禾丰股份：禾丰股份2021年年度报告（英文版）

股份有限公司Wellhope Foods Co., Ltd.2021 Annual Report Stock Code: 603609 Stock Abbreviation (English): Wellhope Wellhope Foods Co., Ltd. 2021 Annual Report April 2022 Wellhope Foods Co., Ltd.2021 Annual Report Important Statements I. The Board of Directors, Supervisory Board, Directors, Supervisors and Senior Management of Wellhope hereby warrant that there are no false representations, misleading statements or material omissions in this annual report, jointly and severally accept full responsibility for the truthfulness, accuracy and completeness of the contents of this report. II. All Directors attended the Board Meeting. III. SuyaJincheng CPALLP has issued a standard audit report for Wellhope. IV. Wellhope's Chairman Jin Weidong and the Director of internal audit Zhang Wenliang warrant the truthfulness, accuracy and completeness of the information presented in the financial statements in this annual report. V. The dividend plan for the reporting period has been deliberated by the Board of Directors. The plan for 2021 dividend distribution will be: In 2021, Wellhope will not pay dividends, issue bonus stock, and convert capital reserve into share capital, the undistributed profit will be carried forward to the next year. According to Rules on Share Repurchase of Public Companies issued by the CSRC, Wellhope paid RMB 200,003,612.37 to repurchase its shares in 2021, which was regarded as cash dividend, accounting for 168.74% of RMB 118,530,518.15, the Company's net profit attributable to shareholders in 2021. VI. Risk Statement of Forward-looking Statements The forward-looking descriptions in this report such as plans, development strategies and other information cannot be deemed the Company's commitment to investors. Please beware of the investment risks. VII. There has been no occurrence of the Company's non-business capital being occupied by controlling shareholder and his related parties. VIII. There has been no occurrence of the Company violating its decision-making procedure while providing external guarantees. IX. There has been no occurrence that more than half of the directors can’t guarantee the authenticity, accuracy and completeness of the annual report disclosed by the Company. X. Material Risk Warning Wellhope describes possible risks in detail, please refer to "Possible Risks" in Section III "Business Operations Analysis". XI. This annual report has been issued in both Chinese and English versions. In case there is any discrepancy or inconsistency between the two versions, the Chinese version shall prevail. The disclosed Chinese version of 2021 Annual Report can be obtained at: . Wellhope Foods Co., Ltd.2021 Annual Report Contents Section IGlossary ...............................................................................................................................4 Section IICompany Profile and Key Financial Information .................................................................5 Section IIIBusiness Operation Analysis ................................................................................................9 Section IVCorporate Governance ......................................................................................................56 Section VEnvironment and Social Responsibility .............................................................................72 Section VIImportant Disclosures .......................................................................................................85 Section VIIChanges in Common Shares and Shareholder Information ..............................................92 Section VIIIPreference Share ...............................................................................................................97 Section IXCorporate Bond .................................................................................................................98 Section XFinancial Statements .........................................................................................................99 Reference file directory Financial statements with the signature and seal of the legal representative, the person taking charge of accounting and the person taking charge of the accounting department. Reference file directory The original audit report with the seal of the accounting firm and the signature and seal of the CPA. Reference file directory During the reporting period, all the original documents and original announcements of the Company that have been publicly disclosed on the websites designated by the CSRC. Wellhope Foods Co., Ltd.2021 Annual Report Section IGlossary I. Glossary CSRC refers to China Securities Regulatory Commission SSE refers to Shanghai Stock Exchange Wellhope, the Company refers to Wellhope Foods Co., Ltd. Reporting Period refers to January 1,2021-December 31,2021 The end of the reporting period refers to December 31,2021 Royal De Heus refers to Koninklijke De Heus B.V., the parent company of De Heus Mauritius Ltd., the biggest privately-owned feed company in the Netherlands Company Constitution refers to The Constitution of Wellhope Foods Co., Ltd. Shareholders' Meeting refers to The Shareholders' Meeting of Wellhope Foods Co., Ltd. Board of Directors refers to The Board of Directors of Wellhope Foods Co., Ltd. Supervisory Board refers to The Supervisory Board of Wellhope Foods Co., Ltd. Corporate Law refers to The Corporate Law of the People's Republic of China Securities Law refers to The Securities Law of the People's Republic of China Wellhope Foods Co., Ltd.2021 Annual Report Section II Company Profile and Key Financial Information I. Company Information Company name (English) Wellhope Foods Co., Ltd. Abbreviation (English) Wellhope Company name (Chinese)禾丰食品股份有限公司Abbreviation (Chinese)禾丰股份Legal Representative Jin Weidong II. Contact Person Secretary of the Board Representative of Securities Affairs Name Zhao Xin Zhao Changqing Address No.169, Huishan Street, Shenbei New District, Shenyang, Liaoning Province, China No.169, Huishan Street, Shenbei New District, Shenyang, Liaoning Province, China Tel 024-88081409024-88081409 Fax 024-88082333024-88082333 Email hfmy@wellhope.co hfmy@wellhope.co III. Basic Information of the Company Registered address No.169, Huishan Street, Shenbei New District, Shenyang, Liaoning Province, China Change of the Company's registered address On December 6,2016, the registered address of the Company was changed from "No.67, Hunnan Development Zone, Shenyang " to "No.169, Huishan Street, Shenbei New District, Shenyang, Liaoning Province". Please refer to the announcement No. 2016-045 disclosed by the Company on the website of Shanghai Stock Exchange Office address No.169, Huishan Street, Shenbei New District, Shenyang, Liaoning Province, China Postal code 110164 Company website Email hfmy@wellhope.co IV. Place where the Annual Report is Prepared Media designated by the Company for disclosing information China Securities Journal, Shanghai Securities News, Securities Times Website designated by the CSRC for publishing the annual report Place where the Company prepares its annual report Securities Department V. Stock Information Stock information Stock type Stock exchange for IPO Stock abbreviation Stock code A share Shanghai Stock Exchange Wellhope(禾丰股份) 603609 Wellhope Foods Co., Ltd.2021 Annual Report VI. Other Information Accounting firm (local) Name SuyaJincheng CPALLP Office address 14th-16th F, Central International Plaza, No.159 Taishan Road, Nanjing, Jiangsu Province, China Name of signatory CPAZhou Jiawen, Wang Lei The sponsor performs the responsibility of continuous supervision during the reporting period Name China Galaxy Securities Co., Ltd. Office address Qinghai financial building, Fengtai district, Beijing Name of signatory representative Zhang Peng, Qiao Na Period of conducting continuous supervision 2021 VII. Key Accounting Data and Financial Performance Indicators in the Latest Three Years 1. Key accounting data Unit: yuan Currency: RMB Item 20212020 Year-on-Year change % 2019 Operating revenue 29,468,925,899.60 23,817,600,766.26 23.7317,792,091,973.58 Net profit attributable to the shareholders of the Company 118,530,518.151,235,162,151.48 -90.401,199,347,355.96 Net profit attributable to the shareholders of the Company deducting extraordinary items 134,826,072.011,230,677,435.86 -89.041,190,975,760.51 Net cash flow from operating activities 299,160,222.36765,945,453.03 -60.941,111,605,966.58 As at the end of 2021 As at the end of 2020 Year-on-Year change % As at the end of 2019 Net assets attributable to the shareholders of the Company 6,464,358,869.776,752,397,489.35 -4.275,698,139,557.54 Total assets 12,971,506,159.72 11,646,508,203.99 11.389,149,772,043.85 2. Key financial performance indicators Item 20212020 Year-on-Year change % 2019 Basic earnings per share (yuan per share) 0.131.34 -90.301.34 Diluted earnings per share (yuan per share) 0.131.34 -90.301.34 Basic earnings per share deducting extraordinary items (yuan per share) 0.151.33 -88.721.33 Weighted average return on equity (%) 1.8019.93 Decreased 18.13 percentage points 24.57 Weighted average return on equity deducting extraordinary items (%) 2.0519.86 Decreased 17.81 percentage points 24.40 Explanation: The main reasons for the sharp decline in the Company's performance in 2021 are as follows. A. Unexpected decline in domestic pig prices, combined with the increase in feed costs and other factors, led to a heavy loss in the Company's swine raising business. B. The costs of day old chick and feed increased year-on-year, and the consumption in the market was not profitable. The profit of the Company’s broiler integration business turned from profit to loss. Wellhope Foods Co., Ltd.2021 Annual Report VIII. Key Financial Figures by Quarters in 2021 Unit: yuan Currency: RMB Item Q1 Q2 Q3 Q4 Operating revenue 6,323,388,582.647,320,046,599.298,119,870,556.887,705,620,160.79 Net profit attributable to the shareholders of the Company 290,928,241.18 -39,573,337.37 -203,165,870.9970,341,485.33 Net profit attributable to the shareholders of the Company deducting extraordinary items 299,181,338.60 -38,921,639.80 -199,562,495.3174,128,868.52 Net cash flow from operating activities -556,311,101.38303,643,883.8530,142,460.87521,684,979.02 IX. Extraordinary Items Unit: yuan Currency: RMB Item 202120202019 Gains or losses on disposal of non-current assets -13,978,382.833,169,342.06 -3,146,106.63 Government grants charged to current gains or losses (excl. the government grants that are closely related to the Company's ordinary course of business and gained constantly at fixed quotas or amounts as per certain standards based on the state polices) 40,412,773.9733,102,019.8922,363,695.79 Income generated from the investment costs for acquiring subsidiaries, associated companies and joint ventures being lower than the fair value of the investee’s net identifiable assets acquired by the Company 1,844.71 Gains or losses on fair-value changes in trading financial assets and liabilities, derivative financial assets and liabilities, and the income from disposal of trading financial assets and liabilities, derivative financial assets and liabilities as well as other debt investment (excl. the effective portion of hedges that arise in the Company's ordinary course of business) 2,552,441.74 -148,741.924,418,219.50 Non-operating income and expense other than those described above -42,725,463.13 -24,964,468.42 -15,858,496.27 Other items that meet the definition of deducting extraordinary items 184,353.40 820,378.27 deduct: Income tax effects 2,557,348.613,223,835.484,200,204.18 Non-controlling interests’ effects(after-tax) 183,928.403,449,600.51 -3,972,264.26 Total -16,295,553.864,484,715.628,371,595.45 Wellhope Foods Co., Ltd.2021 Annual Report X. Item Measured at Fair Value Unit: yuan Currency: RMB Item Opening balance Closing balance Change Effects on current profit Derivative financial assets 4,725,552.309,667,725.25 4,942,172.95 1,555,420.50 Total 4,725,552.309,667,725.254,942,172.951,555,420.50 Wellhope Foods Co., Ltd.2021 Annual Report Section IIIBusiness Operation Analysis I. Business Operation Analysis 1. Overview of the performance in 2021 In 2021, the agriculture and animal husbandry industries faced severe challenges. In terms of feed, the feed raw materials fluctuated with high prices, the consumption demands for feed in the second half of the year were slowed down as a result of the downward animal raising industry. Pig prices slumped continuously despite the higher-than-expected recovery of production capacity. In terms of broiler industry, the entire market was deteriorated caused by the high price of day old chick, soaring feed cost and sluggish customer consumption. Against such a backdrop, all employees of Wellhope joined hands to forge ahead and overcome difficulties by vigorously expanding new markets, optimizing marketing strategies, reducing internal costs and heightening working efficiency, as well as improving operational capability. Besides, measures have also been taken to enhance the management of accounts receivable, reasonably arrange capital expenditures, accelerate inventory turnover to ensure sufficient cash flow. Under the concerted efforts made by all employees, Wellhope remained one of the few enterprises that made profits despite the first big drop in the Company's performance. Wellhope’s operating revenue reached RMB 29.47 billion with a year-on-year increase of 23.73%, the net profit attributable to shareholders of the Company recorded RMB 119 million, decreased by 90.40%, the net profit attributable to shareholders deducting extraordinary items recorded RMB 135 million, declined 89.04%. At the end of the reporting period, the total assets reached RMB 12.97 billion, rising 11.38% compared with the end of the prior year, whilst the equity attributable to the owners of parent company recorded RMB 6.46 billion, declining 4.27% compared with the end of the prior year. 2. Review of the Company’s business progress A. Feed business In 2021, the feed raw materials witnessed remarkably fluctuations with high prices, the market of animal raising industry changed complexly, making the transformation and upgrading of the feed industry accelerated, the polarization in feed industry has become increasingly remarkably. At a time when opportunities and risks coexisted, the Company, as an industrial leader, leveraged its advantages of corporate brand and technology to speed up the reform of feed business, bravely explored new markets and refined internal operation to constantly develop and optimize its system capabilities. In 2021, the total output of feed produced by the Company's holding and associated companies reached 8.03 million tons, up 15.04% year on year, and the feed sold to the markets recorded 4.33 million tons, up 12.54% year on year. Wellhope Foods Co., Ltd.2021 Annual Report Feed sales volume of companies included in the consolidated scope in 2021 Item Sales volume 2021 (10k tons) % of total sales volume Sales volume 2020 (10k tons) YOY change of national feed production Swine feed 197.2445.54% 155.9926.44% Poultry feed 142.8332.98% 144.69 -1.29% Ruminant feed 71.6916.55% 63.1013.61% Other feed 21.344.93% 21.051.38% Total 433.10100.00% 384.8312.54% a. Upgrading strategic positioning and strengthening internal collaboration Feed business has been always identified as the primary business of the Company. In 2021, when revising strategies, the Company further enhanced the strategic position of feed business, proposing higher requirements for the core capabilities of feed business while granting more resources to feed business. Within the reporting period, to develop feed business, the Company promoted the collaboration and interconnection among technology department, purchasing department and marketing department, making the marketing and sales departments as well as the function departments could be strategically connected to share pressure and performance. With science-based procedure design and targeted appraisal mechanism, the collaboration capabilities among these departments have been enhanced continuously. Besides, the Company launched the "Xiaohe Smart Customer Sevice" project to promote online management of feed business, which has further intensified the management of the process of marketing activities, optimized the customer service system, and powered the sales personnel with an information platform. Under the efforts made by all these departments jointly, the Company successfully maintained an industry-leading net profit per ton in a market environment where the price of feed raw materials remained high, significantly improving its core capabilities of feed business. b. Promoting organizational structure and talents team to vigorously support the sales team In 2021, the head office of the Company, based on the original structure of the technology department, purchasing department and marketing department, established three research institutes, including Technology R&DInstitute, Market Trend Research Institute, and Market Research Institute. The Technology R&DInstitute was established to develop the formulas of various types of feed products and research animal raising technologies, the Market Trend Research Institute was designed to study the industry trend as well as the status quo of the upstream and downstream industries, especially the changes in the price of feed raw materials, the Market Research Institute was set up to analyze and study the market structure, competitors and customer demands. Meanwhile, based on regional management, the Company set up marketing business lines for different feed varieties to provide professional service with specialized personnel and specialized business lines. With the cooperation between regional management and business line management, the Company’s differentiated market insight and development strategy complemented each other with professional marketing and service Wellhope Foods Co., Ltd.2021 Annual Report system, which improved the quality and speed of customer development significantly. Besides, these three institutes and various business lines have taken measures to attract key professional talents and optimize resource allocation constantly, with the purpose of providing more support for front-line marketing personnel. c. Improving technical service to seize resources in the new market In 2021, the Company further expanded its input in market expansion and upgraded the technical service system, witnessing a rapid increase in the proportion of large-scale farms and a steady-state growth of feed sales volume. In northeastern China, the Company, by taking its relative advantages in raw material purchasing, has vigorously developed large-scale farm customers while enriching its sales strategies by making using of the new media and diversified platforms, which has strengthened the brand advantages of the Company’s products in medium-sized farms and back-yard farms. In other areas, the Company divided its market into five regions in terms of North China, Shandong region, Central China, West China and East China. By promoting the decentralized management mode and formulating specific market expansion solutions according to the characteristics of different regions, the Company has increased its sales units steadily to fill the gap in the market gradually. Besides, the Company launched Wellhope 6M management service solution for large-scale farms, which contained 6 strategies aimed at reducing costs and increasing efficiency (e.g., system evaluation strategy, problem analysis strategy, cost structure strategy, pig herd management strategy, precise nutrition strategy, customized solution strategy) to sort out, analyze and rank complex problems related to farms. Designed with 73 operation appraisal indicators, the solution covered 1,123 key inspection points of the farms, and could rapidly identify the key problems for farms with the 22 precision management tools designed for the solution, which could help customers make feasible and effective solutions. By constantly attracting technical service experts and expanding the scale of the service team, the Company has improved its overall service capability and increased the proportion of large-scale farms significantly. B. Broiler integration business In 2021, the cost of the upstream business of broiler industry increased, whilst the downstream consumption decreased. In such a context, the profits dropped precipitously, which marked an unprecedented downward trend in this industry. Under such adverse conditions, the Company, taking ensuring safety, improving efficiency, enhancing ecosystem and increasing profits as the development policy, slowed down the expansion pace of broiler integration business. Instead, the Company took measures to improve its operational capability and reduce costs, improve the layout of the industrial chain while ensuring safety to expand its market share steadily. In 2021, the holding and associated companies slaughtered 693 million broilers with a year-on-year increase of 8.5%, totally produced and sold 1.8 million tons of broiler parts products, increased by 7.0%, produced 28,000 tons of prepared food and cooked food with a year-on-year increase of 7.3%, among which, the export volume of cooked Wellhope Foods Co., Ltd.2021 Annual Report food recorded 3,488 tons, increased by 15.9% compared with the same period of last year. a. Slowing down the expansion pace and improving the layout of the industrial chain In 2021, the projects newly invested in the past two years in the broiler industry were put into production densely, leading to a periodical surplus of supply. In this regard, the Company slowed down the development pace of the broiler business in 2021, and moderately increased the production capacity of broiler breeding and raising, heightened the proportion of self-supplied day old chicks and live broilers to match the industrial chain as planned. In additions, the Company constantly enhanced production management, improved operation indicators. Meanwhile, in response to the changes in the market, the Company dynamically adjusted the policies on feeding fees for contract farm owners according to the production time and stage of farms, so as to ensure proper allocation of profits between the Company and farm owners. As for the slaughtering business, in the second half of 2021, the Company reduced the target yield in the previous plan according to the estimations on the market trend, actively slowed down the pace of expansion, and maintained stable development with existing production capacity. Attaching equal importance to short-term profits and long-term development, the Company increased the production and sales scale of new projects not producing at full capacity by centralizing resources, with the purpose of crossing the break-even point as soon as possible. b. Squeezing costs and expenses, heightening cost and efficiency management In 2021, despite the downturn broiler industry, the Company insisted on lean management of its broiler integration business by continuously optimizing production indicators, improving operation efficiency, strictly controlling product quality and rationally squeezing the cost and expenses, which has further enhanced its operational capability. As for broiler raising business, the Company boosted the informatization in this sector to improve the data analysis ability and decision-making efficiency. Meanwhile, the Company made efforts to ensure the quality of self-produced day old chicks, diversified options of outsourcing chicks, constantly modified and improved Breeding Site Management Manual, achieving growth of production performance steadily. As for slaughtering business, the Company continued to improve its production efficiency, reduce operation costs, and strengthen quality management. At the same time, the Company continuously explored the operation modes of automatic production lines, also designed automatic configuration of production lines according to the reality of plants by considering multiple elements in terms of production scale, product positioning, product mix, customer structure, which has laid a solid foundation for future transformation and upgrading of businesses. c. Expanding the market vigorously and optimizing marketing strategy In 2021, as COVID-19 lingered and market consumption stayed at a low level, the delivery of frozen broiler products faced various challenges. Meanwhile, with the higher-than-expectation recovery of the production capacity of live pigs, demands for chicken have been further squeezed reduced and pork with cheap price was taking a big bite out of chicken. To cope with this unfavorable situation, the Wellhope Foods Co., Ltd.2021 Annual Report Company’s slaughtering entities, with the multi-brand strategy, accelerated the expansion of the sales channel of broiler parts products, and occupied market shares rapidly on the condition of reaching a balance between production and sales. Meanwhile, the Company further improved the quality of broiler products and increased the proportion of fresh products to realize the highest comprehensive value with the best product portfolio. The Company also explored high-quality customers, and improved the ecological niche sustainably. As for prepared food and cooked food businesses, the Company has improved its core capabilities and brand influence by accelerating the construction progress of new projects to expand the scale of basic production and sales rapidly, improving its ability to undertake large orders, and strengthening R&D of products to create knock-out products. C. Pig raising business In 2021, pig prices in China witnessed a higher-than-expected reduction. The era of gaining high profits from raising pig ended, while the industry getting stuck in periodical in-depth deficit, imposing huge capital pressure on those companies who were seeking radical expansion of production previously. At such a critical turning point, the Company faced all the challenges and made rational decisions, including phasing out inefficient sows, reducing production scale, constantly enhancing pig farm management to improve production performance, reducing costs and expenses, controlling the weight of pig, and improving the turnover speed to ensure capital safety. In 2021, the Company’s holding and associated companies marketed 639,000 heads of finishers,588,000 piglets (215,000 heads sold to market,373,000 sold to internal companies),66,000 heads of pig breeders, totaling 1.293 million heads of pig (920,000 heads sold to market, and 373,000 sold to internal companies). a. Insisting on stable operation and phasing out inefficient sows From 2019 to the first quarter of 2021, despite the extremely high profit of pig raising industry, the Company insisted on stable operation with a calm mind, most farms were expanded production by asset-light mode. Meanwhile, the Company strictly controlled the quality of pig breeders. By the end of June 2021, the holding and associated companies had 79,000 sows in stock, with ternary hybrid breeding sows accounting for only 5.5% (the average level in the industry was 45%). With the inflection point of the market arriving, the Company phased out inefficient sows without hesitation,20,000 heads of sows with low production performance in the third quarter were cut, and 9,000 sows were eliminated in the fourth quarter. By the end of 2021, the number of sows of the Company reduced to 50,000, including 30,000 heads of reproducible sows and 20,000 gilts. The entire production performance of sows has been further enhanced. Meanwhile, the Company also heightened the performance appraisal criterion for contact farms, terminated its cooperation with some fattening farms and outsourcing farms to slow down the development pace and reduce business pressure, which reduced the costs and expenses significantly and ensured capital safety. Wellhope Foods Co., Ltd.2021 Annual Report b. Continuously reducing costs and increasing efficiency, improving production performance significantly In 2021, the Company started to apply process-based performance management systems in its pig raising business sector, including three-level meeting, benchmark analysis and task list. Every month, the head office, regional branches, and pig farms held operation analysis meetings to identify key problems of each farm by applying the benchmark analysis management mode, formulated task lists to effectively implement the improvement plan. In addition, in 2021, the Company reviewed the structure of pig business again to optimize personnel configuration. By offering trainings for staff and introducing key technical talents, the Company has successfully improved the competence of technical and service personnel. The cost for piglet weaning and fattening have been reduced sharply supported by phasing out inefficient sows, improving asset quality, heightening technical skill of resident staff and enhancing farm operation. In the future, the Company will further improve its pig production performance, constantly increase the operation of pig farms and develop into a Company with industry-leading cost management and control. c. Enhancing African Swine Fever management, reducing epidemic prevention cost African Swine Fever prevention has been normalized for biosecurity and has become a key element affecting costs. In 2021, the Company, still taking biosecurity as a priority, reviewed the biosecurity control of feed mills, pig farms, and cooperative farms, and built a multi-level management and control system to prevent external cases and internal infection. Meanwhile, to ensure that every team member had a strong sense of responsibility and awareness, the Company took measures to improve the technical proficiency of teams and further improved the reward and punishment mechanisms. Through three years’ practice, the Company has accumulated rich experience in ASF prevention, reserved sufficient professional talents, and developed a mature prevention system. In 2022, the Company will combine ASF prevention with lean management gradually. On the condition of ensuring biosecurity, the Company will constantly verify the economic efficiency and effectiveness of prevention costs, improve the prevention procedure, and reduce the prevention cost of biosecurity. D. Raw material trade business In 2021, companies active in animal raising industry generally suffered losses, and the cost of feed and animal health products came under pressure, which brought certain challenges to the Company's trading business. However, the Company accurately studied on the market situation, seized the opportunity and obtained a better profit in fish meal, amino acid, calcium hydrogen and other raw material varieties with a large potential for growth. In addition, the Company actively took multiple measures to hedge the adverse impact of the industry, on the one hand, broadened the product category based on the original product line, expanded sales areas and promoted product sales. On the other hand, gave full play to the advantages of the professional team, improved the service to the farms to enhance market competitiveness. Furthermore, the Company developed the import business of Wellhope Foods Co., Ltd.2021 Annual Report foreign feed raw materials, which brought new opportunities for business expansion. At the same time, with the help of information platform, the Company further improved the internal management of its trading companies, also reduced operating costs, improved operating efficiency, which would lay a solid foundation for the great development of future trade. E. Progress in other aspects a. Increasing talent configuration and improving purchasing capability During the reporting period, the Company has taken a large number of measures to improve team construction, purchasing mode, and business management specification of the purchasing system as well as enhance the interconnection between the technology department and the purchasing department. In 2021, young and highly-educated employees with abundant experiences joined in the purchasing team, which improved the study on raw materials and the market trend research capability. As for the purchasing mode, the Company improved the concentration ratio of purchasing, with certain areas having completed the transformation from three-level procurement to two-level procurement to enhance centralized decision-making and improve the efficiency of procurement management. As for business management, measures have been taken to improve the raw material supply chain management, making the supply channel could be selected flexibly according to market change, expanding the scope of the supplies to ensure the supply security. Meanwhile, the Company has also taken measures to deepen the collaboration between the technology department and the purchasing department. At a time of high raw material prices, the Company gained obvious advantages regarding alternative costs of raw materials through the interconnection between technology and raw material purchasing. b. Actively responding to changes, research and development making contributions In 2021, with the changing background of external unpredictable environment, sharp fluctuation of raw material prices, the COVID-19 cases, the impact of African Swine Fever, and the increasing market competition pressure, the Company insisted on R&D and innovation, pursued the production of feed products with higher quality and cost-effective, and looked for better alternative combinations, and upgraded on-site farming technology solutions. For feed business, the Company launched a new generation of creep feed, with better palatability, diarrhea-resistance. In the application of raw material alternative technology, the Company shared technical information with its partner Royal De Heus, continuously optimized the dynamic database and reserves a variety of efficient technologies for feed formulations. In terms of the iterative upgrading of feeding programs, the Company has achieved remarkable results in pig feeding management technology, beef cattle and sheep feeding program and poultry feeding technology. Over the years, the Company has unswervingly focused on the input in R&D. Now it has a technical team composed of hundreds of doctoral, master and senior experts. It also continued to introduce doctors with development potential as R&D or regional technology leaders, and the R&D expenses increased year by year. For more details about research and development, please Wellhope Foods Co., Ltd.2021 Annual Report refer to Section III. c. Enhancing benchmark management and building a process-based performance management system During the reporting period, the Company mainly focused on building a process-based performance management system, it accumulated experience through the mature management mode of broiler integration business and then applied such experiences in other business sectors. By implementing monthly three-level operation analysis meeting involving the head office, regional center, and subsidiaries, supporting by management methods and tools including inspection team, specialized project team and task list, the Company has formed a full set of PDCA circulation of process-based performance management. In 2021, the Company strengthened benchmark management and plan tracking, developed in-depth market insight, and reviewed management, which has achieved the implementation of the strategic goals and key tactical plans. For employees, the performance of the Company and individuals was tracked and managed effectively. Such a mode will be further improved and promoted in 2022, to constantly improve the performance of the Company and its employees. d. Strengthening capital operation, powering business development During the reporting period, in order to improve the long-term investment value of stocks and safeguard the interests of shareholders, the Company repurchased its shares by means of centralized bidding. In 2021, the Company has repurchased 20.96 million shares with a cumulative payment of RMB 200 million, the repurchased shares will be used to carry out employee stock ownership plans or equity incentive plans. As of the disclosure date of this report, the issuance of convertible bonds of the Company was being promoted as planned. The convertible bonds were expected to raise RMB 1.5 billion, and all the funds raised will be used for the development of the primary businesses and the realization of the strategic goals. F. Awards and recognitions in 2021 Being listed in the Fortune China 500 for the fifth time, ranking 409, up 91 places. Being selected as the first batch of national supply chain innovation and application demonstration enterprises Ranking 9th in China's top 100 enterprises of light industry technology Ranking 11th among the Top 50 enterprises in China's light industry and food industry Ranking 28th in China's top 200 light industry enterprises Being awarded the Dedication Medal of the Red Cross Society of China Obtaining the A-level Evaluation of information disclosure of Shanghai Stock Exchange in 2020-2021, wining this honor for four consecutive years Wining the 9th season of China Good Feed, Technology innovation Leader, Ruminant Technology Innovation Star Brand Being named the 2021 National Agricultural and Rural Informatization Demonstration Base Wellhope Foods Co., Ltd.2021 Annual Report Being rated as the demonstration base of excellent quality management promotion in Liaoning Province II. Review of the Circumstances of the industries that the Company involved 1. Feed industry China's feed industry started up in the mid to late 1970s, and in just a dozen years, China’s feed industry has achieved what developed countries have accomplished in decades. In 2011, China's feed production exceeded the United States for the first time, becoming the world's largest feed producer. Comparing with the rapid development of the early stage, China’s feed industry has witnessed a slowdown in the growth of production output in the past 10 years, but it still has a huge market size. In 2021, China's total feed production grew steadily, with a booming supply and demand in the market. In terms of supply, the production of national commercial feed in 2021 reached 293.443 million tons with a year-on-year increase of 16.1%. By varieties, swine feed recorded 130.765 million tons, increased by 46.6%. The production of layer feed and broiler feed recorded 32.314 million tons and 89.096 million tons, decreased by 3.6% and 2.9% respectively, whilst the ruminant feed output reached 14.803 million tons, rose by 12.2%. From the perspective of industry consolidation, there were 957 feed mills with an annual capacity over 100,000 tons, newly increased 208 producers compared with the prior year. These feed mills totally produced 177.077 million tons of feed with a year-on-year increase of 24.4%, contributing towards 60.3% of the total national feed production, which rose by 7.5 percentage points over the previous year. Among these large-scale feed mills, there were 39 feed enterprise groups with annual output of more than 1 million tons, an increase of 6 over the previous year, and the total feed output accounted for 59.7% of the total national feed production, an increase of 5.1 percentage points over the previous year. In terms of demand, in 2021, the demand for swine feed and ruminant feed was favorable, while the demand for poultry feed decreased. Specifically, regarding swine feed, the pig stock in the northern region has reached a high level in the first half of the year, and the demand for swine feed in the southern region has grown rapidly due to the accelerated recovery of production capacity, in the second half of the year, with the sharp decline in pig prices, the growth rate of swine raising scale has been controlled, and the growth rate of swine feed demand has slowed down. Regarding poultry feed, egg prices have continued to be weak, old chickens have been eliminated centrally, the stock of layer has dropped significantly, and the demand for layer feed has shrunk. Although there was an increase in the number of slaughtered broilers, the body weight was significantly declined, and the feed to meat ratio was also reduced, resulting in a slight decrease in broiler feed demand. For ruminant feed, farmers were positive to replenish the stock as raising cattle and sheep was profitable, thus the stock was gradually growing, making the demand for feed increase. Overall, the growth rate of China's feed production in the first half of 2021 was higher than that in the second half year, and the annual growth rate far exceeded the average growth rate in the past 10 years, Wellhope Foods Co., Ltd.2021 Annual Report however, the growth rate reflected obvious unevenness among various regions, categories and companies with different scales. In terms of geography, the process of resuming pig production in the North was basically ended, and the pig stock in the South had been rapidly increasing, so the growth of pig feed sales in the South was much larger than that in the North. In terms of category, benefiting from the unexpected recovery of pig production, the increase of pig feed output was much larger than that of other varieties of feed. In terms of industry consolidation, the entry barrier of feed industry has been continuously increasing, and the polarization among feed enterprises has been becoming remarkable. Large enterprises have been rabidly grabbing market shares supported by their technologies, costing, branding, management, capital, logistics, and other advantages, whilst small and medium-sized companies have been gradually squeezed out the market, the consolidation of feed industry has been unceasingly enhanced. Note: The above data is obtained from the China Feed Industry Association Statistical Report and Boyar Industry Analysis Report. 2. Broiler industry In 2021, pig production recovered beyond expectations and the excess supply of pork significantly suppressed the demand for chicken. In the meantime, the production capacity of large-scale enterprises after rapid expansion in 2019-2020 was released intensively, thus leading to increasingly fierce market competition. On the supply side, the overcapacity of broiler breeders was cut in the fourth quarter of last year, which resulted the inventories of forced-moulting breeders falling to a new low in the first quarter of 2021. In the meantime, factors such as the suspension of day old chick hatching at the Spring Festival and COVID-19 cases, caused the supply of commercial day old chicks was tight in the first quarter, the price rose rapidly from RMB 1 yuan per chick at the beginning of the year to RMB 5-6 yuan, and the delivery of chick was less than expected. In the second and third quarters, with the recovery of chicken supply, the delivery of live broiler gradually increased to the high level, hitting a historical high in July, above 470 million for five consecutive months. In the fourth quarter, the winter climate increased the difficulty of breeding, and the delivery of chickens dropped from high level. For the whole year, China's broiler production in 2021 recorded 5.39 billion with a year-on-year increase of 7.76%, and the production of broiler parts products reached 10.2 million tons with an increase of 5.86%, the supply of chicken exceeded 2014, reaching a record high. On the demand side, the influences of COVID-19 continued to linger. Against the backdrop of weak economic conditions, consumer demand has slightly rebounded, but it was still far from the level of market consumption before the COVID-19 pandemic. In 2021, the outbreak of COVID-19 cases in many places continued to impact outdoor catering, group consumption, wholesale market, supermarket retail, food processing and other links, and the demand for chicken remained weak. Moreover, the continuous sharp decline in pork prices influenced the alternative of chicken for pork, further squeezing domestic Wellhope Foods Co., Ltd.2021 Annual Report demand for chicken. In terms of chicken price, the comprehensive price of broiler parts products had been falling all the way from RMB 11,000 yuan per ton at the beginning of the year, approaching RMB 10,000 yuan in June, and almost falling below RMB 9,000 yuan per ton at the end of September, which was the lowest price in nearly a year. At the end of the year, chicken prices rebounded a bit, but they were still below the cost line of most integrated enterprises. Overall, in 2021, the price of day old chick was higher, feed costs rose sharply, and the consumption was not preferable. Looking through all the year round, the grandparent breeder enterprises gained higher profit, whilst the parent breeder enterprises obtained modest profit, and commercial broiler breeding enterprises suffered a small loss, slaughtering enterprises faced heavy loss. For integrated companies, each broiler lost RMB 0.25 yuan this year, earnings were down sharply. Note: The above data is obtained from the China Feed Industry Association Statistical Report and Boyar Industry Analysis Report. 