RNS Number : 9336X
China Western Investments PLC
30 June 2008
For Immediate Release
30 June 2008
China Western Investments plc ("the Company")
Results of the Company
for the nine month period ended 31 December 2007
The Board announces the results of the Company for the nine month period ended 31 December 2007, which are set out below. These have
today been published and will be despatched to shareholders.
A copy will also be posted to the company website www.chwi.co.uk
The AGM will be held at the offices of Littlejohn at 1 Westferry Circus, Canary Wharf, London E14 4HD on 10 November 2008 at 12 noon.
The accounting date has been changed to 31st December to fit in with the year end dates for companies in China as outlined last year.
This is a logical step because all trading is now in China. The financial data is, therefore, for a period of nine months to the end of
December 2007.
Due to the earthquake in the southern part of Gansau Province, the auditors were unable to undertake their audit work in full. This has
resulted in a qualification to the financial statements.
Trading has not been as good as had been hoped with both the investment property and hospital showing losses for the period. The
hospital is increasing its revenue and a break even point is expected in early course. Interest costs are continuing to impact the rental
net revenues.
Profitability will not be achieved without investment in the property under construction and the Group continues to examine all avenues
of investment opportunities to enable the development to take place. No satisfactory investment funding has been identified which satisfies
the Group's requirements but we continue to monitor all possible opportunities. However, an enquiry has recently been received from possible
investors regarding investment in the Lanzhou project and we are having initial discussions in this regard. Shareholders will be updated as
appropriate.
The Group continues to receive the support of some major shareholders who have made loans to support the working capital. There are also
guarantees in place to ensure that the cash flow remains positive whilst the investment capital is sought.
Michael A Shields
Chairman
30th June 2008
Enquiries:
China Western Investments plc Harry Jeffs Tel: +44 01539 723233
Nominated Adviser, Pascal Keane Tel: +44 020 7408 4090
Shore Capital
The directors present their report and the financial statements of the Group for the nine months ended 31 December 2007. The accounting
period has been shortened from one year to nine months in order to align the Group reporting dates. The comparative amounts shown for the
Income Statement, Statement of Changes in Equity, Cash Flow Statement and the related notes are for one year and are therefore not directly
comparable.
Principal activities
The principal activity of the Group during the year was that of property investment.
Review of the business
Property investment assets amount to �30 million which are situated in China. The property in China consists of the 10 storey Lanzhou
International Trade Centre and its adjacent resettlement buildings. The lower ground floor and levels 1 to 5 are fully let; development of
the remaining floors of the shopping centre is planned once investment funds have been raised. The Group also has an investment in Tien Shui
hospital.
Future developments
Concentration on investment in China through development of the Lanzhou project will be the principal area of activity in the immediate
future. The operation of the hospital facilities in Tien Shui will also be extended.
Both of these developments are expected to generate positive cash flows that will enable further investment to be made in both of these
operations.
Principal Risks and Uncertainties
The Group's operations expose it to a variety of financial risks that include the effect of changes in interest rate risk, liquidity
risk and currency risk. The key business risks and uncertainties facing the Group are considered to be those deriving from the property
market and in particular the effects that the market has on property prices and rental returns. The Group also faces risk in its ability to
raise finance and the impact of interest rate rises.
Key Performance Indicators
The Board monitors progress of the overall group strategy and the individual strategic elements by reference to three key performance
indicators. These are return on property investment, rental yield and cost of capital. Material improvement should occur when development
funds are invested.
Results and dividends
The trading results for the period and the group's financial position at the end of the period are shown in the attached financial
statements.
A review of the Group's results including future prospects is set out in the Chairman's statement.
The directors have not recommended payment of a dividend (2007 - �Nil).
Directors
The directors who served the Group during the period were as follows;
D A Thomas
Chan Yim Sang
J Ho
Zhan Chun Hu
M A Shields
Significant shareholdings
The Group has been notified of the following shareholdings of more than 3% as at 31 May 2008:
1p Ordinary Shares %
Ho King Assets Corp * 191,999,700 26.4
Zhan Chun Hu 100,980,000 13.9
Wing Kit Enterprise Ltd ** 100,980,000 13.9
Pacific Continental Securities (UK) Nominees Ltd 91,728,634 12.6
Wong Wing Hay 54,648,000 7.5
Roy Nominees Ltd 46,417,000 6.4
Pointex Enterprises Ltd *** 23,760,000 3.3
HSBC Global Custody Nominee (UK) Ltd 23,100,000 3.2
Ng Kin Wah **** 21,333,300 3.0
* Ho King Assets Corporation is owned by John Ho (65%) and Chan Yim Sang (35%)
** Chan Yim Sang has a beneficial interest in 50% of Wing Kit Enterprises Limited
*** Pointex Enterprises Limited is wholly owned by the family of John Ho
**** Ng Kin Wah holds the shares as security for a loan granted to Ho King assets Corporation which will be transferred back to Ho King
Assets Corporation upon repayment of the loan
Payment of Suppliers
The Group seeks to settle payment in agreement with suppliers' terms and conditions. At the year end the balance disclosed as trade
payables consists predominantly of professional fees. Trade payables of the group at 31 December 2007 expressed in relation to total amounts
invoiced by supplies for services during period were equivalent to 535 days (2007: 472 days).
Corporate Governance Statement
In recognising the need for the highest standards of corporate behaviour and accountability, the directors of China Western Investments
plc support and have adhered to the principles of good corporate governance. The Company has now established an audit committee and a
remuneration committee, which comprises the two independent non-executive directors, namely M A Shields, as chairman, and D A Thomas. The
primary duties of the committees are to review and supervise the financial reporting and internal control procedures of the Group.
