Final Results

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ASIAN CITRUS HOLDINGS LIMITED

亞洲果業控股有限公司*

(Incorporated in Bermuda with limited liability)

(Stock Code: HKSE: 73; AIM: ACHL)

ANNOUNCEMENT OF THE ANNUAL RESULTS

FoR THE YEAR ENDED 30 JUNE 2014

The board of directors (the "Board") of Asian Citrus Holdings Limited (the "Company" or "Asian Citrus") announces the audited consolidated results of the Company and its subsidiaries (collectively, the "Group") for the year ended 30 June 2014 together with its comparative figures for the year ended 30 June 2013.

Results Highlights

** Conversion at £1 = RMB10.56 and RMB9.36 for the years ended 30 June 2014and 2013 respectively (for reference only).

# Adjusted core financial information refers to activities for the year excluding change in the carrying value of goodwill, change in fair value of biological assets and share-based payments.

RESULTS HIGHLIGHTS

l Results for the year are as anticipated:

- Total orange production yield decreased by 9.7% to 197,467 tonnes (2013: 218,600 tonnes) due to the replanting programme in Hepu Plantation; the production yield not yet returning to volumes reported prior to the citrus canker; the impact of frosts in Hepu in early 2014 and the inclement weather and persistent heavy rainfall in Xinfeng Plantation.

- Revenue down by 14.4% to RMB1,271.2million (2013: RMB1,485.9million).

- Adjusted core loss attributable to shareholders down by 113.0% to RMB51.8 million (2013: adjusted core profit attributable to shareholders of RMB399.6 million) reflecting the reduction in production yield of the orange crop and higher direct costs as a result of inclement weather; the decrease in the average selling prices of both oranges and processed fruit; and the loss relating to damage caused by Typhoon Rammasun.

- Net operating activities cash inflow of RMB33.4 million (2013: RMB560.3 million) and cash and cash equivalents of RMB1,804.7 million as at 30 June2014 (2013: RMB2,141.2million).

l The construction of the third plantation in Hunan was completed. 422,160 grapefruit trees were planted during the year and a further 26,960grapefruit trees were planted in July 2014.

l In view of the Group's net loss for the year, the Board does not recommend the payment of any dividend for the year ended 30 June 2014 (2013: RMB0.10 per share, which included the final dividend of RMB0.05, interim dividend of RMB0.03 and special dividend of RMB0.02). The Group is taking a prudent approach in managing its capital and reserves to maintain the appropriate financial position and ensure sufficient funds are available to develop new products and growth opportunities, including through R&D and restructuring projects.

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CHIEF EXECUTIVE OFFICER'S STATEMENT

It is my pleasure to present the annual results of the Group. Looking back on my first six months as the Chief Executive Officer, it is clear that the Group faced numerous challenges in the year ended 30 June 2014. Whilst many of the challenges are of a temporary nature, they still take time to address. Accordingly, we have implemented new long-term and short-term strategic plans that we believe will restore the profitability of the Group through new sales initiatives as well as reducing costs.

Post the financial year end, Typhoon Rammasun (the "Typhoon") destroyed all banana trees planted in 2013, damaged certain farmland infrastructure and equipment and caused a significant volume of pre-mature fruit drop from existing oranges trees in Hepu Plantation and the temporary suspension of activities at two of BPG's plants. Approximately 220,000 banana trees are being replanted, following clearance of the damage caused by the Typhoon, with an expected harvest by the end of 2015. However, it will take a number of years for Hepu Plantation and harvests to fully recover. We nevertheless remain confident that the Group's performance will improve under our strong management team's leadership.

