THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR … · · 2015-04-21“Property Valuers” Colliers International Consultancy and Valuation Pty Limited, Knight Frank Valuations (SA),

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you shouldconsult your stockbroker or other registered dealer in securities, bank manager, solicitor, professionalaccountant or other professional adviser.

If you have sold or transferred all your shares in CK Life Sciences Int’l., (Holdings) Inc., youshould at once hand this circular to the purchaser or the transferee or to the bank, stockbroker or otheragent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

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

(Incorporated in the Cayman Islands with limited liability)(Stock Code: 0775)

MAJOR TRANSACTION

in respect ofthe acquisition of a maximum of 72.26% of

Challenger Wine Trust

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

31 December 2010

Page

Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Appendix I – Financial information of the Group . . . . . . . . . . . . . . . . . . . . . . . . 18

Appendix II – Accountants’ report on CWT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Appendix III – Management discussion and analysis on CWT . . . . . . . . . . . . . . . . 61

Appendix IV – Unaudited pro forma financial information ofthe Enlarged Group following the Acquisition . . . . . . . . . . . . . . 63

Appendix V – Valuers’ reports on the properties of CWT . . . . . . . . . . . . . . . . . . 68

Appendix VI – General information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 273

CONTENTS

– i –

In this circular, the following expressions have the following meanings unless the contextindicates otherwise:

“Acquisition” the acquisition of the Scheme Units by CKLSII (or itsnominee, Regenal) pursuant to the Scheme

“Agreement” the implementation agreement dated 7 November 2010and entered between CKLSII and CLIL in relation to,among other things, the Acquisition

“ASX” Australian Securities Exchange or ASX Limited

“AUD” the lawful currency of Australia

“Board” the board of directors of the Company

“CKLSII” CK Life Sciences Int’l., Inc., a company incorporatedin the British Virgin Islands with limited liability, andan indirect wholly-owned subsidiary of the Company

“CLC” Challenger Life Company Limited, a companyincorporated in Australia with limited liability

“CLIL” Challenger Listed Investments Limited, a companyincorporated in Australia with limited liability, actingas responsible entity of CWT

“CMS” Challenger Management Services Limited, a companyincorporated in Australia with limited liability

“Company” CK Life Sciences Int’l., (Holdings) Inc., a companyincorporated in the Cayman Islands with limitedliability

“Completion” completion of the Acquisition

“connected person(s)” has the meaning ascribed to it under the Listing Rules(as may be amended from time to time)

“Corporations Act” the Corporations Act 2001 (Cth) of Australia

“CWT” Challenger Wine Trust, a trust and a registeredmanaged investment scheme under the CorporationsAct, which is listed on ASX and the units of which arequoted on the ASX

“CWT Unitholder” a person who is registered as the holder of a CWT Unitin the CWT unit register from time to time

“CWT Units” the ordinary units on issue in CWT

DEFINITIONS

– 1 –

“Deed of Guarantee andIndemnity”

the deed of guarantee and indemnity dated7 November 2010 and provided by the Company toCLIL to, inter alia, guarantee the payment and otherobligations of CKLSII and Regenal under theAgreement and the Transitional Arrangements Deed

“Directors” the directors of the Company

“Enlarged Group” the Group as enlarged by the possible acquisition of72.26% of CWT Units

“Group” the Company and its subsidiaries

“GST” has the same meaning ascribed to it under A New TaxSystem (Goods and Services Tax) Act 1999 (Cth) ofAustralia

“Guidance Note 15” Guidance Note 15: Listed Trusts and ManagedInvestment Scheme Mergers issued by the TakeoversPanel of Australia

“HK$” the lawful currency of Hong Kong

“Hong Kong” the Hong Kong Special Administrative Region of thePeople’s Republic of China

“Implementation Date” the seventh business day after the date on which thelast of the conditions to the Agreement is satisfied orwaived

“Independent Expert’s Report” the report prepared by the independent expert (being,KPMG Corporate Finance (Aust) Pty Ltd) statingwhether, in its opinion, (a) the Scheme is fair andreasonable for the CWT Unitholders not associatedwith CKLSII; and (b) the Scheme is in the bestinterests of the CWT Unitholders not associated withCKLSII

“LANV” Lanv Pty Limited, a company incorporated in Australiawith limited liability, and a subsidiary of CLC and anominee of CLC to hold its CWT Units

“Latest Practicable Date” 28 December 2010, being the latest practicable dateprior to the printing of this circular for ascertainingcertain information referred to in this circular

“Listing Rules” Rules Governing the Listing of Securities on The StockExchange of Hong Kong Limited

DEFINITIONS

– 2 –

“Management Deed” the deed dated 7 November 2010 and entered intobetween the New Trustee and CMS in relation to theprovision of management services by CMS for amanagement fee

“Meeting Date” the date on which the Scheme Meeting is held as setout in the Scheme Notice, which, as at the LatestPracticable Date, is scheduled on 31 January 2011

“Model Code” the Model Code for Securities Transactions byDirectors adopted by the Company

“New Trustee” Belvino Investments Pty Limited, a companyincorporated in Australia with limited liability,currently an indirect wholly-owned subsidiary of theCompany

“New Trustee Board” the board of directors of the New Trustee

“NZD” the lawful currency of New Zealand

“percentage ratio(s)” has the meaning ascribed to it under the Listing Rules

“Property Valuers” Colliers International Consultancy and Valuation PtyLimited, Knight Frank Valuations (SA), Telfer Young(Hawkes Bay) Limited, Crighton Stone Limited, andHegney Property Valuations being the independentprofessional valuers who prepared the propertyvaluation reports as set out in Appendix V to thiscircular

“Regenal” Regenal Investments Pty Limited, a companyincorporated in Australia with limited liability, anindirect wholly-owned subsidiary of the Company andthe nominee of CKLSII under the Acquisition

“Scheme” the arrangement, in accordance with Guidance Note 15,under which CKLSII (or its nominee, Regenal) acquiresall of the Scheme Units that is facilitated byamendments to the constitutional document of CWT asset out in the Supplemental Deed, subject to theScheme Resolutions being approved by the requisitemajorities of CWT Unitholders

“Scheme Meeting” the general meeting of CWT Unitholders to be held toconsider and, if thought fit, to approve the SchemeResolutions

“Scheme Notice” notice of the Scheme Meeting to be sent to CWTUnitholders

DEFINITIONS

– 3 –

“Scheme Resolutions” the resolutions of CWT Unitholders to approve theScheme and the amendment of the constitutionaldocument of CWT

“Scheme Unit” a CWT Unit on issue on the record date (other thanany units of CWT held by or on behalf of CLC and itscontrolled entities) pursuant to the Agreement

“Securityholders Deed” the deed dated 7 November 2010 and entered intobetween LANV, Regenal and the New Trustee inrelation to, among other things, arrangements toregulate the affairs among LANV and Regenal as theonly CWT Unitholders after the Implementation Date

“Securityholders DeedResolution”

the ordinary resolution of CWT Unitholders for thepurpose of item 7 of section 611 of the CorporationsAct, to approve the terms of the Securityholders Deedin so far as that agreement would, but for the approval,constitute an acquisition by CKLSII of a relevantinterest (as defined in the Corporations Act) in CWTUnits held by the CLC group

“SFO” Securities and Futures Ordinance (Chapter 571 of theLaws of Hong Kong)

“Share(s)” ordinary share(s) of HK$0.10 each in the share capitalof the Company

“Shareholders” holders of Shares

“Share Option Scheme” the share option scheme adopted by the Company on26 June 2002 and revised on 16 March 2009

“Stock Exchange” The Stock Exchange of Hong Kong Limited

“substantial shareholder(s)” has the meaning ascribed to it under the Listing Rules(as may be amended from time to time)

“Supplemental Deed” a deed to be provided by CLIL to effect the amendmentof certain provisions of the constitutional document ofCWT pursuant to a special resolution passed by theCWT Unitholders at the Scheme Meeting

“Transaction” the transactions contemplated under the Agreement, theSecurityholders Deed, the Management Deed and theTransitional Arrangements Deed and the Deed ofGuarantee and Indemnity

DEFINITIONS

– 4 –

“Transitional Arrangements Deed” a deed dated 7 November 2010 and entered intobetween CLIL, LANV, Regenal and the New Trustee inrelation to, inter alia, the relationship of the NewTrustee and CLIL during the transitional period (asdefined in that deed)

“Transfer Price” the transfer price of AUD0.24 (equivalent toapproximately HK$1.89) for each Scheme Unit

“USD” the lawful currency of the United States of America

For the purpose of illustration only, AUD to HK$ is translated at a rate ofAUD1.00 = HK$7.86, USD to HK$ is translated at a rate of USD1.00 = HK$7.80, and NZDto HK$ is translated at a rate of NZD1.00 = HK$5.79 throughout this circular.

DEFINITIONS

– 5 –

(Incorporated in the Cayman Islands with limited liability)(Stock Code: 0775)

Board of DirectorsExecutive DirectorsLI Tzar Kuoi, Victor Chairman

KAM Hing Lam President and Chief Executive Officer

IP Tak Chuen, Edmond Senior Vice President and Chief Investment Officer

YU Ying Choi, Alan Abel Vice President and Chief Operating Officer

CHU Kee Hung Vice President and Chief Scientific Officer

Non-executive DirectorsPeter Peace TULLOCH Non-executive Director

WONG Yue-chim, Richard Independent Non-executive Director

KWOK Eva Lee Independent Non-executive Director

Colin Stevens RUSSEL Independent Non-executive Director

Company SecretaryEirene YEUNG

Registered OfficeP.O. Box 309GTUgland HouseSouth Church StreetGrand CaymanCayman Islands

Head Office2 Dai Fu StreetTai Po Industrial EstateTai Po, Hong Kong

Principal Place of Business7th Floor, Cheung Kong Center2 Queen’s Road CentralHong Kong

31 December 2010

To the Shareholders

Dear Sir or Madam,

MAJOR TRANSACTION

in respect ofthe acquisition of a maximum of 72.26% of

Challenger Wine Trust

INTRODUCTION

The Board refers to the announcement of the Company dated 8 November 2010 in relationto the Agreement entered into between CKLSII, an indirect wholly-owned subsidiary of theCompany, and CLIL (as responsible entity of CWT) on 7 November 2010, pursuant towhich, CKLSII has conditionally agreed to acquire from the CWT Unitholders other thanCLC/LANV the Scheme Units at a Transfer Price of AUD0.24 (approximately HK$1.89) perScheme Unit in cash. On the assumption that the Scheme is implemented, the totalconsideration for the Acquisition will be approximately AUD33.08 million (approximatelyHK$260 million). Simultaneously with the entering into of the Agreement, the Company hasentered into the Deed of Guarantee and Indemnity pursuant to which, the Company willguarantee, among other things, the payment and other obligations of CKLSII in respect ofthe Acquisition.

LETTER FROM THE BOARD

– 6 –

The purpose of this circular is to give you further information in relation to the Transaction.

Unless otherwise stated, a reference to any time contained in this letter is a reference to thattime in Sydney, Australia.

THE AGREEMENT

Date: 7 November 2010

Parties: (i) CKLSII

(ii) CLIL (as responsible entity of CWT)

To the best of the Directors’ knowledge, information and belief, havingmade all reasonable enquiries, CLIL, being the responsible entity ofCWT, is a limited liability company incorporated under the laws ofAustralia and CLIL and its ultimate beneficial owners are third partiesindependent of the Company and its connected persons.

CWT is a trust and a registered managed investment scheme under theCorporations Act, which is listed on the ASX and the units of which arequoted on the ASX. CWT is not a legal person. To the best of theDirectors’ knowledge, information and belief, having made all reasonableenquiries, the CWT Unitholders are third parties independent of theCompany and its connected persons.

ASSETS TO BE ACQUIRED

137,837,287 Scheme Units.

CKLSII (or its nominee, Regenal) will acquire the Scheme Units pursuant to the Schemewhich is to be implemented in accordance with Guidance Note 15. Under the Scheme, allthe Scheme Units will be transferred to CKLSII (or its nominee, Regenal) and theparticipants of the Scheme (being all CWT Unitholders other than CLC/LANV) will beentitled to receive consideration per Scheme Unit held. As at the Latest Practicable Date, allScheme Units represent approximately 72.26% of all CWT Units on issue.

CONSIDERATION

The consideration is AUD0.24 (approximately HK$1.89) per Scheme Unit. For informationpurpose only, the closing price per CWT Unit on 1 November 2010 (being the last tradingday prior to the date of the Agreement) as quoted on ASX was AUD0.19 (approximatelyHK$1.49). On the assumption that the Scheme is implemented, the total consideration forthe Acquisition will be approximately AUD33.08 million (approximately HK$260 million).

The Group has taken into account the following factors in determining the consideration forthe Acquisition, which was arrived at after arm’s length negotiations between the parties:(i) the economic benefits of the Transaction to the Group; (ii) the future prospects of thebusiness of CWT; (iii) the synergistic effects and strategic value of CWT on the futuredevelopment of the Group; and (iv) the potential business opportunities that can be providedto the Group.


– 7 –

The Company has sufficient internal resources to fully satisfy the total consideration for theAcquisition but the Company may consider obtaining financing from other sources, such asbank borrowings, for other purposes such as hedging and corporate structuring purposes.

CONDITIONS

Implementation of the Scheme is conditional upon the satisfaction or waiver of variousconditions including:

(a) ASIC modification: before the Meeting Date, Australian Securities and InvestmentsCommission has granted the modification (“ASIC Modification”) of item 7 of section611 of the Corporations Act, to allow CWT Unitholders other than CKLSII and CLCand each of their associates to vote in favour of the Scheme for the purpose of item 7of section 611 of the Corporations Act or has indicated in writing that suchmodification is not required;

(b) Independent Expert’s Report: the Independent Expert’s Report concludes that theScheme is in the best interests of the CWT Unitholders;

(c) CWT Unitholder approval: the Scheme Resolutions and the Securityholders DeedResolution are approved at the Scheme Meeting by the requisite majorities of the CWTUnitholders under the Corporations Act and in accordance with Guidance Note 15before the expiry of 3 months from the date of the Agreement;

(d) No prescribed occurrence: no prescribed occurrence (as defined in the Agreement, forexample, if CWT or any of its sub-trusts disposes the whole or a substantial part of itsbusiness or property or issues securities or grants an option over its securities) occursbetween the date of the Agreement and 8.00am on the Meeting Date;

(e) Approval of New Zealand Overseas Investment Office: CKLSII obtaining allconsents in writing required under the Overseas Investment Act 2005 (New Zealand)for the acquisition by CKLSII of the Scheme Units (“OIO Approval”) which is subjectonly to customary conditions or conditions that CKLSII has agreed to in itsapplication; and

(f) No material adverse change: there is no material adverse change (as defined in theAgreement) of such nature as described in the Agreement for the respective periodscommencing from (i) the date of the Agreement until midnight on the Meeting Date;and (ii) midnight on the Meeting Date until 31 March 2011, being the expected datefor obtaining the OIO Approval.

If any condition precedent above is not satisfied or waived pursuant to the terms of theAgreement by the date specified, with the last date expected to be 31 March 2011 (or if anevent occurs which would prevent a condition being satisfied by the date specified), or if theSupplemental Deed has not become effective as required under the Corporations Act by30 June 2011 (subject to any extension), then a party may by notice in writing to the otherparty terminate the Agreement without liability to the other party by reason of thattermination alone but without limiting either party’s rights in respect of a breach of theAgreement prior to its termination.


– 8 –

In addition to the ASIC Modification referred to in paragraph (a) above, and to facilitate theimplementation of the Scheme, CLIL has applied to the Australian Securities andInvestments Commission for relief from section 601FC(1)(d) of the Corporations Act to theextent necessary to allow CLIL to treat CLC/LANV differently from other CWT Unitholdersunder the Scheme, by excluding the CWT Units held by CLC and LANV from the Scheme.

IMPLEMENTATION OF THE SCHEME

The Scheme is subject to CWT Unitholder approval which is required to facilitate CKLSII(or its nominee, Regenal) acquiring the specified 72.26% of CWT in accordance with theapplicable Australian laws. The Scheme Notice has been sent to CWT Unitholders on20 December 2010 containing the Independent Expert’s Report and the information which isrequired to be disclosed under Guidance Note 15. If the Scheme Resolutions are passed bytheir requisite majorities at the Scheme Meeting, CLIL shall, among other things, within 1business day after the Meeting Date execute the Supplemental Deed, lodge the SupplementalDeed and any other requested documents with the Australian Securities and InvestmentsCommission rendering the Supplemental Deed effective under the Corporations Act.

If the Supplemental Deed becomes effective and all the conditions are satisfied or waived inaccordance with the Agreement, on the Implementation Date, CKLSII shall pay the TransferPrice for all the Scheme Units that it is acquiring by depositing the same into an accountnominated by CLIL, and CLIL shall execute and deliver to CKLSII instruments of transferof, and register all transfers of, the Scheme Units to CKLSII (or its nominee, Regenal) inaccordance with the Supplemental Deed. Upon Completion, CKLSII (or its nominee,Regenal) will own approximately 72.26% of CWT Units and CWT’s accounts will beconsolidated into that of the Group, LANV will own approximately 27.74% of CWT Unitsand an application will be made immediately after the Scheme Units are registered in thename of CKLSII (or its nominee, Regenal) for CWT Units to be delisted from ASX.

OTHER MATERIAL INFORMATION IN RELATION TO THE ACQUISITION

Pursuant to the Agreement, CLIL agrees to, subject to applicable laws in Australia or afinding of unacceptable circumstances by the Takeovers Panel of Australia, reimburseCKLSII for the actual external costs it has incurred in relation to the proposal contemplatedunder the Scheme, subject to a maximum amount of AUD330,000 (equivalent toapproximately HK$2.6 million) (plus GST, if applicable) if at any time before the MeetingDate, any of the following occurs and CKLSII does not proceed to acquire all of the SchemeUnits by 30 June 2011:

(a) a superior proposal to that proposed under the Scheme is announced or open foracceptance and, whether before or within 3 months after 30 June 2011, that superiorproposal is completed substantially in accordance with its terms; or

(b) the independent directors of CLIL fail to make, or withdraw, a recommendation toCWT Unitholders to vote in favour of the Scheme Resolutions other than incircumstances where the independent expert has concluded that the Scheme is not inthe best interests of the CWT Unitholders.


– 9 –

Pursuant to an Explanatory Memorandum dated 16 December 2010 issued by CWT to theCWT Unitholders, the independent directors of CLIL unanimously recommended thatCWT Unitholders approve the Scheme Resolutions in the absence of a superior proposal.

In order to facilitate the implementation of the Scheme and to govern the relationshipbetween (i) the remaining unitholders of CWT after the Acquisition in the management ofCWT; (ii) CLIL as the exiting trustee and the New Trustee as incoming trustee during thetransitional period; and (iii) the New Trustee and CMS as the manager of CWT and itssubtrusts, the following agreements have been entered into simultaneously with theAgreement:

(a) the Securityholders Deed, entered into between LANV (the nominee of CLC to holdCLC’s CWT Units and a subsidiary of CLC), Regenal (an indirect wholly-ownedsubsidiary of the Company and the nominee of CKLSII under the Acquisition) and theNew Trustee, pursuant to which, (i) Regenal will own 72.3% and LANV will own27.7% of the issued share capital of the New Trustee, which, in turn, will be appointedas new trustee of CWT; and (ii) the parties thereto have agreed on the arrangements toregulate the affairs among them, such as the appointment of directors to the NewTrustee Board and matters reserved for unanimous approval of the CWT unitholders;

(b) the Management Deed, entered into between the New Trustee and CMS, pursuant towhich the parties thereto have agreed that in consideration of the management feepayable by the New Trustee to CMS, CMS will provide management services (as setout in the Management Deed) during the term of the Management Deed; and

(c) the Transitional Arrangements Deed, entered into between LANV, Regenal, the NewTrustee and CLIL, pursuant to which, the parties thereto agreed on, among otherthings, the transitional arrangements for the retirement of CLIL as trustee of CWT andthe appointment of New Trustee in that capacity, in the event that the Scheme isimplemented.

GUARANTEE AND INDEMNITY

Pursuant to the Deed of Guarantee and Indemnity provided by the Company, the Companywill, inter alia, guarantee CLIL the payment and other obligations of CKLSII and Regenalunder the Agreement and the Transitional Arrangements Deed and indemnify CLIL for costs,losses, liability and expenses that CLIL incurs as a result of a default.

INFORMATION ON CWT, CLIL, CMS AND LANV

CWT

CWT is a trust and a registered managed investment scheme under the Corporations Act,which is listed on the ASX and the units of which are quoted on the ASX. CWT, directlyand through 3 wholly-owned sub-trusts, owns 20 vineyards (inclusive of 2 wineries) with atotal area of 5,059 hectares and various water entitlements across Australia and New Zealandwhich are used for the production of wine grapes.


– 10 –

Based on the accountants’ report of CWT as shown in Appendix II, the audited net assetsattributable to unitholders of CWT as at 30 June 2010 was approximately AUD84.5 million(approximately HK$664.2 million). The audited net losses before taxation and extraordinaryitems of CWT for the years ended 30 June 2009 and 2010 were approximately AUD24.0 million(approximately HK$188.6 million) and approximately AUD14.6 million (approximatelyHK$114.8 million) respectively. The respective audited net losses after taxation andextraordinary items of CWT for the years ended 30 June 2009 and 2010 were approximatelyAUD24.3 million (approximately HK$191.0 million) and approximately AUD14.7 million(approximately HK$115.5 million). The losses were mainly due to reduction in propertyvaluations amounting to approximately AUD40.1 million (approximately HK$315.2 million)and approximately AUD30.3 million (approximately HK$238.2 million) for the years ended30 June 2009 and 2010 respectively. Before the impact of assets valuation reductions, theprofits from operating activities after tax for the years ended 30 June 2009 and 2010 wereapproximately AUD15.8 million (approximately HK$124.2 million) and approximatelyAUD15.6 million (approximately HK$122.6 million) respectively.

There was no prior transaction or relationship between the Group and CWT and its ultimatebeneficial owner(s) that requires aggregation under Rule 14.22 of the Listing Rules.

CLIL

CLIL is a company incorporated in Australia with limited liability. CLIL is principallyengaged in the business of providing trustee services to listed funds and provides suchservices to CWT and its sub-trusts.

CMS

CMS is a company incorporated in Australia with limited liability. CMS is principallyengaged in the business of providing management services to listed and unlisted funds andprovides such services to CWT and its sub-trusts.

To the best of the Directors’ knowledge, information and belief, having made all reasonableenquiries, CMS and its ultimate beneficial owners are third parties independent of theCompany and its connected persons.

LANV

LANV is a company incorporated in Australia with limited liability. LANV is a subsidiaryof CLC and the nominee of CLC to hold all its CWT Units and is principally engaged ininvestment holding. As at the Latest Practicable Date, LANV is holding 52,922,555 CWTUnits, representing approximately 27.74% of all CWT Units in issue. On the assumption that(i) the Scheme Resolutions are approved at the Scheme Meeting by the requisite majoritiesof CWT Unitholders; and (ii) CKLSII having acquired all Scheme Units, LANV willcontinue to be interested in 27.74% of all CWT Units in issue.

To the Directors’ best knowledge, information and belief, having made all reasonableenquiries, LANV and its ultimate beneficial owners are third parties independent of theCompany and its connected persons.


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REASONS FOR ENTERING INTO THE TRANSACTION

The Transaction is expected to be earnings accretive for the Group and represents a strategicacquisition of large-scale vineyards in Australia and New Zealand with recurring cashflow.The Transaction will enable the Group to expand the geographical coverage, productportfolio, production capability and customer base of its agriculture-related business.

FINANCIAL AND TRADING PROSPECTS OF THE ENLARGED GROUP

The Group

The Group recorded profit attributable to shareholders of approximately HK$187.1 million for theyear ended 31 December 2009, a significant turnaround over the loss of HK$351.8 million in2008. For the six months ended 30 June 2010, the Group also achieved a satisfactory performancewith profit attributable to shareholders of approximately HK$48.6 million.

During the first six months of 2010, the Group recorded sales revenue of HK$1,322.5 million, amarginal increase of 1% as compared to the same period last year, which is attributable to thesteady performance from the Group’s nutraceutical business and good growth in agriculturebusiness.

The Group’s previous acquisitions in North America, namely Santé Naturelle A.G. Ltée,Vitaquest International Holdings LLC and Wex Pharmaceuticals Inc., and Australia, namelyLipa Pharmaceuticals Limited and Accensi Pty Ltd, have also played a key role in propellingthe Group’s development in the past few years.

Going forward, the Group will continue to grow by a four-pronged approach:

(i) enlarge the scale of its agriculture-related business in existing markets, whilecontinuing to extend the geographical coverage;

(ii) expedite the launch of more health supplements to broaden the product range;

(iii) accelerate the R&D progress through collaboration with world renowned institutions;and

(iv) continue to look for targeted strategic acquisitions that offer synergies to the Group’sexisting businesses.

CWT

In the financial year ended 30 June 2010, CWT produced a profit from operating activitiesafter tax but before the impact of assets valuation reductions of AUD15.6 million(approximately HK$122.6 million), down 1.3% from the year before. Turnover ofAUD31.1 million (approximately HK$244.4 million) was down 5.2% from the previous year,primarily due to the impact of a one-off rent rebate, combined with a reduction of incomefrom properties sold. Operating costs remained steady. Reported net profit after tax was aloss of AUD14.7 million (approximately HK$115.5 million) after allowing for a propertyrevaluation decrement of AUD30.3 million (approximately HK$238.2 million).


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The Australasian wine industry is going through a depressed state and consolidation of theindustry is taking place. As a result of this, there has been downward pressure on propertyvaluation, causing CWT to report accounting losses despite operational profits beinggenerated. It is this situation which presents an opportunity for the Group to participate inthe vineyard industry at the Transfer Price which represents a discount to net asset value asof 30 June 2010 of 45%.

Upon Completion, CWT will contribute immediate and recurring profit as well as cashflowto the Enlarged Group, as well as enable the Enlarged Group to expand the geographicalcoverage, product portfolio, production capability and customer base of itsagriculture-related business.

EFFECTS OF THE TRANSACTION ON THE EARNINGS AND ASSETS ANDLIABILITIES OF THE COMPANY

Based on the audited consolidated financial statements of the Group as at 31 December 2009,the Group recorded an audited profit attributable to shareholders of approximatelyHK$187.1 million for the year ended 31 December 2009. Based on the accountants’ reporton CWT as shown in Appendix II, CWT recorded an audited net loss of AUD14.7 million(approximately HK$115.5 million) for the year ended 30 June 2010. The losses were mainlydue to reduction in property valuations amounting to approximately AUD30.3 million(approximately HK$238.2 million). Before the impact of assets valuation reductions, theprofits from operating activities after tax for the year ended 30 June 2010 wasapproximately AUD15.6 million (approximately HK$122.6 million). Given the track records,earning ability and customer base of CWT and the synergies to be realised by the Groupfrom the Acquisition, the Acquisition should be earnings-accretive to the Enlarged Group inthe future.

Based on the unaudited pro forma financial information of the Enlarged Group as shown inAppendix IV, the Group had unaudited total assets and total liabilities of approximatelyHK$7,039.1 million and HK$1,762.4 million respectively as at 30 June 2010. UponCompletion, the Enlarged Group would have unaudited pro forma total assets and totalliabilities of approximately HK$8,665.9 million and HK$2,985.0 million respectively.

Save for the above, the Transaction has no significant impact on the assets and liabilities ofthe Company.

GENERAL

The Directors (including the Independent Non-executive Directors) considered that theAgreement, the Securityholders Deed, the Management Deed, the Transitional ArrangementsDeed and the Deed of Guarantee and Indemnity are entered into on normal commercialterms and that the terms of the Agreement, the Securityholders Deed, the Management Deed,the Transitional Arrangements Deed and the Deed of Guarantee and Indemnity are fair andreasonable and in the interests of the Company and the Shareholders as a whole.

The Company acts as an investment holding company. Its subsidiaries are principallyengaged in research and development, manufacturing, commercialisation, marketing andselling of health and agriculture-related products, and water business as well as investmentin various financial and investment products.


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CKLSII is a company incorporated in the British Virgin Islands with limited liability and anindirect wholly-owned subsidiary of the Company. CKLSII is principally engaged in thebusiness of product commercialisation.

Regenal is a company incorporated in Australia with limited liability and an indirectwholly-owned subsidiary of the Company and the nominee of CKLSII under the Acquisition.Regenal is principally engaged in the business of investment holding.

PROPERTY VALUATION

Appendix V to this circular sets out the summaries of valuation reports with respect to theproperties owned by CWT. The full version of the valuation reports will be published on thewebsites of the Stock Exchange and of the Company respectively, and will be available forinspection during normal business hours at the principal place of business of the Companyin Hong Kong at 7th Floor, Cheung Kong Center, 2 Queen’s Road Central, Hong Kong onweekdays (Saturdays and public holidays excepted) up to and including 17 January 2011.

In addition to the valuation reports with respect to the Rarangi Vineyard (the “RarangiReport”) and Dashwood Vineyard (the “Dashwood Report”) as set out on pages 218 and 228respectively of this circular, the Company would supplement the following information:

(a) with respect to both the Dashwood Report and the Rarangi Report, Delegat’s Trust is awholly-owned sub-trust of CWT, and Delegat Wine Estate is the lessee of the propertyreferred to in the said reports;

(b) the “pre defined level” as referred to in the Rarangi Report on page 220 and in theDashwood Report on page 230 of this circular means the greater of (i) the amountbeing the lesser of the compound annual return amount and the market value, and (ii)the minimum purchase price as defined in the relevant option agreements;

(c) the Rights of last Refusal as referred to in the Rarangi Report in page 220 and in theDashwood Report on page 230 of this circular means in the case where the landlord iswilling to accept an offer from a third party other than the tenant to purchase therelevant property, the tenant has the right to purchase the relevant property from thelandlord on the same terms offered by the third party;

(d) results of the title investigation as referred to in the Dashwood Report are set outbelow:

Legal Description Title Identifier Area (Hectares)

Lot 1 Deposited Plan 10008 MB5D/670 11.2650 hectares





– 14 –


Lot 1, 3-4 Deposited Plan 12215 MB6C/526 78.5300 hectares

Lot 2 Deposited Plan 12259 MB6C/698 63.5000 hectares

Lot 2 Deposited Plan 12215 MB6C/527 4.0000 hectares

Total Land Area 200.519 hectares

All of the above titles are registered in the name of Challenger Beston Limited orCLIL, as custodian for CWT.

Lessee’s Interest Description Title Identifier Area (Hectares)

Lot 1 and Lot 2-4 Deposited Plan 10008and Lot 1-4 Deposited Plan 12215and Lot 2 Deposited Plan 12259

63802 200.5190 hectares

Title 63802 is registered in the name of Delegat’s Wine Estate Limited.

(e) results of the title investigation as referred to in the Rarangi Report are set out below:


Lot 1 Deposited Plan 10404 MB6A/89 81.6770 hectares

Lot 2 Deposited Plan 10404 MB6A/90 60.4310 hectares

Total Land Area 142.108 hectares

All of the above titles are registered in the name of Challenger Beston Limited orCLIL, as custodian for CWT.

Lessee’s Interest Description Title Identifier Area (Hectares)

Lot 1 and Lot 2 Deposited Plan 10404 162261 142.1080 hectares

Title 162261 is registered in the name of Delegat’s Wine Estate Limited.

(f) with respect to the valuation certificate as set out in the Dashwood Report, the grossfloor area of buildings in the relevant property comprises approximately 371 squaremetres; and

(g) with respect to the valuation certificate as set out in the Rarangi Report, the gross floorarea of buildings in the relevant property comprises approximately 315 square metres.


– 15 –

In addition to the valuation reports with respect to the Gimblett Road Vineyard, Highway 50Vineyard and Crownthorpe Vineyard as set out on pages 199 to 217 of this circular, theCompany would supplement that the title owner of all the abovementioned vineyards isChallenger Beston Limited as custodian for CWT.

The following is a summary of the experience of the independent professional valuers whohave prepared the valuation reports as set out in Appendix V:

Company Name of Valuer

Years of experience in valuingproperties in Australia andNew Zealand, as the case may be

Colliers InternationalConsultancy and ValuationPty Limited

AngusBarrington-Case

more than 5 years experience

Alex Thamm more than 5 years experience

Nicholas Cranna more than 2 years experience

Knight Frank Valuations (SA) Jason Oster 5 years experience

Telfer Young (Hawkes Bay)Limited

M I Penrose approximately 30 years experience

Crighton Stone Limited Boyd A Gross 20 years experience

Hegney Property Valuations Rod Davidson 20 years experience

LISTING RULES IMPLICATIONS

As one or more of the applicable percentage ratios in respect of the Acquisition is greaterthan 25% and less than 100%, as calculated under Rule 14.07 of the Listing Rules, theentering into of the Agreement constitutes a major transaction for the Company under theListing Rules.

Pursuant to the Listing Rules, shareholders’ approval is required for a major transaction. Asno shareholder of the Company is required to abstain from voting if the Company were toconvene a general meeting for approving the Acquisition, and as the Company has obtaineda written approval of the Acquisition from a closely allied group of Shareholders, namelyGold Rainbow Int’l Limited, Trueway International Limited and Triluck Assets Limited,which are currently holding 4,355,634,570 Shares (representing approximately 45.31%),2,119,318,286 Shares (representing approximately 22.05%) and 716,441,429 Shares(representing approximately 7.45%) of the Company respectively, pursuant to Rule 14.44 ofthe Listing Rules, the Company is not required to convene a general meeting for approvingthe Acquisition. Gold Rainbow Int’l Limited, Trueway International Limited and TriluckAssets Limited have been Shareholders for more than 8 years and have provided writtenapproval to major transactions of the Company as a closely allied group of Shareholderspreviously. Each of Cheung Kong (Holdings) Limited and Li Ka Shing Foundation Limitedis deemed to be interested in the Company through its respective interests in Gold RainbowInt’l Limited (for Cheung Kong (Holdings) Limited) and Trueway International Limited and


– 16 –

Triluck Assets Limited (for Li Ka Shing Foundation Limited) as set out in the notes to thetable headed “Long positions of substantial Shareholders in the Shares” on page 276 of thiscircular. There were certain occasions where business associations were formed betweensubsidiaries/associates of Cheung Kong (Holdings) Limited and Li Ka Shing FoundationLimited.

Your attention is also drawn to the additional information set out in the appendices to thiscircular.

Yours faithfully,By Order of the Board

CK Life Sciences Int’l., (Holdings) Inc.LI TZAR KUOI, VICTOR

Chairman


– 17 –

(A) AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP

The Company is required to set out in this circular the information for the last threefinancial years with respect to the profits and losses, financial record and position, setout as a comparative table and the latest published audited balance sheet together withthe notes on the annual accounts for the last financial year for the Group.

The audited consolidated financial statements of the Group for the year ended 31December 2009 has been set out from page 42 in the Annual Report 2009 of theCompany which was published on 26 March 2010. The Annual Report 2009 has alsobeen posted on the Company’s website http://www.ck-lifesciences.com. Please also seebelow quick link to the Annual Report 2009:

http://www.ck-lifesciences.com/eng/pdf/e_20100325.pdf

The audited consolidated financial statements of the Group for the year ended 31December 2008 has been set out from page 100 in the Annual Report 2008 of theCompany which was published on 15 April 2009. The Annual Report 2008 has alsobeen posted on the Company’s website http://www.ck-lifesciences.com. Please also seebelow quick link to the Annual Report 2008:

http://www.ck-lifesciences.com/eng/pdf/ew_0775frp-20090414.pdf

The audited consolidated financial statements of the Group for the year ended 31December 2007 has been set out from page 94 in the Annual Report 2007 of theCompany which was published on 29 March 2008. The Annual Report 2007 has alsobeen posted on the Company’s website http://www.ck-lifesciences.com. Please also seebelow quick link to the Annual Report 2007:

http://www.ck-lifesciences.com/eng/pdf/ew8222ar-20080328.pdf

(B) INDEBTEDNESS

The Group

As at the close of business on 31 October 2010, being the latest practicable date forthe purpose of this indebtedness statement prior to the printing of this circular, theGroup had total borrowing of approximately HK$1,101,710,000. These borrowingscomprised of secured borrowings of HK$121,361,000, other unsecured loans ofHK$978,902,000 and finance lease obligations of HK$1,447,000.

As at 31 October 2010, certain assets with carrying value of HK$181,385,000 werepledged to secure borrowing facilities granted to the Group.

As at 31 October 2010, the Group had no significant contingent liabilities.

Save as aforesaid and apart from intra-group liabilities, the Group did not, at the closeof business on 31 October 2010, have any loan capital issued and outstanding or agreedto be issued, bank overdrafts, loans or other similar indebtedness, liabilities under

APPENDIX I FINANCIAL INFORMATION OF THE GROUP

– 18 –

acceptances or acceptable credits, debentures, mortgages, charges, obligations underhire purchases contracts or finance leases, guarantees, or other material contingentliabilities.

Challenger Wine Trust (“CWT”)

As at the close of business on 31 October 2010, being the latest practicable date forthe purpose of this indebtedness statement prior to the printing of this circular, CWThad total outstanding bank loans of approximately HK$1,024,740,000, which weresecured by certain assets of CWT with carrying value of approximatelyHK$1,758,793,000 as at 31 October 2010.

Save as aforesaid, CWT did not, at the close of business on 31 October 2010, have anyloan capital issued and outstanding or agreed to be issued, bank overdrafts, loans orother similar indebtedness, liabilities under acceptances or acceptable credits,debentures, mortgages, charges, obligations under hire purchases contracts or financelease, guarantees, or other material contingent liabilities.

(C) WORKING CAPITAL

The Directors are of the opinion that, upon completion of the Acquisition and aftertaking into accounts the present available banking facilities and financial resources ofthe Enlarged Group and the expected payment to be made for the Acquisition, theEnlarged Group has sufficient working capital for its present requirements and for theperiod up to 12 months from the date of this circular in the absence of unforeseeablecircumstances.

APPENDIX I FINANCIAL INFORMATION OF THE GROUP

– 19 –

The following is the text of a report, prepared for the sole purpose of inclusion in thiscircular, received from the independent reporting accountants, Deloitte Touche Tohmatsu,Certified Public Accountants, Hong Kong. As described in the section headed “Documentsavailable for inspection” in Appendix VI, a copy of the following report is available forinspection.

31 December 2010

The DirectorsCK Life Sciences Int’l., (Holdings) Inc.

Dear Sirs,

We set out below our report on the financial information set out in sections I to IV (the“Financial Information”) relating to Challenger Wine Trust (the “Target Trust”) for each ofthe three years ended 30 June 2010 (hereinafter collectively referred to as the “RelevantPeriods”) for inclusion in the circular of CK Life Sciences Int’l., (Holdings) Inc. (the“Company”) dated 31 December 2010 (the “Circular”) in connection with the proposedacquisition of 137,837,287 scheme units, represent approximately 72.26% of all units inissue, of the Target Trust by way of a scheme by CK Life Sciences Int’l., Inc., a subsidiaryof the Company.

The Target Trust is an Australian registered managed investment scheme. Its units have beenlisted on the Australian Securities Exchange since 2 July 1999. The principal activity of theTarget Trust is to invest in a portfolio of high quality, strategically located vineyards andwineries that are leased primarily to wine companies. The vineyards are located acrossAustralia and New Zealand.

At the end of each reporting period and at the date of this report, the Target Trust has thefollowing sub-trusts:

Name of sub-trustsPlace and dateof registration

Percentage ofequity interestattributable to

the Target Trust Principal activities

Delegat’s Trust New Zealand3 April 2003

100% Investment in vineyardsand wineries

Southcorp Trust Australia26 June 2003


McGuigan Simeon Trust Australia1 October 2002


APPENDIX II ACCOUNTANTS’ REPORT ON CWT

– 20 –

All the trusts comprising the Target Trust are engaged in the same principal activities of theTarget Trust and have adopted 30 June as their financial year end date.

The consolidated financial statements of the Target Trust for the Relevant Periods, whichwere prepared in accordance with Australian Accounting Standards issued by the AustralianAccounting Standards Board and International Financial Reporting Standards (“IFRSs”)issued by the International Accounting Standards Board. The consolidated financialstatements for the Relevant Periods were audited by Ernst & Young in Sydney, Australia.

For the purpose of this report, we have examined the audited consolidated financialstatements of the Target Trust for the Relevant Periods. Our examination was made inaccordance with the Auditing Guideline 3.340 “Prospectuses and the Reporting Accountant”as recommended by the Hong Kong Institute of Certified Public Accountants (the“HKICPA”).

The Financial Information of the Group for the Relevant Periods set out in this report hasbeen prepared from the audited consolidated financial statements of the Target Trust. Noadjustment has been made by us to the consolidated financial statements in preparing ourreport for inclusion in the Circular.

The consolidated financial statements of the Target Trust are the responsibility of thedirectors of Challenger Listed Investments Limited (the “Responsible Entity”), whoapproved their issue. The directors of the Company are responsible for the contents of theCircular in which this report is included. It is our responsibility to compile the FinancialInformation set out in this report from the audited consolidated financial statements, to forman independent opinion on the Financial Information and to report our opinion to you.

In our opinion, the Financial Information, together with the notes thereon gives, for thepurpose of this report, a true and fair view of the state of affairs of the Target Trust as at 30June 2008, 30 June 2009 and 30 June 2010 and of its results and cash flows of the TargetTrust for the Relevant Periods in accordance with IFRSs.

Without qualifying our opinion, we draw attention to note 2 of Section II of the FinancialInformation. It explains that the Target Trust’s current liabilities exceeded current assets byAUD60,146,000 at 30 June 2010 and that the Target Trust needs to refinanceAUD58,201,000 of its secured bank borrowings maturing within the next twelve months.These factors cast doubt over whether the Target Trust will realise its assets and extinguishits liabilities in the normal course of the business and at the amounts stated in the FinancialInformation. The Financial Information does not include any adjustments relating to therecoverability and classification of recorded asset amounts or to the amounts andclassification that might be necessary should the Target Trust not continue as a goingconcern.


– 21 –

I. FINANCIAL INFORMATION

Consolidated income statements

Year ended 30 JuneNotes 2008 2009 2010

AUD’000 AUD’000 AUD’000

Turnover 8 31,583 32,783 31,075Other income, gains and losses 9 1,085 167 343Net loss on fair value changes of

investment properties 15 (30,379) (5,934) (6,135)Net gain (loss) on fair value changes of

vines 16 29,206 (33,381) (20,044)Impairment of property, plant and

equipment 17 (1,437) (813) (3,493)Impairment of intangible assets 18 – – (625)Responsible Entity fees and

management fees 31 (2,443) (2,350) (2,008)Other expenses (1,098) (1,252) (1,088)Finance costs 10 (12,526) (13,184) (12,614)

Profit (loss) before taxation 13,991 (23,964) (14,589)Taxation 11 (457) (367) (120)

Profit (loss) for the year 12 13,534 (24,331) (14,709)

Basic earnings (loss) per unit (cents) 13 7.95 (14.29) (8.25)


– 22 –

Consolidated statements of comprehensive income

Year ended 30 June2008 2009 2010

AUD’000 AUD’000 AUD’000

Profit (loss) for the year 13,534 (24,331) (14,709)

Other comprehensive income (expense)Exchange difference arising from bank

borrowings designated as effective netinvestment hedges 6,453 (461) (663)

Exchange difference arising from translation (6,911) 596 471Loss on fair value changes of

available-for-sale assets (64) – –Reclassification adjustment upon disposal of

available-for-sale assets (389) – –Reclassification adjustment on cash flow

hedges (1,822) 2,218 4,495Gain (loss) on fair value changes on cash

flow hedges 1,587 (16,571) (4,868)

Other comprehensive income (expense) for theyear (1,146) (14,218) (565)

Total comprehensive income (expense) for theyear 12,388 (38,549) (15,274)


– 23 –

Consolidated statements of financial position

As at 30 JuneNotes 2008 2009 2010

AUD’000 AUD’000 AUD’000

Non-current assetsInvestment properties 15 137,603 132,146 125,058Vines 16 130,319 97,201 77,707Property, plant and equipment 17 6,743 5,978 2,175Intangible assets 18 21,836 21,786 20,700Derivative financial instruments 19 2,015 69 –

298,516 257,180 225,640

Current assetsReceivables and prepayments 20 505 2,392 1,826Derivative financial instruments 19 1,172 159 280Deferred tax asset 25 – – 92Pledged bank deposit 21 – – 7,200Bank balances and cash 21 13,690 5,841 3,801

15,367 8,392 13,199Assets classified as held for sale 22 2,350 – 1,208

17,717 8,392 14,407

Current liabilitiesOther payables 23 2,112 3,071 3,526Rental received in advance 1,399 888 1,326Distribution payable 14 4,026 2,044 1,908Derivative financial instruments 19 37 1,378 2,121Bank borrowings 24 – 2,163 65,379Taxation – 77 293

7,574 9,621 74,553

Liabilities associated with the assetsclassified as held for sale 22 1,941 – –

9,515 9,621 74,553

Net current assets (liabilities) 8,202 (1,229) (60,146)

Total assets less current liabilities 306,718 255,951 165,494


– 24 –

As at 30 JuneNotes 2008 2009 2010

AUD’000 AUD’000 AUD’000

Non-current liabilitiesDerivative financial instruments 19 1,092 6,919 6,089Bank borrowings 24 153,054 147,101 74,907

154,146 154,020 80,996

Net assets 152,572 101,931 84,498

Equity and reservesContributed equity 26 145,644 145,644 150,928Reserves 6,928 (43,713) (66,430)

152,572 101,931 84,498


– 25 –

Consolidated statements of changes in equity

Contributedequity

Investmentrevaluation

reserveTranslation

reserveHedging

reserve

Retainedearnings

(accumulatedlosses) Total

AUD’000 AUD’000 AUD’000 AUD’000 AUD’000 AUD’000

At 1 July 2007 145,644 453 969 2,293 6,835 156,194

Profit for the year – – – – 13,534 13,534

Exchange differencearising from bankborrowings designatedas effective netinvestment hedges – – 6,453 – – 6,453

Exchange differencearising from translation – – (6,911) – – (6,911)

Loss on fair valuechanges ofavailable-for-saleassets – (64) – – – (64)

Reclassificationadjustment upondisposal ofavailable-for-saleassets – (389) – – – (389)

Reclassificationadjustment on cashflow hedges – – – (1,822) – (1,822)

Gain on fair valuechanges on cash flowhedges – – – 1,587 – 1,587

Total comprehensiveincome (expense) forthe year – (453) (458) (235) 13,534 12,388

Distributions tounitholders – – – – (16,010) (16,010)

At 30 June 2008 145,644 – 511 2,058 4,359 152,572

Loss for the year – – – – (24,331) (24,331)

Exchange differencearising from bankborrowings designatedas effective netinvestment hedges – – (461) – – (461)

Exchange differencearising from translation – – 596 – – 596

Reclassificationadjustment on cashflow hedges – – – 2,218 – 2,218

Loss on fair valuechanges on cash flowhedges – – – (16,571) – (16,571)


– 26 –

Contributedequity

Investmentrevaluation

reserveTranslation

reserveHedging

reserve

Retainedearnings

(accumulatedlosses) Total

AUD’000 AUD’000 AUD’000 AUD’000 AUD’000 AUD’000

Total comprehensiveincome (expense) forthe year – – 135 (14,353) (24,331) (38,549)


At 30 June 2009 145,644 – 646 (12,295) (32,064) 101,931

Loss for the year – – – – (14,709) (14,709)

Exchange differencearising from bankborrowings designatedas effective netinvestment hedges – – (663) – – (663)

Exchange differencearising from translation – – 471 – – 471

Reclassificationadjustment on cashflow hedges – – – 4,495 – 4,495

Loss on fair valuechanges on cash flowhedges – – – (4,868) – (4,868)

Total comprehensive(expense) for the year – – (192) (373) (14,709) (15,274)


Units issued, net oftransaction costs 5,284 – – – – 5,284

At 30 June 2010 150,928 – 454 (12,668) (54,216) 84,498


– 27 –

Consolidated statement of cash flows


AUD’000 AUD’000 AUD’000

OPERATING ACTIVITIESProfit (loss) before taxation 13,991 (23,964) (14,589)

Adjustments for:Finance costs 12,526 13,184 12,614Depreciation of property, plant and equipment 210 313 317Impairment of property, plant and equipment 1,437 813 3,493Impairment of intangible assets – – 625Fair value (gain) loss reclassified from

hedging reserve (235) 205 328Net gain on fair value changes of

available-for-sale assets disposed of duringthe year (389) – –

Net gain on disposal of property, plant andequipment – (22) –

Net gain on disposal of non-current assets (838) (38) (117)Net loss on fair value changes of investment

properties 30,379 5,934 6,135Net (gain) loss on fair value changes of vines (29,206) 33,381 20,044Net loss on fair value changes of investment

properties and vines classified as held forsale 1,093 400 –

Loan notes written off 197 – –Deferred leasing incentive – – (886)Dividend income (42) – –Interest income (809) (712) (249)Foreign exchange gain – – (305)

Operating cash flows before movements inworking capital 28,314 29,494 27,410

Decrease (increase) in receivables andprepayments 746 (1,550) 457

Increase (decrease) in other payables 378 (312) 218Increase (decrease) in rental received in advance 423 (511) 438

Cash generated from operations 29,861 27,121 28,523Income tax paid (457) (290) –

NET CASH FROM OPERATIONS 29,404 26,831 28,523


– 28 –


AUD’000 AUD’000 AUD’000

INVESTING ACTIVITIESInterest received 809 712 249Purchases of property, plant and equipment (27) (67) (460)Purchases of intangible assets (6,748) – –Purchases of investment properties (21,982) (413) (610)Purchases of vines (14,156) – (24)Dividend received 42 – –Proceeds on disposal of property, plant and

equipment – 181 –Proceeds on disposal of non-current assets 18,194 2,480 2,435Proceeds on disposal of available-for-sale assets 436 – –Proceeds received from repayment of loan notes 200 – –Increase in pledged bank deposit – – (7,200)

NET CASH (USED IN) FROM INVESTINGACTIVITIES (23,232) 2,893 (5,610)

FINANCING ACTIVITIESInterest paid (12,888) (12,593) (11,939)Distributions paid (15,876) (14,074) (2,044)Repayments of borrowings (8,410) (7,088) (9,980)New borrowings raised 38,390 638 –Derivative option fee paid – (120) –Payment of equity raising costs – – (251)Cash received (paid) on settlement of hedging

instruments 235 (267) (328)Cash paid on settlement of early terminated

hedging instruments – (4,106) (427)

NET CASH FROM (USED IN) FINANCINGACTIVITIES 1,451 (37,610) (24,969)

NET INCREASE (DECREASE) IN CASH ANDCASH EQUIVALENTS 7,623 (7,886) (2,056)

CASH AND CASH EQUIVALENTS ATBEGINNING OF THE YEAR 6,158 13,690 5,841

Effect of foreign exchange rate changes (91) 37 16

CASH AND CASH EQUIVALENTS AT THEEND OF THE YEAR 13,690 5,841 3,801

Representing:Bank balances and cash 13,690 5,841 3,801


– 29 –

II. NOTES TO THE FINANCIAL INFORMATION

1. GENERAL

The Target Trust is an Australian registered managed investment scheme and its units have beenlisted on the Australian Securities Exchange since 2 July 1999. The responsible entity of the TargetTrust is Challenger Listed Investments Limited (the “Responsible Entity”). The role of theResponsible Entity is to manage the Target Trust in the unitholders’ best interests in accordance withthe Target Trust’s constitution (the “Constitution”) and the Corporations Act 2001 (Cth) of Australia.The Responsible Entity has appointed Challenger Management Services Limited (the “Manager”) tomanage the Target Trust. The Manager and the Responsible Entity are wholly owned subsidiaries ofChallenger Financial Services Group Limited, a substantial unitholder of the Target Trust.

The principal activity of the Target Trust is to invest in a portfolio of high quality, strategicallylocated vineyards and wineries that are leased primarily to wine companies. The vineyards arelocated across Australia and New Zealand. The address of the registered office and the principalplace of business of the Target Trust is Level 15, 255 Pitt Street, Sydney NSW 2000, Australia.

The Financial Information is presented in Australian dollars, which is the same as the functionalcurrency of the Target Trust.

2. BASIS OF PREPARATION OF FINANCIAL INFORMATION

The Financial Information has been prepared on the basis that the Target Trust will continue as agoing concern, which assumes that the Target Trust will be able to meet its commitments, continueoperations and realise its assets and discharge its liabilities in the normal course of business for theforeseeable future. The validity of the assumption is dependent on the successful implementation bythe Target Trust of the actions set out below.

In light of the narrowed gearing covenant headroom at 30 June 2010, the potential for investmentproperty values to further decline, and the Target Trust’s next debt maturity in May 2011, the TargetTrust is conducting a review of capital management alternatives to ensure ongoing compliance withbanking covenants and to position itself to secure refinancing. Advisors have been appointed to assistwith a review of capital management alternatives and the Target Trust is in active discussions onrecapitalisation alternatives.

As at 31 December 2010, the Target Trust has secured bank borrowings of AUD58,201,000 maturingin May 2011. The expiration of this debt facility has contributed to current liabilities exceedingcurrent assets, resulting in a net current liability of AUD60,146,000 at 30 June 2010.

On 8 November 2010, CK Life Sciences Int’l., (Holdings) Inc. (the “Company”) has agreed toacquire 72.26% of all units in issue of the Target Trust by way of a scheme (the “Acquisition”). TheAcquisition is subject to a number of conditions precedent including the approval of unitholders.

Based on the progress of the review of capital management alternatives by the directors of theResponsible Entity including the proposed acquisition as set out above, the directors of theResponsible Entity have concluded that there are reasonable grounds to believe that the goingconcern basis is appropriate.

3. APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTINGSTANDARDS (“IFRSs”)

The International Accounting Standard Board and International Financial Reporting StandardsInterpretation Committee (formerly known as International Financial Reporting InterpretationsCommittee) has issued a number of new or revised standard, amendments and interpretations (“newIFRSs”) which are effective for the financial year of the Target Trust beginning on 1 July 2009. Forthe purpose of preparing and presenting the Financial Information of the Relevant Periods, the newIFRSs were consistently adopted throughout the Relevant Periods.


– 30 –

The Target Trust has not early applied the following new or revised standards, amendments orinterpretations that have been issued but are not yet effective.

IFRSs (Amendments) Improvements to IFRSs 20091

IFRSs (Amendments) Improvements to IFRSs 20102

IAS 24 (Revised) Related Party Disclosure3

IAS 32 (Amendment) Classification of Rights Issues4

IFRS 1 (Amendment) Additional Exemptions for First-time Adopters5

IFRS 1 (Amendment) Limited Exemption from Comparative IFRS 7 Disclosures forFirst-time Adopters7

IFRS 2 (Amendment) Group Cash-settled Share-based Payment Transactions5

IFRS 7 (Amendments) Disclosures – Transfers of Financial Assets8

IFRS 9 Financial Instruments6

IFRIC 14 (Amendment) Prepayments of Minimum Funding Requirement3

IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments7

1 Amendments that are effective for annual periods beginning on or after 1 January 20102 Effective for annual periods beginning on or after 1 July 2010 and 1 January 2011, as appropriate3 Effective for annual periods beginning on or after 1 January 20114 Effective for annual periods beginning on or after 1 February 20105 Effective for annual periods beginning on or after 1 January 20106 Effective for annual periods beginning on or after 1 January 20137 Effective for annual periods beginning on or after 1 July 20108 Effective for annual periods beginning on or after 1 July 2011

Based on the existing available information, the directors of the Responsible Entity anticipate that theapplication of the new and revised standards, amendments or interpretations will have no materialimpact on the financial position and results of the Target Trust.

4. SIGNIFICANT ACCOUNTING POLICIES

The Financial Information has been prepared on the historical cost basis, except for certainproperties, vines and financial instruments, which are measured at fair values, as explained in theaccounting policies set out below.

The Financial Information has been prepared in accordance with the following accounting policieswhich conform with IFRSs. In addition, the Financial Information includes applicable disclosuresrequired by the Rules Governing the Listing of Securities on The Stock Exchange of Hong KongLimited and by the Hong Kong Companies Ordinance.

Basic of consolidation

The Financial Information incorporates the financial statements of the Target Trust and entitiescontrolled by the Target Trust. Control is achieved where the Target Trust has the power to governthe financial and operating policies of an entity so as to obtain benefits from its activities.

All intra-group transactions, balances, income and expenses are eliminated on consolidation.

Assets classified as held for sale

Assets are classified as held for sale if their carrying amount will be recovered principally through asale transaction rather than through continuing use. This condition is regarded as met only when thesale is highly probable and the asset (or disposal group) is available for immediate sale in its presentcondition.


– 31 –

Assets (or disposal groups) classified as held for sale, excluding investment properties and vineswhich are measured at fair value, are measured at the lower of the assets (or disposal groups)previous carrying amount and fair value less costs to sell.

Revenue recognition

Revenue is recognised at the fair value of the consideration received or receivable and representsamounts receivable for service provided in the normal course of business, net of related taxes.

Rental income is recognised over the lease term of the respective tenancy on a straight-line basis.

Interest income from a financial asset is accrued on a time basis, by reference to the principaloutstanding and at the effective interest rate applicable, which is the rate that exactly discountsestimated future cash receipts through the expected life of the financial asset’s net carrying amount.

Dividend income from investments is recognised when the shareholder’s rights to receive paymenthave been established.

Property, plant and equipment

Property, plant and equipment are stated at cost less subsequent accumulated depreciation andaccumulated impairment losses.

Depreciation is provided to write off the cost of items of property, plant and equipment over theirestimated useful lives and after taking into account of their estimated residual value, using thestraight-line method at the following rates per annum:

Winery equipment 20-25 years

Buildings 40 years

Winery plant 7.5-15 years

An item of property, plant and equipment is derecognised upon disposal or when no future economicbenefits are expected to arise from the continued use of the asset. Any gain or loss arising onderecognition of the asset (calculated as the difference between the net disposal proceeds and thecarrying amount of the item) is included in the profit or loss in the period in which the item isderecognised.

Investment properties

Investment properties are properties held to earn rentals and/or for capital appreciation.

On initial recognition, investment properties, which include land, buildings and integral infrastructure,are measured at cost, including any directly attributable expenditure. Subsequent to initialrecognition, investment properties are measured at their fair values using the fair value model. Gainsor losses arising from changes in the fair value of investment property are included in profit or lossfor the period in which they arise.

An investment property is derecognised upon disposal or when the investment property ispermanently withdrawn from use or no future economic benefits are expected from its disposals. Anygain or loss arising on derecognition of the asset (calculated as the difference between the netdisposal proceeds and the carrying amount of the asset) is included in the profit or loss in the year inwhich the item is derecognised.

Vines

Vines are biological assets and are initially recorded at cost including transaction costs. Subsequentto initial recognition, the vines are stated at fair value less costs to sell. Gains or losses arising fromchanges in the fair values of vines less costs to sell are recognised in profit or loss in the year inwhich they arise.


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Intangible assets

Water rights

Water rights provide the owner with an allocation of irrigation water for as long as the rights areheld. Water rights are able to be legally separated from properties and are able to be traded.

Water rights are recognised at cost less any accumulated impairment losses. The cost is not amortisedas the water licences have indefinite useful lives.

Due to the water rights being used for the provision of permanent planting of crops (vines) thesewater rights are held to support the vines and not for regular trading purposes.

Impairment

At the end of the reporting period, the directors of the Responsible Entity review the carryingamounts of its tangible and intangible assets to determine whether there is any indication that thoseassets have suffered an impairment loss. If any such indication exists, the recoverable amount of theasset is estimated in order to determine the extent of the impairment loss (if any). Where it is notpossible to estimate the recoverable amount of an individual asset, the Target Trust estimates therecoverable amount of the cash-generating unit to which the asset belongs.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing valuein use, the estimated future cash flows are discounted to their present value using a pre-tax discountrate that reflects current market assessments of the time value of money and the risks specific to theassets for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset/cash-generating unit is estimated to be less than its carryingamount, the carrying amount of the asset/cash-generating unit is reduced to its recoverable amount.Impairment losses are recognised as expenses immediately.

Where an impairment loss is subsequently reversed, the carrying amount of an asset/cash-generatingunit is increased to the revised estimate of its recoverable amount, but such reversal cannot exceedthe carrying amount that would have been determined had no impairment loss been recognised for theassets/cash-generating unit in prior years. A reversal of an impairment loss is recognised in profit orloss immediately.

Financial instruments

Financial assets and financial liabilities are recognised in the consolidated statements of financialposition when a group entity becomes a party to the contractual provisions of the instrument.Financial assets and financial liabilities are initially measured at fair value. Transaction costs that aredirectly attributable to the acquisition or issue of financial assets and financial liabilities are added toor deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initialrecognition.

Financial assets

The Target Trust’s financial asset is classified into available-for-sale financial assets and loans andreceivables. All regular way purchases or sales of financial assets are recognised and derecognised ona trade date basis. Regular way purchases or sales are purchases or sales of financial assets thatrequire delivery of assets within the time frame established by regulation or convention in themarketplace.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial asset and ofallocating interest income over the relevant period. The effective interest rate is the rate that exactlydiscounts estimated future cash receipts (including all fees paid or received that form an integral part


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of the effective interest rate, transaction costs and other premiums or discounts) through the expectedlife of the financial asset, or, where appropriate, a shorter period to the net carrying amount on initialrecognition.

Interest income is recognised on an effective interest basis.

Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated or not classified asfinancial assets at fair value through profit or loss, loans and receivables or held-to-maturityinvestments.

Available-for-sale financial assets are measured at fair value at the end of the reporting period.Changes in fair value are recognised in other comprehensive income and accumulated in investmentrevaluation reserve, until the financial asset is disposed of or is determined to be impaired, at whichtime, the cumulative gain or loss previously accumulated in the investment revaluation reserve isreclassified to profit or loss (see accounting policy on impairment loss on financial assets below).

For available-for-sale equity investments that do not have a quoted market price in an active marketand whose fair value cannot be reliably measured and derivatives that are linked to and must besettled by delivery of such unquoted equity instruments, they are measured at cost using less anyidentified impairment losses at the end of the reporting period (see accounting policy on impairmentloss on financial assets below).

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments thatare not quoted in an active market. Subsequent to initial recognition, loans and receivables (includingtrade and other receivables and bank balances) are carried at amortised cost using the effectiveinterest method, less any identified impairment losses (see accounting policy on impairment loss onfinancial assets below).

Impairment of financial assets

Financial assets are assessed for indicators of impairment at the end of the reporting period. Financialassets are impaired where there is objective evidence that, as a result of one or more events thatoccurred after the initial recognition of the financial asset, the estimated future cash flows of thefinancial assets have been affected.

For an available-for-sale equity instrument, a significant or prolonged decline in the fair value of thatinvestment below its cost is considered to be objective evidence of impairment.

For all other financial assets, objective evidence of impairment could include:

� significant financial difficulty of the issuer or counterparty; or

� default or delinquency in interest or principal payments; or

� it becoming probable that the borrower will enter bankruptcy or financial re-organisation.

For certain categories of financial asset, such as receivables, assets that are assessed not to beimpaired individually are subsequently assessed for impairment on a collective basis. Objectiveevidence of impairment for a portfolio of receivables could include the Target Trust’s past experienceof collecting payments, an increase in the number of delayed payments in the portfolio past theaverage credit period, observable changes in national or local economic conditions that correlate withdefault on receivables.


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For financial assets carried at amortised cost, an impairment loss is recognised in profit or loss whenthere is objective evidence that the asset is impaired, and is measured as the difference between theasset’s carrying amount and the present value of the estimated future cash flows discounted at theoriginal effective interest rate.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financialassets with the exception of trade receivables, where the carrying amount is reduced through the useof an allowance account. Changes in the carrying amount of the allowance account are recognised inprofit or loss. When a trade receivable is considered uncollectible, it is written off against theallowance account. Subsequent recoveries of amounts previously written off are credited to profit orloss.

For financial assets measured at amortised cost, if, in a subsequent period, the amount of impairmentloss decreases and the decrease can be related objectively to an event occurring after the impairmentlosses was recognised, the previously recognised impairment loss is reversed through profit or loss tothe extent that the carrying amount of the asset at the date the impairment is reversed does notexceed what the amortised cost would have been had the impairment not been recognised.

Impairment losses on available-for-sale equity investments will not be reversed in profit or loss insubsequent periods. Any increase in fair value subsequent to impairment loss is recognised directly inother comprehensive income and accumulated in investment revaluation reserve.

Financial liabilities and equity

Financial liabilities and equity instruments issued by a group entity are classified according to thesubstance of the contractual arrangements entered into and the definitions of a financial liability andan equity instrument.

The accounting policy of the Target Trust’s financial liabilities and equity instruments are set outbelow.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial liability andof allocating interest expense over the relevant period. The effective interest rate is the rate thatexactly discounts estimated future cash payments through the expected life of the financial liability,or, where appropriate, a shorter period.

Interest expense is recognised on an effective interest basis.

Financial liabilities

Financial liabilities including other payables and bank borrowings are subsequently measured atamortised cost, using the effective interest method.

Equity instruments

Units issued by the Target Trust which entitled the holders to a pro-rata share of the Target Trust’snet assets in the event of the Target Trust’s liquidation and are in the class of instruments that issubordinate to all other classes of instruments are classified as equity instruments.

Equity instruments issued by the Target Trust are recorded at the proceeds received, net of directissue costs.


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Derivative financial instruments and hedging

Derivative financial instruments are initially recognised at fair value at the date a derivative contractis entered into and are subsequently remeasured to their fair value at the end of the reporting period.The resulting gain or loss is recognised in profit or loss immediately unless the derivative isdesignated and effective as a hedging instrument, in which event the timing of the recognition inprofit or loss depends on the nature of the hedge relationship.

Hedge accounting

The directors of the Responsible Entity designate certain interest rate swaps to hedge against theinterest rate risk of variable-rate bank borrowings (cash flow hedges) and bank borrowings to hedgeagainst the currency risk of its net investment in a foreign operation.

At the inception of the hedging relationship the entity documents the relationship between thehedging instrument and hedged item, along with its risk management objectives and its strategy forundertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoingbasis, the directors of the Responsible Entity document whether the hedging instrument that is usedin a hedging relationship is highly effective in offsetting changes in fair values or cash flows of thehedged item.

Cash flow hedges

The effective portion of changes in the fair value of derivatives that are designated and qualify ascash flow hedges are recognised in other comprehensive income. The gain or loss relating to theineffective portion is recognised immediately in profit or loss.

Amounts previously recognised in other comprehensive income and accumulated in equity (hedgingreserve) are reclassified to profit or loss in the periods when the hedged item is recognised in profitor loss.

Hedge accounting is discontinued when the Target Trust revokes the hedging relationship, thehedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedgeaccounting. Any cumulative gain or loss accumulated in equity at that time remains in equity and isrecognised when the forecast transaction is ultimately recognised in profit or loss. When a forecasttransaction is no longer expected to occur, the gain or loss accumulated in equity is recognisedimmediately in profit or loss.

Hedges of net investments in foreign operations

Hedges of net investments in foreign operations are accounted for similarly to cash flow hedges. Anygain or loss on the hedging instrument relating to the effective portion of the hedge is recognised inother comprehensive income and accumulated in the translation reserve. The gain or loss relating tothe ineffective portion is recognised immediately in profit or loss as other gains or losses.

Gain or loss accumulated in the translation reserve is reclassified to profit or loss on disposal of theforeign operation.

Derecognition

Financial assets are derecognised when the rights to receive cash flows from the assets expire or, thefinancial assets are transferred and the Target Trust has transferred substantially all the risks andrewards of ownership of the financial assets. On derecognition of a financial asset, the differencebetween the asset’s carrying amount and the sum of the consideration received and receivable and thecumulative gain or loss that had been recognised directly in other comprehensive income isrecognised in profit or loss.


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Financial liabilities are derecognised when the obligation specified in the relevant contract isdischarged, cancelled or expires. The difference between the carrying amount of the financial liabilityderecognised and the consideration paid and payable is recognised in profit or loss.

Provisions

Provisions are recognised when the Target Trust has a present obligation as a result of a past event,and it is probable that the Target Trust will be required to settle that obligation. Provisions aremeasured at the best estimate of the consideration required to settle the present obligation at the endof the reporting period, taking into account the risks and uncertainties surrounding the obligation.Where a provision is measured using the cash flows estimated to settle the present obligation, itscarrying amount is the present value of those cash flows (where the effect is material).

Leases

Leases are classified as finance leases whenever the terms of the lease transfer substantially all therisks and rewards of ownership to the lessee. All other leases are classified as operating leases.

The Target Trust as lessor

Lease agreements entered into with lessees over vineyard properties and wineries are considered to beoperating leases given that the Target Trust retains substantially all the risks and benefits ofownership of the leased assets.

Rental income from operating leases is recognised in profit or loss on a straight-line basis over theterm of the relevant lease.

Under certain circumstances, incentives such as rent-free periods may be offered to tenants. Such anincentive is amortised over the term of the lease as a reduction in rental income on a straight-linebasis.

Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit asreported in the consolidated income statements because it excludes items of income or expense thatare taxable or deductible in other years and it further excludes income statement items that are nevertaxable or deductible. The Target Trust’s liability for current tax is calculated using tax rates thathave been enacted or substantively enacted by the end of the reporting period.

Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in theconsolidated financial statements and the corresponding tax bases used in the computation of taxableprofit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferredtax assets are generally recognised for all deductible temporary difference to the extent that it isprobable that taxable profits will be available against which those deductible temporary differencescan be utilised. Such assets and liabilities are not recognised if the temporary difference arises fromgoodwill or from the initial recognition (other than in a business combination) of other assets andliabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences associated with investmentsin subsidiaries, except where the Target Trust is able to control the reversal of the temporarydifference and it is probable that the temporary difference will not reverse in the foreseeable future.Deferred tax assets arising from deductible temporary differences associated with such investmentsand interests are only recognised to the extent that it is probable that there will be sufficient taxableprofits against which to utilise the benefits of the temporary differences and they are expected toreverse in the foreseeable future.


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The carrying amount of deferred tax assets is reviewed at the end of the reporting period and reducedto the extent that it is no longer probable that sufficient taxable profits will be available to allow allor part of the asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in theperiod in which the liability is settled or the asset is realised, based on tax rate (and tax laws) thathave been enacted or substantively enacted by the end of the reporting period. The measurement ofdeferred tax liabilities and assets reflects the tax consequences that would follow from the manner inwhich the Target Trust expects, at the end of the reporting period, to recover or settle the carryingamount of its assets and liabilities. Deferred tax is recognised in profit or loss, except when it relatesto items that are recognised in other comprehensive income or directly in equity, in which case thetax is also recognised in other comprehensive income or directly in equity respectively.

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifyingassets, which are assets that necessarily take a substantial period of time to get ready for theirintended use or sale, are added to the cost of those assets until such time as the assets aresubstantially ready for their intended use or sale. Investment income earned on the temporaryinvestment of specific borrowings pending their expenditure on qualifying assets is deducted from theborrowing costs eligible for capitalisation.

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

Foreign currencies

Items included in the financial statements of each individual group entity are measured using thecurrency of the primary economic environment in which the entity operates (the “functionalcurrency”). The consolidated financial statements are presented in Australian dollars, which is theTarget Trust’s functional and presentation currency.

Transactions in foreign currencies are translated at the prevailing rates on the dates of thetransactions. At the end of the reporting period, monetary assets and liabilities denominated inforeign currencies are retranslated at the prevailing rates at that date. Non-monetary items carried atfair value that are denominated in foreign currencies are translated at the rates prevailing on that datewhen the fair value was determined. Non-monetary items that are measured in terms of historical costin a foreign currency are not retranslated.

Exchange differences arising on the settlement of monetary items, and on the translation of monetaryitems, are recognised in profit or loss in the period in which they arise except for exchangedifferences arising on a monetary item that forms part of the Target Trust’s net investment in aforeign operation, in which case, such exchange differences are recognised in other comprehensiveincome and accumulated in equity and will be reclassified from equity to profit or loss on disposal ofthe foreign operation. Exchange differences arising on the retranslation of non-monetary items carriedat fair value are included in profit or loss for the period except for exchange differences arising onthe retranslation of non-monetary items in respect of which gains and losses are recognised directlyin other comprehensive income, in which cases, the exchange differences are also recognised directlyin other comprehensive income.

For the purposes of presenting the Financial Information, the assets and liabilities of the TargetTrust’s entities, are translated into the presentation currency of the Target Trust (i.e. Australiandollars) at the rate of exchange prevailing at the end of the reporting period, and their income andexpenses are translated at the average exchange rates for the year. Exchange differences arising, ifany, are recognised in other comprehensive income and accumulated in equity (the translationreserve).


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5. CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS

In the process of applying the Target Trust’s accounting policies described in note 4, the directors ofthe Responsible Entity have made estimates and assumptions concerning the future. The estimatesand assumptions that have a significant impact on changes in value of the carrying amounts of themost significant amounts of assets/liabilities include investment properties, vines and derivativefinancial instruments.

Other than the process for determining fair value of investment properties, vines and derivativefinancial instruments described in notes 15, 16 and 19 respectively, there are no key estimates andassumptions that have a significant risk of causing a material adjustment to the carrying amounts ofthe Target Trust’s assets and liabilities within the next financial year.

6. CAPITAL RISK MANAGEMENT

The Target Trust manages its capital to ensure that the Target Trust will be able to continue as agoing concern while maximising the optimal return to unitholders through monitoring the debt andequity balance to reduce the cost of capital. The Target Trust’s overall strategy remains unchangedduring the Relevant Periods.

The capital structure of the Target Trust consists of contribution from unitholders and debt, whichincludes bank borrowings disclosed in note 24, bank balances disclosed in note 21 and equityattributable to unitholders of the Target Trust, comprising contributed equity, reserves and retainedearnings. The directors of the Responsible Entity review the capital structure on a regular basis andbalance its overall capital structure through the payment of distributions, new unit issues as well asthe drawing of new debt or the redemption of existing debt.

Capital risk is monitored against policies, guidelines and externally imposed covenants:

As at 30 JuneThe Target Trust policy 2008 2009 2010

Gearing Targeted gearing limit of 45%-55% (i) 48% 54% 55%

Cash flow interestrate risk

To effectively hedge the interest on greater than60% of target drawn debt (ii)

100% 76% 64%

Currency risk Capital hedging– To maintain a natural capital hedge against

a minimum of 90% of the total value ofassets invested offshore (iii)

92% 99% 114%

(i) The Target Trust’s targeted gearing limit is calculated as debt less cash in pledged bank depositaccounts/total assets (with assets recognised at fair value as disclosed in notes 15 and 16) lesscash in pledged bank deposit accounts.

(ii) It was estimated by the average of notional contract value of interest swap entered over thetarget drawn debt along the remaining life of the swap contracts.

(iii) The Target Trust remains temporarily over hedged in regard to its New Zealand dollars assets.It is anticipated the Target Trust will move to within its preferred hedging range on completionof its debt refinancing due by May 2011.

During the Relevant Periods, the financial covenants under the bank borrowing facilities werecomplied with. In light of the narrowed gearing covenant headroom at 30 June 2010, the potential forinvestment property values to further decline and the Target Trust’s next debt maturity in May 2011,the Target Trust is conducting a review of capital management alternatives to ensure ongoingcompliance with banking covenants and to position itself to secure refinancing. Advisors have beenappointed to assist with a review of capital management alternatives and the Target Trust is in activediscussions on recapitalisation alternatives.


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7. FINANCIAL INSTRUMENTS

(a) Categories of financial instruments

As at 30 June2008 2009 2010

AUD’000 AUD’000 AUD’000

Financial assetsLoans and receivables (including cash and

cash equivalents) 14,096 7,738 12,470Derivative financial instruments in designated

hedge accounting relationships 3,187 228 280

Financial liabilitiesAmortised cost 157,107 152,335 143,812Derivative financial instruments in designated

hedge accounting relationships 1,129 8,297 8,210

(b) Financial risk management objectives and policies

The Target Trust’s major financial instruments include trade and other receivables, derivativefinancial instruments, bank balances, other payables and bank borrowings. Details of thesefinancial instruments are disclosed in respective notes. The risks associated with these financialinstruments include market risk (currency risk and interest rate risk), credit risk and liquidityrisk. The policies on how to mitigate these risks are set out below. The directors of theResponsible Entity manage and monitor these exposures to ensure appropriate measures areimplemented on a timely and effective manner.

(i) Market risk

Currency risk

The Target Trust is exposed to currency risk primarily arising from foreign operationand borrowings denominated in currencies other than the functional currency of thesub-trusts.

The Target Trust has a policy to implement a natural capital hedge of a minimum of90% of the total value of assets invested by the Target Trust in a foreign operation. Thisis achieved by borrowing in the same foreign currency to insulate against movements inexchange rates, both favourable and unfavourable. As at 30 June 2008, 30 June 2009and 30 June 2010, the Target Trust has naturally hedged 92%, 99% and 114%respectively of its foreign currency exposure. Hedge accounting is applied.

Given this, the director of the Responsible Entity consider that the net exposure tocurrency risk is kept to an appropriate level.


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Sensitivity analysis

The following table details the Target Trust’s sensitivity to a 5% increase and decreasein New Zealand dollars against Australian dollars. 5% changes in sensitivity raterepresent the assessment of the directors of the Responsible Entity on the reasonablypossible change in foreign exchange rates. The sensitivity analysis includes onlyoutstanding foreign currency denominated monetary items (including items designated ashedging instruments) and adjusts their translation at the year end for a 5% change inforeign currency rates. A positive number below indicates an increase in othercomprehensive income where New Zealand dollars strengthen or weaken 5% againstAustralian dollars.

Movementin variable

againstAUD(i)

New Zealand Dollars ImpactYear ended 30 June

2008 2009 2010AUD’000 AUD’000 AUD’000

(Decrease) increase inother comprehensiveincome for the year +5% (488) 276 649

Increase (decrease) inother comprehensiveincome for the year –5% 597 (298) (704)

(i) Movement in variable against Australian dollars was 10% for the year ended 30June 2008. A 5% movement in variable against the Australian dollars has beenused for the years ended 30 June 2009 and 30 June 2010 following detailedanalysis of New Zealand dollars against Australian dollars foreign exchangemovements over the past 10 years.

Interest rate risk

The Target Trust is exposed to cash flow interest rate risk in relation to variable-ratebank borrowings and bank deposits. It is the Target Trust’s policy to manage the impactof interest rate movements on its debt servicing capacity, profitability and businessrequirements by entering into interest rate swaps to effectively hedge a minimum of60% of its borrowings. These interest rate swaps are designated as effective hedginginstruments and hedge accounting is used. (see note 19 for details).

The Target Trust’s profit and loss exposure to interest rate movements is in respect tointerest income earned on surplus cash and the unhedged portion of its bank borrowings.

Sensitivity analysis

The sensitivity analyses below have been determined based on the exposure to interestrates for both derivatives and non-derivatives instruments at the end of respectivereporting periods. A 100 basis point increase or decrease represents the assessment ofthe directors of the Responsible Entity on a reasonably possible change in interest ratesover the period until the end of the next reporting period.


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The Target Trust’s sensitivity to movements in interest rates in relation to the value offinancial instruments and assets is shown as follows:

Movementin

variable

Effect on profit or lossIncrease/(decrease)Year ended 30 June

Effect on equityIncrease/(decrease)Year ended 30 June

2008 2009 2010 2008 2009 2010AUD’000 AUD’000 AUD’000 AUD’000 AUD’000 AUD’000

Financial instrumentsAustralian dollars +1% 93 27 (142) 3,545 1,852 1,112

–1% (93) (27) 142 (3,722) (1,904) (1,141)

New Zealand dollars +1% 4 11 19 3,242 3,280 2,818–1% (4) (11) (19) (3,371) (3,400) (2,927)

(ii) Credit risk

The Target Trust’s maximum exposure to credit risk which will cause a financial loss tothe Target Trust due to failure to discharge an obligation by the counterparties is arisingfrom the carrying amount of the respective recognised financial assets as stated in theconsolidated statements of financial position.

The Target Trust aims to ensure that at all times it has appropriate credit riskmanagement in place and that the directors and senior management of the ResponsibleEntity are appropriately informed of the Target Trust’s credit risks.

The Target Trust’s approach to credit management utilises a credit risk framework toensure that the following principals are adhered to:

� independence from the fund manager;

� appropriate segregation practices in place to avoid conflicts of interest;

� credit exposures are systematically controlled and monitored;

� credit exposures are regularly reviewed in accordance with existing creditprocedures;

� credit personnel are appropriately qualified and experienced; and

� credit exposures include such exposures arising from derivative transactions.

The credit risk on liquid funds is limited because the counterparties are banks with highcredit ratings assigned by international credit-rating agencies.

The Target Trust minimises concentration of credit risk in relation to trade receivablesby ensuring no more than 40% of the property portfolio shall be leased by one tenantand providing leases only to tenants who are considered creditworthy third parties. TheTarget Trust has three major tenants who individually contributed 15% or more of therental income of the Target Trust. These three tenants represent 0%, 68% and 0% oftrade receivables as at 30 June 2008, 30 June 2009 and 30 June 2010 respectively.

(iii) Liquidity risk

In the management of the liquidity risk, the Target Trust monitors and maintains a levelof bank balances and cash deemed adequate by the management to finance the TargetTrust’s operations and mitigate the effects of fluctuations in cash flows.


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The following table details the Target Trust’s remaining contractual maturity for itsderivative and non-derivative financial liabilities. The table has been drawn up based onthe undiscounted cash flows of financial liabilities based on the earliest date on whichthe Target Trust can be required to pay.

At 30 June 2008

Weightedaverageinterest

rate < 1 year 1-2 years 2-3 years 3-4 years 4-5 years > 5 years

Totalcontractual

undiscountedcash flow

Carryingamount at

30 June2008

% AUD’000 AUD’000 AUD’000 AUD’000 AUD’000 AUD’000 AUD’000 AUD’000

Non-derivative financialliabilities

Other payables 2,112 – – – – – 2,112 2,112

Variable-rate bankborrowings 7.89 12,244 12,244 73,903 101,001 – – 199,392 154,995

14,356 12,244 73,903 101,001 – – 201,504 157,107

Derivative financialliabilities

Interest rate swaps 37 54 164 193 237 444 1,129 1,129

Total financial liabilities 14,393 12,298 74,067 101,194 237 444 202,633 158,236

At 30 June 2009



Totalcontractual


Carryingamount at

30 June2009



Other payables 3,071 – – – – – 3,071 3,071

Variable-rate bankborrowings 8.04 9,915 67,553 92,638 – – – 170,106 149,264

12,986 67,553 92,638 – – – 173,177 152,335


Interest rate swaps 4,026 2,489 1,292 682 400 824 9,713 8,297

Total financial liabilities 17,012 70,042 93,930 682 400 824 182,890 160,632


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At 30 June 2010



Totalcontractual


Carryingamount at

30 June2010



Other payables 3,526 – – – – – 3,526 3,526

Variable-rate bankborrowings 8.35 77,189 81,834 – – – – 159,023 140,286

80,715 81,834 – – – – 162,549 143,812


Interest rate swaps 2,785 2,322 1,785 1,059 1,078 1,202 10,231 8,210

Total financial liabilities 83,500 84,156 1,785 1,059 1,078 1,202 172,780 152,022

(c) Fair value

The fair value of financial assets and financial liabilities are determined in accordance withgenerally accepted pricing models based on discounted cash flow analysis.

The directors of the Responsible Entity consider that the carrying amounts of financial assetsand financial liabilities recorded at amortised cost in the Financial Information approximatetheir fair values.

Fair value measurements recognised in the consolidated statements of financial position

The following table provides an analysis of financial instruments that are measured subsequentto initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which thefair value is observable.

� Level 1 fair value measurements are those derived from quoted prices (unadjusted) inactive market for identical assets or liabilities.

� Level 2 fair value measurements are those derived from inputs other than quoted pricesincluded within Level 1 that are observable for the asset or liability, either directly (i.e.as prices) or indirectly (i.e. derived from prices).

� Level 3 fair value measurements are those derived from valuation techniques thatinclude inputs for the asset or liability that are not based on observable market data(unobservable inputs).

Level 2As at 30 June

2008 2009 2010AUD’000 AUD’000 AUD’000

Derivative financial assets 3,187 228 280

Derivative financial liabilities 1,129 8,297 8,210

There were no transfers between Level 1 and 2 during the Relevant Periods.

8. TURNOVER

Turnover represents the rentals received and receivable from the lease of properties.


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9. OTHER INCOME, GAINS AND LOSSES


AUD’000 AUD’000 AUD’000Other income, gains and losses representing:

Interest income 809 712 249Dividend income 42 – –Loan notes written off (197) – –Fair value gain (loss) reclassified from hedging

reserve 235 (205) (328)Net gain on fair value changes of available-for-sale

assets disposed of during the year 389 – –Net gain on disposal of property, plant and

equipment – 22 –Net gain on disposal of non-current assets 838 38 117Net loss on fair value changes of investment

properties and vines classified as held for sale (1,093) (400) –Foreign exchange gain – – 305Other 62 – –

1,085 167 343

10. FINANCE COSTS


AUD’000 AUD’000 AUD’000

Interest on bank borrowings wholly repayable withinfive years 14,113 11,171 8,447

Fair value (gain) loss reclassified from hedgingreserve (1,587) 2,013 4,167

12,526 13,184 12,614

11. TAXATION


AUD’000 AUD’000 AUD’000

The tax charge for the year comprises:

New Zealand income tax– Current tax 286 367 212– Underprovision in prior years 171 – –– Deferred tax (note 25) – – (92)

457 367 120


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Eligible investment business

Under current legislation, the Target Trust and its sub-trusts that established in Australia undertakeactivities of an “eligible investment business” that is investing in land and vines for the purpose of,or primarily for the purpose of, deriving rent, and is therefore not liable to pay income tax as the netincome of the Target Trust is assessable in the hands of the unitholders who are entitled to theincome of the Target Trust.

New Zealand tax payable

One of Target Trust’s sub-trusts, Delegat’s Trust, is treated as a company for New Zealand taxpurposes as deriving rental income from New Zealand property is deemed to be taxable income ofthe trustee. As a result, Delegat’s Trust is required to calculate and pay tax in New Zealand at theNew Zealand company tax rate. On 17 May 2007, the New Zealand Parliament passed the Taxation(KiwiSaver and Company Tax Rate Amendments) Bill which reduced the company tax rate from 33%to 30% effective from the year of assessment 2008/2009. Therefore, the New Zealand income tax iscalculated at 33%, 30% and 30% of the estimated assessable profit for the years ended 30 June 2008,30 June 2009 and 30 June 2010 respectively.

The tax charges for the Relevant Periods can be reconciled to the profit (loss) before taxation asfollows:


AUD’000 AUD’000 AUD’000

Profit (loss) before taxation 13,991 (23,964) (14,589)

Tax at New Zealand income tax rate (2008: 33%;2009: 30%; 2010: 30%) 4,617 (7,189) (4,377)

Tax effect of non-taxable income (1,811) (8) (4)Tax effect of non-deductible expenses – 1,544 3,255Effect of tax exemption (2,230) 6,218 1,649Tax effect of temporary differences not recognised (282) (240) (403)Income tax refund – (24) –Underprovision in prior years 171 – –Other (8) 66 –

Tax charge for the year 457 367 120


– 46 –

12. PROFIT (LOSS) FOR THE YEAR


AUD’000 AUD’000 AUD’000

Profit (loss) for the year has been arrived at aftercharging (crediting):

Auditor’s remuneration 67 81 95Depreciation of property, plant and equipment 210 313 317Gross rental income from investment properties (31,583) (32,783) (31,075)Less: direct operating expenses from investment

properties that generated rental incomeduring the year – 163 147

Net rental income (31,583) (32,620) (30,928)

During the Relevant Periods, no amounts were paid by the Target Trust directly to the directors, keymanagement personnel and other staff of the Responsible Entity and the Manager.

13. EARNINGS (LOSS) PER UNIT


Basic earnings (loss) per unit (cents) 7.95 (14.29) (8.25)

The following table reflects the income and unit data used in the basic earnings (loss) per unitcomputations.


AUD’000 AUD’000 AUD’000

Net (loss) profit attributable to unitholders 13,534 (24,331) (14,709)

Weighted average number of units for basic earningsper unit (thousands) 170,313 170,313 178,267

No diluted earnings (loss) per unit is presented as Target Trust has no dilutive potential ordinaryunits.


– 47 –

14. DISTRIBUTIONS


AUD’000 AUD’000 AUD’000

Interim distribution (2008: AUD7.036 cents per unit;2009: AUD5.90 cents per unit; 2010: AUD3.25cents per unit) declared and paid during the yearto unitholders 11,984 10,048 5,535

Final distribution (2008: AUD2.364 cents per unit;2009: AUD1.20 cents per unit; 2010: AUD1.00cent per unit) recognised as a liability 4,026 2,044 1,908

Total distributions (2008: AUD9.40 cents per unit;2009: AUD7.10 cents per unit; 2010: AUD4.25cents per unit) 16,010 12,092 7,443

In accordance with the Constitution, the Responsible Entity must determine the distributable incomeof the Target Trust for each financial year. The Responsible Entity may in its absolute discretiondetermine that the distributable income will be some other amount which the Responsible Entityconsiders appropriate for distribution for that financial year and which may include income or capital,or both income and capital. The distribution may be paid in cash and/or units and must be madewithin 90 days after the end of each reporting period.

On 6 August 2008, 19 June 2009 and 10 June 2010, the Target Trust announced an estimated finaldistribution for 30 June 2008, 30 June 2009 and 30 June 2010 to be paid on 15 August 2008, 17August 2009 and 30 August 2010 respectively.


– 48 –

15. INVESTMENT PROPERTIES

AUD’000

Fair value:At 1 July 2007 161,358Exchange adjustments (6,486)Additions 21,982Reclassified from held for sale (note) 478Net decrease in fair value recognised in profit or loss (30,379)Reclassified to intangible assets (302)Reclassified to held for sale (643)Disposals (8,405)

At 30 June 2008 137,603Exchange adjustments 506Additions 413Net decrease in fair value recognised in profit or loss (5,934)Disposals (442)

At 30 June 2009 132,146Exchange adjustments 664Additions 687Deferred leasing incentives 331Net decrease in fair value recognised in profit or loss (6,135)Reclassified to held for sale (1,000)Disposals (1,635)

At 30 June 2010 125,058

The fair value of the Target Trust’s investment properties as at 30 June 2008, 30 June 2009 and 30June 2010, which include land, buildings and integral infrastructure, have been determined based onindependent valuations from accredited industry valuers who are specialists in valuing these types ofinvestment properties. The valuation was determined by reference to market evidence of recenttransaction prices for similar properties and replacement cost approach. Independent valuations ofinvestment properties are obtained at least once every 18 months from qualified valuers, unless thedirectors of the Responsible Entity determine that a valuation is to be obtained in the interveningperiod. The directors of the Responsible Entity have performed a valuation of the investmentproperties by reference to these independent valuations at each reporting date.

The majority of the Target Trust’s leases include an option or right of first refusal for the lessee topurchase the property from the Target Trust during the option term, which is generally at the end ofthe lease or, if at any time during the lease period if the Target Trust wishes to dispose of theproperty. The option deed is integrally linked to the underlying lease of the property and thereforeforms part of the fair value consideration supplied by the independent valuer. As a result, theseoptions are not considered to be embedded derivatives and are not recognised separately from theproperties.

Note:

During the year ended 30 June 2008, the directors of the Responsible Entity have undertaken areview of the Hermitage Road Winery and have determined that as a result of the current marketconditions in the Hunter Valley region it would be more beneficial to unitholders to lease out theproperty for rental rather than selling the property. The property has therefore been withdrawn frombeing actively marketed for sale. Accordingly, the property has been reclassified from assets held forsale to investment properties and property, plant and equipment, as appropriate.


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16. VINES

The principal activity of the Target Trust is to invest in a portfolio of vineyard and wineries that areleased primarily to wine companies. The vineyards are located across Australia and New Zealand.The areas of vines of the vineyard at reporting dates are as follows:

As at 30 June2008 2009 2010

hectares hectares hectares

Vines 4,568 4,407 4,264

The Target Trust is exposed to fair value risks arising from changes in fair value of the vines. Thefair value of vines at reporting dates are as follows:

AUD’000

Fair value:At 1 July 2007 94,991Exchange adjustments (3,296)Additions 14,156Net increase in fair value recognised in profit or loss 29,206Disposals (4,738)

At 30 June 2008 130,319Exchange adjustments 263Net decrease in fair value recognised in profit or loss (33,381)

At 30 June 2009 97,201Exchange adjustments 401Additions 24Deferred leasing incentives 555Net decrease in fair value recognised in profit or loss (20,044)Disposals (430)

At 30 June 2010 77,707

The fair value of the Target Trust’s vines as at 30 June 2008, 30 June 2009 and 30 June 2010 havebeen determined based on independent valuations from accredited industry valuers who are specialistsin valuing these types of assets. Valuations of vines are residuals from the valuation of vineyardsafter deducting value of investment properties and water rights. The valuations of vineyards aredetermined by discounting the expected future cash flows from the vineyards at discount ratesranging from 10% to 13.5%. Independent valuations of vineyards are obtained at least once every 18months from qualified valuers, unless the directors of the Responsible Entity determine that avaluation is to be obtained in the intervening period. The directors of the Responsible Entity haveperformed valuation of the vines by reference to these independent valuations.


– 50 –

17. PROPERTY, PLANT AND EQUIPMENT

Wineryequipment Buildings

Wineryplant Total

AUD’000 AUD’000 AUD’000 AUD’000

Cost:At 1 July 2007 1,395 3,154 608 5,157Additions – 27 – 27Reclassified from held for sale

(note) 1,931 993 1,506 4,430

At 30 June 2008 3,326 4,174 2,114 9,614Additions – 68 452 520Disposals (156) – (5) (161)

At 30 June 2009 3,170 4,242 2,561 9,973Additions – – 7 7

At 30 June 2010 3,170 4,242 2,568 9,980

Depreciation and impairment:At 1 July 2007 71 92 40 203Reclassified from held for sale

(note) 490 12 519 1,021Impairment loss recognised in

profit or loss 697 328 412 1,437Provided for the year 69 80 61 210

At 30 June 2008 1,327 512 1,032 2,871Impairment loss recognised in

profit or loss – 80 733 813Provided for the year 95 98 120 313Eliminated on disposals (2) – – (2)

At 30 June 2009 1,420 690 1,885 3,995Impairment loss recognised in

profit or loss 1,657 1,282 554 3,493Provided for the year 93 95 129 317

At 30 June 2010 3,170 2,067 2,568 7,805

Carrying values:At 30 June 2008 1,999 3,662 1,082 6,743

At 30 June 2009 1,750 3,552 676 5,978

At 30 June 2010 – 2,175 – 2,175

During the Relevant Periods, the directors of the Responsible Entity conducted reviews on therecoverable amounts of the Target Trust’s winery plant and equipment and determined that certainitems of those assets were impaired as the carrying amounts of those assets were in excess of theirrecoverable amounts. Accordingly, impairment losses of AUD1,437,000, AUD813,000 andAUD3,493,000 have been recognised in respect of the winery plant and equipment for the yearsended 30 June 2008, 30 June 2009 and 30 June 2010 respectively. The recoverable amount estimationwas based on the fair value less costs to sell as assessed by independent valuations.


– 51 –

Note:

During the year ended 30 June 2008, the directors of the Responsible Entity have undertaken areview of the Hermitage Road Winery and have determined that as a result of the current marketconditions in the Hunter Valley region it would be more beneficial to unitholders to lease out theproperty for rental rather than selling the property. The property has therefore been withdrawn frombeing actively marketed for sale. Accordingly, the property has been reclassified from assets held forsale to investment properties and property, plant and equipment, as appropriate.

18. INTANGIBLE ASSETS

AUD’000

Cost less impairmentAt 1 July 2007 16,995Additions 6,748Reclassified from investment properties 302Disposals (2,209)

At 30 June 2008 21,836Disposals (50)

At 30 June 2009 21,786Impairment loss recognised in profit or loss (625)Reclassified to held for sale (208)Disposals (253)

At 30 June 2010 20,700

Water right entitlements, which are included in intangible assets, provide the owner with anallocation of irrigation water for as long as the rights are held. The intangible assets are consideredby the directors of the Responsible Entity as having an indefinite useful life because it is expected togenerate economic benefit indefinitely. Water rights are recognised at cost less accumulatedimpairment losses. The right will not be amortised until its useful life is determined to be finite.Instead it will be tested for impairment annually and whenever there is an indication that it may beimpaired.

During the Relevant Periods, the directors of the Responsible Entity conducted reviews on therecoverable amounts of water right entitlements annually. The recoverable amount estimation wasbased on the market value. As a result, impairment losses of AUD625,000 have been recognised inprofit or loss to reduce the carrying amount of intangible assets to their recoverable amount for theyear ended 30 June 2010.


– 52 –

19. DERIVATIVE FINANCIAL INSTRUMENTS

AssetsAs at 30 June

LiabilitiesAs at 30 June

2008 2009 2010 2008 2009 2010AUD’000 AUD’000 AUD’000 AUD’000 AUD’000 AUD’000

Cash flow hedges –Interest rate swaps 3,187 228 280 (1,129) (8,297) (8,210)

Carrying amountanalysed forreporting purposeas:Non-current 2,015 69 – (1,092) (6,919) (6,089)Current 1,172 159 280 (37) (1,378) (2,121)

3,187 228 280 (1,129) (8,297) (8,210)

Cash flow hedges

At 30 June 2008, 30 June 2009 and 30 June 2010, the Target Trust has entered into interest rateswaps to hedge 100%, 100% and 83% of its 30 June 2008, 30 June 2009 and 30 June 2010borrowing levels in order to minimise its exposure to cash flow changes of its highly probable futureinterest payments on variable rate borrowings by swapping a proportion of the interest payments atvariable rate to fixed rate.

At the end of the reporting period, the notional contract value of the interest rate swaps, theirremaining terms and estimated net fair value are as follows:

Year

Notionalcontract

value

Fairvalue

movementsNet fair

value


rate

Maturity profile

<1 year1-2

years2-3

years3-4

years4-5

years>5

yearsAUD’000 AUD’000 AUD’000 % AUD’000 AUD’000 AUD’000 AUD’000 AUD’000 AUD’000

At 30 June 2008 225,040 1,587 2,058 7.89% 85,525 – 4,041 8,323 35,710 91,441At 30 June 2009 149,919 (16,571) (8,069) 8.04% 28,400 34,548 – 23,063 8,226 55,682At 30 June 2010 117,874 (4,868) (7,930) 8.45% 34,632 – 22,223 6,778 2,121 52,120

At 30 June 2008, the notional contract value of the Target Trust’s interest rate swaps includeAUD68,600,000 of interest rate swaps with effective dates beginning after 30 June 2008 that willreplace certain interest rate swaps that expire within the next 12 months from 30 June 2008.

All of the above interest rate swaps have been designated as effective hedges and formaldocumentation of the hedging relationship has been maintained. The Target Trust’s derivativeinstruments are assessed on an ongoing basis and have been determined to be highly effectivethroughout the Reporting Periods for which they have been designated as effective. The directors ofthe Responsible Entity are of the opinion that it is highly probable that the bank borrowings wouldbe renewed continuously to match with the term of the respective interest rate swaps.

Fair value gain of AUD1,587,000 and fair value losses of AUD16,571,000 and AUD4,868,000 havebeen recognised in other comprehensive income for the year ended 30 June 2008, 30 June 2009 and30 June 2010 respectively and are expected to be released to the consolidated income statements atvarious dates after the end of respective reporting periods.


– 53 –

During the Relevant Periods, (gains) losses reclassified from other comprehensive income to profit orloss are included in the following line items in the consolidated income statements:


AUD’000 AUD’000 AUD’000

Other income, gains and losses (235) 205 328Finance costs (1,587) 2,013 4,167

The fair values of interest rate swap are measured by reference to market values for similarinstruments.

20. RECEIVABLES AND PREPAYMENTS

As at 30 June2008 2009 2010

AUD’000 AUD’000 AUD’000

Trade receivables – 1,654 876Other receivables 406 243 593

Trade and other receivables 406 1,897 1,469Prepayments 99 495 357

505 2,392 1,826

The Target Trust has a policy allowing an average credit period of 30 days to its customers.

The following is an analysis of trade receivables by age, presented based on invoice date.

As at 30 June2008 2009 2010

AUD’000 AUD’000 AUD’000

0 – 30 days – 1,620 62131 – 60 days – 34 23861 – 90 days – – 17

– 1,654 876

The ageing analysis of trade receivables that are not impaired are as follows:

As at 30 June2008 2009 2010

AUD’000 AUD’000 AUD’000

Current – 1,620 621Less than 30 days past due – 34 23831 – 90 days past due – – 17

– 1,654 876

All trade receivable outstanding as at 30 June 2008, 30 June 2009 and 30 June 2010 have beencollected subsequent to respective year ends.


– 54 –

For credit assessment, the Target Trust makes primary use of both external and internal ratings whichare expressed on the basis of Standard and Poor’s rating definitions.

Owing to the specialised and sometimes smaller scale nature of the tenants’ operations within theTarget Trust, assigning external ratings nomenclature is not considered appropriate. New tenants aresubject to a detailed credit assessment and thereafter their credit quality is regularly monitored.

All customers who wish to trade on credit terms are subject to credit verification procedures. Inaddition, rent receivable balances are monitored on an ongoing basis to ensure the Target Trust’sexposure to bad debts is managed through normal payment terms and review of any rental in arrears.

Included in the other receivables as at 30 June 2010 is an amount of AUD362,000 receivable on saleof non-current asset relates to a vineyard.

21. BANK BALANCES AND CASH/PLEDGED BANK DEPOSIT

As at 30 June2008 2009 2010

AUD’000 AUD’000 AUD’000

Cash at bank and in hand 1,950 3,474 3,796Term deposits 11,740 2,367 5

13,690 5,841 3,801

Cash at bank carries interest at floating rates based on daily bank deposit rates.

Term deposits are made for varying periods of between seven days and three months, depending onthe immediate cash requirements of the Target Trust and earn interest at the respective short-termdeposit rates.

Pledged bank deposit of AUD7,200,000 relates to security for bank borrowings.

22. ASSETS CLASSIFIED AS HELD FOR SALE/LIABILITIES ASSOCIATED WITH ASSETSCLASSIFIED AS HELD FOR SALE

The Target Trust has continued to dispose of its properties as a part of its capital managementprogram. The following table includes a summary of the vineyards classified as held for sale as at 30June 2008 and 30 June 2010:

Year DescriptionAcquisitiondate Country

Carryingvalue of net

assetsAUD’000

At 30 June 2008 Sandy Hollow Vineyard Nov 1998 Australia 409At 30 June 2010 Gundagai Vineyard Sep 2000 Australia 1,208


– 55 –

The assets and liabilities attributable to the vineyards, which are expected to be sold within twelvemonths, have been classified as a disposal group held for sale and are presented separately in theconsolidated statements of financial position. Major classes of assets and liabilities of vineyardclassified as held for sale are as follows:

As at 30 June2008 2009 2010

AUD’000 AUD’000 AUD’000

Investment properties 2,150 – 1,000Vines 200 – –Intangible assets – – 208

Assets classified as held for sale 2,350 – 1,208

Bank borrowings (1,941) – –

Liabilities associated with the assets classified asheld for sale (1,941) – –

23. OTHER PAYABLES

As at 30 June2008 2009 2010

AUD’000 AUD’000 AUD’000

Derivative payables on reset of hedge positions – – 631Maintenance capital expenditure and development

payables – 453 77Interest payable 1,006 1,824 1,806Other payables 1,106 794 1,012

2,112 3,071 3,526

24. BANK BORROWINGS

As at 30 June2008 2009 2010

AUD’000 AUD’000 AUD’000

Secured bank borrowings 153,054 149,264 140,286

Carrying amount repayable:Within one year – 2,163 65,401More than one year but not exceeding two years – 60,013 74,953More than two years but not more than five years 153,218 87,204 –

153,218 149,380 140,354Less: unamortised borrowing costs (164) (116) (68)

153,054 149,264 140,286Less: Amounts due within one year shown under

current liabilities – (2,163) (65,379)

153,054 147,101 74,907


– 56 –

The carrying amounts of the Target Trust’s bank borrowings are denominated in Australian dollarsand New Zealand dollars, the functional currency and foreign currency of the Target Trustrespectively:

As at 30 June2008 2009 2010

AUD’000 AUD’000 AUD’000

Australian dollars 88,188 83,679 75,798New Zealand dollars 65,030 65,701 64,556Less: unamortized borrowing costs (164) (116) (68)

153,054 149,264 140,286

As at 30 June 2008, 30 June 2009 and 30 June 2010, all bank borrowings are variable-rateborrowings with weighted effective interest rates of 7.89%, 8.04% and 8.35% per annum respectively.

During the Relevant Periods, there were no defaults or breaches on any of the loans. As at 30 June2008, 30 June 2009 and 30 June 2010, the Target Trust has undrawn bank borrowing facilities ofAUD11,161,000, AUD12,344,000 and AUD888,000 respectively.

25. DEFERRED TAX ASSET

The following is the deferred tax asset recognised by the Target Trust and the movements thereonduring the Relevant Periods:

Tax lossesAUD’000

At 1 July 2007, 30 June 2008 and 30 June 2009 –Credit to profit or loss (92)

At 30 June 2010 (92)

As at 30 June 2008, 30 June 2009 and 30 June 2010, the total un-utilised tax losses amounted toapproximately nil, nil and AUD307,000 respectively. A deferred tax asset has been recognised inrespect of AUD307,000 of such losses as at 30 June 2010.

26. CONTRIBUTED EQUITY

Number of ordinary unitsAs at 30 June

Equity balanceAs at 30 June

2008 2009 2010 2008 2009 2010’000 ’000 ’000 AUD’000 AUD’000 AUD’000

At beginning of year 170,313 170,313 170,313 145,644 145,644 145,644

Equity issued pursuantto the interim DRP – – 20,447 – – 5,535

Transaction costs – – – – – (251)

At end of the year 170,313 170,313 190,760 145,644 145,644 150,928

During the year ended 30 June 2010, an underwritten Distribution Reinvestment Plan (“DRP”) was inplace in respect of the interim distribution of AUD5,535,000. The issue price was 27.07 cents. Theinterim DRP was underwritten to an amount equal to the total distribution less the Challenger


– 57 –

Financial Services Group committed amount of 27.74%. An additional 20,447,209 units were issuedon 9 February 2010 under the interim DRP. The DRP was deactivated for the 30 June 2010 finaldistribution.

According to the distribution policy as mentioned in note 14, the Target Trust has no contractualobligation to pay or declare distribution of which is entirely at the discretion of the directors of theResponsible Entity pursuant to the Constitution. Accordingly the issued units are classified as equityin accordance with IAS 32 “Financial Instruments: Disclosure and Presentation”.

27. OPERATING LEASE ARRANGEMENTS

Property rental income earned during the years ended 30 June 2008, 30 June 2009 and 30 June 2010were AUD31,583,000, AUD32,783,000 and AUD31,075,000 respectively. The non-cancellable leaseshave remaining terms of between three months to seven years.

At the end of the reporting period, the Target Trust had contracted with tenants for the followingfuture minimum lease payments under non-cancellable operating leases in respect of rented premiseswhich fall due as follows:

As at 30 June2008 2009 2010

AUD’000 AUD’000 AUD’000

Within one year 33,064 31,812 30,090In the second to fifth year inclusive 115,889 100,314 88,561Over five years 55,131 36,591 19,724

204,084 168,717 138,375

28. CAPITAL COMMITMENTS

As at 30 June2008 2009 2010

AUD’000 AUD’000 AUD’000

Capital expenditure in respect of the acquisition ofvineyards contracted for but not provided in theFinancial Information 738 673 276

29. PLEDGE OF ASSETS

As at 30 June 2008, 30 June 2009 and 30 June 2010, bank borrowings of AUD154,995,000,AUD149,264,000 and AUD140,286,000 were secured by first mortgages over all investmentproperties, vines, intangible assets, property, plant and equipment and pledged bank deposit of theTarget Trust with aggregate carrying values of AUD298,851,000, AUD257,111,000 andAUD234,048,000.

The terms of the first mortgages preclude the assets being disposal of or being used as security forfurther mortgages without the permission of the first mortgage holder.

30. SEGMENT INFORMATION

Operating segments have been determined based on reports reviewed by the Manager that are used tomake strategic decisions. Based on these reports it has been determined that the Target Trust has asingle operating segment. The Target Trust operates entirely within Australasia, investing in vineyardproperties and wine infrastructure assets for lease to vineyard and winery operators with similarcharacteristics, risks and returns.


– 58 –

Revenue is attributable to geographic locations based on the location of the tenants. Rental incomefrom external tenants by geographic locations is detailed below:


AUD’000 AUD’000 AUD’000

Australia 25,648 27,005 25,259New Zealand 5,935 5,778 5,816

31,583 32,783 31,075

The geographic location of non-current assets other than derivative financial instruments is asfollows:

As at 30 June2008 2009 2010

AUD’000 AUD’000 AUD’000

Australia 225,497 190,486 168,802New Zealand 71,004 66,625 56,838

296,501 257,111 225,640

The Target Trust has three major tenants who individually amount to 15% or more of the rentalincome of the Target Trust. These three tenants represent 68%, 71% and 72% of total rental incomefor the years ended 30 June 2008, 30 June 2009 and 30 June 2010 respectively.

31. RELATED PARTY TRANSACTIONS

(a) Compensation of key management personnel

The directors of the Responsible Entity and the personnel with the authority for the strategicdirector and management of the Target Trust are the key management personnel of the TargetTrust. During the Relevant Periods, no amounts were paid by the Target Trust directly to thekey management personnel.

(b) Responsible Entity fees and management fees

The Responsible Entity is entitled under the Constitution to be reimbursed for certain expensesincurred in administering the Target Trust. The basis on which the expenses are reimbursed isdefined in the Constitution.

In accordance with the Constitution, the Responsible Entity is entitled to a fee equal to 0.65%per annum of the total asset value of the Target Trust up to and including AUD1 billion (plus0.45% of the total asset value in excess of AUD1 billion), and 1.5% on capital acquisitions,assessed at the end of each month.

The Responsible Entity is also entitled to receive up to 1% per annum of the properties’annual gross income for managing the vineyards, payable monthly.


– 59 –

The following table discloses all fees paid by the Target Trust to the Responsible Entity underthe Constitution and to the Manager under the management agreement with the ResponsibleEntity:


AUD’000 AUD’000 AUD’000

Responsible Entity fees paid or payable to theResponsible Entity 300 300 300

Management fees paid or payable to theManager 2,143 2,050 1,708

Total fees charged to profit or loss 2,443 2,350 2,008Capitalised transaction fees paid or payable to

the Manager 631 10 16

Total fees paid or payable 3,074 2,360 2,024

Total expenses paid by the Target Trust to reimburse the Manager in respect of costs paid onbehalf of the Target Trust for the years ended 30 June 2008, 30 June 2009 and 30 June 2010were AUD588,000, AUD105,000 and AUD147,000 respectively.

III. SUBSEQUENT EVENTS

On 8 November 2010, the Company has agreed to acquire 72.26% of all units in issueof the Target Trust by way of a scheme (the “Acquisition”). The Acquisition is subjectto a number of conditions precedent including the approval of unitholders.

IV. SUBSEQUENT FINANCIAL INFORMATIONS

No audited consolidated financial informations of the Target Trust or any of itssub-trusts have been prepared in respect of any period subsequent to 30 June 2010.

Yours faithfully,Deloitte Touche TohmatsuCertified Public AccountantsHong Kong


– 60 –

CWT’s bank borrowings profiles during the years under review were as follows:

As of 30 June2008 2009 2010

Total borrowings AUD’000 153,054 149,264 140,286(approximately

HK$’000)1,203,004 1,173,215 1,102,648

Of which:Due within one year AUD’000 0 2,163 65,379

(approximatelyHK$’000)

0 17,001 513,879

Due more than one yearbut less than five years

AUD’000 153,054 147,101 74,907(approximately

HK$’000)1,203,004 1,156,214 588,769

First mortgages have been granted as security for bank loans over all investment properties,vines, intangible assets and plant and equipment.

CWT’s gearing ratio was 91%, 141% and 153% as of 30 June 2008, 2009 and 2010respectively. Gearing ratio is calculated as total net borrowings (total borrowings less cashand bank balances including pledged bank deposit) divided by capital.

Of the total borrowings of AUD153,054,000 (approximately HK$1,203,004,000),AUD149,264,000 (approximately HK$1,173,215,000) and AUD140,286,000 (approximatelyHK$1,102,648,000) as of 30 June 2008, 2009 and 2010 respectively, about AUD65,030,000(approximately HK$511,136,000), AUD65,701,000 (approximately HK$516,410,000) andAUD64,556,000 (approximately HK$507,410,000) were denominated in New Zealand dollarsas of 30 June 2008, 2009 and 2010 respectively, while the rest were denominated inAustralian dollars.

All of CWT’s bank borrowings carry interests at variable rate, while CWT uses interest rateswaps instruments to hedge its interest rate exposure. CWT had outstanding interest rateswaps with notional value amounting to AUD225,040,000 (approximatelyHK$1,768,814,000), AUD149,919,000 (approximately HK$1,178,363,000) andAUD117,874,000 (approximately HK$926,490,000) as of 30 June 2008, 2009 and 2010respectively. The marked-to-market fair value of these derivatives were AUD2,058,000(approximately HK$16,176,000), minus AUD8,069,000 (approximately minusHK$63,422,000) and minus AUD7,930,000 (approximately minus HK$62,330,000) as of 30June 2008, 2009 and 2010 respectively.

Except for investment properties and derivative financial instruments, CWT does not holdany significant investments, and have not made any acquisitions or disposals of subsidiariesor affiliated companies during the three years under review.

CWT has a single operating segment, which is investing in vineyards properties and wineinfrastructure assets for lease to vineyard and winery operators. The Australian wine industryhas experienced a difficult time since 2008 due to a combination of (i) the high Australian

APPENDIX III MANAGEMENT DISCUSSION AND ANALYSIS ON CWT

– 61 –

Dollar severely hitting export sales, (ii) economic impact of the global financial crisis, and(iii) over-planting in the early 2000s leading to excess supply of grapes and vineyards.While the first two factors are external, the industry is making progress in resolving thethird factor, with an estimated 8% of vines having already been removed from an estimated157,000 hectares, with more expected to be removed. The industry downturn since 2008 wasreflected in CWT’s results through the changes in value of investment properties, vines,property, plant and equipment and intangible assets amounting to minus AUD2,610,000(approximately minus HK$20,515,000), minus AUD40,128,000 (approximately minusHK$315,406,000) and minus AUD30,297,000 (approximately HK$238,134,000) for the yearsended 30 June 2008, 2009 and 2010 respectively.

CWT does not have any employees, as it is a managed investment scheme managed by CMSunder management agreement. Management fees paid to CMS amounted to AUD2,774,000(approximately HK$21,804,000), AUD2,060,000 (approximately HK$16,192,000) andAUD1,724,000 (approximately HK$13,551,000) for the years ended 30 June 2008, 2009 and2010 respectively.

CWT incurred capital expenditure of AUD42,913,000 (approximately HK$337,296,000),AUD480,000 (approximately HK$3,773,000) and AUD1,094,000 (approximatelyHK$8,599,000) during the years ended 30 June 2008, 2009 and 2010 respectively for thepayment for vines, investment properties and development. CWT has budgeted to incurAUD750,000 (approximately HK$5,895,000) for the current year, which will be funded byinternal resources.

APPENDIX III MANAGEMENT DISCUSSION AND ANALYSIS ON CWT

– 62 –

The following is the text of a report, prepared for the sole purpose of inclusion in thiscircular, received from the independent reporting accountants, Deloitte Touche Tohmatsu,Certified Public Accountants Hong Kong. As described in the section headed “Documentsavailable for inspection” in Appendix VI, a copy of the following report is available forinspection.

ACCOUNTANTS’ REPORT ON UNAUDITED PRO FORMA FINANCIALINFORMATION TO THE DIRECTORS OF CK LIFE SCIENCES INT’L.,(HOLDINGS) INC.

We report on the unaudited pro forma financial information of CK Life Sciences Int’l.,(Holdings) Inc. (the “Company”) and its subsidiaries (hereinafter collectively referred to asthe “Group”), which has been prepared by the directors of the Company for illustrativepurposes only, to provide information about how the proposed acquisition of 137,837,287scheme units, represent approximately 72.26% of all units in issue, of Challenger Wine Trustby way of a scheme (the Group upon completion of the acquisition hereinafter referred to asthe “Enlarged Group”) might have affected the financial information presented, for inclusionin Appendix IV of the circular dated 31 December 2010 (the “Circular”). The basis ofpreparation of the unaudited pro forma financial information is set out on page 65 to theCircular.

RESPECTIVE RESPONSIBILITIES OF DIRECTORS OF THE COMPANY ANDREPORTING ACCOUNTANTS

It is the responsibility solely of the directors of the Company to prepare the unaudited proforma financial information in accordance with paragraph 29 of Chapter 4 of the RulesGoverning the Listing of Securities on The Stock Exchange of Hong Kong Limited (the“Listing Rules”) and with reference to the Accounting Guideline 7 “Preparation of ProForma Financial Information for Inclusion in Investment Circulars” issued by the HongKong Institute of Certified Public Accountants.

It is our responsibility to form an opinion, as required by paragraph 29(7) of Chapter 4 ofthe Listing Rules, on the unaudited pro forma financial information and to report ouropinion to you. We do not accept any responsibility for any reports previously given by uson any financial information used in the compilation of the unaudited pro forma financialinformation beyond that owed to those to whom those reports were addressed by us at thedates of their issue.

APPENDIX IV UNAUDITED PRO FORMA FINANCIAL INFORMATIONOF THE ENLARGED GROUP FOLLOWING THE ACQUISITION

– 63 –

BASIS OF OPINION

We conducted our engagement in accordance with the Hong Kong Standard on InvestmentCircular Reporting Engagements 300 “Accountants’ Reports on Pro Forma FinancialInformation in Investment Circulars” issued by the Hong Kong Institute of Certified PublicAccountants. Our work consisted primarily of comparing the unadjusted financialinformation with the source documents, considering the evidence supporting the adjustmentsand discussing the unaudited pro forma financial information with the directors of theCompany. This engagement did not involve independent examination of any of theunderlying financial information.

