TIDMYCI
RNS Number : 9890Y
Yangtze China Investment Limited
14 September 2009
+-------------------------------------+-------------------------------------------+
| Press Release | 14 September 2009 |
+-------------------------------------+-------------------------------------------+
Yangtze China Investment Limited
("Yangtze" or "the Company")
Final Results
Yangtze China Investment Limited (AIM:YCI.L), a provider of expansion capital to
China-based enterprises, today announces its final results covering the period
from 5 July 2007 (date of incorporation) to 31 March 2009 ("the Period").
Financial Highlights
+-----+----------------------------------------------------------------------------+
| * | NAV (net of listing expenses) increased to US$24.5 million (14 May 2008: |
| | US$22.4 million) mainly due to write-up of investment in Aesthetic |
| | International Holdings Group Limited, its first investment post flotation |
+-----+----------------------------------------------------------------------------+
| * | NAV per share (net of listing expenses) increased by 10.2% to US$0.97 (14 |
| | May 2008: US$0.88) mainly due to the write-up |
+-----+----------------------------------------------------------------------------+
| * | Current cash and cash equivalents to date total US$7.0 million |
+-----+----------------------------------------------------------------------------+
Operational Highlights
+-----+----------------------------------------------------------------------------+
| * | Successful flotation in May 2008, raising approximately US$25.4 million |
| | (gross) |
+-----+----------------------------------------------------------------------------+
| * | Acquisition of the Initial Portfolio concurrent with the flotation |
+-----+----------------------------------------------------------------------------+
| * | Completion of US$5.0 million investment into Aesthetic International |
| | Holdings Group Limited after flotation |
+-----+----------------------------------------------------------------------------+
| * | Write-off of investment in IGO Home Shopping Holdings Limited mainly due |
| | to aggressive network expansion being adversely impacted by the unexpected |
| | slowdown of China's retail market after the financial turmoil |
+-----+----------------------------------------------------------------------------+
Commenting on the results, Mr Wilfred Wong, Chairman of Yangtze China Investment
Limited, said: "I am pleased to report that our NAV per share recorded an
increase of 10.2% since our flotation on AIM. Since our listing, our investment
in a beauty spa franchise network has appreciated substantially but its
favourable impact has been significantly offset by impairment in our investment
in a TV home shopping network. During these challenging times, we have been
exceptionally cautious in our investment decision making. Accordingly, as
reported in our interim results, we decided to write off our investment in the
TV home shopping network in its entirety, even though we are actively seeking
alternative funding sources and working partners to recapitalise the company."
"With global markets stabilising and China's anticipated rebound, Yangtze has
been actively looking for further investment opportunities. Our current cash
position of US$7.0 million places the Company in an excellent position to invest
in good-quality assets at attractive entry valuations as and when suitable
opportunities arise."
"China has experienced rapid economic growth over the past few years. Despite
the recent global economic downturn, China's real GDP increased by 9.0% in 2008.
The Chinese government's stimulus package in November 2008 reinforces our
investment strategy as it aims to support China's GDP growth of around 8.0% in
2009 and to foster the long-term development of its domestic sector. Given
China's strong underlying economy and strong domestic growth, the Board of
Directors is confident that the Company is well positioned to capitalise on
these opportunities."
- ENDS -
For further information:
+-------------------------------------------+----------------------------+
| Yangtze Capital Advisory Limited | |
+-------------------------------------------+----------------------------+
| Richard Zhao | Tel: +852 2281 7218 |
| Steven Feng | Tel: +852 2281 7223 |
+-------------------------------------------+----------------------------+
| | ww.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-end 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.
Since the free market reforms in 1978, China's GDP has grown on an average of
9.9% a year and recorded real GDP growth of 9.0% in 2008. Government reforms are
transforming the economy, with a focus on domestic consumption, infrastructure
spending and increasingly upon environmental issues.
Yangtze was admitted to AIM on 14 May 2008. For further information, please see
www.yangtzecn.com
Chairman's Statement
I am pleased to present this maiden set of final results for Yangtze China
Investment Limited since its admission to the Alternative Investment Market
("AIM") of the London Stock Exchange on 14 May 2008. Since the Company's
flotation, its NAV per share increased by 10.2 per cent from US$0.88 (net of all
relevant listing expenses) to US$0.97 per share. At 31 March 2009, the Company's
NAV was US$24.5 million.
The Company was established to capitalise on the immense growth opportunities in
the Chinese domestic market, and these opportunities are reflected in China's
strong GDP which has outperformed those of many industrialised countries during
the current downturn. The downturn's effects on the West have impacted on
China's export market the most, and I am pleased that from the outset the
Company chose to focus on capitalising on Chinese domestic growth driven by
rising consumption levels within the country. The Company has not been immune to
the current adverse conditions in the global economy. Whilst China's economic
outlook in the year ahead will be filled with challenges, there will be
opportunities too. The Company remains confident that China's underlying
economic strength and the PRC Central People Government's macroeconomic stimulus
will continue to further position China as one of the world's major economies.
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
has been benefiting from the PRC Central People Government's policy of boosting
economic growth through stimulating domestic consumption and the expanding
number of female consumers with growing disposable income.
Yangtze currently has cash balances of US$7.0 million. Whilst the Company
continues to follow a cautious approach, it also continues to actively pursue
potential investments with due diligence. The Board of Directors are confident
that Yangtze is well positioned to capitalise on the opportunities ahead.
Wilfred Ying Wai WONG
Chairman
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. Aesthetic's
excellent performance since Yangtze's investment has been the principal factor
contributing to the write-up of 10.2 per cent in the Company's NAV per share
since its flotation on AIM.
During the period under review, the Company took a prudent approach and wrote
off the entire value of one of its investee companies at the time of flotation,
IGO Home Shopping Holdings Limited, due to uncertainties about IGO's cash
position. The Company has acted on its promise in its interim results
announcement, and has further stepped 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 will continue
to follow this prudent approach under the current conditions.
In addition, the Company continues to explore investment opportunities where the
Company can boost its valuation by investing in companies that are
revenue-generating, ideally profitable or anticipated to generate profits
imminently.
Despite the global economic downturn, Yangtze believes that its current
portfolio companies excluding IGO are well positioned to deliver profits and
benefit from China's growing domestic sector and strong GDP growth. Details on
all of the Company's investees since the time of flotation are included below.
Portfolio
Aesthetic International Holdings Group Limited ("Aesthetic")
Aesthetic, a beauty spa franchise based in Beijing, China, has performed in line
with expectations and continued to operate with impressive growth in
profitability during the period under review. Aesthetic is Yangtze's first
investment post-flotation, and we are confident that Aesthetic will continue to
thrive in China's growing consumer market.
* Aesthetic 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. At 31 March 2009, Aesthetic had both
franchised and sub-franchised, through its agents, over 1,800 beauty centres
throughout China.
* During the period under review, Aesthetic established four regional management
centres in Chengdu, Shenyang, Guangzhou and Dalian. These centres, successfully
launched in May 2009, have helped to enhance management control over Aesthetic's
franchisees and are facilitating 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 also enhanced its existing product lines through ingredient
reformulation and packaging redesign. These new product lines were launched in
the 2nd quarter of 2009 and have received positive customer feedback. To widen
its product range, Aesthetic has planned to roll out new toiletries and
cosmetics product lines by end of 2009.
