1 Apr 2008 07:01
PureCircle Limited01 April 2008 PureCircle Limited('PureCircle' or 'the Group') Audited Results for year ended 31 December 2007 PureCircle Limited ('PCL'), the world leading developer and producer of naturalhigh intensity sweetener ('HIS'), and which listed on AIM in December 2007,today announces audited results for the year ended 31 December 2007. Results Summary (Note: PureCircle was incorporated on 23 July 2007. The results highlights aretherefore in respect of PureCircle Sdn Bhd ("PCSB"), the wholly-owned subsidiaryof the Group and which was fully operational during the period.) • Revenues up by 397% to US$21.8 million (2006: US$4.4 million) reflecting a full year's production and sales of high-intensity sweetener products• Gross margins of 29.5% following improved utilisation of production capacity• Maiden profit after tax and minority interest of US$4.6 million (2006: loss of US$3.1 million) PureCircle Limited's adjusted earnings per share ("EPS") were US$0.024 for theperiod from incorporation on 23 July 2007 to 31 December 2007. EPS is statedbefore allowance for a foreign exchange loss of US$1.2 million arising on theconversion of Sterling proceeds from the AIM listing. Operational Summary• Good progress with development plans - advancement of Kenyan stevia supply initiatives - construction of new Chinese extraction facility underway: world's largest capacity crude stevia extraction complex (3,000 metric tonnes per annum) expected to be fully operational in early 2009• Enhanced revenue confidence provided by new contract wins and the extension of the contract to supply Reb-A to Cargill through to mid 2010. Commenting on the results, Paul Selway-Swift, Chairman of PureCircle, said: "2007 was a major milestone for PureCircle. We have laid the foundations forscaling up the business to meet our customers' needs for natural high-intensitysweeteners which, in turn, will enable them to develop and market new productswhich meet a growing global demand for natural and healthy food and beverages. "Our growth plans are well underway and we now have the financial flexibilityand strength to deliver on our strategic objectives. We are excited about theGroup's prospects and I look forward to reporting on further progress." 1 April 2008 EnquiriesPureCircle Limited +60 1 23888 049Magomet Malsagov, Managing Director CollegeHill +44 20 7457 2020Mark GarrawayAdam Aljewicz PureCircle Limited's AIM Nominated Adviser is RFC Corporate +61 8 9480 2500Finance LtdStephen Allen CHAIRMAN'S STATEMENT Introduction I am pleased to report PureCircle's first results since its listing on AIM on 11December 2007. Good progress has been made in delivering on the Group'sobjectives set out at the time of the listing and the results for the yearreflect the rapidly growing demand for our products. This is a very exciting stage of the Group's development. One of the principalreasons for listing was to give PureCircle access to new sources of capital tobuild the business at a pace in keeping with the rapidly growing market forall-natural, zero-calorie high intensity sweeteners. We continue toaggressively develop within this new market in conjunction with our customersand business partners in order to ensure that we maintain our first-moveradvantage and remain the supplier of choice to food and beverage multinationals. We are not only focused on growing our business to meet the future needs of ourcustomers, but also on improving our business processes and efficiencythroughout our supply chain. Controlling every stage of the process fromplantation to extraction to refining to distribution gives us a significant edgeover our competitors and we are confident that our positive momentum can bemaintained. Results and dividend As PureCircle Limited was only incorporated on 23 July 2007, we are providingsummary financial results of its wholly-owned subsidiary PureCircle Sdn Bhd ('PCSB') for the full year from 1 January 2007 to 31 December 2007. Revenues were up by 397% to US$21.8 million reflecting a full year's productionand sales of high intensity sweeteners. Rebaudioside - A ("Reb-A") contributed70% of total revenues with the remaining 30% coming from Sweta (7%), crudestevia extract (20%) and others (3%). Gross margins were significantly improvedat 29.5%, as compared to a gross loss position in 2006, reflecting the improvedutilisation of available production capacity. Whilst Management, Administration and Finance expenses were and continue to bemanaged carefully, against the backdrop of higher production and sales in theyear, expenses overall increased by 61% to US$ 4.9 million. Profit after tax was US$ 4.6 million against a loss in the prior year of US$ 3.1million. While the Company is developing its business, the Board deems working capital tobe a priority and in the longer term interest of shareholders. The Group willtherefore not be recommending payment of a dividend. This policy will bereviewed in the future in light of the Group's progress. AIM listing On 11 December PureCircle became a publicly listed company through Admission toAIM, raising US$50 million to develop the business in line with the rapidlygrowing demand for its high intensity sweetener products. As set out in theAdmission document, these funds were earmarked for the following: • Creation of a new stand alone supply chain in Africa (Kenya) in pursuit of Company's goal to diversify from Asia and provide multiple source of product to our food and beverage partners; • Restructuring Group debt; • Upgrading our existing Chinese extraction plant; and • Building a new extraction plant in China as well as developing new plantations and providing additional working capital to grow the business. I am pleased to report that we are delivering on all our promises: The Group has budgeted US$20 million for investment in Kenya. Furtherannouncements will be made in due course. • Group debt has been restructured to accommodate working capital requirements for 2008, with an additional US$50 million of working capital instruments having been allocated by the Group's banks. This money will be largely used to buy stevia leaves that will be harvested this year and will be used as raw material for 2009. • The construction of additional extraction plant in China is underway as planned and will be operational in 2009, which will bring the Group's annual production capacity of crude stevia extract to more than 3,000 metric tonnes per annum. Board A Board of Directors was formed in late 2007 in preparation for becoming apublic company, to support executive management and to bring the Group into linewith good corporate governance standards. On 20 November 2007, a number of new non-executive Board appointments were made,including my own as Chairman, and those of Olivier Maes and John Slosar, whowere appointed as non-executive Directors. Both are veterans of the food andbeverage industry and bring with them a wealth of industry and managementexperience. I am delighted to be involved in this exciting business and to have such strongnon-executive support alongside an excellent executive management team assistingin its development and future progress. People I would like to thank all the Group's employees for their hard work anddedication during the year, and all those involved in successfully helping todeliver a successful stock market listing. As we continue to grow we areconstantly bringing in fresh talent and I would also like to welcome all newemployees to the Group. Outlook 2007 was a major milestone for PureCircle. We have laid the foundations forscaling up the business to meet our customers' needs for natural high-intensitysweeteners which, in turn, will enable them to develop and market new productswhich meet a growing global demand for natural and healthy food and beverages. Our growth plans are well underway and we now have the financial flexibility andstrength to deliver on our strategic objectives. We are excited about theGroup's prospects and I look forward to reporting on further progress. Paul Selway-SwiftChairman Managing Director's Review Introduction 2007 was an important year for the Group, culminating in our AIM listing whichhas given us the resources needed to deliver our growth strategy. Being apublic company also gives us greater market visibility, which is vital insecuring long-term supply contracts with our blue chip customers. The resultsfor 2007 were pleasing and give us enormous confidence in our business model andmarket approach. The business has expanded substantially during the year,notably staff numbers have increased to more than 400 (2006: 100). As set out at the time of our listing, our strategy is to continue to developand expand globally our natural high-intensity sweetener business, includinginvestment in such essential infrastructure as new plantations, primaryextraction and refining plants. This is crucial to maintaining the leadingposition which we enjoy today and to further leverage our first-mover advantagein this emerging market. Market Overview The Group has a range of final products derived from the natural extracts ofstevia including high purity Reb-A and various other co-products. Reb-A isall-natural, has low caloric content and a low glycemic index (also making itsuitable for consumption by diabetics) and has a taste profile very similar tosugar. It is the first natural, healthy and commercially credible alternative tosugar and artificial sweeteners. As such, it allows our customers to developnew products and platforms in response to the phenomenal and increasing consumerdemand for healthier products. The urgency behind the development of new products is evidenced by thecontinuing decline in the level of sales of carbonated drinks and increasedconsumption of bottled water and juices over the past few years. Meanwhile,demand for biofuels and continuing price increases of both high fructose cornsyrup and sugar have also created favourable market conditions for the Group'sproducts. PureCircle is the only company capable of providing Reb-A on thescale and to specification required by global food and beverage manufacturers. After the year-end, we extended our contract with Cargill to supply Reb-A untilmid 2010. We have also secured a number of supply contracts with other majorfood and beverage companies which commence on 1 July 2008 when our contract withCargill becomes non-exclusive. These are long-term agreements which provideenhanced revenue confidence enabling us to further invest in our fullyintegrated supply chain. We continue to work hard to internationalise ourbusiness and expand our long-term customer base. In December we also entered into an exclusive two-year supply agreement with aKorean food ingredients company for the supply of SWETA into the Korean market.SWETA is a co-product derived from the remaining molecules extracted from stevialeaves as a result of the production of Reb-A and is targeted at the morecommoditised sweetener market. Our technological capability to convert Reb-Aresidue into co-product that can successfully compete with commoditisedsweeteners is an important competitive advantage. Review of Operations Developing our production infrastructure is a priority as we are seeing anincreasing demand for our products from international food and beverage majors.We have increased our stevia plantation capacity in China threefold from lastyear's levels, all of which is planted with high Reb-A yielding steviaseedlings. Planting in China begins in April and harvesting takes place from July throughto October. By the end of this year we therefore anticipate having the majorityof our raw leaf requirements for 2009 already stored in our warehouses andinsured. This will also significantly increase the level of consumption ofstevia leaves produced under group direct supervision, further enhancing ourquality control. Where possible, we have joined up with strategic partners who have plantationand extraction expertise and who have proven experience and an existinginfrastructure in the regions in which we operate. As we indicated at the timeof listing, diversification of our supply chain is one of our key strategicpriorities and we are expanding our plantation activities into new territoriesto develop alternative sources of stevia leaf alongside our Chinese operations. The Group has budgeted US$20 million for investment in Kenyan plantation andextraction facilities and plans are in progress. Our objective is to create a stand alone, self supporting supply chaincomprising plantations, crude extraction and refining facilities in multiplelocations. Construction of our new extraction facility in China is already underway and isexpected to be fully operational in early 2009. This will increase the annualproduction capacity to more than 3,000 metric tonnes per