We planned and performed our work so as to obtain the information and explanations weconsidered necessary in order to provide us with sufficient evidence to give reasonableassurance that the unaudited pro forma financial information has been properly compiled bythe directors of the Company on the basis stated, that such basis is consistent with theaccounting policies of the Group and that the adjustments are appropriate for the purpose ofthe unaudited pro forma financial information as disclosed pursuant to paragraph 29(1) ofChapter 4 of the Listing Rules.

The unaudited pro forma financial information is for illustrative purpose only, based on thejudgments and assumptions of the directors of the Company, and, because of its hypotheticalnature, does not provide any assurance or indication that any event will take place in futureand may not be indicative of the financial position of the Enlarged Group as at 30 June2010, or any future date.

Opinion

In our opinion:

a) the unaudited pro forma financial information has been properly compiled by thedirectors of the Company on the basis stated;

b) such basis is consistent with the accounting policies of the Group; and

c) the adjustments are appropriate for the purposes of the unaudited pro forma financialinformation as disclosed pursuant to paragraph 29(1) of Chapter 4 of the Listing Rules.

Deloitte Touche TohmatsuCertified Public AccountantsHong Kong31 December 2010


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1. Unaudited pro forma consolidated statement of financial position of the EnlargedGroup

The unaudited pro forma consolidated statement of financial position of the EnlargedGroup is prepared based on the unaudited consolidated statement of financial positionof the Group as at 30 June 2010 extracted from the half-year report issued by theCompany on 26 July 2010 and the audited statement of financial position of ChallengerWine Trust (“CWT”) as at 30 June 2010 extracted from the accountants’ report set outin Appendix II of this circular after making pro forma adjustments that are necessary.The financial information of CWT and the pro forma adjustments are translated fromAUD to HK$ at the rate of 7.86.

The unaudited pro forma consolidated statement of financial position of the EnlargedGroup has been prepared to provide unaudited pro forma financial information of theEnlarged Group as if the proposed acquisition of 72.26% of all units in issue of CWThad been completed on 30 June 2010. As it has been prepared for illustrative purposeonly and because of its hypothical nature, it may not give a true picture of the financialposition of the Enlarged Group as at 30 June 2010 or at any future date.

The Group CWT CWT TotalPro forma

adjustmentEnlarged

GroupHK$’000 AUD’000 HK$’000 HK$’000 HK$’000 HK$’000

(A) (B) (A)+(B) (C) (A)+(B)+(C)

Non-current assetsInvestment properties – 125,058 982,956 982,956 982,956Vines – 77,707 610,777 610,777 610,777Property, plant and

equipment 443,500 2,175 17,096 460,596 460,596Prepaid lease for land 11,604 – – 11,604 11,604Intangible assets 3,926,444 20,700 162,701 4,089,145 4,089,145Interests in associates 18,041 – – 18,041 18,041Available-for-sale

investments 576,058 – – 576,058 576,058Investments at fair

value through profitor loss 184,720 – – 184,720 184,720

Deferred taxation 26,600 – – 26,600 26,600Long-term receivables 26,040 – – 26,040 26,040Time deposits 65,880 – – 65,880 65,880

5,278,887 225,640 1,773,530 7,052,417 7,052,417


– 65 –


adjustmentEnlarged


(A) (B) (A)+(B) (C) (A)+(B)+(C)

Current assetsDeferred taxation – 92 723 723 723Investments at fair

value through profitor loss 120,312 – – 120,312 120,312

Derivative financialinstruments 1,562 280 2,201 3,763 3,763

Tax recoverable 731 – – 731 731Inventories 404,773 – – 404,773 404,773Receivables and

prepayment 732,878 1,826 14,352 747,230 747,230Pledged bank deposit – 7,200 56,592 56,592 56,592Time deposits 51,972 – – 51,972 51,972Bank balances and

deposits 448,007 3,801 29,876 477,883 (260,000)(1)(2) 217,883

1,760,235 13,199 103,744 1,863,979 1,603,979

Assets classified as heldfor sale – 1,208 9,495 9,495 9,495

1,760,235 14,407 113,239 1,873,474 1,613,474

Current liabilitiesPayables and accruals (499,898) (6,760) (53,133) (553,031) (553,031)Derivative financial

instruments (24,910) (2,121) (16,671) (41,581) (41,581)Bank overdrafts (1,389) – – (1,389) (1,389)Bank loans (116,775) (65,379) (513,879) (630,654) (630,654)Finance lease

obligations (298) – – (298) (298)Taxation (53,369) (293) (2,303) (55,672) (55,672)

(696,639) (74,553) (585,986) (1,282,625) (1,282,625)

Net current assets(liabilities) 1,063,596 (60,146) (472,747) 590,849 330,849

Total assets lesscurrent liabilities 6,342,483 165,494 1,300,783 7,643,266 7,383,266

Non-current liabilitiesDerivative financial

instruments – (6,089) (47,860) (47,860) (47,860)Bank loans (943,800) (74,907) (588,769) (1,532,569) (1,532,569)Finance lease

obligations (716) – – (716) (716)Loan from a minority

shareholder (29,746) – – (29,746) (29,746)Deferred taxation (91,474) – – (91,474) (91,474)

(1,065,736) (80,996) (636,629) (1,702,365) (1,702,365)

Total net assets 5,276,747 84,498 664,154 5,940,901 5,680,901


– 66 –


adjustmentEnlarged


(A) (B) (A)+(B) (C) (A)+(B)+(C)

Capital and reservesContributed equity – 150,928 1,186,294 1,186,294 (1,186,294)(3) –Share capital 961,107 – – 961,107 – 961,107Share premium and

reserves 4,147,380 (66,430) (522,140) 3,625,240 742,058(1)(3) 4,367,298

Equity attributable toequity holders of theCompany 5,108,487 84,498 664,154 5,772,641 5,328,405

Share option reserve ofa subsidiary 490 – – 490 490

Non-controllinginterests 167,770 – – 167,770 184,236(4) 352,006

Total equity 5,276,747 84,498 664,154 5,940,901 5,680,901

Notes:

(1) To reflect the payment of consideration of AUD33,081,000 (equivalent to approximatelyHK$260,000,000) and the gain from a bargain purchase of HK$219,918,000 arising from acquisitionof CWT. The gain from the bargain purchase is calculated based on the consideration less thecarrying amounts of identifiable assets and liabilities of CWT at 30 June 2010 assuming that the fairvalues of the identifiable assets and liabilities at 30 June 2010 approximate to their carrying amounts.As the carrying amounts of the identifiable assets and liabilities of CWT at the date of Completionmay be substantially different from their carrying amounts as at 30 June 2010, the actual goodwill /gain from the bargain purchase arising from the Acquisition may be different from the estimatedfigure as shown above.

(2) The consideration is satisfied by the bank balances and deposits.

(3) To eliminate the share capital and the pre-acquisition reserves of the Target Co upon the Acquisition.

(4) To recognise non-controlling interest of HK$184,236,000.


– 67 –

This appendix contains summaries (the “Report Summaries”) of the valuation reports on theproperties owned by CWT (the “Full Reports”). Each of the Report Summaries, on its own,complies with the requirements set out in Chapter 5 of the Listing Rules. The Full Reportswill be published on the websites of the Stock Exchange and of the Company respectively,and will be available for inspection during normal business hours at the principal place ofbusiness of the Company in Hong Kong at 7th Floor, Cheung Kong Center, 2 Queen’s RoadCentral, Hong Kong on weekdays (Saturdays and public holidays excepted) up to andincluding 17 January 2011.

The table below sets out certain information with respect to the properties which shall beread in conjunction with Report Summaries and the Full Report:

No. Property NamePropertyClassification

CWT’seffectiveinterest

in theproperty

Effective dateof valuation

Market Value/Capital Value

ApproximateHK$ equivalent

1. Cocoparra and WoodsVineyard

Property held forinvestment

100% 31 December2010

AUD10,000,000 HK$78,600,000

2. Whitton Vineyard Property held forinvestment


AUD3,900,000 HK$30,654,000

3. Summers Vineyard Property held forinvestment


AUD1,075,000 HK$8,449,500

4. Waikerie Vineyard Property held for sale 100% 31 December2010

AUD1,200,000 HK$9,432,000

5. Schubert’s Vineyard Property held forinvestment


AUD5,400,000 HK$42,444,000

6. Balranald Vineyard Property held forinvestment


AUD21,800,000 HK$171,348,000

7. Stephendale Vineyard Property held forinvestment


AUD22,750,000 HK$178,815,000

8. Richmond GroveVineyard



AUD16,750,000 HK$131,655,000

9. Chapel Vineyard Property held fordisposal


AUD800,000 HK$6,288,000

10. Lawsons Vineyard Property held forinvestment


AUD9,300,000 HK$73,098,000

11. Corryton Park Vineyard Property held forinvestment


AUD2,350,000 HK$18,471,000

12. Pooles Rock Winery Property held for sale 100% 31 December2010

AUD5,400,000 HK$42,444,000

13. Hermitage RoadWinery



AUD1,500,000 HK$11,790,000

14. Qualco East Vineyard Property held forinvestment


AUD6,500,000 HK$51,090,000

15. Miamba Vineyard Property held forinvestment


AUD10,100,000 HK$79,386,000

APPENDIX V VALUERS’ REPORTS ON THE PROPERTIES OF CWT

– 68 –

No. Property NamePropertyClassification

CWT’seffectiveinterest

in theproperty

Effective dateof valuation

Market Value/Capital Value

ApproximateHK$ equivalent

16. Del Rios Vineyard Property held forinvestment


AUD42,950,000 HK$337,587,000

17. Gimblett RoadVineyard



NZD2,425,000 HK$14,040,750

18. Highway 50 Vineyard Property held forinvestment


NZD2,035,000 HK$11,782,650

19. Crownthorpe Vineyard Property held forinvestment


NZD17,000,000 HK$98,430,000

20. Rarangi Vineyard Property held forinvestment


NZD17,080,000 HK$98,893,200

21. Dashwood Vineyard Property held forinvestment


NZD21,730,000 HK$125,816,700

22. Sirens Vineyard Property held forinvestment


AUD2,100,000 HK$16,506,000

Total HK$1,637,020,800


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Colliers International Consultancy and Valuation Pty LimitedLevel 10, Statewide House99 Gawler PlaceAdelaide SA 5000

16 December 2010

The DirectorsRegenal Investments Pty Limited as Nominee ofCK Life Sciences Int’l., (Holdings) Inc.2 Dai Fu StreetTai Po Industrial EstateNew Territories, HONG KONG

Dear Sirs

Subject Property: Cocoparra and Woods Vineyard, Griffith, NSW, Australia

In accordance with the instructions from Regenal Investments Pty Limited (“the Company”)to value the property interests of CK Life Sciences Int’l., (Holdings) Inc. (CKLS), the“Target Company” in Australia, we confirm that we have carried out inspections, maderelevant enquiries and obtained such further information as we consider necessary for thepurpose of providing the market value of such property interests as at 31 December 2010(referred to as the “date of valuation”).

It is our understanding that this valuation is for major transaction purposes.

This valuation extract, which is an extract from our full valuation report, explains the basisand methodology of valuation, and clarifies our assumptions made, title investigation ofproperties and the limiting conditions. It has been prepared specifically for use by theCompany and CKLS in meeting the disclosure requirements of CKLS to/with the HongKong Stock Exchange. However full particulars in relation to the valuation process are setforth in our full valuation report and this valuation extract should be read in conjunctionwith that document.

Basis of Valuation

The subject property in our opinion is likely to be regarded as a leased investment.Consequently, in adopting this definition of value we are of the opinion that it is consistentwith the definition of Market Value defined by International Valuation Standards Committee(IVSC) and endorsed by the Australian Property Institute (API).

“Market Value” is the estimated amount for which a property should exchange on the date ofvaluation between a willing buyer and a willing seller in an arms length transaction afterproper marketing wherein the parties had each acted knowledgeably, prudently and withoutcompulsion.

This valuation extract is provided by Colliers International Consultancy & Valuation PtyLimited (CICV) and not by any other company in the Colliers International Group. Thisvaluation extract has been prepared for major transaction purposes and should not be


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relied upon for any other purpose or by any person other than Regenal Investments PtyLimited. CICV accepts no responsibility for any statements in this report other than for thestated purpose. This valuation extract is issued on the basis that no liability attaches to thecompanies in the Colliers International Group other than CICV in relation to any statementscontained in the valuation extract.

This valuation extract complies with the Listing Rules of the Hong Kong Stock Exchangeand in valuing the property interest, we have complied with the standards adopted by theInternational Valuation Standards Council, Eighth Edition 2007.

In determining our opinion of “Market Value” we have utilised a market based approach.

Date of Issue

In accordance with your written instructions dated 2 December 2010, our inspection of thesubject property as at 9 December 2010 and the requested date of valuation as at31 December 2010, we confirm that this valuation certificate has been provided as at31 December 2010 (Date of Valuation).

We have assumed that there will be no change to the property or the market between thedate of issue and the date of valuation. Should we become aware of any relevant marketinformation that may impact on the value of the property, up to and including31 December 2010, we at our own discretion reserve the right to review and possibly amendthe valuation analysis contained herein.

Qualification and Warning

CICV has been engaged by Regenal Investments Pty Limited to provide a valuation ofCocoparra and Woods Vineyard, Griffith, NSW.

Regenal Investments Pty Limited and CKLS wish to include the valuation extract in theMajor Transaction Circular of CKLS (the Circular) to the Hong Kong Stock Exchange andhave requested CICV to consent to the inclusion of this valuation extract. CICV consents tothe inclusion of this valuation extract in the Circular and to being named in the Circular,subject to the condition that Regenal Investments Pty Limited includes this Qualification andWarning:–

i. This valuation extract has been prepared for Regenal Investments Pty Limited only andfor the specific purposes outlined within the Instruction section of this report andcannot be relied upon by third parties.

ii. This valuation extract is a summary of the valuations of the aforementioned propertiesas at 31 December 2010 and has not been prepared for the purpose of assessing theproperty as an investment opportunity.

iii. CICV makes no representation or recommendation to a Recipient in relation to thevaluation of the property or the investment opportunity contained in this valuationextract.


– 71 –

iv. Recipients must seek their own advice in relation to the investment opportunitycontained in this valuation extract.

v. The events of early 2008 including the initial sub-prime fallout in the United Statesand subsequent Global Financial Crisis (GFC) created uncertain times for both theequities and property markets in Australia which impacted to varying degrees upon avariety of market participants. The initial impact was focussed on the Listed PropertyTrust sector operating assets within the major commercial, industrial, retail andinfrastructure sectors. While a degree of uncertainty still remains within these markets,the magnitude is notably less than that evident throughout 2008 and the majority of2009. Improving levels of general market activity over recent times appears to haveresulted in growing investor confidence, albeit shallower than that experienced prior tothe GFC.

The rural property market has typically lagged the experiences of the other majormarkets and traditionally has not displayed their volatility. However there have beensome very substantial collapses within the managed investment scheme sector inparticular that have dampened investor confidence. The very rapid tightening of creditavailability that resulted from the GFC remains an issue within the Australian ruralproperty market with LVR requirements causing a general pull back in many regionalmarkets.

CICV has prepared this valuation extract on the basis of, and limited to, the financial andother information (including market information and third party information) referred to inthe valuation extract and contained in the full valuation report. We have assumed that thethird party information is accurate, reliable and complete and confirm that we have nottested the information in that respect.

Liability Disclaimer

In the case of advice provided in this valuation extract and our full valuation report which isof a projected nature, we must emphasise that specific assumptions have been made by uswhich appear realistic based upon current market perceptions. It follows that any one of ourassociated assumptions set out in the text of this valuation extract may be proved incorrectduring the course of time and no responsibility can be accepted by us in this event.

This valuation extract has been prepared subject to the conditions referred to in ourQualification and Warning.

CICV has prepared this valuation extract which appears in the Circular. CICV were involvedonly in the preparation of this valuation extract and the valuation referred to herein, andspecifically disclaim any liability to any person in the event of any omission from, or falseor misleading statement included in the Circular, other than in respect of the valuation andthis valuation. We confirm that this valuation extract may be published in the Circular.

The valuation is current as at the date of the valuation only. The value assessed herein maychange significantly and unexpectedly over a relatively short period as a result of generalmarket movements or factors specific to the particular property. We do not accept liabilityfor losses arising from such subsequent changes in value. Without limiting the generality ofthe above comment, we do not assume any responsibility or accept any liability where this


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valuation is relied upon after the expiration of three months from the date of the valuation,or such earlier date if you become aware of any factors that have any effect on thevaluation.

CICV confirms that it does not have a pecuniary interest that would conflict with itsvaluation of the property.

Property Description

Address Cocoparra and Woods Vineyard, Via Griffith, NSW

Brief Description The subject property is improved with mature dripirrigated vineyards and associated structuralimprovements that include shedding, office facilities,pump houses and internal roadways.

The property is held in three Certificates of Title and aCrown Licence having a total area of approximately560.82 hectares of which 260.6 hectares has beendeveloped to vineyard.

The property is held in two non contiguous landparcels with approximately 185.75 hectares of theCocoparra property comprising dense scrub that has alimited value. The remainder of the land consists ofhead lands and roadways together with an area ofapproximately 68 hectares that may potentially besuited to future plantings. Despite this according to theviticultural report supplied the area that has beenidentified as having future development potential maybe more susceptible to frost and have some soil salinityissues.

The property has been developed from 1988 through to2009.

Zoning 1B (Rural Agricultural Protection) Griffith City Council

Lessee Fosters Group Limited

Term 5.25 years

Rent $1,157,495 per annum

Lease Expiry Date 22 April 2013

Rent Review Annual to Consumer Price Index (CPI)

Option 5+5 years


– 73 –

Property Classification Investment

Certificate of Title

Title Details

Search Date 7 December 2010

Local Government Area Griffith

Parish Tabbita

County Cooper

Legal Description Volume/Folio Registered Proprietor Area

Allotment 6 within DepositedPlan 812633

6/812633 Australian ExecutorTrustees (SA) Limited

455.20



34.15



6.415

Australian Executor Trustees (SA) holds freehold tenure.

Australian Executor Trustees (SA) Limited is a custodian of Challenger Wine Trust land.

Site Contamination

A visual site inspection in consideration of the past land uses has not revealed any obviouspollution or contamination.

The property has been used for viticultural purposes for many years. During these activities,chemicals in the form of fertilisers and sprays would have been applied to the land and fueland oils stored on the land. These activities could have given rise to low level contaminationsimilar to that found in the district and reflected in the prices paid generally for land in thearea.

We are not aware of the full details with regard to usage of the site prior to the current use,however, we have no cause to believe that the site has been contaminated.

We advise that we are not experts in the detection or quantification of any environmentalproblems, and accordingly have not carried out a detailed environmental investigation.

Therefore, this valuation is made on the assumption that there are no actual or potentialcontamination issues affecting:

i) the value or marketability of the property;

ii) the site.


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Verification that the property is free from contamination and has not been affected bypollutants of any kind should be obtained from a suitably qualified environmentalprofessional. Should subsequent investigation say that the site is contaminated, this valuationwill require revision.

At the time of inspection there were no sign of visible site contamination. We are unawareof any past or proposed use of the land that could create potential liabilities under theenvironmental use protection legislation.

We have not been provided with an environmental audit report of this site.

Building Materials

We have not sighted any form of Asbestos Register in relation to the subject property.

Our site inspection did not reveal any obvious signs of asbestos products, however wecannot certify the site free of contamination.

We recommend that if the parties whom wish to rely on this report have any concerns inrelation to potential asbestos contamination, they should request the owner to commission asurvey and to prepare an Asbestos register.

Building Condition and Utility

We are not aware of any notices currently issued against the property and we have made noenquiries in this regard. Expert opinion has not been sought in respect to the buildingstructure or the plant and equipment, however our limited enquiries have not revealed anymajor defects. The improvements are considered to be in reasonable condition for their ages.

We have assumed that the property complies with the appropriate statutory, building and firesafety regulations.

We have also assumed that there is no timber infestation, asbestos or other defect and havemade no investigation for them nor have we undertaken a structural survey or tested thebuilding services.


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Valuation

We assign the following value to the subject property as at 31 December 2010 and subjectto the existing leases, comments, terms, conditions and assumptions contained within andannexed to our report, in fee simple and assuming the property is free of encumbrances,restrictions or other impediments of an onerous nature which would affect value:

Current Market Value on a Leased Basis:AUD$10,000,000(TEN MILLION DOLLARS)

Colliers International Consultancy and Valuation Pty LimitedAngus Barrington-Case, AAPIBachelor of Business (Property)Associate Member Australian Property Institute NSW Licence No 7259Certified Practising Valuer16 December 2010


– 76 –

Summary of Valuation

PropertyMarket value in existing state

as at 31 December 2010

Cocoparra & Woods Vineyard, Griffith, NSW, Australia AUD$10,000,000


– 77 –

Valuation Certificate

Property DescriptionParticulars ofOccupancy

Market Value inexisting state as at31 December 2010

Cocoparra & Woods Vineyard,Griffith, NSW, Australia

The subject property isimproved with mature dripirrigated vineyards andassociated structuralimprovements that includeshedding, office facilities,pump houses and internalroadways.

The property is held in threeCertificates of Title and aCrown Licence having a totalarea of approximately 560.82hectares of which 260.6hectares has been developedto vineyard.

The property is held in twonon contiguous land parcelswith approximately 185.75hectares of the Cocoparraproperty comprising densescrub that has a limited value.The remainder of the landconsists of head lands androadways together with anarea of approximately 68hectares that may potentiallybe suited to future plantings.Despite this according to theviticultural report supplied thearea that has been identifiedas having future developmentpotential may be moresusceptible to frost and havesome soil salinity issues.

The property has beendeveloped from 1988 throughto 2009.

The property iscurrently tenantedwith the current termexpiring on the22 April 2013.

The tenant has tworights of renewal offive years each.

AUD$10,000,000


– 78 –


16 December 2010


Dear Sirs

Subject Property: Whitton Vineyard, Whitton, NSW, Australia




Basis of Valuation



This valuation extract is provided by Colliers International Consultancy & Valuation PtyLimited (CICV) and not by any other company in the Colliers International Group. Thisvaluation extract has been prepared for major transaction purposes and should not be


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relied upon for any other purpose or by any person other than Regenal Investments PtyLimited. CICV accepts no responsibility for any statements in this report other than for thestated purpose. This valuation extract is issued on the basis that no liability attaches to thecompanies in the Colliers International Group other than CICV in relation to any statementscontained in the valuation extract.



Date of Issue

In accordance with your written instructions dated 2 December 2010, our inspection of thesubject property as at 9 December 2010 and the requested date of valuation as at31 December 2010, we confirm that this valuation extract has been provided as at31 December 2010 (Date of Valuation).



CICV has been engaged by Regenal Investments Pty Limited to provide a valuation ofWhitton Vineyard, Whitton, NSW.






– 80 –








CICV has prepared this valuation extract which appears in the Circular. CICV were involvedonly in the preparation of this valuation extract and the valuation referred to herein, andspecifically disclaim any liability to any person in the event of any omission from, or falseor misleading statement included in the Circular, other than in respect of the valuation andthis valuation extract. We confirm that this valuation extract may be published in theCircular.

The valuation is current as at the date of the valuation only. The value assessed herein maychange significantly and unexpectedly over a relatively short period as a result of generalmarket movements or factors specific to the particular property. We do not accept liabilityfor losses arising from such subsequent changes in value. Without limiting the generality of


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the above comment, we do not assume any responsibility or accept any liability where thisvaluation is relied upon after the expiration of three months from the date of the valuation,or such earlier date if you become aware of any factors that have any effect on thevaluation.



Address Whitton Vineyard, Via Whitton, NSW

Brief Description The subject property is improved with a semi maturedrip irrigated vineyard together with associatedshedding improvements and internal roadways.

The property is held in three Certificates of Titlehaving a total area of approximately 103.36 hectares ofwhich 96.64 hectares has been planted to vines withthe remainder of the land comprising headlands,roadways and building sites. The property is located onthe northern side of Mancini Road and was developedfrom 1985 through to 2007.

Structural improvements located on the property aregenerally contained within the Allotment 64 towardsthe eastern boundary of the property.

Zoning Rural 1A Leeton Shire Council

Lessee Australian Vintage Limited

Term 10 years

Rent $437,534 per annum

Lease Expiry Date 27 April 2015

Rent Review Annual to Consumer Price Index (CPI) capped at 1.5%

Option 5 years plus 2 rights of renewal each for 5 years



– 82 –


Title Details


Local Government Area Leeton

Parish Bringan

County Cooper

Legal Description Volume/Folio Registered Proprietor Area (ha)


63/44502 Australian ExecutorTrustee (SA) Limited

44.48



54.22



3.57



Site Contamination







ii) the site.


– 83 –




Building Materials









– 84 –

Valuation


Current Market Value on a Leased Basis:AUD$3,900,000(THREE MILLION NINE HUNDRED THOUSAND DOLLARS)



– 85 –




Whitton Vineyard, Whitton, NSW, Australia AUD$3,900,000


– 86 –




Whitton Vineyard, Whitton,NSW, Australia

The subject property isimproved with a semi maturedrip irrigated vineyardtogether with associatedshedding improvements andinternal roadways.

The property is held in threeCertificates of Title having atotal area of approximately103.36 hectares of which96.64 hectares has beenplanted to vines with theremainder of the landcomprising headlands,roadways and building sites.The property is located on thenorthern side of Mancini Roadand was developed from 1985through to 2007.

Structural improvementslocated on the property aregenerally contained within theAllotment 64 towards theeastern boundary of theproperty.

The property iscurrently tenantedwith the current termexpiring on the27 April 2015.


AUD$3,900,000


– 87 –


15 December 2010


Dear Sirs

Subject Property: Summers Vineyard, Tanunda Creek Road, Eden Valley, SA, Australia




Basis of Valuation




– 88 –

This valuation extract is provided by Colliers International Consultancy & Valuation PtyLimited (CICV) and not by any other company in the Colliers International Group. Thisvaluation extract has been prepared for major transaction purposes and should not berelied upon for any other purpose or by any person other than Regenal Investments PtyLimited. CICV accepts no responsibility for any statements in this report other than for thestated purpose. This valuation extract is issued on the basis that no liability attaches to thecompanies in the Colliers International Group other than CICV in relation to any statementscontained in the valuation extract.



Date of Issue

In accordance with your written instructions dated 2 December 2010, our inspection of thesubject property as at 7 December 2010 and the requested date of valuation as at31 December 2010, we confirm that this valuation extract has been provided as at31 December 2010 (Date of Valuation).



CICV has been engaged by Regenal Investments Pty Limited to provide a valuation ofSummers Vineyard, Tanunda Creek Road, Eden Valley.

Regenal Investments Pty Limited and CKLS wish to include the valuation extract in theMajor Transaction Circular (the Circular) to the Hong Kong Stock Exchange and haverequested CICV to consent to the inclusion of this valuation extract. CICV consents to theinclusion of this valuation extract in the Circular and to being named in the Circular, subjectto the condition that Regenal Investments Pty Limited includes this Qualification andWarning:–




– 89 –





CICV has prepared this valuation extract on the basis of, and limited to, the financial andother information (including market information and third party information) referred to inthis valuation extract and contained in the full valuation report. We have assumed that thethird party information is accurate, reliable and complete and confirm that we have nottested the information in that respect.






– 90 –

The valuation is current as at the date of the valuation only. The value assessed herein maychange significantly and unexpectedly over a relatively short period as a result of generalmarket movements or factors specific to the particular property. We do not accept liabilityfor losses arising from such subsequent changes in value. Without limiting the generality ofthe above comment, we do not assume any responsibility or accept any liability where thisvaluation is relied upon after the expiration of three months from the date of the valuation,or such earlier date if you become aware of any factors that have any effect on thevaluation.



Address Summers Vineyard, Tanunda Creek Road, EdenValley

Brief Description The subject property comprises an irrigated maturevineyard located in the Eden Valley GI, approximately11 kilometres south of the Barossa Valley township ofTanunda.

The whole property is leased to Burge Corp Pty Ltd for5+5+5 years, with the current term set to expire on the19 February 2013.

The vineyard was developed largely in 1982 and 1984,to Chardonnay, Riesling, with a small patch of PinotNoir developed in 1998. The property has a stronghistory of supplying quality sought after fruit. Theproperty is devoid of building improvements apart froma pump shed constructed around the same time as thevineyard was built.

Zoning Rural (Barossa Range) Zone within the BarossaCouncil

Lessee Burge Corp Pty Ltd

Term 5 years


Lease Expiry Date 19 February 2013

Rent Review Fixed annual increases of 1.5% of the former rent

Option Two rights of renewal of five years each



– 91 –


Title Details


Local Government Area The Barossa Council

Area Flaxman Valley

Hundred Moorooroo

Legal Description Volume/Folio Registered Proprietor

Allotment 727 5212/16 Australian Executor Trustees (SA) Ltd


Australian Executor Trustees (SA) Limited is a custodian of Challenger Wine Trust land

The total area is approximately 27.50 hectares approximately as shown on the title plan.

Site Contamination







ii) the site.



– 92 –



Building Materials









– 93 –

Valuation


Market Value on an Encumbered/Leased Basis:AUD$1,075,000 – GST Exclusive(ONE MILLION AND SEVENTY FIVE THOUSAND DOLLARS)

Colliers International Consultancy and Valuation Pty Limited

Nicholas Cranna, AAPIBachelor of Business (Property)Associate Member Australian PropertyInstituteCertified Practising Valuer15 December 2010

Alex Thamm, AAPIBachelor of Business (Property)Associate Member Australian PropertyInstituteCertified Practising Valuer15 December 2010


– 94 –




Summers Vineyard, Tanunda Creek Road, Eden Valley,SA, Australia

AUD$1,075,000


– 95 –

Valuation Extract



Summers Vineyard, TanundaCreek Road, Eden Valley, SA,Australia

The subject propertycomprises an irrigated maturevineyard located in the EdenValley GI, approximately 11kilometres south of theBarossa Valley township ofTanunda.

The whole property is leasedto Burge Corp Pty Ltd for5+5+5 years, with the currentterm set to expire on the19 February 2013.

The vineyard was developedlargely in 1982 and 1984, toChardonnay, Riesling, with asmall patch of Pinot Noirdeveloped in 1998. Theproperty has a strong historyof supplying quality soughtafter fruit. The property isdevoid of buildingimprovements apart from apump shed constructed aroundthe same time as the vineyardwas built.

The property iscurrently tenantedwith the current termof 5 years.


AUD$1,075,000


– 96 –


14 December 2010


Dear Sirs

Subject Property: Waikerie Vineyard, Ballantine Road, Waikerie, SA, Australia




Basis of Valuation




– 97 –




Date of Issue

In accordance with your written instructions dated 2 December 2010, our inspection of thesubject property as at 5 November 2010 and the requested date of valuation as at31 December 2010, we confirm that this valuation extract has been provided as at31 December 2010 (Date of Valuation).



CICV has been engaged by Regenal Investments Pty Limited to provide a valuation ofWaikerie Vineyard, Ballantine Road, Waikerie, SA.





– 98 –











– 99 –




Address Waikerie Vineyard, Ballantine Road, Waikerie, SA

Brief Description The subject property comprises an irrigated maturevineyard located in the Riverland GI, approximately sixkilometres south west of the township of Waikerie.

The property is leased to Australian Vintage Ltd for5+5 years, with the current term due to expire on the1 May 2013.

The vineyard has been established to eleven varietiestotalling 38 hectares, with the smallest parcel 0.80hectares of Ruby Cabernet and the largest 9.22 hectaresof Shiraz. The vineyard was established in the 1970’swith the most recent plantings developed in the late1990’s.

The property sources irrigation the Central IrrigationTrust and incorporates a residence and basic shedding.

Zoning Horticulture within the Loxton Waikerie DistrictCouncil

Lessee Australian Vintage Ltd

Term 5 years

Rent $257,998.80 per annum

Lease Expiry Date 1 May 2013

Rent Review Annual to Consumer Price Index (CPI) capped at 4%.

Option One rights of renewal of five years

Property Classification Held for sale

The subject property is currently being offered to the market for sale by Challenger WineTrust.


– 100 –


Title Details

Search Date 2 November 2010

Local Government Area Loxton Waikerie District Council

Area Golden Heights

Hundred Waikerie

Legal DescriptionCrown LeaseReference Registered Proprietor Area (ha)

Section 795 in the RamcoDivision of the WaikerieIrrigation Area Hundred ofWaikerie

1414/50 Tower Trust (SA) Ltd 2.683











The total area of the combined site is therefore 42.52 hectares or thereabouts (rounded).

Tower Trust (SA) Ltd holds freehold tenure.

Tower Trust (SA) Ltd is a custodian of Challenger Wine Trust land.

Site Contamination



– 101 –






ii) the site.




Building Materials








– 102 –


Valuation


Market Value on an Encumbered/Leased Basis:AUD$1,200,000 – GST Exclusive(ONE MILLION TWO HUNDRED THOUSAND DOLLARS)



Angus Barrington-Case, AAPIBachelor of Business (Property)Associate Member Australian PropertyInstituteCertified Practising Valuer14 December 2010


– 103 –




Waikerie Vineyard, Ballantine Road, Waikerie, SA,Australia

AUD$1,200,000


– 104 –

Valuation Extract



Waikerie Vineyard, BallantineRoad, Waikerie, SA, Australia

The subject propertycomprises an irrigated maturevineyard located in theRiverland GI, approximatelysix kilometres south west ofthe township of Waikerie.

The property is leased toAustralian Vintage Ltd for5+5 years, with the currentterm due to expire on the1 May 2013.

The vineyard has beenestablished to eleven varietiestotalling 38 hectares, with thesmallest parcel 0.80 hectaresof Ruby Cabernet and thelargest 9.22 hectares of Shiraz.The vineyard was establishedin the 1970’s with the mostrecent plantings developed inthe late 1990’s.

The property sources irrigationthe Central Irrigation Trustand incorporates a residenceand basic shedding.


The tenant has oneright of renewal offive years.

AUD$1,200,000


– 105 –


14 December 2010


Dear Sirs

Subject Property: Schubert’s Vineyard, Schubert Road & Lobethal-Mount TorrensRoad, Lobethal, SA, Australia




Basis of Valuation




– 106 –




Date of Issue

In accordance with your written instructions dated 2 December 2010, our inspection of thesubject property as at 3 November 2010 and the requested date of valuation as at31 December 2010, we confirm that this valuation extract has been provided as at31 December 2010 (Date of Valuation).



CICV has been engaged by Regenal Investments Pty Limited to provide a valuation ofSchubert’s Vineyard, Schubert Road & Lobethal-Mount Torrens Road, Lobethal, SA.





– 107 –


iv. Recipients must seek their own advice in relation to the investment opportunitycontained in the valuation extract.









– 108 –




Address Schubert’s Vineyard, Schubert Road &Lobethal-Mount Torrens Road, Lobethal, SA

Brief Description The subject property comprises an irrigated maturevineyard located in the Adelaide Hills GI,approximately two kilometres north east of thetownship of Lobethal.

The property is leased to Australian Vintage Ltd for10+5+5+5 years, with the current term due to expire onthe 3rd of July 2011.

The vineyard is 74.2 hectares in area with the majorityof varieties planted in 2001 aside from the Pinot Griswhich was planted in 2005.

The property sources irrigation water from twooperational bores and contains a reasonable level ofbuilding improvements. They are relatively clustered tothe property’s western boundary.

Zoning Watershed (Primary Production) within the AdelaideHills Council


Term 10 years

Rent $708,774.18 per annum

Lease Expiry Date 3 July 2011

Rent Review Annual to the Consumer Price Index (CPI) capped at4%.

Option Three rights of renewal of five years each



– 109 –


Title Details


Local Government Area Adelaide Hills Council

Area Lobethal

Hundred Onkaparinga


Allotment comprising Pieces 44and 45 within Filed Plan156211


Allotment 17 within Filed Plan155932





Tower Trust (SA) Ltd holds freehold tenure.

Tower Trust (SA) Ltd is a custodian of Challenger Wine Trust land.

Site Contamination







ii) the site.


– 110 –




Building Materials









– 111 –

Valuation


Market Value on an Encumbered/Leased Basis:AUD$5,400,000 – GST Exclusive(FIVE MILLION FOUR HUNDRED THOUSAND DOLLARS)





– 112 –




Schubert’s Vineyard, Schubert Road & Lobethal-MountTorrens Road, Lobethal, SA, Australia

AUD$5,400,000


– 113 –

Valuation Extract



Schubert’s Vineyard, SchubertRoad & Lobethal-MountTorrens Road, Lobethal, SA,Australia

The subject propertycomprises an irrigated maturevineyard located in theAdelaide Hills GI,approximately two kilometresnorth east of the township ofLobethal.

The property is leased toAustralian Vintage Ltd for10+5+5+5 years, with thecurrent term due to expire onthe 3rd of July 2011.

The vineyard is 74.2 hectaresin area with the majority ofvarieties planted in 2001 asidefrom the Pinot Gris which wasplanted in 2005.

The property sources irrigationwater from two operationalbores and contains areasonable level of buildingimprovements. They arerelatively clustered to theproperty’s western boundary.


The tenant has threerights of renewal offive years each.

AUD$5,400,000


– 114 –


14 December 2010


Dear Sirs

Subject Property: Balranald Vineyard, Balranald, NSW, Australia




Basis of Valuation




– 115 –




Date of Issue

In accordance with your written instructions dated 2 December 2010, our inspection of thesubject property as at 5 November 2010 and the requested date of valuation as at31 December 2010, we confirm that this valuation certificate has been provided as at31 December 2010 (Date of Valuation).



CICV has been engaged by Regenal Investments Pty Limited to provide a valuation ofBalranald Vineyard, Balranald, NSW.





– 116 –











– 117 –




Address Balranald Vineyard, Via Balranald, NSW

Brief Description The subject property is improved with a matureirrigated vineyard and associated improvements thatinclude a residential dwelling, office facilities,numerous sheds, pump houses and internal roadways.

The property is held in 14 Certificates of Title having atotal area of approximately 547.31 hectares of which465.10 hectares has been planted to vines with theremainder of the land comprising headlands, roadways,a wood lots and land not suitable for viticulturepurposes. The property is located on both sides of theIvanhoe Road and was developed from 1995 through to1998.

The structural improvement that are located on theproperty are generally contained within a singleCertificate of Title that is located on the western sideof Ivanhoe Road and accessed from that road.

Zoning 1 Rural (Non Urban) Balranald Shire Council.


Rent $3,153,708 per annum excluding GST.

Lease Expiry Date 27 November 2016

Rent Review Fixed increases of 1.5% of the former rent.

Option Three rights of renewal of five years each.



– 118 –


Title Details

Search Date 21 October 2010

Local Government Area Balranald

Parish Balranald

County Caira


Lot 3 in Deposited Plan 848352 3/848352 Challenger ListedInvestments Limited

41.22


41.28


41.05


41.99


27.14


25.51


48.96


44.05


43.00


43.00


41.53


40.02


41.26


27.30

547.31

Challenger Listed Investments Limited holds freehold tenure.

Challenger Listed Investments Limited is a custodian of Challenger Wine Trust land.


– 119 –

Site Contamination







ii) the site.




