For the fiscal year ended December 31, 2010.

OR

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

For the transition period from                      to                     

OR

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

		Date of event requiring this shell company report

Commission file number: 001-33766

 

(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)

 

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

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

None

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

None

Indicate the number of outstanding shares of each of the Issuer’s classes of capital or common stock as of the close of the period covered by the annual report. 110,766,600 ordinary shares, par value US$0.0000001 per share, as of December 31, 2010.

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

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

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

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

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

Large accelerated filer o		Accelerated filer o		Non-accelerated filer þ

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

US GAAP þ		International Financial Reporting Standards as issued by the International Accounting Standards Board o		Other o

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

Item 17 o                      Item 18 o

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

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

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

 

 

TABLE OF CONTENTS

INTRODUCTION			1
PART I			2
ITEM 1. Identity of Directors, Senior Management and Advisers			2
ITEM 2. Offer Statistics and Expected Timetable			2
ITEM 3. Key Information			2
ITEM 4. Information on the Company			23
ITEM 4A. Unresolved Staff Comments			39
ITEM 5. Operating and Financial Review and Prospects			39
ITEM 6. Directors, Senior Management and Employees			55
ITEM 7. Major Shareholders and Related Party Transactions			63
ITEM 8. Financial Information			67
ITEM 9. The Offer and Listing			68
ITEM 10. Additional Information			69
ITEM 11. Quantitative and Qualitative Disclosures About Market Risk			75
ITEM 12. Description of Securities Other than Equity Securities			76
PART II			77
ITEM 13. Defaults, Dividend Arrearages and Delinquencies			77
ITEM 14. Material Modifications to the Rights of Security Holders and Use of Proceeds			77
ITEM 15. Controls and Procedures			78
ITEM 16A. Audit Committee Financial Expert			79
ITEM 16B. Code of Ethics			79
ITEM 16C. Principal Accountant Fees and Services			80
ITEM 16D. Exemptions from the Listing Standards for Audit Committees			80
ITEM 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers			81
ITEM 16F. Change In Registrant’s Certifying Accountant			81
ITEM 16G. Corporate Governance			82
PART III			82
ITEM 17. Financial Statements			82
ITEM 18. Financial Statements			82
ITEM 19. Exhibits			83
Exhibit 4.40
Exhibit 4.41
Exhibit 4.42
Exhibit 4.43
Exhibit 4.44
Exhibit 4.45
Exhibit 4.46
Exhibit 4.47
Exhibit 4.48
Exhibit 4.54
Exhibit 4.55
Exhibit 4.56
Exhibit 4.57
Exhibit 4.58
Exhibit 8.1
Exhibit 12.1
Exhibit 12.2
Exhibit 13.1
Exhibit 13.2
Exhibit 15.1
Exhibit 15.2
Exhibit 15.3
Exhibit 15.4

INTRODUCTION

Unless otherwise indicated and except where the context otherwise requires, references in this annual report on Form 20-F to:

•

“we,” “us,” “our company,” “the Company,” “our” and “Agria” refer to Agria Corporation, a Cayman Islands company, and its predecessor entities, subsidiaries and, unless the context indicates otherwise, Guanli, our consolidated affiliated entity, and its subsidiaries and associates (including its 49% owned associate Wuwei Ganxin Seeds Company Limited, or Ganxin);

•

“P3A” refers to Taiyuan Primalights III Agriculture Development Co., Ltd., a limited liability company established in China, which was one of our consolidated affiliated entities until it was disposed of in July 2010;

•

“Guanli” refers to our consolidated affiliated entity, Shenzhen Guanli Agricultural Technology Co., Ltd., which is a limited liability company established in China;

•

“PGW” refers to PGG Wrightson Group, in which we hold 50.01% equity interest;

•

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

•

“shares” or “ordinary shares” refers to our ordinary shares, and “preferred shares” refers to our series A redeemable convertible preferred shares, all of which were converted into our ordinary shares upon the completion of our initial public offering on November 13, 2007;

•

“ADSs” refers to our American depositary shares, each of which represents two ordinary shares; and

•

all references to “RMB” or “Renminbi” are to the legal currency of China; all references to “$,” “US$,” “dollars” and “US dollars” are to the legal currency of the United States.

FORWARD-LOOKING STATEMENTS

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

You can identify forward-looking statements by words or phrases such as “may,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “likely to” or other similar expressions. We have based these forward-looking statements largely on our current expectations, estimates and projections about future events and financial trends that we believe may affect our financial condition, results of operations, liquidity, business strategy and financial needs. We believe that the following important factors, among others, in some cases have affected, and in the future could affect our consolidated results and could cause our actual consolidated results for the fiscal year ended December 31, 2011 and any other future period to differ materially from those described in any forward-looking statements made by us:

	•		our future business development, results of operations and financial condition;
	•		changes in our revenues, cost and expense items;

•

our anticipated development strategies, which may include potential acquisitions and divestitures, expanding into new sectors within the agricultural industry, expanding sales into new regions, and expanding our product offerings;

•

our strategy to expand our research and development capability;

•

the growth in demand in China for corn and vegetable seeds;

•

our ability to attract customers and end users and enhance our brand recognition;

•

future changes in government regulations affecting our business;

•

trends and competition in the agricultural industry, particularly in China, New Zealand, Australia and South America; and

•

our ability to retain and motivate existing management and other key personnel and to recruit and integrate additional qualified personnel into our operations.

You should thoroughly read this annual report and the documents that we refer to in this annual report with the understanding that our actual future results may be materially different from or worse than what we expect. We qualify all of our forward-looking statements by these cautionary statements. Other sections of this annual report include additional factors which could adversely impact our business and financial performance. Moreover, we operate in an evolving environment. New risk factors and uncertainties emerge from time to time and it is not possible for our management to predict all risk factors and uncertainties, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

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

P3A was our only revenue generating business in 2006 and 2007 and it is accounted for as discontinued operations since its divestiture in July 2010. Financial information for the years ended December 31, 2006 and 2007 are not included in this annual report as such information cannot be recast and provided without unreasonable effort or expense.

The following table presents a summary of our consolidated balance sheet data as of December 31, 2008, 2009 and 2010:

Exchange Rate Information

This annual report contains translations of RMB amounts into US dollars at specific rates solely for the convenience of the reader. The conversion of RMB into US dollars in this annual report is based on the noon buying rate in The City of New York for cable transfers of RMB as certified for customs purposes by the Federal Reserve Bank of New York. Unless otherwise noted, all translations from RMB to US dollars and from US dollars to RMB in this annual report were made at a rate of RMB6.6000 to $1.00, the noon buying rate in effect as of December 30, 2010. We make no representation that any RMB or US dollar amounts could have been, or could be, converted into US dollars or RMB, as the case may be, at any particular rate, at the rates stated below, or at all. The PRC government imposes control over its foreign currency reserves in part through direct regulation of the conversion of RMB into foreign exchange and through restrictions on foreign trade. On June 17, 2011, the noon buying rate was RMB6.4700 to $1.00.

This annual report contains translations of New Zealand dollar amounts into US dollars at specific rates solely for the convenience of the reader. The conversion of New Zealand Dollars into US dollars in this annual report is based on the noon buying rate in The City of New York for cable transfers of New Zealand dollars as certified for customs purposes by the Federal Reserve Bank of New York. Unless otherwise noted, all translations from New Zealand dollars to US dollars and from US dollars to New Zealand dollars in this annual report were made at a rate of $0.7687 to NZ$1.00, the noon buying rate in effect as of December 30, 2010.

B. Capitalization and Indebtedness

Not Applicable.

C. Reasons for the Offer and Use of Proceeds

Not Applicable.

D. Risk Factors

Risks Related to Our Business

Extreme weather conditions and other natural or man-made disasters could damage our production, which would cause a material reduction in revenues.

The seeds sold by our China Seeds business are produced primarily on leased land and through a network of multiple village collectives and production companies in Gansu and other provinces in China. Our production bases are invariably subject to the risks associated with agriculture, including extreme weather conditions and other natural disasters such as drought, flood, snowstorm, earthquake, pestilence, plant diseases and insect infestations. The quality, cost and volume of seeds that we produce could be materially adversely affected by extreme weather conditions or natural disasters, harming our sales and profitability. For example, in November 2009, unexpected snow storms across northern China caused severe damage and disruptions to wide sections of the agricultural industry in Shanxi, where our operations under P3A, our previous principal operating entity, were concentrated. Man-made disasters, such as arson or other acts that may adversely affect our inventory in the winter storage season, may also damage our products or our production facilities. For instance, in March 2008, a fire broke out in one of P3A’s corn seed warehouses, which led to a substantial loss of RMB8.2 million primarily from damage to our corn seed inventory and property, plant and equipment. Furthermore, natural or man-made disasters may cause farmers to migrate from their farmland, which would decrease the number of end users of our products. We are particularly susceptible to disasters or other incidents in Gansu and Xinjiang provinces, where we have the greatest concentration of our operations. In the event of a widespread failure of a seed crop in these provinces, we would likely sustain substantial loss of revenues and suffer substantial operating losses. We do not have insurance to protect against such risks.

Ganxin primarily relies on arrangements with village collectives to produce the corn seed products and we rely on contracts with production companies to produce our edible corn seed products. If we were unable to continue these arrangements or enter into new arrangements with other village collectives or other production companies, our total land acreage devoted to corn seed production would decrease and our growth would be inhibited.

We outsource the production of our edible corn seeds to production companies in Gansu and Xinjiang provinces, including our associate, Ganxin, which in 2010 had access to approximately 5,410 acres of farmland in Gansu province primarily through contractual arrangements with village collectives for corn seed production. In the event that prices for other crops increase, these village collectives and production companies may decide to farm other crops in breach of our leases and seed production agreements with them or, following the expiration of our leases, lease the land to our competitors or other parties. If the land policy changes so that we are unable to continue to lease land, if a significant number of village collectives refuse to lease land to us upon the expiration of their current leases or if a significant number of production companies are unable to fulfill their contractual obligations to us, our business and results of operations would be materially and adversely affected. Any of these disruptions could materially and adversely affect our supply of seeds and our revenues. Such disruptions could also damage our relationships with our distributors and customers if we cannot supply them with the quantities and varieties of seeds that they expect. Moreover, due to competition for land suitable for leasing, we may be unable to lease the same land or other land at commercially reasonable prices. In the event that we have to pay more to lease land or are unable to lease sufficient land, our results of operations may be materially and adversely affected.

If our rights to lease land from village collectives were subject to a dispute, or if their legality or validity were challenged, our operations could be disrupted.

PRC law provides for the registration of land ownership and land-use rights and for the issuance of certificates evidencing land ownership or the right to use land. See “Item 4. Information on the Company—B. Business Overview—Regulation—Land Use Rights.” However, the administrative system for the registration of land ownership and land-use rights is not well-developed in rural areas where we produce most of our corn seed. As a result, we are generally not able to verify the ownership or land-use rights of the parties from whom we have leased land through the land registry system. Despite our efforts to obtain representations from the village collectives that they own the land, possess land-use rights or have the right to sub-contract the land-use right on behalf of the holder of such rights, there is a risk that they have not legally and validly granted the right to use the land to us.

In addition, under PRC law, if a village collective plans to enter into a lease with a party that does not belong to the collective, the contract must first be approved by at least two-thirds of the members of the village assembly or representatives of the villagers. The lease must then be submitted to the township government for approval before it becomes effective. There is a risk that the village collectives with which we have entered into leases, and which have generally advised us that the required village assembly meetings were convened and the leases were approved by the township government, have in fact not undertaken all required actions prior to entering into leases with us.

In 2007 and 2008, P3A entered into two contractual leases, both of which commenced on January 1, 2009, with village collectives with respect to two parcels of land of 5,931 acres in aggregate for a term of 30 years. However, PRC contract law provides that the term of these contractual leases cannot exceed 20 years. As a result, unless the parties are able to renegotiate or otherwise agree to extend the remainder term of the lease, these contractual leases may be subject to termination after the initial 20-year term. Although we divested P3A in July 2010, we retained the interest in these leases.

As of December 31, 2010, we had prepaid all of the rent due under certain leases granting access to approximately 13,500 acres of land, which were formerly held by P3A and have been retained by us following the divestiture of P3A in July 2010. The leases have remaining terms of between approximately 10 and 28 years. We are not currently using this land and are in the process of assessing appropriate revenue generating opportunities that will make use of the land. If we do not identify such opportunities we intend to rent the land to as yet unidentified third parties. If we are unable to identify revenue generating use for the land and are unable to identify parties to whom to rent the land or if we were to lose our rights to this land, we may not be able to recoup the prepayments made.

There is a risk that the legality or validity of our leases will be disputed or challenged with respect to P3A’s original rights to the land or P3A’s transfer of the rights to the leased land to us. If our leases are disputed or challenged, we may have to suspend our operations on such leased land. We could also lose our rights to use such land which would in turn reduce the amount to which we would be able to recoup the prepayments made and materially and adversely affect our business, financial condition and results of operations.

The highly fragmented agriculture industry in China makes it difficult to evaluate our future prospects and results of operations.

You should consider our future prospects in light of the risks and uncertainties facing companies in the highly fragmented agricultural industry in China. Some of these risks and uncertainties relate to our ability to:

•

maintain our competitive position in China and compete in each of our business segments with Chinese and international companies, many of which have longer operating histories and greater financial resources than we do;

•

offer commercially successful seed products to attract and retain direct customers and ultimate users;

•

retain access to the farmland we currently use and obtain access to additional farmland for expansion;

•

continue our existing arrangements with village collectives that grow our corn seed products and enter into new arrangements with additional village collectives;

•

maintain effective control of our costs and expenses; and

•

retain and motivate our management and skilled technical staff and recruit and integrate additional qualified personnel into our operations.

If we are unsuccessful in addressing any of these risks and uncertainties, our business, financial condition and results of operations may be materially and adversely affected.

The ongoing strategic review has resulted in a refocusing and repositioning of the company’s business and operation, including acquisitions and divestitures. Future acquisitions or divestitures could materially change our business and materially and adversely affect our results of operations and financial condition.

In September 2009, we announced a strategic review of our business and operations. The purpose of this review is to reduce inherent risk in the business and to increase the value of shareholders’ equity. We provided updates on the ongoing strategic review in March 2010 and July 2010. This strategic review is now largely complete. For details of our key strategic priorities going forward, see “Item 4. Information on the Company—B. Business Overview—Senior Management Changes and Strategic Review.” While we will only take actions that are considered to be in the best interests of our shareholders, the strategic review may result in a refocusing and repositioning of our business and operations, including potential acquisitions and divestitures.

Our key strategic priorities require our ongoing efforts in pursuing strategic acquisitions, investments and strategic partnerships both in China and internationally. By May 2011, we have acquired 50.01% of equity interest in PGW, New Zealand’s largest rural services business, which offers a wide range of products, services and solutions to farmers, growers and processors in New Zealand and internationally. In October 2009, we also entered into a strategic cooperation framework agreement with China National Academy of Agricultural Sciences, or CNAAS, providing for future cooperation across the spectrum of agricultural research. In addition, we entered into an investment agreement with CNAAS and its affiliates to invest RMB35.0 million into Beijing Zhongnong Seed Industry Co., Ltd., or Zhongnong, a company wholly owned by CNAAS and its affiliates. In September 2009, we acquired Beijing Nong Ke Yu Seeds International Co., Ltd., or Nong Ke Yu, a company engaged in research and development, production, distribution and sale of edible corn seeds, and in January 2010, we acquired Tianjin Beiao Seed Technology Development Co., Ltd., or BeOK, a company engaged in research, production and marketing of vegetable seeds. In September 2010, we acquired a 49% equity interest in Ganxin, a corn seed research, development, production and sales company based in Gansu. We are also at various stages of discussions regarding potential investments in seed companies with proprietary seed varieties.

Presented with appropriate opportunities, we may acquire businesses or assets that we believe complement our existing business. Any such acquisitions are invariably subject to associated execution risk including issues relating to the integration of new operations and personnel, geographical coordination, retention of key management personnel, systems integration and the reconciliation of corporate cultures. The acquisition and integration could cause the diversion of management’s attention or resources from our existing business or cause a temporary interruption of, or loss of momentum in, our business. We could also lose key personnel from the acquired companies. There may be unforeseen or hidden liabilities or we may not be able to generate sufficient revenue to offset new costs of acquisitions, investments and strategic partnerships. The execution of international expansion of our operations exposes us to a number of additional risks including difficulties in staffing and managing overseas operations, fluctuations in foreign currency exchange rates, increased costs associated with maintaining the ability to understand local trends, difficulties and costs relating to compliance with the different commercial, legal and regulatory requirements of the overseas locations in which we operate, failure to develop appropriate risk management and internal control structures tailored to overseas operations, inability to obtain, maintain or enforce intellectual property rights, unanticipated changes in economic conditions and regulatory requirements in overseas environment. These risks associated with strategic repositioning, future acquisitions, investments and strategic partnerships could have a material and adverse effect on our business, results of operations, financial condition or liquidity.

Until July 2010, P3A had historically been our principal operating entity with three production lines: corn seeds, sheep products and seedlings. P3A’s financial and operating performance has declined since 2007. In July 2010, we divested P3A to Mr. Zhixin Xue, the president and a director of P3A, by transferring all of our interest in P3A to Mr. Xue. Following the completion of the divestiture, we acquired from Mr. Xue and cancelled shares representing 11.5% of our issued and outstanding share capital immediately prior to the transaction. The leases over nine parcels of land totaling approximately 13,500 acres previously held by P3A have been retained by us.

Any acquisitions and divestitures may materially affect our operations and business mix. We may also incur costs, suffer losses or incur liabilities in connection with these acquisitions or divestitures. Any acquisitions and divestitures could also result in reduction in our ADS price as result of any of the foregoing or because of market reaction to a transaction and diversion of management’s attention from other concerns. Any such acquisition or divestiture could materially and adversely affect our business, results of operation and financial condition.

Any plans to increase our production capacity and expand into new markets may not be successful, which could adversely affect our operating results.

As a result of our strategic review announced in September 2009 and subsequently updated in March 2010 and July 2010, we decided to increase production of certain corn and vegetable seed products and develop new seed varieties to our product portfolio. In September 2009, we acquired Nong Ke Yu, a company engaged in research and development, production, distribution and sale of edible corn seeds based in Beijing; in January 2010, we acquired BeOK, a company engaged in research, production and marketing of vegetable seeds based in Tianjin; and in September 2010, we acquired a 49% equity interest in Ganxin, a corn seed research, development, production and sales company based in Gansu. We may make other acquisitions or expansions in the future, which may place substantial demand on our managerial, operational, technological and other resources. Our failure to manage our product offerings, operations and distribution channels effectively and efficiently could materially adversely affect our operating results.

As part of our development, we may expand the geographic areas in which we sell or produce our products. Expansion into new markets may present operating and marketing challenges that differ from those that we currently encounter in our existing markets. For example, in April 2011, we completed a transaction to increase our shareholding in PGW from 19% to 50.01% and gained control. If we are unable to anticipate the changing demands that our expanding operations will impose on our management capacities, production systems and distribution channels, or if we fail to adapt our production systems and distribution channels to changing demands in a timely manner, our revenues could decline, our expenses could rise and our results of operations could be materially adversely affected.

Our senior management team has worked together in their current roles for a short time, which may make it difficult for you to evaluate their effectiveness and ability to address future challenges to our business.

Due to our recent restructuring and additions to our corporate management team, certain of our senior management have worked together at our company for only a short time. For example, we appointed Xie Tao to be our chief executive officer in September 2009 and John Layburn to be our chief strategy and compliance officer in October 2009 and our acting chief financial officer in April 2011. As a result, it may be difficult for you to evaluate the effectiveness of our senior management, on an individual or collective basis, and their ability to address future challenges to our business. In addition, we may not be able to successfully execute our plan to recruit qualified candidates with substantial experience in the global agricultural industry to join our senior management team. Even if we are able to recruit qualified senior management personnel, such new senior management personnel may not be able to work with our existing management to effectively execute our growth strategy and address future challenges to our business.

Our business depends substantially on the continuing efforts of our management, and our business may be severely disrupted if we lose their services.

Our future success depends significantly upon the continued services of our management, including the management of our operating entities. We rely on our management’s experience in product development, business operations and sales and marketing, as well as on their relationships with distributors and relevant government authorities. If one or more of our key management personnel is unable or unwilling to continue in their present positions, we may not be able to replace them easily or at all. The loss of the services of our key management personnel, in the absence of suitable replacements, could materially adversely affect our operations and financial condition, and we may incur additional expenses to recruit and train personnel. Each member of our management team has entered into an employment agreement with us, which contains confidentiality and non-competition provisions. If disputes arise between our management and us in light of the uncertainties within the PRC legal system, there is a risk that some of the provisions of these agreements may not be enforced or enforceable in China, where our managers reside and hold most of their assets.

