Half Yearly Report

Taihua plc

("Taihua" or the "Company")

Interim Results for the Six Months Ended 30 June 2010

Highlights

·; Statutory profit of RMB14.7m due to new fair valuation of Company's plantation

·; Underlying profit of RMB1.7m

Statement

I am pleased to be able to report that the recovery in Taihua plc ("Taihua") continued in 2010 H1.

The results were significantly affected by implementation of accounting standards relating to our Chinese Yew plantation. We reported profit of RMB14.7m. RMB13.0m of which was in respect of a change in the basis of measurement of our plantation from cost to fair value based on its future cashflows. This change was required under IAS41 once its fair value could be reliably measured as its trees approached maturity. The remaining RMB1.7m was in respect of the trading in the period.

The plantation has been developing steadily since the planting program in 2006-2008 and we expect to commence harvesting in 2011. As the trees mature the harvest quantities will increase. We anticipate that, as a consequence of this, the cashflow will be enhanced by RMB0.4m in 2011, increasing to RMB2.5m by 2016. This is based on current demand. Should Paclitaxel sales volumes increase then this is likely to have a further positive effect.

The RMB1.7m underlying profit was generated from RMB13.7m sales. Pricing of our key Paclitaxel and Homoharringtonine products stabilised in 2009 H2 and I am encouraged to report that pricing in 2010 H1 continued at the same levels. This is particularly pleasing following the price reductions in 2009 H1 and I believe it is reflective of improving local and global economic conditions.

Sales volume of Paclitaxel increased by 7% over 2009 H2 and Homoharringtonine was stable.

Paclitaxel Sales Analysis

2010 H1 2009 H2 2009 H1 2008 H2 2008 H1

RMBm 5.6 5.2 3.7 4.3 12.1

Kg 7.3 6.8 4.9 5.2 11.7

Homoharringtonine Sales Analysis

2010 H1 2009 H2 2009 H1 2008 H2 2008 H2

RMBm 6.2 6.2 2,8 5.4 14.5

Kg 3.6 3.6 1.6 2.5 6.6

Having achieved the notable success in obtaining approval from the European Directorate of Qualitative Medicine (EDQM) for the sale of Paclitaxel Active Pharmaceutical Ingredient ("API") in Europe the Company is actively exploring the most effective ways to exploit this. The Company has engaged an independent auditor to review its facilities and procedures to ensure that they meet GMP standards. This process has been completed and, where necessary, upgrades to facilities and procedures have been implemented.

The Company recognises that the European Paclitaxel market is potentially lucrative, particularly for any organisation that is able to move downstream from API supply into manufacture of injectable products. It has proved to be more challenging than originally anticipated to engage with a suitable European partner. This appears to be due to the specialised nature of the API and the caution of European Distributors in engaging with Chinese suppliers in the cancer related API field. The Company continues to work towards a successful conclusion in this area.

It remains the Company's objective to sell Paclitaxel in PRC in both raw API and injectable forms and to expand downstream to sell Homoharringtonine in an injectable form. The Company has made progress in preparing the necessary information to support these applications but at this moment, the application files are not complete. Given that the Company is currently focussing on the re-registration of its GMP certification to sell Homoharringtonine in PRC these additional applications are on hold at present. The Company will restart the process once the Homoharringtonine GMP re-certification is completed.

The critical raw materials for Taihua's business are two closely associated Chinese Yew trees. The first, the key raw material for Paclitaxel is currently being purchased from long term 3rd party suppliers. Our reliance upon them will reduce over the coming years. It is anticipated that the raw material required to support current sales of 14.6kg pa will be entirely met by our own plantation by 2016. When fully mature, the plantation will have sufficient output to allow an extraction of 30kg of Paclitaxel per year. Homoharringtonine is also extracted from a variant of the Chinese Yew tree. This grows wild extensively in the mountainous areas of Shaanxi province and as such we see no benefit in developing a plantation for this. We will continue to work with local co-operatives to provide supply.

The Company regards its expertise in production and marketing of Traditional Chinese Medicines (TCMs) as a strategic strength. During the year a new product, Bing Tong Pian tablet, a constipation reliever, was developed. Sales of this are forecast to commence in October 2010 and the Company is already in possession of approximately RMB 900,000 of orders for this product. We will continue to leverage our strengths in this area to develop or acquire a wider portfolio of products. We consider the Chinese TCM market to be robust and margins to be strong.

The Company's balance sheet remains strong with cash of RMB 86.3m. Debtors have increased due to extending credit terms to certain key customers to help them expand their sales. All other elements of working capital are largely unchanged. The Company remains committed to using its cash resources to invest into both its own operations and acquisitions to enhance shareholder value

In summary, I am pleased to report that the low point in the Company's financial performance of 2008 H2 and 2009 H1 is now behind us and the business has a stable platform on which to grow. With the plantation coming on stream from 2011 we will benefit from a reduced cost base that will further allow us to exploit the competitive advantages we enjoy in the marketplace. The combination of a strong balance sheet and an ambitious and experienced management team means that we are confident that our plans for development of the business will be successful

For more information please contact:

Nicholas Lyth, Taihua plc 0776 990 6686

Katy Mitchell, WH Ireland Limited +44 161 832 2174

TAIHUA PLC

UNAUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED 30 JUNE, 2010

TAIHUA PLC

UNAUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE, 2010

TAIHUA PLC

UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHS ENDED 30 JUNE, 2010

TAIHUA PLC

UNAUDITED CONSOLIDATED STATEMENT OFCASH FLOWS

FOR THE SIX MONTHS ENDED 30 JUNE, 2010

Notes to the Unaudited Consolidated Financial Statements for the six months ended 30 June, 2010 

1. ACCOUNTING POLICIES

Basis of preparation

The annual financial statements of Taihua plc for the year ending 31 December, 2010 will be prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted for use in the European Union. Accordingly the interim financial information has been prepared using accounting policies consistent with those which will be adopted by the group in the financial statements.