annum of crude steviaextract, the largest capacity crude stevia extraction complex in the world. This investment in infrastructure will provide the Group sufficient capacity tomeet demand for the foreseeable future, and at a level that is in excess of bothour current supply agreements and those which are currently being negotiated. Management and Employees In addition to the key strategic investment in our operations, we continue toinvest in our human capital. To support our global expansion and increasingscale, we are planning to make a number of new appointments to strengthen seniorexecutive management of the Group. These appointments will be in finance,supply chain and human resources. Prospects Together with our customers and strategic partners, PureCircle is pioneering anew and fast growing global market for natural high-intensity sweeteners. Ourbusiness is at the early stages of its development and we are working hard tobuild our infrastructure to further secure and grow our market leading position. We anticipate that the escalating demand for our products will continue and wehave every confidence of making further progress this year. Magomet MalsagovManaging Director FINANCIAL REVIEW PureCircle Limited was incorporated on 23 July 2007 as an investment holdingcompany. For a more accurate reflection of the Group's performance during theperiod, and in addition to the Group's financial statements, we have alsoincluded below the audited results for PureCircle Sdn Bhd ('PCSB'), the Group'swholly-owned subsidiary, which traded throughout the year. Other than PCSB, theGroup did not have any other subsidiaries as at 31 December 2007. PCL Group PCSB Group PCSB Group Audited Audited Audited 23.07.07 (date FYE FYE of incorporation) to 31.12.07 31.12.07 31.12.06 USD'000 USD'000 USD'000 REVENUE 8,898 21,843 4,394 COST OF SALES (6,249) (15,410) (4,676) GROSS PROFIT / (LOSS) 2,649 6,433 (282) OTHER INCOME 364 2,458 381 SHARE OF PROFIT IN ASSOCIATED COMPANY - 329 148 3,013 9,220 247 MANAGEMENT, ADMINISTRATION AND FINANCE EXPENSES (1,353) (4,928) (3,067) PROFIT / (LOSS) FROM OPERATIONS 1,660 4,292 (2,820) FOREIGN EXCHANGE LOSS ON ISSUANCE OF SHARES (1,216) - - PROFIT/(LOSS) BEFORE TAXATION 444 4,292 (2,820) TAXATION 569 1,080 (316) PROFIT/(LOSS) AFTER TAXATION 1,013 5,372 (3,136) MINORITY INTEREST (591) (752) - PROFIT AFTER TAX AND MINORITY INTEREST 422 4,620 (3,136) BASIC EARNINGS PER SHARE (US$) 0.006 ADJUSTED EARNINGS PER SHARE (US$) (before foreignexchange loss arising from listing proceeds) 0.024 Revenue Revenue was up by 397% to US$21.8 million reflecting a full year of productionand sales of its high intensity sweeteners. Reb- A continues to dominate revenueand contributed 70% of total revenue. The remaining 30% were contributed bySweta (7%), crude stevia extract (20%) and others (3%). Margins PCSB recorded gross margin of 29.45% as compared to gross loss position in 2006.The significant improvement in margins was made possible from improvedutilisation of available production capacity. Other income Other income comprises mainly royalty fees received from transfer of technologyand know-how and negative goodwill arising out of acquisition of 55% interest inGanzhou Julong High-Tech Food Industries Ltd. Management, administration and finance Management, administration and finance expenses increased corresponding to thegrowth and expansion needs during the year. Against the backdrop of higherproduction and sales in 2007, expenses were higher in manpower, finance chargesand general administration costs. Taxation Both operations in Malaysia and China were not subject to any taxation duringthe year. Taxation in 2007 is in relation to reversal of deferred tax providedin prior years. Earnings PCSB registered its first net profit after tax of US$4.6 million. Earnings per share Adjusted earnings per share, before the foreign exchange loss arising fromlisting proceeds in Sterling, are US$0.024. The earnings per share afterincorporating the exchange loss stood at US$0.006. PURECIRCLE LIMITED(Incorporated in Bermuda)Registration No : 40431 DIRECTORS' REPORT The directors hereby submit their report and the audited financial statements ofthe Group and of the Company for the financial period from 23 July 2007 (date ofincorporation) to 31 December 2007. PRINCIPAL ACTIVITIES The Company is principally engaged in the business of investment holding whilstthe principal activities of the subsidiaries are set out in Note 6 to thefinancial statements. There have been no significant changes in the nature ofthese activities during the financial period. BUSINESS REVIEW AND FUTURE DEVELOPMENTS The financial results and the financial position of the Group and of the Companyfor the financial period are shown in the annexed financial statements. DIRECTORS AND THEIR INTERESTS The interests (all of which are beneficial interests save as otherwise stated)of the Directors and of the persons connected with them as at 31 December 2007are as follows:--(1) Director Number of SharesPaul Selway-Swift1 100,000Magomet Malsagov2 29,483,495Peter Robert Milsted3 1,160,000Aslan Tomov4 29,340,638Olivier Phillipe Marie Maes5 580,000John Robert Slosar6 1,418,702 1 Held indirectly through HSBC Trust Company (CI) Ltd. 2 29,340,638 of these shares are held by Asian Investment Partners Limited(AIP), being a company of which Magomet Malsagov is a director and 50%shareholder. The remaining142,857 shares is held directly by him. MagometMalsagov has subsequent to 31 December 2007 restructured and held all hisshareholdings directly comprising of 14,813,176 shares representing 11.37% 3 Held directly. 4 All held by AIP, being a company of which Aslan Tomov is a director and 15%shareholder. Aslan Tomov has subsequent to 31 December 2007 restructured andheld all his shareholdings directly comprising 4,401,096 shares representing3.38% 5 Held indirectly through Oak Grove International Limited, a company of whichOlivier Maes owns 75% 6 Family interest held by his wife, Salakjit Palakawong Na Ayudhya. STATEMENT OF DIRECTORS' RESPONSIBILITIES The directors are responsible for the preparation of the financial statementsfor each financial period which give a true and fair view of the state ofaffairs of the Company and of the Group at the end of the period and of theresults of the Group and of the Company for the period in preparing thosefinancial statements, the directors are required to: - (a) select suitable accounting policies and then apply them consistently; (b) make judgements and estimates that are reasonable and prudent; (c) state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; and (d) prepare the financial statements on the going concern basis unless it is inappropriate to assume that the Group will continue in business. The directors are responsible for keeping proper accounting records whichdisclose with reasonable accuracy at any time the financial position of theCompany and to enable them to ensure that the financial statements comply withInternational Financial Reporting Standards. The directors are also responsiblefor safeguarding the assets of the Company and hence for taking reasonable stepsfor the prevention and detection of fraud or other irregularities. So far as the directors are aware, there is no relevant audit information ofwhich the Company's auditors are unaware and we have taken all the steps that weought to have taken as directors in to make ourselves aware of any relevantaudit information and to establish that the Company's auditors are aware of thatinformation. The directors are responsible for information contained in the directors' reportand other information contained in the accounts. PAYMENT OF CREDITORS It is the policy of the Group in respect of all its creditors, where it isreasonably practicable, to settle the payment with those creditors according tothe terms formally agreed with them. The creditors' payment periods for the Group throughout the financial year underreview range from 30 to 60 days. STATEMENT OF CORPORATE GOVERNANCE The Board of Directors ("the Board") is committed to ensuring that the higheststandards of corporate governance are practiced throughout the Group as afundamental part of discharging its responsibilities to protect and enhanceshareholders value and the financial performance of PureCircle Group. AlthoughPureCircle Limited is admitted to trading on the AIM market of the London StockExchange plc and therefore does not need to comply with the Combined Code ("theCode of the Financial Reporting Council"), the Board has reviewed the corporategovernance of the Group and has implemented the provisions of the Code it hasfelt appropriate, given the Group's size. The Board and its Committees The Board currently includes three executive directors, three non-executivedirectors and one of whom who serves as Chairman. Significant decisions relating to the Board are discussed and approved in Boardmeetings. The Board is responsible for formulating, reviewing and approving theCompany's strategy, budgets, major items of capital expenditure and seniorpersonnel appointments. The Board intends to convene regular directors'meetings, approximately 4 times per year, at which operating and financialreports are considered. STATEMENT OF CORPORATE GOVERNANCE (CONT'D) The Board will review monthly management accounts which highlight the keyfinancial data required to monitor the financial position and prospects of thePureCircle Group, including a summary of trading for the period, breakdown ofrevenue by major customer, review of overheads, cash and banking issues and theconsideration of results compared to budget and the assessment of the financialforecasts in the light of the results. The Board has established three committees: the Audit Committee, theRemuneration Committee and the Nomination Committee, each of which shall includeat least two non-executive directors. The Audit Committee is responsible for making recommendations to the Board onthe appointment of the auditors and the audit fee and to receive and reviewreports from management and the Company's auditors on the financial accounts andinternal control systems used throughout the Company. The role of the Remuneration Committee is to review the performance of theexecutive Directors and other senior executives and to set the scale andstructure of their remuneration, including bonus arrangements, with due regardto the interest of shareholders. The Remuneration Committee will also administerand establish performance targets for share incentive schemes and determine theallocation of share incentives to employees. The Nomination Committee is responsible for reviewing the structure, size,composition and skills of the Board, presenting suitable candidates to fillBoard vacancies, reviewing succession planning for the Board and seniormanagers, evaluating the time commitment of the Chairman and Non-ExecutiveDirectors, undertaking the performance evaluation of the Board and reviewing there-appointment of Non-Executive Directors. AUDITORS The auditors, Messrs. Horwath, have expressed their willingness to continue inoffice as auditors and a resolution proposing their reappointment will besubmitted to shareholder at the forthcoming Annual General Meeting. SIGNED IN ACCORDANCE WITH A RESOLUTION OF THE DIRECTORS DATED Peter Robert Milsted Magomet Malsagov INDEPENDENT AUDITORS' REPORT TO THE SHAREHOLDERS OFPURECIRCLE LIMITED(Incorporated in Bermuda)Registration No : 40431 We have audited the financial statements of PureCircle Limited which comprisethe Group and the Company Income Statements, the Group and the Company BalanceSheets, the Group and the Company Cash Flow Statements and the related notes.These financial statements have been prepared in accordance with the accountingpolicies set out therein. This report is made solely to the Company's members, as a body. Our audit workhas been undertaken so that we might state to the Company's members thosematters we are required to state to them in an auditor's report and for no otherpurpose. To the fullest extent permitted by law, we do not accept or assumeresponsibility to anyone other than the Company and the Company's members, as abody, for our audit work, for this report, or for the opinions we have formed. RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS The Company's directors are responsible for the preparation of the financialstatements in accordance with International Financial Reporting Standards. Our responsibility is to audit the financial statements in accordance withInternational Standards of Auditing. We report to you our opinion as to whether the financial statements give a trueand fair view, the financial statements are properly prepared in accordance withInternational Financial Reporting Standards. INDEPENDENT AUDITORS' REPORT TO THE SHAREHOLDERS