* Aesthetic has also commenced the setting up of a medical beauty clinic in
Shenyang to provide a range of medical cosmetic therapies and Chinese health and
beauty treatments which include hair replacement, botox and cosmetic surgery,
body reshape, etc. At the same time, Aesthetic is in the process of setting up a
beauty training school in Chengdu to provide cosmetology and beauty
therapy-related courses. The medical beauty clinic and the beauty training
school are expected to commence operation by end 2009 and early 2010
respectively.
Arigata Holdings Inc. ("Onbest")
Onbest, a designer and manufacturer of cash registers, has fine-tuned its
product and market strategy in response to the financial turmoil to aim at a
more promising customer base. The strategic move has proved to be sound as
Onbest has received encouraging market feedback together with initial sales
orders.
* 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 final stage of seeking certification and verification of industry standards
for the handheld POS device from VISA and MasterCard, which are known to set
very strict security requirements. At the same time, it has received initial
orders from several customers in North America for the handheld POS device for
delivery by end 2009.
* There was little progress on the sale of the fiscal-tax controlled cash register
mainly because of inadequate legislative support in the PRC for the promotion of
the cash register and the complication in linking up the completely separate
taxation and banking systems in the PRC.
* Onbest continues to explore the opportunities to promote the handheld POS device
in China. Preliminary ATM and POS gateway certification procedures with UnionPay
have been commenced with good progress.
* A portable docking device has also been successfully developed to enable both
wireless
and cable connection to enhance mobility of the handheld POS device.
Creative Picture Development Limited ("Creative Picture")
Creative Picture, which carries out technology research, production and sales of
3-D display technology in China, has won a number of new contracts during the
period under review and continues to expand its marketing activities.
* 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 and is holding further discussions to cover schools in those
selected Asian cities.
* Creative Picture won a contract to produce a 3-D TV drama for China's
state-owned TV channel, the movie version of which will also be shown in
cinemas.
* Creative Picture continues to market its products by means of model showcases
installed at prominent spots, including museums, airports and train stations.
* An increasing number of movies are being shown in 3-D, and 3-D cinema is
expected to be an ongoing trend in the PRC as well as worldwide. With more
cinemas equipped with 3-D technology, some movies are expected to be released
only in 3-D with no accompanying 2-D version. However, home viewing of movies
presents a problem for the film industry. A growing demand for 3-D and 3-D ready
visualisation facilities and other available content is expected. Creative
Picture expects its future revenue to derive primarily from the content
development and sale of visualisation facilities.
IGO Home Shopping Holdings Limited ("IGO")
As announced in Yangtze's interim results, Yangtze has taken a prudent approach
and written off the value of its investment in IGO in its entirety because of
uncertainties in its cash position. Details are provided below.
* 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 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 the 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.
China's Economy
According to the International Monetary Fund, the Chinese economy in terms of
GDP has been growing at a faster rate than most of the key economies in the
world. China's GDP was ranked third in the world by size as of 2008 after the
United States and Japan. Despite the recent global economic downturn, China's
real GDP increased nonetheless in 2008, by 9.0%, according to the National
Bureau of Statistics of China. However, the downturn has caused a substantial
reduction in China's export growth. The global economic impact has been felt
strongly in the US and Europe, which account for over half of China's exports.
China has strong macroeconomic fundamentals and large balance of payment
surpluses but its overall economic growth is susceptible to export performance.
In November 2008, China's government announced a US$586 billion 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
most of people's living standards which are in line with the objectives of the
11th five-year plan to rebalance the economy. With the stimulus package
gradually taking effect, it is expected that GDP growth of China in 2009 will be
in the region of 8.0%.
Outlook
Given the economic downturn, Yangtze will continue to step up its efforts on
post-investment monitoring initiatives. However, with global markets showing
signs of stabilising and China's anticipated rebound, Yangtze has also been
actively looking for further investment opportunities. Its current cash position
of US$7.0 million places the Company in an excellent position to invest in
good-quality assets at attractive entry valuations as and when suitable
opportunities arise.
We look forward to presenting you our progress on this in our next interim
results announcement.
Yangtze Capital Advisory Limited
Investment Adviser
Portfolio Summary
At 31 March 2009, the Company's total assets amounted to US$24.7 million. About
US$17.6 million were investments in four companies in the form of convertible
note instruments at fair values.
The following table summarises the status of the Company's portfolio at 31 March
2009:
+---------------+------------+------------+----------+-------------+------------+----------------+
| Description | Industry / | Time of | Purchase | As of 31 March 2009 |
| | Location | Investment | cost() | |
| | | by the | (US$) | |
| | | Company | | |
+ + + + +-------------------------------------------+
| | | | | Fair value | Change on | % of |
| | | | | (US$) | cost (US$) | ownership |
| | | | | | | (on full |
| | | | | | | conversioninto |
| | | | | | | shares)() |
| | | | | | | |
+---------------+------------+------------+----------+-------------+------------+----------------+
| Aesthetic | Beauty spa | July 2008 | 5.11m | 11.91m | 6.80m | 25% |
| International | franchise | | | | | |
| Holdings | / China | | | | | |
| Group Limited | | | | | | |
+---------------+------------+------------+----------+-------------+------------+----------------+
| Arigata | Fiscal / | May 2008 | 3.05m | 3.95m | 0.90m | 30% |
| Holdings | tax | | | | | |
| Inc. | processing | | | | | |
| | solutions | | | | | |
| | / China | | | | | |
+---------------+------------+------------+----------+-------------+------------+----------------+
| Creative | 3-D | May 2008 | 1.30m | 1.79m | 0.49m | 12.5% |
| Picture | display | | | | | |
| Development | technology | | | | | |
| Limited | /China | | | | | |
+---------------+------------+------------+----------+-------------+------------+----------------+
| IGO Home | TV home | May 2008 | 5.06m | - | (5.06m) | 20% |
| Shopping | shopping / | | | | | |
| Holdings | China | | | | | |
| Limited | | | | | | |
+---------------+------------+------------+----------+-------------+------------+----------------+
| Total | | | 14.52m | 17.65m | 3.13m | |
+---------------+------------+------------+----------+-------------+------------+----------------+
Consolidated income statement
for the period from 5 July 2007 (date of incorporation) to 31 March 2009
+-------------------------------------------------------+-------+--+------------------+
| | Notes | | From |
| | | | 5 July 2007 |
| | | | (date of |
| | | | incorporation) |
| | | | to |
| | | | 31 March 2009 |
+-------------------------------------------------------+-------+--+------------------+
| | | | US$ |
+-------------------------------------------------------+-------+--+------------------+
| Revenue | | | |
+-------------------------------------------------------+-------+--+------------------+
| Net gain on financial assets at fair value through | 11 | | 3,126,118 |
| profit or loss | | | |
+-------------------------------------------------------+-------+--+------------------+
| Interest income | | | 61,989 |
+-------------------------------------------------------+-------+--+------------------+
| | | | 3,188,107 |
+-------------------------------------------------------+-------+--+------------------+
| | | | |
+-------------------------------------------------------+-------+--+------------------+
| Expenses | | | |
+-------------------------------------------------------+-------+--+------------------+
| Auditors' remuneration | | | (58,016) |
+-------------------------------------------------------+-------+--+------------------+
| Administration fee | 6 | | (96,841) |
+-------------------------------------------------------+-------+--+------------------+
| Advisory fee | 7 | | (343,240) |
+-------------------------------------------------------+-------+--+------------------+
| Business valuation fee | | | (77,146) |
+-------------------------------------------------------+-------+--+------------------+
| Directors' fees | 8 | | (202,500) |
+-------------------------------------------------------+-------+--+------------------+