FINANCIAL HIGHLIGHTS

For the year ended 30 June 2014, the Group's total revenue decreased by 14.4% to RMB1,271.2 million (2013: RMB1,485.9 million). Adjusted core loss attributable to shareholders for the year (before the change in the carrying value of goodwill, change in fair value of biological assets and share-based payments) declined by 113% to RMB51.8 million (2013: adjusted core net profit RMB399.6 million), primarily reflecting the reduction in production yield and higher direct costs as a result of inclement weather; the decrease in average selling prices of both oranges and processed fruit; and the loss relating to damage caused by the Typhoon as highlighted in the Company's announcement to the market on 11 August 2014.

The Group recorded impairment losses of RMB853.4 million and RMB923.9 million from the change in the carrying value of goodwill and change in fair value of biological assets respectively during the year ended 30 June 2014. It is however worth noting that the change in the carrying value of goodwill and change in fair value of biological assets are non-operational and have no effect on the cash flow for the Group.

After taking into account the non-cash items of the change in the carrying value of goodwill, change in fair value of biological assets and share-based payments, the net loss attributable to shareholders for the year was RMB1,839.2 million (2013: net profit attributable to shareholders of RMB114.4 million).

OPERATIONAL REVIEW

The Group's three plantations in mainland China occupy a total area of approximately 103 square kilometres with two currently in operation: Hepu Plantation in Guangxi Zhuang Autonomous Region ("Guangxi") and Xinfeng Plantation in Jiangxi Province. Production at the third plantation in Hunan Province, Hunan Plantation, is delayed due to the impact of frosts but is scheduled to begin in 2016.

For the year ended 30 June 2014, the production yield at Hepu Plantation decreased by 17.7% to 74,239 tonnes (2013: 90,205 tonnes). The decreased production was mainly due to the replanting programme to replace the existing winter orange trees; the production yield not yet returning to volumes reported prior to the citrus canker; and the impact of frosts in Hepu in early 2014. The gross profit margin for Hepu Plantation fell from 43.0% last year to 12.8%, as a result of a decreased average selling price of 3.2% compared with last year, as well as increased direct costs incurred as a result of the inclement weather.

The production yield for the year ended 30 June 2014 at Xinfeng Plantation decreased by 4% to 123,228 tonnes (2013: 128,395 tonnes). The gross profit margin for Xinfeng Plantation decreased from 33.4% last year to 2.9%. The costs of maintaining the trees and plantation are fixed and when applied against a lower turnover this severely impacted the gross profit margin. This was further affected by (i) the persistent heavy rainfall, which not only negatively affected the growth of the winter orange crop but also caused some leaching of soil nutrients in Xinfeng Plantation, resulting in a higher volumes of fertilisers and pesticides being consumed in order to maintain output levels, and (ii) dyed oranges being sold by other individual suppliers in the Gannan areas which negatively impacted the selling prices of Xinfeng Plantation winter orange crop, resulting in a 16.9% decrease compared to last year.

Through our 92.94% equity interest in Beihai BPG, we also operate two fruit processing plants in Beihai City and Hepu County in Guangxi, covering a total site area of nearly 110,000 square metres, and have an annual production capacity of around 60,000 tonnes.

The Group will start to increase the overall production capacity with a third plant in Baise City, Guangxi, which commenced operations in 2014, after successfully completing trial productions. It normally takes between three to five years for a new plant to achieve full capacity, and therefore, it is expected that the utilisation rate of the new plant in the coming year will not be as high as the two existing plants.

STRATEGIC OVERVIEW

We are currently evaluating a number of accelerated strategies to streamline and restructure multiple aspects of our supply chain, including methods of reducing costs of pesticides and fertilisers, exploring new export opportunities, and changing the product mix in order to improve margins. Although the Group incurred increased costs due to adverse weather during the year, we are developing advanced management systems and cost reduction plans in order to mitigate the effect of future adverse weather events.

We have also been collaborating with renowned specialists and scientists, who visited our three plantations during the year. They have been instrumental in providing advice on production and product improvements as well as innovation in harvesting methods. We are also combining our efforts in finding innovative ways to recover our products from citrus canker. Separately, our current R&D effort is focusing on improving quality by means of size, i.e. larger citruses, and taste, which should lead to premium pricing of our products in both the current market as well as new potential export markets.

Furthermore, we have been putting a great deal of effort into our international networks in order to assess potential new market entries in premium growth regions. This will subsequently allow us to charge premium prices for our products. New sales initiatives within our current markets will also be a cornerstone of our strategy for the upcoming years.

CORPORATE GOVERNANCE

During the year, there were a number of changes to our management and the composition of the Company's Board. On behalf of the Board, I would like to express my appreciation to Mr. Tong Wang Chow, Hon Peregrine Moncreiffe and Mr. Ma Chiu Cheung, Andrew for their valuable contributions over the years. I would also like to welcome and congratulate Mr. Ng Hoi Yue, Mr. Tong Hung Wai, Tommy, Mr. Chung Koon Yan, Mr. Ho Wai Leung and Mr. Ng Cheuk Lun to their new positions in the Company.

With the changes to the Board's composition, five of the board members (over half) are independent non-executive directors and the roles of chairman and chief executive are now performed by separate individuals, in accordance with the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and reflects our commitment to good corporate governance.

DIVIDENDS

Our existing dividend policy stipulates a dividend of not less than 30% on our adjusted core net profit. However, in view of the Group's net loss in the current reporting year, the Board is recommending that no dividend is paid in respect of the year ended 30 June 2014, with the intention of recommending dividend payments when adjusted core net profit improves.

The Group is taking a prudent approach in managing its capital and reserves, in order to maintain the appropriate financial position and ensure sufficient funds are available to develop new products and growth opportunities, including through R&D and restructuring projects.

Finally, on behalf of the Board, I would like to take this opportunity to thank the whole team for their hard work and enthusiasm over the last year. Although I only accepted this position in March this year, it is already clear to me that, with their continued drive and determination, we can continue to deliver for our customers, our communities and our shareholders, building a bigger and better business for the years to come.

Ng Ong Nee

Chief Executive Officer

26 September 2014

MANAGEMENT DISCUSSION AND ANALYSIS

OPERATING PERFORMANCE

Revenue

The breakdown of revenue by type is as follows:

Sales of oranges

Revenue from sales of oranges decreased by approximately 20.3% to RMB732.8 million for the year ended 30 June 2014. This was mainly due to a decrease of approximately 9.7% in the production yield to 197,467tonnes (2013: 218,600 tonnes) and approximately 11.8% decrease in average selling price.

The production yield from Hepu Plantation decreased by approximately 17.7% from 90,205 tonnes last year to 74,239 tonnes for the year ended 30 June 2014. The decreased production was mainly due to the replanting programme to replace the existing winter orange trees in the last year; the production yield not yet returning to volumes reported prior to the citrus canker; and the impact of frosts in Hepu in early 2014.

The production yield from Xinfeng Plantation decreased by approximately 4% from 128,395 tonnes last year to 123,228 tonnes for the year ended 30 June 2014, due to the inclement weather and persistent heavy rainfall, which not only negatively affected the growth of the winter orange crop but also resulted in the leaching of nutrients from the soil in Xinfeng Plantation. As a result of the poor growth and leaching, higher volumes of fertilisers and pesticides were consumed during the year in order to maintain output levels.

The following table sets out the average selling prices of oranges in different plantations:

The average selling prices of the winter orange crop in both Hepu Plantation and Xinfeng Plantation decreased by approximately 3.7% and 16.9% respectively for the year ended 30 June 2014. This was mainly due to an increase in overall market supply of winter oranges in the Gannan areas (where Xinfeng Plantation is located) and an increase in the average maturity yield of orange trees reaching the peak level across the region. Additionally, local media reported that dyed oranges were sold in the Gannan areas, an incident which was unrelated to Asian Citrus. This negatively affected customer confidence in the domestic orange market as a whole and, in particular, the oranges from Jiangxi province.