OFPURECIRCLE LIMITED(Incorporated in Bermuda)Registration No : 40431 BASIS OF AUDIT OPINION We conducted our audit in accordance with International Standards on Auditing.An audit includes examination, on a test basis, of evidence relevant to theamounts and disclosures in the financial statements. It also includes anassessment of the significant estimates and judgements made by the directors inthe preparation of the financial statements, and of whether the accountingpolicies are appropriate to the Group's and Company's circumstances,consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information andexplanations which we considered necessary in order to provide us withsufficient evidence to give reasonable assurance that the financial statementsare free from material misstatement, whether caused by fraud or otherirregularity or error. In forming our opinion, we also evaluated the overalladequacy of the presentation of information in the financial statements. OPINION In our opinion, (a) the financial statements give a true and fair view, in accordancewith International Financial Reporting Standards, of the state of the Group'sand the Company's affairs as at 31 December 2007 and of the Group's andCompany's profit for the period then ended; and (b) the financial statements have been properly prepared inaccordance with International Financial Reporting Standards. HorwathFirm No: AF 1018Chartered AccountantsKuala Lumpur Balance Sheet at 31 December 2007 The The Group Company Note USD'000 USD'000ASSETSNON-CURRENT ASSETSInvestment in subsidiaries 6 - 17,985Investment in an associate 7 157Intangible assets 8 7,789 -Property, plant and equipment 9 26,725 -Prepaid land lease payments 10 1,457 - 36,128 17,985 CURRENT ASSETS Inventories 11 12,509 -Trade receivables 12 3,410 -Other receivables, deposits and prepayments 13 8,275 4,951Amount owing by a subsidiary 14 - 10,312Amount owing by related parties 15 2,137 -Fixed deposits 17 31,543 31,543Cash and bank balances 18 12,722 3,221 70,596 50,027 TOTAL ASSETS 106,724 68,012 EQUITY AND LIABILITIESEQUITYShare capital 19 13,029 13,029Share premium 20 55,697 55,697Treasury shares 21 * *Foreign currency translation reserve 22 909 -Retained profit/(Accumulated loss) 422 (1,143) SHAREHOLDERS' EQUITY 70,057 67,583 MINORITY INTERESTS 11,613 - TOTAL EQUITY 81,670 67,583 Note: * - Represents less than USD1.00 Approved and authorised for issue by the board of directors on Peter Robert Milsted Magomet Malsagov Balance Sheet at 31 December 2007 The The Group Company Note USD'000 USD'000NON-CURRENT LIABILITYLong-term borrowings 24 10,625 - 10,625 CURRENT LIABILITIES Trade payables 26 778 -Other payables and accruals 27 1,501 429Short-term borrowings 28 11,630 -Bank overdraft 29 520 - 14,429 429 TOTAL LIABILITIES 25,054 429 TOTAL EQUITY AND LIABILITIES 106,724 68,012 NET ASSETS PER SHARE (USD) 30 0.54 Approved and authorised for issue by the board of directors on Peter Robert Milsted Magomet Malsagov Income statements for the financial period from 23 July 2007( date ofincorporation) to 31 December 2007 The The Group Company Note USD'000 USD'000 REVENUE 31 8,898 - COST OF SALES (6,249) - GROSS PROFIT 2,649 - OTHER INCOME 364 118 3,013 118 ADMINISTRATIVE EXPENSES (882) (45) FINANCE COSTS (471) - PROFIT FROM OPERATIONS 1,660 73 FOREIGN EXCHANGE LOSS ON ISSUANCE OF SHARES (1,216) (1,216) PROFIT/(LOSS) BEFORE TAXATION 444 (1,143) INCOME TAX EXPENSE 32 569 - PROFIT/(LOSS) AFTER TAXATION 1,013 (1,143) ATTRIBUTABLE TO:-EQUITY HOLDERS OF THE COMPANY 422 (1,143)MINORITY INTERESTS 591 - 1,013 (1,143) EARNINGS PER SHARE (US CENTS)- Basic 33 0.61 Statements of changes in equity for the financial period from 23 July 2007 (dateof incorporation) to 31 December 2007 Foreign Currency Share Share Treasury Translation Retained Minority Total Capital Premium Shares Reserve Profit Interests USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000The Group Balance at 23.7.2007 (Date of incorporation) 10 - - - - - 10 New allotment for cash during the financial period 1,530 9,390 - - - - 10,920 Acquisition of a subsidiary, PureCircle Sdn Bhd 10,070 - - - - 5,122 15,192 Shares subscribed by minority shareholders - - - - - 5,900 5,900 Purchase of own shares and held as treasury shares - - # - - - # Cancellation of treasury shares upon purchase (10) - - - - - (10) Issuance of shares pursuant to admission to AIM market 1,429 48,571 - - - - 50,000 Admission expenses ^ - (3,318) - - - - (3,318) Gain from sale of treasury shares ^ - 1,054 * - - - 1,054 Profit for the financial period - - - - 422 591 1,013 Exchange difference ^ - - - 909 - - 909 Balance at 31.12.2007 13,029 55,697 * 909 422 11,613 81,670 Notes: # - Represents USD1.00 * - Represents less than USD1.00 ^ - Gain/(Loss) not recognised in Income Statement Statements of changes in equity for the financial period from 23 July 2007 (dateof incorporation) to 31 December 2007 Share Share Treasury Accumulated Capital Premium Shares Loss Total USD'000 USD'000 USD'000 USD'000 USD'000The Company Balance at 23.7.2007 (Date of incorporation) 10 - - - 10 New allotment during the financial period 1,530 9,390 - - 10,920 Shares issued for acquisition of a subsidiary, PureCircle Sdn 10,070 - - - 10,070Bhd Purchase of own shares and held as treasury shares - - # - # Cancellation of treasury shares (10) - - - (10) upon purchase Issuance of shares pursuant to admission to AIM market 1,429 48,571 - - 50,000 Admission expenses ^ - (3,318) - - (3,318) Gain from sale of treasury shares ^ - 1,054 * - 1,054 Loss for the financial period - - - (1,143) (1,143) Balance at 31.12.2007 13,029 55,697 * (1,143) 67,583 Notes: # - - Represents USD1.00 * - - Represents less than USD1.00 ^ - Gain/(Loss) not recognised in Income Statement Cash flow statements for financial period from 23 July 2007 (date ofincorporation) to 31 December 2007 The The Group Company Note USD'000 USD'000 CASH FLOWS FOR OPERATING ACTIVITIESProfit/(Loss) for the financial period 444 (1,143) Adjustments for:-Amortisation of intellectual property rights 18 -Amortisation of prepaid land lease payments 18 -Depreciation of property, plant and equipment 391 -Equipment written off 40 -Interest expense 381 -Interest income (127) (116)Excess of Group's interest in the net fair value of acquiree's identifiable assets, liabilities and contingent liabilities over cost of acquisition (51) -Unrealised loss on foreign exchange 981 981 Operating profit/(loss) before working capital changes 2,095 (278)Increase in inventories (1,580) -Increase in trade and other receivables (6,511) (3,998)Increase in amount owing by a subsidiary - (10,312)(Decrease)/Increase in trade and other payables (2,154) 429 NET CASH FOR OPERATIONS (8,150) (14,159)Interest received 127 116Interest paid (381) - NET CASH FOR OPERATING ACTIVITIES (8,404) (14,043) CASH FLOWS FOR INVESTING ACTIVITIES Acquisition of a subsidiary, net of cash acquired 35 (6,708) (7,915)Purchase of intangible assets (3,237) -Purchase of leasehold land (851) -Purchase of property, plant and equipment (2,658) -Acquisition of an associate (157) - NET CASH FOR INVESTING ACTIVITIES (13,611) (7,915) BALANCE CARRIED FORWARD (22,015) (21,958) Cash flow statements for financial period from 23 July 2007 (date ofincorporation) to 31 December 2007 (Cont'd) The The Group Company Note USD'000 USD'000 BALANCE BROUGHT FORWARD (22,015) (21,958) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of shares 60,920 60,920Admission to AIM market expenses (3,318) (3,318)Proceeds from disposal of treasury shares 84 84Net drawdown of term loans 3,215 -Repayment of hire purchase (54) -Proceeds from minority shareholders 5,900 - NET CASH FROM FINANCING ACTIVITIES 66,747 57,686 Effects of foreign exchange rate changes on cash and cash equivalents (987) (964) CASH AND CASH EQUIVALENTS AT END OF THE FINANCIAL PERIOD 36 43,745 34,764 Notes to the financial statements for the financial period from 23 July 2007(date of incorporation) to 31 December 2007 1. GENERAL INFORMATION The Company was incorporated and registered as a private limitedcompany in Bermuda, under the Companies (Bermuda) Law 1991 (as amended). On 23July 2007, the Company was re-registered as a registered public company limitedby shares. The registered office and principal place of business are as follows:- Registered office : Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda. Principal place of business : PT23419, Lengkuk Teknologi, Techpark@ENSTEK, 71760 Bandar ENSTEK, Negeri Sembilan, Malaysia. The financial statements were authorised for issue by the Board ofDirectors in accordance with a resolution of the directors dated 2. PRINCIPAL ACTIVITIES The Company is principally engaged in the business of investment holding whilstthe principal activities of the subsidiaries are set out in Note 6 to thefinancial statements. There have been no significant changes in the nature ofthese activities during the financial period. 3. FINANCIAL INSTRUMENTS The Group's activities expose it to a variety of financial risks (includingforeign currency risk, interest rate risk and price risk), credit risk,liquidity and cash flow risk, and capital risk management. The Group's overallrisk management programme focuses on the unpredictability of financial marketsand seeks to minimise potential adverse effects on the Group's financialperformance. (a) Financial Risk Management Policies (i) Foreign Currency Risk The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the Sterling Pound, Ringgit Malaysia and Chinese Renminbi. Foreign exchange risk arises from future commercial transactions, recognised assets and liabilities and net investments in foreign operations. 3. FINANCIAL INSTRUMENTS (CONT'D) (a) Financial Risk Management Policies (Cont'd) (i) Foreign Currency Risk (Cont'd) It manages its foreign exchange exposure by a policy of matching as far aspossible receipts and payments in each individual currency. The following table demonstrates the sensitivity to a reasonably possible changein the Sterling Pound, Ringgit Malaysia and Chinese Renminbi exchange rate, withall other variables held constant of the Group's profit and the Group's equity:- Effect on Increase/ profit Effect on decrease in after taxation equity exchange rate USD '000 USD '000 Sterling Pound + 5% 1,574 1,574 - 5% (1,574) (1,574) Ringgit Malaysia + 5% 66 1,296 - 5% (66) (1,296) Chinese Renminbi + 5% 36 1,290 - 5% (36) (1,290) 3. FINANCIAL INSTRUMENTS (CONT'D) (a) Financial Risk Management Policies (Cont'd) (ii) Interest Rate Risk The Group's exposure to interest rate risk arises mainly from interest-bearingdeposits, loans and borrowings. The Group's interest rate profile as monitoredby management is set out below:- THE GROUP Effective Interest Rate 2007 % USD'000 Fixed deposits 4.80 31,543Bank overdraft 6.75 520Term loans 7.78 14,482 Interest rate sensitivity analysis At 31 December 2007, it is estimated that a general increase or decrease of 100basis points in interest rates, with all other variable held constant, wouldincrease or decrease the Group's profit for the period by approximatelyUSD11,000. The sensitivity analysis above has been determined assuming that the change ininterest rates had occurred at the balance sheet date and had been applied tothe exposure to interest rate risk for both derivative and non-derivativefinancial instruments in existence at that date. The 100 basis point increase ordecrease represents management's assessment of a reasonably possible change ininterest rates over the period until the next annual balance sheet date. 3. FINANCIAL INSTRUMENTS (CONT'D) (a) Financial Risk Management Policies (Cont'd) (iii) Price Risk The Company does not have any quoted investments and hence is not exposed toprice risk. (iv) Credit Risk The Group trades only with recognised, creditworthy third parties. It is theGroup's policy that all customers who wish to trade on credit terms are subjectto credit verification procedures. In addition, receivable balances aremonitored on an ongoing basis with the result that the Group's exposure to baddebt is not significant. The maximum exposure is the carrying amount asdisclosed in Note 12 to the financial statements. The Group's concentration of credit risk relates to debts owing by a majorcustomer which constituted approximately 17% of its outstanding receivables atthe balance sheet date. The Group's exposure to credit risk arises from default of the counterparty,with a maximum exposure equal to the carrying amount of these instruments. (v) Liquidity and Cash Flow Risks Liquidity and cash flow risks arise mainly from general funding and businessactivities. The Group practises prudent risk management by maintainingsufficient cash and the availability of funding through certain committed creditfacilities. 