Financial Instruments
Details of the Groups financial risk management objectives and policies are included in note 16 to the accounts.
Going Concern
The Directors have formed a judgement at the time of approving the accounts that there is a reasonable expectation that the Company and
Group have adequate resources to continue its operations for the foreseeable future. This judgement is based on the fact that the
shareholder loans will remain in place and that interest will accrue but will not be paid. Further shareholder loans will be made available
to fund any short term cash flows and investment funds are being sought to develop the assets in China which will create further positive
cash flows. For this reason, the Directors continue to adopt the going concern basis in preparing the financial statements.
Directors' Responsibilities in relation to the company's auditor
The Directors who held office at the date of approval of this Directors' Report confirm that, so far as they are each aware, there is no
relevant audit information of which the company's Auditor is unaware; and each director has taken steps that ought to have been taken as a
Director to make themselves aware of any relevant audit information and to establish that the Company's Auditor is aware of that
information.
Registered office: Signed by order of the directors
1 Beacon Buildings
Yard 23
Stramongate
Kendal
LA9 4BH
Approved by the directors on 30th June 2008.
H Jeffs
Company Secretary
The directors are responsible for preparing the annual report and Group and Company financial statements in accordance with applicable
laws and regulations.
Company law requires the Directors to prepare Group and Company financial statements for each financial period. Under that law the
directors have elected to prepare the financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted
by the EU.
The Group and Company financial statements are required by law and IFRSs as adopted by the EU to present fairly the financial position
of the Group and Company and the performance for that period, the Companies Act 1985 provides in relation to such financial statements that
references in the relevant part of that Act to financial statements giving a true and fair view are references to their achieving a fair
presentation.
In preparing the Group and Company financial statements, the directors are required to;
* select suitable accounting policies and apply them consistently;
* make judgements and estimates that are reasonable and prudent;
* state whether they have been prepared in accordance with IFRSs as adopted by the EU, and
* prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in
business.
The directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial
position of the Group and Company and to enable them to ensure that the financial statements comply with the Companies Act 1985. The
directors are also responsible taking such steps as are reasonably open to them to safeguard the assets of the group and to prevent and
detect fraud and other irregularities.
Under applicable law and regulations the directors are also responsible for preparing a Directors' Report and a Business Review.
The directors are responsible for the maintenance and integrity of the corporate and financial information on the Company website.
Legislation in the United Kingdom governing the preparation and dissemination of the financial statements may differ from legislation in
other jurisdictions.
We have audited the Group and Parent Company financial statements (the "Financial Statements") of China Western Investments plc, which
comprise the consolidated income statement, consolidated statement of recognised income and expense, consolidated balance sheet, the company
balance sheet, the consolidated cash flow statement, the company cash flow and the related notes 1 to 21. The Group financial statements
have been prepared under the accounting policies set out therein.
This report is made solely to the Company's members, as a body, in accordance with section 235 of the Companies Act 1985. Our audit work
has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report
and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company
and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of the directors and the auditors
The directors are responsible for preparing the Annual Report, and the Group financial statements, in accordance with applicable law and
International Financial Reporting Standards (IFRSs) are set out in the Statement of Directors' Responsibilities.
Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements and International
Standards on Auditing (UK and Ireland).
We report to you our opinion as to whether the group financial statements give a true and fair view and are properly prepared in
accordance with the Companies Act 1985 and Article 4 of the IAS regulation. We also report to you if, in our opinion, the information given
in the directors' report is consistent with the Group financial statements.
In addition we report to you if, in our opinion, the company has not kept proper accounting records, if we have not received all the
information and explanations we require for our audit, or if information specified by law regarding directors' remuneration and other
transactions is not disclosed.
We read other information contained in the Annual Report and consider whether it is consistent with the audited group financial
statements. This other information comprises only the Directors' Report and the Chairman's Statement. We consider the implications for our
report if we become aware of any apparent misstatements or material inconsistencies with the accounts. Our responsibilities do not extend to
any other information outside the annual report.
Basis of opinion
We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board
except that the scope of our work was limited as explained below.
An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the group financial statements.
It also includes an assessment of the significant estimates and judgments made by the directors in the preparation of the financial
statements, and of whether the accounting policies are appropriate to the group's circumstances, consistently applied and adequately
disclosed.
We planned our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud
or other irregularity or error. However, the evidence available to us was limited because we were unable to undertake our audit work in full
due to the earthquake in mainland China which prevented access to the southern part of Gansau Province where the Tien Shui hospital is
based. As a result of this we have been unable to obtain sufficient appropriate audit evidence concerning the hospital's activities and
because of the significance of this in terms of the Group financial statements, we have been unable to form a view on the Group Financial
Statements.
In forming our opinion we also evaluated the overall adequacy of the presentation on information in the Group Financial Statements.
Opinion: disclaimer on view given by the Group Financial Statements
Due to the natural disaster (earthquake) within the People's Republic of China during the course of our audit work we were unable to
visit all the Company's subsidiaries.
Because of the possible effect of the limitation in evidence available to us, we are unable to form an opinion as to whether the Group
Financial Statements:
* give a true and fair view, in accordance with IFRSs as adopted by the European Union, of the state of the Group's affairs as at 31
December 2007 and of its loss for the period then ended; and
* have been properly prepared in accordance with the Companies Act 1985 and Article 4 of the IAS regulation; and
* the information given in the Directors' Report is consistent with the Group Financial Statements.
In respect solely of the limitation on our work referred to above:
* we have not obtained all the information and explanations that we considered necessary for the purposes of the audit; and
* we were unable to determine whether proper accounting records have been maintained.
