tax) Beijing Jiaozhen Biological Fruit juice beverage 262,080.00 Technology Co., Ltd. Total 262,080.00

4. Related guarantee

The Company as the warrantee

		Start		Guarantee
	Amount	date of	Expiring date	performed
Guarantor	guaranteed	guarantee	of guarantee	fully or not
Shan Dan	36,000,000.00	31.03.2016	Two years from the	No
			expiration of the debt
			performance period

Note: In March 2016, Ms. Shan Dan, the director and general manager of the Company, signed a guarantee contract ((DT) 2016 BZ No. DC002) with Haikou Longhua Sub-branch of Bank of Communications for providing joint liability guarantee for the loan contract ((DT) 2016 LDZ No. DC001) of RMB3,000 signed by Hainan Dachuan Food Co., Ltd. (a subsidiary of the Company) and Haikou Longhua Sub-branch of Bank of Communications; the scope of guarantee includes principal, interest, compound interest, penalty interest, liquidated damages, compensation for damage and expenses for realizing creditor’s rights under the main contract.

XII. SHARE-BASED PAYMENT

During the reporting period, no matters related to share-based payment occurred in the Company.

– II-120 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

XIII. COMMITMENTS AND CONTINGENCIES

(I) Major commitments

1. The signed lease contracts being or to be performed and their financial impact

(1) Since 2013, Guangxi Tianye Innovation Agricultural Technology Co., Ltd., a subsidiary of the Company, has successively signed land lease agreements with villagers in Guangliang Village, Pumiao Town, Yongning District, Nanning City; (2) In 2013, Guangxi Tianye Innovation Agricultural Technology Co., Ltd., a subsidiary of the Company, signed a land lease agreement with Zhangchou Village Committee of Qujie Town, Xuwen County, Guangdong Province; (3) In 2017, Hubei Tianye Innovation Nonggu Fruit & Vegetable Co., Ltd., a subsidiary of the Company, signed a land lease agreement with Heji Office in Qujialing Management District of Jingmen City for planting. Details of the aforementioned contracts are as follows:

		Contract or
		subcontract			Payment method
Lessor	Land location	period	Land area (mu)	Contract amount	of rent
Villagers in Guangliang	Guangliang	10 years/	9,406.85	The rent is	4-year period and
Village	Village, Pumiao	13 years/		RMB520/mu/year and	5-year period
	Town, Yongning	16 years/		paid once every four
	District,	25 years/		years, which is
	Nanning City	39 years		implemented according
				to the contract
Zhangchou Village	Collective land of	10 years	300.00	3,180,000.00	Annually
Committee of Qujie	Zhangchou			(annually)
Town, Xuwen County,	Village
Guangdong Province	Committee of
	Qujie Town,
	Xuwen County
Heji Office in Qujialing	Wangtai Team of	19 years	559.00	In the first four years, the	Annually
Management District of	Heji Office			rent is RMB627.90 per
Jingmen City				mu and increases by
				2% every year since the
				fifth year

Except for the above commitments, as of December 31, 2017, the Company had no other major commitments that should be disclosed but not disclosed.

(II) Contingencies at the balance sheet date

As of December 31, 2017, there were no major contingencies that need to be disclosed by the Company.

– II-121 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

XIV. EVENTS AFTER THE BALANCE SHEET DATE

(I) Important non-adjustment events

Hubei Iceman Foods Co., Ltd., a subsidiary of the Company, suffered a major flood in July 2016, which caused the inventory of Hubei Iceman Foods Co., Ltd. to be damaged and its equipment and houses to be soaked in water. The Company decided to stop the production and operation of Hubei Iceman Foods Co., Ltd. As of the reporting date of this financial statement, Hubei Iceman Foods Co., Ltd. was still in a state of suspension of production.

On March 20, 2018, Hubei Iceman Foods Co., Ltd., a subsidiary of the Company, and Jingmen Qujialing Urban and Rural Construction Investment Co., Ltd. signed an asset acquisition framework agreement. According to the agreement, Hubei Iceman Foods Co., Ltd. plans to transfer the land and factory buildings (with price no less than RMB47 million) to Jingmen Qujialing Urban and Rural Construction Investment Co., Ltd. As of the reporting date of this financial statement, the sale of assets of Hubei Iceman Foods Co., Ltd., a subsidiary of the Company, was still under further transaction as of the reporting date of this financial statement.

XV. OTHER IMPORTANT EVENTS

(I) Events not yet contributed by the associated enterprises

According to the partnership agreement of Tianjin Fangfu Tianye Investment Center (Limited Partnership), Tianjin Fangfu Tianye Investment Center (Limited Partnership) has a total investment of RMB100 million. As a limited partner, the Company contributes RMB99 million with its own funds, accounting for 99.00% of the total investment of the partnership. As a general partner, Beijing Fangfu Capital Management Co., Ltd. contributes RMB1 million, accounting for 1.00% of the total investment of the partnership.

At the end of 2016, the company actually contributed RMB50.7 million, accounting for 99.00% of the actual contribution, and Beijing Fangfu Capital Management Co., Ltd. actually contributed RMB512,100, accounting for 1.00% of the actual contribution. The partnership agreement did not stipulate the subscription period. According to the resolution of the first meeting of all partners of Tianjin Fangfu Tianye Investment Center (Limited Partnership) in 2017, it is agreed to refund the Company’s investment of RMB12 million. As of the reporting date of this financial statement, the Company has actually contributed RMB38.7 million, with RMB60.3 million to be contributed.

– II-122 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

XVI. NOTES TO MAIN ITEMS OF THE PARENT COMPANY’S FINANCIAL STATEMENTS

Note 1. Accounts receivable

1. Disclosure of accounts receivable by category

Category Accounts receivable with individually significant amount and individual provision for bad debt Accounts receivables with bad-debt provision withdrawn through credit risk characteristic combination Including: Accounts receivable for withdrawing bad-debt provision by aging analysis method Accounts receivable not withdrawing bad-debt provision Accounts receivable without individually significant amounts but individual provision for bad debt Total Category Accounts receivable with individually significant amount and individual provision for bad debt Accounts receivables with bad-debt provision withdrawn through credit risk characteristic combination Including: Accounts receivable for withdrawing bad-debt provision by aging analysis method Accounts receivable not withdrawing bad-debt provision Accounts receivable without individually significant amounts but individual provision for bad debt Total	Book balance Amount Proportion (%) 24,053,072.32 100.00 22,273,518.17 92.60 1,779,554.15 7.40 24,053,072.32 100.00 Book balance Amount Proportion (%) 23,195,242.20 100.00 23,195,242.20 100.00 23,195,242.20 100.00	Closing balance Bad-debt provision Amount Proportion (%) 1,159,400.06 4.82 1,159,400.06 5.21 1,159,400.06 4.82 Opening balance Bad-debt provision Amount Proportion (%) 1,159,762.11 5.00 1,159,762.11 5.00 1,159,762.11 5.00	Book value 22,893,672.26 21,114,118.11 1,779,554.15
			22,893,672.26
			Book value 22,035,480.09 22,035,480.09
			22,035,480.09

– II-123 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

• (1) Receivables for withdrawing bad-debt provision by aging analysis method in combination

Aging <1 year 1-2 years Total Aging <1 year 1-2 years 2-3 years 3-4 years 4-5 years >5 years Total	Closing balance Accounts receivable Bad-debt provision 21,359,035.17 1,067,951.76 914,483.00 91,448.30 22,273,518.17 1,159,400.06 Opening balance Accounts receivable Bad-debt provision 23,195,242.20 1,159,762.11 23,195,242.20 1,159,762.11	Proportion (%) 5.00 10.00
		4.82
		Proportion (%) 5.00
		5.00

• (2) Accounts receivable not withdrawing bad-debt provision in combination

Organization name Hainan Dachuan Food Co., Ltd. Hainan Tianye Drinks Food Sales Co. Ltd. Total	Accounts receivable 1,369,819.85 409,734.30 1,779,554.15	Closing balance Bad-debt provision Proportion Reason for withdrawal (%) No withdrawal without risk for the amount of related parties within the scope of consolidation No withdrawal without risk for the amount of related parties within the scope of consolidation

2. Provision, recovery or reversal and write-off of provision for bad-debt in current period

In this period, the provision for bad debts of accounts receivable is RMB362.05.

3. There is no write-off of accounts receivable in current period.

– II-124 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

4. Top five accounts receivable based on debtors

Organization name Dalian Yiheng Import & Export Co., Ltd. Shandong Yipintang Industrial Co., Ltd. Yanbian Tianlu Foods Co., Ltd. Hainan Dachuan Food Co., Ltd. Zhumadian Yuliang Biological Technology Co., Ltd. Total	Closing balance 6,241,619.80 1,829,145.00 1,536,000.00 1,369,819.85 1,238,800.00 12,215,384.65	Proportion in closing balance of accounts receivable (%) 25.95 7.60 6.39 5.69 5.15 50.78	Provision for bad-debt 312,080.99 91,457.25 76,800.00 61,940.00
			595,854.64

Note 2. Other receivables

1. Disclosure of other receivables by category

Category Other receivables with individually significant amount and individual provision for bad debt Other receivables with bad-debt provision withdrawn through credit risk characteristic combination Including: Other receivables for withdrawing bad-debt provision by aging analysis method Other receivables not withdrawing bad-debt provision Other receivables without individually significant amount but with individual provision for bad debt Total	Book balance Amount Proportion (%) 284,148,310.43 100.00 508,821.95 0.18 283,639,488.48 99.82 284,148,310.43 100.00	Closing balance Bad-debt provision Amount Proportion (%) 25,441.10 0.01 25,441.10 77.11 25,441.10 0.01	Book value 284,122,869.33
			284,122,869.33

– II-125 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Category Other receivables with individually significant amount and individual provision for bad debt Other receivables with bad-debt provision withdrawn through credit risk characteristic combination Including: Other receivables for withdrawing bad-debt provision by aging analysis method Other receivables not withdrawing bad-debt provision Other receivables without individually significant amount but with individual provision for bad debt Total	Opening balance Book balance Bad-debt provision Amount Proportion Amount Proportion (%) (%) 91,123,429.53 100.00 19,618.19 0.02 392,363.75 0.43 19,618.19 5.00 90,731,065.78 99.57 90,731,065.78 91,123,429.53 100.00 19,618.19 0.02	Book value 91,103,811.34 372,745.56
		91,103,811.34

Description of other receivables category:

• (1) Other receivables for withdrawing bad-debt provision by aging analysis method in combination

Aging <1 year Total Aging <1 year 1-2 years 2-3 years Total	Closing balance Other receivables Bad-debt provision 508,821.95 25,441.10 508,821.95 25,441.10 Opening balance Other receivables Bad-debt provision 392,363.75 19,618.19 392,363.75 19,618.19	Proportion (%) 5.00
		5.00
		Proportion (%) 5.00
		5.00

– II-126 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

• (2) Other receivables not withdrawing bad-debt provision in combination

Organization name Hubei Tianye Nonggu Biological Technology Co., Ltd. Hubei Iceman Foods Co., Ltd. Guangxi Tianye Innovation Agricultural Technology Co., Ltd. Hainan Tianye Drinks Food Sales Co. Ltd. Total

December 31, 2017 Other receivables Bad-debt provision Proportion Reason for withdrawal (%) 208,720,000.00 No withdrawal without risk for the amount of related parties within the scope of consolidation 44,225,698.44 No withdrawal without risk for the amount of related parties within the scope of consolidation 30,688,971.54 No withdrawal without risk for the amount of related parties within the scope of consolidation 4,818.50 283,639,488.48

2. Provision, recovery or reversal and write-off of provision for bad-debt in current period

The provision for bad debts in current period is RMB5,822.91.

3. There is no write-off of other receivables in current period.

4. Disclosure of other receivables by nature

Nature of payment Transaction payment Reserve fund Withholding social security, etc Scattered material purchase fund Others Total	Closing balance 283,639,488.48 474,664.65 34,157.30 284,148,310.43	Opening balance 90,988,884.46 25,702.07 50,804.90 51,981.75 6,056.35
		91,123,429.53

– II-127 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

5. Top five other accounts receivable based on debtors

Organization name Nature of payment Hubei Tianye Nonggu Biological Technology Co., Ltd. Transaction payment Hubei Iceman Foods Co., Ltd. Transaction payment Guangxi Tianye Innovation Agricultural Technology Co., Ltd. Transaction payment Zhang Yexiu Reserve fund Zhan Tao Reserve fund Total	Closing balance Aging 208,720,000.00 <3 years 44,225,698.44 Within 4 years 30,688,971.54 Within 2 years 134,000.00 <1 year 263,064.65 <1 year 284,031,734.63	Proportion in closing balance of other receivables (%) 73.45 15.56 10.80 0.05 0.09 99.95	Bad-debt provision Closing balance 6,700.00 13,153.23
			19,853.23

Note 3. Long-term equity investment

Item Investment in subsidiaries Investment in associated enterprises Total	Closing balance Book balance Bad-debt provision 113,737,642.83 10,230,275.57 39,617,867.46 153,355,510.29 10,230,275.57	Book value 103,507,367.26 39,617,867.46 143,125,234.72	Opening balance Book balance Bad-debt provision Book value 108,737,642.83 108,737,642.83 47,594,736.95 47,594,736.95 156,332,379.78 156,332,379.78	Opening balance Book balance Bad-debt provision Book value 108,737,642.83 108,737,642.83 47,594,736.95 47,594,736.95 156,332,379.78 156,332,379.78
	153,355,510.29			156,332,379.78

– II-128 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

1. Investment in subsidiaries

Investee Hainan Dachuan Food Co., Ltd. Guangxi Tianye Innovation Agricultural Technology Co., Ltd. Hainan Tianye Drinks Food Sales Co. Ltd. Hubei Iceman Foods Co., Ltd. Hubei Tianye Nonggu Biological Technology Co., Ltd. Hubei Tianye Innovation Nonggu Fruit & Vegetable Co., Ltd. Total	Initial investment cost 33,737,641.83 30,000,000.00 5,000,000.00 15,000,001.00 25,000,000.00 108,737,642.83	Opening balance 33,737,641.83 30,000,000.00 5,000,000.00 15,000,001.00 25,000,000.00 108,737,642.83	Increase of current period 5,000,000.00 5,000,000.00	Decrease of current period	Closing balance 33,737,641.83 30,000,000.00 5,000,000.00 15,000,001.00 25,000,000.00 5,000,000.00 113,737,642.83	Depreciation reserves withdrawn in current period 2,432,889.97 7,797,385.60 10,230,275.57	Closing balance of provision for impairment 2,432,889.97 7,797,385.60
							10,230,275.57

2. Investment in associates

Investee Tianjin Fangfu Tianye Investment Center (Limited Partnership) Total Investee Tianjin Fangfu Tianye Investment Center (Limited Partnership) Total	Opening balance Increase and decrease of current period Additional investment Negative investment Profits and losses on investments recognized by equity method 47,594,736.95 12,000,000.00 1,152,130.51 47,594,736.95 12,000,000.00 1,152,130.51 Increase and decrease of current period Closing balance Other equity changes Distribution of cash dividends or profits Withdrawal of provision for impairment Others 39,617,867.46 39,617,867.46	Opening balance Increase and decrease of current period Additional investment Negative investment Profits and losses on investments recognized by equity method 47,594,736.95 12,000,000.00 1,152,130.51 47,594,736.95 12,000,000.00 1,152,130.51 Increase and decrease of current period Closing balance Other equity changes Distribution of cash dividends or profits Withdrawal of provision for impairment Others 39,617,867.46 39,617,867.46		Adjustment of other comprehensive incomes 2,871,000.00
				2,871,000.00
				Closing balance of provision for impairment

Note: See “Note 10 Long-term equity investment” in “VI. Main Notes to Consolidated Financial Statements” in this note for details.

– II-129 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Note 4. Operating incomes and operating costs

1. Operating income, operating costs

Item Principal operating activities Others Total	Amount of current period Revenue Cost 93,159,791.94 62,031,145.25 93,159,791.94 62,031,145.25	Amount of last period Revenue Cost 103,999,173.41 71,347,955.68 103,999,173.41 71,347,955.68	Amount of last period Revenue Cost 103,999,173.41 71,347,955.68 103,999,173.41 71,347,955.68
			71,347,955.68

2. Principal operating activities (by products)

Product name Raw fruit juice Quick-frozen fruit and vegetable Others Total	Amount of current period Operating income Operating cost 38,231,282.30 25,988,078.77 49,656,345.47 32,391,733.90 5,272,164.17 3,651,332.58 93,159,791.94 62,031,145.25	Amount of last period Operating income Operating cost 49,427,836.57 32,786,787.88 49,621,651.55 34,855,265.36 4,949,685.29 3,705,902.44 103,999,173.41 71,347,955.68	Amount of last period Operating income Operating cost 49,427,836.57 32,786,787.88 49,621,651.55 34,855,265.36 4,949,685.29 3,705,902.44 103,999,173.41 71,347,955.68
			71,347,955.68

3. Operating income of the top five customers of the Company

Customer Fresh Fruit Juice (Note) Dalian Yiheng Import & Export Co., Ltd. Shanghai Yuguo Food Sales Co., Ltd. Zhumadian Yuliang Biological Technology Co., Ltd. Shandong Yipintang Industrial Co., Ltd. Total Customer Fresh Fruit Juice (Note) Guangzhou Dajiangyuan Food Technology Co., Ltd. Hainan Dachuan Food Co., Ltd. Wuhan Lianlianniu Fruit Industry Co., Ltd. Inter Free Business Co., Ltd. Total	Amount of operating income in 2017 12,914,279.27 6,766,152.55 6,391,561.53 4,491,589.74 4,390,353.84 34,953,936.93 Amount of operating income in 2016 10,369,622.30 9,111,390.26 8,840,333.40 7,619,194.32 5,905,187.74 41,845,728.02	Proportion in the Company’s total operating income (%) 13.86 7.26 6.86 4.82 4.71
		37.51
		Proportion in the Company’s total operating income (%) 9.97 8.76 8.5 7.33 5.68
		40.24

Note:

Fresh Fruit Juice customers implemented centralized procurement, and the above sales amount includes related parties included in their centralized procurement.

– II-130 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Note 5. Investment revenue

1. Details of investment revenue

Source of investment revenue Long-term equity investment income measured by equity method Bank financing revenue Total	Amount of current period 1,152,130.51 1,152,130.51	Amount of last period 573,569.35 2,119,916.52
		2,693,485.87

2. Description of investment revenue

During the reporting period, there was no significant restriction on the repatriation of investment revenue of the Company.

XVII. SUPPLEMENTARY INFORMATION

(I) Detailed statement of non-recurring profits and losses

	Amount of	Amount of
Item	current period	last period
Profits and loss on disposal of non-current assets, including
the write-off part of the provision for impairment of assets	-683,179.05	-779,705.06
Tax returns, reductions, and exemptions with unauthorized
approval or without official approval documents with
occurrence
Government grant included in the current profits and losses
(except for the government grant which are closely related
to the business of the company and are in accordance with
the national unified standard quota)	10,586,828.23	7,887,080.92
Fund possession cost charged from non-financial enterprises
including in current profits and losses
The investment cost for acquiring subsidiaries, associated
enterprises and cooperative enterprises is less than the
income generated by the fair value of the identifiable net
assets of the merged unit when acquiring investment
Exchange losses of non-monetary assets
Profits and losses of assets invested or managed by
entrustment
Assets for impairment withdrawn due to force majeure such
as natural disasters
Profits and losses on debt restructuring
Corporate restructuring costs, such as fees on staffing and
integration
Profits and losses exceeding the fair value part due to an
unfair transaction price during the transaction
Net profits and losses of the subsidiaries in the current period
from the beginning of period to the date of merger due to
the merger of enterprises under the common control
Profit and loss caused by contingencies that are irrelevant to
Company’s normal businesses

– II-131 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Item

Amount of Amount of current period last period

Profits and losses from variation of fair value by holding transactional financial assets, transactional financial liability and investment incomes from handling transactional financial assets, transactional financial liability and salable financial assets, in addition to the valid arbitrage hedging business related to normal corporate business Reversing assets impairment of receivables for independent impairment test Losses and profits obtained from foreign entrusted loans Profit and loss from fair value variation of investment real estate by adopting fair value mode for follow-up calculation Influence on the current profit and loss by one-time adjustment as per laws and regulations on taxes and accounting Trustee fee income from entrusted operation Non-operating income and expenses in addition to the above-mentioned items Other profit and loss items that conform to the definition of non-recurring profit and loss. Subtotal Less: income tax affected amount Minority equity affected amount (after tax) Total	-559,058.71 9,344,590.47 351,824.37 8,992,766.10	-2,960,433.01 4,146,942.85 400,416.07
		3,746,526.78

(II) Rate of return on common stockholders’ equity and earnings per share

		2017
	Weighted-average
	Income rate of	**Earnings per **	share (EPS)
Profits during reporting period	net assets	Basic EPS	Diluted EPS
	(%)
Net profits attributable to common
corporate shareholders	6.14	0.1753	0.1753
Net profits attributable to common
corporate shareholders after the
deduction of the non-recurring profit and
loss	4.83	0.1379	0.1379

– II-132 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

		2016
	Weighted-average
	Income rate of	**Earnings per **	share (EPS)
Profits during reporting period	net assets	Basic EPS	Diluted EPS
	(%)
Net profits attributable to common
corporate shareholders	7.47	0.2006	0.2006
Net profits attributable to common
corporate shareholders after the
deduction of the non-recurring profit and
loss	6.89	0.1850	0.1850

Tianye Innovation Corporation Head of Accounting Department: (Official Stamp) Legal representative: Chief Accountant:

April 16, 2018

– II-133 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

ZHONGXINGHUA CERTIFIED PUBLIC ACCOUNTANTS LLP Add: F15, Sichuan Building East, No. 1 Fu Wai Da Jie, Xicheng District, Beijing, China Tel: 010-68364878 Fax: 010-68364875

AUDITOR’S REPORT

ZXHSZ (2019) No. 010640

To all shareholders of Tianye Innovation Corporation:

I. AUDIT OPINIONS

We have audited the accompanying financial statements of Tianye Innovation Corporation (hereinafter referred to as “ the Company ”), which comprise the consolidated and the parent company’s balance sheet as at December 31, 2018, the consolidated and the parent company’s income statement, the consolidated and the parent company’s cash flow statement, the consolidated and the parent company’s statement of changes in shareholders’ equity for the year 2018 and notes to the financial statements.

In our opinion, the accompanying financial statements present fairly, in all material respects, the consolidated and the company’s financial position as at December 31, 2018, and its consolidated and the company’s financial performance and cash flows for the year 2018 in accordance with the Accounting Standards for Business Enterprises issued by the Ministry of Finance of the People’s Republic of China.

II. BASIS FOR FORMATION OF AUDIT OPINIONS

We conducted our audit in accordance with China Standards on Auditing for Certified Public Accountants (“ CSAs ”). 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 Tianye Innovation in accordance with the China Code of Ethics for Certified Public 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.

III. OTHER INFORMATION

The management of Tianye Innovation (hereinafter referred to as the management) is responsible for the other information. The other information comprises all the information included in 2018 annual report of the Company, other than 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 other information and, in doing so, consider whether other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.

– II-134 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

If, based on the work we have performed, we conclude that there is a material misstatement of this other information; we are required to report that fact. We have nothing to report in this regard.

IV. RESPONSIBILITIES OF THE MANAGEMENT AND THE GOVERNANCE FOR FINANCIAL STATEMENTS

The Management is responsible for preparation and fair presentation of the financial statements in accordance with the Accounting Standards for Business Enterprises, and for the design, implementation and maintenance of such internal control necessary to enable that the financial statements are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the management is responsible for assessing the Company’s ability to continue as a going to concern and using the going concern basis of accounting unless the management either intends to liquidate Tianye Innovation or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the financial report process of the Company.

V. RESPONSIBILITIES OF CPAS FOR THE AUDIT OF FINANCIAL STATEMENTS

Our objectives are to reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is high level of assurance but is not a guarantee that an audit conducted in accordance with CSAs will always detect a material misstatement when it exists. Misstatement 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 CSAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• (1) Identify and assess the risks of material misstatement of financial statements, whether due to fraud or errors, 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 from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentation, or the override of internal control.

• (2) Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.

• (3) Evaluate the appropriateness of accounting policies used and reasonableness of accounting estimates and related disclosures made by the management.

• (4) Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or; if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to continue as a going concern.

– II-135 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

• (5) Evaluate the overall presentation, structure, and content of the financial statements, including the disclosure, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

• (6) Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the financial statements. We are responsible for the instruction, supervision and execution of the audit, and assume full responsibility for the audit opinions.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control defects that we identify during our audit.

ZHONGXINGHUA CERTIFIED PUBLIC CPA: ACCOUNTANTS LLP Beijing, China CPA:

April 24, 2019

– II-136 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

CONSOLIDATED BALANCE SHEET

December 31, 2018

Prepared by: Tianye Innovation Corporation

Unit: RMB

Item Notes Current assets: Monetary funds VI. Note 1 Financial assets measured at fair value with changes included in the current profits and losses Derivative financial assets Notes and accounts receivable VI. Note 2 Prepayment VI. Note 3 Other receivables VI. Note 4 Inventories VI. Note 5 Held-for-sale assets Non-current assets due within one year Other current assets VI. Note 6 Total current assets Non-current assets: Available-for-sale financial assets Held-to-maturity investment Long-term receivables VI. Note 7 Long-term equity investment VI. Note 8 Investment real estate properties Fixed assets VI. Note 9 Construction in progress VI. Note 10 Productive biological assets VI. Note 11 Oil & gas assets Intangible assets VI. Note 12 Development expenditures Goodwill VI. Note 13 Long-term deferred expenses VI. Note 14 Deferred income tax assets VI. Note 15 Other non-current assets VI. Note 16 Total non-current assets Total assets	Closing balance 219,674,020.33 42,295,833.29 3,321,692.49 10,166,089.03 49,148,296.79 12,725,447.33 337,331,379.26 18,924,216.78 238,320,812.64 204,547,782.04 27,473,763.77 87,388,363.15 14,857,682.84 12,892,387.40 1,472,171.06 3,307,357.16 609,184,536.84 946,515,916.10	Opening balance 211,052,482.61 55,176,877.56 471,162.74 1,002,578.02 53,427,074.26 3,694,120.69
		324,824,295.88
		318,000.00 39,617,867.46 158,804,567.36 157,284,035.29 24,704,959.31 89,193,588.31 14,857,682.84 17,307,344.06 1,136,731.45 53,423,153.57
		556,647,929.65
		881,472,225.53

(Notes to Financial Statement attached below are important part of the Financial Statement.)

Legal representative:

Chief Accountant:

Head of Accounting Department:

– II-137 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

CONSOLIDATED BALANCE SHEET (CONT.)

December 31, 2018

Prepared by: Tianye Innovation Corporation Item Notes Current liabilities: Short-term loans VI. Note 17 Financial liabilities measured at fair value with changes included in the current profits and losses Derivative financial liabilities Notes and accounts payable VI. Note 18 Advances from customers VI. Note 19 Payroll and employee benefits payable VI. Note 20 Taxes payable VI. Note 21 Accounts payable VI. Note 22 Holding-for-sale liabilities Current portion of non-current liabilities Other current liabilities Total current liabilities Non-current liabilities: Long-term loans VI. Note 23 Bonds payable Include: preferred stocks Perpetual bonds Long-term payables VI. Note 24 Long-term employee compensation Estimated liabilities Deferred income VI. Note 25 Deferred income tax liabilities VI. Note 15 Other non-current liabilities Total non-current liabilities Total liabilities	Closing balance 101,000,000.00 15,537,891.19 1,637,963.44 3,144,595.78 2,585,212.93 3,787,778.19 127,693,441.53 30,000,000.00 397,555.46 65,108,098.02 114,268.15 95,619,921.63 223,313,363.16	Unit: RMB Opening balance 66,000,000.00 28,325,710.25 4,088,193.01 3,041,876.87 2,927,898.18 2,705,266.75
		107,088,945.06
		67,690,400.23
		67,690,400.23
		174,779,345.29

– II-138 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Item Notes Shareholders’ equity: Share capital VI. Note 26 Other equity instruments Perpetual bonds Capital reserves VI. Note 27 Minus: treasury shares Other comprehensive incomes VI. Note 28 Special reserve Surplus reserve VI. Note 29 Undistributed profit VI. Note 30 Total shareholders’ equities attributable to parent company Minority shareholders’ equity Total shareholders’ equities Total liabilities and shareholders’ equities	Closing balance 240,000,000.00 246,300,093.95 -2,632,212.00 11,042,103.18 228,492,567.81 723,202,552.94 723,202,552.94 946,515,916.10	Opening balance 240,000,000.00 246,300,093.95 10,523,286.40 209,869,499.89 706,692,880.24
		706,692,880.24
		881,472,225.53

(Notes to Financial Statement attached below are important part of the Financial Statement.)

Legal representative: Chief Accountant:

Head of Accounting Department:

– II-139 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

CONSOLIDATED PROFIT STATEMENT 2018

Prepared by: Tianye Innovation Corporation

Monetary Unit: RMB

		Current	Previous
Item	Remarks	Balance	Balance
I. Total operating income		258,435,753.75	203,133,324.85
Include: operating income	VI. Note 31	258,435,753.75	203,133,324.85
II. Total operating cost		231,448,305.87	170,238,430.53
Include: operating costs	VI. Note 31	181,881,408.84	127,117,026.05
Taxes and surcharges	VI. Note 32	3,987,239.60	2,202,858.90
Selling expenses	VI. Note 33	10,201,050.97	8,901,681.64
General and administrative expenses	VI. Note 34	31,629,640.96	24,731,816.69
Research and development expenses	VI. Note 35	1,730,762.09	2,079,226.92
Financial expenses	VI. Note 36	1,768,117.26	2,539,651.74
Including: interest expense		2,316,078.80	3,261,961.98
Credit interest		585,908.38	822,098.71
Assets impairment loss	VI. Note 37	250,086.15	2,666,168.59
Plus: other profits	VI. Note 38	5,949,486.80	9,774,455.20
Investment income (loss is indicated by “-”)	VI. Note 39	-3,219,330.68	1,152,130.51
Include: investment income from affiliates
and joint ventures		-3,219,330.68	1,152,130.51
Income from changes in fair value (loss is
indicated by “-”)
Income from assets disposal (loss is
indicated by “-”)	VI. Note 40	-2,200,916.61	69,133.72
III. Operating profit (loss is indicated
by “-”)		27,516,687.39	43,890,613.75
Add: non-operating income	VI. Note 41	352,041.46	33.98
Minus: non-operating expenses	VI. Note 42	598,904.51	708,990.43
IV. Total profit (total loss is indicated
by “-”)		27,269,824.34	43,181,657.30
Less: income tax expense	VI. Note 43	3,327,939.64	1,098,988.72
V. Net profits (the net loss expressed
with “-”)		23,941,884.70	42,082,668.58
(I) Classified by operation continuity:
1. Net profit of continued operations (net
loss is indicated by “-”)		23,941,884.70	42,082,668.58
2. Net profit of discontinued operations (net
loss is indicated by “-”)
(II) Classified by ownership:
1. Net profits assigned to the parent
company’s shareholders (net loss is
indicated by “-”)		23,941,884.70	42,082,668.58

– II-140 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

		Current	Previous
Item	Remarks	Balance	Balance
VI. Net amount of other comprehensive
income after tax		-2,632,212.00	2,440,350.00
Net amount of other comprehensive income
after tax attributable to the shareholders of
parent company		-2,632,212.00	2,440,350.00
(I) Other comprehensive income not allowed
to be re-classified into profits and losses		-2,632,212.00	2,440,350.00
1. Remeasurement of change of defined
benefit plans
2. Other comprehensive income that cannot be
converted into profits and losses under the
equity method		-2,632,212.00	2,440,350.00

1. Other comprehensive income that cannot be converted into profits and losses under the equity method

2. (II) Other comprehensive income to be reclassified into profits and losses

3. Other comprehensive income that can be converted into profits and losses under the equity method

4. Profits and losses of changes in fair value of available-for-sale financial assets

5. Profits and losses of available-for-sale financial assets re-classified from the held-to-maturity investment

6. Profits and losses of cash flow hedging in force

7. Translation balance of foreign currency financial statements

held-to-maturity investment 4. Profits and losses of cash flow hedging in force 5. Translation balance of foreign currency financial statements
6. Others
Net amount of other comprehensive income
after tax attributable to minority
shareholders
VII. Total comprehensive income	21,309,672.70	44,523,018.58
Total comprehensive income attributable to
the shareholders of parent company	21,309,672.70	44,523,018.58
Total comprehensive income attributable to
minority shareholders
VIII. Earnings per share (EPS):
(I) Basic EPS	0.10	0.18
(II) Diluted EPS	0.10	0.18

(Notes to Financial Statement attached below are important part of the Financial Statement.)

Legal representative: Chief Accountant: Head of Accounting Department:

– II-141 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

CONSOLIDATED STATEMENT OF CASH FLOW 2018

Prepared by: Tianye Innovation Corporation			Unit: RMB
		Amount of	Amount of
Item	Remarks	current period	last period
I. Cash flows from operating activities:
Cash received from goods sales and service
rendering		299,322,086.19	231,918,464.19
Tax refunds received		3,130,928.00	818,491.93
Cash received related to other operating
activities	VI. Note 44	2,751,330.24	11,327,213.31
Subtotal of cash inflow from operating
activities		305,204,344.43	244,064,169.43
Cash paid for purchase of goods and services		173,773,936.66	110,174,204.06
Cash paid to and on behalf of employee		28,867,651.50	29,232,449.13
Cash paid for taxes		21,049,739.55	15,338,998.87
Cash paid related to other operating activities	VI. Note 44	30,500,405.64	14,847,878.44
Subtotal of cash outflow from operating
activities		254,191,733.35	169,593,530.50
Net cash flows from operating activities		51,012,611.08	74,470,638.93
II. Cash flows from investing activities:
Cash received from disposal of investments		14,377,600.00	12,000,000.00
Cash received from investment income
Net amount of cash resulted from disposal of
fixed assets, intangible assets and other long
term assets		20,670.00	454,530.00
Net cash received from disposal of
subsidiaries and other business entities
Cash received related to other investing
activities
Subtotal of cash inflow from investing
activities		14,398,270.00	12,454,530.00
Net cashes paid for construction of fixed
assets, intangible assets and other long-term
assets		113,786,381.81	180,485,800.61
Cash paid for investments
Cash Paid for disposal of subsidiaries and
other business units
Cash paid related to other investing activities		113,786,381.81	180,485,800.61
Net cash flows from investing activities		-99,388,111.81	-168,031,270.61

– II-142 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

		Amount of	Amount of
Item	Remarks	current period	last period
III. Cash flows from financing activities:
Cash received from introducing investment
Include: cash received by subsidiaries from
absorbing minority shareholder’s investment
Cash received from loans		131,000,000.00	96,000,000.00
Cash received from bonds issuance
Cash paid related to other financing activities
Subtotal of cash inflow from financing
activities		131,000,000.00	96,000,000.00
Cash paid for repayment of debts		66,000,000.00	111,000,000.00
Cash paid for distribution of dividends or
profits, or interest payment		8,016,078.80	3,471,919.98
Include: dividend and profit paid by
subsidiaries to minority shareholders
Cash paid relating to other financing activities	VI. Note 44	5,000,000.00	2,253,547.26
Subtotal of cash outflows from financial
activities		79,016,078.80	116,725,467.24
Net cash flows from financing activities		51,983,921.20	-20,725,467.24
IV. Effect of exchange rate changes on cash
and cash equivalents		13,117.25	-40,860.94
V. Net increase of cash and cash equivalents		3,621,537.72	-114,326,959.86
Plus: Cash and cash equivalents at beginning
of year		211,052,482.61	325,379,442.47
VI. CASH AND CASH EQUIVALENTS AT
END OF YEAR		214,674,020.33	211,052,482.61

(Notes to Financial Statement attached below are important part of the Financial Statement.)

Legal representative: Chief Accountant:

Head of Accounting Department:

– II-143 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Unit: RMB			Minority Total	shareholders’ shareholders’	equity equities	706,692,880.24					706,692,880.24	16,509,672.70	21,309,672.70						-4,800,000.00			-4,800,000.00												723,202,552.94
				Special Surplus Undistributed	reserve reserve profits Subtotal	10,523,286.40 209,869,499.89 706,692,880.24					10,523,286.40 209,869,499.89 706,692,880.24	518,816.78 18,623,067.92 16,509,672.70	23,941,884.70 21,309,672.70						518,816.78 -5,318,816.78 -4,800,000.00	518,816.78 -518,816.78		-4,800,000.00 -4,800,000.00												11,042,103.18 228,492,567.81 723,202,552.94		Head of Accounting Department:
Prepared by: Tianye Innovation Corporation	Amount of current period	Shareholder’s equity attributable to the parent company	Other equity instruments Less: Other	Capital Treasury comprehensive Preferred Perpetual	Item Share Capital reserves shares income stocks bonds Others	I. Closing balance of last year 240,000,000.00 246,300,093.95	Add: accounting policy changes	Correction of previous errors	Business combination under the same control	MISCELLANEOUS	II. Opening balance of current year 240,000,000.00 246,300,093.95	III. Increases and decreases of this year (decrease is indicated by “-”) -2,632,212.00	(I) Total comprehensive profits -2,632,212.00	(II) Capital paid in and reduced by shareholders	1. Common stock paid in by shareholders	2. Capital paid in by holders of other equity instruments	3. Amounts of share-based payments recognized in shareholders’ equity	4. Others	(III) Distribution of profits	1. Withdrawal of surplus reserves	2. Withdrawal of general risk reserves	3. Distribution to shareholders	4. Others	(IV) Internal carry-forward of shareholders’ equity	1. Capitalized capital reserves (or capital stock)	2. Capitalized surplus reserves (or capital stock)	3. Offsetting of loss by surplus reserves	4. Changes of defined benefit plans carried forward into retained income	5. Others	(V) Reasonable reserves	1. Amount withdrawn for the period	2. Amount used for the period	(VI) Others	IV. Closing balance of current year 240,000,000.00 246,300,093.95 -2,632,212.00	(Notes to Financial Statement attached below are important part of the Financial Statement.)	Legal representative: Chief Accountant:

– II-144 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Unit: RMB			Minority Total	shareholders’ shareholders’	equity equities	662,169,861.66					662,169,861.66	44,523,018.58	44,523,018.58																					706,692,880.24
				Special Surplus Undistributed	reserve reserve profits Subtotal	9,869,750.20 168,440,367.51 662,169,861.66					9,869,750.20 168,440,367.51 662,169,861.66	653,536.20 41,429,132.38 44,523,018.58	42,082,668.58 44,523,018.58						653,536.20 -653,536.20	653,536.20 -653,536.20														10,523,286.40 209,869,499.89 706,692,880.24		Head of Accounting Department:
Prepared by: Tianye Innovation Corporation	Amount of last period	Shareholder’s equity attributable to the parent company	Other equity instruments Less: Other	Capital Treasury comprehensive Preferred Perpetual	Item Share capital reserves shares income stocks bonds Others	I. Closing balance of last year 240,000,000.00 246,300,093.95 -2,440,350.00	Add: accounting policy changes	Correction of previous errors	Business combination under the same control	MISCELLANEOUS	II. Opening balance of current year 240,000,000.00 246,300,093.95 -2,440,350.00	III. Increases and decreases of this year (decrease is indicated by “-”) 2,440,350.00	(I) Total comprehensive profits 2,440,350.00	(II) Capital paid in and reduced by shareholders	1. Common stock paid in by shareholders	2. Capital paid in by holders of other equity instruments	3. Amounts of share-based payments recognized in shareholders’ equity	4. Others	(III) Distribution of profits	1. Withdrawal of surplus reserves	2. Withdrawal of general risk reserves	3. Distribution to shareholders	4. Others	(IV) Internal carry-forward of shareholders’ equity	1. Capitalized capital reserves (or capital stock)	2. Capitalized surplus reserves (or capital stock)	3. Offsetting of loss by surplus reserves	4. Changes of defined benefit plans carried forward into retained income	5. Others	(V) Reasonable reserves	1. Amount withdrawn for the period	2. Amount used for the period	(VI) Others	IV. Closing balance of current year 240,000,000.00 246,300,093.95	(Notes to Financial Statement attached below are important part of the Financial Statement.)	Legal representative: Chief Accountant:

– II-145 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

BALANCE SHEET

December 31, 2018

Prepared by: Tianye Innovation Corporation Item Notes Current assets: Monetary funds Financial assets measured at fair value with changes included in the current profits and losses Derivative financial assets Notes and accounts receivable XVI. Note 1 Prepayment Other receivables XVI. Note 2 Inventories Held-for-sale assets Current portion of non-current liabilities Other current assets Total current assets Non-current assets: Available-for-sale financial assets Held-to-maturity investment Long-term receivables Long-term equity investment XVI. Note 3 Investment real estate properties Fixed assets Construction in progress Productive biological assets Oil & gas assets Intangible assets Development expenditures Goodwill Long-term deferred expenses Deferred income tax assets Other non-current assets Total non-current assets Total assets	Closing balance 158,231,492.93 15,580,194.18 2,673,526.03 283,921,064.71 25,487,932.56 485,894,210.41 122,431,584.04 76,583,430.17 970,157.10 10,924,692.59 772,608.68 135,286.90 211,817,759.48 697,711,969.89	Unit: RMB Opening Balance 102,001,263.28 22,893,672.26 176,078.72 284,122,869.33 27,562,352.76 3,292.57
		436,759,528.92
		143,125,234.72 83,174,647.73 11,214,729.35 355,870.51 2,315,563.50
		240,186,045.81
		676,945,574.73

(Notes to Financial Statement attached below are important part of the Financial Statement.) Legal representative: Chief Accountant: Head of Accounting Department:

– II-146 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

BALANCE SHEET (CONT.)

December 31, 2018

Prepared by: Tianye Innovation Corporation

Unit: RMB

Item Notes Current liabilities: Short-term loans Financial liabilities measured at fair value with changes included in the current profits and losses Derivative financial liabilities Notes and accounts payable Advances from customers Payroll and employee benefits payable Taxes payable Accounts payable Holding-for-sale liabilities Current portion of non-current liabilities Other current liabilities Total current liabilities Non-current liabilities: Long-term loans Bonds payable Including: preferred stocks Perpetual bonds Long-term payables Long-term employee compensation Estimated liabilities Deferred income Deferred income tax liabilities Other non-current liabilities Total non-current liabilities Total liabilities Shareholders’ equity: Share Capital Other equity instruments Include: preferred stocks Perpetual bonds Capital reserves Minus: treasury shares Other comprehensive incomes Special reserve Surplus reserve Undistributed profit Total shareholders’ equities Total liabilities and shareholders’ equities	Closing balance 36,000,000.00 22,036,006.29 15,336,994.62 1,329,988.41 961,588.86 45,609,669.91 121,274,248.09 1,339,175.31 1,339,175.31 122,613,423.40 240,000,000.00 244,109,726.71 -2,632,212.00 11,042,103.18 82,578,928.60 575,098,546.49 697,711,969.89	Opening Balance 36,000,000.00 13,166,447.80 2,757,385.21 1,377,141.48 1,279,890.09 43,454,490.58
		98,035,355.16
		1,567,628.87 1,567,628.87
		99,602,984.03
		240,000,000.00 244,109,726.71 10,523,286.40 82,709,577.59 577,342,590.70 676,945,574.73

(Notes to Financial Statement attached below are important part of the Financial Statement.)

Legal representative: Chief Accountant:

Head of Accounting Department:

– II-147 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

INCOME STATEMENT

2018

Prepared by: Tianye Innovation Corporation

Unit: RMB

		Amount of	Amount of
Item	Notes	current period	last period
I. Operating revenue	XVI. Note 4	89,610,086.49	93,159,791.94
Less: operating cost	XVI. Note 4	62,672,313.57	62,035,114.85
Taxes and surcharges		1,195,933.31	1,222,651.51
Selling expenses		2,881,253.45	3,043,515.89
General and administrative expenses		12,167,738.44	8,833,414.31
Research and development expenses		1,730,762.09	1,078,272.25
Financial expenses		399,631.11	905,197.02
Including: interest expense		728,328.80	1,493,795.00
interest income		393,454.73	662,131.91
Assets impairment loss		-170,011.98	10,288,676.83
Plus: Other income		456,983.56	1,338,913.13
Investment income (loss is indicated by “-”)	XVI. Note 5	-3,219,330.68	1,152,130.51
Include: investment income from affiliates and
joint ventures		-3,219,330.68	1,152,130.51
Income from changes in fair value (loss is
indicated by “-”)
Gains from asset disposals (loss is indicated
by “-”)
II. Operating profit (loss is indicated by
“-”)		5,970,119.38	8,243,992.92
Add: non-operating income		100,000.00
Minus: non-operating expenses		24,254.29	550,502.99
III. Total profit (total loss is indicated by
“-”)		6,045,865.09	7,693,489.93
Less: income tax expense		857,697.30	1,158,127.91
IV. Net profit (net loss is indicated by “-”)		5,188,167.79	6,535,362.02
(I) Net profit from continuous operation
(net loss is indicated by “-”)		5,188,167.79	6,535,362.02
(II) Net profit from discontinuing operation
(net loss is indicated by “-”)
V. After-tax net amount of other
comprehensive income		-2,632,212.00	2,440,350.00
(I) Other comprehensive income not allowed
to be re-classified into profits and losses		-2,632,212.00	2,440,350.00
1. Remeasurement of change of defined
benefit plans
2. Other comprehensive income that cannot be
converted into profits and losses under the
equity method		-2,632,212.00	2,440,350.00
(II) Other comprehensive income to be
reclassified into profits and losses
1. Other comprehensive income that can be
converted into profits and losses under the
equity method

1. Profits and losses of changes in fair value of available-for-sale financial assets

– II-148 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Item

Amount of Amount of Notes current period last period

1. Profits and losses of available-for-sale financial assets re-classified from the held-to-maturity investment

2. Profits and losses of cash flow hedging in force

3. Translation balance of foreign currency financial statements

4. Others

VI. Total comprehensive incomes

2,555,955.79 8,975,712.02

Legal representative: Chief Accountant:

Head of Accounting Department:

– II-149 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

CASH FLOW STATEMENT

2018

Prepared by: Tianye Innovation Corporation

Prepared by: Tianye Innovation Corporation			Unit: RMB
		Amount of	Amount of
Item	Notes	current period	last period
I. Cash flows from operating activities:
Cash received from goods sales and service
rendering		121,204,346.46	108,069,283.49
Tax refunds received			818,491.93
Cash received related to other operating
activities		85,767,216.69	23,577,937.92
Subtotal of cash inflow from operating
activities		206,971,563.15	132,465,713.34
Cash paid for purchase of goods and services		41,913,810.61	50,565,706.44
Cash paid to and on behalf of employee		14,618,525.48	12,980,570.78
Cash paid for taxes		7,677,447.81	9,758,387.14
Cash paid related to other operating activities		91,538,057.30	218,429,538.62
Subtotal of cash outflow from operating
activities		155,747,841.20	291,734,202.98
Net cash flows from operating activities		51,223,721.95	-159,268,489.64
II. Cash flows from investing activities:
Cash received from disposal of investments		14,377,600.00	12,000,000.00
Cash received from investment income
Net amount of cash resulted from disposal of
fixed assets, intangible assets and other long
term assets
Cash received related to other investing
activities
Subtotal of cash inflow from investing
activities		14,377,600.00	12,000,000.00
Net cashes paid for construction of fixed
assets, intangible assets and other long-term
assets		2,901,077.32	1,052,056.04
Cash paid for investments			5,000,000.00
Cash paid related to other investing activities
Subtotal of cash outflow from investing
activities		2,901,077.32	6,052,056.04
Net cash flows from investing activities		11,476,522.68	5,947,943.96
III. Cash flows from financing activities:
Cash received from introducing investment
Cash received from loans		36,000,000.00	36,000,000.00
Cash received from bonds issuance
Other cash received relating to fund-raising
activities			1,200,000.00
Subtotal of cash inflow from financing
activities		36,000,000.00	37,200,000.00
Cash paid for repayment of debts		36,000,000.00	36,000,000.00
Cash paid for distribution of dividends or
profits, or interest payment		6,428,328.80	1,593,795.00
Cash paid related to other financing activities			2,253,547.26
Subtotal of cash outflows from financial
activities		42,428,328.80	39,847,342.26

– II-150 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

		Amount of	Amount of
Item	Notes	current period	last period
Net cash flows from financing activities		-6,428,328.80	-2,647,342.26
IV. Effect of exchange rate changes on cash
and cash equivalents		-41,686.18	-30,898.69
V. Net increase of cash and cash equivalents		56,230,229.65	-155,998,786.63
Plus: Cash and cash equivalents at beginning
of year		102,001,263.28	258,000,049.91
VI. Cash and cash equivalents at the end of
year		158,231,492.93	102,001,263.28

(Notes to Financial Statement attached below are important part of the Financial Statement.) Legal representative: Chief Accountant: Head of Accounting Department:

– II-151 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Unit: RMB		Total	Undistributed shareholders’	profits equities	82,709,577.59 577,342,590.70				82,709,577.59 577,342,590.70	-130,648.99 -2,244,044.21	5,188,167.79 2,555,955.79						-5,318,816.78 -4,800,000.00	-518,816.78		-4,800,000.00 -4,800,000.00												82,578,928.60 575,098,546.49
	Amount of current period	Other	Capital Less: Treasury comprehensive	reserves shares income Special reserve Surplus reserve	244,109,726.71 10,523,286.40				244,109,726.71 10,523,286.40	-2,632,212.00 518,816.78	-2,632,212.00						518,816.78	518,816.78														244,109,726.71 -2,632,212.00 11,042,103.18		Head of Accounting Department:
				Others
Prepared by: Tianye Innovation Corporation		Other equity instruments	Preferred Perpetual	Item Share capital stocks bonds	I. Closing balance of last year 240,000,000.00	Add: accounting policy changes	Correction of previous errors	MISCELLANEOUS	II. Opening balance of current year 240,000,000.00	III. Increases and decreases of this year (decrease is indicated by “-”)	(I) Total comprehensive profits	(II) Capital paid in and reduced by shareholders	1. Common stock paid in by shareholders	2. Capital paid in by holders of other equity instruments	3. Amounts of share-based payments recognized in shareholders’ equity	4. Others	(III) Distribution of profits	1. Withdrawal of surplus reserves	2. Withdrawal of general risk reserves	3. Distribution to shareholders	4. Others	(IV) Internal carry-forward of shareholders’ equity	1. Capitalized capital reserves (or capital stock)	2. Capitalized surplus reserves (or capital stock)	3. Offsetting of loss by surplus reserves	4. Changes of defined benefit plans carried forward into retained income	5. Others	(V) Reasonable reserves	1. Amount withdrawn for the period	2. Amount used for the period	(VI) Others	IV. Closing balance of current year 240,000,000.00	(Notes to Financial Statement attached below are important part of the Financial Statement.)	Legal representative: Chief Accountant:

– II-152 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

	Unit: RMB		Total	shareholders’	equities	568,366,878.68				568,366,878.68	8,975,712.02	8,975,712.02																					577,342,590.70
				Undistributed	profits	76,827,751.77				76,827,751.77	5,881,825.82	6,535,362.02						-653,536.20	-653,536.20														82,709,577.59
		Amount of current period	Other	Capital Less: Treasury comprehensive	reserves shares income Special reserve Surplus reserve	244,109,726.71 -2,440,350.00 9,869,750.20				244,109,726.71 -2,440,350.00 9,869,750.20	2,440,350.00 653,536.20	2,440,350.00						653,536.20	653,536.20														244,109,726.71 10,523,286.40		Head of Accounting Department:
					Others
2018	Prepared by: Tianye Innovation Corporation		Other equity instruments	Preferred Perpetual	Item Share capital stocks bonds	I. Closing balance of last year 240,000,000.00	Add: accounting policy changes	Correction of previous errors	MISCELLANEOUS	II. Opening balance of current year 240,000,000.00	III. Increases and decreases of this year (decrease is indicated by “-”)	(I) Total comprehensive profits	(II) Capital paid in and reduced by shareholders	1. Common stock paid in by shareholders	2. Capital paid in by holders of other equity instruments	3. Amounts of share-based payments recognized in shareholders’ equity	4. Others	(III) Distribution of profits	1. Withdrawal of surplus reserves	2. Withdrawal of general risk reserves	3. Distribution to shareholders	4. Others	(IV) Internal carry-forward of shareholders’ equity	1. Capitalized capital reserves (or capital stock)	2. Capitalized surplus reserves (or capital stock)	3. Offsetting of loss by surplus reserves	4. Changes of defined benefit plans carried forward into retained income	5. Others	(V) Reasonable reserves	1. Amount withdrawn for the period	2. Amount used for the period	(VI) Others	IV. Closing balance of current year 240,000,000.00	(Notes to Financial Statement attached below are important part of the Financial Statement.)	Legal representative: Chief Accountant:

– II-153 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Tianye Innovation Corporation Notes to Financial Statements For the year ended December 31, 2018

I. General Information of the Company

(I) Company profile

1. Limited company stage

Tianye Innovation Corporation (hereinafter referred to as “ the Company ”), formerly Beihai Tianye Food Co., Ltd., was jointly established by Guangxi Tianye Science and Technology Seed Industry Co., Ltd., Yao Jiuzhi, Huo Weidong and Liu Youqiang. On January 23, 2007, the Company obtained the Business License of Enterprise Legal Person (Q) No. 450500000005715 issued by Beihai Administration for Industry and Commerce. The registered capital is RMB2 million, and all shareholders contributed RMB2 million, accounting for 100.00% of the registered capital. The capital contribution has been verified by the Capital Verification Report (BZKYZ [2007] No. 006) issued by Beihai Zhucheng (Joint) Accounting Firm. The shareholding status of each shareholder is as follows:

Shareholder Guangxi Tianye Science and Technology Seed Industry Co., Ltd. Huo Weidong Liu Youqiang Yao Jiuzhi Total	Contribution (RMB10,000) 170.00 10.00 10.00 10.00 200.00	Proportion (%) 85.00 5.00 5.00 5.00
		100.00

On April 15, 2009, the Company’s Board of Shareholders resolved to increase the registered capital by RMB8 million, and Guangxi Tianye Science and Technology Seed Industry Co., Ltd. increased the capital by RMB8 million in cash; this capital increase has been verified by the Capital Verification Report (ZHYZ [2009] No. 210) issued by Qinzhou Zhongheng Joint Accounting Firm. The shareholding status of each shareholder after capital increase is as follows:

Shareholder Guangxi Tianye Science and Technology Seed Industry Co., Ltd. Huo Weidong Liu Youqiang Yao Jiuzhi Total	Contribution (RMB10,000) 970.00 10.00 10.00 10.00 1,000.00	Proportion (%) 97.00 1.00 1.00 1.00
		100.00

– II-154 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

On May 6, 2009, the Company’s Board of Shareholders resolved that Guangxi Tianye Science and Technology Seed Industry Co., Ltd. accepted all the equities of the Company held by Yao Jiuzhi, Huo Weidong and Liu Youqiang. The shareholding status of each shareholder after the change is as follows:

Shareholder Guangxi Tianye Science and Technology Seed Industry Co., Ltd. Total	Contribution (RMB10,000) 1,000.00 1,000.00	Proportion (%) 100.00
		100.00

On August 11, 2011, the Company’s Board of Shareholders resolved to increase the registered capital by RMB32.6 million, with Guangxi Tianye Science and Technology Seed Industry Co., Ltd. contributing RMB25 million in kind and Yao Jiuzhi contributing RMB7.6 million in cash. Among them, Yao Jiuzhi contributed RMB7.6 million in cash for the first capital increase, and Guangxi Tianye Science and Technology Seed Industry Co., Ltd. completed the capital contribution within 2 years. This capital increase has been verified by the Capital Verification Report (ZXSYZ [2011] No. 046) issued by Shenzhen Branch of Zhongxi Certified Public Accountants Co., Ltd. The above-mentioned in-kind capital contribution has been appraised by the Assets Appraisal Report (ZLPBZ [2011] No. 493) issued by China United Assets Appraisal Group Co., Ltd., and as of October 28, 2011, the property rights procedures had been changed; after that, in order to confirm the change of property rights of the in-kind contribution assets, the Shenzhen Branch of Zhongxi Certified Public Accountants Co., Ltd. issued the Capital Verification Report (ZXSYZ [2012] No. 003). After the capital increase is completed, the registered capital of the industrially and commercially registered company is RMB42.6 million, and the shareholding status of each shareholder is as follows:

Shareholder Guangxi Tianye Science and Technology Seed Industry Co., Ltd. Yao Jiuzhi Total	Contribution (RMB10,000) 3,500.00 760.00 4,260.00	Proportion (%) 82.16 17.84
		100.00

On September 2, 2011, the Company’s Board of Shareholders resolved to increase the registered capital by RMB12.4 million, which was contributed in cash by natural persons Cheng Cheng, Wu Zhonglin, Guo Shanjie, Zhang Pei, Chen Yu, Li Zhenghua, Zhang Jinfeng, Zhao Yongli, Han Kaifeng, Lv Lingling, Huang Huiqiong, Li Junli, Rao Guizhong, Zhao Fagui, Wu Dongfeng, Wu Yanping and Wu Qingwen, Chen Junrong, Zhu Rong, Wang Jianxin, Zhao Fayu, Nong Xiancheng, Wang Jianfeng; this capital increase has been verified by the Capital Verification Report (ZXSYZ [2011] No. 051) issued by Shenzhen Branch of Zhongxi Certified Public Accountants Co., Ltd. The shareholding status of each shareholder after capital increase is as follows:

Shareholder	Contribution	Proportion
	(RMB10,000)	(%)
Guangxi Tianye Science and Technology Seed Industry Co.,
Ltd.	3,500.00	63.64
Yao Jiuzhi	760.00	13.82
Cheng Cheng	230.00	4.18

– II-155 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Shareholder Wu Zhonglin Chen Yu Huang Huiqiong Lv Lingling Han Kaifeng Li Zhenghua Zhang Jinfeng Zhao Yongli Li Junli Guo Shanjie Wu Dongfeng Rao Guizhong Zhao Fagui Wang Jianfeng Wu Qingwen Wang Jianxin Zhang Pei Wu Yanping Chen Junrong Zhu Rong Zhao Fayu Nong Xiancheng Total	Contribution (RMB10,000) 160.00 150.00 120.00 100.00 80.00 60.00 60.00 60.00 50.00 20.00 20.00 19.00 19.00 19.00 11.00 11.00 10.00 10.00 10.00 10.00 6.00 5.00 5,500.00	Proportion (%) 2.91 2.73 2.18 1.82 1.45 1.09 1.09 1.09 0.91 0.36 0.36 0.35 0.35 0.35 0.20 0.20 0.18 0.18 0.18 0.18 0.11 0.09
		100.00

On September 15, 2011, the Company’s Board of Shareholders resolved to approve the transfer of 1.27% equity of the Company held by Yao Jiuzhi to Li Junli, and the transfer of 3.64% equity of the Company held by Yao Jiuzhi to Beijing Zhonghe Zhengxi Investment Consulting Co., Ltd.

On October 8, 2011, the Company’s Board of Shareholders resolved to increase the registered capital by RMB5 million, which was contributed in cash by Tongji Huacheng Venture Capital (Beijing) Co., Ltd., Su Songqing and Chen Zuren; this capital increase was verified by the Capital Verification Report (ZXSYZ [2011] No. 055) issued by Shenzhen Branch of Zhongxi Certified Public Accountants Co., Ltd. The shareholding status of each shareholder after capital increase is as follows:

Shareholder	Contribution	Proportion
	(RMB10,000)	(%)
Guangxi Tianye Science and Technology Seed Industry Co.,
Ltd.	3,500.00	58.33
Yao Jiuzhi	490.00	8.17
Cheng Cheng	230.00	3.83
Beijing Zhonghe Zhengxi Investment Consulting Co., Ltd.	200.00	3.33
Tongji Huacheng Venture Capital (Beijing) Co., Ltd.	200.00	3.33
Wu Zhonglin	160.00	2.67
Chen Yu	150.00	2.50
Su Songqing	150.00	2.50
Chen Zuren	150.00	2.50
Huang Huiqiong	120.00	2.00
Li Junli	120.00	2.00

– II-156 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Shareholder Lv Lingling Han Kaifeng Li Zhenghua Zhang Jinfeng Zhao Yongli Guo Shanjie Wu Dongfeng Rao Guizhong Zhao Fagui Wang Jianfeng Wu Qingwen Wang Jianxin Zhang Pei Wu Yanping Chen Junrong Zhu Rong Zhao Fayu Nong Xiancheng Total	Contribution (RMB10,000) 100.00 80.00 60.00 60.00 60.00 20.00 20.00 19.00 19.00 19.00 11.00 11.00 10.00 10.00 10.00 10.00 6.00 5.00 6,000.00	Proportion (%) 1.67 1.33 1.00 1.00 1.00 0.33 0.33 0.32 0.32 0.32 0.18 0.18 0.17 0.17 0.17 0.17 0.10 0.08
		100.00

On November 23, 2011, the Company’s Board of Shareholders resolved to increase the registered capital by RMB7 million, in which, RMB5 million was contributed by Beijing Qiuyin Datong Investment Management Center (L.P.) in cash and RMB2 million by Zhang Jun in cash. This capital increase has been verified by the Capital Verification Report (ZXSYZ [2011] No. 060) issued by Shenzhen Branch of Zhongxi Certified Public Accountants Co., Ltd. The shareholding status of each shareholder after capital increase is as follows:

Shareholder	Contribution	Proportion
	(RMB10,000)	(%)
Guangxi Tianye Science and Technology Seed Industry Co.,
Ltd.	3,500.00	52.24
Beijing Qiuyin Datong Investment Management Center (L.P.)	500.00	7.46
Yao Jiuzhi	490.00	7.31
Cheng Cheng	230.00	3.43
Beijing Zhonghe Zhengxi Investment Consulting Co., Ltd.	200.00	2.99
Tongji Huacheng Venture Capital (Beijing) Co., Ltd.	200.00	2.99
Zhang Jun	200.00	2.99
Wu Zhonglin	160.00	2.39
Chen Yu	150.00	2.24
Su Songqing	150.00	2.24
Chen Zuren	150.00	2.24
Huang Huiqiong	120.00	1.79
Li Junli	120.00	1.79
Lv Lingling	100.00	1.49
Han Kaifeng	80.00	1.19
Li Zhenghua	60.00	0.90
Zhang Jinfeng	60.00	0.90
Zhao Yongli	60.00	0.90
Guo Shanjie	20.00	0.30
Wu Dongfeng	20.00	0.30

– II-157 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Shareholder Rao Guizhong Zhao Fagui Wang Jianfeng Wu Qingwen Wang Jianxin Zhang Pei Wu Yanping Chen Junrong Zhu Rong Zhao Fayu Nong Xiancheng Total	Contribution (RMB10,000) 19.00 19.00 19.00 11.00 11.00 10.00 10.00 10.00 10.00 6.00 5.00 6,700.00	Proportion (%) 0.28 0.28 0.28 0.16 0.16 0.15 0.15 0.15 0.15 0.09 0.07
		100.00

On December 16, 2011, the Company’s Board of Shareholders resolved that shareholder Wu Qingwen transferred his 0.01% equity (i.e. RMB10,000) to Zhao Fagui, Zhao Fayu transferred his 0.01% equity (i.e. RMB10,000) to Zhao Fagui, and Wang Jianxin transferred his 0.01% equity (i.e. RMB10,000) to Wang Jianfeng. It is agreed to increase the registered capital by RMB3 million, and such RMB3 million was contributed by Beijing Haiyan Lifang Venture Capital Center (Limited Partnership) in cash. This capital increase has been verified by the Capital Verification Report (ZXSYZ [2011] No. 063) issued by Shenzhen Branch of Zhongxi Certified Public Accountants Co., Ltd. The shareholding status of each shareholder after capital increase is as follows:

Shareholder	Contribution	Proportion
	(RMB10,000)	(%)
Guangxi Tianye Science and Technology Seed Industry Co.,
Ltd.	3,500.00	50.00
Beijing Qiuyin Datong Investment Management Center (L.P.)	500.00	7.14
Yao Jiuzhi	490.00	7.00
Beijing Haiyan Lifang Venture Capital Center (Limited
Partnership)	300.00	4.29
Cheng Cheng	230.00	3.29
Beijing Zhonghe Zhengxi Investment Consulting Co., Ltd.	200.00	2.86
Tongji Huacheng Venture Capital (Beijing) Co., Ltd.	200.00	2.86
Zhang Jun	200.00	2.86
Wu Zhonglin	160.00	2.29
Chen Yu	150.00	2.14
Su Songqing	150.00	2.14
Chen Zuren	150.00	2.14
Huang Huiqiong	120.00	1.71
Li Junli	120.00	1.71
Lv Lingling	100.00	1.43
Han Kaifeng	80.00	1.14
Li Zhenghua	60.00	0.86
Zhang Jinfeng	60.00	0.86
Zhao Yongli	60.00	0.86
Zhao Fagui	21.00	0.30
Guo Shanjie	20.00	0.29
Wu Dongfeng	20.00	0.29
Wang Jianfeng	20.00	0.29
Rao Guizhong	19.00	0.27

– II-158 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Shareholder Wu Qingwen Wang Jianxin Zhang Pei Wu Yanping Chen Junrong Zhu Rong Zhao Fayu Nong Xiancheng Total	Contribution (RMB10,000) 10.00 10.00 10.00 10.00 10.00 10.00 5.00 5.00 7,000.00	Proportion (%) 0.14 0.14 0.14 0.14 0.14 0.14 0.07 0.07
		100.00

On June 27, 2012, the Company’s Board of Shareholders resolved that Wu Dongfeng transferred his 0.29% equity to Rao Guizhong, Zhao Fayu transferred his 0.07% equity to Rao Guizhong, Wu Yanping transferred his 0.14% equity to Rao Guizhong, Nong Xiancheng transferred his 0.07% equity to Rao Guizhong, Chen Junrong transferred his 0.14% equity to Rao Guizhong, Zhu Rong transferred his 0.14% equity to Rao Guizhong, Wang Jianxin transferred his 0.14% equity to Rao Guizhong, Wu Qingwen transferred his 0.14% equity to Rao Guizhong, Zhao Fagui transferred his 0.07% equity to Rao Guizhong, Zhao Fagui transferred his 0.23% equity to Lan Haikun, and Cheng Cheng transferred his 3.29% equity to Qi Xiaohong.

On June 27, 2012, the Company’s Board of Shareholders resolved to increase the registered capital by RMB15 million, which was contributed by all equities of Hainan Dachuan Food Co., Ltd. held by natural persons Shan Dan, Li Guangjiang, Li Ruiqi, Zhao Ruijun, Fan Jia, Fu Yu, Dong Ailin, Ding Zhulan, Cao Dongmei, Zeng Jun, Zhang Dewei, Wu Kaixiong, He Zhenshu, Zhou Chongyuan, Zheng Dingcheng, Fu Duanyao, Lin Xueyun, Du Jindong, Zhang Yimin, Li Xiaobei, Xiao Jin, Liu Ping, Huang Zenghua, Huang Huifang, Chen Jie and Shi Mingyuan.

The valuable consideration of this capital increase was calculated based on the Assets Appraisal Report of the Shareholders’ Equity Value Assessment Project Involved in the Capital Increase of Beihai Tianye Food Co., Ltd. (ZLPBZ [2012] No. 391) and the Assets Appraisal Report of the Proposed Equity Project by Beihai Tianye Food Co., Ltd. for Replacing Hainan Dachuan Food Co., Ltd. by Capital Increase (ZLPBZ [2012] No. 392) issued by China United Assets Appraisal Group Co., Ltd. (the base date of appraisal: March 31, 2012).

This capital increase has been verified by the Capital Verification Report (ZXSYZ [2012] No. 024) issued by Shenzhen Branch of Zhongxi Certified Public Accountants Co., Ltd. The shareholding status of each shareholder after capital increase is as follows:

Shareholder	Contribution	Proportion
	(RMB10,000)	(%)
Guangxi Tianye Science and Technology Seed Industry Co.,
Ltd.	3,500.00	41.18
Beijing Qiuyin Datong Investment Management Center (L.P.)	500.00	5.88
Yao Jiuzhi	490.00	5.76
Beijing Haiyan Lifang Venture Capital Center (Limited
Partnership)	300.00	3.53
Beijing Zhonghe Zhengxi Investment Consulting Co., Ltd.	200.00	2.35
Tongji Huacheng Venture Capital (Beijing) Co., Ltd.	200.00	2.35
Zhang Jun	200.00	2.35
Wu Zhonglin	160.00	1.88
Chen Yu	150.00	1.76

– II-159 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Shareholder

Shareholder Su Songqing Chen Zuren Huang Huiqiong Li Junli Lv Lingling Han Kaifeng Li Zhenghua Zhang Jinfeng Zhao Yongli Guo Shanjie Wang Jianfeng Rao Guizhong Zhang Pei Shan Dan Li Guangjiang Li Ruiqi Xiao Jin Huang Zenghua Zhao Ruijun Huang Huifang Liu Ping Du Jindong Shi Mingyuan Zhang Yimin Li Xiaobei Fan Jia Fu Yu Chen Jie Dong Ailin He Zhenshu Ding Zhulan Cao Dongmei Zeng Jun Zhou Chongyuan Zheng Dingcheng Fu Duanyao Zhang Dewei Wu Kaixiong Lin Xueyun Lan Haikun Qi Xiaohong Total	Contribution (RMB10,000) 150.00 150.00 120.00 120.00 100.00 80.00 60.00 60.00 60.00 20.00 20.00 104.00 10.00 420.00 205.00 200.00 200.00 102.00 100.00 55.00 45.50 31.25 25.00 18.75 12.50 10.00 10.00 10.00 8.00 8.00 7.00 5.00 5.00 5.00 5.00 5.00 3.00 2.00 2.00 16.00 230.00 8,500.00	Proportion (%) 1.76 1.76 1.41 1.41 1.18 0.94 0.71 0.71 0.71 0.24 0.24 1.22 0.12 4.94 2.41 2.35 2.35 1.20 1.18 0.65 0.54 0.37 0.29 0.22 0.15 0.12 0.12 0.12 0.09 0.09 0.08 0.06 0.06 0.06 0.06 0.06 0.04 0.02 0.02 0.19 2.71
		100.00

On August 16, 2012, the Company’s Board of Shareholders resolved to approve the transfer of 1% equity of the Company held by Rao Guizhong to Yao Jiuzhi.

2. Reform of shareholding system

On September 24, 2012, the founding meeting and the first general meeting of shareholders of Tianye Innovation Corporation passed a resolution: all shareholders of Beihai Tianye Food Co., Ltd., as initiators and according to the audited net assets of RMB186,609,726.71 (i.e. 85,000,000

– II-160 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

shares) of Beihai Tianye Food Co., Ltd. as of August 31, 2012, change the company into a joint stock limited company according to law; the term of operation of the company is changed to permanent existence. On September 24, 2012, Shenzhen Branch of Zhongxi Certified Public Accountants Co., Ltd. issued the Capital Verification Report (ZXSYZ [2012] No. 043) to verify this overall change of the capital contribution. On September 25, 2012, Tianye Innovation Corporation completed the change of industrial and commercial registration in Beihai Administration for Industry and Commerce, and obtained the Business License of Enterprise Legal Person with the registration number of 450500000005715. The shareholding status of each shareholder after the change is as follows:

		Number of
**S/N **	Shareholder	shares held	Proportion
		(10,000 shares)	(%)
1	Guangxi Tianye Science and Technology Seed Industry
	Co., Ltd.	3,500.00	41.18
2	Beijing Qiuyin Datong Investment Management Center
	(L.P.)	500.00	5.88
3	Yao Jiuzhi	575.00	6.76
4	Shan Dan	420.00	4.94
5	Beijing Haiyan Lifang Venture Capital Center (Limited
	Partnership)	300.00	3.53
6	Qi Xiaohong	230.00	2.71
7	Li Guangjiang	205.00	2.41
8	Beijing Zhonghe Zhengxi Investment Consulting Co.,
	Ltd.	200.00	2.35
9	Tongji Huacheng Venture Capital (Beijing) Co., Ltd.	200.00	2.35
10	Zhang Jun	200.00	2.35
11	Li Ruiqi	200.00	2.35
12	Xiao Jin	200.00	2.35
13	Wu Zhonglin	160.00	1.88
14	Chen Yu	150.00	1.76
15	Su Songqing	150.00	1.76
16	Chen Zuren	150.00	1.76
17	Huang Huiqiong	120.00	1.41
18	Li Junli	120.00	1.41
19	Rao Guizhong	19.00	0.22
20	Huang Zenghua	102.00	1.20
21	Lv Lingling	100.00	1.18
22	Zhao Ruijun	100.00	1.18
23	Han Kaifeng	80.00	0.94
24	Li Zhenghua	60.00	0.71
25	Zhang Jinfeng	60.00	0.71
26	Zhao Yongli	60.00	0.71
27	Huang Huifang	55.00	0.65
28	Liu Ping	45.50	0.54
29	Du Jindong	31.25	0.37
30	Shi Mingyuan	25.00	0.29
31	Guo Shanjie	20.00	0.24
32	Wang Jianfeng	20.00	0.24
33	Zhang Yimin	18.75	0.22
34	Lan Haikun	16.00	0.19
35	Li Xiaobei	12.50	0.15
36	Zhang Pei	10.00	0.12
37	Fan Jia	10.00	0.12

– II-161 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

S/N Shareholder 38 Fu Yu 39 Chen Jie 40 Dong Ailin 41 He Zhenshu 42 Ding Zhulan 43 Cao Dongmei 44 Zeng Jun 45 Zhou Chongyuan 46 Zheng Dingcheng 47 Fu Duanyao 48 Zhang Dewei 49 Wu Kaixiong 50 Lin Xueyun Total	Number of shares held (10,000 shares) 10.00 10.00 8.00 8.00 7.00 5.00 5.00 5.00 5.00 5.00 3.00 2.00 2.00 8,500.00	Proportion (%) 0.12 0.12 0.09 0.09 0.08 0.06 0.06 0.06 0.06 0.06 0.04 0.02 0.02
		100.00

On November 26, 2013, Yao Jiuzhi signed the Equity Transfer Contract with Wu Dongfeng, Wu Qingwen, Zhu Rong, Wang Jianxin, Chen Junrong, Wu Yanping, Zhao Fazhen, Nong Xiancheng, Zhao Fagui and Rao Guizhong respectively, and agreed to transfer 200,000 shares to the new shareholder Wu Dongfeng, 100,000 shares to the new shareholder Wu Qingwen, 100,000 shares to the new shareholder Zhu Rong, 100,000 shares to new shareholder Wang Jianxin, 100,000 shares to the new shareholder Chen Junrong, 100,000 shares to the new shareholder Wu Yanping, 50,000 shares to the new shareholder Zhao Fayu, 50,000 shares to the new shareholder Nong Xiancheng, 40,000 shares to the new shareholder Zhao Fagui and 10,000 shares to shareholder Rao Guizhong; the Company changed the Register of Shareholders accordingly.

On December 28, 2013, Guangxi Tianye Science and Technology Seed Industry Co., Ltd. signed the Equity Transfer Contract with Yao Yuzhi, Zhao Ying, Guo Nan, Li Xingping, Li Zhiqi, Li Huiyun and Ginkgo Bo Rong (Beijing) Technology Co., Ltd., and agreed to transfer 1.6 million shares to Yao Yuzhi, 1.2 million shares to new shareholder Zhao Ying, 1.1 million shares to new stock Dong Guonan, and 111 shares. 1 million shares were transferred to the new shareholder Yinxing Borong, 1 million shares to the new shareholder Li Zhiqi and 600,000 shares to the new shareholder Li Huiyun. Each transferee completed the payment of the share transfer consideration in January 2014, and the Company changed the Register of Shareholders accordingly. The shareholding status of each shareholder after the change is as follows:

		Number of
**S/N **	Shareholder	shares held	Proportion
		(10,000 shares)	(%)
1	Guangxi Tianye Science and Technology Seed Industry
	Co., Ltd.	2,740.00	32.24
2	Yao Jiuzhi	650.00	7.65
3	Beijing Qiuyin Datong Investment Management Center
	(L.P.)	500.00	5.88
4	Shan Dan	420.00	4.94
5	Beijing Haiyan Lifang Venture Capital Center (Limited
	Partnership)	300.00	3.53
6	Qi Xiaohong	230.00	2.71
7	Li Guangjiang	205.00	2.41

– II-162 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

		Number of
**S/N **	Shareholder	shares held	Proportion
		(10,000 shares)	(%)
8	Beijing Zhonghe Zhengxi Investment Consulting Co.,
	Ltd.	200.00	2.35
9	Tongji Huacheng Venture Capital (Beijing) Co., Ltd.	200.00	2.35
10	Li Ruiqi	200.00	2.35
11	Xiao Jin	200.00	2.35
12	Zhang Jun	200.00	2.35
13	Wu Zhonglin	160.00	1.88
14	Chen Yu	150.00	1.76
15	Su Songqing	150.00	1.76
16	Chen Zuren	150.00	1.76
17	Huang Huiqiong	120.00	1.41
18	Li Junli	120.00	1.41
19	Zhao Ying	120.00	1.41
20	Guo Nan	110.00	1.29
21	Li Xingping	110.00	1.29
22	Huang Zenghua	102.00	1.2
23	Lv Lingling	100.00	1.18
24	Zhao Ruijun	100.00	1.18
25	Ginkgo Bo Rong (Beijing) Technology Co., Ltd.	100.00	1.18
26	Li Zhiqi	100.00	1.18
27	Han Kaifeng	80.00	0.94
28	Li Zhenghua	60.00	0.71
29	Zhang Jinfeng	60.00	0.71
30	Zhao Yongli	60.00	0.71
31	Li Huiyun	60.00	0.71
32	Huang Huifang	55.00	0.65
33	Liu Ping	45.50	0.54
34	Du Jindong	31.25	0.37
35	Shi Mingyuan	25.00	0.29
36	Guo Shanjie	20.00	0.23
37	Wang Jianfeng	20.00	0.23
38	Wu Dongfeng	20.00	0.23
39	Rao Guizhong	20.00	0.23
40	Zhang Yimin	18.75	0.22
41	Lan Haikun	16.00	0.19
42	Li Xiaobei	12.50	0.15
43	Zhang Pei	10.00	0.12
44	Chen Jie	10.00	0.12
45	Fan Jia	10.00	0.12
46	Fu Yu	10.00	0.12
47	Wu Qingwen	10.00	0.12
48	Zhu Rong	10.00	0.12
49	Wang Jianxin	10.00	0.12
50	Chen Junrong	10.00	0.12
51	Wu Yanping	10.00	0.12
52	He Zhenshu	8.00	0.09
53	Dong Ailin	8.00	0.09
54	Ding Zhulan	7.00	0.08
55	Cao Dongmei	5.00	0.06
56	Zhou Chongyuan	5.00	0.06
57	Zheng Dingcheng	5.00	0.06

– II-163 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

S/N Shareholder 58 Fu Duanyao 59 Zeng Jun 60 Zhao Fayu 61 Nong Xiancheng 62 Zhao Fagui 63 Zhang Dewei 64 Wu Kaixiong 65 Lin Xueyun Total	Number of shares held (10,000 shares) 5.00 5.00 5.00 5.00 4.00 3.00 2.00 2.00 8,500.00	Proportion (%) 0.06 0.06 0.06 0.06 0.05 0.04 0.02 0.02
		100.00

Zhang Dewei, a shareholder of the Company, unfortunately died of illness in February 2013. After verification by the Company, the successors first in order were only his spouse and son. On May 6, 2014, his spouse Chu Ping issued the Confirmation Letter on Inheritance of All Shares Held by Zhang Dewei in Tianye Innovation Corporation , confirming that all the 30,000 shares held by Zhang Dewei before his death were inherited by Zhang Dewei’s son Zhang Hangrui.

On June 11, 2014, Zeng Jun signed the Equity Transfer Contract with Shan Dan for transferring 50,000 shares of the Company held by him to Shan Dan, and the Company changed the Register of Shareholders accordingly.

As of December 31, 2014, the equity structure of the Company was as follows:

		Number of
**S/N **	Shareholder	shares held	Proportion
		(10,000 shares)	(%)
1	Guangxi Tianye Science and Technology Seed Industry
	Co., Ltd.	2,740.00	32.24
2	Yao Jiuzhi	650.00	7.65
3	Beijing Qiuyin Datong Investment Management Center
	(L.P.)	500.00	5.88
4	Shan Dan	425.00	5.00
5	Beijing Haiyan Lifang Venture Capital Center (Limited
	Partnership)	300.00	3.53
6	Qi Xiaohong	230.00	2.71
7	Li Guangjiang	205.00	2.41
8	Tongji Huacheng Venture Capital (Beijing) Co., Ltd.	200.00	2.35
9	Zhang Jun	200.00	2.35
10	Beijing Zhonghe Zhengxi Investment Consulting Co.,
	Ltd.	200.00	2.35
11	Li Ruiqi	200.00	2.35
12	Xiao Jin	200.00	2.35
13	Wu Zhonglin	160.00	1.88
14	Chen Yu	150.00	1.76
15	Su Songqing	150.00	1.76
16	Chen Zuren	150.00	1.76
17	Li Junli	120.00	1.41
18	Huang Huiqiong	120.00	1.41
19	Zhao Ying	120.00	1.41
20	Guo Nan	110.00	1.29

– II-164 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

S/N Shareholder 21 Li Xingping 22 Huang Zenghua 23 Lv Lingling 24 Zhao Ruijun 25 Ginkgo Bo Rong (Beijing) Technology Co., Ltd. 26 Li Zhiqi 27 Han Kaifeng 28 Li Zhenghua 29 Zhao Yongli 30 Zhang Jinfeng 31 Li Huiyun 32 Huang Huifang 33 Liu Ping 34 Du Jindong 35 Shi Mingyuan 36 Wang Jianfeng 37 Guo Shanjie 38 Rao Guizhong 39 Wu Dongfeng 40 Zhang Yimin 41 Lan Haikun 42 Li Xiaobei 43 Zhang Pei 44 Fu Yu 45 Fan Jia 46 Chen Jie 47 Wu Qingwen 48 Zhu Rong 49 Wang Jianxin 50 Chen Junrong 51 Wu Yanping 52 He Zhenshu 53 Dong Ailin 54 Ding Zhulan 55 Cao Dongmei 56 Zhou Chongyuan 57 Zheng Dingcheng 58 Fu Duanyao 59 Zhao Fayu 60 Nong Xiancheng 61 Zhao Fagui 62 Zhang Hangrui 63 Lin Xueyun 64 Wu Kaixiong Total	Number of shares held (10,000 shares) 110.00 102.00 100.00 100.00 100.00 100.00 80.00 60.00 60.00 60.00 60.00 55.00 45.50 31.25 25.00 20.00 20.00 20.00 20.00 18.75 16.00 12.50 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 8.00 8.00 7.00 5.00 5.00 5.00 5.00 5.00 5.00 4.00 3.00 2.00 2.00 8,500.00	Proportion (%) 1.29 1.20 1.18 1.18 1.18 1.18 0.94 0.71 0.71 0.71 0.71 0.65 0.54 0.37 0.29 0.23 0.23 0.23 0.23 0.22 0.19 0.15 0.12 0.12 0.12 0.12 0.12 0.12 0.12 0.12 0.12 0.09 0.09 0.08 0.06 0.06 0.06 0.06 0.06 0.06 0.05 0.04 0.02 0.02
		100.00

In May 2015, according to the proposal of the Stock Issuance Plan of Tianye Innovation Corporation reviewed and approved at the 2014 Annual General Meeting of Shareholders and the revised Articles of Association, the Company issued RMB ordinary shares with unlimited sales conditions to 43 investors including Li Xingping, Li Junli, Zhang Jun, Guo Nan, Li Guangjiang,

– II-165 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Ginkgo Bo Rong (Beijing) Technology Co., Ltd., Caida Securities Co., Ltd. and Fangfu Growth Phase II Investment Fund, totaling 35,000,000.00 shares, with par value of each share of RMB1.00, and the subscription price of each share of RMB8.50. This time, RMB297,500,000.00 was raised, and the registered capital was changed to RMB120,000,000.00. After verification by Dahua Certified Public Accountants (Special General Partnership), as of May 28, 2015, the paid-in amount of the above 43 investors was RMB297,500,000.00, and the actual net fund raised by the Company was RMB297,450,000.00, and the Capital Verification Report (DHYZ [2015] No. 000417) was issued.

As of December 31, 2015, the equity structure of the Company was as follows:

S/N Shareholder 1 Guangxi Tianye Science and Technology Seed Industry Co., Ltd. 2 Yao Jiuzhi 3 Li Ruiqi 4 Zhang Yimin 5 Beijing Qiuyin Datong Investment Management Center (L.P.) 6 Shan Dan 7 Huang Zenghua 8 Li Qing 9 Beijing Haiyan Lifang Venture Capital Center (Limited Partnership) 10 Beijing Fangfu Capital Management Co., Ltd. 11 Other investors Total	Number of shares held (10,000 shares) 1,826.70 1,513.10 521.10 518.75 500.00 425.00 413.90 380.10 300.00 287.10 5,314.25 12,000.00	Proportion (%) 15.22 12.61 4.34 4.32 4.17 3.54 3.45 3.17 2.50 2.39 44.29
		100.00

In April 2016, according to the Company’s Profit Distribution Plan for 2015 reviewed and approved at the 2015 Annual General Meeting of Shareholders, the Company distributed cash dividend RMB1 (including tax) for every 10 shares based on the total share capital of 120 million shares as of December 31, 2015, with a total cash dividend of RMB12 million, and the remaining undistributed profits were carried over to the following years. At the same time, the capital reserve was used to increase 10 shares for every 10 shares of all shareholders, and the total increased share capital was 120 million shares. The total share capital of the Company was changed to 240 million shares after the share capital increase.

As of December 31, 2016, the equity structure of the Company was as follows:

		Number of
**S/N **	Shareholder	shares held	Proportion
		(10,000 shares)	(%)
1	Guangxi Tianye Science and Technology Seed Industry
	Co., Ltd.	3,018.40	12.58
2	Yao Jiuzhi	3,016.10	12.57
3	Zhang Yimin	1,000.00	4.17
4	Beijing Qiuyin Datong Investment Management Center
	(L.P.)	1,000.00	4.17
5	Shan Dan	850.00	3.54
6	Huang Zenghua	800.00	3.33

– II-166 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

S/N Shareholder 7 Li Qing 8 Gongtou Zhaochen Investment Management Co., Ltd. — Huixin Investment — Quality Modern Agriculture Contractual Type Fund 9 Qi Xiaohong 10 Beijing Fangfu Capital Management Co., Ltd. 11 Other investors Total	Number of shares held (10,000 shares) 760.20 454.20 442.00 400.00 12,259.10 24,000.00	Proportion (%) 3.17 1.89 1.84 1.67 51.07
		100.00

As of December 31, 2017, the equity structure of the Company was as follows:

S/N Shareholder 1 Yao Jiuzhi 2 Beijing Qiuyin Datong Investment Management Center (L.P.) 3 Menghai Zhicun Gaoyuan Tea Industry Co., Ltd. 4 Zhang Yimin 5 Shan Dan 6 Yao Linhao 7 Li Qing 8 Qi Xiaohong 9 Huang Zenghua 10 Li Ruiqi 11 Other investors Total	Number of shares held (10,000 shares) 4,252.10 1,000.00 1,000.00 975.00 850.00 800.00 760.20 439.00 428.30 421.80 13,073.60 24,000.00	Proportion (%) 17.72 4.17 4.17 4.06 3.54 3.33 3.17 1.83 1.78 1.76 54.47
		100.00

As of December 31, 2018, the equity structure of the Company is as follows:

S/N Shareholder 1 Yao Jiuzhi 2 Menghai Zhicun Gaoyuan Tea Industry Co., Ltd. 3 Beijing Qiuyin Datong Investment Management Center (L.P.) 4 Zhang Yimin 5 Shan Dan 6 Li Qing 7 Yao Linhao 8 Yang Yunping 9 Qi Xiaohong 10 Huang Zenghua 11 Other investors Total	Number of shares held (10,000 shares) 4,271.10 1,017.50 1,000.00 949.50 850.00 760.20 738.00 452.60 439.00 424.30 13,097.80 24,000.00	Proportion (%) 17.7963 4.2396 4.1667 3.9563 3.5417 3.1675 3.075 1.8858 1.8292 1.7679 54.574
		100.00

– II-167 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Unified Social Credit Code: 914505007968370834

Registered address: Chuangye Avenue, Hepu Industrial Park, Beihai City

Legal representative: Yao Jiuzhi

(II) Business scope

The Company’s business scope: production and sales of beverages (fruit juice and vegetable juice), quick-frozen foods [quick-frozen other foods (quick-frozen fruit and vegetable products)], dried fruits and vegetables and preserved fruits; acquisition, processing and sales of agricultural and sideline products (which can only be operated after obtaining environmental impact acceptance and fire protection permit); comprehensive development of agricultural products projects; self-management and agent for import and export of various commodities and technologies (except commodities and technologies that are restricted by the state or prohibited from import and export).

(III) The nature of business and main operating activities of the Company

The Company’s main products: fruit juice, quick-frozen foods, fresh fruits, etc.

The Company belongs to the “vegetable, fruit and nut processing industry” in the “agricultural and sideline food processing industry”.

(IV) Approval of the financial statements

The financial statements have been authorized for issuance by the Board of Directors of the Company on April 24, 2019.

II. Scope of Consolidated Financial Statements

During the reporting period, there were 6 subsidiaries included in the scope of consolidated financial statements, including:

			Shareholding	Ratio of
Subsidiary	Subsidiary type	Level	ratio	voting right
			(%)	(%)
Hainan Dachuan Food Co., Ltd.	Wholly-owned	1	100.00	100.00
	subsidiary
Guangxi Tianye Innovation	Wholly-owned	1	100.00	100.00
Agricultural Technology Co., Ltd.	subsidiary
Hainan Tianye Drinks Food Sales	Wholly-owned	1	100.00	100.00
Co. Ltd.	subsidiary
Hubei Iceman Foods Co., Ltd.	Wholly-owned	1	100.00	100.00
	subsidiary

– II-168 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

			Shareholding	Ratio of
Subsidiary	Subsidiary type	Level	ratio	voting right
			(%)	(%)
Hubei Tianye Nonggu Biological	Wholly-owned	1	100.00	100.00
Technology Co., Ltd.	subsidiary
Hubei Tianye Innovation Nonggu	Wholly-owned	1	100.00	100.00
Fruit & Vegetable Co., Ltd.	subsidiary

Note: Refer to “Note VII. Change of consolidation scope” for details of the subject of consolidation scope change.

III. Basis for the Preparation of Financial Statements

(I) Basis for the preparation

The Company prepares the financial statements on the basis of going concern, according to actual transactions and events, and in accordance with the Accounting Standards for Business Enterprises — Basic Standards and concrete accounting standards, and Accounting Standards for Business Enterprises — Application Guidelines , the Accounting Standards for Business Enterprises–Interpretations issued by the Ministry of Finance and other relevant provisions (hereinafter collectively referred to as –Accounting Standards for Business Enterprises), and as well as Compilation Rules for Information Disclosure by Companies Offering Securities to the Public No. 15 — General Provisions on Financial Reports (Rev. 2014) issued by China Securities Regulatory Commission.

(II) Going concern

The Company has assessed its ability to continually operate for the next 12 months from the end of the reporting period. There are no major events that will affect the Company’s operational ability, Therefore, the financial statements are prepared on the basis of going-concern assumption.

IV. Significant Accounting Policies and Accounting Estimates

(I) Statement of compliance with Accounting Standards for Business Enterprises

The financial statements of the Company are prepared in accordance with the requirements of the Accounting Standards for Business Enterprises, which truly and completely reflect the financial status, operating results, cash flow and other relevant information of the Company in the reporting period.

(II) Accounting period

The accounting year of the Company begins on January 1 and ends on December 31 of the Gregorian calendar.

(III) Recording currency

The recording currency of the Company is RMB.

– II-169 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

• (IV) Accounting treatment of “Business combination involving entities under common control” and “Business combination involving entities not under common control”

1. If the terms, conditions and economic impacts of each transaction conform to one or more of the following cases in the business combination step by step, these transactions shall be handled in an accounting way as a package deal:

• (1) These transactions are concluded simultaneously or after the consideration of the mutual influence;

• (2) These transactions can lead to a complete commercial result only when they are in their entirety;

• (3) The occurrence of a transaction relies on the occurrence of at least another transaction;

• (4) A transaction alone is deemed uneconomic but economic when together with other transactions.

2. Business combination under same control

The assets and liabilities that the Company obtains in a business combination shall be measured on the basis of the book value of the combined party in the consolidated financial statement of the final controlling party on the combining date (including the business reputation formed after the final controlling party merges the combined party). As for the balance between the book value of the net assets obtained by the combining party and the book value of the consideration paid by it (or the total par value of the stocks issued), the share capital premium in capital reserve shall be adjusted; if the share capital premium in capital reserve is not sufficient to be offset, the retained earnings shall be adjusted.

If there is contingent consideration and the estimated liabilities or assets should be confirmed, the capital reserve (capital premium or capital stock premium) should be adjusted according to the balance between the amount of estimated liabilities or assets and settled amount of follow-up contingent consideration. If the capital reserve is insufficient, the retained income should be adjusted.

If the business combination is finally realized through various transactions and it is a “package deal”, the various transactions should have accounting treatment by regarding it as the one acquired the control right. If it is not a “package deal”, on the date of obtaining the control right, the capital reserve shall be adjusted according to the difference between initial investment cost of the long-term equity investment and the sum of the book value of long-term equity investment before combination and the book value of new paid consideration of shares that further acquired on combining date; if capital reserve is not enough for offset, the retained income shall be adjusted. For the equity investment held before the combining date, other comprehensive income calculated with the equity method or calculated and confirmed according to standards for recognition and measurement of financial instruments will not have accounting treatment until the disposal of the investment, when the accounting treatment should be conducted on the basis of same assets or liabilities handled directly by the investee. Other changes in owners’ equities in net assets of the investee except from the net profits and losses, other comprehensive income and profits accounted and confirmed with the equity method will not have accounting treatment temporarily until the it will be included in current profits and losses during the disposal of the investment.

– II-170 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

3. Business combination not under the same control

The “acquisition date” refers to the date on which the acquirer actually obtains the control on the acquiree, i.e. the date on which the control right over the net assets or operation decisions of the acquiree is transferred to the Company. The Company deems the control right is transferred when following conditions are all met:

• ① The combination contract or agreement has passed the approval of internal authority of the Company.

• ② Matters related to business combination that require approval of relevant state authorities have been approved by relevant authorities.

• ③ Necessary property right transfer formalities have been handled.

• ④ The Company has paid a large part of the combination expenses it is able to and plans to pay the rest expenses.

• ⑤ The Company has controlled the financial and operation policies of the acquiree in fact and it enjoys relevant interests and bear relevant risks.

The Company shall measure the assets given and liabilities incurred or assumed by an enterprise for a business combination at the acquisition date based on the fair values, and shall take the balances between the fair values and their book value into the profit and loss of the current period.

The Company shall recognize the positive balance between the combination costs and the fair value of the identifiable net assets it obtains from the acquiree as business reputation. The balance between the combination cost and the fair value of the identifiable net assets acquired from the acquiree in the business combination shall be included in the current profits and losses after recheck.

If the business combination not under the same control realized through disposal in steps by transactions is a package deal, the combining party shall conduct accounting treatment on all transactions by regarding it as one transaction that has acquired the control. It is not a package deal and the equity investment before the combining date is accounted with the equity method, the initial investment cost of the investment is the sum of the book value of the equity investment held by the acquiree before the acquisition date and the new investment cost on the acquisition date. For other comprehensive income of the equity investment confirmed before acquisition date, the accounting treatment shall be conducted on the same basis on which the investee directly disposes related assets or liabilities when handling the investment. For the equity investment held before the combining date that are accounted according to the standards for recognition and measurement of financial instruments, the initial investment cost on the combining date is the sum of the book value of the equity investment on the combining date and the new investment cost. For originally held equities, the difference between the book value and the fair value and the cumulative fair value included in other comprehensive income originally shall be all transferred to current investment profits on the combining date.

4. Expenses related to business combination

Commission fees for audit, legal services, assessment and consultation due to business combination and other directly related expenses shall be included in the current profits and losses when they occur. For the transaction expenses for the issuance of equity securities for the business combination, the part directly attributed to equity transactions can be deducted from equities.

– II-171 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

(V) Base of consolidated financial statements

1. Consolidation scope

The scope of consolidated financial statements the Company shall be confirmed based on the control and all subsidiaries (including individual principal controlled by the Company) shall be included in the consolidation range of the consolidated financial statements.

2. Consolidation procedure

The Company shall prepare consolidated financial statements based on its and its subsidiaries’ financial statements according to other relevant data. During preparation of consolidated financial statements, the Company shall consider the whole company as an accounting entity on the basis of the recognition, measurement and presentation requirements of relevant accounting standards for business enterprises and in accordance with the unified accounting policies, reflecting the Company’s overall financial status, operating results and cash flows.

The accounting policies or accounting period adopted by the subsidiary included in the consolidation range shall be in line with the Company. If the accounting policies or accounting period adopted by the subsidiary are not in line with the Company, necessary adjustments shall be made according to the Company’s accounting policies and period when preparing consolidated financial statements.

When preparing consolidated financial statement, the effects of the offset of internal transactions between the Company and other subsidiary and the offset of internal transactions between subsidiaries to consolidated balance sheet, consolidated profit statement, consolidated statement of cash flow and consolidated statement of change in shareholders’ equity shall be recorded. If the recognition on a same transaction with the Company or its subsidiary as the accounting entity is different from the perspective of consolidated financial statement of the Company, the transaction should be adjusted from the perspective of the Company.

