Half Yearly Report

Asian Citrus Holdings Limited

Interim Results for the six months ended 31 December 2011

Asian Citrus Holdings Limited ("Asian Citrus"), the largest orange plantation owner and operator in China, announces interim results for the six months ended 31 December 2011.

Key Highlights

# Core net profits refers to profit for the period excluding net gain on change in fair value of biological assets and share-based payment. The Group's management considers this revised presentation more appropriately reflects the performance of the core operations. In order to conform to the current period's presentation, certain comparative figures for prior reporting period have been reclassified.

** Conversion at £1 = RMB10.25 and RMB10.12 for the six months ended 31December 2011 and 2010 respectively for reference only

*For identification purposes only 

Business Highlights

·; Revenue up 67.2% to RMB1,043.4m (2010/11:RMB624.0m)

·; EBITDA, excluding net gain on change in fair value of biological assets and share-based payments up 52.3% to RMB395.6m (2010/11:RMB259.8m)

·; Total production 171,607 tonnes up 19.4% from 143,698 tonnes in 2010/2011

·; Continued to expand our direct sales to 22 supermarket chains (in 2010, sales were to 20 supermarket chains)with total supply of approximately 48,447 tonnes of oranges (2010/11: 38,572 tonnes), up approximately 25.6%

·; Continued the construction of the new production facility of Beihai Perfuming Juice Company Limited ("Beihai BPG") in Baise city of the Guangxi Region with an annual capacity of approximately 40,000 tonnes. The progress is broadly in line with our expectation but the trial production is revised to commence shortly after mid 2012 due to administrative issues

·; Sold approximately 191,000 self-bred saplings to local farmers which offers the Group the first right to purchase their oranges

·; Continued the construction of the Hunan Plantation with 280,000 summer orange trees planted during the current period with another 343,000 summer orange trees to be planted before March 2012

·; Recommended an interim dividend of RMB0.03 (2010/11: RMB0.02 per share)and a special dividend of RMB0.02 per share (2010/11: Nil) and this equates to approximately 19.9% (2010/11: 11.9%) of the core net profit excluding net gain on change in fair value of biological assets and share-based payment

·; Approved a programme to buy back up to HK$250 million of Asian Citrus shares by way of "on-market repurchases" from now till the next annual general meeting

Hepu Plantation

·; Fully developed with approximately 1.3m orange trees, of which 1.0m are fruit-bearing trees

·; Production decreased by approximately 11.1% to 44,906 tonnes (2010/11: 50,517 tonnes) due to the reduction in the number of productive winter orange trees under the replanting programme

·; Replanting programme underway with 66,449 winter trees, to be replaced and replanted with the same number of new species of summer orange trees before March 2012

·; The second batch of 76,135 summer orange trees replanted in 2008 will commence production in the coming summer of 2012

Xinfeng Plantation

·; Fully planted with 1.6m winter orange trees, of which all are producing

·; Production increased by approximately 36.0% to 126,701 tonnes (2010/11: 93,181 tonnes)

Hunan Plantation

·; 707,000 summer orange trees have been planted as at 31 December 2011

·; Another 343,000 summer orange trees are expected to be planted before March 2012

·; RMB375.6m invested which mainly represents expenditure for land clearing, land cultivation, planting costs and other farmland infrastructure

Beihai BPG

·; Sold a total of approximately 14,604 tonnes of juice concentrates, 15,076 tonnes of fruit purees and 8,738 tonnes of frozen and dried fruits and vegetables for the period

·; As of the reporting date, RMB54.3m invested in the new juicing facility in Baise city which mainly represents expenditure for production machinery, land improvements and prepayments for land use rights and other construction works

·; The utilisation rate of production facilities in Beihai city and Hepu county was approximately 92.2% and 93.4% respectively

Tony Tong, Chairman, commented:

The Group is progressing well as a comprehensive fruit and juice production company with an increasing presence in the Chinese retail market with higher production volume and market penetration. With the continuous growth of the Chinese economy and the government's promotion of domestic consumption, we are confident that the demand for consumables such as fruits and juice concentrates in China will continue to grow, providing the Group with an exciting opportunity to further expand its business in both the agricultural and fruits processing businesses through both organic growth and potential acquisitions.