| Legal and professional fees | | | (89,165) |
+-------------------------------------------------------+-------+--+------------------+
| Marketing and communication fees | | | (65,991) |
+-------------------------------------------------------+-------+--+------------------+
| Other operating expenses | | | (104,781) |
+-------------------------------------------------------+-------+--+------------------+
| Profit before taxation | | | 2,150,427 |
+-------------------------------------------------------+-------+--+------------------+
| | | | |
+-------------------------------------------------------+-------+--+------------------+
| Taxation | 9 | | - |
+-------------------------------------------------------+-------+--+------------------+
| | | | |
+-------------------------------------------------------+-------+--+------------------+
| Increase in net assets attributable to shareholders | | | 2,150,427 |
| of the Company | | | |
+-------------------------------------------------------+-------+--+------------------+
| | | | |
+-------------------------------------------------------+-------+--+------------------+
| Earnings per share attributable to shareholders of | 10 | | |
| the Company during the period | | | |
+-------------------------------------------------------+-------+--+------------------+
| - Basic | | | US$0.08 |
+-------------------------------------------------------+-------+--+------------------+
| - Diluted | | | N/A |
+-------------------------------------------------------+-------+--+------------------+
Consolidated balance sheet
as at 31 March 2009
+----------------------------------------------------+------------+---+----------------+
| | Notes | | 31 March 2009 |
+----------------------------------------------------+------------+---+----------------+
| | | | US$ |
+----------------------------------------------------+------------+---+----------------+
| | | | |
+----------------------------------------------------+------------+---+----------------+
| Non-current assets | | | |
+----------------------------------------------------+------------+---+----------------+
| Financial assets at fair value through profit or | 11 | | 17,647,042 |
| loss | | | |
+----------------------------------------------------+------------+---+----------------+
| | | | |
+----------------------------------------------------+------------+---+----------------+
| Current assets | | | |
+----------------------------------------------------+------------+---+----------------+
| Prepayments and other receivables | 12 | | 31,219 |
+----------------------------------------------------+------------+---+----------------+
| Cash and cash equivalents | 13 | | 7,025,012 |
+----------------------------------------------------+------------+---+----------------+
| | | | 7,056,231 |
+----------------------------------------------------+------------+---+----------------+
| | | | |
+----------------------------------------------------+------------+---+----------------+
| Current liabilities | | | |
+----------------------------------------------------+------------+---+----------------+
| Accrued expenses and other payables | | | 138,779 |
+----------------------------------------------------+------------+---+----------------+
| Amounts due to directors | 14 | | 44,381 |
+----------------------------------------------------+------------+---+----------------+
| | | | 183,160 |
+----------------------------------------------------+------------+---+----------------+
| Net current assets | | | 6,873,071 |
+----------------------------------------------------+------------+---+----------------+
| Net assets | | | 24,520,113 |
+----------------------------------------------------+------------+---+----------------+
| | | | |
+----------------------------------------------------+------------+---+----------------+
| Net assets attributable to shareholders of the | | | |
| Company | | | |
+----------------------------------------------------+------------+---+----------------+
| Share capital | 15 | | 2,538,001 |
+----------------------------------------------------+------------+---+----------------+
| Share premium | 16 | | 19,831,685 |
+----------------------------------------------------+------------+---+----------------+
| Retained profits | | | 2,150,427 |
+----------------------------------------------------+------------+---+----------------+
| | | | 24,520,113 |
+----------------------------------------------------+------------+---+----------------+
| | | | |
+----------------------------------------------------+------------+---+----------------+
| Number of ordinary shares in issue | | | 25,380,010 |
+----------------------------------------------------+------------+---+----------------+
| | | | |
+----------------------------------------------------+------------+---+----------------+
| Net asset value per ordinary share | 17 | | US$0.97 |
+----------------------------------------------------+------------+---+----------------+
Consolidated cash flow statement
For the period from 5 July 2007 (date of incorporation) to 31 March 2009
+-----------------------------------------------------+------+--+--------------------+
| | | | From |
| | | | 5 July 2007 |
| | | | (date of |
| | | | incorporation) to |
| | | | 31 March 2009 |
+-----------------------------------------------------+------+--+--------------------+
| | | | US$ |
+-----------------------------------------------------+------+--+--------------------+
| | | | |
+-----------------------------------------------------+------+--+--------------------+
| Cash flows from operating activities | | | |
+-----------------------------------------------------+------+--+--------------------+
| Profit before taxation | | | 2,150,427 |
+-----------------------------------------------------+------+--+--------------------+
| Adjustments for : | | | |
+-----------------------------------------------------+------+--+--------------------+
| Interest income | | | (61,989) |
+-----------------------------------------------------+------+--+--------------------+
| Net gain on financial assets at fair value through | | | (3,126,118) |
| profit or loss | | | |
+-----------------------------------------------------+------+--+--------------------+
| Operating loss before working capital changes | | | (1,037,680) |
+-----------------------------------------------------+------+--+--------------------+
| Increase in prepayments and other receivables | | | (29,334) |
+-----------------------------------------------------+------+--+--------------------+
| Increase in accrued expenses and other payables | | | 138,779 |
+-----------------------------------------------------+------+--+--------------------+
| Increase in amounts due to directors | | | 44,381 |
+-----------------------------------------------------+------+--+--------------------+
| Cash used in operations | | | (883,854) |
+-----------------------------------------------------+------+--+--------------------+
| Interest received | | | 60,104 |
+-----------------------------------------------------+------+--+--------------------+
| Net cash used in operating activities | | | (823,750) |
+-----------------------------------------------------+------+--+--------------------+
| | | | |
+-----------------------------------------------------+------+--+--------------------+
| Cash flows from investing activities | | | |
+-----------------------------------------------------+------+--+--------------------+
| Purchase of convertible notes | | | (5,136,718) |
+-----------------------------------------------------+------+--+--------------------+
| Net cash used in investing activities | | | (5,136,718) |
+-----------------------------------------------------+------+--+--------------------+
| | | | |
+-----------------------------------------------------+------+--+--------------------+
| Cash flows from financing activities | | | |
+-----------------------------------------------------+------+--+--------------------+
| Net proceeds from issuance of ordinary shares | | | 12,985,480 |
+-----------------------------------------------------+------+--+--------------------+
| Net cash generated from financing activities | | | 12,985,480 |
+-----------------------------------------------------+------+--+--------------------+
| Net increase in cash and cash equivalents | | | 7,025,012 |
+-----------------------------------------------------+------+--+--------------------+
| | | | |
+-----------------------------------------------------+------+--+--------------------+
| Cash and cash equivalents at beginning of the | | | - |
| period | | | |
+-----------------------------------------------------+------+--+--------------------+
| | | | |
+-----------------------------------------------------+------+--+--------------------+
| Cash and cash equivalents at end of the period | | | 7,025,012 |
+-----------------------------------------------------+------+--+--------------------+
Consolidated statement of changes in equity
For the period from 5 July 2007 (date of incorporation) to 31 March 2009
+----------------------------------+-----------+------------+-------------+------------+
| | Share | Share | Accumulated | Total |
| | capital | premium | profits | |
+----------------------------------+-----------+------------+-------------+------------+