The owners’ equity of subsidiaries, current net profits and losses and the shares in total comprehensive income attributable to minority shareholders shall be independently listed in the “owners’ equity” in consolidated balance sheet, the “net profits” and “total comprehensive income” in consolidated income statements. If current loss shared by minority shareholders in a subsidiary exceeds the share enjoyed by minority shareholders in the subsidiary’s owner’s equity at the beginning of the period, the balance shall be written down with the minority shareholders’ equity.

If the subsidiary is acquired through combinations under common control, the adjustments are made to the consolidated financial statements based on the book value of its assets and liabilities (including the business reputation formed after the final controlling party merges the combined party) in the consolidated financial statement of the final controlling party.

For a subsidiary acquired through business combination not under the same control, its financial statements are adjusted based on the fair value of the identifiable net assets on the acquisition date.

(1) Increase of subsidiary or business

For the subsidiary or business increased under the same control due to business combination in the reporting period, the opening balance of the consolidated balance sheet shall be adjusted, and the subsidiary and the revenues, expenses and profits from the beginning to the closing period of the current business combination are incorporated into the consolidated profit statement, as well

– II-172 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

as the cash flow of the same period to the consolidated cash flow statement. Meanwhile, relevant items of the comparative statement are adjusted and the consolidated report subject is regarded to exist from the time the final control party begins to control.

If the investee under the same control can be controlled due to additional investment, it shall be deemed that all parties involved in the combination adjusted the current state/existence when the final controller began to control it. For the equity investment held before the control right over the combined party is obtained, the changes in relevant profits and losses, other comprehensive incomes and other net assets recognized from the later one of the date when the original equity is obtained and the date when the combing party and the combined party are under the same control to the combination date shall respectively be used to offset the retained income at the beginning period of the comparative statement or current profits and losses.

In the reporting period, for the added subsidiary companies or businesses caused by business combination under common control, the beginning balance of the consolidated financial statement shall not be adjusted. The incomes, expenses and profits of the subsidiary or business incurred from the acquisition date to the end of reporting period shall be recorded into consolidated profit statement. The cash flow of the subsidiary or business from the acquisition date to the end of reporting period shall be included into consolidated cash flow statement.

If the investee not under the same control can be controlled due to additional investment, the Company shall measure again its equity owned from the acquiree prior to the acquisition date in accordance with the fair value of the equity at the acquisition date, and the balance between the fair value and the book value shall be taken into the investment income of the current period. For the held equity from the acquiree before the acquisition date which involves other comprehensive income under accounting with equity method, and changes of owner’s equities except from net profits and losses, other comprehensive income and distribution of profits shall be changed into the current incomes from investment on the acquisition date, except from other comprehensive income due to changes in net debt or assets caused by remeasurement and re-definition of benefit plan by the investee.

(2) Disposal of subsidiaries or businesses

1) General disposal method

If the Company disposes its subsidiary or the business within the reporting period, the revenues, expenses and profits occurred from the beginning of the business to the disposal date and of the subsidiary are incorporated into the consolidated income statement and the cash flow produced from the beginning of the period to the disposal date of the subsidiary is included into the consolidated cash flow statement.

If it loses the control on the investee because of disposing part of the equity investment or due to other reasons, the disposed remaining equity investment shall be remeasured by the Company as per the fair value on the date of losing the control. The balance obtained by deducting the portion of net assets reckoned continuously since the acquisition or combination date by the original subsidiary that shall be enjoyed according to the original calculated shareholding ratio with the sum of consideration generated from the disposal and the fair value of the residual equity shall be numbered into the investment income of the current period in which the right of control is lost. Other comprehensive incomes or changes of owner’s equities except from net profits and losses, other comprehensive income and distribution of profits associated with the equity investments of the original subsidiary are turned into the current investment income at the time the right of control is lost. However, other comprehensive income due to changes in net debt or assets caused by remeasurement and re-definition of benefit plan by the investee is excluded.

– II-173 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

2) Disposal of subsidiary in steps

For investment in subsidiary from disposal in steps by transactions to control loss, if the clauses, condition and economic impact of each transaction conform to one or more of the following cases during the disposal of equity investment to subsidiaries, it is commonly acknowledged these transactions shall be handled in an accounting way as a package deal:

• A. These transactions are concluded simultaneously or after the consideration of the mutual influence;

• B. These transactions can lead to a complete commercial result only when they are in their entirety;

• C. The occurrence of a transaction relies on the occurrence of at least another transaction;

• D. A transaction alone is deemed uneconomic but economic when together with other transactions.

If various transactions from disposal of subsidiary equity investment to control loss belong to package deal, these transactions shall be disposed in an accounting way as a transaction for subsidiary disposal with control loss. However, for each transaction conducted before control loss, the balance between the disposal price and corresponding net asset share of disposed investment over the subsidiary shall be recognized as other comprehensive income in the consolidated financial statement and transferred to current profits and losses at the time of control loss together.

If various transactions from disposal of subsidiary equity investment to control loss do not belong to package deal, accounting treatment shall be conducted for policies related to equity investment of the subsidiary under the condition of no control right loss. If the control right is lost, accounting treatment shall be conducted with general method for disposal of subsidiary.

(3) Purchase of minority equities in subsidiaries

The stock premium in capital reserve in consolidated balance sheet shall be adjusted for the difference between the net asset shares continuously calculated since acquisition date (or combining date) of subsidiary corporation to be enjoyed by long-term equity investment as a result of purchasing minority interest, as well as calculation on the basis of new shareholding ratio. If the stock premium in capital reserve is insufficient for offset, retained income shall be adjusted.

(4) Disposal of equity investment of subsidiary partially without losing control right

The stock premium in capital reserve in consolidated balance sheet shall be adjusted according to the difference of net assets of subsidiary as result of continuous calculation since the acquisition or combining date enjoyed during disposal of price and long-term equity investment due to the disposal of the long-term equity investment of subsidiary partially without losing its control right. If the stock premium in capital reserve is insufficient for offset, retained income shall be adjusted.

(VI) Cash and cash equivalents

The Company’s cash on hand and deposits available for payment at any time are recognized as cash when the Company prepares its cash flow statement. Any short-term (expires after three months from the purchase date generally) and highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value are confirmed as cash equivalents.

– II-174 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

(VII) Foreign operations and foreign currency translation

1. Foreign operations

At the time of initial recognition of a foreign currency transaction, the amount shall be translated into RMB at the spot exchange rate of the transaction date.

The foreign currency monetary items shall be translated at the spot exchange rate on the balance sheet date into RMB. The balance of exchange arising from the difference of exchange rate, except from the balance of exchange arising from foreign currency borrowings for the purchase and construction or production of qualified assets which is capitalized, shall be included into profits and losses of the current period. The foreign currency non-monetary items measured at the historical cost shall still be translated at the spot exchange rate on the transaction date, of which the amount of functional currency shall not be changed.

Foreign currency non-monetary items measured at fair value shall be translated at the spot exchange rate on the date when the fair value is determined. The resulting difference shall be recognized as the fair value change in the current profit and loss. The resulting difference belonging to the non-monetary items of available-for-sale foreign currency shall be recognized as other comprehensive incomes.

2. Translation of foreign currency financial statements

The asset and liability items in the balance sheet shall be translated at spot exchange rate on the balance sheet date. Among the owner’s equity items, except items in “undistributed profits”, others shall be translated at the spot exchange rate at the time when they are incurred. The income and expense items in the profit statements shall be translated at the spot rate of the transaction date. The translation difference of foreign currency financial statements generated according to the above translation shall be included in other comprehensive income.

When disposing of overseas operations, the translation difference of foreign currency financial statements listed in other comprehensive income items in the balance sheet and related to the overseas operations shall be transferred from other comprehensive income items to the current profits and losses; when part of the equity investment is disposed of or other reasons lead to a decrease in the proportion of overseas business interests, but the right to control overseas business is not lost, the translation difference of foreign currency statements related to the disposal of the overseas business shall be attributed to minority shareholders’ interests and shall not be transferred to the current profits and losses. In case of disposal of part of equity of the associated enterprises or cooperative enterprises in the overseas business, the translation balance related to the overseas business shall be translated into the current profits and losses based on the ratio to dispose overseas business.

(VIII) Financial instruments

The financial instruments are divided into financial assets or financial liabilities and equity instruments.

1. Classification of financial instruments

According to the contract clauses related to the issued financial instruments and the economic nature they reflect rather than the only lawful form as well as the purpose of the obtaining and holding the financial assets and bearing the financial liabilities, the Company classifies the financial assets and financial liabilities at initial recognition into financial assets (or financial

– II-175 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

liabilities) which are measured at their fair values and the variation of which is recorded into the profits and losses of the current period, the investments which will be held to their maturity, account receivables, financial assets available for sale, and other financial liabilities.

2. The condition of recognition and measurement method of financial instruments

• (1) Financial assets (financial liabilities) which are measured at their fair values and the variation of which is recorded into the profits and losses of the current period

The financial assets or financial liabilities which are measured at their fair values and of which the variation is included in the current profits and losses, including transactional financial assets or financial liabilities and the designated financial assets or financial liabilities which are measured at their fair values directly and of which the variation is included in the current profits and losses.

The transactional financial assets or financial liabilities refer to the financial assets or financial liabilities meeting any of the following requirements:

• 1) The purpose to acquire the said financial assets or financial liabilities is mainly for selling or repurchase of them in short term;

• 2) Forming a part of the identifiable combination of financial instruments, and for which there are objective evidences proving that the Company may manage the combination by way of short-term profit making in the near future;

• 3) Being a derivative instrument, excluding the designated derivative instruments which are effective hedging instruments, or derivative instruments to financial guarantee contracts, and the derivative instruments which are connected with the equity instrument investments for which there is no quoted price in the active market, whose fair value cannot be reliably measured, and which shall be settled by delivering the said equity instruments.

Only the financial assets or financial liabilities meeting any of the following requirements can be designated, when they are initially recognized, as financial assets or financial liabilities as measured at its fair value and of which the variation is included in the current profits and losses:

• 1) The designation is able to eliminate or obviously reduce the discrepancies in the recognition or measurement of relevant gains or losses arisen from the different basis of measurement of the financial assets or financial liabilities;

• 2) The official written documents on risk management or investment strategies of the Company concerned have recorded that the combination of said financial assets, the combination of said financial liabilities, or the combination of said financial assets and financial liabilities will be managed and evaluated on the basis of their fair values and be reported to the key management personnel;

• 3) The mixed instrument containing one or several embedded derivative instruments if the embedded derivative instrument does not significantly change the cash flow of the mixed instrument or the derivative instruments embedded in similar mixed instruments shall obviously not be separated from the relevant mixed instruments;

• 4) Mixed instrument that should be separated but it is impossible to make an independent measurement for embedded derivative instruments when they are obtained or subsequently on the balance sheet date.

– II-176 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Upon acquiring, according to the fair value (less cash dividends declared but yet to issue or bond interest up to payment period but has not claimed), financial assets or financial liabilities measured at their fair value and with their variation included in the current profits and losses shall be regarded as initial recognition cost and relevant transaction expenses are included in current profits and losses. Interest or cash dividends acquired during holding time shall be recognized as income from investment, and the variation of fair value shall be included into the current profits and losses at the end of the period. During the disposal of such financial assets, the balance between their fair value and original recorded amount shall be recognized as investment income, and meanwhile, the profits and losses of changes in fair value shall be adjusted.

(2) Accounts receivable

“Accounts receivable” refers to the non-derivative financial assets for which there is no quoted price in the active market and of which the recoverable amount is fixed or determinable.

For the creditor’s rights receivable formed by the Company’s sale of product or provision of labor service, and creditor’s rights of other enterprises held by the Company (excluding debt instruments with an offer in the active market), including accounts receivable, other receivables, notes receivable, advance payments and long-term receivables, the Company will take them as the initial recognition amount by means of contract or agreement price receivable by the acquirer; for those with financing nature, initial recognition shall be carried out according to the present value.

During the recovery or disposal, the balance of the price acquired and the book value of the receivable shall be recorded into the profit or loss for the current period.

(3) Held-to-maturity investment

Held-to-maturity investment refers to a non-derivative financial asset with a fixed date of maturity, a fixed or determinable amount of recoverable price and which the Company holds for a definite purpose or the enterprise is able to hold until its maturity.

For the held-to-maturity investment, upon acquiring, the sum of fair value (less bond interest up to payment period but has not claimed) and relevant transaction expenses shall be regarded as initial recognition cost. The interest income of held-to-maturity investments acquired during holding time shall be calculated based on the amortized cost and effective interest rate and included in the income from investment. The actual interest is determined upon the receipt and shall be maintained within the predicted term of existence or within a shorter applicable term. During the disposal of held-to-maturity investments, the balance between the acquired price and book value of the investment shall be included in the income from investment.

If the held-to-maturity investment is disposed or reclassified to amount of other types of financial assets and such amount is considerably large as compared with the amount before such investment is sold or re-classified, the surplus of such investment shall be re-classified as a sellable financial asset. The balance between the book of the said investment on the reclassification day and the fair value shall be computed into other comprehensive income, and when the said sellable financial asset is impaired or transferred out when it is terminated from recognizing, it shall be recorded into the profits and losses of the current period. However, the following circumstances shall be excluded:

• 1) The date of sale or re-classification is quite near to the maturity date or the redemption date of the said investment (e.g., within 3 months prior to maturity) that any change of the market interest rate will produce little impact upon the fair value of the said investment.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

• 2) After almost all the initial principal of the investment has been drawn back by way of repayment according to the provisions of the contract.

• 3) The sale or re-classification is caused by any independent event that the enterprise cannot control, is predicted not to occur again and is hard to be reasonably predicted.

(4) Available-for-sale financial assets

Financial assets available for sale include the non-derivative financial assets which are designated as sellable when they are initially recognized and other financial assets in addition to these mentioned above.

With regard to the measurement, upon acquiring, the sum of fair value (less cash dividends declared but yet to issue or bond interest up to payment period but has not claimed) and relevant transaction expenses shall be regarded as initial recognition cost. Interest or cash dividends acquired during holding time shall be recognized as income from investment. Gains and losses resulting from the changes of the fair values of the available-for-sale financial assets shall be directly counted into other comprehensive income, excluding impairment losses and the exchange difference resulting from the foreign currency monetary financial assets. During the disposal of financial assets available for sale, the balance between the acquired price and book value of the financial assets shall be included into the investment profit and loss; moreover, the accumulated amount of changes in fair value of the other comprehensive income originally included which corresponds to the amount of disposed part shall be transferred out and recorded into the investment profit and loss.

The equity instrument investments for which there is no quotation in the active market and whose fair value cannot be measured reliably, and the derivative financial assets which are connected with the said equity instrument and must be settled by delivering the said equity instrument shall be measured on the basis of their costs.

(5) Other financial liabilities

For such financial assets, the sum of the fair value when obtained and related transaction costs shall be regarded as the initial recognition amount. The Company shall make subsequent measurement on the basis of the post-amortization costs.

3. Recognition basis and measurement method for the transfer of financial assets

For the transfer of 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 shall stop recognizing the financial asset. If it retained nearly all of the risks and rewards related to the ownership of the financial asset, it shall not derecognize the financial asset.

For judging whether the financial assets transfer can satisfy the above termination determination condition or not, the “substance over form” principle shall be followed. The Company distinguishes the transfer of financial assets into the whole transfer and partial transfer of financial assets. When the overall transfer of financial assets meets the conditions for termination of recognition, the difference between the following two items is included in the current profits and losses:

• (1) Book value of the transferred financial asset;

• (2) Sum of the consideration received due to transfer and the accumulated amount of changes in the fair value directly reckoned in the owner’s equity (involving the occasion when the transferred financial asset is a financial asset available for sale)

– II-178 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

If the transfer of partial financial assets satisfies the conditions to stop the recognition, the entire book value of the transferred financial asset shall, between the portion whose recognition has been stopped and the portion whose recognition has not been stopped, be apportioned according to their respective relative fair value, and the difference between the amounts of the following two items shall be included into the current profits and losses:

• (1) Book value of the part whose recognition is terminated;

• (2) Sum of the consideration of the part whose recognition is terminated and the accumulated amount of changes in fair value originally included in the owner’s equity which corresponds to the amount of the part whose recognition is terminated (involving the occasion when the transferred financial asset is a financial asset available for sale).

If the transferred financial asset does not satisfy the conditions for recognition, it shall continue to recognize the financial asset, and the consideration received shall be recognized as a financial liability.

4. Conditions for derecognition of financial liabilities

When current obligations of a financial liability have been wholly or partly canceled, then the financial liability or part of it shall be wholly or partly de-recognized. When the Company and the creditors sign agreements to take on new ways to replace the existing financial liabilities with new financial liabilities and the contract terms of existing financial liabilities and new financial liabilities are different in essence, recognition of the current financial liabilities shall be terminated and new financial liabilities shall be recognized at the same time.

Where an enterprise makes substantial revisions to some or all of the contractual stipulations of the existing financial liability, it shall terminate the recognition of the existing financial liability or part of it, and at the same time recognize the financial liability after the modification of the contractual stipulations as a new financial liability.

Where the recognition of a financial liability is totally or partially terminated, the Company shall include into the profits and losses of the current period the gap between the book value of financial liabilities which recognition is terminated and the considerations it has paid (including the non-cash assets it has transferred out and the new financial liabilities it has assumed.

If the Company repurchases some financial liabilities, the overall book value of these financial liabilities will be distributed according to the relative fair value of the part which we will continue to confirm and the part which we have terminated on the repurchasing date. The Company shall include into the profits and losses of the current period the gap between the book value which has been terminated from recognition and the considerations it has paid (including the non-cash assets it has transferred out and the new financial liabilities it has assumed.

5. Methods for the determination of the fair value of financial assets and financial liabilities

As for the financial assets or financial liabilities for which there is an active market, the quoted prices in the active market shall be used to determine the fair values thereof. The quoted prices in the active market include the prices of relevant assets and liabilities that are easily available from the stock exchanges, dealers, brokers, industry associations, pricing service institutions or supervisory institutions, etc. at a fixed term, and that represent the prices which actually and frequently occurred in market transactions under fair conditions.

As for the financial assets initially obtained or produced at source and the financial liabilities assumed, the fair value thereof shall be determined on the basis of the transaction price of the market.

– II-179 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

For those financial assets or liabilities for which there is no active market, the fair value shall be determined by means of valuation technique. During the evaluation, the Company uses the valuation technique which is applicable in the current condition and has enough available data and other information. The input value consistent with the features of assets or liabilities considered in transactions of relevant assets or liabilities with market participants and observable input value should be used with priority as far as possible. Only under the situations of relevant observable input values not obtained or non-feasible, the non-observable input values can be used.

6. Withdrawing of impairment provision for financial assets (excluding receivables)

On the balance sheet date, the Company shall carry out an inspection, on the book value of the financial assets other than those measured at their fair values and of which the variation is recorded into the profits and losses of the current period. Where there is any objective evidence proving that such financial asset has been impaired, an impairment provision shall be made.

The objective evidences that can prove the impairment of a financial asset shall include but not limited to:

• (1) A serious financial difficulty occurs to the issuer or debtor;

• (2) The debtor breaches any of the contractual stipulations, for example, it fails to pay or delays the payment of interests or the principal, etc.;

• (3) The creditor makes any concession to the debtor which is in financial difficulties for economic or legal factors;

• (4) The debtor is likely to become bankrupt or carry out other financial reorganizations;

• (5) The financial asset can no longer continue to be traded in the active market due to serious financial difficulties of the issuer;

• (6) It is impossible to identify whether the cash flow of a certain asset within a certain combination of financial assets has decreased or not. But after making an overall appraisal according to the public data available, it is found that the predicted future cash flow of the said combination of financial assets has indeed decreased since it was initially recognized and such decrease can be measured, for example, the payment ability of the debtor of the said combination of financial assets was deteriorated, the unemployment rate of the country of region where the debtor located raised, the price in the region where the collateral located dropped significantly or the collateral industry faced a hard time;

• (7) Any seriously disadvantageous change has occurred to technical, market, economic or legal environment, etc. operated by the issuers of the equity instruments, which makes the investor of an equity instrument unable to take back its cost of investment;

• (8) Where the fair value of the equity instrument investment drops significantly or not contemporarily;

The specific depreciation method for financial assets is shown below:

• (1) Provision for impairment of available-for-sale financial assets

The Company will perform independent test for the investment of various equity instruments available for sale on the balance sheet date. If they fair value on the balance sheet date is equal to or greater than 50% (including 50%) of the cost or this condition lasts

– II-180 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

for 12 or more than 12 months, it shows that impairment occurs; if their fair value on the balance sheet date is equal to or greater than 20% (including 20%) but less than 50% of the cost, the Company will give overall consideration to other relevant factors such as price fluctuation to judge whether the investment of equity instruments is in impairment.

The cost mentioned above can be determined by deducting the recoverable principle and amortized amount based on the initial cost of available-for-sale equity instruments and the impairment losses originally included in profits and losses. For the available-for-sale equity instrument investment without active market, their fair value shall be determined based on the present value determined according to the market returns of similar financial assets on future cash flow. For the available-for-sale equity instrument investment with active market and quotation, their “fair value” shall be determined according to the closing price at the end of period on stock exchange, unless the available-for-sale equity instrument investment has a restricted stock trade period. For the available-for-sale equity instrument investment with a restricted stock trade period, the impairment shall be conducted after the compensation required by the market participant who will bear the risk of the sales failure of the equity instrument in open market in a specified period is deducted from the closing balance at the end of period on stock exchange.

Where a sellable financial asset is impaired, even if the recognition of the financial asset has not been terminated, the Company will transfer out the accumulative losses arising from the decrease of the fair value of the comprehensive income which was directly included and record the same into the profits and losses of the current period. The accumulative losses that are transferred out shall be the balance obtained from the initially obtained costs of the sold financial asset after deducting the principals as taken back, the current fair value and the impairment-related losses as was recorded into the profits and losses of the current period.

As for the sellable debt instruments whose impairment-related losses have been recognized, if, within the accounting period thereafter, the fair value has risen and are objectively related to the subsequent events that occur after the originally impairment-related losses were recognized, the originally recognized impairment-related losses shall be reversed and be recorded into the profits and losses of the current period. The impairment-related losses incurred to a sellable equity instrument investment shall be reversed through equities when the value of the equities rises. However, the impairment-related losses incurred to an equity instrument investment for which there is no quoted price in the active market and whose fair value cannot be reliably measured, or incurred to a derivative financial asset which is connected with the said equity instrument and which shall be settled by delivering the said equity instrument, may not be reversed.

(2) Held-to-maturity investments depreciation reserves

Where there is any objective evidence proving that the held-to-maturity investment has been impaired, the impairment loss shall be determined according to the balance between the book value and the current value of expected future cash flow. If there is any objective evidence proving that the value of the said financial asset has been restored after withdrawal, the impairment-related loss as originally recognized shall be reversed and be recorded into the profiles and losses of the current period. However, the reversed carrying amounts shall not be more than the post-amortization costs of the said financial asset on the day of reverse under the assumption that no provision is made for the impairment.

– II-181 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

7. Offsetting financial assets and financial liabilities

In all other situations they are presented separately in the balance sheet and are not offset. However, the net income offset shall be listed in the balance sheet when they satisfy the requirements below at the same time:

• (1) The Company is legally authorized to offset verified amount, and the legal right is executable;

• (2) The Company is planned for netting and meanwhile change the financial asset into cash and pay off the financial liability.

(IX) Recognition criteria and withdrawing method of provision for bad debts of receivables

1. Receivables that are individually significant and have bad debts provision separately drawn:

Recognition criteria of receivables with significant single amount and single provision for bad debts: the amount is more than RMB1 million (inclusive).

Withdrawing method for bad-debt provision of receivables with significant single amount: Impairment test shall be carried out independently and bad-debt provision shall be withdrawn according to the balance between present value of expected future cash flow and book value and included in profits and losses of current period. The accounts receivable without impairment shall be tested one by one and they shall be classified in relevant combinations for bad-debt provision withdrawing.

2. Receivables for withdrawing bad-debt provision in combination:

• (1) The basis for determining the combination of credit risk characteristics:

For the accounts receivables with non-significant single amounts, they and the accounts receivables with significant single amounts for single test without value impairment shall be divided into several combinations on the basis of credit risk features, and the bad-debt provision that shall be withdrawn shall be determined on the basis of actual loss ratio of previous receivables combinations with similar credit risk features and combining with the current conditions.

Basis for determining combination:

Item Basis for determining combination

Combination without withdrawing Accounts receivable between enterprises included in the bad debts consolidation scope of the Company

Combination of aging analysis Including receivables other than the above-mentioned method combinations, the Company shall make the best estimate of the accrual ratio of receivables based on past historical experience, and classify the credit risk combinations with reference to the aging of receivables

– II-182 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

(2) The accrual method determined according to the combination of credit risk characteristics:

Item

Withdrawing method for bad-debt provision

Combination without withdrawing bad debts

Bad-debt provision without withdrawing

• Combination of aging analysis method

Aging analysis method

In the combination, withdraw the bad-debt provision by aging analysis method:

	Withdrawal
	ratio of notes		Withdrawing
	receivable	Withdrawing	proportion of
	(trade	proportion of	other
Aging	acceptance)	receivables	receivables
	(%)	(%)	(%)
Within 1 year (including 1 year)	5	5	5
1-2 years	10	10	10
2-3 years	30	30	30
3-4 years	50	50	50
4-5 years	80	80	80
>5 years	100	100	100

3. Receivables with non-significant single amounts but with a single provision for bad debts

Reasons for single withdrawing of bad-debt provision: there is any objective evidence proving that the Company is about to fail to withdraw the found as per the original articles of accounts receivables.

Withdrawing method for bad-debt provision: withdrawn on the basis of the balance between book value and the estimated present value of future cash flow of receivables.

(X) Inventories

1. Classification of inventories

The term “inventories” refer to finished products or merchandise possessed by the Company for sale in the daily business, or work in progress in the process of production, or materials and supplies to be consumed in the process of production or offering labor service. It mainly includes raw materials, turnover materials, entrusted processing materials, in-process products and finished products (inventory goods), etc.

2. Inventory valuation method

After the inventories are obtained, its initial measurement shall be carried out based on their cost, including purchase cost, processing cost and other costs. The method of weighted mean is adopted for valuation of sending inventories.

– II-183 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

3. Determination basis of net realizable value of inventories and method of provision for depreciation

After complete check on inventory at the end of the period, inventory falling price reserves shall be withdrawn or adjusted at the lower of inventory cost and net realizable value. For merchandise inventory which is directly for sale like finished products, commodity stocks, and material for sale, during normal production and marketing process, net realizable value of which shall be determined by subtracting estimated selling expenses and relevant taxes from the estimated sale price; for material inventory needs to be processed, during normal production and marketing process, net realizable value of which shall be determined by subtracting the cost going to happen, the estimated marketing expenses and relevant taxes from the estimated sale price of finished products; for inventory held for performing sales contract or labor contract, net realizable value of which shall be determined on the basis of contract price, if the quantity of inventory is more than the quantity purchases by sales contract, net realizable value of the surplus part shall be calculated as per average sales price.

The inventory falling price reserves shall be withdrawn as per the single inventory item at the end of the period generally, and for inventories with large quantity and relatively low unit prices, the inventory falling price reserves shall be withdrawn according to the inventory type. For the inventories related to the series of products manufactured and sold in the same area, and of which the final use or purpose is identical or similar there to, and if it is difficult to measure them by separating them from other items, the provision for loss on decline in value of inventories shall be made on a combination basis.

If the factors causing any write-down of the inventories have disappeared, the amount of write-down shall be resumed and be reversed from the provision for the loss on decline in value of inventories that has been made. The reversed amount shall be included in the current profits and losses.

4. Inventory system for inventories

Perpetual inventory system is adopted.

5. Amortization method for low-value consumables and wrappage

• (1) One-time amortization method is adopted for the amortization of low priced and easily worn articles;

• (2) One-time amortization method is adopted for the amortization of packing materials.

• (3) Other turnover materials are amortized by one-time write-off method.

(XI) Held-for-sale assets

1. Determination standards for held-for-sale assets

The non-current assets meeting the following conditions or disposal groups shall be categorized into held-for-sale assets:

• (1) Based on the practice of selling such assets or disposal groups in similar transactions, they can be sold immediately under current conditions;

• (2) The sale is very likely to happen, that is, the Company has made a resolution on a sale plan and obtained a firm purchase commitment, and it is estimated that the sale will be completed within one year.

– II-184 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

The confirmed purchase commitment refers to the legally binding purchase agreement signed between the Company and other parties. The agreement contains important terms such as the transaction price, time, and heavy penalty for breach of contract that lead to the smallest possibility to adjust largely or cancel the agreement.

2. Accounting method for held-for-sale assets

For held-for-sale non-current assets for which depreciation or amortization are not be carried out, if the book value is higher than the net value of fair value minus the sales expense, the book value should be written down to the nut value after the fair value minus the dales expense. The write-down amount shall be recognized as the loss of asset impairment and be recorded as the profits or losses for the current period. Simultaneously, a provision for the asset impairment shall be made accordingly.

For the non-current assets or disposal groups classified as held-for-sale type on the obtaining date, they shall be measured at the lower one of the initially measured value when it is not classified as held-for-sale type and the net value of fair value minus the sales expense.

The principles above are applicable to all non-current assets, excluding the investment real estate adopting fair value pattern for subsequent measurement, the biological assets measured at the net value of fair value minus the sales expense, the assets formed by employee payroll, the deferred income tax assets, financial assets meeting accounting standards for financial instruments and the rights generated from the insurance contract meeting relevant accounting standards for insurance contracts.

(XII) Long-term equity investment

1. Determination of initial investment cost

• (1) For the long-term equity investment formed by business combination, please refer to Note IV/(IV) for specific accounting policies

Accounting arrangement methods for business combination under and not under the same control.

• (2) Long-term equity investment formed by other modes

For long-term equity investment obtained by cash payment, the initial investment cost is the amount actually paid for the purchase. The initial cost consists of the expenses directly relevant to the obtainment of the long-term equity investment, taxes and other necessary expenses. The initial cost of a long-term equity investment obtained on the basis of issuing equity securities shall be the fair value of the equity securities issued. Transaction costs incurred when issuing or acquiring their own equity instruments may be directly attributable to equity transactions and deducted from equity.

Under the premise that the non-monetary assets exchange is of commercial essence and the fair value of long-term equity investment received or surrendered can be reliably measured, the initial investment cost of intangible asset received during the non-monetary assets exchange shall be recognized based on the fair value of asset surrendered, unless there is any exact evidence showing that the fair value of asset received is more reliable; for the non-monetary assets exchange which fails to meet the above premise, the book value of asset surrendered and relevant taxes and dues payable shall be regarded as the initial investment cost of long-term equity investment.

– II-185 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

The initial cost of a long-term equity investment obtained by recombination of liabilities shall be determined on the basis of fair value.

2. Subsequent measurement and profit and loss determination

• (1) Cost method

The long term equity investment on the invested enterprise shall be accounted by employing the cost method and it shall be evaluated based on its initial investment cost. If there are additional investments or disinvestments, the long-term equity investment cost shall be adjusted.

Except from cost actually paid in investment and cash dividends or profits declared but not distributed included in consideration, the Company will enjoy the investment income recognized in current period according to cash dividends or profits declared to distribute by the invested company.

(2) Equity method

Equity method shall be applied for the accounting of long-term equity investment of associated enterprise and cooperative enterprise. For equity investment of associated enterprise partially and indirectly held by the Company as a result of investment to risk investment organization, mutual fund, trust company or similar entities such as unit-linked fund, the Company shall account the indirect investment as per its fair value and record its variation into the benefits and losses.

If the initial cost of a long-term equity investment is more than the investing enterprise’ attributable share of the fair value of the invested entity’s identifiable net assets for the investment, the initial cost of the long-term equity investment may not be adjusted. If the initial cost of a long term equity investment is less than the investing enterprise’ attributable share of the fair value of the invested entity’s identifiable net assets for the investment, the difference shall be included in the current profits and losses.

After long-term equity investment is acquired, the investor shall determine the return on investment and other consolidated income according to the net profits and losses and other income of the investee in the same year it shall be enjoyed and shared, and adjust the fair value of the long-term equity investment; the investor shall calculate the proportion enjoyed of the profit or cash dividend announced by the investee to be distributed, reduce the fair value of the long-term equity investment accordingly, and adjust the fair value of the long-term equity investment and include it into the owners’ equity in terms of other changes to the owners’ equity other than net profits and losses, other consolidated income, and profit distribution.

On the ground of the fair value of all identifiable assets of the investee when the Company obtains the investment, the attributable share of the net profits and losses of the investee shall be recognized after the net profits of the investee are adjusted. The Company’s entitled part of unrealized profits and losses from internal transaction between the Company and associated enterprises or cooperative enterprises shall be offset according to the Company’s entitled proportion. On such basis the investment profits/losses are confirmed.

If Company decides to share the losses of investee, deal with the matter in the following order: firstly, write down the book value of long-term equity investment. If the book value of the long-term equity investment is insufficient for offset, the recognition of the investment losses is continued based on the book value of the long-term equities of the net investment of the investee to offset the book value of long-term receivables. Finally, after the treatment above, if the

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

investment contract or agreement agrees the enterprise shall still bear extra obligations, the accrued liabilities shall be recognized according to obligations to be shouldered and included into current investment losses.

If the investee achieves profitability in the future, Company shall deal with it in the reverse order after deducting the unconfirmed loss sharing amount, write down the book balance of confirmed accrued liabilities, recover the book value of long-term interests of net investment and long-term equity investment constituted on investee substantially and confirm the investment income.

3. Conversion of long-term equity investment by accounting method

• (1) Conversion from fair value measurement to accounting by equity method

With regard to the equity investment having accounting treatment according to financial instrument recognition and measurement standard originally held by the Company that does not have control, joint control or significant influence on the invested entity, if the Company is able to do joint control or significant influence, which does not constitute control, over the invested entity as a result of additional investment or other reasons, the fair value of original equity investment added to new investment cost in accordance with the Accounting Standards for Business Enterprises No. 22 — Recognition and Measurement of Financial Instruments shall be regarded as initial investment cost measured by employing the equity method.

If the original equity investment is categorized as sellable financial assets, the difference between the fair value and the book value, along with the change in the accumulated total fair value originally included in other comprehensive income, shall be transferred to the current profit and loss accounted by the equity method which has been transferred to.

If the initial investment cost calculated with the equity method is smaller than the fair value of the net identifiable assets of the investee enjoyed on the date of increase in investment calculated and determined with the new shareholding ratio, the book value of long-term equity investment shall be adjusted with the balance and included into the current non-operating income.

• (2) Conversion from measurement based on fair value or accounting by equity method to accounting by cost method

For the equity investments held by the Company that have no control, joint control, or significant influence on the investee in accordance with the standards for recognition and measurement of financial instruments, or originally held long-term equity investments in cooperative enterprises or associated enterprises that can control the investee not under the same control due to additional investment and other reasons, in individual financial statement, the sum of book value of original equity investment and newly increased investment cost shall be regarded as the initial investment cost measured by employing the cost method.

For other comprehensive income of the equity investment confirmed before purchase date, the accounting treatment shall be conducted on the same basis on which the investee directly disposes related assets or liabilities when handling the investment.

If the equity investment held prior to the acquisition date is put under accounting treatment in accordance with the relevant provisions of Accounting Standards for Business Enterprises No. 22 — Recognition and Measurement of Financial Instruments , the accumulated fair value changes previously included in other comprehensive income are transferred to the current profit and loss after the cost method is adopted.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

• (3) Conversion from accounting by equity method to measurement based on fair value

If significant influence or joint control of the Company is lost due to reasons including the disposal of part of the equity investment, the residual equity after disposal shall be confirmed through financial instrument and accounted according to Accounting Standards for Business Enterprises No. 22 — Recognition and Measurement of Financial Instruments , the difference between the fair value and the book value of the remaining equity on the date of loss shall be included in the current profit and loss.

For other comprehensive income of the original equity investment recognized by the equity method, at the time that the equity method stops being employed, the accounting treatment shall be conducted on the same basis on which the investee directly disposes related assets or liabilities.

(4) Conversion from cost method to equity method

If the Company losses joint control of the invested company as a result of disposal of partial equity investment, and in the individual financial statement the surplus equity is able to carry out joint control and significant influences to the invested company, the equity method shall be used for accounting, and the surplus equity shall be regarded to be accounted and adjusted by equity method same to the equity originally obtained.

• (5) Conversion from measurement with cost method to measurement based on fair value

If the Company losses joint control of the invested company as a result of disposal of partial equity investment, and in the individual financial statement the surplus equity is unable to carry out joint control and significant influences to the invested company, it shall be accounted as per Accounting Standards for Business Enterprises No. 22 — Recognition and Measurement of Financial Instruments , and the difference between fair value and book value on the date when losing the joint control shall be included in the current benefits and losses.

4. Disposal of long-term equity investment

During the disposal of a long-term equity investment, the difference between its book value and the actual purchase price shall be included in the current profits and losses. For long-term equity investments checked by the equity method, when the investments are disposed of, the same basis as the investee’s direct disposal of the relevant assets or liabilities shall be used, and the part originally included in other comprehensive income is treated in accordance with the corresponding proportion.

If the clauses, condition and economic impact of each transaction conform to one or more of the following cases during the disposal of equity investment to subsidiaries, these transactions shall be handled in an accounting way as a package deal:

• (1) These transactions are concluded simultaneously or after the consideration of the mutual influence;

• (2) These transactions can lead to a complete commercial result only when they are in their entirety;

• (3) The occurrence of a transaction relies on the occurrence of at least another transaction;

• (4) A transaction alone is deemed uneconomic but economic when together with other transactions.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

If the Company losses control over a subsidiary due to partial disposal of equity investment or other reasons and it is not package deal, individual financial statement and consolidated financial statement shall be distinguished for accounting treatment.

• (1) In some financial statements, for disposed equity, the difference between its book value and the actual purchase price shall be included in the current profits and losses. The remaining equity after disposing is recognized and measured by equity method if it is able to have joint control over or significant impact on the investee, and are adjusted also by equity method from the time of obtaining; In case of failing to have joint control or impact on the investee, the remaining equity is recognized according to Accounting Standards for Business Enterprises No. 22 — Recognition and Measurement of Financial Instruments , and the difference between the fair value and book value when losing the joint control occurring is included in current profits and losses.

• (2) During preparation of consolidated financial statement, for transactions before losing the control on subsidiaries, disposal of price and long-term equity investment can enjoy the difference of net assets of subsidiary as result of continuous calculation since the date of purchasing or acquisition, the adjust capital reserve (capital premium) should be adjusted, If the capital reserve is insufficient for offset, adjust retained incomes. When the control over subsidiary is lost, the remaining equity shall be recalculated according to its fair value on control loss date. The difference between the sum of consideration received for disposal of equity interest and the fair value of remaining equity interest less the net assets attributable to the original subsidiary calculated continuously since the purchase date based on shareholding percentage before disposal are recognized in investment gain in the period when the control is lost and offset for the business reputation. Other comprehensive income related to equity investment in the subsidiary is transferred to investment gain at the time of control lost.

If the transactions from the disposal of equity investment to the subsidiary till the loss of control belong to package deal, the transactions shall have accounting treatment by taking it as a transaction that disposes the equity investment to the subsidiary and causes control loss. Individual financial statement and consolidated financial statement shall be distinguished for accounting treatment.

• (1) In individual financial statement, the balance between each disposal price and the book value of the long-term equity investment corresponding to the disposed equities is recognized as other comprehensive income and it is transferred to the profits and losses at the time of control loss.

• (2) In consolidated financial statement, the balance between each disposal price and corresponding net asset proportion of disposed investment over the subsidiary before the control loss shall be recognized as other comprehensive income and it is transferred to the profits and losses at the time of control loss.

5. Judgment standards of joint control or significant influences

If the Company controls one arrangement with other parties jointly according to regulations and the decisions having significant influences on the return from the arrangement can only exist after consensus from the parties sharing the control right is obtained, it means the arrangement is under joint control of the Company and the other parties and the arrangement is the joint venture arrangement.

If the joint venture arrangement is achieved through an independent entity, the independent entity shall be taken as joint venture when the rights of the Company on the net assets of the independent entity are judged and equity method shall be used for accounting. If it is judged the

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Company does not have rights on the net assets of the independent entity according to regulations, the independent entity shall confirm items related to profits from joint operation with the Company and have accounting treatment according to Accounting Standards for Business Enterprises.

Significant influence refers to the right of participation in the decisions of financial and operational policies of the investee, not including the right to control, or jointly control with other participants. The Company is judged to have significant influence on the investee through following conditions and after all facts and conditions are considered. (1) The Company has appointed representatives to the board of directors of the investee or such institutions; (2) The Company participates in the preparation of financial and operational policies of the investee; (3) The Company has important transactions with the investee; (4) The Company has appointed management personnel to the investee; and (5) The Company provides key technical data to the investee.

(XIII) Fixed assets

1. Recognition condition of fixed assets

Fixed assets are tangible assets whose service life is in excess of one accounting year and who are held for the sake of producing commodities, rendering labor service, renting or business management. No fixed asset may be recognized unless it simultaneously meets the conditions as follows:

• (1) The economic benefits pertinent to the fixed asset are likely to flow into the enterprise; and

• (2) The cost of the fixed asset can be measured reliably.

2.

• Initial measurement of fixed assets

• (1) The cost of a purchased fixed asset consists of the purchase price, the relevant taxes including import tariff, and other expenses that bring the fixed asset to the expected conditions for use and that may be relegated to the fixed asset.

• (2) The cost of a self-constructed fixed asset shall be formed by the necessary expenses incurred for bringing the asset to the expected conditions for use.

• (3) For the fixed assets invested by the investor, their value agreed in the investment contract or agreement shall be ascertained as the entry value. Those assets with unfair value as stipulated in the contract or agreement shall take fair value as the entry value.

• (4) If the payment for a fixed asset is delayed beyond the normal credit conditions and it is of financing nature in effect, the cost of the fixed asset shall be ascertained based on the current value of the purchase price. The difference between the actual payment and the current value of the purchase price shall be included in the current profits and losses within the credit period, unless it shall be capitalized.

3. Subsequent measurement and disposal of fixed assets

• (1) Depreciation of fixed assets

Fixed assets’ depreciation was calculated within estimated service life after reducing estimated net residual value from the entry value of fixed assets. For those fixed assets being provided for impairment loss, the related depreciation charge is determined based on the carrying amounts less impairment over their remaining useful lives.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Fixed assets that have been fully depreciated but are still in use shall not be depreciated.

According to the nature and use of various fixed assets, the service life and net residual value of fixed assets can be determined. And review the service life and salvage value of fixed asset as well as depreciation method at the end of the year. Make corresponding adjustment if the review results are different from the previously estimated amounts.

The depreciation method, depreciation life and yearly depreciation of various fixed assets are as follows:

	Depreciation		Residuals	Yearly
Category	method	Depreciation Life	rate	depreciation
		(year)	(%)	(%)
Pant and buildings	Straight-line	20−30	5	3.17−4.75
	depreciation
Machinery and equipment	Straight-line	5−10	5	9.50−19.00
	depreciation
Vehicles	Straight-line	10	5	9.50
	depreciation
Office equipment	Straight-line	3−5	5	19.00−31.67
	depreciation
Others	Straight-line	3−5	5	19.00−31.67
	depreciation

• (2) Subsequent expenses of fixed assets

If the subsequent expenses related to fixed assets conform to the confirmation conditions of the fixed assets, and then such subsequent expenses shall be included in the costs of the fixed assets; If not conforming to the confirmation conditions of these fixed assets, such subsequent expenses shall be included in the current profits and losses while occurred.

(3) Fixed Assets Disposal

The book values of fixed assets are derecognized when the fixed assets are disposed or no future economic benefits are expected from their use or disposal. Disposal consideration amount from sale, transfer, scrap or damage of fixed assets shall be included in current profits and losses after deducting the book value and related taxes.

4. Basis of recognition for fixed assets acquired under financial leases, valuation and depreciation methods

Where a lease satisfies one or more of the following criteria, it shall be recognized as a financial lease:

• (1) The ownership of the leased asset is transferred to the lessee when the term of lease expires.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

• (2) The lessee has the option to buy the leased asset at a price which is expected to be far lower than the fair value of the leased asset at the date when the option becomes exercisable. Thus, on the lease beginning date, it can be reasonably determined that the option will be exercised.

• (3) Even if the ownership of assets is not transferred, the lease term accounts for the largest proportion of the service life of the leased asset.

• (4) In the case of the lessee, the present value of the minimum lease payments on the lease beginning date amounts to substantially all of the fair value of the leased asset on the lease beginning date.

• (5) The leased assets are of a specialized nature that only the Company can use them without making major modifications.

With regard to the fixed assets under financing lease, a lessee shall record the lower one from the fair value of the leased asset and the present value of the minimum lease payments on the lease beginning date as the entering value in an account. The balance between the recorded amount of the leased asset and the long-term account payable shall be treated as unrecognized financing charges. The initial direct costs such as commissions, attorney’s fees and traveling expenses, stamp duties directly attributable to the leased item incurred during the process of lease negotiating and signing the leasing agreement shall be recorded in the asset value of the current period. The unrecognized financing charges shall be amortized by effective interest method during the periods within the lease term.

In calculating the depreciation of a leased asset under financial lease, the Company shall adopt a depreciation policy for leased assets consistent with that for depreciable assets which are owned by the lessee. If it is reasonable to be certain that the lessee will obtain the ownership of the leased asset when the lease term expires, the leased asset shall be fully depreciated over its service life. If it is not reasonable to be certain that the lessee will obtain the ownership of the leased asset at the expiry of the lease term, the leased asset shall be fully depreciated over the shorter one of the lease term or its useful life.

(XIV) Construction in progress

1. Types of construction in progress

The construction in progress self-constructed by the Company shall be evaluated at its actual cost. The actual cost of it shall be formed by the necessary expenses incurred for bringing the asset to the expected conditions for use, including the material cost, labor cost, relevant taxes paid, borrowing expenses to be capitalized and indirect expenses to be amortized. The construction in progress of the Company is accounted by project classification.

2. Standards and time point of carrying forward construction in progress as fixed assets

As for construction in progress, all expenses occurred during the construction period before the assets achieve the predetermined serviceable condition shall be recognized as entry value of the fixed assets. Construction of fixed assets in progress whose construction is complete and has achieved the predetermined serviceable condition, but whose final settlement of account has not been processed, shall be transferred to fixed assets by the estimated value according to the project budget, construction cost or the actual cost of the project since the date that they achieved the predetermined serviceable condition. In addition, the depreciation of these fixed assets shall be withdrawn according to the Company’s fixed asset depreciation policy. After the final settlement of account is processed, the previously estimated value shall be adjusted according to the actual cost. The previously withdrawn depreciated value shall not be adjusted.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

(XV) Borrowing costs

1. Recognition principle for borrowing costs capitalization

Where the borrowing costs incurred by the Company can be directly attributed to the purchase, construction or production of assets that meet the capitalization conditions, they shall be capitalized if they meet the capitalization conditions and included in the relevant asset costs; other borrowing costs, when incurred, shall be recognized as expenses according to the amount incurred, and included in the current profits and losses.

The term “assets eligible for capitalization” refers to the fixed assets, investment real estate, inventories and other assets, of which the acquisition and construction or production may take a quite long time to get ready for its intended use or for sale.

Capitalization can only be started if the borrowing costs meet the following conditions at the same time:

• (1) The asset disbursements have already incurred, which shall include the cash, transferred non-cash assets or interest bearing debts paid for the acquisition and construction for preparing assets eligible for capitalization;

• (2) The borrowing costs have already incurred;

• (3) Purchase, construction or production activities required for the assets to fulfill the expected serviceable or salable condition have begun.

2.

• Borrowing costs capitalization period

The capitalization period shall refer to the period from the commencement to the cessation of capitalization of the borrowing costs, excluding the period of suspension of capitalization of the borrowing costs.

When the qualified asset under acquisition and construction or production is ready for the intended use or sale, the capitalization of the borrowing costs shall be ceased.

When parts of the project of the qualified asset under acquisition and construction or production is ready for the intended use or sale are complete and used separately, the capitalization of the borrowing costs of these parts shall be ceased.

Where each part of an asset under acquisition and construction or production is completed separately and is ready for use or sale during the continuing construction of other parts, but it can not be used or sold until the asset is entirely completed, the capitalization of the borrowing costs shall be ceased when the asset is completed entirely.

3. Capitalization suspension period

Where the acquisition and construction or production of a qualified asset is interrupted abnormally and the interruption period lasts for more than 3 months, the capitalization of the borrowing costs shall be suspended. If the interruption is a necessary step for making the qualified asset under acquisition and construction or production ready for the intended use or sale, the capitalization of the borrowing costs shall continue. Capitalization shall resume after the borrowing costs incurred during such period are recorded into the profits and losses of the current period, and the acquisition and construction or production of the asset restarts.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

4. Computation methods of capitalized amount of the borrowing costs

Specifically borrowed loans interest cost (minus the income of interests earned on the unused borrowing loans as a deposit in the bank or as a temporary investment) and auxiliary expenses shall be capitalized before the qualified asset under acquisition and construction or production is ready for the intended use or sale.

The Company shall calculate and determine the to-be-capitalized amount of interests on the general borrowing by multiplying the weighted average asset disbursement of the part of the accumulative asset disbursements minus the general borrowing by the capitalization rate of the general borrowing used. The capitalization rate shall be determined according to the weighted average interest rate of the general borrowings.

Where there is any discount or premium, the amount of discounts or premiums that shall be amortized during each accounting period shall be determined by the real interest rate method, and an adjustment shall be made to the amount of interests in each period.

(XVI) Biological assets

The Company’s biological assets include consumable biological assets and productive biological assets.

1. Recognition conditions of biological assets

No biological asset shall be recognized unless it meets the conditions as follows simultaneously:

• (1) The enterprise owns or controls the biological assets due to past transactions or events;

• (2) The economic benefits or service potential related to the biological assets are likely to flow into the enterprise;

• (3) The cost of this biological asset can be measured reliably.

2. Initial measurement of biological assets

• (1) Consumable biological assets

• ① The cost of a purchased consumable biological assets consists of the purchase price, the relevant taxes, freight, insurance premium and other expenses that may be directly attributable to the purchase of the assets.

• ② For the expendable biological assets invested by investors, the entry value of the expendable biological assets shall be the value agreed in the investment contract or agreement plus the relevant taxes and fees payable. However, if the value agreed in the contract or agreement is unfair, the actual cost shall be determined according to the fair value.

• ③ The cost of self-cultivated, propagated or farmed consumable biological assets consists of the necessary expenses such as the cost of materials including seedlings, fertilizers and pesticides consumed before harvest, labor costs and indirect expenses to be shared.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

• (2) Productive biological assets

• ① The cost of purchased productive biological assets consists of the purchase price, relevant taxes, transportation fees, insurance premiums and other expenses that may be directly attributable to the purchase of the assets.

• ② For the productive biological assets invested by investors, the entry value of the productive biological assets shall be the value agreed in the investment contract or agreement plus relevant taxes and fees payable. However, if the value agreed in the contract or agreement is unfair, the actual cost shall be determined according to the fair value.

• ③ For the productive biological assets planted by the Company, the cost shall be determined according to the necessary expenses such as seedlings costs, labor costs, materials costs, fertilizers costs, land lease costs and other indirect expenses consumed before achieving the expected production and business objectives (and before harvest). Achieving the intended production and operation objectives means that the productive biological assets enter the normal production period, and can continuously and stably produce agricultural products, provide labor services or rent for many years. The specific conditions are as follows: starting to bear fruits and picking them as the standard for turning into maturity.

• 1) Accounting methods for immature productive biological assets

Necessary expenditures of immature productive biological assets during the immature period, including seedlings costs, labor costs, materials costs, fertilizers costs, land lease costs and other indirect expenses, shall be directly included in the asset cost. Among them, seedlings costs, direct labor costs, fertilizers costs and land rent costs which can be directly classified into each plot shall be collected in the subject of “productive biological assets-immature productive biological assets”, and indirect costs such as material consumption shall be collected in the “manufacturing expenses” first when they occur, and then included in each plot according to the area apportion.

• 2) Accounting methods for mature productive biological assets

The related expenses incurred after the mature productive biological assets, including labor costs, material costs, fertilizers costs, utilities, land lease costs and other indirect expenses, shall be collected in the subject of “production cost”; the book value of the carried-over mature productive biological assets shall be depreciated according to the depreciation period, and the depreciation expenses shall be also included in the “production cost”; after the fruits are picked, the “production cost” shall be carried over to “inventory goods”.

3. Subsequent measurement of productive biological assets

• (1) Depreciation of productive biological assets

The Company accrues depreciation for productive biological assets, and the depreciation method adopts the straight-line depreciation. The Company determines the service life and estimated net residual value of productive biological assets according to their nature, usage and expected realization of relevant economic benefits. At the end of the year, the Company reviews the service life, estimated net residual value and depreciation method of productive biological assets, and make corresponding adjustments if there are differences with the original estimates.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

The Company’s productive biological assets are estimated to have no net residual value, and the estimated service life and annual depreciation rate are as follows:

	Estimated	Yearly
Asset type	service life	depreciation
	(year)	(%)
Passion fruit	2	50.00
Mango	10	10.00
Pitaya	4	25.00
Pineapple	2	50.00
Banana	2	50.00
Sugarcane	2	50.00
Papaya	3	33.33
Guava	4	25.00

• (2) Disposal of biological assets

When harvesting or selling consumable biological assets, the weighted average method is used to carry over the cost; the cost of biological assets after use conversion is determined according to the book value at the time of use conversion; when the biological assets are sold, damaged or in short supply, the balance of the disposal income after deducting the book value and related taxes and fees shall be included in the current profit and loss.

4. Impairment of biological assets

The Company shall, at least at the end of each year, review the consumptive biological assets and productive biological assets. If any well established evidence indicates that the realizable net value of any consumptive biological asset or the recoverable amount of any productive biological asset is lower than its book value as a result of natural disaster, plant diseases and insect pests or change of market demand, the enterprise shall, based on the difference between the realizable net value or the recoverable amount and the relevant book value, make provision for the loss on decline in value of or for the impairment of the biological asset and shall include it in the current profits and losses.

If the influencing factors of the impairment of consumptive biological assets have disappeared, the amount of write down shall be restored and reversed within the amount of the original provision for falling price, and the amount reversed shall be included in the current profits and losses. Once the provision for impairment of a productive biological asset is withdrawn, it shall not be reversed. On the balance sheet date, the Company measures the productive biological assets according to the lower of book value and recoverable amount, and withdraw the provision for impairment of productive biological assets according to the difference between the recoverable amount of individual assets and book value. Once the impairment loss of productive biological assets is recognized, it will not be reversed in the following accounting period.

(XVII) Intangible assets and development expenses

Intangible assets refer to the identifiable non-monetary assets possessed or controlled by the Company which have no physical shape. It includes land use right, patent right, trademark right and software, etc.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

1. Initial measurement of intangible assets

Cost of the outsourcing intangible assets shall include purchase price, relevant taxes and other necessary expenditures directly attributable to intangible assets for expected purpose. The price of buying intangible assets exceeds the delayed payment at normal credit condition, which actually has a financing property, the cost of the intangible assets shall be determined based on the present value of the price.

For the intangible assets used for debt payment, the fair value of the intangible assets shall be used as basis for its entry value determination. The balance between the book value and the fair value of the intangible assets used for debt payment shall be included into current loses and gains.

Under the premise that the non-monetary assets exchange is of commercial essence and the fair value of intangible assets received or surrendered can be reliably measured, the entry value of intangible asset received during the non-monetary assets exchange shall be recognized based on the fair value of asset surrendered, unless there is any exact evidence showing that the fair value of asset received is more reliable; for the non-monetary assets exchange which fails to meet the above premise, the book value of asset surrendered and relevant taxes and dues payable shall be regarded as the cost of intangible asset and no profits and losses will be recognized.

The entry value of intangible asset obtained by consolidation merger of enterprises under the same control shall be recognized based on the book value of merged enterprise; the entry value of intangible asset obtained by consolidation merger of enterprises not under the same control shall be recognized based on the fair value of merged enterprise.

The costs of internal self-developed intangible assets shall include: the cost of materials consumed, labor cost and registration charges occurred while developing the intangible assets; the amortization charge of other patents and franchises used as well as the interest cost spent to meet the capitalization requirements during the development process; as well as other direct costs attributable to intangible assets for the expected purpose.

2. Subsequent measurement of intangible assets

The Company analyzes and judges the service life of intangible assets when it obtains intangible assets and they are classified as intangible assets with limited service life and intangible assets with limited service life without undetermined service life.

(1) Intangible assets with limited service life

Intangible assets with limited service life shall be amortized by straight-line method in the period in which economic benefits are brought for the Company. Expected service life of intangible assets with limited service life and calculation basis:

Item	Expected useful life	Basis
Land use right	40 years/50 years/	The service life is determined by the contract
	70 years	or by reference to the period that can bring
		economic benefits to the Company
Patent right	10 years
Trademark right	10 years
Software	3-5 years

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

At the end of each year, the service life and the amortization method of intangible assets with limited service life shall be rechecked. Make corresponding adjustment if the review results are different from the previously estimated amounts.

According to the review, the service life and amortization method of intangible assets at the end of this period do not differ from previous estimation.

• (2) Intangible assets with uncertain service life

During the reporting period, the Company had no intangible assets with uncertain service life.

3. Detailed standards for dividing research and development stages of internal R&D projects:

Research stage: The stage of creative and planned investigation and research to acquire and understand new scientific or technological knowledge.

Development stage: The stage that the research results or other knowledge is used for a plan or design to produce something new or substantive improved materials, devices and products before commercial production or use.

The expenditure occurred during the research stage of internal R&D project shall be included into the profits and losses of current period when it occurred.

4. Detailed conditions for the capitalization of expenses during the development stage

Expenditures incurred during the development stage of internal research and development project that simultaneously meet the following conditions shall be recognized as intangible assets:

• (1) It is feasible technically to finish intangible assets for use or sale;

• (2) It is intended to finish and use or sell the intangible assets;

• (3) The usefulness of methods for intangible assets to generate economic benefits shall be proved, including being able to prove that there is a potential market for the products manufactured by applying the intangible assets or there is a potential market for the intangible assets itself or the intangible assets will be used internally;

• (4) It is able to finish the development of the intangible assets, and able to use or sell the intangible assets, with the support of sufficient technologies, financial resources and other resources;

• (5) The development expenditures of the intangible assets can be reliably measured.

The expenditure not meeting conditions above is included into the profits and losses of current period when it occurs. Development expenses accounted into profits and losses in previous period are no longer re-confirmed as assets. Expenses at the development stage capitalized are listed as development expenses in the balance sheet, and are converted into intangible assets when the Project reaches the estimated usable conditions.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

(XVIII) Impairment of long-term assets

The Company shall, on the day of balance sheet, make a judgment on whether there is any sign of possible impairment of long-term assets. If the long-term assets have sign of possible impairment, recoverable amount should be estimated by the Company based on single assets. If it is not possible to estimate the recoverable amount of single assets, the recoverable amount of the asset group to which the asset belongs is recognized.

The recoverable amount shall be determined in light of the higher one of the net amount of the fair value of the assets minus the disposal expenses and the current value of the expected future cash flow of the assets.

Where the measurement result of the recoverable amount indicates that an asset’s recoverable amount is lower than its book value, the book value of the long-term asset shall be recorded down to the recoverable amount, and the reduced amount shall be recognized as the loss of long-term asset impairment and be recorded as the profit or loss for the current period. Simultaneously, a provision for the asset impairment shall be made accordingly. Once any loss of asset impairment is recognized, it shall not be switched back in the future accounting periods.

After the loss of asset impairment has been recognized, the depreciation or amortization expenses of the impaired asset shall be adjusted accordingly in the future periods so as to amortize the post-adjustment book value of the asset systematically (deducting the expected net residual value rate) within the residual service life of the asset.

No matter there is any sign of possible assets impairment or not, the business reputation formed by business combination and intangible assets with uncertain service life are subject to impairment test at the end of each year.

In impairment test for business reputation, book value of business reputation shall be amortized to assets groups or combination of assets groups which are expected to benefit from the synergy effect of business combination. When making an impairment test on the relevant asset groups or combination of asset groups containing business reputation, if any evidence shows that the impairment of asset groups or combinations of asset groups is possible, the enterprise shall first make an impairment test on the asset groups or combinations of asset groups not containing business reputation, calculate the recoverable amount, compare it with the relevant carrying value and recognize the corresponding impairment loss. Then the enterprise shall make an impairment test of the asset groups or combinations of asset groups containing business reputation, and compare the carrying value of these asset groups or combinations of asset groups(including the carrying value of the business reputation apportioned thereto) with the recoverable amount. Where the recoverable amount of the relevant assets or combinations of the asset groups is lower than the carrying value thereof, it shall recognize the impairment loss of the business reputation.

(XIX) Long-term unamortized expenses

1. Amortization method

Long-term unamortized expenses refer to the Company’s various costs that have occurred and are apportioned by the current and future periods which is longer than 1 year. Long-term unamortized expenses shall be amortized within benefit period by method of line.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

2. Amortization life (year)

Category	Amortization life (year)	Remarks
Decoration and reconstruction	3-5
expenditure
Land lease expense	Settlement period agreed in	The settlement period of the
	the contract	leased land of the Company
		has different settlement
		periods such as 4 years and
		5 years

(XX) Employee compensation

Employee compensation refers to the remuneration or compensation offered by the Company for the purpose of acquiring the services provided by the employees or terminating labor relationships. Employee compensation includes short-term compensation, post-employment benefit, dismission benefit, and other long-term employee benefit.

1. Short-term compensation

Short-term compensation refers to employee compensation that shall be fully paid by the Company within 12 months after annual report period of related services provided by employees, except post-employment welfare, dismission welfare. In the accounting period when the employees provide services to the Company, the short-term compensation payable shall be confirmed as liabilities, and shall be included in related asset costs and fees according to the benefit objects of the service provided by the employees.

2. Post-employment welfare

Post-employment welfare refers to the various forms of remuneration or compensation offered by the Company for the purpose of acquiring the services provided by the employees after employee retirement or termination of labor relations with the Company, except for short-term compensation and dismission welfare. The Company classifies post-employment welfare plan as defined contribution plan and defined benefit plan.

The defined contribution plan is mainly to participate in social basic endowment insurance and unemployment insurance organized and implemented by local labor and social security institutions; during the accounting period when employees provide services for the Company, the amount of deposit payable calculated according to the defined contribution plan is recognized as a liability and included in the current profits and losses or related asset costs.

After paying the above funds regularly according to the standard specified by the State, the Company will be free of other payment obligations.

3. Termination benefits

Termination benefits refers to the compensation made by the Company to the employees for the termination of the labor relationship with any employee prior to the expiration of the relevant labor contract or for encouraging the employee to accept a layoff. When the Company cannot unilaterally withdraw the dismission welfare stated on labor service relationship termination plan or layoff proposal or the Company is confirming the cost and expense in relation to the restructuring of paying dismission welfare (the earlier one shall be applied), liabilities caused by dismission welfare shall be confirmed and included in current profits and losses.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

4. Other long-term employee welfare

Other long-term employee welfare refers to other employee welfare except from short-term salaries, post-employment welfare and dismission welfare.

For other long-term employee welfare conforming to defined contribution plan, within accounting period during which employees provide service for the company, the amount payable shall be determined as liability and included into current profits and losses or relevant asset cost. For other long-term employee welfare except that mentioned above, the amount shall be calculated with the expected cumulative welfare unit method on the balance sheet date and the welfare obligations produced by the defined benefit plan shall be attributed to the period during which employees provide service and be included into current profits and losses or relevant asset cost.

(XXI) Estimated liabilities

1. Recognition principles for estimated liabilities

The obligation pertinent to contingencies shall be recognized as an estimated liability when the following conditions are satisfied simultaneously:

The obligation is the current obligation assumed by the Company;

The performance of this obligation is likely to lead to an outflow of economic interests;

The amount of the obligation can be reliably measured.

2. Measurement methods of accrued liabilities

The estimated liabilities of the Company shall be initially measured in accordance with the liability estimate of the necessary expenses for the performance of the current obligation.

The Company takes into account the contingencies related risk, uncertainty, time value of money, and other factors when determining the best estimate. If the time value of money is of great significance, the best estimate shall be determined after discounting the relevant future outflow of cash.

The best estimate shall be conducted in accordance with the following situations respectively:

If there is a continuous range (or interval) for the necessary expenses and if all the outcomes within this range are equally likely to occur, the best estimate shall be determined in accordance with the middle estimate within the range, i.e. the average number of the maximum amount and minimum amount.

In the event that there is no continuous range (or interval) or that there is a continuous range but the outcomes within this range are unlikely to occur equally, if single item is involved in the contingencies, the best estimate shall be determined based on the amount most likely to occur; and if several items are involved in the contingencies, the best estimate shall be determined based on various possible outcomes and relevant probability calculation.

If all or some of the expenses necessary for the liquidation of estimated liabilities of the Company are expected to be compensated by a third party, the compensation shall be separately recognized as an asset when it is virtually certain that the reimbursement will be obtained and the compensation recognized shall not be in excess of the estimated liability book value.

– II-201 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

(XXII)Revenue

1. Standard for determining the time of revenue recognition from goods sales

The Company has transferred the significant risks and rewards of ownership of the goods to the buyer; the Company retains neither continuous management right that usually keeps relation with the ownership nor effective control over the sold goods; the amount of revenue can be measured in a reliable way; relevant economic benefits may flow into the Company; when relevant cost incurred or to be incurred can be reliably measured, recognize the sales revenue.

If the collection of the price as stipulated in the contract or agreement is delayed and if it has the financing nature, the revenue incurred by selling goods shall be ascertained in accordance with the fair value of the receivable price as stipulated in the contract or agreement.

Specific methods to recognize the Company’s revenue:

The Company mainly sells fruit juice, quick-frozen products, fresh fruits and other products.

• (1) Revenue recognition of domestic products: the products are delivered to the buyer according to the contract, and the Company recognizes the revenue according to the date of the receipt; if there is no receipt, the revenue is recognized after the acceptance objection period determined according to the contract.

• (2) Revenue recognition of export products: the export products of the Company are mainly in FOB form, and the delivery place is offshore port, and the bill of lading is obtained as the evidence for collection, and the date of customs declaration, shipment and export is taken as the time point for revenue recognition.

2. Basis of determining revenue from transferring use right of the assets

When the revenue amount can be reliably measured, it is likely that economic benefits relating to trades will flow into the company. The amount of revenue resulting from alienating asset-use right shall be determined respectively in the following situations:

• (1) The amount of interest revenue shall be measured and recognized in accordance with the length of time for which the Company’s monetary capital is used by others and the actual interest rate.

• (2) The amount of royalty revenue should be measured and confirmed in accordance with the period and method of charging as stipulated in the relevant contract or agreement.

3. Basis and method of determining the revenue from providing labor services

If the result of the labor service transaction can be estimated reliably on the balance sheet date, the revenue from the labor service transaction shall be recognized by the completion percentage method, and the completion progress of the labor service transaction shall be determined according to the proportion of the already incurred labor cost to the estimated total cost.

The outcome of a transaction concerning the providing of labor services can be measured in a reliable way, means that the following conditions shall be met simultaneously:

• (1) The revenue amount can be measured reliably;

• (2) Relevant economic benefits are likely to flow into the Company;

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

• (3) The completion schedule of the transaction can be reliably determined;

• (4) The costs incurred or to be incurred in the transaction can be measured in a reliable way.

The Company ascertains the total revenue from the providing of labor services in accordance with the received or to-be-received price as stipulated in the contract or agreement, unless the received or to-be-received price as stipulated in the contract or agreement is unfair. The Company shall, on the date of the balance sheet, ascertain the current revenue from providing labor services in accordance with the amount of multiplying the total amount of revenues from providing labor services by the schedule of completion then deducting the accumulative revenues from the providing of labor services that have been recognized in the previous accounting periods. At the same time, the enterprise shall carry forward the current cost of labor services in accordance with the sum of multiplying the total amount of revenues arising from the providing of labor services by the schedule of completion and then deducting the accumulative revenues from the providing of labor services.

If the Company cannot, on the date of the balance sheet, measure the result of a transaction concerning the providing of labor services in a reliable way, it shall be conducted in accordance with the following circumstances, respectively:

• (1) If the labor cost incurred is expected to be compensated, the labor service income shall be recognized according to the amount of labor service costs incurred and carried forward at the same amount.

• (2) If the cost of labor services incurred is not expected to compensate, the cost incurred shall be included in the current profits and losses, and no revenue from the rendering of service shall be recognized.

Where a contract or agreement signed between enterprises concerns selling goods and providing of labor services, if the part of sale of goods and the part of providing labor services can be distinguished from each other and can be measured respectively, the part of sale of goods shall be conducted as selling goods and the part of providing labor services shall be conducted as providing labor services. If the part of sale of goods and the part of providing labor services can be distinguished from each other and can be measured respectively, the part of sale of goods shall be conducted as selling goods and the part of providing labor services shall be conducted as providing labor services.

(XXIII) Government grants

1. Type

A government grants refers to the monetary and non-monetary assets obtained by an company from the government free of charge, excluding the capital invested by the government as the owner of the company. Based on the objects regulated by governmental documents, the government grants are classified into government grants related to assets and government grants related to income.

The Company defines the government grants for purchasing or constructing or otherwise forming long-term assets as asset-related government grants; other government grants are defined as the income-related government grants.

– II-203 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

2. Recognition of government grants

If the Company meets the financial support policy and receives financial support funds, the government grants shall be recognized according to the actual amount received.

If a government grant is a monetary asset, it shall be measured in the light of the received or receivable amount. If a government grant is a non-monetary asset, it shall be measured at its fair value. If its fair value cannot be obtained in a reliable way, it shall be measured at its nominal amount (RMB1). The government grants measured at their nominal amounts shall be directly included in the profits and losses of current period.

3. Accounting arrangement method

The government grants pertinent to assets shall be recognized as the deferred income and they shall be included to the profits or losses on a reasonable and systematic basis within the service life of constructed or purchased assets;

The government grants pertinent to income and used for compensating the related future expenses or losses of an enterprise shall be recognized as deferred income and shall be included in the current profits and losses during the period when the relevant expenses or losses are recognized. The grants used for compensating the related expenses or losses of the enterprise incurred shall be directly included in the current profits and losses at receiving.

Government grants related to daily activities of the Company are included in other income and others are included in non-operating income.

The received government grants related to preferential policy loans are used to offset related borrowing costs. When the recognized government grant needs to be refunded, if there is related deferred income balance, the book balance of the deferred income shall be written down, while the excessive part shall be included in the current profits and losses; if there is no relevant deferred income, the subsidy shall be directly included in the current profits and losses.

(XXIV) Deferred tax assets and deferred tax liabilities

Deferred tax assets and deferred tax liabilities are calculated and recognized based on the differences (temporary differences) arising from the tax bases of assets and liabilities and their book value. On the balance sheet date, the deferred tax assets and deferred tax liabilities shall be measured at the tax rate applicable to the period during which the assets are expected to be recovered or the liabilities are expected to be settled.

1. Basis of recognizing deferred tax assets

The Company sets the income tax payable likely to be acquired to offset against the deductible temporary difference and deductible loss and tax credits that can be carried forward to the next year as the deadline to recognize the deferred tax assets generated by the deductible temporary difference. However, deferred tax assets arising from the initial recognition of assets or liabilities in transactions with the following characteristics shall not be recognized: (1) business combination; (2) transactions or events directly recognized in owner’s equity.

As for the deductible temporary difference of taxable relevant to the investment of associated enterprises, the corresponding deferred tax assets can be recognized when it can simultaneously meet the following the conditions: the temporary difference is likely to turn back, and the amount of the taxable can be obtained to offset the deductible temporary difference at a high possibility in the future.

– II-204 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

2. Basis for confirming deferred tax liabilities

The Company confirms the taxable temporary differences payable but unpaid in current period and previous period as the deferred tax liabilities. but excluding:

• (1) The temporary differences generated through initial recognition of business reputation;

• (2) Transactions formed by business combination or transactions or events directly recognized in owner’s equity;

• (3) The turning-back time of the temporary difference of taxable relevant to the investment of subsidiaries and associated enterprises can be controlled, or the temporary difference will not turn back at a very high possibility in a foreseeable future.

3. When meeting all the following conditions, the deferred tax assets and liabilities are listed as net amount after offset

• (1) The Company is entitled to settle the current income tax assets and current income tax liabilities in net amount;

• (2) The deferred tax assets and deferred tax liabilities are associated with the income tax imposed for the same subject of taxation or different subject of taxation by the same tax collection and management department. However, during each important deferred tax assets and liabilities reverse period in the future, the subject of taxation involved is intended to settle the current income tax assets and liabilities or acquiring assets to pay off debts.

(XXV) Operating lease and financing lease

If the leasing clauses transfer in substance all the risks and rewards related to the ownership of an asset to the leasee, it is a financial lease. Otherwise, it is operating lease.

1. Accounting treatment method of operating lease

• (1) Assets leased in under operating lease

Lease expense paid by the Company for leased assets should be amortized with the method of straight line within the entire lease term without deducting the rent-free period and should be included into current expenses. The initial direct costs pertinent to lease transactions paid by the Company are included into current expenses.

If the assets leasor has paid the fees pertinent to leasing that shall be paid by the Company, the Company will deduct the fees from the total rental and amortize the remaining rental within the lease term and include it into current expenses.

• (2) Assets leased out under operating lease

lease expense collected by the Company for leased assets should be amortized with the method of straight line within the entire lease term without deducting the rent-free period and should be recognized as rental income. Initial direct costs pertinent to lease transactions paid by the Company should be included into current expenses. If the amount is large, the initial direct cost should be capitalized and included into current profits on the basis of basic installation of the equal rental income within the entire lease term.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

If the Company has paid the fees pertinent to leasing which shall be paid by the leasee, it will deduct the fees from total rental and amortize the remaining within the lease term.

2. Accounting arrangement method of financial lease

• (1) Assets leased in under financial lease: On the lease beginning date, a lessee shall record the lower one between the fair value of the leased asset and the present value of the minimum lease payments on the lease beginning date as the entry value in an account, recognize the amount of the minimum lease payments as the entry value in an account of long-term account payable, and take their difference as unrecognized financing cost. Please see Note IV/(XIII) Fixed Assets for the conditions of recognition, valuation and depreciation methods for assets leased in under financial lease.

For the financing expenses not recognized, the Company adopts the effective interest rate method for amortization in assets leasing period and includes them to financial expenses.

• (2) Assets leasing leased out under financial lease: On the beginning date of the lease term, the leasor shall recognize the balance between the sum of receivable financial lease payment and unguaranteed residual value and the current value as unrealized financing income and recognize the rent received in the future as rental income. The initial direct expenses pertinent to leasing transaction should be included into initial measurement of receivable financial lease payment and confirmed amount of revenue received within lease term should be reduced.

(XXVI) Changes in major accounting policies and accounting estimates

1. Change in accounting policy

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

2. Change in accounting estimates

There is no change in accounting estimates in the reporting period.

(XXVII) Notes to change of listing items of the financial statements

The Ministry of Finance has issued Notification about Revising, Printing and Distributing 2018 General Enterprise Financial Statement Form (CK No. [2018]15) on June 15, 2018, revised general enterprise financial statement form, incorporated some balance sheet items and split some profit statement items. The Ministry of Finance also has issued Interpretation for Problems about 2018 General Enterprise Financial Statement Form on September 7, 2018, clearly requiring reporting withholding individual income tax service charge return in “other incomes” and reporting practically received government subsidies, regardless of being related to assets or income, as cash flow generated by business activities while making a cash flow statement.

The Company has prepared financial statement according to new requirements for enterprise financial statement form, so that the reported items in the financial statement also have changed. The Company has adjusted the comparative data during the comparable period according to the related regulations, such as Accounting Standards for Business Enterprises No. 30 — Presentation of Financial Statement .

– II-206 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Influences on items and amount in financial statement presentation during comparable period are as follows:

	Original
	presented		Restated
	amount in	Affected	amount in
Listed Items	2017	amount	2017	Remarks
Notes receivable	217,100.00	-217,100.00
Accounts receivable	54,959,777.56	-54,959,777.56
Notes and accounts receivable		55,176,877.56	55,176,877.56
Accounts payable	28,325,710.25	-28,325,710.25
Notes and accounts payable		28,325,710.25	28,325,710.25
Administration expenses	26,811,043.61	-2,079,226.92	24,731,816.69
R&D Spending			2,079,226.92
Other cash received relating to business
activities	2,470,935.31	8,856,278.00	11,327,213.31
Other cash received related to fund-raising
activities	8,856,278.00	-8,856,278.00

V. Taxes

(I) Main tax categories and tax rates of the Company

Tax type	Taxation basis	Tax rates
VAT	Sales of goods	16%、12%、10%
Urban maintenance and construction tax	Paid-in turnover tax	5%
Educational surcharges	Paid-in turnover tax	3%
Local educational surcharges	Paid-in turnover tax	2%
Business income tax	Taxable income	15%、25%

(II) Description of enterprise income tax rate of different taxpayers:

	Income tax
Name of taxpayer	rate
Tianye Innovation Corporation	15%
Hainan Dachuan Food Co., Ltd.	25%
Guangxi Tianye Innovation Agricultural Technology Co., Ltd.	25%
Hainan Tianye Drinks Food Sales Co. Ltd.	25%
Hubei Iceman Foods Co., Ltd.	25%
Hubei Tianye Nonggu Biological Technology Co., Ltd.	25%
Hubei Tianye Innovation Nonggu Fruit & Vegetable Co., Ltd.	25%

(III) Policies and basis of tax preference

1. VAT tax preference

According to the Provisional Regulations of the People’s Republic of China on Value-Added Tax (Order No. 538 of the State Council of the People’s Republic of China), “Article XV (I) Self-produced agricultural products sold by agricultural producers shall be exempted from value-added tax”, with the approval of Nanning State Taxation Bureau and Nanning Yongning

– II-207 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

State Taxation Bureau, Guangxi Tianye Innovation Agricultural Technology Co., Ltd., a wholly-owned subsidiary of the Company, shall be exempted from value-added tax on its own crops and fruits and vegetables, which will be implemented from January 1, 2014.

2. Tax preference for enterprise income tax

(1) Tianye Innovation Corporation

According to Article 2 of the Notice of the Ministry of Finance, General Administration of Customs and State Administration of Taxation on Tax Policy Issues Concerning In-depth Implementation of the Strategy of Developing the Western Region (CS [2011] No. 58), the Company is an encouraged industrial enterprise in the western region. From January 1, 2017 to December 31, 2020, the Company paid enterprise income tax at a reduced rate of 15%.

According to the Regulations for the Implementation of the Enterprise Income Tax Law of the People’s Republic of China (Order No. 512 of the State Council of the People’s Republic of China), the Notice of the Ministry of Finance and the State Administration of Taxation on Issuing the Scope of Primary Processing of Agricultural Products Enjoy Preferential Policies of Enterprise Income Tax (Trial) (CS [2008] No. 149) and the provisions on “primary processing of agricultural products shall be exempted from enterprise income tax”, the Company’s products (quick-frozen pineapple, corn, mango, papaya, seedless passion fruit puree) belong to the primary processing of agricultural products and are exempt from enterprise income tax. The preferential policies for reducing and exempting enterprise income tax have been audited and filed by the State Taxation Bureau of Hepu County (HGSBZ [2013] No. 201), and the preferential enterprise income tax policy has been implemented from January 1, 2012.

• (2) Hainan Dachuan Food Co., Ltd.

• 1) According to Article 27 of the Enterprise Income Tax Law of the People’s Republic of China and Article 86 of its implementing regulations, CS [2008] No. 149, CS [2011] No. 26, GSBF [2011] No. 132, Announcement of State Administration of Taxation (No. 2 [2010]) and Announcement of State Administration of Taxation Announcement (No. 48 [2011]), the puree juice produced by Hainan Dachuan Food Co., Ltd., a wholly-owned subsidiary of the Company, belongs to the primary processing range of agricultural products and is exempt from enterprise income tax. The preferential reduction and exemption of enterprise income tax has been examined and approved by the State Taxation Bureau of Ding’an County, Hainan Province (DGST [2013] No. 258) and has been implemented from January 1, 2011.

• 2) According to the Notice on Issuing the Scope of Primary Processing of Agricultural Products Enjoy Preferential Policies of Enterprise Income Tax (CS [2008] No. 149) issued by the Ministry of Finance and the State Administration of Taxation, the fruit and vegetable juice products produced by Hainan Dachuan Food Co., Ltd., a wholly-owned subsidiary of the Company, are primary processed products of fruits and vegetables, which have been exempted from enterprise income tax as determined by the State Taxation Bureau of Ding’an County, such exemption has been implemented from January 1, 2013.

• (3) Guangxi Tianye Innovation Agricultural Technology Co., Ltd.

According to Article 27 of the Enterprise Income Tax Law of the People’s Republic of China and Article 86 of its implementing regulations, CS [2008] No. 149, GSH [2008] No. 890, GSH [2009] No. 779, CS [2011] No. 26 and Announcement of the State Administration of Taxation (No. 8 [2011]), the fruits planted by Guangxi Tianye Innovation Agricultural Technology Co., Ltd., a

– II-208 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

wholly-owned subsidiary of the Company, has been exempted from enterprise income tax. Preferential policies for reducing and exempting enterprise income tax have been audited and filed by Nanning State Taxation Bureau.

VI. Notes to Main Items of the Consolidated Financial Statements

(All amounts in RMB unless otherwise stated)

Note 1. Monetary funds

Item Cash on hand Bank deposit Other monetary funds Total	Closing balance 5,182.32 214,658,850.80 5,009,987.21 219,674,020.33	Opening balance 17,127.50 211,035,355.11
		211,052,482.61

The details of the restricted monetary funds are as follows:

Item Bank deposits used for pledge loans Total	Closing balance 5,000,000.00 5,000,000.00	Opening balance

Note 2. Notes and accounts receivable

Item Notes receivable Accounts receivable Total	Closing balance 42,295,833.29 42,295,833.29	Opening balance 217,100.00 54,959,777.56
		55,176,877.56

(I) Notes receivable

1. Categories of notes receivable

Type Trade acceptance Total	Closing balance	Opening balance 217,100.00
		217,100.00

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

2. No notes receivable endorsed by the Company and not yet due on the balance sheet date at the end of the period

Note: As of December 31, 2018, the Company has no pledged and discounted notes receivable.

(II) Accounts receivable

1. Disclosure of accounts receivable by category

Category Accounts receivable with individually significant amount and individual provision for bad debt Accounts receivables with bad-debt provision withdrawn through credit risk characteristic combination Including: Accounts receivable for withdrawing bad-debt provision by aging analysis method Accounts receivable not withdrawing bad-debt provision Accounts receivable without individually significant amounts but individual provision for bad debt Total Contd.: Category Accounts receivable with individually significant amount and individual provision for bad debt Accounts receivables with bad-debt provision withdrawn through credit risk characteristic combination	Amount 44,994,500.60 44,994,500.60 44,994,500.60 Amount 57,944,561.81	Book balance Proportion (%) 100.00 100.00 100.00 Book balance Proportion (%) 100.00	Closing balance Bad-debt provision Amount Proportion (%) 2,698,667.31 6.00 2,698,667.31 6.00 2,698,667.31 6.00 Opening balance Bad-debt provision Amount Proportion (%) 2,984,784.25 5.15	Book value 42,295,833.29 42,295,833.29
				42,295,833.29
				Book value 54,959,777.56

– II-210 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Category Including: Accounts receivable for withdrawing bad-debt provision by aging analysis method Accounts receivable not withdrawing bad-debt provision Accounts receivable without individually significant amounts but individual provision for bad debt Total	Amount 57,944,561.81 57,944,561.81	Opening balance Book balance Bad-debt provision Proportion Amount Proportion (%) (%) 100.00 2,984,784.25 5.15 100.00 2,984,784.25 5.15	Book value 54,959,777.56
			54,959,777.56

(1) Receivables for withdrawing bad-debt provision by aging analysis method in combination

Aging <1 year 1-2 years 2-3 years 3-4 years 4-5 years >5 years Total	Accounts receivable 39,212,043.24 4,983,360.36 799,097.00 44,994,500.60	Closing balance Bad-debt provision 1,960,602.17 498,336.04 239,729.10 2,698,667.31	Proportion (%) 5.00 10.00 30.00
			6.00

Contd.:

Aging <1 year 1-2 years 2-3 years 3-4 years 4-5 years >5 years Total	Opening balance Accounts receivable Bad-debt provision 56,196,638.71 2,809,831.94 1,747,523.10 174,752.31 400.00 200.00 57,944,561.81 2,984,784.25	Proportion (%) 5.00 10.00 30.00 50.00
		5.15

2. Provision, recovery or reversal of provision for bad-debt in current period

The amount of bad-debt provision reversed in current period is RMB286,116.94.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

3. There is no write-off of accounts receivable in current period.

4. Top five accounts receivable based on debtors

Organization name Hangzhou Haiguo Trading Co., Ltd. Nongfu Spring (Jiande) Xin’anjiang Drinking Water Co., Ltd. Shandong Yipintang Industrial Co., Ltd. Guangzhou Pumai Biological Technology Co., Ltd. Gerui Juice Industry (Tianjin) Co., Ltd. Total	Closing balance Relationship with the Company 6,184,600.82 Non-affiliated party 5,233,437.30 Non-affiliated party 2,837,436.00 Non-affiliated party 2,666,537.50 Non-affiliated party 2,583,500.00 Non-affiliated party 19,505,511.62	Proportion in closing balance of accounts receivable (%) 13.75 11.63 6.31 5.93 5.74 43.36	Provision for bad-debt 333,643.59 261,671.87 141,871.80 133,326.88 129,175.00
			999,689.14

Note 3. Advance payments

1. Disclosure of prepayments by aging

Aging <1 year 1-2 years 2-3 years >3 years Total	Closing balance Amount Proportion (%) 3,310,932.00 99.68 10,760.49 0.32 3,321,692.49 100.00	Opening Amount 283,001.07 134,964.26 3,198.76 49,998.65 471,162.74	balance Proportion (%) 60.07 28.64 0.68 10.61
			100.00

2. Top five prepayments based on the payers

Organization name Tibet Lehua Cultural Communication Co., Ltd. Shenzhen Asia Global Logistics Co., Ltd. Guangxi Hengrunjia Foods Co., Ltd. Guangxi Hengfeng United Agriculture Development Co., Ltd. Yu Shijing Total	Closing balance Relationship with the Company 2,320,000.00 Non-affiliated party 407,496.00 Non-affiliated party 339,804.66 Non-affiliated party 57,170.00 Non-affiliated party 50,000.00 Non-affiliated party 3,174,470.66	Proportion in total advance payment Reason for unsettlement (%) 69.84 Transaction pending 12.27 Transaction pending 10.23 Transaction pending 1.72 Transaction pending 1.51 Transaction pending 95.57

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

3. At the end of the period, there are no prepayments with an age of more than one year and an important amount that have not been settled in time

Note 4. Other receivables

Item Interests receivable Dividends receivable Other receivables Total	Closing balance 10,166,089.03 10,166,089.03	Opening balance 1,002,578.02
		1,002,578.02

1. Disclosure of other receivables by category

Category Other receivables with individually significant amount and individual provision for bad debt Other receivables with bad-debt provision withdrawn through credit risk characteristic combination Including: Other receivables for withdrawing bad-debt provision by aging analysis method Other receivables not withdrawing bad-debt provision Other receivables without individually significant amount but with individual provision for bad debt Total	Amount 10,878,087.64 10,878,087.64 10,878,087.64	Book balance Proportion (%) 100.00 100.00 100.00	Closing balance Bad-debt provision Amount Proportion (%) 711,998.61 6.55 711,998.61 6.55 711,998.61 6.55	Book value 10,166,089.03 10,166,089.03
				10,166,089.03

Contd.:

			Opening balance
		Book balance	Bad-debt provision		Book value
Category	Amount	Proportion	Amount	Proportion
		(%)	(%)
Other receivables with
individually significant
amount and individual
provision for bad debt

– II-213 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Category Other receivables with bad-debt provision withdrawn through credit risk characteristic combination Including: Other receivables for withdrawing bad-debt provision by aging analysis method Other receivables not withdrawing bad-debt provision Other receivables without individually significant amount but with individual provision for bad debt Total	Amount 1,178,373.54 1,178,373.54 1,178,373.54	Opening balance Book balance Bad-debt provision Proportion Amount Proportion (%) (%) 100.00 175,795.52 14.92 100.00 175,795.52 14.92 100.00 175,795.52 14.92	Book value 1,002,578.02 1,002,578.02
			1,002,578.02

• (1) Other receivables for withdrawing bad-debt provision by aging analysis method in combination

Aging <1 year 1-2 years 2-3 years 3-4 years 4-5 years >5 years Total	Other receivables 10,292,375.76 306,500.00 14,380.69 204,831.19 60,000.00 10,878,087.64	Closing balance Bad-debt provision 514,618.80 30,650.00 4,314.21 102,415.60 60,000.00 711,998.61	Proportion (%) 5.00 10.00 30.00 50.00 80.00 100.00
			6.55

Contd.:

Aging <1 year 1-2 years 2-3 years 3-4 years 4-5 years >5 years Total	Opening balance Other receivables Bad-debt provision 888,161.66 44,408.09 14,380.69 1,438.07 204,831.19 61,449.36 5,000.00 2,500.00 66,000.00 66,000.00 1,178,373.54 175,795.52	Proportion (%) 5.00 10.00 30.00 50.00 80.00 100.00
		14.92

– II-214 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

2. Provision, recovery or reversal of provision for bad-debt in current period The provision for bad debts in current period is RMB536,203.09.

3. There is no write-off of other receivables in current period.

4. Category of other receivables by nature

Nature of payment Transaction payment Margin Reserve fund Withholding social security, etc Others Total	Closing balance 10,430,898.78 210,769.00 102,638.33 105,841.53 27,940.00 10,878,087.64	Opening balance 316,611.88 201,000.00 554,705.48 102,840.26 3,215.92
		1,178,373.54

5. Top five other receivables based on debtors

Organization name Nature of payment Haikou Guangshunda Packaging Material Co., Ltd. Transaction payment Wu Changhui Transaction payment Ling Shiqiang Transaction payment Fang Henghui (former shareholder of Hubei Iceman Foods Co., Ltd.) Transaction payment Human Resources and Social Security Bureau of Qujialing Management District, Jingmen City Margin Total	Closing balance Relationship with the Company Aging 5,268,361.99 Non-affiliated party <1 year 3,954,180.00 Non-affiliated party <1 year 840,000.00 Non-affiliated party <1 year 219,211.88 Non-affiliated party Within 4 years 200,000.00 Non-affiliated party 1 to 2 year(s) 10,481,753.87	Proportion in closing balance of other receivables (%) 48.43 36.35 7.72 2.02 1.84 96.36	Bad-debt provision Closing balance 263,418.10 197,709.00 42,000.00 106,729.81 20,000.00
			629,856.91

Note 5. Inventories

Item Raw materials Revolving materials Finished goods Delivered goods Outsourced materials Goods in process Total	Closing balance Amount Provision for depreciation 3,505,355.49 787,841.86 40,140,701.68 3,029,491.90 1,684,905.86 49,148,296.79	Book value 3,505,355.49 787,841.86 40,140,701.68 3,029,491.90 1,684,905.86 49,148,296.79	Opening balance Amount Provision for depreciation Book value 2,772,567.73 2,772,567.73 587,087.97 587,087.97 45,326,124.56 45,326,124.56 568,525.55 568,525.55 22,446.54 22,446.54 4,150,321.91 4,150,321.91 53,427,074.26 53,427,074.26	Opening balance Amount Provision for depreciation Book value 2,772,567.73 2,772,567.73 587,087.97 587,087.97 45,326,124.56 45,326,124.56 568,525.55 568,525.55 22,446.54 22,446.54 4,150,321.91 4,150,321.91 53,427,074.26 53,427,074.26
				53,427,074.26

Note: During the inventory reporting period, there is no need to make provision for depreciation.

– II-215 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Note 6. Other current assets

Item Added-value tax retained Input tax with VAT to be certified Payment of enterprise income tax in advance Total	Closing balance 3,106,466.75 8,324,371.61 1,294,608.97 12,725,447.33	Opening balance 2,261,266.88 1,432,853.81
		3,694,120.69

Note 7. Long-term receivables

			Closing balance				Opening balance	Opening balance
			Bad-debt				Bad-debt				Range of
Nature of payment		Book balance	provision	Book value	Book balance		provision		Book value		discount rate
Finance leases
Including: unrealized
financing income
Merchandise paid by
installment
Labor services
provided on
installment
Others						318,000.00			318,000.00
Less: long-term
receivables due
within one year
Total						318,000.00			318,000.00
Note 8.	**Long-term equity **		investment
					**Increase and **		decrease of current period
								Profits and
									losses on
								investments		Adjustment to
								recognized			other
			Opening	Additional		Decrease in		under equity		comprehensive
Investee			balance	investment		investment			method		incomes
Associated enterprise:
Tianjin Fangfu Tianye
Investment	Center (Limited
Partnership)		39,617,867.46				14,377,600.00		-3,219,330.68			-3,096,720.00
Total		39,617,867.46				14,377,600.00		-3,219,330.68			-3,096,720.00

– II-216 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Contd.:

Investee Associated enterprise: Tianjin Fangfu Tianye Investment Center (Limited Partnership) Total	Increase and decrease of current period Other equity changes Declared cash dividend or profits Provision for impairment Others	Closing balance 18,924,216.78 18,924,216.78	Closing balance of provision for impairment

Note: According to the resolution of the first meeting of all partners of Tianjin Fangfu Tianye Investment Center (Limited Partnership) in 2018, it is agreed to refund the Company’s investment of RMB14,377,600.

Note 9. Fixed assets

1. Information about fixed assets

		Machinery
	Pant and	and		Office	Other
Item	buildings	equipment	Vehicles	equipment	equipment	Total
I. Total original book value
1. Opening balance	127,954,480.16	104,378,129.30	4,082,355.14	2,390,366.09	395,677.68	239,201,008.37
2. Increase of the current period	89,631,933.08	6,416,202.92	141,182.76	559,834.31		96,749,153.07
Acquisition		3,056,009.25	141,182.76	559,834.31		3,757,026.32
Transfers from construction in progress	89,631,933.08	3,360,193.67				92,992,126.75
3. Decrease of the current period	198,400.00	981,927.99	55,529.99	373,620.00		1,609,477.98
Disposal or scrapping	198,400.00	981,927.99	55,529.99	373,620.00		1,609,477.98
Other transfer-out
4. Closing balance	217,388,013.24	109,812,404.23	4,168,007.91	2,576,580.40	395,677.68	334,340,683.46
II. Accumulated depreciation
1. Opening balance	30,875,153.97	45,604,545.07	1,488,761.69	1,723,443.57	294,685.70	79,986,590.00
2. Increase of the current period	6,403,400.97	9,549,128.86	410,153.66	195,772.08	23,640.78	16,582,096.35
Withdrawal	6,403,400.97	9,549,128.86	410,153.66	195,772.08	23,640.78	16,582,096.35
3. Decrease of the current period	79,318.46	520,892.17	3,516.91	354,939.00		958,666.54
Disposal or scrapping	79,318.46	520,892.17	3,516.91	354,939.00		958,666.54
Other transfer-out
4. Closing balance	37,199,236.48	54,632,781.76	1,895,398.44	1,564,276.65	318,326.48	95,610,019.81
III. Impairment provision
1. Opening balance		382,851.13	26,999.88			409,851.01
2. Increase of the current period
Withdrawal
3. Decrease of the current period
Disposal or scrapping
Other transfer-out
4. Closing balance		382,851.13	26,999.88			409,851.01
IV. Total book value
1. Closing book value	180,188,776.76	54,796,771.34	2,245,609.59	1,012,303.75	77,351.20	238,320,812.64
2. Opening book value	97,079,326.19	58,390,733.10	2,566,593.57	666,922.52	100,991.98	158,804,567.36

– II-217 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

2. Idle fixed assets at the end of the period

Item Plant and buildings Machinery and equipment Total	Original book value 45,252,012.55 1,537,208.14 46,789,220.69	Accumulated depreciation 16,351,627.09 1,428,201.96 17,779,829.05	Impairment provision 59,215.86 59,215.86	Book value 28,900,385.46 49,790.32 28,950,175.78	Remarks

3. Fixed assets that have not completed the title certificate at the end of the period

Item Plant and buildings Total	Book value Reasons for incomplete certificates of title 6,595,958.29 Coordination in progress 6,595,958.29

4. Fixed assets for mortgage at the end of the period

See Note 46 for details of the fixed assets for mortgage at the end of the period.