Building Materials





– 120 –





Valuation


On a Leased BasisAUD$21,800,000 – GST Exclusive(TWENTY ONE MILLION EIGHT HUNDRED THOUSAND DOLLARS)



– 121 –




Balranald Vineyard, Balranald, NSW, Australia AUD$21,800,000


– 122 –




Balranald Vineyard, Balranald,NSW, Australia

The subject property isimproved with a matureirrigated vineyard andassociated improvements thatinclude a residential dwelling,office facilities, numeroussheds, pump houses andinternal roadways.

The property is held in 14Certificates of Title having atotal area of approximately547.31 hectares of which465.10 hectares has beenplanted to vines with theremainder of the landcomprising headlands,roadways, a wood lots andland not suitable forviticulture purposes. Theproperty is located on bothsides of the Ivanhoe Road andwas developed from 1995through to 1998.

The structural improvementthat are located on theproperty are generallycontained within a singleCertificate of Title that islocated on the western side ofIvanhoe Road and accessedfrom that road.

The property iscurrently tenantedwith the current termexpiring on the27 November 2016.

The tenant has threerights of renewal offive years each.

AUD$21,800,000


– 123 –


14 December 2010


Dear Sirs

Subject Property: Stephendale Vineyard, Yenda, NSW, Australia




Basis of Valuation




– 124 –




Date of Issue

In accordance with your written instructions dated 2 December 2010, our inspection of thesubject property as at 21 October 2010 and the requested date of valuation as at 31December 2010, we confirm that this valuation extract has been provided as at 31 December2010 (Date of Valuation).

We have assumed that there will be no change to the property or the market between thedate of issue and the date of valuation. Should we become aware of any relevant marketinformation that may impact on the value of the property, up to and including 31 December2010, we at our own discretion reserve the right to review and possibly amend the valuationanalysis contained herein.


CICV has been engaged by Regenal Investments Pty Limited to provide a valuation ofStephendale Vineyard, Yenda, NSW.





– 125 –











– 126 –




Address Stephendale Vineyard, Via Yenda, NSW

Brief Description The subject property comprises a total area ofapproximately 665.94 hectares of which approximately631.64 hectares has been developed to irrigated vinesin the period from 1996 through to 2004. Structuralimprovements on the property include two residentialdwellings, extensive shedding, water storage andpumping infrastructure together with roadways andloading bays.

The property has been well developed and wellmanaged.

Water for vineyard irrigation purposes is sourced fromthe Northern Branch Canal and stored on site in aholding dam that we have been advised has a capacityin the order of 700 mega-litres.

The property is held in seven valuation extracts of titleand is currently leased to Warburn Estate Pty Ltd for aperiod of ten years expiring 21 September 2017.

Zoning 1B (Rural Agricultural Protection) Griffith City Council

Lessee Warburn Estate (Aust) Pty Limited

Term 9 years commencing 22 September 2008

Rent $2,726,602 per annum excluding GST

Lease Expiry Date 21 September 2017

Rent Review Annual to the Consumer Price Index (CPI) capped at1.52%.




– 127 –

Valuation extract of Title

Title Details


Local Government Area Griffith

Parish Yenda

County Cooper




3.472



5.45



136.804



130.124



130.109



130.03



129.952

Total Aggregated Area 665.94



Site Contamination





– 128 –




ii) the site.




Building Materials









– 129 –

Valuation


On a Leased BasisAUD$22,750,000 – GST Exclusive(TWENTY TWO MILLION SEVEN HUNDRED AND FIFTY THOUSAND DOLLARS)



– 130 –




Stephendale Vineyard, Yenda, NSW, Australia AUD$22,750,000


– 131 –

Valuation extract



Stephendale Vineyard, Yenda,NSW, Australia

The subject propertycomprises a total area ofapproximately 665.94 hectaresof which approximately631.64 hectares has beendeveloped to irrigated vines inthe period from 1996 throughto 2004. Structuralimprovements on the propertyinclude two residentialdwellings, extensive shedding,water storage and pumpinginfrastructure together withroadways and loading bays.

The property has been welldeveloped and well managed.

Water for vineyard irrigationpurposes is sourced from theNorthern Branch Canal andstored on site in a holdingdam that we have beenadvised has a capacity in theorder of 700 mega-litres.

The property is held in sevenvaluation extracts of title andis currently leased to WarburnEstate Pty Ltd for a period often years expiring21 September 2017.

The property iscurrently tenantedwith the current termof 9 yearscommencing22 September 2008.


AUD$22,750,000


– 132 –


14 December 2010


Dear Sirs

Subject Property: Richmond Grove Vineyard, Padthaway, South Australia, Australia




Basis of Valuation




– 133 –




Date of Issue




CICV has been engaged by Regenal Investments Pty Limited to provide a valuation ofRichmond Grove Vineyard, Padthaway, South Australia.





– 134 –











– 135 –




Address Richmond Grove Vineyard, Padthaway, SouthAustralia

Brief Description The subject property comprises a total area ofapproximately 367.97 hectares of which 315.74hectares has been developed to irrigated vineyard from1994 through to 1996. The property is contained inthree separate valuation extracts of titles comprisingtwo separate sections and a single allotment comprisingtwo pieces. The property is located on both the easternand western sides of Riddoch Highway as well as theeastern and western sides of Grubbed Road within thenoted Padthaway GI. Structural improvements on theproperty comprise a residential dwelling which hasbeen converted to offices, bunk house styleaccommodation facilities as well as numerous pumpsheds, implement sheds and secondary storage sheds.The property has been developed to a high standardand portion of the vineyard plantings have been fittedwith frost protection.

The property is currently leased to Pernod RicardPacific Pty Ltd for a period of 7 years commencing1 July 2006 and expiring on 30 June 2013.

Zoning Primary Industry within the Tatiara District Council

Lessee Pernod Ricard Limited

Term 7 years


Lease Expiry Date 30 June 2013

Rent Review Annual at 0.75% until expiry

Option Three rights of renewal of four years each



– 136 –


Title Details


Local Government Area Tatiara District Council


Allotment comprising Pieces 2and 3 within Filed Plan119687 in the Area namedPadthaway Hundred of GlenRoy

5210/29 Challenger ListedInvestments Ltd

257.50 haapprox

Section 34 in the Area namedKeppoch Hundred of GlenRoy


109.67 haapprox

Section 342 in the Area namedPadthaway Hundred of GlenRoy


0.797 haapprox


Challenger Listed Investments Ltd holds freehold tenure.

Challenger Listed Investments Ltd is a custodian of Challenger Wine Trust land.

Site Contamination







ii) the site.


– 137 –




Building Materials









– 138 –

Valuation


Market Value on an Encumbered BasisAUD$16,750,000 – GST Exclusive(SIXTEEN MILLION SEVEN HUNDRED AND FIFTY THOUSAND DOLLARS)

Colliers International Consultancy and Valuation Pty LimitedAlex Thamm, AAPIBachelor of Business (Property)Associate Member Australian Property InstituteCertified Practising Valuer14 December 2010


– 139 –




Richmond Grove Vineyard, Padthaway, South Australia AUD$16,750,000


– 140 –

Valuation Extract



Richmond Grove Vineyard,Padthaway, South Australia

The subject propertycomprises a total area ofapproximately 367.97 hectaresof which 315.74 hectares hasbeen developed to irrigatedvineyard from 1994 through to1996.

The property is contained inthree separate valuationextracts of titles comprisingtwo separate sections and asingle allotment comprisingtwo pieces. The property islocated on both the easternand western sides of RiddochHighway as well as theeastern and western sides ofGrubbed Road within thenoted Padthaway GI.Structural improvements onthe property comprise aresidential dwelling which hasbeen converted to offices,bunk house styleaccommodation facilities aswell as numerous pump sheds,implement sheds andsecondary storage sheds. Theproperty has been developedto a high standard and portionof the vineyard plantings havebeen fitted with frostprotection.

The property iscurrently tenantedwith the current termexpiring on the30 June 2013.

The tenant has threerights of renewal offour years each.

AUD$16,750,000


– 141 –


14 December 2010


Dear Sirs

Subject Property: Chapel Vineyard, Penola, South Australia, Australia




Basis of Valuation




– 142 –




Date of Issue




CICV has been engaged by Regenal Investments Pty Limited to provide a valuation ofChapel Vineyard, Penola, South Australia.





– 143 –











– 144 –




Address Chapel Vineyard, Penola, South Australia

Brief Description The subject property comprises an irrigated coolclimate vineyard that has been planted to 100%Cabernet Sauvignon. The vineyard was established in1997 in four blocks and is fully productive with theexception of just under five hectares which was topworked last year after severe frost damage. The totalplanted area is 29.32 hectares with an additional 7.66hectares comprising roadways, headlands and buildingcurtilage.

The property benefits from a 9.8 hectares irrigationequivalent water licence and has modest workingstructural improvements incorporating a storage shedand pump shed.

Until recently, the property has been subject to a leaseto National Viticultural Fund of Australia Pty Ltd andthey are currently in occupation of the property. Thecurrent lease expires on 24 December 2011, howeveran early termination clause enables expiry on 30 June2011. We have been advised that the lessee does notintend to renew the lease.

Zoning Primary Production within the Wattle Range Council

Lessee National Viticultural Fund of Australia Pty Ltd(vacating property post 2011 vintage)

Term 10 years



– 145 –

Lease Expiry Date 24 December 2011

Rent Review Not Applicable

Option Not Applicable

Property Classification Held for disposal

The property is currently being marketed for sale by Challenger Wine Trust.


Title Details


Local Government Area Wattle Range

Area Penola

Hundred Penola

Legal Description Volume/Folio Registered Proprietor Area (ha)





Total 36.98

Tower Trust (SA) holds freehold tenure.

Tower Trust (SA) Limited is a custodian of Challenger Wine Trust land.

Site Contamination





– 146 –




ii) the site.




Building Materials









– 147 –

Valuation


Market Value on a Vacant Possession BasisAUD$800,000 – GST Exclusive(EIGHT HUNDRED THOUSAND DOLLARS)



– 148 –




Chapel Vineyard, Penola, South Australia AUD$800,000


– 149 –

Valuation extract



Chapel Vineyard, Penola,South Australia

The subject propertycomprises an irrigated coolclimate vineyard that has beenplanted to 100% CabernetSauvignon. The vineyard wasestablished in 1997 in fourblocks and is fully productivewith the exception of justunder five hectares which wastop worked last year aftersevere frost damage. The totalplanted area is 29.32 hectareswith an additional 7.66hectares comprising roadways,headlands and buildingcurtilege.

The property benefits from a9.8 hectares irrigationequivalent water licence andhas modest working structuralimprovements incorporating astorage shed and pump shed.

The property issubject to a lease toNational ViticulturalFund of Australia PtyLtd and they arecurrently inoccupation of theproperty. The currentlease expires on24 December 2011,however an earlytermination clauseenables expiry on30 June 2011. Wehave been advised thatthe lessee does notintend to renew thelease. A notice oftermination is to beserved on the landlordpursuant to thetenant’s rights underClause 4.25(a) of aMemorandum ofExtension of Lease9267518 executedbetween the parties on16 March 2010.

AUD$800,000


– 150 –


14 December 2010


Dear Sirs

Subject Property: Lawsons Vineyard, Padthaway, South Australia, Australia




Basis of Valuation




– 151 –




Date of Issue




CICV has been engaged by Regenal Investments Pty Limited to provide a valuation ofLawsons Vineyard, Padthaway, South Australia.





– 152 –











– 153 –




Address Lawsons Vineyard, Padthaway, South Australia

Brief Description The subject property comprises a total area ofapproximately 205.45 hectares of which approximately168.22 hectares has been developed to irrigated vinesin the period from 1968 through to 2005. The propertyis located within the Padthaway Geographic Indicationand appears to have been developed to a high standard.Secondary improvements on the property include aresidential dwelling together with associated sheddingimprovements in addition to vineyard and chemicalshedding improvements.

The property is held in three valuation extracts of titleand is currently leased to Pernod Ricard Pacific PtyLtd for a period of 7 years commencing on 1 July 2006and expiring on 30 June 2013 together with three rightsof renewal of four years each.

Zoning Primary Industry within the Tatiara District Council

Lessee Pernod Ricard Limited

Term 7 years



Rent Review Annual at 0.75% until expiry

Option Three rights of renewal of four years each



– 154 –


Title Details


Local Government Area Tatiara District Council

Area Padthaway

Hundred Glen Roy

Legal Description Folio Registered Proprietor Area



71.43 haapprox



66.77 haapprox



67.25 haapprox

Challenger Listed Investments Ltd holds freehold tenure.

Challenger Listed Investments Ltd is a custodian of Challenger Wine Trust land.

Site Contamination







ii) the site.


– 155 –




Building Materials









– 156 –

Valuation


On an Encumbered BasisAUD$9,300,000 – GST Exclusive(NINE MILLION THREE HUNDRED THOUSAND DOLLARS)



– 157 –




Lawsons Vineyard, Padthaway, South Australia AUD$9,300,000


– 158 –

Valuation extract



Lawsons Vineyard, Padthaway,South Australia

The subject propertycomprises a total area ofapproximately 205.45 hectaresof which approximately168.22 hectares has beendeveloped to irrigated vines inthe period from 1968 throughto 2005. The property islocated within the PadthawayGeographic Indication andappears to have beendeveloped to a high standard.

Secondary improvements onthe property include aresidential dwelling togetherwith associated sheddingimprovements in addition tovineyard and chemicalshedding improvements.

The property is held in threevaluation extracts of title.

The property iscurrently tenantedwith the current termexpiring on the30 June 2013.

The tenant has threerights of renewal offour years each.

AUD$9,300,000


– 159 –


16 December 2010


Dear Sirs

Subject Property: Corryton Park Vineyard, Wirra Wirra Road, Pewsey Vale, SA,Australia




Basis of Valuation




– 160 –




Date of Issue

In accordance with your written instructions dated 2 December 2010, our inspection of thesubject property as at 7 December 2010 and the requested date of valuation as at 31December 2010, we confirm that this valuation extract has been provided as at 31 December2010 (Date of Valuation).



CICV has been engaged by Regenal Investments Pty Limited to provide a valuation ofCorryton Park Vineyard, Wirra Wirra Road, Pewsey Vale, SA, Australia.





– 161 –











– 162 –




Address Corryton Park Vineyard, Wirra Wirra Road, Pewsey Vale,SA

Brief Description The subject property comprises an irrigated mature vineyardlocated in the Eden Valley GI, approximately 12 kilometres eastof the township of Williamstown.

The whole property is leased to Burge Corp Pty Ltd for 5+5+5years, with the current term due to expire on the 19 February2013.

The vineyard was largely established in 1999 and 2000 toCabernet Sauvignon, Merlot and Petit Verdot and has a stronghistory of supplying quality sought after fruit.

The property sources water from an adjoining property owned bythe lessee (Burge Corp Pty Ltd) under an agreement that runsfor an indefinite period. The property is devoid of buildingimprovements.

Zoning Watershed Zone within the Barossa Council

Lessee Burge Corp Pty Ltd

Term 5 years


Lease Expiry Date 19 February 2013

Rent Review Fixed annual increases of 1.5% of the former rent




Title Details


Local Government Area Barossa Council

Area Pewsey Vale

Hundreds Barossa and Para Wirra


– 163 –

Legal DescriptionVolume/Folio Registered Proprietor


5504/842 Australian Executor Trustees (SA) Ltd

The total area is approximately 53.90 hectares approximately as shown on the title plan.



Site Contamination







ii) the site.





– 164 –

Building Materials








Valuation


Market Value on an Encumbered/Leased Basis:AUD$2,350,000 – GST Exclusive(TWO MILLION THREE HUNDRED AND FIFTY THOUSAND DOLLARS)





– 165 –




Corryton Park Vineyard, Wirra Wirra Road,Pewsey Vale, SA Australia

AUD$2,350,000


– 166 –

Valuation Extract



Corryton Park Vineyard,Wirra Wirra Road,Pewsey Vale, SA Australia

The subject propertycomprises an irrigated maturevineyard located in the EdenValley GI, approximately12 kilometres east of thetownship of Williamstown.

The whole property is leasedto Burge Corp Pty Ltd for5+5+5 years, with the currentterm due to expire on the19 February 2013.

The vineyard was largelyestablished in 1999 and 2000to Cabernet Sauvignon, Merlotand Petit Verdot and has astrong history of supplyingquality sought after fruit.

The property sources waterfrom an adjoining propertyowned by the lessee (BurgeCorp Pty Ltd) under anagreement that runs for anindefinite period. The propertyis devoid of buildingimprovements.



AUD$2,350,000


– 167 –


16 December 2010


Dear Sirs

Subject Property: Pooles Rock Winery, Pokolbin, NSW, Australia




Basis of Valuation




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This valuation extract provided by Colliers International Consultancy & Valuation PtyLimited (CICV) and not by any other company in the Colliers International Group. Thisvaluation extract has been prepared for major transaction purposes and should not berelied upon for any other purpose or by any person other than Regenal Investments PtyLimited. CICV accepts no responsibility for any statements in this report other than for thestated purpose. This valuation extract is issued on the basis that no liability attaches to thecompanies in the Colliers International Group other than CICV in relation to any statementscontained in the valuation extract.



Date of Issue




CICV has been engaged by Regenal Investments Pty Limited to provide a valuation ofPooles Rock Winery, NSW.





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Address Pooles Rock Winery, Pokolbin, NSW

Brief Description The subject property comprises a modern winery facility thatappears to have been developed from the early 1980’s. Thewinery has an estimated processing capacity in the order of2,500 tonnes together with a recently constructed restaurant andsmall vineyard holding located in the heart of the Lower HunterWine and Tourism region.

The property has been structurally improved to a high standardwith the new restaurant facility sited in a way so diners canenjoy uninterrupted views across a dam to the vineyard andbeyond. In addition to the restaurant and winery facility theproperty has the benefit of a modern barrel store, modern highclearance implement shed and workshop, cellar door sales outletand four bedroom dwelling. The improvements on the propertyare set in well landscaped surrounds and have been developed inharmony with the surroundings.

The property is leased to PRW Leasing Pty Ltd for a term of 10years and 2 days commencing 21 November 2004 and expiring22 November 2014.

Zoning 1(V) Rural (Vineyards) Zone Cessnock Shire Council

Lessee PRW Leasing Pty Limited

Rent $861,171.72 per annum excluding GST

Lease Expiry Date 22 November 2014

Rent Review Consumer Price Index (CPI) Capped at 4%


Property Classification Held for sale

The subject property is currently under contract for sale for the consideration of $5,000,000.


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Title Details


Local Government Area Cessnock

Parish Pokolbin

County Northumberland

Legal DescriptionVolume/Folio Registered Proprietor Area(ha)

Allotment within Deposited Plan1139240


20.98



Site Contamination


The property has been used for Winery purposes for many years. During these activities,chemicals would have been stored and applied to the land as well as fuel and oils stored onthe land. These activities could have given rise to low level contamination similar to thatfound in the district and reflected in the prices paid generally for land in the area.





ii) the site.



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Building Materials








Valuation


EncumberedAUD$5,400,000 – GST Exclusive(FIVE MILLION FOUR HUNDRED THOUSAND DOLLARS)



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Pooles Rock Winery, Pokolbin, NSW, Australia AUD$5,400,000


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Valuation Extract



Pooles Rock Winery,Pokolbin, NSW, Australia

The subject propertycomprises a modern wineryfacility that appears to havebeen developed from the early1980’s. The winery has anestimated processing capacityin the order of 2,500 tonnestogether with a recentlyconstructed restaurant andsmall vineyard holding locatedin the heart of the LowerHunter Wine and Tourismregion.

The property has beenstructurally improved to ahigh standard with the newrestaurant facility sited in away so diners can enjoyuninterrupted views across adam to the vineyard andbeyond. In addition to therestaurant and winery facilitythe property has the benefit ofa modern barrel store, modernhigh clearance implement shedand workshop, cellar doorsales outlet and four bedroomdwelling. The improvementson the property are set in welllandscaped surrounds and havebeen developed in harmonywith the surroundings.

The property is leased to PRWLeasing Pty Ltd for a term of10 years and 2 dayscommencing 21 November2004 and expiring22 November 2014.

The property iscurrently tenantedwith the current termexpiring on the22 November 2014.


AUD$5,400,000


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17 December 2010


Dear Sirs

Subject Property: Hermitage Road Winery, Pokolbin, NSW, Australia




Basis of Valuation




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Date of Issue




CICV has been engaged by Regenal Investments Pty Limited to provide a valuation ofHermitage Road Winery, NSW.






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Address Hermitage Road Winery, Pokolbin, NSW

Brief Description The subject property comprises a winery complex known asHermitage Road Winery which appears to have been largelydeveloped in the 1970’s.

Improvements include the main winery complex, with theBluetongue Brewery and San Martino & Hermitage FunctionCentre situated to the southern elevation. Situated adjacent to themain winery building is a freestanding cellar door, with theproperty well landscaped.

The cellar door is leased to “The Hunter Resort Pty Ltd”, until30 June 2021 with a rental of $39,816 per annum. The wineryportion of the property is currently not leased and many of theitems of plant appear to have been decommissioned.

Formally the winery had an operating capacity of around 3,000tonnes however a number of the tanks have been moved off siteand significant works would be required to return it to a facilityof this size.

The bulk of the former winery buildings are considered to havelimited storage value as the winery was largely constructed overtwo levels which restricts the warehousing ability of the sheds.

The remainder of the property comprises cleared land portion ofwhich may be suited to viticultural development.

The property is located at Pokolbin in the Hunter Valley ofNSW, approximately 75 kilometres northwest of the NewcastleCentral Business District (CBD) and some 170 kilometres northof the Sydney CBD.

Zoning Rural 1(a) Singleton Shire Council

Lessee The Hunter Resort Pty Ltd

Rent $39,816 per annum excluding GST


Rent Review Annual to Consumer Price Index (CPI)

Option Nil



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Title Details


Local Government Area Singleton

Parish Rothbury

County Northumberland

Legal Description Folio Registered Proprietor Area

Lot 301 in Deposited Plan 877541 301/877541 Australian ExecutorTrustees (SA)Limited

40.00



Site Contamination


The property has been used for Winery purposes for many years. During these activities,chemicals would have been stored and applied to the land as well as fuel and oils stored onthe land. These activities could have given rise to low level contamination similar to thatfound in the district and reflected in the prices paid generally for land in the area.





ii) the site.



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Building Materials








Valuation


On a Leased BasisAUD$1,500,000 – GST Exclusive(ONE MILLION FIVE HUNDRED THOUSAND DOLLARS)



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Hermitage Road, Pokolbin, NSW, Australia AUD$1,500,000


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Valuation Extract



Hermitage Road, Pokolbin,NSW, Australia

The subject propertycomprises a winery complexknown as Hermitage RoadWinery which appears to havebeen largely developed in the1970’s.

Improvements include themain winery complex, withthe Bluetongue Brewery andSan Martino & HermitageFunction Centre situated to thesouthern elevation. Situatedadjacent to the main winerybuilding is a freestandingcellar door, with the propertywell landscaped.

The cellar door is leased to“The Hunter Resort Pty Ltd”,until 30 June 2021 with arental of $39,816 per annum.The winery portion of theproperty is currently notleased and many of the itemsof plant appear to have beendecommissioned.

Formerly the winery had anoperating capacity of around3,000 tonnes however anumber of the tanks have beenmoved off site and significantworks would be required toreturn it to a facility of thissize.

The bulk of the former winerybuildings are considered tohave limited storage value asthe winery was largelyconstructed over two levelswhich restricts thewarehousing ability of thesheds.

The remainder of the propertycomprises cleared land portionof which may be suited toviticultural development.

The property is located atPokolbin in the Hunter Valleyof NSW, approximately 75kilometres north-west of theNewcastle Central BusinessDistrict (CBD) and some 170kilometres north of theSydney CBD.

The property iscurrently tenantedwith the current 30year term expiring onthe 30 June 2021.

AUD$1,500,000


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Knight FrankLevel 25,91 King William Street,Adelaide SA 5000

10 December 2010

Regenal Investments Pty Ltd as Nominee ofCK Life Sciences Int’l., (Holdings) Inc.2 Dai Fu StreetTai Po Industrial EstateNew Territories, HONG KONG

Dear Sir/Madam,

RE: QUALCO EAST VINEYARD, WAIKERIE TO CADELL ROAD, QUALCO, SA, 5233

In accordance with instructions received from Regenal Investments Pty Ltd as nominee ofCK Life Sciences Int’l., Inc., a subsidiary of CK Life Sciences Int’l., (Holdings) Inc.(CKLS), we confirm that we have carried out inspections, made relevant enquiries andobtained such further information as we consider necessary for the purpose of providing themarket value of the subject property interest as at 31 December 2010 (referred to as the dateof valuation). The valuer, Jason Oster, has been an Associate of the Australian PropertyInstitute since 2004 and has been specialising in the valuation of Agricultural assets since2005.


In valuing the subject property interest, we have complied with the requirements containedin International Valuation Standards 2003, the Australian Property Institute Valuation andProperty Standards 2008, and the Royal Institution of Chartered Surveyors ValuationStandard, the “Red Book” 2010.

Our valuation has been prepared in compliance with the requirements of the RulesGovernment the Listing of Securities of The Stock Exchange of Hong Kong Limited (the“Rules”), including but are not limited to the provisions of Chapter 5 and Practice Note 12of the Rules. In completing the valuation we have assumed continuation of existing use.

This letter which forms an addendum to our full valuation report and provides the basis andmethodology of valuation, clarifies our assumptions made, title investigation of propertiesand the limiting conditions.

We refer to our full detailed valuation update full report to Regenal Investments Pty Ltdwhich sets out the details and description of the property and the assets involved.

BASIS OF VALUATION

The valuation is in our opinion the market value which is defined to mean as perInternational Valuation Standards 2003:


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“Market Value is the estimated amount for which a property should be exchanged onthe date of valuation between a willing buyer and a willing seller in an arm’s lengthtransaction after proper marketing wherein the parties had each acted knowledgably,prudently and without compulsion.”

TITLESHIP INVESTIGATION

Registered Proprietor

In accordance with our recent Title search, the Registered Proprietor is shown asCHALLENGER LISTED INVESTMENTS LTD as Responsible Entity for the ChallengerWine Trust.

In accordance with our recent Title search, the property is described as the whole of the landcontained within the following Freehold Certificate of Title;

• Certificate of Title Volume 5984 Folio 162 Allotment comprising Pieces 100, 101 and102 Filed Plan 217178 in the area named Qualco Hundred of Waikerie.

We advise that we have not sought further encumbrance advice in relation to the propertiesand have, for the purpose of this assessment, assumed the properties to be unaffected by anyother easements, encumbrances, covenants or caveats which may affect our valuationassessment contained herein, and have not been disclosed on the title information recentlysearched.

LOCAL AUTHORITY AND ZONING

The Regulations and the Development Act 1993 have zoned the land “Horticulture” Zonewithin the Loxton Waikerie District Council.

LIMITING CONDITIONS

Qualifications

1. This report is prepared for the private and confidential use of our client, RegenalInvestments Pty Ltd as nominee of CK Life Sciences Int’l., Inc., a subsidiary of CKLife Sciences Int’l., (Holdings) Inc. (CKLS) for Major Transaction purposes to bedespatched to the shareholders of CKLS, and should not be reproduced in whole orpart, or relied upon by any other party for any use without the express writtenauthority of Valuation Services (SA) Pty Ltd, trading as Knight Frank Valuations (SA).

2. Knight Frank Valuations (SA) has consented to this summary being included in theMajor Transaction Circular, but Knight Frank Valuations (SA) is not providing adviceabout a financial product, nor the suitability of any investment set out in the MajorTransaction Circular. Such an opinion can only be provided by a person that holds anAustralian Financial Services Licence. Knight Frank Valuations (SA) does not holdsuch a licence and is not operating under any such licence in providing its opinion ofvalue as detailed in this summary and our valuation report.


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3. In the case of advice provided within this report which is of a projected nature, wemust emphasise that specific assumptions have been made which appear reasonablebased upon current market perceptions. It follows that any one of the assumptions setout in the text of this summary may be proved incorrect during the course of time andno responsibility can be accepted in this event.

4. This valuation represents the valuer’s opinion of value at the date of valuation. It mustbe recognised that the real estate market fluctuates with internal and external influencesand the risk that the property’s value may change under varying market conditions is afact that the parties should understand and accept. No liability is accepted for any lossor damage (including consequential or economic loss) suffered as a consequence offluctuations in the property market subsequent to the date of valuation. The valuationshould not be relied upon by any party after a maximum period of three (3) monthsfrom the date of this valuation, or if there has been a significant change to the propertyand/or the general market conditions in the period since the valuation was performed.

5. The Summary of Valuation appearing at the commencement of this report should beread in conjunction with our complete Valuation Report.

6. Reliance on this report should only be taken upon sighting a signed original documentthat has been counter-signed by an executive of Knight Frank Valuations (SA). Thecounter-signatory verifies that this report is genuine, and issued and endorsed byKnight Frank Valuations (SA). The opinion of value expressed in this report, however,has been arrived at by the prime signatory acting as the Valuer in accordance withinstructions given.

7. We draw your attention to the various qualifications contained within relevant sectionsof this report. These qualifications are an integral part of this report and can beidentified by the “italics” print within each relevant section of this report.

8. Where the plantings are irrigated it is assumed that all existing or proposed waterlicences and agreements will remain linked to the property. To ensure continuity ofwater supply, any party relying on this valuation must maintain some form of charge orother security over these licences or agreements.

9. Vineyards and horticultural plantings are assessed on the assumption that they are andwill continue to be competently managed, and are free from irremediable disease orstructural or design deficiency that affects yields and hence value.

10. Unless noted at the time of inspection, we reserve the right to reassess our valuationshould it become evident that the property was not, or did not continue to be properlymanaged, or if disease or management affecting vine health was not rectified or notknown to be present at the time of our inspection.

11. Properties are valued on the basis that plant items normally associated with continuinguse will remain, and are included in the valuation amount. Such items would includevineyard and horticultural irrigation and trellis systems, water pumps for buildings andthe like, but not mobile or removable processing or agricultural plant.


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12. This valuation assumes that all necessary approvals have been obtained and compliancewith any conditions has been met.

Pecuniary Interest Declaration

The valuer has no pecuniary interest in the said property, past, present or prospective, andthe opinion expressed is free of any bias in this regard. The company warrants under theprovisions of Section 74 of the Trade Practices Act, to prepare this valuation in accordancewith the instructions given, however, the quantum of value cannot form part of the warrantybeing related to prevailing market conditions and ethical opinion.

SUMMARY OF VALUATION

Valuation Methodology and Considerations

We have been instructed to assess the market value of the subject property comprising theland and fixed improvements subject to the existing lease agreement. We have assessed themarket value of the property assuming that the existing Water Licence will remain linked tothe property.

The subject property is subject to a lease agreement with reasonable remaining term toAustralian Vintage Ltd. Due to the complexity of the cash flow with annual reviews to 1.5%and market review in 2012 and 2015, we have adopted a Discounted Cash Flow (DCF)Analysis as the primary method by which to assess the market value of the subject property.Whilst this valuation method is usually adopted for more traditional investment propertytypes, we consider that it suited to the subject property due to the complex and long termcash flow we have analysed. We have undertaken a Capitalisation Approach as a checksubject to the lease agreement.

No. PropertyMarket Value in existing state


Qualco East Vineyard, Qualco South AustraliaDerived value “subject to lease agreement”

AUD6,500,000 Exc GST


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VALUATION CERTIFICATE

No. Property DescriptionParticulars ofOccupancy


1. Qualco East Vineyard,comprising Pieces 100,101 and 102,Waikerie to Cadell Road,QUALCO, SA, 5233

The property comprises alarge scale vineyard with atotal land area of 214 hectaresof which a total of 173.68hectares is planted to vinegrapes with approximately58% planted to Chardonnay,the balance comprisingMerlot, Riesling, SauvignonBlanc, Semillon and Shiraz.The property is located withinthe Riverland Wine Regionand was mostly established inthe late 1990’s, however alarge portion of the vineyardhas been reworked in recentyears.

The property is situated withinthe Qualco districtapproximately 14 kilometresnorth west of Waikerie whichitself is approximately 185kilometres north east of theAdelaide GPO.

The property has Waterlicence No: 2844, with a totalpermanent allocation of1,300,000 kilolitres which iscurrently reduced to 67% ofallocation by GovernmentStatute.

The property issubject to a leaseagreement toAustralian VintageLimited formallyknown as McGuiganSimeon WinesLimited. The leaseexpires on the 10thDecember 2015 withthree (3) further five(5) year options.There is an ExtensionNo 10529721 of leaseNo 9791787 whichextends the lease byone day to 11December 2015.Extension No11478842 whichextends the lease byone day to 12December 2015. Thecurrent passing rentalamount isAUD1,026,754 p.a.($85,562.83 monthly)Exc GST which isconsidered to beabove the marketlevel. Reviewedannually to 1.5% withmarket at renewal.

PropertyClassification• Investment

AUD6,500,000Exc GST

JASON OSTERAssociate Australian Property InstituteB. Bus. Prop. (Val.)Dip. App. Sc. (Farm Management)Associate Director – AgribusinessSpecialised Water Valuer &CERTIFIED PRACTISING VALUER

This valuation report is for the use of and may be relied upon only by the party to whom it is addressed. No otherparty is entitled to use or rely upon it and the valuer shall have no liability to any party who does so.


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10 December 2010


Dear Sir/Madam,

RE: MIAMBA VINEYARD, MIAMBA ROAD, LYNDOCH, SA, 5351





This letter which forms an addendum to our full valuation report and provides the basis andmethodology of valuation, clarifies our assumptions made, Title investigation of propertiesand the limiting conditions.

We refer to our detailed valuation update full report to Regenal Investments Pty Ltd whichsets out the details and description of the property and the assets involved.


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BASIS OF VALUATION





In accordance with our recent Title search, the Registered Proprietor is shown asAUSTRALIAN EXECUTOR TRUSTEES (SA) LTD as Custodian for the Challenger WineTrust.

In accordance with our recent Title searches, the property is described as the whole of theland contained within the following Certificates of Title;

• Certificate of Title Volume 5212 Folio 13, being Allotments 21, 22 and 23, in FiledPlan 119710 in the area named Lyndoch, Hundred of Barossa.

• Certificate of Title Volume 5212 Folio 17, being Section 528 Hundred of Barossa inthe area named Lyndoch.


• Certificate of Title Volume 5404 Folio 349, being Allotment 2 in Filed Plan 100282 inthe area named Williamstown, Hundred of Barossa.




The Regulations and the Development Act 1993 have zoned the land “Rural (Valley Floor)”Zone within the Barossa Council.


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LIMITING CONDITIONS

Qualifications

1. This report is prepared for the private and confidential use of our client, RegenalInvestments Pty Ltd as nominee of CK Life Sciences Int’l., Inc., a subsidiary of CKLife Sciences Int’l., (Holdings) Inc. (CKLS) for Major Transaction purposes to bedespatched to the shareholders of CKLS, and should not be reproduced in whole orpart, or relied upon by any other party for any use without the express writtenauthority of Valuation Services (SA) Pty Ltd, trading as Knight Frank Valuations (SA).








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The subject property is subject to a lease agreement with reasonable remaining term toBurge Corp Pty Ltd. Due to the complexity of the cash flow with annual reviews to 1.5%and market review in 2012 and 2015, we have adopted a Discounted Cash Flow (DCF)Analysis as the primary method by which to assess the market value of the subject property.Whilst this valuation method is usually adopted for more traditional investment propertytypes, we consider that it suited to the subject property due to the complex and long termcash flow we have analysed. We have undertaken a Capitalisation Approach as a checksubject to the lease agreement.



Miamba Vineyard, Lyndoch South AustraliaDerived value “subject to lease agreement”



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1. Miamba Vineyard,Including Allotments21, 22, 23 & 2 andSections 528, 789 &286, Miamba Road,LYNDOCH, SA, 5351

The property comprisesfour (4) individualparcels with a total landarea of 204.38 hectares.The four properties canbe described as Miamba,Chaff Mill Vineyard,Filsell Vineyard andCameron Vale Vineyard,collectively known as theMiamba Vineyard. Thetotal planted area of thefour (4) vineyards isapproximately 130.77hectares with a totaladditional plantable landbeing 27.1 hectares withthe balance of the landbeing mostly un arablecomprising headlands,tracks and some grazingland.

The property is situatedapproximately 3.5kilometres south of theTownship of Lyndochwithin the Barossa ValleyWine District and issurrounded by a numberof other vineyards andrural living propertieswithin the district.

The property is subject toa formal lease agreementto Grant Burge Wineswhich commenced on17 August 2007 for aneight (8) year periodexpiring on the 16August 2015. The leasehas three (3) furtherrights of renewal of four(4) years each, and has apassing annual rental ofAUD1,292,004 p.a.($107,666.66 monthly)Exc GST. The tenant alsohas the first right ofrefusal for the purchaseof the property. Therental is reviewed by1.5% annually andmarket at renewal.

The property hasirrigation water suppliedby a Water Licence No.4035-2 which comprisesa total underground waterallocation of 176,300kilolitres for irrigationand 1,000 kilolitres forstock and domestic.There is also a further68,000 kilolitres ofsurface water allocation.

AUD10,100,000Exc GST

Property Classification• Investment

JASON OSTERAssociate Australian Property InstituteB. Bus. Prop. (Val.) A.A.P.I.Dip. App. Sc. (Farm Management)Associate Director – AgribusinessSpecialised Water Valuer &CERTIFIED PRACTISING VALUER



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10 December 2010


Dear Sir/Madam,

RE: DEL RIOS VINEYARD, COGHILL ROAD, KENLEY, VIC, 3597





This letter which forms an addendum to our full valuation report and provides the basis andmethodology of valuation, clarifies our assumptions made, Title investigation of propertiesand the limiting conditions.

We refer to our detailed valuation update full report to Regenal Investments Pty Ltd whichsets out the details and description of the property and the assets involved.


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BASIS OF VALUATION





In accordance with our recent Title searches, the Registered Proprietor is shown in allinstances as CHALLENGER BESTON LTD as Responsible Entity for the Challenger WineTrust.

In accordance with our recent Title searches, the property is described as the whole of theland contained within the following Certificates of Title;

• Certificate of Title Volume 10379 Folio 724 Crown Allotment 31A Parish of Piambie.

• Certificate of Title Volume 09479 Folio 006 Allotment B on Plan of Subdivision140338.

• Certificate of Title Volume 09568 Folio 789 Allotment 4 on Plan of Subdivision145138.

• Certificate of Title Volume 10708 Folio 833 Allotment 1 on Plan of Subdivision507822F.

• Certificate of Title Volume 10708 Folio 834 Allotment 2 on Plan of Subdivision507822F.

• Certificate of Title Volume 08712 Folio 332 Crown Allotment 31G Parish of Piambie.



The Regulations and the Development Act 1993 have zoned the land “Farming” Zone withinthe Swan Hill Rural City Council.


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LIMITING CONDITIONS

Qualifications

1. This report is prepared for the private and confidential use of our client, RegenalInvestments Pty Ltd on behalf of CK Life Sciences Int’l., Inc., a subsidiary of CK LifeSciences Int’l., (Holdings) Inc. (CKLS) for Major Transaction Circular purposes to bedespatched to the shareholders of CKLS, and should not be reproduced in whole orpart, or relied upon by any other party for any use without the express writtenauthority of Valuation Services (SA) Pty Ltd, trading as Knight Frank Valuations (SA).




5. The Summary of Valuation appearing at the commencement of this report should beread in conjunction with our complete Valuation Report.




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The subject property is subject to a lease agreement to AVL with the initial term expiring inDecember 2016. Due to the complexity of the cash flow with annual reviews and review thefive year anniversary and at renewal, we have adopted a Discounted Cash Flow (DCF)Analysis as the primary method by which to assess the market value of the subject property.Whilst this valuation method is usually adopted for more traditional investment propertytypes, we consider that it is suited to the subject property due to the review mechanisms inthe lease.



Del Rios Vineyard, Kenley, Victoria Derivedvalue “subject to lease agreement”



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Market Value inexisting state as at 31

December 2010

1. Del Rios Vineyard,Including CrownAllotments 31A and31G and Allotment Bon Plan ofSubdivision 140338,Allotment 4 on Planof Subdivision145138, Allotment 1on Plan ofSubdivision 507822Fand Allotment 2 onPlan of Subdivision507822F, CoghillRoad, KENLEY, VIC,3597

The property comprisesan established large scalevineyard with a total landarea of 1,047.9 hectaresand an establishedvineyard ofapproximately 904.75hectares. The property issituated within Swan HillWine Region and wasestablished over anumber of years startingin 1998 with plantingsthrough to 2003. Theproperty comprises arange of varieties withthe majority of thevineyard planted toChardonnay, Merlot,Sauvignon Blanc andShiraz.

The property is situatedapproximately 60kilometres south east ofRobinvale approximately21 kilometres north ofTooleybuc, both of whichare towns situated on theMurray River. Tooleybucis situated approximately385 kilometres north ofMelbourne CBD andapproximately 500kilometres east of theAdelaide GPO.

The property is subject toa lease agreement toAustralian VintageLimited formally knownas McGuigan SimeonWines Limited. The leaseexpires on the 26th June2016 with three (3)further five (5) yearoptions. The rent isreviewed at 1.5%annually and market atrenewal.

The current passing rentalamount isAUD6,776,639.26 p.a.($564,719.94 monthly)Exc GST as at 27th June2010. This rent isconsidered to be abovethe market rate.

The property has WaterShare ID NumbersWEE0045927, 036572and 036571 which isassociated with thisproperty and has apermanent allocation of5,178.2 mega litres perannum of which 100% iscurrently available.

AUD42,950,000Exc GST

Property Classification• Investment

JASON OSTERAssociate Australian Property Institute.B. Bus. Prop. (Val.) A.A.P.I.Dip. App. Sc. (Farm Management)Associate Director – AgribusinessSpecialised Water Valuer &CERTIFIED PRACTISING VALUER



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TelferYoung LimitedHawkes Bay25 Pandora RoadPO Box 572Napier 4140New Zealand

14 December 2010

Regenal Investments Pty Limited as Nominee ofCK Life Sciences Int’l., (Holdings) Inc.2 Dai Fu StreetTai Po Industrial EstateNew Territories, HONG KONG

Dear Sir/Madam

Re: Market ValuationGimblett Road VineyardGimblett Road, Roys Hill, Hawkes Bay

In accordance with instructions from Regenal Investments Pty Limited, as nominee for CKLife Sciences Int’l., (Holdings) Inc. (CKLS), to provide a market valuation of the aboveproperty, we confirm to have carried out an inspection, made relevant enquiry and obtainedsuch further information as we consider necessary for the purpose of providing the marketvalue of this property as at 31 December 2010 (referred to as the “date of valuation”).


Our valuation report complies with the Hong Kong Stock Exchange checklist – “Valuationof Properties Being Acquired/Disposed of (Main Board)” and with Chapter 5 of the MainBoard Listing Rules “Valuation of and Information on Properties”.

This letter which forms part of our valuation report, explains the basis and methodology ofvaluation, and clarifies our assumptions made, title investigations and the limitingconditions. We attach a Certificate of Valuation and our Full Valuation Report, for morecomplete details.

Basis of Valuation

The valuation is our opinion of the market value which is defined as meaning:–

“The estimated amount for which an asset should exchange on the date of valuation betweena willing buyer and a willing seller in an arm’s length transaction after proper marketingwherein the parties have each acted knowledgeably, prudently and without compulsion”.


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To establish the market value of this property we have utilised the standard approach forvaluing rural land used for viticulture in New Zealand being the direct comparison approach.This is a market related approach based on analysis of comparable sales evidence however,as seldom are there two properties directly comparable, adjustments have been made withinour analysis of market sales to account for differences in; size; type of property; standard ofdevelopment; potential productive capacity and; management.

Title Investigation

We have searched and perused the Computer Freehold Registers for the estate in fee simpleassociated with this property. Details are contained in our attached Full Valuation Report.

Key findings: The lease to Delegat’s Wine Estate Ltd is registered against the title. None ofthe registrations are considered abnormal for this type of property nor are they consideredlikely to impact negatively on normal saleability prospects.

Limiting Conditions

(1) We have inspected the property included in the attached Valuation Certificate and FullValuation Report.

(2) No structural survey has been made and we are therefore unable to report as to whetherthe buildings on the property are free from rot, decay, infestation or any otherstructural defects. Also, no tests were carried out on any of the services.

(3) We have not carried out detailed site measurements to verify the correctness of the landarea but have measured the individual buildings and have determined the floor areas ofthese.

(4) Our valuations exclude allowance for stock, plant and equipment and are made on aplus Goods and Services Tax basis.

(5) The basis of our soil investigation has been limited to perusing Hawkes Bay RegionalCouncil soil maps and the Land Use Capability Maps.

(6) We have made no boundary survey of the property and assume no responsibility inconnection with such matters. Unless otherwise stated it is assumed that allimprovements will be within the title boundaries.

(7) Furthermore, we have not undertaken an environmental audit of the site and assumethere is no site contamination particularly from old saw mills, sheep and cattle dips,effluent disposals, farm chemicals, fuel storage tanks, waste dumps and DDT residue inthe ground, restricting potential use.

(8) Delegat’s Wine Estate Limited have provided details of vineyard plantings andproduction and we have relied upon this information as being accurate and correct. Wehave no reason to doubt the truth and accuracy of the information provided to us byDelegat’s Wine Estate Limited.


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(9) No allowance has been made in our valuation for any charges, mortgages or amountsowing on any of the property interests valued nor for any expenses or taxation whichmay be incurred in effecting a sale. Unless otherwise stated, it is assumed that theproperty interests are free of encumbrances, restrictions and outgoings of an onerousnature which could affect their value.


Property Address: Gimblett Road, Roys Hill, Hawkes Bay.

Brief Description: Involving a well situated production vineyard, locatedat the end of Gimblett Road which forms HawkesBay’s premium wine growing sub-district.

The property is situated some 7 kilometres northwestfrom Hastings city and enjoys easy access to a fullrange of urban services and amenities.

This vineyard was planted between 1992 and 1999 witha small area of Chardonnay replanted in 2004. Thevineyard is at full production and is leased to Delegat’sWine Estate Limited (Delegats) however the initial tenyear lease term expires on 11 April 2011 and it is ourunderstanding that Delegats have confirmed they willnot be renewing this lease in its current form.

Delegats is a well established publicly listed NewZealand wine company with production from thisvineyard having been 150.9 tonnes in the 2010 yearalthough no Cabernet Sauvignon was harvested ineither 2009 or 2010.

The vineyard comprises a planted area of 20.69hectares, this comprising a mix of Cabernet Sauvignon,Merlot and Chardonnay.

This property includes a good standard of developmentin respect of post and wire structures, tracking,irrigation and buildings and includes elevated irrigationsprinklers covering approximately two thirds of thetotal planted area. These provide limited frostprotection to the most vulnerable portion of thevineyard.


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Lease Summary: Lessee: Delegat’s Wine Estate LimitedTerm: 10 yearsCommencement Date: 11 April 2001Current Annual Rental: $382,147 per annum.Lease Expiry: 10 April 2011.Lease Renewal: For a further period of five years.Similar provisions apply to the first, second, third andfourth renewal terms, each for five years.Permitted Use: Permitted use means the growing andharvesting of grapes as a commercial concern.

Market Rental: The contract rental is considerably above the marketrent which we assess at $103,700 per annum plusGoods and Services Tax.

Options and Rights: Deed of Option to Purchase.

Key Details:The Grantor has agreed to grant to the Grantee whichhas agreed to take out an Option to Purchase the landand the assets upon the terms and conditions containedin this Deed.

The purchase price of the land and assets shall be thegreater of the following amounts:

(a) The amount being the lesser of the CompoundAnnual Return Amount and the Market Value; and

(b) The Minimum Purchase Price

Summary of Findings:This Option is considered unlikely to impact on normalsaleability prospects.

Classification of Property: The property is held for investment purposes.

Tenure: Estate in Fee Simple (freehold).

Age of Buildings: Administration office and workshop estimate 1980.Implement shed 1999.

Planning and Zoning: Plains zone. Viticulture is a Permitted Activity.

Date of Inspection: 28 October 2010.

Date of Valuation: 31 December 2010.

Interest Valued: Market Value of the Estate in Fee Simple, as at thedate of valuation.


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Market Value As Encumbered: TWO MILLION FOUR HUNDRED AND TWENTYFIVE THOUSAND DOLLARS ($2,425,000) plusGoods and Services Tax, if any.This value is in New Zealand dollars.

Key Assumptions: That Delegats will not renew the existing lease in April2011 on the existing rental basis. Renewal would beexpected to be on the basis of a lower negotiatedrental.

In respect of the encumbered value, the existing leaseobligations will be fulfilled up until 10 April 2011.

The market value assessed on a vacant possession basisassumes there is no ongoing Supply Contract in placefor the grapes.

Conditions of Valuation: The valuation is made subject to the followingcomments:-

+ The above valuations are made on a plus Goodsand Services Tax.

+ The valuation excludes allowance for stock andfor plant and equipment.

+ We have not undertaken a physical count of thevines and have relied upon planting andproduction details supplied by Delegat’s WineEstate Limited, as being accurate and correct.

+ Our market value assessed as encumbered reflectsthe existing Lease and Option Agreements whichexpire on 10 April 2011.

+ We do not assume any responsibility or acceptany liability where this valuation is relied uponafter the expiration of 3 months from the date ofthe valuation, or such earlier date if you becomeaware of any factors that have any effect of thevaluation.


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Qualifications and recognition: My full qualifications are:Fellow of the New Zealand Institute of Valuers.Fellow of the Property Institute of New Zealand.

My valuation basis follows the Hong Kong Institute ofSurveyors Valuation Standards by HKIS and theInternational Valuation Standards by the InternationalValuation Standards Council.

The Property Institute of New Zealand has reciprocityagreements in place with the Royal Institute ofChartered Surveyors and the Hong Kong Institute ofSurveyors. Accordingly my qualifications arerecognised by these bodies.

I was registered as a valuer on 23 December 1980 andhave been involved in the valuation of vineyards formuch of that time period. Fellow status is onlybestowed on valuers in New Zealand with recognisedexperience and I am a Fellow member of both the NZInstitute of Valuers and the Property Institute of NewZealand.

My qualifications are furthermore recognised by theNew Zealand Stock Exchange and by the AustralianStock Exchange.

Attachment: Full valuation report and appendices thereto.

Yours faithfullyTelferYoung (Hawkes Bay) Limited

M I PenroseRegistered Valuer, FNZIV, FPINZ


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14 December 2010


Dear Sir/Madam

Re: Market ValuationHighway 50 VineyardState Highway 50, Roys Hill, Hawkes Bay





Basis of Valuation




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Title Investigation



Limiting Conditions








(8) Delegat’s Wine Estate Limited has provided details of vineyard plantings andproduction and we have relied upon this information as being accurate and correct. Wehave no reason to doubt the truth and accuracy of the information provided to us byDelegat’s Wine Estate Limited.


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Property Address: State Highway 50, Roys Hill, Hawkes Bay.

Brief Description: Involving two adjoining vineyard blocks held inseparate titles and located to the southern side of StateHighway 50, 500 metres east from Gimblett Road.Access is provided of a private right of way thatservices this and a number of other vineyards.

Forming part of the Gimblett Road vineyard subdistrict which forms Hawkes Bay’s premium winegrowing area.

The property is situated some 7 kilometres northwestfrom Hastings city and enjoys easy access to a fullrange of urban services and amenities.

This vineyard was planted between 1993 and 2000 andis at full production. It is leased to Delegat’s WineEstate Limited (Delegats) however the initial ten yearlease term expires on 10 April 2011 and it is ourunderstanding that Delegats have confirmed they willnot be renewing this lease in its current form.

Delegats is a well established publicly listed NewZealand wine company with production from thisvineyard having been 186.0 tonnes in the 2010 year.

The vineyard comprises a planted area of 18.89hectares, this comprising a mix of Cabernet Sauvignon,Malbec, Merlot and Chardonnay.

This property includes only one small building andincludes a good standard of development in respect ofpost and wire structures, tracking and irrigation. It hasno frost protection.


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Lease Summary: Lessee: Delegat’s Wine Estate LimitedTerm: 10 yearsCommencement Date: 11 April 2001Current Annual Rental: $375,539.01 per annum.Lease Expiry: 10 April 2011.Lease Renewal: For a further period of five yearsSimilar provisions apply to the first, second, third andfourth renewal terms, each for five years.Permitted Use: Permitted use means the growing andharvesting of grapes as a commercial concern.

Market Rental: The contract rental is considerably above the marketrent which we assess at $95,400 per annum plus Goodsand Services Tax.









Age of Buildings: Estimate 1980.

Planning and Zoning: Plains zone. Viticulture is a Permitted Activity.



Interest Value: Market Value of the Estate in Fee Simple, as at thedate of valuation.


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Market Value As Encumbered: TWO MILLION AND THIRTY FIVE THOUSANDDOLLARS ($2,035,000) plus Goods and Services Tax,if any.This value is in New Zealand dollars.

Key Assumptions: That Delegats will not renew the existing lease in April2011.









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14 December 2010


Dear Sir/Madam

Re: Market ValuationCrownthorpe VineyardMatapiro Road, Crownthorpe, Hawkes Bay





Basis of Valuation




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Title Investigation



Limiting Conditions








(8) Delegat’s Wine Estate Limited have provided details of vineyard plantings andproduction and we have relied upon this information as being accurate and correct. Wehave no reason to doubt the truth and accuracy of the information provided to us byDelegat’s Wine Estate Limited.


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Property Address: Matapiro Road, Crownthorpe, Hawkes Bay.

Brief Description: Comprising a large production vineyard situated atCrownthorpe, approximately 23 kilometres west fromHastings City.

Crownthorpe is not generally recognized as aviticulture locality although a small number of othervineyards have been developed in close proximity tothis property. The main advantages of the Crownthorpearea that prompted development of this and nearbyvineyards was the availability of comparatively cheapand suitable soils together with good water supply.These factors enabled vineyard development at asignificantly lower cost than possible in the primaryviticulture locations.

The property is subject to a long term lease toDelegat’s Wine Estate Limited (Delegats) however theinitial 10 year term expires on 10 April 2011. At thisstage Delegats have not confirmed whether they will berenewing this lease. It would be expected that Delegatswill seek renewal but on the basis of renegotiated andlower rental terms.

This vineyard was planted between 2001 and 2006 withthe vineyard now considered to be at close to fullproduction. Production over the past 3-5 year periodhas been variable with the Chardonnay productionhaving been affected by frost in a number of years.

Delegats is a well established and publicly listed NewZealand wine company with production from thisvineyard having been 2,801 tonnes for the 2010vintage.

The vineyard comprises a planted area of 291.06hectares, this comprising 125.38 hectares of Merlot and165.67 hectares of Chardonnay.


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The property includes a very high standard ofdevelopment in respect of post and wire structures,tracking, irrigation and buildings and includes frostprotection in the form of mechanical windmills andoverhead irrigation sprinklers. Improvement to frostprotection would be seen as a priority to ensure theeconomic viability of this vineyard.

Lease Summary: Lessee: Delegat’s Wine Estate LimitedTerm: 10 yearsCommencement Date: 11 April 2001Current Annual Rental: $2,859,851.65 per annum.Lease Expiry: 10 April 2011.Lease Renewal: For a further period of five yearsSimilar provisions apply to the first, second, third andfourth renewal terms, each for five years.Permitted Use: Permitted use means the growing andharvesting of grapes as a commercial concern.

Market Rental: The contract rental is considerably above the marketrent which we assess at $881,100 per annum plusGoods and Services Tax.






Deed of Option for Winery.

Key Details:The Grantor has agreed to grant to the Grantee whichhas agreed to take an Option to Purchase the WineryLand and all or part of the Winery assets.

The Grantee an Option to Purchase an estate in feesimple in the Winery Land and to purchase the Wineryassets on the terms and conditions contained in thisDeed.


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Deed of Option to Water Supply Winery Easement.

Key Details:The Grantor hereby irrevocably grants to the Granteean Option to require the Grantor to create and registerthe easements in favour of the titles to the dominanttenement over the titles of the servient tenement on theterms and conditions contained in this Deed.

Deed of Option Waste Water Winery Easement.

Key Details:The Grantor has agreed to grant to the Grantee whichhas agreed to take an Option to register Easements overthe land for the benefit of a Winery Complex to beerected by the Grantee on the Winery Land or anotherpiece of land in the same locality as the land upon theterms and conditions contained in this Deed.

Deed of Option Service Winery Easement.

Key Details:The Grantor has agreed to grant to the Grantee whichhas agreed to take an Option to register Easements overthe land, for the benefit of a Winery Complex to beerected by the Grantee on the Winery Land or anotherpiece of land in the same locality as the land, upon theterms and conditions contained in this Deed.




Age of Buildings: Administration offices 2006.Implement shed 2006.Spray and chemicals building 2006.Ex woolshed estimate 1950.Pumping buildings 2001.

Planning and Zoning: Rural zone. Viticulture is a Permitted Activity.




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Interest Valued: Market Value of the Estate in Fee Simple, as at thedate of valuation.

Market Value As Encumbered: SEVENTEEN MILLION DOLLARS ($17,000,000)plus Goods and Services Tax, if any.This value is in new Zealand dollars.

Key Assumptions: That Delegats will not renew the existing lease in April2011 on the existing rental basis. Renewal would beexpected to be on the basis of a lower negotiatedrental.









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205 Hastings Street SouthPO Box 914, HastingsNew ZealandPh: +646 870 [email protected]

8 December 2010


Dear Sir/Madam

RE: Challenger Wine Trust/Delegat’s Trust – Market ValuationRarangi Vineyard – Neal Road, Marlborough, New Zealand

In accordance with instructions received from Regenal Investments Pty Ltd, we have valuedthe property interest of Challenger Wine Trust/Delegat’s Trust in Marlborough, NewZealand, we confirm that we have carried out inspections, made relevant enquiries andobtained such further information as we consider necessary for the purpose of providing themarket value of such property interest as at 31 December 2010 being the date of thevaluation.

It is our understanding that this valuation is for major transaction purpose.

This letter which forms an addendum to our full valuation report provides the basis andmethodology of valuation, clarifies our assumptions made, title investigation of propertiesand the limiting conditions.

We refer you to our full detailed valuation report dated 8 November 2010 which sets out thedetails and description of the property and the assets involved.

BASIS OF VALUATION

The valuation is in our opinion the Market Value (Fair Value) which is defined to mean asper International Valuation Standards 2003:

“Market Value is the estimated amount for which a property should be exchanged on thedate of valuation between a willing buyer and a willing seller in an arm’s-length transactionafter property marketing wherein the parties had each acted knowledgeable, prudently andwithout compulsion.”


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VALUATION METHODOLOGY

The property interests have been valued by two approaches, one being the market basis orcomparison method where sales of other properties and the prices realised are compared tothat of the subject. Adjustments and comparisons are made based on size, character andlocation with those features then compared to the subject property to be determined themarket value.

Due to the existence of the leases for the subject properties we have also considered thevalue based on a discounted cashflow of the rental income stream that has been receivedtaking into account any contractual obligations to either party regarding renewal options thatcould impact on the value. Again the information derived from the existing contractualobligations are compared to the market to determine the relevancy and likely market appealto arrive at a value.

ASSUMPTIONS

In assessing the Fair Value of the properties, we have considered sales of other propertiesthat have transacted recently and have adjusted these sales to reflect the location, standardof improvements, plantings, mixed age of plants and productive capacities compared to thesubject property. When analysing the sales we have paid particular attention to the varietiescontained on the vineyard, the age of the vines, quality and also the size of the vineyardsbeing transacted. All these factors contribute to the value attributed by the purchasers.

One of the key factors in the market at present is the paucity of vineyard transactions, largeor small. This is partly due to large properties being tightly held by the wine companies thatown a large percentage of this size property, but also partially due to the capital required topurchase these vineyards and the limited desire of banks to finance this sector at the presenttime.

The vineyard is well established and located in the Rarangi District an area to the east ofBlenheim township and close to the coast. The current softening in the Real Estate marketand easing returns in the wine sector has resulted in the current rentals for the propertybeing high creating an over rented situation. This creates a disconnect between the marketvalue, unencumbered and the encumbered value as derived by Discounted Cashflow, whichoverstates the later. Buyers would be weary of this situation and the likely chance of thetenant renewing under the same terms and conditions presently contained in the lease. As aresult there is higher perceived tenant risk which has been reflected in the Discount Rateapplied and the exclusion of any renewal periods in the Discounted Cashflow model. Thisrisk could be further compounded by the size of the property in the current climate and thelack of market activity over recent times as buyers hold back to try and gauge the bottom ofthe market.

The investor market, being the market sector for these properties and instruments wouldconsider the current yield from the investment, particularly from countries with low returns,as attractive. Though this would need to be balanced against the liquidity of the asset andlikely eroding value, particularly over a short to medium term hold and the currentuncertainty of the Lessee’s intention.


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We are also cognisant of the option held by Delegat’s Wine Estate that allows them topurchase the assets at a pre defined level and the Right of last Refusal. Over recent yearsthis has been favourable to Delegat’s Wine Estate in that it had been below market levels(un encumbered) meaning Delegat’s Wine Estate would have immediate positive impact tothe balance sheet. As the market conditions soften the incentive of the option will erode andif there is no benefit to Delegats they may elect to not exercise the right of renewal. If themarket softens significantly the market value may ease below the option assessment.Introducing the possibility that the Lessee may wish to exit the lease or renegotiate theterms and conditions. While these options are possible the unknown is how reliant Delegatsare on the subject property for grape supply and would relinquishment compromise theiroverall business model.

The valuations have also been assessed utilising a Discounted Cashflow Approach method.The income stream is based on the current and projected rental stream of the asset for theremainder of the lease term together with an estimated terminal value at the lease expiry.

The terminal value has considered the Option Agreement and also the likely market valuefor the property at next renewal with the later being adopted.

As part of the cashflow agreement we have assessed the likelihood of the Lessee renewingthe lease at the next renewal and/or the Lessee negotiating a new market based rental.

Value in accordance with NZIAS 41 – Agriculture

In accordance with our instructions, we have also been asked to provide a breakdown ofvalues in accordance with NZIAS 41 – Agriculture according to the following:

“(g) Land (bare land with fixed inclusions such as dams).

(h) Buildings.

(i) Infrastructure (depreciated trellising and irrigation systems).

(j) Vines (can be valued using a discounted net cashflow from grape sales over 4 years,however other valuation methods used in the market are acceptable).

(k) Encumbered water rights (value in-situ). This value applies where the water right istradable and a water market can be clearly identified for the rights.

(l) Differential between encumbered and unencumbered value (to be proportioned betweenvines and infrastructure value).”

To determine the individual values we have analysed those components as it relates tomarket and depreciated replacement costs. We have analysed where possible the actualdepreciated replacement cost or market value as derived by market evidence. We considerthat the Land and Water are not easily separated for trade at the present time and the waterasset in not easily traded in the current market.


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We have therefore derived a market value for the combined value of the Land and Water.Building values can also be derived by market evidence and the added value of buildingswill be calculated as such. To determine the value of the infrastructure, we have adopted adepreciated replacement cost method. The balance is the value of the vines, as these providethe method for generating income.

To determine the value of the land, we have analysed a number of sales of vacant parcelsand land suited to vineyard development.

With regard to the infrastructure and the Discounted Replacement Cost (DRC) method wehave adopted a useful economic life of 35 years. This includes the trellis and irrigationsystem in situ. We have taken an average age over the infrastructure of each vineyard anddepreciated the infrastructure with a “straight line” method over the life of the infrastructureat 2.86% per annum.

We have analysed the replacement cost for several vineyards to determine the infrastructurecosts excluding the costs associated with the vines. We consider that the estimated total costof establishing a vineyard, including all trellising, posts, wire, irrigation, labour and vines is$35,000 to $50,000 per hectare dependent on vine density. Of this approximately 30 to 40%can be attributed to the infrastructure.

In assessing the value of the property we have undertaken an analysis of the property in themarket particularly looking at the strengths and weaknesses specific to this property andhow this relates to the wider market and economic conditions prevailing at date of thevaluation and over the short term that may influence the demand and value levels.

Strengths & Opportunities Weaknesses & Threats

➢ Large Scale ➢ Size would limit market➢ Fully Planted ➢ Initial lease term four years to run➢ Yet to reach a steady state of

production➢ Tenants desire to remain

➢ Resource Consents for water ➢ Over rented➢ Standard of Buildings ➢ Wine sector imbalance➢ Strong rent ➢ Foreign Exchange position➢ Strong tenant ➢ Ability to raise finance➢ Location ➢ Small buyer pool

➢ Receiverships and mortgagee sales inmarket

➢ Strength of tenant

The existing vineyard use is a permitted activity within this rural zone.


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Lease Details – Terms and Conditions

The property is leased under a lease agreement and held for investment purposes. Thefollowing is a summary of the principal lease terms and conditions:

Premises: Rarangi Vineyard – Neal Rd, Marlborough

Term: 10 years

Commencement Date: 30 September 2004

Rights of Renewal: Four (4) of Five (5) years each

Current Annual Rental: $1,655,993.93 excl GST ($137,999.49 per month)

Rent Reviews: Annually

Permitted Use: Vineyard

Operating Expenses: The tenant is responsible for 100% operating expensesassociated with the property.

The assessed current market rental for Rarangi vineyard as assessed at date of this valuationis NINE HUNDRED AND TEN THOUSAND DOLLARS ($910,000) per annum exclusiveof GST.

Archaeological

Archaeological sites are present throughout the area and are not always officially recorded.Under the New Zealand Historic Places Act 1993 consent must be obtained to damage,destroy or modify archaeological sites such as for the creation of a house site or track or forland cultivation. Our valuation has been assessed on the basis that there are none on theland.

Environmental Issues

We were advised by the current owners that there is no known or recorded sitecontamination or environmental issues relating to the subject land.

The property has been utilised for viticulture activities. This use requires the use ofchemicals. There may be some chemical residues in the soil.

While due care has been taken to note any contamination liability, our investigations havebeen undertaken for valuation purposes only, and this report does not constitute anenvironmental audit. Unless otherwise stated no account has been taken of the effect onvalue due to contamination or pollution.


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Structural Improvements

While in the course of inspection due care is taken to note building defects, no structuralsurvey has been made and no undertaking is given about the absence of rot, termite or pestinfestation, deleterious substances such as asbestos or calcium chloride or other hiddendefects. We can give no guarantee as to outstanding requisitions in respect to the subjectbuilding(s).

TITLE INVESTIGATION

We have undertaken searches of the Titles held for the above properties and have searchedany key encumbrance that may have an impact on the value or the realisation of theproperty in a sale process. Any registration or interest that would have impacted on theproperty has been discussed within our report and reflected in the valuation assessment.

In undertaking the valuations we have not relied on any legal opinions as regard to the stateof the title or any of the encumbrances.

All legal documents disclosed in this report are for reference only and no responsibility isassumed for any legal maters concerning the legal title to the property interests set out inthis report.

LIMITING CONDITIONS

1. Our responsibility in connection with this valuation report is limited to the person towhom the report is addressed and we disclaim all responsibility to any other partywithout reference to us.

2. This report may not be reproduced, in whole or in part, without our prior writtenapproval.

3. This report has been prepared for the purpose stated in the report and may be reliedupon for that purpose only. Assumptions made in the preparation of the report are asexpressly stated in the report or set out below.

4. Where it is stated in the report that information has been supplied to us by anotherparty, this information is believed to be reliable but we cannot accept responsibility ifthis should prove not to be so. Where information is given without being attributeddirectly to another party, this information has been obtained by our search of recordsand examination of documents or by enquiry from Government or other appropriatedepartments.

5. We have made no survey of the property and unless otherwise stated assume that allimprovements lie within the Computer Freehold Register boundaries. No guarantee isgiven that the land is not subject to statutory rights not recorded on the relevantComputer Freehold Register and not apparent from normal inspection of the property.We assume no responsibility in connection with such foregoing matters.


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6. We do not carry out investigations on site in order to determine the suitability ofground conditions and services, nor do we undertake environmental or geotechnicalsurveys. Unless notified to the contrary, our valuations are on the basis that theseaspects are satisfactory and also that the site is clear of underground mineral or otherworkings, methane gas or other noxious substances.

7. Unless otherwise stated our report is subject to there being no detrimentalregistration(s) affecting the land other than those appearing on the Computer FreeholdRegister(s) valued in this report. Such registrations may include Wahi Tapuregistrations and Historic Places Trust registrations.

8. We have not obtained from the territorial authority a Land Information Memorandum.Our valuation has been made on the basis that such Memorandum if obtained wouldnot have disclosed information which would have affected adversely our opinion of themarket value of the property.

9. No environmental audit has been undertaken, although contaminants present on the siteand obvious to us on inspection may have been noted in the report. No warrant isgiven, or is to be implied, in this report that the property is free from contaminants.

10. While in the course of inspection due care is taken to note building defects, nostructural survey has been made and no undertaking is given about the absence of rot,termite or pest infestation, deleterious substances such as asbestos or calcium chlorideor other hidden defects. We can give no guarantee as to outstanding requisitions inrespect to the subject building.

11. In preparing the valuation it has been assumed hot and cold water systems, electricalsystems and other devices, fittings and conveniences as are in the building to be inproper working order and functioning for the purpose for which they were designed.

12. Where a property is leased, this report records the nature of the information supplied.That information has been accepted and relied upon at face value. It has been assumedthat the information supplied is complete and accurate, and that the lease is fullyenforceable.

13. Unless otherwise stated in our report our valuation is on the basis that the propertycomplies with the Building Act 1991, Health and Safety in Employment Act 1992,Evacuation of Buildings Regulations 1992 and Disabled Persons Community WelfareAct 1975 or that the legislation has no significant impact on the value of the property.

14. We certify that Crighton Stone Limited holds professional indemnity insurance.

OPINION OF VALUE

The valuation assessment and corresponding figures of the Market Value of this property areshown in the attached summary of valuation and their respective valuation certificates.


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COMMENTS

Our valuation has been prepared in accordance with generally accepted valuation proceduresand in compliance with the requirements of the Rules Government the Listing of Securitiesof The Stock Exchange of Hong Kong Limited (the “Rules”), including but are not limitedto the provisions of Chapter 5 and Practice Note 12 of the Rules.

In valuing the property interests we have complied with the requirements contained in theInternational Valuation Standards 2003, the NZPI Valuation Standards and the Hong KongInstitute of Surveyors Valuation Standards.

All amounts are denominated in New Zealand dollars (NZD).

We enclose herewith the summary of the valuation and valuation certificates.

Yours faithfullyCRIGHTON STONE LTDBoyd A GrossB Agr (Rural Val), Dip Bus Std, FNZIV, FPINZ


– 225 –


PropertyMarket Value in existing state


Rarangi VineyardNeal RoadMarlboroughNew Zealand

$17,080,000


– 226 –




Rarangi VineyardNeal RoadMarlboroughNew Zealand

Rarangi comprises a 142.1hectare freehold parcel of landadjoining Neal Road on itssouth-western boundary andbisected by Flax Mill Drive.The property is in two distinctparcels, the northern side ofFlax Mill Drive and thesouthern side of Flax MillDrive. The existing use of theproperty is as a productionvineyard that supplies a thirdparty winery. This vineyarduse is a Permitted Activityunder the MarlboroughDistrict Councils Rural 3zoning. The vineyard haspredominantly beenestablished in 2004 with thefinal planting completed in2005. Redevelopment of aportion of the vineyard thenoccurred in 2009 as amanagement decision toremove the Pinot Noir. Thevineyard is now solely plantedin Sauvignon Blanc variety.Other improvements on theproperty include irrigationwell and reticulation, accesstracking throughout thevineyard. Buildings comprisean office/workshop with yardfacilities and pump shed allconstructed during thedevelopment of the vineyard..The vineyard being a recentdevelopment has establishedwell and has been subject to agood standard of projectmanagement.

The property iscurrently tenantedwith the leasecommencing on30 September 2004,the current 10 yearterm expires on the29 September 2014.The tenant has four(4) rights of renewalof five (5) years eachbeyond the initialterm. The currentannual rental is$1,655,993.93($137,999.49 permonth) excludingGST.

$17,080,000


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205 Hastings Street SouthPO Box 914, HastingsNew ZealandPh: +646 870 [email protected]

8 December 2010


Dear Sir/Madam

RE: Challenger Wine Trust/Delegat’s Trust – Market ValuationDashwood Vineyard – Redwood Pass Road, Marlborough, New Zealand

In accordance with instructions received from Regenal Investments Pty Ltd we have valuedthe property interest of Challenger Wine Trust/Delegat’s Trust in Marlborough, NewZealand, we confirm that we have carried out inspections, made relevant enquiries andobtained such further information as we consider necessary for the purpose of providing themarket value of such property interest as at 31 December 2010 being the date of thevaluation.

It is our understanding that this valuation is for major transaction purpose.

This letter which forms an addendum to our full valuation report provides the basis andmethodology of valuation, clarifies our assumptions made, title investigation of propertiesand the limiting conditions.

We refer you to our full detailed valuation report dated 8 November 2010 which sets out thedetails and description of the property and the assets involved.

BASIS OF VALUATION

The valuation is in our opinion the Market Value (Fair Value) which is defined to mean asper International Valuation Standards 2003:

“Market Value is the estimated amount for which a property should be exchanged on thedate of valuation between a willing buyer and a willing seller in an arm’s-length transactionafter property marketing wherein the parties had each acted knowledgeable, prudently andwithout compulsion.”


– 228 –

VALUATION METHODOLOGY

The property interests have been valued by two approaches, one being the market basis orcomparison method where sales of other properties and the prices realised are compared tothat of the subject. Adjustments and comparisons are made based on size, character andlocation with those features then compared to the subject property to be determined themarket value.

Due to the existence of the leases for the subject properties we have also considered thevalue based on a discounted cashflow of the rental income stream that has been receivedtaking into account any contractual obligations to either party regarding renewal options thatcould impact on the value. Again the information derived from the existing contractualobligations are compared to the market to determine the relevancy and likely market appealto arrive at a value.

ASSUMPTIONS

In assessing the Fair Value of the properties, we have considered sales of other propertiesthat have transacted recently and have adjusted these sales to reflect the location, standardof improvements, plantings, mixed age of plants and productive capacities compared to thesubject property. When analysing the sales we have paid particular attention to the varietiescontained on the vineyard, the age of the vines, quality and also the size of the vineyardsbeing transacted. All these factors contribute to the value attributed by the purchasers.

One of the key factors in the market at present is the paucity of vineyard transactions, largeor small. This is partly due to large properties being tightly held by the wine companies thatown a large percentage of this size property, but also partially due to the capital required topurchase these vineyards and the limited desire of banks to finance this sector at the presenttime.

The vineyard is well established and located in the Dashwood or Lower Awatere area to thesouth of Blenheim on the northern banks of the Awatere River. The current softening in theReal Estate market and easing returns in the wine sector has resulted in the current rentalsfor the property being high creating an over rented situation. This creates a disconnectbetween the market value, unencumbered and the encumbered value as derived byDiscounted Cashflow, which overstates the later. Buyers would be weary of this situationand the likely chance of the tenant renewing under the same terms and conditions presentlycontained in the lease. As a result there is higher perceived tenant risk which has beenreflected in the Discount Rate applied and the exclusion of any renewal periods in theDiscounted Cashflow model. This risk could be further compounded by the size of theproperty in the current climate and the lack of market activity over recent times as buyershold back to try and gauge the bottom of the market.

The investor market, being the market sector for these properties and instruments wouldconsider the current yield from the investment, particularly from countries with low returns,as attractive. Though this would need to be balanced against the liquidity of the asset andlikely eroding value, particularly over a short to medium term hold and the currentuncertainty of the Lessee’s intention.


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We are also cognisant of the option held by Delegat’s Wine Estate that allows them topurchase the assets at a pre defined level and the Right of last Refusal. Over recent yearsthis has been favourable to Delegat’s Wine Estate in that it had been below market levels(un encumbered) meaning Delegat’s Wine Estate would have immediate positive impact tothe balance sheet. As the market conditions soften the incentive of the option will erode andif there is no benefit to Delegat’s they may elect to not exercise the right of renewal. If themarket softens significantly the market value may ease below the option assessment.Introducing the possibility that the Lessee may wish to exit the lease or renegotiate theterms and conditions. While these options are possible the unknown is how reliant Delegat’sare on the subject property for grape supply and would relinquishment compromise theiroverall business model.

The valuations have also been assessed utilising a Discounted Cashflow Approach method.The income stream is based on the current and projected rental stream of the asset for theremainder of the lease term together with an estimated terminal value at the lease expiry.

The terminal value has considered the Option Agreement and also the likely market valuefor the property at next renewal with the later being adopted.

As part of the cashflow agreement we have assessed the likelihood of the Lessee renewingthe lease at the next renewal and/or the Lessee negotiating a new market based rental.

Value in accordance with NZIAS 41 – Agriculture

In accordance with our instructions, we have also been asked to provide a breakdown ofvalues in accordance with NZIAS 41 – Agriculture according to the following:

“(g) Land (bare land with fixed inclusions such as dams).

(h) Buildings.

(i) Infrastructure (depreciated trellising and irrigation systems).

(j) Vines (can be valued using a discounted net cashflow from grape sales over 4 years,however other valuation methods used in the market are acceptable).

(k) Encumbered water rights (value in-situ). This value applies where the water right istradable and a water market can be clearly identified for the rights.

(l) Differential between encumbered and unencumbered value (to be proportioned betweenvines and infrastructure value).”

To determine the individual values we have analysed those components as it relates tomarket and depreciated replacement costs. We have analysed where possible the actualdepreciated replacement cost or market value as derived by market evidence. We considerthat the Land and Water are not easily separated for trade at the present time and the waterasset in not easily traded in the current market.


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We have therefore derived a market value for the combined value of the Land and Water.Building values can also be derived by market evidence and the added value of buildingswill be calculated as such. To determine the value of the infrastructure, we have adopted adepreciated replacement cost method. The balance is the value of the vines, as these providethe method for generating income.

To determine the value of the land, we have analysed a number of sales of vacant parcelsand land suited to vineyard development.

With regard to the infrastructure and the Discounted Replacement Cost (DRC) method wehave adopted a useful economic life of 35 years. This includes the trellis and irrigationsystem in situ. We have taken an average age over the infrastructure of each vineyard anddepreciated the infrastructure with a “straight line” method over the life of the infrastructureat 2.86% per annum.

We have analysed the replacement cost for several vineyards to determine the infrastructurecosts excluding the costs associated with the vines. We consider that the estimated total costof establishing a vineyard, including all trellising, posts, wire, irrigation, labour and vines is$35,000 to $50,000 per hectare dependent on vine density. Of this approximately 30 to 40%can be attributed to the infrastructure.

In assessing the value of the property we have undertaken an analysis of the property in themarket particularly looking at the strengths and weaknesses specific to this property andhow this relates to the wider market and economic conditions prevailing at date of thevaluation and over the short term that may influence the demand and value levels.