| | US$ | US$ | US$ | US$ |
+----------------------------------+-----------+------------+-------------+------------+
| | | | | |
+----------------------------------+-----------+------------+-------------+------------+
| At 5 July 2007 (date of | - | - | - | - |
| incorporation) | | | | |
+----------------------------------+-----------+------------+-------------+------------+
| Net proceeds from issuance of | | | | |
| ordinary shares : | | | | |
+----------------------------------+-----------+------------+-------------+------------+
| - non-public subscription | 1 | - | - | 1 |
+----------------------------------+-----------+------------+-------------+------------+
| - public subscription on | 2,538,000 | 19,831,685 | - | 22,369,685 |
| admission to AIM of London Stock | | | | |
| Exchange | | | | |
+----------------------------------+-----------+------------+-------------+------------+
| Increase in net assets | - | - | 2,150,427 | 2,150,427 |
| attributable to shareholders | | | | |
| from operations | | | | |
+----------------------------------+-----------+------------+-------------+------------+
| At 31 March 2009 | 2,538,001 | 19,831,685 | 2,150,427 | 24,520,113 |
+----------------------------------+-----------+------------+-------------+------------+
Notes to the Consolidated 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 was
changed from Yangtze China Investment Fund to Yangtze China Investment Limited.
with effect from 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 18 to the consolidated financial statements. The Company and its
subsidiaries are collectively referred to as the Group.
The investment objective of the Group is to provide shareholders of the Company
with an attractive return on its investments, predominantly through capital
appreciation by making minority equity and equity-related investments through
convertible note instruments in small and medium-sized unlisted growth
businesses with, or associated with, different consumer 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 financial statements on pages 12 to 33 have been prepared in accordance with
International Financial Reporting Standards ("IFRSs") which collective term
includes all applicable individual International Financial Reporting Standards,
International Accounting Standards and Interpretations issued by the
International Accounting Standards Board ("IASB").
The financial statements of the Group for the period from 5 July 2007 (date of
incorporation) to 31 March 2009 were approved for issue by the board of
directors on 10 September 2009.
2. ADOPTION OF NEW AND AMENDED IFRSs
2.1 In the current period, the Group has adopted all the new and amended
standards and interpretations issued by the IASB and the International Financial
Reporting Interpretations Committee (the "IFRIC") of the IASB that are relevant
to its operations. The adoption of these new and amended standards and
interpretations has had no material impact on the accounting policies of the
Group.
2.2 New or amended IFRSs that have been issued but are not yet effective :
The Group has not early adopted the following IFRSs that have been issued but
are not yet effective.
+--------------------------+------------------------------------------------------+
| IAS 1 (Revised) | Presentation of Financial Statements 1 |
| | |
+--------------------------+------------------------------------------------------+
| IAS 23 (Revised) | Borrowing Costs 1 |
| | |
+--------------------------+------------------------------------------------------+
| IAS 27 (Revised) | Consolidated and Separate Financial Statements 2 |
| | |
+--------------------------+------------------------------------------------------+
| IAS 32, IAS 39 and IFRS | Puttable Financial Instruments and Obligations |
| 7 (Amendments) | Arising on Liquidation 1 |
+--------------------------+------------------------------------------------------+
| IAS 39 (Amendments) | Financial Instruments: Recognition and Measurement - |
| | Eligible Hedge Items 2 |
| | |
+--------------------------+------------------------------------------------------+
| IAS 39 and IFRS 7 | Reclassification of Financial Instruments 8 |
| | |
+--------------------------+------------------------------------------------------+
| IFRS 1 | First-time Adoption of IFRSs 11 |
| | |
+--------------------------+------------------------------------------------------+
| IFRS 1 (Revised) | First-time Adoption of IFRSs 2 |
| | |
+--------------------------+------------------------------------------------------+
| IFRS 1 and IAS 27 | Cost of an Investment in a Subsidiary, Jointly |
| (Amendments) | Controlled Entity or an Associate 1 |
| | |
+--------------------------+------------------------------------------------------+
| IFRS 2 (Amendments) | Share-based Payment - Vesting conditions and |
| | cancellations 1 |
| | |
+--------------------------+------------------------------------------------------+
| IFRS 2 (Amendments) | Group Cash-settled Share-based Payment Transactions |
| | 11 |
| | |
+--------------------------+------------------------------------------------------+
| IFRS 3 (Revised) | Business Combinations 2 |
| | |
+--------------------------+------------------------------------------------------+
| IFRS 7 (Amendments) | Improving Disclosures about Financial Instruments 1 |
| | |
+--------------------------+------------------------------------------------------+
| IFRS 8 | Operating Segments 1 |
| | |
+--------------------------+------------------------------------------------------+
| IFRIC - Int 9 and IAS 39 | Embedded Derivatives 5 |
| (Amendments) | |
+--------------------------+------------------------------------------------------+
| IFRIC - Int 12 | Service Concession Arrangements 6 |
| | |
+--------------------------+------------------------------------------------------+
| IFRIC - Int 13 | Customer Loyalty Programmes 3 |
| | |
+--------------------------+------------------------------------------------------+
| IFRIC - Int 14 | The Limit on a Defined Benefit Asset, Minimum |
| | Funding Requirements and their Interaction 6 |
| | |
+--------------------------+------------------------------------------------------+
| IFRIC - Int 15 | Agreements for the Construction of Real Estate 1 |
| | |
+--------------------------+------------------------------------------------------+
| IFRIC - Int 16 | Hedges of a New Investment in a Foreign Operation 4 |
| | |
+--------------------------+------------------------------------------------------+
| IFRIC - Int 17 | Distributions of Non-cash Assets to Owners 2 |
| | |
+--------------------------+------------------------------------------------------+
| IFRIC - Int 18 | Transfer of Assets from Customers 7 |
| | |
+--------------------------+------------------------------------------------------+
| IFRSs (Amendments) | Annual Improvements to IFRSs 2008 10 |
| | |
+--------------------------+------------------------------------------------------+
| IFRSs (Amendments) | Annual Improvements to IFRSs 2009 9 |
| | |
+--------------------------+------------------------------------------------------+
+---------------+-----------------------------------------------------------------+
| 1 | Effective for annual periods beginning on or after 1 January |
| | 2009 |
+---------------+-----------------------------------------------------------------+
| 2 | Effective for annual periods beginning on or after 1 July 2009 |
+---------------+-----------------------------------------------------------------+
| 3 | Effective for annual periods beginning on or after 1 July 2008 |
+---------------+-----------------------------------------------------------------+
| 4 | Effective for annual periods beginning on or after 1 October |
| | 2008 |
+---------------+-----------------------------------------------------------------+
| 5 | Effective for annual periods beginning on or after 30 June 2009 |
+---------------+-----------------------------------------------------------------+
| 6 | Effective for annual periods beginning on or after 1 January |
| | 2008 |
+---------------+-----------------------------------------------------------------+
| 7 | Effective for transfers of assets from customers received on or |
| | after 1 July 2009 |
+---------------+-----------------------------------------------------------------+
| 8 | Effective on or after 1 July 2008 |
+---------------+-----------------------------------------------------------------+
| 9 | Generally effective for annual periods beginning on or after 1 |
| | January 2009, 1 July |
| | 2009 and 1 January 2010, where appropriate |
+---------------+-----------------------------------------------------------------+
| 10 | Generally effective for annual periods beginning on or after 1 |
| | January 2009, |
| | except the amendments to IFRS 5 which are effective for |
| | annual periods |
| | beginning on or after 1 July 2009 |
+---------------+-----------------------------------------------------------------+
| 11 | Effective for annual periods beginning on or after 1 January |
| | 2010 |
+---------------+-----------------------------------------------------------------+
The directors of the Company anticipate that all the pronouncements will be
adopted in the Group's accounting policies for the first period beginning after
the effective date of the pronouncements.