Note 10. Construction in progress

1. Construction in process

Item Tianye Nonggu Science and Technology Park Project Fermented juice production line Workshop Reconstruction and Expansion Project Supporting facilities of characteristic agricultural demonstration area Equipment Installation and Reconstruction Project Equipment installation works Total	Closing balance Book balance Provision for impairment 172,918,193.57 5,318,877.28 265,943.86 970,157.10 25,309,084.15 297,413.80 204,813,725.90 265,943.86	Book value 172,918,193.57 5,052,933.42 970,157.10 25,309,084.15 297,413.80 204,547,782.04	Opening balance Book balance Provision for impairment Book value 129,601,596.40 129,601,596.40 5,318,877.28 265,943.86 5,052,933.42 21,724,100.00 21,724,100.00 795,405.47 795,405.47 110,000.00 110,000.00 157,549,979.15 265,943.86 157,284,035.29	Opening balance Book balance Provision for impairment Book value 129,601,596.40 129,601,596.40 5,318,877.28 265,943.86 5,052,933.42 21,724,100.00 21,724,100.00 795,405.47 795,405.47 110,000.00 110,000.00 157,549,979.15 265,943.86 157,284,035.29
	204,813,725.90			157,284,035.29

– II-218 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

2. Changes in significant construction in progress of the current period

Project name Tianye Nonggu Science and Technology Park Project Fermented juice production line Workshop Reconstruction and Expansion Project Supporting facilities of characteristic agricultural demonstration area Equipment Installation and Reconstruction Project Total	Opening balance 129,601,596.40 5,318,877.28 21,724,100.00 795,405.47 157,439,979.15	Increase of current period 133,148,288.93 970,157.10 5,622,244.92 139,740,690.95	Decrease of current period Closing balance Transferred to productive biological assets Transferred to fixed assets 89,831,691.76 992,589.71 1,044,671.06 795,405.47 91,619,686.94 1,044,671.06	Others Decrease 172,918,193.57 5,318,877.28 970,157.10 25,309,084.15
				204,516,312.10

Contd.:

Project name Tianye Nonggu Science and Technology Park Project Fermented juice production line Workshop Reconstruction and Expansion Project Supporting facilities of characteristic agricultural demonstration area Equipment Installation and Reconstruction Project Total	Budget amount (RMB10,000) 39,739.33 546.89 187.62 3,513.78 79.54 44,067.16	Proportion of project investment in budget (%) 66.12 97.26 51.71 77.83 100.00	Construction progress (%) 66.12 97.26 51.71 77.83 100.00	Accumulated amount of capitalization of interest	Include: amount of capitalization of interest of current period	Capitalization rate of interest of current period (%) Source of fund Investment Project Self-raised Self-raised Self-raised Self-raised

3. Construction in progress for mortgage at the end of the period

See Note 46 for details of the construction in progress for mortgage at the end of the period.

– II-219 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

4. Other descriptions of construction in progress

Notes: (1) The Tianye Nonggu Science and Technology Park Project is funded by the Company, with a total investment of RMB454,899,100, including RMB104,490,400 for civil works, RMB20,362,100 for ancillary facilities and structures, RMB15,270,000 for land purchase and leveling, RMB257,270,800 for equipment and instrument purchase and installation, RMB500,000 for technology and other investment, RMB7,005,800 for preparation cost and RMB50 million for working capital. (2) The budget of Tianye Nonggu Science and Technology Park Project includes civil works investment, ancillary facilities and structures, land purchase and leveling, equipment and instrument purchase and installation fees.

Note 11. Productive biological assets

1. Productive biological assets measured by cost

			**Planting **	industry
Item	Passion fruit	Pitaya	Pineapple	Banana	Guava	Mango	Total
I. Total original book
value
1. Opening balance	8,366,652.96	3,775,909.46	2,228,428.00	1,195,399.20	3,945,007.64	18,029,895.46	37,541,292.72
2. Increase of current
period	1,562,416.65					7,198,802.08	8,761,218.73
Purchased
Self-planted	1,562,416.65					7,198,802.08	8,761,218.73
Increase in corporation
merger
Invested by
shareholders
Other transfer-in
3. Decrease of current
period	6,938,855.90	2,575,274.65	2,228,428.00	1,195,399.20	1,339,717.85		14,277,675.60
Disposal	6,938,855.90	2,575,274.65	2,228,428.00	1,195,399.20	1,339,717.85		14,277,675.60
Other transfer-out
4. Closing balance	2,990,213.71	1,200,634.81			2,605,289.79	25,228,697.54	32,024,835.85
II. Accumulated
depreciation
1. Opening balance	7,096,211.99	2,359,943.40		1,195,399.20	2,184,778.82		12,836,333.41
2. Increase of current
period	1,335,541.66	836,674.26	1,021,362.87		930,430.29		4,124,009.08
Withdrawal	1,335,541.66	836,674.26	1,021,362.87		930,430.29		4,124,009.08
Increase in corporation
merger
Other transfer-in
3. Decrease of current
period	6,938,855.90	2,092,410.65	1,021,362.87	1,195,399.20	1,161,241.79		12,409,270.41
Disposal	6,938,855.90	2,092,410.65	1,021,362.87	1,195,399.20	1,161,241.79		12,409,270.41
Other transfer-out
4. Closing balance	1,492,897.75	1,104,207.01			1,953,967.32		4,551,072.08
III. Impairment
provision
1. Opening balance
2. Increase of current
period
Withdrawal

– II-220 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Planting industry Item Passion fruit Pitaya Pineapple Banana Guava Mango Total Increase in corporation merger Other transfer-in 3. Decrease of current period Disposal Other transfer-out 4. Closing balance IV. Book value 1. Book value at end of period 1,497,315.96 96,427.80 651,322.47 25,228,697.54 27,473,763.77 2. Book value at beginning of period 1,270,440.97 1,415,966.06 2,228,428.00 1,760,228.82 18,029,895.46 24,704,959.31

2. During the reporting period of productive biological assets, there is no need to make provision for impairment.

Note 12. Intangible assets

Item	Land use right	Patent right	Trademark right	Software	Total
I. Original book value
1. Opening balance	118,455,340.67	15,485.00	10,900.00	30,540.00	118,512,265.67
2. Increase of current period				35,000.00	35,000.00
Acquisition				35,000.00	35,000.00
Internal R&D
Other transfer-in
2. Decrease of current period
Disposal
Other transfer-out
3. Ending balance	118,455,340.67	15,485.00	10,900.00	65,540.00	118,547,265.67
II. Accumulated amortisation
1. Opening balance	9,175,346.86	9,838.40	8,084.17	30,540.00	9,223,809.43
2. Increase of current period	1,831,365.24	770.00	1,089.96	6,999.96	1,840,225.16
Withdrawal	1,831,365.24	770.00	1,089.96	6,999.96	1,840,225.16
Increase in corporation merger
Other transfer-in
3. Decrease of current period
Disposal
Other transfer-out
4. Closing balance	11,006,712.10	10,608.40	9,174.13	37,539.96	11,064,034.59
III. Impairment provision
1. Opening balance	20,094,867.93				20,094,867.93
2. Increase of current period
Withdrawal

– II-221 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Software

Item	Land use right	Patent right	Trademark right	Software	Total
Increase in corporation merger
Other transfer-in
3. Decrease of current period
Disposal
Other transfer-out
4. Closing balance	20,094,867.93				20,094,867.93
IV. Total book value
1. Book value at end of period	87,353,760.64	4,876.60	1,725.87	28,000.04	87,388,363.15
2. Book value at beginning of
period	89,185,125.88	5,646.60	2,815.83		89,193,588.31

Note: See Note 46 for details of intangible assets for mortgage at the end of the period.

Note 13. Goodwill

1. The original book value of goodwill

Name of the investee or items resulting in goodwill Hubei Iceman Foods Co., Ltd. Total	Opening balance 17,607,521.44 17,607,521.44	Increase of current period Arising from business combination Others	Decrease of current period Disposal Others	Closing balance 17,607,521.44
				17,607,521.44

Calculation process of goodwill: In order to effectively integrate the resources and advantages of both parties, enlarge and strengthen the main business, and form a highly competitive production enterprise of fruit juice and fruit and vegetable products, the Company realized the equity acquisition and business restructuring of Hubei Iceman Foods Co., Ltd. On the purchase date (November 16, 2015); the book value of identifiable net assets of Hubei Iceman Foods Co., Ltd. was RMB-24,361,162.41; the fair value of identifiable net assets based on the purchase date was RMB-17,607,520.44. According to the Equity Merger Agreement signed between the Company and the original shareholders of Hubei Iceman Foods Co., Ltd., the consideration for equity merger was RMB1, so the goodwill formed by this merger was RMB17,607,521.44.

2. Provision for impairment of goodwill

Name of the investee or items resulting in goodwill Hubei Iceman Foods Co., Ltd. Total	Opening balance 2,749,838.60 2,749,838.60	Increase of current period Provision Others	Decrease of current period Disposal Others	Closing balance 2,749,838.60
				2,749,838.60

Goodwill impairment test process, parameters and recognition method of goodwill impairment loss: Hubei Iceman Foods Co., Ltd. is taken as a separate asset group for impairment test, and the recoverable amount of goodwill impairment test is determined by fair value minus

– II-222 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

disposal expenses. RMB2,749,838.60 has been withdrawn for goodwill impairment at the beginning of the period. At the end of current period, according to the Appraisal Report (MLHZHPBZ (2019) No. 6037) issued by Fujian United Zhonghe Assets Appraisal Land and Real Estate Appraisal Co., Ltd. on March 25, 2019, with the base date of appraisal of December 31, 2018, the goodwill has been tested for impairment; the book value of the asset group including goodwill was RMB43,304,949.68, the recoverable amount of the asset group was RMB67,198,028.00, and the book value of the asset group was less than the recoverable amount of the asset group, so there was no impairment of goodwill.

Note 14. Long-term deferred expenses

Item Land lease expense Plant Decoration Project Other projects in characteristic agricultural demonstration areas Total	Opening balance 15,647,209.95 1,660,134.11 17,307,344.06	Increase in the current period 1,044,671.06 1,044,671.06	Amortization for the Current Period 4,837,098.60 448,417.32 174,111.80 5,459,627.72	Other decrease	Closing balance 10,810,111.35 1,211,716.79 870,559.26
					12,892,387.40

Note 15. Deferred tax assets and deferred tax liabilities

1. Deferred income tax assets before offset

Item Provision for impairment of assets Offset internal unrealized profits Deductible losses Government grants Changes in fair value of long-term equity investment Total	Closing balance Deductible temporary difference Deferred tax assets 3,384,474.33 744,635.68 1,467,779.65 263,027.38 3,096,720.00 464,508.00 7,948,973.98 1,472,171.06	Opening Deductible temporary difference 2,963,550.33 259,175.18 572,141.91 1,701,046.3 5,495,913.72	balance Deferred tax assets 622,403.48 64,793.80 143,035.48 306,498.69
			1,136,731.45

2. Deferred tax liabilities before offset

Item Unrealized losses in internal transactions Total	Closing balance Taxable temporary differences Deferred income tax liabilities 457,072.59 114,268.15 457,072.59 114,268.15	Opening Taxable temporary differences	balance Deferred income tax liabilities

– II-223 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

3. Unrecognized deferred tax assets

Item Provision for impairment of assets Deferred income Deductible losses Total	Closing balance 26,191.64 63,323,392.40 22,771,782.22 86,121,366.26	Opening balance 197,029.44 65,586,133.20 17,412,890.79
		83,196,053.43

Note: The reason why deferred income tax assets have not been recognized for asset impairment provision was that Guangxi Tianye Venture Agricultural Technology Co., Ltd., a subsidiary of the Company, was exempt from enterprise income tax for fruit planting; the reason why deferred income tax assets have not been recognized for deferred revenue was that Hubei Iceman Food Co., Ltd., a subsidiary of the Company, was uncertain whether it could obtain enough taxable income in the future; the reason why deferred income tax assets have not been recognized for deductible losses was that Hainan Hainan Tianye Drinks Food Sales Co. Ltd., Hubei Iceman Food Co., Ltd. and Hubei Tianye Nonggu Biological Technology Co., Ltd., which were subsidiaries of the Company, were uncertain whether they could obtain enough taxable income in the future.

4. Deductible losses for which deferred tax assets are not recognised will be expired in the following year

Year 2018 2019 2020 2021 2022 2023 Total	Closing balance 149,449.48 460,015.88 3,207,535.44 6,738,381.86 6,857,508.13 5,358,891.43 22,771,782.22	Opening balance 149,449.48 460,015.88 3,207,535.44 6,738,381.86 6,857,508.13
		17,412,890.79

Note 16. Other non-current assets

Item Advance payment for Tianye Nonggu Science and Technology Park Project Equipment project payment Advance payment for IPO Enterprise income tax retained Total	Closing balance 3,019,370.26 287,986.90 3,307,357.16	Opening balance 50,654,371.69 519,506.55 2,215,306.95 33,968.38
		53,423,153.57

– II-224 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Note 17. Short-term loans

Item Pledged loans Unsecured loans Mortgaged and guaranteed loans Total	Closing balance 5,000,000.00 36,000,000.00 60,000,000.00 101,000,000.00	Opening balance 36,000,000.00 30,000,000.00
		66,000,000.00

Note 1: As of December 31, 2018, the short-term loan balance is RMB101 million:

• 1) On December 19, 2018, Hainan Tianye Drinks Food Sales Co. Ltd., a subsidiary of the Company, signed a “Yixiaotong” General Guaranteed Loan Contract of Hainan Rural Credit Cooperative (HKNSS/H (Z) 2018 LJ (C) Z No. 041) with Haikou Rural Commercial Bank Co., Ltd. The loan type was working capital loan, and the loan purpose was for the daily business turnover of the Company; the loan amount was RMB5 million, and the loan period is from December 19, 2018 to December 19, 2019; the annual interest rate of the loan was 6.8%, plus 2% of the integrity deposit; the guarantee method was margin guarantee: “Hainan Tianye Drinks Food Sales Co. Ltd. provides 100% margin guarantee”; it also signed a pledge guarantee contract (HKNSYS/H (Z) 2018 ZZ No. 042), the pledge was the deposit of RMB5 million deposited in the special deposit account (1013225000000396) of Jinlong Road Sub-branch of Haikou Rural Commercial Bank, and the pledgor was Hainan Tianye Drinks Food Sales Co. Ltd.

• 2) In August 2018, the Company signed a loan contract (0210700005-2018 (NZ) Z No. 00096) of RMB36 million with Beihai Sub-branch of Industrial and Commercial Bank of China, with a loan period of one year. The mortgaged properties were land use right (HGY (2012) No. 1560), industrial factory buildings and supporting houses (HFQZHPZ No. 017061-017071). In 2013 and 2016, the maximum amount mortgage contract (GYBNZDZ (2013) No. 001) and the change agreement of maximum mortgage contract (GYBNZZGEDYBZ (2016) No. 001) were signed respectively.

• 3) In December 2018, Hainan Dachuan Food Co., Ltd., a subsidiary of the Company, signed a loan contract (HKNSS/H (Z) 2018 ZGDKZ (040)) of RMB75 million with Haikou Rural Commercial Bank Co., Ltd. The credit was granted for three years; the guarantee method was mortgage+guarantee, and the additional integrity deposit was 2%. It also signed a contract (HKNSS/H (Z) 2018 ZBZ No.040), the mortgaged properties were house and state-owned land use right (E (2018) JMSBDCQ No. 0013299), houses (DCZZ No. 0005745, DCZZ No. 0005746, DCZZ No. 0005747, DCZZ No. 0005749), land use rights (DAGY (2010) No. 253, DAGY (2008) No. 23). It also signed two mortgage contracts (HKNSS/H (Z) 2018 GDZ No. 040-1, HKNSS/H (Z) 2018 GDZ No. 040-2), and the guarantors were Tianye Innovation Corporation, Yao Yuzhi and Hubei Tianye Nonggu Biological Technology Co., Ltd. And it also signed three guarantee contracts (HKNSS/H (Z) 2018 GBZ No. 040-1, HKNSS/H (Z) 2018 GBZ No. 040-2, HKNSS/H (Z) 2018 GBZ No. 040-3). As of December 31, 2018, the short-term loan balance of this contract was RMB30 million.

• 4) In September 2017, Hainan Dachuan Food Co., Ltd., a subsidiary of the Company, and Haikou Longhua Sub-branch of Bank of Communications signed a revolving loan contract (QJY (DT) 2017 LDZ No. DC001) of RMB30 million; the credit period was from September 14, 2017 to September 14, 2019 and term for each loan was up to 12 months; the guarantee method was mortgage+guarantee; the mortgaged properties were house (DCZZ No. 0005745 -0005749), land use rights (DAGY (2010) No. 253, DAGY (2008) No. 23), and machinery equipment; and the mortgage contracts with numbers of QJY (DT) 2017 DZ No. DC001 and QJY (DT) 2017 DZ No. DC002 were signed; and the guarantee contracts with the numbers of QJY (DT) 2017 BZ No. DC001 and QJY (DT) 2017 BZ No. DC002 were signed and the guarantors were Tianye Innovation Corporation and Yao Jiuzhi respectively. The maximum creditor’s right amount of the above mortgage guarantee was RMB36 million (RMB thirty-six million only). As of December 31, 2018, the short-term loan balance of this contract was RMB30 million.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Note 18. Notes and accounts payable

Item Notes payable Accounts payable Total	Closing balance 15,537,891.19 15,537,891.19	Opening balance 28,325,710.25
		28,325,710.25

1. Disclosure of accounts payable by aging

Aging <1 year 1-2 years 2-3 years >3 years Total	Closing balance Amount Proportion (%) 13,247,435.00 85.26 1,023,836.71 6.59 552,693.07 3.56 713,926.41 4.59 15,537,891.19 100.00	Opening Amount 25,359,009.01 1,285,274.95 849,005.03 832,421.26 28,325,710.25	balance Proportion (%) 89.53 4.54 3.00 2.94
			100.00

2. Accounts payable classified by nature

Item Material purchase payment Payment related to expenses Equipment and project purchase payment Others Total	Closing balance 5,668,113.91 2,603,792.52 7,234,635.76 31,349.00 15,537,891.19	Opening balance 16,518,206.83 1,243,499.80 10,186,321.28 377,682.34
		28,325,710.25

3. Significant accounts payable aged over 1 year

Organization name Jiangsu Kaiyi Intelligent Technology Co., Ltd. Xiamen Heguanxin Cryogenic Equipment Co., Ltd. Wuhan Sentai Environmental Protection Co., Ltd. Yang Deping Chen Shixin Total	Closing balance Relationship with the Company 369,200.00 Non-affiliated party 320,200.01 Non-affiliated party 200,000.00 Non-affiliated party 111,300.00 Non-affiliated party 100,000.00 Non-affiliated party 1,100,700.01

Reasons for not been repaid or transferred

Uncompleted settlement Uncompleted settlement

Uncompleted settlement

Uncompleted settlement Uncompleted settlement

– II-226 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

4. Top five accounts payable based on creditor

Organization name Nature of payment Foshan Nanhai District Construction Engineering Co., Ltd. Equipment and project payment Hu’nan Tianchang Engineering Co., Ltd. Equipment and project payment Hainan Anhua Fengyuan Electronic Technology Co., Ltd. Equipment and project payment Wuhan Quanding Environmental Protection Technology Co., Ltd. Equipment and project payment Hubei Yayunjing Construction Technology Co., Ltd. Equipment and project payment Total	Closing balance Relationship with the Company 1,762,384.75 Non-affiliated party 959,545.44 Non-affiliated party 665,000.00 Non-affiliated party 593,767.00 Non-affiliated party 592,000.00 Non-affiliated party 4,572,697.19	Proportion in total accounts payable Aging (%) 11.34 <1 year 6.18 <1 year 4.28 <1 year 3.82 <1 year 3.81 <1 year 29.43

Note 19. Advances from customs

1. Disclosure of advances from customs by aging

Aging <1 year 1-2 years 2-3 years >3 years Total	Closing balance Amount Proportion (%) 1,376,462.69 84.04 120,579.25 7.36 140,921.50 8.60 1,637,963.44 100.00	Opening Amount 3,914,521.51 155,471.50 1,900.00 16,300.00 4,088,193.01	balance Proportion (%) 95.75 3.80 0.05 0.40
			100.00

2. Disclosure of advances from customs by nature

Item Payment for goods Total	Closing balance 1,637,963.44 1,637,963.44	Opening balance 4,088,193.01
		4,088,193.01

– II-227 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

3. Top five advances from customs based on creditor

Organization name Nature of payment Fresh Fruit Juice Co., Ltd. Payment for goods Ningbo Xinjiuyuan Trading Co., Ltd. Payment for goods He’nan Run’ang Industry Co., Ltd. Payment for goods Dalian Yiheng Import & Export Co., Ltd. Payment for goods Hainan Suyan Healthy Drink Co., Ltd. Payment for goods Total	Closing balance Relationship with the Company 353,600.38 Non-affiliated party 326,610.00 Non-affiliated party 200,850.00 Non-affiliated party 82,399.80 Non-affiliated party 77,740.00 Non-affiliated party 1,041,200.18	Proportion in total advance receipts Aging (%) 21.59 <1 year 19.94 <1 year 12.26 <1 year 5.03 <1 year 4.75 <1 year 63.57

Other descriptions of advance receipts: During the reporting period, the Company had not important advance receipts with more than one-year aging.

Note 20. Payroll and employee benefits payable

1. Payroll and employee benefits payable

Item Short-term benefits Post-employment benefits — defined contribution plan Termination benefits Total	Opening balance 2,999,558.95 42,317.92 3,041,876.87	Increase of current period 27,417,096.04 1,757,415.99 41,950.00 29,216,462.03	Decrease of current period 27,277,464.61 1,794,328.51 41,950.00 29,113,743.12	Closing balance 3,139,190.38 5,405.40
				3,144,595.78

2. Short-term benefits

Item Wages or salaries, bonuses, allowances and subsidies Employee welfare Social insurance contributions Including: basic medical insurance premium Industrial injury insurance premium Birth insurance premium Housing funds Labor union and employee education costs Total	Opening balance 2,975,975.15 21,927.80 18,308.60 2,349.80 1,269.40 1,656.00 2,999,558.95	Increase of current period 25,207,654.17 929,951.23 837,615.34 723,060.68 64,242.35 50,312.31 390,824.50 51,050.80 27,417,096.04	Decrease of current period 25,073,842.39 904,271.68 857,463.24 739,706.08 66,536.35 51,220.81 390,836.50 51,050.80 27,277,464.61	Closing balance 3,109,786.93 25,679.55 2,079.90 1,663.20 55.80 360.90 1,644.00 0.00
				3,139,190.38

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

3. Defined contribution plan

Item Basic pension insurance Unemployment insurance Total	Opening balance 41,066.92 1,251.00 42,317.92	Increase of current period 1,709,983.22 47,432.77 1,757,415.99	Decrease of current period 1,745,783.34 48,545.17 1,794,328.51	Closing balance 5,266.80 138.60
				5,405.40

Note 21. Taxes payable

Tax items VAT Enterprise income tax Individual income tax Urban maintenance and construction tax Building tax Land use tax Education expenses and local surcharges Stamp duties Environmental protection tax Total	Closing balance 1,556,335.03 775,023.85 13,875.57 75,898.12 63,309.90 19,500.00 75,049.42 3,096.00 3,125.04 2,585,212.93	Opening balance 1,390,801.38 1,157,903.30 21,783.73 64,015.43 17,757.88 208,682.73 63,901.93 3,051.80
		2,927,898.18

Note 22. Other payables

Item Interest payable Dividends payable Other payables Total (I) Interest payable Item Interest payable Total	Closing balance 857,741.94 2,930,036.25 3,787,778.19 Closing balance 857,741.94 857,741.94	Opening balance 2,705,266.75
		2,705,266.75
		Opening balance

– II-229 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

(II) Other payables

1. Disclosure of other payables by aging

Aging <1 year 1-2 years 2-3 years >3 years Total	Closing balance Amount Proportion (%) 2,197,587.61 75.00 302,349.40 10.32 272,856.61 9.31 157,242.63 5.37 2,930,036.25 100.00	Opening Amount 1,918,180.90 506,863.22 114,510.00 165,712.63 2,705,266.75	balance Proportion (%) 70.91 18.74 4.23 6.12
			100.00

2. Disclosure of other payables by nature

Nature of payment Miscellaneous project payments Payment related to expenses Transaction payment Collection and payment Social security fund, etc Others Total	Closing balance 301,710.00 2,330,614.79 59,146.40 204,652.14 598.72 33,314.20 2,930,036.25	Opening balance 628,965.00 1,601,670.09 213,495.40 198,264.94 46,291.32 16,580.00
		2,705,266.75

3. Top five other payables based on creditor

Organization name Nature of payment Shanghai Liqin Logistics Co., Ltd. Payment related to expenses ZHONGXINGHUA CERTIFIED PUBLIC ACCOUNTANTS LLP (Special General Partnership) Payment related to expenses Xiping Xinguang Freight Service Co., Ltd. Payment related to expenses Beijing Wanshang Tianqin Law Firm Payment related to expenses Liu Zhonghua Payment related to expenses Total	Closing balance Relationship with the Company 283,600.00 Non-affiliated party 283,018.87 Non-affiliated party 226,882.08 Non-affiliated party 188,679.24 Non-affiliated party 183,675.00 Non-affiliated party 1,165,855.19	Proportion in total other payables Aging (%) 9.68 <1 year 9.66 <1 year 7.74 <1 year 6.44 <1 year 6.27 <1 year 39.79

– II-230 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Note 23. Long-term loans

Item Fiduciary loan Total	Closing balance 30,000,000.00 30,000,000.00	Opening balance

Note 1: As of December 31, 2018, the long-term loan balance was RMB30 million: In April 2018, Hubei Tianye Nonggu Biological Technology Co., Ltd., a subsidiary of the Company, signed the RMB Entrusted Loan Contract with Wusan Farm Sub-branch of the Agricultural Bank of China. The contract number was 2018002. Jingmen Qujialing Urban and Rural Construction Investment Co., Ltd. was the loan principal and provided the Company with loan on credit of RMB30 million, with loan term of 2 years and annual interest rate of 7.20%. As of December 31, 2018, the long-term loan balance of this contract is RMB30 million.

Note 24. Long-term accounts payable

					Closing	Closing		Opening	Opening
Item					balance				balance
Payment due for long-term equipment					397,555.46
Total					397,555.46
Note 25. Deferred income
			Increase of	Decrease of
Item	Opening balance		current period	current period	Closing balance		Causes
Government subsidy related to		67,657,400.23	2,256,600.00	4,838,902.21	65,075,098.02		See the		following
assets								note	for details
Government subsidy related to		33,000.00				33,000.00	See the		following
revenues								note	for details
Total		67,690,400.23	2,256,600.00	4,838,902.21	65,108,098.02
1. Deferred revenue related to government grants
			Amount of	Amount
			subsidy	included in
			increased in	the current
		Opening	current	profits and	Other	Closing		Pertinent to
Item		balance	period	losses	changes	balance		Assets/Income
Financial subsidy for the development		380,000.00		80,000.00		300,000.00		Assets related
of SME in local characteristic
industries in 2012
Subsidy for the construction of		323,076.92		215,384.62		107,692.30		Assets related
agricultural product standardization
demonstration base
Infrastructure support subsidies		41,607,650.28		3,644,465.88		37,963,184.40		Assets related
allocated by the government

– II-231 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Item Subsidy for quality and safety demonstration area of export food and agricultural products in Hainan Province Financial subsidy for special fruit planting Supporting funds for infrastructure of Nonggu Science and Technology Park Project Technical transformation funds for fruit and vegetable juice pulp production line Special funds for the development of SME in the autonomous region in 2017 Support funds for grain, agriculture and forestry characteristic industries in the autonomous region in 2016 Funds for Rural Tourism Construction Project Phase I Star Award for Xiangliuxi Tropical Fruit Industry (Core) Demonstration Zone Subsidies for purchasing agricultural machinery Tax refund Research and demonstration project on key technologies of agricultural industry innovation and development in poor villages (slope) Total	Opening balance 461,538.43 1,609,600.00 19,563,390.97 400,000.00 1,187,628.87 300,000.00 800,000.00 1,005,635.76 18,879.00 33,000.00 67,690,400.23	Amount of subsidy increased in current period 2,256,600.00 2,256,600.00	Amount included in the current profits and losses 65,934.12 108,685.51 148,453.56 543,284.06 1,953.00 30,741.46 4,838,902.21	Other changes	Closing balance Pertinent to Assets/Income 395,604.31 Assets related 1,609,600.00 Assets related 19,454,705.46 Assets related 400,000.00 Assets related 1,039,175.31 Assets related 300,000.00 Assets related 800,000.00 Assets related 462,351.70 Assets related 16,926.00 Assets related 2,225,858.54 Assets related 33,000.00 Revenues related 65,108,098.02

Note: As of December 31, 2018, the balance of deferred revenue related to government grants was RMB62,882,239.48:

1. According to GCQ [2012] No. 128 “Notice on Issuing Development Funds for Small and Medium-sized Enterprises in Local Characteristic Industries in 2012” issued by Finance Department of Guangxi Zhuang Autonomous Region, the Company received special funds of RMB800,000 for the development of SME from Hepu County Finance Bureau on October 16, 2012 for fruit and vegetable processing projects, and amortization was divided into 10 years according to the life of asset depreciation.

2. According to NCN [2015] No. 164 “Notice of Nanning Finance Bureau on Appropriating Funds for Agricultural Products Standardization Construction Project in 2015” issued by Nanning Finance Bureau, Guangxi Tianye Innovation Agricultural Technology Co., Ltd., a subsidiary of the Company, received a subsidy of RMB700,000.00 for the construction of agricultural products standardization demonstration base from Yongning District Agriculture, Forestry and Water Conservancy Bureau of Nanning City on February 5, 2016 and April 19, 2016 respectively. After the acceptance, the remaining amortization period of productive biological assets was determined to be 39 months.

3. According to the “Letter on Subsidizing Infrastructure Support for Comprehensive Development of Production and Processing of Fruits and Vegetables and Quick-frozen Fruits and Vegetables in Hubei Iceman Foods Co., Ltd.” issued by Qujialing Management District of Jingmen City on February 9, 2012, Hubei Iceman Foods Co., Ltd., a subsidiary of the Company, received a total of RMB61,910,003.68 of government infrastructure support subsidies in 2012 and 2013, with the assets amortization life of 20 years.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

1. According to QCQ [2014] No. 2041 “Notice on the Allocation of Funds for the Project Construction of Hainan Export Food and Agricultural Product Quality and Safety Demonstration Zone in 2014” issued by Hainan Provincial Department of Finance, Hainan Dachuan Food Co., Ltd., a subsidiary of the Company, received a subsidy fund of RMB500,000.00 for quality and safety demonstration area of export food and agricultural products in Hainan Province on May 14, 2015. The Company amortized this government grant according to the depreciation life of assets.

2. According to the agricultural industrialization development and support work plan of Yongning District, Nanning City in 2016, Guangxi Tianye Innovation Agricultural Technology Co., Ltd., a subsidiary of the Company, received the financial subsidy fund of RMB1,609,600 for newly planted special fruits from Pumiao Town People’s Government of Yongning District of Nanning City, which was amortized according to the mature service life of productive biological assets after acceptance.

3. According to the Interim Measures for Financial Funds to Support Industrial Development in Qujialing Management District , as of December 31, 2017, the Management Committee of Qujialing Economic Development Zone in Hubei Province had allocated a total of RMB20,165,806 for supporting infrastructure, and the project had not been completed by the end of the reporting period.

4. According to the fixed assets investment plan of Hubei Province in 2016, Hubei Iceman Foods Co., Ltd., a subsidiary of the Company, received RMB400,000 from the Development and Reform Bureau of Qujialing Management District of Jingmen City for technical transformation of fruit and vegetable juice pulp production line. As of the end of the reporting period, the project had not been completed.

5. According to the second batch of special funds for the development of SME in the autonomous region in 2017 (dry and preserved fruit and vegetable processing production line project) in [2017] No. 21 document of Finance Bureau of Hepu County, Guangxi Zhuang Autonomous Region and the document of Finance Department of Guangxi Zhuang Autonomous Region, the Company received a development special fund subsidy of RMB1,200,000 on December 4, 2017, and such grant was amortized according to the depreciation life of assets.

6. According to GCN [2015] No. 226 “Notice on Organizing the Application of Supporting Funds for Food, Agriculture and Forestry Advantageous Industries in the Autonomous Region in 2016” issued by Region Finance Department Document of Guangxi Zhuang Autonomous, Guangxi Tianye Innovation Agricultural Technology Co., Ltd., a subsidiary of the Company, received RMB300,000 of support funds for food, agriculture and forestry advantageous industries in the autonomous region in 2016 from Yongning District Agriculture and Forestry Water Conservancy Bureau of Nanning on September 20, 2017, which was amortized according to the mature service life of productive biological assets after acceptance.

7. According to the “Notice on Printing and Distributing the Implementation Plan for the Construction of Tourist Toilets in Yongning District in 2017” issued by the Office of the People’s Government of Yongning District, Nanning City, Guangxi Tianye Innovation Agricultural Technology Co., Ltd., a subsidiary of the Company, received RMB800,000 of fund for Rural Tourism Construction Project Phase I from Nanning Yongning District Cultural Press, Publication and Sports Bureau on December 8, 2017 and December 27, 2017, which was amortized according to the assets depreciation life after acceptance.

8. According to the Implementation Plan for the Establishment of Yongning Xiangliuxi Tropical Fruit Industry (Core) Demonstration Zone (YBF [2014] No. 44), Guangxi Tianye Innovation Agricultural Technology Co., Ltd., a subsidiary of the Company, received RMB4,797,362 of fund related to construction of Xiangliuxi Tropical Fruit Industry (Core) Demonstration Zone in Yongning District, Nanning City from Yongning District Agriculture and Forestry Water Conservancy Bureau on June 7, 2017. The Company amortized such government grant according to the income and assets.

9. According to the document “Notice of the Office of the Agricultural Department of Hubei Province on the Implementation of Agricultural Machinery Purchase Subsidy in 2017” issued by the Office of the Agricultural Department of Hubei Province, Hubei Tianye Innovation Nonggu Fruit & Vegetable Co., Ltd., a subsidiary of the Company, received a subsidy of RMB19,530 for purchase of agricultural machinery from the Agricultural Water Bureau of Qujialing Management District of Jingmen City on December 11, 2017, and the company amortized this government grant according to the depreciation life of assets.

10. According to the Notice on Accelerating the Development of Headquarters Economy in Qujialing Management District , Hubei Iceman Foods Co., Ltd., a subsidiary of the Company, received a tax subsidy of RMB2,256,600 from the Finance Bureau of Qujialing Management District in Jingmen City, and the Company amortized the such grant according to the amortization life of assets.

11. According to YFF [2017] No. 7 “Notice on Issuing the First Batch of Scientific Research and Technology Development Projects (Subjects) in Yongning District, Nanning City in 2017” issued by the Finance Bureau of Yongning District, Nanning City, Guangxi Tianye Innovation Agricultural Technology Co., Ltd., a

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

subsidiary of the Company, received RMB33,000 of fund for research and demonstration project on key technologies of agricultural industry innovation and development in poor villages (slope) from the Treasury Centralized Payment Center in Yongning District, Nanning City on December 5, 2017; such fund was included in the current profits and losses after acceptance.

Note 26. Share capital

					**Changes **	**in **	**the current **	period, increase (+) and decrease (-)	period, increase (+) and decrease (-)
								Capitalization
			Opening	**New **	shares		Share	of capital			Closing
Item			balance		issued		donation	reserve	Others	Subtotal	balance
Number	of	shares	240,000,000.00								240,000,000.00

Note 27. Capital reserves

Item Capital premium Other capital reserves Total	Opening balance 244,109,726.71 2,190,367.24 246,300,093.95	Increase of current period	Decrease of current period	Closing balance 244,109,726.71 2,190,367.24
				246,300,093.95

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

										Closing balance		-2,632,212.00				-2,632,212.00																-2,632,212.00
				Less: carry-over	amount Changes		caused by	remeasurement	and re-definition	of benefit plan
							Attributable to	minority	shareholders	after tax
Amount of current period							Attributable to	the parent	Less: Income tax company after	expenses tax		-464,508.00 -2,632,212.00				-464,508.00 -2,632,212.00																-464,508.00 -2,632,212.00
	Less:	transferring	other	comprehensive	income recorded		in the previous	period into the	losses and profits	of current period
							Incurred amount	before income	tax of current	period		-3,096,720.00				-3,096,720.00																-3,096,720.00
										Opening balance
										Item	I. Other comprehensive income not allowed to be re-classified	into profits and losses	1. Changes caused by remeasurement and re-definition of benefit	plan	2. Other comprehensive profits that cannot be transferred into	profit and loss under the equity method	II. Other comprehensive income allowed to be re-classified into	profits and losses	1. Other comprehensive income that can be converted into losses	and profits under the equity law	2. Gains and losses from changes in fair value of	available-for-sale financial assets	3. Profits and losses of salable financial asset re-classified from	the investments which will be held to their maturity	4. Losses and profits of cash flow hedging in force	5. Balance arising from the translation of foreign currency	statements	6. Disposal income generated by a package of disposal	subsidiaries before losing control	7. Conversion of other assets into investment real estate	measured by fair value model	Total amount of other comprehensive incomes

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Note 29. Surplus reserve

			Opening	Increase of	Decrease of	Decrease of		Closing
Item			balance	current period	current period			balance
Statutory surplus reserves	10,523,286.40			518,816.78			11,042,103.18
Total	10,523,286.40			518,816.78			11,042,103.18
Note: The surplus reserve refers to the statutory surplus			reserve accrued according to 10% of the net profit of the parent
company.
Note 30. Undistributed profits
Changes in undistributed profits
					**Proportion **		of
					**withdrawal **		or
Item				Amount	allocation (%)
Undistributed profits at the end of last year		before		209,869,499.89	—
adjustment
Total undistributed profit at the beginning of					—
adjustment (increase +, decrease -)
Undistributed profits at the beginning of	the period			209,869,499.89	—
after adjustment
Add: net profit attributable to owner of parent				23,941,884.70	—
company in current period
Less: withdrawal of statutory surplus reserves				518,816.78	According to 10% of
						the parent	company’s
						net profit
Withdrawal of discretionary surplus reserves
Common stock dividends payable				4,800,000.00
Common stock dividends converted into share
capital
Other distributions to shareholders
Other profits distribution
Other internal carry-over of owner’s equity
Undistributed profits at the end of the period				228,492,567.81
**Note 31. Operating incomes and operating **			costs
1. Operating income, operating costs
		Amount of current period			Amount of last period
Item			Revenue	Cost		Revenue		Cost
Principal operating activities	258,435,753.75			181,881,408.84	202,888,674.85		126,895,163.45
Others					244,650.00			221,862.60
Total	258,435,753.75			181,881,408.84	203,133,324.85		127,117,026.05

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

2. Principal operating activities (by products)

Product name Raw fruit juice Quick-frozen fruit and vegetable Fresh fruit Others Total	Amount of current period Operating income Operating cost 103,217,845.09 64,136,028.46 48,377,896.55 33,684,603.56 15,421,293.00 6,255,783.93 91,418,719.11 77,804,992.89 258,435,753.75 181,881,408.84	Amount of last period Operating income Operating cost 104,616,357.55 64,460,536.48 50,202,394.78 32,897,826.68 29,909,081.72 14,080,122.30 18,160,840.80 15,456,677.99 202,888,674.85 126,895,163.45	Amount of last period Operating income Operating cost 104,616,357.55 64,460,536.48 50,202,394.78 32,897,826.68 29,909,081.72 14,080,122.30 18,160,840.80 15,456,677.99 202,888,674.85 126,895,163.45
			126,895,163.45

3. Operating income of the top five customers of the Company

Customer Guangdong Nanfenghang Agriculture Investment Co., Ltd. Fresh Fruit Juice (Note) Nongfu Spring (Note) Gerui Juice Industry (Tianjin) Co., Ltd. Wahaha (Note) Total	Amount of current period 40,149,013.99 23,494,532.65 18,937,855.37 9,226,457.99 8,331,538.08 100,139,398.08	Proportion in the Company’s total operating income (%) 15.54 9.09 7.33 3.57 3.23
		38.76

Contd.

Customer Fresh Fruit Juice (Note) Shandong Yipintang Industrial Co., Ltd. Nongfu Spring (Note) Zhumadian Yuliang Biological Technology Co., Ltd. Wahaha (Note) Total	Amount of last period 16,319,181.04 12,289,805.09 11,964,827.72 7,669,572.65 7,017,175.19 55,260,561.69	Proportion in the Company’s total operating income (%) 8.03 6.05 5.89 3.78 3.45
		27.20

– II-237 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Note: Fresh Fruit Juice, Nongfu Spring and Wahaha customers implemented centralized procurement, and the above sales amount includes related parties included in their centralized procurement.

Note 32. Taxes and surcharges

Taxes Urban construction tax Educational surcharges Local educational surcharges Stamp duties Building tax Land use tax Environmental protection tax Other taxes and costs Total	Amount of current period 615,340.97 369,204.50 238,470.51 185,626.70 1,516,825.82 1,041,688.01 11,969.43 8,113.66 3,987,239.60	Amount of last period 546,203.12 327,699.58 218,258.16 185,120.90 582,154.47 338,574.07 4,848.60
		2,202,858.90

Note 33. Selling expenses

Item Warehousing and logistics expenses Labor expenses Advertising and promotion expenses Others Total	Amount of current period 8,400,514.39 1,038,865.51 370,833.24 390,837.83 10,201,050.97	Amount of last period 7,527,043.21 713,394.17 239,399.48 421,844.78
		8,901,681.64

Note 34. General and administration expenses

Item Labor expenses Office expense Depreciation and amortization Agency service expenses Business reception expenses Traveling expenses Taxes Others Total	Amount of current period 11,017,566.84 2,166,964.72 9,353,188.10 4,888,656.41 909,582.87 639,302.05 133,583.80 2,520,796.17 31,629,640.96	Amount of last period 8,407,099.14 1,977,388.51 8,758,326.75 2,331,716.36 877,018.79 1,213,128.49 105,412.74 1,061,725.91
		24,731,816.69

– II-238 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Note 35. Research and development expenses

Item Direct input costs Personnel and labor cost Depreciation and amortization Equipment commissioning fee and testing fee Entrusted external R&D expenses Other Fee Total Note 36. Financial expenses Item Interest expense Less: interest revenue Net income and loss from exchange Others Total Note 37. Losses of asset impairment Item Bad-debt loss Impairment loss on fixed assets Impairment loss on goodwill Total	Amount of current period 387,158.22 1,076,479.23 71,553.18 796.70 194,774.76 1,730,762.09 Amount of current period 2,316,078.80 585,908.38 -5,162.77 43,109.61 1,768,117.26 Amount of current period 250,086.15 250,086.15	Amount of last period 480,828.99 1,164,514.53 131,076.58 258,862.91 43,943.91
		2,079,226.92
		Amount of last period 3,261,961.98 822,098.71 66,625.45 33,163.02
		2,539,651.74
		Amount of last period -136,610.41 52,940.40 2,749,838.60
		2,666,168.59

Note 38. Other incomes

1. Details of other incomes

Item Government grants Total	Amount of current period 5,949,486.80 5,949,486.80	Amount of last period 9,774,455.20
		9,774,455.20

– II-239 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

2. Governmental grants recorded into other income

Item Financial subsidy for the development of SME in local characteristic industries in 2012 Subsidy for the construction of agricultural product standardization demonstration base Infrastructure support subsidies allocated by the government Research and application subsidy project of key technology in coconut milk production stored at room temperature Subsidy for quality and safety demonstration area of export food and agricultural products in Hainan Province Financial support for newly planted fruits Supporting funds for infrastructure of Nonggu Science and Technology Park Project Special funds for the development of SME in the autonomous region in 2017 Star Award for Xiangliuxi Tropical Fruit Industry (Core) Demonstration Zone Subsidies for purchasing agricultural machinery Environmental impact assessment subsidy Grants for stable position Special funds subsidy for foreign trade and economic development Special funds for foreign trade and economic development subsidies for logistics projects outside the region Famous Brand Quality Award of Beihai Municipal Bureau of Quality and Technical Supervision “Beautiful Beihai Rural Construction” Fund of Hepu Industry and Information Technology Committee Exhibition subsidy for product exhibition Return of individual income tax service changes Tax refund Support funds for enterprises listed in 2017 Others Total	Amount of current period 80,000.00 215,384.62 3,644,465.88 65,934.12 108,685.51 148,453.56 543,284.06 1,953.00 16,562.00 7,136.00 110,000.00 50,000.00 40,000.00 4,832.00 7,726.59 905,069.46 5,949,486.80	Amount of last period Assets related Revenues related 80,000.00 Assets related 215,384.62 Assets related 3,644,465.88 Assets related 90,000.00 Assets related 38,461.57 Assets related 592,000.00 Assets related Assets related 12,371.13 Assets related 3,791,726.24 Assets related 651.00 Assets related 61,500.00 Revenues related 46,542.00 Revenues related 40,000.00 Revenues related 160,000.00 Revenues related Revenues related Revenues related Revenues related Revenues related Pertinent to Assets/Income 1,000,000.00 Revenues related 1,352.76 Revenues related 9,774,455.20

– II-240 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Note 39. Investment revenue

1. Details of investment revenue

Source of investment revenue Income from long-term equity investments under equity method Total	Amount of current period -3,219,330.68 -3,219,330.68	Amount of last period 1,152,130.51
		1,152,130.51

Note: The long-term equity investment revenue accounted by the equity method is the profits or losses that the Company should enjoy from the investment in Tianjin Fangfu Tianye Investment Center (Limited Partnership) according to the share agreed in the partnership agreement.

Note 40. Assets disposal income

Item Revenue from disposal of biological assets Income from fixed assets disposal Incomes of disposal of intangible assets Total Note 41. Non-operating income Item Government grants not related to the daily activities of the Company Income from liquidated damages Unpayable payment Penalty income Others Total	Amount of current period -1,868,405.19 -332,511.42 -2,200,916.61 Amount of current period 225,000.00 25,885.42 100,000.00 900.00 256.04 352,041.46	Amount of last period 42,750.85 26,382.87
		69,133.72
		Amount of last period 33.98
		33.98

1. Amount included in non-recurring profits and losses of each period

Item Government subsidiaries not related to the daily activities of the Company Income from liquidated damages Unpayable payment Penalty income Others Total	Amount of current period 225,000.00 25,885.42 100,000.00 900.00 256.04 352,041.46	Amount of last period 33.98
		33.98

– II-241 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

2. Government grants included in current profits and losses

Subsidy item Award for three-star rural tourist area Training subsidy for agricultural technology promotion Fund subsidy for drought relief Total	Amount of current period 200,000.00 15,000.00 10,000.00 225,000.00	Amount of last period Pertinent to Assets/Income Revenues related Revenues related Revenues related

Note 42. Non-operating expenses

Item Donation outlay Penalties and fines for delaying payment Scrap loss of current assets Scrap loss of non-current assets Others Total	Amount of current period 100,000.00 670.52 450,363.42 18,681.00 29,189.57 598,904.51	Amount of last period 5,000.00 7,307.88 546,784.81 149,897.74
		708,990.43

1. The amounts included in the non-recurring profits and losses of each period are listed as follows:

Item Donation outlay Penalties and fines for delaying payment Scrap loss of current assets Scrap loss of non-current assets Others Total	Amount of current period 100,000.00 670.52 450,363.42 18,681.00 29,189.57 598,904.51	Amount of last period 5,000.00 7,307.88 546,784.81 149,897.74
		708,990.43

Note 43. Income tax expense

	Amount of	Amount of
Item	current period	last period
Current tax expenses	3,084,603.10	1,332,105.39
Deferred income tax expense	243,336.54	-233,116.67
Total	3,327,939.64	1,098,988.72

– II-242 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

1. Reconciliation of income tax expenses to the accounting profit

	Amount of	Amount of
Item	current period	last period
Total profits	27,269,824.34	43,181,657.30
Income tax expense calculated at statutory/applicable tax rate	4,090,473.65	5,435,257.60
Effect of different tax rates applicable to subsidiaries	2,726,982.43	2,854,156.07
Effect of adjustment to income tax of prior periods	134,249.88	-352,447.59
Effect of non-taxable income	-4,779,167.37	-10,444,082.90
Effect of non-deductible costs, expenses and losses	190,929.10	1,899,251.13
Effect of using deductible losses for which deferred tax
assets were previously not recognised	-250,020.09
Effect of deductible temporary differences or deductible
losses unrecognized in the current period	1,214,492.04	1,706,854.41
Income tax expense	3,327,939.64	1,098,988.72

Note 44. Notes to items of cash flow statement

1. Cash received relating to other operating activities

Item Transaction payment Government grants Credit interest Other income Total	Amount of current period 777,523.81 1,361,256.59 585,908.38 26,641.46 2,751,330.24	Amount of last period 130,836.60 10,374,278.00 822,098.71
		11,327,213.31

2. Cash paid relating to other operating activities

Item Transaction payment Cash payment Reserve fund Total	Amount of current period 10,211,739.17 20,186,028.14 102,638.33 30,500,405.64	Amount of last period 884,280.84 13,373,147.99 590,449.61
		14,847,878.44

3. Cash paid relating to other financing activities

Item IPO expenses Loan deposit Total	Amount of current period 5,000,000.00 5,000,000.00	Amount of last period 2,253,547.26
		2,253,547.26

– II-243 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Note 45. Supplementary information to the cash flow statement

1. Supplementary information to the cash flow statement

	Amount of	Amount of
Supplementary materials	current period	last period
1. Cash flows converted from net profits for business
operation activities:
Net Profit	23,941,884.70	42,082,668.58
Add: provision for asset impairment	250,086.15	2,666,168.59
Depreciation of fixed assets, depletion of oil and gas assets,
and depreciation of productive biological assets	20,706,105.43	20,173,396.83
Amortization of intangible assets	1,840,225.16	1,847,237.60
Amortization of long-term deferred expenses	5,459,627.72	4,517,660.52
Losses on the disposal of fixed assets, intangible assets and
other long-term assets (gain is indicated by “-”)	2,200,916.61	80,764.02
Losses on retirement of fixed assets (gain is indicated by “-”)	18,681.00
Loss on changes in fair value (gain is indicated by “-”)
Financial expenses (gain is indicated by “-”)	3,216,078.80	3,471,919.98
Losses arising from investments (gain is indicated by “-”)	3,219,330.68	-1,152,130.51
Decrease in deferred tax assets (increase is indicated by “-”)	129,068.39	451,898.72
Increase in deferred tax liabilities (decrease is indicated by
“-”)	114,268.15
Decrease in inventory (increase is indicated by “-”)	4,278,777.47	-7,794,899.72
Decrease in receivables from operating activities (increase is
indicated by “-”)	4,710,678.16	4,778,333.31
Increase in payables from operating activities (decrease is
indicated by “-”)	-19,073,117.34	3,347,621.01
Others
Net cash flows from operating activities	51,012,611.08	74,470,638.93
2. Significant investing and financing activities that do not
involve cash receipts and payments:
Conversion of debt into capital
Convertible bonds due within one year
Fixed assets acquired under finance lease
3. Net changes in cash and cash equivalents:
Closing balance of cash	214,674,020.33	211,052,482.61
Less: opening balance of cash	211,052,482.61	325,379,442.47
Add: closing balance of cash equivalents
Less: opening balance of cash equivalent
Net increase in cash and cash equivalents	3,621,537.72	-114,326,959.86
2. Composition of cash and cash equivalent
	Amount of	Amount of
Item	current period	last period
I. Cash	214,674,020.33	211,052,482.61
Including: cash on hand	5,182.32	17,127.50
Bank deposit ready for payment at any time	214,658,850.80	211,035,355.11
Other monetary fund ready for payment at any time	9,987.21
II. Cash equivalents
Including: bond investments due in three months
III. Closing balance of cash and cash equivalents	214,674,020.33	211,052,482.61
Including: restricted cash and cash equivalents used by parent
company or subsidiaries	5,000,000.00

– II-244 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Note 46. Assets with restricted ownership or right of use

Item Other monetary funds Fixed assets Construction in progress Intangible assets Total	Closing book value Reasons for being restricted 5,000,000.00 Pledge loans 74,948,360.27 Mortgage loan 42,635,026.75 Mortgage loan 31,158,042.53 Mortgage loan 153,741,429.55

Note: Please refer to Note VI “Note 17 Short-term loan” for details of mortgage loan.

Note 47. Government grants

1. Basic information of government subsidies initially recognized in this period

Subsidy item Grants for stable position Special funds subsidy for foreign trade and economic development Special funds for foreign trade and economic development subsidies for logistics projects outside the region Famous Brand Quality Award of Beihai Municipal Bureau of Quality and Technical Supervision “Beautiful Beihai Rural Construction” Fund of Hepu Industry and Information Technology Committee Exhibition subsidy for product exhibition Return of individual income tax service changes Tax refund Award for three-star rural tourist area Training subsidy for agricultural technology promotion Fund subsidy for drought relief Loan with discounted interest Total	Amount 16,562.00 7,136.00 110,000.00 50,000.00 40,000.00 4,832.00 7,726.59 3,130,928.00 200,000.00 15,000.00 10,000.00 900,000.00 4,492,184.59	Assets related Deferred income Offset of the book value of assets 2,256,600.00 2,256,600.00	Deferred income	Revenues related Other incomes Non-operating income 16,562.00 7,136.00 110,000.00 50,000.00 40,000.00 4,832.00 7,726.59 874,328.00 200,000.00 15,000.00 10,000.00 1,110,584.59 225,000.00	Amount for cost offset Actually received? Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes 900,000.00 Yes 900,000.00

– II-245 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

2. Government grants included in current profits and losses

Subsidy item Type Financial subsidy for the development of SME in local characteristic industries in 2012 Financial appropriation Subsidy for the construction of agricultural product standardization demonstration base Financial appropriation Infrastructure support subsidies allocated by the government Financial appropriation Subsidy for quality and safety demonstration area of export food and agricultural products in Hainan Province Financial appropriation Supporting funds for infrastructure of Nonggu Science and Technology Park Project Financial appropriation Special funds for the development of SME in the autonomous region in 2017 Financial appropriation Star Award for Xiangliuxi Tropical Fruit Industry (Core) Demonstration Zone Financial appropriation Subsidies for purchasing agricultural machinery Financial appropriation Grants for stable position Financial appropriation Special funds subsidy for foreign trade and economic development Financial appropriation Special funds for foreign trade and economic development subsidies for logistics projects outside the region Financial appropriation Famous Brand Quality Award of Beihai Municipal Bureau of Quality and Technical Supervision Financial appropriation “Beautiful Beihai Rural Construction” Fund of Hepu Industry and Information Technology Committee Financial appropriation Exhibition subsidy for product exhibition Financial appropriation Return of individual income tax service changes Others Tax refund Tax refund Award for three-star rural tourist area Others Training subsidy for agricultural technology promotion Financial appropriation Fund subsidy for drought relief Financial appropriation Loan with discounted interest Financial discount Total	Included in other revenues 80,000.00 215,384.62 3,644,465.88 65,934.12 108,685.51 148,453.56 543,284.06 1,953.00 16,562.00 7,136.00 110,000.00 50,000.00 40,000.00 4,832.00 7,726.59 905,069.46 5,949,486.80	Included in non-operating income 200,000.00 15,000.00 10,000.00 225,000.00	Amount for cost offset 900,000.00
			900,000.00

– II-246 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

VII. Changes of the Scope of Consolidation

(I) Business combination involving entities not under common control

During the reporting period, there was no business combination involving entities not under common control.

(II) Business combination involving entities under common control

During the reporting period, there was no business combination under common control.

(III) Reverse acquisition

During the reporting period, there was no reverse acquisition.

(IV) Disposal of subsidiaries

During the reporting period, the Company did not dispose of its subsidiaries.

(V) Changes in the consolidation scope due to other reasons

During the reporting period, the Company did not change the scope of consolidation due to other reasons.

VIII. Equity in other Entities

(I) Equity in subsidiaries

	Main place of	Registered		**Shareholding **	ratio (%)	Acquisition
Subsidiary	business	address	Business nature	Directly	Indirectly	method
Hainan Dachuan Food Co., Ltd.	Ding’an, Hainan	Ding’an, Hainan	Processing and	100.00		Business
			sales of			combination
			agricultural			not under the
			products			same control
Guangxi Tianye Innovation	Nanning,	Nanning,	Agricultural	100.00		Established
Agricultural Technology Co.,	Guangxi	Guangxi	planting and			through
Ltd.			sales,			investment
			technology
			R&D
			promotion and
			achievement
			transfer
Hainan Tianye Drinks Food	Ding’an, Hainan	Ding’an, Hainan	Sales of fruit	100.00		Established
Sales Co. Ltd.			food and drink			through
						investment
Hubei Iceman Foods Co., Ltd.	Jingmen, Hubei	Jingmen, Hubei	Processing and	100.00		Business
			sales of			combination
			agricultural			not under the
			products			same control
Hubei Tianye Nonggu Biological	Jingmen, Hubei	Jingmen, Hubei	R&D, production	100.00		Established
Technology Co., Ltd.			and sales of			through
			agricultural			investment
			products

– II-247 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

	Main place of	Registered		**Shareholding **	ratio (%)	Acquisition
Subsidiary	business	address	Business nature	Directly	Indirectly	method
Hubei Tianye Innovation	Jingmen, Hubei	Jingmen, Hubei	Agricultural	100.00		Established
Nonggu Fruit & Vegetable			planting and			through
Co., Ltd.			sales			investment

(II) Equity in associates

1. Significant associates

• (1) General information

						Accounting
	Main place of	Registered	Business	**Shareholding **	ratio (%)	treatment for
Name of associates	business	address	nature	Directly	Indirectly	associates
Tianjin Fangfu Tianye	Tianjin	Tianjin	Investment in	99.00		Equity method
Investment Center (Limited			modern
Partnership)			agriculture,
			food industry,
			commercial
			chain industry
			and mobile
			internet
			industry;
			investment
			consulting.

• (2) Explanation that the shareholding ratio in the associated enterprise is different from the voting right ratio

Tianjin Fangfu Tianye Investment Center (Limited Partnership) has a total investment of RMB100 million. As a limited partner, the Company contributes RMB99 million with its own funds, accounting for 99.00% of the total investment of the partnership. As a general partner, Beijing Fangfu Capital Management Co., Ltd. contributes RMB1 million, accounting for 1.00% of the total investment of the partnership. According to the partnership agreement, Tianjin Fangfu Tianye Investment Center (Limited Partnership) has set up an Investment Decision-making Committee, which consists of five members, including four representatives appointed by the general partner and one member elected by the limited partner. Investment Decision-making Committee is responsible for the final decision-making of partnership investment, and the investment decision-making can only be implemented by unanimous approval of all members. The resolutions of the Investment Decision-making Committee shall be implemented by the general partner and shall be legally binding on the partnership enterprise. The voting system of the Investment Decision-making Committee is one vote for one person, and the Investment Decision-making Committee shall implement the related party avoidance voting system in the process of investment decision-making. Therefore, the voting ratio of the Company to Tianjin Fangfu Tianye Investment Center (Limited Partnership) is different from the shareholding ratio.

– II-248 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

2. Main financial information of important associates

	December 31,	December 31,
	2018/2018	2017/2017
	Tianjin	Tianjin
	Fangfu Tianye	Fangfu Tianye
	Investment	Investment
	Center	Center
	(Limited	(Limited
Item	Partnership)	Partnership)
Current assets	2,741,574.39	11,171,023.56
Non-current assets	16,872,000.00	29,200,000.00
Total assets	19,613,574.39	40,371,023.56
Current liabilities
Non-current liabilities
Total liabilities
Minority shareholders’ equity
Shareholder’s equity attributable to the parent company	19,613,574.39	40,371,023.56
Net asset share calculated in accordance with shareholding
ratio	18,924,216.78	39,967,313.32
Adjustment items
— Goodwill
— Unrealized profits in internal transaction
— Others	-689,357.61	-340,174.47
Book value of equity investment in associated enterprises	18,924,216.78	39,627,138.80
Fair value of equity investment with public offer
Operating income
Net Profit	-3,251,849.17	1,395,552.90
Net profits under discontinued operation
Other comprehensive income	757,000.00	4,810,000.00
Total comprehensive income	-6,379,849.17	6,205,552.90
Dividends received from associated enterprises in the current
period

Note: According to the partnership agreement, the investment revenue of Tianjin Fangfu Tianye Investment Center (Limited Partnership) is distributed according to individual project, and the investment revenue of individual projects = the profit distribution part of the investee + the revenue realized by the investee, assets or shares through listing, resale, secondary acquisition, etc. — the investment cost of individual project; loss sharing: (1) If the amount of loss incurred due to normal investment matters is not greater than the actual contribution of the partner, the loss shall be borne according to the actual contribution ratio of the partner. (2) If the loss incurred due to normal investment matters is greater than the actual contribution of the partners, it shall be borne by the general partners, unless otherwise agreed by all partners. (3) All losses due to reasons other than normal investment matters shall be borne by the general partner, unless otherwise agreed by all partners.

IX. Risk Disclosure Related to Financial Instruments

The Board of Directors of the Company is fully responsible for the determination of risk management objectives and policies, and bears the ultimate responsibility for them. The management manages and monitors these risks to ensure that the risks are controlled within a limited range. The Company’s main financial instruments include notes receivable, accounts receivable, accounts payable, loans, etc. Please refer to the relevant items in this note for details of various financial instruments. The risks related to these financial instruments and the risk management policies adopted by the Company to reduce these risks are as follows:

– II-249 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

The Company’s business activities will face various financial risks: credit risk, liquidity risk and market risk (mainly foreign exchange risk and interest rate risk). The Company’s overall risk management plan aims at the unpredictability of the financial market and strives to reduce the potential adverse impact on the Company’s financial performance.

The objective of risk management of the Company is to strike a proper balance between risks and benefits, reduce the negative impact of risks on the operating performance of the Company to the lowest level, and maximize the interests of shareholders and other equity investors. Based on this risk management objective, the basic strategy of the Company’s risk management is to identify and analyze various risks faced by the company, establish an appropriate risk tolerance bottom line, supervise various risks in a timely and reliable manner, and formulate risk management policies to reduce risks as much as possible without excessively affecting the competitiveness and resilience of the Company.

(I) Credit risk

The credit risk of the Company mainly comes from monetary funds, notes receivable, accounts receivable and other receivables. The management has formulated appropriate credit policies and continuously monitored the exposure of these credit risks.

The monetary funds held by the Company are mainly deposited in large commercial banks and other financial institutions, and the management thinks that these commercial banks have high reputation and asset status and low credit risk.

For notes receivable, accounts receivable and other receivables, the Company sets relevant policies to control credit risk exposure. The Company evaluates the customer’s credit qualification and sets the corresponding credit period based on the customer’s financial status, the possibility of obtaining guarantee from a third party, credit history and other factors such as the current market situation. The Company will regularly monitor customer credit records to ensure that the overall credit risk of the Company is within the controllable range.

As of December 31, 2018, the accounts receivable of the top five customers of the Company accounted for 43.36% of the total accounts receivable of the Company. The maximum credit exposure of the Company is the book value of each financial asset in the balance sheet. The Company has not provided any other guarantee that may expose the Company to credit risk.

(II) Liquidity risk

Liquidity risk refers to the risk that the Company cannot obtain sufficient funds in time to meet the needs of business development or pay due debts and other payment obligations.

In order to control this risk, the Company comprehensively uses various financing means such as bank loans and adopts a combination of long-term and short-term financing to optimize the financing structure and maintain the continuity and flexibility of financing. The Company has obtained bank credit lines from a number of banks to meet working capital requirements and capital expenditure.

– II-250 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

As of December 31, 2018, the financial assets and financial liabilities of the Company are listed as follows with undiscounted contract cash flow by maturity date:

			**Closing **	balance
	Net book	Original book
Item	amount	value	<1 year	1-2 years	2-3 years	>3 years
Monetary funds	219,674,020.33	219,674,020.33	219,674,020.33
Accounts receivable	42,295,833.29	44,994,500.60	39,212,043.24	4,983,360.36	799,097.00
Other receivables	10,166,089.03	10,878,087.64	10,292,375.76	306,500.00	14,380.69	264,831.19
Subtotal	272,135,942.65	275,546,608.57	269,178,439.33	5,289,860.36	813,477.69	264,831.19
Short-term loans	101,000,000.00	101,000,000.00	101,000,000.00
Accounts payable	15,537,891.19	15,537,891.19	13,247,435.00	1,023,836.71	552,693.07	713,926.41
Other payables	3,787,778.19	3,787,778.19	3,055,329.55	302,349.40	272,856.61	157,242.63
Subtotal	120,325,669.38	120,325,669.38	117,302,764.55	1,326,186.11	825,549.68	871,169.04

As of December 31, 2017, the financial assets and financial liabilities of the Company are listed as follows with undiscounted contract cash flow by maturity date:

			**Opening **	balance
	Net book	Original book
Item	amount	value	<1 year	1-2 years	2-3 years	>3 years
Monetary funds	211,052,482.61	211,052,482.61	211,052,482.61
Accounts receivable	54,959,777.56	57,944,561.81	56,196,638.71	1,747,523.10		400.00
Other receivables	1,002,578.02	1,178,373.54	888,161.66	14,380.69	204,831.19	71,000.00
Subtotal	267,014,838.19	270,175,417.96	268,137,282.98	1,761,903.79	204,831.19	71,400.00
Short-term loans	66,000,000.00	66,000,000.00	66,000,000.00
Accounts payable	28,325,710.25	28,325,710.25	25,677,009.01	1,285,274.95	531,005.03	832,421.26
Other payables	2,705,266.75	2,705,266.75	1,918,180.90	506,863.22	114,510.00	165,712.63
Subtotal	97,030,977.00	97,030,977.00	93,595,189.91	1,792,138.17	645,515.03	998,133.89

(III) Market risk

Market risk refers to the risk that the fair value or future cash flow of financial instruments will fluctuate due to the change of market price, which mainly includes foreign exchange risk and interest rate risk.

1. Foreign exchange risk

During the reporting period, the Company’s operations gradually faced foreign countries, and its export business was mainly settled in US dollars. The foreign currency assets and liabilities and future foreign currency transactions (the foreign currency assets and liabilities and foreign currency transactions are mainly denominated in US dollars) recognized by the Company have foreign exchange risks. The financial department of the Company is responsible for monitoring the scale of foreign currency transactions and foreign currency assets and liabilities of the Company to minimize the foreign exchange risks faced; therefore, the Company may sign forward foreign exchange contracts or currency swap contracts to avoid foreign exchange risks.

• (1) The Company has not signed any forward foreign exchange contracts or currency swap contracts this year;

– II-251 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

• (2) As of December 31, 2018, the amount of foreign currency financial assets and foreign currency financial liabilities held by the Company converted into RMB is as follows:

			**Closing **	balance
Item		USD item	EUR item	HKD item	Total
Monetary	funds	235,460.02			235,460.02
Subtotal		235,460.02			235,460.02
Contd.:
			**Opening **	balance
Item		USD item	EUR item	HKD item	Total
Monetary	funds	1,378,205.09			1,378,205.09
Subtotal		1,378,205.09			1,378,205.09

2. Interest rate risk

The Company’s interest rate risk is mainly caused by the financial liabilities with floating interest rate of bank loans, which make the Company face cash flow interest rate risk, while the financial liabilities with fixed interest rate make the Company face fair value interest rate risk. The Company determines the relative proportion of fixed and floating interest rate contracts based on the prevailing market environment.

The financial department of the Company continuously monitors the interest rate level of the Company. Rising interest rate will increase the cost of newly added interest-bearing debt and the interest expense of the company’s unpaid interest-bearing debt with floating interest rate, and will have a significant adverse impact on the Company’s financial performance. The management will make timely adjustments according to the latest market conditions, which may be the arrangement of interest rate swap to reduce interest rate risk.

• (1) During the reporting period, the Company had no interest rate swap arrangement.

X. Financial Instruments Measured at Fair Value

(I) Financial instruments measured at fair value

As of December 31, 2018, the Company had no financial instruments measured at fair value.

(II) Fair value of financial assets and financial liabilities not measured at fair value

Financial assets and liabilities not measured at fair value mainly include monetary funds, notes receivable, receivables, short-term loans, payables, non-current liabilities due within one year and long-term loans.

The difference between book value and fair value of above financial assets and financial liabilities of the Company not measured at fair value is very small.

– II-252 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

XI. Related Parties and Transactions

(I) Actual controller of the Company

			Shareholding
Name of the company or		Organization code or ID	ratio to the	Voting right ratio
natural person	Related relationship	number	Company	to the Company
			(%)	(%)
Yao Jiuzhi	One of the actual controllers	44522219710503****	17.7963	17.7963
Yao Linhao	One of the actual controllers	44522219670725****	3.075	3.075
Menghai Zhicun Gaoyuan Tea	Company controlled by Yao	915328223096945813	4.2396	4.2396
Industry Co., Ltd.	Jiuzhuang
Yao Jiuzhuang	One of the actual controllers	44522219680626****

Notes:

1. The above shareholding ratio is the shareholding ratio as of December 31, 2018.

2. Yao Jiuzhi, Yao Linhao and Yao Jiuzhuang are the actual joint controllers of the Company. Yao Jiuzhi, Yao Linhao and Yao Jiuzhuang signed the Concerted Action Agreement on September 26, 2012, in which the three parties agreed to jointly exercise major decision-making power as concerted action party. If the three parties could not reach an agreement on the matters under consideration, Yao Jiuzhi’s opinion and voting intention shall prevail.

(II) See Note VII (I) “Interests in subsidiaries” for details of subsidiaries of the Company

(III) Information on the Company’s associated enterprises

See Note VIII (II) “Interests in associated enterprises” for details of important associated enterprises of the Company.

(IV) Other related parties

Names of other related parties Relationship between other related parties and the Company

• Menghai Zhicun Gaoyuan Tea Industry Co., Ltd.

Company controlled by shareholders and actual controllers

Shan Dan

Directors, general managers and shareholders

• Guangxi Tianye Science and Technology Seed Industry Co., Ltd.

Company controlled by shareholders and actual controllers

• Guangxi Tianye Ecotourism Health Park Management Co., Ltd.

Subsidiaries of companies controlled by shareholders and actual controllers

– II-253 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

(V) Related parties’ transactions

1. For the subsidiaries under control relationship and included in the scope of consolidated financial statements, the transactions among them and their parent companies have been offset.

2. Related transactions by selling products and providing labors

Related parties Connected transaction contents Guangxi Tianye Science and Technology Seed Industry Co., Ltd. Drinks sales Total	Amount of current period (including tax) 3,071.00 3,071.00	Amount of last period (including tax)

3. Related transactions on purchase of goods and labor service acceptance

Related parties Connected transaction contents Guangxi Tianye Ecotourism Health Park Management Co., Ltd. Training Services Total	Amount of current period (including tax) 21,685.00 21,685.00	Amount of last period (including tax)

4. Related guarantee

The Company as the warrantee

				Guarantee
	Amount	Start date of	Expiring date of	performed
Guarantor	guaranteed	guarantee	guarantee	fully or not
Yao Jiuzhi	36,000,000.00	14/SEP/2017	September 14, 2019	No
Yao Jiuzhi	75,000,000.00	December 19, 2018	December 19, 2021	No

Note: In September 2017, Yao Jiuzhi, the chairman of the Company, signed a guarantee contract ((DT) 2017 BZ No. DC002) with Haikou Longhua Sub-branch of Bank of Communications for providing joint liability guarantee for the loan contract ((DT) 2017 LDZ No. DC001) of RMB30 million signed by Hainan Dachuan Food Co., Ltd. (a subsidiary of the Company) and Haikou Longhua Sub-branch of Bank of Communications; the scope of guarantee includes principal, interest, compound interest, penalty interest, liquidated damages, compensation for damage and expenses for realizing creditor’s rights under the main contract. 2) In December 2018, Hainan Dachuan Food Co., Ltd., a subsidiary of the Company, signed a loan contract (HKNSS/H (Z) 2018 ZGDKZ (040)) of RMB75 million with Haikou Rural Commercial Bank Co., Ltd., and the guarantor was Tianye Innovation Corporation, Yao Yuzhi and Hubei Tianye Nonggu Biological Technology Co., Ltd. And it also signed three guarantee contracts (HKNSS/H (Z) 2018 GBZ No. 040-1, HKNSS/H (Z) 2018 GBZ No. 040-2, HKNSS/H (Z) 2018 GBZ No. 040-3), and the scope of guarantee includes principal, interest, compound interest, penalty interest, liquidated damages, compensation for damage and expenses for realizing creditor’s rights under the main contract.

– II-254 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

5. Balance of related parties’ receivables and payables

(1) The Company’s receivables from related parties

Closing balance Opening balance Bad-debt Bad-debt Name Related parties Book balance provision Book balance provision Accounts Guangxi Tianye Science receivable and Technology Seed Industry Co., Ltd. 3,071.00 153.55 (2) The Company’s payables to related parties Closing Opening Name Related parties balance balance Other payables Guangxi Tianye Ecotourism Health Park Management Co., Ltd. 21,685.00

XII. Share-based Payment

During the reporting period, no matters related to share-based payment occurred in the Company.

XIII. Commitments and Contingencies

(I) Major commitments

1. The signed lease contracts being or to be performed and their financial impact

Since 2013, Guangxi Tianye Innovation Agricultural Technology Co., Ltd., a subsidiary of the Company, has successively signed land lease agreements with villagers in Guangliang Village, Pumiao Town, Yongning District, Nanning City. The details of the contracts are as follows:

				Contract or
				subcontract			Payment method
Lessor			Land location	period	Land area (mu)	Contract amount	of rent
Villagers	in	Guangliang	Guangliang	10 years/13	9,406.85	The rent is	4-year period and
Village			Village, Pumiao	years/16		RMB520/mu/year and	5-year period
			Town, Yongning	years/25		paid once every four
			District,	years/39 years		years, which is
			Nanning City			implemented according
						to the contract

Except for the above commitments, as of December 31, 2018, the Company had no other major commitments that should be disclosed but not disclosed.

(II) Contingencies at the balance sheet date

The Company has no significant contingencies to be disclosed as of December 31, 2018.

– II-255 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

XIV. Events after the Balance Sheet Date

(I) Important non-adjustment events

1. Disposal of subsidiaries

Hubei Iceman Foods Co., Ltd., a subsidiary of the Company, suffered a major flood in July 2016, which caused the inventory of Hubei Iceman Foods Co., Ltd. to be damaged and its equipment and houses to be soaked in water. The Company decided to stop the production and operation of Hubei Iceman Foods Co., Ltd. As of the reporting date of this financial statement, Hubei Iceman Foods Co., Ltd. was still in a state of suspension of production.

On March 20, 2018, Hubei Iceman Foods Co., Ltd., a subsidiary of the Company, and Jingmen Qujialing Urban and Rural Construction Investment Co., Ltd. signed an asset acquisition framework agreement. According to the agreement, Hubei Iceman Foods Co., Ltd. plans to transfer the land and factory buildings (with price no less than RMB47 million) to Jingmen Qujialing Urban and Rural Construction Investment Co., Ltd. As of the reporting date of this financial statement, no formal agreement has been signed for sale of assets of Hubei Iceman Foods Co., Ltd., a subsidiary of the Company, the completion time of the transaction is difficult to predict under the current circumstances.

2. Important external investment

The 19th meeting of the second Board of Directors of the Company was held on July 30, 2018. The meeting deliberated and approved the proposal of setting up a wholly-owned subsidiary of Guangxi Tianye Innovation Agricultural Technology Co., Ltd. The name of the wholly-owned subsidiary is Guangxi Xiangliuhu Tourism Industry Investment Co., Ltd., with a registered capital of RMB2 million. The wholly-owned subsidiary has completed the industrial and commercial registration on January 9, 2019 and obtained the Business License of Enterprise Legal Person issued by Yongning District Administration for Industry and Commerce of Nanning City.

XV. Other Important Events

(I) Events not yet contributed by the associated enterprises

According to the partnership agreement of Tianjin Fangfu Tianye Investment Center (Limited Partnership), Tianjin Fangfu Tianye Investment Center (Limited Partnership) has a total investment of RMB100 million. As a limited partner, the Company contributes RMB99 million with its own funds, accounting for 99.00% of the total investment of the partnership. As a general partner, Beijing Fangfu Capital Management Co., Ltd. contributes RMB1 million, accounting for 1.00% of the total investment of the partnership.

At the end of 2016, the company actually contributed RMB50.7 million, accounting for 99.00% of the actual contribution, and Beijing Fangfu Capital Management Co., Ltd. actually contributed RMB512,100, accounting for 1.00% of the actual contribution. The partnership agreement did not stipulate the subscription period. According to the resolution of the first meeting of all partners of Tianjin Fangfu Tianye Investment Center (Limited Partnership) in 2017, it was agreed to refund the Company’s capital contribution of RMB12 million; according to the resolution of the first meeting of all partners of Tianjin Fangfu Tianye Investment Center (Limited Partnership) in 2018, it is agreed to refund the Company’s contribution of RMB14,377,600. As of the approved reporting date of this financial statement, the Company has actually contributed RMB24,322,400, with RMB74,677,600 to be contributed.

– II-256 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

XVI. Notes to Main Items of the Parent Company’s Financial Statements

Note 1. Notes and accounts receivable

Item Notes receivable Accounts receivable Total	Closing balance 15,580,194.18 15,580,194.18	Opening balance 22,893,672.26
		22,893,672.26

1. Disclosure of accounts receivable by category

Category Accounts receivable with individually significant amount and individual provision for bad debt Accounts receivables with bad-debt provision withdrawn through credit risk characteristic combination Including: Accounts receivable for withdrawing bad-debt provision by aging analysis method Accounts receivable not withdrawing bad-debt provision Accounts receivable without individually significant amounts but individual provision for bad debt Total Contd.: Category Accounts receivable with individually significant amount and individual provision for bad debt Accounts receivables with bad-debt provision withdrawn through credit risk characteristic combination Including: Accounts receivable for withdrawing bad-debt provision by aging analysis method Accounts receivable not withdrawing bad-debt provision Accounts receivable without individually significant amounts but individual provision for bad debt Total	Book balance Amount Proportion (%) 16,589,997.32 100.00 16,525,047.28 99.61 64,950.04 0.39 16,589,997.32 100.00 Book balance Amount Proportion (%) 24,053,072.32 100.00 22,273,518.17 92.60 1,779,554.15 7.40 24,053,072.32 100.00	Closing balance Bad-debt provision Amount Proportion (%) 1,009,803.14 6.09 1,009,803.14 6.11 1,009,803.14 6.09 Opening balance Bad-debt provision Amount Proportion (%) 1,159,400.06 4.82 1,159,400.06 5.21 1,159,400.06 4.82	Book value 15,580,194.18 15,515,244.14 64,950.04
			15,580,194.18
			Book value 22,893,672.26 21,114,118.11 1,779,554.15
			22,893,672.26

– II-257 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

• (1) Receivables for withdrawing bad-debt provision by aging analysis method in combination

Aging <1 year 1-2 years 2-3 years Total Contd.: Aging <1 year 1-2 years 2-3 years 3-4 years 4-5 years >5 years Total	Closing balance Accounts receivable 13,330,649.52 3,075,243.36 119,154.40 16,525,047.28 Opening balance Accounts receivable 21,359,035.17 914,483.00 22,273,518.17	Bad-debt provision 666,532.48 307,524.34 35,746.32 1,009,803.14 Bad-debt provision 1,067,951.76 91,448.30 1,159,400.06	Proportion (%) 5.00 10.00 30.00
			6.11
			Proportion (%) 5.00 10.00
			5.21

• (2) Accounts receivable not withdrawing bad-debt provision in combination

Organization name Hubei Tianye Nonggu Biological Technology Co., Ltd. Guangxi Tianye Innovation Agricultural Technology Co., Ltd. Total	Accounts receivable 44,374.16 20,575.88 64,950.04	Closing balance Bad-debt provision Proportion Reason for withdrawal (%) No withdrawal without risk for the amount of related parties within the scope of consolidation No withdrawal without risk for the amount of related parties within the scope of consolidation

– II-258 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

2. Provision, recovery or reversal and write-off of provision for bad-debt in current period In current period, the provision for bad debts of accounts receivable is RMB149,596.92.

3. There is no write-off of accounts receivable in current period.

4. Top five accounts receivable based on debtors

Organization name Gerui Juice Industry (Tianjin) Co., Ltd. Hangzhou Haiguo Trading Co., Ltd. Shanghai Yuguo Food Sales Co., Ltd. Beijing Haitai Foods Co., Ltd. Wuxi Chengbao Foods Co., Ltd. Total Note 2. Other receivables Item Interests receivable Dividends receivable Other receivables Total	Closing balance Relationship with the Company Proportion in closing balance of accounts receivable Provision for bad-debt (%) 2,583,500.00 Non-affiliated party 15.57 129,175.00 2,137,380.00 Non-affiliated party 12.88 109,659.00 1,084,760.00 Non-affiliated party 6.54 54,238.00 972,000.00 Non-affiliated party 5.86 97,200.00 939,120.00 Non-affiliated party 5.66 46,956.00 7,716,760.00 46.51 437,228.00 Closing balance Opening balance 283,921,064.71 284,122,869.33 283,921,064.71 284,122,869.33	Closing balance Relationship with the Company Proportion in closing balance of accounts receivable Provision for bad-debt (%) 2,583,500.00 Non-affiliated party 15.57 129,175.00 2,137,380.00 Non-affiliated party 12.88 109,659.00 1,084,760.00 Non-affiliated party 6.54 54,238.00 972,000.00 Non-affiliated party 5.86 97,200.00 939,120.00 Non-affiliated party 5.66 46,956.00 7,716,760.00 46.51 437,228.00 Closing balance Opening balance 283,921,064.71 284,122,869.33 283,921,064.71 284,122,869.33	Provision for bad-debt 129,175.00 109,659.00 54,238.00 97,200.00 46,956.00
			437,228.00
		284,122,869.33

– II-259 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

1. Disclosure of other receivables by category

Category Other receivables with individually significant amount and individual provision for bad debt Other receivables with bad-debt provision withdrawn through credit risk characteristic combination Including: Other receivables for withdrawing bad-debt provision by aging analysis method Other receivables not withdrawing bad-debt provision Other receivables without individually significant amount but with individual provision for bad debt Total Contd.: Category Other receivables with individually significant amount and individual provision for bad debt Other receivables with bad-debt provision withdrawn through credit risk characteristic combination Including: Other receivables for withdrawing bad-debt provision by aging analysis method Other receivables not withdrawing bad-debt provision Other receivables without individually significant amount but with individual provision for bad debt Total	Book balance Amount Proportion (%) 283,926,090.75 100.00 91,420.77 0.05 283,834,669.98 99.95 283,926,090.75 100.00 Book balance Amount Proportion (%) 284,148,310.43 100.00 508,821.95 0.18 283,639,488.48 99.82 284,148,310.43 100.00	Closing balance Bad-debt provision Amount Proportion (%) 5,026.04 5,026.04 5.50 5,026.04 Opening balance Bad-debt provision Amount Proportion (%) 25,441.10 0.01 25,441.10 5.00 25,441.10 0.01	Book value 283,921,064.71 86,394.73 283,834,669.98
			283,921,064.71
			Book value 284,122,869.33 483,380.85 283,639,488.48
			284,122,869.33

– II-260 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Description of other receivables category:

• (1) Other receivables for withdrawing bad-debt provision by aging analysis method in combination

Aging <1 year 1-2 years Total Contd.:	Closing balance Other receivables 82,320.77 9,100.00 91,420.77	Bad-debt provision 4,116.04 910.00 5,026.04	Proportion (%) 5.00 10.00
			5.50

Aging <1 year 1-2 years 2-3 years Total	Opening balance Other receivables 508,821.95 508,821.95	Bad-debt provision 25,441.10 25,441.10	Proportion (%) 5.00
			5.00

• (2) Other receivables not withdrawing bad-debt provision in combination

Organization name Hubei Tianye Nonggu Biological Technology Co., Ltd. Hubei Iceman Foods Co., Ltd. Guangxi Tianye Innovation Agricultural Technology Co., Ltd. Hubei Tianye Innovation Nonggu Fruit & Vegetable Co., Ltd. Total	Other receivables 248,120,000.00 32,225,698.44 3,288,971.54 200,000.00 283,834,669.98	Closing balance Bad-debt provision Proportion Reason for withdrawal (%) No withdrawal without risk for the amount of related parties within the scope of consolidation No withdrawal without risk for the amount of related parties within the scope of consolidation No withdrawal without risk for the amount of related parties within the scope of consolidation No withdrawal without risk for the amount of related parties within the scope of consolidation

– II-261 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

2. Provision, recovery or reversal and write-off of provision for bad-debt in current period

• The amount of bad-debt reserve reversed in current period is RMB20,415.06.

3. There is no write-off of other receivables in current period.

4. Disclosure of other receivables by nature

Nature of payment Transaction payment Reserve fund Withholding social security, etc Margin Others Total	Closing balance 283,876,214.89 18,578.60 28,399.26 1,158.00 1,740.00 283,926,090.75	Opening balance 283,639,488.48 474,664.65 34,157.30
		284,148,310.43

5. Top five other accounts receivable based on debtors

Organization name Nature of payment Hubei Tianye Nonggu Biological Technology Co., Ltd. Transaction payment Hubei Iceman Foods Co., Ltd. Transaction payment Guangxi Tianye Innovation Agricultural Technology Co., Ltd. Transaction payment Hubei Tianye Innovation Nonggu Fruit & Vegetable Co., Ltd. Transaction payment Beihai Hepu Power Supply Bureau of CSG Guangxi Power Grid Corporation Transaction payment Total	Closing balance Relationship with the Company Aging 248,120,000.00 Non-affiliated party <3 years 32,225,698.44 Non-affiliated party Within 4 years 3,288,971.54 Non-affiliated party Within 2 years 200,000.00 Non-affiliated party <1 year 39,571.91 Non-affiliated party <1 year 283,874,241.89	Proportion in closing balance of other receivables (%) 87.39 11.35 1.16 0.07 0.01 99.98	Bad-debt provision Closing balance 1,978.60
			1,978.60

– II-262 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Note 3. Long-term equity investment

Closing balance Opening balance Item Book balance Bad-debt provision Book value Book balance Bad-debt provision Book value Investment in subsidiaries 113,737,642.83 10,230,275.57 103,507,367.26 113,737,642.83 10,230,275.57 103,507,367.26 Investment in associated enterprises 18,924,216.78 18,924,216.78 39,617,867.46 39,617,867.46 Total 132,661,859.61 10,230,275.57 122,431,584.04 153,355,510.29 10,230,275.57 143,125,234.72 1. Investment in subsidiaries Investee Initial investment cost Opening balance Increase of current period Decrease of current period Closing balance Depreciation reserves in current period Closing balance of provision for impairment Hainan Dachuan Food Co., Ltd. 33,737,641.83 33,737,641.83 33,737,641.83 Guangxi Tianye Innovation Agricultural Technology Co., Ltd. 30,000,000.00 30,000,000.00 30,000,000.00 Hainan Tianye Drinks Food Sales Co. Ltd. 5,000,000.00 5,000,000.00 5,000,000.00 2,432,889.97 Hubei Iceman Foods Co., Ltd. 15,000,001.00 15,000,001.00 15,000,001.00 7,797,385.60 Hubei Tianye Nonggu Biological Technology Co., Ltd. 25,000,000.00 25,000,000.00 25,000,000.00 Hubei Tianye Innovation Nonggu Fruit & Vegetable Co., Ltd. 5,000,000.00 5,000,000.00 5,000,000.00 Total 113,737,642.83 113,737,642.83 113,737,642.83 10,230,275.57	Closing balance Opening balance Item Book balance Bad-debt provision Book value Book balance Bad-debt provision Book value Investment in subsidiaries 113,737,642.83 10,230,275.57 103,507,367.26 113,737,642.83 10,230,275.57 103,507,367.26 Investment in associated enterprises 18,924,216.78 18,924,216.78 39,617,867.46 39,617,867.46 Total 132,661,859.61 10,230,275.57 122,431,584.04 153,355,510.29 10,230,275.57 143,125,234.72 1. Investment in subsidiaries Investee Initial investment cost Opening balance Increase of current period Decrease of current period Closing balance Depreciation reserves in current period Closing balance of provision for impairment Hainan Dachuan Food Co., Ltd. 33,737,641.83 33,737,641.83 33,737,641.83 Guangxi Tianye Innovation Agricultural Technology Co., Ltd. 30,000,000.00 30,000,000.00 30,000,000.00 Hainan Tianye Drinks Food Sales Co. Ltd. 5,000,000.00 5,000,000.00 5,000,000.00 2,432,889.97 Hubei Iceman Foods Co., Ltd. 15,000,001.00 15,000,001.00 15,000,001.00 7,797,385.60 Hubei Tianye Nonggu Biological Technology Co., Ltd. 25,000,000.00 25,000,000.00 25,000,000.00 Hubei Tianye Innovation Nonggu Fruit & Vegetable Co., Ltd. 5,000,000.00 5,000,000.00 5,000,000.00 Total 113,737,642.83 113,737,642.83 113,737,642.83 10,230,275.57	Closing balance Opening balance Item Book balance Bad-debt provision Book value Book balance Bad-debt provision Book value Investment in subsidiaries 113,737,642.83 10,230,275.57 103,507,367.26 113,737,642.83 10,230,275.57 103,507,367.26 Investment in associated enterprises 18,924,216.78 18,924,216.78 39,617,867.46 39,617,867.46 Total 132,661,859.61 10,230,275.57 122,431,584.04 153,355,510.29 10,230,275.57 143,125,234.72 1. Investment in subsidiaries Investee Initial investment cost Opening balance Increase of current period Decrease of current period Closing balance Depreciation reserves in current period Closing balance of provision for impairment Hainan Dachuan Food Co., Ltd. 33,737,641.83 33,737,641.83 33,737,641.83 Guangxi Tianye Innovation Agricultural Technology Co., Ltd. 30,000,000.00 30,000,000.00 30,000,000.00 Hainan Tianye Drinks Food Sales Co. Ltd. 5,000,000.00 5,000,000.00 5,000,000.00 2,432,889.97 Hubei Iceman Foods Co., Ltd. 15,000,001.00 15,000,001.00 15,000,001.00 7,797,385.60 Hubei Tianye Nonggu Biological Technology Co., Ltd. 25,000,000.00 25,000,000.00 25,000,000.00 Hubei Tianye Innovation Nonggu Fruit & Vegetable Co., Ltd. 5,000,000.00 5,000,000.00 5,000,000.00 Total 113,737,642.83 113,737,642.83 113,737,642.83 10,230,275.57
	143,125,234.72
		Closing balance of provision for impairment 2,432,889.97 7,797,385.60
		10,230,275.57

2. Investment in associates

Investee Tianjin Fangfu Tianye Investment Center (Limited Partnership) Total Contd.: Investee Tianjin Fangfu Tianye Investment Center (Limited Partnership) Total	Increase and decrease of current period Opening balance Additional investment Negative investment Profits and losses on investments recognized by equity method 39,617,867.46 14,377,600.00 -3,219,330.68 39,617,867.46 14,377,600.00 -3,219,330.68 Increase and decrease of current period Closing balance Other equity changes Distribution of cash dividends or profits Provision for impairment Others 18,924,216.78 18,924,216.78	Increase and decrease of current period Opening balance Additional investment Negative investment Profits and losses on investments recognized by equity method 39,617,867.46 14,377,600.00 -3,219,330.68 39,617,867.46 14,377,600.00 -3,219,330.68 Increase and decrease of current period Closing balance Other equity changes Distribution of cash dividends or profits Provision for impairment Others 18,924,216.78 18,924,216.78		Adjustment of other comprehensive incomes -3,096,720.00
				-3,096,720.00
				Closing balance of provision for impairment

– II-263 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Note: See “Note 8 Long-term equity investment” in “VI. Main Notes to Consolidated Financial Statements” in this note for details.

Note 4. Operating incomes and operating costs

1. Operating income, operating costs

Item Principal operating activities Others Total	Amount of current period Revenue Cost 89,610,086.49 62,672,313.57 89,610,086.49 62,672,313.57	Amount of last period Revenue Cost 93,159,791.94 62,031,145.25 93,159,791.94 62,031,145.25	Amount of last period Revenue Cost 93,159,791.94 62,031,145.25 93,159,791.94 62,031,145.25
			62,031,145.25

2. Principal operating activities (by products)

Product name Raw fruit juice Quick-frozen fruit and vegetable Others Total	Amount of current period Operating income Operating cost 36,928,289.00 24,969,213.04 49,824,181.35 34,955,023.74 2,857,616.14 2,748,076.79 89,610,086.49 62,672,313.57	Amount of last period Operating income Operating cost 38,231,282.30 25,988,078.77 49,656,345.47 32,391,733.90 5,272,164.17 3,651,332.58 93,159,791.94 62,031,145.25	Amount of last period Operating income Operating cost 38,231,282.30 25,988,078.77 49,656,345.47 32,391,733.90 5,272,164.17 3,651,332.58 93,159,791.94 62,031,145.25
			62,031,145.25

3. Operating income of the top five customers of the Company

Customer Fresh Fruit Juice (Note) Gerui Juice Industry (Tianjin) Co., Ltd. Hainan Dachuan Food Co., Ltd. Shanghai Zhaoyi Trading Co., Ltd. Shanghai Yuguo Food Sales Co., Ltd. Total	Amount of operating income in 2018 19,885,587.02 9,132,362.12 8,010,340.79 5,097,433.66 4,641,394.21 46,767,117.80	Proportion in the Company’s total operating income (%) 22.19 10.19 8.94 5.69 5.18
		52.19

Contd.

Customer Fresh Fruit Juice (Note) Dalian Yiheng Import & Export Co., Ltd. Shanghai Yuguo Food Sales Co., Ltd. Zhumadian Yuliang Biological Technology Co., Ltd. Shandong Yipintang Industrial Co., Ltd. Total	Amount of operating income in 2017 12,914,279.27 6,766,152.55 6,391,561.53 4,491,589.74 4,390,353.84 34,953,936.93	Proportion in the Company’s total operating income (%) 13.86 7.26 6.86 4.82 4.71
		37.51

– II-264 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Note: Fresh Fruit Juice customers implemented centralized procurement, and the above sales amount includes related parties included in their centralized procurement.

Note 5. Investment revenue

1. Details of investment revenue

Source of investment revenue Long-term equity investment income measured by equity method Total	Amount of current period -3,219,330.68 -3,219,330.68	Amount of last period 1,152,130.51
		1,152,130.51

XVII. Supplementary information

(I) Detailed statement of non-recurring profits and losses

• Amount of Amount of

• Item current period last period Profits and loss on disposal of non-current assets, including the write-off part of the provision for impairment of assets -2,219,597.61 -683,179.05

• Tax returns, reductions, and exemptions with unauthorized approval or without official approval documents with occurrence

• Government grant included in the current profits and losses (except for the government grant which are closely related to the business of the company and are in accordance with the national unified standard quota) 7,074,486.80 10,586,828.23

Item

• Fund possession cost charged from non-financial enterprises including in current profits and losses

• The investment cost for acquiring subsidiaries, associated enterprises and cooperative enterprises is less than the income generated by the fair value of the identifiable net assets of the merged unit when acquiring investment

• Exchange losses of non-monetary assets Profits and losses of assets invested or managed by entrustment

• Assets for impairment withdrawn due to force majeure such as natural disasters

• Profits and losses on debt restructuring

• Corporate restructuring costs, such as fees on staffing and integration

• Profits and losses exceeding the fair value part due to an unfair transaction price during the transaction

• Net profits and losses of the subsidiaries in the current period from the beginning of period to the date of merger due to the merger of enterprises under the common control

• Profit and loss caused by contingencies that are irrelevant to Company’s normal businesses

– II-265 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Item

Amount of Amount of current period last period

Profits and losses from variation of fair value by holding transactional financial assets, transactional financial liability and investment incomes from handling transactional financial assets, transactional financial liability and salable financial assets, in addition to the valid arbitrage hedging business related to normal corporate business Reversing assets impairment of receivables for independent impairment test Losses and profits obtained from foreign entrusted loans Profit and loss from fair value variation of investment real estate by adopting fair value mode for follow-up calculation Influence on the current profit and loss by one-time adjustment as per laws and regulations on taxes and accounting Trustee fee income from entrusted operation Non-operating income and expenses in addition to the above-mentioned items Other profit and loss items that conform to the definition of non-recurring profit and loss. Subtotal Less: income tax affected amount Minority equity affected amount (after tax) Total	-453,182.05 4,401,707.14 -81,030.75 4,482,737.89	-559,058.71 9,344,590.47 351,824.37
		8,992,766.10

(II) Rate of return on common stockholders’ equity and earnings per share

		2018
	Weighted-average
Profits during reporting period	Income rate of	Earnings per share (EPS)
	net assets (%)	Basic EPS	Diluted EPS
Net profits attributable to common
corporate shareholders	3.34	0.0998	0.0998
Net profits attributable to common
corporate shareholders after the
deduction of the non-recurring profit and
loss	2.72	0.0811	0.0811

– II-266 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Contd.:

		2017
	Weighted-average
Profits during reporting period	Income rate of	Earnings per share (EPS)
	net assets (%)	Basic EPS	Diluted EPS
Net profits attributable to common
corporate shareholders	6.14	0.1753	0.1753
Net profits attributable to common
corporate shareholders after the
deduction of the non-recurring profit and
loss	4.83	0.1379	0.1379

Tianye Innovation Corporation Head of Accounting Department: (Official Stamp) Legal representative: Chief Accountant:

April 24, 2019

– II-267 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Auditor’s Report

ZXHSZ (2020) No. 010110

To all shareholders of Tianye Innovation Corporation:

I. Audit Opinions

We have audited the accompanying financial statements of Tianye Innovation Corporation (hereinafter referred to as “ the Company ”), which comprise the consolidated and the parent company’s balance sheet as at December 31, 2019, the consolidated and the parent company’s income statement, the consolidated and the parent company’s cash flow statement, the consolidated and the parent company’s statement of changes in shareholders’ equity for the year 2019 and notes to the financial statements.

In our opinion, the accompanying financial statements present fairly, in all material respects, the consolidated and the company’s financial position as at December 31, 2019,and its consolidated and the company’s financial performance and cash flows for the year 2019 in accordance with the Accounting Standards for Business Enterprises issued by the Ministry of Finance of the People’s Republic of China.

II. Basis for Formation of Audit Opinions

We conducted our audit in accordance with China Standards on Auditing for Certified Public Accountants (“ CSAs ”). 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 Tianye Innovation in accordance with the China Code of Ethics for Certified Public 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.

III. Other Information

The management of Tianye Innovation (hereinafter referred to as the management) is responsible for the other information. The other information comprises all the information included in 2019 annual report of the Company, other than 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 other information and, in doing so, consider whether other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other information; we are required to report that fact. We have nothing to report in this regard.

– II-268 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

IV. Responsibilities of the Management and the Governance for Financial Statements

The Management is responsible for preparation and fair presentation of the financial statements in accordance with the Accounting Standards for Business Enterprises, and for the design, implementation and maintenance of such internal control necessary to enable that the financial statements are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the management is responsible for assessing the Company’s ability to continue as a going to concern and using the going concern basis of accounting unless the management either intends to liquidate Tianye Innovation or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the financial report process of the Company.

V. Responsibilities of CPAs for the Audit of Financial Statements

Our objectives are to reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is high level of assurance but is not a guarantee that an audit conducted in accordance with CSAs will always detect a material misstatement when it exists. Misstatement 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 CSAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• (1) Identify and assess the risks of material misstatement of financial statements, whether due to fraud or errors, 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 from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentation, or the override of internal control.

• (2) Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.

• (3) Evaluate the appropriateness of accounting policies used and reasonableness of accounting estimates and related disclosures made by the management.

• (4) Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or; if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to continue as a going concern.

• (5) Evaluate the overall presentation, structure, and content of the financial statements, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

– II-269 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

• (6) Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the financial statements. We are responsible for the instruction, supervision and execution of the audit, and assume full responsibility for the audit opinions.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control defects that we identify during our audit.

ZHONGXINGHUA CERTIFIED PUBLIC

CPA:

ACCOUNTANTS LLP

Beijing, China

CPA:

June 5, 2020

– II-270 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Consolidated Balance Sheet 31-Dec-19

Prepared by: Tianye Innovation Corporation

Prepared by: Tianye Innovation Corporation Item Notes Current assets: Monetary funds VI. Note 1 Trading financial assets Derivative financial assets Notes receivable Accounts receivable VI. Note 2 Accounts receivable financing Prepayment VI. Note 3 Other receivables VI. Note 4 Inventories VI. Note 5 Held-for-sale assets Non-current assets due within one year Other current assets VI. Note 6 Total current assets Non-current assets: Equity investment Other equity investments Available-for-sale financial assets Long-term receivables Long-term equity investment VI. Note 7 Other equity instrument investments Other non-current financial assets Investment real estate properties Fixed assets VI. Note 8 Construction in progress VI. Note 9 Productive biological assets VI. Note 10 Oil & gas assets Intangible assets VI. Note 11 Development expenditures Goodwill VI. Note 12 Long-term deferred expenses VI. Note 13 Deferred income tax assets VI. Note 14 Other non-current assets VI. Note 15 Total non-current assets Total assets	Closing balance 257,597,234.88 59,114,385.02 2,134,373.39 1,222,410.16 50,593,198.72 10,836,905.92 381,498,508.09 17,758,310.00 320,015,617.97 129,213,004.74 33,572,076.42 85,556,427.37 14,857,682.84 8,008,571.90 1,816,166.31 10,499,412.40 621,297,269.95 1,002,795,778.04	Opening balance 219,674,020.33 42,295,833.29 3,321,692.49 10,166,089.03 49,148,296.79 12,725,447.33 337,331,379.26 18,924,216.78 238,320,812.64 204,547,782.04 27,473,763.77 87,388,363.15 14,857,682.84 12,892,387.40 1,472,171.06 3,307,357.16 609,184,536.84 946,515,916.10	Unit: RMB Closing balance of last year 219,674,020.33 42,295,833.29 3,321,692.49 10,166,089.03 49,148,296.79 12,725,447.33
			337,331,379.26
			18,924,216.78 238,320,812.64 204,547,782.04 27,473,763.77 87,388,363.15 14,857,682.84 12,892,387.40 1,472,171.06 3,307,357.16
			609,184,536.84
			946,515,916.10

(Notes to Financial Statement attached below are important part of the Financial Statement.)

Legal representative:

Chief Accountant:

Head of Accounting Department:

– II-271 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Consolidated Balance Sheet (Cont.) 31-Dec-19

Prepared by: Tianye Innovation Corporation Item Notes Current liabilities: Short-term loans VI. Note 16 Derivative financial liabilities Notes payable Trade payables VI. Note 17 Advances from customers VI. Note 18 Payroll and employee benefits payable VI. Note 19 Taxes payable VI. Note 20 Accounts payable VI. Note 21 Holding-for-sale liabilities Current portion of non-current liabilities VI. Note 22 Other current liabilities Total current liabilities Non-current liabilities: Long-term loans VI. Note 23 Bonds payable Include: preferred stocks Perpetual bonds Long-term payables VI. Note 24 Long-term employee compensation Estimated liabilities Deferred income VI. Note 25 Deferred income tax liabilities VI. Note 14 Other non-current liabilities Total non-current liabilities Total liabilities Shareholders’ equity: Share capital VI. Note 26 Other equity instruments Including: preferred stocks Perpetual bonds Capital reserves VI. Note 27 Minus: treasury shares Other comprehensive incomes VI. Note 28 Special reserve Surplus reserve VI. Note 29 Undistributed profit VI. Note 30 Total shareholders’ equities attributable to parent company Minority shareholders’ equity Total shareholders’ equities Total liabilities and shareholders’ equities	Closing balance 114,084,728.03 34,109,853.27 2,692,363.10 3,717,302.13 3,081,368.31 4,160,084.72 31,657,741.94 193,503,441.50 381,371.52 61,326,677.13 61,708,048.65 255,211,490.15 240,000,000.00 246,300,093.95 -2,632,212.00 11,367,901.03 252,548,504.91 747,584,287.89 747,584,287.89 1,002,795,778.04	Opening balance 101,000,000.00 15,537,891.19 1,637,963.44 3,144,595.78 2,585,212.93 2,930,036.25 126,835,699.59 30,857,741.94 397,555.46 65,108,098.02 114,268.15 96,477,663.57 223,313,363.16 240,000,000.00 246,300,093.95 -2,632,212.00 11,042,103.18 228,492,567.81 723,202,552.94 723,202,552.94 946,515,916.10	Unit: RMB Closing balance of last year 101,000,000.00 15,537,891.19 1,637,963.44 3,144,595.78 2,585,212.93 3,787,778.19
			127,693,441.53
			30,000,000.00 397,555.46 65,108,098.02 114,268.15
			95,619,921.63
			223,313,363.16
			240,000,000.00 246,300,093.95 -2,632,212.00 11,042,103.18 228,492,567.81 723,202,552.94
			723,202,552.94
			946,515,916.10

(Notes to Financial Statement attached below are important part of the Financial Statement.)

Legal representative:

Chief Accountant:

Head of Accounting Department:

– II-272 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Consolidated Profit Statement FY 2019

Prepared by: Tianye Innovation Corporation

Unit: RMB

		Amount of	Amount of
Item	Notes	current period	last period
I. Total operating income		290,342,840.35	258,435,753.75
Including: operating income	VI. Note 31	290,342,840.35	258,435,753.75
II. Total operating cost		270,956,475.91	231,198,219.72
Including: operating costs	VI. Note 31	211,831,531.96	181,881,408.84
Taxes and surcharges	VI. Note 32	3,689,658.48	3,987,239.60
Selling expenses	VI. Note 33	17,850,406.25	10,201,050.97
General and administrative expenses	VI. Note 34	30,184,926.45	31,629,640.96
Research and development expenses	VI. Note 35	1,598,659.44	1,730,762.09
Financial expenses	VI. Note 36	5,801,293.33	1,768,117.26
Including: interest expense		6,475,446.39	2,316,078.80
interest income		835,240.91	585,908.38
Plus: other income	VI. Note 37	6,769,495.52	5,949,486.80
Investment income (loss is indicated by “-”)	VI. Note 38	530,093.22	-3,219,330.68
Including: investment income from affiliates and joint
ventures		530,093.22	-3,219,330.68
Income from termination of the recognition of financial
assets measured at amortized cost
Net exposure hedging income (loss is indicated by “-”)
Income from changes in fair value (loss is indicated by
“-”)
Credit impairment loss (loss is indicated by “-”)	VI. Note 39	-1,654,322.31
Assets impairment loss (loss is indicated by “-”)	VI. Note 40	-71,400.00	-250,086.15
Income from assets disposal (loss is indicated by “-”)	VI. Note 41	-12,202.60	-2,200,916.61
III. Operating profit (loss is indicated by “-”)		24,948,028.27	27,516,687.39
Add: non-operating income	VI. Note 42	976,270.26	352,041.46
Minus: non-operating expenses	VI. Note 43	240,457.62	598,904.51
IV. Total profit (total loss is indicated by “-”)		25,683,840.91	27,269,824.34
Less: income tax expense	VI. Note 44	1,302,105.96	3,327,939.64
V. Net profits (the net loss expressed with “-”)		24,381,734.95	23,941,884.70
(I) Classified by operation continuity:
1. Net profit of continued operations (net loss is indicated
by “-”)		24,381,734.95	23,941,884.70
2. Net profit of discontinued operations (net loss is
indicated by “-”)
(II) Classified by ownership:
1. Net profits assigned to the parent company’s
shareholders (net loss is indicated by “-”)		24,381,734.95	23,941,884.70
2. Minority shareholders’ profits and losses (net loss is
indicated by “-”)

– II-273 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Item

VI. Net amount of other comprehensive income after tax

• (I) Net amount of other comprehensive income after tax attributable to the owners of parent company

• Other comprehensive income not allowed to be re-classified into profit and loss

• (1) Changes caused by re-measurement and re-definition of benefit plan

• (2) Other comprehensive income that cannot be converted into profits and losses under the equity method

	Amount of	Amount of
Notes	current period	last period
		-2,632,212.00
		-2,632,212.00
		-2,632,212.00
		-2,632,212.00

• (3) Changes in the fair value of other equity instrument investments

• (4) Fair value changes of enterprise own credit risk

• (5) Others

• Other comprehensive income to be re-classified into profit and loss

• (1) Other comprehensive income that can be converted into profits and losses under the equity method

• (2) Changes in the fair value of other debt investments

• (3) The amount of financial assets reclassified into other comprehensive income

• (4) Provision for credit impairment of other debt investments

• (5) Cash flow hedging reserve

• (6) Balance arising from the translation of foreign currency financial statements

• (7) Others

• (II) Net amount of other comprehensive income after tax attributable to minority shareholders

(6) Balance arising from the translation of foreign currency financial statements (7) Others (II) Net amount of other comprehensive income after tax attributable to minority shareholders
VII. Total comprehensive income	24,381,734.95	21,309,672.70
(I) Total comprehensive income attributable to the
shareholders of parent company	24,381,734.95	21,309,672.70
(II) Total comprehensive income attributable to minority
shareholders
VIII. Earnings per share (EPS):
Basic earnings per share	0.10	0.10
(II) Diluted earnings per share	0.10	0.10

(Notes to Financial Statement attached below are important part of the Financial Statement.)

Legal representative: Chief Accountant:

Head of Accounting Department:

– II-274 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

CONSOLIDATED STATEMENT OF CASH FLOW

FY 2019

Prepared by: Tianye Innovation Corporation

FY 2019
Prepared by: Tianye Innovation Corporation			Unit: RMB
		Amount of	Amount of last
Item	Notes	current period	period
I. Cash flows from operating activities:
Cash received from goods sales and service rendering		294,394,064.53	299,322,086.19
Tax refunds received		470,500.00	3,130,928.00
Cash received related to other operating activities	VI. Note 45	7,637,728.06	2,751,330.24
Subtotal of cash inflow from operating activities		302,502,292.59	305,204,344.43
Cash paid for purchase of goods and services		163,886,820.50	173,773,936.66
Cash paid to and on behalf of employee		29,714,661.34	28,867,651.50
Cash paid for taxes		15,419,172.45	21,049,739.55
Cash paid related to other operating activities	VI. Note 45	27,471,726.36	30,500,405.64
Subtotal of cash outflow from operating activities		236,492,380.65	254,191,733.35
Net cash flows from operating activities		66,009,911.94	51,012,611.08
II. Cash flows from investing activities:
Cash received from disposal of investments		1,696,000.00	14,377,600.00
Cash received from investment income
Net amount of cash resulted from disposal of fixed assets,
intangible assets and other long term assets		117,528.00	20,670.00
Net cash received from disposal of subsidiaries and other
business entities
Cash received related to other investing activities
Subtotal of cash inflow from investing activities		1,813,528.00	14,398,270.00
Net cashes paid for construction of fixed assets, intangible
assets and other long-term assets		44,977,569.96	113,786,381.81
Cash paid for investments
Cash Paid for disposal of subsidiaries and other business
units
Cash paid related to other investing activities
Subtotal of cash outflow from investing activities		44,977,569.96	113,786,381.81
Net cash flows from investing activities		-43,164,041.96	-99,388,111.81
III. Cash flows from financing activities:
Cash received from introducing investment
Include: cash received by subsidiaries from absorbing
minority shareholder’s investment
Cash received from loans		111,000,000.00	131,000,000.00
Cash paid related to other financing activities	VI. Note 45	19,066,182.40
Subtotal of cash inflow from financing activities		130,066,182.40	131,000,000.00
Cash paid for repayment of debts		101,000,000.00	66,000,000.00
Cash paid for distribution of dividends or profits, or
interest payment		8,479,613.06	8,016,078.80
Include: dividend and profit paid by subsidiaries to
minority shareholders
Cash paid relating to other financing activities	VI. Note 45	1,316,000.07	5,000,000.00
Subtotal of cash outflows from financial activities		110,795,613.13	79,016,078.80
Net cash flows from financing activities		19,270,569.27	51,983,921.20
IV. Effect of exchange rate changes on cash and cash
equivalents		39,108.59	13,117.25
V. Net increase of cash and cash equivalents		42,155,547.84	3,621,537.72
Plus: Cash and cash equivalents at beginning of year		214,674,020.33	211,052,482.61
VI. CASH AND CASH EQUIVALENTS AT END OF
YEAR		256,829,568.17	214,674,020.33

(Notes to Financial Statement attached below are important part of the Financial Statement.)

Legal representative:

Chief Accountant:

Head of Accounting Department:

– II-275 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

		Unit: RMB			Minority Total	Minority Total	shareholders’ shareholders’ Surplus Undistributed	equity equities reserve profits Subtotal	11,042,103.18 228,492,567.81 723,202,552.94 723,202,552.94				11,042,103.18 228,492,567.81 723,202,552.94 — 723,202,552.94		325,797.85 24,055,937.10 24,381,734.95 24,381,734.95	24,381,734.95 24,381,734.95 24,381,734.95						325,797.85 -325,797.85	325,797.85 -325,797.85															11,367,901.03 252,548,504.91 747,584,287.89 747,584,287.89		Head of Accounting Department:
							Special	reserve
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITIES	FY 2019	Prepared by: Tianye Innovation Corporation	Amount of current period	Shareholder’s equity attributable to the parent company	Other equity instruments Less: Other		Capital Treasury comprehensive Preferred Perpetual	Item Share capital reserves shares income stocks bonds Others	I. Closing balance of last year 240,000,000.00 246,300,093.95 -2,632,212.00	Add: accounting policy changes	Correction of previous errors	MISCELLANEOUS	II. Opening balance of current year 240,000,000.00 246,300,093.95 -2,632,212.00	III. Increases and decreases of this year (decrease is indicated by	“-”)	(I) Total comprehensive profits	(II) Capital paid in and reduced by shareholders	1. Common stock paid in by shareholders	2. Capital paid in by holders of other equity instruments	3. Amounts of share-based payments recognized in shareholders’ equity	4. Others	(III) Distribution of profits	1. Withdrawal of surplus reserves	2. Withdrawal of general risk reserves	3. Distribution to shareholders	4. Others	(IV) Internal carry-forward of shareholders’ equity	1. Capital reserve converted into share capital	2. Surplus reserve converted into share capital	3. Offsetting of loss by surplus reserves	4. Changes of defined benefit plans carried forward into retained income	5. Other comprehensive income carried forward into retained income	6. Others	(V) Reasonable reserves	1. Amount withdrawn for the period	2. Amount used for the period	(VI) Others	IV. Closing balance of current year 240,000,000.00 246,300,093.95 -2,632,212.00	(Notes to Financial Statement attached below are important part of the Financial Statement.)	Legal representative: Chief Accountant:

– II-276 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

		Unit: RMB			Minority Total	shareholders’ shareholders’ Surplus Undistributed	equity equities reserve profits Subtotal	10,523,286.40 209,869,499.89 706,692,880.24 706,692,880.24				10,523,286.40 209,869,499.89 706,692,880.24 706,692,880.24		518,816.78 18,623,067.92 16,509,672.70 16,509,672.70	23,941,884.70 21,309,672.70 21,309,672.70						518,816.78 -5,318,816.78 -4,800,000.00 -4,800,000.00	518,816.78 -518,816.78		-4,800,000.00 -4,800,000.00 -4,800,000.00													11,042,103.18 228,492,567.81 723,202,552.94 723,202,552.94		Head of Accounting Department:
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITIES (CONT.)	FY2019	Prepared by: Tianye Innovation Corporation	Amount of last period	Shareholder’s equity attributable to the parent company	Other equity instruments Less: Other	Capital Treasury comprehensive Special Preferred Perpetual	Item Share capital reserves shares income reserve stocks bonds Others	I. Closing balance of last year 240,000,000.00 246,300,093.95	Add: accounting policy changes	Correction of previous errors	MISCELLANEOUS	II. Opening balance of current year 240,000,000.00 246,300,093.95	III. Increases and decreases of this year (decrease is indicated by	“-”) -2,632,212.00	(I) Total comprehensive profits -2,632,212.00	(II) Capital paid in and reduced by shareholders	1. Common stock paid in by shareholders	2. Capital paid in by holders of other equity instruments	3. Amounts of share-based payments recognized in shareholders’ equity	4. Others	(III) Distribution of profits	1. Withdrawal of surplus reserves	2. Withdrawal of general risk reserves	3. Distribution to shareholders	4. Others	(IV) Internal carry-forward of shareholders’ equity	1. Capital reserve converted into share capital	2. Surplus reserve converted into share capital	3. Offsetting of loss by surplus reserves	4. Changes of defined benefit plans carried forward into retained income	5. Other comprehensive income carried forward into retained income	6. Others	(V) Reasonable reserves	1. Amount withdrawn for the period	2. Amount used for the period	(VI) Others	IV. Closing balance of current year 240,000,000.00 246,300,093.95 -2,632,212.00	(Notes to Financial Statement attached below are important part of the Financial Statement.)	Legal representative: Chief Accountant:

– II-277 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

BALANCE SHEET

December 31, 2019

Prepared by: Tianye Innovation Corporation

Unit: RMB

Item Notes Current assets: Monetary funds Trading financial assets Derivative financial assets Notes receivable Accounts receivable XVI. Note 1 Accounts receivable financing Prepayment Other receivables XVI. Note 2 Inventories Held-for-sale assets Non-current assets due within one year Other current assets Total current assets Non-current assets: Equity investment Available-for-sale financial assets Other equity investments Long-term receivables Long-term equity investment XVI. Note 3 Other equity instrument investments Other non-current financial assets Investment real estate properties Fixed assets Construction in progress Productive biological assets Oil & gas assets Intangible assets Development expenditures Goodwill Long-term deferred expenses Deferred income tax assets Other non-current assets Total non-current assets Total assets	Closing balance 157,356,660.93 19,554,383.43 479,778.29 281,125,796.22 27,684,371.46 569,236.98 486,770,227.31 120,898,515.41 71,878,916.88 -0.00 10,634,655.83 532,852.38 864,440.34 514,901.90 205,324,282.74 692,094,510.05	Opening balance 158,231,492.93 15,580,194.18 2,673,526.03 283,921,064.71 25,487,932.56 485,894,210.41 122,431,584.04 76,583,430.17 970,157.10 10,924,692.59 772,608.68 135,286.90 211,817,759.48 697,711,969.89	Closing balance of last year 158,231,492.93 15,580,194.18 2,673,526.03 283,921,064.71 25,487,932.56
			485,894,210.41
			122,431,584.04 76,583,430.17 970,157.10 10,924,692.59 772,608.68 135,286.90
			211,817,759.48
			697,711,969.89

(Notes to Financial Statement attached below are important part of the Financial Statement.)

Legal representative: Chief Accountant:

Head of Accounting Department:

– II-278 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

BALANCE SHEET (CONT.)

December 31, 2019

Prepared by: Tianye Innovation Corporation

Prepared by: Tianye Innovation Corporation Item Remarks Current liabilities: Short-term loans Trading financial liabilities Derivative financial liabilities Notes payable Trade payables Advances from customers Payroll and employee benefits payable Taxes payable Accounts payable Holding-for-sale liabilities Current portion of non-current liabilities Other current liabilities Total current liabilities Non-current liabilities: Long-term loans Bonds payable Include: preferred stocks Perpetual bonds Long-term payables Long-term employee compensation Estimated liabilities Deferred income Deferred income tax liabilities Other non-current liabilities Total non-current liabilities Total liabilities Shareholders’ equity: Share capital Other equity instruments Include: preferred stocks Perpetual bonds Capital reserves Minus: treasury shares Other comprehensive incomes Special reserve Surplus reserve Undistributed profit Total shareholders’ equities Total liabilities and shareholders’ equities	Closing balance 36,000,000.00 23,285,090.91 1,817,182.84 1,597,823.84 285,358.39 49,641,807.33 112,627,263.31 1,110,721.75 1,110,721.75 113,737,985.06 240,000,000.00 244,109,726.71 -2,632,212.00 11,367,901.03 85,511,109.25 578,356,524.99 692,094,510.05	Opening balance 36,000,000.00 22,036,006.29 15,336,994.62 1,329,988.41 961,588.86 45,609,669.91 121,274,248.09 1,339,175.31 1,339,175.31 122,613,423.40 240,000,000.00 244,109,726.71 -2,632,212.00 11,042,103.18 82,578,928.60 575,098,546.49 697,711,969.89	Unit: RMB Closing balance of last year 36,000,000.00 22,036,006.29 15,336,994.62 1,329,988.41 961,588.86 45,609,669.91
			121,274,248.09
			1,339,175.31
			1,339,175.31
			122,613,423.40
			240,000,000.00 244,109,726.71 -2,632,212.00 11,042,103.18 82,578,928.60
			575,098,546.49
			697,711,969.89

(Notes to Financial Statement attached below are important part of the Financial Statement.)

Legal representative:

Chief Accountant:

Head of Accounting Department:

– II-279 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

INCOME STATEMENT FY2019

Prepared by: Tianye Innovation Corporation

Unit: RMB

		Amount of	Amount of last
Item	Notes	current period	period
I. Operating revenue	XVI. Note 4	101,892,706.74	89,610,086.49
Less: operating cost	XVI. Note 4	75,655,499.45	62,672,313.57
Taxes and surcharges		1,038,797.35	1,195,933.31
Selling expenses		11,159,000.17	2,881,253.45
General and administrative expenses		8,152,386.67	12,167,738.44
Research and development expenses		1,598,659.44	1,730,762.09
Financial expenses		478,111.34	399,631.11
Including: interest expense		1,012,818.50	728,328.80
interest income		549,741.44	393,454.73
Plus: other income		314,027.35	456,983.56
Investment income (loss is indicated by “-”)	XVI. Note 5	530,093.22	-3,219,330.68
Include: investment income from affiliates and joint
ventures		530,093.22	-3,219,330.68
Income from termination of the recognition of financial
assets measured at amortized cost
Net exposure hedging income (loss is indicated by “-”)
Income from changes in fair value (loss is indicated by
“-”)
Credit impairment loss (loss is indicated by “-”)		-760,664.67
Assets impairment loss (loss is indicated by “-”)		-367,161.85	170,011.98
Gains from asset disposals (loss is indicated by “-”)		-84,254.94
II. Operating profit (loss is indicated by “-”)		3,442,291.43	5,970,119.38
Add: non-operating income		328,282.50	100,000.00
Minus: non-operating expenses		40,364.26	24,254.29
III. Total profit (total loss is indicated by “-”)		3,730,209.67	6,045,865.09
Less: income tax expense		472,231.17	857,697.30
IV. Net profit (net loss is indicated by “-”)		3,257,978.50	5,188,167.79
(I) Net profit from continuous operation (net loss is
indicated by “-”)		3,257,978.50	5,188,167.79

(II) Net profit from discontinuing operation (net loss is indicated by “-”)

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

		Amount of	Amount of last
Item	Notes	current period	period
V. After-tax net amount of other comprehensive income			-2,632,212.00
(I) Other comprehensive income not allowed to be
re-classified into profits and losses			-2,632,212.00
1. Remeasurement of change of defined benefit plans
2. Other comprehensive income that cannot be converted
into profits and losses under the equity method			-2,632,212.00
3. Changes in the fair value of other equity instruments
4. Fair value changes of enterprise own credit risk
5. Others
(II) Other comprehensive income to be reclassified into
profits and losses
1. Other comprehensive income that can be converted into
profits and losses under the equity method
2. Changes in the fair value of other debt investments
3. Amount of financial assets reclassified and included in
other comprehensive income
4. Provision for credit impairment of other debt
investments
5. Cash flow hedging reserve
6. Balance arising from the translation of foreign currency
financial statements
7. Others
VI. Total comprehensive incomes		3,257,978.50	2,555,955.79

(Notes to Financial Statement attached below are important part of the Financial Statement.)

Head of Accounting Legal representative: Chief Accountant: Department:

– II-281 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

CASH FLOW STATEMENT FY2019

Prepared by: Tianye Innovation Corporation			Unit: RMB
		Amount of	Amount of last
Item	Notes	current period	period
I. Cash flows from operating activities:
Cash received from goods sales and service rendering		105,554,049.68	121,204,346.46
Tax refunds received
Cash received related to other operating activities		38,340,936.75	85,767,216.69
Subtotal of cash inflow from operating activities		143,894,986.43	206,971,563.15
Cash paid for purchase of goods and services		65,494,903.42	41,913,810.61
Cash paid to and on behalf of employee		14,071,219.07	14,618,525.48
Cash paid for taxes		6,655,318.53	7,677,447.81
Cash paid related to other operating activities		54,400,339.72	91,538,057.30
Subtotal of cash outflow from operating activities		140,621,780.74	155,747,841.20
Net cash flows from operating activities		3,273,205.69	51,223,721.95
II. Cash flows from investing activities:
Cash received from disposal of investments		1,696,000.00	14,377,600.00
Cash received from investment income
Net amount of cash resulted from disposal of fixed assets,
intangible assets and other long term assets		32,528.00
Cash received related to other investing activities
Subtotal of cash inflow from investing activities		1,728,528.00	14,377,600.00
Net cashes paid for construction of fixed assets, intangible
assets and other long-term assets		4,143,743.15	2,901,077.32
Cash paid for investments
Cash paid related to other investing activities
Subtotal of cash outflow from investing activities		4,143,743.15	2,901,077.32
Net cash flows from investing activities		-2,415,215.15	11,476,522.68
III. Cash flows from financing activities:
Cash received from introducing investment
Cash received from loans		36,000,000.00	36,000,000.00
Cash received relating to Other fund-raising activities
Subtotal of cash inflow from financing activities		36,000,000.00	36,000,000.00
Cash paid for repayment of debts		36,000,000.00	36,000,000.00
Cash paid for distribution of dividends or profits, or
interest payment		1,732,818.50	6,428,328.80
Cash paid related to other financing activities
Subtotal of cash outflows from financial activities		37,732,818.50	42,428,328.80
Net cash flows from financing activities		-1,732,818.50	-6,428,328.80
IV. Effect of exchange rate changes on cash and cash
equivalents		-4.04	-41,686.18
V. Net increase of cash and cash equivalents		-874,832.00	56,230,229.65
Plus: Cash and cash equivalents at beginning of year		158,231,492.93	102,001,263.28
VI. CASH AND CASH EQUIVALENTS AT END OF
YEAR		157,356,660.93	158,231,492.93

(Notes to Financial Statement attached below are important part of the Financial Statement.)

Legal representative:

Chief Accountant:

Head of Accounting Department:

– II-282 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Prepared by: Tianye Innovation Corporation Unit: RMB	Amount of current period	Other equity instruments Less: Other Total	Capital Treasury comprehensive Special Surplus Undistributed shareholders’ Preferred Perpetual	Item Share Capital reserves shares income reserve reserve profits equities stocks bonds Others	I. Closing balance of last year 240,000,000.00 244,109,726.71 -2,632,212.00 11,042,103.18 82,578,928.60 575,098,546.49	Add: accounting policy changes	Correction of previous errors	MISCELLANEOUS	II. Opening balance of current year 240,000,000.00 244,109,726.71 -2,632,212.00 11,042,103.18 82,578,928.60 575,098,546.49	III. Increases and decreases of this year (decrease is indicated by	“-”) 325,797.85 2,932,180.65 3,257,978.50	(I) Total comprehensive profits 3,257,978.50 3,257,978.50	(II) Capital paid in and reduced by shareholders	1. Common stock paid in by shareholders	2. Capital paid in by holders of other equity instruments	3. Amounts of share-based payments recognized in shareholders’ equity	4. Others	(III) Distribution of profits 325,797.85 -325,797.85	1. Withdrawal of surplus reserves 325,797.85 -325,797.85	2. Withdrawal of general risk reserves	3. Distribution to shareholders	4. Others	(IV) Internal carry-forward of shareholders’ equity	1. Capital reserve converted into share capital	2. Surplus reserve converted into share capital	3. Offsetting of loss by surplus reserves	4. Changes of defined benefit plans carried forward into retained	income	5. Other comprehensive income carried forward into retained income	6. Others	(V) Reasonable reserves	1. Amount withdrawn for the period	2. Amount used for the period	(VI) Others	IV. Closing balance of current year 240,000,000.00 244,109,726.71 -2,632,212.00 11,367,901.03 85,511,109.25 578,356,524.99	(Notes to Financial Statement attached below are important part of the Financial Statement.)	Legal representative: Chief Accountant: Head of Accounting Department:

– II-283 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Prepared by: Tianye Innovation Corporation Unit: RMB	Amount of last period	Other equity instruments Less: Other Total	Capital Treasury comprehensive Special Surplus Undistributed shareholders’ Preferred Perpetual	Item Share Capital reserves shares income reserve reserve profits equities stocks bonds Others	I. Closing balance of last year 240,000,000.00 244,109,726.71 10,523,286.40 82,709,577.59 577,342,590.70	Add: accounting policy changes	Correction of previous errors	MISCELLANEOUS	II. Opening balance of current year 240,000,000.00 244,109,726.71 10,523,286.40 82,709,577.59 577,342,590.70	III. Increases and decreases of this year (decrease is indicated by	“-”) -2,632,212.00 518,816.78 -130,648.99 -2,244,044.21	(I) Total comprehensive profits -2,632,212.00 5,188,167.79 2,555,955.79	(II) Capital paid in and reduced by shareholders	1. Common stock paid in by shareholders	2. Capital paid in by holders of other equity instruments	3. Amounts of share-based payments recognized in shareholders’ equity	4. Others	(III) Distribution of profits 518,816.78 -5,318,816.78 -4,800,000.00	1. Withdrawal of surplus reserves 518,816.78 -518,816.78	2. Withdrawal of general risk reserves	3. Distribution to shareholders -4,800,000.00 -4,800,000.00	4. Others	(IV) Internal carry-forward of shareholders’ equity	1. Capital reserve converted into share capital	2. Surplus reserve converted into share capital	3. Offsetting of loss by surplus reserves	4. Changes of defined benefit plans carried forward into retained	income	5. Other comprehensive income carried forward into retained income	6. Others	(V) Reasonable reserves	1. Amount withdrawn for the period	2. Amount used for the period	(VI) Others	IV. Closing balance of current year 240,000,000.00 244,109,726.71 -2,632,212.00 11,042,103.18 82,578,928.60 575,098,546.49	(Notes to Financial Statement attached below are important part of the Financial Statement.)	Legal representative: Chief Accountant: Head of Accounting Department:

– II-284 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Tianye Innovation Corporation Notes to Financial Statements For the year ended December 31, 2019

I. GENERAL INFORMATION OF THE COMPANY

(I) Company profile

Tianye Innovation Corporation (hereinafter referred to as “ the Company ”), formerly Beihai Tianye Food Co., Ltd., is a joint-stock company established by Guangxi Tianye Science and Technology Seed Industry Co., Ltd., Beijing Qiuyin Datong Investment Management Center (L.P.), Yao Jiuzhi, Shan Dan, Beijing Haiyan Lifang Venture Capital Center (Limited Partnership) and other shareholders. On February 13, 2015, the Company was listed and traded in the national share transfer system for small and medium-sized enterprises, with the stock code of 832023.

As of December 31, 2019, the equity structure of the Company was as follows:

S/N Shareholder 1 Yao Jiuzhi 2 Beijing Qiuyin Datong Investment Management Center (L.P.) 3 Zhang Yimin 4 Li Qing 5 Shan Dan 6 Menghai Zhicun Gaoyuan Tea Industry Co., Ltd. 7 Gongtou Zhaochen Investment Management Co., Ltd. 8 Yao Linhao 9 Yang Yunping 10 Qi Xiaohong 11 Other investors Total	Number of shares held (10,000 shares) 4,271.10 1,000.00 935.00 760.20 650.00 601.30 569.80 558.00 469.60 453.60 13,731.40 24,000.00	Proportion (%) 17.7963 4.1667 3.8958 3.1675 2.7083 2.5054 2.3742 2.3250 1.9567 1.8900 57.2141
		100.00

914505007968370834

Unified Social Credit Code: 914505007968370834 Registered address: Chuangye Avenue, Hepu Industrial Park, Beihai City Yao Jiuzhi

Legal representative:

– II-285 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

(II) Business scope

The Company’s business scope: production and sales of beverages (fruit juice and vegetable juice), quick-frozen foods [quick-frozen other foods (quick-frozen fruit and vegetable products)], dried fruits and vegetables and preserved fruits; acquisition, processing and sales of agricultural and sideline products (which can only be operated after obtaining environmental impact acceptance and fire protection permit); comprehensive development of agricultural products projects; self-management and agent for import and export of various commodities and technologies (except commodities and technologies that are restricted by the state or prohibited from import and export).

(III) The nature of business and main operating activities of the Company

The Company’s main products: fruit juice, quick-frozen foods, fresh fruits, etc.

The Company belongs to the “vegetable, fruit and nut processing industry” in the “agricultural and sideline food processing industry”.

(IV) Approval of the financial statements

The financial statements have been authorized for issuance by the Board of Directors of the Company on June 5, 2020.

– II-286 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

II. SCOPE OF CONSOLIDATED FINANCIAL STATEMENTS

During the reporting period, there were 6 subsidiaries included in the consolidated financial statements, including:

			Shareholding	Ratio of voting
Subsidiary	Subsidiary type	Level	ratio	right
			(%)	(%)
Hainan Dachuan Food Co., Ltd.	Wholly-owned subsidiary	1	100.00	100.00
Guangxi Tianye Innovation Agricultural
Technology Co., Ltd.	Wholly-owned subsidiary	1	100.00	100.00
Hainan Tianye Drinks Food Sales Co. Ltd.	Wholly-owned subsidiary	1	100.00	100.00
Hubei Iceman Foods Co., Ltd.	Wholly-owned subsidiary	1	100.00	100.00
Hubei Tianye Nonggu Biological Technology
Co., Ltd.	Wholly-owned subsidiary	1	100.00	100.00
Hubei Tianye Innovation Nonggu Fruit &
Vegetable Co., Ltd.	Wholly-owned subsidiary	1	100.00	100.00

Note:

Refer to “Note VII. Change of consolidation scope” for details of the subject of consolidation scope change.

III. BASIS FOR THE PREPARATION OF FINANCIAL STATEMENTS

(I) Basis for the preparation

The Company prepares the financial statements on the basis of going concern, according to actual transactions and events, and in accordance with the Accounting Standards for Business Enterprises — Basic Standards and concrete accounting standards, and Accounting Standards for Business Enterprises — Application Guidelines , the Accounting Standards for Business Enterprises — Interpretations issued by the Ministry of Finance and other relevant provisions (hereinafter collectively referred to as — Accounting Standards for Business Enterprises), and as well as Compilation Rules for Information Disclosure by Companies Offering Securities to the Public No. 15 — General Provisions on Financial Reports (Rev. 2014) issued by China Securities Regulatory Commission.

(II) Going concern

The Company has assessed its ability to continually operate for the next 12 months from the end of the reporting period. There are no major events that will affect the Company’s operational ability,. Therefore, the financial statements are prepared on the basis of going-concern assumption.

– II-287 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

IV. SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES

(I) Statement of compliance with Accounting Standards for Business Enterprises

The financial statements of the Company are prepared in accordance with the requirements of the Accounting Standards for Business Enterprises, which truly and completely reflect the financial status, operating results, cash flow and other relevant information of the Company in the reporting period.

(II) Accounting period

The accounting year of the Company begins on January 1 and ends on December 31.

(III) Recording currency

The recording currency of the Company is RMB.

• (IV) Accounting treatment of “Business combination involving entities under common control” and “Business combination involving entities not under common control”

1. If the terms, conditions and economic impacts of each transaction conform to one or more of the following cases in the business combination step by step, these transactions shall be handled in an accounting way as a package deal:

• (1) These transactions are concluded simultaneously or after the consideration of the mutual influence;

• (2) These transactions can lead to a complete commercial result only when they are in their entirety;

• (3) The occurrence of a transaction relies on the occurrence of at least another transaction;

• (4) A transaction alone is deemed uneconomic but economic when together with other transactions.

2. Business combination under same control

The assets and liabilities that the Company obtains in a business combination shall be measured on the basis of the book value of the combined party in the consolidated financial statement of the final controlling party on the combining date (including the business reputation formed after the final controlling party merges the combined party). As for the balance between the book value of the net assets obtained by the combining party and the book value of the consideration paid by it (or the total par value of the stocks issued), the share capital premium in capital reserve shall be adjusted; if the share capital premium in capital reserve is not sufficient to be offset, the retained earnings shall be adjusted.

If there is contingent consideration and the estimated liabilities or assets should be confirmed, the capital reserve (capital premium or capital stock premium) should be adjusted according to the balance between the amount of estimated liabilities or assets and settled amount of follow-up contingent consideration. If the capital reserve is insufficient, the retained income should be adjusted.

If the business combination is finally realized through various transactions and it is a “package deal”, the various transactions should have accounting treatment by regarding it as the one acquired the control right. If it is not a “package deal”, on the date of obtaining the control

– II-288 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

right, the capital reserve shall be adjusted according to the difference between initial investment cost of the long-term equity investment and the sum of the book value of long-term equity investment before combination and the book value of new paid consideration of shares that further acquired on combining date; if capital reserve is not enough for offset, the retained income shall be adjusted. For the equity investment held before the combining date, other comprehensive income calculated with the equity method or calculated and confirmed according to standards for recognition and measurement of financial instruments will not have accounting treatment until the disposal of the investment, when the accounting treatment should be conducted on the basis of same assets or liabilities handled directly by the investee. Other changes in owners’ equities in net assets of the investee except from the net profits and losses, other comprehensive income and profits accounted and confirmed with the equity method will not have accounting treatment temporarily until the it will be included in current profits and losses during the disposal of the investment.

3. Business combination not under the same control

The “acquisition date” refers to the date on which the acquirer actually obtains the control on the acquiree, i.e. the date on which the control right over the net assets or operation decisions of the acquiree is transferred to the Company. The Company deems the control right is transferred when following conditions are all met:

• ① The combination contract or agreement has passed the approval of internal authority of the Company.

• ② Matters related to business combination that require approval of relevant state authorities have been approved by relevant authorities.

• ③ Necessary property right transfer formalities have been handled.

• ④ The Company has paid a large part of the combination expenses it is able to and plans to pay the rest expenses.

• ⑤ The Company has controlled the financial and operation policies of the acquiree in fact and it enjoys relevant interests and bear relevant risks.

The Company shall measure the assets given and liabilities incurred or assumed by an enterprise for a business combination at the acquisition date based on the fair values, and shall take the balances between the fair values and their book value into the profit and loss of the current period.

The Company shall recognize the positive balance between the combination costs and the fair value of the identifiable net assets it obtains from the acquiree as business reputation. The balance between the combination cost and the fair value of the identifiable net assets acquired from the acquiree in the business combination shall be included in the current profits and losses after recheck.

If the business combination not under the same control realized through disposal in steps by transactions is a package deal, the combining party shall conduct accounting treatment on all transactions by regarding it as one transaction that has acquired the control. It is not a package deal and the equity investment before the combining date is accounted with the equity method, the initial investment cost of the investment is the sum of the book value of the equity investment held by the acquiree before the acquisition date and the new investment cost on the acquisition date. For other comprehensive income of the equity investment confirmed before acquisition date, the accounting treatment shall be conducted on the same basis on which the investee directly disposes related assets or liabilities when handling the investment. For the equity investment held before the

– II-289 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

combining date that are accounted according to the standards for recognition and measurement of financial instruments, the initial investment cost on the combining date is the sum of the book value of the equity investment on the combining date and the new investment cost. For originally held equities, the difference between the book value and the fair value and the cumulative fair value included in other comprehensive income originally shall be all transferred to current investment profits on the combining date.

4. Expenses related to business combination

Commission fees for audit, legal services, assessment and consultation due to business combination and other directly related expenses shall be included in the current profits and losses when they occur. For the transaction expenses for the issuance of equity securities for the business combination, the part directly attributed to equity transactions can be deducted from equities.

(V) BASE OF CONSOLIDATED FINANCIAL STATEMENTS

1. Consolidation scope

The scope of consolidated financial statements the Company shall be confirmed based on the control and all subsidiaries (including individual principal controlled by the Company) shall be included in the consolidation range of the consolidated financial statements.

2. Consolidation procedure

The Company shall prepare consolidated financial statements based on its and its subsidiaries’ financial statements according to other relevant data. During preparation of consolidated financial statements, the Company shall consider the whole company as an accounting entity on the basis of the recognition, measurement and presentation requirements of relevant accounting standards for business enterprises and in accordance with the unified accounting policies, reflecting the Company’s overall financial status, operating results and cash flows.

The accounting policies or accounting period adopted by the subsidiary included in the consolidation range shall be in line with the Company. If the accounting policies or accounting period adopted by the subsidiary are not in line with the Company, necessary adjustments shall be made according to the Company’s accounting policies and period when preparing consolidated financial statements.

When preparing consolidated financial statement, the effects of the offset of internal transactions between the Company and other subsidiary and the offset of internal transactions between subsidiaries to consolidated balance sheet, consolidated profit statement, consolidated statement of cash flow and consolidated statement of change in shareholders’ equity shall be recorded. If the recognition on a same transaction with the Company or its subsidiary as the accounting entity is different from the perspective of consolidated financial statement of the Company, the transaction should be adjusted from the perspective of the Company.

The owners’ equity of subsidiaries, current net profits and losses and the shares in total comprehensive income attributable to minority shareholders shall be independently listed in the “owners’ equity” in consolidated balance sheet, the “net profits” and “total comprehensive income” in consolidated income statements. If current loss shared by minority shareholders in a subsidiary exceeds the share enjoyed by minority shareholders in the subsidiary’s owner’s equity at the beginning of the period, the balance shall be written down with the minority shareholders’ equity.

– II-290 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

If the subsidiary is acquired through combinations under common control, the adjustments are made to the consolidated financial statements based on the book value of its assets and liabilities (including the business reputation formed after the final controlling party merges the combined party) in the consolidated financial statement of the final controlling party.

For a subsidiary acquired through business combination not under the same control, its financial statements are adjusted based on the fair value of the identifiable net assets on the acquisition date.

(1) Increase of subsidiary or business

For the subsidiary or business increased under the same control due to business combination in the reporting period, the opening balance of the consolidated balance sheet shall be adjusted, and the subsidiary and the revenues, expenses and profits from the beginning to the closing period of the current business combination are incorporated into the consolidated profit statement, as well as the cash flow of the same period to the consolidated cash flow statement. Meanwhile, relevant items of the comparative statement are adjusted and the consolidated report subject is regarded to exist from the time the final control party begins to control.

If the investee under the same control can be controlled due to additional investment, it shall be deemed that all parties involved in the combination adjusted the current state/existence when the final controller began to control it. For the equity investment held before the control right over the combined party is obtained, the changes in relevant profits and losses, other comprehensive incomes and other net assets recognized from the later one of the date when the original equity is obtained and the date when the combing party and the combined party are under the same control to the combination date shall respectively be used to offset the retained income at the beginning period of the comparative statement or current profits and losses.

In the reporting period, for the added subsidiary companies or businesses caused by business combination under common control, the beginning balance of the consolidated financial statement shall not be adjusted. The incomes, expenses and profits of the subsidiary or business incurred from the acquisition date to the end of reporting period shall be recorded into consolidated profit statement. The cash flow of the subsidiary or business from the acquisition date to the end of reporting period shall be included into consolidated cash flow statement.

If the investee not under the same control can be controlled due to additional investment, the Company shall measure again its equity owned from the acquiree prior to the acquisition date in accordance with the fair value of the equity at the acquisition date, and the balance between the fair value and the book value shall be taken into the investment income of the current period. For the held equity from the acquiree before the acquisition date which involves other comprehensive income under accounting with equity method, and changes of owner’s equities except from net profits and losses, other comprehensive income and distribution of profits shall be changed into the current incomes from investment on the acquisition date, except from other comprehensive income due to changes in net debt or assets caused by remeasurement and re-definition of benefit plan by the investee.

(2) Disposal of subsidiaries or businesses

1) General disposal method

If the Company disposes its subsidiary or the business within the reporting period, the revenues, expenses and profits occurred from the beginning of the business to the disposal date and of the subsidiary are incorporated into the consolidated income statement and the cash flow produced from the beginning of the period to the disposal date of the subsidiary is included into the consolidated cash flow statement.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

If it loses the control on the investee because of disposing part of the equity investment or due to other reasons, the disposed remaining equity investment shall be remeasured by the Company as per the fair value on the date of losing the control. The balance obtained by deducting the portion of net assets reckoned continuously since the acquisition or combination date by the original subsidiary that shall be enjoyed according to the original calculated shareholding ratio with the sum of consideration generated from the disposal and the fair value of the residual equity shall be numbered into the investment income of the current period in which the right of control is lost. Other comprehensive incomes or changes of owner’s equities except from net profits and losses, other comprehensive income and distribution of profits associated with the equity investments of the original subsidiary are turned into the current investment income at the time the right of control is lost. However, other comprehensive income due to changes in net debt or assets caused by remeasurement and re-definition of benefit plan by the investee is excluded.

2) Disposal of subsidiary in steps

For investment in subsidiary from disposal in steps by transactions to control loss, if the clauses, condition and economic impact of each transaction conform to one or more of the following cases during the disposal of equity investment to subsidiaries, it is commonly acknowledged these transactions shall be handled in an accounting way as a package deal:

• A. These transactions are concluded simultaneously or after the consideration of the mutual influence;

• B. These transactions can lead to a complete commercial result only when they are in their entirety;

• C. The occurrence of a transaction relies on the occurrence of at least another transaction;

• D. A transaction alone is deemed uneconomic but economic when together with other transactions.

If various transactions from disposal of subsidiary equity investment to control loss belong to package deal, these transactions shall be disposed in an accounting way as a transaction for subsidiary disposal with control loss. However, for each transaction conducted before control loss, the balance between the disposal price and corresponding net asset share of disposed investment over the subsidiary shall be recognized as other comprehensive income in the consolidated financial statement and transferred to current profits and losses at the time of control loss together.

If various transactions from disposal of subsidiary equity investment to control loss do not belong to package deal, accounting treatment shall be conducted for policies related to equity investment of the subsidiary under the condition of no control right loss. If the control right is lost, accounting treatment shall be conducted with general method for disposal of subsidiary.

(3) Purchase of minority equities in subsidiaries

The stock premium in capital reserve in consolidated balance sheet shall be adjusted for the difference between the net asset shares continuously calculated since acquisition date (or combining date) of subsidiary corporation to be enjoyed by long-term equity investment as a result of purchasing minority interest, as well as calculation on the basis of new shareholding ratio. If the stock premium in capital reserve is insufficient for offset, retained income shall be adjusted.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

• (4) Disposal of equity investment of subsidiary partially without loosing control right

The stock premium in capital reserve in consolidated balance sheet shall be adjusted according to the difference of net assets of subsidiary as result of continuous calculation since the acquisition or combining date enjoyed during disposal of price and long-term equity investment due to the disposal of the long-term equity investment of subsidiary partially without losing its control right. If the stock premium in capital reserve is insufficient for offset, retained income shall be adjusted.

(VI) CASH AND CASH EQUIVALENTS

The Company’s cash on hand and deposits available for payment at any time are recognized as cash when the Company prepares its cash flow statement. Any short-term (expires after three months from the purchase date generally) and highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value are confirmed as cash equivalents.

(VII) FOREIGN OPERATIONS AND FOREIGN CURRENCY TRANSLATION

1. Foreign operations

At the time of initial recognition of a foreign currency transaction, the amount shall be translated into RMB at the spot exchange rate of the transaction date.

The foreign currency monetary items shall be translated at the spot exchange rate on the balance sheet date into RMB. The balance of exchange arising from the difference of exchange rate, except from the balance of exchange arising from foreign currency borrowings for the purchase and construction or production of qualified assets which is capitalized, shall be included into profits and losses of the current period. The foreign currency non-monetary items measured at the historical cost shall still be translated at the spot exchange rate on the transaction date, of which the amount of functional currency shall not be changed.

Foreign currency non-monetary items measured at fair value shall be translated at the spot exchange rate on the date when the fair value is determined. The resulting difference shall be recognized as the fair value change in the current profit and loss. The resulting difference belonging to the non-monetary items of available-for-sale foreign currency shall be recognized as other comprehensive incomes.

2. Translation of foreign currency financial statements

The asset and liability items in the balance sheet shall be translated at spot exchange rate on the balance sheet date. Among the owner’s equity items, except items in “undistributed profits”, others shall be translated at the spot exchange rate at the time when they are incurred. The income and expense items in the profit statements shall be translated at the spot rate of the transaction date. The translation difference of foreign currency financial statements generated according to the above translation shall be included in other comprehensive income.

When disposing of overseas operations, the translation difference of foreign currency financial statements listed in other comprehensive income items in the balance sheet and related to the overseas operations shall be transferred from other comprehensive income items to the current profits and losses; when part of the equity investment is disposed of or other reasons lead to a decrease in the proportion of overseas business interests, but the right to control overseas business is not lost, the translation difference of foreign currency statements related to the disposal of the overseas business shall be attributed to minority shareholders’ interests and shall not be transferred to the current profits and losses. In case of disposal of part of equity of the associated enterprises

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

or cooperative enterprises in the overseas business, the translation balance related to the overseas business shall be translated into the current profits and losses based on the ratio to dispose overseas business.

(VIII) FINANCIAL INSTRUMENTS

The term “financial instruments” refers to the contracts under which the financial assets of a party are formed and the financial liabilities or right instruments of any other party are formed.

1. Recognition and derecognition of financial instruments

A financial asset or financial liability shall be recognized when the Company becomes a party of financial instrument contract. If a financial asset meets one of the following conditions, its recognition shall be terminated:

• (1) The contractual right to collect the cash flow of the financial asset is terminated;

• (2) The financial asset has been transferred and meets the conditions for the termination of the recognition of financial assets.

When current obligations of a financial liability have been wholly or partly canceled, then the financial liability or part of it shall be wholly or partly de-recognized. The Company (the Debtor) and the Creditor sign the agreement to substitute the new financial liability mode for the existing financial liability. The essences of the contract provisions for the new financial liability and existing financial liability are different, so the recognition of existing financial liability can be terminated and the new financial recognition be recognized at the same time.

Financial assets shall be dealt through conventional methods and their accounting recognition and de-recognition shall be made as per the rate on the transaction date.

2. Classification and measurement of financial assets

According to the Company’s business mode to manage financial assets and the contract cash flow characteristics of financial assets, the financial assets, during initial recognition, are classified into three types: the financial assets measured at amortized cost, the financial assets measured at their fair value with changes included in the other comprehensive income, and the financial assets measured at their fair value with changes included in the current profits and losses.

(1) Financial assets measured at amortized cost

The Company classifies financial assets that simultaneously meet the following conditions and are not designated as financial assets measured at fair value with changes included in current profits and losses as financial assets measured at amortized cost:

The business mode of the Company to manage the financial assets is to collect contractual cash flow;

The contractual terms of the financial assets provide that the cash flow generated on a particular date will only be the payment of the principal and interest based on the outstanding principal amount.

After the initial recognition, effective interest method is adopted to measure the financial assets at amortized cost. Profits or losses of financial assets measured at amortized cost and not part of hedging relationship shall be included into current profits and losses upon termination of recognition, amortization or recognition of impairment based on effective interest method.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

(2) Financial assets measured at fair value and with changes included in other comprehensive income

The Company classifies financial assets that simultaneously meet the following conditions and are not designated as financial assets measured at fair value with changes included in current profits and losses as financial assets measured at their fair value with changes included in the other comprehensive income:

The business mode of the Company to manage the financial assets is to collect contract cash flow and sell the financial assets;

The contractual terms of the financial assets provide that the cash flow generated on a particular date will only be the payment of the principal and interest based on the outstanding principal amount.

After the initial recognition, such financial assets are subsequently measured at fair value. Interests, impairment losses or gains calculated by the effective interest method and exchange gains and losses shall be included in the current profits and losses, and other gains or losses shall be included in other comprehensive income. During the derecognition, the accumulated gains or losses included in other comprehensive income before shall be transferred out from other comprehensive income and included in the current profits and losses.

(3) Financial assets measured at fair value with changes included in the current profits and losses

Except the financial assets above measured at the amortized cost and fair value with changes included in other comprehensive income, the Company classifies all other financial assets as financial assets measured at fair value with changes included into current profits and losses. In the initial recognition, to eliminate or significantly reduce accounting mismatches, the Company shall irrevocably designate part of the financial assets that should have been measured at amortized cost or at fair value with changes included in other comprehensive income as financial assets measured at fair value with changes included in current profits and losses.

After the initial recognition, the financial assets shall be subsequently measured at fair value, and the profits or losses (including interest and dividend income) generated shall be included into the current profits and losses, unless the financial assets are part of the hedging relationship.

Financial assets shall be measured at fair value upon initial recognition. For the financial assets measured at their fair values and of which the change is recorded into the current profits and losses, the transaction expenses thereof are directly recorded into the current profits and losses; for other categories of financial assets, the transaction expenses thereof are included into the initial recognition amount. For the accounts receivable arising from sale of products or provision of labor services that do not contain or do not consider significant financing components, the Company shall use the amount of consideration expected to be received as the initially recognized amount.

3. Classification and measurement of financial liabilities

The financial liabilities of the Company, when initially recognized, are classified as the financial liabilities measured at their fair value with changes included in the current profits and losses and the financial liabilities measured at amortized cost. For financial liabilities that are not classified as financial liabilities measured at fair value and vitiation of which is included in current profits and losses, relevant transaction expenses shall be included into initial recognition amount.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

• (1) Financial liabilities measured at fair value with changes included in the current profits and losses

The financial liabilities which are measured at fair value through profit or loss of the current period, including transactional financial liabilities and the designated financial liabilities measured at their fair values with changes included in the current profits and losses. This kind of financial liabilities shall be measured at the fair value subsequently. Profits and losses generated from variation of fair value and earnings from dividend and interest related to the financial liabilities shall be included in current profits and losses.

(2) Financial liabilities measured at amortized cost

Other financial liabilities are subsequently measured by amortized cost using the effective interest method to terminate the profits or losses arising from recognition or amortization to be included in the current profits and losses.

(3) Distinction between financial liabilities and equity instruments

The “financial liabilities” refers to the liabilities meeting any of the following conditions:

• ① The contractual obligations to deliver cash or other financial assets to any other parties;

• ② The contractual obligations to exchange financial assets or financial liabilities with other parties under potential unfavorable conditions;

• ③ The contractual obligations to non-derivative instruments which must be settled or may be settled by the enterprise with its own equity instruments in the future, whereby the enterprise will deliver an unfixed amount of equity instruments of its own according to the said contract;

• ④ The contractual rights to non-derivative instruments which must be settled or may be settled by the enterprise with its own equity instruments in the future, excluding the contractual rights to the derivative instruments for which the enterprise will exchange for a fixed amount of its own equity instruments with a fixed amount of cash or any other financial assets.

The “equity instruments” refers to the contracts which can prove that a certain enterprise holds the surplus equities of the assets after the deduction of all the debts.

If the Company fails to avoid performing one contractual obligation by delivering cash or other financial assets, the contractual obligation conforms to the definition of financial liabilities.

If a financial instrument needs to or can be settled with equity instruments of the Company, it shall be considered the equity instruments of the Company used for the settlement of the instrument are used as substitute of cash or other financial assets or used to make the holder of the instrument enjoy the residual interests of the assets after deducing all liabilities. If the exchange rate is determined in the first way, the instrument is financial liability of the Company. If it is determined in the second way, the instrument is equity instrument of the Company.

4. Fair value of financial instruments

The fair value is a price received by the market participants from selling an asset or transferring a liability during orderly transaction at the measurement date.

– II-296 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

When the Company measures the relevant assets or liabilities at fair value, it assumes that the orderly transactions of selling assets or transferring liabilities is conducted in the main market of the relevant assets or liabilities; if there is no major market, it assumes that the transaction is conducted in the most advantageous market for the relevant assets or liabilities. The major market (or the most advantageous market) is the trading market in which the Company can enter on the measurement date. The Company adopts the assumption used by the market participants to maximize their economic interests in the process of putting prices on assets or liabilities.

The Company shall determine the fair value of the financial asset or financial liability in the active market by quoting from the active market. For the financial instrument not existing in an active market, its fair value shall be determined by the Company through valuation techniques.

When non-financial assets are measured at fair value, it shall be considered that the market participants’ abilities to use the asset for the best purpose for economic interests or abilities to sell the asset to other market participants for the best purpose for economic interests.

The Company uses estimation techniques that are applicable under current circumstances and that are supported by sufficient available data and other information to prioritize the use of relevant observable inputs, it uses the unobservable input values only if observable inputs are not available or are not practicable.

For the assets and liabilities measured or disclosed at fair value in the financial statements, the level of fair value to which they belong is determined according to the lowest-level input value that is significant to the fair value measurement as a whole: The first level input valve is that the input value that can be obtained on measurement date and not adjusted quoted price of same assets or liabilities in active market; second level is the input value that can be directly or indirectly observed by relevant assets or liabilities except from first-level input value; third level is the input value that can not be observed by relevant assets or liabilities.

On each balance sheet date, the Company reassesses the assets and liabilities that are recognized in the financial statements to be consistently measured at fair value to determine whether to shift between levels of fair value measurement.

5. Impairment of financial assets

On the basis of expected credit losses, the Company conducts impairment accounting treatment for the following items and recognizes loss provisions:

• (1) Financial assets measured at amortized cost;

• (2) Creditors’ investment measured at fair value and whose changes are included in other comprehensive income;

• (3) Measurement of expected credit loss

Expected credit loss refers to the weighted average of credit losses of financial instruments weighted by the default risk. Credit loss refers to the difference between all the contractual cash flows receivable under the contract and all the expected cash flows received by the Company discounted at the original effective interest rate, namely the present value of the total cash shortage.

The Company measures the expected credit losses of financial instruments at different stages. If the credit risk of a financial instrument has not increased significantly since initial recognition, in the first stage, the Company measures the loss provision based on the expected credit loss within the next 12 months; if the credit risk of a financial instrument has increased significantly

– II-297 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

after initial recognition but no credit reduction has occurred, in the second stage, the Company measures the loss provision based on the expected credit loss in the whole duration of the instrument; if the financial instrument has suffered credit impairment since initial recognition, in the third stage, the Company measures the loss provision based on the expected credit loss in the whole duration of the instrument.

For financial instruments with low credit risk on the balance sheet date, the Company assumes that its credit risk has not increased significantly since initial recognition, and measures the loss provision based on the expected credit loss in the next 12 months.

The expected credit loss in the whole duration refers to the expected credit loss caused by all possible default events in the whole duration of a financial instrument. The expected credit loss in the next 12 months refers to the expected credit loss caused by possible default events of a financial instrument within 12 months after the balance sheet date (if the expected duration of the financial instrument is less than 12 months, the expected duration shall prevail), and it is part of the expected credit loss in the whole duration.

For the measurement of the expected credit loss, the longest period to be considered by the Company is the longest contract period that the Company faces credit risk (including consideration of the right to choose renewal or not).

For financial instruments that are in the first and second stages and with lower credit risk, the Company calculates interest income based on the book balance and actual interest rate without deducting the provision for impairment. For financial instruments in the third phase, the Company calculates interest income based on the book balance minus the amortized cost after the withdrawal of the provision for impairment and the actual interest rate.

The Company withdraws bad-debt provision for all receivables according to the expected amount of credit losses in the whole duration. On the basis of actual loss rate of accounts receivable in previous years, judgment of future recovery risk and analysis of credit risk characteristics, the expected loss rate is determined and for bad-debt provision is withdrawn accordingly.

The Company classifies and combines notes receivable, accounts receivable, other receivables and long-term receivables according to the credit risk characteristics, and calculates the expected credit loss on the basis of combination. The basis for determining the combination is as follows:

Item		Expected loss provision ratio
Combination	1	This combination takes the aging of receivables as the credit risk feature
Combination	2	Accounts receivable between enterprises	included in	the scope	of
		consolidation of the Company are generally	excluded from	withdrawal	of
		credit impairment losses
Combination	3	This combination is accounts receivable including all kinds of margins,
		deposits, reserve funds, advance payments	and temporary	payments that
		should be collected in daily activities.

For accounts receivable that are divided into combination 1, the Company prepares a comparison table of accounts receivable aging and the expected credit loss rate for the whole duration and calculates the expected credit loss by referring to the historical credit loss experience and combining the current situation and the forecast of the future economic situation.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

	Withdrawing proportion of
Aging	receivables
	(%)
Less than 1 year (including 1 year, the same below)	5.00
1-2 years	10.00
2-3 years	30.00
3-4 years	50.00
4-5 years	80.00
>5 years	100.00

For other receivables and long-term receivables that are divided into combination 3, the Company evaluates their credit risk on each balance sheet date, and divides them into three stages to calculate the expected credit loss.

	**Withdrawal **	Proportion (%)
Category	Phase I	Phase II	Phase III
Margin, deposit, advance payment and
temporary payment	10.00	50.00	100.00

(4) Evaluation of a significant increase in credit risk

The Company compares the default risk of a financial instrument on the balance sheet date with its default risk on the initial recognition date to determine the relative change of the default risk in the expected duration of the financial instrument, so as to evaluate whether the credit risk of the financial instrument has increased significantly since its initial recognition based on this condition.

While determining whether the credit risk has significantly increased since the initial recognition, the Company considers the reasonable and evidence-based information that can be obtained without unnecessary additional cost or effort, including prospective information. Information considered by the Company includes:

• ① the debtor’s failure to pay the principal and interest before the contract deadline;

• ② serious deterioration in the external or internal credit rating (if any) of financial instruments that has occurred or is expected;

• ③ serious deterioration of the debtor’s business performance that has occurred or is expected; and

• ④ existing or anticipated changes in the technical, market, economic or legal environment that will materially and adversely affect the debtor’s ability to repay the Company.

According to the nature of financial instruments, the Company evaluates whether the credit risk has significantly increased on the basis of a single financial instrument or financial instrument combination. When evaluating the financial instruments on the basis of a financial instrument combination, the Company can classify the financial instruments based on common credit risk characteristics, such as overdue information and credit risk ratings.

If the delay exceeds 30 days, the Company determines that the credit risk of the financial instrument has significantly increased.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

(5) Financial assets that have experienced credit impairment

On the balance sheet date, the Company evaluates whether credit impairment has occurred in financial assets measured at amortized cost and debt instruments measured at fair value with changes included in other comprehensive income. When one or more events that adversely affect the expected future cash flow of financial assets occur, the financial assets become the financial assets that have experienced credit impairment. Evidence proofing that a financial asset has been credit-impaired includes the following observable information:

• ① A serious financial difficulty occurs to the issuer or debtor;

• ② The debtor breaches any of the contractual stipulations, for example, fails to pay or delays the payment of interests or the principal, etc.;

• ③ Out of economic or contractual considerations relating to the debtor’s financial difficulties, the Company grants the debtor concessions that would not be made under any other circumstances;

• ④ The debtor is likely to become bankrupt or carry out other financial reorganizations;

• ⑤ The financial difficulties of the issuer or the debtor cause the disappearance of active market for the financial asset.

(6) Presentation of provision for expected credit loss

To reflect the changes in the credit risk of financial instruments since the initial recognition, the Company shall re-measure the expected credit loss on each balance sheet date and the increased or reversed amount of the provision for loss formed on this account shall be included in the current profits and losses as impairment losses or gains. For the financial assets measured at amortized cost, the loss provision shall offset the book value of the financial assets listed in the balance sheet; for the debt investments measured at fair value with changes included in other comprehensive income, the Company shall recognize the loss provision in other comprehensive income, and shall not offset the book value of the financial assets.

(7) Verification and cancellation

If the Company no longer expects with reason the cash flow of the financial asset contract to be recovered in whole or in part, the book balance of the financial asset shall be directly written down. Such writedowns constitute termination recognition of the relevant financial assets. Such situation usually occurs when the Company determines that the debtor has no assets or sources of income that can generate sufficient cash flow to repay the amount to be written down. However, in accordance with the Company’s procedures for recovering due payments, the financial assets that have been written down may still be affected by execution activities.

If financial assets that have been written down is recovered later, it shall be recorded as impairment loss in the current period of recovery.

6. Transfer of financial assets

The term “transfer of a financial asset” refers to transferring or delivering a financial asset to a party other than the issuer of the financial asset (the transferee).

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

In the event that the Company has transferred nearly all of the risks and rewards related to the ownership of the financial asset to the transferee, it shall stop recognizing the financial asset. In case it has retained nearly all of the risks and rewards associated with the ownership of the financial asset, the financial asset shall not be derecognized.

In the event the Company has neither transferred nor retained almost all the risks and rewards of ownership of financial assets, the following cases shall be considered: if the control of the financial assets is abandoned, the financial assets are derecognized and the assets and liabilities are recognized; if the financial assets are controlled, the relevant financial assets are recognized according to the extent to which they continue to be involved in the transferred financial assets, and the related liabilities are recognized accordingly.

7. Offset of financial assets and financial liabilities

If the Company is legally entitled to offset the confirmed financial assets and financial liabilities, and it is able to perform the legal rights, moreover, it plans to settle accounts in net amount or simultaneously cash the financial assets and pay off the financial liabilities, the amount after mutual offset of financial assets and financial liabilities shall be listed in balance sheet. In all other situations they are presented separately in the balance sheet and are not offset.

(IX) INVENTORIES

1. Classification of inventories

The term “inventories” refer to finished products or merchandise possessed by the Company for sale in the daily business, or work in progress in the process of production, or materials and supplies to be consumed in the process of production or offering labor service. It mainly includes raw materials, turnover materials, entrusted processing materials, in-process products and finished products (inventory goods), etc.

2. Inventory valuation method

After the inventories are obtained, its initial measurement shall be carried out based on their cost, including purchase cost, processing cost and other costs. The method of weighted mean is adopted for valuation of sending inventories.

3. Determination basis of net realizable value of inventories and method of provision for depreciation

After complete check on inventory at the end of the period, inventory falling price reserves shall be withdrawn or adjusted at the lower of inventory cost and net realizable value. For merchandise inventory which is directly for sale like finished products, commodity stocks, and material for sale, during normal production and marketing process, net realizable value of which shall be determined by subtracting estimated selling expenses and relevant taxes from the estimated sale price; for material inventory needs to be processed, during normal production and marketing process, net realizable value of which shall be determined by subtracting the cost going to happen, the estimated marketing expenses and relevant taxes from the estimated sale price of finished products; for inventory held for performing sales contract or labor contract, net realizable value of which shall be determined on the basis of contract price, if the quantity of inventory is more than the quantity purchases by sales contract, net realizable value of the surplus part shall be calculated as per average sales price.

The inventory falling price reserves shall be withdrawn as per the single inventory item at the end of the period generally, and for inventories with large quantity and relatively low unit prices, the inventory falling price reserves shall be withdrawn according to the inventory type. For the

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

inventories related to the series of products manufactured and sold in the same area, and of which the final use or purpose is identical or similar there to, and if it is difficult to measure them by separating them from other items, the provision for loss on decline in value of inventories shall be made on a combination basis.

If the factors causing any write-down of the inventories have disappeared, the amount of write-down shall be resumed and be reversed from the provision for the loss on decline in value of inventories that has been made. The reversed amount shall be included in the current profits and losses.

4. Inventory system for inventories

Perpetual inventory system is adopted.

5. Amortization method for low-value consumables and wrappage

• (1) One-time amortization method is adopted for the amortization of low priced and easily worn articles;

• (2) One-time amortization method is adopted for the amortization of packing materials.

• (3) Other turnover materials are amortized by one-time write-off method.

(X) HELD-FOR-SALE ASSETS

1. Determination standards for held-for-sale assets

The non-current assets meeting the following conditions or disposal groups shall be categorized into held-for-sale assets:

• (1) Based on the practice of selling such assets or disposal groups in similar transactions, they can be sold immediately under current conditions;

• (2) The sale is very likely to happen, that is, the Company has made a resolution on a sale plan and obtained a firm purchase commitment, and it is estimated that the sale will be completed within one year.

The confirmed purchase commitment refers to the legally binding purchase agreement signed between the Company and other parties. The agreement contains important terms such as the transaction price, time, and heavy penalty for breach of contract that lead to the smallest possibility to adjust largely or cancel the agreement.

2. Accounting method for held-for-sale assets

For held-for-sale non-current assets for which depreciation or amortization are not be carried out, if the book value is higher than the net value of fair value minus the sales expense, the book value should be written down to the nut value after the fair value minus the dales expense. The write-down amount shall be recognized as the loss of asset impairment and be recorded as the profits or losses for the current period. Simultaneously, a provision for the asset impairment shall be made accordingly.

For the non-current assets or disposal groups classified as held-for-sale type on the obtaining date, they shall be measured at the lower one of the initially measured value when it is not classified as held-for-sale type and the net value of fair value minus the sales expense.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

The principles above are applicable to all non-current assets, excluding the investment real estate adopting fair value pattern for subsequent measurement, the biological assets measured at the net value of fair value minus the sales expense, the assets formed by employee payroll, the deferred income tax assets, financial assets meeting accounting standards for financial instruments and the rights generated from the insurance contract meeting relevant accounting standards for insurance contracts.

(XI) LONG-TERM EQUITY INVESTMENT

1. Determination of initial investment cost

• (1) For the long-term equity investment formed by business combination, please refer to Note IV/(IV) for specific accounting policies

Accounting arrangement methods for business combination under and not under the same control.

(2) Long-term equity investment formed by other modes

For long-term equity investment obtained by cash payment, the initial investment cost is the amount actually paid for the purchase. The initial cost consists of the expenses directly relevant to the obtainment of the long-term equity investment, taxes and other necessary expenses. The initial cost of a long-term equity investment obtained on the basis of issuing equity securities shall be the fair value of the equity securities issued. Transaction costs incurred when issuing or acquiring their own equity instruments may be directly attributable to equity transactions and deducted from equity.

Under the premise that the non-monetary assets exchange is of commercial essence and the fair value of long-term equity investment received or surrendered can be reliably measured, the initial investment cost of intangible asset received during the non-monetary assets exchange shall be recognized based on the fair value of asset surrendered, unless there is any exact evidence showing that the fair value of asset received is more reliable; for the non-monetary assets exchange which fails to meet the above premise, the book value of asset surrendered and relevant taxes and dues payable shall be regarded as the initial investment cost of long-term equity investment.

The initial cost of a long-term equity investment obtained by recombination of liabilities shall be determined on the basis of fair value.

2. Subsequent measurement and profit and loss determination

(1) Cost method

The long term equity investment on the invested enterprise shall be accounted by employing the cost method and it shall be evaluated based on its initial investment cost. If there are additional investments or disinvestments, the long-term equity investment cost shall be adjusted.

Except from cost actually paid in investment and cash dividends or profits declared but not distributed included in consideration, the Company will enjoy the investment income recognized in current period according to cash dividends or profits declared to distribute by the invested company.

– II-303 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

(2) Equity method

Equity method shall be applied for the accounting of long-term equity investment of associated enterprise and cooperative enterprise. For equity investment of associated enterprise partially and indirectly held by the Company as a result of investment to risk investment organization, mutual fund, trust company or similar entities such as unit-linked fund, the Company shall account the indirect investment as per its fair value and record its variation into the benefits and losses.

If the initial cost of a long-term equity investment is more than the investing enterprise’ attributable share of the fair value of the invested entity’s identifiable net assets for the investment, the initial cost of the long-term equity investment may not be adjusted. If the initial cost of a long term equity investment is less than the investing enterprise’ attributable share of the fair value of the invested entity’s identifiable net assets for the investment, the difference shall be included in the current profits and losses.

After long-term equity investment is acquired, the investor shall determine the return on investment and other consolidated income according to the net profits and losses and other income of the investee in the same year it shall be enjoyed and shared, and adjust the fair value of the long-term equity investment; the investor shall calculate the proportion enjoyed of the profit or cash dividend announced by the investee to be distributed, reduce the fair value of the long-term equity investment accordingly, and adjust the fair value of the long-term equity investment and include it into the owners’ equity in terms of other changes to the owners’ equity other than net profits and losses, other consolidated income, and profit distribution.

On the ground of the fair value of all identifiable assets of the investee when the Company obtains the investment, the attributable share of the net profits and losses of the investee shall be recognized after the net profits of the investee are adjusted. The Company’s entitled part of unrealized profits and losses from internal transaction between the Company and associated enterprises or cooperative enterprises shall be offset according to the Company’s entitled proportion. On such basis the investment profits/losses are confirmed.

If Company decides to share the losses of investee, deal with the matter in the following order: firstly, write down the book value of long-term equity investment. If the book value of the long-term equity investment is insufficient for offset, the recognition of the investment losses is continued based on the book value of the long-term equities of the net investment of the investee to offset the book value of long-term receivables. Finally, after the treatment above, if the investment contract or agreement agrees the enterprise shall still bear extra obligations, the accrued liabilities shall be recognized according to obligations to be shouldered and included into current investment losses.

If the investee achieves profitability in the future, Company shall deal with it in the reverse order after deducting the unconfirmed loss sharing amount, write down the book balance of confirmed accrued liabilities, recover the book value of long-term interests of net investment and long-term equity investment constituted on investee substantially and confirm the investment income.

3. Conversion of long-term equity investment by accounting method

• (1) Conversion from fair value measurement to accounting by equity method

With regard to the equity investment having accounting treatment according to financial instrument recognition and measurement standard originally held by the Company that does not have control, joint control or significant influence on the invested entity, if the Company is able to do joint control or significant influence, which does not constitute control, over the invested entity

– II-304 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

as a result of additional investment or other reasons, the fair value of original equity investment added to new investment cost in accordance with the Accounting Standards for Business Enterprises No. 22 — Recognition and Measurement of Financial Instruments shall be regarded as initial investment cost measured by employing the equity method.

If the original equity investment is categorized as sellable financial assets, the difference between the fair value and the book value, along with the change in the accumulated total fair value originally included in other comprehensive income, shall be transferred to the current profit and loss accounted by the equity method which has been transferred to.

If the initial investment cost calculated with the equity method is smaller than the fair value of the net identifiable assets of the investee enjoyed on the date of increase in investment calculated and determined with the new shareholding ratio, the book value of long-term equity investment shall be adjusted with the balance and included into the current non-operating income.

• (2) Conversion from measurement based on fair value or accounting by equity method to accounting by cost method

For the equity investments held by the Company that have no control, joint control, or significant influence on the investee in accordance with the standards for recognition and measurement of financial instruments, or originally held long-term equity investments in cooperative enterprises or associated enterprises that can control the investee not under the same control due to additional investment and other reasons, in individual financial statement, the sum of book value of original equity investment and newly increased investment cost shall be regarded as the initial investment cost measured by employing the cost method.

For other comprehensive income of the equity investment confirmed before purchase date, the accounting treatment shall be conducted on the same basis on which the investee directly disposes related assets or liabilities when handling the investment.

If the equity investment held prior to the acquisition date is put under accounting treatment in accordance with the relevant provisions of Accounting Standards for Business Enterprises No. 22 — Recognition and Measurement of Financial Instruments , the accumulated fair value changes previously included in other comprehensive income are transferred to the current profit and loss after the cost method is adopted.

(3) Conversion from accounting by equity method to measurement based on fair value

If significant influence or joint control of the Company is lost due to reasons including the disposal of part of the equity investment, the residual equity after disposal shall be confirmed through financial instrument and accounted according to Accounting Standards for Business Enterprises No. 22 — Recognition and Measurement of Financial Instruments , the difference between the fair value and the book value of the remaining equity on the date of loss shall be included in the current profit and loss.

For other comprehensive income of the original equity investment recognized by the equity method, at the time that the equity method stops being employed, the accounting treatment shall be conducted on the same basis on which the investee directly disposes related assets or liabilities.

– II-305 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

• (4) Conversion from cost method to equity method

If the Company losses joint control of the invested company as a result of disposal of partial equity investment, and in the individual financial statement the surplus equity is able to carry out joint control and significant influences to the invested company, the equity method shall be used for accounting, and the surplus equity shall be regarded to be accounted and adjusted by equity method same to the equity originally obtained.

• (5) Conversion from measurement with cost method to measurement based on fair value

If the Company losses joint control of the invested company as a result of disposal of partial equity investment, and in the individual financial statement the surplus equity is unable to carry out joint control and significant influences to the invested company, it shall be accounted as per Accounting Standards for Business Enterprises No. 22 — Recognition and Measurement of Financial Instruments , and the difference between fair value and book value on the date when losing the joint control shall be included in the current benefits and losses.

4. Disposal of long-term equity investment

During the disposal of a long-term equity investment, the difference between its book value and the actual purchase price shall be included in the current profits and losses. For long-term equity investments checked by the equity method, when the investments are disposed of, the same basis as the investee’s direct disposal of the relevant assets or liabilities shall be used, and the part originally included in other comprehensive income is treated in accordance with the corresponding proportion.

If the clauses, condition and economic impact of each transaction conform to one or more of the following cases during the disposal of equity investment to subsidiaries, these transactions shall be handled in an accounting way as a package deal:

• (1) These transactions are concluded simultaneously or after the consideration of the mutual influence;

• (2) These transactions can lead to a complete commercial result only when they are in their entirety;

• (3) The occurrence of a transaction relies on the occurrence of at least another transaction;

• (4) A transaction alone is deemed uneconomic but economic when together with other transactions.

If the Company losses control over a subsidiary due to partial disposal of equity investment or other reasons and it is not package deal, individual financial statement and consolidated financial statement shall be distinguished for accounting treatment.

• (1) In some financial statements, for disposed equity, the difference between its book value and the actual purchase price shall be included in the current profits and losses. The remaining equity after disposing is recognized and measured by equity method if it is able to have joint control over or significant impact on the investee, and are adjusted also by equity method from the time of obtaining; In case of failing to have joint control or impact on the investee, the remaining equity is recognized according to Accounting Standards for Business Enterprises No. 22 — Recognition and Measurement of Financial Instruments , and the difference between the fair value and book value when losing the joint control occurring is included in current profits and losses.

– II-306 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

• (2) During preparation of consolidated financial statement, for transactions before losing the control on subsidiaries, disposal of price and long-term equity investment can enjoy the difference of net assets of subsidiary as result of continuous calculation since the date of purchasing or acquisition, the adjust capital reserve (capital premium) should be adjusted, If the capital reserve is insufficient for offset, adjust retained incomes. When the control over subsidiary is lost, the remaining equity shall be recalculated according to its fair value on control loss date. The difference between the sum of consideration received for disposal of equity interest and the fair value of remaining equity interest less the net assets attributable to the original subsidiary calculated continuously since the purchase date based on shareholding percentage before disposal are recognized in investment gain in the period when the control is lost and offset for the business reputation. Other comprehensive income related to equity investment in the subsidiary is transferred to investment gain at the time of control lost.

If the transactions from the disposal of equity investment to the subsidiary till the loss of control belong to package deal, the transactions shall have accounting treatment by taking it as a transaction that disposes the equity investment to the subsidiary and causes control loss. Individual financial statement and consolidated financial statement shall be distinguished for accounting treatment.

• (1) In individual financial statement, the balance between each disposal price and the book value of the long-term equity investment corresponding to the disposed equities is recognized as other comprehensive income and it is transferred to the profits and losses at the time of control loss.

• (2) In consolidated financial statement, the balance between each disposal price and corresponding net asset proportion of disposed investment over the subsidiary before the control loss shall be recognized as other comprehensive income and it is transferred to the profits and losses at the time of control loss.

5. Judgment standards of joint control or significant influences

If the Company controls one arrangement with other parties jointly according to regulations and the decisions having significant influences on the return from the arrangement can only exist after consensus from the parties sharing the control right is obtained, it means the arrangement is under joint control of the Company and the other parties and the arrangement is the joint venture arrangement.

If the joint venture arrangement is achieved through an independent entity, the independent entity shall be taken as joint venture when the rights of the Company on the net assets of the independent entity are judged and equity method shall be used for accounting. If it is judged the Company does not have rights on the net assets of the independent entity according to regulations, the independent entity shall confirm items related to profits from joint operation with the Company and have accounting treatment according to Accounting Standards for Business Enterprises.

Significant influence refers to the right of participation in the decisions of financial and operational policies of the investee, not including the right to control, or jointly control with other participants. The Company is judged to have significant influence on the investee through following conditions and after all facts and conditions are considered. (1) The Company has appointed representatives to the board of directors of the investee or such institutions; (2) The Company participates in the preparation of financial and operational policies of the investee; (3) The Company has important transactions with the investee; (4) The Company has appointed management personnel to the investee; and (5) The Company provides key technical data to the investee.

– II-307 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

(XII) FIXED ASSETS

1. Recognition condition of fixed assets

Fixed assets are tangible assets whose service life is in excess of one accounting year and who are held for the sake of producing commodities, rendering labor service, renting or business management. No fixed asset may be recognized unless it simultaneously meets the conditions as follows:

• (1) The economic benefits pertinent to the fixed asset are likely to flow into the enterprise; and

• (2) The cost of the fixed asset can be measured reliably.

2. Initial measurement of fixed assets

• (1) The cost of a purchased fixed asset consists of the purchase price, the relevant taxes including import tariff, and other expenses that bring the fixed asset to the expected conditions for use and that may be relegated to the fixed asset.

• (2) The cost of a self-constructed fixed asset shall be formed by the necessary expenses incurred for bringing the asset to the expected conditions for use.

• (3) For the fixed assets invested by the investor, their value agreed in the investment contract or agreement shall be ascertained as the entry value. Those assets with unfair value as stipulated in the contract or agreement shall take fair value as the entry value.

• (4) If the payment for a fixed asset is delayed beyond the normal credit conditions and it is of financing nature in effect, the cost of the fixed asset shall be ascertained based on the current value of the purchase price. The difference between the actual payment and the current value of the purchase price shall be included in the current profits and losses within the credit period, unless it shall be capitalized.

3. Subsequent measurement and disposal of fixed assets

(1) Depreciation of fixed assets

Fixed assets’ depreciation was calculated within estimated service life after reducing estimated net residual value from the entry value of fixed assets. For those fixed assets being provided for impairment loss, the related depreciation charge is determined based on the carrying amounts less impairment over their remaining useful lives.

Fixed assets that have been fully depreciated but are still in use shall not be depreciated.

According to the nature and use of various fixed assets, the service life and net residual value of fixed assets can be determined. And review the service life and salvage value of fixed asset as well as depreciation method at the end of the year. Make corresponding adjustment if the review results are different from the previously estimated amounts.

– II-308 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

The depreciation method, depreciation life and yearly depreciation of various fixed assets are as follows:

		Depreciation	Residuals	Yearly
Category	Depreciation method	Life	rate	depreciation
		(year)	(%)	(%)
Pant and buildings	Straight-line depreciation	20－30	5	3.17－4.75
Machinery and	Straight-line depreciation	5－10	5	9.50－19.00
equipment
Vehicles	Straight-line depreciation	10	5	9.50
Office equipment	Straight-line depreciation	3-5	5	19.00-31.67
Others	Straight-line depreciation	3-5	5	19.00-31.67

(2) Subsequent expenses of fixed assets

If the subsequent expenses related to fixed assets conform to the confirmation conditions of the fixed assets, and then such subsequent expenses shall be included in the costs of the fixed assets; If not conforming to the confirmation conditions of these fixed assets, such subsequent expenses shall be included in the current profits and losses while occurred.

(3) Fixed Assets Disposal

The book values of fixed assets are derecognized when the fixed assets are disposed or no future economic benefits are expected from their use or disposal. Disposal consideration amount from sale, transfer, scrap or damage of fixed assets shall be included in current profits and losses after deducting the book value and related taxes.

4. Basis of recognition for fixed assets acquired under financial leases, valuation and depreciation methods

Where a lease satisfies one or more of the following criteria, it shall be recognized as a financial lease:

• (1) The ownership of the leased asset is transferred to the lessee when the term of lease expires.

• (2) The lessee has the option to buy the leased asset at a price which is expected to be far lower than the fair value of the leased asset at the date when the option becomes exercisable. Thus, on the lease beginning date, it can be reasonably determined that the option will be exercised.

• (3) Even if the ownership of assets is not transferred, the lease term accounts for the largest proportion of the service life of the leased asset.

• (4) In the case of the lessee, the present value of the minimum lease payments on the lease beginning date amounts to substantially all of the fair value of the leased asset on the lease beginning date.

• (5) The leased assets are of a specialized nature that only the Company can use them without making major modifications.

– II-309 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

With regard to the fixed assets under financing lease, a lessee shall record the lower one from the fair value of the leased asset and the present value of the minimum lease payments on the lease beginning date as the entering value in an account. The balance between the recorded amount of the leased asset and the long-term account payable shall be treated as unrecognized financing charges. The initial direct costs such as commissions, attorney’s fees and traveling expenses, stamp duties directly attributable to the leased item incurred during the process of lease negotiating and signing the leasing agreement shall be recorded in the asset value of the current period. The unrecognized financing charges shall be amortized by effective interest method during the periods within the lease term.

In calculating the depreciation of a leased asset under financial lease, the Company shall adopt a depreciation policy for leased assets consistent with that for depreciable assets which are owned by the lessee. If it is reasonable to be certain that the lessee will obtain the ownership of the leased asset when the lease term expires, the leased asset shall be fully depreciated over its service life. If it is not reasonable to be certain that the lessee will obtain the ownership of the leased asset at the expiry of the lease term, the leased asset shall be fully depreciated over the shorter one of the lease term or its useful life.

(XIII) CONSTRUCTION IN PROGRESS

1. Types of construction in progress

The construction in progress self-constructed by the Company shall be evaluated at its actual cost. The actual cost of it shall be formed by the necessary expenses incurred for bringing the asset to the expected conditions for use, including the material cost, labor cost, relevant taxes paid, borrowing expenses to be capitalized and indirect expenses to be amortized. The construction in progress of the Company is accounted by project classification.

2. Standards and time point of carrying forward construction in progress as fixed assets

As for construction in progress, all expenses occurred during the construction period before the assets achieve the predetermined serviceable condition shall be recognized as entry value of the fixed assets. Construction of fixed assets in progress whose construction is complete and has achieved the predetermined serviceable condition, but whose final settlement of account has not been processed, shall be transferred to fixed assets by the estimated value according to the project budget, construction cost or the actual cost of the project since the date that they achieved the predetermined serviceable condition. In addition, the depreciation of these fixed assets shall be withdrawn according to the Company’s fixed asset depreciation policy. After the final settlement of account is processed, the previously estimated value shall be adjusted according to the actual cost. The previously withdrawn depreciated value shall not be adjusted.

(XIV) BORROWING COSTS

1. Recognition principle for borrowing costs capitalization

Where the borrowing costs incurred by the Company can be directly attributed to the purchase, construction or production of assets that meet the capitalization conditions, they shall be capitalized if they meet the capitalization conditions and included in the relevant asset costs; other borrowing costs, when incurred, shall be recognized as expenses according to the amount incurred, and included in the current profits and losses.

The term “assets eligible for capitalization” refers to the fixed assets, investment real estate, inventories and other assets, of which the acquisition and construction or production may take a quite long time to get ready for its intended use or for sale.

– II-310 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Capitalization can only be started if the borrowing costs meet the following conditions at the same time:

• (1) The asset disbursements have already incurred, which shall include the cash, transferred non-cash assets or interest bearing debts paid for the acquisition and construction for preparing assets eligible for capitalization;

• (2) The borrowing costs have already incurred;

• (3) Purchase, construction or production activities required for the assets to fulfill the expected serviceable or salable condition have begun.

2.

Borrowing costs capitalization period

The capitalization period shall refer to the period from the commencement to the cessation of capitalization of the borrowing costs, excluding the period of suspension of capitalization of the borrowing costs.

When the qualified asset under acquisition and construction or production is ready for the intended use or sale, the capitalization of the borrowing costs shall be ceased.

When parts of the project of the qualified asset under acquisition and construction or production is ready for the intended use or sale are complete and used separately, the capitalization of the borrowing costs of these parts shall be ceased.

Where each part of an asset under acquisition and construction or production is completed separately and is ready for use or sale during the continuing construction of other parts, but it can not be used or sold until the asset is entirely completed, the capitalization of the borrowing costs shall be ceased when the asset is completed entirely.

3. Capitalization suspension period

Where the acquisition and construction or production of a qualified asset is interrupted abnormally and the interruption period lasts for more than 3 months, the capitalization of the borrowing costs shall be suspended. If the interruption is a necessary step for making the qualified asset under acquisition and construction or production ready for the intended use or sale, the capitalization of the borrowing costs shall continue. Capitalization shall resume after the borrowing costs incurred during such period are recorded into the profits and losses of the current period, and the acquisition and construction or production of the asset restarts.

4. Computation methods of capitalized amount of the borrowing costs

Specifically borrowed loans interest cost (minus the income of interests earned on the unused borrowing loans as a deposit in the bank or as a temporary investment) and auxiliary expenses shall be capitalized before the qualified asset under acquisition and construction or production is ready for the intended use or sale.

The Company shall calculate and determine the to-be-capitalized amount of interests on the general borrowing by multiplying the weighted average asset disbursement of the part of the accumulative asset disbursements minus the general borrowing by the capitalization rate of the general borrowing used. The capitalization rate shall be determined according to the weighted average interest rate of the general borrowings.

– II-311 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Where there is any discount or premium, the amount of discounts or premiums that shall be amortized during each accounting period shall be determined by the real interest rate method, and an adjustment shall be made to the amount of interests in each period.

(XV) BIOLOGICAL ASSETS

The Company’s biological assets include consumable biological assets and productive biological assets.

1. Recognition conditions of biological assets

No biological asset shall be recognized unless it meets the conditions as follows simultaneously:

• (1) The enterprise owns or controls the biological assets due to past transactions or events;

• (2) The economic benefits or service potential related to the biological assets are likely to flow into the enterprise;

• (3) The cost of this biological asset can be measured reliably.

2. Initial measurement of biological assets

(1) Consumable biological assets

• ① The cost of a purchased consumable biological assets consists of the purchase price, the relevant taxes, freight, insurance premium and other expenses that may be directly attributable to the purchase of the assets.

• ② For the expendable biological assets invested by investors, the entry value of the expendable biological assets shall be the value agreed in the investment contract or agreement plus the relevant taxes and fees payable. However, if the value agreed in the contract or agreement is unfair, the actual cost shall be determined according to the fair value.

• (3) The cost of self-cultivated, propagated or farmed consumable biological assets consists of the necessary expenses such as the cost of materials including seedlings, fertilizers and pesticides consumed before harvest, labor costs and indirect expenses to be shared.

(2) Productive biological assets

• ① The cost of purchased productive biological assets consists of the purchase price, relevant taxes, transportation fees, insurance premiums and other expenses that may be directly attributable to the purchase of the assets.

• ② For the productive biological assets invested by investors, the entry value of the productive biological assets shall be the value agreed in the investment contract or agreement plus relevant taxes and fees payable. However, if the value agreed in the contract or agreement is unfair, the actual cost shall be determined according to the fair value.

• ③ For the productive biological assets planted by the Company, the cost shall be determined according to the necessary expenses such as seedlings costs, labor costs, materials costs, fertilizers costs, land lease costs and other indirect expenses consumed before achieving the expected production and business objectives (and before harvest).

– II-312 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Achieving the intended production and operation objectives means that the productive biological assets enter the normal production period, and can continuously and stably produce agricultural products, provide labor services or rent for many years. The specific conditions are as follows: starting to bear fruits and picking them as the standard for turning into maturity.

1) Accounting methods for immature productive biological assets

Necessary expenditures of immature productive biological assets during the immature period, including seedlings costs, labor costs, materials costs, fertilizers costs, land lease costs and other indirect expenses, shall be directly included in the asset cost. Among them, seedlings costs, direct labor costs, fertilizers costs and land rent costs which can be directly classified into each plot shall be collected in the subject of “productive biological assets-immature productive biological assets”, and indirect costs such as material consumption shall be collected in the “manufacturing expenses” first when they occur, and then included in each plot according to the area apportion.

2) Accounting methods for mature productive biological assets

The related expenses incurred after the mature productive biological assets, including labor costs, material costs, fertilizers costs, utilities, land lease costs and other indirect expenses, shall be collected in the subject of “production cost”; the book value of the carried-over mature productive biological assets shall be depreciated according to the depreciation period, and the depreciation expenses shall be also included in the “production cost”; after the fruits are picked, the “production cost” shall be carried over to “inventory goods”.

3. Subsequent measurement of productive biological assets

(1) Depreciation of productive biological assets

The Company accrues depreciation for productive biological assets, and the depreciation method adopts the straight-line depreciation. The Company determines the service life and estimated net residual value of productive biological assets according to their nature, usage and expected realization of relevant economic benefits. At the end of the year, the Company reviews the service life, estimated net residual value and depreciation method of productive biological assets, and make corresponding adjustments if there are differences with the original estimates.

The Company’s productive biological assets are estimated to have no net residual value, and the estimated service life and annual depreciation rate are as follows:

	Estimated	Yearly
Asset type	service life	depreciation
	(year)	(%)
Passion fruit	2	50.00
Mango	10	10.00
Pitaya	4	25.00
Pineapple	2	50.00
Banana	2	50.00
Sugarcane	2	50.00
Papaya	3	33.33
Guava	4	25.00

– II-313 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

(2) Disposal of biological assets

When harvesting or selling consumable biological assets, the weighted average method is used to carry over the cost; the cost of biological assets after use conversion is determined according to the book value at the time of use conversion; when the biological assets are sold, damaged or in short supply, the balance of the disposal income after deducting the book value and related taxes and fees shall be included in the current profit and loss.

4. Impairment of biological assets

The Company shall, at least at the end of each year, review the consumptive biological assets and productive biological assets. If any well established evidence indicates that the realizable net value of any consumptive biological asset or the recoverable amount of any productive biological asset is lower than its book value as a result of natural disaster, plant diseases and insect pests or change of market demand, the enterprise shall, based on the difference between the realizable net value or the recoverable amount and the relevant book value, make provision for the loss on decline in value of or for the impairment of the biological asset and shall include it in the current profits and losses.

If the influencing factors of the impairment of consumptive biological assets have disappeared, the amount of write down shall be restored and reversed within the amount of the original provision for falling price, and the amount reversed shall be included in the current profits and losses. Once the provision for impairment of a productive biological asset is withdrawn, it shall not be reversed. On the balance sheet date, the Company measures the productive biological assets according to the lower of book value and recoverable amount, and withdraw the provision for impairment of productive biological assets according to the difference between the recoverable amount of individual assets and book value. Once the impairment loss of productive biological assets is recognized, it will not be reversed in the following accounting period.

(XVI) INTANGIBLE ASSETS AND DEVELOPMENT EXPENSES

Intangible assets refer to the identifiable non-monetary assets possessed or controlled by the Company which have no physical shape. It includes land use right, patent right, trademark right and software, etc.

1. Initial measurement of intangible assets

Cost of the outsourcing intangible assets shall include purchase price, relevant taxes and other necessary expenditures directly attributable to intangible assets for expected purpose. The price of buying intangible assets exceeds the delayed payment at normal credit condition, which actually has a financing property, the cost of the intangible assets shall be determined based on the present value of the price.

For the intangible assets used for debt payment, the fair value of the intangible assets shall be used as basis for its entry value determination. The balance between the book value and the fair value of the intangible assets used for debt payment shall be included into current loses and gains.

Under the premise that the non-monetary assets exchange is of commercial essence and the fair value of intangible assets received or surrendered can be reliably measured, the entry value of intangible asset received during the non-monetary assets exchange shall be recognized based on the fair value of asset surrendered, unless there is any exact evidence showing that the fair value

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

of asset received is more reliable; for the non-monetary assets exchange which fails to meet the above premise, the book value of asset surrendered and relevant taxes and dues payable shall be regarded as the cost of intangible asset and no profits and losses will be recognized.

The entry value of intangible asset obtained by consolidation merger of enterprises under the same control shall be recognized based on the book value of merged enterprise; the entry value of intangible asset obtained by consolidation merger of enterprises not under the same control shall be recognized based on the fair value of merged enterprise.