3. FINANCIAL INSTRUMENTS (CONT'D) (a) Financial Risk Management Policies (Cont'd) (v) Liquidity and Cash Flow Risks (Cont'd) The following tables detail the remaining contractual maturities at the balancesheet date of the Group's and the Company's non-derivative financial liabilitiesand derivative financial liabilities, which are based on contractualundiscounted cash flows (including interest payments computed using contractualrates or, if floating, based on rates current at the balance sheet date) and theearliest date the Group and the Company can be required to pay: Total More than More than contractual Within 1 year but 2 years but Carrying undiscounted 1 year or less than less than amount cash flow on demand 2 years 5 years USD'000 USD'000 USD'000 USD'000 USD'000The Group At 31 December 2007 Trade and other 2,279 2,279 2,279 - -payablesBorrowings 22,255 22,255 11,630 6,039 4,586Bank overdraft 520 520 520 - - Total More than More than contractual Within 1 year but 2 years but Carrying undiscounted 1 year or less than less than amount cash flow on demand 2 years 5 years USD'000 USD'000 USD'000 USD'000 USD'000The Company At 31 December 2007 Other payables and accruals 429 429 429 - - 3. FINANCIAL INSTRUMENTS (CONT'D) (b) Capital Risk Management The Group manages its capital to ensure that entities in the Group will be ableto continue as a going concern while maximising the return to shareholdersthrough the optimisation of the debt and equity balance. The capital structure of the Group consists of debts, which include theborrowings disclosed in Note 24, 28 and 29, cash and bank balances and equityattributable to equity holders of the parent, comprising issued capital, sharepremium, reserves and retained earnings. The Group's policy is to maintain a strong capital base by having low gearing.The Group monitors capital on the basis of the gearing ratio. The ratio iscalculated as net debt divided by total equity. The gearing ratio at the financial year end was as follows: 2007 USD '000 Debts (i) 22,775Cash and cash equivalents (44,265) Net debt Not applicable Equity (ii) 70,057 Net debt to equity ratio Not applicable (i) Debts relate to borrowings disclosed in Note 24, 28 and 29 to thefinancial statements. (ii) Equity includes all capital and reserves of the Group. 3. FINANCIAL INSTRUMENTS (CONT'D) (c) Fair Value Estimation All financial instruments are carried at amounts not materiallydifferent from their fair values as at 31 December 2007. Fair value estimates are made at a specific point in time and basedon relevant market information and information about the financial instruments.These estimates are subjective in nature, involve uncertainties and matters ofsignificant judgement and therefore cannot be determined with precision. Changesin assumptions could significantly affect the estimates. 4. BASIS OF PREPARATION The financial statements of the Group and of the Company are prepared under thehistorical cost convention and modified to include other bases of valuation asdisclosed in other sections under significant accounting policies, and incompliance with International Financial Reporting Standards ("IFRS"). The following IFRSs have been issued and are effective for financial periodsbeginning on or after 1 January 2009 and will be effective for the Group'sfinancial statements for the financial year ending 31 December 2009:- IFRS 8 Operating Segments IAS 23 Borrowing Costs (Amendment) IFRS 8 - Operating Segments is effective from 1 January 2009. IFRS 8 replacesIAS 14 and aligns segment reporting with the requirements of the US standardSFAS 131 Disclosures about Segments of an Enterprise and Related Information.The new standard requires a 'management approach', under which segmentinformation is presented on the same basis as that used for internal reportingpurposes. The Group will apply IFRS 8 from 1 January 2009. IAS 23 (Amendment) - Borrowing Cost is effective from 1 January 2009. Theamendment to the standards is still subject to endorsement by the EuropeanUnion. It requires an entity to capitalise borrowing costs directly attributableto the acquisition, construction or production of a qualifying asset (one thattakes a substantial period of time to get ready for use or sale) as part of thecost of that asset. The option of immediately expensing those borrowing costswill be removed. The Group will apply IAS 23 (Amendment) from 1 January 2009. 5. SIGNIFICANT ACCOUNTING POLICIES (a) Critical Accounting Estimates And Judgements Estimates and judgements are continually evaluated by the directorsand management and are based on historical experience and other factors,including expectations of future events that are believed to be reasonable underthe circumstances. The estimates and judgements that affect the application ofthe Group's accounting policies and disclosures, and have a significant risk ofcausing a material adjustment to the carrying amounts of assets, liabilities,income and expenses are discussed below. (i) Depreciation of Property, Plant and Equipment The estimates for the residual values, useful lives and related depreciationcharges for the property, plant and equipment are based on commercial andproduction factors which could change significantly as a result of technicalinnovations and competitors' actions in response to the market conditions. Changes in the expected level of usage and technological developmentcould impact the economic useful lives and the residual values of these assets,therefore future depreciation charges could be revised. (ii) Impairment of Assets When the recoverable amount of an asset is determined based on theestimate of the value-in-use of the cash-generating unit to which the asset isallocated, the management is required to make an estimate of the expected futurecash flows from the cash-generating unit and also to apply a suitable discountrate in order to determine the present value of those cash flows. (iii) Classification of Major Components in the Biotech Plant The classifications of major components in the biotech plant are performed basedon functionality of each significant component of plant and machineries and uponconsultation with the Group.'s engineers and machine suppliers. Theseclassifications are made upon physical inspections of the plant and machineriesto determine the feasibility of the classification. 5. SIGNIFICANT ACCOUNTING POLICIES (CONT'D) (a) Critical Accounting Estimates And Judgements (Cont'd) (iv) Intellectual Property Rights and Product Development The useful lives of the intellectual property rights and product development ofPureCircle Sdn. Bhd. ("PCSB") are estimated to be indefinite because based onthe analysis of all of the relevant factors; there is no foreseeable limit tothe period over which the asset is expected to generate net cash inflows forPCSB. In addition, the estimation of the useful lives is based on the internaltechnical evaluation. The estimated useful lives are reviewed periodically andare updated if expectations differ from previous estimates due to obsolesces,economic, technical and legal or other limits on the use of the intangibleassets. It is possible, however, that future results of operations could bematerially affected by changes in the estimates brought about by changes infactors mentioned above. The useful lives of the intellectual property rights of Ganzhou Julong High-TechFood Industry Co., Ltd ("GJH") is amortised over a period of 20 years. (v) Income Taxes There are certain transactions and computations for which theultimate tax determination is uncertain during the ordinary course of business.The Group recognises tax liabilities based on estimates of whether additionaltaxes will be due. Where the final outcome of these matters is different fromthe amounts that were initially recognised, such difference will impact theincome tax and deferred tax provisions in the period in which such determinationis made. (vi) Allowance for Doubtful Debts of Receivables The Group makes allowance for doubtful debts based on an assessment of therecoverability of receivables. Allowances are applied to receivables whereevents or changes in circumstances indicate that the carrying amounts may not berecoverable. Management specifically analyses historical bad debt, custom erconcentrations, customer creditworthiness, current economic trends and changesin customer payment terms when making a judgement to evaluate the adequacy ofthe allowance for doubtful debts of receivables. Where the expectation isdifferent from the original estimate, such difference will impact the carryingvalue of receivables. 5. SIGNIFICANT ACCOUNTING POLICIES (CONT'D) (a) Critical Accounting Estimates And Judgements (Cont'd) (vii) Fair value estimates for certain financial assets and liabilities The Group carries certain financial assets and liabilities at fair value, whichrequires extensive use of accounting estimates and judgement. While significantcomponents of fair value measurement were determined using verifiable objectiveevidence, the amount of changes in fair value would differ if the Group usesdifferent valuation methodologies. Any changes in fair value of these assets andliabilities would affect profit and equity. (b) Financial Instruments Financial instruments recognised in the balance sheet Financial instruments are recognised in the balance sheet when the Group hasbecome a party to the contractual provisions of the instrument. Financial instruments are classified as financial assets, financial liabilitiesor equity in accordance with the substance of the contractual arrangement.Interest, dividends, losses and gains relating to a financial instrument or acomponent that is a financial liability shall be recognised as income or expensein profit or loss. Distribution to holders of an equity instrument is debiteddirectly to equity, net of any related tax effect. Financial instruments areoffset when the Group has a legally enforceable right to offset and intends tosettle on a net basis or to realise the asset and settle the liabilitysimultaneously. • Classification The Group classifies its financial assets in the following categories:held-to-maturity investments, financial assets at fair value through profit orloss, loans and receivables, and available-for-sale financial assets. Theclassification depends on the purpose for which the financial assets wereacquired. Management determines the classification of its financial assets atinitial recognition and re-evaluates this classification at every reportingdate, with the exception that the designation of financial assets at fair valuethrough profit or loss is not revocable. 5. SIGNIFICANT ACCOUNTING POLICIES (CONT'D) (b) Financial Instruments (Cont'd) • Held-to-maturity investments Held-to-maturity are non-derivative financial assets with fixed or determinablepayments and fixed maturities that the management has the positive intention andability to hold to maturity. Held-to-maturity investments are carried atamortised cost. During the year, the Group did not hold any investments in this category. • Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss are financial assets heldfor trading. A financial asset is classified in this category if acquiredprincipally for the purpose of selling in the short-term. Derivatives are alsoclassified as held for trading unless they are designated as hedges. Assets inthis category are classified as current assets. Realised and unrealised gains and losses arising from changes in the fair valueof the "financial assets at fair value through profit or loss" category areincluded in the income statement in the period in which they arise. During the year, the Group did not hold any financial assets in this category. • Loans and receivables Loans and receivables are non-derivative financial assets with fixed ordeterminable payments that are not quoted in an active market. They are includedin current assets as trade and other receivables. 5. SIGNIFICANT ACCOUNTING POLICIES (CONT'D) (b) Financial Instruments (Cont'd) • Available-for-sale financial assets Available-for-sale financial assets are non-derivatives that are eitherdesignated in this category or not classified in any of the other categories.They are included in non-current assets unless management intends to dispose ofthe investment within 12 months after the balance sheet date. Unrealised gainsand losses arising from changes in the fair value of the investments arerecognised directly in the fair value reserve within equity. Realised gains andlosses arising from change in the fair value are included in the incomestatement. During the year, the Group did not hold any financial assets in this category. • Recognition and derecognition Purchases and sales of investments are recognised on trade date - the date onwhich the Group commits to purchase or sell the asset. Investments arederecognised when the rights to receive cash flow from the financial assets haveexpired or have been transferred and the Group has transferred substantially allrisks and rewards of ownership to the other party. • Initial measurement Financial assets are initially recognised at fair value plus transaction costsexcept for the financial assets at fair value through profit or loss, which arerecognised at fair value. 