Among these new standards and interpretations, IAS 1(Revised) Presentation of
Financial Statements is expected to materially change the presentation of the
Group's financial statements. The amendments affect the presentation of owner
changes in equity and introduce a statement of comprehensive income. The Group
will have the option of presenting items of income and expenses and components
of other comprehensive income either in a single statement of comprehensive
income with subtotals, or in two separate statements (a separate income
statement followed by a statement of comprehensive income). The amendment does
not affect the financial position or results of the Group but will give rise to
additional disclosures.
In addition, IFRS 8 Operating Segments may result in new or amended disclosures.
The directors are in the process of identifying reportable operating segments as
defined in IFRS 8.
The directors are currently assessing the impact of other new and amended IFRSs
but are not yet in a position to state whether they would have a material
financial impact on the Group's financial statements.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of preparation
The significant accounting policies that have been used in the preparation of
these financial statements are summarised below.
The financial statements have been prepared under the historical cost basis
except for certain financial instruments, which are measured at fair value. The
measurement bases are fully described in the accounting policies below.
It should be noted that accounting estimates and assumptions are used in
preparation of the financial statements. Although these estimates are based on
directors' best knowledge and judgement of current events and actions, actual
results may ultimately differ from those estimates. The areas involving a higher
degree of judgement or complexity, or areas where assumptions and estimates are
significant to the financial statements, are disclosed in note 4.
(b) Consolidation
The Group's financial statements consolidate those of the Company and all of its
subsidiaries drawn up to 31 March 2009. 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 at fair value
through profit or loss. The directors determine 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-evaluate
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 or
sales of financial assets are recognised or 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.
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.
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss include financial assets
held for trading and financial assets designated upon initial recognition at
fair value through profit or loss.
Financial assets are classified as held for trading if they are acquired for the
purpose of selling in the near term. Financial assets may be designated at
initial recognition 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 is 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
* the financial asset contains an embedded derivative that would need to be
separately recorded.
The main class of financial instrument designated by the Company is the
investment in convertible notes. The Company has documented risk management and
investment strategies designed to manage such assets at fair value, taking into
consideration the total return from interests and the changes in equity value,
in a way that maximises the investment returns. Information about fair values
are provided internally to key management personnel. The convertible note
investment includes separable embedded derivatives such as share conversion
option, put option and/or call option. The Company has designated the entire
combined contract at fair value through profit or loss.
At each balance sheet date subsequent to initial recognition, the financial
assets at fair value through profit or loss are measured at fair value, with
changes in fair value recognised in the income statement. 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) Other receivables
Other receivables are non-derivative financial assets with fixed or determinable
payments that are not quoted in an active market. Other receivables are
initially recognized at fair value and subsequently measured at amortised cost
using the effective interest method, less any impairment losses.
(e) 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 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.
(f) Impairment of financial assets
Financial assets are assessed at each reporting date to determine whether there
is any objective evidence that they are 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.
(g) Foreign currencies
The financial statements are presented in the currency of United States dollars
("US$"), which is the presentation and functional currency of the Company.
Items included in the Group's financial statements are measured using the
currency of the primary economic environment in which the entities within the
Group operate (the "functional currency"). Transactions in foreign currency are
translated into 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 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.
(h) Income and expenses
Interest income is recognised on a time-proportionate basis using the effective
interest method. 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 recognized 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 assets
to be recovered.
Deferred tax assets and liabilities are not recognized if the temporary
difference arises from initial recognition of assets and liabilities in a
transaction that affects neither taxable nor accounting profit or loss. 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 differences and it is probable that the temporary
differences will not reverse in the foreseeable future.
Deferred tax is calculated, without discounting, at tax rates that are expected
to apply in the period the liability is settled or the asset realised, provided
they are enacted or substantially enacted at the balance sheet date. Changes in
deferred tax assets or liabilities are recognised in the income statement, or in
equity if they relate to items that are charged or credited directly to equity.
(j) Other payables
Other payables are financial liabilities, recognised when the Group becomes a
party to the contractual provisions 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.
(k) Amounts due to directors
Amounts due to directors are recognised initially at fair value and subsequently
measured at amortised cost, using the effective interest method.
(l) Cash and cash equivalents
Cash and cash equivalents represent cash at bank and short term deposits with
original maturity of three months or less.
(m) 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.
(n) 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.
4. 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.
(a) Fair value of financial assets not quoted in an active market
The fair value of financial assets through profit or loss that are not quoted in
an active market is determined by using valuation techniques, primarily the
discounted cash flow model and the option pricing model. The models used to
determine fair values are selected by the directors, which are then validated
and reviewed by the independent professional valuer.
The discounted cash flow model is for business valuation which is based on
company-generated cash flows and observable market data. A terminal multiple is
applied on the projected cash flows at terminal year to derive the value of the
business beyond the projection period. An income approach technique is used to
devolve the future value of the business into a present market value.. The
discount rates used for valuing equity securities are determined using the
Capital Asset Pricing Model ("CAPM") which is based on historic equity returns
for other entities operating in the same industry for which market returns are
observable. The directors use CAPM model to adjust the observed equity returns
to reflect the actual debt/equity financing structure of the valued equity
investment. A discount for lack of marketability is taken into consideration to
reflect the illiquidity of converting the privately-held business into cash.
The option pricing model is used to value the derivative portion of the
financial instruments. The discounted cash flow is adopted to value the debt
portion of the financial instruments using an appropriate discount rate at the
valuation date. The model uses independently sourced market parameters, to the
extent practicable,
including interest rate yield curves, liquidity premium, option volatilities and
dividend yield. Equity values are determined as described above. Most market
parameters are either directly observable or are implied. However, areas such as
counterparty default risk or the valuation of the equity interest require the
directors to make estimates. Changes in assumptions about these factors could
affect the reported fair value of financial instruments.
(b) Functional currency
The directors consider the currency of US$ most faithfully represents the
economic effect of the underlying transactions, events and conditions. The US$
is the currency in which the Company measures its performance and reports its
results, as well as the currency in which it receives subscriptions from its
investors.
5. 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.
6. ADMINISTRATION FEE
Trident Trust Company (Cayman) Limited was appointed as the Administrator of the
Group and is entitled to receive 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 2.0% per annum on the amount equal to the net asset value less
the value of cash and cash equivalents, and 2.0% of the amount equal to the
value of cash and cash equivalents 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 2.0% per annum on 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 a service agreement with
the Company. 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 31 March |
| | | 2009 |
+----------------------------------------------+-----+----------------+
| | | US$ |
+----------------------------------------------+-----+----------------+
| | | |
+----------------------------------------------+-----+----------------+
| Directors' fees in respect of services and | | |
| duties : | | |
+----------------------------------------------+-----+----------------+
| Timothy Gwynne Barker | | 50,625 |
+----------------------------------------------+-----+----------------+
| Anthony Nigel Clifton Griffiths | | 50,625 |
+----------------------------------------------+-----+----------------+
| Hoon Tai Meng | | 50,625 |
+----------------------------------------------+-----+----------------+
| Stephen Shu Kwan Ip | | 50,625 |
+----------------------------------------------+-----+----------------+
| | | |
+----------------------------------------------+-----+----------------+
| | | 202,500 |
+----------------------------------------------+-----+----------------+
The interests in ordinary shares of the non-executive chairman/directors and
their immediate families, who held office during the period, at 31 March 2009,
are set out below:
+--------------------------------+---------------+--------------------+
| | Note | Numbers of shares |
+--------------------------------+---------------+--------------------+
| | | |
+--------------------------------+---------------+--------------------+
| Wilfred | 20(c) | 10 |
| Ying Wai | | |
| Wong | | |
+--------------------------------+---------------+--------------------+
| Timothy Gwynne Barker | 20(c) | 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. EARNINGS PER SHARE
The calculation of basic earnings per share is based on the increase in net
assets attributable to shareholders of the Company of US$2,150,427 and on
25,380,010 ordinary shares in issue during the period from the date of admission
to the AIM to 31 March 2009. As the Group was dormant prior to the admission to
AIM, the calculation of basic earnings per share does not take into account the
weighted average effect of the number of ordinary shares in issue during the
period from the date of incorporation to 31 March 2009.
Diluted earnings per share for the period ended 31 March 2009 are not presented
as there is no dilutive potential share.
11. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
The entire portfolio of the Group's financial instruments comprises unlisted
convertible notes with maturities ranging from 8 months to 47 months at 31 March
2009 and with coupon interest rates ranging from 8% to 15% per annum. All the
convertible note instruments contain a share conversion feature, a put option,
and a call option, except for the convertible note instrument issued by Creative
Picture Development Limited, which does not contain the call option.
The Group's convertible note instruments at 31 March 2009, designated at fair
value through profit or loss, are set out below:
+----------------------------------------------+-----+----------------+
| | | 31 March 2009 |
+----------------------------------------------+-----+----------------+
| | | US$ |
+----------------------------------------------+-----+----------------+
| | | |
+----------------------------------------------+-----+----------------+
| Convertible notes at fair value, as issued | | |
| by : | | |
+----------------------------------------------+-----+----------------+
| - Aesthetic International | | 11,911,769 |
| Holdings Group Limited | | |
+----------------------------------------------+-----+----------------+
| - Arigata Holdings Inc. | | 3,948,274 |
+----------------------------------------------+-----+----------------+
| - Creative Picture Development | | 1,786,999 |
| Limited | | |
+----------------------------------------------+-----+----------------+
| - IGO Home Shopping Holdings | | - |
| Limited ("IGO") | | |
+----------------------------------------------+-----+----------------+
| | | 17,647,042 |
+----------------------------------------------+-----+----------------+
As disclosed in note 18, the Company invests in each of the above four
convertible note instruments through four wholly-owned subsidiaries of the
Company.
The movements in financial assets at fair value through profit or loss during
the period are as follows:
+-------------------------------------------+-------+--+----------------+
| | Notes | | US$ |
+-------------------------------------------+-------+--+----------------+
| | | | |
+-------------------------------------------+-------+--+----------------+
| At 5 July 2007 (date of incorporation) | | | - |
+-------------------------------------------+-------+--+----------------+
| Additions | (a) | | 14,520,924 |
+-------------------------------------------+-------+--+----------------+
| Fair value gain | (b) | | 8,183,088 |
+-------------------------------------------+-------+--+----------------+
| Impairment loss on financial assets | (c) | | (5,056,970) |
+-------------------------------------------+-------+--+----------------+
| | | | |
+-------------------------------------------+-------+--+----------------+
| At 31 March 2009 | | | 17,647,042 |
+-------------------------------------------+-------+--+----------------+
Notes:
(a) The additions to financial assets at fair value through profit or loss
are analysed as follows:
+--------------------------------------------+------+------------------+
| | | From |
| | | 5 July 2007 |
| | | (date of |
| | | incorporation) |
| | | to |
| | | 1 March 2009 |
+--------------------------------------------+------+------------------+
| | | US$ |
+--------------------------------------------+------+------------------+
| | | |
+--------------------------------------------+------+------------------+
| Acquisition by cash | | 5,136,718 |
+--------------------------------------------+------+------------------+
| Received in share capital of subsidiaries | | 9,384,206 |
| (note 19) | | |
+--------------------------------------------+------+------------------+
| | | |
+--------------------------------------------+------+------------------+
| | | 14,520,924 |
+--------------------------------------------+------+------------------+
(b) The valuation of the convertible note instruments was carried out by an
independent professional valuer, Jones Lang LaSalle Sallmanns Limited. A fair
value gain of US$8,183,088 during the period has been recognised in the
consolidated income statement.
(c) IGO operates a home shopping business mainly by way of television media
in the PRC. As IGO had been making significant losses during the period and was
in a net liability position, the directors believe that there is a high
uncertainty in the foreseeable future that IGO can be operated as a going
concern. As such, the directors are of the view that, at 31 March 2009, 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$5,056,970, were fully impaired.
12. PREPAYMENTS AND OTHER RECEIVABLES
+----------------------------------------------+-----+----------------+
| | | 31 March 2009 |
+----------------------------------------------+-----+----------------+
| | | US$ |
+----------------------------------------------+-----+----------------+
| | | |
+----------------------------------------------+-----+----------------+
| Prepayments | | 29,334 |
+----------------------------------------------+-----+----------------+
| Other receivables | | 1,885 |
+----------------------------------------------+-----+----------------+
| | | |
+----------------------------------------------+-----+----------------+
| | | 31,219 |
+----------------------------------------------+-----+----------------+
13. CASH AND CASH EQUIVALENTS
+----------------------------------------------+-----+----------------+
| | | 31 March 2009 |
+----------------------------------------------+-----+----------------+
| | | US$ |
+----------------------------------------------+-----+----------------+
| | | |
+----------------------------------------------+-----+----------------+
| Cash at bank | | 3,010,412 |
+----------------------------------------------+-----+----------------+
| Short term bank deposits (maturing within 3 | | 4,014,600 |
| months) | | |
+----------------------------------------------+-----+----------------+
| | | |
+----------------------------------------------+-----+----------------+
| | | 7,025,012 |
+----------------------------------------------+-----+----------------+
14. AMOUNTS DUE TO DIRECTORS
Amounts are unsecured, interest-free and repayable on demands. The directors of
the Company consider that these balances' carrying amounts are approximate to
their fair value.
15. SHARE CAPITAL
+------------------------------------+------+--------------+--------------+
| | Note | Number of | Nominal |
| | | shares | Value |
+------------------------------------+------+--------------+--------------+
| | | | US$ |
+------------------------------------+------+--------------+--------------+
| | | | |
+------------------------------------+------+--------------+--------------+
| Authorised : | | | |
+------------------------------------+------+--------------+--------------+
| 200,000,000 ordinary shares of | (a) | 200,000,000 | 20,000,000 |
| US$0.1 each | | | |
+------------------------------------+------+--------------+--------------+
| | | | |
+------------------------------------+------+--------------+--------------+
| | | | |
+------------------------------------+------+--------------+--------------+
| 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 | (a) | 10 | 1 |
| 15 April 2008 | | | |
+------------------------------------+------+--------------+--------------+
| Issuance of ordinary shares of | | | |
| US$0.1 each | | | |
+------------------------------------+------+--------------+--------------+
| - public subscription on admission | (b) | 25,380,000 | 2,538,000 |
| to AIM of London Stock Exchange | | | |
+------------------------------------+------+--------------+--------------+
| | | | |
+------------------------------------+------+--------------+--------------+
| At 31 March 2009 | | 25,380,010 | 2,538,001 |
+------------------------------------+------+--------------+--------------+
Note :
(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 the admission of its shares to trading on the AIM of the 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 additional
working capital for financing the investments of the Group. The gross nominal
value of ordinary shares in respect of listing proceeds were US$2,538,000 and
the balance amounting to US$22,842,000 was credited to share premium.
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 purposes. The amount of capital
at 31 March 2009, US$24,520,113 is considered sufficient by the directors giving
due cognisance to the projected return on net assets and the forecast investment
opportunities.
16. SHARE PREMIUM
+----------------------------------------------+-----+----------------+
| | | 31 March 2009 |
+----------------------------------------------+-----+----------------+
| | | US$ |
+----------------------------------------------+-----+----------------+
| | | |
+----------------------------------------------+-----+----------------+
| At 5 July 2007 (date of incorporation) | | - |
+----------------------------------------------+-----+----------------+
| Share premium arising on issue of shares | | 22,842,000 |
+----------------------------------------------+-----+----------------+
| Less : offering costs | | (3,010,315) |
+----------------------------------------------+-----+----------------+
| | | |
+----------------------------------------------+-----+----------------+
| At 31 March 2009 | | 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 the AIM of the London
Stock Exchange, were debited to the share premium account.
17. 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$24,520,113 and on the
ordinary shares in issue of 25,380,010 shares at 31 March 2009.
18. INVESTMENTS IN SUBSIDIARIES
The Company invests in the convertible note instruments through its wholly-owned
subsidiaries. Particulars of the subsidiaries are as follows:
+---------------------+----------------+-------------+--------+----------+------------+
| Name | Country/place |Particulars | Percentage of | Principal |
| | of | of issued | equity | activities |
| |incorporation/ | and fully | interests | |
| | registration/ | paid up | held by the | |
| | operations | capital | Company | |
+---------------------+----------------+-------------+-------------------+------------+
| | | |Direct |Indirect | |
+---------------------+----------------+-------------+--------+----------+------------+
| | | | | | |
+---------------------+----------------+-------------+--------+----------+------------+
| Ace Aim Investments | British | US$1 | 100% | - | Investment |
| Limited <note a> | Virgin | | | | holding |
| | Islands | | | | |
+---------------------+----------------+-------------+--------+----------+------------+
| | | | | | |
+---------------------+----------------+-------------+--------+----------+------------+
| Mission Deluxe | British | US$1 | 100% | - | Investment |
| International | Virgin | | | | holding |
| Limited <note a> | Islands | | | | |
+---------------------+----------------+-------------+--------+----------+------------+
| | | | | | |
+---------------------+----------------+-------------+--------+----------+------------+
| Mission Rich | British | US$1 | 100% | - | Investment |
| International | Virgin | | | | holding |
| Limited <note a> | Islands | | | | |
+---------------------+----------------+-------------+--------+----------+------------+
| | | | | | |
+---------------------+----------------+-------------+--------+----------+------------+
| Camay International | British | US$1 | 100% | - | Investment |
| Limited <note b> | Virgin | | | | holding |
| | Islands | | | | |
+---------------------+----------------+-------------+--------+----------+------------+
Note :
(a) Wilfred Ying Wai Wong, the non-executive chairman of the Company, is also
the vice chairman of the parent company of Excellent Rise Investments Limited
("Excellent Rise"). On admission of the Company's shares to trading on the AIM
of the London Stock Exchange, Excellent Rise subscribed for 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 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.
(b) 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 Company, namely Ace Aim Investments Limited, Mission Deluxe
International Limited and Mission Rich International Limited, respectively.
(c) During the period since listing on 14 May 2008, the Company acquired one
issued and fully paid-up share in the capital of Camay International Limited
("Camay"), representing a 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 investment in convertible notes that
amounted to US$5 million issued by Aesthetic International Holdings Group
Limited.
All subsidiaries of the Company were solely established and acquired, as special
purpose entities and as investment holding companies, to hold the Company's
investment in the convertible notes.
19. MAJOR NON-CASH TRANSACTION
As disclosed in note 18(a), there was a major non-cash transaction in which
9,384,206 ordinary shares of US$0.1 each of the Company were issued to and
subscribed for by Excellent Rise at a consideration of US$9,384,206, to acquire
the three subsidiaries' entire issued share capital and their respective
subsidiaries' convertible note investments upon the admission of the Company's
shares to the AIM of the London Stock Exchange.
20. 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 the sole
shareholder of the Investment Adviser and therefore the Investment Adviser is
regarded as a related party. For the period ended 31 March 2009, the Group
incurred a total advisory fee of US$343,240 payable/ paid to the Investment
Adviser.
(b) As Wilfred Ying Wai Wong, the non-executive chairman of the Company, is
the vice chairman of the parent company of Excellent Rise, Excellent Rise is
regarded as a related party. As disclosed in note 18(a) and 19, Excellent Rise
subscribed a total of 12,820,000 ordinary shares of the Company, worth
equivalent to US$12,820,000 during the period.
