Annual and Transition Report (foreign Private Issuer) (20-f)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F

(Mark One)

¨	REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934

x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended June 30, 2014

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

¨	SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report

Commission file number: 001-34564

LE GAGA HOLDINGS LIMITED

(Exact Name of Registrant as Specified in Its Charter)

N/A

(Translation of Registrant’s Name Into English)

Cayman Islands

(Jurisdiction of Incorporation or Organization)

Unit 1105, The Metropolis Tower

10 Metropolis Drive

Hung Hom, Kowloon

Hong Kong

(Address of Principal Executive Offices)

Auke Cnossen, Chief Financial Officer

Unit 1105, The Metropolis Tower

10 Metropolis Drive

Hung Hom, Kowloon

Hong Kong

Tel: +852-3162-8585

Fax: +852-3167-7227

E-mail: ir@legaga.com.hk

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of Each Class

Name of Each Exchange on Which Registered

Ordinary shares, par value $0.01 per share*

American Depositary Shares, each representing 50 ordinary shares

The NASDAQ Stock Market LLC

(The NASDAQ Global Select Market)

*	Not for trading, but only in connection with the listing on The NASDAQ Global Select Market of American depositary shares, each representing 50 ordinary shares

Securities registered or to be registered pursuant to Section 12(g) of the Act:

None

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

None

(Title of Class)

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

2,198,845,700 ordinary shares, par value $0.01 per share, as of June 30, 2014, after deducting 17,808,850 ordinary shares issued to Citi (Nominees) Limited, as nominee for Citibank, N.A., the depositary of our ADS program, to facilitate our future issuance of ADSs upon the exercise of options under our share incentive plans.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes ¨ No x

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer ¨		Accelerated filer ¨		Non-accelerated filer x

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:


U.S. GAAP ¨		International Financial Reporting Standards as issued by the International Accounting Standards Board x		Other ¨

* If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

Item 17 ¨ Item 18 ¨

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ¨ No ¨

TABLE OF CONTENTS


Introduction		1

Forward-Looking Statements		1

Part I		2

Item 1.	Identity of Directors, Senior Management and Advisers	2
Item 2.	Offer Statistics and Expected Timetable	2
Item 3.	Key Information	2
Item 4.	Information on the Company	22
Item 5.	Operating and Financial Review and Prospects	35
Item 6.	Directors, Senior Management and Employees	58
Item 7.	Major Shareholders and Related Party Transactions	67
Item 8.	Financial Information	68
Item 9.	The Offer and Listing	70
Item 10.	Additional Information	71
Item 11.	Quantitative and Qualitative Disclosures about Market Risk	78
Item 12.	Description of Securities Other than Equity Securities	81

Part II		82

Item 13.	Defaults, Dividend Arrearages and Delinquencies	82
Item 14.	Material Modifications to the Rights of Security Holders and Use of Proceeds	82
Item 15.	Controls and Procedures	83
Item 16A.	Audit Committee Financial Expert	83
Item 16B.	Code of Ethics	83
Item 16C.	Principal Accountant Fees and Services	84
Item 16D.	Exemptions from the Listing Standards for Audit Committees	84
Item 16E.	Purchases of Equity Securities by the Issuer and Affiliated Purchasers	84
Item 16F.	Change in Registrant’s Certifying Accountant	84
Item 16G.	Corporate Governance	84
Item 16H.	Mine Safety Disclosure	84

Part III		84

Item 17.	Financial Statements	84
Item 18.	Financial Statements	84
Item 19.	Exhibits	84

Introduction

Unless the context otherwise requires, in this annual report on Form 20-F:

•

“We,” “us,” “our company,” and “our” refer to Le Gaga Holdings Limited, any entity carrying on Le Gaga’s current business prior to the restructuring transactions through which Le Gaga became our listing vehicle, and their respective subsidiaries;

•

“China” or “PRC” refers to the People’s Republic of China, excluding Taiwan, Hong Kong and Macau;

•

“ADSs” refers to American Depositary Shares, each representing 50 of our ordinary shares;

•

“Renminbi” or “RMB” refers to the legal currency of China; and

•

“$,” “US$” or “U.S. dollars” refers to the legal currency of the United States.

Names of certain companies provided in this annual report are translated or transliterated from their original Chinese legal names.

Discrepancies in any table between the amounts identified as total amounts and the sum of the amounts listed therein are due to rounding.

This annual report on Form 20-F includes our audited consolidated financial statements for the fiscal year ended March 31, 2012, the three months ended June 30, 2012 and the fiscal years ended June 30, 2013 and 2014.

We and certain selling shareholders of our company completed the initial public offering of 10,871,599 ADSs on November 3, 2010. On October 29, 2010, we listed our ADSs on the NASDAQ Global Select Market under the symbol “GAGA.”

Forward-Looking Statements

This annual report on Form 20-F contains forward-looking statements that involve risks and uncertainties. All statements other than statements of historical facts are forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements.

The words “may,” “could,” “would,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “potential,” “future,” “continue,” “is/are likely to” and other similar expressions may identify forward-looking statements, but the absence of these words does not necessarily mean that a statement is not forward-looking. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements include, among other things, statements about:

•

our anticipated growth strategies, including increasing our greenhouse coverage, increasing our production scale, converting our greenhouses to a soil-less production system, strengthening our sales, marketing and distribution efforts, focusing on high quality off-season products, improving our product mix, and expanding our research and development capability;

•

our future business development, results of operations and financial condition;

•

weather conditions that affect the production, harvest, transportation, storage and trade of fresh produce;

•

trends and competition in the fresh vegetable market;

•

future changes in laws or regulations affecting our business; and

•

changes in general economic and business conditions in China.

You should thoroughly read this annual report and the documents that we refer to with the understanding that our actual future results may be materially different from and worse than what we expect. We qualify all of our forward-looking statements by these cautionary statements. We would like to caution you not to place undue reliance on forward-looking statements and you should read these statements in conjunction with the risk factors disclosed in “Item 3.D. Key Information—D. Risk Factors” of this annual report. Those risks are not exhaustive. We operate in an emerging and evolving environment. New risk factors emerge from time to time and it is impossible for our management to predict all risk factors, and we cannot assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause our actual results to materially differ from results contained in any forward-looking statement.

You should not rely upon forward-looking statements as predictions of future events. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required under applicable law.

Part I

Item 1. Identity of Directors, Senior Management and Advisers

Not Applicable.

Item 2. Offer Statistics and Expected Timetable

Not Applicable.

Item 3. Key Information

A. Selected Financial Data

The following selected consolidated statement of profit or loss data (except for the earnings per ADS data) for the fiscal year ended March 31, 2012, the three months ended June 30, 2012 and the fiscal years ended June 30, 2013 and 2014 and the consolidated statement of financial position data as of March 31, 2012, June 30, 2012, June 30, 2013 and June 30, 2014 have been derived from our audited consolidated financial statements, which are included in this annual report beginning on page F-1. The selected consolidated statement of financial position data as of March 31, 2010 and March 31, 2011 and the selected consolidated statement of profit or loss data (except for the earnings per ADS data) for the fiscal years ended March 31, 2010 and March 31, 2011 have been derived from our audited consolidated financial statements not included in this annual report. Our consolidated financial statements have been prepared in accordance with International Financial Reporting Standards, or IFRS. On August 24, 2012, our board of directors approved a change in our fiscal year end from March 31 to June 30. The selected financial data should be read in conjunction with, and are qualified in their entirety by reference to, our audited financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this annual report. The historical results do not necessarily indicate results expected for any future periods.


	Year Ended March 31,									Three Months Ended June 30,			Year Ended June 30,
	2010			2011			2012			2012			2013			2014
	RMB			RMB			RMB			RMB			RMB			RMB			$
	(In thousands, except per share and per ADS data)
Consolidated Statement of Profit or Loss Data:
Revenue		280,512			406,772			519,399			123,248			576,274			580,500			93,575
Cost of inventories sold		(238,277	)		(357,211	)		(455,380	)		(107,983	)		(494,235	)		(493,339	)		(79,525	)
Changes in fair value less costs to sell related to:
Crops harvested during the year/period		119,009			186,183			226,037			5,067			260,928			267,822			43,172
Growing crops on the farmland at the year/period end		33,734			55,713			60,890			17,897			16,576			4,597			741
Total changes in fair value less costs to sell of biological assets		152,743			241,896			286,927			22,964			277,504			272,419			43,913

Operating expenses		(83,278	)		(156,219	)		(184,772	)		(43,428	)		(203,612	)		(296,409	)		(47,781	)
Results from operating activities		111,700			135,238			166,174			(5,199	)		155,931			63,171			10,182
Profit/(loss) for the year/period		110,202			133,375			162,816			(8,464	)		153,136			56,127			9,047

Earnings/(loss) per ordinary/preferred share (in cents)⁽¹⁾
Basic		6.52			6.68			7.12			(0.37	)		6.80			2.55			0.41

Diluted		6.43			6.46			6.91			(0.37	)		6.80			2.55			0.41

Earnings/(loss) per ADS (in cents)
Basic		326.00			334.00			356.00			(18.50	)		340.00			127.50			20.55

Diluted		321.50			323.00			345.50			(18.50	)		340.00			127.50			20.55

Other Financial Data:
Adjusted cost of inventories sold⁽²⁾		(102,565	)		(138,863	)		(172,801	)		(46,020	)		(211,065	)		(211,691	)		(34,124	)
Adjusted profit for the year/period⁽³⁾		98,944			151,828			197,001			34,727			166,801			157,567			25,399
Adjusted EBITDA⁽⁴⁾		135,603			201,200			266,331			56,071			261,299			288,908			46,570


	As of March 31,						As of June 30,
	2010		2011		2012		2012		2013		2014
	RMB		RMB		RMB		RMB		RMB		RMB		$
	(In thousands)
Consolidated Statement of Financial Position Data:
Cash		139,207		598,722		520,475		504,506		305,487		200,740		32,359
Total non-current assets		414,525		664,993		899,512		943,398		1,302,666		1,473,272		237,487
Total current assets		223,929		739,992		668,626		616,208		476,319		460,488		74,230
Total assets		638,454		1,404,985		1,568,138		1,559,606		1,778,985		1,933,760		311,717
Total non-current liabilities		35,700		78,835		75,875		61,998		—		2,369		382
Total current liabilities		22,710		46,403		53,592		61,955		226,462		320,300		51,632
Total liabilities		58,410		125,238		129,467		123,953		226,462		322,669		52,014
Total equity		580,044		1,279,747		1,438,671		1,435,653		1,552,523		1,611,091		259,703

As of March 31,

As of June 30,

2010

2011

2012

2013

2014

Selected Operating Data:

Total arable land area⁽⁵⁾

18,850 mu

(1,257 hectares)

20,402 mu

(1,360 hectares)

25,063 mu

(1,671 hectares)

26,124 mu

(1,742 hectares)

29,382 mu

(1,959 hectares)

31,042 mu

(2,070 hectares)

Total greenhouse land area

4,420 mu

(295 hectares)

6,779 mu

(452 hectares)

8,615 mu

(574 hectares)

8,915 mu

(594 hectares)

11,963 mu

(798 hectares)

12,096 mu

(806 hectares)

Greenhouse land area as a percentage of total arable land area

23.4%

33.2%

34.4%

34.1%

40.7%

39.0%

Year Ended March 31,

Three Months
Ended June 30,

Year Ended June 30,

2010

2011

2012

2013

2014

Total production output

98,076

tonnes

123,294

tonnes

144,192

tonnes

34,947

tonnes

138,212

tonnes

150,231

tonnes

Production yield⁽⁶⁾⁽⁷⁾

5.4 tonnes

per mu

6.4 tonnes

per mu

7.0 tonnes

per mu

1.7 tonnes

per mu

5.9 tonnes

per mu

5.7 tonnes

per mu

Revenue-per-mu⁽⁶⁾⁽⁸⁾

RMB15,497

RMB21,226

RMB25,207

RMB6,129

RMB24,547

RMB22,174

($3,574)

(1)

On October 29, 2010, all preferred shares were automatically converted into ordinary shares on an one-to-one basis upon the completion of our initial public offering. Prior to this conversion, holders of our ordinary and preferred shares had equal rights to receive dividends from our earnings. The automatic conversion did not result in retrospective adjustments to the previously reported amounts of basic and diluted earnings per share for the fiscal year ended March 31, 2010 since the weighted average number of shares used in the calculation of basic and diluted earnings per share includes both ordinary and preferred shares.

(2)

Adjusted cost of inventories sold is defined as cost of inventories sold before biological assets fair value adjustment. We are primarily engaged in agricultural activities of cultivating, processing and distributing vegetables and have therefore adopted International Accounting Standard 41 “Agriculture,” or IAS 41, in accounting for biological assets and agricultural produce. Unlike the historical cost accounting model, IAS 41 requires us to recognize in our statement of profit or loss the gain or loss arising from the change in fair value less costs to sell of biological assets and agricultural produce for each reporting period. Cost of inventories sold determined under IAS 41 reflects the deemed cost of agricultural produce, which is based on their fair value (less costs to sell) at the point of harvest. Biological assets fair value adjustment is the difference between the deemed cost of the agricultural produce and the plantation expenditure we incurred to cultivate the produce to the point of harvest. Although an “adjusted” cost of inventories sold excluding these fair value adjustments is a non-IFRS measure, we believe that separate analysis of the cost of inventories sold excluding these fair value adjustments adds clarity to the constituent parts of our cost of inventories sold and provides additional useful information for investors to assess our cost structure. Set forth below is a reconciliation of adjusted cost of inventories sold to the most directly comparable IFRS measure, cost of inventories sold.


	Year Ended March 31,									Three Months Ended June 30,			Year Ended June 30,
	2010			2011			2012			2012			2013			2014
	RMB			RMB			RMB			RMB			RMB			RMB			$
	(In thousands)
Cost of inventories sold		(238,277	)		(357,211	)		(455,380	)		(107,983	)		(494,235	)		(493,339	)		(79,525	)
Less: biological assets fair value adjustment		135,712			218,348			282,579			61,963			283,170			281,648			45,401

Adjusted cost of inventories sold		(102,565	)		(138,863	)		(172,801	)		(46,020	)		(211,065	)		(211,691	)		(34,124	)

(3)

Adjusted profit for the year/period is defined as profit for the year/period before the net impact of biological assets fair value adjustment and further adjusted to exclude the effects of non-cash share-based compensation, impairment losses on property, plant and equipment, prepayments and receivables, natural disaster loss and offering expenses charged to the statement of profit or loss. As discussed in note (2) above, IAS 41 requires us to recognize in our statement of profit or loss the gain or loss arising from the change in fair value less costs to sell of biological assets and agricultural produce for each reporting period, and to recognize cost of inventories sold at the deemed cost based on their fair value (less costs to sell) at the point of harvest. We believe that separate analysis of the net impact of these fair value adjustments, non-cash share-based compensation, impairment losses on property, plant and equipment, prepayments and receivables, natural disaster loss and offering expenses charged to the statement of profit or loss adds clarity to the constituent part of our results of operations and provides additional useful information for investors to assess the operating performance of our business. Set forth below is a reconciliation of adjusted profit for the year/period to the most directly comparable IFRS measure, profit/(loss) for the year/period.


	Year Ended March 31,									Three Months Ended June 30,			Year Ended June 30,
	2010			2011			2012			2012			2013		2014
	RMB			RMB			RMB			RMB			RMB		RMB		$
	(In thousands)
Profit/(loss) for the year/period		110,202			133,375			162,816			(8,464	)		153,136		56,127		9,047
Add/(less):
Non-cash share-based compensation		5,773			21,678			23,710			4,192			7,999		2,470		398
Impairment losses on property, plant and equipment, prepayments and receivables		—			—			14,823			—			—		27,127		4,373
Natural disaster loss		—			—			—			—			—		62,614		10,093
Offering expenses		—			20,323			—			—			—		—		—
Net impact of biological assets fair value adjustment		(17,031	)		(23,548	)		(4,348	)		38,999			5,666		9,229		1,488

Adjusted profit for the year/period		98,944			151,828			197,001			34,727			166,801		157,567		25,399

(4)

Adjusted EBITDA is defined as EBITDA (earnings before net finance income (costs), income tax (expenses) credit, depreciation and amortization), as further adjusted to exclude the effects of non-cash share-based compensation, the net impact of biological assets fair value adjustment, impairment losses on property, plant and equipment, prepayments and receivables, natural disaster loss and offering expenses charged to the statement of profit or loss. Although the nature of many of these income and expense items is recurring, we have historically excluded such impact from internal performance assessments. We believe that separate analysis and exclusion of the impact of biological assets fair value adjustment under IAS 41, non-cash share-based compensation, impairment losses on property, plant and equipment, prepayments and receivables, natural disaster loss and offering expenses charged to the statement of profit or loss adds clarity to the constituent parts of our performance and provides additional useful information for investors to assess the operating performance of our business.

We believe adjusted EBITDA is useful to investors because it is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in our industry. You should use adjusted EBITDA as a supplemental analytical measure to, and in conjunction with, our IFRS financial data. In addition, we believe that adjusted EBITDA is useful in evaluating our operating performance compared to that of other companies in our industry because the calculation of adjusted EBITDA generally eliminates the effects of non-cash expenses and the effects of financing and income taxes and the accounting effects of capital spending, which items may vary for different companies for reasons unrelated to overall operating performance. We use these non-IFRS financial measures for planning and forecasting and measuring results against the forecast. Using several measures to evaluate the business allows us and investors to assess our relative performance against our competitors and ultimately monitor our capacity to generate returns for our shareholders.

Set forth below is a reconciliation of adjusted EBITDA to the most directly comparable IFRS measure, profit/(loss) for the year/period.


	Year Ended March 31,									Three Months Ended June 30,			Year Ended June 30,
	2010			2011			2012			2012			2013			2014
	RMB			RMB			RMB			RMB			RMB			RMB			$
	(In thousands)
Profit/(loss) for the year/period		110,202			133,375			162,816			(8,464	)		153,136			56,127			9,047
Add/(less):
Amortization of lease prepayments		104			103			87			14			56			56			9
Depreciation		35,057			47,406			65,885			18,065			91,647			124,241			20,027
Finance costs		709			4,643			10,781			4,046			13,017			5,385			868
Income tax expenses/(credit)		890			101			4,415			128			(1,840	)		2,867			462
Non-cash share-based compensation		5,773			21,678			23,710			4,192			7,999			2,470			398
Impairment losses on property, plant and equipment, prepayments and receivables		—			—			14,823			—			—			27,127			4,373
Natural disaster loss		—			—			—			—			—			62,614			10,093
Biological assets fair value adjustment included in cost of inventories sold		135,712			218,348			282,579			61,963			283,170			281,648			45,401
Offering expenses		—			20,323			—			—			—			—			—
Finance income		(101	)		(2,881	)		(11,838	)		(909	)		(8,382	)		(1,208	)		(195	)
Changes in fair value less costs to sell of biological assets		(152,743	)		(241,896	)		(286,927	)		(22,964	)		(277,504	)		(272,419	)		(43,913	)

Adjusted EBITDA		135,603			201,200			266,331			56,071			261,299			288,908			46,570

(5)	Total arable land area includes land leased and either in operation, under construction or reserved by us, and excludes land that we used on a temporary basis.

(6)	For the purposes of calculating production yield and revenue-per-mu, average operating land area within each reporting period also includes land that we use on a temporary basis to generate the production output and revenue.

(7)	Production yield is calculated by dividing total production output by average operating land within each reporting period.

(8)	Revenue-per-mu is calculated by dividing revenue by average operating land within each reporting period.

Exchange Rate Information

Our business is primarily conducted in China and substantially all of our revenues are denominated in RMB. This annual report contains translations of RMB amounts into U.S. dollars at specific rates solely for the convenience of the readers. Unless otherwise noted, all translations from RMB to U.S. dollars in this annual report were made at a rate of RMB6.2036 to $1.00, the noon buying rate in effect as of June 30, 2014 in The City of New York for cable transfers of RMB as certified for customs purposes by the Federal Reserve Bank of New York. We make no representation that any RMB or U.S. dollar amounts could have been, or could be, converted into U.S. dollars or RMB, as the case may be, at any particular rate, or at all. The PRC government imposes control over its foreign currency reserves in part through direct regulation of the conversion of RMB into foreign exchange and through restrictions on foreign trade. On October 17, 2014, the noon buying rate was RMB6.1238 to $1.00.

The following table sets forth information concerning exchange rates between the RMB and the U.S. dollar for the periods indicated. These rates are provided solely for your convenience and are not necessarily the exchange rates that we used in this annual report or will use in the preparation of our future periodic reports or any other information to be provided to you. The source of these rates is the Federal Reserve Bank of New York.


	Noon Buying Rate (RMB per $1.00)
Period	Period End		Average⁽¹⁾		Low		High
Fiscal Year ended June 30, 2010		6.7815		6.8273		6.8358		6.7815
Fiscal Year ended June 30, 2011		6.4635		6.6271		6.8102		6.4628
Fiscal Year ended June 30, 2012		6.3530		6.3540		6.2790		6.4720
Fiscal Year ended June 30, 2013		6.1374		6.2312		6.3610		6.1340
Fiscal Year ended June 30, 2014		6.2036		6.1683		6.2591		6.0402
2014
April		6.2591		6.2246		6.2591		6.1966
May		6.2471		6.2380		6.2591		6.2255
June		6.2036		6.2306		6.2548		6.2036
July		6.1737		6.1984		6.2115		6.1712
August		6.1430		6.1541		6.1793		6.1395
September		6.1380		6.1382		6.1495		6.1266
October (through October 24, 2014)		6.1168		6.1285		6.1385		6.1168

(1)	Annual averages are calculated using the average of month-end rates. Monthly averages are calculated using the average of the daily rates during the relevant period.

B. Capitalization and Indebtedness

Not Applicable.

C. Reasons for the Offer and Use of Proceeds

Not Applicable.

D. Risk Factors

Risks Related to Our Business

We primarily rely on arrangements with farmer households, local villagers’ committees or local governments to lease farmland or forestland. If we were unable to continue these arrangements or enter into other new arrangements on commercially reasonable terms, or at all, our growth would be slowed down or inhibited.

As of June 30, 2014, we had farmland and forestland with an aggregate area of 31,042 mu (2,070 hectares) that were leased and either in operation or under construction or reserved by us. Because we are legally prohibited from owning farmland or forestland, we typically lease the farmland or forestland from farmer households, the local villagers’ committees or the local governments who act on the behalf of farmer households. Most of our leases have terms of 10 to 20 years. If relevant governmental land policy changes so that we are no longer able to continue to lease the farmland or forestland, a significant number of farmer households, local villagers’ committees or local governments refuse to lease the farmland or forestland to us upon the expiration of their current leases on commercially reasonable terms, or at all, or we are unable to find new farmer households, local villagers’ committees or local governments that are willing to lease their farmland or forestland to us on commercially reasonable terms, or at all, our growth rate would be materially and adversely affected. In addition, farmland in China is highly fragmented and we generally enter into a few master lease agreements each with many neighboring land users to form one farm base, which makes our arable land expansion more complicated. Any of these disruptions could materially and adversely affect our production and revenue. Such disruptions could also damage customer relationships and loyalty if we cannot supply them with the quantities and varieties of vegetables that they expect.

If the legality or validity of our leases of agricultural land is challenged, our operations could be disrupted.

Under PRC law, agricultural land is collectively owned by the farmers in a village or rural collective and ownership is evidenced by the relevant title certificate. The right to operate and manage such agricultural land is vested in the relevant local villagers’ committee or rural collective who divides the land into parcels and contracts the rights to operate such parcels of land to individual farmer households or, subject to the approval of local governments and the requisite vote of the farmer households, to any entity or person outside that village or rural collective. The right to operate the land is evidenced by the relevant operating right certificates. See “Item 4. Information on the Company—B. Business Overview—Regulations—Land Use Rights” for a more detailed description of the land regime.

We typically lease agricultural land from the local villagers’ committees or the local governments who act on the farmer households’ behalf. A lessor has no right to lease out agricultural land if it does not have land ownership, operation rights or consent of the holder of the operation rights.

The administrative system for the registration of agricultural land ownership and operation right is underdeveloped in areas where some of our production bases are located. In some areas, there are no established procedures for the issue of ownership certificates or operation right certificates. However, in some of these areas, our lessors have received governmental confirmations evidencing their rights to lease the land to us for operation. As of June 30, 2014, approximately 11% of our total land area had no ownership certificates or related governmental confirmations issued by local authorities. As of June 30, 2014, approximately 3% of the total land area we leased still had no operation right certificates or related governmental confirmations issued by local authorities. We cannot assure you that the governmental confirmations with respect to the lessors’ land ownership or land operating rights would not be revoked or otherwise rendered defective in any respect. The absence of title certificates or operating right certificates also subjects us to the risk that we do not have valid leases.

For leases not directly entered into with the holders of the operation right, authorization letters or consents from the holders of the operation right must be obtained. As of June 30, 2014, authorization letters or consents had not been obtained for approximately 10% of the total land area we leased. Failure to obtain the authorization letters or consents for the remaining land could render such leases unenforceable. Additionally, leases must also be filed with the local villagers’ committee, rural collective or local government. In addition, all leases are subject to the preemptive rights of other farmers in the same village or rural collective. If the preemptive rights are not exercised within two months from the date on which we start using the parcels of land, it is very likely that the PRC courts will not enforce such preemptive rights, although we cannot give any assurance in this regard. As of the date of this annual report, six months or more have passed since we started using most of the land we leased from the local villagers’ committees or local governments, and we have not received any claim from person purporting to assert the preemptive rights.

If the legality or validity of our leases become subject to disputes or challenges, we may need to suspend our farming operations on the respective farmland areas. We may incur costs and losses if we are required to remove our improvements, such as greenhouses, from the farmland. We could also lose our rights to use the land and our business, financial condition and results of operations could be materially and adversely affected.

We may face proceedings or claims for unpaid rent from farmer households.

We lease farmland or forestland either directly from farmer households or from the local villagers’ committees or the local governments who act on the farmer households’ behalf. For land directly leased from local farmer households, we pay rent directly to such farmer households. For land that we lease through local villagers’ committees or the local governments who act on behalf of farmer households, we pay rent in cash or by bank transfer semi-annually or annually in advance to the local committees or governments, which in turn distribute the rent to the farmer households. We are unable to ensure that such rent has been or will be distributed to these farmer households by the local villagers’ committees or the local governments on a timely basis or at all. If the local villagers’ committees fail to distribute the rent to the farmer households, we may be held liable for the unpaid rent. As such, we may face proceedings or claims for unpaid rent from the farmer households affected, which may adversely affect our business operations and financial position. While we have not received any complaints relating to the payment of rent in the past, we cannot assure you that such proceedings or claims will not arise in the future.

Extreme weather conditions, natural disasters, crop diseases, pests and other natural conditions can create substantial volatility for our business and results of operations.

Production of fresh vegetables is vulnerable to extreme weather conditions such as windstorms, hailstorms, drought, temperature extremes and typhoons in southern China, as well as natural disasters such as earthquakes, forest fires and floods. Our production sites are particularly susceptible to weather conditions in the summer months, especially the typhoon season (between the months of June and October) in southern China. For example, super typhoon “Usagi” hit our production bases in Pingshan and Duozhu, Huidong, Guangdong Province in September 2013. These two production bases have greenhouses of a total area of 2,000 mu (133 hectares), part of which experienced various degrees of damage. Unfavorable conditions can reduce both crop size and crop quality. In extreme cases, entire harvests may be lost in some geographic areas. These factors can create substantial volatility relating to our business. We take into account the possibility of the occurrence of these adverse seasonal weather conditions in making our production plans to mitigate such risks. However, such events may occur at any time of the year, and the occurrence of any of these events may create volatility for our business and results of operations.

Our production is also vulnerable to crop diseases and pest infestations, which may vary in severity, depending on the stage of production at the time of infection or infestation, the type of treatment applied and climatic conditions. For example, tomato yellow leaf curl virus, cubensis and powdery mildew are major diseases that affect vegetable cultivation in most of our production bases. The costs to control these diseases and other infestations vary depending on the severity of the damage and the extent of the plantings affected. Moreover, available technologies to control such infestations may not continue to be effective. These infestations can increase costs, decrease revenues and lead to additional expenses, which may have a material and adverse effect on our business, results of operations and financial condition.

Our business is susceptible to potential climate change globally and in China.

Agriculture is extremely vulnerable to climate change, including large-scale changes such as global warming. Global warming is projected to have significant impacts on conditions affecting agriculture, including temperature, carbon dioxide concentration, precipitation and the interaction of these elements. Higher temperatures may eventually reduce yields of desirable crops while encouraging weed and pest proliferation. Changes in precipitation patterns increase the likelihood of short-run crop failures and long-run production declines. While crop production in the temperate zones may reap some benefit from climate change, crop production in the tropical and subtropical zones appear more vulnerable to the potential impacts of global warming. Even a high level of farm-level adaptation in the agricultural sector will not entirely mitigate such negative effects. Nine of our farms, 27,060 mu (1,804 hectares) in aggregate, are located in Fujian and Guangdong, which are tropical and subtropical areas. Our production in these farms is particularly susceptible to climate change in these areas. Rapid and severe climate changes may decrease our crop production, which may materially and adversely affect our business, results of operations and financial condition.

Water or power shortage or other calamities could disrupt our production and have a material adverse effect on our business, financial position and results of operations.

Our production requires a continual supply of utilities such as water and electricity. We use spring water or underground water to irrigate our crops. Our production facilities are all situated in China, and the PRC authorities may ration the supply of utilities. Interruptions of water or electricity supply could result in temporary shutdowns of our irrigation system, electrical system and storage and packing facilities. Any major suspension or termination of water or electricity or other unexpected business interruptions could have a material and adverse impact on our business, financial condition and results of operations. Additionally, other calamities at our production facilities, especially at our greenhouses, may result in the breakdown of or damage to our facilities and loss of our crops, could impair our ability to timely produce products, which could have a material adverse effect on our business, financial position and results of operations.

Our business is sensitive to fluctuations in market prices and demand for our products.

Fresh vegetables are highly perishable and generally must be brought to market and sold very shortly after harvest. The selling price for a certain type of vegetable depends on factors such as supply of and demand for such vegetable and the availability and quality of such vegetable in the market. Conditions affecting vegetable growth in various parts of China, including weather conditions such as windstorms, floods, droughts and freezes and diseases and pests, are primary factors affecting the supply and quality of different types of vegetables.

Oversupply of certain types of vegetables without a corresponding increase in consumer demand may decrease the prices for our products. General public concerns regarding the quality, safety or health risks associated with particular vegetables could reduce demand and prices for some of our products. Market demand for our products may also be adversely affected by negative publicity concerning food safety of vegetables produced by other vegetables producers in our target markets. Such negative publicity may lead to a loss of consumer confidence and a decrease in the demand and prices for our products. However, even if market prices are unfavorable, produce items which are ready to be, or have been harvested must be brought to market promptly. A decrease in the selling price received for our products due to the factors described above could have a material and adverse effect on our business, results of operations and financial condition.

We may not be able to accurately predict and successfully adapt to changes in market demand.

We plan our production schedule and crop selection based on our analysis and estimate of market demand. Demand for our products depends primarily on consumer-related factors such as demographics, local preferences and food consumption trends, macroeconomic factors such as the condition of the economy and the level of consumer confidence, as well as seasonal factors such as weather and festivities. To remain competitive, we must continually monitor and adapt to the changing market demand. Our failure or inability to follow or adapt to changes in market demand in a timely manner, if at all, may have a material and adverse effect on our business and our results of operation.

We are subject to the risk of product contamination and product liability claims as well as negative publicity associated with food safety issues in China.

Consumption of fresh vegetables poses potential risks to human health. Harm to the health of consumers may result from tampering by unauthorized third parties, product contamination or spoilage, including the presence of foreign objects, substances, chemicals, other agents, or residues introduced during the growth, storage, handling or transportation phases. Consumption of our products may cause harm to the health of consumers in the future and we may be subject to claims or lawsuits relating to such matters. Even if a product liability claim is unsuccessful or is not fully pursued, the negative publicity surrounding any assertion that our products caused illness or discomfort could adversely affect our reputation with existing and potential customers and our corporate and brand image.

There have been incidents reported in the media of food safety issues that have caused severe harm to consumers. We are highly dependent upon consumer perception of the safety and quality of our products. Concerns over the safety of food products could have a material and adverse effect in the sale of vegetables produced by us.

Moreover, we do not have any product liability insurance and may not have adequate resources to satisfy a judgment in the event of a successful product liability claim against us. The successful assertion of product liability claims against us could result in potentially significant monetary damages and require us to make significant payments.

Our operations are highly regulated in the areas of food safety and protection of human health and we may be subject to the risk of incurring compliance costs and the risk of potential claims and regulatory actions.

Our operations are subject to a broad range of foreign, national, provincial and local health and safety laws and regulations, including laws and regulations governing the use and disposal of pesticides and other chemicals. These regulations directly affect our day-to-day operations, and violations of these laws and regulations can result in substantial fines or penalties. There can be no assurance that these fines or penalties would not have a material and adverse effect on our business, results of operations and financial condition. To stay compliant with all of the laws and regulations that apply to our operations and produce, we may be required in the future to modify our operations, purchase new raw materials or make capital improvements. Our products may be subject to extensive examinations before they are allowed to enter the market, which may delay the production or sale of our crops or require us to take other actions if we or the regulators believe any such product presents a potential risk. In addition, we may in the future become subject to lawsuits alleging that our operations and products cause damages to human health.

Our limited operating history may not serve as an adequate basis to judge our future prospects and results of operations.

We commenced operations in 2004 and have gradually built up our production, research, development, sales and marketing capabilities. We have a limited operating history under our current business model upon which you can evaluate the viability and sustainability of our business. Accordingly, you should consider our future prospects in light of the risks and uncertainties experienced by other China-based early stage agricultural companies. If we are unsuccessful in addressing any of these risks and uncertainties, our business, financial condition, results of operations and future growth would be adversely affected.

Unfavorable fluctuations in the prices of or shortages in raw materials will increase our production costs and adversely affect our profitability.

Raw materials that we use in production primarily comprise seeds, organic fertilizers, chemical fertilizers, pesticides, substrate, plant support rods and packaging materials. We also purchase steel, bamboo tubes, concrete and plastic films to build greenhouses as well as irrigation equipment such as valves, pipes, tubes and emitters. The prices of raw materials used in our operations are subject to fluctuations according to changes in the industry supply and demand conditions from time to time. Raw materials used in our operations are generally readily available at reasonable and stable costs. However, prices of our raw materials may not remain at the current level. Any shortage in the supply of or upsurge in market demand for our raw materials and the occurrence of other unforeseen circumstances may lead to an increase in prices of such raw materials. If we are unable to pass on the increase in prices of our raw materials to customers, our profitability would be adversely affected. In addition, the supply of our raw materials may not remain adequate. If we are unable to meet customer demand for our products or expand our production because of a shortage of raw materials, we could lose customers, market share and revenues. This would materially and adversely affect our business, financial condition and results of operations.

The Chinese fresh vegetable market is highly competitive and our growth and results of operations may be adversely affected if we are unable to compete effectively.

The fresh vegetable market in China is highly fragmented, regional and competitive. We face significant competition in the fresh vegetable market and we expect competition to increase and intensify within the sector. Some of our competitors may have greater financial, research and development and other resources, or greater operating flexibility which may permit them to respond better or more quickly to changes in the industry or to introduce new varieties of vegetables more quickly and with greater marketing support. Competition may develop from consolidation or other market forces within the fresh vegetable industry in China. Furthermore, our competitors may take pricing or promotional actions that may have a negative effect on us.

We may not be able to compete successfully against our competitors in the future. We may reach a point where we may not be able to continue to increase the return on our investment expenditures or where the incremental increase of investment return will decelerate. If we cannot effectively adapt to increasingly intense competition from local and foreign producers, our revenues and profitability may be materially and adversely affected.

If we are unable to successfully manage our growth, our business, results of operations and financial condition could be materially adversely affected.

We have grown rapidly and expect to continue to grow. We expect to build more production bases, expand the greenhouse coverage of our existing production bases, hire more employees and farm workers, enhance our production facilities and infrastructure and increase the size of our organization and related expenses. To manage our anticipated future growth, we must continue to implement and improve our managerial, operational and financial systems, expand our facilities and continue to recruit and train additional qualified personnel. Because of our limited resources, we may not be able to effectively manage the expansion of our operations or recruit and train additional qualified personnel. The expansion of our operations may lead to significant costs and may divert our management and business development resources. Any inability on the part of our management to manage growth could delay the execution of our business plans or disrupt our operations. If we are unable to manage our growth effectively, we may be unable to use our resources in an efficient manner, which may negatively impact our business, results of operations and financial condition.

As part of our growth strategy, we intend to further expand our sales efforts into geographic areas such as the Yangtze River delta. Expansion into new markets may present operating and marketing challenges that are different from those that we currently encounter in our existing markets. If we are unable to anticipate the changing demands that expanding operations will impose on our production systems and distribution channels, or if we fail to adapt our production systems and distribution channels to changing demands in a timely manner, we could experience a decrease in revenues and an increase in expenses and our results of operations could be materially and adversely affected.

We depend upon key employees in a competitive market. If we are unable to attract and retain key personnel, it could adversely affect our ability to develop and market our products.

We are highly dependent upon our chief executive officer, Mr. Shing Yung Ma. We have an employment agreement, a non-compete agreement and a confidentiality agreement with Mr. Ma. Although these agreements provide for severance payments that are contingent upon Mr. Ma’s refraining from competition with us, the applicable provisions can be difficult and costly to monitor and enforce. The loss of Mr. Ma’s services would adversely affect our ability to develop and market our products.

We also depend in part on the continued services of our farm managers and key scientific personnel and our ability to identify, hire and retain additional personnel, including marketing and sales staff. We face intense competition for skilled personnel, and the existence of non-competition agreements between prospective employees and their former employers may prevent us from hiring those individuals or subject us to suit from their former employers. While we attempt to provide competitive compensation packages to attract and retain key personnel, many of our competitors are likely to have greater resources and more experience than we have, making it difficult for us to compete successfully for key personnel.

Wrongdoings by our employees and farm workers may harm our business.

Our direct sales at the wholesale markets and sales to wholesalers are typically settled in cash and are handled by our employees. We may be susceptible to pilferage and theft by our employees or outsiders. Our employees or farm workers may even deliberately contaminate our vegetables. These wrongdoings by our employees and farm workers may harm our operating results and profits.

Our failure to protect our intellectual property rights may undermine our competitive position, and litigation to protect our intellectual property rights or defend against third-party allegations of infringement may be costly.

Our success depends largely on our proprietary information. Many elements of our proprietary information, such as horticultural know-how, technologies, production and market database, are not patentable in China. We rely primarily on a combination of trade secrets, trademarks and confidentiality agreements with key employees and third parties to protect our intellectual property. Nevertheless, these afford only limited protection and the actions we take to protect our intellectual property rights may not be adequate. Third parties may infringe or misappropriate our proprietary technologies or other intellectual property rights, which could have a material and adverse effect on our business, financial condition or operating results. Policing unauthorized use of proprietary technologies can be difficult and expensive. Also, litigation may be necessary to enforce our intellectual property rights, protect our trade secrets or determine the validity and scope of the proprietary rights of others. We cannot assure you that the outcome of such potential litigation will be in our favor. An adverse determination in any such litigation will compromise our proprietary information protection, impair our intellectual property rights and may harm our business, prospects and reputation. Implementation of PRC intellectual property-related laws has historically been lacking, primarily because of ambiguities in the PRC laws and difficulties in enforcement. Accordingly, intellectual property rights and confidentiality protections in China may not be as effective as in the United States or other countries.

We rely on confidentiality agreements that could be breached and may be difficult to enforce, which could have a material adverse effect on our business and competitive position.

Our policy is to enter agreements relating to the non-disclosure of confidential information with third parties, including our consultants, advisors and research collaborators, as well as agreements that purport to require the disclosure and assignment to us of the rights to the ideas, developments, discoveries and inventions of our employees and consultants while we employ them. However, these agreements can be difficult and costly to enforce. Moreover, to the extent that our consultants, advisors and research collaborators apply or independently develop intellectual property in connection with any of our projects, disputes may arise as to the proprietary rights to this type of information. If a dispute arises, a court may determine that the right belongs to a third party, and enforcement of our rights can be costly and unpredictable. In addition, we rely on trade secrets and proprietary know-how that we will seek to protect in part by confidentiality agreements with our employees, consultants, advisors or others. Despite the protective measures we employ, we still face the risk that:

•

these agreements may be breached;

•

these agreements may not provide adequate remedies for the applicable type of breach; or

•

our trade secrets or proprietary know-how will otherwise become known.

Breach of our confidentiality agreements or our failure to effectively enforce such agreements would have a material and adverse effect on our business and competitive position.

Labor shortages and rising labor cost may adversely affect our business and increase our operation costs.

Our business is labor intensive. As of June 30, 2014, we indirectly hired 1,462 farm workers through a labor company to perform all agricultural labor work on our farms. We have observed an overall tightening of the labor market and an emerging trend of shortage of labor supply. Failure to obtain stable and dedicated farming and other labor support may cause disruption to our business and our operation may be adversely affected. Furthermore, labor costs have increased in China in recent years and may continue to increase in the near future. To remain competitive, we may need to increase the salaries of our employees and farm workers to attract and retain them. Our labor costs for farm workers amounted to RMB41.4 million, RMB11.0 million, RMB47.3 million and RMB46.6 million ($7.5 million) in the fiscal year ended March 31, 2012, the three months ended June 30, 2012 and the fiscal years ended June 30, 2013 and 2014 respectively, accounting for 8.0%, 8.9%, 8.2% and 8.0% of our revenue during the respective period. We have experienced wage inflation and require more skilled laborers, causing higher wages, because we expand our greenhouse coverage and upgrade our product mix towards higher value solanaceous products. The adverse effect from increases in wages has been mitigated because our greenhouses have typically resulted in better utilization of labor compared to open field farming and solanaceous crops are less labor intensive compared to leafy and cruciferous vegetables, which we have grown less as we upgrade our product mix with a higher percentage of higher value solanaceous crops. However, a further increase in labor costs will increase our business operation costs and our financial position may be adversely affected.

We may be subject to claims or administrative penalties for non-execution of labor contracts or nonpayment or underpayment of social insurance and housing fund in respect of our farm workers and our full time employees, which may adversely affect our business, financial condition and results of operations.

We currently hire farm workers to perform all agricultural labor work on our farms. Our farm workers are hired through dispatching arrangements with a labor company. Prior to January 2008, we hired farm workers on a temporary basis in response to the ever changing workload during different phases of our production seasons. Due to the ambiguity relating to the status of temporary workers under PRC laws, we did not enter into any labor contracts with, or pay any social insurance or housing funds for, the farm workers hired before January 1, 2008. We also did not make a provision for the social insurance based on our employees’ actually received salaries and housing funds for our full-time employees.

The PRC government has been adopting increasingly stringent supervision standards over the labor market, particularly with respect to farm workers. The implementation of the PRC Labor Contract Law and its regulation may increase our operating expenses, in particular our human resource costs and our administrative expenses. Specifically, under the PRC Labor Contract Law, we are required to contribute certain amounts to a social insurance fund and a housing fund for our temporary farm workers we hired prior to January 2008 and our full time employees. Our PRC counsel, Dacheng Law Offices LLP (Fuzhou), advised us that the statute of limitations with respect to a claim for unpaid or underpaid social insurance and housing fund by a collective action for employees is two years. As of June 30, 2014, our estimated nonpayment for the housing fund and underpayment for the social insurance for full-time employees for the most recent two years are approximately RMB1.1 million and RMB3.7 million, respectively. We may be subject to a late charge of 0.2% per day of the outstanding social insurance contribution, a fine ranging from RMB10,000 to RMB50,000 for not attending to housing fund registration, and face proceedings or claims for the underpayment or non-payment of social insurance and housing fund. Dacheng Law Offices LLP (Fuzhou) has also advised us that although there is a risk that we may be subject to proceedings or claims initiated by the relevant governmental authorities for the underpayment or nonpayment of social insurance and housing fund, such risk is remote. However, we cannot assure you that the relevant PRC governmental authorities would reach the same conclusion as our PRC counsel and require us to make additional payments including more retroactive contributions and fines.

In addition, if we decide to significantly modify our employment or labor policy or practice, or reduce the number of our employees and farm workers, the PRC Labor Contract Law may limit our ability to effectuate the modifications or changes in the manner that we believe is the most cost-efficient or otherwise desirable, which could materially and adversely affect our business, financial condition and results of operations.

In view of the new legal environment, we now rely on dispatching arrangements with the labor company to hire our farm workers and dispatch these workers to our farms. Under such labor dispatch arrangements, the farm workers are deemed to be employees of the dispatch agent rather than our employees, and the agent undertakes the legal obligation to enter into labor contracts and pay social insurance and housing fund for these workers. While the agent has also confirmed to us that it has undertaken all legal obligations required by, and complied with all compulsory requirements of, applicable PRC labor laws and regulations, in the event that the agent violates applicable PRC labor laws and regulations and causes losses to the dispatched employees, we may be held liable to compensate such losses. If we are not able to recover our payment from the agent or if the agent’s indemnification is not sufficient to cover the losses incurred, our results of operations and financial condition may be adversely affected.

We may be affected by export and import laws and policies and other barriers to trade.

In addition to our domestic sales, we sell our products to customers in Hong Kong. Our sales to customers in Hong Kong accounted for approximately 5.1%, 1.8%, 1.1% and 0.3% of our total revenue in the fiscal year ended March 31, 2012, the three months ended June 30, 2012 and the fiscal years ended June 30, 2013 and 2014, respectively. According to the relevant PRC laws, we are required to register our production bases and processing facilities with the relevant authorities to export the vegetables produced at such production bases and processing facilities to Hong Kong. If we fail to register our production bases as required, our export may be restricted or suspended and our business may be adversely affected. We are currently not subject to export duties in the export of our finished products from the PRC. If the regulatory authorities in the PRC adopt measures to make it more difficult or costly for us to export our products, our business and results of operations may be adversely affected.

We are subject to the applicable Hong Kong laws and regulations relating to food imports and exports. Any violation of or non-compliance with these laws and regulations, or our failure to maintain our required export permits or certificates, may result in the restriction of or ban on some or all of our products by Hong Kong, or penalties being imposed on us. Furthermore, Hong Kong could introduce measures and standards that make our exports more difficult or costly, or take steps to prevent, limit or prohibit our exports. Hong Kong imposes custom duties and import tariffs. We generally export on the basis that any custom duties and import tariffs imposed by Hong Kong will be borne by our customers. However, we may not be able to pass on the cost of such custom duties or import tariffs to our customers in the future.

Our database may not be as effective as anticipated.

Our business operations rely on various timely information, which comprise first-hand market information, meteorological information and vegetable plantation and supply information, to plan vegetable harvesting based on historical vegetable price movement patterns. However, the information that we collect from various sources may be inaccurate or incomplete. In addition, errors may occur in the process of collecting and analyzing such information. Consequently, our analysis of market price movement patterns may not be accurate, which may mislead our harvest planning and adversely affect our business and results of operations.

We are collaborating with Beijing IT to develop a systematic and advanced information network to manage and organize our know-how. However, we cannot assure you that such information network will be developed as successfully as we expect or at all. Failure to develop a systematic and advanced information network may limit the effectiveness of our information network, which may have an adverse effect on our business, prospects, and results of operation.

We are subject to environmental regulations and may be exposed to liability and potential costs for environmental compliance.

We are subject to PRC laws and regulations concerning the discharge of waste water, gaseous waste and solid waste. We are required to establish and maintain facilities to dispose of waste. We are also required to obtain and comply with environmental permits for certain operations. We are responsible for cleaning up in the event that our operations result in the contamination of the environment. We may not at all times comply fully with environmental regulations. Any violation of these regulations may result in substantial fines, criminal sanctions, revocations of operating permits, shutdown of our production bases and obligation to take corrective measures. Our cost of complying with current and future environmental protection laws and regulations and our liabilities which may potentially arise from the discharge of waste water and solid waste may materially adversely affect our business, financial condition and results of operations.

The government may take steps towards the adoption of more stringent environmental regulations. Due to the possibility of unanticipated regulatory or other developments, the amount and timing of future environmental expenditures may vary substantially from those currently anticipated. If there is any unanticipated change in the environmental regulations, we may need to incur substantial capital expenditures to install, replace, upgrade or supplement our pollution control equipment or make operational changes to limit any adverse impact or potential adverse impact on the environment in order to comply with new environmental protection laws and regulations. If such costs become prohibitively expensive, we may be forced to cease certain aspects of our business operations.

As of June 30, 2014, we have not completed the environmental impact assessments as required by the PRC law for our production bases covering approximately 61% of our arable land. Although we intend to complete these environmental impact assessments, a penalty may be imposed on us and our production may be suspended. In addition, our production bases and manufacturing facilities that have been put into operations are in the process of undergoing environment protection inspections. As of the date of this annual report, we have not passed the environmental protection inspections for any of our processing facilities and production bases. Although we will apply for completion inspections by competent environmental approval authorities for our processing facilities and production bases, there is no assurance that such facilities will pass such inspections. Failure to pass these completion inspections may subject us to fines, penalties or orders to suspend our operations in these production bases or processing facilities, which may have a material and adverse effect on our business and results of operations.

We have limited insurance coverage in China.

The insurance industry in China is still at an early stage of development. Insurance companies in China offer limited commercial insurance products for the agricultural sector or only offer them on unattractive terms. We have determined that balancing the risks of disruption or product liability or the risk of loss or damage to our property on the one hand, the cost of insuring for these risks and the difficulties associated with acquiring such insurance on commercially reasonable terms on the other hand, it is not commercially feasible for us to have such insurance. We maintain insurance for workplace injuries, office equipment, premises in Hong Kong and certain greenhouses and vehicles in China. We do not have insurance coverage for our other assets (including biological assets) and do not maintain product liability, business interruption or key-man insurance. Furthermore, the farmer households, local villagers’ committees or local governments from whom we lease our lands may not maintain necessary insurance on these lands. Consequently, any occurrence of loss or damage to property, litigation or business disruption may result in our incurring substantial costs and the diversion of resources, which could have a material and adverse effect on our operating results. The occurrence of certain incidents including fire, severe weather, earthquake, war, floods, power outages, windstorms and the consequences resulting from them are not covered at all by insurance policies. If we incur substantial liabilities that were not covered by insurance, or if our business operations were interrupted for more than a short period of time, we could incur costs and losses that could materially and adversely affect our results of operations.

If we fail to maintain an effective system of internal control over financial reporting, we may be unable to accurately report our financial results or prevent fraud, which may cause our investors to lose confidence in our company, and the market price of our ADSs may be adversely affected.

We are subject to reporting obligations under the U.S. securities laws. Among other things, the SEC, as required by Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, adopted rules requiring us to include a report from management on the effectiveness of our internal control over financial reporting in our annual report on Form 20-F.

Our management has concluded that our internal control over financial reporting is effective as of June 30, 2014. See “Item 15. Controls and Procedures—Management’s Annual Report on Internal Control over Financial Reporting.” However, if we fail to maintain effective internal control over financial reporting in the future, our management may not be able to conclude that we have effective internal control over financial reporting. This could in turn result in the loss of investor confidence in the reliability of our financial statements and negatively impact the trading price of our ADSs. Furthermore, we have incurred and anticipated that we will continue to incur considerable costs, management time and other resources in an effort to maintain compliance with Section 404 and other requirements of the Sarbanes-Oxley Act.

We face risks related to health epidemics and other outbreaks.

Our business could be adversely affected by the outbreak of swine flu, avian flu (including H1N1 and H7N9 subtypes), SARS or other epidemics. Any prolonged occurrence or recurrence of swine flu, avian flu, SARS or other adverse public health developments in China or any of the major markets in which we do business may have a material and adverse effect on our business and operations. These effects could include a restriction on our ability to travel or ship our products outside of China and to designated markets, as well as temporary closure of our production bases, and/or our customers’ facilities, leading to delayed or cancelled orders. Any severe travel or shipment restrictions and closures would severely disrupt our operations and adversely affect our business and results of operations. Almost all of our farm workers live in dormitories with a high population intensity and share personal hygiene facilities, which makes them more susceptible to epidemic outbreaks. We have not adopted any written preventive measures or contingency plans to combat any future outbreak of swine flu, avian flu, SARS or any other epidemic.

Uncertainty and adverse changes in the economy may have a material and adverse effect on our business, financial condition, results of operations and liquidity.

The global financial markets have experienced significant disruptions since 2007, and most of the world’s major economies remain in or are emerging from recession. The recovery from the lows of 2008 and 2009 was uneven and it is facing new challenges, including the escalation of the European sovereign debt crisis since 2011. There remains considerable uncertainty regarding the long-term effects of the expansionary monetary and fiscal policies adopted by the central banks and financial authorities of the world’s leading economies, including those of the United States and China. Continued concerns about the systemic impact of a potentially long-term and widespread recession, the sovereign debt crisis in Europe and fiscal policy challenges in the United States all have contributed to increased market volatility and diminished expectations for economic growth around the world. Such economic challenges have resulted in high unemployment, as well as stagnant wage levels, which has dampened consumer purchasing power. Economic conditions in China are sensitive to global economic conditions. We derive, and expect to continue to derive, our revenues almost entirely from China. Consequently, our results of operations tend to be sensitive to changes in macroeconomic conditions that impact consumer spending in China. Uncertainty or adverse changes in the economy could lead to a significant decline in consumer spending, which, in turn, could result in a decline in the demand for our products. As a result of the economic downturn in China and internationally, overall consumer spending in China may slow down. Any decrease in demand for our products could have a material adverse impact on our operating results and financial condition.

Furthermore, the global capital and credit markets have experienced increased volatility and disruption in the recent years, making it more difficult for companies to access financing markets. We depend in part on stable, liquid and well-functioning capital and credit markets to fund our growth. Although we believe that our operating cash flows, access to capital and credit markets and existing borrowings will permit us to meet our financing needs for the foreseeable future, we cannot assure you that continued or increased volatility and disruption in the capital and credit markets will not impair our liquidity or increase our costs of borrowing. In addition, our major customers may have financial challenges unrelated to us that could result in a decrease in their business with us, delays in payment to us or defaults of payments. Similarly, parties to contracts may be forced to breach their obligations under those contracts with us. These consequences of the global economic downturn may have a material and adverse effect on our business, financial condition, results of operations and liquidity.

As a foreign private issuer, we are permitted to follow certain home country corporate governance practices in lieu of certain NASDAQ requirements. This may afford less protection to holders of our ordinary shares.

As a foreign private issuer, we are permitted to follow certain home country corporate governance practices in lieu of certain NASDAQ requirements. A foreign private issuer must disclose in its annual reports filed with the SEC each NASDAQ requirement with which it does not comply, followed by a description of its applicable home country practice. Our Cayman Islands home country practices may afford less protection to holders of our ADSs. Although we currently do not intend to rely on any exemptions provided by NASDAQ to a foreign private issuer, we may follow our home country practices in the future, and as a result, you may not be provided with the benefits of certain corporate governance requirements of NASDAQ.

We are a foreign private issuer and, as a result, we are not subject to U.S. proxy rules and are subject to Exchange Act reporting obligations that, to some extent, are more lenient and less frequent than those of a U.S. issuer.

We report under the Securities Exchange Act of 1934, as a foreign private issuer. Because we qualify as a foreign private issuer under the Exchange Act, we will be exempt from certain provisions of the Exchange Act that are applicable to U.S. public companies, including (i) the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act, (ii) the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time, and (iii) the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q containing unaudited financial and other specified information, or current reports on Form 8-K, upon the occurrence of specified significant events. In addition, foreign private issuers are required to file their annual report on Form 20-F within four months after the end of the fiscal year covered by the report, while U.S. domestic issuers that are not large accelerated filers or accelerated filers are required to file their annual report on Form 10-K within 90 days after the end of each fiscal year. Foreign private issuers are also exempt from the Regulation Fair Disclosure, aimed at preventing issuers from making selective disclosures of material information. Although we intend to make interim reports available to our shareholders in a timely manner, you may not have the same protections afforded to stockholders of companies that are not foreign private issuers.

We may be classified as a passive foreign investment company, which could result in adverse U.S. federal income tax consequences to U.S. Holders of our ADSs or ordinary shares.