The average selling price of the summer orange crop in Hepu Plantation decreased by approximately 4.4% for the year ended 30 June 2014. This was mainly due to the adverse impact on the yield of high quality oranges suffered from frosting weather early in 2014 at Hepu County, which decreased the sales volume of graded oranges to supermarkets, thereby reducing the average selling price.

All of the Group's oranges were sold on the domesticmarket. The Group's customers can be divided into three categories, namely supermarket chains, corporate customers and wholesale customers. The breakdown of sales by type of customer is as follows:

For the year ended 30 June 2014, the volume and revenue from supermarket chains represented approximately 20.4% and 24.2% respectively of the total for the Group, compared to approximately 23.7% and 27.9% respectively for the year ended 30 June 2013; this percentage decrease reflects the inclement weather's disproportionate impact on the yield of graded oranges in 2014.

For Hepu Plantation and Xinfeng Plantation, the volume sold to supermarkets was 18,860 tonnes and 21,434 tonnes respectively for the year ended 30 June 2014 (2013: 24,907 tonnes and 26,901 tonnes).

The Group sells two types of oranges to customers, namely ungraded oranges and graded oranges. Ungraded oranges are packaged and customers are required to arrange for the transportation at their own expense. Generally, ungraded oranges are sold to wholesale customers. Graded oranges are oranges that the Group grades, packages and delivers to the customers at the Group's cost, usually to supermarket chains and some corporate customers. The graded oranges are branded under our label "Royal Star", at a premium price compared to the ungraded oranges. The sales breakdown of the types of orangesis as follows:

Sales of processed fruit

The below table sets out the volume and revenue from the sales of processed fruit:

The Group has three fruit processing plants in the People's Republic of China (the "PRC"), which are located in Beihai City, Hepu County and Baise City, Guangxi ("BPG"). BPG processes over 22 different types of tropical fruit, including pineapples, passion fruit, lychees, mangoes and papayas (only products that account for over 10% of the revenue from the sales of processed fruit are shown in the table above).

Revenue from the sales of processed fruit decreased by approximately 4.7% to approximately RMB537.5 million for the year ended 30 June 2014, mainly due to (i) a decrease in fruit juice trading; (ii) a decrease in sales of pineapple juice concentrates; and (iii) a decrease in the selling price of these products as a result of competitive market.

The average utilisation rate of the BPG was approximately 86.2% for the year ended 30 June 2014.

BPG currently generates most of its sales from the PRC market, with key customers being beverage mixers supplying major beverage groups.

Sales of self-bred saplings

For the year ended 30 June 2014, approximately RMB892,000was generated from the sales of 74,334 self-bred saplings to local farmers.

Cost of sales

The breakdown of the Group's cost of sales is as follows:

Cost of sales of oranges consists of raw materials such as fertilisers, packaging materials, pesticides and other direct costs such as direct labour, depreciation and production overheads. The cost of sales of oranges increased by approximately 18.6% from approximately RMB569.8 million to RMB676.0 million. The increase in cost of sales was mainly due to the increase in consumption of both fertilisers and pesticides to minimise further damage from the inclement weather and persistent heavy rainfall in order to maintain output levels and higher labour costs incurred due to general wage inflation in the PRC. Consequently, the unit cost of production in Hepu Plantation and Xinfeng Plantation increased to approximately RMB4.20 and RMB2.96 per kg respectively for the year ended 30 June 2014 (2013: RMB2.84 per kg and RMB2.44 per kg respectively).

Cost of sales of processed fruit mainly includes the costs of raw material fruit and packaging materials and other direct costs such as direct labour and production overheads. For the year ended 30 June 2014, the cost of sales of processed fruit increased by approximately 9.9% from approximately RMB417.2 million to RMB458.4 million. This was mainly due to the increase in the cost of raw material as a result of limited supplies.