The costs of internal self-developed intangible assets shall include: the cost of materials consumed, labor cost and registration charges occurred while developing the intangible assets; the amortization charge of other patents and franchises used as well as the interest cost spent to meet the capitalization requirements during the development process; as well as other direct costs attributable to intangible assets for the expected purpose.

2. Subsequent measurement of intangible assets

The Company analyzes and judges the service life of intangible assets when it obtains intangible assets and they are classified as intangible assets with limited service life and intangible assets with limited service life without undetermined service life.

(1) Intangible assets with limited service life

Intangible assets with limited service life shall be amortized by straight-line method in the period in which economic benefits are brought for the Company. Expected service life of intangible assets with limited service life and calculation basis:

Item	Expected useful life	Basis
Land use right	40 years/50 years/70 years	The service life is determined by the
		contract or by reference to the
Patent right	10 years	period that can bring economic
		benefits to the Company
Trademark right	10 years
Software	3-5 years

At the end of each year, the service life and the amortization method of intangible assets with limited service life shall be rechecked. Make corresponding adjustment if the review results are different from the previously estimated amounts.

According to the review, the service life and amortization method of intangible assets at the end of this period do not differ from previous estimation.

– II-315 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

• (2) Intangible assets with uncertain service life

During the reporting period, the Company had no intangible assets with uncertain service life.

3. Detailed standards for dividing research and development stages of internal R&D projects:

Research stage: The stage of creative and planned investigation and research to acquire and understand new scientific or technological knowledge.

Development stage: The stage that the research results or other knowledge is used for a plan or design to produce something new or substantive improved materials, devices and products before commercial production or use.

The expenditure occurred during the research stage of internal R&D project shall be included into the profits and losses of current period when it occurred.

4. Detailed conditions for the capitalization of expenses during the development stage

Expenditures incurred during the development stage of internal research and development project that simultaneously meet the following conditions shall be recognized as intangible assets:

• (1) It is feasible technically to finish intangible assets for use or sale;

• (2) It is intended to finish and use or sell the intangible assets;

• (3) The usefulness of methods for intangible assets to generate economic benefits shall be proved, including being able to prove that there is a potential market for the products manufactured by applying the intangible assets or there is a potential market for the intangible assets itself or the intangible assets will be used internally;

• (4) It is able to finish the development of the intangible assets, and able to use or sell the intangible assets, with the support of sufficient technologies, financial resources and other resources;

• (5) The development expenditures of the intangible assets can be reliably measured.

The expenditure not meeting conditions above is included into the profits and losses of current period when it occurs. Development expenses accounted into profits and losses in previous period are no longer re-confirmed as assets. Expenses at the development stage capitalized are listed as development expenses in the balance sheet, and are converted into intangible assets when the Project reaches the estimated usable conditions.

– II-316 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

(XVII) IMPAIRMENT OF LONG-TERM ASSETS

The Company shall, on the day of balance sheet, make a judgment on whether there is any sign of possible impairment of long-term assets. If the long-term assets have sign of possible impairment, recoverable amount should be estimated by the Company based on single assets. If it is not possible to estimate the recoverable amount of single assets, the recoverable amount of the asset group to which the asset belongs is recognized.

The recoverable amount shall be determined in light of the higher one of the net amount of the fair value of the assets minus the disposal expenses and the current value of the expected future cash flow of the assets.

Where the measurement result of the recoverable amount indicates that an asset’s recoverable amount is lower than its book value, the book value of the long-term asset shall be recorded down to the recoverable amount, and the reduced amount shall be recognized as the loss of long-term asset impairment and be recorded as the profit or loss for the current period. Simultaneously, a provision for the asset impairment shall be made accordingly. Once any loss of asset impairment is recognized, it shall not be switched back in the future accounting periods.

After the loss of asset impairment has been recognized, the depreciation or amortization expenses of the impaired asset shall be adjusted accordingly in the future periods so as to amortize the post-adjustment book value of the asset systematically (deducting the expected net residual value rate) within the residual service life of the asset.

No matter there is any sign of possible assets impairment or not, the business reputation formed by business combination and intangible assets with uncertain service life are subject to impairment test at the end of each year.

In impairment test for business reputation, book value of business reputation shall be amortized to assets groups or combination of assets groups which are expected to benefit from the synergy effect of business combination. When making an impairment test on the relevant asset groups or combination of asset groups containing business reputation, if any evidence shows that the impairment of asset groups or combinations of asset groups is possible, the enterprise shall first make an impairment test on the asset groups or combinations of asset groups not containing business reputation, calculate the recoverable amount, compare it with the relevant carrying value and recognize the corresponding impairment loss. Then the enterprise shall make an impairment test of the asset groups or combinations of asset groups containing business reputation, and compare the carrying value of these asset groups or combinations of asset groups (including the carrying value of the business reputation apportioned thereto) with the recoverable amount. Where the recoverable amount of the relevant assets or combinations of the asset groups is lower than the carrying value thereof, it shall recognize the impairment loss of the business reputation.

– II-317 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

(XVIII) LONG-TERM UNAMORTIZED EXPENSES

1. Amortization method

Long-term unamortized expenses refer to the Company’s various costs that have occurred and are apportioned by the current and future periods which is longer than 1 year. Long-term unamortized expenses shall be amortized within benefit period by method of line.

2. Amortization life (year)

Category	Amortization life	Remarks
	(year)
Decoration and reconstruction	3-5
expenditure
Land lease expense	Settlement period	The settlement period of the leased
	agreed in the	land of the Company has different
	contract	settlement periods such as 4 years
		and 5 years

(XIX) EMPLOYEE COMPENSATION

Employee compensation refers to the remuneration or compensation offered by the Company for the purpose of acquiring the services provided by the employees or terminating labor relationships. Employee compensation includes short-term compensation, post-employment benefit, dismission benefit, and other long-term employee benefit.

1. Short-term compensation

Short-term compensation refers to employee compensation that shall be fully paid by the Company within 12 months after annual report period of related services provided by employees, except post-employment welfare, dismission welfare. In the accounting period when the employees provide services to the Company, the short-term compensation payable shall be confirmed as liabilities, and shall be included in related asset costs and fees according to the benefit objects of the service provided by the employees.

2. Post-employment welfare

Post-employment welfare refers to the various forms of remuneration or compensation offered by the Company for the purpose of acquiring the services provided by the employees after employee retirement or termination of labor relations with the Company, except for short-term compensation and dismission welfare. The Company classifies post-employment welfare plan as defined contribution plan and defined benefit plan.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

The defined contribution plan is mainly to participate in social basic endowment insurance and unemployment insurance organized and implemented by local labor and social security institutions; during the accounting period when employees provide services for the Company, the amount of deposit payable calculated according to the defined contribution plan is recognized as a liability and included in the current profits and losses or related asset costs.

After paying the above funds regularly according to the standard specified by the State, the Company will be free of other payment obligations.

3. Dismission welfare

Dismission welfare refers to the compensation made by the Company to the employees for the termination of the labor relationship with any employee prior to the expiration of the relevant labor contract or for encouraging the employee to accept a layoff. When the Company cannot unilaterally withdraw the dismission welfare stated on labor service relationship termination plan or layoff proposal or the Company is confirming the cost and expense in relation to the restructuring of paying dismission welfare (the earlier one shall be applied), liabilities caused by dismission welfare shall be confirmed and included in current profits and losses.

4. Other long-term employee welfare

Other long-term employee welfare refers to other employee welfare except from short-term salaries, post-employment welfare and dismission welfare.

For other long-term employee welfare conforming to defined contribution plan, within accounting period during which employees provide service for the company, the amount payable shall be determined as liability and included into current profits and losses or relevant asset cost. For other long-term employee welfare except that mentioned above, the amount shall be calculated with the expected cumulative welfare unit method on the balance sheet date and the welfare obligations produced by the defined benefit plan shall be attributed to the period during which employees provide service and be included into current profits and losses or relevant asset cost.

(XX) ESTIMATED LIABILITIES

1. Recognition principles for estimated liabilities

The obligation pertinent to contingencies shall be recognized as an estimated liability when the following conditions are satisfied simultaneously:

The obligation is the current obligation assumed by the Company;

The performance of this obligation is likely to lead to an outflow of economic interests;

The amount of the obligation can be reliably measured.

– II-319 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

2. Measurement methods of accrued liabilities

The estimated liabilities of the Company shall be initially measured in accordance with the liability estimate of the necessary expenses for the performance of the current obligation.

The Company takes into account the contingencies related risk, uncertainty, time value of money, and other factors when determining the best estimate. If the time value of money is of great significance, the best estimate shall be determined after discounting the relevant future outflow of cash.

The best estimate shall be conducted in accordance with the following situations respectively:

If there is a continuous range (or interval) for the necessary expenses and if all the outcomes within this range are equally likely to occur, the best estimate shall be determined in accordance with the middle estimate within the range, i.e. the average number of the maximum amount and minimum amount.

In the event that there is no continuous range (or interval) or that there is a continuous range but the outcomes within this range are unlikely to occur equally, if single item is involved in the contingencies, the best estimate shall be determined based on the amount most likely to occur; and if several items are involved in the contingencies, the best estimate shall be determined based on various possible outcomes and relevant probability calculation.

If all or some of the expenses necessary for the liquidation of estimated liabilities of the Company are expected to be compensated by a third party, the compensation shall be separately recognized as an asset when it is virtually certain that the reimbursement will be obtained and the compensation recognized shall not be in excess of the estimated liability book value.

(XXI) REVENUE

1. Standard for determining the time of revenue recognition from goods sales

The Company has transferred the significant risks and rewards of ownership of the goods to the buyer; the Company retains neither continuous management right that usually keeps relation with the ownership nor effective control over the sold goods; the amount of revenue can be measured in a reliable way; relevant economic benefits may flow into the Company; when relevant cost incurred or to be incurred can be reliably measured, recognize the sales revenue.

If the collection of the price as stipulated in the contract or agreement is delayed and if it has the financing nature, the revenue incurred by selling goods shall be ascertained in accordance with the fair value of the receivable price as stipulated in the contract or agreement.

– II-320 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Specific methods to recognize the Company’s revenue:

The Company mainly sells fruit juice, quick-frozen products, fresh fruits and other products.

• (1) Revenue recognition of domestic products: the products are delivered to the buyer according to the contract, and the Company recognizes the revenue according to the date of the receipt; if there is no receipt, the revenue is recognized after the acceptance objection period determined according to the contract.

• (2) Revenue recognition of export products: the export products of the Company are mainly in FOB form, and the delivery place is offshore port, and the bill of lading is obtained as the evidence for collection, and the date of customs declaration, shipment and export is taken as the time point for revenue recognition.

2. Basis of determining revenue from transferring use right of the assets

When the revenue amount can be reliably measured, it is likely that economic benefits relating to trades will flow into the company. The amount of revenue resulting from alienating asset-use right shall be determined respectively in the following situations:

• (1) The amount of interest revenue shall be measured and recognized in accordance with the length of time for which the Company’s monetary capital is used by others and the actual interest rate.

• (2) The amount of royalty revenue should be measured and confirmed in accordance with the period and method of charging as stipulated in the relevant contract or agreement.

3. Basis and method of determining the revenue from providing labor services

If the result of the labor service transaction can be estimated reliably on the balance sheet date, the revenue from the labor service transaction shall be recognized by the completion percentage method, and the completion progress of the labor service transaction shall be determined according to the proportion of the already incurred labor cost to the estimated total cost.

The outcome of a transaction concerning the providing of labor services can be measured in a reliable way, means that the following conditions shall be met simultaneously:

• (1) The revenue amount can be measured reliably;

• (2) Relevant economic benefits are likely to flow into the Company;

• (3) The completion schedule of the transaction can be reliably determined;

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

• (4) The costs incurred or to be incurred in the transaction can be measured in a reliable way.

The Company ascertains the total revenue from the providing of labor services in accordance with the received or to-be-received price as stipulated in the contract or agreement, unless the received or to-be-received price as stipulated in the contract or agreement is unfair. The Company shall, on the date of the balance sheet, ascertain the current revenue from providing labor services in accordance with the amount of multiplying the total amount of revenues from providing labor services by the schedule of completion then deducting the accumulative revenues from the providing of labor services that have been recognized in the previous accounting periods. At the same time, the enterprise shall carry forward the current cost of labor services in accordance with the sum of multiplying the total amount of revenues arising from the providing of labor services by the schedule of completion and then deducting the accumulative revenues from the providing of labor services.

If the Company cannot, on the date of the balance sheet, measure the result of a transaction concerning the providing of labor services in a reliable way, it shall be conducted in accordance with the following circumstances, respectively:

• (1) If the labor cost incurred is expected to be compensated, the labor service income shall be recognized according to the amount of labor service costs incurred and carried forward at the same amount.

• (2) If the cost of labor services incurred is not expected to compensate, the cost incurred shall be included in the current profits and losses, and no revenue from the rendering of service shall be recognized.

Where a contract or agreement signed between enterprises concerns selling goods and providing of labor services, if the part of sale of goods and the part of providing labor services can be distinguished from each other and can be measured respectively, the part of sale of goods shall be conducted as selling goods and the part of providing labor services shall be conducted as providing labor services. If the part of sale of goods and the part of providing labor services can be distinguished from each other and can be measured respectively, the part of sale of goods shall be conducted as selling goods and the part of providing labor services shall be conducted as providing labor services.

– II-322 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

(XXII) GOVERNMENT GRANTS

1. Type

A government grants refers to the monetary and non-monetary assets obtained by an company from the government free of charge, excluding the capital invested by the government as the owner of the company. Based on the objects regulated by governmental documents, the government grants are classified into government grants related to assets and government grants related to income.

The Company defines the government grants for purchasing or constructing or otherwise forming long-term assets as asset-related government grants; other government grants are defined as the income-related government grants.

2. Recognition of government grants

If the Company meets the financial support policy and receives financial support funds, the government grants shall be recognized according to the actual amount received.

If a government grant is a monetary asset, it shall be measured in the light of the received or receivable amount. If a government grant is a non-monetary asset, it shall be measured at its fair value. If its fair value cannot be obtained in a reliable way, it shall be measured at its nominal amount (RMB1). The government grants measured at their nominal amounts shall be directly included in the profits and losses of current period.

3. Accounting arrangement method

The government grants pertinent to assets shall be recognized as the deferred income and they shall be included to the profits or losses on a reasonable and systematic basis within the service life of constructed or purchased assets;

The government grants pertinent to income and used for compensating the related future expenses or losses of an enterprise shall be recognized as deferred income and shall be included in the current profits and losses during the period when the relevant expenses or losses are recognized. The grants used for compensating the related expenses or losses of the enterprise incurred shall be directly included in the current profits and losses at receiving.

Government grants related to daily activities of the Company are included in other income and others are included in non-operating income.

– II-323 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

The received government grants related to preferential policy loans are used to offset related borrowing costs. When the recognized government grants needs to be refunded, if there is related deferred income balance, the book balance of the deferred income shall be written down, while the excessive part shall be included in the current profits and losses; if there is no relevant deferred income, the subsidy shall be directly included in the current profits and losses.

(XXIII) DEFERRED TAX ASSETS AND DEFERRED TAX LIABILITIES

Deferred tax assets and deferred tax liabilities are calculated and recognized based on the differences (temporary differences) arising from the tax bases of assets and liabilities and their book value. On the balance sheet date, the deferred tax assets and deferred tax liabilities shall be measured at the tax rate applicable to the period during which the assets are expected to be recovered or the liabilities are expected to be settled.

1. Basis of recognizing deferred tax assets

The Company sets the income tax payable likely to be acquired to offset against the deductible temporary difference and deductible loss and tax credits that can be carried forward to the next year as the deadline to recognize the deferred tax assets generated by the deductible temporary difference. However, deferred tax assets arising from the initial recognition of assets or liabilities in transactions with the following characteristics shall not be recognized: (1) business combination; (2) transactions or events directly recognized in owner’s equity.

As for the deductible temporary difference of taxable relevant to the investment of associated enterprises, the corresponding deferred tax assets can be recognized when it can simultaneously meet the following the conditions: the temporary difference is likely to turn back, and the amount of the taxable can be obtained to offset the deductible temporary difference at a high possibility in the future.

2. Basis for confirming deferred tax liabilities

The Company confirms the taxable temporary differences payable but unpaid in current period and previous period as the deferred tax liabilities. but excluding:

• (1) The temporary differences generated through initial recognition of business reputation;

• (2) Transactions formed by business combination or transactions or events directly recognized in owner’s equity;

• (3) The turning-back time of the temporary difference of taxable relevant to the investment of subsidiaries and associated enterprises can be controlled, or the temporary difference will not turn back at a very high possibility in a foreseeable future.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

3. When meeting all the following conditions, the deferred tax assets and liabilities are listed as net amount after offset

• (1) The Company is entitled to settle the current income tax assets and current income tax liabilities in net amount;

• (2) The deferred tax assets and deferred tax liabilities are associated with the income tax imposed for the same subject of taxation or different subject of taxation by the same tax collection and management department. However, during each important deferred tax assets and liabilities reverse period in the future, the subject of taxation involved is intended to settle the current income tax assets and liabilities or acquiring assets to pay off debts.

(XXIV) OPERATING LEASE AND FINANCING LEASE

If the leasing clauses transfer in substance all the risks and rewards related to the ownership of an asset to the leasee, it is a financial lease. Otherwise, it is operating lease.

1. Accounting treatment method of operating lease

(1) Assets leased in under operating lease

Lease expense paid by the Company for leased assets should be amortized with the method of straight line within the entire lease term without deducting the rent-free period and should be included into current expenses. The initial direct costs pertinent to lease transactions paid by the Company are included into current expenses.

If the assets leasor has paid the fees pertinent to leasing that shall be paid by the Company, the Company will deduct the fees from the total rental and amortize the remaining rental within the lease term and include it into current expenses.

(2) Assets leased out under operating lease

lease expense collected by the Company for leased assets should be amortized with the method of straight line within the entire lease term without deducting the rent-free period and should be recognized as rental income. Initial direct costs pertinent to lease transactions paid by the Company should be included into current expenses. If the amount is large, the initial direct cost should be capitalized and included into current profits on the basis of basic installation of the equal rental income within the entire lease term.

If the Company has paid the fees pertinent to leasing which shall be paid by the leasee, it will deduct the fees from total rental and amortize the remaining within the lease term.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

2. Accounting arrangement method of financial lease

• (1) Assets leased in under financial lease: On the lease beginning date, a lessee shall record the lower one between the fair value of the leased asset and the present value of the minimum lease payments on the lease beginning date as the entry value in an account, recognize the amount of the minimum lease payments as the entry value in an account of long-term account payable, and take their difference as unrecognized financing cost. Please see Note IV/(XII) “Fixed assets” for the conditions of recognition, valuation and depreciation methods for assets under financial lease.

For the financing expenses not recognized, the Company adopts the effective interest rate method for amortization in assets leasing period and includes them to financial expenses.

• (2) Assets leasing leased out under financial lease: On the beginning date of the lease term, the leasor shall recognize the balance between the sum of receivable financial lease payment and unguaranteed residual value and the current value as unrealized financing income and recognize the rent received in the future as rental income. The initial direct expenses pertinent to leasing transaction should be included into initial measurement of receivable financial lease payment and confirmed amount of revenue received within lease term should be reduced.

(XXV) CHANGES IN MAJOR ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES

1. Change in accounting policy

Since January 1, 2019, the Company has implemented the Accounting Standards for Business Enterprises No. 22 — Recognition and Measurement of Financial Instruments , Accounting Standards for Business Enterprises No. 23 — Transfer of Financial Assets , Accounting Standards for Business Enterprises No. 24 — Hedging Accounting , and Accounting Standards for Business Enterprises No. 37 — Presentation of Financial Instruments revised by the Ministry of Finance in 2017 (the above four documents are collectively referred to as the “New Financial Instrument Standards”); if the standards for recognition and measurement of financial instruments before January 1, 2019 are inconsistent with the requirements of the New Financial Instrument Standards, the Company shall make adjustment in accordance with the requirements of the New Financial Instrument Standards. In case that the data of financial statements involved in the previous comparison are inconsistent with the requirements of the New Financial Instrument Standards, the Company has not adjusted the information of comparable periods, and the implementation of the New Financial Instrument Standards has no impact on the Company’s opening balance sheet of current period.

2. Change in accounting estimates

There is no change in accounting estimates in the reporting period.

– II-326 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

(XXVI) NOTES TO CHANGE OF LISTING ITEMS OF THE FINANCIAL STATEMENTS

On April 30, 2019, the Ministry of Finance issued the Notice of the Ministry of Finance on Revising and Issuing the Format of Financial Statements of General Enterprises in 2019 (CK [2019] No. 6) to amend the format of general enterprises’ financial statements, break up some items of balance sheet and adjust some items of income statement. The Company has prepared financial statement according to new requirements for enterprise financial statement form, so that the reported items in the financial statement also have changed. The Company has adjusted the comparative data during the comparable period according to the related regulations, such as Accounting Standards for Business Enterprises No. 30 — Presentation of Financial Statement .

The Company adjusts the comparative data of the comparable period according to CK [2019] No. 6. Influences on items and amount in financial statement presentation during comparable period are as follows:

① Items affected by consolidated financial statements

	Book value		Book Value
	before		after
	adjustment		Regulation
	(December	Adjusted	(January 1,
Item	31st, 2018)	amount	2019)
Notes and accounts receivable	42,295,833.29	-42,295,833.29
Notes receivable
Accounts receivable		42,295,833.29	42,295,833.29
Notes and accounts payable	15,537,891.19	-15,537,891.19
Notes payable
Accounts payable		15,537,891.19	15,537,891.19
Other payables	3,787,778.19	-857,741.94	2,930,036.25
Long-term loans	30,000,000.00	857,741.94	30,857,741.94

② Items affected by the financial statements of the parent company

	Book value		Book Value
	before		after
	adjustment		Regulation
	(December	Adjusted	(January 1,
Item	31st, 2018)	amount	2019)
Notes and accounts receivable	15,580,194.18	-15,580,194.18
Notes receivable
Accounts receivable		15,580,194.18	15,580,194.18
Notes and accounts payable	22,036,006.29	-22,036,006.29
Notes payable
Accounts payable		22,036,006.29	22,036,006.29

– II-327 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

V. TAXES

(I) Main tax categories and tax rates of the Company

Tax type	Taxation basis	Tax rates
VAT	Sales of goods	16%, 13%, 12%, 10%,
		9%
Urban maintenance and construction tax	Paid-in turnover tax	5%
Educational surcharges	Paid-in turnover tax	3%
Local educational surcharges	Paid-in turnover tax	2%
Enterprise income tax	Taxable income	15%, 25%

(II) Description of enterprise income tax rate of different taxpayers:

	Income tax
Name of taxpayer	rate
Tianye Innovation Corporation	15%
Hainan Dachuan Food Co., Ltd.	25%
Guangxi Tianye Innovation Agricultural Technology Co., Ltd.	25%
Hainan Tianye Drinks Food Sales Co. Ltd.	25%
Hubei Iceman Foods Co., Ltd.	25%
Hubei Tianye Nonggu Biological Technology Co., Ltd.	25%
Hubei Tianye Innovation Nonggu Fruit & Vegetable Co., Ltd.	25%

(III) Policies and basis of tax preference

1. VAT tax preference

According to the Provisional Regulations of the People’s Republic of China on Value-Added Tax (Order No. 538 of the State Council of the People’s Republic of China), “Article XV (I) Self-produced agricultural products sold by agricultural producers shall be exempted from value-added tax”, with the approval of Nanning State Taxation Bureau and Nanning Yongning State Taxation Bureau, Guangxi Tianye Innovation Agricultural Technology Co., Ltd., a wholly-owned subsidiary of the Company, shall be exempted from value-added tax on its own crops and fruits and vegetables, which will be implemented from January 1, 2014.

2. Tax preference for enterprise income tax

(1) Tianye Innovation Corporation

According to Article 2 of the Notice of the Ministry of Finance, General Administration of Customs and State Administration of Taxation on Tax Policy Issues Concerning In-depth Implementation of the Strategy of Developing the Western Region (CS [2011] No. 58), the Company is an encouraged industrial enterprise in the western region. From January 1, 2017 to December 31, 2020, the Company paid enterprise income tax at a reduced rate of 15%.

According to the Regulations for the Implementation of the Enterprise Income Tax Law of the People’s Republic of China (Order No. 512 of the State Council of the People’s Republic of China), the Notice of the Ministry of Finance and the State Administration of Taxation on Issuing the Scope of Primary Processing of Agricultural Products Enjoy Preferential Policies of Enterprise Income Tax (Trial) (CS [2008] No. 149) and the provisions on “primary processing of agricultural products shall be exempted from enterprise income tax”, the Company’s products (quick-frozen pineapple, corn, mango, papaya, seedless passion fruit puree) belong to the primary processing of

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

agricultural products and are exempt from enterprise income tax. The preferential policies for reducing and exempting enterprise income tax have been audited and filed by the State Taxation Bureau of Hepu County (HGSBZ [2013] No. 201), and the preferential enterprise income tax policy has been implemented from January 1, 2012.

• (2) Hainan Dachuan Food Co., Ltd.

• 1) According to Article 27 of the Enterprise Income Tax Law of the People’s Republic of China and Article 86 of its implementing regulations, CS [2008] No. 149, CS [2011] No. 26, GSBF [2011] No. 132, Announcement of State Administration of Taxation (No. 2 [2010]) and Announcement of State Administration of Taxation Announcement (No. 48 [2011]), the puree juice produced by Hainan Dachuan Food Co., Ltd., a wholly-owned subsidiary of the Company, belongs to the primary processing range of agricultural products and is exempt from enterprise income tax. The preferential reduction and exemption of enterprise income tax has been examined and approved by the State Taxation Bureau of Ding’an County, Hainan Province (DGST [2013] No. 258) and has been implemented from January 1, 2011.

• 2) According to the Notice on Issuing the Scope of Primary Processing of Agricultural Products Enjoy Preferential Policies of Enterprise Income Tax (CS [2008] No. 149) issued by the Ministry of Finance and the State Administration of Taxation, the fruit and vegetable juice products produced by Hainan Dachuan Food Co., Ltd., a wholly-owned subsidiary of the Company, are primary processed products of fruits and vegetables, which have been exempted from enterprise income tax as determined by the State Taxation Bureau of Ding’an County, such exemption has been implemented from January 1, 2013.

• (3) Guangxi Tianye Innovation Agricultural Technology Co., Ltd.

According to Article 27 of the Enterprise Income Tax Law of the People’s Republic of China and Article 86 of its implementing regulations, CS [2008] No. 149, GSH [2008] No. 890, GSH [2009] No. 779, CS [2011] No. 26 and Announcement of the State Administration of Taxation (No. 8 [2011]), the fruits planted by Guangxi Tianye Innovation Agricultural Technology Co., Ltd., a wholly-owned subsidiary of the Company, has been exempted from enterprise income tax. Preferential policies for reducing and exempting enterprise income tax have been audited and filed by Nanning State Taxation Bureau.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

VI. NOTES TO MAIN ITEMS OF THE CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in RMB unless otherwise stated)

Note 1. Monetary funds

Item Closing balance Cash on hand 6,855.47 Bank deposit 256,736,477.57 Other monetary funds 853,901.84 Total 257,597,234.88 The details of the restricted monetary funds are as follows:	Closing balance of last year 5,182.32 214,658,850.80 5,009,987.21
	219,674,020.33

Item Bank deposits used for pledge loans Total	Closing balance 767,666.71 767,666.71	Closing balance of last year 5,000,000.00
		5,000,000.00

Note 2. Accounts receivable

1. Disclosure of accounts receivable by aging

Aging <1 year 1-2 years 2-3 years 3-4 years 4-5 years >5 years Subtotal Less: bad debt provision Total	Closing balance 52,566,886.06 7,277,231.45 3,181,123.50 799,097.00 63,824,338.01 4,709,952.99 59,114,385.02	Closing balance of last year 39,212,043.24 4,983,360.36 799,097.00 44,994,500.60 2,698,667.31
		42,295,833.29

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

2. Disclosed by bad debt provision methods

Category Accounts receivable for which bad debts reserve is set aside individually Accounts receivable for which provision for bad debts is set aside in portfolios Including: combination 1 Combination 2 Total Category Accounts receivable for which bad debts reserve is set aside individually Accounts receivable for which provision for bad debts is set aside in portfolios Including: combination 1 Combination 2 Total	Closing balance Book balance Bad-debt provision Amount Proportion Amount Proportion of provision (%) (%) 63,824,338.01 100.00 4,709,952.99 7.38 63,824,338.01 100.00 4,709,952.99 7.38 63,824,338.01 100.00 4,709,952.99 7.38 Closing balance of last year Book balance Bad-debt provision Amount Proportion Amount Proportion of provision (%) (%) 44,994,500.60 100.00 2,698,667.31 6.00 44,994,500.60 100.00 2,698,667.31 6.00 44,994,500.60 100.00 2,698,667.31 6.00	Book value 59,114,385.02 59,114,385.02
		59,114,385.02
		Book value 42,295,833.29 42,295,833.29
		42,295,833.29

3. Accounts receivable for which provision for bad debts is set aside in portfolios

• (1) Combination 1

Aging <1 year 1-2 years 2-3 years 3-4 years 4-5 years >5 years Total	Accounts receivable 52,566,886.06 7,277,231.45 3,181,123.50 799,097.00 63,824,338.01	Closing balance Bad-debt provision 2,628,344.30 727,723.14 954,337.05 399,548.50 4,709,952.99	Proportion of provision (%) 5.00 10.00 30.00 50.00 80.00 100.00
			7.38

– II-331 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Contd.:

Aging <1 year 1-2 years 2-3 years 3-4 years 4-5 years >5 years Total	Closing balance of last Accounts receivable Bad-debt provision 39,212,043.24 1,960,602.17 4,983,360.36 498,336.04 799,097.00 239,729.10 44,994,500.60 2,698,667.31	year Proportion of provision (%) 5.00 10.00 30.00
		6.00

4. Provision, recovery or reversal of provision for bad-debt in current period

Changes in current period Category Opening balance Provision Recovery or reversal Write-off Other changes Accounts receivable for which bad debts reserve is set aside individually Accounts receivable for which provision for bad debts is set aside in portfolios 2,698,667.31 2,011,285.68 Including: combination 1 2,698,667.31 2,011,285.68 Combination 2 Total 2,698,667.31 2,011,285.68 5. There is no write-off of accounts receivable in current period. 6. Top five accounts receivable based on debtors Organization name Closing balance Relationship with the Company Proportion in closing balance of accounts receivable (%) Guangzhou Yuekai Trading Co., Ltd. 7,245,240.00 Non-affiliated party 11.35 Hangzhou Haiguo Trading Co., Ltd. 5,613,121.42 Non-affiliated party 8.79 Youdianai (Chuzhou) Healthy Technology Co., Ltd. 4,835,213.50 Non-affiliated party 7.58 Xinfeng Nongfu Spring Beverages Co., Ltd. 4,693,926.00 Non-affiliated party 7.35 Nongfu Spring (Jiande) Xin’anjiang Drinking Water Co., Ltd. 4,615,632.00 Non-affiliated party 7.23 Total 27,003,132.92 42.30	Changes in current period Category Opening balance Provision Recovery or reversal Write-off Other changes Accounts receivable for which bad debts reserve is set aside individually Accounts receivable for which provision for bad debts is set aside in portfolios 2,698,667.31 2,011,285.68 Including: combination 1 2,698,667.31 2,011,285.68 Combination 2 Total 2,698,667.31 2,011,285.68 5. There is no write-off of accounts receivable in current period. 6. Top five accounts receivable based on debtors Organization name Closing balance Relationship with the Company Proportion in closing balance of accounts receivable (%) Guangzhou Yuekai Trading Co., Ltd. 7,245,240.00 Non-affiliated party 11.35 Hangzhou Haiguo Trading Co., Ltd. 5,613,121.42 Non-affiliated party 8.79 Youdianai (Chuzhou) Healthy Technology Co., Ltd. 4,835,213.50 Non-affiliated party 7.58 Xinfeng Nongfu Spring Beverages Co., Ltd. 4,693,926.00 Non-affiliated party 7.35 Nongfu Spring (Jiande) Xin’anjiang Drinking Water Co., Ltd. 4,615,632.00 Non-affiliated party 7.23 Total 27,003,132.92 42.30	Closing balance 4,709,952.99 4,709,952.99
		4,709,952.99
		Provision for bad-debt 362,262.00 393,493.36 336,338.35 234,696.30 230,781.60
		1,557,571.61

– II-332 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Note 3. Prepayments

1. Disclosure of prepayments by aging

Aging <1 year 1-2 years 2-3 years >3 years Total	Closing balance Amount Proportion (%) 1,667,393.62 78.12 466,979.77 21.88 2,134,373.39 100.00	Closing balance of last year Amount Proportion (%) 3,310,932.00 99.68 10,760.49 0.32 3,321,692.49 100.00	Closing balance of last year Amount Proportion (%) 3,310,932.00 99.68 10,760.49 0.32 3,321,692.49 100.00
			100.00

2. Top five prepayments based on the payers

Organization name Jinglin Industry (Shenzhen) Co., Ltd. Shenzhen Asia Global Logistics Co., Ltd. Zhangjiagang Xujiadong Machinery Equipment Co., Ltd. Zhongshan Yuyong Import & Export Trading Co., Ltd. Huazhong Agricultural University Total	Closing balance Relationship with the Company 901,636.98 Non-affiliated party 407,496.00 Non-affiliated party 113,400.00 Non-affiliated party 105,175.71 Non-affiliated party 100,000.00 Non-affiliated party 1,627,708.69	Proportion in total advance payment Reason for unsettlement (%) 42.24 Transaction pending 19.09 Transaction pending 5.31 Transaction pending 4.93 Transaction pending 4.69 Transaction pending 76.26

3. At the end of the period, there are no prepayments with an age of more than one year and an important amount that have not been settled in time

Note 4. Other receivables

Item Interests receivable Dividends receivable Other receivables Total	Closing balance 1,222,410.16 1,222,410.16	Closing balance of last year 10,166,089.03
		10,166,089.03

– II-333 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

1. Disclosure of other receivables by aging

Aging <1 year 1-2 years 2-3 years 3-4 years 4-5 years >5 years Subtotal Less: bad debt provision Total	Closing balance 986,199.92 50,033.60 274,000.00 14,380.69 204,831.19 48,000.00 1,577,445.40 355,035.24 1,222,410.16	Closing balance of last year 10,292,375.76 306,500.00 14,380.69 204,831.19 60,000.00 10,878,087.64 711,998.61
		10,166,089.03

2. Disclosed by bad-debt provision method

Category Other accounts receivable for expected credit losses by single provision Other accounts receivable for expected credit losses by combination Including: combination 1 Combination 2 Combination 3 Total	Book balance Amount Proportion (%) 1,577,445.40 100.00 1,577,445.40 100.00 1,577,445.40 100.00	Closing balance Bad-debt provision Amount Proportion of provision (%) 355,035.24 22.51 355,035.24 22.51 355,035.24 22.51	Book value 1,222,410.16 1,222,410.16
			1,222,410.16

Contd.:

Category Other accounts receivable for expected credit losses by single provision Other accounts receivable for expected credit losses by combination Including: combination 1 Combination 2 Combination 3 Total	Closing balance of last year Book balance Bad-debt provision Amount Proportion Amount Proportion of provision (%) (%) 10,878,087.64 100.00 711,998.61 6.55 10,878,087.64 100.00 711,998.61 6.55 10,878,087.64 100.00 711,998.61 6.55	Book value 10,166,089.03 10,166,089.03
		10,166,089.03

– II-334 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

3. Other accounts receivable for expected credit losses by combination

(1) Combination 3

Item Margin, deposit, advance payment and temporary payment, etc. Total Contd.: Aging <1 year 1-2 years 2-3 years 3-4 years 4-5 years >5 years Total	Closing balance Other receivables Bad-debt provision 1,577,445.40 355,035.24 1,577,445.40 355,035.24 Closing balance of last Other receivables Bad-debt provision 10,292,375.76 514,618.80 306,500.00 30,650.00 14,380.69 4,314.21 204,831.19 102,415.60 60,000.00 60,000.00 10,878,087.64 711,998.61	Proportion of provision (%) 22.51
		22.51
		year Proportion of provision (%) 5.00 10.00 30.00 50.00 80.00 100.00
		6.55

4. Provision, recovery or reversal of provision for bad-debt in current period

	Phase I	Phase II	Phase III
		Anticipated
		credit loss	Anticipated
		in the entire	credit loss
		duration	in the entire
	Expected	(not	duration
	credit loss	incurred	(incurred
	in the next	credit	credit
Bad-debt provision	12 months	impairment)	impairment)	Total
Opening balance	711,998.61			711,998.61
Opening balance in current period
— Converted to the second stage
— Transferred into phase III			106,729.81	106,729.81
— Transferred back to phase II
— Reversed to the first stage
Provision of current period			112,482.07	112,482.07
Reversal of the current period	469,445.44			469,445.44
Write-off of the current period
Verification of the current period
Other changes
Closing balance	135,823.36		219,211.88	355,035.24

– II-335 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

5. There is no write-off of other receivables in current period.

6. Category of other receivables by nature

Nature of payment Transaction payment Margin Reserve fund Withholding social security, etc Others Total	Closing balance 327,611.88 331,770.46 183,384.16 148,604.07 586,074.83 1,577,445.40	Closing balance of last year 10,430,898.78 210,769.00 102,638.33 105,841.53 27,940.00
		10,878,087.64

7. Top five other receivables based on debtors

Organization name Nature of payment Hepu Yulong Pipeline Gas Co., Ltd. Others Fang Henghui (former shareholder of Hubei Iceman Foods Co., Ltd.) Transaction payment Human Resources and Social Security Bureau of Qujialing Management District, Jingmen City Margin Du Jian Reserve fund Tang Xiaohui Others Total	Closing balance Relationship with the Company Aging 353,948.79 Non-affiliated party <1 year 219,211.88 Non-affiliated party Within 4 years 200,000.00 Non-affiliated party <1 year 57,639.09 Non-affiliated party <1 year 142,459.03 Non-affiliated party <1 year 973,258.79	Proportion in closing balance of other receivables (%) 22.44 13.90 12.68 3.65 9.03 61.70	Closing balance of Bad-debt provision 35,394.88 21,921.19 20,000.00 5,763.91 14,245.90
			97,325.88

Note 5. Inventories

Item Raw materials Revolving materials Finished goods Delivered goods Outsourced materials Goods in process Total	Closing balance Amount Provision for depreciation 6,337,615.33 71,400.00 1,367,004.65 41,606,948.47 1,344,674.74 8,355.53 50,664,598.72 71,400.00	Book value 6,266,215.33 1,367,004.65 41,606,948.47 1,344,674.74 8,355.53 50,593,198.72	Closing balance of last year Amount Provision for depreciation Book value 3,505,355.49 3,505,355.49 787,841.86 787,841.86 40,140,701.68 40,140,701.68 3,029,491.90 3,029,491.90 1,684,905.86 1,684,905.86 49,148,296.79 49,148,296.79	Closing balance of last year Amount Provision for depreciation Book value 3,505,355.49 3,505,355.49 787,841.86 787,841.86 40,140,701.68 40,140,701.68 3,029,491.90 3,029,491.90 1,684,905.86 1,684,905.86 49,148,296.79 49,148,296.79
				49,148,296.79

– II-336 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Note 6. Other current assets

Item Added-value tax retained Input tax with VAT to be certified Payment of enterprise income tax in advance Land lease expense Other withholding taxes Total	Closing balance 7,730,553.11 3,284.79 315,567.74 137,500.00 2,650,000.28 10,836,905.92	Closing balance of last year 3,106,466.75 8,324,371.61 1,294,608.97
		12,725,447.33

Note 7.Long-term equity investment

Investee Associated enterprise: Tianjin Fangfu Tianye Investment Center (Limited Partnership) Total Contd.: Investee Associated enterprise: Tianjin Fangfu Tianye Investment Center (Limited Partnership) Total	Increase and decrease of current period Opening balance Additional investment Decrease in investment Profits and losses on investments recognized under equity method Adjustment to other comprehensive incomes 18,924,216.78 1,696,000.00 530,093.22 18,924,216.78 1,696,000.00 530,093.22 Increase and decrease of current period Closing balance Closing balance of provision for impairment Other equity changes Declared cash dividend or profits Provision for impairment Others 17,758,310.00 17,758,310.00	Increase and decrease of current period Opening balance Additional investment Decrease in investment Profits and losses on investments recognized under equity method Adjustment to other comprehensive incomes 18,924,216.78 1,696,000.00 530,093.22 18,924,216.78 1,696,000.00 530,093.22 Increase and decrease of current period Closing balance Closing balance of provision for impairment Other equity changes Declared cash dividend or profits Provision for impairment Others 17,758,310.00 17,758,310.00	Increase and decrease of current period Opening balance Additional investment Decrease in investment Profits and losses on investments recognized under equity method Adjustment to other comprehensive incomes 18,924,216.78 1,696,000.00 530,093.22 18,924,216.78 1,696,000.00 530,093.22 Increase and decrease of current period Closing balance Closing balance of provision for impairment Other equity changes Declared cash dividend or profits Provision for impairment Others 17,758,310.00 17,758,310.00	Increase and decrease of current period Opening balance Additional investment Decrease in investment Profits and losses on investments recognized under equity method Adjustment to other comprehensive incomes 18,924,216.78 1,696,000.00 530,093.22 18,924,216.78 1,696,000.00 530,093.22 Increase and decrease of current period Closing balance Closing balance of provision for impairment Other equity changes Declared cash dividend or profits Provision for impairment Others 17,758,310.00 17,758,310.00
				Closing balance of provision for impairment

Note:

According to the resolution of the first meeting of all partners of Tianjin Fangfu Tianye Investment Center (Limited Partnership) in 2019, it is agreed to refund the Company’s investment of RMB1,696,000.

– II-337 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Note 8. Fixed assets

1. Information about fixed assets

	Pant and	Machinery and		Office	Other
Item	buildings	equipment	Vehicles	equipment	equipment	Total
I. Total original book value
1. Opening balance	217,388,013.24	109,812,404.23	4,168,007.91	2,576,580.40	395,677.68	334,340,683.46
2. Increase of the current period	86,209,732.19	13,155,378.75	51,440.00	3,056,897.59		102,473,448.53
Acquisition	84,315.34	2,467,687.26	51,440.00	206,897.59		2,810,340.19
Transfers from construction in progress	86,125,416.85	10,687,691.49		2,850,000.00		99,663,108.34
3. Decrease of the current period	1,822,420.00	2,650,310.94	6,450.00	33,808.81		4,512,989.75
Disposal or scrapping	1,822,420.00	1,586,249.41	6,450.00	33,808.81		3,448,928.22
Other transfer-out		1,064,061.53				1,064,061.53
4. Closing balance	301,775,325.43	120,317,472.04	4,212,997.91	5,599,669.18	395,677.68	432,301,142.24
II. Accumulated depreciation
1. Opening balance	37,199,236.48	54,632,781.76	1,895,398.44	1,564,276.65	318,326.48	95,610,019.81
2. Increase of the current period	8,388,866.67	10,175,151.93	420,253.42	506,791.39	13,801.74	19,504,865.15
Withdrawal	8,388,866.67	10,175,151.93	420,253.42	506,791.39	13,801.74	19,504,865.15
3. Decrease of the current period	872,863.56	2,295,777.41	4,505.99	31,820.89		3,204,967.85
Disposal or scrapping	872,863.56	1,439,355.05	4,505.99	31,820.89		2,348,545.49
Other transfer-out		856,422.36				856,422.36
4. Closing balance	44,715,239.59	62,512,156.28	2,311,145.87	2,039,247.15	332,128.22	111,909,917.11
III. Impairment provision
1. Opening balance		382,851.13	26,999.88			409,851.01
2. Increase of the current period
Withdrawal
3. Decrease of the current period		34,243.85				34,243.85
Disposal or scrapping		34,243.85				34,243.85
Other transfer-out
4. Closing balance		348,607.28	26,999.88			375,607.16
IV. Total book value
1. Closing book value	257,060,085.84	57,456,708.48	1,874,852.16	3,560,422.03	63,549.46	320,015,617.97
2. Opening book value	180,188,776.76	54,796,771.34	2,245,609.59	1,012,303.75	77,351.20	238,320,812.64

2. Idle fixed assets at the end of the period

Item Plant and buildings Machinery and equipment Total	Original book value 45,252,012.55 798,054.29 46,050,066.84	Accumulated depreciation 16,078,903.81 758,151.52 16,837,055.33	Provision for impairment 25,427.01 25,427.01	Book value Remarks 29,173,108.74 14,475.76 29,187,584.50

3. Fixed assets that have not completed the title certificate at the end of the period

Item Plant and buildings Total	Book value Reasons for incomplete certificates of title 10,661,032.40 Coordination in progress 10,661,032.40

– II-338 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

4. Fixed assets for mortgage at the end of the period

See Note 47 for details of the fixed assets mortgaged at the end of the period.

Note 9. Construction in progress

1. Construction in process

Item Tianye Nonggu Science and Technology Park Project Fermented juice production line Workshop Reconstruction and Expansion Project Supporting facilities of characteristic agricultural demonstration area Equipment installation works Total	Closing balance Book balance Provision for impairment 98,711,669.49 5,451,159.96 265,943.86 25,316,119.15 129,478,948.60 265,943.86	Book value 98,711,669.49 5,185,216.10 25,316,119.15 129,213,004.74	Closing balance of last year Book balance Provision for impairment Book value 172,918,193.57 172,918,193.57 5,318,877.28 265,943.86 5,052,933.42 970,157.10 970,157.10 25,309,084.15 25,309,084.15 297,413.80 297,413.80 204,813,725.90 265,943.86 204,547,782.04	Closing balance of last year Book balance Provision for impairment Book value 172,918,193.57 172,918,193.57 5,318,877.28 265,943.86 5,052,933.42 970,157.10 970,157.10 25,309,084.15 25,309,084.15 297,413.80 297,413.80 204,813,725.90 265,943.86 204,547,782.04
				204,547,782.04

2. Changes in significant construction in progress of the current period

Project name Tianye Nonggu Science and Technology Park Project Fermented juice production line Workshop Reconstruction and Expansion Project Supporting facilities of characteristic agricultural demonstration area Equipment installation works Total	Opening balance 172,918,193.57 5,318,877.28 970,157.10 25,309,084.15 297,413.80 204,813,725.90	Increase of current period 20,040,509.66 132,282.68 3,936,042.62 7,035.00 24,115,869.96	Decrease of current period Transferred to productive biological assets Transferred to fixed assets Others Decrease 94,247,033.74 4,906,199.72 297,413.80 99,450,647.26	Closing balance 98,711,669.49 5,451,159.96 25,316,119.15
				129,478,948.60

– II-339 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Contd.:

Project name Tianye Nonggu Science and Technology Park Project Fermented juice production line Workshop Reconstruction and Expansion Project Supporting facilities of characteristic agricultural demonstration area Equipment Installation and Reconstruction Project Total	Budget amount (RMB10,000) 39,739.33 546.89 490.62 3,513.78 29.74 44,320.36	Proportion of project investment in budget (%) 71.16 99.68 100.00 77.85 100.00	Construction progress (%) 71.16 99.68 100.00 77.85 100.00	Accumulated amount of capitalization of interest	Include: amount of capitalization of interest of current period 3,097,741.94 3,097,741.94	Capitalization rate of interest of current period (%)	Source of fund Investment Project Self-raised Self-raised Self-raised Self-raised

3. Construction in progress for mortgage at the end of the period

See Note 47 for details of the construction in progress for mortgage at the end of the period.

4. Other descriptions of construction in progress

Notes:

(1) The Tianye Nonggu Science and Technology Park Project is funded by the Company, with a total investment of RMB454,899,100, including RMB104,490,400 for civil works, RMB20,362,100 for ancillary facilities and structures, RMB15,270,000 for land purchase and leveling, RMB257,270,800 for equipment and instrument purchase and installation, RMB500,000 for technology and other investment, RMB7,005,800 for preparation cost and RMB50 million for working capital. (2) The budget of Tianye Nonggu Science and Technology Park Project includes civil works investment, ancillary facilities and structures, land purchase and leveling, equipment and instrument purchase and installation fees.

Note 10. Productive biological assets

1. Productive biological assets measured by cost

		**Planting **	industry
Item	Passion fruit	Pitaya	Guava	Mango	Total
I. Total original book value
1. Opening balance	2,990,213.71	1,200,634.81	2,605,289.79	25,228,697.54	32,024,835.85
2. Increase of current period	2,746,324.22			5,003,803.18	7,750,127.40
Purchased
Self-planted	2,746,324.22			5,003,803.18	7,750,127.40
Increase in corporation merger
Invested by shareholders

– II-340 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

		**Planting **	industry
Item	Passion fruit	Pitaya	Guava	Mango	Total
Other transfer-in
3. Decrease of current period	1,427,797.06				1,427,797.06
Disposal	1,427,797.06				1,427,797.06
Other transfer-out
4. Closing balance	4,308,740.87	1,200,634.81	2,605,289.79	30,232,500.72	38,347,166.19
II. Accumulated depreciation
1. Opening balance	1,492,897.75	1,104,207.01	1,953,967.32		4,551,072.08
2. Increase of current period	904,064.48	96,427.80	651,322.47		1,651,814.75
Withdrawal	904,064.48	96,427.80	651,322.47		1,651,814.75
Increase in corporation merger
Other transfer-in
3. Decrease of current period	1,427,797.06				1,427,797.06
Disposal	1,427,797.06				1,427,797.06
Other transfer-out
4. Closing balance	969,165.17	1,200,634.81	2,605,289.79		4,775,089.77
III. Impairment provision
1. Opening balance
2. Increase of current period
Withdrawal
Increase in corporation merger
Other transfer-in
3. Decrease of current period
Disposal
Other transfer-out
4. Closing balance
IV. Book value
1. Book value at end of period	3,339,575.70			30,232,500.72	33,572,076.42
2. Book value at beginning of
period	1,497,315.96	96,427.80	651,322.47	25,228,697.54	27,473,763.77

– II-341 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

2. During the reporting period of productive biological assets, there is no need to make provision for impairment.

Note 11. Intangible assets

Item	Land use right	Patent right	Trademark right	Software	Total
I. Original book value
1. Opening balance	118,455,340.67	15,485.00	10,900.00	65,540.00	118,547,265.67
2. Increase of current period
Acquisition
Internal R&D
Other transfer-in
2. Decrease of current period
Disposal
Other transfer-out
3. Ending balance	118,455,340.67	15,485.00	10,900.00	65,540.00	118,547,265.67
II. Accumulated amortisation
1. Opening balance	11,006,712.10	10,608.40	9,174.13	37,539.96	11,064,034.59
2. Increase of current period	1,823,075.82	770.04	1,089.96	6,999.96	1,831,935.78
Withdrawal	1,823,075.82	770.04	1,089.96	6,999.96	1,831,935.78
Increase in corporation merger
Other transfer-in
3. Decrease of current period
Disposal
Other transfer-out
4. Closing balance	12,829,787.92	11,378.44	10,264.09	44,539.92	12,895,970.37
III. Impairment provision
1. Opening balance	20,094,867.93				20,094,867.93
2. Increase of current period
Withdrawal
Increase in corporation merger
Other transfer-in
3. Decrease of current period
Disposal
Other transfer-out
4. Closing balance	20,094,867.93				20,094,867.93
IV. Total book value
1. Book value at end of period	85,530,684.82	4,106.56	635.91	21,000.08	85,556,427.37
2. Book value at beginning of
period	87,353,760.64	4,876.60	1,725.87	28,000.04	87,388,363.15

Note:

See Note 47 for details of intangible assets mortgaged at the end of the period.

– II-342 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Note 12. Goodwill

1. The original book value of goodwill

Name of the investee or items resulting in goodwill Hubei Iceman Foods Co., Ltd. Total	Opening balance 17,607,521.44 17,607,521.44	Increase of current period Arising from business combination Others	Decrease of current period Disposal Others	Closing balance 17,607,521.44
				17,607,521.44

Calculation process of goodwill: In order to effectively integrate the resources and advantages of both parties, enlarge and strengthen the main business, and form a highly competitive production enterprise of fruit juice and fruit and vegetable products, the Company realized the equity acquisition and business restructuring of Hubei Iceman Foods Co., Ltd. On the purchase date (November 16, 2015); the book value of identifiable net assets of Hubei Iceman Foods Co., Ltd. was RMB-24,361,162.41; the fair value of identifiable net assets based on the purchase date was RMB-17,607,520.44. According to the Equity Merger Agreement signed between the Company and the original shareholders of Hubei Iceman Foods Co., Ltd., the consideration for equity merger was RMB1, so the goodwill formed by this merger was RMB17,607,521.44.

2. Provision for impairment of goodwill

Name of the investee or items resulting in goodwill Hubei Iceman Foods Co., Ltd. Total	Opening balance 2,749,838.60 2,749,838.60	Increase of current period Provision Others	Decrease of current period Disposal Others	Closing balance 2,749,838.60
				2,749,838.60

Goodwill impairment test process, parameters and recognition method of goodwill impairment loss: Hubei Iceman Foods Co., Ltd. is taken as a separate asset group for impairment test, and the recoverable amount of goodwill impairment test is determined by fair value minus disposal expenses. RMB2,749,838.60 has been withdrawn for goodwill impairment at the beginning of the period. At the end of current period, according to the Appraisal Report (LHZHPBZ (2020) No. 6078) issued by Fujian United Zhonghe Assets Appraisal Land and Real Estate Appraisal Co., Ltd. on March 25, 2020, with the base date of appraisal of December 31, 2019, the goodwill has been tested for impairment; the book value of the asset group including goodwill was RMB43,714,245.61, the recoverable amount of the asset group was RMB67,420,767.28, and the book value of the asset group was less than the recoverable amount of the asset group, so there was no impairment of goodwill.

– II-343 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Note 13. Long-term deferred expenses

Item Land lease expense Plant Decoration Project Other projects in characteristic agricultural demonstration areas Total	Opening balance 10,810,111.35 1,211,716.79 870,559.26 12,892,387.40	Increase in the current period 79,233.00 570,913.26 210,384.96 650,146.26	Amortization for the current period 4,837,098.60 486,478.20 5,533,961.76	Other decrease	Closing balance 6,052,245.75 1,296,151.85 660,174.30
					8,008,571.90

Note 14. Deferred tax assets and deferred tax liabilities

1. Deferred income tax assets before offset

Item Provision for impairment of assets Internal unrealized profit Deductible losses Government grants Changes in fair value of long-term equity investment Total	Closing balance Deductible temporary differences Deferred tax assets 4,932,871.27 1,073,518.44 81,315.84 12,197.38 1,420,058.66 265,942.49 3,096,720.00 464,508.00 9,530,965.77 1,816,166.31	Closing balance of last year Deductible temporary differences Deferred tax assets 3,384,474.33 744,635.68 1,467,779.65 263,027.38 3,096,720.00 464,508.00 7,948,973.98 1,472,171.06	Closing balance of last year Deductible temporary differences Deferred tax assets 3,384,474.33 744,635.68 1,467,779.65 263,027.38 3,096,720.00 464,508.00 7,948,973.98 1,472,171.06
			1,472,171.06

2. Deferred tax liabilities before offset

Item Unrealized losses in internal transactions Changes in fair value of long-term equity investment Total 3. Unrecognized deferred tax assets Item Provision for impairment of assets Deferred income Deductible losses Total	Closing balance Closing balance of last year Taxable temporary differences Deferred tax liabilities Taxable temporary differences Deferred tax liabilities 457,072.59 114,268.15 457,072.59 114,268.15 Closing balance Closing balance of last year 132,116.96 26,191.64 59,906,618.47 63,323,392.40 22,743,346.76 22,771,782.22 82,782,082.19 86,121,366.26	Closing balance Closing balance of last year Taxable temporary differences Deferred tax liabilities Taxable temporary differences Deferred tax liabilities 457,072.59 114,268.15 457,072.59 114,268.15 Closing balance Closing balance of last year 132,116.96 26,191.64 59,906,618.47 63,323,392.40 22,743,346.76 22,771,782.22 82,782,082.19 86,121,366.26	Closing balance Closing balance of last year Taxable temporary differences Deferred tax liabilities Taxable temporary differences Deferred tax liabilities 457,072.59 114,268.15 457,072.59 114,268.15 Closing balance Closing balance of last year 132,116.96 26,191.64 59,906,618.47 63,323,392.40 22,743,346.76 22,771,782.22 82,782,082.19 86,121,366.26
			86,121,366.26

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Note:

The reason why deferred income tax assets have not been recognized for asset impairment provision was that Guangxi Tianye Venture Agricultural Technology Co., Ltd., a subsidiary of the Company, was exempt from enterprise income tax for fruit planting; the reason why deferred income tax assets have not been recognized for deferred revenue was that Hubei Iceman Foods Co., Ltd., a subsidiary of the Company, was uncertain whether it could obtain enough taxable income in the future; the reason why deferred income tax assets have not been recognized for deductible losses was that Hainan Tianye Drinks Food Sales Co. Ltd., Hubei Iceman Foods Co., Ltd., Hubei Tianye Nonggu Biological Technology Co., Ltd., and Hubei Tianye Innovation Nonggu Fruit & Vegetable Co., Ltd., which were subsidiaries of the Company, were uncertain whether they could obtain enough taxable income in the future.

4. Deductible losses for which deferred tax assets are not recognised will be expired in the following year

Year 2018 2019 2020 2021 2022 2023 2024 Total Note 15. Other non-current assets Item Advance payment for Tianye Nonggu Science and Technology Park Project Equipment project payment Total Note 16. Short-term loans Item Unsecured loans Pledged loans Mortgage loans Mortgaged and guaranteed loans Accrued interest on short-term loans Total	Closing balance 3,207,535.44 6,738,381.86 6,857,508.13 5,358,891.43 1581,029.90 22,743,346.76 Closing balance 9,984,510.50 514,901.90 10,499,412.40 Closing balance 2,928,894.70 36,000,000.00 75,000,000.00 155,833.33 114,084,728.03	Closing balance of last year 149,449.48 460,015.88 3,207,535.44 6,738,381.86 6,857,508.13 5,358,891.43
		22,771,782.22
		Closing balance of last year 3,019,370.26 287,986.90
		3,307,357.16
		Opening balance 5,000,000.00 36,000,000.00 60,000,000.00
		101,000,000.00

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Note 1:

RMB113,928,894.70 of the short-term loan balance as of December 31, 2019: 1) Hainan Dachuan Food Co., Ltd., a subsidiary of the Company, signed an accounts receivable purchase agreement with Shanghai Branch of JPMorgan Chase Bank (China) Co., Ltd., and Hainan Dachuan sold the accounts receivable from customer Coca-Cola Beverage (Shanghai) Co., Ltd. to Shanghai Branch of JPMorgan Chase Bank (China) Co., Ltd.; on the payment due date, Coca-Cola Beverage (Shanghai) Co., Ltd. directly paid the accounts receivable to Shanghai Branch of JPMorgan Chase Bank (China) Co., Ltd. As of December 31, 2019, the total amount of accounts receivable that were not due for payment sold by Hainan Dachuan to Shanghai Branch of JPMorgan Chase Bank (China) Co., Ltd. was RMB2,928,894.70.

2) In July 2019, the Company signed a loan contract (0210700005-2019 (NZ) Z No. 00151) of RMB36 million with Beihai Sub-branch of Industrial and Commercial Bank of China, with a loan period of one year. The mortgaged properties were land use right (HGY (2012) No. 1560), industrial factory buildings and supporting houses (HFQZHPZ No. 017061-017071). In 2013 and 2016, the maximum amount mortgage contract (GYBNZDZ (2013) No. 001) and the change agreement of maximum mortgage contract (GYBNZZGEDYBZ (2016) No. 001) were signed respectively.

3) In December 2018, Hainan Dachuan Food Co., Ltd., a subsidiary of the Company, signed a loan contract (HKNSS/H (Z) 2018 ZGDKZ (040)) of RMB75 million with Haikou Rural Commercial Bank Co., Ltd. The credit was granted for three years; the guarantee method was mortgage+guarantee, and the fixed interest rate was 6.8% with the additional integrity deposit of 2%. It also signed a contract (HKNSS/H (Z) 2018 ZBZ No.040), the mortgaged properties were house and state-owned land use right (E (2018) JMSBDCQ No. 0013299), property certificates (DCZZ No. 0005745, DCZZ No. 0005746, DCZZ No. 0005747, DCZZ No. 0005749), land use rights (DAGY (2010) No. 253, DAGY (2008) No. 23), and 56 production machinery equipment and supporting facilities under the name of Hainan Dachuan Food Co., Ltd. It also signed three mortgage contracts (HKNSS/H (Z) 2018 GDZ No. 040-1, HKNSS/H (Z) 2018 GDZ No. 040-2, HKNSS/H (Z) 2018 GDZ No. 040-3), and the guarantors were Tianye Innovation Corporation, Yao Yuzhi and Hubei Tianye Nonggu Biological Technology Co., Ltd. And it also signed two guarantee contracts (HKNSS/H (Z) 2018 GBZ No. 040-1, HKNSS/H (Z) 2018 GBZ No. 040-2). As of December 31, 2019, the short-term loan balance of this contract was RMB75 million.

Note 17. Accounts payable

1. Disclosure of accounts payable by aging

Aging <1 year 1-2 years 2-3 years >3 years Total	Closing balance Amount Proportion (%) 30,351,559.30 88.98 1,961,599.60 5.75 650,382.39 1.91 1,146,311.98 3.36 34,109,853.27 100.00	Closing balance of last year Amount Proportion (%) 13,247,435.00 85.26 1,023,836.71 6.59 552,693.07 3.56 713,926.41 4.59 15,537,891.19 100.00	Closing balance of last year Amount Proportion (%) 13,247,435.00 85.26 1,023,836.71 6.59 552,693.07 3.56 713,926.41 4.59 15,537,891.19 100.00
			100.00

2. Accounts payable classified by nature

Item Material purchase payment Payment related to expenses Equipment and project purchase payment Others Total	Closing balance 25,645,802.70 3,433,512.28 4,940,770.27 89,768.02 34,109,853.27	Closing balance of last year 5,668,113.91 2,603,792.52 7,234,635.76 31,349.00
		15,537,891.19

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

3. Significant accounts payable aged over 1 year

Organization name Foshan Nanhai District Construction Engineering Co., Ltd. Jiangsu Kaiyi Intelligent Technology Co., Ltd. Wuhan Quanding Environmental Protection Technology Co., Ltd. Zhang Zhiwu Wuhan Sentai Environmental Protection Co., Ltd. Hunan Xingyu Decoration Co., Ltd. Xiamen Heguanxin Cryogenic Equipment Co., Ltd. Yang Deping Chen Shixin Total

Closing balance Relationship with the Company Reasons for not been repaid or transferred 432,384.75 Non-affiliated party Uncompleted settlement 369,200.00 Non-affiliated party Uncompleted settlement 293,767.00 Non-affiliated party Uncompleted settlement 200,000.00 Non-affiliated party Uncompleted settlement 200,000.00 Non-affiliated party Uncompleted settlement 181,818.18 Non-affiliated party Uncompleted settlement 160,100.01 Non-affiliated party Uncompleted settlement 111,300.00 Non-affiliated party Uncompleted settlement 100,000.00 Non-affiliated party Uncompleted settlement 2,048,569.94

4. Top five accounts payable based on creditor

Organization name Nature of payment Shenzhen Shihuida Import & Export Co., Ltd. Material purchase payment Haikou Guangshunda Packaging Material Co., Ltd. Material purchase payment Chen Feng Material purchase payment Dalian Yiheng Import & Export Co., Ltd. Material purchase payment Wu Changhui Material purchase payment Total	Closing balance Relationship with the Company 2,991,375.10 Non-affiliated party 2,573,394.95 Non-affiliated party 2,461,418.00 Non-affiliated party 1,527,040.00 Non-affiliated party 1,331,125.00 Non-affiliated party 10,884,353.05	Proportion in total accounts payable Aging (%) 8.77 <1 year 7.54 <1 year 7.22 <1 year 4.48 <1 year 3.90 <1 year 31.91

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Note 18. Advances from customs

1. Disclosure of advances from customs by aging

Aging <1 year 1-2 years 2-3 years >3 years Total	Closing balance Amount Proportion (%) 2,565,465.15 95.29 51,647.00 1.92 37,129.45 1.38 38,121.50 1.41 2,692,363.10 100.00	Closing balance of last year Amount Proportion (%) 1,376,462.69 84.04 120,579.25 7.36 140,921.50 8.60 1,637,963.44 100.00	Closing balance of last year Amount Proportion (%) 1,376,462.69 84.04 120,579.25 7.36 140,921.50 8.60 1,637,963.44 100.00
			100.00

2. Disclosure of advances from customs by nature

Item Payment for goods Total	Closing balance 2,692,363.10 2,692,363.10	Closing balance of last year 1,637,963.44
		1,637,963.44

3. Top five advances from customs based on creditor

Organization name Nature of payment Fresh Fruit Juice Co., Ltd. Payment for goods Hainan Yiluo Technology Co., Ltd. Payment for goods He’nan Run’ang Industry Co., Ltd. Payment for goods Wuxi Baisite Food Industrial Co., Ltd. Payment for goods Shandong Taileyuan Agricultural Technology Co., Ltd. Payment for goods Total	Closing balance Relationship with the Company 1,144,426.19 Non-affiliated party 433,335.00 Non-affiliated party 200,850.00 Non-affiliated party 152,400.00 Non-affiliated party 103,700.00 Non-affiliated party 2,034,711.19	Proportion in total advance receipts Aging (%) 42.51 <1 year 16.09 <1 year 7.46 <1 year 5.66 <1 year 3.85 <1 year 75.57

Other descriptions of advance receipts: During the reporting period, the Company had not important advance receipts with more than one-year aging.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Note 19. Payroll and employee benefits payable

1. Payroll and employee benefits payable

Item Short-term benefits Post-employment benefits — defined contribution plan Termination benefits Total	Opening balance 3,139,190.38 5,405.40 3,144,595.78	Increase of current period 28,545,412.08 1,717,755.61 24,200.00 30,287,367.69	Decrease of current period 27,967,300.33 1,723,161.01 24,200.00 29,714,661.34	Closing balance 3,717,302.13
				3,717,302.13

2. Short-term benefits

Item Wages or salaries, bonuses, allowances and subsidies Employee welfare Social insurance contributions Including: basic medical insurance Work injury insurance Maternity insurance premium Housing funds Labor union and employee education costs Total	Opening balance 3,109,786.93 25,679.55 2,079.90 1,663.20 55.80 360.90 1,644.00 3,139,190.38	Increase of current period 26,129,207.94 990,571.24 893,796.10 780,190.98 62,814.51 50,790.61 479,946.00 51,890.80 28,545,412.08	Decrease of current period 25,551,710.74 986,232.79 895,876.00 781,854.18 62,870.31 51,151.51 481,590.00 51,890.80 27,967,300.33	Closing balance 3,687,284.13 30,018.00
				3,717,302.13

3. Defined contribution plan

Item Basic pension insurance Unemployment insurance Total	Opening balance 5,266.80 138.60 5,405.40	Increase of current period 1,666,064.13 51,691.48 1,717,755.61	Decrease of current period 1,671,330.93 51,830.08 1,723,161.01	Closing balance

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Note 20. Taxes payable

Tax items VAT Enterprise income tax Individual income tax Urban maintenance and construction tax Building tax Land use tax Education expenses and local surcharges Stamp duties Environmental protection tax Total	Closing balance 931,094.20 1,406,938.11 24,491.89 46,554.71 557,492.95 19,500.00 46,554.71 45,616.70 3,125.04 3,081,368.31	Closing balance of last year 1,556,335.03 775,023.85 13,875.57 75,898.12 63,309.90 19,500.00 75,049.42 3,096.00 3,125.04
		2,585,212.93

Note 21. Other payables

Item Interest payable Dividends payable Other payables Total	Closing balance 4,160,084.72 4,160,084.72	Opening balance 2,930,036.25
		2,930,036.25

1. Disclosure of other payables by aging

Aging <1 year 1-2 years 2-3 years >3 years Total	Closing balance Amount Proportion (%) 3,406,181.10 81.88 189,060.98 4.54 165,275.40 3.97 399,567.24 9.61 4,160,084.72 100.00	Opening Amount 2,197,587.61 302,349.40 272,856.61 157,242.63 2,930,036.25	balance Proportion (%) 75.00 10.32 9.31 5.37
			100.00

2. Disclosure of other payables by nature

Nature of payment Miscellaneous project payments Payment related to expenses Transaction payment Collection and payment Social security fund, etc Others Total	Closing balance 274,942.60 3,486,759.87 128,549.40 243,601.23 809.62 25,422.00 4,160,084.72	Opening balance 301,710.00 2,330,614.79 59,146.40 204,652.14 598.72 33,314.20
		2,930,036.25

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

3. Top five other payables based on creditor

Organization name Nature of payment Shanghai Liqin Logistics Co., Ltd. Payment related to expenses Henan Jiankun Supply Chain Management Co., Ltd. Payment related to expenses ZHONGXINGHUA CERTIFIED PUBLIC ACCOUNTANTS LLP (Special General Partnership) Payment related to expenses Huang Hongkui Payment related to expenses Guangxi Beibuwan Xinyong Cold-Chain Logistics Co., Ltd. Payment related to expenses Total	Closing balance Relationship with the Company 715,921.56 Non-affiliated party 572,020.08 Non-affiliated party 566,037.74 Non-affiliated party 422,568.50 Non-affiliated party 368,306.27 Non-affiliated party 2,644,854.15	Proportion in total other payables Aging (%) 17.21 <1 year 13.75 <1 year 13.61 <1 year 10.16 <1 year 8.85 <1 year 63.58

Note 22. Current portion of non-current liabilities

Item Unsecured loans Interest payable on non-current capital liabilities due within one year Total	Closing balance 30,000,000.00 1,657,741.94 31,657,741.94	Closing balance of last year

Note 1:

As of December 31, 2019, the balance of non-current capital liabilities due within one year was RMB30 million: In April 2018, Hubei Tianye Nonggu Biological Technology Co., Ltd., a subsidiary of the Company, signed the RMB Entrusted Loan Contract with Wusan Farm Sub-branch of the Agricultural Bank of China. The contract number was 2018002. Jingmen Qujialing Urban and Rural Construction Investment Co., Ltd. was the loan principal and provided the Company with loan on credit of RMB30 million, with loan term of 2 years and annual interest rate of 7.20%. As of December 31, 2019, the long-term loan balance of this contract is RMB30 million.

Note 23. Long-term loans

Item Unsecured loans Interest payable on long-term loans Total	Closing balance	Closing balance of last year 30,000,000.00 857,741.94
		30,857,741.94

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Note 24. Long-term accounts payable

Item Payment due for long-term equipment Total	Closing balance 381,371.52 381,371.52	Closing balance of last year 397,555.46
		397,555.46

Note 25. Deferred income

Item Government grants related to assets Government grants related to revenues Total	Opening balance 65,075,098.02 33,000.00 65,108,098.02	Increase of current period 1,098,700.00 1,098,700.00	Decrease of current period 4,880,120.89 4,880,120.89	Closing balance Causes 61,293,677.13 See the following note for details 33,000.00 See the following note for details 61,326,677.13

– II-352 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

1. Deferred revenue related to government grants

Item Financial subsidy for the development of SME in local characteristic industries in 2012 Subsidy for the construction of agricultural product standardization demonstration base Infrastructure support subsidies allocated by the government Subsidy for quality and safety demonstration area of export food and agricultural products in Hainan Province Financial subsidy for special fruit planting Supporting funds for infrastructure of Nonggu Science and Technology Park Project Technical transformation funds for fruit and vegetable juice pulp production line Special funds for the development of SME in the autonomous region in 2017 Support funds for grain, agriculture and forestry characteristic industries in the autonomous region in 2016 Funds for Rural Tourism Construction Project Phase I Star Award for Xiangliuxi Tropical Fruit Industry (Core) Demonstration Zone Subsidies for purchasing agricultural machinery Tax refund Special funds for energy-saving and circular economy Research and demonstration project on key technologies of agricultural industry innovation and development in poor villages (slope) Total	Opening balance 300,000.00 107,692.30 37,963,184.40 395,604.31 1,609,600.00 19,454,705.46 400,000.00 1,039,175.31 300,000.00 800,000.00 462,351.70 16,926.00 2,225,858.54 33,000.00 65,108,098.02	Amount of subsidy increased in current period 918,700.00 180,000.00 1,098,700.00	Amount included in the current profits and losses 80,000.00 107,692.30 3,644,465.88 65,934.12 657,392.88 148,453.56 119,907.35 1,953.00 40,988.52 13,333.28 4,880,120.89	Other changes	Closing balance Pertinent to Assets/Income 220,000.00 Assets related Assets related 34,318,718.52 Assets related 329,670.19 Assets related 1,609,600.00 Assets related 19,716,012.58 Assets related 400,000.00 Assets related 890,721.75 Assets related 300,000.00 Assets related 800,000.00 Assets related 342,444.35 Assets related 14,973.00 Assets related 2,184,870.02 Assets related 166,666.72 Assets related 33,000.00 Revenues related 61,326,677.13

– II-353 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Note:

As of December 31, 2019, the balance of deferred revenue related to government grants was RMB61,326,677.13:

1. According to GCQ [2012] No. 128 “Notice on Issuing Development Funds for Small and Medium-sized Enterprises in Local Characteristic Industries in 2012” issued by Finance Department of Guangxi Zhuang Autonomous Region, the Company received special funds of RMB800,000 for the development of SME from Hepu County Finance Bureau on October 16, 2012 for fruit and vegetable processing projects, and amortization was divided into 10 years according to the life of asset depreciation.

2. According to NCN [2015] No. 164 “Notice of Nanning Finance Bureau on Appropriating Funds for Agricultural Products Standardization Construction Project in 2015” issued by Nanning Finance Bureau, Guangxi Tianye Innovation Agricultural Technology Co., Ltd., a subsidiary of the Company, received a subsidy of RMB700,000.00 for the construction of agricultural products standardization demonstration base from Yongning District Agriculture, Forestry and Water Conservancy Bureau of Nanning City on February 5, 2016 and April 19, 2016 respectively. After the acceptance, the remaining amortization period of productive biological assets was determined to be 39 months.

3. According to the “Letter on Subsidizing Infrastructure Support for Comprehensive Development of Production and Processing of Fruits and Vegetables and Quick-frozen Fruits and Vegetables in Hubei Iceman Foods Co., Ltd.” issued by Qujialing Management District of Jingmen City on February 9, 2012, Hubei Iceman Foods Co., Ltd., a subsidiary of the Company, received a total of RMB61,910,003.68 of government infrastructure support subsidies in 2012 and 2013, with the assets amortization life of 20 years.

4. According to QCQ [2014] No. 2041 “Notice on the Allocation of Funds for the Project Construction of Hainan Export Food and Agricultural Product Quality and Safety Demonstration Zone in 2014” issued by Hainan Provincial Department of Finance, Hainan Dachuan Food Co., Ltd., a subsidiary of the Company, received a subsidy fund of RMB500,000.00 for quality and safety demonstration area of export food and agricultural products in Hainan Province on May 14, 2015. The Company amortized this government grant according to the depreciation life of assets.

5. According to the agricultural industrialization development and support work plan of Yongning District, Nanning City in 2016, Guangxi Tianye Innovation Agricultural Technology Co., Ltd., a subsidiary of the Company, received the financial subsidy fund of RMB1,609,600 for newly planted special fruits from Pumiao Town People’s Government of Yongning District of Nanning City, which was amortized according to the mature service life of productive biological assets after acceptance.

6. According to the Interim Measures for Financial Funds to Support Industrial Development in Qujialing Management District , as of December 31, 2019, Hubei Tianye Nonggu Biological Technology Co., Ltd., a subsidiary of the Company, received a total of RMB20,482,090.97 support funds for infrastructure allocated by the Management Committee of Qujialing Economic Development Zone of Hubei Province, and the Company amortized the such subsidy according to the depreciation life of assets.

7. According to the fixed assets investment plan of Hubei Province in 2016, Hubei Iceman Foods Co., Ltd., a subsidiary of the Company, received RMB400,000 from the Development and Reform Bureau of Qujialing Management District of Jingmen City for technical transformation of fruit and vegetable juice pulp production line. As of the end of the reporting period, the project had not been completed.

8. According to the second batch of special funds for the development of SME in the autonomous region in 2017 (dry and preserved fruit and vegetable processing production line project) in [2017] No. 21 document of Finance Bureau of Hepu County, Guangxi Zhuang Autonomous Region and the document of Finance Department of Guangxi Zhuang Autonomous Region, the Company received a development special fund subsidy of RMB1,200,000 on December 4, 2017, and such subsidy was amortized according to the depreciation life of assets.

9. According to GCN [2015] No. 226 “Notice on Organizing the Application of Supporting Funds for Food, Agriculture and Forestry Advantageous Industries in the Autonomous Region in 2016” issued by Region Finance Department Document of Guangxi Zhuang Autonomous, Guangxi Tianye Innovation Agricultural Technology Co., Ltd., a subsidiary of the Company, received RMB300,000 of support funds for food, agriculture and forestry advantageous industries in the autonomous region in 2016 from Yongning District Agriculture and Forestry Water Conservancy Bureau of Nanning on September 20, 2017, which was amortized according to the mature service life of productive biological assets after acceptance.

10. According to the “Notice on Printing and Distributing the Implementation Plan for the Construction of Tourist Toilets in Yongning District in 2017” issued by the Office of the People’s Government of Yongning District, Nanning City, Guangxi Tianye Innovation Agricultural Technology Co., Ltd., a subsidiary of the Company, received

– II-354 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

RMB800,000 of fund for Rural Tourism Construction Project Phase I from Nanning Yongning District Cultural Press, Publication and Sports Bureau on December 8, 2017 and December 27, 2017, which was amortized according to the assets depreciation life after acceptance.

1. According to the Implementation Plan for the Establishment of Yongning Xiangliuxi Tropical Fruit Industry (Core) Demonstration Zone (YBF [2014] No. 44), Guangxi Tianye Innovation Agricultural Technology Co., Ltd., a subsidiary of the Company, received RMB4,797,362 of fund related to construction of Xiangliuxi Tropical Fruit Industry (Core) Demonstration Zone in Yongning District, Nanning City from Yongning District Agriculture and Forestry Water Conservancy Bureau on June 7, 2017. The Company amortized such government grant according to the income and assets.

2. According to the document “Notice of the Office of the Agricultural Department of Hubei Province on the Implementation of Agricultural Machinery Purchase Subsidy in 2017” issued by the Office of the Agricultural Department of Hubei Province, Hubei Tianye Innovation Nonggu Fruit & Vegetable Co., Ltd., a subsidiary of the Company, received a subsidy of RMB19,530 for purchase of agricultural machinery from the Agricultural Water Bureau of Qujialing Management District of Jingmen City on December 11, 2017, and the company amortized this government grant according to the depreciation life of assets.

3. According to the Notice on Accelerating the Development of Headquarters Economy in Qujialing Management District , Hubei Iceman Foods Co., Ltd., a subsidiary of the Company, received a tax subsidy of RMB2,256,600 from the Finance Bureau of Qujialing Management District in Jingmen City on February 2018, and the Company amortized the such subsidy according to the amortization life of assets.

4. According to QCJ [2018] No. 1954 “ On Allocating Special Funds for Energy-saving and Circular Economy in 2018 ” issued by Hainan Provincial Department of Finance, Hainan Dachuan Food Co., Ltd., a subsidiary of the Company, received a special fund of RMB180,000 for 2018 energy-saving and circular economy from Ding’an County Industrial Information and Science & Technology Bureau in May 2019. The Company amortized this government grant according to the depreciation life of assets.

5. According to YFF [2017] No. 7 “Notice on Issuing the First Batch of Scientific Research and Technology Development Projects (Subjects) in Yongning District, Nanning City in 2017” issued by the Finance Bureau of Yongning District, Nanning City, Guangxi Tianye Innovation Agricultural Technology Co., Ltd., a subsidiary of the Company, received RMB33,000 of fund for research and demonstration project on key technologies of agricultural industry innovation and development in poor villages (slope) from the Treasury Centralized Payment Center in Yongning District, Nanning City on December 5, 2017; such fund was included in the current profits and losses after acceptance.

Note 26. Share capital

					**Changes **	**in **	**the current **	period, increase (+) and decrease (-)	period, increase (+) and decrease (-)
								Capitalization
			Opening	**New **	shares		Share	of capital			Closing
Item			balance		issued		donation	reserve	Others	Subtotal	balance
Number	of	shares	240,000,000.00								240,000,000.00

Note 27. Capital reserves

Item Capital premium Other capital reserves Total	Opening balance 244,109,726.71 2,190,367.24 246,300,093.95	Increase of current period	Decrease of current period	Closing balance 244,109,726.71 2,190,367.24
				246,300,093.95

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Note 28. Other comprehensive income

Item I. Other comprehensive income not allowed to be re-classified into profits and losses 1. Changes caused by remeasurement and re-definition of benefit plan 2. Other comprehensive profits that cannot be transferred into profit and loss under the equity method II. Other comprehensive income allowed to be re-classified into profits and losses 1. Other comprehensive income that can be converted into losses and profits under the equity law 2. Gains and losses from changes in fair value of available-for-sale financial assets 3. Profits and losses of salable financial asset re-classified from the investments which will be held to their maturity 4. Losses and profits of cash flow hedging in force 5. Balance arising from the translation of foreign currency statements 6. Disposal income generated by a package of disposal subsidiaries before losing control 7. Conversion of other assets into investment real estate measured by fair value model Total amount of other comprehensive incomes	Opening balance -2,632,212.00 -2,632,212.00 -2,632,212.00	Incurred amount before income tax of current period	Less: transferring other comprehensive income recorded in the previous period into the losses and profits of current period	Amount of current period Less: Income tax expenses Attributable to the parent company after tax	Attributable to minority shareholders after tax	Less: carry-over amount Changes caused by remeasurement and re-definition of benefit plan	Closing balance -2,632,212.00 -2,632,212.00
							-2,632,212.00

– II-356 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Note 29. Surplus reserve

Item Statutory surplus reserves Total	Opening balance 11,042,103.18 11,042,103.18	Increase of current period 325,797.85 325,797.85	Decrease of current period	Closing balance 11,367,901.03
				11,367,901.03

Note:

The surplus reserve refers to the statutory surplus reserve accrued according to 10% of the net profit of the parent company.

Note 30. Undistributed profits

Changes in undistributed profits

		Proportion of
		withdrawal or
Item	Amount	allocation
		(%)
Undistributed profits at the end of last year before
adjustment	228,492,567.81	—
Total undistributed profit at the beginning of
adjustment (increase +, decrease -)		—
Undistributed profits at the beginning of the period
after adjustment	228,492,567.81	—
Add: net profit attributable to owner of parent
company in current period	24,381,734.95	—
Less: withdrawal of statutory surplus reserves	325,797.85	According to 10%
		of the parent
		company’s net profit
Withdrawal of discretionary surplus reserves
Common stock dividends payable
Common stock dividends converted into share
capital
Other distributions to shareholders
Other profits distribution
Other internal carry-over of owner’s equity
Undistributed profits at the end of the period	252,548,504.91

– II-357 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Note 31. Operating income and operating costs

1. Operating income, operating costs

Item Principal operating activities Others Total	Amount of current period Revenue Cost 290,342,840.35 211,831,531.96 290,342,840.35 211,831,531.96	Amount of last period Revenue Cost 258,435,753.75 181,881,408.84 258,435,753.75 181,881,408.84	Amount of last period Revenue Cost 258,435,753.75 181,881,408.84 258,435,753.75 181,881,408.84
			181,881,408.84

2. Principal operating activities (by products)

Product name Raw fruit juice Quick-frozen fruit and vegetable Fresh fruit Others Total	Amount of current period Operating income Operating cost 127,504,764.37 88,249,368.02 48,326,820.93 37,554,041.51 14,629,684.92 5,972,757.12 99,881,570.13 80,055,365.31 290,342,840.35 211,831,531.96	Amount of last period Operating income Operating cost 103,217,845.09 64,136,028.46 48,377,896.55 33,684,603.56 15,421,293.00 6,255,783.93 91,418,719.11 77,804,992.89 258,435,753.75 181,881,408.84	Amount of last period Operating income Operating cost 103,217,845.09 64,136,028.46 48,377,896.55 33,684,603.56 15,421,293.00 6,255,783.93 91,418,719.11 77,804,992.89 258,435,753.75 181,881,408.84
			181,881,408.84

3. Operating income of the top five customers of the Company

Customer Guangdong Nanfenghang Agriculture Investment Co., Ltd. Nongfu Spring (Note) Fresh Fruit Juice (Note) Coca-cola (Note) Shanghai Zhaoyi Trading Co., Ltd. Total	Amount of current period 66,436,018.36 35,614,214.62 19,778,297.33 11,973,207.69 9,972,382.21 143,774,120.21	Proportion in the Company’s total operating income (%) 22.88 12.27 6.81 4.12 3.43
		49.51

– II-358 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Contd.

		Proportion in the
	Amount of last	Company’s total
Customer	period	operating income
		(%)
Guangdong Nanfenghang Agriculture Investment
Co., Ltd.	40,149,013.99	15.54
Fresh Fruit Juice (Note)	23,494,532.65	9.09
Nongfu Spring (Note)	18,937,855.37	7.33
Gerui Juice Industry (Tianjin) Co., Ltd.	9,226,457.99	3.57
Wahaha (Note)	18,331,538.08	3.23
Total	100,139,398.08	38.76

Note:

Fresh Fruit Juice, Nongfu Spring and Coca-cola customers implement centralized procurement, and the above sales amount includes related parties included in their centralized procurement.

Note 32. Taxes and surcharges

Taxes Urban construction tax Educational surcharges Local educational surcharges Stamp duties Building tax Land use tax Environmental protection tax Other taxes and costs Total	Amount of current period 509,679.12 305,807.47 203,871.64 123,576.10 1,775,711.89 749,968.51 12,500.16 8,543.59 3,689,658.48	Amount of last period 615,340.97 369,204.50 238,470.51 185,626.70 1,516,825.82 1,041,688.01 11,969.43 8,113.66
		3,987,239.60

Note 33. Selling expenses

	Amount of current	Amount of last
Item	period	period
Warehousing and logistics expenses	7,817,870.17	8,400,514.39
Labor expenses	1,383,592.48	1,038,865.51
Advertising and promotion expenses	7,964,012.06	370,833.24
Others	684,931.54	390,837.83
Total	17,850,406.25	10,201,050.97

– II-359 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Note 34. General and administrative expenses

Item Labor expenses Office expense Depreciation and amortization Agency service expenses Business reception expenses Traveling expenses Taxes Others Total	Amount of current period 11,305,923.83 2,116,370.19 10,951,832.34 2,510,396.08 1,165,283.86 414,615.14 133,583.80 1,720,505.01 30,184,926.45	Amount of last period 11,017,566.84 2,166,964.72 9,353,188.10 4,888,656.41 909,582.87 639,302.05 2,520,796.17
		31,629,640.96

Note 35. Research and development expenses

Item Direct input costs Personnel and labor cost Depreciation and amortization Equipment commissioning fee and testing fee Entrusted external R&D expenses Total	Amount of current period 273,908.67 1,246,199.49 78,551.28 1,598,659.44	Amount of last period 387,158.22 1,076,479.23 71,553.18 796.70 194,774.76
		1,730,762.09

Note 36. Financial expenses

Item Interest expense Less: interest revenue Net income and loss from exchange Others Total	Amount of current period 6,475,446.39 835,240.91 -39,108.59 200,196.44 5,801,293.33	Amount of last period 2,316,078.80 585,908.38 -5,162.77 43,109.61
		1,768,117.26

Note 37. Other incomes

1. Details of other incomes

Item Government grants Total	Amount of current period 6,769,495.52 6,769,495.52	Amount of last period 5,949,486.80
		5,949,486.80

– II-360 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

2. Government grants recorded into other incomes

Item Financial subsidy for the development of SME in local characteristic industries in 2012 Subsidy for the construction of agricultural product standardization demonstration base Infrastructure support subsidies allocated by the government Subsidy for quality and safety demonstration area of export food and agricultural products in Hainan Province Supporting funds for infrastructure of Nonggu Science and Technology Park Project Special funds for the development of SME in the autonomous region in 2017 Star Award for Xiangliuxi Tropical Fruit Industry (Core) Demonstration Zone Special funds for energy-saving and circular economy Subsidies for purchasing agricultural machinery Grants for stable position Logistics support funds Special funds subsidy for foreign trade and economic development Special funds for foreign trade and economic development subsidies for logistics projects outside the region Famous Brand Quality Award of Beihai Municipal Bureau of Quality and Technical Supervision Subsidies for “Three Products and One Mark” certification project “Beautiful Beihai Rural Construction” Fund of Hepu Industry and Information Technology Committee Exhibition subsidy for product exhibition Return of individual income tax service changes Tax refund Tax preference for retired soldiers employment Total	Amount of current period 80,000.00 107,692.30 3,644,465.88 65,934.12 657,392.88 148,453.56 119,907.35 13,333.28 1,953.00 19,776.00 60,000.00 21,000.00 9,569.28 1,806,517.87 13,500.00 6,769,495.52	Amount of last period Assets related Revenues related 80,000.00 Assets related 215,384.62 Assets related 3,644,465.88 Assets related 65,934.12 Assets related 108,685.51 Assets related 148,453.56 Assets related 543,284.06 Assets related Assets related 1,953.00 Assets related 16,562.00 Revenues related Revenues related 7,136.00 Revenues related 110,000.00 Revenues related 50,000.00 Revenues related Revenues related 40,000.00 Revenues related 4,832.00 Revenues related 7,726.59 Revenues related 905,069.46 Pertinent to Assets/Income Revenues related 5,949,486.80

– II-361 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Note 38. Investment revenue

1. Details of investment revenue

Source of investment revenue Income from long-term equity investments under equity method Total	Amount of current period 530,093.22 530,093.22	Amount of last period -3,219,330.68
		-3,219,330.68

Note:

The long-term equity investment revenue accounted by the equity method is the profits or losses that the Company should enjoy from the investment in Tianjin Fangfu Tianye Investment Center (Limited Partnership) according to the share agreed in the partnership agreement.

Note 39. Credits impairment losses

Item Bad debt provision Total Note 40. Asset impairment losses Item Bad debt provision Written-down of inventories Total Note 41. Assets disposal income Item Revenue from disposal of biological assets Income from fixed assets disposal Incomes of disposal of intangible assets Total	Amount of current period -1,654,322.31 -1,654,322.31 Amount of current period -71,400.00 -71,400.00 Amount of current period -12,202.60 -12,202.60	Amount of last period
		Amount of last period -250,086.15
		-250,086.15
		Amount of last period -1,868,405.19 -332,511.42
		-2,200,916.61

– II-362 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Note 42. Non-operating income

	**Amount **	**of **	current	Amount of last
Item			period	period
Government grants not related to the daily
activities of the Company		810,000.00		225,000.00
Income from liquidated damages		12,669.88		25,885.42
Unpayable payment		104,360.38		100,000.00
Penalty income			900.00
Others		49,240.00		256.04
Total		976,270.26		352,041.46
1. **Amount included in non-recurring profits and losses of **		each period
	**Amount **	**of **	current	Amount of last
Item			period	period
Government grants not related to the daily
activities of the Company		810,000.00		225,000.00
Income from liquidated damages		12,669.88		25,885.42
Unpayable payment		104,360.38		100,000.00
Penalty income			900.00
Others		49,240.00		256.04
Total		976,270.26		352,041.46
2. **Government grants included in current **	profits and losses
	Amount of		Amount of	Pertinent to
Subsidy item	current period		last period	Assets/Income
Award for three-star rural tourist area			200,000.00	Revenues
				related
Training subsidy for agricultural			15,000.00	Revenues
technology promotion				related
Fund subsidy for drought relief	10,000.00		10,000.00	Revenues
				related
Tax incentive	200,000.00
Award for tourism industry	400,000.00
Award for AAA-level scenic spot	200,000.00
Total	810,000.00		225,000.00

– II-363 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Note 43. Non-operating expenses

Item Donation outlay Penalties and fines for delaying payment Scrap loss of current assets Scrap loss of non-current assets Others Total	Amount of current period 23,016.89 85,367.03 124,761.35 3,540.86 3,771.49 240,457.62	Amount of last period 100,000.00 670.52 450,363.42 18,681.00 29,189.57
		598,904.51

1. The amounts included in the non-recurring profits and losses of each period are listed as follows:

Item Donation outlay Penalties and fines for delaying payment Scrap loss of current assets Scrap loss of non-current assets Others Total	Amount of current period 23,016.89 85,367.03 124,761.35 3,540.86 13,771.49 240,457.62	Amount of last period 100,000.00 670.52 450,363.42 18,681.00 29,189.57
		598,904.51

Note44. Income tax expense

Item Current tax expenses Deferred tax expense Total	Amount of current period 1,760,369.36 -458,263.40 1,302,105.96	Amount of last period 3,084,603.10 243,336.54
		3,327,939.64

1. Reconciliation of income tax expenses to the accounting profit

	Amount of	Amount of
Item	current period	last period
Total profits	25,683,840.91	27,269,824.34
Income tax expense calculated at statutory/applicable tax rate	3,852,576.14	4,090,473.65
Effect of different tax rates applicable to subsidiaries	2,568,384.09	2,726,982.43
Effect of adjustment to income tax of prior periods		134,249.88
Effect of non-taxable income	-4,508,210.04	-4,779,167.37
Effect of non-deductible costs, expenses and losses	255,008.50	190,929.10
Effect of using deductible losses for which deferred tax
assets were previously not recognised	-1,000,161.69	-250,020.09
Effect of deductible temporary differences or deductible
losses unrecognized in the current period	134,508.96	1,214,492.04
Income tax expense	1,302,105.96	3,327,939.64

– II-364 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Note 45. Notes to items of cash flow statement

1. Cash received relating to other operating activities

Item Transaction payment Government grants Credit interest Other income Total 2. Cash paid relating to other operating activities Item Transaction payment Cash payment Reserve fund Total 3. Cash received relating to other financing activities Item Loan deposit Discount of accounts receivable Total 4. Cash paid relating to other financing activities Item Loan deposit Total	Amount of current period 2,693,013.02 4,047,564.25 835,240.91 61,909.88 7,637,728.06 Amount of current period 2,739,671.09 24,651,309.44 80,745.83 27,471,726.36 Amount of current period 5,575,555.58 13,490,626.82 19,066,182.40 Amount of current period 1,316,000.07 1,316,000.07	Amount of last period 777,523.81 1,361,256.59 585,908.38 26,641.46
		2,751,330.24
		Amount of last period 10,211,739.17 20,186,028.14 102,638.33
		30,500,405.64
		Amount of last period
		Amount of last period 5,000,000.00
		5,000,000.00

– II-365 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Note 46. Supplementary information to the cash flow statement

1. Supplementary information to the cash flow statement

	Amount of	Amount of last
Supplementary materials	current period	period
1. Cash flows converted from net profits for business operation
activities:
Net Profit	24,381,734.95	23,941,884.70
Plus: provision for credit impairment	1,654,322.31
Provision for impairment of assets	71,400.00	250,086.15
Depreciation of fixed assets, depletion of oil and gas assets, and
depreciation of productive biological assets	21,156,679.90	20,706,105.43
Amortization of intangible assets	1,831,935.78	1,840,225.16
Amortization of long-term deferred expenses	5,533,961.76	5,459,627.72
Losses on the disposal of fixed assets, intangible assets and other
long-term assets (gain is indicated by “-”)	12,202.60	2,200,916.61
Losses on retirement of fixed assets (gain is indicated by “-”)	3,540.86	18,681.00
Loss on changes in fair value (gain is indicated by “-”)
Financial expenses (gain is indicated by “-”)	7,195,450.43	3,216,078.80
Losses arising from investments (gain is indicated by “-”)	-530,093.22	3,219,330.68
Decrease in deferred tax assets (increase is indicated by “-”)	-343,995.25	129,068.39
Increase in deferred tax liabilities (decrease is indicated by “-”)	-114,268.15	114,268.15
Decrease in inventory (increase is indicated by “-”)	-1,516,301.93	4,278,777.47
Decrease in receivables from operating activities (increase is indicated
by “-”)	-6,690,028.48	4,710,678.16
Increase in payables from operating activities (decrease is indicated by
“-”)	13,363,370.38	-19,073,117.34
Others
Net cash flows from operating activities	66,009,911.94	51,012,611.08
2. Significant investing and financing activities that do not involve cash
receipts and payments:
Conversion of debt into capital
Convertible bonds due within one year
Fixed assets acquired under finance lease
3. Net changes in cash and cash equivalents:
Closing balance of cash	256,829,568.17	214,674,020.33
Less: opening balance of cash	214,674,020.33	211,052,482.61
Add: closing balance of cash equivalents
Less: opening balance of cash equivalent
Net increase in cash and cash equivalents	42,155,547.84	3,621,537.72

– II-366 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

2. Composition of cash and cash equivalent

	Amount of	Amount of last
Item	current period	period
I. Cash	256,829,568.17	214,674,020.33
Include: cash on hand	6,855.47	5,182.32
Bank deposit ready for payment at any time	256,736,477.57	214,658,850.80
Other monetary fund ready for payment at any time	86,235.13	9,987.21
II. Cash equivalents
Including: bond investments due in three months
III. Closing balance of cash and cash equivalents	256,829,568.17	214,674,020.33
Including: restricted cash and cash equivalents used by parent company
or subsidiaries	767,666.71	5,000,000.00

Note 47. Assets with restricted ownership or right of use

Item Other monetary funds Fixed assets Intangible assets Total	Closing book value Reasons for being restricted 767,666.71 Loan deposit 129,749,116.28 Mortgage loan 19,615,568.22 Mortgage loan 150,132,351.21

Note:

Please refer to Note VI “Note 16 Short-term loan” for details of mortgage loan.

