RNS Number : 4659K
Yangtze China Investment Limited
19 December 2008
Press Release 19 December 2008
Yangtze China Investment Limited
("Yangtze" or "the Company")
Interim Results
Yangtze China Investment Limited (AIM:YCI.L), a provider of expansion capital to China-based enterprises, today announces its interim
results for the period from 14 May 2008, being the date of the Company's admission to AIM, to 30 September 2008 ("the Period").
Financial Highlights
* NAV(net of listing expenses) reduced to US$17.3 million (14 May 2008:
US$22.4 million) due to write-down of an investment in the Initial Portfolio
* NAVper share (net of listing expenses) decreased by 22.7% to US$0.68 (14 May
2008: US$0.88), due to the write-down
* Current cash not invested to date totals US$7.44 million
Operational Highlights
* Successful flotation in May 2008 raising approximately US$25 million
(gross)
* Acquisition of the Initial Portfolio concurrent with the flotation
* Completion of US$5 million investment into Aesthetic International
Holdings Group Limited, representing the first investment post flotation
Commenting on the results, Mr Wilfred Wong, Chairman of Yangtze China Investment Limited, said: "During the period one of our Initial
Portfolio investments has been significantly impaired due to the global economic downturn impacting on China's retail market. To maintain
our prudent approach, we have decided to write down the investment in its entirety, although we are actively seeking alternative funding
sources and working partners to recapitalise the company.
"Yangtze's current cash position of US$7.44 million places the Company in an excellent position to invest into good-quality assets at
attractive entry valuations as and when suitable opportunities arise in the future.
"Despite the current turmoil in global financial markets, China's GDP growth is expected to be in the region of 8% in 2008. The recent
stimulus package announced by the Chinese government in November 2008 reinforces our investment strategy as it aims to support China's
long-term development of the domestic sector and to improve living standards."
For further information:
Yangtze Capital Advisory Limited
Richard Zhao Tel: +852 2281 7218
Steven Feng Te: +852 2281 7223
www.yangtzecn.com
Collins Stewart Europe Limited
Adrian Hadden Tel: +44 (0) 20 7523 8350
www.collinsstewart.com
Media enquiries:
Abchurch Communications Ltd
Henry Harrison-Topham / Monique Tsang Tel: +44 (0) 20 7398 7712
monique.tsang@abchurch-group.com www.abchurch-group.com
Notes to Editors
Yangtze China Investment Limited is a closed-ended investment company established to make minority equity and equity-related investments
in a portfolio of small and medium-sized growth businesses within, or associated with, the consumer sector in China. With a proprietary deal
flow, the Group focuses on unlisted companies whose business operations are based principally in mainland China. Yangtze will typically
seek to invest in companies that are revenue generating, ideally profitable or anticipated to generate profits in the near term and which
the Group believes have strong management teams and market leading potential.
Yangtze aims to capitalise on the growing disposable income in China, investing primarily in companies operating in a variety of
consumer sectors, including consumer related technology, media and advertising, entertainment, distribution and retailing of consumer goods
and services, and health goods and services.
The Chinese economy has experienced a 9.97% average GDP growth over the past 14 years and recorded GDP growth of 11.4% in 2007.
Government reforms are transforming the economy, with a focus on domestic consumption, infrastructure spending and increasingly upon
environmental issues.
For further information, please see www.yangtzecn.com
Chairman's Statement
I am pleased to present this maiden set of interim results of Yangtze China Investment Limited, covering the period from its admission
to the Alternative Investment Market ("AIM") of the London Stock Exchange on 14 May 2008 to 30 September 2008. During the period under
review, the NAV per share of the Company decreased by 22.7 per cent from US$0.88 (net of all relevant listing expenses) to US$0.68 per
share. As at 30 September 2008, the Company's NAV was US$17.3 million.
During the period the Company successfully closed an investment which had been identified before flotation. The investee company,
Aesthetic International Holdings Group Limited, is a beauty spa franchise based in Beijing, China, which is expected to benefit from the
expanding female working class of consumers with growing disposable income and the PRC Central Government's policy of economic growth
through domestic consumption.
Impacted by the current adverse conditions for the global economy, the economic outlook of China, and in particular its retail market,
the year ahead is anticipated to be filled with challenges but there will be opportunities too. The Company remains confident about China's
underlying economic strength and the PRC Central Government's macroeconomic measures that will continue to position China as one of the
world's major economic powerhouses.
As the Company is currently not fully invested, it will continue to pursue potential investments with due diligence and prudence.
Wilfred Ying Wai WONG
Chairman
19 December 2008
Investment Adviser's Report
Following the Company's admission to AIM on 14 May 2008, in which Yangtze successfully raised approximately US$25 million by way of an
issue of new equity, the Company immediately implemented and completed the acquisition of the Initial Portfolio from Excellent Rise. In July
2008, Yangtze completed the investment of US$5 million, in the form of convertible loan notes (equivalent to 25 per cent equity interest if
fully converted), into Aesthetic International Holdings Group Limited, a beauty spa franchise network in China.