Notwithstanding our disclaimer on the view given by the Group Financial Statements, in our opinion:
* the Parent Company Financial Statements give a true and fair view, in accordance with IFRSs as adopted by the European Union as
applied in accordance with the provisions of the Companies Act 1985, of the state of the Parent Company's affairs as at 31st December 2007
* the information given in the Directors' Report is consistent with the Financial Statements.
Littlejohn
Chartered Accountants & Registered Auditors
1 Westferry Circus
Canary Wharf
London
E14 4HD
30th June 2008
Consolidated Income Statement
Period ended 31 Year
December 2007 ended 31
March 2007
(Restated)
Note �000 �000
Revenue 2 540 458
Cost of sales (150) (240)
------------- -------------
Gross profit 390 218
Administrative expenses (117) (452)
Finance Costs 6 (1,164) (508)
------------- -------------
(Loss) before taxation (891) (742)
Income tax expense 7 (30) (38)
------------- -------------
(Loss) from continuing (921) (780)
operations
(Loss) from discontinued - (200)
operations
------------- -------------
Attributable to parent (921) (980)
company's equity shareholders
Attributable to minority - (2)
interests
------------- -------------
(Loss) for the financial (921) (982)
period
------------- -------------
(Loss)/earnings per share
Basic (continuing) (p) (0.13) (0.11)
Basic (total) (p) (0.13) (0.13)
The company has taken advantage of section 230 of the Companies Act 1985 not to publish its own Income statement.
CHINA WESTERN INVESTMENTS PLC
31 December 2007
Consolidated Statement of Changes in Equity
Share Share Revaluation reserve Merger reserve Retained earnings Minority interests
capit premiu �'000 �'000 �'000 �'000
al m Total
�'000 �'000 �'000
Balance as at 1 April 2006 7,183 32,919 18,262 3 (23,627) 210 34,950
Changes in accounting policy - - - - 1,584 - 1,584
to comply with IAS 38
Changes in accounting policy - - - - (5,247) - (5,247)
to comply with IAS 12
Restated balances 7,183 32,919 18,262 3 (27,290) 210 31,287
Exchange differences on
translating foreign operations - - - - (1,723) -- (1,723)
Valuation gain in investment - - 1,177 - - -- 1,177
properties
Deferred tax charge on - - - - (353) -- (353)
revaluation gain
Net income recognised directly - - 1,177 - (2,076) (899)
in equity
Loss for the period - - - - (982) 2 (980)
Total recognised income and
expense - - 1,177 - (3,058) 2 (1,879)
Share issue 100 - - - - - 100
Balance at 31 March 2007 7,283 32,919 19,439 3 (30,348) 212 29,508
Share Share Revaluation reserve Merger reserve Retained earnings Minority interests
capit premiu �'000 �'000 �'000 �'000
al m Total
�'000 �'000 �'000
Balance as at 1 March 2007 7,283 32,919 19,439 3 (30,348) 212 29,508
Changes in accounting policy
to comply with IFRS - - - - - - -
Restated balances 7,283 32,919 19,439 3 (30,348) 212 29,508
Exchange differences on
translating foreign operations - - - - 1,080 - 1,080
Net income recognised directly
in equity - - - - 1,080 - 1,080
Loss for the period - - - - (921) - (921)
Total recognised income and
expense - - - - 159 - 159
Balance at 31 December 2007 7,283 32,919 19,439 3 (30,189) 212 29,667
CHINA WESTERN INVESTMENTS PLC
31 December 2007
Company Statement of Changes in Equity
Share Share Retained earnings
capital premium �'000
�'000 �'000 Total
�'000
Balance as at 1 April 2007 7,283 32,919 (6,652) 33,550
Loss for the period - - (305) (305)
------------- ------------- ------------- -------------
Total recognised income and - - (305) (305)
expense
---------------- ----------------- ------------------- ------------------
Balance at 31 December 2007 7,283 32,919 (6,957) 33,245
****** ****** ****** =******
Consolidated Balance Sheet 31 December
2007
�'000 31 March 2007
31 December 2007 Restated
�'000
ASSETS
Note
Non-current assets
Investment property 10 30,698 29,117
Property, plant and equipment 11 760 638
------------- -------------
Total non-current assets 31,458 29,755
------------- -------------
Current assets
Trade and other receivables 14 223 220
Property under construction 13 18,825 18,752
Inventories 13 20 17
Cash and cash equivalents 20 47
------------- -------------
Total current assets 19,088 19,036
------------- -------------
TOTAL ASSETS 50,546 48,791
****** ******
EQUITY AND LIABILITIES
Share capital 19 7,283 7,283
Share premium 32,919 32,919
Other reserves 19,442 19,442
Retained earnings (30,189) (30,348)
Minority interest 212 212
------------- -------------
Total equity 29,667 29,508
**** -------------
Non-current liabilities
Financial liabilities 16 270 270
Long term borrowings 16 24 68
Deferred tax liability 17 5,600 5,600
------------- -------------
Total non-current liabilities 5,894 5,938
------------- -------------
Current liabilities
Trade and other payables 15 3,794 3,188
Short term borrowings 16 11,029 9,994
Current tax liabilities 162 163
------------- -------------
Total current liabilities 14,985 13,345
------------- -------------
Total liabilities 20,879 19,283
------------- -------------
TOTAL EQUITY AND LIABILITIES 50,546 48,791
***** *****
These financial statements were approved by the board of directors and authorised for issue on the 30th June 2008 and are signed on
their behalf by:
____________________ ____________________
Michael A Shields J Ho
Company Balance Sheet
31 December 2007
31 December 2007 31 March 2007
Restated
Note �000 �000
ASSETS
Non-current assets
Investments 12 35,640 35,640
***** *****
Total non-current assets 35,640 35,640
Current assets
Trade and other receivables 14 796 847
Cash and cash equivalents 1 15
***** *****
Total current assets 797 862
***** *****
TOTAL ASSETS 36,437 36,502
***** *****
EQUITY AND LIABILITIES
Share capital 19 7,283 7,283
Share premium 32,919 32,919
Retained earnings (6,957) (6,652)