- ends -

Chairman's Statement

I am very pleased to report the results of Asian Citrus Holdings Limited (the "Company" or "Asian Citrus") and its subsidiaries (collectively referred to as the "Group") for the six months ended 31 December 2011. For the six months ended 31 December 2011, the Group's revenue increased by 67.2% from RMB624.0 million to RMB1,043.4 million, core net profit before net gains on change in fair value of biological assets and share based payments increased by 50.9% from RMB204.7 million to RMB308.8 million while net profit, after net gains on change in fair value of biological assets and share based payments decreased by 26.7% from RMB523.4 million to RMB383.6 million.

STRATEGIC OVERVIEW

Agricultural business

The Group continued to expand its direct sales to supermarkets. During the six months ended 31 December 2011, the Group sold approximately 48,447 tonnes of oranges directly to 22 supermarket chains, representing an increase of approximately 25.6% over the comparable period's volume of sales to supermarkets of 38,572 tonnes. The Group believes that the increasing volume of direct sales to supermarkets will continue to enhance the Group's profitability and lead to better product recognition within China.

The Group continued to mass produce self-bred saplings from both the Hepu Plantation and Hunan Plantation. In addition to using these saplings for our own replanting programme at the Hepu Plantation and the new planting in our Hunan Plantation, the Group sold approximately 191,000 self-bred saplings to local farmers during the six months ended 31 December 2011. The sales of self-bred saplings provide the Group with a high margin revenue stream and the capability to secure long-term supplies of high- quality oranges through reciprocal agreements with the farmers, which offer the Group the first right to purchase their oranges.

Fruit-processing business

The Group conducts its fruit processing business through Beihai Perfuming Garden Juice Company Limited ("Beihai BPG") and our customers include most of the major food and beverages producers in China and globally. In addition to the existing production facilities with an annual output capacity of approximately 60,000 tonnes located in Beihai city and Hepu county of Guangxi Zhuang Autonomous Region (the "Guangxi Region"), we are expanding the production capacities of Beihai BPG by establishing a new juicing facility with an annual output capacity of approximately 40,000 tonnes in the Baise city of the Guangxi Region. The construction progress of the new production facility is broadly in line with our expectation but the trial production is revised to commence shortly after mid 2012 due to certain administrative issues.

OPERATIONS REVIEW

Agricultural business

The Hepu Plantation is fully planted with approximately 1.3 million orange trees of which 1.0 million are currently producing oranges. Output from the Hepu Plantation was approximately 44,906 tonnes for the six months ended 31 December 2011 which represents a decrease of approximately 11.1% over the comparable year's production of 50,517 tonnes. The decrease in production volume was mainly due to the ongoing replanting programme at the plantation where 63,584 winter orange trees were replaced with the same number of summer orange trees during the year ended 30 June 2011.

The Group's replanting programme in the Hepu Plantation continues and there were approximately120,000 winter oranges trees as at 31 December 2011 which are expected to be replanted in the next two years. 66,449 winter orange trees are expected to be removed and the corresponding land area to be replanted with the same number of the new species of summer orange trees before the end of March 2012. We believe the improved species of trees being planted will deliver long term economic benefits by increasing average yields and achievable revenue per tonne. It is expected that the second batch of 76,135 trees replanted during 2008 will commence production in the coming summer of 2012 which will add to our existing summer oranges production.

The Xinfeng Plantation is fully planted with 1.6 million winter orange trees. During the six months ended 31 December 2011, all the 1.6 million trees were producing oranges (2010: 1.6 million), yielding approximately 126,701 tonnes of oranges, which represents an increase of approximately 36.0% over the previous year's production of 93,181 tonnes. Growth was mainly due to increased production from the winter oranges trees, which are still yet to achieve their full maturity.