China's Economy
China's growth is expected to achieve the government target of 8 per cent in 2008. This notwithstanding, substantial reduction in export
growth is anticipated as the global downturn continues to deepen in the US and Europe and starts to hit emerging markets, which account for
over half of China's exports at present. China has strong macroeconomic fundamentals and large balance of payment surpluses but its overall
economic growth is susceptible to export performance.
On 9 November 2008, China's government announced a stimulus package to boost economic growth. The stimulus package contains many
elements that support China's overall long term development of the domestic sector and improve people's living standards which are in line
with the objectives of the 11th five-year plan to rebalance the economy.
Portfolio
Aesthetic International Holdings Group Limited ("Aesthetic")
* Aesthetic is a beauty spa franchise based in Beijing, China. It has developed a variety of product lines, totalling approximately
200 items. Aesthetic generates revenues principally through its product sales as well as licensing and franchising fees. As at 30 September
2008, Aesthetic had both franchised and sub-franchised, through its agents, over 1,700 beauty centres throughout China.
* During the period under review, Aesthetic embarked on establishing four regional management centres in Chengdu, Shenyang,
Guangzhou and Dalian. This enhances management control over its franchisees and facilitates technical and logistical support to its beauty
centres. Aesthetic will continue to expand its customer base through the organisation of demonstrations and workshops for potential
customers.
* Aesthetic has performed in line with expectations and recorded net profits during the period. Despite the financial crisis, we are
confident that Aesthetic will thrive in this sector in China's growing consumer market.
IGO Home Shopping Holdings Limited ("IGO")
* Shanghai IGO Business Services Company Limited ("Shanghai IGO") designs and produces TV home shopping programmes and supplies them
to TV companies. As IGO cannot invest in Shanghai IGO directly, due to the current regulations restricting foreign ownership in the media
industry in the PRC, it has entered into an exclusive product supply agreement and cooperation agreement with Shanghai IGO.
* In line with its plan for further fund raising and an eventual public listing, Shanghai IGO embarked on an aggressive network
expansion plan to increase its coverage across three provinces. However, due to unexpected slowdown of China's retail market in recent
months, the increased coverage was not able to generate the necessary income to offset its higher media cost. In consultation with IGO,
Shanghai IGO has started scaling down media coverage and retrenched staff in order to conserve its cash outflow.
* IGO is actively seeking new investors for additional funding and exploring merger opportunities with other home shopping operators
to keep it as a going concern.
* As such, we believe that it is prudent to write down the value of our investment in IGO in its entirety because of the current
uncertainty.
Creative Picture Development Limited ("Creative Picture")
* Creative Picture carries out technology research, production and sales of 3-D display technology in China.
* During the period under review, Creative Picture obtained a sales order from an Asian media company which intends to install 3-D
advertisement displays within shopping malls in selected Asian cities. Creative Picture expects revenue will primarily come from the content
development and sale of visualisation facilities.
* Creative Picture markets its products by means of model showcases installed at prominent spots, including museums, airports and
train stations.
Arigata Holdings Inc. ("Onbest")
* Onbest is principally engaged in the design, manufacture and sales of fiscal/tax processing solutions installed in integrated
circuit ("IC") chips, which are then embedded in the motherboards of point-of-sale ("POS") machines, tax-controlled cash registers and
fiscal-tax controlled cash registers.
* Based on its existing technology capability, Onbest has developed a handheld POS device that features certain ATM functions with
advanced security. Onbest is in the process of seeking technical approval for the handheld POS device from VISA, which is known to set very
strict security requirements. Onbest is also awaiting the technical approval from a major US banking services provider which is considering
using Onbest's products for internet banking.
Given the domino effect of the current worldwide financial turmoil, the Company will further step up its efforts on post investment
monitoring initiatives, including the adjustment of business development plans, cost control and reduction, scrutiny of cash flow and
financial capabilities, and improvement on operational efficiency to help the investee companies to weather the turbulence amid the global
economic downturn.
Yangtze Capital Advisory Limited
Investment Adviser
19 December 2008
Portfolio Summary
As of 30 September 2008, the Company's total assets amounted to US$17.5 million. About US$14.5 million has been invested into four
companies in the form of convertible note instruments.
