Prospects and Future Plans

Our Prospects
In the last few years, there has been an increase in the annual per capita disposable income in the PRC and our Directors’ expect the growth to continue in the coming years. The growth prospects of our Group’s soybean-based business will be driven by the economic growth in the PRC. Our Directors believe that the increasing affluence of the PRC citizens resulting from the growing economy of the PRC, would lead to consumers’ demand for soybean-based products.

Soybean-based products have gained recognition as a health supplement over the years. Based on the following reasons, our Directors are optimistic that our business will continue to grow:

(a) Continuing global demand for soybean-based products
Our Directors believe that soybean-based products will continue to be a popular nutritional food and one which is known to be an important source of protein. Our Directors therefore believe that there will be continuing global demand for soybeans. To the best of our Director’s knowledge and belief, the PRC will continue to be one of the largest producers and consumers of soybean and soybean-based products in the world.

(b) Greater awareness of health qualities of soybean
Our Directors believe that the demand for soybean-based products in the PRC will increase in line with increasing consciousness to lead healthy lifestyle, which in turn is due to the higher standard of living in the PRC as the domestic economy continues its expansion. Our Directors expect the increasing consumer purchasing power to spur demand for health-food substitutes such as high quality soybean-based products including our soy oligosaccharide syrup product. This development is likely to lead to an increase in the production of soybean-based products in the PRC. This will in turn lead to an increase in demand for our soybean-based products.

Our Strategies and Future Plans
To capture the emerging business opportunities, we intend to adopt the strategies and future plans as set out below:-

(a) Increase our production capacity for existing products

We intend to expand our production capacity for our existing products, soy protein isolates and soy oligosaccharide syrup, to support our further growth. We plan to:

(i) increase our production capacity for soy protein isolates by 20,000 tonnes per annum at our Linyi Plant by setting up new production lines;

(ii) increase our production capacity for soy oligosaccharide syrup by 2,000 tonnes per annum at each of our Linyi Plant and Daqing Plant, by setting up new production facilities at these plants; and

(iii) increase the production capacity for defatted soy flakes by 75,000 tonnes per annum at our Linyi Plant by setting up a new production line, both to increase the vertical integration of our production processes and to support the increase in production capacity for soy protein isolates.

As at the Latest Practicable Date, we have not entered into any contracts in relation to the setting up of the new production lines. We intend to commence the above expansion plans as soon as practicable after the admission of our Company to the Official List of the SGX-ST. We are targeting to complete the installation of the above production lines and commence trial production
of:-

(i) the defatted soy flakes by the fourth quarter of 2005;

(ii) the soy protein isolates by the first quarter of 2006; and

(iii) the soy oligosaccharide syrup by the first quarter of 2006.

The targeted dates for completion of the installation of the above production lines and the commencement of trial production as set out above are only indicative estimates, and may be subject to changes.

(b) Increase research and development efforts

Our Directors expect the worldwide demand for soybean-based products to continue to grow, driven primarily by increasing awareness of the benefits of soybean and a shift in consumer preference to health products.

In view of this, our Directors believe that to stay ahead of competition, we would need to seek to improve our existing products and also expand our product range. To support such initiatives, we plan to further increase our research and development strength to increase our efforts in exploring and developing improvements to our existing products and manufacturing processes for new products.

(c) Expand our marketing and distribution network

We believe that the growth of our sales will be further enhanced if we continue to actively promote our brands so as to increase awareness among our target consumers.

We intend to develop our Tian Song brand name for our soy oligosaccharide syrup by educating the consumers on our products through media advertisement. We also intend to increase public awareness of the benefits of soy oligosaccharide syrup by distributing pamphlets to educate the general public of its benefits. We estimate that we will spend approximately RMB11 million for these purposes.

Further, we intend to establish our own retail outlets for the sale of our products, which will give us more control over our sales and also more opportunities to communicate with our customers. This will reduce the barriers between our customers and our Group, which would enable us to adapt to our customers’ demand more efficiently. We estimate that we will spend approximately RMB4 million for this purpose.

We also intend to expand our marketing and distribution network by establishing sales offices in major cities in the PRC, including Beijing, Shanghai, Jinan, Guangzhou and Wuhan. We estimate that the cost for setting up the sales offices which include staff costs, lease rentals, and costs of furniture and fitting) will be approximately RMB3 million to set up a sales office in Beijing and approximately RMB1 million in each of the other cities.

We intend to utilise approximately RMB22.0 million of the net proceeds from this Invitation for all the purposes set out above.