– II-367 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Note 48. Government grants

			Amount included
			in the profits
			and losses of
Type	Amount	Listed Items	current period
Financial subsidy for the development of SME in	800,000.00	Deferred income	80,000.00
local characteristic industries in 2012
Subsidy for the construction of agricultural	700,000.00	Deferred income	107,692.30
product standardization demonstration base
Infrastructure support subsidies allocated by the	61,910,003.68	Deferred income	3,644,465.88
government
Subsidy for quality and safety demonstration area	500,000.00	Deferred income	65,934.12
of export food and agricultural products in
Hainan Province
Supporting funds for infrastructure of Nonggu	20,482,090.97	Deferred income	657,392.88
Science and Technology Park Project
Special funds for the development of SME in the	1,200,000.00	Deferred income	148,453.56
autonomous region in 2017
Star Award for Xiangliuxi Tropical Fruit Industry	4,797,362.00	Deferred income	119,907.35
(Core) Demonstration Zone
Subsidies for purchasing agricultural machinery	19,530.00	Deferred income	1,953.00
Tax refund related to assets	2,256,600.00	Deferred income	40,988.52
Special funds for energy-saving and circular	180,000.00	Deferred income	13,333.28
economy
Grants for stable position	19,776.00	Other incomes	19,776.00
Logistics support funds	60,000.00	Other incomes	60,000.00
Subsidies for “Three Products and One Mark”	21,000.00	Other incomes	21,000.00
certification project
Return of individual income tax service changes	9,569.28	Other incomes	9,569.28
Tax refund related to income	1,765,529.35	Other incomes	1,765,529.35
Tax preference for retired soldiers employment	13,500.00	Other incomes	13,500.00
Financial discount	720,000.00	Financial	720,000.00
		expenses
Fund subsidy for drought relief	10,000.00	Non-operating	10,000.00
		income
Tax incentive	200,000.00	Non-operating	200,000.00
		income
Award for tourism industry	400,000.00	Non-operating	400,000.00
		income
Award for AAA-level scenic spot	200,000.00	Non-operating	200,000.00
		income

– II-368 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

VII. Changes of the scope of consolidation

(I) Business combination involving entities not under common control

During the reporting period, there was no business combination involving entities not under common control.

(II) Business combination involving entities under common control

During the reporting period, there was no business combination under common control.

(III) Reverse acquisition

During the reporting period, there was no reverse acquisition.

(IV) Disposal of subsidiaries

During the reporting period, the Company did not dispose of its subsidiaries.

(V) Changes in the consolidation scope due to other reasons

During the reporting period, the Company did not change the scope of consolidation due to other reasons.

VIII. Equity in other Entities

(I) Equity in subsidiaries

	Main place of	Registered				Acquisition
Subsidiary	business	address	Business nature	Shareholding ratio (%)		method
				Directly	Indirectly
Hainan Dachuan Food Co., Ltd.	Ding’an,	Ding’an,	Processing and sales of	100.00		Business
	Hainan	Hainan	agricultural products			combination not
						under the same
						control
Guangxi Tianye Innovation	Nanning,	Nanning,	Agricultural planting and	100.00		Established
Agricultural Technology Co.,	Guangxi	Guangxi	sales, technology R&D			through
Ltd.			promotion and			investment
			achievement transfer
Hainan Tianye Drinks Food Sales	Ding’an,	Ding’an,	Sales of fruit food and	100.00		Established
Co. Ltd.	Hainan	Hainan	drink			through
						investment
Hubei Iceman Foods Co., Ltd.	Jingmen,	Jingmen,	Processing and sales of	100.00		Business
	Hubei	Hubei	agricultural products			combination not
						under the same
						control
Hubei Tianye Nonggu Biological	Jingmen,	Jingmen,	R&D, production and	100.00		Established
Technology Co., Ltd.	Hubei	Hubei	sales of agricultural			through
			products			investment

– II-369 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Main place of Registered Acquisition Subsidiary business address Business nature Shareholding ratio (%) method Directly Indirectly Hubei Tianye Innovation Nonggu Jingmen, Jingmen, Agricultural planting and 100.00 Established Fruit & Vegetable Co., Ltd. Hubei Hubei sales through investment

Subsidiary

• (II) Equity in associates

1. Significant associates

• (1) General information

						Accounting
	Main place of	Registered	Business			treatment for
Name of associates	business	address	nature	Shareholding ratio (%)		associates
				Directly	Indirectly
Tianjin Fangfu Tianye Investment	Tianjin	Tianjin	Investment in modern	99.00		Equity method
Center (Limited Partnership)			agriculture, food
			industry, commercial
			chain industry and
			mobile internet
			industry; investment
			consulting.

(2) Explanation that the shareholding ratio in the associated enterprise is different from the voting right ratio

Tianjin Fangfu Tianye Investment Center (Limited Partnership) has a total investment of RMB100 million. As a limited partner, the Company contributes RMB99 million with its own funds, accounting for 99.00% of the total investment of the partnership. As a general partner, Beijing Fangfu Capital Management Co., Ltd. contributes RMB1 million, accounting for 1.00% of the total investment of the partnership. According to the partnership agreement, Tianjin Fangfu Tianye Investment Center (Limited Partnership) has set up an Investment Decision-making Committee, which consists of five members, including four representatives appointed by the general partner and one member elected by the limited partner. Investment Decision-making Committee is responsible for the final decision-making of partnership investment, and the investment decision-making can only be implemented by unanimous approval of all members. The resolutions of the Investment Decision-making Committee shall be implemented by the general partner and shall be legally binding on the partnership enterprise. The voting system of the Investment Decision-making Committee is one vote for one person, and the Investment Decision-making Committee shall implement the related party avoidance voting system in the process of investment decision-making. Therefore, the voting ratio of the Company to Tianjin Fangfu Tianye Investment Center (Limited Partnership) is different from the shareholding ratio.

– II-370 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

2. Main financial information of important associates

Item Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Minority shareholders’ equity Shareholder’s equity attributable to the parent company Net asset share calculated in accordance with shareholding ratio Adjustment items — Goodwill — Unrealized profits in internal transaction — Others Book value of equity investment in associated enterprises Fair value of equity investment with public offer Operating income Net Profit Net profits under discontinued operation Other comprehensive income Total comprehensive income Dividends received from associated enterprises in the current period	December 31, 2019/2019 Tianjin Fangfu Tianye Investment Center (Limited Partnership) 1,297,450.37 16,872,000.00 18,169,450.37 18,169,450.37 17,987,755.87 -229,445.87 17,758,310.00 535,447.70 535,447.70	December 31, 2018/2018 Tianjin Fangfu Tianye Investment Center (Limited Partnership) 2,741,574.39 16,872,000.00 19,613,574.39 19,613,574.39 19,417,438.65 -493,221.87 18,924,216.78 -3,251,849.17 -3,128,000.00
		-6,379,849.17

Note:

According to the partnership agreement, the investment revenue of Tianjin Fangfu Tianye Investment Center (Limited Partnership) is distributed according to individual project, and the investment revenue of individual projects = the profit distribution part of the investee + the revenue realized by the investee, assets or shares through listing, resale, secondary acquisition, etc. — the investment cost of individual project; loss sharing: (1) If the amount of loss incurred due to normal investment matters is not greater than the actual contribution of the partner, the loss shall be borne according to the actual contribution ratio of the partner. (2) If the loss incurred due to normal investment matters is greater than the actual contribution of the partners, it shall be borne by the general partners, unless otherwise agreed by all partners. (3) All losses due to reasons other than normal investment matters shall be borne by the general partner, unless otherwise agreed by all partners.

– II-371 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

IX. Risk Disclosure Related to Financial Instruments

The Board of Directors of the Company is fully responsible for the determination of risk management objectives and policies, and bears the ultimate responsibility for them. The management manages and monitors these risks to ensure that the risks are controlled within a limited range. The Company’s main financial instruments include accounts receivable, accounts payable, loans, etc. Please refer to the relevant items in this note for details of various financial instruments. The risks related to these financial instruments and the risk management policies adopted by the Company to reduce these risks are as follows: The Company’s business activities will face various financial risks: credit risk, liquidity risk and market risk (mainly foreign exchange risk and interest rate risk). The Company’s overall risk management plan aims at the unpredictability of the financial market and strives to reduce the potential adverse impact on the Company’s financial performance.

The objective of risk management of the Company is to strike a proper balance between risks and benefits, reduce the negative impact of risks on the operating performance of the Company to the lowest level, and maximize the interests of shareholders and other equity investors. Based on this risk management objective, the basic strategy of the Company’s risk management is to identify and analyze various risks faced by the company, establish an appropriate risk tolerance bottom line, supervise various risks in a timely and reliable manner, and formulate risk management policies to reduce risks as much as possible without excessively affecting the competitiveness and resilience of the Company.

(I) Credit risk

The credit risk of the Company mainly comes from monetary funds, accounts receivable and other receivables. The management has formulated appropriate credit policies and continuously monitored the exposure of these credit risks.

The monetary funds held by the Company are mainly deposited in large commercial banks and other financial institutions, and the management thinks that these commercial banks have high reputation and asset status and low credit risk.

For accounts receivable and other receivables, the Company sets relevant policies to control credit risk exposure. The Company evaluates the customer’s credit qualification and sets the corresponding credit period based on the customer’s financial status, the possibility of obtaining guarantee from a third party, credit history and other factors such as the current market situation. The Company will regularly monitor customer credit records to ensure that the overall credit risk of the Company is within the controllable range.

As of December 31, 2019, the book balance and expected credit impairment losses of related assets are as follows:

Aging Accounts receivable Other receivables Total	Book balance 63,824,338.01 1,577,445.40 65,401,783.41	Impairment provision 4,709,952.99 355,035.24
		5,064,988.23

– II-372 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

(II) Liquidity risk

Liquidity risk refers to the risk that the Company cannot obtain sufficient funds in time to meet the needs of business development or pay due debts and other payment obligations.

In order to control this risk, the Company comprehensively uses various financing means such as bank loans and adopts a combination of long-term and short-term financing to optimize the financing structure and maintain the continuity and flexibility of financing. The Company has obtained bank credit lines from a number of banks to meet working capital requirements and capital expenditure.

As of December 31, 2019, the financial assets and financial liabilities of the Company are listed as follows with undiscounted contract cash flow by maturity date:

Item Monetary funds Accounts receivable Other receivables Subtotal Short-term loans Accounts payable Other payables Subtotal	Net book amount 256,829,568.17 59,114,385.02 1,222,410.16 317,166,363.35 114,084,728.03 34,109,853.27 4,160,084.72 152,354,666.02	Original book value 256,829,568.17 63,824,338.01 1,577,445.40 322,231,351.58 114,084,728.03 34,109,853.27 4,160,084.72 152,354,666.02	Closing <1 year 256,829,568.17 52,566,886.06 986,199.92 310,382,654.15 114,084,728.03 30,351,559.30 3,406,181.10 147,842,468.43	balance 1-2 years 7,277,231.45 50,033.60 7,327,265.05 1,961,599.60 189,060.98 2,150,660.58	2-3 years 3,181,123.50 274,000.00 3,455,123.50 650,382.39 165,275.40 815,657.79	>3 years 799,097.00 267,211.88 1,066,308.88 1,146,311.98 399,567.24
						1,545,879.22

As of December 31, 2018, the financial assets and financial liabilities of the Company are listed as follows with undiscounted contract cash flow by maturity date:

Item Monetary funds Accounts receivable Other receivables Subtotal Short-term loans Accounts payable Other payables Subtotal	Net book amount 219,674,020.33 42,295,833.29 10,166,089.03 272,135,942.65 101,000,000.00 15,537,891.19 2,930,036.25 119,467,927.44	Original book value 219,674,020.33 44,994,500.60 10,878,087.64 275,546,608.57 101,000,000.00 15,537,891.19 2,930,036.25 119,467,927.44	Opening <1 year 219,674,020.33 39,212,043.24 10,292,375.76 269,178,439.33 101,000,000.00 13,247,435.00 2,197,587.61 116,445,022.61	balance 1-2 years 4,983,360.36 306,500.00 5,289,860.36 1,023,836.71 302,349.40 1,326,186.11	2-3 years 799,097.00 14,380.69 813,477.69 552,693.07 272,856.61 825,549.68	>3 years 264,831.19 264,831.19 713,926.41 157,242.63
						871,169.04

(III) Market risk

Market risk refers to the risk that the fair value or future cash flow of financial instruments will fluctuate due to the change of market price, which mainly includes foreign exchange risk and interest rate risk.

– II-373 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

1. Foreign exchange risk

During the reporting period, the Company’s operations gradually faced foreign countries, and its export business was mainly settled in US dollars. The foreign currency assets and liabilities and future foreign currency transactions (the foreign currency assets and liabilities and foreign currency transactions are mainly denominated in US dollars) recognized by the Company have foreign exchange risks. The financial department of the Company is responsible for monitoring the scale of foreign currency transactions and foreign currency assets and liabilities of the Company to minimize the foreign exchange risks faced; therefore, the Company may sign forward foreign exchange contracts or currency swap contracts to avoid foreign exchange risks.

(1) The Company has not signed any forward foreign exchange contracts or currency swap contracts this year;

(2) As of December 31, 2019, the amount of foreign currency financial assets and foreign currency financial liabilities held by the Company converted into RMB is as follows:

Item Monetary funds Subtotal Contd.:	USD item 959.16 959.16	Closing EUR item	balance HKD item	Total 959.16
				959.16

Item Monetary funds Subtotal	Closing balance of last year USD item EUR item HKD item 235,460.02 235,460.02	Total 235,460.02
		235,460.02

2. Interest rate risk

The Company’s interest rate risk is mainly caused by the financial liabilities with floating interest rate of bank loans, which make the Company face cash flow interest rate risk, while the financial liabilities with fixed interest rate make the Company face fair value interest rate risk. The Company determines the relative proportion of fixed and floating interest rate contracts based on the prevailing market environment.

The financial department of the Company continuously monitors the interest rate level of the Company. Rising interest rate will increase the cost of newly added interest-bearing debt and the interest expense of the company’s unpaid interest-bearing debt with floating interest rate, and will have a significant adverse impact on the Company’s financial performance. The management will make timely adjustments according to the latest market conditions, which may be the arrangement of interest rate swap to reduce interest rate risk.

• (1) During the reporting period, the Company had no interest rate swap arrangement.

X. Financial Instruments Measured at Fair Value

• (I) Financial instruments measured at fair value

As of December 31, 2019, the Company had no financial instruments measured at fair value.

– II-374 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

(II) Fair value of financial assets and financial liabilities not measured at fair value

Financial assets and liabilities not measured at fair value mainly include monetary funds, notes receivable, receivables, short-term loans, payables, non-current liabilities due within one year and long-term loans.

The difference between book value and fair value of above financial assets and financial liabilities of the Company not measured at fair value is very small.

XI. Related Parties and Transactions

(I) Actual controller of the Company

			Shareholding	Voting right
Name of the company or		Organization code or	ratio to the	ratio to the
natural person	Related relationship	ID number	Company	Company
			(%)	(%)
Yao Jiuzhi	One of the actual	44522219710503****	17.7963	17.7963
	controllers
Yao Linhao	One of the actual	44522219670725****	2.3250	2.3250
	controllers
Menghai Zhicun Gaoyuan Tea	Company controlled	915328223096945813	2.5054	2.5054
Industry Co., Ltd.	by Yao Jiuzhuang
Yao Jiuzhuang	One of the actual	44522219680626****
	controllers

Notes:

1. The above shareholding ratio is the shareholding ratio as of December 31, 2019.

2. Yao Jiuzhi, Yao Linhao and Yao Jiuzhuang are the actual joint controllers of the Company. Yao Jiuzhi, Yao Linhao and Yao Jiuzhuang signed the Concerted Action Agreement on September 26, 2012, in which the three parties agreed to jointly exercise major decision-making power as concerted action party. If the three parties could not reach an agreement on the matters under consideration, Yao Jiuzhi’s opinion and voting intention shall prevail.

(II) See Note VII (I) “Interests in subsidiaries” for details of subsidiaries of the Company

(III) Information on the Company’s associated enterprises

See Note VIII (II) “Interests in associated enterprises” for details of important associated enterprises of the Company.

– II-375 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

(IV) Other related parties

Names of other related parties

Relationship between other related parties and the Company

Menghai Zhicun Gaoyuan Tea Industry Co., Ltd.

Company controlled by shareholders and actual controllers

Shan Dan

Directors, general managers and shareholders

Guangxi Tianye Science and Technology Seed Industry Co., Ltd.

Company controlled by shareholders and actual controllers

Guangxi Tianye Ecotourism Health Subsidiaries of companies controlled by shareholders and Park Management Co., Ltd. actual controllers

(V) Related parties’ transactions

1. For the subsidiaries under control relationship and included in the scope of consolidated financial statements, the transactions among them and their parent companies have been offset.

2. Related transactions by selling products and providing labors

Related parties Connected transaction contents Guangxi Tianye Science and Technology Seed Industry Co., Ltd. Drinks sales Total	Amount of current period (including tax)	Amount of last period (including tax) 3,071.00
		3,071.00

3. Related transactions on purchase of goods and labor service acceptance

Related parties Connected transaction contents Guangxi Tianye Ecotourism Health Park Management Co., Ltd. Training Services Total	Amount of current period (including tax)	Amount of last period (including tax) 21,685.00
		21,685.00

– II-376 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

4. Related guarantee

The Company as the warrantee

Start date of Expiring date of Guarantee performed Guarantor Amount guaranteed guarantee guarantee fully or not Yao Jiuzhi 75,000,000.00 December 19, 2018 December 19, 2021 No

Note:

In December 2018, Hainan Dachuan Food Co., Ltd., a subsidiary of the Company, signed a loan contract (HKNSS/H (Z) 2018 ZGDKZ (040)) of RMB75 million with Haikou Rural Commercial Bank Co., Ltd., and the guarantor was Tianye Innovation Corporation, Yao Yuzhi and Hubei Tianye Nonggu Biological Technology Co., Ltd. And it also signed three guarantee contracts (HKNSS/H (Z) 2018 GBZ No. 040-1, HKNSS/H (Z) 2018 GBZ No. 040-2, HKNSS/H (Z) 2018 GBZ No. 040-3), and the scope of guarantee includes principal, interest, compound interest, penalty interest, liquidated damages, compensation for damage and expenses for realizing creditor’s rights under the main contract.

5. Balance of related parties’ receivables and payables

(1) The Company’s receivables from related parties

Closing balance Closing balance of last year Bad-debt Bad-debt Name Related parties Book balance provision Book balance provision Accounts Guangxi Tianye Science 3,071.00 153.55 receivable and Technology Seed Industry Co., Ltd.

(2) The Company’s payables to related parties

Closing Closing balance of Name Related parties balance last year Other payables Guangxi Tianye Ecotourism Health Park 21,685.00 21,685.00 Management Co., Ltd.

XII. Share-based Payment

During the reporting period, no matters related to share-based payment occurred in the Company.

– II-377 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

XIII. Commitments and Contingencies

(I) Major commitments

1. The signed lease contracts being or to be performed and their financial impact

Since 2013, Guangxi Tianye Innovation Agricultural Technology Co., Ltd., a subsidiary of the Company, has successively signed land lease agreements with villagers in Guangliang Village, Pumiao Town, Yongning District, Nanning City. The details of the contracts are as follows:

		Contract or
		subcontract	Land area		Payment
Lessor	Land location	period	(mu)	Contract amount	method of rent
Villagers in	Guangliang Village,	10 years/	9,455.50	The rent is	4-year period
Guangliang	Pumiao Town,	13 years/		RMB520/mu/year	and 5-year
Village	Yongning District,	16 years/		and paid once every	period
	Nanning City	25 years/		four years, which is
		39 years		implemented
				according to the
				contract

Except for the above commitments, as of December 31, 2019, the Company had no other major commitments that should be disclosed but not disclosed.

2. Capital commitments

As of the balance sheet date, the capital expenditure commitments signed by the Company and not yet listed on the balance sheet:

Item Tianye Nonggu Science and Technology Park Project Supporting facilities of characteristic agricultural demonstration area Total	31 December 2019 39,861,536.00 9,821,680.85
	49,683,216.85

(II) Contingencies at the balance sheet date

The Company has no significant contingencies to be disclosed as of December 31, 2019.

XIV. Events after the Balance Sheet Date

(I) Important non-adjustment events

1. Impact assessment on novel coronavirus epidemic

Since the outbreak of the Novel Coronavirus Pneumonia (NCP) throughout the country in January 2020, the disease prevention and control work is still carried out nationwide continuously. The Company actively responds to and strictly implements the regulations and requirements of the Party and governments at all levels on the prevention and control of NCP. The Company estimated that the NCP and prevention and control measures would cause some temporary effects on the production and operation of Hubei Iceman Foods Co., Ltd., Hubei Tianye Nonggu Biological Technology Co., Ltd. and Hubei Tianye Innovation Nonggu Fruit & Vegetable Co., Ltd.

– II-378 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

(subsidiaries of the Company), and the degree of effect will depend on the progress of NCP prevention and control, duration and implementation of prevention and control policies from place to place. The Company will keep paying close attention to the NCP development, estimate and actively reduce its bad effects on the financial conditions, operating results and other aspects of the Company. As of the reporting date of this financial statement, the estimation was still in progress.

2. Important external investment

The third meeting of the fourth Board of Directors was held on April 13, 2020. The meeting deliberated and approved the proposal to establish a wholly-owned subsidiary. The name of the wholly-owned subsidiary is Panzhihua Tianye Innovation Agricultural Technology Co., Ltd., with a registered capital of RMB30 million. The wholly-owned subsidiary completed the industrial and commercial registration on April 15, 2020 and obtained the Business License of Enterprise Legal Person issued by Yanbian County Market Supervision Administration.

3. Disposal of equity

In May 2020, the Company proposed to transfer all the shares held in Tianjin Fangfu Tianye Investment Center (Limited Partnership) to an unrelated third party. As of the reporting date of this financial statement, relevant audit and evaluation work was in progress, and the equity transfer agreement has not yet been signed.

XV. Other Important Events

(I) Events not yet contributed by the associated enterprises

According to the partnership agreement of Tianjin Fangfu Tianye Investment Center (Limited Partnership), Tianjin Fangfu Tianye Investment Center (Limited Partnership) has a total investment of RMB100 million. As a limited partner, the Company contributes RMB99 million with its own funds, accounting for 99.00% of the total investment of the partnership. As a general partner, Beijing Fangfu Capital Management Co., Ltd. contributes RMB1 million, accounting for 1.00% of the total investment of the partnership.

At the end of 2016, the company actually contributed RMB50.7 million, accounting for 99.00% of the actual contribution, and Beijing Fangfu Capital Management Co., Ltd. actually contributed RMB512,100, accounting for 1.00% of the actual contribution. The partnership agreement did not stipulate the subscription period. According to the resolution of the first meeting of all partners of Tianjin Fangfu Tianye Investment Center (Limited Partnership) in 2017, it was agreed to refund the Company’s capital contribution of RMB12 million; according to the resolution of the first meeting of all partners of Tianjin Fangfu Tianye Investment Center (Limited Partnership) in 2018, it is agreed to refund the Company’s contribution of RMB14,377,600. According to the resolution of the first meeting of all partners of Tianjin Fangfu Tianye Investment Center (Limited Partnership) in 2019, it is agreed to refund the Company’s investment of RMB1,696,000. As of the reporting date of this financial statement, the Company has actually contributed RMB22,626,400, with RMB76,373,600 to be contributed.

(II) Suspension of construction in progress

According to the notice Plan of Conducting Special Clean and Rectification Action for “Greenhouse” Issue to Resolutely Curbing Farmland Non-agriculturalization (NNF [2018] No. 3) issued by the Ministry of Agriculture and Rural Affairs and the Ministry of Natural Resources, the supporting facilities in the characteristic agricultural demonstration zone built by Guangxi Tianye Innovation Agricultural Technology Co., Ltd., a subsidiary of the Company, have been suspended

– II-379 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

since March 2019, and as of the reporting date of this financial statement, the project was still in a state of suspension. The Company will take active measures to promote project construction in accordance with laws and regulations.

XVI. Notes to Main Items of the Parent Company’s Financial Statements

Note1. Accounts accounts receivables

1. Disclosure of accounts receivable by aging

Aging Closing balance Closing balance of last year <1 year 17,180,689.21 13,395,599.56 1-2 years 1,994,245.37 3,075,243.36 2-3 years 1,958,996.50 119,154.40 3-4 years 119,154.40 4-5 years >5 years Subtotal 21,253,085.48 16,589,997.32 Less: bad debt provision 1,698,702.05 1,009,803.14 Total 19,554,383.43 15,580,194.18 2. Disclosure of accounts receivable by bad-debt provision methods Category Closing balance Book balance Bad-debt provision Book value Amount Proportion Amount Proportion of provision (%) (%) Accounts receivable for which bad debts reserve is set aside individually Accounts receivable for which provision for bad debts is set aside in portfolios 21,253,085.48 100.00 1,698,702.05 7.99 19,554,383.43 Including: combination 1 21,172,124.66 99.62 1,698,702.05 8.02 19,473,422.61 Combination 2 80,960.82 0.38 80,960.82 Total 21,253,085.48 100.00 1,698,702.05 7.99 19,554,383.43	Closing balance of last year 13,395,599.56 3,075,243.36 119,154.40 16,589,997.32 1,009,803.14	Closing balance of last year 13,395,599.56 3,075,243.36 119,154.40 16,589,997.32 1,009,803.14
	15,580,194.18
		Book value 19,554,383.43 19,473,422.61 80,960.82
		19,554,383.43

– II-380 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Contd.:

Category Accounts receivable for which bad debts reserve is set aside individually Accounts receivable for which provision for bad debts is set aside in portfolios Including: combination 1 Combination 2 Total	Closing balance of last year Book balance Bad-debt provision Amount Proportion Amount Proportion of provision (%) (%) 16,589,997.32 100.00 1,009,803.14 6.09 16,525,047.28 99.61 1,009,803.14 6.11 64,950.04 0.39 16,589,997.32 100.00 1,009,803.14 6.09	Book value 15,580,194.18 15,515,244.14 64,950.04
		15,580,194.18

3. Accounts receivable for which provision for bad debts is set aside in portfolios

• (1) Combination 1

Aging <1 year 1-2 years 2-3 years 3-4 years 4-5 years >5 years Total Contd.:	Accounts receivable 17,159,429.53 1,934,544.23 1,958,996.50 119,154.40 21,172,124.66	Closing balance Bad-debt provision 857,971.48 193,454.42 587,698.95 59,577.20 1,698,702.05	Proportion of provision (%) 5.00 10.00 30.00 50.00
			8.02

Aging <1 year 1-2 years 2-3 years 3-4 years 4-5 years >5 years Total	Closing balance of last Accounts receivable Bad-debt provision 13,330,649.52 666,532.48 3,075,243.36 307,524.34 119,154.40 35,746.32 16,525,047.28 1,009,803.14	year Proportion of provision (%) 5.00 10.00 30.00
		6.11

– II-381 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

(2) Combination 2

Organization name Hubei Tianye Nonggu Biological Technology Co., Ltd. Guangxi Tianye Innovation Agricultural Technology Co., Ltd. Total	Accounts receivable 53,888.86 27,071.96 80,960.82	Closing balance Bad-debt provision	Proportion of provision Reason for withdrawal (%) No withdrawal without for the amount of rela parties within the sco consolidation No withdrawal without for the amount of rela parties within the sco consolidation

No withdrawal without risk for the amount of related parties within the scope of consolidation No withdrawal without risk for the amount of related parties within the scope of consolidation

Contd.:

Organization name Hubei Tianye Nonggu Biological Technology Co., Ltd. Guangxi Tianye Innovation Agricultural Technology Co., Ltd. Total	Closing balance of last Accounts receivable Bad-debt provision 44,374.16 20,575.88 64,950.04	year Proportion of provision Reason for withdrawal (%) No withdrawal without risk for the amount of related parties within the scope of consolidation No withdrawal without risk for the amount of related parties within the scope of consolidation

4. Provision, recovery or reversal and write-off of provision for bad-debt in current period

Category Accounts receivable for which bad debts reserve is set aside individually Accounts receivable for which provision for bad debts is set aside in portfolios Including: combination 1 Combination 2 Total	Opening balance 1,009,803.14 1,009,803.14 1,009,803.14	Provision 688,898.91 688,898.91 688,898.91	Changes in current period Recovery or reversal Write-off	Other changes	Closing balance 1,698,702.05 1,698,702.05
					1,698,702.05

– II-382 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

5. There is no write-off of accounts receivable in current period.

6. Top five accounts receivable based on debtors

Organization name Guangzhou Yuekai Trading Co., Ltd. Shandong Yipintang Industrial Co., Ltd. Hangzhou Haiguo Trading Co., Ltd. Kunming Yiyun Economy & Trade Co., Ltd. Suzhou Weize Foods Co., Ltd. Total	Closing balance Relationship with the Company 7,245,240.00 Non-affiliated party 2,980,078.00 Non-affiliated party 1,288,514.40 Non-affiliated party 1,056,384.00 Non-affiliated party 1,038,087.40 Non-affiliated party 13,608,303.80	Proportion in closing balance of accounts receivable (%) 34.09 14.02 6.06 4.97 4.88 64.02	Provision for bad-debt 362,262.00 149,003.90 122,478.72 52,819.20 51,904.37
			738,468.19

Note 2. Other receivables

Item Interests receivable Dividends receivable Other receivables Total 1. Disclosure of other receivables by aging Aging <1 year 1-2 years 2-3 years 3-4 years 4-5 years >5 years Subtotal Less: bad debt provision Total	Closing balance 281,125,796.22 281,125,796.22 Closing balance 18,258,895.44 50,009,022.60 212,934,669.98 281,202,588.02 76,791.80 281,125,796.22	Closing balance of last year 283,921,064.71
		283,921,064.71
		Closing balance of last year 50,282,320.77 233,643,769.98
		283,926,090.75
		5,026.04
		283,921,064.71

– II-383 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

2. Disclosure of other receivables by bad-debt provision methods

Category Other accounts receivable for expected credit losses by single provision Other accounts receivable for expected credit losses by combination Including: combination 1 Combination 2 Combination 3 Total	Book balance Amount Proportion (%) 281,202,588.02 100.00 280,434,669.98 99.73 767,918.04 0.27 281,202,588.02 100.00	Closing balance Bad-debt provision Amount proportion of provision (%) 76,791.80 0.03 76,791.80 10.00 76,791.80 0.03	Book value 281,125,796.22 280,434,669.98 691,126.24
			281,125,796.22

Contd.:

Category Other accounts receivable for expected credit losses by single provision Other accounts receivable for expected credit losses by combination Including: combination 1 Combination 2 Combination 3 Total	Closing balance of last year Book balance Bad-debt provision Amount Proportion Amount proportion of provision (%) (%) 283,926,090.75 100.00 5,026.04 283,834,669.98 99.95 91,420.77 0.05 5,026.04 5.50 283,926,090.75 100.00 5,026.04	Book value 283,921,064.71 283,834,669.98 86,394.73
		283,921,064.71

3. Other accounts receivable for expected credit losses by combination

• (1) Combination 3

Item Margin, deposit, advance payment and temporary payment, etc. Total	Other receivables 767,918.04 767,918.04	Closing balance Bad-debt provision 76,791.80 76,791.80	proportion of provision (%) 10.00
			10.00

– II-384 –

APPENDIX II

FINANCIAL INFORMATION OF THE TARGET COMPANY

Contd.:

Closing balance of last year Other Bad-debt proportion of Aging receivables provision provision (%) <1 year 82,320.77 4,116.04 5.00 1-2 years 9,100.00 910.00 10.00 2-3 years Total 91,420.77 5,026.04 5.50 (2) Combination 2 Closing balance Other Bad-debt Proportion of Organization name receivables provision provision Reason for withdrawal (%) Hubei Tianye Nonggu Biological 245,620,000.00 No withdrawal without risk Technology Co., Ltd. for the amount of related parties within the scope of consolidation Hubei Iceman Foods Co., Ltd. 31,525,698.44 No withdrawal without risk for the amount of related parties within the scope of consolidation Guangxi Tianye Innovation 3,288,971.54 No withdrawal without risk Agricultural Technology Co., for the amount of related Ltd. parties within the scope of consolidation Total 280,434,669.98

– II-385 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Contd.:

Organization name Hubei Tianye Nonggu Biological Technology Co., Ltd. Hubei Iceman Foods Co., Ltd. Guangxi Tianye Innovation Agricultural Technology Co., Ltd. Hubei Tianye Innovation Nonggu Fruit & Vegetable Co., Ltd. Total	Other receivables 248,120,000.00 32,225,698.44 3,288,971.54 200,000.00 283,834,669.98	Closing balance of last year Bad-debt provision Proportion of provision Reason for withdrawal (%) No withdrawal without risk for the amount of related parties within the scope of consolidation No withdrawal without risk for the amount of related parties within the scope of consolidation No withdrawal without risk for the amount of related parties within the scope of consolidation No withdrawal without risk for the amount of related parties within the scope of consolidation

4. Provision, recovery or reversal and write-off of provision for bad-debt in current period

	Phase I	Phase II	Phase III
		Anticipated
		credit loss in the	Anticipated
		entire duration	credit loss in the
	Expected credit	(not incurred	entire duration
	loss in the next	credit	(incurred credit
Bad-debt provision	12 months	impairment)	impairment)	Total
Opening balance	5,026.04			5,026.04
Opening balance in current period
— Converted to the second stage
— Transferred into phase III
— Transferred back to phase II
— Reversed to the first stage
Provision of current period	71,765.76			71,765.76
Reversal of the current period
Write-off of the current period
Verification of the current period
Other changes
Closing balance	76,791.80			76,791.80

– II-386 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

5. There is no write-off of other receivables in current period.

6. Other receivables classified by nature of payment

Nature of payment Transaction payment Reserve fund Withholding social security, etc Margin Others Total	Closing balance 280,434,669.98 27,166.53 57,517.22 102,159.46 581,074.83 281,202,588.02	Closing balance of last year 283,876,214.89 18,578.60 28,399.26 1,158.00 1,740.00
		283,926,090.75

7. Top five other accounts receivable based on debtors

Organization name Nature of payment Hubei Tianye Nonggu Biological Technology Co., Ltd. Transaction payment Hubei Iceman Foods Co., Ltd. Transaction payment Guangxi Tianye Innovation Agricultural Technology Co., Ltd. Transaction payment Hepu Yulong Pipeline Gas Co., Ltd. Others Guangzhou Maohuang Trading Co., Ltd. Margin Total Note3. Long-term equity investment Item Book balance Investment in subsidiaries 113,737,642.83 Investment in associated enterprises 17,758,310.00 Total 131,495,952.83	Closing balance 245,620,000.00 31,525,698.44 3,288,971.54 353,948.79 51,000.00 280,839,618.77 Closing balance Impairment provision 10,597,437.42 10,597,437.42	Relationship with the Company Related parties Related parties Related parties Non-affiliated party Non-affiliated party Book value 103,140,205.41 17,758,310.00 120,898,515.41	Aging Proportion in closing balance of other receivables Bad-debt provision Closing balance (%) <3 years 87.35 <3 years 11.21 2-3 years 1.17 <1 year 0.13 17,697.44 <1 year 0.02 2,550.00 99.88 20,247.44 Opening balance Book balance Impairment provision Book value 113,737,642.83 10,230,275.57 103,507,367.26 18,924,216.78 18,924,216.78 132,661,859.61 10,230,275.57 122,431,584.04	Bad-debt provision Closing balance 17,697.44 2,550.00
				20,247.44
				122,431,584.04

– II-387 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

1. Investment in subsidiaries

Investee Hainan Dachuan Food Co., Ltd. Guangxi Tianye Innovation Agricultural Technology Co., Ltd. Hainan Tianye Drinks Food Sales Co. Ltd. Hubei Iceman Foods Co., Ltd. Hubei Tianye Nonggu Biological Technology Co., Ltd. Hubei Tianye Innovation Nonggu Fruit & Vegetable Co., Ltd. Total	Initial investment cost 33,737,641.83 30,000,000.00 5,000,000.00 15,000,001.00 25,000,000.00 5,000,000.00 113,737,642.83	Opening balance 33,737,641.83 30,000,000.00 5,000,000.00 15,000,001.00 25,000,000.00 5,000,000.00 113,737,642.83	Increase of current period	Decrease of current period	Closing balance 33,737,641.83 30,000,000.00 5,000,000.00 15,000,001.00 25,000,000.00 5,000,000.00 113,737,642.83	Depreciation reserves in current period 367,161.85 367,161.85	Closing balance of provision for impairment 2,800,051.82 7,797,385.60
							10,597,437.42

2. Investment in associates

Investee Tianjin Fangfu Tianye Investment Center (Limited Partnership) Total	Opening balance Increase and decrease of current period Additional investment Negative investment Profits and losses on investments recognized by equity method Adjustment of other comprehensive incomes 18,924,216.78 1,696,000.00 530,093.22 18,924,216.78 1,696,000.00 530,093.22

Contd.:

Investee Increase and decrease of current period Other equity changes Distribution of cash dividends or profits Provision for impairment Others Tianjin Fangfu Tianye Investment Center (Limited Partnership) Total	Closing balance Closing balance of provision for impairment 17,758,310.00 17,758,310.00

Note: See “Note 7 Long-term equity investment” in “VI. Main Notes to Consolidated Financial Statements” in this note for details.

– II-388 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Note 4. Operating incomes and operating costs

1. Operating income, operating costs

Item Principal operating activities Others Total	Amount of current period Revenue Cost 101,892,706.74 75,655,499.45 101,892,706.74 75,655,499.45	Amount of last period Revenue Cost 89,610,086.49 62,672,313.57 89,610,086.49 62,672,313.57	Amount of last period Revenue Cost 89,610,086.49 62,672,313.57 89,610,086.49 62,672,313.57
			62,672,313.57

2. Principal operating activities (by products)

Item Raw fruit juice Quick-frozen fruit and vegetable Others Total	Amount of current period Revenue Cost 42,804,313.90 29,785,107.61 48,947,212.11 38,447,282.84 10,141,180.73 7,423,109.00 101,892,706.74 75,655,499.45	Amount of last period Revenue Cost 36,928,289.00 24,969,213.04 49,824,181.35 34,955,023.74 2,857,616.14 2,748,076.79 89,610,086.49 62,672,313.57	Amount of last period Revenue Cost 36,928,289.00 24,969,213.04 49,824,181.35 34,955,023.74 2,857,616.14 2,748,076.79 89,610,086.49 62,672,313.57
			62,672,313.57

3. Operating income of the top five customers of the Company

Customer Fresh Fruit Juice (Note) Shanghai Zhaoyi Trading Co., Ltd. Guangzhou Yuekai Trading Co., Ltd. Suzhou Weize Foods Co., Ltd. Shandong Yipintang Industrial Co., Ltd. Total	Amount of current period 16,867,128.79 9,972,382.21 9,474,165.16 7,248,354.41 5,799,933.66 49,361,964.23	Proportion in the Company’s total operating income (%) 16.55 9.79 9.30 7.11 5.69
		48.44

– II-389 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Contd.

Customer Fresh Fruit Juice (Note) Gerui Juice Industry (Tianjin) Co., Ltd. Hainan Dachuan Food Co., Ltd. Shanghai Zhaoyi Trading Co., Ltd. Shanghai Yuguo Food Sales Co., Ltd. Total	Amount of last period 19,885,587.02 9,132,362.12 8,010,340.79 5,097,433.66 4,641,394.21 46,767,117.80	Proportion in the Company’s total operating income (%) 22.19 10.19 8.94 5.69 5.18
		52.19

Note:

Fresh Fruit Juice customers implemented centralized procurement, and the above sales amount includes related parties included in their centralized procurement.

Note 5. Investment revenue

1. Details of investment revenue

Source of investment revenue Long-term equity investment income measured by equity method Total XVII. Supplementary information (I) Detailed statement of non-recurring profits and losses Item Profits and loss on disposal of non-current assets, including the write-off part of the provision for impairment of assets Tax returns, reductions, and exemptions with unauthorized approval or without official approval documents with occurrence Government grant included in the current profits and losses (except for the government grant which are closely related to the business of the company and are in accordance with the national unified standard quota) Fund possession cost charged from non-financial enterprises including in current profits and losses The investment cost for acquiring subsidiaries, associated enterprises and cooperative enterprises is less than the income generated by the fair value of the identifiable net assets of the merged unit when acquiring investment	Amount of current period 530,093.22 530,093.22 Amount of current period -15,743.46 8,299,495.52	Amount of last period -3,219,330.68
		-3,219,330.68
		Amount of last period -2,219,597.61 7,074,486.80

– II-390 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Item Exchange losses of non-monetary assets Profits and losses of assets invested or managed by entrustment Assets for impairment withdrawn due to force majeure such as natural disasters Profits and losses on debt restructuring Corporate restructuring costs, such as fees on staffing and integration Profits and losses exceeding the fair value part due to an unfair transaction price during the transaction Net profits and losses of the subsidiaries in the current period from the beginning of period to the date of merger due to the merger of enterprises under the common control Profit and loss caused by contingencies that are irrelevant to Company’s normal businesses Profits and losses from variation of fair value by holding transactional financial assets, transactional financial liability and investment incomes from handling transactional financial assets, transactional financial liability and salable financial assets, in addition to the valid arbitrage hedging business related to normal corporate business Reversing assets impairment of receivables for independent impairment test Losses and profits obtained from foreign entrusted loans Profit and loss from fair value variation of investment real estate by adopting fair value mode for follow-up calculation Influence on the current profit and loss by one-time adjustment as per laws and regulations on taxes and accounting Trustee fee income from entrusted operation Non-operating income and expenses in addition to the above-mentioned items Other profit and loss items that conform to the definition of non-recurring profit and loss. Subtotal Less: income tax affected amount Minority equity affected amount (after tax) Total	Amount of current period -70,646.50 8,213,105.56 436,397.32 7,776,708.24	Amount of last period -453,182.05 4,401,707.14 -81,030.75
		4,482,737.89

– II-391 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

(II) Rate of return on common stockholders’ equity and earnings per share

Profits during reporting period		2019
	Weighted-average
	Income rate of	**Earnings per share **		(EPS)
	net assets	Basic EPS	Diluted EPS
	(%)
Net profits attributable to common
corporate shareholders	3.32	0.1016		0.1016
Net profits attributable to common
corporate shareholders after the
deduction of the non-recurring profit and
loss	2.26	0.0692		0.0692
Contd.:
Profits during reporting period		2018
	Weighted-average
	Income rate of	**Earnings per share **		(EPS)
	net assets	Basic EPS	Diluted EPS
	(%)
Net profits attributable to common
corporate shareholders	3.34	0.0998		0.0998
Net profits attributable to common
corporate shareholders after the
deduction of the non-recurring profit and
loss	2.72	0.0811		0.0811
Tianye Innovation Corporation	Head of Accounting Department:
(Official Stamp)
Legal representative:	Chief Accountant:

June 5, 2020

– II-392 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

SECTION I. FINANCIAL ACCOUNTING REPORT

I. Auditor’s Report

Audited

No

II. Financial Statements

(I) Consolidated Balance Sheet

Unit: Yuan

Item Note Current assets: Monetary funds VI. Note 1 Provision of settlement fund Lending founds Trading financial assets Derivative financial assets Notes receivable Accounts receivable VI. Note 2 Accounts receivable financing Prepayments VI. Note 3 Premiums receivable Reinsurance accounts receivable Accounts receivable reinsurance reserve Other receivables VI. Note 4 Include: interest receivable Dividends receivable Purchase of resold financial assets Inventories VI. Note 5 Contract assets Held-for-sale assets Non-current assets maturing within one year Other current assets VI. Note 6 Total current assets	June 30, 2020 218,203,639.87 — — — — — 41,681,193.73 — 20,997,324.23 — — — 9,400,120.15 — — — 83,424,970.40 — — — 9,480,560.91 383,187,809.29	December 31, 2019 257,597,234.88 — — — — — 59,114,385.02 — 2,134,373.39 — — — 1,222,410.16 — — — 50,593,198.72 — — — 10,836,905.92
		381,498,508.09

– II-393 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Item Note Non-current assets: Loans and advances Equity investment Other equity investments Long-term receivables Long-term equity investment VI. Note 7 Other equity instrument investments Other non-current financial assets Investment properties Fixed assets VI. Note 8 Construction in progress VI. Note 9 Productive biological assets VI. Note 10 Oil & gas assets Right of use assets Intangible assets VI. Note 11 Development expenses Goodwill VI. Note 12 Long-term prepaid expenses VI. Note 13 Deferred tax assets VI. Note 14 Other non-current assets VI. Note 15 Total non-current assets Total assets Current liabilities: Short-term loans VI. Note 16 Borrowings from central bank Borrowing funds Trading financial liabilities Derivative financial liabilities Notes payable Accounts payable VI. Note 17 Advances received Contract liabilities VI. Note 18 Financial assets sold under repurchase agreement Absorbed deposit and inter-bank deposit Receivings from vicariously traded securities	June 30, 2020 — — — — 17,758,310.00 — — — 312,082,377.82 123,252,542.05 33,099,605.68 — — 84,640,459.51 — 14,857,682.84 5,297,671.48 1,719,020.56 22,656,355.91 615,364,025.85 998,551,835.14 110,000,000.00 — — — — — 41,861,833.71 — 4,567,026.11 — — —	December 31, 2019 — — — — 17,758,310.00 — — — 320,015,617.97 129,213,004.74 33,572,076.42 — — 85,556,427.37 — 14,857,682.84 8,008,571.90 1,816,166.31 10,499,412.40
		621,297,269.95
		1,002,795,778.04
		114,084,728.03 — — — — — 34,109,853.27 — 2,692,363.10 — — —

– II-394 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Item Note Receivings from vicariously sold securities Remuneration payable to employees VI. Note 19 Taxes payable VI. Note 20 Other payables VI. Note 21 Include: interest payable Dividends payable Fees and commissions payable Reinsurance accounts payable Holding-for-sale liabilities Non-current liabilities maturing within one year VI. Note 22 Other current liabilities Total current liabilities Non-current liabilities: Reserves for insurance contract Long-term loans Bonds payable Include: preferred stocks Perpetual bonds Lease Liability Long-term accounts payable Long-term employee compensation Estimated liabilities Deferred income VI. Note 23 Deferred income tax liabilities Other non-current liabilities Total non-current liabilities Total liabilities Owners’ equity (or shareholders’ equity) Share Capital VI. Note 24 Other equity instruments Include: preferred stocks Perpetual bonds Capital reserves VI. Note 25 Less: Treasury shares Other comprehensive income Special reserve	June 30, 2020 — 1,898,221.16 790,953.50 1,734,492.84 — — — — — 20,553,741.94 — 181,406,269.26 — — — — — — 373,364.46 — — 61,799,693.27 — — 62,173,057.73 243,579,326.99 240,000,000.00 — — — 246,300,093.95 — -2,632,212.00 —	December 31, 2019 — 3,717,302.13 3,081,368.31 4,160,084.72 — — — — — 31,657,741.94 —
		193,503,441.50
		— — — — — — 381,371.52 — — 61,326,677.13 — — 61,708,048.65 255,211,490.15 240,000,000.00 — — — 246,300,093.95 — -2,632,212.00 —

– II-395 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Item Note June 30, 2020 Surplus reserve VI. Note 26 11,367,901.03 General risk reserves — Undistributed profits VI. Note 27 259,936,725.17 Total owners’ equity attributable to parent company 754,972,508.15 Minority shareholders’ equity — Total owners’ equities 754,972,508.15 Total liabilities and owners’ equity 998,551,835.14 Legal representative: Yao Jiuzhi Principal in charge of accounting: Rao Guizhong Principal of accounting body: Rao Guizhong	December 31, 2019 11,367,901.03 — 252,548,504.91 747,584,287.89 —
	747,584,287.89
	1,002,795,778.04

– II-396 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

(II) Balance Sheet of the Parent Company

Item Note Current assets: Monetary funds Trading financial assets Derivative financial assets Notes receivable Accounts receivable XVI. Note 1 Accounts receivable financing Prepayments Other receivables Include: interest receivable Dividends receivable Purchase of resold financial assets Inventories XVI. Note 2 Contract assets Held-for-sale assets Non-current assets maturing within one year Other current assets Total current assets Non-current assets: Equity investment Other equity investments Long-term receivables Long-term equity investment XVI. Note 3 Other equity instrument investments Other non-current financial assets Investment properties Fixed assets Construction in progress Productive biological assets Oil & gas assets Right of use assets Intangible assets	June 30, 2020 78,444,519.93 — — — 16,213,748.38 — 1,243,077.47 319,076,740.10 — — — 40,749,746.09 — — — — 455,727,831.97 — — — 150,898,515.41 — — — 69,712,223.92 — — — — 10,489,637.45	Unit: Yuan December 31, 2019 157,356,660.93 — — — 19,554,383.43 — 479,778.29 281,125,796.22 — — — 27,684,371.46 — — — 569,236.98
		486,770,227.31
		— — — 120,898,515.41 — — — 71,878,916.88 — — — — 10,634,655.83

– II-397 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Item Note Development expenses Goodwill Long-term prepaid expenses Deferred tax assets Other non-current assets Total non-current assets Total assets Current liabilities: Short-term loans Trading financial liabilities Derivative financial liabilities Notes payable Accounts payable Advances received Contract liabilities Financial assets sold under repurchase agreement Remuneration payable to employees Taxes payable Other payables Include: interest payable Dividends payable Holding-for-sale liabilities Non-current liabilities maturing within one year Other current liabilities Total current liabilities Non-current liabilities: Long-term loans Bonds payable Include: preferred stocks Perpetual bonds Lease Liability Long-term accounts payable Long-term employee compensation Estimated liabilities	June 30, 2020 — — 569,902.40 861,955.67 98,340.40 232,630,575.25 688,358,407.22 25,000,000.00 — — — 30,558,951.02 — 3,570,709.45 — 565,499.62 274,247.07 41,182,903.06 — — — — — 101,152,310.22 — — — — — — — —	December 31, 2019 — — 532,852.38 864,440.34 514,901.90
		205,324,282.74
		692,094,510.05
		36,000,000.00 — — — 23,285,090.91 — 1,817,182.84 — 1,597,823.84 285,358.39 49,641,807.33 — — — — —
		112,627,263.31
		— — — — — — — —

– II-398 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Item Note June 30, 2020 Deferred income 996,494.97 Deferred income tax liabilities — Other non-current liabilities — Total non-current liabilities 996,494.97 Total liabilities 102,148,805.19 Owners’ equity (or shareholders’ equity) Share Capital 240,000,000.00 Other equity instruments — Include: preferred stocks — Perpetual bonds — Capital reserves 244,109,726.71 Less: Treasury shares — Other comprehensive income -2,632,212.00 Special reserve — Surplus reserve 11,367,901.03 General risk reserves — Undistributed profits 93,364,186.29 Total owners’ equities 586,209,602.03 Total liabilities and owners’ equity 688,358,407.22 Legal representative: Yao Jiuzhi Principal in charge of accounting: Rao Guizhong Principal of accounting body: Rao Guizhong	December 31, 2019 1,110,721.75 — —
	1,110,721.75
	113,737,985.06
	240,000,000.00 — — — 244,109,726.71 — -2,632,212.00 — 11,367,901.03 — 85,511,109.25
	578,356,524.99
	692,094,510.05

– II-399 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

(III) Consolidated Profit Statement

Unit: Yuan

		January-June	January-June
Item	Note	2020	2019
I. Total operating income	VI. Note 28	106,668,616.97	138,087,856.90
Including: operating income	VI. Note 28	106,668,616.97	138,087,856.90
CREDIT INTEREST		—	—
Earned premium		—	—
Fee and commission revenue		—	—
II. Total operating cost		94,338,425.06	121,884,045.58
Including: operating cost	VI. Note 28	76,367,666.63	94,583,376.36
Interest expense		—	—
Fee and commission expenses		—	—
Surrender value		—	—
Net payments for compensation		—	—
Net amount of allotment of provisions for insurance
liabilities		—	—
Bond insurance expenses		—	—
Amortized reinsurance expenditures		—	—
Taxes and surcharges	VI. Note 29	402,664.21	2,275,970.03
Operating expenses	VI. Note 30	2,553,288.98	5,562,673.32
Administration expenses	VI. Note 31	11,712,883.95	15,041,709.62
R&D expenditures	VI. Note 32	721,494.30	682,080.80
Financial expenses	VI. Note 33	2,580,426.99	3,738,235.45
Include: interest expenses		3,293,273.44	4,557,461.18
CREDIT INTEREST		378,487.31	379,402.56
Plus: other profits	VI. Note 25	5,557,877.90	5,689,235.57
Investment income (loss is indicated by “-”)		—	—
Including: Income from investment in associated
enterprises and joint ventures		—	—
Revenue recognized from termination of recognition of
financial assets measured at amortized cost (loss is
indicated by “-”)		—	—
Exchange earnings (loss is indicated by “-”)		—	—
Net exposure hedging income (loss is indicated by “-”)		—	—

– II-400 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

		January-June	January-June
Item	Note	2020	2019
Income from changes in fair value (loss is indicated by
“-”)		—	—
Credit impairment loss (loss is indicated by “-”)	VI. Note 34	191,526.56	-927,269.86
Impairment losses on assets (loss is indicated by “-”)		—	—
Income from asset disposal (loss is indicated by “-”)	VI. Note 36	-9,860,441.54	—
III. Operating profits (loss is indicated by “-”)		8,219,154.83	20,965,777.03
Add: Non-operating income	VI. Note 37	111,278.15	4,775.01
Less: non-operating expenses	VI. Note 38	469,799.68	113,258.10
IV. Total profits (total loss is indicated by “-”)		7,860,633.30	20,857,293.94
Less: Income tax expenses	VI. Note 39	472,413.04	232,185.69
V. Net profits (net loss is indicated by “-”)		7,388,220.26	20,625,108.25
Including: net profit obtained by the acquiree prior to
combination		—
(I) Classified by operation continuity:		—	—
1. Net profit of continued operations (net loss is indicated
by “-”)		7,388,220.26	20,625,108.25
2. Net profit of discontinued operations (net loss is
indicated by “-”)		—	—
(II) Classified by ownership:		—	—
1. Minority shareholders’ profit and loss		—	—
2. Net profit attributable to the owner of the parent
company		7,388,220.66	20,625,108.25
VI. Net amount of other comprehensive income after
tax
(I) Net amount of other comprehensive income after tax
attributable to the owners of parent company		—	—
1. Other comprehensive income not allowed to be
re-classified into profit and loss		—	—
(1) Changes caused by re-measurement and re-definition
of benefit plan		—	—
(2) Other comprehensive income that cannot be converted
into profits and losses under the equity method		—	—
(3) Changes in the fair value of other equity instrument
investments		—	—
(4) Fair value changes of enterprise own credit risk		—	—
(5) Others		—	—

– II-401 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

		January-June	January-June
Item	Note	2020	2019
2. Other comprehensive income to be re-classified into
profit and loss		—	—
(1) Other comprehensive income that can be converted
into profits and losses under the equity method		—	—
(2) Changes in the fair value of other debt investments		—	—
(3) The amount of financial assets reclassified into other
comprehensive income		—	—
(4) Provision for credit impairment of other debt
investments		—	—
(5) Cash flow hedging reserve		—	—
(6) Balance arising from the translation of foreign
currency financial statements		—	—
(7) Others		—	—
(II) Net amount of other comprehensive income after tax
attributable to minority shareholders		—	—
VII. Total comprehensive income		7,388,220.66	20,625,108.25
(I) Total comprehensive income attributable to owners of
parent company		7,388,220.66	20,625,108.25
(II) Total comprehensive income attributable to minority
shareholders		—	—
VIII. Earnings per share (EPS):
(I) Basic EPS (RMB/share)		0.03	0.09
(II) Diluted EPS (RMB/share)		0.03	0.09
Legal representative:	Yao Jiuzhi
Principal in charge of accounting:	Rao Guizhong
Principal of accounting body:	Rao Guizhong

– II-402 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

(IV) Income Statement of the Parent Company

Unit: Yuan

		January-June	January-June
Item	Note	2020	2019
I. Operating revenue	XVI. Note 4	45,404,171.97	46,668,643.03
Less: operating cost	XVI. Note 4	33,083,474.12	32,629,334.32
Taxes and surcharges		227,442.92	803,604.18
Operating expenses		224,717.29	3,670,939.80
Administration expenses		2,970,911.42	3,608,567.84
R&D expenditures		721,494.30	682,080.80
Financial expenses		214,653.22	178,486.42
Include: interest expenses		878,140.00	878,550.40
CREDIT INTEREST		224,345.05	257,857.56
Plus: other profits		147,150.41	374,226.78
Investment income (loss is indicated by “-”)		—	—
Including: Income from investment in associated
enterprises and joint ventures		—	—
Revenue recognized from termination of recognition of
financial assets measured at amortized cost (loss is
indicated by “-”)		—	—
Exchange earnings (loss is indicated by “-”)		—	—
Net exposure hedging income (loss is indicated by “-”)		—	—
Income from changes in fair value (loss is indicated by
“-”)		—	—
Credit impairment loss (loss is indicated by “-”)		122,337.75	-522,469.91
Impairment losses on assets (loss is indicated by “-”)		—	—
Income from asset disposal (loss is indicated by “-”)		—	—
II. Operating profits (loss is indicated by “-”)		8,230,966.86	4,947,386.54
Add: Non-operating income		77,381.11	—
Less: non-operating expenses		77,518.97	391.07
III. Total profit (total loss is indicated by “-”)		8,230,829.00	4,946,995.47
Less: Income tax expenses		377,751.96	228,050.41
IV. Net profits (net loss is indicated by “-”)		7,853,077.04	4,718,945.06
(I) Net profit from continuous operation (net loss is
indicated by “-”)		7,853,077.04	4,718,945.06

– II-403 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

		January-June	January-June
Item	Note	2020	2019
(II) Net profit from discontinuing operation (net loss is
indicated by “-”)		—	—
V. After-tax net amount of other comprehensive income		—	—
(I) Other comprehensive income not allowed to be
re-classified into profit and loss		—	—
1. Re-measurement of changes in defined benefit plan		—	—
2. Other comprehensive income that cannot be converted
into profits and losses under the equity law		—	—
3. Fair value changes of other equity instrument
investment		—	—
4. Fair value changes of enterprise own credit risk		—	—
Others		—	—
(II) Other comprehensive income allowed to be
re-classified into profit and loss		—	—
1. Other comprehensive income that can be converted into
profits and losses under the equity method		—	—
2. Fair value changes in other debt investments		—	—
3. Amount of financial assets reclassified into other
comprehensive income		—	—
4. Provision for credit impairment of other debt
investments		—	—
5. Cash flow hedging reserve		—	—
6. Balance arising from the translation of foreign currency
financial statements		—	—
Others		—	—
VI. Total comprehensive incomes		7,853,077.04	4,718,945.06
VII. Earnings per share:
(I) Basic EPS (RMB/share)		—	—
(II) Diluted EPS (RMB/share)		—	—
Legal representative:	Yao Jiuzhi
Principal in charge of accounting:	Rao Guizhong
Principal of accounting body:	Rao Guizhong

– II-404 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

(V) Consolidated Statement of Cash Flow

Unit: Yuan

		January-June	January-June
Item	Note	2020	2019
I. Cash flows from operating activities:
Cash received from the sale of goods or rendering of
services		135,941,078.80	146,068,888.66
Net increase in customer deposits and deposits and loans
from banks		—	—
Net increase in borrowings from central bank		—	—
Cash from received premiums of original insurance
contract		—	—
Net cash received from reinsurance business		—	—
Net increase in policy holder deposits and investment
funds		—	—
Cash received from interests, service charges and
commissions		—	—
Net increase in borrowings from banks and other financial
institutions		—	—
Net capital increase in repurchase business		—	—
Receivings from vicariously traded securities		—	—
Taxes refunds received		671,322.58	—
Other cash received relating to business activities	VI. Note 40	28,251,910.65	29,401,569.55
Subtotal of cash inflow from operating activities		164,864,312.03	175,470,458.21
Cash paid for goods and receiving services		104,854,917.30	80,651,664.45
Net increase in customer loans and advances		—	—
Net increase in deposits with central bank and with banks
and other financial institutions		—	—
Cash paid for original insurance contract claims		—	—
Net increase in financial assets held for trading purposes		—	—
Net increase in lendings		—	—
Cash paid for interests, service charges and commissions		—	—
Cash paid as bonus for insurance policies		—	—
Cash paid to and for employees		14,509,827.60	13,339,322.75
Taxes paid		8,736,608.36	12,751,485.53
Other paid cash related to operating activities	VI. Note 40	34,677,045.87	25,046,239.51

– II-405 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

		January-June	January-June
Item	Note	2020	2019
Subtotal of cash outflow from operating activities		162,778,399.13	131,788,712.24
Net cash flows from operating activities		2,085,912.90	43,681,745.97
II. Cash flows from investing activities:
Cash received from disposal of investment		—	1,300,000.00
Cash received from return on investment		—	—
Net cash received from disposal of fixed assets, intangible
assets and other long-term assets		9,778.76	391.07
Net cash received from disposal of subsidiaries and other
operating units		—	—
Other cash received in connection with investing activities		—	—
Subtotal of cash inflow from investing activities		9,778.76	1,300,391.07
Cash paid for purchase and construction of fixed assets,
intangible assets and other long-term assets		21,748,641.25	29,557,002.59
Cash paid for investment			—
Net increase in pledge loans		—	—
Net cash paid for acquisition of subsidiaries and other
operating units		—	—
Other cash paid in connection with investing activities		—	—
Subtotal of cash outflow from investing activities		21,748,641.25	29,557,002.59
Net cash flows from investing activities		-21,738,862.49	-28,256,611.52
III. Cash flows from financing activities:
Cash received from introducing investment		—
Include: cash received by subsidiaries from absorbing
minority shareholder’s investment		—	—
Cash received for obtaining loans		80,000,000.00	45,000,000.00
Cash received from bonds issuance		—	—
Other cash received in connection with financing activities		—	—
Subtotal of cash inflow from financing activities		80,000,000.00	45,000,000.00
Cash paid for repayment of debts		94,084,728.03	30,000,000.00
Cash paid for distribution of dividends or profits, or
repayment of interest		6,059,106.77	4,197,461.18
Include: dividend and profit paid by subsidiaries to
minority shareholders		—	—
Other paid cash related to financing activities		99,439.36	—
Subtotal of cash outflows from financial activities		100,243,274.16	34,197,461.18
Net cash flows from financing activities		-20,243,274.16	10,802,538.82

– II-406 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

		January-June	January-June
Item	Note	2020	2019
IV. Effect of exchange rate changes on cash and cash
equivalents		9,508.55	11,449.42
V. Net increase of cash and cash equivalents		-39,886,715.20	26,239,122.69
Plus: balance of cash and cash equivalents at the
beginning of the period		258,090,355.07	214,674,020.33
VI. Closing balance of cash and cash equivalents		218,203,639.87	240,913,143.02
Legal representative:	Yao Jiuzhi
Principal in charge of accounting:	Rao Guizhong
Principal of accounting body:	Rao Guizhong

– II-407 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

(VI) Cash Flow Statement of the Parent Company

Unit: Yuan

		January-June	January-June
Item	Note	2020	2019
I. Cash flows from operating activities:
Cash received from the sale of goods or rendering of
services		55,618,041.38	51,678,132.75
Taxes refunds received		23,322.58	—
Other cash received relating to business activities		41,433,779.46	17,581,716.10
Subtotal of cash inflow from operating activities		97,075,143.42	69,259,848.85
Cash paid for goods and receiving services		36,936,352.98	19,222,660.76
Cash paid to and for employees		7,240,922.56	6,321,497.80
Taxes paid		5,319,473.23	7,345,341.48
Other paid cash related to operating activities		82,630,150.01	21,227,529.34
Subtotal of cash outflow from operating activities		132,126,898.78	54,117,029.38
Net cash flows from operating activities		-35,051,755.36	15,142,819.47
II. Cash flows from investing activities:
Cash received from disposal of investment		—	1,300,000.00
Cash received from return on investment		—	—
Net cash received from disposal of fixed assets, intangible
assets and other long-term assets		—	391.07
Net cash received from disposal of subsidiaries and other
operating units		—	—
Other cash received in connection with investing activities		—	—
Subtotal of cash inflow from investing activities		—	1,300,391.077
Cash paid for purchase and construction of fixed assets,
intangible assets and other long-term assets		1,531,272.19	1,848,464.96
Cash paid for investment		30,000,000.00	—
Net cash paid for acquisition of subsidiaries and other
operating units		—	—
Other cash paid in connection with investing activities		—	—
Subtotal of cash outflow from investing activities		31,531,272.19	1,848,464.96
Net cash flows from investing activities		-31,531,272.19	-548,073.89
III. Cash flows from financing activities:
Cash received from introducing investment		—	—
Cash received for obtaining loans		25,000,000.00	—

– II-408 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

		January-June	January-June
Item	Note	2020	2019
Cash received from bonds issuance		—	—
Other cash received in connection with financing activities		—	—
Subtotal of cash inflow from financing activities		25,000,000.00	—
Cash paid for repayment of debts		36,000,000.00	—
Cash paid for distribution of dividends or profits, or
repayment of interest		1,328,140.00	878,550.40
Other paid cash related to financing activities		—	—
Subtotal of cash outflows from financial activities		37,328,140.00	878,550.40
Net cash flows from financing activities		-12,328,140.00	-878,550.40
IV. Effect of exchange rate changes on cash and cash
equivalents		-973.45	-5.26
V. Net increase of cash and cash equivalents		-78,912,141.00	13,716,189.92
Plus: balance of cash and cash equivalents at the
beginning of the period		157,356,660.93	158,231,492.93
VI. Closing balance of cash and cash equivalents		78,444,519.93	171,947,682.85
Legal representative:	Yao Jiuzhi
Principal in charge of accounting:	Rao Guizhong
Principal of accounting body:	Rao Guizhong

– II-409 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

III. Notes to Financial Statements

(I) Notes

Description		Yes or No		Index
1. Whether the accounting policies adopted in the semi-annual	√YES		□No	IV. (XXVI)
report have changed from the Financial Statements of the
previous year
2. Whether the accounting estimates used in the semi-annual	□YES		√No
report have changed from the Financial Statements of the
previous year
3. Is there any previous error correction	□YES		√No
4. Whether there are seasonal or periodic characteristics in	√YES		□No
business operation
5. Whether there is any change in the related party with control	□YES		√No
relationship
6. Whether the consolidation scope of consolidated financial	√YES		□No	II
statements has changed
7. Whether there are securities issuance, repurchase and repayment	□YES		√No
8. Whether there is any distribution of profits to owners	□YES		√No
9. Whether segment reporting is disclosed in accordance with the	□YES		√No
relevant provisions of accounting standards
10. Whether there are non-adjustment matters between the	□YES		√No
semi-annual balance sheet date and the semi-annual financial
report approval date
11. Whether there are changes in contingent liabilities and	□YES		√No
contingent assets after the balance sheet date of the previous
year
12. Is there any change in the structure of the enterprise	□YES		√No
13 Whether any significant long-term assets are transferred or sold	□YES		√No
14 Whether significant fixed assets and intangible assets have	□YES		√No
changed
15. Whether there are significant research and development	□YES		√No
expenditures
16. Whether there is a significant impairment loss on assets	□YES		√No
17. Whether there is an estimated liability	□YES		√No

– II-410 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

(II) Notes on report items

TIANYE INNOVATION CORPORATION 2020 SEMI-ANNUAL NOTES TO FINANCIAL STATEMENTS

I. General Information of the Company

(I) Company profile

1. Limited company stage

Tianye Innovation Corporation (hereinafter referred to as “ the Company ”), formerly Beihai Tianye Food Co., Ltd., was jointly established by Guangxi Tianye Science and Technology Seed Industry Co., Ltd., Yao Jiuzhi, Huo Weidong and Liu Youqiang. On January 23, 2007, the Company obtained the Business License of Enterprise Legal Person (Q) No. 450500000005715 issued by Beihai Administration for Industry and Commerce. The registered capital is RMB2 million, and all shareholders contributed RMB2 million, accounting for 100.00% of the registered capital. The capital contribution has been verified by the Capital Verification Report (BZKYZ [2007] No. 006) issued by Beihai Zhucheng (Joint) Accounting Firm. The shareholding status of each shareholder is as follows:

Shareholder Guangxi Tianye Science and Technology Seed Industry Co., Ltd. Huo Weidong Liu Youqiang Yao Jiuzhi Total	Contribution (RMB10,000) 170.00 10.00 10.00 10.00 200.00	Proportion (%) 85.00 5.00 5.00 5.00
		100.00

– II-411 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

On April 15, 2009, the Company’s Board of Shareholders resolved to increase the registered capital by RMB8 million, and Guangxi Tianye Science and Technology Seed Industry Co., Ltd. increased the capital by RMB8 million in cash; this capital increase has been verified by the Capital Verification Report (ZHYZ [2009] No. 210) issued by Qinzhou Zhongheng Joint Accounting Firm. The shareholding status of each shareholder after capital increase is as follows:

Shareholder

Shareholder Guangxi Tianye Science and Technology Seed Industry Co., Ltd. Huo Weidong Liu Youqiang Yao Jiuzhi Total	Contribution (RMB10,000) 970.00 10.00 10.00 10.00 1,000.00	Proportion (%) 97.00 1.00 1.00 1.00
		100.00

On May 6, 2009, the Company’s Board of Shareholders resolved that Guangxi Tianye Science and Technology Seed Industry Co., Ltd. accepted all the equities of the Company held by Yao Jiuzhi, Huo Weidong and Liu Youqiang. The shareholding status of each shareholder after the change is as follows:

Shareholder Guangxi Tianye Science and Technology Seed Industry Co., Ltd. Total	Contribution (RMB10,000) 1,000.00 1,000.00	Proportion (%) 100.00
		100.00

On August 11, 2011, the Company’s Board of Shareholders resolved to increase the registered capital by RMB32.6 million, with Guangxi Tianye Science and Technology Seed Industry Co., Ltd. contributing RMB25 million in kind and Yao Jiuzhi contributing RMB7.6 million in cash. Among them, Yao Jiuzhi contributed RMB7.6 million in cash for the first capital increase, and Guangxi Tianye Science and Technology Seed Industry Co., Ltd. completed the capital contribution within 2 years. This capital increase has been verified by the Capital Verification Report (ZXSYZ [2011] No. 046) issued by Shenzhen Branch of Zhongxi Certified Public Accountants Co., Ltd. The above-mentioned in-kind capital contribution has been appraised by the Assets Appraisal Report (ZLPBZ [2011] No. 493) issued by China United Assets Appraisal Group Co., Ltd., and as of October 28, 2011, the property rights procedures had been changed; after that, in order to confirm

– II-412 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

the change of property rights of the in-kind contribution assets, the Shenzhen Branch of Zhongxi Certified Public Accountants Co., Ltd. issued the Capital Verification Report (ZXSYZ [2012] No. 003). After the capital increase is completed, the registered capital of the industrially and commercially registered company is RMB42.6 million, and the shareholding status of each shareholder is as follows:

Shareholder

Shareholder Guangxi Tianye Science and Technology Seed Industry Co., Ltd. Yao Jiuzhi Total	Contribution (RMB10,000) 3,500.00 760.00 4,260.00	Proportion (%) 82.16 17.84
		100.00

On September 2, 2011, the Company’s Board of Shareholders resolved to increase the registered capital by RMB12.4 million, which was contributed in cash by natural persons Cheng Cheng, Wu Zhonglin, Guo Shanjie, Zhang Pei, Chen Yu, Li Zhenghua, Zhang Jinfeng, Zhao Yongli, Han Kaifeng, Lv Lingling, Huang Huiqiong, Li Junli, Rao Guizhong, Zhao Fagui, Wu Dongfeng, Wu Yanping and Wu Qingwen, Chen Junrong, Zhu Rong, Wang Jianxin, Zhao Fayu, Nong Xiancheng, Wang Jianfeng; this capital increase has been verified by the Capital Verification Report (ZXSYZ [2011] No. 051) issued by Shenzhen Branch of Zhongxi Certified Public Accountants Co., Ltd. The shareholding status of each shareholder after capital increase is as follows:

Shareholder

Shareholder	Contribution	Proportion
	(RMB10,000)	(%)
Guangxi Tianye Science and Technology Seed Industry Co.,
Ltd.	3,500.00	63.64
Yao Jiuzhi	760.00	13.82
Cheng Cheng	230.00	4.18
Wu Zhonglin	160.00	2.91
Chen Yu	150.00	2.73
Huang Huiqiong	120.00	2.18
Lv Lingling	100.00	1.82
Han Kaifeng	80.00	1.45
Li Zhenghua	60.00	1.09
Zhang Jinfeng	60.00	1.09
Zhao Yongli	60.00	1.09

– II-413 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Shareholder

Shareholder Li Junli Guo Shanjie Wu Dongfeng Rao Guizhong Zhao Fagui Wang Jianfeng Wu Qingwen Wang Jianxin Zhang Pei Wu Yanping Chen Junrong Zhu Rong Zhao Fayu Nong Xiancheng Total	Contribution (RMB10,000) 50.00 20.00 20.00 19.00 19.00 19.00 11.00 11.00 10.00 10.00 10.00 10.00 6.00 5.00 5,500.00	Proportion (%) 0.91 0.36 0.36 0.35 0.35 0.35 0.20 0.20 0.18 0.18 0.18 0.18 0.11 0.09
		100.00

On September 15, 2011, the Company’s Board of Shareholders resolved to approve the transfer of 1.27% equity of the Company held by Yao Jiuzhi to Li Junli, and the transfer of 3.64% equity of the Company held by Yao Jiuzhi to Beijing Zhonghe Zhengxi Investment Consulting Co., Ltd.

On October 8, 2011, the Company’s Board of Shareholders resolved to increase the registered capital by RMB5 million, which was contributed in cash by Tongji Huacheng Venture Capital (Beijing) Co., Ltd., Su Songqing and Chen Zuren; this capital increase was verified by the Capital Verification Report (ZXSYZ [2011] No. 055) issued by Shenzhen Branch of Zhongxi Certified Public Accountants Co., Ltd. The shareholding status of each shareholder after capital increase is as follows:

Shareholder	Contribution	Proportion
	(RMB10,000)	(%)
Guangxi Tianye Science and Technology Seed Industry Co.,
Ltd.	3,500.00	58.33
Yao Jiuzhi	490.00	8.17
Cheng Cheng	230.00	3.83
Beijing Zhonghe Zhengxi Investment Consulting Co., Ltd.	200.00	3.33

– II-414 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Shareholder Tongji Huacheng Venture Capital (Beijing) Co., Ltd. Wu Zhonglin Chen Yu Su Songqing Chen Zuren Huang Huiqiong Li Junli Lv Lingling Han Kaifeng Li Zhenghua Zhang Jinfeng Zhao Yongli Guo Shanjie Wu Dongfeng Rao Guizhong Zhao Fagui Wang Jianfeng Wu Qingwen Wang Jianxin Zhang Pei Wu Yanping Chen Junrong Zhu Rong Zhao Fayu Nong Xiancheng Total	Contribution (RMB10,000) 200.00 160.00 150.00 150.00 150.00 120.00 120.00 100.00 80.00 60.00 60.00 60.00 20.00 20.00 19.00 19.00 19.00 11.00 11.00 10.00 10.00 10.00 10.00 6.00 5.00 6,000.00	Proportion (%) 3.33 2.67 2.50 2.50 2.50 2.00 2.00 1.67 1.33 1.00 1.00 1.00 0.33 0.33 0.32 0.32 0.32 0.18 0.18 0.17 0.17 0.17 0.17 0.10 0.08
		100.00

– II-415 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

On November 23, 2011, the Company’s Board of Shareholders resolved to increase the registered capital by RMB7 million, in which, RMB5 million was contributed by Beijing Qiuyin Datong Investment Management Center (L.P.) in cash and RMB2 million by Zhang Jun in cash. This capital increase has been verified by the Capital Verification Report (ZXSYZ [2011] No. 060) issued by Shenzhen Branch of Zhongxi Certified Public Accountants Co., Ltd. The shareholding status of each shareholder after capital increase is as follows:

Shareholder

Shareholder	Contribution	Proportion
	(RMB10,000)	(%)
Guangxi Tianye Science and Technology Seed Industry Co.,
Ltd.	3,500.00	52.24
Beijing Qiuyin Datong Investment Management Center (L.P.)	500.00	7.46
Yao Jiuzhi	490.00	7.31
Cheng Cheng	230.00	3.43
Beijing Zhonghe Zhengxi Investment Consulting Co., Ltd.	200.00	2.99
Tongji Huacheng Venture Capital (Beijing) Co., Ltd.	200.00	2.99
Zhang Jun	200.00	2.99
Wu Zhonglin	160.00	2.39
Chen Yu	150.00	2.24
Su Songqing	150.00	2.24
Chen Zuren	150.00	2.24
Huang Huiqiong	120.00	1.79
Li Junli	120.00	1.79
Lv Lingling	100.00	1.49
Han Kaifeng	80.00	1.19
Li Zhenghua	60.00	0.90
Zhang Jinfeng	60.00	0.90
Zhao Yongli	60.00	0.90
Guo Shanjie	20.00	0.30
Wu Dongfeng	20.00	0.30
Rao Guizhong	19.00	0.28
Zhao Fagui	19.00	0.28
Wang Jianfeng	19.00	0.28
Wu Qingwen	11.00	0.16
Wang Jianxin	11.00	0.16
Zhang Pei	10.00	0.15
Wu Yanping	10.00	0.15
Chen Junrong	10.00	0.15

– II-416 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Shareholder Zhu Rong Zhao Fayu Nong Xiancheng Total	Contribution (RMB10,000) 10.00 6.00 5.00 6,700.00	Proportion (%) 0.15 0.09 0.07
		100.00

On December 16, 2011, the Company’s Board of Shareholders resolved that shareholder Wu Qingwen transferred his 0.01% equity (i.e. RMB10,000) to Zhao Fagui, Zhao Fayu transferred his 0.01% equity (i.e. RMB10,000) to Zhao Fagui, and Wang Jianxin transferred his 0.01% equity (i.e. RMB10,000) to Wang Jianfeng. It is agreed to increase the registered capital by RMB3 million, and such RMB3 million was contributed by Beijing Haiyan Lifang Venture Capital Center (Limited Partnership) in cash. This capital increase has been verified by the Capital Verification Report (ZXSYZ [2011] No. 063) issued by Shenzhen Branch of Zhongxi Certified Public Accountants Co., Ltd. The shareholding status of each shareholder after capital increase is as follows:

Shareholder	Contribution	Proportion
	(RMB10,000)	(%)
Guangxi Tianye Science and Technology Seed Industry Co.,
Ltd.	3,500.00	50.00
Beijing Qiuyin Datong Investment Management Center (L.P.)	500.00	7.14
Yao Jiuzhi	490.00	7.00
Beijing Haiyan Lifang Venture Capital Center (Limited
Partnership)	300.00	4.29
Cheng Cheng	230.00	3.29
Beijing Zhonghe Zhengxi Investment Consulting Co., Ltd.	200.00	2.86
Tongji Huacheng Venture Capital (Beijing) Co., Ltd.	200.00	2.86
Zhang Jun	200.00	2.86
Wu Zhonglin	160.00	2.29
Chen Yu	150.00	2.14
Su Songqing	150.00	2.14
Chen Zuren	150.00	2.14
Huang Huiqiong	120.00	1.71
Li Junli	120.00	1.71
Lv Lingling	100.00	1.43
Han Kaifeng	80.00	1.14
Li Zhenghua	60.00	0.86

– II-417 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Shareholder

Shareholder Zhang Jinfeng Zhao Yongli Zhao Fagui Guo Shanjie Wu Dongfeng Wang Jianfeng Rao Guizhong Wu Qingwen Wang Jianxin Zhang Pei Wu Yanping Chen Junrong Zhu Rong Zhao Fayu Nong Xiancheng Total	Contribution (RMB10,000) 60.00 60.00 21.00 20.00 20.00 20.00 19.00 10.00 10.00 10.00 10.00 10.00 10.00 5.00 5.00 7,000.00	Proportion (%) 0.86 0.86 0.30 0.29 0.29 0.29 0.27 0.14 0.14 0.14 0.14 0.14 0.14 0.07 0.07
		100.00

On June 27, 2012, the Company’s Board of Shareholders resolved that Wu Dongfeng transferred his 0.29% equity to Rao Guizhong, Zhao Fayu transferred his 0.07% equity to Rao Guizhong, Wu Yanping transferred his 0.14% equity to Rao Guizhong, Nong Xiancheng transferred his 0.07% equity to Rao Guizhong, Chen Junrong transferred his 0.14% equity to Rao Guizhong, Zhu Rong transferred his 0.14% equity to Rao Guizhong, Wang Jianxin transferred his 0.14% equity to Rao Guizhong, Wu Qingwen transferred his 0.14% equity to Rao Guizhong, Zhao Fagui transferred his 0.07% equity to Rao Guizhong, Zhao Fagui transferred his 0.23% equity to Lan Haikun, and Cheng Cheng transferred his 3.29% equity to Qi Xiaohong.

On June 27, 2012, the Company’s Board of Shareholders resolved to increase the registered capital by RMB15 million, which was contributed by all equities of Hainan Dachuan Food Co., Ltd. held by natural persons Shan Dan, Li Guangjiang, Li Ruiqi, Zhao Ruijun, Fan Jia, Fu Yu, Dong Ailin, Ding Zhulan, Cao Dongmei, Zeng Jun, Zhang Dewei, Wu Kaixiong, He Zhenshu, Zhou Chongyuan, Zheng Dingcheng, Fu Duanyao, Lin Xueyun, Du Jindong, Zhang Yimin, Li Xiaobei, Xiao Jin, Liu Ping, Huang Zenghua, Huang Huifang, Chen Jie and Shi Mingyuan.

The valuable consideration of this capital increase was calculated based on the Assets Appraisal Report of the Shareholders’ Equity Value Assessment Project Involved in the Capital Increase of Beihai Tianye Food Co., Ltd. (ZLPBZ [2012] No. 391) and the Assets Appraisal Report

– II-418 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

of the Proposed Equity Project by Beihai Tianye Food Co., Ltd. for Replacing Hainan Dachuan Food Co., Ltd. by Capital Increase (ZLPBZ [2012] No. 392) issued by China United Assets Appraisal Group Co., Ltd. (the base date of appraisal: March 31, 2012).

This capital increase has been verified by the Capital Verification Report (ZXSYZ [2012] No. 024) issued by Shenzhen Branch of Zhongxi Certified Public Accountants Co., Ltd. The shareholding status of each shareholder after capital increase is as follows:

Shareholder

Shareholder	Contribution	Proportion
	(RMB10,000)	(%)
Guangxi Tianye Science and Technology Seed Industry Co.,
Ltd.	3,500.00	41.18
Beijing Qiuyin Datong Investment Management Center (L.P.)	500.00	5.88
Yao Jiuzhi	490.00	5.76
Beijing Haiyan Lifang Venture Capital Center (Limited
Partnership)	300.00	3.53
Beijing Zhonghe Zhengxi Investment Consulting Co., Ltd.	200.00	2.35
Tongji Huacheng Venture Capital (Beijing) Co., Ltd.	200.00	2.35
Zhang Jun	200.00	2.35
Wu Zhonglin	160.00	1.88
Chen Yu	150.00	1.76
Su Songqing	150.00	1.76
Chen Zuren	150.00	1.76
Huang Huiqiong	120.00	1.41
Li Junli	120.00	1.41
Lv Lingling	100.00	1.18
Han Kaifeng	80.00	0.94
Li Zhenghua	60.00	0.71
Zhang Jinfeng	60.00	0.71
Zhao Yongli	60.00	0.71
Guo Shanjie	20.00	0.24
Wang Jianfeng	20.00	0.24
Rao Guizhong	104.00	1.22
Zhang Pei	10.00	0.12
Shan Dan	420.00	4.94
Li Guangjiang	205.00	2.41
Li Ruiqi	200.00	2.35
Xiao Jin	200.00	2.35

– II-419 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Shareholder

Shareholder Huang Zenghua Zhao Ruijun Huang Huifang Liu Ping Du Jindong Shi Mingyuan Zhang Yimin Li Xiaobei Fan Jia Fu Yu Chen Jie Dong Ailin He Zhenshu Ding Zhulan Cao Dongmei Zeng Jun Zhou Chongyuan Zheng Dingcheng Fu Duanyao Zhang Dewei Wu Kaixiong Lin Xueyun Lan Haikun Qi Xiaohong Total	Contribution (RMB10,000) 102.00 100.00 55.00 45.50 31.25 25.00 18.75 12.50 10.00 10.00 10.00 8.00 8.00 7.00 5.00 5.00 5.00 5.00 5.00 3.00 2.00 2.00 16.00 230.00 8,500.00	Proportion (%) 1.20 1.18 0.65 0.54 0.37 0.29 0.22 0.15 0.12 0.12 0.12 0.09 0.09 0.08 0.06 0.06 0.06 0.06 0.06 0.04 0.02 0.02 0.19 2.71
		100.00

On August 16, 2012, the Company’s Board of Shareholders resolved to approve the transfer of 1% equity of the Company held by Rao Guizhong to Yao Jiuzhi.

2. Reform of shareholding system

On September 24, 2012, the founding meeting and the first general meeting of shareholders of Tianye Innovation Corporation passed a resolution: all shareholders of Beihai Tianye Food Co., Ltd., as initiators and according to the audited net assets of RMB186,609,726.71 (i.e. 85,000,000 shares) of Beihai Tianye Food Co., Ltd. as of August 31, 2012, change the company into a joint stock limited company according to law; the term of operation of the company is changed to

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

permanent existence. On September 24, 2012, Shenzhen Branch of Zhongxi Certified Public Accountants Co., Ltd. issued the Capital Verification Report (ZXSYZ [2012] No. 043) to verify this overall change of the capital contribution. On September 25, 2012, Tianye Innovation Corporation completed the change of industrial and commercial registration in Beihai Administration for Industry and Commerce, and obtained the Business License of Enterprise Legal Person with the registration number of 450500000005715. The shareholding status of each shareholder after the change is as follows:

		Number of
**S/N **	Shareholder	shares held	Proportion
		(10,000 shares)	(%)
1	Guangxi Tianye Science and Technology Seed Industry
	Co., Ltd.	3,500.00	41.18
2	Beijing Qiuyin Datong Investment Management Center
	(L.P.)	500.00	5.88
3	Yao Jiuzhi	575.00	6.76
4	Shan Dan	420.00	4.94
5	Beijing Haiyan Lifang Venture Capital Center (Limited
	Partnership)	300.00	3.53
6	Qi Xiaohong	230.00	2.71
7	Li Guangjiang	205.00	2.41
8	Beijing Zhonghe Zhengxi Investment Consulting Co.,
	Ltd.	200.00	2.35
9	Tongji Huacheng Venture Capital (Beijing) Co., Ltd.	200.00	2.35
10	Zhang Jun	200.00	2.35
11	Li Ruiqi	200.00	2.35
12	Xiao Jin	200.00	2.35
13	Wu Zhonglin	160.00	1.88
14	Chen Yu	150.00	1.76
15	Su Songqing	150.00	1.76
16	Chen Zuren	150.00	1.76
17	Huang Huiqiong	120.00	1.41
18	Li Junli	120.00	1.41
19	Rao Guizhong	19.00	0.22
20	Huang Zenghua	102.00	1.20
21	Lv Lingling	100.00	1.18
22	Zhao Ruijun	100.00	1.18
23	Han Kaifeng	80.00	0.94

– II-421 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

S/N Shareholder 24 Li Zhenghua 25 Zhang Jinfeng 26 Zhao Yongli 27 Huang Huifang 28 Liu Ping 29 Du Jindong 30 Shi Mingyuan 31 Guo Shanjie 32 Wang Jianfeng 33 Zhang Yimin 34 Lan Haikun 35 Li Xiaobei 36 Zhang Pei 37 Fan Jia 38 Fu Yu 39 Chen Jie 40 Dong Ailin 41 He Zhenshu 42 Ding Zhulan 43 Cao Dongmei 44 Zeng Jun 45 Zhou Chongyuan 46 Zheng Dingcheng 47 Fu Duanyao 48 Zhang Dewei 49 Wu Kaixiong 50 Lin Xueyun Total	Number of shares held (10,000 shares) 60.00 60.00 60.00 55.00 45.50 31.25 25.00 20.00 20.00 18.75 16.00 12.50 10.00 10.00 10.00 10.00 8.00 8.00 7.00 5.00 5.00 5.00 5.00 5.00 3.00 2.00 2.00 8,500.00	Proportion (%) 0.71 0.71 0.71 0.65 0.54 0.37 0.29 0.24 0.24 0.22 0.19 0.15 0.12 0.12 0.12 0.12 0.09 0.09 0.08 0.06 0.06 0.06 0.06 0.06 0.04 0.02 0.02
		100.00

On November 26, 2013, Yao Jiuzhi signed the Equity Transfer Contract with Wu Dongfeng, Wu Qingwen, Zhu Rong, Wang Jianxin, Chen Junrong, Wu Yanping, Zhao Fazhen, Nong Xiancheng, Zhao Fagui and Rao Guizhong respectively, and agreed to transfer 200,000 shares to the new shareholder Wu Dongfeng, 100,000 shares to the new shareholder Wu Qingwen, 100,000 shares to the new shareholder Zhu Rong, 100,000 shares to new shareholder Wang Jianxin, 100,000 shares to the new shareholder Chen Junrong, 100,000 shares to the new shareholder Wu

– II-422 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Yanping, 50,000 shares to the new shareholder Zhao Fayu, 50,000 shares to the new shareholder Nong Xiancheng, 40,000 shares to the new shareholder Zhao Fagui and 10,000 shares to shareholder Rao Guizhong; the Company changed the Register of Shareholders accordingly.

On December 28, 2013, Guangxi Tianye Science and Technology Seed Industry Co., Ltd. signed the Equity Transfer Contract with Yao Yuzhi, Zhao Ying, Guo Nan, Li Xingping, Li Zhiqi, Li Huiyun and Ginkgo Bo Rong (Beijing) Technology Co., Ltd., and agreed to transfer 1.6 million shares to Yao Yuzhi, 1.2 million shares to new shareholder Zhao Ying, 1.1 million shares to new stock Dong Guonan, and 111 shares. 1 million shares were transferred to the new shareholder Yinxing Borong, 1 million shares to the new shareholder Li Zhiqi and 600,000 shares to the new shareholder Li Huiyun. Each transferee completed the payment of the share transfer consideration in January 2014, and the Company changed the Register of Shareholders accordingly. The shareholding status of each shareholder after the change is as follows:

		Number of
**S/N **	Shareholder	shares held	Proportion
		(10,000 shares)	(%)
1	Guangxi Tianye Science and Technology Seed Industry
	Co., Ltd.	2,740.00	32.24
2	Yao Jiuzhi	650.00	7.65
3	Beijing Qiuyin Datong Investment Management Center
	(L.P.)	500.00	5.88
4	Shan Dan	420.00	4.94
5	Beijing Haiyan Lifang Venture Capital Center (Limited
	Partnership)	300.00	3.53
6	Qi Xiaohong	230.00	2.71
7	Li Guangjiang	205.00	2.41
8	Beijing Zhonghe Zhengxi Investment Consulting Co.,
	Ltd.	200.00	2.35
9	Tongji Huacheng Venture Capital (Beijing) Co., Ltd.	200.00	2.35
10	Li Ruiqi	200.00	2.35
11	Xiao Jin	200.00	2.35
12	Zhang Jun	200.00	2.35
13	Wu Zhonglin	160.00	1.88
14	Chen Yu	150.00	1.76
15	Su Songqing	150.00	1.76
16	Chen Zuren	150.00	1.76
17	Huang Huiqiong	120.00	1.41

– II-423 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

		Number of
**S/N **	Shareholder	shares held	Proportion
		(10,000 shares)	(%)
18	Li Junli	120.00	1.41
19	Zhao Ying	120.00	1.41
20	Guo Nan	110.00	1.29
21	Li Xingping	110.00	1.29
22	Huang Zenghua	102.00	1.2
23	Lv Lingling	100.00	1.18
24	Zhao Ruijun	100.00	1.18
25	Ginkgo Bo Rong (Beijing) Technology Co., Ltd.	100.00	1.18
26	Li Zhiqi	100.00	1.18
27	Han Kaifeng	80.00	0.94
28	Li Zhenghua	60.00	0.71
29	Zhang Jinfeng	60.00	0.71
30	Zhao Yongli	60.00	0.71
31	Li Huiyun	60.00	0.71
32	Huang Huifang	55.00	0.65
33	Liu Ping	45.50	0.54
34	Du Jindong	31.25	0.37
35	Shi Mingyuan	25.00	0.29
36	Guo Shanjie	20.00	0.23
37	Wang Jianfeng	20.00	0.23
38	Wu Dongfeng	20.00	0.23
39	Rao Guizhong	20.00	0.23
40	Zhang Yimin	18.75	0.22
41	Lan Haikun	16.00	0.19
42	Li Xiaobei	12.50	0.15
43	Zhang Pei	10.00	0.12
44	Chen Jie	10.00	0.12
45	Fan Jia	10.00	0.12
46	Fu Yu	10.00	0.12
47	Wu Qingwen	10.00	0.12
48	Zhu Rong	10.00	0.12
49	Wang Jianxin	10.00	0.12
50	Chen Junrong	10.00	0.12
51	Wu Yanping	10.00	0.12
52	He Zhenshu	8.00	0.09

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

S/N Shareholder 53 Dong Ailin 54 Ding Zhulan 55 Cao Dongmei 56 Zhou Chongyuan 57 Zheng Dingcheng 58 Fu Duanyao 59 Zeng Jun 60 Zhao Fayu 61 Nong Xiancheng 62 Zhao Fagui 63 Zhang Dewei 64 Wu Kaixiong 65 Lin Xueyun Total	Number of shares held (10,000 shares) 8.00 7.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 4.00 3.00 2.00 2.00 8,500.00	Proportion (%) 0.09 0.08 0.06 0.06 0.06 0.06 0.06 0.06 0.06 0.05 0.04 0.02 0.02
		100.00

Zhang Dewei, a shareholder of the Company, unfortunately died of illness in February 2013. After verification by the Company, the successors first in order were only his spouse and son. On May 6, 2014, his spouse Chu Ping issued the Confirmation Letter on Inheritance of All Shares Held by Zhang Dewei in Tianye Innovation Corporation , confirming that all the 30,000 shares held by Zhang Dewei before his death were inherited by Zhang Dewei’s son Zhang Hangrui.

On June 11, 2014, Zeng Jun signed the Equity Transfer Contract with Shan Dan for transferring 50,000 shares of the Company held by him to Shan Dan, and the Company changed the Register of Shareholders accordingly.

As of December 31, 2014, the equity structure of the Company was as follows:

		Number of
**S/N **	Shareholder	shares held	Proportion
		(10,000 shares)	(%)
1	Guangxi Tianye Science and Technology Seed Industry
	Co., Ltd.	2,740.00	32.24
2	Yao Jiuzhi	650.00	7.65

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

		Number of
**S/N **	Shareholder	shares held	Proportion
		(10,000 shares)	(%)
3	Beijing Qiuyin Datong Investment Management Center
	(L.P.)	500.00	5.88
4	Shan Dan	425.00	5.00
5	Beijing Haiyan Lifang Venture Capital Center (Limited
	Partnership)	300.00	3.53
6	Qi Xiaohong	230.00	2.71
7	Li Guangjiang	205.00	2.41
8	Tongji Huacheng Venture Capital (Beijing) Co., Ltd.	200.00	2.35
9	Zhang Jun	200.00	2.35
10	Beijing Zhonghe Zhengxi Investment Consulting Co.,
	Ltd.	200.00	2.35
11	Li Ruiqi	200.00	2.35
12	Xiao Jin	200.00	2.35
13	Wu Zhonglin	160.00	1.88
14	Chen Yu	150.00	1.76
15	Su Songqing	150.00	1.76
16	Chen Zuren	150.00	1.76
17	Li Junli	120.00	1.41
18	Huang Huiqiong	120.00	1.41
19	Zhao Ying	120.00	1.41
20	Guo Nan	110.00	1.29
21	Li Xingping	110.00	1.29
22	Huang Zenghua	102.00	1.20
23	Lv Lingling	100.00	1.18
24	Zhao Ruijun	100.00	1.18
25	Ginkgo Bo Rong (Beijing) Technology Co., Ltd.	100.00	1.18
26	Li Zhiqi	100.00	1.18
27	Han Kaifeng	80.00	0.94
28	Li Zhenghua	60.00	0.71
29	Zhao Yongli	60.00	0.71
30	Zhang Jinfeng	60.00	0.71
31	Li Huiyun	60.00	0.71
32	Huang Huifang	55.00	0.65
33	Liu Ping	45.50	0.54
34	Du Jindong	31.25	0.37

– II-426 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

S/N Shareholder 35 Shi Mingyuan 36 Wang Jianfeng 37 Guo Shanjie 38 Rao Guizhong 39 Wu Dongfeng 40 Zhang Yimin 41 Lan Haikun 42 Li Xiaobei 43 Zhang Pei 44 Fu Yu 45 Fan Jia 46 Chen Jie 47 Wu Qingwen 48 Zhu Rong 49 Wang Jianxin 50 Chen Junrong 51 Wu Yanping 52 He Zhenshu 53 Dong Ailin 54 Ding Zhulan 55 Cao Dongmei 56 Zhou Chongyuan 57 Zheng Dingcheng 58 Fu Duanyao 59 Zhao Fayu 60 Nong Xiancheng 61 Zhao Fagui 62 Zhang Hangrui 63 Lin Xueyun 64 Wu Kaixiong Total	Number of shares held (10,000 shares) 25.00 20.00 20.00 20.00 20.00 18.75 16.00 12.50 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 8.00 8.00 7.00 5.00 5.00 5.00 5.00 5.00 5.00 4.00 3.00 2.00 2.00 8,500.00	Proportion (%) 0.29 0.23 0.23 0.23 0.23 0.22 0.19 0.15 0.12 0.12 0.12 0.12 0.12 0.12 0.12 0.12 0.12 0.09 0.09 0.08 0.06 0.06 0.06 0.06 0.06 0.06 0.05 0.04 0.02 0.02
		100.00

– II-427 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

In May 2015, according to the proposal of the Stock Issuance Plan of Tianye Innovation Corporation reviewed and approved at the 2014 Annual General Meeting of Shareholders and the revised Articles of Association, the Company issued RMB ordinary shares with unlimited sales conditions to 43 investors including Li Xingping, Li Junli, Zhang Jun, Guo Nan, Li Guangjiang, Ginkgo Bo Rong (Beijing) Technology Co., Ltd., Caida Securities Co., Ltd. and Fangfu Growth Phase II Investment Fund, totaling 35,000,000.00 shares, with par value of each share of RMB1.00, and the subscription price of each share of RMB8.50. This time, RMB297,500,000.00 was raised, and the registered capital was changed to RMB120,000,000.00. After verification by Dahua Certified Public Accountants (Special General Partnership), as of May 28, 2015, the paid-in amount of the above 43 investors was RMB297,500,000.00, and the actual net fund raised by the Company was RMB297,450,000.00, and the Capital Verification Report (DHYZ [2015] No. 000417) was issued.