The following table summarises the status of the Company's portfolio at 30 September 2008:
Description Industry / Location Time of Investment Purchase cost(1) As of 30 September 2008
(Unaudited)
by the Company (US$)
Fair value (US$) Change on cost (US$)
% of ownership (on
full conversioninto
shares)(2)
IGO Home Shopping Holdings TV home shopping / May 2008 5.06m - (5.06m)
20%
Limited China
Creative Picture Development 3-D display May 2008 1.30m 1.30m --
12.5%
Limited technology /China
Arigata Holdings Inc. Fiscal / tax May 2008 3.05m 3.05m --
30%
processing solutions
/ China
Aesthetic International Beauty spa franchise July 2008 5.11m 5.11m --
25%
Holdings Group Limited / China
Total 14.52m 9.46m (5.06m)
[1] Included capitalised directly attributable investment expenses.
[2] For reference only. The percentage of ownership represents, upon full conversion, a stake of the entire equity
share capital of the investee company on a fully diluted basis.
Independent Review report on the unaudited interim financial information
To the board of directors of Yangtze China Investment Limited
(incorporated in the Cayman Islands with limited liability)
Introduction
We have reviewed the unaudited interim financial information of Yangtze China Investment Limited (formerly known as "Yangtze China
Investment Fund") (the "Company") and its subsidiary, set out on pages 9 to 26 which comprise the condensed unaudited consolidated balance
sheet as of 30 September 2008, the related condensed unaudited consolidated income statement, the condensed unaudited consolidated statement
of changes in equity and the condensed unaudited consolidated cash flow statement for the period from 5 July 2007 (date of incorporation) to
30 September 2008, and a summary of significant accounting policies and other explanatory notes (the "Unaudited Interim Financial
Information").
The Alternative Investment Market Rules for Companies of London Stock Exchange require the preparation of an interim financial report to
be in compliance with the relevant provisions thereof and International Accounting Standard 34 "Interim Financial Reporting". The directors
of the Company are responsible for the preparation and presentation of the Unaudited Interim Financial Information in accordance with
International Accounting Standard 34.
Our responsibility is to express a conclusion on the Unaudited Interim Financial Information based on our review and to report our
conclusion solely to you, as a body, in accordance with our agreed terms of engagement, and for no other purpose. We do not assume
responsibility towards or accept liability to any other person for the contents of this report.
Scope of Review
We conducted our review in accordance with International Standard on Review Engagements 2410, "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity". A review of the Unaudited Interim Financial Information consists of making inquiries,
primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is
substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable
us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the Unaudited Interim Financial Information is not
prepared, in all material respects, in accordance with International Accounting Standard 34.
Yours faithfully
Grant Thornton
Certified Public Accountants
13th Floor, Gloucester Tower
The Landmark
15 Queen's Road Central
Hong Kong
19 December 2008
Condensed consolidated income statement
for the period from 5 July 2007 (date of incorporation) to 30 September 2008
From 5 July 2007
(date of incorporation) to
30 September 2008
Note (Unaudited)
US$
Interest income 5 832,326
Impairment loss on financial assets
at fair value through profit or 11 (5,056,970)
loss
(4,224,644)
Expenses
Administration fee 6 (45,554)
Advisory fee 7 (170,155)
Directors' fees 8 (132,500)
Other operating expenses (455,850)
(840,059)
Loss before taxation (5,028,703)
Taxation 9 -
Decrease in net assets attributable
to shareholders of the Company 16 (5,028,703)
Losses per share attributable to
shareholders of the Company during 10
the period
- Basic (US$0.2)
- Diluted N/A
Condensed consolidated balance sheet
as at 30 September 2008
Note 30 September 2008
(Unaudited)
US$
Non-current assets
Financial assets at fair value through profit or 11 9,463,954
loss
Current assets
Prepayments and other receivables 591,604
Cash and cash equivalents 12 7,444,466
8,036,070
Current liabilities
Accruals and other payables 153,095
Amount due to a director 13 5,054
Amount due to investment adviser 13 892
159,041
Net current assets 7,877,029
Net assets 17,340,983
Net assets attributable to shareholders
of the Company
Share capital 14 2,538,001
Share premium 15 19,831,685
Accumulated losses (5,028,703)
17,340,983
Number of ordinary shares in issue 25,380,010
Net asset value per ordinary share 16 US$0.68
Condensed consolidated cash flow statement
For the period from 5 July 2007 (date of incorporation) to 30 September 2008
From 5 July 2007
(date of incorporation) to
30 September 2008
(Unaudited)
US$
Net cash inflow/ (outflow) from :
Operating activities (404,296)
Investing activities (5,136,718)
Financing activities 12,985,480
Net increase in cash and cash 7,444,466
equivalents
Cash and cash equivalents at beginning -
of period
Cash and cash equivalents at end of 7,444,466
period
Analysis of balances of cash and cash
equivalents :
Cast at bank 944,466
Short term bank deposits 6,500,000
7,444,466
Condensed consolidated statement of changes in equity from 5 July 2007 (date of incorporation) to 30 September 2008
Share Share Accumulated
capital premium losses Total
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
US$ US$ US$ US$
At 5 July 2007 (date of incorporation) - - - -
Proceeds from issuance of ordinary shares :
- non-public subscription 1 - - 1
- public subscription on admission to AIM of
London Stock Exchange 2,538,000 19,831,685 - 22,369,685
Decrease in net assets attributable to shareholders from
operations - - (5,028,703) (5,028,703)
At 30 September 2008 2,538,001 19,831,685 (5,028,703) 17,340,983
Notes to the Condensed Consolidated Interim Financial Information
1. GENERAL INFORMATION
Yangtze China Investment Limited (formerly known as "Yangtze China Investment Fund") (the "Company") is a closed-end investment company
incorporated on 5 July 2007 ("date of incorporation") and registered under the Companies Law (2004 Revision) of the Cayman Islands with
limited liability.