***** *****
Total equity 33,245 33,550
***** *****
Non-current liabilities
Financial liabilities 16 270 270
***** *****
Total non-current liabilities 270 270
***** *****
Current liabilities
Trade and other payables 15 945 603
Short term borrowings 16 1,977 2,079
***** *****
Total current liabilities 2,922 2,682
***** *****
Total liabilities 3,192 2,952
***** *****
TOTAL EQUITY AND LIABILITIES 36,437 36,502
***** *****
These financial statements were approved by the board of directors and authorised for issue on the 30th June 2008 and are signed on
their behalf by:
____________________ ____________________
Michael A Shields J Ho
CHINA WESTERN INVESTMENTS PLC
Cash Flow
Period ended 31 December 2007
Period ended 31 December 2007 Year ended 31 March 2007
Restated
�000 �000
Consolidated Cash Flow
Cash flows from operating
activities
Loss before tax (891) (942)
Adjustments for:
Depreciation 52 104
Commission paid by shares - 100
Exchange (gains) (516) (1,723)
Surplus on revaluation - 1,177
(Increase) in inventories (76) (17)
(Increase) in trade and other (3) (62)
receivables
Increase/(decrease) in trade 454 (284)
and other payables
****** ******
Cash (used) in operations (980) (1,647)
Income taxes paid (31) (25)
****** ******
Net cash from operating (1,011) (1,672)
activities
Cash flows from investing
activities
Purchase of property, plant (159) (522)
and equipment (PPE)
Proceeds from sale of PPE - 11,359
****** ******
Net cash (used)/generated in (159) 10,837
investing activities
Cash flows from financing
activities
Increase/(decrease) in 1,071 (9,233)
borrowings
Decrease of finance lease 134 -
liabilities
Capital element of finance (62) -
lease liabilities
****** ******
Net cash generated/(used) in 1,143 (9,233)
financing activities
Net decrease in cash and cash (27) (68)
equivalents
Cash and cash equivalents at 47 115
beginning of period
***** *****
Cash and cash equivalents at 20 47
end of period
***** *****
Company Cash Flow
Cash flows from operating
activities
Loss before tax (305) (376)
Adjustments for:
Commission paid by shares - 100
Exchange gains (130) -
Decrease in trade and other 51 164
receivables
Increase/(decrease) in trade 342 (98)
and other payables
--------- --------
Cash (used) in operations (42) (210)
Cash flows from financing
activities
Increase in borrowings 28 136
-------- --------
Net cash generated from 28 136
financing activities
Net decrease in cash and cash (14) (74)
equivalents
Cash and cash equivalents at 15 89
beginning of period
-------- ---------
Cash and cash equivalents at 1 15
end of period
**** ****
1. Accounting policies
The consolidated financial statements of the Group for the period ended 31 December 2007 comprise the company and its subsidiaries
(together referred to as the 'Group' and individually as the 'Group entities'. The Company is a public limited company which is listed on
AIM, incorporated in the UK and domiciled in the United Kingdom, however the principal place of business is in the Peoples Republic of
China.
The following accounting policies have been applied consistently in dealing with items which are considered material in relation to the
financial information of China Western Investments plc and its subsidiaries.
Basis of preparation
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) issued by
the International Accounting Standards Board (IASB), as adopted for use in the EU. These are the group's first consolidated financial
statements prepared in accordance with IFRS and IFRS 1: First time adoption has been applied and the comparatives have been restated from UK
Generally Accepted Accounting Practice (UK GAAP) to comply with IFRS. Explanations of how the transition to IFRS has effected the reported
financial position and financial performance of the Group are provided in note 21.
The financial statements have been prepared on a historical cost basis except where IFRS requires an alternative treatment. The
principal variations from the historical cost basis relate to IAS 40 "Investment properties", where the standard allows a choice in
presentation of historic cost or fair value. The Group has chosen the fair value presentation as stated in note 13 in accounting for
property under construction. The directors believe that the financial statements present fairly the financial position.
The Group's principal accounting policies are set out below. These accounting policies have been applied consistently to all periods
presented in the consolidated financial statements and in preparing an opening IFRS balance sheet at 1 April 2006 for the purposes of the
transition to IFRS.
Basis of consolidation
The consolidated financial statements include the financial statements of the Company and its subsidiary undertakings made up to 31
December 2007 and 31 March 2007. Control is achieved where the Company has the power to govern the financial and operating policies of an
investee entity so as to obtain benefits from its activities.
On acquisition, the assets and contingent liabilities of a subsidiary are measured at their fair values at the date of acquisition. Any
excess of the cost of acquisition over the fair values of the identifiable net assets acquired is recognised as goodwill. Any deficiency of
the cost of acquisition below the fair values of the identifiable net assets acquired is credited to the income statement in the period of
acquisition.
The profits or losses of subsidiaries are included in the consolidated income statement. The results of those subsidiaries acquired or
disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective
date of disposal, as appropriate.
All intra group transactions are eliminated on consolidation.
Revenue Recognition
Revenue comprises the value of rental income invoiced by the Group, net of Value Added Tax.