During the six months ended 31 December 2011, the Group continued to invest in the Hunan Plantation. As at 31 December 2011, the Group has invested approximately RMB375.6 million in the Hunan Plantation which mainly represents expenditure for land clearing, land cultivation, planting costs for the orange trees and other farmland infrastructure. The development of this plantation is in line with our expectations and approximately 707,000 orange trees have been planted as at 31 December 2011. Another 343,000 orange trees are expected to be planted in the Hunan Plantation before end of March 2012. Expenditure for the infant trees in the Hunan Plantation, comprising mainly fertilisers, pesticides and staff costs, of approximately RMB11.4 million (2010: Nil) was expensed as general and administrative expenses for the six months ended 31 December 2011.

Fruit-processing business

For the six months ended 31 December 2011, Beihai BPG sold a total of approximately 14,604 tonnes of juice concentrates, 15,076 tonnes of fruit purees and 8,738 tonnes of frozen and dried fruits and vegetables.

As at 31 December 2011, the Group has invested approximately RMB54.3 million in the new juicing facility in Baise city which mainly represents expenditure for production machinery, land improvements and prepayments for land use rights and other construction works. The utilisation rate of the production facilities in Beihai city and Hepu county was approximately 92.2% and 93.4% respectively.

Dividends

The Board recommended the payment of an interim dividend of RMB0.03 and a special dividend of RMB0.02 per share for the six months ended 31 December 2011. We believe that the declaration of the interim and special dividends is in the interest of the shareholders and allow our shareholders to share the successful results of the Group.

The interimand specialdividends will be paid in sterling or HK Dollars on or before 4 May 2012 to shareholders that appear on the Company's register of members at the close of business on the record date of 9 March 2012, with an ex-dividend date of 8 March 2012 and 7 March 2012 on The Stock Exchange of Hong Kong Limited ("HKEx") and London Stock Exchange PLC, respectively. The actual translation rate for the purpose of dividend payment in sterling or HK Dollars will be determined by reference to the exchange rate on 13 March 2012.

In order to qualify for receiving the interim and special dividends, shareholders registered on the Hong Kong branch register of the Company are reminded to ensure that all transfers of shares, accompanied by the relevant share certificates and transfer forms, must be lodged with the Company's branch share registrar in Hong Kong, Computershare Hong Kong Investor Services Limited, at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen's Road East, Wanchai, Hong Kong for registration not later than 4:30p.m. on 9 March2012.

Share Repurchase Programme

On 24 February 2012, the Board approved a programme to buy back up to HK$250 million of Asian Citrus shares by way of "on-market repurchases" from now till the next annual general meeting. The share repurchase programme will be funded by the Company's free cash flow as well as existing working capital.

Investor relations and Corporate Governance

The Board is convinced that transparency and accountability are key elements in maintaining good investor relationships. The Group's management pays regular visits to institutional investors and private client investment advisers and attends investor conferences in order to update existing shareholders and potential investors on the Group's latest business developments.

The Board is fully committed to adhering to the corporate governance best practices as set out in the Combined Code, which is the key source of corporate governance recommendations for UK listed companies. The Group has also adopted the code provisions set out in the Code on Corporate Governance Practices contained in Appendix 14 to the Rules Governing the Listing of Securities on the HKEx as its additional code on corporate governance practices. The Board is continuing to improve our corporate governance and transparency by increasing information disclosure on our website and public documents.

Outlook

The Group is progressing well as a comprehensive fruit and juice production company with an increasing presence in the Chinese retail market with higher production volume and market penetration. With the continuous growth of the Chinese economy and the government's promotion of domestic consumption, we are confident that the demand for consumables such as fruits and juice concentrates in China will continue to grow, providing the Group with an exciting opportunity to further expand its business in both the agricultural and fruits processing businesses through both organic growth and potential acquisitions.

On behalf of the Board, I would also like to take this opportunity to thank our shareholders, business partners, customers and employees for their continuous support and contribution to the growth of Asian Citrus. I am very confident that Asian Citrus will continue to deliver strong operational performances and create more success in the future.

Tony Tong Wang Chow

Chairman

24 February 2012

Management Discussion and Analysis

OPERATING PERFORMANCE

Revenue

The breakdown of revenue by types is as follows:

The Group's revenue increased by approximately 67.2% from RMB624.0 million to RMB1,043.4 million for the six months ended 31 December 2011.