The interim financial information for the six months ended 30 June, 2010 is unaudited and that for the equivalent period in 2009 is unaudited. The comparatives for the full year ended 31 December, 2009 are not the Group's full statutory accounts for that year. The financial statements for the year ended 31 December, 2009 contained an unqualified auditor's report and did not contain a statement under sections 498(2) or 498(3) of the Companies Act 2006.

Foreign currency translation

The functional currency of the subsidiary undertakings is Renminbi ("RMB"), and the financial statements of the subsidiary undertakings have been drawn up in RMB. As sales and purchases are denominated primarily in RMB and receipts from operations are usually retained in RMB, the directors are of the opinion that RMB reflects the economic substance of the underlying events and circumstances relevant to the Group. Monetary assets and liabilities maintained in currencies other than RMB are translated into RMB at the approximate rates of exchange ruling at the balance sheet date. Transactions in currencies other than RMB are translated at rates ruling on the transaction dates.

The presentation currency of the Group is RMB and therefore the financial statements have been translated from GBP and HKD to RMB at the following exchange rates:

Period end rates Average rates

30 June 2010 GBP1=RMB10.2610 GBP1=RMB10.4331

HKD1=RMB0.8747 HKD1=RMB0.8796

Biological Assets

A biological asset is defined as a living plant managed by an enterprise which is involved in the

agricultural activity of the transformation of biological assets for sale, into agricultural produce, or

into additional biological assets.

The fair values of Chinese Yew tree biological assets are based on the present value of expected net cashflows from the trees discounted at a current market-determined pre-tax rate (the "Valuation Methodology").

In the absence of an active open market, self-bred seedlings are stated at cost at the balance sheet date and will be transferred to the category of infant trees upon transfer from the nursery to the plantation at their carrying value.

A gain or loss arising on initial recognition of biological assets at fair value less estimated harvesting and initial processing costs is recognised in the income statement.

Agricultural produce harvested from the Group's biological assets is transferred to inventories at its deemed costs. The fair value of agricultural produce is based on market prices of Chinese Yew output from third party suppliers.

Key Sources of Estimation Uncertainty

Fair Value of Biological Assets

Management estimates the current market prices less estimated harvesting and initial processing costs of biological assets at the balance sheet date with reference to market prices. Management

considers that there is presently an absence of effective financial instruments for hedging against the pricing risks with the underlying agricultural produce. Unexpected volatility in market prices of the underlying agricultural produce could significantly affect the fair values of these biological assets and result in fair value re-measurement changes in future accounting periods.

The Group's business is subject to the usual biological hazards from fire, wind, insects and other

natural disasters. Forces of nature such as temperature and rainfall may also affect harvest efficiency.

Management considers adequate preventive measures are in place. Nevertheless, unexpected factors affecting harvestable agricultural produce may result in re-measurement or harvest changes in future accounting periods.

2. REVENUE

Revenue on sale of goods represents the invoiced value of goods sold, net of value added tax ("VAT"), consumption tax ("CT") and other sales taxes, after allowances for goods returns and trade discounts.

An analysis of the Group's turnover and other revenue is set out below :-

3. OPERATING SEGMENTS

For the purposes of resources allocation and performance assessment, the chief operating decision maker, who is the Executive Director, regularly reviews revenue and cost of sales for each product.  The financial information provided to the Executive Director contains profit or loss information of each product line.  Therefore, the operation of the Group constitutes three reportable segments, being the manufacture and sales of three classes of pharmaceutical drugs.

The Group's reportable segments under IFRS 8 Operating Segments are as follows :

·; Paclitaxel - Paclitaxel is extracted from the bark of the yew tree (Taxus). This drug is one of the main-stream treatments for cancer of the ovaries, breast, certain types of lung cancer, and a cancer of the skin and mucous membranes more commonly found in patients with acquired immunodeficiency syndrome (AIDS).

·; Homoharringtonine - Homoharringtonine is an alkaloid extracted from the branches and leaves of the Cephalotaxus tree. This drug has been prescribed for acute myeloid leukaemia and other cancers in China.

·; TCM products - Traditional Chinese Medicine has recognition as a viable alternative health treatment and has been recognised by the World Health Organisation for its effectiveness in the treatment of certain forms of illnesses and diseases. The Company currently manufactures seven TCM products which are Gengnianan Tablet, Duzhong Pingya Tablet, Zaoren Anshen Keli, Bunao Anshen Tablet, Jiangzi Jianfei Tablet, Dabaidu Capsule and Runing Tablet.

The Group's revenues are not significantly impacted by seasonality.

Segment revenues and costs of sales.

The following is an analysis of the Group's revenue and cost of sales by reportable segments: