ADAMA Ltd. Full Content of the Third Quarter Report 2019 ADAMA LTD. THIRD QUARTER REPORT 2019 ADAMA Ltd. is one of the world's leading crop protection companies. We strive to Create Simplicity in Agriculture - offering farmers effective products and services that simplify their lives and help them grow. With one of the most comprehensive and diversified portfolios of differentiated, quality products, our 7,000 strong team reaches farmers in over 100 countries, providing them with solutions to control weeds, insects and disease, and improve their yields. Please see important additional information and further details included in the Annex. October 2019 1 ADAMA Ltd. Full Content of the Third Quarter Report 2019 Section I - Important Notice The Company’s Board of Directors, Board of Supervisors, directors, supervisors and executive managers confirm that the content of this report is true, accurate and complete and contains no false statement, misleading presentation or material omissions, and assume joint and several legal liability arising therefrom. Chen Lichtenstein, the person in charge of the Company as well as its legal representative, and Aviram Lahav, the person leading the accounting function (Chief Financial Officer), hereby state and ensure the truthfulness, accuracy and completeness of the Financial Report. All the Company’s directors attended the board meeting for the review of this Report. This Report has been prepared in both Chinese and English. Should there be any discrepancies between the two versions, the Chinese version shall prevail. 2 ADAMA Ltd. Full Content of the Third Quarter Report 2019 Section II - Financial Highlights & Shareholder Changes I. Highlights of accounting data and financial indicators Whether the Company performs any retroactive adjustments to, or restatements of, its accounting data of last year due to change in accounting policies or correction of accounting errors √Yes □ No The reason for the retroactive adjustments or restatements: Business combination under common control. Unit: RMB’000 End of last year +/- (%) End of Reporting Period Before adjustment After adjustment After adjustment Total assets 46,046,978 42,812,505 44,135,063 4.33% Net assets attributable to shareholders of the Company 23,222,179 22,280,126 22,744,862 2.10% January - September, July - September, 2019 YoY +/- (%) YoY +/- (%) 2019 Operating revenues 6,666,043 6.01% 20,282,075 1.78% Net profit attributable to shareholders of the Company 206,095 (6.62%) 794,733 (69.55%) Net profit attributable to shareholders of the Company excluding non-recurring profit and loss 192,235 9.40% 622,505 (35.56%) Net cash flow from operating activities -- -- 94,261 (93.93%) Basic EPS (RMB/share) 0.0842 (6.65%) 0.3248 (69.55%) Diluted EPS (RMB/share) N/A N/A N/A N/A Weighted average return on net assets 0.87% 0.87% 3.46% (8.07%) Please see key additional information and further details included in the Annex. Non-Recurring profit/loss √ Applicable □ Not applicable Unit: RMB’000 Item January - September, 2019 Note Gains/losses on the disposal of non-current assets (including the 121,403 offset part of asset impairment provisions) Government grants recognized through profit or loss (excluding government grants closely related to business of the Company 21,086 and given at a fixed quota or amount in accordance with government’s uniform standards) Profit or loss of subsidiaries generated before combination date of 38,027 a business combination under common control Recovery or reversal of provision for bad debts which is assessed 20,349 individually during the years Other non-operating income and expenses other than the above (7,631) Less: Income tax effects 21,006 Total 172,228 Explanation of why the Company classified an item as exceptional profit/loss according to the definition in the Explanatory Announcement No. 1 on Information Disclosure for Companies Offering Their Securities to the Public - Exceptional Profit and Loss, or reclassified any exceptional profit/loss item given as an example in the said explanatory announcement to recurrent profit/loss □ Applicable √ Not applicable No such cases in the Reporting Period. 3 ADAMA Ltd. Full Content of the Third Quarter Report 2019 II. Total number of shareholders and shareholdings of top 10 shareholders at the period-end 1. Total number of ordinary shareholders and preference shareholders who have re-attained their voting rights, and shareholdings of top 10 shareholders at the period-end Unit: share 49,866 (including 34,042 Total number of ordinary shareholders at the end of the Total number of preference shareholders who had resumed their A shareholders and 15,824 0 Reporting Period voting right at the end of the Reporting Period (if any) B shareholders) Shareholdings of top 10 shareholders Number of Number of restricted Pledged or frozen shares Name of shareholder Nature of shareholder Shareholding percentage shares held shares held Status Number China National State-owned legal Agrochemical Corporation 74.02% 1,810,883,039 1,810,883,039 - - person (CNAC) Jingzhou Sanonda Holding State-owned legal 4.89% 119,687,202 - - - Co., Ltd. person China Cinda Asset State-owned legal 1.37% 33,557,046 - - - Management Co., Ltd. person China Structural Reform State-owned legal 1.37% 33,557,046 - - - Fund Co., Ltd. person Portfolio No.503 of National Social Security Others 0.55% 13,499,813 - - - Fund CCB Principal-ICBC-Avic Trust, Trust Plan of Pooled Funds of CCB Principal Others 0.53% 12,885,906 - - - Private Placement Investment, Tianqi (2016) No. 293 of Avic Trust Zhu Shenglan Domestic natural person 0.42% 10,207,100 - - - Industrial Bank Co., Ltd, Mixed Securities Investment Others 0.33% 8,053,736 - - - Fund, Aegon-Industrial Trend Investment (LOF) Caitong Fund Fuchun Chuangyi Private Placement Others 0.19% 4,697,986 - - - No.3 Asset Management Plan GUOTAI JUNAN SECURITIES(HONGKONG Foreign legal person 0.18% 4,355,572 - - - ) LIMITED Shareholdings of top 10 non-restricted shareholders Number of non-restricted shares held Type of shares Name of shareholder at the period-end Type Number Jingzhou Sanonda Holding Co., Ltd. 119,687,202 RMB ordinary share 119,687,202 China Cinda Asset Management Co., Ltd. 33,557,046 RMB ordinary share 33,557,046 China Structural Reform Fund Co., Ltd. 33,557,046 RMB ordinary share 33,557,046 Portfolio No.503 of National Social Security Fund 13,499,813 RMB ordinary share 13,499,813 CCB Principal-ICBC-Avic Trust, Trust Plan of Pooled Funds of CCB Principal 12,885,906 RMB ordinary share 12,885,906 Private Placement Investment, Tianqi (2016) No. 293 of Avic Trust Zhu Shenglan 10,207,100 RMB ordinary share 10,207,100 