Gross profit

The Group's overall gross profit decreased by approximately 73.1% to approximately RMB133.9 million for the year ended 30 June 2014 (2013: RMB497.6 million). The overall gross profit margin decreased from approximately 33.5% to 10.5% for the year ended 30 June 2014.

The following table sets out a breakdown of the Group's gross profit margin by plantation:

The decrease in gross profit margin was mainly due to (i) the average selling prices of the orange crop in Hepu Plantation and Xinfeng Plantation dropping by approximately 3.2% and 16.9% respectively; (ii) the cost of sales of oranges increased by approximately 18.6%, reflecting the increase in consumption of both fertilisers and pesticides to minimise further damage from the inclement weather and persistent heavy rainfall in order to maintain output levels; and (iii) higher labour costs incurred due to general wage inflation in the PRC.

The following table sets out a breakdown of the Group's gross profit margin by business:

For BPG, the normalised gross profit margin for the year ended 30 June 2014 decreased to approximately 14.7% compared to 26.0% in the last year. It was mainly due to (i) the decrease in selling price; (ii) the increase in cost of raw materials due to limited supplies; and (iii) higher labour costs incurred.

Change in fair value of biological assets

The Group recognised a loss of RMB923.9 million from an adjustment in the fair value of biological assets for the year ended 30 June 2014, compared to a loss of RMB260.5 million in last year. The loss was mainly due to the decrease in production yield, higher cost of sales, the decrease in the market prices of both winter and summer oranges and the post year-end effect of Typhoon Rammasun (the "Typhoon"). The Board wishes to emphasise that the change in fair value of biological assets is non-operational and does not have any effect on the cash flow of the Group for the year ended 30 June 2014.

Selling and distribution expenses

Selling and distribution expenses comprise mainly of advertising, staff commission, salaries and welfare of sales personnel, traveling and transportation expenses. The selling and distribution expenses of the Group were broadly in line with last year at approximately RMB45.3 million for the year ended 30 June 2014 (2013: RMB45.6 million).

General and administrative expenses

General and administrative expenses comprise mainly of salaries, office administration expenses, depreciation, amortisation, and research costs. The general and administrative expenses of the Group increased by 19.5% from approximately RMB120.1 million last year to approximately RMB143.5 million for the year ended 30 June 2014. The increase included the loss on disposal of plant and machinery and written off of inventories for the year.

Other operating expenses

The Group recorded impairment losses of approximately RMB895.2 million on certain assets for the year ended 30 June 2014 (2013: Nil), which included:

Impairment losses relating to damage caused by the Typhoon

Impairment losses of approximately RMB36 million were provided relating to damage caused by the Typhoon, which was the largest typhoon to hit South China in 41 years. The Typhoon landed in Guangxi, where Hepu Plantation is located, in July 2014. The Typhoon (i) destroyed all banana trees, and as a result there was no harvest in September 2014; (ii) damaged certain farmland infrastructure, machinery and buildings such as windbreaks, greenhouse facilities, high and low voltage wires at Hepu Plantation and BPG; and (iii) caused BPG to temporarily suspend the activities of its two production plants, as a result of the suspension of electricity supply. Consequently, some inventories such as raw material were not used for the purposes for which they were originally acquired.

Change in the carrying value of goodwill

An impairment loss of approximately RMB853.4 million was provided for the change in the carrying value of goodwill (arising initially from the acquisition of Beihai BPG in November 2010 for a consideration of approximately HK$2.31 billion (equivalent to approximately RMB1.97 billion)), according to a comparison of the carrying value of goodwill as at 30 June 2014 and the recoverable amount assessed based on the current business and operating environment of Beihai BPG. The Board wishes to emphasise that the change in carrying value of goodwill is non-operational and does not have any effect on the cash flow of the Group for the year ended 30 June 2014.

Impairment loss on a project related to properties for sale

An impairment loss of approximately RMB5.8 million was provided on a project related to properties for sale in relation to the second phase of the agricultural wholesalers' market and orange processing centre, which is located in the Xinfeng County Zhongduan Industrial Park.

