Dear Shareholders,

Thank you for the trust and support you have given Dachan Food throughout the challenging year of 2025. It is this trust that has empowered us to steadfastly pursue transformation and advance steadily amid a complex environment.

Over the past year, the global economy has continued to face mounting pressure under multiple factors: recurring geopolitical conflicts, rising trade protectionism, and transition of the world economy into a low-growth cycle. Domestically, insufficient effective demand has coexisted with overcapacity in certain industries. The mutual impact of corporate operating pressure and subdued consumer confidence placed the recovery process under strain. The timely introduction of national policies to stabilize growth and stimulate consumption has renewed market confidence and provided policy support for industry transformation.

In the white feather broiler industry, the imbalance between supply and demand has been particularly pronounced. In recent years, the expansion on the supply side has far outpaced the growth in demand, which has intensified homogeneous competition, squeezed the profit margin along the industrial chain and placed sustained pressure on industry players.

Confronted with this complex environment intertwined with internal and external challenges, we chose not to wait passively for a cyclical rebound. Instead, we made a firm decision to unlock long-term development momentum through business model transformation. We deeply understand that only by strengthening our fundamentals and strengthening our internal capabilities can we build sustainable competitiveness during cyclical fluctuations. We pressed ahead with a strategic shift led by the food business, and continuously optimized the business structure and operation model. Firstly, we further optimized our business model, rebuilt our supply chain system around customer needs, and steadily improved our relative competitiveness by reducing costs and increasing efficiency through refined management. Secondly, we focused on the adjustment of our industrial chain layout, increasing our investments in the expansion of processed food production capacity, research and development of core technologies, optimization of the end-to-end supply chain and precise marketing strategies, while moderately reducing the resource allocation to broiler breeding, slaughtering and feed processing segments – thereby strengthening a growth engine led by processed food. Thirdly, we promoted strategy implementation and organizational capability upgrades, integrating business model transformation with holistic enhancements in organization, systems, talent and culture, to ensure that all strategies can be effectively implemented.

Encouragingly, our transformation efforts have begun to bear fruit in the second half of the year. In the second half of 2025, the Company successfully reversed the losses recorded in the first half of the year and returned to profits, demonstrating operational resilience and recovery momentum. In particular, the processed food segment has continued to serve as a “ballast stone” – in the fourth quarter, the operating income and gross profit of the food business increased by 13% and 17% year-on year, respectively, accounting for 76% of the Company’s gross profit, and has become the most stable profit source and core growth engine of the Group.

RESHAPING THE INDUSTRIAL CHAIN COMPETITIVENESS WITH FOOD AS THE CORE

We recognize that extending deeper into downstream food processing is essential to effectively mitigate cyclical fluctuations in the poultry industry chain and establish a sustainable profit model. Therefore, we continued to increase investments in food production capacity, research and development and supply chain enhancement while moderately reducing resource allocation in breeding and slaughter operations, supporting our business model transformation from “production-driven” to “customer demand-driven.” In 2025, we further solidified the two major food base layouts centered in Bengbu (in the Yangtze River Delta region) and Dalian (in the Northeast region) and continued to advance planning and construction of the Phase III intelligent food plant in Bengbu to meet the rising market demand for higher value-added chicken products through large-scale and intelligent production. Meanwhile, we deepened the “sales-driven production” supply chain model and stimulated upstream production by downstream orders to enhance responsiveness and cost controllability across the entire chain.

CHANNEL SPECIALIZATION AND SCENARIOBASED PRODUCT DEVELOPMENT TO BUILD DIFFERENTIATED ADVANTAGES