5. SIGNIFICANT ACCOUNTING POLICIES (CONT'D) (b) Financial Instruments (Cont'd) • Subsequent measurement Available-for-sale financial assets and financial assets at fair value throughprofit or loss are subsequently carried at fair value. Loans and receivables andheld-to-maturity investments are carried at amortised cost using the effectiveinterest method. Realised and unrealised gains and losses arising from changes in the fair valueof the 'financial assets at fair value through profit or loss' investmentcategory are included in the income statement in the period in which they arise.Unrealised gains and losses arising from changes in the fair value of theinvestment classified as available-for-sales are recognised in the fair valuereserve within equity. When the investment classified as available-for-sale aresold or impaired, the accumulated fair value adjustment in the fair valuereserve within equity are included in the income statement. • Determination of fair value Fair value is the amount for which an asset could be exchanged, or a liabilitysettled, between knowledgeable, willing parties in an arm's length transaction.The fair values of the quoted financial assets are based on current bid prices.If the market for a financial asset is not active, the Group establishes thefair value by using various techniques. These include the use of the recentarm's length transaction, reference to other instruments that are substantiallythe same, discounted cash flow analysis, option pricing models refined toreflect the issuer's specific circumstances and others, where appropriate. 5. SIGNIFICANT ACCOUNTING POLICIES (CONT'D) (b) Financial Instruments (Cont'd) • Impairment of financial assets The Group assesses at each balance sheet date whether there is objectiveevidence that a financial asset or a group of financial assets is impaired. Inthe case of equity investment classified as available-for-sales, a significantor prolonged decline in the fair value of the investment below its cost isconsidered in determining whether the investments are impaired. If any suchevidence exists for available-for-sale financial assets, the cumulative loss -measured as the difference between the acquisition cost and the current fairvalue, less any impairment loss on that financial asset previously recognised inprofit or loss - is removed from the fair value reserve within equity andrecognised in the income statement. Impairment losses recognised in the incomestatement on equity investment are not reversed through the income statement,until the equity investments are disposed of. If there is objective evidence that an impairment loss on loans and receivablescarried at amortised cost has been incurred, the amount of the loss is measuredas the difference between the asset's carrying amount and the present value ofestimated future cash flow discount at the financial asset's original effectiveinterest rate ( i.e. the effective interest rate computed at initialrecognition). The carrying amount of the asset shall be reduced either directlyor through use of an allowance account. The amount of the loss shall berecognised in the profit or loss. Financial instruments not recognised in the balance sheet There were no financial instruments not recognised in the balance sheets. 5. SIGNIFICANT ACCOUNTING POLICIES (CONT'D) (c) Financial assets • Receivables Trade and other receivables are recognised initially at fair value andsubsequently measured at amortised cost using the effective interest method,less allowance for impairment. An allowance for impairment of receivables isestablish when there is objective evidence that the Group will not be able tocollect all amount due according to the original terms of the receivables. (d) Financial liabilities • Payables Liabilities for trade and other payables, including amounts owing to associatesand related parties, are recognised initially at fair value and subsequentlymeasured at amortised cost using the effective interest method. • Interest-bearing loans and borrowings All loans and borrowings are recognised initially at fair value of theconsideration received, net of directly attributable transaction cost incurred,and are subsequently stated at amortised cost. Any difference between theproceeds (net of transaction cost) and the redemption value is recognised in theincome statement over the period of the loans and borrowings using the effectiveinterest method. 5. SIGNIFICANT ACCOUNTING POLICIES (CONT'D) (e) Functional and Foreign Currency (i) Functional and Presentation Currency The functional currency of each of the Group's entities is measured using thecurrency of the primary economic environment in which the entity operates. The functional and presentation currency of the Company is United States Dollar("USD"). The consolidated financial statements are presented in United StatesDollars ("USD") which is the parent's presentation currency. (ii) Transactions and Balances Transactions of the Company in foreign currency are converted into USD at theapproximate rates of exchange ruling at the transaction dates. Transactions in foreign currency are measured in the respective functionalcurrencies of the Group's entities and are recorded on initial recognition inthe functional currencies at exchange rates approximating those ruling at thetransaction dates. Monetary assets and liabilities at the balance sheet date are translated at therates ruling as of that date. Non-monetary assets and liabilities are translated using exchange rates thatexisted when the values were determined. All exchange differences are taken tothe income statement. 5. SIGNIFICANT ACCOUNTING POLICIES (CONT'D) (e) Functional and Foreign Currency (Cont'd) (iii) Foreign Operations The results and financial position of the subsidiaries engaged in foreignoperations are translated into the presentation currency as follows:- (a) assets and liabilities, including goodwill and fair valueadjustments arising on the acquisition of foreign operations, for each balancesheet presented are translated at the closing rate at the date of the balancesheet; (b) income statement of foreign operations, including revenue andexpenses, are translated at the average exchange rates for the year; and (c) all resulting exchange differences are recognised as a separatecomponent of equity, as a foreign currency translation reserve; (d) on disposal, accumulated translation differences are recognised inthe consolidated income statements as part of the gain or loss on sale of theforeign operation. (f) Basis of Consolidation The consolidated financial statements include the financial statements of theCompany and its subsidiaries made up to 31 December 2007. A subsidiary is defined as a company in which the Group has the power, directlyor indirectly, to exercise control over the financial and operating policies soas to obtain benefits from its activities. All subsidiaries are consolidated using the purchase method of accounting. Underthe purchase method of accounting, the results of the subsidiaries acquired ordisposed of are included from the date of acquisition or up to the date ofdisposal. At the date of acquisition, the fair values of the subsidiary's netassets are determined and these values are reflected in the consolidatedfinancial statements. The cost of acquisition is measured at the aggregate ofthe fair values, at the date of exchange, of assets given, liabilities incurredor assumed, and equity instruments issued by the Group in exchange for controlof the acquiree, plus any costs directly attributable to the businesscombination. 5. SIGNIFICANT ACCOUNTING POLICIES (CONT'D) (f) Basis of Consolidation (Cont'd) Intragroup transactions, balances and unrealised gains ontransactions are eliminated; unrealised losses are also eliminated unless costcannot be recovered. Where necessary, adjustments are made to the financialstatements of the subsidiary to ensure consistency of accounting policies withthose of the Group. Minority interests in the consolidated balance sheets consist of theminorities' share of fair values of the identifiable assets and liabilities ofthe acquiree as at the date of acquisition and the minorities' share ofmovements in the acquiree's equity. Minority interests are presented in the consolidated balance sheetof the Group within equity, separately from the Company's equity holders, andare separately disclosed in the consolidated income statement of the Group. (g) Goodwill on Consolidation Goodwill on consolidation represents the excess of the fair value of thepurchase consideration over the Group's share of the fair values of theidentifiable net assets of the subsidiaries at the date of acquisition. Goodwill is measured at cost less accumulated impairment losses, if any. Thecarrying value of goodwill is reviewed for impairment annually. The impairmentvalue of goodwill is recognised immediately in the consolidated incomestatement. An impairment loss recognised for goodwill is not reversed in asubsequent period. If, after reassessment, the Group's interest in the fair values of theidentifiable net assets of the subsidiaries exceeds the cost of the businesscombinations, the excess is recognised immediately in the consolidated incomestatement. (h) Investments in Subsidiaries Investments in subsidiaries are stated at cost in the balance sheet of theCompany, and are reviewed for impairment at the end of the financial year ifevents or changes in circumstances indicate that their carrying values may notbe recoverable. On the disposal of the investments in subsidiaries, the difference between thenet disposal proceeds and the carrying amount of the investments is taken to theincome statement. Significant Accounting Policies (Cont'd) (i) Intangibles Assets Intangibles assets acquired separately are measured on initial recognition atcost. The cost of intangible assets acquired in a business combination is theirfair values as at the date of acquisition. Following initial recognition,intangible assets are carried at cost less any accumulated amortisation and anyaccumulated impairment losses. The useful lives of intangible assets are either finite or indefinite. Intangible assets with finite lives are amortised on a straight-line basis overthe estimated economic useful. The amortisation period and the amortisationmethod for an intangible asset with a finite useful life are reviewed at everybalance sheet date. Intangible assets with indefinite useful lives are notamortised. All intangible assets are tested for impairment annually or more frequently ifthe events or changes in circumstances indicate that the carrying value may beimpaired either individually or at the cash-generating unit level. The usefullife of an intangible asset with an indefinite life is also reviewed annually todetermine whether the useful life assessment continues to be supportable. (i) Intellectual Property Rights Intellectual property rights of PureCircle Sdn. Bhd. ("PCSB") comprise thepatents, technological process, micro-organisms and all intellectual andindustrial property rights in connection therewith on the production of naturalenzymatically enhanced sweetener, pharmaceutical products and chemicalderivatives of bio-organic and physiologically active compounds. The useful life of the intellectual property rights of PCSB is considered to beindefinite because based on the analysis of all of the relevant factors; thereis no foreseeable limit to the period over which the asset is expected togenerate net cash inflows for PCSB. Intellectual property rights are stated atcost les impairment losses. They are not amortised but tested for impairmentannually or more frequently when indicators of impairment are identified. Significant Accounting Policies (Cont'd) (i) Intangibles Assets (Cont'd) (i) Intellectual Property Rights (Cont'd) The intellectual property of Ganzhou Julong High-tech Food Industry Co., Ltd ("GJH") consists of the acquisition costs of the patents, technological process,micro-organisms and all intellectual and industrial property rights inconnection therewith on the production of natural enzymatically enhancedsweetener, pharmaceutical products and chemical derivatives of bio-organic andphysiologically active compounds. The acquisition cost is capitalised as anintangible asset as it is able to generate future economic benefits to GJH. The intellectual property of GJH is amortised on a straight-line basis over theperiod of 20 years during which its economic benefits are expected to beconsumed. (ii) Product Development All research costs are recognised in the income statement as incurred. Expenditure incurred on projects to develop new products is capitalized asintangible asset and deferred only when the Group can demonstrate the technicalfeasibility of completing the intangible asset so that it will be available foruse or sale, its intention to complete and its ability to use or sell the asset,how the asset will generate future economic benefits, the availability ofresource to complete the project and the ability to measure reliably theexpenditure during the development. Product development expenditures which donot meet these criteria are expensed when incurred. 