Loss for the year

The loss for the yearended 30 June 2014 was approximately RMB1,836.4million, compared to a profit of approximately RMB124.7 million in last year, representing a decrease of approximately 15.7 times.

The adjusted core loss, which refers to the loss for the yearexcluding the change in carrying value of goodwill, change in fair value of biological assetsand share-based payments for the year ended 30 June 2014 was approximately RMB49.1 million, compared to the adjusted core profit of approximately RMB409.8 million in last year, representing a decrease of approximately 112.0%.

DIVIDENDS

In view of the Group's net loss for the year, the Board does not recommend the payment of any dividend for the year ended 30 June 2014 (2013: RMB0.10 per ordinary share, which included the final dividend of RMB0.05, interim dividend of RMB0.03 and special dividend of RMB0.02).

The Group is taking a prudent approach in managing its capital and reserves, in order to maintain the appropriate financial position and ensure sufficient funds are available to develop new products and growth opportunities, including through R&D and restructuring projects.

The production yield of winter oranges decreased by 8.3% to 147,927 tonnes for the year ended 30 June 2014. The production yield of winter oranges in Hepu Plantation decreased by 24.8% from 32,838 tonnes last year to 24,699 tonnes this year, due to the replanting programme to replace the existing winter orange trees. In the previous year, 48,058 winter orange trees were removed and replanted with approximately 221,769 banana trees. The production yield of winter oranges in Xinfeng Plantation decreased by 4% from 128,395 tonnes last year to 123,228 tonnes this year, due to the inclement weather and persistent heavy rainfall, which not only affected the growth of the winter orange crop but also resulted in the leaching of nutrients from the soil in Xinfeng Plantation. Higher volumes of fertilisers and pesticides were consumed during the year in order to maintain output levels.

The production yield of summer oranges in Hepu Plantation decreased by 13.6% from 57,367 tonnes last year to 49,540 tonnes this year, due to the fact that production yield has not yet returned to volumes reported prior to the citrus canker, and production was also negatively impacted by frosts in Hepu in early 2014.

Unfortunately, the Typhoon destroyed all banana trees, and as a result there was no harvest in September 2014. The Typhoon also caused a significant volume of pre-mature fruit drop from existing oranges trees in Hepu Plantation, which will result in decreased production yield in particular for the upcoming winter and summer oranges in the financial year of 2015.

CAPITAL STRUCTURE

As at 30 June 2014there were 1,249,637,884 shares in issue. Based on the closing price of HK$1.74 as at 28 June2014, the market capitalisation of the Company was approximately HK$2,174.4 million (GBP165.0million).

HUMAN RESOURCES

There were a total of 1,746employees (excluding directors) of the Group as at 30 June 2014 (2013: 1,697 employees), staff costs for the year ended 30 June 2014 were approximately RMB143.0 million (2013: RMB131.4 million). The Group aims to attract, retain and motivate high calibre individuals with competitive remuneration packages. Remuneration packages are performance-linked and business performance, market practices and competitive market conditions are all taken into considerationin calculating remuneration. Remuneration packages, which are reviewed annually, include salaries/wages and other employee benefits, such as discretionary bonuses, mandatory provident fund contributions and share options.

Liquidity

The current ratio and quick ratio were 21.84 and 19.18respectively. The liquidity of the Group hasremained healthy with sufficient reserves for both current operational and future development.

Profitability

The asset turnover of the Group was approximately 0.20 (2013: 0.18) for the year ended 30 June 2014. The ratio has remained stable when compared to last year due to a decrease in revenue offset by a decrease in total assets as detailed previously.

The basic loss per share for the year ended 30 June 2014 was approximately RMB1.48(2013: basic earnings per share of RMB0.09). This was mainly due to an increase in loss attributable to shareholders for the year.