Upon a special resolution dated 16 July 2007, the name of the Company is changed from Yangtze China Investment Fund to Yangtze China
Investment Limited, effected on 17 July 2007.
The Company was admitted to the Alternative Investment Market ("AIM") of the London Stock Exchange, on 14 May 2008. Details of the
Company's subsidiaries are set out in note 17 to the condensed consolidated financial information. The Company and its subsidiaries are
collectively referred to as the Group hereinafter.
The investment objective of the Group is to provide shareholders of the Company with an attractive return on its investments,
predominantly through capital appreciation, during the period, by making minority equity and equity-related investments through convertible
note instruments in small and medium-sized growth businesses with, or associated with, the different commercial sectors in the People's
Republic of China (the "PRC").
The investment activities of the Group are managed by Yangtze Capital Advisory Limited (the "Investment Adviser"). The Company's
Administrator is Trident Trust Company (Cayman) Limited. The registered office of the Company is One Capital Place, P.O. Box 847, Grand
Cayman KY1-1103, Cayman Islands.
The unaudited interim financial information of the Group for the period from 5 July 2007 (date of incorporation) to 30 September 2008 on
pages 9 to 26 authorised for issue by the directors of the Company on 19 December 2008.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of preparation
The unaudited interim financial information have been prepared in accordance with International Accounting Standard ("IAS") 34 "Interim
Financial Reporting".
The Group has not early adopted the International Financial Reporting Standards ("IFRSs") that have been issued but are not yet
effective. The directors of the Company anticipate that the adoption of such IFRSs will not result in any material financial impact on the
Group's financial statements.
IAS 1 (revised), "Presentation of Financial Statements" (effective from 1 January 2009) requires changes made to the presentation of the
financial statements. However, it does not change the recognition, measurement or disclosure of specific transactions and other events
required by other IFRSs. The Group will apply IAS 1 (revised) from 1 January 2009.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(b) CONSOLIDATION
The Group financial statements consolidate those of the Company and all of its subsidiaries drawn up to 30 September 2008. Subsidiaries
are all entities (including special purpose entities) over which the Group has the power to control the financial and operating policies so
as to obtain benefits of their activities. The existence and effect of potential voting rights that are currently exercisable or convertible
are considered when assessing whether the Group controls another entity.
Unrealised gains and losses on transactions between Group companies are eliminated. Where unrealised losses on intra-group asset sales
are reversed on consolidation, the underlying asset is also tested for impairment from a group perspective. Amounts reported in the
financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the
Group.
Profit or loss and other comprehensive income of subsidiaries acquired or disposed of during the period are recognised from the
effective date of acquisition, or up to the effective date of disposal, as applicable.
(c) FINANCIAL ASSETS
The Group's financial assets are convertible notes designated as at fair value through profit or loss. Management determines the
classification of its financial assets at initial recognition depending on the purpose for which the financial assets were acquired and
where allowed and appropriate, re-evaluates this designation at every reporting date.
All financial assets are recognised when, and only when, the Group becomes a party to the contractual provisions of the instrument.
Regular way purchases of financial assets are recognised on trade date. When financial assets are recognised initially, they are measured at
fair value, plus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs.
All regular way purchase or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or
sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or
convention in the marketplace.
Financial assets at fair value through profit or loss
Financial assets may be designated at initial recognition as at fair value through profit or loss if the following criteria are met:
- the designation eliminates or significantly reduces the inconsistent treatment that would otherwise arise from measuring the assets
or recognising gains or losses on them on a different basis; or
- the assets are part of a group of financial assets which are managed and their performance evaluated on a fair value basis, in
accordance with a documented risk management strategy and information about the group of financial assets is provided internally on that
basis to the key management personnel; or
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(c) FINANCIAL ASSETS (Continued)
- the financial asset contains an embedded derivative that would need to be separately recorded.
At each balance sheet date subsequent to initial recognition, financial assets at fair value through profit of loss are measured at fair
value, with changes in fair value recognised directly in the income statement in the period in which they arise. The net gain or loss
recognised in the income statement excludes any dividend or interest earned on the financial assets.
