pine agritech limited - 早报

We are principally engaged in the manufacture and sale of soybean-based products such as soy protein isolates, soybean oil and soy oligosaccharide syrup. We have three production plants which are strategically located in the PRC. Our 3 plants are located strategically in Linyi, in Shandong province and Fujin and Daqing, in Heilongjiang province.

Our Products

Soy Protein Isolates

• Contains not less than 90% of pure soy protein

• Manufactured from defatted soy fl akes

• Improves the texture and nutritional value of foods

• Stabilises emulsions and aids in the absorption of water and fat

• Used as an ingredient in the manufacture of a wide variety of food

products

• Sold mainly to processed meat manufacturers

• Current annual production capacity is at 50,000 tonnes, targeted to reach

70,000 tonnes by September 2005 and further to 90,000 tonnes by fi rst

quarter of 2006

Soybean Oil

• Extracted during the manufacture of defatted soy fl akes

• Contains Vitamins A and D and various unsaturated fatty acids

• Ideal high nutritional food product

• Sold to refi ned oil manufacturers and small retailers

• Production output varies according to the production capacity of defatted

soy fl akes. Annual production capacities of defatted soy fl akes has

increased from 45,000 tonnes to 90,000 tonnes in March 2005 and is

targeted to reach 165,000 tonnes by the fourth quarter of 2005

Soy Oligosaccharide Syrup

• Manufactured from soybean whey, a by-product from the production of

soy protein isolates, using the membrane separation technology

• Selectively stimulates favourable bifi dobacteria growth in the intestines

and colon, which helps to improve digestion

• Approved as a health-care food product by the Ministry of Health of the

PRC

• Qualifi ed for export after registration with the State Certifi cation and

Accreditation Administration

• Sold to distributors for retail sales, operators of small retail outlets and

recently, to a beverage manufacturer to be used as an ingredient in their

manufacturing process

• Current annual production capacity is at 2,000 tonnes and target to reach

4,000 tonnes in May 2005 and further to 8,000 tonnes by fi rst quarter of

2006

Our Business

Invitation in respect of 150,000,000 New Shares of S$0.10 each as follows:-

(1) 5,000,000 Offer Shares at S$0.575 for each Offer Share by way of public offer; and

(2) 145,000,000 Placement Shares at S$0.575 for each Placement Share by way of placement,

payable in full on application.

Manager

Underwriter and Placement Agent

Pine Agritech Limited

(Incorporated in Bermuda on 7 September 2004)

Bancheng Town, Lanshan District, Linyi City, Shandong Province, PRC 276036Tel. (86) 539 297 7593 Fax. (86) 539 297 7259 E-mail: [email protected]

This document is important. If you are in any doubt as to the action you should take, you should consult your stockbroker, bank manager, solicitor, accountant, or other professional adviser.

We have made an application to the Singapore Exchange Securities Trading Limited (“SGX-ST”) for permission to deal in and for quotation of the ordinary shares of S$0.10 each (the “Shares”) in the capital of Pine Agritech Limited (the “Company”) already issued, the new Shares which form part of this Invitation (the “New Shares”), and the new Shares which may be issued upon the exercise of the options (the “Option Shares”) to be granted under the Pine Agritech Share Option Scheme. Such permission will be granted when we have been admitted to the Offi cial List of the SGX-ST. The dealing and quotation of the Shares will be in Singapore dollars.

Acceptance of applications will be conditional upon, inter alia, permission being granted to deal in, and for quotation of, all of the issued Shares, the New Shares and the Option Shares. If the completion of this Invitation does not occur because the SGX-ST’s permission is not granted or for any other reasons, monies paid in respect of any application accepted will be returned to you at your own risk, without interest or any share of revenue or other benefi t arising therefrom and you will not have any claims whatsoever against us, the Manager, the Underwriter or the Placement Agent.

The SGX-ST assumes no responsibility for the correctness of any of the statements or opinions made or reports contained in this Prospectus. Admission to the Offi cial List of SGX-ST is not to be taken as an indication of the merits of this Invitation, our Company, our subsidiaries, our Shares, the New Shares or the Option Shares.

A copy of this Prospectus has been lodged with and registered by the Monetary Authority of Singapore (the “Authority”). The Authority assumes no responsibility for the contents of this Prospectus. Registration of this Prospectus by the Authority does not imply that the Securities and Futures Act (Chapter 289) of Singapore, or any other legal or regulatory requirements, have been complied with. The Authority has not, in any way, considered the merits of our Shares, the New Shares or the Option Shares, as the case may be, being offered or in respect of which an invitation is made, for investment.

The Bermuda Monetary Authority has given its consent to the issue of the New Shares pursuant to this Invitation on the terms referred to in this Prospectus. A copy of this Prospectus will, as soon as reasonably practicable, be fi led with the Registrar of Companies in Bermuda. The Bermuda Monetary Authority in granting such permission and the Registrar of Companies in Bermuda in accepting this Prospectus for fi ling accept no responsibility for the fi nancial soundness of our Group or any proposal or for the correctness of any of the statements made or opinion expressed in this Prospectus or any other documents.

Investing in our Shares involves risks which are described in the section entitled “RISK FACTORS” of this Prospectus. No Shares will be allotted or allocated on the basis of this Prospectus later than six months after the date of registration of this Prospectus.

PROSPECTUS DATED 3 MAY 2005(Registered with the Monetary Authority of Singapore on 3 May 2005)


*

* For identifi cation purpose only

PIN

E A

GR

ITEC

H LIM

ITED

We believe that our strengths lie in the following:

• Strategically located production facilities allowing access to an abundant supply of high quality, non-genetically modifi ed soybeans in Heilongjiang

• Experienced management and technical team• Vertically integrated production facilities enabling maximum

uses of soybeans, better management of costs, supply and quality of defatted soy fl akes and achieving economies of scale benefi ts

• Continuous product development efforts through emphasis on R&D

We believe we are in a good position to capitalise on business opportunities in the PRC’s soybean-based products industry due to the reasons set out below:

• Continuing global demand for soybean-based products We believe that soybean-based products will continue to be a

popular nutritional food due to continued global demand for such health products and that the PRC will continue to be one of the largest producer and consumers of soybean and soybean-based products in the world.

• Greater awareness of health qualities of soybean Spurred by the demand for health-food substitutes brought about by

consumers’ rising affl uence and heightened awareness for healthy living, we thus foresee that demand for soybean-based products will continue to be on the rise.

Increase our production capacity for existing products• Increase annual production capacity by 20,000 tonnes for soy

protein isolates• Increase annual production capacity by 4,000 tonnes for soy

oligosaccharide syrup• Increase annual production capacity by 75,000 tonnes for

defatted soy fl akes

Increase R&D efforts• Improve on existing products and expand our product range• Explore and develop manufacturing processes for new

products

Expand our marketing and distribution network• Brand promotional efforts to increase consumers’ awareness • Further educate consumers on benefi ts of soy oligosaccharide

syrup• Establish retail outlets

Revenue700 -

600 -

500 -

400 -

300 -

200 -

100 -

RMB’million

FY01 FY02 FY03 FY04 (E) Year

30.7

210.4

373.9

204.3162.5

527.9 (E)

CAGR: 249.1% (3

yrs)

Profi t before Tax

160 -

140 -

120 -

100 -

80 -

60 -

40 -

20 -

RMB’million

YearFY01 FY02 FY03 FY04 (E)

3.3

27.7

61.2

25.5

52.0

136.9 (E)

CAGR: 329.3% (3 yrs)

Manufacturing Process

Competitive Strengths

Prospects

Strategies and Future Plans

Full Fatted Soy Flakes

Defatted Soy Flakes

Soybean Whey

Solvent ExtractionEvaporation / Condensation

Refi ning Deodorisation

Cleaning & SelectionDehulling / Cracking / Softening

ConditioningFlaking

ExtractionSeparation

Acidifi cationSeparationGrinding

Neutralisation Disinfection / Deodorising

Dehumidifi cation

Coarse Filtration Medium Filtration

Desalination & DecolourisationFine Filtration / Grinding

Concentration

“Our vertically-integrated manufacturing process allows us to maximise the use of our soybean raw material and reap economies of scale benefi ts.

”Financial Highlights

Revenue Profi t After Tax

Soybean Oil



We are principally engaged in the manufacture and sale of soybean-based products such as soy protein isolates, soybean oil and soy oligosaccharide syrup. We have three production plants which are strategically located in the PRC. Our 3 plants are located strategically in Linyi, in Shandong province and Fujin and Daqing, in Heilongjiang province.

Our Products


• Contains not less than 90% of pure soy protein

• Manufactured from defatted soy fl akes

• Improves the texture and nutritional value of foods

• Stabilises emulsions and aids in the absorption of water and fat

• Used as an ingredient in the manufacture of a wide variety of food

products

• Sold mainly to processed meat manufacturers

• Current annual production capacity is at 50,000 tonnes, targeted to reach

70,000 tonnes by September 2005 and further to 90,000 tonnes by fi rst

quarter of 2006

Soybean Oil

• Extracted during the manufacture of defatted soy fl akes

• Contains Vitamins A and D and various unsaturated fatty acids

• Ideal high nutritional food product

• Sold to refi ned oil manufacturers and small retailers

• Production output varies according to the production capacity of defatted

soy fl akes. Annual production capacities of defatted soy fl akes has

increased from 45,000 tonnes to 90,000 tonnes in March 2005 and is

targeted to reach 165,000 tonnes by the fourth quarter of 2005


• Manufactured from soybean whey, a by-product from the production of

soy protein isolates, using the membrane separation technology

• Selectively stimulates favourable bifi dobacteria growth in the intestines

and colon, which helps to improve digestion

• Approved as a health-care food product by the Ministry of Health of the

PRC

• Qualifi ed for export after registration with the State Certifi cation and

Accreditation Administration

• Sold to distributors for retail sales, operators of small retail outlets and

recently, to a beverage manufacturer to be used as an ingredient in their

manufacturing process

• Current annual production capacity is at 2,000 tonnes and target to reach

4,000 tonnes in May 2005 and further to 8,000 tonnes by fi rst quarter of

2006

Our Business

Invitation in respect of 150,000,000 New Shares of S$0.10 each as follows:-

(1) 5,000,000 Offer Shares at S$0.575 for each Offer Share by way of public offer; and

(2) 145,000,000 Placement Shares at S$0.575 for each Placement Share by way of placement,

payable in full on application.

Manager

Underwriter and Placement Agent


(Incorporated in Bermuda on 7 September 2004)

Bancheng Town, Lanshan District, Linyi City, Shandong Province, PRC 276036Tel. (86) 539 297 7593 Fax. (86) 539 297 7259 E-mail: [email protected]

This document is important. If you are in any doubt as to the action you should take, you should consult your stockbroker, bank manager, solicitor, accountant, or other professional adviser.

We have made an application to the Singapore Exchange Securities Trading Limited (“SGX-ST”) for permission to deal in and for quotation of the ordinary shares of S$0.10 each (the “Shares”) in the capital of Pine Agritech Limited (the “Company”) already issued, the new Shares which form part of this Invitation (the “New Shares”), and the new Shares which may be issued upon the exercise of the options (the “Option Shares”) to be granted under the Pine Agritech Share Option Scheme. Such permission will be granted when we have been admitted to the Offi cial List of the SGX-ST. The dealing and quotation of the Shares will be in Singapore dollars.

Acceptance of applications will be conditional upon, inter alia, permission being granted to deal in, and for quotation of, all of the issued Shares, the New Shares and the Option Shares. If the completion of this Invitation does not occur because the SGX-ST’s permission is not granted or for any other reasons, monies paid in respect of any application accepted will be returned to you at your own risk, without interest or any share of revenue or other benefi t arising therefrom and you will not have any claims whatsoever against us, the Manager, the Underwriter or the Placement Agent.

The SGX-ST assumes no responsibility for the correctness of any of the statements or opinions made or reports contained in this Prospectus. Admission to the Offi cial List of SGX-ST is not to be taken as an indication of the merits of this Invitation, our Company, our subsidiaries, our Shares, the New Shares or the Option Shares.

A copy of this Prospectus has been lodged with and registered by the Monetary Authority of Singapore (the “Authority”). The Authority assumes no responsibility for the contents of this Prospectus. Registration of this Prospectus by the Authority does not imply that the Securities and Futures Act (Chapter 289) of Singapore, or any other legal or regulatory requirements, have been complied with. The Authority has not, in any way, considered the merits of our Shares, the New Shares or the Option Shares, as the case may be, being offered or in respect of which an invitation is made, for investment.

The Bermuda Monetary Authority has given its consent to the issue of the New Shares pursuant to this Invitation on the terms referred to in this Prospectus. A copy of this Prospectus will, as soon as reasonably practicable, be fi led with the Registrar of Companies in Bermuda. The Bermuda Monetary Authority in granting such permission and the Registrar of Companies in Bermuda in accepting this Prospectus for fi ling accept no responsibility for the fi nancial soundness of our Group or any proposal or for the correctness of any of the statements made or opinion expressed in this Prospectus or any other documents.

Investing in our Shares involves risks which are described in the section entitled “RISK FACTORS” of this Prospectus. No Shares will be allotted or allocated on the basis of this Prospectus later than six months after the date of registration of this Prospectus.

PROSPECTUS DATED 3 MAY 2005(Registered with the Monetary Authority of Singapore on 3 May 2005)


*

* For identifi cation purpose only

PIN

E A

GR

ITEC

H LIM

ITED

CONTENTS

CORPORATE INFORMATION ............................................................................................................. 5

DEFINITIONS ....................................................................................................................................... 8

GLOSSARY OF TECHNICAL TERMS................................................................................................. 15

PURCHASE BY OUR COMPANY OF OUR OWN SHARES .............................................................. 17

ATTENDANCE AT GENERAL MEETINGS ......................................................................................... 18

TAKE-OVERS....................................................................................................................................... 19

SELLING RESTRICTIONS .................................................................................................................. 20

DETAILS OF THIS INVITATION........................................................................................................... 21

LISTING ON THE SGX-ST................................................................................................................... 21

INDICATIVE TIMETABLE FOR LISTING.............................................................................................. 24

CLEARANCE AND SETTLEMENT ..................................................................................................... 25

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS...................................... 26

EXCHANGE RATES ............................................................................................................................ 27

PROSPECTUS SUMMARY ................................................................................................................. 28

BUSINESS ........................................................................................................................................... 28

COMPETITIVE STRENGTHS.............................................................................................................. 28

PROSPECTS........................................................................................................................................ 29

OUR STRATEGIES AND FUTURE PLANS......................................................................................... 29

OUR FINANCIAL PERFORMANCE..................................................................................................... 30

WHERE YOU CAN FIND US................................................................................................................ 30

THIS INVITATION................................................................................................................................. 31

PLAN OF DISTRIBUTION ................................................................................................................... 32

USE OF PROCEEDS ........................................................................................................................... 33

RISK FACTORS ................................................................................................................................... 34

RISKS RELATING TO OUR BUSINESS .............................................................................................. 34

RISKS RELATING TO THE PRC.......................................................................................................... 38

RISKS RELATING TO INVESTMENT IN OUR SHARES .................................................................... 40

INVITATION STATISTICS .................................................................................................................... 42

DILUTION............................................................................................................................................. 43

SELECTED PRO FORMA GROUP FINANCIAL INFORMATION ...................................................... 44

1

REVIEW OF PAST OPERATING PERFORMANCE AND FINANCIAL POSITION ............................ 48

OVERVIEW........................................................................................................................................... 48

REVIEW OF RESULTS OF OPERATIONS.......................................................................................... 51

REVIEW OF PAST PERFORMANCE .................................................................................................. 52

ESTIMATED PROFIT ........................................................................................................................... 57

LIQUIDITY AND CAPITAL RESOURCES............................................................................................ 59

CAPITALISATION AND INDEBTEDNESS .......................................................................................... 61

FOREIGN EXCHANGE EXPOSURE................................................................................................... 63

EXCHANGE CONTROLS .................................................................................................................... 64

FOREIGN EXCHANGE CONTROLS IN THE PRC ............................................................................. 64

FOREIGN EXCHANGE CONTROLS IN BERMUDA ........................................................................... 65

DIVIDEND POLICY .............................................................................................................................. 66

GENERAL INFORMATION ON OUR GROUP .................................................................................... 67

SHARE CAPITAL.................................................................................................................................. 67

SHAREHOLDERS................................................................................................................................ 70

MORATORIUM ..................................................................................................................................... 71

RESTRUCTURING EXERCISE ........................................................................................................... 72

GROUP STRUCTURE ......................................................................................................................... 76

HISTORY AND BUSINESS.................................................................................................................. 78

HISTORY AND DEVELOPMENT......................................................................................................... 78

OUR BUSINESS .................................................................................................................................. 80

OUR MANUFACTURING PROCESS................................................................................................... 81

PRODUCTION FACILITIES AND PRODUCTION CAPACITY ............................................................. 86

QUALITY CONTROL............................................................................................................................ 87

AWARDS AND CERTIFICATIONS....................................................................................................... 88

RESEARCH AND DEVELOPMENT..................................................................................................... 88

INVENTORY MANAGEMENT .............................................................................................................. 89

SALES AND MARKETING CHANNELS .............................................................................................. 90

MAJOR CUSTOMERS ......................................................................................................................... 90

MAJOR SUPPLIERS............................................................................................................................ 92

COMPETITORS ................................................................................................................................... 93

COMPETITIVE STRENGTHS.............................................................................................................. 93

ORDER BOOKS................................................................................................................................... 94

PROPERTIES AND FIXED ASSETS................................................................................................... 94

MATERIAL CAPITAL EXPENDITURES AND DIVESTMENTS............................................................ 96

INSURANCE ........................................................................................................................................ 96

STAFF TRAINING................................................................................................................................. 96

2

INTELLECTUAL PROPERTY............................................................................................................... 97

GOVERNMENT REGULATIONS.......................................................................................................... 97

LICENCES, PERMITS AND APPROVALS........................................................................................... 100

PROSPECTS AND FUTURE PLANS .................................................................................................. 102

DIRECTORS, MANAGEMENT AND STAFF ....................................................................................... 104

OUR MANAGEMENT STRUCTURE.................................................................................................... 104

DIRECTORS......................................................................................................................................... 104

MANAGEMENT.................................................................................................................................... 107

EMPLOYEES........................................................................................................................................ 110

REMUNERATION................................................................................................................................. 110

SERVICE AGREEMENTS.................................................................................................................... 111

PINE AGRITECH EMPLOYEE SHARE OPTION SCHEME................................................................ 112

INTERESTED PERSON TRANSACTIONS ......................................................................................... 118

PAST INTERESTED PERSONS TRANSACTIONS ............................................................................. 118

PRESENT INTERESTED PERSONS TRANSACTIONS ..................................................................... 119

SHAREHOLDERS’ MANDATE ............................................................................................................. 120

OTHER TRANSACTIONS .................................................................................................................... 125

CONFLICTS OF INTEREST ................................................................................................................ 125

REVIEW BY AUDIT COMMITTEE ....................................................................................................... 125

CORPORATE GOVERNANCE ............................................................................................................ 126

GENERAL AND STATUTORY INFORMATION ................................................................................... 128

INFORMATION ON DIRECTORS AND EXECUTIVE OFFICERS....................................................... 128

SHARE CAPITAL.................................................................................................................................. 129

LITIGATION .......................................................................................................................................... 130

MATERIAL CONTRACTS..................................................................................................................... 130

MANAGEMENT AND UNDERWRITING AND PLACEMENT ARRANGEMENTS............................... 131

EXPENSES OF THIS INVITATION....................................................................................................... 132

CONSENTS.......................................................................................................................................... 132

MISCELLANEOUS ............................................................................................................................... 133

DOCUMENTS AVAILABLE FOR INSPECTION................................................................................... 133

STATEMENT BY DIRECTORS OF OUR COMPANY........................................................................... 134

APPENDIX A

REPORT FROM THE JOINT REPORTING ACCOUNTANTS ON THE PRO FORMA CONSOLIDATED FINANCIAL INFORMATION OF THE GROUP FOR THE FINANCIAL YEARS ENDED 31 DECEMBER 2001, 31 DECEMBER 2002 AND 31 DECEMBER 2003 AND THE SIX MONTHS ENDED 30 JUNE 2004................................................................................ A-1

APPENDIX B

AUDITED FINANCIAL STATEMENTS OF LINYI SHANSONG BIOLOGICAL PRODUCTS CO., LTD. FOR THE SIX MONTHS ENDED 30 JUNE 2004................................................................ B-1

3

APPENDIX C

REVIEW LETTER BY THE AUDITORS IN RELATION TO THE UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION OF PINE AGRITECH LIMITED AND ITS SUBSIDIARIES FOR THE YEAR ENDED 31 DECEMBER 2004........................................................ C-1

APPENDIX D

AUDITED FINANCIAL STATEMENTS OF LINYI SHANSONG BIOLOGICAL PRODUCTS CO., LTD.FOR THE PERIOD FROM 4 JANUARY 2002 (DATE OF ESTABLISHMENT) TO 31 DECEMBER 2002 AND 31 DECEMBER 2003............................................................................... D-1

APPENDIX E

AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF FOR THE PERIOD FROM 8 AUGUST 2002 (DATE OF ESTABLISHMENT) TO 31 DECEMBER 2002 AND 31 DECEMBER 2003............................................................................... E-1

APPENDIX F

AUDITED FINANCIAL STATEMENTS OF FOR THE PERIOD FROM 17 SEPTEMBER 2001 (DATE OF ESTABLISHMENT) TO 31 DECEMBER 2001AND 31 DECEMBER 2002 .................................................................................................................. F-1

APPENDIX G

INDEPENDENT FINANCIAL ADVISERS LETTER FROM ASIAN CORPORATE ADVISORS PTE LTD TO THE INDEPENDENT DIRECTORS IN RESPECT OF THE SHAREHOLDERS’MANDATE FOR INTERESTED PERSON TRANSACTIONS............................................................... G-1

APPENDIX H

TAXATION............................................................................................................................................. H-1

APPENDIX I

SUMMARY OF MEMORANDUM OF ASSOCIATION AND SELECTED BYE-LAWS OF OUR COMPANY................................................................................................................................... I-1

APPENDIX J

SUMMARY OF BERMUDA COMPANY LAW....................................................................................... J-1

APPENDIX K

RULES OF THE PINE AGRITECH EMPLOYEE SHARE OPTION SCHEME..................................... K-1

APPENDIX L

TERMS, CONDITIONS AND PROCEDURES FOR APPLICATION .................................................... L-1

4

CORPORATE INFORMATION

BOARD OF DIRECTORS : Ming Kam Sing (Non-executive Chairman)Li Zhuping (Chief Executive Officer)Hu Fabao (Executive Director)Ong Tiong Seng (Independent Director)Chan Wai Meng (Independent Director)

JOINT COMPANY SECRETARIES : Abdul Jabbar Bin Karam Din, LLB. (Hons)Ho Hin Yip, CPADana Bean* BSc

BERMUDA RESIDENT : Jonathan L. Evans*REPRESENTATIVE

BERMUDA ASSISTANT RESIDENT : Appleby Corporate Services (Bermuda) Ltd.*REPRESENTATIVE AND ASSISTANT Canon’s CourtSECRETARY 22 Victoria Street

Hamilton HM12Bermuda

REGISTERED OFFICE OF OUR : Canon’s CourtCOMPANY 22 Victoria Street

Hamilton HM12Bermuda

HEAD OFFICE AND PRINCIPAL : Bancheng TownPLACE OF BUSINESS Lanshan District, Linyi City

Shandong ProvincePeople’s Republic of China, 276036

MANAGER : Stirling Coleman Capital Limited4 Shenton Way, #07-03SGX Centre 2Singapore 068807

UNDERWRITER AND PLACEMENT : UOB Kay Hian Private LimitedAGENT 80 Raffles Place, #30-01

UOB Plaza 1Singapore 048624

FINANCIAL ADVISER TO OUR : Boulton Capital Asia LimitedCOMPANY Unit 5707, The Center

99 Queen’s Road CentralCentral, Hong Kong

SOLICITORS TO THIS INVITATION : Rajah & Tann4 Battery Road, #26-01Bank of China BuildingSingapore 049908

5

* Jonathan L. Evans, Dana Bean and Appleby Corporate Services (Bermuda) Ltd. will resign as Bermuda ResidentRepresentative, Resident Secretary and Assistant Resident Representative respectively upon the listing of our Shares on theSGX-ST, whereupon Appleby Corporate Services (Bermuda) Ltd., will be appointed as the Bermuda ResidentRepresentative and Assistant Secretary.

REGISTRAR FOR THIS INVITATION : Lim Associates (Pte) LtdAND SINGAPORE SHARE 10 Collyer Quay, #19-08TRANSFER AGENT Ocean Building

Singapore 049315

LEGAL ADVISER TO OUR : Jingtian & GongchengCOMPANY ON PRC LAW 15th Floor, Union Plaza

20 Chaoyangmenwai StreetChaoyang DistrictBeijing 100020People’s Republic of China

LEGAL ADVISER TO OUR : Appleby Spurling HunterCOMPANY ON BERMUDA LAW 5511 The Center

99 Queen’s RoadCentral, Hong Kong

JOINT REPORTING ACCOUNTANTS : Grant Thornton Certified Public Accountants13th Floor, Gloucester TowerThe Landmark11 Pedder StreetCentral, Hong KongPartner in Charge : Andrew Lam

Foo Kon Tan Grant Thornton Certified Public Accountants47 Hill Street, #05-01Chinese Chamber of Commerce & Industry BuildingSingapore 179365Partner in Charge : Wong Kian Kok

AUDITORS : Grant Thornton Certified Public Accountants13th Floor, Gloucester TowerThe Landmark11 Pedder StreetCentral, Hong KongPartner in Charge : Andrew Lam

BERMUDA SHARE REGISTRAR : The Bank of Bermuda LimitedAND SHARE TRANSFER AGENT Bank of Bermuda Building

6 Front StreetHamilton HM 11Bermuda

INDEPENDENT FINANCIAL : Asian Corporate Advisors Pte LtdADVISERS 80 Robinson Road

#10-01ASingapore 068898

RECEIVING BANK : The Bank of East Asia, LimitedSingapore Branch137 Market StreetBank of East Asia BuildingSingapore 048943

6

PRINCIPAL BANKERS : Agricultural Bank of China Daqing Branch Sa’ertu Office8 Tuanjie Road, Sa’ertu DistrictDaqing CityHeilongjiang ProvincePeople’s Republic of China, 163000

: Agricultural Bank of China Fujin BranchFujin CityHeilongjiang Province People’s Republic of China, 156100

: Agricultural Bank of China Linyi Bancheng BranchBancheng Town, Lanshan DistrictLinyi CityShandong ProvincePeople’s Republic of China, 276036

7

DEFINITIONS

In this Prospectus and the accompanying Application Forms and, in relation to Electronic Applications,the instructions appearing on the screens of the ATMs or the IB websites of the relevant ParticipatingBanks, the following definitions apply where the context so admits:-

Our Group Companies

“Pine Agritech” or the “Company” : Pine Agritech Limited ( *),incorporated in Bermuda as an exempted company withlimited liability

“Group” : Our Company and our subsidiaries

“LSBP” : (Linyi Shansong BiologicalProducts Co., Ltd.), a company established in the PRC andwholly-owned by Rainbow Palace

“Pro forma Group” : Our Company and its subsidiaries following the completionof the Restructuring Exercise, treated for the purpose of thisProspectus, as if these entities had been in existence since17 September 2001 (being the date on which the first of ourGroup companies was incorporated) on the basis describedin the Accountants’ Report as set out in Appendix A of thisProspectus

“Rainbow Palace” : Rainbow Palace Inc., a company incorporated in the BVIand wholly-owned by our Company

Other Corporations and Agencies

“Achievement Way” : Achievement Way Corporation, a company incorporated inthe BVI and wholly-owned by Dai Yonghu

“Bio Driven” : Bio Driven Limited, a company incorporated in the BVI andwholly-owned by Luo Chuan

“Authority” : The Monetary Authority of Singapore

“CDP” : The Central Depository (Pte) Limited

“Daqing Xinyu” : (Daqing Xinyu Food Products Co.,Ltd.), a company established in the PRC

“Elite Union” : Elite Union Corporation, a company incorporated in the BVIand wholly-owned by Li Zhuping

“Frontier Empire” : Frontier Empire Limited, a company incorporated in the BVIand wholly-owned by Han Seng Juan

“Glorious Faith” : Glorious Faith Corporation, a company incorporated in theBVI

8

* For identification purpose only

“Golden Revenue” : Golden Revenue Inc., a company incorporated in the BVIand wholly-owned by Hu Fabao

“HKEx” : The Stock Exchange of Hong Kong Limited

“ISO” : International Organisation for Standardisation, a worldwidefederation of national standards bodies, whose mission is todevelop industrial standards that facilitate international trade.The work of preparing International Standards is normallycarried out through ISO technical committees

“Jointway Holdings” : Jointway Holdings Ltd, a company incorporated in the BVIand wholly-owned by Wang Chengtian

“Linyi Yikang” : (Linyi Yikang Soybean ProteinProcessing Plant)

“Loampit” : Loampit Limited, a company incorporated in the BVI andwholly-owned by PFH

“Manager” : Stirling Coleman Capital Limited

“PFH” : People’s Food Holdings Limited, a company incorporated inBermuda, the shares of which are listed on the Mainboardof the SGX-ST and HKEx

“PFH group” : PFH and its subsidiaries

“Shansong Bio-Engineering” : (Shandong Shansong Bio-

Engineering Group Co., Ltd.), formerly known as

(Shandong Shansong Soybean ProteinCo., Ltd.), a company established in the PRC

“SCCS” : Securities Clearing & Computer Services (Pte) Ltd

“SGX-ST” or “Singapore Exchange” : Singapore Exchange Securities Trading Limited

“Underwriter” and “Placement Agent” : UOB Kay Hian Private Limited

“Victory Time” : Victory Time Finance Limited, a company incorporated inthe BVI and wholly-owned by Cheung Yick Chung

“Vienna Management” : Vienna Management Limited, a company incorporated in theBVI and wholly-owned by Loh Kim Kang David

General

“Accountants’ Report” : The Report from the Joint Reporting Accountants in relationto the Pro forma Consolidated Financial Information

“Application Forms” : The printed application forms to be used for the purpose ofthis Invitation and which form part of this Prospectus

“Application List” : The list of applications for subscription for the New Shares

9

“Associate” : (a) In relation to a Director, chief executive officer orControlling Shareholder (being an individual) means:-

(i) his immediate family;(ii) the trustees, acting in their capacity as such

trustees, of any trust of which he or hisimmediate family is a beneficiary or, in the caseof a discretionary trust, is a discretionaryobject; or

(iii) any company in which he and his immediatefamily together (directly or indirectly) have aninterest of 30% or more;

(b) In relation to a Substantial Shareholder (being acompany) means any other company which is itssubsidiary, or holding company or is a fellowsubsidiary of any such holding company or one in theequity of which it and/or such other company orcompanies taken together (directly or indirectly) havean interest of 30 per cent or more

“ATM” : Automated teller machine

“Audit Committee” : The audit committee of our Company

“Bermuda Companies Act” : The Companies Act 1981 of Bermuda, as amended

“BVI” : The British Virgin Islands

“Bye-Laws” : Bye-Laws of our Company

“control” : In relation to a corporation, means the capacity to determinethe outcome of decisions on the financial and operatingpolicies of the corporation, having regard to the followingconsiderations:-

(a) the practical influence which can be exerted (ratherthan the rights which can be enforced); and

(b) any practice or pattern of behaviour affecting thefinancial or operating policies of the corporation (evenif it involves a breach of trust),

but excludes any capacity to influence decisions on thefinancial and operating policies of a corporation where suchinfluence is required to be exercised for the benefit of otherpersons pursuant to an obligation imposed under any writtenlaw, rule of law, contract or order of court

“Controlling Shareholder” : In relation to a corporation, means:-

(a) a person who has an interest in the voting rights ofthe corporation and who exercises control over thecorporation; or

(b) a person who has an interest of 15% or more of theaggregate of the nominal amount of all the votingshares in a corporation, unless he does not exercisecontrol over the corporation

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“Daqing Plant” : Our manufacturing operations located at the northern side ofXi Bin Road, Sa’ertu District, Daqing City, HeilongjiangProvince, PRC

“Directors” : The directors of our Company as at the date of thisProspectus

“Electronic Applications” : Applications for the Offer Shares made through an ATM ofone of the Participating Banks or the IB website of one ofthe relevant Participating Banks in accordance with theterms and conditions of this Prospectus

“EPS” : Earnings per Share

“Estimated Profit” : The estimated profit of our Pro forma Group for FY2004which is based on the unaudited Pro forma consolidatedfinancial information of the Pro forma Group for FY2004, asdiscussed in the section entitled “Estimated Profit” on pages57 and 58 of this Prospectus

“Executive Directors” : The executive Directors of our Company as at the date ofthis Prospectus

“Executive Officers” : The executive officers of our Company as at the date of thisProspectus

“Fujin Plant” : Our manufacturing operations located at No. 40 Southportion of Xinkai Street, Fujin City, Heilongjiang Province,PRC

“FY” : Financial year ended 31 December or ending 31 December

“GMP” : GMP for health-care food products is a product qualityassurance system, i.e. a standardised operation processformulated and implemented for the purpose of ensuringhygiene, safety and quality in the course of food processing,which is formulated and enacted by the PRC Ministry ofHealth. Such a system requires manufacturers to installgood equipment, adopt rational production process, perfectquality control and strict inspection system so as to preventthe manufacture of food under unhygienic conditions or in anenvironment which may cause pollution, and to ensure thehygiene, safety and quality of products

“Glorious Faith Shares” : Ordinary shares of US$0.10 each in the capital of GloriousFaith

“IB” : Internet Banking

“Independent Directors” : The independent Directors of our Company as at the date ofthis Prospectus

“Invitation” : This invitation by our Company to the public to subscribe forthe New Shares, subject to and on the terms and conditionsof this Prospectus

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“ISO 9001:2000” : The third edition of ISO 9001 to cancel and replace thesecond edition (ISO 9001:1994) together with ISO9002:1994 and ISO 9003:1994. This International Standardpromotes the adoption of a process approach whendeveloping, implementing and improving the effectiveness ofa quality management system, to enhance customersatisfaction by meeting customer requirements

“Issue Price” : S$0.575 for each New Share

“Latest Practicable Date” : 18 March 2005, being the latest practicable date prior to thelodgement of this Prospectus with the Authority

“Linyi Plant” : Our manufacturing operations located at Bancheng Town,Lanshan District, Linyi City, Shandong Province, PRC

“Listing Manual” : Listing Manual of the SGX-ST

“Market Day” : A day on which the SGX-ST is open for trading in securities

“New Shares” : The 150,000,000 new Shares which our Company invitesapplications to subscribe for pursuant to this Invitation,subject to and on the terms and conditions of thisProspectus

“Nominating Committee” : The nominating committee of our Company

“Non-executive Directors” : The non-executive Directors of our Company as at the dateof this Prospectus

“NTA” : Net tangible assets

“Offer” : Offer by our Company of the Offer Shares to the public forsubscription at the Issue Price, subject to and on the termsand conditions of this Prospectus

“Offer Shares” : 5,000,000 of the New Shares which are the subject of theOffer

“Options” : The options which may be granted pursuant to the PineAgritech Share Option Scheme

“Option Shares” : The new Shares (not exceeding 15% of the issued sharecapital of our Company on the date preceding the grant ofan Option) which may be allotted and issued upon theexercise of the Options

“Participating Banks” : DBS Bank Ltd (including POSB) (“DBS”); Oversea-ChineseBanking Corporation Limited (“OCBC”); and UnitedOverseas Bank Limited and its subsidiary, Far Eastern BankLimited (the “UOB Group”)

“PBT” : Profit before taxation

“PER” : Price earnings ratio

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“Pine Agritech Share Option Scheme” : The Pine Agritech Employee Share Option Scheme, or “ESOS” adopted by our Company on 23 March 2005, the terms of

which are set out in the section headed “Rules of the PineAgritech Employee Share Option Scheme” in Appendix J ofthis Prospectus

“Placement” : The placement by the Placement Agent on behalf of ourCompany of the Placement Shares at the Issue Price,subject to and on the terms and conditions of thisProspectus

“Placement Shares” : 145,000,000 of the New Shares which are the subject of thePlacement

“PRC” or “China” : The People’s Republic of China

“Pro forma Consolidated Pro forma consolidated financial information of our Company Financial Information” and our subsidiaries for the financial years ended 31

December 2001, 31 December 2002 and 31 December2003, and the six months ended 30 June 2004 as set out inAppendix A of this Prospectus

“Remuneration Committee” : The remuneration committee of our Company

“Restructuring Exercise” : The restructuring exercise of our Group undertaken inconnection with this Invitation, as described on pages 72 to75 of this Prospectus

“Securities Account” : Securities account maintained by a depositor with CDP butdoes not include a securities sub-account

“Securities and Futures Act” : Securities and Futures Act, Chapter 289 of Singapore

“SFDA” : State Food and Drug Administration of PRC formerly knownas the State Drug Administration

“Shares” : Ordinary shares of S$0.10 each in the capital of ourCompany

“Shareholders” : Registered holders of our Shares

“Singapore Companies Act” : The Companies Act, Chapter 50 of Singapore

“Singapore Take-over and Merger : Sections 138, 139 and 140 of the Securities and Futures Act Laws and Regulations” and the Singapore Code on Take-overs and Mergers

“State” or “PRC Government” : The central government of PRC, including all politicalsubdivisions (including provincial, municipal and otherregional or local government entities) and instrumentalitiesthereof

“Substantial Shareholder” : A person who has an interest in our Shares, the nominalamount of which represents 5% or more of the nominalamount of all our Shares

“UK” : The United Kingdom

“USA” : The United States of America

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Currencies

“RMB” : Renminbi

“S$” or “$” and “cents” : Singapore dollar(s) and cent(s) respectively

“US$” : United States dollar(s)

Units

“kg” : kilogramme

“ml” : millilitre

“mt” or “tonnes” : metric tonnes

“sq ft” : square feet

“sq m” : square metres

“%” or “per cent” : per centum

Any reference in this Prospectus and the Application Forms to any statute or enactment is a reference tothat statute or enactment for the time being amended or re-enacted. Any word defined under theSingapore Companies Act, the Bermuda Companies Act, the Securities and Futures Act or any statutorymodification thereof and used in this Prospectus and the Application Forms and Electronic Applicationsshall have the meaning assigned to it under the Singapore Companies Act, the Bermuda Companies Act,the Securities and Futures Act or such statutory modification, as the case may be.

Any reference in this Prospectus and the Application Forms and Electronic Applications to Shares beingallotted to an applicant includes allotment to CDP for the account of that applicant.

Any reference to a time of day in this Prospectus shall be a reference to Singapore time unless otherwisestated.

The expressions “we”, “us”, “our”, “ourselves”, or other grammatical variations thereof shall, unlessotherwise stated, mean our Company and our subsidiaries.

The terms “Depositor”, “Depository Agent” and “Depository Register” shall have the meanings ascribed tothem respectively in Section 130A of the Singapore Companies Act.

Words importing the singular shall, where applicable, include the plural and vice versa and wordsimporting the masculine gender shall, where applicable, include the feminine and neuter genders andvice versa. References to persons shall include corporations.

Certain names with Chinese characters have been translated into English names. Such translations areprovided solely for the convenience of Singapore based investors and may not have been registered withthe relevant PRC authorities and should not be construed as representations that the English namesactually represent the Chinese characters.

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GLOSSARY OF TECHNICAL TERMS

The glossary contains an explanation of certain terms used in this Prospectus in connection with ourGroup and our business. The terms and their assigned meanings may not correspond to standardindustry or common meanings, as the case may be, or usage of these terms.

“amino acids” : The building blocks of the human body which areresponsible for building cells and repairing tissue

“centrifugation” : The process of centrifuging in which an apparatus consistingessentially of a compartment spin about a central axis toseparate contained materials of different specific gravities, orto separate colloidal particles suspended in a liquid

“coalescence” : The act of combining different substances to become oneform

“defatted soy flake” : The dried soy flake that remains after oil is extracted andsolvent is removed from the full-fatted soy flake

“dehulling” : The process of removing the outer covering from grains orother seeds

“distillation” : The evaporation and subsequent collection of a liquid bycondensation as a means of purification

“flaking” : A process for rolling dehulled and cracked soybean into thinflakes for solvent extraction or other processing

“full-fatted soy flake” : The soy flake after dehulling and cracking but before oil isextracted and solvent is removed

“hexane” : A colourless flammable liquid, C6H14, derived from thefractional distillation of petroleum and used as a solvent toextract edible oil from seeds and vegetable crops (e.g.soybean, peanuts, corn, etc.)

“homogenous” : Uniform in composition throughout the mixture

“hull” : The outer covering of grains or other seeds

“pH” : A measure of the acidity or alkalinity of a solution,numerically equal to 7 for neutral solutions, increasing withincreasing alkalinity and decreasing with increasing acidity

“prebiotics” : Non-digestible food substances that stimulate the growth oractivity of beneficial bacteria within the colon

“protein” : A naturally occurring combination of amino acids containingcarbon, hydrogen, oxygen, nitrogen and usually sulphur.Protein is one of the essential constituents of all living thingsand of the diet of animal organisms

“silo” : Cylindrical vertical silo used for storage of soybeans

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“soy protein isolates” : A product derived by removing the majority of non-proteincomponents from soybean and which contain not less than90% pure soy protein

“soybean whey” : A by-product derived from the production of soy proteinisolates and the main raw material used for the productionof soy oligosaccharide syrup

“unsaturated fatty acids” : Fatty acids whose carbon chain can absorb additionalhydrogen atoms

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PURCHASE BY OUR COMPANY OF OUR OWN SHARES

Under the laws of Bermuda, a company may, if authorised by its memorandum of association or bye-laws, purchase its own shares. Our Company has such power to purchase our own Shares according toClause 7(h) of our memorandum of association. Such power of our Company to purchase our Sharesshall, subject to the Bermuda Companies Act and our memorandum of association (and, if applicable,the rules and regulations of the SGX-ST and other competent regulatory authorities) be exercisable byour Directors upon such terms and subject to such conditions as they think fit, in accordance with Bye-Law 7(B).

Under the laws of Bermuda, such purchases may be effected out of the capital paid-up on the purchasedshares or out of the funds of our Company otherwise available for dividend or distribution or out ofproceeds of a fresh issue of shares made for that purpose. Any premium payable on such a purchaseover the par value of the shares to be purchased must be provided for out of the funds of our Companyotherwise available for dividend or distribution or out of our Company’s share premium account. Anyamount due to a Shareholder on a purchase of our own Shares may (i) be paid in cash, (ii) be satisfiedby the transfer of any part of the undertaking or property of our Company having the same value; or (iii)be satisfied partly under (i) and partly under (ii). Further, such purchase may not be made if, on the dateon which the purchase is to be effected, there are reasonable grounds for believing that our Company is,or after the purchase would be, unable to pay our liabilities as they become due. The Shares sopurchased will be treated as cancelled and our Company’s issued capital, but not its authorised capital,will be diminished accordingly.

For further details, please refer to the section “Purchase by the Company of its own shares and warrants”in paragraph (iv) of Appendix J – “Summary of Bermuda Company Law” on page J-2 of this Prospectus.

Our Company presently has no intention of purchasing our own Shares after the listing. However, if wedecide to do so later, we will seek our Shareholders’ approval in accordance with the laws of Bermuda,the Bye-Laws of our Company and the rules of the SGX-ST. Our Company will make prompt publicannouncement of any such share purchase and has given an undertaking to the SGX-ST to comply withall requirements that the SGX-ST may impose in the event of any such share purchase.

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ATTENDANCE AT GENERAL MEETINGS

Our Company is incorporated in Bermuda and is subject to Bermuda law. Under the BermudaCompanies Act, only those persons who agree to become Shareholders of a Bermuda company andwhose names are entered on the register of members of such a company are considered members, withrights to attend and vote at general meetings. Accordingly, Depositors holding Shares through CDPwould not be recognised as members of our Company, and would not have a right to attend and to voteat general meetings of our Company.

In the event that Depositors wish to attend and vote at general meetings of our Company, CDP will haveto appoint them as proxies, pursuant to the Bye-Laws and the Bermuda Companies Act. As a matter ofpractice, CDP will issue a proxy appointing each of those persons whose names are listed on theDepository Register maintained by the CDP as at a certain record date. Therefore, Depositors who areindividuals can attend and vote at the general meetings of our Company without the lodgement of anyproxy form. If the Depositors (who are individuals) themselves wish to appoint someone else to attend intheir place, then they must lodge a Depositor Proxy form with our Company appointing the other personas appointee to attend the meeting. Where a Depositor is a corporation, it must appoint anappointee/appointees to attend and vote in respect of its Shareholding, and as such they must lodge aDepository Proxy form with our Company within the prescribed time limit.

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TAKE-OVERS

There are presently no requirements under any Bermuda laws or regulations on take-over offers for ourShares which would be applicable to us. In addition, Singapore Take-over and Merger Laws andRegulations do not apply to companies incorporated outside Singapore. As our Company wasincorporated in Bermuda, the Singapore Take-over and Merger Laws and Regulations do not apply totake-over offers for our Company.

Bye-Law 193 (as described below) will, due to its binding effect on our Shareholders, require ourShareholders who make take-over offers in respect of our Shares to comply with the Singapore Take-over Laws and Regulations. However, it is uncertain whether this can be enforced in respect of personswho are not our Shareholders. This is because Bye-Law 193 only binds our registered Shareholders. Aperson (including a corporation) who is not our registered Shareholders is not bound to comply with theSingapore Take-over Laws and Regulations. This may affect you because in the event that a person (notbeing one of our registered Shareholders), whether alone or together with parties acting in concert withhim, acquires or gains control of 30% or more of our Shares or, in the event that he already owns orcontrols 30% or more but less than 50% of our Shares, and acquires an additional 1% of our Shareswithin any six-month period, you may not be offered an opportunity to sell your Shares to such acquirerat the price he paid for those Shares. In addition, even if a take-over offer is made for our Shares, suchtake-over offer may not be made in accordance with the procedures stipulated in the Singapore Take-over Laws and Regulations.

Bye-Law 193 provides that for so long as our Shares are listed on the Designated Stock Exchange (asdefined in the Bye-Laws which includes the SGX-ST), the Singapore Take-over Laws and Regulations,including any amendments, modifications, revisions, variations or re-enactments thereof, shall apply,mutatis mutandis, to all take-over offers for our Company.

Each of Elite Union, Achievement Way, Golden Revenue and Loampit, has undertaken to the SGX-STthat, as long as they continue to be Substantial Shareholders of our Company, they will endeavour topersuade potential offerors in connection with a take-over offer for our Company to comply with therequirements of the Singapore Take-over Laws and Regulations in the event of any take-over offers forour Company.

Each of Li Zhuping, Dai Yonghu, Hu Fabao and PFH who holds the entire issued share capital of each ofElite Union, Achievement Way, Golden Revenue and Loampit, respectively, has undertaken to the SGX-ST that, so long as each of Elite Union, Achievement Way, Golden Revenue and Loampit continues to bea Substantial Shareholder of our Company, he/it will endeavour to persuade potential offerors inconnection with a takeover offer for our Company to comply with the requirements of the Singapore Take-over and Merger Laws and Regulations.

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SELLING RESTRICTIONS

This Prospectus does not constitute an offer, solicitation or invitation to subscribe for the New Shares inany jurisdiction in which such offer, solicitation or invitation is unlawful or is not authorised or to anyperson to whom it is unlawful to make such offer, solicitation or invitation. No action has been or will betaken under the requirements of the legislation or regulations of, or of the legal or regulatory authoritiesof, any jurisdiction, except for the filing and/or registration of this Prospectus in Singapore in order topermit a public offering of the New Shares and the public distribution of this Prospectus in Singapore.The distribution of this Prospectus and the offering of the New Shares in certain jurisdictions may berestricted by the relevant laws in such jurisdictions. Persons who may come into possession of thisProspectus are required by us, the Manager, the Underwriter and the Placement Agent to informthemselves about and to observe and comply with, any such restrictions.

Selling Restrictions in Hong Kong

This Prospectus has not been and will not be registered with the Registrar of Companies in Hong Kong.Accordingly, this document may not be issued, circulated or distributed in Hong Kong. This documentmay be issued to professional investors within the meaning of the Securities and Futures Ordinance (the“Ordinance”) (Chapter 571 of the Laws of Hong Kong) or otherwise pursuant to, and in accordance withthe conditions of, any other applicable exemptions set out in the Ordinance. This document may also beissued in a manner which does not constitute an invitation or offer to the public in Hong Kong tosubscribe for the New Shares.

Selling Restrictions in the PRC

This Prospectus does not constitute an offer, solicitation or invitation to subscribe for the New Shares orany other securities of our Company in the PRC. Under the laws of the PRC, such offer, solicitation orinvitation to the PRC citizens is unlawful. The distribution of this Prospectus and the offering of the NewShares in the PRC are not permitted under the laws of the PRC.

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DETAILS OF THIS INVITATION

LISTING ON THE SGX-ST

Application has been made to the SGX-ST for permission to deal in and for quotation of all our Sharesalready issued as well as the New Shares and the Option Shares. Such permission will be granted whenour Company has been admitted to the Official List of the SGX-ST. Acceptance of applications will beconditional upon permission being granted by the SGX-ST for dealing in and for quotation of all of ourexisting issued Shares, the Option Shares and the New Shares. Monies paid in respect of anyapplication accepted will be returned to you, without interest or any share of revenue or other benefitarising therefrom and at your own risk, if the said permission is not granted.

The SGX-ST assumes no responsibility for the correctness of any of the statements made, reportscontained or opinions expressed in this Prospectus. Admission to the Official List of the SGX-ST is notto be taken as an indication of the merits of this Invitation, our Company, our subsidiaries, our Shares,the New Shares or the Option Shares.

No Shares shall be allotted or allocated on the basis of this Prospectus later than six months after thedate of registration of this Prospectus.

A copy of this Prospectus has been lodged with and registered by the Authority. The Authority assumesno responsibility for the contents of this Prospectus. Registration of this Prospectus by the Authoritydoes not imply that the Securities and Futures Act, or any other legal or regulatory requirements, havebeen complied with. The Authority has not, in any way, considered the merits of our existing issuedshares, the Option Shares and the New Shares, as the case may be, being offered or in respect of whichan invitation is made, for investment.

We are subject to the provisions of the Securities and Futures Act and the Listing Manual of the SGX-STregarding corporate disclosure. In particular, if after this Prospectus is registered but before the close ofthis Invitation, we become aware of:-

(a) a false or misleading statement or matter in this Prospectus;

(b) an omission from this Prospectus of any information that should have been included in it underSection 243 of the Securities and Futures Act; or

(c) a new circumstance that has arisen since this Prospectus was lodged with the Authority whichwould have been required by Section 243 of the Securities and Futures Act to be included in thisProspectus, if it had arisen before this Prospectus was lodged,

and that is materially adverse from the point of view of an investor, we may lodge a supplementary orreplacement prospectus with the Authority pursuant to Section 241 of the Securities and Futures Act.

Where the Authority issues a stop order pursuant to Section 242 of the Securities and Futures Act, theSecurities and Futures Act provides that:-

(a) in a case where the New Shares have not been issued to the applicants, the applications for theNew Shares pursuant to this Invitation shall be deemed to have been withdrawn and cancelled andour Company is required to, within 14 days from the date of the stop order, pay to the applicantsall monies the applicants had paid on account of their applications for the New Shares; and

(b) in the case where the New Shares have been issued to the applicants, the Securities and FuturesAct requires the issue of the New Shares pursuant to this Invitation to be deemed to be void andour Company is required to, within 14 days from the date of the stop order, pay to the applicantsall monies paid by them for the New Shares.

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If our Company is required by applicable Singapore laws to cancel issued New Shares and repayapplication monies to applicants (including instances where a stop order under the Securities andFutures Act is issued), subject to compliance with the Bermuda Companies Act, our Company willpurchase such New Shares at the Issue Price. Information relating to the purchase of Shares by ourCompany is set out in “Purchase by our Company of our own Shares” on page 17 of this Prospectus.

Where monies are to be returned to applicants for the New Shares, it shall be paid to the applicantswithout any interest or share of revenue or other benefit arising therefrom, and at the applicant’s ownrisk.

The Bermuda Monetary Authority has given its consent to the issue of the New Shares pursuant to thisInvitation on the terms referred to in this Prospectus. A copy of this Prospectus will, as soon asreasonably practicable, be filed with the Registrar of Companies in Bermuda. The Bermuda MonetaryAuthority in granting such permission and the Registrar of Companies in Bermuda in accepting thisProspectus for filing accept no responsibility for the financial soundness of our Group or any proposal orfor the correctness of any of the statements made or opinion expressed in this Prospectus or any otherdocuments.

This Prospectus has been seen and approved by our Directors and they individually and collectivelyaccept full responsibility for the accuracy of the information given in this Prospectus and confirm, havingmade all reasonable enquiries, that to the best of their knowledge and belief, the facts stated and that allexpressions of opinion, intention and expectations contained herein are honestly held and made afterdue and careful consideration, and that this Prospectus constitutes full and true disclosure of all materialfacts as at the date of this Prospectus about this Invitation, our Group, our Shares and that there are nomaterial facts the omission of which would make any statement in this Prospectus misleading, and thatthe Estimated Profit has been stated by our Directors after due and careful enquiry.

The New Shares are offered for subscription solely on the basis of the information contained and therepresentations made in this Prospectus.

Neither our Company, the Manager, the Underwriter and the Placement Agent nor any other partiesinvolved in this Invitation is making any representation to any person regarding the legality of aninvestment in our Shares by such person under any investment or other laws or regulations. Noinformation in this Prospectus should be considered as being business, legal or tax advice. Eachprospective investor should consult his own professional or other advisers for business, legal or taxadvice regarding an investment in our Shares.

No person has been or is authorised to give any information or to make any representation not containedin this Prospectus in connection with this Invitation and, if given or made, such information orrepresentation must not be relied upon as having been authorised by us, the Manager, the Underwriteror the Placement Agent. Neither the delivery of this Prospectus and the Application Forms nor thisInvitation shall, under any circumstances, constitute a continuing representation or create any suggestionor implication that there has been no change in our affairs or in the statements of fact or informationcontained in this Prospectus since the date of this Prospectus. Where such changes occur, we maymake an announcement of the same to the SGX-ST and will comply with the requirements of theSecurities and Futures Act. All applicants should take note of any such announcement and, uponrelease of such an announcement, shall be deemed to have notice of such changes. Save as expresslystated in this Prospectus, nothing herein is, or may be relied upon as, a promise or representation as toour future performance or policies.

This Prospectus has been prepared solely for the purpose of this Invitation and may not be relied uponby any persons other than the applicants in connection with their application for the New Shares for anyother purpose. This Prospectus does not constitute an offer, solicitation or invitation to subscribefor the New Shares in any jurisdiction in which such offer, solicitation or invitation is unlawful oris not authorised or to any person to whom it is unlawful to make such offer, solicitation orinvitation.

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Copies of this Prospectus and the Application Forms may be obtained on request, subject to availability,during office hours from:-

Stirling Coleman Capital Limited UOB Kay Hian Private Limited4 Shenton Way, #07-03 80 Raffles Place, #30-01

SGX Centre 2 UOB Plaza 1Singapore 068807 Singapore 048624

and from members of the Association of Banks in Singapore, members of the SGX-ST and merchantbanks in Singapore. A copy of this Prospectus is also available on the SGX-ST websitehttp://www.sgx.com.

The Application List will open at 10.00 a.m. on 10 May 2005 and will remain open until noon onthe same day or for such other period or further periods as our Company may, in consultationwith the Manager, decide, subject to any limitation under all applicable laws. In the event asupplementary prospectus or replacement prospectus is lodged, the Application List will remainopen for at least 14 days after the lodgement of the supplementary or replacement prospectus.

Where applications have been made for the New Shares prior to the lodgement of the supplementary orreplacement prospectus, we shall, within seven days from the date of lodgement of the supplementary orreplacement prospectus, either:-

(a) provide the applicants with a copy of the supplementary or replacement prospectus and providethe applicants with an option to withdraw their applications, or

(b) treat the applications as withdrawn and cancelled and return all monies paid, without interest orany share of revenue or other benefit arising therefrom, in respect of any application accepted.

Any applicant who wishes to exercise his option to withdraw his application shall, within 14 days from thedate of lodgement of the supplementary or replacement prospectus, notify us whereupon we shall, withinseven days from the receipt of such notification, return the application monies without interest or anyshare of revenue or other benefit arising therefrom at your own risk.

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INDICATIVE TIMETABLE FOR LISTING

In accordance with the SGX-ST News Release of May 28, 1993 on the trading of initial public offeringshares on a “when issued” basis, an indicative timetable is set out below for your reference:-

INDICATIVE TIME/DATE EVENT

12.00 noon on 10 May 2005 Close of Application List

11 May 2005 Balloting of applications, if necessary (in the event of over-subscription for the Offer Shares)

9.00 a.m. on 12 May 2005 Commence trading on a “when issued” basis

24 May 2005 Last day of trading on a “when issued” basis

9.00 a.m. on 25 May 2005 Commence trading on a “ready” basis

30 May 2005 Settlement date for all trades done on a “when issued” basis andfor trades done on a “ready” basis on 25 May 2005

The above timetable is only indicative as it assumes that the date of closing of the Application List is 10May 2005, the date of admission of our Company to the Official List of the SGX-ST is 12 May 2005, theshareholding spread requirement will be complied with and the New Shares will be issued and fully paid-up prior to 12 May 2005. The actual date on which our Shares will commence trading on a “whenissued” basis will be announced when it is confirmed by the SGX-ST.

The above timetable and procedure may be subject to such modifications as the SGX-ST may in itsdiscretion decide, including the decision to permit trading on a “when issued” basis and thecommencement date of such trading. All persons trading in the Shares on a “when issued” basis do soat their own risk. In particular, persons trading in the Shares before their Securities Accounts withCDP are credited with the relevant number of Shares do so at the risk of selling Shares whichneither they nor their nominees, as the case may be, have been allotted or are otherwisebeneficially entitled to. Such persons are also exposed to the risk of having to cover their net sellpositions earlier if “when issued” trading ends sooner than the indicative date mentioned above.Persons who have a net sell position traded on a “when issued” basis should close their positionon or before the first day of “ready” basis trading.

In the event of any changes in the closure of the Application List or the time period during which thisInvitation is open, we will publicly announce the same:-

(i) through a SGXNET announcement to be posted on the Internet at the SGX-ST websitehttp://www.sgx.com; and

(ii) in a local English newspaper, namely, The Straits Times.

Investors should consult the SGX-ST announcement of the “ready” listing date on the Internet (atthe SGX-ST website http://www.sgx.com), INTV or newspapers, or check with their brokers on thedate on which trading on a “ready” basis will commence.

We will provide details of the results of this Invitation through the channels in (i) and (ii) above.

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CLEARANCE AND SETTLEMENT

Upon listing and quotation on the SGX-ST, our Shares will be traded under the book-entry settlementsystem of CDP, and all dealings in and transactions of the Shares through SGX-ST will be effected inaccordance with the terms and conditions for the operation of Securities Accounts with CDP, asamended from time to time.

Our Shares will be registered in the name of CDP or its nominee and held by CDP for and on behalf ofpersons who maintain, either directly or through depository agents, Securities Accounts with CDP.Persons named as direct securities account holders and depository agents in the depository registermaintained by CDP will not be treated under our Bye-Laws as members of our Company in respect ofthe number of Shares credited to their respective securities accounts.

Persons holding the Shares in Securities Accounts with CDP may withdraw the number of Shares theyown from the book-entry settlement system in the form of physical share certificates. Such sharecertificates will, however, not be valid for delivery pursuant to trades transacted on SGX-ST, althoughthey will be prima facie evidence of title and may be transferred in accordance with our Bye-Laws. A feeof S$10 for each withdrawal of 1,000 Shares or less and a fee of S$25 for each withdrawal of more than1,000 Shares is payable upon withdrawing the Shares from the book-entry settlement system andobtaining physical share certificates. In addition, a fee of S$2 or such other amount as our Directors maydecide, is payable to the share registrar for each share certificate issued and a stamp duty of S$10 isalso payable where our Shares are withdrawn in the name of the person withdrawing our Shares orS$0.20 per S$100 or part thereof of the last-transacted price where it is withdrawn in the name of a thirdparty. Persons holding physical share certificates who wish to trade on SGX-ST must deposit with CDPtheir share certificates together with the duly executed and stamped instruments of transfer in favour ofCDP, and have their respective Securities Accounts credited with the number of Shares deposited beforethey can effect the desired trades. A fee of S$10 is payable upon the deposit of each instrument oftransfer with CDP. A fee of S$10 is chargeable as stamp duty on such instrument of transfer.

Transactions in our Shares under the book-entry settlement system will be reflected by the seller’sSecurities Account being debited with the number of Shares sold and the buyer’s Securities Accountbeing credited with the number of Shares acquired. No transfer stamp duty is currently payable for theShares that are settled on a book-entry basis.

A Singapore clearing fee for trades in our Shares on the SGX-ST is payable at the rate of 0.05 per centof the transaction value subject to a maximum of S$200 per transaction. The clearing fee, instrument oftransfer deposit fee and share withdrawal fee may be subject to Singapore Goods and Services Tax of5.0 per cent.

Dealings of our Shares will be carried out in Singapore dollars and will be effected for settlement on CDPon a scripless basis. Settlement of trades on a normal “ready” basis on the SGX-ST generally takesplace on the third Market Day following the transaction date, and payment for the securities is generallysettled on the following business day. CDP holds securities on behalf of investors in Securities Accounts.An investor may open a direct account with CDP or a sub-account with a CDP agent. The CDP agentmay be a member company of the SGX-ST, bank, merchant bank or trust company.

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

All statements contained in this Prospectus, statements made in press releases and oral statements thatmay be made by us or our officers, Directors or employees acting on our behalf, that are not statementsof historical fact, constitute ‘forward-looking statements’. You can identify some of these statements byforward-looking terms such as ‘expect’, ‘believe’, ‘plan’, ‘intend’, ‘estimate’, ‘anticipate’, ‘may’, ‘will’, ‘would’,and ‘could’ or similar words. However, you should note that these words are not the exclusive means ofidentifying forward-looking statements. All statements regarding our expected financial position, businessstrategy, plans and prospects are forward-looking statements. These forward-looking statements,including statements as to our revenue and profitability, cost measures, planned strategy and any othermatters discussed in this Prospectus regarding matters that are not historical facts are only predictions.These forward-looking statements involve known and unknown risks, uncertainties and other factors thatmay cause our actual results, performance or achievements to be materially different from any futureresults, performance or achievements expressed or implied by such forward-looking statements.

Given the risks and uncertainties that may cause our actual future results, performance or achievementsto be materially different from that expected, expressed or implied by the forward-looking statements inthis Prospectus, we advise you not to place undue reliance on those statements. We are not warrantingor representing to you that our actual future results, performance or achievements will be as discussed inthose statements. Neither we, the Manager, the Underwriter nor the Placement Agent is warranting orrepresenting to you that our actual future results, performance or achievements will be as discussed inthose statements.

Further, we, the Manager, the Underwriter and the Placement Agent, disclaim any responsibility toupdate any of those forward-looking statements or publicly announce any revisions to those forward-looking statements to reflect future developments, events or circumstances for any reason, even if newinformation becomes available or other events occur in the future. Where such changes occur and theyare material, we will make an announcement of the same to the SGX-ST and the public, and if required,lodge a supplementary or replacement document or prospectus with the Authority pursuant to section241 of the Securities and Futures Act and will take steps to comply with the requirements of theSecurities and Futures Act and the regulations issued thereunder. We are also subject to the provisionsof the Listing Manual regarding corporate disclosure upon our admission to the Official List of the SGX-ST.

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EXCHANGE RATES

The exchange rate between the RMB and the S$ as at the Latest Practicable Date was RMB5.087 toS$1.00.

The table below sets out the high and low exchange rates between the RMB and S$ for each month forthe six months prior to the Latest Practicable Date. The table below indicates how many RMB can bebought with one S$.

RMB/S$ RateHigh Low

September 2004 4.909 4.802October 2004 4.984 4.835November 2004 5.061 4.956December 2004 5.082 4.981January 2005 5.097 4.902February 2005 5.095 4.909

The following table sets forth, for each of the financial periods indicated, the average exchange ratesbetween the RMB and S$ calculated by using the average of the exchange rates on the last day of eachmonth during each financial period. Where applicable, the exchange rates in this table are used for thetranslation of our Company’s financial statements disclosed elsewhere in this Prospectus.

RMB/S$ RateAverage Closing

FY2001 4.623 4.484FY2002 4.649 4.776FY2003 4.751 4.866HY2003 4.739 4.699HY2004 4.880 4.853

The exchange rates between RMB and S$ as outlined above have been presented solely for information.The exchange rates should not be construed as a representation that these RMB amounts could havebeen or could be converted into S$ at any particular rates, the rates above, or at all.

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PROSPECTUS SUMMARY

This summary highlights certain information found in greater detail elsewhere in this Prospectus. Inaddition to this summary, we urge you to read the entire Prospectus carefully, especially the discussionof risk of investing in our shares under “Risk Factors”, before deciding to buy our Shares.

BUSINESS

We are principally engaged in the manufacture and sale of soybean-based products such as (i) soyprotein isolates; (ii) soybean oil and (iii) soy oligosaccharide syrup. Other than these three products, wealso sell other by-products derived from our production processes as animal feeds. These by-productsare defatted soy flakes that do not meet our quality standards for further processing or residues whichare not required in our manufacturing processes.

We sell our soy protein isolates mainly to manufacturers of processed meat products. As for oursoybean oil, our customers are mainly manufacturers who purchase our soybean oil for furtherprocessing to obtain higher grade oil and we also sell to small retailers. Our soy oligosaccharide syrup issold to distributors for retail sales and also to operators of small retail outlets. Since 1 July 2004, we alsosell our soy oligosaccharide syrup to a beverage manufacturer to be used as an ingredient in theirmanufacturing process.

COMPETITIVE STRENGTHS

We believe our competitive strengths are as follows:-

Our operations are strategically located

The production facilities for our soybean oil and defatted soy flakes are located in the HeilongjiangProvince. The Heilongjiang Province is a major soybean farming area which is widely known for highquality non-genetically modified soybean. Our Group therefore has access to an abundant supply of highquality soybean.

We have an experienced management and technical team

Our management team, led by Li Zhuping, our Chief Executive Officer, Hu Fabao, our Executive Director,Dai Yonghu, our General Manager and our senior management, who each have extensive experience inthe industry that we operate in. Li Zhuping, our Chief Executive Officer, has been involved in thesoybean-based industry for the past eight years and has provided invaluable contributions to our Group.Hu Fabao, our Executive Director, has been involved in the management of various manufacturingcompanies for over 19 years and has also obtained a Diploma in Enterprise Management from theShandong Technical University in 1998. Dai Yonghu, our General Manager, graduated from LinyiAgricultural Institution with a Diploma in Management in 1995 and has worked in the soybean industrysince then.

We have vertically integrated production facilities

We believe we have vertically integrated production facilities where we are able to maximise the uses ofthe soybean raw materials. We are also able to manage the supply, costs and quality of the other rawmaterial, defatted soy flakes, used in the production of our soy protein isolates. Further, we are able toenjoy economies of scale due to the scale of our operations at our production facilities.

For further details of our competitive strengths, please refer to the section “Competitive Strengths” onpages 93 and 94 of this Prospectus.

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PROSPECTS

In the last few years, there has been an increase in the annual per capita disposable income in the PRCand our Directors expect the growth to continue in the coming years. We believe that our prospects willbe driven by the following factors:-

� Soybean-based products will continue to be a popular nutritional food and one which is known tobe an important source of protein.

� The demand for soybean-based products in the PRC will increase in line with increasingconsciousness to lead healthy lifestyle, which in turn is due to the higher standard of living in thePRC as the domestic economy continues its growth.

For further details of our prospects, please refer to the section “Prospects and Future Plans” on pages102 and 103 of this Prospectus.

OUR STRATEGIES AND FUTURE PLANS

To capture the emerging business opportunities, we intend to adopt the strategy and future plans as setout below:-

Increase our production capacity for existing products

We intend to expand our production capacity at our production facilities for our existing products, soyprotein isolates and soy oligosaccharide syrup, to support our further growth. In our efforts to increasethe vertical integration of our production processes and to support the increase in production capacity forsoy protein isolates, we intend to expand our production capacity for defatted soy flakes.

Increase research and development efforts

We seek to improve our existing products and also to expand our existing product range. To supportsuch initiatives, we plan to further increase our research and development strength to increase ourefforts in exploring and developing improvements to our existing products and manufacturing processesfor new products.

Expand our marketing and distribution network

We intend to develop our Tian Song brand name for our soy oligosaccharide syrup by educating theconsumers of our products through media advertisement. Further, we intend to establish our own retailoutlets for the sale of our products, which will give us more control over our sales and also moreopportunities to communicate with our customers.

For further details of our strategies and future plans, please refer to the section “Prospects and FuturePlans” on pages 102 and 103 of this Prospectus.

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OUR FINANCIAL PERFORMANCE

The following tables present a summary of the financial highlights of our Pro forma Group and should beread in conjunction with the Pro forma Consolidated Financial Information set out in Appendix A of thisProspectus.

Selected items from the operating results of our Pro forma Group

Pro forma Unauditedsix months Six months

ended 30 June ended 30 June (RMB’000) FY2001 FY2002 FY2003 2003 2004

Revenue 30,677 210,406 373,932 162,473 204,317

Gross profit 6,116 51,029 110,071 47,754 62,776

Gross profit margin 19.9% 24.3% 29.4% 29.4% 30.7%

Profit before taxation 4,953 41,691 92,480 38,345 52,011

Net profit attributable to 3,319 27,692 61,180 25,528 52,011Shareholders

EPS (RMB cents) (1) 0.74 6.15 13.60 5.67 11.56

Note:-

(1) For comparative purposes, the EPS for the period under review has been computed based on the net profit attributable toShareholders and our pre-Invitation share capital of 450,000,000 Shares.

Selected items from the financial position of our Pro forma Group

Pro forma

(RMB’000) As at 31 December 2003 As at 30 June 2004

Non-current assets 147,585 212,490

Current assets 133,460 133,552

Current liabilities 61,072 55,658

Net current assets 72,388 77,894

Pro forma shareholders’ equity 219,973 271,984

NTA per Share (RMB cents) (1) 46.58 51.86

Note:-

(1) For comparative purposes, our NTA per Share has been computed based on our net assets excluding land use rights andour pre-Invitation share capital of 450,000,000 Shares.

WHERE YOU CAN FIND US

Our registered office is at Canon’s Court, 22 Victoria Street, Hamilton HM12, Bermuda and our businessaddress is at Bancheng Town, Lanshan District, Linyi City, Shandong Province, PRC, 276036. Ourtelephone number is 86-539-2977-593 and our facsimile number is 86-539-2977-259. Our email addressis [email protected].

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THIS INVITATION

Size The 150,000,000 New Shares. The New Shares, uponallotment and issue, will rank pari passu in all respects withour existing issued Shares.

Issue Price S$0.575 for each New Share.

The Offer The Offer comprises an invitation by our Company to thepublic in Singapore to subscribe for the 5,000,000 OfferShares at the Issue Price, subject to and on the terms andconditions of this Prospectus.

The Placement The Placement comprises a placement of 145,000,000Placement Shares at the Issue Price, subject to and on theterms and conditions of this Prospectus.

Purpose of this Invitation Our Directors believe that the listing of our Company andthe quotation of our Shares on the SGX-ST will enhance ourGroup’s public image and enable our Group to raise fundsfrom the capital markets to finance our business expansion.It will also provide members of the public, our businessassociates and partners with an opportunity to participate inthe equity of our Company.

Listing Status Our Shares will be quoted on the SGX-ST, subject toadmission of our Company to the Official List of the SGX-STand permission for dealing in and for quotation of ourShares being granted by the SGX-ST.

Risk Factors Investing in our Shares involves risks which are described in“Risk Factors” on pages 34 to 41 of this Prospectus.

Trading Currency Our Shares will be quoted and traded in Singapore dollarson the Official List of the SGX-ST.

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PLAN OF DISTRIBUTION

The Issue Price is determined by us in consultation with the Manager, the Underwriter and thePlacement Agent, based on market conditions and estimated market demand for our Shares determinedthrough a book building process. The Issue Price is S$0.575 for each New Share and is payable in fullon application.

Offer Shares

The Offer Shares are made available to the members of the public in Singapore for subscription at theIssue Price. The terms and conditions and procedures for application are described in Appendix L of thisProspectus.

In the event of an under-subscription for the Offer Shares as at the close of the Application List, thatnumber of Offer Shares not subscribed for shall be made available to satisfy excess applications for thePlacement Shares to the extent there is an over-subscription for the Placement Shares as at the close ofthe Application List.

In the event of an over-subscription for the Offer Shares as at the close of the Application List and/or thePlacement Shares are fully subscribed or over-subscribed as at the close of the Application List, thesuccessful applications for the Offer Shares will be determined by ballot or otherwise as determined byour Directors and approved by the SGX-ST.

Pursuant to the terms and conditions contained in the Management and Underwriting Agreement signedbetween our Company, the Manager and the Underwriter dated 3 May 2005, the Underwriter has agreedto underwrite our Offer Shares.

Placement Shares

Application for the Placement Shares may only be made by way of application form. The terms andconditions and procedures for application are described in Appendix L of this Prospectus.

Pursuant to the terms and conditions in the Placement Agreement signed between our Company and thePlacement Agent dated 3 May 2005, the Placement Agent has agreed to subscribe for and/or procuresubscribers for the Placement Shares at the Issue Price.

Subscribers of the Placement Shares may be required to pay a commission of up to 1.0% of the IssuePrice to the Placement Agent (subject to Singapore Goods and Services Tax of 5.0%, if applicable).

In the event of an under-subscription for the Placement Shares as at the close of the Application List,that number of Placement Shares not subscribed for shall be made available to satisfy excessapplications for the Offer Shares to the extent that there is an over-subscription for the Offer Shares as atthe close of the Application List.

None of our existing Shareholders or Executive and Non-Executive Directors intend to subscribe forShares in this Invitation.

None of the members of our Group’s management or employees intend to subscribe for Shares in thisInvitation amounting to 5% or more of the New Shares.