3. Swine raising industry In 2021, a key turnaround occurred in the pig breeding industry, with capacity recovering beyond expectation, pig prices dropping sharply since the high level at the beginning of the year, the industry transforming from high profitability to significant losses, and policy guidance changing from expanding production to stabilizing production. On the supply side, China's pig production capacity recovered beyond expectation in 2021, with the slaughtered hog nationwide increasing by 59.17% year-on-year and pork production increasing by 49.17% year-on-year. In the second and third quarters, a number of factors such as raising large-weight pig, holding finisher to wait price going up and cutting sows, resulted in a continuously sharp drop in domestic pig prices, whereafter farmers and companies stampeded into selling pigs, making the national average pig price fall to a low point in October. With the continuous downward movement of pig prices, the industry gradually changed from scale expansion to cost control, a few players decisively drop out the market, while most players still held a wait-and-see attitude, eliminating low-efficiency breeding sows while retaining a large number of gilts, leading market gaming intensify. At the end of 2021, the domestic breeding sow stock decreased by 9.72% year-on-year, but the quality of sows was significantly optimized compared to the end of 2020, and the proportion of three way cross breeding sow stock decreased from 50% to less than 10%, so the enhancement of sow efficiency was enough to make up for the impact of reduced production capacity. In terms of demand, with the recovery of pork supply and the decline of pork price, pork consumption gradually recovered, but the recovery of consumption was slower than the growth of supply. In the past two years, the production of pork alternatives, mainly chicken, has increased significantly. The long-standing high prices of pork have changed residents' consumption habits, and the consumption of alternatives has increased significantly. Although the price of pork declined, it is difficult to return to the consumption level before 2018. In addition, the long-term harassment of the COVID-19 pandemic has Wellhope Foods Co., Ltd.2021 Annual Report always suppressed terminal consumption, and the recovery of consumption has shown a gradual, while the supply of pork was concentrated in a short period of time, resulting in a serious imbalance between pork supply and demand. In 2021, the national average price of pig hit the bottom in early October, approaching RMB 10 yuan per kg, and consumption recovered slightly in the fourth quarter, the price rebounded to near RMB 16 yuan per kg at the end of the year, but still decreased 56% compared with the high price at the beginning of the year. In general, the domestic live pig production capacity recovered beyond expectations, and the quality of sows and the number of live pigs slaughtered both increased remarkably. Although the demand for pork slightly increased, the recovery of consumption was significantly slower than the increase of production capacity, coupled with the large inventory pressure of slaughterhouses and the periodic imbalance of supply and demand, all these intensively weed out incompetent players in this industry. Note: The above data is obtained from the China Feed Industry Association Statistical Report and Boyar Industry Analysis Report. III. Circumstance of Primary Businesses in the Reporting Period Wellhope is one of the renowned large-scale enterprises across domestic agriculture and animal husbandry industries, primary businesses cover animal feed, feed raw materials trade, broiler integration and swine raising, it is also involved in veterinary drug, farming equipment manufacturing, pet clinic, etc. In 2018, Wellhope identified food business as its strategic business, which is now in full swing implementation. Since establishment, Wellhope has always adhered to its corporate mission, i.e., “Through advanced technology, professional service, and high-quality products, Wellhope is devoted to the development of China’s animal husbandry industry, resources conservation, environment protection, as well as food security for the benefit of people", and all Wellhope people hold together to set sights on becoming one of the world's leading enterprise across agriculture, animal husbandry, and food industries. During the reporting period, the primary businesses of Wellhope have not changed significantly. Primary business Feed Broiler integration Swine raising Primary products Swine, poultry, ruminant, aquatic feed Live broiler, broiler parts products Finisher, piglet, pig breeders Operation model Sales model-dealer, direct sales Operation model-R&D, purchasing, production, marketing, service Industrial chain-covering broiler breeder raising, day old chick hatching, feed processing, commercial broiler rearing, slaughtering and processing, further processing of prepared food and cooked food Raising model of commercial broiler-own farms together with contract farms(outsourcing) Industrial chain-covering a complete swine breeding system, including great grandparent, grandparent and parent stock, piglet, and commercial swine Raising model of finisher- own farms together with contract farms(outsourcing) Business distribution 29 provincial-level administrative regions Liaoning, Jilin, Heilongjiang, Henan, Hebei, and Shandong provinces Liaoning, Jilin, Heilongjiang, Anhui, Hebei, and Henan provinces Wellhope Foods Co., Ltd.2021 Annual Report 1. Animal feed, feed raw materials trade businesses Wellhope produces and sells animal feed for swine, poultry, ruminant, aquatic and fur-farmed animals, which are marketed in 29 provinces and regions across China. It has also built feed mills in Nepal, Indonesia and the Philippines, etc. Driven by the concept of “constantly working on new products, never following the beaten path”, Wellhope always designs tailored products for animals in different phases, and it is committed to offering farmers integrated services such as animal raising, disease prevention and operation management, while helping farmers achieve desirable economic returns. The subsidiary trade companies mainly trade in feed raw materials such as fish meal, soybean meal and co-products of corn, also engage in feed additives including amino acid, antioxidant, mold inhibitors and vitamin. In addition, these trade companies are the sales agents of animal health products such as vaccines and veterinary drugs produced by global strategic suppliers. Now the trade business is active in the regions of Northeast, North, East, South, and Southwest regions across China, some products have been exported to Nepal, Mongolia and other countries. 2. Broiler integration business Wellhope has invested more than 50 holding and associated entities in the value chain of broiler integration, which are mainly located in the provinces of Liaoning, Jilin, Heilongjiang, Hebei, Henan and Shandong, etc. Wellhope's broiler integration business, with three business sectors in terms of broiler raising, meat processing and further processing, contains all parts in the industrial chain, including broiler breeders raising, day-old chick hatching, feed production, commercial broiler rearing, slaughtering and processing of raw meat, further processing of prepared and cooked food. Through standardized management and streamline operation, Wellhope, cooperating with its partners, consolidates the controls of bio-safety, drug residue and in-process hygiene to achieve traceable food safety. Based on the number of broilers slaughtered by holding and associated factories, Wellhope has stepped into the first echelon of the broiler industry and become one of the leading suppliers of broiler products nationwide. Wellhope ../hfmy/AppData/Local/Youdao/Dict/Application/7.5.2.0/resultui/dict/Wellhope Foods Co., Ltd.2021 Annual Report Broiler raising: This sector covers broiler breeder raising, day-old chick hatching, commercial broiler rearing and feed processing. By formulating scientific and rational feeding programs, light programs and comprehensive disease prevention systems, Wellhope provides high-quality eggs for its hatching farms. Meanwhile, it has established thorough management systems in the hatching process and purchased intelligent facilities that are available for hatching in batches, also equipped with high-efficient and energy-saving hatcher and micro-environment control system for producing healthy day-old chicks. Entering commercial broiler sector, Wellhope mainly raises broiler by self-invested farms and contract(out-sourcing) farms under the pattern of standardized management by unifying nine aspects. All these farms apply three-tier cages and automate all the processes from feed intake, water supply, temperature to moisture control, etc. The average weight of Wellhope’s commercial broiler has reached 3.0 kg with the livability of over 96%, and the European production index exceeded 390, which have received wide recognitions from the cooperative farms. Raw meat processing: Wellhope has set up 16 holding and associated slaughtering and processing factories, which are equipped with domestically state-of-the-art production lines that are available to slaughter 900 million broilers per year. Driven by strict all-in and all-out inspection and quarantine as well as drug residue detection, every single factory has established a total quality guarantee system and traceability system to monitor all the processes. Meanwhile, Wellhope constantly strengthens slaughtering and processing techniques by ways of systematic pre-job training and skill promotion training as well as conducting "6S" management (i.e., Seiri, Seiton, Seiketsu, Shitsuke, Seiso, Safety), making the killing out percentage and per capita slaughtering efficiency stand out among companies with similar scale. Now Wellhope’s broiler parts products have entered the supply chain of Shineway Group, Jinluo Group, Yurun Group, China’s McDonalds and KFC, Yoshinoya, Wallace, Dili Fresh Food, Yonghui Superstores, RT-MART, other regional large food distributors, fresh markets and food processing plants, etc. In the meantime, broiler products have also been sold to the regions of Hong Kong and Macao, and exported to some countries such as Mongolia and Bahrain, etc. Further processing: Relying on the advantage of integration, Wellhope uses high-quality chicken supplied by own slaughterhouses as raw materials and installs efficient and energy-saving equipment to process raw meat into prepared products. At present it supplies over 100 kinds of further-processed chicken products to central kitchens of restaurant chains, corporate and school canteens, supermarkets and convenience stores. In terms of online marketing, Wellhope’s flagship store of food products have been launched on Taobao and JDcom, whilst some of its independent-brand products produced by Wellhope's subordinated companies have also been marketed via community e-commerce platforms. In addition, due to ever-growing demand from consumers, Wellhope has been vigorously expanding its export business of cooked products, and such products have successfully penetrated the Japanese and Korean markets with good response. Wellhope Foods Co., Ltd.2021 Annual Report 3. Swine raising business By carefully considering industry trends and own strengthens, Wellhope has tried swine raising business in 2016. Through solely-invested, co-invested operations and leasing, it has built farms and expanded businesses in some predominant regions suitable for raising swine, such as Liaoning, Jilin, Heilongjiang, Henan, Hebei, and Anhui provinces. At present, Wellhope's swine raising business mainly adopts the operation model that composes of pig breeders raising and sales, commercial piglet selling plus fattening via own farms and contract farms (such as leasing, agent construction, cooperative farming base). Through establishing comprehensive and strict bio-safety systems, advanced breeding systems and scientific feeding management systems, Wellhope is devoted to crafting an integrated chain that contains breeding, swine raising, slaughtering and processing. A. Building farms with high standard Wellhope insists on constructing farms in compliance with the principle of moderate scale for every single farm, whilst it strictly designs bio-safety systems driven by the philosophy of beginning with the end in mind. All newly-built and under-construction projects adopt advanced production process and farming equipment, while using intelligent feeding system, environmental control equipment, and production management software to improve productivity and create a comfortable environment for swine. B. Holistic operation a. In terms of genetic selection and breeding. Wellhope introduces high-quality pig breeders with French, American and Danish genes to match different business areas to provide parent stock with pure blood and clear pedigree. At the same time, by establishing scientific breeding programs, Wellhope continuously optimizes the structures of breeding stock to ensure the source of excellent breeders, so as to enhance its competence in swine raising industry. b. In terms of feeding management. Wellhope has established a dynamic management system for feeding swine. It covers feed nutrition and raw material database, feed processing and product quality database as well as production performance database, in combination with dynamic formulation technology, large-scale pig farm feeding management technology and bio-safety prevention technology to provide systematic nutrition solutions for farms. Meanwhile, through continuous measures such as data collection and analysis, result tracking, Wellhope is capable to accurately optimize nutrition Wellhope Foods Co., Ltd.2021 Annual Report programs, refine internal management and risk warning to improve feeding performance. c. In terms of bio-safety prevention. After more than two years of exploration and experimentation, Wellhope has established the bio-safety management system that consists of small group feeding, four-zone control, three-level disinfection, precise detection and monitoring with alarm system. For instance, various levels of security systems, such as service centers and disinfection areas have been set up outside the farms. Professional staff disinfect people, vehicles and materials thoroughly step by step. Regarding inside farms, all these farms have been divided into zones with different safety levels corresponding to quarantine and isolation remedy, with installation of AI identification and surveillance cameras at key links and spots of bio-safety. The visualization management helps ensure enforcement of bio-safety measures. Moreover, each business unit has set up laboratories specialized in testing African swine fever, which apply techniques like fluorescence quantitative PCR to achieve precise detection, discovery and elimination to safeguard pig farms. 4. The Company's position in the involved industries Wellhope has obtained the honorary titles of National Leading Enterprise in Agricultural Integration Industry, National-recognized Enterprise Technology Center, National High-Tech Enterprise. Since completing IPO in 2014, Wellhope has been elected as Top 100 Most Valuable Corporation of Chinese Public Companies for four times and ranked on China’s Top 500 Private Enterprise for five times. Meanwhile, it holds a leading position in the Northeast regions of China, whilst has also become a highly influential brand in North, East, Central and Northwest regions across China. Regarding feed business, Wellhope is the Vice Chairman of China Feed Industry Association, and has been awarded as National Top 10 Leading Feed Enterprise, it was rated as Top 10 Leading feed enterprises in China in 2020, with a higher sales volume of commercial feed in China. Regarding broiler business, Wellhope’s broiler integration business has been developing rapidly in recent years. Based on the number of broilers slaughtered and processed by holding and associated companies, Wellhope is now among the top rank of China’s white feather broiler industry. IV. Core Competence Analysis within the Reporting Period The core competencies of Wellhope are embodied in a highly educated, loyal and enterprising management team, integrated with rationally planned and stably developed business strategies, a sophisticated and advanced industrial chain, widespread adoption of a systematic and scientific-based innovative R&D system, constantly enhanced and increasingly matured brand influence, coupled with highly energized and dynamic corporate culture that powers the development of Wellhope. 1. A highly educated, loyal and enterprising management team Talented people are the primary resources and the core competence of Wellhope. The highly-educated management team, led by seven cofounders, all with professional backgrounds, abundance of experiences and practices in management and animal husbandry industries, are highly capable of grasping the business environment accurately, formulating the development strategy scientifically, and Wellhope Foods Co., Ltd.2021 Annual Report have deep insights and high recognitions of Wellhope’s core values and business philosophy. Almost all the middle and senior managers are internally selected and cultivated by Wellhope, these core members have been rewarded with various incentives, and they have a strong sense of ownership. Over the past 27 years, the middle and senior management team has been highly stable, and the directors and general managers have rarely left the Company on their own initiative, except for those who were reassigned to other positions due to substandard performance. Meanwhile, newly promoted members of the management team born in the 1980s and 1990s are selected from key talents’ cultivation programs, such as “Seedling Plan” and “Sunflower Program”. They love the Company, they are aggressive to forge ahead, having become the backbone force of the management team. Wellhope also attaches great importance to the continuous learning and ability improvement of these managers, by setting up various senior training programs such as the EDP (Executive Development Program), leadership training camp, etc. At the same time, it also organizes managers to study in domestic and overseas outstanding enterprises to expand their horizons and reflect on improvement. The main cause of failure of some domestic companies is due to unstable and disunited management team. In contrast, the highly educated, loyal and enterprising management team is one of Wellhope’s core competence advantages at present and in the future, and it is also the main reason why the Company is so confident about the future. 2. Rationally planned and stably developed business strategies Based on in-depth understanding of both domestic and global politics, economies and industrial trends, Wellhope has always attached great importance to its sustainable development and risk control, with focus on operation capability and emphasis on profitable investment return from new projects. Driven by the investment concepts of steady growth, healthy and sustainable development, Wellhope, rationalizes its business layout step by step, instead of pushing through rash and impulsive investment, to maintain the rationality and safety of its industrial chain and to mitigate all calculated risks faced by enterprise operations, taking the “Built to Last” philosophy as a significant objective. Rationally planned and stably developed business strategies reflect in the following aspects. A. Prudent expansion of business areas Starting off with the premix business, Wellhope has been dedicated to expanding feed business over the years, at present it has become one of the top 10 commercial feed producers nationwide. In 2008, Wellhope entered broiler integration business after careful thinking. After 14 years of efforts, the number of broilers processed by Wellhope’s holding and associated entities have been standing at the forefront of the broiler industry, with its management and key technical indicators ranking top position both at home and abroad. In 2018, in order to seize market opportunities and control operating risks, Wellhope decided to formally launch swine raising business through cooperation and sole proprietorship. Since then, it has been mastering the core competitive advantage of this business through talents cultivation, practice accumulation, etc. Meanwhile, in the year 2018, Wellhope further Wellhope Foods Co., Ltd.2021 Annual Report recognized its development strategy in the next ten years, i.e., while unceasingly expand feed business, Wellhope would vigorously boost broiler integration and swine raising businesses, explore and promote food business, to ultimately become a leading enterprise with leading-edge product quality and operation efficiency across agriculture, animal husbandry and food industries. B. Business model confirming to the future trends Wellhope has gradually formed a value chain with high competence and capability of withstanding risk in the fields of animal feed, raising, slaughtering and further processing, which enables all business divisions to closely connect and support each other, reduce the cost of intermediate processes, lower trading risks, improve profit margin, and ensure food safety. Such set up has become a future direction for agricultural companies under an increasingly complex and changing economic and industrial environment. C. Steady market expansion Instead of expanding rapidly in the nationwide markets supported by the success of feed business in Northeast regions and broiler integration business, Wellhope, with rich experiences in market expansion, insists on exploring new markets based on overall analysis and investigations, carefully penetrating the markets step by step in the Northeast, Northwest, Northern China, Henan, Shandong provinces and other areas, while continuing to pursue asset-light operation, taking into account operational efficiency and returns on investment. D. Complete and balanced product mix Wellhope offers a full range of feed products. The sales volume and development of swine, poultry, ruminant and aquatic feed products have reached great height of achievements respectively, which in turn could mitigate operational risks caused by sporadic animal diseases or other cases beyond the Company’s control. E. Strict control of financial risks Wellhope always attaches great importance to financial risk control. Since going public, it has gradually improved internal control system, regulated corporate governance structure and enhanced the awareness on risk control. It uses vertical management methods in coping with finances, such as centralized financing and credit management, centralized funds and cash management and centralized management of decision-making for providing guarantees. Taking into account the socio-economic environment, the development of the industry and operating conditions, the Company effectively controlled the scale of indebtedness and financial costs, with a gearing ratio of 42.08% at the end of the reporting period. 3. A sophisticated and advantaged industrial chain The advantages of Wellhope’s industrial chain are mainly reflected in geographical locations and business portfolios. Wellhope Foods Co., Ltd.2021 Annual Report A. Preferable geographical location The head office of Wellhope is located at Shenyang in Liaoning province, with its primary businesses mainly involved distribution in Northern China, especially in the Northeast regions. Northeast China is a potential growth area for animal husbandry specially designated by the government, and is thus suitable for agricultural companies to expand their businesses with the availability of ample high-quality raw materials, mild climates, small stocking density and a relatively lower human resource cost. The Northeast is located in the largest grain-producing region in China, especially producing corn and rice characterized by high quality and large output. Relying on well-developed further processing industry, Northeast has abundant grain and its by-products that can be used as feed raw materials, which have the advantages of high performance cost ratio and convenient logistics. After implementing the national policy of pre-assigned auction of rice, the Northeast can enjoy a unique advantage supported by large rice supply and comprehensive costs. The application of brown rice in formula has been maximumly dampened the pressure of the high price of corn for feed costs. Meanwhile, broiler production mainly centralizes in Liaoning, Jilin, Henan, Hebei and Shandong provinces, where Wellhope’s broiler integration businesses are mainly located in, account for over 75% of national production, and these areas are the most important regions for developing white feather broiler industry in China, with a strong foundation for broiler raising and more mature marketing system. Moreover, Wellhope is actively exploring overseas markets by building feed mills in the Philippines, Indonesia and Nepal, where animal husbandry is developing well with high potential. B. Constantly optimized business portfolio Centered on agriculture and animal husbandry industries, Wellhope adopts the expansion strategies of "diversification and integration" to constantly optimize its business portfolio, which has increasingly heightened its capacity on risk resistance and sustained profitability. In terms of diversification, while strengthening and expanding feed business, Wellhope has been vigorously promoting broiler integration and swine raising businesses to strive to build an operation model powered by these two businesses. In terms of integration, the integrated model is an inevitable trend for domestic companies that are active in agriculture and animal husbandry industries. After years of development in raw materials trading, feed production, animal raising, slaughtering and further processing businesses, Wellhope has formed a complete industrial chain with high competitive advantage and risk prevention capability, and it is gradually perfecting its support structure to each business sector in the chain, boldly exploring food further processing to fast complete the industrial chain, while constantly standardizing and optimizing the division and cooperation system to further enhance the synergies among all business sectors. 4. A systematic and scientific-based innovative R&D system By holding fast to the corporate mission, i.e. “Through advanced technology, professional services, and high-quality products, Wellhope is devoted to the development of China’s animal husbandry industry, Wellhope Foods Co., Ltd.2021 Annual Report resources conservation, environmental protection, as well as food security for the benefit of the people”, Wellhope’s R&D system always adheres to market-oriented and customer-oriented principles as well as upholding the objective of producing “safe products, with stable quality, tailored nutrition and being customer-centric”, constantly exploring innovative technology and working on new products. The Company has a unique and competitive R&D cooperation model, an excellent and leading R&D team, and it has formed a three-level R&D system and high-efficient achievement transformation system supported by the large platform of Wellhope Research Institute. Meanwhile, the Company also has first-class testing capability nationwide and an efficient and accurate dynamic raw material database, a distinct product portfolio and a constantly optimized service capability. A. Excellent R&D team Relying on a relatively complete industrial chain, Wellhope has built a R&D team specializing in animal raising, product formulation, manufacturing and related technologies to focus on feed, broiler integration, swine raising, biological feed additives, etc. Wellhope’s R&D team is composed of hundreds of masters and doctorate degree holders, professors and senior experts. These experts, with profound knowledge, have transformed many cutting-edge technologies into actual applications. In the meantime, those experienced technicians focus on conducting trials and demonstrations projects to validate, choose and apply the most suitable technologies. Relying on technical strengths, Wellhope has received many national and local-level accreditations and honors, including the Nationally-recognized Enterprise Technology Center, National and Local Joint Engineering Research Center for the Development and Application of New Biological Feed, National R&DBranch Center of Feed Processing, Comprehensive Trial Farm for National Swine Raising Industry Technology System, R&DCenter of Agricultural Products Further Processing and Bio-pharmaceutical Industry Cluster of Liaoning Province, Innovation Team for Feed Technology and Safety of Liaoning Province. B. Competitive R&D cooperation In 2006, Wellhope partnered with Royal De Heus, a century-old company from the Netherlands. By drawing on its globally advanced technological resources, leading know-how and a century of excellent management practices, Wellhope has made successful breakthroughs and progresses in producing safe and high-quality feed, with precise and efficient nutritional contents, and most importantly using antibiotic-free technologies. Meanwhile, the R&D teams from both sides have maintained frequent exchanges, which enable Wellhope to keep abreast with the world's latest technologies in R&D achievements. By combining own 27-year’s technologies and experiences, Wellhope is committed to providing customers with high quality products and technical service. Adding to these, the Company cooperates deeply with research institutes and universities, such as China Agricultural University, Nanjing Agricultural University, Shenyang Agricultural University, Northeast Agricultural University, Hefei University of Technology, Anhui Agricultural University, to develop new technologies for feed products and meat products and joint training of professional talents. Wellhope Foods Co., Ltd.2021 Annual Report C. Top-class testing ability and database The Company's central laboratory is one of the few CNAS-accredited laboratories among domestic feed companies, and the test results can be recognized by 60 countries or regions worldwide. The lab has been equipped with advanced testing equipment and divided into three functional rooms to cater for physics and chemistry testing, microbiology testing and precision instruments testing. From micro to macro levels, the central laboratory is able to maintain consistency in quality and plays a vital role in implementing the concept of safety first in every step of the production processes. Meanwhile, it has also established an internal raw material database and shares data resources with the Dutch partner. With precise net energy database of sow and growing pig, amino acid database, crude fiber database, fatty acid database, etc., animal rations can be precisely formulated according to production performance and feed intake to obtain the lowest cost formula and achieve the best cost performance ratio. D. Fruitful research and development results Research and development power the sustainable development of an enterprise. Wellhope has made many fruitful achievements on the road of research and development. By the end of the reporting period, Wellhope has received 196 authorized patents, including 59 invention patents, and won 2 National Science and Technology Progress Awards,1 National Technology Invention Award and nearly 20 provincial and ministerial-level sci-tech awards. In the face of market changes during the reporting period, the Company continued to consolidate its R&D achievements, accumulate practices and made breakthroughs in certain technologies, such as raw material alternative technology, optimization of antibiotic-free pig feed, intestinal health control technology for creep and nursery feed, and participated in revising Feed Ingredients Catalog led by the Ministry of Agriculture, undertook special project named Feed Quality Safety Control and Low-protein Feed of Liaoning Province, participated in the development of national group standards for low-protein diets for pigs and poultry, became an demonstrated enterprise driven by the reduction of corn and soybean meal, joined in the development of group standards related to bio-fermented feed, and became a demonstration base for bio-fermentation. At the same time, the Company has set up scientific research and innovation platforms, such as Wellhope Research Institute, provincial key laboratory, provincial enterprise technology center, provincial enterprise engineering technology research center and other scientific research innovation platform and postdoctoral innovation practice talents training base, to comprehensively improve the competitiveness of research and development. 5. Constantly enhanced and increasingly matured brand influence Wellhope has successfully established its product and corporate brand in domestic agriculture and animal husbandry industries for the past 27 years. With the constant transformation and upgrading of the animal husbandry industry, its branding will be further strengthened. Wellhope Foods Co., Ltd.2021 Annual Report A. Product brand Relying on leading-edge technology, high quality products and continuous improvement in customer service over the years, Wellhope’s brands have been widely accepted and trusted by customers in the market, especially in the Northern regions of China. The brand “Wellhope” has been recognized and honored as Liaoning Province Famous-brand Product, Liaoning Province Famous Trademark, China Famous Brand, China’s Top 500 Most Valuable Brands, Most Influential Brand in National Animal Husbandry Industry, Trustworthy Product in China's Feed Industry, Governor's Quality Award of Liaoning Province. B. Corporate brand Driven by the core values of "Integrity, Responsibility, Double-Win", some of Wellhope’s businesses are joint ventures with partners, it has been working closely together with many partners for more than 10 or even 20 years, including a 16-year’s good relationship with Royal De Heus. These successful ventures have proven that “Wellhope”, as a corporate brand, has been well recognized and trusted by its partners. Meanwhile, the strength of Wellhope's brand has also been proved by long-term strategic partnerships with various multinational and domestic suppliers, and all loans provided by financial institutions over the years have been credit loans due to the good reputation of Wellhope. As a strong employer brand, “Wellhope” has been recognized and favored by employees, and potential job seekers. Wellhope has twice won the "Best Employer" based on rating by a third party Zhaopin.com. 6. Highly energized and dynamic corporate culture that powers the development of Wellhope After 27 years of development, Wellhope has established energized and dynamic corporate culture that has been acknowledged by all staff and powers its development. The core value of "Integrity, Responsibility, Double-Win" and the management philosophy of "Innovation, Efficiency, Self-Discipline", have been deeply entrenched in the thinking and behaviors of employees, and has been applied without fail in day-to-day management, strategic planning and business decision. Common values play a crucial role in improving organization efficiency, enhancing organizational cohesion and organizational empowerment. A good corporate culture is the fundamental principle for corporate operation, which powers the long-term development of Wellhope. The publicity campaign presented by Wellhope's managers once a year, with their good practices in daily work and leading by example, have been freely shared as part of the corporate culture dissemination efforts. In the first half of 2021, the Company held President's Strategy Presentation and Wellhope Products Purchasing Festival via live streaming on the occasion of Wellhope Day, the anniversary of the Company's founding, to strengthen the implementation of the Company's goals and improvement measures, and to stimulate the sense of responsibility and enthusiasm for all employees. More than 160 subsidiaries held different kinds of staff activities to celebrate Wellhope Day, which enriched the cultural life of staff and further promoted the corporate culture. Moreover, the Company further improved the self-media matrix, adopted diverse and fresh forms to publicize the culture of Wellhope Foods Co., Ltd.2021 Annual Report Wellhope by head office, regional center and subsidiary, so that the culture could be further penetrated into the hearts of employees. In the second half of the year, the first 32 stars with high sense of values were selected from the Stars with high Sense of Values campaign, and their deeds were spread in the Company, becoming one of the important ways to promote Wellhope's culture. The season IIIVoice of Wellhope brought encouragement and motivation to all employees under the backdrop of downward industry. Furthermore, in order to make the core values and management philosophy can better guide the behavior of employees, the Company has launched the Code of Conduct on Core Values and Management Philosophy, and planned to make all staff achieve full familiarity and understanding of the Code this year and try to apply it in the annual performance appraisal of employees. In addition, the Company promoted the culture of Benchmarking throughout 2021 to boost the benchmarking management, which may lead all employees to set internal and external benchmarks, find gaps, and catch up with the benchmarks. It has been proved that corporate culture is the moat of Wellhope’s development, and constantly strengthening culture construction shall be a lasting and significant work for Wellhope. V. Operations during the reporting period As at December 31,2021, Wellhope's total assets recorded RMB 12.97 billion, increased by 11.38% compared with the end of prior year, the equity attributable to the owners of parent company recorded RMB 6.46 billion, decreased by 4.27% compared with the end of prior year. Meanwhile, the operating revenue realized RMB 29.47 billion with a year-on-year increase of 23.73%, and the net profit attributable to the shareholders of the Company recorded RMB 118.53 million, declined 11.38% on a year-on-year basis. 1. Analysis of primary business A. Analysis of changes of income and cash flow Unit: yuan Currency: RMB Item 20212020 Change % Operating revenue 29,468,925,899.60 23,817,600,766.26 23.73 Operating costs 27,900,298,516.35 21,683,591,011.74 28.67 Sales expenses 570,137,322.67465,307,995.8922.53 Administrative expenses 418,116,582.79310,275,697.0334.76 Financial expenses 100,665,726.0664,680,213.7255.64 R&D expenses 97,360,753.4483,587,106.4016.48 Net cash flow from operating activities 299,160,222.36765,945,453.03 -60.94 Net cash flow from investing activities -1,051,027,476.87 -1,506,349,447.57 Not applicable Net cash flow from financing activities 764,760,161.07 419,432,876.57 82.33 Explanation of above changes. Operating revenue-the operating revenue of feed business, broiler integration business, raw material trade business and swine raising business increased. Wellhope Foods Co., Ltd.2021 Annual Report Operating costs- the sales volume of primary businesses increased, the cost of raw materials grew. Sales expenses- the volume of business grew in the current period, resulting in an increase in sales and operating expenses. Administrative expenses- manager’s compensation and expenses increased. Financial expenses- the interest on bank borrowings increased. R&D expenses-R&D input increased. Net cash flow from operating activities- the year-over-year increase in cash outflow from operating activities was greater than the year-over-year increase in cash inflow from operating activities. Net cash flow from investing activities- cash paid for investments decreased compared to the same period of the previous year. Net cash flow from financing activities- cash received from loans increased compared to the same period of the previous year. Wellhope Foods Co., Ltd.2021 Annual Report B. Analysis of revenue and cost During the reporting period, Wellhope achieved an operating revenue of RMB 29.47 billion with a year-on-year growth of 23.73%, which was mainly contributed by the increased sales revenue of feed business, broiler integration business, trade business and pig raising business. The operating cost recorded RMB 27.90 billion with a growth rate of 28.67%, mainly due to the growth of feed sales volume and the rising costs of raw materials. a. Primary business analyzed by industries, product classification and regions Unit: yuan Currency: RMB Analyzed by Industries Industry Operating revenue Operating cost Gross profit margin % YoY change of revenue % YoY change of cost % YoY change of gross profit margin % Feed 15,357,358,385.7713,910,119,144.709.4226.8128.03 Decreased 0.86 percentage points Broiler integration 8,254,927,757.758,202,644,655.330.6315.1420.57 Decreased 4.48 percentage points Raw materials trade 3,676,535,189.413,492,547,504.095.0016.6817.15 Decreased 0.38 percentage points Swine raising 1,487,908,610.431,725,822,225.36 -15.9996.60229.52 Decreased 46.79 percentage points Related businesses 676,260,828.90561,257,982.9017.0111.1713.13 Increased 1.44percentage points Analyzed by Product Categories Product Operating revenue Operating cost Gross profit margin % YoY change of revenue % YoY change of cost % YoY change of gross profit margin % Feed 15,357,358,385.7713,910,119,144.709.4226.8128.03 Decreased 0.86 percentage points Broiler integration 8,254,927,757.758,202,644,655.330.6315.1420.57 Decreased 4.48 percentage points Raw materials trade 3,676,535,189.413,492,547,504.095.0016.6817.15 Decreased 0.38 percentage points Swine raising 1,487,908,610.431,725,822,225.36 -15.9996.60229.52 Decreased 46.79 percentage points Related businesses 676,260,828.90561,257,982.9017.0111.1713.13 Increased 1.44percentage points Analyzed by Regions Region Operating revenue Operating cost Gross profit margin % YoY change of revenue % YoY change of cost % YoY change of gross profit margin % East China 2,944,928,663.542,795,772,871.185.064.949.66 Decreased 4.09 percentage points Wellhope Foods Co., Ltd.2021 Annual Report North China 3,662,109,835.923,516,433,267.033.9820.1027.92 Decreased 5.87 percentage points Northeast China 15,001,518,812.6514,012,804,503.586.5932.6936.13 Decreased 2.36 percentage points Central and South China 5,036,917,573.954,977,009,073.071.1929.2339.52 Decreased 7.29 percentage points Southwest China 693,852,777.01668,911,808.593.59 -18.17 -16.05 Decreased 2.42 points Northwest China 1,716,466,841.561,545,880,286.419.949.097.57 Increased 1.27 percentage points Overseas market 397,196,267.63375,579,702.515.4425.8536.20 Decreased 7.18 percentage points Analyzed by Sales Model Sales model Operating revenue Operating cost Gross profit margin % YoY change of revenue % YoY change of cost % YoY change of gross profit margin % Direct selling 20,987,808,392.8719,803,378,424.985.6417.3921.05 Decreased 2.85 percentage points Selling on commission 8,465,182,379.398,089,013,087.404.4443.0652.35 Decreased 5.83 percentage points Explanation During the reporting period, the sales of live pig increased significantly, whilst feed raw materials price remained high, the operating income and operating costs of the Company’s swine raising business increased substantially year-on-year, and the gross profit margin decreased significantly. The Company's operating revenue and operating cost in Northeast China increased remarkably, mainly due to the significant growth of the sales of live pig in these regions in 2021 and the stable growth of feed sales volume. b. Analysis of sales volume Product Production volume (10k tons) Sales volume (10k tons) Inventory (10k tons) YoY change of production volume % YoY change of sales volume % YoY change of inventory % Feed 516.20433.107.278.3012.5415.40 c. Analysis of cost Unit: yuan Currency: RMB By Industry Item 2021 % of total costs 2020 % of total costs YoY change % Feed Raw material 12,784,888,622.2196.1010,104,260,157.1096.2726.53 Feed Labor cost 150,722,363.441.13108,916,427.661.0438.38 Feed Depreciation 106,103,495.180.8088,079,837.940.8420.46 Feed Energy (electricity, coal, steam) 146,590,774.251.10103,360,428.220.9841.82 Feed Other 115,466,115.610.8791,210,812.760.8726.59 Wellhope Foods Co., Ltd.2021 Annual Report manufacturing expenses (energy and depreciation excluded) Feed Total production cost 13,303,771,370.69100.0010,495,827,663.68100.0026.75 Broiler Raw material 7,256,411,038.6483.025,926,656,581.3182.3622.44 Broiler Labor cost 458,522,106.145.25333,817,293.684.6437.36 Broiler Depreciation 67,106,803.950.7749,577,201.220.6935.36 Broiler Energy (electricity, coal, steam) 95,115,811.601.0979,688,980.831.1119.36 Broiler Other manufacturing expenses (energy and depreciation excluded) 863,170,280.189.88806,179,181.0911.207.07 Broiler Total production cost 8,740,326,040.51100.007,195,919,238.13100.0021.46 By Product Item 2021 % of total costs 2020 % of total costs YoY change % Feed Raw material 12,784,888,622.2196.1010,104,260,157.1096.2726.53 Feed Labor cost 150,722,363.441.13108,916,427.661.0438.38 Feed Depreciation 106,103,495.180.8088,079,837.940.8420.46 Feed Energy (electricity, coal, steam) 146,590,774.251.10103,360,428.220.9841.82 Feed Other manufacturing expenses (energy and depreciation excluded) 115,466,115.610.8791,210,812.760.8726.59 Feed Total production cost 13,303,771,370.69100.0010,495,827,663.68100.0026.75 Broiler Raw material 7,256,411,038.6483.025,926,656,581.3182.3622.44 Broiler Labor cost 458,522,106.145.25333,817,293.684.6437.36 Broiler Depreciation 67,106,803.950.7749,577,201.220.6935.36 Broiler Energy (electricity, coal, steam) 95,115,811.601.0979,688,980.831.1119.36 Broiler Other manufacturing expenses (energy and depreciation excluded) 863,170,280.189.88806,179,181.0911.207.07 Broiler Total production cost 8,740,326,040.51100.007,195,919,238.13100.0021.46 d. Top 5 customers and suppliers The sales revenue of top 5 customers reached RMB 1.10 billion, contributing towards 3.73% of the Company’s total operating revenue, the sales revenue of which, arising from selling products to the related parties reached RMB 432.46 million, accounting for 1.47% of the total annual sales. The purchase orders of top 5 suppliers reached RMB 2.57 billion, accounting for 14.45% of the Company’s purchase orders during the reporting period, of which, it did not occur the orders of purchasing products from the related parties. Wellhope Foods Co., Ltd.2021 Annual Report C. Expense Unit: yuan Currency: RMB Item 20212020 Change % Sales expense 570,137,322.67 465,307,995.89 22.53 Administrative expense 418,116,582.79 310,275,697.03 34.76 R&D expense 97,360,753.44 83,587,106.40 16.48 Financial expense 100,665,726.06 64,680,213.72 55.64 D. R&DInput a. R&D input Unit: yuan Currency: RMB Expensing R&D input 97,360,753.44 Capitalizing R&D expenditure 0 Total R&D expenditure 97,360,753.44 % of total operating revenue 0.33 Percentage of capitalizing R&D expenditure 0 b. Headcount Headcount of R&D 249 Percentage of total staff % 3.18 Educational structure Item Headcount Doctoral candidate 20 Masters 108 Bachelors 75 Junior college 41 High school and below 5 Age structure Item Headcount 30 years old (30 excluded) 94 30-40 (30 included,40 excluded) 108 40-50 (40 included,50 excluded) 30 50-60 (50 included,60 excluded) 17 60 and above 0 c. Circumstances of R&D During the reporting period, the Company was under increasing market competition pressure and facing the ever-changing market environment where ASF was becoming normal, raw material prices sharply fluctuated. The Company was committed to the R&D of new feed products, searching for raw material alternatives, optimizing antibiotic-free feed solutions, and the transformation and upgrading of animal raising technologies, to constantly improve market adaptability, exploit cost advantages, and enhance product competitiveness. Wellhope Foods Co., Ltd.2021 Annual Report a) Updating feed product, effectively solving breeding problems Pig Feed: Wellhope continually optimized the antibiotic-free program, upgraded the creep feed and sow feed products, etc. After one-year’s successful test in the feed market, Wellhope has further optimized the antibiotic-free solution in the regional market and focused more on piglet intestinal health management. The performance of antibiotic-free feed has been further enhanced, and the cost of antibiotic-free solutions became more competitive in the industry. During the reporting period, Wellhope launched a new generation of creep feed, which comprehensively improved the palatability and piglet diarrhea-resistance. Meanwhile, the existing sow feed products and 6M supporting solution had been upgraded in all aspects to effectively solve the problems such as the hyper prolific sows with larger litter size, insufficient milk secretion and an increase in the number of weak piglets. Broiler feed: The Company focused on reducing the cost of commercial broiler feed and solving the problems of pulverization and grading in bulk feed transportation. During the reporting period, the Company continuously adjusted the feed formula to reduce cost, and promoted the use of brown rice, wheat and other grains to replace corn. Now the factories in the north area have used brown rice in high inclusion levels, and some factories in other areas have successfully promoted wheat diet. In view of the problems that the traditional feed forms can be easy to be pulverized and graded during bulk transportation, the Company improved the processing technology and upgraded the original feed forms to control the material losses. Layer feed：To satisfy the market requirement, the Company constantly made efforts in layer feed R&D, put into a new experimental base, improved processing technology and upgraded products. The new R&D experimental base can carry out the verifying test of chick, pullet and layer feed products simultaneously. It also researched on the effect of the particle size of raw materials on bulk transportation, obtained the optimum grinding parameters, which reduced mixing and grading during transportation. Meanwhile, to meet the market demand for more cost-effective wheat diet, the Company launched a wheat premix product and upgraded the premix products of laying period, which showed good effect on enhancing egg weight, eggshell quality and color. Ruminant feed: The Company has been deep in ruminant feed industry for decades. The dairy cattle product line focused on the aspects of nutritional immune and anti-oxidative stress, which could help to manage the dry cows in proper body condition (Body Condition Score between 3.25 and 3.5). Meanwhile, the research of anti-oxidative stress research helped to reduce the incidence of metabolic diseases after calving and to relieve the heat and cold stress in dairy cattle. The beef cattle and meat-type sheep and goat product line focused on building the regional research and development base. Based on the different feeding strategies around China, the product line pertinently developed new products and new feeding patterns to improve the profit for customers. Aquatic feed: The Company developed and launched puffed compound feeds for carp, grass carp and crucian carp, and also developed a sinking and floating feeding mode suitable for different breeding Wellhope Foods Co., Ltd.2021 Annual Report modes, replacing pellet compound feeds and shortening the marketing cycle of marketable fish. In order to solve the key pain points of body color, health problems and low survival rate in shrimp culture, while enhancing the competitiveness of the factory shrimp feed, the Company has developed shrimp fermented feed called “Yisheng KangTai”, established feeding patterns and standards to solve customer problems. b) Widely using raw material alternatives to highlight competitive cost advantage In 2021, in the face of sharp increase in raw materials price, supported by more than 20 years R&D practices and drawing on the experiences of partner Royal De Heus about raw material alternatives, the Company continuously updated raw material dynamic database to reserve multiple formula technology. For swine feed, the Company was committed to developing and promoting corn substitutes such as wheat and brown rice, which continuously enhanced animals’ performance and product competitiveness. For layer feed, it also researched and reserved the application technology of wheat, brown rice and sorghum diets on production performance on laying hens. For broiler feed, the Company applied all-wheat or all-brown rice blended diets, and the technology of replacing soybean meal and fish meal in chick feed with self-produced chicken intestinal meal, etc. Meanwhile, under the premise of ensuring feed quality, it explored more possibilities of raw material alternatives. c) Upgrading animal raising programs to improve benefits Technology of pig breeding management: Wellhope constantly exerted efforts in pig breeding management, and has made great progress in pig breeding and selection, biosecurity, antibiotic-free programs, and feeding management technology. During the reporting period, Wellhope regionally distributed breeding pigs, carried out genetic cooperation with the top international pig breeding companies, and established a pig breeding system mainly based on French and Danbred pig breeds. After more than three years of exploration and experience accumulation in biosecurity prevention and control technology, plenty of achievements have been made in the field of ASF prevention and control. The prevention methods such as gridding feeding in pig farms, and the combination with conventional and unconventional prevention measures, have significantly reduced the occurrence of ASF. In terms of the antibiotic-free solutions in the regional market, the Company emphasized more on the management of piglet intestinal health, and therefore the effects of antibiotic-free products have been further strengthened. Furthermore, it clarified cost control indicators, and recommended personalized feeding program according to market conditions and pig breeds, which make breeding costs under control. At the same time, an intelligent feeding system for sows was built to achieve precise feeding with good effect. Feeding pattern of beef cattle and meat-type sheep and goat: Beef cattle and meat-type sheep and goat product line focused on building the regional research and development base. The nutritionist guided the regional product managers to pertinently design and optimize the products based on the features of local animal feeding. It also encouraged to actively try and innovate the feeding patterns. The re-new Wellhope Foods Co., Ltd.2021 Annual Report of feeding patterns could significantly increase the labor efficiency and the customer’s profit. Broiler feeding and slaughter capacity: In 2021, the Company constantly improved the feeding patterns and feeding programs. According to the different physiological stages of broilers and corresponding to the feed forms, the Company formulated systematic feeding procedures and programs, clearly stipulated the feeding consumption for each stage, and improved FCR. In terms of reducing the use of antibiotics in feed, the Company has evaluated a large number of feed additives to replace antibiotics, which has improved intestinal health of broiler and reduced the mortality rate during feeding. At the same time, the Company has made strict selection of substitution for coccidiostat, and some feed products have completely use antibiotic-free technology. And the Company continued to improve broiler slaughter technology and was committed to improving meat yield and quality. d) Adhering to R & D and innovation work The Company has been attaching great importance to scientific research and innovation, and has been rated as the national enterprise technology center, national feed processing professional sub-center, national agricultural product processing enterprise technology innovation institution, provincial key laboratory, provincial enterprise technology center, provincial enterprise engineering technology research center and scientific research innovation platform and post-doctoral innovation practice talent training base, etc. At the same time, to carry out the research and development of new products and meat products, as well as joint training of professional talents, Wellhope has carried out in-depth cooperation with scientific research institutes and major universities such as China Agricultural University, Nanjing Agricultural University, Shenyang Agricultural University, Northeast Agricultural University, Hefei University of Technology, Anhui Agricultural University, etc. Honors and Patents Patents granted in 2021 Number of authorized patents 196 Patents for invention 59 Patents for utility models and designs 137 Circumstances of Wellhope participating in the formulation of national or community standards and undertaking sci-tech projects in 2021 National standards Participated in the revision of the Catalogue of Feed Materials led by the Ministry of Agriculture, and was responsible for the addition and revision of the categories of Legume Seeds and their Processed Products, Tubers, Roots and their Processed Products and Other Seeds and their Processed Products Community standards Participated in the Technical Regulations for Safe and High Quality Pork Production and Technical Regulations for Safe and High Quality Egg Production led by Beijing Biofeed Industry Technology Innovation Strategic Alliance Sci-tech projects that Wellhope undertook and presided Liaoning Province Major Project Feed Quality Safety Control and Low-Protein Feed Shenyang Science and Technology Program Research on Sow Precise Nutrition and Supporting Feeding Mode Liaoning Province Selection of Livestock and Poultry Breeding and Key Technologies of Production in the Whole Industry Chain Honors regarding technology research and development in 2021 javascript:;Wellhope Foods Co., Ltd.2021 Annual Report Honors Obtained the CNAS laboratory accreditation certificate again in April 2021 Authentication Certificate of Information Security Management System in October 2021 The 3rd Sannong Science and Technology Service Golden Bridge Award--Research and Promotion of Integrated Nutrition of Sows and Piglets E. Cash flow Unit: yuan Currency: RMB Item 20212020 Change % Cash inflow of operating activities 30,162,759,715.04 24,607,049,169.74 22.58 Cash outflow of operating activities 29,863,599,492.68 23,841,103,716.71 25.26 Net cash flow from operating activities 299,160,222.36 765,945,453.03 -60.94 Cash inflow of investing activities 198,241,674.35 504,590,930.16 -60.71 Cash outflow of investing activities 1,249,269,151.22 2,010,940,377.73 -37.88 Net cash flow from investing activities -1,051,027,476.87 -1,506,349,447.57 Not applicable Cash inflow of financing activities 3,325,721,138.44 2,555,443,020.39 30.14 Cash outflow of financing activities 2,560,960,977.37 2,136,010,143.82 19.89 Net cash flow from financing activities 764,760,161.07 419,432,876.57 82.33 Net cash flow 12,075,918.87 -322,192,838.64 Not applicable Wellhope Foods Co., Ltd.2021 Annual Report 2. Assets and liabilities A. Circumstance of assets and liabilities Unit: yuan Currency: RMB Item Closing balance of 2021 % of total assets Closing balance of 2020 % of total assets YoY change % Explanation Trading financial assets 50,000,000.000.43 -100.00 Maturity of structured deposits decreased Derivative financial assets 9,667,725.250.074,725,552.300.04104.58 New derivative financial assets Accounts receivable 681,517,885.705.25450,170,744.453.8751.39 Newly increased accounts receivable in thesettlement period Prepayments 479,830,550.253.70364,401,520.233.1331.68 Prepayments for procurement increased during the year Contract assets 2,505,447.690.024,301,418.290.04 -41.75 The contract warranty reduced Other current assets 156,089,468.631.20109,698,865.940.9442.29 Deductible VATincreased in this period Construction in progress 602,237,560.514.64322,895,206.902.7786.51 Projects such as pig farms and slaughterhouses Right-of-use assets 199,981,121.451.54 Due to implement new lease guidelines Goodwill 2,135,421.240.02290,425.670.00635.27 Merger of enterprises under different control Long-term amortized costs 53,309,950.440.41143,945,562.291.24 -62.97 Due to implement new lease guidelines Short-term borrowing 1,546,199,813.2611.921,110,672,869.409.5439.21 Short-term borrowing increased Advance receipt 10,500,434.760.0815,522,362.130.13 -32.35 Proceeds from sale decreased Other payables 408,226,372.673.15280,673,085.072.4145.45 Funds transfer with external companies increased Non-current liabilities due within one year 191,145,065.591.47121,896,906.661.0556.81 Long-term borrowings and long-term payables due within one year increased Other current liabilities 9,681,957.600.073,386,523.000.03185.90 The amount of tax to be transferred increased Wellhope Foods Co., Ltd.2021 Annual Report Long-term borrowings 1,245,618,946.139.60574,880,271.674.94116.67 Long-term bank borrowing increased Lease liabilities 123,468,375.460.95 Due to implement new lease guidelines Long-term payables 47,702,610.060.3715,458,230.920.13208.59 Financial leasing increased Deferred income 60,335,083.330.4742,238,872.750.3642.84 Government grants related to assets that received in the reporting period increased Deferred income tax liabilities 2,792,995.020.021,936,853.230.0244.20 Deferred income liabilities recognized as taxable temporary differences increased javascript:;javascript:;javascript:;javascript:;Wellhope Foods Co., Ltd.2021 Annual Report B. Overseas assets Overseas assets recorded RMB 20,867,005.31, accounting for 0.16% of the total assets. 3. Investment analysis As at December 31,2021, the balance of the Company’s long-term equity investment recorded RMB 2.33 billion, decreased by 3.80% compared with the end of prior year. For details, please refer to notes to the items of Consolidated Financial Statements--long-term equity investment. Wellhope Foods Co., Ltd.2021 Annual Report 4. Main holding and associated companies Unit: RMB 10k Company Primary business Registered capital Total assets Net assets Net profit Operating revenue Operating profit Beijing Sanyuan Wellhope Agri-Tech Company Feed production and selling 1,000.00 24,868.20 20,352.08 3,680.83 73,873.13 4,161.40 Shenyang Wellhope Agri-Tech Company Feed production and selling 8,210.00 26,585.04 20,141.33 3,430.07 188,128.25 4,542.10 Xi'an Wellhope Feed Sci-Tech Company Feed production and selling 500.00 27,867.96 21,890.12 5,063.49 106,972.13 5,882.23 Anshan Jiuguhe Food Company Broiler slaughtering, processing and selling 4,320.00 88,117.81 49,415.47 5,986.94 198,085.15 5,993.85 Beipiao Hongfa Food Company Feed processing, broiler breeder raising, day old chick hatching, broiler raising and slaughtering 3,000.00224,332.96 140,899.74 -655.66 307,158.34 -1,631.52 Dalian Heyuan Agri-Tech Company Feed processing, broiler breeder raising, day old chick hatching, broiler raising 10,000.00152,661.19 83,193.85 -3,466.93 303,262.94 -3,201.48 Dalian Chengsan Animal Husbandry Company Broiler raising and feed processing 1,008.61256,348.12 141,897.31 -12,780.97 444,982.62 -16,403.94 Liaoning Wellhope Agriculture and Animal Husbandry Development Swine raising 5,000.00117,746.16 21,046.55 -3,930.96 72,826.41 -4,078.44 Anhui Wellhope Agri-Tech Company Feed production and selling, swine raising 16,000.00 71,066.65 14,784.71 -11,106.25 74,670.92 -10,259.17 Tai’an Jiuguhe Agriculture Development Company Broiler raising and feed processing 1,060.0059,458.40 13,660.59 -8,918.08 229,582.19 -9,172.50 Shenyang Wellhope Ruminant Feed Mill Feed production and selling 550.00 22,901.74 17,031.91 3,069.24 70,306.91 4,098.17 Linghai Jiuguhe Feed Mill Broiler raising and feed processing 1,755.00 16,888.86 11,217.02 -3,471.47 166,779.97 -3,579.68 Wellhope Foods Co., Ltd.2021 Annual Report VI. Outlook on the Company's Future Development 1. Industry outlook China is a large agricultural producer with a population of 1.4 billion. In China, agriculture has always been regarded as a strategic industry that provides security and stability to residents and lays a foundation for national economy. This is not only because agriculture is the source of food and clothing for people and the basis of survival, but also because it is the pillar of the independence and development of other industries. China has always paid great attention to the development of agriculture. Along with latest changes in international trade, resources and environment, technological circumstance, industrial structure, policies and regulations and other factors, the development of agriculture has also ushered in a new phase. Under the backdrop of deepening reform on the supply-side and industrial transformation and upgrading, the animal husbandry industry in which Wellhope is active has also ushered in a new development opportunity despite numerous challenges. A. Edging out less qualified players, the consolidation of feed industry is increasingly heightened Along with fierce competitions taking place in the feed industry, extra-large companies are constantly expanding their businesses, medium-sized producers are seeking business opportunities, whilst small producers are gradually squeezed out of the market. For large companies, they enjoy their strengths and advantages in technology, cost, brand, management, capital and logistics to continuously improve their total factor productivity, rapidly expand production scale and seize market shares through mergers and acquisitions as well as embarking on new projects. Those small and medium-sized feed producers have been gradually edged out in the increasingly fierce competitions due to their lower technical level, higher comprehensive costs, weaker brand reputation, lack of management skills, and bigger financial pressure. With a series of events such as ban of using antibiotics in feed, COVID-19 cases, African Swine Fever and the price increase of raw materials, the entry barriers of feed industry have been raised yet again, customers have also remarkably increased their requirements on the comprehensive strength of feed suppliers, which has sped up the elimination of backward players. In 2021, there were 957 large-scale feed mills with annual capacity over 100,000 tons, increased 208 plants compared to the prior year. These feed mills have produced 177.08 million tons of feed with a year-on-year increase of 24.4%, which contributed towards 60.3% of China’s total feed production, rising by 7.5 percentage points. The feed industry has been further transformed to become more large-scale and intensive. B. Vertical integration of resources and continuous extension of industrial chain Animal husbandry industry consists of several industries such as feed production, animal health product, livestock and poultry raising, slaughtering and processing, etc., where the upstream activities are more related to crop planting, whilst the downstream activities focus more on agricultural and sideline food processing industries, with a mixture of other related industries in between to form an organic whole. As competition has intensified to edge out less qualified players, large-scale companies are continuously Wellhope Foods Co., Ltd.2021 Annual Report expanding their business scale. For reasons of risk control, profit growth, food safety and other needs, apart from engaging in mergers and acquisitions, these giants involved in animal husbandry industry gradually integrate resources to expand their businesses in both upstream and downstream industries in order to break through the industrial chain and establish strong competitive advantages as well as develop better anti-risk capabilities. Under the development trend of industrial chain integration, the industrial divisions of large enterprises in agricultural and animal husbandry industries have been gradually weakened, while seizing the resources of the whole industrial chain has become the theme of the development of animal husbandry industry. C. Constantly strengthened environment protection promoting the concept of green development being practiced In recent years, China has put forward a series of regulations on environmental protection, such as the revision of the Environmental Protection Law, the promulgation of the Environmental Protection Tax Law, and the release of the Regulations on Pollution Prevention of Large-scale Raising of Livestock and Poultry and the Action Plan for Pollution Abatement of Agriculture and Rural Areas, etc. These successively launched policies have showed China's determination to heighten supervision on environmental protection in animal husbandry industry, local governments have also issued certain new regulations related to farm removal, ban of animal raising and restriction of farms, which will further edge out less qualified players and reframe animal husbandry industry. D. Increasingly stringent supervisions on food safety highlighting the advantages of large-scale companies In the past several years, the circumstances food safety in China have been improving, but at present the circumstances of the small-scale, and fragmented food industry with low entry barriers have not been changed much, and the farm-to-table industrial chain is too long and too large with many risk points. In October 2019, Premier Li Keqiang issued a Decree of State Council and released the new edition on Food Safety Regulation of the People’s Republic of China, which not only provided clear regulatory initiatives to address specific issues, but also strengthened the penalties for violations of the law through the policy of "implementing penalties to individuals". The Regulation came into force from December 1,2019, the market has since been the most heavily regulated. In the future, more attention will be paid to the normalization of food safety and industrial system. Stringent food safety supervision will further squeeze out less qualified players, at the same time highlighting the strengths and advantages of large integrated companies. E. Pig farming industry ending the era of high profits, the prevention of African swine fever becoming normal In 2021, the domestic pig production capacity recovered beyond expectations, the pig price fell sharply, but the production capacity recovery and pork consumption were out-of-step, which resulted high-cost pig breeding ended from high profit to heavy loss, those enterprises who aggressively expanded pig Wellhope Foods Co., Ltd.2021 Annual Report breeding suffered huge financial pressure. As a result, a key turning point has taken place in the industry. The pig raising industry has ended the era of high profit, and the main line of the industry has changed from "aggressive and fast expansion" to "cost reduction and efficiency improvement". In 2022, the pig raising industry will continue to shift from "expansion speed competition" to "cost control competition". The start of the cost war means that China's pig raising industry has entered a new stage. Under the transformation and upgrading of high-quality development, the new pattern of supply and demand has been reshaping. In the meantime, the prevention of African Swine Fever has become normal, and biosecurity is still the primary problem that the industry needs to face at present, which further raises the entry barriers of swine raising industry, and the economic efficiency and validity of the epidemic prevention input has become an important factor affecting the total cost of pig farming. F. High pork prices curbing consumer demand, accelerating the adjustment of meat consumption structure In 2019, African swine fever has hit China’s swine industry particularly hard, with severe production capacity losses and a remarkable increase in swine and pork prices, which fueled the prices of livestock and poultry products to record highs. In 2020, the outbreak of COVID-19 has severely attacked the national economy and weakened the consumption power of residents. It has been already quite difficult to sell high-priced pork, the COVID-19 pandemic has once again reduced pork consumption, purchasing pork for group meal dropped remarkably and food producers were forced to shift raw materials to chicken and vegetarian food, which quickened the adjustment of consumption structure of domestic meat products, and the overall consumption habits of residents have begun to change. In 2021, pig production capacity recovered beyond expectations, making pig prices fell sharply, but residents' demand for pork is difficult to return to the consumption level before the occurrence of African Swine Fever In addition, characterized by high protein, low fat and cholesterol levels, chicken has been well accepted by residents as a viable alternative to pork, and white feather broilers have a big advantage over swine such as growth rate, raising cost and environmental protection, etc. Seeing the experiences of developed countries, China's per capita chicken consumption still has great growth potential and a broad market. 2. Development strategy of the Company Wellhope’s long-term development objective is to become the world's leading enterprise across agriculture, animal husbandry and food industries. In the next three years, the Company will vigorously consolidate resources to further develop feed business, steadily develop broiler integration business, further improve broiler industrial chain management, stabilize the foundation of pig raising industry and strive to improve the production and management level, whilst complete the phased layout of the food business and accelerate the development pace of food business. According to the three-year plan, and based on the analysis and judgment of the economic and industrial development trend in 2022, the Company has determined its business strategy for 2022, i.e., Wellhope Foods Co., Ltd.2021 Annual Report by upholding the core values of integrity, responsibility, double-win, and the management philosophy of innovation, high efficiency, and self-discipline, Wellhope will further heighten systemic management and the core competences, whilst improve the synergy management among all business sectors. In addition, it will focus on talents’ recruitment and echelon construction, improving and innovating incentive mechanism, speeding up the construction of three platforms, including research and development, information resource, finance and banking, making efforts to create competitive and aggressive front platform(including product power, service ability, financial strength, marketing force), cost-efficient middle platform(including production, purchasing, quality assurance, technology), and energized back-end platform(including HR, finance, technology, R&D, purchasing, IT, corporate culture). 3. Business plan for 2022 In 2021, the agriculture and animal husbandry industries faced severe challenges. In terms of feed, the feed raw materials fluctuated with high prices, the consumption demands for feed in the second half of the year was slowed down as a result of the downward animal raising industry. Pig prices slumped continuously despite the higher-than-expected recovery of production capacity. In terms of broiler industry, the entire market was deteriorated caused by the high price of day old chick, soaring feed cost and sluggish customer consumption. Against such a backdrop, all employees of Wellhope joined hands to forge ahead and overcome difficulties by vigorously expanding new markets, optimizing marketing strategies, reducing internal costs and heightening working efficiency, as well as improving operational capability. Besides, measures have also been taken to enhance the management of accounts receivable, reasonably arrange capital expenditures, accelerate inventory turnover to ensure sufficient cash flow. Under the concerted efforts made by all employees, Wellhope remained one of the few enterprises that struggled to make profits despite the first big drop in the Company's performance. In 2021, the Company achieved operating revenue of RMB 29.47 billion with a year-on-year increase of 23.73%, the net profit attributable to shareholders of the Company recorded RMB 119 million, declining 90.40% year on year. In 2022, the Company will continue to adhere to the core values of integrity, responsibility, double-win, with the goal of strengthening core competitiveness and broadening the Company's core competences, and strive to create competitive and aggressive front platform, cost-efficient middle platform and energized back-end platform. At the same time, the Company will continue to deepen market insight, grasp the industry trend, according to the plan, rhythmically promote the production capacity layout and reserve of talent, to lay a solid foundation for the realization of the Company's long-term plan. A. Feed business Feed business has been always identified as the primary business of the Company. In 2022, the Company will further enhance the strategic position of the feed business by promoting four strategic transformations steadily, such as enhancing the interconnection of technology, procurement and market, promoting the transformation from American-style daily ration to European formula, improving Wellhope Foods Co., Ltd.2021 Annual Report the core competitiveness of feed business to realize the transformation from tradition concentrated feed to complete feed, upgrading technical service by improving the proportion of large-scale farm customers while maintaining the channel advantages of distributors, and realizing the transformation from focusing on channel advantage to attaching equivalent importance to channels and farms, making investments with centralized resources to expand the feed business to realize the transformation from a feed company in the northeast to a national feed company. The Company will, centering on the four strategic transformations, further improve its decision implementation efficiency, optimize organizational structure and enhance the capabilities of teams. Besides, the Company will try to provide professional service with specialized personnel and specialized business lines and constantly increase the configuration of key talents. Moreover, based on the comprehensive data analysis and benchmark management, the Company will excavate the potential profit of various feed varieties, feed mills from the perspective of cost and efficiency, constantly enhance the differentiation advantages of profit-oriented products, and expand the production and sales scale of quantity-oriented products. In the three provinces in northeast China, the Company will try to increase its market share steadily to discover potential growth spaces. In areas other than northeast China, the Company will seek rapid expansion of market share. In 2022, the Company has planned to increase the sales volume of feed with a year-on-year growth of 15%. B. Broiler integration business In 2022, production capacity will continue to be increased in broiler industry. Given the oversupply of pork and the impact of COVID-19, this industry is expected to remain in a downturn. Under such adverse conditions, the Company, taking ensuring safety, improving efficiency, protecting ecology and increasing profits as the core guiding philosophy, will further improve its operational capability and ensure safety margin. Meanwhile, the Company will also slow down the expansion and optimize the structure of the industrial chain. For broiler breeder business, the Company will expand the scale of breeders raising properly to increase the proportion of self-supplied chicks. Meanwhile, the Company will continue to improve production indicators, day old chick quality, and the overall management level of broiler farms. For broiler raising business, the Company will expand production steadily according to the status quo of downstream industry and the demands, constantly increase the percentage of raised broilers raised by own farms to slaughtering, and dynamically adjusted the policies on feeding fees for farm owners to ensure proper allocation of profits between the Company and farm owners. For the slaughtering business, the Company will, based on existing production capacity, seek for steady development, increase the percentage of fresh products and actively develop high-quality customers, try to realize the maximum comprehensive value with optimal product portfolios. For food business, the Company will accelerate the progress of new projects, expand the scale of production and sales rapidly, and improve its capability of undertaking large orders. Meanwhile, it will enhance R&D capability to develop knock-out products, expand sales channels, cultivate marketing teams and Wellhope Foods Co., Ltd.2021 Annual Report constantly enhance its core capabilities and brand influence. In the future, the Company will allocate more resources to its food business. In 2022, the Company plans to raise 690 million broilers by its holding companies and associated companies, slaughter 730 million broilers in total. C. Swine raising business In 2021, the production capacity of pig across the country witnessed a higher-than-expected recovery. However, the production capacity recovery and consumption mismatched, which brought heavy losses to animal raising companies that once enjoyed high profits. The priority of the industry also transformed from rapid expansion to cost reduction and efficiency increase. In 2022, pig raising industry will transform from competing with expansion speed to competing with cost. As the war on cost started, pig raising industry in China has entered a new era. For the pig raising industry under transformation toward high-quality development, a new supply-demand pattern has been shaping. In such context, in 2022, the Company will, following the prudent investment philosophy, maintain a safe development pace for pig raising business by strictly controlling the production capacity and expanding scale discreetly. Meanwhile, the Company will continue to implement the process-based performance management system to enhance the skills of staff, improve the operational capability of pig farms, optimize feed nutrition solutions, reduce the raising costs in a multi-dimensional way, and thereby improve the core competitiveness of the pig raising business. In the next one to two years, the Company will try to improve its cost management capability to an industry-leading level. Besides, ASF prevention has been normalized after biosecurity becoming a key element affecting costs. In the future, the Company will continue to take biosecurity as the priority to optimize its epidemic prevention system and constantly reduce the costs and abnormal costs triggered by epidemics. In 2022, the Company plans to market 900,000 to 1,000,000 heads of pig. This business plan can not be deemed as the Company's performance commitment to investors, please maintain sufficient risk awareness. 4. Possible risks A. Risks of fluctuations in raw material prices Most costs of the feed business come from raw materials. Factors in terms of production changes in producing areas, import policies, purchasing, storage, and grants, exchange rate fluctuations, logistics costs, etc., may cause fluctuations in the raw material market, which will affect the Company's feed business costs and gross profit margins. With deepened globalization of the trade of agricultural products in recent years, the supply-demand relationship and the trading price of raw materials have been affected by market conditions such as spot and futures at home and abroad, and the price trend has become more complex followed by increasingly fierce fluctuations, which further increases the difficulties of the Company’s cost management. In addition, the fluctuations of COVID-19, Sino-US relations, international political and economic environment, and other factors have also made the purchase price of raw materials more variable. Wellhope Foods Co., Ltd.2021 Annual Report Solutions a. Wellhope has established strategic partnerships with many leading domestic and overseas raw material suppliers. Meanwhile, it adopts three-level purchasing mode that includes centralized purchasing of head office, bidding purchasing of different business regions and local subsidiary purchasing to clarify the role of purchasing. b. Wellhope combines its raw material trading business with purchasing management, i.e., the professional and practical raw materials’ purchasing team conducts targeted forward-looking researches and real-time tracking on the market to strategically reduce the purchasing price, such as uniformly managing different variety of raw materials, adopting spot purchasing and futures together. c. The purchasing team works closely with the R&D team to further optimize the purchasing cost by way of re-formulating the feeds, i.e., changing the composition of the feed to use cheaper alternative raw materials while achieving the same results. d. Wellhope and Royal De Heus have set up an information sharing channel, which enables the two sides to timely share the market trends of raw materials and additives. In addition, the two sides may carry out joint purchasing cooperation in the future, which will greatly enhance the overall bargaining power. B. Risks of fluctuations in livestock and poultry prices Animal husbandry industry is a typical cyclical industry, and the hysteretic adjustment of supply causes the prices fluctuating periodically. At present, China's animal husbandry industry is still dominated by back yard farms and small-scale farms, these farm owners show the character of non-rational decision-making with an obvious “herd effect”, which further aggravates the cyclical fluctuations in the market price. Solutions a. Wellhope always keeps high attention of price fluctuations of upstream and downstream products, continues to deepen market research to accurately predict industry trends and adjust business strategies. Meanwhile, Wellhope’s three primary businesses share resources and boost production expansion as planned to effectively control the risk of price fluctuations. b. Wellhope's broiler integration business has established an industrial chain from broiler breeder raising, day old chick hatching, feed production, commercial broiler raising, slaughtering, processing to further processing of prepared food and cooked food. In the meantime, Wellhope’s swine raising business has also been entering downstream industries, such as the smooth development of slaughtering business. The continuous improvement of the industry chain makes the price fluctuations of each sector in the chain can be fully hedged, which maximumly mitigate the price fluctuations of the whole industry chain. c. Wellhope has always been committed to improving the production standard of each sector, constantly innovating the practical operation technology and management mode of various businesses, Wellhope Foods Co., Ltd.2021 Annual Report reducing overall operating costs by optimizing the production indicators and improving per capita efficiency. Costs advantage can mitigate the negative impacts of downward industry on the Company, while improving the overall profitability when facing a booming market. C. Risks of serious animal epidemic Feed and animal raising are Wellhope's two core businesses. Epidemic is one of the main risks faced by animal raising companies. Once an animal epidemic happens, it will certainly cause panic in the market, which will reduce the demands, then lessen the production, the income shrinks and the cost rises. The feed industry mainly serves downstream animal raising industry, thus, the downstream market will directly affect the performance of feed business. As an unpredictable emergency, an explosive epidemic will undoubtedly have a strong impact on the Company's operations. Solutions a. Wellhope attaches great importance to regional distribution and business structure, which is the most direct way to disperse the risk of animal epidemic. b. Wellhope continues to improve the prevention technology of major epidemics, completes the early warning system and strives to control epidemics effectively before spreading. c. When the epidemic comes, the speed of response is particularly critical, the faster to response, the less to loss. Wellhope has set an emergency command system for major epidemics to minimize losses when they occur. d. Wellhope has been continuously conducting post-epidemic analysis and researches. Meanwhile, it has been constantly strengthening the ability to prevent epidemics from multiple aspects such as animal nutrition and veterinary services. e. For African Swine Fever, Wellhope has formed a relatively complete prevention system from product researches to farm management. Specific preventive measures have been detailed in Section III hereof-Swine raising business. D. Risks of the industrial pattern adjustment caused by environmental protection policies China has put forward some environmental protection regulations in recent years, such as Environmental Protection Tax Law, etc., which show the government's determination to increase supervision on environmental protection in animal husbandry industry, whilst the local governments have also issued certain new regulations regarding farm demolition, prohibition or restriction of animal raising. It can be seen that the continuously strengthened environmental protection is the trend of the industry, also an inevitable reality, which will further weed out unqualified players and reframe the industry. Solutions During the start-up period, Wellhope had input "saving resources, being committed to environmental protection" as part of its Mission. During the past 26 years, Wellhope has always considered saving resources and protecting environment as its important mission, taking strict compliance with laws and Wellhope Foods Co., Ltd.2021 Annual Report regulations, and implementing environmental protection requirements as key performance appraisal indicators for managers. a. Animal raising and slaughtering--In the face of increasingly strict environmental protection requirements, all Wellhope’s subordinated entities have carried out a comprehensive identification of environmental risk points, and formulated emergency plans for emergent environmental incident based on actual circumstances and the requirements of local governments at all levels. In view of the key pollutant discharge entity, Wellhope has made a complete self-monitoring program to identify problems timely and eliminate hidden dangers, it also constantly increases personnel, capital investment in environmental protection to ensure that the key pollutant discharge entities always meet the national standards. b. Feed processing-Wellhope has always performed all environmental standards of the state with the most rigorous attitude, established complete control measures for waste gas, noise, wastewater, solid waste and other pollution generated during the production process. Meanwhile, it uses eco-friendly raw materials and additives in feed formulas, and continuously develops safe diet to reduce the emissions of heavy metals, nitrogen and phosphorus. E. Risks of exchange-rate fluctuations Wellhope's international business started early and has been developed rapidly, which can be affected by exchange-rate fluctuations in raw material purchasing, product export, overseas investment, including the following aspects. Firstly, international development has made the global purchasing of raw materials becoming normally, therefore, the risk of exchange-rate fluctuations is particularly acute for raw materials that are largely supplied from abroad. Secondly, Wellhope’s export business of broiler parts products are growing rapidly with customers from many countries and regions across the world, and the exchange-rate fluctuations are inevitably caused by the settlements of multiple currencies. Finally, due to the large overseas investment and overseas operations, the cross-border capital transactions and settlements will also be affected by exchange-rate fluctuations. Solutions a. Wellhope closely focuses on the dynamic international foreign exchange market, whilst enhances the awareness of foreign exchange risk, and improves the researching and forecasting capabilities of the foreign exchange market. b. Wellhope continues to improve the bargaining power in foreign trade transaction by enhancing the competitiveness of products, while reducing the exchange rate risks by using RMB for settlement, adding insured value clause and the exchange-rate risk allocation clause in the contract. c. By making full use of foreign exchange forwards, swaps and options (portfolios) and other instruments to maintain the exchange-rate for foreign exchange exposure. d. According to specific conditions of different countries, based on the principle of "using foreign currencies in foreign trade", Wellhope reasonably manages the income and debts to control the Wellhope Foods Co., Ltd.2021 Annual Report exchange-rate risks. F. Risks of food safety In recent years, there have been some food safety incidents in China, which affected consumers' confidence in food safety. China has continuously improved the legislation on food safety and food sources, conducted forceful measures on handling food violations. Once the food safety incident happens, it will directly damage the interests of consumers and cause panic, which may greatly impact the downstream demands, affect the brand and performance of the enterprises. Solutions Since its establishment, Wellhope has always attached great importance to the issues of food safety and quality assurance, adhering to implement the quality policy of "six never" with the most rigorous attitude--Never accept unqualified raw material, Never use abnormal equipment, Never allow nonstandard operation, Never produce substandard product, Never ignore unsatisfied customer, Never tolerate imperfect service. Wellhope’s head office has set up Food and Quality Safety Management Committee, whilst all business sectors and corresponding subsidiaries have established food and quality safety management group to ensure that the team always maintains a high sense of responsibility and awareness. a. Feed business-Wellhope has established a three-level quality management mechanism and testing system that compose of head office, regional center and subsidiary. By adopting international standards such as ISO9001, ISO22000 and ISO-IEC17025, and thoroughly implementing a series of quality standards such as the "Feed Quality and Safety Management Practice" and "Veterinary Drug Production Quality Management Practice" issued by the Ministry of Agriculture and Rural Affairs, Wellhope has controlled the whole production process and established the traceability system. Meanwhile, it vigorously popularizes near-infrared detection technology, improves detection efficiency to timely share data and quickly realize risk early warning. Wellhope also focuses on the detection and monitoring of heavy metals, harmful microorganisms, mycotoxins, which provides an important guarantee for the safety of feed products. In addition, by learning from the technical experiences of antibiotic-free feed in Europe, coupled with the current situation of China’s animal raising industry, Wellhope has achieved a leading advantage in the field of antibiotic-free feed, and now all the feed products have successfully transited to be antibiotic-free. b. Animal raising and slaughtering business-In terms of production management, Wellhope strictly monitors and checks the drug selection and drug residue control in broiler integration and swine raising businesses. Whilst it constantly strengthens the quality management in slaughtering and processing, earnestly implements the inspection and quarantine as well as drug residue detection. Regarding business model, Wellhope's broiler integration business has formed an industrial chain including broiler breeder raising, day-old chick hatching, feed production, commercial broiler rearing, slaughtering and processing of raw meat, further processing of prepared and cooked food. The integrated operation Wellhope Foods Co., Ltd.2021 Annual Report ensures sufficient supply of raw materials in each sector of the chain, and strictly controls the whole process of food and quality safety from the source. Through standardized management and streamline operation, Wellhope consolidates the controls of bio-safety, drug residue and in-process hygiene to achieve traceable food safety. Wellhope Foods Co., Ltd.2021 Annual Report Section IVCorporate Governance I. Overview of Corporate Governance In accordance with the Corporation Law, the Securities Law, the Guidelines for Governance of Listed Company and other requirements, Wellhope has constantly improved corporate governance and internal control, such as shareholder’s meeting, board meeting, supervisory board meeting, etc. In 2021, Wellhope held 4 times of shareholders' meeting,10 times of board meetings and 8 times