Interim results announcement for the six months ended 31 december 2016

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

The board of directors (the "Board") of Chaoda Modern Agriculture (Holdings) Limited (the "Company") presents the interim results of the Company and its subsidiaries (collectively referred to as the "Group" or "Chaoda") for the six months ended 31 December 2016. The consolidated statement of profit or loss and other comprehensive income of the Group for the six months ended 31 December 2016 and the consolidated statement of financial position of the Group as at 31 December 2016, together with the selected explanatory notes, are unaudited and condensed, which have been reviewed by the Company's Audit Committee and the Company's auditors, Elite Partners CPA Limited.

1. BASIS OF PREPARATION

   The unaudited condensed consolidated interim financial statements of the Group for the six months ended 31 December 2016 (the "Interim Financial Report") have been prepared in accordance with Hong Kong Accounting Standard 34 "Interim Financial Reporting" issued by the Hong Kong Institute of Certified Public Accountants (the "HKICPA") and the applicable disclosure requirements of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.

   The Interim Financial Report does not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group's annual financial statements for the year ended 30 June 2016 (the "2016 Annual Financial Statements").

   The Interim Financial Report has been prepared in accordance with the same accounting policies adopted in the 2016 Annual Financial Statements, except for the adoption of the new, amended or revised Hong Kong Financial Reporting Standards ("HKFRSs") (which collectively include all applicable individual Hong Kong Financial Reporting Standard ("HKFRS"), Hong Kong Accounting Standard ("HKAS") and Interpretation issued by the HKICPA) as disclosed in Note 2.

   The Interim Financial Report is unaudited but has been reviewed by Elite Partners CPA Limited in accordance with Hong Kong Standard on Review Engagements 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the HKICPA.

2. ADOPTION OF NEW, AMENDED OR REVISED HKFRSs

In the current interim period, the Group has applied, for the first time, all the new standards, amendments and interpretations (the "new HKFRSs") issued by the HKICPA, which are relevant to and effective for the Group's condensed consolidated financial statements for the annual period beginning on 1 July 2016. Except as described below, the application of the new HKFRSs in the current interim period has had no material effect on the amounts reported in the Interim Financial Report and/or disclosures set out in the Interim Financial Report.

The Group has applied the Amendments to HKAS 16 and HKAS 41 "Agriculture: Bearer Plants" for the first time in the current interim period. The Amendments to HKAS 16 "Property, Plant and Equipment" and HKAS 41 "Agriculture" define a bearer plant and require biological assets that meet the definition of a bearer plant to be accounted for as property, plant and equipment in accordance with HKAS 16, instead of HKAS 41. The agricultural produce growing on bearer plants continue to be accounted for in accordance with HKAS 41. The fruit trees of the Group have met the definition of bearer plant and shall be accounted for under property, plant and equipment since 1 July 2015.

The effects of the change in Amendments to HKAS 16 and HKAS 41 described above on the unaudited condensed consolidated statement of profit or loss and other comprehensive income of the Group for the six months ended 31 December 2015, are as follow:

The effects of the change in Amendments to HKAS 16 and HKAS 41 described above on the consolidated statement of financial position of the Group as at the end of the immediately preceding financial year, 30 June 2016, are as follow:

1. ADOPTION OF NEW, AMENDED OR REVISED HKFRSs (Continued) Amendments to HKAS 16 and HKAS 41 "Agriculture: Bearer Plants" (Continued)

   The effects of the change in Amendments to HKAS 16 and HKAS 41 described above on the consolidated statement of financial position of the Group as at the beginning of the comparative period, 1 July 2015, are as follow:

   As at
   1 July	As at
   2015	1 July
   (Originally	2015
   stated)	Adjustment	(Restated)
   RMB'000	RMB'000	RMB'000
   Property, plant and equipment	3,082,171	540,742	3,622,913
   Construction in progress	7,553	8,846	16,399
   Biological assets - non-current portion	682,521	(655,068)	27,453
   Biological assets - current portion	283,624	114,330	397,954
   Total effect on net assets	4,055,869	8,850	4,064,719
   Accumulated losses and total effect on equity	1,424,793	8,850	1,433,643

   The Group has not early adopted certain new standards, amendments to standards and interpretations that have been issued at the time of preparing the Interim Financial Report but are not yet effective. The directors of the Company (the "Directors") anticipate that all of the pronouncements will be adopted in the Group's accounting policy for the period beginning after the effective date of the pronouncements. The Directors are also currently assessing the impact of these new standards, amendments to standards and interpretations but are not yet in a position to state whether they would have material impact on the results and the financial position of the Group.

2. REVENUE

   The principal activities of the Group are the growing and sales of crops, and the breeding and sales of livestock.

   Revenue represents the sales value of goods supplied to customers. The amount of each significant category of revenue recognised during the period is as follows:

   2016	2015
   RMB'000	RMB'000
   Sales of crops	517,132	690,032
   Sales of livestock	2,664	2,486
   519,796	692,518

   Six months ended 31 December
3. SEGMENT INFORMATION

   The Group identifies operating segments and prepares segment information based on the regular internal financial information reported to the executive directors for their decisions about resources allocation to the Group's business components and for their review of the performance of those components. The business components in the internal financial information reported to the executive directors are determined following the Group's major operations. The Group's operating business are organised and managed separately according to the nature of products, which each segment representing a strategic business segment that offers different products in the People's Republic of China ("PRC") market. However, the Group's executive directors considered that over 90% of the Group's revenue, operating results and assets during the six months ended 31 December 2016 and 2015 were mainly derived from its growing and sales of crops. Consequently, no operating segment analysis is presented.

   The Company is an investment holding company and the principal place of the Group's operation is in the PRC. For the purpose of segment information disclosures under HKFRS 8, the Group regarded the PRC as its country of domicile. Over 90% of the Group's revenue and non-current assets are principally attributable to the PRC, being the single geographical region.

4. OTHER OPERATING EXPENSES

   2016	2015
   RMB'000	RMB'000
   Impairment loss on prepaid premium for land leases	279,164	-
   Impairment loss on property, plant and equipment	808,267	-
   Natural crop losses	1,750	76,772
   Loss on disposals and write off of property, plant and equipment	-	8,483
   Impairment loss on biological assets	76,821	-
   Deferred expenditure written off	57,955	39,783
   Others	103,310	133,063
   1,327,267	258,101

   Six months ended 31 December
5. LOSS BEFORE INCOME TAX

   Loss before income tax is arrived at after charging/(crediting):

6. Finance costs

   2016	2015
   RMB'000	RMB'000
   Bank and finance charges	18	18
   Interest on bank loans wholly repayable within five years	17	41
   35	59

   Six months ended 31 December
7. Staff costs

   2016	2015
   RMB'000	RMB'000
   Salaries, wages and other benefits	286,232	361,443
   Employee share option benefits	12,003	-
   Retirement benefit costs	2,444	2,332
   300,679	363,775

   Six months ended 31 December
8. Other items

   2016	2015
   RMB'000	RMB'000
   Interest income	(1,021)	(480)
   Amortisation of deferred expenditure, net of amount capitalised	49,636	84,697
   Amortisation of prepaid premium for land leases, net of amount capitalised	31,804	50,180
   Cost of inventories sold	713,703	1,024,404
   Depreciation of property, plant and equipment, net of amount capitalised	178,694	191,309
   Depreciation of investment properties	1,982	1,196
   Operating lease expense in respect of land and buildings	65,071	104,412

   Six months ended 31 December
9. INCOME TAX EXPENSE

10. No provision for the PRC enterprise income tax has been made in the condensed consolidated financial statements for the six months ended 31 December 2016 and 2015 as the PRC companies within the Group either has no assessable profits arising from the PRC or exempt from the enterprise income tax.

    According to the PRC tax law and its interpretation rules (the "PRC Tax Law"), enterprises that engage in qualifying agricultural business are eligible for certain tax benefits, including full enterprise income tax exemption or half reduction of enterprise income tax on profits derived from such business. Fuzhou Chaoda Modern Agriculture Development Company Limited, the Company's principal subsidiary, and other PRC subsidiaries engaged in qualifying agricultural business, which include the growing and sales of crops and the breeding and sales of livestock, are entitled to full exemption of the enterprise income tax. The enterprise income tax rate of other PRC subsidiaries of the Company not engaged in qualifying agricultural business is 25% for the six months ended 31 December 2016 and 2015.

11. No provision for Hong Kong profits tax has been made as the Company and its subsidiaries operating in Hong Kong either do not derive material estimated assessable profits or have unused tax losses brought forward to offset against the current period's estimated assessable profits for the six months ended 31 December 2016 and 2015.

13. DIVIDENDS

    The Directors do not recommend the payment of interim dividend for the six months ended 31 December 2016 and 2015.

14. LOSS PER SHARE
15. Basic loss per share

    The calculation of basic loss per share is based on the loss attributable to the owners of the Company of RMB1,743,207,000 (Six months ended 31 December 2015: RMB759,621,000) and the weighted average number of 3,291,798,000 (Six months ended 31 December 2015: 3,291,302,000) ordinary shares in issue during the period.

16. Diluted loss per share

    The calculation of diluted loss per share is based on the loss attributable to the owners of the Company of RMB1,743,207,000 (Six months ended 31 December 2015: RMB759,621,000) and the weighted average number of 3,291,798,000 (Six months ended 31 December 2015: 3,291,302,000) ordinary shares. The computation of diluted loss per share does not assume the conversion of the Company's share options outstanding since their exercise would result in a decrease in loss per share for the six months ended 31 December 2016 and 2015.

17. PROPERTY, PLANT AND EQUIPMENT

    31 December	30 June
    2016	2016
    RMB'000	RMB'000
    Net book value at 1 July 2016/ 1 July 2015 (Audited)	2,108,972	3,082,171
    Retrospective effect of adoption of HKAS 16 and HKAS 41 (amendments)	-	540,742
    Net book value at 1 July 2016/ 1 July 2015, as restated	2,108,972	3,622,913
    Additions	17,506	34,729
    Transfer from construction-in-progress	27,545	67,153
    Transfer to investment properties	-	(29,846)
    Written off / Disposals	-	(509,311)
    Depreciation charges	(181,307)	(484,133)
    Impairment loss (Note)	(808,267)	(592,674)
    Exchange realignment	134	141
    Net book value at 31 December 2016/ 30 June 2016	1,164,583	2,108,972

    Note:

    As at the period ended 31 December 2016, an impairment loss of approximately RMB808,267,000 was recognised to impair the carrying amount of certain farmland infrastructures of subsidiaries engaged in the growing and sales of crops.

    As at the year ended 30 June 2016, an impairment loss of approximately RMB592,674,000, of which approximately RMB540,210,000 was related to the impairment of bearer plants resulting from the retrospective effect of the adoption of HKAS as stated in Note 2, was recognised to impair the carrying amount of certain furniture, fixtures and equipment, farmland infrastructures and bearer plants of subsidiaries engaged in the growing and sales of fruits.

18. PREPAID PREMIUM FOR LAND LEASES

    Long-term prepaid rentals	Land use rights	Total
    RMB'000	RMB'000	RMB'000
    Cost
    At 1 July 2015	4,453,519	127,970	4,581,489
    Early termination of leases	(2,465,402)	-	(2,465,402)
    Exchange realignment	(8,316)	-	(8,316)
    At 30 June 2016 and 1 July 2016	1,979,801	127,970	2,107,771
    Early termination of leases	(391,676)	-	(391,676)
    Exchange realignment	10,620	-	10,620
    At 31 December 2016	1,598,745	127,970	1,726,715
    Accumulated amortisation and impairment loss
    At 1 July 2015	874,867	53,244	928,111
    Amortisation for the year	100,120	4,889	105,009
    Early termination of leases	(355,700)	-	(355,700)
    Impairment loss (Note)	341,393	1,771	343,164
    Exchange realignment	(8,316)	-	(8,316)
    At 30 June 2016 and 1 July 2016	952,364	59,904	1,012,268
    Amortisation for the period	26,080	2,421	28,501
    Early termination of leases	(391,676)	-	(391,676)
    Impairment loss (Note)	279,164	-	279,164
    Exchange realignment	10,620	-	10,620
    At 31 December 2016	876,552	62,325	938,877
    Net carrying value
    At 31 December 2016	722,193	65,645	787,838
    At 30 June 2016	1,027,437	68,066	1,095,503

    31 December	30 June
    2016	2016
    RMB'000	RMB'000
    Non-current portion	753,406	1,038,582
    Current portion	34,432	56,921
    Net carrying value	787,838	1,095,503

    Note:

    As at the period ended 31 December 2016, an impairment loss of approximately RMB279,164,000 was recognised to impair the carrying amount of certain long-term prepaid rentals of subsidiaries engaged in the growing and sales of crops.

    During the year ended 30 June 2016, an impairment loss of approximately RMB343,164,000 was recognised to impair the carrying amount of certain long-term prepaid rentals and the land use rights of a subsidiary engaged in the growing and sales of fruits.

19. BIOLOGICAL ASSETS

20. Fruit	Livestock	Vegetables	Total
    RMB'000	RMB'000	RMB'000	RMB'000
    At 1 July 2015 (Audited)	655,068	27,453	283,624	966,145
    Retrospective effect of adoption of HKAS 16 and HKAS 41 (amendments)	(540,738)	-	-	(540,738)
    At 1 July 2015, as restated	114,330	27,453	283,624	425,407
    Additions, as restated	389,982	54,697	1,225,283	1,669,962
    Decrease due to harvest or sales	(289,292)	(26,991)	(1,306,386)	(1,622,669)
    Written off / Impairment loss, as restated	(215,020)	-	-	(215,020)
    (Loss)/Gain arising from changes in fair value less costs to sell, as restated	-	(33,065)	81,805	48,740
    At 30 June 2016, as restated	-	22,094	284,326	306,420
    At 1 July 2016 (Audited)	181,069	22,094	284,326	487,489
    Retrospective effect of adoption of HKAS 16 and HKAS 41 (amendments)	(181,069)	-	-	(181,069)
    At 1 July 2016, as restated	-	22,094	284,326	306,420
    Additions	131,318	27,960	450,692	609,970
    Decrease due to harvest or sales	(54,497)	(20,511)	(596,937)	(671,945)
    Impairment loss	(76,821)	-	-	(76,821)
    Loss arising from changes in fair value less costs to sell	-	(13,629)	(64,745)	(78,374)
    At 31 December 2016	-	15,914	73,336	89,250

    Biological assets as at 31 December 2016 and 30 June 2016 are stated at fair values less costs to sell and are analysed as follows:

    Fruit	Livestock	Vegetables	31 December 2016 Total	30 June 2016 Total
    RMB'000	RMB'000	RMB'000	RMB'000	RMB'000
    (Restated)
    Non-current portion	-	15,914	-	15,914	22,094
    Current portion	-	-	73,336	73,336	284,326
    -	15,914	73,336	89,250	306,420

    The fair values of livestock and vegetables are determined by the Directors with reference to the methodologies and assumptions adopted in the valuation for the year ended 30 June 2016.