5. SIGNIFICANT ACCOUNTING POLICIES (CONT'D) (j) Property, Plant and Equipment Property, plant and equipment, other than freehold land, are stated at cost lessaccumulated depreciation or amortisation and impairment losses, if any. Freeholdland is stated at cost less impairment losses, if any, and is not depreciated. Depreciation or amortisation is calculated under the straight-line method towrite off the depreciable amount of the assets over their estimated usefullives. Depreciation of an asset does not cease when the asset becomes idle or isretired from active use unless the asset is fully depreciated. The principalannual rates used for this purpose are:- Buildings 5%Biotech plant 2% - 5%Mould and factory equipment 10% - 20%Tools 10%Office equipment and computers 20%Furniture and fittings 20%Motor vehicles 20% The depreciation method, useful life and residual values are reviewed, andadjusted if appropriate, at each balance sheet date to ensure that the amount,method and period of depreciation are consistent with previous estimates and theexpected pattern of consumption of the future economic benefits embodied in theitems of the property, plant and equipment. An item of property, plant and equipment is derecognised upon disposal or whenno future economic benefits are expected from its use. Any gain or loss arisingfrom derecognition of the asset is included in the income statement in the yearthe asset is derecognised. Capital work-in-progress represents assets under construction, and which are notready for commercial use at the balance sheet date. Capital work-in-progress isstated at cost, and will be transferred to the relevant category of long-termassets and depreciated accordingly when the assets are completed and ready forcommercial use. Cost of capital work-in-progress includes direct cost, related expenditure andinterest cost on borrowings taken specifically to finance the purchase of theassets, net of interest income on the temporary investment of those borrowings 5. SIGNIFICANT ACCOUNTING POLICIES (CONT'D) (k) Impairment of Assets The carrying values of assets, other than those to which IAS 36 - Impairment ofAssets does not apply, are reviewed at each balance sheet date for impairmentwhen there is an indication that the assets might be impaired. Impairment ismeasured by comparing the carrying values of the assets with their recoverableamounts. The recoverable amount of the assets is the higher of the assets' netselling price and their value-in-use, which is measured by reference todiscounted future cash flow. An impairment loss is charged to the income statement immediately unless theasset is carried at its revalued amount. Any impairment loss of a revalued assetis treated as a revaluation decrease to the extent of a previously recognisedrevaluation surplus for the same asset. In respect of assets other than goodwill, and when there is a changein the estimates used to determine the recoverable amount, a subsequent increasein the recoverable amount of an asset is treated as a reversal of the previousimpairment loss and is recognised to the extent of the carrying amount of theasset that would have been determined (net of amortisation and depreciation) hadno impairment loss been recognised. The reversal is recognised in the incomestatement immediately, unless the asset is carried at its revalued amount. Areversal of an impairment loss on a revalued asset is credited directly to therevaluation surplus. However, to the extent that an impairment loss on the samerevalued asset was previously recognised as an expense in the income statement,a reversal of that impairment loss is recognised as income in the incomestatement. 5. SIGNIFICANT ACCOUNTING POLICIES (CONT'D) (l) Assets Under Finance Lease and Hire Purchase Leases of plant and equipment where substantially all the benefitsand risks of ownership are transferred to the Group are classified as financeleases. Assets under finance lease and hire purchase are recognized at theinception of the lease/hire purchase as if the assets are owned by the Group. Each lease or hire purchase payment is allocated between theliability and finance charges so as to achieve a constant rate on the financebalance outstanding. The corresponding outstanding obligations due under thefinance lease and hire purchase after deducting finance charges are included asliabilities in the financial statements. Finance charges are allocated to the income statement over theperiods of the respective lease and hire purchase agreements. Plant and equipment acquired under finance leases and hire purchaseare depreciated over the useful lives of the assets. If there is no reasonablecertainty that the ownership will be transferred to the Group, the assets aredepreciated over the shorter of the lease terms and their useful lives. (m) Inventories Inventories are stated at the lower of cost and netrealisable value. Cost is determined on the weighted average basis, andcomprises the purchase price and incidentals incurred in bringing theinventories to their present location and condition. Cost of finished goods andwork-in-progress includes the cost of materials, labour and an appropriateproportion of production overheads. Net realisable value represents the estimated sellingprice less the estimated costs of completion and the estimated costs necessaryto make the sale. Where necessary, due allowance is made for all damaged, obsolete and slow-moving items. 5. SIGNIFICANT ACCOUNTING POLICIES (CONT'D) (n) Income Taxes Income taxes for the year comprise current and deferred tax. Current tax is the expected amount of income taxes payable in respect of thetaxable profit for the year and is measured using the tax rates that have beenenacted or substantially enacted at the balance sheet date. Deferred tax is provided in full, using the liability method, on the temporarydifferences arising between the tax bases of assets and liabilities and theircarrying amounts in the financial statements. Deferred tax liabilities are recognised for all taxable temporary differencesother than those that arise from goodwill or excess of the acquirer's interestin the net fair value of the acquiree's identifiable assets, liabilities andcontingent liabilities over the business combination costs or from the initialrecognition of an asset or liability in a transaction which is not a businesscombination and at the time of the transaction, affects neither accountingprofit nor taxable profit. Deferred tax assets are recognised for all deductible temporary differences,unused tax losses and unused tax credits to the extent that it is probable thatfuture taxable profits will be available against which the deductible temporarydifferences, unused tax losses and unused tax credits can be utilised. Deferred tax assets and liabilities are measured at the tax rates that areexpected to apply in the period when the asset is realised or the liability issettled, based on the tax rates that have been enacted or substantially enactedat the balance sheet date. Deferred tax is recognised in the income statement, except when it arises from atransaction which is recognised directly in equity, in which case the deferredtax is also charged or credited directly to equity, or when it arises from abusiness combination that is an acquisition, in which case the deferred tax isincluded in the resulting goodwill or excess of the acquirer's interest in thenet fair value of the acquiree's identifiable assets, liabilities and contingentliabilities over the business combination costs. The carrying amounts ofdeferred tax assets are reviewed at each balance sheet date and reduced to theextent that it is no longer probable that sufficient future taxable profits willbe available to allow all or part of the deferred tax assets to be utilised. 5. SIGNIFICANT ACCOUNTING POLICIES (CONT'D) (o) Equity Instruments Ordinary shares are classified as equity. Incremental costs directlyattributable to the issue of new shares or options are shown in equity as adeduction, net of tax, from proceeds. Dividends on ordinary shares are recognised as liabilities when approved forappropriation. Where the Company purchases any of its own equity share capital (treasuryshares), the consideration paid, including any directly attributable incrementalcosts (net of income taxes) is shown as a deduction from equity attributable toshareholders of the Company until the shares are cancelled or reissued. Gain orloss from cancellation or subsequent reissue is taken as a movement in equity. (p) Borrowings Borrowings are recognised initially at fair value, net of transaction costsincurred. Borrowings are subsequently stated at amortised cost; any differencebetween the proceeds (net of transaction costs) and the redemption value isrecognised in the income statement over the period of the borrowings using theeffective interest method. Borrowings are classified as current liabilities unless the Group has anunconditional right to defer settlement of the liability for at least 12 monthsafter the balance sheet date. (q) Cash and Cash Equivalents Cash and cash equivalents comprise cash in hand, deposits held atcall with banks, bank overdraft and short-term, highly liquid investments thatare readily convertible to known amounts of cash and which are subject to aninsignificant risk of changes in value. 5. SIGNIFICANT ACCOUNTING POLICIES (CONT'D) (r) Employee Benefits (i) Short-term Benefits Wages, salaries, paid annual leave, bonuses and non-monetary benefits areaccrued in the period in which the associated services are rendered by employeesof the Group. (ii) Defined Contribution Plans The Group's contributions to defined contribution plans are charged to theincome statement in the period to which they relate. Once the contributions havebeen paid, the Group has no further liability in respect of the definedcontribution plans. (s) Segmental Information Segment revenue and expenses are those directly attributable to thesegments and include any joint revenue and expenses where a reasonable basis ofallocation exists. Segment assets include all assets used by a segment andconsist principally of property, plant and equipment (net of accumulateddepreciation, where applicable), other investments, inventories, receivables andcash and bank balances. Most segment assets can be directly attributed to the segments on areasonable basis. Segment assets do not include income tax assets, whilstsegment liabilities do not include income tax liabilities and borrowings fromfinancial institutions. Segment revenue, expenses and results include transfers betweensegments. The prices charged on inter-segment transactions are based on normalcommercial terms. These transfers are eliminated on consolidation. 5. SIGNIFICANT ACCOUNTING POLICIES (CONT'D) (t) Revenue Recognition (i) Sale of Goods Revenue is recognised upon delivery of goods and customers' acceptance and whereapplicable, net of sales tax, returns and trade discounts. (ii) Interest Income Interest income is recognised on an accrual basis, based on the effective yieldon the investment. 6. INVESTMENT IN SUBSIDIARIES The Company USD'000 Unquoted shares, at cost 17,985 Details of the subsidiaries are as follows:- Name of Company County of Effective Equity Incorporation Interest Principal Activities 2007 PureCircle Sdn. Bhd. Malaysia 100% Manufacturing and sale of(Formerly known as extracts of natural Stevian Biotechnology high intensity sweeteners. Corporation Sdn. Bhd.) Ganzhou Julong High- The People's 55% Manufacturing, marketingTech Food Industry Co. Republic of and sale of Stevioside Ltd.* China ("The PRC") and Stevia products. * - Held through PureCircle Sdn. Bhd. 7. INVESTMENT IN AN ASSOCIATE The Group 2007 USD'000 Unquoted shares, at cost 157 Details of the associate are as follows:- County of Incorporation EffectiveName Equity Interest Principal Activities 2007 SDF Limited Hong Kong 30% Dormant. The equity method is not applied to account for the investment inthe associate as the amount involved is not material for equity accounting to beapplied. 