To the best of our knowledge, we are not aware of any person who intends to subscribe for Shares in thisInvitation amounting to 5% or more of the New Shares. However, through a book-building process toassess market demand for our Shares, there may be person(s) who may indicate an interest to subscribefor Shares amounting to 5% or more of the New Shares. If such person(s) were to make an applicationfor Shares amounting to 5% or more of the New Shares and subsequently be allotted such number ofShares, we will make the necessary announcements at an appropriate time.

Further, no Shares shall be allocated or allotted on the basis of this Prospectus later than six monthsafter the date of registration of this Prospectus.

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USE OF PROCEEDS

We expect to receive net proceeds of approximately S$80.7 million after deducting estimated expensesfrom the issue of 150,000,000 New Shares at an issue price of S$0.575 each.

We intend to use the net proceeds for the following purposes:-

(a) approximately RMB110 million, equivalent to S$$21.6 million(1), for setting up and installingadditional production lines for soy protein isolates to increase production capacity by 20,000tonnes per annum;

(b) approximately RMB100 million, equivalent to S$19.7million(1), for setting up and installing additionalproduction lines for soy oligosaccharide syrup to increase production capacity by 4,000 tonnes perannum;

(c) approximately RMB45 million, equivalent to S$8.8 million(1), for setting up and installing a newproduction line for defatted soy flakes, a raw material for the production of soy protein isolates, toincrease production capacity by 75,000 tonnes per annum;

(d) approximately RMB22 million, equivalent to S$4.3 million(1), for the expansion of our marketing anddistribution network;

(e) approximately RMB100 million, equivalent to S$19.7 million(1) to reduce bank borrowings. Forfurther details, please refer to the section “Capitalisation and Indebtedness” on pages 61 and 62 ofthis Prospectus; and

(f) the balance of approximately RMB34 million, equivalent to S$6.6 million(1), for general workingcapital.

For further details of (a) to (d) above, please refer to the section “Prospects and Future Plans” on pages102 and 103 of this Prospectus.

Pending the specific deployment of funds, the proceeds may be placed as deposits with financialinstitutions or added to our working capital or used for investment in short-term money marketinstruments as may be determined by our Directors in their absolute discretion.

In the opinion of our Directors, no minimum amount must be raised by this Invitation. Although nominimum amount must be raised by our Company from this Invitation in order to provide for the itemsabove, such amount is proposed to be provided out of the issue of the New Shares or in the event thisInvitation is cancelled, out of funds generated from our operations, external borrowings and other fundraising exercises. We may choose not to fully implement our plans.

Note:-

(1) Based on the exchange rate of S$1.00 to RMB5.087 as at the Latest Practicable Date.

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RISK FACTORS

Prospective investors should carefully consider and evaluate the following considerations and all otherinformation contained in this Prospectus before deciding to invest in our Shares. If any of the followingconsiderations and uncertainties develop into actual events, our business, results of operations andfinancial condition could be materially and adversely affected. In such cases, the trading price of ourShares could decline due to any of these considerations and uncertainties, and you may lose all or partof your investment in our Shares.

RISKS RELATING TO OUR BUSINESS

We are vulnerable to fluctuations of soybean prices

Soybean and defatted soy flakes are our main raw materials. For FY2001, FY2002 and FY2003 and thesix months ended 30 June 2004, soybean constituted approximately 60.6%, 70.5%, 53.5% and 53.4%respectively of our cost of sales, and defatted soy flakes constituted approximately 15.9%, 12.1%, 26.2%and 24.9% respectively of our cost of sales. As defatted soy flakes are derived from soybean, prices ofdefatted soy flakes would be affected by fluctuations in soybean prices. Any fluctuations in the prices ofsoybean will have a direct impact on our cost of sales.

Prices of soybean are affected mainly by climatic and market conditions. In the event of a drought orflood or other adverse weather conditions, soybean harvests will be affected. These would result indecreases in the supply of soybean and increases in soybean prices, which will lead to increases in ourcost of sales. Prices of soybean are also affected by prevailing market demand and supply conditions.

There can be no assurance that we will not be adversely affected by fluctuations in the prices of soybeanin the future. Furthermore, should there be any significant fluctuations in soybean prices, there can beno assurance that we will be able to pass on such increases to our consumers. In this event, ourbusiness, profitability and financial performance will be materially and adversely affected.

We are dependent on regulatory approvals for our operations

Operators within the PRC soybean industry are subject to compliance with the PRC food hygiene lawsand regulations. These food hygiene laws require all enterprises engaged in the production and sale offood related products to obtain a hygiene permit. They also set out hygiene standards with respect tofood production and packaging, information to be disclosed on the packaging as well as hygienerequirements for food production and sites, facilities and equipment used for transportation and sale offood. Such hygiene permits are subject to annual review. The relevant authorities conduct stringentinspections at our manufacturing plants to ensure that our production meets the prescribed standards. Ifour soybean-based products fail to meet the prescribed standards, the relevant authorities may withdrawor suspend the relevant licence or activities of our Group and/or impose penalties on our Group.

We have obtained all the requisite licences for our operations. Please refer to the section “Licences,Permits and Approvals” on pages 100 and 101 of this Prospectus for further details of the requisitelicences. Should we fail to obtain or renew the requisite licences or should any of them be revoked orsuspended, our business and financial performance would be adversely affected.

We manufacture soybean oil at our Fujin Plant. With effect from 18 July 2003, underthe (Administrative Measures for Quality & Safety Supervisionof Food Production and Processing Enterprises), we are required to obtain a permit for the production of soybean oil at our Fujin Plant. On 3 November 2004, we received the(National Industrial Productions Production Permit) from the (The GeneralAdministration of Quality Supervision, Inspection and Quarantine of the PRC) for the production ofsoybean oil at our Fujin Plant. Prior to the issuance of the production permit, we have obtainedconfirmation from the (Quality and Technical Supervision Bureau of Jiamusi)(“Jiamusi QTSB”) that we have complied with the requisite safety and quality standards for the productionof soybean oil. Further, the Jiamusi QTSB has confirmed that we will not be subject to any penalty forcontinuing production of soybean oil prior to the receipt of a production permit. However, there is no

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assurance that (Quality and Technical Supervision Bureau of HeilongjiangProvince) (“Heilongjiang QTSB”) being the authority at the provincial level responsible for theadministration of the food-production enterprises, will not impose any penalty on us in this regard. Suchpenalty include a fine amounting to between 15% and 20% of the cost of soybean oil produced (suchfine if imposed is estimated to be between RMB5.7 million and RMB7.6 million based on the total cost ofsoybean oil produced of RMB37.9 million) and the confiscation of proceeds obtained from the sale of thesoybean oil (the amount of such proceeds is estimated to be approximately RMB44.4 million). If wesuffer a penalty, our Group’s business operations and financial results will be materially and adverselyaffected. Please refer to the section “Licences, Permits and Approvals” on pages 100 and 101 of thisProspectus for further information.

Compliance with GMP standards for health-care food

According to an opinion issued by the SFDA in 2003, all health-care food product manufacturers in thePRC are required to comply with the GMP standards by 31 December 2003, otherwise their hygienepermits will be revoked or they will not be renewed and accordingly production will have to be terminated.

As our soy oligosaccharide syrup is being distributed as a health-care food product, we are required toobtain the approval certification from the health administration authority, and to pass the GMP standardscertification for our production of such health-care products.

The GMP standards of compliance may change from time to time and may give rise to substantialcompliance burdens and increase the operation costs of our Group. If our Group fails to comply withsuch PRC food hygiene laws and standards, the renewal of any required hygiene permit or GMP-relatedstatus may not be granted and all or part of the manufacturing operations of our Group’s soyoligosaccharide syrup may have to be terminated. This will in turn have a material adverse impact on ourGroup’s performance.

We may be affected by complaints from customers and negative publicity

We may, from time to time, be the subject of complaints from consumers with regard to food quality andfood hygiene, which may harm our reputation. Our business may also be adversely affected by negativepublicity resulting from the publication of industry findings, research reports or health concerns withregard to soybean and soybean-based products. Complaints from customers and such negativepublicity, regardless of their basis and validity, may lead to consumers choosing not to purchase soybeanand soybean-based products, and thereby causing a decrease in demand for our soybean-basedproducts. In such event, our sales and profitability will be adversely affected.

We are subject to changes in consumer preferences

We believe that our continued growth depends, in part, on the continued consumer preference forsoybean-based products. Shifts in consumer preferences away from our soybean-based food products toother types of food products could lead to a significant drop in demand for our soybean-based products.In such event, our business operations and profitability will be materially and adversely affected.

We face competition from other manufacturers and new entrants

Currently, differentiation between our products and those of our competitors is low. Our successdepends on our ability to compete effectively against our competitors’ soybean-based products. Wecannot assure you that we will be able to compete effectively and successfully in the future. Should therebe any significant increase in the number and brands of soybean-based products, in particular soyprotein isolates, or if we are not able to compete effectively against other soybean-based productsmanufacturers in the PRC or cope with the changing market condition by improving our competitiveness,including price and quality of our products, our sales and profitability will be adversely affected.

There is also no assurance that we will not face competition from new entrants and that we can competesuccessfully against these new entrants. If we are unable to compete effectively and successfully againstthe new entrants, our sales and profitability will be adversely affected. Please refer to the section“Competitors” on page 93 of this Prospectus for more details of our competitors.

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We are dependent on our major customers

Our major customers, (Linyi Xincheng Jinluo Meat Products Co., Ltd.),

(Daqing Jinluo Meat Products Co., Ltd.) and (Jiutai MeatProcessing Plant) accounted for 16.1%, 26.0% and 23.7% of our total sales and 30.7%, 35.1% and32.7% of our total sales for soy protein isolates for FY2002, FY2003 and the six months ended 30 June2004 respectively. Other than the agreement to supply soy oligosaccharide syrup to a beveragemanufacturer for two years from 1 July 2004 as disclosed under the section “Major Customers” on pages90 to 92 of this Prospectus, we do not have any long-term contracts with any of our customers. Therecan be no assurance that our major customers, as set out in the section “Major Customers” on pages 90to 92 of this Prospectus, will continue to purchase our soybean-based products at current levels.

If any of our major customers ceases or reduces significantly their purchases of our soybean-basedproducts and we are unable to obtain or secure new orders of comparable size, our business andprofitability will be materially and adversely affected.

We are dependent on our major suppliers

Our major suppliers, accounted for in aggregate approximately 8.4%, 17.3% and 17.9% of our Group’spurchases for FY2002, FY2003 and the six months ended 30 June 2004 respectively. We have notentered into any long-term supply contracts with any of our suppliers to enable us to maintain flexibility insourcing quality suppliers with competitive prices.

If our suppliers are unable to fulfil our raw materials needs, we may not be able to seek alternativesources of supply in a timely manner, or we may be subject to higher costs from alternative suppliers.An insufficient supply of raw materials or any delay or disruption in delivery schedules of raw materialswill adversely affect our ability to meet our customers’ orders, and any significant increase in the cost ofraw materials will have a material adverse impact on our profitability.

We are exposed to potential product liability

Under the (Product Quality Law of China), if a product causes propertydamage or personal injury, manufacturers and sellers of the product are liable for property damage orpersonal injuries caused by the product. In addition, under the (Protection of the Rights and Interests of Consumers Law of China), which protects the rights ofconsumers in respect of safety of person and property in the purchase and use of goods and services,

(The Industry and Commerce Authority) is authorised to impose penalties on thesemanufacturers and sellers. Although none of the laboratory tests conducted by our Group has indicatedthat our Group’s products are toxic or can cause irritation, there can be no assurance that such productswill not cause irritation, health complications or any other allergic reactions on certain users. Anysuccessful product liability claim against our Group will adversely affect our Group’s business andreputation. Even if our Group is able to successfully defend such claim, there can be no assurance thatour customers will not lose confidence in our Group’s products and thereby adversely affecting thebusiness and reputation of our Group. A product liability claim, even one without merit, could result inour Group incurring significant expenses and substantial time and efforts of the management of ourGroup in defending and proving such claim to be without merit.

Our intellectual property is important to our ability to succeed in our business but may bedifficult to protect

Our ability to compete successfully and achieve future growth in revenues will depend, in part, on ourability to protect our trade secrets and/or technical know-how relating to our manufacturing processes.Apart from the Service Agreements entered into between our Company and our Executive Directors,details of which are set out in the section “Service Agreements” on page 111 of this Prospectus, ourGroup has also entered into confidentiality agreements with our management and employees from theResearch and Development team to protect such trade secrets and proprietary information.

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In the event of a departure of any of our management or technical personnel, they may disclose suchtrade secrets and/or technical know-how to third parties. In addition, we may fail to achieve ourintellectual property objectives, and as a result, we may be unable to obtain or use intellectual propertyrights we need to operate our business, and this may increase our costs which could reduce ourprofitability.

If our Group decides to enforce our intellectual property rights through litigation, such litigation, whethersuccessful or unsuccessful, could result in substantial costs and diversions of resources, either of whichcould have a material adverse effect on our Group’s business, financial condition and operation results.

Additionally, we cannot assure you that our competitors will not develop or gain access to similar tradesecrets and/or technical know-how. The occurrence of any of those events could have a materialadverse effect on our business, financial condition, results of operations and/or prospects and our abilityto succeed in our business.

We may face legal suits for infringement of third party intellectual property rights

We may be subject to legal suits if we infringe third party intellectual property rights. Our intellectualproperty rights and proprietary know-how may be subject to dispute and it is possible that there iscompeting technical know-how vested in third parties. As at the date of this Prospectus, we have notreceived any claims from third parties in respect of the infringement of any intellectual property rightsowned by such third parties. However, there can be no assurance that third parties may not assertclaims to our proprietary processes, technologies and systems. Any such claims, with or without merit,could be time consuming, result in costly litigation and diversion of technical and management personnel,cause product shipment delays, require us to develop non-infringing products or enter into licensingagreements. Such licensing agreements, if required may not be available on terms acceptable to us or atall. In the event of a successful claim of intellectual property right infringement against us and our failureor inability to develop non-infringing products or to license the infringed intellectual property rights in atimely or cost-effective basis, our business, operations and financial performance will be adverselyaffected.

Our research and development of new products may not lead to successful commercialisation ofthese products

One of the factors contributing to our success is our research and development efforts to improve thequality of our existing products and to accelerate the development of new products. However, successfuldevelopment and marketing and sale of our products is uncertain. Products which appear to bepromising at the early phases of research and development may fail to be commercialised for numerousreasons, including disproportionate high costs of production and the discovery of other negative productcharacteristics. Our future growth depends on the successful development and sale of new products.There is no assurance that our Group’s future research and development projects will be successful orwould be completed within the anticipated time frame. Further, we may not be able to control and predictthe market response for our new products introduced into the market. An unexpected poor responsefrom the market of our new products will not generate the expected revenues to cover our research anddevelopment costs and other costs relating to the promotion of the product. These developments wouldhave a material adverse impact on our business and profitability.

Failure to retain the services of our key management staff or to hire and retain experiencedexecutives and staff will adversely affect our operations and results

Our continued success is dependent, to a large extent, on our ability to retain the services of our keymanagement and operational personnel as they are responsible for the formulation of our businessstrategies and overseeing our manufacturing operations. The loss of our key management and staff, whohave the experience and expertise in our business as well as established relationships with ourcustomers and suppliers, without suitable replacements, or the inability to attract and retain qualifiedpersonnel will adversely affect our operations and hence, revenue and profits. In particular, the loss ofthe services of Li Zhuping, our Chief Executive Officer, Hu Fabao, our Executive Director and our seniormanagement, will have an adverse impact on our performance.

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Failure to collect our trade receivables could impair our profits

Our trade receivables of approximately RMB3.0 million, RMB1.8 million, RMB30.3 million and RMB13.4million accounted for approximately 5.1%, 1.8%, 22.7% and 10.1% of our current assets andapproximately 3.3%, 1.0%, 10.8% and 3.9% of our total assets as at FY2001, FY2002, FY2003 and thesix months ended 30 June 2004 respectively. Therefore, our financial position, profitability and cash floware dependent to a large extent on the creditworthiness of our customers and their ability to pay us on atimely basis. Please refer to the section “Credit Policy” on pages 91 and 92 of this Prospectus for moredetails. Further, as our customer base grows, we will be exposed to credit risks from new customers.We are unable to assure you that the risk of default by our customers will not occur or increase in thefuture.

We may be affected by the spread of severe acute respiratory syndrome (“SARS”) or an outbreakof any other communicable or virulent disease

An outbreak of SARS and other communicable diseases, if uncontrolled, could have a material adverseeffect on our operations. In the event that any of our employees or the employees of our suppliers and/orcustomers is infected with SARS, we, our suppliers or customers may be required to temporarily shutdown operations to prevent the spread of the disease. This will have a negative impact on our business.

RISKS RELATING TO THE PRC

Change in political and economic conditions

Since our business is located in the PRC, our business operations and financial position are subject tothe economic and political development in the PRC to a significant degree.

The PRC government started implementing the economic reform policy in 1978 which has enabled thePRC economy to gradually transform from a planned economy to a socialist market economy. In 1993,the concept of the socialist market economy was introduced into the Constitution of the PRC, and thedevelopment of the PRC’s economy has since accelerated. A noteworthy phenomenon in the recentdevelopment of the PRC economy is the role of non-state owned enterprises such as private enterpriseswhich play an increasingly important role in the whole PRC economy and the declining influence anddirect control by the PRC government over the economy.

The PRC government has been taking macro-economic austerity measures to suppress inflation andcurb the pace of economic growth since July 1993. These measures include raising interest rates,tightening credit supply, delaying implementation of certain reform policies on pricing, enhancing financialsupervision as well as tightening control on the grant of approval for property and infrastructure projects.However, since 1998, there has been deflation in the PRC economy and the current economic policies ofthe PRC mainly focus on stimulating consumption and expansion of domestic demand.

The PRC government has not stopped its economic reform policy since 1978, and if there are anysignificant adverse changes in the social, political and economic conditions of the PRC, there may befundamental changes in the PRC economic reform policies and thus our business, results of operationand financial position will be materially and adversely affected.

Changes and uncertainties in the PRC legal system

The PRC legal system is based on statutory law. Unlike the common law system, statutory law is basedon written statutes. Prior court decisions may be cited as persuasive authority but do not have bindingeffect. Since 1979, the PRC government has been promulgating and amending the laws and, regulationsregarding economic matters, such as corporate organisation and governance, foreign investment,commerce, taxation and trade. However, the PRC legal system is still not as well-developed as thosewestern countries with a common law legal system and the interpretation and enforcement of the PRClaws are still subject to uncertainties.

If any court decision or any interpretation or enforcement of the PRC laws in relation to our businessdoes not follow relevant precedents and are decided to our detriment, our business, results of operationand financial position will be materially and adversely affected as a result of such uncertainty.

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We are subject to foreign exchange controls, which can materially and adversely affect ouroperating results and financial position and our PRC subsidiary’s ability to pay dividends ormake other distribution to us

Our PRC subsidiary is subject to PRC rules and regulations on currency conversion. In the PRC, theState Administration for Foreign Exchange (“SAFE”) regulates the conversion of the RMB into foreigncurrencies. Currently, foreign invested enterprises (“FIEs”) are required to apply to SAFE for “ForeignExchange Registration Certificates for FIEs”. Our PRC subsidiary is a FIE. With such registrationcertifications (which need to be reviewed annually), FIEs are allowed to open foreign currency accountsincluding the “recurrent account” and “capital account”. Currently, conversion within the scope of the“recurrent account” (for example, remittance of foreign currencies for payment of dividends, etc.) can beeffected without requiring the approval of SAFE. However, conversion of currency in the “capital account”(for example, for capital items such as direct investments, loans, securities, etc.) still requires theapproval of SAFE.

The applicable law in respect of conversion of RMB into other currencies is the Regulation for ForeignExchange Controls of the PRC ("Regulation") which came into effect on 1 April 1996 and amended as of14 January 1997.

Under the Regulation:

(a) conversion of RMB into foreign currencies for the use of recurring items, including the distributionof dividends and profits to foreign investors of foreign investment enterprises is permissible andforeign investment enterprises are permitted to remit foreign currencies from their foreign currencybank accounts in the PRC upon presentation of board resolutions which authorise the distributionof profits or dividends and subject to other requirements being satisfied; and

(b) conversion of RMB into foreign currencies for capital items, such as repatriation of capital,repayment of loans and for securities investment, is still under control.

In addition, on 24 January 2005, SAFE promulgated the

(Circular of the State Administration of Foreign Exchange Concerning Relevant Issues onImproving Foreign Exchange Administration for Merger and Acquisitions with Foreign Entities) (the“Circular”). The Circular provides for, inter alia, strict supervision and control by SAFE and its localbranches/offices of capital contribution examination, foreign currency registration for share transfers,registration of shareholders’ loan, remittance of profits out of the PRC, re-investment of profits, and sharetransfers by foreign invested enterprises established in the manner of acquisitions of PRC enterprises byforeign enterprises with PRC residents as shareholders.

According to the (Notice concerning theRelevant Issues for the Registration of Overseas Investments by Domestic Residents and ForeignExchange Registration for Foreign Acquisition) promulgated by SAFE on 8 April 2005, it was furtherrequired that PRC residents who have contributed their domestic assets or shares into the overseascompanies and thus hold the shares of such overseas companies directly or indirectly, shall conductsupplemental foreign exchange registration with the local foreign exchange authority, even if the relevantacquisition of the domestic company had been completed prior to 24 January 2005. Without suchsupplemental registration, the PRC residents are prohibited to conduct foreign investment and conductother foreign exchange business under capital item, and the foreign exchange registration for the foreigninvested company will not be proceeded by the local foreign exchange authority. If the foreign exchangeregistration for the foreign invested company was made by false or misleading information andrepresentation, the foreign invested company shall be liable for the profits remitted out of the PRC andother transactions under the capital item since the registration date. The PRC resident who is the largestshareholder in the overseas invested companies directly or indirectly is also required to go throughregistration for modification or record with the local foreign exchange authority within 30 days from thedate of any increase/decrease of capital, share transfer, merger/splitting, overseas share investment, andforeign guarantees concerning domestic assets of such overseas invested companies (“material issues”).Failure to conduct the above supplemental registration, registration for modification or record of thematerial issues with the local foreign exchange authority fully could adversely affect our ability to remitour profits, liquidation, share transfer and capital decreasing fees abroad, and could be punished as

39

foreign exchange evasion. The relevant PRC residents, Li Zhuping, Hu Fabao and Dai Yonghu hadcompleted the supplemental registration with the local foreign exchange authority, and each of them hasgiven an undertaking to comply with the above requirements in relation to the registration for modificationor record with the local foreign exchange authority if any material issues should occur.

We cannot provide any assurance that the PRC regulatory authorities will not impose further restrictionson the convertibility of the RMB. As our subsidiary in the PRC generates a significant proportion of ourrevenue and these revenues are denominated mainly in RMB, any future restrictions on currencyexchanges may limit our ability to repatriate such revenues for the distribution of dividends to ourShareholders or for funding our other business activities outside the PRC.

Please refer to the section “Exchange Controls” on pages 64 and 65 of this Prospectus for further details.

We will be subject to the PRC’s environmental laws and regulations

Our manufacturing facilities in the PRC will be subject to environmental laws and regulations imposed bythe PRC authorities. In the PRC, our business operations are subject to laws and regulations relating to,inter alia, air protection, waste management and water protection. If stricter rules are imposed on airprotection, waste management and water protection by the PRC authorities which result in us having toincur a higher production cost to comply with such stricter rules, our businesses and financialperformance in the PRC will be adversely affected.

Cessation of income tax exemption for our PRC subsidiary will have an adverse impact on ournet profit

In accordance with the applicable corporate income tax law of the PRC, LSBP, our wholly-ownedsubsidiary which was established as a wholly foreign-owned enterprise (“WFOE”) in the PRC, isexempted from the corporate income tax for its first two profitable calendar years of operations and isentitled to a 50% relief from the state corporate income tax and exempted from the local income tax forthe following three years. The two years’ tax exemption period for LSBP commenced in the financial yearended 31 December 2004 and will expire as at 31 December 2005 as approved by the local tax authority.Upon expiry of the tax exemption period, LSBP will be subject to a reduced state corporate income taxrate of 15% and be exempted from the local income tax for the three financial years from 1 January 2006to 31 December 2008. After 31 December 2008, an income tax rate of 33% will be applicable to us. Assuch we will not be able to enjoy the tax benefits from 31 December 2008 onwards. The loss of the taxbenefit will increase our tax expenses.

Please refer to the section “Selected Pro Forma Group Financial Information” on pages 44 to 47 of thisProspectus which states the Pro forma Financial Information of our Group for the past three financialyears ended 31 December 2001, 2002 and 2003 and the six months ended 30 June 2004 for moredetails. In addition, prior to 31 December 2008, our profits will be adversely affected in the event of anytotal or partial removal of such tax benefits or changes to the prevailing tax regulations.

RISKS RELATING TO INVESTMENT IN OUR SHARES

Future sale of our Shares could adversely affect our Share price

Any future sale or availability of our Shares can have a downward pressure on our Share price. The saleof a significant amount of our Shares in the public market after this Invitation, or the perception that suchsales may occur, could materially adversely affect the market price of our Shares. These factors alsoaffect our ability to sell additional equity securities. Except as otherwise described in the section“Moratorium” on page 71 of this Prospectus, there will be no restriction on the ability of our SubstantialShareholders to sell their Shares either on the SGX-ST or otherwise.

We are a Bermuda incorporated company and the rights and protection accorded to ourShareholders may be different from those applicable to shareholders of a Singapore-incorporatedcompany

We are incorporated in Bermuda as an exempted company under the Bermuda Companies Act. TheSingapore Companies Act may provide shareholders of Singapore incorporated companies rights andprotection of which there may be no corresponding or similar provisions under Bermuda Companies Act.As such, if you invest in our Shares, you may or may not be accorded the same level of Shareholderrights and protection that a shareholder of a Singapore incorporated company may be accorded underthe Singapore Companies Act. We have set out in Appendix J of this Prospectus, a summary of certain

40

provisions under Bermuda company law and in Appendix I of this Prospectus a summary of ourMemorandum of Association and selected Bye-Laws. Each of the summaries and explanatorystatements is not intended to be and does not constitute legal advice and any person wishing to haveadvice on the differences between the Bermuda Companies Act and the Singapore Companies Actand/or the laws of any jurisdiction with which he is not familiar is recommended to seek independentlegal advice. Copies of our Memorandum of Association and Bye-Laws are available for inspection atsuch place and time as set out in the section “Documents available for inspection” on pages 133 and 134of this Prospectus.

Our subsidiaries, operations and significant assets are located in the PRC. Our shareholdersmay not be accorded the same rights and protection that would be accorded under the SingaporeCompanies Act. In addition, it could be difficult to enforce a Singapore judgement against us, ourDirectors and our officers

Our principal operating subsidiary, LSBP, and our operations are located in the PRC. Our principalsubsidiary is therefore subject to the applicable laws and regulations in the PRC. The SingaporeCompanies Act may provide Shareholders with certain rights and protection of which there may be nocorresponding or similar provisions under applicable PRC laws and regulations. As such, investors in ourShares may or may not be accorded the same level of shareholder rights and protection that would beaccorded under the Singapore Companies Act in relation to a Singapore incorporated company. Inaddition, our Executive Directors and all of our Executive Officers are non-residents of Singapore, andsubstantially all the assets of these persons are located outside Singapore. As a result, it could bedifficult for investors to effect service of process in Singapore if they wish to make a claim against ourCompany or our subsidiaries or any of our Executive Directors or Executive Officers, or to enforce ajudgement obtained in Singapore against our Company or our subsidiaries or any of our ExecutiveDirectors or Executive Officers.

Protection afforded under the Singapore Take-over and Merger Laws and Regulations is limited inthe event of a take-over

There are at present no provisions under any Bermuda laws or regulations of general applicationrequiring persons who acquire significant shareholdings in the capital of our Company to make take-overoffers for our Shares. As our Company is established in Bermuda, the Singapore Take-over and MergerLaws and Regulations will not apply to offers for our Shares. Although Bye-Law 193 of our Bye-Lawswill, due to its binding effect on our registered Shareholders, require our registered Shareholders (our“Members”) who make take-over offers for our Shares to comply with the Singapore Take-over andMerger Laws and Regulations, it is uncertain whether this can be enforced in respect of persons who arenot our Members. In the event that a person (not being one of our Members), whether alone or togetherwith parties acting in concert with him, acquires or gains control of 30% or more of our issued and paid-up share capital, you may not be offered an opportunity to sell your Shares to such person at the pricehe paid for those Shares. Even if any take-over offer is made for our Shares, such take-over offer maynot be made in accordance with the procedures stipulated in the Singapore Take-over and Merger Lawsand Regulations. Please refer to the section “Take-overs” on page 19 of this Prospectus.

Risks relating to the purchase by our Company of our own Shares

Under the laws of Bermuda, a company may, if authorised by its memorandum of association or bye-laws, purchase its own shares. Our Company has such power to purchase our own Shares pursuant toClause 7(h) of our memorandum of association. Such purchases may be effected out of the capital paid-up on the purchased Shares or out of the funds of our Company otherwise available for dividends ordistribution or out of proceeds of a fresh issue of Shares made for that purpose. Any premium payableon such a purchase over the par value of the Shares to be purchased must be provided for out of thefunds of our Company otherwise available for dividends or distribution or out of our Company’s sharepremium account before the Shares are purchased. Further, such purchase may not be made if, on thedate on which the purchase is to be effected, there are reasonable grounds for believing that ourCompany is, or after the purchase would be, unable to pay our liabilities as they become due. Sharespurchased by our Company will be treated as cancelled and our Company’s issued capital, but not ourauthorised capital, will be diminished accordingly. For further details, please refer to the section“Purchase by our Company of our own Shares” on page 17 of this Prospectus.

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42

INVITATION STATISTICS

Issue Price

NTA

The adjusted NTA per Share(1) based on the Pro forma consolidated balancesheet of our Group as at 30 June 2004 and after adjusting for the RestructuringExercise referred to in the section “Restructuring Exercise” on pages 72 to 75 ofthis Prospectus (the “Adjusted NTA per Share”):-

(a) before adjusting for the estimated net proceeds of this Invitation andbased on our pre-Invitation share capital of 450,000,000 Shares

(b) after adjusting for the estimated net proceeds of this Invitation and basedon our post-Invitation share capital of 600,000,000 Shares

Premium of Issue Price over the Adjusted NTA per Share:-

(a) before adjusting for the estimated net proceeds of this Invitation andbased on our pre-Invitation share capital of 450,000,000 Shares

(b) after adjusting for the estimated net proceeds of this Invitation and basedon our post-Invitation share capital of 600,000,000 Shares

EPS

Historical net EPS of our Group for FY2003 based on our pre-Invitation sharecapital of 450,000,000 Shares

Historical net EPS of our Group for FY2003 based on our pre-Invitation sharecapital of 450,000,000 Shares, assuming that the Service Agreements (set outin the section “Service Agreements” on page 111 of this Prospectus) had beenin place since the beginning of FY2003

PER

Historical net PER based on the historical net EPS of our Group for FY2003

Historical net PER based on the historical net EPS of our Group for FY2003,assuming that the Service Agreements (set out in the section “ServiceAgreements” on page 111 of this Prospectus) had been in place since thebeginning of FY2003

Net Operating Cash Flow(2)

Historical net operating cash flow per Share of our Group for FY2003 based onour pre-Invitation share capital of 450,000,000 Shares

Price to Cash Flow Ratio

Ratio of Issue Price to historical net operating cash flow per Share for FY2003

Market Capitalisation

Our Company’s market capitalisation based on our post-Invitation share capitalof 600,000,000 Shares and the Issue Price

Notes:-

(1) NTA per Share has been computed based on our net assets excluding land use rights.

(2) Net operating cash flow is defined as net profit after tax with provision for depreciation and amortisation (net of tax) addedback.

57.50 cents

10.69 cents

21.47 cents

437.89 %

167.82 %

2.86 cents

2.82 cents

20.10 times

20.39 times

3.20 cents

17.97 times

S$345.00 million

DILUTION

Dilution is the amount by which the Issue Price paid by subscribers of our Shares in this Invitationexceeds our Pro forma NTA per Share(1) after this Invitation. The Pro forma NTA of our Group as at 30June 2004 was approximately 10.69 cents per Share based on our pre-Invitation share capital of450,000,000 Shares.

Based on the issue of 150,000,000 New Shares at the Issue Price of S$0.575 per Share pursuant to thisInvitation and after deducting estimated issue expenses, the Pro forma NTA of our Group as at 30 June2004 based on our post-Invitation share capital of 600,000,000 Shares would have been approximately21.47 cents per Share. This represents an immediate increase in NTA of approximately 10.78 cents perShare to our existing Shareholders and an immediate dilution in NTA of approximately 36.03 cents perShare to new investors.

The following table illustrates this per Share dilution:-

cents

Issue Price per Share 57.50

Pro forma NTA per Share as at 30 June 2004 10.69

Increase in Pro forma NTA per Share to our existing Shareholders 10.78

Pro forma NTA per Share after this Invitation 21.47

Dilution in Pro forma NTA per Share to new investors 36.03

Dilution in Pro forma NTA per Share to new investors as a percentage of Issue Price 62.66%

The following table summarises the total number of Shares acquired by our existing shareholders directlyfrom us during the period of three years prior to the date of this Prospectus (acquired pursuant to theRestructuring Exercise, details of which are set out in the section “Restructuring Exercise” on pages 72to 75 of this Prospectus), the total consideration paid by them and the average price per Share to theexisting shareholders and to our Company’s new investors pursuant to this Invitation.

Total Cash/Non-Number of Shares Cash Average Price

acquired Consideration(2) per Share(’000) S$(’000) (cents)

Existing Shareholders 175,500 18,840 10.74

PFH 220,500 45,737 20.74

Pre-IPO Investors 54,000 10,936 20.25

New investors 150,000 86,250 57.50

Notes:-

(1) NTA per Share has been computed based on our net assets excluding land use rights.

(2) Based on net asset value as at 31 December 2003 and an exchange rate of S$1:RMB4.8883.

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SELECTED PRO FORMA GROUP FINANCIAL INFORMATION

The following selected Pro forma Group Financial Information should be read in conjunction with the fulltext of this Prospectus, including the Pro forma Consolidated Financial Information of our Pro formaGroup as set out in Appendix A of this Prospectus.

OPERATING RESULTS OF OUR PRO FORMA GROUP(1)

Pro forma

Unaudited six months

ended Six months period 30 ended 30 June

RMB’000 FY2001 FY2002 FY2003 June 2003 2004

Revenue 30,677 210,406 373,932 162,473 204,317Cost of sales (24,561) (159,377) (263,861) (114,719) (141,541)

Gross profit 6,116 51,029 110,071 47,754 62,776Other revenue 98 1,208 971 634 657Selling and distribution (812) (7,020) (10,619) (4,732) (7,588)expenses

Administrative expenses (386) (3,232) (7,683) (5,206) (3,668)Other operating expenses (63) (294) (260) (105) (166)

Profit before taxation 4,953 41,691 92,480 38,345 52,011Taxation (1,634) (13,999) (31,300) (12,817) –

Net profit attributable to 3,319 27,692 61,180 25,528 52,011Shareholders

EPS (RMB cents) (2) 0.74 6.15 13.60 5.67 11.56

Notes:-

(1) The financial results of our Pro forma Group for the period under review have been prepared on the basis that our Pro formaGroup following the completion of the Restructuring Exercise has been in existence throughout the period under review since17 September 2001.

(2) For comparative purposes, EPS for the period under review have been computed based on the net profit attributable toShareholders for the relevant financial period and our pre-Invitation share capital of 450,000,000 Shares.

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OPERATING RESULTS OF OUR PRO FORMA GROUP(1)

(translated to Singapore Dollars)

Pro forma

Unaudited six months

ended Six months 30 June ended 30 June

S$’000 FY2001 FY2002 FY2003 2003 2004

Revenue 6,636 45,258 78,706 34,284 41,868Cost of sales (5,313) (34,282) (55,538) (24,207) (29,004)

Gross profit 1,323 10,976 23,168 10,077 12,864Other revenue 21 260 204 134 135Selling and distribution (176) (1,510) (2,235) (999) (1,555)expenses

Administrative expenses (83) (695) (1,617) (1,099) (752)Other operating expenses (14) (63) (55) (22) (34)

Profit before taxation 1,071 8,968 19,465 8,091 10,658Taxation (353) (3,011) (6,588) (2,705) –

Net profit attributable to 718 5,957 12,877 5,386 10,658Shareholders

EPS (cents) (2) 0.16 1.32 2.86 1.20 2.37

Notes:-

(1) The financial results of our Pro forma Group for the periods under review have been prepared on the basis that our Proforma Group following the completion of the Restructuring Exercise has been in existence throughout the period underreview since 17 September 2001.

(2) For comparative purposes, EPS for the periods under review have been computed based on the net profit attributable toShareholders for the relevant financial period and our pre-Invitation share capital of 450,000,000 Shares.

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FINANCIAL POSITION OF OUR PRO FORMA GROUP(1)

Pro forma

As at As atRMB’000 31 December 2003 30 June 2004Non-current assets

Fixed assets 125,463 166,201Deposits 11,739 7,677Land use rights 10,383 38,612

147,585 212,490Current assets

Inventories 62,867 81,416Trade receivables 30,333 13,440Prepayments and other receivables 9,193 10,568Cash and bank balances 31,067 28,128

133,460 133,552Current liabilities

Trade payables 13,457 7,977Accrued liabilities, other payables and deposits received 30,235 46,706Amount due to a director 975 975Amount due to a related company 8,286 –Provision for taxation 8,119 –

61,072 55,658


Total assets less current liabilities 219,973 290,384

Non-current liability

Other payables – 18,400

Net assets 219,973 271,984

Represented by:


NTA per Share (RMB cents) (2) 46.58 51.86

Notes:-

(1) The financial position of our Pro forma Group as at 31 December 2003 and 30 June 2004 have been prepared on the basisthat our Pro forma Group following the completion of the Restructuring Exercise was in existence on these dates.

(2) For comparative purposes, our NTA per Share has been computed based on our net assets excluding land use rights and onour pre-Invitation share capital of 450,000,000 Shares.

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FINANCIAL POSITION OF OUR PRO FORMA GROUP(1)

(translated to Singapore Dollars)

Pro forma

As at As atS$’000 31 December 2003 30 June 2004Non-current assets

Fixed assets 25,784 34,247Deposits 2,412 1,582Land use rights 2,134 7,956

30,330 43,785

Current assets

Inventories 12,920 16,776Trade receivables 6,234 2,769Prepayments and other receivables 1,889 2,178Cash and bank balances 6,385 5,796

27,428 27,519

Current liabilities

Trade payables 2,765 1,644Accrued liabilities, other payables and deposits received 6,214 9,624Amount due to a director 200 201Amount due to a related company 1,703 –Provision for taxation 1,669 –

12,551 11,469




Other payables – 3,791

Net assets 45,207 56,044

Represented by:


NTA per Share (cents)(2) 9.57 10.69

Notes:-

(1) The financial position of our Pro forma Group as at 31 December 2003 and 30 June 2004 have been prepared on the basisthat our Pro forma Group following the completion of the Restructuring Exercise was in existence on these dates.

(2) For comparative purposes, our NTA per Share has been computed based on our net assets excluding land use rights and onour pre-Invitation share capital of 450,000,000 Shares.

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48

REVIEW OF PAST OPERATING PERFORMANCE AND FINANCIAL POSITION

The following discussion of our results of operations and financial position should be read in conjunctionwith the Pro forma Consolidated Financial Information as set out in Appendix A of this Prospectus. Thisdiscussion contains forward-looking statements that involve risks and uncertainties. Our actual resultsmay differ significantly from those projected in the forward-looking statements. Factors that might causeour actual future results to differ significantly from those projected in the forward-looking statementsinclude, but are not limited to, those discussed below and elsewhere in this Prospectus, particularly in thesection entitled “Risk Factors”.

OVERVIEW


We sell our soy protein isolates mainly to manufacturers of processed meat products. As for oursoybean oil, our customers are mainly manufacturers who purchase our soybean oil for furtherprocessing to obtain higher grade oil and we also sell to small retailers. Our soy oligosaccharide syrup issold to distributors for retail sales and to operators of small retail outlets. Since 1 July 2004, we also sellour soy oligosaccharide syrup to a beverage manufacturer to be used as an ingredient in theirmanufacturing process.

As at the Latest Practicable Date, we have three production plants in the PRC, namely (i) Linyi Plant (ii)Daqing Plant; and (iii) Fujin Plant. We manufacture defatted soy flakes and soybean oil (the by-productfrom the production of defatted soy flakes), soy protein isolates and soy oligosaccharide syrup at ourLinyi Plant. Our Fujin Plant manufactures soybean oil and defatted soy flakes and our Daqing Plantmanufactures soy protein isolates. As at the Latest Practicable Date, our annual production capacity is50,000 tonnes for soy protein isolates, 2,000 tonnes for soy oligosaccharide syrup and 90,000 tonnes fordefatted soy flakes. Our production of soybean oil is obtained during the manufacturing process ofdefatted soy flakes and its production output may vary accordingly.

Revenue

Our operations commenced at the end of October 2001 with the establishment of Linyi Yikang inSeptember 2001. Since then, our revenue increased from approximately RMB30.7 million in FY2001 toRMB210.4 million in FY2002 and RMB373.9 million in FY2003. For the six months ended 30 June 2004,our revenue was approximately RMB204.3 million. The increase in our revenue for the periods underreview was due mainly to the increase in the demand for our products and our production capacity.Please refer to the section “Production Facilities and Production Capacity” on pages 86 and 87 of thisProspectus for details on our maximum production capacity and approximate utilisation rates of ourproduction facilities.

Amongst our major products, our soy protein isolates product is the key contributor to our total revenue,contributing approximately 47.4%, 52.3%, 74.1% and 72.6%, or RMB14.5 million, RMB110.0 million,RMB277.0 million and RMB148.3 million, of our revenue for FY2001, FY2002, FY2003 and the sixmonths ended 30 June 2004 respectively.

Soybean oil is our other major product which is obtained during the production of defatted soy flakes.Soybean oil contributed approximately 19.1%, 23.3%, 13.5% and 12.8%, or RMB5.8 million, RMB49.1million, RMB50.5 million and RMB26.1 million, to our revenue for FY2001, FY2002, FY2003 and the sixmonths ended 30 June 2004 respectively.

Our other major product, soy oligosaccharide syrup, was launched in early FY2003. It is manufacturedfrom soybean whey, a by-product obtained during the production of soy protein isolates. The revenuecontribution from soy oligosaccharide syrup was approximately 1.0% and 6.6%, or RMB3.8 million andRMB13.5 million, for FY2003 and the six months ended 30 June 2004 respectively.

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The manufacturing processes for our major products result in the generation of other by-products whichare defatted soy flakes that do not meet our quality standards for further processing and also residueswhich are not required in our manufacturing processes. Such by-products are sold as animal feeds. ForFY2001, FY2002, FY2003 and the six months ended 30 June 2004, by-products accounted forapproximately 33.5%, 24.4%, 11.4% and 8.0% of our revenue respectively.

Revenue is recognised upon the delivery and acceptance of our products. For the last three financialyears ended 31 December 2003 and the six months ended 30 June 2004, all of our revenue isdenominated in RMB.

The main factors that may affect our revenue are as follows:-

(i) Ability to retain our existing customers and secure new customers

Our repeat customers, (Linyi Xincheng Jinluo Meat Products Co.,Ltd.), (Daqing Jinluo Meat Products Co., Ltd.) and (Jiutai Meat Processing Plant), together accounted for approximately 3.8%, 16.1%, 26.0% and23.7% of our revenue for FY2001, FY2002, FY2003 and the six months ended 30 June 2004respectively. Our continued growth is dependent on our ability to retain our existing customers andsecure new customers.

(ii) Ability to maintain and improve on our competitive strengths

Currently, differentiation between our products and those of our competitors is low. Our successdepends on our ability to compete effectively against our competitors’ soybean-based products bymaintaining and improving our competitiveness, including the price and quality of our products andthe development of new products.

(iii) Continuing demand for soybean-based products and greater awareness of the health qualities ofsoybean-based products.

Soybean-based products have gained recognition as a nutritional supplement over the years. Ourcontinued growth depends, in part, on the continuing demand and greater awareness of the healthqualities of soybean-based products.

(iv) Fluctuations in the price of soybean

Soybean and defatted soy flakes are our main raw materials. For FY2001, FY2002 and FY2003and the six months ended 30 June 2004, soybean constituted approximately 60.6%, 70.5%, 53.5%and 53.4% respectively of our cost of sales, and defatted soy flakes constituted approximately15.9%, 12.1%, 26.2% and 24.9% respectively of our cost of sales. As such, any fluctuations in theprices of soybean and defatted soy flakes will have a direct impact on our cost of sales. Asdefatted soy flakes are derived from soybean, prices of defatted soy flakes would be affected byfluctuations in soybean prices. Prices of soybean are mainly affected by climatic conditions andmarket conditions. In the event of a drought or flood or other adverse weather conditions, soybeanharvests will be affected. This would lead to decreases in the supply of soybean and increases insoybean prices, which will lead to increases in our cost of sales. Prices of soybean are alsoaffected by prevailing market demand and supply conditions. Between FY2002 and the six monthsended 30 June 2004, average price of soybean increased from approximately RMB1.84/kg toRMB2.56/kg. Generally, we are able to pass on part of the increase in soybean prices to ourcustomers.

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Cost of Sales

Cost of sales represented approximately 80.1%, 75.7%, 70.6% and 69.3% of our revenue for FY2001,FY2002, FY2003 and the six months ended 30 June 2004 respectively. Our cost of sales comprisescosts related to direct materials, direct labour and production overheads as follows:-

Six months Six monthsended 30 ended 30

Cost of Sales FY2001 % FY2002 % FY2003 % June 2003 % June 2004 %(RMB’000)

Direct materials 22,091 90.0 139,038 87.2 226,956 86.0 98,708 86.0 119,518 84.4

Direct labour 620 2.5 2,971 1.9 5,251 2.0 2,502 2.2 3,686 2.6

Production overheads 1,850 7.5 17,368 10.9 31,654 12.0 13,509 11.8 18,337 13.0

Total 24,561 100.0 159,377 100.0 263,861 100.0 114,719 100.0 141,541 100.0

Direct materials accounted for a significant portion of our cost of sales for the period under review,varying from approximately 84.4% to approximately 90.0%. The purchase of soybean accounted for asignificant proportion of our direct material cost, representing approximately 67.4%, 80.8%, 62.2% and63.3%, or RMB14.9 million, RMB112.3 million, RMB141.2 million and RMB75.6 million respectively forFY2001, FY2002, FY2003 and the six months ended 30 June 2004. Our soybean raw materials aremainly purchased directly from farmers in the northeast region of the PRC with no long-term supplycontracts. Our Fujin Plant is located in the Heilongjiang Province where there is an abundant supply ofsoybean. This geographical proximity also helps to lower our cost of sales, such as lower raw materialprices and transportation costs.

The purchase of defatted soy flakes accounted for approximately 17.6%, 13.9%, 30.5% and 29.5%, orRMB3.9 million, RMB19.3 million, RMB69.2 million and RMB35.3 million respectively of our directmaterial cost for FY2001, FY2002, FY2003 and the six months ended 30 June 2004. Our Fujin Plantpurchases soybean to produce defatted soy flakes for our use in the manufacture of soy protein isolates.However, the production capacity of our Fujin Plant for defatted soy flakes was unable to meet ourproduction requirements of soy protein isolates for the period under review. Therefore, we had to procureadditional defatted soy flakes from external suppliers. For FY2003, our Fujin Plant was only able to meetapproximately 64.0% of our defatted soy flakes requirements. We purchase the balance of ourrequirements from third party suppliers.

Direct labour and production overheads accounted for the balance of our cost of sales for the periodunder review, varying from approximately 1.9% to 2.6% and approximately 7.5% to 13.0% respectively.Direct labour includes salaries, wages and other staff-related costs for plant operators, technicians andthose who are directly involved in the manufacture of our products. Production overheads consist ofdepreciation of our machinery and equipment, fuel and utilities charges for our factories, consumablesand supplies, and other factory-related costs.

Other revenue

Other revenue comprises interest income and other non-operating income generated mainly from thesales of spare parts and delivery charges to customers. For the period under review, other revenueconstituted an insignificant portion of our revenue.

Operating expenses

Operating expenses comprise selling and distribution expenses, administrative expenses and otheroperating expenses.

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Selling and distribution expenses comprise advertising and promotion expenses, salaries and staffwelfare expenses of sales personnel, transportation, and delivery charges. For FY2001 and FY2002,transportation expense and salary and allowance comprise the bulk of our selling and distributionexpenses, accounting for more than 95% of the selling and distribution expense. In FY2003 and the sixmonths ended 30 June 2004, the proportion of transportation and salary and allowance expensesdeclined to approximately 45.1% and 60.2%, respectively, as our advertising and promotion expensesincreased, accounting for approximately 43.6% and 27.3%, respectively, of our selling and distributionexpenses. Selling and distribution expenses accounted for approximately 64.4%, 66.6%, 57.2% and66.4% of our total operating expenses for FY2001, FY2002, FY2003 and the six months ended 30 June2004 respectively.

Administrative expenses comprise salaries and staff-related expenses of administrative personnel,electricity and water, travelling expenses, entertainment expenses, depreciation, and sundry expenditure.Such expenses accounted for approximately 30.6%, 30.6%, 41.4% and 32.1% of our total operatingexpenses incurred for FY2001, FY2002, FY2003 and the six months ended 30 June 2004 respectively.Salaries and staff-related expenses of administrative personnel represented approximately 82.0%,55.1%, 41.7% and 43.3% respectively of our administrative expenses for FY2001, FY2002, FY2003 andthe six months ended 30 June 2004. Electricity and water charges represented approximately 10.8%,16.8%, 7.4%, and 1.0% of our administrative expenses for FY2001, FY2002, FY2003, and the sixmonths ended 30 June 2004 respectively.

Other operating expenses comprise research and development expenses incurred for productenhancement and development, and foreign exchange losses resulting from our acquisitions ofequipment used in our manufacturing processes. Such expenses accounted for an insignificant portionof our total operating expenses for the period under review.

Taxation

For FY2001 to FY2003, our Group was subject to the applicable tax rate of 33%.

In accordance with the applicable corporate income tax law of the PRC, LSBP, our wholly-ownedsubsidiary which was established as a WFOE in the PRC, is exempted from the corporate income tax forits first two profitable calendar years of operations and is entitled to a 50% relief from the state corporateincome tax and exempted from the local tax for the following three years. The two tax exemption yearsperiod for LSBP commenced in the financial year ended 31 December 2004 and will expire as at 31December 2005 as approved by the local tax authority. Upon expiry of the tax exemption period, LSBPwill be subject to a reduced state corporate income tax rate of 15% and exempted from the local incometax for the three financial years from 1 January 2006 to 31 December 2008. After 31 December 2008, anincome tax rate of 33% will be applicable to us.

Inflation

Our financial performance during the periods under review was not materially affected by inflation.

Seasonality

There is no apparent seasonality pattern in our sales during the periods under review.

REVIEW OF RESULTS OF OPERATIONS

As almost all our operating activities and revenue are carried out in the PRC, a segmentation of ourrevenue by geographical regions will not be meaningful. We have therefore segmented our revenue,gross profit and gross profit margin by products for the period under review.

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Breakdown of performance by product segment

The following tables segment our revenue, gross profit and gross profit margin by products for FY2001,FY2002, FY2003 and the six months ended 30 June 2004.

Unauditedsix months Six monthsended 30 ended 30

Revenue FY2001 % FY2002 % FY2003 % June 2003 % June 2004 %(RMB’000)

Soy protein isolates 14,528 47.4 110,036 52.3 277,048 74.1 119,992 73.8 148,299 72.6Soybean oil 5,847 19.1 49,057 23.3 50,507 13.5 16,366 10.1 26,092 12.8Soy oligosaccharide syrup – – – – 3,796 1.0 580 0.4 13,507 6.6By-products 10,302 33.5 51,313 24.4 42,581 11.4 25,535 15.7 16,419 8.0

30,677 100.0 210,406 100.0 373,932 100.0 162,473 100.0 204,317 100.0

Unauditedsix months Six monthsended 30 ended 30

Gross Profit FY2001 % FY2002 % FY2003 % June 2003 % June 2004 %(RMB’000)

Soy protein isolates 3,315 54.2 33,892 66.4 89,923 81.7 39,186 82.0 47,238 75.2Soybean oil 944 15.4 8,026 15.7 9,336 8.5 2,810 5.9 3,782 6.0Soy oligosaccharide syrup – – – – 748 0.7 462 1.0 8,322 13.3By-products 1,857 30.4 9,111 17.9 10,064 9.1 5,296 11.1 3,434 5.5

6,116 100.0 51,029 100.0 110,071 100.0 47,754 100.0 62,776 100.0

Unauditedsix months Six months ended 30 ended 30

Gross profit margins (%) FY2001 FY2002 FY2003 June 2003 June 2004

Soy protein isolates 22.8 30.8 32.5 32.7 31.9Soybean oil 16.1 16.4 18.5 17.2 14.5Soy oligosaccharide syrup – – 19.7 79.7 61.6By-products 18.0 17.8 23.6 20.7 20.9Overall gross profit margins 19.9 24.3 29.4 29.4 30.7

REVIEW OF PAST PERFORMANCE

FY2001 VS FY2002

Revenue

We commenced operations at the end of October 2001. Our revenue increased by approximatelyRMB179.7 million from approximately RMB30.7 million in FY2001 to approximately RMB210.4 million inFY2002. The significant increase in revenue in FY2002 was due mainly to the increase in sales from afull year of operations in FY2002, as we did not operate for a full 12-month period in FY2001.

Revenue from the sale of soy protein isolates increased by approximately RMB95.5 million fromapproximately RMB14.5 million in FY2001 to approximately RMB110.0 million in FY2002 and contributedapproximately 52.3% to our revenue in FY2002.

Revenue from the sale of soybean oil increased by approximately RMB43.3 million from approximatelyRMB5.8 million in FY2001 to approximately RMB49.1 million in FY2002, in line with the increase in thesale of soy protein isolates. The production of soybean oil is obtained during the production of defattedsoy flakes, a raw material which is in turn used to produce soy protein isolates.

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Revenue from the sale of our by-products increased by approximately RMB41.0 million fromapproximately RMB10.3 million in FY2001 to approximately RMB51.3 million in FY2002 and contributedapproximately 24.4% to our revenue in FY2002.

Cost of sales and gross profit margin

Our cost of sales increased by approximately RMB134.8 million from approximately RMB24.6 million inFY2001 to approximately RMB159.4 million in FY2002. For the period under review, the percentageincrease in our cost of sales was less than the percentage increase in revenue mainly because of greatereconomies of scale with increase in production volume.

Our cost of sales for soy protein isolates and soybean oil increased by approximately RMB64.9 millionfrom approximately RMB11.2 million to approximately RMB76.1 million and by approximately RMB36.1million from approximately RMB4.9 million to approximately RMB41.0 million respectively for the periodunder review.

Our overall gross profit margin increased from approximately 19.9% in FY2001 to approximately 24.3% inFY2002 due mainly to greater economies of scale resulting from the increase in production volume. Inparticular, the gross profit margin for our soy protein isolates increased from approximately 22.8% inFY2001 to approximately 30.8% in FY2002.

Other revenue

Other revenue increased by approximately RMB1.1 million from RMB0.1 million in FY2001 to RMB1.2million in FY2002 due mainly to an increase in other non-operating income generated mainly from thesales of spare parts and delivery charges to our customers.

Operating expenses

With the expansion of our business operations and the full year of operations in FY2002 as comparedwith FY2001, our overall operating expenses increased significantly by approximately RMB9.2 millionfrom approximately RMB1.3 million in FY2001 to approximately RMB10.5 million in FY2002.

Our selling and distribution expenses increased by approximately RMB6.2 million from approximatelyRMB0.8 million in FY2001 to approximately RMB7.0 million in FY2002, due mainly to an increase intransportation costs and salaries and allowances. In FY2002, transportation costs and salaries andallowance increased by approximately RMB5.4 million and RMB0.5 million respectively as we expand ourcustomer base in the PRC.

Administrative expenses increased by approximately RMB2.8 million from approximately RMB0.4 millionin FY2001 to approximately RMB3.2 million in FY2002 due mainly to increases in salaries and staff-related expenses and utilities. Salaries and staff-related expenses increased by approximately RMB1.5million as we increased our managerial and sales staff strength by 53 members from 69 in FY2001 to122 in FY2002, in line with our increase in business activities in FY2002. Utilities increased byapproximately RMB0.5 million in line with our increase in business activities in FY2002.

Our other operating expenses increased by approximately RMB0.2 million in FY2002 compared toapproximately RMB63,000 in FY2001 due to an increase in research and development expenses in linewith the increase in our business activities.

Profit before taxation

Our profit before taxation increased by approximately RMB36.7 million from approximately RMB5.0million in FY2001 to approximately RMB41.7 million in FY2002 due mainly to the significant increase inrevenue and gross profit margins coupled with a lower rate of increase in our operating expenses.

Profit after taxation

Our profit after taxation increased by approximately RMB24.4 million from approximately RMB3.3 millionin FY2001 to approximately RMB27.7 million in FY2002 due mainly to the significant increase in profitbefore taxation.

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FY2002 VS FY2003

Revenue

For FY2003, we continued to benefit from the continuing increase in the demand for our major productsand the expansion of our production capacity. Our revenue increased by approximately 77.7% orRMB163.5 million from approximately RMB210.4 million in FY2002 to approximately RMB373.9 million inFY2003. The increase in revenue was due mainly to a 152.0% or RMB167.0 million increase in sales ofsoy protein isolates from approximately RMB110.0 million in FY2002 to approximately RMB277.0 millionin FY2003. The significant increase in revenue contribution from soy protein isolates was due mainly tothe increase in production volume of approximately 150.0%, from approximately 11,500 tonnes inFY2002 to 28,700 tonnes in FY2003. Sale of soybean oil increased marginally by approximately 2.9% orRMB1.5 million from approximately RMB49.1 million in FY2002 to approximately RMB50.5 million inFY2003. In FY2003, we launched our soy oligosaccharide syrup product. The sales contribution fromsoy oligosaccharide syrup in FY2003 was due mainly to the initial market breakthrough period which istypical of new products. In FY2003, sales of our by-products decreased by approximately RMB8.7million from approximately RMB51.3 million in FY2002 to approximately RMB42.6 million in FY2003 duemainly to a decrease in sales of defatted soy flakes. The decrease in sales of defatted soy flakes wasdue mainly to an improvement in our quality control measures. This resulted in a reduction in thequantity of defatted soy flakes which did not meet our quality standards for further processing to be soldas animal feeds.


Our cost of sales increased by approximately 65.6% or RMB104.5 million from approximately RMB159.4million in FY2002 to approximately RMB263.9 million in FY2003. For FY2003, our overall gross profitmargin increased by approximately 5.1 percentage points from approximately 24.3% in FY2002 to 29.4%in FY2003. This is due mainly to improved gross profit margins for all of our product types, includingcontribution from our then newly launched soy oligosaccharide syrup. In particular, gross profit marginsfor our soy protein isolates in FY2003 improved from approximately 30.8% in FY2002 to approximately32.5% in FY2003 as a result of greater production efficiency. Gross profit margin for soybean oilincreased by approximately 2.1 percentage points from 16.4% in FY2002 to 18.5% in FY2003 due mainlyto an increase in our average selling price for soybean oil in view of the increase in the average purchaseprice of soybean. The average purchase price of soybean increased from approximately RMB1.84/kg inFY2002 to approximately RMB2.29/kg in FY2003. For FY2003, we achieved a low gross profit margin ofonly approximately 19.7% for soy oligosaccharide syrup due to a one-time sale at cost to a formershareholder of our subsidiary, LSBP, during the SARS outbreak. Gross profit margin for our by-productsincreased by approximately 5.8 percentage points from approximately 17.8% in FY2002 to approximately23.6% in FY2003 due mainly to an increase in our average selling price to take into account the increasein the average purchase price of soybean.

Other revenue

Other revenue decreased marginally by approximately RMB0.2 million from approximately RMB1.2million in FY2002 to approximately RMB1.0 million in FY2003 due mainly to a decrease in sales of spareparts partly offset by an increase in interest income.

Operating expenses

Our operating expenses increased by approximately 77.1% or RMB8.1 million from approximatelyRMB10.5 million in FY2002 to approximately RMB18.6 million in FY2003 due mainly to increases inadministrative expenses and selling and distribution expenses.

Our selling and distribution expenses increased by approximately 51.4% or RMB3.6 million fromapproximately RMB7.0 million in FY2002 to approximately RMB10.6 million in FY2003 due mainly toadvertising and promotion costs of approximately RMB3.4 million incurred in FY2003 in relation to oursoy oligosaccharide syrup product launched in FY2003.

Our administrative expenses increased by approximately 140.6% or RMB4.5 million from approximatelyRMB3.2 million in FY2002 to approximately RMB7.7 million in FY2003 due mainly to higher operatingexpenses incurred by Daqing Xinyu which only commenced operations in the second half of FY2002.

There were no significant changes to our other operating expenses in FY2003 compared to FY2002.


Our profit before taxation increased by approximately 121.8% or RMB50.8 million from approximatelyRMB41.7 million in FY2002 to approximately RMB92.5 million in FY2003 due mainly to the significantincrease in revenue and gross profit margins for all of our product types, in particular soy protein isolates.Our profit before taxation margin improved by approximately 4.9 percentage points from approximately19.8% in FY2002 to 24.7% in FY2003 due mainly to the increase in profit before taxation coupled withoperating expenses remaining relatively stable at approximately 5.0% of our revenue for FY2003.


Our profit after taxation increased by approximately RMB33.5 million from approximately RMB27.7 millionin FY2002 to approximately RMB61.2 million in FY2003, due mainly to the significant increase in profitbefore taxation.

Six months ended 30 June 2003 vs Six months ended 30 June 2004

Revenue

Our revenue increased by approximately 25.7% or RMB41.8 million from approximately RMB162.5million for the six months ended 30 June 2003 to approximately RMB204.3 million for the six monthsended 30 June 2004 due mainly to the increase in sales of all our soy protein isolates, soybean oil andsoy oligosaccharide syrup.

Sale of soy protein isolates increased by approximately 23.6% or RMB28.3 million from approximatelyRMB120.0 million for the six months ended 30 June 2003 to approximately RMB148.3 million for the sixmonths ended 30 June 2004 due mainly to an increase in our average selling price from approximatelyRMB9.49/kg to RMB12.16/kg.

Sale of soybean oil increased by approximately 59.1% or RMB9.7 million from approximately RMB16.4million for the six months ended 30 June 2003 to approximately RMB26.1 million for the six monthsended 30 June 2004 due mainly to an increase in average selling price from approximately RMB5.33/kgto RMB6.47/kg.

Sale of soy oligosaccharide syrup increased significantly from approximately RMB0.6 million for the sixmonths ended 30 June 2003 to approximately RMB13.5 million for the six months ended 30 June 2004due mainly to sales to a beverage manufacturer.

Such increases in revenue were partially offset by a decrease in the sale of by-products, whichdecreased by approximately RMB9.1 million from approximately RMB25.5 million for the six monthsended 30 June 2003 to approximately RMB16.4 million for the six months ended 30 June 2004. Thedecrease in sales of defatted soy flakes was due mainly to an improvement in our quality controlmeasures which resulted in a reduction in the quantity of defatted soy flakes which did not meet ourquality standards for further processing and to be sold as by-products.


Our cost of sales increased by approximately RMB26.8 million or 23.4% from approximately RMB114.7million for the six months ended 30 June 2003 to approximately RMB141.5 million for the six monthsended 30 June 2004. Despite an increase in our average purchase price of soybean from approximatelyRMB2.29/kg for FY2003 compared to approximately RMB2.56/kg for the six months ended 30 June2004, we were able to achieve a marginally higher overall gross profit margin of approximately 30.7% forthe six months ended 30 June 2004 compared to approximately 29.4% for the six months ended 30 June2003. This was due mainly to the significant increase in sales of soy oligosaccharide syrup ofapproximately RMB12.9 million, which product generally has higher gross profit margins compared to ourother product types. Gross profit margins for soy protein isolates and soybean oil decreased marginallyduring the period under review due mainly to the increase in average purchase price of soybean fromapproximately RMB2.29/kg for FY2003 compared to RMB2.56/kg for the six months ended 30 June2004.

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Other revenue

Our other revenue remained relatively unchanged at approximately RMB0.7 million for the six monthsended 30 June 2004 compared to approximately RMB0.6 million for the six months ended 30 June 2003.

Operating Expenses

Our operating expenses increased by approximately 14.0% or RMB1.4 million from approximatelyRMB10.0 million for the six months ended 30 June 2003 to approximately RMB11.4 million for the sixmonths ended 30 June 2004, due mainly to an increase in our selling and distribution expenses whichwas partly offset by a decrease in our administrative expenses.

Our selling and distribution expenses increased by approximately 61.7% or RMB2.9 million fromapproximately RMB4.7 million for the six months ended 30 June 2003 to approximately RMB7.6 millionfor the six months ended 30 June 2004. This is due mainly to an increase in advertising and promotioncosts by approximately RMB0.9 million incurred mainly for promoting and marketing our soyoligosaccharide syrup product, and an increase in transportation costs by approximately RMB1.6 millionin line with the increase in our business activities.

Our administrative expenses decreased by approximately RMB1.5 million from approximately RMB5.2million for the six months ended 30 June 2003 to approximately RMB3.7 million for the six months ended30 June 2004. During the six months ended 30 June 2003, we made a one-time cash donation of RMB2million to the PRC government to support the efforts to counter SARS. There were no such expenses forthe six months ended 30 June 2004.


Our profit before taxation increased by approximately 35.8% or RMB13.7 million from approximatelyRMB38.3 million for the six months ended 30 June 2003 to approximately RMB52.0 million for the sixmonths ended 30 June 2004 due mainly to the increase in our gross profit. Our profit before taxationmargin improved marginally by approximately 1.9 percentage points from approximately 23.6% for the sixmonths ended 30 June 2003 to approximately 25.5% for the six months ended 30 June 2004, due mainlyto a higher rate of increase in our gross profit (approximately 31.5%) compared to the rate of increase inour operating expenses (approximately 14.0%).


Our profit after taxation increased by approximately RMB26.5 million or 103.9% from approximatelyRMB25.5 million for the six months ended 30 June 2003 to approximately RMB52.0 million for the sixmonths ended 30 June 2004, due mainly to the increase in profit before taxation. For the six monthsended 30 June 2004, we were not subjected to corporate income tax as the two years’ tax exemptionperiod for our subsidiary, LSBP, commenced in the financial year ended 31 December 2004.

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ESTIMATED PROFIT

Investors should be aware that there is no assurance that the estimated profit of our Pro forma Group setout below can be achieved as there are risks and uncertainties that may cause our actual results andperformance (after completion of the entire audit process) to be materially different from those estimated.The factors that may affect our business and operations are mainly set out under the section entitled“Risk Factors” of this Prospectus. This section should also be read together with the section entitled“Cautionary Note on Forward-Looking Statements” of this Prospectus.

Estimated Profit and NTA(1) of our Pro forma Group for the financial year ended 31 December 2004

Pro forma Estimated

consolidated Pro forma

operating results and consolidated

NTA of our Pro forma operating results

Group for the 6 and NTA of our

months ended Pro forma Group

30 June 2004 for FY2004

Revenue (RMB million) 204.3 527.9

Gross profit (RMB million) 62.8 169.1

Gross profit margin (%) 30.7 32.0

Net profit before income tax (RMB million) 52.0 136.9

Net profit after income tax (RMB million) 52.0 136.9

Net tangible assets (RMB million) 233.4 323.6

Estimated profit of our Pro forma Group for FY2004

Barring any unforeseen circumstances and on the bases and assumptions set out below, our Directorsestimate our Pro forma Group to achieve a revenue, gross profit and net profit before tax ofapproximately RMB527.9 million, RMB169.1 million and RMB136.9 million, respectively for FY2004. Theestimate for FY2004 is based on the unaudited Pro forma Consolidated Financial Information of our Proforma Group for FY2004.

For FY2004, our Pro forma Group estimates revenue to increase by approximately RMB154.0 million or41.2% from RMB373.9 million in FY2003 to RMB527.9 million in FY2004 while our gross profit isestimated to increase by approximately RMB59.0 million or 53.6% from RMB110.1 million in FY2003 toRMB169.1 million in FY2004. For the 6 months ended 30 June 2004 (based on the Pro formaConsolidated Financial Information for the 6 months ended 30 June 2004), our Pro forma Groupachieved revenue of RMB204.3 million or 38.7% of our Pro forma Group’s estimated revenue for FY2004.For the 6 months ended 31 December 2004, our Pro forma Group expects to achieve revenue ofRMB323.6 million.

Please also refer to the “Review Letter by the Auditors in relation to the unaudited Pro formaconsolidated financial information of Pine Agritech Limited and its Subsidiaries for the year ended 31December 2004” in Appendix C of this Prospectus.

Bases and assumptions underlying the Estimated Profit

The Estimated Profit for FY2004, for which our Directors are solely responsible, has been prepared onbases consistent with the accounting policies normally adopted by our Pro forma Group in thepreparation of our financial statements.

Note:-

(1) NTA based on our net assets excluding land use rights.

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The general principal assumptions underlying the Estimated Profit are set out below:-

� There will be no adverse changes in the national or international monetary, financial, fiscal,political, economic, legal, social, regulatory and market conditions that are likely to materiallyprejudice the operations of our Pro forma Group.

� There will be no material changes in the prevailing inflation and foreign currency exchange ratesand in the base or rates of taxation in the PRC or in any other places in which our subsidiariesoperate business.

� There will be no exceptional circumstances or events which will materially affect the operations ofour main customers.

� There will be no exceptional circumstances, which will require provisions to be made by our Proforma Group in respect of any contingent liability or arbitration threatened or otherwise, abnormalbad debts and other assets.

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LIQUIDITY AND CAPITAL RESOURCES

Since our establishment, our capital expenditure and operating requirements have been financed througha combination of shareholders’ equity, cash generated from operations, advances from a then relatedparty, advances from a Director and an amount received from the Bancheng Town Government ofRMB23.0 million from the (Enterprise Support Scheme). For the last three financial yearsended 31 December 2003 and the six months ended 30 June 2004, we did not have any bankborrowings. As at the Latest Practicable Date, our cash and cash equivalents amounted toapproximately RMB51.6 million. LSBP had obtained a RMB30.0 million five-year secured term loan inOctober 2004 and a RMB70.0 million one-year secured term loan in December 2004. Please refer to thesection “Capitalisation and Indebtedness” on pages 61 and 62 for further details of these term loans.

A summary of our statement of cash flows for FY2003 and the six months ended 30 June 2004 are setout in the table below:-

Cash Flow Summary

Six months ended 30

RMB’000 FY2003 June 2004

Net cash inflow from operating activities 28,851 48,297Net cash used in investing activities (79,864) (51,236)Net cash inflow from financing activities 48,008 –

Net decrease in cash and cash equivalents (3,005) (2,939)Cash and cash equivalents at beginning of financial year/period 34,072 31,067

Cash and cash equivalents at end of financial year/period 31,067 28,128

In FY2003, we recorded a net cash inflow from operating activities of approximately RMB28.9 million.This comprised cash generated from operating activities before changes in working capital ofapproximately RMB99.8 million adjusted for net working capital outflows of approximately RMB43.7million and income tax paid of approximately RMB27.2 million. The net working capital outflows were theresult of:-

(i) an increase in trade receivables of approximately RMB28.5 million in line with the increase in ourbusiness activities;

(ii) an increase in inventories of approximately RMB4.2 million in line with the increase in our businessactivities;

(iii) an increase in other current assets of approximately RMB1.1 million relating mainly toprepayments to our raw material suppliers;

(iv) repayment of other current liabilities of approximately RMB16.2 million relating to the purchase offixed assets for our Fujin Plant and Linyi Plant; and

(v) partial repayment of an amount due to (Linyi Chuangxin BiochemicalEngineering Co., Ltd.), a company owned by Wang Chengtian, a former shareholder of LSBP,relating to the purchase of certain equipment used in our manufacturing process of soyoligosaccharide syrup amounting to approximately RMB5.9 million.

The above working capital outflows were partially offset by the cash inflows from:-

(i) an increase in trade payables of approximately RMB11.9 million in line with the increase in ourbusiness activities; and

(ii) an increase in advances from Li Zhuping, our Chief Executive Officer, to Shansong Bio-Engineering for working capital purposes.

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We recorded a net cash outflow from investing activities of approximately RMB79.9 million in FY2003.This was due mainly to the acquisition of fixed assets during FY2003 totalling approximately RMB18.1million, increase in our construction in progress of approximately RMB42.1 million in respect of our fournew soy protein isolates production lines at our Linyi Plant, acquisition of land use rights of approximatelyRMB8.8 million in respect of our Linyi Plant and deposits paid for the purchase of fixed assets ofapproximately RMB10.9 million for our Linyi Plant.

Net cash inflow from financing activities amounted to approximately RMB48.0 million in FY2003 as aresult of an increase in share capital in LSBP by approximately US$5.0 million to US$7.0 million andcapital reserves of approximately RMB6.6 million in FY2003.

For the six months ended 30 June 2004, we recorded a net cash inflow from operating activities ofapproximately RMB48.3 million. This comprised cash generated from operating activities before changesin working capital of approximately RMB57.6 million adjusted for net working capital outflow ofapproximately RMB1.2 million and income tax paid of approximately RMB8.1 million. The net workingcapital outflow was the result of:-

(i) an increase in inventories of approximately RMB18.5 million in line with the increase in ourbusiness activities;

(ii) an increase in prepayments and other receivables of approximately RMB1.4 million in line with theincrease in our business activities;

(iii) repayment of trade payables of approximately RMB5.5 million; and

(iv) final repayment of an amount due to (Linyi Chuangxin BiochemicalEngineering Co., Ltd.), a company owned by Wang Chengtian, a former shareholder of LSBP,relating to the purchase of certain equipment used in the manufacturing process of soyoligosaccharide syrup amounting to approximately RMB8.3 million.

The above working capital outflows were partially offset by the cash inflows from:-

(i) a decrease in trade receivable balances by approximately RMB16.9 million due mainly to thesettlement of outstanding balances owing by a major customer of approximately RMB7.9 millionduring the six months ended 30 June 2004; and

(ii) an increase in other current liabilities of approximately RMB15.6 million relating to the acquisitionof land use rights for our Linyi Plant of approximately RMB21.8 million.