We rely on contractual arrangements with Guanli for our China operations, which may not be as effective in providing control over our operating entity as direct ownership.

Because PRC regulations currently restrict foreign ownership of corn seed companies directly in China, we have no equity ownership interest in Guanli and must rely on contractual arrangements to control and operate it. The contractual arrangement with Guanli may not be as effective in providing control over the entity as direct ownership. In the future, Guanli may fail to take actions required for our business despite its contractual obligation to do so. Guanli is able to transact business with parties not affiliated with us. If Guanli fails to perform under its agreements with us, we may have to rely on legal remedies under Chinese law, which we cannot be sure would be available. In addition, we cannot be certain that the individual equity owners of Guanli would always act in our best interest.

Our growth prospects may be materially and adversely affected if we are unable to develop or acquire new products.

The majority of the products provided by our China seeds business are upstream products ultimately used by farmers in China. The profitability of our business depends on sustained and recurring orders from our direct customers, which include distributors, breed improvement and reproductive stations and other intermediaries. Reorder rates are uncertain due to several factors, many of which are beyond our control. These factors include changing customer preferences, competitive price pressures, failure to develop new products to meet the evolving demands of farmers in China, the development of higher-quality products by our competitors and general economic conditions. If we are unable to develop or acquire additional products that meet the demands of farmers in China, or if our competitors develop products that are favored by farmers in China, our growth prospects may be materially and adversely affected and our revenues and profitability may decline.

One or more of our distributors could engage in activities that are harmful to our brand and to our business.

Our seed products are sold primarily through distributors, and those distributors are responsible for ensuring that our products have the appropriate licenses to be sold to farmers in their provinces. If those distributors do not obtain the appropriate licenses, their sales of our products in those provinces may be illegal, and we may be subject to government sanctions, including confiscation of illegal revenues and a fine of between two and three times the amount of such illegal revenues. Unlicensed sales in a province may also cause a delay for our other distributors in receiving a license from the authorities for their provinces, which could further adversely impact our sales. In addition, distributors may sell our products under another brand licensed in a particular province if our product is not licensed there. If our products are sold under another brand, the purchasers will not be aware of our brand name, and we will be unable to cross-market other seed varieties or other products as effectively to these purchasers. Moreover, our ability to provide appropriate customer service to these purchasers will be negatively affected, and we may be unable to develop our local knowledge of the needs of these purchasers and their environment. Furthermore, if any of our distributors sells inferior seeds produced by other companies under our brand name, our brand and reputation could be harmed, which could make marketing of our branded seeds more difficult.

Our operating results may fluctuate due to a number of factors, some of which are beyond our control, and you may not be able to rely on our historical operating results as an indication of our future performance.

Our operating results may fluctuate due to a number of factors, some of which are beyond our control. Our quarterly and annual revenues and costs and expenses as a percentage of our revenues may differ significantly from our historical rates. Our operating results in future quarters may fall below expectations. Business disruption in key sales periods may significantly impact our full year results. Any unexpected seasonal or other fluctuations could adversely affect our business and results of operations. Future acquisitions or divestitures may also materially change our business mix and adversely affect our results of operations and financial condition.

Our future profitability depends on our ability to secure sufficient orders from customers. An adverse change in market conditions may materially adversely affect our operating results if we cannot adjust our operating and marketing strategy to respond to such changes. Our results of operations may be materially and adversely affected by reduced orders and profit margins in the event of a slowdown in market demand, an increase in business competition, a decrease in government subsidies to farmers, increased costs, or other reasons. As such, we may not be able to maintain a similar level of profitability and you may not be able to rely on our historical operating results as an indication of our future performance.

A severe or prolonged downturn in the global economy or the markets that we primarily operate in could materially and adversely affect our revenues and results of operations.

The global financial markets have experienced significant disruptions since 2008 and the effect of the crisis persisted in 2009 and 2010. Continued concerns about the systemic impact of potential long-term and wide-spread recession, energy costs, geopolitical issues, the availability and cost of credit, and the global housing and mortgage markets have contributed to increased market volatility and diminished expectations for economic growth around the world. The grim economic outlook has negatively affected business and consumer confidence and contributed to volatility of unprecedented levels.

We and PGW, our 50.01% held subsidiary beginning April 2011, primarily operate in China, New Zealand, Australia and South America. Weak economic conditions and decreasing agricultural commodity demand and prices across the world may have a negative impact on agricultural production and the rural economies in China, New Zealand, Australia and South America. Lower commodity prices reduce farmers’ income and weaken their confidence in the development of agricultural business. In turn, this may limit their ability or lessen their willingness to use more expensive agricultural products, including the ones we produce. There are still great uncertainties regarding economic conditions and the demand for agricultural commodities. Continued turbulence in the international markets and economies and prolonged declines in agricultural commodity demand and prices in China, New Zealand, Australia and South America may adversely affect our business, revenues and results of operations.

We have limited insurance coverage on our assets in China and any uninsured loss or damage to our property, business disruption or litigation may result in our incurring substantial costs.

The insurance industry in China is still at an early stage of development. Insurance companies in China offer limited insurance products. Other than automobile insurance on certain vehicles and property and casualty insurance for some of our assets, we do not have insurance coverage on our assets or inventories, nor do we have any business interruption, product liability or litigation insurance for our operations in China. We have determined that the costs of insuring for these risks and the difficulties associated with acquiring such insurance on commercially reasonable terms make it impractical for us to have such insurance. Any uninsured loss or damage to property, business disruption or litigation may result in our incurring substantial costs and the diversion of our resources, which may materially adversely affect our results of operations, financial condition and/or liquidity.

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

The agricultural market in China is highly fragmented, largely regional and highly competitive, and we expect competition to increase and intensify within the sector. We face significant competition in our corn seed and sheep lines of business. Many of our competitors have greater financial, research and development and other resources than we have. Competition may also develop from consolidation within the corn seed industry in China or the privatization of corn seed producers that are currently operated by local governments in China. According to the Opinion on Enhancement of Market Supervision regarding Seed Administration Reform issued by the General Office of the PRC State Council in May 2006, local government agricultural administrative offices were required to separate their governmental administrative functions from seed production activities by the end of June 2007 and, therefore, more privately-owned seed companies may emerge in the future. Our competitors may be better positioned to take advantage of industry consolidation and acquisition opportunities than we are. The reform and restructuring of state-owned equity in seed enterprises will likely lead to the reallocation of market share in the seed industry, and our competitors may increase their market share by participating in the restructuring of state-owned seed companies. Such privatization would likely result in increased numbers of market participants with more efficient and commercially viable business models. In addition, the PRC government currently restricts foreign ownership of any domestic seed development and production business to no more than 50%. When and if such restrictions are lifted, multinational corporations engaged in the seed business may expand into the agricultural market in China. These companies have significantly greater financial, technological and other resources than we do and may become our major competitors in China. As competition intensifies, our margins may be compressed by more competitive pricing and we may lose our market share and experience a reduction in our revenues and profit.

If we are unable to estimate farmers’ future needs accurately and to match our production levels to meet the demand of our direct customers, our business, financial condition and results of operations may be materially and adversely affected.

Due to the nature of the seed industry, we normally produce seeds according to our production plan before we sell them to distributors, which are our direct customers. Chinese farmers, the end users of our seeds, generally make purchasing decisions for our products based on market prices, economic and weather conditions as well as other factors that we and our distributors may not be able to anticipate accurately in advance. If we fail to accurately estimate the volume and types of products sought by farmers, we may produce seeds that are not in demand. Unsold inventory could eventually be sold as field corn to end users at much lower prices than those of field corn seeds. Aged inventory could result in asset impairment, which would cause us to suffer a loss and incur an increase in our operating expenses. Conversely, if we underestimate demand, we may not be able to satisfy our distributors’ demand for corn seeds, and as a result damage our customer relations and end-user loyalty. Failure to estimate farmers’ future needs and to match our production to our direct customers’ demands may materially and adversely affect our business, financial condition and results of operations.

If Ganxin is not able to recover all of the advances paid to village collectives or if a substantial number of our customers fail to pay for our products, our liquidity and financial condition may be materially and adversely affected.

Ganxin provides cash advances to the village collectives that grow field corn seeds for it so they can purchase fertilizer and other production materials. At the end of the growing season, after taking delivery of corn seeds, Ganxin credits the advances against the purchase prices payable to the village collectives. If the village collectives fail to produce or deliver the contracted amounts of corn seeds by the end of each growing season, Ganxin may not be able to recover all of the advances paid to the village collectives and its financial condition may be materially and adversely affected.

The resources we devote to research and development may not result in commercially viable or competitive products.

Our success depends in part on our ability to develop new products. Research and development in the seed industries is generally expensive and prolonged. For example, seed development takes at least five years, as measured from the selection of the variety of seed for product development to the launch of a new seed product on the market. Due to the uncertainties and complexities associated with seed and biotechnological research, seed products may not survive the development process, may not ultimately be commercially viable or may not pass government testing in the relevant provinces. In addition, we have significantly fewer financial resources than many of our international competitors. If the resources we devote to research and development do not result in products that survive the development stage, do not result in products that we can sell to our customers or do not pass government testing, our results of operations may be materially and adversely affected.

We may be subject to intellectual property claims in the future which could result in substantial costs and divert our financial and management resources away from our business.

We are subject to the risk that the products, technology and processes that we have developed in collaboration with institutes and universities will infringe upon patents, copyrights, trademarks or other third-party intellectual property rights. We may be subject to legal proceedings and claims relating to the intellectual property of others. If any such claims arise in the future, litigation or other dispute resolution proceedings may be necessary to allow us to retain our ability to offer our products. Even if we prevail in contesting such claims, this could result in substantial costs and divert our management’s resources and attention. If we are found to have violated the intellectual property rights of others, we may be enjoined from using such intellectual property rights, incur additional costs to license or develop alternative products and be forced to pay fines and damages, any of which could materially and adversely affect our business and results of operations.

Failure to protect our intellectual property rights may undermine our competitive position, and legal action to protect our intellectual property rights may be costly and divert our management’s resources.

We rely primarily on trademark, trade secret and copyright law and contractual restrictions to protect our intellectual property. These afford only limited protection, and the actions we take to protect our intellectual property rights may not be adequate. Third parties may infringe or misappropriate our proprietary technologies or other intellectual property rights, which could materially adversely affect our business, financial condition or operating results. Preventing unauthorized use of proprietary technology can be difficult and expensive. Also, litigation may be necessary to enforce our intellectual property rights, protect our trade secrets or determine the validity and scope of the proprietary rights of others. The outcome of such litigation may not be in our favor. Such litigation may be costly and may divert management’s attention as well as consume resources which could otherwise have been devoted to our business. An adverse determination in any such litigation would impair our intellectual property rights and may harm our business, prospects and reputation. In addition, we have no insurance coverage against litigation costs and would bear all costs arising from such litigation to the extent that we are unable to recover them from other parties. The occurrence of any of the foregoing may materially adversely affect our business, results of operations and financial condition.

Historically, implementation of PRC intellectual property laws has been lacking, primarily because of ambiguities in PRC law and difficulties of enforcement. Accordingly, intellectual property rights and confidentiality protections in China may not be as effective as those in the United States or other countries, which increases the risk that we may not be able to adequately protect our intellectual property.

We face risks and costs associated with our strategic partnership and investment that may negatively impact our business, results of operations and financial condition.

In October 2009, we entered into a strategic cooperation framework agreement with CNAAS, which provides for future cooperation across the spectrum of agricultural research. In addition, we entered into an investment agreement with CNAAS and its affiliates to invest RMB35.0 million into Zhongnong, a company wholly owned by CNAAS and its affiliates. The strategic cooperation framework grants Zhongnong preferential rights to the commercialization of research undertaken by CNAAS. We may not realize the anticipated benefits of our strategic partnership and we face risks, uncertainties and disruptions associated with the integration process, such as diversion of our management’s attention from other business concerns. In addition, our operating results may suffer because of costs related to the strategic partnership and potential additional investments required to commercialize the research. Furthermore, notwithstanding Zhongnong’s preferential rights, CNAAS may partner with other companies in commercializing some of their research.

In January 2010, we acquired a 19% equity interest and subscribed for convertible redeemable notes issued by PGW in an aggregate principal amount of approximately NZ$33.9 million (approximately $24.2 million based on the exchange rate on December 31, 2009). PGW, New Zealand’s largest rural services business, offers a wide range of products, services and solutions to farmers, growers and processors in New Zealand and internationally. In January 2011, we made an offer to acquire an additional 31.0% equity interest in PGW in order to bring our total shareholding in PGW to 50.01%, which was completed in April 2011. PGW is a public company listed on the New Zealand Stock Exchange and is subject to a different set of rules and regulations from U.S. securities laws and the Corporate Governance Rules of the New York Stock Exchange. Therefore, rules and regulations applicable to PGW may prohibit or restrict our ability to take actions with respect to PGW. Additionally, the convertible redeemable notes issued by PGW are an illiquid instrument and under the terms of the subscription agreement, the timing of conversion or redemption of the convertible redeemable notes and the form that the conversion will take are not within our control. Any failure to successfully manage our strategic partnership and investment may have a material adverse effect on our business and results of operations.

We face risks related to PGW’s business and operations that may adversely affect our results of operations and financial condition.

We expect a substantial portion of our revenues to be derived from our 50.01% shareholding in PGW, and therefore our revenues will be directly tied to the business and operations of PGW beginning in April 2011. PGW is New Zealand’s leading provider of agricultural services and its business is spread across the agriculture, livestock, merchandising, insurance, real estate, irrigation and pumping and financial services sectors, all of which may be subject to various risks and factors beyond our control. If PGW’s business and operations are not as successful as we expect or its revenues do not reach levels that we expected when we acquired our shareholding in it, our results of operations and financial condition may be materially and adversely affected.

Our ability to cause PGW to act solely in our interest may be restricted by agreements with the minority shareholders of Agria Asia Investments Limited and other factors.

We have gained control over PGW through our majority ownership of Agria Asia Investments Limited, or Agria Asia, which indirectly holds a 50.01% shareholding in PGW. However, we have entered into shareholder agreements with Ngai Tahu Capital Limited, or Ngai Tahu, and New Hope International (Hong Kong) Limited, or New Hope International, the minority shareholders of Agria Asia, which contain provisions protecting the rights of minority shareholders, including those that would require the unanimous shareholder approval for certain decisions. Additionally, certain decisions with respect to PGW may require super-majority shareholder approval, which our 50.01% shareholding does not ensure. Furthermore, we may be ineligible to vote on related party transactions between PGW and us, and such related party transactions may not be approved by PGW’s remaining shareholders. As such, restrictions on our ability to exercise control over PGW may adversely affect our business, results of operations and financial condition.

Contractual agreements with the other shareholders of Ganxin may affect our shareholding and level of influence in Ganxin.

Under the terms of contractual agreements we have entered into with the other shareholders of Ganxin, these shareholders have the right to purchase our shares in Ganxin in certain circumstances and the right to require us to purchase their shares in Ganxin in certain circumstances. The circumstances under which we buy or sell shares of Ganxin under these contractual arrangements may not be commercially favorable to us. The price or consideration for which we purchase or sell shares of Ganxin may not reflect the true value of those shares. If we are required to sell our shares of Ganxin to the other shareholders of Ganxin, our field corn seed product business would be directly impacted and our business, results of operations and financial condition may be adversely affected.

We may not possess all of the licenses required to operate our business, or we may fail to maintain the licenses we currently hold. This could subject us to fines and other penalties, which could materially adversely affect our results of operations.

We are required to hold a variety of permits and licenses to conduct our corn seed, sheep and seedling businesses in China. We may not possess all of the permits and licenses required for each of our business segments. In addition, the approvals, permits or licenses required by governmental agencies may change without substantial advance notice, and we could fail to obtain the approvals, permits or licenses required to expand our business. If we fail to obtain or to maintain such permits or licenses, or if renewals are granted with onerous conditions, we could be subject to fines and other penalties and be limited in the number or the quality of the products that we could offer. As a result, our business, results of operations and financial condition could be materially and adversely affected.

We may be subject to product quality or liability claims, which may cause us to incur litigation expenses and to devote significant management time to defending such claims, and if such claims are determined adversely to us we may be required to pay significant damage awards.

In addition to the genetic traits and the quality of our products, the performance of our products depends on climate, geographic conditions, cultivation method, farmers’ degree of knowledge and other factors. At the same time, the viability of some farmland in China has deteriorated due to toxic and hazardous materials from farmers’ overuse of herbicides. Moreover, different production methods might result in inconsistent quality. These factors can result in sub-optimal production yields. Farmers generally attribute sub-optimal production yields to lower quality agricultural raw materials. In addition, inconsistent quality of products may also result in the unwillingness of consumers to purchase products or pay for products already purchased that they consider to be sub-standard.

We may be subject to legal proceedings and claims from time to time relating to the quality of our products. The defense of these proceedings and claims could be both costly and time-consuming and significantly divert the efforts and resources of our management. An adverse determination in any such proceeding could subject us to significant liability. In addition, any such proceeding, even if ultimately determined in our favor, could damage our reputation and prevent us from maintaining or increasing sales and market share. Protracted litigation could also result in our customers or potential customers deferring or limiting their purchase of our products.

Seed prices and sales volumes may decrease in any given year with a corresponding reduction in sales, margins and profitability.

There have been periods of instability during which seed and other commodity prices and sales volumes have fluctuated significantly. Commodities can be affected by general economic conditions, weather, outbreaks of disease and factors affecting demand, such as the availability of financing, competition and trade restrictions. Our attempts to differentiate our products from those of other seed producers have not prevented some seed markets from having the characteristics of a commodity market. As a result, the price that we are able to demand for our seed depends on the amount of seed available from other producers. Therefore, prices may be volatile even in the absence of significant external events that might cause volatility. As a result, the amount of revenue that we receive in any given year is subject to change. As production levels are determined prior to the time that the volume and the market price for orders is known, we may have too much or too little product available, which may materially and adversely affect our revenues, margins and profitability.

The advent of the genetic modification of corn seeds in China could adversely affect our business, causing us to lose business opportunities, market share and revenues.

We rely upon traditional methods of creating corn seed hybrids to develop new products. There has been a worldwide increase in the development and application of genetically modified agricultural products to increase the quality and quantity of crop yields. Advances in technology are increasingly allowing the use of gene modification to produce seeds that are superior to those produced by traditional methods. The production and commercial sale of genetically modified corn seed have not yet obtained public acceptance and are not encouraged by government authorities in China. However, if government attitude changes to encourage genetically modified corn seeds, demand may develop for these products, and we expect that we will need to produce genetically modified products to meet customer demands.

Should the Chinese government change its attitude with respect to genetically modified corn seeds, our current steps to respond to the potential competitive threat posed by genetically modified agricultural products, including our research and development activities with respect to genetically modified corn seeds, may not allow us to compete successfully. In particular, our competitors may have more advanced technology or may market genetically modified seed more successfully than we do.

Our growth prospects may be affected if we are unable to obtain additional capital to finance acquisitions.

We may require additional cash resources in order to make acquisitions. In general, we do not know the cost of an acquisition until we analyze the opportunity, complete due diligence and begin negotiations. If the cost of any such acquisition exceeds our cash resources, we will need to seek additional cash resources, and may seek to sell additional equity or debt securities or borrow under credit facilities. The sale or issuance of additional equity securities could dilute our shareholders. The incurrence of indebtedness would result in increased debt service obligations and could result in operating and financing covenants that would restrict our operations. For example, both Agria Asia, our subsidiary that ultimately holds our investment in PGW, and PGW had substantial indebtedness as of the date of this annual report. Depending on the quantum and timing of cash flows arising from its indirect holding in PGW, we may need to refinance some or all of the debt in Agria Asia. Furthermore, New Hope International has the right to sell its shares in Agria Asia to Agria Group Limited, or Agria Group, on the terms and conditions provided in the shareholders agreement at a certain repurchase price determined pursuant to a supplemental agreement entered into between Agria Group and New Hope International in June 2011. The obligation of Agria Group in connection with this put option held by New Hope International may be on terms that are not commercially favorable to us. Additionally, we funded our equity investment in Agria Asia through letters of credit and bank loans secured by our RMB cash deposits. Our existing debt may also have an adverse effect our ability to obtain financing in amounts or on terms acceptable to us, if we are able to obtain financing at all. We may also not be able to secure, repay or refinance debt incurred to fund acquisitions and purchases of equity interests, especially if the acquisition or equity interest purchase does not result in the benefits anticipated. As a result, our operating results and financial condition may be materially and adversely affected.