Investment properties
Investment properties are accounted for using the fair value model in accordance with IAS 40 "Investment properties", under which an
investment property is measured, after initial measurement, at fair value with changes in fair value recognised in the profit or loss. This
is contrary to the Companies Act 1985 which states that, subject to any provision for depreciation or diminution in value, Property, plant
and equipment are normally to be stated at purchase price or production cost. Current cost accounting or the revaluation of specific assets
to market value, as determined at the date of the last valuation, is also permitted.
The treatment of investment properties under the Companies Act does not give a true and fair view as these assets are not held for
consumption in the business but as investments, the disposal of which would not materially affect and manufacturing or trading operations of
the enterprise. In such a case it is the current value of these investments, and changes in that current value, which are of prime
importance. Consequentially, for the proper appreciation of the financial position, the accounting treatment required by IAS 40 is
considered appropriate for investment properties.
Investment properties acquired are recognised only on practical completion. The direct costs of the property and associated costs of
acquisition are capitalised. Interest is written off to profit and loss.
Revaluations of investment properties are undertaken annually.
Inventories
Inventories include medical supplies which are valued at the lower of cost and estimated fair value.
Property under construction
Property under construction is accounted for at estimated fair value.
The property was acquired as part of the acquisition of Lanzhou International Trade Building Company Limited (LITBC) in 2004.
Acquisition value was established based on an independent valuation of LITBC's property interests. Goodwill of �17,313,000 would arise if
the property was accounted for at the lower of cost and estimated fair value. In the directors' opinion no goodwill should be recorded, as
no premium has been paid for the Company. Deferred tax is recognised on the eventual gain.
Cash and cash equivalents
Cash and cash equivalents include cash at bank and in hand.
Employee benefits
The Group operates a defined contribution pension scheme for its employees. The assets of the scheme are held separately from those of
the Company. The annual contributions payable are charged to the consolidated income statement.
Investments
In the Company's accounts, investments in subsidiary undertakings are stated at cost. As permitted by section 133 of the Companies Act
1985, where the merger relief afforded under section 131 of the Companies Act 1985 applies, cost is the aggregate of the nominal value of
the relevant number of the Company's shares and the fair value of any other consideration given to acquire the share capital of the
subsidiary undertakings. Provision is made where there is an impairment in the value of the investment.
Financial Instruments
Financial instruments are classified and accounted for, according to the substance of the contractual arrangement, as either financial
assets, financial liabilities or equity instruments. An equity instrument is any contract that evidences a residual interest in the assets
of the company after deducting all of its liabilities.
Borrowings
Borrowing costs are recognised in profit or loss in the period in which they occur.
Property, plant and equipment
All property, plant and equipment is stated in the balance sheet at historical cost less accumulated depreciation and accumulated
impairment losses.
Depreciation is charged so as to write off the cost over their estimated useful lives using the straight line method of depreciation, as
follows:
Motor vehicles 9 - 18% straight line
Fixtures and fittings 9 - 18% straight line
Office Equipment 9 - 18% straight line
The gain/loss arising on disposal of an asset is determined as the difference between the sales proceeds and the carrying amount of the
asset and is recognised in profit or loss for the period.
Leasing
Leases are classified as finance leases whenever the terms of the lease transfer all the risks or rewards of ownership to the lessee.
All other leases are classified as operating leases.
Rental payments under operating leases are charged to profit or loss on a straight-line basis over the term of the lease.
Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
Current tax is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted or
substantially enacted at the balance sheet date.
Deferred tax is recognised between the carrying amount of assets and liabilities in the financial statements and the corresponding tax
bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are
generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that the
future taxable profit will be available against which the temporary differences can be utilised.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries except where the group
is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the
foreseeable future.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer
probable that the temporary difference will not reverse in the foreseeable future.
Deferred tax is calculated at the tax rates that are expected to apply in the period in which the liability is settled or the asset
realised. Deferred tax is credited or charged to the income statement, except where it relates to items charged or credited directly to
equity, in which case the deferred tax is also dealt with in equity.
Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date.
Deferred tax assets are recognised only to the extent that, in the opinion of the directors, they are expected to be fully recoverable.
Functional Currency
The main trading is effected in the currency of the People's Republic of China. The accounts are converted into sterling due to the
company being incorporated in England and Wales and listed on the London Stock Exchange.
Foreign currency
Transactions in foreign currencies are translated into Sterling at the rate ruling at the date of the transaction. Assets and
liabilities denominated in foreign currencies are retranslated into Sterling at the rates prevailing at the balance sheet date. Resultant
gains and losses are recognised in the income statement.
Where subsidiary undertakings prepare their financial statements in a currency other than sterling, all revenue, expenses, assets and
liabilities are translated at the rate of exchange ruling at the balance sheet date.
Differences arising on the restatement of opening balance sheets of overseas subsidiary undertakings are taken directly to reserves.
Going concern
United Kingdom law requires the Company's directors to consider whether it is appropriate to prepare financial statements on the basis
that the group is a going concern. In considering this matter the directors have reviewed the Group's budget for 2008 and 2009. This
involved consideration of the cash flow implications of the budget and the plan. The directors see no reason why the Group and Company
should not continue in operational existence for the foreseeable future, given the subordinated loan and shareholder loans secured as noted
in note 18 of these accounts. For this reason they have adopted the going concern basis in preparing the Group's financial statements.
Standards and interpretations
At the authorisation of these financial statements, the following standards and interpretations, which have not been applied in these
financial statements, were in issue but not yet effective. The directors anticipate that the adoption of these standards and interpretations
will have no material impact on the Group's financial statements. The directors anticipate that the Group will adopt these standards and
interpretations on their effective dates:
* IFRS 8 'Operating segments', issued in November 2006, is effective for periods commencing on or after 1 January 2009.
Interpretations in issue but not considered relevant to the activities of the Group are as follows:
* IFRIC 1 'Changes in existing decommissioning, restoration and similar liabilities'
* IFRIC 2 'Members' shares in cooperative entities and similar instruments'
* IFRIC 5 'Rights to interests arising from decommissioning, restoration and environmental rehabilitation funds'
* IFRIC 6 'Liabilities arising from participating in a specific market - waste electrical and electronic equipment'
* IFRIC 7 'Applying the restatement approach under IAS 29 financial reporting in hyperinflationary economies'
* IFRIC 10 'Interim financial reporting and impairment', issued in July 2006, is effective for periods commencing on or after 1
November 2006
* IFRIC 11 'Group and treasury share transactions', issued in November 2006, is effective for periods commencing on or after 1 March
2007
* IFRIC 12 'Service concession arrangements', issued in November 2006, is effective for periods commencing on or after 1 January
2008
* IFRIC 13 'Customer loyalty programmes', effective for accounting periods beginning on or after 1 July 2008
* IFRIC 14 'IAS 19 - The limit on a defined benefit asset, minimum funding requirements and their interaction', effective for
accounting periods beginning on or after 1 January 2008
* Revised IAS1 'Presentation of financial statements' issued in September 2007 effective for accounting periods beginning on or
after 1 January 2009
* Revised IAS23 ' Amendments to the requirements for borrowing costs' issued in March 2007 effective for accounting periods
beginning on or after 1 January 2009
2. Segmental Information
During the period, the Group operated one principal class of business, that of property investment
All of the Group's activities are conducted and based in the People's Republic of China.
An analysis of revenue is given below:
Period to 31 December 2007
2007
�000 �000
United Kingdom
Continuing operations - -
Discontinued operations - 182
========= ==========
People's Republic of China
Property revenues 308 342
Hospital revenues 232 116
------------- --------------
540 458
========= ==========
All assets and liabilities of the Group relate to the activities in the People's Republic of China.
3. Net (loss) before tax
Net profit/(loss) is stated after charging:
Period to 31 December 2007
2007
�000 �000
Depreciation of property, plant and equipment 52 104
Auditors' remuneration
- as auditors 15 15
- tax fees 2 2
- audit of subsidiaries (including prior year fees) 65 23
4. Particulars of employees
The aggregate payroll costs were:
Period to 31 December 2007
2007
�000 �000
Wages and salaries 148 118
Social security costs 1 1
Other pension costs 1 -
------------ ------------
150 119
======= =======
Average number of employees 151 100
======= =======
5. Directors' emoluments
The directors' aggregate emoluments in respect of qualifying services were:
Period to 31 December 2007
2007
�000 �000
Emoluments receivable 106 92
Compensation for loss of office - 30
Reduction in fees in respect of earlier - (139)
years
----------- -----------
106 (17)
======= =======
6. Finance costs
Period to 31 December 2007
2007
�000 �000
Interest payable on bank borrowing 120 52
Interest payable on other loans 1,044 457
----------- -----------
1,164 509
Discontinued operations - 515
----------- -----------
1,164 1,024
======= =======
7. Income tax expense
(a) Analysis of charge in the period
Period to 31 December 2007
2007
�000 �000
Overseas tax based on the results for the 30 38
period at 30% (2007 - 30%)
--------------- ---------------
Total tax 30 38
========== ==========
The Group has estimated tax losses carried forward of �5,150,000 (2007: �4,900,000) that are available for offset against future
taxable profits. These losses would give rise to a deferred tax asset of �1,545,000 (2007: �1,470,000), however no asset has been recognised
on the basis that the likelihood of future economic benefit is unlikely.
(b) Factors affecting current tax charge
The tax assessed on the (loss) on ordinary activities for the period is higher than the standard rate of corporation tax in the UK
of 30% (2007 - 30%).
Period to 31 December 2007
2007
�000 �000
(Loss) on ordinary activities before taxation (891) (942)
======== =======
(Loss) on ordinary activities by rate of tax (267) (283)
Expenses not deductible for tax purposes 17 140
Loss carried forward 250 143
Overseas tax 30 38
------------ ------------
Total tax (note 7 (a)) 30 38
======== ========
8. Loss attributable to members of the parent company
The loss dealt with in the accounts of the parent company was �305,000 (2007 - �376,000).
9. Earnings per share
Period to 31 December 2007
2007
pence Pence
Loss per ordinary share - total operations (0.13) (0.13)
======== ========
Loss per ordinary share - discontinued operations - (0.02)
======== ========
Loss per share is based on the loss for the period ended 31 December 2007: �921,000 and the loss for the year ended 31 March 2007:
�980,000 divided by the weighted average number of shares issued during the period ended 31 December 2007: 723,375,495 and the year ended 31
March 2007: 723,375,495. As the company has made a loss for the year no option is potentially dilutive and hence both basic and diluted loss
per share are the same.
10. Investment properties
Group Land use rights Total
�000 �000
Fair Value
At 1 April 2007 29,117 29,117
Additions - Capitalised 21 21
subsequent expenditure
Exchange variance 1,560 1,560
------------------------ ------------------------
At 31 December 2007 30,698 30,698
=============== ===============
All of the investment property assets are held in the People's Republic of China. The land use rights of the land related to the
investment property is vested in Lanzhou International Trade Building Company Limited (LITBC) for a term between 1993 and 2032.
In accordance with "IAS 40 Investment Property", the group has chosen to use the fair value model in determining the value of
investment property.
Fair value has been determined by reference to the external valuation performed by Vigers Appraisal & Consulting Limited
(Independent professional valuers) as at 31 December 2007. No significant change has occurred since 31 March 2007.
Investment properties generating the following rental income and direct operating expenses;
Group Period to 31 December 2007
2007
�000 �000
Rental income 208 522
======== ========
Wages 24 119
Direct operating expenses relating to generating rental 108 252
income
======== ========
Net rental income from rented properties 76 151
======== ========
11. Property, Plant and Equipment
Motor Fixtures Office Total
Vehicles & Fittings Equipment
�'000 �'000 �'000
�'000
Cost
At 1 April 2007 138 791 26 955
Exchange translation 18 33 2 53
Additions - 138 - 138
-------------------- -------------------- --------------------- ----------------------
---- ---- ---
At 31 December 2007 156 962 28 1,146
=============== =============== ================ ===============
Depreciation
At 1 April 2007 90 225 2 317
Charge for period 9 40 3 52
Exchange translation 6 11 - 17
-------------------- -------------------- --------------------- ----------------------
---- ---- ---
At 31 December 2007 105 276 5 386
=============== =============== ================ ===============
Net book value
At 31 March 2007 48 566 24 638
At 31 December 2007 51 686 23 760
=============== =============== ================ ===============
The company itself has no property, plant and equipment
12. Investments
Company Total
�000
Cost
At 1 April 2007 35,640
Acquisitions in the period -
------------------------
At 31 December 2007 35,640
================
Provision
At 1 April 2007 -
Provision during period -
------------------------
At 31 December 2007 -
================
Net book value
At 31 March 2007 35,640
================
At 31 December 2007 35,640
================
Subsidiary undertakings
Name of Company Holding % held Nature of Business
Hemisphere Properties (Southern) Limited ^ Ordinary 100% Property investment
Bemacroft Limited*^ Ordinary 100% Property investment
Punch Properties Limited*^ Ordinary 100% Property investment
Hemisphere Properties (Northern) Limited ^ Ordinary 100% Property investment
Kayleigh Limited ^ Ordinary 100% Property investment
Uniplan Assets Limited Ordinary 100% Property investment
Fu Keung Venture Limited Ordinary 100% Property Investment
Lanzhou International Trade Building Ordinary 99% Property Investment
Company limited **
Ming Kong Property Limited*** Ordinary 100% Property Investment
*Held by Hemisphere Properties (Southern) Limited.
** 75% held by Ming Kong Property Limited and 24% held by Fu Keung Venture Limited.
*** Held by Uniplan Limited
^ these companies were dormant throughout the period
Uniplan Assets Limited and Fu Keung Venture Limited are incorporated in the British Virgin Islands. Lanzou International Trade
Building Company Limited is formed under the law of the People's Republic of China and Ming Kong Property Limited is formed under the law of
Hong Kong. All other companies are incorporated in the United Kingdom.
13. Inventories
Group Company
Period to 31 December 2007 Period to 31 December 2007
2007 2007
�000 �000 �000 �000
Materials 20 17 - -
---------------- --------------- -------------- -------------
20 17 - -
=========== ========== ========= ========
Property under construction
Group Company
Period to 31 December 2007 Period to 31 December 2007
2007 2007
�000 �000 �000 �000
Property under construction 18,825 18,752 - -
---------------- --------------- -------------- -------------
18,825 18,752 - -
=========== ========== ========= ========
The Group owns a 99% interest in LITBC as set out above. The acquisition value, in 2004 was established based on an independent
valuation of LITBC's property interests. Goodwill on acquisition of �17,313,000 was calculated, which would then be subject to an annual
impairment review. In the Director's opinion no goodwill should be recorded as no premium over market value was paid by the Group.
The construction in progress has therefore been recorded at fair value of �18,825,000 (cost �1,278,197).
14. Trade and other receivables
Group Company
Period to 31 December 2007 Period to 31 December 2007
2007 2007
�000 �000 �000 �000
Trade receivables 2 - - -
Amounts owed by group - - 784 839
undertakings
Other receivables 208 205 - -
Prepayments and accrued income 13 15 12 8
----------- ----------- ------------ -----------
223 220 796 847
======== ======= ======= =======
15. Trade and other payables
Group Company
Period to 31 December 2007 Period to 31 December 2007
2007 2007
�000 �000 �000 �000
Trade payables 1,235 1,214 - -
Other payables 1,152 1,042 108 112
Accruals and deferred income 1,407 932 837 491
-------------- ------------- ------------ -----------
3,794 3,188 945 603
========= ======== ======= =======
16. Borrowings
Group
Bank loans and Shareholder loans Convertible loans Other loans
overdrafts
Total
�000 �000 �000 �000 �000
1,871 1,977 - 7,181
Within one year 11,029
Between one and two years - - - 24
24
Between two and five years - - - -
-
Over 5 years - - 270 - 270
--------------- -------------- ------------- -------------- ----------------
1,871 1,977 270 7,205 11,323
========= ========= ======== ========= ==========
Company
Bank loans and Shareholder loans Convertible loans Other loans
overdrafts
Total
�000 �000 �000 �000 �000
- 1,977 - -
Within one year 1,977
Between one and two years - - - -
-
Between two and five years - - - -
-
Over 5 years - - 270 - 270
--------------- -------------- ------------- -------------- ----------------
- 1,977 270 - 2,247
========= ========= ======== ========= ==========
The bank loans are secured over the related investment properties.
Shareholder loans are unsecured. No specific date is set for repayment. Interest is accruing, but is not being paid.
The convertible redeemable loan is unsecured, and subject to certain restrictions, is convertible into ordinary shares at 6p per
share. If the holder has not had an opportunity to convert within 12 months of issue the holder is entitled to redeem the loan note on
giving notice. Interest is payable bi-annually at the base rate of Barclays Bank and the final redemption date is 31 December 2020.
Set out below are the disclosures relating to financial instruments;
Financial instruments
The Group's financial instruments comprise cash, overdraft facilities, loans and various items such as short-term receivables that
arise from its operations. The main purpose of these financial instruments is to fund the short term working capital requirements of the
business. The Group has no derivatives.
The main risks arising for the Group's financial instruments are interest and liquidity risk. The Board reviews and agrees policies
for managing each of the se risks and they are summarised below. These policies have remained unchanged throughout the year.
Interest rate risk
The Group finances its operations through retained earnings, the use of overdraft facilities and loans. The Group places its cash on
deposit at which interest rates are fixed in the short term but for sufficiently short periods that there is no need to hedge against the
implied risk.
Liquidity risk
Short term flexibility is achieved by overdraft facilities. These were used during the year, for short periods of time. It is the
Group's policy to keep facilities in place in order to provide flexibility in the management of the Group's liquidity.
Currency risk
The Group is exposed to currency risk in its Chinese operations. The Group does not hedge its exposure.
Fair values and maturity of financial instruments
There is no material difference between the book value and the fair value of the financial assets or liabilities.
Creditors include finance capital which is due for repayment as follows:
Group Company
Period to 31 December Year to Period to 31 December Year to
2007 2007
2007 2007
�000 �000 �000 �000
Amounts repayable:
In one year or less or on 11,029 9,994 1,977 2,079
demand
In more than one year but less 24 68 - -
than two years
In more than five years 270 270 270 270
-------------- -------------- ----------- -----------
11,323 10,332 2,247 2,349
========= ========= ======= =======
Bank loan:
Floating rate 8% to 12% 1,871 1,811 - -
Shareholder loans 12% 1,977 2,079 1,977 2,079
Related party loan floating 7,133 6,104 - -
rate 8% to 12%
Convertible notes bank base 270 270 270 270
rate
Hire Purchase loans 72 68 - -
-------------- ------------ ---------- ----------
11,323 10,332 2,247 2,349
========= ======== ====== ======
17. Provisions for liabilities and charges
Group Company
Period to 31 December 2007 Period to 31 December 2007
2007 2007
�000 �000 �000 �000
As at 1 April 5,600 - - -
Change in accounting policy to - 5,600 - -
comply with IAS 12
-------------- ------------ ----------- -----------
As at 31 December 5,600 5,600 - -
========= ======== ======= =======
The elements of the deferred tax provision are as follows
Property under construction 5,247 5,247 - -
Revalued investment property 353 353
18. Related party transactions
There is no ultimate controlling party.
During the period, Wong Wing Hay, a shareholder of the group continued to loan monies to the group. Interest of �148,953 (2007 -
�218,505) was charged to profit and loss. At the balance sheet date the group owed �1,679,448 (2007 - �1,893,450) to Wong Wing Hay.
John Ho, a director and shareholder of the group, is also a shareholder of Estrigeat Limited. During the period Estrigeat Limited
continued to loan monies to the group. Interest of �5,258 (2007 - �8,161) was charged to profit and loss. At the balance sheet date the
group owed �58,161 (2007 - �58,161) to Estrigeat Limited.
Zhan Chun Hu, a director, is a director and majority shareholder of Gansau Ecnomic Co-operation Commerce Trade Company Limited.( GECC)
During the year GECC continued to loan monies to the group. Interest of �978,335 (2007 - �222,107) was charged to profit and loss. At the
balance sheet date the company owed �7,132,710 (2007 - �6,104,000) to GECC.
Two further loans to the group are personally guaranteed by John Ho. Interest of �20,249 (2007 �40,416) was charged to profit and loss.
At the balance sheet date the group owed �239,105 (2007 - �239,105) to these lenders.
19. Share capital
Authorised share capital:
Period to 31 2007
December
2007
�000 �000
1,500,000,000 Ordinary Shares of 1p 15,000 15,000
each
=============== ===============
Allotted and called up:
Period to 31 2007
December
2007
�000 �000
728,375,495 Ordinary Shares of 1p 7,283 7,283
each (2007: 728,375,495 Ordinary
Shares of 1p each)
=============== ===============
.
20. Capital commitments
At 31 December 2007, the group was contractually committed to �nil (2007 - �nil) of future expenditure for the purchase, construction
and development of investment property.
21. Reconciliation IFRS to UK GAAP
Income Statement
The income statements for the period ended 31 December 2007 and year ended 31 March 2007 do not vary because of the transition to IFRS
Consolidated Balance Sheet
In accordance with IAS 38 "Intangible Assets" any deficiency of the cost of acquisition below the fair values of the identifiable net
assets acquired was shown as a balance sheet item under Intangible Assets. The effect of transition to IFRS is that the deficiency of the
cost of acquisition below the fair values of the identifiable net assets acquired is credited to retained earnings in the period of
acquisition.
The effect of the above change is to increase retained earnings by �1,584,000.
Deferred tax has been recognised on the revalued amount of investment properties and property under construction, in accordance with IAS
12 "Income Taxes"
The above changes increased the deferred tax liability in the year ended 31 March 2007 by �5,247,000. The cumulative effect of the above
adjustment is to reduce retained earnings by �5,247,000.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR URVVRWVRNOAR
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