We recorded a net cash outflow from investing activities of approximately RMB51.2 million for the sixmonths ended 30 June 2004. This was due mainly to acquisition of fixed assets of approximatelyRMB8.6 million, construction in progress of approximately RMB37.1 million and acquisition of land userights of approximately RMB9.7 million for our Linyi Plant.

There were no changes in cash flow from financing activities for the six months ended 30 June 2004.

Our Directors are of the opinion that, after taking into account the cash flows generated from operations,bank loans and cash and cash equivalents as at the Latest Practicable Date, we have adequate workingcapital for our present requirements.

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CAPITALISATION AND INDEBTEDNESS

The following table shows the cash and cash equivalents, capitalisation and indebtedness of our Groupas at 30 June 2004:-

(i) based on our unaudited Pro forma consolidated balance sheet as at 30 June 2004 as adjusted forthe Restructuring Exercise; and

(ii) as adjusted to give effect to the issue of the New Shares pursuant to this Invitation and theapplication of the net proceeds from this Invitation.

Pro forma as at30 June 2004 as

Pro forma as at adjusted for the 30 June 2004 as Restructuringadjusted for the Exercise and the Restructuring issue of the New

(RMB’000) Exercise Shares

Cash and cash equivalents 28,128 438,802

IndebtednessAmount due to a Director 975 975Short-term borrowings Nil NilLong-term borrowings Nil Nil

Total indebtedness 975 975

Total shareholders’ equity 271,984 682,658

Total capitalisation and indebtedness 272,959 683,633

Amount due to a Director relates to advances made by our Chief Executive Officer, Li Zhuping, to ourGroup mainly for working capital purposes. The advances are interest free with no fixed terms ofrepayment. This amount was fully repaid on 12 November 2004.

On 25 October 2004, our subsidiary, LSBP, secured a RMB30.0 million five-year secured term loan forthe purpose of the acquisition of land use rights for the Linyi Plant and for general working capital. Thisterm loan bears interest at the rate of 6.05% per annum to be paid on a quarterly basis. The full amountis payable before 24 October 2009. The loan is secured by way of a charge over certain equipment ofLSBP.

On 10 December 2004, our subsidiary, LSBP, secured a RMB70.0 million one-year secured term loan forgeneral working capital purposes. This term loan bears interest at the rate of 5.58% per annum to bepaid on a monthly basis. The term loan is repayable in full on 9 December 2005. The loan is secured byway of a charge over the leasehold building at our Linyi Plant and certain equipment of LSBP.

Our Company intends to repay these loans using the proceeds raised from this Invitation.

As at the Latest Practicable Date, we have cash and cash equivalents of RMB51.6 million.

As at the Latest Practicable Date, there were no material changes in our cash and cash equivalents, andcapitalisation and indebtedness as disclosed above, save for:-

(i) the increase in our borrowings by approximately RMB99.0 million from approximately RMB1.0million as at 30 June 2004 to approximately RMB100.0 million;

(ii) the increase in our cash and cash equivalents by approximately RMB23.5 million fromapproximately RMB28.1 million as at 30 June 2004 to approximately RMB51.6 million; and

(iii) changes in our retained earnings arising from our day-to-day operations in the ordinary course ofour business.

As at the Latest Practicable Date, our Group had the following capital commitments:-

(i) capital expenditure commitments in respect of the acquisition of plant and machinery and buildingsfor our Linyi Plant amounting to approximately RMB42.2 million; and

(ii) operating lease commitments in respect of our office and factory buildings for our Fujin Plant asfollows:-

(a) RMB1.5 million payable by 31 December 2005; and

(b) RMB1.8 million payable after 31 December 2005.

In 2004, our subsidiary, LSBP, received an amount of RMB23.0 million from the Bancheng TownGovernment under the (Enterprise Support Scheme). The amount of assistance fundprovided to LSBP is unsecured and non-interest bearing and is repayable by equal yearly instalments ofRMB4.6 million within five years from 2004, with the first instalment being payable before the end of2004. The first instalment has been paid in December 2004.

Save as disclosed above, as at the Latest Practicable Date, our Group has no other borrowings orindebtedness and liabilities under acceptances (other than normal trading bills) or acceptance credits,mortgages, charges, obligations under finance leases, guarantees or other material contingent liabilities.

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FOREIGN EXCHANGE EXPOSURE

Our reporting currency is RMB and transactions in other currencies are converted to RMB at theexchange rates prevailing on the transaction dates.

All of our sales and purchases are denominated in RMB.

In the event that our Group expands our sales to overseas markets outside the PRC in the future, oursales may be dominated in currencies other than RMB, and our Group may be exposed to foreignexchange fluctuations in the future.

Currently, we do not have any hedging policy. We will monitor our foreign currency exposure closely inthe future and will consider hedging any material foreign exchange exposure should the need arise.

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EXCHANGE CONTROLS

The following is a description of the exchange controls that exist in the jurisdiction which our Groupoperates in.

FOREIGN EXCHANGE CONTROLS IN THE PRC

Major reforms have been introduced to the foreign exchange control system of the PRC since 1993.

On 28 December 1993, the People’s Bank of China (“PBOC”), with the authorisation of the State Councilissued the Notice on Further Reform of the Foreign Exchange Control System which came into effect on1 January 1994. Other new regulations and implementation measures include the Regulations on theForeign Exchange Settlement, Sale and Payments which were promulgated on 20 June 1996 and tookeffect on 1 July 1996 and which contain detailed provisions regulating the settlement, sale and paymentof foreign exchange by enterprises, individuals, foreign organisations and visitors in the PRC and theregulations of the PRC on Foreign Exchange Control which were promulgated on 1 January 1996 andtook effect on 1 April 1996 and which contain detailed provisions in relation to foreign exchange control.

Under these new regulations, the previous dual exchange rate system for RMB was abolished and aunified floating exchange rate system based largely on supply and demand was introduced. The PBOCpublishes the RMB exchange rate against the US$ daily. Such rate is to be set by reference to theRMB/US$ trading price on the previous day on the inter-bank foreign exchange market.

The foreign exchange earnings of all PRC enterprises, other than those foreign investment enterprises(“FIE”), who are allowed to retain a part of their regular foreign exchange earnings or specificallyexempted under the relevant regulations, are to be sold to designated banks. Foreign exchangeearnings obtained from borrowings from foreign institutions or issues of shares or bonds denominated inforeign currency need not be sold to designated banks, but must be kept in foreign exchange bankaccounts of designated banks unless specifically approved otherwise.

At present, control of the purchase of foreign exchange is relaxed. Enterprises within the PRC whichrequire foreign exchange for their ordinary trading and non-trading activities, import activities andrepayment of foreign debts may purchase foreign exchange from designated banks if the application issupported by the relevant documents. Furthermore, FIEs may distribute profit to their foreign investorswith funds in their foreign exchange bank accounts kept with designated banks. Should such foreignexchange be insufficient, enterprises may purchase foreign exchange from designated banks upon thepresentation of the resolutions of the directors on the profit distribution plan of the particular enterprise.

When conducting foreign exchange transactions, the designated banks may, based on the exchange ratepublished by the PBOC and subject to certain limits, freely determine the applicable exchange rate.

The China Foreign Exchange Trading Centre (“CFETC”) was formally established and came intooperation on 1 April 1994. CFETC has set up a computerised network with sub-centres in several majorcities, thereby forming an interbank market in which designated PRC banks can trade and settle theirforeign currencies. Prior to 1 December 1998, FIE may upon their own choice enter into exchangetransactions through a swap centre or through designated PRC banks.

On 14 January 1997, the Regulations of the People’s Republic of China on Foreign Exchange Controlwas amended such that the payment in and transfer of foreign exchange for current internationaltransactions will no longer be subject to the PRC government control or restrictions.

On 25 October 1998, PBOC and the State Administration of Foreign Exchange issued a jointannouncement on the abolishment of foreign exchange swap business which stated that from 1December 1998, foreign exchange transactions will have to be conducted through designated banks. Inaddition, some swap centres would be abolished while others which are already linked up with CFETCby the computerised network will be merged with CFETC and sub-centres to the CFETC.

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In addition, on 24 January 2005, SAFE promulgated the

(Circular of the State Administration of Foreign Exchange Concerning Relevant Issues onImproving Foreign Exchange Administration for Merger and Acquisitions with Foreign Entities) (the“Circular”). The Circular provides for, inter alia, strict supervision and control by SAFE and its localbranches/offices of capital contribution examination, foreign currency registration for share transfers,registration of shareholders’ loan, remittance of profits out of the PRC, re-investment of profits, and sharetransfers by foreign invested enterprises established in the manner of acquisitions of PRC enterprises byforeign enterprises with PRC residents as shareholders. On 8 April 2005,

(Notice concerning the Relevant Issues for the Registration ofOverseas Investments by Domestic Residents and Foreign Exchange Registration for ForeignAcquisition) was promulgated by SAFE which further requires that PRC residents who have contributedtheir domestic assets or shares into the overseas companies and thus hold the shares of such overseascompanies directly or indirectly, shall conduct supplemental foreign exchange registration with the localforeign exchange authority, even if the relevant acquisition of the domestic company had been completedprior to 24 January 2005. Without such supplemental registration, the PRC residents are prohibited toconduct foreign investment and conduct other foreign exchange business under capital item, and theforeign exchange registration for the foreign invested company will not be proceeded by the local foreignexchange authority. If the foreign exchange registration for the foreign investment company was made byfalse or misleading information and representation, the foreign invested company shall be liable for theprofits remitted out of the PRC and other transactions under the capital item since the registration date.The PRC resident who is the largest shareholder in the overseas invested companies directly orindirectly is also required to go through registration for modification or record with the local foreignexchange authority within 30 days from the date of any increase/decrease of capital, share transfer,merger/splitting, overseas share investment, and foreign guarantees concerning domestic assets of suchoverseas invested companies (“material issues”). Failure to conduct the above supplemental registration,registration for modification or record of the material issues with the local foreign exchange authority fullycould adversely affect the foreign invested company’s ability to remit its profits, liquidation, share transferand capital decreasing fees abroad, and could be punished as foreign exchange evasion. The relevantPRC residents, Li Zhuping, Hu Fabao, Dai Yonghu had completed the supplemental registration with thelocal foreign exchange authority, and each of them has given an undertaking to our Company to complywith the above requirements in relation to the registration for modification or record with the local foreignexchange authority if any material issues should occur.

FOREIGN EXCHANGE CONTROLS IN BERMUDA

Although incorporated in Bermuda, our Company has been classified as non-resident in Bermuda forexchange control purposes by the Bermuda Monetary Authority. Accordingly, our Company may convertcurrency (other than Bermudian currency) held for its account to any other currency without restriction.

Persons, firms or companies regarded as residents of Bermuda for exchange control purposes requirespecific consent under the Exchange Control Act 1972 of Bermuda, and regulations thereunder, topurchase or sell shares or warrants of the company which are regarded as foreign currency securities bythe Bermuda Monetary Authority.

In granting such permission, the Bermuda Monetary Authority accepts no responsibility for the financialsoundness of any proposals or for the correctness of any statements made or opinions expressed in thisdocument with regard to them.

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DIVIDEND POLICY

Subject to the Bermuda Companies Act, Shareholders in general meeting may from time to time declarea dividend or other distribution but no dividend or distribution shall be declared in excess of the amountrecommended by our Directors. Subject to the Bermuda Companies Act, our Directors may also fromtime to time declare a dividend or other distribution.

Our Company has not distributed any cash dividend on our Shares since our incorporation on 7September 2004. The declaration and payment of dividends in the future will depend upon our operatingresults, financial conditions, other cash requirements including capital expenditure, restrictions under theterms of our credit facilities (if any), and other factors deemed relevant by our Directors.

We expect to declare dividends either in HK$ or RMB and make payment of the dividends in S$.Shareholders should note that there will be exchange rate exposure in respect of dividends declared inHK$ or RMB and subsequently paid to them in S$ equivalent amounts. Shareholders whose Shares areheld through CDP will receive their dividends in S$. CDP will make the necessary arrangement toconvert these dividends received from our Company in HK$ or RMB into S$ equivalent at such foreignexchange rate as CDP may determine for onward distribution to such Shareholder thereto. Neither ourCompany nor CDP will be liable for any loss howsoever arising from the conversion of the dividendentitlement of Shareholders holding their Shares through CDP from HK$ or RMB into S$ equivalent.

Subject to the above, our Directors intend to recommend and distribute dividends of not less than 20% ofour net profits attributable to our Shareholders for FY2005 and FY2006 (the “Proposed Dividend”).However, investors should note that all the foregoing statements, including the statements on theProposed Dividend, are merely statements of our present intention and shall not constitute legallybinding statements in respect of our future dividends which may be subject to modification (includingreduction or non-declaration thereof) in our Directors’ sole and absolute discretion. Investors should nottreat the Proposed Dividend as an indication of our Group’s future dividend policy. No inference shouldor can be made from any of the foregoing statements as to our actual future profitability or ability to paydividends in any of the periods discussed.

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GENERAL INFORMATION ON OUR GROUP

SHARE CAPITAL

Our Company (Registration No. 35792) was incorporated in Bermuda on 7 September 2004 under theBermuda Companies Act as an exempted company with limited liability. As at the date of incorporation,the authorised share capital of our Company was US$12,000 divided into 120,000 ordinary shares ofUS$0.10 each. On 8 September 2004, 120,000 ordinary shares of US$0.10 each were allotted andissued nil-paid to Elite Union.

Pursuant to written resolutions dated 15 October 2004 in lieu of a special general meeting, ourShareholder approved, inter alia, the following:-

(a) the change of denomination of every 120,000 ordinary shares of US$0.10 into 120,000 ordinaryshares of S$0.168 each (the “Share Re-denomination”);

(b) the sub-division of every one ordinary share of S$0.168 each after the Share Re-denomination into168 ordinary shares of S$0.001 each (the “Share Sub-division”); and

(c) the consolidation of 100 ordinary shares of S$0.001 each after the Share Sub-division into oneordinary share of S$0.10 each (the “Share Consolidation”).

Pursuant to written resolutions dated 23 March 2005 in lieu of a special general meeting, ourShareholder approved, inter alia, the following:-

(a) the adoption of a new set of Bye-Laws of our Company;

(b) the adoption of the Pine Agritech Share Option Scheme;

(c) the increase in the authorised share capital of our Company from S$20,160 divided into 201,600shares of par value S$0.10 each to S$100 million divided into 1,000,000,000 shares of S$0.10each;

(d) crediting as fully paid the 201,600 nil-paid Shares held by Elite Union and the allotment and issueof 449,798,400 new Shares to the shareholders of Glorious Faith pursuant to the RestructuringExercise (details of which are set out under the section “Restructuring Exercise” on pages 72 to 75of this Prospectus);

(e) the allotment and issue of the New Shares which are the subject of this Invitation. The NewShares, when issued and fully paid-up, will rank pari passu in all respects with our existing issuedand paid-up Shares; and

(f) that authority be given to our Directors to allot and issue Shares (other than the New Shares) orconvertible securities in our Company (whether by way of rights, bonus or otherwise) at any timeand from time to time, upon such terms and conditions whether for cash or otherwise and for suchpurposes and to such persons as our Directors may in their absolute discretion deem fit, providedthat the aggregate number of shares and convertible securities to be issued pursuant to suchauthority shall not exceed 50% of the issued share capital of our Company, of which the aggregatenumber of such Shares and convertible securities to be issued other than on a pro-rata basis toour existing Shareholders shall not exceed 20% of the issued share capital of our Company (thepercentage of the issued share capital being based on the post-Invitation issued share capital afteradjusting for any subsequent consolidation or subdivision of shares). Unless revoked or varied byour Company in general meeting, such authority shall continue in full force until the conclusion ofour next Annual General Meeting or the date by which our next Annual General Meeting isrequired by law or by our Bye-Laws to be held, whichever is earlier.

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As at the Latest Practicable Date, our Company has only one class of shares, being ordinary shares ofS$0.10 each. The rights and privileges of our Shares are stated in our Bye-Laws. Save for the OptionShares, there are no founder, management, deferred or unissued shares reserved for the issuance forany purpose. Save for the Options that may be granted under the Pine Agritech Share Option Scheme,no person has been, or is entitled to be, given an option to subscribe for or purchase any securities ofour Company or any of our subsidiaries. As at the Latest Practicable Date, no option to subscribe forShares in our Company has been granted to, or was exercised by any of our Directors.

The present issued and paid-up capital of our Company is S$45,000,000 divided into 450,000,000Shares. Upon the allotment of the New Shares, the issued and paid-up share capital of our Companywill be increased to S$60,000,000 divided into 600,000,000 Shares.

Details of the changes in the issued and paid-up share capital of our Company since incorporation andthe issued and paid-up share capital immediately after this Invitation are as follows:-

Resultant issuedNumber of and paid-up

Purpose Par Value shares share capital

Issued ordinary shares of US$0.10 each nil-paid as at 8 September 2004 US$0.10 120,000 –

Re-denomination of par value of each ordinary share from US$0.10 to S$0.168 S$0.168 120,000 –

Sub-division of every one ordinary share of S$0.168 into S$0.001 S$0.001 20,160,000 –

Consolidation of 100 ordinary shares of S$0.001 each into one ordinary share of S$0.10 each S$0.10 201,600 –

Credited as fully paid the 201,600 Sharesthat were issued nil-paid S$0.10 201,600 S$20,160

Issued and fully paid-up Shares allotted and issued pursuant to the Restructuring Exercise S$0.10 449,798,400 S$45,000,000

Pre-Invitation share capital S$0.10 450,000,000 S$45,000,000

New Shares to be issued pursuant to this Invitation S$0.10 150,000,000 S$60,000,000

Post-Invitation share capital S$0.10 600,000,000 S$60,000,000

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The authorised share capital and the Shareholders’ equity of our Company as at the date ofincorporation, after the Restructuring Exercise and after the issue of the New Shares pursuant to thisInvitation are set forth below. These statements should be read in conjunction with the Pro FormaConsolidated Financial Information set out in Appendix A of this Prospectus.

After the Share After the Re-denomination, increase in

Share Sub- authorised share division and the capital and

As at Share Restructuring After this Incorporation Consolidation Exercise Invitation

(US$) (S$) (S$) (S$)

AUTHORISED SHARE CAPITALOrdinary shares of US$0.10 each 12,000 – – –Ordinary shares of S$0.10 each – 20,160 100,000,000 100,000,000

SHAREHOLDERS’ EQUITYIssued nil paid share capital 12,000(1) 20,160(1) – –Issued and fully paid-up share capital – – 45,000,000 60,000,000Share premium – – – 20,730,000Contributed surplus(2) – – 8,612,732 8,612,732

Total Shareholders’ equity 12,000 20,160 53,612,732 89,342,732

Notes:-

(1) This represents the 120,000 ordinary shares of US$0.10 each issued nil-paid as at the date of incorporation, or 201,600ordinary shares of S$0.10 each nil paid after the Share Re-denomination, the Share Sub-division and the ShareConsolidation.

(2) Contributed surplus arose as a result of the Restructuring Exercise and represents the difference between the thenconsolidated net assets value of subsidiaries acquired, over the nominal value of our Company's Shares issued in exchangetherefore. For the purpose of preparation of the above disclosure, the consolidated net assets value of our Pro forma Groupas at 30 June 2004 was used for calculation of the amount of contributed surplus. The final amount of the contributedsurplus will be adjusted by reference to the consolidated net assets value of our Pro forma Group as at 31 March 2005,being the date of completion of the Restructuring Exercise.

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SHAREHOLDERS

The Shareholders of our Company and their respective shareholdings immediately before this Invitation(as at the Latest Practicable Date) and after this Invitation are set out as follows:-

Before this Invitation After this InvitationDirect Interest Deemed Interest Direct Interest Deemed Interest

Number of Number of Number of Number ofShares % Shares % Shares % Shares %

Directors

Ming Kam Sing(1) – – – – – – – –Li Zhuping(2) – – 58,500,000 13.00 – – 58,500,000 9.75Hu Fabao(3) – – 58,500,000 13.00 – – 58,500,000 9.75Ong Tiong Seng – – – – – – – –Chan Wai Meng – – – – – – – –

Substantial Shareholders(5% or more)

PFH(4) – – 220,500,000 49.00 – – 220,500,000 36.75Loampit(4) 220,500,000 49.00 – – 220,500,000 36.75 – –Elite Union(2) 58,500,000 13.00 – – 58,500,000 9.75 – –Golden Revenue(3) 58,500,000 13.00 – – 58,500,000 9.75 – –Achievement Way(5) 58,500,000 13.00 – – 58,500,000 9.75 – –

Others

Maleque Limited(1) – – 220,500,000 49.0 – – 220,500,000 36.75Vienna Management(6) 18,000,000 4.00 – – 18,000,000 3.00 – –Loh Kim Kang David(6) – – 18,000,000 4.00 – – 18,000,000 3.00Frontier Empire(7) 18,000,000 4.00 – – 18,000,000 3.00 – –Han Seng Juan(7) – – 18,000,000 4.00 – – 18,000,000 3.00Victory Time(8) 18,000,000 4.00 – – 18,000,000 3.00 – –Cheung Yick Chung(8) – – 18,000,000 4.00 – – 18,000,000 3.00Public – – – – 150,000,000 25.00 – –

TOTAL 450,000,000 100.00 600,000,000 100.00

Notes:-

(1) Ming Kam Sing is appointed to the board of our Company as a nominee director of PFH. He is also the Chairman andExecutive Director of PFH. Ming Kam Sing holds 65% interest in Maleque Limited which holds 46.41% of PFH. PFH holdsthe entire interest of our substantial shareholder, Loampit.

(2) Elite Union is wholly-owned by Li Zhuping, our Chief Executive Officer. Li Zhuping is deemed to have an interest in all theShares held by Elite Union.

(3) Golden Revenue is wholly-owned by Hu Fabao, our Executive Director. Hu Fabao is deemed to have an interest in all theShares held by Golden Revenue.

(4) Loampit is wholly-owned by PFH, a company which shares are listed on the SGX-ST and the HKEx. PFH is deemed tohave an interest in all the Shares held by Loampit.

(5) Achievement Way is wholly-owned by Dai Yonghu, our General Manager. Dai Yonghu is deemed to have an interest in allthe Shares held by Achievement Way.

(6) Vienna Management is an investment company incorporated in BVI on 8 September 1995 and is wholly and beneficiallyowned by Loh Kim Kang David, an unrelated third party who is not associated to our Directors, Executive Officers orControlling Shareholders. Loh Kim Kang David is deemed to have an interest in all the Shares held by ViennaManagement. Loh Kim Kang David is a director of UOB Kay Hian Private Limited, our Underwriter and Placement Agent.Loh Kim Kang David and Han Seng Juan are maternal cousins. The mothers of Han Seng Juan and Loh Kim Kang Davidare sisters.

(7) Frontier Empire is an investment company incorporated in BVI on 25 March 2004 and is wholly and beneficially owned byHan Seng Juan, an unrelated third party who is not associated to our Directors, Executive Officers or ControllingShareholders. Han Seng Juan is deemed to have an interest in all the Shares held by Frontier Empire. Han Seng Juan isa director of UOB Kay Hian Private Limited, our Underwriter and Placement Agent. Loh Kim Kang David and Han SengJuan are maternal cousins. The mothers of Han Seng Juan and Loh Kim Kang David are sisters.

(8) Victory Time is an investment company incorporated in BVI on 5 May 2004 and is wholly and beneficially owned by CheungYick Chung, an unrelated third party who is not associated to our Directors, Executive Officers or Controlling Shareholders.Cheung Yick Chung is deemed to have an interest in all the Shares held by Victory Time.

Our Shares held by our Directors and Substantial Shareholders do not carry different voting rights fromthe New Shares which are the subject of this Invitation. Our Directors are not aware of any arrangement,the operation of which may at a subsequent date result in a change in control of our Company.

Save as disclosed under the section “Restructuring Exercise” on pages 72 to 75 of this Prospectus, therehas been no significant change in the percentage of ownership of our Shares since our incorporation.

MORATORIUM

To demonstrate their commitment to our Group, each of Loampit, Elite Union, Golden Revenue andAchievement Way, who holds 36.75%, 9.75%, 9.75% and 9.75% of our Company’s post-Invitation sharecapital respectively, has undertaken not to dispose of or transfer or enter into any agreement that willdirectly or indirectly constitute or will be deemed as a disposal of any part of their respectiveshareholding in our Company for a period of six months commencing from the date of admission of ourCompany to the Official List of the SGX-ST, and each of them will not dispose of or transfer any of theirshareholdings in our Company to below 50% of their original shareholdings in our Company in the sixmonths thereafter.

Each of PFH, Li Zhuping, Hu Fabao and Dai Yonghu who holds the entire issued and paid-up sharecapital of Loampit, Elite Union, Golden Revenue and Achievement Way respectively has given theirindividual undertakings that they will not dispose of or transfer or enter into any agreement that willdirectly or indirectly constitute or will be deemed as a disposal of any part of their respective interest inthe respective companies for a period of 12 months commencing from the date of admission of ourCompany to the Official List of the SGX-ST.

Each of Vienna Management, Frontier Empire and Victory Time, each holds 3.00% of our Company’spost-Invitation share capital, has undertaken not to dispose of or transfer or enter into any agreementthat will directly or indirectly constitute or will be deemed as a disposal of any part of their respectiveshareholding in our Company for a period of six months commencing from the date of admission of ourCompany to the Official List of the SGX-ST.

Each of Loh Kim Kang David, Han Seng Juan and Cheung Yick Chung who holds the entire issued andpaid-up share capital of Vienna Management, Frontier Empire and Victory Time respectively has giventheir undertakings that they will not dispose of or transfer or enter into any agreement that will directly orindirectly constitute or will be deemed as a disposal of any part of their respective interest in therespective companies for a period of six months commencing from the date of admission of ourCompany to the Official List of the SGX-ST.

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RESTRUCTURING EXERCISE

Our Group’s business comprises the businesses previously carried on by each of LSBP and ShansongBio-Engineering. The shareholding and corporate structure of each of LSBP and Shansong Bio-Engineering prior to the Restructuring Exercise are as shown below.

(a) The shareholding and corporate structure of LSBP:-

(b) The shareholding and corporate structure of Shansong Bio-Engineering:-

Note:-

(1) Linyi Yimin has obtained approval for the cancellation of its registration from The Administration for Industry and Commerceon 18 March 2005.

The various steps in the Restructuring Exercise which resulted in our current shareholding and corporatestructure are as set out below:-

a) LSBP acquired the entire businesses and assets of Shansong Bio-Engineering (excludingShansong Bio-Engineering’s investments in Linyi Yimin, Linyi Meiyuan and Daqing Xinyu) andDaqing Xinyu (the “Shansong Bio-Engineering Acquisition”)

On 6 December 2003, LSBP entered into an asset transfer agreement with Shansong Bio-Engineering (as amended by a supplemental agreement dated 30 April 2004), whereby LSBPagreed to acquire the entire business, assets and liabilities of:-

(i) Shansong Bio-Engineering relating to the manufacture and sale of soy protein isolates andrelated products (such business now being carried on by our Linyi Branch); and

(ii) those of Shansong Bio-Engineering’s branch, the Heilongjiang Fujin branch, relating to themanufacture and sale of soybean oil and defatted soy flakes (such business now beingcarried on by our Fujin Branch).

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LSBP also entered into an asset transfer agreement with Daqing Xinyu dated 6 December 2003(as amended by a supplemental agreement dated 29 April 2004), whereby LSBP agreed toacquire the entire businesses, assets and liabilities of Daqing Xinyu relating to the manufactureand sale of soy protein isolates and related products (such business now being carried on by ourDaqing Branch).

The total purchase consideration for the Shansong Bio-Engineering Acquisition was determinedbased on the net assets of the businesses and assets to be acquired as at 31 December 2003,which amounted to approximately RMB156.7 million.

The Shansong Bio-Engineering Acquisition was completed on 23 October 2004 and the totalpurchase consideration was paid on 24 October 2004. Under the terms of the assets transferagreements, the Shansong Bio-Engineering Acquisition was to take effect from 1 January 2004.

Subsequent to the Shansong Bio-Engineering Acquisition, Shansong Bio-Engineering entered intoa deed of undertaking with our Company on 23 March 2005 (the “Shansong Bio-Engineering Deedof Undertaking”), pursuant to which Shansong Bio-Engineering has undertaken to our Group that itand its subsidiaries, will not carry on or be interested in the soybean-based business or anybusiness similar to or in competition with the business of our Group in the PRC for a period of fiveyears from the date of admission of our Company to the Official List of the SGX-ST.

b) Establishment of Glorious Faith

On 1 April 2004, Glorious Faith was incorporated in the BVI as an investment holding companywith an authorised share capital of US$50,000 divided into 50,000 shares of US$1.00 par valueeach (which was sub-divided into 500,000 shares of US$0.10 par value each on 14 May 2004).

On 17 May 2004, Bio Driven, Elite Union, Golden Revenue, Achievement Way and JointwayHoldings subscribed for and were allotted and issued 1,176, 1,176, 980, 980 and 788 GloriousFaith Shares respectively, representing 23.1%, 23.1%, 19.2%, 19.2% and 15.4% of the entireissued and paid up capital of Glorious Faith respectively.

Each of Bio Driven, Elite Union, Golden Revenue, Achievement Way and Jointway Holdings (the“Glorious Faith Shareholders”) is owned entirely by Luo Chuan, Li Zhuping, Hu Fabao, Dai Yonghuand Wang Chengtian respectively.

The respective shareholdings in Glorious Faith of the Glorious Faith Shareholders were agreedamong them based on the net asset value and net profit of LSBP and the business and assetsacquired pursuant to the Shansong Bio-Engineering Acquisition.

c) Establishment of Rainbow Palace

On 1 April 2004, Rainbow Palace was incorporated in the BVI as an investment holding companywith an authorised share capital of US$50,000 divided into 50,000 shares of US$1.00 each.

On 17 May 2004, Glorious Faith subscribed for and was allotted and issued 1 share of US$1.00each in the capital of Rainbow Palace representing the entire issued and paid up capital ofRainbow Palace, whereupon Rainbow Palace became the wholly-owned subsidiary of GloriousFaith.

d) Rainbow Palace acquired LSBP from Wang Chengtian

On 17 May 2004, Rainbow Palace entered into an acquisition agreement (as amended by thesupplemental agreement dated 23 September 2004 with Wang Chengtian (the “LSBP AcquisitionAgreement”) pursuant to which Wang Chengtian agreed to transfer his entire interest in LSBP toRainbow Palace and with all rights and benefits attaching to Wang Chengtian’s entire interest inLSBP from 1 January 2004 (the “LSBP Acquisition”).

The purchase consideration payable in cash by Rainbow Palace to Wang Chengtian for the LSBPAcquisition was initially US$28.0 million, subject to adjustments based on the audited net assetvalue of LSBP (taking into account the Shansong Bio-Engineering Acquisition as described in (a)above) as at 31 December 2003.

74

Pursuant to a supplemental agreement dated 23 September 2004 entered into between RainbowPalace and Wang Chengtian, the purchase consideration for the LSBP Acquisition was revised toapproximately US$26.5 million based on the audited net asset value of LSBP (taking into accountthe Shansong Bio-Engineering Acquisition as described in (a) above) as at 31 December 2003.

The LSBP Acquisition was completed and the total purchase consideration was paid on 22October 2004. Under the terms of the LSBP Acquisition Agreement, the entire interest in LSBP istransferred with all rights and benefits attaching thereto with effect from 1 January 2004.

e) Loampit, a wholly-owned subsidiary of PFH, subscribed for 49% interest in Glorious Faith

On 20 July 2004, PFH entered into a conditional subscription agreement (the “SubscriptionAgreement”) with Glorious Faith pursuant to which PFH will subscribe for, and Glorious Faith willallot and issue to PFH or its nominee, 4900 Glorious Faith Shares representing 49% of theenlarged issued and paid up capital of Glorious Faith. The final subscription price payable by PFHwas approximately US$27.1 million in cash, and was determined based on a price earnings ratioof approximately 7.5 times the audited consolidated net profits of LSBP (taking into account theShansong Bio-Engineering Acquisition as described in (a) above) for the year ended 31 December2003.

Following the completion of the Subscription Agreement on 15 October 2004, Loampit, a wholly-owned subsidiary of PFH was allotted and issued the 4,900 Glorious Faith Shares and holds a49% interest in the issued and paid up capital of Glorious Faith.

f) Disposal of shareholding in Glorious Faith by Bio Driven

Bio Driven is a company incorporated in the BVI and owned by Luo Chuan. On 8 September2004, Bio Driven disposed of its entire shareholding in Glorious Faith to Elite Union as to 440Glorious Faith Shares, Golden Revenue as to 368 Glorious Faith Shares and Achievement Way asto 368 Glorious Faith Shares.

The cash consideration payable by each of Elite Union, Golden Revenue and Achievement Waywas calculated in RMB which was RMB20.2 million, RMB16.9 million and RMB16.9 millionrespectively, and was determined based on the same valuation used in the subscription of theGlorious Faith Shares by PFH as stated in (e) above.

Concurrently, Luo Chuan acquired the entire shareholding interest in Shansong Bio-Engineeringheld by Li Zhuping, Hu Fabao and Dai Yonghu, for an aggregate of RMB54.0 million. Uponcompletion of this transaction, Shansong Bio-Engineering is owned as to 66.74% by Luo Chuanand 23.26% by Di Xinsheng.

Subsequent to the disposal by Bio Driven, owned by Luo Chuan, of its entire interest in GloriousFaith and the acquisition of the interests in Shansong Bio-Engineering, Luo Chuan entered into adeed of undertaking with our Company on 23 March 2005 (the “LC Deed of Undertaking”).Pursuant to the LC Deed of Undertaking, Luo Chuan has undertaken to our Group that he will notand will also procure that his associates will not carry on or be interested in the soybean-basedbusiness or any business similar to or in competition with the business of our Group in the PRC fora period of five years from the date of admission of our Company to the Official List of the SGX-ST.

Di Xinsheng, being the other investor in Shansong Bio-Engineering, has also entered into a similardeed of undertaking with our Company on 23 March 2005.

g) Pre-IPO Investors

On 29 October 2004, Elite Union, Golden Revenue and Achievement Way transferred 316, 48 and48 Glorious Faith Shares respectively to Vienna Management, Frontier Empire and Victory Time,respectively for a consideration of approximately US$1.7 million, US$0.26 million and US$0.26million. On 29 October 2004, Jointway Holdings also transferred 84, 352 and 352 Glorious FaithShares to Vienna Management, Frontier Empire and Victory Time, respectively representing itsentire interest in Glorious Faith, for a cash consideration of approximately US$0.46 million, US$1.9million and US$1.9 million, respectively. The valuation was determined based on the samevaluation used in the subscription of the Glorious Shares by PFH as stated in (e) above.

75

Upon completion of the transfers, each of Vienna Management, Frontier Empire and Victory Timeholds 4.0% of the issued and paid up capital of Glorious Faith. Elite Union, Golden Revenue andAchievement Way each holds 13.0% interest in the issued and paid up share capital of GloriousFaith.

Subsequent to the disposal by Jointway Holdings of its entire interest in Glorious Faith, WangChengtian who owns Jointway Holdings, entered into a deed of undertaking with our Company on23 March 2005 (the “WCT Deed of Undertaking”). Pursuant to the WCT Deed of Undertaking,Wang Chengtian has undertaken to our Group that he will not and will also procure that hisassociates will not carry on or be interested in the soybean-based business or any businesssimilar to or in competition with the business of our Group in the PRC for a period of five yearsfrom the date of admission of our Company to the Official List of the SGX-ST.

h) Our Company acquired Rainbow Palace

On 31 March 2005, our Company entered into a share purchase agreement with Glorious Faithand its shareholders (the “Share Purchase Agreement”), whereby our Company agreed to:

(i) acquire from Glorious Faith the entire issued and paid-up share capital of Rainbow Palacecomprising 1 share of par value US$1.00; and

(ii) accept the assignment by Glorious Faith of the outstanding amount of US$26.5 million beingdue from Rainbow Palace to Glorious Faith,

(the “Rainbow Palace Acquisition”), subject to and upon the terms and conditions of the SharePurchase Agreement.

The consideration payable for the Rainbow Palace Acquisition (including (i) and (ii) as statedabove) is approximately US$26.5 million or approximately RMB220.0 million, which is determinedbased on the Pro forma consolidated net asset value of Rainbow Palace as at 31 December 2003and the value of the amount due from Rainbow Palace to Glorious Faith of US$26.5 million. Theconsideration payable was satisfied by:-

(i) crediting as fully paid the 201,600 nil paid Shares of S$0.10 each in the capital of ourCompany held by Elite Union; and

(ii) allotting and issuing 449,798,400 new Shares of S$0.10 in the capital of our Company,credited as fully paid, to the shareholders of Glorious Faith as directed by Glorious Faith, asfollows:-

% of the issuedNumber of Shares and paid-up capital

Name of allottee allotted and issued of our Company

Loampit 220,500,000 49Elite Union 58,298,400 13(1)

Golden Revenue 58,500,000 13Achievement Way 58,500,000 13Vienna Management 18,000,000 4Frontier Empire 18,000,000 4Victory Time 18,000,000 4

Total 100

Note:

(1) This percentage shareholding includes the 201,600 shares issued nil paid to Elite Union and credited as fully paidpursuant to the Restructuring Exercise.

The Rainbow Palace Acquisition was completed on 31 March 2005.

Upon completion of the various steps in the Restructuring Exercise as set out above, our Groupstructure and shareholding structure are as set out in the section “Group Structure” on pages 76and 77 of this Prospectus.

76

GROUP STRUCTURE

Our Group structure following the Restructuring Exercise before this Invitation is set out below:-

Pine Agritech(Bermuda)

Our Group structure following the Restructuring Exercise after this Invitation is set out below:-

The details of our subsidiaries are set out below:-

Principal business/Place of Principal place of Equity held by our

Name of company incorporation business Company/Group

Rainbow Palace BVI Investment holding /BVI 100%

LSBP(1) PRC Production and sale 100%of soybean-based

products /PRC

LSBP also has operations carried on through its Linyi branch, Daqing branch and Fujin branch.

None of our subsidiaries is listed on any stock exchange. We do not have any associated company.

Note:-

(1) LSBP : The term of operation is 18 years from 4 January 2002 to 3 January 2020.

77

PFH

36.75%

100%

100%

Pine Agritech (Bermuda)

Rainbow Palace (BVI)

LSBP (PRC)

Daqing Branch Linyi Branch Fujin Branch

Loampit (BVI)

100%

Loh Kim Kang David

Vienna Management

(BVI)

Han Seng Juan

3%

Cheung Yick Chung

Victory Time (BVI)

Li Zhuping

Hu Fabao

Golden Revenue

(BVI)

9.75% 9.75% 9.75%

100% 100%

3%

Dai Yonghu

Achievement Way (BVI)

100%

Frontier Empire (BVI)

3%

Elite Union (BVI)

100% 100% 100%

Public25%

HISTORY AND BUSINESS

HISTORY AND DEVELOPMENT

As disclosed under the section “Restructuring Exercise” on pages 72 to 75 of this Prospectus, ourGroup’s business comprises the soybean-based products manufacturing businesses previously carriedon by each of Shansong Bio-Engineering and LSBP.

Shansong Bio-Engineering

The business of Shansong Bio-Engineering was founded in 2001 when Li Zhuping, our Chief ExecutiveOfficer, established (“Linyi Yikang”) in Bancheng Town, Linyi City, ShandongProvince, PRC to manufacture soy protein isolates. Linyi Yikang set up production facilities bypurchasing certain fixed assets from (“Linyi Bancheng Town Jingwei ProteinPlant”) for a total consideration of approximately RMB33.3 million.

With a view to supporting and enhancing the efficiency of its operations, on 28 October 2001, LinyiYikang acquired the rights to manage the assets and operations of

(Fujin Oil Processing Company of Shandong Jinluo Enterprise Group Company) (“HeilongjiangFujin”). In consideration for the acquisition of the rights, Linyi Yikang was obliged to pay an amount ofRMB2.0 million per annum for the period commencing from 1 November 2001 to 31 October 2004.Heilongjiang Fujin became the branch operations of Linyi Yikang, principally engaged in the manufactureof defatted soy flakes and soybean oil.

In August 2002, with a view to increasing the scale of production of soy protein isolates, Li Zhuping, HuFabao, Dai Yonghu, Di Xinsheng and Luo Chuan (collectively the “Founding Shareholders”) establishedShandong Shansong Soybean Protein Co., Ltd. (which subsequently changed its name to ShandongShansong Bio-Engineering Group Co., Ltd. in October 2002) with an initial registered capital of RMB86.0million. The initial registered capital was contributed by the Founding Shareholders in cash, except for LiZhuping, our Chief Executive Officer, whose contribution comprised cash and the total net assets of LinyiYikang valued at RMB15 million. Upon contribution of the registered capital, Shansong Bio-Engineeringwas held as to 23.26%, 20.93%, 20.93%, 17.44% and 17.44% by Di Xinsheng, Luo Chuan, Li Zhuping,Hu Fabao and Dai Yonghu, respectively.

Also in 2002, to further expand its business operations into areas which offered synergies, ShansongBio-Engineering invested a total amount of RMB31.0 million in:-

(i) a 54.55% interest in Daqing Xinyu, to engage in the manufacture of soy protein isolates;

(ii) a 51.61% interest in (Linyi Meiyuan Seasoning Material Co., Ltd.) (“LinyiMeiyuan”), to engage in the manufacture of food seasonings made from animal bone extracts; and

(iii) a 60% interest in (Linyi Yimin True Oil Co., Ltd.) (“Linyi Yimin”), to engagein the manufacture of food seasonings made from animal bone extracts. (Linyi Yimin has obtainedapproval for the cancellation of its registration from The Administration for Industry and Commerceon 18 March 2005.)

The other investors in Daqing Xinyu are Li Ying, Sun Mingqin and Li Xianhuan and in Linyi Yimin are LiJinmin, Dai Yonghu and Zhang Lifeng. Li Ying and Dai Yonghu are our Executive Officers. None of theother investors in Daqing Xinyu and Linyi Yimin is related to any of our Directors or SubstantialShareholders.

The other investors of Linyi Meiyuan are Hu Naiying, Zhang Lifeng, Li Jinmin and Fan Jianhong who arenot related to our Directors or Substantial Shareholders.

In November 2003, Shansong Bio-Engineering acquired the assets of Heilongjiang Fujin and establishedits Fujin Branch.

78

LSBP

LSBP was established on 4 January 2002 by Wang Chengtian as a wholly foreign-owned enterprise(“WFOE”) with a term of operation of 18 years from 4 January 2002 to 3 January 2020. LSBP wasestablished with an initial registered capital of US$2.0 million which was contributed fully on 11 March2002 by Wang Chengtian. On 21 February 2003, the registered capital was increased to US$7.0 millionand was fully paid on 28 May 2003. LSBP set up production facilities in Linyi to manufacture soy proteinisolates and soy oligosaccharide syrup and commenced operations in January 2003. On 22 March2004, approval was obtained for a further increase of its registered capital from US$7.0 million toUS$14.0 million. The increased registered capital of LSBP was contributed fully on 22 October 2004.

The Shansong Bio-Engineering Acquisition

As disclosed in the section “Restructuring Exercise” on pages 72 and 75 of this Prospectus, in 2003,pursuant to the Shansong Bio-Engineering Acquisition, LSBP acquired the businesses, assets andliabilities of Shansong Bio-Engineering including its Heilongjiang Fujin branch and the businesses, assetsand liabilities of Daqing Xinyu for an aggregate consideration of approximately RMB156.7 million witheffect from 1 January 2004. In connection with the Shansong Bio-Engineering Acquisition and to meetpayment for the purchase consideration, LSBP increased its total investment and registered capital up toUS$29.8 million and US$14.0 million respectively.

After completion of the Shansong Bio-Engineering Acquisition, the operations of Shansong Bio-Engineering and its Fujin Branch (Heilongjiang Fujin) and Daqing Xinyu were set up as LSBP’s branchoperations namely, (Linyi Branch),

(Fujin Branch) and (Daqing Branch). Approval forsetting up the branches were obtained from the original approving authority of LSBP on 14 December2003 and the business licences of each of Linyi Branch, Daqing Branch and Fujin Branch were issued bythe relevant administration for industry and commence on 24 December 2003, 13 January 2004 and 4January 2004, respectively.

The LSBP Acquisition

On 1 April 2004, Glorious Faith was incorporated and held as to 23.1%, 23.1%, 19.2%, 19.2%, and15.4% by Bio Driven, Elite Union, Golden Revenue, Achievement Way and Jointway Holdings, which arewholly and beneficially owned by Luo Chuan, Li Zhuping, Hu Fabao, Dai Yonghu and Wang Chengtianrespectively. Also on 1 April 2004, Rainbow Palace was incorporated with Glorious Faith as its holdingcompany. On 17 May 2004, pursuant to the LSBP Acquisition, Rainbow Palace acquired WangChengtian’s entire interest in LSBP for a consideration of US$26.5 million. The LSBP Acquisition wascompleted and paid on 22 October 2004. Under the terms of the LSBP Acquisition Agreement (asamended by the supplemental agreement dated 23 September 2004), Wang Chengtian agreed totransfer his entire interest in LSBP to Rainbow Palace together with all the profits and dividendsattaching thereto from 1 January 2004 (the “LSBP Acquisition”).

The Subscription Agreement

On 20 July 2004, PFH entered into a subscription agreement with Glorious Faith pursuant to which PFHsubscribed for 4,900 Glorious Faith Shares (representing 49% of the enlarged share capital of GloriousFaith) for an aggregate subscription price of approximately US$27.1 million. PFH, a company listed onthe SGX-ST and the HKEx, and the PFH group, is principally engaged in the manufacture anddistribution of fresh and frozen meat and processed meat products in the PRC. The subscription wascompleted on 15 October 2004 and the subscription monies had been mainly applied towards completionof the Shansong Bio-Engineering Acquisition and the LSBP Acquisition.

79

OUR BUSINESS


We sell our soy protein isolates mainly to manufacturers of processed meat products. As for oursoybean oil, our customers are mainly manufacturers who purchase our soybean oil for furtherprocessing to obtain higher grade oil and we also sell to small retailers. Our soy oligosaccharide syrup issold to distributors for retail sales and to operators of small retail outlets. Since 1 July 2004, we also sellour soy oligosaccharide syrup to a beverage manufacturer to be used as an ingredient in theirmanufacturing process.

We have three production plants in the PRC, namely Linyi Plant, Daqing Plant and Fujin Plant. Wemanufacture soybean oil, defatted soy flakes, soy protein isolates and soy oligosaccharide syrup at ourLinyi Plant. Our Fujin Plant manufactures soybean oil and defatted soy flakes and our Daqing Plantmanufactures soy protein isolates.

Soy protein isolates

Soy protein isolates are manufactured from defatted soy flakes, has high protein content and when usedas an ingredient in food products, improves the texture and nutritional value of foods. Soy proteinisolates also stabilise emulsions and aid in the absorption of water and fat. Soy protein isolates are usedas an ingredient in a wide range of food products which include dairy foods, nutritional supplements,seafood, processed meats, frozen food, nutritional beverages, cream soups, sauces and snacks.

Soybean oil

Soybean oil is obtained from the extraction of oils during the manufacturing process of defatted soyflakes. We use defatted soy flakes as raw materials in our manufacture of soy protein isolates. Soybeanoil contains vitamins A and D, various unsaturated fatty acids which are essential to the human bodywhich makes it an ideal food product with a high nutritional value. We sell our soybean oil mainly tomanufacturers of refined oils for further processing and we also sell to small retailers.

Soy oligosaccharide syrup

Soy oligosaccharide syrup is manufactured from soybean whey. Soybean whey is a by-product from theproduction of soy protein isolates. By using soybean whey for the manufacture of soy oligosaccharidesyrup, we are able to optimise the use of the soybean raw material.

Soy oligosaccharide syrup is made up of the saccharides contained in soybean, and is a food materialthat enhances the growth of bifidobacteria in the intestines which are essential for intestinal health. Soyoligosaccharide syrup, classified as prebiotics, is non-digestible and when ingested, will selectivelystimulate favourable bifidobacteria growth in the intestines and colon, thereby improving digestion.

We believe that we are one of the few companies in the PRC which has successfully adopted themembrane separation technology and has the capital funding to support the commercial production ofsoy oligosaccharide syrup. Our soy oligosaccharide syrup is a health-care food product approved by theMinistry of Health of the PRC and has been registered with the (StateCertification and Accreditation Administration) thereby qualifying for export.

80

OUR MANUFACTURING PROCESS

The flowchart illustrates the various stages of our manufacturing processes of our soybean-basedproducts:-

81

Storage and preparation of soybean

Storage

The key raw material used in the production of our products is soybean. In the production of oursoybean-based products, we use non-genetically modified soybean harvested in the Heilongjiang regionin the PRC.

82

Separation

Acidification

Separation

Protein Precipitate

Grinding

Neutralisation

Deodorisation

Dehumidification


Soybean whey

Coarse and medium filtration

Desalination / Decolourisation

Fine filtration / grinding

Concentration


Disinfection

1

Soy

bean

whe

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When soybeans are received at our Fujin Plant and Linyi Plant, they are unloaded, weighed andconveyed to silos for storage. As at the Latest Practicable Date, we have 12 silos at our Fujin Plant witha total storage capacity of 50,000 tonnes and 3 silos at our Linyi Plant with a total storage capacity of15,000 tonnes.

At the point of receiving delivery of soybean, we take random samples of the soybean and conductquality control checks for foreign matter, colour and broken seeds. A sample of the soybean is furtheranalysed for oil, protein and moisture content to ensure that the soybeans conform with our specifiedcriteria. After the checks and accepting delivery, the soybeans are weighed and conveyed to the silos forstorage.

Preparation

Prior to the extraction of soybean oil, the soybeans are subjected to the following processes:-

(1) Cleaning and selection

The soybeans are cleaned and where tramp iron is removed from the soybeans using magneticseparators and stones, sand, dust and other foreign matters are removed by shaker screens andaspiration.

(2) Dehulling/Cracking

Dehulling is a necessary step as the presence of hulls during oil extraction will result in a lower oilyield due to the absorption of the oil into the particles. The soybeans are dehulled by subjectingthem to a stream of hot air (causing an expansion) followed by a stream of cold air (causing acontraction). This step loosens and separates the husks of the soybeans from the soybean seeds.The dehulled soybean seeds are then cracked into smaller pieces for flaking. The cracked hullsand soybeans are then separated with the use of shaker screens and aspiration. The lighter hullsare removed from the heavier beans and kernels, with the use of fan aspiration and screens tostrain for heavy objects.

(3) Softening

The soybeans are then softened by passing them through a high temperature air stream.

(4) Conditioning

The cracked pieces of soybeans are then subject to conditioning through the application of indirectsteam to adjust the moisture content and temperature. These soybeans are exposed totemperatures of approximately 65-70 degrees celsius for thirty to sixty minutes. The purpose ofconditioning is to make extraction easier through heat denaturation and subsequent coagulation ofproteins present in the soybeans. In addition, conditioning will also cause coalescence of oildroplets and the reduction in the affinity for oil for the solid materials.

(5) Flaking

The conditioned pieces of soybean are fed into flaking machines consisting of a pair of counter-rotating smooth steel rolls and flattened into uniform thickness as the rolls rotate against eachother. The flattened pieces of soybean are referred to as full-fatted soy flakes. The main purposeof flaking is to increase the contact surface between the solvent used in the subsequent hexaneextraction process and the full-fatted soybean flakes.

83

Extraction of soybean oil

We extract soybean oil from the full-fatted soy flakes to produce defatted soy flakes, a raw material whichwe use for the manufacture of our soy protein isolates. We extract soybean oil with the solvent extractionmethod, using hexane as the solvent.

(1) Solvent extraction

The solvent extraction is performed in a solvent extractor tank where hexane, the liquid solvent, ispumped over the bed of full-fatted soy flakes. Through this process, only some of the soybean oilis extracted from the full-fatted soy flakes. The hexane that flows through the bed of full-fatted soyflakes will be mixed with soybean oil. This mixture of hexane and soybean oil is known asmiscella.

(2) Evaporation/Condensation

The miscella undergoes the evaporation process whereby steam is introduced which causes thehexane solvent to evaporate. The resulting vapour is condensed and channelled back to thesolvent extractor to be re-used. Hexane and steam are continuously being introduced to themiscella, until crude soybean oil is extracted from the full-fatted soy flakes.

The full-fatted soy flakes which have undergone the solvent extraction and theevaporation/condensation processes are referred to as defatted soy flakes. Defatted soy flakesare the main raw material used in the manufacture of our soy protein isolates at our Daqing Plantand Linyi Plant.

(3) Refining

The crude soy oil is mixed with caustic soda, then subjected to washing with water, andsubsequently put through a centrifuge to remove any impurities in the crude soy oil.

(4) Deodorisation

The crude soy oil is subjected to washing using high vacuum and superheated steam to removematerials which would contribute objectionable flavours and odours to the finished soy oil product.

Refined soybean oil is derived from the above processes.

Manufacturing processes for soy protein isolates

Soy protein isolates are produced by removing proteins from defatted soy flakes.

(1) Extraction

Defatted soy flakes are mixed with a solution of water and alkali, such as sodium hydroxide so asto bring the pH from neutral to slightly alkaline reaction in heated vessels for the extraction ofprotein contents within the defatted soy flakes. The majority of the soybean proteins along with thesugars, carbohydrates and other soluble substances are dissolved.

(2) Separation

The solution after extraction is subject to a separation process to separate the insoluble residuecomprising soybean fibre and residual soybean hull from the soluble mixture solution.

(3) Acidification

The soybean proteins are precipitated out from the solution at mildly acidic conditions by mixingwith hydrochloric acid and bringing the pH to between 4.3 to 4.5 where the soybean proteinsexhibit minimum solubility.

84

(4) Separation

The glutinous soybean protein precipitates are separated from the liquid which comprises solublecarbohydrates, sugars, and salts, and are referred to as soybean whey.

(5) Grinding

Water is added to the glutinous soybean protein precipitates for grinding into more liquefied form.

(6) Neutralisation

Sodium hydroxide is added to neutralise the pH level of the glutinous soybean protein mixture.

(7) Disinfection/Deodorising

The glutinous soybean protein precipitates is then disinfected and deodorised by superheatedsteam to destroy bacteria and remove any materials which would contribute objectionable flavoursand odours to the finished soy protein isolates.

(8) Dehumidification

The soy protein precipitates is then spray dried by feeding the soy protein precipitates into a highpressure drier and dehumidifier to remove moisture to produce soy protein isolates in powder form.

Manufacturing processes for soy oligosaccharide syrup

Soybean whey, produced during the production process of soy protein isolates, are used in theproduction of soy oligosaccharide syrup.

(1) Coarse and medium filtration

Using the membrane separation technology, the soybean whey is subjected to coarse filtration andmedium filtration to obtain the crude form of soy oligosaccharide syrup.

(2) Desalination and decolourisation

The crude form of soy oligosaccharide syrup then undergoes the desalination process to removesalt content and the decolourisation process to remove colouring.

(3) Fine filtration/grinding

The crude form of soy oligosaccharide syrup is subjected to the fine filtration/grinding process toachieve a more homogenous texture.

(4) Concentration process

After the fine filtration/grinding process, the soy oligosaccharide syrup is subjected to theconcentration process to reduce water content so as to achieve a high concentration of sugarcontent in the soy oligosaccharide syrup.

The soy oligosaccharide syrup is further sterilised before bottling and packing for storage and delivery.

85

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86

In December 2004, we installed one new production line for defatted soy flakes and its by-product,soybean oil, at our Linyi Plant and commenced production in March 2005. This new production line willcontribute an additional production capacity of 45,000 tonnes per annum for defatted soy flakes at ourLinyi Plant.

In January 2005, we commenced the installation of one new production line for soy oligosaccharidesyrup at our Linyi Plant, the installation of which is expected to be completed in May 2005. This will addan additional production capacity of 2,000 tonnes per annum for soy oligosaccharide syrup at our LinyiPlant. We also commenced the installation of two additional production lines for soy protein isolates atour Linyi Plant, the installation of which is expected to be completed in September 2005. These newproduction lines will add a total production capacity of 20,000 tonnes per annum for soy protein isolatesat our Linyi Plant.

The total cost for the two new production lines above is RMB80.2 million, comprising RMB31.23 millionfor the defatted soy flakes production line and RMB48.97 million for the soy oligosaccharide syrupproduction line. The total cost incurred was financed by a new 1-year term loan of RMB70 million andinternal resources.

QUALITY CONTROL

We focus significantly on the quality of the raw materials and finished products at all our plants to ensurethe desired quality of outputs. Our quality control team is committed to attaining high quality in ourproducts and as such, we have implemented stringent and comprehensive quality control procedures.

Details of our quality control measures are as follows:-

Raw material quality control

The key raw material used in our production is soybeans. As our manufacturing processes are highlyautomated, the quality of our finished products would depend largely on the quality control measuresundertaken at the raw materials inspection stage and the storage of the soybeans. It is important that weensure that the soybeans used in our production meet our requirements as the protein and oil contentsof soybeans will determine the quality of our finished products.

We procure only natural non-genetically modified soybeans and when the soybeans are delivered to ourFujin Plant and Linyi Plant, our quality control team will conduct visual inspection of random sample fromeach bag of soybeans for testing. After the quality control team has completed visual checks on therepresentative sample for residues and the colour of the soybeans, the moisture and protein level contentof the soybeans are measured, to ensure that the soybeans conform with our requirements. Soybeansthat do not conform with our requirements will be rejected.

Soybeans which have passed our incoming quality control procedures are stored in the silos at our FujinPlant and Linyi Plant. The silos at our Fujin Plant are located close to our soybean suppliers which allowus to have ready access to supply of soybeans and minimise damage to soybeans during transportation.

The silos are fitted with temperature monitoring and control devices. The warehouse supervisors at ourplants will regularly monitor the temperature and ventilation in the silos so as to ensure that the soybeansare stored at optimal conditions for use in the production of our soybean-based products.

Finished products quality control

To further ensure that our products meet our requirements and national food manufacturing standards,our quality control team will carry out random checks on the finished products. The products that do notcomply with our internal quality control standards will be rejected.

In accordance with our emphasis on quality control measures applied throughout our production process,our subsidiary, LSBP has applied for and has been certified ISO 9001:2000 compliant. On 11 February2003, LSBP was awarded the ISO 9001:2000 certification in respect of the design, development,production and distribution for soy oligosaccharide syrup and soy protein isolates. The certification wasawarded by the China National Import & Export Commodities Inspection Corporation Quality Certification

87

Center and is valid until 10 February 2006. Our production facilities for soy oligosaccharide syrup andsoy protein isolates are subject to half-yearly reviews by the said certification body. We have so farsatisfied all the half-yearly reviews and maintained the certification. We expect that the ISO 9001:2000certification will be renewed for a further 3 years upon its expiry on 10 February 2006 provided that wesatisfy all the half-yearly reviews.

AWARDS AND CERTIFICATIONS

We were awarded the following certifications:-

(1) Our soy oligosaccharide syrup was recommended as a “Health Food for Sub-health Consumption”by the (China International Exchange and Campaign Association forMedical and Healthcare - Sub-health Professional Committee) in April 2003;

(2) Our subsidiary, LSBP, was granted the (Quarantine Hygiene RegistrationCertificates) for exporting soy protein isolates and soy oligosaccharide syrup by the

(State Entry-Exit Inspection and Quarantine Administration) on 22 October2002. This certification is valid from 22 October 2002 to 21 October 2005; and

(3) Our subsidiary, LSBP, was granted the (Hygiene Registration Certificates) forexporting soy protein isolates and soy oligosaccharide syrup by the(State Certification and Accreditation Administration) on 22 October 2002. This certification is validfrom 22 October 2002 to 21 October 2005.

RESEARCH AND DEVELOPMENT

In order to maintain our competitiveness, we place emphasis on research and development to improve thequality of our existing products and to accelerate the development of new products. As at the LatestPracticable Date, our Group has a research and development team comprising 25 members located in Linyi.

Our research and development team is headed by Zhang Jichuan and he is assisted by an experiencedteam of research staff.

The main functions of our research and development team are as follows:-

Conduct research on products

We conduct research on products characteristics so as to enable us to find other ways of using ourproducts and also to improve on the existing products.

Develop new products

Through our research and development efforts, our Group has successfully adopted the membraneseparation technology to produce our soy oligosaccharide syrup. We are also currently carrying out researchand development activities for two new products, namely soybean peptides and soybean dietary fiber.

Soybean peptide is a form of biological functional active peptide substance, which is a protein moleculecomposed of two or more units of amino acids. It is easily absorbed by the human body. It is believedthat the functions of soybean peptides include suppressing tumours, lowering blood pressure andenhancing the immunity of the human body. Soybean peptides can also be used as nutritionalsupplements. We believe that soybean dietary fiber is not only high in nutritional value but that it canalso act as a binding ingredient to be used for making confectionary products.

Our Company believes that there are opportunities for these two products and intends to expand into theproduction of soybean peptides and soybean dietary fiber in the future.

88

A summary of the research and development costs for the last three financial years ended 31 December2003 and the six months ended 30 June 2004 is set out below:-

Six monthsended

FY2001 FY2002 FY2003 30 June 2004

Research and development expenses (RMB’000) 63 294 260 166Percentage of revenue (%) 0.21 0.14 0.07 0.08

All research and development costs were expensed in the years they were incurred.

INVENTORY MANAGEMENT

Our key raw materials comprise soybeans and defatted soy flakes.

For soybean, we mainly purchase from suppliers/farmers in the Heilongjiang Province for our productionfacilities which manufactures soybean oil and defatted soy flakes. Our Fujin Branch purchasesapproximately 80% of its annual requirement for soybean after the harvesting period from October toFebruary, when there is ample supply and prices are relatively lower. Our remaining annual requirementfor soybean, are purchased from time to time during the other months of the year. We maintain aminimum stock level of our requirement for soybean for up to two months.

For defatted soy flakes, our Fujin Plant manufactures defatted soy flakes for use in the manufacture ofour soy protein isolates at our Daqing Plant and Linyi Plant. Currently, our Fujin Plant only meetsapproximately 60% of our annual requirement for defatted soy flakes. The remaining approximately 40%of our annual requirement for defatted soy flakes is met by purchases from third party suppliers. Wemaintain a minimum stock of defatted soy flakes for up to one week. Since March 2005, we hadcommenced production of defatted soy flakes at our Linyi Plant for use in the manufacture of our soyprotein isolates.

As at 31 December 2001, 31 December 2002, 31 December 2003 and 30 June 2004, our inventorylevels were approximately RMB48.6 million, RMB59.2 million, RMB62.9 million and RMB81.4 million,respectively. Our inventory comprises mainly soybean and defatted soy flakes.

Our Group’s general provision policy on obsolete or damaged inventory is that where our managementconsiders obsolete or damaged inventory to have no residual value, such inventory will be written offcompletely. In addition, provisions are made on the diminution in the market value of the inventory whenour management considers appropriate.

The adequacy of inventory provision is reviewed by our management on a half yearly basis. Specificprovisions will be made when our management should determine that the current level of provision isinadequate.

We have not made any provision nor written off any inventory for damage or obsolescence in the lastthree financial years ended 31 December 2003 and the six months ended 30 June 2004, as we have notexperienced any significant damage or loss in respect of our inventory.

Our inventory turnover days for the past three financial years ended 31 December 2003 and the sixmonths ended 30 June 2004 were as follows:-

Six monthsended

FY2001 FY2002 FY2003 30 June 2004

Average inventory turnover days 60(3) 122 83 92

Notes:-

(1) Average inventory turnover days for FY2002 and FY2003 are computed based on (Average inventory balance/Cost of sales)x 360 days.

89

(2) Average inventory turnover days for the six months ended 30 June 2004 is computed based on (Average inventorybalance/Cost of sales) x 180 days.

(3) Average inventory turnover days for FY2001 is computed based on (Average inventory balance/cost of sales) x 60 days. Thisis not meaningful for comparison with the other financial periods as we only commenced our operations in end October2001.

SALES AND MARKETING CHANNELS

All of our soybean-based products are mainly sold in the PRC. Our customers are mainly meat-processing manufacturers and food processing manufacturers who are located mainly in ShandongProvince, Jiangsu Province, Henan Province, Hebei Province, Heilongjiang Province, Tianjin, Beijing andShanghai.

As at the Latest Practicable Date, our sales and marketing team comprises over 90 employees. Oursales and marketing team concentrates on marketing our soy protein isolates as this product is currentlythe major contributor to our sales.

We make frequent visits to our customers to gather feedback on our products and to keep abreast withtheir changing requirements as well as their planned production schedules.

For marketing to prospective clients, we would first introduce to them our product range and prices. If theprospective clients are interested in our products, we would then arrange for visits to our variousproduction plants for them to gain a better understanding of our products.

Customers for our soybean oil are mainly manufacturers of refined soybean oil who purchase oursoybean oil for further processing into higher grade soybean oil and we also sell to small retailers. Thesecustomers purchase from us through industry knowledge and word of mouth.

For soy oligosaccharide syrup, our target customers are pharmacies, supermarkets, other beveragemanufacturers and operators of retail outlets. We plan to promote greater public awareness of thebenefits of our soy oligosaccharide syrup product through media advertisement and also through thedistribution of pamphlets to educate the general public of its benefits.

MAJOR CUSTOMERS

Our major customers who each accounted for 5% or more of our revenue for the last three financialyears ended 31 December 2003 and the six months ended 30 June 2004 are as follows:-

Percentage (%) of revenue Six months

endedProduct(s) FY2001 FY2002 FY2003 30 June 2004

PFH group:(1)

(i) Soy protein N/A 4.7 9.8 10.7(Linyi Xincheng Jinluo isolates

Meat Products Co., Ltd.)

(ii) Soy protein N/A 0.9 7.2 2.6(Daqing Jinluo Meat isolatesProducts Co., Ltd.)

N/A 5.6 17.0 13.3

Defatted 5.4 N/A N/A N/A (Sichuan Guangzhou Han soy flakesGuo Xiong Feedstuff Co., Ltd.)

90

Percentage (%) of revenue Six months

endedProduct(s) FY2001 FY2002 FY2003 30 June 2004

Defatted 5.4 1.5 N/A N/A (Sichuan Mianyang Xiwang soy flakesFeedstuff Co., Ltd.)

Soy protein 3.8 10.5 9.0 10.4 (Jiutai Meat Processing Plant) isolates

Note:-

(1) Comprises sales to two subsidiaries of PFH group, namely (Linyi Xincheng Jinluo MeatProducts Co., Ltd.) and (Daqing Jinluo Meat Products Co., Ltd.).

Our customers comprise mainly meat processing companies and animal feed manufacturers whopurchase our soy protein isolates as raw material for their production purposes.

The PFH group has consistently been our customer over the last two financial years ended 31 December2003. In FY2003, our sales to the PFH group increased from 5.6% to 17.0% due to increase in orders.Ming Kam Sing, our Non-executive Chairman, is appointed to the board of our Company as a nomineedirector of PFH. Ming Kam Sing is also the Chairman and Executive Director of PFH.

In FY2001, we sold defatted soy flakes to (Sichuan Mianyang XiwangFeedstuff Co., Ltd.) and (Sichuan Guangzhou Han Guo Xiong FeedstuffCo., Ltd.). In FY2002, we ceased supplying to these companies when we channelled our supply ofdefatted soy flakes to our production of soy protein isolates.

On 1 July 2004, we entered into an agreement with a beverage manufacturer located in Linyi City,Shandong Province to supply them with soy oligosaccharide syrup for use in their beverage products.Under the agreement, we will supply them with 720 mt of soy oligosaccharide syrup per year for a periodof two years ending 30 June 2006.

Save as disclosed above, we do not have any long-term agreements or arrangements with any of ourmajor customers. We are not dependent on any of our major customers.

Besides the long term contract disclosed above, in January 2005, we had entered into separateagreements with 100 operators of retail shops. Under each of these agreements, we will supply eachoperator with 7,200 bottles (330 ml for each bottle or approximately 2.88 mt for 7,200 bottles) of soyoligosaccharide syrup for one year from 21 January 2005 to 20 January 2006.

Save as disclosed above, none of our Directors or Substantial Shareholders has any interest, direct orindirect, in any of the above major customers.

Credit Policy

We typically grant our existing customers credit period of between 30 to 90 days. We may grant longercredit periods to our existing customers with good payment history and market reputation. All our creditterms are recommended and subject to the approval of our management. For new customers, we do nottypically grant credit terms and may require a down payment if deemed necessary.

We monitor closely all of our outstanding accounts receivables and review our accounts receivablescollectivity annually to make specific provisions in the event that any collection is considered to bedoubtful.

91

For the last three financial years ended 31 December 2003 and the six months ended 30 June 2004, wedid not make any provisions for doubtful debts and did not have any bad debts write-offs.

Our average accounts receivable turnover days for the last three financial years ended 31 December2003 and the six months ended 30 June 2004 are as follows:-

Six monthsended

FY2001 FY2002 FY2003 30 June 2004

Average accounts receivable turnover days 3 4 15 19

The aging schedule for our trade receivables of approximately RMB13.4 million as at 30 June 2004 areas follows:-

Aging schedule of 30 June 2004 Amount of provisionaccount receivables (RMB’000) (RMB’000)

Less than 30 days : 9,518 –Between 31 and 60 days : 812 –Between 61 and 180 days : 3,110 –Over 180 days : – –

As at the Latest Practicable Date, all the outstanding trade receivables as at 30 June 2004 have beenfully collected.

MAJOR SUPPLIERS

Our suppliers who each accounted for 5% or more of our purchases in the last three financial yearsended 31 December 2003 and the six months ended 30 June 2004 are as follows:-

Percentage (%) of total purchases Six months

Type of raw endedmaterials FY2001 FY2002 FY2003 30 June 2004

Defatted 9.8 8.4 17.3 17.9(Shandong Yuwang soy flakesEnterprise Co., Ltd.)

Defatted 5.7 N/A N/A N/A(Neimenggu Doudu Youzhi soy flakesGroup Co., Ltd.)

(Shandong Yuwang Enterprise Co., Ltd.) supplies us with defatted soy flakes andour purchases have increased from 8.4% in FY2002 to 17.3% in FY2003 and to 17.9% for the sixmonths ended 30 June 2004 due to an increase in our production capacity during that period.

Due to commercial considerations, we have ceased to purchase supplies of defatted soy flakes from(Neimenggu Doudu Youzhi Group Co., Ltd.) since FY2002.

We mainly source soybeans from individual farmers and each individual farmer does not account formore than 5% of our total purchases.

We do not have any long-term agreements or arrangements with any of our major suppliers and we arenot dependent on any of our suppliers.

None of our Directors or Substantial Shareholders has any interest, direct or indirect, in any of the abovemajor suppliers.

92

Credit Policy from our Suppliers

The usual credit terms extended to us by our suppliers are generally between 30 to 90 days dependingon the types of raw material supply. Generally, credit term for soybean purchases are of a shorterduration.

The average accounts payable turnover days for the last three financial years ended 31 December 2003and the six months ended 30 June 2004 are as follows:-

Six monthsended

FY2001 FY2002 FY2003 30 June 2004

Average accounts payable turnover days 15 11 10 14

COMPETITORS

(a) Soy protein isolates

Our main competitors in the PRC include (Hubei Yun Meng Protein Co.,Ltd.), Celestial NutriFoods Limited, (Jilin Fuji Protein Co., Ltd.), and

(Harbin High Technology Food Products Co., Ltd.)

(b) Soybean oil

As the market demand for soybean oil is highly localised due to the high transportation costs, webelieve that we do not have any competitors for soybean oil within the vicinity of Fujin City. Withinthe PRC, our competitors include (Harbin High Technology FoodProducts Co., Ltd.) (Dalian Huanong Group Limited) and

(Heilongjiang Jiusan Oil and Fat Co., Ltd.)

(c) Soy oligosaccharide syrup

We believe that we are one of the few companies in the PRC who has successfully adopted themembrane separation technology to produce soy oligosaccharide syrup products. Our maincompetitor is (Harbin High Technology Food Products Co., Ltd.).

COMPETITIVE STRENGTHS

Our Directors believe that our competitive strengths are as follows:-

Our operations are strategically located

The production facilities for our soybean oil and defatted soy flakes are located in the HeilongjiangProvince. The Heilongjiang Province is a major soybean farming area which is widely known for highquality non-genetically modified soybean. Our Group therefore has access to an abundant supply of highquality soybean.

Defatted soy flakes produced at our Fujin Plant are transported to our Linyi Plant in Shandong Provinceand Daqing Plant in the Heilongjiang Province for further processing into soy protein isolates and soyoligosaccharide syrup.

We have an experienced management and technical team

Our management team, led by Li Zhuping, our Chief Executive Officer, Hu Fabao, our Executive Director,Dai Yonghu, our General Manager and our senior management have extensive experience in the industrythat we operate in. Li Zhuping, our Chief Executive Officer, graduated from Hunan ZhongnanlinInstitution with a Bachelor of Science and has worked in the soybean industry since 1996 and hasgained invaluable experience in the industry. Hu Fabao, our Executive Director, has been involved in the

93

management of various manufacturing companies for over 19 years and has obtained a Diploma inEnterprise Management from the Shandong Technical University in 1998. Dai Yonghu, our GeneralManager, graduated from Linyi Agricultural Institution with a Diploma in Management in 1995 and hasworked in the soybean industry since then.

We have vertically integrated production facilities

With vertically integrated production facilities, we are able to maximise the uses of our soybean rawmaterials. We are also able to manage the supply, costs and quality of the other main raw material,defatted soy flakes, used in the production of our soy protein isolates. Further, we are able to enjoyeconomies of scale due to the scale of our operations at our manufacturing plants.

Our production facilities are vertically integrated which enables us to manufacture and sell a range ofsoybean-based products derived from soybeans.

At our Fujin Plant, we extract soybean oil from soybeans to manufacture defatted soy flakes for use in theproduction of our soy protein isolates. Soybean oil extracted in this process is sold to our customers forfurther processing. At our Daqing Plant and Linyi Plant, we manufacture soy protein isolates usingdefatted soy flakes as raw materials. During the manufacturing process for soy protein isolates, soybeanwhey is derived which we further process using the membrane separation technology to produce soyoligosaccharide syrup.