of supervisory board meetings. The actual circumstance of the Company’s corporate governance has been basically in line with the requirements of the normative documents issued by China Securities Regulatory Commission. Wellhope’s corporate governance regarding shareholder’s meeting, board meeting, supervisory board meeting, information disclosure and stakeholder complied with the requirements of relevant documents. A. Shareholder and shareholders’ meeting. Wellhope convened and held shareholders’ meeting in strict accordance with relevant laws, and adopted physical voting and online voting to ensure that all shareholders, especially non-controlling shareholders, could fully exercise their right to vote. The controlling shareholder (actual controller) of the Company conscientiously performed the obligation of good faith and did not damage the rights and interests of the Company and non-controlling shareholders. B. Board directors and board meeting. The convening procedure of the board of directors complied with the requirements of laws and regulations. All directors actively attended the board meetings and shareholders’ meetings held by the Company, got familiar with relevant laws and regulations, understood the rights, obligations and responsibilities of directors, and safeguarded the legitimate rights and interests of all shareholders. C. Supervisors and supervisory board meeting. Wellhope's supervisors, in accordance with the Company Constitution and relevant laws and regulations, have conscientiously performed their duties, supervised the Company's financial position, transactions with related party, periodic reports, as well as the compliance of the directors and senior managers regarding their performance of duties, and safeguarded the legitimate rights and interests of the Company and its shareholders. D. Information disclosure. Wellhope strictly implemented its Information Disclosure Management Regulation, which has clarified the person taking charge of information disclosure to ensure that the disclosed information could be true, accurate, complete, timely and fair. It designated the board secretary to take charge of information disclosure and investor relations management, strictly implemented the Company’s regulations regarding information disclosure, such as Management Regulation on Insider Information Registration, so as to disclose information truly, accurately, completely and timely to guarantee that all shareholders could have equal right to know the information of the Company. Meanwhile, Wellhope constantly improved corporate governance structure and standardized internal operations in strict accordance with the requirements of the Wellhope Foods Co., Ltd.2021 Annual Report Corporation Law, the Securities Law, relevant laws and regulations issued by China Securities Regulatory Commission. E. Stakeholder. Wellhope fully respected and safeguarded the legitimate rights and interests of stakeholders, strived to achieve the coordination and balance among shareholders, employees, and other parties, and jointly promoted the sustainable, healthy and stable development of the Company. II. Shareholders' Meeting Convened during the Reporting Period Meeting Date Query URLs of Resolution Disclosing Date of Resolution 2021 First Extraordinary Shareholders' Meeting February 1,2021 February 2,2021 2021 Second Extraordinary Shareholders' Meeting February 19, 2021 February 20,2021 2020 Annual Shareholders' Meeting April 20,2021 April 21,2021 2021 Third Extraordinary Shareholders' Meeting July 19,2021 July 20,2021 javascript:;Wellhope Foods Co., Ltd.2021 Annual Report III. Information about Directors, Supervisors and Senior Managers 1. Changes in shareholdings and remuneration of incumbent and outgoing directors, supervisors and senior management during the reporting period Name Office title Gender Age Start of tenure End of tenure Opening shareholding (shares) Closing shareholding (shares) Changes in shareholding (shares) in 2021 Reason of changes Pre-tax remuneration paid by the Company (RMB 10k) Whether obtain remuneration from related parties of the Company Jin Weidong Chairman male 59 Feb.3,2015 Feb.1,2024149,549,498149,549,498 72.00 No Qiu Jiahui Director, President male 50 Feb.1,2021 Feb.1,2024 70.00 No Jacobus Johannes de Heus Director male 53 Feb.3,2015 Feb.1,2024 No Shao Caimei Director, Chief Technical Officer female 56 Feb.3,2015 Feb.1,202449,773,87849,773,878 67.24 No Zhang Wenliang Director, Chief Financial Officer male 62 Feb.3,2015 Feb.1,20248,565,1008,565,100 39.60 No Zhao Xin Director, Board Secretary, Chief HROfficer female 50 Feb.3,2015 Feb.1,20244,420,1604,420,160 67.00 No ZUOXIAOLEI Independent Director female 69 Feb.1,2021 Feb.1,2024 9.00 No Jiang Yan Independent Director female 49 Feb.1,2021 Feb.1,2024 9.00 No Zhang Shuyi Independent Director male 58 Feb.1,2021 Feb.1,2024 9.00 No Wang Fengjiu Vice President male 53 Feb.3,2015 Feb.1,202447,964,60247,964,602 59.08 No Wang Xueqiang Vice President male 55 Feb.1,2021 Feb.1,20249,355,0009,355,000 70.00 No Wellhope Foods Co., Ltd.2021 Annual Report Di Guo Vice President male 52 Feb.1,2021 Feb.1,20244,908,2194,908,219 70.00 No Wang Zhongtao Chairman of the Supervisory Board male 58 Feb.3,2015 Feb.1,202446,625,22946,625,229 70.00 No Marcus Leonardus van der Kwaak Supervisor male 53 Feb.3,2015 Feb.1,2024 No Li Jun Supervisor male 50 Apr.27,2016 Feb.1,2024 37.92 No Ren Bingxin Supervisor male 59 Mar.27,2019 Feb.1,2024 5,429,500 5,429,500 25.00 No Yuan Minger Supervisor female 52 Feb.3,2015 Feb.1,2024 32.40 No Ding Yunfeng Director and President (outgoing) male 59 Feb.3,2015 Feb.1,202181,929,55881,929,558 48.00 No Wang Zhenyong Vice President (outgoing) male 56 Feb.3,2015 Feb.1,20219,800,0009,802,0002,000 Bought from the secondary market 70.00 No Hu Jianmin Independent Director (outgoing) male 63 Feb.3,2015 Feb.1,2021 0.50 No Liu Huan Independent Director (outgoing) male 67 Feb.3,2015 Feb.1,2021 0.50 No Wang Zhe Independent Director (outgoing) female 42 Feb.2,2018 Feb.1,2021 0.50 No Total / / / / / 418,320,744418,322,7442,000 / 826.74 / Wellhope Foods Co., Ltd.2021 Annual Report Name Work experience Jin Weidong Male, born in 1963, Chinese nationality, bachelor of veterinarian from Shenyang Agricultural University, master of physiology and biochemistry from Jilin University, doctoral advisor of Shenyang Agricultural University, winner of the first batch of National Natural Science Foundation of China, core founder of Wellhope, serving as the Chairman of Wellhope since 1995. After graduation, he worked in the university for two years. In 1991, he joined Continental Grain Company (the US), successively served as the sales manager of China’s Northeast Region, national sales manager and assistant vice president of Asia Region. Currently he holds the posts of Vice President of China Feed Industry Association, Vice President of China Animal Husbandry Industry Association, President of Liaoning Feed Industry Association, also the MBA interviewer of Peking University and Tsinghua University, guest professor of Remin University of China, Ocean University of China and Northeast Agricultural University, etc. He has been awarded the honorary titles of "China's Outstanding Private Science and Technology Entrepreneur", "National Outstanding Builder of the Socialist Cause", "China's Top Ten Economic Figures in the 30 Years of Reform and Opening up of Feed Industry", "May 1st Labor Medal of Shenyang City", "Model Worker of Liaoning Province" and etc. In 2015, he was awarded as One of the Top Ten Models of Entrepreneurship for Agriculture, Rural Areas and Farmers. Meanwhile, he was awarded as Outstanding Entrepreneur of Liaoning Province in 2017, and awarded as Career-creating Talent regarding Science and Technology Innovation by China’s Ministry of Science and Technology in 2018. In 2019, he was selected as the fourth batch of leading talents regarding technology entrepreneurship in the National Ten Thousand Talents Program, and in 2020 awarded as the National Model Worker. Qiu Jiahui Male, born in 1972, Chinese nationality, bachelor of veterinarian from Shenyang Agricultural University. After graduation from university, he worked in Dalian Broiler Breeder Farm, a state-owned core breeding enterprise, engaged in technical and on-site management. He joined Wellhope in 2000, served successively as General Manager of Haicheng Wellhope Feed Mill, Haicheng Xinzhongxin Feed Mill, Vice President of Former Huakang Feed Group, Marketing Director of Wellhope, President of Broiler Integration Business Division, Vice President of Wellhope. Due to his outstanding performance and diligence, he has been elected as the board director and President of Wellhope on February 1,2021. Mr. Qiu Jiahui is the pioneer of Wellhope’s broiler integration business. With more than 10 years of leadership, the broiler integration business has achieved rapid development. Jacobus Johannes de Heus Male, born in 1969, the Netherlands’ nationality, master's degree, been working in Royal De Heus since 1992, now serves as the CEO of Royal De Heus, board director of Wellhope. Shao Caimei Female, born in 1966, Chinese nationality, at the age of 25, she received her PhD in animal physiology and biochemistry from Nanjing Agricultural University. She is one of the founders of Wellhope. She used to be a technician in a poultry breeding center of the Ministry of Agriculture and served as the formula manager at CONTINENTALGRAIN COMPANY(the US). Since founding Wellhope, she has always taken charge of the technology of Wellhope, successively serving as the Technology Director and Vice President. Now she is the Board Director and CTO of Wellhope, also holds the posts of standing director of Animal Nutrition Branch of Chinese Association of Animal Science and Veterinary Medicine, member of Chinese Feed Industrial Standardization Technical Committee, leader of the Comprehensive Trial Farm for National Swine Raising Industry Technology System and etc. Meanwhile, she has been serving as the master supervisor of China Agricultural University and Shenyang Agricultural University. She has won a number of first and second prizes of provincial-level science and technology progress and applied nearly 30 technical invention patents. Zhang Wenliang Male, born in 1960, Chinese nationality, master of quality cost management from Northeastern University, senior auditor, the first batch of China’s certified public accountant. He used to work for the Shenyang Office of National Audit Office, mainly engaged in auditing of finance, national tax, customs and large enterprises. He joined Wellhope in 1996 and served successively as Financial Manager of Shenyang Wellhope Feed Mill, Auditing Manager of Wellhope, Financial Manager of Beijing Sanyuan Wellhope Feed Mill, and Financial Director of Wellhope. He is currently the Board Director and CFO of Wellhope. Mr. Wenliang Zhang led and participated in some capital operation projects of Wellhope, such as the shareholding system transformation, IPO and non-public offering new shares. Zhao Xin Female, born in 1972, Chinese nationality, bachelor of economics from Shenyang Agricultural University. She joined Wellhope in 1995 after graduation, successively served as the Secretary to general manager, Director of Marketing Department, Director of HRDepartment, Human Resources Manager and Chief HRDirector, Assistant to Chairman, etc. Now holds the posts of Board Director, Board Secretary and CHO of Wellhope. Ms. Xin Zhao has more than 20 years of experience in human resources and enterprise management, she is one of the managers who established Wellhope's human resources management system. In 2020 and 2021, she was awarded as "Outstanding Board Secretary" in the Selection of China’s Valuable Public Companies. Wellhope Foods Co., Ltd.2021 Annual Report ZUOXIAOLEI Female, born in 1953, Singapore’s nationality, famous economist, Ph.D. of International Finance and Econometrics from University of Illinois, USA. She used to be a lecturer in the School of Economic Statistics at the National University of Singapore, associate professor at the Asian Institute of Management in the Philippines, chief economist and chief president adviser of Galaxy Securities, independent director of Tongfang Co., Ltd. and Hubei Bank. Now she serves as the researcher at the Financial Center of Counsellors' Office of the State Council of China. Ms. Xiaolei Zuo is one of the most influential economists in China, who has published more than 50 papers in the fields of econometrics, international finance and securities market. She is the author of "Xiaolei's Perspective: My View on China's Economy" and other books. Jiang Yan Female, born in 1973, Chinese nationality, doctor of management from Institute of Fiscal Science of Ministry of Finance, certified public accountant, certified asset appraiser. She worked in the Stock Issuance Supervision Department at China Securities Regulatory Commission from 2002-2016, now holds the posts of core consultant of several investment banks such as Minsheng Securities Co., Ltd., and the independent director of Weichai Power Co., Ltd. Zhang Shuyi Male, born in 1964, Chinese nationality, doctor of ecology from Marie Curie University, France, doctoral advisor of Shenyang Agricultural University. Once he held the posts of researcher of the Institute of Zoology of Chinese Academy of Sciences, Dean of Interdisciplinary Institute of Science and Technology of East China Normal University, Dean of the School of Management of Zhejiang Ocean University. Now he is the Dean of the School of Animal Husbandry and Veterinary of Shenyang Agricultural University. In addition to the scientific field, he used to serve as an independent director of Wellhope, vice president of Tiansanqi Group Co., Ltd. (Beijing), etc. Mr. Shuyi Zhang has made great achievements in the field of science. He has been funded by the National Natural Science Foundation of China for Distinguished Young Scholars, supported by the "Changjiang Rive Scholars" team project of the Ministry of Education, and been selected into the first and second levels of the National Millions of Talents Project, the "Hundred Talents Program" of the Chinese Academy of Sciences, and the Climbing Scholars Program of Universities in Liaoning Province. He has been awarded special government allowance of the State Council, second prize of national science and technology progress, first prize of natural science of Shanghai and other awards, etc. Wang Fengjiu Male, born in 1969, Chinese nationality, master of animal nutrition and feed science from Chinese Academy of Agricultural Sciences, one of the founders of Wellhope. He once worked in the office of academic affairs of Shenyang Agricultural University and served as the sales manager of China’s Northeast Region at CONTINENTALGRAINCOMPANY (the Us). After the establishment of Wellhope, he has successively acted as Business Manager, Deputy General Manager, General Manager of some subsidiaries, President of Wellhope. He is now the Vice President of Wellhope, who takes charge of Wellhope’s food business. He is also a standing member of the 15th Shenyang Committee of CPPCC, Vice President of Liaoning Agricultural Integration Association and Shenyang Food Association. Wang Xueqiang Male, born in 1967, Chinese nationality, bachelor of animal husbandry from Shenyang Agricultural University. He once worked at Shenyang Institute of Applied Ecology of Chinese Academy of Sciences. He joined Wellhope in 1995 and served successively as Sales Manager and Deputy General Managers, General Managers of some subsidiaries and Vice President of Wellhope. He is now the Vice President of Wellhope. Mr. Xueqiang Wang is one of the important contributors to Wellhope's feed business management system. The Liaoning Region under his leadership is now the benchmark of Wellhope's "quality management", also the base camp of Wellhope's business development and talent growth. Di Guo Male, born in 1970, Chinese nationality, master of management from Shenyang Agricultural University. Joining Wellhope in 1996, he served successively as Salesman, Sales Manager, Deputy General Manager and General Manager of some subsidiaries, President of Huakang Group, Chief Director of feed business in Jilin and Heilongjiang regions, Secretary of the Board of Directors and Vice President of Wellhope. He is now the Vice President of Wellhope. Mr. Guo Di has rich experiences in marketing and enterprise management, who has been appointed to take on important responsibilities in times of crisis. He is an innovator of business development in Jilin and Heilongjiang regions. Wang Zhongtao Male, born in 1964, Chinese nationality, Bachelor of Animal Husbandry in Shenyang Agricultural University, one of the founders of Wellhope. He once worked in Tianjin Huajin Company as a technical director, a large state-owned enterprise, and the sales manager of six provinces in North China at CONTINENTALGRAINCOMPANY(the US). After founding Wellhope, he served successively as Purchasing Manager, Financial Manager, General Manager, etc, now holds the post of Chairman of the Supervisory Board. Mr. Wang Zhongtao is the most important contributor to the development and growth of Wellhope’s trading business. Over the past 20 years, Wellhope’s trading business has flourished and the business scale is among the top in China. Marcus Leonardus van der Kwaak Male, born in 1969, the Netherlands’ nationality, master's degree, CFO of Royal De Heus, supervisor of Wellhope. Wellhope Foods Co., Ltd.2021 Annual Report Li Jun Male, born in 1972, Chinese nationality, master of Business Administration from Northeastern University. He used to be the export salesman of Shenyang Grain, Oil and Food Import and Export Company, and the sales manager of Shenyang Tongfeng Trading Company. He joined Wellhope in 2004 and successively served as General Manager of several trading subsidiaries. Now he is the Director of Wellhope trading business division, General Manager of Liaoning Expert Trading Company, and supervisor of Wellhope. Mr. Li Jun has been engaged in international trade for many years, who has rich experience in trading feed raw materials. He has made important contributions to the development of Wellhope’s trading business. Ren Bingxin Male, born in 1963, Chinese nationality, PhD in cell engineering from Ocean University of China. He joined Wellhope in 1998 and has served as Production Manager, Technical Manager, ISOSystem Manager and Deputy General Manager. Now he holds the post of Technical Director of broiler feed line and Supervisor. Mr. Ren Bingxin is the chief expert of Wellhope’s broiler feed products, with rich experience in feed production and technology research and development. He is an important participant and contributor to the rapid development of Wellhope’s broiler integration business, and has obtained 2 authorized invention patents and 3 utility model patents during his tenure. Yuan Minger Female, born in 1970, Chinese nationality, bachelor's degree, senior auditor, joined Wellhope in 2004, served successively as Deputy Financial Manager of Liaoning Wellhope and Financial Manager of Wellhope Aquatic Feed Company, now holds the posts of Supervisor and Audit Manager of Wellhope. Ding Yunfeng Male, born in 1963, Chinese nationality, bachelor's degree, one of the founders of Wellhope. Once served as the deputy general manager of Liaohe Feed Group, the northeast regional manager and consulting manager of Continental Grain Company. After founding Wellhope, he served as General Manager of many subsidiaries, such as Gongzhuling Wellhope, Liaoning Wellhope, Shanghai Wellhope, etc., the Chairman of the third and fourth session of the Supervisory Board, the Director and President of the fifth and sixth session of Board of Directors. Wang Zhenyong Male, born in 1966, Chinese nationality, Ph.D., joined Wellhope in 1996, served successively as Technical Manager, General Manager, Northeast Region Technical Director and Vice President. Now he is taking charge of international business. Hu Jianmin Male, born in 1959, Chinese nationality, Ph.D., professor of School of Animal Husbandry and Veterinarian of Shenyang Agricultural University, once held the post of the independent director of Wellhope. Liu Huan Male, born in 1955, Chinese nationality, certified public accountant. He once held the post of independent director of Zhejiang Hailiang Company, China Europe Fund Company, Shouchuang Securities Company, and the independent director of Wellhope. Now he is the Deputy Dean of the School of Taxation of Central University of Finance and Economics. Wang Zhe Female, born in 1980, Chinese nationality, Ph.D., a postdoctoral fellow at Center for Ecology and Evolutionary Biology of Yale University, and then worked at East China Normal University as a researcher in the Interdisciplinary Institute for Advanced Studies in Science and Technology. Now she is a professor and doctoral advisor of School of Animal Husbandry and Veterinarian of Shenyang Agricultural University, once held the post of the independent director of Wellhope. Wellhope Foods Co., Ltd.2021 Annual Report 2. Post held by ongoing and outgoing Directors, Supervisors and senior managers in other entity Post in other entities Name Other entity Post Start of tenure End of tenure Wang Zhe Shenyang Agricultural University Professor 2015 Hu Jianmin Shenyang Agricultural University Professor 2000 Hu Jianmin Liaoning-Shenyang Agricultural Wellhope Bio-Tech Company Board director 2016 Liu Huan School of Taxation of Central University of Finance and Economics Deputy dean and professor 2010 Zhang Shuyi Shenyang Agricultural University Professor 2016 Zhang Shuyi Wuxi Kezhiqian Technology Company Executive director 2012 Zhang Shuyi Liaoning Petmate Bio-tech Company Board director 2016 Jiang Yan Weichai Power Co., Ltd. Independent director 2020 Jacobus Johannes de Heus Royal De Heus CEO 2002 Marcus Leonardus van der Kwaak Royal De Heus CFO 2001 Jin Weidong Beijing BOYARAgriculture and Animal Husbandry Technology Co., Ltd. Supervisor 2010 Jin Weidong Beijing Huikezhongda Information Consulting Company Board director 2020 Jin Weidong Shenyang Shengjing Asset Management Group Company Board director 2019 Jin Weidong Changzhou Sangdichuan Agricultural Development Company Executive director 2021 3. Remuneration of Directors, Supervisors and Senior Management Decision-making procedure for remuneration According to the Company's performance appraisal management, related regulations and the stipulations of the Remuneration and Performance Appraisal Committee of the Board of Directors. Basis for determining remuneration According to the remuneration level in the industry, the Company's business performance, job responsibilities, etc., and in accordance with the work plan made by the Board of Directors at the beginning of the year, in combination with individual’s work performance and other qualitative and quantitative indicators. Actual payment Paying in accordance with the annual performance of the Company, the work performance of senior managers and management ability, etc. Wellhope Foods Co., Ltd.2021 Annual Report Total remuneration during the reporting period Totally paid RMB 8.27 million to board directors, supervisory board directors and senior managers. 4. Changes in directors, supervisors and senior management IV. Board meetings held in 2021 V. Performance of duties of directors Name Post Change Reason Qiu Jiahui Board director Election General election Qiu Jiahui President Appointment General election Wang Xueqiang Vice President Appointment General election Di Guo Vice President Appointment General election ZUOXIAOLEIIndependent director Election General election Jiang Yan Independent director Election General election Zhang Shuyi Independent director Election General election Wang Zhe Independent director Outgoing General election Hu Jianmin Independent director Outgoing General election Liu Huan Independent director Outgoing General election Ding Yunfeng Board director Outgoing General election Ding Yunfeng President Outgoing General election Wang Zhenyong Vice President Outgoing General election Qiu Jiahui Vice President Outgoing General election Meeting Date Resolution The 19th meeting of the 6th session of Board of Directors Jan.15,2021 No.2021-001 announcement--meeting resolution The 1st meeting of the 7th session of Board of Directors Feb.1,2021 No.2021-008 announcement --meeting resolution The 2nd meeting of the 7th session of Board of Directors Mar.29,2021 No.2021--018 announcement --meeting resolution The 3rd meeting of the 7th session of Board of Directors Apr.20,2021 No.2021-037 announcement --meeting resolution The 4th meeting of the 7th session of Board of Directors May 6,2021 No.2021-045 announcement -meeting resolution The 5th meeting of the 7th session of Board of Directors May 10,2021 No.2021-046 announcement --meeting resolution The 6th meeting of the 7th session of Board of Directors Jun.30,2021 No.2021-056 announcement --meeting resolution The 7th meeting of the7th session of Board of Directors Aug.27,2021 No.2021-076 announcement --meeting resolution The 8th meeting of the 7th session of Board of Directors Oct.27,20212021 Third Quarter Report The 9th meeting of the 7th session of Board of Directors Nov.30,2021 No.2021-096 announcement Wellhope Foods Co., Ltd.2021 Annual Report 1. Circumstance of attending board meeting and shareholders’ meeting Name Independent director or not Attendance of Board Meeting Shareholders' Meeting Number of board meetings required to attend in 2021 Physical presence Via Tele- communi Via proxy Number of absences Whether continually fail to physically attend the meeting two times Number of shareholders' meeting attended Jin Weidong no 1010600 no 2 Qiu Jiahui no 99300 no 3 Jacobus Johannes de Heus no 10101000 no 0 Shao Caimei no 1010600 no 2 Zhang Wenliang no 1010600 no 2 Zhao Xin no 1010200 no 4 ZUOXIAOLEI yes 99800 no 1 Jiang Yan yes 99800 no 1 Zhang Shuyi yes 99500 no 3 Ding Yunfeng no 11000 no 1 Hu Jianmin yes 11000 no 1 Liu Huan yes 11100 no 0 Wang Zhe yes 11100 no 0 Number of board meetings held in 202110 Including on-site meeting 0 Number of meetings held via telecommunication 2 Number of meetings held via on-site meeting and telecommunication 8 VI. Circumstance of Special Committee of Board of Directors 1. Member of each committee Committee Member Audit committee Jiang Yan(head), ZUOXIAOLEI, Zhang Wenliang Nominating committee ZUOXIAOLEI(head), Zhang Shuyi, Shao Caimei Compensation and appraisal committee Zhang Shuyi(head), Jiang Yan, Zhao Xin Strategy committee Jin Weidong(head), Jacobus Johannes de Heus, Qiu Jiahui, Zhang Wenliang, ZUOXIAOLEI 2. Meetings held by the audit committee Date Agenda Important comments and suggestions Other circumstance Mar.26,2021 To deliberate 2020 annual report, renewing contract with accounting firm,2020 audit committee performance report, 2020 internal control evaluation report and After full communication and discussion, all the proposals were unanimously approved Non Wellhope Foods Co., Ltd.2021 Annual Report other proposals Apr.17,2021 To deliberate 2021 First Quarter Report After full communication and discussion, all the proposals were unanimously approved Non Aug.25,2021 To deliberate 2021 Interim Report After full communication and discussion, all the proposals were unanimously approved Non Oct.25,2021 To deliberate 2021 Third Quarter Report After full communication and discussion, all the proposals were unanimously approved Non 3. Meetings held by the nominating committee Date Agenda Important comments and suggestions Other circumstance Jan.29,2021 Deliberating the proposal on the election of the Chairman of the Board of Directors for the seventh term, the election of members and head of the committees of the Board of Directors, the appointment of senior management personnel of the Company After full communication and discussion, all the proposals were unanimously approved Non 4. Meetings held by the compensation and appraisal committee Date Agenda Important comments and suggestions Other circumstance Mar.26,2021 Deliberating the compensation plan for the board directors and senior executives, unlocking restricted shares after achieving the performance objective of the second lock-up period disclosed in 2018 Restricted Stock Incentive Plan After full communication and discussion, all the proposals were unanimously approved Non 5. Meetings held by the strategy committee Date Agenda Important comments Other circumstance Wellhope Foods Co., Ltd.2021 Annual Report and suggestions Jun.28,2021 Deliberating proposals about issuing convertible bonds After full communication and discussion, all the proposals were unanimously approved Non VII. Employees of the Parent Company and Major Subsidiaries 1. Headcount Full time employee of parent company 262 Full time employee of major subsidiaries 7,576 Total full-time employees 7,838 The number of retired employees whose expenses are borne by the parent company and major subsidiaries 10 Functions Line Employees Production 2,992 Sales 2,581 Technology 818 Finance 400 Administration 1,047 Total 7,838 Educational backgrounds Educational background Employees Master's degree and above 434 Bachelor's degree 2,623 Junior college 2,391 Below junior college 2,390 Total 7,838 2. Remuneration policy Wellhope always follows the human resource strategy of providing a fair, just and merit-based environment for rewarding employees, builds a comprehensive compensation incentive system that includes salary policy, appointment management, long-term incentive and welfare protection, continuously improves and innovates the incentive mechanism, and excavates the ego-enhancement drive of employees and improves their satisfactions. In 2021, the Company revised the compensation management measures, optimized the compensation management-control mode, clarified the compensation management mode of key managers, whilst continued to promote the implementation of broadband compensation in some business sectors and regions, and strengthened the investigation of the compensation system of several benchmark enterprises. Under the backdrop of downward pig raising industry, the Company guaranteed the compensation and welfare of employees who work in pig raising subsidiaries, and attracted excellent talents by stable salary policies. The Company also constantly revised the Administrative Measures on Promotion to select more outstanding managers through scientific promotion system, as well as Wellhope Foods Co., Ltd.2021 Annual Report providing more challenging tasks to motivate employees. Moreover, the Company has been paying close attention to the long-term incentives for outstanding employees. In 2018,372 key managers were granted restricted shares, they signed performance agreements with the Company, and they could unlock the restricted shares according to the results of working performance. By doing this, it can fully mobilize the enthusiasm and sense of ownership of key talents and promote the rapid development of all business sectors. In 2020 and 2021, these motivated managers successfully unlocked part of their restricted shares. Furthermore, the Company repurchased 20.9566 million shares through centralized bidding in 2021, paying RMB 200 million in total, the repurchased shares will be used to implement employee stock ownership plans or equity incentive plans. In addition, the Company, in accordance with national laws and regulations, offers staff social insurances and housing fund. Besides, it also provides other welfare, such as commercial insurance and annual physical examination to benefit employees and their families, also enriches their benefits through employee in-store purchase festival, Wings of Love charitable foundation and other ways to share internal resource and improve satisfaction. 3. Training plan Led by strategic goals and human resource strategy, the Company gave full play to the advantages of its training system accumulated over the years, and further strengthened the three-level training system in 2021, constantly improved the training management system that matches the Company's strategy and the strategy of each business segment, focusing on key areas, being pragmatic and efficient. A. Continuously improving the training system to make progress All business sectors of the Company jointly implemented hierarchical echelon talent training plan, including high-level trainings, middle management training camp, sales backbone training camp, new employee training project, etc., which covered senior executives, general managers, middle managers and key employees. At the same time, it optimized and innovated new employee training, strengthened three-level training mode supported by head office, business regions and subsidiary, also heightened the new employee training process and implementation effect, which was more suitable for new employees. B. Further developing the training courses to boost up business development During the report period, the Company strengthened course development and promotion management, launched management measures to improve the effectiveness of the online college platform, and significantly improved learning enthusiasm and effectiveness through a variety of forms such as weekly class,727 course development project, video, internal trainer incentive, and bi-monthly tracking management. There were 187 new courses updated in Wellhope Net Institute in 2021, with an average of 14.7 hours of study. At the same time, the Company used live coverage to train managers, which could unify thoughts, reach a consensus and rapidly output task list. Thereafter, by using three level Wellhope Foods Co., Ltd.2021 Annual Report meeting and task list tracking to mine outstanding cases, common problems, summarize experience and promote. 4. Labor outsourcing The total number of working hours 5,165,029 Total amount of remuneration paid for outsourcing RMB 101,032,125.07 VIII. Common Stock Profit Distribution or Capital Reserve Converted into Share Capital 1. Cash dividend Driven by the goal of realizing long-term and sustainable development, the Company has established a sustainable, stable and scientific profit distribution system for investors based on considering its actual operation, shareholders’ need, social factors such as capital costs, external financing environment, current and future profitability, cash flow, project investment and capital demand, bank credit and debt financing environment, etc. The Company held the 2nd meeting of the 7th Session of Board of Directors to formulate and deliberate the Shareholders’ Dividend Plan for the Next Three Years (2020-2022), which had been approved its 2020 Annual Shareholders’ Meeting. At least every three years, the Company re-reviews its Shareholders’ Dividend Return Plan for the Next Three Years to evaluate on-going profit distribution policy and make necessary modifications according to the opinions of shareholders (especially non-controlling shareholders), independent directors and supervisors, and determines the Shareholders’ Dividend Plan for that period. During the reporting period, according to the Proposal of 2020 Profit Distribution Plan approved by 2020 Annual Shareholders’ Meeting on April 20,2021: based on the total share capital on the equity registration date, the Company paid cash dividends of RMB 2.20 per 10 shares (tax included) to all shareholders, amounted to RMB 202,831,243.12. The dividends had been paid in June 2021. The 2021 profit distribution plan will be: In 2021, the Company will not pay dividend, issue bonus share, convert reserved funds into capital stock, and undistributed profits will be carried forward to the next year. According to the Share Repurchase Rules for Listed Companies issued by the CSRC, RMB 200,003,612.37 paid by the Company for repurchasing its shares could be regarded as cash dividend. This profit distribution plan is pending to be submitted to 2021 Annual Shareholders' Meeting. IX. Employee Equity Incentive Plan, Stock Ownership Plan or Other Incentive Measures and Impacts Wellhope Foods Co., Ltd.2021 Annual Report X. Internal Control System Construction and Implementation Wellhope will disclose the evaluation report of internal control when discloses 2021 Annual Report. Details, please refer to the website of Shanghai Stock Exchange (. XI. Management and Control of Subsidiaries during the Reporting Period The Company implemented internal control management on its subsidiaries in strict accordance with relevant provisions of laws and regulations. By managing subsidiaries’ operation, human resource, finance, internal audit, information disclosure, investment and financing, business assessment and other management measures, the Company controlled the risk of subsidiaries. Each subsidiary uniformly implemented the standards and regulations issued by the Company, and established business plans and risk management procedures according to the Company's overall development strategic planning and annual business plan. Each subsidiary, in accordance with major event reporting Overview Query URLs On March 29,2021, Wellhope’s 2nd meeting of the 7th Session of Board of Directors and the 2nd meeting of the 7th Session of Supervisory Board approved the proposals of Unlocking Restricted Shares after Achieving the Performance Objective Stated in the Second Lock-Up period of 2018 Restricted Stock Incentive Plan, Adjusting the Repurchase Price of Restricted Shares, Repurchasing and Writing off Part of Locked Restricted Shares. 1.364 managers could totally unlock 4.26 million restricted shares. 2. As Wellhope had paid cash dividends in 2019and 2020, the repurchase price of per restricted share had been adjusted as RMB 4.45 per share. 3. In view of 3 managers (Sun Zhumin, Zhang Weili, Zhao Chunxi) leaving the Company, they were no longer eligible for the incentive rules.10 managers did not meet the conditions of unlocking restricted shares due to their work performance appraisal,99,700 shares held by these 10 individuals would be repurchased and written off by the Company. Details can be obtained at , announcements disclosed on March 31,2021, No.2021-018,2021-019,2021-024,2021-025, 2021-026 On April 6,2021, Wellhope disclosed the announcement of Listing and Circulation of Restricted Shares in the Second Lockup Period, 4.25 million restricted shares could be traded on April 9,2021 Details can be obtained at , announcement disclosed on April 6,2021, No. 2021-033 On May 17,2021, Wellhope disclosed the announcement of the Implementation of Repurchasing and Writing off Part of Restricted Shares.99,700 shares held by 13 individuals had been repurchased and written off by the Company. On May 19,2021, these shares were written off. Details can be obtained at , announcement disclosed on May 17,2021, No. 2021-050 javascript:;Wellhope Foods Co., Ltd.2021 Annual Report regulations and review procedures, timely reported major business and financial events to the responsible person of the Company, and reported major events to the Company's board of directors or shareholders' meeting. During the reporting period, the subsidiaries operated stably, the Company has no major defects in the management and control of the subsidiaries, and the internal control of the subsidiaries have been effectively implemented. XII. Explanation of Audit Report for Internal Control SuyaJincheng CPALLP issued the Audit Report, put forward that Wellhope has maintained effective internal control over financial reports in all major aspects on December 31,2021 in accordance with relevant regulations. Details please refer to the website of Shanghai Stock Exchange (. XIII. Circumstance of Rectification regarding Self-inspection on Corporate Governance According to the self-inspection list of public companies' governance issued by the China Securities Regulatory Commission at the end of 2020, from January to April 2021, the Company inspected its corporate governance. Through self-inspection, the Company has established a relatively complete and reasonable corporate governance structure and internal control system in accordance with relevant laws, regulations and rules such as the Company Law, the Governance Standards for Listed Companies, etc. Through the inspection, the Company found that the responsibility assigning mechanism has not been established, then the Company actively implement rectification measures by revising Related Party Transaction Management Regulation, and supplemented the responsibility assigning mechanism. The company will, in accordance with the provisions of laws and regulations, further improve the management of board of directors, supervisory board and shareholders’ meeting, strengthen the management of corporate governance and internal control, continuously improve the operation of public companies. Wellhope Foods Co., Ltd.2021 Annual Report Section V Environment and Social Responsibility I. Environment information 1. Information of pollutant-discharging subsidiaries disclosed Puyang Wellhope Food Company (hereinafter referred to as "Puyang Wellhope"), a subsidiary of Wellhope, has been listed as the company with pollution discharging of Puyang City. Dalian Zhongjia Wellhope Food Company (hereinafter referred to as "Zhongjia Food") and Dalian Huakang Xinxin Food Company (hereinafter referred to as "Dalian Huakang"), subsidiaries of Wellhope, have been listed as the company with pollution discharging of Dalian City. Kaifeng Wellhope Meat Food Company (hereinafter referred to as "Kaifeng Wellhope"), a subsidiary of Wellhope, has been listed as the company with pollution discharging of Kaifeng City. Shenyang Huakang Broiler Company (hereinafter referred to as "Shenyang Huakang"), a subsidiary of Wellhope, has been listed as the company with pollution discharging of Shenyang City. Pingyuan Wellhope Food Processing Company (hereinafter referred to as "Pingyuan Wellhope"), a subsidiary of Wellhope, has been listed as the company with pollution discharging of Handan City. Changchun Wellhope Food Company (hereinafter referred to as "Changchun Wellhope"), a subsidiary of Wellhope, has been listed as the company with pollution discharging of Changchun City. Chifeng Wellhope Fuxinyuan Food Company (hereinafter referred to as "Chifeng Wellhope"), a subsidiary of Wellhope, has been listed as the company with pollution discharging of Chifeng City. Shandong Heyuan Food Company (hereinafter referred to as "Shandong Heyuan"), a subsidiary of Wellhope, has been listed as the company with pollution discharging of Weihai City. Dunhua Fengda Agriculture and Animal Husbandry Development Company (hereinafter referred to as "Dunhua Fengda"), a subsidiary of Wellhope, has been listed as the company with pollution discharging of Dunhua City. Daqing Wellhope Food Company (hereinafter referred to as "Daqing Wellhope"), a subsidiary of Wellhope, has been listed as the company with pollution discharging of Daqing City. Details are presented as follows. Wellhope Foods Co., Ltd.2021 Annual Report Company Primary pollutants Way of discharge Number of discharge outlet Distribution of outlets Emission concentration Pollutant discharge standards Total amount of discharge Total approved emissions Whether discharge excessive pollutants Puyang Wellhope Waste water (COD, ammonia nitrogen, total phosphorus, PH, suspended solids, biochemical oxygen demand, animal and plant oil, total coliform, total nitrogen). Waste gas (SO2, nitric oxide, particulate matter) Waste gas—direct discharge after treatment, waste water-- indirect discharge 1 outlet for waste gas,1 for waste water 1 waste water emission outlet located in the southeast corner of the sewage monitoring station,1 waste gas exhaust outlet distributed in the boiler room in the northeast corner of the factory COD--40.253mg/L, ammonia nitrogen --3.582mg/L, total phosphorus --0.417mg/L, total nitrogen --15.855mg/L, SO2--0mg/ m3, nitric oxide --22mg/ m3, particulate matter --2.1mg/ m3 Discharge Standard of Water Pollutants for Meat Processing Industry (GB 13457-1992). Boiler Air Pollutant Emission Standard (GB 13271-2014) COD--11.381t/a, ammonia nitrogen --1.013t/a COD--15.58t/a, ammonia nitrogen --2.95t/a No Zhongjia Food Waste water (COD, ammonia nitrogen, total phosphorus, PH, suspended solids, biochemical oxygen demand, total nitrogen). Waste gas (SO2, nitric oxide, particulate matter) Waste gas—direct discharge after treatment, waste water-- access to sewage works 1 outlet for waste gas,1 for waste water Waste water enters the sewage plant through the pump; the exhaust gas outlet is distributed in the boiler house on the north side of the company COD--41.35mg/L, ammonia nitrogen--1.98mg/L, total nitrogen--21.46mg/L, total phosphorus-- 2.64mg/L, PH--7.27, particulate matter--22.9mg/m3, sulfur dioxide--209mg/m3, nitric oxide--132mg/m3 Comprehensive Wastewater Discharge Standard of Liaoning Province (GB 21/1627-2008). Boiler Air Pollutant Emission Standard (GB 13271-2014) Simplified management, no emissions Non No Dalian Huakang Waste water (COD, ammonia nitrogen, total phosphorus, PH, suspended solids, total nitrogen). Waste gas (SO2, nitric oxide, particulate matter) Waste water-- put into the pipe network after treatment, waste gas—direct discharge 1 outlet for waste gas,1 for waste water Wastewater discharge outlet is distributed in the southeast corner of the company's sewage treatment COD--300mg/L, ammonia nitrogen--30mg/L, total phosphorus--5mg/L, total nitrogen--50mg/L Comprehensive Wastewater Discharge Standard of Liaoning Province (GB 21/1627-2008). Boiler Air Pollutant Emission Standard (GB 13271-2014) Waste water enter the pipe network, no discharge. Using of biomass boiler, no exhaust emissions Non No Wellhope Foods Co., Ltd.2021 Annual Report workshop; exhaust gas outlet is located on the roof of the company's boiler house Kaifeng Wellhope Waste water (COD, ammonia nitrogen, total phosphorus, PH, suspended solids, biochemical oxygen demand, animal and plant oil, total coliform, total nitrogen) Waste water— indirect discharge 1 outlet for waste water, 1 for waste water Wastewater discharge outlet is distributed in the northeast corner of the company's sewage monitoring infrastructure station COD--43mg/L, ammonia nitrogen--6.5mg/L, total phosphorus-1.17mg/L sulfuretted hydrogen—1.45mg/m3, ammonia—1.86mg/m3 Level 2 standard of Discharge Standard of Water Pollutants for Meat Processing Industry (GB 13457-1992) COD--3.43t/a, ammonia nitrogen--0.77t/a COD--3.6t/a, ammonia nitrogen--0.79t/a No Shenyang Huakang Waste water (coliform group,5 days biochemical oxygen demand, suspended matter, animal and plant oil, ammonia nitrogen, PH, chemical oxygen demand, total phosphorus). Waste gas (particulate matter, sulfur dioxide, nitrogen oxides, smoke blackness, mercury and its compounds) Waste gas—direct discharge after treatment, waste water-- put into the municipal pipe network after treatment 1 outlet for waste gas,1 for waste water Wastewater discharge outlet is distributed in the southeast corner of the company's sewage monitoring base station. The exhaust gas outlet is located at the boiler house in the northeast corner of the company COD--40mg/m3, suspended matter--8mg/m3, ammonia nitrogen--25.915mg/m3, 5 days biochemical oxygen demand--4.3mg/m3, total phosphorus--4.05mg/m3, animal and plant oil--5.33mg/m3, particulate matter--26.9mg/m3, sulfur dioxide--9mg/m3, nitrogen oxides--133mg/m3, mercury and its compounds<0.003ug/m3, ringelman emittance