Based on the market price of our ADSs, the value of our assets, and the composition of our income and assets, we do not believe we were a passive foreign investment company, or PFIC, for U.S. federal income tax purposes for our taxable year ended June 30, 2014. However, the application of the PFIC rules is subject to uncertainty in several respects, and we cannot assure you the U.S. Internal Revenue Service will not take a contrary position. A non-U.S. corporation will be a PFIC for any taxable year if either (1) at least 75% of its gross income for such year is passive income or (2) at least 50% of the value of its assets (based on an average of the quarterly values of the assets) during such year is attributable to assets that produce passive income or are held for the production of passive income. A separate determination must be made after the close of each taxable year as to whether we were a PFIC for that year. Because the value of our assets for purposes of the PFIC test will generally be determined by reference to the market price of our ADSs and ordinary shares, fluctuations in the market price of our ADSs and ordinary shares may cause us to become a PFIC. In addition, changes in the composition of our income or assets may cause us to become a PFIC. If we are a PFIC for any taxable year during which a U.S. Holder (as defined in “Item 10. Additional Information—E. Taxation—U.S. Federal Income Taxation”) holds an ADS or an ordinary share, certain adverse U.S. federal income tax consequences could apply to such U.S. Holder. For example, such U.S. Holder may incur a significantly increased U.S. federal income tax liability on the receipt of certain distributions on our ADSs or ordinary shares or on any gain recognized from a sale or other disposition of our ADSs or ordinary shares. See “Item 10. Additional Information—E. Taxation—U.S. Federal Income Taxation—Passive Foreign Investment Company.”

Risks Related to Doing Business in China

Adverse changes in economic and political policies of the PRC government could have a material and adverse effect on overall economic growth in China, which could materially and adversely affect our business.

We conduct substantially all of our business operations and sales activities in China. Accordingly, our business, financial condition, results of operations and prospects depend to a significant degree on economic developments in China. China’s economy differs from the economies of most other countries in many respects, including with respect to the amount of government involvement in the economy, the general level of economic development, growth rates and government control of foreign exchange and the allocation of resources. While the PRC economy has experienced significant growth in the past 30 years, this growth has remained uneven across different periods, regions and among various economic sectors. The PRC government has implemented various measures to encourage economic development and guide the allocation of resources. The PRC government also exercises significant control over China’s economic growth through the allocation of resources, controlling the payment of foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies. Since late 2003, the PRC government has implemented a number of measures, such as increasing the People’s Bank of China’s statutory deposit reserve ratio and imposing commercial bank lending guidelines, which had the effect of slowing the growth of credit availability. However, the PRC government has loosened such requirements in 2008 and 2009 in response to the global financial crisis and has then tightened and loosened the requirements from time to time depending on the general economy at the time. Any future actions and policies adopted by the PRC government could materially affect the Chinese economy and slow the growth of the demand for high-quality vegetables in China, which could materially and adversely affect our business.

Future changes in laws, regulations or enforcement policies in China could adversely affect our business.

We are subject to Chinese laws and regulations relating to land use, agricultural products, food safety, food export and environmental protection, among others. Laws, regulations or enforcement policies in China, including those relating to agricultural industry, are evolving and subject to frequent changes. Further, regulatory agencies in China may periodically, and sometimes abruptly, change their enforcement practices. Therefore, prior enforcement activity, or lack of enforcement activity, is not necessarily predictive of future actions. Any enforcement actions against us could have a material and adverse effect on us and the market price of our ADSs. In addition, any litigation or governmental investigation or enforcement proceedings in China may be protracted and may result in substantial cost and diversion of resources and management attention, negative publicity, damage to our reputation and decline in the price of our ADSs.

We rely principally on dividends and other distributions on equity paid by our subsidiaries in China and Hong Kong to fund our cash and financing requirements, and any limitation on the ability of our subsidiaries to make payments to us could have a material and adverse effect on our ability to conduct our business.

We are an offshore holding company, and we rely principally on dividends from our subsidiaries in China and Hong Kong for our cash requirements, including for the service of any debt we may incur. Current PRC regulations permit our subsidiaries to pay dividends to us only out of their accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations. In addition, each of our subsidiaries in China is required to set aside a certain amount of its after-tax profits each year, if any, to fund certain statutory reserves. These reserves are not distributable as cash dividends. Furthermore, the instruments governing the debt our subsidiaries in China and Hong Kong incur on their own behalf from time to time restrict their ability to pay dividends or make other payments to us, including repayment of any loans from us. Any limitation on the ability of our subsidiaries to distribute dividends or other payments to us could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our businesses, pay dividends or otherwise fund and conduct our business.

The dividends we receive from our PRC subsidiaries may be subject to PRC tax under the Enterprise Income Tax Law, which would have a material adverse effect on our results of operations.

Under the Enterprise Income Tax Law, dividends, interests, rents and royalties payable by a foreign-invested enterprise in the PRC to its foreign investor who is a non-resident enterprise, as well as gains on transfers of shares of a foreign-invested enterprise in the PRC by such a foreign investor, are subject to a 10% withholding tax, unless such non-resident enterprise’s jurisdiction of incorporation has a tax treaty with the PRC that provides for a reduced rate of withholding tax. As of the date of this annual report, the Cayman Islands and the British Virgin Islands have not entered into any such tax treaties with the PRC. If we are considered a non-resident enterprise for purposes of the Enterprise Income Tax Law, this withholding tax imposed on dividends paid to us by our PRC subsidiaries would reduce our net income in the event we decide to declare a dividend, which may have an adverse effect on our operating results.

Changes in PRC government policy on foreign investment in China may adversely affect our business and results of operations.

As foreign-invested enterprises, our wholly owned subsidiaries are subject to restrictions on foreign investment imposed by PRC laws from time to time. For instance, under the Foreign Investment Industrial Guidance Catalogue, some industries are categorized as sectors which are encouraged, restricted or prohibited for foreign investment.

According to the latest version of this catalogue, which became effective on January 30, 2012, our business is not in the prohibited or the restricted category. As this catalogue is updated every few years, there can be no assurance that the PRC government will not change its policies in a manner that would cause part or all of our businesses to fall within the restricted or prohibited categories. If any of our businesses becomes prohibited or if we cannot obtain approval from relevant approval authorities to engage in businesses which become restricted for foreign investors, we may be forced to sell or restructure our businesses which have become restricted or prohibited for foreign investment. If we are forced to adjust our corporate structure or business line as a result of changes in government policy on foreign investment, our business, financial condition and results of operations may be materially and adversely affected.

PRC regulation of loans to and direct investments in PRC entities by offshore holding companies may delay or prevent us from making loans or additional capital contributions to our PRC operating subsidiaries.

We may make loans to our PRC subsidiaries. Any investments in or foreign loans to our PRC subsidiaries are subject to approval by or registration with relevant governmental authorities in China. We may also decide to finance our subsidiaries by means of capital contributions. According to the relevant PRC regulations on foreign-invested enterprises in China, depending on the total amount of investment and the industries of the investment, capital contributions to our PRC operating subsidiaries may be subject to the approval of the PRC Ministry of Commerce, or MOFCOM, or its local branches. We may not obtain these government approvals on a timely basis, if at all, with respect to future capital contributions by us to our PRC subsidiaries. If we fail to receive such approvals, our ability to capitalize our PRC operations may be negatively affected, which could adversely affect our liquidity and our ability to fund and expand our business.

Fluctuations in the value of the Renminbi may have a material and adverse effect on your investment.

The value of the Renminbi against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in China’s political and economic conditions and China’s foreign exchange policies. The conversion of Renminbi into foreign currencies, including the U.S. dollar, has historically been set by the People’s Bank of China. On July 21, 2005, the PRC government changed its policy of pegging the value of the Renminbi to the U.S. dollar. The PRC government has then from time to time revised the new policy, under which the Renminbi is permitted to fluctuate within a managed band against a basket of certain foreign currencies. Between July 21, 2005 and June 30, 2014, the RMB appreciated by approximately 33.4% against the U.S. dollar, although the pace of appreciation was uneven during the period. It is difficult to predict how market forces or PRC or U.S. government policy may impact the exchange rate between the Renminbi and the U.S. dollar in the future.

There remains significant international pressure on the PRC government to adopt an even more flexible currency policy, which could result in a further and more significant appreciation of the Renminbi against foreign currencies. Our revenues and costs are mostly denominated in the Renminbi, and a significant portion of our financial assets are also denominated in Renminbi. As we rely entirely on dividends paid to us by our subsidiaries, any significant revaluation of the Renminbi may have a material and adverse effect on our revenues and financial condition, and the value of, and any dividends payable on, our ordinary shares in foreign currency terms. For example, to the extent that we need to convert U.S. dollars into Renminbi for our operations, appreciation of the Renminbi against the U.S. dollar would reduce the Renminbi amount we receive from the conversion. Conversely, if we decide to convert our Renminbi into U.S. dollars for the purpose of making dividend payments on our ordinary shares or for other business purposes, appreciation of the U.S. dollar against the Renminbi would reduce the U.S. dollar amount available to us. Any fluctuations in the exchange rate between the Renminbi and the U.S. dollar could also result in foreign currency translation losses for financial reporting purposes.

Governmental control of currency conversion may limit our ability to utilize our revenues effectively and affect the value of your investment.

The PRC government imposes controls on the convertibility of the Renminbi into foreign currencies and, in certain cases, the remittance of currency out of China. We receive most of our revenues in Renminbi. Under our current corporate structure, our Cayman Islands holding company may rely on dividend payments from our PRC and Hong Kong subsidiaries to fund any cash and financing requirements we may have. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior approval from the State Administration of Foreign Exchange, or SAFE, by complying with certain procedural requirements. Therefore, our PRC subsidiaries are able to pay dividends in foreign currencies to us without prior approval from SAFE by complying with certain procedural requirements. But approval from or registration with appropriate government authorities is required where Renminbi is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies. This could affect the ability of our PRC subsidiaries to obtain foreign exchange through debt or equity financing, including by means of loans or capital contributions from us. The PRC government may also at its discretion restrict access in the future to foreign currencies for current account transactions. If the foreign exchange control system prevents us from obtaining sufficient foreign currencies to satisfy our foreign currency demands, we may not be able to pay dividends in foreign currencies to our shareholders, including holders of our ADSs.

Regulations relating to offshore investment activities by PRC residents may limit our ability to acquire PRC companies and could adversely affect our business, financial condition and results of operations.

In July 2014, SAFE promulgated a regulation known as Circular No. 37, which states that if PRC residents use assets or equity interests in their PRC entities as capital contributions to establish offshore companies or inject assets or equity interests of their PRC entities into offshore companies to raise capital overseas, they must register with local provincial SAFE branches with respect to their overseas investments in offshore companies. They must also file amendments to their registrations if their offshore companies experience material events involving capital variation, such as changes in share capital, share transfers, mergers and acquisitions, spin-off transactions, long-term equity or debt investments or guarantee. Under this regulation, failure to comply with the registration procedures set forth in such regulation may result in restrictions being imposed on the foreign exchange activities of the relevant PRC entity, including the payment of dividends and other distributions to its offshore parent, as well as restrictions on the capital inflow from the offshore entity to the PRC entity. While we believe Circular No. 37 currently does not apply to us since none of our individual beneficial shareholders is a PRC resident, any failure by any of our future shareholders who is a PRC resident, or controlled by a PRC resident, to comply with relevant requirements under this regulation could subject our company to fines or sanctions imposed by the PRC government, including restrictions on our subsidiaries’ ability to pay dividends or make distributions to us and our ability to increase our investment in or to provide loans to our subsidiaries.

Failure to comply with PRC regulations regarding the registration requirements for employee stock ownership plans or share option plans may subject our PRC stock incentive plan participants or us to fines and other legal or administrative sanctions.

In December 2006, the People’s Bank of China promulgated Administrative Measures for Individual Foreign Exchange, or the Individual Foreign Exchange Rules, setting forth the requirements for foreign exchange transactions by PRC individuals under either the current account or the capital account. In January 2007, SAFE issued Implementing Rules for the Individual Foreign Exchange Rules, which, among other things, specified approval requirements for certain capital account transactions such as a PRC citizen’s participation in the employee stock ownership plans or stock option plans of an overseas publicly-listed company. On February 15, 2012, SAFE promulgated the Notice on Issues concerning the Foreign Exchange Administration of Domestic Individuals’ Participation in Equity Incentive Plans of Overseas Listed Companies, or the Stock Option Notice. Under the Stock Option Notice, PRC citizens who are granted stock options by an overseas publicly-listed company are required, through a PRC agent or PRC subsidiary of such overseas publicly-listed company, to register with SAFE and complete certain other procedures. We and our directors, officers and employees who are PRC citizens and have been granted stock options are subject to the Stock Option Notice. If we or our PRC optionees fail to comply with these regulations, we or our PRC optionees may be subject to fines and legal sanctions.

Uncertainties with respect to the Chinese legal system could have a material and adverse effect on us.

The PRC legal system is based on written statutes. Unlike under common law systems, decided legal cases have little value as precedents in subsequent legal proceedings. In 1979, the PRC government began to promulgate a comprehensive system of laws and regulations governing economic matters in general, and forms of foreign investment, including wholly foreign-owned enterprises and joint ventures, in particular. These laws, regulations and legal requirements are often changing, and their interpretation and enforcement involve significant uncertainties that could limit the reliability of the legal protections available to us. We cannot predict the effects of future developments in the PRC legal system. We may be required in the future to procure additional permits, authorizations and approvals for our existing and future operations, which may not be obtainable in a timely fashion or at all. An inability to obtain such permits or authorizations may have a material and adverse effect on our business, financial condition and results of operations.

Our business benefits from certain government incentives. Expiration of, or changes to, these incentives could have a material adverse effect on our operating results by significantly increasing our tax expenses.

The PRC government has provided various incentives to agricultural companies in order to encourage the development of the agricultural industry. Such incentives include reduced tax rates, tax exemptions, subsidies and other measures. Under the PRC income tax laws effective prior to January 1, 2008, domestic companies typically were subject to an enterprise income tax rate of 33%, while foreign invested manufacturing enterprises with operation terms of 10 or more years enjoyed preferential tax treatment of “two-year tax exemption and three-year tax reduction of 50%,” subject to the approval of relevant tax authority.

On January 1, 2008, the Enterprise Income Tax Law became effective. The Enterprise Income Tax Law imposes a uniform tax rate of 25% on all domestic enterprises and foreign invested enterprises unless they qualify under certain exceptions. Businesses engaged in the cultivation and primary processing of vegetable products enjoy a 100% relief from enterprise income tax under the law and its implementation rules. From January 1, 2008, our PRC subsidiaries, except for Linong (Fujian) Investment Holdings Limited and Linong Agriculture Technology (Shenzhen) Co., Ltd., are eligible for this tax relief, subject to the approval by or registration with the relevant tax authorities. As of September 30, 2014, all of our PRC subsidiaries engaged in the cultivation and primary processing of vegetable products have registered with the tax authorities for the tax exemption. Furthermore, the current taxation incentives for the agricultural industry may be changed, any future change in the PRC tax policies could also have a material adverse effect on our financial condition and results of operations.

The approval of the China Securities Regulatory Commission, or the CSRC, may be required in connection with our initial public offering that was completed in November 2010; the failure to obtain this approval, if required, could have a material adverse effect on our business, operating results and reputation as well as the trading price of our ADSs. The regulation also establishes more complex procedures for acquisitions by foreign investors, which could make it more difficult to pursue growth through acquisitions.

On August 8, 2006, six PRC regulatory agencies, including the MOFCOM and the China Securities Regulatory Commission, or the CSRC, jointly promulgated the Regulation on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, which became effective on September 8, 2006. This regulation, among other things, requires offshore special purpose vehicles, formed for overseas listing purposes through acquisitions of PRC domestic companies and controlled by PRC individuals, to obtain the approval of the CSRC prior to publicly listing their securities on an overseas stock exchange.

We completed our initial public offering in November 2010. The application of the M&A Rules with respect to our initial public offering remains unclear. Based on the advice of our PRC counsel, we believe that no CSRC approval was required in the context of our initial public offering as we are owned and controlled by non-PRC individuals, and all our PRC subsidiaries are foreign-funded and have been incorporated through our direct investment instead of acquisition. However, we cannot assure you that the relevant PRC government agency, including the CSRC, would reach the same conclusion as our PRC counsel. If CSRC approval was required or is retroactively required under new PRC rules or regulations but not obtained, we may face sanctions by the CSRC or other PRC regulatory agencies, which could have a material adverse effect on our business, financial condition, results of operations, reputation and prospects, as well as the trading price of our ADSs.

In addition, the M&A Rules, among other things, established additional procedures and requirements that could make merger and acquisition activities by foreign investors more time-consuming and complex. In the future, we may grow our business in part by acquiring complementary businesses, although we do not have any plans to do so at this time. Complying with the requirements of the M&A Rules to complete such transactions could be time-consuming, and any required approval processes, including obtaining approval from the Ministry of Commerce, may delay or inhibit our ability to complete such transactions, which could affect our ability to expand our business or maintain our market share.

Risks Related to Our ADSs

There can be no assurance that the going private transaction will be successfully consummated. Potential uncertainty involving the going private transaction may adversely affect our business and the market price of our ADSs.

The market price for our ADSs may be volatile.

The market price for our ADSs is likely to be volatile and subject to wide fluctuations in response to factors including the following:

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regulatory developments in our target markets affecting us, our customers or our competitors;

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actual or anticipated fluctuations in our quarterly operating results and changes or revisions of our expected results;

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changes in financial estimates by securities research analysts;

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announcements of technological or competitive developments;

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any litigation, governmental investigation or enforcement proceedings brought against us by authorities and industry regulators in China or elsewhere;

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addition or departure of our senior management and key personnel;

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changes in the economic performance or market valuations of other agricultural companies;

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economic, regulatory or political developments in China;

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release or expiration of lock-up or other transfer restrictions on our outstanding ordinary shares or ADSs; and

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sales of additional ordinary shares or ADSs, or the perception that such sales might occur.

In addition, the securities market has from time to time experienced significant price and volume fluctuations that are not related to the operating performance of particular companies. For instance, any negative news or perceptions about inadequate corporate governance practices or fraudulent accounting, corporate structure or other matters of other Chinese companies may also negatively affect the attitudes of investors towards Chinese companies in general, including us, regardless of whether we have engaged in any inappropriate activities. The market fluctuations may also have a material adverse effect on the market price of our ADSs.

Substantial future sales of our ADSs in the public market, or the perception that such sales might occur, could cause the price of our ADSs to decline.

Additional sales of our ADSs in the public market, or the perception that these sales could occur, could cause the market price of our ADSs to decline. If any existing shareholder or shareholders sell a substantial amount of ordinary shares in the form of ADSs, the market price of our ADSs could decline. In addition, we may issue additional ordinary shares as considerations for future acquisitions. If we do so, your ownership interests in our company would be diluted and this in turn could have an adverse effect on the price of our ADSs.

Our principal shareholders have substantial influence over our company and their interests may not be aligned with the interests of our other shareholders.

Mr. Shing Yung Ma, our chief executive officer, beneficially owned 32.55% of our outstanding share capital as of September 30, 2014. Because of this high level of shareholding, Mr. Ma has substantial influence over our business, including decisions regarding mergers, consolidations and the sale of all or substantially all of our assets, election of directors and other significant corporate actions. Mr. Ma may take actions that are not in the best interest of us or our other shareholders. This concentration of ownership may discourage, delay or prevent a change in control of our company, which could deprive our shareholders of an opportunity to receive a premium for their shares as part of a sale of our company and might reduce the price of our ADSs. These actions may be taken even if they are opposed by our other shareholders.

In addition, as of September 30, 2014, Sequoia Entities, Yiheng Capital LLC and SIG China Investments One, Ltd. and its affiliates, or SIG, beneficially owned 16.02%, 6.25% and 6.20% of our outstanding share capital, respectively. These shareholders, if acting together, will be able to exercise significant influence over matters requiring shareholder approval, including the election of directors and the approval of significant corporate transactions. These shareholders will also have veto power, if acting together, with respect to any shareholder action or approval requiring a special resolution, except where they are required by the rules of the NASDAQ Global Select Market to abstain from voting. Such concentration of ownership may also have the effect of delaying, preventing or deterring a change in control of the Company which may benefit our ADS holders.

Holders of ADSs have fewer rights than shareholders and must act through the depositary to exercise those rights.

Holders of ADSs do not have the same rights as holders of our ordinary shares and ADS holders only have such rights as are specified in the deposit agreement, which generally are more restricted than the rights of holders of ordinary shares. Under our articles of association, the minimum notice period required to convene a general meeting is at least 21 clean calendar days. When a general meeting is convened, you may not receive sufficient notice of a shareholders’ meeting to permit you to withdraw your ordinary shares to allow you to cast your vote with respect to any specific matter. In addition, the depositary and its agents may not be able to send voting instructions to you or carry out your voting instructions in a timely manner. We will make all reasonable efforts to cause the depositary to extend voting rights to you in a timely manner, but we cannot assure you that you will receive the voting materials in time to ensure that you can instruct the depositary to vote your shares. Furthermore, the depositary and its agents will not be responsible for any failure to carry out any instructions to vote, for the manner in which any vote is cast or for the effect of any such vote. As a result, you may not be able to exercise your right to vote and you may lack recourse if your ordinary shares are not voted as you requested. In addition, in your capacity as an ADS holder, you will not be able to call a shareholder meeting.

You may be subject to limitations on transfers of your ADSs.

Your ADSs are transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from time to time when it deems expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer or register transfers of ADSs generally when our books or the books of the depositary are closed, or at any time if we or the depositary deem it advisable to do so because of any requirement of law or of any government or governmental body, or under any provision of the deposit agreement, or for any other reason.

Your right to participate in any future rights offerings may be limited, which may cause dilution to your holdings.

We may from time to time distribute rights to our shareholders, including rights to acquire our securities. However, we cannot make rights available to you in the United States unless we register the rights and the securities to which the rights relate under the Securities Act or an exemption from the registration requirements is available. Also, under the deposit agreement, the depositary will not make rights available to you unless the distribution to ADS holders of both the rights and any related securities are either registered under the Securities Act, or exempted from registration under the Securities Act. We are under no obligation to file a registration statement with respect to any such rights or securities or to endeavor to cause such a registration statement to be declared effective. Moreover, we may not be able to establish an exemption from registration under the Securities Act. Accordingly, you may be unable to participate in our rights offerings and may experience dilution in your holdings.

You may not receive cash dividends if the depositary decides that it is inequitable or impractical to make them available to you.

The depositary of our ADSs has agreed to pay to you the cash dividends or other distributions it or the custodian receives on our ordinary shares or other deposited securities after deducting its fees and expenses. You will receive these distributions in proportion to the number of ordinary shares your ADSs represent. However, the depositary may, at its discretion, decide that it is inequitable or impractical to make a distribution available to any holders of ADSs. For example, the depositary may determine that it is not practicable to distribute certain property through the mail, or that the value of certain distributions may be less than the cost of mailing them. In these cases, the depositary may decide not to distribute such property, in which event you would not receive such distribution.

We are a Cayman Islands company and, because judicial precedent regarding the rights of shareholders is more limited under Cayman Islands law than under U.S. law, you may have less protection of your shareholder rights than you would under U.S. law.

Our corporate affairs are governed by our amended and restated memorandum and articles of association, the Cayman Islands Companies Law and the common law of the Cayman Islands.

The rights of shareholders to take action against the directors, the rights of minority shareholders to institute actions, and the fiduciary responsibilities of our directors to us under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as from English common law, the latter of which has persuasive, but not binding, authority on a court in the Cayman Islands. The rights of our shareholders and the fiduciary responsibilities of our directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedent in the United States. In particular, because the Cayman Islands has no legislation specifically dedicated to the rights of investors in securities, and thus no statutorily defined private causes of action specific to investors in securities such as those found under the Securities Act of 1933 or the Securities Exchange Act of 1934 in the United States, it provides less protection to investors. In addition, shareholders of Cayman Islands companies may not be able to institute a derivative action at a court in the United States.

There is uncertainty regarding whether Cayman Islands courts would:

•

recognize or enforce against us or our directors or officers all judgments of courts of the United States predicated upon civil liability provisions of U.S. securities laws; and

•

impose liability against us or our directors or officers, in original actions brought in the Cayman Islands, based on all civil liability provisions of U.S. securities laws or laws of any state in the U.S.

As a result of all of the above, our public shareholders may have more difficulty in protecting their interests through actions against our management, directors or major shareholders than would shareholders of a corporation incorporated in a jurisdiction in the United States.

Your ability to bring an action against us or against our directors and officers, or to enforce a judgment against us or them, will be limited because we are incorporated in the Cayman Islands, because we conduct substantially all of our operations in China and Hong Kong and because the majority of our directors and officers reside outside of the United States.

We are incorporated in the Cayman Islands, and we conduct substantially all of our operations in China through our PRC or Hong Kong subsidiaries. Most of our directors and officers reside, and substantially all of the assets of those persons are located, outside the United States. As a result, it may be difficult for investors to effect service of process upon these persons within the United States or to enforce against us or these persons in U.S. courts, judgments obtained in U.S. courts, including judgments based on the civil liability provisions of the federal securities laws of the United States. In addition, it may be difficult for investors to enforce, in original actions brought in courts in jurisdictions located outside the United States, liabilities based on the U.S. federal securities laws. In addition, there is uncertainty as to whether the courts of the Cayman Islands or the PRC would recognize or enforce judgments of U.S. courts against us or our officers and directors predicated upon the civil liability provisions of the securities laws of the United States or any state. Our PRC counsel has advised us that China does not have treaties with the United States or many other countries providing for the reciprocal recognition and enforcement of judgment of courts. It is also uncertain whether the Cayman Islands or PRC courts would be competent to hear original actions brought in the Cayman Islands or the PRC against us or our officers and directors predicated upon the securities laws of the United States or any state.

Our articles of association contains anti-takeover provisions that could have a material adverse effect on the rights of holders of our ordinary shares and ADSs.

Our articles of association contain provisions limiting the ability of others to acquire control of our company or cause us to engage in change-of-control transactions. These provisions could have the effect of depriving our shareholders of an opportunity to sell their shares at a premium over prevailing market prices by discouraging third parties from seeking to obtain control of our company in a tender offer or similar transaction. For example, our board of directors has the authority, without further action by our shareholders, to issue preferred shares in one or more series and to fix their designations, powers, preferences, privileges, and relative participating, optional or special rights and the qualifications, limitations or restrictions, including dividend rights, conversion rights, voting rights, terms of redemption and liquidation preferences, any or all of which may be greater than the rights associated with our ordinary shares, in the form of ADSs or otherwise. Preferred shares could be issued quickly with terms calculated to delay or prevent a change in control of our company or make removal of management more difficult. If our board of directors decides to issue preferred shares, the price of our ADSs may fall and the voting and other rights of the holders of our ordinary shares and ADSs may be materially and adversely affected.

Item 4. Information on the Company

A. History and Development of the Company

Mr. Shing Yung Ma, our chief executive officer, founded a broccoli farming business in March 2004. In April 2004, Mr. Ma began to corporatize this business by injecting it into Land V. Limited (Hong Kong), a Hong Kong holding company. By the end of July 2004, Land V. Limited (Hong Kong) had established three wholly owned PRC subsidiaries to take over the operation of Mr. Ma’s broccoli farming business.

On April 25, 2005, Mr. Ma became the sole shareholder of Land V. Group Limited, a then newly incorporated British Virgin Islands company. At the same time, our product offering was expanded from broccoli to a variety of fresh vegetables. Between October 2005 and March 2006, Land V. Group Limited and Land V. Limited (Hong Kong) together went through a reorganization and as a result, Land V. Limited (Hong Kong) became a wholly owned subsidiary of Land V. Group Limited. After this reorganization, Mr. Ma owned 58.4% of the equity interest in Land V. Group Limited and several angel investors in aggregate held the remaining 41.6% equity interest. On March 24, 2006, China Linong was incorporated in the British Virgin Islands to facilitate investment into our group and became the holding company of Land V. Group Limited through a share exchange. Since 2006, venture capital and private equity investors, Sequoia, SIG and Pacven Walden Ventures VI, L.P. and its affiliates started to invest in us by subscribing for preferred shares of China Linong.

We incorporated Le Gaga Holdings Limited in the Cayman Islands as an exempted limited liability company on May 6, 2010 as our listing vehicle. Le Gaga Holdings Limited became the 100% holding company of China Linong on July 16, 2010 when all of the ordinary shareholders and preferred shareholders of China Linong exchanged their shares in China Linong for shares of Le Gaga Holdings Limited on a pro rata basis. There was no change in the economic substance of our business or the shareholders’ equity interests before and after the share exchange. Each of our preferred shares was automatically converted into one ordinary share immediately upon the closing of our initial public offering.

In November 2010, we completed our initial public offering of 10,871,599 ADSs. We listed our ADSs on the NASDAQ Global Select Market on October 29, 2010.

Our principal executive offices are located at Unit 1105, The Metropolis Tower, 10 Metropolis Drive, Hung Hom, Kowloon, Hong Kong. Our telephone number at this address is +852-3162-8585 and our fax number is +852-3167-7227. Our registered office in the Cayman Islands is located at the offices of Maples Corporate Services Limited, PO Box 309, Ugland House, Grand Cayman, KY1-1104 Cayman Islands.

Going Private Transaction

On July 30, 2014, we entered into a definitive agreement and plan of merger, or the Merger Agreement, with Harvest Parent Limited, or Parent, a Cayman Islands exempted company with limited liability, and Harvest Merger Limited, or Merger Sub, a Cayman Islands exempted company with limited liability. Pursuant to the Merger Agreement, Parent will acquire the Company for $0.0812 per ordinary share or $4.06 per ADS, each representing 50 ordinary shares. Subject to the terms and conditions of the Merger Agreement, at the effective time of the merger, Merger Sub will merge with and into the Company, with the Company continuing as the surviving corporation and a wholly-owned subsidiary of Parent, or the Merger. Immediately following the consummation of the transactions contemplated under the Merger Agreement, Parent will be beneficially owned by (i) Ms. Na Lai Chiu, (ii) Valuetrue Investments Limited, a British Virgin Islands company wholly-owned by Ms. Na Lai Chiu, (iii) Mr. Shing Yung Ma, (iv) Grow Grand Limited, a British Virgin Islands company wholly-owned by Mr. Shing Yung Ma, (v) Sequoia Capital China I, L.P., Sequoia Capital China Partners Fund I, L.P., Sequoia Capital China Principals Fund I, L.P., Sequoia Capital China Growth Fund I, L.P., Sequoia Capital China Growth Partners Fund I, L.P. and Sequoia Capital China GF Principals Fund I, L.P., (vi) YH Greenhouse, LLC, a Delaware limited liability company, (vii) SIG China Investments One, Ltd., a Cayman Islands company, (viii) Honeycomb Assets Management Limited, a British Virgin Islands company, (ix) Limewater Limited, a British Virgin Islands company, (x) Natural Eternity Limited, a British Virgin Islands company, (xi) Win Seasons Holdings Limited, a Hong Kong company, (xii) Pacven Walden Ventures VI, L.P. and Pacven Walden Ventures Parallel VI, L.P., Cayman Islands limited partnerships, and (xiii) Mr. Ming Ho Lui. The Merger Agreement has been approved by the shareholders at an extraordinary general meeting of shareholders held on October 22, 2014. Completion of the Merger is subject to the satisfaction or waiver of the conditions set forth in the Merger Agreement. The Company will work with the other parties to the Merger Agreement to satisfy all conditions precedent to the Merger set forth in the Merger Agreement and complete the Merger as quickly as possible. If and when completed, the Company will become a privately-held company, and the ADSs no longer being listed on NASDAQ.

B. Business Overview

Overview

We are a leading greenhouse vegetable producer in China, with our greenhouses covering approximately 39.0% of our total arable land as of June 30, 2014. We grow vegetables by using greenhouses primarily and specialize in producing and selling off-season vegetables. We focus on applying advanced agricultural know-how to grow safe and consistently high-quality vegetables. We sell over 50 varieties of vegetables to wholesalers, institutional customers and supermarket chains in China and Hong Kong. We have established and rely on a comprehensive database in planning each stage of the crop cultivation process, from seed selection to crop production to harvesting, taking into account customer preferences and market and meteorological conditions. Combining the use of our planning system, our advanced horticultural know-how and greenhouse cultivation, we have been able to better control crop cycles and harvest schedules to capture attractive market opportunities, such as off-season and higher-priced vegetables.

We use greenhouses to grow vegetables in most of our Fujian and Guangdong farms. Our greenhouses are sturdy structures equipped with retractable walls to regulate temperature without the use of energy supply and temperature control systems. Greenhouses protect our crops from adverse weather conditions, such as typhoons and rainstorms, that are common in the summer in southern China. They also create a favorable microclimate that, together with our horticultural know-how, allows us to grow and sell high-priced vegetables of superior quality and uniform size, color and ripeness that are desired by consumers, as well as off-season vegetables during the winter, when supplies of these vegetables are limited and their prices are high, which enables us to avoid selling into a highly commoditized market. Compared to open-field farming, greenhouse cultivation improves our production yield and the quality of our produce and allows us to produce higher-priced off-season products. This leads to much higher revenue per mu, profit margins and return on our investment expenditures. Accordingly, our greenhouses have contributed to a significantly higher percentage of our revenues than would be suggested by their percentage coverage of our arable land.

We have accumulated proprietary horticultural know-how for each step of the crop cultivation process. We have formulated this know-how into standardized production processes for each type of vegetable we produce. Each process is broken down into simple steps to allow for uniform application of our horticultural know-how across all production bases, while minimizing the time for training farm workers. Each year we test grow many varieties of seeds supplied by domestic and international seed companies to identify new varieties with superior quality and production yield. We devote significant resources to research and development and collaborate with domestic research institutions, universities and industry experts to develop cultivation techniques and improve production yield.

We have systematically gathered, collected and analyzed market information, seed information, meteorological information, as well as vegetable supply information in China. We have gathered a large volume of data on historical vegetable price movements and weather patterns in various regions of China, which helps us to plan crop cultivation and harvest. We collaborated with Beijing IT to develop an advanced information management system and database to better organize and utilize our know-how.

In the fiscal year ended March 31, 2012, the three months ended June 30, 2012 and the fiscal years ended June 30, 2013 and 2014, our revenue was RMB519.4 million, RMB 123.2 million, RMB 576.3 million and RMB580.5 million ($93.6 million), respectively. Our result for the year/period was a profit of RMB162.8 million, a loss of RMB8.5 million, a profit of RMB153.1 million and a profit of RMB56.1 million ($9.0 million) for the fiscal year ended March 31, 2012, the three months ended June 30, 2012 and the fiscal years ended June 30, 2013 and 2014, respectively.

Our Products

We offer over 50 varieties of fresh vegetables to wholesalers, institutional customers and supermarket chains in China and Hong Kong. Our product offerings include solanaceous vegetables, in particular “fruit-bearing” vegetables such as peppers, tomatoes, eggplants, pumpkins and cucumbers; leafy vegetables such as flowering Chinese cabbage (choi sum), baby bok choy and baby Chinese cabbage; and cruciferous vegetables such as broccoli and Chinese cabbage. Typically, we grow solanaceous vegetables in autumn, winter and spring, when prices of this type of vegetables are high in southern China where most of our sales occur due to limited supplies caused by cold weather in northern China, which is the main production region for solanaceous vegetables. Generally, we grow leafy vegetables and cruciferous vegetables in summer, when the weather in southern China is too warm and humid for most solanaceous vegetables. The following table sets forth the percentages of our total revenue and average selling prices of various types of our products in the PRC and Hong Kong for the periods indicated.


	Year Ended June 30,
	2013					2014
	Revenue (%)			Average Selling Price (RMB/kg)		Revenue (%)			Average Selling Price (RMB/kg)
PRC revenue⁽¹⁾
Solanaceous		65	%		4.76		86	%		4.01
Leafy		21	%		3.17		8	%		2.80
Cruciferous		11	%		3.04		5	%		3.39
Others		2	%		4.72		1	%		5.34

Subtotal		99	%		4.07		100	%		3.86

Hong Kong revenue		1	%				0	%

Total		100	%				100	%

(1)	Defined as revenue from sales of respective products in the PRC mainland to external customers

Each year we grow in large quantities several new varieties of vegetables to better meet evolving consumer preferences and market demand. We place a strong emphasis on food safety and undertake stringent quality control measures. Recognized for our commitment and efforts in maintaining effective quality control, we received Green Food certification and the Certification of Pollution-free Agricultural Product for various PRC subsidiaries. We continually focus on improving our revenue per mu and efficiency.

Business Model

We utilize a business model that combines our three major competitive advantages: our large-scale greenhouse facilities, our proprietary horticultural know-how and our comprehensive database.

Our large-scale greenhouse facilities create a microclimate that allows us to control and schedule our crop plantation. Our greenhouse facilities, coupled with our database and proprietary horticultural know-how, have enabled us to produce consistently high-quality vegetables and to enjoy greater flexibility in planning harvests to meet higher market demand of our crops, and have thereby enabled us to command better market selling price, particularly during the off-season.

We aim to achieve optimal production results through the interaction between our proprietary horticultural know-how and our database. We have adopted unique vegetable cultivation techniques at each step of the cultivation process and have formulated unique standardized production processes that incorporate our horticultural know-how for each type of vegetable that we produce.

Our database comprises the latest information relating to market, seed sales and supply, weather conditions and vegetable supply in our target markets, as well as a large database on historical vegetable prices, various soil and landscape statistics and weather patterns and movements. This database provides us with key information throughout our entire production process, from the initial selection of production base location to efficient production planning and effective control of crop cycles.

Greenhouses and Other Agricultural Facilities

We grow various types of vegetables in greenhouses at most of our nine farms in southern China, where typhoons and rainstorms are common occurrences in the summer. We also cultivate seedlings in nursery greenhouses at our production bases in northern China. Most of our greenhouses are sturdy structures with either entirely steel frames or steel roof frames and concrete columns as side frames, covered by thick plastic films that are securely fastened to the frame as roofs and walls. Our greenhouses are equipped with retractable walls for temperature regulation, instead of expensive energy supply and temperature control systems. We are gradually phasing out our older greenhouses that have bamboo frames and thin plastic films. As of June 30, 2014, 96.4% of our greenhouse land was covered by steel/concrete structures. Greenhouses with concrete column frames are more typhoon-resistant and we reinforce the typhoon resistance of greenhouses with steel frames by fastening the greenhouses to the ground with steel wires. We have also built structures with three or four greenhouses connected together to increase farmland utilization and typhoon resistance.

Greenhouses offer improved production yield compared to traditional open-field farming as plants develop more rapidly inside a climate-controlled environment and are better protected against adverse weather. During the day, we roll up the plastic sheet walls of the greenhouses to release heat and moisture. We roll down the plastic walls to keep heat within the greenhouses during winter nights. In summer, we also put an extra layer of black net on the roofs to block excessive heat from sunlight.

Greenhouses protect our crops from adverse weather conditions, such as cold fronts, droughts, typhoons, rain storms or dust storms. They also help keep out pests and reduce the need to use pesticides, increase the efficiency of fertilizer application and create a microclimate conducive to cultivating crops of consistent quality and size all year round. Accordingly, our greenhouses have contributed to a significantly higher percentage of our revenues than would be suggested by their percentage coverage of our arable land.

In June 2013, following the end of the solanaceous season, we have started the conversion of part of our greenhouse area to a soil-less production system. The key reasons for shifting to the soil-less system are (1) the increasing difficulty in finding farm land with unpolluted soil and a safe and reliable water supply in China, (2) the increasing disease pressure in recent years due to ever more intensive farming methods around China, and (3) the increasing difficulty in finding skilled farm workers in China.

The soil-less system provides more control over the growing environment as well as the application of production inputs such as fertilizer, water and pesticide and helps to mitigate soil-borne disease and pollution issues. Furthermore, this system is less labor intensive compared to production in the soil. The central government has commenced a series of R&D activities on soil-less production in 2013, as it is increasingly focusing on the environmental impact of farming as well as food safety issues. Thus, we believe that this is the future development of the agricultural industry in China.

In each of the farms we operate, we have built comprehensive agricultural facilities, including irrigation systems, on-farm roads, electrical systems, as well as storage and packing facilities. To support our operations, we have also implemented organizational procedures for the planning, design, procurement, construction, operation and maintenance of our agricultural facilities.

Horticultural Know-how

We have adopted advanced horticultural techniques and have developed proprietary horticultural know-how for each step of cultivation. Our density sowing know-how helps us to significantly improve our land utilization and production yield. We apply industrial seedling cultivation to grow seedlings in large volumes. We use grafting techniques to improve the anti-disease characteristic of our crops. We manage water application, light and moisture to control the growth speed of our crops. We mix liquid fertilizers into the irrigation water to ensure uniform and effective distribution of fertilizer and use organic fertilizer to improve soil quality.

Disease Control. Our produce are vulnerable to crop diseases such as tomato yellow leaf curl virus, cubensis and powdery mildew, and to infestations of pests such as aphids, Altica Geoffroy pests, diamond back moths, noctuid and whitefly. We rely on a pest and disease control system to protect our crops, including biological control such as pest traps using pheromones, physical control such as insect nets, and chemical control such as pesticide application. We use plastic film mulching to suppress weeds.

Water Application Management. We primarily use drip irrigation to water our solanaceous vegetables. Drip irrigation allows water and fertilizers to drip slowly to the roots of plants, either into the soil surface or directly to the root systems, through a network of valves, pipes, tubing and emitters. This method improves our irrigation and fertilization efficiency by saving water, minimizing fertilizer and nutrient loss due to localized application and reducing labor cost. We are also able to regulate water supply to control crop growth by regulating the valves and drips. In addition, localized fertilization through drip irrigation limits the contact of fertilizers with the produce itself and focuses its application on the roots, which are the non-edible parts of fruit-bearing solanaceous vegetables. Drip irrigation enhances the food safety of our produce.

We use sprinkler irrigation to water our leafy vegetable and cruciferous vegetable. Sprinkler irrigation, which is similar to rainfall, provides efficient coverage for small to large areas. We use sprinklers to administer fertilizers only during the germination phase of plant growth to avoid contamination of our produce.

Harvest. We plan our harvest schedule based on our analysis of the information contained in our database to capture optimal market prices. We fine-tune our harvest time based on market and weather information. As the harvest process for most of the vegetables we grow cannot be mechanized, our farm workers hand harvest our crops in all of our farms. We have developed methods to cut leafy vegetables to a uniform length in harvesting to improve packaging efficiency. We also conduct preliminary grading of our produce during on-field harvest by separating different sizes of vegetable into different baskets. We conduct further grading based on the quality and size of vegetables in our processing facilities to ensure quality consistency.

Database

We have established a comprehensive database, comprising first-hand market information collected by our sales and marketing personnel stationed in each target market, seed information collected from large seed suppliers such as sales volumes and sales areas of particular types of vegetables, meteorological information for areas where our production bases and our competitors’ farms are located, as well as vegetable supply information in China. We further analyze these information and data to plan our production, schedule our harvests and direct our sales efforts. We maintain and analyze a large volume of historical vegetable price movement data in various regions of China, as well as weather patterns, which help us plan vegetable plantation and harvesting based on historical vegetable price movement patterns in our target markets. In 2010, we entered into a technology development agreement with Beijing IT. Under the terms of the agreement, Beijing IT is developing an information and logistics management system for the management of our business, including production schedules, inventory management, harvest management, price analysis and customer management. Design of this new system commenced in March 2010. We have started testing, implementation and further improvement of the system at several of our farms. In June 2012, we renewed the agreement with Beijing IT, expanding the scope of the project with a focus on sales and production statistics and data analysis. The project has been completed in 2014. Data and files generated during the course of project development are jointly owned by Beijing IT and us, and may not be disclosed to a third party without the consent of each of Beijing IT and us. All patents applied for during the course of project development belong to us.

We rely on this comprehensive database to plan our crop selection, production and harvesting schedule. When our analysis of the database indicates that market prices for a particular type of vegetable may rise, mostly due to adverse weather conditions, we plant the seedlings, as opposed to seeds, of this type of vegetable so that we can shorten the crop cycle to benefit from the favorable market price. When market prices decline for a type of vegetable that we are growing, using our horticultural know-how and techniques, we are able to delay the harvest while maintaining the quality of vegetables.

Production Bases

We operate nine production bases in the provinces of Fujian and Guangdong in southern China and one production base in Hebei province in northern China, mostly on land for which we lease land use rights from local villagers’ committees, farmer households or local governments. As of June 30, 2014, we had farmland and forestland with an aggregate area of 31,042 mu (2,070 hectares) that were leased and either in operation or under construction or reserved by us. Our production bases typically consist of farms, packing and storage facilities, offices and employee accommodation.

Before selecting each production base, we first utilize our database to analyze information on the sales volume and price of the top ten vegetables sold in our target market. Next we calculate target crop outputs, cost estimates and the size of the production base, taking into consideration our target market share and target profitability. Then we determine the size of the production base and the types of vegetables to grow. In selecting new production bases, we look for open plain fields in a low-pollution environment with fertile soil and abundant water supplies, supported by an efficient transportation system. We have strategically located our production bases in southern China within 200 kilometers of our target markets. The proximity of our farms to our target markets lowers transportation costs and related logistical costs for our customers and us. It also shortens the shipment time and helps maintain the freshness and quality of our produce. In addition, we operate one farm in Hebei province to produce vegetables that grow best in a cooler climate. The table below sets forth the geographical locations of our production bases as well as their arable areas as of June 30, 2014.


Production Base⁽¹⁾	Location		Arable Area (mu)		Arable Area (hectare)
Fuqing		Fujian		1,837		122
Huizhou		Guangdong		4,024		268
Ningde		Fujian		2,346		157
Quangang		Fujian		2,604		174
Quanzhou		Fujian		1,700		114
Sanming		Fujian		1,464		98
Xianyou		Fujian		8,710		580
Zhangjiakou		Hebei		3,982		265
Zhangpu		Fujian		3,225		215
Zishan Orchard		Fujian		1,150		77

Total				31,042		2,070

(1)

We review the productivity and efficiency of the utilization of our resources for each of our existing farms on a regular basis. We decided to dispose of farms with a total land area of 2,346 mu in Fujian Province. As of June 30, 2014, we are in the process of returning these farmlands to the landlords.

The growing season, the period of each year when crops can be grown, is spring, summer, autumn and winter for our production bases in Guangdong and Fujian provinces, and spring, summer and autumn for our production base in Hebei province. Our production bases in Guangdong and Fujian and Hebei provinces primarily serve the Guangdong, Fujian and Yangtze River Delta markets.

Our leases with farmer households, local villagers’ committees or local governments who lease the land on farmer households’ behalf typically have terms of 10 years to 20 years. We pay rent in cash or by bank transfer semi-annually or annually in advance directly to farmer households, or to the local villagers’ committees who act on behalf of the farmer households, which in turn distribute the rent to farmer households. We are permitted under the leases to build agricultural facilities on the land and access utilities such as water supply and electrical grid on the farmland that we lease. We typically have the right of first refusal to renew these lease contracts when their terms expire.

Quality Control and Food Safety

Our standardized production processes, product grading standards, monitoring and testing systems help to ensure consistent adherence to our quality control and food safety policies and procedures across all of our farms. We have centralized our raw material procurement, in particular our purchases of seeds, fertilizers and pesticides, to ensure quality and safety.

After each harvest, we cleanse our farmland to eliminate pests, pest eggs and detrimental bacteria in preparation for the next growth cycle. We use spring water and underground water to irrigate our crops. Our designated personnel safeguard our water sources against any man-made or natural pollution. A combination of greenhouses, know-how and bio-control systems reduce chemical fertilizer usage and protect our crops from dust, rain damage and soil pollution. We have developed our uniform pesticide-residue standard based on pesticide-residue standards of various target domestic and international markets. We employ biological, physical and chemical pest control methods. We have established internal policies on pesticide and equipment sourcing and usage.

We conduct pre-harvest testing of our crops in fields and pre-shipment inspection in our packaging facilities to identify and locate substandard produce and remove them from the supply chain. We refrigerate vegetables that are easily perishable, such as flowering Chinese cabbage, in a cooling facility within an hour of their harvest to maintain their freshness.

Customers

Our produce are primarily sold to vegetable wholesalers, institutional customers and supermarket chains. We had a customer base of 162, 154 and 153 customers in the fiscal year ended March 31, 2012, and the fiscal years ended June 30, 2013 and 2014, respectively. Sales to our top five customers collectively accounted for 20.6%, 26.3% and 32.6% of our revenue in the fiscal year ended March 31, 2012 and the fiscal years ended June 30, 2013 and 2014, respectively. No single customer accounted for over 10% of our revenue during the fiscal year ended March 31, 2012 and the fiscal years ended June 30, 2013 and 2014. The following table sets forth the breakdown of our revenue by different sales channels both in absolute amount and as a percentage of our total revenue for the periods indicated.


	Year Ended March 31,				Three Months Ended June 30,				Year Ended June 30,
	2012				2012				2013				2014
	RMB		%		RMB		%		RMB		%		RMB		$		%
	(In thousands, except percentages)
Wholesalers		289,976		55.8		63,968		51.9		370,999		64.4		327,380		52,773		56.4
Institutional customers		197,394		38.0		54,224		44.0		189,164		32.8		246,037		39,660		42.4
Supermarkets		31,880		6.2		5,047		4.1		16,111		2.8		7,083		1,142		1.2
Others⁽¹⁾		149		0.0		9		0.0		—		0.0		—		—		0.0

Total		519,399		100.0		123,248		100.0		576,274		100.0		580,500		93,575		100.0

(1)	Includes retailers and small distributors who are not our regular customers.

Wholesale

We employ two wholesale approaches: direct sales at wholesale markets and sale to wholesalers at our farms.

Our direct sales at wholesale markets are made at prevailing market prices and are typically settled in cash. Our direct sales force collects first-hand market information on vegetable prices, volumes, qualities, conditions, supply and demand, and other market data on vegetable produce.

In addition, we sell our produce at our farms located in Guangdong and Fujian provinces to wholesalers from various wholesale markets in China. These wholesalers fax in their purchase orders with prices and volumes the day before they wish to purchase the produce, we then confirm their orders with the prices and they then come to our farms to pick up their purchases the following day and sell the produce at these wholesale markets to vegetable retailers and traders. Our sales to wholesalers are made at prevailing market prices and are primarily settled in cash at our farms or by wire transfer.

While we focus our wholesale operations in southern China, from time to time we sell our produce to customers in northern China when vegetable prices there are significantly higher than those in the southern China market, to the extent that the difference in prices exceeds the additional shipping and packaging costs that we may incur.

Institutional customers

We sell our produce to institutional customers such as export traders, food processing companies, large company canteens and large logistic traders. We typically do not enter into long-term supply contracts with our institutional customers. Pricing of produce sold to food processing companies and export traders is negotiated between the parties taking into account the market price trend at the time when the purchase orders are placed. Pricing of produce sold to large company canteens and large logistic traders is determined based on purchase orders placed on a monthly basis. Sales to institutional customers are settled in cash or by wire transfer.

Supermarket chains

We also sell our produce to supermarket chains, including New Hua Du in the PRC and Park’N Shop in Hong Kong.

Our sales to supermarket chains are made in the form of either direct sales or concession sales. In direct sales, we sell our produce to supermarket chains, which in turn sell them to consumers. In concession sales, supermarket chains allow us to sell our produce to consumers directly in their stores and we pay concessionaire fees to these supermarket chains. The pricing terms in both direct sales and concession sales are based on the prevailing market price. In direct sales, the supermarket chains place purchase orders with terms on prices and volumes in advance of delivery. The concessionaire fees we pay to supermarket chains in connection with our concession sales vary among different supermarket chains. We typically do not enter into fixed-price long-term supply contracts with our supermarket chain customers.

We started selling our produce to leading Hong Kong supermarkets in 2006. During the fiscal year ended March 31, 2012, we ceased all concession sales to the Hong Kong supermarkets, due to lower profitability of concession sales compared to direct sales and realignment of our resources.

Our distribution staff deliver our vegetables on scheduled dates in agreed volumes to the logistic centers of supermarket chains in Hong Kong and to large supermarket and hypermarket stores in China.

Our sales to supermarket chains are primarily settled by wire transfer. From time to time we offer our supermarket chain customers credit terms within a period of 60 days from the day of delivery. We decide on the length of credit terms based on price and the size of the purchase orders.

Sales, Marketing and Distribution

We believe we attract and retain our customers through the quality and safety of our produce and the reliability of our supply. We have built a good reputation among wholesalers, institutional customers and supermarket chains for consistently delivering high-quality, fresh vegetables.

As of June 30, 2014, we had 2 sales and marketing personnel in Hong Kong and 30 sales and marketing personnel in China. We divide our sales and marketing personnel into four teams based on different sales channels. We also set sales objectives for our sales personnel and reward them for achieving these objectives to keep them sufficiently incentivized.

We conduct thorough and extensive market research and plan our sales and marketing efforts based on the market information and our business strategies. We study evolving market demands and consumer preferences to develop new crop varieties to increase our sales and profitability.

We intend to strengthen our sales and marketing efforts in southern China and further expand sales of our produce in the Yangtze River Delta, an affluent area with growing demand for high-quality fresh vegetables.

Our wholesale customers pick up our vegetables at our farms and cover their own transportation costs. We also deliver our produce to wholesale markets and other customers such as supermarket chains and customers in Hong Kong by rented trucks.

Supplies and Utilities

We use spring water or drill wells in our farmland to source water to irrigate our crops. Other utilities such as electricity and diesel are in ample supply at reasonable cost where our farms are located.

Competition

The fresh vegetable production industry in China is highly fragmented and intensively competitive with a very large number of participants including individual farmers and private vegetable production companies. We compete for market share mostly with numerous unorganized individual farmers. Among companies engaged in vegetable plantation business, large private vegetable production companies are the leading players. We also compete with smaller regional and local vegetable producers and individual farmers. Competition is primarily affected by product selection, product quality, food safety, reliability of supply, brand recognition and perception, distribution capability, pricing and the ability to satisfy changing customer preferences through innovative product offerings. The level of competition may affect our ability to control our prices, and subsequently our profit margins and results of operations.

Our ability to compete successfully in the vegetable production business largely depends on our ability to consistently deliver high-quality, fresh vegetables of desirable color, aroma, freshness, texture, flavor and nutritional value. We need to further expand our production scale and enhance our product offerings in order to compete with competitors successfully.

Intellectual Property

Many elements of our proprietary information, such as horticultural know-how, technologies, production and market database, are not patentable in China. We rely primarily on a combination of trade secrets, trademarks and confidentiality agreements with key employees and third parties to protect our intellectual property. As of June 30, 2014, we owned two registered trademarks in China for our logos. We also use three other unregistered trademarks, “Land V,” “FDC” and “Scarecrow,” on our packaged vegetables.

Insurance

We maintain insurance for workplace injuries, office equipment and premises in Hong Kong and certain greenhouse facilities and vehicles in China. We do not have insurance coverage for our other assets (including biological assets), inventories, business and product liability, interruption of business or key-employees. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business—We have a limited insurance coverage in China.”

Environmental Matters

Our agricultural operations are subject to a broad range of evolving environmental laws and regulations in China. We place strong emphasis on environmental protection in conducting our business and adopt horticultural methods and processes that are in accordance with the green food production standards promulgated by the Ministry of Agriculture of China. These standards limit the amount of pesticide, fertilizer, veterinary drug and additive that can be used in agricultural production to prevent any toxic or harmful matters from contaminating the products and the environment to ensure environmental and product safety. In order to protect soil fertility, we also practice crop rotation which helps prevent nutrient loss of our farmland. We deliver plastic film waste to professional recycling plants for processing. Our strategy to convert part of our greenhouse area to a soil-less production system helps to reduce pesticide usage.

Compliance with these laws and related regulations is an ongoing process that is not expected to have a material effect on our capital expenditures, earnings or competitive position. Environmental concerns, however, are inherent in most major agricultural operations, and there can be no assurance that future developments, such as increasingly strict environmental laws and enforcement policies thereunder, could result in increased compliance cost. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business—We are subject to environmental regulations and may be exposed to liability and potential costs for environmental compliance.”

Regulations

This section sets forth a summary of the most significant regulations or requirements that affect our business activities in China.

Agriculture Law

The PRC Agriculture Law sets forth various principles and measures designed to ensure the steady development of China’s agricultural industry. These include registration or licensing requirements for the production or the use of agricultural production materials, such as farm chemicals, seeds and fertilizers, that may affect the health of human beings or animals.

Laws and Regulations Relating to Agricultural Products

Agricultural Product Quality Safety Law

The PRC Agricultural Product Quality Safety Law seeks to ensure the quality and safety of agricultural products, maintain the health of the general public and promote the development of agriculture and rural economy. “Agricultural products” refers to primary products sourced from agriculture, including plants, animals, micro-organisms and their products obtained from agricultural activities.

The Agricultural Products Quality Safety Law provides for requirements relating to quality of agricultural products to ensure human health and safety. The state has established and continues to improve a system of agricultural product quality safety standards with compulsory technical specifications. To prevent the impairment of quality and safety of products, agricultural producers are required, in accordance with the relevant laws and regulations, to make reasonable use of agricultural raw materials, strictly comply with the regulations on the implementation of safe application intervals and periods when agricultural lands are required to lay fallow.

Agricultural enterprises are required to maintain production records of the application of agricultural raw materials, the harvest date of produce, the occurrence of plague and insect pests, if any, and extermination measures taken. Production records must be kept for at least two years.

Agricultural products for sale must be in compliance with quality and safety standards. Producers may apply for a permit agricultural marks to quality as harm-free agricultural products. Once the quality of their agricultural products meets the quality standards set by the state for high-quality agricultural products, these producers may apply to use the appropriate quality label on agricultural products.

Producers or distributors of agricultural products produced or sold that cause damage to consumers are held liable for compensation and may be subject to administrative penalties. Punitive measures for violations of the Agricultural Product Quality Safety Law include the issuance of rectification orders, stop orders against sale of agricultural products, order for innocuous treatment of the endangering products, confiscation of the sale proceeds thereof, and the imposition of fines. In the event of serious violations, the agricultural product producer or distributor may be subject to criminal liability.

Food Safety Law

The PRC government has strengthened its supervision and regulation over food safety. According to the Special Rules on Strengthening Safety Supervision of Food and Other Products, food producers and distributors are liable for the safety of food products produced or sold, including edible agricultural products, drugs and other products concerning the health and safety of human beings. Food production and distribution activities must comply with the relevant standards and requirements as provided by relevant laws and regulations. Raw materials, food additives and other materials used by food producers in their production must meet legal and industrial standards. If a producer discovers any of its potentially dangerous product that damage human health, the producer must announce such information to the public and recall such product. Violations of these special rules will subject the offenders to different levels of penalties, ranging from confiscating illegal gains, products, equipment, tools and materials used in the production of the substandard products, imposing fines and revoking relevant productions permits. Severe violations could be criminal offenses.

Under the PRC Food Safety Law enacted on February 28, 2009 and its implementation regulations enacted on July 20, 2009, the quality and safety of edible agricultural products is governed by the Agricultural Product Quality Safety Law. The PRC Food Safety Law applies to the formulation of quality and safety standards and disclosure of safety related information of the edible agricultural products.

Food Export

Under the Measures for the Administration of Export Food Hygiene of the PRC (Provisional), manufacturers who export food products must register with the provincial administration of import-export inspection and quarantine. Food products that do not undergo export inspection or fail export inspections are not allowed to be exported.

Furthermore, according to the Administrative Provisions on the Filing of Export Food Manufacturer, enterprises that produce, process or store export foods must register with the authority of the PRC State Certification and Accreditation Administration on the national level or the local administration of import-export inspection and quarantine.

According to the Administration Methods of Inspection and Quarantine on Vegetables Exporting to Hong Kong and Macau promulgated on April 19, 2002, a registration system is implemented for vegetable farms and markets by the inspection and quarantine authorities for vegetables exported to Hong Kong and Macau. No vegetables from unregistered farms or markets can be exported to Hong Kong or Macau.

On November 1, 2009, the Administration Methods of Inspection and Quarantine on Vegetables Exporting to Hong Kong and Macau was abolished. It was replaced by the Administration Methods on the Inspection and Quarantine Supervision on Vegetables Exporting to Hong Kong and Macau promulgated by the General Administration of Quality Supervision, Inspection and Quarantine of the PRC. Under the new administration measures, inspection and quarantine authorities are to set up a registration system to administer vegetables production bases and processing enterprises for vegetables exported to Hong Kong and Macau. Except for vegetables that fall under the minority vegetable category prescribed by the General Administration of Quality Supervision, Inspection and Quarantine of the PRC, all vegetables production bases and processing enterprises must register with the authorities. No vegetables from the unregistered production bases are allowed to be exported to Hong Kong or Macau. “Production bases” refers to the planting locations of vegetables exported to Hong Kong and Macau; “processing enterprises” refers to enterprises engaging in vegetables purchase and primary processing for export to Hong Kong and Macau; and “minority vegetable category” refers to vegetables exported to Hong Kong and Macau with few daily supplies and not eligible for the production base registration.

Quality Marks on Agricultural Product

According to the Agricultural Product Quality Safety Law, producers of agricultural products may apply for the use of “harm-free” marks on their agricultural products. They may use this quality mark on their products if the agricultural products comply with the standards prescribed by the state for high-quality agricultural products.

According to the Administration Measures on the Harm-free Agricultural Products, the harm-free agricultural products may be authenticated by two methods, namely origin authentication and product authentication. The authentication takes into account the conformity of plantation environment, processing procedures and product quality with the relevant state standards and specifications. The producers may use harm-free marks on their agricultural products after obtaining the relevant authentication certificates.

According to the Administration Measures on Green-food Marks, without the examination and approval of the competent authorities, no person may use green-food marks on agricultural products.

According to the Administration Methods on Organic Production Authentication, food producers may only use the organic marks after obtaining the organic product certificates. These marks may be used on certain products that fall within the stipulated scope and quantity as prescribed by the organic product authentication certificates.

Land Use Rights

Collective-owned Agricultural Land in Rural Areas

According to the PRC Law on Land Administration, all lands in the PRC are either state-owned or collectively owned. Generally, land in the urban areas of a city or town are state-owned, whereas land in the rural areas of a city or town and all rural land are, unless otherwise specified by law, collectively owned. When required, the state has the right to reclaim the collectively owned lands in accordance with law if such reclaim is beneficial to the public. For individuals, businesses and other organizations granted with the land use rights of state-owned or collectively-owned agricultural land, they are permitted to hold, lease and develop these lands.

Title Certificate of Collective-owned Land

According to the PRC Law on Land Administration, land located within a village or rural collective economic organization is collectively owned as a whole by the farmers of the village or rural collective organization. An exception is where such land is stipulated by the laws as state-owned, in which case, such land is owned by the state. The government at the county level must register and maintain a record of the collectively owned lands, and issue “collectively-owned land ownership certificates” for farmland or “forest title certificates” for forestlands to evidence and certify the ownership of the lands concerned. Lands collectively owned by rural residents are contracted to and operated by members of the respective village or rural collective economic organization for various uses such as plantation, forestry, livestock husbandry or fishery productions.

Rural Land Contracted Operation Rights

Under the Law of the People’s Republic of China on Land Contract in Rural Areas, or Land Contract Law, land in rural areas includes arable land, forestland and grasslands and other lands for agriculture use owned collectively by the farmers and by the State. The State applies the contractual management system in respect of lands in rural areas. These land contracts take the form of household contracts within the rural collective economic organization. Land that is not suitable for household contracts such as barren mountains, gullies, hills and beaches may be contracted in forms such as bid invitation, auction and public consultation. Anyone entering into a household contract must be a farmer household of the relevant rural collective economic organization. The term of the contracts is 30 years for arable land, 30 to 50 years for grassland, and 30 to 70 years for forestland.

A local villagers’ committee or rural collective economic organization is designated to operate and manage the rural land collectively owned by all the farmers within that village or rural collective economic organization. The local villagers’ committee or rural collective organization must enter into written contract with the farmer households granting the farmer households the right to operate the rural land. The contract becomes effective on the signing date and the farmer household is entitled, on the same date to obtain the land contracted operation rights. Local governments at or above the county level issue to the farmer households the “land contracted operation right certificates” for farmland or the “forest title certificates” for forestland to evidence the rural land contracted operation right. The rural land contracted operation right obtained through the household contract may be transferred through subcontracts, leases, exchanges or other means as prescribed under PRC law, provided that certain approvals and procedures have been complied with. However, if the farmer households transfer or assign the rural land contracted operation right before obtaining the land contracted operation right certificates, other farmers of the village or rural collective economic organization have the right to claim the transfer or assignment invalid.

The farmer households who have obtained the rural land contracted operation right have the right to decide whether to transfer or assign the rural land contracted operation right and the means of transfer or assignment. Under equal conditions, members of the same village or rural collective economic organization should enjoy preemptive rights. Such preemptive rights must be claimed within a reasonable period after the issuance of the written announcement of transfer or assignment, or in case of no written announcement, within two months after the land has been used by other persons or entities outside the local village or collective economic organization. The preemptive rights will not be supported by the court if not claimed within the stipulated time period. Where the rural land contracted operation right is transferred or assigned by way of subcontracts, leases, exchanges or other means, the parties must enter into a written contract and such transfer must be filed with the local villagers’ committee and government for registration.

Environmental Protection Regulations

We are subject to a variety of governmental regulations related to environmental protection. The environmental regulations applicable to us primarily include the PRC Environmental Protection Law, the PRC Water Pollution Prevention and Control Law, the Implementation Rules of the PRC Water Pollution Prevention and Control Law, the PRC Air Pollution Prevention and Control Law, the Implementation Rules of the PRC Air Pollution Prevention and Control Law, the PRC Solid Waste Pollution Prevention and Control Law.

According to the Environment Impact Appraisal Law, to commence production which may potentially lead to environmental pollution during the course of production, an environmental impact appraisal report or form should be prepared to provide a complete and detailed evaluation of the potential pollution as well as the impact on the environment. Such environmental impact appraisal report or form should be submitted to the environment protection authorities for approval.

Furthermore, according to the Administrative Measures for Environmental Protection Inspection and Acceptance Concerning Construction Project Completion, no production activities should be commenced before the inspection and acceptance report for environmental protection is examined and approved by the competent environmental protection authorities.

Foreign Currency Exchange

Foreign currency exchange regulation in China is primarily governed by the following rules:

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Foreign Currency Administration Rules (1996), as amended, or the Exchange Rules; and

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Administration Rules of the Settlement, Sale and Payment of Foreign Exchange (1996), or the Administration Rules.

Under the Exchange Rules, the Renminbi is convertible for current account items, including the distribution of dividends, interest payments, trade and service-related foreign exchange transactions. Conversion of Renminbi for capital account items, such as direct investment, loan, security investment and repatriation of investment, however, is still subject to the approval of the SAFE.

Under the Administration Rules, FIEs may only buy, sell and/or remit foreign currencies at those banks authorized to conduct foreign exchange business after providing valid commercial documents and, in the case of capital account item transactions, obtaining approval from the SAFE. Capital investments by FIEs outside of China are also subject to limitations, which include approvals by the Ministry of Commerce and the State Reform and Development Commission and registration with the SAFE.

Dividend Distribution

The principal regulations governing distribution of dividends paid by wholly foreign owned enterprises include:

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Wholly Foreign Owned Enterprise Law (1986), as amended; and

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Wholly Foreign Owned Enterprise Law Implementation Rules (1990), as amended.

Under these regulations, FIEs in China may pay dividends only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, a FIE in China is required to set aside at least 10.0% of their after-tax profit based on PRC accounting standards each year to its general reserves until the accumulative amount of such reserves reach 50.0% of its registered capital. These reserves are not distributable as cash dividends. The board of directors or executive director of a FIE has the discretion to allocate a portion of its after-tax profits to staff welfare and bonus funds, which may not be distributed to equity owners except in the event of liquidation. Under the Foreign Exchange Administration Rules and the relevant regulations on foreign currency transactions, an FIE must obtain a tax clearance before it can remit dividends abroad. Moreover, an FIE may not distribute any dividends if it has “uncompensated losses” accumulating from prior years, as calculated under PRC accounting standards and regulations.

Foreign Exchange Registration of Offshore Investment by PRC Residents

Pursuant to the SAFE’s Notice on Relevant Issues Concerning Foreign Exchange Administration in Financing and Investment by PRC Residents via Overseas Special Purpose Vehicles and Roundtrip Investment, generally known in China as SAFE Circular No. 37, issued on July 4, 2014 and became effective on July 4, 2014, (i) a person residing in the PRC, who is referred to as a PRC resident in SAFE Circular 37, shall register with the local provincial branch of the SAFE before it establishes or controls a SPV for the purpose of overseas equity financing (including convertible debts financing); (ii) when a PRC resident contributes the assets of or its equity interests in a domestic enterprise into an SPV, or engages in overseas financing after contributing assets or equity interests into an SPV, such PRC resident shall register his or her interest in the SPV and the change thereof with the local provincial branch of the SAFE; and (iii) when the SPV undergoes a material event outside of China, such as change in share capital or merger and acquisition, the PRC resident shall, within 30 days from the occurrence of such event, register such change with the local provincial branch of the SAFE.

Under SAFE Circular No. 37, failure to comply with the registration procedures set forth above may result in the penalties, including imposition of restrictions on a PRC subsidiary’s foreign exchange activities and its ability to distribute dividends to the SPV. See “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—Regulations relating to offshore investment activities by PRC residents may limit our ability to acquire PRC companies and could adversely affect our business, financial condition and results of operations.”

On December 25, 2006, the People’s Bank of China promulgated the “Measures for the Administration of Individual Foreign Exchange,” and on January 5, 2007, the SAFE further promulgated the implementation rules on those measures. According to the implementation rules, PRC citizens who are granted shares or share options by a company listed on an overseas stock market according to its employee share option or share incentive plan are required, through the PRC subsidiary of such overseas listed company or any other qualified PRC agent, to register with the SAFE and to complete certain other procedures related to the share option or other share incentive plan. Foreign exchange income received from the sale of shares or dividends distributed by the overseas listed company may be remitted into a foreign currency account of such PRC citizen or be exchanged into Renminbi. Our PRC citizen employees who have been granted share options will be subject to the Individual Foreign Exchange Rules upon the listing of our ADSs on the NASDAQ Global Select Market.

Regulations on Overseas Listing

On August 8, 2006, six PRC regulatory agencies, namely the MOC, the State Assets Supervision and Administration Commission, the State Administration of Taxation, the SAIC, the CSRC, and the SAFE, jointly adopted the M&A Rules, which became effective on September 8, 2006. This M&A Rules, as amended on June 22, 2009, purports, among other things, to require offshore special purpose vehicles, or SPVs, formed for overseas listing purposes through acquisitions of PRC domestic companies and controlled by PRC companies or individuals, to obtain the approval of the CSRC prior to publicly listing their securities on an overseas stock exchange. On September 21, 2006, the CSRC published a notice on its official website specifying documents and materials required to be submitted to it by SPVs seeking the CSRC approval of their overseas listings.

On December 14, 2006, the CSRC published on its official website procedures regarding its approval of overseas listings by SPVs. The CSRC approval procedures require the filing of a number of documents with the CSRC and the approval process takes several months to complete.

While the application of this new regulation remains unclear, we believe, based on the advice of our PRC counsel, Dacheng Law Offices LLP (Fuzhou), that CSRC approval is not required in the context of our initial public offering because we are not an SPV covered by the new regulation as we are owned and controlled by non-PRC individuals, and all our PRC subsidiaries are foreign-funded and have been incorporated through our direct investment instead of acquisition. However, we cannot assure you that the relevant PRC government agencies, including the CSRC, would reach the same conclusion as our PRC counsel. If the CSRC or other PRC regulatory body subsequently determines that CSRC’s approval was required for our initial public offering, we may face sanctions by the CSRC or other PRC regulatory agencies. In such event, these regulatory agencies may impose fines and penalties on our operations in China, limit our operating privileges in China, our initial public offering, or take other actions that could have a material adverse effect on our business, financial condition, results of operations, reputation and prospects, as well as on the trading price of our ADSs. The M&A Rules also established additional procedures and requirements that could make merger and acquisition activities by foreign investors more time-consuming and complex, including requirements in some instances that the MOC be notified in advance of any change of control transaction in which a foreign investor takes control of a PRC domestic enterprise. See “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—“The approval of the China Securities Regulatory Commission, or the CSRC, may be required in connection with our initial public offering that was completed in November 2010; the failure to obtain this approval, if required, could have a material adverse effect on our business, operating results and reputation as well as the trading price of our ADSs. The regulation also establishes more complex procedures for acquisitions by foreign investors, which could make it more difficult to pursue growth through acquisitions.”

C. Organizational Structure

The following diagram illustrates our corporate structure as of June 30, 2014.

LOGO

D. Property, Plant and Equipment

Our principal executive offices are located in Hong Kong.

As of June 30, 2014, we operated ten production bases with an aggregate area of 31,042 mu (2,070 hectares) in Fujian, Guangdong and Hebei provinces in China, mostly through leases of operation rights from local villagers’ committees, farmer households or local governments. The terms of these leases range from 10 years to 20 years. Our production bases typically consist of farms, processing and storage facilities, offices and employee lodges.

Item 4A. Unresolved Staff Comments

None.

Item 5. Operating and Financial Review and Prospects

The following discussion of our financial condition and results of operations is based upon and should be read in conjunction with our consolidated financial statements and their related notes included in this annual report. This report contains forward-looking statements. See “—G. Safe Harbor.” In evaluating our business, you should carefully consider the information provided under the caption “Item 3. Key Information—D. Risk Factors” in this annual report. We caution you that our businesses and financial performance are subject to substantial risks and uncertainties.

A. Operating Results

Overview

We are a leading greenhouse vegetable producer in China. We focus on applying advanced agricultural know-how to grow safe and consistently high-quality vegetables.

We sell over 50 varieties of vegetables to wholesalers, institutional customers and supermarket chains in China and Hong Kong. Our customers include Park’N Shop and New Hua Du. Sales to wholesalers are our largest revenue contributor and accounted for 55.8%, 51.9%, 64.4% and 56.4% of our total revenue in the fiscal year ended March 31, 2012, the three months ended June 30, 2012 and the fiscal years ended June 30, 2013 and 2014, respectively.

We operated ten farms with an aggregate area of 31,042 mu (2,070 hectares) in the Chinese provinces of Fujian, Guangdong and Hebei as of June 30, 2014. Nine of our farms, with an aggregate area of 27,060 mu (1,804 hectares), are located in Fujian and Guangdong near our target markets in southern China, which offers a favorable climate for year-around crop cultivation. In addition, we operate one farm in Hebei province to produce vegetables that grow best in a cooler climate. By the end of the fiscal year ending June 30, 2015, we expect to add approximately 3,700 mu (247 hectares) of arable land in areas adjacent to existing production bases in Fujian and Guangdong and increase our greenhouse land area by approximately 4,700 mu (313 hectares) to 16,900 mu (1,127 hectares). We expect to incur RMB350 million to expand our production bases, increase our greenhouse land area and upgrade existing production facilities and greenhouses in the fiscal year ending June 30, 2015. We use greenhouses to grow vegetables in most of our Fujian and Guangdong farms. As of June 30, 2014, our greenhouses covered approximately 39.0% of our total arable land. Greenhouses protect our crops from adverse weather conditions, such as typhoons and rainstorms. They also create a favorable microclimate that, together with our horticultural know-how, allows us to grow and sell high-priced vegetables of superior quality and uniform size, as well as off-season vegetables during the winter, which enables us to avoid selling into a highly commoditized market. Compared to open-field farming, greenhouse cultivation thus improves our revenue per mu, profit margins and return on our investment expenditures. Accordingly, our greenhouses have contributed to a significantly higher percentage of our revenues than would be suggested by their percentage coverage of our arable land.

In the fiscal year ended March 31, 2012, the three months June 30, 2012 and the fiscal years ended June 30, 2013 and 2014, our revenue was RMB519.4 million, RMB123.2 million, RMB576.3 million and RMB580.5 million ($93.6 million), respectively. Our result for the year/period was a profit of RMB162.8 million, a loss of RMB8.5 million, a profit of RMB153.1 million and a profit of RMB56.1 million ($9.0 million) for the fiscal year ended March 31, 2012, the three months ended June 30, 2012 and the fiscal years ended June 30, 2013 and 2014, respectively.

Financial Overview

Revenue

We derive substantially all of our revenue from the sale of fresh vegetables. Our revenue was RMB519.4 million in the fiscal year ended March 31, 2012, RMB123.2 million in the three months ended June 30, 2012, RMB576.3 million in the fiscal year ended June 30, 2013 and RMB580.5 million ($93.6 million) in the fiscal year ended June 30, 2014.

Our revenue-per-mu was RMB25,207 per mu (RMB378,105 per hectare) for the fiscal year ended March 31, 2012, RMB6,129 per mu (RMB91,935 per hectare) for the three months ended June 30, 2012, RMB24,547 per mu (RMB368,205 per hectare) for the fiscal year ended June 30, 2013 and RMB22,174 per mu (RMB332,610 per hectare) for the fiscal year ended June 30, 2014.

As of March 31, 2012, June 30, 2012, June 30, 2013 and June 30, 2014, a total of 8,615 mu (574 hectares), 8,915 mu (594 hectares), 11,963 mu (798 hectares) and 12,096 mu (806 hectares) of our arable land was covered by greenhouses, respectively, accounting for 34.4%, 34.1%, 40.7% and 39.0% of our total arable land for each of the respective periods. The size of our arable land amounted to 25,063 mu (1,671 hectares), 26,124 mu (1,742 hectares), 29,382 mu (1,959 hectares) and 31,042 mu (2,070 hectares) as of March 31, 2012, June 30, 2012, June 30, 2013 and June 30, 2014, respectively.

We sell fresh vegetables to wholesalers, institutional customers and supermarket chains in China and Hong Kong. The following table sets forth a breakdown of our revenue by sales channels, in absolute amounts and as a percentage of total revenue, for the periods indicated.


	Year Ended				Three Months Ended				Year Ended
	March 31, 2012				June 30, 2012				June 30, 2013				June 30, 2014
	RMB		%		RMB		%		RMB		%		RMB		$		%
	(In thousands, except percentages)
Wholesalers		289,976		55.8		63,968		51.9		370,999		64.4		327,380		52,773		56.4
Institutional customers		197,394		38.0		54,224		44.0		189,164		32.8		246,037		39,660		42.4
Supermarkets		31,880		6.2		5,047		4.1		16,111		2.8		7,083		1,142		1.2
Others⁽¹⁾		149		0.0		9		0.0		—		0.0		—		—		0.0

Total		519,399		100.0		123,248		100.0		576,274		100.0		580,500		93,575		100.0

(1)	Includes retailers and small distributors who are not our regular customers.

Sales to wholesalers were our largest revenue contributor in the fiscal year ended March 31, 2012, the three months ended June 30, 2012 and the fiscal years ended June 30, 2013 and 2014. Sales to wholesalers grew from RMB290.0 million in the fiscal year ended March 31, 2012 to RMB327.4 million ($52.8 million) in the fiscal year ended June 30, 2014. The faster growth of our sales to wholesalers was primarily attributable to (1) the successful implementation of our strategy to adjust our product mix to meet the increasing local and regional demand for high-quality fresh vegetables in the PRC domestic market, and (2) the increasing recognition of our corporate brand in the wholesale markets.

Most of our sales to institutional customers are made to export traders, who purchase vegetables from us and resell them in the overseas markets. Our institutional customers also include produce processing companies, large company cafeterias and large logistic traders.

We also sell our produce to supermarket chains in China and Hong Kong. Sales to supermarket chains decreased from RMB31.9 million in the fiscal year ended March 31, 2012 to RMB7.1 million ($1.1 million) in the fiscal year ended June 30, 2014. The decrease in sales to supermarkets was primarily because we ceased operation of all concession sales to the Hong Kong supermarket customers during the fiscal year ended March 31, 2012.

From time to time, we also purchase from third parties a small number of vegetable varieties that we do not produce to fulfill the diverse demand of our supermarket customers in Hong Kong and China.

Our customer base has narrowed from 162 customers in the fiscal year ended March 31, 2012 to 153 customers in the fiscal year ended June 30, 2014. Sales to our top five customers collectively accounted for 20.6%, 30.4%, 26.3% and 32.6% of our revenue in the fiscal year ended March 31, 2012, the three months ended June 30, 2012 and the fiscal years ended June 30, 2013 and 2014, respectively. No single customer accounted for over 10% of our revenue during any of the fiscal year ended March 31, 2012, the three months ended June 30, 2012 or the fiscal years ended June 30, 2013 and 2014.

Cost of inventories sold

Our cost of inventories sold comprises (1) direct materials such as seeds, fertilizers and pesticides, (2) labor costs associated with our cultivation activities, (3) manufacturing expenses of our farmland facilities such as rents, salaries for administrative staff, utilities and depreciation, (4) costs associated with the purchase from third parties of certain vegetables that we do not produce to fulfill the diverse demand of our supermarket customers in Hong Kong and China, and (5) biological assets fair value adjustment at the point of harvest.

Our cost of inventories sold was RMB455.4 million, RMB108.0 million, RMB494.2 million and RMB493.3 million ($79.5 million) in the fiscal year ended March 31, 2012, the three months ended June 30, 2012 and the fiscal years ended June 30, 2013 and 2014, respectively.

Although adjusted cost of inventories sold (cost of inventories sold before biological assets fair value adjustment) is a non-IFRS measure, we believe that separate analysis of the cost of inventories sold excluding the fair value adjustment adds clarity to the constituent parts of our cost of inventories sold and provides additional useful information for investors to assess our cost structure. A reconciliation of the adjusted cost of inventories sold to cost of inventories sold determined in accordance with IFRS is set forth in Item 3. Key Information—A. Selected Financial Data.

Our adjusted cost of inventories sold was RMB172.8 million, RMB46.0 million, RMB211.1 million and RMB211.7 million ($34.1 million) in the fiscal year ended March 31, 2012, the three months ended June 30, 2012 and the fiscal years ended June 30, 2013 and 2014, respectively, in line with increased revenue.

Our direct material costs are affected by our production volume, the cost of agricultural inputs, our product mix, our plantation model and our horticultural know-how. Greenhouse production, as compared to open field production, typically results in more efficient utilization of inputs such as seeds, fertilizers and other growing materials. Our seed costs increased due to more plantation of higher value solanaceous products which typically have more expensive seeds. As most of our fertilizers are organic fertilizers and the prices of organic fertilizers are less volatile compared to those of chemical fertilizers, the unit cost of our fertilizers did not materially change during the periods.

Our business is labor intensive. As of June 30, 2014, we indirectly hired 1,462 farm workers through a labor company to perform all agricultural labor work on our farms. We have observed an overall tightening of the labor market in the PRC and an emerging trend of shortage of labor supply in China. Furthermore, labor costs have been increasing in China in recent years and may continue to increase in the near future. Our labor costs amounted to RMB41.4 million, RMB11.0 million, RMB47.3 million and RMB46.6 million ($7.5 million) in the fiscal year ended March 31, 2012, the three months ended June 30, 2012 and the fiscal years ended June 30, 2013 and 2014, respectively, accounting for 8.0%, 8.9%, 8.2% and 8.0% of our revenue during the respective periods. We do not expect that the overall tightening of the labor market will have a material adverse effect on our expansion plans, as our standardized production process can be easily followed by farm workers with minimal skills, allowing us to hire farm workers from a large labor pool. We have experienced wage inflation and require more skilled laborers, causing higher wages, because we expand our greenhouse coverage and upgrade our product mix towards higher value solanaceous products. The adverse effect from increases in wages has been mitigated because our greenhouses have typically resulted in better utilization of labor compared to open field farming and solanaceous crops are less labor intensive compared to leafy and cruciferous vegetables. However, a further increase in labor costs will increase our business operation costs and our financial position may be adversely affected.

Our manufacturing expenses are primarily affected by our greenhouse expansion. Higher greenhouse coverage will lead to higher depreciation and lower fixed costs, such as rent, as a percentage of sales. Land rents have been increasing in China in recent years and may continue to increase in the near future. We do not expect that increasing land rents have a material adverse effect on our cost structure as our productivity as measured by revenue per mu increases due to higher greenhouse coverage.

Purchases of third party produced vegetables have declined as we ceased all concession sales in the Hong Kong supermarket channel during the fiscal year ended March 31, 2012.

Biological Assets Fair Valuation and Its Impact on Cost of Inventories and Results of Operations

As a company primarily engaged in agricultural activities, we have adopted International Accounting Standard 41 “Agriculture,” or IAS 41, in the measurement of biological assets and agriculture produce. IAS 41 applies to biological assets, such as living plants related to managed agricultural activity that are in the process of growing, degenerating, regenerating and/or procreating and that are expected to eventually result in agricultural produce, as well as agricultural produce at the point of harvest. Our biological assets represent the growing crops, including vegetables, fresh fruits, tea trees and fir trees in our various production bases in China.

We recognize in our statements of profit or loss the changes in the fair value less costs to sell of biological assets, which include the agricultural produce (vegetables and fruits) harvested during the reporting period and the vegetables and trees on the farmland at each reporting period end. In addition, cost of inventories sold represents the deemed cost of the agricultural produce based on the fair value less costs to sell at the point of harvest. Costs to sell are the incremental costs incurred in selling the agricultural produce. With respect to the agricultural produce harvested during the reporting period, the fair value of our biological assets in their present locations and condition is determined based on the current market price of these biological assets. With respect to the vegetables and trees on the farmland at each reporting period end, the fair value of our biological assets in their present locations and conditions is determined at the present value of expected cash flows from the biological assets discounted at a market-determined pre-tax rate, with reference to the species, growing conditions, costs incurred and expected yield of the crops.

Cost of inventories sold determined under IAS 41 reflects the deemed cost of agricultural produce, which is based on their fair value (less costs to sell) at the point of harvest. Biological assets fair value adjustment is the difference between the deemed cost of the agricultural produce and the plantation expenditure we incurred to cultivate the produce to the point of harvest. For agricultural produce harvested and sold during the year, the fair value adjustment included in the cost of inventories sold represents the total changes in fair value less costs to sell for that particular agricultural produce, which include the fair value gain or loss that arose in both the current and the prior periods, and therefore differ from the amount of changes in fair value less costs to sell related to crops harvested during the year.

The gain or loss arising from the changes in fair value less costs to sell of our biological assets are partially offset by the corresponding gain or loss included in the cost of inventories sold, to the extent that the agricultural produce is sold, as the harvested agricultural produce is also stated at the fair value less costs to sell at the point of harvest. Our changes in fair value less costs to sell of biological assets amounted to RMB286.9 million, RMB23.0 million, RMB277.5 million and RMB272.4 million ($43.9 million) in the fiscal year ended March 31, 2012, the three months ended June 30, 2012 and the fiscal years ended June 30, 2013 and 2014, respectively, which was offset by the fair value adjustments included in the costs of inventories sold of RMB282.6 million, RMB62.0 million, RMB283.2 million and RMB281.6 million ($45.4 million), for the fiscal year ended March 31, 2012, the three months ended June 30, 2012 and the fiscal years ended June 30, 2013 and 2014, respectively.

As a result, our cost of inventories sold after biological assets fair value adjustment represented the agricultural produce sold during the year at their fair value less costs to sell at the point of harvest, and have increased in line with the increase in our revenue, amounting to RMB455.4 million, RMB108.0 million, RMB494.2 million and RMB493.3 million ($79.5 million) in the fiscal year ended March 31, 2012, the three months ended June 30, 2012 and the fiscal years ended June 30, 2013 and 2014, respectively.

The following table sets forth the biological assets fair value adjustment included in cost of inventories sold, the changes in fair value less costs to sell of biological assets and the net impact of biological assets fair value adjustments to our results of operations.


	Year Ended March 31,			Three Months Ended June 30,			Year Ended June 30,
	2012			2012			2013			2014
	RMB			RMB			RMB			RMB			$
	(In thousands)
Biological assets fair value adjustment included in cost of inventories sold		(282,579	)		(61,963	)		(283,170	)		(281,648	)		(45,401	)
Changes in fair value less costs to sell of biological assets		286,927			22,964			277,504			272,419			43,913

Net impact		4,348			(38,999	)		(5,666	)		(9,229	)		(1,488	)

The net impact of the biological assets fair value adjustments represents the net increase or decrease in the gain in fair value less costs to sell of crops on our farmland at the current reporting year end compared to the immediately preceding reporting year end.

The net impact of biological assets fair value adjustments is primarily driven by:

•

the volume of crops on the land at the period ends;

•

the product mix of the crops on the land at the period ends; and

•

the market prices at the period ends of different products.

We plant different types of vegetables with different yields and selling prices during different periods. The net impact of biological assets fair value adjustments for each reporting period is attributable to the comparison of the adjustment to record our unharvested biological assets at fair value at the beginning of the reporting period and such fair value adjustment related to our unharvested biological assets at the end of the reporting period. As the quantity, product mix and market prices at the beginning and end of each reporting period are different, it is not meaningful to discuss the net impact of biological assets fair value adjustments of the reporting period by comparing different products’ prices and yields.

Changes in fair value less costs to sell of biological assets reported in each period include the biological assets fair value gain or loss arising from both (1) crops harvested during the period and (2) growing crops on the farmland at the period end. The growing crops on the farmland at the period end will be carried forward to future reporting periods and as the crops are harvested and sold, the related biological assets fair value gain or loss up to point of harvest is included in the determination of cost of inventories sold for the period in which the inventory is sold. The factors driving the changes in fair value less costs to sell relating to harvested crops or growing crops are generally the same, such as product mix and the market prices of different types of crops at the time of harvest or at period end. Furthermore, because the growth cycle of our crops is generally less than one year, the time factor is insignificant and it would not be meaningful to discuss the drivers separately. We believe the separate preparation of the two components of the changes in fair value less costs to sell, together with the discussion of the cost of inventories sold (including the effect of the biological assets fair value adjustment), provide relevant and useful financial information for the various stages of our agricultural production cycle.

Key Factors Affecting Our Results of Operations

Revenue-Per-Mu

The key metric used by our management in evaluating our financial performance is revenue-per-mu, or the revenue that a unit measure of arable land generates. Revenue-per-mu is determined by our production yield, defined as the production output that a unit measure of arable land generates, and the price at which we can sell our produce. Both production yield and average selling price are affected by our product mix. Our revenue-per-mu was RMB25,207, RMB6,129, RMB24,547 and RMB22,174 ($3,574) for the fiscal year ended March 31, 2012, the three months ended June 30, 2012 and the fiscal years ended June 30, 2013 and 2014.

Our revenue-per-mu is affected by (1) the greenhouse coverage, (2) the size of our arable land in southern China, which is more productive compared to northern China, (3) the improvement in our horticultural know-how and our effective production planning, and (4) market prices. The increase in the greenhouse coverage in the recent years (1) allows us to upgrade our product mix, (2) leads to higher production yields, (3) leads to better quality and thus better prices, and (4) allows us to produce more products during the off-season when prices are generally higher.

Production yield

Our production yield was 7.0 tonnes, 1.7 tonnes, 5.9 tonnes and 5.7 tonnes per mu in the fiscal year ended March 31, 2012, the three months ended June 30, 2012 and the fiscal years ended June 30, 2013 and 2014. Our production yield is affected by various factors. An increase in our greenhouse coverage and improvements in our horticultural know-how and techniques and our production planning would increase production yields. An upgrade of our product mix would result in a decrease in production yield as higher value crops typically have lower production yields. Our production yield has been significantly enhanced by our greenhouse cultivation. Greenhouses increase production output by allowing crops to grow faster and year-round and protecting crops from extreme weather conditions, such as typhoons and windstorms. As of March 31, 2012, June 30, 2012, June 30, 2013 and June 30, 2014, a total of 8,615 mu (574 hectares), 8,915 mu (594 hectares), 11,963 mu (798 hectares) and 12,096 mu (806 hectares), respectively, of our arable land was covered by greenhouses, accounting for 34.4%, 34.1%, 40.7% and 39.0% of our total arable land for each period, respectively.

We have been able to further increase our production yield for each vegetable variety by applying advanced cultivation techniques at each step of the cultivation process to improve soil productivity, enhance crop nutrient content and minimize crop diseases, pests and weeds. Relying on our greenhouse cultivation, horticultural know-how and our effective production planning, we are able to schedule and control crop plantation and harvest to meet higher–priced off-season demand. We intend to further increase our production yield for each vegetable variety by continuing to increase our greenhouse coverage and enhance our horticultural know-how.

Product mix

Greenhouses create a more favorable and controlled growing environment, which allows us to grow more fruit-bearing solanaceous vegetables. Fruit bearing solanaceous vegetables are typically much more difficult to grow compared to leafy and cruciferous vegetables and as a result, they can be sold for higher market prices than those of leafy and cruciferous vegetables. As we are expanding our greenhouse coverage, we expect solanaceous vegetables of higher value grown in greenhouses will constitute a larger share of our total revenue. Solanaceous vegetables are also less labor intensive compared to leafy vegetables, which further improves our profit margins.

Within the solanaceous vegetable category, we focus primarily on fruit-bearing crops such as peppers, tomatoes, eggplants, cucumbers and melons. Within each of these product groups, yields and average selling prices can vary widely. For example, specialty solanaceous vegetables, such as small snack tomatoes or mini peppers, may have a much higher average selling price but much lower yield per mu compared to beefsteak tomatoes and bell peppers. Therefore, our sales volume and average selling prices are also affected by each product’s percentage of our overall product mix.

Product pricing

The prices of our produce are determined by several factors, including general economic conditions, market competition, weather conditions, seasonal factors, sales channels and most importantly, the supply of and demand for different types of vegetables.

The price of a particular type of vegetable is volatile and fluctuates depending on seasonal factors, the distance between vegetable farms and markets, the supply of and demand for it in the marketplace throughout the year, which in turn depends on weather conditions, including level of precipitation, temperature and other extreme weather conditions, local preferences and festivities. We focus on cultivating high-value vegetables during off-season periods, and through careful production planning and the use of greenhouses and advanced horticultural know-how to control the crop cycle, seek to sell them during the periods in which they are most in demand to achieve higher prices and profits.

Size of Arable Land

Our total production capacity depends to a large extent on the size of our arable land. As of June 30, 2014, a total of 31,042 mu (2,070 hectares) of arable land, compared to 25,063 mu (1,671 hectares) as of March 31, 2012, 26,124 mu (1,742 hectares) as of June 30, 2012 and 29,382 mu (1,959 hectares) as of June 30, 2013, was leased and either in operation or under construction or reserved by us. Our production output was 144,192 tonnes, 34,947 tonnes, 138,212 tonnes and 150,231 tonnes in the fiscal year ended March 31, 2012, the three months ended June 30, 2012 and the fiscal years ended June 30, 2013 and 2014, respectively.

We source most of our land from farmer households, local villagers’ committees or local governments. Although China is one of the largest countries in the world by land area, the arable land area as a percentage of total land is small. In addition, arable land in recent years has been increasingly scarce due to extensive urbanization and property development. Sourcing arable land in China has been highly competitive because of the increased demand for land for agricultural and other uses. Because the supply of arable land that can be leased from the farmers is limited, competition is fierce in obtaining such leases. In addition, farmland in China is highly fragmented and we generally enter into a few master lease agreements each with many neighboring land users to form one farm base, which makes our arable land expansion more complicated.

Market Demand

Our ability to increase production and grow our revenue is driven in part by the increasing demand in China for safe and high-quality fresh vegetables. We currently target the Guangdong, Fujian and Yangtze River Delta markets, which have demonstrated a strong demand for fresh vegetables.

Operating Expenses

The following table sets forth our operating expenses, both as an absolute amount and as a percentage of total revenue for the periods indicated.


	Year Ended March 31,				Three Months Ended June 30,				Year Ended June 30,
	2012				2012				2013				2014
	RMB		%		RMB		%		RMB		%		RMB		$		%
	(In thousands, except percentages)
Packing expenses		33,405		6.4		8,913		7.2		47,754		8.3		46,142		7,438		7.9
Land preparation costs		37,593		7.2		12,887		10.5		56,078		9.7		67,712		10,915		11.7
Research and development expenses		9,091		1.8		2,291		1.9		13,283		2.3		15,926		2,567		2.7
Selling and distribution expenses		32,120		6.2		6,516		5.3		42,899		7.4		41,687		6,720		7.2
Administrative expenses		58,519		11.3		13,155		10.7		44,631		7.7		36,072		5,815		6.2
Impairment losses on property, plant and equipment, prepayments and receivables		14,823		2.9		—		—		—		—		27,127		4,373		4.7
Natural disaster loss		—		—		—		—		—		—		62,614		10,093		10.8
Other expenses		2,551		0.5		132		0.1		797		0.1		874		141		0.2

Packing expenses. Our packing expenses consist of materials utilized to pack our vegetables, labor costs and various expenses associated with our packing and processing facilities. Our packing expenses were RMB33.4 million, RMB8.9 million, RMB47.8 million and RMB46.1 million ($7.4 million) in the fiscal year ended March 31, 2012, the three months ended June 30, 2012 and the fiscal years ended June 30, 2013 and 2014, respectively, representing 6.4%, 7.2%, 8.3% and 7.9% of our revenue in those respective periods. Our packing expenses are affected by (1) product mix, as solanaceous products require more packaging compared to leafy and cruciferous products, (2) the quality and amount of packaging used to enhance the selling price and improve our brand awareness. In the fiscal year ended June 30, 2014 we have improved the efficiency in operation flows related to harvesting and packing tasks, which helped to reduce labor costs related to packing activities.

Land preparation costs. We leave parts of our farmlands uncultivated in between plantation cycles to improve soil quality, and recognize expenses associated with the uncultivated land during these periods. Furthermore, the parcels of land we lease are not used for plantation immediately after we rent them. We record the rent, the depreciation of facilities on the land, and other miscellaneous costs relating to preparing these land parcels as an expense. We expect this expense to increase as we continue to expand our production and lease more land, which will result in additional losses associated with land before plantation, in non-cultivation periods and in between growing seasons. Our land preparation expenses were RMB37.6 million, RMB12.9 million, RMB56.1 million and RMB67.7 million ($10.9 million) in the fiscal year ended March 31, 2012, the three months ended June 30, 2012 and the fiscal years ended June 30, 2013 and 2014, respectively.

Research and development expenses. We incur research and development expenses in connection with our research and development activities focusing on developing more effective cultivation techniques, improving produce quality and increasing production yield. Our research and development expenses consist of:

•

direct cost of materials used in research and development such as seeds, fertilizers, pesticides, substrate and consumable materials;

•

salaries and related expenses for research and development personnel;

•

rent for our research facilities; and

•

depreciation.

Our research and development expenses were RMB9.1 million, RMB2.3 million, RMB13.3 million and RMB15.9 million ($2.6 million) in the fiscal year ended March 31, 2012, the three months ended June 30, 2012 and the fiscal years ended June 30, 2013 and 2014, respectively, representing 1.8%, 1.9%, 2.3% and 2.7% of our revenue in those respective periods. We anticipate that our research and development expenses will increase as we continue to experiment with new horticultural know-how, new varieties and new plantation models.

Selling and distribution expenses. Our selling and distribution expenses consist of transportation expenses to transport vegetables from our farms to their points of sale, salaries, employee benefits, bonuses and related expenses for our sales and marketing staff, packaging and loading expenses, and advertising expenses. Our selling and distribution expenses were RMB32.1 million, RMB6.5 million, RMB42.9 million and RMB41.7 million ($6.7 million) in the fiscal year ended March 31, 2012, the three months ended June 30, 2012 and the fiscal years ended June 30, 2013 and 2014, respectively, representing 6.2%, 5.3%, 7.4% and 7.2% of our revenue in those respective periods. We expect our selling and distribution expenses to increase as we plan to strengthen our brand building efforts and expand and broaden our sales, marketing and distribution network and enter new markets.

Administrative expenses. Administrative expenses consist of the following:

•

salaries, bonuses and benefits for our administrative and management personnel;

•

auditing fees and legal and other professional fees; and

•

travel and other expenses associated with our corporate and administrative activities.

Our administrative expenses were RMB58.5 million, RMB13.2 million, RMB44.6 million and RMB36.1 million ($5.8 million) in the fiscal year ended March 31, 2012, the three months ended June 30, 2012 and the fiscal years ended June 30, 2013 and 2014, respectively, representing 11.3%, 10.7%, 7.7% and 6.2% of our revenue in those respective periods.

Impairment losses on property, plant and equipment, prepayments and receivables. During the fiscal year ended March 31, 2012, we suspended operations at several less productive farms. These farms (1) were either small operations and thus cannot enjoy the economies of scale we can generate at our larger farms, (2) had less productive bamboo greenhouses or (3) were less suitable for our current product mix (solanaceous, leafy and cruciferous products). We assessed the recoverable amounts of those items of property, plant and equipment and prepayments with carrying amount of RMB14.8 million located at suspended farms and as a result the carrying amount of property, plant and equipment, prepayments and receivables held by these farms were fully impaired following our decision to return the related leased farmland to the landlords and dispose of these assets.

The impairment losses on property, plant and equipment, prepayments and receivables for the fiscal year ended June 30, 2014 primarily related to the impairment of (1) RMB16.4 million for a small and less productive farm which we have decided to dispose of and (2) RMB7.3 million for an idle processing factory in Liaoyang, Liaoning Province.

Natural disaster loss. During the fiscal year ended June 30, 2014, a super typhoon hit our production bases and caused substantial damage. Total loss from the collapsed and damaged greenhouses amounting to RMB62.6 million was recognized.

Other expenses. Other expenses include expenses associated with losses associated with the disposal of fixed assets, profit and loss adjustments for previous years, and so forth.

Taxation

The Cayman Islands, the British Virgin Islands and Hong Kong

Under the current laws of the Cayman Islands and the British Virgin Islands, or the BVI, we and our subsidiaries incorporated in the BVI are not subject to any tax on income or capital gains. In addition, dividend payments are not subject to withholding tax in those jurisdictions. No provision for Hong Kong profits tax has been made, as our Hong Kong subsidiaries did not generate any assessable profits or had tax losses brought forward to offset estimated assessable profits for the fiscal year ended March 31, 2012, the three months ended June 30, 2012 and the fiscal years ended June 30, 2013 and 2014.

PRC

Enterprise Income Tax

According to the PRC’s Enterprise Income Tax Law and its implementation rules, the PRC statutory income tax rate is 25%. In addition, our PRC subsidiaries which are engaged in growing, processing and sales of agricultural products are exempt from PRC income tax, subject to approval by or registration with the relevant tax authority.

No provision for PRC income tax was made for Linong Agriculture Technology (Shenzhen) Co. Limited, which is engaged in the sales of agricultural products, as it sustained losses for the fiscal year ended March 31, 2012, the three months ended June 30, 2012 and the fiscal years ended June 30, 2013 and 2014 for taxation purpose.

The financial impact related to reduced tax rates and tax exemptions amounted to a positive of RMB53.4 million, RMB1.1 million, RMB46.1 million and RMB24.4 million ($3.9 million) in the fiscal year ended March 31, 2012, the three months ended June 30, 2012 and the fiscal years ended June 30, 2013 and 2014 respectively. Without the preferential tax treatment, the impact on our net income and basic and diluted earnings per ordinary share for the following periods is as set forth below:


	Year Ended March 31,		Three Months Ended June 30,		Year Ended June 30,
	2012		2012		2013		2014
	RMB		RMB		RMB		RMB		$
Profit for the year/period (in thousands)		53,397		1,074		46,149		24,429		3,938
Basic earnings per ordinary share (in cents)		2.35		0.05		2.05		1.11		0.18
Diluted earnings per ordinary share (in cents)		2.33		0.05		2.05		1.11		0.18

As of June 30, 2014, all of our PRC subsidiaries engaged in the cultivation and primary processing of vegetable products have registered with the tax authorities for the tax exemption under the Enterprise Income Tax Law. See “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—Our business benefits from certain government incentives. Expiration of, or changes to, these incentives could have a material adverse effect on our operating results by significantly increasing our tax expenses.”

Pursuant to the Enterprise Income Tax Law and its implementation rules, dividends payable to foreign investors are subject to a 10% withholding tax. Pursuant to the grandfathering arrangement, dividends receivable from our PRC subsidiaries in respect of their undistributed profits prior to December 31, 2007 are exempt from withholding tax. Under the taxation arrangement between the PRC and Hong Kong, a qualified Hong Kong tax resident which is the “beneficial owner” and directly holds 25% or more of the equity interest in a PRC-resident enterprise is entitled to a reduced withholding tax rate of 5%. In the fiscal year ended March 31, 2011, withholding tax of RMB101,000 was paid by Land V. Limited (Liaoyang) for the distribution of RMB2,010,000 to be made upon liquidation. Land V. Limited (Liaoyang) has been deregistered in July 2011. In the fiscal year ended March 31, 2012, Land V. Group Limited (BVI) disposed of a subsidiary, Land V. Limited (Shantou), with a gain of RMB1.3 million for PRC tax purposes, which is subject to 10% withholding tax. In the fiscal year ended March 31, 2012, Land V. Limited (Shantou) declared a dividend of RMB58.2 million to its immediate holding company, Land V. Group Limited (BVI). RMB33.5 million of this dividend was distributed from the retained profits of Land V. Limited (Shantou) after December 31, 2007 and was subject to 10% withholding tax. In the fiscal year ended June 30, 2014, Land V. Agriculture Technology (Ningde) Co. Limited suspended operation of the cultivation base in Hubei, Fujian. The Group plans to deregister Linong Ningde after the return of the cultivation base to the landlord and the undistributed profit of Land V. Agriculture Technology (Ningde) Co. Limited is expected to be distributed to Land V. Group Limited (BVI), in the foreseeable future. Land V. Agriculture Technology (Ningde) Co. Limited had an undistributed profit of RMB34,667,000 as of June 30, 2014, of which RMB23.7 million was derived from earnings generated since January 1, 2008 which would be subject to 10% withholding tax. Accordingly, deferred tax liabilities were recognized in respect of the undistributed profits of RMB23.7 million.

Value-added Tax

In accordance with the relevant tax laws in the PRC, value-added tax, or VAT, is levied on the value of sales of agricultural and related products at a general rate of 13%. We are required to remit the VAT collected to the tax authority, but may deduct the VAT that we have paid on eligible purchases. Except for Linong Agriculture Technology (Shenzhen) Co., Ltd., our PRC subsidiaries are exempt from VAT since they are engaged in the sales of self-produced agricultural products or for investment holding purpose.

Critical Accounting Policies

We prepare our financial statements in conformity with IFRS, which require us to make judgments, estimates and assumptions. We continually evaluate these estimates and assumptions based on the most recently available information, our own historical experience and various other assumptions that we believe to be reasonable under the circumstances. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from those estimates.

An accounting policy is considered critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time such estimate is made, and if different accounting estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could material impact the consolidated financial statements. We believe that the following accounting policies involve a higher degree of judgment and complexity in their application and require us to make significant accounting estimates. The following descriptions of critical accounting policies, judgments and estimates should be read in conjunction with our consolidated financial statements and other disclosures included in this annual report.

Fair Value of Biological Assets and Agricultural Produce

Biological assets include vegetables and fruits which are to be harvested as agricultural produce, tea and other trees which are not agricultural produce but are self-regenerating for sustaining regular harvests of agricultural produce.

We account for biological assets and agricultural produce by applying IAS41—Agriculture. Under IAS 41, biological assets are measured on initial recognition and at the end of each reporting period at their fair value less costs to sell; agricultural produce harvested from biological assets are measured at its fair value less costs to sell at the point of harvest. With respect to the agricultural produce harvested during the reporting period, the fair value of our biological assets is determined based on the current market price of these biological assets in their present location and condition. The fair value is determined based on the market price at which our agricultural produce is sold to customers on the date of harvest, adjusted for packing and transportation costs. With respect to the vegetables and trees on the farmland at each reporting period end, the fair value is determined at the present value of expected cash flows from the biological assets discounted at a market-determined pre-tax rate, with reference to the species, growing conditions, costs incurred and expected yield of the crops. We estimate that it takes one to ten months to grow our vegetable crops and approximately 3 years to 16 years to grow our trees on the farmland before they can be harvested. For the fiscal year ended June 30, 2014, the revenue contributed by the tree business accounted for less than 0.3% of our total revenue. Costs to sell include all incremental costs directly attributable to the sale of the biological assets. The change in fair value less costs to sell of a biological asset is included in profit or loss of the period in which it arises. We record such gains or losses in our Consolidated Statement of Profit or Loss under “Changes in fair value less costs to sell of biological assets.”

The determination of fair value of biological assets and agricultural produce requires us to make complex and subjective estimates and assumptions about the expected production output and market price of crops on the land.

We engaged independent valuers to assist us in determining the fair value of biological assets and agricultural produce. We engaged Jones Lang LaSalle Corporate Appraisal and Advisory Limited in the fiscal year ended March 31, 2012 and AVA Associates Limited in the fiscal years ended June 30, 2013 and 2014. We applied weighted average cost of capital as a discount rate to reflect the risks of the cash flows as how the risks of the cash flows from growing crops should be borne by both the equity holders and the debt holders. In determining the discount rate, we have considered factors including the risk free rate, the market return, the re-levered beta, the size premium and the specific premium. We used 19.2% to 19.4% as the discount rate for orchards and 16.0% as the discount rate for vegetables in the fiscal year ended March 31, 2012, 19.1% to 19.3% as the discount rate for orchards and 15.8% as the discount rate for vegetables for the three months ended June 30, 2012, 19.1% to 19.3% as the discount rate for orchards and 15.7% as the discount rate for vegetables for the fiscal year ended June 30, 2013 and 20.0% to 20.3% as the discount rate for orchards and 17.0% as the discount rate for vegetables for the fiscal year ended June 30, 2014.

Changes in the estimates and assumptions regarding the expected market price, production volume, plantation expenditure, costs to sell and the discount rates in the valuation of our biological assets and agricultural produce could significantly impact the estimated fair values of our biological assets and agricultural produce and, as a result, our net income. We believe production volume, plantation expenditure and costs to sell are relatively controllable inputs by management decisions and operational strategies, while expected market price and discount rates are affected by more of external factors. For illustration purposes, in the fiscal year ended June 30, 2014:

•

a 5% increase or decrease in the prices of vegetables, fruits and teas we assumed, in the absence of other changes, will result in an RMB2.0 million ($330,000) increase or decrease in our net change in fair value less costs to sell of biological assets and profit for the year; and

•

an increase or decrease in the average discount rate we used by one percentage point, in the absence of other changes, will result in an RMB624,000 ($101,000) decrease or increase in our net change in fair value less costs to sell of biological assets and profit for the year.

Share-based payments

In May 2007, China Linong International Limited, or China Linong, adopted a share option scheme, under which it made option grants on May 23, 2007 to Winsome Group Limited, which is held by certain directors and employees of our company. In April 2009, China Linong adopted another share option scheme, under which it made option grants on April 17, 2009 and March 29, 2010. As of July 17, 2010, 116,010 options granted to directors, 67,000 options granted to employees, and 35,000 options granted to others providing similar services, respectively, were outstanding which were exchanged for 116,010,000, 67,000,000 and 35,000,000 options, respectively, following our restructuring and share swap with China Linong. In August 2010 we adopted our 2010 share incentive plan, under which we have granted options to certain directors, employees and others providing similar services on August 31, 2010 and June 10, 2011.

We account for share-based payments under the provisions of IFRS 2, Share-based Payment, or IFRS 2. Under IFRS 2, we are required to measure the cost of employee and consultant services received in exchange for an award of equity instruments based on the grant date fair value of the award and recognize the expense in our consolidated statements of profit or loss over the period during which an employee is required to provide service in exchange for the award. The additional expenses associated with share-based compensation may reduce the attractiveness of our equity incentive plans to directors, employees and consultants.

We applied the Binomial Option Pricing model for the fiscal year ended March 31, 2012 in determining the fair value of the options granted to employees and others providing similar services. These models require the input of highly subjective assumptions including the expected stock price volatility, the expected life at which employees are likely to exercise share options. For expected volatilities, we made reference to historical volatilities of several comparable companies. The risk-free rate for periods within the expected life of the option was based on the yield of USD China Sovereign Bond Rate denominated in USD with similar terms in effect at the time of grant.

We used the income approach to assess our enterprise value at the grant dates for the fiscal years ended March 31, 2010 and 2011. Under this method, indications of value have been developed by discounting future free cash flow to the firm to their present worth at discount rates which we believe are appropriate for the risks of the business. The discount rate used is the weighted average cost of capital (WACC) to reflect the risks of the cash flows. As we were a privately held company at the grant date and the discount rate used was based on WACC for publicly traded comparable companies, we deducted the interest bearing debts and added back any excess net asset/ liabilities from the enterprise value, and then applied a further discount for lack of marketability to derive the total equity value of our company. The discount rate for the lack of marketability is 28%, 23% and 17% for the share options granted on April 17, 2009, March 29, 2010 and August 31, 2010, respectively. The determination of the marketability discount rates was based on the study on quantitative marketability discount model published in The CPA Journal and the put option approach (Black-Scholes model). Under such option pricing method, the lack of marketability discount is determined by the following key parameters or variables as of each grant date:

•

time to expect the liquidity event, i.e., an initial public offering, which is determined based on the management’s expected timing of an initial public offering;

•

company risks associated with holding an investment in an illiquid market, including the required holding return, the growth in underlying value during the holding period and the expected cash flow distributions during the holding period;

•

prevailing risk free rate; and

•

volatility in the underlying security.

To the extent our capital structure was comprised of the ordinary shares and the preferred shares as of the grant date, we adopted the option pricing method to allocate total equity value derived to different classes of shares, in accordance with “Valuation of Privately-Held-Company Equity Securities Issued as Compensation” developed by the American Institute of Certified Public Accountants. This method treats preferred shares and ordinary shares as call options on our total equity value, with exercise prices based on the liquidation preference of the preferred shares. The Black-Scholes Option Pricing method involves making estimate of the expected timing of the potential liquidity event such as the sale of our company or initial public offering, and estimate of the volatility of our equity securities. The expected timing is based on the plan of our board of directors and management.

We have used the market approach to assess our enterprise value at the grant date after our listing on the NASDAQ Global Select Market.

We measured the fair value of services received in return for share options granted by reference to the fair value of share options granted. Set forth below are the assumptions we applied to calculate the fair value of the options on the grant date using the Black-Scholes Option Pricing model or Binomial Option Pricing model.


	At April 17, 2009 (Date of Grant)			At March 29, 2010 (Date of Grant)			At August 31, 2010 (Date of Grant)			At June 10, 2011 (Date of Grant)
Fair value at measurement date	$ $	0.02035 – 0.02385		$ $	0.02912 – 0.03209		$ $	0.04571 – 0.04862		$ $	0.06960 – 0.07760
Share price	$	0.05015		$	0.06061		$	0.083		$	0.135
Exercise price	$	0.07293		$	0.07570		$	0.080		$	0.143
Expected volatility (expressed as average volatility used in the modeling under the Black-Scholes Option Pricing model or the Binomial Option Pricing model)		51.30% – 53.70	%		56.90	%		57.60% – 58.70	%		53.00	%
Option life (expressed as weighted average life used in the modeling under the Black-Scholes Option Pricing model or the Binomial Option Pricing model)		5.5 – 6.5 years			5.5 – 6.5 years			5.5 – 6.5 years			10 years
Expected dividends		—			—			—			—
Risk-free interest rate (based on USD China Sovereign Bond Rate)		3.75% – 3.90	%		2.96% – 3.26	%		2.51% – 2.75	%		4.1184	%

Depreciation and Estimated Useful Life

We record property, plant and equipment in the statement of financial position at cost less accumulated depreciation and impairment losses. Gains or losses arising from the retirement or disposal of an item of property, plant and equipment as the difference between the net disposal proceeds and the carrying amount of the item and are recognized in profit or loss on the date of retirement or disposal. We calculate depreciation to write off the cost of items of property, plant and equipment, less their estimated residual value, if any, using the straight-line method over their estimated useful lives as follows:


Land improvements, buildings and farmland infrastructure		— Shorter of the unexpired term of land leases and their estimated useful lives of 3 to 30 years
Equipment and machinery		— 3 to 10 years
Motor vehicles		— 3 to 10 years
Furniture, fixtures and computer equipment		— 5 years

We capitalize costs relating to land improvements during the formative stage and depreciate these costs over the shorter of the unexpired term of the respective land leases or their estimated useful lives.

We capitalize depreciation of property, plant and equipment attributable to agricultural activities as part of inventory, and expense such depreciation when the inventory is sold. We charge depreciation relating to idle capacity to profit or loss in the accounting period in which it is incurred. Where parts of an item of property, plant and equipment have different useful lives, we allocate the cost of the item on a reasonable basis between the parts and each part is depreciated separately. We review both the useful life of an asset and its residual value, if any, annually.

Impairment of Assets

Impairment of non-current assets

We review internal and external sources of information at each statement of financial position date to identify indications that the following assets may be impaired or an impairment loss previously recognized no longer exists or may have decreased:

•

property, plant and equipment;

•

construction in progress;

•

lease prepayments; and

•

long-term deposits and prepayments.

If any such indication exists, we estimate the asset’s recoverable amount.

•

Calculation of recoverable amount. The recoverable amount of an asset is the greater of its fair value less costs to sell and value in use. In assessing value in use, we discount the estimated future cash flows to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Where an asset does not generate cash inflows largely independent of those from other assets, we determine the recoverable amount for the smallest group of assets that generates cash inflows independently (i.e. a cash-generating unit).

•

Recognition of impairment losses. We recognize an impairment loss in profit or loss if the carrying amount of an asset, or the cash-generating unit to which it belongs, exceeds its recoverable amount. We allocate impairment losses recognized in respect of cash-generating units to reduce the carrying amount of the other assets in the unit (or group of units) on a pro rata basis, except that the carrying value of an asset will not be reduced below its individual fair value less costs to sell, or value in use, if determinable.

•

Reversals of impairment provisions. We reverse an impairment provision if there has been a favorable change in the estimates used to determine the recoverable amount.

We limit a reversal of an impairment provision to the asset’s carrying amount that would have been determined had no impairment loss been recognized in prior years. We credit reversals of impairment provisions to profit or loss in the year in which the reversals are recognized.

As of June 30, 2014, we identified certain indications of impairment and conducted an impairment testing in respect of our property, plant and equipment, construction in progress, lease prepayments and long-term deposits and prepayments. The recoverable amounts of those non-current assets were based on their value in use, determined by discounting future cash flows to be generated from the continuing use of those non-current assets. Seven years of cash flows were included in the discounted cash flow model. Key assumptions used in the estimation of value in use included discount rate, terminal value growth rate and budgeted EBITDA. The estimated recoverable amounts of these non-current assets exceeded their respective carrying amounts as of June 30, 2014. As such, we concluded that no impairment loss was required to be provided on our property, plant and equipment, construction in progress, lease prepayments and long-term deposits and prepayments as of June 30, 2014.

Any change in the assumptions adopted in the cash flow forecasts would significantly affect our impairment testing and hence our results.

Impairment of receivables

We review current receivables that are carried at amortized cost at each statement of financial position date to determine whether there is objective evidence of impairment. Objective evidence of impairment includes observable data that comes to our attention about one or more of the following loss events:

•

significant financial difficulty of the debtor;

•

breach of contract;

•

it becoming probable that the debtor will enter bankruptcy or other financial reorganization; and

•

significant changes in the technological, market, economic or legal environment that have an adverse effect on the debtor.

If any such evidence exists, we determine and recognize the impairment loss as follows: for trade and other current receivables carried at amortized cost, we measure the impairment loss as the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate (i.e. the effective interest rate computed at initial recognition of these assets), where the effect of discounting is material. We make assessment collectively where financial assets carried at amortized cost share similar risk characteristics, such as similar past due status, and have not been individually assessed as impaired. We base future cash flows for financial assets which are assessed for impairment collectively on historical loss experience for assets with credit risk characteristics similar to the collective group.

We write off impairment losses against the corresponding assets directly, except for impairment losses recognized in respect of trade receivables whose recovery is considered doubtful but not remote. In this case, we record the impairment losses for doubtful debts using an allowance account. When we are satisfied that recovery is remote, the amount considered irrecoverable is written off against trade receivables directly and any amounts held in the allowance account relating to that debt are reversed. We recognize other changes in the allowance account and subsequent recoveries of amounts previously written off directly in profit or loss. In the fiscal year ended June 30, 2014, we recognized a total amount of RMB472,000 on impairment loss on uncollectible amount against the allowance account for trade receivables.

In the fiscal year ended March 31, 2012, we disposed the entire equity interest of Linong Agricultural Technology (Shantou) Co. Limited to an independent third party. As at June 30, 2014, the outstanding balance of consideration receivable amounting to RMB2,967,000 was determined to be impaired as we assessed that such receivable is not expected to be recovered.

Results of Operations

The following table sets forth a summary of our consolidated results of operations for the periods indicated. On August 24, 2012, our board of directors approved a change in our fiscal year end from March 31 to June 30. The consolidated statement of profit or loss data for the year ended March 31, 2012, the three months ended June 30, 2012 and the years ended June 30, 2013 and 2014 has been derived from our audited consolidated financial statements, which are included in this annual report beginning on page F-1. The consolidated statement of profit or loss data for the three months ended June 30, 2011 and the twelve months ended June 30, 2012 has been derived from our unaudited interim consolidated financial statements for the three months ended June 30, 2011 and the twelve months ended June 30, 2012, respectively. Unless otherwise noted, the comparable period for the year ended June 30, 2013 is the twelve months ended June 30, 2012. We believe that such comparison provides useful benchmark for investors to assess the operating performance of our business. Our consolidated financial statements have been prepared in accordance with International Financial Reporting Standards, or IFRS. This information should be read together with our consolidated financial statements and related notes included elsewhere in this annual report. The operating results in any period are not necessarily indicative of the results that may be expected for any future period.


	Year Ended March 31,			Three Months Ended June 30,						Twelve Months Ended June 30,			Year Ended June 30,
	2012			2011			2012			2012			2013			2014
	RMB			RMB			RMB			RMB			RMB			RMB			$
	(In thousands)
Revenue		519,399			123,332			123,248			519,315			576,274			580,500			93,575
Cost of inventories sold		(455,380	)		(106,276	)		(107,983	)		(457,087	)		(494,235	)		(493,339	)		(79,525	)
Changes in fair value less costs to sell related to:
Crops harvested during the year/period		226,037			13,173			5,067			251,848			260,928			267,822			43,172
Growing crops on the farmland at the year/period end		60,890			22,990			17,897			21,880			16,576			4,597			741
Total changes in fair value less costs to sell of biological assets		286,927			36,163			22,964			273,728			277,504			272,419			43,913
Packing expenses		(33,405	)		(8,431	)		(8,913	)		(33,887	)		(47,754	)		(46,142	)		(7,438	)
Land preparation costs		(37,593	)		(7,008	)		(12,887	)		(43,472	)		(56,078	)		(67,712	)		(10,915	)
Other income		3,330			135			466			3,661			1,830			1,745			281
Research and development expenses		(9,091	)		(2,061	)		(2,291	)		(9,321	)		(13,283	)		(15,926	)		(2,567	)
Selling and distribution expenses		(32,120	)		(8,882	)		(6,516	)		(29,754	)		(42,899	)		(41,687	)		(6,720	)
Administrative expenses		(58,519	)		(14,361	)		(13,155	)		(57,313	)		(44,631	)		(36,072	)		(5,815	)
Impairment losses on property, plant and equipment, prepayments and receivables		(14,823	)		—			—			(14,823	)		—			(27,127	)		(4,373	)
Natural disaster loss		—			—			—			—			—			(62,614	)		(10,093	)
Other expenses		(2,551	)		(133	)		(132	)		(2,550	)		(797	)		(874	)		(141	)

Results from operating activities		166,174			12,478			(5,199	)		148,497			155,931			63,171			10,182
Finance income		11,838			2,937			909			8,556			8,382			1,208			195
Finance costs		(10,781	)		(2,787	)		(4,046	)		(10,786	)		(13,017	)		(5,385	)		(868	)

Net finance (costs)/income		1,057			150			(3,137	)		(2,230	)		(4,635	)		(4,177	)		(673	)
Profit/(loss) before taxation		167,231			12,628			(8,336	)		146,267			151,296			58,994			9,509
Income tax (expense)/credit		(4,415	)		—			(128	)		(4,543	)		1,840			(2,867	)		(462	)

Profit/(loss) for the year/period		162,816			12,628			(8,464	)		141,724			153,136			56,127			9,047


	Year Ended March 31,			Three Months Ended June 30,						Twelve Months Ended June 30,			Year Ended June 30,
	2012			2011			2012			2012			2013			2014
	RMB			RMB			RMB			RMB			RMB			RMB			RMB
	(In thousands)
Biological assets fair value adjustment included in cost of inventories sold		(282,579	)		(59,405	)		(61,963	)		(285,137	)		(283,170	)		(281,648	)		(45,401	)
Changes in fair value less costs to sell of biological assets		286,927			36,163			22,964			273,728			277,504			272,419			43,913

Net impact		4,348			(23,242	)		(38,999	)		(11,409	)		(5,666	)		(9,229	)		(1,488	)

Year Ended June 30, 2014 Compared to Year Ended June 30, 2013

Revenue. Our revenue increased by RMB4.2 million, or 0.7%, from RMB576.3 million in the fiscal year ended June 30, 2013 to RMB580.5 million ($93.6 million) in the fiscal year ended June 30, 2014. The increase in sales of our produce was attributable to an increase in our land area, greenhouse area and open field utilization. Our average operating land increased by 11.5% to 26,179 mu (1,745 hectares) for the fiscal year ended June 30, 2014, compared to 23,476 mu (1,565 hectares) for the fiscal year ended June 30, 2013.

Our average selling price decreased from RMB4.07 per kg for the fiscal year ended June 30, 2013 to RMB3.86 ($0.62) per kg for the fiscal year ended June 30, 2014. The decrease in our average selling price was due to (1) lower demand for high end vegetables and (2) more customers picked up the produce at our farms, which resulted in lower selling prices because no transportation cost were included in such sales transactions. This resulted in a decrease in our revenue per mu from RMB24,547 for the fiscal year ended June 30, 2013 to RMB22,174 ($3,574) for the fiscal year ended June 30, 2014.

Cost of Inventories Sold. Our cost of inventories sold decreased by RMB0.9 million, or 0.2%, from RMB494.2 million for the fiscal year ended June 30, 2013 to RMB493.3 million ($79.5 million) for the fiscal year ended June 30, 2014.

Cost of inventories sold before biological assets fair value adjustment increased by RMB0.6 million, or 0.3%, from RMB211.1 million in the fiscal year ended June 30, 2013 to RMB211.7 million ($34.1 million) in the fiscal year ended June 30, 2014. Cost of inventories sold before biological assets fair value adjustment as a percentage of our revenue decreased to 36.5% in the fiscal year ended June 30, 2014 from 36.6% in the fiscal year ended June 30, 2013, primarily due to (1) our shift of product mix to solanaceous vegetables which have a higher gross margin, and (2) an increase in production efficiency resulting from enhanced horticultural know-how and soil-less plantation techniques, and partially off-set by the higher depreciation charges, as a percentage of revenue.

Changes in Fair Value Less Costs to Sell of Biological Assets and Net Impact of Biological Assets Fair Value Adjustment. Changes in fair value less costs to sell of biological assets decreased by RMB5.1 million from RMB277.5 million in the fiscal year ended June 30, 2013 to RMB272.4 million ($43.9 million) in the fiscal year ended June 30, 2014.

The net impact of biological assets fair value adjustment for the fiscal year ended June 30, 2014 was a negative of RMB9.2 million ($1.5 million). This was attributable to our strategy of focusing more on the off-season (winter months) and less on the summer months.

In comparison, the net impact of biological assets fair value adjustment for the fiscal year ended June 30, 2013 was a negative of RMB5.7 million.

Packing Expenses. Our packing expenses decreased by RMB1.7 million, or 3.4%, from RMB47.8 million in the fiscal year ended June 30, 2013 to RMB46.1 million ($7.4 million) in the fiscal year ended June 30, 2014, primarily due to a decrease of RMB2.0 million in labor cost, as we have improved the efficiency in operation flows related to harvesting and packing tasks.

Land Preparation Costs. Our land preparation costs increased by RMB11.6 million, or 20.7%, from RMB56.1 million in the fiscal year ended June 30, 2013 to RMB67.7 million ($10.9 million) in the fiscal year ended June 30, 2014. The increase was due to (1) an increase in greenhouse area and (2) an increase in the amount of land in reserve or under construction due to longer construction period for new farms under construction.

Other Income. Our other income decreased by RMB0.1 million, or 4.6% from RMB1.8 million in the fiscal year ended June 30, 2013 to RMB1.7 million ($0.3 million) in the fiscal year ended June 30, 2014. Our other income is primarily composed of the amortization of subsidy from our depositary bank.

Research and Development Expenses. Our research and development expenses increased by RMB2.6 million, or 19.9%, from RMB13.3 million in the fiscal year ended June 30, 2013 to RMB15.9 million ($2.6 million) in the fiscal year ended June 30, 2014, due to (1) the increase in the scale of our operations and (2) increased direct materials, labor and rental costs as well as higher depreciation charges.

Selling and Distribution Expenses. Our selling and distribution expenses decreased by RMB1.2 million, or 2.8%, from RMB42.9 million in the fiscal year ended June 30, 2013 to RMB41.7 million ($6.7 million) in the fiscal year ended June 30, 2014. This decrease was primarily due to the decrease of RMB0.6 million in transportation costs, as more customers picked up the produce at our farmland. As a result, less transportation costs were included in average selling prices.

Administrative Expenses. Our administrative expenses decreased by RMB8.5 million, or 19.2%, from RMB44.6 million in the fiscal year ended June 30, 2013 to RMB36.1 million ($5.8 million) in the fiscal year ended June 30, 2014. This decrease was due to (1) a decrease of RMB5.5 million in equity-settled share-based compensation and (2) a decrease of RMB2.8 million in other tax expenses.

Impairment Losses on Property, Plant and Equipment, Prepayments and Receivables. Our impairment losses on property, plant and equipment, prepayments and receivables was RMB27.1 million ($4.4 million) for the fiscal year ended June 30, 2014. This primarily related to the impairment of (1) RMB16.4 million for a small and less productive farm which we have decided to dispose of and (2) RMB7.3 million for an idle processing factory in Liaoyang, Liaoning Province.

Natural Disaster Loss. Our natural disaster loss of RMB62.6 million ($10.1 million) for the fiscal year ended June 30, 2014 represents the loss resulting from the hit by super typhoon “Usagi” in September 2013 at our farm in Huidong, Guangzhou Province.

Other Expenses. Our other expenses increased by RMB0.1 million, or 9.7%, from RMB0.8 million in the fiscal year ended June 30, 2013 to RMB0.9 million ($0.1 million) in the fiscal year ended June 30, 2014.

Results of Operating Activities. As a result of the foregoing, our results of operating activities decreased by RMB92.7 million, or 59.5% from RMB155.9 million in the fiscal year ended June 30, 2013 to RMB63.2 million ($10.2 million) in the fiscal year ended June 30, 2014.

Net Finance Income/(Costs). We had a net finance cost of RMB4.2 million ($0.7 million) in the fiscal year ended June 30, 2014, compared to a net finance cost of RMB4.6 million in the fiscal year ended June 30, 2013. The decrease in net finance cost was primarily due to an decrease in interest expense of RMB7.6 million, which was partially offset by (1) the decrease of RMB5.9 million in exchange gain and (2) the decrease of RMB1.3 million of interest income.

Income Tax (Expenses)/Credit. Our income tax expense was RMB2.9 million ($0.5 million) in the year ended June 30, 2014, compared to an income tax credit of RMB1.8 million in the year ended June 30, 2013.

Profit for the Period. As a result of the foregoing, our profit for the period decreased by RMB97.0 million, or 63.3%, from RMB153.1 million in the year ended June 30, 2013 to RMB56.1 million ($9.0 million) in the year ended June 30, 2014.

Year Ended June 30, 2013 Compared to Twelve Months Ended June 30, 2012

Revenue. Our revenue increased by RMB57.0 million, or 11.0%, from RMB519.3 million in the twelve months ended June 30, 2012 to RMB576.3 million in the fiscal year ended June 30, 2013. The increase in sales of our produce was attributable to an increase in our land area, greenhouse area and open field utilization. Our average operating land increased by 14.3% to 23,476 mu (1,565 hectares) for the fiscal year ended June 30, 2013, compared to 20,530 mu (1,369 hectares) for the twelve months ended June 30, 2012.

Our average selling price increased from RMB3.69 per kg for the twelve months ended June 30, 2012 to RMB4.07 per kg for the fiscal year ended June 30, 2013. The increase in our average selling price was due to (1) the upgrade in our product mix, (2) better product quality, (3) more spending on product packaging, (4) more transportation costs incurred and passed on to customers as fewer customers came to our farms to pick up the produce, which was offset by lower market prices. Our revenue per mu decreased slightly as the upgrade in product mix resulted in lower volume per mu.

Cost of Inventories Sold. Our cost of inventories sold increased by RMB37.1 million, or 8.1%, from RMB457.1 million for the twelve months ended June 30, 2012 to RMB494.2 million for the fiscal year ended June 30, 2013.

Cost of inventories sold before biological assets fair value adjustment increased by RMB39.1 million, or 22.7%, from RMB172.0 million in the twelve months ended June 30, 2012 to RMB211.1 million in the fiscal year ended June 30, 2013. Cost of inventories sold before biological assets fair value adjustment as a percentage of our revenue increased to 36.6% in the fiscal year ended June 30, 2013 from 33.1% in the twelve months ended June 30, 2012. The increase in our cost of inventories sold before biological assets fair value adjustment was due to increased direct materials, labor and rental costs as well as higher depreciation charges, as a percentage of revenue.

Changes in Fair Value Less Costs to Sell of Biological Assets and Net Impact of Biological Assets Fair Value Adjustment. Changes in fair value less costs to sell of biological assets increased by RMB3.8 million from RMB273.7 million in the twelve months ended June 30, 2012 to RMB277.5 million in the fiscal year ended June 30, 2013.

The net impact of biological assets fair value adjustment for the fiscal year ended June 30, 2013 was a negative of RMB5.7 million. This was attributable to (1) our strategy of focusing more on the off-season (winter months) and less on the summer months and (2) an increase in land not in operation due to the conversion of part of our greenhouses to the soil-less production system.

In comparison, the net impact of biological assets fair value adjustment for the twelve months ended June 30, 2012 was a negative of RMB11.4 million.

Packing Expenses. Our packing expenses increased by RMB13.9 million, or 40.9%, from RMB33.9 million in the twelve months ended June 30, 2012 to RMB47.8 million in the fiscal year ended June 30, 2013, as a result of (1) the increased production volume of solanaceous products, which require more packaging compared to leafy and cruciferous products, (2) better packaging used to enhance the selling price, and (3) our effort to enhance our brand awareness.

Land Preparation Costs. Our land preparation costs increased by RMB12.6 million, or 29.0%, from RMB43.5 million in the twelve months ended June 30, 2012 to RMB56.1 million in the fiscal year ended June 30, 2013. The increase was due to (1) an increase in greenhouse coverage which increased the unit land preparation cost and (2) an increase in the amount of land in reserve or under construction due to longer construction period for new farms under construction.

Other Income. Our other income decreased by RMB1.9 million, or 50.0% from RMB3.7 million in the twelve months ended June 30, 2012 to RMB1.8 million in the fiscal year ended June 30, 2013. This decrease was primarily due to the RMB1.3 million one-time gain on disposal of a subsidiary in the twelve months ended June 30, 2012.

Research and Development Expenses. Our research and development expenses increased by RMB4.0 million, or 42.5%, from RMB9.3 million in the twelve months ended June 30, 2012 to RMB13.3 million in the fiscal year ended June 30, 2013, due to (1) the increase in the scale of our operations, (2) increased direct materials, labor and rental costs as well as higher depreciation charges, and (3) an increase in spending on research related to soil-less production techniques.

Selling and Distribution Expenses. Our selling and distribution expenses increased by RMB13.1 million, or 44.2%, from RMB29.8 million in the twelve months ended June 30, 2012 to RMB42.9 million in the fiscal year ended June 30, 2013. This increase was due to the increase of RMB14.9 million in transportation costs, as a result of (1) the increase in sales of solanaceous products, which are shipped further away compared to leafy and cruciferous vegetables, (2) higher transportation costs incurred by the company as fewer customers picked up the produce at our farms and (3) increased fuel costs. The increase in selling and distribution expenses was offset by a decrease of RMB1.8 million in spending on other selling related expenses as we ceased our concessionary sales in Hong Kong.

Administrative Expenses. Our administrative expenses decreased by RMB12.7 million, or 22.1%, from RMB57.3 million in the twelve months ended June 30, 2012 to RMB44.6 million in the fiscal year ended June 30, 2013. This decrease was due to (1) a decrease of RMB14.8 million in equity-settled share-based compensation and (2) a decrease of RMB1.6 million in travelling expenses. The decrease in administrative expenses is offset by an increase of RMB3.7 million in legal and professional fee and other administrative related expenses.

Other Expenses. Our other expenses decreased by RMB1.8 million, or 68.7%, from RMB2.6 million in the twelve months ended June 30, 2012 to RMB0.8 million in the fiscal year ended June 30, 2013. This decrease was due to a RMB2.2 million loss on disposal of property, plant and equipment in the twelve months ended June 30, 2012 offset by an increase of RMB0.4 million in other expenses.

Results of Operating Activities. As a result of the foregoing, our results of operating activities increased by 5.0% from RMB148.5 million in the twelve months ended June 30, 2012 to RMB155.9 million in the fiscal year ended June 30, 2013.

Net Finance Income/(Costs). We had a net finance cost of RMB2.2 million in the twelve months ended June 30, 2012, compared to a net finance cost of RMB4.6 million in the fiscal year ended June 30, 2013, primarily due to an increase in interest expense of RMB2.2 million in the fiscal year ended June 30, 2013.

Income Tax (Expenses)/Credit. Our income tax expense was RMB4.5 million in the twelve months ended June 30, 2012 compared to an income tax credit of RMB1.8 million in the fiscal year ended June 30, 2013.

Profit for the Period. As a result of the foregoing, our profit for the period increased by RMB11.4 million, or 8.1%, from RMB141.7 million in the twelve months ended June 30, 2012 to RMB153.1 million in the fiscal year ended June 30, 2013.

Three Months Ended June 30, 2012 Compared to Three Months Ended June 30, 2011

Revenue. Our revenue decreased by RMB0.1 million, or 0.1%, from RMB123.3 million for the three months ended June 30, 2011 to RMB123.2 million for the three months ended June 30, 2012. The slight change in revenue was attributable to the offsetting effect of (1) an increase in revenue-per-mu from RMB6,046 for the three months ended June 30, 2011 to RMB6,129 for the three months ended June 30, 2012, which in turn was due to an increase in average selling price of our produce, and (2) a decrease in average operating land from 20,569 mu for the three months ended June 30, 2011 to 20,062 mu for the three months ended June 30, 2012.

The increase in revenue-per-mu and average selling price for the three months ended June 30, 2012 was driven by (1) increased greenhouse coverage, which lead to (a) better product mix, i.e., more solanaceous products, and (b) improved quality of our products, (2) enhanced cultivation know-how, and (3) market inflation. This was offset by lower production yield.

We primarily grow solanaceous vegetables (primarily peppers and tomatoes) and green leafy vegetables during the three months ended June 30, 2012. Solanaceous vegetables generally have a higher selling price. Due to increased greenhouse coverage, more revenue from high quality solanaceous vegetables was generated for the three months ended June 30, 2012 compared to the three months ended June 30, 2011. Furthermore, within the solanaceous category we grew more specialty products such as small snack tomatoes, which have higher selling prices but lower volume per mu. Due to the poor weather, we planted more leafy and less cruciferous product during the three months ended June 30, 2012 as compared to the same period in 2011. However, leafy product prices decreased during the month of June 2012, and our revenue was negatively affected.

Our greenhouse area increased from 7,150 mu (477 hectares) as of June 30, 2011 to 8,915 mu (594 hectares) as of June 30, 2012. The average selling price of our produce increased from RMB2,965 per tonne for the three months ended June 30, 2011 to RMB3,527 per tonne for the three months ended June 30, 2012. Our production yield decreased from 2.0 tonnes per mu in the three months ended June 30, 2011 to 1.7 tonnes in the three months ended June 30, 2012.

Our product mix shifted further towards solanaceous products during the three months ended June 30, 2012. Solanaceous vegetables sold to external customers in the PRC mainland increased from 60% of total revenue from these customers for the three months ended June 30, 2011 to 65% for the three months ended June 30, 2012. The percentage of leafy, cruciferous and other vegetables declined as our product mix shifted towards solanaceous vegetables.

Cost of Inventories Sold. Our cost of inventories sold increased by RMB1.7 million, or 1.6%, from RMB106.3 million for the three months ended June 30, 2011 to RMB108.0 million for the three months ended June 30, 2012.

Cost of inventories sold before biological assets fair value adjustment decreased by RMB0.9 million, or 1.8%, from RMB46.9 million in the three months ended June 30, 2011 to RMB46.0 million in the three months ended June 30, 2012. Cost of inventories sold before biological assets fair value adjustment as a percentage of our revenue decreased to 37.3% in the three months ended June 30, 2012 from 38.0% in the three months ended June 30, 2011. The decrease in our cost of inventories sold before biological assets fair value adjustment as a percentage of revenue was due to (1) increased greenhouse coverage and improved production techniques reducing variable inputs such as seeds and land film as a percentage of revenue, which was offset by an increase in overhead costs, and (2) reduced purchases of third party product due to our decision to cease Hong Kong concessionary sales during the fiscal year ended March 31, 2012.

Changes in Fair Value Less Costs to Sell of Biological Assets and Net Impact of Biological Assets Fair Value Adjustment. Changes in fair value less costs to sell of biological assets decreased by RMB13.2 million, or 36.5%, from RMB36.2 million in the three months ended June 30, 2011 to RMB23.0 million in the three months ended June 30, 2012.

The net impact of biological assets fair value adjustment for the three months ended June 30, 2012 was a loss of RMB39.0 million. This was attributable to the change in product mix from solanaceous to leafy products because the season for solanaceous products ended during the three months ended June 30, 2012. Therefore, the value of crops on our farmland as of June 30, 2012, when compared with that of March 31, 2012 decreased, resulting in a negative net impact.

In comparison, the net impact of biological assets fair value adjustment for the three months ended June 30, 2011 was a loss of RMB23.2 million. The larger negative net impact for the three months ended June 30, 2012 compared to the same period in 2011 was due to the more pronounced seasonality resulting from the higher concentration on solanaceous products. More pronounced seasonality resulted in a larger fair value gain recognized in preceding reporting periods, and thus a larger change in biological assets fair value is reflected in the three months ended June 30, 2012, when compared to the same period in 2011. The low vegetable market prices at the end of June 2012 further reduced the value of crops on land at the end of the period and thus increased the fair value change resulting from switching from high value to low value crops.

Packing Expenses. Our packing expenses increased by RMB0.5 million, or 5.7%, from RMB8.4 million for the three months ended June 30, 2011 to RMB8.9 million for the three months ended June 30, 2012, due to an increase of RMB1.1 million in packing materials consumed. The increase in packing materials consumed was due to (1) our effort to enhance our brand awareness, (2) better packing used to enhance the selling price, (3) an increase in the production of solanaceous products as a percentage of total revenue, which require more packing compared to leafy and cruciferous vegetables. This was offset by a decrease of RMB0.6 million in overhead costs.

Land Preparation Costs. Our land preparation costs increased by RMB5.9 million, or 83.9%, from RMB7.0 million for the three months ended June 30, 2011 to RMB12.9 million for the three months ended June 30, 2012, which was due to (1) an increase in greenhouse coverage which increased the unit land preparation cost and (2) an increase in the amount of land in reserve or under construction due to new farm bases added.

Other Income. Our other income increased by RMB0.4 million from RMB0.1 million in the three months ended June 30, 2011 to RMB0.5 million in the three months ended June 30, 2012. This increase was due to the amortization of RMB0.4 million resulting from incentive payment received from our depositary bank.

Research and Development Expenses. Our research and development expenses increased by RMB0.2 million, or 11.2%, from RMB2.1 million in the three months ended June 30, 2011 to RMB2.3 million in three months ended June 30, 2012, which was in line with the expansion of our operations.

Selling and Distribution Expenses. Our selling and distribution expenses decreased by RMB2.4 million, or 26.6%, from RMB8.9 million for the three months ended June 30, 2011 to RMB6.5 million for the three months ended June 30, 2012, which was due to (1) a decrease of RMB1.5 million in salary and commission payments as we ceased our concessionary sales in Hong Kong and (2) poor weather conditions, resulting in higher prices but lower volumes, which resulted in lower distribution costs.

Administrative Expenses. Our administrative expenses decreased by RMB1.2 million, or 8.4%, from RMB14.4 million for the three months ended June 30, 2011 to RMB13.2 million for the three months ended June 30, 2012, due to (1) a decrease of RMB0.9 million in equity-settled share-based compensation, (2) a decrease of RMB0.5 million in legal and professional fees, offset by an increase of RMB0.2 million in salaries and other administrative expenses.

Other Expenses. Our other expenses were RMB0.1 million and RMB0.1 million in the three months ended June 30, 2011 and 2012, respectively.

Results of Operating Activities. As a result of the foregoing, our results of operating activities was a loss of RMB5.2 million in the three months ended June 30, 2012, compared to a profit of RMB12.5 million in the three months ended June 30, 2011.

Net Finance Income/(Costs). We had a net finance cost of RMB3.1 million in the three months ended June 30, 2012, compared to a net finance income of RMB0.2 million in the three months ended June 30, 2011, due to the net foreign exchange loss of RMB1.2 million in the three months ended June 30, 2012 resulting from the depreciation of the Renminbi, compared with a net foreign exchange gain of RMB2.7 million in the three months ended June 30, 2011, attributable to the appreciation of the Renminbi, from translation of non-functional currency balances between group companies and offset by an increase of RMB0.6 million in interest income.

Income Tax Expense. Our income tax expense was RMB0.1 million in the three months ended June 30, 2012. We did not have any income tax expense in the three months ended June 30, 2011. This increase was due to the withholding tax relating to the incentive payment received from our depositary bank.

Profit/(loss) for the Period. As a result of the foregoing, we recorded a loss of RMB8.5 million for the three months ended June 30, 2012 compared to a profit of RMB12.6 million for the three months ended June 30, 2011.

B. Liquidity and Capital Resources

We have financed our business primarily through cash generated from our operations, borrowings from institutional lenders and proceeds from initial public offering. See “Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions—Private Placements.” Our cash consists of cash on hand and cash at banks, which are unrestricted as to withdrawal or use, and which have maturities of three months or less that are placed with banks. As of June 30, 2014, we had RMB200.7 million ($32.4 million) in cash. We generally deposit our excess cash in interest bearing bank accounts.

As of June 30, 2014, we had an RMB20.0 million outstanding short-term bank loan bearing an interest rate of 6.3% per annum under a loan agreement that we entered into with Bank of China, Quanzhou Branch, for a facility of RMB40.0 million secured by a personal guarantee by Mr. Shing Yung Ma and a corporate guarantee by one of our subsidiaries. We also had several outstanding short-term bank loans totaling RMB78.5 million, bearing a fixed rate of 6.3% to 7.8% per annum with certain PRC banks. These loans were secured by a personal guarantee by Mr. Shing Yung Ma and a corporate guarantee by certain of our other subsidiaries. We also had a shareholder’s loan of RMB18.6 million ($3 million) from Lui Ming Ho for the operations of the Group. The loan is unsecured, interest bearing at a fixed rate of 5.0% per annum and repayable within one year.

Cash Flows and Working Capital

The following table shows our cash flow with respect to operating activities, investing activities and financing activities for the periods indicated. The consolidated statement of cash flow data for the year ended March 31, 2012, the three months ended June 30, 2012 and the years ended June 30, 2013 and 2014 has been derived from our audited consolidated financial statements, which are included in this annual report beginning on page F-1. The consolidated statement of cash flow data for the three months ended June 30, 2011 and the twelve months ended June 30, 2012 has been derived from our unaudited interim consolidated financial statements for the three months ended June 30, 2011 and the twelve months ended June 30, 2012, respectively. Unless otherwise noted, the comparable period for the year ended June 30, 2013 is the twelve months ended June 30, 2012. This information should be read together with our consolidated financial statements and related notes included elsewhere in this annual report. The cash flow in any period is not necessarily indicative of the cash flow that may be expected for any future period.


	Year Ended March 31,			Three Months Ended June 30,						Twelve Months Ended June 30,			Year Ended June 30,
	2012			2011			2012			2012			2013			2014
	RMB			RMB			RMB			RMB			RMB			RMB			$
	(In thousands)
Net cash generated from operating activities		286,649			82,458			53,351			257,542			258,951			252,623			40,721
Net cash used in investing activities		(337,121	)		(112,221	)		(65,221	)		(290,121	)		(421,307	)		(264,397	)		(42,619	)
Net cash used in financing activities		(13,545	)		(11,378	)		(5,305	)		(7,472	)		(34,745	)		(92,949	)		(14,983	)
Net decrease in cash		(64,017	)		(41,141	)		(17,175	)		(40,051	)		(197,101	)		(104,723	)		(16,881	)
Cash at the beginning of the year/period		598,722			598,722			520,475			551,491			504,506			305,487			49,244
Cash at the end of the year/period		520,475			551,491			504,506			504,506			305,487			200,740			32,359

Operating Activities

Net cash generated from operating activities decreased by RMB6.4 million, or 2.4%, from RMB259.0 million in the fiscal year ended June 30, 2013 to RMB252.6 ($40.7 million) in the fiscal year ended June 30, 2014. This decrease in operating cash flow was a result of the offsetting effect of (1) a decrease of RMB13.6 million in cash received, primarily as a result of an increase in trade receivables outstanding as at June 30, 2014, compared to June 30, 2013, and (2) a decrease of RMB7.2 million in cash paid for our cost of revenue and operating expenses. The increase in trade receivables was primarily due to an increase in sales to institutional customers, which have longer credit terms.

Net cash generated from operating activities increased by RMB1.5 million, or 0.5%, from RMB257.5 million in the twelve months ended June 30, 2012 to RMB259.0 million in the fiscal year ended June 30, 2013. The slight change in operating cash inflow is the offsetting effect of (1) an increase of RMB42.3 million in cash received from sales and (2) an increase of RMB40.8 million in cash paid for our cost of revenue and operating expenses, compared to last year.

Net cash generated from operating activities decreased by RMB29.1 million, or 35.3%, from RMB82.5 million in the three months ended June 30, 2011 to RMB53.4 million in the three months ended June 30, 2012. This decrease in operating cash flow was the result of (1) a decrease of RMB18.2 million in cash received due to a positive effect from trade balances from March 31, 2011 to June 30, 2011, and (2) an increase of RMB10.9 million in cash paid for our cost of revenue and operating expenses.

Investing Activities

Net cash used in investing activities in the fiscal year ended June 30, 2014 was RMB264.4 million ($42.6 million), due primarily to the cash outflows for the payment for construction in progress of RMB256.3 million ($41.3 million), which consisted of the payment for (1) the construction of greenhouses in the amount of RMB134.3 million ($21.6 million), (2) agricultural infrastructure in the amount of RMB101.4 million ($16.3 million), including RMB46.2 million ($7.4 million) for the conversion to soil-less production, and (3) land improvements in the amount of RMB20.6 million ($3.3 million).

Net cash used in investing activities in the fiscal year ended June 30, 2013 was RMB421.3 million, due primarily to the cash outflows for the payment for construction in progress of RMB399.7 million, which consisted of the payment for (1) agricultural infrastructure in the amount of RMB198.1 million, including RMB48.7 million for the conversion to soil-less production, (2) the construction of greenhouses in the amount of RMB150.9 million, and (3) land improvements in the amount of RMB50.7 million.

Net cash used in investing activities in the three months ended June 30, 2012 was RMB65.2 million, due primarily to the cash outflows for payment for construction in progress of RMB60.9 million, which consisted primarily of the payment for (a) the construction of greenhouses in the amount of RMB43.3 million, (b) land improvements in the amount of RMB6.7 million and (c) payment for agricultural infrastructure of RMB6.1 million in connection with our operation expansion.

Financing Activities

Net cash used in financing activities in the fiscal year ended June 30, 2014 was RMB92.9 million ($15.0 million), which consisted of (1) repayment of bank loans of RMB147.7 million ($23.8 million), (2) proceeds of RMB101.0 million ($16.3 million) from new bank loans, (3) increase in pledged bank deposits of RMB54.9 million ($8.9 million), (4) proceeds from a loan from a shareholder of RMB18.6 million ($3.0 million) and (5) payment of interest of RMB9.9 million ($1.6 million).

Net cash used in financing activities in the fiscal year ended June 30, 2013 was RMB34.7 million, consisted of (1) proceeds of RMB113.5 million from new bank loans, (2) repayment of bank loans of RMB52.1 million, (3) increase in pledged bank deposits of RMB45.1 million, (4) payment for repurchase of shares of RMB37.9 million and (5) payment of interest of RMB13.2 million.

Net cash used in financing activities in the three months ended June 30, 2012 was RMB5.3 million, which was related to interest payment.

Capital Expenditures

We had capital expenditures of RMB335.5 million, RMB65.2 million, RMB457.7 million and RMB387.4 million ($62.4 million) for the fiscal year ended March 31, 2012, the three months ended June 30, 2012 and the fiscal years ended June 30, 2013 and 2014, respectively. Our capital expenditures were made primarily for the construction of our production facilities, farmland infrastructure and the purchases of property, plant and equipment. Our capital expenditures have been primarily funded by net cash generated from our operating activities and cash provided by financing activities. In the fiscal year ending June 30, 2015, we expect to incur capital expenditures of approximately RMB350 million ($56.4 million). We expect our capital expenditures in the fiscal year ending June 30, 2015 to primarily consist of the construction of our production facilities and farmland infrastructure, the conversion of part of our greenhouses to a soil-less production system and the purchases of property, plant and equipment. We expect to fund these capital expenditures from cash on hand as well as operating cash inflow.

Recent Accounting Pronouncements

The following standards, amendments and interpretations to existing standards are not yet effective and have not been adopted by us:

•

Amendments to IAS 32, Financial instruments: Presentation “Offsetting financial assets and financial liabilities” effective for periods beginning on or after January 1, 2014

•

Annual improvements to IFRSs 2011 – 2013 cycle effective for periods beginning on or after July 1, 2014

•

Annual improvements to IFRSs 2010 – 2012 cycle effective for periods beginning on or after July 1, 2014

•

Amendments to IAS 16, Property, plant and equipment and IAS 41, Agriculture, Agriculture: Bearer plants effective for periods beginning on or after January 1, 2016

•

IFRS 15, Revenue from contracts with customer effective for periods beginning on or after January 1, 2017

•

IFRS 9, Financial instruments effective for periods beginning on or after January 1, 2018.

We are in the process of making an assessment of what the impact of these amendments is expected to be in the period of initial application. So far we have concluded that the adoption of these amendments is unlikely to have a significant impact on our results of operations and financial position, except for the Amendments to IAS 16 and IAS 41.

Amendments to IAS 16 and IAS 41 simplify the accounting for bearer plants by including bearer plants in the scope of IAS 16, such that the Group can elect to measure bearer plants at cost. The agricultural produce from bearer plants will continue to be measured at fair value less costs to sell under IAS 41. Certain biological assets of the Group are bearer plants of which the measurement may be impacted by the amendments to IAS 16 and IAS 41. Amendments to IAS 16 and IAS 41 are effective as from January 1, 2016. The Group has not completed its assessment of the full impact of adopting amendments to IAS 16 and IAS 41 and therefore the possible impact on the consolidated financial statements has not been quantified.

C. Research and Development

We place a strong emphasis on research and development to improve our productivity and profitability. Our research and development efforts focus on developing more effective crop cultivation techniques, improving product quality, testing new vegetable varieties, increasing production yield and revenue per mu. As of June 30, 2014, our in-house research and development team consisted of 87 research professionals and staff, 16 of which have advanced degrees. Production on each of our farms is supervised by a horticultural technician who usually possesses at least ten years of experience in agriculture.

Each year we test grow many varieties of seeds, including superior varieties supplied by leading international seed companies, to identify several varieties with superior quality and yield for production. We have leased a parcel of forestland with an aggregate area of 1,150 mu (77 hectares) in Fuzhou to test grow new varieties of fruits.

We study the different nutrient requirements of various vegetables as well as factors affecting soil fertility and fertilizer efficiency in an effort to achieve optimal nutrient supply by managing fertilizer application and mix. We grow seedlings of superior varieties in nursery greenhouses with controlled temperature, moisture, sunlight and soil conditions to produce large volumes of seedlings in an accelerated manner. Our research and development team also uses techniques such as grafting and cuttage to cultivate seedlings in large volumes in soil with rich minerals before growing them in regular farm fields to control costs and produce large volumes of seedlings.

We continually develop our horticultural know-how and carry out research and development of cultivation techniques such as soil-less production, scaffolding, pruning and fruit retention to improve our production yield and efficiency.

We also focus on designing and improving our agricultural facilities and farm equipment. Our research and development personnel are actively involved in the design, planning and improvement of farm facilities, for example, the layout, height, construction materials and ventilation of greenhouses and the irrigation and road systems, to achieve optimal production. Our research and development team maintains cooperative relationship and collaborates closely with research institutions, universities and industry experts.

We have devoted significant resources to research and development. Our research and development expenses were RMB9.1 million, RMB2.3 million, RMB13.3 million and RMB15.9 million ($2.6 million) in the fiscal year ended March 31, 2012, the three months ended June 30, 2012 and the fiscal years ended June 30, 2013 and 2014, respectively, representing 1.8%, 1.9%, 2.3% and 2.7% of our net revenue in those respective periods.

D. Trend Information

Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events for the period from June 30, 2013 to June 30, 2014 that are reasonably likely to have a material adverse effect on our net revenues, income, profitability, liquidity or capital resources, or that caused the disclosed financial information to be not necessarily indicative of future operating results or financial conditions.

E. Off-Balance Sheet Commitments and Arrangements

We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative contracts that are indexed to our shares and classified as shareholder’s equity, or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us.

F. Contractual Obligations and Commercial Commitments

The following table sets forth our contractual obligations as of June 30, 2014:


	Payment Due by Period
Contractual Obligations	Total		Less than 1 Year		1-3 Years		3-5 Years		More than 5 Years
	(RMB in thousands)
Debt obligations (including interest)		122,857		101,727		21,130		—		—
Operating lease obligations		268,633		21,997		41,321		40,571		164,744
Purchase obligations		195,894		195,894		—		—		—

Total		587,384		319,618		62,451		40,571		164,744

Our operating lease obligations consisted of our obligations under lease agreements with lessors of our farmland. Our purchase obligations relate to construction contracts in respect of greenhouses, infrastructure and irrigation systems that we entered into with respective sub-contractors.

G. Safe Harbor

This annual report on Form 20-F contains statements of a forward-looking nature. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements convey our current expectations and views of future events. The words “may,” “could,” “would,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “potential,” “future,” “continue,” “is/are likely to” and other similar expressions may identify forward-looking statements, but the absence of these words does not necessarily mean that a statement is not forward-looking. These forward-looking statements include, among other things, statements about:

•

our anticipated growth strategies, including increasing our greenhouse coverage, increasing our production scale, strengthening our sales, marketing and distribution efforts, focusing on high quality off-season products, improving our product mix, and expanding our research and development capability;

•

our future business development, results of operations and financial condition;

•

weather conditions that affect the production, harvest, transportation, storage and trade of fresh produce;

•

trends and competition in the fresh vegetable market;

•

future changes in laws or regulations affecting our business; and

•

changes in general economic and business conditions in China.

Any or all of our forward-looking statements in this annual report may turn out to be inaccurate. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. They may be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties, including the risks, uncertainties and assumptions described in “Item 4. Key Information—D. Risk Factors.” In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this annual report may not occur as contemplated, and actual results could differ materially from those anticipated or implied by the forward-looking statements.

You should not unduly rely on these forward-looking statements, which speak only as of the date of this annual report. Unless required by law, we undertake no obligation to update or revise any forward-looking statements to reflect new information or future events or otherwise. You should, however, review the factors and risks we describe in reports we will file from time to time with the SEC after the date of this annual report. See “Item 10. Additional Information—H. Documents on Display.”

Item 6. Directors, Senior Management and Employees

A. Directors and Senior Management

Set forth below is the name, age, position and a brief account of the business experience of each of our executive officers and directors.


Name	Age		Position/Title

Shing Yung Ma		49	Director, Chief executive officer
Na Lai Chiu		58	Chairman of the board
Jin Li		47	Director
Neil Nanpeng Shen		46	Director
Gordon Xiaogang Wang		50	Director
Chung Bong Pang		38	Director
Li-Lan Cheng		49	Director
Yaping Si		61	Director
Auke Cnossen		41	Chief financial officer
Hang Chen		45	Vice president of operations
Dan Ma		31	Production base development director

Shing Yung Ma is the founder of our company and has served as our chairman and chief executive officer since our inception. In 2012, Mr. Ma resigned as chairman. Mr. Ma has over 16 years of managerial and operational experience in the vegetable cultivation industry. From 1999 to 2003, he served as the vice president of Chaoda Modern Agriculture (Holdings) Ltd., a vegetable production company listed on the Hong Kong Stock Exchange, where he was in charge of operations and sales. Prior to that, he was the general manager of Fujian Chaoda Green Agriculture Ltd. Co from 1997 to 1999. From 1991 to 1997, Mr. Ma was the vice president of Fujian Guangyuan Logistics Ltd. Co., a China-based logistics company. Prior to his career in the agricultural industry, he worked as an instructor in Fujian Normal College from 1987 to 1991. Mr. Ma received his college diploma from Fujian Normal College in 1987 where he majored in Chinese literature.

Na Lai Chiu has been our vice chairman since July 2010 and became our adviser in early 2008. In 2012, Ms. Chiu became our chairman. Ms. Chiu is one of the founders of Chaoda Modern Agriculture (Holdings) Ltd., a vegetable production company listed on the Hong Kong Stock Exchange. Prior to founding Chaoda Modern Agriculture (Holdings) Ltd., Ms. Chiu had over 15 years of experience in the trading business and served as the deputy general manager of a trading company based in Hong Kong, where she was primarily responsible for business management and administration.

Jin Li has been our director since 2006. He has been advising our company on operations and strategic matters since 2006. He is also an independent director of Country Style Cooking Restaurant Chain Co. Ltd., a quick service restaurant chain listed on the New York Stock Exchange. Mr. Li began his career as an attorney in New York and then relocated to Asia in 1997. He has worked for Skadden, Arps, Slate, Meagher & Flom LLP & Affiliates in Beijing and Hong Kong, and Linklaters in Hong Kong, as a partner. Mr. Li received his bachelor of arts degree from Peking University and master of science degree from the University of Michigan, Ann Arbor. He received his J.D. degree from Columbia Law School.

Neil Nanpeng Shen has been our director since 2006 and was appointed by Sequoia following our series A financing. Mr. Shen is the founding managing partner of Sequoia Capital China. Mr. Shen co-founded Ctrip.com International Ltd., the largest travel consolidator in China, and served as its chief financial officer from 2000 to October 2005 and as its president from August 2003 to October 2005. He also co-founded Home Inns and Hotels Management, a leading economy hotel chain in China. Prior to founding Ctrip and Home Inns, Mr. Shen had worked for over eight years in the investment banking industry in New York and Hong Kong. Currently, Mr. Shen is a co-chairman of Home Inns, a director of Ctrip, a director of E-House (China) Holdings Limited, a NYSE-listed real estate service company in China, a director of Qihoo 360, a NASDAQ-listed search solution provider in China. He is also a director of a number of privately owned companies based in China. Mr. Shen received his bachelor’s degree from Shanghai Jiao Tong University, China in 1988 and his master’s degree from Yale University in 1992.

Gordon Xiaogang Wang has been our director since October 2010. Mr. Wang has over 15 years of experience in corporate finance and strategic business development. From April 2010 to present, Mr. Wang is a partner of Boardroom Advisors Co., Limited, a company focusing on advising China-based companies on corporate finance and strategic matters. He served as the chief financial officer of Acorn International, Inc., a China-based marketing company listed on the New York Stock Exchange, from September 2005 to March 2010. Mr. Wang served as the chief financial officer and executive vice president of Chaoda Modern Agriculture (Holdings) Ltd., a vegetable production company listed on the Hong Kong Stock Exchange, from 2003 to 2005. Mr. Wang also served as the director of investor relations at Legend Group Limited from 2002 to 2003. Prior to that, Mr. Wang held positions in various organizations, including JingTai Securities (Hong Kong), MeetChina.com, Schroders Asia Limited and Morgan Stanley Asia Limited. Mr. Wang received his bachelor’s degree in mechanical engineering from Tianjin University in 1985, his master’s degree in computer-aided engineering from Rutgers University in 1989 and an MBA degree from the University of Chicago in 1994.

Chung Bong Pang has been our director since October 2010. Mr. Pang has served as the director in Avista Valuation Advisory Limited since June 2010. From 2007 to 2010, Mr. Pang was an associate director at PricewaterhouseCoopers in Beijing. Prior to that, he was a manager of the financial valuation group of American Appraisal China Limited from 2005 to 2007, and an associate director of BMI Group in Hong Kong from 2000 to 2005. Mr. Pang received his bachelor’s degree from the University of New South Wales in 1999 where he majored in accounting and finance. He is a certified practicing accountant in Australia and a certified public accountant under the Hong Kong Institute of Certified Public Accountants.

Li-Lan Cheng has been our director since October 2010. He has been the chief operating officer of E-House (China) Holdings Limited, a real estate services company listed on the NYSE, since April 2012 and served as its chief financial officer from November 2006 to April 2012. Mr. Cheng has served as executive director of Leju since March 2014. He is also an independent director and member of the audit committee of Country Style Cooking Restaurant Chain Co. Ltd., a China-based quick service restaurant chain listed on the NYSE and 51job, Inc., a human resource service provider listed on NASDAQ. Prior to joining E-House (China) Holdings Limited, Mr. Cheng served from 2005 to 2006 as the chief financial officer of SouFun Holdings Limited, a real estate internet company in China. Mr. Cheng was an assistant director and the head of the Asian transportation sector investment banking group of ABN AMRO Asia from 1997-2002. Mr. Cheng received his bachelor’s degree in economics from Swarthmore College and his Ph.D. degree in economics from the Massachusetts Institute of Technology. Mr. Cheng is a chartered financial analyst.

Yaping Si has been our director since August 2011. She has over 30 years of experience in agriculture and vegetable cultivation research. Ms. Si currently serves as the director of the Facility Horticulture Branch of the Chinese Society of Horticultural Science and the director of the Beijing Vegetable Institute. From 1979 to 2007, she worked in the National Engineering Research Centre for Vegetables, focusing on vegetable breeding and modern vegetable cultivation techniques. While at the National Engineering Research Centre for Vegetables, she headed its Vegetable Cultivation Research Laboratory. Ms. Si has hosted and participated in a number of research projects commissioned by the Ministry of Science and Technology, the Ministry of Agriculture, Animal Husbandry and Fishery, the Beijing Municipal Commission of Science and Technology, and the Beijing Municipal Commission of Rural Affairs, and won a number of awards for her work. Ms. Si graduated from the Biology Department of Peking University with a bachelor’s degree in plant physiology and biochemistry in 1978.

Auke G. Cnossen has been our chief financial officer since September 2010. Prior to joining us, Mr. Cnossen held various positions at Rabobank International since July 2004, including the director of mergers & acquisitions and corporate advisory for Northeast Asia region, the head of food & agribusiness research and strategic advisory for Northeast Asia region and the senior associate in the mergers and acquisitions group and the leveraged finance group. From 2001 to 2002, he worked as an internal consultant in the research and development department of Unilever Bestfoods in the Netherlands. He served as a research fellow in the food science department of the University of Arkansas from 1998 to 2001. Mr. Cnossen received an MBA degree from Cornell University in 2004 and a master’s degree in agricultural engineering from Wageningen University in the Netherlands in 1997.

Hang Chen has been our vice president of operations since May 2010 and joined our company in 2008. Mr. Chen has over ten years of managerial and operational experience in vegetable cultivation in China. From 2005 to 2008, Mr. Chen was a private consultant advising on various farming projects in China. From 1997 to 2005, Mr. Chen was an executive director in Chaoda Modern Agriculture (Holdings) Ltd., a vegetable production company listed on the Hong Kong Stock Exchange, where he was in charge of the administration and personnel management. From 1990 to 1997, Mr. Chen worked as a manager in Fujian Semi-Conductor Device Factory. Mr. Chen graduated from Minjiang College in 1990 where he majored in business administration.

Dan Ma has been our production base development director since June 2010. Ms. Ma joined our company in 2005 after she received her college diploma from Liaodong College in 2005 where she majored in agricultural studies. Ms. Ma has held various positions in our company, including the deputy general manager, the assistant general manager and the processing facilities supervisor of Linong Agricultural Technology (Huizhou) Co. Ltd., one of our operating subsidiaries in Guangdong province.

Employment Agreements

We have entered into employment agreements with our senior executive officers. Under these employment agreements, each of our executive officers is employed for a specified time period, subject to automatic extension unless either we or the executive officer gives a one-month prior notice to terminate such employment. We may terminate the employment for cause, at any time, without notice or remuneration, for certain acts of the employee, including but not limited to a conviction or plea of guilty to certain crimes, negligence or dishonesty to our detriment and failure to perform the agreed-to duties after a reasonable opportunity to cure the failure. An executive officer may terminate his employment at any time with one-month prior written notice if there is a material reduction in his authority, duties and responsibilities or if there is a material reduction in his annual salary before the next annual salary review. Furthermore, we may terminate the employment at any time without cause upon advance written notice to the executive officer. These agreements do not provide for any special termination benefits, nor do we have other arrangements with these executive officers for special termination benefits.

Each executive officer has agreed to hold, both during and after the employment agreement expires or is earlier terminated, in strict confidence and not to use, except as required in the performance of his duties in connection with the employment, any confidential information, trade secrets and know-how of our company or the confidential information of any third party, including our variable interest entities and our subsidiaries, received by us. In addition, each executive officer has agreed to be bound by non-competition restrictions set forth in his or her employment agreement. Specifically, each executive officer has agreed not to, for a period of two years following the termination or expiration of the employment agreement, (i) carry on or be engaged or interested, directly or indirectly, as shareholder, director, employee, partner, agent or otherwise carry on any business in direct competition with our business; (ii) solicit or entice away from us, or attempt to solicit or entice away from us, any person or entity who has been our customer, client or our representative or agent or in the habit of dealing with us within two years prior to such executive officer’s termination of employment; (iii) solicit or entice away from us, or attempt to solicit or entice away from us, any person or entity who has been our officer, manager, consultant or employee within 12 months prior to such executive officer’s termination of employment; or (iv) use a name including the word “Linong” or any other words used by us in our name or in the name of any of our products, in such a way as to be capable of or likely to be confused with our name or the name of our products.

B. Compensation of Directors and Executive Officers

Compensation of Directors and Executive Officers

Our directors and executive officers receive compensation in the form of annual salaries and bonuses. While we do not have a specific bonus plan setting the calculation of our annual bonuses, each director and executive officer is entitled to receive an annual discretionary bonus based upon his or her performance of such amount as shall be determined by the board of directors.

In the fiscal year ended June 30, 2014, the total compensation we paid to our executive officers and directors was approximately RMB5.6 million ($0.9 million), including share-based compensation in the amount of approximately RMB1.8 million ($0.3 million). See “—Share Incentive Plans” below for information regarding share options that we granted to our executive officers and directors. In the fiscal year ended June 30, 2014, we paid RMB42,000 ($7,000) for pension, retirement or similar benefits for our executives officers and directors.

Share Incentive Plans

The board of directors of China Linong adopted share incentive plans in May 2007 and April 2009 and our board of directors adopted a share incentive plan in August 2010. These incentive plans were adopted to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to directors, officers, advisors and key employees and to promote the success of our business. Options to purchase 66.58 ordinary shares of China Linong under China Linong’s 2007 share incentive plan were issued in 2007 and after a 1-to-1000 subdivision in 2008 and an option exchange in 2010, these options subsequently represented the right to purchase 66,580,000 of our ordinary shares. As part of our restructuring, we adopted a 2009 share incentive plan, or the 2009 plan, whose key provisions are substantially the same as those of China Linong’s 2009 share incentive plan. We have reserved an aggregate of 151,430,000 ordinary shares for issuance under the 2009 plan. In July 2010, China Linong, we and all option grantees under China Linong’s 2007 and 2009 share incentive plans entered into an option exchange agreement, under which the option grantees agreed to exchange their option shares granted by China Linong with options to purchase our shares under the same terms and conditions. In August 2010, our board of directors and shareholders adopted a 2010 share incentive plan, or the 2010 plan. The maximum aggregate number of ordinary shares which may be issued pursuant to all awards under the 2010 plan is 60,000,000 shares, plus an annual increase on the first day of each year, beginning in the year ended December 31, 2011 and ending in the year ending December 31, 2021, equal to the lesser of (1) 60,000,000 shares, (2) two percent of the shares outstanding (on an as converted basis) on the last day of the immediately preceding fiscal year and (3) such smaller number of shares as determined by our board of directors. Our future option grants will be made pursuant to the 2010 plan.

The following paragraphs describe the principal terms of our share incentive plans.

Types of awards

The types of awards we may grant under the plans include the options to purchase our ordinary shares at a specified price and in a specified period determined by our compensation committee. Under the 2010 plan, we may also grant awards of our ordinary (1) restricted shares, (2) restricted share units, (3) dividend equivalents, (4) deferred shares, (5) share payments and (6) share appreciation rights under the terms and conditions determined by our compensation committee.

Eligibility

We may grant awards to directors, officers, advisors and employees of the Company and our wholly owned subsidiaries and any entity which may thereafter be established.

Plan administration

The compensation committee of our board of directors, or a committee of no less than two (or five, in the case of China Linong’s 2007 plan and the 2009 plan) members of the board of directors, will administer the plans. The committee will determine the terms and conditions of each grant, including but not limited to, the exercise, grant or purchase prices, any reload provision, any restrictions or limitations on the awards, vesting schedules, restrictions on the exercisability of the awards, any accelerations or waivers, and any provision related to non-competition and recapture of gain on the awards.

Option offer letter/Award agreement

Awards granted under the plans will be evidenced by an option offer letter or an award agreement that will set forth the terms, conditions and limitations for each award. The option offer letter should be signed by the employee and a director or an officer of the Company. Share awards may be evidenced by way of an issuance of certificates or book entries with appropriate legends. The certificates and book entry procedures may be subject to counsels’ advice, stop-transfer orders or other conditions or restrictions where the plan administrator deems necessary to comply with the required laws and regulations.

Vesting

The 2010 plan provides that the administrator may set the period during which an option or a share appreciation right can be exercised and may determine that an option or a share appreciation right may not be exercised for a specified period after it is granted. Such vesting can be based on criteria selected by the administrator. At any time after the grant of an option or a share appreciation right, the administrator may, in its sole discretion and subject to terms and conditions it determines, accelerate the period during which an option or a share appreciation right vests. No portion of an option or a share appreciation right unexercisable at the termination of service of an option or a share appreciation right holder with our company or subsidiaries can become exercisable afterwards, unless otherwise provided by the administrator.

The 2009 plan provides that the administrator may set the period during which an option can be exercised and may determine that an option may not be exercised for a specified period after it is granted. Such vesting can be based on criteria selected by the administrator. However, any option granted will vest immediately prior to any merger into, consolidation with or acquisition of our company by another company in which our company’s shareholders do not retain more than 50% of the voting power. At any time after the grant of an option, the administrator may, in its sole discretion and subject to terms and conditions it determines, accelerate the period during which an option vests. No portion of an option unexercisable at the termination of service of an option holder with our company or its subsidiaries can become exercisable afterwards, unless otherwise provided by the administrator.

China Linong’s 2007 share incentive plan provides that the period during which each option may be vested should be fixed by the compensation committee at the time such option is granted, but the option will expire no later than 10 years from the date it is granted. Each option granted may be vested only after one year of continued employment by our company or its subsidiaries immediately following the date the option if granted. However, any option granted will vest immediately prior to any merger into, consolidation with or acquisition of our company by another company in which our company’s shareholders do not retain more than 50% of the voting power.

Exercise price and term of awards

The exercise price per share of options granted under the 2010 plan is determined by the plan administrator in the award agreement. The price may be fixed or variable related to the fair market value of our ordinary shares. The term of any option granted should not exceed 10 years. However in the case where our incentive option is granted to an individual who, at the date of grant, owns more than ten percent of the total voting power of all classes of our shares, the price granted shall not be less than 110% of the fair market value on the date of grant and the option is exercisable for no more than five years from the date of grant.

For ordinary share awards granted under the 2010 plan, namely (1) restricted shares, (2) restricted share units, (3) dividend equivalents, (4) deferred shares, and (5) share payments, the consideration shall not be less than the par value of the shares purchased. The terms of the share awards are set by the plan administrator in its sole discretion.

The exercise price of share appreciation right under the 2010 plan is determined by the plan administrator and set forth in the award agreement which may be a fixed or variable price related to the fair market value of the shares. The term of the share appreciation right will not exceed 10 years.

The exercise price per share of options granted under the 2009 plan is determined by the plan administrator in the award agreement. The price may be fixed or variable related to the fair market value of our ordinary shares. The fair market value is the value of shares determined in good faith by reference to the placing price of the latest private placement of the shares and the development of our business operations and the general economic and market conditions since such latest private placement. The term of any option granted will not exceed 10 years.

Under China Linong’s 2007 share incentive plan, the exercise price of an award is generally determined by the compensation committee but the price should be no less than 100% of the fair market value of such shares of ordinary shares on the date the option is granted. However, the fair market value as determined should not be less than the book value of our ordinary shares as reflected in our most recent audited financial statements. The fair market value of shares should be deemed conclusive upon the determination of the compensation committee in good faith. The term of an award should not exceed 10 years from the date of the grant.

Transfer restrictions

The awards granted under the 2010 plan may not be sold, pledged, assigned or transferred other than by will or the laws of descent and distribution or, subject to the consent of the plan administrator, as required under the applicable laws.

Under the 2009 plan, the plan administrator has the power to determine the restrictions on the exercisability of the award granted, based on considerations determined by the plan administrator.

Under China Linong’s 2007 share incentive plan, an option granted may not be transferred except by will or the laws of descent or distribution, and during the lifetime of the employee to whom the option is granted, may be exercised only by such employee.

Amendments or termination

The 2009 plan and the 2010 plan provide that in the event of any changes affecting our ordinary shares or our share price, the plan administrator can make proportionate and equitable adjustments to reflect such changes. Upon or in anticipation of a corporate transaction, including acquisition, disposal of substantially all or all assets, reverse takeover, dissolution, the plan administrator should in its discretion provide for replacement or assumption of such award. In the event of other changes, the compensation committee should in its discretion make adjustments in the number and class of shares subject to awards outstanding on the date of such change to prevent dilution or enlargement of rights. The 2009 and 2010 plans will expire and no further awards may be granted after the tenth anniversary of the plan was adopted.

China Linong’s 2007 share incentive plan provides that the board of directors have the right to amend, suspend or terminate the plan. Amendments to the plan are subject to shareholders approval to increase the number of shares available for issuance under the plans, change the minimum purchase price for the optioned shares, or extend the term or the option period beyond ten years from the date of grant. Unless terminated earlier, the plan will expire and no further awards may be granted after the tenth anniversary of the plan took effect.

As of September 30, 2014, we have granted options to purchase a total of 196,275,000 ordinary shares to our directors and executive officers with exercise prices of $0.0354 per share, $0.0729 per share, $0.0757 per share, $0.08 per share or $0.143 per share under our share incentive plans, including options which had been exercised to purchase 44,128,000 ordinary shares.

C. Board Practices

Board of Directors

Our board of directors currently consists of eight directors. A director is not required to hold any shares in our company by way of qualification. A director may vote with respect to any contract, proposed contract or arrangement in which he is materially interested as long as he or she has made a declaration of the nature of such interest and has not been disqualified by the chairman of the relevant board meeting. Our board of directors may exercise all the powers of our company to borrow money, to mortgage or charge its undertakings, property and uncalled capital, or any part thereof, and to issue debentures, debenture stock or other securities whether outright or as security for any debt, liability or obligation of our company or of any third party.

Committees of the Board of Directors

Our board of directors established an audit committee and a compensation committee in October 2010 and a nominating and corporate governance committee in August 2011.

Audit Committee

Our audit committee consists of Mr. Gordon Xiaogang Wang, Mr. Chung Bong Pang and Mr. Li-Lan Cheng, and is chaired by Mr. Wang. Messrs. Wang, Pang and Cheng satisfy the “independence” requirements of Rule 5605 of NASDAQ Stock Market, Marketplace Rules as well as the “independence” requirements of Rule 10A-3 under the Securities Exchange Act of 1934. Our board also has determined that Messrs. Wang, Pang and Cheng qualify as audit committee financial experts within the meaning of the SEC rules. The audit committee oversees our accounting and financial reporting processes and the audits of the financial statements of our company. The audit committee is responsible for, among other things:

•

selecting our independent auditors and pre-approving all auditing and non-auditing services permitted to be performed by our independent auditors;

•

reviewing with our independent auditors any audit problems or difficulties and management’s response;

•

reviewing and approving all proposed related-party transactions, as defined in Item 404 of Regulation S-K under the Securities Act;

•

discussing the annual audited financial statements with management and our independent auditors;

•

reviewing major issues as to the adequacy of our internal controls and any special audit steps adopted in light of material control deficiencies;

•

annually reviewing and reassessing the adequacy of our audit committee charter;

•

such other matters that are specifically delegated to our audit committee by our board of directors from time to time;

•

meeting separately and periodically with management and our internal and independent auditors; and

•

reporting regularly to the full board of directors.

For the fiscal year ended June 30, 2014, our audit committee held three meetings.

Compensation Committee

Our compensation committee consists of Mr. Neil Nanpeng Shen and Mr. Gordon Xiaogang Wang, and is chaired by Mr. Shen. Messrs. Shen and Wang satisfy the “independence” requirements of Rule 5605 of NASDAQ Stock Market, Marketplace Rules. Our compensation committee assists the board in reviewing and approving the compensation structure of our directors and executive officers, including all forms of compensation to be provided to our directors and executive officers. Members of the compensation committee are not prohibited from direct involvement in determining their own compensation. Our chief executive officer may not be present at any committee meeting during which his compensation is deliberated. The compensation committee will be responsible for, among other things:

•

approving and overseeing the compensation package for our executive officers;

•

reviewing and making recommendations to the board with respect to the compensation of our directors;

•

reviewing and approving corporate goals and objectives relevant to the compensation of our chief executive officer, evaluating the performance of our chief executive officer in light of those goals and objectives, and setting the compensation level of our chief executive officer based on this evaluation; and

•

reviewing periodically and making recommendations to the board regarding any long-term incentive compensation or equity plans, programs or similar arrangements, annual bonuses, employee pension and welfare benefit plans.

For the fiscal year ended June 30, 2014, our compensation committee held one meeting.

Nominating and Corporate Governance Committee

Our nominating and corporate governance committee consists of Mr. Neil Nanpeng Shen and Ms. Yaping Si. Mr. Shen and Ms. Si satisfy the “independence” requirements of Rule 5605 of NASDAQ Stock Market, Marketplace Rules. Our nominating and corporate governance committee assists the board in discharging the board’s responsibilities regarding:

•

identification and recommendation to the board of qualified director nominees to be elected at the next annual meeting of shareholders (or special meeting of shareholders at which directors are to be elected);

•

identification and recommendation to the board for selection, of qualified candidates to fill any vacancies on the board;

•

annual review of the composition of the board in light of the characteristics of independence, qualification, experience and availability of the board members;

•

monitoring compliance of corporate governance guidelines and principles applicable to us;

•

oversight of the evaluation of the board; and

•

monitoring of compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our internal rules and procedures to ensure compliance with applicable laws and regulations.

For the fiscal year ended June 30, 2014, our nominating and corporate governance committee held one meeting.

Duties of Directors

Under Cayman Islands law, our directors have a duty of loyalty to act honestly, in good faith and with a view to our best interests. Our directors also have a duty to exercise the skill they actually possess and such care and diligence that a reasonably prudent person would exercise in comparable circumstances. In fulfilling their duty of care to us, our directors must ensure compliance with our memorandum and articles of association, as amended and re-stated from time to time. Our company has the right to seek damages if a duty owed by our directors is breached.

The functions and powers of our board of directors include, among others:

•

convening shareholders’ annual general meetings;

•

declaring dividends and distributions;

•

appointing officers and determining the term of office of officers;

•

exercising the borrowing powers of our company and mortgaging the property of our company; and

•

approving the issuance and transfer of shares of our company, including the registering of such shares in our share register.

Terms of Directors and Officers

Each of our directors holds office until the expiration of his term and until his successor has been duly elected and qualified. A director may be removed by a special resolution of our shareholders or by our board of directors. Pursuant to our amended and restated memorandum and articles of association, one-third of our directors are required to retire at each annual general meeting of our company, but shall be eligible for re-election at such meeting. In addition, the office of any director shall be vacated if the director (i) becomes bankrupt or makes any arrangement or composition with his creditors, (ii) is found to be or becomes of unsound mind or dies, (iii) resigns by notice in writing to our company, (iv) without special leave of absence from our board, is absent from three consecutive meetings of our board and our board resolves that his office be vacated.

D. Employees

We had 262, 260, 228 and 206 employees as of March 31, 2012, June 30, 2012, June 30, 2013 and June 30, 2014, respectively. The following table sets forth the number of our employees by function as of June 30, 2014:


	Number of Employees
Administrative		42
Accounting and finance		45
Sales and marketing		32
Research and development		87

Total		206

We have entered into employment agreements with our full-time employees. Our management and research and development personnel have signed non-competition agreements with us and are prohibited from engaging any activities that compete with our business during the period of their employment with us and for one to two years after leaving the company.

We provide systematic training to our employees. We invite industry experts and farm managers to give regular training to our technical personnel as well as orientations to our newly hired technical personnel. We equip our middle managerial personnel with extensive training on business management and agricultural technology that are provided by experts and scholars associated with domestic and international research institutes. We also provide our farm workers with training on standardized, facilities-based agricultural production. We conduct monthly evaluations of our farm workers’ performance.

We do not have collective bargaining agreements with our employees. We do not have labor unions. We consider our relations with our employees to be amicable.

E. Share Ownership

The following table sets forth information with respect to the beneficial ownership of our ordinary shares as of September 30, 2014 by:

•

each of our directors and executive officers; and

•

each person known to us to own beneficially more than 5% of our shares.

As of September 30, 2014, 2,198,845,700 of our ordinary shares were issued and outstanding, after deducting 17,808,850 ordinary shares issued to Citi (Nominees) Limited, as nominee for Citibank, N.A., the depositary of our ADS program to facilitate our future issuance of ADSs upon the exercise of options under our share incentive plans. Beneficial ownership is determined in accordance with Rule 13d-3(d)(1) under the Exchange Act. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, we have included shares that the person has the right to acquire within 60 days of September 30, 2014, including through the exercise of any option, warrant or other right or the conversion of any other security. These shares, however, are not included in the computation of the percentage ownership of any other person.


	Ordinary Shares Beneficially Owned		%
Directors and Executive Officers:
Shing Yung Ma⁽¹⁾		729,488,001		32.55
Na Lai Chiu⁽²⁾		131,805,000		5.87
Jin Li⁽³⁾		*		*
Neil Nanpeng Shen⁽⁴⁾		353,365,000		16,02
Gordon Xiaogang Wang⁽⁵⁾		56,000,000		2.54
Chung Bong Pang		*		*
Li-Lan Cheng		*		*
Yaping Si		—		—
Auke Cnossen		*		*
Hang Chen		*		*
Dan Ma		*		*
All directors and executive officers as a group		1,320,058,001		56.15
Principal Shareholders:
Grow Grand Limited⁽⁶⁾		667,318,001		30.35
Sequoia Entities⁽⁷⁾		346,465,000		15.76
Yiheng Capital, LLC⁽⁸⁾		137,394,400		6.25
SIG China Investments One, Ltd.⁽⁹⁾		136,425,000		6.20

*	Less than 1% of our ordinary shares

(1)

Consists of (i) 667,318,001 ordinary shares held by Grow Grand Limited, (ii) 20,000,000 ordinary shares held by Mr. Ma, and (iii) 42,170,000 options exercisable within 60 days after September 30, 2014. Grow Grand Limited, a British Virgin Islands company, is wholly owned by Shing Yung Ma. The registered address of Grow Grand Limited is P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands.

(2)

Consists of (i) 80,638,000 ordinary shares held by Valuetrue Investments Limited, (ii) 3,500,000 ordinary shares held by Ms. Chiu, and (iii) 47,667,000 options exercisable within 60 days after September 30, 2014. Valuetrue Investments Limited, a British Virgin Islands company, is 100% held by Na Lai Chiu. The address of Valuetrue Investments Limited is P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands.

(3)	Consists of certain ordinary shares held by Kara International Limited and options held by Mr. Li exercisable within 60 days after September 30, 2014. Mr. Li is a director of Kara International Limited.

(4)	Consists of (i) 346,465,000 ordinary shares held by Sequoia Entities (see Note (7) below for details), and (ii) 6,900,000 options exercisable within 60 days after September 30, 2014.

(5)

Consists of (i) 50,000,000 ordinary shares held by Win Seasons Holdings Limited and (ii) 6,000,000 options exercisable within 60 days after September 30, 2014. Win Seasons Holdings Limited is a Hong Kong company 100% held by Gordon Xiaogang Wang. The registered address of Win Seasons Holdings Limited is Room 2701, 27/F, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong.

(6)	Grow Grand Limited, a British Virgin Islands company, is wholly owned by Shing Yung Ma. The registered address of Grow Grand Limited is P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands.

(7)

Consists of (i) 201,164,000 ordinary shares held by Sequoia Capital China I, L.P., (ii) 23,112,000 ordinary shares held by Sequoia Capital China Partners Fund I, L.P., (iii) 31,139,000 ordinary shares held by Sequoia Capital China Principals Fund I, L.P. (together with Sequoia Capital China I, L.P. and Sequoia Capital China Partners Fund I, L.P., the “SCCI Funds”), (iv) 79,429,000 ordinary shares held by Sequoia Capital China Growth Fund I, L.P., (v) 1,879,000 ordinary shares held by Sequoia Capital China Growth Partners Fund I, L.P. and (vi) 9,742,000 ordinary shares held by Sequoia Capital China GF Principals Fund I, L.P., (together with Sequoia Capital China Growth Fund I, L.P. and Sequoia Capital China Growth Partners Fund I, L.P., the “SCGF Funds”). The SCCI Funds and SCGF Funds are collectively called “Sequoia Entities” for the purpose of this annual report. The SCCI Funds and SCGF Funds are managed by Sequoia Capital China Advisors Limited, a company incorporated in the Cayman Islands. The general partner of SCCI Funds is Sequoia Capital China Management I, L.P. (“SCCI Mgt”). The general partner of SCGF Funds’ is Sequoia Capital China Growth Fund Management I, L.P. (“SCCG Mgt”). The general partner of SCCI Mgt and SCCG Mgt is SC China Holding Limited, a company incorporated in the Cayman Islands. SC China Holding Limited is wholly owned by SNP China Enterprises Limited, a company wholly owned by Neil Nanpeng Shen. Neil Nanpeng Shen disclaims beneficial ownership in all securities shown except to the extent of his pecuniary interests therein. The registered address of SCCI Funds and SCGF Funds is Cricket Square, Hutchins Dr., P.O. Box 2681, Grand Cayman KY1-1111, Cayman Islands.

(8)

According to the Statement on Schedule 13D filed with the SEC on July 31, 2014 by YH Greenhouse LLC, Yiheng Capital, LLC and Mr. Yuanshan Guo (collectively, “Yiheng”), consists of 2,747,888 ADSs, representing 137,394,400 ordinary shares. The business address of Yiheng is 1 Montgomery St. Ste 3450, San Francisco, CA 94104, United States.

(9)

Consists of 136,425,000 ordinary shares held by SIG China Investments One, Ltd (SIG). SIG Asia Investment, LLL.P., the investment manager of SIG has discretionary authority to vote and dispose of the shares held by SIG. Arthur Dantchik, in his capacity as president of SIG Asia Investment, LLL.P., may also be deemed to have investment discretion over the shares held by SIG. Mr. Dantchik disclaims any such investment discretion or beneficial ownership with respect to the shares held by SIG. The address of SIG China Investments One, Ltd is One Capital Place, P.O. Box 1787GT, Grand Cayman, Cayman Islands, British West Indies.

Based on a review of the register of members maintained by our Cayman Islands registrar, we believe that Citi (Nominees) Limited, as nominee for Citibank, N.A., the depositary of our ADS program, was our only U.S. record holder, holding 604,256,650 ordinary shares, or approximately 27.48% of our 2,198,845,700 issued and outstanding shares as of September 30, 2014.

None of our shareholders has different voting rights from other shareholders as of the date of this annual report. We are currently not aware of any arrangement that may, at a subsequent date, result in a change of control of our company.

Item 7. Major Shareholders and Related Party Transactions

A. Major Shareholders

Please see “Item 6. Directors, Senior Management and Employees—E. Share Ownership.”

B. Related Party Transactions

Transactions with Certain Directors, Shareholders and Affiliates

In April 2014, China Linong entered into a loan agreement with a shareholder of the Company—Lui Ming Ho for a loan with the principal amount of RMB18.6 million ($3 million) for the operations of the Group. The loan is unsecured, interest bearing at a fixed rate of 5.0% per annum and repayable within one year.

Private Placement

Series A Preferred Shares

In April 2006, pursuant to a share purchase agreement dated April 12, 2006, China Linong sold 169.38 series A preferred shares to Sequoia Capital China I, L.P., or Sequoia China, for an aggregate amount of $3,150,383.31, 19.46 series A preferred shares to Sequoia Capital China Partners Fund I, L.P., or Sequoia China Partners Fund, for an aggregate amount of $361,946.27 and 26.22 series A preferred shares to Sequoia Capital China Principals Funds I, L.P., or Sequoia China Principals Fund, for an aggregate amount of $487,678.89. A total of 215.06 series A preferred shares were sold for an aggregate amount of $4.0 million. The consideration was paid in cash. In March 2008, each of these series A preferred shares was subdivided into 1,000 series A preferred shares. In July 2010, these China Linong series A preferred shares were exchanged for our series A preferred shares at a 1 to 1,000 ratio. All of our series A preferred shares were converted into ordinary shares on an one-to-one basis upon the completion of our initial public offering.

Series A1 Preferred Shares

In February 2007, pursuant to a share purchase agreement dated February 14, 2007, China Linong sold 31.784 series A1 preferred shares to Sequoia China for an aggregate amount of $1,575,200, 3.652 series A1 preferred shares to Sequoia China Partners Fund for an aggregate amount of $181,000, 4.919 series A1 preferred shares to Sequoia China Principals Fund for an aggregate amount of $243,800, 24.213 series A1 preferred shares to Grow Grand Limited, or Grow Grand, for an aggregate amount of $1.2 million, and 16.142 series A1 preferred shares to Honeycomb Assets Management Limited, or Honeycomb, for an aggregate amount of $800,000. A total of 80.71 series A1 preferred shares were sold for an aggregate amount of $4.0 million. The consideration was paid in cash. In March 2008, each of these series A1 preferred shares was subdivided into 1,000 series A1 preferred shares. In July 2010, these China Linong series A1 preferred shares were exchanged for our series A1 preferred shares at a 1 to 1,000 ratio. All of our series A1 preferred shares were converted into ordinary shares on an one-to-one basis upon the completion of our initial public offering.

Series B Preferred Shares

In March 2008, pursuant to a purchase agreement dated March 21, 2008, China Linong sold 75,420 series B preferred shares to Sequoia Capital China Growth Fund China I, L.P., or Sequoia China Growth Fund, for an aggregate amount of $5,500,237, 130,270 series B preferred shares to SIG China Investments One, Ltd. or SIG China, for an aggregate amount of $9,500,344, 89,056 series B preferred shares to Pacven VI, for an aggregate amount of $6,494,685, 6,934 series B preferred shares to Pacven VI Parallel, for an aggregate amount of $505,683, and 27,420 series B preferred shares to PreIPO Capital Partners Limited, or PreIPO Capital, for an aggregate amount of $1,999,688. A total of 329,100 series B preferred shares were sold for an aggregate amount of $24,000,637. The consideration was paid in cash. In July 2010, these China Linong series B preferred shares were exchanged for our series B preferred shares at a 1 to 1,000 ratio.

On April 10, 2008, PreIPO Capital transferred all its interest in China Linong’s series B preferred shares to its affiliate, Made In China Ltd. As a result of the transfer, Made In China Ltd. replaced PreIPO Capital as the holder of series B preferred shares and held 27,420,000 series B preferred shares. All of Made in China Ltd’s series B preferred shares were converted into ordinary shares on a one-to-one basis upon the completion of our initial public offering. In June 2011, Made In China Ltd. deposited all their ordinary shares with Citibank, N.A., the depositary of our ADS program.

On July 18, 2008, Sequoia China Growth Fund sold all its interest in China Linong’s series B preferred shares to its affiliates, Sequoia Capital China Growth Partners Fund I, L.P., or Sequoia China Growth Partner Fund, and Sequoia Capital China GF Principals Fund I, L.P., or Sequoia China GF Principals Fund, for a consideration of $701,860. As a result of the sale, Sequoia China Growth Partners Fund and Sequoia China GF Principals Fund each held 1,554,000 and 8,070,000 of our series B preferred shares, respectively.

All of our series B preferred shares were converted into ordinary shares on an one-to-one basis upon the completion of our initial public offering.

Series B1 Preferred Shares

In December 2009, pursuant to a share purchase agreement dated December 22, 2009, China Linong sold a total of 79,127 series B1 preferred shares for a total consideration of $5,989,914 to a group of investors, comprising Grow Grand, Magnetic Star Holdings Limited, or Magnetic Star, Honeycomb, Valuetrue Investments Limited, or Valuetrue, Chic Holdings Limited, or Chic Holdings, Lu Rong, SIG China, Pacven VI, Pacven VI Parallel, Sequoia China, Sequoia China Partners Fund, Sequoia China Principals Fund, Sequoia China Growth Fund, Sequoia China Growth Partners Fund, Sequoia China GF Principals Fund and Made In China Ltd. The consideration was paid in cash. In July 2010, these China Linong series B1 preferred shares were exchanged for our series B1 preferred shares at a 1 to 1,000 ratio. All of our series B1 preferred shares were converted into ordinary shares on an one-to-one basis upon the completion of our initial public offering.

Shareholders Agreement

In July 2010, each of the companies in our group, holders of our series A, series A1, series B, series B1 preferred shares, as well as the then existing holders of our ordinary shares entered into a shareholders agreement. The shareholders agreement contains various rights, all of which except for the registration rights were terminated immediately upon the closing of our initial public offering.

Employment Agreements

See “Item 6. Directors, Senior Management and Employees—A. Directors and Senior Management—Employment Agreements.”

Share Incentive Plans

See “Item 6. Directors, Senior Management and Employees—B. Compensation of Directors and Executive Officers—Share Incentive Plans.”

C. Interests of Experts and Counsel

Not applicable.

Item 8. Financial Information

A. Consolidated Statements and Other Financial Information

We have appended consolidated financial statements filed as part of this annual report.

Legal and Administrative Proceedings

From time to time, we may be subject to various claims and legal actions arising in the ordinary course of business. We are not aware of any proceedings being contemplated by any governmental authority.

We are not currently a party to any material litigation or other legal proceedings and are not aware of any pending or threatened litigation or legal proceedings that may have a material adverse impact on our business, financial condition or results of operations.

Dividend Policy

We have never declared or paid any dividends, nor do we have any present plan to pay any cash dividends on our ordinary shares in the foreseeable future. We currently intend to retain most, if not all, of our available funds and any future earnings to operate and expand our business.

Our board of directors has complete discretion on whether to declare and pay dividends. Our shareholders may by ordinary resolution declare dividends or distributions, but no dividend or distribution may exceed the amount recommended by our directors. Even if our board of directors decides to pay dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that the board of directors may deem relevant.

If we pay any dividends, we will pay such dividends as are attributable to the shares represented by our ADSs to the depositary, which shall in turn pay such dividends to our ADS holders, upon and subject to the terms of the deposit agreement, including the fees and expenses payable thereunder. Cash dividends on our ordinary shares, if any, will be paid in U.S. dollars.

We are a holding company, and we rely on dividends paid by our operating subsidiaries in China for our cash needs, including the funds necessary to pay dividends and other cash distributions to our shareholders, service any debt we may incur and pay our operating expenses. The payment of dividends in China is subject to limitations. Regulations in the PRC currently permit payment of dividends by our PRC subsidiaries only out of accumulated profits as determined in accordance with accounting standards and regulations in China. Our PRC subsidiaries are required to set aside at least 10% of their after-tax profits each year to contribute to their respective reserve funds until the accumulated balance of the reserve funds reach 50% of their respective registered capital. They are also required to reserve a portion of their after-tax profits to their employee welfare and bonus fund, the amount of which is determined by their respective board of directors. These funds are not distributable in cash dividends.

B. Significant Changes

Except as disclosed elsewhere in this annual report, we have not experienced any significant changes since the date of our audited consolidated financial statements included in this annual report.

Item 9. The Offer and Listing

A. Offering and Listing Details.

Our ADSs have been listed on the NASDAQ Global Select Market under the symbol “GAGA” since October 29, 2010. The following table provides the high and low trading prices for our ADSs on the NASDAQ Global Select Market for the indicated periods.


	Sales Price
	High		Low
Annual High and Low
Fiscal year ended June 30, 2011 (from October 29, 2010)		11.39		5.38
Fiscal year ended June 30, 2012		7.85		3.47
Fiscal year ended June 30, 2013		4.94		3.08
Fiscal year ended June 30, 2014		4.00		2.94
Quarterly High and Low
Fiscal quarter ended September 30, 2012		4.94		3.09
Fiscal quarter ended December 31, 2012		4.11		3.54
Fiscal quarter ended March 31, 2013		3.89		3.40
Fiscal quarter ended June 30, 2013		3.85		3.08
Fiscal quarter ended September 30, 2013		3.83		3.31
Fiscal quarter ended December 31, 2013		3.65		3.10
Fiscal quarter ended March 31, 2014		3.80		2.94
Fiscal quarter ended June 30, 2014		3.79		3.26
Fiscal quarter ended September 30, 2014		3.99		3.15
Monthly High and Low
April 2014		3.79		3.61
May 2014		3.70		3.27
June 2014		3.60		3.26
July 2014		3.98		3.15
August 2014		3.99		3.90
September 2014		3.99		3.89
October 2014 (through October 28)		4.00		3.96

B. Plan of Distribution

Not applicable.

C. Markets

Our ADSs, each representing 50 ordinary shares, have been listed on the NASDAQ Global Select Market since October 29, 2010 under the symbol “GAGA.”

D. Selling Shareholders

Not applicable.

E. Dilution

Not applicable.

F. Expenses of the Issue

Not applicable.

Item 10. Additional Information

A. Share Capital

Not applicable.

B. Memorandum and Articles of Association

The following are summaries of material provisions of our amended and restated memorandum and articles of association, as well as the Companies Law (2013 Revision), as the same may be amended from time to time, of the Cayman Islands, which is referred to as the “Companies Law” below, insofar as they relate to the material terms of our ordinary shares. This summary is not complete, and you should read our memorandum and articles of association.

Registered Office and Objects

The Registered Office of our company is at the offices of Maples Corporate Services Limited, P.O. Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands or at such other place as our directors may from time to time decide. The objects for which our company is established are unrestricted and we have full power and authority to carry out any object not prohibited by the Companies Law or as the same may be revised from time to time, or any other law of the Cayman Islands.

Board of Directors

See “Item 6. Directors, Senior Management and Employees—C. Board Practices—Board of Directors.”

Ordinary Shares

All of our issued and outstanding ordinary shares are fully paid and non-assessable. Certificates representing the ordinary shares are issued in registered form. Shareholders who are nonresidents of the Cayman Islands may freely hold and vote their shares.

Dividends

The holders of our ordinary shares are entitled to such dividends as may be declared by our board of directors subject to the Companies Law.

Voting Rights

Each ordinary share is entitled to one vote on all matters upon which the ordinary shares are entitled to vote. Voting at any meeting of shareholders is by show of hands unless a poll is demanded. A poll may be demanded by the chairman of our board of directors or by any one or more or our shareholders present in person or by proxy who together hold not less than 10% of the paid up voting share capital of our company.

A quorum required for a meeting of shareholders consists of shareholders who hold at least one-third of our ordinary shares at the meeting present in person or by proxy or, if a corporation or other non-natural person, by its duly authorized representative. Shareholders’ meetings may be convened by our board of directors on its own initiative or upon a request to the directors by shareholders holding in aggregate at least one-third in par value of our voting share capital. Advance notice of at least 21 clear calendar days is required for the convening of our annual general meeting and other shareholders meetings.

An ordinary resolution to be passed by the shareholders requires the affirmative vote of a simple majority of the votes attaching to our ordinary shares cast in a general meeting, while a special resolution requires the affirmative vote of no less than two-thirds of the votes attaching to our ordinary shares cast in a general meeting. A special resolution will be required for important matters such as a change of name or making changes to our amended and restated memorandum and articles of association.

Transfer of Shares

Subject to the restrictions of our articles of association, as applicable, any of our shareholders may transfer all or any of his or her ordinary shares by an instrument of transfer in the usual or common form or any other form approved by our board.

Our board of directors may, in its absolute discretion, decline to register any transfer of any ordinary share which is not fully paid up or on which we have a lien. Our directors may also decline to register any transfer of any ordinary share unless (a) the instrument of transfer is lodged with us, accompanied by the certificate for the ordinary shares to which it relates and such other evidence as our board of directors may reasonably require to show the right of the transferor to make the transfer; (b) the instrument of transfer is in respect of only one class of ordinary shares; (c) the instrument of transfer is properly stamped, if required; (d) in the case of a transfer to joint holders, the number of joint holders to whom the ordinary share is to be transferred does not exceed four; or (e) the shares transferred are free of any lien in favor of us.

If our directors refuse to register a transfer they shall, within two months after the date on which the instrument of transfer was lodged, send to each of the transferor and the transferee notice of such refusal. The registration of transfers may, on 14 days’ notice being given by advertisement in such one or more newspapers or by electronic means, be suspended and the register of members closed at such times and for such periods as our board of directors may from time to time determine, provided however, that the registration of transfers shall not be suspended nor the register be closed for more than 30 days in any year.

Liquidation

On a return of capital on winding up or otherwise (other than on conversion, redemption or purchase of shares), assets available for distribution among the holders of ordinary shares shall be distributed among the holders of the ordinary shares on a pro rata basis. If our assets available for distribution are insufficient to repay all of the paid-up capital, the assets will be distributed so that the losses are borne by our shareholders proportionately.

Calls on Shares and Forfeiture of Shares

Our board of directors may from time to time make calls upon shareholders for any amounts unpaid on their shares in a notice served to such shareholders at least 14 days prior to the specified time and place of payment. The shares that have been called upon and remain unpaid on the specified time are subject to forfeiture.

Redemption, Repurchase and Surrender of Shares

We may issue shares on terms that such shares are subject to redemption, at our option or at the option of the holders thereof, on such terms and in such manner as may be determined by our board, before the issue of such shares. Our company may also repurchase any of our shares provided that the manner of such purchase has been approved by an ordinary resolution of our shareholders or the manner of purchase is in accordance with our amended and restated memorandum and articles of association. Under the Companies Law, the redemption or repurchase of any share may be paid out of our company’s profits or share premium account or out of the proceeds of a fresh issue of shares made for the purpose of such redemption of repurchase, or out of capital if our company shall, immediately following such payment, be able to pay its debts as they fall due in the ordinary course of business. In addition, under the Company Law no such share may be redeemed or repurchased (a) unless it is fully paid up, (b) if such redemption or repurchase would result in there being no shares outstanding, or (c) our company has commenced liquidation. In addition, our company may accept the surrender of any fully paid share for no consideration.

Variation of Rights of Shares

All or any of the special rights attached to any class of shares may, subject to the provisions of the Companies Law, be varied either with the written consent of the holders of a majority of the issued shares of that class or with the sanction of a special resolution passed at a general meeting of the holders of the shares of that class.

Inspection of Books and Records

Holders of our ordinary shares will have no general right under Cayman Islands law to inspect or obtain copies of our list of shareholders or our corporate records. However, we will provide our shareholders with annual audited financial statements. See “Item 10. Additional Information—H. Documents on Display.”

Anti-takeover Provisions in Our Memorandum and Articles of Association

Some provisions of our memorandum and articles of association may discourage, delay or prevent a change of control of our company or management that shareholders may consider favorable, including a provision that authorizes our board of directors to issue preference shares in one or more series and to designate the price, rights, preferences, privileges and restrictions of such preference shares without any further vote or action by our shareholders.

Such shares could be issued quickly with terms calculated to delay or prevent a change in control of our company or make removal of management more difficult. If our board of directors decides to issue these preference shares, the price of our ADSs may fall and the voting and other rights of the holders of our ordinary shares and ADSs may be materially and adversely affected.

However, under Cayman Islands law, our directors may only exercise the rights and powers granted to them under our memorandum and articles of association for a proper purpose and for what they believe in good faith to be in the best interests of our company.

C. Material Contracts

We have not entered into any material contracts other than in the ordinary course of business and other than those described in “Item 4. Information on the Company” or elsewhere in this annual report.

D. Exchange Controls

See “Item 4. Information on the Company—B. Business Overview—C. Regulation—Foreign Currency Exchange” and “—Dividend Distribution.”

E. Taxation

Cayman Islands Taxation

The Cayman Islands currently levies no taxes on individuals or corporations based upon profits, income, gains or appreciation and there is no taxation in the nature of inheritance tax or estate duty. There are no other taxes likely to be material to us levied by the Government of the Cayman Islands except for stamp duties which may be applicable on instruments executed in, or brought within the jurisdiction of the Cayman Islands. The Cayman Islands is not party to any double tax treaties that are applicable to any payments made to or by our company. There are no exchange control regulations or currency restrictions in the Cayman Islands.

U.S. Federal Income Taxation

The following discussion describes certain U.S. federal income tax consequences to U.S. Holders (as defined below) under present law of an investment in our ADSs or ordinary shares. This discussion applies only to U.S. Holders that hold the ADSs or ordinary shares as capital assets within the meaning of Section 1221 of the U.S. Internal Revenue Code (generally, property held for investment) and that have the U.S. dollar as their functional currency. This discussion is based on the tax laws of the United States as of the date of this annual report and on U.S. Treasury regulations in effect or, in some cases, proposed as of the date of this annual report, as well as judicial and administrative interpretations thereof available on or before such date. All of the foregoing authorities are subject to change, which change could apply retroactively and could affect the tax consequences described below.

The following discussion neither deals with the tax consequences to any particular investor nor describes all of the tax consequences applicable to persons in special tax situations such as:

•

banks;

•

certain financial institutions;

•

insurance companies;

•

regulated investment companies;

•

real estate investment trusts;

•

broker-dealers;

•

traders that elect to mark to market;

•

U.S. expatriates;

•

tax-exempt entities;

•

persons liable for alternative minimum tax;

•

persons holding an ADS or ordinary share as part of a straddle, hedging, conversion or integrated transaction;

•

persons that actually or constructively own 10% or more of the total combined voting power of all classes of our voting stock;

•

persons who acquired ADSs or ordinary shares pursuant to the exercise of any employee share option or otherwise as compensation; or

•

partnerships or pass-through entities, or persons holding ADSs or ordinary shares through such entities.

INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISORS ABOUT THE APPLICATION OF THE U.S. FEDERAL INCOME TAX RULES TO THEIR PARTICULAR CIRCUMSTANCES AS WELL AS THE STATE, LOCAL, NON-U.S. AND OTHER TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF ADSs OR ORDINARY SHARES.

The discussion below of the U.S. federal income tax consequences to “U.S. Holders” will apply to you if you are the beneficial owner of our ADSs or ordinary shares and you are, for U.S. federal income tax purposes:

•

an individual who is a citizen or resident of the United States;

•

a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) created or organized in the United States or under the laws of the United States, any State thereof or the District of Columbia;

•

an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or

•

a trust that (1) is subject to the primary supervision of a court within the United States and the control of one or more U.S. persons for all substantial decisions or (2) has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person.

If you are a partner in an entity treated as a partnership for U.S. federal income tax purposes that holds ADSs or ordinary shares, your tax treatment will generally depend on your status and the activities of the partnership. If you are a partner in such a partnership, you should consult your tax advisor.

The discussion below assumes the representations contained in the deposit agreement are true and the obligations in the deposit agreement and any related agreement have been and will be complied with in accordance with their terms. If you own ADSs, you should be treated as the owner of the underlying ordinary shares represented by those ADSs for U.S. federal income tax purposes.

The U.S. Treasury has expressed concerns that intermediaries in the chain of ownership between the holder of an ADS and the issuer of the security underlying the ADS may be taking actions that are inconsistent with the beneficial ownership of the underlying security (for example, pre-releasing ADSs to persons that do not have the beneficial ownership of the securities underlying the ADSs). Accordingly, the creditability of any foreign taxes and the availability of the reduced tax rate for any dividends received by certain non-corporate U.S. Holders, including individual U.S. Holders (as discussed below), could be affected by actions taken by intermediaries in the chain of ownership between the holders of ADSs and our company if as a result of such actions the holders of ADSs are not properly treated as beneficial owners of underlying ordinary shares.

Taxation of Dividends and Other Distributions on the ADSs or Ordinary Shares

Subject to the PFIC rules discussed below, the gross amount of any distributions we make to you with respect to our ADSs or ordinary shares generally will be includible in your gross income as dividend income on the date of receipt by the depositary, in the case of ADSs, or by you, in the case of ordinary shares, but only to the extent the distribution is paid out of our current or accumulated earnings and profits (as determined under U.S. federal income tax principles). Any such dividends will not be eligible for the dividends-received deduction allowed to corporations in respect of dividends received from other U.S. corporations. To the extent the amount of the distribution exceeds our current and accumulated earnings and profits (as determined under U.S. federal income tax principles), such excess amount will be treated first as a tax-free return of your tax basis in your ADSs or ordinary shares, and then, to the extent such excess amount exceeds your tax basis in your ADSs or ordinary shares, as capital gain. We currently do not, and we do not intend to, calculate our earnings and profits under U.S. federal income tax principles. Therefore, a U.S. Holder should expect that a distribution will generally be reported as a dividend even if that distribution would otherwise be treated as a non-taxable return of capital or as capital gain under the rules described above.

With respect to certain non-corporate U.S. Holders, including individual U.S. Holders, any dividends may be taxed at the lower capital gains rate applicable to “qualified dividend income,” provided (1) the ADSs or ordinary shares are readily tradable on an established securities market in the United States, or, in the event we are deemed to be a “PRC resident enterprise” under PRC tax law, we are eligible for the benefits of the income tax treaty between the United States and the PRC, (2) we are neither a PFIC nor treated as such with respect to you (as discussed below) for the taxable year in which the dividend was paid and the preceding taxable year, and (3) certain holding period requirements are met. Under U.S. Internal Revenue Service authority, ADSs are considered for purposes of clause (1) above to be readily tradable on an established securities market in the United States if they are listed on the NASDAQ Global Select Market, as are our ADSs. However, based on existing guidance, it is not entirely clear whether dividends you receive with respect to the ordinary shares will be taxed as qualified dividend income, because the ordinary shares are not themselves listed on a U.S. exchange. You should consult your tax advisors regarding the availability of the lower capital gains rate applicable to qualified dividend income for any dividends paid with respect to the ADSs or ordinary shares.

Any dividends will constitute foreign source income for foreign tax credit limitation purposes. If the dividends are taxed as qualified dividend income (as discussed above), the amount of the dividend taken into account for purposes of calculating the foreign tax credit limitation will in general be limited to the gross amount of the dividend, multiplied by the reduced tax rate applicable to qualified dividend income and divided by the highest tax rate normally applicable to dividends. The limitation on foreign taxes eligible for credit is calculated separately with respect to specific classes of income. For this purpose, dividends distributed by us with respect to our ADSs or ordinary shares will generally constitute “passive category income” but could, in the case of certain U.S. Holders, constitute “general category income.” If PRC withholding taxes apply to dividends paid to you with respect to the ADSs or ordinary shares, you may be able to obtain a reduced rate of PRC withholding taxes under the income tax treaty between the United States and the PRC if certain requirements are met. In addition, subject to certain conditions and limitations, PRC withholding taxes on dividends may be treated as foreign taxes eligible for credit against your U.S. federal income tax liability. The rules relating to the determination of the foreign tax credit are complex, and you should consult your tax advisor regarding the availability of a foreign tax credit in your particular circumstances and the effects of any income tax treaties.

Taxation of Disposition of ADSs or Ordinary Shares

Subject to the PFIC rules discussed below, you will recognize taxable gain or loss on any sale, exchange or other taxable disposition of an ADS or ordinary share equal to the difference between the amount realized for the ADS or ordinary share and your tax basis in the ADS or ordinary share. The gain or loss generally will be capital gain or loss. If you are a non-corporate U.S. Holder, including an individual U.S. Holder, that has held the ADS or ordinary share for more than one year, you may be eligible for reduced tax rates. The deductibility of capital losses is subject to limitations. Any gain or loss you recognize on a disposition of ADSs or ordinary shares will generally be treated as U.S. source income or loss for foreign tax credit limitation purposes. However, in the event we are treated as a Chinese “resident enterprise” under PRC tax law, we may be eligible for the benefits of the income tax treaty between the United States and the PRC. Under that treaty, if PRC tax were to be imposed on any gain from the disposition of the ADSs or ordinary shares, the gain may be treated as PRC source income. U.S. Holders should consult their tax advisors regarding the effects of any applicable income tax treaties and the creditability of any PRC tax.

Passive Foreign Investment Company

Based on the market price of our ADSs, the value of our assets, and the composition of our income and assets, we do not believe we were a PFIC for U.S. federal income tax purposes for our taxable year ended June 30, 2014. However, the application of the PFIC rules is subject to uncertainty in several respects, and we cannot assure you that the U.S. Internal Revenue Service will not take a contrary position. A non-U.S. corporation will be a PFIC for U.S. federal income tax purposes for any taxable year if either:

•

at least 75% of its gross income for such year is passive income, or

•

at least 50% of the value of its assets (based on an average of the quarterly values of the assets) during such year is attributable to assets that produce passive income or are held for the production of passive income.

For this purpose, we will be treated as owning our proportionate share of the assets and earning our proportionate share of the income of any other corporation in which we own, directly or indirectly, more than 25% (by value) of the stock.

A separate determination must be made after the close of each taxable year as to whether we were a PFIC for that year. Because the value of our assets for purposes of the PFIC test will generally be determined by reference to the market price of our ADSs and ordinary shares, fluctuations in the market price of our ADSs and ordinary shares may cause us to become a PFIC. In addition, changes in the composition of our income or assets may cause us to become a PFIC. If we are a PFIC for any taxable year during which you hold ADSs or ordinary shares, we generally will continue to be treated as a PFIC with respect to you for all succeeding years during which you hold ADSs or ordinary shares, unless we cease to be a PFIC and you make a “deemed sale” election with respect to the ADSs or ordinary shares. If such election is made, you will be deemed to have sold ADSs or ordinary shares you hold at their fair market value on the last day of the last taxable year in which we qualified as a PFIC, and any gain from such deemed sale would be subject to the consequences described in the following two paragraphs. After the deemed sale election, your ADSs or ordinary shares with respect to which the deemed sale election was made will not be treated as shares in a PFIC unless we subsequently become a PFIC.

For each taxable year that we are treated as a PFIC with respect to you, you will be subject to special tax rules with respect to any “excess distribution” you receive and any gain you recognize from a sale or other disposition (including a pledge) of the ADSs or ordinary shares, unless you make a “mark-to-market” election as discussed below. Distributions you receive in a taxable year that are greater than 125% of the average annual distributions you received during the shorter of the three preceding taxable years or your holding period for the ADSs or ordinary shares will be treated as an excess distribution. Under these special tax rules:

•

the excess distribution or recognized gain will be allocated ratably over your holding period for the ADSs or ordinary shares,

•

the amount allocated to the current taxable year, and any taxable years in your holding period prior to the first taxable year in which we were a PFIC, will be treated as ordinary income, and

•

the amount allocated to each other taxable year will be subject to the highest tax rate in effect for individuals or corporations, as applicable, for each such year, and the interest charge generally applicable to underpayments of tax will be imposed on the resulting tax attributable to each such year.

The tax liability for amounts allocated to taxable years prior to the year of disposition or excess distribution cannot be offset by any net operating losses for such years, and gains (but not losses) realized on the sale or other disposition of our ADSs or ordinary shares cannot be treated as capital, even if you hold the ADSs or ordinary shares as capital assets.

If we are treated as a PFIC with respect to you for any taxable year, to the extent any of our subsidiaries are also PFICs or we make direct or indirect equity investments in other entities that are PFICs, you may be deemed to own shares in such lower-tier PFICs that are directly or indirectly owned by us in that proportion which the value of the ADSs or ordinary shares you own bears to the value of all of our ADSs and ordinary shares, and you may be subject to the adverse tax consequences described in the preceding two paragraphs with respect to the shares of such lower-tier PFICs that you would be deemed to own. You should consult your tax advisors regarding the application of the PFIC rules to any of our subsidiaries.

A U.S. Holder of “marketable stock” (as defined below) in a PFIC may make a mark-to-market election for such stock to elect out of the PFIC rules described above regarding excess distributions and recognized gains. If you make a mark-to-market election for our ADSs or ordinary shares, you will include in income for each year we are a PFIC an amount equal to the excess, if any, of the fair market value of the ADSs or ordinary shares as of the close of your taxable year over your adjusted basis in such ADSs or ordinary shares. You will be allowed a deduction for the excess, if any, of the adjusted basis of the ADSs or ordinary shares over their fair market value as of the close of the taxable year. However, deductions will be allowable only to the extent of any net mark-to-market gains on the ADSs or ordinary shares included in your income for prior taxable years. Amounts included in your income under a mark-to-market election, as well as gain on the actual sale or other disposition of the ADSs or ordinary shares, will be treated as ordinary income. Ordinary loss treatment will also apply to the deductible portion of any mark-to-market loss on the ADSs or ordinary shares, as well as to any loss realized on the actual sale or other disposition of the ADSs or ordinary shares, to the extent the amount of such loss does not exceed the net mark-to-market gains previously included for such ADSs or ordinary shares. Your basis in the ADSs or ordinary shares will be adjusted to reflect any such income or loss amounts. If you make a mark-to-market election, any distributions we make would generally be subject to the rules discussed above under “—Taxation of Dividends and Other Distributions on the ADSs or Ordinary Shares,” except the lower rate applicable to qualified dividend income would not apply.

The mark-to-market election is available only for “marketable stock,” which is stock that is regularly traded on a qualified exchange or other market, as defined in applicable U.S. Treasury regulations. Our ADSs are listed on the NASDAQ Global Select Market, which is a qualified exchange or other market for these purposes. Consequently, if the ADSs continue to be listed on the Market and are regularly traded, and you are a holder of ADSs, we expect the mark-to-market election would be available to you if we were to become a PFIC. Because a mark-to-market election cannot be made for equity interests in any lower-tier PFICs that we own, a U.S. Holder may continue to be subject to the PFIC rules with respect to its indirect interest in any investments held by us that are treated as an equity interest in a PFIC for U.S. federal income tax purposes. You should consult your tax advisors as to the availability and desirability of a mark-to-market election, as well as the impact of such election on interests in any lower-tier PFICs.

Alternatively, if a non-U.S. corporation is a PFIC, a holder of shares in that corporation may avoid taxation under the PFIC rules described above regarding excess distributions and recognized gains by making a “qualified electing fund” election to include in income its share of the corporation’s income on a current basis. However, you may make a qualified electing fund election with respect to your ADSs or ordinary shares only if we agree to furnish you annually with certain tax information, and we currently do not intend to prepare or provide such information.

Unless otherwise provided by the U.S. Treasury, each U.S. Holder of a PFIC is required to file an annual report containing such information as the U.S. Treasury may require. If we are or become a PFIC, you should consult your tax advisor regarding any reporting requirements that may apply to you.

You are strongly urged to consult your tax advisor regarding the application of the PFIC rules to your investment in ADSs or ordinary shares.

Information Reporting and Backup Withholding

Any dividend payments with respect to ADSs or ordinary shares and proceeds from the sale, exchange or other taxable disposition of ADSs or ordinary shares may be subject to information reporting to the U.S. Internal Revenue Service and possible U.S. backup withholding. Backup withholding will not apply, however, to a U.S. Holder that furnishes a correct taxpayer identification number and makes any other required certification or that is otherwise exempt from backup withholding. U.S. Holders that are required to establish their exempt status generally must provide such certification on U.S. Internal Revenue Service Form W-9. U.S. Holders should consult their tax advisor regarding the application of the U.S. information reporting and backup withholding rules.

Backup withholding is not an additional tax. Amounts withheld as backup withholding may be credited against your U.S. federal income tax liability, and you may obtain a refund of any excess amounts withheld under the backup withholding rules by filing the appropriate claim for refund with the U.S. Internal Revenue Service and furnishing any required information in a timely manner.

Additional Reporting Requirements

Certain U.S. Holders who are individuals will be required to report information relating to an interest in our ADSs or ordinary shares, subject to certain exceptions (including an exception for ADSs or ordinary shares held in accounts maintained by certain financial institutions). U.S. Holders should consult their tax advisors regarding the effect, if any, of these rules on their ownership and disposition of the ADSs and ordinary shares.

F. Dividends and Paying Agents

Not applicable.

G. Statement by Experts

Not applicable.

H. Documents on Display

We have previously filed with the Commission our registration statement on Form F-1 (File Number 333-169839), as amended, and a prospectus under the Securities Act with respect to our ordinary shares represented by our ADSs. We also filed with the SEC a related registration statement on Form F-6 (File Number 333-170038) with respect to our ADSs.

We are subject to the periodic reporting and other informational requirements of the Exchange Act. Under the Exchange Act, we are required to file reports and other information with the SEC. Specifically, starting from the annual report for the fiscal year ended March 31, 2012, we are required to file annually a Form 20-F no later than four months after the end of each fiscal year, which is October 31. Copies of reports and other information, when so filed, may be inspected without charge and may be obtained at prescribed rates at the public reference facilities maintained by the Securities and Exchange Commission at Judiciary Plaza, 100 F Street, N.E., Washington, D.C. 20549, and at the regional office of the Securities and Exchange Commission located at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. The public may obtain information regarding the Washington, D.C. Public Reference Room by calling the Commission at 1-800-SEC-0330. The SEC also maintains a web site at http://www.sec.gov that contains reports, proxy and information statements, and other information regarding registrants that make electronic filings with the SEC using its EDGAR system.

As a foreign private issuer, we are exempt from the rules of the Exchange Act prescribing the furnishing and content of quarterly reports and proxy statements, and our executive officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we are not required under the Exchange Act to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act.

We will furnish Citibank, N.A., the depositary of our ADSs, with all notices of shareholders’ meeting and other reports and communications that are made generally available to our shareholders. The depositary will make such notices, reports and communications available to holders of ADSs and, upon our written request, will mail to all record holders of ADSs the information contained in any notice of a shareholders’ meeting received by the depositary from us.

In accordance with NASDAQ Stock Market Rule 5250(d), we will post this annual report on Form 20-F on our website at www.legaga.com.hk. In addition, we will provide hard copies of our annual report free of charge to shareholders and ADS holders upon request.

I. Subsidiary Information

For a listing of our subsidiaries, see “Item 4. Information on the Company—C. Organizational Structure.”

Item 11. Quantitative and Qualitative Disclosures about Market Risk

Inflation

Since our inception, inflation in China has not materially impacted our results of operations. According to the National Bureau of Statistics of China, the consumer price index in China increased by 5.4%, 2.6% and 2.6% in 2011, 2012 and 2013, and the year-over-year percent changes in the consumer price index for June 2012, 2013 and 2014 were increases of 2.2%, 2.7% and 2.3%, respectively. Although we have not in the past been materially affected by any such inflation since our inception, we can provide no assurance that we will not be affected in the future by higher rates of inflation in China. For example, certain operating costs and expenses, such as personnel expenses, farmland leasing expenses, travel expenses and office operating expenses may increase as a result of higher inflation. Additionally, because a substantial portion of our assets consists of cash and cash equivalents, high inflation could significantly reduce the value and purchasing power of these assets. We are not able to hedge our exposures to higher inflation in China.

Liquidity Risk

Our policy is to regularly monitor liquidity requirements to ensure that it maintains sufficient reserves of cash to meet its liquidity requirements in the short and longer term.

The following tables show the remaining contractual maturities at the end of reporting period of our non-derivative financial liabilities, which are based on the contractual undiscounted cashflows (including interest payment computed using contractual rates) and the earliest date we can be required to pay.

For term loans subject to repayment on demand clause which can be exercised at the bank’s sole discretion, the analysis shows the cash outflow based on the contractual repayment schedule and, separately, the impact to the timing of cash outflows if the lenders were to invoke their unconditional rights to call the loans with immediate effect.


	Contractual Undiscounted Cash Outflow
	Balance sheet carrying amount		Within 1 year or on demand		More than 1 year but less than 2 years			More than 2 years but less than 5 years			Total
	RMB		RMB		RMB			RMB			RMB
	(In thousands)
March 31, 2012
Trade and other payables		37,055		37,055		—			—			37,055
Bank loans		85,875		20,659		37,147			53,762			111,568

		122,930		57,714		37,147			53,762			148,623

June 30, 2012
Trade and other payables		31,111		31,111		—			—			31,111
Bank loans		86,305		34,786		35,380			36,608			106,774

		117,416		65,897		35,380			36,608			137,885

June 30, 2013
Trade and other payables		75,246		75,246		—			—			75,246
Term loan subject to repayment on demand clauses: scheduled repayments		43,492		729		729			44,123			45,581
Other bank loans		102,618		110,242		—			—			110,242

		221,356		186,217		729			44,123			231,069
Adjustment to disclose cash flows on term based on lender’s right to demand repayment		—		42,763		(729	)		(44,123	)		(2,089	)

		221,356		228,980		—			—			228,980

June 30, 2014
Trade and other payables		197,042		197,042		—			—			197,042
Loan from a shareholder		18,574		19,042		—			—			19,042
Term loan subject to repayment on demand clauses: scheduled repayments		27,500		9,159		13,493			7,638			30,290
Other bank loans		71,000		73,526		—			—			73,526

		314,116		298,769		13,493			7,638			319,900
Adjustment to disclose cash flows on term based on lender’s right to demand repayment		—		18,341		(13,493	)		(7,638	)		(2,790	)

		314,116		317,110		—			—			317,110

Interest Rate Risk

Our exposure to interest rate risk primarily relates to the interest rates for our outstanding borrowings and the interest income generated by excess cash invested in liquid investments. Such interest-earning instruments carry a degree of interest rate risk. Our profit would decrease by approximately RMB Nil for the fiscal year ended March 31, 2012, RMB Nil for the three months ended June 30, 2012, RMB761,000 for the fiscal year ended June 30, 2013 and RMB275,000 ($44,000) for the fiscal year ended June 30, 2014 in response to a 100 basis points increase in interest rates applicable as each period end, with all other variables held constant. We have not used any derivative financial instruments to manage our interest risk exposure. We have not been exposed to material risks due to changes in interest rates. However, our future interest income may be lower than expected due to changes in market interest rates.

Foreign Exchange Risk

The functional currency of our PRC subsidiaries is RMB, while the functional currency of our company and our subsidiaries outside of mainland China are U.S. dollars and Hong Kong dollars. We have adopted RMB as our presentation currency. Our exposure to foreign exchange risk primarily relates to cash and cash equivalents denominated in U.S. dollars as a result of our past issuance of preferred shares through private placements, as well as intra-group purchases by our subsidiaries outside of mainland China that are denominated in RMB. We do not believe that we currently have any significant direct foreign exchange risk and have not hedged exposures denominated in foreign currencies or any other derivative financial instruments. Although in general, our exposure to foreign exchange risks should be limited, the value of your investment in our ADSs will be affected by the foreign exchange rate between U.S. dollars and RMB because the value of our business is effectively denominated in RMB, while the ADSs will be traded in U.S. dollars.

The value of the RMB against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in China’s political and economic conditions. The conversion of Renminbi into foreign currencies, including the U.S. dollar, has historically been set by the People’s Bank of China. On July 21, 2005, the PRC government changed its policy of pegging the value of the Renminbi to the U.S. dollar. The PRC government has then from time to time revised the new policy, under which the Renminbi is permitted to fluctuate within a managed band against a basket of certain foreign currencies. Between July 21, 2005 and June 30, 2014, the RMB appreciated by approximately 33.4% against the U.S. dollar, although the pace of appreciation was uneven during the period. It is difficult to predict how market forces or PRC or U.S. government policy may impact the exchange rate between the Renminbi and the U.S. dollar in the future. There remains significant international pressure on the PRC government to adopt an even more flexible currency policy, which could result in a further and more significant appreciation of the Renminbi against foreign currencies. Our revenues and costs are mostly denominated in the Renminbi, and a significant portion of our financial assets are also denominated in the Renminbi. As we rely entirely on dividends paid to us by our subsidiaries, any significant revaluation of the Renminbi may have a material and adverse effect on our revenues and financial condition, and the value of, and any dividends payable on, our ordinary shares in foreign currency terms. For example, to the extent that we need to convert U.S. dollars into Renminbi for our operations, appreciation of the Renminbi against the U.S. dollar would reduce the Renminbi amount we receive from the conversion. Conversely, if we decide to convert our Renminbi into U.S. dollars for the purpose of making dividend payments on our ordinary shares or for other business purposes, appreciation of the U.S. dollar against the Renminbi would reduce the U.S. dollar amount available to us. We have not used any forward contracts or currency borrowings to hedge our exposure to foreign currency exchange risk.

The following table indicates the instantaneous change in our profit after tax that would arise if foreign exchange rates to which we have significant exposure at the statement of financial position date had changed at that date, assuming all other risk variables remained constant. In this respect, we assume that the pegged rate between the Hong Kong dollars and the U.S. dollars would be materially unaffected by any changes in movement in value of the U.S. dollars against other currencies.


	Year Ended March 31,						Three Months Ended June 30,						Year Ended June 30,
	2012						2012						2013						2014
	Increase/ (Decrease) in Foreign Exchange Rates			Increase/ (Decrease) in Profit After Tax			Increase/ (Decrease) in Foreign Exchange Rates			Increase/ (Decrease) in Profit After Tax			Increase/ (Decrease) in Foreign Exchange Rates			Increase/ (Decrease) in Profit After Tax			Increase/ (Decrease) in Foreign Exchange Rates			Increase/ (Decrease) in Profit After Tax
				RMB in thousands						RMB in thousands						RMB in thousands						RMB in thousands
Renminbi⁽¹⁾		5	%		5,222			5	%		5,287			5	%		6,725			5	%		3,229
		(5	)%		(5,222	)		(5	)%		(5,287	)		(5	)%		(6,725	)		(5	)%		(3,229	)
Hong Kong Dollars⁽²⁾		5	%		(865	)		5	%		(895	)		5	%		(860	)		5	%		(381	)
		(5	)%		865			(5	)%		895			(5	)%		860			(5	)%		381
U.S. Dollars⁽²⁾		5	%		(1,114	)		5	%		(36	)		5	%		(999	)		5	%		(1,089	)
		(5	)%		1,114			(5	)%		36			(5	)%		999			(5	)%		1,089

(1)	Arising from subsidiaries outside the PRC-mainland whose functional currency is Hong Kong dollars.

(2)	Arising from our subsidiaries whose functional currency is RMB.

Results of the analysis as presented in the above table represent an aggregation of the effects on each of our group entities’ profit or loss after tax measured in the respective functional currencies, translated into RMB at the exchange rate ruling at the statement of financial position date for presentation purposes.

The sensitivity analysis assumes that the change in foreign exchange rates had been applied to re-measure those financial instruments we held which expose us to foreign currency risk at the statement of financial position date, including inter-company payables and receivables within us which are denominated in a currency other than the functional currencies of the lender or the borrower. The analysis excludes differences that would result from the translation of the financial statements of operations outside the mainland into our presentation currency. The analysis is performed on the same basis for all the years presented.

Credit Risk

Our credit risk is primarily attributable to trade and other receivables. Management has a credit policy in place and the exposures to these credit risks are monitored on an ongoing basis. Customers are either required to settle in cash on delivery or granted with credit term. Individual credit evaluations are performed on all customers requiring credit over a certain amount. These evaluations focus on the customer’s past history of making payments when due and current ability to pay, and take into account information specific to the customer. Trade receivables are generally due within 5 to 90 days from the date of delivery. Debtors with balances that are overdue are requested to settle all outstanding balances before any further credit is granted. Normally, we do not obtain collateral from customers. Our exposure to credit risk is influenced mainly by the individual characteristics of each customer. The default risk of the industry and country in which customers operate also has an influence on credit risk but to a lesser extent. As of June 30, 2014, we had certain concentrations of credit risk as 6.4% and 33.5% of the total trade and other receivables were due from the largest customer and the five largest customers, respectively. The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the statement of financial position. We do not provide any guarantee which would expose us to credit risk.

Item 12. Description of Securities Other than Equity Securities

A. Debt Securities

Not applicable.

B. Warrants and Rights

Not applicable.

C. Other Securities

Not applicable.

D. American Depositary Shares

As an ADS holder, you will be required to pay the following service fees to Citibank, N.A., our Depositary:


Service		Fees
• Issuance of ADSs		Up to $0.05 per ADS issued

• Cancellation of ADSs		Up to $0.05 per ADS canceled

• Distribution of cash dividends or other cash distributions		Up to $0.05 per ADS held

• Distribution of ADSs pursuant to stock dividends, free stock distributions or exercise of rights		Up to $0.05 per ADS held

• Distribution of securities other than ADSs or rights to purchase additional ADSs		Up to $0.05 per ADS held

• Depositary Services		Up to $0.05 per ADS held on the applicable record date(s) established by the Depositary

• Transfer of ADRs		$1.50 per certificate presented for transfer

As an ADS holder you will also be responsible to pay certain fees and expenses incurred by the depositary and certain taxes and governmental charges such as:

•

fees for the transfer and registration of ordinary shares charged by the registrar and transfer agent for the ordinary shares in the Cayman Islands (i.e., upon deposit and withdrawal of ordinary shares);

•

expenses incurred for converting foreign currency into U.S. dollars;

•

expenses for cable, telex and fax transmissions and for delivery of securities;

•

taxes and duties upon the transfer of securities (i.e., when ordinary shares are deposited or withdrawn from deposit); and

•

fees and expenses incurred in connection with the delivery or servicing of ordinary shares on deposit.

Depositary fees payable upon the issuance and cancellation of ADSs are typically paid to the depositary banks by the brokers (on behalf of their clients) receiving the newly issued ADSs from the Depositary banks and by the brokers (on behalf of their clients) delivering the ADSs to the Depositary banks for cancellation. The brokers in turn charge these fees to their clients. Depositary fees payable in connection with distributions of cash or securities to ADS holders and the Depositary services fee are charged by the Depositary banks to the holders of record of ADSs as of the applicable ADS record date.

The depositary fees payable for cash distributions are generally deducted from the cash being distributed. In the case of distributions other than cash (i.e., stock dividend, rights), the depositary charges the applicable fee to the ADS record date holders concurrent with the distribution. In the case of ADSs registered in the name of the investor (whether certificated or uncertificated in direct registration), the Depositary sends invoices to the applicable record date ADS holders. In the case of ADSs held in brokerage and custodian accounts (via DTC), the Depositary generally collects its fees through the systems provided by DTC (whose nominee is the registered holder of the ADSs held in DTC) from the brokers and custodians holding ADSs in their DTC accounts. The brokers and custodians who hold their clients’ ADSs in DTC accounts in turn charge their clients’ accounts the amount of the fees paid to the Depositary.

In the event of refusal to pay the depositary fees, the depositary may, under the terms of the deposit agreement, refuse the requested service until payment is received or may set off the amount of the Depositary fees from any distribution to be made to the ADS holder.

Note that the fees and charges you may be required to pay may vary over time and may be changed by us and by the Depositary. You will receive prior notice of such changes.

The depositary may reimburse us for certain expenses incurred by us in respect of the ADR program established pursuant to the deposit agreement, by making available a portion of the Depositary fees charged in respect of the ADR program or otherwise, upon such terms and conditions as we and the Depositary may agree from time to time. For the fiscal year ended June 30, 2013, we received reimbursement payment of $20,000 from Citibank, N.A.

Part II

Item 13. Defaults, Dividend Arrearages and Delinquencies

None.

Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds

A. – D. Material Modifications to the Rights of Security Holders

None.

E. Use of Proceeds

On November 3, 2010, we completed our initial public offering of ADSs sold by our company and selling shareholders. In the initial public offering, we registered and sold 10,871,599 ADSs, each representing 50 ordinary shares, at $9.50 per ADS. The aggregate offering price was $103,280,191, with $87,400,000 for the ADSs offered by us and $15,880,191 for the ADSs offered by the selling shareholders. We received net proceeds of approximately $76.9 million from our initial public offering. We did not receive any of the proceeds from the sale of ADSs by the selling shareholders. From October 29, 2010, the effective date of our registration statement on Form F-1 in connection with our initial public offering, to June 30, 2014, we have fully used the net proceeds of $76.9 million from our initial public offering for the investment of our new farmlands in Fujian province. None of the net proceeds from our initial public offering were paid directly or indirectly to directors or officers of our company or their associates, persons owning 10% or more of our equity securities or our affiliates.

Item 15. Controls and Procedures

Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and chief financial officer, has performed an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report, as required by Rule 13a-15(b) under the Exchange Act.

Based upon that evaluation, our management has concluded that, as of June 30, 2014, our disclosure controls and procedures were effective in ensuring that the information required to be disclosed by us in the reports that we file and furnish under the Exchange Act was recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our chief executive officer and chief financial officer, to allow timely decisions regarding required disclosure.

Management’s Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) under the Exchange Act. Our management evaluated the effectiveness of our internal control over financial reporting, as required by Rule 13a-15(c) of the Exchange Act, based on criteria established in the framework in Internal Control-Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO. Based on this evaluation, our management has concluded that our internal control over financial reporting was effective as of June 30, 2014 based on the criteria established in Internal Control-Integrated Framework (1992) issued by COSO.

Changes in Internal Controls

There were no changes in our internal controls over financial reporting that occurred during the period covered by this annual report that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

Item 16A. Audit Committee Financial Expert

Mr. Gordon Xiaogang Wang, Mr. Chung Bong Pang and Mr. Li-Lan Cheng qualify as “audit committee financial experts” as defined in Item 16A of Form 20-F. Messrs. Wang, Pang and Cheng satisfy the independence requirements of Rule 5605 of NASDAQ Stock Market, Marketplace Rules and Rule 10A-3 under the Exchange Act.

Item 16B. Code of Ethics

Our board of directors adopted a code of business conduct and ethics that applies to our directors, officers and employees. We are filing herewith as Exhibit 11.1 our code of business conduct and ethics, as amended, originally filed as an exhibit to Exhibit 99.1 of our registration statement on Form F-1 (file No. 333-169839) filed with the Securities and Exchange Commission on October 15, 2010 and posted a copy of our code of business conduct and ethics on our website at www.legaga.com.hk. We hereby undertake to provide to any person without charge, upon a written request, a copy of our code of business conduct and ethics.

Item 16C. Principal Accountant Fees and Services

The following table sets forth the aggregate fees by categories specified below in connection with certain professional services rendered by KPMG, our principal external auditors, for the periods indicated. We did not pay any tax related or other fees to our auditors during the periods indicated below.

Year Ended March 31,

Three Months
Ended June 30,

Year Ended June 30,

2012

2013

2014

RMB

(In thousands)

Audit fees⁽¹⁾

4,604

1,500

4,085

3,534

570

(1)	“Audit fees” means the aggregate fees billed for professional services rendered in connection with the audit or review of our financial statements.

The policy of our audit committee is to pre-approve all audit and non-audit services provided by KPMG, including audit services, audit-related services, tax services and other services as described above, other than those for de minimus services which are approved by our audit committee prior to the completion of the audit.

Item 16D. Exemptions from the Listing Standards for Audit Committees

Not applicable.

Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers

Not applicable.

Item 16F. Change in Registrant’s Certifying Accountant

Not applicable.

Item 16G. Corporate Governance

We believe that there are no significant differences between our corporate governance practices and those of U.S. domestic companies under the listing standards of the NASDAQ Stock Market.

Item 16H. Mine Safety Disclosure

Not applicable.

Part III

Item 17. Financial Statements

We have elected to provide financial statements pursuant to Item 18.

Item 18. Financial Statements

The consolidated financial statements of Le Gaga Holdings Limited and its subsidiaries are included at the end of this annual report.

Item 19. Exhibits


Exhibit Number		Description of Document

1.1		Amended and Restated Memorandum and Articles of Association of the Registrant, as currently in effect (incorporated by reference to Exhibit 3.2 of our Registration Statement on Form F-1 (file No. 333-169839), as amended, initially filed with the Securities and Exchange Commission on October 8, 2010)

2.1		Form of Registrant’s American Depositary Receipt (included in Exhibit 2.3)

2.2		Registrant’s Specimen Certificate for Ordinary Shares (incorporated by reference to Exhibit 4.2 of our Registration Statement on Form F-1 (file No. 333-169839), as amended, initially filed with the Securities and Exchange Commission on October 8, 2010)

2.3		Form of Deposit Agreement among the Registrant, the depositary and Owners and Beneficial Owners of the American Depositary Shares issued thereunder (incorporated by reference to Exhibit 4.3 of our Registration Statement on Form F-1 (file No. 333-169839), as amended, initially filed with the Securities and Exchange Commission on October 8, 2010)

4.1		Series A Preferred Share Purchase Agreement by and among China Linong International Limited, Land V. Group Limited, Land V. Limited, Shing Yung Ma, Li Luan, Sequoia Capital China I, L.P., Sequoia Capital China Partners Fund I, L.P., Sequoia Capital China Principals Fund I, L.P., and the then PRC Subsidiaries (as defined therein) dated April 12, 2006 (incorporated by reference to Exhibit 10.1 of our Registration Statement on Form F-1 (file No. 333-169839), as amended, initially filed with the Securities and Exchange Commission on October 8, 2010)

4.2		Series A1 Preferred Share Purchase Agreement by and among China Linong International Limited, Land V. Group Limited, Land V. Limited, Hong Kong Linong Limited, Shing Yung Ma, Li Luan, Sequoia Capital China I, L.P., Sequoia Capital China Partners Fund I, L.P., Sequoia Capital China Principals Fund I, L.P., Grow Grand Limited, Honeycomb Assets Management Limited, and the then PRC Subsidiaries (as defined therein) dated February 14, 2007 (incorporated by reference to Exhibit 10.2 of our Registration Statement on Form F-1 (file No. 333-169839), as amended, initially filed with the Securities and Exchange Commission on October 8, 2010)

4.3		Series B Preferred Share Subscription Agreement by and among China Linong International Limited, Land V. Group Limited, Land V. Limited, Hong Kong Linong Limited, Shing Yung Ma, Li Luan, Sequoia Capital China Growth Fund I, L.P., SIG China Investments One, Ltd, Pacven Walden Ventures VI, L.P., Pacven Walden Ventures Parallel VI, L.P., PreIPO Capital Partners Limited, and the then PRC Subsidiaries (as defined therein) dated March 21, 2008 (incorporated by reference to Exhibit 10.3 of our Registration Statement on Form F-1 (file No. 333-169839), as amended, initially filed with the Securities and Exchange Commission on October 8, 2010)

4.4		Series B1 Preferred Share Subscription Agreement by and among China Linong International Limited, Land V. Group Limited, Land V. Limited, Hong Kong Linong Limited, Shing Yung Ma, Li Luan, Grow Grand Limited, Magnetic Star Holdings Limited, Honeycomb Assets Management Limited, Valuetrue Investments Limited, Chic Holdings Limited, Lu Rong, SIG China Investments One, Ltd, Pacven Walden Ventures VI, L.P., Pacven Walden Ventures Parallel VI, L.P., Sequoia Capital China I, L.P., Sequoia Capital China Partners Fund I, L.P., Sequoia Capital China Principals Fund I, L.P., Sequoia Capital China Growth Fund I, L.P., Sequoia Capital China Growth Partners Fund I, L.P., Sequoia Capital China GF Principals Fund I, L.P., Made In China Ltd., and the then PRC Subsidiaries (as defined therein) dated December 22, 2009 (incorporated by reference to Exhibit 10.4 of our Registration Statement on Form F-1 (file No. 333-169839), as amended, initially filed with the Securities and Exchange Commission on October 8, 2010)

4.5		Share Purchase Agreement relating to series B preferred shares between PreIPO Capital Partners Limited and Made In China Ltd dated April 10, 2008 (incorporated by reference to Exhibit 10.5 of our Registration Statement on Form F-1 (file No. 333-169839), as amended, initially filed with the Securities and Exchange Commission on October 15, 2010)

4.6		Share Purchase Agreement relating to series B preferred shares by and among Sequoia Capital China Growth Fund I, L.P., Sequoia Capital China Growth Partners Fund I, L.P., and Sequoia Capital China GF Principals Fund I, L.P., dated July 18, 2008 (incorporated by reference to Exhibit 10.6 of our Registration Statement on Form F-1 (file No. 333-169839), as amended, initially filed with the Securities and Exchange Commission on October 8, 2010)

4.7		Accession Agreement relating to series B preferred shares by and among all parties of series B Shareholders Agreement, Sequoia Capital China Growth Partners Fund I, L.P., Sequoia Capital China GF Principals Fund I, L.P., and Made In China Ltd dated July 22, 2008 (incorporated by reference to Exhibit 10.7 of our Registration Statement on Form F-1 (file No. 333-169839), as amended, initially filed with the Securities and Exchange Commission on October 8, 2010)

4.8		Share Transfer Agreement relating to ordinary shares between Natural Scent Limited and Chic Holdings Limited dated January 18, 2010 (incorporated by reference to Exhibit 10.8 of our Registration Statement on Form F-1 (file No. 333-169839), as amended, initially filed with the Securities and Exchange Commission on October 8, 2010)


Exhibit Number		Description of Document

4.9		Share Transfer Agreement relating to ordinary shares between Natural Scent Limited and Lu Rong dated January 18, 2010 (incorporated by reference to Exhibit 10.9 of our Registration Statement on Form F-1 (file No. 333-169839), as amended, initially filed with the Securities and Exchange Commission on October 8, 2010)

4.10		Share Purchase Agreement relating to series B1 preferred shares by and among Sequoia Capital China I, L.P., Sequoia Capital China Partners Fund I, L.P., Sequoia Capital China Principals Fund I, L.P., Sequoia Capital China Growth Fund I, L.P., Sequoia Capital China Growth Partners Fund I, L.P., Sequoia Capital China GF Principals Fund I, L.P. dated January 19, 2010 (incorporated by reference to Exhibit 4.2 of our Registration Statement on Form F-1 (file No. 333-169839), as amended, initially filed with the Securities and Exchange Commission on October 8, 2010)

4.11		Shareholders Agreement by and among the Registrant, China Linong International Limited, Land V. Group Limited, Land V. Limited, Hong Kong Linong Limited, Shing Yung Ma, Li Luan, holders of ordinary shares, holders of series A preferred shares, holders of series A1 preferred shares, holders of series B preferred shares, holders of series B1 preferred shares and the PRC subsidiaries dated July 16, 2010 (incorporated by reference to Exhibit 10.11 of our Registration Statement on Form F-1 (file No. 333-169839), as amended, initially filed with the Securities and Exchange Commission on October 8, 2010)

4.12		Loan Agreement entered into between DEG—Deutsche Investitions- und Entwicklungsgesellschaft Mbh and China Linong International Limited dated November 10, 2009 (incorporated by reference to Exhibit 10.12 of our Registration Statement on Form F-1 (file No. 333-169839), as amended, initially filed with the Securities and Exchange Commission on October 8, 2010)

4.13		Amended and Restated Share Retention Letter dated April 6, 2011 from Shing Yung Ma to DEG—Deutsche Investitions- und Entwicklungsgesellschaft Mbh, agreed on May 3, 2011 (incorporated by reference to Exhibit 10.13 of our Annual Report on Form 20-F (file No. 001-34923), as amended, initially filed with the Securities and Exchange Commission on July 15, 2011)

4.14		Share Retention Letter dated October 22, 2009 from Shing Yung Ma to DEG—Deutsche Investitions- und Entwicklungsgesellschaft Mbh, agreed on November 10, 2009 (incorporated by reference to Exhibit 10.13 of our Registration Statement on Form F-1 (file No. 333-169839), as amended, initially filed with the Securities and Exchange Commission on October 8, 2010)

4.15		2010 Share Incentive Plan (incorporated by reference to Exhibit 10.14 of our Registration Statement on Form F-1 (file No. 333-169839), as amended, initially filed with the Securities and Exchange Commission on October 8, 2010)

4.16		2009 Share Incentive Plan (incorporated by reference to Exhibit 10.15 of our Registration Statement on Form F-1 (file No. 333-169839), as amended, initially filed with the Securities and Exchange Commission on October 8, 2010)

4.17		Form of Indemnification Agreement (incorporated by reference to Exhibit 10.16 of our Registration Statement on Form F-1 (file No. 333-169839), as amended, initially filed with the Securities and Exchange Commission on October 8, 2010)

4.18		Form of Employment Agreement (incorporated by reference to Exhibit 10.17 of our Registration Statement on Form F-1 (file No. 333-169839), as amended, initially filed with the Securities and Exchange Commission on October 8, 2010)

4.19		English translation of Land Lease Contract between Agricultural Development Office of Guyuan County, Hebei Province and Land V. Ltd (Zhangjiakou) dated November 1, 2006 (incorporated by reference to Exhibit 10.18 of our Registration Statement on Form F-1 (file No. 333-169839), as amended, initially filed with the Securities and Exchange Commission on October 8, 2010)

4.20		English translation of Land Sub-Lease Contract between Cai Yingguo and Land V. Ltd (Fujian) dated June 14, 2005 (incorporated by reference to Exhibit 10.19 of our Registration Statement on Form F-1 (file No. 333-169839), as amended, initially filed with the Securities and Exchange Commission on October 8, 2010)

4.22		English translation of Technology Development Contract between China Linong International Limited and Beijing Research Center for Information Technology in Agriculture dated August 5, 2010 (incorporated by reference to Exhibit 10.21 of our Registration Statement on Form F-1 (file No. 333-169839), as amended, initially filed with the Securities and Exchange Commission on October 8, 2010)

4.23		English translation of form master lease agreement for certain leases executed in the fiscal year ended March 21, 2012 (incorporated by reference to Exhibit 4.23 of our Annual Report on Form 20-F (file No. 001-34564), as amended, initially filed with the Securities and Exchange Commission on July 20, 2012)

4.24		English translation of form master lease agreement for certain lease executed in the fiscal year ended March 21, 2012 (incorporated by reference to Exhibit 4.24 of our Annual Report on Form 20-F (file No. 001-34564), as amended, initially filed with the Securities and Exchange Commission on July 20, 2012)

8.1*		List of Subsidiaries as of June 30, 2014

11.1		Code of Business Conduct and Ethics of the Registrant, as amended, originally filed as Exhibit 99.1 with the Securities and Exchange Commission on October 15, 2010


Exhibit Number		Description of Document

12.1*		CEO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

12.2*		CFO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

13.1*		CEO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

13.2*		CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

15.1*		Consent of Dacheng Law Offices LLP (Fuzhou)

15.2*		Consent of KPMG, Independent Registered Public Accounting Firm

*	Filed with this annual report on Form 20-F.

SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.


Le Gaga Holdings Limited

By:		/s/ Shing Yung Ma
Name:		Shing Yung Ma
Title:		Chief Executive Officer

Date: October 30, 2014

LE GAGA HOLDINGS LIMITED

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


	Page
Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm		F-2

Consolidated Statements of Profit or Loss for the Year Ended March 31, 2012, the Three Months Ended June 30, 2012 and the Years Ended June 30, 2013 and 2014		F-3

Consolidated Statements of Profit or Loss and Other Comprehensive Income for the Year Ended March 31, 2012, the Three Months Ended June 30, 2012 and the Years Ended June 30, 2013 and 2014		F-5

Consolidated Statements of Financial Position as of March 31, 2012, June 30, 2012, June 30, 2013 and June 30, 2014		F-6

Consolidated Statements of Changes in Equity for the Year Ended March 31, 2012, the Three Months Ended June 30, 2012 and the Years Ended June 30, 2013 and 2014		F-8

Consolidated Statements of Cash Flows for the Year Ended March 31, 2012, the Three Months Ended June 30, 2012 and the Years Ended June 30, 2013 and 2014		F-12

Notes to the Consolidated Financial Statements		F-16

F-1

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders of

Le Gaga Holdings Limited:

We have audited the accompanying consolidated statements of financial position of Le Gaga Holdings Limited and subsidiaries as of March 31, 2012, June 30, 2012, June 30, 2013 and June 30, 2014, and the related consolidated statements of profit or loss, statements of profit or loss and other comprehensive income, statements of changes in equity and statements of cash flows for the year ended March 31, 2012, the three months ended June 30, 2012 and the years ended June 30, 2013 and 2014, all expressed in Renminbi. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain 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 the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Le Gaga Holdings Limited and subsidiaries as of March 31, 2012, June 30, 2012, June 30, 2013 and June 30, 2014, and the results of their operations and their cash flows for the year ended March 31, 2012, the three months ended June 30, 2012 and the years ended June 30, 2013 and 2014, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.

/s/ KPMG

Hong Kong, China

October 30, 2014

F-2

Consolidated statements of profit or loss

for the year ended March 31, 2012,

the three months ended June 30, 2012 and

the years ended June 30, 2013 and 2014

(Expressed in Renminbi)


				Year ended March 31,			Three months ended June 30,			Years ended June 30,
	Note			2012			2012			2013			2014
				RMB’000			RMB’000			RMB’000			RMB’000
Revenue		4			519,399			123,248			576,274			580,500
Cost of inventories sold		18	(c)		(455,380	)		(107,983	)		(494,235	)		(493,339	)
Changes in fair value less costs to sell related to:
– Crops harvested during the year/period					226,037			5,067			260,928			267,822
– Growing crops on the farmland at the year/period end					60,890			17,897			16,576			4,597
Total changes in fair value less costs to sell of biological assets		17	(a)		286,927			22,964			277,504			272,419
Packing expenses					(33,405	)		(8,913	)		(47,754	)		(46,142	)
Land preparation costs		8	(c)		(37,593	)		(12,887	)		(56,078	)		(67,712	)
Other income		5			3,330			466			1,830			1,745
Research and development expenses					(9,091	)		(2,291	)		(13,283	)		(15,926	)
Selling and distribution expenses					(32,120	)		(6,516	)		(42,899	)		(41,687	)
Administrative expenses					(58,519	)		(13,155	)		(44,631	)		(36,072	)
Impairment losses on property, plant and equipment, prepayments and receivables		8	(b)		(14,823	)		—			—			(27,127	)
Natural disaster loss		6			—			—			—			(62,614	)
Other expenses		5			(2,551	)		(132	)		(797	)		(874	)

Results from operating activities					166,174			(5,199	)		155,931			63,171

Finance income					11,838			909			8,382			1,208
Finance costs					(10,781	)		(4,046	)		(13,017	)		(5,385	)

Net finance income/(costs)		7			1,057			(3,137	)		(4,635	)		(4,177	)

Profit/(loss) before taxation		8			167,231			(8,336	)		151,296			58,994
Income tax (expense)/credit		9	(a)		(4,415	)		(128	)		1,840			(2,867	)

Profit/(loss) for the year/period					162,816			(8,464	)		153,136			56,127

F-3

Consolidated statements of profit or loss

for the year ended March 31, 2012,

the three months ended June 30, 2012 and

the years ended June 30, 2013 and 2014 (continued)

(Expressed in Renminbi)


			Year ended March 31,		Three months ended June 30,			Years ended June 30,
	Note		2012		2012			2013		2014
			RMB’000		RMB’000			RMB’000		RMB’000
Earnings/(loss) per ordinary share (in RMB cents)		10
Basic				7.12		(0.37	)		6.80		2.55

Diluted				6.91		(0.37	)		6.80		2.55

See accompanying notes to the consolidated financial statements.

F-4

Consolidated statements of profit or loss and other comprehensive income

for the year ended March 31, 2012,

the three months ended June 30, 2012 and

the years ended June 30, 2013 and 2014

(Expressed in Renminbi)


	Year ended March 31,			Three months ended June 30,			Years ended June 30,
	2012			2012			2013			2014
	RMB’000			RMB’000			RMB’000			RMB’000
Profit/(loss) for the year/period		162,816			(8,464	)		153,136			56,127
Other comprehensive income for the year/period (net of nil income tax)
Items that may be reclassified subsequently to profit or loss:
– Exchange differences on translation of financial statements of entities outside the People’s Republic of China (the “PRC”)—mainland		(23,535	)		1,254			(6,342	)		(29	)
– Reclassification adjustment for release of exchange reserve upon disposal of a subsidiary/deregistration of a subsidiary		2,969			—			—			—

Other comprehensive income for the year/period		(20,566	)		1,254			(6,342	)		(29	)

Total comprehensive income for the year/period		142,250			(7,210	)		146,794			56,098

See accompanying notes to the consolidated financial statements.

F-5

Consolidated statements of financial position at March 31,

2012, June 30, 2012, June 30, 2013 and June 30, 2014

(Expressed in Renminbi)


			As of March 31,		As of June 30,
	Note		2012		2012		2013		2014
			RMB’000		RMB’000		RMB’000		RMB’000
Assets
Property, plant and equipment		12		693,297		700,245		1,049,311		1,067,910
Construction in progress		13		52,441		68,627		70,508		104,722
Lease prepayments		14		1,263		1,256		1,171		1,111
Long-term deposits and prepayments		15		142,754		163,494		166,916		283,408
Biological assets		17		7,697		7,833		12,439		13,227
Deferred tax assets		26		2,060		1,943		2,321		2,894

Total non-current assets				899,512		943,398		1,302,666		1,473,272

Biological assets		17		77,097		30,709		26,268		13,317
Inventories		18		11,193		16,427		14,941		17,398
Trade and other receivables		19		59,861		64,566		84,558		129,033
Pledged bank deposits		20		—		—		45,065		100,000
Cash		21		520,475		504,506		305,487		200,740

Total current assets				668,626		616,208		476,319		460,488

Total assets				1,568,138		1,559,606		1,778,985		1,933,760

Equity		27
Capital				692,833		692,833		644,397		644,397
Reserves				745,838		742,820		908,126		966,694

Total equity				1,438,671		1,435,653		1,552,523		1,611,091

F-6

Consolidated statements of financial position at March 31,

2012, June 30, 2012, June 30, 2013 and June 30, 2014 (continued)

(Expressed in Renminbi)


			As of March 31,		As of June 30,
	Note		2012		2012		2013		2014
			RMB’000		RMB’000		RMB’000		RMB’000
Liabilities
Bank loans		22		75,875		61,998		—		—
Deferred tax liabilities		26		—		—		—		2,369

Total non-current liabilities				75,875		61,998		—		2,369

Bank loans		22		10,000		24,307		146,110		98,500
Trade and other payables		23		37,055		31,111		75,246		197,042
Loan from a shareholder		24		—		—		—		18,574
Current taxation		26		6,537		6,537		5,106		6,184

Total current liabilities				53,592		61,955		226,462		320,300

Total liabilities				129,467		123,953		226,462		322,669

Total equity and liabilities				1,568,138		1,559,606		1,778,985		1,933,760

See accompanying notes to the consolidated financial statements.

F-7

Consolidated statements of changes in equity

for the year ended March 31, 2012,

the three months ended June 30, 2012 and

the years ended June 30, 2013 and 2014

(Expressed in Renminbi)


	Share capital		Share premium		Treasury shares			Statutory reserve			Exchange reserve			Capital reserve			Other reserve		Retained earnings			Total
	(note 27(a))		(note 27(b)(i))		(note 27(b)(ii))			(note 27(b)(iii))			(note 27(b)(iv))			(note 27(b)(v))			(note 27(b)(vi))
	RMB’000		RMB’000		RMB’000			RMB’000			RMB’000			RMB’000			RMB’000		RMB’000			RMB’000
At April 1, 2011		154,938		532,768		—			41,269			(15,438	)		23,960			217,267		324,983			1,279,747

Profit for the year		—		—		—			—			—			—			—		162,816			162,816
Other comprehensive income		—		—		—			—			(20,566	)		—			—		—			(20,566	)

Total comprehensive income for the year		—		—		—			—			(20,566	)		—			—		162,816			142,250

Repurchase of shares		—		—		(10,513	)		—			—			—			—		—			(10,513	)
Exercise of share options		453		4,674		—			—			—			(1,650	)		—		—			3,477
Equity settled share-based transactions		—		—		—			—			—			23,710			—		—			23,710
Disposal of a subsidiary		—		—		—			(3,800	)		—			—			—		3,800			—
Appropriations		—		—		—			15,037			—			—			—		(15,037	)		—

At March 31, 2012		155,391		537,442		(10,513	)		52,506			(36,004	)		46,020			217,267		476,562			1,438,671

F-8

Consolidated statements of changes in equity

for the year ended March 31, 2012,

the three months ended June 30, 2012 and

the years ended June 30, 2013 and 2014 (continued)

(Expressed in Renminbi)


	Share capital		Share premium		Treasury shares			Statutory reserve		Exchange reserve			Capital reserve		Other reserve		Retained earnings			Total
	(note 27(a))		(note 27(b)(i))		(note 27(b)(ii))			(note 27(b)(iii))		(note 27(b)(iv))			(note 27(b)(v))		(note 27(b)(vi))
	RMB’000		RMB’000		RMB’000			RMB’000		RMB’000			RMB’000		RMB’000		RMB’000			RMB’000
At April 1, 2012		155,391		537,442		(10,513	)		52,506		(36,004	)		46,020		217,267		476,562			1,438,671

Loss for the period		—		—		—			—		—			—		—		(8,464	)		(8,464	)
Other comprehensive income		—		—		—			—		1,254			—		—		—			1,254

Total comprehensive income for the period		—		—		—			—		1,254			—		—		(8,464	)		(7,210	)

Equity settled share-based transactions		—		—		—			—		—			4,192		—		—			4,192

At June 30, 2012		155,391		537,442		(10,513	)		52,506		(34,750	)		50,212		217,267		468,098			1,435,653

F-9

Consolidated statements of changes in equity

for the year ended March 31, 2012,

the three months ended June 30, 2012 and

the years ended June 30, 2013 and 2014 (continued)

(Expressed in Renminbi)


	Share capital			Share premium			Treasury shares			Statutory reserve		Exchange reserve			Capital reserve		Other reserve		Retained earnings			Total
	(note 27(a))			(note 27(b)(i))			(note 27(b)(ii))			(note 27(b)(iii))		(note 27(b)(iv))			(note 27(b)(v))		(note 27(b)(vi))
	RMB’000			RMB’000			RMB’000			RMB’000		RMB’000			RMB’000		RMB’000		RMB’000			RMB’000
At July 1, 2012		155,391			537,442			(10,513	)		52,506		(34,750	)		50,212		217,267		468,098			1,435,653

Profit for the year		—			—			—			—		—			—		—		153,136			153,136
Other comprehensive income		—			—			—			—		(6,342	)		—		—		—			(6,342	)

Total comprehensive income for the year		—			—			—			—		(6,342	)		—		—		153,136			146,794

Cancellation of shares		(6,885	)		(41,551	)		48,436			—		—			—		—		—			—
Repurchase of shares		—			—			(37,923	)		—		—			—		—		—			(37,923	)
Equity settled share-based transactions		—			—			—			—		—			7,999		—		—			7,999
Appropriations		—			—			—			17,017		—			—		—		(17,017	)		—

At June 30, 2013		148,506			495,891			—			69,523		(41,092	)		58,211		217,267		604,217			1,552,523

F-10

Consolidated statements of changes in equity

for the year ended March 31, 2012,

the three months ended June 30, 2012 and

the years ended June 30, 2013 and 2014 (continued)

(Expressed in Renminbi)


	Share capital		Share premium		Treasury shares		Statutory reserve		Exchange reserve			Capital reserve		Other reserve		Retained earnings			Total
	(note 27(a))		(note 27(b)(i))		(note 27(b)(ii))		(note 27(b)(iii))		(note 27(b)(iv))			(note 27(b)(v))		(note 27(b)(vi))
	RMB’000		RMB’000		RMB’000		RMB’000		RMB’000			RMB’000		RMB’000		RMB’000			RMB’000
At July 1, 2013		148,506		495,891		—		69,523		(41,092	)		58,211		217,267		604,217			1,552,523

Profit for the year		—		—		—		—		—			—		—		56,127			56,127
Other comprehensive income		—		—		—		—		(29	)		—		—		—			(29	)

Total comprehensive income for the year		—		—		—		—		(29	)		—		—		56,127			56,098

Equity settled share-based transactions		—		—		—		—		—			2,470		—		—			2,470
Appropriations		—		—		—		9,444		—			—		—		(9,444	)		—

At June 30, 2014		148,506		495,891		—		78,967		(41,121	)		60,681		217,267		650,900			1,611,091

See accompanying notes to the consolidated financial statements.

F-11

Consolidated statements of cash flows

for the year ended March 31, 2012,

the three months ended June 30, 2012 and

the years ended June 30, 2013 and 2014

(Expressed in Renminbi)


			Year ended March 31,			Three months ended June 30,			Years ended June 30,
	Note		2012			2012			2013			2014
			RMB’000			RMB’000			RMB’000			RMB’000
Operating activities
Profit/(loss) before taxation				167,231			(8,336	)		151,296			58,994
Adjustments for:
Amortization of lease prepayments				87			14			56			56
Depreciation				65,885			18,065			91,647			124,241
Equity settled share-based transactions				23,710			4,192			7,999			2,470
Changes in fair value less costs to sell of biological assets				(286,927	)		(22,964	)		(277,504	)		(272,419	)
Interest income				(1,310	)		(909	)		(2,084	)		(775	)
Interest expense				10,781			2,792			13,017			5,385
Gain on disposal of a subsidiary		28		(1,309	)		—			—			—
Net loss on disposal of property, plant and equipment and lease prepayments				2,153			79			21			338
Impairment losses on property, plant and equipment, prepayments and receivables				14,823			—			—			27,127
Natural disaster loss				—			—			—			62,614
Foreign exchange (gain)/ loss				(7,630	)		330			(5,529	)		(901	)

				(12,506	)		(6,737	)		(21,081	)		7,130

F-12

Consolidated statements of cash flows

for the year ended March 31, 2012,

the three months ended June 30, 2012 and

the years ended June 30, 2013 and 2014 (continued)

(Expressed in Renminbi)


		Year ended March 31,			Three months Ended June 30,			Years ended June 30,
	Note	2012			2012			2013			2014
		RMB’000			RMB’000			RMB’000			RMB’000
Changes in working capital:
Changes in current biological assets due to plantations			(162,201	)		(37,627	)		(206,499	)		(206,456	)
Changes in inventories, net of effect of harvested crops transferred to inventories			439,116			102,089			487,180			490,419
Decrease/(increase) in trade and other receivables			295			(4,724	)		(19,914	)		(49,033	)
Decrease in long-term deposits and prepayments			7,561			3,192			11,451			8,388
Increase/(decrease) in trade and other payables			17,265			(2,842	)		7,814			2,175

Cash generated from operations			289,530			53,351			258,951			252,623
Income tax paid			(2,881	)		—			—			—

Net cash generated from operating activities			286,649			53,351			258,951			252,623

F-13

Consolidated statements of cash flows

for the year ended March 31, 2012,

the three months ended June 30, 2012 and

the years ended June 30, 2013 and 2014 (continued)

(Expressed in Renminbi)


		Year ended March 31,			Three months Ended June 30,			Years ended June 30,
	Note	2012			2012			2013			2014
		RMB’000			RMB’000			RMB’000			RMB’000
Investing activities
Interest received			1,310			909			2,084			576
Plantations of non-current biological assets			(1,656	)		(480	)		(1,856	)		(1,838	)
Payment for the purchase of property, plant and equipment			(6,797	)		(4,746	)		(21,878	)		(6,963	)
Payment for construction in progress and prepayments			(339,046	)		(60,904	)		(399,657	)		(256,321	)
Proceeds from disposal of property, plant and equipment and lease prepayment			5,331			—			—			149
Net cash inflow from disposal of a subsidiary			3,737			—			—			—

Net cash used in investing activities			(337,121	)		(65,221	)		(421,307	)		(264,397	)

Financing activities
Interest paid			(10,521	)		(5,305	)		(13,238	)		(9,938	)
Proceeds from bank loans			10,000			—			113,492			101,000
Repayments of bank loans			(6,000	)		—			(52,011	)		(147,650	)
Increase in pledged bank deposits			—			—			(45,065	)		(54,935	)
Proceeds from loan from a shareholder			—			—			—			18,574
Proceeds from exercise of share options			3,161			—			—			—
Payment for repurchase of shares			(10,185	)		—			(37,923	)		—

Net cash used in financing activities			(13,545	)		(5,305	)		(34,745	)		(92,949	)

F-14

Consolidated statements of cash flows

for the year ended March 31, 2012,

the three months ended June 30, 2012 and

the years ended June 30, 2013 and 2014 (continued)

(Expressed in Renminbi)


			Year ended March 31,			Three months Ended June 30,			Years ended June 30,
	Note		2012			2012			2013			2014
			RMB’000			RMB’000			RMB’000			RMB’000
Net decrease in cash				(64,017	)		(17,175	)		(197,101	)		(104,723	)
Cash at beginning of the year/period				598,722			520,475			504,506			305,487
Effect of foreign exchange rate changes				(14,230	)		1,206			(1,918	)		(24	)

Cash at end of the year/period		21		520,475			504,506			305,487			200,740

See accompanying notes to the consolidated financial statements.

F-15

Notes to the consolidated financial statements

(Expressed in Renminbi unless otherwise indicated)

1	General information

(a)

Principal activities

Le Gaga Holdings Limited (the “Company”) was incorporated in the Cayman Islands on May 6, 2010 as the holding company of China Linong International Limited (“China Linong”) and its subsidiaries in connection with the initial public offering (the “IPO”) of the Company’s American depositary shares on the NASDAQ Global Select Market, which was completed in October 2010. The registered office of the Company is located at the offices of Maples Corporate Services Limited, P.O. Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands. The Company and its subsidiaries (hereinafter collectively referred as the “Group”) are principally engaged in cultivating and processing of vegetables in the People’s Republic of China (the “PRC”) for distribution to markets in the PRC.

(b)

Change in Fiscal Year End

On August 24, 2012, the Board of Directors of the Company (the “Board”) approved a change in the Company’s fiscal year end from March 31 to June 30. The change in year end is to align the Company’s fiscal reporting period and its annual budget planning with the Company’s production and sales cycle.

2	Significant accounting policies

(a)

Statement of compliance

The accompanying consolidated financial statements have been prepared in accordance with all applicable International Financial Reporting Standards (“IFRSs”), as issued by the International Accounting Standards Board (“IASB”). IFRSs include International Accounting Standards (“IASs”) and interpretations. The consolidated financial statements were approved and authorized for issue by the Board on October 30, 2014.

The IASB has issued certain new and revised IFRSs that are first effective or available for early adoption for the current accounting period of the Group. Information on changes in accounting policies resulting from initial application of these developments to the extent that they are relevant to the Group for the current and prior periods reflected in the accompanying consolidated financial statements is provided in note 2(c).

F-16

2	Significant accounting policies (continued)

(b)

Basis of preparation of the financial statements

The measurement basis used in the preparation of the accompanying consolidated financial statements is the historical cost basis except for the following assets and liabilities which are stated at fair values as explained in the accounting policies set out below:

•

biological assets (see note 2(l))

•

derivative financial instruments (see note 2(e))

The preparation of financial statements in conformity with IFRSs requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Judgements made by management in the application of IFRSs that have significant effect on the financial statements and major sources of estimation uncertainty are discussed in note 3.

F-17

2	Significant accounting policies (continued)

(c)

Changes in accounting policies

The IASB has issued the following new IFRSs and amendments to IFRSs that are first effective for the current accounting period of the Group:

•

Amendments to IAS 1, Presentation of financial statements—Presentation of items of other comprehensive income.

•

IFRS 10, Consolidated Financial Statements

•

IFRS 13, Fair value measurement

•

Amendments to IFRS 7, Offsetting financial assets and financial liabilities

The Group has not applied any new standard or interpretation that is not yet effective for the current accounting period (note 32). Impacts of the adoption of the new or amended IFRSs are discussed below:

Amendments to IAS 1, Presentation of financial statements—Presentation of items of other comprehensive income

The amendments require entities to present separately the items of other comprehensive income that would be reclassified to profit or loss in the future if certain conditions are met from those that would never be reclassified to profit or loss. The presentation of other comprehensive income in the consolidated statements of profit or loss and other comprehensive income in these financial statements has been modified accordingly. In addition, the Group has chosen to use the new titles “statements of profit or loss” and “statements of profit or loss and other comprehensive income” as introduced by the amendments in these consolidated financial statements.

IFRS 10, Consolidated financial statements

IFRS 10, replace the requirements in IAS 27, Consolidated and separate financial statements relating to the presentation of consolidated financial statements and SIC 12 Consolidation—Special purpose entities. It introduces a single control model to determine whether an investee should be consolidated, by focusing on whether the entity has power over the investee, exposure or rights to variable returns from its involvement with the investee and the ability to use its power to affect the amount of those returns.

As a result of the adoption of IFRS 10, the Group has changed its accounting policy with respect to determining whether it has control over an investee. The adoption does not change any of the control conclusions reached by the Group in respect of its involvement with other entities as at 1 July 2013.

F-18

2	Significant accounting policies (continued)

(c)

Changes in accounting policies (continued)

IFRS 13, Fair value measurement

IFRS 13 replaces existing guidance in individual IFRSs with a single source of fair value measurement guidance. IFRS 13 also contains extensive disclosure requirements about fair value measurements for both financial instruments and non-financial instruments. To the extent that the requirements are applicable to the Group, the Group has provided those disclosures in notes 17 and 29. The adoption of IFRS 13 does not have any material impact on the fair value measurements of the Group’s assets and liabilities.

Amendments to IFRS 7, Offsetting financial assets and financial liabilities

The amendments introduce new disclosures in respect of offsetting financial assets and financial liabilities. Those new disclosures are required for all recognized financial instruments that are set off in accordance with IAS 32, Financial instruments: Presentation and those that are subject to an enforceable master netting arrangement or similar agreement that covers similar financial instruments and transactions, irrespective of whether the financial instruments are set off in accordance with IAS 32.

The adoption of the amendments does not have an impact on the Group’s financial statements because the Group has not offset financial instruments, nor has it entered into master netting arrangement or similar agreement which is subject to the disclosures of IFRS 7 during the periods presented.

(d)

Subsidiaries

Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. When assessing whether the Group has power, only substantive rights (held by the Group and other parties) are considered.

An investment in a subsidiary is consolidated into the consolidated financial statements from the date that control commences until the date that control ceases. Intra-group balances, transactions and cash flows and any unrealized profits arising from intra-group transactions are eliminated in full in preparing the consolidated financial statements. Unrealized losses resulting from intra-group transactions are eliminated in the same way as unrealized gains but only to the extent that there is no evidence of impairment.

F-19

2	Significant accounting policies (continued)

(e)

Derivative financial instruments

Derivative financial instruments are recognized initially at fair value. At the end of each reporting period the fair value is remeasured. The gain or loss on remeasurement to fair value is charged immediately to profit or loss.

(f)

Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and on hand, demand deposits with banks and other financial institutions, and short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value, having been within three months of maturity at acquisition.

(g)

Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses (see note 2(k)).

Gains or losses arising from the retirement or disposal of an item of property, plant and equipment are determined as the difference between the net disposal proceeds and the carrying amount of the item and are recognized in profit or loss on the date of retirement or disposal.

Depreciation is calculated to write off the cost of items of property, plant and equipment, less their estimated residual value, if any, using the straight-line method over their estimated useful lives as follows:



•	Land improvements, buildings and farmland infrastructure	Shorter of the unexpired term of land leases and their estimated useful lives of 3 to 30 years

•	Equipment and machinery	3 to 10 years

•	Motor vehicles	3 to 10 years

•	Furniture, fixtures and computer equipment	5 years

Depreciation of property, plant and equipment attributable to agricultural activities is capitalized as part of plantation expenditure. Depreciation relating to idle capacity is charged to profit or loss in the accounting period of which the idle capacity is identified.

Where parts of an item of property, plant and equipment have different useful lives, the cost of the item is allocated on a reasonable basis between the parts and each part is depreciated separately. Both the useful life of an asset and its residual value, if any, are reviewed annually.

F-20

2	Significant accounting policies (continued)

(h)

Construction in progress

Construction in progress represents property, plant and equipment under construction, and is stated at cost less impairment losses (see note 2(k)). Cost of self-constructed items of property, plant and equipment include the cost of materials, direct labour and an appropriate proportion of production overheads and borrowing costs (see note 2(w)). Capitalization of these costs ceases and the construction in progress is transferred to property, plant and equipment when the asset is substantially ready for its intended use.

No depreciation is provided in respect of construction in progress until it is completed and ready for its intended use.

(i)

Lease prepayments

Lease prepayments represent the cost of land use rights paid to the PRC government authorities. Lease prepayments are carried at cost less accumulated amortization and impairment losses (see note 2(k)). Amortization is charged to profit or loss on a straight-line basis over the respective periods of the rights.

(j)

Leased assets

An arrangement, comprising a transaction or a series of transactions, is or contains a lease if the Group determines that the arrangement conveys a right to use a specific asset or assets for an agreed period of time in return for a payment or a series of payments. Such a determination is made based on evaluation of the substance of the arrangement and is regardless of whether the arrangement takes the legal form of a lease.

(i)	Classification of assets leased to the Group

Assets that are held by the Group under leases which transfer to the Group substantially all the risks and rewards of ownership are classified as being held under finance leases. Leases which do not transfer substantially all the risks and rewards of ownership to the Group are classified as operating leases.

(ii)	Operating lease charges

Where the Group has the use of assets held under operating leases, payments made under the leases are charged to profit or loss in equal installments over the accounting periods covered by the lease term. Lease incentives received are recognized in profit or loss as an integral part of the aggregate net lease payments made. Contingent rentals are charged to profit or loss in the accounting period in which they are incurred.

The cost of acquiring land held under an operating lease is amortized on a straight-line basis over the period of the lease term.

F-21

2	Significant accounting policies (continued)

(k)

Impairment of assets

(i)	Impairment of receivables

Current receivables that are carried at amortized cost are reviewed at the end of each reporting period to determine whether there is objective evidence of impairment. Objective evidence of impairment includes observable data that comes to the attention of the Group about one or more of the following loss events:

•

significant financial difficulty of the debtor;

•

a breach of contract, such as a default or delinquency in interest or principal payments;

•

it becoming probable that the debtor will enter bankruptcy or other financial reorganization; and

•

significant changes in the technological, market, economic or legal environment that have an adverse effect on the debtor.

If any such evidence exists, the impairment loss is determined and recognized as follows:

•

For trade and other current receivables carried at amortized cost, the impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate (i.e. the effective interest rate computed at initial recognition of these assets), where the effect of discounting is material. This assessment is made collectively where these financial assets share similar risk characteristics, such as similar past due status, and have not been individually assessed as impaired. Future cash flows for financial assets which are assessed for impairment collectively are based on historical loss experience for assets with credit risk characteristics similar to the collective group.

Impairment losses are written off against the corresponding assets directly, except for impairment losses recognized in respect of trade receivables whose recovery is considered doubtful but not remote. In this case, the impairment losses for doubtful debts are recorded using an allowance account. When the Group is satisfied that recovery is remote, the amount considered irrecoverable is written off against trade receivables directly and any amounts held in the allowance account relating to that debt are reversed. Subsequent recoveries of amounts previously charged to the allowance account are reversed against the allowance account. Other changes in the allowance account and subsequent recoveries of amounts previously written off directly are recognized in profit or loss.

F-22

2	Significant accounting policies (continued)

(k)

Impairment of assets (continued)

(ii)	Impairment of other assets

Internal and external sources of information are reviewed at the end of each reporting period to identify indications that the following assets may be impaired or an impairment loss previously recognized no longer exists or may have decreased.

•

property, plant and equipment;

•

construction in progress;

•

lease prepayments; and

•

long-term deposits and prepayments.

If any such indication exists, the asset’s recoverable amount is estimated.

•

Calculation of recoverable amount

The recoverable amount of an asset is the greater of its fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Where an asset does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the smallest group of assets that generates cash inflows independently (i.e. a cash-generating unit).

•

Recognition of impairment losses

An impairment loss is recognized in profit or loss if the carrying amount of an asset, or the cash-generating unit to which it belongs, exceeds its recoverable amount. Impairment losses recognized in respect of cash-generating units are allocated to reduce the carrying amount of the other assets in the unit (or group of units) on a pro rata basis, except that the carrying value of an asset will not be reduced below its individual fair value less costs of disposal, or value in use, if determinable.

•

Reversals of impairment losses

An impairment loss is reversed if there has been a favourable change in the estimates used to determine the recoverable amount. A reversal of an impairment loss is limited to the asset’s carrying amount that would have been determined had no impairment loss been recognized in prior years. Reversals of impairment losses are credited to profit or loss in the year in which the reversals are recognized.

F-23

2	Significant accounting policies (continued)

(l)

Biological assets

Biological assets are living plants managed by the Group on its farmland. Biological assets include vegetables and fruits which are to be harvested as agricultural produce, and tea and other trees which are not agricultural produce but are self-regenerating for sustaining regular harvests of agricultural produce. Biological assets with life cycle of one year or less are classified as current biological assets. Biological assets are measured at fair value less costs to sell on initial recognition and at the end of each reporting period. Costs to sell include all incremental costs directly attributable to the sale of the biological assets, excluding finance costs and income taxes. The fair value of a biological asset in its present location and condition is determined based on either the present value of expected net cash flows from the biological asset discounted at a current market-determined pre-tax rate or the current market price with reference to the species, growing condition, costs incurred and expected yield of the crops. The gain or loss arising from initial recognition of a biological asset at fair value less costs to sell and from a change in fair value less costs to sell of a biological asset is recognized in profit or loss.

Agricultural produce harvested from the Group’s biological assets is initially measured at its fair value less costs to sell at the point of harvest. The fair value of agricultural produce is determined based on market prices in the local market. The gain or loss arising from initial recognition of agricultural produce as a result of harvesting is recognized in profit or loss for the period in which it arises. The fair value less costs to sell at the point of harvest is the deemed cost of the agricultural produce included in inventories for subsequent sale in the local market.

(m)

Inventories

Inventories comprising agricultural materials, consumables, packing materials, and agricultural produce and are measured at the lower of cost and net realizable value. The cost of inventories, other than agricultural produce, is based on the weighted average cost formula, and includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition. The cost of agricultural produce transferred from biological assets is its fair value less costs to sell at the point of harvest.

Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

When inventories are sold, the carrying amount of those inventories is recognized as an expense in the period in which the related revenue is recognized. The amount of any write-down of inventories to net realizable value and all losses of inventories are recognized as an expense in the period the write-down or loss occurs.

F-24

2	Significant accounting policies (continued)

(n)

Trade and other receivables

Trade and other receivables are initially recognized at fair value and thereafter stated at amortized cost using the effective interest rate method, less allowance for impairment of doubtful debts (see note 2(k)), except where the receivables are interest-free loans made to related parties without any fixed repayment terms or the effect of discounting would be immaterial. In such cases, the receivables are stated at cost less allowance for impairment of doubtful debts.

(o)

Interest-bearing borrowings

Interest-bearing borrowings are recognized initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortized cost with any difference between the initially recognized amount and redemption value being recognized in profit or loss over the period of the borrowings, together with any interest and fees payable, using the effective interest method.

(p)

Trade and other payables

Trade and other payables are initially recognized at fair value and thereafter stated at amortized cost unless the effect of discounting would be immaterial, in which case they are stated at cost.

(q)

Employee benefits

(i)	Short term employee benefits and contributions to defined contribution retirement plans

Salary, annual bonuses, paid annual leave, contributions to defined contribution retirement plans and the cost of non-monetary benefits are accrued in the year in which the associated services are rendered by employees. Where payment or settlement is deferred and the effect would be material, these amounts are stated at their present values.

F-25

2	Significant accounting policies (continued)

(q)

Employee benefits (continued)

(ii)	Share-based payments

The fair value of share options granted to employees is recognized as an employee cost with a corresponding increase in a capital reserve within equity. The fair value is measured at grant date using the Black-Scholes Option Pricing model or the Binomial Option Pricing model, taking into account the terms and conditions upon which the options were granted. Where the employees have to meet vesting conditions before becoming unconditionally entitled to the options, the total estimated fair value of the options is spread over the vesting period, taking into account the probability that the options will vest.

During the vesting period, the number of share options that is expected to vest is reviewed. Any resulting adjustment to the cumulative fair value recognized in prior years is charged/credited to profit or loss for the year of the review, unless the original employee expenses qualify for recognition as an asset, with a corresponding adjustment to the capital reserve. On vesting date, the amount recognized as an expense is adjusted to reflect the actual number of options that vest (with a corresponding adjustment to the capital reserve) except where forfeiture is only due to not achieving vesting conditions that relate to the market price of the shares. The equity amount is recognized in the capital reserve until either the option is exercised (when it is transferred to the share premium account) or the option expires (when it is released directly to retained earnings).

(r)

Income tax

Income tax for the year/period comprises current tax and movements in deferred tax assets and liabilities. Current tax and movements in deferred tax assets and liabilities are recognized in profit or loss except to the extent that they relate to business combinations or items recognized in other comprehensive income or directly in equity, in which case the relevant amounts are recognized in other comprehensive income or directly in equity, respectively.

Current tax is the expected tax payable on the taxable income for the year/period, using tax rates enacted or substantively enacted at the end of reporting period, and any adjustment to tax payable in respect of previous years.

Deferred tax assets and liabilities arise from deductible and taxable temporary differences respectively, being the differences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax bases. Deferred tax assets also arise from unused tax losses and unused tax credits.

F-26

2	Significant accounting policies (continued)

(r)

Income tax (continued)

Apart from certain limited exceptions, all deferred tax liabilities, and all deferred tax assets to the extent that it is probable that future taxable profits will be available against which the asset can be utilized, are recognized. Future taxable profits that may support the recognition of deferred tax assets arising from deductible temporary differences include those that will arise from the reversal of existing taxable temporary differences, provided those differences relate to the same taxation authority and the same taxable entity, and are expected to reverse either in the same period as the expected reversal of the deductible temporary difference or in periods into which a tax loss arising from the deferred tax asset can be carried back or forward. The same criteria are adopted when determining whether existing taxable temporary differences support the recognition of deferred tax assets arising from unused tax losses and credits, that is, those differences are taken into account if they relate to the same taxation authority and the same taxable entity, and are expected to reverse in a period, or periods, in which the tax loss or credit can be utilized.

The limited exceptions to recognition of deferred tax assets and liabilities are those temporary differences arising from the initial recognition of assets or liabilities that affect neither accounting nor taxable profit (provided they are not part of a business combination), and temporary differences relating to investments in subsidiaries to the extent that, in the case of taxable differences, the Group controls the timing of the reversal and it is probable that the differences will not reverse in the foreseeable future, or in the case of deductible differences, unless it is probable that they will reverse in the future.

The amount of deferred tax recognized is measured based on the expected manner of realization or settlement of the carrying amount of the assets and liabilities, using tax rates enacted or substantively enacted at the end of reporting period. Deferred tax assets and liabilities are not discounted.

The carrying amount of a deferred tax asset is reviewed at each end of reporting period and is reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow the related tax benefit to be utilized. Any such reduction is reversed to the extent that it becomes probable that sufficient taxable profits will be available.

Current tax balances and deferred tax balances, and movements therein, are presented separately from each other and are not offset. Current tax assets are offset against current tax liabilities, and deferred tax assets against deferred tax liabilities, if the Group has the legally enforceable right to set off current tax assets against current tax liabilities and the following additional conditions are met:

•

in the case of current tax assets and liabilities, the Group intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously; or

F-27

2	Significant accounting policies (continued)

(r)

Income tax (continued)

•

in the case of deferred tax assets and liabilities, if they relate to income taxes levied by the same taxation authority on either:

•

the same taxable entity; or

•

different taxable entities, which, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered, intend to realize the current tax assets and settle the current tax liabilities on a net basis or realize and settle simultaneously.

(s)

Provisions and contingent liabilities

Provisions are recognized for liabilities of uncertain timing or amount when the Group has a legal or constructive obligation arising as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made. Where the time value of money is material, provisions are stated at the present value of the expenditures expected to settle the obligation.

Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote.

(t)

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable. Provided it is probable that the economic benefits will flow to the Group and the revenue and costs, if applicable, can be measured reliably, revenue is recognized in profit or loss as follows:

(i)	Sale of goods

The Group recognizes revenue on product sales when vegetables are delivered and the customers take ownership and assume risk of loss, which is when the vegetables are received by the customer at its or a designated location or collected directly by the customer from the cultivation bases, collection of the relevant receivable is probable and the selling price is fixed or determinable. Net sales of products represents the invoiced value of goods, net of trade discounts and allowances.

F-28

2	Significant accounting policies (continued)

(t)

Revenue recognition (continued)

(ii)	Interest income

Interest income is recognized as it accrues using the effective interest method.

(iii)

Government grants

Government grants unrelated to biological assets are recognized in the statement of financial position initially when there is reasonable assurance that it will be received and that the Group will comply with the conditions attaching to them. Grants that compensate the Group for expenses incurred are deducted from the expenses on a systematic basis in the same periods in which the expenses are incurred. Grants that compensate the Group for the cost of an asset are deducted from the carrying amount of the asset and consequently are effectively recognized in profit or loss over the useful life of the asset by way of reduced depreciation expense.

(u)

Translation of foreign currencies

The functional currency of the subsidiaries of the Group in the PRC-mainland is Renminbi (“RMB”), whereas the functional currencies of the Company and China Linong International Limited (“China Linong”) are United States dollars and the functional currencies of the subsidiaries of the Group outside the PRC-mainland are either United States dollars or Hong Kong dollars. For the purposes of presenting the consolidated financial statements, the Group has adopted RMB as its presentation currency, rounded to the nearest thousand.

Foreign currency transactions during the year/period are translated at the foreign exchange rates ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated at the foreign exchange rates ruling at the end of reporting period. Exchange gains and losses are recognized in profit or loss.

Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the foreign exchange rates ruling at the transaction dates.

F-29

2	Significant accounting policies (continued)

(u)

Translation of foreign currencies (continued)

The results of operations outside the PRC-mainland are translated into RMB at the exchange rates approximating the foreign exchange rates ruling at the dates of the transactions. Statement of financial position items are translated into RMB at the closing foreign exchange rates ruling at the end of reporting period. The resulting exchange differences are recognized in other comprehensive income and accumulated separately in equity in the exchange reserve.

On disposal of an operation outside the PRC-mainland, the cumulative amount of the exchange differences relating to that operation is reclassified from equity to profit or loss when the profit or loss on disposal is recognized.

(v)

Research and development costs

Research and development costs are recognized as expenses in the period in which they are incurred.

(w)

Borrowing costs

Borrowing costs that are directly attributable to the acquisition, construction or production of an asset which necessarily takes a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of that asset. Other borrowing costs are expensed in the period in which they are incurred.

The capitalization of borrowing costs as part of the cost of a qualifying asset commences when expenditure for the asset is being incurred, borrowing costs are being incurred and activities that are necessary to prepare the asset for its intended use or sale are in progress. Capitalization of borrowing costs is suspended or ceases when substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are interrupted or complete.

(x)

Related parties

(a)

A person, or a close member of that person’s family, is related to the Group if that person:

(i)

has control or joint control over the Group;

(ii)

has significant influence over the Group; or

(iii)

is a member of the key management personnel of the Group or the Group’s parent.

F-30

2	Significant accounting policies (continued)

(x)

Related parties (continued)

(b)

An entity is related to the Group if any of the following conditions applies:

(i)

The entity and the Group are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others).

(ii)

One entity is an associate or joint venture of the entity (or an associate or joint venture of a member of a group of which the other entity is a member).

(iii)

Both entities are joint ventures of the same third party.

(iv)

One entity is a joint venture of a third entity and the other entity is an associate of the third entity.

(v)

The entity is a post-employment benefit plan for the benefit of employees of either the Group or an entity related to the Group.

(vi)

The entity is controlled or jointly controlled by a person identified in (a).

(vii)

A person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).

Close members of the family of a person are those family members who may be expected to influence, or be influenced by, that person in their dealings with the entity.

(y)

Earnings per share

Basic earnings per share (EPS) is calculated by dividing the profit or loss attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year/period.

Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares, which comprise share options granted to employees.

F-31

2	Significant accounting policies (continued)

(z)

Segment reporting

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. All operating segments’ operating results are reviewed regularly by the Group’s most senior executive management to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available.

3	Accounting estimates and judgements

Notes 25 and 29 contain information about the assumptions and their risk factors relating to fair value of the share options granted and financial instruments. Other key sources of estimation uncertainty are as follows:

(a)

Depreciation and estimated useful lives

Property, plant and equipment is depreciated on a straight line basis over the estimated useful lives of the assets. The Group reviews the estimated useful lives of the assets regularly in order to determine the amount of depreciation expense to be recorded during any reporting period. The useful lives are based on the Group’s historical experience with similar assets. The depreciation expense for future periods is adjusted if there are material changes from previous estimates.

(b)

Impairment of assets

The Group reviews the internal and external sources of information at the end of each reporting period to identify indications that property, plant and equipment, construction in progress, lease prepayments and long-term deposits and prepayments may be impaired. When indication of impairments is identified, management assesses its fair value less costs of disposal or value in use to determine the recoverable amount of such assets and the difference between the carrying amount and recoverable amount is recognized as impairment losses.

F-32

3	Accounting estimates and judgements (continued)

(b)

Impairment of assets (continued)

As of June 30, 2014, the Group identified certain indications of impairments and conducted an impairment testing in respect of its property, plant and equipment, construction in progress, lease prepayments and long-term deposits and prepayments. The recoverable amounts of these non-current assets were based on its value in use, determined by discounting future cash flows to be generated from the continuing use of those non-current assets. Key assumptions used in the estimation of value in use included discount rate, terminal value growth rate and budgeted EBITDA. The estimated recoverable amounts of those non-current assets exceeded their respective carrying amounts as of June 30, 2014. As such, management concluded that no impairment loss was required to be provided on the Group’s property, plant and equipment, construction in progress, lease prepayments and long-term deposits and prepayments as of June 30, 2014.

Any change in the assumptions adopted in the cash flow forecasts would significantly affect the Group’s impairment testing and hence its results.

(c)

Fair value of biological assets and agricultural produce

The Group’s biological assets are valued at fair value less costs to sell at the end of each reporting period and the Group’s agricultural produce harvested from a biological asset is measured at fair value less costs to sell at the point of harvest.

The fair value less costs to sell at the end of each reporting period is determined using the net present value approach which requires a number of key assumptions and estimates to be made such as discount rate, future net cash flows, etc. Any change in these estimates may affect the fair value of the biological assets significantly. Management reviews the assumptions and estimates periodically to identify any significant change in the fair value of biological assets.

F-33

4	Revenue and segment information

(a)

Revenue

The principal activities of the Group are cultivating, processing and distribution of vegetables. Revenue represents the invoiced value of goods sold during the year/period, net of returns and discounts.

An analysis of the Group’s revenue by the categories of customers for the year ended March 31, 2012, the three months ended June 30, 2012 and the years ended June 30, 2013 and 2014 is as follows:


	Year ended March 31,		Three months ended June 30,		Years ended June 30,
	2012		2012		2013		2014
	RMB’000		RMB’000		RMB’000		RMB’000
Wholesalers		289,976		63,968		370,999		327,380
Institutional customers		197,394		54,224		189,164		246,037
Supermarkets		31,880		5,047		16,111		7,083
Others		149		9		—		—

		519,399		123,248		576,274		580,500

The Group’s customer base is diversified and there is no customer with whom transactions have exceeded 10% of the Group’s revenues for the year ended March 31, 2012, the three months ended June 30, 2012 and the years ended June 30, 2013 and 2014. Details of concentrations of credit risk are set out in note 29.

Further details regarding the Group’s principal activities are disclosed below.

(b)

Segment information

The Group manages its business by two operating segments, being the Vegetables business and Trees business, which are organized by the type of biological assets. In a manner consistent with the way in which information is reported internally to the Group’s most senior executive management for the purpose of resource allocation and performance assessment, the Group has identified the following two reportable segments. No operating segments have been aggregated to form the following reportable segments.

•

Vegetables business (PRC-mainland/Hong Kong)

Vegetables business consists of the cultivating, processing and distribution of vegetables.

•

Trees business (PRC-mainland)

Trees business consists of the cultivating, processing and distribution of fruits and tea leaf from its fruit and tea trees, and cultivating and selling of fir trees.

F-34

4	Revenue and segment information (continued)

(b)

Segment information (continued)

For the purposes of assessing the Group’s performance, the Group’s senior executive management monitors segment performance according to the operating results after charging the cost of inventories used, packing expenses, land preparation costs and natural disaster losses but before biological fair value adjustments, other income and expenses as set out in the reconciliation in note 4(b)(ii) below.

(i)	Analysis of segment results


	Year ended March 31,									Three months ended June 30,									Years ended June 30,
	2012									2012									2013									2014
	Vegetables			Trees			Total			Vegetables			Trees			Total			Vegetables			Trees			Total			Vegetables			Trees			Total
	RMB’000			RMB’000			RMB’000			RMB’000			RMB’000			RMB’000			RMB’000			RMB’000			RMB’000			RMB’000			RMB’000			RMB’000
Segment revenue		517,783			1,616			519,399			122,880			368			123,248			574,101			2,173			576,274			578,786			1,714			580,500

Segment profit		274,522			1,078			275,600			55,197			231			55,428			259,989			1,388			261,377			191,335			1,006			192,341

Depreciation and amortization		(63,406	)		(87	)		(63,493	)		(17,411	)		(14	)		(17,425	)		(88,873	)		(56	)		(88,929	)		(121,011	)		(56	)		(121,067	)

F-35

4	Revenue and segment information (continued)

(b)

Segment information (continued)

(ii)	Reconciliation of segment profit

Reconciliation of reportable segment profit to consolidated profit/(loss) before taxation is disclosed as follows:


	Year ended March 31,			Three months ended June 30,			Years ended June 30,
	2012			2012			2013			2014
	RMB’000			RMB’000			RMB’000			RMB’000
Segment profit		275,600			55,428			261,377			192,341
Other income		3,330			466			1,830			1,745
Research and development expenses		(9,091	)		(2,291	)		(13,283	)		(15,926	)
Selling and distribution expenses		(32,120	)		(6,516	)		(42,899	)		(41,687	)
Administrative expenses		(58,519	)		(13,155	)		(44,631	)		(36,072	)
Impairment losses on property, plant and equipment, prepayments and receivables		(14,823	)		—			—			(27,127	)
Other expenses		(2,551	)		(132	)		(797	)		(874	)
Net finance income/(costs)		1,057			(3,137	)		(4,635	)		(4,177	)
Biological assets fair value adjustment		4,348			(38,999	)		(5,666	)		(9,229	)

Profit/(loss) before taxation		167,231			(8,336	)		151,296			58,994

(iii)

Geographical information

The geographical location of a customer is based on the location at which the services were provided or the goods delivered. Substantially all of the Group’s revenues are derived from external customers located in the PRC.

The geographical location of the Group’s non-current assets is based on the physical location of an asset in the case of property, plant and equipment, construction in progress, lease prepayments and biological assets. Substantially all of the Group’s non-current assets are located in the PRC.

F-36

5	Other income and other expenses


	Year ended March 31,			Three months ended June 30,			Years ended June 30,
	2012			2012			2013			2014
	RMB’000			RMB’000			RMB’000			RMB’000
Other income
Gain on disposal of a subsidiary (note 28)		1,309			—			—			—
Incentive payment from depositary bank		980			427			1,828			1,661
Rental income		750			—			—			—
Sundry income		291			39			2			84

		3,330			466			1,830			1,745

Other expenses
Net loss on disposal of property, plant and equipment		(2,153	)		(79	)		(21	)		(338	)
Others		(398	)		(53	)		(776	)		(536	)

		(2,551	)		(132	)		(797	)		(874	)

6	Natural disaster loss

In September 2013, super typhoon “Usagi” hit Guangdong Province, the PRC and caused substantial damages to two cultivation bases located in Guangdong area. These two cultivation bases had greenhouses of a total area of 2,002 mu, part of which experienced various degrees of damages. Certain greenhouses with carrying value of RMB62,614,000 were subject to serious damages and were disposed of with nil proceeds during the year ended June 30, 2014.

F-37

7	Finance income and finance costs recognized in profit or loss


	Year ended March 31,			Three months ended June 30,			Years ended June 30,
	2012			2012			2013			2014
	RMB’000			RMB’000			RMB’000			RMB’000
Finance income
Interest income on bank deposits		1,310			909			2,084			775
Net foreign exchange gain		10,528			—			6,298			433

		11,838			909			8,382			1,208

Finance costs
Interest on bank loans		(10,781	)		(2,792	)		(13,017	)		(10,136	)
Net foreign exchange loss		—			(1,254	)		—			—

		(10,781	)		(4,046	)		(13,017	)		(10,136	)
Less: Interest expense capitalized into construction in progress (note)		—			—			—			4,751

		(10,781	)		(4,046	)		(13,017	)		(5,385	)

Net finance income/(costs) recognized in profit or loss		1,057			(3,137	)		(4,635	)		(4,177	)

Note: The borrowing costs have been capitalized at rate of 6.2% - 7.8% per annum for the year ended June 30, 2014.

F-38

8	Profit/(loss) before taxation

Profit/(loss) before taxation is arrived at after charging:


		Year ended March 31,		Three months ended June 30,		Years ended June 30,
		2012		2012		2013		2014
		RMB’000		RMB’000		RMB’000		RMB’000
*(a)*	*Staff costs*
	Contributions to defined contribution retirement plans		699		149		670		610
	Equity settled share-based payment expenses		21,564		3,813		7,100		2,295
	Salaries, wages and other benefits		67,117		17,661		74,696		72,730

			89,380		21,623		82,466		75,635

*(b)*	*Other items*
	Amortization of lease prepayments		87		14		56		56
	Depreciation		65,885		18,065		91,647		124,241
	Equity settled share-based payment expenses in respect of the Company’s consultants		2,146		379		899		175
	Impairment losses		14,823		—		—		27,127
	– property, plant and equipment (note 12)		12,771		—		—		20,198
	– long-term prepayments (note 15)		2,052		—		—		3,490
	– trade receivables (note 19(a))		—		—		—		472
	– other receivables (note 19(c))		—		—		—		2,967
	Auditors’ remuneration		5,686		1,444		4,933		3,263
	Operating lease charges: minimum lease payments in respect of farmland and premises		14,738		4,384		21,716		21,571

(c)

Land preparation costs

Land preparation costs represent costs incurred before the commencement of agricultural activities on farmland and cost of maintenance of idle farmland during the rotation period.

F-39

9	Income tax in the consolidated statements of profit or loss

(a)

Taxation in the consolidated statements of profit or loss represents:


	Year ended March 31,			Three months ended June 30,		Years ended June 30,
	2012			2012		2013			2014
	RMB’000			RMB’000		RMB’000			RMB’000
Current tax
PRC withholding tax on dividends (note (v))		3,353			—		—			—
US withholding tax on incentive payment (note (iv))		2,099			—		—			—
PRC withholding tax on capital gains (note (vi))		358			—		—			—
Provision for PRC income tax (notes (vii) and (viii))		1,317			—		924			1,078
Release of unrecognized tax benefits due to expiration of the statute of limitations (note 26(f))		(641	)		—		(2,351	)		—

		6,486			—		(1,427	)		1,078
Deferred tax
Origination of temporary differences		(2,071	)		128		(413	)		1,789

Income tax expense/(credit)		4,415			128		(1,840	)		2,867

F-40

9	Income tax in the consolidated statements of profit or loss (continued)

(b)

Reconciliation between tax expenses/(credit) and accounting profit/(loss) at applicable tax rates:


	Year ended March 31,			Three months ended June 30,			Years ended June 30,
	2012			2012			2013			2014
	RMB’000			RMB’000			RMB’000			RMB’000
Profit/(loss) before taxation		167,231			(8,336	)		151,296			58,994

Notional tax on profit before taxation, calculated at the rates applicable to the tax jurisdictions concerned (note (i))		53,256			897			45,959			22,945
Effect of non-taxable income		(528	)		(49	)		(474	)		(141	)
Effect of non-deductible expenses		—			—			—			1,204
Effect of tax concessions (note (ii))		(53,397	)		(1,074	)		(46,148	)		(24,429	)
Effect of tax loss not recognized (note (iii))		570			226			663			421
Effect of tax on gain on disposal of an asset (note (vii))		1,416			—			—			—
US withholding tax on incentive payment (note (iv))		258			128			511			498
PRC withholding tax on dividends (note (v))		3,353			—			—			—
PRC withholding tax on capital gains (note (vi))		128			—			—			—
PRC withholding tax on undistributable profits from a PRC subsidiary (note (ix))		—			—			—			2,369
Release of unrecognized tax benefits due to expiration of the statute of limitations (note 26(f))		(641	)		—			(2,351	)		—

Actual tax expense/(credit)		4,415			128			(1,840	)		2,867

Notes:

(i)

Pursuant to the rules and regulations of the Cayman Islands and the British Virgin Islands (“BVI”), the Group is not subject to any tax on income or capital gains in the Cayman Islands and the BVI.

The Hong Kong statutory profits tax rate is 16.5%. The payments of dividends by Hong Kong companies are not subject to any Hong Kong withholding tax.

The PRC’s statutory income tax rate is 25%.

F-41

9	Income tax in the consolidated statements of profit or loss (continued)

(b)

Reconciliation between tax expenses/(credit) and accounting profit/(loss) at applicable tax rates: (continued)

Notes: (continued)

(ii)

According to the PRC’s Income Tax Law and its relevant regulations, the PRC statutory income tax rate is 25%, however, the Group’s PRC subsidiaries which are engaged in growing, processing and sales of agricultural products are exempt from PRC income tax.

(iii)

No provision for Hong Kong profits tax was made as the Group’s subsidiaries operating in Hong Kong sustained tax losses or had tax losses brought forward to offset estimated assessable profits for the year ended March 31, 2012, the three months ended June 30, 2012 and the years ended June 30, 2013 and 2014.

No provision for PRC income tax was made for Linong Agriculture Technology (Shenzhen) Co. Limited, which is engaged in the sales of agricultural products, as it sustained tax losses for the year ended March 31, 2012, the three months ended June 30, 2012 and the years ended June 30, 2013 and 2014.

Deferred tax asset were not recognized in respecting such tax losses. Further details are set out in note 26(d).

(iv)

The Company has entered into a contract with its depositary bank for American Depositary Shares (“ADS”) depository service for a term of 5 years. During the year ended March 31, 2012, the depositary bank provided an incentive payment of US$1,100,000 to the Company which is refundable to the extent that the service contract is early terminated before the expiry of the 5-year term. The incentive amount is recorded as other payables (included in “deferred income”), which is amortized and recognized as other income over the contract term on a straight-line basis. The Company received a net payment of US$770,000 (equivalent to RMB4,897,000) from the depositary bank, after the deduction of a 30% withholding tax on the gross incentive payment, as required under the relevant U.S. tax laws. Such withholding tax amounted to US$330,000 (equivalent to RMB2,099,000). Deferred tax asset was recognized in respect of such deferred income upon receipt of the incentive payment during the year ended March 31, 2012.

F-42

9	Income tax in the consolidated statements of profit or loss (continued)

(b)

Reconciliation between tax expenses/(credit) and accounting profit/(loss) at applicable tax rates: (continued)

Notes: (continued)

(v)

Pursuant to the PRC’s Income Tax Law and its relevant regulations, dividends payable to foreign corporate investors are subject to a 10% withholding tax for earnings generated since January 1, 2008. Under the Mainland China/Hong Kong Special Administrative Region (“HKSAR”) taxation arrangement, a qualified Hong Kong tax resident which is the “beneficial owner” and holds 25% or more of the equity interest in a PRC-resident enterprise is entitled to a reduced withholding rate of 5%.

During the year ended March 31, 2012, Linong Agriculture Technology (Shantou) Co. Limited (“Linong Shantou”) declared a dividend of RMB58,204,000 to its immediate holding company, Land V. Group Limited, a BVI company, following the decision to dispose of Linong Shantou as mentioned in note 28. Included in the dividend payable to Land V. Group Limited, an amount of RMB33,531,000 was distributed from earnings generated since January 1, 2008 which is subject to 10% PRC dividend withholding tax and provision for PRC withholding tax on dividends of RMB3,353,000 was made.

(vi)

During the year ended March 31, 2012, Linong Agriculture Technology (Liaoyang) Co. Limited was deregistered, with a gain of RMB2,296,000 for PRC tax purpose from the transfer of its processing factory located at Liaoyang, Shenyang to its immediate holding company, Land V. Limited, which is subject to withholding tax at 10% of PRC capital gains tax. No such gain was noted for accounting purposes. Accordingly, deferred tax asset was recognized in respect of such capital gain and related temporary differences would be reversed upon the disposal of the relevant assets.

During the year ended March 31, 2012, Land V. Group Limited disposed of its equity interest in Linong Shantou, with a gain of RMB1,276,000 for PRC tax purpose which is subject to 10% PRC capital gain withholding tax.

(vii)

During the year ended March 31, 2012, Land V. Limited (Fujian) disposed of its processing factory located at Lianjiang, Fujian Province for a consideration of RMB2,300,000 which is subject to PRC income tax of RMB575,000 and PRC land appreciation tax of RMB742,000.

F-43

9	Income tax in the consolidated statements of profit or loss (continued)

(b)

Reconciliation between tax expenses/(credit) and accounting profit/(loss) at applicable tax rates: (continued)

Notes: (continued)

(viii)

During the years ended June 30, 2013 and 2014, the Group received several government grants totalling RMB3,695,000 and RMB4,316,800 respectively which were regarded as non-agricultural source of income and subject to PRC income tax of 25%. Such government grants are initially recognized as other payables (see note 23) and will be deducted from the expenses or the carrying amounts of construction in progress upon the fulfillment of conditions attached to such government grants (see note 2(t)(iii)). Deferred tax assets were recognized in respect of such other payables upon receipt of such government grants and the related temporary difference would be reversed upon deduction of relevant amounts from the expenses or reduced depreciation expenses charged to profit or loss.

(ix)

During the year ended June 30, 2014, Land V. Agriculture Technology (Ningde) Co. Limited (“Linong Ningde”) suspended operation of the cultivation base in Hubei, Fujian. The Group plans to deregister Linong Ningde after the return of the cultivation base to the landlord and the undistributed profit of Linong Ningde is expected to be distributed to the immediate holding company, Land V. Group Limited, in the foreseeable future. Linong Ningde had an undistributed profit of RMB34,667,000 as of June 30, 2014, of which RMB23,693,000 was derived from earnings generated since January 1, 2008 which would be subject to 10% PRC dividend withholding tax upon distribution. Accordingly, deferred tax liabilities was recognized in respect of the undistributed profits of RMB23,693,000.

10	Earnings/(loss) per ordinary share

(a)

Basic earnings/(loss) per ordinary share

The calculation of basic profit/(loss) per share is based on the profit/(loss) attributable to ordinary equity shareholders of the Group of a profit of RMB56,127,000 (year ended March 31, 2012: profit of RMB162,816,000; three months ended June 30, 2012: loss of RMB8,464,000; year ended June 30, 2013: profit of RMB153,136,000) and the weighted average number of ordinary shares outstanding, calculated as follows:

F-44

10	Earnings/(loss) per ordinary share (continued)

(a)

Basic earnings/(loss) per ordinary share (continued)

Weighted average number of ordinary shares:


	Year ended March 31,			Three months ended June 30,			Years ended June 30,
	2012			2012			2013			2014
Issued ordinary shares at beginning of the year/period		2,293,591,000			2,300,782,150			2,300,782,150			2,198,845,700
Effect of treasury shares		(7,425,000	)		(19,351,850	)		(49,119,623	)		—
Effect of share options exercised		969,000			—			—			—

Weighted average number of ordinary shares at end of the year/period		2,287,135,000			2,281,430,300			2,251,662,527			2,198,845,700

(b)

Diluted earnings/(loss) per ordinary share

The calculation of diluted earnings/(loss) per share is based on the profit/(loss) attributable to ordinary equity shareholders of the Group of a profit of RMB56,127,000 (year ended March 31, 2012: profit of RMB162,816,000; three months ended June 30, 2012: loss of RMB8,464,000; year ended June 30, 2013: profit of RMB153,136,000) and the weighted average number of ordinary shares outstanding, calculated as follows:

Weighted average number of ordinary shares (diluted):


	Year ended March 31,		Three months ended June 30,		Years ended June 30,
	2012		2012		2013		2014
Weighted average number of ordinary shares at end of the year/period		2,287,135,000		2,281,430,300		2,251,662,527		2,198,845,700
Effect of deemed issue of shares under the Company’s share option schemes		67,614,000		—		777,380		—

Weighted average number of ordinary shares (diluted) at end of the year/period		2,354,749,000		2,281,430,300		2,252,439,907		2,198,845,700

F-45

10	Earnings/(loss) per ordinary share (continued)

(b)

Diluted earnings/(loss) per ordinary share (continued)

For the three months ended June 30, 2012, the computation of diluted loss per share does not assume the conversion of the Company’s outstanding share options since it would have been anti-dilutive.

For the year ended June 30, 2014, all options issued under the Group’s share option schemes (year ended March 31, 2012: 44,971,801 options; year ended June 30, 2013: 189,155,852 options) were excluded from the diluted weighted average number of shares calculation as their effect would have been anti-dilutive.

11	Employee retirement benefits

Defined contribution retirement schemes

Pursuant to the relevant labour rules and regulations in the PRC-mainland, the Group participates in defined contribution retirement benefit schemes (the “Schemes”) organized by the relevant local government authorities whereby the Group is required to make contributions to the Schemes based on a percentage of the eligible employees’ salaries. Contributions made are charged to profit or loss as they become payable, in accordance with the rules of the Schemes. The employer’s contributions vest fully once they are made. The local government authorities are responsible for the entire pension obligations payable to existing and retired employees.

The Group also operates a Mandatory Provident Fund Scheme (the “MPF Scheme”) under the Hong Kong Mandatory Provident Fund Schemes Ordinance for employees employed under the jurisdiction of the Hong Kong Employment Ordinance. The MPF Scheme is a defined contribution retirement plan administered by independent trustees. Under the MPF Scheme, the employer and its employees are each required to make contributions to the plan at 5% of the employees’ relevant income, subject to a cap of monthly relevant income of HK$30,000 (HK$25,000 prior to June 2014). Contributions to the plan vest immediately.

The Group does not have any other pension schemes for its employees in respect of the subsidiaries outside PRC-mainland and Hong Kong. The directors of the Company are of the opinion that the Group did not have any significant liabilities beyond the above contributions in respect of the retirement benefits of its employees.

F-46

12	Property, plant and equipment


	Land improvements			Buildings and farmland infrastructure			Equipment and machinery			Motor vehicles			Furniture, fixtures and computer equipment			Total
	RMB’000			RMB’000			RMB’000			RMB’000			RMB’000			RMB’000
Cost:
As at April 1, 2011		136,734			513,007			30,604			2,716			1,965			685,026
Exchange adjustments		—			(70	)		—			(36	)		(17	)		(123	)
Additions		100			253			5,765			563			116			6,797
Transfer from construction in progress (note 13)		42,815			160,749			932			—			—			204,496
Disposals
– through disposal of subsidiary		(11,163	)		(8,250	)		(198	)		—			—			(19,611	)
– others		—			(5,030	)		(9,776	)		(198	)		(418	)		(15,422	)

As at March 31, 2012		168,486			660,659			27,327			3,045			1,646			861,163

Accumulated depreciation:
As at April 1, 2011		25,771			67,264			14,693			1,372			680			109,780
Exchange adjustments		—			(4	)		—			(18	)		(4	)		(26	)
Charge for the year		15,559			43,264			6,339			412			311			65,885
Impairment loss		4,055			8,711			5			—			—			12,771
Written back on disposals
– through disposal of subsidiary		(4,686	)		(4,308	)		(119	)		—			—			(9,113	)
– others		(28	)		(2,391	)		(8,690	)		(131	)		(191	)		(11,431	)

As at March 31, 2012		40,671			112,536			12,228			1,635			796			167,866

Net book value:
As at March 31, 2012		127,815			548,123			15,099			1,410			850			693,297

F-47

12	Property, plant and equipment (continued)


	Land improvements		Buildings and farmland infrastructure			Equipment and machinery			Motor vehicles		Furniture, fixtures and computer equipment			Total
	RMB’000		RMB’000			RMB’000			RMB’000		RMB’000			RMB’000
Cost:
As at April 1, 2012		168,486		660,659			27,327			3,045		1,646			861,163
Exchange adjustments		—		49			—			5		2			56
Additions		—		—			4,500			171		75			4,746
Transfer from construction in progress (note 13)		1,000		19,298			—			—		—			20,298
Disposals		—		(3,778	)		(619	)		—		(80	)		(4,477	)

As at June 30, 2012		169,486		676,228			31,208			3,221		1,643			881,786

Accumulated depreciation:
As at April 1, 2012		40,671		112,536			12,228			1,635		796			167,866
Exchange adjustments		—		4			—			3		1			8
Charge for the period		4,150		11,960			1,782			104		69			18,065
Written back on disposals		—		(3,778	)		(548	)		—		(72	)		(4,398	)

As at June 30, 2012		44,821		120,722			13,462			1,742		794			181,541

Net book value:
As at June 30, 2012		124,665		555,506			17,746			1,479		849			700,245

F-48

12	Property, plant and equipment (continued)


	Land Improvements			Buildings and farmland infrastructure			Equipment and machinery			Motor vehicles			Furniture, fixtures and computer equipment			Total
	RMB’000			RMB’000			RMB’000			RMB’000			RMB’000			RMB’000
Cost:
As at July 1, 2012		169,486			676,228			31,208			3,221			1,643			881,786
Exchange adjustments		—			(202	)		—			(21	)		(6	)		(229	)
Additions		—			1,555			20,026			—			297			21,878
Transfer from construction in progress (note 13)		68,656			321,042			27,315			—			2,030			419,043
Disposals		(1,070	)		(3,568	)		(2,457	)		(7	)		(108	)		(7,210	)

As at June 30, 2013		237,072			995,055			76,092			3,193			3,856			1,315,268

Accumulated depreciation:
As at July 1, 2012		44,821			120,722			13,462			1,742			794			181,541
Exchange adjustments		—			(21	)		—			(17	)		(4	)		(42	)
Charge for the year		21,416			58,309			11,156			386			380			91,647
Written back on disposals		(1,070	)		(3,567	)		(2,457	)		(6	)		(89	)		(7,189	)

As at June 30, 2013		65,167			175,443			22,161			2,105			1,081			265,957

Net book value:
As at June 30, 2013		171,905			819,612			53,931			1,088			2,775			1,049,311

F-49

12	Property, plant and equipment (continued)


	Land Improvements			Buildings and farmland infrastructure			Equipment and machinery			Motor vehicles			Furniture, fixtures and computer equipment			Total
	RMB’000			RMB’000			RMB’000			RMB’000			RMB’000			RMB’000
Cost:
As at July 1, 2013		237,072			995,055			76,092			3,193			3,856			1,315,268
Exchange adjustments		—			(29	)		—			1			(1	)		(29	)
Additions		—			—			5,060			1,830			73			6,963
Transfer from construction in progress (note 13)		19,501			151,980			47,718			—			—			219,199
Disposals		(1,249	)		(74,314	)		(11,568	)		(508	)		(55	)		(87,694	)

As at June 30, 2014		255,324			1,072,692			117,302			4,516			3,873			1,453,707

Accumulated depreciation:
As at July 1, 2013		65,167			175,443			22,161			2,105			1,081			265,957
Exchange adjustments		—			(2	)		—			(4	)		—			(6	)
Charge for the year		25,116			77,136			21,035			466			488			124,241
Impairment loss		4,656			15,540			2			—			—			20,198
Written back on disposals		(1,249	)		(12,585	)		(10,315	)		(394	)		(50	)		(24,593	)

As at June 30, 2014		93,690			255,532			32,883			2,173			1,519			385,797

Net book value:
As at June 30, 2014		161,634			817,160			84,419			2,343			2,354			1,067,910

Farmland infrastructure and certain buildings are built on the leased farmland and the directors of the Company are of the opinion that the Group is entitled to the beneficial title of such farmland infrastructure and buildings over the term of land leases, the carrying value of those farmland infrastructure and buildings amounted to approximately RMB541,702,000, RMB549,107,000, RMB813,590,000 and RMB817,160,000 at March 31, 2012, June 30, 2012, June 30, 2013 and June 30, 2014 respectively.

During the year ended March 31, 2012, the Group suspended operations at some of its cultivation bases. The Group assessed the recoverable amount of those items of property, plant and equipment with carrying amount of RMB12,771,000 located at suspended cultivation bases and as a result the carrying amount of property, plant and equipment held by these cultivation bases were fully impaired following the Group’s decision to return the related leased farmland to the landlords and dispose of the related property, plant and equipment.

F-50

12	Property, plant and equipment (continued)

During the year ended June 30, 2014, the Group suspended the operation of a cultivation base (see note 9(b)(ix)). The Group assessed the recoverable amount of those items of property, plant and equipment with carrying amount of RMB12,903,000 located at the suspended cultivation base and as a result the carrying amount of property, plant and equipments held by the cultivation base was fully impaired following the Group’s decision to return the leased farmland to the landlords and dispose of the related property, plant and equipment.

During the year ended June 30, 2014, the Group decided to terminate the plan to operate the processing factory, with a carrying amount of RMB7,295,000, located at Liaoyang area as the Group’s processing and distribution centre in this area. The Group assessed the recoverable amount of the processing factory to be minimal and full impairment was recognized.

13	Construction in progress


	As of March 31,			As of June 30,
	2012			2012			2013			2014
	RMB’000			RMB’000			RMB’000			RMB’000
At beginning of the year/period		24,294			52,441			68,627			70,508
Additions		232,643			36,484			420,924			253,413
Transfer to property, plant and equipment (note 12)		(204,496	)		(20,298	)		(419,043	)		(219,199	)

At end of the year/period		52,441			68,627			70,508			104,722

The construction in progress primarily comprises costs incurred on the land improvements and farmland infrastructure on cultivation bases of the subsidiaries in the PRC-mainland under construction at the respective end of reporting periods.

F-51

14	Lease prepayments


	As of March 31,			As of June 30,
	2012			2012		2013			2014
	RMB’000			RMB’000		RMB’000			RMB’000
Cost:
At beginning of the year/period		2,828			1,471		1,478			1,449
Exchange adjustments		—			7		(29	)		(4	)
Disposals		(1,357	)		—		—			—

At end of the year/period		1,471			1,478		1,449			1,445

Accumulated amortization:
At beginning of the year/period		415			208		222			278
Charge for the year		87			14		56			56
Written back on disposals		(294	)		—		—			—

At end of the year/period		208			222		278			334

Net book value:
At end of the year/period		1,263			1,256		1,171			1,111

Lease prepayments represent cost of land use rights paid to the PRC land bureau. The Group has been granted land use rights for a period of 50 years.

F-52

15	Long-term deposits and prepayments

Long-term deposits and prepayments represent prepayments for construction works, deposits to wholesalers and the prepaid marketing, pest control, environmental protection and land sanitation service costs and utilities expenses at the respective end of reporting periods:


	As of March 31,			As of June 30,
	2012			2012			2013			2014
	RMB’000			RMB’000			RMB’000			RMB’000
Construction works		99,504			123,436			138,309			265,341
Prepaid environmental protection service costs		13,454			12,926			10,816			9,275
Prepaid land sanitation service costs		12,390			10,764			4,409			1,565
Prepaid pest control service costs		12,215			11,323			9,009			6,552
Deposits to wholesalers		4,080			4,080			4,080			4,080
Prepaid utilities expenses		1,830			1,773			1,461			1,365
Prepaid facility/front-end fees in connection with bank loans		1,333			1,244			497			232

		144,806			165,546			168,581			288,410
Less: Impairment loss related to suspended cultivation bases		(2,052	)		(2,052	)		(1,665	)		(5,002	)

		142,754			163,494			166,916			283,408

The Group made prepayments to certain third party vendors during the year ended March 31, 2012, the three months ended June 30, 2012 and the years ended June 30, 2013 and 2014 for the provision of pest control, environmental protection and land sanitation service for periods of three to ten years.

During the year ended March 31, 2012, the Group suspended the operations of certain cultivation bases and impairment loss of RMB2,052,000 was recognized in respect of prepayments for pest control service and land sanitation service in relation to such cultivation bases.

During the year ended June 30, 2013, the Group returned one of the suspended cultivation bases to the landlord and wrote off the relevant long-term prepayments of RMB387,000 and related impairment loss made previously.

During the year ended June 30, 2014, the Group returned one of the suspended cultivation bases to the landlord and wrote off the relevant long-term prepayments of RMB153,000 and related impairment loss made previously.

During the year ended June 30, 2014, the Group suspended the operations of one cultivation base and impairment loss of RMB3,490,000 was recognized in respect of prepayments for pest control service, environmental protection service and land sanitation service in relation to such cultivation base.

F-53

16	Principal subsidiaries

The following list contains the particulars of subsidiaries of the Company as of March 31, 2012, June 30, 2012, June 30, 2013 and June 30, 2014. The class of shares held is ordinary unless otherwise stated.


Name of company	Place and date of establishment/ incorporation and operation		Registered capital/issued and fully paid up capital		Ownership interest												Principal activities
Name of company					As of March 31,			As of June 30,									Principal activities
					2012			2012			2013			2014
China Linong International Limited		BVI/ Hong Kong March 24, 2006		US$1,754		100	%		100	%		100	%		100	%		Investment holding
Land V. Group Limited		BVI/ Hong Kong March 24, 2005		US$1,050		100	%		100	%		100	%		100	%		Investment holding
China Linong (Hong Kong) Limited		Hong Kong July 22, 2011		HK$10,000		100	%		100	%		100	%		100	%		Investment holding
Linong (Fujian) Investment Holdings Limited		The PRC January 19, 2012		Registered capital of RMB200,000,000		100	%		100	%		100	%		100	%		Investment holding
Land V. Limited		Hong Kong October 31, 2001		HK$100,000		100	%		100	%		100	%		100	%		Sales of agricultural products
Hong Kong Linong Limited		Hong Kong November 10, 2006		HK$100,000		100	%		100	%		100	%		100	%		Sales of agricultural products
Linong Agriculture Technology (Shenzhen) Co. Limited		The PRC April 23, 2004		HK$10,000,000		100	%		100	%		100	%		100	%		Sales of agricultural products
Land V. Limited (Fujian)		The PRC July 23, 2004		HK$15,000,000		100	%		100	%		100	%		100	%		Growing, processing and sales of agricultural products
Land V. Limited (Zhangjiakou)		The PRC October 18, 2006		HK$11,000,000		100	%		100	%		100	%		100	%		Growing, processing and sales of agricultural products

F-54

16	Principal subsidiaries (continued)


Name of company	Place and date of establishment/ incorporation and operation	Registered capital/issued and fully paid up capital	Ownership interest												Principal activities
Name of company			As of March 31,			As of June 30,									Principal activities
			2012			2012			2013			2014
Linong Agriculture Technology (Huizhou) Co. Limited	The PRC December 28, 2006	HK$90,000,000		100	%		100	%		100	%		100	%	Growing, processing and sales of agricultural products
Xiamen Land V. Group Co. Limited	The PRC March 20, 2007	US$1,000,000		100	%		100	%		100	%		100	%	Growing, processing and sales of agricultural products
Land V. Agriculture Technology (Ningde) Co. Limited	The PRC September 22, 2008	US$2,100,000		100	%		100	%		100	%		100	%	Growing, processing and sales of agricultural products
Fuzhou Land V. Group Co. Limited	The PRC June 12, 2008	US$10,000,000		100	%		100	%		100	%		100	%	Growing, processing and sales of agricultural products
Land V. Agriculture Technology (Zhangzhou) Co. Limited	The PRC June 19, 2008	US$10,000,000		100	%		100	%		100	%		100	%	Growing, processing and sales of agricultural products
Liyuan Agriculture Technology (Quanzhou) Co. Limited	The PRC October 26, 2009	RMB10,000,000		100	%		100	%		100	%		100	%	Growing, processing and sales of agricultural products
Liaoyang Liyuan Agricultural Products Co. Limited	The PRC April 28, 2010	RMB3,000,000		100	%		100	%		100	%		100	%	Growing, processing and sales of agricultural products
Putian Land V. Group Co. Limited	The PRC December 23, 2010	US$24,000,000		100	%		100	%		100	%		100	%	Growing, processing and sales of agricultural products

F-55

16	Principal subsidiaries (continued)


Name of company	Place and date of establishment/ incorporation and operation	Registered capital/issued and fully paid up capital	Ownership interest											Principal activities
Name of company			As of March 31,		As of June 30,									Principal activities
			2012		2012			2013			2014
Linong (Sanming) Limited	The PRC May 23, 2012	RMB50,000,000		—		100	%		100	%		100	%	Growing, processing and sales of agricultural products
Linong Agriculture Technology (Fuqing) Co. Limited	The PRC May 31, 2012	RMB60,000,000		—		100	%		100	%		100	%	Growing, processing and sales of agricultural products
Linong Agriculture Technology (Xianyou) Co. Limited	The PRC June 19, 2012	RMB20,000,000		—		100	%		100	%		100	%	Growing, processing and sales of agricultural products

17	Biological assets

Biological assets represent the growing crops including vegetables and, tea and other trees in various cultivation bases located in the PRC-mainland.

(a)

Reconciliation of carrying amount of biological assets:


	As of March 31, 2012			As of June 30,
	As of March 31, 2012			2012			2013			2014
	RMB’000			RMB’000			RMB’000			RMB’000
At beginning of the year/period		79,711			84,794			38,542			38,707
Changes in fair value less costs to sell		286,927			22,964			277,504			272,419
Plantation expenditure		163,857			38,107			208,355			208,294
Harvested crops transferred to inventories		(445,701	)		(107,323	)		(485,694	)		(492,876	)

At end of the year/period		84,794			38,542			38,707			26,544

Non-current portion		7,697			7,833			12,439			13,227
Current portion		77,097			30,709			26,268			13,317

At end of the year/period		84,794			38,542			38,707			26,544

F-56

17	Biological assets (continued)

(a)

Reconciliation of carrying amount of biological assets (continued):

Plantation expenditure comprises those costs that are directly attributable to cultivation of vegetables, fresh fruits and trees on farmland including seeds, fertilizers, pesticide, direct labour, operating lease charges on farmland, depreciation and other direct costs.

(b)

The analysis of carrying amount of biological assets:


	As of March 31, 2012
	Area		Vegetables		Area		Tea and other trees		Total
	(Mu)		RMB’000		(Mu)		RMB’000		RMB’000
Non-current		—		—		1,150		7,697		7,697
Current		7,092		77,097		—		—		77,097

		7,092		77,097		1,150		7,697		84,794


	As of June 30, 2012
	Area		Vegetables		Area		Tea and other trees		Total
	(Mu)		RMB’000		(Mu)		RMB’000		RMB’000
Non-current		—		—		1,150		7,833		7,833
Current		6,848		30,709		—		—		30,709

		6,848		30,709		1,150		7,833		38,542


	As of June 30, 2013
	Area		Vegetables		Area		Tea and other trees		Total
	(Mu)		RMB’000		(Mu)		RMB’000		RMB’000
Non-current		—		—		1,150		12,439		12,439
Current		6,732		26,268		—		—		26,268

		6,732		26,268		1,150		12,439		38,707


	As of June 30, 2014
	Area		Vegetables		Area		Tea and other trees		Total
	(Mu)		RMB’000		(Mu)		RMB’000		RMB’000
Non-current		—		—		1,150		13,227		13,227
Current		2,792		13,317		—		—		13,317

		2,792		13,317		1,150		13,227		26,544

F-57

17	Biological assets (continued)

(b)

The analysis of carrying amount of biological assets (continued):

Vegetables and fruits are to be harvested as agricultural produce while tea and other trees are not agricultural produce but are self-regenerating for sustaining regular harvests of agricultural produce.

(c)

Measurement of fair values

(i)	Fair value hierarchy

The fair value measurements for vegetables and tea and other trees of RMB13,317,000 and RMB13,227,000 respectively as of June, 30 2014 have been categorised as Level 3 fair values based on the inputs to the valuation techniques used.

The Group has an established control framework with respect to the measurements of fair values. This includes the finance team who has overall responsibility for overseeing fair value measurements of biological assets and reports directly to the Chief Financial Officer.

The finance team collects the significant unobservable inputs from management of each cultivation bases. The significant unobservable inputs are then reviewed by the Financial Controller before being adopted by the independent valuer in the valuation of the Group’s biological assets. The valuation techniques used in the determination of fair values as well as the key inputs used in the valuation models are disclosed in Note 17(c)(ii). The valuation result is then reviewed and approved by the Chief Financial Officer.

F-58

17	Biological assets (continued)

(c)

Measurement of fair values (continued)

(ii)	Level 3 fair values—Valuation techniques and significant unobservable inputs

The following table shows the valuation technique used in measuring fair values of biological assets as of June 30, 2014, as well as the significant unobservable inputs used.


Type	Valuation technique	Significant unobservable inputs	Inter-relationship between key unobservable inputs and fair value measurement

Vegetables	Discounted cash flows:		The estimated fair value would increase (decrease) if:
	The valuation model considers the net present value of the net cash flows expected to be generated by the biological assets. The discount rate used to discount the projected cash flows in the valuation of the biological assets was based on the market-determined pre-tax rate.	- Estimated revenue per Mu (RMB1,725 to RMB31,800), which is based on estimated production volume and estimated market prices	- the estimated revenue per Mu is higher (lower)
		- Estimated plantation expenditure per Mu (RMB1,370 to RMB6,370)	- the estimated cultivation costs per Mu is lower (higher)
		- Estimated costs to sell as a percentage of revenue (7.2%)	- the estimated costs to sell as a percentage of revenue is lower (higher)
		- Discount rate (16.97%)	- the discount rate is lower (higher)

Tea and other trees	Discounted cash flows:		The estimated fair value would increase (decrease) if:

	The valuation model considers the net present value of the net cash flows expected to be generated by the biological assets. The cash flow projections include specific estimates for 10, 12 and 21 years for tea, fir and fruit trees respectively. The discount rates used to discount the projected cash flows in the valuation of the biological assets were based on the market-determined pre-tax rate.	- Estimated revenue per Mu (RMB1,200 to RMB9,200), which is based on estimated production volume and estimated market prices	- the estimated revenue per Mu is higher (lower)
		- Estimated plantation expenditure per Mu (RMB900 to RMB3,600)	- the estimated cultivation costs per Mu is lower (higher)
		- Estimated costs to sell as a percentage of revenue (7.2%)	- the estimated costs to sell as a percentage of revenue is lower (higher)
		- Discount rate (20.01% to 20.29%)	- the discount rate is lower (higher)

F-59

17	Biological assets (continued)

(d)

The quantity and amount of fair value less costs to sell of agricultural produce harvested during the year/period:

As of March 31,

2012

As of June 30,

2012

2013

2014

Quantity

Amount

Quantity

Amount

Quantity

Amount

Quantity

Amount

(tons)

RMB’000

(tons)

RMB’000

(tons)

RMB’000

(tons)

RMB’000

Vegetables and fruits

144,192

445,701

34,947

107,323

138,212

485,694

150,231

492,876

(e)

Risks related to the Group’s biological assets:

Regulatory and environment risks

The Group is subject to laws and regulations in various locations in which it operates. The Group has established environmental policies and procedures aimed at compliance with local environmental and other laws. Management performs regular reviews to identify environmental risks and to ensure that the systems in place are adequate to manage these risks.

Supply and demand risk

The Group is exposed to risks arising from fluctuations in the price and sales volume of agricultural crops. When possible the Group manages this risk by aligning its harvest volume to market supply and demand. Management performs regular industry trend analysis to ensure that the Group’s pricing structure is in line with the market and to ensure that projected harvest volumes are consistent with the expected demand.

Climate and other risks

The Group’s agricultural crops are exposed to the risk of damage from climatic changes, diseases and other natural forces. The Group has extensive processes in place aimed at monitoring and mitigating those risks, including regular inspections and industry pest and disease surveys.

F-60

18	Inventories

(a)

Inventories in the consolidated statements of financial position comprise:


	As of March 31, 2012		As of June 30,
	As of March 31, 2012		2012		2013		2014
	RMB’000		RMB’000		RMB’000		RMB’000
Agricultural materials		10,886		15,057		13,820		16,106
Consumables and packing materials		307		1,370		1,121		1,292

		11,193		16,427		14,941		17,398

Agricultural materials represent seeds, fertilizers and pesticides.

(b)

Reconciliation of carrying amount of agricultural produce:


	As of March 31, 2012			As of June 30,
	As of March 31, 2012			2012			2013			2014
	RMB’000			RMB’000			RMB’000			RMB’000
At beginning of the year/period		34			—			—			—
Harvested crops transferred in from biological assets		445,701			107,323			485,694			492,876
Purchases during the year/period		9,645			660			8,541			463
Cost of inventories sold		(455,380	)		(107,983	)		(494,235	)		(493,339	)

At end of the year/period		—			—			—			—

(c)

The cost of inventories sold for the year ended March 31, 2012, the three months ended June 30, 2012 and the years ended June 30, 2013 and 2014 includes the costs of agricultural produce purchased from third party vendors, the actual plantation expenditure and the adjustments to record the inventories at fair value less costs to sell, as follows:


	As of March 31, 2012		As of June 30,
	As of March 31, 2012		2012		2013		2014
	RMB’000		RMB’000		RMB’000		RMB’000
Purchases of agricultural produce		9,679		660		8,541		463
Plantation expenditure		163,122		45,360		202,524		211,228
Biological assets fair value adjustments		282,579		61,963		283,170		281,648

Cost of inventories sold		455,380		107,983		494,235		493,339

F-61

19	Trade and other receivables


	As of March 31,		As of June 30,
	2012		2012		2013		2014
	RMB’000		RMB’000		RMB’000		RMB’000
Trade receivables		29,804		32,876		55,299		106,065
Less: Allowance for doubtful debts (note 19(a))		—		—		—		(472	)

		29,804		32,876		55,299		105,593
Other receivables, deposits and prepayments		30,057		31,690		29,259		26,407
Less: impairment loss (note 19(c))		—		—		—		(2,967	)

		30,057		31,690		29,259		23,440

		59,861		64,566		84,558		129,033

All of the trade and other receivables are expected to be recovered within one year.

(a)

Impairment of trade receivables

Impairment losses in respect of trade receivables are recorded using an allowance account unless the Group is satisfied that recovery of the amount is remote, in which case the impairment loss is written off against trade receivables directly (see
note 2(k)).

The movement in the allowance for doubtful debts during the year/period is as follows:


	As of March 31,		As of June 30,
	2012		2012		2013		2014
	RMB’000		RMB’000		RMB’000		RMB’000
At beginning of the year/period		—		—		—		—
Impairment loss recognized		—		—		—		472

At end of the year/period		—		—		—		472

As of June 30, 2014, the Group’s trade receivables of RMB472,000 (March 31, 2012: Nil; June 30, 2012: Nil; June 30, 2013: Nil) were individually determined to be impaired. The individually impaired receivables related to customers that were in financial difficulties and management assessed that these receivables are expected not to be recovered. Consequently, specific allowances for doubtful debts of RMB472,000 (March 31, 2012: Nil; June 30, 2012: Nil; June 30, 2013: Nil) were recognized. The Group does not hold any collateral over these balances.

F-62

19	Trade and other receivables (continued)

(b)

Trade receivables that are not impaired

The ageing analysis of trade receivables that are neither individually nor collectively considered to be impaired are as follows:


	As of March 31,		As of June 30,
	2012		2012		2013		2014
	RMB’000		RMB’000		RMB’000		RMB’000
Neither past due nor impaired		29,576		31,403		55,186		83,561

Less than 1 month past due		7		484		105		18,250
1 to 3 months past due		1		3		—		3,416
3 to 6 months past due		216		982		—		366
6 to 12 months past due		4		4		8		—

		228		1,473		113		22,032

		29,804		32,876		55,299		105,593

Receivables that were neither past due nor impaired relate to a wide range of customers for whom there was no recent history of default.

Receivables that were past due but not impaired relate to customers that have a good track record with the Group. Based on past experience, management believes that no impairment allowance is necessary in respect of these balances as there has not been a significant change in credit quality and the balances are still considered fully recoverable. The Group does not hold any collateral over these balances.

F-63

19	Trade and other receivables (continued)

(c)

Impairment of other receivables

During the year ended March 31, 2012, the Group disposed its entire equity interest of a subsidiary to an independent third party (the “buyer”) at a consideration of RMB7,600,000. As of June 30, 2014, the outstanding balance of consideration receivable amounting to RMB2,967,000 was determined to be impaired as management assessed that such receivable is not expected to be recovered since the buyer was found to be in financial difficulties.

20	Pledged bank deposits

As at June 30, 2013, bank deposits of US$5,000,000 and RMB14,000,000 (equivalent to totalling RMB45,065,000) were pledged to a bank to secure a bank loan of US$7,000,000 (equivalent to RMB43,492,000). The pledged bank deposits were released by the bank after the repayment of relevant bank loan of US$7,000,000 during the year ended June 30, 2014.

As at June 30, 2014, bank deposits of RMB100,000,000 were pledged to a bank to secure bills amounting to RMB100,000,000 issued to certain construction contractors in respect of the construction of farmland infrastructure (see note 23).

Cash

Cash comprises:


	As of March 31,		As of June 30,
	2012		2012		2013		2014
	RMB’000		RMB’000		RMB’000		RMB’000
Cash at bank		469,225		435,547		160,757		78,753
Cash in hand		51,250		68,959		144,730		121,987

		520,475		504,506		305,487		200,740

As of June 30, 2014, cash of RMB186,667,000 (March 31, 2012: RMB306,463,000; June 30, 2012: RMB309,105,000; June 30, 2013: RMB289,729,000) is denominated in RMB. RMB is not a freely convertible currency and the remittance of funds out of the PRC is subject to the exchange restriction imposed by the PRC government.

F-64

22	Bank loans


	As of March 31,		As of June 30,
	2012		2012		2013		2014
	RMB’000		RMB’000		RMB’000		RMB’000
Non-current liabilities
DEG loan—non-current portion		75,875		61,998		—		—

Current liabilities
Rabobank loan		—		—		43,492		—
DEG loan—current portion		—		14,307		32,618		—
Other bank loans		10,000		10,000		70,000		98,500

		10,000		24,307		146,110		98,500

		85,875		86,305		146,110		98,500

(a)

DEG loan

On November 10, 2009, China Linong entered into a loan agreement (the “Loan Agreement”) with DEG—Deutsche Investitions—Und Entwicklungsgesellschaft mbH (“DEG”) for a loan principal amount of US$18,000,000 (the “DEG Loan”) to finance the expansion of the Group’s farmland operations. As at June 30, 2013, the outstanding loan principal was US$5,250,000 (equivalent to RMB32,618,000). During the year ended June 30, 2014, the Group repaid the remaining loan principal of US$5,250,000.

(b)

Rabobank loan

During the year ended June 30, 2013, the Company entered into a term loan facility with Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A. (“Rabobank”) for a loan principal amount of US$20,000,000 (“Rabobank loan”). The purpose of the Rabobank loan is for the repayment of the DEG loan and general working capital. Rabobank loan was secured by the pledged deposits as disclosed in note 20. The facility was utilized to the extent of bank loan of US$7,000,000 (equivalent to RMB43,492,000) as of June 30, 2013. During the year ended June 30, 2014, the Company fully repaid the bank loan of US$7,000,000.

F-65

22	Bank loans (continued)

(b)

Rabobank loan (continued)

The term loan facility agreement contains clauses which gives Rabobank the right at any time not later than thirty days prior to the dates falling from one year or two years from the date of drawn down (“call option dates”) to notify the Company all amounts outstanding under the loan facility to be repaid on the call option dates irrespective of whether the Company has complied with the covenants. As a result of the call option right of Rabobank, the outstanding Rabobank loan as of June 30, 2013 was classified as a current liability.

(c)

Other bank loans

A subsidiary of the Company obtained banking facilities of RMB40,000,000 which were guaranteed by Mr. Ma Shing Yung, at nil fee, and guaranteed by another subsidiary of the Company. The facilities were utilized to the extent of bank loans of RMB40,000,000 as of June 30, 2014 (March 31, 2012: RMB10,000,000; June 30, 2012: RMB10,000,000; June 30, 2013: RMB20,000,000). The bank loans are unsecured, interest bearing at fixed rate from 6.3% to 7.5% per annum and repayable within one year.

During the year ended June 30, 2014, a subsidiary of the Company obtained a bank loan of RMB30,000,000 which was guaranteed by Mr. Ma Shing Yung, at nil fee, and guaranteed by a subsidiary of the Company. The loan is unsecured and interest bearing at a floating rate of 10% per annum increment to People’s Bank of China Benchmark rate. The loan is repayable in semi-annual installment of RMB2,500,000 each within the first year from the drawn down date and RMB5,000,000 each in the second year and RMB7,500,000 each in the third year from the drawn down date. During the year ended June 30, 2014, the loan carried an interest rate of 6.77% per annum. The loan agreement contains clauses which gives the bank the right at any time to request the Company to repay all amount of outstanding bank loan under the loan agreement. As a result of the clauses, the outstanding amount of the bank loan of RMB27,500,000 at June 30, 2014 is classified as a current liability.

During the year ended June 30, 2014, certain subsidiaries of the Company obtained bank loans totalling RMB31,000,000 which were guaranteed by Mr. Ma Shing Yung, at nil fee, and guaranteed by other subsidiaries of the Company. The loans are unsecured, interest bearing at a fixed rate of 7.8% per annum and repayable within one year.

Further details of the Company’s management of liquidity risk are set out in note 29(c).

F-66

23	Trade and other payables


	As of March 31,		As of June 30,
	2012		2012		2013		2014
	RMB’000		RMB’000		RMB’000		RMB’000
Trade creditors		9,307		7,755		13,855		17,915
Bills payable		—		—		—		100,000
Government grants		1,220		1,552		4,821		7,839
Deferred income		6,103		5,710		3,905		2,224
Other creditors and accrued charges		20,425		16,094		52,665		69,064

		37,055		31,111		75,246		197,042

All of the trade and other payables are expected to be settled within one year.

At June 30, 2014, bills payable was secured by pledged bank deposits of RMB100,000,000 (see note 20).

During the year ended June 30, 2014, RMB20,391,000 of government grants (year ended March 31, 2012: RMB1,100,000; three months ended June 30, 2012: Nil; year ended June 30, 2013: RMB1,900,000) that compensated the Group for the cost of construction of certain buildings and farmland infrastructure were deducted from the carrying amount of the respective construction in progress.

24	Loan from a shareholder

As of

March 31,

As of June 30,

2012

2013

2014

RMB’000

Loan from a shareholder

—

18,574

On April 24, 2014, the Company obtained a loan from a shareholder—Lui Ming Ho of USD3,000,000 (equivalent to RMB18,574,000) for financing the operations of the Group. The loan from a shareholder is unsecured, interest bearing at a fixed rate of 5.0% per annum and repayable on or before December 31, 2014.

F-67

25	Equity settled share-based transactions

China Linong has several share option schemes (the “Scheme”) which were adopted on May 22, 2007, April 16, 2009 and March 26, 2010, whereby the board of directors of China Linong is authorized to, at its discretion, invite directors, employees and others providing similar services of China Linong or its subsidiaries to take up options to subscribe for shares in China Linong subject to terms and conditions stipulated therein. The Schemes will terminate after ten years from the dates of adoption and no options may be granted under the Schemes thereafter.

On May 23, 2007, China Linong granted share options to Winsome Group Limited, a company held by certain directors and employees of the Group, to subscribe 66,580 ordinary shares of China Linong (on post-split basis upon the subdivision of ordinary shares into 1,000 shares of nominal value of US$0.001 each pursuant to written board resolutions of China Linong on March 21, 2008). On April 17, 2009 and March 29, 2010, China Linong granted share options to certain directors, employees and others providing similar services of the Group to subscribe 48,246 and 103,184 ordinary shares of China Linong respectively. The options granted vest after one to three years after the date of grant and are exercisable within a period of ten years. Each option gives the holder the right to subscribe for one ordinary share in China Linong.

On July 17, 2010, the Company granted 218,010,000 share options (“Le Gaga option”) to the options holders of China Linong at a 1,000-for-1 exchange ratio (“Share Options Exchange”). Each Le Gaga option gives the holder the right to subscribe for one ordinary Share in the Company. Upon the grant of Le Gaga options, 218,010 share options representing all outstanding share options of China Linong were cancelled on July 17, 2010. The grant of Le Gaga options was a replacement plan for the cancelled share options of China Linong and no increment fair value was resulted from the Share Options Exchange as the terms and conditions attached to Le Gaga options are the same as those options granted by China Linong on May 23, 2007, April 17, 2009 and March 29, 2010, respectively except for the corresponding adjustment for the exercise price to give effect to the 1,000-for-1 exchange ratio. The number of options and per share data disclosed in notes 25(a), (b) and (c) was adjusted if applicable to give effect of the 1,000-for-1 exchange ratio.

On August 31, 2010 and June 10, 2011, the Company granted shares options under 2010 Share Incentive Plan (adopted by the Company on August 31, 2010) to certain directors, employees and others providing similar services to the Group to subscribe 60,000,000 and 45,871,801 ordinary shares of the Company, respectively. The options granted vest after one to three years after the date of grant and are exercisable within a period of ten years. Each option gives the holder the right to subscribe for one ordinary share in the Company. The exercise price of share options granted on August 31, 2010 and June 10, 2011 is US$0.08 and US$0.143, respectively.

F-68

25	Equity settled share-based transactions (continued)

(a)

The terms and conditions of the grants are as follows:


	Number of share options								Vesting conditions (from the date of grant)		Contractual term
	Directors		Consultants		Employees		Total		Vesting conditions (from the date of grant)		Contractual term
Granted on May 23, 2007
		15,526,667		—		6,700,000		22,226,667		One year		10 years
		15,526,667		—		6,700,000		22,226,667		Two years		10 years
		15,526,666		—		6,600,000		22,126,666		Three years		10 years

		46,580,000		—		20,000,000		66,580,000

Granted on April 17, 2009
		8,748,667		5,666,667		1,666,667		16,082,001		One year		10 years
		8,748,667		5,666,667		1,666,667		16,082,001		Two years		10 years
		8,748,666		5,666,666		1,666,666		16,081,998		Three years		10 years

		26,246,000		17,000,000		5,000,000		48,246,000

Granted on March 29, 2010
		14,394,667		6,000,000		14,000,000		34,394,667		One year		10 years
		14,394,667		6,000,000		14,000,000		34,394,667		Two years		10 years
		14,394,666		6,000,000		14,000,000		34,394,666		Three years		10 years

		43,184,000		18,000,000		42,000,000		103,184,000

Granted on August 31, 2010
		5,600,000		1,800,000		12,600,000		20,000,000		One year		10 years
		5,600,000		1,800,000		12,600,000		20,000,000		Two years		10 years
		5,600,000		1,800,000		12,600,000		20,000,000		Three years		10 years

		16,800,000		5,400,000		37,800,000		60,000,000

Granted on June 10, 2011
		11,085,000		1,000,000		3,205,601		15,290,601		One year		10 years
		11,085,000		1,000,000		3,205,600		15,290,600		Two years		10 years
		11,085,000		1,000,000		3,205,600		15,290,600		Three years		10 years

		33,255,000		3,000,000		9,616,801		45,871,801

F-69

25	Equity settled share-based transactions (continued)

(b)

The number and weighted average exercise price of share options are as follows:


	As of March 31,					As of June 30,
	2012					2012					2013					2014
	Weighted average exercise price		Number of options			Weighted average exercise price		Number of options			Weighted average exercise price		Number of options			Weighted average exercise price		Number of options
	US$					US$					US$					US$
Outstanding at beginning of the year/period		0.076493		197,516,001			0.089338		232,363,302			0.089411		230,563,302			0.089781		223,721,202
Exercised during the year/period		0.076699		(7,191,150	)		—		—			—		—			—		—
Forfeited during the year/period		0.093296		(3,833,350	)		0.08		(1,800,000	)		0.077334		(6,842,100	)		—		—
Granted during the year/period		0.143		45,871,801			—		—			—		—			—		—

Outstanding at end of the year/period		0.089338		232,363,302			0.089411		230,563,302			0.089781		223,721,202			0.089781		223,721,202

Exercisable at end of the year/period		0.075855		96,914,833			0.0834		126,187,434			0.086487		191,730,601			0.089781		223,721,202

F-70

25	Equity settled share-based transactions (continued)

(b)

The number and weighted average exercise price of share options are as follows: (continued)

The weighted average share price at the date of exercise for share options exercised during the year ended March 31, 2012 was US$0.10. No share options were exercised during the three months ended June 30, 2012 and the years ended June 30, 2013 and 2014.

The options outstanding as of June 30, 2014 had a weighted average remaining contractual life of 5.94 years (March 31, 2012: 8.19 years; June 30, 2012: 7.94 years; June 30, 2013: 6.94 years).

(c)

Fair value of share options and assumptions

The fair value of services received in return for share options granted is measured by reference to the fair value of share options granted. The estimate of the fair value of the share options granted is measured based on the Black-Scholes Option Pricing model or the Binomial Option Pricing model. The weighted average life of the share option is used as an input into this model. Expectations of early exercise are incorporated into the Black-Scholes Option Pricing model or the Binomial Option Pricing model.


	At April 17, 2009 (date of grant)			At March 29, 2010 (date of grant)			At August 31, 2010 (date of grant)			At June 10, 2011 (date of grant)
Fair value at measurement date		US$0.02035 - US$0.02385			US$0.02912 - US$0.03209			US$0.04571 - US$0.04862			US$0.06960 - US$0.07760
Share price		US$0.05015			US$0.06061			US$0.083			US$0.135
Exercise price		US$0.07293			US$0.07570			US$0.080			US$0.143
Expected volatility (expressed as average volatility used in the modeling under the Black-Scholes Option Pricing model or the Binomial Option Pricing model)		51.30% - 53.70	%		56.90	%		57.60% - 58.70	%		53.00	%
Option life (expressed as weighted average life used in the modeling under the Black-Scholes Option Pricing model or the Binomial Option Pricing model)		5.5 - 6.5 years			5.5 - 6.5 years			5.5 - 6.5 years			10 years
Expected dividends		—			—			—			—
Risk-free interest rate (based on USD China Sovereign Bond Rate)		3.75% - 3.90	%		2.96% - 3.26	%		2.51% - 2.75	%		4.1184	%

F-71

25	Equity settled share-based transactions (continued)

(c)

Fair value of share options and assumptions (continued)

The expected volatility is based on the average annualized standard deviations of the continuously compounded rates of return on the average share prices of similar companies as of the measurement date publicly quoted. Expected dividends are based on historical record. Changes in the subjective input assumptions could materially affect the fair value estimate.

Share options were granted under a service condition. This condition has not been taken into account in the grant date fair value measurement of the services received. There were no market conditions associated with the share option grants.

26	Income tax in the consolidated statements of financial position

(a)

Current taxation in the consolidated statements of financial position represents:


	As of March 31,		As of June 30,
	2012		2012		2013		2014
	RMB’000		RMB’000		RMB’000		RMB’000
Provision for PRC income/ withholding tax for the year/ period		3,096		—		924		1,078
Balance in respect of prior years		3,441		6,537		4,182		5,106

		6,537		6,537		5,106		6,184

F-72

26	Income tax in the consolidated statements of financial position (continued)

(b)

Deferred tax assets and liabilities recognized

The component of deferred tax assets/ (liabilities) recognized in the consolidated statements of financial position and the movements during the year ended March 31, 2012; the three months ended June 30, 2012, the years ended June 30, 2013 and 2014, are as follows:


	Property, plant and equipment and lease prepayment			Other payables			Undistributed profits of a PRC subsidiary			Total
	RMB’000			RMB’000			RMB’000			RMB’000
Deferred tax arising from:
At April 1, 2011		—			—			—			—
Credited to profit or loss		230			1,841			—			2,071
Exchange difference		(1	)		(10	)		—			(11	)

At March 31, 2012		229			1,831			—			2,060

At April 1, 2012		229			1,831			—			2,060
Charged to profit or loss		—			(128	)		—			(128	)
Exchange difference		1			10			—			11

At June 30, 2012		230			1,713			—			1,943

At July 1, 2012		230			1,713			—			1,943
Credited to profit or loss		—			413			—			413
Exchange difference		(5	)		(30	)		—			(35	)

At June 30, 2013		225			2,096			—			2,321

At July 1, 2013		225			2,096			—			2,321
Credited/(charged) to profit or loss		—			580			(2,369	)		(1,789	)
Exchange difference		(1	)		(6	)		—			(7	)

At June 30, 2014		224			2,670			(2,369	)		525

F-73

26	Income tax in the consolidated statements of financial position (continued)

(c)

Reconciliation to the consolidated statements of financial position:


	As of March 31, 2012		As of June 30,
	As of March 31, 2012		2012		2013		2014
	RMB’000		RMB’000		RMB’000		RMB’000
Net deferred tax assets recognized in the consolidated statements of financial position		2,060		1,943		2,321		2,894
Net deferred tax liabilities recognized in the consolidated statements of financial position		—		—		—		(2,369	)

		2,060		1,943		2,321		525

(d)

Deferred tax assets not recognized

The Group has not recognized deferred tax assets as of June 30, 2014 in respect of cumulative tax losses of RMB33,972,000 and RMB5,563,000 (March 31, 2012: RMB29,282,000 and RMB7,297,000; June 30, 2012: RMB30,523,000 and RMB7,382,000; June 30, 2013: RMB33,265,000 and RMB6,916,000) arising from the subsidiaries in Hong Kong and in the PRC-mainland, respectively, as it is not probable that future taxable profits against which losses can be utilized will be available in the relevant entities. The tax losses of the subsidiaries in Hong Kong do not expire under current tax legislation while those of the subsidiaries in the PRC-mainland will expire in five years.

The cumulative tax losses of the subsidiaries in the PRC-mainland amounted to RMB5,563,000 as of June 30, 2014, of which RMB1,560,000, RMB1,208,000, RMB1,210,000, RMB1,062,000, RMB350,000 and RMB173,000 will expire, if unused, by December 31, 2014, 2015, 2016, 2017, 2018 and 2019 respectively.

(e)

Deferred tax liabilities not recognized

At June 30, 2014, deferred tax liabilities not recognized in respect of temporary differences relating to the undistributed profits of PRC subsidiaries amounted to RMB889,384,000 (March 31, 2012: RMB531,015,000; June 30, 2012: RMB575,867,000; June 30, 2013: RMB774,946,000) as the Group controls the dividend policy of these PRC subsidiaries and it has been determined that it is probable that these accumulated profits will not be distributed in the foreseeable future by the PRC subsidiaries.

F-74

26	Income tax in the consolidated statements of financial position (continued)

(f)

Unrecognized tax benefits

The unrecognized tax benefits as of March 31, 2012, June 30, 2012, June 30, 2013 and June 30, 2014 are the potential benefits that, if recognized, would affect the effective tax rate. The unrecognized tax benefits mainly related to the tax positions of PRC subsidiaries on the taxability of certain income, government grants and declared dividends. The Group does not expect that the amount of unrecognized tax benefits will change significantly within the next 12 months. No interest and penalty expenses were recorded for the year ended March 31, 2012, the three months ended June 30, 2012 and the years ended June 30, 2013 and 2014.

According to the PRC Tax Administration and Collection Law, the statute of limitations is three years if the underpayment of taxes is due to computational errors made by the taxpayer or the withholding agent. The statute of limitations is extended to five years under special circumstances where the underpayment of taxes is more than RMB100,000. In the case of transfer pricing issues, the statute of limitations is ten years. There is no statute of limitations in the case of tax evasion. The tax returns of the Group’s PRC subsidiaries for the tax years beginning in 2008 are subject to the examination by the relevant tax authorities.

A reconciliation of the beginning and ending amount of unrecognized tax benefits in the PRC-mainland are as follows:


	As of March 31, 2012			As of June 30,
	As of March 31, 2012			2012		2013			2014
	RMB’000			RMB’000		RMB’000			RMB’000
At the beginning of the year/period		4,082			6,537		6,537			5,106
Additions based on tax positions related to current year/period		3,096			—		924			1,078
Expiration of the statute of limitations		(641	)		—		(2,351	)		—
Exchange difference		—			—		(4	)		—

At end of the year/period		6,537			6,537		5,106			6,184

F-75

27	Equity

(a)

Share capital

(i)	Share capital of the Company

The Company was incorporated in the Cayman Islands on May 6, 2010 with an authorized share capital of US$50,000,000 divided into 5,000,000,000 shares of US$0.01 each.

During the year ended March 31, 2012, 7,191,150 ordinary shares were issued in respect of the exercises of options.

During the year ended June 30, 2013, the Group cancelled 101,936,450 ordinary shares (equivalent to 2,038,729 ADSs) repurchased under the Company’s 2011 and 2012 share repurchase programs (note 27(c)).

During the year ended June 30, 2014, there was no change in the ordinary shares of the Group.

F-76

27	Equity (continued)

(a)

Share capital (continued)

(i)	Share capital of the Company (continued)


	As of March 31,				As of June 30,
	2012				2012				2013						2014
	Number of shares		Amount		Number of shares		Amount		Number of shares			Amount			Number of shares		Amount
			RMB’000				RMB’000					RMB’000					RMB’000
Authorized:
Ordinary shares of US$0.01 each		5,000,000,000		338,590		5,000,000,000		338,590		5,000,000,000			338,590			5,000,000,000		338,590

Issued:
Ordinary shares:
At beginning of the year/period		2,293,591,000		154,938		2,300,782,150		155,391		2,300,782,150			155,391			2,198,845,700		148,506
Exercise of share options		7,191,150		453		—		—		—			—			—		—
Cancellation of shares upon shares repurchased		—		—		—		—		(101,936,450	)		(6,885	)		—		—

At end of the year/period		2,300,782,150		155,391		2,300,782,150		155,391		2,198,845,700			148,506			2,198,845,700		148,506

F-77

27	Equity (continued)

(a)

Share capital (continued)

(ii)	Ordinary shares

The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. All ordinary shares rank equally with regard to the Company’s residual assets.

(b)

Nature and purpose of reserves

(i)	Share premium

The share premium represents the difference between the par value of the ordinary shares of the Company and proceeds received from the issue of the ordinary shares of the Company. Under the Companies Law of the Cayman Islands, the share premium account of the Company is distributable to the shareholders of the Company provided that immediately following the date on which the dividend is proposed to be distributed, the Company will be in a position to pay off its debts as they fall due in the ordinary course of business.

(ii)	Treasury shares

Treasury shares comprise the cost of the Company’s American Depositary Shares (“ADS”) held by the Company. As of June 30, 2014, the Company did not hold any of its own ADSs (March 31, 2012: 387,037, June 30, 2012: 387,037 and June 30, 2013: Nil).

(iii)

Statutory reserve

Transfers from retained earnings to statutory reserves were made in accordance with the relevant PRC rules and regulations and the articles of association of the Company’s subsidiaries incorporated in the PRC and were approved by the respective board of directors.

Statutory surplus reserve

The subsidiaries in the PRC-mainland are required to transfer 10% of their net profit, as determined in accordance with the PRC accounting rules and regulations, to statutory surplus reserve until the reserve balance reaches 50% of the registered capital. The transfer to this reserve must be made before distribution of a dividend to shareholders.

Statutory surplus reserve can be used to make good previous years’ losses, if any, and may be converted into share capital by the issue of new shares to shareholders in proportion to their existing shareholdings or by increasing the par value of the shares currently held by them, provided that the balance after such issue is not less than 25% of their registered capital.

F-78

27	Equity (continued)

(b)

Nature and purpose of reserves (continued)

(iv)	Exchange reserve

The exchange reserve comprises all foreign exchange differences arising from the translation of the financial statements of entities outside the PRC-mainland. The reserve is dealt with in accordance with the accounting policy set out in note 2(u).

(v)	Capital reserve

Capital reserve comprises the fair value of the actual or estimated number of unexercised share options granted to directors and other eligible participants of the Group recognized in accordance with the accounting policy adopted for share based payments in note 2(q)(ii).

(vi)	Other reserve

(1)

In connection with a group reorganization completed in 2006, China Linong acquired the entire equity interest in Land V. Group Limited by issuing 1,050 new ordinary shares as consideration. The difference between the carrying amount of share capital and share premium of Land V. Group Limited and the nominal value of the share issued by China Linong was credited to other reserve.

(2)

Under the a group reorganization in 2010, the Company issued ordinary shares and preferred shares to the then ordinary shareholders and preferred shareholders of China Linong in exchange for all outstanding ordinary shares and preferred shares of China Linong at a 1,000-for-1 exchange ratio. The difference between the carrying amount of share capital and share premium of China Linong and the nominal value of the shares issued by the Company was credited to other reserve.

(c)

Share repurchase

On September 27, 2011, the Company’s Board of Directors authorized a program to repurchase the Company’s American Depositary Shares (“ADSs”), each representing 50 ordinary shares of the Company, up to US$10 million over a period of six months or at the time when the repurchase program is revoked or varied by the Board of Directors, whichever occurs earlier (“2011 share repurchase program”). The 2011 share repurchase program ended on March 26, 2012.

On July 31, 2012, the Board of Directors authorized a program, following the completion of 2011 share repurchase program, to repurchase the Company’s “ADS”, each representing 50 ordinary shares of the Company, up to US$10 million over a period of nine months or at the time when repurchase program is revoked or varied by the Board of Directors, whichever occurs earlier (“2012 share repurchase program”). The 2012 share repurchase program ended on April 31, 2013.

F-79

27	Equity (continued)

(c)

Share repurchase (continued)

During the year ended June 30, 2014, the Company did not repurchase any of its ADSs. (year ended March 31, 2012: 387,037; three months ended June 30, 2012: Nil; year ended June 30, 2013: 1,651,692)

(d)

Capital management

The Group’s primary objectives when managing capital are to safeguard the Group’s ability to continue as a going concern, so that it can continue to provide returns for its shareholders by pricing products commensurately with the level of risk and by securing access to finance at a reasonable cost.

The Group actively and regularly reviews and manages its capital structure to maintain a balance between the higher returns to the equity shareholders of the Group that might be possible with higher level of borrowings and the advantages and security afforded by a sound capital position, and makes adjustments to the capital structure in light of changes in economic conditions.

The Group maintains sufficient capital (which comprises all components of equity) such that net current assets are maintained, i.e. it has the financial resources to repay all its current liabilities when they fall due.

The Group was not subject to any externally imposed capital requirements during the years/periods presented in these financial statements.

F-80

28	Disposal of a subsidiary

Disposal of Linong Agriculture Technology (Shantou) Co Limited

During the year ended March 31, 2012, the Group disposed of its 100% equity interests in Linong Agriculture Technology (Shantou) Co Limited (the “Shantou Subsidiary”) to an independent third party for a consideration of RMB7,600,000 which was settled by cash.

Net assets disposed of at the date of disposal:


	RMB’000
Property, plant and equipment		10,498
Trade and other receivables		1,612
Trade and other payables		(7,224	)
Current taxation		(1,149	)
Cash and cash equivalents		3,863

Net assets disposed of		7,600
Satisfied by cash		(7,600	)
Release of exchange reserve upon disposal of the Shantou Subsidiary		(1,309	)

Gain on disposal of the Shantou Subsidiary		(1,309	)

F-81

29	Financial risk management and fair values

Exposure to credit, currency, liquidity and interest rate risks arises in the normal course of the Group’s business. The Group’s exposure to these risks and the financial risk management policies and practices used by the Group to manage these risks are described below.

(a)

Credit risk

The Group’s credit risk is primarily attributable to trade and other receivables. Management has a credit policy in place and the exposures to these credit risks are monitored on an ongoing basis.

Customers are either required to settle in cash on delivery or granted with credit term. Individual credit evaluations are performed on all customers requiring credit over a certain amount. These evaluations focus on the customer’s past history of making payments when due and current ability to pay, and take into account information specific to the customer. Trade receivables are generally due within 5 to 90 days from the date of delivery. Debtors with balances that are overdue are requested to settle all outstanding balances before any further credit is granted. Normally, the Group does not obtain collateral from customers.

The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The default risk of the industry and country in which customers operate also has an influence on credit risk but to a lesser extent. At the end of reporting period, the Group has certain concentrations of credit risk as 6.4% (March 31, 2012: 5.1%; June 30 2012: 6.5%; June 30, 2013: 3.9%) and 33.5% (March 31, 2012: 13.0%; June 30 2012: 17.3%; June 30, 2013: 19.4%) of the total trade and other receivables were due from the largest customer and the five largest customers respectively.

Further quantitative disclosures in respect of the Group’s exposure to credit risk arising from trade and other receivables are set out in note 19.

(b)

Currency risk

(i)	Forecast transactions

The Group is exposed to currency risks arising from the intra-group purchases by the subsidiaries outside the PRC-mainland from those subsidiaries in the PRC-mainland. Such purchases are denominated in RMB. The Group ensures that the net exposure is kept to an acceptable level by selling Hong Kong dollars and United States dollars at spot rates where necessary to address short-term imbalances.

F-82

29	Financial risk management and fair values (continued)

(b)

Currency risk (continued)

(ii)	Exposure to currency risk

The following table details the Group’s exposure at the end of reporting period to currency risk arising from recognized assets or liabilities denominated in a currency other than the functional currency of the entity to which they relate. For presentation purposes, the amounts of the exposure are shown in RMB, translated using the spot rate at the year end. Differences resulting from the translation of the financial statements of operations outside the PRC-mainland into the Group’s presentation currency are excluded.


	As of March 31, 2012 (expressed in Renminbi)
	Hong Kong dollars			United States dollars			Renminbi
	RMB’000			RMB’000			RMB’000
Trade and other receivables		—			—			78,197
Cash and cash equivalents		210			2			26,837
Trade and other payables		(17,510	)		(22,282	)		(587	)

Net exposure arising from recognized assets and liabilities		(17,300	)		(22,280	)		104,447


	As of June 30, 2012 (expressed in Renminbi)
	Hong Kong dollars			United States dollars			Renminbi
	RMB’000			RMB’000			RMB’000
Trade and other receivables		—			—			79,057
Cash and cash equivalents		2			22,355			26,679
Trade and other payables		(17,908	)		(23,068	)		(617	)

Net exposure arising from recognized assets and liabilities		(17,906	)		(713	)		105,119

F-83

29	Financial risk management and fair values (continued)

(b)

Currency risk (continued)

(ii)	Exposure to currency risk (continued)


	As of June 30, 2013 (expressed in Renminbi)
	Hong Kong dollars			United States dollars			Renminbi
	RMB’000			RMB’000			RMB’000
Trade and other receivables		—			—			85,965
Pledged bank deposits		—			—			14,000
Cash and cash equivalents		—			1,888			34,531
Trade and other payables		(17,205	)		(21,873	)		(704	)

Net exposure arising from recognized assets and liabilities		(17,205	)		(19,985	)		133,792


		As of June 30, 2014 (expressed in Renminbi)
	Hong Kong dollars			United States dollars			Renminbi
	RMB’000			RMB’000			RMB’000
Trade and other receivables		—			—			54,858
Cash and cash equivalents		—			—			10,565
Trade and other payables		(7,620	)		(21,781	)		(850	)

Net exposure arising from recognized assets and liabilities		(7,620	)		(21,781	)		64,573

F-84

29	Financial risk management and fair values (continued)

(b)

Currency risk (continued)

(iii)

Sensitivity analysis

The following table indicates the instantaneous change in the Group’s profit after tax that would arise if foreign exchange rates to which the Group has significant exposure at the end of reporting period had changed at that date, assuming all other risk variables remained constant. In this respect, it is assumed that the pegged rate between the Hong Kong dollars and the United States dollars would be materially unaffected by any changes in movement in value of the United States dollars against other currencies.


	As of March 31,						As of June 30,
	2012						2012						2013						2014
	Increase/ (decrease) in foreign exchange rates			Increase/ (decrease) in profit after tax			Increase/ (decrease) in foreign exchange rates			Increase/ (decrease) in profit after tax			Increase/ (decrease) in foreign exchange rates			Decrease/ (Increase) in loss after tax			Increase/ (decrease) in foreign exchange rates			Increase/ (decrease) in profit after tax
				RMB’000						RMB’000						RMB’000						RMB’000
Renminbi (note (a))		5	%		5,222			5	%		5,256			5	%		6,690			5	%		3,229
		(5	)%		(5,222	)		(5	)%		(5,256	)		(5	)%		(6,690	)		(5	)%		(3,229	)
Hong Kong Dollars (note (b))		5	%		(865	)		5	%		(895	)		5	%		(860	)		5	%		(381	)
		(5	)%		865			(5	)%		895			(5	)%		860			(5	)%		381
United States Dollars (note (b))		5	%		(1,114	)		5	%		(36	)		5	%		(999	)		5	%		(1,089	)
		(5	)%		1,114			(5	)%		36			(5	)%		999			(5	)%		1,089

Results of the analysis as presented in the above table represent an aggregation of the effects on each of the group entities’ profit after tax measured in the respective functional currencies, translated into RMB at the exchange rate ruling at the end of reporting period for presentation purposes.

The sensitivity analysis assumes that the change in foreign exchange rates had been applied to re-measure those financial instruments held by the Group which expose the Group to foreign currency risk at the end of reporting period, including inter-company payables and receivables within the Group which are denominated in a currency other than the functional currencies of the lender or the borrower. The analysis excludes differences that would result from the translation of the financial statements of operations outside the PRC-mainland into the Group’s presentation currency. The analysis is performed on the same basis for all the years/periods presented.

Notes:

(a)

Arising from subsidiaries outside the PRC-mainland whose functional currency is Hong Kong dollars and United States dollars.

(b)

Arising from PRC subsidiaries whose functional currency is RMB.

F-85

29	Financial risk management and fair values (continued)

(c)

Liquidity risk

The Group’s policy is to regularly monitor liquidity requirements to ensure that it maintains sufficient reserves of cash to meet its liquidity requirements in the short and longer term.

The following tables show the remaining contractual maturities at the end of reporting period of the Group’s non-derivative financial liabilities, which are based on the contractual undiscounted cashflows (including interest payment computed using contractual rates) and the earliest date the Group can be required to pay.


	Contractual undiscounted cash outflow
	Balance sheet carrying amount		Within 1 year or on demand		More than 1 year but less than 2 years		More than 2 years but less than 5 years		Total
	RMB’000		RMB’000		RMB’000		RMB’000		RMB’000
March 31, 2012
Trade and other payables		37,055		37,055		—		—		37,055
Bank loans		85,875		20,659		37,147		53,762		111,568

		122,930		57,714		37,147		53,762		148,623

June 30, 2012
Trade and other payables		31,111		31,111		—		—		31,111
Bank loans		86,305		34,786		35,380		36,608		106,774

		117,416		65,897		35,380		36,608		137,885

F-86

29	Financial risk management and fair values (continued)

(c)

Liquidity risk (continued)


	Contractual undiscounted cash outflow
	Balance sheet carrying amount		Within 1 year or on demand		More than 1 year but less than 2 years			More than 2 years but less than 5 years			Total
	RMB’000		RMB’000		RMB’000			RMB’000			RMB’000
June 30, 2013
Trade and other payables		75,246		75,246		—			—			75,246
Term loan subject to repayment on demand clauses: scheduled repayments		43,492		729		729			44,123			45,581
Other bank loans		102,618		110,242		—			—			110,242

		221,356		186,217		729			44,123			231,069
Adjustment to disclose cash flows on term based on lender’s right to demand repayment		—		42,763		(729	)		(44,123	)		(2,089	)

		221,356		228,980		—			—			228,980

June 30, 2014
Trade and other payables		197,042		197,042		—			—			197,042
Loan from a shareholder		18,574		19,042		—			—			19,042
Term loan subject to repayment on demand clauses: scheduled repayments		27,500		9,159		13,493			7,638			30,290
Other bank loans		71,000		73,526		—			—			73,526

		314,116		298,769		13,493			7,638			319,900
Adjustment to disclose cash flows on term based on lender’s right to demand repayment		—		18,341		(13,493	)		(7,638	)		(2,790	)

		314,116		317,110		—			—			317,110

F-87

29	Financial risk management and fair values (continued)

(d)

Interest rate risk

The Group’s interest rate risk arises primarily from borrowings. Borrowings issued at variable rates and at fixed rates expose the Group to cash flow interest rate risk and fair value interest rate risk respectively. The Group’s interest rate profile as monitored by management is set out in (i) below.

(i)	Interest rate profile

The following table details the interest rate profile of the Group’s total borrowing at the end of the reporting period:


	As of March 31,						As of June 30,
	2012						2012						2013						2014
	Effective interest rates			Amount			Effective interest rates			Amount			Effective interest rates			Amount			Effective interest rates			Amount
		%			RMB’000			%			RMB’000			%			RMB’000			%			RMB’000
Fixed rate borrowings:
Bank loans		12.41	%		85,875			12.42	%		86,305			6.94	%		70,000			7.29	%		71,000
Variable rate borrowings:
Bank loans		—			—			—			—			6.55	%		76,110			6.77	%		27,500

Total net borrowings					85,875						86,305						146,110						98,500

Net fixed rate borrowings as a percentage of total net borrowings					100	%					100	%					48	%					72	%

(ii)	Sensitivity analysis

(a)	Fair value sensitivity analysis for fixed rate borrowings

The Group accounts for the bank loans at amortized cost and changes in interest rates at the end of reporting period would not affect profit or loss and equity.

(b)	Cash flow sensitivity analysis for variable rate borrowings

The Group’s profit for the year would decrease by approximately RMB275,000 (2013: RMB761,000) in response to a 100 basis points increase in interest rates applicable as at 30 June 2014, with all other variables held constant. The impact on the Group’s profit for the year is estimated as an annualized impact on the interest expense of such a change in interest rates. The analysis is performed on the same basis for 2013.

F-88

29	Financial risk management and fair values (continued)

(e)

Nature risk

The Group’s revenue depends significantly on the ability to grow crops and harvest agricultural produce at an adequate level. The ability to grow crops may be affected by unfavorable local weather conditions and natural disasters. Weather conditions such as floods, droughts and windstorms and natural disasters such as fire, disease, insect infestation and pests are examples of such events. The occurrence of severe weather conditions or natural disasters may affect the growth of crops, which in turn may have a material adverse effect on the Group’s ability to harvest the agricultural produce in sufficient quantities and in a timely manner.

(f)

Price risk

The market prices of crops and agricultural produce are constantly affected by both demand and supply cycle of the agricultural industry. As a result, movements of the market prices would have significant impact on the Group’s earnings. Whilst efforts have been made by management to implement certain strategies, there can be no assurance that the Group will be fully shielded from the negative effects of cyclical movements of the market prices of crops and agricultural produce.

(g)

Fair values

All financial instruments are carried at amounts not materially different from their fair values as of March 31, 2012, June 30, 2012, June 30, 2013 and June 30, 2014 because of the immediate and short-term maturities of those financial instruments.

30	Material related party transactions

(a)

During the year ended March 31, 2012, the three months ended June 30, 2012 and the years ended June 30, 2013 and 2014, the directors of the Company are of the view that the following is related party of the Group:


Name of party		Relationship

Lui Ming Ho		Shareholder and a former director of China Linong

F-89

30	Material related party transactions (continued)

(b)

In addition to the transactions and balances disclosed elsewhere in these financial statements, the Group entered into the following material related party transactions:

(i)


	As of March 31, 2012		As of June 30,
	As of March 31, 2012		2012		2013		2014
	RMB’000		RMB’000		RMB’000		RMB’000
Loan from a shareholder—Lui Ming Ho
At beginning of the year/period		—		—		—		—
Loan from a shareholder		—		—		—		18,574

At end of the year/period		—		—		—		18,574

During the year ended June 30, 2014, the Company obtained a loan from its shareholder-Lui Ming Ho of USD3,000,000 for financing the operations of the Group.

(ii)	Remuneration for key management personnel of the Group is as follows:


	Year ended March 31, 2012		Three months ended June 30, 2012		Years ended June 30,
	Year ended March 31, 2012		Three months ended June 30, 2012		2013		2014
	RMB’000		RMB’000		RMB’000		RMB’000
Basic salaries, allowances and benefits in kind		6,474		1,383		5,575		5,393
Equity settled share-based payment expenses		16,909		3,176		7,243		1,703

		23,383		4,559		12,818		7,096

Total remuneration is included in “staff costs” (see note 8(a)).

F-90

31	Commitments and contingent liabilities

(a)

Capital commitments

Capital commitments outstanding at March 31, 2012, June 30, 2012, June 30, 2013 and June 30, 2014 not provided for in the financial statements are as follows:


	As of March 31, 2012		As of June 30,
	As of March 31, 2012		2012		2013		2014
	RMB’000		RMB’000		RMB’000		RMB’000
Contracted for		126,998		147,759		250,172		195,894
Authorized but not contracted for		252,140		229,726		209,408		274,591

		379,138		377,485		459,580		470,485

(b)

Operating lease commitments

At June 30, 2014, the total future minimum lease payments under non-cancellable operating leases are payable as follows:


	As of March 31, 2012		As of June 30,
	As of March 31, 2012		2012		2013		2014
	RMB’000		RMB’000		RMB’000		RMB’000
Within 1 year		14,479		14,308		18,621		21,997
After 1 year but within 5 years		56,333		56,128		70,414		81,892
After 5 years		133,675		130,391		153,872		164,744

		204,487		200,827		242,907		268,633

The Group leases a number of properties and cultivation bases under operating leases. The leases typically run for an initial period of one to fifteen years, with an option to renew the lease when all terms are renegotiated. None of the leases includes contingent rentals.

F-91

31	Commitments and contingent liabilities (continued)

(c)

Environmental contingencies

The Group’s operations are regulated by various laws and regulations. Laws and regulations protecting the environment have generally become more stringent in recent years and could become more stringent in the future. Violation of these laws and regulations could impose significant costs, expenses, penalties and liabilities on the Group. The financial position of the Group may be adversely affected by any environmental liabilities which may be imposed under such new environmental laws and regulations. The directors of the Company are not aware of any environmental liabilities as of March 31, 2012, June 30, 2012, June 30, 2013 and June 30, 2014. The directors of the Company are also not aware of any significant costs, expenses, penalties and liabilities resulting from violation of existing laws and regulations.

(d)

Contingent liabilities

As of June 30, 2014, certain subsidiaries of the Company had issued corporate guarantees (“guarantor subsidiaries”) in respect of banking facilities granted to other subsidiaries within the Group which would remain in force so long as these subsidiaries have drawn down under the banking facilities. Under the corporate guarantees, the guarantor subsidiaries are liable for all and any of the borrowings from banks which are the beneficiaries of the corporate guarantees.

As of June 30, 2014, the directors of the Company did not consider it is probable that a claim will be made against the Group under the above guarantees. The maximum liability of the Group as of June 30, 2014 under the corporate guarantees is the amount of the facilities utilized of RMB98,500,000 (March 31, 2012: RMB10,000,000; June 30, 2012: RMB10,000,000; June 30, 2013: RMB70,000,000).

F-92

32	Possible impact of amendments, new standards and interpretations issued but not yet effective for the year ended June 30, 2014

Up to the date of issue of these financial statements, the IASB has issued a number of amendments and five new standards which are not yet effective for the year ended June 30, 2014 and which have not been adopted in these financial statements. These include the following which may be relevant to the Group.


	Effective for accounting periods beginning on or after
Amendments to IAS 32, Financial instruments: Presentation “Offsetting financial assets and financial liabilities”		January 1, 2014
Annual improvements to IFRSs 2011—2013 cycle		July 1, 2014
Annual improvements to IFRSs 2010—2012 cycle		July 1, 2014
Amendments to IAS 16, Property, plant and equipment and IAS 41, Agriculture, Agriculture: Bearer plants		January 1, 2016
IFRS 15, Revenue from contracts with customer		January 1, 2017
IFRS 9, Financial instruments		January 1, 2018

The Group is in the process of making an assessment of what the impact of these amendments is expected to be in the period of initial application. So far it has concluded that the adoption of them is unlikely to have a significant impact on the consolidated financial statements, except for the Amendments to IAS 16 and IAS 41.

F-93

EXHIBIT 8.1

LIST OF SUBSIDIARIES


No.	Company	Jurisdiction
1.	China Linong International Limited	BVI
2.	Land V. Group Limited	BVI
3.	Land V. Limited	Hong Kong
4.	Hong Kong Linong Limited	Hong Kong
5.	China Linong (Hong Kong) Limited	Hong Kong
6.	Linong (Fujian) Investment Holdings Limited	PRC
7.	Land V. Ltd (Fujian)	PRC
8.	Land V. Ltd (Zhangjiakou)	PRC
9.	Xiamen Land V. Group Co. Ltd	PRC
10.	Fuzhou Land V. Group Co. Ltd	PRC
11.	Land V. Agriculture Technology (Zhangzhou) Co. Ltd	PRC
12.	Land V. Agriculture Technology (Ningde) Co. Ltd	PRC
13.	Linong Agriculture Technology (Huizhou) Co. Ltd	PRC
14.	Linong Agriculture Technology (Shenzhen) Co. Ltd	PRC
15.	Liyuan Agriculture Technology (Quanzhou) Co. Ltd	PRC
16.	Putian Land V. Group Co. Ltd	PRC
17.	Liaoyang Liyuan Agricultural Products Co. Ltd	PRC
18.	Linong (Sanming) Limited	PRC
19.	Linong Agriculture Technology (Fuqing) Co. Ltd	PRC
20.	Linong Agriculture Technology (Xianyou) Co. Ltd	PRC

EXHIBIT 12.1

Certification by the Chief Executive Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Shing Yung Ma, certify that:

1. I have reviewed this annual report on Form 20-F of Le Gaga Holdings Limited (the “Company”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;

4. The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and

5. The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.

Date: October 30, 2014


By:		/s/ Shing Yung Ma
Name:		Shing Yung Ma
Title:		Chief Executive Officer

EXHIBIT 12.2

Certification by the Chief Financial Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Auke Cnossen, certify that:

1. I have reviewed this annual report on Form 20-F of Le Gaga Holdings Limited (the “Company”);

4. The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) and 15d-15(f)) for the Company and have:

(d) Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.

Date: October 30, 2014


By:		/s/ Auke Cnossen
Name:		Auke Cnossen
Title:		Chief Financial Officer

EXHIBIT 13.1

Certification by the Chief Executive Officer

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Annual Report of Le Gaga Holdings Limited (the “Company”) on Form 20-F for the year ended June 30, 2014 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Shing Yung Ma, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: October 30, 2014


By:		/s/ Shing Yung Ma
Name:		Shing Yung Ma
Title:		Chief Executive Officer

EXHIBIT 13.2

Certification by the Chief Financial Officer

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Annual Report of Le Gaga Holdings Limited (the “Company”) on Form 20-F for the year ended June 30, 2014 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Auke Cnossen, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: October 30, 2014


By:		/s/ Auke Cnossen
Name:		Auke Cnossen
Title:		Chief Financial Officer

EXHIBIT 15.1

Letterhead of Dacheng Law Offices LLP (Fuzhou)

October 30, 2014

Le Gaga Holdings Limited

Unit 1105, The Metropolis Tower

10 Metropolis Drive

Hung Hom, Kowloon

Hong Kong

Ladies and Gentlemen:

We hereby consent to the use of our name under the captions “Risk Factors” and “Regulations” in Le Gaga Holdings Limited’s Annual Report (the “Annual Report”) on Form 20-F for the year ended June 30, 2014, which will be filed with the Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended, on October 30, 2014. We also consent to the filing with the SEC of this consent letter as an exhibit to the Annual Report. In giving such consent, we do not thereby admit that we come within the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended, or the regulations promulgated thereunder.

Sincerely Yours,

/s/ Hou Li

Hou Li, Partner

Dacheng Law Offices LLP (Fuzhou)

EXHIBIT 15.2

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors

Le Gaga Holdings Limited:

We consent to the incorporation by reference in the registration statement (No. 333-173979) on Form S-8 of Le Gaga Holdings Limited of our report dated October 30, 2014, with respect to the consolidated statements of financial position of Le Gaga Holdings Limited and subsidiaries as of March 31, 2012, June 30, 2012, June 30, 2013 and June 30, 2014, and the related consolidated statements of profit or loss, statements of profit or loss and other comprehensive income, statements of changes in equity and statements of cash flows for the year ended March 31, 2012, the three months ended June 30, 2012 and the years ended June 30, 2013 and 2014, which report appears in the June 30, 2014 annual report on Form 20-F of Le Gaga Holdings Limited.

/s/ KPMG

Hong Kong, China

October 30, 2014

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