Derecognition of financial assets occurs when the rights to receive cash flows from the investments expire or are transferred and
substantially all of the risks and rewards of ownership have been transferred. At each balance sheet date, financial assets are reviewed to
assess whether there is objective evidence of impairment. If any such evidence exists, impairment loss is determined and recognised based on
the classification of the financial asset.
Where a contract contains one or more embedded derivatives, the entire hybrid contract may be designated as a financial asset at fair
value through profit or loss, except where the embedded derivative does not significantly modify the cash flows or it is clear that
separation of the embedded derivative is prohibited.
(d) EFFECTIVE INTEREST METHOD
The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over
the relevant periods. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees on
points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts)
through the expected life of the financial asset, or where appropriate, a shorter period.
(e) IMPAIRMENT OF FINANCIAL ASSETS
Financial assets are assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A
financial asset is considered to be impaired if objective evidence indicates that one or more events have a negative effect on the estimated
future cash flows of that asset. An impairment loss in respect of a financial asset measured at amortised cost is calculated as the
difference between its carrying amount and present value of the estimated future cash flows discounted at the original effective interest
rate. Individual significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed
collectively in groups that share similar credit risk characteristics. All impairment losses are recognised in the income statement.
An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was
recognised. The reversal is recognised in the income statement.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(f) FOREIGN CURRENCIES
Items included in the Group's unaudited interim financial information are measured using the currency of the primary economic
environment in which the entities within the Group operate (the "functional currency"). Transactions in foreign currencies are translated
into the respective functional currencies at the approximate rates ruling on the dates of the transactions. Monetary assets and liabilities
denominated in foreign currencies are translated into the respective functional currencies at the approximate rates ruling on the balance
sheet date. Gains and losses arising on exchange are dealt with in the income statement.
The unaudited interim financial information are presented in the currency of United States Dollars ("US$"), which is the presentation
and functional currency of the Group.
(g) RECOGNITION OF REVENUE
Interest income from financial assets is recognised on a time proportion basis, by reference to the principal amounts outstanding and at
the effective interest rate applicable, which is the rate that exactly discounts the estimated future cash receipts through the expected
life of a financial asset to the asset's net carrying amount.
(h) EXPENSES
All expenses are accounted for on an accrual basis.
(i) TAXATION
Taxation represents the sum of the tax currently payable and deferred taxation.
The tax currently payable is based on taxable profit for the period. Taxable profit differs from the profit as reported in the income
statement because it excludes items of income and expense that are taxable or deductible in other periods, and it further excludes income
statement items that are never taxable or deductible.
Deferred taxation is recognised on differences between the carrying amounts of assets and liabilities in the financial statements and
the corresponding tax bases used in the computation of taxable profit. 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 taxable profits will be available
against which deductible temporary differences can be utilised. 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 sufficient taxable profit will be available to allow all or part of the
asset to be recovered.
(j) OTHER RECEIVABLES
Other receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Other
receivables include convertible note interest receivable and other receivables, which are initially recognised at fair value and
subsequently measured at amortised cost using the effective interest method, less any impairment losses. Any changes in their value are
recognised in the income statement.
Convertible note interest receivable and other receivables are provided against, when objective evidence is received that the Group will
not be able to collect all or part of the amount due to it, in accordance with the original terms. The amount of the write-down is
determined as the difference between the asset's carrying amount and the present value of estimated future cash flows.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(k) OTHER PAYABLES
Other payables are financial liabilities, recognised when the Group becomes a party to the contractual agreements of the instrument. The
Group's other payables are recognised initially at their fair value and subsequently measured at amortised cost, using the effective
interest method.
(l) AMOUNTS DUE TO A DIRECTOR/ INVESTMENT ADVISER
Amounts due to a director/ investment adviser are recognised initially at their fair value and subsequently measured at amortised cost,
using the effective interest method.
(m) CASH AND CASH EQUIVALENTS
Cash and cash equivalents represent cash at bank with original maturity of less than 90 days.
(n) SHARE CAPITAL
Ordinary shares are classified as equity. Share capital is determined using the nominal value of shares that have been issued. Costs
directly attributable to the issue of new shares as shown in equity are deducted from the share premium account.
(o) RELATED PARTIES
A party is considered to be related to the Group if :
(i) directly, or indirectly through one or more intermediaries, the party :
- controls, is controlled by, or is under common control with, the Group;
- has an interest in the Group that gives it significant influence over the Group; or
- has joint control over the Group;
(ii) the party is a jointly-controlled entity;
(iii) the party is an associate;
(iv) the party is a member of the key management personnel of the Group or its parent;
(v) the party is a close member of the family of any individual referred to in (i) or (iv);
(vi) the party is an entity that is controlled, jointly-controlled or significantly influenced by or for which significant voting
power in such entity resides with, directly or indirectly, any individual referred to in (iv) or (v); or
(vii) the party is a post-employment benefit plan for the benefit of employees of the Group, or of any entity that is a related party
of the Group.
3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of
future events that are believed to be reasonable under the circumstances.
The Group's financial assets at fair value through profit or loss are valued by the directors and have been reviewed by independent
professional valuer using the discounted cash flow valuation, including the reference made to certain assumptions of prevailing market
conditions, and the fair values of other comparable financial instruments that are substantially the same nature of the Group's financial
assets at fair value through profit or loss. Favourable or unfavourable changes to these assumptions may result in changes in the fair value
of the Group's financial assets at fair value through profit or loss and corresponding adjustments to the changes in fair value reported in
the consolidated income statement and the carrying amount of these financial assets at fair value through profit or loss included in the
consolidated balance sheet.
4. SEGMENT INFORMATION
In accordance with the Group's internal financial reporting policy, the Group is principally engaged in a single business segment of
investment business. The Group's segment revenue and segment assets are all attributable to a single geographical region, which is the PRC.
5. INTEREST INCOME
From 5 July 2007
(date of incorporation) to
30 September 2008
(Unaudited)
US$
Income arising from the cash held at a 8,685
bank
Income arising from convertible notes 823,641
832,326
Interest income arising from the convertible note instruments was derived from the notes' coupon interest rates that range from 8% to
15% per annum.
6. ADMINISTRATION FEE
Trident Trust Company (Cayman) Limited was appointed as the Administrator of the Group and is entitled to receive the fees based on the
actual working hours incurred on the relevant services provided to the Group.
7. ADVISORY FEE
Yangtze Capital Advisory Limited is the Investment Adviser and is entitled to an advisory fee of 2% per annum on the amount equal to the
net asset value in respect of the initial 12 months period after the admission to the AIM of London Stock Exchange. Thereafter, the advisory
fee will be calculated based on 2% of the amount equal to the net asset value less the value of cash and cash equivalents, and 1.5% of the
amount equal to the value of cash and cash equivalents.
8. DIRECTORS' FEES AND INTERESTS
Each of the non-executive directors has entered into the service agreement with the Group. The directors' fees, incurred in the course
of their duties during the period and in respect of services provided to the Group, are set out below :
From 5 July 2007
(date of incorporation) to
30 September 2008
(Unaudited)
US$
Directors' fees in respect of services
and duties :
Timothy Gwynne Barker 33,125
Anthony Nigel Clifton Griffiths 33,125
Hoon Tai Meng 33,125
Stephen Shu Kwan Ip 33,125
132,500
The interests in ordinary shares of the non-executive chairman/ director and their immediate families, who held office during the
period, as at 30 September 2008, are set out below :
Number of shares
Wilfred Ying Wai Wong 10
Timothy Gwynne Barker 60,000
9. TAXATION
No provision for income tax has been made as the income of the Group is not liable to any income tax or capital gain tax in Cayman
Islands and is excluded from the charge to profits tax in other jurisdictions for which the Group does not generate taxable income.
10. LOSSES PER SHARE
The calculation of basic losses per share is based on the decrease in net assets attributable to shareholders of the Company of
US$5,028,703 and on 25,380,010 ordinary shares in issue during the period from the date of admission to the AIM to 30 September 2008. As the
Company and Group was dormant prior to the admission to AIM, the calculation of basic losses per share does not take into account of the
weighted average effect in the number of ordinary shares in issue during the period from the date of incorporation to 30 September 2008.
Diluted losses per share for the period ended 30 September 2008 are not presented as there is no dilutive potential share.
11. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
The entire portfolio of the Group's financial instruments comprises unlisted convertible notes with maturities ranging from 14 months to
53 months at 30 September 2008 and with coupon interest rates ranging from 8% to 15% per annum. All the convertible note instruments contain
a share conversion feature, a put option, and a call option, except for the convertible note instrument as issued by Creative Picture
Development Limited which does not contain the call option.
The Group's convertible note instruments as at 30 September 2008, designated at fair value through profit or loss, are set out below :
30 September 2008
(Unaudited)
US$
Convertible notes at fair value, as issued by :
- IGO Home Shopping Holdings Limited ("IGO") -
- Creative Picture Development Limited 1,302,640
- Arigata Holdings Inc. 3,049,254
- Aesthetic International Holdings Group Limited 5,112,060
9,463,954
As disclosed in note 17, the Group invests in each of above four convertible note instruments through four wholly-owned subsidiaries of
the Group.
IGO operates a home shopping business mainly by way of television media in the PRC. As IGO had been making significant loss during the
period and was a net liability position, management of the Group believes that there is a high uncertainty in the foreseeable future that
IGO can be operated as a going concern. As such, management is of the view that, as at 30 September 2008, there is no fair value in the
convertible notes issued by IGO. Accordingly, the carrying amounts of the investment in the convertible notes as issued by IGO, amounting to
US$5,056,970, were fully impaired as at 30 September 2008. The valuation of the convertible bonds issued by IGO has been carried out by the
professional valuer using the discounted cash flow valuation. In addition, the receivable balance of US$287,123 derived from the interest on
this convertible bond has been fully provided for in other operating expenses.
12. CASH AND CASH EQUIVALENTS
30 September 2008
(Unaudited)
US$
Cash at bank 944,466
Short term bank deposits (to be matured within 3 months)
6,500,000
7,444,466
13. AMOUNTS DUE TO A DIRECTOR/ INVESTMENT ADVISER
Amounts are unsecured, interest-free and repayable on demands. The directors of the Company consider that these balances' carrying
amounts approximate to their fair value.
14. SHARE CAPITAL
Number of Nominal
Note shares value
US$
Authorised :
200,000,000 ordinary shares of US$0.1 each (a)
200,000,000 20,000,000
Issued and fully paid :
At 5 July 2007 (date of incorporation) - -
Issuance of ordinary share of US$1 each
- non-public subscription 1 1
Subdivision of ordinary shares on 15 April (a)
2008 10 1
Issuance of ordinary shares of US$0.1 each (b)
- public subscription on admission to
AIM of London Stock Exchange
25,380,000 2,538,000
As at 30 September 2008 (Unaudited) 25,380,010 2,538,001
(a) The Company was incorporated on 5 July 2007 with an authorised share capital of US$50,000 divided into 50,000 shares of a nominal
value of US$1 each. By the resolution of the shareholders dated 21 February 2008, the Company increased its authorised share capital from
US$50,000 to US$200,000,000 by the creation of 199,950,000 ordinary shares of US$1 each. By the resolution of the shareholders dated 15
April 2008, the Company subdivided each ordinary share of US$1 each into 10 ordinary shares of US$0.1 each, following which the authorised
share capital of the Company was reduced to 200,000,000 ordinary shares by the cancellation of 1,800,000,000 unissued ordinary shares.
(b) On admission to trading on AIM of London Stock Exchange on 14 May 2008, the Company issued 25,380,000 ordinary shares of US$0.1
each at a consideration of US$25,380,000 in aggregate to provide for additional working capital financing the investments of the Group. The
gross nominal value of ordinary shares in respect of the listing proceeds were US$2,538,000 and the balance amounted to US$22,842,000 was
credited to share premium as mentioned in note 15.
CAPITAL MANAGEMENT
The Group's primary objectives when managing capital are to safeguard the Group's ability to continue as a going concern, so that it can
continue to provide returns for the shareholders, to support the Group's sustainable growth; and to provide capital for the purpose of
potential investment.
The directors of the Company regard net assets attributable to ordinary shareholders as capital, for capital management purpose. The
amount of capital at 30 September 2008, US$17,340,983 is considered sufficient by the directors giving due cognizance to the projected
return on net assets and the forecasted investment opportunities.
15. SHARE PREMIUM
30 September 2008
(Unaudited)
US$
At 5 July 2007 (date of incorporation) -
Share premium arising on issue of shares 22,842,000
Less : Offering costs (3,010,315)
At 30 September 2008 19,831,685
The above offering costs, which are directly attributable to the issue of new shares in relation to the fund-raising of the Group on AIM
of London Stock Exchange, were debited to the share premium account.
16. NET ASSET VALUE PER ORDINARY SHARE
The net asset value per ordinary share of the Group is based on net assets attributable to ordinary shareholders of the Company of
US$17,340,983 and on the ordinary shares in issue of 25,380,010 shares as at 30 September 2008.
17. INVESTMENTS IN SUBSIDIARIES
Particulars of the principal subsidiaries are as follows :
Particulars of
Country/place of issued and fully Percentage of
incorporation/ paid up capital equity interests
registration/ held by
operations the Company
Principal
activities
Name
Direct Indirect
Ace Aim Investments Limited British Virgin US$1 100% - Investment
Islands holdings
Mission Deluxe International British Virgin US$1 100% - Investment
limited Islands holdings
Mission Rich International British Virgin US$1 100% - Investment
limited Islands holdings
Camay International Limited British Virgin US$1 100% - Investment
Islands holdings
Note:
(a) Wilfred Ying Wai Wong, the non-executive chairman of the Company, is also the vice chairman and chief executive officer of the
parent company of Excellent Rise Investments Limited ("Excellent Rise"). On admission to trading on AIM of the London Stock Exchange,
Excellent Rise subscribed a total of 12,820,000 ordinary shares of US$0.1 each of the Company for a consideration of both US$3,435,794 cash
(worth the equivalent to 3,435,794 ordinary shares of the Company) and 9,384,206 ordinary shares of the Company (worth the equivalent to
US$9,384,206) in exchange for these three subsidiaries' entire share interests and respective subsidiaries' convertible note investments as
the initial portfolio.