Sale of oranges

Revenue from sale of oranges grew by 22.6% to RMB644.3 million for the six months ended 31 December 2011. This was achieved by an increase of approximately 19.4% in the Group's production to 171,607 tonnes combined with increase in average selling price of oranges of approximately 3.0% to 4.2%year on year.

The production yield from Hepu Plantation decreased by 11.1% from 50,517 tonnes to 44,906 tonnes for the six months ended 31 December 2011 due to the ongoing replanting programme. In the previous year, 63,584 winter orange trees were removed and replanted with the same number of the summer orange trees. As the orange trees continue to mature, the production yield from the Xinfeng Plantation increased significantly by 36.0% to 126,701 tonnes for the six months ended 31 December 2011 from 93,181 tonnes in the comparable period last year.

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

All of the Group's oranges were sold domestically. The Group's customers for the sale of oranges can be divided into three categories, namely corporate customers, wholesale customers, and supermarket chains. The breakdown of the types of customers is as follows:

For the six months ended 31 December 2011, the production volume and revenue to supermarket chains represented approximately 28.2% and 32.0% respectively of the Group, compared to approximately26.8% and 31.4% for the six months ended 31 December 2010. For the Hepu Plantation, the production volume and revenue to supermarkets increased to 35.9% and 48.0% of the Group respectively (12/2010: 32.2% and 44.1%).

Sale of processed fruits

The table sets out the volume and revenue from the sale of processed fruits:

Beihai BPG processes over 22 different types of tropical fruits, including pineapples, passion fruit, lychees, mangoes and papayas. Only single product accounting for over 10% of the revenue from the sale of processed fruits are shown separately in the table above.

Revenue from the sale of processed fruits increased by 471.9% to RMB396.9 million for the six months ended 31 December 2011. It is mainly attributable by the six months results of Beihai BPG which are consolidated into the Group's results for the six months ended 31 December 2011 compared to one month results of Beihai BPG being consolidated into the Group's results for the six months ended 31 December 2010 follow by the completion of the acquisition as of 30 November 2010.

The utlisation rate of two existing processing plants in Beihai and Hepu is approximately 92.2% and 93.4% for the six months ended 31 December 2011 respectively.

Beihai BPG currently generates most of its sales from the People's Republic of China("PRC") market, with key customers being beverage mixers supplying major beverage groups.

Sale of self-bred saplings

For the six months ended 31 December 2011, RMB2.2 million was recognised from the sales of the approximately 191,000 selfbred saplings developed from the nursery centre at the Hepu Plantation to local farmers.

Cost of sales

The breakdown of cost of sales is as follows:

Cost of sales of oranges principally consists of the costs of raw materials such as fertilisers, packaging materials, pesticides, and other direct costs such as direct labour, depreciation and production overheads. The production cost of sales of oranges increased 24.9% to RMB355.4 million (12/2010: RMB284.6 million). The increase in production costs was principally due to the increase in fertilisers and pesticides utilised for higher production volumes and generally warmer weather during the period.

The unit cost of production in the Hepu Plantation remained at approximately RMB1.76 per kg for the six months ended 31 December 2011 (12/2010: RMB1.72 per kg).

The unit cost of production in the Xinfeng Plantation slightly increased by 2.8% to RMB2.18 per kg for the six months ended 31 December 2011 (12/2010: RMB2.12 per kg) as a result of higher amount of pesticides used and related expenses due to generally warmer weather during the period.

The combined unit cost of production increased by 4.5% to RMB2.07 per kg from RMB1.98 per kg in the comparable period due to higher contribution from Xinfeng Plantation with relatively higher unit cost.

Cost of sales of processed fruit mainly includes the costs of fruit and packaging materials and other direct costs such as direct labour, depreciation and production overheads. For the six months ended 31December 2011, the cost of processed fruits increased by 472.1% from RMB49.1 million to RMB280.9 million. The increase was mainly due to six months results of Beihai BPG which are consolidated into the Group's results for the six months ended 31 December 2011 compared to one month results of Beihai BPG being consolidated into the Group's results for the six months ended 31 December 2010 follow by the completion of acquisition as of 30 November 2010.

Gross profit

The Group's overall gross profit increased by 47.5% to approximately RMB406.3 million for the six months ended 31 December 2011 (12/2010: RMB275.4 million). The improvement in gross profit was due to an increase in the production output of the Group's winter orange trees of 19.4%, an increase in the average price of oranges of approximately 3.0% to 4.2% year on year and inclusion of the six months gross profit of Beihai BPG of RMB116.0 million.

The overall gross profit margin decreased from 44.1% to 38.9% for the six months ended 31 December 2011 due to higher contribution from processed fruits segment which has a relatively lower margin.

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

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

The gross profit margin of the Hepu Plantation kept at 56.2% for the six months ended 31 December 2011 (12/2010: 55.4%).

Despite better economies of scale being achieved, the gross profit margin of Xinfeng Plantation only grew to 40.4% (12/2010: 40.2%) due to a higher amount of pesticides used and related expenses as a result of generally warmer weather in current period. Over the medium term, as the continuous growth in production volume and better economies of scale, we expect the margin of the Xinefeng Plantation will grow again.

Due to higher contribution from Xinfeng Plantation with a relatively lower margin, the overall gross profit margin from sales of oranges slightly dropped to approximately 44.8% (12/2010: 45.9%) for the six months ended 31 December 2011.

Beihai BPG processes over 22 different types of fruit with different gross profit margins. The normalised gross profit margin of Beihai BPG for the six months ended 31 December 2011 was unchanged at 29.2% compared to one month ended 31 December 2010.

Gain on change in fair value of biological assets

The Group recorded a gain of RMB100.6 million from net gain on change in fair value of biological assets for the six months ended 31 December 2011, compared to a gain of RMB338.2 million for the corresponding period last year in 2010. The lower increase was mainly due to all the orange trees in the Xinfeng Plantation becoming fruit bearing in the previous period and there was no transfer of infant trees to orange trees during the six months ended 31 December 2011. The net gain on change in fair value of biological assets does not have any effect on the cash flow of the Group for the six months ended 31 December2011.

The gain on change in fair value of biological assets is summarised as follows:

Selling and distribution expenses

Selling and distribution expenses mainly comprise sales commissions, advertising, salaries and welfare of sales personnel, travelling and transportation expenses. The selling and distribution expenses of the Group increased from approximately RMB27.4 million for the six months ended 31 December 2010 to approximately RMB29.0 million for the six months ended 31 December 2011, representing an increase of 5.8%, mainly resulting from the increased sale activities in Xinfeng Plantation and Beihai BPG.

Selling and distribution expenses represented 2.8% of the Group's revenue, a decrease of 1.6 percentage points as compared to 4.4% in corresponding period last year, demonstrating the Group's ability to achieve economies of scale amid rapid development.

General and administrative expenses

General and administrative expenses comprise mainly salary, office administration expenses, depreciation, amortization, raw material utilised for infant trees and research costs. The general and administrative expenses of the Group were approximately RMB94.3 million for the six months ended 31 December 2011 (12/2010: RMB63.9 million). The increase was mainly due to the raw materials and related expenses of of RMB11.4 million utilised for the first batch of 427,000 infant trees planted in Hunan Plantation last year, inclusion of the general and administrative expenses of RMB6.4 million of Beihai BPG, the increase of the share based payment of RMB6.3 million in relation to the employee share options and higher research expenses of RMB4.3 million for developing and testing new species of orange.

General and administrative expenses represented 9.0% of the Group's revenue, a decrease of 1.2 percentage points as compared to 10.2% in last corresponding period, demonstrating the Group was able to control the cost effectively amid rapid business expansion.

Profit

The profit attributable to shareholders for the six months ended 31 December 2011 decreased to approximately RMB383.6 million, compared to approximately RMB523.4 million for corresponding period last year, representing a decrease of approximately 26.7%. The decrease in profit is mainly due to lower increase in the net gain on change in fair value of biological assets as all the orange trees in the Xinfeng Plantation becoming fruit bearing in the previous period and there was no transfer of infant trees to orange trees during the six months ended 31 December 2011.