Product Development

We believe that our product development efforts have put us ahead of our competitors in the business ofthe manufacture of soybean-based products. We have focused not only on different productmanufacturing techniques, we have also placed emphasis on continuous product development. We arecurrently carrying out research and development for two new products, namely soybean peptides andsoybean dietary fiber. We believe that these products will further differentiate us from our competitors.Please see the section “Research and Development” on page 88 of this Prospectus for further details ofthese two products.

ORDER BOOKS

In general, our customers do not place long-term orders with us. Instead, they place orders with us fromtime to time depending on their requirements. As at the Latest Practicable Date, our orders on handamounted to approximately RMB5.04 million for which we have received confirmed purchase orders.These orders are generally scheduled for delivery within 30 days. These confirmed purchase orders arehowever subject to cancellation, deferral or rescheduling by our customers. Accordingly, our order bookas at any particular date may not be indicative of our revenue for any succeeding period.

PROPERTIES AND FIXED ASSETS

Properties

As at the Latest Practicable Date, we own the following properties:-

Site area Built-up floor area Period of land Description/Location (Approximate sq m) (Approximate sq m) Use of property use rights

Southern side of Fu 33,912 16,614 Manufacturing, For various termsCheng Road storage, offices until 29 DecemberBancheng Town staff quarters 2027 or 8 June 2028Lan Shan District and otherLinyi City supporting Shandong Province purposesPRC

94

Site area Built-up floor area Period of land Description/Location (Approximate sq m) (Approximate sq m) Use of property use rights

Western side of 205 39,366 8,458 Manufacturing For various termsGuo Street and storage until 29 SeptemberBancheng Town 2028 or 1 DecemberLanshan District 2028Linyi CityShandong ProvincePRC

Gongyeyuan Road 241,140 29,398 Manufacturing, Until 5 June 2033Bancheng Town storage and officeLan Shan DistrictLinyi CityShandong ProvincePRC

Northern side of Xi 10,003 4,789 Manufacturing Until 23 October 2053Bin Road and storageSa’ertu DistrictDaqing CityHeilongjiang ProvincePRC

As at 30 June 2004, the aggregate net book value of the leasehold properties set out above is RMB37.8million and the net book value of the land use rights is RMB38.6 million.

As at the Latest Practicable Date, we lease the following properties:-

Built-up areaDescription/Location (Approximate sq m) Use of property Annual rental Tenure

A factory complex 11,543 Manufacturing, RMB1.8 million 1 January 2004 tolocated at No. 40 storage, office 31 December 2006South portion and otherXinkai Street supportingFujin City purposesHeilongjiang Province,PRC

Fixed Assets

As at 30 June 2004, we had other fixed assets with net book values as follows:-

RMB’000

Plant and machinery 81,802Furniture, fixture and office equipment 442Construction in progress 46,171

There are no regulatory requirements that may materially affect our Group’s utilisation of a tangible fixedasset.

95

MATERIAL CAPITAL EXPENDITURES AND DIVESTMENTS

Our material capital expenditures and divestments for the last three financial years ended 31 December2003, the six months ended 30 June 2004 and up to the Latest Practicable Date were as follows:-

Pro forma 1 July 2004

to theSix months Latest ended 30 Practicable

(RMB’000) FY2001 FY2002 FY2003 June 2004 Date

Acquisitions- Leasehold building* 8,524 18,659 22,530 37,032 115,566- Land use rights – 1,971 8,837 28,942 –- Machinery 24,974 23,548 37,426 8,484 12,409- Furniture & fixture, and 38 190 206 134 131

office equipment

33,536 44,368 68,999 74,592 128,106

Divestments- Leasehold building – 86 32 40 14- Machinery – 9 – – 23- Furniture & fixture, and – – – – 2

office equipment

– 95 32 40 39

*Includes construction in progress.

The increase in capital expenditure during the period from 1 July 2004 to the Latest Practicable Date hasbeen funded by internal resources and bank borrowings.

INSURANCE

As at the Latest Practicable Date, we have obtained insurance policies for our production facilities,inventories and raw materials. Our Directors believe that the coverage from these insurance policies isadequate for our present operations. However, significant damage to our operations or any of ourproperties, whether as a result of fire and/or other causes, may still have a material adverse impact onour results of operations or financial condition.

Our PRC subsidiary, LSBP is required to maintain mandatory social insurance for its employees.Currently, we have implemented the social insurance plan which includes retirement pension insurance,employee injury insurance, and medical insurance, as required by the local social insuranceadministrative agency.

STAFF TRAINING

All new employees are required to undergo a two-week orientation programme to familiarise themselveswith our Group’s background, culture and policies. The in-house orientation programme includes trainingin the operation of the machineries, employees’ discipline, safety and environmental awareness, foodproduction standards and regulations and other laws relating to the operation of our Group.

Our staff training may be classified into internal training and external training. Internal training of our staffinvolves an orientation program for our new employees, on-the-job training and internal training sessions.We may also send our staff for external training that includes attending seminars conducted by industryexperts.

The amount of expenditure incurred in relation to staff training for the last three financial years ended 31December 2003 and the six months ended 30 June 2004 as a percentage of our revenue wasinsignificant.

96

INTELLECTUAL PROPERTY

Our subsidiary, LSBP, has registered the following trademark in the PRC which is currently used for oursoy oligosaccharide syrup products:-

Registration RegistrationTrademark Country of Registration Class Number Date/Effective Date

PRC 30(1) 3065073 14 May 2003 to

13 May 2013

Notes:-

(1) Class 30 – Non-Medical Nutrient Powder; Non-Medical Nutrient Capsules; Edible Royal Jelly(Non-Medical); SoyOligosaccharide syrup (Non-Medical); Non-Medical Nutrient Fluid; Spiral Algae (Non-Medical Nutrient).

(2) According to the (Trademark Law of the PRC), a registered trademark may be renewed, subject to anapplication for renewal of the registration being made within six months before the expiration of the period of validity. Theperiod of validity of each renewal of registration shall be ten years. The Patent Bureau shall have the discretion to approvesuch renewal application. Provided that we have not violated any Trademark Law and other related regulations, we do notexpect any legal impediment to the renewal of our trademark.

On 20 October 2004, the (the State Intellectual Property Office of thePeople’s Republic of China) approved two applications for exterior design patents applied by oursubsidiary, LSBP. The two patents shall be valid for a period of ten years commencing from 30 October2003. These patents relate to exterior design patents, namely bottle packaging and special giftpackaging.

GOVERNMENT REGULATIONS

Save as disclosed below, as at the Latest Practicable Date, our business operations in the PRC are notsubject to any special legislation or regulatory controls which have a material impact on our business andoperations.

Environmental Protection Regulations

In accordance with the Environmental Protection Law of the PRC adopted by the Standing Committee ofthe National People’s Congress on 26 December 1989, the Administration Supervisory Department ofEnvironmental Protection of the State Council sets the national guidelines for the discharge of pollutants.The provincial and municipal governments of provinces, autonomous regions and municipalities may alsoset their own guidelines for the discharge of pollutants within their own provinces or districts in the eventthat the national guidelines are inadequate.

A company or enterprise, which causes environmental pollution and discharges other polluting materials,which endanger the public, should implement environmental protection methods and procedures intotheir business operations. This may be achieved by setting up a system of accountability within thecompany’s business structure for environmental protection; adopting effective procedures to preventenvironmental hazards such as waste gases, water and residues, dust powder, radioactive materials andnoise arising from production, construction and other activities from polluting and endangering theenvironment. The environmental protection system and procedures should be implementedsimultaneously with the commencement of and during the operation of construction, production and otheractivities undertaken by the company. Any company or enterprise which discharges environmentalpollutants should report and register such discharge with the Administration Supervisory Department ofEnvironmental Protection and pay any fines imposed for the discharge. A fee may also be imposed onthe company for the cost of any work required to restore the environment to its original state.Companies, which have caused severe pollution to the environment, are required to restore theenvironment or remedy the effects of the pollution within a prescribed time limit.

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If a company fails to report and/or register the environmental pollution caused by it, it will receive awarning or be penalised. Companies which fail to restore the environment or remedy the effects of thepollution within the prescribed time will be penalised or have their business licences terminated.Companies or enterprises which have polluted and endangered the environment must bear theresponsibility for remedying the danger and effects of the pollution, as well as to compensate the anylosses or damages suffered as a result of such environmental pollution.

Food Safety and Hygiene Regulations

1. Food Hygiene Law of the PRC

The Food Hygiene Law of the PRC (“Food Hygiene Law”) is promulgated by the StandingCommittee of the National People’s Congress and implemented on 25 October 1995. Inaccordance with the Food Hygiene Law, the PRC implements the Food Hygiene SupervisionSystem. Any entity or individual engaged in food production/operation in the PRC shall complywith the Food Hygiene Law. The Food Hygiene Law is applicable to all types of food products,food additives, food containers, packing materials, food-specific tools/equipments, detergents,disinfectors, and the food production/operation places, facilities and environment. The foodproduction/operation entities shall conduct food manufacturing and operating activities afterobtaining the hygiene permit, and shall comply with the provisions of the Food Hygiene Law for theestablishment of food production/operation entities, health of food production/operation employees,food production/package and food import & export.

The Food Hygiene Law provides that the county-level administrative authorities shall have theauthority to supervise the food hygiene standards within their jurisdiction and are entitled tosupervise/check and punish any act violating the Food Hygiene Law, and impose anyadministrative penalty accordingly. According to the Food Hygiene Law, the liable party whoviolates the Food Hygiene Law may be ordered to stop the production/operation, or may beconfiscated of the illegal income. Furthermore, the liable parties may be fined and even beprosecuted for the criminal responsibility in accordance with the law.

According to the Standardisation Law of the PRC and its implementation regulation, the foodhygiene standards are mandatory and must be enforced by all food manufacturing enterprises.The enterprises are prohibited from producing, selling or importing products that do not complywith the mandatory standards.

2. Health-care Food Administrative Measures

Health-care Food Administrative Measures is promulgated by the Ministry of Health of the PRCwith effect from 1 June 1996, which is to strengthen health-care food supervision/administrationand safeguard health-care food quality in accordance with Food Hygiene Law. In accordance withthe provisions of Health-care Food Administrative Measures, the Ministry of Health shall beresponsible for the examination and approval of the health-care food.

On 10 March 2003, the First Session of the National People’s Congress passed the decisionregarding the State Council Organization Reform Plan. To strengthen the supervision andadministrative system of food safety and safe production, State Food and Drug Administration(“SFDA”) was established on the basis of the State Drug Administration and is authorised toexamine/approve the health-care food in place of the Ministry of Health. In accordance with theprovisions of Health-care Food Administrative Measures, the food production entities in theproduction of health-care food must obtain the approval of the provincial-level hygieneadministrative authority with the additional remark of approved licensing of “Health-care Food” onthe “Hygiene Permit”. Any food product declaring health-care function must be examined andverified by SFDA with issuance of a “Health-care Food Approval Certificate”. In addition, thelabels, instructions and advertisements of the health-care food must comply with the provisions ofHealth-care Food Administrative Measures, and applicable national standards and requirementswith indication of the labelling contents stipulated by Health-care Food Administrative Measures.The name of health-care food shall not incorporate any name of non-material function ingredientsof the food, and the labels, instructions and advertisements shall not imply any disease-curing

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function. Any health-care food production/operation activities without the SFDA approval and anyviolation of stipulations in relation to the name, label and instructions are subject to the punishmentof the county-level health administrative authorities in accordance with Food Hygiene Law. Inaddition to the Health-care Food Administrative Measures, the Ministry of Health also promulgatedRegulations on Health-care Food Labelling, Health-care Food Good Manufacturing Practices,Technical Provision on the Evaluation and Examination of Health-care Food, General HygieneRequirements for Health-care Food and other related regulations.

According to the Notice concerning the Circulation of the Examination Measures and AssessmentRules for Health-care Food Good Manufacturing Practices (“GMP”) issued by the Ministry ofHealth on 2 April 2003, the relevant hygiene administrative authorities in provincial level arerequired to complete the GMP examination of all healthcare food production enterprises by 31December 2003. A Hygiene Permit will be issued to healthcare food production enterprises whichcomply with the GMP standards, and for those that do not pass the inspections, their HygienePermits will be revoked.

3. Administrative Regulations for Hygiene Registration and Record of Export-foodManufacturers

In accordance with Food Hygiene Law, Import and Export Commodity Inspection Law of the PRCand its implementation rules and other applicable regulations, Administrative Regulations forHygiene Registration and Record of Export-food Manufacturers (“Administrative Regulations”) ispromulgated by General Administration of Quality Supervision, Inspection and Quarantine of thePRC (“GAQSIQ”) and took effect on 20 May 2002. The promulgation of the AdministrativeRegulations is to strengthen the supervision/administration of Export-food Manufacturers andsafeguard the Export-food quality and hygiene. In accordance with Administrative Regulations,PRC implements hygiene registration and record system on enterprises manufacturing,processing, and storing export-food (collectively “Export Food Manufacturers”). Any entityengaged in the export-food production, processing and storing in the territory of the PRC mustobtain the Hygiene Registration Certificate or Hygiene Record Certificate prior to thecommencement of such operation. Certification Accreditation Administration of the PRC(“Certification Accreditation Administration”) is responsible for the hygiene registration and recordof Export Food Manufacturers. The entry/exit inspection and quarantine bureaus directly affiliatedunder the GAQSIQ is responsible for the hygiene registration and record within their jurisdiction.The Certification Accreditation Administration shall announce and adjust “Product Lists Subject toFood Hygiene Registration and Record” (“Registration List”) based on the risk degree of theexport-food products. Hygiene registration administration shall be implemented for Export FoodManufacturers with products listed in the Registration List, and hygiene record administration shallbe implemented for manufacturers with food products not listed in the Registration List. Presently,the Registration List covers the canned food, meat, meat products, drinks, edible lipid, functionalfoods, food additives (especially referring to the edible gluten) among the total 20 categories offood products. In addition, Administrative Regulations also specifically provides for the hygienerequirements on the Export Food Manufacturers.

4. Administrative Measures for Quality & Safety Supervision of Food Production andProcessing Enterprises

Administrative Measures for Quality & Safety Supervision of Food Production and ProcessingEnterprises (“Administrative Measures”) is promulgated by GAQSIQ to strengthen the supervisionand administration of food quality safety from the source, and to improve the quality administrationand quality safety level of food production/processing enterprises, and safeguard public health andsafety in accordance with the Product Quality Law of the PRC, Interim Regulations of IndustrialProduct Production License, State Council Decision on the Issues regarding Further Strengtheningof Product Quality and the duties of GAQSIQ authorized by the State Council, which took effect on18 July 2003. Any entities engaged in food production and processing activities in the PRC for thepurpose of sales must comply with these measures. The Administrative Measures specificallyprovides that the food quality and safety must comply with the state laws, administration

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regulations and compulsory standards, meeting the requirements of ensuring human health andsafety without the unreasonable risks of endangering the human health and safety. The entitiesengaged in food production and processing (including the individual operators) must follow thegovernment requirements on the market entry system for food quality and safety implemented bythe state, be qualified for the necessary production conditions of the food quality and safety, andobtain the food production license according to the required procedures. Enterprises without thefood production licence shall not produce/process the corresponding food products. Any suchproduction without due production license shall be deemed unauthorized production. Foodproducts without passing the inspection and affixing of market entry label for food quality andsafety shall not enter into the market for sales. In accordance with the requirements of GAQSIQ,quality and safety supervision and administration shall be implemented on five categories of food,i.e. wheat powder, rice, edible vegetable oil, sauce and vinegar, starting from the latter half of2002. Furthermore, implementation of production license administration, compulsory factoryinspection and administration of market entry label on food quality and safety shall be carried out.For any violation of the Administrative Measures, e.g. unauthorised production without foodproduction licence, production exceeding the licensed scope, entities with food production licensefailing to indicate the production license number and affixing QS label on food packaging, thequality and technical supervision authority shall have the right to, depending on the seriousness ofthe case, impose such sanctions as order for correction, fining, or cancellation of food productionlicence.

LICENCES, PERMITS AND APPROVALS

We have the following licences, permits and approvals from the relevant government authorities, whichare required for the conduct of our businesses:-

Licences, permits and approvals Authority Duration

Effective from 2 July 2004(Hygiene permit for soybean-based products including (Lanshan District, to 1 July 2007 soy oligosaccharide syrup, soybean peptide, soy protein Linyi City Sanitation and isolates, soybean beverages and soybean-based Hygiene Department)processed food products)

Effective from 5 July 2004(Health Food Production Enterprise GMP Certificate) (Shandong Provincial to 4 July 2007

Health Administration)

Effective from 18 August(Hygiene permit for the manufacture of the soy (Shandong Provincial 2004 to 17 August 2005oligosaccharide syrup under the brand name Health Administration)“Tian Song”)

One-time application(Locally produced health-care food products approval (Ministry of Health of for the soy oligosaccharide syrup under the brand name the PRC)“Tian Song”)(1)

Effective from 21 (Hygiene permit for soybean-based products including (Lanshan District, December 2004 to soy protein isolates, soybean-based processed food Linyi City Sanitation 20 December 2005products and production of soybean-based beverages) and Hygiene Department)

Effective from 12 March(Hygiene permit for soybean-based products including (The Health Bureau of 2005 to 12 March 2006 processing and sales of soybean oil and defatted soy Fujin City)flakes)

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Licences, permits and approvals Authority Duration

Effective from 29 (Hygiene permit for soybean-based products including (The Health Bureau of Sa September 2004 to 28the production and sales of soy protein isolates) Er Tu District, Daqing City) September 2005

Effective from 22 October(Quarantine Registration Certificates for soy protein (State Entry-Exit 2002 to 21 October 2005isolates and soy oligosaccharide syrup) Inspection and Quarantine

Administration)

Effective from 22 October(Health Registration Certificates for soy protein isolates 2002 to 21 October 2005and soy oligosaccharide syrup) (State Certification and

Accreditation Administration)

Notes:

(1) Our subsidiary, LSBP has on the 4 July 2002 obtained the “Locally produced health-care products approval certificate” for thesoy oligosaccharide syrup. Pursuant to a change of brand name, LSBP was granted a renewed approval certificate underthe brand name “Tian Song” on 18 March 2003.

(2) The above licences, permits and approvals may be terminated if we violate any of the applicable laws and regulations for theissuance of such licences, permits and certificates. They may be renewed upon expiry provided that we have complied withall applicable laws and regulations. Upon our application for renewal, the relevant governmental authorities shall examinewhether we have complied with the conditions and requirements for the renewal of such licences, permits and certificates.

We manufacture soybean oil at our Fujin Plant. With effect from 18 July 2003, under the(Administrative Measures for Quality & Safety Supervision of Food

Production and Processing Enterprises), we are required to obtain a permit for the production and sale of soybean oil at our Fujin Plant. On 3 November 2004, we received the

(National Industrial Productions Production Permit) from the (The GeneralAdministration of Quality Supervision, Inspection and Quarantine of the PRC) for the production and saleof soybean oil at our Fujin Plant. Prior to the issuance of the production permit, we have obtainedconfirmation from the (Quality and Technical Supervision Bureau of Jiamusi)(“Jiamusi QTSB”) that we have complied with the requisite safety and quality standards for the productionand sale of soybean oil. Further, the Jiamusi QTSB has confirmed that we will not be subject to anypenalty for continuing production and sale of soybean oil prior to the receipt of a production permit.However, there is no assurance that (Quality and Technical Supervision Bureauof Heilongjiang Province) (“Heilongjiang QTSB”) being the authority at the provincial level responsible forthe administration of the food-production enterprises, will not impose any penalty on us in this regard;such penalty include a fine amounting to between 15% and 20% of the cost of soybean oil produced(such fine if imposed is estimated to be between RMB5.7 million and RMB7.6 million, based on the totalcost of soybean oil produced of RMB37.9 million) and the confiscation of proceeds obtained from thesale of the soybean oil (the amount of such proceeds is estimated to be approximately RMB44.4 million).If we suffer a penalty, our Group’s business operations and financial results will be materially andadversely affected. Each of our Chief Executive Officer, Li Zhuping and our Executive Director, Mr HuFabao, has given an undertaking to our Company to indemnify our Group if we should suffer or incur anypenalty imposed by the Heilongjiang QTSB or the Jiamusi QTSB in relation to the production permit.

In March 2005, we started production of defatted soy flakes at our Linyi Plant, a by-product of which issoybean oil. However, we currently do not sell the soybean oil derived from the production of defattedsoy flakes at our Linyi Plant. As such, we are not required to obtain, and as at the Latest PracticableDate, we have not obtained, a (National Industrial Productions ProductionPermit) from the relevant authority.

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PROSPECTS AND FUTURE PLANS

Our Prospects

In the last few years, there has been an increase in the annual per capita disposable income in the PRCand our Directors’ expect the growth to continue in the coming years. The growth prospects of ourGroup’s soybean-based business will be driven by the economic growth in the PRC. Our Directorsbelieve that the increasing affluence of the PRC citizens resulting from the growing economy of the PRC,would lead to consumers’ demand for soybean-based products.

Soybean-based products have gained recognition as a health supplement over the years. Based on thefollowing reasons, our Directors are optimistic that our business will continue to grow:

(a) Continuing global demand for soybean-based products

Our Directors believe that soybean-based products will continue to be a popular nutritional foodand one which is known to be an important source of protein. Our Directors therefore believe thatthere will be continuing global demand for soybeans. To the best of our Director’s knowledge andbelief, the PRC will continue to be one of the largest producers and consumers of soybean andsoybean-based products in the world.

(b) Greater awareness of health qualities of soybean

Our Directors believe that the demand for soybean-based products in the PRC will increase in linewith increasing consciousness to lead healthy lifestyle, which in turn is due to the higher standardof living in the PRC as the domestic economy continues its expansion. Our Directors expect theincreasing consumer purchasing power to spur demand for health-food substitutes such as highquality soybean-based products including our soy oligosaccharide syrup product. Thisdevelopment is likely to lead to an increase in the production of soybean-based products in thePRC. This will in turn lead to an increase in demand for our soybean-based products.

Our Strategies and Future Plans

To capture the emerging business opportunities, we intend to adopt the strategies and future plans as setout below:-

(a) Increase our production capacity for existing products

We intend to expand our production capacity for our existing products, soy protein isolates and soyoligosaccharide syrup, to support our further growth. We plan to:

(i) increase our production capacity for soy protein isolates by 20,000 tonnes per annum at ourLinyi Plant by setting up new production lines;

(ii) increase our production capacity for soy oligosaccharide syrup by 2,000 tonnes per annumat each of our Linyi Plant and Daqing Plant, by setting up new production facilities at theseplants; and

(iii) increase the production capacity for defatted soy flakes by 75,000 tonnes per annum at ourLinyi Plant by setting up a new production line, both to increase the vertical integration ofour production processes and to support the increase in production capacity for soy proteinisolates.

As at the Latest Practicable Date, we have not entered into any contracts in relation to the settingup of the new production lines. We intend to commence the above expansion plans as soon aspracticable after the admission of our Company to the Official List of the SGX-ST. We aretargeting to complete the installation of the above production lines and commence trial productionof:-

(i) the defatted soy flakes by the fourth quarter of 2005;

(ii) the soy protein isolates by the first quarter of 2006; and

(iii) the soy oligosaccharide syrup by the first quarter of 2006.

As disclosed under the section “Use of Proceeds” on page 33 of this Prospectus, we intend toutilise approximately RMB110.0 million, RMB100.0 million and RMB45.0 million of the netproceeds from this Invitation for setting up new production lines for soy protein isolates, soyoligosaccharide syrup and defatted soy flakes, respectively. If the costs for setting up these newproduction lines exceed our current estimates, we intend to fund any additional costs out of fundsgenerated from our operations or external borrowings.

The targeted dates for completion of the installation of the above production lines and thecommencement of trial production as set out above are only indicative estimates, and may besubject to changes.

(b) Increase research and development efforts

Our Directors expect the worldwide demand for soybean-based products to continue to grow,driven primarily by increasing awareness of the benefits of soybean and a shift in consumerpreference to health products.

In view of this, our Directors believe that to stay ahead of competition, we would need to seek toimprove our existing products and also expand our product range. To support such initiatives, weplan to further increase our research and development strength to increase our efforts in exploringand developing improvements to our existing products and manufacturing processes for newproducts.

As disclosed in the section “Research and Development” on pages 88 and 89 of this Prospectus,we are currently carrying out research and development activities for the two new products,namely soybean peptides and soybean dietary fiber. Our research and development efforts onthese products are still on-going and we have not yet conducted any market research andfeasibility studies to ascertain market acceptance of these products. Upon completion of ourresearch and development, market research and feasibility studies, we may eventually establishproduction facilities for these products. The research and development expenses would be fundedfrom internal sources and will not be funded from the proceeds of this Invitation.

(c) Expand our marketing and distribution network

We believe that the growth of our sales will be further enhanced if we continue to actively promoteour brands so as to increase awareness among our target consumers.

We intend to develop our Tian Song brand name for our soy oligosaccharide syrup by educatingthe consumers on our products through media advertisement. We also intend to increase publicawareness of the benefits of soy oligosaccharide syrup by distributing pamphlets to educate thegeneral public of its benefits. We estimate that we will spend approximately RMB11 million forthese purposes.

Further, we intend to establish our own retail outlets for the sale of our products, which will give usmore control over our sales and also more opportunities to communicate with our customers. Thiswill reduce the barriers between our customers and our Group, which would enable us to adapt toour customers’ demand more efficiently. We estimate that we will spend approximately RMB4million for this purpose.

We also intend to expand our marketing and distribution network by establishing sales offices inmajor cities in the PRC, including Beijing, Shanghai, Jinan, Guangzhou and Wuhan. We estimatethat the cost for setting up the sales offices which include staff costs, lease rentals, and costs offurniture and fitting) will be approximately RMB3 million to set up a sales office in Beijing andapproximately RMB1 million in each of the other cities.

We intend to utilise approximately RMB22.0 million of the net proceeds from this Invitation for allthe purposes set out above.

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DIRECTORS, MANAGEMENT AND STAFF

OUR MANAGEMENT STRUCTURE

DIRECTORS

Our Directors’ particulars are listed below:-

Name Age Residential Address Designation

Ming Kam Sing 47 217 Bauhinia Road, West Fairview Park, Non-executive ChairmanYuen Long, New Territories, Hong Kong

Li Zhuping 31 Dong Hu, 2 Lou, Zhongdanyuan, 11 Lou, Chief Executive OfficerShansong Jiashulou, Bancheng Town, Lanshan District, Linyi City, Shandong Province, PRC

Hu Fabao 43 Xi Hu, 1 Lou, Zhongdanyuan, 10 Lou, Executive DirectorShansong Jiashulou, Bancheng Town,Lanshan District, Linyi City, Shandong Province,PRC

Ong Tiong Seng 38 17C Nassim Road #01-02 Nassim Park Independent DirectorSingapore 258394

Chan Wai Meng 51 159 Thomson Ridge Independent DirectorSingapore 574735

Information on the business and working experience of our Directors is set out below:-

Ming Kam Sing was appointed our Non-executive Chairman on 23 March 2005. Ming Kam Sing isappointed to the board of our Company as a nominee director of PFH. He is the Chairman andExecutive Director of PFH. Mr Ming has over 21 years of experience in the health and medical industry.From 1981 to 1993, he served as a doctor in the Beijing Medical University Hospital and then the XieheHospital. In 1993, he started his own business dealing in the sale of medical equipment and soon after,he founded the PFH group together with other partners in 1994. Since 2002, he has been the Chairmanand Executive Director of PFH. He graduated from the Shandong Medical College, PRC in 1981 with adegree in Medicine.

Li Zhuping, our Chief Executive Officer, was appointed on 15 September 2004. He is responsible forour Group’s overall production and management of our Group. From 1996 to 1997, Li Zhuping workedas a Technical Supervisor at the Guizhou Soybean Food Processing Co., Ltd. which is a companyprincipally engaged in the manufacturing of soybean-based products. Subsequently, from 1997 to 2001,he was involved in the business of soybean-based products. Li Zhuping was the General Manager ofLinyi Yikang from 2001 till 2002 when he became the Assistant General Manager of LSBP. In 2003, LiZhuping was promoted to the position of General Manager of LSBP. Li Zhuping graduated from HunanZhongnanlin Institution with a Bachelor of Science in 1996.

Hu Fabao was appointed our Executive Director on 15 September 2004. Prior to joining us, Hu Fabaowas an administrative officer at the Bancheng Zhen Industrial Office from 1982 to 1985. In 1985, HuFabao became the General Manager of Linyi Xinglong Supplier Co., Ltd. which is a company principallyinvolved in the business of soybean-based products. Hu Fabao worked there for a period of two yearsbefore he became the Production Manager at the Bancheng Zhen Oil Processing Co., Ltd. till 2002. In2002, he became the Assistant General Manager of Shansong Bio-Engineering and was responsible forthe production department. Hu Fabao graduated from the Shandong Technical University in 1998 with aDiploma in Enterprise Management.

Ong Tiong Seng, our Independent Director, was appointed on 23 March 2005. He is the ManagingDirector of Cogent Financial Group (HK) Limited, an investment fund company, where he is responsiblefor venture capital investments and for providing advisory services on mergers and acquisitions, andinitial public offers. Prior to joining the financial industry, he was director of operations of Nippon MachineTools, a company in the aerospace industry from 1997 to 2002 and was in charge of managing the salesand service engineers in the aerospace industry business. From 1994 to 1997, he worked with theEconomic Development Board, first as a senior financial officer with areas of responsibility in audit andcorporate finance, then as a senior officer where he dealt with policy matters on the ASEAN CountryDesk, and finally as senior development officer (Enterprise Development Division) where he worked topromote the precision engineering sector in Singapore. Mr Ong graduated with a Bachelors ofCommerce (Banking and Finance) from the University of Canberra and a Masters of Economics fromMacquarie University.

Chan Wai Meng, our Independent Director, was appointed on 23 March 2005. He has over 25 years ofworking experience in finance, corporate planning, sales and marketing. Mr Chan has worked in variousfinancial positions in a public accounting firm, a financial institution and an electronic manufacturingcompany. He has also been involved in the start-up of the business of a local software company in thecapacity of a financial officer. From 1985 to 2003, he served in various management positions inSingapore Pools Pte Ltd, and was their chief operating officer from 1998 to 2003. He is currently theexecutive director of the Singapore Cancer Society, a voluntary welfare organisation. Mr Chan holds aBachelors’ degree in accounting from University of Singapore, and has been a member of the Institute ofCertified Public Accountants of Singapore for the past 20 years.

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The list of present and past directorships of each Director over the last five years excluding those held inour Company, is set out below:-

Name Present Directorships Past Directorships

Ming Kam Sing Group Companies Group Companies

Rainbow Palace Inc NilLinyi Shansong Biological Products Co. Ltd.

Other Companies Group Companies

Champ Base Limited NilDaqing Jinluo Meat Products Co., Ltd.Qiqihaer Jinluo Food Products Co., Ltd.Dezhou Jinluo Food Products Co., Ltd.Glorious Faith CorporationLinyi Minsheng Food Development Co., Ltd.Linyi Xincheng Jinluo Meat Products Co., Ltd.Loampit LimitedMaleque LimitedMeishan Jinluo Food Co., Ltd.People’s Food Holdings LimitedTongliao Jinluo Food Co., Ltd.Xiangtan Jinluo Food Co., Ltd.

Li Zhuping Group Companies Group Companies

Linyi Shansong Biological Products NilCo. Ltd.Rainbow Palace Inc

Other Companies Other Companies

Elite Union Corporation Shandong Shansong Bio-Engineering Glorious Faith Corporation Group Co., Ltd

Hu Fabao Group Companies Group Companies

Linyi Shansong Biological Products Co. Ltd. NilRainbow Palace Inc


Glorious Faith Corporation Shandong Shansong Bio-EngineeringGolden Revenue Inc. Group Co., Ltd.

Ong Tiong Seng Group companies Group companies

Nil Nil

Other companies Other companies

China Paper Holdings Limited Byte Power Pty Ltd (Australia)Cogent Financial Group (HK) Limited Byte Power Technology (International) Pte LtdCogent Communications Pte Ltd M-Rex Precision Engineering Pte LtdCogent Communications Sdn Bhd Nippon Holding Pte LtdConcord Energy Pte Ltd Nippon Machine Tool Pte LtdCompass Welfare Foundation Limited Nippon Machine Tool Sdn BhdFibrechem Technologies Limited NMT Engineering Services PteInnovative Technology Engineering Sungai Sanjung Sdn Bhd(Tai Cang)Co., Ltd. Straits CapitalProvenance Finance (HK) Limited Management Pte LtdProvenance Capital Pte Ltd Willhart Able Air Pty Ltd(Australia)(formerly known as Arka Project Willhart Limited Corporate Finance Pte Ltd) Willhart Power Tech Pty Ltd

Pan Alliance Management Pte Ltd Willhart Technologies Pty LtdSei Woo Technologies LimitedSnowcity International Holdings Limited3R Intelligence Network Pte Ltd

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Chan Wai Meng Group Companies Group Companies

Nil Nil


CG Technologies Holdings Limited Paradiz Investments LtdChina Paper Holdings LimitedGlobal Testing Corporation LimitedScottish & Oriental Estates Ltd

With the exception of Ming Kam Sing, our Non-executive Chairman, who is a nominee director of ourSubstantial Shareholder, PFH, to the best of our Directors’ knowledge, information and belief, there areno arrangements or understandings with any Substantial Shareholders, customers, suppliers or others,pursuant to which any of our Directors and/or Executive Officers was appointed.

None of our Directors are related by blood or marriage to one another or any of our Executive Officersnor are they so related to any Substantial Shareholder.

MANAGEMENT

The particulars of our Executive Officers are set out below:-

Name Age Residential Address Designation

Dai Yonghu 27 4 Lou Donghu, No.29, 5 Lou Danyuan, General ManagerChengcai Road Beiyuan Xiaoqu, Lanshan District,Linyi City, Shandong Province, PRC

Zhou Yan’an 29 12 Lou, 2 Louxihu, Jiashulou, Bancheng Town, Vice President – Internal AuditLanshan District, Linyi City, Shandong Province, PRC

Ho Hin Yip 31 Flat A, 11/F, Block 1, 34 Sands Street, Financial ControllerHong Kong

Zhang Qingping 41 No.24, Hounanzhuang Cun, Bancheng Town, Vice President – Sales Lanshan District, Linyi City, Shandong Province, & MarketingPRC

Meng Fanqi 42 Zhongsungou, Bancheng Town, Lanshan District, Vice President – FinanceLinyi City, Shandong Province, PRC & Administration

Zhang Jichuan 35 12 Lou, Dongdanyuan 3 Louxihu, Jiashulou, Vice President – ResearchBancheng Town, Lanshan District, Linyi City, & DevelopmentShandong Province, PRC

Bao Shouhui 30 No.162, Wangzhuangzi Cun, Bancheng Town, Vice President – PurchasingLanshan District, Linyi City, Shandong Province, PRC

Zhang Youyun 52 Hounanzhuang Cun, Houzhen Bancheng Town, Vice President – ProductionLinyi City, Shandong Province, PRC Linyi

Wen Bin 27 Tianqiaoxiaoqu, Ying Nan County, Linyi City, Vice President – Production Shandong Province, PRC Fujin

Li Ying 60 11-29A-2-302, Xibin Lu, Daqing City, Vice President – ProductionHeilongjiang Province, PRC Daqing

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Dai Yonghu, our General Manager joined us since 2004. He is responsible for the purchasing functionsof our Group. Dai Yonghu started his career in 1995, as a Production Supervisor at the Bancheng OilProcessing Plant. In 1996, Dai Yonghu was a businessman dealing in the trading of soybean oil, soyflakes and other soybean-based products till 2001. In 2001, he became the Assistant General Managerat Linyi Yikang. In 2002, Dai Yonghu joined Shandong Shansong Bio-Engineering as the AssistantGeneral Manager. Dai Yonghu graduated in 1995 from the Linyi Agricultural Institution with a Diploma inManagement.

Zhou Yan’an, our Vice President (Internal Audit) joined us in 2003. He is responsible for the internalaudit function of our Group. Zhou Yan’an started his career in 2000, as a teacher at the Luhua SecondarySchool. Subsequently in 2001, he became a trainer in Tianjin Trading Co., Ltd., responsible forconducting internal training for the employees. In 2000, he graduated from the Tianjin Normal Universitywith a Bachelor of Science. In 2003, Zhou Yan’an obtained a Masters in Science from the University ofSussex in the United Kingdom.

Ho Hin Yip, our Financial Controller and Joint Company Secretary, joined our Group in October 2004and is in charge of the daily finance and administrative of our Group. In addition, he is responsible forimplementing internal controls and corporate governance and practices as well as liaising with externalparties and regulatory bodies in respect of our financial matters. Prior to joining our Group, he workedas an auditor for Deloitte Touche Tohmatsu from 1997 to 2002 for a period of five years and later workedas Assistant Internal Audit Manager at the Eton Management Ltd till 2004. Subsequently, he became aCompliance Officer at the Regent Financial Services Limited for another year before joining our Group.He holds a Bachelor of Business Administration in Professional Accountancy from the Chinese Universityof Hong Kong. He is a CPA member of the Hong Kong Institute of Certified Public Accountants and anassociate member of Association of Chartered Certified Accountants.

Zhang Qingping, our Vice President (Sale and Marketing) has been with us since 2002. He isresponsible for the sales and marketing of our Group. In 1980, Zhang Qingping served in the armedforces of Shandong for a period of five years. In 1986, he joined the Shandong Sanwei Oil ProcessingCo., Ltd. as an executive in the sales and marketing department and continued working there for twoyears. Subsequently in 1988, he was promoted to the Sales and Marketing Manager of ShandongSanwei Oil Processing Co., Ltd. till 2002. From 2002 to 2004, Zhang Qingping was the Manager of theSales Department of LSBP. Zhang Qingping graduated with a Diploma in Marketing from the ShandongEconomic Institution where he studied from 1985 to 1987.

Meng Fanqi, our Vice President (Finance & Administration), has been with us since 2002. He isresponsible for our Group’s accounting and financial matters. Before Meng Fanqi joined our Group, hestarted his career at the Linyi Chashan Plant as a Supervisor and was responsible for the financialmatters of the company from 1986 to 1992. Thereafter in 1992 he was the Supervisor at the BanchengTown Economic Committee. Meng Fanqi was subsequently promoted to the Finance Manager ofBancheng Town Economic Committee in 1993 and continued his services there until 2002. In 2002, hewas the Finance Manager of LSBP. Meng Fanqi obtained his Diploma in Accounting from the ShandongEconomic Institution in 1986.

Zhang Jichuan, our Vice President (Research & Development) joined us in 2004. He is responsible forthe research and development department of our Group. In 1996, Zhang Jichuan was the AssistantTechnical Supervisor of Guizhou Dadou Food Processing Plant and was subsequently promoted to theTechnical Supervisor in 1997. In 2001, he became the Research and Development Manager of the LinyiYikang Soybean Protein Processing Co., Ltd. Thereafter, he was the Research and DevelopmentManager at LSBP from 2002 to 2004. Zhang Jichuan graduated from Hunan Zhongnanlin Institution in1996, where he obtained a Bachelor of Science.

Bao Shouhui, our Vice President (Purchasing), joined us since 2003. Bao Shouhui is responsible foroverseeing the purchasing functions of our Group such as procurement of raw materials from third partysuppliers and to ensure that such raw materials comply with our Group’s quality standards. Prior tojoining our Group, he has five years experience as a Assistant Purchasing Manager in Jingwei ProteinPlant, a company that was principally involved in the production and sale of soy protein isolates. BaoShouhui joined Linyi Yikang in 2001 as the Assistant Purchasing Manager. Subsequently in 2002, hejoined Shansong Bio-Engineering where he was the Purchasing Manager, responsible for the purchasingfunctions of the company. In 2003, he was the Purchasing Manager at LSBP. He obtained his Diplomain Economics Management from the Shandong University in 1996.

Zhang Youyun, our Vice President (Production – Linyi Plant) joined us since 2002. He is responsible forthe overall production matters at our Group’s Linyi branch. Zhang Youyun has over 20 years ofexperience in production management. He started working as a Technician in 1980 at the ShandongJinan Shi Jichuang Plant and worked there for 18 years. From 1998 to 2002, he became the Supervisorat Shandong Sanwei Oil Group Co., Ltd. In 2002, he joined LSBP as a Production Manager. ZhangYouyun graduated from Shandong Economics Institution with a Diploma in Economics in 1980.

Wen Bin, our Vice President (Production – Fujin Plant), joined us since 2004. He is responsible for theoverall management matters at our Group’s Fujin Plant. Wen Bin has worked at Junan Xian Grains andOil Supplier Co., Ltd. for the period of 1994 to 2003 as an employee and was subsequently made aManager in 1997. In 2003, Wen Bin was the Manager of Shansong Bio-Engineering at the HeilongjiangFujin Branch and he was responsible for the overall management of the Company. He graduated fromLinyi Agricultural Institution with a Diploma in Forestry in 1994.

Li Ying, our Vice President (Production – Daqing Plant), has been with us since 2004. He is responsiblefor the overall production matters at our Group’s Daqing branch. Li Ying has more than 40 yearsexperience in management. In 1964, he was a Supervisor at the Daqing Commodity Provision Bureau.From 1981 to 1989, he was the Assistant Manager in Daqing Petroleum Management Co., Ltd. From1989 to 1998, he was the Assistant General Manager at the Daqing Trading Co., Ltd. From 1999 to2002, he was the General Manager of Daqing Economy & Trading Group Co., Ltd. In 2002, Li Ying wasthe Director and General Manager of Daqing Xinyu Food Co., Ltd. Li Ying obtained his Diploma inManagement from Daqing Petroleum Institution in 1983.

None of our Executive Officers are related by blood or marriage to one another or to our Directors or anySubstantial Shareholder.

The list of present and past directorships of each Executive Officer in the last five years preceding thedate of this Prospectus is set out below:-


Dai Yonghu Group Companies Group Companies

Rainbow Palace Inc NilLinyi Shansong Biological Products Co. Ltd.


Achievement Way Corporation Shandong Shansong Bio-Engineering Glorious Faith Corporation Group Co., Ltd.

Li Ying Group Companies Group Companies

Nil Nil


Nil Daqing Xinyu Food Co., Ltd.

Other than Dai Yonghu and Li Ying, our Executive Officers do not have directorships in any company inthe last five years preceding the date of this Prospectus.

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EMPLOYEES

The functional distribution and geographical breakdown of our full-time employees as at 31 December2001, 2002 and 2003 and 30 June 2004 were as follows:-

31 December 2001 2002 2003 30 June 2004

By function

Production 264 344 512 723Management 40 85 89 126Sales 29 37 46 80

Number of employees 333 466 647 929

31 December 2001 2002 2003 30 June 2004

By geographical region

Linyi - Shandong 151 199 411 688Fujin - Heilongjiang 182 195 135 142Daqing - Heilongjiang Nil 72 101 99

Number of employees 333 466 647 929

We do not have any part-time employee. Our employees are not unionised. The relationship andcooperation between the management and staff have been good and are expected to continue in thefuture. There has not been any incidence of work stoppages or labour disputes that affected ouroperations.

REMUNERATION

The compensation paid to our Directors and our Executive Officers for services rendered to us and oursubsidiaries on an individual basis and in remuneration bands during FY2003, the estimatedremuneration for FY2004 and FY2005 are as follows:-

Estimated for Estimated for currentNames FY2003 FY2004 FY2005

Directors

Ming Kam Sing N/A N/A Band ALi Zhuping Band A Band A Band AHu Fabao N/A N/A Band AOng Tiong Seng N/A N/A Band AChan Wai Meng N/A N/A Band A

Management

Dai Yonghu N/A N/A Band AZhou Yan’an N/A Band A Band AHo Hin Yip N/A N/A Band AZhang Qingping Band A Band A Band AMeng Fanqi Band A Band A Band AZhang Jichuan Band A Band A Band ABao Shouhui N/A Band A Band AZhang Youyun Band A Band A Band AWen Bin N/A Band A Band ALi Ying N/A N/A Band A

Notes:-

(1) Band A means up to S$250,000.

(2) To determine the remuneration band for each of our Directors and Executive Officers, we have used the year-end S$:RMBexchange rate for FY2003 and FY2004 and the S$:RMB exchange rate as at the Latest Practicable Date for FY2005.

We have not set aside or accrued any amounts for our Directors and Executive Officers to provide forpension, retirement or similar benefits.

SERVICE AGREEMENTS

On 31 March 2005, our Company entered into separate service agreements (the “Service Agreements”)with our Executive Directors, Li Zhuping and Hu Fabao, for a period of two years (unless otherwiseterminated by either party giving not less than six months’ notice to the other) with effect from the date oftheir respective Service Agreement. We may also terminate their respective Service Agreements if anyof these Executive Directors are guilty of dishonesty or serious or persistent misconduct, becomesbankrupt or otherwise acts to the prejudice of our Company. None of these Executive Directors will beentitled to any benefits upon termination of their respective Service Agreements.

Pursuant to the terms of their respective Service Agreements, each of Li Zhuping and Hu Fabao isentitled to an annual salary of RMB600,000 and RMB300,000 respectively.

Each of our Executive Directors, Li Zhuping and Hu Fabao, is also entitled to an annual performancebonus in respect of each financial year commencing from FY2005, which is calculated based on theconsolidated net profit after tax and extraordinary items (“NPAT”) of our Group as follows:-

NPAT Attained Performance Bonus

(i) For the first RMB100 million 0.5% of the NPAT

(ii) More than RMB100 million but up to and RMB675,000 plus 1% of the amount of NPAT in excess including RMB150 million of RMB100 million

(iii) More than RMB150 million RMB1,125,000 plus 2% of the amount of NPAT in excessof RMB150 million

Had the Service Agreements been in place since the beginning of FY2003, the aggregate remunerationpayable to our Executive Directors (including annual bonus, Director’s fees, performance bonus andbenefits-in-kind) would have been approximately RMB1.5 million instead of approximately RMB15,000and our profit before taxation would have been approximately RMB91.0 million instead of approximatelyRMB92.5 million.

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PINE AGRITECH EMPLOYEE SHARE OPTION SCHEME

On 23 March 2005, our Shareholders approved an employee share option scheme known as the PineAgritech Employee Share Option Scheme (the “ESOS”), the rules of which are set out in Appendix K ofthis Prospectus. The ESOS complies with the relevant rules of the SGX-ST as set out in Chapter 8 ofthe Listing Manual. The ESOS will provide eligible participants with an opportunity to participate in theequity of our Company and to motivate them towards better performance through increased dedicationand loyalty. The ESOS, which forms an integral and important component of our employeecompensation plan, is designed to primarily reward and retain executive directors, non-executivedirectors and employees of our Group whose services are vital to our well being and success.

As at the Latest Practicable Date, no Options have been granted under the ESOS.

Objectives of the ESOS

The objectives of the ESOS are as follows:-

(a) to motivate participants to optimise their performance standards and efficiency and to maintain ahigh level of contribution to our Group;

(b) to retain key employees and directors whose contributions are essential to the long-term growthand profitability of our Group;

(c) to instil loyalty to and a stronger identification by participants with the long-term prosperity of ourGroup;

(d) to attract potential employees with the relevant skill sets to contribute to our Group and to createvalue for our Shareholders; and

(e) to align the interest of participants with the interests of our Shareholders.

Summary of ESOS

A summary of the rules of the ESOS is set out as follows:-

(1) Participants

Under the rules of the ESOS, executive and non-executive directors (including our IndependentDirectors) and employees of our Group, who are not Controlling Shareholders or their Associates,are eligible to participate in the ESOS.

(2) Administration

The ESOS shall be administered by the Remuneration Committee with powers to determine, interalia, the following:-

(a) persons to be granted Options;

(b) number of Options to be granted; and

(c) recommendations for modifications to the ESOS.

As at the date of this Prospectus, our Remuneration Committee comprises Messrs Li Zhuping,Chan Wai Meng and Ong Tiong Seng. The Remuneration Committee will consist of Directors(including Directors or persons who may be participants of the ESOS). A member of theRemuneration Committee who is also a participant of the ESOS must not be involved in itsdeliberation in respect of Options granted or to be granted to him.

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(3) Size of the ESOS

The aggregate number of Shares over which the Remuneration Committee may grant Options onany date, when added to the nominal amount of Shares issued and issuable in respect of allOptions granted under the ESOS shall not exceed 15 per cent of the issued share capital of ourCompany on the day immediately preceding the date of the relevant grant.

We believe that this 15 per cent limit set by the SGX-ST gives our Company sufficient flexibility todecide the number of Option Shares to offer to our existing and new employees. 15 per cent ofthe post-Invitation share capital of our Company constitutes approximately 90 million Shares. As itis intended that the ESOS shall last for ten years, assuming that there is no change in the totalissued share capital of our Company, the number of Options that may be granted in a year willaverage approximately 9 million Shares. The number of eligible participants is expected to growover the years. Our Company, in line with its goal of ensuring sustainable growth, is constantlyreviewing its position and considering the expansion of its talent pool which may involve employingnew employees. The employee base, and thus the number of eligible participants will increase asa result. If the number of Options available under the ESOS is limited, our Company may only beable to grant a small number of Options to each eligible participant which may not be a sufficientlyattractive incentive. Our Company is of the opinion that it should have sufficient number of Optionsto offer to new employees as well as to existing ones. The number of Options offered must also besignificant to serve as a meaningful reward for contributions to our Group. However, it does notnecessarily mean that the Remuneration Committee will definitely issue Option Shares up to theprescribed limit. The Remuneration Committee shall exercise its discretion in deciding the numberof Option Shares to be granted to each employee which will depend on the performance and valueof the employee to our Group.

(4) Maximum entitlements

The aggregate number of Shares comprised in any Option to be offered to a participant under theESOS shall be determined at the absolute discretion of the Remuneration Committee, which shalltake into account (where applicable) criteria such as rank, past performance, years of service,potential for future development of that participant.

(5) Options, exercise period and exercise price

The Options that are granted under the ESOS may have exercise prices that are, at theRemuneration Committee’s discretion, set at a price (the “Market Price”) equal to the average ofthe last dealt prices for the Shares on the Official List of the SGX-ST for the five consecutiveMarket Days immediately preceding the relevant date of grant of the relevant Option; or at adiscount to the Market Price (subject to a maximum discount of 20 per cent). Options which arefixed at the Market Price (“Market Price Option”) may be exercised after the first anniversary of thedate of grant of that Option while Options exercisable at a discount to the Market Price(“Discounted Option”) may only be exercised after the second anniversary from the date of grant ofthe Option. Under no circumstances shall the exercise price be less than the nominal value of aShare.

(6) Grant of options

Under the rules of the ESOS, there are no fixed periods for the grant of Options. As such, offersfor the grant of Options may be made at any time from time to time at the discretion of theRemuneration Committee. However, no Option shall be granted during the period of 30 daysimmediately preceding the date of announcement of our Company’s interim or final results (as thecase may be).

In addition, in the event that an announcement on any matter of an exceptional nature involvingunpublished price sensitive information is imminent, offers may only be made after the secondMarket Day from the date on which the aforesaid announcement is made.

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(7) Termination of Options

Special provisions in the rules of the ESOS deal with the lapse or earlier exercise of Options incircumstances which include the termination of the participant’s employment in our Group, thebankruptcy of the participant, the death of the participant, a take-over of our Company and thewinding-up of our Company.

(8) Acceptance of Options

The grant of Options shall be accepted within 30 days from the date of offer. Offers of Optionsmade to grantees, if not accepted before the closing date, will lapse. Upon acceptance of theoffer, the grantee must pay our Company a consideration of S$1.00.

(9) Rights of Shares arising from the exercise of Options

Shares arising from the exercise of Options are subject to the provisions of the Memorandum ofAssociation of our Company and the Bye-Laws. The Shares so allotted will upon issue rank paripassu in all respects with the then existing issued Shares, save for any dividend, rights, allotmentsor distributions, the record date (“Record Date”) for which is prior to the relevant exercise date ofthe Option. “Record Date” means the date as at the close of business on which Shareholdersmust be registered in order to participate in any dividends, rights, allotments or other distributions(as the case may be).

(10) Duration of the ESOS

The ESOS shall continue in operation for a maximum duration of ten years and may be continuedfor any further period thereafter with the approval of our Shareholders by ordinary resolution ingeneral meeting and of any relevant authorities which may then be required.

(11) Abstention from voting

Shareholders who are eligible to participate in the ESOS are to abstain from voting on anyresolution of Shareholders relating to the ESOS.

Grant of Discounted Options

The ability to offer Options to participants of the ESOS with exercise prices set at a discount to theprevailing market prices of the Shares will operate as a means to recognise the performance ofparticipants as well as to motivate them to continue to excel while encouraging them to focus more onimproving the profitability and return of our Group above a certain level which will benefit ourShareholders when these are eventually reflected through share price appreciation. The ESOS will alsoserve to recruit new employees whose contributions are important to the long-term growth andprofitability of our Group. Discounted Options would be perceived in a more positive light by theparticipants, inspiring them to work hard and produce results in order to be offered Discounted Optionsas only employees who have made significant contributions to the success and development of ourGroup would be granted Discounted Options.

The flexibility to grant Discounted Options is also intended to cater to situations where the stock marketperformance has overrun the general market conditions. In such events, the Remuneration Committeewill have absolute discretion to:-

(a) grant Options set at a discount to the Market Price of a Share (subject to a maximum limit of 20per cent); and

(b) determine the participants to whom, and the Options to which, such reduction in exercise priceswill apply.

In determining whether to give a discount and the quantum of the discount, the Remuneration Committeeshall be at liberty to take into consideration factors including the performance of our Company, ourGroup, the performance of the participant concerned, the contribution of the participant to the successand development of our Group and the prevailing market conditions.

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115

At present, our Company foresees that Discounted Options may be granted principally in the followingcircumstances:-

(a) Firstly, where it is considered more effective to reward and retain talented employees by way of aDiscounted Option rather than a Market Price Option. This is to reward the outstanding performerswho have contributed significantly to our Group’s performance and the Discounted Option servesas additional incentives to such Group employees. Options granted by our Company on the basisof market price may not be attractive and realistic in the event of an overly buoyant market andinflated share prices. Hence during such period the ability to offer Discounted Options would allowour Company to grant Options on a more realistic and economically feasible basis. Furthermore,Discounted Options will give an opportunity to our Group employees to realise some tangiblebenefits even if external events cause the Share price to remain largely static.

(b) Secondly, where it is more meaningful and attractive to acknowledge a participant’s achievementsthrough a Discounted Option rather than paying him a cash bonus. For example, DiscountedOptions may be used to compensate employees and to motivate them during economic downturnswhen wages (including cash bonuses and annual wage supplements) are frozen or cut, or theycould be used to supplement cash rewards in lieu of larger cash bonuses or annual wagesupplements. Accordingly, it is possible that merit-based cash bonuses or rewards may becombined with grants of Market Price Options or Discounted Options, as part of eligibleemployees’ compensation packages. The ESOS will provide our Group employees with anincentive to focus more on improving the profitability of our Group thereby enhancing shareholdervalue when these are eventually reflected through the price appreciation of our Shares after thevesting period.

(c) Thirdly, where due to speculative forces and having regard to the historical performance of theShare price, the Market Price of the Shares at the time of the grant of the Options may not bereflective of financial performance indicators such as return on equity and/or earnings growth.

The Remuneration Committee will have the absolute discretion to grant Discounted Options, to determinethe level of discount (subject to a maximum discount of 20 per cent of the Market Price) and the granteesto whom, and the Options to which, such discount in the exercise price will apply provided that ourShareholders in general meeting shall have authorised, in a separate resolution, the making of offers andgrants of Options under the ESOS at a discount not exceeding the maximum discount as aforesaid.

Our Company may also grant Options without any discount to the Market Price. Additionally, ourCompany may, if it deems fit, impose conditions on the exercise of the Options (whether such Optionsare granted at the market price or at a discount to the Market Price), such as restricting the number ofShares for which the Option may be exercised during the initial years following its vesting.

Rationale for participation of directors (including our Independent Directors) and employees of our Group

The extension of the ESOS to the executive and non-executive directors (including our IndependentDirectors but excluding Controlling Shareholders or their Associates) and employees of our Group allowsour Group to have a fair and equitable system to reward directors and employees who have made andwho continue to make significant contributions to the long-term growth of our Group.

Non-executive directors bring to our Group their wealth of knowledge, business expertise and contacts inthe business community. It is desirable that non-executive directors of our Group be allowed toparticipate in the ESOS to incentivise and retain them and to further align their interests with that of ourGroup.

Granting eligibility to the non-executive directors of our Group gives us the ability to supplement thecurrent cash-based remuneration by way of director’s fees to the non-executive directors of our Group fortheir services and will help us remain competitive in the remuneration of the non-executive directors ofour Group when other listed companies offer share options to their non-executive directors.

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We are of the view that including the non-executive directors of our Group in the ESOS will show ourappreciation for, and further motivate them in their contribution towards our success. However, as werecognise that the services and contributions of the non-executive directors of our Group cannot bemeasured in the same way as those of our full time employees, we envisage that the bulk of the Optionswill be given to our employees. The non-executive directors of our Group will be granted Options at thediscretion of our Remuneration Committee.

Our Remuneration Committee, when deciding on the selection of the non-executive directors of ourGroup to participate in the ESOS and the number of Options to be offered, will take into considerationthe nature and extent of their input, the assistance and expertise rendered by them to the Board and theimpact thereof on the growth, success and development of our Group, as well as their involvement andcommitment to the boards of directors on which they sit. Our Remuneration Committee may, where itconsiders relevant, take into account other factors such as the economic conditions and our Company’sperformance.

Although the non-executive directors of our Group may be appointed as members of our RemunerationCommittee, the rules of the ESOS provide that a member is not to be involved in its deliberations inrespect of the grant of Options to him. We will ensure that the number of Options granted to the non-executive directors of our Group will be such that any conflict of interests that may potentially arise iskept minimal and that the independence of the non-executive directors of our Group are notcompromised.

It is our intention that all our employees whether key employees or not should be treated equally for thepurposes of the ESOS. The main purpose of the ESOS is to align the interests of our Group’s directorsand all employees who are involved in our business and prosperity with those of our own. The extensionof the ESOS to all employees of our Group allows us a fair and equitable system to reward employeeswho have made and will continue to make important contributions to our long-term growth, be they keyemployees or otherwise.

We believe that the ESOS will be an essential part of our strategy for recruiting and retaining capableemployees. The ESOS will provide an incentive to our employees to achieve and maintain a high level ofperformance as well as to encourage greater dedication and loyalty by enabling our Group to giverecognition to past contributions and services as well as to further encourage participants generally tocontribute towards our long term prosperity. To this end, we will determine the number of Options to begranted to an employee by taking into account the appointment, responsibilities, length of service,potential and performance. The level of performance of each employee will be assessed on the basis ofan annual appraisal process for all employees.

Cost of Options granted under the ESOS to our Company

The grant of Options under the ESOS will result in an increase in our Company’s issued share capital tothe extent that Options are exercised and new Shares are issued. This will in turn depend on, inter alia,the number of Shares comprised in the Options granted, the vesting schedules and the prevailing MarketPrice of the Shares on the SGX-ST.

The issue of new Shares upon the exercise of Options granted under the ESOS will have the effect ofincreasing our Company’s consolidated NTA by the aggregate exercise price of the new Shares issued.On a per Share basis, the effect would be accretive if the exercise price is above the NTA per Share butdilutive otherwise.

Based on the International Financial Reporting Standards, no cash outlays would be expended by ourCompany at the time Options are granted by it (as compared with cash bonuses). Accordingly, ourprofitability will not be affected at such point in time. However, whenever the Options are granted by ourCompany to subscribe for new Shares, such Options have a fair value attached to them at the time ofgrant. This fair value is the estimated value of the Option on its date of grant and may be derived byapplying a variety of valuation techniques or pricing models developed for valuing traded options.

Under the ESOS, each participant to whom an Option is offered pays a nominal consideration of S$1.00to our Company on his acceptance of the offer of the Option. Insofar as such Options are granted at aconsideration that is less than their fair value at the time of grant, there will be a cost to our Company (inthat we will receive from the participant upon the grant of the Option to him, a consideration that is lessthan the fair value of the Option).

The cost to our Company in granting an Option would vary depending on the number of Options grantedpursuant to the ESOS, whether these Options are granted at Market Price or at a discount and thevalidity period of the Options. Generally a greater discount and a longer validity period for an Option willresult in a higher potential cost to our Company. If such costs were to be recognised, it would have to becharged to our Company’s profit and loss account at the time the Options are granted.

The issuance of new Shares under the ESOS will have a dilutive impact on our consolidated EPS.However, the impact is not expected to be material in any given financial year as the Options are likely tobe exercised over several years in accordance with the predetermined vesting schedules.

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INTERESTED PERSON TRANSACTIONS

In general, transactions between our Group and any of our interested persons (namely, our Directors,Executive Officers or Controlling Shareholders and their Associates) are known as interested persontransactions. The following discussion on material interested person transactions for the last threefinancial years and as at the Latest Practicable Date, is based on our Pro forma Group and interestedpersons are construed accordingly.

Save for the interested person transactions discussed below and as set out under the section“Restructuring Exercise” on pages 72 to 75 of this Prospectus respectively, there are no other interestedperson transactions undertaken by our Group within the last three financial years and up to the LatestPracticable Date.

PAST INTERESTED PERSONS TRANSACTIONS

Distribution Agreement

The PFH group distributes some of its meat products under the brandname “Jinluo”, through adistribution network comprising sales outlets and speciality stores in the PRC operated by independentthird parties. We had determined that we can tap on the PFH group’s distribution network to launch anddistribute our recently introduced soy oligosaccharide syrup products under the brand name “Tian Song”.

On 31 October 2003, LSBP entered into a distribution agreement with PFH, pursuant to which PFH hasagreed to arrange for our Group to distribute our soy oligosaccharide syrup products through the PFH’sdistribution network (the “Distribution Agreement”). The PFH group would also provide us with sales andmarketing support.

Under the Distribution Agreement, PFH is entitled to be paid a commission calculated based on 2.5% ofthe gross revenue from our soy oligosaccharide syrup sales made through the PFH group’s distributionnetwork. The Distribution Agreement is for a term of one year and expired on 30 October 2004 and wasnot renewed. The terms of the Distribution Agreement had been negotiated on an arm’s length basis andat the point of entering into the Distribution Agreement, PFH did not have any interest in our Group otherthan being one of our customers.

The amount of commission that we have paid to PFH for the last three financial years ended 31December 2003, the six months ended 30 June 2004, and for the period from 1 July 2004 to the LatestPracticable Date were:-

1 July 2004 to the

Six months Latest ended 30 Practicable


Commissions paid to PFH – – – 59 41

Advances from our Chief Executive Officer, Li Zhuping, to Shansong Bio-Engineering

Our Chief Executive Officer, Li Zhuping, had from time to time extended advances to Shansong Bio-Engineering for working capital purposes. These advances were unsecured, interest-free and had nofixed-term of repayment. The advances extended by Li Zhuping for last three financial years ended 31December 2003, the six months ended 30 June 2004, and for the period from 1 July 2004 to the LatestPracticable Date were:-

1 July 2004 to the



Total amount due to Li Zhuping 75 711 975 975 –

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During the last three financial years ended 31 December 2003, the six months ended 30 June 2004, andfor the period from 1 July 2004 to the Latest Practicable Date, the largest outstanding amount due to LiZhuping was RMB975,000. This amount was fully repaid on 12 November 2004.

PRESENT INTERESTED PERSONS TRANSACTIONS

Transactions with our Substantial Shareholder, PFH

PFH acquired a 49% interest in our subsidiary, Glorious Faith, on 15 October 2004 pursuant tocompletion of the subscription entered into between Glorious Faith and PFH on 20 July 2004.Subsequently, on 15 October 2004, PFH became a Substantial Shareholder of our Company when ourCompany acquired all the issued and paid-up capital of Glorious Faith and PFH was allotted and issuedShares in our Company representing 49% interest in our Company. PFH’s 49% interest in our Companyis held by its wholly-owned subsidiary, Loampit. Please refer to the section “Restructuring Exercise” forfurther details.

Sales of our soy protein isolates to PFH

The PFH group is principally engaged in the production and distribution of fresh and frozen meat andprocessed meat products in the PRC.

The PFH group has been a customer of our Group since 2002, prior to its acquisition of an interest in ourGroup. The PFH group purchases from us soy protein isolates for use in the manufacture of itsprocessed meat products. All sales of soy protein isolates to the PFH group were conducted at arm’slength basis and on normal commercial terms. After our admission to the Official List of the SGX-ST, anysales to the PFH group will be entered into in accordance with such guidelines as described under thesection “Shareholders Mandate - Review Procedures for Interested Parties Transactions” set out onpages 122 and 123 of this Prospectus, so as to ensure that transactions will be carried out at prevailingmarket prices on terms which are no more favourable to PFH than the usual commercial terms extendedto an unrelated third party (including where applicable, preferential rates/prices/discount accorded forbulk purchases/delivery arrangement/credit terms) or otherwise in accordance with applicable industrynorms.

The value of the sales to the PFH group for the last three financial years ended 31 December 2003, thesix months ended 30 June 2004, and for the period from 1 July 2004 to the Latest Practicable Datewere:-

1 July 2004 to the



Sales to the PFH group – 11,714 63,592 27,117 121,735

Provision of public relations services by Cogent Communications Pte Ltd

Ong Tiong Seng, our Independent Director, is a director and shareholder of Cogent Communications PteLtd ("Cogent"), a company engaged in the provision of public relations services. Ong Tiong Seng has adirect shareholding interest of 40%, and an indirect shareholding interest of 20%, of the issued and paid-up share capital of Cogent.

Our Company has engaged Cogent in FY2004 to provide public relations services in connection with theInvitation. The total fees payable to Cogent for its public relations services is S$35,000. On 30December 2004, we paid to Cogent S$17,500 with the remaining S$17,500 being payable after the listingof our Company. The fees to be paid by our Company to Cogent are according to prevailing market rates.The aggregate amounts paid to Cogent for its public relations services in the last three financial yearsand up to the Latest Practicable Date are as follows:-

120

From 1 July 2004 to the


S$('000) FY 2001 FY 2002 FY 2003 June 2004 Date

Fees for public relations Nil Nil Nil Nil 17.5services

After the listing of our Company on the SGX-ST, we may engage the services of Cogent as and whenthe need arises in the future. All future transactions with Cogent will be conducted in accordance withthe guidelines described in the section "Review by Audit Committee" on page 125 of this Prospectus andChapter 9 of the Listing Manual.

Our Directors are of the view that the value and nature of the transactions between our Company andCogent are not significant and will not affect the independence of Ong Tiong Seng.

Save as disclosed above and in the section “Restructuring Exercise” on pages 72 to 75 of thisProspectus, no Director, Substantial Shareholder or Executive Officer of our Group has any interest,direct or indirect, in any transactions to which our Group was or is to be a party.

SHAREHOLDERS’ MANDATE

1. Introduction

1.1. Our Group will, in the ordinary course of our business, enter into certain transactions with personswho are considered “interested persons” as defined in Chapter 9 of the Listing Manual. Suchtransactions are likely to occur with some degree of frequency and could arise at any time andfrom time to time. Such transactions include, but are not limited to the categories of transactionsdescribed below.

1.2. Under Chapter 9 of the Listing Manual, a listed company may obtain a mandate from itsShareholders for recurrent interested person transactions which are of a revenue or trading natureor for those necessary for its day to day operations. These transactions may not include thepurchase or sale of assets, undertakings or businesses.

1.3. Pursuant to Rule 920(2) of the SGX-ST Listing Manual, our Company may treat a general mandateas having been obtained from our shareholders (“Shareholders’ Mandate”) for us to enter intointerested person transactions with our interested persons, if the information required under Rule920(1)(b) of the SGX-ST Listing Manual is included in this Prospectus. In relation to us, theinformation required by Rule 920(1)(b) is as follows:

(i) the class of interested persons with which the Entity At Risk (as defined below) will betransacting;

(ii) the nature of the transactions contemplated under the mandate;

(iii) the rationale, and benefit to the Entity At Risk;

(iv) the methods or procedures for determining transaction prices;

(v) the independent financial adviser’s opinion on whether the methods or procedures in (iv)above are sufficient to ensure that the transactions will be carried out on normal commercialterms and will not be prejudicial to our interest and the interests of our minorityshareholders;

(vi) an opinion from our Audit Committee if it takes a different view to the independent financialadviser; and

(vii) a statement from us that we will obtain a fresh mandate from our shareholders if themethods or procedures in (iv) above become inappropriate.

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1.4. The Shareholders’ Mandate will be effective upon our admission to the Official List of the SGX-STand will be effective until the earlier of the following: (i) our first annual general meeting followingour admission to the Official List of the SGX-ST; or (ii) the first anniversary of the date of ouradmission to the Official List of the SGX-ST. Thereafter, we will seek the approval of ourShareholders for a renewal of the Shareholders’ Mandate at each subsequent annual generalmeeting.

2. Entity at Risk

For the purposes of the Shareholders’ Mandate, an “Entity At Risk” means:

(a) our Company;

(b) a subsidiary of our Company that is not listed on the SGX-ST or an approved exchange; or

(c) an associated company of our Company that is not listed on the SGX-ST or an approvedexchange, provided that our Group and our interested person(s), have control over theassociated company. (Currently, we do not have any such associated companies.)

3. Classes of Interested Persons

3.1. The Shareholders’ Mandate will apply to the Recurrent Interested Person Transactions (asdescribed in paragraph 4 below) carried out with the PFH group (the “Interested Persons”).

3.2. Transactions with Interested Persons which do not fall within the ambit of the Shareholders’Mandate shall be subject to the relevant provisions of Chapter 9 of the Listing Manual. Please seethe section “Review by Audit Committee” on page 125 of this Prospectus for further details.

4. Nature of the Recurrent Interested Person Transactions (“Recurrent IPTs”)

The transactions covered under the Shareholders’ Mandate includes the sale of products toInterested Persons.

5. Rationale for and benefits of the Shareholders’ Mandate

5.1. We are principally engaged in the manufacture and sale of a range of soybean-based productssuch as soy protein isolates, soybean oil and soy oligosaccharide syrup. We sell our soy proteinisolates mainly to manufacturers of processed meat products, including the Interested Persons.The Interested Persons have purchased products from our Group totalling, approximatelyRMB11.7 million, RMB63.6 million and RMB27.1 million for each of the financial years ended 31December 2002, 2003 and the six months ended 30 June 2004, respectively, and whichrepresents 5.6%, 17.0%, and 13.3% of our Group’s turnover respectively. PFH is one of ourSubstantial Shareholders, which holds through its wholly-owned subsidiary, Loampit, approximately49% and 36.75% interests of our Company prior to and after this Invitation respectively. TheInterested Persons have been one of our customers since 2002 and we expect that their demandfor our soy protein isolates will continue to grow with the expansion of the Interested Persons’scale of production. Therefore, our Directors believe that our Group will be able to benefit fromsuch Recurrent IPTs. In addition to the Interested Persons, our Group also sells soy proteinisolates to other customers in the PRC.

5.2. The transactions with the Interested Persons are entered into or are to be entered into by ourGroup in the ordinary course of business. Such transactions are Recurrent IPTs which are likelyto occur with some degree of frequency and may arise at any time and from time to time in theordinary course of our Group’s business.

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5.3. The Shareholders’ Mandate and the renewal of the Shareholders’ Mandate on an annual basis willeliminate the need to convene separate general meetings from time to time to seek Shareholders’approval as and when potential transactions with the Interested Persons arise, thereby reducingsubstantially, the administrative time and expenses in convening such meetings, withoutcompromising the corporate objectives and adversely affecting the business opportunities availableto us.

5.4. The Shareholders’ Mandate is intended to facilitate transactions in our ordinary course of businessthat are transacted from time to time with the Interested Persons, provided that they are carriedout on normal commercial terms and are not prejudicial to our Company or our minorityShareholders.

6. Review Procedures for Interested Parties Transactions

6.1 Our Group, has subject to the terms of reference set out in the Independent Financial Advisersletter (please see Appendix G of this Prospectus for further details) implemented the followingprocedures to ensure that Recurrent IPTs will be carried out on normal commercial terms whichwill not be prejudicial to the interests of our Group and our minority Shareholders:-

Procedures for Determining Transaction Prices of Recurrent IPTs

(a) all Recurrent IPTs will be carried out in the same manner as those conducted with anyunrelated third party. The Recurrent IPTs will be carried out at prevailing market prices onterms which are no more favourable to the Interested Persons than the usual commercialterms extended to an unrelated third party (including where applicable, preferentialrates/prices/discount accorded for bulk purchases/delivery arrangement/credit terms) orotherwise in accordance with applicable industry norms; and

(b) where the prevailing market rates or prices are not available due to the nature of the productto be sold, our pricing for such products to be sold to the Interested Persons is determinedin accordance with our usual business practices and pricing policies, at margins to beobtained by us for the same or substantially similar type of contract or transaction withunrelated third parties. In determining the transaction price payable by the InterestedPersons for such products, factors such as, but not limited to, quantity, specifications andrequirements, duration of contracts, credit terms, delivery arrangement and strategicpurposes of the transaction will be taken into account.

Approval Limits for Recurrent IPTs

In addition, to supplement the internal system procedures to ensure that Recurrent IPTs will becarried out on normal commercial terms and will not be prejudicial to the interests of our Groupand its minority Shareholders, subject to the terms of reference set out in the IndependentFinancial Advisers letter (Please see Appendix G of this Prospectus for further details), thefollowing limits for Recurrent IPTs will be applied:

� where an individual Recurrent IPT is equal to or in excess of RMB3.0 million, suchtransaction will be subject to prior approval by the Audit Committee;

� where an individual Recurrent IPT is below RMB3.0 million, such transaction will be subjectto prior approval by the Chief Executive Officer; and

� where the aggregate value of the Recurrent IPTs in the same financial year is equal to or inexcess of RMB50.0 million, all Recurrent IPTs comprising such an amount will be reviewedby the Audit Committee to ensure that they have been carried out on normal commercialterms and in accordance with the procedures set out in the Shareholders’ Mandate.Recurrent IPTs which have been reviewed by the Audit Committee need not be aggregatedfor the purpose of this review.

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Procedures for Identification and Recording of Interested Person Transactions

(i) the Financial Controller will maintain a list of interested persons (as defined in the ListingManual) and disclose a list of the Interested Persons to the relevant personnel to enableidentification of Interested Persons. The list of Interested Persons will be reviewed by theAudit Committee at least on a semi-annual basis;

(ii) the Financial Controller will maintain a register of all transactions with interested persons(including the Interested Persons) recording the basis on which transactions are entered intoand the approval or review by the Audit Committee or the Chief Executive Officer, as thecase may be; and

(iii) the internal auditors will review all recorded transactions with interested persons (includingthe Interested Persons) on a quarterly basis to ensure the proper recording of interestedperson transactions (including the Recurrent IPTs) and that procedures for determining thetransaction prices of interested person transactions (including the Recurrent IPTs) areadhered to.

6.2 All Interested Persons Transactions will be reviewed quarterly by the Audit Committee to ensurethat they are carried out on normal commercial terms and in accordance with the proceduresoutlined above. All relevant non-quantitative factors will also be taken into account. In its review ofthe Recurrent IPTs under the section “Approval Limits for Recurrent IPTs” as set out above, or aspart of the quarterly review under this section, the Audit Committee would be supported by reportsfrom our Company’s internal auditors, or if deemed necessary by the Audit Committee, by reportsfrom external auditors.

6.3 The Board of Directors will also ensure that all disclosure, approval and other requirements onRecurrent IPTs, including those required by prevailing legislation, the Listing Manual andaccounting standards, are complied with. In particular, our Group will disclose in its annual report,the aggregate value of the Recurrent IPTs in its annual reports for the financial years during whichthe Shareholders’ Mandate is in force. We will also announce the aggregate value of theRecurrent IPTs for the financial periods which it is required to report on pursuant to Rule 705 ofthe Listing Manual within the required time frame while the Shareholders’ Mandate remain in force.

6.4 Our Audit Committee shall review from time to time the above guidelines and procedures todetermine if they are adequate and/or commercially practicable in ensuring that Recurrent IPTswill be conducted at arm’s length basis and on normal commercial terms and are not prejudicial tothe interests of our Company and minority Shareholders. This would have to take into account thenature of the operation of our Group, which may not be similar from those at the time of listing.Further, if during these periodic reviews by our Audit Committee, our Audit Committee is of viewthat the guidelines and procedures as stated above are inappropriate or are not sufficient toensure that the Recurrent IPTs will be at arm’s length basis and on normal commercial terms andwill not be prejudicial to the interests of our Company and minority Shareholders, our Company will(pursuant to Rule 920(1)(b)(iv) and (vii) of the Listing Manual) revert to Shareholders for a freshmandate based on new guidelines and procedures. If a member of the Audit Committee has aninterest in a transaction, he will abstain from participating in the review and approval process inrelation to that transaction.

6.5 Ming Kam Sing, our Non-executive Chairman and a member of our Audit Committee, is also theChairman and Executive Director of PFH. Ming Kam Sing will abstain from participation in:

(i) the review and/or approval by the Audit Committee of transactions between ourGroup and the PFH group ; and

(ii) the discussion and review by the Audit Committee on the adequacy of the aboveguidelines and procedures for transactions entered into between our Group and the PFHgroup.

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7. DisclosureWe will ensure that all disclosure, approval and other requirements on interested persontransactions, including those required by prevailing legislation, the Listing Manual and accountingstandards are complied with. In particular, we will disclose in our annual report the aggregatevalue of the Recurrent IPTs conducted pursuant to the Shareholders’ Mandate during FY2004 andlikewise in our annual reports for the subsequent financial years during which the Shareholders’Mandate is in force.

We will announce the aggregate value of transactions conducted pursuant to the Shareholders’Mandate for the financial periods which we are required to report on pursuant to Rule 705 of theListing Manual within the required time frame while the Shareholders’ Mandate remain in force.

Aggregate value of all interestedperson transactions during the Aggregate value of all interested

financial year under review person transactions conducted Name of (excluding transactions less than under Shareholders’ Mandate interested person $100,000 and transactions pursuant to Rule 920 (excluding

conducted under Shareholders’ transactions less than $100,000)Mandate pursuant to Rule 920)

8. Review by Audit Committee

Our Audit Committee believes that the above guidelines and procedures are sufficient to ensurethat our Group’s transactions with PFH group will be carried out on normal commercial terms andwill not be prejudicial to the interests of our Company or its minority Shareholders. Our AuditCommittee will review from time to time such guidelines and procedures to determine if theycontinue to be adequate and commercially practicable in ensuring that transactions between PFHgroup and our Group are carried out on normal commercial terms and will not be prejudicial to theinterests of our Company or its minority Shareholders.

Further, if during these periodic reviews by our Audit Committee, our Audit Committee is of theview that the guidelines and procedures as stated above are not sufficient to ensure that theseinterested person transactions will be carried out on normal commercial terms and will not beprejudicial to the interests of our Company or its minority Shareholders, we will (pursuant to Rule920(1)(b)(iv) and (vii) of the Listing Manual) revert to Shareholders for a fresh mandate based onnew guidelines and procedures for transactions with Interested Persons.

Our Audit Committee will review all other existing and future interested person transactions notsubject to the Shareholders’ Mandate to ensure that they are carried out at arm’s length basis andon normal commercial terms and are not prejudicial to the interests of our Company and itsminority Shareholders.

Our Audit Committee will also review all interested person transactions to ensure that the thenprevailing rules and regulations of the SGX-ST (in particular Chapter 9 of the Listing Manual) arecomplied with. We will also endeavour to comply with the principles of best practices set out in the“Best Practices Guide” of the Listing Manual.

9. Abstention from Voting

In accordance with Rules 919 of the Listing Manual, Interested Persons and their associates shallabstain from voting on resolutions approving interested person transactions involving themselvesor our Group.

10. Opinion of the Independent Financial Adviser

Asian Corporate Advisors Pte Ltd (“Asian Corporate”) has been appointed as the independentfinancial adviser to provide an opinion to the independent directors of our Company (“IndependentDirectors”) on whether the review procedures set out in the Shareholders’ Mandate (“ReviewProcedures”) are sufficient to ensure that the Mandate Transactions will be carried out at arm’slength basis and on normal commercial terms and will not be prejudicial to the interests of ourCompany and the minority Shareholders.

Based on the evaluation of Asian Corporate on the Review Procedures and the discussions withour Directors and management of our Company and subject to the qualifications and assumptionsmade in their letter (the “IFA Letter”), Asian Corporate is of the opinion that the current methods orprocedures for determining transaction prices as set out in this Prospectus are currently sufficient,if implemented fully and diligently, to ensure that the Recurrent IPTs will be conducted at arm’slength basis and on normal commercial terms and will not be prejudicial to the interests of ourCompany and its minority Shareholders.

The IFA Letter is reproduced in Appendix G of this Prospectus.

OTHER TRANSACTIONS

We set forth below transactions involving persons or companies connected to our Group and itsassociated companies but which do not fall within the ambit of the definition of an “Interested Person”under Chapter 9 of the Listing Manual.

Transactions involving Wang Chengtian, the former shareholder of LSBP

Wang Chengtian was the former and original sole shareholder of LSBP before the LSBP Acquisition.Please refer to the section “Restructuring Exercise” on pages 72 to 75 of this Prospectus for furtherinformation.

During the year ended 31 December 2003, our Group sold inventories amounting to RMB2.75 million atcost to Wang Chengtian. During the year ended 31 December 2002, LSBP purchased fixed assets atbook value of RMB12.07 million from (Linyi Chuangxin BiochemicalEngineering Co., Ltd.), an entity of which Wang Chengtian is also a director and shareholder.

CONFLICTS OF INTEREST

Save as disclosed in the section “Interested Person Transactions” on pages 118 to 120 of thisProspectus, none of our Directors, Controlling Shareholders and Executive Officers or their Associateshas any material interest, direct or indirect in:-

(i) any company carrying out the same business or a similar trade as our Group, directly or indirectly;

(ii) any enterprise or company that is our Group’s customer or supplier of goods or services; and

(iii) any transaction to which we were or are a party.

REVIEW BY AUDIT COMMITTEE

For all other interested person transactions which are not covered under the Shareholders’ Mandate, ourAudit Committee will review all such interested person transactions on at least a quarterly basis toensure that they are carried out on normal commercial terms and are not prejudicial to the interests ofour Shareholders. Please refer to the section “Corporate Governance” on pages 126 and 127 of thisProspectus for more details on our Audit Committee.

Our Audit Committee will also review all interested person transactions to ensure that the then prevailingrules and regulations of the SGX-ST (in particular Chapter 9 of the Listing Manual) are complied with.We will also endeavour to comply with the principles of and best practices set out in the Listing Manual.

Each member of the Audit Committee shall abstain from voting any resolution in respect of matters ofwhich he is interested in.

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CORPORATE GOVERNANCE

Our Bye-Laws provide that our board of Directors will consist of not less than two Directors. None of ourDirectors are appointed for any fixed term, but one-third of our Directors is required to retire at everyannual general meeting of our Company. Hence, the maximum term for each Director is three years.Directors who retire are eligible to stand for re-election.

The Directors recognise the importance of corporate governance and the offering of high standards ofaccountability to our Shareholders.

Nominating Committee

Our Nominating Committee comprises Messrs Li Zhuping, our Chief Executive Officer, Chan Wai Mengand Ong Tiong Seng, our Independent Directors. The Chairman of the Nominating Committee is OngTiong Seng. Our Nominating Committee will be responsible for (i) re-nomination of our Directors havingregard to the Director’s contribution and performance, (ii) determining annually whether or not a Directoris independent and (iii) deciding whether or not a Director is able to and has been adequately carryingout his duties as a Director. The Nominating Committee will decide how the board’s performance is to beevaluated and propose objective performance criteria, subject to the approval of the board, whichaddress how the board has enhanced long-term Shareholders’ value. The performance evaluation willalso include consideration of the Company’s share price performance over a five-year period vis-à-vis theSingapore Straits Times Index and a benchmark index of its industry peers. The board will alsoimplement a process to be carried out by the Nominating Committee for assessing the effectiveness ofthe board as a whole and for assessing the contribution by each individual Director to the effectivenessof the board. Each member of the Nominating Committee shall abstain from voting any resolutions inrespect of the assessment of his performance or re-nomination as Director.

Remuneration Committee

Our Remuneration Committee comprises Messrs Li Zhuping, our Chief Executive Officer, Chan WaiMeng and Ong Tiong Seng, our Independent Directors. The Chairman of the Remuneration Committeeis Ong Tiong Seng. Our Remuneration Committee will recommend to our Board a framework ofremuneration for the Directors and key executives officers, determine specific remuneration packages foreach Executive Director and administer the ESOS. The recommendations of our RemunerationCommittee on remuneration of Directors and Chief Executive Officer should be submitted forendorsement by the entire board. All aspects of remuneration, including but not limited to Directors’ fees,salaries, allowances, bonuses, options and benefits in kind shall be covered by our RemunerationCommittee. Each member of the Remuneration Committee shall abstain from voting any resolutions inrespect of his remuneration package.

Audit Committee

Our Audit Committee comprises Messrs Chan Wai Meng, Ong Tiong Seng, and Ming Kam Sing. TheChairman of our Audit Committee is Chan Wai Meng. Our Directors recognise the importance ofcorporate governance and the offering of high standards of accountability to the Shareholders of ourCompany. Our Audit Committee shall meet periodically to perform the following functions:-

(a) review with the external auditors the audit plan, their evaluation of the system of internal controls,their audit report, their management letter and our management's response;

(b) review the quarterly and annual financial statements before submission to our Board of Directorsfor approval, focusing in particular, on changes in accounting policies and practices, major riskareas, significant adjustments resulting from the audit, the going concern statement, compliancewith accounting standards as well as compliance with any stock exchange and statutory/regulatoryrequirements;

(c) review the internal controls and procedures and ensure co-ordination between the external auditorsand our management, reviewing the assistance given by our management to the auditors, anddiscuss problems and concerns, if any arising from the interim and final audits, and any matterswhich the auditors may wish to discuss (in the absence of our management where necessary);

(d) review, with our internal auditors, the scope and findings of the internal audit procedures andmonitor the response to their findings to ensure that appropriate follow-up measures are taken;

(e) consider the appointment or re-appointment of the external auditors and matters relating toresignation or dismissal of the auditors;

(f) review transactions falling within the scope of Chapter 9 of the SGX-ST Listing Manual;

(g) undertake such other review and projects as may be requested by our Board of Directors andreport to our Board of Directors its findings from time to time on matters arising and requiring theattention of our Audit Committee; and

(h) generally undertake such other functions and duties as may be required by statute or the ListingManual, and by such amendments made thereto from time to time.

Apart from the duties listed above, our Audit Committee shall commission and review the findings ofinternal investigations into matters where there is any suspected fraud or irregularity, or failure of internalcontrols or infringement of any Singapore law, rule or regulation which has or is likely to have a materialimpact on our Group’s operating results and/or financial position. Each member of the Audit Committeeshall abstain from voting on any resolutions in respect of matters in which he is interested.

Further, to support the management in the discharging of their financial reporting responsibilities andobligations, our Company has undertaken to engage an independent external auditor to:

(i) conduct a full review on the internal controls of our Group each year for three financial years fromthe date of listing and to report its findings to the SGX-ST; and

(ii) provide advice to our Group in respect of our financial reporting in accordance with the SingaporeFinancial Reporting Standards for at least one financial year from the date of listing. Should theappointment of such independent external auditor be subsequently terminated within a year of thedate of listing, our Company would appoint a replacement of a similar standing. Should theappointment of the independent external auditor be terminated after a year from the date of listing,our Audit Committee will provide a confirmation to the SGX-ST that our Group's accountingfunction has sufficient experience and expertise to satisfy our financial reporting obligations.

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GENERAL AND STATUTORY INFORMATION

INFORMATION ON DIRECTORS AND EXECUTIVE OFFICERS

(1) The name, address, age and principal occupation of each of our Directors and Executive Officersare set out under the section “Directors, Management and Staff” on page 104 and page 107respectively of this Prospectus.

(2) Information on the business and work experience of each of our Directors and Executive Officers isset out under the section “Directors, Management and Staff” on pages 105, 108 and 109 of thisProspectus.

(3) None of our Directors or Executive Officers is or was involved in any of the following events:-

(i) during the last 10 years, a petition under any bankruptcy laws of any jurisdiction filed againsthim or against a partnership of which he was a partner;

(ii) during the last 10 years, a petition under any law of any jurisdiction filed against acorporation of which he was a Director or key executive for the winding up of thatcorporation on the ground of insolvency;

(iii) any unsatisfied judgements against him;

(iv) a conviction of any offence, in Singapore or elsewhere, involving fraud or dishonesty whichis punishable with imprisonment for three months or more, or any criminal proceedings(including any pending criminal proceedings which he is aware of) for such purpose;

(v) a conviction of any offence, in Singapore or elsewhere, involving a breach of any law orregulatory requirement that relates to the securities or futures industry in Singapore orelsewhere, or any criminal proceedings (including pending criminal proceedings which he isaware of) for such breach;

(vi) during the last ten years, judgement entered against him in any civil proceeding inSingapore or elsewhere involving a breach of any law or regulatory requirement that relatesto the securities or futures industry in Singapore or elsewhere, or a finding of fraud,misrepresentation or dishonesty on his part, or any civil proceedings (including any pendingcivil proceedings which he is aware of) involving an allegation of fraud, misrepresentation ordishonesty on his part;

(vii) a conviction in Singapore or elsewhere of any offence in connection with the formation ormanagement of any corporation;

(viii) disqualification from acting as a Director of any corporation, or from taking part directly orindirectly in the management of any corporation;

(ix) the subject of any order, judgement or ruling of any court, tribunal or governmental bodypermanently or temporarily enjoining him from engaging in any type of business practice oractivity; and

(x) to his knowledge, been concerned with the management or conduct, in Singapore orelsewhere, of affairs of

(a) any corporation which has been investigated for a breach of any law or regulatoryrequirement governing corporations in Singapore or elsewhere; or

(b) any corporation or partnership which has been investigated for a breach of any law orregulatory requirement that relates to the securities or futures industry in Singapore orelsewhere,

in connection with any matter occurring or arising during the period when he was soconcerned with the corporation or partnership.

(4) Save as disclosed under the section “Service Agreements” on page 111 of this Prospectus, thereare no existing or proposed service contracts between our Executive Directors and our Group.

(5) Save as disclosed under the sections “Interested Person Transactions” and “Other Transactions” onpages 118 to 125 of this Prospectus, none of our Directors is interested, directly or indirectly, in thepromotion of, or in any property or assets which have, within the three years preceding the date ofthis Prospectus, been acquired or disposed of by or leased to, our Company or any of oursubsidiaries, or are proposed to be acquired or disposed of by or leased to our Company or any ofour subsidiaries.

(6) No option to subscribe for shares in or debentures of, our Company or any of our subsidiaries hasbeen granted to, or was exercised by, any of our Directors or Executive Officers within the lastfinancial year.

(7) No sum or benefit has been paid or is agreed to be paid to any Director or expert, or to any firm inwhich such Director or expert is a partner or any corporation in which such Director or expertholds shares or debentures, in cash or shares or otherwise, by any person to induce him tobecome, or to qualify him as, a Director, otherwise for services rendered by him or by such firm orcorporation in connection with the promotion or formation of our Company.

(8) There is no shareholding qualification for our Directors in our Bye-Laws.

(9) Save as disclosed under the section “Directors, Management and Staff” on pages 104 to 111 ofthis Prospectus, none of our Directors or Executive Officers was appointed pursuant to anarrangement or understanding with any of our Substantial Shareholders, customers or suppliers.

SHARE CAPITAL

(10) As at the date of this Prospectus, there is only one class of shares in the capital of our Company.There are no founder, management or deferred shares. The rights and privileges attached to theShares are stated in our Bye-Laws. The Shares owned by our Directors and SubstantialShareholders are not entitled to any different voting rights from the New Shares.

(11) There is no known arrangement the operation of which may, at a subsequent date, result in achange of control of our Company.

(12) There has not been any public takeover offer by a third party in respect of the Shares, or by ourCompany in respect of the shares of another corporation, which has occurred during the last andcurrent financial year.

(13) Save as disclosed below and set out in the section “Share Capital” on pages 67 to 69 of thisProspectus, there were no changes in the issued and paid-up capital of our Company and oursubsidiaries within the three years preceding the date of lodgement of this Prospectus.

LSBP

Resultant Registered Date Purpose Amount (US$) Capital (US$)

8 May 2002 Capital injection 2,000,000 2,000,000

29 May 2003 Capital injection 5,000,000 7,000,000

22 October 2004 Capital injection 7,000,000 14,000,000

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LITIGATION

(14) Neither our Company nor any of our subsidiaries is engaged in any litigation as plaintiff ordefendant in respect of any claims or amounts which are material in the contact of this Invitationand to the best of our Directors’ knowledge and belief, having made all reasonable enquiries, thereare no legal or arbitration proceedings, including those which are pending or known to becontemplated, which may have or have had in the last 12 months before the date of lodgement ofthe Prospectus with the Authority, a material effect on our financial position or profitability.

MATERIAL CONTRACTS

(15) The following contracts not being contracts entered into in the ordinary course of business havebeen entered into by our Company and our subsidiaries within the two years preceding the date ofthis Prospectus and are or may be material:-

(a) Asset and business transfer agreement dated 6 December 2003 as amended by theSupplemental Agreement dated 30 April 2004, between (LinyiShansong Biological Products Co. Ltd.) and (ShandongShansong Bio-engineering Group Co. Ltd.) for the acquisition of the business and assets of

(Shandong Shansong Bio-engineering Group Co. Ltd.) andits Fujin Branch for an aggregate consideration of approximately RMB117.2 million. Theacquisition became effective on 1 January 2004. Please refer to the section “RestructuringExercise” on pages 72 to 75 of this Prospectus for further details;

(b) Asset and business transfer agreement dated 6 December 2003 as amended by the

Supplemental Agreement dated 29 April 2004, between (LinyiShansong Biological Products Co. Ltd.) and (Daqing Xinyu FoodProducts Co., Ltd.) for the acquisition of the business and assets of Daqing Xinyu for anaggregate consideration of approximately RMB39.4 million. The acquisition becameeffective on 1 January 2004. Please refer to the section “Restructuring Exercise” on pages72 to 75 of this Prospectus for further details;

(c) The Share Transfer Agreement dated 17 May 2004 as amended by the SupplementalAgreement dated 23 September 2004 between Rainbow Palace and Wang Chengtianpursuant to which Wang Chengtian transferred his entire interest in

(Linyi Shansong Biological Products Co. Ltd.) to Rainbow Palace for a considerationof approximately US$26.5 million. Please refer to the section “Restructuring Exercise” onpages 72 to 75 of this Prospectus for further details;

(d) The Share Purchase Agreement dated 31 March 2005 entered into between our Companyand Glorious Faith and its shareholders, for the acquisition of the entire issued and paid upshare capital of Rainbow Palace comprising of 1 share of par value US1.00 from GloriousFaith, further details are set out in the section “Restructuring Exercise’ on pages 72 to 75 ofthis Prospectus;

(e) The Management and Underwriting Agreement dated 3 May 2005 between our Company,the Manager and the Underwriter for the management of this Invitation and the underwritingof the Offer Shares (the “Management and Underwriting Agreement”);

(f) The Placement Agreement dated 3 May 2005 between our Company and the PlacementAgent for the placement of the Placement Shares (the “Placement Agreement”); and

(g) The Depository Agreement dated 3 May 2005 between our Company and CDP pursuant towhich CDP will act as central depository for our securities for trades in the securities throughthe SGX–ST.

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MANAGEMENT AND UNDERWRITING AND PLACEMENT ARRANGEMENTS

(16) (a) Pursuant to the Management and Underwriting Agreement, our Company appointed theManager to manage this Invitation and the Underwriter to underwrite the Offer Shares. TheManager will receive a management fee from our Company for its services rendered inconnection with this Invitation.

(b) Pursuant to the Management and Underwriting Agreement, the Underwriter has agreed tounderwrite the Offer Shares for a commission of 3.25% of the Issue Price for each OfferShare, payable by our Company.

(c) Pursuant to the Placement Agreement, the Placement Agent has agreed to subscribe orprocure subscriptions for the Placement Shares for a placement commission of 3.50% of theIssue Price for each Placement Share, payable by our Company.

(d) Brokerage will be paid by our Company to members of the SGX-ST, merchant banks andmembers of the Association of Banks in Singapore in respect of accepted application madeon Application Forms bearing their respective stamps, or to Participating Banks in respect ofsuccessful applications made through Electronic Applications at the ATMs and the internetbanking websites of the relevant Participating Banks, at the rate of 0.25% of the Offer Pricefor each Offer Share.

(e) Subscribers of the Placement Shares may be required to pay a commission of up to 1.0% ofthe Issue Price to the Placement Agent (subject to Singapore Goods and Services Tax of5.0% if applicable).

(f) Save as aforesaid and under the section on “Plan of Distribution” on page 32 of thisProspectus, no commission, discount or brokerage, has been paid or other special termsgranted within the two years preceding the date of this Prospectus or is payable to anyDirector or any other person for subscribing or agreeing to subscribe or procuring oragreeing to procure subscriptions for any shares in or debentures of our Company.

(g) The Management and Underwriting Agreement may be terminated by the Manager and theUnderwriter at any time on or prior to the close of the Application List on the occurrence ofcertain events including, inter alia, any change, or any development involving a prospectivechange, in local, national or international, financial (including stock market, foreign exchangemarket, international bank or interest rates or money market), political, industrial, economic,legal or monetary conditions, taxations or exchange controls, which events or events shall,in the opinion of the Manager and the Underwriter (exercise in good faith):-

(i) result or be likely to result in a material adverse fluctuation or adverse conditions inthe stock market in Singapore or elsewhere; or

(ii) be likely to prejudice the success of the offer or subscription of the New Shares(whether in the primary market or in respect of dealings in the secondary market); or

(iii) make it impracticable, inadvisable, inexpedient or uncommercial to proceed with anyof the transactions contemplated in the Management and Underwriting Agreement; or

(iv) be likely to have an adverse effect on the business, trading position, operations orprospects of our Company; or

(v) be such that no reasonable underwriter would have entered into the Management andUnderwriting Agreement; or

(vi) make it uncommercial or otherwise contrary to or outside the usual commercialpractices of underwriting in Singapore for the Underwriter to observe or perform or beobliged to observe or perform the terms of the Management and UnderwritingAgreement.

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(h) Notwithstanding the above, the Management and Underwriting Agreement may beterminated by the Manager and the Underwriter if, inter alia, at any time:-

(i) up to date of commencement of trading of our Shares on the Official List of the SGX-ST, a stop order is issued by the Authority pursuant to Section 242 of the Securitiesand Futures Act; or

(ii) after the registration of this Prospectus with the Authority but before the close of theApplication List, our Company fails and/or neglects to lodge a supplementaryprospectus or replacement prospectus if required to do so pursuant to Section 243 ofthe Securities and Futures Act.

(i) Pursuant to the Underwriting Agreement, our Company shall not, for a period of 12 monthsfrom the date of listing of our Company on the SGX-ST, grant any Options under the ESOSor issue any new Shares without the prior written consent of the Underwriter (such consentnot to be unreasonably withheld).

(j) Save as disclosed in the section “Shareholders” of this Prospectus, we do not have anymaterial relationships with any of the Manager, Underwriter or Placement Agent.

EXPENSES OF THIS INVITATION

(17) The estimated amount of expenses of this Invitation and of the application for listing, includingmanagement fee, professional fees to reporting accountants and solicitors to this Invitation,underwriting and placement commission and brokerage fees and all other incidental expenses inrelation to this Invitation is approximately S$5.5 million, which will be borne by us. A breakdown ofthese estimated expenses is as follows:-

S$’000

Listing fees 25

Professional fees 1,960

Underwriting commission, placement commission and brokerage 3,000

Miscellaneous expenses 535

Total estimated expenses of this Invitation 5,520

CONSENTS

(18) Each of the Joint Reporting Accountants has given and has not withdrawn their respective writtenconsents to the issue of this Prospectus with the inclusion herein of the Report from the JointReporting Accountants on the Pro Forma Consolidated Financial Information of the Group for thefinancial years ended 31 December 2001, 31 December 2002 and 31 December 2003 and the sixmonths ended 30 June 2004.

(19) The Auditor has given and has not withdrawn its written consent to the issue of this Prospectuswith the inclusion herein of (a) Audited Financial Statements of Linyi Shansong Biological ProductsCo., Ltd. for the six months ended 30 June 2004; (b) Audited Financial Statements of LinyiShansong Biological Products Co., Ltd for the period from 4 January 2002 (date of establishment)to 31 December 2002 and 31 December 2003; (c) Audited Consolidated Financial Statements of for the period from 8 August 2002 (date of establishment) to 31 December 2002 and 31 December 2003; (d) Audited Financial Statements of

for the period from 17 September 2001 (date of establishment) to 31December 2001 and 31 December 2002; and (e) review letter by the Auditors in relation to theUnaudited Pro Forma Consolidated Financial Information of Pine Agritech Limited and itssubsidiaries for the year ended 31 December 2004.

(20) The Independent Financial Advisers, Asian Corporate Advisors Pte Ltd, has given and has notwithdrawn their written consent to the issue of this Prospectus with the inclusion herein of theirletter with respect to the shareholders’ mandate for interested person transactions and context inwhich they are included and reference to their name in the form and content in which it appears inthis Prospectus and to act in such capacity in relation to this Prospectus.

(21) The Manager, Underwriter and Placement Agent, the Solicitors to this Invitation, the LegalAdvisers to our Company on Bermuda Law, the Legal Advisers to our Company on PRC Law, theRegistrar for this Invitation and Singapore Share Transfer Agent, the Bermuda Share Registrar andShare Transfer Agent, the Receiving Bank and the Principal Banker(s) have each given and havenot withdrawn their written consents to the issue of this Prospectus with the inclusion herein oftheir names, references thereto in the form and context in which they respectively appear in thisProspectus and to act in such respective capacities in relation to this Prospectus.

MISCELLANEOUS

(22) There was no public take-over offer, by a third party in respect of our Company’s Shares or by ourCompany in respect of the shares of another corporation during FY2004 and up to the LatestPracticable Date.

(23) No expert is employed on a contingent basis by our Group, has a material interest, whether director indirect, in the Shares of our Group, or has a material economic interest, whether direct orindirect, in our Company, including an interest in the success of this Invitation.

(24) Save as disclosed in the sections entitled “Risk Factors”, “Review of Past Operating Performanceand Financial Position” and “Estimated Profit” in this Prospectus, our Directors are not aware ofany event which has occurred since 30 June 2004, which may have a material effect on ourGroup’s financial information.

(25) Save as disclosed in the sections “Risks relating to our business” on pages 34 to 38 of thisProspectus and “Licences, Permits and Approvals” on pages 100 and 101 of this Prospectus, ourbusiness and/or profitability is not materially dependent on any patent, licence, industrial,commercial or financial contract (including a contract with a customer or supplier) or newmanufacturing process.

DOCUMENTS AVAILABLE FOR INSPECTION

(26) Copies of the following documents may be inspected at Messrs Rajah & Tann, 4 Battery Road,#26-01, Bank of China Building, Singapore 049908 during normal business hours for a period ofsix months from the Latest Practicable Date:-

(a) the Memorandum of Association and Bye-Laws of our Company;

(b) the Report from the Joint Reporting Accountants on the Pro Forma Consolidated FinancialInformation of the Group for the financial years ended 31 December 2001, 31 December2002 and 31 December 2003 and the six months ended 30 June 2004 as set out inAppendix A of this Prospectus;

(c) the Audited Financial Statements of Linyi Shansong Biological Products Co., Ltd. for the sixmonths ended 30 June 2004 as set out in Appendix B of this Prospectus;

(d) the Review Letter by the Auditors in relation to the unaudited Pro forma consolidatedfinancial information of Pine Agritech Limited and its Subsidiaries for the year ended 31December 2004 in Appendix C of this Prospectus;

(e) the Audited Financial Statements of Linyi Shansong Biological Products Co., Ltd. for theperiod from 4 January 2002 (date of establishment) to 31 December 2002 and 31 December2003 as set out in Appendix D of this Prospectus;

133

(f) the Audited Consolidated Financial Statements of for theperiod from 8 August 2002 (date of establishment) to 31 December 2002 and 31 December2003 as set out in Appendix E of this Prospectus;

(g) the Audited Financial Statements of for the period from 17September 2001 (date of establishment) to 31 December 2001 and 31 December 2002 asset out in Appendix F of this Prospectus;

(h) the material contracts referred to in paragraph 15 under “General and Statutory Information”of this Prospectus;

(i) the letters of consent referred to in paragraphs 18 and 19 under “General and StatutoryInformation” of this Prospectus;

(j) the Service Agreements referred to in the section “Service Agreements” on page 111 of thisProspectus; and

(k) the Bermuda Companies Act.

STATEMENT BY DIRECTORS OF OUR COMPANY

(27) This Prospectus has been seen and approved by our Directors and they collectively andindividually accept the full responsibility for the accuracy of the information given in this Prospectusand confirm, having made all reasonable enquires, that to the best of their knowledge and belief,that the facts stated and the opinions expressed herein are fair and accurate in all materialrespects as of the date hereof and there are no other facts the omission of which would make anystatements herein misleading, and that this Prospectus constitutes full and true disclosure of allmaterial facts about this Invitation and our Group and that there are no material facts the omissionof which would make any statement in this Prospectus misleading, and that the Estimated Profithas been stated by our Directors after due and careful enquiry.

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APPENDIX A

REPORT FROM THE JOINT REPORTING ACCOUNTANTS ON THE PRO FORMACONSOLIDATED FINANCIAL INFORMATION OF THE GROUP FOR THE FINANCIAL

YEARS ENDED 31 DECEMBER 2001, 31 DECEMBER 2002 AND 31 DECEMBER2003 AND THE SIX MONTHS ENDED 30 JUNE 2004

Date: 3 May 2005

The Board of DirectorsPine Agritech LimitedCanon’s Court22 Victoria StreetHamilton HM12Bermuda

Dear Sirs,

This report has been prepared for inclusion in the Prospectus dated 3 May 2005 (the “Prospectus”) inconnection with the invitation in respect of new shares in the capital of Pine Agritech Limited.

We report on the pro forma consolidated financial information of Pine Agritech Limited (the “Company”)and its subsidiaries (collectively, the “Group”) set out in Appendix A on pages A-3 to A-35 of theProspectus dated 3 May 2005, which has been prepared for illustrative purpose only and is based oncertain assumptions and after making certain adjustments to show what:

(a) the financial results of the Group for the financial years ended 31 December 2001, 2002 and 2003and the six months ended 30 June 2004 (the “Relevant Periods”) would have been if the Groupstructure as at the date of the registration of the Prospectus had been in place and the acquisitionof the soy bean business from (i) (“Linyi Yikang”); and (ii)

(“Shansong Bio-Engineering”) and one of its subsidiaries(collectively, the “Businesses and Operations”) had already occurred at the beginning of theRelevant Periods;

(b) the financial positions of the Group as at 31 December 2003 and 30 June 2004 would have been ifthe Group structure as at the date of the registration of the Prospectus had been in place and theacquisition of the Businesses and Operations had already occurred at the beginning of theRelevant Periods; and

(c) the changes in equity and cash flows of the Group for the financial year ended 31 December 2003and the six months ended 30 June 2004 would have been if the Group structure as at the date ofthe registration of the Prospectus had been in place and the acquisition of the Businesses andOperations had already occurred at the beginning of the Relevant Periods.

The pro forma consolidated financial information, because of their nature, may not give a true picture ofthe Group’s actual financial positions, financial results, changes in equity and cash flows.

The pro forma consolidated financial information are the responsibility of the directors of the Company.Our responsibility is to express an opinion on the pro forma consolidated financial information based onour work.

A-1

We carried out procedures in accordance with Singapore Statement of Auditing Practice 24: “Auditorsand Public Offering Documents”. Our work, which involved no independent examination of the underlyingfinancial statements and management accounts, consisted primarily of comparing the pro formaconsolidated financial information to the financial statements and management accounts of theCompany’s subsidiaries as described in note (4) and the Businesses and Operations, considering theevidence supporting the adjustments and discussing the pro forma consolidated financial information withthe directors of the Company.

In our opinion,

(a) the pro forma consolidated financial information have been properly prepared:

(i) in a manner consistent with both the format of the financial statements and the accountingpolicies of the Company, which are in accordance with International Financial ReportingStandards;

(ii) on the basis stated in note 5 to the pro forma consolidated financial information to showwhat the financial positions of the Group as at 31 December 2003 and 30 June 2004, andthe financial results for each of the Relevant Periods and changes in equity and cash flowsof the Group for the financial year ended 31 December 2003 and the six months ended 30June 2004 would have been if the Group structure as at the date of the registration of theProspectus had been in place and the acquisition of the Businesses and Operations hadalready occurred at the beginning of the Relevant Periods; and

(b) each material adjustment made to the information used in the preparation of the pro formaconsolidated financial information is appropriate for the purpose of preparing such consolidatedfinancial information.

Foo Kon Tan Grant Thornton Grant ThorntonCertified Public Accountants Certified Public AccountantsSingapore Hong Kong

Partner: Wong Kian Kok Partner: Andrew Lam

A-2

Pro forma consolidated income statements

Unauditedsix months Six months

ended endedYear ended 31 December 30 June 30 June

2001 2002 2003 2003 2004Notes RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Revenue 9 30,677 210,406 373,932 162,473 204,317Cost of sales (24,561) (159,377) (263,861) (114,719) (141,541)

Gross profit 6,116 51,029 110,071 47,754 62,776Other revenue 9 98 1,208 971 634 657Selling and distribution costs (812) (7,020) (10,619) (4,732) (7,588)Administrative expenses (386) (3,232) (7,683) (5,206) (3,668)Other operating expenses (63) (294) (260) (105) (166)

Profit before taxation 10 4,953 41,691 92,480 38,345 52,011Taxation 11 (1,634) (13,999) (31,300) (12,817) –

Net profit attributableto shareholders 3,319 27,692 61,180 25,528 52,011

Earnings per share – basic (RMB)# 0.7 cents 6.2 cents 13.6 cents 5.7 cents 11.6 cents

# These pro forma earnings per share were computed based on the pre-Invitation (as defined in note 1 to the pro formaconsolidated financial information) number of shares of 450,000,000 (note 2).

A-3

Pro forma consolidated balance sheets

31 December 30 JuneNotes 2003 2004

RMB’000 RMB’000

ASSETS AND LIABILITIES

Non-current assets

Fixed assets 13 125,463 166,201Deposits 14 11,739 7,677Land use rights 15 10,383 38,612

147,585 212,490

Current assets

Inventories 16 62,867 81,416Trade receivables 17 30,333 13,440Prepayments and other receivables 18 9,193 10,568Cash and bank balances 19 31,067 28,128

133,460 133,552

Current liabilities

Trade payables 13,457 7,977Accrued liabilities, other payables and deposits received 20 30,235 46,706Amount due to a director 22 975 975Amount due to a related company 22 8,286 –Provision for taxation 11 8,119 –

61,072 55,658




Other payables 21 – 18,400

– 18,400

Net assets 219,973 271,984

Represented by:Pro forma shareholders’ equity 219,973 271,984

A-4

Pro forma consolidated statements of changes in equity


Year ended ended ended31 December 30 June 30 June

2003 2003 2004RMB’000 RMB’000 RMB’000

At beginning of financial year/period 110,785 110,785 219,973

Net profit for the financial year/period 61,180 25,528 52,011

Issue of share capital 48,008 48,008 –

At end of financial year/period 219,973 184,321 271,984

A-5

Pro forma consolidated cash flow statements


Year ended ended ended31 December 30 June 30 June

Notes 2003 2003 2004RMB’000 RMB’000 RMB’000

Cash flows from operating activities

Profit before taxation 92,480 38,345 52,011Adjustments for :Amortisation of land use rights 10 419 209 713Depreciation 10 6,909 3,367 4,872Loss on disposal of fixed assets 10 32 – 40Interest income 9 (87) (40) (32)

Operating profit before working capital changes 99,753 41,881 57,604(Increase)/decrease in inventories (4,211) 4,521 (18,549)(Increase)/decrease in trade receivables (28,514) (12,555) 16,893Increase in prepayments and other receivables (1,102) (6,671) (1,375)Increase/(decrease) in trade payables 11,953 9,141 (5,480)(Decrease)/increase in accrued liabilities, otherpayables and deposits received (16,173) (4,562) 15,609

Increase in amount due to a director 265 265 –(Decrease)/increase in amount due to a related company (5,885) 81 (8,286)

Cash generated from operations 56,086 32,101 56,416Income taxes paid (27,235) (8,410) (8,119)

Net cash generated from operating activities 28,851 23,691 48,297

Cash flows from investing activities

Purchases of fixed assets (60,162) (7,901) (45,650)Purchases of land use rights (8,836) (8,836) (9,680)Deposits paid for purchases of fixed assets (10,953) (13,589) 4,062Interest received 87 40 32

Net cash used in investing activities (79,864) (30,286) (51,236)

Cash flows from financing activities

Increase in share capital 48,008 48,008 –

Net cash generated from financing activities 48,008 48,008 –

Net (decrease)/increase in cash and cash equivalents (3,005) 41,413 (2,939)Cash and cash equivalents at beginning offinancial year/period 34,072 34,072 31,067

Cash and cash equivalents at end of financialyear/period 31,067 75,485 28,128

Analysis of balances of cash and cash equivalentsCash and bank balances 31,067 75,485 28,128

A-6

Notes to the pro forma consolidated financial statements

1. INTRODUCTION

The pro forma consolidated financial statements of the Group have been prepared for inclusion inthe prospectus of the Company dated 3 May 2005 issued for the invitation (the “Invitation”) by theCompany in respect of the issue of ordinary shares of S$0.10 each in the capital of the Company.

2. THE COMPANY

The Company was incorporated in Bermuda under the Companies Act 1981 of Bermuda on 7September 2004 as an exempted company with limited liability under the name of Pine AgritechLimited.

At the date of incorporation, the authorised share capital of the Company was US$12,000 dividedinto 120,000 ordinary shares of US$0.10 each, all of which were allotted and issued nil paid toElite Union Corporation (“Elite Union”) upon the incorporation of the Company. Elite Union wasestablished on 25 March 2004 in the British Virgin Islands (“BVI”) and was wholly owned by Mr. LiZhuping, the Chief Executive Officer of the Company.

The registered office of the Company is located at Canon’s Court, 22 Victoria Street, Hamilton HM12,Bermuda. The Company does not have a place of business in Singapore as at the date of this report.

The principal activity of the Company is investment holding. The Company’s subsidiaries areprincipally engaged in the manufacture and sale of soybean-based food products in the People’sRepublic of China, excluding Hong Kong and Macau (the “PRC”). The Group mainly sources itsraw materials from suppliers in the PRC and distributes its products to customers in the PRC. TheGroup employed approximately 330, 470, 650 and 930 employees as at 31 December 2001, 2002and 2003 and 30 June 2004, respectively.

Pursuant to written resolutions dated 15 October 2004, the shareholders of the Companyapproved, inter alia, the following:

(a) the re-denomination of the authorised and issued share capital of the Company ofUS$12,000 comprising 120,000 shares of par value US$0.10 each at the currencyconversion rate of US$1.00 to S$1.68, such that the authorised and issued share capitalshould be S$20,160 divided into 120,000 shares of par value S$0.168 each;

(b) the sub-division of every 1 ordinary share of S$0.168 each in the authorised and issuedshare capital of the Company into 168 shares of S$0.001 each; and

(c) the consolidation of every 100 ordinary shares of S$0.001 each into 1 ordinary share ofS$0.10 each. The resultant authorised and issued share capital of S$20,160 is divided into201,600 shares of S$0.10 each.

Pursuant to another written resolution passed on 23 March 2005, the then shareholder of theCompany approved, inter alia, the following:

(a) the increase in the authorised share capital of the Company from S$20,160 to S$100 millionby the creation of an additional 999,798,400 ordinary shares of S$0.10 each;

(b) the Company’s acquisition of the entire issued share capital of Rainbow Palace Inc.(“Rainbow Palace”) from Glorious Faith Corporation (“Glorious Faith”) as part of therestructuring exercise as further explained in note 3 to the pro forma consolidated financialstatements, the consideration for such acquisition being the issue of 449,798,400 ordinaryshares of S$0.10 each fully paid-up in the capital of the Company to the shareholders ofGlorious Faith and crediting as fully paid-up the 201,600 nil paid ordinary shares of S$0.10each which were issued to Elite Union, details of which are set out under the heading“Restructuring Exercise” in the prospectus of the Company;

A-7


2. THE COMPANY (Continued)

(c) the adoption of a new set of bye-laws and a share option scheme of the Company;

(d) the allotment and issue of the new shares (including the additional new shares to be allottedand issued pursuant to the exercise of the over-allotment option) which are the subject ofthe Invitation. The new shares and additional new shares, when issued and fully paid-up,will rank pari passu in all respects with the existing issued and fully paid-up shares; and

(e) that authority be given to the directors to allot and issue shares or convertible securities inthe Company (whether by way of rights, bonus or otherwise) at any time and upon suchterms and conditions whether for cash or otherwise and for such purposes and to suchpersons as the directors shall in their absolute discretion deem fit, provided that theaggregate number of shares and convertible securities to be issued pursuant to suchauthority shall not exceed 50 per cent. of the issued share capital of the Company and thatthe aggregate number of shares and convertible securities to be issued other than on a pro-rata basis to the then existing shareholders of the Company shall not exceed 20 per cent. ofthe post-Invitation issued share capital of the Company, and unless revoked or varied by theCompany in annual general meeting, such authority shall continue to be in force until theconclusion of the next annual general meeting of the Company or the expiration of theperiod within which the next annual general meeting is required by law or by the bye-laws tobe held, or when varied or revoked by the shareholders of the Company, whichever isearlier.

For the purpose of this resolution and pursuant to Rules 806(3) and 806(4) of TheSingapore Exchange Securities Trading Limited (the “SGX-ST”) Listing Manual, the “post-Invitation issued share capital” shall mean the enlarged issued and paid-up share capital ofthe Company after the Invitation, after adjusting for any subsequent consolidation orsubdivision of shares.

At the date of this report, the authorised share capital of the Company is S$100,000,000, dividedinto 1,000,000,000 ordinary shares of S$0.10 each. The issued and paid-up share capital of theCompany is S$45,000,000, divided into 450,000,000 ordinary shares of S$0.10 each.

3. THE RESTRUCTURING EXERCISE

A restructuring exercise was undertaken by the Group to rationalise the corporate structure for theInvitation (the “Restructuring Exercise”). The following steps were carried out in the RestructuringExercise:

1. Acquisition of soy bean business from Linyi Yikang

Linyi Yikang was established on 17 September 2001 in the PRC to manufacture soy proteinisolate products. Linyi Yikang was wholly owned by Mr. Li Zhuping (“Mr. Li”), the ChiefExecutive Officer of the Company. In August 2002, Mr. Di Xinsheng, Mr. Luo Chuan, Mr. HuFabao, Mr. Dai Yonghu and Mr. Li (collectively, the “Founding Shareholders”) establishedShansong Bio-Engineering. The initial registered capital was contributed by the FoundingShareholders in cash, except for Mr. Li whose contribution comprised of cash and the totalnet assets of Linyi Yikang. Accordingly, Shansong Bio-Engineering acquired the soy beanbusiness from Linyi Yikang.

A-8


3. THE RESTRUCTURING EXERCISE (Continued)

2. Acquisition of soy bean business by Linyi Shansong Biological Products Co., Ltd. (“LinyiShansong”)

Linyi Shansong entered into two business and asset acquisition agreements on 6 December2003 and supplemental agreements on 29 April 2004 and 30 April 2004 (collectively the“Business and Asset Acquisition Agreements”). Pursuant to the Business and AssetAcquisition Agreements, Linyi Shansong acquired the soy bean business relating to themanufacture and sale of soy oil, soy protein isolate and related products from ShansongBio-Engineering and one of its subsidiaries, at a total consideration of approximatelyRMB156,669,000 payable in cash, which was determined based on the total audited netasset value of the soy bean business acquired from Shansong Bio-Engineering and one ofits subsidiaries as at 31 December 2003. Under the terms of the Business and AssetAcquisition Agreements, the acquisition would take effect from 1 January 2004.

3. Establishment of Glorious Faith

Glorious Faith was established on 1 April 2004 in the BVI as an investment holdingcompany with an authorised share capital of US$50,000 divided into 50,000 shares ofUS$1.00 each (which was sub-divided into 500,000 shares of US$0.10 par value each on14 May 2004). On 17 May 2004, Bio Driven Limited (“Bio Driven”), Elite Union, GoldenRevenue Inc. (“Golden Revenue”), Achievement Way Corporation (“Achievement Way”) andJointway Holdings Limited (“Jointway Holdings”) subscribed for and were allotted and issued1,176, 1,176, 980, 980 and 788 shares in Glorious Faith respectively, representing 23.1%,23.1%, 19.2%, 19.2% and 15.4% of the entire issued and paid up capital of Glorious Faithrespectively.

4. Acquisition of Rainbow Palace

Rainbow Palace was established on 1 April 2004 in the BVI as an investment holdingcompany with an authorised share capital of US$50,000 divided into 50,000 shares ofUS$1.00 each. On 17 May 2004, Glorious Faith subscribed for and was issued and allotted1 share in the capital of Rainbow Palace representing the entire issued and paid up capitalof Rainbow Palace.

5. Acquisition of Linyi Shansong

Rainbow Palace entered into an acquisition agreement on 17 May 2004 and a supplementalagreement on 23 September 2004 pursuant to which Mr. Wang Chengtian, the former soleshareholder of Linyi Shansong, surrendered to Rainbow Palace all the economic benefits(including any profit generated by Linyi Shansong since 1 January 2004) attaching to hisentire interest in Linyi Shansong for a total consideration of approximately US$26.5 millionbased on the aggregate audited net asset value of Linyi Shansong (including the soy beanbusiness acquired from Shansong Bio-Engineering and one of its subsidiaries) as at 31December 2003.

6. People’s Food Holdings Limited (“PFH”) subscribed for 49% interest in Glorious Faith

PFH, a company incorporated in Bermuda, was listed on the SGX-ST and The StockExchange of Hong Kong Limited. On 20 July 2004, PFH entered into a conditionalsubscription agreement (“Subscription Agreement”) with Glorious Faith pursuant to whichPFH would subscribe for, and Glorious Faith would issue and allot to PFH 4,900 shares inthe capital of Glorious Faith for the consideration of US$27.1 million payable in cash. The4,900 shares represented 49% of the enlarged issued and paid up capital of Glorious Faith.

Following the completion of the Subscription Agreement on 15 October 2004, PFH holds a49% interest in the issued and paid up capital of Glorious Faith.

A-9


3. THE RESTRUCTURING EXERCISE (Continued)

7. Disposal of shareholding in Glorious Faith by Bio Driven

On 8 September 2004, Bio Driven disposed of its shareholding in 440 Glorious Faith’sshares to Elite Union, 368 Glorious Faith’s shares to Golden Revenue and 368 GloriousFaith’s shares to Achievement Way at a cash consideration of RMB20.2 million, RMB16.9million and RMB16.9 million respectively.

8. Pre-IPO Investors

On 29 October 2004, Elite Union, Golden Revenue and Achievement Way transferred 316,48 and 48 shares in Glorious Faith to Vienna Management Limited (“Vienna Management”);Frontier Empire Limited (“Frontier Empire”) and Victory Time Limited (“Victory Time”),respectively for a consideration of approximately US$1.7 million, US$0.26 million andUS$0.26 million. On 29 October 2004, Jointway also transferred, in aggregate, 84, 352 and352 shares in Glorious Faith to Vienna Management, Frontier Empire and Victory Time,respectively for a consideration of approximately US$0.46 million, US$1.9 million andUS$1.9 million, respectively.

Upon completion of the transfers, each of Vienna Management, Frontier Empire and VictoryTime holds 4.0% of the issued and paid up capital of Glorious Faith. Elite Union, GoldenRevenue and Achievement Way each holds 13.0% interest in the issued and paid up sharecapital of Glorious Faith.

9. Acquisition of Rainbow Palace by the Company

On 31 March 2005, the Company entered into a share purchase agreement with GloriousFaith and its shareholders (the “Share Purchase Agreement”), whereby the Companyagreed to:

(i) acquire from Glorious Faith the entire issued and paid up share capital of RainbowPalace comprising of 1 share of par value US$1.00; and

(ii) accept the assignment by Glorious Faith of the outstanding amount of US$26.5 millionbeing due from Rainbow Palace to Glorious Faith,

(the “Rainbow Palace Acquisition”), subject to and upon the terms and conditions of theShare Purchase Agreement.

The consideration payable for the Rainbow Palace Acquisition (including (i) and (ii) as statedabove) of approximately US$26.5 million or approximately RMB220.0 million, which wasdetermined based on the pro forma consolidated net asset value of Rainbow Palace as at31 December 2003 and the value of the amount due from Rainbow Palace to Glorious Faithof US$26.5 million, was satisfied by:-

(i) crediting as fully paid the 201,600 nil paid shares of S$0.10 each in the capital of theCompany that were issued to Elite Union upon the incorporation of the Company asthe Company’s initial subscriber; and

(ii) allotting and issuing 449,798,400 new shares of S$0.10 in the capital of the Company,credited as fully paid.

A-10


4. THE GROUP

Upon completion of the Restructuring Exercise, the Company has the following subsidiaries(referred collectively with the Company as the “Group”):

Date and place of Paid-up Percentage ofincorporation/ share/ equity interest

Name of establishment registered attributable to Principalsubsidiaries and business capital the Company activities

Directly heldRainbow Palace Inc. 1 April 2004, BVI US$1 100 Investment holding

Indirectly heldLinyi ShansongBiological Products Co., Ltd. 4 January 2002, US$14,000,000 100 Manufacture and

the PRC sale of soybeanbased foodproducts

Linyi Shansong was established as a wholly foreign-owned enterprise with a registered capital ofUS$2,000,000 in the PRC on 4 January 2002 and its registered capital was fully paid up duringthe year ended 31 December 2002. On 21 February 2003, the registered capital of LinyiShansong was approved to be increased from US$2,000,000 to US$7,000,000 and paid up in fullduring the year ended 31 December 2003. On 22 March 2004 the registered capital of LinyiShansong was increased from US$7,000,000 to US$14,000,000 and the incremental registeredcapital was paid up in full on 22 October 2004.

5. BASIS OF PREPARATION OF THE PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

The objective of the pro forma consolidated financial statements is to show what the historicalinformation might have been had the Group as described in note 4 to the pro forma consolidatedfinancial statements above been in place at the beginning of the Relevant Periods and thus, theyare for illustrative purposes only.

The pro forma consolidated financial statements, because of their nature, may not give a truepicture of the Group’s actual financial position, financial results, changes in equity and cash flows.

The pro forma consolidated financial statements have been prepared in accordance withInternational Financial Reporting Standards (“IFRS”), which comprise standards andinterpretations approved by the International Accounting Standards Board, and InternationalAccounting Standards and Standing Interpretations Committee interpretations approved by theInternational Accounting Standards Committee that remain in effect.

The pro forma consolidated financial statements have been prepared on the assumption that thecurrent Group structure as outlined in note 4 “The Group” had been in existence at the beginningof the Relevant Periods. In addition, the pro forma consolidated financial statements are alsoprepared based on certain assumptions and after making certain adjustments, to show what theeffect on the financial results and financial positions of the Group would have been if theacquisition of the Businesses and Operations had occurred at the beginning of the RelevantPeriods.

The pro forma consolidated financial statements are expressed in Renminbi (“RMB”), which is thefunctional and reporting currency of the principal subsidiaries of the Group, and have beenprepared under the historical cost convention and in accordance with the accounting policies of theGroup as set out in note 6 to the pro forma consolidated financial statements.

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5. BASIS OF PREPARATION OF THE PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS(Continued)

The pro forma consolidated financial statements for the financial years ended 31 December 2001,2002 and 2003 and the six months ended 30 June 2004 are prepared based on:

(i) the audited financial statements of Linyi Shansong for the period from 4 January 2002 (dateof establishment) to 31 December 2002 and the financial year ended 31 December 2003prepared in accordance with IFRS;

(ii) the audited financial statements of Linyi Yikang for the period from 17 September 2001 (dateof establishment) to 31 December 2001 and the financial year ended 31 December 2002prepared in accordance with IFRS;

(iii) the audited consolidated financial statements of Shansong Bio-Engineering for the periodfrom 8 August 2002 (date of establishment) to 31 December 2002 and the financial yearended 31 December 2003 prepared in accordance with IFRS; and

(iv) the audited financial statements of Linyi Shansong for the six months ended 30 June 2004prepared in accordance with IFRS.

No audit has been performed on the management accounts of the Company as it was newlyincorporated on 7 September 2004. No audit has been performed on the management accountsof Rainbow Palace since its date of incorporation on 1 April 2004 because its managementaccounts are not required to be audited under the laws of the BVI. Grant Thornton, CertifiedPublic Accountants, Hong Kong, a member of the Hong Kong Institute of Certified PublicAccountants, has performed an independent review of all relevant transactions of the Companyand Rainbow Palace since their dates of incorporation up to the date of this report.

The statutory financial statements of Linyi Shansong prepared in accordance with applicableaccounting regulations in the PRC for tax reporting purposes were audited by Linyi HongchengCertified Public Accountants, a member of the Chinese Institute of Certified Public Accountants.The auditors’ reports on the statutory financial statements of Linyi Shansong were unqualified.

For management review purposes, the financial statements of (i) Linyi Shansong for the periodfrom 4 January 2002 (date of establishment) to 31 December 2002 and the financial year ended31 December 2003; (ii) Linyi Shansong for the six months ended 30 June 2004; (iii) Linyi Yikang forthe period from 17 September 2001 (date of establishment) to 31 December 2001 and thefinancial year ended 31 December 2002; and the consolidated financial statements of ShansongBio-Engineering for the period form 8 August 2002 (date of establishment) to 31 December 2002and the financial year ended 31 December 2003, have been prepared under IFRS. GrantThornton, Certified Public Accountants, Hong Kong, have audited these financial statementsprepared under IFRS and the auditors’ reports on these audited financial statements wereunqualified.

6. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies, which have been consistently applied in preparing the proforma consolidated financial statements, are as follows:

(a) Basis of preparation of the pro forma consolidated financial statements

The basis of preparation of the pro forma consolidated financial statements is set out innote 5. All significant intra-group transactions and balances within the Group are eliminatedon pro forma consolidation.

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6. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(b) Subsidiaries

Subsidiaries are those enterprises controlled by the Company. Control exists when theCompany has the power to govern the financial and operating policies of an enterprise so asto obtain benefits from its activities.

(c) Fixed assets and depreciation

Fixed assets, other than construction in progress, are stated at cost less accumulateddepreciation and any impairment losses. The cost of an asset comprises its purchase priceand any directly attributable costs of bringing the asset to the working condition and locationfor its intended use. Expenditure incurred after fixed assets have been put into operation,such as repairs and maintenance, is normally charged to the pro forma consolidated incomestatement in the period in which it is incurred. In situations where it can be clearlydemonstrated that the expenditure has resulted in an increase in the future economicbenefits expected to be obtained from the use of the asset, the expenditure is capitalised asan additional cost of that asset.

Depreciation is calculated on the straight-line basis to write off the cost of fixed assets, lessany estimated residual values, over the following estimated useful lives:

Leasehold buildings The shorter of the lease terms and 50 yearsPlant and machinery 10 yearsFurniture, fixture and office equipment 5 years

The gain or loss on disposal or retirement of a fixed asset recognised in the pro formaconsolidated income statement is the difference between the net sales proceeds and thecarrying amount of the relevant asset.

Construction in progress, which represents buildings under construction, and plant andmachinery pending installation, is stated at cost less any impairment losses. Costcomprises direct costs incurred during the periods of construction, installation and testing.No depreciation is provided on construction in progress. Construction in progress isreclassified to the appropriate category of fixed assets when completed and ready for use.

(d) Land use rights

Land use rights are stated at cost less accumulated amortisation and any impairmentlosses. Amortisation is calculated on the straight-line basis to write off the cost of the landuse rights over the lease terms.

(e) Impairment of assets

An assessment is made at each balance sheet date of whether there is any indication ofimpairment of any asset, or whether there is any indication that an impairment losspreviously recognised for an asset in prior years may no longer exist or may havedecreased. If any such indication exists, the asset’s recoverable amount is estimated. Anasset’s recoverable amount is calculated as the higher of the asset’s value in use or its netselling price.

An impairment loss is recognised only if the carrying amount of an asset exceeds itsrecoverable amount. An impairment loss is charged to the pro forma consolidated incomestatement in the period in which it arises.

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(e) Impairment of assets (Continued)

A previously recognised impairment loss is reversed only if there has been a change in theestimates used to determine the recoverable amount of an asset, however not to an amounthigher than the carrying amount that would have been determined (net of anydepreciation/amortisation) had no impairment loss been recognised for the asset in prioryears.

A reversal of an impairment loss is credited to the pro forma consolidated income statementin the period in which it arises.

(f) Trade receivables

Trade receivables, which generally have credit terms ranging from 30 to 90 days, arerecognised and carried at original invoiced amount less provision made for impairment ofthese receivables. A provision for impairment of trade receivables is made when thecollection of the full amount is no longer probable. Bad debts are written off as incurred.

(g) Inventories

Inventories are stated at the lower of cost and net realisable value after making dueallowances for obsolete or slow-moving items. Cost comprises direct materials computedusing weighted average method and, where applicable, direct labour and those overheadsthat have been incurred in bringing the inventories to their present location and condition.Net realisable value is calculated as the actual or estimated selling prices less all furthercost of completion and the estimated costs necessary to make the sale.

(h) Trade payables

Liabilities for trade payables, which are normally settled on credit terms of 30 to 90 days, arecarried at cost which is the fair value of the consideration to be paid in the future for goodsand services received, whether or not billed to the Group.

(i) Provisions

A provision is recognised when there is a present obligation, legal or constructive, as aresult of a past event and it is probable that an outflow of resources will be required to settlethe obligation, provided that a reliable estimate can be made of the amount of the obligation.

(j) Revenue recognition

Revenue is recognised when it is probable that the economic benefits will flow to the Groupand when the revenue can be measured reliably, on the following bases:

(a) from the sale of goods, when the significant risks and rewards of ownership havebeen transferred to the buyer, provided that the Group maintains neither managerialinvolvement to the degree usually associated with ownership, nor effective controlover the goods sold; and

(b) interest income, on a time proportion basis after taking into account the principaloutstanding and the effective interest rate applicable.

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(k) Dividends

Final dividends proposed by the directors are classified as a separate allocation of retainedprofits within the capital and reserves section of the pro forma balance sheet, until they havebeen approved by the shareholders in a general meeting. When these dividends have beenapproved by the shareholders and declared, they are recognised as a liability.

Interim dividends are simultaneously proposed and declared, because memorandum andarticles of association grant the directors the authority to declare interim dividends.Consequently, interim dividends are recognised immediately as a liability when they areproposed and declared.

(l) Income tax

Income tax for the year comprises current and deferred tax.

Current tax is the expected tax payable on the taxable income for the year using tax ratesenacted at the balance sheet date, and any adjustment to tax payable in respect of previousyears.

The PRC Corporate Income Tax is provided at rates applicable to an enterprise in the PRCon income for financial reporting purpose, adjusted for income and expenses items whichare not assessable or deductible for income tax purpose.

Deferred tax is the tax expected to be payable or recoverable on differences between thecarrying amounts of assets and liabilities in the pro forma consolidated financial statementsand the corresponding tax bases used in the computation of taxable profit, and is accountedfor using the balance sheet liability method. Deferred tax liabilities are generally recognisedfor all taxable temporary differences, and deferred tax assets are recognised to the extentthat it is probable that taxable profits will be available against which deductible temporarydifferences can be utilised. Such assets and liabilities are not recognised if the temporarydifference arises from the initial recognition of other assets and liabilities in a transactionthat affects neither the tax profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences arising oninvestments in subsidiaries and associates, and interests in joint ventures, except where theCompany is able to control the reversal of the temporary difference and it is probable thatthe temporary difference will not reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at each balance sheet date andreduced to the extent that it is no longer probable that sufficient taxable profits will beavailable to allow all or part of the asset to be recovered. Any such reduction is reversed tothe extent that it becomes probable that sufficient taxable profit will be available.

Deferred tax assets and liabilities are not discounted. Deferred tax is calculated at the taxrates that are expected to apply in the period when the liability is settled or the assetrealised. Deferred tax is charged or credited to the pro forma consolidated incomestatement, except when it relates to items charged or credited directly to equity, in whichcase the deferred tax is also dealt with in equity.

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(m) Retirement benefits

Pursuant to the relevant regulations of the PRC, the subsidiary in the PRC has participatedin a local municipal government retirement benefits scheme (the “Scheme”), whereby thesubsidiary in the PRC is required to contribute a certain percentage of the basic salaries oftheir employees to the Scheme to fund their retirement benefits. The local municipalgovernment undertakes to assume the retirement benefits obligations of all existing andfuture retired employees of the subsidiary in the PRC. The only obligation of the Group withrespect to the Scheme is to pay the ongoing required contributions under the Schemementioned above. Contributions under the Scheme are charged to the pro formaconsolidated income statement as incurred. There are no provisions under the Schemewhereby forfeited contributions may be used to reduce future contributions.

(n) Foreign currencies

The Group maintains its accounting records in RMB and transactions arising in foreigncurrencies during the year/period are translated into RMB at the applicable rates ofexchange ruling at the transaction dates. Monetary assets and liabilities denominated inforeign currencies at the balance sheet date are translated at the applicable rates ofexchange ruling at that date. Exchange differences are dealt with in the pro formaconsolidated income statement.

On pro forma consolidation, the operating results of the non-PRC companies comprising theGroup are translated into RMB at weighted average exchange rates for the year/period andthe assets and liabilities of the non-PRC companies comprising the Group are translatedinto RMB at the applicable rates of exchange ruling at the balance sheet date. The resultingtranslation differences, if any, are included in the exchange fluctuation reserve.

(o) Related parties

Parties are considered to be related if one party has the ability, directly or indirectly, tocontrol the other party or exercise significant influence over the other party in makingfinancial and operating decisions. Related parties may be individuals or corporate entities.

(p) Research and development costs

All research costs are charged to the pro forma consolidated income statement as incurred.

Expenditure incurred on projects to develop new products is capitalised and deferred onlywhen the projects are clearly defined; the expenditure is separately identifiable and can bemeasured reliably; there is reasonable certainty that the projects are technically feasible;and the products have commercial value. Product development expenditure which does notmeet these criteria is expensed when incurred.

Deferred development costs that have been capitalised are amortised using the straight-linebasis over the commercial lives of the underlying products of not exceeding 5 years,commencing from the date when the products are put into commercial production.

During the Relevant Periods, the research and development costs incurred were notsignificant to the Group and were charged to the pro forma consolidated income statement.

(q) Operating leases

Leases where substantially all the risks and rewards of ownership of assets remain with thelessor are accounted for as operating leases. Where the Group is the lessee, rentalspayable under the operating leases are charged to the pro forma consolidated incomestatement on the straight-line basis over the lease terms.

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(r) Cash and cash equivalents

Cash and cash equivalents are carried at cost.

For the purpose of the pro forma consolidated cash flow statement, cash and cashequivalents comprise cash on hand and in banks and demand deposits, and short termhighly liquid investments which are readily convertible into known amounts of cash andwhich are subject to an insignificant risk of changes in value and have a short maturity ofgenerally within three months when acquired, less bank overdrafts which are repayable ondemand and form an integral part of the Group’s cash arrangement.

For the purpose of the pro forma consolidated balance sheet, cash and bank balancescomprise cash on hand and in banks, including term deposits, and assets similar in natureto cash, which are not restricted as to use.

7. RELATED PARTY TRANSACTIONS

The Group had the following material transactions with related parties:

(i) During the year ended 31 December 2003, the Group sold inventories at cost ofRMB2,745,000 to Mr. Wang Chengtian, a former and original sole shareholder of asubsidiary.

(ii) During the year ended 31 December 2002, the Group purchased fixed assets at carryingvalue of RMB12,066,000 from , an entity of which Mr. WangChengtian is also a director and shareholder.

8. SEGMENT INFORMATION

No separate analysis of segment information by business or geographical segments is presentedas the Group’s major business comprises the manufacture and sale of soybean based foodproducts. The Group’s revenue, expenses, results, assets and liabilities and capital expenditureare principally attributable to a single geographical region, which is the PRC.

9. REVENUE

Revenue represents the net invoiced value of goods sold, after allowances for returns and tradediscounts, and after elimination of all significant intra-Group transactions.



2001 2002 2003 2003 2004RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

RevenueSale of goods 30,677 210,406 373,932 162,473 204,317

Other revenueInterest income 3 44 87 40 32Others 95 1,164 884 594 625

98 1,208 971 634 657

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10. PROFIT BEFORE TAXATION

The Group’s profit before taxation is arrived at after charging/(crediting):




Cost of inventories sold 24,561 159,377 263,861 114,719 141,541Amortisation of land userights payments – 6 419 209 713

Depreciation 461 3,140 6,909 3,367 4,872Minimum lease payments under operating leases for production facilities 409 2,896 2,000 1,002 900

Directors’ remuneration:Fees – – – – –Other emoluments 10 73 54 17 35

10 73 54 17 35

Research and development costs 63 294 260 105 166Loss on disposal of fixed assets – – 32 – 40Staff costs (excluding directors’remuneration and retirement schemecontribution) 768 4,934 7,925 3,979 5,178

Less: Amount included in researchand development costs above (19) (109) (168) (63) (100)

749 4,825 7,757 3,916 5,078

Retirement scheme contribution 107 524 1,460 683 766Interest income (3) (44) (87) (40) (32)

11. TAXATION




Current year/period provision:The PRC 1,634 13,999 31,300 12,817 –

All tax expenses of the Group represented the tax charges provided in respect of the assessableprofits derived by the Businesses and Operations in the PRC. Linyi Yikang and Shansong Bio-Engineering and one of its subsidiaries were established in the PRC and hence the Businessesand Operations are subject to a PRC corporate income tax rate of 33% in accordance with therelevant laws and regulations in the PRC.

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11. TAXATION (Continued)

In accordance with the applicable corporate income tax law of the PRC, Linyi Shansong, theCompany’s wholly-owned subsidiary established as a wholly foreign-owned enterprise (“WOFE”) inthe PRC, is exempted from the corporate income tax for its first two profitable calendar years ofoperations and is entitled to a 50% relief from the state corporate income tax and exempted fromthe local corporate income tax for the following three years (the “Tax Holiday”). The two year’s taxexemption period for Linyi Shansong commenced in the tax year ended 31 December 2004 andwill expire as at 31 December 2005 under the local jurisdiction. Upon expiry of the tax exemptionperiod, Linyi Shansong will be subject to a reduced tax rate of 15% for the three financial yearsfrom 1 January 2006 to 31 December 2008. Upon expiry of the Tax Holiday on 31 December2008, an income tax rate of 33% is applicable to Linyi Shansong.

No deferred tax has been provided as the Group did not have any significant temporarydifferences which gave rise to a deferred tax asset or liability at 31 December 2001, 2002 and2003 and 30 June 2004.

A reconciliation of the expected theoretical tax expenses with the tax expense charged to the proforma consolidated income statement is presented below:




Profit before taxation 4,953 41,691 92,480 38,345 52,011

Tax at the applicable tax rate of 33% 1,634 13,758 30,518 12,654 17,163Non-deductible expenses – 241 782 163 –Tax Holiday of a WOFE of the Group – – – – (17,163)

Actual PRC corporate income tax 1,634 13,999 31,300 12,817 –

12. DIVIDENDS

No dividend has been paid or declared by the Company since the date of its incorporation. Thedividend paid during the financial year ended 31 December 2002 represented the dividend paid byLinyi Yikang.




Interim dividend – 13,785 – – –

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13. FIXED ASSETS

Furniture,fixture and

Leasehold Plant and office Construction buildings machinery equipment in progress TotalRMB’000 RMB’000 RMB’000 RMB’000 RMB’000

31 December 2003

Cost:

At 1 January 2003 26,985 48,135 227 112 75,459Additions 1,651 16,213 206 42,092 60,162Disposals – – – (32) (32)Transfer in/(out) 406 21,213 – (21,619) –

At 31 December 2003 29,042 85,561 433 20,553 135,589

Accumulated depreciation:

At 1 January 2003 628 2,574 15 – 3,217Charge for the year 1,312 5,535 62 – 6,909

At 31 December 2003 1,940 8,109 77 – 10,126

Net book value:

At 31 December 2003 27,102 77,452 356 20,553 125,463

At 31 December 2002 26,357 45,561 212 112 72,242

30 June 2004

Cost:

At 1 January 2004 29,042 85,561 433 20,553 135,589Additions – 8,484 134 37,032 45,650Disposals – – – (40) (40)Transfer in/(out) 11,374 – – (11,374) –

At 30 June 2004 40,416 94,045 567 46,171 181,199

Accumulated depreciation:

At 1 January 2004 1,940 8,109 77 – 10,126Charge for the period 690 4,134 48 – 4,872

At 30 June 2004 2,630 12,243 125 – 14,998

Net book value:

At 30 June 2004 37,786 81,802 442 46,171 166,201

The Group’s leasehold buildings are situated in the PRC and are held under medium term leases.

14. DEPOSITS

The amount represented the Group’s deposits paid for the acquisition of fixed assets.

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15. LAND USE RIGHTS

31 December 30 June2003 2004

RMB’000 RMB’000

Cost:At beginning of year/ period 1,971 10,808Additions 8,837 28,942

At end of year/ period 10,808 39,750

Accumulated amortisation:At beginning of year/ period 6 425Amortisation charge for the year/ period 419 713

At end of year/ period 425 1,138

Net book value at end of year/ period 10,383 38,612

16. INVENTORIES


RMB’000 RMB’000

Raw materials 42,474 49,406Finished goods 20,393 32,010

62,867 81,416

None of the above inventories were carried at net realisable value.

17. TRADE RECEIVABLES


RMB’000 RMB’000

Accounts receivable 30,333 13,440Less: Provision for doubtful debts – –

30,333 13,440

18. PREPAYMENTS AND OTHER RECEIVABLES


RMB’000 RMB’000

Prepayments 600 2,654Other receivables 8,593 7,914

9,193 10,568

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19. CASH AND BANK BALANCES

As at 31 December 2003 and 30 June 2004, the Group had cash and bank balances denominatedin RMB amounting to approximately RMB31,067,000 and RMB28,128,000, respectively, whichwere deposited with banks in the PRC. The RMB is not freely convertible into foreign currencies.Under the PRC Foreign Exchange Control Regulations and Administration of Settlement, Salesand Payment of Foreign Exchange Regulations, the Group is permitted to exchange RMB forforeign currencies through banks that are authorised to conduct foreign exchange business.

20. ACCRUED LIABILITIES, OTHER PAYABLES AND DEPOSITS RECEIVED


RMB’000 RMB’000

Accrued liabilities 3,472 6,115Other payables 26,447 30,934Sales deposits received 316 9,657

30,235 46,706

21. OTHER PAYABLES

Other payables represented advanced by the PRC government. The balance wasnon-interesting bearing, unsecured and repayable by 4 instalments of RMB4,600,000 each startingfrom the year ending 31 December 2005.

22. AMOUNT DUE TO A DIRECTOR / RELATED COMPANY

Amount due to a director / related company is unsecured, non-interest bearing and has no fixedterms of repayment.

23. OPERATING LEASE ARRANGEMENTS

The Group leases certain of its production facilities under operating lease arrangements. Leasesfor production facilities are negotiated for terms of 2 years.

Total future minimum lease payments under non-cancellable operating leases for productionfacilities are as follows:


RMB’000 RMB’000

Within one year 3,467 1,800In the second to fifth years inclusive 1,050 150

4,517 1,950

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24. CAPITAL COMMITMENTS

The Group had the following capital commitments at each of the balance sheet dates:


RMB’000 RMB’000

Contracted but not provided for in respect of acquisition of:Plant and machinery 1,756 3,702Buildings 6,397 6,772Land use rights 19,262 –

27,415 10,474

25. FINANCIAL INSTRUMENTS

The Group does not have written risk management policies and guidelines. However, the board ofdirectors meets periodically to analyse and formulate measures to manage the Group’s exposureto market risk, including principally changes in interest rates and currency exchange rates.Generally, the Group employs a conservative strategy regarding its risk management. As theGroup’s exposure to market risk is kept at a minimum level, the Group has not used anyderivatives or other instruments for hedging purposes. The Group does not hold or issuederivative financial instruments for trading purposes.

As at 31 December 2003 and 30 June 2004, the Group’s financial instruments mainly consisted ofcash and bank balances, trade receivables, other receivables, trade payables, accrued liabilities,other payables deposits received, an amount due to a director and an amount due to a relatedcompany.

(i) Interest rate risk

The Group has no significant interest rate risk as the Group has no interest-bearingborrowings.

(ii) Foreign currency risk

The Group has no significant foreign currency risk due to limited foreign currency traderelated transactions. The Group does not use derivative financial instruments to hedge itsforeign currency risk.

(iii) Credit risk

The Group’s bank balances are maintained with state-owned banks in the PRC.

The carrying amounts of the trade receivables and other receivables included in the proforma consolidated balance sheets represent the Group’s maximum exposure to credit riskin relation to the Group’s financial assets. No other financial assets carry a significantexposure to credit risk. The Group has no significant concentration of credit risk due to itslarge customer base.

The Group performs ongoing credit evaluation of its customers’ financial position andrequires no collateral from its customers. The allowance for doubtful debts is based upon areview of the expected collectibility of all trade receivables.

(iv) Fair values

The fair values of the Group’s financial assets and liabilities are not materially different fromtheir carrying amounts because of the immediate or short term maturity of these financialinstruments.

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26. POST BALANCE SHEET EVENTS

The Group had the following significant post balance sheet events:

(i) On 25 October 2004, Linyi Shansong had obtained an interest-bearing bank loan of RMB30million. The interest-bearing bank loan is secured by the pledge of certain of the Group’sfixed assets, bearing interest rate of 6.05% per annum and repayable on 24 October 2009.

(ii) On 10 December 2004, Linyi Shansong obtained another RMB70 million one-year interest-bearing secured term loan. The interest-bearing bank loan is secured by the pledge ofcertain of the Group’s fixed assets, bearing interest rate of 5.58% per annum and repayableon 9 December 2005.

(iii) In addition to the events disclosed in notes 2 and 3, PFH and its subsidiaries (collectively,the “PFH Group”) has been a customer of the Group since 2002, prior to PFH’s acquisitionof an interest in the Group. PFH Group purchases soy protein isolates from the Group foruse in the manufacture of its processed meat products.

Sales to the PFH Group for the Relevant Periods are:




Sales to the PFH Group – 11,714 63,592 29,131 27,117

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27. STATEMENTS OF PRO FORMA ADJUSTMENTS

The following adjustments have been made in arriving at the pro forma consolidated balancesheet:

Per aggregation of financial

statements of individual Pro forma Per pro forma

entities adjustments consolidated (note A) (note B) balance sheet

31 December 2003 RMB’000 RMB’000 RMB’000


Non-current assets

Fixed assets 128,547 (3,084) 125,463Deposits 11,739 – 11,739Land use rights 10,383 – 10,383

150,669 (3,084) 147,585

Current assets

Inventories 64,651 (1,784) 62,867Trade receivables 30,333 – 30,333Prepayments and other receivables 63,949 (54,756) 9,193Cash and bank balances 64,292 (33,225) 31,067

223,225 (89,765) 133,460

Current liabilities

Trade payables 25,726 (12,269) 13,457Accrued liabilities, other payables and deposits received 73,420 (43,185) 30,235Amount due to a director 975 – 975Amount due to a related company 8,214 72 8,286Provision for tax 8,372 (253) 8,119

116,707 (55,635) 61,072

Net current assets 106,518 (34,130) 72,388

Minority interests 35,435 (35,435) –

Net assets 221,752 (1,779) 219,973

Represented by:

Pro forma shareholders’ equity 221,752 (1,779) 219,973

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27. STATEMENTS OF PRO FORMA ADJUSTMENTS (Continued)


statements of individual Pro forma Per pro forma

entities adjustments consolidated (note A) (note B) balance sheet

30 June 2004 RMB’000 RMB’000 RMB’000


Non-current assets

Fixed assets 166,201 – 166,201Deposits 7,677 – 7,677Land use rights 38,612 – 38,612

212,490 – 212,490

Current assets

Inventories 81,416 – 81,416Trade receivables 13,440 – 13,440Prepayments and other receivables 167,237 (156,669) 10,568Cash and bank balances 28,128 – 28,128

290,221 (156,669) 133,552

Current liabilities

Trade payables 7,977 – 7,977Accrued liabilities, other payables and deposits received 203,287 (156,581) 46,706Amount due to a director 975 – 975

212,239 (156,581) 55,658

Net current assets 77,982 (88) 77,894

Total assets less current liabilities 290,472 (88) 290,384


Other payables 18,400 – 18,400

18,400 – 18,400

Net assets 272,072 (88) 271,984

Represented by:

Pro forma shareholders’ equity 272,072 (88) 271,984

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The following adjustments have been made in arriving at the pro forma consolidated incomestatement:


statements of Per pro formaindividual Pro forma consolidated

entities adjustments income (note A) (note C) statement


Revenue 30,677 – 30,677

Cost of sales (24,561) – (24,561)

Gross profit 6,116 – 6,116Other revenue 98 – 98Selling and distribution costs (812) – (812)Administrative expenses (386) – (386)Other operating expenses (63) – (63)

Profit before taxation 4,953 – 4,953Taxation (1,634) – (1,634)

Net profit attributable to shareholders 3,319 – 3,319





Revenue 210,406 – 210,406

Cost of sales (159,377) – (159,377)

Gross profit 51,029 – 51,029Other revenue 1,208 – 1,208Selling and distribution costs (7,020) – (7,020)Administrative expenses (3,232) – (3,232)Other operating expenses (294) – (294)

Profit before taxation 41,691 – 41,691Taxation (13,999) – (13,999)

Profit before minority interests 27,692 – 27,692Minority interests (586) 586 –

Net profit attributable to shareholders 27,106 586 27,692

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Revenue 383,029 (9,097) 373,932

Cost of sales (270,672) 6,811 (263,861)

Gross profit 112,357 (2,286) 110,071Other revenue 974 (3) 971Selling and distribution costs (10,929) 310 (10,619)Administrative expenses (7,925) 242 (7,683)Other operating expenses (260) – (260)

Profit before taxation 94,217 (1,737) 92,480Taxation (31,824) 524 (31,300)

Profit before minority interests 62,393 (1,213) 61,180Minority interests (7,848) 7,848 –

Net profit attributable to shareholders 54,545 6,635 61,180




30 June 2004 RMB’000 RMB’000 RMB’000

Revenue 204,317 – 204,317

Cost of sales (141,541) – (141,541)

Gross profit 62,776 – 62,776Other revenue 657 – 657Selling and distribution costs (7,588) – (7,588)Administrative expenses (3,668) – (3,668)Other operating expenses (166) – (166)

Profit before taxation 52,011 – 52,011Taxation – – –

Net profit attributable to shareholders 52,011 – 52,011

A-28



Notes to the statements of pro forma adjustments

(A) The aggregation of the financial statements of the individual entities for the years ended 31December 2001, 2002 and 2003 and the six months ended 30 June 2004 included theaudited financial statements of (i) Linyi Shansong for the period from 4 January 2002 (dateof establishment) to 31 December 2002 and the financial year ended 31 December 2003; (ii)Linyi Shansong for the six months ended 30 June 2004; (iii) Linyi Yikang for the period from17 September 2001 (date of establishment) to 31 December 2001 and the financial yearended 31 December 2002; and the consolidated financial statements of Shansong Bio-Engineering for the period from 8 August 2002 (date of establishment) to 31 December 2002and the financial year ended 31 December 2003.

(B) In arriving at the pro forma consolidated balance sheets, adjustments have been made asfollows:


RMB’000 RMB’000

(a) Fixed assets

Fixed assets per aggregation of financial statements ofindividual entities 128,547 166,201

Pro forma adjustments:

To exclude the accumulated depreciation of the leasehold buildings,plant and machinery, furniture, fixture and office equipment not acquired by the Group 234 –

To exclude the cost of the leasehold buildings, plant and machinery, furniture, fixture and office equipment not acquired by the Group (3,318) –

Fixed assets per pro forma consolidated balance sheets 125,463 166,201

(b) Inventories

Inventories per aggregation of financial statements of individual entities 64,651 81,416


To exclude inventories not acquired by the Group (1,633) –To eliminate unrealised profit in inventories (151) –

Inventories per pro forma consolidated balance sheets 62,867 81,416

A-29




RMB’000 RMB’000

(c) Prepayments and other receivables

Prepayments and other receivables per aggregation of financial statements of individual entities 63,949 167,237


To exclude prepayments and other receivables from the Relevant Periods as the amount arises as a result of the Restructuring Exercise, which is assumed to be completed at the beginning of the Relevant Periods under the pro forma basis – (156,669)

To eliminate intra-group balances (54,720) –To exclude prepayments and other receivables not acquired by the Group (36) –

Prepayments and other receivables per pro forma consolidated balance sheets 9,193 10,568

(d) Cash and bank balances

Cash and bank balances per aggregation of financial statements ofindividual entities 64,292 28,128


To exclude cash and bank balances not acquired by the Group (33,225) –

Cash and bank balances per pro forma consolidated balance sheets 31,067 28,128

(e) Trade payables

Trade payables per aggregation of financial statements of individual entities 25,726 7,977


To eliminate intra-group balances (12,174) –Trade payables not taken up by the Group (95) –

Trade payables per pro forma consolidated balance sheets 13,457 7,977

A-30




RMB’000 RMB’000

(f) Accrued liabilities, other payables and deposits received

Accrued liabilities, other payables and deposits received per aggregation of financial statements of individual entities 73,420 203,287


To exclude accrued liabilities, other payables and deposits received from the Relevant Periods as the amount arises as a result of theRestructuring Exercise, which is assumed to be completed at the beginning of the Relevant Periods under the pro forma basis – (156,669)

To take up accrued liabilities, other payables and deposits received of Rainbow Palace – 88

To eliminate intra-group balances (42,546) –Reallocation to amount due to a related company (72) –Accrued liabilities, other payables and deposits received not taken up by the Group (567) –

Accrued liabilities, other payables and deposits received per pro forma consolidated balance sheets 30,235 46,706

(g) Amount due to a related company

Amount due to a related company per aggregation 8,214 –of financial statements of individual entities


Reallocation from accrued liabilities, other payables and deposits received 72 –

Amount due to a related company per pro forma consolidated balance sheets 8,286 –

(h) Provision for taxation

Provision for taxation per aggregation of financial statements of individual entities 8,372 –


Provision for taxation not taken up by the Group (253) –

Provision for taxation per pro forma consolidated balance sheets 8,119 –

A-31




RMB’000 RMB’000

(i) Minority interests

Minority interests per aggregation of financial statements of individual entities 35,435 –


Minority interests not taken up by the Group (35,435) –

Minority interests per pro forma consolidated balance sheets – –

(j) Pro forma shareholders’ equity

Pro forma shareholders’ equity per aggregation of financialstatements of individual entities 221,752 272,072


To take up the formation costs of Rainbow Palace – (88)To exclude the accumulated depreciation of the leasehold buildings, plant and machinery, furniture, fixture and office equipment not acquired by the Group 234 –

To exclude the cost of the leasehold buildings, plant and machinery,furniture, fixture and office equipment not acquired by the Group (3,318) –

To exclude inventories not acquired by the Group (1,633) –To eliminate unrealised profit in inventories (151) –To exclude prepayments and other receivables not acquired by the Group (36) –

To exclude cash and bank balances not acquired by the Group (33,225) –Trade payables not taken up by the Group 95 –Accrued liabilities, other payables and deposits received not taken up by the Group 567 –

Provision for tax not taken up by the Group 253 –Minority interests not taken up by the Group 35,435 –

Pro forma shareholders’ equity per pro forma consolidated balance sheets 219,973 271,984

A-32



(C) In arriving at the pro forma consolidated income statements, adjustments have been madeas follows:

Six monthsended

Year ended 31 December 30 June2001 2002 2003 2004

RMB’000 RMB’000 RMB’000 RMB’000

(a) Revenue

Revenue per aggregation of financial statements of individual entities 30,677 210,406 383,029 204,317


To eliminate inter-company transactions – – (323) –

To exclude operating results of business not acquired by the Group – – (8,774) –

Revenue per pro forma consolidated income statements 30,677 210,406 373,932 204,317

(b) Cost of sales

Cost of sales per aggregation of financial statements of individual entities 24,561 159,377 270,672 141,541


To eliminate inter-company transactions – – (323) –To exclude operating results of business not acquired by the Group – – (6,639) –

To eliminate unrealised profit on inter-company transactions – – 151 –

Cost of sales per pro forma consolidated income statements 24,561 159,377 263,861 141,541

(c) Other revenue

Other revenue per aggregation of financial statements of individual entities 98 1,208 974 657


To exclude operating results of business not acquired by the Group – – (3) –

Other revenue per pro forma consolidated income statements 98 1,208 971 657

A-33



Six monthsended


RMB’000 RMB’000 RMB’000 RMB’000

(d) Selling and distribution costs

Selling and distribution costs per aggregation of financial statements of individual entities 812 7,020 10,929 7,588



Selling and distribution costs per pro forma consolidated income statements 812 7,020 10,619 7,588

(e) Administrative expenses

Administrative expenses per aggregation of financial statements of individual entities 386 3,232 7,925 3,668



Administrative expenses per pro forma consolidated income statements 386 3,232 7,683 3,668

(f) Taxation

Taxation per aggregation of financial statements of individual entities 1,634 13,999 31,824 –



Taxation per pro forma consolidated income statements 1,634 13,999 31,300 –

(g) Minority interests

Minority interests per aggregation of financial statements of individual entities – 586 7,848 –


To write back share of profit to minority interests – (586) (7,848) –

Minority interests per pro forma consolidated income statements – – – –

A-34



Six monthsended


RMB’000 RMB’000 RMB’000 RMB’000

(h) Net profit attributable to shareholders

Net profit attributable to shareholders per aggregation of financial statements of individual entities 3,319 27,106 54,545 52,011


To eliminate unrealised profit on inter-company transactions – – (151) –

To write back share of profit to minority interests – 586 7,848 –

To exclude operating results of business not acquired by the Group – – (1,062) –

Net profit attributable to shareholders per pro forma consolidated income statements 3,319 27,692 61,180 52,011

A-35

APPENDIX B

AUDITED FINANCIAL STATEMENTS OF LINYI SHANSONG BIOLOGICALPRODUCTS CO., LTD. FOR THE SIX MONTHS ENDED 30 JUNE 2004

Auditors’ report

To the directors of Linyi Shansong Biological Products Company Limited(Established in the People’s Republic of China with limited liability)

We have audited the financial statements of Linyi Shansong Biological Products Company Limited setout on pages B-2 to B-16 which have been prepared in accordance with International Financial ReportingStandards.

Respective responsibilities of directors and auditors

These financial statements are the responsibility of the Company’s directors. Our responsibility is toexpress an opinion on these financial statements based on our audit. This report is made solely to you,as a body, in accordance with our agreed terms of engagement, and for no other purpose. We do notassume responsibility towards or accept liability to any other person for the contents of this report.

Basis of opinion

We conducted our audit in accordance with International Standards on Auditing issued by TheInternational Federation of Accountants. Those standards require that we plan and perform the audit toobtain reasonable assurance about whether the financial statements are free of material misstatement.An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in thefinancial statements. An audit also includes assessing the accounting principles used and significantestimates made by the Company’s directors, as well as evaluating the overall financial statementspresentation. We believe that our audit provides a reasonable basis for our opinion.

Opinion

In our opinion, the financial statements give a true and fair view of the financial position of the Companyas at 30 June 2004 and of its profit and cash flows for the six months then ended in accordance withInternational Financial Reporting Standards.

Grant ThorntonCertified Public AccountantsHong Kong28 September 2004

B-1

Income statementSix months ended 30 June 2004

Audited Unauditedsix months six months

ended ended30 June 30 June

2004 2003Notes RMB RMB

Revenue 3 204,317,103 3,332,022

Cost of sales (141,540,965) (1,229,967)

Gross profit 62,776,138 2,102,055Other revenue 3 656,862 25,149Selling and distribution costs (7,588,187) (1,652,817)Administrative expenses (3,667,727) (555,059)Other operating expenses (165,888) (16,163)

Profit/(loss) before taxation 4 52,011,198 (96,835)Taxation 5 – –

Net profit/(loss) for the period 52,011,198 (96,835)

B-2

Balance sheet30 June 2004

Audited Audited30 June 31 December



Non-current assets

Fixed assets 6 166,201,056 84,959,318Deposits 7 7,677,437 9,680,274Land use rights 8 38,611,786 2,440,287

212,490,279 97,079,879Current assets

Inventories 9 81,416,487 23,291,020Trade receivables 13,440,200 2,864,745Prepayment, other receivables and deposits 16 167,236,437 3,401,899Cash and bank balances 18 28,127,650 6,745,275

290,220,774 36,302,939

Current liabilities

Trade payables 7,976,979 18,403,928Accrued liabilities, other payables and deposits received 203,287,264 43,373,102Amount due to a director 17 975,117 –Amount due to a related company 17 – 8,213,922

212,239,360 69,990,952

Net current assets / (liabilities) 77,981,414 (33,688,013)

Total assets less current liabilities 290,471,693 63,391,866


Other payables 10 18,400,000 –

Net assets 272,071,693 63,391,866

CAPITAL AND RESERVES

Paid-up capital 11 57,943,950 57,943,950Reserves 214,127,743 5,447,916

272,071,693 63,391,866

Director Director

B-3

Statement of changes in equitySix months ended 30 June 2004

(Accumulated Statutorylosses)/ Capital surplus

Paid-up Retained reserves* reserves*capital profits* (note 12) (note 12) TotalRMB RMB RMB RMB RMB

At 1 January 2004 57,943,950 (1,176,084) 6,624,000 – 63,391,866Net profit for the period – 52,011,198 – – 52,011,198Transfer to statutory reserves – (5,201,120) – 5,201,120 –Capital contribution undertaken by the shareholders – – 156,668,629 – 156,668,629

Balance as at 30 June 2004 57,943,950 45,633,994 163,292,629 5,201,120 272,071,693

At 1 January 2003 16,560,000 (43,386) – – 16,516,614Capital contribution from equity holders 41,383,950 – 6,624,000 – 48,007,950

Net loss for the period – (96,835) – – (96,835)

Balance as at 30 June 2003 57,943,950 (140,221) 6,624,000 – 64,427,729

* These reserves accounts comprise the reserve of RMB214,127,743 (30 June 2003 : RMB6,483,779) in the balance sheet asat 30 June 2004.

B-4

Cash flow statementSix months ended 30 June 2004




Cash flows from operating activities

Profit/(loss) before taxation 52,011,198 (96,835)Adjustments for:Interest income 4 (32,215) (25,149)Amortisation of land use rights 4 713,630 50,954Depreciation 4 4,872,514 1,454,745Loss on disposal of fixed assets 4 39,692 –

Operating profit before working capital changes 57,604,819 1,383,715Working capital adjustments:Increase in inventories (18,461,459) (10,058,081)Decrease/(increase) in trade receivables 29,429,337 (19,034)Increase in prepayment, other receivables and deposits (115,860,692) (10,033,934)(Decrease)/increase in trade payables (17,653,426) 3,005,013Increase in accrued liabilities, other payables and deposits received 121,453,614 3,536,924

(Decrease)/increase in amount due to a related company (8,213,922) 80,299

Net cash inflow/(outflow) from operating activities 48,298,271 (12,105,098)

Cash flows from investing activities

Purchases of fixed assets 6 (45,650,333) (7,544,479)Purchases of land use rights 8 (9,680,274) (576,795)Acquisition of operations 14 24,321,223 –Interest received 32,215 25,149Deposits paid for acquisition of fixed assets 4,061,273 (12,516,809)

Net cash used in investing activities (26,915,896) (20,612,934)

Cash flows from financing activities

Registered capital contribution – 48,007,950

Net cash generated from financing activities – 48,007,950

Net increase in cash and cash equivalents 21,382,375 15,289,918Cash and cash equivalents at beginning of period 6,745,275 17,028,361

Cash and cash equivalents at end of period 28,127,650 32,318,279

Analysis of balances of cash and cash equivalentsCash and bank balances 28,127,650 32,318,279

B-5

Notes to the financial statements30 June 2004

1. CORPORATE INFORMATION

The Company was established with limited liability in the People’s Republic of China (“the PRC”)on 4 January 2002 under the name of Linyi Shansong Biological Products Company Limited.

The registered office of the Company is located at Bancheng Town, Lanshan District, Linyi City,Shandong, PRC.

The principal activities of the Company have not change since its establishment and consisted ofthe manufacture and sale of soybean based food products.

The Company mainly operates in the PRC, and employed approximately 930 employees as at 30June 2004.

The Company is a wholly-owned subsidiary of Rainbow Palace Inc., a company incorporated inthe British Virgin Islands (“BVI”). At the balance sheet date, the directors considered GloriousFaith Corporation, a company incorporated in the BVI, to be the Company’s ultimate holdingcompany.


(a) Basis of preparation

The non-statutory financial statements have been prepared for management purpose onlyunder the historical cost convention and in accordance with International Financial ReportingStandards, which comprise standards and interpretations approved by the InternationalAccounting Standards Board, and International Accounting Standards and StandingInterpretations Committee Interpretations approved by The International AccountingStandards Committee that remain in effect.

The Company’s operations are principally conducted in the PRC. Accordingly, the financialstatements of the Company have been prepared in Renminbi (“RMB”), being the functionalcurrency of the Company.

(b) Fixed assets and depreciation

Fixed assets, other than construction in progress, are stated at cost less accumulateddepreciation and any impairment losses. The cost of an asset comprises its purchase priceand any directly attributable costs of bringing the asset to the working condition and locationfor its intended use. Expenditure incurred after fixed assets have been put into operation,such as repairs and maintenance, is normally charged to the income statements in theperiod in which it is incurred. In situations where it can be clearly demonstrated that theexpenditure has resulted in an increase in the future economic benefits expected to beobtained from the use of the fixed asset, the expenditure is capitalised as an additional costof that asset.

Depreciation is calculated on the straight-line basis to write off the cost of each assets, lessany estimated residual values, over the following estimated useful lives:

Leasehold buildings The shorter of the lease terms and 50 yearsPlant and machinery 7-10 yearsFurniture, fixture and office equipment 2-5 years

The gain or loss on disposal or retirement of a fixed asset recognised in the incomestatement is the difference between the net sales proceeds and the carrying amount of therelevant asset.

B-6



(b) Fixed assets and depreciation (Continued)


(c) Land use rights


(d) Impairment of assets


An impairment loss is recognised only if the carrying amount of an asset exceeds itsrecoverable amount. An impairment loss is charged to the income statement in the period inwhich it arises.


A reversal of an impairment loss is credited to the income statement in the period in which itarises.

(e) Trade receivables

Trade receivables, which generally have credit terms of 30 to 90 days, are recognised andcarried at original invoiced amount less an allowance for any uncollectible amounts. Anestimate for doubtful debts is made when the collection of the full amount is no longerprobable. Bad debts are written off as incurred.

(f) Inventories

Inventories are stated at the lower of cost and net realisable value after making dueallowances for obsolete or slow-moving items. Cost comprises direct materials computedusing weighted average method and, where applicable, direct labour and those overheadsthat have been incurred in bringing the inventories to their present location and condition.Net realisable value is calculated as the actual or estimated selling price less all furthercosts of completion and the estimated costs necessary to make the sale.

(g) Trade payables

Liabilities for trade payables, which are normally settled on credit terms of 30 to 90 days, arecarried at cost which is the fair value of the consideration to be paid in the future for goodsand services received, whether or not billed to the Company.

B-7



(h) Income tax




Deferred tax is the tax expected to be payable or recoverable on differences between thecarrying amounts of assets and liabilities in the financial statements and the correspondingtax bases used in the computation of taxable profit, and is accounted for using the balancesheet liability method. Deferred tax liabilities are generally recognised for all taxabletemporary differences, and deferred tax assets are recognised to the extent that it isprobable that taxable profits will be available against which deductible temporary differencescan be utilised. Such assets and liabilities are not recognised if the temporary differencearises from the initial recognition of other assets and liabilities in a transaction that affectsneither the tax profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences arising oninvestments in subsidiaries and associates, and interests in joint ventures, except where thecompany is able to control the reversal of the temporary difference and it is probable that thetemporary difference will not reverse in the foreseeable future.


Deferred tax assets and liabilities are not discounted. Deferred tax is calculated at the taxrates that are expected to apply in the period when the liability is settled or the assetrealised. Deferred tax is charged or credited to the income statement, except when it relatesto items charged or credited directly to equity, in which case the deferred tax is also dealtwith in equity.

(i) Retirement benefits

Pursuant to the relevant regulations of the PRC government, the Company participates in alocal municipal government retirement benefits scheme (the “Scheme”), whereby theCompany is required to contribute a certain percentage of the basic salaries of itsemployees to the Scheme to fund their retirement benefits. The local municipal governmentundertakes to assume the retirement benefits obligations of all existing and future retiredemployees of the Company. The only obligation of the Company with respect to the Schemeis to pay the ongoing required contributions under the Scheme mentioned above.Contributions under the Scheme are charged to the income statements as incurred. Thereare no provisions under the Scheme whereby forfeited contributions may be used to reducefuture contributions.

B-8



(j) Research and development costs

All research costs are charged to the income statement as incurred.


Deferred development costs are amortised using the straight-line basis over the commerciallives of the underlying products of not exceeding 5 years, commencing from the date whenthe products are put into commercial production.

During the period, the research and development costs incurred were not significant to theCompany and were charged to the income statement.

(k) Cash and cash equivalents


For the purpose of the cash flow statements, cash and cash equivalents consist of cash onhand and in banks and demand deposits, and short term highly liquid investments which arereadily convertible into known amounts of cash and which are subject to an insignificant riskof changes in value, and have a short maturity of generally within three months whenacquired, less bank overdrafts which are repayable in demand and form an integral part ofthe Company’s cash arrangement.

For the purpose of balance sheet classification, cash and bank balances comprise cash onhand and in banks, including term deposits, and assets similar in nature to cash, which arenot restricted as to use.

(l) Recognition of revenue

Revenue is recognised when it is probable that the economic benefits will flow to theCompany and when the revenue can be measured reliably, on the following bases: -

(a) from the sale of goods, when the significant risks and rewards of ownership havebeen transferred to the buyer, provided that the Company maintains neithermanagerial involvement to the degree usually associated with ownership, nor effectivecontrol over the goods sold; and

(b) interest income, on a time proportion basis taking into account the principaloutstanding and the effective interest rate applicable.

(m) Related parties

Parties are considered to be related if one party has the ability, directly or indirectly, tocontrol the other party or exercise significant influence over the other party in makingfinancial and operating decisions. Parties are also considered to be related if they aresubject to common control or common significant influence. Related parties may beindividuals or corporate entities.

B-9


3. REVENUE

Turnover represents the net invoiced value of goods sold, after allowances for returns and tradediscounts.



2004 2003RMB RMB

RevenueSales of goods 204,317,103 3,332,022

Other revenueInterest income 32,215 25,149Others 624,647 –

656,862 25,149

4. PROFIT / (LOSS) BEFORE TAXATION

The Company’s profit / (loss) before taxation is arrived after charging/(crediting):



2004 2003RMB RMB

Cost of inventories sold 141,540,965 1,229,967Amortisation of land use rights 713,630 50,954Depreciation 4,872,514 1,454,745Minimum lease payment under operating leases: production facilities 900,000 –Research and development costs 165,888 16,163Loss on disposal of fixed assets 39,692 –Directors’ remuneration:Fees – –Other emoluments 35,424 –

Staff costs (excluding directors’ emoluments) 5,943,682 1,239,530Less: retirement scheme contribution (766,600) (225,000)

amount included in research and development costs (99,676) –

5,077,406 1,014,530Interest income (32,215) (25,149)

B-10


5. TAXATION

In accordance with various approval documents issued by the State Tax Bureau and the Local TaxBureau of the PRC, the Company was exempted from the PRC state and local corporate tax of thePRC for the first two profitable financial years of its operation starting from the financial year ended31 December 2004, and thereafter is entitled to a 50% relief from the state corporate income taxand exempted from the local corporate tax of the PRC for the following three financial years (the“Tax Holiday”). Accordingly, the Company would be subject to the reduced tax rate of 15% for thethree financial years from 1 January 2006 to 31 December 2008. Upon expiry of the Tax Holidayon 31 December 2008, an income tax rate of 33% is applicable to the Company.

Accordingly, PRC corporate income tax has not been provided by the Company during the period(six months ended 30 June 2003: Nil).

No deferred tax has been provided as the Company did not have any significant temporary differenceswhich gave rise to a deferred tax asset or liability at 30 June 2004 (31 December 2003: Nil).

6. FIXED ASSETS

Furniture,fixture

Leasehold Plant and and office Constructionbuildings machinery equipment in progress Total

RMB RMB RMB RMB RMB

Cost

At 1 January 2004 12,607,055 55,408,803 58,417 20,379,969 88,454,244Additions – 8,484,224 134,377 37,031,732 45,650,333Acquisition of operations 15,073,619 24,952,126 304,476 173,390 40,503,611Disposals – – – (39,692) (39,692)Transfer in / (out) 11,373,885 – – (11,373,885) –

At 30 June 2004 39,054,559 88,845,153 497,270 46,171,514 174,568,496

Accumulated depreciation

At 1 January 2004 579,647 2,908,462 6,817 – 3,494,926Charge for the period 689,739 4,134,398 48,377 – 4,872,514

At 30 June 2004 1,269,386 7,042,860 55,194 – 8,367,440

Net book value

At 30 June 2004 37,785,173 81,802,293 442,076 46,171,514 166,201,056

At 31 December 2003 12,027,408 52,500,341 51,600 20,379,969 84,959,318

The Company’s leasehold buildings are situated in the PRC and are held under medium termleases.

7. DEPOSITS

The amount represented the Company’s deposits paid for the acquisition of fixed assets.

B-11


8. LAND USE RIGHTS


2004 2003RMB RMB

Cost

At beginning of the year / period 2,547,695 1,970,900Acquisition of operations 7,942,829 –Additions 28,942,300 576,795

At end of year 39,432,824 2,547,695

Accumulated amortisation

At beginning of the year / period 107,408 5,500Provided during the year / period 713,630 101,908

At end of year / period 821,038 107,408

Net book value

At end of year / period 38,611,786 2,440,287

9. INVENTORIES


2004 2003RMB RMB

Raw material 49,406,130 4,884,889Finished goods 32,010,357 18,406,131

81,416,487 23,291,020

No inventories were carried at net realisable value at the balance sheet date (31 December 2003 :Nil).

10. OTHER PAYABLES

Other payables represented advanced by the PRC government. The balance wasnon-interesting bearing, unsecured and repayable by 4 instalments of RMB4,600,000 each startingfrom the year ending 31 December 2005.

11. CAPITAL


2004 2003RMB RMB

Registered and paid-up capital (equivalent to US$7,000,000) 57,943,950 57,943,950

B-12


12. RESERVES

During the six months ended 30 June 2004, the capital reserves of the Company representedcash contributed by the Company’s equity holders in excess of the then approved registeredcapital of the Company and capital contribution undertaken by the shareholder. During the sixmonths ended 30 June 2003, the capital reserves of the Company represented cash contributedby the Company’s equity holders in excess of the then approved registered capital of theCompany.

In accordance with the relevant laws and regulations of the PRC and the articles of association ofthe Company, the Company is required to transfer not less than 10% of its profit after tax preparedin accordance with the accounting regulation in the PRC to the statutory surplus reserve until thereserve balance reaches 50% of the Company’s registered capital. Such reserve may be used toreduce any losses incurred by the Company, if any.

13. COMMITMENTS

At the balance sheet date, the Company had the following outstanding commitments:


2004 2003RMB RMB

(a) Capital commitmentsContracted, but not provided for, in respect of acquisition of :Plant and machinery 3,701,987 –Buildings 6,771,970 6,396,830Land use rights – 19,262,026

10,473,957 25,658,856

(b) Operating lease commitmentsTotal future minimum lease payments under non-cancellable operating leases for production facilities areas follows:


2004 2003RMB RMB

Within one year 1,800,000 –In the second to fifth years inclusive 150,000 –

1,950,000 –

B-13


14. NOTES TO THE CASH FLOW STATEMENT

Acquisition of operations




Net assets acquired:Fixed assets 6 40,503,611 –Deposits 2,058,436 –Land use rights 8 7,942,829 –Inventories 39,664,008 –Trade receivables 40,004,792 –Cash and bank balances 24,321,223 –Prepayment and other receivables 47,973,846 –Trade payables (7,226,477) –Accrued liabilities, other payables and deposits received (38,573,639) –

156,668,629 –

Satisfied by:Cash 156,668,629 –

An analysis of the net inflow of cash and cash equivalents in respect of the acquisition ofoperations is as follows:



2004 2003RMB RMB

Cash consideration (156,668,629) –Cash and bank balances acquired 24,321,223 –

(132,347,406) –Unsettled amount as at 30 June 2004* 156,668,629 –

Net inflow of cash and cash equivalents in respect of the acquisition of operations 24,321,223 –

* Unsettled amount as at 30 June 2004 of RMB156,668,629 was included in accrued liabilities, other payables anddeposits received.

B-14



The Company does not have written risk management policies and guidelines. However, theboard of directors meets periodically to analyse and formulate measures to manage theCompany’s exposure to market risk, including principally changes in interest rates and currencyexchange rates. Generally, the Company employs a conservative strategy regarding its riskmanagement. As the Company’s exposure to market risk is kept at a minimum level, the Companyhas not used any derivatives or other instruments for hedging purposes. The Company does nothold or issue derivative financial instruments for trading purposes.

As at 30 June 2004, the Company’s financial instruments mainly consisted of cash and bankbalances, trade receivables, prepayment, other receivables and deposits, trade payables, accrualliabilities, other payables and deposits received.


The Company has no significant interest rate risk due to no interest bearing borrowings.


The Company has no significant foreign currency risk due to limited foreign currency traderelated transactions. The Company does not use derivative financial instruments to hedgeits foreign currency risk.

(iii) Credit risk

The Company’s bank balances are maintained with state-owned banks in the PRC.

The carrying amounts of the trade receivables and other receivables included in thebalance sheets represent the Company’s maximum exposure to credit risk in relation to theCompany’s financial assets. No other financial assets carry a significant exposure to creditrisk. The Company has no significant concentration of credit risk due to its large customerbase.

The Company performs ongoing credit evaluation of its customers’ financial position andrequires no collateral from its customers. The allowance for doubtful debts is based upon areview of the expected collectibility of all trade receivables.

(iv) Fair values

The fair values of the Company’s financial assets and liabilities are not materially differentfrom their carrying amounts because of the immediate or short term maturity of thesefinancial instruments.

16. PREPAYMENT, OTHER RECEIVABLES AND DEPOSITS

As at the balance sheet date, the balance of the Company’s prepayment, other receivables anddeposits included capital contribution undertaken by the shareholder of RMB156,668,629.

17. AMOUNT DUE TO A RELATED COMPANY / DIRECTOR

The amount due to a related company / director is unsecured, interest-free and has no fixed termsof repayment.

B-15



As at 30 June 2004, the Company had cash and bank balances denominated in RMB amountingto RMB28,127,650 (31 December 2003 : RMB6,745,275), which was deposited with banks in thePRC. The RMB is not freely convertible into foreign currencies. Under the PRC Foreign ExchangeControl Regulations and Administration of Settlement, Sales and Payment of Foreign ExchangeRegulations, the Company is permitted to exchange RMB for foreign currencies through banks thatare authorised to conduct foreign exchange business.

19. APPROVAL OF THE FINANCIAL STATEMENT

The financial statements on pages B-2 to B-16 were approved by the board of directors on 28September 2004.

B-16

APPENDIX C

REVIEW LETTER BY THE AUDITORS IN RELATION TO THE UNAUDITED PROFORMA CONSOLIDATED FINANCIAL INFORMATION OF PINE AGRITECH LIMITED

AND ITS SUBSIDIARIES FOR THE YEAR ENDED 31 DECEMBER 2004

Date: 3 May 2005

The DirectorsPine Agritech LimitedCanon’s Court22 Victoria StreetHamilton HM12Bermuda

Dear Sirs

REVIEW BY THE AUDITORS IN RELATION TO THE UNAUDITED PRO FORMA CONSOLIDATEDFINANCIAL INFORMATION OF PINE AGRITECH LIMITED AND ITS SUBSIDIARIES FOR THE YEARENDED 31 DECEMBER 2004

We have reviewed the unaudited pro forma consolidated financial information of Pine Agritech Limited(incorporated in Bermuda) (the “Company”) and its subsidiaries (collectively the “Group”) for the financialyear ended 31 December 2004. The unaudited pro forma consolidated financial information of the Groupare the responsibility of the Company’s directors. Our responsibility is to issue a letter on theseunaudited pro forma consolidated financial information based on our review.

The basis of preparation of the pro forma consolidated financial information and summary of significantaccounting policies have been described in note 5 and note 6, respectively, in the Report from the JointReporting Accountants on the Pro Forma Consolidated Financial Information of the Group (the“Accountants’ Report”) as set out in Appendix A of the Prospectus dated 3 May 2005 (the “Prospectus”)in connection with the invitation in respect of new shares in the capital of the Company.

We conducted our review in accordance with the Singapore Standard on Auditing applicable to reviewengagements. This standard requires that we plan and perform the review to obtain moderate assuranceas to whether the unaudited pro forma consolidated financial information of the Group are free ofmaterial misstatement. A review is limited primarily to inquiries of company personnel and analyticalprocedures applied to financial data and thus provides less assurance than an audit. We have notperformed an audit and, accordingly, we do not express an audit opinion.

Based on our review, nothing has come to our attention that causes us to believe that any materialmodifications should be made to the unaudited pro forma consolidated financial information of the Groupprepared in accordance with accounting policies normally adopted by the Group as described in note 6in the Accountants’ Report as set out in Appendix A of this Prospectus.

Yours faithfully

Grant ThorntonCertified Public AccountantsHong Kong

C-1

APPENDIX D

AUDITED FINANCIAL STATEMENTS OF LINYI SHANSONG BIOLOGICALPRODUCTS CO., LTD. FOR THE PERIOD FROM 4 JANUARY 2002 (DATE OF

ESTABLISHMENT) TO 31 DECEMBER 2002 AND 31 DECEMBER 2003

Auditors’ report

To the directors of Linyi Shansong Biological Products Company Limited(Established in the People’s Republic of China with limited liability)

We have audited the financial statements of Linyi Shansong Biological Products Company Limited setout on pages D-2 to D-15 which have been prepared in accordance with International FinancialReporting Standards.



Basis of opinion


Opinion

In our opinion, the financial statements give a true and fair view of the financial positions of the Companyas at 31 December 2003 and 2002 and of its losses and cash flows for the year ended 31 December2003 and for the period from 4 January 2002 (date of establishment) to 31 December 2002 inaccordance with International Financial Reporting Standards.


D-1

Income statements

Period from4 January

2002 (date of Year ended establishment)

31 December to 31 December 2003 2002

Notes RMB RMB

Revenue 3 20,696,680 –

Cost of sales (14,892,663) –

Gross profit 5,804,017 –Other revenue 3 43,380 –Selling and distribution costs (5,680,687) –Administrative expenses (1,219,682) (32,395)Other operating expenses (79,726) (10,991)

Loss before taxation 4 (1,132,698) (43,386)Taxation 5 – –

Net loss for the year/period (1,132,698) (43,386)

D-2

Balance sheets

31 December 31 December 2003 2002

Notes RMB RMB


Non-current assets

Fixed assets 6 84,959,318 30,747,515Deposits 7 9,680,274 70,800Land use rights 8 2,440,287 1,965,400

97,079,879 32,783,715

Current assets

Inventories 9 23,291,020 –Trade receivables 2,864,745 –Prepayment, other receivables and deposits 3,401,899 893,778Cash and bank balances 17 6,745,275 17,028,361

36,302,939 17,922,139

Current liabilities

Trade payables 18,403,928 –Accrued liabilities, other payables and deposits received 43,373,102 20,017,625Amount due to a related company 14 8,213,922 14,171,615

69,990,952 34,189,240

Net current liabilities (33,688,013) (16,267,101)

Net assets 63,391,866 16,516,614


Paid-up capital 10 57,943,950 16,560,000Reserves 5,447,916 (43,386)

63,391,866 16,516,614

Director Director

D-3

Statements of changes in equity

Capital Paid up Accumulated reserves*capital losses* (note 11) TotalRMB RMB RMB RMB

Capital contribution from equity holders 16,560,000 – – 16,560,000Net loss for the period – (43,386) – (43,386)

Balance as at 31 December 2002 16,560,000 (43,386) – 16,516,614Capital contribution from equity holders 41,383,950 – 6,624,000 48,007,950Net loss for the year – (1,132,698) – (1,132,698)

Balance as at 31 December 2003 57,943,950 (1,176,084) 6,624,000 63,391,866

* These reserves accounts comprise the reserve of RMB5,447,916 and the deficit of RMB43,386 in the balance sheets as at31 December 2003 and 2002, respectively.

D-4

Cash flow statements




Notes RMB RMB

Cash flows from operating activitiesLoss before tax (1,132,698) (43,386)Adjustments for:Interest income 4 (31,804) –Amortisation of land use rights 4 101,908 5,500Depreciation 4 3,494,926 –

Operating profit/(loss) before working capital changes 2,432,332 (37,886)Working capital adjustments:Increase in deposits (9,609,474) (70,800)Increase in inventories (23,291,020) –Increase in trade receivables (2,864,745) –Increase in prepayment, other receivables and deposits (2,508,121) (893,778)Increase in trade payables 18,403,928 –Increase in accrued liabilities, other payables anddeposits received 23,355,477 20,017,625

(Decrease)/increase in amount due to a related company (5,957,693) 14,171,615

Net cash generated from operating activities (39,316) 33,186,776

Cash flows from investing activitiesPurchases of fixed assets 6 (57,706,729) (30,747,515)Purchases of land use rights 8 (576,795) (1,970,900)Interest received 31,804 –

Net cash used in investing activities (58,251,720) (32,718,415)

Cash flows from financing activitiesRegistered capital contribution 48,007,950 16,560,000

Net cash generated from financing activities 48,007,950 16,560,000

Net (decrease)/increase in cash and cash equivalents (10,283,086) 17,028,361Cash and cash equivalents at beginning of year/period 17,028,361 –

Cash and cash equivalents at end of year/period 6,745,275 17,028,361

Analysis of balances of cash and cash equivalentsCash and bank balances 6,745,275 17,028,361

D-5

D-6

Notes to the financial statements31 December 2003 and 2002


The Company was established with limited liability in the People’s Republic of China (“the PRC”)on 4 January 2002 under the name of Linyi Shansong Biological Products Company Limited.


The principal activities of the company have not change since its establishment and consisted ofthe manufacture and sale of soybean based food products.

The Company mainly operates in the PRC, and employed approximately 200 and 8 employees asat 31 December 2003 and 2002 respectively.



The financial statements have been prepared on a going concern basis, notwithstanding theCompany had net current liabilities as at 31 December 2003 and 2002 as Mr. WangChengtian (“Mr. Wang”), the sole shareholder of the Company has undertaken to providecontinuing financial support to the Company to enable it to meet its obligations and liabilitiesas and when they fall due.


The Company’s operations are principally conducted in the PRC. Accordingly, the financialstatements of the Company have been prepared in Renminbi (“RMB”), being the functionalcurrency of the Company.










(c) Land use rights


(d) Impairment of assets





(e) Trade receivables


(f) Inventories


(g) Trade payables

Liabilities for trade payables, which are normally settled on credit terms of 30 to 90 days, arecarried at cost which is the fair value of the consideration to be paid in the future for goodsand services received, whether or not billed to the Company.

D-7

D-8



(h) Income tax





Deferred tax liabilities are recognised for taxable temporary differences arising oninvestments in subsidiaries and associates, and interests in joint ventures, except where thecompany is able to control the reversal of the temporary difference and it is probable that thetemporary difference will not reverse in the foreseeable future.



(i) Retirement benefits

Pursuant to the relevant regulations of the PRC government, the Company participates in alocal municipal government retirement benefits scheme (the “Scheme”), whereby theCompany is required to contribute a certain percentage of the basic salaries of itsemployees to the Scheme to fund their retirement benefits. The local municipal governmentundertakes to assume the retirement benefits obligations of all existing and future retiredemployees of the Company. The only obligation of the Company with respect to the Schemeis to pay the ongoing required contributions under the Scheme mentioned above.Contributions under the Scheme are charged to the income statements as incurred. Thereare no provisions under the Scheme whereby forfeited contributions may be used to reducefuture contributions.



(j) Research and development costs

All research costs are charged to the income statements as incurred.



During the year ended 31 December 2003 and the period from 4 January 2002 (date ofestablishment) to 31 December 2002, the research and development costs incurred werenot significant to the Company and were charged to the income statements.

(k) Cash and cash equivalents


For the purpose of the cash flow statements, cash and cash equivalents consist of cash onhand and in banks and demand deposits, and short term highly liquid investments which arereadily convertible into known amounts of cash and which are subject to an insignificant riskof changes in value, and have a short maturity of generally within three months whenacquired, less bank overdrafts which are repayable in demand and form an integral part ofthe Company’s cash arrangement.


(l) Recognition of revenue

Revenue is recognised when it is probable that the economic benefits will flow to theCompany and when the revenue can be measured reliably, on the following bases: -

(a) from the sale of goods, when the significant risks and rewards of ownership havebeen transferred to the buyer, provided that the Company maintains neithermanagerial involvement to the degree usually associated with ownership, nor effectivecontrol over the goods sold; and


(m) Related parties


D-9


3. REVENUE

Turnover represents the net invoiced value of goods sold, after allowances for returns and tradediscounts.



31 December to 31 December 2003 2002RMB RMB

RevenueSales of goods 20,696,680 –

Other revenue Interest income 31,804 –Others 11,576 –

43,380 –

4. LOSS BEFORE TAXATION

The Company’s loss before taxation is arrived after charging/(crediting):



31 December to 31 December 2003 2002RMB RMB

Cost of inventories sold 14,892,663 –Amortisation of land use rights 101,908 5,500Depreciation 3,494,926 –Research and development costs 79,726 10,991Staff costs 2,924,438 35,606Less: retirement scheme contribution (545,000) (7,000)

amount included in research and development costs (37,235) (9,755)

2,342,203 18,851Interest income (31,804) –

5. TAXATION

PRC corporate income tax has not been provided as the Company has not generated anyassessable profits in the PRC during the period from 4 January 2002 (date of establishment) to 31December 2002 and year ended 31 December 2003.

No deferred tax has been provided as the Company did not have any significant temporarydifferences which gave rise to a deferred tax asset or liability at 31 December 2003 and 2002.

D-10

D-11


6. FIXED ASSETS

Furniture,fixture


RMB RMB RMB RMB RMB

Cost

Additions 8,393,241 19,093,475 22,635 3,238,164 30,747,515Transfer in / (out) 3,238,164 – – (3,238,164) –

At 31 December 2002 11,631,405 19,093,475 22,635 – 30,747,515Additions 975,650 15,102,706 35,782 41,592,591 57,706,729Transfer in / (out) – 21,212,622 – (21,212,622) –

At 31 December 2003 12,607,055 55,408,803 58,417 20,379,969 88,454,244

Accumulateddepreciation

At 31 December 2002 – – – – –Charge for the year 579,647 2,908,462 6,817 – 3,494,926

At 31 December 2003 579,647 2,908,462 6,817 – 3,494,926

Net book value

At 31 December 2003 12,027,408 52,500,341 51,600 20,379,969 84,959,318

At 31 December 2002 11,631,405 19,093,475 22,635 – 30,747,515

The Company’s leasehold buildings are situated in the PRC and are held under medium termleases.

7. DEPOSITS

The amounts represented the Company’s deposits paid for the acquisition of land use rights andfixed assets as at 31 December 2003 and 2002.

D-12


8. LAND USE RIGHTS

31 December 31 December 2003 2002RMB RMB

Cost

At beginning of the year /period 1,970,900 –Additions 576,795 1,970,900

At end of year/period 2,547,695 1,970,900

Accumulated amortisation

At beginning of the year/period 5,500 –Provided during the year/period 101,908 5,500

At end of year/period 107,408 5,500

Net book value

At end of year/period 2,440,287 1,965,400

9. INVENTORIES


Raw material 4,884,889 –Finished goods 18,406,131 –

23,291,020 –


10. CAPITAL


Registered and paid-up capital US$7,000,000 US$2,000,000

On 28 May 2003, the registered capital of the Company was increased from US$2,000,000 toUS$7,000,000 and fully paid up during the year ended 31 December 2003.

11. CAPITAL RESERVES

The capital reserve of the Company represents cash contributed by the Company’s equity holdersin excess of the then approved registered capital of the Company.

D-13


12. CAPITAL COMMITMENTS

The Company had the following capital commitments at each of the balance sheet dates:


(a) Contracted, but not provided for, in respect of :- buildings 6,396,830 –- acquisition of land use rights 19,262,026 –

(b) The Company entered into two business and asset acquisition agreements on 6 December2003 and two supplemental agreements on 29 April 2004 and 30 April 2004 (collectively the“Business and Asset Acquisition Agreement”). Pursuant to the Business and AssetAcquisition Agreement, the Company acquired the entire business, assets and liabilities of

and at atotal consideration of approximately RMB156,669,000 which was determined based on thetotal audited net asset value of and as at 31 December 2003. Accordingto the Business and Asset Acquisition Agreement, the acquisition will take effect from 1January 2004.


The Company does not have written risk management policies and guidelines. However, theboard of directors meets periodically to analyse and formulate measures to manage theCompany’s exposure to market risk, including principally changes in interest rates and currencyexchange rates. Generally, the Company employs a conservative strategy regarding its riskmanagement. As the Company’s exposure to market risk is kept at a minimum level, the Companyhas not used any derivatives or other instruments for hedging purposes. The Company does nothold or issue derivative financial instruments for trading purposes.

As at 31 December 2003 and 2002, the Company’s financial instruments mainly consisted of cashand bank balances, trade receivables, prepayment, other receivables and deposits, tradepayables, accrual liabilities, other payables and deposits received.


The Company has no significant interest rate risk due to no interest bearing borrowings.


The Company has no significant foreign currency risk due to limited foreign currency traderelated transactions. The Company does not use derivative financial instruments to hedgeits foreign currency risk.

(iii) Credit risk

The Company’s bank balances are maintained with state-owned banks in the PRC.

The carrying amounts of the trade receivables and other receivables included in thebalance sheets represent the Company’s maximum exposure to credit risk in relation to theCompany’s financial assets. No other financial assets carry a significant exposure to creditrisk. The Company has no significant concentration of credit risk due to its large customerbase.


13. FINANCIAL INSTRUMENTS (Continued)

(iii) Credit risk (Continued)

The Company performs ongoing credit evaluation of its customers’ financial position andrequires no collateral from its customers. The allowance for doubtful debts is based upon areview of the expected collectibility of all trade receivables.

(iv) Fair values

The fair values of the Company’s financial assets and liabilities are not materially differentfrom their carrying amounts because of the immediate or short term maturity of thesefinancial instruments.

14. AMUONT DUE TO A RELATED COMPANY

The amount due to a related company is unsecured, interest-free and no fixed terms of repayment.

15. RELATED PARTY TRANSACTIONS

The Company had the following transactions with related parties during the year ended 31December 2003 and the period from 4 January 2002 (date of establishment) to 31 December2002.




Notes RMB RMB

Purchases of plant and machinery from a related company (i) – 12,066,242

Sales of finished goods to a director (ii) 2,745,472 –

Notes:

(i) The plant and machinery were purchased at their net book value amounts.

(ii) Finished goods represents soy oligosaecharides which were sold to the director at cost.

D-14



In addition to those disclosed elsewhere in the financial statements, the Company had thefollowing significant post balance sheet events:

(1) On 17 May 2004, Rainbow Palace Inc. (“Rainbow Palace”), an investment holding companyincorporated in the British Virgin Islands, entered into a business and asset acquisitionagreement and supplemental agreement dated 23 September 2004 (collectively the“Shangsong Acquisition Agreement”) with Mr. Wang, the sole shareholder of the Company.Pursuant to the Shagsong Acquisition Agreement, Mr. Wang will surrender all his entitlementof profit generated from the Company since 1 January 2004 for a total consideration ofUS$7,627,033 based on the audited net asset value of the Company as at 31 December2003.

(2) On 24 March 2004, the registered capital of the Company was increased fromUS$7,000,000 to US$14,000,000. The incremental registered capital of US$7,000,000 wasnot paid up at the approval date of this financial statements.


As at 31 December 2003 and 2002, the Company had cash and bank balances denominated inRMB amounting to RMB6,745,275 and RMB17,028,361, respectively, which were deposited withbanks in the PRC. The RMB is not freely convertible into foreign currencies. Under the PRCForeign Exchange Control Regulations and Administration of Settlement, Sales and Payment ofForeign Exchange Regulations, the Company is permitted to exchange RMB for foreign currenciesthrough banks that are authorised to conduct foreign exchange business.


The financial statements on pages D-2 to D-15 were approved by the board of directors on 28September 2004.

D-15

APPENDIX E

AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF

FOR THE PERIOD FROM 8 AUGUST 2002 (DATEOF ESTABLISHMENT) TO 31 DECEMBER 2002 AND 31 DECEMBER 2003

Auditors’ report

To the directors of (Established in the People’s Republic of Chinawith limited liability)

We have audited the financial statements of on pages E-2 to E-20,which have been prepared in accordance with International Financial Reporting Standards.



Basis of opinion


Opinion

In our opinion, the financial statements give a true and fair view of the financial positions of the Group asat 31 December 2002 and 2003 and of the profits and cash flows of the Group for the year ended 31December 2003 and for the period from 8 August 2002 (date of establishment) to 31 December 2002 inaccordance with International Financial Reporting Standards.


E-1

Consolidated income statements

Period from8 August 2002

(date of Year ended establishment) to

31 December 31December Notes 2003 2002

RMB RMB

Revenue 3Continuing operations 8,774,519 –Discontinuing operations 4 353,557,583 102,894,230

362,332,102 102,894,230

Cost of sales (255,779,065) (74,227,905)

Gross profit 106,553,037 28,666,325

Other revenue 3 931,462 916,063

Selling and distribution costs (5,247,890) (2,493,826)Administrative expenses (6,705,219) (1,232,040)Other operating expenses (180,137) (50,673)

Profit before taxation 5

Continuing operations 1,587,354 –Discontinuing operations 4 93,763,899 25,805,849

95,351,253 25,805,849

Taxation 6

Continuing operations (523,827) –Discontinuing operations 4 (31,300,611) (8,537,919)

(31,824,438) (8,537,919)

Profit before minority interests 63,526,815 17,267,930

Minority interests (7,848,685) (586,076)

Net profit from ordinary activities attributable to shareholders 55,678,130 16,681,854

E-2

Consolidated balance sheets

31 December 31 DecemberNotes 2003 2002

RMB RMB


Non-current assetsFixed assets 7 43,587,840 41,495,337Deposits 8 2,058,436 715,492Land use rights 9 7,942,830 –

53,589,106 42,210,829

Current assetsInventories 11 41,359,971 58,656,142Trade receivables 27,468,569 1,818,961Prepayment and other receivables 60,546,636 27,059,728Cash and bank balances 19 57,546,812 53,043,696

186,921,988 140,578,527

Current liabilitiesTrade payables 7,321,775 1,503,807Accrued liabilities, other payables and deposits received 30,047,276 46,252,570Amount due to a director 12 975,117 710,527Provision for tax 8,372,181 4,054,522

46,716,349 52,521,426

Net current assets 140,205,639 88,057,101

Minority interests 35,434,761 27,586,076

Net assets 158,359,984 102,681,854


Paid-up capital 13 86,000,000 86,000,000Reserves 72,359,984 16,681,854

158,359,984 102,681,854

__________________________ __________________________Director Director

E-3

Consolidated statements of changes in equity

Statutory public

Statutory welfarePaid-up Retained reserves * reserves *capital Profits * (note 14) (note 14) TotalRMB RMB RMB RMB RMB

Capital contribution from 86,000,000 – – – 86,000,000equity holders

Net profit for the period – 16,681,854 – – 16,681,854Transfer to statutory reserves – (2,669,097) 1,668,185 1,000,912 –

Balance as at 31 December 2002 86,000,000 14,012,757 1,668,185 1,000,912 102,681,854

Net profit for the year – 55,678,130 – – 55,678,130Transfer to statutory reserves – (8,908,501) 5,567,813 3,340,688 –

Balance as at 31 December 2003 86,000,000 60,782,386 7,235,998 4,341,600 158,359,984

* These reserves accounts comprise the reserve of RMB72,359,984 and RMB16,681,854 in the balance sheets as at 31December 2003 and 2002, respectively.

E-4

Consolidated cash flow statements


(date ofYear Ended establishment) to


RMB RMB

Cash flows from operating activitiesProfit before taxation 95,351,253 25,805,849Adjustments for:Interest income 5 (57,762) (35,650)Amortisation of land use rights 5 317,244 –Depreciation 5 3,648,720 1,494,701Loss on disposal of fixed assets 5 32,198 –

Operating profit before working capital changes 99,291,653 27,264,900Working capital adjustments:Decrease / (increase) in inventories 17,296,171 (54,580,322)Decrease / (increase) in trade receivables (25,649,608) 2,937,375Increase in prepayment and other receivables (33,486,908) (24,860,931)Increase / (decrease) in trade payables 5,817,968 (1,166,304)(Decrease) / increase in accrued liabilities, other payables (16,205,294) 15,214,438and deposits received

Increase in due to a director 264,590 710,527

Cash generated from/(used in) operations 47,328,572 (34,480,317)Tax paid (27,506,779) (4,483,397)

Net cash generated from/(used in) operating activitiesContinuing operations 541,845 –Discontinuing operations 19,279,948 (38,963,714)

Total 19,821,793 (38,963,714)

Cash flows from investing activitiesPurchases of fixed assets 7 (11,795,761) (12,029,535)Purchases of land use rights 9 (8,260,074) –Deposits paid for purchases of fixed assets (1,342,944) (715,492)Proceeds on disposal of fixed assets 6,022,340 88,653Interest received 57,762 35,650

Net cash outflow from investing activitiesContinuing operations (3,316,256) –Discontinuing operations (12,002,421) (12,620,724)

Total (15,318,677) (12,620,724)

E-5

Consolidated cash flow statements (cont’d)


(date ofYear Ended establishment) to


RMB RMB

Cash flows from financing activitiesRegistered capital contribution 16 – 77,628,134Capital contribution from minority shareholders

of the subsidiaries – 27,000,000

Net cash inflow from financing activitiesContinuing operations – 17,000,000Discontinuing operations – 87,628,134

Total – 104,628,134

Net increase in cash and cash equivalents 4,503,116 53,043,696

Cash and cash equivalents at beginning of year / period 53,043,696 –

Cash and cash equivalents at end of year / period 57,546,812 53,043,696

Analysis of balances of cash and cash equivalents

Cash and bank balances 57,546,812 53,043,696

E-6



The Company was established with limited liability in the People’s Republic of China (the “PRC”)on 8 August 2002 under the name of . The Company changed itsname to on 11 October 2002.


The principal activities of the Company have not changed since its establishment and consisted ofthe manufacture and sale of soybean based food products and investment holding. The principalactivities of the Company’s subsidiaries are set out in note 10 to the financial statements. Otherthan the discontinuance of the Group’s operations of the manufacture and sale of soybean basedfood products, further details of which are included in note 4 to the financial statements, therewere no significant changes in the nature of the subsidiaries’ principal activities during the period.

The Group mainly operates in the PRC and employed approximately 510 and 470 employees as at31 December 2003 and 2002, respectively.


(a) Basis of presentation

The non–statutory financial statements have been prepared for management purpose onlyunder the historical cost convention and in accordance with International Financial ReportingStandards, which comprise standards and interpretations approved by the InternationalAccounting Standards Board, and International Accounting Standards and StandingInterpretations Committee Interpretations approved by The International AccountingStandards Committee that remain in effect.

The Group’s operations are principally conducted in the PRC. Accordingly, the consolidatedfinancial statements have been prepared in Renminbi (“RMB”), being the functional currencyof the Group.

(b) Basis of consolidation

The consolidated financial statements include the financial statements of the Company andits subsidiaries for the year ended 31 December 2003 and the period from 8 August 2002(date of establishment) to 31 December 2002. The results of the subsidiaries acquired ordisposed of during the year are consolidated from or to their effective dates of acquisition ordisposal, respectively. All significant intercompany transactions and balances within theGroup are eliminated on consolidation.

Minority interests represent the interests of outside shareholders in the results and netassets of the Company’s subsidiaries.

(c) Subsidiaries

A subsidiary is a company whose financial and operating policies the Company controls,directly or indirectly, so as to obtain benefits from its activities.

E-7



(d) Fixed assets and depreciation


Depreciation is calculated on the straight–line basis to write off the cost of each assets, lessany estimated residual values, over the following estimated useful lives:




(e) Land use rights

Land use rights are stated at cost less accumulated amortisation and any impairmentlosses. Amortisation is calculated on the straight–line basis to write off the cost of the landuse rights over the lease terms.

(f) Impairment of assets





E-8



(g) Trade receivables


(h) Inventories


(i) Trade payables

Liabilities for trade payables, which are normally settled on credit terms of 30 to 90 days, arecarried at cost which is the fair value of the consideration to be paid in the future for goodsand services received, whether or not billed to the Group.

(j) Income tax





Deferred tax liabilities are recognised for taxable temporary differences arising oninvestments in subsidiaries and associates, and interests in joint ventures, except where theCompany is able to control the reversal of the temporary difference and it is probable thatthe temporary difference will not reverse in the foreseeable future.


E-9



(j) Income tax (Continued)


(k) Retirement benefits

Pursuant to the relevant regulations of the PRC government, the Group participates in alocal municipal government retirement benefits scheme (the “Scheme”), whereby the Groupis required to contribute a certain percentage of the basic salaries of its employees to theScheme to fund their retirement benefits. The local municipal government undertakes toassume the retirement benefits obligations of all existing and future retired employees of theGroup. The only obligation of the Group with respect to the Scheme is to pay the ongoingrequired contributions under the Scheme mentioned above. Contributions under theScheme are charged to the income statements as incurred. There are no provisions underthe Scheme whereby forfeited contributions may be used to reduce future contributions.

(l) Research and development costs




During the year ended 31 December 2003 and the period from 8 August 2002 (date ofestablishment) to 31 December 2002, research and development costs incurred were notsignificant to the Group and were charged to the income statements.

(m) Cash and cash equivalents


For the purpose of the consolidated cash flow statements, cash and cash equivalentsconsist of cash on hand and in banks, demand deposits and short term highly liquidinvestments which are readily convertible into known amounts of cash and which are subjectto an insignificant risk of changes in value, and have a short maturity of generally withinthree months when acquired, less bank overdrafts which are repayable in demand and forman integral part of the Group’s cash arrangement.

For the purpose of consolidated balance sheet classification, cash and bank balancescomprise cash on hand and in banks, including term deposits, and assets similar in natureto cash, which are not restricted as to use.

E-10



(n) Recognition of revenue

Revenue is recognised when it is probable that the economic benefits will flow to theGroup’s and when the revenue can be measured reliably, on the following bases: -

(a) from the sale of goods, when the significant risks and rewards of ownership havebeen transferred to the buyer, provided that the Group maintains neither managerialinvolvement to the degree usually associated with ownership, nor effective controlover the goods sold; and


(o) Operating leases

Leases where substantially all the risks and rewards of ownership of assets remain with thelessor are accounted for as operating leases. Where the Group is the lessee, rentalspayable under the operating leases are charged to the income statements on the straight-line basis over the lease terms.

(p) Related parties


3. REVENUE

Revenue represents the net invoiced value of goods sold, after allowances for returns and tradediscounts, and after elimination of all significant intra-group transactions.

An analysis of the Group’s revenue and other revenue is as follows:



31 December 31 December2003 2002RMB RMB


Other revenueInterest income 57,762 35,650Others 873,700 880,413

931,462 916,063

E-11


4. DISCONTINUING OPERATIONS

The Group entered into a business and asset transfer agreement on 6 December 2003 and asupplemental agreement dated 30 April 2004 (collectively, the “Business and Asset TransferAgreements”) with Linyi Shansong Biological Products Company Limited (“Shansong Biological”)in respect of Shansong Biological’s acquisition of the manufacture and sale of soybean based foodproducts operations (the “Businesses and Operations”) from the Company and its subsidiaries at aconsideration of approximately RMB156,669,000 (the “Consideration”). The acquisition of theBusinesses and Operations by Shansong Biological was completed in January 2004.

The Consideration for the acquisition was determined based on the audited net asset value of theBusinesses and Operations acquired from the Company and its subsidiaries as at 31 December2003. Accordingly to the Business and Asset Transfer Agreements, the Consideration was to besettled before 30 September 2004. At the date of approval of these financial statements, thewhole consideration was settled.

The revenue, other revenue, expenses and results of the soybean based food products operationsincluded in the Group’s consolidated income statements for the year ended 31 December 2003and for the period from 8 August 2002 (date of establishment) to 31 December 2002 are asfollows:




Revenue 353,557,583 102,894,230

Cost of sales (249,140,172) (74,227,905)

Gross profit 104,417,411 28,666,325

Other revenue 928,139 916,063

Selling and distribution costs (4,938,252) (2,493,826)Administrative expenses (6,463,262) (1,232,040)Other operating expenses (180,137) (50,673)

Profit before taxation 93,763,899 25,805,849

Taxation (31,300,611) (8,537,919)

Profit before minority interests 62,463,288 17,267,930

Minority interests (7,334,075) (586,076)

Net profit for the year / period 55,129,213 16,681,854

E-12


4. DISCONTINUING OPERATIONS (Continued)

The carrying amounts of the total assets and liabilities relating to the discontinuing operations ateach of the balance sheet dates are as follows:


Total assets 202,289,098 146,789,356

Total liabilities (45,557,880) (52,521,426)

Net assets 156,731,218 94,267,930


The Group’s profit before taxation is arrived at after charging/ (crediting):




Cost of inventories sold 255,779,065 74,227,905Amortisation of land use rights 317,244 –Depreciation 3,648,720 1,494,701Loss on disposal of fixed assets 32,198 –Minimum lease payments under operating leases: 2,000,000 1,039,045production facilities

Directors’ remuneration:Fees – –Other emoluments 54,120 8,204

Staff costs (excluding directors’ remuneration) 7,318,188 2,530,238Less: retirement scheme contribution (914,822) (235,094)


6,272,280 2,280,283Research and development costs 180,137 50,673

Interest income (57,762) (35,650)

E-13


6. TAXATION

The charge comprises :




Current year/period provision:The PRC 31,824,438 8,537,919

The Group is subject to the PRC corporate income tax rate of 33% in accordance with the relevantlaws and regulations in the PRC.

No deferred tax has been provided as the Group did not have any significant temporarydifferences which gave rise to a deferred tax asset or liability at 31 December 2002 and 2003.

Reconciliation between tax expense and accounting profit at applicable tax rates is as follows:

Period from8 August

2002(date of Year ended establishment)

31 December to 31 December2003 2002RMB RMB


Tax at the applicable tax rate 33% 31,465,913 8,515,930Non-deductible expenses 358,525 21,989

Actual PRC corporate income tax 31,824,438 8,537,919

E-14


7. FIXED ASSETS

Furniture,fixture

Leasehold Plant and and office Construction buildings machinery equipment in progress Total

RMB RMB RMB RMB RMB

CostAdditions 8,490,037 27,630,480 199,818 6,758,356 43,078,691Disposal (85,591) (8,778) – – (94,369)Transfer in/(out) 6,645,935 – – (6,645,935) –

At 31 December 2002 15,050,381 27,621,702 199,818 112,421 42,984,322

Additions 1,312,585 9,801,884 182,140 499,152 11,795,761Disposal – (7,133,368) (5,690) (32,198) (7,171,256)Transfer in/(out) 405,985 – – (405,985) –

At 31 December 2003 16,768,951 30,290,218 376,268 173,390 47,608,827

Accumulated depreciationCharge for the period 329,707 1,154,752 10,242 – 1,494,701Written back on disposal (4,743) (973) – – (5,716)

At 31 December 2002 324,964 1,153,779 10,242 – 1,488,985

Charge for the year 754,697 2,838,025 55,998 – 3,648,720Written back on disposal – (1,116,610) (108) – (1,116,718)

At 31 December 2003 1,079,661 2,875,194 66,132 – 4,020,987

Net book value

At 31 December 2003 15,689,290 27,415,024 310,136 173,390 43,587,840

At 31 December 2002 14,725,417 26,467,923 189,576 112,421 41,495,337

The Group’s leasehold buildings are situated in the PRC and are held under medium term leases.

8. DEPOSITS

The amount represented the Group’s deposits paid for the acquisition of fixed assets.

E-15


9. LAND USE RIGHTS


Cost:Addition 8,260,074 –

At end of year/period 8,260,074 –

Accumulated amortisation:Provided during the year/period 317,244 –

At end of year/period 317,244 –

Net book valueAt end of year/period 7,942,830 –

10. INTERESTS IN SUBSIDIARIES

Particulars of the principal subsidiaries are as follow:

Place of Paid-up Percentage of equity establishment registered directly attributable to Principal

Name and operations capital the Company activities

PRC RMB5,000,000 60% Dormant

PRC RMB22,000,000 55% Manufacture and sale of soybean products

PRC RMB31,000,000 52% Manufacture and sale

of

11. INVENTORIES


Raw material 38,607,539 50,894,126 Finished goods 2,752,432 7,762,016

41,359,971 58,656,142


12. AMOUNT DUE TO A DIRECTOR

The amount due to a director is unsecured, interest-free and has no fixed terms of repayment.

E-16


13. CAPITAL


Registered and paid-up capital 86,000,000 86,000,000

The Company was established on 8 August 2002 with a registered capital of RMB86,000,000which was fully paid up during the year ended 31 December 2002.

14. STATUTORY RESERVES

In accordance with the relevant laws and regulations of the PRC, the Company and its subsidiariesare required to transfer 10% of its profit after tax prepared in accordance with the accountingregulation in the PRC to the statutory reserve until the reserve balance reaches 50% of therespective registered capital. Such reserve may be used to reduce any losses incurred or forcapitalisation as paid-up capital.

In addition, the Company and its subsidiaries are required to transfer 6% of its profit after taxprepared in accordance with the accounting regulations in the PRC to the statutory public welfarereserve. The use of the statutory public welfare reserve is restricted to capital expenditure foremployee facilities. This statutory public welfare reserve is non-distributable except uponliquidation.

15. COMMITMENTS

The Group had the following commitments at each of the balance sheet dates:


(a) Capital commitmentsContracted, but not provided for, in respect of acquisition 1,756,593 98,865of plant and machinery

(b) Operating lease commitments

Total future minimum lease payments under non-cancellable operating leases for production facilities are asfollows:


Within one year 3,466,670 2,000,004In the second to fifth years inclusive 1,050,000 1,666,670

4,516,670 3,666,674

E-17



Registered capital contribution

During the period ended 31 December 2002, in addition to the registered capital contribution ofRMB71,000,000 by cash, part of the Company’s initial registered capital of RMB15,000,000 wascontributed by assets and liabilities. The details of the assets and liabilities injected are as follows:

Period from8 August


31 December to 31 December2003 2002

Notes RMB RMB

Net assets acquired

Fixed assets 7 – 31,049,156Inventories – 4,075,820Trade receivables – 4,756,336Prepayment and other receivables – 2,198,797Cash and bank balances – 6,628,134Trade payables – (2,670,111)Accrued liabilities, other payables and deposits received – (31,038,132)

– 15,000,000

An analysis of the net inflow of cash and cash equivalents in respect of initial registered capitalcontribution is as follows:

Period from8 August


31 December to 31 December2003 2002RMB RMB

Registered capital contribution by cash – 71,000,000Cash and bank balances injected – 6,628,134

Net inflow of cash and cash equivalents in respect of initial registered capital contribution – 77,628,134

E-18



The Group does not have written risk management policies and guidelines. However, the board ofdirectors meets periodically to analyse and formulate measures to manage the Group’s exposureto market risk, including principally changes in interest rates and currency exchange rates.Generally, the Group employs a conservative strategy regarding its risk management. As theGroup’s exposure to market risk is kept at a minimum level, the Group has not used anyderivatives or other instruments for hedging purposes. The Group does not hold or issuederivative financial instruments for trading purposes.

As at 31 December 2003 and 2002, the Group’s financial instruments mainly consisted of cashand bank balances, trade receivables, prepayment and other receivables, trade payables, accruedliabilities, other payables and deposits received.


The Group has no significant interest rate risk due to no interest bearing borrowings.


The Group has no significant foreign currency risk due to limited foreign currency traderelated transactions. The Group does not use derivative financial instruments to hedge itsforeign currency risk.

(iii) Credit risk

The Group’s bank balances are maintained with state-owned banks in the PRC.

The carrying amounts of the trade receivables and other receivables included in the balancesheets represent the Group’s maximum exposure to credit risk in relation to the Group’sfinancial assets. No other financial assets carry a significant exposure to credit risk. TheGroup has no significant concentration of credit risk due to its large customer base.

The Group performs ongoing credit evaluation of its customers’ financial position andrequires no collateral from its customers. The allowance for doubtful debts is based upon areview of the expected collectibility of all trade receivables.

(iv) Fair values

The fair values of the Group’s financial assets and liabilities are not materially different fromtheir carrying amounts because of the immediate or short term maturity of these financialinstruments.


In addition to the events disclosed elsewhere in these financial statements, the Group had thefollowing significant post balance sheet event :

i) Subsequent to 31 December 2003, , a subsidiary of the Company, was in theprocess of cancellation of its registration.


As at 31 December 2003 and 2002, the Group had cash and bank balances denominated in RMBamounting to RMB57,546,812 and RMB53,043,696, respectively, which were deposited with banksin the PRC. The RMB is not freely convertible into foreign currencies. Under the PRC ForeignExchange Control Regulations and Administration of Settlement, Sales and Payment of ForeignExchange Regulations, the Group is permitted to exchange RMB for foreign currencies throughbanks that are authorised to conduct foreign exchange business.

E-19



The financial statements on pages E-2 to E-20 were approved by the board of directors on 28September 2004.

E-20

APPENDIX F

AUDITED FINANCIAL STATEMENTS OF FOR THE PERIODFROM 17 SEPTEMBER 2001 (DATE OF ESTABLISHMENT) TO 31 DECEMBER 2001

AND 31 DECEMBER 2002

Auditors’ report

To the proprietor of (Established in the People’s Republic of China)

We have audited the financial statements of set out on pages F-2 to F-15which have been prepared in accordance with International Financial Reporting Standards.

Respective responsibilities of proprietor and auditors

These financial statements are the responsibility of the proprietor. Our responsibility is to express anopinion on these financial statements based on our audit. This report is made solely to you, as a body, inaccordance with our agreed terms of engagement, and for no other purpose. We do not assumeresponsibility towards or accept liability to any other person for the contents of this report.

Basis of opinion

We conducted our audit in accordance with International Standards on Auditing issued by TheInternational Federation of Accountants. Those standards require that we plan and perform the audit toobtain reasonable assurance about whether the financial statements are free of material misstatement.An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in thefinancial statements. An audit also includes assessing the accounting principles used and significantestimates made by the proprietor, as well as evaluating the overall financial statements presentation. Webelieve that our audit provides a reasonable basis for our opinion.

Opinion

In our opinion, the financial statements give a true and fair view of the financial positions of the Factoryas at 31 December 2002 and 2001 and of the profits and cash flows of the Factory for the year end 31December 2002 and for the period from 17 September 2001 (date of establishment) to 31 December2001 in accordance with International Financial Reporting Standards.


F-1

Income statements

Period from17 September2001 (date of

Year ended establishment) to 31 December 31 December

Notes 2002 2001RMB RMB

Revenue 3 107,511,316 30,676,699

Cost of sales (85,149,079) (24,561,099)

Gross profit 22,362,237 6,115,600

Other revenue 3 291,753 97,741

Selling and distribution costs (4,526,302) (812,301)Administrative expenses (1,966,782) (385,592)Other operating expenses (232,707) (62,837)

Profit before taxation 4 15,928,199 4,952,611

Taxation 5 (5,461,037) (1,634,362)

Net profit for the year/period 10,467,162 3,318,249

F-2

Balance sheets


RMB RMB


Non-current assetsFixed assets 6 – 33,074,483Deposits 7 – 22,743

– 33,097,226Current assetsInventories 8 – 48,577,173Trade receivables – 3,045,952Prepayment and other receivable – 1,317,879Amount due from proprietor 1 950,000 –Cash and bank balances 13 – 7,212,543

950,000 60,153,547Current liabilitiesTrade payables – 8,068,550Accrued liabilities, other payables and deposits received – 79,204,603Amount due to proprietor 1 – 75,009Provision for tax – 1,634,362

– 88,982,524

Net current assets / (liabilities) 950,000 (28,828,977)

Net assets 950,000 4,268,249

Capital and Reserves

Paid-up capital 9 950,000 950,000

Retained profits – 3,318,249

950,000 4,268,249

__________________________Proprietor

F-3

Statements of changes in equity

Paid-up Retainedcapital profits TotalRMB RMB RMB

Capital contribution from proprietor 950,000 – 950,000Net profit for the period – 3,318,249 3,318,249

Balance as at 31 December 2001 950,000 3,318,249 4,268,249

Net profit for the year – 10,467,162 10,467,162Withdrawal* – (13,785,411) (13,785,411)

Balance as at 31 December 2002 950,000 – 950,000

* Amount represented withdrawal by the proprietor in 2002.

F-4

Cash flow statements



Notes 2002 2001RMB RMB

Cash flows from operating activitiesProfit before taxation 15,928,199 4,952,611Adjustments for:Interest income 4 (8,238) (2,794)Depreciation 4 3,080,568 460,926

Operating profit before working capital changes 19,000,529 5,410,743Working capital adjustments:Decrease/ (increase) in deposits 22,743 (22,743)Decrease / (increase) in inventories 44,501,353 (48,577,173)Increase in trade receivables (1,710,384) (3,045,952)Increase in prepayment and other receivables (880,918) (1,317,879)(Decrease) / increase in trade payables (5,398,439) 8,068,550(Decrease) / increase in accrued liabilities, other (48,166,471) 79,204,603payables and deposits received

(Decrease) / increase in amount due from/to proprietor (75,009) 75,009

Cash generated from operations 7,293,404 39,795,158Tax paid (7,095,399) –

Net cash generated from operating activities 198,005 39,795,158

Cash flows from investing activitiesPurchases of fixed assets 6 (790,652) (33,535,409)Disposal of business assets 12 (6,628,134) –Interest received 8,238 2,794

Net cash outflow from investing activities (7,410,548) (33,532,615)

Cash flows from financing activitiesRegistered capital contribution – 950,000

Net cash inflow from financing activities – 950,000

Net (decrease) / increase in cash and cash equivalents (7,212,543) 7,212,543

Cash and cash equivalents at beginning of year / period 7,212,543 –

Cash and cash equivalents at end of year/ period – 7,212,543

Analysis of balances of cash and cash equivalents

Cash and bank balances – 7,212,543

F-5

F-6



The Factory was established in the People’s Republic of China (the “PRC”) on 17 September 2001

under the name of .

The registered office of the Factory is located at Bancheng Town, Lanshan District, Linyi City,Shandong, PRC.

The principal activities of the Factory have not changed since its establishment and consisted ofthe manufacture and sale of soybean based food products.

The Factory mainly operates in the PRC, and employed approximately 2 and 330 employees as at31 December 2002 and 2001 respectively.

Amount due from/to proprietor is unsecured, interest-free and has no fixed terms of repayment.




The Factory’s operations are principally conducted in the PRC. Accordingly, the financialstatements of the Factory have been prepared in Renminbi (“RMB”), being the functionalcurrency of the Factory.






F-7





(c) Impairment of assets





(d) Trade receivables


(e) Inventories


(f) Trade payables

Liabilities for trade payables, which are normally settled on credit terms of 30 to 90 days, arecarried at cost which is the fair value of the consideration to be paid in the future for goodsand services received, whether or not billed to the Factory.

F-8



(g) Income tax





Deferred tax liabilities are recognised for taxable temporary differences arising oninvestments in subsidiaries and associates, and interests in joint ventures, except where thefactory is able to control the reversal of the temporary difference and it is probable that thetemporary difference will not reverse in the foreseeable future.



(h) Retirement benefits

Pursuant to the relevant regulations of the PRC government, the Factory participates in alocal municipal government retirement benefits scheme (the “Scheme”), whereby theFactory is required to contribute a certain percentage of the basic salaries of its employeesto the Scheme to fund their retirement benefits. The local municipal government undertakesto assume the retirement benefits obligations of all existing and future retired employees ofthe Factory. The only obligation of the Factory with respect to the Scheme is to pay theongoing required contributions under the Scheme mentioned above. Contributions underthe Scheme are charged to the income statements as incurred. There are no provisionsunder the Scheme whereby forfeited contributions may be used to reduce futurecontributions.

F-9



(i) Research and development costs




During the two years ended 31 December 2001 and 2002, the research and developmentcosts incurred were not significant to the Factory and were charged to the incomestatements.

(j) Cash and cash equivalents


For the purpose of the cash flow statements, cash and cash equivalents consist of cash onhand and in banks and demand deposits, and short term highly liquid investments which arereadily convertible into known amounts of cash and which are subject to an insignificant riskof changes in value, and have a short maturity of generally within three months whenacquired, less bank overdrafts which are repayable in demand and form an integral part ofthe Factory’s cash arrangement.


(k) Recognition of revenue

Revenue is recognised when it is probable that the economic benefits will flow to the Factoryand when the revenue can be measured reliably, on the following bases: -

(a) from the sale of goods, when the significant risks and rewards of ownership havebeen transferred to the buyer, provided that the Factory maintains neither managerialinvolvement to the degree usually associated with ownership, nor effective controlover the goods sold; and


(l) Related parties


F-10


3. REVENUE

Revenue represents the net invoiced value of goods sold, after allowances for returns and tradediscounts.



2002 2001RMB RMB


Other revenueInterest income 8,238 2,794Others 283,515 94,947

291,753 97,741


The Factory’s profit before taxation is arrived at after charging/ (crediting):



2002 2001RMB RMB

Cost of inventories sold 85,149,079 24,561,099Depreciation 3,080,568 460,926Minimum lease payments under operating leases: production facilities 1,857,063 409,009Proprietor’s salaries 64,353 9,505

Staff costs (excluding proprietor’s salaries) 2,842,741 874,470Less: retirement scheme contribution (282,334) (107,000)


2,475,941 748,949Research and development costs 232,707 62,837

Interest income (8,238) (2,794)

F-11


5. TAXATION

The charge comprises:



2002 2001RMB RMB

Current year/period provision:The PRC 5,461,037 1,634,362

The Factory is subject to the PRC Corporate Income tax rate of 33% in accordance with therelevant laws and regulations in the PRC.

No deferred tax has been provided as the Factory did not have any significant temporarydifferences which gave rise to a deferred tax asset or liability at 31 December 2001 and 2002.

The Factory has no income tax consequences attaching to the withdrawal by the proprietor.

Reconciliation between tax expense and accounting profit at applicable tax rates is as follows:



2002 2001RMB RMB


Tax at the applicable tax rate 33% 5,256,306 1,634,362Non-deductible expenses 204,731 –

Actual PRC corporate income tax 5,461,037 1,634,362


6. FIXED ASSETS

Furniture,fixture


RMB RMB RMB RMB RMBCostAdditions 8,513,863 24,973,781 37,618 10,147 33,535,409

At 31 December 2001 8,513,863 24,973,781 37,618 10,147 33,535,409

Additions – 685,178 3,200 102,274 790,652Disposal (8,513,863) (25,658,959) (40,818) (112,421) (34,326,061)

At 31 December 2002 – – – – –

Accumulated depreciationCharge for the period 67,401 392,744 781 – 460,926

At 31 December 2001 67,401 392,744 781 – 460,926

Charge for the year 442,605 2,630,261 7,702 – 3,080,568Written back (510,006) (3,023,005) (8,483) – (3,541,494)

At 31 December 2002 – – – – –

Net book value

At 31 December 2002 – – – – –

At 31 December 2001 8,446,462 24,581,037 36,837 10,147 33,074,483

The Factory’s leasehold buildings are situated in the PRC and are held under medium term leases.

7. DEPOSITS

The amount represented the Factory’s deposits paid for the acquisition of fixed assets as at 31December 2001.

F-12

F-13


8. INVENTORIES


Raw material – 45,426,734Finished goods – 3,150,439

– 48,577,173


9. CAPITAL


Registered and paid-up capital 950,000 950,000

10. OPERATING LEASE COMMITMENTS

The Factory had the following capital commitments at each of the balance sheet dates:

Total future minimum lease payments under non-cancellable operating leases for productionfacilities are as follows:


Within one year – 2,000,004In the second to fifth years inclusive – 3,666,674

– 5,666,678


The Factory does not have written risk management policies and guidelines. However, theproprietor periodically to analyse and formulate measures to manage the Factory’s exposure tomarket risk, including principally changes in interest rates and currency exchange rates. Generally,the Factory employs a conservative strategy regarding its risk management. As the Factory’sexposure to market risk is kept at a minimum level, the Factory has not used any derivatives orother instruments for hedging purposes. The Factory does not hold or issue derivative financialinstruments for trading purposes.

As at 31 December 2002 and 2001, the Factory’s financial instruments mainly consisted of cashand bank balances, trade receivables; amount due from/to proprietor, prepayment and otherreceivables, trade payables, accrued liabilities, other payables and deposits received.


The Factory has no significant interest rate risk due to no interest bearing borrowings.

F-14


11. FINANCIAL INSTRUMENTS (Continued)


The Factory has no significant foreign currency risk due to limited foreign currency traderelated transactions. The Factory does not use derivative financial instruments to hedge itsforeign currency risk.

(iii) Credit risk

The Factory’s bank balances are maintained with state-owned banks in the PRC.

The carrying amounts of the trade receivables included in the balance sheets represent theFactory’s maximum exposure to credit risk in relation to the Factory’s financial assets. Noother financial assets carry a significant exposure to credit risk. The Factory has nosignificant concentration of credit risk due to its large customer base.

The Factory performs ongoing credit evaluation of its customers’ financial position andrequires no collateral from its customers. The allowance for doubtful debts is based upon areview of the expected collectibility of all trade receivables.

(iv) Fair values

The fair values of the Factory’s financial assets and liabilities are not materially different fromtheir carrying amounts because of the immediate or short term maturity of these financialinstruments.


Disposal of assets and liabilities



2002 2001Note RMB RMB

Net assets disposedFixed assets 6 30,784,567 –Inventories 4,075,820 –Trade receivables 4,756,336 –Prepayment and other receivables 2,198,797 –Cash and bank balances 6,628,134 –Trade payables (2,670,111) –Accrued liabilities, other payables and deposits received (31,038,132) –

14,735,411 –

Satisfied by

Amount due from proprietor 14,735,411 –


12. NOTES TO THE CASH FLOW STATEMENT (Continued)

An analysis of the net outflow of cash and cash equivalents in respect of the disposal of assetsand liabilities is as follows:



2002 2001RMB RMB

Cash and bank balances disposed 6,628,134 –

Net outflow of cash and cash equivalents in 6,628,134 –respect of the disposal of assets and liabilities


As at 31 December 2001, the Factory had cash and bank balances denominated in RMBamounting to RMB7,212,543, which was deposited with banks in the PRC. The RMB is not freelyconvertible into foreign currencies. Under the PRC Foreign Exchange Control Regulations andAdministration of Settlement, Sales and Payment of Foreign Exchange Regulations, the Factory ispermitted to exchange RMB for foreign currencies through banks that are authorised to conductforeign exchange business.

14. RELATED PARTY TRANSACTION

During the year ended 31 December 2002, the Company disposed all assets and liabilities toproprietor at their net book value amounts. The details were disclosed in note 12 to the financialstatements.


The financial statements on pages F-2 to F-15 were approved by the proprietor on 28 September2004.

F-15

APPENDIX G

INDEPENDENT FINANCIAL ADVISERS LETTER FROM ASIAN CORPORATE ADVISORS PTE LTDTO THE INDEPENDENT DIRECTORS IN RESPECT OF THE SHAREHOLDERS’ MANDATE FOR

INTERESTED PERSON TRANSACTIONS

3 May 2005

The Independent Directors of Pine Agritech Limitedc/o Pine Agritech LimitedCanon’s Court22 Victoria StreetHamilton HM12Bermuda

Dear Sirs

PROPOSED GENERAL MANDATE FROM SHAREHOLDERS OF PINE AGRITECH LIMITED FORTRANSACTIONS WITH INTERESTED PERSONS

1. INTRODUCTION

We understand that Pine Agritech Limited (the “Company”) wishes to make an application to theSingapore Exchange Securities Trading Limited (“SGX-ST”) for the listing and quotation of itsshares on the SGX-ST.

In connection with the application, the Company would like to seek a mandate (the “Shareholders’Mandate”) from its shareholders (“Shareholders”) pursuant to Chapter 9 of the Listing Manual(“Listing Manual”) of the SGX-ST, permitting it; its subsidiaries that are not listed on the SGX-ST oran approved exchange; or its associated companies that are not listed on the SGX-ST or anapproved exchange (provided that the Company and its subsidiaries (the “Group”), or the Groupand its interested persons, have control over the associated company) (each entity an “Entity AtRisk”) to enter into certain types of recurrent transactions of a revenue or trading nature or thosenecessary for day-to-day operations (“Recurrent IPTs”) with specified classes of interestedpersons.

To comply with the requirements of Chapter 9 of the Listing Manual, Asian Corporate Advisors PteLtd (“ACA”) has been appointed as the independent financial adviser to provide an opinion onwhether the methods or procedures, as set out in the “Review Procedures for Interested PartiesTransactions” as described on pages 122 and 123 of the prospectus in relation to the proposedlisting of the Company on SGX-ST (“Prospectus”), for determining transaction prices are sufficientto ensure that the Recurrent IPTs will be conducted at arm’s length basis and on normalcommercial terms and will not be prejudicial to the interests of the Company and its minorityShareholders.

Pursuant to Rule 920(2) of the Listing Manual, the Company may treat the Shareholders’ Mandateas having been obtained if the information below, as required by Rule 920(1)(b) of the ListingManual, is included in the Prospectus:

(i) the class of interested persons with which the Entity At Risk will be transacting;

(ii) the nature of the transactions contemplated under the Shareholders’ Mandate;

(iii) the rationale for, and benefit to, the Entity At Risk;

(iv) the methods or procedures for determining transaction prices;

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(v) the independent financial adviser’s opinion on whether the methods or procedures in (iv)above are sufficient to ensure that the Recurrent IPTs will be conducted at arm’s lengthbasis and on normal commercial terms and will not be prejudicial to the interests of theCompany and its minority Shareholders;

(vi) an opinion from the Audit Committee if it takes a different view to the independent financialadviser;

(vii) a statement from the Company that it will obtain a fresh mandate from Shareholders if themethods or procedures in (iv) above become inappropriate; and

(viii) a statement that the interested person will abstain, and has undertaken to ensure that itsassociates will abstain, from voting on the resolution approving the transaction.

This letter has been prepared for the use by the independent directors of the Company(“Independent Directors”) and is to be incorporated into the Prospectus, which sets out, inter alia,details of the Shareholders’ Mandate and the recommendation of the Independent Directors.Defined terms used in this letter shall have the same meanings attached to them in the Prospectusunless otherwise stated.

2. TERMS OF REFERENCE

ACA has been appointed by the Company, pursuant to Chapter 9 of the Listing Manual, to advisethe Independent Directors in respect of the Shareholders’ Mandate. We were neither a party to thenegotiations entered into by the Company and its subsidiaries (“Group”) in relation to thetransactions contemplated under the Shareholders’ Mandate nor were we involved in thedeliberations leading to the decision by the directors of the Company (“Directors”) to obtain theShareholders’ Mandate and we do not, by this letter or otherwise, advise or form any judgment onthe merits of the Shareholders’ Mandate other than to form an opinion, on the bases set out hereinon whether the methods or procedures, as set out in “Review Procedures for Interested PartiesTransactions” as described on pages 122 and 123 of the Prospectus, for determining transactionprices, are sufficient to ensure that the transactions under the Shareholders’ Mandate will beconducted at arm’s length basis and on normal commercial terms and will not be prejudicial to theinterests of the Company and its minority Shareholders.

Our terms of reference do not require us to evaluate or comment on the strategic orcommercial/financial merits of the Shareholders’ Mandate (including the reliability of the sourcesfor the transactions as well as the pricing as compared to third party sources) or on the futureprospects or value of the Company or the Group. In addition we are not required to comment andhave not commented on the reliability as well as the implementation of the system for IPTs. Inaddition, we do not and are not required to confirm the nature or the types of IPTs or thedisclosure of the IPTs that the Group is involved in. We are also not required to comment on orevaluate the methods or the procedures for determining interested parties. Likewise we are notrequired to comment on or evaluate the methods or procedures used by the Group in the contextof possible changes in the nature of operations. Such evaluations or comments remain the soleresponsibility of the Directors and management of the Company (“Management”).

We were not requested nor authorised to solicit, and we have not solicited, any indications ofinterest, quotations or transaction prices from any third party with respect to transactions similar tothose covered under the Shareholders’ Mandate. Neither are we required to solicit any alternativesources for the transactions nor review the existence of alternative sources. In that regard, we arenot able to, and we will not compare the Recurrent IPTs with similar transactions that may beentered into with any third party and such comparison and consideration remain the responsibilityof the Directors.

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In the course of our evaluation, we have held discussions with certain members of the Board andManagement and have relied on information contained in the Prospectus as well as informationprovided by the Directors, Management and professional advisers of the Company and theirrepresentatives, which include the existing and future processes or procedures for the Companyand the Group. We have relied upon and assumed the accuracy without having independentlyverified such information, whether written or verbal, and accordingly cannot and do not expresslyor impliedly warrant, and do not accept any responsibility for, the accuracy, completeness oradequacy of such information. Whilst care has been exercised in reviewing the information onwhich we have relied, we cannot and have not independently verified the information butnevertheless have made such enquiry (to the Directors and Management) and judgment as wasdeemed necessary and have found no reason to doubt the accuracy of the information.

Nevertheless, the Directors have confirmed to us that to the best of their knowledge, informationand belief, having made due and careful enquiries, all material information available to them inconnection with the Shareholders’ Mandate has been disclosed to ACA and that such informationconstitutes a full and true disclosure and is true, complete and accurate in all material respectsand there is no other information or fact, the omission of which would cause any of the informationdisclosed to us or relied upon by us in making our recommendation or giving our advice orinformation disclosed or opinion expressed herein or in the Prospectus to be inaccurate,incomplete or untrue in any material respect or misleading. This include the IPTs which are listedout on pages 118 to 120 of the Prospectus and that effects of the state of efficiency of the marketson the pricing for the transactions and the Recurrent IPTs.

We have further assumed that all statements of fact, belief, opinion and intention made by theDirectors and Management in the Prospectus and that all representations and undertakings fromthe Directors to us on the continuance of the system for IPTs, have been reasonably made afterdue and careful enquiry. Accordingly, no representation or warranty, express or implied, is madeand no responsibility is accepted by us concerning the accuracy, completeness or adequacy ofsuch information. In addition, we are not able to and are not required to ascertain the efficiency ofthe respective markets for the transactions and the impact of the inefficiency on the pricing for theRecurrent IPTs. We relied on the Directors’ representation and have assumed for the purposes ofthis letter that there are transactions with other third parties similar to the Recurrent IPTs and thatit would be possible to determine the market prices and terms. For transactions where theprevailing market rates or prices are not available due to the nature of the product to be sold, wehave relied on the Directors’ representation that it is possible to determine the pricing for suchproducts to be sold to the Interested Persons in accordance with the Group’s usual businesspractices and pricing policies, at margins to be obtained by the Group for the same or substantiallysimilar type of contract or transaction with unrelated third parties. In determining the transactionprice payable by the Interested Persons for such products, factors such as, but not limited to,quantity, specifications and requirements, duration of contracts, credit terms, delivery arrangementand strategic purposes of the transaction will be taken into account.

Our views are based on the market, economic, industry, monetary and other conditions (whereapplicable) prevailing on, and the information made available to us as of the Latest PracticableDate. We assume no responsibility to update, revise or reaffirm our opinion, factors orassumptions in light of any subsequent development after the Latest Practicable Date as well asreview the existence or the implementation of the procedures or processes for Recurrent IPTs thatmay affect our opinion or factors or assumptions contained herein.

We have not had regard to the general or specific investment objectives, financial situation, taxposition, risk profiles or unique needs and constraints of any individual Shareholder. As differentShareholders would have different investment portfolios and objectives, we would advise you thatany individual Shareholder who may require advice in relation to his specific investment portfolioshould consult his stockbroker, bank manager, solicitor, accountant, tax adviser or otherprofessional advisers.

Our opinion in respect of the Shareholders’ Mandate, as set out under Section 4 of this letter,should be considered in the context of the entirety of our advice as set out in this letter.

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3. SHAREHOLDERS’ MANDATE

The details of the Shareholders’ Mandate can be found on pages 120 to 125 of the Prospectus.

(a) Entity at Risk

For the purposes of the Shareholders’ Mandate, an “Entity At Risk” means:

(i) the Company;

(ii) a subsidiary of the Company that is not listed on the SGX-ST or an approvedexchange; or

(iii) an associated company of the Company that is not listed on the SGX-ST or anapproved exchange, provided that the Group and its interested person(s), havecontrol over the associated company.

(b) Class of Interested Persons

The Shareholders’ Mandate will apply to the Recurrent IPTs as described in paragraph (c)below carried out with People’s Food Holdings Limited (“PFH”) and its subsidiaries (the“Interested Persons”).

Transactions with interested persons which do not fall within the ambit of the Shareholders’Mandate shall be subject to the relevant provisions of Chapter 9 of the Listing Manual.

(c) Nature of the Recurrent IPTs

The transactions covered under the Shareholders’ Mandate relate to the sale of products tothe Interested Persons as described in the section entitled “Interested Person Transactions”in the Prospectus.

(d) Rationale and Benefit of the Shareholders’ Mandate

The Group is principally engaged in the manufacture and sale of a range of soybean-basedproducts such as soy protein isolates, soybean oil and soy oligosaccharide syrup. It sells itssoy protein isolates mainly to manufacturers of processed meat products, including theInterested Persons. The Interested Persons have purchased products from the Groupamounting in aggregate to Nil, RMB11.7 million, RMB63.6 million and RMB27.1 million foreach of the financial years ended 31 December 2001, 2002, 2003 and the six months ended30 June 2004, respectively, representing Nil%, 5.6%, 17.0%, and 13.3% of the turnover ofthe Group respectively.

PFH, one of the substantial Shareholders, has an indirect interest (held through its wholly-owned subsidiary, Loampit Limited), of approximately 49% and 36.75% in the Companyprior to and after the Invitation to the public to subscribe for new Shares in conjunction withthe proposed listing of the Company respectively. The Interested Persons have beencustomers of the Group since 2002 and their demand for soy protein isolates which theGroup produces is expected to continue to grow with the expansion of the scale ofproduction of the Interested Persons. In addition to the Interested Persons, the Group alsosells soy protein isolates to other customers in the People’s Republic of China.

The transactions with the Interested Persons are entered into or are to be entered into bythe Group in the ordinary course of business. Such transactions are Recurrent IPTs and arelikely to occur with some degree of frequency and may arise at any time and from time totime in the ordinary course of the business of the Group. The Directors believe that theGroup will be able to benefit from such Recurrent IPTs with the demand of its products forthe scale of production of the Interested Persons.

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The Shareholders’ Mandate and the renewal of the Shareholders’ Mandate on an annualbasis will eliminate the need to convene separate general meetings from time to time toseek the approval of Shareholders as and when potential transactions with the InterestedPersons arise, thereby reducing substantially, the administrative time and expenses inconvening such meetings, without compromising the corporate objectives and adverselyaffecting the business opportunities available to the Group.

The Shareholders’ Mandate is intended to facilitate transactions in the ordinary course ofbusiness that are transacted from time to time with the Interested Persons, provided thatthey are conducted at arm’s length basis and on normal commercial terms and are notprejudicial to the Company or its minority Shareholders.

(e) Procedures for Determining Transaction Prices of Recurrent IPTs

We note, subject to our terms of reference, that the Group has implemented the followingprocedures to ensure that Recurrent IPTs will be conducted at arm’s length basis and onnormal commercial terms and which will not be prejudicial to the interests of the Companyand its minority Shareholders:

� all Recurrent IPTs will be carried out in the same manner as those conducted withany unrelated third party. The Recurrent IPTs will be carried out at prevailing marketprices on terms which are no more favourable to the Interested Persons than theusual commercial terms extended to an unrelated third party (including whereapplicable, preferential rates/prices/discount accorded for bulk purchases/deliveryarrangement/credit terms) or otherwise in accordance with applicable industry normstaking into account the inefficiencies of the market for such transactions; and

� where the prevailing market rates or prices are not available due to the nature of theproduct to be sold, our pricing for such products to be sold to the Interested Personsis determined in accordance with our usual business practices and pricing policies, atmargins to be obtained by us for the same or substantially similar type of contract ortransaction with unrelated third parties. In determining the transaction price payableby the Interested Persons for such products, factors such as, but not limited to,quantity, specifications and requirements, duration of contracts, credit terms, deliveryarrangement and strategic purposes of the transaction will be taken into account.

(f) Approval Limits for Recurrent IPTs

To supplement the internal system procedures to ensure that Recurrent IPTs will beconducted at arm’s length basis and on normal commercial terms and will not be prejudicialto the interests of the Company and its minority Shareholders, we note, subject to our termsof reference, that the following limits for Recurrent IPTs will be applied:

� where an individual Recurrent IPT is equal to or in excess of RMB3.0 million, suchtransaction will be subject to prior approval by the Audit Committee;

� where an individual Recurrent IPT is below RMB3.0 million, such transaction will besubject to prior approval by the Chief Executive Officer; and

� where the aggregate value of the Recurrent IPTs in the same financial year is equalto or in excess of RMB50.0 million, all Recurrent IPTs comprising such an amount willbe reviewed by the Audit Committee to ensure that they have been conducted atarm’s length basis and on normal commercial terms and in accordance with theprocedures set out in the Shareholders’ Mandate. Recurrent IPTs which have beenreviewed by the Audit Committee need not be aggregated for the purpose of thisreview.

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(g) Procedures for Identification and Recording of Interested Person Transactions

We note that the Group will also implement the following procedures for the identification ofinterested persons and the recording of interested person transactions:

(i) the Financial Controller will maintain a list of interested persons (as defined in theListing Manual) and disclose a list of the Interested Persons to the relevant personnelto enable identification of Interested Persons. The list of Interested Persons will bereviewed by the Audit Committee at least on a semi-annual basis;

(ii) the Financial Controller will maintain a register of all transactions with interestedpersons (including the Interested Persons) recording the basis on which suchtransactions are entered into and the approval or review by the Audit Committee orthe Chief Executive Officer, as the case may be; and

(iii) the internal auditors will review all recorded transactions with interested persons(including the Interested Persons) on a quarterly basis to ensure the proper recordingof interested person transactions (including the Recurrent IPTs) and that proceduresfor determining the transaction prices of interested person transactions (including theRecurrent IPTs) are adhered to.

(h) Review Procedures by Audit Committee

We note that, on a quarterly basis, as part of its standard procedures while examining theadequacy of its internal controls, the Audit Committee will review all recorded RecurrentIPTs to ensure that they are conducted at arm’s length basis and on normal commercialterms and in accordance with the procedures outlined above. All relevant non-quantitativefactors will also be taken into account. In its review of the Recurrent IPTs under paragraph(f) above or as part of the quarterly review under this paragraph (h), the Audit Committeewould be supported by reports from the Company’s internal auditors or if deemed necessaryby the Audit Committee, by reports from the external auditors.

The Audit Committee shall review from time to time the above guidelines and procedures todetermine if they are adequate and/or commercially practicable in ensuring that RecurrentIPTs will be conducted at arm’s length basis and on normal commercial terms and will notbe prejudicial to the interests of the Company and its minority Shareholders. This wouldhave to take into account the nature of the operations of the Group, which may not besimilar from those at the time of listing. If during such periodic reviews, the Audit Committeeis of view that the guidelines and procedures as stated above are inappropriate or are notsufficient to ensure that Recurrent IPTs will be conducted at arm’s length basis and onnormal commercial terms and will not be prejudicial to the interests of the Company and itsminority Shareholders, the Company will, pursuant to Rule 920(1)(b)(iv) and (vii) of theListing Manual, revert to Shareholders for a fresh mandate based on new guidelines andprocedures. If a member of the Audit Committee has an interest in a transaction, he willabstain from participating in the review and approval process in relation to that transaction.

The Board of Directors will also ensure that all disclosure, approval and other requirementson interested person transactions, including those required by prevailing legislation, theListing Manual and accounting standards, are compiled with. In particular, the Company willdisclose in its annual report, the aggregate value of the Recurrent IPTs for the financialyears during which the Shareholders’ Mandate is in force. It will also announce theaggregate value of the Recurrent IPTs for the financial periods which it is required to reporton pursuant to Rule 705 of the Listing Manual within the required time frame while theShareholders’ Mandate remain in force.

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4. CONCLUSION

In arriving at our opinion on whether the methods or procedures for determining the transactionprices of Recurrent IPTs for the purposes of the Shareholders’ Mandate as set out in thisProspectus are sufficient to ensure that the Recurrent IPTs will be conducted at arm’s length basisand on normal commercial terms and will not be prejudicial to the interests of the Company and itsminority Shareholders, we have considered the following factors:

(a) the rationale and benefits of the Shareholders’ Mandate;

(b) the procedures for determining transaction prices of Recurrent IPTs; and

(c) the additional procedures for Recurrent IPTs.

Having considered the above, subject to the assumptions and qualifications set out herein andunder prevailing conditions and market expectations as at the Latest Practicable Date, we are ofthe opinion that the current methods or procedures for determining transaction prices as set out inthis Prospectus are currently sufficient, if implemented fully and diligently to ensure that theRecurrent IPTs will be conducted at arm’s length basis and on normal commercial terms and willnot be prejudicial to the interests of the Company and its minority Shareholders.

This letter has been prepared for the use by the Independent Directors of the Company inconnection with and for the purposes of their consideration of the Shareholders’ Mandate. Therecommendation to be made by them to the Shareholders shall remain the responsibility of theIndependent Directors.

Whilst a copy of this letter may be reproduced in the Prospectus, no other person may reproduce,disseminate or quote this letter (or any part thereof) for any other purposes at any time and in anymanner, without the prior written consent of ACA in each specific case. This opinion is governedby, and construed in accordance with, the laws of Singapore, and is strictly limited to the mattersstated herein and does not apply by implication to any other matter.

Yours faithfullyFor and on behalf ofAsian Corporate Advisors Pte Ltd

H. K. LiauManaging Director

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APPENDIX H

TAXATION

The discussion below is not intended to constitute a complete analysis of all tax consequences relatingto ownership of our ordinary shares. Prospective purchasers of our ordinary shares should consult theirown tax advisors concerning the tax consequences of their particular situations. This description isbased on laws, regulations and interpretations now in effect and available as of the date of thisProspectus. The laws, regulations and interpretations, however, may change at any time, and anychange could be retroactive. These laws and regulations are also subject to various interpretations andthe relevant tax authorities or the courts could later disagree with the explanations or conclusions set outbelow.

The following discussion describes the material Singapore income tax, stamp duty, estate duty andgoods and services tax consequences of the purchase, ownership and disposal of our shares.

Income Tax

General

Singapore resident taxpayers, which include individuals who are residing in Singapore and companieswhich are controlled or managed in Singapore, are subject to Singapore income tax on:-

(i) income that is accrued in or derived from Singapore; and

(ii) foreign income received or deemed to be received in Singapore. On 28 February 2003, theFinance Minister announced in the Financial Year 2003 Budget that all foreign-sourced income inthe form of dividends, branch profits and services income (derived from jurisdictions with“headline” tax rates of at least 15%) will be exempt from tax from 1 June 2003.

A company will be resident in Singapore if the control and management of its business is exercised inSingapore. A company will usually be regarded as being resident in Singapore if the company’s board ofdirectors meets in Singapore to discuss overall management policy and high-level business matters inrelation to the business of our Company. An individual will be resident in Singapore if he resides inSingapore (except for temporary absences from Singapore) or if he is physically present or exercises anemployment (other than as a director of a company) in Singapore for 183 days or more during thecalendar year preceding the year of assessment.

Non-resident corporate taxpayers, subject to certain exceptions, are also subject to Singapore incometax on:-

(i) income that is accrued in or derived from Singapore; and

(ii) foreign income received or deemed to be received in Singapore.

The corporate tax rate in Singapore is 24.5% for the year of assessment 2002 (i.e. the financial yearended in 2001). In addition, three quarters of up to the first $10,000 of a company’s chargeable incomeand one half of up to the next $90,000 will be exempted from tax with effect from the year of assessment2002. The remaining chargeable income (after tax exemption) will be taxed at 24.5%. Pursuant to thesecond off-budget measures announced on 12 October 2001, a 5% tax rebate will be given on the taxpayable for the year of assessment 2002. The above tax exemption and tax rebate will not apply toSingapore dividends received by companies. The corporate tax rate was reduced to 22% with effectfrom the year of assessment 2003 (i.e. financial year ended 2002) and 20% with effect from the year ofassessment 2005 (ie. financial year ended 2004).

Non-resident individuals, subject to certain exceptions, are subject to Singapore income tax only onincome accruing in or derived from Singapore.

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Subject to any applicable tax treaty, non-resident taxpayers are subject to a withholding tax of 22% inrespect of income derived from technical or management services provided in Singapore, or generally15% in the case of interest, royalty and rental of movable property if such interest, royalty or rental is notderived by the non-resident from any trade or business carried on in Singapore and is not effectivelyconnected with any permanent establishment in Singapore of the non-resident person.

Gains on disposal of the Shares

Singapore currently does not have a capital gains tax regime. However, capital gains may be consideredto be of an income nature and subject to Singapore income tax if they arise from activities which theInland Revenue Authority of Singapore regards as the carrying on of a trade in Singapore.

Any profits from the disposal of our shares are not taxable in Singapore unless the seller is regarded ascarrying on a trade of dealing in our shares in Singapore, in which case, the disposal profits would betaxable as trading income.

Dividend Distributions

Dividends, either in cash or in any other form, received in respect of our shares by either a resident ornon-resident of Singapore are not subject to Singapore withholding tax.

Shareholders are taxed in Singapore on the gross amount of dividends (that is, the cash amount of thedividend plus the amount of corporate tax paid by our company on the profits out of which thosedividends are paid). Under Singapore’s dividend imputation system, the tax paid by our company at theprevailing corporate rate of 20% is deemed to be paid by its shareholders and thus, its shareholdersreceive dividends net of the tax paid by the company. The corporate tax paid or deemed to be paid byour company will be available to holders of our shares as a tax credit to offset the income tax liability ontheir overall income subject to Singapore income tax (including the gross amount of dividends).

When dividends are paid to the shareholders, pursuant to Singapore’s dividend imputation system, theshareholder will receive, in addition to the net dividend, a tax credit based on the dividend amountreceived. The tax credit will reflect the amount of tax paid or deemed to be paid by the company on theprofits from which the dividend income is declared by the company and received by the shareholder. Thetax credit can be used to offset the shareholder’s tax liability. If the amount of Singapore tax payable bythe shareholder is less than the tax credit, the shareholder will be entitled to a refund on the differencefrom the Inland Revenue Authority of Singapore.

With effect from 1 January 2003, Singapore replaced the existing dividend imputation system with a one-tier system where dividend income is only taxed once at company level. Once the shareholder declareshis or her taxable income (including the gross amount of dividends) to Inland Revenue Authority ofSingapore, income derived from dividend is deemed taxable at 20%, equivalent to the corporate tax rateresulting in zero tax payable by shareholders on dividend income. Income derived from sources otherthan dividend income will be assessed accordingly by Inland Revenue Authority of Singapore.

A shareholder who is not a tax resident of Singapore will be taxed at the same rate on which the credit iscomputed. Consequently, non-resident shareholders will not need to pay any further Singapore tax ondividends received.

Dividends declared out of tax-exempt profit by the company will be exempted from tax in the hands ofshareholders who are Singapore tax residents. This would also, in general, be applicable to foreignshareholders.

However, foreign shareholders are advised to consult their own tax advisors to take into account the taxlaws of their respective countries of residence and the existence of any double taxation agreement whichtheir country of residence may have with Singapore.

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Where our company receives foreign dividends for which a tax credit has been allowed, the dividendpayments from these foreign dividends to the holders of our shares will be exempt from tax. The taxcredit could be obtained pursuant to a double taxation treaty with one of Singapore’s treaty partners or itcould be unilaterally granted under the Singapore Income Tax Act. Where the credit is available underany of the options above, a special account is to be created for the purposes of ensuring that thepayment of exempt dividends is restricted to the amount of the dividends for which foreign tax credit hasbeen allowed.

Stamp Duty

No stamp duty is payable on the allotment or holding of our shares.

Stamp duty is payable on an instrument of transfer of our shares at the rate of $0.20 for every $100 orany part thereof of the consideration for our shares. The purchaser is liable for stamp duty, unlessotherwise agreed. However, no stamp duty is payable if no instrument of transfer is executed (such as inthe case of scripless shares, the transfer of which does not require instruments of transfer to beexecuted) or if the instrument of transfer is executed outside Singapore. However, stamp duty may bepayable if the instrument of transfer which is executed outside Singapore is received in Singapore.

Also, no stamp duty is payable on contract notes sent by brokers or agents to their principal.

Estate Duty

Singapore estate duty is imposed on the value of most immovable property situated in Singapore and onmost movable property wherever it may be, owned by individuals who are domiciled in Singapore,subject to specific exemption limits.

Singapore estate duty is imposed on the value of most immovable property situated in Singapore ownedby individuals who at the time of his death was not domiciled in Singapore, subject to specific exemptionlimits, i.e. all Singapore movable assets of such persons are not subject to Singapore estate duty.

Any Shares held by individual who is domiciled in Singapore could be subject to Singapore estate dutyupon the individual’s death.

Singapore estate duty is payable to the extent that the value of the Shares aggregated with any otherchargeable assets exceeds S$600,000. Unless other exemptions apply to the other assets, for example,the separate exemption limit for residential properties, any excess beyond S$600,000 will be taxed asfollows:-

First S$12,000,000 5%Excess over S$12,000,000 10%

Individuals should consult their own tax advisors regarding the Singapore estate duty consequences oftheir ownership of the Shares.

Goods and Services Tax (“GST”)

The sale of shares by an investor belonging in Singapore through an SGX-ST member or to anotherperson belonging in Singapore is an exempt sale not subject to GST.

Where shares are sold by the investor to a person belonging outside Singapore, the sale of the shares isgenerally a taxable sale subject to GST at zero-rate. Any GST incurred by a GST registered investorsupplying goods & services in the course of furtherance of a business may be recovered from theComptroller of GST.

Charges on brokerage, handling and clearing services rendered by a GST registered person to aninvestor belonging in Singapore in connection with the investor purchase, sale, holding of shares will besubject to GST at the current rate of 5%. Similar services rendered to an investor outside of Singaporeare subject to GST at zero-rate.

APPENDIX I

SUMMARY OF MEMORANDUM OF ASSOCIATIONAND SELECTED BYE-LAWS OF OUR COMPANY

This appendix provides information about certain provisions of our Memorandum of Association and Bye-laws and Bermuda company law. The description below is only a summary and is qualified in its entiretyby reference to our Memorandum of Association and Bye-laws and the Companies Act 1981 of Bermuda(the “Bermuda Companies Act”).

The instruments that constitute and define the Company are the Memorandum of Association and theBye-Laws of the Company.

1. MEMORANDUM OF ASSOCIATION AND REGISTRATION NUMBER

The registration number with which the Company was incorporated is 35792. Our Memorandum ofAssociation states that the liability of shareholders of our Company is limited to the amount, if any,for the time being unpaid on the shares respectively held by them and that our Company is anexempted company as defined in the Bermuda Company Act. Our Memorandum of Associationalso sets out the objects for which our Company was formed, including acting as a holding andinvestment company, and the powers of our Company, including the powers set out in the FirstSchedule to the Bermuda Company Act. As an exempted company, our Company will be carryingon business outside Bermuda from a place of business within Bermuda.

2. DIRECTORS

(a) Ability of interested directors to vote

Subject to the Bermuda Company Act and any further disclosure required thereby, if ageneral notice to our Board of Directors is given by a Director or officer declaring that he isa director or officer or has an interest in a person and is to be regarded as interested in anytransaction or arrangement made with that person, it shall be a sufficient declaration ofinterest in relation to any transaction or arrangement so made. Our Directors shall not votein respect of any contract, proposed contract or arrangement in which he has a personalmaterial interest, whether directly or indirectly held, although he may be counted in thequorum present at the meeting.

(b) Remuneration

Fees payable to non-executive Directors shall be a fixed sum (not being a commission on ora percentage of profits or turnover of the Company) as shall from time to time bedetermined by the Company in general meeting. Fees payable to Directors shall not beincreased except at a general meeting convened by a notice specifying the intention topropose such increase.

The Board may grant special remuneration to any Director who, being called upon, shallperform any special or extra services to or at the request of the Company. Such specialremuneration may be made payable to such Director in addition to or in substitution for hisordinary remuneration as a Director, as the Board may determine.

The remuneration of a Managing Director, Joint Managing Director, Deputy ManagingDirector or an Executive Director of our Company or a Director appointed to any other officein the management of our Company may from time to time be fixed by our Board ofDirectors and with such other benefits (including pension and/or gratuity and/or otherbenefits on retirement) and allowances as our Board of Directors may from time to timedecide. Such remuneration shall be in addition to his ordinary remuneration as a Director ofour Company.

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We are required to obtain shareholders’ approval for any payments to our Directors of anysum by way of compensation for loss of office or as consideration for or in connection withhis retirement from office (not being a payment to which our Directors are contractuallyentitled).

(c) Borrowing

Our Board of Directors may, at its discretion, exercise all the powers of our Company toraise or borrow or to secure the payment of any sum or sums of money for the purposes ofour Company and to mortgage or charge our undertaking, property and uncalled capital orany part thereof.

(d) Retirement Age Limit

There is no retirement age limit for Directors.

(e) Shareholding Qualification

There is no shareholding qualification for Directors in the Bye-Laws of the Company.

3. SHARE RIGHTS AND RESTRICTIONS

Our Company currently has one class of shares, namely, ordinary shares. Under the BermudaCompany Act, only persons who are registered on our register of members are recognised as ourshareholders. Shareholders who are named as depositors in the depository register maintained byCDP will not be recognised as shareholders under Bermuda law and will hold their shares andexercise their rights through CDP.

(a) Dividends and distribution

We may, by ordinary resolution, declare dividends at a general meeting, but we may not paydividends in excess of the amount recommended by our Board of Directors. All dividendswe declare must be paid out of our profits, which would generally comprise retainedearnings, or pursuant to Section 40(2)(a) of the Bermuda Company Act, which permits theapplication of the share premium attributable to our issued shares to the payment ofdividends in the form of shares. Our Board of Directors may also declare an interimdividend without the approval of our shareholders. All dividends are paid pro rata amongthe shareholders in proportion to the amount paid up on each shareholder’s ordinary shares,unless the rights attaching to an issue of any share provide otherwise. All dividends orbonuses unclaimed for one year after having been declared may be invested or otherwisemade use of by our Board of Directors for the benefit of our Company until claimed and ourCompany shall not be constituted a trustee in respect thereof. All dividends or bonusesunclaimed for six years after having been declared may be forfeited by our Board ofDirectors and shall revert to our Company.

Our Board of Directors may retain any dividends or other moneys payable on or in respectof a share upon which our Company has a lien, and may apply the same in or towardssatisfaction of the debts, liabilities or engagements in respect of which the lien exists. OurBoard of Directors may also deduct from any dividend or bonus payable to any shareholderall sums of money (if any) presently payable by him to our Company on account of calls,instalments or otherwise.

(b) Voting rights

A shareholder is entitled to attend, speak and vote at any general meeting in person and ashareholder who is the holder of two or more shares may appoint not more than two proxiesto attend on the same occasion. Notwithstanding the foregoing provision, CDP may appointmore than two proxies or a corporate representative to attend and vote at the same generalmeeting. A proxy need not be a shareholder.

The Bye-Laws do not provide for cumulative voting for entire shareholders and directors.

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4. CHANGE IN CAPITAL

Under the Bermuda Company Act, changes in the capital structure of our Company (for example,an increase, a consolidation or a sub-division of our share capital) require shareholder approval atgeneral meetings which requires a minimum period of 14 days with resolutions being passed by asimple majority. However, we are required to obtain our shareholders’ consent by way of a specialresolution for any reduction of our share capital, redemption reserve, fund or any share premiumaccount or other undistributable reserve, subject to the conditions prescribed by law.

The Bye-Laws provide a distinction between an “ordinary resolution” and a “special resolution”, adistinction which is not made in the Bermuda Company Act. A resolution shall be an “ordinaryresolution” when it has been passed by a simple majority of the votes cast by our shareholders ata general meeting held in accordance with these presents and of which not less than 14 days’notice has been duly given. A resolution shall be a “special resolution” when it has been passedby a majority of 3/4 of the votes cast by our shareholders at a general meeting of which not lessthan 21 days’ notice, specifying (without prejudice to the power contained in these presents toamend the same) the intention to propose the resolution as a Special Resolution, has been dulygiven.

5. VARIATION OF RIGHTS OF EXISTING SHARES OR CLASSES OF SHARES

Subject to the Bermuda Company Act, if at any time our share capital is divided into differentclasses of shares, all or any of the special rights attached to any class (unless otherwise providedfor by the terms of issue of the shares of that class) may, subject to the provisions of the BermudaCompany Act, be varied or abrogated either with the consent in writing of the holders of not lessthan three-fourths in nominal value of the issued shares of that class or with the sanction of aspecial resolution passed at a separate general meeting of the holders of the shares of that class.To every such separate general meeting the provisions of these Bye-Laws relating to generalmeetings shall mutatis mutandis apply, but so that the necessary quorum shall be not less thantwo persons holding or representing by proxy or by corporate representative one-third in nominalvalue of the issued shares of that class, and that any holder of shares of the class present inperson or by proxy or by duly authorised corporate representative may demand a poll. Thisprovisions will also apply to the variation or abrogation of the special rights attached to the sharesof any class as if each group of shares of the class differently treated formed a separate class therights whereof are to be varied or abrogated.

The relevant Bye-Law does not impose more significant conditions than the Bermuda CompanyAct in this regard.

6. LIMITATIONS ON SHAREHOLDERS REGARDED AS NON-RESIDENTS OF BERMUDA

There are no limitations on the rights of our shareholders who are regarded as non-residents ofBermuda to hold or vote their shares. As the Company has been designated by the BermudaMonetary Authority as non-resident of Bermuda for exchange control purposes, the Company isfree to acquire, hold and sell foreign currency and securities without restriction.

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APPENDIX J

SUMMARY OF BERMUDA COMPANY LAW

The Company is incorporated in Bermuda and therefore, operates subject to Bermuda law. Set outbelow is a summary of certain provisions of Bermuda company law, which does not purport to contain allapplicable qualifications and exemptions and does not purport to be a complete review of all matters ofBermuda company law or a comparison of provisions that may differ from the laws of other jurisdictions,with which interested parties may be more familiar.

(i) Share capital

The Bermuda Act provides for the giving of financial assistance by a company for the acquisition ofits own or its holding company’s shares in specific circumstances.

The Bermuda Act provides that where a company issues shares at a premium whether for cash orotherwise, a sum equal to the aggregate amount or value of the premium on those shares shall betransferred to an account, to be called “the share premium account” and the provisions of theBermuda Act relating to a reduction of share capital shall, except as provided in section 40 of theBermuda Act, apply as if the share premium account were paid up share capital of the company.An exception is made to this rule in the case of an exchange of shares where the excess value ofthe shares acquired over the nominal value of the shares being issued may be credited to acontributed surplus account of the issuing company. Contributed surplus is a North Americanconcept recognised under the generally accepted accounting principles of the Canadian Institute ofChartered Accountants which accounting principles are applied in Bermuda.

The Bermuda Act permits a company to issue preference shares and under certain circumstancesto convert those preference shares into redeemable shares.

(ii) Alteration of share capital

A company may if authorised by a general meeting of the shareholders of the company and by itsbye-laws, alter the conditions of its memorandum of association to increase its share capital, divideits shares into several classes and attach thereto respectively any preferential, deferred, qualifiedor special rights, privileges or conditions, consolidate and divide all or any of its share capital intoshares of a larger amount than is fixed by the memorandum of association, make provision for theissue and allotment of shares which do not carry any voting rights, cancel shares which have notbeen taken or agreed to be taken by any person, diminish the amount of its share capital by theamount of the shares so cancelled and change the currency denomination of its share capital.With the exception of an increase in capital, cancellation of shares and redenomination of currencyof capital, there are no filing requirements for any of the above-mentioned alterations.

Furthermore, a company may, if authorised by a general meeting of the shareholders, reduce itsshare capital. There are certain requirements, including a requirement prior to the reduction topublish a notice in an appointed newspaper stating the amount of the share capital as lastdetermined by the company, the amount to which the share capital is to be reduced and the dateon which the reduction is to have effect.

The Bermuda Act provides that a company shall not reduce the amount of its share capital if onthe date the reduction is to be effected there are reasonable grounds for believing that thecompany is, and after the reduction would be, unable to pay its liabilities as they become due.

The Bermuda Act includes certain protections for holders of special classes of shares, requiringtheir consent to be obtained before their rights may be varied.

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The Bermuda Act requires that as soon as practicable after the allotment of any of its shares acompany must complete and have ready for delivery share certificates in relation to those sharesallotted unless the conditions of issue of the shares otherwise provide. A certificate under thecommon seal of the company shall be prima facie evidence of the title of the shareholder to theshares. The Bermuda Act prohibits bearer shares.

(iii) Financial assistance to purchase shares of a company or its holding company

A company is prohibited from providing financial assistance for the purpose of an acquisition of itsown or its holding company’s shares. However, in certain circumstances, the prohibition fromgiving financial assistance may be excluded such as where the company’s principal purpose ingiving that assistance is not to give it for the purpose of any such acquisition, or the giving of theassistance for that purpose is but an incidental part of some larger purpose of the company, andthe assistance is given in good faith in the interests of the company. In addition, a company is onlyprohibited from granting financial assistance if on the date from which the financial assistance is tobe given, there are reasonable grounds for believing that the company is, or after the giving ofsuch financial assistance would be, unable to pay its liabilities as they become due.

(iv) Purchase by the company of its own shares and warrants

The Bermuda Act permits the company, if authorised to do so by its memorandum of associationor by its bye-laws, to purchase its own shares. It should be noted that the company is authorisedby its bye-laws, subject to certain approvals, to purchase its own shares. Such purchases mayonly be effected out of the capital paid up on the purchased shares, profits otherwise available fordividend or distribution (see “Dividends and distributions” below) or out of the proceeds of a newissue of shares made for the purpose. Any premium payable on a repurchase over the par valueof the shares to be repurchased must be provided for out of the profits otherwise available fordividends, out of the company’s share premium account, or out of contributed surplus. A purchaseby the company of its own shares may be authorised by its board of directors or otherwise by or inaccordance with the provisions of its bye-laws. The Bermuda Act provides that no purchase by thecompany of its own shares may be effected if, on the date on which the purchase is to be effected,there are reasonable grounds for believing that the company is, or after the purchase would be,unable to pay its liabilities as they become due. The shares purchased pursuant to the BermudaAct shall be treated as cancelled and the amount of the company’s issued capital shall bediminished by the nominal amount of those shares accordingly. It shall not be taken as reducingthe amount of the company’s authorised share capital.

The company is not prevented from purchasing and may purchase its own warrants. There is norequirement of Bermuda Law that the company’s memorandum of association or its bye-lawscontain a specific enabling provision authorising any such purchase and the directors may relyupon the general power contained in its memorandum of association to buy and sell and deal inpersonal property of all kinds.

A company has power to hold and purchase shares of its holding company. A distinction must bedrawn between the purchase of shares in the holding company by the holding company itself andthe purchase by a subsidiary. A holding company can only purchase its own shares in accordancewith the provisions referred to above. When a subsidiary acquires shares in its holding company,the shares, once purchased, may be voted by the subsidiary for its own benefit.

(v) Transfer of securities

Title to securities of companies whose securities are traded or listed on an appointed stockexchange may, where permitted by regulations made by the Minister or where such transfer iseffected through the mechanism required or permitted by an appointed stock exchange, beevidenced and transferred without a written instrument.

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(vi) Dividends and distributions

The Bermuda Act provides that a company shall not declare or pay a dividend or make adistribution out of contributed surplus, if there are reasonable grounds for believing that (a) thecompany is, or would after the payment be, unable to pay its liabilities as they become due; or (b)the realisable value of the company’s assets would thereby be less than the aggregate of itsliabilities and its issued share capital and share premium accounts.

Contributed surplus for these purposes is defined as including proceeds arising from donatedshares, credits resulting from the redemption or conversion of shares at less than the amount setup as nominal capital, the excess value of shares acquired over those issued in a share exchangeshould the Board elect to treat it as such and donations of cash and other assets to the company.

(vii) Charges on the assets of the company

The Bermuda Act established a register of charges at the office of the Registrar of Companiespermitting any charges on the assets of a company to be registered. Registration is notmandatory but does govern priority in Bermuda, giving a registered charge priority over anysubsequently registered charge and over all unregistered charges save those in effect prior to thecoming into effect of the Bermuda Act in July 1983. The register of charges is available forinspection by members of the public. The Bermuda Act also makes provision for the registration ofa series of debentures.

(viii) Management and administration

The management and administration of a Bermuda company is essentially governed by Part VI ofthe Bermuda Act and provides that the management and administration of a Bermuda companyshall be vested in the hands of not less than two (2) directors duly elected by the shareholders.The Bermuda Act requires that a Bermuda company maintain either (a) a Bermuda residentsecretary and a Bermuda resident representative; or (b) a Bermuda resident secretary and aBermuda resident director; or (c) two (2) Bermuda resident directors, all of whom must beindividuals. Exempted companies, the shares of which are listed on an appointed stock exchange,may appoint a resident representative in Bermuda in place of the other Bermuda resident officers,who or which may be either an individual or a corporate entity, whose statutory right, duties andobligations are established by the Bermuda Act.

The Bermuda Act contains no specific restrictions on the power of the directors to resolve todispose of assets of a company although it specifically requires that every officer (which includes adirector and managing director and secretary) of a company, in exercising his powers anddischarging his duties, shall act honestly and in good faith with a view to the best interests of thecompany and exercise the care, diligence and skill that a reasonably prudent person wouldexercise in comparable circumstances. Furthermore, it requires that every officer should complywith the Bermuda Act, regulations passed pursuant to the Bermuda Act and the bye-laws of thecompany.

(ix) Accounting requirements under the Bermuda Act

The Bermuda Act requires that a company shall cause to be kept proper records of account withrespect to:-

(a) all sums of money received and expended by the company and the matters in respect ofwhich the receipt and expenditure take place;

(b) all sales and purchases of goods by the company; and

(c) the assets and liabilities of the company.

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It further requires that the records of account shall be kept at the registered office of the companyor at such other place as the Board thinks fit and shall at all times be open to inspection by thedirectors. The Bermuda Act also requires that, these records of account also be maintained at theoffice of the resident representative where the company is listed on an appointed stock exchangeand the company has appointed a resident representative. There is a provision in the BermudaAct to the effect that if the records of account are kept at some place outside Bermuda, there shallbe kept at an office of the company in Bermuda such records as will enable the Board to ascertainwith reasonable accuracy the financial position of the company at the end of each three (3) monthperiod. Power is vested in the courts of Bermuda to order the company to make available therecords of account to any of the directors of the company should the company for some reasonrefuse to do so. Furthermore, the Bermuda Act imposes a fine in the event of failure to complywith the aforementioned requirements which fine is limited to the sum of BD$500.00(approximately equivalent in value to US$500.00), for the time being.

(x) Auditing requirements

The Bermuda Act requires that the board of every company shall, at least once in every year, laybefore the company in general meeting:-

(a) financial statements for the period, which shall include:-

(1) a statement of the results of operations for such period;(2) a statement of retained earnings or deficits;(3) a balance sheet at the end of such period;(4) a statement of changes in the financial position for the period;(5) notes to the financial statements; and(6) such further information as required by the Bermuda Act and the company’s

memorandum of association and its bye-laws;

(b) the report of the auditor in respect of the financial statements described above based uponthe results of the audit made in accordance with generally accepted accounting principles;and

(c) the notes referred to in paragraph (a5) above shall include a description of the generallyaccepted accounting principles used in the preparation of the financial statements andwhere the accounting principles used are those of a country or jurisdiction other thanBermuda the notes shall disclose this fact and shall name the country or jurisdiction.

Financial statements to be laid before the shareholders in general meeting shall be signed on thebalance sheet by two (2) of the directors of the company.

If for some reason it becomes impossible, for reasons beyond the reasonable control of thedirectors, to lay the financial statements before the shareholders, it shall be lawful for the meetingto adjourn the meeting for a period of up to ninety (90) days or such longer period as theshareholders may agree.

All shareholders of a company are entitled to receive a copy of the financial statements preparedin accordance with the aforementioned requirements, at least seven (7) days before the generalmeeting of the company at which the financial statements would be tabled. The Bermuda Act alsoprovides that companies listed on an appointed stock exchange (including the SingaporeExchange) may send summarized financial statements instead of the unabridged financialstatements mentioned above. Each shareholder can elect to receive unabridged financialstatements for that period and/or any subsequent period. The summarized financial statementstogether with auditors report and notice to elect to receive the unabridged financial statementsmust be sent to shareholders twenty-one days before the general meeting. A company shall sendthe full financial statements to a member within seven days of receipt of the member’s election toreceive the full financial statements.

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The summarized financial statements must be derived from the company’s financial statementsand shall include:

(a) a summarized report of the unabridged financial statements;

(b) such further information extracted from the financial statements as the board of directorsconsiders appropriate; and

(c) a statement that it is only a summarized version of the company’s financial statements anddoes not contain sufficient information to allow as full an understanding of the financialposition, results of operations or changes in financial position or cash flows of the companyas would be provided by unabridged financial statements.

There are certain exceptions in the case of shareholders not entitled to receive notices of generalmeetings, joint holders of shares or where the address for a person is not known to the company.

The Bermuda Act also makes provision vesting power in the shareholders in general meeting towaive the laying of the financial statements and auditors’ report and to waive the appointment ofan auditor. In order to do so, it is required that all shareholders and directors of the companyagree either in writing or at a general meeting, that in respect of a particular interval no financialstatement or auditors’ report thereon need be laid before a general meeting.

The Bermuda Act contains specific requirements in section 89 in relation to the appointment anddisqualification of an auditor.

By way of general reference, the provisions of sections 83, 84, 87, 88, 89 and 90 govern thepreparation and maintenance of accounting records and audited financial statements.

(xi) Exchange control

Although incorporated in Bermuda, the company has been classified as non-resident in Bermudafor exchange control purposes by the Bermuda Monetary Authority. Accordingly, the company mayconvert currency (other than Bermudian currency) held for its account to any other currencywithout restriction.

Persons, firms or companies regarded as residents of Bermuda for exchange control purposesrequire specific consent under the Exchange Control Act 1972 of Bermuda, and regulationsthereunder, to purchase or sell shares or warrants of the company which are regarded as foreigncurrency securities by the Bermuda Monetary Authority. Under the terms of the consent given tothe company by the Bermuda Monetary Authority, the issue of shares pursuant to this documentand any transactions in issued shares between persons, firms or companies regarded as non-resident in Bermuda for exchange control purposes may be effected without further permissionfrom that Authority. Before the company can issue any further shares beyond the consent givenfrom the Bermuda Monetary Authority, the company must first obtain the prior written consent ofthat Authority.

In granting such permission, the Bermuda Monetary Authority accepts no responsibility for thefinancial soundness of any proposals or for the correctness of any statements made or opinionsexpressed in this document with regard to them.

(xii) Taxation

In Bermuda, there are no taxes on profits, income or dividends, nor is there any capital gains tax,estate duty or death duty. Profits can be accumulated and it is not obligatory for a company to paydividends. The company is required to pay an annual government fee (the “Government Fee”),which is determined on a sliding scale by reference to a company’s authorised share capital andshare premium account, with the minimum fee being BD$1,780 and the maximum BD$27,825 (theBD$ is treated at par with the US$). The Government Fee is payable at the end of January inevery year and is based on the authorised share capital and share premium account as they stoodat 31 August in the preceding year.

The Bermuda Government has enacted legislation under which the Minister of Finance isauthorised to give an assurance to an exempted company or a partnership that, in the event ofthere being enacted in Bermuda any legislation imposing tax computed on profits or income orcomputed on any capital asset, gain or appreciation, then the imposition of any such tax shall notbe applicable to such entities or any of their operations. In addition, there may be included anassurance that any such tax or any tax in the nature of estate duty or inheritance tax, shall not beapplicable to the shares, debentures or other obligations of such entities. This assurance hasbeen obtained by the company for a period ending 28 March 2016.

(xiii) Stamp duty

The law relating to stamp duties has been fundamentally changed as a result of the enactment ofcertain legislation that came into force on 1 April 1990. Stamp duty is no longer chargeable inrespect of the incorporation, registration or licensing of an exempted company, nor, subject tocertain minor exceptions, on their transactions. Accordingly, no stamp duty will be payable on theincrease in or the issue or transfer of the share capital of the company.

(xiv) Loans to directors

The Bermuda Act prohibits the making of loans by the company to any of its directors or to theirfamilies or companies in which they hold a 20 per cent interest, without the consent ofshareholders of the company holding in the aggregate not less than nine-tenths (9/10) of the totalvoting rights of all shareholders having the right to vote at any meeting of the shareholders of thecompany. These prohibitions do not apply to anything done to provide a director with funds tomeet expenditure incurred or to be incurred by him for the purposes of the company, provided thatthe company gives its prior approval at a general meeting or, if not, the loan is made on conditionthat it shall be repaid within six (6) months of the next annual general meeting if the loan is notapproved at such meeting. If the approval of the company is not given for a loan, the directorswho authorised it will be jointly and severally liable for any loss arising.

(xv) The investigation of the affairs of a company and the protection of minorities

The Bermuda Act makes specific provision with regard to the foregoing and provides that theMinister of Finance may, at any time of his own volition, appoint one or more inspectors toinvestigate the affairs of an exempted company and to report thereon in such manner as he maydirect. The Bermuda Act requires that such an investigation be conducted in private unless thecompany requests that it be held in public. Furthermore, any shareholder of a company whocomplains that the affairs of the company are being conducted or have been conducted in amanner oppressive or prejudicial to the interests of some part of the shareholders, includinghimself, or where a report has been made to the Minister of Finance under the foregoing, theRegistrar on behalf of the Minister, may make an application to the court by petition for an orderthat the company’s affairs are being conducted or have been conducted in a manner oppressive orprejudicial to the interests of some part of the shareholders and that to wind up the companywould unfairly prejudice that part of the shareholders but otherwise the facts would justify themaking of a winding up order on the ground that it would be just and equitable that the companyshould be wound up. If the court is of this opinion, then it may, with a view to bringing to an endthe matters complained of, make such order as it thinks fit whether for regulating the conduct ofthe company’s affairs in future or for the purchase of shares of any shareholders of the companyby other shareholders of the company or by the company and in the case of a purchase by thecompany, for the reduction accordingly of the company’s capital, or otherwise.

Class actions and derivative actions are generally not available to shareholders under the laws ofBermuda; however, the Bermuda courts ordinarily would expect to follow English case lawprecedent which would permit a shareholder to commence an action in the name of the companyto remedy a wrong done to the company where the act complained of is alleged to be beyond thecorporate power of the company or is illegal or would result in the violation of a company’smemorandum of association and bye-laws. Furthermore, consideration would be given by thecourt to acts that are alleged to constitute a fraud against the minority shareholders or, forinstance, where an act requires the approval of a greater percentage of the company’sshareholders than that which actually approved it.

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In addition to the above, the shareholders may be able to bring claims against a company; suchclaims must, however, be based on the general laws of contract or tort applicable in Bermuda.

A statutory right of action is conferred on subscribers to shares of a company against persons(including directors and officers) responsible for the issue of a prospectus in respect of damagesuffered by reason of an untrue statement therein (see above) but this confers no right of actionagainst the company itself. In addition, the company itself (as opposed to its shareholders) maytake action against the officers (including directors) for breach of their statutory and fiduciary dutyto act honestly and in good faith with a view to the best interests of the company (as mentionedabove).

(xvi) Inspection of corporate records

Members of the general public have the right to inspect the public documents of the companyavailable at the office of the Registrar of Companies in Bermuda which will include the company’scertificate of incorporation, its memorandum of association (including its objects and powers) andany alteration to the company’s memorandum of association and documents relating to anincrease or reduction of authorised capital. The shareholders have the additional right to inspectthe bye-laws of the company, minutes of general (i.e. shareholders) meetings and audited financialstatements of the company, which must be presented to the annual general meeting ofshareholders. The register of shareholders of the company is also open to inspection byshareholders without charge, and to members of the general public for a fee. The company isrequired to maintain its share register in Bermuda but may establish a branch register outsideBermuda. The company is required to keep at its registered office a register of its directors andofficers which is open for inspection by members of the public without charge.

(xvii) Winding up and liquidation provisions of Bermuda legislation

(a) Introduction

The winding up of Bermuda companies is governed by the provisions of the Bermuda Actand by the Companies (Winding Up) Rules 1982 (the “Rules”) and may be divided into thefollowing two types:-

(1) Voluntary winding up which commences with the shareholders’ resolution or upon thehappening of a specified event (fixed or limited life company) and which itself can besub-divided into a shareholders’ voluntary winding up and a creditors’ voluntarywinding up; and

(2) Compulsory winding up, by petition presented to the courts of Bermuda followed bywinding up order.

(b) Voluntary winding up

(1) Shareholders’ voluntary winding up

A shareholders’ voluntary winding up is only possible if a company is solvent. AStatutory Declaration of Solvency to the effect that a company is able to meet itsdebts within twelve (12) months from the date of the commencement of its winding upis sworn by a majority of the company’s directors and filed with the Registrar ofCompanies.

A general meeting of shareholders is then convened which resolves that the companybe wound up voluntarily and that a liquidator (responsible for collecting in the assetsof the company, determining its liabilities and distributing its assets amongst itscreditors and the surplus to the shareholders) be appointed.

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Once the affairs of the company are fully wound up, the liquidator prepares a fullaccount of the liquidation which he then presents to the company’s shareholders at ageneral meeting called for that purpose. This special general meeting must beadvertised in an appointed newspaper in Bermuda at least one (1) month before it isheld and within one (1) week after it is held, the liquidator notifies the Registrar ofCompanies that the company has been dissolved.

(2) Creditors’ voluntary winding up

A creditors’ voluntary winding up may occur where a company is insolvent and aDeclaration of Solvency cannot be sworn.

A board meeting is convened which resolves to recommend to the shareholders ofthe company that the company be placed into a creditors’ voluntary winding up. Thisrecommendation is then considered and, if thought fit, approved at a special generalmeeting of the company’s shareholders and, subsequently, at a meeting of thecompany’s creditors.

Notice of the creditors’ meeting must appear in an appointed newspaper on at leasttwo (2) occasions and the directors must provide this meeting with a list of thecompany’s creditors and a full report of the position of the company’s affairs.

At their respective meetings, the creditors and shareholders are entitled to nominate aperson or persons to serve as liquidator(s) and whose responsibilities includecollecting in the assets of the company, ascertaining its liabilities and distributing itsassets rateably amongst its creditors in accordance with their proofs of debt. Inaddition to the liquidator, the creditors are entitled to appoint a Committee ofInspection which, under Bermuda Law, is a representative body of creditors whoassist the liquidator during the liquidation.

As soon as the affairs of the company are fully wound up, the liquidator prepares hisfinal account explaining the liquidation of the company and the distribution of itsassets which he then presents to the company’s shareholders in a special generalmeeting and to the company’s creditors in a meeting. Within one (1) week after thelast of these meetings, the liquidator sends a copy of the account to the Registrar ofCompanies in Bermuda who proceeds to register it in the appropriate public recordsand the company is deemed dissolved three (3) months after the registration of thisaccount.

(c) Compulsory winding up

The courts of Bermuda may wind up a Bermuda company on a petition presented bypersons specified in the Bermuda Act and which include the company, itself and any creditoror creditors of the company (including contingent or prospective creditors) and anyshareholder or shareholders of the company.

Any such petition must state the grounds upon which the Bermuda court has been asked towind up the company and may include either one of the following:-

(1) that the company has by resolution resolved that it be wound up by the Bermudacourt;

(2) that the company is unable to pay its debts;

(3) that the Bermuda court is of the opinion that it is just and equitable that the companybe wound up.

The winding up petition seeks a winding up order and may include a request for theappointment of a provisional liquidator.

Prior to the Winding Up Order being granted and the appointment of the provisionalliquidator, (who under Bermuda Law, may or may not be the Official Receiver – aGovernment appointed officer) an interim provisional liquidator may be appointed toadminister the affairs of the company with a view to its winding up until he is relieved ofthese duties by the appointment of the provisional liquidator. (Often, the interim provisionalliquidator is appointed the provisional liquidator).

As soon as the Winding Up Order has been made, the provisional liquidator summonsseparate meetings of the company’s creditors and shareholders in order to determinewhether or not he should serve as the permanent liquidator or be replaced by some otherperson who will serve as the permanent liquidator and also to determine whether or not aCommittee of Inspection should be appointed and, if appointed, the shareholders of thatCommittee. The provisional liquidator notifies the Court of the decisions made at thesemeetings and the Court makes the appropriate orders.

A permanent liquidator’s powers are prescribed by the Act and include the power to bring ordefend actions or other legal proceedings in the name and on behalf of the company andthe power to carry on the business so far as may be necessary for the beneficial winding upof the company. His primary role and duties are the same as a liquidator in a creditors’voluntary winding up i.e. to distribute the company’s assets rateably amongst its creditorswhose debts have been admitted.

As soon as the affairs have been completely wound up, the liquidator applies to the courtsof Bermuda for an order that the company be dissolved and the company is deemeddissolved from the date of this order being made.

Any person wishing to have a detailed summary of Bermuda company law or advice on thedifferences between it and the laws of any jurisdiction with which he is more familiar isrecommended to seek independent legal advice.

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APPENDIX K

RULES OF THE PINE AGRITECH EMPLOYEE SHARE OPTION SCHEME

1. NAME OF THE ESOS

The ESOS shall be called the “Pine Agritech Employee Share Option Scheme”.

2. DEFINITIONS

2.1 In the ESOS, unless the context otherwise requires, the following words and expressions shallhave the following meanings:-

“Act” The Companies Act, Chapter 50 of Singapore as amended,modified or supplemented from time to time.

“Auditors” The auditors of the Company for the time being.

“Bermuda Companies Act” The Bermuda Companies Act, as amended, modified orsupplemented from time to time.

“Board” The board of directors of the Company.

“Bye-Laws” The Bye-Laws of the Company, as amended from time totime.

“CDP” The Central Depository (Pte) Limited.

“CPF” Central Provident Fund.

“Committee” The remuneration committee of the Company, or such othercommittee comprising directors of the Company dulyauthorised and appointed by the Board to administer thisESOS.

“Company” Pine Agritech Limited.

“control” The capacity to dominate decision making, directly orindirectly, in relation to the financial and operating policies ofthe Company.

“Controlling Shareholder” A shareholder exercising control over the Company andunless rebutted, a person who controls directly or indirectlyfifteen (15) per cent or more of the Company’s issued sharecapital shall be presumed to be a Controlling Shareholder ofthe Company.

“Director” A person holding office as a director for the time being ofthe Company and/or its Subsidiaries, as the case may be.

“ESOS” The Pine Agritech Employee Share Option Scheme, as thesame may be modified or altered from time to time.

“Executive Director” A director of the Company and/or its Subsidiaries, as thecase may be, who performs an executive function within theCompany or the relevant Subsidiary, as the case may be.

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“Exercise Price” The price at which a Participant shall subscribe for eachShare upon the exercise of an Option which shall be theprice as determined in accordance with Rule 9, as adjustedin accordance with Rule 10.

“Grantee” A person to whom an offer of an Option is made.

“Group” The Company and its Subsidiaries.

“Group Employee” Any confirmed employee of the Group (including anyExecutive Director) selected by the Committee to participatein the ESOS in accordance with Rule 4.

“Incentive Option” The right to subscribe for Shares granted or to be grantedpursuant to the ESOS and for the time being subsisting, andin respect of which the Subscription Price is determined inaccordance with Rule 9.1(b).

“Market Day” A day on which the SGX-ST is open for trading in securities.

“Market Price” A price equal to the average of the last dealt prices for theShares on the SGX-ST over the five consecutive TradingDays immediately preceding the Date of Grant of thatOption, as determined by the Committee by reference to thedaily official list or any other publication published by theSGX-ST, rounded to the nearest whole cent in the event offractional prices.

“Market Price Option” The right to subscribe for Shares granted or to be grantedpursuant to the ESOS and for the time being subsisting, andin respect of which the Subscription Price is determined inaccordance with Rule 9.1(a).

“Non-Executive Director” A director of the Company and/or its Subsidiaries, as thecase may be, other than an Executive Director but includingthe independent Directors of the Company.

“Offer Date” The date on which an offer to grant an Option is madepursuant to the ESOS.

“Offeree” The person to whom an offer of an Option is made.

“Option” The right to subscribe for Shares granted or to be granted toa Group Employee pursuant to the ESOS and for the timebeing subsisting.

“Option Period” The period for the exercise of an Option being:-

(a) in the case of a Market Price Option granted to aGroup Employee, a period commencing after the firstanniversary of the Date of Grant and expiring on thetenth anniversary of such Date of Grant, subject asprovided in Rules 11 and 15 and any other conditionsas may be introduced by the Committee from time totime;

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(b) in the case of a Market Price Option granted to aNon-executive Director, a period commencing afterthe first anniversary of the Date of Grant and expiringon the fifth anniversary of such Date of Grant, subjectas provided in Rules 11 and 15 and any otherconditions as may be introduced by the Committeefrom time to time;

(c) in the case of an Incentive Option granted to a GroupEmployee, a period commencing after the secondanniversary of the Date of Grant and expiring on thetenth anniversary of such Date of Grant, subject asprovided in Rules 11 and 15 and any other conditionsas may be introduced by the Committee from time totime;

(d) in the case of an Incentive Option granted to a Non-executive Director, a period commencing after thesecond anniversary of the Date of Grant and expiringon the fifth anniversary of such Date of Grant, subjectas provided in Rules 11 and 15 and any otherconditions as may be introduced by the Committeefrom time to time.

“Participant” The holder of an Option.

“Record Date” The date as at the close of business on which theShareholders must be registered in order to participate inany dividends, rights, allotments or other distributions.

“Rules” Rules of the Pine Agritech Employee Share Option Scheme.

“S$” Singapore Dollars.

“Securities Account” The securities account maintained by a Depositor with CDP.

“Shareholders” Registered holders of Shares, except where the registeredholder is CDP, the term “Shareholders” shall, in relation tosuch Shares, mean the Depositors whose SecuritiesAccounts are credited with Shares.

“Shares” Ordinary shares of par value S$0.10 each in the capital ofthe Company.

“Subsidiaries” Companies which are for the time being subsidiaries of theCompany as defined by Section 5 of the Act; and“Subsidiary” means each of them.

“SGX-ST” Singapore Exchange Securities Trading Limited.

“Trading Day” A day on which the Shares are traded on the SGX-ST.

“US$” United States Dollars.

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2.2 The term “Depositor”, “Depository Register” and “Depository Agent” shall have the meaningsascribed to it by Section 130A of the Act and the term “associate” shall have the meaning ascribedto it by the SGX-ST Listing Manual or any other publication prescribing rules or regulations forcorporations admitted to the Official List of the SGX-ST (as modified, supplemented or amendedfrom time to time).

2.3 Words importing the singular number shall, where applicable, include the plural number and viceversa. Words importing the masculine gender shall, where applicable, include the feminine andneuter gender.

2.4 Any reference to a time of a day in the ESOS is a reference to Singapore time.

2.5 Any reference in the ESOS to any enactment is a reference to that enactment as for the time beingamended or re-enacted. Any word defined under the Bermuda Companies Act or any statutorymodification thereof and used in the ESOS shall have the meaning assigned to it under theBermuda Companies Act.

3. OBJECTIVES OF THE ESOS

The ESOS will provide an opportunity for Group Employees who have contributed significantly tothe growth and performance of the Group (including Executive and Non-Executive Directors) andwho satisfy the eligibility criteria as set out in Rule 4 of the ESOS, to participate in the equity of theCompany.

The ESOS is primarily a share incentive scheme. It recognises the fact that the services of suchGroup Employees are important to the success and continued well-being of the Group.Implementation of the ESOS will enable the Company to give recognition to the contributionsmade by such Group Employees. At the same time, it will give such Group Employees anopportunity to have a direct interest in the Company at no direct cost to its profitability and will alsohelp to achieve the following positive objectives:-

(a) the motivation of each Participant to optimise his performance standards and efficiency andto maintain a high level of contribution to the Group;

(b) the retention of key employees and Executive Directors of the Group whose contributionsare essential to the long-term growth and profitability of the Group;

(c) to instil loyalty to, and a stronger identification by the Participants with the long-termprosperity of, the Company;

(d) to attract potential employees with relevant skills to contribute to the Group and to createvalue for the Shareholders; and

(e) to align the interests of the Participants with the interests of the Shareholders.

4. ELIGIBILITY

4.1 Confirmed Group Employees (including Executive and Non-Executive Directors) who have attainedthe age of twenty-one (21) years on or prior to the relevant Offer Date and are not undischargedbankrupts and have not entered into a composition with their respective creditors, shall be eligibleto participate in the ESOS at the absolute discretion of the Committee.

4.2 Controlling Shareholders and their associates shall not be eligible to participate in the ESOS.

4.3 There will be no restriction on the eligibility of any Participant to participate in any other shareoption or share incentive schemes implemented by any other companies within the Group.

4.4 Subject to the Act, Bermuda Companies Act and any requirement of the SGX-ST, the terms ofeligibility for participation in the ESOS may be amended from time to time at the absolutediscretion of the Committee, which would be exercised judiciously.

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5. MAXIMUM ENTITLEMENT

Subject to RuIe 4 and Rule 10, the aggregate number of Shares in respect of which Options maybe offered to a Grantee for subscription in accordance with the ESOS shall be determined at thediscretion of the Committee who shall take into account criteria such as rank, past performance,years of service and potential development of the Participant.

6. LIMITATION ON SIZE OF THE ESOS

The aggregate nominal amount of Shares over which the Committee may grant Options on anydate, when added to the nominal amount of Shares issued and issuable in respect of all Optionsgranted under the ESOS shall not exceed fifteen (15) per cent of the issued share capital of theCompany on the day immediately preceding the Offer Date of the Option.

7. OFFER DATE

7.1 The Committee may, save as provided in Rule 4, Rule 5 and Rule 6, offer to grant Options to suchGrantees as it may select in its absolute discretion at any time during the period when the ESOSis in force, except that no Option shall be granted during the period of thirty (30) days immediatelypreceding the date of announcement of the Company’s interim and/or final results (whichever thecase may be). In addition, in the event that an announcement on any matter of an exceptionalnature involving unpublished price sensitive information is made, offers to grant Options may onlybe made on or after the second Market Day on which such announcement is released.

7.2 An offer to grant the Option to a Grantee shall be made by way of a letter (the “Letter of Offer”) inthe form or substantially in the form set out in Schedule A, subject to such amendments as theCommittee may determine from time to time.

8. ACCEPTANCE OF OFFER

8.1 An Option offered to a Grantee pursuant to Rule 7 may only be accepted by the Grantee withinthirty (30) days after the relevant Offer Date and not later than 5.00 p.m. on the thirtieth (30th) dayfrom such Offer Date (a) by completing, signing and returning to the Company the AcceptanceForm in or substantially in the form set out in Schedule B, subject to such modification as theCommittee may from time to time determine, accompanied by payment of S$1.00 as considerationand (b) if, at the date on which the Company receives from the Grantee the Acceptance Form inrespect of the Option as aforesaid, he remains eligible to participate in the ESOS in accordancewith these Rules.

8.2 If a grant of an Option is not accepted strictly in the manner as provided in this Rule 8, such offershall, upon the expiry of the thirty (30) day period, automatically lapse and shall forthwith bedeemed to be null and void and be of no effect.

8.3 The Company shall be entitled to reject any purported acceptance of a grant of an Option madepursuant to this Rule 8 or Exercise Notice given pursuant to Rule 12 which does not strictly complywith the terms of the ESOS.

8.4 Options are personal to the Grantees to whom they are granted and shall not be sold, mortgaged,transferred, charged, assigned, pledged or otherwise disposed of or encumbered in whole or inpart or in any way whatsoever without the Committee’s prior written approval, but may beexercised by the Grantee’s duly appointed personal representative as provided in Rule 11.5 in theevent of the death of such Grantee.

8.5 The Grantee may accept or refuse the whole or part of the offer. If only part of the offer isaccepted, the Grantee shall accept the offer in multiples of 1,000 Shares.

8.6 In the event that a grant of an Option results in a contravention of any applicable law or regulation,such grant shall be null and void and be of no effect and the relevant Participant shall have noclaim whatsoever against the Company.

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8.7 Unless the Committee determines otherwise, an Option shall automatically lapse and become null,void and of no effect and shall not be capable of acceptance if:-

(a) it is not accepted in the manner as provided in Rule 8.1 within the thirty (30) day period; or

(b) the Grantee dies prior to his acceptance of the Option; or

(c) the Grantee is adjudicated a bankrupt or enters into composition with his creditors prior tohis acceptance of the Option; or

(d) the Grantee being a Group Employee ceases to be in the employment of the Group or(being a Director) ceases to be a Director of the Company, in each case, for any reasonwhatsoever prior to his acceptance of the Option; or

(e) the Company is liquidated or wound-up prior to the Grantee’s acceptance of the Option.

9. EXERCISE PRICE

9.1 Subject to any adjustment pursuant to Rule 10, the Exercise Price for each Share in respect ofwhich an Option is exercisable shall be determined by the Committee, in its absolute discretion, onthe Date of Grant, at:-

(a) a price equal to the Market Price; or

(b) a price which is set at a discount to the Market Price, provided that:-

(i) the maximum discount shall not exceed twenty (20) per cent of the Market Price (orsuch other percentage or amount as may be determined by the Committee andpermitted by the SGX-ST); and

(ii) the Shareholders in general meeting shall have authorised, in a separate resolution,the making of offers and grants of Options under the ESOS at a discount notexceeding the maximum discount as aforesaid.

9.2 In making any determination under Rule 9.1(b) on whether to give a discount and the quantum ofsuch discount, the Committee shall be at liberty to take into consideration such criteria as theCommittee may, at its absolute discretion, deem appropriate, including but not limited to:-

(a) the performance of the Company and/or its Subsidiaries, as the case may be;

(b) the years of service and individual performance of the eligible Group Employee or Director;

(c) the contribution of the eligible Group Employee or Director to the success and developmentof the Company and/or the Group; and

(d) the prevailing market conditions.

9.3 The Exercise Price shall in no event be less than the nominal value of a Share. Where theExercise Price as determined above is less than the nominal value of the Share, the ExercisePrice shall be the nominal value.

10. ALTERATION OF CAPITAL

10.1 If a variation in the issued share capital of the Company (whether by way of a capitalisation ofprofits or reserves or rights issue or reduction (including any reduction arising by reason of theCompany purchasing or acquiring its issued Shares), subdivision, consolidation or distribution, orotherwise howsoever) should take place, then:-

(a) the Exercise Price in respect of the Shares and nominal value, class and/or number ofShares comprised in the Options to the extent unexercised and the rights attached thereto;and/or

(b) the nominal value, class and/or number of Shares in respect of which additional Optionsmay be granted to Participants,

may, be adjusted in such manner as the Committee may determine to be appropriate includingretrospective adjustments where such variation occurs after the date of exercise of an Option butthe Record Date relating to such variation precedes such date of exercise and, except in relationto a capitalisation issue, upon the written confirmation of the Auditors (acting only as experts andnot as arbitrators), that in their opinion, such adjustment is fair and reasonable.

10.2 Notwithstanding the provisions of Rule 10.1 above, no such adjustment shall be made (a) whichwould result in the Shares to be issued upon the exercise of an Option being issued at a discountto the nominal value and if such an adjustment would but for this sub-Clause have so resulted, theExercise Price payable shall be the nominal value of a Share; (b) if as a result, the Participantreceives a benefit that a Shareholder does not receive; and (c) unless the Committee afterconsidering all relevant circumstances considers it equitable to do so.

10.3 Unless the Committee considers an adjustment to be appropriate, the issue of securities asconsideration for an acquisition or a private placement of securities, or the cancellation of issuedShares purchased or acquired by the Company by way of a market purchase of such Sharesundertaken by the Company on the SGX-ST during the period when the Share purchase mandategranted by the members of the Company (including any renewal of such mandate) is in force, shallnot normally be regarded as a circumstance requiring adjustment.

10.4 The restriction on the number of Shares to be offered to any Grantee under Rule 5 above, shallnot apply to the number of additional Shares or Options over additional Shares issued by virtue ofany adjustment to the number of Shares and/or Options pursuant to this Rule 10.

10.5 Upon any adjustment required to be made, the Company shall notify each Participant (or his dulyappointed personal representative(s)) in writing and deliver to him (or, where applicable, his dulyappointed personal representative(s)) a statement setting forth the new Exercise Price thereafter ineffect and the nominal value, class and/or number of Shares thereafter comprised in the Option sofar as unexercised. Any adjustment shall take effect upon such written notification being given.

11. RIGHTS

11.1 Subject to Rules 11 and 15, an Option shall be exercisable, in whole or in part, during the OptionPeriod applicable to that Option. Upon the expiry of the relevant Option Period, the correspondingOptions shall immediately become null and void.

11.2 An Option shall, to the extent unexercised, immediately lapse and become null and void and aParticipant shall have no claim against the Company:-

(a) subject to Rules 11.3, 11.4 and 11.5, upon the Participant ceasing to be in the employmentof the Company or any of the companies within the Group for any reason whatsoever; or

(b) upon the bankruptcy of the Participant or the happening of any other event which result inhis being deprived of the legal or beneficial ownership of such Option; or

(c) in the event of misconduct on the part of the Participant, as determined by the Committee inits absolute discretion.

For the purpose of Rule 11.2(a), a Participant shall be deemed to have ceased to be so employedas of the date the notice of termination of employment is tendered by or is given to him, unlesssuch notice shall be withdrawn prior to its effective date.

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11.3 If a Participant ceases to be employed by the Group by reason of his:-

(a) ill health, injury or disability, in each case, as certified by a medical practitioner approved bythe Committee;

(b) redundancy;

(c) retirement at or after a normal retirement age; or

(d) retirement before that age with the consent of the Committee,

or for any other reason approved in writing by the Committee, he may, at the absolute discretion ofthe Committee exercise any unexercised Option within the relevant Option Period and upon theexpiry of such period, the Option shall immediately lapse and become null and void.

11.4 If a Participant ceases to be employed by a Subsidiary:-

(a) by reason of the Subsidiary, by which he is principally employed ceasing to be a companywithin the Group or the undertaking or part of the undertaking of such Subsidiary, beingtransferred otherwise than to another company within the Group; or

(b) for any other reason, provided the Committee gives its consent in writing, he may, at theabsolute discretion of the Committee, exercise any unexercised Options within the relevantOption Period and upon the expiry of such period, the Option shall immediately lapse andbecome null and void.

11.5 If a Participant dies and at the date of his death holds any unexercised Option, such Option may,at the absolute discretion of the Committee, be exercised by the duly appointed legal personalrepresentatives of the Participant within the relevant Option Period and upon the expiry of suchperiod, the Option shall immediately lapse and become null and void.

11.6 If a Participant, who is also an Executive Director, ceases to be a Director for any reasonwhatsoever, he may, at the absolute discretion of the Committee, exercise any unexercised Optionwithin the relevant Option Period and upon the expiry of such period, the Option shall immediatelylapse and become null and void.

11.7 If a Participant, being a Non-Executive Director, ceases to be a Director for any reasonwhatsoever, any Option then held by him shall, to the extent unexercised, immediately lapsewithout any claim against the Company, unless otherwise determined by the Committee in itsabsolute discretion. In exercising such discretion, the Committee may also determine the numberof Shares in respect of which that Option may be exercised and the period during which suchOption may continue to be exercisable, provided that such period shall not in any event exceed theOption Period applicable to such Option.

12. EXERCISE OF OPTIONS, ALLOTMENT AND LISTING OF SHARES

12.1 Subject to Rule 11.1, an Option may be exercised, in whole or in part (provided that an Optionmay be exercised in part only in respect of 1,000 Shares or any multiple thereof), by a Participantgiving notice in writing to the Company in or substantially in the form set out in Schedule C (the“Exercise Notice”), subject to such amendments as the Committee may from time to timedetermine. Every Exercise Notice must be accompanied by a remittance for the full amount of theaggregate Exercise Price in respect of the Shares which have been exercised under the Option,the relevant CDP charges (if any) and any other documentation the Committee may require. Allpayments shall be made by cheque, cashier’s order, bank draft or postal order made out in favourof the Company. An Option shall be deemed to be exercised upon the receipt by the Company ofthe abovementioned Notice duly completed and the receipt by the Company of the full amount ofthe aggregate Exercise Price in respect of the Shares which have been exercised under theOption.

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12.2 Subject to:-

(a) such consents or other actions required by any competent authority under any regulations orenactments for the time being in force as may be necessary (including any approvalsrequired from the SGX-ST); and

(b) compliance with the Rules, the Memorandum of Association and Bye-Laws of the Company,the Company shall, as soon as practicable after the exercise of an Option by a Participantbut in any event within ten (10) Market Days after the date of the exercise of the Option inaccordance with Rule 12.1, allot the Shares in respect of which such Option has beenexercised by the Participant and within five (5) Market Days from the date of such allotment,despatch the relevant share certificates to CDP for the credit of the securities account ofthat Participant by ordinary post or such other mode of delivery as the Committee maydeem fit.

12.3 The Company shall, if necessary, as soon as practicable after the exercise of an Option, apply tothe SGX-ST or any other stock exchange on which the Shares are quoted or listed for permissionto deal in and for quotation of the Shares which may be issued upon exercise of the Option andthe Shares (if any) which may be issued to the Participant pursuant to any adjustments made inaccordance with Rule 10.

12.4 Shares which are all allotted on the exercise of an Option by a Participant shall be issued, as theParticipant may elect, in the name of CDP to the credit of the securities account of the Participantmaintained with CDP or the Participant’s securities sub-account with a CDP Depository Agent.

12.5 Shares allotted and issued upon the exercise of an Option shall be subject to all provisions of theMemorandum of Association and Bye-Laws of the Company and shall rank pari passu in allrespects with the then existing issued Shares in the capital of the Company except for anydividends, rights, allotments or other distributions, the Record Date for which is prior to the datesuch Option is exercised.

12.6 The Company shall keep available sufficient unissued Shares to satisfy the full exercise of allOptions for the time being remaining capable of being exercised.

13. MODIFICATIONS TO THE ESOS

13.1 Any or all the provisions of the ESOS may be modified and/or altered at any time and from time totime by resolution of the Committee, except that:-

(a) any modification or alteration which shall alter adversely the rights attaching to any Optiongranted prior to such modification or alteration and which in the opinion of the Committee,materially alters the rights attaching to any Option granted prior to such modification oralteration may only be made with the consent in writing of such number of Participants who,if they exercised their Options in full, would thereby become entitled to not less than three-quarters (3/4) in nominal amount of all the Shares which would fall to be allotted uponexercise in full of all outstanding Options;

(b) any modification or alteration which would be to the advantage of Participants under theESOS shall be subject to the prior approval of the Shareholders in general meeting; and

(c) no modification or alteration shall be made without the prior approval of the SGX-ST or (ifrequired) any other stock exchange on which the Shares are quoted and listed, and suchother regulatory authorities as may be necessary.

For the purposes of Rule 13.1(a), the opinion of the Committee as to whether any modification oralteration would alter adversely the rights attaching to any Option shall be final and conclusive.

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13.2 Notwithstanding anything to the contrary contained in Rule 13.1, the Committee may at any timeby resolution (and without other formality, save for the prior approval of the SGX-ST) amend oralter the ESOS in any way to the extent necessary to cause the ESOS to comply with anystatutory provision or the provision or the regulations of any regulatory or other relevant authorityor body (including the SGX-ST).

13.3 Written notice of any modification or alteration made in accordance with this Rule 13 shall be givento all Participants.

14. DURATION OF THE ESOS

14.1 The ESOS shall continue to be in force at the discretion of the Committee, subject to a maximumperiod of ten (10) years, commencing on the date on which the ESOS is adopted by Shareholders.Subject to compliance with any applicable laws and regulations in Singapore, the ESOS may becontinued beyond the above stipulated period with the approval of the Shareholders by ordinaryresolution at a general meeting and of any relevant authorities which may then be required.

14.2 The ESOS may be terminated at any time by the Committee or by resolution of the Shareholdersat a general meeting subject to all other relevant approvals which may be required and if theESOS is so terminated, no further Options shall be offered by the Company hereunder.

14.3 The termination, discontinuance or expiry of the ESOS shall be without prejudice to the rightsaccrued to Options which have been granted and accepted as provided in Rule 8, whether suchOptions have been exercised (whether fully or partially) or not.

15. TAKE-OVER AND WINDING UP OF THE COMPANY

15.1 In the event of a take-over offer being made for the Company, Participants (including Participantsholding Options which are then not exercisable pursuant to the provisions of Rule 11.1) holdingOptions as yet unexercised shall, notwithstanding Rules 11 and 12 but subject to Rule 15.5, beentitled to exercise such Options in full or in part in the period commencing on the date on whichsuch offer is made or, if such offer is conditional, the date on which the offer becomes or isdeclared unconditional, as the case may be, and ending on the earlier of:-

(a) the expiry of six (6) months thereafter, unless prior to the expiry of such six (6) monthperiod, at the recommendation of the offeror and with the approvals of the Committee andthe SGX-ST, such expiry date is extended to a later date (being a date falling not later thanthe date of expiry of the Option Period relating thereto); or

(b) the date of the expiry of the Option Period relating thereto,

whereupon any Option then remaining unexercised shall immediately lapse and become null andvoid.

Provided Always that if during such period the offeror becomes entitled or bound to exercise therights of compulsory acquisition of the Shares under the provisions of the Act or the BermudaCompanies Act and, being entitled to do so, gives notice to the Participants that it intends toexercise such rights on a specified date, the Option shall remain exercisable by the Participantsuntil such specified date or the expiry of the Option Period relating thereto, whichever is earlier.Any Option not so exercised by the said specified date shall lapse and become null and void.

Provided That the rights of acquisition or obligation to acquire stated in the notice shall have beenexercised or performed, as the case may be. If such rights of acquisition or obligations have notbeen exercised or performed, all Options shall, subject to Rule 11.2, remain exercisable until theexpiry of the Option Period.

15.2 If, under any applicable laws, the court sanctions a compromise or arrangement proposed for thepurposes of, or in connection with, a scheme for the reconstruction of the Company or itsamalgamation with another company or companies, Participants (including Participants holdingOptions which are then not exercisable pursuant to the provisions of Rule 11.1) shallnotwithstanding Rules 11 and 12 but subject to Rule 15.5, be entitled to exercise any Option thenheld by them during the period commencing on the date upon which the compromise orarrangement is sanctioned by the court and ending either on the expiry of sixty (60) daysthereafter or the date upon which the compromise or arrangement becomes effective, whichever islater (but not after the expiry of the Option Period relating thereto), whereupon any unexercisedOption shall lapse and become null and void.

15.3 If an order or an effective resolution is passed for the winding up of the Company on the basis ofits insolvency, all Options, to the extent unexercised, shall lapse and become null and void.

15.4 In the event a notice is given by the Company to its members to convene a general meeting for thepurposes of considering and, if thought fit, approving a resolution to voluntarily wind-up theCompany, the Company shall on the same date as or soon after it dispatches such notice to eachmember of the Company give notice thereof to all Grantees (together with a notice of the existenceof the provision of this Rule 15.4) and thereupon, each Grantee (or his personal representative)shall be entitled to exercise all or any of his Options at any time not later than two business daysprior to the proposed general meeting of the Company by giving notice in writing to the Company,accompanied by a remittance for the aggregate Exercise Price whereupon the Company shall assoon as possible and in any event, no later than the business day immediately prior to the date ofthe proposed general meeting referred to above, allot the relevant Shares to the Grantee creditedas fully paid.

15.5 If in connection with the making of a general offer referred to in Rule 15.1 above or the schemereferred to in Rule 15.2 above or the winding up referred to in Rule 15.4 above, arrangements aremade (which are confirmed in writing by the Auditors, acting only as experts and not as arbitrators,to be fair and reasonable) for the compensation of Participants, whether by the continuation oftheir Options or the payment of cash or the grant of other options or otherwise, a Participantholding an Option, which is not then exercisable, may not, at the discretion of the Committee, bepermitted to exercise that Option as provided for in this Rule 15.

15.6 To the extent that an Option is not exercised within the periods referred to in this Rule 15, it shalllapse and become null and void.

16. ADMINISTRATION OF THE ESOS

16.1 The ESOS shall be administered by the Committee in its absolute discretion with such powers andduties as are conferred on it by the Board.

16.2 The Committee shall have the power, from time to time, to make or vary such regulations (notbeing inconsistent with the ESOS) for the implementation and administration of the ESOS as itthinks fit.

16.3 Any decision of the Committee, made pursuant to any provision of the ESOS (other than a matterto be certified by the Auditors), shall be final and binding (including any decisions pertaining todisputes as to the interpretation of the ESOS or any rule, regulation, or procedure thereunder oras to any rights under the ESOS).

16.4 A Director who is a member of the Committee shall not be involved in its deliberation in respect ofOptions to be granted to him.

17. NOTICES

17.1 Any notice given by a Participant to the Company shall be sent by post or delivered to theregistered office of the Company or such other address as may be notified by the Company to theParticipant in writing.

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17.2 Any notice or documents given by the Company to a Participant shall be sent to the Participant byhand or sent to him at his home address stated in the records of the Company or the last knownaddress of the Participant, and if sent by post shall be deemed to have been given on the dayimmediately following the date of posting.

18. TERMS OF EMPLOYMENT UNAFFECTED

18.1 The ESOS or any Option shall not form part of any contract of employment between the Companyor any Subsidiary (as the case may be) and any Participant and the rights and obligations of anyindividual under the terms of the office or employment with such company within the Group shallnot be affected by his participation in the ESOS or any right which he may have to participate in itor any Option which he may hold and the ESOS or any Option shall afford such an individual noadditional rights to compensation or damages in consequence of the termination of such office oremployment for any reason whatsoever.

18.2 The ESOS shall not confer on any person any legal or equitable rights (other than thoseconstituting the Options themselves) against the Company and/or any Subsidiary directly orindirectly or give rise to any cause of action at law or in equity against the Company or anySubsidiary.

19. TAXES

All taxes (including income tax) arising from the exercise of any Option granted to any Participantunder the ESOS shall be borne by that Participant.

20. COSTS AND EXPENSES OF THE ESOS

20.1 Each Participant shall be responsible for all fees of CDP relating to or in connection with the issueand allotment of any Shares pursuant to the exercise of any Option in CDP’s name, the deposit ofshare certificate(s) with CDP, the Participant’s securities account with CDP, or the Participant’ssecurities sub-account with a Depository Agent or CPF investment account with a CPF agent bankand all taxes referred to in Rule 19 which shall be payable by the relevant Participant.

20.2 Save for such costs and expenses expressly provided in the ESOS to be payable by theParticipants, all fees, costs and expenses incurred by the Company in relation to the ESOSincluding but not limited to the fees, costs and expenses relating to the allotment and issue ofShares pursuant to the exercise of any Option shall be borne by the Company.

21. CONDITION OF OPTION

Every Option shall be subject to the condition that no Shares shall be issued pursuant to theexercise of an Option if such issue would be contrary to any law or enactment, or any rules orregulations of any legislative or non-legislative governing body for the time being in force inSingapore or any other relevant country.

22. DISCLAIMER OF LIABILITY

Notwithstanding any provisions herein contained and subject to the Act, the Board, the Committeeand the Company shall not under any circumstances be held liable for any costs, losses, expensesand damages whatsoever and howsoever arising in respect of any matter under or in connectionwith the ESOS, including but not limited to the Company’s delay in allotting and issuing the Sharesor in applying for or procuring the listing of the Shares on the SGX-ST.

23. DISCLOSURE IN ANNUAL REPORT

The Company shall make the following disclosure in its annual report:-

(a) The names of the members of the Committee;

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(b) The information required in the table below for the following Participants (which for theavoidance of doubt, shall include Participants who have exercised all their Options in anyparticular financial year):-

(i) participants who are Directors of the Company; and

(ii) participants, other than those in (i) who receive five (5) per cent or more of the totalnumber of Options available under the ESOS.

Name of Options Aggregate Options Aggregate Options Aggregate Participant granted during granted since exercised since Options

financial year commencement commencement of outstanding as atunder review of the ESOS to of the ESOS to end of financial

(including the end of the end of year under terms) financial year financial year review

(c) The number and proportion of Options granted at the following discounts to average marketvalue of the Shares in the financial year under review:-

(i) Options granted at up to 10 per cent discount; and

(ii) Options granted at between 10 per cent but not more than 20 per cent discount.

24. ABSTENTION FROM VOTING

Grantees who are Shareholders are to abstain from voting on any Shareholders’ resolution relatingto the ESOS.

25. DISPUTES

Any disputes or differences of any nature arising hereunder shall be referred to the Committee andits decision shall be final and binding in all respects.

26. GOVERNING LAW

The ESOS shall be governed by, and construed in accordance with, the laws of the Republic ofSingapore. The Participants, by accepting Options in accordance with the ESOS, and theCompany submit to the exclusive jurisdiction of the courts of the Republic of Singapore.

Schedule A


LETTER OF OFFER

Serial No:

Date:

To: NameDesignationAddress

Private and Confidential

Dear Sir/Madam,

1. We have the pleasure of informing you that, pursuant to the Pine Agritech Employee Share OptionScheme (“ESOS”), you have been nominated to participate in the ESOS by the Committee (the“Committee”) appointed by the Board of Directors of Pine Agritech Limited (the “Company”) toadminister the ESOS. Terms as defined in the ESOS shall have the same meaning when used inthis letter.

2. Accordingly, in consideration of the payment of a sum of S$1.00, an offer is hereby made to grantyou an option (the “Option”), to subscribe for and be allotted Shares at theprice of S$ for each Share.

3. The Option is personal, to you and shall not be transferred, charged, pledged, assigned orotherwise disposed of by you, in whole or in part, except with the prior approval of the Committee.

4. The Option shall be subject to the terms of the ESOS, a copy of which is available for inspection atthe business address of the Company.

5. If you wish to accept the offer of the Option on the terms of this letter, please sign and return theenclosed Acceptance Form with a sum of S$1.00 not later than 5.00 p.m. on failing which this offer will lapse.

Yours faithfully,For and on behalf ofPINE AGRITECH LIMITED

Name:

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Schedule B


ACCEPTANCE FORM

Serial No:

Date:

To: The Committee,Pine Agritech Employee Share Option SchemePine Agritech Limited[Address of Company]

Closing Date for Acceptance of Offer:

Number of Shares Offered:

Exercise Price for each Share: S$

Total Amount Payable: S$

I have read your Letter of Offer dated and agree to be bound by the terms of theLetter of Offer and ESOS referred to therein. Terms defined in your Letter of Offer shall have the samemeanings when used in this Acceptance Form.

I hereby accept the Option to subscribe for Shares at S$ for eachShare. I enclose cash for S$1.00 in payment for the purchase of the Option/I authorise my employer todeduct the sum of S$1.00 from my salary in payment for the purchase of the Option.

I understand that I am not obliged to exercise the Option.

I confirm that my acceptance of the Option will not result in the contravention of any applicable law orregulation in relation to the ownership of shares in the Company or options to subscribe for such shares.

I agree to keep all information pertaining to the grant of the Option to me confidential.

I further acknowledge that you have not made any representation to induce me to accept the offer andthat the terms of the Letter of Offer and this Acceptance Form constitute the entire agreement betweenus relating to the offer.

Please print in block letters

Name in full :Designation :Address :Nationality :*NRIC/Passport No. :

SignatureDate

Note:-

* Delete accordingly

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Schedule C


FORM OF EXERCISE OF OPTION

Total number of ordinary shares of S$0.10 each(the “Shares”) offered at S$ foreach Share (the “Exercise Price”) under theESOS on (Date of Grant)

Number of Shares previously allotted thereunder :

Outstanding balance of Shares to be allotted thereunder :

Number of Shares now to be subscribed :

To: The Committee,Pine Agritech Employee Share Option SchemePine Agritech Limited[Address of Company]

1. Pursuant to your Letter of Offer dated and my acceptance thereof, I hereby exercisethe Option to subscribe for Shares in PINE AGRITECH LIMITED (the “Company”) atS$ for each Share.

2. I enclose a *cheque/cashiers order/banker’s draft/postal order no. for S$by way of subscription for the total number of the said Shares.

3. I agree to subscribe for the said Shares subject to the terms of the Letter of Offer, the PineAgritech Employee Share Option Scheme and the Memorandum of Association and the Bye-Lawsof the Company.

4. I declare that I am subscribing for the said Shares for myself and not as a nominee for any otherperson.

5. I request the Company to allot and issue the Shares in the name of The Central Depository (Pte)Limited (“CDP”) for credit of my *Securities Account with CDP/Sub-Account with the DepositoryAgent/CPF investment account with my Agent Bank specified below and I hereby agree to bearsuch fees or other charges as may be imposed by CDP in respect thereof.

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Please print in block letters

Name in full :

Designation :

Address :

Nationality :

*NRIC/Passport No :

*Direct Securities Account No. :

OR

*Sub Account No. :

Name of Depository Agent :

OR

*CPF Investment Account No. :

Name of Agent Bank :

Signature :

Date :

Note:-

* Delete accordingly

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APPENDIX L

TERMS, CONDITIONS AND PROCEDURES FOR APPLICATION

You are invited to apply and subscribe for the New Shares at the Issue Price, subject to the followingterms and conditions:-

1. YOUR APPLICATION MUST BE MADE IN LOTS OF 1,000 NEW SHARES OR INTEGRALMULTIPLES THEREOF. YOUR APPLICATION FOR ANY OTHER NUMBER OF NEW SHARESWILL BE REJECTED.

2. YOUR APPLICATION FOR THE OFFER SHARES MAY BE MADE BY WAY OF THE PRINTEDOFFER SHARES APPLICATION FORMS OR BY WAY OF AUTOMATED TELLER MACHINES(“ATMS”) OF THE PARTICIPATING BANKS (“ATM ELECTRONIC APPLICATIONS”) ORTHROUGH INTERNET BANKING (“IB”) WEBSITES OF THE RELEVANT PARTICIPATING BANKS(“INTERNET ELECTRONIC APPLICATIONS” WHICH, TOGETHER WITH ATM ELECTRONICAPPLICATIONS, SHALL BE REFERRED TO AS “ELECTRONIC APPLICATIONS”).

YOUR APPLICATION FOR THE PLACEMENT SHARES MAY ONLY BE MADE BY WAY OF THEPRINTED PLACEMENT SHARES APPLICATION FORMS.

YOU MAY NOT USE CPF FUNDS TO APPLY FOR THE NEW SHARES.

3. You are allowed to submit only one application in your own name either for the Offer Shares or thePlacement Shares.

If you submit an application for the Offer Shares by way of a printed Offer Shares ApplicationForm, you may not submit another application for the Offer Shares by way of an ElectronicApplication and vice versa. Such separate applications shall be deemed to be multipleapplications and shall be rejected.

If you submit an application for the Offer Shares by way of an Internet Electronic Application, youmay not submit another application for the Offer Shares by way of an ATM Electronic Applicationand vice versa. Such separate applications shall be deemed to be multiple applications and shallbe rejected.

If you (being other than an approved nominee company) have submitted an application for theOffer Shares in your own name, you should not submit any other application for the Offer Shares,whether by way of a printed Application Form or by way of an Electronic Application, for any otherperson. Such separate applications shall be deemed to be multiple applications and shall berejected.

If you have made an application for the Placement Shares, you should not make any applicationfor the Offer Shares either by way of a printed Offer Shares Application Form or by way of anElectronic Application and vice versa. Such separate applications shall be deemed to be multipleapplications and shall be rejected.

Conversely, if you have made an application for the Offer Shares either by way of an ElectronicApplication or by way of a printed Offer Shares Application Form, you may not make anyapplication for the Placement Shares. Such separate applications shall be deemed to be multipleapplications and shall be rejected.

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Joint and multiple applications for the New Shares shall be rejected. If you submit or procuresubmissions of multiple share applications for the Offer Shares, the Placement Shares or both theOffer Shares and the Placement Shares, you may be deemed to have committed an offence underthe Penal Code, (Chapter 224) of Singapore and the Securities and Futures Act, (Chapter 289) ofSingapore, and your applications may be referred to the relevant authorities for investigation.Multiple applications or those appearing to be or suspected of being multiple applications will beliable to be rejected at the discretion of our Company.

4. We will not accept applications from any person under the age of 21 years, undischargedbankrupts, sole-proprietorships, partnerships, or non-corporate bodies, joint Securities Accountholders of CDP and from applicants whose addresses (furnished in their printed Application Formsor, in the case of Electronic Applications, contained in the records of the relevant ParticipatingBanks) bear post office box numbers.

5. We will not recognise the existence of a trust. Any application by a trustee or trustees must bemade in his/their own name(s) and without qualification or, where the application is made by wayof a printed Application Form by a nominee, in the name(s) of an approved nominee company orapproved nominee companies after complying with paragraph 6 below.

6. WE WILL ONLY ACCEPT APPLICATIONS FROM APPROVED NOMINEE COMPANIES.Approved nominee companies are defined as banks, merchant banks, finance companies,insurance companies, licensed securities dealers in Singapore and nominee companies controlledby them. Applications made by persons acting as nominees other than approved nomineecompanies shall be rejected.

7. IF YOU ARE NOT AN APPROVED NOMINEE COMPANY, YOU MUST MAINTAIN A SECURITIESACCOUNT WITH CDP IN YOUR OWN NAME AT THE TIME OF YOUR APPLICATION. If you donot have an existing Securities Account with CDP in your own name at the time of yourapplication, your application will be rejected (if you apply by way of an Application Form), or youwill not be able to complete your Electronic Application (if you apply by way of an ElectronicApplication). If you have an existing Securities Account but fail to provide your Securities Accountnumber or provide an incorrect Securities Account number in Section B of the printed ApplicationForm or in your Electronic Application, as the case may be, your application is liable to be rejected.Subject to paragraph 8 below, your application shall be rejected if your particulars, such as name,NRIC/passport number, nationality and permanent residence status and CDP Securities Accountnumber provided in your Application Form, or in the case of an Electronic Application, contained inthe records of the relevant Participating Bank at the time of your Electronic Application, as thecase may be, differ from those particulars in your Securities Account as maintained with CDP. Ifyou possess more than one individual direct Securities Account with CDP, your application shall berejected.

8. If your address as stated in the Application Form or, in the case of an Electronic Application, in therecords of the relevant Participating Bank, as the case may be, is different from the addressregistered with CDP, you must inform CDP of your updated address promptly, failing which thenotification letter on successful allotment will be sent to your address last registered with CDP.

9. Our Company reserves the right to reject any application which does not conform strictly to theinstructions set out in the Application Forms and in this Prospectus or which does not comply withthe instructions for Electronic Applications or with the terms and conditions of this Prospectus or, inthe case of an application by way of an Application Form, which is illegible, incomplete, incorrectlycompleted or which is accompanied by an improperly drawn up or improper form of remittance.Our Company further reserves the right to treat as valid any applications not completed orsubmitted or effected in all respects in accordance with the instructions set out in the ApplicationForms or the instructions for Electronic Applications or the terms and conditions of this Prospectus,and also to present for payment or other processes all remittances at any time after receipt and tohave full access to all information relating to, or deriving from, such remittances or the processingthereof.

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10. Our Company reserves the right to reject or to accept, in whole or in part, or to scale down or toballot any application, without assigning any reason therefor, and we will not entertain any enquiryand/or correspondence on the decision of our Company except in respect of applications whichhave been balloted but subsequently rejected where reasons for such rejection will be provided toyou. This right applies to applications made by way of Application Forms and by way of ElectronicApplications. In deciding the basis of allotment, our Company will give due consideration to thedesirability of allotting the New Shares to a reasonable number of applicants with a view toestablishing an adequate market for the Shares.

11. Share certificates will be registered in the name of CDP and will be forwarded only to CDP. It isexpected that CDP will send to you, at your own risk, within 15 Market Days after the close of theApplication List, a statement of account stating that your Securities Account has been credited withthe number of New Shares allotted to you. This will be the only acknowledgement of applicationmonies received and is not an acknowledgement by our Company. You irrevocably authorise CDPto complete and sign on your behalf as transferee or renouncee any instrument of transfer and/orother documents required for the issue or transfer of the New Shares allotted to you. Thisauthorisation applies to applications made by way of Application Forms and by way of ElectronicApplications.

12. In the event of an under-subscription for the Offer Shares as at the close of the Application List, wewill make available that number of the Offer Shares under-subscribed to satisfy applications for thePlacement Shares to the extent that there is an over-subscription for the Placement Shares as atthe close of the Application List.

In the event of an under-subscription for the Placement Shares as at the close of the ApplicationList, we will make available that number of the Placement Shares under-subscribed to satisfyapplications for the Offer Shares to the extent that there is an over-subscription for the OfferShares as at the close of the Application List.

In the event of an over-subscription for the Offer Shares as at the close of the Application Listand/or the Placement Shares are fully subscribed or over-subscribed as at the close of theApplication List, the successful applications for the Offer Shares will be determined by ballot orotherwise as determined by our Directors, in consultation with the Manager, and approved by theSGX-ST.

13. You irrevocably authorise CDP to disclose the outcome of your application, including the number ofNew Shares allotted to you pursuant to your application, to authorised operators.

14. Any reference to the “you” in this section shall include an individual, a corporation, an approvednominee and trustee applying for the Offer Shares by way of an Application Form or by way of anElectronic Application and a person applying for the Placement Shares.

15. By completing and delivering an application form or by making and completing an electronicapplication by (in the case of an ATM electronic application) pressing the “enter” or “ok” or“confirm” or “yes” key or any other relevant key on the ATM (as the case may be) or by (in the caseof an internet electronic application) clicking “submit” or “continue” or “yes” or “confirm” or any otherbutton on the IB website screen of the relevant Participating Banks (as the case may be) inaccordance with the provisions of this Prospectus, you:-

(a) irrevocably offer to subscribe for the number of New Shares specified in your application (orsuch smaller number for which the application is accepted) at the Issue Price and agree thatyou will accept such New Shares as may be allotted to you, in each case on the terms of,and subject to the conditions set out in, this Prospectus and the Memorandum and Bye-Laws of our Company;

(b) agree that in the event of any inconsistency between the terms and conditions forapplication set out in this Prospectus and those set out in the ATMs of the ParticipatingBanks, or the IB websites of the relevant Participating Banks, the terms and conditions setout in this Prospectus shall prevail;

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(c) agree that the aggregate Issue Price for the New Shares applied for is due and payable toour Company forthwith;

(d) warrant the truth and accuracy of the information contained, and representations anddeclarations made, in your application, and acknowledge and agree that such information,representations and declarations will be relied on by our Company in determining whether toaccept your application and/or whether to allot or allocate any New Shares to you; and

(e) agree and warrant that if the laws of any jurisdictions outside Singapore are applicable toyour application, you have complied with all such laws and none of our Company, theManager, the Underwriter and/or the Placement Agent will infringe any such laws as a resultof the acceptance of your application.

16. Our acceptance of applications will be conditional upon, inter alia, our Company being satisfiedthat:-

(a) permission has been granted by the SGX-ST to deal in and for quotation for all our existingShares and the New Shares on the Official List of the SGX-ST; and

(b) the Management and Underwriting Agreement and the Placement Agreement referred to inparagraph 16 under “General and Statutory Information” of this Prospectus have becomeunconditional and have not been terminated or cancelled prior to such date as our Companymay determine.

17. We will not hold any applications in reserve.

18. We will not allot Shares on the basis of this Prospectus later than six months after the date ofregistration of this Prospectus.

19. Additional terms and conditions for applications by way of Application Forms are set out on pagesL-4 to L-8 of this Prospectus.

20. Additional terms and conditions for applications by way of Electronic Applications are set out onpages L-8 to L-15 of this Prospectus.

ADDITIONAL TERMS AND CONDITIONS FOR APPLICATIONS USING PRINTED APPLICATIONFORMS

You shall make an application by way of Application Forms made on and subject to the terms andconditions of this Prospectus including but not limited to the terms and conditions appearing below aswell as those set out under the section on “TERMS, CONDITIONS AND PROCEDURES FORAPPLICATION” on pages L-1 to L-15 of this Prospectus, as well as the Memorandum and Bye-Laws ofour Company.

1. Your application for the Offer Shares must be made using the WHITE Offer Shares ApplicationForms and WHITE official envelopes “A” or “B” accompanying and forming part of this Prospectus.

Your application for the Placement Shares must be made using the BLUE Placement SharesApplication Forms accompanying and forming part of this Prospectus.

We draw your attention to the detailed instructions contained in the respective Application Formsand this Prospectus for the completion of the Application Forms which must be carefully followed.Our Company reserves the right to reject applications which do not conform strictly to theinstructions set out in the Application Forms and this Prospectus or to the terms andconditions of this Prospectus or which are illegible, incomplete, incorrectly completed orwhich are accompanied by improperly drawn remittances.

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2. Your Application Forms must be completed in English. Please type or write clearly in ink usingBLOCK LETTERS.

3. All spaces in the Application Forms except those under the heading “FOR OFFICIAL USE ONLY”must be completed and the words “NOT APPLICABLE” or “N.A”.” should be written in any spacethat is not applicable.

4. Individuals, corporations, approved nominee companies and trustees must give their names in full.If you are an individual, you must make your application using your full names appearing in youridentity card (if you have such identification document) or in your passport and, in the case ofcorporations, in your full names as registered with a competent authority. If you are a non-individual completing the Application Form under the hand of an official, you must state the nameand capacity in which that official signs. If you are a corporation completing the Application Form,you are required to affix your Common Seal (if any) in accordance with your Memorandum andArticles of Association or equivalent constitutive documents. If you are a corporate applicant andyour application is successful, a copy of your Memorandum and Articles of Association orequivalent constitutive documents must be lodged with our Company’s Share Registrar and ShareTransfer Office. Our Company reserves the right to require you to produce documentary proof ofidentification for verification purposes.

5. (a) You must complete Sections A and B and sign page 1 of the Application Form.

(b) You are required to delete either paragraph 7(a) or 7(b) on page 1 of the Application Form.Where paragraph 7(a) is deleted, you must also complete Section C of the ApplicationForms with particulars of the beneficial owner(s).

(c) If you fail to make the required declaration in paragraph 7(a) or 7(b), as the case may be, onpage 1 of the Application Forms, your application is liable to be rejected.

6. You (whether you are an individual and corporate applicant, whether incorporated orunincorporated and wherever incorporated or constituted), will be required to declare whether youare a citizen or permanent resident of Singapore or a corporation in which citizens or permanentresidents of Singapore or any body corporate constituted under any statute of Singapore have aninterest in the aggregate of more than 50 per cent of the issued share capital of or interests insuch corporations. If you are an approved nominee company, you are required to declare whetherthe beneficial owner of the New Shares is a citizen or permanent resident of Singapore or acorporation, whether incorporated or unincorporated and wherever incorporated or constituted, inwhich citizens or permanent residents of Singapore or any body corporate whether incorporated orunincorporated and wherever incorporated or constituted under any statute of Singapore have aninterest in the aggregate of more than 50 per cent of the issued share capital of or interests insuch corporation.

7. Your application must be accompanied by a remittance in Singapore currency for the full amountpayable, in respect of the number of New Shares applied for, in the form of a BANKER’S DRAFTor CASHIER’S ORDER drawn on a bank in Singapore, made out in favour of “PAgritech ShareIssue A/c” crossed “A/C PAYEE ONLY”, with your name and address written clearly on thereverse side. WE WILL NOT ACCEPT APPLICATIONS NOT ACCOMPANIED BY ANYPAYMENT OR ACCOMPANIED BY ANY OTHER FORM OF PAYMENT. WE WILL REJECTREMITTANCES BEARING “NOT TRANSFERABLE” OR “NON TRANSFERABLE” CROSSINGS.No acknowledgement or receipt will be issued by our Company or the Manager for applicationsand application monies received.

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8. Monies paid in respect of unsuccessful applications are expected to be returned (without interestor any share of revenue or other benefit arising therefrom) to you by ordinary post within 24 hoursof the balloting at your own risk. Where your application is rejected or accepted in part only, thefull amount or the balance of the application monies, as the case may be, will be refunded (withoutinterest or any share of revenue or other benefit arising therefrom) to you by ordinary post at yourown risk within 14 Market Days after the close of the Application List, provided that the remittanceaccompanying such applications which has been presented for payment or other processes hasbeen honoured and the application monies have been received in the designated share issueaccount.

9. Capitalised terms used in the Application Forms and defined in this Prospectus shall bear themeanings assigned to them in this Prospectus.

10. By completing and delivering the Application Form, you agree that:-

(a) in consideration of us having distributed the Application Form to you and agreeing to closethe Application List at 12.00 noon on 10 May 2005 or such other time or date as ourCompany may, in consultation with the Manager, decide and by completing and deliveringthe Application Form, you agree that:-

(i) your application is irrevocable;

(ii) your remittance will be honoured on first presentation and that any monies returnablemay be held pending clearance of your payment without interest or any share ofrevenue or other benefit arising therefrom;

(b) all applications, acceptances and contracts resulting therefrom under the Invitation shall begoverned by and construed in accordance with the laws of Singapore and that youirrevocably submit to the non-exclusive jurisdiction of the Singapore courts;

(c) in respect of the New Shares for which your application has been received and not rejected,acceptance of your application shall be constituted by written notification and not otherwise,notwithstanding any remittance being presented for payment by or on behalf of ourCompany;

(d) you will not be entitled to exercise any remedy of rescission for misrepresentation at anytime after acceptance of your application;

(e) in making your application, reliance is placed solely on the information contained in thisProspectus and none of our Company, the Manager, the Underwriter, the Placement Agentor any other person involved in the Invitation, shall have any liability for any information notso contained;

(f) you consent to the disclosure of your name, NRIC/passport number, address, nationality,permanent resident status, CDP Securities Account number, and share application amountto our Share Registrar, SGX-ST, CDP, SCCS, our Company, the Manager, the Underwriterand the Placement Agent; and

(g) you irrevocably agree and undertake to subscribe the number of New Shares applied for asstated in the Application Form or any smaller number of such Invitation Shares that may beallocated to you in respect of your application. In the event that our Company decide to allotany smaller number of New Shares or not to allot any New Shares to you, you agree toaccept such decision as final.

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Applications for Offer Shares

1. Your applications for Offer Shares MUST be made using the WHITE Offer Shares ApplicationForms and WHITE official envelopes “A” and “B”.

2. You must:-

(a) enclose the WHITE Offer Shares Application Form, duly completed and signed, togetherwith your correct remittance in accordance with the terms and conditions of this Prospectus,in the WHITE official envelope “A” provided;

(b) in the appropriate spaces on WHITE official envelope “A”:-

(i) write your name and address;

(ii) state the number of Offer Shares applied for;

(iii) tick the relevant box to indicate the form of payment; and

(iv) affix adequate Singapore postage;

(c) SEAL WHITE OFFICIAL ENVELOPE “A”;

(d) write, in the special box provided on the larger WHITE official envelope “B” addressed toLim Associates (Pte) Ltd, 10 Collyer Quay, #19-08 Ocean Building, Singapore 049315,the number of Offer Shares you have applied for; and

(e) insert WHITE official envelope “A” into WHITE official envelope “B”, seal WHITE officialenvelope “B” affix adequate Singapore postage on WHITE envelope “B” (if dispatched byordinary post) and thereafter DESPATCH BY ORDINARY POST OR DELIVER BY HAND atyour own risk to Lim Associates (Pte) Ltd, 10 Collyer Quay, #19-08 Ocean Building,Singapore 049315, so as to arrive by 12.00 noon on 10 May 2005 or such other time ordate as our Company may, in consultation with the Manager, decide. Local UrgentMail or Registered Post must NOT be used. No acknowledgement of receipt will beissued for any application or remittance received.

3. Applications that are illegible, incomplete or incorrectly completed or accompanied by improperlydrawn remittances or improper forms of remittance are liable to be rejected.

4. ONLY ONE APPLICATION should be enclosed in each envelope.

Applications for Placement Shares

1. Your application for Placement Shares MUST be made using the BLUE Placement SharesApplication Forms.

2. The completed and signed BLUE Placement Shares Application Form and your remittance inaccordance with the terms and conditions of this Prospectus, for the full amount payable in respectof the number of Placement Shares you have applied for, with your name, CDP Account numberand address written clearly on the reverse side, must be enclosed and sealed in an envelope to beprovided by you. You must affix adequate Singapore postage on the envelope (if dispatching byordinary post). The sealed envelope must be DESPATCHED BY ORDINARY POST ORDELIVERED BY HAND at your own risk to UOB Kay Hian Private Limited, 80 Raffles Place#30-01 UOB Plaza 1 Singapore 048624, so as to arrive by 12.00 noon on 10 May 2005 or suchother time or date as our Company may, in consultation with the Manager, decide. LocalUrgent Mail or Registered Post must NOT be used. No acknowledgement of receipt will beissued for any application or remittance received.

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3. Applications that are illegible, incomplete or incorrectly completed or accompanied by improperlydrawn remittances or improper form of remittance are liable to be rejected.

4. ONLY ONE APPLICATION should be enclosed in each envelope.

ADDITIONAL TERMS AND CONDITIONS FOR ELECTRONIC APPLICATIONS

The procedures for Electronic Applications at ATMs are set out on the ATM screens (in the case on ATMElectronic Applications) and the IB website screens (in the case of Internet Electronic Applications) of therelevant Participating Banks. Currently, DBS and UOB are the only Participating Banks through whichInternet Electronic Applications can be made. For illustration purposes, the procedures for ElectronicApplications through ATMs and the IB website of UOB are set out respectively in the “Steps for ElectronicApplications through ATMs of DBS and “Steps for Internet Electronic Applications through the IB websiteof DBS” (collectively, the “Steps”) appearing on pages L-13 to L-15 of this Prospectus.

The Steps set out the actions that you must take at an ATM or the IB website of DBS to complete anElectronic Application. Please read carefully the terms of this Prospectus, the Steps and the terms andconditions for Electronic Applications set out below before making an Electronic Application.

Any reference to “you” in the Additional Terms and Conditions for Electronic Applications and the Stepsshall refer to you making an application for the Offer Shares through an ATM or the IB website of arelevant Participating Bank.

You must have an existing bank account with and be an ATM cardholder of one of the ParticipatingBanks before you can make an Electronic Application at the ATMs of that Participating Bank. An ATMcard issued by one Participating Bank cannot be used to apply for the Offer Shares at an ATM belongingto other Participating Banks. Upon the completion of your ATM Electronic Application transaction, youwill receive an ATM transaction slip (“Transaction Record”), confirming the details of your ATM ElectronicApplication. The Transaction Record is for your retention and should not be submitted with any printedApplication Form.

You must ensure that you enter your own Securities Account number when using the ATM card issued toyou in your own name. If you fail to use your own ATM card or do not key in your own Securities Accountnumber, your application will be rejected. If you operate a joint bank account with any of the ParticipatingBanks, you must ensure that you enter your own Securities Account number when using the ATM cardissued to you in your own name. Using your own Securities Account number with an ATM card which isnot issued to you in your own name will render your Electronic Application liable to be rejected.

For an Internet Electronic Application, you must have an existing bank account with and an IB UserIdentification (“User ID”) and a Personal Identification Number/Password (“PIN”) given by the relevantParticipating Bank. Upon completion of your Internet Electronic Application, there will be an on-screenconfirmation (“Confirmation Screen”) of the application which you can print out for your record. Thisprinted record of the Confirmation Screen is for your retention and should not be submitted with anyprinted Application Form.

You must ensure, when making an Internet Electronic Application, that your mailing address is inSingapore and the application is being made in Singapore and you will be asked to declare accordingly.Otherwise, your application is liable to be rejected. In this connection, you will be asked to declare thatyou are in Singapore at the time when you make the application.

Your Electronic Application shall be made on the terms and, subject to the conditions of this Prospectus,including but not limited to the terms and conditions appearing below and those set out under the sectionon “TERMS, CONDITIONS AND PROCEDURES FOR APPLICATION” on pages L-1 to L-15 of thisProspectus as well as the Memorandum and Bye-Laws of our Company.

1. IN CONNECTION WITH YOUR ELECTRONIC APPLICATION FOR THE OFFER SHARES, YOUARE REQUIRED TO CONFIRM STATEMENTS TO THE FOLLOWING EFFECT IN THE COURSEOF ACTIVATING THE ELECTRONIC APPLICATION:-

(a) that you have received a copy of this Prospectus and has read, understood andagreed to all the terms and conditions of application for the Offer Shares and thisProspectus prior to effecting the Electronic Application and agrees to be bound bythe same;

(b) that you consent to the disclosure of your name, NRIC/passport number, address,nationality, permanent resident status, CDP Securities Account number, and shareapplication amount (the “Relevant Particulars”) from your account with thatParticipating Bank to the Share Registrar, SGX-ST, CDP, SCCS, our Company and theManager (the “Relevant Parties”); and

(c) that this is your only application and it is made in your own name and at your ownrisk.

YOUR APPLICATION WILL NOT BE SUCCESSFULLY COMPLETED AND CANNOT BERECORDED AS A COMPLETED TRANSACTION IN THE ATM UNLESS YOU PRESS THE“ENTER” OR “OK” OR “CONFIRM” OR “YES” KEY or any other relevant key in the ATM orclick “confirm” or “OK” or “Submit” or “Continue” or “Yes” or any other relevant button onthe Internet screen. BY DOING SO, YOU SHALL BE TREATED AS SIGNIFYING YOURCONFIRMATION OF EACH OF THE ABOVE THREE STATEMENTS. IN RESPECT OFSTATEMENT 1(B) ABOVE, YOUR CONFIRMATION, BY PRESSING THE “ENTER” OR “OK” OR“CONFIRM” OR “YES” or any other relevant KEY or by clicking “confirm” or “OK” or“Submit” or “Continue” or “Yes” or any other relevant button, SHALL SIGNIFY AND SHALLBE TREATED AS YOUR WRITTEN PERMISSION, GIVEN IN ACCORDANCE WITH THERELEVANT LAWS OF Singapore INCLUDING Section 47(4) OF THE BANKING ACT(CHAPTER 19) OF Singapore TO THE DISCLOSURE BY THAT Participating Bank OF YOURRelevant Particulars TO THE Relevant Parties.

2. BY MAKING AN ELECTRONIC APPLICATION, YOU CONFIRM THAT YOU ARE NOT APPLYINGFOR THE OFFER SHARES AS NOMINEE OF ANY OTHER PERSON AND THAT ANYELECTRONIC APPLICATION THAT YOU MAKE IS THE ONLY APPLICATION MADE BY YOUAS BENEFICIAL OWNER.

YOU SHOULD MAKE ONLY ONE ELECTRONIC APPLICATION FOR THE OFFER SHARESAND SHOULD NOT MAKE ANY OTHER APPLICATION FOR OFFER SHARES, WHETHER ATTHE ATMs OR THE IB WEBSITES (IF ANY) OF ANY PARTICIPATING BANK OR ON THEAPPLICATION FORMS. IF YOU HAVE MADE AN APPLICATION FOR THE OFFER SHARESON AN APPLICATION FORM, YOU SHALL NOT MAKE AN ELECTRONIC APPLICATION FORTHE OFFER SHARES AND VICE VERSA.

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3. You must have sufficient funds in your bank account with your Participating Bank at the time youmake your Electronic Application, failing which your Electronic Application will not be completed.Any Electronic Application which does not conform strictly to the instructions set out inthis Prospectus or on the screens of the ATM or IB website through which your ElectronicApplication is being made shall be rejected.

You may make an Electronic Application using cash only by authorising such Participating Bank todeduct the full amount payable from your account with such Participating Bank.

4. You irrevocably agree and undertake to subscribe for and to accept the number of Offer Sharesapplied for as stated on the Transaction Record or Confirmation Screen or any lesser number ofsuch Offer Shares that may be allotted to you in respect of your Electronic Application. In theevent that our Company decide to allot any lesser number of such Offer Shares or not to allot anyOffer Shares to you, you agree to accept such decision as final.

If your Electronic Application is successful, your confirmation (by your action of pressing the“Enter” or “OK” or “Confirm” or “Yes” or any other relevant key on the ATM or clicking “Confirm” or“OK” or “Submit” or “Continue” or “Yes” or any other relevant button on the IB website screen of thenumber of Offer Shares applied for shall signify and shall be treated as your acceptance of thenumber of Offer Shares that may be allotted to you and your agreement to be bound by theMemorandum and Bye-Laws of our Company.

5. We will not keep any applications in reserve. Where your Electronic Application isunsuccessful, the full amount of the application monies will be refunded (without interest or anyshare of revenue or other benefit arising therefrom) to you by being automatically credited to youraccount with your Participating Bank at your own risk within 24 hours after balloting.

Where your Electronic Application is rejected or accepted in part only, the full amount or thebalance of the application monies, as the case may be, will be refunded (without interest or anyshare of revenue or other benefit arising therefrom) to you by being automatically credited to youraccount with your Participating Bank, at your own risk within 14 Market Days after the close of theApplication List.

Responsibility for timely refund of application monies arising from unsuccessful or partiallysuccessful Electronic Applications lies solely with the respective Participating Banks. Therefore,you are strongly advised to consult your Participating Bank as to the status of your ElectronicApplication and/or the refund of any monies to you from unsuccessful or partially successfulElectronic Application, to determine the exact number of Offer Shares allotted to you before tradingthe Offer Shares on the SGX-ST. Neither the SGX-ST, the CDP, the SCCS, the ParticipatingBanks, our Company nor the Manager assume any responsibility for any loss that may be incurredas a result of you having to cover any net sell positions or from buy-in procedures activated by theSGX-ST.

6. If your Electronic Application is made through the ATMs of one of the Participating Banks, and isunsuccessful, no notification will be sent by such Participating Bank.

If your Internet Electronic Application made through the IB website of DBS or UOB isunsuccessful, no notification will be sent by such Participating Bank.

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If you make Electronic Applications through the ATMs of the following banks, you may check theprovisional results of your Electronic Applications as follows:-

Bank Telephone Available at Operating Hours Service expected from

DBS 1800 339 6666 Internet Banking 24 hours a day Evening of the balloting(for POSB account http://www.dbs.com(1) dayholders)

1800 111 1111(for DBS account holders)

OCBC 1800 363 3333 ATM ATM / Phone Banking Evening of the balloting24 hours a day day

UOB 1800 222 2121 ATM (Other ATM/ Phone Banking Evening of the balloting Group Transactions – “IPO 24 hours a day day

Enquiry”)

http://www.uobgroup. Internet Bankingcom(1)(2) 24 hours a day

(1) If you make your Internet Electronic Applications through the IB website of DBS or UOB, you may check the resultthrough the same channels listed in the table above in relation to ATM Electronic Applications made at ATMs ofDBS or the UOB Group.

(2) If you make your Electronic Application through the ATMs or IB website of the UOB Group, you may check theresults of your application through UOB Personal Internet Banking, UOB Group’s ATMs or UOB Phone BankingServices.

7. Electronic Applications shall close at 12.00 noon on 10 May 2005 or such other time or date asour Company may, in consultation with the Manager, decide. All Internet Electronic Applicationsmust be received by 12.00 noon on 10 May 2005. Subject to paragraph 9 below, your InternetElectronic Application is deemed to be received when it enters the designated information systemof the relevant Participating Bank.

8. You are deemed to have requested and authorised us to:-

(a) register the Offer Shares allotted to you in the name of CDP for deposit into your SecuritiesAccount;

(b) send the relevant Share certificate(s) to CDP;

(c) return or refund (without interest or any share of revenue earned or other benefit arisingtherefrom) the application monies, should your Electronic Application be unsuccessful, byautomatically crediting your bank account with your Participating Bank with the relevantamount at your risk, within 24 hours of the balloting; and

(d) return or refund (without interest or any share of revenue or other benefit arising therefrom)the balance of the application monies, should your Electronic Application be accepted inpart only, by automatically crediting your bank account with your Participating Bank with therelevant amount at your risk, within 14 Market Days after the close of the Application List.

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9. You irrevocably agree and acknowledge that your Electronic Application is subject to risks ofelectrical, electronic, technical and computer-related faults and breakdowns, fires, acts of God andother events beyond the control of the Participating Banks, our Company and the Manager and if,in any such event, our Company, the Manager and/or the relevant Participating Bank do not recordor receive your Electronic Application, or data relating to your Electronic Application or the tape orany other devices containing such data is lost, corrupted or not otherwise accessible, whetherwholly or partially for whatever reason, you shall be deemed not to have made an ElectronicApplication and you shall have no claim whatsoever against our Company, the Manager and/or therelevant Participating Bank for Offer Shares applied for or for any compensation, loss or damage.

10. We do not recognise the existence of a trust. Any Electronic Application by a trustee must bemade in your own name and without qualification. Our Company will reject any application by anyperson acting as nominee.

11. All your particulars in the records of your Participating Bank at the time you make your ElectronicApplication shall be deemed to be true and correct and your Participating Bank and the RelevantParties shall be entitled to rely on the accuracy thereof. If there has been any change in yourparticulars after making your Electronic Application, you shall promptly notify your ParticipatingBank.

12. You should ensure that your personal particulars as recorded by both CDP and the relevantParticipating Bank are correct and identical, otherwise, your Electronic Application is liableto be rejected. You should promptly inform CDP of any change in address, failing which thenotification letter on successful allotment will be sent to your address last registered with CDP.

13. By making and completing an Electronic Application, you are deemed to have agreed that:-

(a) in consideration of our Company making available the Electronic Application facility, throughthe Participating Banks acting as agents of our Company, at the ATMs and the IB websitesof the relevant Participating Banks (if any):-

(i) your Electronic Application is irrevocable; and

(ii) your Electronic Application, the acceptance of our Company and the contract resultingtherefrom under the Invitation shall be governed by and construed in accordance withthe laws of Singapore and you irrevocably submit to the non-exclusive jurisdiction ofthe Singapore courts;

(b) none of our Company, the Manager or the Participating Banks shall be liable for any delays,failures or inaccuracies in the recording, storage or in the transmission or delivery of datarelating to your Electronic Application to us or CDP due to breakdowns or failure oftransmission, delivery or communication facilities or any risks referred to in paragraph 9above or to any cause beyond their respective controls;

(c) in respect of the Offer Shares for which your Electronic Application has been successfullycompleted and not rejected, acceptance of your Electronic Application shall be constitutedby written notification by or on behalf of our Company and not otherwise, notwithstandingany payment received by or on behalf of our Company;

(d) you will not be entitled to exercise any remedy of rescission for misrepresentation at anytime after acceptance of your application; and

(e) reliance is placed solely on information contained in this Prospectus and that none of ourCompany, the Manager, the Underwriter, the Placement Agent nor any other person involvedin the Invitation shall have any liability for any information not so contained.

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STEPS FOR ELECTRONIC APPLICATIONS THROUGH ATMS OF DBS

Instructions for ATM Electronic Applications will appear on the ATM screens of the Participating Bank.For illustration purposes, the steps for making an ATM Electronic Application through a DBS ATM areshown below. Certain words appearing on the screen are in abbreviated form (“A/c”, “amt”, “appln”, “&”,“I/C”, “SGX”, “No.” and “Max” refer to “Account”, “amount”, “application”, “and”, “NRIC” “SGX-ST”,“Number” and “Maximum” respectively). Instructions for ATM Electronic Applications on the ATM screensof Participating Banks (other than DBS), may differ slightly from those represented below.

Step 1 : Insert your personal DBS Bank or POSB ATM Card

2 : Enter your Personal Identification Number

3 : Select “CASHCARD & MORE SERVICES”

4 : Select “ESA-IPO SHARE/INVESTMENTS”

5 : Select “ELECTRONIC SECURITY APPLICATION (IPO-SHARE/BOND/ST-NOTES)”

6 : Read and understand the following statements which will appear on thescreen:-

� THE OFFER OF SECURITIES (OR UNITS OF SECURITIES) WILL BEMADE IN, OR ACCOMPANIED BY, A COPY OF THEPROSPECTUS/DOCUMENT OR PROFILE STATEMENT (AND IFAPPLICABLE, A COPY OF THE REPLACEMENT ORSUPPLEMENTARY PROSPECTUS/DOCUMENT OR PROFILESTATEMENT) WHICH CAN BE OBTAINED FROM ANY DBS/POSBBRANCH IN SINGAPORE AND, WHERE APPLICABLE, THE VARIOUSPARTICIPATING BANKS DURING BANKING HOURS, SUBJECT TOAVAILABILITY.

� ANYONE WISHING TO ACQUIRE THESE SECURITIES (OR UNITS OFSECURITIES) SHOULD READ THE PROSPECTUS/DOCUMENT ORPROFILE STATEMENT (AS SUPPLEMENTED OR REPLACED, IFAPPLICABLE) BEFORE SUBMITTING HIS APPLICATION WHICH WILLNEED TO BE MADE IN THE MANNER SET OUT IN THEPROSPECTUS/DOCUMENT OR PROFILE STATEMENT (ASSUPPLEMENTED OR REPLACED, IF APPLICABLE). A COPY OF THEPROSPECTUS/DOCUMENT OR PROFILE STATEMENT, AND IFAPPLICABLE, A COPY OF THE REPLACEMENT ORSUPPLEMENTARY PROSPECTUS/DOCUMENT OR PROFILESTATEMENT HAS BEEN LODGED WITH AND REGISTERED BY THEMONETARY AUTHORITY OF SINGAPORE WHO ASSUMES NORESPONSIBILITY FOR ITS OR THEIR CONTENTS.

Press the “Enter” key to confirm that you have read and understood.

7 : Select “PAgritech” to display details

8 : Press the “ENTER” key to acknowledge:-

YOU HAVE READ, UNDERSTOOD AND AGREED TO ALL TERMS OF THEAPPLICATION AND PROSPECTUS/DOCUMENT OR PROFILE STATEMENT,AND IF APPLICABLE, THE REPLACEMENT OR SUPPLEMENTARYPROSPECTUS/DOCUMENT OR PROFILE STATEMENT.

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YOU CONSENT TO DISCLOSE YOUR NAME, NRIC/PASSPORT NO.,ADDRESS, NATIONALITY, CDP SECURITIES A/C NO., CPF INVESTMENTA/C NO. AND SECURITIES APPLICATION AMOUNT FROM YOUR BANKACCOUNT(S) TO SHARE REGISTRARS, SGX, SCCS, CDP, CPF AND THEISSUER(S).

FOR FIXED AND MAX PRICE SECURITY APPLICATION, THIS IS YOURONLY APPLICATION AND IT IS MADE IN YOUR OWN NAME AND AT YOUROWN RISK.

THE MAXIMUM PRICE FOR EACH SHARE IS PAYABLE IN FULL ONAPPLICATION AND SUBJECT TO REFUND IF THE FINAL PRICE IS LOWER.

FOR TENDER SECURITIES APPLICATIONS, THIS IS YOUR ONLYAPPLICATION AT THE SELECTED TENDER PRICE AND IT IS MADE INYOUR OWN NAME AND AT YOUR OWN RISK.

YOU ARE NOT A US PERSON AS REFERRED TO IN THEPROSPECTUS/DOCUMENT OR PROFILE STATEMENT AND IFAPPLICABLE, THE REPLACEMENT OR SUPPLEMENTARYPROSPECTUS/DOCUMENT OR PROFILE STATEMENT.

9 : Select your nationality

10 : Select the DBS Bank account (Autosave/Current/Savings/Savings Plus) or thePOSB account (current/savings) from which to debit your application monies

11 : Enter the number of securities you wish to apply for using cash

12 : Enter your own 12-digit CDP Securities Account number. (Note: This step willbe omitted automatically if your CDP Securities Account number has alreadybeen stored in the Bank’s records)

13 : Check the details of your share application, your I/C/passport number and CDPSecurities Account number and number of securities on the screen and pressthe “ENTER” key to confirm your application

14 : Remove the Transaction Record for your reference and retention only

STEPS FOR INTERNET ELECTRONIC APPLICATIONS THROUGH THE IB WEBSITE OF DBS

For illustrative purposes, the steps for making an Internet Electronic Application through the DBS IBwebsite are shown below. Certain words appearing on the screen are in abbreviated form (“A/C”, “amt”,“&”, “I/C”, “SGX” and “No.” refer to “Account”, “amount”, “and”, “NRIC”, “SGX-ST” and “Number”respectively).

Step 1 : Click on to DBS website (www.dbs.com)

2 : Login to Internet Banking

3 : Enter your User ID and PIN

4 : Select “Electronic Security Application”

5 : Click “Yes” to proceed and to warrant that you have observed and complied with allapplicable laws and regulations

6 : Select your country of residence

7 : Click on “PAgritech” and click the “Submit” button

8 : Click “Confirm” to confirm

(a) You have read, understood and agreed to all terms of this application andthe Prospectus/Document or Profile Statement and if applicable, theSupplementary or Replacement Prospectus/Document or ProfileStatement.

(b) You consent to disclose your name, I/C or Passport number, address,nationality, CDP Securities Account number, CPF Investment Accountnumber (if applicable) and securities application amount from yourDBS/POSBank Account(s) to registrars of securities, SGX, SCCS, CDP,CPF Board and issuer/vendor(s).

(c) You are not a US Person (as such term is define in Regulation S under theUnited States Securities Act of 1993, as amended).

(d) This application is made in your name and your own risk.

(e) For FIXED/MAX price securities application, this is your only application.For TENDER price securities application, this is your only application atthe selected tender price.

9 : Fill in details for share application and click “Submit”

10 : Check the details of your share application, your NRIC or Passport Number and click“OK” to confirm your application

11 : Print Confirmation Screen (optional) for your reference & retention only

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