As of December 31, 2015, the equity structure of the Company was as follows:

S/N Shareholder 1 Guangxi Tianye Science and Technology Seed Industry Co., Ltd. 2 Yao Jiuzhi 3 Li Ruiqi 4 Zhang Yimin 5 Beijing Qiuyin Datong Investment Management Center (L.P.) 6 Shan Dan 7 Huang Zenghua 8 Li Qing 9 Beijing Haiyan Lifang Venture Capital Center (Limited Partnership) 10 Beijing Fangfu Capital Management Co., Ltd. 11 Other investors Total	Number of shares held (10,000 shares) 1,826.70 1,513.10 521.10 518.75 500.00 425.00 413.90 380.10 300.00 287.10 5,314.25 12,000.00	Proportion (%) 15.22 12.61 4.34 4.32 4.17 3.54 3.45 3.17 2.50 2.39 44.29
		100.00

In April 2016, according to the Company’s Profit Distribution Plan for 2015 reviewed and approved at the 2015 Annual General Meeting of Shareholders, the Company distributed cash dividend RMB1 (including tax) for every 10 shares based on the total share capital of 120 million shares as of December 31, 2015, with a total cash dividend of RMB12 million, and the remaining

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

undistributed profits were carried over to the following years. At the same time, the capital reserve was used to increase 10 shares for every 10 shares of all shareholders, and the total increased share capital was 120 million shares. The total share capital of the Company was changed to 240 million shares after the share capital increase.

As of December 31, 2016, the equity structure of the Company was as follows:

S/N Shareholder 1 Guangxi Tianye Science and Technology Seed Industry Co., Ltd. 2 Yao Jiuzhi 3 Zhang Yimin 4 Beijing Qiuyin Datong Investment Management Center (L.P.) 5 Shan Dan 6 Huang Zenghua 7 Li Qing 8 Gongtou Zhaochen Investment Management Co., Ltd. — Huixin Investment — Quality Modern Agriculture Contractual Type Fund 9 Qi Xiaohong 10 Beijing Fangfu Capital Management Co., Ltd. 11 Other investors Total	Number of shares held (10,000 shares) 3,018.40 3,016.10 1,000.00 1,000.00 850.00 800.00 760.20 454.20 442.00 400.00 12,259.10 24,000.00	Proportion (%) 12.58 12.57 4.17 4.17 3.54 3.33 3.17 1.89 1.84 1.67 51.07
		100.00

As of December 31, 2017, the equity structure of the Company was as follows:

		Number of
**S/N **	Shareholder	shares held	Proportion
		(10,000 shares)	(%)
1	Yao Jiuzhi	4,252.10	17.72
2	Beijing Qiuyin Datong Investment Management Center
	(L.P.)	1,000.00	4.17
3	Menghai Zhicun Gaoyuan Tea Industry Co., Ltd.	1,000.00	4.17
4	Zhang Yimin	975.00	4.06

– II-429 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

S/N Shareholder 5 Shan Dan 6 Yao Linhao 7 Li Qing 8 Qi Xiaohong 9 Huang Zenghua 10 Li Ruiqi 11 Other investors Total	Number of shares held (10,000 shares) 850.00 800.00 760.20 439.00 428.30 421.80 13,073.60 24,000.00	Proportion (%) 3.54 3.33 3.17 1.83 1.78 1.76 54.47
		100.00

As of December 31, 2018, the equity structure of the Company is as follows:

S/N Shareholder 1 Yao Jiuzhi 2 Menghai Zhicun Gaoyuan Tea Industry Co., Ltd. 3 Beijing Qiuyin Datong Investment Management Center (L.P.) 4 Zhang Yimin 5 Shan Dan 6 Li Qing 7 Yao Linhao 8 Yang Yunping 9 Qi Xiaohong 10 Huang Zenghua 11 Others Total	Number of shares held (10,000 shares) 4,271.10 1,017.50 1,000.00 949.50 850.00 760.20 738.00 452.60 439.00 424.30 13,097.80 24,000.00	Proportion (%) 17.80 4.24 4.17 3.95 3.54 3.17 3.08 1.88 1.83 1.77 54.57
		100.00

– II-430 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

As of December 31, 2019, the equity structure of the Company was as follows:

S/N Shareholder 1 Yao Jiuzhi 2 Beijing Qiuyin Datong Investment Management Center (L.P.) 3 Zhang Yimin 4 Li Qing 5 Shan Dan 6 Menghai Zhicun Gaoyuan Tea Industry Co., Ltd. 7 Gongtou Zhaochen Investment Management Co., Ltd. 8 Yao Linhao 9 Yang Yunping 10 Qi Xiaohong 11 Others Total	Number of shares held (10,000 shares) 4,271.10 1,000.00 935.00 760.20 650.00 601.30 569.80 558.00 469.60 453.60 13,731.40 24,000.00	Proportion (%) 17.80 4.17 3.90 3.17 2.71 2.51 2.37 2.33 1.96 1.89 57.21
		100.00

As of June 30, 2020, the equity structure of the Company was as follows:

S/N Shareholder 1 Yao Jiuzhi 2 Hefei Fangfu 3 Qiuyin Datong 4 Zhang Yimin 5 Li Qing 6 Yao Linhao 7 Shan Dan 8 Yang Yunping 9 Qi Xiaohong 10 Li Junli 11 Others Total	Number of shares held (10,000 shares) 4,253.10 2,812.52 1,000.00 935.00 760.20 488.00 487.50 469.60 453.60 410.30 11,930.18 24,000.00	Proportion (%) 17.72 11.72 4.17 3.90 3.17 2.03 2.03 1.96 1.89 1.71 49.71
		100.00

– II-431 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Unified Social Credit Code: 914505007968370834 Registered address: Chuangye Avenue, Hepu Industrial Park, Beihai City Legal representative: Yao Jiuzhi

(II) Business scope

The Company’s business scope: production and sales of beverages (fruit juice and vegetable juice), quick-frozen foods [quick-frozen other foods (quick-frozen fruit and vegetable products)], dried fruits and vegetables and preserved fruits; acquisition, processing and sales of agricultural and sideline products (which can only be operated after obtaining environmental impact acceptance and fire protection permit); comprehensive development of agricultural products projects; self-management and agent for import and export of various commodities and technologies (except commodities and technologies that are restricted by the state or prohibited from import and export).

(III) The nature of business and main operating activities of the Company

The Company’s main products: fruit juice, quick-frozen foods, fresh fruits, etc.

The Company belongs to the “vegetable, fruit and nut processing industry” in the “agricultural and sideline food processing industry”.

(IV) Approval of the financial statements

The financial statements have been authorized for issuance by the Board of Directors of the Company on August 24, 2020.

– II-432 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

II. Scope of Consolidated Financial Statements

During the reporting period, there were 6 subsidiaries included in the scope of consolidated financial statements, including:

	Subsidiary		Shareholding	Ratio of
Subsidiary	type	Level	ratio	voting right
			(%)	(%)
Hainan Dachuan Food Co., Ltd.	Wholly-owned	1	100.00	100.00
	subsidiary
Guangxi Tianye Innovation	Wholly-owned	1	100.00	100.00
Agricultural Technology Co., Ltd.	subsidiary
Hainan Tianye Drinks Food Sales Co.	Wholly-owned	1	100.00	100.00
Ltd.	subsidiary
Hubei Iceman Foods Co., Ltd.	Wholly-owned	1	100.00	100.00
	subsidiary
Hubei Tianye Nonggu Biological	Wholly-owned	1	100.00	100.00
Technology Co., Ltd.	subsidiary
Hubei Tianye Innovation Nonggu	Wholly-owned	1	100.00	100.00
Fruit & Vegetable Co., Ltd.	subsidiary
Panzhihua Tianye Innovation	Wholly-owned	1	100.00	100.00
Agricultural Technology Co., Ltd.	subsidiary

Note:

During the reporting period, Panzhihua Tianye Innovation was a new subsidiary included in the scope of consolidation. Refer to “Note VII. Change of consolidation scope” for details of the subject of consolidation scope change.

III. Basis for the Preparation of Financial Statements

(I) Basis for the preparation

The Company prepares the financial statements on the basis of going concern, according to actual transactions and events, and in accordance with the Accounting Standards for Business Enterprises — Basic Standards and concrete accounting standards, and Accounting Standards for Business Enterprises — Application Guidelines , the Accounting Standards for Business Enterprises — Interpretations issued by the Ministry of Finance and other relevant provisions (hereinafter collectively referred to as — Accounting Standards for Business Enterprises), and as well as Compilation Rules for Information Disclosure by Companies Offering Securities to the Public No. 15 — General Provisions on Financial Reports (Rev. 2014) issued by China Securities Regulatory Commission.

– II-433 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

(II) Going concern

The Company has assessed its ability to continually operate for the next 12 months from the end of the reporting period. There are no major events that will affect the Company’s operational ability, Therefore, the financial statements are prepared on the basis of going-concern assumption.

IV. Significant Accounting Policies and Accounting Estimates

(I) Statement of compliance with Accounting Standards for Business Enterprises

The financial statements of the Company are prepared in accordance with the requirements of the Accounting Standards for Business Enterprises, which truly and completely reflect the financial status, operating results, cash flow and other relevant information of the Company in the reporting period.

(II) Accounting period

The accounting year of the Company begins on January 1 and ends on December 31 of the Gregorian calendar.

(III) Recording currency

The recording currency of the Company is RMB.

(IV) Accounting treatment of “Business combination involving entities under common control” and “Business combination involving entities not under common control”

1. If the terms, conditions and economic impacts of each transaction conform to one or more of the following cases in the business combination step by step, these transactions shall be handled in an accounting way as a package deal:

• (1) These transactions are concluded simultaneously or after the consideration of the mutual influence;

• (2) These transactions can lead to a complete commercial result only when they are in their entirety;

• (3) The occurrence of a transaction relies on the occurrence of at least another transaction;

• (4) A transaction alone is deemed uneconomic but economic when together with other transactions.

2. Business combination under same control

The assets and liabilities that the Company obtains in a business combination shall be measured on the basis of the book value of the combined party in the consolidated financial statement of the final controlling party on the combining date (including the business reputation formed after the final controlling party merges the combined party). As for the balance between the book value of the net assets obtained by the combining party and the book value of the consideration paid by it (or the total par value of the stocks issued), the share capital premium in capital reserve shall be adjusted; if the share capital premium in capital reserve is not sufficient to be offset, the retained earnings shall be adjusted.

– II-434 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

If there is contingent consideration and the estimated liabilities or assets should be confirmed, the capital reserve (capital premium or capital stock premium) should be adjusted according to the balance between the amount of estimated liabilities or assets and settled amount of follow-up contingent consideration. If the capital reserve is insufficient, the retained income should be adjusted.

If the business combination is finally realized through various transactions and it is a “package deal”, the various transactions should have accounting treatment by regarding it as the one acquired the control right. If it is not a “package deal”, on the date of obtaining the control right, the capital reserve shall be adjusted according to the difference between initial investment cost of the long-term equity investment and the sum of the book value of long-term equity investment before combination and the book value of new paid consideration of shares that further acquired on combining date; if capital reserve is not enough for offset, the retained income shall be adjusted.

For the equity investment held before the combining date, other comprehensive income calculated with the equity method or calculated and confirmed according to standards for recognition and measurement of financial instruments will not have accounting treatment until the disposal of the investment, when the accounting treatment should be conducted on the basis of same assets or liabilities handled directly by the investee. Other changes in owners’ equities in net assets of the investee except from the net profits and losses, other comprehensive income and profits accounted and confirmed with the equity method will not have accounting treatment temporarily until the it will be included in current profits and losses during the disposal of the investment.

3. Business combination not under the same control

The “acquisition date” refers to the date on which the acquirer actually obtains the control on the acquiree, i.e. the date on which the control right over the net assets or operation decisions of the acquiree is transferred to the Company. The Company deems the control right is transferred when following conditions are all met:

• ① The combination contract or agreement has passed the approval of internal authority of the Company.

• ② Matters related to business combination that require approval of relevant state authorities have been approved by relevant authorities.

• ③ Necessary property right transfer formalities have been handled.

• ④ The Company has paid a large part of the combination expenses it is able to and plans to pay the rest expenses.

• ⑤ The Company has controlled the financial and operation policies of the acquiree in fact and it enjoys relevant interests and bear relevant risks.

The Company shall measure the assets given and liabilities incurred or assumed by an enterprise for a business combination at the acquisition date based on the fair values, and shall take the balances between the fair values and their book value into the profit and loss of the current period.

– II-435 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

The Company shall recognize the positive balance between the combination costs and the fair value of the identifiable net assets it obtains from the acquiree as business reputation. The balance between the combination cost and the fair value of the identifiable net assets acquired from the acquiree in the business combination shall be included in the current profits and losses after recheck.

If the business combination not under the same control realized through disposal in steps by transactions is a package deal, the combining party shall conduct accounting treatment on all transactions by regarding it as one transaction that has acquired the control. It is not a package deal and the equity investment before the combining date is accounted with the equity method, the initial investment cost of the investment is the sum of the book value of the equity investment held by the acquiree before the acquisition date and the new investment cost on the acquisition date. For other comprehensive income of the equity investment confirmed before acquisition date, the accounting treatment shall be conducted on the same basis on which the investee directly disposes related assets or liabilities when handling the investment. For the equity investment held before the combining date that are accounted according to the standards for recognition and measurement of financial instruments, the initial investment cost on the combining date is the sum of the book value of the equity investment on the combining date and the new investment cost. For originally held equities, the difference between the book value and the fair value and the cumulative fair value included in other comprehensive income originally shall be all transferred to current investment profits on the combining date.

4. Expenses related to business combination

Commission fees for audit, legal services, assessment and consultation due to business combination and other directly related expenses shall be included in the current profits and losses when they occur. For the transaction expenses for the issuance of equity securities for the business combination, the part directly attributed to equity transactions can be deducted from equities.

(V) Base of consolidated financial statements

1. Consolidation scope

The scope of consolidated financial statements the Company shall be confirmed based on the control and all subsidiaries (including individual principal controlled by the Company) shall be included in the consolidation range of the consolidated financial statements.

2. Consolidation procedure

The Company shall prepare consolidated financial statements based on its and its subsidiaries’ financial statements according to other relevant data. During preparation of consolidated financial statements, the Company shall consider the whole company as an accounting entity on the basis of the recognition, measurement and presentation requirements of relevant accounting standards for business enterprises and in accordance with the unified accounting policies, reflecting the Company’s overall financial status, operating results and cash flows.

The accounting policies or accounting period adopted by the subsidiary included in the consolidation range shall be in line with the Company. If the accounting policies or accounting period adopted by the subsidiary are not in line with the Company, necessary adjustments shall be made according to the Company’s accounting policies and period when preparing consolidated financial statements.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

When preparing consolidated financial statement, the effects of the offset of internal transactions between the Company and other subsidiary and the offset of internal transactions between subsidiaries to consolidated balance sheet, consolidated profit statement, consolidated statement of cash flow and consolidated statement of change in shareholders’ equity shall be recorded. If the recognition on a same transaction with the Company or its subsidiary as the accounting entity is different from the perspective of consolidated financial statement of the Company, the transaction should be adjusted from the perspective of the Company.

The owners’ equity of subsidiaries, current net profits and losses and the shares in total comprehensive income attributable to minority shareholders shall be independently listed in the “owners’ equity” in consolidated balance sheet, the “net profits” and “total comprehensive income” in consolidated income statements. If current loss shared by minority shareholders in a subsidiary exceeds the share enjoyed by minority shareholders in the subsidiary’s owner’s equity at the beginning of the period, the balance shall be written down with the minority shareholders’ equity.

If the subsidiary is acquired through combinations under common control, the adjustments are made to the consolidated financial statements based on the book value of its assets and liabilities (including the business reputation formed after the final controlling party merges the combined party) in the consolidated financial statement of the final controlling party.

For a subsidiary acquired through business combination not under the same control, its financial statements are adjusted based on the fair value of the identifiable net assets on the acquisition date.

(1) Increase of subsidiary or business

For the subsidiary or business increased under the same control due to business combination in the reporting period, the opening balance of the consolidated balance sheet shall be adjusted, and the subsidiary and the revenues, expenses and profits from the beginning to the closing period of the current business combination are incorporated into the consolidated profit statement, as well as the cash flow of the same period to the consolidated cash flow statement. Meanwhile, relevant items of the comparative statement are adjusted and the consolidated report subject is regarded to exist from the time the final control party begins to control.

If the investee under the same control can be controlled due to additional investment, it shall be deemed that all parties involved in the combination adjusted the current state/existence when the final controller began to control it. For the equity investment held before the control right over the combined party is obtained, the changes in relevant profits and losses, other comprehensive incomes and other net assets recognized from the later one of the date when the original equity is obtained and the date when the combing party and the combined party are under the same control to the combination date shall respectively be used to offset the retained income at the beginning period of the comparative statement or current profits and losses.

In the reporting period, for the added subsidiary companies or businesses caused by business combination under common control, the beginning balance of the consolidated financial statement shall not be adjusted. The incomes, expenses and profits of the subsidiary or business incurred from the acquisition date to the end of reporting period shall be recorded into consolidated profit statement. The cash flow of the subsidiary or business from the acquisition date to the end of reporting period shall be included into consolidated cash flow statement.

If the investee not under the same control can be controlled due to additional investment, the Company shall measure again its equity owned from the acquiree prior to the acquisition date in accordance with the fair value of the equity at the acquisition date, and the balance between the fair value and the book value shall be taken into the investment income of the current period. For the held equity from the acquiree before the acquisition date which involves other comprehensive

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

income under accounting with equity method, and changes of owner’s equities except from net profits and losses, other comprehensive income and distribution of profits shall be changed into the current incomes from investment on the acquisition date, except from other comprehensive income due to changes in net debt or assets caused by remeasurement and re-definition of benefit plan by the investee.

• (2) Disposal of subsidiaries or businesses

• 1) General disposal method

If the Company disposes its subsidiary or the business within the reporting period, the revenues, expenses and profits occurred from the beginning of the business to the disposal date and of the subsidiary are incorporated into the consolidated income statement and the cash flow produced from the beginning of the period to the disposal date of the subsidiary is included into the consolidated cash flow statement.

If it loses the control on the investee because of disposing part of the equity investment or due to other reasons, the disposed remaining equity investment shall be remeasured by the Company as per the fair value on the date of losing the control. The balance obtained by deducting the portion of net assets reckoned continuously since the acquisition or combination date by the original subsidiary that shall be enjoyed according to the original calculated shareholding ratio with the sum of consideration generated from the disposal and the fair value of the residual equity shall be numbered into the investment income of the current period in which the right of control is lost. Other comprehensive incomes or changes of owner’s equities except from net profits and losses, other comprehensive income and distribution of profits associated with the equity investments of the original subsidiary are turned into the current investment income at the time the right of control is lost. However, other comprehensive income due to changes in net debt or assets caused by remeasurement and re-definition of benefit plan by the investee is excluded.

• 2) Disposal of subsidiary in steps

For investment in subsidiary from disposal in steps by transactions to control loss, if the clauses, condition and economic impact of each transaction conform to one or more of the following cases during the disposal of equity investment to subsidiaries, it is commonly acknowledged these transactions shall be handled in an accounting way as a package deal:

• A. These transactions are concluded simultaneously or after the consideration of the mutual influence;

• B. These transactions can lead to a complete commercial result only when they are in their entirety;

• C. The occurrence of a transaction relies on the occurrence of at least another transaction;

• D. A transaction alone is deemed uneconomic but economic when together with other transactions.

If various transactions from disposal of subsidiary equity investment to control loss belong to package deal, these transactions shall be disposed in an accounting way as a transaction for subsidiary disposal with control loss. However, for each transaction conducted before control loss, the balance between the disposal price and corresponding net asset share of disposed investment over the subsidiary shall be recognized as other comprehensive income in the consolidated financial statement and transferred to current profits and losses at the time of control loss together.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

If various transactions from disposal of subsidiary equity investment to control loss do not belong to package deal, accounting treatment shall be conducted for policies related to equity investment of the subsidiary under the condition of no control right loss. If the control right is lost, accounting treatment shall be conducted with general method for disposal of subsidiary.

(3) Purchase of minority equities in subsidiaries

The stock premium in capital reserve in consolidated balance sheet shall be adjusted for the difference between the net asset shares continuously calculated since acquisition date (or combining date) of subsidiary corporation to be enjoyed by long-term equity investment as a result of purchasing minority interest, as well as calculation on the basis of new shareholding ratio. If the stock premium in capital reserve is insufficient for offset, retained income shall be adjusted.

(4) Disposal of equity investment of subsidiary partially without losing control right

The stock premium in capital reserve in consolidated balance sheet shall be adjusted according to the difference of net assets of subsidiary as result of continuous calculation since the acquisition or combining date enjoyed during disposal of price and long-term equity investment due to the disposal of the long-term equity investment of subsidiary partially without losing its control right. If the stock premium in capital reserve is insufficient for offset, retained income shall be adjusted.

(VI) Cash and cash equivalents

The Company’s cash on hand and deposits available for payment at any time are recognized as cash when the Company prepares its cash flow statement. Any short-term (expires after three months from the purchase date generally) and highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value are confirmed as cash equivalents.

(VII) Foreign operations and foreign currency translation

1. Foreign operations

At the time of initial recognition of a foreign currency transaction, the amount shall be translated into RMB at the spot exchange rate of the transaction date.

The foreign currency monetary items shall be translated at the spot exchange rate on the balance sheet date into RMB. The balance of exchange arising from the difference of exchange rate, except from the balance of exchange arising from foreign currency borrowings for the purchase and construction or production of qualified assets which is capitalized, shall be included into profits and losses of the current period. The foreign currency non-monetary items measured at the historical cost shall still be translated at the spot exchange rate on the transaction date, of which the amount of functional currency shall not be changed.

Foreign currency non-monetary items measured at fair value shall be translated at the spot exchange rate on the date when the fair value is determined. The resulting difference shall be recognized as the fair value change in the current profit and loss. The resulting difference belonging to the non-monetary items of available-for-sale foreign currency shall be recognized as other comprehensive incomes.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

2. Translation of foreign currency financial statements

The asset and liability items in the balance sheet shall be translated at spot exchange rate on the balance sheet date. Among the owner’s equity items, except items in “undistributed profits”, others shall be translated at the spot exchange rate at the time when they are incurred. The income and expense items in the profit statements shall be translated at the spot rate of the transaction date. The translation difference of foreign currency financial statements generated according to the above translation shall be included in other comprehensive income.

When disposing of overseas operations, the translation difference of foreign currency financial statements listed in other comprehensive income items in the balance sheet and related to the overseas operations shall be transferred from other comprehensive income items to the current profits and losses; when part of the equity investment is disposed of or other reasons lead to a decrease in the proportion of overseas business interests, but the right to control overseas business is not lost, the translation difference of foreign currency statements related to the disposal of the overseas business shall be attributed to minority shareholders’ interests and shall not be transferred to the current profits and losses. In case of disposal of part of equity of the associated enterprises or cooperative enterprises in the overseas business, the translation balance related to the overseas business shall be translated into the current profits and losses based on the ratio to dispose overseas business.

(VIII) Financial instruments

The financial instruments are divided into financial assets or financial liabilities and equity instruments.

1. Classification of financial instruments

The financial assets are classified into the following three categories in initial recognition: ① financial assets measured at amortized cost; ② financial assets that are measured at fair value and their changes are included in the other comprehensive income; ③ financial assets that are measured at fair value and their changes are included in the current profits and losses.

The financial liabilities are classified into the following four categories in initial recognition: ① financial liabilities that are measured at fair value and their changes are included in current profits and losses; ② financial liabilities formed due to financial assets’ failure to be transferred in accordance with derecognition conditions or continuous involvement in the transferred financial assets; ③ financial guarantee contracts not belonging to ① or ② above, and commitments of loans at a rate below the market interest rate that do not belong to ① above; ④ financial liabilities measured at amortized cost.

The condition of recognition and measurement method of financial instruments

① Recognition basis and initial measurement method of financial assets and financial liabilities

A financial asset or financial liability is recognized when the Company becomes a party of financial instrument contract. When financial assets or financial liabilities are initially recognized,

they will be measured at their fair values; for the financial assets and liabilities that are measured at fair value and their changes are included into the profits and losses of the current period, the transaction expenses thereof are directly included into the profits and losses of the current period; for other categories of financial assets and financial liabilities, the transaction expenses thereof are included in the initially recognized amount. However, in the event that the

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

major financing components are not included in the accounts receivable initially recognized by the Company, or the Company takes no account of the financing components of a contract not exceeding one year, the initial measurement is conducted as per the transaction price.

• ② Subsequent measurement methods of financial assets

• 1) Financial assets measured at amortized cost

Subsequent measurement on its financial liabilities is conducted on the basis of the post-amortization costs by adopting the actual interest rate method. Profits or losses of financial assets measured at amortized cost and not a part of hedging relationship are included into current profits and losses upon termination of recognition, reclassification, amortization or recognition of impairment based on effective interest method.

• 2) Investment in debt instruments that are measured at fair value and their changes are included in other comprehensive income

The fair value is used for subsequent measurement. Interests, impairment losses or gains calculated by the effective interest method and exchange gains and losses shall be included in the current profits and losses, and other gains or losses shall be included in other comprehensive income. During the derecognition, the accumulated gains or losses included in other comprehensive income before shall be transferred out from other comprehensive income and included in the current profits and losses.

• 3) Investment in equity instruments that are measured at fair value and their changes are included in other comprehensive income

The fair value is used for subsequent measurement. Dividends obtained (except for the part of investment cost recovery) shall be included in the current profits and losses, and other gains or losses shall be included in other comprehensive income. During the derecognition, the accumulated gains or losses included in other comprehensive income before shall be transferred out from other comprehensive income and included in the retained earnings.

• 4) Financial assets that are measured at fair value and their changes are included in current profits and losses

The fair value is used for subsequent measurement, and the profits or losses (including interests and dividend income) generated shall be included into the current profits and losses, unless the financial assets are a part of the hedging relationship.

• ③ Subsequent measurement method of financial liabilities

• 1) Financial liabilities that are measured at fair value and their changes are included in current profits and losses

Such financial liabilities include trading financial liabilities (including derivative instruments belonging to financial liabilities) and financial liabilities designated to be measured at its fair value and their changes are included into current profits and losses, and are subsequently measured at their fair value. For financial liabilities caused by changes in the Company’s own credit risk that are designated to be measured at fair value and whose changes are included in the current profits and losses, the amount of change in fair value shall be included in other comprehensive income unless such handling will cause or expand the accounting mismatch in profits and losses. Other gains or losses arising from such financial liabilities (including interest expenses and changes in fair value caused by reasons other than changes in the Company’s own credit risk) shall be included in the current profits and losses, unless the financial liabilities are a part of the hedging

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

relationship. During the derecognition, the accumulated gains or losses included in other comprehensive income before shall be transferred out from other comprehensive income and included in the retained earnings.

• 2) For financial liabilities formed due to financial assets’ failure to be transferred in accordance with derecognition conditions or continuous involvement in the transferred financial assets, they shall be measured in accordance with the relevant provisions of Accounting Standards for Business Enterprises No. 23 — Transfer of Financial Assets .

• 3) For the financial guarantee contracts that do not belong to the above 1) or 2) and loan commitments that do not belong to the above 1) and are lent at a interest rate lower than the market interest rate, after initial recognition, subsequent measurement shall be made according to the higher of the following two amounts: ① amount of loss provision determined in accordance with the impairment regulations of financial instruments; ② balance of the initial recognition amount after deducting the accumulated amortization amount determined in accordance with relevant regulations.

• 4) Financial liabilities measured at amortized cost

They are measured at amortized cost using the effective interest method. Profits or losses of financial liabilities measured at amortized cost and not a part of hedging relationship shall be included into current profit and loss upon the derecognition and amortization based on effective interest method.

• ④ Derecognition of financial assets and financial liabilities

• 1) When one of the following conditions is met, the financial assets shall be derecognized:

• a. The contractual right to collect cash flow from financial assets has been terminated;

• b. The financial assets have been transferred, and the transfer meets the regulations on derecognition of financial assets in the Accounting Standards for Business Enterprises No. 23 — Transfer of Financial Assets .

• 2) If the current obligation of (the whole or a part of) financial liabilities has been discharged, (the whole or the part of) financial liabilities shall be accordingly derecognized.

Recognition basis and measurement method for the transfer of financial assets

In the event that the Company has transferred almost all of the risks and rewards related to the ownership of the financial assets, it shall stop recognizing the financial assets and separately recognize the rights and obligations generated or retained in the transfer as assets or liabilities. If almost all of the risks and rewards related to the ownership of the transferred financial asset are retained, it may continue to recognize the transferred financial assets. In the event the Company has neither transferred nor retained almost all the risks and rewards of ownership of financial assets, the following cases shall be considered: (1) if the control over the financial assets is not retained, the financial assets shall be recognized and the rights and obligations generated or retained in the transfer shall be separately recognized as assets or liabilities; (2) if the control over financial assets is retained, relevant financial assets shall be recognized according to the extent to which they continue to be involved in the transferred financial assets, and related liabilities shall be recognized accordingly.

If the overall transfer of financial assets meets the derecognition conditions, the difference between the following two amounts shall be included in the current profits and losses: (1) the book value of the transferred financial assets on the date of derecognition; (2) the sum of the

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

consideration received for the transfer of financial assets and the amount corresponding to the derecognized part of the accumulated amount of changes in fair value that was originally directly included in other comprehensive income (the financial assets involved in the transfer are investments in debt instruments measured at fair value whose changes are included in other comprehensive income). Where a part of the financial assets is transferred and the transferred part generally meets the derecognition conditions, the entire book value of the financial assets before transfer shall, between the part whose recognition has been terminated and the part whose recognition has not been terminated, be apportioned according to their respective relative fair value on the date of transfer, and the difference between the amounts of the following two items shall be recorded in the current profits and losses: (1) the book value of derecognized part; (2) the sum of the consideration of the derecognized part and the amount corresponding to the derecognized part of the accumulated amount of changes in fair value that was originally directly included in other comprehensive income (the financial assets involved in the transfer are investments in debt instruments measured at fair value whose changes are included in other comprehensive income).

Methods for the determination of the fair value of financial assets and financial liabilities

The Company shall use sufficient and usable data and the valuation technique supported by other information under current situations to determine the fair value of relevant financial assets and financial liabilities. The Company shall divide the input values of valuation technique into the following levels and use them in turn:

• (1) The first level input value is an unadjusted quotation for the same asset or liability that can be obtained on the measurement date in an active market;

• (2) The second level is an input value that is directly or indirectly observable for related assets or liabilities, except for the first level, including the quotation for similar assets or liabilities in an active market, quotation of the same or similar assets or liabilities in an inactive market and other observable input values other than quotation, such as the observable interest rate and yield curve during the normal quotation interval, input value for market validation, etc.;

• (3) The third level is unobservable input values for related assets or liabilities, including interest rates that cannot be directly observed or verified by observable market data, stock volatility, future cash flows from disposal obligations in business combination, and financial projections made by using their own data.

Withdrawing of impairment provision for financial assets (excluding receivables)

Impairment measurement and accounting of financial instruments

Based on expected credit losses, the Company shall perform impairment treatment on financial guarantee contracts for financial assets measured at amortized cost, investments in debt instruments measured at fair value whose changes are included in other comprehensive income, lease receivables, loan commitments that are classified other than financial liabilities measured at fair value whose changes are included in current profits and losses, financial liabilities other than those measured at fair value whose changes are included in current profits and losses or financial liabilities other than those formed due to financial assets’ failure to be transferred in accordance with derecognition conditions or continuous involvement in the transferred financial assets, and recognize the loss provisions.

Expected credit loss refers to the weighted average of credit losses of financial instruments weighted by the default risk. Credit losses refer to the difference between all the contract cash flows receivable under the contract and all the expected cash flows received by the Company

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

discounted at the original effective interest rate, namely the present value of the total cash shortage. For financial assets purchased by the Company or original financial assets that have suffered credit impairment, the financial assets shall be discounted at the actual interest rate through credit adjustment.

For purchased or original financial assets that have suffered credit impairment, the Company shall only recognize the cumulative changes in expected credit losses in the whole duration since the initial recognition as loss provisions on the balance sheet date.

For receivables that do not contain a significant financing component or where the Company does not consider the financing component of a contract of not more than one year, the Company will assess whether the credit risk has increased significantly based on individual financial assets or financial asset combinations and measure the loss reserve based on the equivalent expected credit loss amount in the whole duration using simplified measurement methods.

(IX) Recognition criteria and withdrawing method of provision for bad debts of receivables

The Company adopts a simplified method for the accounts receivable formed by transactions regulated by Accounting Standards for Business Enterprises No. 14 — Revenue (whether it contains significant financing components or not) and the rents receivable regulated by Accounting Standards for Business Enterprises No. 21 — Lease , that is, the loss provision is always measured based the expected credit loss in the whole duration. According to the nature of financial instruments, the Company evaluates whether the credit risk increases significantly on the basis of single financial asset or financial asset combination.

According to the nature of financial instruments, the Company evaluates whether the credit risk increases significantly on the basis of single financial asset or financial asset combination. The Company divides the accounts receivable into several combinations according to the credit risk characteristics, and calculates the expected credit losses on the basis of the combinations. The basis for determining the combinations is as follows:

Accounts receivable combination 1 : low-risk combination, including: accounts receivable from related parties, deposits, margins, reserve loans, advance deposits and other receivables that can be determined to be recovered

Accounts receivable combination 2 : aging analysis combination

		Withdrawal
	Withdrawal	Proportion of
	Proportion of	Other
Aging	Receivables	Receivables
	(%)	(%)
Less than 1 year (including 1 year, the same below)	2	2
1-2 years	10	10
2-3 years	20	20
3-4 years	40	40
4-5 years	80	80
>5 years	100	100

For accounts receivable that are divided into combinations, the Company prepares a comparison table of accounts receivable aging and the expected credit loss rate for the whole duration and calculates the expected credit loss by referring to the historical credit loss experience and combining the current situation and the forecast of the future economic situation. For notes receivable that are divided into combinations, the Company calculates the expected credit loss by

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

referring to the historical credit loss experience and combining the current situation and the forecast of the future economic situation through the default risk exposure and the expected credit loss rate within the whole duration.

Based on the acceptor credit risk of notes receivable as a common risk feature, it is divided into different combinations, and the accounting estimation policy of expected credit loss is determined:

Combination classification

Withdrawing method

1. Combination of bank acceptances These payments have a lower credit risk

2. Combination of trade acceptances Provision for impairment is withdrawn according to the expected loss rate, which is the same as the combination division of receivables

Methods for measuring loss provision of other financial assets

For financial assets other than the above ones, such as creditor’s rights investment, other creditor’s rights investment, other receivables, long-term receivables other than rents receivable, etc., the Company measures the loss provision according to the general method, namely “three-stage” model.

The Company divides other receivables into several combinations according to the nature of payment, and calculates the expected credit loss on the basis of combinations. The basis for determining the combinations is as follows:

Other accounts receivables combination 1 : low-risk combination, including: accounts receivable from related parties, deposits, margins, reserve loans, advance deposits and other receivables that can be determined to be recovered

Other accounts receivable combination 2 : aging analysis combination (see aging analysis combination of accounts receivable)

Accounting arrangement method of expected credit loss

In order to reflect the change of credit risk of financial instruments after initial recognition, the Company re-measures the expected credit loss at each balance sheet date, and the resulting increase or reversal amount of loss provision shall be included in the current profits and losses as impairment loss or gain, and according to the type of financial instruments, the book value of the financial assets listed in the balance sheet shall be offset or included in the estimated liabilities (loan commitment or financial guarantee contract) or other comprehensive income (debt investment that is measured at fair value and its changes are included in other comprehensive income).

(X) Inventories

1. Classification of inventories

The term “inventories” refer to finished products or merchandise possessed by the Company for sale in the daily business, or work in progress in the process of production, or materials and supplies to be consumed in the process of production or offering labor service. It mainly includes raw materials, turnover materials, entrusted processing materials, in-process products and finished products (inventory goods), etc.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

2. Inventory valuation method

After the inventories are obtained, its initial measurement shall be carried out based on their cost, including purchase cost, processing cost and other costs. The method of weighted mean is adopted for valuation of sending inventories.

3. Determination basis of net realizable value of inventories and method of provision for depreciation

After complete check on inventory at the end of the period, inventory falling price reserves shall be withdrawn or adjusted at the lower of inventory cost and net realizable value. For merchandise inventory which is directly for sale like finished products, commodity stocks, and material for sale, during normal production and marketing process, net realizable value of which shall be determined by subtracting estimated selling expenses and relevant taxes from the estimated sale price; for material inventory needs to be processed, during normal production and marketing process, net realizable value of which shall be determined by subtracting the cost going to happen, the estimated marketing expenses and relevant taxes from the estimated sale price of finished products; for inventory held for performing sales contract or labor contract, net realizable value of which shall be determined on the basis of contract price, if the quantity of inventory is more than the quantity purchases by sales contract, net realizable value of the surplus part shall be calculated as per average sales price.

The inventory falling price reserves shall be withdrawn as per the single inventory item at the end of the period generally, and for inventories with large quantity and relatively low unit prices, the inventory falling price reserves shall be withdrawn according to the inventory type. For the inventories related to the series of products manufactured and sold in the same area, and of which the final use or purpose is identical or similar there to, and if it is difficult to measure them by separating them from other items, the provision for loss on decline in value of inventories shall be made on a combination basis.

If the factors causing any write-down of the inventories have disappeared, the amount of write-down shall be resumed and be reversed from the provision for the loss on decline in value of inventories that has been made. The reversed amount shall be included in the current profits and losses.

4. Inventory system for inventories

Perpetual inventory system is adopted.

5. Amortization method for low-value consumables and wrappage

• (1) One-time amortization method is adopted for the amortization of low priced and easily worn articles;

• (2) One-time amortization method is adopted for the amortization of packing materials.

• (3) Other turnover materials are amortized by one-time write-off method.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

(XI) Held-for-sale assets

1. Determination standards for held-for-sale assets

The non-current assets meeting the following conditions or disposal groups shall be categorized into held-for-sale assets:

• (1) Based on the practice of selling such assets or disposal groups in similar transactions, they can be sold immediately under current conditions;

• (2) The sale is very likely to happen, that is, the Company has made a resolution on a sale plan and obtained a firm purchase commitment, and it is estimated that the sale will be completed within one year.

The confirmed purchase commitment refers to the legally binding purchase agreement signed between the Company and other parties. The agreement contains important terms such as the transaction price, time, and heavy penalty for breach of contract that lead to the smallest possibility to adjust largely or cancel the agreement.

2. Accounting method for held-for-sale assets

For held-for-sale non-current assets for which depreciation or amortization are not be carried out, if the book value is higher than the net value of fair value minus the sales expense, the book value should be written down to the nut value after the fair value minus the dales expense. The write-down amount shall be recognized as the loss of asset impairment and be recorded as the profits or losses for the current period. Simultaneously, a provision for the asset impairment shall be made accordingly.

For the non-current assets or disposal groups classified as held-for-sale type on the obtaining date, they shall be measured at the lower one of the initially measured value when it is not classified as held-for-sale type and the net value of fair value minus the sales expense.

The principles above are applicable to all non-current assets, excluding the investment real estate adopting fair value pattern for subsequent measurement, the biological assets measured at the net value of fair value minus the sales expense, the assets formed by employee payroll, the deferred income tax assets, financial assets meeting accounting standards for financial instruments and the rights generated from the insurance contract meeting relevant accounting standards for insurance contracts.

(XII) Long-term equity investment

1. Determination of initial investment cost

• (1) For the long-term equity investment formed by business combination, please refer to Note IV/(IV) for specific accounting policies Accounting arrangement methods for business combination under and not under the same control.

• (2) Long-term equity investment formed by other modes.

For long-term equity investment obtained by cash payment, the initial investment cost is the amount actually paid for the purchase. The initial cost consists of the expenses directly relevant to the obtainment of the long-term equity investment, taxes and other necessary expenses.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

The initial cost of a long-term equity investment obtained on the basis of issuing equity securities shall be the fair value of the equity securities issued. Transaction costs incurred when issuing or acquiring their own equity instruments may be directly attributable to equity transactions and deducted from equity.

Under the premise that the non-monetary assets exchange is of commercial essence and the fair value of long-term equity investment received or surrendered can be reliably measured, the initial investment cost of intangible asset received during the non-monetary assets exchange shall be recognized based on the fair value of asset surrendered, unless there is any exact evidence showing that the fair value of asset received is more reliable; for the non-monetary assets exchange which fails to meet the above premise, the book value of asset surrendered and relevant taxes and dues payable shall be regarded as the initial investment cost of long-term equity investment.

The initial cost of a long-term equity investment obtained by recombination of liabilities shall be determined on the basis of fair value.

2. Subsequent measurement and profit and loss determination

(1) Cost method

The long term equity investment on the invested enterprise shall be accounted by employing the cost method and it shall be evaluated based on its initial investment cost. If there are additional investments or disinvestments, the long-term equity investment cost shall be adjusted.

Except from cost actually paid in investment and cash dividends or profits declared but not distributed included in consideration, the Company will enjoy the investment income recognized in current period according to cash dividends or profits declared to distribute by the invested company.

(2) Equity method

Equity method shall be applied for the accounting of long-term equity investment of associated enterprise and cooperative enterprise. For equity investment of associated enterprise partially and indirectly held by the Company as a result of investment to risk investment organization, mutual fund, trust company or similar entities such as unit-linked fund, the Company shall account the indirect investment as per its fair value and record its variation into the benefits and losses.

If the initial cost of a long-term equity investment is more than the investing enterprise’ attributable share of the fair value of the invested entity’s identifiable net assets for the investment, the initial cost of the long-term equity investment may not be adjusted. If the initial cost of a long term equity investment is less than the investing enterprise’ attributable share of the fair value of the invested entity’s identifiable net assets for the investment, the difference shall be included in the current profits and losses.

After long-term equity investment is acquired, the investor shall determine the return on investment and other consolidated income according to the net profits and losses and other income of the investee in the same year it shall be enjoyed and shared, and adjust the fair value of the long-term equity investment; the investor shall calculate the proportion enjoyed of the profit or cash dividend announced by the investee to be distributed, reduce the fair value of the long-term equity investment accordingly, and adjust the fair value of the long-term equity investment and include it into the owners’ equity in terms of other changes to the owners’ equity other than net profits and losses, other consolidated income, and profit distribution.

– II-448 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

On the ground of the fair value of all identifiable assets of the investee when the Company obtains the investment, the attributable share of the net profits and losses of the investee shall be recognized after the net profits of the investee are adjusted. The Company’s entitled part of unrealized profits and losses from internal transaction between the Company and associated enterprises or cooperative enterprises shall be offset according to the Company’s entitled proportion. On such basis the investment profits/losses are confirmed.

If Company decides to share the losses of investee, deal with the matter in the following order: firstly, write down the book value of long-term equity investment. If the book value of the long-term equity investment is insufficient for offset, the recognition of the investment losses is continued based on the book value of the long-term equities of the net investment of the investee to offset the book value of long-term receivables. Finally, after the treatment above, if the investment contract or agreement agrees the enterprise shall still bear extra obligations, the accrued liabilities shall be recognized according to obligations to be shouldered and included into current investment losses.

If the investee achieves profitability in the future, Company shall deal with it in the reverse order after deducting the unconfirmed loss sharing amount, write down the book balance of confirmed accrued liabilities, recover the book value of long-term interests of net investment and long-term equity investment constituted on investee substantially and confirm the investment income.

3. Conversion of long-term equity investment by accounting method

• (1) Conversion from fair value measurement to accounting by equity method

With regard to the equity investment having accounting treatment according to financial instrument recognition and measurement standard originally held by the Company that does not have control, joint control or significant influence on the invested entity, if the Company is able to do joint control or significant influence, which does not constitute control, over the invested entity as a result of additional investment or other reasons, the fair value of original equity investment added to new investment cost in accordance with the Accounting Standards for Business Enterprises No. 22 — Recognition and Measurement of Financial Instruments shall be regarded as initial investment cost measured by employing the equity method.

If the original equity investment is categorized as sellable financial assets, the difference between the fair value and the book value, along with the change in the accumulated total fair value originally included in other comprehensive income, shall be transferred to the current profit and loss accounted by the equity method which has been transferred to.

If the initial investment cost calculated with the equity method is smaller than the fair value of the net identifiable assets of the investee enjoyed on the date of increase in investment calculated and determined with the new shareholding ratio, the book value of long-term equity investment shall be adjusted with the balance and included into the current non-operating income.

• (2) Conversion from measurement based on fair value or accounting by equity method to accounting by cost method

For the equity investments held by the Company that have no control, joint control, or significant influence on the investee in accordance with the standards for recognition and measurement of financial instruments, or originally held long-term equity investments in cooperative enterprises or associated enterprises that can control the investee not under the same control due to additional investment and other reasons, in individual financial statement, the sum of book value of original equity investment and newly increased investment cost shall be regarded as the initial investment cost measured by employing the cost method.

– II-449 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

For other comprehensive income of the equity investment confirmed before purchase date, the accounting treatment shall be conducted on the same basis on which the investee directly disposes related assets or liabilities when handling the investment.

If the equity investment held prior to the acquisition date is put under accounting treatment in accordance with the relevant provisions of Accounting Standards for Business Enterprises No. 22 — Recognition and Measurement of Financial Instruments , the accumulated fair value changes previously included in other comprehensive income are transferred to the current profit and loss after the cost method is adopted.

(3) Conversion from accounting by equity method to measurement based on fair value

If significant influence or joint control of the Company is lost due to reasons including the disposal of part of the equity investment, the residual equity after disposal shall be confirmed through financial instrument and accounted according to Accounting Standards for Business Enterprises No. 22 — Recognition and Measurement of Financial Instruments , the difference between the fair value and the book value of the remaining equity on the date of loss shall be included in the current profit and loss.

For other comprehensive income of the original equity investment recognized by the equity method, at the time that the equity method stops being employed, the accounting treatment shall be conducted on the same basis on which the investee directly disposes related assets or liabilities.

(4) Conversion from cost method to equity method

If the Company losses joint control of the invested company as a result of disposal of partial equity investment, and in the individual financial statement the surplus equity is able to carry out joint control and significant influences to the invested company, the equity method shall be used for accounting, and the surplus equity shall be regarded to be accounted and adjusted by equity method same to the equity originally obtained.

(5) Conversion from measurement with cost method to measurement based on fair value

If the Company losses joint control of the invested company as a result of disposal of partial equity investment, and in the individual financial statement the surplus equity is unable to carry out joint control and significant influences to the invested company, it shall be accounted as per Accounting Standards for Business Enterprises No. 22 — Recognition and Measurement of Financial Instruments , and the difference between fair value and book value on the date when losing the joint control shall be included in the current benefits and losses.

4. Disposal of long-term equity investment

During the disposal of a long-term equity investment, the difference between its book value and the actual purchase price shall be included in the current profits and losses. For long-term equity investments checked by the equity method, when the investments are disposed of, the same basis as the investee’s direct disposal of the relevant assets or liabilities shall be used, and the part originally included in other comprehensive income is treated in accordance with the corresponding proportion.

If the clauses, condition and economic impact of each transaction conform to one or more of the following cases during the disposal of equity investment to subsidiaries, these transactions shall be handled in an accounting way as a package deal:

• (1) These transactions are concluded simultaneously or after the consideration of the mutual influence;

– II-450 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

• (2) These transactions can lead to a complete commercial result only when they are in their entirety;

• (3) The occurrence of a transaction relies on the occurrence of at least another transaction;

• (4) A transaction alone is deemed uneconomic but economic when together with other transactions.

If the Company losses control over a subsidiary due to partial disposal of equity investment or other reasons and it is not package deal, individual financial statement and consolidated financial statement shall be distinguished for accounting treatment.

(1) In some financial statements, for disposed equity, the difference between its book value and the actual purchase price shall be included in the current profits and losses. The remaining equity after disposing is recognized and measured by equity method if it is able to have joint control over or significant impact on the investee, and are adjusted also by equity method from the time of obtaining; In case of failing to have joint control or impact on the investee, the remaining equity is recognized according to Accounting Standards for Business Enterprises No. 22 — Recognition and Measurement of Financial Instruments , and the difference between the fair value and book value when losing the joint control occurring is included in current profits and losses.

(2) During preparation of consolidated financial statement, for transactions before losing the control on subsidiaries, disposal of price and long-term equity investment can enjoy the difference of net assets of subsidiary as result of continuous calculation since the date of purchasing or acquisition, the adjust capital reserve (capital premium) should be adjusted, If the capital reserve is insufficient for offset, adjust retained incomes. When the control over subsidiary is lost, the remaining equity shall be recalculated according to its fair value on control loss date. The difference between the sum of consideration received for disposal of equity interest and the fair value of remaining equity interest less the net assets attributable to the original subsidiary calculated continuously since the purchase date based on shareholding percentage before disposal are recognized in investment gain in the period when the control is lost and offset for the business reputation. Other comprehensive income related to equity investment in the subsidiary is transferred to investment gain at the time of control lost.

If the transactions from the disposal of equity investment to the subsidiary till the loss of control belong to package deal, the transactions shall have accounting treatment by taking it as a transaction that disposes the equity investment to the subsidiary and causes control loss. Individual financial statement and consolidated financial statement shall be distinguished for accounting treatment.

(1) In individual financial statement, the balance between each disposal price and the book value of the long-term equity investment corresponding to the disposed equities is recognized as other comprehensive income and it is transferred to the profits and losses at the time of control loss.

(2) In consolidated financial statement, the balance between each disposal price and corresponding net asset proportion of disposed investment over the subsidiary before the control loss shall be recognized as other comprehensive income and it is transferred to the profits and losses at the time of control loss.

– II-451 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

5. Judgment standards of joint control or significant influences

If the Company controls one arrangement with other parties jointly according to regulations and the decisions having significant influences on the return from the arrangement can only exist after consensus from the parties sharing the control right is obtained, it means the arrangement is under joint control of the Company and the other parties and the arrangement is the joint venture arrangement.

If the joint venture arrangement is achieved through an independent entity, the independent entity shall be taken as joint venture when the rights of the Company on the net assets of the independent entity are judged and equity method shall be used for accounting. If it is judged the Company does not have rights on the net assets of the independent entity according to regulations, the independent entity shall confirm items related to profits from joint operation with the Company and have accounting treatment according to Accounting Standards for Business Enterprises.

Significant influence refers to the right of participation in the decisions of financial and operational policies of the investee, not including the right to control, or jointly control with other participants. The Company is judged to have significant influence on the investee through following conditions and after all facts and conditions are considered. (1) The Company has appointed representatives to the board of directors of the investee or such institutions; (2) The Company participates in the preparation of financial and operational policies of the investee; (3) The Company has important transactions with the investee; (4) The Company has appointed management personnel to the investee; and (5) The Company provides key technical data to the investee.

(XIII) Fixed assets

1. Recognition condition of fixed assets

Fixed assets are tangible assets whose service life is in excess of one accounting year and who are held for the sake of producing commodities, rendering labor service, renting or business management. No fixed asset may be recognized unless it simultaneously meets the conditions as follows:

• (1) The economic benefits pertinent to the fixed asset are likely to flow into the enterprise; and

• (2) The cost of the fixed asset can be measured reliably.

2.

Initial measurement of fixed assets

• (1) The cost of a purchased fixed asset consists of the purchase price, the relevant taxes including import tariff, and other expenses that bring the fixed asset to the expected conditions for use and that may be relegated to the fixed asset.

• (2) The cost of a self-constructed fixed asset shall be formed by the necessary expenses incurred for bringing the asset to the expected conditions for use.

• (3) For the fixed assets invested by the investor, their value agreed in the investment contract or agreement shall be ascertained as the entry value. Those assets with unfair value as stipulated in the contract or agreement shall take fair value as the entry value.

– II-452 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

• (4) If the payment for a fixed asset is delayed beyond the normal credit conditions and it is of financing nature in effect, the cost of the fixed asset shall be ascertained based on the current value of the purchase price. The difference between the actual payment and the current value of the purchase price shall be included in the current profits and losses within the credit period, unless it shall be capitalized.

3. Subsequent measurement and disposal of fixed assets

(1) Depreciation of fixed assets

Fixed assets’ depreciation was calculated within estimated service life after reducing estimated net residual value from the entry value of fixed assets. For those fixed assets being provided for impairment loss, the related depreciation charge is determined based on the carrying amounts less impairment over their remaining useful lives.

Fixed assets that have been fully depreciated but are still in use shall not be depreciated.

According to the nature and use of various fixed assets, the service life and net residual value of fixed assets can be determined. And review the service life and salvage value of fixed asset as well as depreciation method at the end of the year. Make corresponding adjustment if the review results are different from the previously estimated amounts.

The depreciation method, depreciation life and yearly depreciation of various fixed assets are as follows:

	Depreciation	Depreciation	Residuals	Yearly
Category	method	Life	rate	depreciation
		(year)	(%)	(%)
Plant and buildings	Straight-line	20-30	5	3.17-4.75
	depreciation
Machinery and equipment	Straight-line	5-10	5	9.50-19.00
	depreciation
Vehicles	Straight-line	10	5	9.50
	depreciation
Office equipment	Straight-line	3-5	5	19.00-31.67
	depreciation
Others	Straight-line	3-5	5	19.00-31.67
	depreciation

(2) Subsequent expenses of fixed assets

If the subsequent expenses related to fixed assets conform to the confirmation conditions of the fixed assets, and then such subsequent expenses shall be included in the costs of the fixed assets; If not conforming to the confirmation conditions of these fixed assets, such subsequent expenses shall be included in the current profits and losses while occurred.

(3) Fixed Assets Disposal

The book values of fixed assets are derecognized when the fixed assets are disposed or no future economic benefits are expected from their use or disposal. Disposal consideration amount from sale, transfer, scrap or damage of fixed assets shall be included in current profits and losses after deducting the book value and related taxes.

– II-453 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

4. Basis of recognition for fixed assets acquired under financial leases, valuation and depreciation methods

Where a lease satisfies one or more of the following criteria, it shall be recognized as a financial lease:

• (1) The ownership of the leased asset is transferred to the lessee when the term of lease expires.

• (2) The lessee has the option to buy the leased asset at a price which is expected to be far lower than the fair value of the leased asset at the date when the option becomes exercisable. Thus, on the lease beginning date, it can be reasonably determined that the option will be exercised.

• (3) Even if the ownership of assets is not transferred, the lease term accounts for the largest proportion of the service life of the leased asset.

• (4) In the case of the lessee, the present value of the minimum lease payments on the lease beginning date amounts to substantially all of the fair value of the leased asset on the lease beginning date.

• (5) The leased assets are of a specialized nature that only the Company can use them without making major modifications.

With regard to the fixed assets under financing lease, a lessee shall record the lower one from the fair value of the leased asset and the present value of the minimum lease payments on the lease beginning date as the entering value in an account. The balance between the recorded amount of the leased asset and the long-term account payable shall be treated as unrecognized financing charges. The initial direct costs such as commissions, attorney’s fees and traveling expenses, stamp duties directly attributable to the leased item incurred during the process of lease negotiating and signing the leasing agreement shall be recorded in the asset value of the current period. The unrecognized financing charges shall be amortized by effective interest method during the periods within the lease term.

In calculating the depreciation of a leased asset under financial lease, the Company shall adopt a depreciation policy for leased assets consistent with that for depreciable assets which are owned by the lessee. If it is reasonable to be certain that the lessee will obtain the ownership of the leased asset when the lease term expires, the leased asset shall be fully depreciated over its service life. If it is not reasonable to be certain that the lessee will obtain the ownership of the leased asset at the expiry of the lease term, the leased asset shall be fully depreciated over the shorter one of the lease term or its useful life.

(XIV) Construction in progress

1. Types of construction in progress

The construction in progress self-constructed by the Company shall be evaluated at its actual cost. The actual cost of it shall be formed by the necessary expenses incurred for bringing the asset to the expected conditions for use, including the material cost, labor cost, relevant taxes paid, borrowing expenses to be capitalized and indirect expenses to be amortized. The construction in progress of the Company is accounted by project classification.

– II-454 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

2. Standards and time point of carrying forward construction in progress as fixed assets

As for construction in progress, all expenses occurred during the construction period before the assets achieve the predetermined serviceable condition shall be recognized as entry value of the fixed assets. Construction of fixed assets in progress whose construction is complete and has achieved the predetermined serviceable condition, but whose final settlement of account has not been processed, shall be transferred to fixed assets by the estimated value according to the project budget, construction cost or the actual cost of the project since the date that they achieved the predetermined serviceable condition. In addition, the depreciation of these fixed assets shall be withdrawn according to the Company’s fixed asset depreciation policy. After the final settlement of account is processed, the previously estimated value shall be adjusted according to the actual cost. The previously withdrawn depreciated value shall not be adjusted.

(XV)Borrowing costs

1. Recognition principle for borrowing costs capitalization

Where the borrowing costs incurred by the Company can be directly attributed to the purchase, construction or production of assets that meet the capitalization conditions, they shall be capitalized if they meet the capitalization conditions and included in the relevant asset costs; other borrowing costs, when incurred, shall be recognized as expenses according to the amount incurred, and included in the current profits and losses.

The term “assets eligible for capitalization” refers to the fixed assets, investment real estate, inventories and other assets, of which the acquisition and construction or production may take a quite long time to get ready for its intended use or for sale.

Capitalization can only be started if the borrowing costs meet the following conditions at the same time:

• (1) The asset disbursements have already incurred, which shall include the cash, transferred non-cash assets or interest bearing debts paid for the acquisition and construction for preparing assets eligible for capitalization;

• (2) The borrowing costs have already incurred;

• (3) Purchase, construction or production activities required for the assets to fulfill the expected serviceable or salable condition have begun.

2.

Borrowing costs capitalization period

The capitalization period shall refer to the period from the commencement to the cessation of capitalization of the borrowing costs, excluding the period of suspension of capitalization of the borrowing costs.

When the qualified asset under acquisition and construction or production is ready for the intended use or sale, the capitalization of the borrowing costs shall be ceased.

When parts of the project of the qualified asset under acquisition and construction or production is ready for the intended use or sale are complete and used separately, the capitalization of the borrowing costs of these parts shall be ceased.

– II-455 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Where each part of an asset under acquisition and construction or production is completed separately and is ready for use or sale during the continuing construction of other parts, but it can not be used or sold until the asset is entirely completed, the capitalization of the borrowing costs shall be ceased when the asset is completed entirely.

3. Capitalization suspension period

Where the acquisition and construction or production of a qualified asset is interrupted abnormally and the interruption period lasts for more than 3 months, the capitalization of the borrowing costs shall be suspended. If the interruption is a necessary step for making the qualified asset under acquisition and construction or production ready for the intended use or sale, the capitalization of the borrowing costs shall continue. Capitalization shall resume after the borrowing costs incurred during such period are recorded into the profits and losses of the current period, and the acquisition and construction or production of the asset restarts.

4. Computation methods of capitalized amount of the borrowing costs

Specifically borrowed loans interest cost (minus the income of interests earned on the unused borrowing loans as a deposit in the bank or as a temporary investment) and auxiliary expenses shall be capitalized before the qualified asset under acquisition and construction or production is ready for the intended use or sale.

The Company shall calculate and determine the to-be-capitalized amount of interests on the general borrowing by multiplying the weighted average asset disbursement of the part of the accumulative asset disbursements minus the general borrowing by the capitalization rate of the general borrowing used. The capitalization rate shall be determined according to the weighted average interest rate of the general borrowings.

Where there is any discount or premium, the amount of discounts or premiums that shall be amortized during each accounting period shall be determined by the real interest rate method, and an adjustment shall be made to the amount of interests in each period.

(XVI) Biological assets

The Company’s biological assets include consumable biological assets and productive biological assets.

1. Recognition conditions of biological assets

No biological asset shall be recognized unless it meets the conditions as follows simultaneously:

• (1) The enterprise owns or controls the biological assets due to past transactions or events;

• (2) The economic benefits or service potential related to the biological assets are likely to flow into the enterprise;

• (3) The cost of this biological asset can be measured reliably.

– II-456 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

2. Initial measurement of biological assets

(1) Consumable biological assets

① The cost of a purchased consumable biological assets consists of the purchase price, the relevant taxes, freight, insurance premium and other expenses that may be directly attributable to the purchase of the assets.

② For the expendable biological assets invested by investors, the entry value of the expendable biological assets shall be the value agreed in the investment contract or agreement plus the relevant taxes and fees payable. However, if the value agreed in the contract or agreement is unfair, the actual cost shall be determined according to the fair value.

③ The cost of self-cultivated, propagated or farmed consumable biological assets consists of the necessary expenses such as the cost of materials including seedlings, fertilizers and pesticides consumed before harvest, labor costs and indirect expenses to be shared.

(2) Productive biological assets

① The cost of purchased productive biological assets consists of the purchase price, relevant taxes, transportation fees, insurance premiums and other expenses that may be directly attributable to the purchase of the assets.

② For the productive biological assets invested by investors, the entry value of the productive biological assets shall be the value agreed in the investment contract or agreement plus relevant taxes and fees payable. However, if the value agreed in the contract or agreement is unfair, the actual cost shall be determined according to the fair value.

③ For the productive biological assets planted by the Company, the cost shall be determined according to the necessary expenses such as seedlings costs, labor costs, materials costs, fertilizers costs, land lease costs and other indirect expenses consumed before achieving the expected production and business objectives (and before harvest). Achieving the intended production and operation objectives means that the productive biological assets enter the normal production period, and can continuously and stably produce agricultural products, provide labor services or rent for many years. The specific conditions are as follows: starting to bear fruits and picking them as the standard for turning into maturity.

1) Accounting methods for immature productive biological assets

Necessary expenditures of immature productive biological assets during the immature period, including seedlings costs, labor costs, materials costs, fertilizers costs, land lease costs and other indirect expenses, shall be directly included in the asset cost. Among them, seedlings costs, direct labor costs, fertilizers costs and land rent costs which can be directly classified into each plot shall be collected in the subject of “productive biological assets-immature productive biological assets”, and indirect costs such as material consumption shall be collected in the “manufacturing expenses” first when they occur, and then included in each plot according to the area apportion.

2) Accounting methods for mature productive biological assets

The related expenses incurred after the mature productive biological assets, including labor costs, material costs, fertilizers costs, utilities, land lease costs and other indirect expenses, shall be collected in the subject of “production cost”; the book value of the carried-over mature productive biological assets shall be depreciated according to the depreciation period, and the depreciation expenses shall be also included in the “production cost”; after the fruits are picked, the “production cost” shall be carried over to “inventory goods”.

– II-457 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

3. Subsequent measurement of productive biological assets

• (1) Depreciation of productive biological assets

The Company accrues depreciation for productive biological assets, and the depreciation method adopts the straight-line depreciation. The Company determines the service life and estimated net residual value of productive biological assets according to their nature, usage and expected realization of relevant economic benefits. At the end of the year, the Company reviews the service life, estimated net residual value and depreciation method of productive biological assets, and make corresponding adjustments if there are differences with the original estimates.

The Company’s productive biological assets are estimated to have no net residual value, and the estimated service life and annual depreciation rate are as follows:

	Estimated	Yearly
Asset type	service life	depreciation
	(year)	(%)
Passion fruit	2	50.00
Mango	10	10.00
Pitaya	4	25.00
Pineapple	2	50.00
Banana	2	50.00
Sugarcane	2	50.00
Papaya	3	33.33
Guava	4	25.00

• (2) Disposal of biological assets

When harvesting or selling consumable biological assets, the weighted average method is used to carry over the cost; the cost of biological assets after use conversion is determined according to the book value at the time of use conversion; when the biological assets are sold, damaged or in short supply, the balance of the disposal income after deducting the book value and related taxes and fees shall be included in the current profit and loss.

4. Impairment of biological assets

The Company shall, at least at the end of each year, review the consumptive biological assets and productive biological assets. If any well established evidence indicates that the realizable net value of any consumptive biological asset or the recoverable amount of any productive biological asset is lower than its book value as a result of natural disaster, plant diseases and insect pests or change of market demand, the enterprise shall, based on the difference between the realizable net value or the recoverable amount and the relevant book value, make provision for the loss on decline in value of or for the impairment of the biological asset and shall include it in the current profits and losses.

If the influencing factors of the impairment of consumptive biological assets have disappeared, the amount of write down shall be restored and reversed within the amount of the original provision for falling price, and the amount reversed shall be included in the current profits and losses. Once the provision for impairment of a productive biological asset is withdrawn, it shall not be reversed.

– II-458 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

On the balance sheet date, the Company measures the productive biological assets according to the lower of book value and recoverable amount, and withdraw the provision for impairment of productive biological assets according to the difference between the recoverable amount of individual assets and book value. Once the impairment loss of productive biological assets is recognized, it will not be reversed in the following accounting period.

(XVII) Intangible assets and development expenses

Intangible assets refer to the identifiable non-monetary assets possessed or controlled by the Company which have no physical shape. It includes land use right, patent right, trademark right and software, etc.

1. Initial measurement of intangible assets

Cost of the outsourcing intangible assets shall include purchase price, relevant taxes and other necessary expenditures directly attributable to intangible assets for expected purpose. The price of buying intangible assets exceeds the delayed payment at normal credit condition, which actually has a financing property, the cost of the intangible assets shall be determined based on the present value of the price.

For the intangible assets used for debt payment, the fair value of the intangible assets shall be used as basis for its entry value determination. The balance between the book value and the fair value of the intangible assets used for debt payment shall be included into current loses and gains.

Under the premise that the non-monetary assets exchange is of commercial essence and the fair value of intangible assets received or surrendered can be reliably measured, the entry value of intangible asset received during the non-monetary assets exchange shall be recognized based on the fair value of asset surrendered, unless there is any exact evidence showing that the fair value of asset received is more reliable; for the non-monetary assets exchange which fails to meet the above premise, the book value of asset surrendered and relevant taxes and dues payable shall be regarded as the cost of intangible asset and no profits and losses will be recognized.

The entry value of intangible asset obtained by consolidation merger of enterprises under the same control shall be recognized based on the book value of merged enterprise; the entry value of intangible asset obtained by consolidation merger of enterprises not under the same control shall be recognized based on the fair value of merged enterprise.

The costs of internal self-developed intangible assets shall include: the cost of materials consumed, labor cost and registration charges occurred while developing the intangible assets; the amortization charge of other patents and franchises used as well as the interest cost spent to meet the capitalization requirements during the development process; as well as other direct costs attributable to intangible assets for the expected purpose.

2. Subsequent measurement of intangible assets

The Company analyzes and judges the service life of intangible assets when it obtains intangible assets and they are classified as intangible assets with limited service life and intangible assets with limited service life without undetermined service life.

– II-459 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

• (1) Intangible assets with limited service life

Intangible assets with limited service life shall be amortized by straight-line method in the period in which economic benefits are brought for the Company. Expected service life of intangible assets with limited service life and calculation basis:

Item	Expected useful life	Basis
Land use right	40 years/50 years/70	The service life is determined by the
	years	contract or by reference to the
Patent right	10 years	period that can bring economic benefits to the Company
Trademark right	10 years
Software	3-5 years

At the end of each year, the service life and the amortization method of intangible assets with limited service life shall be rechecked. Make corresponding adjustment if the review results are different from the previously estimated amounts.

According to the review, the service life and amortization method of intangible assets at the end of this period do not differ from previous estimation.

• (2) Intangible assets with uncertain service life

During the reporting period, the Company had no intangible assets with uncertain service life.

3. Detailed standards for dividing research and development stages of internal R&D projects:

Research stage: The stage of creative and planned investigation and research to acquire and understand new scientific or technological knowledge.

Development stage: The stage that the research results or other knowledge is used for a plan or design to produce something new or substantive improved materials, devices and products before commercial production or use.

The expenditure occurred during the research stage of internal R&D project shall be included into the profits and losses of current period when it occurred.

4. Detailed conditions for the capitalization of expenses during the development stage

Expenditures incurred during the development stage of internal research and development project that simultaneously meet the following conditions shall be recognized as intangible assets:

• (1) It is feasible technically to finish intangible assets for use or sale;

• (2) It is intended to finish and use or sell the intangible assets;

• (3) The usefulness of methods for intangible assets to generate economic benefits shall be proved, including being able to prove that there is a potential market for the products manufactured by applying the intangible assets or there is a potential market for the intangible assets itself or the intangible assets will be used internally;

• (4) It is able to finish the development of the intangible assets, and able to use or sell the intangible assets, with the support of sufficient technologies, financial resources and other resources;

– II-460 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

• (5) The development expenditures of the intangible assets can be reliably measured.

The expenditure not meeting conditions above is included into the profits and losses of current period when it occurs. Development expenses accounted into profits and losses in previous period are no longer re-confirmed as assets. Expenses at the development stage capitalized are listed as development expenses in the balance sheet, and are converted into intangible assets when the Project reaches the estimated usable conditions.

(XVIII) Impairment of long-term assets

The Company shall, on the day of balance sheet, make a judgment on whether there is any sign of possible impairment of long-term assets. If the long-term assets have sign of possible impairment, recoverable amount should be estimated by the Company based on single assets. If it is not possible to estimate the recoverable amount of single assets, the recoverable amount of the asset group to which the asset belongs is recognized.

The recoverable amount shall be determined in light of the higher one of the net amount of the fair value of the assets minus the disposal expenses and the current value of the expected future cash flow of the assets.

Where the measurement result of the recoverable amount indicates that an asset’s recoverable amount is lower than its book value, the book value of the long-term asset shall be recorded down to the recoverable amount, and the reduced amount shall be recognized as the loss of long-term asset impairment and be recorded as the profit or loss for the current period. Simultaneously, a provision for the asset impairment shall be made accordingly. Once any loss of asset impairment is recognized, it shall not be switched back in the future accounting periods.

After the loss of asset impairment has been recognized, the depreciation or amortization expenses of the impaired asset shall be adjusted accordingly in the future periods so as to amortize the post-adjustment book value of the asset systematically (deducting the expected net residual value rate) within the residual service life of the asset.

No matter there is any sign of possible assets impairment or not, the business reputation formed by business combination and intangible assets with uncertain service life are subject to impairment test at the end of each year.

In impairment test for business reputation, book value of business reputation shall be amortized to assets groups or combination of assets groups which are expected to benefit from the synergy effect of business combination. When making an impairment test on the relevant asset groups or combination of asset groups containing business reputation, if any evidence shows that the impairment of asset groups or combinations of asset groups is possible, the enterprise shall first make an impairment test on the asset groups or combinations of asset groups not containing business reputation, calculate the recoverable amount, compare it with the relevant carrying value and recognize the corresponding impairment loss. Then the enterprise shall make an impairment test of the asset groups or combinations of asset groups containing business reputation, and compare the carrying value of these asset groups or combinations of asset groups(including the carrying value of the business reputation apportioned thereto) with the recoverable amount. Where the recoverable amount of the relevant assets or combinations of the asset groups is lower than the carrying value thereof, it shall recognize the impairment loss of the business reputation.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

(XIX) Long-term unamortized expenses

1. Amortization method

Long-term unamortized expenses refer to the Company’s various costs that have occurred and are apportioned by the current and future periods which is longer than 1 year. Long-term unamortized expenses shall be amortized within benefit period by method of line.

2. Amortization life (year)

Category	Amortization life	Remarks
	(year)
Decoration and reconstruction	3-5
expenditure
Land lease expense	Settlement period	The settlement period of the leased
	agreed in the contract	land of the Company has different
		settlement periods such as 4 years
		and 5 years

(XX)Employee compensation

Employee compensation refers to the remuneration or compensation offered by the Company for the purpose of acquiring the services provided by the employees or terminating labor relationships. Employee compensation includes short-term compensation, post-employment benefit, dismission benefit, and other long-term employee benefit.

1. Short-term compensation

Short-term compensation refers to employee compensation that shall be fully paid by the Company within 12 months after annual report period of related services provided by employees, except post-employment welfare, dismission welfare. In the accounting period when the employees provide services to the Company, the short-term compensation payable shall be confirmed as liabilities, and shall be included in related asset costs and fees according to the benefit objects of the service provided by the employees.

2. Post-employment welfare

Post-employment welfare refers to the various forms of remuneration or compensation offered by the Company for the purpose of acquiring the services provided by the employees after employee retirement or termination of labor relations with the Company, except for short-term compensation and dismission welfare. The Company classifies post-employment welfare plan as defined contribution plan and defined benefit plan.

The defined contribution plan is mainly to participate in social basic endowment insurance and unemployment insurance organized and implemented by local labor and social security institutions; during the accounting period when employees provide services for the Company, the amount of deposit payable calculated according to the defined contribution plan is recognized as a liability and included in the current profits and losses or related asset costs.

After paying the above funds regularly according to the standard specified by the State, the Company will be free of other payment obligations.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

3. Termination benefits

Termination benefits refers to the compensation made by the Company to the employees for the termination of the labor relationship with any employee prior to the expiration of the relevant labor contract or for encouraging the employee to accept a layoff. When the Company cannot unilaterally withdraw the dismission welfare stated on labor service relationship termination plan or layoff proposal or the Company is confirming the cost and expense in relation to the restructuring of paying dismission welfare (the earlier one shall be applied), liabilities caused by dismission welfare shall be confirmed and included in current profits and losses.

4. Other long-term employee welfare

Other long-term employee welfare refers to other employee welfare except from short-term salaries, post-employment welfare and dismission welfare.

For other long-term employee welfare conforming to defined contribution plan, within accounting period during which employees provide service for the company, the amount payable shall be determined as liability and included into current profits and losses or relevant asset cost. For other long-term employee welfare except that mentioned above, the amount shall be calculated with the expected cumulative welfare unit method on the balance sheet date and the welfare obligations produced by the defined benefit plan shall be attributed to the period during which employees provide service and be included into current profits and losses or relevant asset cost.

(XXI) Estimated liabilities

1. Recognition principles for estimated liabilities

The obligation pertinent to contingencies shall be recognized as an estimated liability when the following conditions are satisfied simultaneously:

The obligation is the current obligation assumed by the Company;

The performance of this obligation is likely to lead to an outflow of economic interests;

The amount of the obligation can be reliably measured.

2. Measurement methods of accrued liabilities

The estimated liabilities of the Company shall be initially measured in accordance with the liability estimate of the necessary expenses for the performance of the current obligation.

The Company takes into account the contingencies related risk, uncertainty, time value of money, and other factors when determining the best estimate. If the time value of money is of great significance, the best estimate shall be determined after discounting the relevant future outflow of cash.

The best estimate shall be conducted in accordance with the following situations respectively:

If there is a continuous range (or interval) for the necessary expenses and if all the outcomes within this range are equally likely to occur, the best estimate shall be determined in accordance with the middle estimate within the range, i.e. the average number of the maximum amount and minimum amount.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

In the event that there is no continuous range (or interval) or that there is a continuous range but the outcomes within this range are unlikely to occur equally, if single item is involved in the contingencies, the best estimate shall be determined based on the amount most likely to occur; and if several items are involved in the contingencies, the best estimate shall be determined based on various possible outcomes and relevant probability calculation.

If all or some of the expenses necessary for the liquidation of estimated liabilities of the Company are expected to be compensated by a third party, the compensation shall be separately recognized as an asset when it is virtually certain that the reimbursement will be obtained and the compensation recognized shall not be in excess of the estimated liability book value.

(XXII) Revenue

1. Standard for determining the time of revenue recognition from goods sales

The accounting policies applicable after January 1, 2020. The Company has transferred the significant risks and rewards of ownership of the goods to the buyer; the Company retains neither continuous management right that usually keeps relation with the ownership nor effective control over the sold goods; the amount of revenue can be measured in a reliable way; relevant economic benefits may flow into the Company; when relevant cost incurred or to be incurred can be reliably measured, recognize the sales revenue. If the collection of the price as stipulated in the contract or agreement is delayed and if it has the financing nature, the revenue incurred by selling goods shall be ascertained in accordance with the fair value of the receivable price as stipulated in the contract or agreement. Specific methods to recognize the Company’s revenue:

The Company mainly sells fruit juice, quick-frozen products, fresh fruits and other products.

(1) Revenue recognition of domestic products: the products are delivered to the buyer according to the contract, and the Company recognizes the revenue according to the date of the receipt; if there is no receipt, the revenue is recognized after the acceptance objection period determined according to the contract.

(2) Revenue recognition of export products: the export products of the Company are mainly in FOB form, and the delivery place is offshore port, and the bill of lading is obtained as the evidence for collection, and the date of customs declaration, shipment and export is taken as the time point for revenue recognition.

2. Basis of determining revenue from transferring use right of the assets

When the revenue amount can be reliably measured, it is likely that economic benefits relating to trades will flow into the company. The amount of revenue resulting from alienating asset-use right shall be determined respectively in the following situations:

• (1) The amount of interest revenue shall be measured and recognized in accordance with the length of time for which the Company’s monetary capital is used by others and the actual interest rate.

• (2) The amount of royalty revenue should be measured and confirmed in accordance with the period and method of charging as stipulated in the relevant contract or agreement.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

3. Basis and method of determining the revenue from providing labor services

If the result of the labor service transaction can be estimated reliably on the balance sheet date, the revenue from the labor service transaction shall be recognized by the completion percentage method, and the completion progress of the labor service transaction shall be determined according to the proportion of the already incurred labor cost to the estimated total cost.

The outcome of a transaction concerning the providing of labor services can be measured in a reliable way, means that the following conditions shall be met simultaneously:

• (1) The revenue amount can be measured reliably;

• (2) Relevant economic benefits are likely to flow into the Company;

• (3) The completion schedule of the transaction can be reliably determined;

• (4) The costs incurred or to be incurred in the transaction can be measured in a reliable way.

The Company ascertains the total revenue from the providing of labor services in accordance with the received or to-be-received price as stipulated in the contract or agreement, unless the received or to-be-received price as stipulated in the contract or agreement is unfair. The Company shall, on the date of the balance sheet, ascertain the current revenue from providing labor services in accordance with the amount of multiplying the total amount of revenues from providing labor services by the schedule of completion then deducting the accumulative revenues from the providing of labor services that have been recognized in the previous accounting periods. At the same time, the enterprise shall carry forward the current cost of labor services in accordance with the sum of multiplying the total amount of revenues arising from the providing of labor services by the schedule of completion and then deducting the accumulative revenues from the providing of labor services.

If the Company cannot, on the date of the balance sheet, measure the result of a transaction concerning the providing of labor services in a reliable way, it shall be conducted in accordance with the following circumstances, respectively:

• (1) If the labor cost incurred is expected to be compensated, the labor service income shall be recognized according to the amount of labor service costs incurred and carried forward at the same amount.

• (2) If the cost of labor services incurred is not expected to compensate, the cost incurred shall be included in the current profits and losses, and no revenue from the rendering of service shall be recognized.

Where a contract or agreement signed between enterprises concerns selling goods and providing of labor services, if the part of sale of goods and the part of providing labor services can be distinguished from each other and can be measured respectively, the part of sale of goods shall be conducted as selling goods and the part of providing labor services shall be conducted as providing labor services. If the part of sale of goods and the part of providing labor services can be distinguished from each other and can be measured respectively, the part of sale of goods shall be conducted as selling goods and the part of providing labor services shall be conducted as providing labor services.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

(XXIII) Government grants

1. Type

A government grants refers to the monetary and non-monetary assets obtained by an company from the government free of charge, excluding the capital invested by the government as the owner of the company. Based on the objects regulated by governmental documents, the government grants are classified into government grants related to assets and government grants related to income.

The Company defines the government grants for purchasing or constructing or otherwise forming long-term assets as asset-related government grants; other government grants are defined as the income-related government grants.

2. Recognition of government grants

If the Company meets the financial support policy and receives financial support funds, the government grants shall be recognized according to the actual amount received.

If a government grant is a monetary asset, it shall be measured in the light of the received or receivable amount. If a government grant is a non-monetary asset, it shall be measured at its fair value. If its fair value cannot be obtained in a reliable way, it shall be measured at its nominal amount (RMB1). The government grants measured at their nominal amounts shall be directly included in the profits and losses of current period.

3. Accounting arrangement method

The government grants pertinent to assets shall be recognized as the deferred income and they shall be included to the profits or losses on a reasonable and systematic basis within the service life of constructed or purchased assets;

The government grants pertinent to income and used for compensating the related future expenses or losses of an enterprise shall be recognized as deferred income and shall be included in the current profits and losses during the period when the relevant expenses or losses are recognized. The grants used for compensating the related expenses or losses of the enterprise incurred shall be directly included in the current profits and losses at receiving.

Government grants related to daily activities of the Company are included in other income and others are included in non-operating income.

The received government grants related to preferential policy loans are used to offset related borrowing costs. When the recognized government grant needs to be refunded, if there is related deferred income balance, the book balance of the deferred income shall be written down, while the excessive part shall be included in the current profits and losses; if there is no relevant deferred income, the subsidy shall be directly included in the current profits and losses.

(XXIV) Deferred tax assets and deferred tax liabilities

Deferred tax assets and deferred tax liabilities are calculated and recognized based on the differences (temporary differences) arising from the tax bases of assets and liabilities and their book value. On the balance sheet date, the deferred tax assets and deferred tax liabilities shall be measured at the tax rate applicable to the period during which the assets are expected to be recovered or the liabilities are expected to be settled.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

1. Basis of recognizing deferred tax assets

The Company sets the income tax payable likely to be acquired to offset against the deductible temporary difference and deductible loss and tax credits that can be carried forward to the next year as the deadline to recognize the deferred tax assets generated by the deductible temporary difference. However, deferred tax assets arising from the initial recognition of assets or liabilities in transactions with the following characteristics shall not be recognized: (1) business combination; (2) transactions or events directly recognized in owner’s equity.

As for the deductible temporary difference of taxable relevant to the investment of associated enterprises, the corresponding deferred tax assets can be recognized when it can simultaneously meet the following the conditions: the temporary difference is likely to turn back, and the amount of the taxable can be obtained to offset the deductible temporary difference at a high possibility in the future.

2. Basis for confirming deferred tax liabilities

The Company confirms the taxable temporary differences payable but unpaid in current period and previous period as the deferred tax liabilities. but excluding:

(1) The temporary differences generated through initial recognition of business reputation;

(2) Transactions formed by business combination or transactions or events directly recognized in owner’s equity;

(3) The turning-back time of the temporary difference of taxable relevant to the investment of subsidiaries and associated enterprises can be controlled, or the temporary difference will not turn back at a very high possibility in a foreseeable future.

3. When meeting all the following conditions, the deferred tax assets and liabilities are listed as net amount after offset

(1) The Company is entitled to settle the current income tax assets and current income tax liabilities in net amount;

(2) The deferred tax assets and deferred tax liabilities are associated with the income tax imposed for the same subject of taxation or different subject of taxation by the same tax collection and management department. However, during each important deferred tax assets and liabilities reverse period in the future, the subject of taxation involved is intended to settle the current income tax assets and liabilities or acquiring assets to pay off debts.

(XXV) Operating lease and financing lease

If the leasing clauses transfer in substance all the risks and rewards related to the ownership of an asset to the leasee, it is a financial lease. Otherwise, it is operating lease.

1. Accounting treatment method of operating lease

• (1) Assets leased in under operating lease

Lease expense paid by the Company for leased assets should be amortized with the method of straight line within the entire lease term without deducting the rent-free period and should be included into current expenses. The initial direct costs pertinent to lease transactions paid by the Company are included into current expenses.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

If the assets leasor has paid the fees pertinent to leasing that shall be paid by the Company, the Company will deduct the fees from the total rental and amortize the remaining rental within the lease term and include it into current expenses.

(2) Assets leased out under operating lease

lease expense collected by the Company for leased assets should be amortized with the method of straight line within the entire lease term without deducting the rent-free period and should be recognized as rental income. Initial direct costs pertinent to lease transactions paid by the Company should be included into current expenses. If the amount is large, the initial direct cost should be capitalized and included into current profits on the basis of basic installation of the equal rental income within the entire lease term.

If the Company has paid the fees pertinent to leasing which shall be paid by the leasee, it will deduct the fees from total rental and amortize the remaining within the lease term.

2. Accounting arrangement method of financial lease

(1) Assets leased in under financial lease: On the lease beginning date, a lessee shall record the lower one between the fair value of the leased asset and the present value of the minimum lease payments on the lease beginning date as the entry value in an account, recognize the amount of the minimum lease payments as the entry value in an account of long-term account payable, and take their difference as unrecognized financing cost. Please see Note IV/(XIII) Fixed Assets for the conditions of recognition, valuation and depreciation methods for assets leased in under financial lease.

For the financing expenses not recognized, the Company adopts the effective interest rate method for amortization in assets leasing period and includes them to financial expenses.

(2) Assets leasing leased out under financial lease: On the beginning date of the lease term, the leasor shall recognize the balance between the sum of receivable financial lease payment and unguaranteed residual value and the current value as unrealized financing income and recognize the rent received in the future as rental income. The initial direct expenses pertinent to leasing transaction should be included into initial measurement of receivable financial lease payment and confirmed amount of revenue received within lease term should be reduced.

(XXVI) Changes in major accounting policies and accounting estimates

1. Change in accounting policy

① Changes in accounting policies caused by the implementation of the new income standards. On July 5, 2017, the Ministry of Finance issued the Accounting Standards for Business Enterprises No. 14 — Income (Rev. 2017) (CK [2017] No.22) (hereinafter referred to as the “New Income Standards”). On January 1, 2020, the Company began to implement the aforementioned New Income Standards. The New Income Standards establish a new income recognition model for regulating the income generated by contracts signed with customers. In order to implement the New Income Standards, the Group reassessed the recognition, measurement, accounting and presentation of income from major contracts. According to the provisions of the New Income Standards, the accumulated impact amount of the first implementation is adjusted to the amount of retained earnings and other related items in the financial statements at the beginning of the current period (i.e. January 1, 2020), and the information of comparable periods is not adjusted. The change and impact of the implementation of the New Income Standards on the Company is to change the contract consideration received from customers in advance for the transfer of goods from the item of “advance receipts” to the item of “contract liabilities”.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

From January 1, 2020, the New Income Standards adjustment was implemented for the first time; the related items in the financial statements at the beginning of the first implementation year are as follows:

(1) Consolidated balance sheet

	31 December	1 January	Amount of
Report item	2019	2020	adjustment
Accounts received in advance	2,692,363.10		-2,692,363.10
Contract liabilities		2,692,363.10	2,692,363.10
(2) Company balance sheet
	31 December	1 January	Amount of
Report item	2019	2020	adjustment
Accounts received in advance	1,817,182.84		-1,817,182.84
Contract liabilities		1,817,182.84	1,817,182.84

2. Change in accounting estimates

There is no change in accounting estimates in the reporting period.

V. Taxes

(I) Main tax categories and tax rates of the Company

Tax type	Taxation basis	Tax rates
VAT (Note 1)	Sales of goods	17%, 11%, 16%, 10%,
		13%, 9%
Urban maintenance and construction tax	Paid-in turnover tax	5%
Educational surcharges	Paid-in turnover tax	3%
Local educational surcharges	Paid-in turnover tax	2%
Enterprise income tax	Taxable income	15%, 25%

• Note 1: (1) According to the Provisional Regulations of the People’s Republic of China on Value-Added Tax (Order No. 538 of the State Council of the People’s Republic of China), “Article 8, (III) In addition to obtaining special VAT invoices or customs import VAT payment books, the input tax shall be calculated according to the purchase price of agricultural products and the deduction rate of 13% indicated on the agricultural product purchase invoices or sales invoices”, for the agricultural products purchased by the company and its subsidiaries before July 1, 2017, the input tax shall be calculated at a deduction rate of 13% and deducted from the output tax.

• (2) According to the Notice of the Ministry of Finance and the State Administration of Taxation on the Policy of Degenerating VAT Rate (CS [2017] No. 37), the input tax of agricultural products purchased by the company and its subsidiaries from July 1, 2017 is calculated at a deduction rate of 11% and deducted from the output tax.

• (3) According to the State Administration of Taxation Announcement No. 19, 2017, Annex 3 of the State Administration of Taxation on matters related to adjusting the VAT tax return, regarding the Adjustment of the VAT Tax Return (Applicable to General Taxpayers) and its attached information filling description, when the company and its subsidiaries will use the purchased agricultural products for production and sales or entrust the processing of goods with a tax rate of 17% from July 1, 2017, the input tax shall be calculated at a deduction rate of 11% plus 2% and deducted from the output tax.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

• (4) According to CS [2009] No. 9 Notice of the Ministry of Finance and the State Administration of Taxation on the application of low VAT rate and simple measures to collect VAT policy for some goods, and the Notice of the Ministry of Finance and the State Administration of Taxation on Printing and Distributing Notes on the Taxation Scope of Agricultural Products (CSZ [1995] No. 52), the company and its subsidiaries sell frozen products at a VAT rate of 13%.

• (5) According to the Notice of the Ministry of Finance and the State Administration of Taxation on Adjusting the VAT Rate (CS [2018] No. 32), since May 1, 2018, for manufacturing taxpayers engaged in VAT sales or import and export of goods, if the original applicable tax rates are 17% and 11%, such tax rates shall be adjusted to 16% and 10% respectively. For taxpayers purchasing agricultural products, if the original applicable deduction rate is 11%, such deduction rate shall be adjusted to 10%.

• (6) According to the notice of the Ministry of Finance and the State Administration of Taxation on the adjustment of the VAT rate, since April 1, 2019, for the manufacturing taxpayers engaged in VAT sales or import and export of goods, if the original applicable tax rates are 16% and 10%, such tax rates shall be adjusted to 13% and 9% respectively. For taxpayers purchasing agricultural products, if the original applicable deduction rate is 11%, such deduction rate shall be adjusted to 10%.

(II) Description of enterprise income tax rate of different taxpayers:

	Income tax
Name of taxpayer	rate
Tianye Innovation Corporation	15%
Hainan Dachuan Food Co., Ltd.	15%
Guangxi Tianye Innovation Agricultural Technology Co., Ltd.	25%
Hainan Tianye Drinks Food Sales Co. Ltd.	25%
Hubei Iceman Foods Co., Ltd.	25%
Hubei Tianye Nonggu Biological Technology Co., Ltd.	25%
Hubei Tianye Innovation Nonggu Fruit & Vegetable Co., Ltd.	25%
Panzhihua Tianye Innovation Agricultural Technology Co., Ltd.	15%

(III) Policies and basis of tax preference

1. VAT tax preference

According to the Provisional Regulations of the People’s Republic of China on Value-Added Tax (Order No. 538 of the State Council of the People’s Republic of China), “Article XV (I) Self-produced agricultural products sold by agricultural producers shall be exempted from value-added tax”, with the approval of Nanning State Taxation Bureau and Nanning Yongning State Taxation Bureau, Guangxi Tianye Innovation Agricultural Technology Co., Ltd., a wholly-owned subsidiary of the Company, shall be exempted from value-added tax on its own crops and fruits and vegetables, which will be implemented from January 1, 2014.

2. Tax preference for enterprise income tax

(1) Tianye Innovation Corporation

According to the Regulations for the Implementation of the Enterprise Income Tax Law of the People’s Republic of China (Order No. 512 of the State Council of the People’s Republic of China), the Notice of the Ministry of Finance and the State Administration of Taxation on Issuing the Scope of Primary Processing of Agricultural Products Enjoy Preferential Policies of Enterprise Income Tax (Trial) (CS [2008] No. 149) and the provisions on “primary processing of agricultural products shall be exempted from enterprise income tax”, the Company’s products (quick-frozen pineapple, corn, mango, papaya, seedless passion fruit puree) belong to the primary processing of agricultural products and are exempt from enterprise income tax. The preferential policies for

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

reducing and exempting enterprise income tax have been audited and filed by the State Taxation Bureau of Hepu County (HGSBZ [2013] No. 201), and the preferential enterprise income tax policy has been implemented from January 1, 2012.

According to the Notice on Tax Policy Issues Concerning the In-depth Implementation of the Western Development Strategy (CS [2011] No. 58) and the Catalogue of Encouraged Industries in the Western Region (Order No. 15 of the National Development and Reform Commission of the People’s Republic of China), Tianye Innovation Corporation is an encouraged industrial enterprise located in the western region, and its enterprise income tax is levied at a reduced rate of 15%. According to the Announcement of the State Administration of Taxation on Issuing the Revised “Measures for Handling Preferential Policies for Enterprise Income Tax” (Announcement No. 23 of the State Administration of Taxation, 2018), Tianye Innovation Corporation enjoys the tax preference according to the handling method of “self-determination, declaration and enjoyment, and keeping relevant materials for future reference”.

(2) Hainan Dachuan Food Co., Ltd.

1) According to Article 27 of the Enterprise Income Tax Law of the People’s Republic of China and Article 86 of its implementing regulations, CS [2008] No. 149, CS [2011] No. 26, GSBF [2011] No. 132, Announcement of State Administration of Taxation (No. 2 [2010]) and Announcement of State Administration of Taxation Announcement (No. 48 [2011]), the puree juice produced by Hainan Dachuan Food Co., Ltd., a wholly-owned subsidiary of the Company, belongs to the primary processing range of agricultural products and is exempt from enterprise income tax. The preferential reduction and exemption of enterprise income tax has been examined and approved by the State Taxation Bureau of Ding’an County, Hainan Province (DGST [2013] No. 258) and has been implemented from January 1, 2011.

2) According to the Notice on Issuing the Scope of Primary Processing of Agricultural Products Enjoy Preferential Policies of Enterprise Income Tax (CS [2008] No. 149) issued by the Ministry of Finance and the State Administration of Taxation, the fruit and vegetable juice products produced by Hainan Dachuan Food Co., Ltd., a wholly-owned subsidiary of the Company, are primary processed products of fruits and vegetables, which have been exempted from enterprise income tax as determined by the State Taxation Bureau of Ding’an County, such exemption has been implemented from January 1, 2013.

3) According to the announcement of Hainan Provincial Taxation Bureau of State Administration of Taxation on the preferential policies for enterprise income tax in Hainan Free Trade Port (Announcement No. 4 of Hainan Provincial Taxation Bureau of State Administration of Taxation in 2020), the Enterprise Income Tax Law of the People’s Republic of China and its implementation regulations (hereinafter referred to as the “implementation regulations”), and the Notice of the Ministry of Finance and the State Administration of Taxation on the Preferential Policies for Enterprise Income Tax in Hainan Free Trade Port (CS [2020] No. 31), for enterprises of encouraged industries registered in Hainan Free Trade Port and substantially operated, the enterprise income tax will be levied at a reduced tax rate of 15%. It was implemented from January 1, 2020.

(3) Guangxi Tianye Innovation Agricultural Technology Co., Ltd.

According to Article 27 of the Enterprise Income Tax Law of the People’s Republic of China and Article 86 of its implementing regulations, CS [2008] No. 149, GSH [2008] No. 890, GSH [2009] No. 779, CS [2011] No. 26 and Announcement of the State Administration of Taxation (No. 8 [2011]), the fruits planted by Guangxi Tianye Innovation Agricultural Technology Co., Ltd., a wholly-owned subsidiary of the Company, has been exempted from enterprise income tax. Preferential policies for reducing and exempting enterprise income tax have been audited and filed by Nanning State Taxation Bureau.

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

VI. Notes to Main Items of the Consolidated Financial Statements

(All amounts in RMB unless otherwise stated)

Note 1. Monetary funds

Item Cash on hand Bank deposit Other monetary funds Total	Closing balance 63,097.64 218,036,461.60 104,080.63 218,203,639.87	Opening balance 6,855.47 256,736,477.57 853,901.84
		257,597,234.88

Note:

As of June 30, 2020, there was no money pledged, frozen or with potential recovery risk.