(c) As disclosed in note 8, Wilfred Ying Wai Wong, the non-executive chairman
of the Company and Timothy Gwynne Barker, a non-executive director of the
Company, subscribed for 10 and 60,000 ordinary shares of the Company
respectively.
21. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Group's activities expose it to a variety of financial risks, which
substantially result from its operating and investing activities. In the view of
the directors, the Group's risk management is coordinated by the Investment
Adviser in close cooperation with the director, and focuses on actively securing
the Group's short to medium term cash flows.
The significant financial risks to which the Group is exposed, are described
below:
Credit risk
The Group's maximum exposure to credit risk is limited to the carrying amounts
of the following financial assets recognised at the balance sheet date, as
summarised below:
+----------------------------------------------+-----+----------------+
| | | 31 March 2009 |
+----------------------------------------------+-----+----------------+
| | | US$ |
+----------------------------------------------+-----+----------------+
| | | |
+----------------------------------------------+-----+----------------+
| Classes of financial assets - carrying | | |
| amounts: | | |
+----------------------------------------------+-----+----------------+
| Financial assets at fair value through | | 17,647,042 |
| profit or loss | | |
+----------------------------------------------+-----+----------------+
| Other receivables | | 1,885 |
+----------------------------------------------+-----+----------------+
| Cash and cash equivalents | | 7,025,012 |
+----------------------------------------------+-----+----------------+
| | | |
+----------------------------------------------+-----+----------------+
| | | 24,673,939 |
+----------------------------------------------+-----+----------------+
Credit risk is only disclosed in circumstances where the maximum potential loss
differs significantly from the carrying amounts of the above financial assets.
At 31 March 2009, the Group's credit risk is primarily attributable to its
investments in convertible note instruments. To minimise the credit risk, the
Group has formulated a defined investment policy and 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. During the period,
the directors have assessed the financial status and potential growth of the
investee companies and considered that full impairment provision should be made
against the convertible notes issued by IGO.
The credit risk on cash and cash equivalents is limited because the Group places
deposits with financial institutions in Singapore with credit rating A2
according to Moody's Investors Service.
Concentration risk
At 31 March 2009, the Group's financial assets exposed to credit risk are
concentrated in four unlisted convertible note instruments which approximate to
72 percent of the net assets of the Group at the 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.
+----------------------------------------------+-----+----------------+
| | | 31 March 2009 |
+----------------------------------------------+-----+----------------+
| | | US$ |
+----------------------------------------------+-----+----------------+
| | | |
+----------------------------------------------+-----+----------------+
| Convertible notes at fair value, as issued | | |
| by : | | |
+----------------------------------------------+-----+----------------+
| - Aesthetic International Holdings Group | | 11,911,769 |
| Limited | | |
+----------------------------------------------+-----+----------------+
| - Arigata Holdings Inc. | | 3,948,274 |
+----------------------------------------------+-----+----------------+
| - Creative Picture Development Limited | | 1,786,999 |
+----------------------------------------------+-----+----------------+
| - IGO Home Shopping Holdings Limited ("IGO") | | - |
+----------------------------------------------+-----+----------------+
| | | |
+----------------------------------------------+-----+----------------+
| | | 17,647,042 |
+----------------------------------------------+-----+----------------+
At 31 March 2009, the Group's market risk is affected by changes in the level or
volatility of market rates or prices, such as equity prices, interest rates and
foreign exchange rates.
If the price of convertible note instruments not traded in an active market were
changed based on the market risk variable as shown below, the decrease/increase
on net assets attributable to the Group would be approximately US$1,595,838 and
US$1,928,904 respectively.
+---------------+--------------+----------+---------+-------------+----------+-----------+
| | Valuation | Key | Change | Impact | Change | Impact |
| | methodology | market | (%) | on | (%) | on |
| | | risk | | post-tax | | post-tax |
| | | variable | | profit | | profit |
+---------------+--------------+----------+---------+-------------+----------+-----------+
| | | | | US$ | | US$ |
+---------------+--------------+----------+---------+-------------+----------+-----------+
| Financial | | | | | | |
| assets at | | | | | | |
| fair value | | | | | | |
| through | | | | | | |
| profit or | | | | | | |
| loss | | | | | | |
+---------------+--------------+----------+---------+-------------+----------+-----------+
| - Aesthetic | Discounted | Discount | +2% | (1,029,563) | -2% | 1,421,447 |
| International | cash flow | rate | | | | |
| Holdings | and option | | | | | |
| Group Limited | pricing | | | | | |
| | model | | | | | |
+---------------+--------------+----------+---------+-------------+----------+-----------+
| | | | | | | |
+---------------+--------------+----------+---------+-------------+----------+-----------+
| - Arigata | Discounted | Discount | +2% | (426,131) | -2% | 306,290 |
| Holdings | cash flow | rate | | | | |
| Inc. | and option | | | | | |
| | pricing | | | | | |
| | model | | | | | |
+---------------+--------------+----------+---------+-------------+----------+-----------+
| | | | | | | |
+---------------+--------------+----------+---------+-------------+----------+-----------+
| - Creative | Discounted | Discount | +2% | (140,144) | -2% | 201,167 |
| Picture | cash flow | rate | | | | |
| Development | and option | | | | | |
| Limited | pricing | | | | | |
| | model | | | | | |
+---------------+--------------+----------+---------+-------------+----------+-----------+
| | | | | | | |
+---------------+--------------+----------+---------+-------------+----------+-----------+
| TOTAL | | | | (1,595,838) | | 1,928,904 |
+---------------+--------------+----------+---------+-------------+----------+-----------+
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$. However, the investments in the convertible notes held
by the Group are issued by investee undertakings located in the PRC. Any change
in the US$/RMB exchange rate will therefore affect the fair value of these
investments.
The Investment Adviser monitors the Group's exposure to foreign currencies
periodically and reports to the board on a regular basis. At 31 March 2009, had
the exchange rate between US$ and RMB increased or decreased by 5% with all
other variables held constant, the increase or decrease respectively in net
assets attributable to the Group from operations would amount to approximately
US$882,352.
Interest rate risk
The Group is not exposed to any significant interest rate risk because the
convertible note instruments bear interest at specific rates per annum from the
date of the instrument until the date of redemption or conversion of the
convertible note.
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.
Fair value estimation
The fair value of financial instruments that are not quoted in an active market
is determined by using valuation techniques. The Group appointed an independent
professional valuer to make assumptions based on market conditions current at
the balance sheet date. Valuation techniques such as comparable recent arm's
length transactions, discounted cash flow analysis and other valuation
techniques commonly used by market participants have been used. Due to the
inherent uncertainty of valuations, however, estimated fair values may differ
significantly from the values that would have been used had a readily available
market existed and the differences could be material.
In cases where the carrying amount is a reasonable approximation of fair value
such as short-term receivables and payables, no additional fair value is
disclosed. All current assets and current liabilities are short-term in nature.
The Audit Committee had reviewed with the external auditors the audited
financial statements of the Group for the period from 5 July 2007 (date of
incorporation) to 31 March 2009.
- Ends -
This information is provided by RNS
The company news service from the London Stock Exchange
END
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