8. INTANGIBLE ASSETS Intellectual Property Product Rights Development TotalThe Group USD'000 USD'000 USD'000Cost:Arising from the acquisition of subsidiaries 4,182 733 4,915Additions during the financial period 3,077 160 3,237Foreign exchange translation difference 158 25 183 At 31.12.2007 7,417 918 8,335 Accumulated amortization:Arising from the acquisition of subsidiaries (512) - (512)Amortisation (18) - (18)Foreign exchange translation difference (16) - (16) At 31.12.2007 (546) - (546) Net carrying amountAt 31.12.2007 6,871 918 7,789 8. INTANGIBLE ASSETS (CONT'D) Intellectual property rights comprise the patents, technologyprocess, micro-organisms and all intellectual and industrial property rights inconnection therewith on the production of natural enzymatically enhancedsweetener, pharmaceutical products and chemical derivatives of bio-organic andphysiologically active compounds. (a) Key assumptions for value-in-use calculations The recoverable amount of a cash generating unit ("CGU") isdetermined based on value-in-use calculations using cash flow projections basedon financial budgets approved by management covering a five-year period. The keyassumptions used for each of the CGU's value-in-use calculations are: (i) Growth rate The average growth rate used is based on the planned capacity andforecasted demands. (ii) Gross margin The budgeted gross margin used is based on the average sellingprices and the fixed and variable costs achieved in the year immediately beforethe budgeted year, adjusted for market conditions and economic conditions andinternal resource efficiency. (iii) Discount rate The discount rates used ranged between 7.75% and 10% whichapproximate the CGUs' average cost of funds and risk factor. 8. INTANGIBLE ASSETS (CONT'D) (b) Sensitivity to changes in assumptions The management believes that no reasonably possible change in any of the abovekey assumptions would cause the carrying value of the intangible assets to bematerially higher than its recoverable amount. 9. PROPERTY, PLANT AND EQUIPMENT Acquisition Exchange Of Written Depreciation Fluctuation At Subsidiaries Additions Transfer Off Charge Difference 31.12.2007 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000 USD'000The Group Net Book Value Freehold land 507 - - - - 17 524Buildings 92 - - - (2) 1 91Biotech plant 18,980 223 5 (40) (173) 421 19,416Mould and factory equipment 1,877 797 - - (75) 200 2,799Tools 1,179 992 - - (79) 29 2,121Office equipment and computers 232 10 - - (17) 7 232Furniture and 119 1 - - (9) 4 115fittingsMotor vehicles 657 - - - (36) 15 636Capital work-in- progress 98 635 (5) - - 63 791 23,741 2,658 - (40) (391) 757 26,725 At Accumulated Net Book Cost Depreciation ValueAt 31.12.2007 USD'000 USD'000 USD'000 Freehold land 524 - 524Building 103 (12) 91Biotech plant 21,401 (1,985) 19,416Mould and factory equipment 3,550 (751) 2,799Tools 2,550 (429) 2,121Office equipment and computer 376 (144) 232Furniture and fittings 204 (89) 115Motor vehicles 862 (226) 636Capital work-in-progress 791 - 791 30,361 (3,636) 26,725 9. PROPERTY, PLANT AND EQUIPMENT (CONT'D) The carrying values of plant and equipment charged to financial institutions tosecure banking facilities granted to the Group are as follows:- The Group 2007 USD'000 Biotech plant 9,845Mould and factory equipment 1,103 10,948 The carrying values of plant and equipment acquired under hire purchase termsare as follows:- The Group 2007 USD'000 Biotech plant 76Motor vehicle 265 10. PREPAID LAND LEASE PAYMENTS The Group 2007 USD'000 Arising from acquisition of a subsidiary 603Additions for the financial period 851Amortisation for the financial period (18)Effect of foreign exchange translation 21 At 31 December 1,457 The prepaid land lease payments represent the Group's right to use the land for20 years. Accordingly, the amortisation of the prepaid land lease payments is ona straight line basis over 20 years. The prepaid land lease payments have beenpledged as security for banking facilities granted to the Group. 11. INVENTORIES The Group 2007 USD'000At Cost:-Raw materials 8,716Work-in-progress 654Finished goods 1,412 10,782At Net Realisable Value:-Work-in-progress 1,727 12,509 12. TRADE RECEIVABLES The Group's normal trade credit term range from 30 to 120 days.Other credit terms are assessed and approved on case-by-case basis. The trade receivables that are less than three months past due are notconsidered impaired. As of 31 December 2007, trade receivables of USD58,000 werepast due but not impaired. These related to a number of independent customersfor whom there is no recent history of default. The ageing analysis of thesetrade receivables is as follows:- The Group 2007 USD'000 Up to 3 months 293 to 6 months 29 58 The foreign currency exposure profile of the trade receivables at the balancesheet date was as follows:- The Group 2007 USD'000 Chinese Renminbi 773Euro 8Ringgit Malaysia 286 13. OTHER RECEIVABLES, DEPOSITS AND PREPAYMENTS The Group 2007 USD'000 Other receivables, deposits and prepayments 8,299Allowance for doubtful debts (24) 8,275 The foreign currency exposure profile of the other receivables, deposits andprepayments at the balance sheet date was as follows:- The Group 2007 USD'000 Ringgit Malaysia 3,234Sterling Pound 551 Included in other receivables are the following major balances:- (a) An amount of approximately USD4.9 million owed by placees inrelation to new shares issued under the admission to AIM market exercise. Thisamount was fully received subsequent to the balance sheet date; (b) USD2.2 million advances to suppliers/agents for the purchaseof stevia leaves; and (c) USD0.97 million which represents the deferred amount payableby a director in respect of shares sold to him. 14. AMOUNT OWING BY A SUBSIDIARY The amount owing is unsecured, interest-free and is repayable on demand. 15. AMOUNT OWING BY RELATED PARTIES The amount owing is unsecured, interest-free and is repayable on demand. 16. LOANS AND RECEIVABLES The Group The Company 2007 2007 USD'000 USD'000 Trade receivables 3,410 -Other receivables, deposits and prepayments 8,275 4,951Less: Prepayments (372) - Trade and other receivables 11,313 4,951Amount owing by a subsidiary - 10,312Amount owing by related parties 2,137 -Fixed deposits with licensed bank 31,543 31,543Cash and bank balances 12,722 3,221 57,715 50,027 17. FIXED DEPOSITS The weighted average interest of the fixed deposits at the balance sheet datewas 4.8% per annum. The fixed deposits have maturity period of 30 days. The foreign currency exposure profile of fixed deposits with licensed banks atbalance sheet date was as follows:- The Group/ The Company 2007 USD'000 Sterling Pound 29,037 18. CASH AND BANK BALANCES The foreign currency exposure profile of the cash and bank balancesat the balance sheet date was as follows:- The Group The Company 2007 2007 USD'000 USD'000 Chinese Renminbi 7,788 -Ringgit Malaysia 80 -Sterling Pound 2,380 1,892 19. SHARE CAPITAL The movements in the authorised and paid-up share capital are as follows:- The Company 2007 Par Value Number Of Shares USD '000 USD'000 AuthorisedAt 23 July 2007 (date of incorporation) 1.00 10 10Increase during the financial period 1.00 24,990 24,990 25,000 25,000 Sub-division of the par value of ordinary shares of USD1.00 to USD0.10 each 0.10 250,000 25,000 19. SHARE CAPITAL (CONT'D) The Company 2007 Par Value USD Number Of Shares USD Issued And Fully Paid-UpAt 23 July 2007 (date of incorporation) 1.00 10,000 10,000Sub-division of par value from USD1.00 toUSD0.10 per share - 90,000 - 0.10 100,000 10,000Issuance of shares pursuant to the:- issue during the financial period 0.10 15,303,030 1,530,303- acquisition of a subsidiary 0.10 100,696,970 10,069,697Cancellation upon purchase of shares 0.10 (100,000) (10,000) 116,000,000 11,600,000Public issue 0.10 14,285,714 1,428,571 At 31 December 2007 0.10 130,285,714 13,028,571 The Company was incorporated with an authorised share capital ofUSD10,000 divided into 10,000 ordinary shares of USD1.00 each. On incorporation,10,000 ordinary shares were issued at USD1.00 and have been fully paid. During the financial period, the Company, (a) increased its authorised ordinary share capital from USD10,000 toUSD25,000,000 by the creation of 24,990,000 new ordinary shares of USD1.00 eachand further sub-divided its 25,000,000 authorised share capital of USD1.00 eachinto 250,000,000 authorised share capital of USD0.10 each; and (b) increased its issued and paid-up ordinary share capitalfrom USD10,000 to USD13,028,571 by way of:- (i) the issuance of 15,303,030 ordinary shares of USD0.10 eachat an issue price of USD0.7136 per ordinary share for cash, to fund theacquisition of 7,651,515 ordinary shares of RM1.00 each representing 13.19%equity interest in PCSB, and for additional working capital purposes; and 19. SHARE CAPITAL (CONT'D) (ii) the issuance of 100,696,970 ordinary shares of USD0.10 eachat par, for the acquisition of the 50,348,485 ordinary shares of RM1.00 eachrepresenting 86.81% equity interest in PCSB; and (c) decreased its issued and fully paid-up share capital fromUSD11,610,000 to USD11,600,000 by way of purchase and cancellation of 100,000 ofits own ordinary shares of USD0.10 each held by a shareholder at the amountpaid-up there-on; and (d) issued 14,285,714 new ordinary shares of USD0.10 each atan issue price of USD3.50 per share pursuant to the admission to AIM market. All new shares issued during the financial period rank pari passu inall respects with the existing shares of the Company. 20. SHARE PREMIUM The Group/ The Company 2007 USD'000At 23 July 2007 (date of incorporation) -Premium arising from:- issue of shares to fund the acquisition of subsidiaries and working capital purposes 9,390- issue of shares pursuant to admission to AIM market 48,571Gain from sale of treasury shares 1,054Admission to AIM market expenses (3,318) At 31 December 2007 55,697 21. TREASURY SHARES The Company bought 2,320,000 of its own ordinary shares on 27 September 2007 fora total cash consideration of USD1.00. During the financial period, the Company sold 1,260,000 treasury shares to twodirectors of the Company for a total cash consideration of USD1,053,621. At 31 December 2007, the Company held a total of 1,060,000 treasury shares. 22. FOREIGN EXCHANGE TRANSLATION RESERVE The foreign exchange translation reserve arose from the translationof the financial statements of the foreign subsidiaries. 23. FINANCIAL LIABILITIES MEASURED AT AMORTISED COST The Group The Company 2007 2007 USD'000 USD'000 Trade payables 778 -Other payables and accruals 1,501 429Total borrowings 22,775 - 25,054 429 24. LONG-TERM BORROWINGS The Group 2007 USD'000 Lease and hire purchase payables (Note 37) 216Term loans (Note 38) 10,409 10,625 25. DEFERRED TAX LIABILITIES The Group 2007 USD'000 Arising from the acquisition of subsidiaries 561Recognised in the income statement (Note 32) (561) At 31 December - 26. TRADE PAYABLES The normal trade credit terms granted to the Group range from 30 to 60 days. The foreign currency exposure profile of the trade payables at the balance sheetdate was as follows:- The Group 2007 USD'000 Chinese Renminbi 212Ringgit Malaysia 564 27. OTHER PAYABLES AND ACCRUALS The foreign currency exposure profile of the other payables andaccruals at the balance sheet date was as follows:- The Group At 31.12.2007 USD'000 Chinese Renminbi 718Pounds Sterling 186Ringgit Malaysia 307 28. SHORT-TERM BORROWINGS The Group 2007 USD'000 Bills payable 7,496Lease and hire purchase payables (Note 37) 61Term loans (Note 38) 4,073 11,630 The foreign currency exposure profile of the short-term borrowingsat the balance sheet date was as follows:- The Group 2007 USD'000 Chinese Renminbi 2,464Ringgit Malaysia 9,166 29. BANK OVERDRAFT The bank overdraft bore an effective interest rate of 6.75% per annum at thebalance sheet date and is secured by way of:- (i) a fixed and floating charge over present and future assets and thefreehold property of a subsidiary; and (ii) the joint and several guarantee of certain directors of the subsidiary. The foreign currency exposure profile of the short-term borrowings at thebalance sheet date was as follows:- The Group 2007 USD'000 Ringgit Malaysia 520 30. NET ASSETS PER SHARE The net assets per share is calculated based on the net assets value at thebalance sheet date of USD70,057,000 divided by the number of ordinary shares inissue (excluding the treasury shares held by the Company) at the balance sheetdate of 129,225,714. 31. REVENUE Revenue represents the invoiced value of services rendered lessreturns and trade discounts. 32. INCOME TAX EXPENSE The Group 23.7.2007 to 31.12.2007 USD'000Current tax- foreign tax 8 Deferred tax (Note 25):- overprovision of deferred tax 561 569 The Company was granted a tax assurance certificate dated 18 August 2007 underthe Exempted Undertakings Tax Protection Act 1966 pursuant to which it isexempted from any Bermuda taxes (other than local property taxes) until 28 March2016. The subsidiary, PCSB, has been granted the BioNexus Status by the MalaysianBiotechnology Corporation Sdn Bhd in which PCSB is entitled to a 100% income taxexemption for a period of 10 years on its income commencing from the date ofcommercial operation. Upon the expiry of the 10-year incentive period, PCSB willbe entitled to a concessionary tax rate of 20% on income derived from qualifyingactivities for a further period of 10 years. The other subsidiary, GJH, has also been granted a 100% exemption on corporatetax from 1 January to 31 December 2008 and 50% exemption on corporate tax from 1January 2009 to 31 December 2011. 32. INCOME TAX EXPENSE (CONT'D) A reconciliation of income tax expense applicable to the profitbefore taxation at the statutory tax rate to income tax expense at the effectivetax rate of the Group is as follows:- The Group 2007 USD'000 Profit before taxation 444 Tax at the statutory tax rates in the respective countries (676) Tax effects of:-Non-deductible expenses (2,436)Non-taxable income 2,912Utilisation of deferred tax assets 208Overprovision of deferred tax 561 Income tax expense 569 33. EARNINGS PER SHARE The basic earnings per share is calculated by dividing the profitattributable to equity holders of the Company by the weighted average number ofordinary shares in issue (excluding the treasury shares) during the year asdisclosed in Note 21 to the financial statements:- The Group 2007 Profit attributable to equity holders of the Company (USD'000) 422Weighted average number of ordinary shares in issue (thousands) 69,663Basic earnings per share (US Cents) 0.61 34. DIRECTORS' REMUNERATION The aggregate amount of emoluments received and receivable by directors of theGroup and of the Company during the financial period are as follows:- The Group The Company 23.7.2007 23.7.2007 to to 31.12.2007 31.12.2007 USD'000 USD'000 Executive directors:-- basic salary 64 - Non-executive directors:-- fee 39 39 103 39 34. DIRECTORS' REMUNERATION (CONT'D) Details of emoluments for the directors of the Group and of the Company received/receivable for the financial period in bands of USD20,000 are as follows:- The Group/The Company 2007 Executive Non-Executive Directors Directors Below USD20,000 2 3USD20,001 - USD35,000 1 - Key management personnel comprises executive and non-executive directors of theGroup which having authority and responsibility for planning, directing, andcontrolling the activities of the Group, directly or indirectly. 35. ACQUISITION OF A SUBSIDIARY, NET OF CASH ACQUIRED (a) During the financial period, the Company acquired 100% equityinterest in PureCicle Sdn. Bhd for a total consideration of USD17,985,000. Thepurchase consideration was satisfied by way of the following:- (i) cash consideration of USD7.915 million for the acquisition of7,651,515 ordinary shares of RM1.00 each representing 13.19% equity interest inPCSB, and (ii) the remaining 86.81% equity interest in PCSB for a consideration ofUSD10,069,697 settled via share swap arrangement, whereby 50,348,485 ordinaryshares of RM1.00 each in PCSB were swapped for 100,696,970 ordinary shares ofUSD0.10 each in the Company at par on the basis of 2 new ordinary shares in theCompany for every 1 ordinary share held in PCSB. 35. ACQUISITION OF A SUBSIDIARY, NET OF CASH ACQUIRED (CONT'D) The details of net assets acquired and cash flow arising from the acquisition ofa subsidiary are as follows:- The Group The Group 2007 2007 USD'000 USD'000 Fair Value Carrying Amount Non-current assets 28,746 28,746Current assets 19,537 19,537Current liabilities (24,564) (24,564)Non-current liability (561) (561)Minority interests (5,122) (5,122) Fair value of net assets acquired 18,036 18,036 Excess of Group's interest in the net fair value of acquiree's identifiable assets, liabilities and contingent liabilities over cost of acquisition (51) Total cost of acquisition 17,985 *Satisfied by the issuance of ordinary shares (10,070) Satisfied in cash 7,915Less: Cash and cash equivalents of subsidiary acquired (1,207) Net cash outflow from acquisition of subsidiary 6,708 Note:- * Includes related costs of USD135,000. 35. ACQUISITION OF A SUBSIDIARY, NET OF CASH ACQUIRED (CONT'D) The effects of the acquisition of the subsidiaries on the financial results ofthe Group at the end of the financial year are as follows:- The Group 2007 USD'000Revenue 8,898Profit for the financial period 2,156 36. CASH AND CASH EQUIVALENTS For the purpose of the cash flow statements, cash and cashequivalents comprise the following:- The Group The Company 2007 2007 USD'000 USD'000 Fixed deposits 31,543 31,543Cash and bank balances 12,722 3,221Bank overdraft (520) - 43,745 34,764 37. LEASE AND HIRE PURCHASE PAYABLES The Group 2007 USD'000Minimum lease and hire purchase payments:- not later than one year 73- later than one year and not later than five years 230- after five years 32 335Future finance charges (58) Present value of lease and hire purchase payables 277 The net lease and hire purchase payables are repayable as follows: Current (Note 28):- not later than one year 61 Non-current (Note 24):- later than one year and not later than five years 194- after five years 22 216 277 The lease and hire purchase payables of the Group are subject to effectiveinterest rates ranging from 4.79% to 9.78% per annum at the balance sheet date. 38. TERM LOANS The Group 2007 USD'000Current portion (Note 28):- repayable within one year 4,073 Non-current portion (Note 24):- repayable between one and two years 5,845- repayable between two and five years 4,564 Total non-current portion 10,409 14,482 The term loans bore a weighted average effective interest rate of7.78% per annum at the balance sheet date. Details of the repayment terms of the term loans are as follows:- Term loans Number of monthly Monthly instalments Commencement date of Amount outstanding instalments amount repayment The Group 2007 USD'000 USD'000 1 84 171 April 2005 6,728 2 48 28 July 2008 1,183 3 1 411 January 2008 411 4 1 274 March 2008 274 5 1 411 March 2008 411 6 1 548 June 2008 548 7 1 821 August 2008 821 8 1 4,106 July 2009 4,106 14,482 The fair values of the term loans approximated their carrying amounts. Term loan 1 and 2 are secured by way of:- (i) a fixed and floating charge over present and future assetsand the freehold property of a subsidiary; and (ii) the joint and several guarantee of certain directors of thesubsidiary. 38. TERM LOANS (CONT'D) Term loan 3 is secured by pledges of 528MT of the Stevia Leaves of a subsidiary. Term loan 4 and 6 are unsecured while term loan 5 is secured by a legal chargeover certain assets of the subsidiary. Term loan 7 is secured as follows:- (i) a legal charge over certain assets of the subsidiary; and (ii) pledges of 1,437MT of the Stevia Leaves of the subsidiary. Term loan 8 is secured as follows:- (i) a legal charge over certain assets of the subsidiary; (ii) a legal charge over the prepaid land lease payments of the subsidiary; and (iii) pledges of 1,761.28MT of the Stevia Leaves of the subsidiary. 39. SIGNIFICANT RELATED PARTY TRANSACTIONS The The Group Company 23.7.2007 23.7.2007 to to 31.12.2007 31.12.2007 USD'000 USD'000 Purchase of biotech plant from certain directors of GJH 1,487 - Purchase of intellectual property rights - from the directors of GJH 3,114 - Sale of treasury shares to 2 directors of the Company 1,054 1,054 In the opinion of the directors, the above transactions have been entered intounder terms that were mutually agreed between the parties. 40. SIGNIFICANT RELATED PARTY BALANCES The Group 2007 USD'000 Amount owing by directors and/or key management of the GJH as disclosed in Note 15 to the financial statements 2,137 41. FOREIGN EXCHANGE RATES The applicable closing foreign exchange rates used (expressed on thebasis of one unit of foreign currency to United States Dollar equivalent) forthe translation of foreign currency balances at the balance sheet date are asfollows:- The Group 2007 Chinese Renminbi 0.1369Ringgit Malaysia 0.2998Sterling Pound 1.996 42. SIGNIFICANT EVENTS DURING THE FINANCIAL PERIOD (i) On 27 July 2007, the Company entered into a Sale andPurchase Agreement to acquire 7,651,515 ordinary shares of RM1.00 eachequivalent to 13.19% of the issued and paid-up share capital of PureCircle Sdn.Bhd. ("PCSB") from a shareholder of PCSB for a total cash consideration ofUSD7,779,668; (ii) On 27 September 2007, the Company entered into a Share SwapAgreement with the other remaining shareholders of PCSB to acquire the remaining50,348,485 ordinary shares RM1.00 each representing 86.81% equity interest inPCSB, whereby the 50,348,485 ordinary shares in PCSB were swapped for100,696,970 ordinary shares of USD0.10 each in the Company at par on the basisof 2 new ordinary shares in the Company for every 1 ordinary share held in PCSB; (iii) On 27 September, the Company purchased 2,320,000 of its ownordinary shares of USD0.10 each from a shareholder for a total consideration ofUSD1.00. These shares were held as treasury shares; 42. SIGNIFICANT EVENTS DURING THE FINANCIAL PERIOD (CONT'D) (iv) On 10 November 2007, the Company sold 1,260,000 ordinaryshares of USD0.10 each held as treasury shares, to two directors of the Companyfor a total cash consideration of USD1,054,621; (v) The Company issued a total of 14,285,714 new ordinary sharesof USD0.10 each pursuant to the admission to AIM market of the London StockExchange plc in December 2007. The shares were issued at an issue price ofUSD3.50 per share, and total cash consideration of USD50 million was raisedpursuant to this exercise. 43. SEGMENTAL REPORTING (i) Primary reporting format - business segments Investment Holdings Manufacturing Eliminations Total2007 USD'000 USD'000 USD'000 USD'000 REVENUE - 14,604 (5,706) 8,898 RESULTSegment profit 551 Finance costs (471) Other income 364 Profit before taxation 444 Income tax expense 569 Profit after taxation 1,013 OTHER INFORMATIONSegment assets # 68,012 67,532 (28,820) 106,724Segment liabilities * 430 34,933 (10,309) 25,054Capital expenditure - 3,509 - 3,509Depreciation and amortisation - 427 - 427 # - Segment assets comprise total current and non-current assets. * - Segment liabilities comprise total current and long-termliabilities. 43. SEGMENTAL REPORTING (CONT'D) (ii) Secondary reporting format - geographical segments The Malaysia PRC Eliminations Total2007 USD'000 USD'000 USD'000 USD'000 REVENUE 5,780 8,824 (5,706) 8,898 RESULTSegment profit 551 Finance costs (471) Other income 364 Profit before taxation 444 Income tax expense 569 Profit after taxation 1,013 OTHER INFORMATIONSegment assets # 102,433 33,111 (28,820) 106,724Segment liabilities * 27,861 7,502 (10,309) 25,054Capital expenditure 251 3,258 - 3,509Depreciation and amortisation 222 205 - 427 # - Segment assets comprise total current and non-current assets. * - Segment liabilities comprise total current and long-termliabilities. 44. CAPITAL COMMITMENT Capital expenditure contracted for at the balance sheet date but not yetincurred is as follows:- The Group USD'000 Property, plant and equipment 2,497 45. FAIR VALUES OF FINANCIAL ASSETS AND LIABILITIES Fair value is defined as the amount at which the financialinstrument could be exchanged in a current transaction between knowledgeablewilling parties in an arm's length transaction, other than in a forced sale orliquidation. The following methods and assumptions are used to estimate the fairvalue of each class of financial instruments:- (a) Amounts Owing By/(To) A Subsidiary And Related Parties It is not practicable to estimate the fair values of the amountsowing by/(to) a subsidiary and the related parties due principally to the lackof fixed repayment terms. However, the Company does not anticipate the carryingamounts recorded at the balance sheet date to be significantly different fromthe values that would eventually be settled. (b) Cash And Cash Equivalents And Other Short-Term Receivables/Payables The carrying amounts approximated their fair values dueto the relatively short-term maturity of these investments. (c) Long-term Borrowings The carrying amounts approximated the fair values ofthese instruments. The fair values of the long-term borrowings are determined bydiscounting the relevant cash flows using current interest rates for similartypes of instruments at the balance sheet date. 46. COMPARATIVE FIGURES No comparative figures are presented for the Group and the Company as this isthe first set of financial statements prepared by the Company sinceincorporation. -------------------------- This information is provided by RNS The company news service from the London Stock Exchange
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