The core net profit, which refers to profit for the period excluding net gain on change in fair value of biological assets and share-based payments, for the six months ended 31 December 2011 was approximately RMB308.8 million, compared to approximately RMB204.7 million for corresponding period last year, representing an increase of approximately 50.9%. The increase was mainly attributable to the increase in production volume of winter orange, the increase in average selling price of oranges and six months results of Beihai BPG are consolidated into the Group during the period compared to one month results in corresponding period last year.

INTERIM DIVIDEND

The Directors are pleased to declare an interim dividend of RMB0.03 (12/2010: RMB0.02)and a special dividend of RMB0.02 (12/2010: Nil) per share.

PRODUCTIVITY

The production volume of winter oranges increased to 171,607 tonnes for the six months ended 31 December 2011, representing an increase of 19.4%.

The production volume of winter oranges in Hepu Plantation dropped from approximately 50,517 tonnes last year to approximately 44,906 tonnes in the current year, representing a decrease of approximately11.1%, which was due to the ongoing replanting programme. In the year to 30 June 2011, 63,584 winter orange trees were removed and replanted with the same number of the summer orange trees.

In addition, the production volume of winter orange from the Xinfeng Plantation increased from approximately 93,181 tonnes last year to approximately 126,701 tonnes in the current year, representing an increase of approximately 36.0% due to increased maturity during the period.

CAPITAL STRUCTURE

As at 31 December 2011, there were 1,228,052,182 shares in issue. Based on the closing price of HKD4.09, the market capitalisation of the Company was approximately HKD5,022.7 million as at 31 December 2011 (GBP417.2 million).

HUMAN RESOURCES

There were a total of 1,595 employees of the Group as at 31 December 2011. The Group aims to attract, retain and motivate high calibre individuals with a competitive remuneration package. Remuneration packages are performance-linked and business performance, market practices and competitive market conditions are all taken into consideration. The Group reviews the employees' remuneration packages on an annual basis. The Group also places heavy emphasis on staff training and development so that employees can reach their maximum potential.

FINANCIAL PERFORMANCE

Liquidity

The current ratio and quick ratio was 38.51 and 36.96 respectively. The liquidity of the Group remains healthy with sufficient reserves for both operation and development.

Profitability

The asset turnover of the Group improved to 0.13 (12/2010: 0.08) for the six months ended 31 December 2011. The higher asset turnover was mainly due to six months results of Beihai BPG being consolidated into Group in current period compared to one month results in last corresponding period.

The basic earnings per share for the six months ended 31 December 2011 was RMB0.32 (12/2010: RMB0.59). This was driven by the 26.7% decrease in profit attributable to shareholders for the period and the dilution effect from the issuance of new ordinary shares in December 2010. The decrease in profit attributable to shareholders is mainly due to substantial decrease in the net gain on change in fair value of biological assets as all the orange trees in the Xinfeng Plantation becoming fruit bearing in the previous and there was no transfer of infant trees to orange trees during the six months ended 31 December 2011.

The core net profit per share for the six months ended 31 December 2011 increased to RMB0.25 (12/2010: RMB0.23).

Debt ratio

The net cash positions of the Group were RMB2,413.6 million and RMB2,232.2 million at 31 December 2011 and 30 June 2011 respectively.

Internal cash resource

The Group's major internal cash resource is its cash and bank balances. The Group did not have any outstanding bank borrowings as at 31 December 2011.

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 31 December 2011.

Capital commitment

As at 31 December 2011, the Group had a capital commitment of approximately RMB69.8 million mainly in relation to the construction of the farmland infrastructure in the Hunan Plantation and the new juicing plant in Basie city.

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 operations to which they relate. The currencies giving rise to this risk are primarily Hong Kong dollars, United States dollars and British pounds.

The Group undertakes certain transactions denominated in foreign currencies, hence exposures to exchange rate fluctuation arise. 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 and considers hedging significant foreign currency exposure should the need arise.

PLANTATIONS

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

Hepu Plantation

The Hepu Plantation is fully planted and comprises approximately 1.3 million orange trees of which, approximately 1.0 million trees were producing oranges.

Xinfeng Plantation

The Xinfeng Plantation is fully planted and comprises 1.6 million winter orange trees, all of which are now producing oranges.

Hunan Plantation

The Hunan Plantation is still under development and comprises approximately 0.7 million summer orange trees as at 31 December 2011. During the period, approximately 280,000 summer orange trees were planted with a futher approximately 340,000 summer orange trees to be planted in the second half of financial year ending 30 June 2012.

The below table sets out the age profile as at 31 December 2011 and the production volume of the plantations for the six months ended 31 December 2011:

Summer orange trees

Winter orange trees

The below table sets out the age profile as at 31 December 2010 and the production volume of the plantations for the six months ended 31 December 2010:

Summer orange trees

Winter orange trees

VALUATION OF BOLOGICAL ASSETS

The valuation of the Group's orange trees as at 31 December 2011 was conducted on the basis of discounted cash flow. The discount rate being applied to the discounted cash flow model is based on The Capital Asset Pricing Model. We begin with the appraised value of the orange trees by discounting the future income streams attributable to the orange trees to arrive at a present value and deduct the tangible assets (including plantation related machinery and equipment and land improvements) from the appraised value which are employed in the operation of the plantations.

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 as follows:

1) The discount rate applied for the six months ended 31 December 2011 was 20.0% (2010: 19.8%). 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 10, remains stable for about 22 years, and then decreases until age 35.

3) The market prices variables represent the assumed market price for the Summer Oranges and Winter Oranges produced by the Group. We adopted the market sales prices prevailing as of the relevant balance sheet date for each type of orange produced as the sales price estimate. Such estimation was based on real terms without considering inflationary effect and planned future business activity that may impact the future prices of oranges harvested from the plantations. The selling prices of winter oranges and summer oranges from the Hepu Plantation and winter oranges from the Xinfeng Plantation adopted were RMB3,310 per tonne, RMB5,300 per tonne and RMB3,730 per tonne, respectively, for the six months ended 31 December 2011 and RMB3,230 per tonne, RMB4,830 per tonne and RMB3,660 per tonne, respectively, for the six months ended 31 December 2010.

4) The direct production cost 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 direct production cost 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. We applied direct production costs of 34% (2010: 32% to 37%) and 34% to 50% (2010: 32% to 65%) of sale of oranges for the Hepu Plantation and the Xinfeng Plantation, respectively, during the six months ended 31 December 2011.

Sensitive analysis

1) Changes in the discount rate applied result in significant fluctuations in the Group's gain from changes in fair value of orange trees less costs to sell. The following table illustrates the sensitivity of the Group's gain from changes in fair value of orange tree less costs to sell to increases or decreases by 100 basis points in the discount rate of 20.0% applied for the six months ended 31 December 2011:

2) Changes in the yield per orange tree can also result in significant fluctuations in gain from changes in fair value of orange trees less costs to sell. The following table illustrates that sensitivity of the Group's gain from changes in fair value of orange trees less costs to sell to 5.0% increase or decrease in the yield per tree applied for the six months ended 31 December 2011:

3) Changes in assumed market prices of the oranges can also result in significant fluctuations in gain from changes in fair value of orange trees less costs to sell. The following table illustrates the sensitivity of the Group's gain from changes in fair value of orange trees less costs to sell to 5.0% increase or decrease in the assumed market prices of oranges as at 31 December 2011 used to calculate gain from changes in fair value of orange trees less costs to sell for the six months ended 31 December 2011:

4) Changes in the assumed direct production costs can also result in significant fluctuations in gain from changes in fair value of orange trees less costs to sell. The following table illustrates the sensitivity of the Group's gain from changes in fair value of orange trees less costs to sell to 5.0% increases or decreases in the Group's assumed direct production costs used to calculate gain from changes in fair value of orange trees less costs to sell for the six months ended 31 December 2011:

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

Valuation

The aggregate value of the orange trees in the Hepu Plantation and Xinfeng Plantation as at 31 December 2011 was estimated to be approximately RMB2,146 million.

Condensed Consolidated Income Statement

For the six months ended 31 December 2011