Strengths & Opportunities Weaknesses & Threats

➢ Large Scale ➢ Size would limit market➢ Fully Planted ➢ Initial lease term due to expire in two years➢ At a steady state of production ➢ Tenants desire to remain➢ Resource Consents for water ➢ Over rented➢ Standard of Buildings ➢ Wine sector imbalance➢ Strong rent ➢ Foreign Exchange position➢ Strong tenant ➢ Ability to raise finance➢ Location ➢ Small buyer pool➢ Various titles ➢ Receiverships and mortgagee sales in

market➢ River outlook ➢ Strength of tenant

The existing vineyard use is a permitted activity within this rural zone.


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Lease Details – Terms and Conditions

The property is leased under a lease agreement and held for investment purposes. Thefollowing is a summary of the principal lease terms and conditions:

Premises: Dashwood Vineyard – Redwood Pass, Marlborough

Term: 10 years

Commencement Date: 31 October 2002

Rights of Renewal: Four (4) of Five (5) years each

Current Annual Rental: $2,191,653.45 excl GST ($182,637.78 per month)

Rent Reviews: Annually

Permitted Use: Vineyard

Operating Expenses: The tenant is responsible for 100% operating expensesassociated with the property.

The assessed current market rental for Dashwood vineyard as assessed at date of thisvaluation is ONE MILLION ONE HUNDRED THOUSAND DOLLARS ($1,100,000) perannum exclusive of GST.

Archaeological

Archaeological sites are present throughout the area and are not always officially recorded.Under the New Zealand Historic Places Act 1993 consent must be obtained to damage,destroy or modify archaeological sites such as for the creation of a house site or track or forland cultivation. Our valuation has been assessed on the basis that there are none on theland.

Environmental Issues

We were advised by the current owners that there is no known or recorded sitecontamination or environmental issues relating to the subject land.

The property has been utilised for viticulture activities. This use requires the use ofchemicals. There may be some chemical residues in the soil.

While due care has been taken to note any contamination liability, our investigations havebeen undertaken for valuation purposes only, and this report does not constitute anenvironmental audit. Unless otherwise stated no account has been taken of the effect onvalue due to contamination or pollution.


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Structural Improvements

While in the course of inspection due care is taken to note building defects, no structuralsurvey has been made and no undertaking is given about the absence of rot, termite or pestinfestation, deleterious substances such as asbestos or calcium chloride or other hiddendefects. We can give no guarantee as to outstanding requisitions in respect to the subjectbuilding(s).


We have undertaken searches of the Titles held for the above properties and have searchedany key encumbrance that may have an impact on the value or the realisation of theproperty in a sale process. Any registration or interest that would have impacted on theproperty has been discussed within our report and reflected in the valuation assessment.

In undertaking the valuations we have not relied on any legal opinions as regard to the stateof the title or any of the encumbrances.

All legal documents disclosed in this report are for reference only and no responsibility isassumed for any legal maters concerning the legal title to the property interests set out inthis report.

LIMITING CONDITIONS

1. Our responsibility in connection with this valuation report is limited to the person towhom the report is addressed and we disclaim all responsibility to any other partywithout reference to us.

2. This report may not be reproduced, in whole or in part, without our prior writtenapproval.

3. This report has been prepared for the purpose stated in the report and may be reliedupon for that purpose only. Assumptions made in the preparation of the report are asexpressly stated in the report or set out below.

4. Where it is stated in the report that information has been supplied to us by anotherparty, this information is believed to be reliable but we cannot accept responsibility ifthis should prove not to be so. Where information is given without being attributeddirectly to another party, this information has been obtained by our search of recordsand examination of documents or by enquiry from Government or other appropriatedepartments.

5. We have made no survey of the property and unless otherwise stated assume that allimprovements lie within the Computer Freehold Register boundaries. No guarantee isgiven that the land is not subject to statutory rights not recorded on the relevantComputer Freehold Register and not apparent from normal inspection of the property.We assume no responsibility in connection with such foregoing matters.


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6. We do not carry out investigations on site in order to determine the suitability ofground conditions and services, nor do we undertake environmental or geotechnicalsurveys. Unless notified to the contrary, our valuations are on the basis that theseaspects are satisfactory and also that the site is clear of underground mineral or otherworkings, methane gas or other noxious substances.

7. Unless otherwise stated our report is subject to there being no detrimentalregistration(s) affecting the land other than those appearing on the Computer FreeholdRegister(s) valued in this report. Such registrations may include Wahi Tapuregistrations and Historic Places Trust registrations.

8. We have not obtained from the territorial authority a Land Information Memorandum.Our valuation has been made on the basis that such Memorandum if obtained wouldnot have disclosed information which would have affected adversely our opinion of themarket value of the property.

9. No environmental audit has been undertaken, although contaminants present on the siteand obvious to us on inspection may have been noted in the report. No warrant isgiven, or is to be implied, in this report that the property is free from contaminants.

10. While in the course of inspection due care is taken to note building defects, nostructural survey has been made and no undertaking is given about the absence of rot,termite or pest infestation, deleterious substances such as asbestos or calcium chlorideor other hidden defects. We can give no guarantee as to outstanding requisitions inrespect to the subject building.

11. In preparing the valuation it has been assumed hot and cold water systems, electricalsystems and other devices, fittings and conveniences as are in the building to be inproper working order and functioning for the purpose for which they were designed.

12. Where a property is leased, this report records the nature of the information supplied.That information has been accepted and relied upon at face value. It has been assumedthat the information supplied is complete and accurate, and that the lease is fullyenforceable.

13. Unless otherwise stated in our report our valuation is on the basis that the propertycomplies with the Building Act 1991, Health and Safety in Employment Act 1992,Evacuation of Buildings Regulations 1992 and Disabled Persons Community WelfareAct 1975 or that the legislation has no significant impact on the value of the property.

14. We certify that Crighton Stone Limited holds professional indemnity insurance.

OPINION OF VALUE

The valuation assessment and corresponding figures of the Market Value of this property areshown in the attached summary of valuation and their respective valuation certificates.


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COMMENTS

Our valuation has been prepared in accordance with generally accepted valuation proceduresand in compliance with the requirements of the Rules Government the Listing of Securitiesof The Stock Exchange of Hong Kong Limited (the “Rules”), including but are not limitedto the provisions of Chapter 5 and Practice Note 12 of the Rules.

In valuing the property interests we have complied with the requirements contained in theInternational Valuation Standards 2003, the NZPI Valuation Standards and the Hong KongInstitute of Surveyors Valuation Standards.

All amounts are denominated in New Zealand dollars (NZD).

We enclose herewith the summary of the valuation and valuation certificates.

Yours faithfullyCRIGHTON STONE LTDBoyd A GrossB Agr (Rural Val), Dip Bus Std, FNZIV, FPINZ


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PropertyMarket Value in existing state


Dashwood VineyardRedwood Pass RoadMarlboroughNew Zealand

$21,730,000


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Dashwood VineyardRedwood Pass RoadMarlboroughNew Zealand

Dashwood comprises a 200.52hectare freehold parcelcontained on Redwood PassRoad in the Awatere Districton the northern side of theAwatere River near theSeddon township. Theproperty has beenprogressively developed since2001, being mainly planted in2001 and 2002. The existinguse of the property is as aproduction vineyard thatsupplies a third party winery.This vineyard use is aPermitted Activity under theMarlborough District CouncilsRural 3 zoning. The vineyardis contained on both thenorthern and southern sides ofRedwood Pass Road and hasbeen developed to a goodstandard. Other improvementson the property include anadministration, staff,implement shed, spray andworkshop complex, irrigationsource and reticulation,access, residential dwelling,sheds, and implement shed.The buildings have beenconstructed over variousstages from the 1980’s for thedwelling to early 2000’s forthe main vineyard structures.

The property iscurrently tenantedwith the leasecommencing on31 October 2002, thecurrent 10 year termexpires on the30 October 2012. Thetenant has four (4)rights of renewal offive (5) years eachbeyond the initialterm. The currentannual rental is$2,191,653.45($182,637.78 permonth) excludingGST.

$21,730,000


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SUITE 4/10 VICTORIA STREETBUNBURY WA 6230PO BOX 2493 BUNBURY 6231TELEPHONE(08) 9792 5544FACSMILE (8) 9792 5540EMAIL [email protected] www.hegney.com.au

10 December 2010


Re: Valuation – ‘Sirens Vineyard’, 135 Rowcliffe Road,Forest Grove, Western Australia

Following instructions received from Ms Bonita Ho, CK Life Sciences Int’l., we haveundertaken an inspection and prepared a valuation effective as of the 10 December 2010 ofthe property known as ‘Sirens Vineyard’, 135 Rowcliffe Road, Forest Grove, WesternAustralia, which we trust will be sufficient for your purposes. A copy of the letter ofinstructions is appended to the rear of this report.

1.0 ASSUMPTIONS, CONDITIONS AND LIMITATIONS

1. The valuation is subject to an encumbered fee simple title with a lease on theproperty. A fee simple title is the highest level of Title in Western Australia.

2. The valuation assumes that the details provided verbally and in writing by theowner /Lessee of the subject property are true and correct and without error oromission.

3. Unless otherwise stated, all valuation figures and calculations within this reportare exclusive of GST and in Australian Dollars.

4. We have conducted the valuation in accordance with Chapter 5 of the ListingRules and the Hong Kong Stock Exchange Checklist provided by CK LifeSciences Int’l Inc. However, we consider it necessary for any person relying onthis report to satisfy themselves to this fact by fully reading these in conjunctionwith this valuation. A copy of these has been appended to the rear of this report.

5. The report complies with the standards of the Australian Property InstituteGuidelines which has reciprocal rights with the Royal Institute of CharteredSurveyors (RICS). The valuer is eligible for membership to RICS. The valuer,Rodney Davidson, has 20 years valuation experience in Western Australia andmeets the requirements as per your original letter of instruction stating that thevaluer must have qualifications and experience relevant to Australia and itsprofessional institution of which he is a member. The valuation complies with theInternational Valuations Standards 2003.


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2.0 VALUATION APPROACH

The valuation is made on the basis of “Market Value” as adopted by The AustralianProperty Institute from the International Valuation Standards Committee definition.That is:

“the estimated amount for which an asset should exchange on the date of valuation between a willingbuyer and a willing seller in an arms’ length transaction after proper marketing wherein the parties

had each acted knowledgeably, prudently, and without compulsion.”

3.0 SYNOPSIS

The subject property comprises a 66.0852 hectare portion of rural land which has beendeveloped with a 44.01 hectare portion of developed vineyard and is currently leased toFoster’s Australia Limited (formerly Southcorp Limited).

We have been requested to determine a fair market value for the subject property to beused in a major transaction circular to be given to CKLS shareholders by the31 December 2010. The report must meet the Hong Kong Stock Exchange regulatoryrequirements.

The subject property has 17 months to run on the current lease term with two furtherfive year options.

In valuing the subject property we have analysed the subject property on a freeholdTitle basis and also on its current leasehold interest. We consider that the current leaseis above current fair market value and we have valued the subject property taking intoaccount what we consider to be its fair market value and applied a factor for profitrent.

The viticultural and wine industry within Australia is currently in a declined state withmany uncertainties. Recent transactions within the industry have shown a sharp declinein values with most transactions selling at or marginally above land values.

We report to you as follows.

4.0 LOCATION

A Location Map is appended to the rear of this report for your perusal.

The subject property is situated in the Forest Grove locality within the Shire ofAugusta-Margaret River, some 20kms south of the Margaret River townsite and some310kms south of the Perth Central Business District.

This area of the State is referred to as the South West region of Western Australia andis renowned for its high rainfall and scenic landforms.


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The surrounding properties to the subject comprise land utilised for traditionalagricultural practises as well as viticultural and some tourist pursuits. This region,being an attractive region of the South West of Western Australia, is becoming everincreasingly popular with those seeking an alternative lifestyle that this area can offer.

We note that properties within the immediate vicinity of the subject property have beenpurchased and utilised for alternative lifestyle, viticultural, traditional agricultural andtree plantation purposes.

Specifically the subject property is situated at the end of the made portion of RowcliffeRoad.

The Margaret River townsite has a population in excess of 6,000 persons with the Shirehaving approximately 11,000 persons. The townsite provides a full range of necessaryresidential amenities including schools, shopping centres, public transport, medical andrecreational facilities.

5.0 TITLE DETAILS

A search of the Certificate of Title has been undertaken from Landgate (WesternAustralian Land Information Authority). The details are as follows and we refer you toa copy of the Certificate of Title appended to the rear of this report.

5.1 LEGAL DESCRIPTION

The subject property is described as an estate in fee simple being Lot 1645 onDeposited Plan 201652, and being the whole of the land contained in Certificateof Title Volume 1812 Folio 834.


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5.2 REGISTERED PROPRIETOR

The Registered Proprietor is:

• Challenger Beston Ltd. Registered 9 October 2002.

Note: we have been advised that Challenger Beston Ltd is the responsibleentity for Challenger Wine Trust. We cannot comment further on thisrelationship.

5.3 ENCUMBRANCES

The following encumbrances have been registered in respect to the subjectproperty:

• I270568 Lease to Southcorp Ltd. Expires: see Lease. Registered 21 October2002.

Note: ‘Expires: see Lease’ refers to the fact that this Instrument will expirewhen the lease finishes. Please refer to the lease for the information andSection 16.0 within this report.

• I270569 Mortgage to National Australia Bank Ltd. Registered 21 October2002.

• *I270570 Caveat by Southcorp Ltd. Lodged 21 October 2002.

5.4 SURVEY

A current survey has not been sighted. The valuation is made on the basis thatthere are no encroachments by or upon the property and this should be confirmedby a current survey report and/or advice from a Registered Surveyor. If anyencroachments are noted by the survey report, the valuer should be consulted toreassess any effect on the value stated within this report.

6.0 TOWN PLANNING/GOVERNMENT AUTHORITIES

6.1 SHIRE OF AUGUSTA-MARGARET RIVER

We have been verbally advised by an officer within the Shire of Augusta-MargaretRiver that the subject property is currently zoned ‘Rural’ in accordance with theprovisions of the current Town Planning Scheme. The current use of the subjectproperty is a permitted use under this zoning.


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7.0 SITE DETAILS

We refer you the attached Certificate of Title sketch which indicates a slightly irregularshaped parcel of land. The dimensions of the lot are as follows:

Northern Boundary: 1,046.54 mEastern Boundary: 299.40 mSouthern Boundary (Slightly Truncated): 1,238.92 mWestern Boundary: 962.09 m

Total Land Area 66.0852 ha

8.0 SERVICES

Electricity and telephone services are currently connected to the property. There is noscheme water supply available in this area, with properties sourcing their own supplies.Sewerage disposal is via septic tank leach drain systems.

Power to the property is single phase.

Rowcliffe Road adjoins the property to its south western corner. The continuation ofRowcliffe Road and Holland Road has not been completed and are road reserves only.

9.0 LAND DESCRIPTION

With reference to the Department of Agriculture Land Resource Series No. 5 conductedby P J Tille and N C Lantzke, the subject property is situated within two land systems.To the western moiety of the site it is situated in the Wilyabrup Valleys Land Systemand the central and eastern moiety of the site is situated in the Treeton Hills LandSystem.

The Wilyabrup Valleys Land System is commonly yellow-brown duplex (Forest Grove)and redbrown, gravelly gradational (Keenan) soils.

The land capability had been traditionally used for grazing and the areas highlysuitable for this land use. Sufficient water for stock can usually be provided fromdams.

Since 1967 the viticultural industry has developed and produces fine quality tablewines. The slope gradient and the usually high gravel content of these soils ensuresgood drainage. Viticulturists prefer east and north facing slopes as damage to vinesfrom the prevailing south to westerly winds is reduced.

On the Treeton Hills Land System, the crests and side slopes have similarbrown-gravelly duplex soils but are also interspersed with mottled (Mungite) soils.


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This land system was also primarily used for grazing with the majority being goodgrazing country. Market gardening is largely restricted to fertile alluvial flats along theMargaret River and erosion can be a problem on more loam hill slopes particularly on(Mungite) soils.

With reference to the soil map appended to the rear of this report, the topography ofthe subject property comprises a creekline situated through the central moiety of thesite. This has a narrow band of Treeton Flat Soils and is not suitable for viticulture dueto drainage and water logging.

The remaining soils, particularly to the western and eastern moiety of the site, providegood soils for viticulture and a sufficient water resource has been created through thatcentral creekline.

10.0 CLIMATE

Climate in this area of Western Australia is fully Mediterranean, with cool winters andwarm summers. Bureau of Meteorology information confirms that the subject propertyhas an average annual rainfall of 1,100 millimetres. This area is considered a highrainfall area of Western Australia.

11.0 LAND DEVELOPMENT

11.1 DEVELOPMENT

Perusal of an aerial photograph combined with our onsite ground inspectionreveals the subject property has been extensively developed as a vineyard withsome remnant vegetation around the central creekline and some trees used aswindbreaks.

We consider that the subject property is predominantly fully developed forviticultural purposes.


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11.2 FENCING

The subject property has good quality timber post and wire rural style fencingthroughout.

11.3 WATER SUPPLIES

The subject property currently has two dams with one dam located centrally onthe Rowcliffe Road southern boundary of 41 megalitres.

There is a central creek line which has a smaller but permanent soak/dam of 11megalitres.

We consider that the subject property has adequate water supplies for the currentviticultural development on the site.

There is also a water licence on the subject property Instrument No. GWL98420with an annual water entitlement of 88,000 kilolitres. The licence is for theirrigation of 44 hectares of wine grapes. The licence is dated from 24 February2003 to 21 February 2013.


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12.0 IMPROVEMENTS

12.1 MAIN SHED

This is a colorbond shed constructed in approximately 2002 with concrete floorand free span steel frame. It has an open canopy area to the front and a lean-tostorage area to the rear with a dirt floor. There is also a further open concretehardstand area to the front. Areas are as follows.

Main Areas : 171m2

Front Canopy : 45m2

Rear Lean-to : 27m2

Concrete Hardstand : 36m2

Internally, the shed has a kitchen area and toilet.

The kitchen/lunchroom has a single sink set in a bench cupboard and a concretefloor. The ablutions comprise a toilet with basin.

There is a chemical hose down area to the front and a 2,000 litre rainwater tankadjoining the shed.


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12.2 PUMP AND FERTIGATION SHEDS

These are two adjoining sheds set on concrete floors. Pump shed has an area of25 m2 with the fertigation shed having an area of 20 m2.

12.3 VINEYARD

The subject property comprises 44.01 hectares of established vineyard which wasplanted in various stages from 1995 through to 2004. The vines are set on VSP(vertical shoot trellising system) with three metre rows and two metre vinespacing.

It is a fully irrigated vineyard with drip inline irrigation.


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The following is a breakdown of the vineyard by planting area.

Type Area Planted

Chardonnay 16.67 hectares 1995 – 1998Sauvignon Blanc 12.77 hectares 2001 – 2004Cabernet Sauvignon 10.07 hectares 2000 – 2004Malbec 1.30 hectares 2004Merlot 3.20 hectares 2000

Tonnages Year Tonnes Per Hectare

450 tonnes 2010 10.20

The yield is considered to be slightly above average for this style of vineyard andthe viticulturist has stated they tend to look for 8 tonnes per hectare.

Ninety percent of the fruit is currently used within the Southcorp/Fosters brands.

Inspection of the vineyard shows it to be well managed and in good conditionthroughout.


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13.0 CONDITION OF IMPROVEMENTS

The valuer is not a building construction and/or structural expert and this report is nota building construction or structural survey report. It is recommended that advice besought from other experts in respect of building construction/structural issues.Accordingly, no responsibility can be accepted by the valuer in relation to buildingconstruction/structural issues related to improvements located on the property.

The valuation assumes the improvements comply with the requirements of the relevantauthorities unless otherwise stated. Should the improvements be found to be in breach,the valuer should be consulted and the right is reserved to alter the value accordingly.

We did not note any items in disrepair or malfunction that we regard as serious in thecontext of our valuation.

14.0 ENVIRONMENTAL AND CULTURAL ISSUES

14.1 SITE CONTAMINATION

A visual site inspection and enquiries of local government authorities has notrevealed any obvious pollution or contamination. Nevertheless, we are not expertsin the detection or quantification of environmental problems and, accordingly,have not carried out a detailed environmental investigation. Therefore, thevaluation is made on the assumption that there are no actual or potentialcontamination issues affecting:

1. The value or marketability of the property.

2. The site.

Verification that the property is free from contamination and has not been affectedby pollutants of any kind should be obtained from a suitable qualifiedenvironmental professional. Should subsequent investigations show that the site iscontaminated this valuation may require revision.

Upon inspection of this site, there did not appear to be any evidence of sitecontamination, however we are not qualified in the detection or identification ofenvironmental problems, and accordingly have not carried out a detailedenvironmental audit. Therefore, we have assumed the property is unaffected andshould subsequent advice indicate the property be contaminated in any way, wereserve the right to reassess our valuation.

14.2 ASBESTOS PRODUCTS

Only a full expert analysis of the site would reveal whether there is actually anyasbestos fibre contamination from building products used on this site and we areNOT QUALIFIED to do such a site survey. We cannot therefore make anyabsolute guarantees that asbestos contamination has not yet occurred or will notoccur in the future on this site.


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14.3 HERITAGE ISSUES

Enquires to the relevant authorities have indicated that there are no currentheritage implications in respect to the subject property, nor did we expect todiscover any such implications in this instance.

14.4 ABORIGINAL SITES

We have assumed the property to be unaffected by Native Title claim for thepurpose of this valuation.

14.5 NOXIOUS WEEDS

We understand from discussions with the proprietors there are no noxious orcontrollable weeds of any significance on this property.

14.6 CHEMICAL RESIDUE

We believe there are no chemical resistant problems located on this subjectproperty from our enquiries made with the proprietors. The valuation has beenbased upon this premise.

15.0 LAND USE

The land is currently utilised as a vineyard.

16.0 TENANCY DETAILS

At the date of inspection there was a lease in place and the details of which are asfollows.

Lessor: Challenger Beston Limited

Lessee: Southcorp Limited

Commencement: 8th October 2002

Expiry Date: 31st May 2012

Term: 9 years and 7 months and 24 days

Options: Two options for a further term of 5 years each

Current Rental: $319,469.80 as of the 8th October 2010($26,622.48 per month)

Next Rent Review Date: 8th October 2011

Rent Review Type: CPI September Quarter All Cities Average or aminimum of 1% to a maximum of 5%


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Purchase Option Date: Between 12 months and 18 months prior to leaseexpiry

Purchase Option Price: Rate of market value or minimum purchase price

The Lease is basically designed around expenditure and return on expenditure which iscalculated by the Government Bond Rate plus 2.25%. This is then increased by a CPIamount per annum.

The rent on the option is the higher of the bond rate plus 2.25% times the market valueof the property, or the bond rate plus 2.25% times total expenditure plus aggregatecapital expenditure times a factor.

In this regard if the option was to be taken as at May 2012 it would appear that therent cannot be lowered.

The option purchase price at the expiry of lease also has a significant impact on thesubject property, as it is either the market value or minimum purchase price whicheverhas the greater value. We have been advised that currently the minimum purchase priceis $3,932,792. We consider that this is currently far in excess of fair market value andit would be highly unlikely that the Lessee would take up the option to purchase at thislevel.

The Lessee has requirements under the lease for full maintenance and repair of thevineyards to maintain it at a high standard.

The capital expenditure for the improvement of the subject property, when required canbe requested by the Lessee and then this is calculated into a further lease payment atthe formula being the bond rate plus 2.25% multiplied by that expenditure.

Note: We consider that in the current economic environment and the current climate forthe viticultural and wine industry of Australia, the lease is well above what weconsider to be current fair market rental value.

We therefore consider that the lease provides a profit rent to the subject property.

17.0 GENERAL COMMENTS

The subject property comprise 66.0852 hectare portion of rural land situated in theForest Grove locality south of the Margaret River townsite being approximately 20kms.The property comprises a central creekline, two established dams and has beendeveloped with a 44.01 hectare production vineyard. The subject site is currently leasedto Foster’s Australia Limited (formerly Southcorp Limited) and currently has 17months until the lease expires. The lease commenced on the 8th October 2002.

Under the lease the whole property is run by Foster’s Australia Limited (formerlySouthcorp Limited) and they currently pay an annual rental of $319,469.80. Thisamount has been in place since the 8th October 2010 and will be increased by CPI on


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the 8th October 2011. The lease has been designed and based on a return on investmentwhich is the capital expenditure on the site, at the government bond rate plus 2.25%.This has been increased by CPI annually.

In the current economic climate and particularly with the state of the viticulture/wineindustry of Australia having a large oversupply, we have seen the price of viticulturalproduce drop markedly over the preceding 2 – 3 year period. This has also led to amarked drop in property values for viticultural holdings throughout the market. Thiscombined with the global financial crisis has led to a sharp decline in consumerdemand for both wine products and property in general.

The subject vineyard appears to be well managed and is currently in excellentcondition and we have been advised approximately 90% of the fruit is used within theFoster’s Australia Limited (formerly Southcorp Limited) brand of ‘Devils Lair’.

We consider the current lease in the order of $319,469.80 per annum indicates a rent ofapproximately $7,259 per annum per hectare. On limited evidence there have beenrecent transactions at approximately $3,000 – $3,500 per annum per hectare for muchsmaller holdings. This is coupled with numerous sightings of vineyards being leased at‘peppercorn’ rentals with the day – to – day management and running of the vineyardbeing handled by another party in exchange for the fruit.

In valuing the subject property we have analysed what we consider to be the currentfair market value of the property and then added a ‘profit rent’ for what we considerwould be the excess rental component of the current lease.

Recent transactions of production vineyards within the Margaret River appellation showonly a marginal added value for the vineyard over the underlying land and buildingcomponent value of the sites. Discussions with active agents within this market havestated there is little demand for properties with the only demand coming fromestablished operators possibly looking for an opportunity to secure a property with fruitthey may require, but at a bargain price. However, these buyers are very limited.

Due to the marginal added value of the vineyard component throughout the regioncoupled with the state of the viticultural industry in Margaret River and Australia andthe uncertainty continuing to surround the market with the global financial crisis wehave adopted an added value for the vineyard component of $10,000 to $15,000 perhectare and we have adopted $12,500 per hectare. This is significantly discounted backfrom peak value levels which had added values of vines in the order of $50,000 to$60,000 per hectare.

We consider the added value of the vineyard component is in line with the currentmarket.

As previously stated, we consider that there is current lease which showsapproximately $7,259 per hectare of established vineyard and we consider that recentleasing evidence would indicate this should be no more than $3,000 per hectare.


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On a monthly basis this would indicate a ‘profit rent’ in the order of $15,620 permonth. On a ‘present value’ calculation using a 7.5% interest rate and a 17 month termwith the payment of $15,620 per month, indicates a ‘profit rent’ over the remainingmonths of $252,746.

We have also examined what we consider to be a current return on the subjectproperty, which indicates a 15.2% return under the current lease at our encumberedmarket value. We do know though that the lease only has 17 months to run, iscurrently far over market rental value and this return is not sustainable. Therefore weconsider it would not attract an investor under this investment regime.

By applying what we consider to be a fair rent to the subject property at $3,000 perhectare of established vineyard, this shows an overall rental return of $132,000 for thesubject property.

A calculation on what we consider to be return on the unencumbered value of thesubject property, we have as follows:

Unencumbered value of the subject property being $1,850,000 at the fair market rent of$132,000 indicates a return of 7.1%. We consider that at this level it may attract aninvestor but it would be difficult.

We have valued the subject property on an open fair market value basis of what weconsider the market is as at the 10 December 2010. The viticultural market is currently.In the medium term we may see the market recover particularly with vines beingremoved throughout regions of Western Australia and Australia, which should bring therecovery forward. At this stage it is difficult to provide a clear view of when themarket will recover.

POSSIBLE SALE TO THE FOSTER GROUP

We consider recovery during the remaining term of the lease being 17 months isunlikely. Therefore, it is likely that Fosters may not renew its lease particularly at itscurrent level being above fair market rental value and if they were to exercise its rightunder the lease, unlikely to purchase the property at what we consider would be wellabove fair market value.

Though, we do consider that as this vineyard adjoins their current ‘Devils Lair’Vineyard and it is a brand estate used in their ‘Fifth Leg’ label, it could be seen as astrategic purchaser for Fosters.

We consider that Fosters may pay a premium over the fair market value that we haveadopted for the subject property. It is difficult to ascertain exactly what this premiumwould be, but we consider it would be above the current level of value that we havegiven the property particularly at its unencumbered value level.

Historically, adjoining owners purchase strategic properties at above fair market valueand we consider this is likely to be the case for the subject property.


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PROPERTY CLASSIFICATION

Subject to your requirements, this property would fall into the classification of‘investment purposes’ as it is currently leased with further options available.

18.0 MARKET COMMENTARY

18.1 SPECIFIC AREA

Over the past 24 to 36 month period, we have seen a softening of the viticulturalmarket throughout Western Australia and also in Australia itself. There has beenan excess supply of wine grapes throughout Australia which has led to a softeningof the market in general. We note however, that land values for the region haveremained relatively strong with reference to the alternative lifestyle market,although demand due to the global economic conditions and the credit crisis hascaused this market to soften in recent times with falls in values being posted, aswell as a large supply of property on the market with limited purchasers.

From discussions with agents, we note that during the past 9 to 12 month period,there has been a significant decrease in demand for well located viticulturalproperties with very little activity occurring and a large number of propertiesbeing currently on the market. As such, we consider values for this type ofproperty may still be softening.

We are aware that the transaction of production vineyards in Western Australiahave traditionally shown added value of vines on an overall per hectare vineyardbasis in the 2000 to 2002 period as being between $50,000 to $60,000 per hectarefor quality well located vineyards. These values have then dropped in the 2004 to2005 period in the order of $30,000 to $40,000 per hectare which then increasedfor a short period of time in the vicinity of $45,000 to $55,000 per hectare in the2006 to 2007 period due to the drought conditions occurring in the eastern stateswhich increased demand for Western Australian wine grapes. We note howeverthat analysis of vineyard sales and discussions with agents handling this style ofproperty, we believe this figure has dropped back to around $20,000 to $30,000per hectare for quality, well set up vineyards with good contracts for their fruit.

We note values have fallen further for those vineyards whose fruit is uncontractedand located in secondary areas of the main viticultural region of WesternAustralia. A number of recent sales show minimal added value of the vines up toa maximum of $25,000 per hectare, for a well located property with a far smallerholding.

As such, we consider the current viticultural market in Western Australia is underpressure at present and could soften further. This could be further accelerated bythe poor global economic conditions that are being experienced across the worldat present and the strengthening Australian dollar has decreased Australia’scompetitiveness in U.K. and U.S.A. markets by 25% to 30%.

19.0 VALUATION METHODOLOGY

In establishing a fair market value for the subject property we have used the acceptedvaluation principles including Direct Comparison, Summation Approaches andBreakdown of the Encumbered Value for Financial Reporting.


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The following sales evidence has been used in determining these methods.

All reasonable attempts have been made to establish the method by which GST hasbeen calculated on the sales evidence analysed below. Where written documentationcould not be cited, we have relied upon verbal advice provided by selling agents,vendors and/or purchasers. This valuation assumes that the advice provided verbally istrue and correct and without error or omission. Should this not be the case we reservethe right to review this valuation.

19.1 MARKET EVIDENCE

It is conceded that not all properties are directly comparable, however a range ofevidence has been put forward to provide the best cross section for valuationpurposes.

A cross section of the market evidence examined is as follows:

LAND & BUILDING SALES

1. Proposed Lot 303 Buller Road, Karridale $850,000 02/10

Land Area: 40.83 ha

Improvements: Property comprises gently undulatingcleared and pastured land with smallstands of remnant native vegetation.Tree lined with a creek runs parallel tothe western boundary. This sale reflects$20,818/ha.

Comparison Comment: Smaller allotment reflecting higher ratesper hectare. Slightly superior location.No improvements.

2. Lot 5 Ironmonger Road, Karridale $1,500,000 04/10

Land Area: 78.75 ha

Improvements: Property comprises mainly cleared andpastured land with small area ofremnant vegetation. Improvements tothe property comprise a basic fibrocottage in poor condition, some shedsand two large dams. The property alsohas frontage to Caves Road. Salereflects $19,047/ha overall or $18,500/ha for the land component.

Comparison Comment: Location considered superior.Improvements considered inferior.Similar size allotment.


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3. 410 Brockman Highway, Karridale $1,265,000 01/10

Land Area: 42.63 ha

Improvements: Property comprises a predominatelycleared pastured allotment bisected by awinter creek line which is beingdammed for a relatively large body ofwater. Comprises a refurbished originalgroup settlement homestead with 3bedrooms, 2 bathrooms, plus studio andstudy. There are also general farmmachinery sheds. Property has beendeveloped with approximately 10 ha ofestablished vineyard and currentlytrades as “Random Valley”. Propertywas originally asking $1,850,000.Vineyard component considered to behighly depreciated providing little or noadded value. Sale reflects $29,674/haoverall or $19,500/ha for the landcomponent.

Comparison Comment: Similar location. Smaller landcomponent reflecting higher rate perhectare. Inferior building improvements.Inferior overall.

4. Lot 3905 Twenty Four Road, Karridale $1,500,000 11/09

Land Area: 108.15 ha

Improvements: Property comprises mainly cleared andpastured allotment, which features aconventional house, storage sheds andwinter creek. Analysis shows a rate of$13,869/ha over all or $12,000/ha forthe land component.

Comparison Comment: Larger rural holding in similar location.Inferior building improvements.

5. Lot 8 Garstone Road, Cowaramup $800,000 05/10

Land Area: 20 ha

Improvements: Comprises a vacant rural allotmentimproved with a small dam andstockyard. Predominantly clearedpasture with some stands of nativevegetation and rural valley views.Shows $40,000/ha.

Comparison Comment: Smaller landholding.


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6. 331 North Treeton Road, Cowaramup $1,160,000 05/10

Land Area: 48.8 ha

Improvements: Comprises a vacant rural allotmentsituated approximately 5.5kms fromCowaramup. Comprises undulatingpaddocks with a winter creek fed damand some stands of native vegetation.Sales shows a rate of $23,741/ha.

Comparison Comment: Well located. Small landholding.

7. 252 Osmington Road, Margaret River $925,000 01/10

Land Area: 20 ha

Improvements: A well located lot, cleared with acreekline and an extended 5 bedroom, 1bathroom group settlement house.Shows $35,000/ha.

Comparison Comment: Good location.

8. Lot 22 Taylor Road, Jindong $1,300,000 04/09

Land Area: 59 ha

Improvements: Comprises a portion of rural land whichhas been developed with a substantial 4bedroom 2 bathroom brick and ironresidence and large workshop. Theresidence has a building area of 240 m2

and the workshop 150 m2. The propertyhas two old dairies. Predominantlygrazing land with approximately 20hectares of remnant vegetation and acreekline. Shows a land value of$900,000 or $15,250/ha.

Comparison Comment: Inferior location and land.

VITICULTURE SALES – WESTERN AUSTRALIA

1. Vineyard, Pilandri Road, Margaret River $3,000,000 10/10

Land Area: 57.89 hectares

Planted Area: 23.66 hectares


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Improvements: The subject property is an establishedolder vineyard of 23.66 hectares ofmostly aged vines. This is anundulating parcel of land and includesan old stone and iron roof residence.This property had an offer of$2,700,000 which was rejected by theowners. Considered a prime location.Discounting back the value of land andimprovements and working on theprevious offer would indicate an addedvalue of the vines in the order of$20,000/ha or at a higher counter offeramount would indicate a value in theorder of $25,000/ha.

2. Foxcliffe Estate, Davis Road, Witchcliffe $1,625,000 02/10

Land Area: 62.2 ha

Planted Area: 39.40 ha

Improvements: Comprises a rural allotment adjoiningthe Witchcliffe townsite. It has a fullyestablished 39.4 hectare vineyardcomprising Cabernet, Sauvignon,Merlot, Zinfandel, Petit Verdot andShiraz varieties. The property wasowned and managed by a longestablished wine brand. Ancillaryimprovements include a large iron shedand four bedroom two bathroomresidence of approximately 300 m2.Excluding the house, the sale shows anunderlying value of $22,300/haincluding the vines. Sale indicates thereis little added value for the vineyardand is indicative of the depressednature of this industry. At best shows$5,000/ha for the vines.

Comparison Comment: Inferior overall.

3. 529 Osmington Road, Margaret River $1,945,000 12/09




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Improvements: Comprises a winery and cellar doorwith bed & breakfast and chaletsituated adjacent to the ColonialBrewery on Osmington Road north ofMargaret River. The property isdeveloped with 4.9 hectares ofestablished Cabernet vines. Theproperty was purchased for its touristshort-stay business with the vineyard,winery and cellar door to be leased out.

Comparison Comment: Superior improvements and location.

4. Dragonvale Estate – 599 Brockman Highway,Karridale

$2,000,000 12/09

Land Area: 78.55 ha


Improvements: Comprises a portion of rural land whichhas been developed with 35.81 hectaresof vines, 80 megalitre substantial dam,large new residence of brick and ironconstruction built in 1997, manager’sresidence being rustic timberweatherboard and iron roof (185 m2),associated sheds and otherinfrastructure.

This vineyard sold under somewhatdistressed circumstances and showslittle to no added value for the vineyardcomponent. We note this property wasoriginally purchased for $2,700,000some three years earlier andapproximately $300,000 – $500,000was also spent on the vineyard. It wasoriginally purchased under a leaseagreement with the Lessee defaultingand has now been sold under forcedcircumstances. Production vineyard,distressed sale. Sale at best shows$5,000/ha for the vines.

Comparison Comment: Larger landholding. Two houses.Inferior location.


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5. Lot 7 Brockman Highway, Karridale $1,285,000 01/10

Land Area: 42.60 ha

Planted Area: 28 ha

Improvements: Comprises a portion of rural land withimprovements comprising a refurbishedoriginal group settlement homesteadwith 3 bedrooms 2 bathrooms plusstudio and study. The studio is smalland has been renovated internallyincluding unisex toilet and wash basin.There are also general sheds. Theproperty has been developed withapproximately 28 hectares of vines andcurrently trades as ‘Random Valley’. Itwas originally asking $1,850,000.

Comparison Comment: Inferior.

6. 1403 Wildwood Road, Yallingup $2,000,000 05/09

Land Area: 35.80 ha

Planted Area: 5 ha

Improvements: Property has been developed with acedar, iron and stone lifestyle residence,associated sheds and has someviticulture improvements ofapproximately 5 hectares of establishedvineyard. Not a full ‘arms length’transaction but at market value. Soldfor its lifestyle attributes and location.

Comparison Comment: Superior location. Overall better.


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7. Lot 22 Stephens Road, Margaret River $4,000,000 09/08

Land Area: 63.26 ha

Planted Area: 22 ha

Improvements: The subject property has 22 hectares ofaged vines in a premium locality ofMargaret River. The property is alsodeveloped with substantialimprovements including one largehouse, a secondary house and thirdminor residence with associated sheds,small winery and good dam watersupply. This property indicates anadded value of the vines at $35,000/ha.This sale had good interest with anoriginal asking price in the order of$6,000,000 indicating much lowerlevels of value for this style ofproperty. We consider that some 12months prior to this sale, this propertywould have had a value in the order of$5,000,000. Sold during a strongermarket and we consider would now sellfor substantially less.

Comparison Comment: Sold during a much stronger market.

8. Omrah Vineyard, Mt Barker $1,500,000 12/09



Improvements: The subject comprises five Titles ofland with 72.70 hectares of vines on thefringe of the Mt Barker townsite. Wasbeing sold by the assets fromConstellation Group when they soldGoundrey Wines – this was a superiorvineyard. The property has offices andstaff quarters, 120 megalitre dam, anolder renovated managers residence anda large main home with olderrenovation.