Industrial Bank Co., Ltd, Mixed Securities Investment Fund, Aegon-Industrial 8,053,736 RMB ordinary share 8,053,736 Trend Investment (LOF) Caitong Fund Fuchun Chuangyi Private Placement No.3 Asset Management 4,697,986 RMB ordinary share 4,697,986 Plan Domestically listed GUOTAI JUNAN SECURITIES(HONGKONG) LIMITED 4,355,572 4,355,572 foreign share Qichun County State-owned Assets Administration 4,169,266 RMB ordinary share 4,169,266 Jingzhou Sanonda Holdings Co., Ltd. and CNAC are related parties, and are acting-in-concert parties as Related or act-in-concert parties among the prescribed in the Administrative Methods for Acquisition of Listed Companies. Sanonda Holding is a shareholders above subsidiary of CNAC. It is unknown whether the other shareholders are related parties or acting-in-concert parties as prescribed in the Administrative Methods for Acquisition of Listed Companies. Shareholder Zhu Shenglan held 3,767,200 shares of the Company through a credit collateral securities trading Top 10 ordinary shareholders conducting account and held 6,439,900 shares of the Company through a common securities account, and therefore held securities margin trading (if any) 10,207,100 shares of the Company in aggregate. Did any of the top 10 ordinary shareholders or the top 10 non-restricted ordinary shareholders of the Company conduct any agreed securities buyback during the Reporting Period? □ Yes √ No No such cases in the Reporting Period. 2. Total number of preference shareholders and shareholdings of the top 10 of such at the period-end □ Applicable √ Not applicable 4 ADAMA Ltd. Full Content of the Third Quarter Report 2019 Section III - Significant Events I. Changes in main accounting statement items and financial indicators in the Reporting Period, as well as reasons for the changes √ Applicable □ Not applicable January - Same period January - Same period September, last year September, last year +/-% +/-% 2019 (000’RMB) 2019 (000’USD) (000’RMB) (Restated) (000’USD) (Restated) Operating income (Revenues) 20,282,075 19,927,452 1.78% 2,961,572 3,066,842 (3.43%) Cost of goods sold 13,607,433 13,331,039 2.07% 1,986,377 2,050,927 (3.15%) Gross Profits 6,674,642 6,596,413 1.19% 975,195 1,015,915 (4.01%) Sales & Marketing expenses 3,664,412 3,401,616 7.73% 535,288 522,793 2.39% General & Administrative expenses 902,506 735,794 22.66% 131,885 113,303 16.40% R&D expenses 317,642 262,580 20.97% 46,357 40,180 15.37% Financial Expenses 1,503,130 661,660 127.18% 219,199 100,733 117.60% Gain (loss) from Changes in Fair 1,157,695 (344,673) 435.88% 170,076 (53,221) 419.57% Value Investment Income (loss) (467,057) 355,812 (231.27%) (69,534) 53,838 (229.15%) Total Net Financial Expenses and 812,492 650,521 24.90% 118,657 100,116 18.52% Investment Income Total profits 962,140 3,407,520 (71.76%) 140,951 532,852 (73.55%) Income tax expenses 167,407 797,637 (79.01%) 24,537 124,745 (80.33%) Net income 794,733 2,609,883 (69.55%) 116,414 408,108 (71.47%) EBITDA 3,524,465 5,501,713 (35.94%) 515,069 854,418 (39.72%) Q3 2018 Q3 2019 Q3 2018 Q3 2019 (000’RMB) +/-% (000’USD) (000’USD) +/-% (000’RMB) (Restated) (Restated) Operating income (Revenues) 6,666,043 6,288,379 6.01% 953,422 925,156 3.06% Cost of goods sold 4,584,191 4,288,856 6.89% 655,666 631,105 3.89% Gross Profits 2,081,852 1,999,523 4.12% 297,756 294,051 1.26% Sales & Marketing expenses 1,164,638 1,144,625 1.75% 166,573 168,399 (1.08%) General & Administrative expenses 274,247 211,973 29.38% 39,224 31,046 26.34% R&D expenses 106,943 106,305 0.60% 15,295 15,640 (2.21%) Financial Expenses 564,934 314,106 79.85% 80,798 46,251 74.69% Gain (loss) from Changes in Fair 273,560 (101,297) 370.06% 39,126 (14,903) 362.54% Value Investment Income (loss) 47,386 208,759 (77.30%) 6,777 30,713 (77.93%) Total Net Financial Expenses and 243,988 206,644 18.07% 34,895 30,441 14.63% Investment Income Total profits 232,965 280,795 (17.03%) 33,320 41,293 (19.31%) Income tax expenses 26,870 60,079 (55.28%) 3,845 8,832 (56.47%) Net income 206,095 220,716 (6.62%) 29,475 32,461 (9.20%) EBITDA 1,063,546 1,015,502 4.73% 152,113 149,424 1.80% 5 ADAMA Ltd. Full Content of the Third Quarter Report 2019 Analysis of Financial Highlights (1) Revenues Revenues in the third quarter grew compared to the same period last year in US dollar terms, and in RMB terms. Nine-month sales were somewhat lower compared to the parallel period last year, and up in RMB terms, overcoming the significant headwinds encountered throughout the period. This growth was achieved despite the impact of the disruption at the Jingzhou old site, which constrains the supply of high-demand products in many geographies as it continues its gradual ramp-up of operations. The disruption at the site constrained third quarter sales by $55 million and nine-month sales by $162 million. The third quarter saw a partial recovery in North America late in the season following the severe weather challenges seen in the first half of the year, with noteworthy performances in both the US and Canada. The Company also grew strongly in Europe in the third quarter, following a challenging first half of the year, despite the drought in the region, as well as in Brazil and the rest of Latin America, where its portfolio of differentiated products is driving increasing market penetration. In China, ADAMA continues to grow sales of its differentiated, formulated and branded products at significant double-digit rates. Supportive demand facilitated further price increases in the quarter of an average 2% across all regions. Regional Sales Performance Q3 2019 Q3 2018 Change 9M 2019 9M 2018 Change $m $m USD $m $m USD Europe 188 168 +12.1% 816 870 -6.2% North America 160 124 +28.8% 560 530 +5.5% Latin America 302 277 +9.1% 657 587 +11.9% Asia Pacific 138 131 +5.3% 496 487 +1.9% Of which China 76 69 +9.8% 255 241 +5.6% India, Middle East & Africa 166 173 -4.0% 432 443 -2.4% Total 953 872 +9.3% 2,962 2,918 +1.5% Note: 2018 sales by region in the table above, and as described in the regional explanations below, are as previously reported, and not as restated to include the business combination under common control of Anpon. Europe: The strong performance in the quarter was driven by business growth, although only partially recovering from the supply-related challenges in the first-half of the year, and despite a severe drought in the region which delayed herbicide application in cereals, reduced disease pressure in grapes and citrus, lowering consumption, and reduced oilseed rape planting areas. In Northern Europe, sales grew strongly in the quarter driven by Germany and the Baltic countries. The Company restrains sales in Ukraine where liquidity remains challenging for distributors. The Company saw robust growth in South Europe in the quarter with continued market share gains. Noteworthy performances were recorded in France, which experienced its second strongest harvest on record, as well as Italy and Iberia. Strong demand for insecticides compensated for weak disease pressure in grapes and citrus. The Company obtained a number of new registrations for differentiated products, including FOLPAN , ADAMA’s proprietary fungicide treating key resistant diseases in cereals in Germany, PITCHER, a differentiated mixture fungicide for flower-bulbs in the Netherlands and ZAKEO EXTRA, a dual-action, wide spectrum fungicide in Greece. 6 ADAMA Ltd. Full Content of the Third Quarter Report 2019 North America: Sales in the region grew significantly in the quarter through a combination of robust organic business growth, increased prices and joiners. The Company recorded strong growth in the quarter in both the US and Canada, partially recovering from the first-half floodings while benefiting from price increases in key backward-integrated products. Latin America: Latin America delivered strong business growth in key countries in the face of a severe drought across the region, alongside continued price increases, which more than offset the impact of constrained supply. The Company continues to grow strongly in Brazil despite a delayed planting season in soybean and corn crops, driven by its differentiated product portfolio and key recently launched products. These include flagship product CRONNOS, the triple-action fungicide for soybean rust which is performing strongly in its first year since launch, GALIL, a differentiated combination insecticide and TRIVOR, a dual-action insecticide for rapid and extended control of sucking pests. Noteworthy performances were recorded in the quarter in Colombia, Bolivia, Mexico and Peru, while over the nine-month period, the leading contributors to growth were Peru and Colombia. During the quarter, ADAMA launched several new products, including BREVIS, a differentiated solution to optimize fruit load and size in apples in Argentina and TRIVOR, in Colombia. The Company obtained a number of new registrations for differentiated products, including EXPERTGROW, a range of biostimulants promoting the growth and development of multiple fruit, vegetables and flower crops in Peru, Paraguay and Bolivia. Asia Pacific: Sales in the region grew, driven by business growth alongside continued price increases, while being affected by constrained supply of products of the Jingzhou old site. In China, ADAMA continues to see strong demand for its differentiated, formulated and branded products, with sales growth of more than 25% in both the quarter and the first nine months, excluding those from the Jingzhou old site. In the first nine months of this year, ADAMA has launched 12 new products in China, driving this strong growth. Two new registrations of the NIMITZ suite of products were obtained in the quarter. Anpon delivered a solid performance. The third quarter saw robust growth in Japan and a resilient performance in Australia, despite the continued severe drought in the country which is significantly reducing summer crops. These compensated for the weather-related challenges seen throughout South-East Asia. During the quarter, the Company obtained new registrations in Australia, including SOPRANO, a cereal fungicide, and SOMBRERO, an insecticide seed dressing for a wide range of crops. India, Middle East and Africa: In India, the Company benefited from the start of the monsoon rains, but was impacted by shortages of key products produced at the Jingzhou old site. ADAMA saw noteworthy sales in the country of SHAMIR, the novel dual-action combination fungicide for protection of multiple fruit and vegetable crops. Over the nine-month period, India and Turkey delivered noteworthy performance. (2) Gross Profit: The somewhat lower gross margins reflect the impact of the Jingzhou old site disruption which constrained sales of backward-integrated products in high demand, as well as higher procurement costs and softer currencies, partially offset by higher pricing aimed at passing on the impact of the higher procurement costs, as well as an improvement in product mix in the quarter. The Jingzhou site disruption reduced third quarter gross profit by $24 million and nine-month gross profit by $64 million. 7 ADAMA Ltd. Full Content of the Third Quarter Report 2019 (3) Operating Expenses: Sales and Marketing expenses: Sales and Marketing expenses reflect the inclusion of the joiner’s expenses, as well as the amortization of the written-up value of assets transferred from Syngenta in connection with the 2017 ChemChina-Syngenta transaction (see additional details below). These impacts were partially offset by ongoing strong expense containment. In recent years, the Company conducted various corporate development activities, including mergers and acquisitions, which resulted in the inclusion within its sales and marketing expenses of various one-time or non-cash or non-operational items affecting the Company’s reported numbers, mainly as follows: Amortization of legacy Purchase Price Allocation (PPA) of 2011 acquisition of Adama Agricultural Solutions Ltd., a wholly-owned subsidiary of the Company (“Solutions”) (non-cash): Under PRC GAAP, since the first combined reporting in Q3 2017 following the combination, the Company has inherited the historical “legacy” amortization charge that ChemChina previously was incurring in respect of its acquisition of Solutions in 2011. This amortization is done in a linear manner on a quarterly basis, most of which will be fully amortized by the end of 2020. Its reported financial impact (affecting the Sales & Marketing expenses) in the first nine months is USD 28.6 million, net of tax. Amortization of Transfer assets received and written-up due to 2017 ChemChina-Syngenta transaction (non-cash): The proceeds from the Divestment of crop protection products in connection with the approval by the EU Commission of the acquisition of Syngenta by ChemChina, net of taxes and transaction expenses, were paid to Syngenta in return for the transfer of a portfolio of products in Europe of similar nature and economic value. Since the products acquired from Syngenta are of the same nature, and with the same net economic value as those divested, the Divestment and Transfer transactions had no net impact on the underlying economic performance of the Company. Its reported financial impact (affecting the Sales & Marketing expenses) in the first nine months of 2019 is USD 27.5 million. Amortization of acquisition PPA (non-cash): The amortization of non-cash intangible assets created in the course of acquisitions, and which has no impact on the ongoing performance of the companies acquired. Its reported financial impact (affecting Sales & Marketing expenses) in the first nine months of 2019 is USD 4.2 million, net of tax. General and Administrative expenses: General and Administrative expenses include the recording of Jingzhou old-site related idleness costs of $8 million in the third quarter and $29 million in the nine-month period as it advances its gradual ramp-up in production, as well as the relevant expenses of the joiner, partially offset by the strong containment of expenses. (3) Financial Expenses “Financial Expenses” alone mainly reflect interest payments on corporate bonds and bank loans as well as foreign exchange gains/losses on the bonds and other monetary assets and liabilities before the Company carries out any hedging. The impact of Financial Expenses (before hedging) is USD 219 million for the first nine months of 2019 compared with USD 101 million for the corresponding period in 2018. The higher level in the first nine months compared with the same period last year reflects mainly (i) the adverse foreign exchange impact on balance sheet positions (before hedging), (ii) higher interest payments, and (iii) offset in the third quarter by the reduction in financing costs on the ILS-denominated, CPI-linked bonds due to a lower CPI. 8 ADAMA Ltd. Full Content of the Third Quarter Report 2019 Given the global nature of its operational activities and the composition of its assets and liabilities, the Company, in the ordinary course of its business, uses foreign currency derivatives (forwards and options) to hedge the cash flow risks associated with existing monetary assets and liabilities that may be affected by exchange rate fluctuations. Net gains/losses from hedging of those positions, are recorded in “Gains/Losses from Changes in Fair Value”, and are then transferred to “Investment Income” upon realization. The combined impact of Gains/Losses from Changes in Fair Value and Investment Income is a net benefit of USD 101 million for the first nine months of 2019 compared with a negligible net negative impact for the parallel period in 2018. The aggregate of Financial Expenses, Gains/Losses from Changes in Fair Value and Investment Income (hereinafter as “Total Net Financial Expenses and Investment Income”), which more comprehensively reflects the financial expenses of the Company in supporting its main business and protecting its monetary assets/liabilities, amounts to USD 119 million for the first nine months of 2019 compared with USD 100 million for the parallel period in 2018. This moderate increase in reflects mainly the net, combined impact of (i) the higher hedging costs due to global currency volatility, (ii) higher interest payments, (iii) the net foreign exchange impact on balance sheet positions which was largely offset by the benefit from hedging transactions and (iv) in the third quarter, the reduction in financing costs on the Shekel-denominated, CPI-linked bonds, due to a reduction in the CPI. The lower expenses in the corresponding periods last year reflect the benefit of foreign exchange income related to balance sheet positions. (4) Income Tax Expenses The lower income tax expenses in the quarter reflect the impact of the Jingzhou old site disruption, which reduced taxable income, partially offset by a non-cash impact due to the devaluation of the Brazilian Real over the quarter, which reduced the value of local currency-denominated non-monetary assets. The lower tax expenses over the nine-month period were largely due to the lower taxable income mainly resulting from the impact from the Jingzhou old site disruption, as well as changes in exchange rates against the US dollar that affected the value of local-currency denominated balance sheet items. The higher tax expenses in the corresponding period last year reflect the one-time capital gain from Divestment of registrations due to 2017 ChemChina-Syngenta transaction. Note: In estimating the impact from the Jingzhou old site disruption, the lost sales and gross profit are calculated as the difference in sales and gross profit earned on the affected products between the relevant periods in 2019 and their comparative periods in 2018. Related operating expenses include the additional idleness costs recorded in this year’s periods compared to the parallel period last year, as well as an assumed saving of 2.5% of affected sales in respect of incremental Sales & Marketing expenses. Financing costs were assumed not to be impacted. An effective tax rate of 20% was assumed in calculating the after-tax impact. Corporate development On October 30, 2019 the Company signed an agreement for the acquisition of AgroKlinge, a leading Peruvian crop protection company for a non-material amount for the Company. This acquisition will allow ADAMA to further improve and expand its business in Peru, broadening its portfolio, creating a leading commercial platform throughout the country and enhancing its access to large scale industrial farmers. Increasing collaboration activities The Company continues to advance collaboration opportunities with other ChemChina group entities, as well as other entities of the Sinochem group, to make the most of its positioning. Jingzhou Old Site Following resumption of operations at the Jingzhou old site in late March, the Company continues to advance the gradual ramp-up of production at the site. The site was visited during the third quarter by the Ecological Protection Supervision Team of the central government, as part of its inspections of the ChemChina group and in 9 ADAMA Ltd. Full Content of the Third Quarter Report 2019 the context of strengthening ongoing nationwide environmental focus. As part of its China sites’ three-year relocation and upgrade process, due to conclude by the end of next year, the Company continues to work with all relevant authorities to bring the site to best-in-class safety and environmental standards. In a significant milestone in this upgrade and relocation process, ADAMA obtained a new, expanded EIA (Environmental Impact Assessment) permit for the new Jingzhou site, allowing increased production of Acephate, DMPAT and other backward-integrated products. This will ensure the Company’s ability to strengthen the ACEMAIN franchise in key markets, including India, Brazil, US and China, leveraging its strong cost position and site stability. By end of 2020, ADAMA is aiming to complete most of its relocations at both Jingzhou and Huai’An, vacate the old sites, and be operational with improved cost and efficiencies at its new sites. The transformed new sites are designed to be more profitable, and ready to accommodate additional new molecules emerging from the Company’s strong development pipeline. Unit: RMB’000 Assets and liabilities September 30, December 31, +/- Main reason for change 2019 2018 (%) Cash at bank and on hand 4,579,346 6,400,190 (28%) Due to the Company’s robust performance in Brazil in the Accounts receivable 7,345,260 6,573,100 12% first nine months Due to the higher procurement costs, changes in the sales mix due to the volatile weather in many regions, Inventories 10,508,640 9,433,876 11% proactively-constrained sales due to credit restraint in Eastern Europe, as well as the first-time inclusion of joiner Right of use assets 549,588 - 100% Adoption of ASBE-21 Mainly due to increase of short-term credits from banks to Short term loans 1,558,465 1,122,774 39% finance the increase in the needs of working capital and the increased investments in the period Bills payable 215,709 445,533 (52%) Mainly due to Jingzhou old site disruption Taxes payable 424,381 616,780 (31%) Payment of income taxes Mainly increase in liabilities in respect of securitization Other payables 1,646,187 1,197,579 37% transaction Non-current liabilities due Mainly increase in current portion due to adoption of 547,668 301,814 81% within one year ASBE-21 – Leases Mainly due to change of the terms of a put option to Other current liabilities 349,861 578,184 (39%) holders of non-controlling interests Mainly due to increase of long-term loans from banks in Long-term loans 997,538 235,819 323% order to finance acquisitions and other investments and due to the increase in the working capital in the period Lease liabilities 413,418 - 100% Adoption of ASBE-21 Other non-current Mainly due to change of the terms of a put option to 416,790 199,930 108% liabilities holders of non-controlling interests II. Progress on significant events, as well as the influence and solutions □ Applicable √ Not applicable Status of share buyback □Applicable√Not applicable Status of share buyback in the way of centralized bidding □Applicable√Not applicable 10 ADAMA Ltd. Full Content of the Third Quarter Report 2019 III. None completion of Commitments that should have been completed in the reporting period by the Company, actual controller, shareholders, related parties, acquirer, and other committed parties □ Applicable √ Not applicable No such cases in the Reporting Period. IV. Securities investment □ Applicable √ Not applicable No such cases in the Reporting Period. V. Wealth management entrustment □ Applicable √ Not applicable No such cases in the Reporting Period. VI. Investment in derivative financial instruments √ Applicable □ Not applicable Unit: RMB’000 Amount Percentage of Investment Amount sold Gain/loss The party that Relation Related party Initial purchased Impairment Investment investment Starting Expiring amount at during the during the operates the with the transaction or Type investment during the accrued (if amount at end amount divided by date date beginning of reporting reporting investment Company not? amount reporting any) of the period net asset at end of the period period period period the period Banks No No Option 3,362,968 25/3/2019 26/2/2020 3,362,968 2,127,756 -3,720,452 No 1,770,272 7.63% 249,366 Banks No No Forward 11,634,236 28/6/2019 6/3/2020 11,634,236 32,329,857 -28,499,029 No 15,465,064 66.64% 581,854 Total 14,997,204 -- -- 14,997,204 34,457,613 -32,219,481 17,235,336 74.27% 831,220 Source of fund for the investment Internal litigation-related situations (if applicable) N/A Date of disclosure of Board approval (if any) December 30, 2017 Date of disclosure of Shareholders’ approval (if any) N/A The aforesaid refers to short term hedging currency transactions made with banks. The Group’s transactions are not traded in the market. The Transactions are between the applicable company in the Group and the applicable bank until the expiration date of the transaction, therefore no market risk is involved. Regarding credit and liquidity risk, the Group is working with large and substantial banks only and with some of them the Group has ISDA agreements. As to operational risk, the Group is working with relevant software, which is its back office for all transactions. No legal risk is involved. Risk and control analysis for the reporting period The actions taken in order to further reduce risks are: (including but not limited to market risk, liquidity The relevant subsidiaries have specific guidelines, under the Group’s policy, which were approved by the subsidiaries' financial statements risk, credit risk, operational risk, legal risk, etc.) committee of the board, which specifies, inter alia, the hedging policy, the persons that have the authorization to deal with hedging, the tools, ranges etc. The only subsidiary that has hedging positions in the Group in the period was Solutions and its subsidiaries. The relevant subsidiaries apply management designed procedures and controls, which among other things, monitor the working process and the controls of the hedging transactions and are quarterly reviewed and annually audited. The controllers of the relevant subsidiaries are involved in the process and are monitoring the hedging accounting treatment. Every 2-3 years the internal audit of the relevant subsidiaries’ department is auditing the entire procedure. Market price or fair value change of investments The aforesaid refers to short time hedging currency transactions made by the relevant subsidiary with banks. during the reporting period. Segregation of duties as follows: Specific methodology and assumptions should be For the fair value evaluation, the relevant subsidiary is usually using external experts. The relevant subsidiary hedges currencies only; the relevant disclosed in the analysis of fair value of the transactions are simple (Options and forwards) for short terms. For fair value methodology see section X of this report, note IX. Fair Value. The exchange investments rates are provided by the accounting department of the relevant subsidiary and all other parameters are provided by the experts. Explanation for any significant changes in accounting policies and principles, compared with N/A last reporting period The derivative investments carried by the Company are for hedging and narrowing down the risk of market fluctuations. The investments respond to the Independent Directors’ opinion on the investment in Company’s routine business demands and are in accordance with the relevant laws and regulations. Additionally, the Company has adopted Currency Risk derivative financial instruments and related risk Hedging Policy to strengthen the risk management and control which benefit the Company’s ability to protect against market risk. The derivative controls investments do not harm the interests of the Company and its shareholders. VII. Visits paid to the Company for purposes of research, communication, interview, etc. during the Reporting Period √ Applicable □ Not applicable Date of visit Way of visit Type of visitor About Global industry review and outlook. Introduced the July 8 to 9, 2019 On Site Research Institutional Investors situation of the Company's main markets and the registrations. 11 ADAMA Ltd. Full Content of the Third Quarter Report 2019 Date of visit Way of visit Type of visitor About Introduced the Company's overall situation and August 13, 2019 Call (One to One) Institutional Investor business development. Communication on the Q2 performances of the August 21, 2019 Call (One to Many) Institutional Investors Company. Communication on the Q2 performances of the September 3, 2019 Roadshow (One to Many) Institutional Investors Company. Introduced the Company's overall situation and September 18, 2019 On Site Research Institutional Investors business development. VIII. Illegal provision of guarantees for external parties □ Applicable √ Not applicable No such cases in the Reporting Period. IX. Utilization of the Company’s capital by the controlling shareholder or its related parties for non-operating purposes □ Applicable √ Not applicable No such cases in the Reporting Period. 12 ADAMA Ltd. Full Content of the Third Quarter Report 2019 Section IV - Financial Statements I. Financial statements 1. Consolidated balance sheet Prepared by Adama Ltd. 30 September 2019 Unit: RMB’000 September 30, December 31, September 30, December 31, Item Item 2019 2018 (Restated) 2019 2018 (Restated) Current assets: Current liabilities: Cash at bank and on hand 4,579,346 6,400,190 Short-term loans 1,558,465 1,122,774 Financial assets held for trading 32,860 46,095 Derivative financial liabilities 697,814 1,451,670 Derivative financial assets 887,316 517,726 Bills payable 215,709 445,533 Notes receivable 53,910 40,569 Accounts payable 3,893,560 4,627,936 Accounts receivable 7,345,260 6,573,100 Contract liabilities 982,837 848,402 Receivables financing 71,608 73,216 Employee benefits payable 901,398 944,175 Prepayments 318,263 410,506 Taxes payable 424,381 616,780 Other receivables 1,386,551 1,079,332 Other payables 1,646,187 1,197,579 Non-current liabilities due Inventories 10,508,640 9,433,876 547,668 301,814 within one year Non-current assets due within one 1 48 Other current liabilities 349,861 578,184 year Other current assets 659,935 660,806 Total current liabilities 11,217,880 12,134,847 Total current assets 25,843,690 25,235,464 Non-current liabilities: Non-current assets: Long-term loans 997,538 235,819 Long-term accounts receivable 177,452 157,600 Debentures payable 8,532,704 7,649,098 Long-term equity investments 136,161 108,350 Lease liabilities 413,418 N/A Other equity investments 98,911 91,559 Long-term accounts payable 29,883 25,106 Long-term employee benefits Investment property 3,852 4,094 719,474 620,646 payables Fixed assets 7,243,932 7,263,866 Provisions 129,251 132,351 Construction in progress 622,421 487,204 Deferred tax liabilities 367,861 392,404 Right-of-use assets 549,588 N/A Other non-current liabilities 416,790 199,930 Intangible assets 5,811,965 5,741,962 Total non-current liabilities 11,606,919 9,255,354 Goodwill 4,422,687 4,085,945 Total liabilities 22,824,799 21,390,201 Deferred tax assets 782,034 741,737 Owners’ equity: Other non-current assets 354,285 217,282 Share capital 2,446,554 2,446,554 Total non-current assets 20,203,288 18,899,599 Capital reserves 12,903,168 13,324,491 Total assets 46,046,978 44,135,063 Other comprehensive income 1,508,234 1,090,827 Special reserves 18,361 13,536 Surplus reserves 240,162 240,162 Retained earnings 6,105,700 5,629,292 Total owners’ equity 23,222,179 22,744,862 Total liabilities and owners’ 46,046,978 44,135,063 equity Legal representative: _______________ Chief of the accounting work: ____________Chief of the accounting organ: ____________ Chen Lichtenstein Aviram Lahav Aviram Lahav 13 ADAMA Ltd. Full Content of the Third Quarter Report 2019 2. Balance sheet of the Company Unit: RMB’000 Item September 30, 2019 December 31, 2018 Current Assets: Cash at bank and on hand 1,509,485 2,058,253 Accounts receivable 313,755 692,199 Receivables financing 50,780 19,917 Prepayments 33,560 10,500 Other receivables 16,139 31,748 Inventories 82,307 147,975 Other current assets 9,623 1,343 Total current assets 2,015,649 2,961,935 Non-current assets: Long-term equity investments 16,403,642 15,939,826 Other equity investments 86,059 80,119 Investment property 3,851 4,094 Fixed assets 914,742 1,012,674 Construction in progress 300,546 188,020 Right-of-use assets 505 N/A Intangible assets 171,477 174,997 Deferred tax assets 102,474 48,103 Other non-current assets 130,613 54,060 Total non-current assets 18,113,909 17,501,893 Total assets 20,129,558 20,463,828 Current liabilities: Short-term loans 100,000 20,000 Bills payables 82,165 209,700 Accounts payables 96,481 182,110 Contract liabilities 7,783 9,983 Employee benefits payable 25,334 25,758 Taxes payable 1,831 55,198 Other payables 207,272 187,762 Non-current liabilities due within one year 608 72,000 Total current liabilities 521,474 762,511 Non-current liabilities: Long-term loans 90,000 - Long-term employee benefits payables 97,704 100,144 Provisions 17,071 16,454 Other non-current liabilities 171,770 171,770 Total non-current liabilities 376,545 288,368 Total liabilities 898,019 1,050,879 Owners’ equity: Share capital 2,446,554 2,446,554 Capital reserves 15,463,245 15,414,429 Other comprehensive income 41,668 43,167 Special reserves 15,213 11,564 Surplus reserves 240,162 240,162 Retained earnings 1,024,697 1,257,073 Total owners’ equity 19,231,539 19,412,949 Total liabilities and owners’ equity 20,129,558 20,463,828 14 ADAMA Ltd. Full Content of the Third Quarter Report 2019 3. Consolidated income statement for the Reporting Period Unit: RMB’000 July-September, 2018 Item July-September, 2019 (Restated) 1. Total operating Income 6,666,043 6,288,379 Less: Cost of sales 4,584,191 4,288,856 Taxes and surcharges 18,495 17,462 Selling and Distribution expenses 1,164,638 1,144,625 General and Administrative expenses 274,247 211,973 Research and Development expenses 106,943 106,305 Financial expenses 564,934 314,106 Including: Interest expense 196,172 132,180 Interest income 23,000 18,407 Add: Investment income, net 47,386 208,759 Including: Income from investment in associates and joint ventures 944 992 Gain (loss) from changes in fair value 273,560 (101,297) Credit impairment loss (23,376) (7,999) Asset impairment loss (16,626) (19,345) Gain (loss) from disposal of assets 5,890 (928) 2. Operating profit 239,429 284,242 Add: Non-operating income 3,022 1,855 Less: Non-operating expense 9,486 5,302 3. Total profit 232,965 280,795 Less: income tax expense 26,870 60,079 4. Net profit 206,095 220,716 5.1 Classified by nature of operations 5.1.1 Continuing operations 206,095 220,716 5.1.2 Discontinued operations - - 5.2 Classified by ownership 5.2.1 Shareholders of the Company 206,095 220,716 5.2.2 Non-controlling interests - - 5. Other comprehensive income net of tax 535,389 706,766 Other comprehensive income net of tax attributable to shareholders of the Company 5.1 Items that will not be reclassified into profit/loss (29,628) (1,346) 5.1.1 Re-measurement of defined benefit plan liability (23,079) (1,346) 5.1.2 FV changes in other equity investment (6,549) - 5.2 Items that were or will be reclassified to profit or loss 565,017 708,112 5.2.1 Effective portion of gains or loss of cash flow hedge 120,790 7,607 5.2.2 Translation differences of foreign financial statements 444,227 700,505 6. Total comprehensive income for the period Attributable to shareholders of the Company 741,484 927,482 7. Earnings per share 7.1 Basic earnings per share (RMB/ share) 0.0842 0.0902 7.2 Diluted earnings per share (RMB/ share) N/A N/A For business combination under common control in the reporting period, net profit of the acquiree before the business combination was 0 thousand RMB; net profit of the acquiree in the comparative period (July-September, 2018) was 41,252 thousand RMB. Legal representative: _______________ Chief of the accounting work: ____________Chief of the accounting organ: ____________ Chen Lichtenstein Aviram Lahav Aviram Lahav 15 ADAMA Ltd. Full Content of the Third Quarter Report 2019 4. Income statement of the Company for the Reporting Period Unit: RMB’000 Item July-September, 2019 July-September, 2018 1. Operating income 395,343 760,590 Less: Cost of sales 286,894 468,749 Taxes and surcharges 1,625 2,323 Selling and Distribution expenses 12,885 30,248 General and Administrative expenses 97,658 43,487 Research and Development expenses 16,362 23,433 Financial expenses (income) (13,275) (23,294) Including: Interest expense 583 2,032 Interest income 6,439 6,061 Add: Investment income, net 2,583 - Credit impairment loss 376 (1,781) Asset Impairment loss (3,990) (401) 2. Operating profit (7,837) 213,462 Add: Non-operating income 25 - Less: Non-operating expense 50 844 3. Total profit (7,862) 212,618 Less: Income tax expense (50,591) 43,648 4. Net profit 42,729 168,970 4.1 Continuing operations 42,729 168,970 4.2 Discontinued operations - - 5. Other comprehensive income net of tax (6,549) (68) 5.1 Items that will not be reclassified into profit/loss (6,549) (68) 5.1.1 Re-measurement of defined benefit plan liability - (68) 5.1.3 FV changes in other equity investment (6,549) - 5.2 Items that were or will be reclassified to profit or loss - - 6. Total comprehensive income for the period 36,180 168,902 16 ADAMA Ltd. Full Content of the Third Quarter Report 2019 5. Consolidated income statement for the period from the year-beginning to the end of the Reporting Period Unit: RMB’000 January-September, 2018 Item January-September, 2019 (Restated) 1. Total operating Income 20,282,075 19,927,452 Less: Cost of sales 13,607,433 13,331,039 Taxes and surcharges 64,721 78,010 Selling and Distribution expenses 3,664,412 3,401,616 General and Administrative expenses 902,506 735,794 Research and Development expenses 317,642 262,580 Financial expenses: 1,503,130 661,660 Including: Interest expense 521,310 439,001 Interest income 64,534 59,872 Add: Investment income (loss), net (467,057) 355,812 Including: Income from investment in associates and joint ventures 22,668 13,750 Gain (loss) from changes in fair value 1,157,695 (344,673) Credit impairment loss (20,029) (14,096) Asset impairment loss (40,435) (57,128) Gain from disposal of assets 121,404 1,996,242 2. Operating profit 973,809 3,392,910 Add: Non-operating income 13,833 28,739 Less: Non-operating expense 25,502 14,129 3. Total profit 962,140 3,407,520 Less: income tax expense 167,407 797,637 4. Net profit 794,733 2,609,883 5.1 Classified by nature of operations 5.1.1 Continuing operations 794,733 2,609,883 5.1.2 Discontinued operations - - 5.2 Classified by ownership 5.2.1 Shareholders of the Company 794,733 2,609,883 5.2.2 Non-controlling interests - - 5. Other comprehensive income net of tax 421,918 1,212,127 Other comprehensive income net of tax attributable to shareholders of the Company 5.1 Items that will not be reclassified into profit/loss (34,045) 9,760 5.1.1 Re-measurement of defined benefit plan liability (37,057) 9,760 5.1.2 FV changes in other equity investment 3,012 - 5.2 Items that were or will be reclassified to profit or loss 455,963 1,202,367 5.2.1 Effective portion of gains or loss of cash flow hedge (31,203) 301,081 5.2.2 Translation differences of foreign financial 487,166 901,286 statements 6. Total comprehensive income for the period Attributable to shareholders of the Company 1,216,651 3,822,010 7. Earnings per share 7.1 Basic earnings per share (RMB/ share) 0.3248 1.0668 7.2 Diluted earnings per share (RMB/ share) N/A N/A For business combination under common control in the reporting period, net profit of the acquiree before the business combination was 38,027 thousand RMB; net profit of the acquiree in the comparative period (January-September, 2018) was 67,414 thousand RMB. Legal representative: _______________ Chief of the accounting work: ____________Chief of the accounting organ: ____________ Chen Lichtenstein Aviram Lahav Aviram Lahav 17 ADAMA Ltd. Full Content of the Third Quarter Report 2019 6. Income statement of the Company for the period from the year-beginning to the end of the Reporting Period Unit: RMB’000 Item January-September, 2019 January-September, 2018 1. Operating income 1,130,769 2,427,162 Less: Cost of sale 805,455 1,638,505 Taxes and surcharges 10,535 23,534 Selling and Distribution expenses 55,939 99,782 General and Administrative expenses 288,608 129,163 Research and Development expenses 40,826 25,863 Financial expenses: (14,529) (43,731) Including: Interest expense 2,642 6,950 Interest income 20,772 19,096 Add: Investment income (loss), net 2,583 - Credit impairment loss (1,257) (4,854) Asset Impairment loss (4,262) (1,306) 2. Operating profit (59,001) 547,886 Add: Non-operating income 4,455 428 Less: Non-operating expense 1,946 420 3. Total profit (56,492) 547,894 Less: Income tax expense (61,432) 96,542 4. Net profit 4,940 451,352 4.1 Continuing operations 4,940 451,352 4.2 Discontinued operations - - 5. Other comprehensive income net of tax (1,499) (459) 5.1 Items that will not be reclassified into profit/loss (1,499) (459) 5.1.1 Re-measurement of defined benefit plan liability (1,499) (459) 5.2 Items that were or will be reclassified to profit or loss - - 6. Total comprehensive income for the period 3,441 450,893 18 ADAMA Ltd. Full Content of the Third Quarter Report 2019 7. Consolidated cash flow statement for the period from the year-beginning to the end of the Reporting Period Unit: RMB’000 January-September, 2018 Item January-September, 2019 (Restated) 1. Cash flows from operating activities: Cash received from sale of goods and rendering of services 18,678,554 18,345,384 Refund of taxes and surcharges 50,825 12,072 Cash received relating to other operating activities 385,343 555,148 Sub-total of cash inflows from operating activities 19,114,722 18,912,604 Cash paid for goods and services 13,819,496 12,450,518 Cash paid to and on behalf of employees 2,589,280 2,475,360 Payments of taxes and surcharges 579,208 365,980 Cash paid relating to other operating activities 2,032,477 2,068,103 Sub-total of cash outflows from operating activities 19,020,461 17,359,961 Net cash flows from operating activities 94,261 1,552,643 2. Cash flows from investing activities: Cash received from disposal of investments 20,173 9,792 Cash received from returns of investments 7,763 - Net cash received from disposal of fixed assets, intangible assets and 182,089 2,444,906 other long-term assets Cash received from other investing activities 59,687 57 Sub-total of cash inflows from investing activities 269,712 2,454,755 Cash paid to acquire fixed assets, intangible assets and other long-term assets 1,090,047 2,967,239 Cash paid for acquisition of investments - 6,566 Net cash paid to acquire subsidiaries or other business units 826,805 13,213 Cash paid for other investing activities 15,177 14 Sub-total of cash outflows from investing activities 1,932,029 2,987,032 Net cash flows from investing activities (1,662,317) (532,277) 3. Cash flows from financing activities: Cash received from borrowings 2,668,024 621,453 Cash received relating to other financing activities 132,216 - Sub-total of cash inflows from financing activities 2,800,240 621,453 Cash repayment of borrowings 1,483,578 2,732,485 Cash payment for dividends, profit distributions or interest 706,890 490,563 Including: dividends paid to non-controlling interest 29,209 24,830 Cash paid relating to other financing activities 894,617 62,856 Sub-total of cash outflows from financing activities 3,085,085 3,285,904 Net cash flows from financing activities (284,845) (2,664,451) 4. Effect of foreign exchange rate changes on cash and cash equivalents 61,806 172,206 5. Net increase (decrease) in cash and cash equivalents (1,791,095) (1,471,879) Add: Cash and cash equivalents at the beginning of the period 6,346,196 7,979,502 6. Cash and cash equivalents at the end of the period 4,555,101 6,507,623 19 ADAMA Ltd. Full Content of the Third Quarter Report 2019 8. Cash flow statement of the Company for the period from the year-beginning to the end of the Reporting Period Unit: RMB’000 Item January-September, 2019 January-September, 2018 1. Cash flows from operating activities: Cash received from sale of goods and rendering of services 1,357,646 2,006,704 Refund of taxes and surcharges 25,691 12,981 Cash received relating to other operating activities 26,770 24,141 Sub-total of cash inflows from operating activities 1,410,107 2,043,826 Cash paid for goods and services 843,164 844,221 Cash paid to and on behalf of employees 138,028 134,483 Payments of taxes and surcharges 76,174 75,128 Cash paid relating to other operating activities 133,914 126,968 Sub-total of cash outflows from operating activities 1,191,280 1,180,800 Net cash flows from operating activities 218,827 863,026 2. Cash flows from investing activities: Cash received from returns of investments 4,391 - Net cash received from disposal of fixed assets, intangible assets and other long-term assets - - Sub-total of cash inflows from investing activities 4,391 - Cash paid for acquisition of investments 415,000 - Cash paid to acquire fixed assets, intangible assets and other long-term assets 214,548 72,571 Sub-total of cash outflows from investing activities 629,548 72,571 Net cash flows from investing activities (625,157) (72,571) 3. Cash flows from financing activities: Cash received from borrowings 190,000 20,000 Cash received relating to other financing activities 39,886 - Sub-total of cash inflows from financing activities 229,886 20,000 Cash repayment of borrowings 92,000 116,590 Cash payment for dividends, profit distributions or interest 240,028 161,188 Cash paid relating to other financing activities 8,836 454,551 Sub-total of cash outflows from financing activities 340,864 732,329 Net cash flows from financing activities (110,978) (712,329) 4. Effect of foreign exchange rate changes on cash and cash equivalents (184) (8,829) 5. Net increase (decrease) in cash and cash equivalents (517,492) 69,297 Add: cash and cash equivalents at the beginning of the period 2,005,313 1,864,003 6. Cash and cash equivalents the end of the period 1,487,821 1,933,300 20 ADAMA Ltd. Full Content of the Third Quarter Report 2019 II. Adjustments of the financial statements 1. Opening balance adjustments due to adoption of new accounting standards for financial instruments, revenue and leases √ Applicable □ Not applicable Summary of impacts to assets and liabilities from adoption of new lease standard, as at January 1, 2019: Unit: RMB’000 December 31, Impact from adoption of January 1, Items 2018 new leases standard 2019 Fixed assets 7,263,866 (6,917) 7,256,949 Right-of-use assets N/A 513,780 513,780 Total non-current assets 18,899,599 506,863 19,406,462 Total assets 44,135,063 506,863 44,641,926 Non-current liabilities due within one year 301,814 120,584 422,398 Other payables 1,197,579 (4,327) 1,193,252 Total current liabilities 12,134,847 116,257 12,251,104 Lease liabilities N/A 390,606 390,606 Total non-current liabilities 9,255,354 390,606 9,645,960 Total liabilities 21,390,201 506,863 21,897,064 2. Retrospective adjustments due to adoption of new accounting standards for financial instruments, revenue and leases □ Applicable √ Not applicable III. Auditor’s report Is this Report audited? □ Yes √ No This Report is unaudited. ADAMA Ltd. October 31, 2019 21