17. INVESTMENTS IN SUBSIDIARIES (Contiuned)
The initial portfolio, representing the three convertible note investments issued by IGO Home Shopping Holdings Limited, Creative
Picture Development Limited and Arigata Holdings Inc., were held by three wholly-owned subsidiaries of the Group, namely Ace Aim Investments
Limited, Mission Deluxe International Limited and Mission Rich International Limited, respectively.
(b) During the period since listing on 14 May 2008, the Group acquired one issued and fully paid-up share capital of Camay
International Limited ("Camay"), representing 100% interest in Camay, for a consideration of US$1. Camay was solely established and
acquired, as a special purpose entity and as an investment holding company, for holding the interests in investment of convertible notes
amounted to US$5 million as issued by Aesthetic International Holdings Group Limited.
All subsidiaries of the Group were solely established and acquired, as special purpose entities and as investment holding companies, to
hold the Company's investment interests in the convertible notes.
18. MAJOR NON-CASH TRANSACTIONS
As disclosed in note 17(a), there was a major non-cash transaction where 9,384,206 ordinary shares of US$0.1 each of the Company were
issued to and subscribed by Excellent Rise at a consideration of US$9,384,206 to acquire the three subsidiaries' entire share interests and
respective subsidiaries' convertible note investments upon the admission to AIM of the London Stock Exchange.
19. RELATED PARTY TRANSACTIONS
(a) The Investment Adviser has been appointed to provide investment advisory services to the Group. The non-executive chairman of the
Company is also the sole shareholder of the Investment Adviser and therefore the Investment Advisor is regarded as a related party. For the
period ended 30 September 2008, the Group incurred a total advisory fee of US$170,155 payable/ paid to the Investment Adviser.
(b) As Wilfred Ying Wai Wong, the non-executive chairman of the Company, is also the vice chairman and chief executive officer of the
parent company of Excellent Rise, Excellent Rise is regarded as a related party. As disclosed in notes 17(a) and 18, Excellent Rise
subscribed a total of 12,820,000 ordinary shares from the Group, worth equivalent to US$12,820,000 during the period.
(c) As disclosed in note 8, Wilfred Ying Wai Wong, the non-executive chairman of the Company and Timothy Gwynne Barker, a non-executive
director of the Company, subscribed 10 and 60,000 ordinary shares of the Company respectively.
20. RISK MANAGEMENT OBJECTIVES AND POLICIES
The Group's activities expose to a variety of financial risks which substantially result from its operating and investing activities. In
the view of the directors, the Group's risk management is coordinated by the Investment Adviser in close cooperation with the directors, and
focuses on actively securing the Group's short to medium term cash flows.
The significant financial risks to which the Group is exposed, are described below :
Credit risk
The Group's principal financial assets are cash and cash equivalents, other receivables and financial assets at fair value through
profit or loss, which represent the Group's maximum exposure to credit risk in relation to financial assets. The Group's credit risk is
primarily attributable to its investments in convertible note instruments. To minimise credit risk, the Group has formulated a defined
investment policy and has delegated management of investment risk to the Investment Adviser. The Group has obtained the subscribed
convertible notes, for which the money was lent to investees, by entering into guarantee agreements with guarantors. During the period, the
directors have assessed the financial status and potential growth of the investee companies and consider that full impairment provision
should be made against the convertible notes issued by IGO.
The credit risk pertaining to cash and cash equivalents is considered limited.
Concentration risk
As at 30 September 2008, the Group's financial assets exposed to credit risk are concentrated in four unlisted convertible note
instruments which approximate to 57 percent of the net assets of the Group as at balance sheet date.
Market price risk
The fair value or future cash flows of the convertible note instruments may fluctuate because of changes in market prices which are
generally affected by overall conditions in the economy of the PRC. The Investment Adviser assesses the exposure to market risk when making
each investment recommendation to the Board, and monitors the overall level of market risk on the whole of the investment portfolio on an
ongoing basis.
Liquidity risk
In the view of the directors, the Group is not exposed to any significant liquidity risk which requires the immediate meeting and
settlement of any significant liabilities or potential liabilities. The Investment Adviser monitors the Group's liquidity position on a
daily basis and considers the liquidity risk as minimal.
Foreign currency risk
The Group holds a relatively small portion of its financial assets and liabilities in foreign currencies denominated other than in its
functional currency, which is US$. However, the Group has investments in subsidiary undertakings which hold assets denominated in Renminbi.
The Investment Adviser monitors the Group's exposure to foreign currencies periodically and reports to the board on a regular basis.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR FFASAUSASEIE
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