Note 2. Accounts receivable

1. Disclosure of accounts receivable by aging

Aging Within 1 year 1-2 years 2-3 years 3-4 years 4-5 years 5+ Years Subtotal Less: bad debt provision Total	Closing balance 34,817,937.03 5,630,201.90 4,407,370.77 903,624.60 45,759,134.30 4,077,940.57 41,681,193.73	Closing balance of last year 52,566,886.06 7,277,231.45 3,181,123.50 799,097.00 63,824,338.01 4,709,952.99
		59,114,385.02

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APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

2. Disclosed by bad debt provision methods

Category Accounts receivable for which bad debts reserve is set aside individually Accounts receivable for which provision for bad debts is set aside in portfolios Including: combination 1 Combination 2 Total Category Accounts receivable for which bad debts reserve is set aside individually Accounts receivable for which provision for bad debts is set aside in portfolios Including: combination 1 Combination 2 Total	Closing balance Book balance Bad-debt provision Amount Proportion Amount Proportion (%) (%) 45,759,134.30 100.00 4,077,940,57 8.91 45,759,134.30 100.00 4,077,940,57 8.91 45,759,134.30 100.00 4,077,940.57 8.91 Closing balance of last year Book balance Bad-debt provision Amount Proportion Amount Proportion (%) (%) 63,824,338.01 100.00 4,709,952.99 7.38 63,824,338.01 100.00 4,709,952.99 7.38 63,824,338.01 100.00 4,709,952.99 7.38	Book value 41,681,193.73 41,681,193.73
		41,681,193.73
		Book value 59,114,385.02 59,114,385.02
		59,114,385.02

3. Accounts receivable for expected credit loss withdrawn by combination

Aging <1 year 1-2 years 2-3 years 3-4 years 4-5 years >5 years Total	Accounts receivable 34,817,937.03 5,630,201.90 4,407,370.77 903,624.60 45,759,134.30	Closing balance Bad-debt provision Proportion (%) 1,740,896.85 5.00 563,020.19 10.00 1,322,211.23 30.00 451,812.30 50.00 4,077,940.57

– II-473 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Aging <1 year 1-2 years 2-3 years 3-4 years 4-5 years >5 years Total	Opening balance Accounts receivable Bad-debt provision Proportion (%) 52,566,886.06 2,628,344.30 5.00 7,277,231.45 727,723.14 10.00 3,181,123.50 954,337.05 30.00 799,097.00 399,548.50 50.00 63,824,338.01 4,709,952.99

4. Provision, recovery or reversal of provision for bad-debt in current period

Category Accounts receivable for which bad debts reserve is set aside individually Accounts receivable for which provision for bad debts is set aside in portfolios Including: combination 1 Combination 2 Total	Changes in current period Opening balance Provision Recovery or reversal Write-off Other changes 4,709,952.99 632,012.42 4,709,952.99 632,012.42 4,709,952.99 632,012.42	Closing balance 4,077,940.57 4,077,940.57
		4,077,940.57

5. There is no write-off of accounts receivable in current period.

6. Top five accounts receivable based on debtors

Organization name Hangzhou Haiguo Trading Co., Ltd. Guangzhou Yuekai Trading Co., Ltd. Shenzhen Pindao Catering Management Co., Ltd. Yiguo Fruit Industry (Guangzhou) Co., Ltd. Qingdao Badu Guoyue Foods Co., Ltd. Total	Closing balance Relationship with the Company 6,562,121.42 Non-affiliated party 4,050,000.00 Non-affiliated party 3,521,087.64 Non-affiliated party 2,977,342.50 Non-affiliated party 1,987,200.00 Non-affiliated party 19,097,751.56	Proportion in closing balance of accounts receivable (%) 14.34% 8.85% 7.69% 6.51% 4.34% 41.73%	Provision for bad-debt 529,501.16 202,500.00 176,054.38 148,867.13 99,360.00
			1,156,282.67

– II-474 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Note 3. Prepayments

1. Disclosure of prepayments by aging

Aging <1 year 1-2 years 2-3 years >3 years Total	Closing balance Amount Proportion (%) 20,089,865.33 95.68 848,867.87 4.04 58,591.03 0.28 20,997,324.23 100.00	Opening Amount 1,667,393.62 466,979.77 2,134,373.39	balance Proportion (%) 78.12 21.88
			100.00

2. Top five prepayments based on the payers

Organization name Jinglin Industry (Shenzhen) Co., Ltd. Hainan Ruigong Technology Engineering Co., Ltd. Hainan Baizhi Biological Technology Co., Ltd. Hubei Changjian Engineering Construction Co., Ltd. Guangdong Guiguo Agriculture Co., Ltd. Total	Closing balance Relationship with the Company 9,575,078.98 Non-affiliated party 2,808,256.10 Non-affiliated party 2,000,000.00 Non-affiliated party 1,500,000.00 Non-affiliated party 840,115.20 Non-affiliated party 16,723,450.28	Proportion in total advance payment Reason for unsettlement (%) 45.60 Transaction pending 13.37 Transaction pending 9.53 Transaction pending 7.14 Transaction pending 4.00 Transaction pending 79.64

Note 4. Other receivables

Item Interests receivable Dividends receivable Other receivables Total	Closing balance 9,400,120.15 9,400,120.15	Closing balance of last year 1,222,410.16
		1,222,410.16

– II-475 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

• (1) Disclosure of other receivables by aging

Aging <1 year 1-2 years 2-3 years 3-4 years 4-5 years >5 years Subtotal Less: bad debt provision Total	Closing balance 9,506,626.82 127,602.55 300,200.00 219,211.88 42,000.00 10,195,641.25 795,521.10 9,400,120.15	Closing balance of last year 986,199.92 50,033.60 274,000.00 14,380.69 204,831.19 48,000.00 1,577,445.40 355,035.24
		1,222,410.16

• (2) Disclosed by bad-debt provision method

Category Other accounts receivable for expected credit losses by single provision Other accounts receivable for expected credit losses by combination Including: combination 1 Combination 2 Combination 3 Total Category Accounts receivable for expected credit loss withdrawn by single provision Other accounts receivable for expected credit loss withdrawn by combination Other receivables Including: combination 1 Combination 2 Combination 3 Total	Closing balance Book balance Bad-debt provision Amount Proportion Amount Proportion (%) (%) 10,195,641.25 100.00 795,521.10 7.80 10,195,641.25 100.00 795,521.10 7.80 10,195,641.25 100.00 795,521.10 7.80 Closing balance of last year Book balance Bad-debt provision Amount Proportion Amount Proportion (%) (%) 1,577,445.40 100.00 355,035.24 22.51 1,577,445.40 100.00 355,035.24 22.51 1,577,445.40 100.00 355,035.24 22.51	Book value 9,400,120.15 9,400,120.15
		9,400,120.15
		Book value 1,222,410.16 1,222,410.16
		1,222,410.16

– II-476 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

• (3) Other accounts receivable for expected credit losses by combination

Aging Margin, deposit, advance payment and temporary payment, etc. Total Aging <1 year 1-2 years 2-3 years 3-4 years 4-5 years >5 years Total	Other receivables 10,195,641.25 10,195,641.25 Other receivables 9,506,626.82 127,602.55 300,200.00 50.00 219,211.88 42,000.00 10,195,641.25	Closing balance Bad-debt provision 795,521.10 795,521.10 Closing balance Bad-debt provision 475,331.34 12,760.26 90,060.00 175,369.50 42,000.00 795,521.10	Proportion (%) 7.80
			7.80
			Proportion (%) 5.00 10.00 30.00 80.00 100.00

(4) Provision for withdrawn or returned or transferred bad debt in current period

	Phase I	Phase II	Phase III
		Expectation
		in whole	Expectation
		duration	in whole
		Credit loss	duration
	Expected	(not	Credit loss
	credit loss	incurred	(occurred
	in the next	credit	credit
Bad-debt provision	12 months	impairment)	impairment)	Total
Opening balance	355,035.24			355,035.24
Opening balance in current period
— Converted to the second stage
— Transferred into phase III
— Transferred back to phase II
— Reversed to the first stage
Provision of current period	440,485.86			440,485.86
Reversal of the current period
Write-off of the current period
Verification of the current period
Other changes
Closing balance	795,521.10			795,521.10

– II-477 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

• (5) No write-off of other receivables in current period.

• (6) Category of other receivables by nature

Nature of payment Transaction payment Margin Reserve fund Withholding social security, etc Others Total	Closing balance 3,317,489.67 6,101,001.46 437,890.50 317,435.62 21,824.00 10,195,641.25	Closing balance of last year 327,611.88 331,770.46 183,384.16 148,604.07 586,074.83
		1,577,445.40

• (7) Top five other receivables based on debtors

Organization name Payment nature Southwest United Property Rights Exchange Co., Ltd. Margin Hainan Ruigong Technology Engineering Co., Ltd. Transaction payment Yanbian County Agricultural Investment Development Co., Ltd. Margin Guangxi Xinyue Construction Engineering Co., Ltd. Transaction payment Human Resources and Social Security Bureau of Qujialing Management District, Jingmen City Transaction payment Total	Closing balance Relationship with the Company Aging 5,000,000.00 Non-affiliated party <1 year 1,566,515.00 Non-affiliated party <1 year 1,000,000.00 Non-affiliated party <1 year 454,242.00 Non-affiliated party <1 year 200,000.00 Non-affiliated party Between 2 to 3 years 8,220,757.00	Proportion in closing balance of other receivables (%) 49.04 15.36 9.81 4.46 1.96 80.63	Closing balance of bad-debt provision 250,000.00 78,325.75 50,000.00 22,712.10 60,000.00
			461,037.85

– II-478 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Note 5. Inventories

Item Raw materials Revolving materials Finished goods Delivered goods Consumable biological assets Goods in process Total	Closing balance Amount Provision for depreciation 10,414,845.86 71,400.00 1,281,256.71 65,828,039.73 3,585,933.73 0 2,386,294.37 83,496,370.40 71,400.00	Book value 10,343,445.86 1,281,256.71 65,828,039.73 3,585,933.73 2,386,294.37 83,424,970.40	Opening balance Amount Provision for depreciation Book value 6,337,615.33 71,400.00 6,266,215.33 1,367,004.65 1,367,004.65 41,606,948.47 41,606,948.47 1,344,674.74 1,344,674.74 8,355.53 8,355.53 50,664,598.72 71,400.00 50,593,198.72	Opening balance Amount Provision for depreciation Book value 6,337,615.33 71,400.00 6,266,215.33 1,367,004.65 1,367,004.65 41,606,948.47 41,606,948.47 1,344,674.74 1,344,674.74 8,355.53 8,355.53 50,664,598.72 71,400.00 50,593,198.72
	83,496,370.40			50,593,198.72

Note:

During the inventory reporting period, there is no need to make provision for depreciation.

Note 6. Other current assets

Item Added-value tax retained Input tax with VAT to be certified Payment of enterprise income tax in advance Land lease expense Other withholding tax Total	Closing balance 7,690,280.18 2,780.49 315,567.74 137,500.00 1,650,000.24 9,480,560.91	Opening balance 7,730,553.11 3,284.79 137,500.00 2,650,000.28
		10,836,905.92

Note 7. Long-term equity investment

Investee Associated enterprise: Tianjin Fangfu Tianye Investment Center (Limited Partnership) Total	Opening balance 17,758,310.00 17,758,310.00	Increase and decrease of current period Additional investment Decrease in investment Profits and losses on investments recognized under equity method Adjustment to other comprehensive incomes	Increase and decrease of current period Additional investment Decrease in investment Profits and losses on investments recognized under equity method Adjustment to other comprehensive incomes

– II-479 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Investee Associated enterprise: Tianjin Fangfu Tianye Investment Center (Limited Partnership) Total	Increase and decrease of current period Other equity changes Declared cash dividend or profits Provision for impairment Others	Closing balance 17,758,310.00 17,758,310.00	Closing balance of provision for impairment

Note 8. Fixed assets

1. Information about fixed assets

	Plant and	Machinery and		Office	Other
Item	buildings	equipment	Vehicles	equipment	equipment	Total
I. Total original book value
1. Opening balance	301,775,325.43	120,317,472.04	4,212,997.91	5,599,669.18	395,677.68	432,301,142.24
2. Increase of the current period	196,345.51	3,019,683.83		27,864.79	10,300.00	3,254,194.13
Acquisition	192,660.55	3,019,683.83		27,864.79	10,300.00	3,250,509.17
Transfers from construction in progress	3,684.96				3,684.96
3. Decrease of the current period		437,393.16		2,777.77		440,170.93
Disposal or scrapping				2,777.77		2,777.77
Other transfer-out		437,393.16				437,393.16
4. Closing balance	301,971,670.94	122,899,762.71	4,212,997.91	5,624,756.20	405,977.68	435,115,165.44
II. Accumulated depreciation
1. Opening balance	44,715,239.59	62,512,156.28	2,311,145.87	2,039,247.15	332,128.22	111,909,917.11
2. Increase of the current period	5,391,782.86	5,259,567.69	205,481.56	262,314.07	5,545.36	11,124,691.54
Withdrawal	5,391,782.86	5,259,567.69	205,481.56	262,314.07	5,545.36	11,124,691.54
3. Decrease of the current period		374,789.31		2,638.88		377,428.19
Disposal or scrapping				2,638.88		2,638.88
Other transfer-out		374,789.31				374,789.31
4. Closing balance	50,107,022.45	67,396,934.66	2,516,627.43	2,298,922.34	337,673.58	122,657,180.46
III. Impairment provision
1. Opening balance		348,607.28	26,999.88			375,607.16
2. Increase of the current period
Withdrawal
3. Decrease of the current period
Disposal or scrapping
4. Closing balance	—	348,607.28	26,999.88			375,607.16
IV. Total book value
1. Closing book value	251,864,648.49	55,154,220.77	1,669,370.60	3,325,833.86	68,304.10	312,082,377.82
2. Opening book value	257,060,085.84	57,456,708.48	1,874,852.16	3,560,422.03	63,549.46	320,015,617.97

2. Fixed assets for mortgage at the end of the period

See Note 41 for details of the fixed assets mortgaged at the end of the period.

– II-480 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Note 9. Construction in progress

1. Construction in process

Item Tianye Nonggu Science and Technology Park Project Fermented juice production line Supporting facilities of characteristic agricultural demonstration area Equipment installation works Total	Book balance 100,757,284.98 5,451,159.96 15,477,913.61 1,832,127.36 123,518,485.91	Closing balance Impairment provision 265,943.86 265,943,86	Book value 100,757,284.98 5,185,216.10 15,477,913.61 1,832,127.36 123,252,542.05	Book balance 98,711,669.49 5,451,159.96 25,316,119.15 129,478,948.60	Opening balance Impairment provision 265,943.86 265,943.86	Book value 98,711,669.49 5,185,216.10 25,316,119.15
						129,213,004.74

2. Changes of major projects under construction of the current period

Project name Tianye Nonggu Science and Technology Park Project Fermented juice production line Supporting facilities of characteristic agricultural demonstration area Total Project name Budget (RMB10,000) Tianye Nonggu Science and Technology Park Project 39,739.33 Fermented juice production line 546.89 Supporting facilities of characteristic agricultural demonstration area 3,513.78 Total 43,800.00	Opening balance 98,711,669.49 5,451,159.96 25,316,119.15 129,478,948.60 Proportion of project investment in budget (%) 73.05 99.68 77.89	Increase of current period 2,045,615.49 22,236.00 2,067851.49 Construction progress (%) 73.05 100 77.89	Decrease of current period Transferred to productive biological assets Transferred to fixed assets Others Decrease 9,860,441.54 9,860,441.54 Accumulated amount of capitalization of interest Include: amount of capitalization of interest of current period Capitalization rate of interest of current period (%) 417.17 107.40	Closing balance 100,757,284.98 5,451,159.96 15,477,913.61
				121,686,358.55
				Source of fund Self-raised Self-raised Self-raised

– II-481 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Note 10. Productive biological assets

1. Productive biological assets measured by cost

			**Planting **	industry
Item	Passion fruit	Pitaya	Pineapple	Yellow peach	Guava	Mango	Total
I. Total original book value
1. December 31, 2019	4,308,740.87	1,200,634.81			2,605,289.79	30,232,500.72	38,347,166.19
2. Increase of current
period	38,019.00					899,662.57	937,681.57
Purchased
Self-planted	38,019.00					899,662.57	937,681.57
Increase in corporation
merger
Invested by shareholders
Other transfer-in
3. Decrease of current
period
Disposal
Other transfer-out
4. June 30, 2020	4,346,759.87	1,200,634.81			2,605,289.79	31,132,163.29	39,284,847.76
II. Accumulated
depreciation
1. December 31, 2019	969,165.17	1,200,634.81			2,605,289.79		4,775,089.77
2. Increase of current
period	1,077,185.22					332,967.09	1,410,152.31
Withdrawal	1,077,185.22					332,967.09	1,410,152.31
Increase in corporation
merger
Other transfer-in
3. Decrease of current
period
Disposal
Other transfer-out
4. June 30, 2020	2,046,350.39	1,200,634.81			2,605,289.79	332,967.09	6,185,242.08
III. Impairment provision
1. December 31, 2019
2. Increase of current
period
Withdrawal
Increase in corporation
merger
Other transfer-in
3. Decrease of current
period
Disposal
Other transfer-out
4. Balance as of June 30,
2020
IV. Book value
1. June 30, 2020	2,300,409.48					30,799,196.20	33,099,605.68
2. December 31, 2019	3,339,575.70					30,232,500.72	33,572,076.42

– II-482 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Note 11. Intangible assets

Item	Land use right	Patent right	Trademark right	Software	Total
I. Original book value
1. Opening balance	118,455,340.67	15,485.00	10,900.00	65,540.00	118,547,265.67
2. Increase of current period
Acquisition
Internal R&D
Other transfer-in
2. Decrease of current period
Disposal
Other transfer-out
3. Ending balance	118,455,340.67	15,485.00	10,900.00	65,540.00	118,547,265.67
II. Accumulated amortisation
1. Opening balance	12,829,787.92	11,378.44	10,264.09	44,539.92	12,895,970.37
2. Increase of current period	911,537.88	385.02	544.98	3,499.98	915,967.86
Withdrawal	911,537.88	385.02	544.98	3,499.98	915,967.86
Increase in corporation merger
Other transfer-in
3. Decrease of current period
Disposal
Other transfer-out
4. Closing balance	13,741,325.80	11,763.46	10,809.07	48,039.90	13,811,938.23
III. Impairment provision
1. Opening balance	20,094,867.93				20,094,867.93
2. Increase of current period
Withdrawal
Increase in corporation merger
Other transfer-in
3. Decrease of current period
Disposal
Other transfer-out
4. Closing balance	20,094,867.93				20,094,867.93
IV. Total book value
1. Book value at end of period	84,619,146.94	3,721.54	90.93	17,500.10	84,640,459.51
2. Book value at beginning of period	85,530,684.82	4,106.56	635.91	21,000.08	85,556,427.37
Note:

See Note 41 for details of intangible assets mortgaged at the end of the period.

– II-483 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Note 12. Goodwill

1. The original book value of goodwill

Name of the investee or items resulting in goodwill Hubei Iceman Foods Co., Ltd. Total	Opening balance 17,607,521.44	Increase of current period Arising from business combination Others	Decrease of current period Disposal Others	Closing balance 17,607,521.44
	17,607,521.44			17,607,521.44

Calculation process of goodwill: In order to effectively integrate the resources and advantages of both parties, enlarge and strengthen the main business, and form a highly competitive production enterprise of fruit juice and fruit and vegetable products, the Company realized the equity acquisition and business restructuring of Hubei Iceman Foods Co., Ltd. On the purchase date (November 16, 2015); the book value of identifiable net assets of Hubei Iceman Foods Co., Ltd. was RMB-24,361,162.41; the fair value of identifiable net assets based on the purchase date was RMB-17,607,520.44. According to the Equity Merger Agreement signed between the Company and the original shareholders of Hubei Iceman Foods Co., Ltd., the consideration for equity merger was RMB1, so the goodwill formed by this merger was RMB17,607,521.44.

2. Provision for impairment of goodwill

Name of the investee or items resulting in goodwill Opening balance Hubei Iceman Foods Co., Ltd. 2,749,838.60 Total 2,749,838.60 Note 13. Long-term deferred expenses Item Opening balance Plant Decoration Project 1,296,151.85 Land lease expense 6,052,245.75 Other projects in characteristic agricultural demonstration areas 660,174.30 Total 8,008,571.90	Opening balance 2,749,838.60	Increase of current period Decrease of current period Closing balance Provision Others Disposal Others 2,749,838.60 2,749,838.60 Increase in the current period Amortization for the current period Other decrease Closing balance 101,120.00 288,278.64 1,108,993.21 2,418,549.30 3,633,696.45 105,192.48 554,981.82 101,120.00 2,812,020.42 5,297,671.48	Increase of current period Decrease of current period Closing balance Provision Others Disposal Others 2,749,838.60 2,749,838.60 Increase in the current period Amortization for the current period Other decrease Closing balance 101,120.00 288,278.64 1,108,993.21 2,418,549.30 3,633,696.45 105,192.48 554,981.82 101,120.00 2,812,020.42 5,297,671.48	Closing balance 2,749,838.60
	2,749,838.60			2,749,838.60
			5,297,671.48

– II-484 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Note 14. Deferred tax assets and deferred tax liabilities

1. Deferred income tax assets before offset

Item Provision for impairment of assets Offset internal unrealized profits Deductible losses Government grants Changes in fair value of long-term equity investment Total	Closing balance Deductible temporary difference Deferred tax assets 4,744,914.68 971,248.43 81,315.84 12,197.38 1,482,864.89 271,066.75 3,096,720.00 464,508.00 9,405,815.41 1,719,020.56	Opening Deductible temporary difference 4,932,871.27 81,315.84 1,420,058.66 3,096,720.00 9,530,965.77	balance Deferred tax assets 1,073,518.44 12,197.38 265,942.49 464,508.00
			1,816,166.31

2. Unrecognized deferred tax assets

Item Provision for impairment of assets Deferred income Deductible losses Total	Closing balance 128,546.99 59,906,618.47 22,743,346.76 82,778,512.22	Closing balance of last year 132,116.96 59,906,618.47 22,743,346.76
		82,782,082.19

3. Deductible losses for which deferred tax assets are not recognised will be expired in the following year

Year 2020 2021 2022 2023 2024 Total	Closing balance 3,207,535.44 6,738,381.86 6,857,508.13 5,358,891.43 581,029.90 22,743,346.76	Closing balance of last year 3,207,535.44 6,738,381.86 6,857,508.13 5,358,891.43 581,029.90
		22,743,346.76

– II-485 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Note 15. Other non-current assets

Item Advance payment for Tianye Nonggu Science and Technology Park Project Equipment project payment Advance payment for IPO Enterprise income tax retained Others Total Note 16. Short-term loans Item Pledged loans Unsecured loans Mortgaged and guaranteed loans Fiduciary loan Accrued interest on short-term loans Total	Closing balance 22,558,015.51 98,340.40 22,656,355.91 Closing balance 25,000,000.00 75,000,000.00 10,000,000.00 110,000,000.00	Opening balance 9,984,510.50 514,901.90
		10,499,412.40
		Opening balance 36,000,000.00 75,000,000.00 2,928,894.70 155,833.33
		114,084,728.03

Note: As of June 30, 2020, the closing balance of short-term loans was RMB110 million: 1) In June 2020, the Company signed a Loan Contract (45002169100220060001) of RMB30 million with Beihai Avenue Sub-branch of Postal Savings Bank of China, with a loan period of one year. The mortgaged properties were land use right (HGY (2012) No. 1560), industrial factory buildings and supporting houses (HFQZHPZ No. 017061-017071), and the Maximum Amount Mortgage Contract with the contract number of 45002169100420060001 was signed in 2020. As of June 30, 2020, the Postal Savings Bank of China actually lent RMB25 million. (2) On December 19, 2018, the Company signed a loan contract (HKNSS/H (Z) 2018 ZGDKZ (040)) of RMB75 million with Haikou Rural Commercial Bank Co., Ltd. The credit was granted for three years; the guarantee method was mortgage+guarantee, and the fixed interest rate was 6.8% with the additional integrity deposit of 2%. It also signed a contract (HKNSS/H (Z) 2018 ZBZ No.040), the mortgaged properties were house and state-owned land use right (E (2018) JMSBDCQ No. 0013299), property certificates (DCZZ No. 0005745, DCZZ No. 0005746, DCZZ No. 0005747, DCZZ No. 0005749), land use rights (DAGY (2010) No. 253, DAGY (2008) No. 23), and 56 production machinery equipment and supporting facilities under the name of Hainan Dachuan Food Co., Ltd. It also signed three mortgage contracts (HKNSS/H (Z) 2018 GDZ No. 040-1, HKNSS/H (Z) 2018 GDZ No. 040-2, HKNSS/H (Z) 2018 GDZ No. 040-3), and the guarantors were Tianye Innovation Corporation, Yao Yuzhi and Hubei Tianye Nonggu Biological Technology Co., Ltd. And it also signed two guarantee contracts (HKNSS/H (Z) 2018 GBZ No. 040-1, HKNSS/H (Z) 2018 GBZ No. 040-2). 3. In June 2020, Hubei Nonggu Biological Technology Co., Ltd. and Jingmen Wusan Modern Agriculture Development Co., Ltd. signed a short-term credit loan contract of RMB10 million with the contract number of 42010620200000043, with the loan term of one year.

– II-486 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Note 17. Accounts payable

1. Disclosure of accounts payable by aging

			Closing balance of last	Closing balance of last	Closing balance of last
	**Closing **	balance	year
Aging	Amount	Proportion	Amount	Proportion
		(%)			(%)
<1 year	38,609,936.19	92.23	30,351,559.30		88.98
1-2 years	1,417,464.65	3.39	1,961,599.60		5.75
2-3 years	449,069.56	1.07	650,382.39		1.91
>3 years	1,385,363.31	3.31	1,146,311.98		3.36
Total	41,861,833.71	100.00	34,109,853.27		100.00

2. Accounts payable classified by nature

Item Material purchase payment Payment related to expenses Equipment and project purchase payment Others Total	Closing balance 36,528,446.29 373,955.71 4,919,431.71 40,000.00 41,861,833.71	Opening balance 25,645,802.70 3,433,512.28 4,940,770.27 89,768.02
		34,109,853.27

3. Significant accounts payable aged over 1 year

Organization name Jiangsu Kaiyi Intelligent Technology Co., Ltd. Wuhan Quanding Environmental Protection Technology Co., Ltd. Wuhan Sentai Environmental Protection Engineering Co., Ltd. Xiamen Heguanxin Cryogenic Equipment Co., Ltd. Hu’nan Tianchang Engineering Co., Ltd. Total	Closing balance Relationship with the Company Reasons for not been repaid or transferred 369,200.00 Non-affiliated party Uncompleted settlement 293,767.00 Non-affiliated party Uncompleted settlement 200,000.00 Non-affiliated party Uncompleted settlement 160,100.01 Non-affiliated party Uncompleted settlement 155,000.00 Non-affiliated party Uncompleted settlement 1,178,067.01

– II-487 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

4. Top five accounts payable based on creditor

Organization name Nature of payment Guangdong Guiguo Agriculture Co., Ltd. Material purchase payment Haikou Xianmeirui Industry Co., Ltd. Material purchase payment Guangxi Yanjin Puzi Foods Co., Ltd. Material purchase payment Wu Shoujian Material purchase payment Lei Dacheng Material purchase payment Total	Closing balance Relationship with the Company 2,586,177.19 Non-affiliated party 1,936,480.00 Non-affiliated party 1,893,398.23 Non-affiliated party 1,826,916.00 Non-affiliated party 1,728,913.00 Non-affiliated party 9,971,884.42	Proportion in total accounts payable Aging (%) 6.18 <1 year 4.63 <1 year 4.52 <1 year 4.36 <1 year 4.13 <1 year 23.82

Note 18. Contract liabilities

1. Contract liabilities classified by nature of payment

Item Payment for goods Total	Closing balance 4,567,026.11 4,567,026.11	Opening balance 2,692,363.10
		2,692,363.10

Other description of contract liabilities: at the end of the reporting period, the Company did not have any important advance receipts with more than one-year aging.

Note 19. Payroll and employee benefits payable

1. Payroll and employee benefits payable

Item Short-term benefits Post-employment benefits — defined contribution plan Termination benefits Total	Opening balance 3,717,302.13 3,717,302.13	Increase of current period 12,444,905.04 220,468.60 25,372.99 12,690,746.63	Decrease of current period 14,263,986.01 220,468.60 25,372.99 14,509,827.60	Closing balance 1,898,221.16
				1,898,221.16

– II-488 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

2. Short-term benefits

Item Opening balance Wages or salaries, bonuses, allowances and subsidies 3,687,284.13 Employee welfare 30,018.00 Social insurance contributions Including: basic medical insurance premium Industrial injury insurance premium Birth insurance premium Housing funds Labor union and employee education costs Total 3,717,302.13 3. Defined contribution plan Item Opening balance Basic pension insurance Unemployment insurance Total Note 20. Taxes payable Tax items VAT Enterprise income tax Individual income tax Urban maintenance and construction tax Building tax Land use tax Education expenses and local surcharges Stamp duties Environmental protection tax Total Note 21. Other payables Nature of payment Interest payable Other payables Total	Increase of current period Decrease of current period 11,486,447.85 13,291,537.78 413,810.89 436,720.65 291,532.58 291,532.58 286,309.70 286,309.70 5,222.88 5,222.88 243,018.00 235,078.00 10,095.72 9,117.00 12,444,905.04 14,263,986.01 Increase of current period Decrease of current period 211,202.93 211,202.93 9,265.67 9,265.67 220,468.60 220,468.60 Closing balance 429,291.84 202,484.66 7,793.78 28,256.03 64,275.56 19,500.00 28,256.03 11,095.60 790,953.50 Closing balance 18,000.00 1,716,492.84 1,734,492.84	Increase of current period Decrease of current period 11,486,447.85 13,291,537.78 413,810.89 436,720.65 291,532.58 291,532.58 286,309.70 286,309.70 5,222.88 5,222.88 243,018.00 235,078.00 10,095.72 9,117.00 12,444,905.04 14,263,986.01 Increase of current period Decrease of current period 211,202.93 211,202.93 9,265.67 9,265.67 220,468.60 220,468.60 Closing balance 429,291.84 202,484.66 7,793.78 28,256.03 64,275.56 19,500.00 28,256.03 11,095.60 790,953.50 Closing balance 18,000.00 1,716,492.84 1,734,492.84	Closing balance 1,882,194.20 7,108.24 7,940.00 978.72
			1,898,221.16
			Closing balance
			Opening balance 931,094.20 1,406,938.11 24,491.89 46,554.71 557,492.95 19,500.00 46,554.71 45,616.70 3,125.04
			3,081,368.31
			Opening balance 4,160,084.72
			4,160,084.72

– II-489 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

(I) Interest payable

Item Interest payable Total	Closing balance 18,000.00 18,000.00	Opening balance

(II) Other payables

1. Disclosure of other payables by aging

Aging <1 year 1-2 years 2-3 years >3 years Total	Closing balance Amount Proportion (%) 1,383,193.21 80.58 15,510.00 0.91 32,997.00 1.92 284,792.63 16.59 1,716,492.84 100.00	Opening Amount 3,406,181.10 189,060.98 165,275.40 399,567.24 4,160,084.72	balance Proportion (%) 81.88 4.54 3.97 9.61
			100.00

1. Disclosure of other payables by nature

Nature of payment Miscellaneous project payments Payment related to expenses Transaction payment Collection and payment Social security fund, etc Others Total	Closing balance 77,710.00 1,327,008.00 26,826.17 65,368.95 1,900.72 217,679.00 1,716,492.84	Opening balance 274,942.60 3,486,759.87 128,549.40 243,601.23 809.62 25,422.00
		4,160,084.72

– II-490 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

1. Top five other payables based on creditor

Organization name Nature of payment Huang Caihong Payment related to expenses Shanghai Liqin Logistics Co., Ltd. Payment related to expenses Henan Jiankun Supply Chain Management Co., Ltd. Payment related to expenses Huang Hongkui Payment related to expenses Long Kun Payment related to expenses Total	Closing balance Relationship with the Company 214,640.00 Non-affiliated party 200,000.00 Non-affiliated party 192,660.55 Non-affiliated party 186,447.50 Non-affiliated party 144,000.00 Non-affiliated party 937,748.05	Proportion in total other payables Aging (%) 12.50 <1 year 11.65 <1 year 11.22 <1 year 10.86 <1 year 8.39 3 to 4 years 54.62

Note 22. Current portion of non-current liabilities

1. Current portion of non-current liabilities

Item Unsecured loans Interest payable Total	Closing balance 20,000,000.00 553,741.94 20,553,741.94	Opening balance 30,000,000.00 1,657,741.94
		31,657,741.94

Note: Hubei Tianye Nonggu Biological Technology Co., Ltd., a subsidiary of the Company, signed the RMB Entrusted Loan Contract with Wusan Farm Sub-branch of the Agricultural Bank of China. The contract number was 2018002. Jingmen Qujialing Urban and Rural Construction Investment Co., Ltd. was the loan principal and provided the Company with loan on credit of RMB30 million, with loan term of 2 years and annual interest rate of 7.20%. As of June 30, 2020, the outstanding principal amount of this loan was RMB20 million.

Note 23. Deferred income

Item Government subsidy related to assets Government subsidy related to revenues Total	Opening balance 61,293,677.13 33,000.00 61,326,677.13	Increase of current period 2,901,300.00 26,852.26 2,928,152.26	Decrease of current period 2,428,283.86 26,852.26 2,455,136.12	Closing balance Causes 61,766,693.27 See the following note for details 33,000.00 See the following note for details 61,799,693.27

– II-491 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

1. Deferred revenue related to government grants

Item Financial subsidy for the development of SME in local characteristic industries in 2012 Infrastructure support subsidies allocated by the government Research and demonstration project on key technologies of agricultural industry innovation and development in poor villages (slope) Subsidy for quality and safety demonstration area of export food and agricultural products in Hainan Province Financial subsidy for special fruit planting Supporting funds for infrastructure of Nonggu Science and Technology Park Project Technical transformation funds for fruit and vegetable juice pulp production line Special funds for the development of SME in the autonomous region in 2017 Support funds for grain, agriculture and forestry characteristic industries in the autonomous region in 2016 Funds for Rural Tourism Construction Project Phase I Star Award for Xiangliuxi Tropical Fruit Industry (Core) Demonstration Zone Subsidies for purchasing agricultural machinery Tax refund Refund for steady post Living allowance for people returning to Hainan Special funds for energy-saving and circular economy Total	Opening balance 220,000.00 34,318,718.52 33,000.00 329,670.19 1,609,600.00 19,716,012.58 400,000.00 890,721.75 300,000.00 800,000.00 342,444.35 14,973.00 2,184,870.02 166,666.72 61,326,677.13	Amount of subsidy increased in current period 2,901,300.00 20,972.26 5,880.00 2,928,152.26	Amount included in the current profits and losses 40,000.00 1,822,232.94 32,967.06 427,386.60 74,226.78 976.50 20,494.02 20,972.26 5,880.00 9,999.96 2,455,136.12	Other changes	Closing balance Pertinent to Assets/Income 180,000.00 Assets related 32,496,485.58 Assets related 33,000.00 Revenues related 296,703.13 Assets related 1,609,600.00 Assets related 22,189,925.98 Assets related 400,000.00 Assets related 816,494.97 Assets related 300,000.00 Assets related 800,000.00 Assets related 342,444.35 Assets related 13,996.50 Assets related 2,164,376.00 Assets related Revenues related Government subsidy related to revenues 156,666.76 Assets related 61,799,693.27

– II-492 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Note 24. Paid-in capital

Item Opening balance Changes New shares issued Number of shares 240,000,000.00 Note 25. Capital reserves Item Capital premium Other capital reserves Total Note 26. Surplus reserve Item Statutory surplus reserves Total	in the current period, increase (+) and decrease (-) Closing balance Share donation Capitalization of capital reserve Others Subtotal 240,000,000.00 Opening balance Increase of current period Decrease of current period Closing balance 244,109,726.71 244,109,726.71 2,190,367.24 2,190,367.24 246,300,093.95 246,300,093.95 Opening balance Increase of current period Decrease of current period Closing balance 11,367,901.03 11,367,901.03 11,367,901.03 11,367,901.03	in the current period, increase (+) and decrease (-) Closing balance Share donation Capitalization of capital reserve Others Subtotal 240,000,000.00 Opening balance Increase of current period Decrease of current period Closing balance 244,109,726.71 244,109,726.71 2,190,367.24 2,190,367.24 246,300,093.95 246,300,093.95 Opening balance Increase of current period Decrease of current period Closing balance 11,367,901.03 11,367,901.03 11,367,901.03 11,367,901.03
		246,300,093.95
		Closing balance 11,367,901.03
		11,367,901.03

Note: The surplus reserve refers to the statutory surplus reserve accrued according to 10.00% of the net profit of the parent company.

Note 27. Undistributed profits

Changes in undistributed profits

		Proportion of
		withdrawal or
Item	Amount	allocation
		(%)
Undistributed profits at the end of last year before adjustment	252,548,504.91
Total undistributed profit at the beginning of adjustment
(increase +, decrease -)
Undistributed profits at the beginning of the period after
adjustment	252,548,504.91
Add: net profit attributable to owner of parent company in
current period	7,388,220.26
Less: withdrawal of statutory surplus reserves
Withdrawal of discretionary surplus reserves
Common stock dividends payable
Common stock dividends converted into share capital
Other distributions to shareholders
Other profits distribution
Other internal carry-over of owner’s equity
Undistributed profits at the end of the period	259,936,725.17

– II-493 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Note 28. Operating incomes and operating costs

1. Operating income, operating costs

Item Principal operating activities Total	Amount of current period Revenue Cost 106,668,616.97 76,367,666.63 106,668,616.97 76,367,666.63	Amount of last period Revenue Cost 138,087,856.90 94,583,376.36 138,087,856.90 94,583,376.36	Amount of last period Revenue Cost 138,087,856.90 94,583,376.36 138,087,856.90 94,583,376.36
			94,583,376.36

Note 29. Taxes and surcharges

Taxes Urban construction tax Educational surcharges Local educational surcharges Building tax Urban Land Using Tax Others Total	Amount of current period 81,222.29 48,733.39 32,488.91 146,504.28 34,373.20 59,342.14 402,664.21	Amount of last period 271,729.08 163,037.45 108,691.63 1,121,821.99 546,682.24 64,007.64
		2,275,970.03

Note 30. Selling expenses

Item Warehousing and logistics expenses Labor expenses Advertising and promotion expenses Traveling expenses Office expense Postage Others Total	Amount of current period 1,917,651.62 342,412.96 65,183.73 228,040.67 2,553,288.98	Amount of last period 2,003,128.11 472,330.92 2,799,899.44 846.00 1,461.95 985.00 284,021.90
		5,562,673.32

– II-494 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Note 31. General and administration expenses

Item Labor expenses Office expense Amortization of intangible assets Depreciation and amortization Amortization of long-term unamortized expenses Agency service expenses Business reception expenses Traveling expenses Taxes Others Total	Amount of current period 3,897,235.34 310,664.96 826,930.92 3,557,685.03 1,477,173.60 541,916.47 201,035.34 117,399.93 782,842.36 11,712,883.95	Amount of last period 5,637,171.59 131,524.89 915,967.88 3,594,847.08 1,378,039.46 317,449.82 482,594.90 260,869.49 19,365.65 2,303,878.86
		15,041,709.62

Note 32. Research and development expenses

Item Direct material Workers’ wage Depreciation and amortization Total Note 33. Financial expenses Item Interest expense Less: interest revenue Net income and loss from exchange Financial discount Bank charges Others Total Note 34. Credits impairment losses Item Bad-debt loss Total	Amount of current period 164,412.16 517,983.15 39,098.99 721,494.30 Amount of current period 3,293,273.44 378,487.31 -9,508.55 -350,560.64 25,710.05 2,580,426.99 Amount of current period -191,526.56 -191,526.56	Amount of last period 108,565.62 534,286.34 39,228.84
		682,080.80
		Amount of last period 4,557,461.18 379,402.56 -11,449.42 -450,000.00 21,626.25
		3,738,235.45
		Amount of last period -927,269.86
		-927,269.86

– II-495 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Note 35. Assets disposal income

Item Revenue from disposal of biological assets Income from fixed assets disposal Disposal loss of construction in progress Total	Amount of current period -9,860,441.54 -9,860,441.54	Amount of last period

Note 36. Other incomes

1. Details of other incomes

Item Government grants Total	Amount of current period 5,557,877.90 5,557,877.90	Amount of last period 5,689,235.57
		5,689,235.57

2. Government grants recorded into other incomes

Subsidy item Infrastructure support subsidies allocated by the government Subsidy for the construction of agricultural product standardization demonstration base Tax refund Special funds for supporting infrastructure Award for scenic spots Others Environmental impact assessment subsidy Star Award for Xiangliuxi Tropical Fruit Industry (Core) Demonstration Zone Exhibition subsidies for industrialization and informatization and information products in Hepu County Financial subsidy for special fruit planting Subsidy for the characteristic development of SME Subsidy for quality and safety demonstration area of export food and agricultural products in Hainan Province Special funds for energy-saving and circular economy Total	Amount of current period 1,822,232.94 1,794,118.17 427,386.60 156,946.39 1,200,000.00 114,226.78 32,967.06 9,999.96 5,557,877.90	Amount of last period Pertinent to Assets/Income 1,822,232.94 Assets related Assets related 1,258,000.00 Assets related Revenues related 796,556.50 Assets related 600,000.00 Revenues related 393,693.10 Revenues related 347,111.00 Assets related 271,642.03 Assets related 200,000.00 Revenues related Revenues related Revenues related Assets related Assets related 5,689,235.57

– II-496 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Note 37. Non-operating incomes

Item Others Total	Amount of current period 111,278.15 111,278.15	Amount of last period 4,775.01
		4,775.01

Note 38. Non-operating expenses

Item Donation outlay Losses on disposal of non-current assets Others Total	Amount of current period 451,075.59 585.20 18,138.89 469,799.68	Amount of last period 20,700.00 92,558.10
		113,258.10

1. The amounts included in the non-recurring profits and losses of each period are listed as follows:

Item Donation outlay Losses on disposal of non-current assets Others Total	Amount of current period 451,075.59 585.20 18,138.89 469,799.68	Amount of last period 20,700.00 92,558.10
		113,258.10

Note 39. Income tax expense

Item Current tax expenses Deferred income tax expense Total	Amount of current period 375,267.29 97,145.75 472,413.04	Amount of last period 403,665.37 -171,479.68
		232,185.69

– II-497 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

1. Reconciliation of income tax expenses to the accounting profit

	Amount of	Amount of
Item	current period	last period
Total profits	7,860,633.30	20,857,293.94
Income tax expense calculated at statutory/applicable tax rate	2,616,522.81	3,371,560.69
Effect of different tax rates applicable to subsidiaries	469,206.54	1,043,586.69
Effect of adjustment to income tax of prior periods		-865,928.49
Effect of non-taxable income	-2,501,970.49	-3,136,026.96
Effect of non-deductible costs, expenses and losses	199,631.07	41,303.10
Effect of using deductible losses for which deferred tax
assets were previously not recognised	-383,758.21	-261,371.77
Effect of deductible temporary differences or deductible
losses unrecognized in the current period	72,781.32	39,062.43
Income tax expense	472,413.04	232,185.69

Note 40. Notes to items of cash flow statement

1. Cash received relating to other operating activities

Item Transaction payment Government grants Credit interest Others Total	Amount of current period 21,745,031.15 6,097,642.19 378,487.31 30,750.00 28,251,910.65	Amount of last period 25,011,272.82 4,010,894.17 379,402.56
		29,401,569.55

2. Cash paid relating to other operating activities

Item Transaction payment Cash payment Total	Amount of current period 34,677,045.87 34,677,045.87	Amount of last period 25,046,239.51
		25,046,239.51

– II-498 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Note 41. Supplementary information to the cash flow statement

1. Supplementary information to the cash flow statement

	Amount of current	Amount of last
Supplementary materials	period	period
1. Cash flows converted from net profits for business operation activities:
Net Profit	7,388,220.26	20,625,108.25
Add: provision for asset impairment		927,269.86
Provision for credit impairment	-191,526.56
Depreciation of fixed assets, depletion of oil and gas assets, and depreciation of
productive biological assets	11,124,691.54	9,329,208.03
Amortization of intangible assets	915,967.86	915,967.88
Amortization of long-term deferred expenses	2,812,020.42	2,712,886.28
Losses on the disposal of fixed assets, intangible assets and other long-term assets (gain
is indicated by “-”)	9,860,441.54
Losses on retirement of fixed assets (gain is indicated by “-”)		391.07
Loss on changes in fair value (gain is indicated by “-”)
Financial expenses (gain is indicated by “-”)	4,003,764.89	4,546,011.76
Losses arising from investments (gain is indicated by “-”)
Decrease in deferred tax assets (increase is indicated by “-”)	97,145.75	-171,479.68
Increase in deferred tax liabilities (decrease is indicated by “-”)
Decrease in inventory (increase is indicated by “-”)	-32,831,771.68	1,818,662.33
Decrease in receivables from operating activities (increase is indicated by “-”)	-8,218,567.89	2,139,438.56
Increase in payables from operating activities (decrease is indicated by “-”)	7,125,526.77	838,281.63
Others
Net cash flows from operating activities	2,085,912.90	43,681,745.97
2. Significant investing and financing activities that do not involve cash receipts and
payments:
Conversion of debt into capital
Convertible bonds due within one year
Fixed assets acquired under finance lease
3. Net changes in cash and cash equivalents:
Closing balance of cash	218,203,639.87	240,913,143.02
Less: opening balance of cash	258,090,355.07	214,674,020.33
Add: closing balance of cash equivalents
Less: opening balance of cash equivalent
Net increase in cash and cash equivalents	-39,886,715.20	26,239,122.69
2. Composition of cash and cash equivalent
	Amount of current	Amount of last
Item	period	period
I. Cash	218,203,639.87	240,913,143.02
Including: cash on hand	63,097.64	21,331.61
Bank deposit ready for payment at any time	218,036,461.60	240,840,511.77
Other monetary funds ready for payment at any time	104,080.63	51,299.64
II. Cash equivalents
Including: bond investments due in three months
III. Closing balance of cash and cash equivalents	218,203,639.87	240,913,143.02
Including: restricted cash and cash equivalents used by parent company or subsidiaries

– II-499 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Note 42. Assets with restricted ownership or right of use

Item Fixed assets Intangible assets Total	Closing book value Reasons for being restricted 101,818,533.04 Mortgage loan 12,263,168.16 Mortgage loan 114,081,701.20

Note: Please refer to Note VI “Note 16 Short-term loan” for details of mortgage loan.

VII. Changes of the Scope of Consolidation

(I) Business combination involving entities not under common control

During the reporting period, there was no business combination involving entities not under common control.

(II) Business combination involving entities under common control

During the reporting period, there was no business combination under common control.

(III) Reverse acquisition

During the reporting period, there was no reverse acquisition.

(IV) Disposal of subsidiaries

During the reporting period, the Company did not dispose of its subsidiaries.

(V) Changes in the consolidation scope due to other reasons

In April 2020, the Company invested and established Panzhihua Tianye Innovation Agricultural Technology Co., Ltd., and in 2020, the scope of consolidation of the Company increased by one subsidiary.

VIII. Equity in other Entities

(I) Equity in subsidiaries

	Main place of	Registered		**Shareholding **	ratio (%)
Subsidiary	business	address	Business nature	Directly	Indirectly	Acquisition method
Hainan Dachuan Food	Ding’an,	Ding’an,	Processing and sales	100.00		Business combination
Co., Ltd.	Hainan	Hainan	of agricultural			not under the same
			products			control
Guangxi Tianye	Nanning,	Nanning,	Agricultural planting	100.00		Established through
Innovation Agricultural	Guangxi	Guangxi	and sales,			investment
Technology Co., Ltd.			technology R&D
			promotion and
			achievement
			transfer

– II-500 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

	Main place of	Registered		**Shareholding **	ratio (%)
Subsidiary	business	address	Business nature	Directly	Indirectly	Acquisition method
Hainan Tianye Drinks	Ding’an,	Ding’an,	Sales of fruit food	100.00		Established through
Food Sales Co. Ltd.	Hainan	Hainan	and drink			investment
Hubei Iceman Foods Co.,	Jingmen,	Jingmen,	Processing and sales	100.00		Business combination
Ltd.	Hubei	Hubei	of agricultural			not under the same
			products			control
Hubei Tianye Nonggu	Jingmen,	Jingmen,	R&D, production and	100.00		Established through
Biological Technology	Hubei	Hubei	sales of agricultural			investment
Co., Ltd.			products
Hubei Tianye Innovation	Jingmen,	Jingmen,	Agricultural planting	100.00		Established through
Nonggu Fruit &	Hubei	Hubei	and sales			investment
Vegetable Co., Ltd.
Panzhihua Tianye	Panzhihua	Panzhihua	Processing and sales	100.00		Established through
Innovation Agricultural	Yanbian	Yanbian	of agricultural and			investment
Technology Co., Ltd.			sideline products,
			fruit planting and
			sales, etc.

(II) Equity in associates

1. Significant associates

• (1) General information

						Accounting
	Main place of	Registered		**Shareholding **	ratio (%)	treatment for
Name of associates	business	address	Business nature	Directly	Indirectly	associates
Tianjin Fangfu Tianye	Tianjin	Tianjin	Investment in modern	99.00		Equity method
Investment Center			agriculture, food
(Limited Partnership)			industry,
			commercial chain
			industry and
			mobile internet
			industry;
			investment
			consulting.

• (2) Explanation that the shareholding ratio in the associated enterprise is different from the voting right ratio

Tianjin Fangfu Tianye Investment Center (Limited Partnership) has a total investment of RMB100 million. As a limited partner, the Company contributes RMB99 million with its own funds, accounting for 99.00% of the total investment of the partnership. As a general partner, Beijing Fangfu Capital Management Co., Ltd. contributes RMB1 million, accounting for 1.00% of the total investment of the partnership. According to the partnership agreement, Tianjin Fangfu Tianye Investment Center (Limited Partnership) has set up an Investment Decision-making Committee, which consists of five members, including four representatives appointed by the general partner and one member elected by the limited partner. Investment Decision-making

– II-501 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Committee is responsible for the final decision-making of partnership investment, and the investment decision-making can only be implemented by unanimous approval of all members. The resolutions of the Investment Decision-making Committee shall be implemented by the general partner and shall be legally binding on the partnership enterprise. The voting system of the Investment Decision-making Committee is one vote for one person, and the Investment Decision-making Committee shall implement the related party avoidance voting system in the process of investment decision-making. Therefore, the voting ratio of the Company to Tianjin Fangfu Tianye Investment Center (Limited Partnership) is different from the shareholding ratio.

IX. Risk Disclosure Related to Financial Instruments

The Board of Directors of the Company is fully responsible for the determination of risk management objectives and policies, and bears the ultimate responsibility for them. The management manages and monitors these risks to ensure that the risks are controlled within a limited range. The Company’s main financial instruments include accounts receivable, accounts payable, loans, etc. Please refer to the relevant items in this note for details of various financial instruments. Due to the unpredictability of the financial market related to these financial instruments, the Company strives to reduce the potential adverse impact on the financial performance of the Company.

The objective of risk management of the Company is to strike a proper balance between risks and benefits, reduce the negative impact of risks on the operating performance of the Company to the lowest level, and maximize the interests of shareholders and other equity investors. Based on this risk management objective, the basic strategy of the Company’s risk management is to identify and analyze various risks faced by the company, establish an appropriate risk tolerance bottom line, supervise various risks in a timely and reliable manner, and formulate risk management policies to reduce risks as much as possible without excessively affecting the competitiveness and resilience of the Company.

(I) Credit risk: The credit risk of the Company mainly comes from monetary funds, accounts receivable and other receivables. The management has formulated appropriate credit policies and continuously monitored the exposure of these credit risks. The monetary funds held by the Company are mainly deposited in large commercial banks and other financial institutions, and the management thinks that these commercial banks have high reputation and asset status and low credit risk. For accounts receivable and other receivables, the Company sets relevant policies to control credit risk exposure. The Company evaluates the customer’s credit qualification and sets the corresponding credit period based on the customer’s financial status, the possibility of obtaining guarantee from a third party, credit history and other factors such as the current market situation. The Company will regularly monitor customer credit records to ensure that the overall credit risk of the Company is within the controllable range.

As of June 30, 2020, the book balance and expected credit impairment losses of related assets are as follows:

Aging Accounts receivable Other receivables Total	Book balance 45,759,134.30 10,195,641.25 55,954,775.55	Impairment provision 4,077,940.57 795,521.10
		4,873,461.67

(II) Liquidity risk: Liquidity risk refers to the risk that the Company cannot obtain sufficient funds in time to meet the needs of business development or pay due debts and other payment obligations. In order to control this risk, the Company comprehensively uses various financing

– II-502 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

means such as bank loans and adopts a combination of long-term and short-term financing to optimize the financing structure and maintain the continuity and flexibility of financing. The Company has obtained bank credit lines from a number of banks to meet working capital requirements and capital expenditure. As of June 30, 2020, the financial assets and financial liabilities of the Company are listed as follows with undiscounted contract cash flow by maturity date:

Item Monetary funds Accounts receivable Other receivables Subtotal Short-term loans Accounts payable Other payables Subtotal	Net book amount 218,203,639.87 41,681,193.73 9,400,120.15 269,284,953.75 110,000,000.00 41,861,833.71 1,734,492.84 153,596,326.55	Original book value 218,203,639.87 45,759,134.30 10,195,641.25 274,158,415.42 110,000,000.00 41,861,833.71 1,734,492.84 153,596,326.55	Closing <1 year 218,203,639.87 34,817,937.03 9,564,418.37 262,585,995.27 110,000,000.00 38,609,936.19 1,401,193.21 150,011,129.40	balance 1-2 years 5,630,201.90 69,811.00 5,700,012.90 1,417,464.65 15,510.00 1,432,974.65	2-3 years 4,407,370.77 300,200.00 4,707,570.77 449,069.56 32,997.00 482,066.56	>3 years 903,624.60 261,211.88 1,164,836.48 1,385,363.31 284,792.63
						1,670,155.94

As of December 31, 2019, the financial assets and financial liabilities of the Company are listed as follows with undiscounted contract cash flow by maturity date:

Item Monetary funds Accounts receivable Other receivables Subtotal Short-term loans Accounts payable Other payables Subtotal	Net book amount 256,829,568.17 59,114,385.02 1,222,410.16 317,166,363.35 114,084,728.03 34,109,853.27 4,160,084.72 152,354,666.02	Original book value 256,829,568.17 63,824,338.01 1,577,445.40 322,231,351.58 114,084,728.03 34,109,853.27 4,160,084.72 152,354,666.02	Opening <1 year 256,829,568.17 52,566,886.06 986,199.92 310,382,654.15 114,084,728.03 30,351,559.30 3,406,181.10 147,842,468.43	balance 1-2 years 7,277,231.45 50,033.60 7,327,265.05 1,961,599.60 189,060.98 2,150,660.58	2-3 years 3,181,123.50 274,000.00 3,455,123.50 650,382.39 165,275.40 815,657.79	>3 years 799,097.00 267,211.88 1,066,308.88 1,146,311.98 399,567.24
						1,545,879.22

(III) Market risk: Market risk refers to the risk that the fair value or future cash flow of financial instruments will fluctuate due to the change of market price, which mainly includes foreign exchange risk and interest rate risk.

1 . Foreign exchange risk: During the reporting period, the Company’s operations gradually faced foreign countries, and its export business was mainly settled in US dollars. The foreign currency assets and liabilities and future foreign currency transactions (the foreign currency assets and liabilities and foreign currency transactions are mainly denominated in US dollars) recognized by the Company have foreign exchange risks. The financial department of the Company is responsible for monitoring the scale of foreign currency transactions and foreign currency assets and liabilities of the Company to minimize the foreign exchange risks faced; therefore, the Company may sign forward foreign exchange contracts or currency swap contracts to avoid foreign exchange risks.

(1) The Company has not signed any forward foreign exchange contracts or currency swap contracts this year;

– II-503 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

(2) As of December 31, 2019, the amount of foreign currency financial assets and foreign currency financial liabilities held by the Company converted into RMB is as follows:

Item Monetary funds Subtotal Item Monetary funds Subtotal	Closing balance USD item EUR item HKD item 45,520.28 45,520.28 Closing balance of last year USD item EUR item HKD item 959.16 959.16	Total 45,520.28
		45,520.28
		Total 959.16
		959.16

2 . Interest rate risk: The Company’s interest rate risk is mainly caused by the financial liabilities with floating interest rate of bank loans, which make the Company face cash flow interest rate risk, while the financial liabilities with fixed interest rate make the Company face fair value interest rate risk. The Company determines the relative proportion of fixed and floating interest rate contracts based on the prevailing market environment.

The financial department of the Company continuously monitors the interest rate level of the Company. Rising interest rate will increase the cost of newly added interest-bearing debt and the interest expense of the company’s unpaid interest-bearing debt with floating interest rate, and will have a significant adverse impact on the Company’s financial performance. The management will make timely adjustments according to the latest market conditions, which may be the arrangement of interest rate swap to reduce interest rate risk.

X. Financial Instruments Measured at Fair Value

(I) Financial instruments measured at fair value

As of June 30, 2020, the Company had no financial instruments measured at fair value.

(II) Fair value of financial assets and financial liabilities not measured at fair value

Financial assets and liabilities not measured at fair value mainly include monetary funds, notes receivable, receivables, short-term loans, payables, non-current liabilities due within one year and long-term loans.

The difference between book value and fair value of above financial assets and financial liabilities of the Company not measured at fair value is very small.

– II-504 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

XI. Related Parties and Related Party Transactions

(I) Actual controller of the Company

Name of the			Shareholding	Shareholding	Voting right
company or natural	Related	Organization code or	ratio to the		ratio to the
person	relationship	ID number	Company		Company
				(%)	(%)
Yao Jiuzhi	One of the actual	44522219710503****		17.72	17.72
	controllers
Yao Linhao	One of the actual	44522219670725****		2.03	2.03
	controllers
Menghai Zhicun	Company	915328223096945813		0.25	0.25
Gaoyuan Tea	controlled by
Industry Co., Ltd.	Yao Jiuzhuang
Yao Jiuzhuang	One of the actual	44522219680626****
	controllers

Notes:

1. The above shareholding ratio is the shareholding ratio as of June 30, 2020.

2. Yao Jiuzhi, Yao Linhao and Yao Jiuzhuang are the actual joint controllers of the Company. Yao Jiuzhi, Yao Linhao and Yao Jiuzhuang signed the Concerted Action Agreement on September 26, 2012, in which the three parties agreed to jointly exercise major decision-making power as concerted action party. If the three parties could not reach an agreement on the matters under consideration, Yao Jiuzhi’s opinion and voting intention shall prevail.

(II) Introduction to the Company’s subsidiaries

See Note VIII (I) “Interests in subsidiaries” for details of subsidiaries of the Company.

(III) Information on the Company’s associated enterprises

See Note VIII (II) “Interests in associated enterprises” for details of important associated enterprises of the Company.

(IV) Other related parties

Names of other related parties Relationship between other related parties and the Company Menghai Zhicun Gaoyuan Tea The company under the control of the actual controller Industry Co., Ltd.

Shan Dan Directors, general managers and shareholders

Guangxi Tianye Science and Technology Seed Industry Co., Ltd.

Company controlled by shareholders and actual controllers

Guangxi Tianye Ecotourism Health Subsidiaries of companies controlled by shareholders and Park Management Co., Ltd. actual controllers

– II-505 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

(V) Related parties’ transactions

1. For the subsidiaries under control relationship and included in the scope of consolidated financial statements, the transactions among them and their parent companies have been offset.

2. Related transactions by selling products and providing labors

There are no related transactions by selling products and providing labors.

3. Related transactions on purchase of goods and labor service acceptance

• There are no related transactions by selling products and providing labors.

4. Related guarantee

The Company as the warrantee

Start date Expiring Guarantee Amount of date of performed Guarantor guaranteed guarantee guarantee fully or not Yao Jiuzhi 75,000,000.00 December December No 19, 2018 19, 2021

Note: In December 2018, Hainan Dachuan Food Co., Ltd., a subsidiary of the Company, signed a loan contract (HKNSS/H (Z) 2018 ZGDKZ (040)) of RMB75 million with Haikou Rural Commercial Bank Co., Ltd., and the guarantor was Tianye Innovation Corporation, Yao Yuzhi and Hubei Tianye Nonggu Biological Technology Co., Ltd. And it also signed three guarantee contracts (HKNSS/H (Z) 2018 GBZ No. 040-1, HKNSS/H (Z) 2018 GBZ No. 040-2, HKNSS/H (Z) 2018 GBZ No. 040-3), and the scope of guarantee includes principal, interest, compound interest, penalty interest, liquidated damages, compensation for damage and expenses for realizing creditor’s rights under the main contract.

5. Accounts receivable and payable of related parties

• (1) The Company’s receivables from related parties

			**Closing **	balance	Closing balance of last year	Closing balance of last year
				Bad-debt		Bad-debt
Name		Related parties	Book balance	provision	Book balance	provision
Accounts	receivable	Guangxi Tianye	31,644.10	1,582.21
		Ecotourism
		Health Park
		Management
		Co., Ltd.

– II-506 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

• (2) The Company’s payables to related parties

				Closing balance of
Name		Related parties	Closing balance	last year
Other	payables	Guangxi Tianye	21,685.00	21,685.00
		Ecotourism
		Health Park
		Management
		Co., Ltd.

XII. Share-based Payment

During the reporting period, no matters related to share-based payment occurred in the Company.

XIII. Commitments and Contingencies

(I) Major commitments

1. The signed lease contracts being or to be performed and their financial impact

(1) Since 2013, Guangxi Tianye Innovation Agricultural Technology Co., Ltd., a subsidiary of the Company, has successively signed land lease agreements with villagers in Guangliang Village, Pumiao Town, Yongning District, Nanning City. Details of the aforementioned contracts are as follows:

		Contract or
		subcontract			Payment
Lessor	Land location	period	Land area	Contract amount	method of rent
			(mu)
Villagers in	Guangliang	10 years/	9,406.85	The rent is	4-year period
Guangliang Village	Village,	13 years/		RMB520/mu/year	and 5-year
	Pumiao	16 years/		and paid once every	period
	Town,	25 years/		four years, which is
	Yongning	39 years		implemented
	District,			according to the
	Nanning City			contract

Except for the above commitments, as of June 30, 2020, the Company had no other major commitments that should be disclosed but not disclosed.

(II) Contingencies at the balance sheet date

As of June 30, 2020, there were no major contingencies that need to be disclosed by the Company.

XIV. Events after the Balance Sheet Date

NA.

XV. Other Important Events

NA.

– II-507 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

XVI. Notes to Main Items of the Parent Company’s Financial Statements

Note 1. Accounts receivable

1. Disclosure of accounts receivable by aging

Aging Closing balance Closing balance of last year <1 year 13,780,191.91 17,180,689.21 1-2 years 1,796,088.80 1,994,245.37 2-3 years 2,000,951.83 1,958,996.50 3-4 years 119,154.40 119,154.40 4-5 years >5 years Subtotal 17,696,386.94 21,253,085.48 Less: bad debt provision 1,482,638.56 1,698,702.05 Total 16,213,748.38 19,554,383.43 2. Disclosure of accounts receivable by category Category Closing balance Book value Book balance Bad-debt provision Amount Proportion Amount Proportion (%) (%) Accounts receivable for expected credit loss withdrawn by single provision Accounts receivable for expected credit loss withdrawn by combination 17,696,386.94 100.00 1,482,638.56 8.54 16,213,748.38 Including: combination 1 17,344,294.95 97.97 1,482,638.56 15,861,656.39 Combination 2 352,091.99 2.03 352,091.99 Total 17,696,386.94 100.00 1,482,638.56 8.54 16,213,748.38	Closing balance of last year 17,180,689.21 1,994,245.37 1,958,996.50 119,154.40	Closing balance of last year 17,180,689.21 1,994,245.37 1,958,996.50 119,154.40
	21,253,085.48 1,698,702.05
	19,554,383.43
		Book value 16,213,748.38 15,861,656.39 352,091.99
		16,213,748.38

– II-508 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Category Accounts receivable for expected credit loss withdrawn by single provision Accounts receivable for expected credit loss withdrawn by combination Including: combination 1 Combination 2 Total	Closing balance of last year Book balance Bad-debt provision Amount Proportion Amount Proportion (%) (%) 21,253,085.48 100.00 1,698,702.05 7.99 21,172,124.66 99.62 1,698,702.05 8.02 80,960.82 0.38 80,960.82 21,253,085.48 100.00 1,698,702.05 7.99	Book value 19,554,383.43 19,473,422.61
		19,554,383.43

3. Accounts receivable for which provision for bad debts is set aside in portfolios

• (1) Combination 1

Aging <1 year 1-2 years 2-3 years 3-4 years Total Contd.:	Accounts receivable 13,497,702.14 1,731,121.94 2,115,470.87 17,344,294.95	Closing balance Bad-debt provision Proportion (%) 674,885.11 5.00 173,112.19 10.00 634,641.26 30.00 50.00 1,482,638.56

Aging <1 year 1-2 years 2-3 years 3-4 years 4-5 years >5 years Total	Opening balance Accounts receivable Bad-debt provision Proportion (%) 17,159,429.53 857,971.48 5.00 1,934,544.23 193,454.42 10.00 1,958,996.50 587,698.95 30.00 119,154.40 59,577.20 50.00 21,172,124.66 1,698,702.05

– II-509 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

(2) Combination 2

Closing balance Accounts Bad-debt Organization name receivable provision Proportion Reason for withdrawal (%) Hubei Tianye Nonggu Biological 300,479.96 No withdrawal without risk Technology Co., Ltd. for the amount of related parties within the scope of consolidation Hainan Dachuan Food Co., Ltd. 21,240.00 No withdrawal without risk for the amount of related parties within the scope of consolidation Guangxi Tianye Innovation 30,372.03 No withdrawal without risk Agricultural Technology Co., for the amount of related Ltd. parties within the scope of consolidation Total 352,091.99

4. Provision, recovery or reversal and write-off of provision for bad-debt in current period

Category Accounts receivable for expected credit losses by single provision Accounts receivable for expected credit losses by combination Including: combination 1 Combination 2 Total	Opening balance 1,698,702.05 1,698,702.05 1,698,702.05	Provision	Changes in current period Recovery or reversal Write-off 216,063.49 216,063.49 216,063.49	Other changes	Closing balance 1,482,638.56 1,482,638.56
					1,482,638.56

5. No write-off of accounts receivable in current period

6. Top five accounts receivable based on debtors

Organization name Guangzhou Yuekai Trading Co., Ltd. Qingdao Badu Guoyue Foods Co., Ltd. Shandong Yipintang Industrial Co., Ltd. Hangzhou Haiguo Trading Co., Ltd. Beijing Haitai Foods Co., Ltd. Total	Closing balance 4,050,000.00 1,987,200.00 1,356,254.00 1,288,514.40 972,000.00 9,653,968.40	Proportion in closing balance of accounts receivable (%) 22.89% 11.23% 7.66% 7.28% 5.49% 54.55	Provision for bad-debt 202,500.00 99,360.00 67,812.70 128,851.44 291,600.00
			790,124.14

– II-510 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Note 2. Other receivables

Item Interests receivable Dividends receivable Other receivables Total 1. Disclosure of other receivables by aging Aging <1 year 1-2 years 2-3 years 3-4 years 4-5 years >5 years Subtotal Less: bad debt provision Total	Closing balance 319,076,740.10 319,076,740.10 Closing balance 60,201,559.20 178,700,000.00 80,345,698.44 319,247,257.64 170,517,54 319,076,740.10	Closing balance of last year 281,125,796.22
		281,125,796.22
		Closing balance of last year 18,258,895.44 50,009,022.60 212,934,669.98
		281,202,588.02 76,791.80
		281,125,796.22

2. Disclosure of other receivables by bad-debt provision methods

Category Accounts receivable for expected credit loss withdrawn by single provision Other receivables Accounts receivable for expected credit loss withdrawn by combination for single-item withdrawing of bad-debt provision Including: combination 1 Combination 2 Combination 3 Total	Closing balance Book balance Bad-debt provision Amount Proportion Amount Proportion (%) (%) 319,247,257.64 100.00 170,517.54 0.05 315,945,698.44 98.97 3,301,559.20 1.03 170,517.54 319,247,257.64 100.00 170,517.54 0.05	Book value 319,076,740.10 315,945,698.44 3,131,041.66
		319,076,740.10

– II-511 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Category Accounts receivable for expected credit loss withdrawn by single provision Other accounts receivable for expected credit loss withdrawn by combination Including: combination 1 Combination 2 Combination 3 Total	Closing balance of last year Book balance Bad-debt provision Amount Proportion Amount Proportion (%) (%) 281,202,588.02 100.00 76,791.80 0.03 280,434,669.98 99.73 767,918.04 0.27 76,791.80 10.00 281,202,588.02 100.00 76,791.80 0.03	Book value 281,125,796.22 280,434,669.98 691,126.24
		281,125,796.22

3. Other accounts receivable for expected credit loss withdrawn by combination

• (1) Combination 3

Item Margin, deposit, advance payment and temporary payment, etc. Total Aging <1 year 1-2 years 2-3 years Total	Closing balance Other receivables Bad-debt provision 3,301,559.20 170,517.54 3,301,559.20 170,517.54 Closing balance of last Other receivables Bad-debt provision 767,918.04 76,791.80 767,918.04 76,791.80	Proportion (%) 5.16
		5.16
		year Proportion (%) 5.00 10.00 30.00
		10.00

– II-512 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

• (2) Combination 2

Organization name Hubei Tianye Nonggu Biological Technology Co., Ltd. Hubei Iceman Foods Co., Ltd. Panzhihua Tianye Innovation Agricultural Technology Co., Ltd. Total	Other receivables 264,420,000.00 31,525,698.44 20,000,000.00 315,945,698.44	Closing balance Bad-debt provision Proportion Reason for withdrawal (%) No withdrawal without risk for the amount of related parties within the scope of consolidation No withdrawal without risk for the amount of related parties within the scope of consolidation No withdrawal without risk for the amount of related parties within the scope of consolidation

4. Provision for withdrawn or returned or transferred bad debt in current period

	Phase I	Phase II	Phase III
		Expectation in	Expectation in
		whole duration	whole duration
	Expected	Credit loss	Credit loss
	credit loss in	(not incurred	(occurred
	the next 12	credit	credit
Bad-debt provision	months	impairment)	impairment)	Total
Opening balance	76,791.80			76,791.80
Opening balance in current period
— Converted to the second stage
— Transferred into phase III
— Transferred back to phase II
— Reversed to the first stage
Provision of current period	93,725.74			93,725.74
Reversal of the current period
Write-off of the current period
Verification of the current period
Other changes
Closing balance	170,517.54			170,517.54

– II-513 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

5. No write-off of other receivables in current period

6. Other receivables classified by nature of payment

Nature of payment Transaction payment Reserve fund Withholding social security, etc Margin Others Total	Closing balance 318,934,022.03 174,918.79 35,302.36 101,001.46 2,013.0 319,247,257.64	Closing balance of last year 283,876,214.89 18,578.60 28,399.26 1,158.00 1,740.00
		283,926,090.75

7. Top five other accounts receivable based on debtors

Organization name Nature of payment Hubei Tianye Nonggu Biological Technology Co., Ltd. Transaction payment Hubei Iceman Foods Co., Ltd. Transaction payment Panzhihua Tianye Innovation Agricultural Technology Co., Ltd. Transaction payment Hainan Ruigong Technology Engineering Co., Ltd. Transaction payment Guangxi Xinyue Construction Engineering Co., Ltd. Transaction payment Total	Closing balance Relationship with the Company Aging 264,420,000.00 Related parties <3 years 31,525,698.44 Related parties <3 years 20,000,000.00 Related parties <1 year 1,566,515.00 Non-affiliated party <1 year 454,242.00 Non-affiliated party <1 year 317,966,455.44	Proportion in closing balance of other receivables (%) 82.83 9.88 6.26 0.49 0.14 99.60	Closing balance of bad-debt provision 78,325.75 22,712.10
			101,037.85

Note 3. Long-term equity investment

Item Investment in subsidiaries Investment in associated enterprises Total	Book balance 143,737,642.83 17,758,310.00 161,495,952.83	Closing balance Bad-debt provision 10,597,437.42 10,597,437.42	Book value 133,140,205.41 17,758,310.00 150,898,515.41	Book balance 113,737,642.83 17,758,310.00 131,495,952.83	Opening balance Bad-debt provision 10,597,437.42 10,597,437.42	Book value 103,140,205.41 17,758,310.00
						120,898,515.41

– II-514 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

1. Investment in subsidiaries

Investee Hainan Dachuan Food Co., Ltd. Guangxi Tianye Innovation Agricultural Technology Co., Ltd. Hainan Tianye Drinks Food Sales Co. Ltd. Hubei Iceman Foods Co., Ltd. Hubei Tianye Nonggu Biological Technology Co., Ltd. Hubei Tianye Innovation Nonggu Fruit & Vegetable Co., Ltd. Panzhihua Tianye Innovation Agricultural Technology Co., Ltd. Total	Initial investment cost 33,737,641.83 30,000,000.00 5,000,000.00 15,000,001.00 25,000,000.00 5,000,000.00 30,000,000.00 143,737,642.83	Opening balance 33,737,641.83 30,000,000.00 5,000,000.00 15,000,001.00 25,000,000.00 5,000,000.00	Increase of current period 30,000,000.00 30,000,000.00	Decrease of current period	Closing balance 33,737,641.83 30,000,000.00 5,000,000.00 15,000,001.00 25,000,000.00 5,000,000.00 30,000,000.00 143,737,642.83	Depreciation reserves in current period	Closing balance of provision for impairment 2,800,051.82 7,797,385.60
		113,737,642.83					10,597,437.42

2. Investment in associates

Investee Tianjin Fangfu Tianye Investment Center (Limited Partnership) Total Investee Tianjin Fangfu Tianye Investment Center (Limited Partnership) Total	Opening balance Increase and decrease of current period Additional investment Negative investment Profits and losses on investments recognized by equity method Adjustment of other comprehensive incomes 17,758,310.00 17,758,310.00 Increase and decrease of current period Closing balance Closing balance of provision for impairment Other equity changes Distribution of cash dividends or profits Provision for impairment Others 17,758,310.00 17,758,310.00	Opening balance Increase and decrease of current period Additional investment Negative investment Profits and losses on investments recognized by equity method Adjustment of other comprehensive incomes 17,758,310.00 17,758,310.00 Increase and decrease of current period Closing balance Closing balance of provision for impairment Other equity changes Distribution of cash dividends or profits Provision for impairment Others 17,758,310.00 17,758,310.00	Opening balance Increase and decrease of current period Additional investment Negative investment Profits and losses on investments recognized by equity method Adjustment of other comprehensive incomes 17,758,310.00 17,758,310.00 Increase and decrease of current period Closing balance Closing balance of provision for impairment Other equity changes Distribution of cash dividends or profits Provision for impairment Others 17,758,310.00 17,758,310.00	Opening balance Increase and decrease of current period Additional investment Negative investment Profits and losses on investments recognized by equity method Adjustment of other comprehensive incomes 17,758,310.00 17,758,310.00 Increase and decrease of current period Closing balance Closing balance of provision for impairment Other equity changes Distribution of cash dividends or profits Provision for impairment Others 17,758,310.00 17,758,310.00
				Closing balance of provision for impairment

Note: See “Note 8 Long-term equity investment” in “VI. Main Notes to Consolidated Financial Statements” for details.

– II-515 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Note 4. Operating incomes and operating costs

1. Operating income, operating costs

Item Principal operating activities Others Total	Amount of current period Revenue Cost 45,338,715.97 33,036,559.72 65,456.00 46,914.40 45,404,171.97 33,083,474.12	Amount of last period Revenue Cost 46,668,389.58 32,629,124.92 253.45 209.40 46,668,643.03 32,629,334.32	Amount of last period Revenue Cost 46,668,389.58 32,629,124.92 253.45 209.40 46,668,643.03 32,629,334.32
			32,629,334.32

XVII. Supplementary information

(I) Detailed statement of non-recurring profits and losses

	Amount of	Amount of
Item	current period	last period
Profits and loss on disposal of non-current assets, including
the write-off part of the provision for impairment of assets	-9,860,441.54	-391.07
Tax returns, reductions, and exemptions with unauthorized
approval or without official approval documents with
occurrence
Government grant included in the current profits and losses
(except for the government grant which are closely related
to the business of the company and are in accordance with
the national unified standard quota)	5,908,438.64	6,139,235.57
Fund possession cost charged from non-financial enterprises
including in current profits and losses
The investment cost for acquiring subsidiaries, associated
enterprises and cooperative enterprises is less than the
income generated by the fair value of the identifiable net
assets of the merged unit when acquiring investment
Exchange losses of non-monetary assets
Profits and losses of assets invested or managed by
entrustment
Assets for impairment withdrawn due to force majeure such
as natural disasters

Item

• Profits and losses on debt restructuring

• Corporate restructuring costs, such as fees on staffing and integration

• Profits and losses exceeding the fair value part due to an unfair transaction price during the transaction

• Net profits and losses of the subsidiaries in the current period from the beginning of period to the date of merger due to the merger of enterprises under the common control

• Profit and loss caused by contingencies that are irrelevant to Company’s normal businesses

– II-516 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

Item

Amount of Amount of current period last period

Profits and losses from variation of fair value by holding transactional financial assets, transactional financial liability and investment incomes from handling transactional financial assets, transactional financial liability and salable financial assets, in addition to the valid arbitrage hedging business related to normal corporate business Reversing assets impairment of receivables for independent impairment test Losses and profits obtained from foreign entrusted loans Profit and loss from fair value variation of investment real estate by adopting fair value mode for follow-up calculation Influence on the current profit and loss by one-time adjustment as per laws and regulations on taxes and accounting Trustee fee income from entrusted operation Non-operating income and expenses in addition to the above-mentioned items Other profit and loss items that conform to the definition of non-recurring profit and loss. Subtotal Less: income tax affected amount Minority equity affected amount (after tax) Total	-358,521.53 -4,310,524.43 164,461.80 -4,146,062.63	-108,092.02
		6,030,752.48 769,268.53
		6,800,021.01

(II) Rate of return on common stockholders’ equity and earnings per share

		January-June 2020
	Weighted-average	**Earnings per **	share
	Income rate of	(EPS)
Profits during reporting period	net assets	Basic EPS	**Diluted **	EPS
	(%)
Net profits attributable to common
corporate shareholders	0.98	0.03		0.03
Net profits attributable to common
corporate shareholders after the
deduction of the non-recurring profit and
loss	1.54	0.05		0.05

– II-517 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

		January-June 2019
	Weighted-average	**Earnings per **	share
	Income rate of	(EPS)
Profits during reporting period	net assets	Basic EPS	**Diluted **	EPS
	(%)
Net profits attributable to common
corporate shareholders	2.82	0.09		0.09
Net profits attributable to common
corporate shareholders after the
deduction of the non-recurring profit and
loss	2.10	0.06		0.06

XVIII. Changes of Main Data in Financial Statements and Reasons for Changes

	Closing	Opening		Variable	Reason for
Item	balance	balance	Amount	proportion	change
Accounts receivable	41,681,193.73	59,114,385.02	-17,433,191.29	-29.49%	1
Prepayments	20,997,324.23	2,134,373.39	18,862,950.84	883.77%	2
Other receivables	9,400,120.15	1,222,410.16	8,177,709.99	668.98%	3
Other non-current assets	22,656,355.91	10,499,412.40	12,156,943.51	115.79%	4
Contract liabilities	4,567,026.11	2,692,363.10	1,874,663.01	69.63%	5
Taxes payable	790,953.50	3,081,368.31	-2,290,414.81	-74.33%	6
Taxes and surcharges	402,664.21	2,275,970.03	-1,873,305.82	-82.31%	7
Non-operating expense	469,799.68	113,258.10	356,541.58	314.80%	8
Non-operating income	111,278.15	4,775.01	106,503.14	2230.42%	9
Income tax expense	358,144.89	232,185.69	125,959.20	54.25%	10
Operating profits	8,219,154.83	20,965,777.03	-12,746,622.20	-60.80%	11
Total profits	7,860,633.30	20,857,293.94	-12,996,660.64	-62.31%	12
Net Profit	7,388,220.26	20,625,108.25	-13,236,887.99	-64.17%	13

1. Accounts receivable decreased by RMB17,433,191.29 at the end of the period compared with the beginning of the period, with a change ratio of -29.49%, mainly due to the decrease in customer payment;

2. The prepayments at the end of the period increased by RMB18,862,950.84 compared with the beginning of the period, with a change ratio of 883.77%. The main reasons are as follows: firstly, the newly established Panzhihua Field started construction, and RMB3.52 million was paid in advance for engineering and equipment purchases; secondly, RMB9.58 million was paid in advance for imported durian; and thirdly, payment in advance for raw materials and packaging materials increased. The Company paid for the preparation costs, as well as the purchase costs of durian, a large number of imported agricultural products, and the cost of purchased products;

3. Other receivables increased by RMB8,177,709.99 at the end of the period compared with the beginning of the period, with a change ratio of 668.98%. The main reason is that the newly established subsidiary Panzhihua Tianye proposed to buy land and real estate from local state-owned enterprises through local property rights exchanges and paid a deposit of RMB6 million. The Company paid for the cost of infrastructure construction and the construction cost of new frozen storage;

4. Other non-current assets increased by RMB12,156,943.51 at the end of the period compared with the beginning of the period, with a change ratio of 115.79%, mainly due to the increase in advance payment for construction;

5. The advance receipts at the end of the period increased by RMB1,874,663.01 compared with the beginning of the period, with a change ratio of 69.63%, mainly due to the increase in the advance payment received by the enterprise company according to the newly signed sales contract;

6. The tax payable at the end of the period decreased by RMB2,290,414.81 compared with the beginning of the period, with a change ratio of -74.33%, mainly due to the decrease of VAT and income tax payable;

7. Taxes and surcharges decreased by RMB1,873,305.82 compared with the same period of last year, with a change ratio of -82.31%, mainly due to the fact that the VAT paid in current period is lower than that in the same period of last year, thus affecting taxes and surcharges data;

– II-518 –

APPENDIX II FINANCIAL INFORMATION OF THE TARGET COMPANY

1. Non-operating expenses increased by RMB356,541.58 compared with the same period of the last year, with a change ratio of 314.80%. The main reason is that the Company responded to the government’s call to jointly fight against COVID-19 and donated materials and funds to medical institutions and epidemic prevention personnel;

2. Non-operating income increased by RMB106,503.14 compared with the same period of the last year, with a change ratio of 2,230.43%, mainly due to external donations and social security subsidies received due to the epidemic;

3. Income tax expenses increased by RMB125,959.20 compared with the same period of the last year, with a change ratio of 54.25%, mainly due to the fact that the current profit of the Tianye Headquarters was higher than that of the last year;

4. Operating profit, total profit and net profit decreased significantly compared with the same period of last year, mainly due to the decrease of income and the loss caused by the demolition of construction in progress.

Tianye Innovation Corporation 24 August 2020

– II-519 –

THE REPORT FROM ERNST & YOUNG IN RELATION TO THE PROFIT FORECAST

APPENDIX III

REPORT FROM REPORTING ACCOUNTANTS ON THE DISCOUNTED CASH FLOW FORECAST IN CONNECTION WITH THE VALUATION OF EQUITY INTEREST IN TIANYE INNOVATION CORPORATION

To the Directors of Shineroad International Holdings Limited

We have been engaged to report on the arithmetical accuracy of the calculations of the discounted cash flow forecast (the “ Forecast ”) on which the valuation dated 10 December 2020 prepared by International United Consulting & Appraisal Limited in respect of TIANYE INNOVATION CORPORATION (the “ Target ”) as at 30 September 2020 is based. The valuation is set out in the circular of Shineroad International Holdings Limited (the “ Company ”) dated 25 January 2021 (the “ Circular ”) in connection with the acquisition of approximately 11.72% equity interest of the Target. The valuation based on the Forecast is regarded by The Stock Exchange of Hong Kong Limited as a profit forecast under paragraph 14.61 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “ Listing Rules ”).

Directors’ responsibilities

The directors of the Company (the “ Directors ”) are solely responsible for the Forecast. The Forecast has been prepared using a set of bases and assumptions (the “ Assumptions ”), the completeness, reasonableness and validity of which are the sole responsibility of the Directors. The Assumptions are set out in the section headed “Principal assumptions of the valuation” of the Circular.

Our Independence and Quality Control

We have complied with the independence and other ethical requirements of the Code of Ethics for Professional Accountants issued by the Hong Kong Institute of Certified Public Accountants (“ HKICPA ”), which is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behavior.

Our firm applies Hong Kong Standard on Quality Control 1 Quality Control for Firms that Perform Audits and Reviews of Financial Statements, and Other Assurance and Related Services Engagements , and accordingly maintains a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements.

– III-1 –

THE REPORT FROM ERNST & YOUNG IN RELATION TO THE PROFIT FORECAST

APPENDIX III

Reporting Accountants’ responsibilities

Our responsibility is to express an opinion on the arithmetical accuracy of the calculations of the Forecast based on our work. The Forecast does not involve the adoption of accounting policies.

We conducted our engagement in accordance with Hong Kong Standard on Assurance Engagements 3000 (Revised) Assurance Engagements Other Than Audits or Reviews of Historical Financial Information issued by the HKICPA. This standard requires that we plan and perform our work to obtain reasonable assurance as to whether, so far as the arithmetical accuracy of the calculations are concerned, the Directors have properly compiled the Forecast in accordance with the Assumptions adopted by the Directors. Our work consisted primarily of checking the arithmetical accuracy of the calculations of the Forecast prepared based on the Assumptions made by the Directors. Our work is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing issued by the HKICPA. Accordingly, we do not express an audit opinion.

We are not reporting on the appropriateness and validity of the Assumptions on which the Forecast are based and thus express no opinion whatsoever thereon. Our work does not constitute any valuation of the Target. The Assumptions used in the preparation of the Forecast include hypothetical assumptions about future events and management actions that may or may not occur. Even if the events and actions anticipated do occur, actual results are still likely to be different from the Forecast and the variation may be material. Our work has been undertaken for the purpose of reporting solely to you under paragraph 14.62(2) of the Listing Rules and for no other purpose. We accept no responsibility to any other person in respect of our work, or arising out of or in connection with our work.

Opinion

Based on the foregoing, in our opinion, so far as the arithmetical accuracy of the calculations of the Forecast is concerned, the Forecast has been properly compiled in all material respects in accordance with the Assumptions adopted by the Directors.

Certified Public Accountants Hong Kong

– III-2 –

LETTER FROM THE BOARD IN RELATION TO THE PROFIT FORECAST

APPENDIX IV

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==> picture [58 x 33] intentionally omitted <==

Shineroad International Holdings Limited 欣融國際控股有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock code: 1587)

25 January 2021

To the Independent Shareholders

Dear Sir or Madam,

MAJOR TRANSACTION

IN RELATION TO THE ACQUISITION OF APPROXIMATELY 11.72% OF THE TARGET COMPANY

We refer to the valuation performed by International United Consulting & Appraisal Limited in relation to per share equity interest of the Target Company as at 30 September 2020 (the “ Valuation ”). The Valuation was prepared based on income approach, which involves the use of the discounted cash flow approach. Accordingly, the Valuation is regarded as a profit forecast under Rule 14.61 of the Listing Rules. Capitalised terms used herein shall have the same meanings as defined in the circular of the Company dated 25 January 2021 unless the context otherwise requires.

We have reviewed the bases and assumptions upon which the Valuation has been prepared and for which International United Consulting & Appraisal Limited is responsible. We have also considered the report from the reporting accountants of the Company, Ernst & Young, on the arithmetical accuracy of the calculations of the discounted cash flow forecast of the Target Company, where it is opined that so far as the arithmetical accuracy of the calculations are concerned, the forecast has been properly compiled in all material respects in accordance with the Assumptions as set out in the Valuation.

– IV-1 –

LETTER FROM THE BOARD IN RELATION TO THE PROFIT FORECAST

APPENDIX IV

On the basis of the foregoing, we confirm that we have made the profit forecast of the Target Company after due and careful enquiry.

By order of the Board

Shineroad International Holdings Limited Huang Haixiao Chairman

– IV-2 –

GENERAL INFORMATION

APPENDIX V

1. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief, the information contained in this circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this circular misleading.

2. DISCLOSURE OF INTERESTS

Interests and short positions of Directors and chief executive of the Company in the Shares, underlying Shares and debentures of the Company and its associated corporations

As at the Latest Practicable Date, the interests or short positions of the Directors and chief executives of the Company in the shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which any such Directors and chief executive(s) of the Company is taken or deemed to have under such provisions of the SFO) or which were required to be entered in the register required to be kept by the Company pursuant to Section 352 of the SFO or which were otherwise required to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies (the “ Model Code ”) were as follows:

Long positions in the Shares and underlying Shares

				Approximate
				Percentage of
				Shareholding in
Name of		Nature of	Number of	the Company
Director	Position	interest	Shares	(Note 2)
Huang Haixiao	Executive	Interest in	510,000,000	75.00%
	Director	controlled
		corporation
		(Note 1)

– V-1 –

GENERAL INFORMATION

APPENDIX V

Interest in the shares of the Company’s associated corporations

					Approximate
					Percentage of
					Shareholding
		Name of			in the
Name of		associated	Nature of	Number of	Company
Director	Position	corporation	interest	Shares	(Note 2)
Huang	Executive	Ocean Town	Beneficial	1	100.00%
Haixiao	Director	Company	owner
		Limited
Huang	Executive	Shineroad	Interest in	1	100.00%
Haixiao	Director	Group	controlled
		Limited	corporation

Notes:

• (1) Huang Haixiao beneficially owns the entire issued share capital of Ocean Town Company Limited, which beneficially owns the entire issued share capital of the Shineroad Group Limited. Therefore, each of Huang Haixiao and Ocean Town Company Limited is deemed to be interested in 510,000,000 Shares held by Shineroad Group Limited for the purpose of the SFO.

• (2) The total number of the issued Shares as at the Latest Practicable Date (i.e. 680,000,000 Shares) has been used for the calculation of the approximate percentage of shareholding in the Company.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors and chief executive(s) of the Company had or was deemed to have any interests or short positions in the shares, underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which any such Directors and chief executive(s) of the Company is taken or deemed to have under such provisions of the SFO) or which were required to be entered in the register required to be kept by the Company pursuant to Section 352 of the SFO or which was required to be notified to the Company and the Stock Exchange pursuant to the Model Code.

– V-2 –

GENERAL INFORMATION

APPENDIX V

Substantial Shareholders and other persons’ interests and short positions in the Shares and underlying Shares

So far as is known to the Directors or the chief executive of the Company, as at the Latest Practicable Date, the following persons (other than the Directors and chief executive of the Company) had interests or short positions in the Shares and underlying Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO or was recorded in the register required to be kept by the Company under section 336 of the SFO:

			Approximate
			percentage of total
			issued share capital
	Capacity/Nature of		of the Company
Name of Shareholder	interest	Number of Shares	(Note 3)
Ocean Town Company	Interest in controlled	510,000,000	75.00%
Limited	corporation (Note 1)
Shineroad Group	Beneficial owner	510,000,000	75.00%
Limited	(Note 1)
Chen Dongying	Interest of spouse	510,000,000	75.00%
	(Note 2)

Notes:

• (1) Such 510,000,000 Shares are held by Shineroad Group Limited as a registered holder. The entire issued share capital of Shineroad Group Limited is wholly-owned by Ocean Town Company Limited. Therefore, Ocean Town Company Limited is deemed to be interested in 510,000,000 Shares held by Shineroad Group Limited for the purpose of the SFO.

• (2) Chen Dongying is the spouse of Huang Haixiao and is therefore deemed to be interested in 510,000,000 Shares in which Huang Haixiao has, or is deemed to have, for the purpose of the SFO.

• (3) The total number of the issued Shares as at the Latest Practicable Date (i.e. 680,000,000 Shares) has been used for the calculation of the approximate percentage of shareholding in the Company.

Save as disclosed above, so far as is known to the Directors or chief executive of the Company, as at the Latest Practicable Date, no person (other than a Director or chief executive of the Company) had, or was deemed to have, an interest or short position in the Shares or underlying Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO or was recorded in the register required to be kept by the Company under section 336 of the SFO.

– V-3 –

GENERAL INFORMATION

APPENDIX V

3. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had any existing or proposed service contract with any member of the Group which was not determinable by the employer within one year without payment of compensation (other than statutory compensation).

4. COMPETING INTEREST

As at the Latest Practicable Date, none of the Directors and their respective close associates (as defined under the Listing Rules) was interested in any business, apart from the business of the Group, which competed or was likely to compete, either directly or indirectly, with that of the Group.

5. DIRECTORS’ INTEREST IN CONTRACTS AND ASSETS OF THE GROUP

As at the Latest Practicable Date, save as the agreements listed below of which Mr. Huang Haixiao, the Chairman of the Board, has deemed interests, (a) none of the Directors had any direct or indirect interest in any assets which have since 31 December 2019 being the date to which the latest published audited consolidated financial statements of the Group were made up, been acquired or disposed of by, or leased to any member of the Group, or were proposed to be acquired or disposed of by or leased to any member of the Group; (b) none of the Directors was materially interested, directly or indirectly, in any contract or arrangement entered into by any member of the Group which was significant in relation to the business of the Group:

• (i) the master purchase agreements dated 4 June 2018 and 9 October 2018 with Shanghai Hi-Road Food Technology Co., Ltd. (上海海融食品科技股份有限公司) (“ Hi-Road ”) and Shanghai Hi-morse Food Additives Co., Ltd. (上海海象食品配料有限公司) in relation to the purchase of food flavourings, chocolate and other food ingredients and additives by the Group;

• (ii) the master purchase agreements dated 4 June 2018 and 9 October 2018 with Zhejiang Teaheals Bio-tech Co., Ltd.* (浙江頂亨生物科技有限公司) in relation to the purchase of tea powder, herbal powder and fruit powder products by the Group;

• (iii) the master supply agreements dated 4 June 2018 and 31 October 2018 with Hi-Road in relation to the sale of sucrose esters (蔗糖酯), vanillin (香蘭素) and other food ingredients and additives by the Group;

– V-4 –

GENERAL INFORMATION

APPENDIX V

• (iv) the rental agreement in relation to the office building located in No. 666, Jindou Road, Shanghai with a total building area of 641.1 square meters at a monthly rental fee of RMB15,000; and

• (v) the rental agreement in relation to the office building located in Floor 25, No. 1, Lane 1040, Caoyang Road, Shanghai with a total building area of 584.26 square meters at a monthly rental fee of RMB53,000.

6. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors confirm that there has been no material adverse change in the financial or trading position of the Group since 31 December 2019, being the date to which the latest published audited accounts of the Company have been made up.

7. LITIGATION

As at the Latest Practicable Date, no member of the Group was engaged in any litigation or claim of material importance and no litigation or claim of material importance was known to the Directors to be pending or threatened against the members of the Group.

8. MATERIAL CONTRACTS

Except for the Share Transfer Agreement, no contract (being contract entered into outside the ordinary course of business of the Group) has been entered into by the members of the Group within two years preceding the date of this circular which are or may be material.

9. EXPERT’S QUALIFICATION AND CONSENT

The following are the qualification of the experts who have been named in this circular or have been given opinion or letter, which is contained in this circular:

Name

Qualifications

Ernst & Young Certified Public Accountants International United Consulting & Independent valuer Appraisal Limited

– V-5 –

GENERAL INFORMATION

APPENDIX V

As at the Latest Practicable Date, they had given and had not withdrawn their written consent to the issue of this circular with the inclusion of their letters or opinions or reports or references to their names in the form and context in which they appear.

As at the Latest Practicable Date, they did not have shareholding in any member of the Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group, nor did they have any direct or indirect interests in any assets which had been, since 31 December 2019 (the date to which the latest published audited consolidated financial statements of the Group were made up), acquired or disposed of by or leased to any member of the Group, or were proposed to be acquired or disposed of by or leased to any member of the Group.

10. CORPORATE INFORMATION

• (a) The company secretary of the Company is Mr. Tse Yin Fung, who is admitted to practise as a solicitor in Hong Kong.

• (b) The registered office of the Company is located at Windward 3, Regatta Office Park, P.O. Box 1350, Grand Cayman KY1-1108, Cayman Islands. The headquarters in the PRC in at 25/F South, Block 1 Zhongyou Building, Lane 1040 Caoyang Road, Putuo District, Shanghai, PRC. The principal place of business in Hong Kong is at Unit 6, 16/F, K. Wah Centre, 191 Java Road, Hong Kong.

• (c) The Hong Kong branch share registrar and transfer office of the Company is Tricor Investor Services Limited, at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong.

– V-6 –

GENERAL INFORMATION

APPENDIX V

11. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection at the principal place of business in Hong Kong of the Company at Unit 6, 16/F, K. Wah Centre, 191 Java Road, Hong Kong during normal business hours on any weekday (except public holidays), up to and including 14 days from the date of this circular:

• (a) the memorandum of association of the Company;

• (b) the annual reports of the Company for the three years ended 31 December 2019 and the interim report of the Company for the six months ended 30 June 2020, as set out in Appendix I to this circular;

• (c) the financial information of the Target Company, the text of which is set out in Appendix II to this circular;

• (d) the valuation report prepared by International United Consulting & Appraisal Limited in respect of the per share equity interest of the Target Company as at 30 September 2020;

• (e) the report from Ernst & Young relating to the profit forecast of Target Company, the text of which is set out in Appendix III to this circular;

• (f) the letter from the Board relating to the profit forecast of the Target Company, the text of which is set out in Appendix IV to this circular;

• (g) the written consent of the experts as referred to in the section headed “Expert’s Qualification and Consent” in this appendix;

• (h) the Share Transfer Agreement; and

• (i) this circular.

– V-7 –