The adjusted core net lossper share for the year ended 30 June 2014 was approximately RMB0.04 (2013: adjusted core net profit per share of RMB0.33), representing a decrease of approximately 112.1%.

Debt ratio

The net cash position of the Group was approximately RMB1,804.7million at 30 June 2014 (2013: RMB2,141.2 million).

Internal cash resource

The Group's funding resource is internal cash and cash equivalents. The Group did not have any outstanding borrowings as at 30 June 2014.

Charge on assets and contingent liabilities

None of the Group's assets were pledged and the Group did not have any material contingent liabilities as at 30 June 2014.

Capital Commitments

As at 30 June 2014, the Group had capital commitments of approximately RMB9.7million, mainly in relation to the construction of the farmland infrastructure in Hepu Plantation, Hunan Plantationand the acquisition of plant and machinery in BPG.

Foreign exchange risk

The Group is exposed to currency risk, primarily through its cash and cash equivalents that are denominated in a currency other than the functional currency of the operation to which they related. The currencies giving rise to this risk are primarily Hong Kong dollars, United States dollars and British pounds.

The Group has limitedtransactions denominated in foreign currencies, hence exposures to exchange rate fluctuation is minimal. The Group currently does not use any derivative contracts to hedge against its exposure to currency risk. Management manages its currency risk by closely monitoring the movement of the foreign currency rate. 

PLANTATIONS

The Group has three orange plantations in the PRC occupying approximately 155,000 mu (equivalent to approximately 103.3 sq.km.) of land in total, with approximately 46,000 mu (equivalent to approximately 30.7 sq.km.) located in the Hepu County of the Guangxi Zhuang Autonomous Region, Hepu Plantation, approximately 56,000 mu (equivalent to approximately 37.3 sq.km.) in the Xinfeng County of the Jiangxi province, Xinfeng Plantation, and approximately 53,000mu (equivalent to approximately 35.3 sq.km.) in the Dao County of the Hunan province, Hunan Plantation.

Hepu Plantation

Hepu Plantation is fully planted and comprises approximately 1.2 million orange trees. The last batch of 48,058 winter orange trees was removed according to the replanting programme and we commenced a trial planting of banana trees in the same area for product diversification. A total of 221,769 banana trees were planted in August 2013. There was no harvest in September 2014 as all banana trees were destroyed by the Typhoon in July 2014.

Xinfeng Plantation

Xinfeng Plantation is fully planted and comprises 1.6 million winter orange trees.

Hunan Plantation

Hunan Plantation is under development and comprises approximately 1.05 million summer orange trees and approximately 723,360 grapefruit trees as at 30 June 2014. A further 26,960 grapefruit trees were planted in July 2014. At that time, the construction of Hunan Planation was completed. The first harvest of oranges is expected in 2016.

The below tables set out the age profile as at 30 June 2014 and the production yield of the plantations for the year ended 30 June 2014:

Summer orange trees

Grapefruit trees

Note: Grapefruit is a type of citrus fruit and is harvested during the winter period in the PRC.

Winter orange trees

The below tables set out the age profile as at 30 June 2013 and the production volume of the plantations for the year ended 30 June 2013:

Summer orange trees

Grapefruit trees

Note: Grapefruit is a type of citrus fruit and is harvested during the winter period in the PRC.

Winter orange trees

Note: 24,937 winter orange trees (age: 16), 10,133 winter orange trees (age: 17) and 12,988 winter orange trees (age: 18) were removed during the year ended 30 June 2013.

VALUATION OF BIOLOGICAL ASSETS

The Group engaged an independent valuer to perform a valuation on the fair value of the orange trees less costs to sell as at 30 June 2014.

The valuations of the Group's orange trees were conducted on the basis of discounted cash flow. The discount rate being applied to the discounted cash flow model is based on Capital Asset Pricing Model. The independent valuer began with the appraised value of the Group's orange trees by discounting the future income streams attributable to the Group's orange trees to arrive at a present value and then deducted the tangible assets (including plantation related machinery and equipment and land improvements) from the appraised value which are employed in the operation of the Group's plantations to arrive at a fair value of the biological assets.

Major assumptions

The discounted cash flow method adopted a number of key assumptions, which include the discount rate, market prices of oranges, production yield per tree, related production costs, etc. The values of such variables are determined by the independent valuer using information supplied by the Group, as well as proprietary and third-party data, as follows:

1) The discount rate applied for the year ended 30 June 2014 was 18.0% (2013: 18.0%). The discount rate reflected the expected market return on the asset and can be affected by the interest rate, market sentiments and risk of the asset versus the general market risk.

2) The yield per tree variables represent the harvest level of the orange trees. The yield of orange trees is affected by the age, species and health of the orange trees, the climate, location, soil conditions, topography and infrastructure. In general, yield per tree increases from age 3 to 15, remains stable for about 10 years, and then starts to decline from age 25 to 35.

3) The market prices variables represent the assumed market price for the summer oranges and winter oranges produced by the Group. The independent valuer adopted the market sales prices prevailing as at the relevant reporting date for each type of orange produced by the Group as the sales price estimate. For the year ended 30 June 2014, the wholesale prices per tonne of winter and summer oranges from Hepu Plantation and winter oranges from Xinfeng Plantation adopted were RMB3,270, RMB5,150 and RMB3,110, respectively; the supermarket selling prices per tonne of winter and summer oranges from Hepu Plantation and winter oranges from Xinfeng Plantation adopted were RMB5,320, RMB7,030 and RMB5,180, respectively. For the year ended 30 June 2013, the selling prices per tonne of winter and summer oranges from Hepu Plantation and winter oranges from Xinfeng Plantation adopted were RMB3,320, RMB5,220 and RMB3,740, respectively.

4) The cost of sales variables represent the direct costs necessary to bring the oranges to their sales form, which mainly include raw material costs and direct labour costs. The cost of sales variables are determined by reference to actual costs incurred for areas that have been previously harvested and cost information for comparable areas with regards to areas that have not been harvested previously.

Sensitivity analysis

1) Changes in the discount rate applied result in significant fluctuations in the changes in fair value of orange trees less costs to sell. The following table illustrates the sensitivity of the Group's net change in fair value of orange trees less costs to sell to an increase or decrease of 1.0% in the discount rate of 18.0% applied by the independent valuer for the year ended 30 June 2014:

2) Changes in the yield per orange tree can also result in significant fluctuations in the changes in fair value of orange trees less costs to sell. The following table illustrates the sensitivity of the Group's net change in fair value of orange trees less costs to sell to a 5.0% increase or decrease in the yield per tree applied for the year ended 30 June 2014:

3) Changes in assumed market prices of the oranges can also result in significant fluctuations in the changes in fair value of orange trees less costs to sell. The following table illustrates the sensitivity of the Group's net change in fair value of orange trees less costs to sell to a 5.0% increase or decrease in the assumed market prices of oranges as at 30 June 2014 used to calculate the changes in fair value of orange trees less costs to sell for the year ended 30 June 2014:

4) Changes in the assumed cost of sales can also result in significant fluctuations in the changes in fair value of orange trees less costs to sell. The following table illustrates the sensitivity of the Group's net change in fair value of orange trees less costs to sell to a 5.0% increase or decrease in the Group's assumed cost of sales used to calculate the changes in fair value of orange trees less costs to sell for the year ended 30 June 2014:

The above sensitivity analyses are intended for illustrative purposes only, and any variation could exceed the amounts shown above.

Valuation

According to the valuation report of the independent valuer, the aggregate value of the orange trees in Hepu Plantation and Xinfeng Plantation as at 30 June 2014 was estimated to be approximately RMB1,080 million (2013: RMB1,983 million).

CONSOLIDATED STATEMENT OF PROFIT OR LOSS

For the year ended 30 June 2014