Comparison Comment: Considered to have sold below landvalue, with no added value of vines.


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9. Fox River Vineyard, Albany Highway, MtBarker

$2,100,000 12/09

Land Area: 207 ha

Planted Area: 69 ha

Improvements: The property is held over ten Titlessouth west of Mt Barker and has beendeveloped with 69 hectares ofestablished vines and large cellar doorcomplex. Sold originally by theConstellation Group for the buyer ofGoundrey Wines. Being on sold in thistransaction as it is surplus to theirrequirements.

Comparison Comment: Has sold below land value, with novalue for the vineyard. Currently leasedat a ‘peppercorn’ rent.

10. Windy Hill Vineyard, Mt Barker $725,000 01/09

Land Area: 47 ha


Improvements: An established vineyard of 26.70hectares with sheds and a small 3bedroom 1 bathroom residence. Alsopart of the Goundrey sale byConsolidation Group.

Comparison Comment: This shows no added value for thevineyard.

11. Constellation Vineyard, Pemberton $4,715,000 06/08


Planted Area: 81 ha


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Improvements: The subject property comprises 81 haof established vineyard with residenceand associated shed infrastructure and anumber of irrigation dams. We considerthis sale indicates an underlying valuefor the vineyard in the vicinity of$28,000/ha. The vineyard itself isapproximately 75% white varieties andthe property is considered to have soldat the lower end of its value range andwould be considered indicative ofwhere the market is at present forproduction vineyards in a softeningmarket.

Comparison Comment: Smaller land area, much smallervineyard. Sold during a strongermarket.

12. Gnangara Vineyard, Seton Ross Road, Shire ofManjimup

$6,300,000 12/07

Land Area: 257 ha

Planted Area: 101 ha

Improvements: The subject property comprises a largeproduction vineyard with 101 ha ofvines, being a mixture of Chardonnay,Sauvignon Blanc and Shiraz,established in 2003. The vineyard wasleased to Evans and Tate previouslywith improvements being relativelybasic and the vineyards considered tohave an added value of $55,000/ha.Considered a high sale in a much morebuoyant market.

Comparison Comments: A large production vineyard which soldduring a stronger market.


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VITICULTURE SALES – EASTERN STATES

We have also been advised of some recent sales within the Eastern States ofAustralia. We note we have not inspected these properties but have been provideddetails. These are as follows.

1. Robertson’s Well, Riddoch Highway, North ofCoonawarra, South Australia

$1,650,000 10/09

Land Area: 83 ha

Planted Area: 71 ha

Improvements: Comprises an 83 hectare allotmentplanted with 71 hectares of vinescomprising Cabernet Sauvignon andShiraz. It was developed in the mid –1990’s. Other improvements include anadministration building, sheds andchemical mixing facilities. The propertyhad a 32.5 hectare irrigation equivalentground water licence. The vineyardproduces 619 tonnes and is consideredto indicate approximately $5,000 –$6,000/ha on vines applying $15,000/haon land value.

2. Partalunga, Mount Keyneton Road, MountPleasant, South Australia

$2,400,000 10/09

Land Area: 224 ha

Planted Area: 84 ha

Improvements: Comprises a 224 hectare portion of landwhich has been planted with 84hectares of Chardonnay, Shiraz,Sauvignon Blanc and Riesling. It hastwo substantial dams of 145 megalitresand 60 megalitres and licenses for 98.9hectares of vines. Other improvementsinclude a 5 bedroom residence, severalsheds, office, shearing shed, hay shedand chemical sheds. Producesapproximately 527 tonnes and had agrape contract for 350 tonnes.

The property was to be run short termas a vineyard and then had long termsubdivision potential. The current landvalues in this locality shows littleadded value for the vines.


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3. Glenlofty, Elmhurst, Victoria $1,150,000 02/09

Land Area: 265 ha

Planted Area: 112 ha

Improvements: Comprises a 265 hectare portion of landplanted to 112 hectares of vinescomprising Shiraz, Chardonnay,Cabernet Sauvignon and Marsane. Thevineyard was originally planted in1995. improvements include amanager’s residence, office, meetingroom, large modern machinery shed andpump shed. Water entitlement is 100megalitre diversion license fromGlenlofty Creek. Offered for sale withno contract. Indicates no value for thecurrent vines.

CURRENT VITICULTURE PROPERTIES ON THE MARKET

1. Tabuya Vineyard, Jindong $750,000 –$950,000

ASKING PRICE

Land Area: 30.13 ha


Improvements: Comprises a 30.13 ha parcel of ruralland improved with 23.14 ha ofdeveloped vineyard planted in 2000.There is a dam and shared licensedbore of 42,750 kilolitres. Situatedapproximately 14kms from Vasse. Theproperty is offered for sale at $750,000to $950,000 with no consideration forthe vineyard. A written quote isavailable for the removal of thevineyard and the owner is consideringall offers.


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2. Farm/Vineyard, Sabina River $1,080,000plus WineStock

ASKING PRICE

Land Area: 28 ha


Improvements: Comprises a parcel of rural land brokenup by tree belts and an establishedvineyard. Improvements include a fourbedroom one bathroom home with largeentertaining areas. A large 144 m2 plantand equipment shed plus two othersheds and cool room. Vineyard plantinginclude: Shiraz – 5 acres; SauvignonBlanc – approx. 6 acres and Merlot 2.5acres. The property is being offeredwith plant and machinery.

3. Pemberton Estate Vineyard $1,550,000 ASKING PRICE



Improvements: Property has a single level residence,large machinery shed, pump sheds andother vineyard improvements.Discounting value of improvements andland would indicate an underlyingasking value for the vines of $14,000/ha. Asking price has recently beenreduced from $1,900,000.

4. Commercial Vineyard, Jindong Road,Jindong

$1,200,000 to$1,500,000

ASKING PRICE



Improvements: This vineyard yields over 300 tonnesand was established in 1998.Discounting the value of the landcomponent indicates value of $16,200/ha for vines.


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5. Vineyard, Margaret River $2,600,000 ASKING PRICE



Improvements: Comprises a rural holding withvineyard in the northern part of theMargaret River wine appellation.Ancillary improvements include a 140 m2

all steel lockup shed consisting oflunchroom, plant and equipment storageand chemical storage. A water supply isvia a 38 megalitre dam and a waterlicense in place to extract water fromthe Leederville Aquifer. The propertyhas contracts in place.

6. Broomestick Estate, Rocky Road,Margaret River

$2,600,000 ASKING PRICE



Improvements: The subject property comprises anundulating landholding with a large 4hectare lake/dam and was first plantedin 1997. Fruit is currently being sold tomajor wineries. It has a combination oftwo full length railway carriages,ablution block set up for privateaccommodation. There is also asubstantial landholding of trees worthapproximately $100,000. We considerthis property would have a value in theorder of $2,200,000. Discounting backthe value of the dam, land andimprovements would indicate an askingprice of the vines in the order of$40,000/ha.


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7. Margaret River Vineyard, WirringRoad, Cowaramup

$2,525,000 ASKING PRICE



Improvements: The subject property comprises anundulating parcel of land with asubstantial lake style dam and arenovated weatherboard cottage. Vineswere established in 1998 and area amixture of reds and whites and there isa four year contract on the fruit. Thispreviously had an offer of $2,250,000during a stronger market. Indicates anasking price in the order of $50,000/hafor the vines. In the current market thisis considered high.

19.2 VALUATION METHODOLOGY CALCULATIONS

19.2.1 DIRECT COMPARISON APPROACH

The initial method of valuation is the Direct Comparison method, that being theanalysis of sales of similar properties by comparative basis. The basis ofcomparison is reflected in a value of the improved site as measured against theimproved land area, building area and unimproved land area as applicable. Whenundertaking this comparison factors such as, but not limited to, the following areassessed and then related back to the subject property as a whole.

• Location • Zoning • Type of Buildings• Land Area • Development Potential • Design and Function• Frontages • Site Coverage • Construction Materials• Topography • Site Layout • Age and Quality• Services and Access • Car Parking • Degree of Obsolescence

Most of the sales evidence examined for the subject property indicates a currentfair market value in the order $2,000,000 to $2,200,000 and we have adopted$2,100,000.

19.2.2 SUMMATION APPROACH

We have also examined a Summated Value as a guide to value (i.e. land valueplus the depreciated value of the existing improvements allowing for bothphysical and functional obsolescence). We believe this to be a realistic method bywhich the majority of owner occupiers would assess the property in the currentmarket.


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In applying appropriate rates for the building areas, we have had regard toindicative unit construction costs as per Rawlinson’s Australian ConstructionHandbook. For the purpose of the valuation we have adopted a depreciation ratethat reflects the age, degree of obsolescence and condition of the improvements.

The calculation in respect to a land value plus depreciated replacement cost of theimprovements is as follows:

Land Value Adopt: 66.0852 ha @ $18,000/ha $1,189,533 $1,200,000

Improvements:

Shed 171 m2 @ $200/m2 $ 34,200Shed Canopy 45 m2 @ $100/m2 $ 4,500Shed Lean-to 27 m2 @ $100/m2 $ 2,700Hardstand 36 m2 @ $30/m2 $ 1,080Pump Shed 1 25 m2 @ $200/m2 $ 5,000Pump Shed 2 20 m2 @ $200/m2 $ 4,000

Total: $ 51,480

Adopt: $ 50,000Other Infrastructure

Roads/Fencing $ 50,000

Vines

Area 44.01 ha @ $12,500/ha $ 550,125Adopt: $ 550,000

Subtotal – Land/Buildings/Vines $1,850,000Plus Profit Rental for Lease (the profit rental value is the current rental value per month less what we

consider would be a fair market rental).($15,620/month @ 17 mths @ 7.5% interest) $ 252,746Adopt: $ 250,000

Total Encumbered Value $2,100,000

20.0 SUMMARY

Application of these methods produced a current fair market value range for the subjectproperty of $1,850,000 unencumbered and $2,100,000 encumbered with the currentlease.

21.0 S.W.O.T. ANALYSIS

21.1 STRENGTHS

➢ The lot has good soils being well suited for viticultural use.

➢ The vineyard is well managed and in excellent condition.

➢ The subject property is situated next door to ‘Devils Lair’, a large productionvineyard owned by Foster’s Australia Limited (formerly Southcorp Limited) and iscurrently being leased by this group.


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➢ The vineyard produces quality fruit.

21.2 WEAKNESSES

➢ The subject property has a high area of Chardonnay vines which is currently aweak variety. The Cabernet Sauvignon, whilst good is also a weak variety. TheMelbec and Merlot are currently very weak varieties.

➢ The lease only has 23 months to run and the lease is considered to be over fairmarket value. The lease has an option to purchase but we consider the option topurchase formula and level is far above fair market value.

➢ There is currently a vast oversupply of viticultural produce throughout WesternAustralia and Australia. The likely timeframe for this oversupply to reduce to anequilibrium is at least 4 – 5 years. The USA and European and UK markets arecurrently very slow due to the global financial crisis and the high Australiandollar.

21.3 OPPORTUNITIES

➢ The subject property has suitable sites for a residence if required.

➢ Develop a strategy to have Foster’s Australia Limited (formerly SouthcorpLimited) renew the lease at similar rates.

21.4 THREATS

➢ The lease will not be renewed and there are no contracts in place for the fruit.

➢ The viticultural industry is in a declined state and it is difficult to see aturnaround in the short term. A further softening in economic conditions withinAustralia and the world would have an effect on this property.

22.0 VALUATION

22.1 MARKET VALUE – ENCUMBERED

After taking into account all of the relevant factors, along with sales evidence, thecurrent market value of the subject property known as Lot 135 Rowcliffe Road,Forest Grove, Western Australia is considered to be, subject to an encumbered feesimple title

As At10 December 2010$2,100,000 AUD

( Two Million & One Hundred Thousand Dollars AUD )Exclusive of GST


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Disclosure: In valuing the subject property we have complied with therequirements of the International Valuation Standards 2003 and the AustraliaProperty Institute Guidelines. We are recognised by the Australian StockExchange.

23.0 RECOMMENDATIONS

23.1 INSURANCE ESTIMATE

The current replacement costs for insurance purposes of the main buildingimprovements, including demolition, removal of debris and clearing, statutory,council and professional fees is considered to be $150,000. This assessment isindicative only and should you require a more precise costing a quantity surveyorand/or architect should be consulted.

24.0 DISCLAIMERS

The valuation is for the use only of the party to which it is addressed and is not to beused for any other purpose. No responsibility is accepted or undertaken to any thirdparties in relation to this valuation and report. The valuer’s inspection and report doesnot constitute a structural survey and is not intended as such. We, Hegney PropertyValuations and the valuer Mr Rod Davidson state that we do not have any direct,indirect or financial interest in the property described herein. This report is alsoprovided on the basis that we will not be liable for losses resulting from marketfluctuations.

This report is relevant as at the date of preparation and to circumstances prevailing atthat time. However, within a rapidly changing economic environment experiencingfluctuations in interest rates, rents and building expenditure, returns on investments andvalues as a consequence can change over a relatively short time scale. We thereforestrongly recommend that before any action is taken involving acquisition, disposal,shareholding restructure or other transaction, that you consult the valuer.

This valuation is current as at the date of valuation only. The value assessed hereinmay change significantly and unexpectedly over a relatively short period, (including asa result of general market movements or factors specific to the particular property). Wedo not accept liability for losses arising from such subsequent changes in value.Without limiting the generality of the above comment, we do not assume anyresponsibility or accept any liability where this valuation is relied upon after theexpiration of 3 months from the date of the valuation, or such earlier date if youbecome aware of any factors that have any effect of the valuation.


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Unless otherwise stated all valuation figures provided are GST exclusive.

Should any other leases exist in respect to the premises, we reserve the right to reviewthe valuation.

Except as specifically set out in this report, the valuation is given on the basis that:

1. The client has made a full and frank disclosure of all material information.

2. The improvements comply with the requirements of relevant authorities.

Neither the whole nor part of this report, nor any reference thereto may be included inany document, circular or statement without our written approval of the form andcontext in which it will appear. Note: we have given approval for it to appear in aStock Exchange circular.

Finally, and in accordance with standard practice it is stated that this report is preparedfor the addresses only and no liability for damages incurred by a third party using thewhole or any part thereof will be accepted.

We have carried out an inspection of exposed and readily accessible areas of theimprovements. However, the valuer is not a building construction or structural expertand is therefore unable to certify the structural soundness of the improvements. Readersof this report should make their own enquiries.

The report is not to be relied upon by any other person or for any other purpose. Weaccept no liability to third parties nor do we contemplate that this report will be reliedupon by third parties. We invite other parties who may come into possession of thisreport to seek our written consent to them relying on this report. We reserve our rightto withhold consent or to review the contents of this report in the event that ourconsent is sought.

Yours faithfullyFor Hegney Property ValuationsSouth West & Great SouthernMr Rod Davidson DirectorAssociate of the Australia Property InstituteCertified Practising ValuerAAPI LIC VAL No. 44053FOR THE STATE OF WESTERN AUSTRALIA


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The following table is a reconciliation of the property value set out in Appendix V with thefigures set out in the Accountants’ reports on CWT in Appendix II of this circular.

PropertyValue in December 2010

per Appendix V

Value as ofJune 30, 2010

perAccountant’s

Report(Appendix II)

Valuationgain/loss

during theperiod

in originalcurrency ’000 in AUD’000(1) in AUD’000(2) in AUD’000

Cocoparra & Woods Vineyards AUD10,000 10,000 10,032 -32Whitton Vineyard AUD3,900 3,900 3,600 300Summers Hill Vineyard AUD1,075 1,075 1,150 -75Waikerie Vineyard AUD1,200 1,200 1,218 -18Schuberts Vineyard AUD5,400 5,400 5,562 -162Balranald Vineyard AUD21,800 21,800 21,594 206Stephendale Vineyard AUD22,750 22,750 23,750 -1,000Richmond Grove Vineyards(3) AUD16,750 16,750 32,000(3) -5,950Chapel Vineyard AUD800 800 1,270 -470Lawsons Vineyards(3) AUD9,300 9,300Corryton Park Vineyard AUD2,350 2,350 2,500 -150Poole’s Rock Vineyard & Winery AUD5,400 5,400 5,700 -300Hermitage Road Winery AUD1,500 1,500 1,500 0Qualco East Vineyard AUD6,500 6,500 5,785 715Miamba Vineyard AUD10,100 10,100 10,601 -501Del Rios Vineyard AUD42,950 42,950 40,480 2,470Gimblett Vineyard(4) NZD2,425 1,810 4,709(4) -1,381Hwy 50 Vineyard(4) NZD2,035 1,519Crownthorpe Vineyard NZD17,000 12,687 19,564 -6,877Rarangi Vineyard NZD17,080 12,746 14,654 -1,908Dashwood Vineyard NZD21,730 16,216 17,911 -1,695Sirens Estate Vineyard AUD2,100 2,100 2,060 40

Total non-current assets 208,853 225,640 -16,787

(1) NZ properties were translated using a AUD/NZD rate of 1.34

(2) NZ properties were translated using the 30 June 10 AUD/NZD rate of 1.23

(3) Richmond Grove Vineyard and Lawsons Vineyard operate as one, and their values were combined in theJune 30, 10 report.

(4) Gimblett Vineyard and Hwy 50 Vineyard operate as one, and their values were combined in the June 30, 10report.


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1. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept fullresponsibility, includes particulars given in compliance with the Listing Rules for thepurpose of giving information with regard to the Company. The Directors, having madeall reasonable enquiries, confirm that to the best of their knowledge and belief theinformation contained in this circular is accurate and complete in all material respectsand not misleading or deceptive, and there are no other matters the omission of whichwould make any statement herein or this circular misleading.

2. DIRECTORS’ INTERESTS AND SHORT POSITIONS IN SHARES, UNDERLYINGSHARES AND DEBENTURES

As at the Latest Practicable Date, the interests or short positions of the Directors andchief executives of the Company in the shares, underlying shares and debentures of theCompany or any of its associated corporations (within the meaning of Part XV of theSFO) which were notified to the Company and the Stock Exchange pursuant toDivisions 7 and 8 of Part XV of the SFO (including interests or short positions whichthey were taken or deemed to have under such provisions of the SFO), or which wererecorded in the register required to be kept by the Company under Section 352 of theSFO, or which were required, pursuant to the Model Code, to be notified to theCompany and the Stock Exchange, were as follows:

(1) Long positions in the Shares

Number of Ordinary Shares

Name of Director CapacityPersonalInterests

FamilyInterests

CorporateInterests

OtherInterests Total

Approximate% of

Shareholding

Li Tzar Kuoi, Victor Beneficial owner& beneficiaryof trusts

2,250,000 – – 4,355,634,570(Note)

4,357,884,570 45.34%

Kam Hing Lam Interest of childor spouse

– 6,225,000 – – 6,225,000 0.06%

Ip Tak Chuen, Edmond Beneficial owner 2,250,000 – – – 2,250,000 0.02%

Yu Ying Choi, Alan Abel Beneficial owner 2,250,000 – – – 2,250,000 0.02%

Chu Kee Hung Beneficial owner 2,250,000 – – – 2,250,000 0.02%

Peter Peace Tulloch Beneficial owner 1,050,000 – – – 1,050,000 0.01%

Wong Yue-chim, Richard Beneficial owner 375,000 – – – 375,000 0.004%

Kwok Eva Lee Beneficial owner 200,000 – – – 200,000 0.002%

Note:

Such 4,355,634,570 Shares are held by a subsidiary of Cheung Kong (Holdings) Limited (“CKH”). LiKa-Shing Unity Trustee Company Limited (“TUT”) as trustee of The Li Ka-Shing Unity Trust (the“LKS Unity Trust”) and companies controlled by TUT as trustee of the LKS Unity Trust hold morethan one-third of the issued share capital of CKH. Li Ka-Shing Unity Trustee Corporation Limited(“TDT1”) as trustee of The Li Ka-Shing Unity Discretionary Trust (“DT1”) and Li Ka-Shing UnityTrustcorp Limited (“TDT2”) as trustee of another discretionary trust (“DT2”) hold all issued andoutstanding units in the LKS Unity Trust but are not entitled to any interest or share in any particularproperty comprising the trust assets of the LKS Unity Trust. The discretionary beneficiaries of suchdiscretionary trusts are, inter alia, Mr. Li Tzar Kuoi, Victor, his wife and children, and Mr. Li TzarKai, Richard. Mr. Li Tzar Kuoi, Victor, as a discretionary beneficiary of such discretionary trusts anda Director of the Company, is taken to be interested in those shares of CKH and thus is taken to beinterested in those 4,355,634,570 Shares held by the subsidiary of CKH under the SFO.

APPENDIX VI GENERAL INFORMATION

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(2) Long positions in the underlying shares of the Company

Pursuant to the Share Option Scheme, certain Directors in the capacity asbeneficial owners were granted unlisted and physically settled share options tosubscribe for Shares, details of which as at the Latest Practicable Date were asfollows:

Name ofDirector Date of grant

Number of shareoptions outstanding as

at the LatestPracticable Date Option period

Subscriptionprice per

ShareHK$

Yu Ying Choi,Alan Abel

30/9/2002 348,440 30/9/2003 – 29/9/2012 1.42227/1/2003 775,560 27/1/2004 – 26/1/2013 1.28619/1/2004 775,560 19/1/2005 – 18/1/2014 1.568

Chu Kee Hung 30/9/2002 348,440 30/9/2003 – 29/9/2012 1.42227/1/2003 775,560 27/1/2004 – 26/1/2013 1.28619/1/2004 775,560 19/1/2005 – 18/1/2014 1.568

Save as disclosed above, none of the Directors or chief executives of the Companyhad, as at the Latest Practicable Date, any interests or short positions in the shares,underlying shares and debentures of the Company or any of its associated corporations(within the meaning of Part XV of the SFO) which would have to be notified to theCompany and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of theSFO (including interests or short positions which they were taken or deemed to haveunder such provisions of the SFO), or which were recorded in the register required tobe kept by the Company under Section 352 of the SFO, or which were required to benotified to the Company and the Stock Exchange pursuant to the Model Code.


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3. INTERESTS AND SHORT POSITIONS OF SHAREHOLDERS

So far as is known to any Director or chief executive of the Company, as at the LatestPracticable Date, Shareholders (other than Directors or chief executives of theCompany) who had interests or short positions in the Shares or underlying shares ofthe Company which would fall to be disclosed to the Company under the provisions ofDivisions 2 and 3 of Part XV of the SFO, or which were recorded in the registerrequired to be kept by the Company under Section 336 of the SFO or otherwisenotified to the Company were as follows:

(1) Long positions of substantial Shareholders in the Shares

Name CapacityNumber of

Ordinary SharesApproximate %of Shareholding

Gold Rainbow Int’l Limited Beneficial owner 4,355,634,570 45.31%

Gotak Limited Interest of acontrolledcorporation

4,355,634,570(Note i)

45.31%

Cheung Kong (Holdings) Limited Interest of controlledcorporations

4,355,634,570(Note ii)

45.31%

Li Ka-Shing Unity Trustee Company Limitedas trustee of The Li Ka-Shing Unity Trust

Trustee 4,355,634,570(Note iii)

45.31%

Li Ka-Shing Unity Trustee CorporationLimited as trustee of The Li Ka-ShingUnity Discretionary Trust

Trustee & beneficiaryof a trust

4,355,634,570(Note iii)

45.31%

Li Ka-Shing Unity Trustcorp Limited astrustee of another discretionary trust

Trustee & beneficiaryof a trust

4,355,634,570(Note iii)

45.31%

Li Ka-shing Founder ofdiscretionary trusts& interest ofcontrolledcorporations

4,355,634,570(Note iv)

45.31%

Trueway International Limited Beneficial owner 2,119,318,286 22.05%

Li Ka Shing Foundation Limited Interest of controlledcorporations

2,835,759,715(Note v)

29.50%

(2) Long position of other person in the Shares

Name CapacityNumber of

Ordinary SharesApproximate %of Shareholding

Triluck Assets Limited Beneficial owner 716,441,429 7.45%


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Notes:

i. This represents the same block of Shares as shown against the name of Gold Rainbow Int’l Limited(“Gold Rainbow”) above. Since Gold Rainbow is wholly-owned by Gotak Limited, Gotak Limited isdeemed to be interested in the same number of Shares in which Gold Rainbow was interested underthe SFO.

ii. As Gotak Limited is wholly-owned by CKH, CKH is deemed to be interested in the same number ofShares which Gotak Limited is deemed to be interested under the SFO.

iii. TUT as trustee of the LKS Unity Trust and companies controlled by TUT as trustee of the LKSUnity Trust hold more than one-third of the issued share capital of CKH. TDT1 as trustee of DT1and TDT2 as trustee of DT2 hold all issued and outstanding units in the LKS Unity Trust but are notentitled to any interest or share in any particular property comprising the trust assets of the LKSUnity Trust. Under the SFO, each of TUT as trustee of the LKS Unity Trust, TDT1 as trustee of DT1and TDT2 as trustee of DT2 is deemed to be interested in the same block of Shares as CKH isdeemed to be interested as disclosed in Note ii above.

iv. As Mr. Li Ka-shing owns one-third of the issued share capital of Li Ka-Shing Unity HoldingsLimited which in turn holds the entire issued share capital of TUT, TDT1 and TDT2 and is the settlorand may be regarded as a founder of each of DT1 and DT2 for the purpose of the SFO,Mr. Li Ka-shing is deemed to be interested in the same number of Shares in which CKH is deemedto be interested as mentioned above under the SFO.

v. Trueway International Limited (“Trueway”) and Triluck Assets Limited (“Triluck”) are wholly-ownedby Li Ka Shing Foundation Limited (“LKSF”) and LKSF is deemed to be interested in a total of2,835,759,715 Shares under the SFO, being the aggregate of the Shares in which Trueway and

Triluck were interested as shown against the names Trueway and Triluck above.

Save as disclosed above, as at the Latest Practicable Date, the Company had not beennotified by any persons (other than Directors or chief executives of the Company) whohad interests or short positions in the Shares or underlying shares of the Companywhich would fall to be disclosed to the Company under the provisions of Divisions 2and 3 of Part XV of the SFO, or which were recorded in the register required to bekept by the Company under Section 336 of the SFO.

4. INTERESTS OF SUBSTANTIAL SHAREHOLDERS IN OTHER MEMBERS OFTHE GROUP

So far as is known to any Director or chief executive of the Company, as at the LatestPracticable Date, the following shareholders were interested in 10% or more of theequity interests of the following subsidiaries of the Company:

Name of subsidiary Name of shareholderNo. and class

of shares held % of shareholding

AquaTower Pty Ltd Gotak InvestmentLimited

49 ordinary shares 49%

PT Far East Agritech PT Anggraini Mulia 60,000 ordinary shares 40%

Vitaquest InternationalHoldings LLC

VQ Investments, Inc. N/A(Note 1)

14.75%(Note 1)


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Name of subsidiary Name of shareholderNo. and class

of shares held % of shareholding

Polynoma LLC Maanex LLC N/A(Note 2)

23.34%(Note 2)

Renascence TherapeuticsLimited

Comprehensive DrugEnterprises Limited

29 ordinary shares 29%

Notes:

1. Vitaquest International Holdings LLC is a limited liability company established under the laws of thestate of Delaware, the United States of America, of which VQ Investments, Inc. holds 14.75%partnership interests.

2. Polynoma LLC is a limited liability company established under the laws of the state of Delaware, the

United States of America, of which Maanex LLC holds 23.34% partnership interests.

Save as disclosed above, as at the Latest Practicable Date, the Company had not beennotified by any persons (other than Directors or chief executives of the Company) whowas interested in 10% or more of the nominal value of any class of share capitalcarrying rights to vote in all circumstances at general meetings of any other member ofthe Group, or any options in respect of such capital.

5. DETAILS OF OPTIONS GRANTED BY THE COMPANY

The Company has adopted the Share Option Scheme under which the Directors oremployees of the Company or its subsidiaries or certain other persons may be grantedshare options to subscribe for Shares subject to the terms and conditions stipulated inthe Share Option Scheme.

As at the Latest Practicable Date, options to subscribe for an aggregate of 9,068,881 Sharesgranted to certain continuous contract employees (including the Executive Directors of theCompany as disclosed above) pursuant to the Share Option Scheme were outstanding, detailsof which were as follows:

Date of grant

Number of share optionsoutstanding as at the

Latest Practicable Date Option periodSubscription price

per ShareHK$

30/9/2002 1,551,682 30/9/2003 – 29/9/2012(Note 1)

1.422

27/1/2003 3,628,159 27/1/2004 – 26/1/2013(Note 2)

1.286

19/1/2004 3,889,040 19/1/2005 – 18/1/2014(Note 3)

1.568


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Notes:

1. The options are exercisable from 30 September 2003 to 29 September 2012 (both days inclusive)subject to the following vesting periods:

(i) up to 35% of the options commencing on 30 September 2003;

(ii) up to 70% of the options (including the options not exercised under the limit prescribed for inthe previous period) commencing on 30 September 2004; and

(iii) up to 100% of the options (including the options not exercised under the limit prescribed for inthe previous periods) commencing on 30 September 2005.

2. The options are exercisable from 27 January 2004 to 26 January 2013 (both days inclusive) subject tothe following vesting periods:

(i) up to 35% of the options commencing on 27 January 2004;

(ii) up to 70% of the options (including the options not exercised under the limit prescribed for inthe previous period) commencing on 27 January 2005; and

(iii) up to 100% of the options (including the options not exercised under the limit prescribed for inthe previous periods) commencing on 27 January 2006.

3. The options are exercisable from 19 January 2005 to 18 January 2014 (both days inclusive) subject tothe following vesting periods:

(i) up to 35% of the options commencing on 19 January 2005;

(ii) up to 70% of the options (including the options not exercised under the limit prescribed for inthe previous period) commencing on 19 January 2006; and

(iii) up to 100% of the options (including the options not exercised under the limit prescribed for inthe previous periods) commencing on 19 January 2007.

6. COMPETING INTERESTS

As at the Latest Practicable Date, the interests of Directors or their respectiveassociates (as defined in the Listing Rules) in the businesses which compete or arelikely to compete, either directly or indirectly, with the businesses of the Group (the“Competing Business”) as required to be disclosed pursuant to the Listing Rules wereas follows:

(1) Core business activities of the Group

(i) Research and development, manufacturing, commercialisation, marketing andselling of health and agriculture-related products, and water business; and

(ii) Investment in various financial and investment products.


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(2) Interests in Competing Business

Name of Director Name of Company Nature of Interest

CompetingBusiness(Note)

Li Tzar Kuoi, Victor Cheung Kong (Holdings)Limited

Managing Director andDeputy Chairman

(ii)

Hutchison WhampoaLimited

Executive Director andDeputy Chairman

(i) & (ii)

Cheung KongInfrastructure HoldingsLimited

Chairman (i) & (ii)

Hongkong ElectricHoldings Limited

Executive Director (ii)

Kam Hing Lam Cheung Kong (Holdings)Limited

Deputy Managing Director (ii)

Hutchison WhampoaLimited

Executive Director (i) & (ii)


Group Managing Director (i) & (ii)

Hongkong ElectricHoldings Limited

Executive Director (ii)

Ip Tak Chuen, Edmond Cheung Kong (Holdings)Limited

Deputy Managing Director (ii)


Executive Director andDeputy Chairman

(i) & (ii)

TOM Group Limited Non-executive Director (ii)AVIC International

Holding (HK) LimitedNon-executive Director (ii)

Excel TechnologyInternational HoldingsLimited

Non-executive Director (ii)

Shougang ConcordInternationalEnterprises CompanyLimited


ARA Asset ManagementLimited


Ruinian InternationalLimited

Non-executive Director (i)

Note: Such businesses may be conducted through the relevant companies’ subsidiaries, associatedcompanies or by way of other forms of investments.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors ortheir respective associates was interested in any business apart from the Group’sbusinesses which competes or is likely to compete, either directly or indirectly, withthe businesses of the Group.


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7. DIRECTORS’ INTERESTS IN CONTRACTS

(a) As at the Latest Practicable Date, none of the Directors had any existing orproposed service contract with any member of the Group which will not expire oris not determinable by the Group within one year without payment ofcompensation (other than statutory compensation).

(b) As at the Latest Practicable Date, none of the Directors had any direct or indirectinterest in any assets which had been, since 31 December 2009, the date to whichthe latest published audited accounts of the Company were made up, acquired ordisposed of by or leased to any member of the Enlarged Group, or were proposedto be acquired or disposed of by or leased to any member of the Enlarged Group.

(c) As at the Latest Practicable Date, none of the Directors was materially interestedin any contract or arrangement subsisting at the date of this circular and whichwas significant in relation to the business of the Enlarged Group.

(d) As at the Latest Practicable Date, the remuneration payable to and benefits inkind receivable by the Directors and the directors of CKLSII have not been variedin consequence of the Acquisition.

8. LITIGATION

As at the Latest Practicable Date, neither the Company nor any member of theEnlarged Group was engaged in any litigation or claims of material importance andthere was no litigation or claims of material importance known to the Directors to bepending or threatened against the Company or any member of the Enlarged Group.

9. MATERIAL CONTRACTS

Save as disclosed below, within the two years immediately preceding the LatestPracticable Date, there was no contract (not being contracts entered into in the ordinarycourse of business) entered into by members of the Enlarged Group which was ormight be material:

An asset purchase agreement dated 29 May 2009 (the “Asset Purchase Agreement”)was entered into between Vitaquest International LLC (an indirect non wholly-ownedsubsidiary of the Company) as vendor and Windmill Health Products, LLC as purchaserin relation to the disposal of the assets of Windmill Health Products (“WHP”), adivision of Vitaquest International LLC, which are used exclusively for the operationand conduct of the business of WHP at a consideration of approximatelyUSD22,200,000 (approximately HK$173,160,000), on the terms and subject to theconditions set out in the Asset Purchase Agreement. Further details were disclosed inan announcement of the Company dated 1 June 2009.

10. NO MATERIAL ADVERSE CHANGE

The Directors believe there has been no material adverse change in the financial ortrading position of the Group since 31 December 2009, being the date to which thelatest published audited accounts of the Company have been made up.


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11. EXPERTS AND CONSENTS

The following are the qualifications of the accountant and the Property Valuers whohave given their opinions in this circular:

Name Qualification

Deloitte Touche Tohmatsu Certified Public Accountants

Colliers International Consultancy andValuation Pty Limited

Independent Professional ValuerCertified Practising ValuerAssociate Australian Property Institute

Knight Frank Valuations (SA) Independent Professional ValuerCertified Practising ValuerAssociate Australian Property Institute

Telfer Young (Hawkes Bay) Limited Independent Professional ValuerFellow Property Institute of New ZealandFellow of New Zealand Institute of Valuers

Crighton Stone Limited Independent Professional ValuerFellow Property Institute of New ZealandFellow of New Zealand Institute of Valuers

Hegney Property Valuations Independent Professional ValuerCertified Practising ValuerAssociate Australian Property Institute

As at the Latest Practicable Date, Deloitte Touche Tohmatsu and the Property Valuersdid not have any shareholding in any Shares or any member of the Group or any right(whether legally enforceable or not) to subscribe for or to nominate persons tosubscribe for any shares in any member of the Group.

As at the Latest Practicable Date, Deloitte Touche Tohmatsu and the Property Valuersdid not have any direct or indirect interest in any assets which have been since31 December 2009, the date to which the latest published audited accounts of theCompany were made up, acquired or disposed of by or leased to, or which wereproposed to be acquired or disposed of by or leased to the Company or any member ofthe Enlarged Group.

Deloitte Touche Tohmatsu and the Property Valuers have given and have not withdrawntheir written consents to the issue of this circular with inclusion of their reports dated31 December 2010, 8 December 2010, 10 December 2010, 14 December 2010 and17 December 2010 and the references to their names included herein in the form andcontext in which they respectively appear.


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12. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection during normal businesshours at the principal place of business of the Company in Hong Kong at 7th Floor,Cheung Kong Center, 2 Queen’s Road Central, Hong Kong on weekdays (Saturdaysand public holidays excepted) up to and including 17 January 2011:

(a) memorandum and articles of association of the Company;

(b) the material contract referred to in the section headed “Material Contracts” in thisAppendix VI;

(c) the 2008 and 2009 annual reports of the Company for the two financial yearsended 31 December 2008 and 2009 respectively;

(d) the accountants’ report on financial information of CWT as set out in Appendix IIto this circular;

(e) the report from Deloitte Touche Tohmatsu on the unaudited pro forma financialinformation of the Enlarged Group following the Acquisition as set out inAppendix IV to this circular;

(f) the full version of valuation reports on the properties owned by CWT issued bythe Property Valuers; and

(g) the letters of consent from Deloitte Touche Tohmatsu and the Property Valuersreferred to in the section headed “Experts and Consents” in this Appendix VI.

13. OTHER INFORMATION

(a) The principal activities of the Group are research and development,manufacturing, commercialisation, marketing and selling of health andagriculture-related products, and water business as well as investment in variousfinancial and investment products.

(b) The company secretary of the Company is Ms. Eirene Yeung. She is a solicitor ofthe High Court of Hong Kong and of the Supreme Court of Judicature in Englandand Wales, and she holds a Master of Science degree in Finance, a Master’sdegree in Business Administration and a Bachelor’s degree in Laws.

(c) The registered office of the Company is situated at P.O. Box 309GT, UglandHouse, South Church Street, Grand Cayman, Cayman Islands.

(d) The head office of the Company is situated at 2 Dai Fu Street, Tai Po IndustrialEstate, Tai Po, Hong Kong and the principal place of business of the Company issituated at 7th Floor, Cheung Kong Center, 2 Queen’s Road Central, Hong Kong.


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(e) The principal share registrar and transfer office of the Company is ButterfieldFulcrum Group (Cayman) Limited, Butterfield House, 68 Fort Street, P.O. Box705, Grand Cayman, KY1-1107, Cayman Islands. The branch share registrar andtransfer office of the Company in Hong Kong is Computershare Hong KongInvestor Services Limited, Rooms 1712-1716, 17th Floor, Hopewell Centre, 183Queen’s Road East, Hong Kong.

(f) The English text of this circular shall prevail over the Chinese text, in case of anyinconsistency.


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This circular (both English and Chinese versions) (“Circular”) has been posted on theCompany’s website at http://www.ck-lifesciences.com. Shareholders who have chosen (orare deemed to have consented) to read the Company’s corporate communications(including but not limited to the Circular) published on the Company’s website in placeof receiving printed copies thereof may request the printed copy of the Circular in writingto the Company c/o the Company’s Branch Share Registrar, Computershare Hong KongInvestor Services Limited, at 17M Floor, Hopewell Centre, 183 Queen’s Road East, HongKong or by email to [email protected].

Shareholders who have chosen (or are deemed to have consented) to receive thecorporate communications using electronic means through the Company’s website andwho for any reason have difficulty in receiving or gaining access to the Circular postedon the Company’s website will upon request in writing to the Company c/o theCompany’s Branch Share Registrar or by email to [email protected] be sent the Circular in printed form free of charge.

Shareholders may at any time choose to change your choice as to the means of receipt(i.e. in printed form or by electronic means through the Company’s website) and/or thelanguage of the Company’s corporate communications by reasonable prior notice inwriting to the Company c/o the Company’s Branch Share Registrar or sending a notice [email protected].

Shareholders who have chosen to receive printed copy of the corporate communicationsin either English or Chinese version will receive both English and Chinese versions ofthe Circular since both language versions are bound together into one booklet.

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