Failure to properly manage our storage system may damage our products, resulting in operating losses.

Seed storage entails significant risks associated with the storage environment, including moisture, temperature and humidity levels, deviations in which may result in damage to seeds in stock. Any significant damage to the products we have in storage could materially and adversely affect our results of operations.

Failure to achieve and maintain effective internal controls could materially adversely affect the trading price of our ADSs.

We are subject to reporting obligations under the U.S. securities laws. The Securities and Exchange Commission, or SEC, as required under Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, has adopted rules requiring public companies to include a report of management on the effectiveness of such companies’ internal control over financial reporting in their annual reports. In addition, an independent registered public accounting firm for a public company must report the effectiveness of our company’s internal control over financial reporting. We became subject to these requirements from the fiscal year ended December 31, 2008.

As of December 31, 2008, we and our independent registered public accounting firm identified a number of control deficiencies, including a material weakness, in our internal control over financial reporting. The material weakness observed was that controls designed to ensure that significant transactions, accounting estimates, and other adjustments were properly reviewed, analyzed and monitored by sufficient and appropriate accounting staff on a timely basis did not operate effectively. Additionally, our management concluded that our internal control over financial reporting was not effective as of December 31, 2009. When finalizing the financial statements for the year end December 31, 2009, our auditors identified a material misstatement from the misapplication of U.S. GAAP on the presentation of expenses, recorded by our consolidated affiliate, comprising impairment charges to damaged inventories and long-lived assets caused by extreme weather conditions, which constituted a material weakness. As a result, an audit adjustment was required to reclassify non-operating expenses to operating expenses. Management recorded the audit adjustment, which did not result in any change to net income reported by us. In response to these material weaknesses, our management took remediation measures in 2010, including strengthening our monitoring control over financial reporting, implementing a series of review and monitoring controls over the financial statement closing process, appointed external consultants with relevant expertise and experience in U.S. GAAP and internal control over financial reporting and strengthening our internal audit team. Management has tested the effectiveness of these newly implemented controls and found them to be operating effectively for a sufficient period of time to reduce the possibility of a material misstatement to less than a reasonably possible likelihood. As a result, management has concluded that, as of December 31, 2010, the material weakness disclosed in our Form 20-F for the year ended December 31, 2009 had been remediated. Our management has concluded that our internal control over financial reporting was effective as of December 31, 2010. See “Item 15. Controls and Procedures.”

If we fail to maintain effective internal controls over financial reporting in the future, we may not be able to produce reliable financial reports and prevent fraud and investors may lose confidence in the reliability of our financial statements, which would negatively impact the trading price of our ADSs. Our reporting obligations as a public company, including our efforts to comply with Section 404 of the Sarbanes-Oxley Act, will continue to place a significant strain on our management, operational and financial resources and systems for the foreseeable future.

If we grant additional employee share options, restricted shares or other share incentives in the future, our net income could be adversely affected.

We have adopted a share incentive plan and granted share options under the plan. We are required to account for share-based compensation in accordance with ASC 718-10, “Compensation-Stock Compensation: Overall,” which requires a company to recognize, as an expense, the fair value of share options and other share-based compensation to employees based on the fair value of equity awards on the date of the grant, with the compensation expense recognized over the period in which the recipient is required to provide service in exchange for the equity award. If we grant additional options, restricted shares or other equity incentives in the future, we could incur significant compensation charges equal to the fair value of the additional options, restricted shares and other equity incentives, and our net income could be adversely affected.

We do not maintain insurance on our seed storage facilities; therefore, if a fire or other disaster damages some or all of our stored seeds, we will not receive any compensation.

We store a portion of our seed products from February to September. We do not maintain insurance on our storage facilities. A fire or other natural or man-made disaster may damage our stored products, particularly if such event occurs shortly before the peak season for the sales of seeds products, which could materially adversely affect our operating results and financial condition.

Risks Related to Doing Business in China

If the Chinese government finds that the agreements that establish the structure for operating our Chinese businesses do not comply with Chinese governmental restrictions on foreign investment in the seed industry, or if these regulations or the interpretation of existing regulations change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations.

Most of our operations are conducted through our contractual arrangements with our affiliated entities and their shareholders in China. PRC regulations currently restrict foreign ownership of corn seed companies. For a description of these regulations, see “Item 4. Information on the Company—B. Business Overview—Regulation—Seed Law, Animal Husbandry Law and Other Relevant Regulations—Seed Law and Other Relevant Regulations.” We have entered into contractual arrangements with our affiliated entity, Guanli, and its shareholders, all PRC citizens, which enable us to, among other things, exercise effective control over the affiliated entities. See “Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions—Contractual Arrangements with Guanli and Its Shareholders” and “Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions—Contractual Arrangements with Agria Agriculture and Zhongyuan and Their Respective Shareholders.”

If we or either of our PRC subsidiaries or affiliated entity or our corporate structure is found to be in violation of any existing or future PRC laws or regulations (for example, if we are deemed to be holding equity interests in an entity in which direct foreign ownership is restricted), the relevant PRC regulatory authorities, including the State Administration of Industry and Commerce, the State Administration of Foreign Exchange, or SAFE, and relevant agencies of the Ministry of Commerce, would have broad discretion in dealing with such violations, including:

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revoking Guanli’s business and operating licenses;

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confiscating relevant income and imposing fines and other penalties;

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prohibiting or restricting Guanli’s operations in China;

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requiring us or Guanli to restructure Guanli’s ownership structure or operations;

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restricting or prohibiting our use of the proceeds from our initial public offering to finance our businesses and operations in China; or

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imposing conditions or requirements with which we or our subsidiaries or Guanli may not be able to comply.

The imposition of any of these penalties could materially adversely affect our ability to conduct our business.

The shareholders of Guanli may breach our agreements with them or may have potential conflicts of interest with us, and we may not be able to enter into agreements to derive economic benefits from Guanli, which may materially and adversely affect our business and financial condition.

The shareholders of Guanli, our consolidated affiliated entity in the PRC, may breach or refuse to renew the existing contractual arrangements with us that allow us to effectively control Guanli, and receive economic benefits from their operations. They may not always act in the best interests of our company. We do not have existing arrangements to address potential conflicts of interest between these individuals and our company. We rely on these individuals to abide by the contract laws of China and to honor their contracts with us in order for us to effectively control Guanli and to receive the economic benefits of Guanli. If we cannot resolve any conflicts of interest or disputes that may arise between us and the shareholders of Guanli or if the shareholders breach our agreements with them, we would have to rely on legal proceedings, which may disrupt our business. There is also substantial uncertainty as to the outcome of any such legal proceedings.

Any limitation of PRC law and regulations on the ability of our subsidiaries and affiliated entity to distribute dividends or make other payments to us could materially adversely affect our ability to conduct our business.

Current PRC regulations permit our subsidiaries to pay dividends to us only out of their accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations. In addition, each of our subsidiaries and our affiliated entity in China is required to set aside at least 10% of its after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of its registered capital, and to further set aside a portion of its after-tax profits to fund the employee welfare fund at the discretion of the shareholders’ meeting or the board. These reserves are not distributable as cash dividends. Furthermore, if our subsidiaries and our affiliated entity in China incur debt on their own behalf in the future, the loan agreements governing that debt may restrict their ability to pay dividends or make payments to us according to the contractual agreements. In addition, the PRC tax authorities may require us to adjust our taxable income under the contractual arrangements we have in place in a manner that would materially and adversely affect our subsidiaries’ ability to pay dividends and other distributions to us. Any limitation on the ability of our subsidiaries and our affiliated entity to distribute dividends or other payments to us could materially limit our ability to grow, make investments or acquisitions that could be beneficial to our businesses, or otherwise fund and conduct our business.

Pursuant to the new PRC enterprise income tax law that became effective on January 1, 2008, or the 2008 EIT Law, an enterprise established outside of the PRC with “de facto management bodies” within the PRC is considered as a resident enterprise and will be subject to a PRC income tax on its global income. According to the implementing rules of the 2008 EIT Law, or the Implementing Rules, “de facto management bodies” refer to “establishments that carry out substantial and overall management and control over the manufacturing and business operations, personnel, accounting, properties, etc. of an enterprise.” On April 22, 2009, the State Administration of Taxation promulgated a circular setting out the criteria for determining whether “de facto management bodies” are located in China for overseas incorporated, domestically controlled enterprises. However, as this circular only applies to enterprises incorporated under the laws of foreign countries or regions that are controlled by PRC enterprises or groups of PRC enterprises, it remains unclear how the tax authorities will determine the location of “de facto management bodies” for overseas incorporated enterprises that are not controlled by PRC enterprises or groups of PRC enterprises like us. Accordingly, we may be considered a resident enterprise and may therefore be subject to a PRC income tax on our global income. If we are considered a resident enterprise and earn income other than dividends from our PRC subsidiaries, such PRC income tax on our global income could significantly increase our tax burden and materially and adversely affect our cash flow and profitability.

Under the applicable PRC tax laws in effect before January 1, 2008, dividend payments to foreign investors made by foreign-invested enterprises are exempt from PRC withholding tax. Pursuant to the 2008 EIT Law and the Implementing Rules effective as of January 1, 2008, however, dividends generated after January 1, 2008 and payable by a foreign-invested enterprise to its foreign investors will be subject to a 10% withholding tax if the foreign investors are considered non-resident enterprises without any establishment or place within China or if the dividends payable have no connection with the establishment or place of the foreign investors within China, unless any such foreign investor’s jurisdiction of incorporation has a tax treaty with China that provides for a different withholding arrangement. The Cayman Islands, where we are incorporated, does not have such a tax treaty with China. China Victory International Holdings Limited, or China Victory, our wholly owned subsidiary and the direct holder of 100% equity interest in Aero Biotech Science & Technology Co., Ltd., or Agria China, and Agria Brother Biotech (Shenzhen) Co., Ltd., or Agria Brother, is incorporated in Hong Kong. According to the Arrangement between Mainland China and Hong Kong Special Administrative Region on the Avoidance of Double Taxation and Prevention of Fiscal Evasion in August 2006, or the Mainland and Hong Kong Taxation Arrangement, and the Notice in Relation to the Dispatch of Schedule of Agreed Tax Rates on Dividends issued by the State Administration of Taxation (State Taxation Circular No. 112 (2008)), dividends paid by a foreign-invested enterprise in China to its direct holding company in Hong Kong will be subject to withholding tax at a rate of 5% (if the foreign investor owns directly at least 25% of the shares of the foreign-invested enterprise).

On October 1, 2009, the Administrative Measures for Non-Residents Enjoying Tax Treaty Benefits (Trial Implementation) became effective. Under these measures, our Hong Kong subsidiary needs to obtain approval from the competent local branch of the State Administration of Taxation in order to enjoy the preferential withholding tax rate of 5% in accordance with the tax treaty. In February 2009, the State Administration of Taxation issued Notice No. 81. According to Notice No. 81, in order to enjoy the preferential treatment on dividend withholding tax rates, an enterprise must be the “beneficial owner” of the relevant dividend income, and no enterprise is entitled to preferential treatment pursuant to any tax treaties if such enterprise qualifies for such preferential tax rates through any transaction or arrangement, the major purpose of which is to obtain such preferential tax treatment. The tax authority in charge has the right to make adjustments to the applicable tax rates, if it determines that any taxpayer has enjoyed preferential treatment under tax treaties as a result of such transaction or arrangement. In October 2009, the State Administration of Taxation issued Notice No. 601 to provide guidance on the criteria to determine whether an enterprise qualifies as the “beneficial owner” of the PRC sourced income for the purpose of obtaining preferential treatment under tax treaties. Pursuant to Notice No. 601, the PRC tax authorities will review and grant tax preferential treatment on a case-by-case basis and adopt the “substance over form” principle in the review. Notice 601 specifies that a beneficial owner should generally carry out substantial business activities and own and have control over the income, the assets or other rights generating the income. Therefore, an agent or a conduit company will not be regarded as a beneficial owner of such income. Since the two notices were issued, it has remained unclear how the PRC tax authorities will implement them in practice and to what extent they will affect the dividend withholding tax rates for dividends distributed by our subsidiaries in China to our Hong Kong subsidiary. Under the 2008 EIT Law and the Implementing Rules, if China Victory is regarded as a resident enterprise, the dividends payable to China Victory from Agria China and Agria Brother will be exempt from the PRC income tax. If China Victory is regarded as a non-resident enterprise and the relevant tax authority determines that China Victory does not qualify as the “beneficial owner” of the dividend income it receives from our PRC subsidiaries and therefore is subject to the higher 10% withholding tax rate, the amount of funds available to us to meet our cash requirements, including the payment of dividends to our shareholders, could be reduced correspondingly.

In addition, because uncertainty remains regarding the interpretation and implementation of the 2008 EIT Law and the Implementing Rules, if we are regarded as a PRC resident enterprise, then any dividends to be distributed by us to our non-PRC shareholders or any gains realized by non-PRC shareholders or ADS holders from transfer of our shares or ADSs may be subject to PRC withholding tax. If we are required under the 2008 EIT Law to withhold PRC income tax on the above dividends or gains, the investment in our shares or ADSs may be materially and adversely affected.

We benefit from certain PRC government incentives. Expiration of, changes to, disputes over or challenges against these incentives or protectionism arising from the incentives could adversely affect our operating results.

Prior to January 1, 2008, companies established in China were generally subject to a state and local enterprise income tax, or the EIT, at statutory rates of 30% and 3%, respectively. However, the Chinese government has provided incentives to high-technology companies and agricultural companies in order to encourage the development of the high-technology and agricultural industries. These incentives include reduced tax rates, subsidies and other measures. Agria China, our wholly-owned subsidiary established in March 2007 in China, was initially granted a full exemption from the EIT for the fiscal years 2007 to 2009. As a result of the 2008 EIT Law and its Implementing Rules, Agria China’s EIT exemption ended on December 31, 2007, and Agria China is subject to EIT at a rate of 25% from 2008 onwards.

Under the 2008 EIT Law, the Implementing Rules, the State Council circulars on implementation of enterprise tax transition preferential policy and relevant rules, foreign-invested enterprises, such as our subsidiary, Agria China, and domestic companies would be subject to EIT at a uniform rate of 25%. Preferential tax treatments will continue to be granted to entities that are classified as “high and new technology enterprises strongly supported by the State” or conduct business in encouraged sectors, whether foreign-invested enterprises or domestic companies. Furthermore, enterprises that were established and that have already enjoyed preferential tax exemption or reduction for a specified term will continue to enjoy them until the expiration of such term. Uncertainty remains with respect to their interpretation and implementation. If the PRC central government challenges the preferential tax treatment enjoyed by some of our subsidiaries and consolidated affiliates, our effective tax rate applied to our income in China will likely increase to a maximum of 25%, which could materially adversely affect our financial condition and results of operations.

The PRC government has in recent years reduced taxes and increased subsidies and other support across the agricultural industry. For instance, the government subsidizes farmers for their seed purchases, and has increased spending on rural infrastructure. Sales of agricultural products from producers to intermediaries or to farmers are exempt from PRC value-added tax, or VAT. Discontinuance of preferential treatments granted by the Chinese government to the seed industry could adversely affect our earnings.

In addition, subsidies may adversely affect our ability to market our products, especially in provinces other than Shanxi where we are planning to increase our sales. Farmers can buy corn seeds designated as “high-quality” at subsidized prices, but the designation of seeds as “high-quality” is at the discretion of the local government, companies owned by the local government and local private seed companies. Because of local protectionism, this policy could result in preferential treatment for local seed producers, with locally produced seeds being designated as “high-quality”, while ours are not designated as such. If such preferential treatment were to occur, the price for our seeds to farmers in those provinces would be higher than the subsidized local seeds, and our sales in those provinces could suffer, which could materially and adversely affect our results of operations.

Uncertainties with respect to the PRC legal system could adversely affect us.

We conduct our business primarily through our subsidiaries and affiliated entity in China. Our operations in China are governed by PRC laws and regulations. Our subsidiaries are generally subject to laws and regulations applicable to foreign investments in China, and in particular, laws applicable to wholly foreign-owned enterprises. The PRC legal system is based on written statutes. Prior court decisions may be cited for reference but have limited precedential value.

Since 1979, PRC legislation and regulations have significantly enhanced the protections afforded to various forms of foreign investments in China. However, China has not developed a fully integrated legal system and recently enacted laws and regulations may not sufficiently cover all aspects of economic activities in China. In particular, because these laws and regulations are relatively new, and because of the limited volume of published decisions and their non-binding nature, the interpretation and enforcement of these laws and regulations involve uncertainties. In addition, the PRC legal system is based in part on government policies and internal rules (some of which are not published on a timely basis or at all) that may have a retroactive effect. As a result, we may not be aware of our violation of these policies and rules until after the violation. In addition, any litigation in China, regardless of outcome, may be protracted and result in substantial costs and diversion of resources and management attention.

SAFE regulations relating to offshore investment activities by PRC residents may increase our administrative burden and restrict our overseas and cross-border investment activity. If our shareholders and beneficial owners who are PRC residents fail to make required applications and filings under such regulations, we may be unable to distribute profits and may become subject to liability under PRC laws.

SAFE has promulgated several regulations, including Circular No. 75 issued in November 2005, requiring registrations with, and approvals from, PRC government authorities in connection with direct or indirect offshore investment activities by PRC residents. These regulations apply to our shareholders and beneficial owners who are PRC residents.

The SAFE regulations require registration of direct or indirect investments made by PRC residents in offshore companies. In the event that a PRC shareholder with a direct or indirect stake in an offshore parent company fails to make the required SAFE registration, the PRC subsidiaries of that offshore parent company may be prohibited from making distributions of profit to the offshore parent and from paying the offshore parent proceeds from any reduction in capital, share transfer or liquidation in respect of the PRC subsidiaries. Further, failure to comply with the various SAFE registration requirements described above could result in liability under PRC law for foreign exchange evasion.

We have requested our shareholders and beneficial owners who are PRC residents to make the necessary applications and filings as required under these regulations and under any implementing rules or approval practices that may be established under these regulations. However, due to the lack of implementing rules and uncertainty concerning the reconciliation of the new regulations with other approval requirements, it remains unclear how these regulations, and any future legislation concerning offshore or cross-border transactions, will be interpreted, amended and implemented by the relevant government authorities. There is a risk that not all of our shareholders and beneficial owners who are PRC residents will comply with our request to make or obtain any applicable registration or approvals required by these regulations or other related legislation. The failure or inability of our PRC resident shareholders and beneficial owners to receive any required approvals or make any required registrations may subject us to fines and legal sanctions, restrict our overseas or cross-border investment activities, limit our PRC subsidiaries’ ability to make distributions or pay dividends or affect our ownership structure, as a result of which our acquisition strategy and business operations and our ability to distribute profits to you could be materially and adversely affected. See “Item 4. Information on the Company—B. Business Overview—Regulation—Foreign Exchange.”

In addition, under the Implementation Rules of the Administrative Measures for Individual Foreign Exchange, or the Individual Foreign Exchange Rules, issued on January 5, 2007 by SAFE, PRC citizens who are granted shares or share options by an overseas listed company according to its employee share option or share incentive plan are required, through the PRC subsidiary of such overseas listed company or any other qualified PRC agent, to register with SAFE and complete certain other procedures related to the share option or other share incentive plan. Foreign exchange income received from the sale of shares or dividends distributed by the overseas listed company may be remitted into a foreign currency account of such PRC citizen or be exchanged into Renminbi. Our PRC citizen employees who have been granted share options, or PRC option holders, are subject to the Individual Foreign Exchange Rules. If we or our PRC citizen employees fail to comply with these regulations, we or our PRC option holders may be subject to fines and legal sanctions.

Restrictions on currency exchange may limit our ability to utilize our revenues effectively.

The PRC government imposes controls on the convertibility of RMB into foreign currencies and, in certain cases, the remittance of currency out of China. We receive all of our revenues in RMB. Under our current structure, our income is primarily derived from dividend payments from our PRC subsidiaries. Shortages in the availability of foreign currency may restrict the ability of our PRC subsidiaries and our affiliated entity to remit sufficient foreign currency to pay dividends or other payments to us, or otherwise satisfy their foreign currency denominated obligations. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and expenditures from trade-related transactions, can be made in foreign currencies without prior approval from SAFE by complying with certain procedural requirements. However, approval from appropriate government authorities is required where RMB are to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of bank loans denominated in foreign currencies. The PRC government may also, at its discretion, restrict access in the future to foreign currencies for current account transactions. If the foreign exchange control system prevents us from obtaining sufficient foreign currency to satisfy our currency demands, we may not be able to pay dividends in foreign currencies to our shareholders, including holders of our ADSs.

Fluctuation in the value of the Renminbi may materially adversely affect your investment.

The value of the Renminbi against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in political and economic conditions and the foreign exchange policy adopted by the PRC government. On July 21, 2005, the PRC government changed its policy of pegging the value of the Renminbi to the U.S. dollar. Under the current policy, the Renminbi is permitted to fluctuate within a narrow and managed band against a basket of certain foreign currencies. Following the removal of the U.S. dollar peg, the Renminbi appreciated more than 20% against the U.S. dollar over the following three years. During the period between July 2008 and June 2010, the Renminbi has traded stably within a narrow range against the U.S. dollar. Since June 2010, the Renminbi has started to slowly appreciate further against the U.S. dollar.

In the year ended December 31, 2010, our revenues and costs were mostly denominated in Renminbi, while a significant portion of our financial assets were denominated in US dollars. Substantially all of our sales contracts were denominated in Renminbi and substantially all of our costs and expenses were denominated in Renminbi. We rely entirely on dividends and other fees paid to us by our subsidiaries and our affiliated entity in China. To the extent that we need to convert US dollars into Renminbi for our operations, appreciation of the Renminbi against the US dollar would adversely affect the Renminbi amount we receive from the conversion. Conversely, if we decide to convert our Renminbi into US dollars for the purpose of dividend distribution or for other business purposes, appreciation of the US dollar against the Renminbi would negatively affect the US dollar amount available to us. Fluctuations in the exchange rate will also affect the relative value of any dividend we issue which will be exchanged into US dollars and earnings from and the value of any US dollar-denominated investments we make.

Limited hedging transactions are available in China to reduce our exposure to exchange rate fluctuations. To date, we have not entered into any hedging transactions in an effort to reduce our exposure to foreign currency exchange risk. While we may decide to enter into hedging transactions, the availability and effectiveness of these hedges may be limited so that we may not be able to successfully hedge our exposure at all. In addition, our currency exchange losses may be magnified by PRC exchange control regulations that restrict our ability to convert RMB into foreign currency. As a result, fluctuations in exchange rates may materially adversely affect your investment.

We face risks related to health epidemics and other outbreaks or acts of terrorism in China, which could result in reduced demand for our products or disrupt our operations.

Our business could be materially and adversely affected by an outbreak of H1N1 influenza A, avian flu, severe acute respiratory syndrome or another epidemic, or an act of terrorism. From time to time, there have been reports on the occurrences of avian flu in various parts of China, including a few confirmed human cases and deaths. Since 2009, human cases of H1N1 influenza A virus infection have been identified internationally. Any prolonged recurrence of H1N1 influenza A, avian flu, severe acute respiratory syndrome or other adverse public health developments in China or elsewhere in Asia may have a material and adverse effect on our business operations. In addition, terrorist attacks, such as those that took place on September 11, 2001, geopolitical uncertainty and international conflicts, could adversely affect our business operations. Any of these events could adversely affect China’s economy and cause an immediate and prolonged drop in consumer demand. An immediate and prolonged drop in consumer demand could severely disrupt our business operations and adversely affect our results of operations. Furthermore, a significant portion of our revenues are derived from government customers, which may reduce their spending on our products during a crisis, which could adversely affect our results of operations and could probably be difficult to recover once the threat has subsided.

The PRC Property Rights Law may affect the perfection of the pledge in our pledge agreement with Guanli and its shareholders.

Under the equity pledge agreement among Guanli, the shareholders of Guanli and Agria Brother, the shareholders of Guanli have pledged all of their equity interests in Guanli to Agria Brother. The equity pledge agreement was duly created by recording the pledge on the register of shareholders of Guanli in accordance with the PRC Security Law and the PRC Contract Law. The purpose of the Guanli equity pledge agreement is to guarantee Guanli’s performance of its obligations under the exclusive technology development, technical support and service agreement, the exclusive call option agreement and the loan agreement. However, according to the PRC Property Rights Law, which became effective as of October 1, 2007, a pledge is not effective without being registered with the relevant local Administration for Industry and Commerce. Guanli has attempted to register the pledge, but the applications for registration have not been processed due to the lack of registration procedures. Guanli will continue to make efforts to register such pledge when the local Administration for Industry and Commerce implements registration procedures. If Guanli is unable to do so, the pledge itself may be deemed ineffective under the PRC Property Rights Law. If Guanli or its shareholders breach their obligations under the agreements with Agria Brother, there is a risk that Agria Brother may not be able to successfully enforce the pledge and would need to resort to legal proceedings to enforce its contractual rights.

Risks Related to the ADSs

The trading price of our ADSs has been and continues to be highly volatile.

The trading price of our ADSs may be highly volatile and subject to wide fluctuations in response to factors including the following:

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announcement of securities law class action lawsuits against us and our directors and officers;

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delays in our periodic earnings announcements;

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announcements of technological or competitive developments;

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

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actual or anticipated fluctuations in our quarterly operating results;

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changes in financial estimates by securities research analysts;

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changes in the economic performance or market valuations of our seeds;

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additions to or departures of our executive officers and key personnel;

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fluctuations in the exchange rates between the US dollar and RMB; and

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sales or anticipated sales of additional ADSs.

In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are not related to the operating performance of particular companies. These market fluctuations may also materially adversely affect the market price of our ADSs.

Substantial future sales or perceived sales of our ADSs in the public market or substantial cancellation of our ADSs could cause the price of our ADSs to decline.

Additional sales of our ADSs in the public market or the perception that these sales could occur could cause the market price of our ADSs to decline. A substantial repurchase of our ADSs may adversely affect the liquidity of our shares. As of the date of this annual report, we had 110,766,600 ordinary shares outstanding, of which 48,830,000 ordinary shares were represented by 24,415,000 ADSs. All ADSs are freely transferable without additional registration requirements under the Securities Act. Since the 180-day lock-up period of our initial public offering has expired, the remaining ordinary shares not represented by ADSs are available for sale subject to the volume and other restrictions as applicable under Rule 144 and Rule 701 under the Securities Act. Risks associated with a substantial sale or cancellation of our ADSs could materially and adversely affect the market price of our ADSs and liquidity.

We were a passive foreign investment company for the taxable year ended December 31, 2010, which could result in adverse United States federal income tax consequences to U.S. Holders of our ADSs or ordinary shares.

Based on the market price of our ADSs and the value and composition of our assets, we believe we were a “passive foreign investment company,” or PFIC, for U.S. federal income tax purposes for the taxable year ended December 31, 2010. In addition, it is likely that one or more of our subsidiaries were also PFICs for such year. A non-U.S. corporation will be a PFIC for any taxable year if either (1) at least 75% of its gross income for such year is passive income or (2) at least 50% of the value of its assets (based on an average of the quarterly values of the assets) during such year is attributable to assets that produce passive income or are held for the production of passive income. We must make a separate determination after the close of each taxable year as to whether we were a PFIC for that year. Because the value of our assets for purposes of the PFIC test will generally be determined by reference to the market price of our ADSs or ordinary shares, our PFIC status will depend in large part on the market price of the ADSs or ordinary shares, which may fluctuate significantly. Because we believe we were a PFIC for the taxable year ended December 31, 2010, certain adverse U.S. federal income tax consequences could apply to U.S. Holders (as defined in “Item 10. Additional Information—E. Taxation—United States Federal Income Taxation”) of our ADSs or ordinary shares with respect to any “excess distribution” received from us and any gain from a sale or other disposition of the ADSs or ordinary shares. See “Item 10. Additional Information—E. Taxation—United States Federal Income Taxation—Passive Foreign Investment Company.”

You may not have the same voting rights as the holders of our ordinary shares and may not receive voting materials in time to be able to exercise your right to vote.

Except as described in this annual report and in the deposit agreement, holders of our ADSs will not be able to exercise voting rights attaching to the shares represented by our ADSs on an individual basis. Holders of our ADSs will appoint the depositary or its nominee to vote the shares represented by the ADSs. You may not receive voting materials in time to instruct the depositary to vote and you may not have the opportunity to exercise a right to vote. Upon our written request, the depositary will mail to you a shareholder meeting notice that contains, among other things, a statement as to the manner in which you may give your voting instructions, including an express indication that such instructions may be given or deemed given to the depositary to give a discretionary proxy to a person designated by us if no instructions are received by the depositary from you on or before the response date established by the depositary. However, no voting instruction shall be deemed given and no such discretionary proxy shall be given with respect to any matter as to which we inform the depositary that (i) we do not wish such proxy given, (ii) substantial opposition exists, or (iii) such matter materially and adversely affects the rights of shareholders.

Under our deposit agreement, the depositary will give us a discretionary proxy to vote our ordinary shares underlying your ADSs at shareholders’ meetings if you do not vote, unless we have instructed the depositary that we do not wish a discretionary proxy to be given or under any of the other situations specified under the deposit agreement. The effect of this discretionary proxy is that you cannot prevent ordinary shares underlying your ADSs from being voted, absent the situations described above, and it may be more difficult for shareholders to influence the management of our company. Holders of our ordinary shares are not subject to this discretionary proxy.

Your right to participate in any future rights offerings may be limited, which may dilute your holdings, and you may not receive cash dividends if it is impractical to make them available to you.

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

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

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

Our corporate affairs are governed by our amended and restated memorandum and articles of association, the Cayman Islands Companies Law and the common law of the Cayman Islands. The rights of shareholders to take action against the directors, actions by minority shareholders and the fiduciary responsibilities of our directors to us under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as that from English common law, which has persuasive, but not binding, authority on a court in the Cayman Islands. The rights of our shareholders and the fiduciary responsibilities of our directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedent in some jurisdictions in the United States. In particular, the Cayman Islands has a less developed body of securities laws than the United States. In addition, some U.S. states, such as Delaware, have more fully developed and judicially interpreted bodies of corporate law than the Cayman Islands.

As a result of all of the above, public shareholders of our company may have more difficulty in protecting their interests in the face of actions taken by management, members of the board of directors or controlling shareholders of our company than they would as shareholders of a U.S. public company.

We are controlled by a small group of shareholders, whose interests may differ from other shareholders.

As of the date of this annual report, our principal shareholder, Mr. Guanglin Lai, beneficially owned 43.9% of our total outstanding shares with another 23.8% owned by the next three biggest shareholders. This concentration of ownership may discourage, delay or prevent a change in control of our company, which could deprive our shareholders of an opportunity to receive a premium for their shares as part of a sale of our company and might reduce the price of our ADSs. In addition, because these shareholders could collectively control our company, they would be able to take actions that may not be in the best interests of other shareholders. These actions may be taken even if they are opposed by our other shareholders. We do not have any existing arrangements with any of our shareholders to address potential conflicts of interests between these shareholders and our company, and none of our shareholders, other than our officers pursuant to the terms of their service agreements, has entered into non-compete agreements. There is a risk that our existing shareholders may not always act in the best interests of our company.

Our memorandum and articles of association contain anti-takeover provisions that could adversely affect the rights of holders of our ordinary shares and ADSs.

Our memorandum and articles of association include the following provisions that may have the effect of delaying or preventing a change of control of our company:

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Our board of directors has the authority to establish from time to time one or more series of shares, including preferred shares without action by our shareholders and to determine, with respect to any series of preferred shares, the terms and rights of that series, including the designation of the series; number of shares of the series; dividend rights, dividend rates, conversion rights, voting rights; and rights and terms of redemption and liquidation preferences.

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Our board of directors may issue a series of preferred shares without action by our shareholders to the extent of available authorized but unissued shares. Accordingly, the issuance of preferred shares may adversely affect the rights of the holders of the ordinary shares. Issuance of preference shares may dilute the voting power of holders of ordinary shares.

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Subject to applicable regulatory requirements, our board of directors may issue additional ordinary shares or rights to acquire ordinary shares without action by our shareholders to the extent of available authorized but unissued shares.

By discouraging third parties from seeking to obtain control of our company in a tender offer or similar transaction, our memorandum and articles of association could deprive our shareholders of the opportunity to sell their shares at a premium over the prevailing market price.

You may have difficulty enforcing judgments obtained against us.

We are a Cayman Islands company and most of our assets are located outside of the United States. We conduct most of our operations are in the PRC. In addition, most of our directors and officers are nationals and residents of countries other than the United States. A substantial portion of the assets of these persons are located outside the United States. As a result, it may be difficult for you to effect service of process within the United States upon these persons. It may also be difficult for you to enforce in U.S. courts judgments obtained in U.S. courts based on the civil liability provisions of the U.S. federal securities laws against us and our officers and directors, most of whom are not residents in the United States and the substantial majority of whose assets are located outside of the United States. In addition, there is uncertainty as to whether the courts of the Cayman Islands or the PRC would recognize or enforce judgments of U.S. courts.

We formed Southrich Limited, a wholly-owned subsidiary of Agria Group, in September 2009 under the laws of the British Virgin Islands to hold our convertible redeemable notes issued by PGW in 2010. Agria (Singapore) Pte. Ltd., or Agria Singapore, a wholly-owned subsidiary of Southrich Limited, was incorporated in November 2009 under the laws of Singapore to hold our 19.01% equity interest in PGW. In January 2010, Southrich Limited changed its name to Agria Asia . In January 2011, Agria Singapore made a partial takeover offer to the shareholders of PGW to acquire an additional 31.0% of the shares in PGW at an offer price of NZ$0.60 per share. On April 29, 2011, we completed this acquisition and increased our shareholding of PGW to 50.01%. In April 2011, New Hope International invested US$20 million in the equity of Agria Asia, upon which our equity interest in Agria Asia was 88.05%. In April 2011 we also entered a conditional sale and purchase agreement to sell a 7.24% stake in Agria Asia to Ngai Tahu. This sale became unconditional when the shareholders of PGW approved the transaction in June 2011. We expect the sale will be completed in early July 2011. Upon the completion of this sale, our equity interest in Agria Asia will be 80.81%.

In July 2010, we divested P3A to Mr. Zhixin Xue, the president and a director of P3A. Agria China assigned to Mr. Xue all of our rights, interests, duties, liabilities and obligations under our contractual agreements with P3A in exchange for 11.5% of our issued and outstanding share capital immediately prior to the transaction. As a result of the divestiture, we ceased to operate the seed, sheep and seedling businesses that were previously operated through P3A.

In September 2010, we acquired a 49% equity stake in Wuwei Ganxin Seeds Company Limited, or Ganxin, for RMB40.0 million. Ganxin is a corn seed research, development, production and sales company based in the Gansu Province of China.

B.  Business Overview

Overview

We are a China-based agriculture company with operations in China and internationally. In China, we engage in research and development, production and sale of seed products, including field corn seeds, edible corn seeds and vegetable seeds. We own through Agria Asia a 50.1% equity interest in PGW, New Zealand’s largest agricultural services company. In July 2010, we divested P3A, which was engaged in research and development, production and sales of upstream agriculture products. Our total revenues increased from RMB3.0 million in 2009 to RMB29.0 million ($4.4 million) in 2010, while our net losses decreased from a loss of RMB135.3 million in 2009 to a loss of RMB59.2 million ($9.0 million) in 2010.

China Seeds Business

Our China seed business consists primarily of research and development, production, marketing and distribution of three types of seeds: field corn seeds, edible corn seeds and vegetable seeds. We operate our China seed business through four of our subsidiaries and associates described below:

We hold a 49% equity interest in Ganxin, which was established in January 2005 in Wuwei, Gansu Province. Ganxin serves as the primary production base for our field corn seed products.

We conduct sales, marketing and distribution of our corn seed products through Nong Ke Yu. Nong Ke Yu was established in 1998 in Beijing. In September 2009, we acquired 100% of Nong Ke Yu’s equity for a cash consideration of RMB5 million.

We conduct research and development and sales of vegetable seeds through BeOK. BeOK was established in August 2008 in Tianjin. In January 2010, we acquired 100% of BeOK’s equity for a cash consideration of RMB1 million.

In October 2009, we entered into an investment agreement with CNAAS and its affiliates, under which we agreed to invest RMB35 million (of which RMB 7 million has been paid as at December 31, 2010) for 53.84% of equity interest of Zhongnong, a company wholly owned by CNAAS and its affiliates. Zhongnong’s business is to hold the priority rights to accept the transfer of all existing and future cultivated seed varieties owned by CNAAS and its affiliates for the purposes of commercialization.

Products and Production

Our seeds products primarily consist of field corn seeds sold to farmers growing corn for animal feed and industrial uses, as well as edible corn seeds and vegetable seeds sold to farmers growing food for human consumption.

We invested in Ganxin in September 2010 to make it the primary production base for our field corn seed products. To our knowledge, in the corn growing season prior to our investment, or from March to August 2010, Ganxin had access to approximately 5,410 acres of farmland in Gansu Province for the production of field corn seeds and it produced 12,882 tons of field corn seeds.

We invested in Ganxin, a corn seed research, development, production and sales company based in the Gansu province, China, in September 2010 to make it the primary production base for our field corn seed products. Ganxin was formed in 2005 and produces corn seeds through arrangements with farmers in Gansu province, which is regarded as the leading area for corn seed production in China. Ganxin’s rights to produce and sell three varieties of corn seeds have been approved by relevant government authorities. This includes the variety Jixiang No. 1, which has features of high productivity and strong resistance to disease and is well regarded with a significant market share in China. Under the investment agreement, we received a 49% equity stake in Ganxin.

We also entered into an exclusive sales agency agreement with Ganxin, whereby the entire production volume of all current and future varieties of seeds owned or developed by Ganxin will be sold by us, acting as Ganxin’s exclusive agent. This sales agency agreement will remain effective for so long as we hold an equity stake in Ganxin.

Ganxin provides parent seeds to village collectives through arrangements where it leases land from local village collectives and distributes corn seeds within the village collectives. The village collectives in turn arrange for the farmers in the village to work on the land and produce corn seeds under the terms of our contractual arrangements. Cash advances are generally provided to the farmers for their purchase of fertilizer and other production materials. At the end of each growing season, Ganxin purchases the seeds that the village collectives produce on the leased land and deduct payment for the parent seeds and other advances provided.

We operate our edible corn seed business through Nong Ke Yu and our vegetable seed business through BeOK, both of which use outsourced production models. In 2010 we outsourced production of edible corn seeds to two production companies in Gansu, one of which is Ganxin, and one production company in Xinjiang and we outsourced production of vegetable seeds to one production company in each of Shandong, Tianjin and Inner Mongolia. Under these contractual outsourcing arrangements, we provide parent seeds, technical guidance and supervision to farmers and agree to buy the seeds from them at harvest. We processed and packaged these seed products and sold them to local and regional distributors.

Sales and Marketing

We market our seed products through pre-sale training, demonstrations and presentations to distributors, farmers and other potential customers.

Our field corn seeds are primarily sold to distributors, who in turn sell them to the farmers. As of December 31, 2010, we had approximately 72 field corn seed products distributors in China, who usually place orders two months before deliveries. Our edible corn seeds are primarily sold to distributors, who in turn sell them to farmers or processing factories. As of December 31, 2010, we had approximately 100 edible corn seed products distributors and 110 processing factory customers in China. Sales of both our field corn seeds and edible corn seeds are primarily conducted by Nong Ke Yu. Our vegetable seeds are primarily sold to distributors, who in turn sell them to farmers. As of December 31, 2010, we had approximately 58 vegetable seed products distributors in China. We sell 18 varieties of vegetable seeds in six categories including broccoli, celery, chili, Chinese cabbage, cucumber and tomato.

As of December 31, 2010, our sales and marketing team comprised nine employees.

Research and Development

We conduct research and development primarily in cooperation with our associate Zhongnong and with various universities and research institutions. See “—Intellectual Property.” We have also acquired a number of technologies and varieties of corn from third parties.

Our research and development team currently consists of 14 research professionals and staff who work in conjunction with us and CNAAS and an additional three research professionals and staff employed by Zhongnong. We have experimental breeding and testing bases for new corn varieties in Beijing and Hainan for our edible corn seeds business and in Beijing, Hainan and Shanxi for our field corn business.

In October 2009, we entered into a strategic cooperation framework agreement with CNAAS, providing for future cooperation across the spectrum of agricultural research. Under this agreement, we have preferential rights to partner with CNAAS in commercializing their research results. Established in 1957, CNAAS comprises 39 research institutes across China, covering all major areas of the agricultural sector, including advanced research in the development of horticulture and livestock. CNAAS employs over 5,000 scientists and research engineers and controls one of the largest germplasm banks in the world.

Additionally, we collaborate with a number of universities and research institutions to develop advanced technologies, including the Beijing Academy of Agricultural Sciences, Baotou Agricultural Science Institution of Inner Mongolia, Tianjin Vegetable Research Institution and Shenyang Agricultural University.

As of December 31, 2010, through acquisitions and self-development efforts, we own the rights to three proprietary edible corn seed varieties, namely JKN2000, JKN120 and JingZiNuo218. In 2011, we acquired the rights to two proprietary field corn seeds varieties, namely BaYu11 and ZhongDan909. Ganxin is currently applying for the proprietary right for JiXiang No. 1, a field corn seed variety. We also employed a breeder to carry out our own breeding programs. We have established 70 testing sites for testing and selection of new varieties.

International Business

Our international business comprises our investment in PGW, New Zealand’s leading provider of agricultural services to growers, farmers and processors in New Zealand and internationally. PGW has more than 2,100 employees and its revenues amounted to NZ$1.2 billion for the fiscal year ended June 30, 2010. We have gained control over PGW on April 29, 2011, when we increased the shares held in PGW by Agria Singapore to 50.01%. Agria Singapore is 100% owned by Agria Asia which is currently 88.05% owned by Agria Group and following completion of a sale of 7.24% of Agria Asia to Ngai Tahu expected in early July 2011, Agria Asia will be 80.81% owned by Agria Group.

In 2010, PGW restructured its operations into two major business divisions: AgriTech, which engages in the seed, nutrition and grain businesses, and AgriServices, which engages in merchandising, livestock, insurance, real estate, irrigation and pumping and PGG Wrightson Finance, or PWF.

AgriTech

PGW’s AgriTech division comprises the following businesses:

Seeds

PGW’s Seed business is the largest Southern Hemisphere supplier of commodity and proprietary forage seed predominately to New Zealand, Australia, South America and various international markets. PGW’s seed product range includes grass seeds, seed treatment products, forage legumes, forage brassicas, herb seeds, pea seeds and turf seeds. PGW is a market leader in New Zealand in forage, brassicas and turf, in Australia in proprietary and commodity forage products and a strong presence in South America through various investments in Uruguay, Argentina and Brazil. PGW’s seed products are focused on improving overall farm productivity and performance. The business is also involved in the turf seeds market in New Zealand and Australia for application in sports grounds, parks and lawns. The Seeds division is supported by a strong research base and commercializes new products through internal research and development, breeding and evaluation programs and joint venture research partnerships. The seeds business has a number of proprietary seeds that provide superior margins. In addition it has a large number of new cultivars in development.

Nutrition

The Nutrition business (Agri-Feeds) is a leading importer and wholesaler of liquid animal feeds based on sugar cane molasses. Agri-Feeds also manufactures and supplies products for treating facial eczema in livestock.

Grain

PGW’s Grain business is New Zealand’s largest domestic grain brokerage and marketing service. The business specializes in the supply of cereal seeds to arable farmers together with crop drying and storage activities in maize in the North Island and grain brokerage services throughout New Zealand. Key product categories include feed wheat, milling wheat, malting barley, feed barley, maize and proprietary cereals. The Grain division has strong relationships with growers via a network of field representatives throughout key cropping areas.

AgriServices

PGW’s AgriServices division focuses on the end customer and PGW’s distribution network. The AgriServices division provides standard agricultural products and services to New Zealand customers and international distributors. The AgriServices division includes the following products and services:

Merchandising

PGW operates a network of 96 stores under the PGG Wrightson and Fruitfed Supplies brands providing a range of products from animal health and nutrition, grain, seed and chemicals to clothing, fuel, fencing, machinery and leisure goods.

Livestock

PGW’s livestock business comprises New Zealand’s largest group of livestock representatives (more than 250 in total) managing a variety of relationships between farmers, meat processors, livestock exporters and stud-stock breeders and buyers. PGW’s livestock representatives also facilitate the buying and selling of livestock on behalf of clients (at auction or privately on-farm), and provide advice in relation to livestock genetics, stocking and animal evaluation, valuation and selling and buying strategies.

Insurance

PGW offers a range of specialized insurance products delivered in conjunction with New Zealand insurance broker, AON. Insurance products include farm insurance, domestic insurance, livestock insurance, crop insurance and business insurance.

Real Estate

PGW operates a national rural real estate business conducted through a team of sales representatives with specialized knowledge of the rural property market.

Irrigation and Pumping

Irrigation and Pumping is an integrated irrigation business including system design, construction and service with a primary focus on the design and installation of “turnkey” irrigation and pumping projects for arable, pastoral and dairy platforms.

Other AgriServices

PGW has several other investments, advances and ventures which are grouped under the AgriServices division including investments in: Wool Partners International; The New Zealand Merino Company; and Agriculture NZ.

PWF

PWF is a non-bank specialist rural finance company offering a range of financial products and services including term loans, seasonal finance, livestock, wool, crop and farm input advances.

On June 14, 2011, PGW announced it had entered into a conditional share sale agreement with Heartland New Zealand Limited, or Heartland, to sell its finance subsidiary, PWF, to Heartland’s wholly-owned subsidiary, Heartland Building Society, or HBS. The purchase price, an amount equal to the adjusted net tangible assets of PWF as of the expected completion date of the transaction, August 31, 2011, is expected to be approximately NZ$100 million ($76.9 million). In connection with the transaction, PWF would transfer certain loans with a combined value of approximately NZ$96.5 million ($74.2 million), to a wholly-owned PGW special purpose vehicle, which would work to realize or refinance these facilities over the short to medium term. If all sale conditions are met, Heartland would become the issuer of the debt securities currently issued by PWF and would take over all aspects of PWF’s business, including its loan book and existing staff. Further, PGW and Heartland have agreed to enter into a distribution and services agreement whereby Heartland will make financial products and services available to PGW clients in support of their farming activities. The transaction is conditional upon a number of approvals, including PGW and Heartland shareholder approvals, PWF debt holder consent, PWF and Heartland trustee consents, Heartland’s capital raising, as well as relevant regulatory and New Zealand government consents.

Structure of our investment in PGW

In October 2009, we entered into agreements to invest in and form a strategic partnership with PGW. Between November 2009 and December 2009, through equity purchases and participation in a rights issue, we invested a total of NZ$83.9 million ($64.5 million) and acquired a 19.01% stake in PGW. This stake was held by Agria Singapore, a wholly owned subsidiary of Agria Asia, which in turn was a 100% owned subsidiary of Agria.

On January 15, 2010, pursuant to a subscription agreement dated November 18, 2009, we subscribed for convertible redeemable notes issued by PGW in an aggregate principal amount of approximately NZ$33.8 million ($26.0 million). This note was held by Agria Asia.

In January 2011, Agria Singapore made a partial takeover offer for an additional 31.0% of the shares in PGW at the offer price of NZ$0.60 per share to in order to bring its total shareholding in PGG Wrightston to 50.01%. The total consideration paid by Agria Singapore, excluding transaction expenses for the shares acquired under the partial offer, was NZ$141.0 million ($108.4 million).

Between January 2011 and April 2011, Agria Group, Agria Asia and Agria Singapore entered into a number of financing arrangements between ourselves and also with New Hope International, or New Hope International, a subsidiary of New Hope Group to provide equity funding to Agria Singapore to complete such partial takeover. Agria Asia and its wholly owned subsidiaries also raised bank acquisition finance and debt from New Zealand-based Livestock Improvement Corporation Limited, or LIC, who agreed to support our partial takeover offer.

Under our equity funding arrangements, in addition to the 19.01% stake in PGW already owned by Agria Singapore and the CRN held by Agria Asia, Agria Group subscribed for additional equity in Agria Asia valued at $55.3 million for a combination of cash, expenses already incurred on behalf of Agria Asia and expenses that we agreed to incur on behalf of Agria Asia. At the date of completion of the partial offer we held 88.05% of Agria Asia.

Under New Hope International’s equity funding arrangements, New Hope International subscribed for equity in Agria Asia valued at $20.0 million for cash. New Hope International hold 11.95% of Agria Asia.

In April 2011, we also entered into a share purchase agreement with Ngai Tahu, a long-term strategic investor with a particular focus on New Zealand’s South Island commercial and rural ventures. Under the terms of the agreement, Ngai Tahu agreed to purchase from us 7.24% of the total shares of Agria Asia for a consideration of NZ$15.0 million ($11.5 million), subject to approval of shareholders of PGW. On June 28, 2011, PGW’s shareholders approved the transaction and the sale became unconditional. We expect the sale will be completed in early July 2011. Upon the completion of this sale, the equity interest in Agria Asia will be as follows:

New Hope Group is one of China’s largest agricultural and food corporations. The company employs more than 60,000 staff and engages in agribusiness and food, chemicals and resources, finance and investment, and real estate and infrastructure. The agribusiness and food sector of New Hope Group is the largest animal feed producer and one of the largest suppliers of meat, egg and dairy products in China. New Hope Group also has extensive chemical and resource interests in the areas of potassium, phosphorous and coal, and is the largest producer of high-potassium hydrogen and phosphate in Asia. In addition, New Hope Group is the largest shareholder of MinSheng Bank, China’s seventh largest commercial bank.

In June 2011, we entered a new shareholders agreement with New Hope International. Under this agreement, we granted New Hope International the rights of first offer in the event that Agria Corporation proposes to transfer all or part of its shares in Agria Group, as well as the tag-along rights in the event that Agria Group proposes to transfer all or part of its shares in Agria Asia. Furthermore, New Hope International has the right to sell its shares in Agria Asia to Agria Group on the terms and conditions provided in the shareholders agreement at a certain repurchase price to be determined pursuant to a supplemental agreement entered into between Agria Group and New Hope International in June 2011. Under the supplemental agreement, Agria Group agreed to provide guarantee to New Hope International for a minimal level of dividends to be distributed by Agria Asia to New Hope International. If Agria Group makes any payment to New Hope International under that guarantee, New Hope International will remit such payment to Agria Group once cumulative dividends distributed by Agria Asia to New Hope International exceeds the minimal guaranteed level. To secure the performance of Agria Group’s obligation in connection with this put option held by New Hope International, in June 2011, Agria Group pledged its shares in Agria Asia to New Hope International and Mr. Guanglin Lai, the chairman of our board, made a personal guarantee to New Hope International for Agria Group’s payment obligation in the event that New Hope International exercises its put option. Agria Corporation agreed to indemnify Mr. Lai against all the obligations, losses, costs, damages, expenses, liabilities, actions and demands that he may incur or sustain in connection with his personal guarantee.

The key features of the convertible redeemable notes issued by PGW to us are as follows:

Term. The convertible redeemable notes have a perpetual term.

Interest

Interest payable under the convertible redeemable notes is:

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for the period from January 15, 2010 to December 31, 2011, 8.0% per annum on the principal amount of the notes;

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for the period from January 1, 2012 to December 31, 2013, the two-year swap on December 31, 2011 plus a margin of 5.5%;

•

for subsequent two-year periods commencing on January 1, 2014, January 1, 2016 and so on, the two-year swap at the start of the relevant two-year period plus a margin of 6.5%.

PGW can suspend the interest payments at its sole discretion. Suspended interest accumulates and any suspended interest is payable on any subsequent interest payment date at the sole discretion of PGW. At any time when there is suspended interest, PGW may not declare or pay any dividend or make a distribution on its ordinary shares. Once payment of interest on the notes is resumed, PGW may not declare or pay any dividend or make a distribution on its ordinary shares for a period of 12 months commencing on the date on which the payment of interest is resumed, unless all suspended and unpaid interest is paid.

Conversion and Redemption

Unless otherwise agreed by PGW and us, PGW may elect at its sole discretion to convert or redeem the notes at any time following 18 months after January 15, 2010.

In the event that PGW elects to convert the notes into its ordinary shares, each note will be converted into 2.1 ordinary shares of PGW, subject to PGW’s shareholder approval.

In the event that PGW elects to redeem the notes, we may choose whether the notes will be redeemed in cash or exchanged into ordinary shares of PWF, a wholly owned subsidiary of PGW, which exchange is subject to PGW’s shareholder approval.

If the notes are redeemed in cash, PGW will pay us 102% of the principal amount of the notes if the redemption takes place on or before December 31, 2011, or 104%, with each subsequent two-year period cash redemption amount accreting at an additional 2%, if the redemption takes place during the two-year period after December 31, 2011.

If the notes are exchanged into ordinary shares of PWF, the exchange ratio at which each note is exchanged into PWF ordinary shares will be the greater of (1) 1/(net tangible assets per PWF share on December 31, 2009), and (2) 1/(net tangible assets per PWF share at the last day of the month immediately prior to the time of exchange), provided that the exchange ratio shall be between 30% to 50%, depending upon the performance of PWF. In addition to the exchange, PGW will also pay Agria 2% of the principal amount of the notes to be redeemed if the redemption occurs on or before December 31, 2011, or 4%, with each subsequent two-year exchange period redemption payment accreting at an additional 2%, if the redemption occurs between January 1, 2012 and on or before December 31, 2013.

In the event that shareholder approval, or any other regulatory or other approval or consent required by either PGW or us in order to effect the exchange of PWF ordinary shares, cannot be obtained, we will have the option to have PGW redeem the notes in cash at the abovementioned cash redemption amount, or have PGW pay us in cash the cash equivalent value of the ordinary shares of PWF sought to be transferred to us under the exchange arrangement.

Strategic Review

We commenced a process of strategic review with the changes in our senior management in late 2009. This strategic review is now largely complete and we have concluded the following as our key strategic priorities:

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Growing a focused seed business in China. We believe that the PRC government and the agricultural industry participants share the same goal of improving agricultural productivity, which is evidenced by strong foreign and domestic investment flowing into the agricultural industry in China. We consider that focusing on the seed sector will best position us to achieve sustainable growth in the future.

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Developing strong expertise in operational management. The agricultural sector in China is highly fragmented with many small companies whose growth potential is hindered by a lack of experienced operational management. Our investment in and strategic partnership with PGW, which owns the largest seed company in the southern hemisphere gives us an access to a management team experienced in running modern international seed businesses. In June 2010, we also recruited Mr. Chuanli Zhou as the head of our seeds division. Mr. Zhou has over 20 years of experience in the seed industry in China and was previously the general manager of Shandong Denghai-PIONEER Seed Company, a joint venture between Pioneer Hi-Bred International Inc., a leading international agricultural company, and Shandong Denghai Seeds Co., Ltd.

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Acquiring proprietary technologies. The seed industry is a technology-centered business and companies with sufficient quantity and quality of proprietary technologies have a significant competitive edge. We will continue to leverage our recent investment in and partnership with CNAAS to develop proprietary technologies. We are also at various stages of discussions regarding potential investments in seed companies with proprietary seed producers.

P3A

P3A Business

In July 2010, we divested P3A which engaged in research and development, production and sales of upstream agriculture products in three categories: seeds, sheep products and seedling and dates products.

Prior to our divestiture of P3A in July 2010, the P3A seed products primarily consisted of corn seeds sold to farmers growing corn for animal feed, human consumption and industrial uses. These corn seeds were grown through contractual arrangements with village collectives under which P3A provided farming, harvesting and other technical guidance and supervision to farmers. P3A processed and package field corn seed products and sold them to local and regional distributors.

The P3A sheep products segment consisted primarily of buying, raising and selling sheep and goats. In 2008 and previous years, the P3A sheep business was also involved in the production and sale of frozen semen and embryos of sheep and goats. However, in 2008, P3A relocated the production of frozen semen and embryos to Youyu, Shanxi province. This transfer significantly disrupted the sheep business and led to quality control problems.

The P3A seedling products primarily consisted of Chinese dates and date seedlings that P3A sold directly to end users. Historically, these seedling products comprised Chinese date seedlings and tree seedlings. In 2010, P3A stopped producing date seedlings and also ceased the production and sale of the other seedling varieties.

Divestiture of P3A

P3A had historically been Agria’s principal operating entity with three production lines: corn seeds, sheep products and seedlings. P3A’s financial and operating performance had declined since 2007.

On June 29, 2010, we announced we had reached an agreement in principle to divest P3A to Mr. Zhixin Xue, the president and a director of P3A. On July 9, 2010, our audit committee approved the transaction and we entered into definitive agreements to divest P3A, to Mr. Zhixin Xue. The divestiture of P3A was completed in July 2010.

Through the transaction, we acquired from Mr. Xue and cancelled shares representing 11.5% of our issued and outstanding share capital immediately prior to the transaction in exchange for the transfer of all of Agria’s interest in P3A to Mr. Xue. Immediately following the proposed transaction, Mr. Xue held approximately 7% of our ordinary shares.

The leases over nine parcels of land totaling approximately 13,500 acres previously held by P3A have been retained by us. We are not currently using this land and are in the process of assessing appropriate revenue generating opportunities that will make use of the land.

Investments and Strategic Partnerships

In September 2009, we entered into an agreement to acquire Nong Ke Yu. Under the terms of the agreement, Guanli, our consolidated affiliated entity acquired 100% of the equity of Nong Ke Yu for RMB5.0 million ($0.8 million). Previously, in June 2008, we had purchased the production and sales rights to two corn seeds owned by Nong Ke Yu, JKN2000 and JKN120.

In October 2009, we entered into a strategic co-operation framework agreement with CNAAS, which provides for future co-operation across the spectrum of agricultural research. In October 2009, we agreed to invest RMB35 million in Beijing Zhongnong Seed Industry Co., Ltd., or Zhongnong, a seed company based in China, for a 53.84% equity interest in Zhongnong. As of December 31, 2010, we had invested RMB7 million in Zhongnong. Zhongnong’s business is to hold the priority rights to accept the transfer of all existing and future cultivated seed varieties owned by CNAAS and its affiliates for the purposes of commercialization.

In January 2010, we entered into an agreement to acquire 100% of the equity of BeOK for RMB1.0 million ($0.2 million). BeOK is primarily engaged in the research and development and sale of vegetable seeds and is based in Tianjin.

In September 2010, we completed our strategic investment in Ganxin. Pursuant to the share purchase agreement dated June 13, 2010 by and between Guanli and Ganxin, Guanli acquired a 49% equity interest in Ganxin for a consideration of RMB40.0 million. Under the share purchase agreement, we have the right to appoint two directors, and the original shareholders have the right to appoint one director, to the board of directors which consists of three directors. A majority of votes, including that of the director appointed by the original shareholders must be obtained in order for the board to pass a resolution. As a result, we have board representation sufficient to enforce veto rights on all decisions. Nong Ke Yu has entered into an exclusive sales agency agreement with Ganxin to act as its exclusive agent and sell the entire production volume of all current and future varieties of seeds owned or developed by Ganxin.

Intellectual Property

Many elements of our proprietary information, such as production processes, technologies, know-how and data are not patentable in China. We rely primarily on a combination of trade secrets, trademarks, and confidentiality agreements with employees and third parties to protect our intellectual property. While we cannot assure you that our efforts will deter others from misappropriating our intellectual property rights, we will continue to create and protect our intellectual property rights in order to maintain our competitive position.

Legal Proceedings

On February 3, 2009, a consolidated class action lawsuit in the United States District Court for the Southern District of New York was filed, alleging violations of various sections of the Securities Act, against us, our executive officers, our directors and other defendants. The lawsuit alleges that our initial public offering registration statement and prospectus failed to disclose certain alleged discussions between two Agria executives relating to requests for additional compensation and a threatened resignation.

On December 1, 2009, the U.S. District Court for the Southern District of New York dismissed the consolidated class action against the Company and the underwriters defendants, and the Court issued a judgment in favor of the Company and the underwriter defendants.

On June 4, 2010, we entered into a memorandum of understanding with the lead plaintiff reflecting an agreement in principle and agreed to pay $3.75 million to settle all claims asserted in the class action lawsuit. On September 20, 2010, the court granted a preliminary approval of the settlement. The deadline for filing objections to the Settlement, Plan of Distribution of settlement proceeds, and attorneys’ fee and expense request by Lead Plaintiff’s counsel expired on January 7, 2011, and no such objections were filed by Class Members.

On June 7, 2011, the court granted final approval of the settlement and entered a final judgment resolving the case. The settlement amount is within the limit of our applicable insurance policies, and we do not expect the settlement to have any impact on our financial position, results of operation or cash flows.

Regulation

Agriculture Law

On July 2, 1993, the PRC promulgated the Agriculture Law which sets forth certain principles and various measures designed to ensure the steady development of the agricultural industry. For example, the production and operation of agricultural products that affect the health of people or animals, such as seeds, must meet registration and approval requirements under PRC laws and regulations. The Agriculture Law was revised on December 28, 2002 and became effective as of March 1, 2003.

Seed Law, Animal Husbandry Law and Other Relevant Regulations

Seed Law and Other Relevant Regulations

The crop seed business is a highly regulated industry in the PRC. In July 2000, the Seed Law was enacted to promote the use of seed resources; to control the selection, production and use of seeds and regulate related business operations; to protect the legal rights of producers, business operators and users of seeds; to promote seed quality; to drive the industrialization processes of seeds and to accelerate the development of the planting and forestry industries. The Seed Law became effective on December 1, 2000 and was amended on August 28, 2004.

Under the Seed Law, major crop seeds and tree varieties are subject to examination and approval as a pre-condition of their popularization. An applicant may apply directly for examination and approval at either the national or provincial level. Committees composed of professional experts have been established separately by the State Council’s agriculture and forestry administrative departments and the provincial governments for the examination and approval of crop and tree varieties. Major crop seed varieties that are verified and approved by the State Council’s committee and the National Crop Variety Examination and Approval Committee may be marketed and distributed nationwide. Varieties that receive provincial approval are only permitted to be marketed and distributed within the province that granted the approval.

For seed production, a permission-based system is currently in practice pursuant to the Administrative Regulation on Permission of Production and Operation of Crop Seeds, which was issued on February 26, 2001 and revised on July 1, 2004. A company engaged in the production of seeds must obtain a production license, which is issued at either the provincial or the local level, entitling the licensee to engage in seed production in the permitted area. The level of issuing authority required for a production license varies based on the types of seeds to be produced. The production license also specifies the types of seeds the license holder may produce, the geographic region where seeds can be produced and the term of the production license.

For seed distribution, a company must obtain a distribution license in order to distribute seeds in permitted areas. Generally, a distribution license may be issued at the county level or above. A seed company must obtain a distribution license from the provincial government to distribute major crop seeds in that province and a distribution license from the national government for national distribution.

Animal Husbandry Law and Other Relevant Regulations

According to the PRC’s Animal Husbandry Law, which was promulgated on December 29, 2005 and became effective on July 1, 2006, popularization of any new variety of livestock is subject to examination and approval by the National Commission of Animal Genetic Resources. Approved varieties are announced by the Ministry of Agriculture and be eligible for popularization.

Pursuant to the Animal Husbandry Law, entities or individuals engaged in production of breeder livestock or poultry, or engaged in the commercial production of new-born livestock or poultry, must obtain a Permit for the Production and Business Operation of Breeding Livestock and Poultry, or the Husbandry Permit. Entities and individuals engaged in the production of ova, frozen sperm, embryos or other genetic materials must obtain a Husbandry Permit from the State Council’s stockbreeding and veterinary administrative departments through their respective provincial agencies. The approval level of the Husbandry Permit varies depending on the permitted scope and content.

In addition to the Animal Husbandry Law, the Administrative Regulation of Breeders was issued on April 15, 1994 and revised on January 8, 2011. These regulations specify conditions and requirements that must be satisfied by breeding farms regarding their technologies, facilities, quarantine measures, livestock and poultry inspection systems and livestock and poultry distribution. We believe our sheep farms meet the conditions required under the applicable regulations.

Supervision of Agricultural Products Quality and Safety

On March 10, 2005, the Ministry of Agriculture issued the Administrative Measures for the Supervision and Spot Check of Agricultural Seed Quality, which became effective on May 1, 2005, and which permit the government’s administrations of agriculture at the county level or above to organize relevant seed administration and seed quality inspection institutions to sample and inspect agricultural seeds that are produced and sold. A seed production and operation company that does not meet inspection standards must recall any seeds that have been sold. Such companies may not conduct sales until they meet inspection standards. A legal representative of the seed company must circulate information on the inspection to all employees, and the company must determine why the seeds failed to meet inspection standards and implement corrective measures. Such measures include improving quality control processes, submitting rectification reports and submitting to subsequent examinations by the administration of agriculture.

Under the PRC Law on Agricultural Product Quality Safety, issued on April 29, 2006 and declared effective on November 1, 2006, an entity engaged in the production of agricultural products must maintain production records and retain data relating to production for 2 years.

Under the PRC Law on Animal Epidemic Prevention, issued on July 3, 1997 and revised on August 30, 2007, animals and/or animal products to be sold or transported require quarantine certificates and quarantine inspection marks or seals. Shanxi province’s Regulations on Animal Epidemic Prevention require business operators to report to their local supervisory institutions or animal quarantine officers of animal epidemic prevention where such operators are domiciled, and to submit to inspections and quarantines of animals and animal products. The level of inspection varies depending on the uses for such animals or animal products.

Under the Regulations on Plant Quarantine, issued on January 3, 1983 and revised on May 13, 1992, plants and plant products listed in quarantine catalogues are subject to quarantine inspections before they are transported from a county administration area where an epidemic occurs. Plant seeds, seedlings or other propagating materials are subject to quarantine inspections prior to transportation.

Land Use Rights

All land in the PRC is either state-owned or collectively owned, depending on the location of the land. All land in the urban areas of a city or town is state-owned, and all land in the rural areas of a city or town and all rural land are, unless otherwise specified by law, collectively owned. The state has the right to reclaim land in accordance with law if required for the benefit of the public. Although all land in the PRC is owned by the state or by collectives, private individuals and businesses and other organizations are permitted to hold, lease and develop land for which they are granted land use rights.

National Legislation on Land

In April 1988, the constitution of the PRC was amended by the National People’s Congress to allow for the transfer of land use rights for value, and in December 1988, the Land Administration Law of the PRC was similarly amended. The Land Administration Law of the PRC was further amended in August 1988 and August 2004.

Under the Interim Regulations of the People’s Republic of China on Grant and Transfer of the Right to Use State-owned Urban Land, or Interim Regulations on Grant and Transfer, promulgated in May 1990, local governments at or above the county level have the power to grant land use rights for specific purposes and for a definite period to a land user pursuant to a contract for the grant of land use rights against payment of a grant premium.

Under the Interim Regulations on Grant and Transfer, all local and foreign enterprises are permitted to acquire land use rights unless the law provides otherwise. The state may not reclaim lawfully granted land use rights prior to the expiration of the term of grant. If public interest requires repossession by the state under special circumstances during the term of grant, compensation will be paid by the state. A land grantee may lawfully transfer, mortgage or lease its land use rights to a third party for the remainder of the term of grant.

Upon expiration of the term of grant, renewal is possible subject to the execution of a new contract for the grant of land use rights and payment of a premium. If the term of the grant is not renewed, the land use rights and ownership of any buildings erected on the land will revert to the state without compensation.

Transfer and Lease of State-owned Land Use Rights

After the state had granted land use rights relating to a particular area of land, unless any restriction is imposed, the party to whom such land use rights have been granted may transfer, lease or mortgage such land use rights for a term not exceeding the term which has been granted by the state. The difference between a transfer and a lease is that a transfer involves the vesting of the land use rights by the transferor in the transferee during the term for which such land use rights were vested in the transferor. A lease, on the other hand, does not involve a transfer of such rights by the lessor to the lessee. Furthermore, a lease, unlike a transfer, does not usually involve the payment of a premium. Instead, a rent is payable during the term of the lease. Land use rights cannot be transferred, leased or mortgaged if the provisions of the land grant contract, with respect to the prescribed period and conditions of investment, development and use of the land, have not been complied with. In addition, different areas of the PRC have different conditions which must be fulfilled before the respective land use rights can be transferred, leased or mortgaged.

All transfers, mortgages and leases of land use rights must be evidenced by a written contract registered with the relevant local land bureau at the municipality or the county level. Upon a transfer of land use rights, all rights and obligations contained in the contract pursuant to which the land use rights were originally granted by the state are deemed to be incorporated as part of the terms and conditions of such transfer, depending on the nature of the transaction.

Under Article 38 of the PRC Law on Administration of Urban Real Estate, or the Urban Real Estate Law, issued on July 5, 1994 and revised on August 30, 2007, real property that has not been registered and for which a title certificate has not been obtained in accordance with the law cannot be transferred. Under Article 39 of the Urban Real Estate Law, if land use rights are acquired by means of grant, the following conditions must be met before the land use rights may be transferred: (1) the premium for the grant of land use rights must have been paid in full in accordance with the land grant contract and a land use rights certificate must have been obtained; (ii) investment or development must have been made or carried out in accordance with terms of the land grant contract; (iii) where the investment or development involves a real estate construction project, more than 25% of the total amount of investment or development must have been made or completed; and (iv) where the investment or development involves a large tract of land, conditions for use of the land for industrial or other construction purpose must have been confirmed.

Regulation of Collective-owned Land

According to the PRC Law on Land Administration, adopted by the National People’s Congress on June 25, 1986 and amended on August 28, 2004, land in rural and suburban areas, except for that stipulated by law as being owned by the state, is collectively owned by rural residents. Land collectively owned by rural residents is contracted to and operated by members of the respective collective economic entity for uses such as plantation, forestry, livestock husbandry or fishery production. Before any land collectively owned by rural residents is contracted to a unit or individual not from the collective economic entity, at least two-thirds of the members of the villager committee meeting or at least two-thirds of the village representatives must agree, and it must be submitted to the people’s government at the township level for approval. The land use rights of collectively owned land must not be granted, assigned or leased to any party for any non-agricultural uses.

Foreign Ownership Restrictions in the Seed Industry

The PRC restricts foreign ownership of domestic businesses engaged in the seed industry. According to the Foreign Investment Industrial Guidance Catalogue, which became effective on December 1, 2007, the selection and breeding of new breeds of crops and the development and production of seeds fall into the category of a restricted foreign investment industry. In addition, the breeding and planting of China’s rare and peculiar breeds (including quality gene cultivation, animal husbandry and aquatic products) and the production and development of genetically modified plant seeds, breeding livestock and poultry and aquatic seedlings are considered prohibited foreign investment industries. PRC law currently prohibits a foreign entity or person from owning over 50% of any seed development and production business in China and prohibits a foreign entity or person from owning any sheep business in China.

In accordance with the Regulation on the Approval and Registration of Foreign Investment Enterprises in the Agricultural Seed Industry, issued and effective on September 8, 1997, investors may establish foreign-invested crop seed companies provided that they have satisfied the following requirements: (i) the company’s PRC investors must have obtained necessary approvals for crop seed production and operation and submitted the business to any necessary examinations; (ii) the foreign investors must be equipped with relatively advanced research breeding capabilities, seed production technologies and good corporate management and possess a positive business reputation; (iii) the investors must be able to introduce or adopt outstanding domestic or foreign species or seed resources and advanced seeds technologies and facilities; (iv) the registered capital of companies engaged in the production of cereal, cotton and oil products seeds must be no less than $2 million, and the registered capital of companies engaged in the production of other crop seeds must be no less than $0.5 million; and (iv) the company’s PRC investors’ equity ownership in the foreign-invested cereal, cotton and oil products seeds enterprises must be more than 50%. Pursuant to this regulation, foreign investors are not permitted to establish foreign-invested crop seed distribution enterprises or wholly foreign-owned crop seed enterprises in China.

Intellectual Property

The PRC Trademark Law, adopted on August 23, 1982 and revised on October 27, 2001, protects the proprietary rights of registered trademarks. The State Administration for Industry and Commerce’s Trademark Office handles trademark registrations and grants an initial term of ten years to registered trademarks. Upon the initial term’s expiration, a second term of ten years may be granted under a renewal. Trademark license agreements must be filed with the Trademark Office or a regional office. In addition, if a registered trademark is recognized as a well-known trademark, the proprietary right of the trademark holder may be extended beyond the registered scope of products and services to which the trademark relates.

Under the PRC Patent Law, which was adopted on March 12, 1984 and revised on December 27, 2008, animal and plant varieties may not be protected under patents, but the production methods of animal and plant varieties may be patented. Producers of plant varieties may seek protection for their rights to new varieties under the Protection of New Varieties of Plants Regulation.

The Protection of New Varieties of Plants Regulation was promulgated by the State Council on March 20, 1997, and became effective on October 1, 1997. The administrative departments of the State Council in charge of agriculture and forestry are, according to their respective functions, jointly responsible for the acceptance and examination of applications for the rights to new varieties of plants and grant such rights to new varieties of plants which satisfy the requirements under the regulations. An entity or individual that has completed the production, sale or dissemination of a new variety of plant which has been granted a variety right will have an exclusive right in its protected variety. Unless otherwise provided for in these regulations, without a license from the owner of the variety right, no other entity or individual may use such variety for commercial purposes.

Foreign Currency Exchange

Under the Foreign Currency Administration Rules promulgated on January 29, 1996 and amended on August 5, 2008, the foreign exchange incomes of domestic entities and individuals can be remitted into China or deposited abroad, subject to the conditions and time limits to be issued by SAFE. According to the Foreign Currency Administration Rules, the Renminbi is convertible for current account items, including the distribution of dividends, interest payments, trade and service-related foreign exchange transactions. Conversion of Renminbi for capital account items, such as direct investment, loan, securities investment, derivative transactions and repatriation of investment, however, is still subject to the approval of, and/or the registration with, SAFE or its local branches.

Dividend Distribution

The principal regulations governing distribution of dividends of wholly foreign-owned enterprises include the Wholly Foreign-owned Enterprise Law, promulgated by the National People’s Congress on April 12, 1986 and amended on October 31, 2000, and the Wholly Foreign-owned Enterprise Law Implementing Rules, promulgated by the National People’s Congress on December 12, 1990 and amended on April 12, 2001. Under these regulations, wholly foreign-owned enterprises in the PRC may pay dividends only out of their accumulated profits, if any, as determined in accordance with PRC accounting standards and regulations. Additionally, wholly foreign-owned enterprises are required to set aside at least 10% of their after-tax profits each year, if any, to contribute to certain reserve funds until the cumulative amounts in such reserve funds have reached 50% of the registered capital of such enterprises. These reserves are not distributable as cash dividends.

Pursuant to the 2008 EIT Law and the Implementing Rules effective on January 1, 2008, dividends payable by a foreign-invested enterprise to its foreign investors who are non-resident enterprises will be subject to a 10% withholding tax, unless any such foreign investor’s jurisdiction of incorporation has a tax treaty with China that provides for a different withholding arrangement. According to the Mainland and Hong Kong Special Administrative Region Arrangement on Avoiding Double Taxation or Evasion of Taxation on Income agreed between the Mainland and Hong Kong Special Administrative Region in August 2006 and the Notice in Relation to the Dispatch of Schedule of Agreed Tax Rates on Dividends issued by the State Administration of Taxation (State Taxation Circular No. 112 (2008)), dividends payable by a foreign-invested enterprise to its foreign investors will be subject to a 5% tax provided that such foreign investor directly owns at least 25% of the equity interests of the foreign-invested enterprise.

On October 1, 2009, the Administrative Measures for Non-Residents Enjoying Tax Treaty Benefits (Trial Implementation) became effective. Under these measures, our Hong Kong subsidiary needs to obtain approval from the competent local branch of the State Administration of Taxation in order to enjoy the preferential withholding tax rate of 5% in accordance with the tax treaty. In February 2009, the State Administration of Taxation issued Notice No. 81. According to Notice No. 81, in order to enjoy the preferential treatment on dividend withholding tax rates, an enterprise must be the “beneficial owner” of the relevant dividend income, and no enterprise is entitled to preferential treatment pursuant to any tax treaties if such enterprise qualifies for such preferential tax rates through any transaction or arrangement, the major purpose of which is to obtain such preferential tax treatment. The tax authority in charge has the right to make adjustments to the applicable tax rates, if it determines that any taxpayer has enjoyed preferential treatment under tax treaties as a result of such transaction or arrangement. In October 2009, the State Administration of Taxation issued Notice No. 601 to provide guidance on the criteria to determine whether an enterprise qualifies as the “beneficial owner” of the PRC sourced income for the purpose of obtaining preferential treatment under tax treaties. Pursuant to Notice No. 601, the PRC tax authorities will review and grant tax preferential treatment on a case-by-case basis and adopt the “substance over form” principle in the review. Notice 601 specifies that a beneficial owner should generally carry out substantial business activities and own and have control over the income, the assets or other rights generating the income. Therefore, an agent or a conduit company will not be regarded as a beneficial owner of such income. Since the two notices were issued, it has remained unclear how the PRC tax authorities will implement them in practice and to what extent they will affect the dividend withholding tax rates for dividends distributed by our subsidiaries in China to our Hong Kong subsidiary. Under the 2008 EIT Law and the Implementing Rules, if China Victory is regarded as a resident enterprise, the dividends payable to China Victory from Agria China and Agria Brother will be exempt from the PRC income tax. If the relevant tax authority determines that our Hong Kong subsidiary is a conduit company and does not qualify as the “beneficial owner” of the dividend income it receives from our PRC subsidiaries, the higher 10% withholding tax rate may apply to such dividends.

Pursuant to the 2008 EIT Law which became effective on January 1, 2008, an enterprise established outside of the PRC with “de facto management bodies” within the PRC is considered as a resident enterprise and will be subject to PRC income tax on its global income. According to the Implementing Rules, “de facto management bodies” refer to establishments that carry out substantial and overall management and control over the manufacturing and business operations, personnel, accounting, properties, etc. of an enterprise. On April 22, 2009, the State Administration of Taxation promulgated a circular setting out the criteria for determining whether “de facto management bodies” are located in China for overseas incorporated, domestically controlled enterprises. However, as this circular only applies to enterprises incorporated under the laws of foreign countries or regions that are controlled by PRC enterprises or groups of PRC enterprises, it remains unclear how the tax authorities will determine the location of “de facto management bodies” for overseas incorporated enterprises that are not controlled by PRC enterprises or groups of PRC enterprises like us. Accordingly, we may be considered a resident enterprise and may therefore be subject to PRC income tax on our global income.

Moreover, under the EIT law, if we are classified as a PRC resident enterprise and such income is deemed to be sourced from within the PRC, foreign ADS holders may be subject to a 10% withholding tax upon dividends payable by us and gains realized on the sale or other disposition of ADSs or ordinary shares.

Foreign Exchange

In October 2005, SAFE issued the Notice on Issues Relating to the Administration of Foreign Exchange in Fund-raising and Return Investment Activities of Domestic Residents Conducted via Offshore Special Purpose Companies, or SAFE Notice 75, which became effective as of November 1, 2005, and was further supplemented by an implementation notice issued by SAFE on November 24, 2005. SAFE Notice 75 suspends the implementation of two prior regulations promulgated in January and April of 2005 by SAFE. SAFE Notice 75 states that PRC residents, whether natural or legal persons, must register with the relevant local SAFE branch prior to establishing or taking control of an offshore entity established for the purpose of overseas equity financing involving onshore assets or equity interests held by them. The term “PRC legal person residents” as used in SAFE Notice 75 refers to those entities with legal person status or other economic organizations established within the territory of the PRC. The term “PRC natural person residents” as used in SAFE Notice 75 includes all PRC citizens and all other natural persons, including foreigners, who habitually reside in the PRC for economic benefit. The SAFE implementation notice of November 24, 2005 further clarifies that the term “PRC natural person residents” as used under SAFE Notice 75 refers to those “PRC natural person residents” defined under the relevant PRC tax laws and those natural persons who hold any interests in domestic entities that are classified as “domestic-funding” interests.

PRC residents are required to complete amended registrations with the local SAFE branch upon: (i) injection of equity interests or assets of an onshore enterprise to the offshore entity, or (ii) subsequent overseas equity financing by such offshore entity. PRC residents are also required to complete amended registrations or filing with the local SAFE branch within 30 days of any material change in the shareholding or capital of the offshore entity, such as changes in share capital, share transfers, long-term equity or debt investments, and granting security interests. PRC residents who have already incorporated or gained control of offshore entities that have made onshore investment in the PRC before SAFE Notice 75 was promulgated must register their shareholding in the offshore entities with the local SAFE branch on or before March 31, 2006.

Under SAFE Notice 75, PRC residents are further required to repatriate into the PRC all of their dividends, profits or capital gains obtained from their shareholdings in the offshore entity within 180 days of their receipt of such dividends, profits or capital gains. The registration and filing procedures under SAFE Notice 75 are prerequisites for other approval and registration procedures necessary for capital inflow from the offshore entity, such as inbound investments or shareholders loans, or capital outflow to the offshore entity, such as the payment of profits or dividends, liquidating distributions, equity sale proceeds, or the return of funds upon a capital reduction.

New M&A Rule

On August 8, 2006, six PRC regulatory agencies, namely, the PRC Ministry of Commerce, the State Assets Supervision and Administration Commission, the State Administration for Taxation, the State Administration for Industry and Commerce, the China Securities Regulatory Commission, or the CSRC, and SAFE, jointly adopted the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the New M&A Rule, which became effective on September 8, 2006. This New M&A Rule purports, among other things, to require offshore special purpose vehicles formed for overseas listing purposes through acquisitions of PRC domestic companies and controlled by PRC companies or individuals to obtain the approval of the CSRC prior to publicly listing their securities on an overseas stock exchange. On September 21, 2006, the CSRC published a notice on its official website specifying documents and materials required to be submitted to it by special purpose vehicles seeking CSRC approval of their overseas listings.

While the application of this new regulation remains unclear, we believe, based on the advice of our PRC counsel, Commerce & Finance Law Offices, that CSRC approval was not required in the context of our initial public offering because we established our PRC subsidiaries by means of direct investment other than by merger or acquisition of PRC domestic companies. The regulation also establishes more complex procedures for acquisitions conducted by foreign investors which could make it more difficult to pursue growth through acquisitions.

C. Organizational Structure

The following diagram illustrates our corporate structure, including our principal subsidiaries, as of June 1, 2011:

We conduct our business through contractual agreements with our consolidated affiliated entities, Guanli, Shenzhen Agria Agricultural Co., Ltd., or Agria Agriculture, and Shenzhen Zhongyuan Agriculture Co., Ltd., or Zhongyuan, which hold the requisite licenses and permits for conducting agricultural business. Our contractual arrangements with Guanli, Agria Agriculture and Zhongyuan and their respective shareholders enable us to:

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exercise effective control over Guanli, Agria Agriculture and Zhongyuan;

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receive substantially all of the earnings and other economic benefits from Guanli, Agria Agriculture and Zhongyuan to the extent permissible under PRC law in consideration for the services provided by Agria Brother; and

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have an exclusive option to purchase all or part of the equity interests in P3A, Guanli, Agria Agriculture and Zhongyuan in each case when and to the extent permitted by PRC law.

In addition, the shareholders of Guanli have executed a letter of undertaking to remit all of the dividends and other distributions received from Guanli to Agria Brother, subject to satisfaction of their personal income tax and other statutory obligations arising from receiving such dividends or other distributions. We will require every person who holds the equity interests in Guanli at any time to enter into agreements with us on terms substantially similar as the existing contractual agreements between us and the current shareholders of Guanli. We have the legal obligation to provide funding for all losses incurred by Guanli, Agria Agriculture and Zhongyuan.

Up until July 2010 when we divested P3A, we conducted our business through contractual agreements with P3A, our consolidated affiliated entity, which held the requisite licenses and permits for conducting agricultural business. Our contractual arrangements with P3A enabled us to achieve the same operation effects as those with regards to Guanli, Agria Agriculture and Zhongyuan. The shareholders of P3A had executed a letter of undertaking to remit all of the dividends and other distributions received from P3A to Agria China, subject to satisfaction of their personal income tax and other statutory obligations arising from receiving such dividends or other distributions. We had the legal obligation to provide funding for all losses incurred by P3A.

D. Property, Plants and Equipment

We invested in Ganxin in September 2010 to make it the primary production base for our field corn seed products. To our knowledge, in the corn seed growing season prior to our investment, or March to August 2010, Ganxin had access to approximately 5,410 acres of farmland in Gansu Province for the production of field corn seeds.

P3A, which we divested in July 2010, leased approximately 14,500 acres of land for its seed production, primarily from village collectives. Our interest in this land was sold as part of the P3A divestiture.

Additionally, P3A had entered into long-term lease agreements with local government and village collectives for approximately 13,500 acres of land with remaining durations of approximately 9 to 27 years and all rental payments was prepaid in full. P3A had previously used this land for sheep breeding. As part of the divestiture of P3A, we retained our interest in this land. We are not currently using this land, although we are assessing appropriate revenue generating opportunities for this land.

Production of our edible corn seed and vegetable seed products is primarily outsourced to third parties. In addition, we lease approximately 120 acres of land, which are generally used for seed testing and production. These leases typically have terms of 18 years.

A. Operating Results

China Seed Products Revenues

We have generated revenues from the sale of edible corn seed products since we acquired Nong Ke Yu in September 2009. We have generated revenues from the sale of vegetable seed products since we acquired BeOK in January 2010. We have also generated revenues from the sale of field corn seed products since we invested in, and entered into an exclusive sales agency agreement with, Ganxin in September 2010.

Revenues from the sale of each of these categories of seed products were influenced by the total sales volume and the average selling prices of our products.

Revenues from our China seed business in each of 2008 and 2009 included a royalty income of RMB3.0 million from Nong Ke Yu. This royalty income related to the purchase and subsequent rental of production and sales rights to two corn seeds JKN2000 and JKN120 for the period prior to the acquisition of Nong Ke Yu. There was no other revenue in 2008.

The following table sets forth our seed sales volume and revenues, in absolute amounts and as percentages of our total revenues, for each of the seed product categories as well as our royalty income for the years indicated:

The total sales volumes of the seeds products increased from 385kg in 2009 to 814,001kg in 2010, primarily due to the following factors:

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In September 2009, we acquired Nong Ke Yu, an edible corn seeds business engaged in research and development, production, distribution and sales of seeds for edible corn for human consumption. Due to the seasonal nature of this business and the timing of the acquisition, revenue derived from Nong Ke Yu in 2009 was very low. However, in 2010, we benefited fully from Nong Ke Yu’s business and operations.

•

In January 2010, we acquired BeOK, a company engaged in research, production and marketing of vegetable seeds.

•

In September 2010, we invested in Ganxin and entered into an exclusive sales agency agreement with them. Under the terms of the exclusive sales agency agreement, we have the exclusive right to sell the entire production volume of all current and future varieties of field corn seeds owned or developed by Ganxin. Due to the seasonal nature of this business and the timing of the acquisition, no material revenue was derived from field corn seeds in 2010.

The average selling price of our edible corn seeds increased from RMB34 per kg in 2009 to RMB35 per kg in 2010. This was caused by a general increase in market prices for corn seeds in 2010. The average selling price of our field corn seeds in 2010 was RMB3 per kg and the average price of our vegetable seeds in 2010 was RMB622 per kg.

Revenue generated from our China seed business in each of 2008 and 2009 included a royalty income of RMB3.0 million from Nong Ke Yu. relating to the purchase and subsequent rental of production and sales rights to two corn seeds JKN2000 and JKN120 for the period prior to the acquisition of Nong Ke Yu.

Cost of Revenues and Gross Margins

Total cost of revenues increased by 228.2% from RMB5.3 million in 2009 to RMB17.3 million ($2.6 million) in 2010. Our gross profit improved from a loss of RMB2.3 million in 2009 to a profit of RMB11.7 million ($1.8 million) in 2010.

Total cost of revenues increased by 99.3% from RMB2.7 million in 2008 to RMB5.3 million in 2009. The decrease was primarily due to a full year of amortization of our purchased technology know-how. Our gross profit deteriorated from a profit of RMB0.3 million in 2008 to a loss of RMB2.3 million in 2009.

Our historical operating business P3A was disposed of in July 2010 and is classified as a discontinued operation. Therefore our cost of revenue has been recast to remove P3A revenue in each of the three years ended December 31, 2010.

Our costs of revenue in the three years ended December 31, 2010 were all incurred by our China seed business.

China Seeds Products

Since our acquisition of Nong Ke Yu in September 2009, our cost of revenues for our China seeds products primarily consists of the costs that we pay to companies to whom we outsource production of our seed products, depreciation of buildings and equipment and direct labor cost. At the beginning of each growing season, we provide parent seeds to the production companies to grow for us under contractual arrangements, which detail the area of land, standard yield and quality requirements. We also provide advances to the production companies for their rental of land, payments to farmers, purchase of fertilizer and other production materials. At the end of the growing season, we take delivery of the seeds and undertake various sorting, selecting, coating and packaging processes to produce our finished goods.

In 2008 and 2009, our cost of revenue primarily comprised the amortization of purchased technology know-how relating to two varieties of corn seeds, JKN 2000 and JKN 120. In 2010, since we no longer received royalty income from these corn seed varieties, the amortization of purchased technology know-how was charged to general and administrative expenses rather than cost of revenues.

The following table sets forth the cost of sales, the gross profit and the gross profit as percentages of our total revenues for each of the seed product categories and of other costs of revenues (amortization of our purchased technology know-how) for the years indicated.

Our cost of revenues for the seeds business increased from RMB5.3 million in 2009 to RMB17.3 million ($2.6 million) in 2010. This increase was primarily due to (i) our acquisition of Nong Ke Yu in September 2009, (ii) our exclusive sales agency arrangement with our 49% owned associate Ganxin, and (iii) our acquisition of BeOK in January 2010. The increase was partially offset by the amortization of purchased technology know-how that was charged to our general and administrative expenses in 2010 rather that cost of revenues in 2009. Our gross margin for seed sales improved from a loss of 75.4% in 2009 to a profit of 40.2% in 2010, because the increase in our revenue due to our acquisitions was at a greater rate than the increase in our cost of sales.

Our cost of revenues increased from RMB2.7 million in 2008 to RMB5.3 million in 2009. Our gross margin decreased from a profit margin of 11.6% in 2008 to a loss margin of 75.4% in 2009, primarily because we incurred a full year of amortization of our purchased technology know-how in 2009, compared to only a partial year amortization in 2008.

Operating Expenses and Income

Our historical operating business P3A was disposed of in July 2010 and is classified as a discontinued operation. Therefore our operating expenses and income has been recast to remove P3A operating expenses and income in each of the three years ended December 31, 2010 .

Selling Expenses. Our selling expenses primarily consist of our expenses of advertising in magazines, salaries and compensation for our sales personnel, promotion expenses and other marketing related expenses. Prior to our acquisition of Nong Ke Yu in September 2009, we did not incur any selling expenses.

Selling expenses increased from RMB0.2 million in 2009 to RMB0.9 million ($0.1 million) in 2010. This increase was due to the full year impact of our Nong Ke Yu acquisition and an increase in the number of sales personnel from one to nine during 2010.

Selling expenses increased from nil in 2008 to RMB0.2 million in 2009 as we did not have any selling expenses prior to our acquisition of Nong Ke Yu in September 2009.

General and Administrative Expenses. Our general and administrative expenses primarily consist of compensation and benefits for administrative, finance and human resources personnel, depreciation, provisions for bad debts, travel and other expenses associated with our corporate and administrative activities.

Our general and administrative expenses increased from RMB89.5 million in 2009 to RMB97.8 million ($14.8 million) in 2010. The increase was primarily due to amortization of corn seed rights in 2010 of RMB5.0 million ($0.8 million) which were classified as costs of goods sold in 2009, amortization of land use rights of the land that was retained by us as part of the P3A divestiture of RMB7.6 million ($1.2 million) for the period from the date of divestiture until December 31, 2010, offset in part by a reduction in the costs of amortization of share options from RMB14.6 million in 2009 to RMB9.8 million ($1.5 million).

Our general and administrative expenses decreased from RMB864.8 million in 2008 to RMB89.5 million in 2009. The decrease was primarily due to an general and administrative expense in 2008 of RMB768.5 million relating to a non-cash charge arising from the arrangements between Brothers Capital Limited, or BCL, and certain employees of P3A.

Our general and administrative expenses in 2009 also included legal and professional fees of RMB28.8 million. This amount included expenses of RMB7.1 million incurred during the acquisition of our interest in PGW.

Our stock-based compensation charge within general and administrative expenses decreased from RMB68.6 million in 2008 to RMB14.6 million in 2009.

Research and Development Expenses. Research and development expenses primarily consist of expenses related to development of our proprietary products, salaries and benefits of our research and development personnel, fees paid to our research partners, costs of raw materials used in our research and development activities, as well as other overhead incurred by our research and development personnel.

Research and development expenses fell from RMB1.2 million in 2009 to RMB114,000 ($17,000) in 2010 due to the departure of several members of our research and development staff in 2009 and the partial release in 2010 of a provision from the time of the acquisition of Nong Ke Yu. NongKeyYu, prior to our acquisition in September 2009, had been undertaking trials in Leizhou to examine the viability of certain varieties of edible corn seeds for the Southern China market. At the time of our acquisition, we had an expectation of liabilities and committed expenditure in relation to these trials and made a provision in the acquired balance sheet of RMB2.0 million. The actual costs incurred in terminating the tests was RMB1.5 million with the balance being released to offset research and development expenses in 2010.

Research and development expenses fell from RMB1.9 million in 2008 to RMB1.2 million in 2009 due to the departure of several members of our research and development staff in 2009.

Share-based Compensation Expenses. Since we adopted the 2007 share incentive plan in July 2007, options to purchase a total of 13,238,100 ordinary shares were granted to our officers, directors and employees and remained outstanding as of December 31, 2010. We had not granted any options or other or equity incentives to any employee, director or consultant before July 2007.

We determine share-based compensation expenses based on the fair value of the options as of the date of grant and amortize such expenses over the vesting period of the options. A change in the amount of share-based compensation expenses will primarily affect our operating expenses, net income and earnings per share.

For the options to purchase 13,238,100 ordinary shares that were granted to our officers, directors and employees on July 4, 2007, July 19, 2007, December 7, 2007, February 1, 2008, May 27, 2008, June 5 2008, June 12, 2008, September 5, 2008, December 5, 2008, October 13, 2009, May 21,2010 and June 1, 2010 and remained outstanding, total unrecognized compensation costs are estimated to be approximately $1.7 million as of December 31, 2010 based on an assessment of the fair value of the awarded options. The compensation expenses are to be recognized as a charge to expense over the vesting period of two to four years from the respective grant dates.

Operating Profit (Loss)

As a result of the foregoing factors, our operating loss from operations improved from a loss of RMB93.0 million in 2009 to a loss of RMB87.1 million ($13.2 million) in 2010.

As a result of the foregoing factors, our operating loss from operations improved from a loss of RMB866.4 million in 2008 to a loss of RMB93.0 million in 2009.

Interest Income

The interest income in 2008 and 2009 comprised interest earned on our cash deposits, which were reduced as we invested the cash received through our IPO. In January 2010, we completed our subscription for convertible redeemable notes issued by PGW of NZ$33.8 million and received interest income at a rate of 8% from the date of subscription.

As a result of the above factors, our interest income was RMB33.7 million, RMB8.5 million and RMB 22.4 million ($3.4 million) in 2008, 2009 and 2010, respectively.

Interest Expense

Our interest expense comprised interest paid on bank loans and was RMB2.3 million ($0.3 million) in 2010 compared to immaterial amounts in both 2008 and 2009.

Unrealized Gain (Loss) on Investment

The unrealized gain on investments of RMB1.9 million ($0.3 million) in 2010 compared to the unrealized loss on investment of RMB0.5 million in 2009 represented the difference between the fair value of PGW based on the share price of PGW as of December 31, 2010 and the fair value of the investment based on the share price as of December 31, 2009.

The unrealized loss on investments of RMB0.5 million in 2009, compared to nil in 2008, represented the difference between the initial investment cost of PGW and the fair value of the investment based on the share price of PGW as of December 31, 2009.

Other Income

We recorded RMB20.6 million ($3.1 million) of other income in 2010, which was primarily attributable to payments of $0.5 million from our insurers for our legal costs incurred in defending our class action lawsuit and $2.2 million of income from our ADS depositary as reimbursement for legal fees and administrative expenses.

We recorded RMB2.8 million of other income in 2009, which was primarily attributable to an underwriting fee received as part of our participation in the rights issue undertaken by PGW.

Loss From Associates

We recorded RMB2.2 million ($0.3 million) of loss from associates in 2010, compared to nil in 2009 and 2008. This is primarily attributable to our share of net losses of Zhongnong from the date of our investment in June 2010, which was partially offset by our share of the net profits of Ganxin from the date of our investment in September 2010.

Income (Loss) Before Income Tax

As a result of the foregoing factors, our pre-tax income improved from a pre-tax loss of RMB99.0 million in 2009 to a pre-tax loss of RMB50.8 million ($7.7 million) in 2010.

As a result of the foregoing factors, our pre-tax income improved from a pre-tax loss of RMB846.5 million in 2008 to a pre-tax loss of RMB99.0 million in 2009.

Income Tax

Our income tax decreased from RMB10.9 million in 2009 to RMB7.1 million ($1.1 million) in 2010 as a result of our reduced taxable profits, offset in part by an increase to RMB4.4 million ($0.7 million) in tax on income from our ADS depositary.

Our income tax decreased from RMB25.6 million in 2008 to RMB10.9 million in 2009 as a result of our reduced taxable profits.

Net Loss From Continuing Operations

As a result of the foregoing factors, our net income from continuing operations improved from a loss of RMB109.9 million in 2009 to a loss of RMB57.9 million ($8.8 million) in 2010.

As a result of the foregoing factors, our net income from continuing operations improved from a loss of RMB872.1 million in 2008 to a loss of RMB109.9 million in 2009.

Profit (Loss) From Discontinued Operations

On July 13, 2010, we completed the divestiture of P3A to Mr. Zhixin Xue, the president and a director of P3A. As a result of the transaction, we acquired from Mr. Xue and cancelled shares representing 11.5% of our issued and outstanding share capital immediately prior to the transaction.

We recorded an RMB1.3 million ($0.2 million) loss from discontinued operations in 2010. This is attributed to P3A and comprises:

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an RMB20.3 million ($3.1 million) net profit from discontinued operations for the period through the date of disposal;

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an RMB212.8 million ($32.2 million) loss on disposal of discontinued operations; and

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an RMB191.2 million ($29.0 million) reversal of deferred tax liabilities released due to the divestiture of our discontinued operations.

We recorded an RMB25.4 million loss from discontinued operations in 2009 attributable to P3A’s net loss in 2009.

We recorded an RMB121.1 million profit from discontinued operations in 2008 attributable to P3A’s net profit in 2008.

Net Loss

As a result of the foregoing factors, our net income improved from a loss of RMB135.3 million in 2009 to a loss of RMB59.2 million ($9.0 million) in 2010.

As a result of the foregoing factors, our net income improved from a loss of RMB751.0 million in 2008 to a loss of RMB135.3 million in 2009.

Taxation

We are incorporated in the Cayman Islands. Under the current law of the Cayman Islands, we are not subject to income or capital gains tax. In addition, dividend payments are not subject to withholding tax in the Cayman Islands.

Hong Kong Income Tax

In 2008, our subsidiary in Hong Kong had a taxable profit of RMB1.4 million subject to PRC income tax at a rate of 25% due to its effective management being deemed to be in China. In 2009, none of our subsidiaries in Hong Kong had any assessable profits that would be subject to the profit tax.

PRC Enterprise Income Tax

On March 16, 2007, the National People’s Congress of China enacted a new tax law, the 2008 EIT Law, which became effective on January 1, 2008. Under the new tax law, foreign invested enterprises and domestic companies are subject to EIT at a uniform rate of 25% and any tax exemption, reduction and preferential treatments which are applicable only to foreign invested enterprises will be revoked. P3A, our consolidated affiliated entity up until July 2010, qualified as a “key technology enterprise” under the Shanxi province 1311 Agricultural High Technology Project implemented by Shanxi province in 2002, and therefore P3A had been exempted from EIT since 2002 based on the approval of the local tax authority in Shanxi. Upon effectiveness of the 2008 EIT Law on January 1, 2008 and based on Jin Di Shui Gao Xing Fa (2009)2 issued by Local Tax Bureau of Taiyuan, P3A was approved to be exempted from PRC income tax since January 1, 2008 unless the scope of its operation had been changed. The tax exemption status was subject to annual inspection by end of each May. Agria China, our wholly-owned subsidiary established in March 2007 in China, was initially granted a “tax holiday” for a full exemption from EIT for the fiscal years 2007 to 2009. As a result of the new EIT law passed in March 2007 and its related implementation rules, our “tax holiday” exemption ceased on December 31, 2007, and Agria China has been subject to EIT at a rate of 25% since January 1, 2008. Agria Brother, our wholly-owned subsidiary established in April 2008 in Shenzhen, China is subject to EIT at a rate of 25%. Guanli, our consolidated affiliated entity established in November 2008, is subject to EIT at a rate of 25%.

Under the new tax law, enterprises organized under the laws of jurisdictions outside China with their de facto management bodies located within China may be considered PRC resident enterprises and therefore subject to PRC EIT at the rate of 25% on their worldwide income. According to the Implementing Rules, “de facto management bodies” refer to “establishments that carry out substantial and overall management and control over the manufacturing and business operations, personnel, accounting, properties, etc. of an enterprise.” We may be considered a resident enterprise and may therefore be subject to a 25% PRC income tax on our global income. Virtually all of our income is currently sourced from China. See “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—Any limitation of PRC law and regulations on the ability of our subsidiaries and affiliated entity to distribute dividends or make other payments to us could materially adversely affect our ability to conduct our business.”

PRC Value-Added Tax (VAT)

In accordance with the relevant tax laws in the PRC, VAT is levied on the invoiced value of sales and is payable by purchasers. A PRC company is required to remit the VAT it collects to the tax authorities but may deduct the VAT it has paid on eligible purchases. Up until July 2010 when we divested P3A, it had been exempt from VAT since 2002 pursuant to the relevant PRC regulations and policies regarding the VAT applicable to producers of certain agricultural products.

Critical Accounting Policies

We prepare financial statements in accordance with U.S. GAAP, which requires us to make judgments, estimates and assumptions that affect (i) the reported amounts of our assets and liabilities, (ii) the disclosure of our contingent assets and liabilities at the end of each fiscal period and (iii) the reported amounts of revenues and expenses during each fiscal period. We continually evaluate these judgments and estimates based on our own historical experience, knowledge and assessment of current business and other conditions, our expectations regarding the future based on available information and assumptions that we believe to be reasonable, which together form our basis for making judgments about matters that are not readily apparent from other sources. Since the use of estimates is an integral component of the financial reporting process, our actual results could differ from those estimates. Significant estimates reflected in our financial statements include, but are not limited to, allowance for doubtful accounts, useful lives of fixed assets, intangible assets, and imputed interest on related party loans. Some of our accounting policies require a higher degree of judgment than others in their application.

The selection of critical accounting policies, the judgments and other uncertainties affecting application of those policies and the sensitivity of reported results to changes in conditions and assumptions are factors that should be considered when reviewing our financial statements. We believe the following accounting policies involve the most significant judgments and estimates used in the preparation of our financial statements.

Principles of Consolidation

The consolidated financial statements include the financial statements of the Company, its subsidiaries and variable interest entities for which the Company is the primary beneficiary. All significant intercompany transactions and balances between the Company, its subsidiaries and its variable interest entities are eliminated upon consolidation.

Accounts Receivable

An allowance for doubtful accounts is recorded in the period in which a loss is determined to be probable based on an assessment of specific evidence indicating troubled collection, historical experience, account balance aging and prevailing economic conditions. An accounts receivable is written off after all collection efforts have ceased.

Property, Plant and Equipment, Intangible Assets and Other Assets (“Long-lived Assets”)

Property, plant and equipment are stated at cost and are depreciated using the straight-line method over the estimated useful lives of the assets as follows:

Repair and maintenance costs are charged to expense when incurred, whereas the cost of renewals and betterments that extend the useful life of fixed assets are capitalized as additions to the related assets. Retirement, sale and disposals of assets are recorded by removing the cost and accumulated depreciation with any resulting gain or loss reflected in the consolidated statements of operations.

All facilities purchased or constructed which require a period of time before completion are accounted for as construction-in-progress. Construction-in-progress is recorded at acquisition cost, including cost of facilities, installation costs and interest costs. Capitalization of interest costs ceases when the asset is substantially complete and ready for its intended use. Interest capitalized for the year ended December 31, 2008, 2009 and 2010 amounted to RMB0.9 million, RMB0.2 million and nil, respectively.

Revenue Recognition

Our primary business activity is to produce and sell seeds. We records revenue when the criteria of ASC 605-10 “Revenue Recognition: Overall” are met. These criteria include all of the following: persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable and collectability is reasonably assured

More specifically, our sales arrangements are evidenced by individual sales agreements for each transaction. The customer takes title and assumes the risks and rewards of ownership of the products upon delivery of products which generally occurs at shipping point. Other than warranty obligations, we do not have any substantive performance obligations to deliver additional products or services to the customers. The product sales price stated in the sales contract is final and not subject to adjustment. We generally do not accept sales returns and do not provide customers with price protection. We assess a customer’s creditworthiness before accepting sales orders. Based on the above, we record revenue related to product sales upon delivery of the product to the customers.

Business Combinations and Intangible Assets Including Goodwill

We account for business combinations using the purchase method of accounting and accordingly, we record assets and liabilities of the acquired entities at their estimated fair values at the acquisition date. Goodwill represents the excess of the purchase price over the estimated fair value of net tangible and identifiable intangible assets acquired. Our goodwill outstanding at December 31, 2010 was related to our acquisition of NKY at September 30, 2009 and Beiao at January 31, 2010. In accordance with the provisions of ASC 350-20, Intangibles, Goodwill and Other, goodwill amounts are not amortized, but rather are tested for impairment at least annually or more frequently if there are indicators of impairment present. If the carrying value of the reporting unit to which goodwill is allocated is less than the reporting unit’s fair value, goodwill is considered to be impaired. A reporting unit’s fair value is determined based on its expected cash flows. The amount of goodwill impairment loss is measured as the excess of the carrying value of goodwill over its implied fair value. Subsequent reversal of goodwill impairment loss is prohibited. Goodwill has been assigned to NKY, a component of our corn seeds operating segment, and Beiao, a component of the Company’s vegetable seeds operating segment, for purposes of impairment testing. No impairment charge has been recognized for the year ended December 31, 2010.

Investments

Investments in privately held entities, which are not readily marketable or have quoted market prices, are recorded at cost. Distributions received, other than for return of capital, are recorded as other income in the consolidated statements of operations. We assess its investments for other than temporary impairments when indicators of impairment arise, including adverse changes to financial condition and the market environment of the investees.

In accordance with ASC 825-10 “Financial Instruments — overall”, we elected to account for its equity investee in which the Company exercises significant influence using fair value as determined by the investee’s quoted market price. Accordingly, the investment is reflected on the balance sheet at its fair value, with changes in fair value between reporting periods reflected in the consolidated statements of operations.

Impairment of Long-lived Assets

We evaluate our long-lived assets or asset group, including finite-lived intangibles and goodwill, for impairment whenever events or changes in circumstances (such as a significant adverse change to market conditions that will impact the future use of the assets) indicate that the carrying amount of a group of long-lived assets may not be recoverable. When these events occur, we evaluate the impairment by comparing the carrying amount of the assets to future undiscounted net cash flows expected to result from the use of the assets and their eventual disposition. If the sum of the expected undiscounted cash flows is less than the carrying amount of the assets, we will recognize an impairment loss based on the excess of the carrying amount of the asset group over its fair value based on discounted cash flows. There was no impairment identified as of December 31, 2010.

Fair value accounting

Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) No. 820-10 (“FASB ASC 820-10”) establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). As required by FASB ASC 820-10, assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The three levels of the fair value hierarchy under FASB ASC 820-10 are described below:

Level 1 Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2 Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability;

Level 3 Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

As of December 31, 2010, our equity interest in PGW was measured at fair value on a recurring basis within Level 1. We did not have any assets or liabilities measured on a recurring basis within Level 2 or Level 3.

Income Taxes

Deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the period in which the differences are expected to reverse. We record a valuation allowance to offset deferred tax assets if based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date.

Uncertainty on Income Taxes

We have elected to classify interest due on any underpayment of income taxes, if and when required, in interest expense and penalties, if and when required, within general and administrative expenses.

B. Liquidity and Capital Resources

Our principal sources of liquidity have been cash generated from operating activities and from financing activities, consisting of proceeds from our initial public offering in November of 2007, bank borrowings and loans from related parties. As of December 31, 2010, we had RMB358.2 million ($54.3 million) in cash and cash equivalents, which consisted of cash on hand and bank deposits which are unrestricted as to withdrawal or use. In addition, we had RMB136.0 million ($20.6 milllion) of restricted cash which is pledged to a bank as guarantee for a bank loan. These amounts comprise the main components of our current assets. We can only receive cash payments from Guanli pursuant to our contractual arrangements with Guanli and its shareholders. Similarly, up until July 2010 when we divested P3A, although we consolidated the results of P3A, we could only receive cash payments from P3A pursuant to our contractual arrangements with P3A and its shareholders. See “Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions”

As of December 31, 2010, we had RMB59.6 million ($9.0 million) in outstanding short-term bank loans and borrowings, which bore weighted-average interest rates of LIBOR plus 0.7% per annum. These short-term bank loans and borrowings had terms of twelve months and were repayable in January 2011.

Besides cash and cash equivalents and restricted cash, inventories and accounts receivable are the other two principal components of our current assets. Our inventories were RMB48.5 million, RMB73.4 million and RMB74.4 million ($11.3 million) as of December 31, 2008, 2009 and 2010, respectively. Our inventories increased by RMB1.1 million ($0.2 million) from December 31, 2009 to December 31, 2010, primarily due to the divestiture in 2010 of P3A which had inventories of RMB52.5 million as of December 31, 2009, offset by the increase in inventory for our Nong Ke Yu seeds operations. Our inventories increased by RMB24.9 million from December 31, 2008 to December 31, 2009, primarily due to our purchase of Nong Ke Yu and its associated inventory of RMB21.4 million held as of December 31, 2009.

Our current accounts receivable were RMB162.8 million, RMB109.3 million, and RMB0.3 million ($0.1 million) as of December 31, 2008, 2009 and 2010, respectively. Our accounts receivable decreased by RMB109.0 million ($16.5 million) from December 31, 2009 to December 31, 2010, primarily due to the divestiture in 2010 of P3A which had accounts receivable of RMB109.2 million as of December 31, 2009. Our accounts receivable decreased by RMB53.5 million from December 31, 2008 to December 31, 2009, primarily due to our reduced levels of activity.

We incurred capital expenditures of RMB350.8 million, RMB8.9 million and RMB0.6 million ($0.1 million) in 2008, 2009 and 2010, respectively. Our capital expenditures were made primarily to acquire property, plant and equipment, other assets and technologies. Our capital expenditures are funded by cash provided from operating activities and the proceeds from our 2008 capital raising.

In 2010, we incurred acquisition expenditures of RMB40.0 million ($6.1 million) in connection with our acquisition of a 49% interest in Ganxin, a corn seed research, development, production and sales company based in Gansu.

Our acquisition of BeOK in 2010 for RMB1.0 million ($0.2 million) resulted in net cash outflow of RMB0.7 million ($0.1 million) as a result of acquired cash balances of RMB0.3 million.

In 2010, we invested RMB165.4 million ($25.1 million) in a convertible redeemable note issued by PGW

Our divestiture of P3A in 2010 resulted in a cash outflow of RMB87.5 million ($13.3 million), representing the cash balances of P3A as at the date of divestiture.

In 2009, we incurred acquisition expenditures of RMB421.1 million ($63.8 million) in connection with our acquisition of a 19.01% interest in PGW, New Zealand’s largest agricultural services company that is listed on the New Zealand Stock Exchange, and a 100% of equity interest in Nong Ke Yu, a seeds distribution business based in Beijing.

In 2009, we also invested RMB7.0 million ($1.1 million) in Zhongnong, which has been recognized as an investment.

Our acquisition in 2009 of Nong Ke Yu for RMB5.0 million resulted in net cash in flow of RMB0.5 million as a result of acquired cash balances of RMB5.5 million.

We have not encountered any difficulties in meeting our cash obligations to date. We believe that our current cash and cash equivalents and anticipated cash flow from operations will be sufficient to meet our anticipated cash needs for the foreseeable future. We may, however, require additional cash due to changing business conditions or other future developments, including any investments or acquisitions that we may pursue, or any amounts we may pay in the class action lawsuits against us. If our existing cash is insufficient to meet our requirements, we may seek to sell additional equity securities, issue debt securities or borrow from lending institutions. We cannot assure you that financing will be available in the amounts we need or on terms acceptable to us, if at all. Any sale of additional equity securities, including convertible debt securities, would dilute our shareholders. The incurrence of debt would divert cash from working capital and capital expenditures to service debt obligations and could result in operating and financial covenants that restrict our operations and our ability to pay dividends to our shareholders. If we are unable to obtain additional equity or debt financing as required, our business operations and prospects may suffer.

The following table sets forth a summary of our cash flows for the periods indicated:

Operating Activities

Net cash used in operating activities in the year ended December 31, 2010 was RMB9.2 million ($1.4 million), primarily as a result cash received from the sales of our products being more than offset by our cash operating expenses. Additionally, both our inventories and accounts payable have increased as we grow our seeds business. The increase in our inventories caused cash outflow of RMB54.5 million ($8.3 million) and the increase in our accounts payable caused cash inflow of RMB41.3 million ($6.3 million).

Net cash used in operating activities in the year ended December 31, 2009 was RMB6.3 million, primarily as a result of the decrease in our revenue. The decrease in accounts receivable caused cash inflow of RMB47.4 million. The increase in our inventories caused cash outflow of RMB34.9 million

Net cash provided by operating activities in the year ended December 31, 2008 was RMB209.1 million, resulting primarily from the sales of our products. Although we recorded a net loss of RMB751.0 million for the year ended December 31, 2008, there were significant non-cash charges, including the P3A settlement of RMB768.5 million, stock-based compensation charges of RMB45.3 million, amortization and depreciation of RMB26.4 million, inventory write-down of RMB16.6 million and bad debt charges of RMB12.8 million.

Investing Activities

Net cash used in investing activities for the year ended December 31, 2010 was RMB277.2 million ($42.0 million) due primarily to the following factors:.(1) we incurred investment expenditures of RMB165.4 million ($25.1 million) in connection with our subscription for convertible redeemable notes issued by PGW, (2) we incurred investment expenditure of RMB40.0 million ($6.1 million) in connection with our acquisition of a 49% interest in Ganxin, and (3) P3A held cash balances of RMB87.5 million at the date of divestiture.

Net cash used in investing activities for the year ended December 31, 2009 was RMB430.0 million due primarily to the following factors: (1) we incurred capital expenditure of RMB8.9 million in 2009 primarily to acquire property, plant and equipment, other assets and intangible assets, and (2) we incurred acquisition expenditures of RMB414.6 in connection with our acquisition of a 19.01% interest in PGW, New Zealand’s largest agricultural services company that is quoted on the New Zealand Stock Exchange. Our acquisition of Nong Ke Yu for RMB5.0 million resulted in net cash inflow of RMB0.5 million as a result of acquired cash balances of RMB5.5 million.

Net cash used in investing activities for the year ended December 31, 2008 was RMB337.6 million, due primarily to the prepayments for acquisition of property, plant and equipment and intangible assets of RMB256.4 million and acquisition of property, plant and equipment and other assets of RMB69.2 million.

Financing Activities

Net cash used by our financing activities was RMB76.4 million ($11.6 million) in 2010, resulting primarily from a pledge over cash balances of RMB136.0 million ($20.6 million) granted as security over short term bank loans during the year offset in part by the net effect of the drawdown of two loans for RMB59.6 million ($9.0 million) each and the repayment of one of these loans during the year.

Net cash used in our financing activities was RMB2.0 million in 2009, resulting primarily from loan proceeds and repayment of existing loans and the repurchase of shares.

Net cash used in our financing activities was RMB13.6 million in 2008, resulting primarily from loan proceeds and repayment of existing loans and the repurchase of shares.

Pro-forma balance sheet

As of December 31, 2008 and 2009, P3A did not meet the held-for-sale criteria and we did not classify the P3A business that was discontinued in July 2010 as being held for sale. For ease of comparison, our management believes it is appropriate to include summarized balance sheet information on a pro forma basis assuming that the P3A assets had been classified as assets held for sale and the P3A liabilities had been classified as liabilities associated with assets held for sale as of December 31, 2008 and 2009. The following summarized information is unaudited and has been prepared for comparative purposes only.

Recently Issued Accounting Pronouncements

In May 2011, the Financial Accounting Standard Board (“FASB”) issued Accounting Standards Update (ASU) No. 2011-04, Amendments to Fair Value Measurement and Disclosure Requirements. Accounting Standards Update (ASU) No. 2011-04 amends FASB Codification Topic 820 on fair value measurements and disclosures to (1) clarify the board’s intent in respect of existing measurement guidance, (2) revise certain measurement guidance that changes or modifies a principle, and (3) add disclosure requirements concerning the measurement uncertainty of level 3 measurements. For public entities, the amendments to FASB ASC 820 made by ASU No. 2011-04 are effective for interim and annual periods beginning after December 15, 2011, with early application not permitted. We will adopt this amendment for the fiscal year ending December 31, 2012.

In January 2011, the FASB issued Accounting Standards Update (ASU) No. 2010-29, “Pro Forma Information for a Business Combination Occurring in the Current Period”. The update clarifies that pro forma revenue and earnings for a business combination occurring in the current year should be presented as though the business combination occurred as of the beginning of the year or, if comparative statements are presented, as though the business combination took place as of the beginning of the comparative year. The new and amended disclosures should be applied prospectively to business combinations consummated on or after the start of the first annual reporting period beginning on or after December 15, 2010, with earlier application permitted. We will adopt this amendment for the fiscal year ending December 31, 2011.

In April 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-13 (ASU 2010-13), Compensation-Stock Compensation (Topic 718): Effect of Denominating the Exercise Price of a Share-Based Payment Award in the Currency of the Market in Which the Underlying Equity Security Trades — a consensus of the FASB Emerging Issues Task Force. The amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2010. Earlier application is permitted. We are currently assessing the impact, if any, of this new standard on its consolidated financial statements.

In October 2009, the FASB issued Accounting Standards Update 2009-13, Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements. This update addressed the accounting for multiple-deliverable arrangements to enable vendors to account for products or services (deliverables) separately rather than a combined unit and will be separated in more circumstances under existing US GAAP. This amendment has eliminated that residual method of allocation. Effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Early adoption is permitted. We do not expect the provisions of this new standard to have a material effect on our financial position, results of operations or cash flows.

C. Research and Development, Patents and Licenses, etc.

We conduct research and development primarily in cooperation with our associate Zhongnong and with various universities and research institutions. See “—Intellectual Property.” We have also acquired a number of technologies and varieties of corn from third parties.

Our research and development team currently consists of 14 research professionals and staff who work in conjunction with us and CNAAS and an additional three research professionals and staff employed by Zhongnong. We have experimental breeding and testing bases for new corn varieties in Beijing and Hainan for our edible corn seeds business and in Beijing, Hainan and Shanxi for our field corn business.

In October 2009, we entered into a strategic cooperation framework agreement with CNAAS, providing for future cooperation across the spectrum of agricultural research. Under this agreement, we have preferential rights to partner with CNAAS in commercializing their research results. Established in 1957, CNAAS comprises 39 research institutes across China, covering all major areas of the agricultural sector, including advanced research in the development of horticulture and livestock. CNAAS employs over 5,000 scientists and research engineers and controls one of the largest germplasm banks in the world.

Additionally, we collaborate with a number of universities and research institutions to develop advanced technologies, including the Beijing Academy of Agricultural Sciences, Baotou Agricultural Science Institution of Inner Mongolia, Tianjin Vegetable Research Institution and Shenyang Agricultural University.

As of December 31, 2010, through acquisitions and self-development efforts, we own the rights to three proprietary edible corn seed varieties, namely JKN2000, JKN120 and JingZiNuo218. In 2011, we acquired the rights to two proprietary field corn seeds varieties, namely BaYu11 and ZhongDan909. Ganxin is currently applying for the proprietary right for JiXiang No.1, a field corn seed variety. We also employed a breeder to carry out our own breeding programs. We have established 70 testing sites for testing and selection of new varieties.

Our expenses incurred in connection with company-sponsored research and development were RMB1.9 million in 2008, RMB1.2 million in 2009 and RMB114,000 ($17,000) in 2010. We have also acquired a number of technologies from third parties.

Research and development expenses primarily consist of expenses related to development of our proprietary products, salaries and benefits of our research and development personnel, fees paid to our research partners, costs of raw materials used in our research and development activities, as well as other overhead incurred by our research and development personnel.

D. Trend Information

See “Item 3. Key Information,” “Item 4. Information on the Company” and “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Results of Operations” for information on material trends affecting our business and results of operations.

For the year ending December 31, 2011, we expect our revenues to be materially higher than in the year ended December 31, 2010. This is primarily due to our consolidation of the results of PGW, following the completion of the partial offer by Agria Singapore for PGW in April 2011. Although we will only consolidate the revenue for the period from closing of the investment to the year end, we expect our consolidation of PGW’s results to lead to a significant increase in our reported revenue.

E. Off-Balance Sheet Commitments and Arrangements

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

F. Tabular Disclosure of Contractual Obligations

The following table sets forth our contractual obligations as of December 31, 2010: