TIDMYCI
RNS Number : 6014D
Yangtze China Investment Limited
04 December 2009
?
+-------------------------------------+-------------------------------------------+
| Press Release | 4 December 2009 |
+-------------------------------------+-------------------------------------------+
Yangtze China Investment Limited
("Yangtze" or "the Company")
Interim Results
Yangtze China Investment Limited (AIM:YCI), a provider of expansion capital to
China-based enterprises, today announces its interim results for the six months
ended 30 September 2009 ("the Period").
Financial Highlights
+----+------------------------------------------------------------------------------------------------------+
| -- | NAV maintained at US$24.1 million (31 March 2009: US$24.5 million) |
+----+------------------------------------------------------------------------------------------------------+
| -- | NAV per share maintained at US$0.95 (31 March 2009: US$0.97) |
+----+------------------------------------------------------------------------------------------------------+
| -- | Current cash and cash equivalents total US$6.6 million |
+----+------------------------------------------------------------------------------------------------------+
Commenting on the results, Mr Wilfred Wong, Chairman of Yangtze China Investment
Limited, said: "I am pleased to report that our NAV per share was maintained at
US$0.95, a position similar to that at our last year end. Our investment in a
beauty spa franchise network appreciated substantially last year and it
continues to operate with impressive growth in profitability in the current
period. During these challenging times, we have been exceptionally cautious in
our investment decision-making, but we remain confident of the immense growth
opportunities in the Chinese consumer market."
"With global markets stabilising and China's economy showing signs of recovery,
Yangtze has been actively looking for further investment opportunities. Our
current cash position of US$6.6 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's economy has been growing rapidly during the past few years. Despite
the recent global financial challenge, China's real GDP increased at an annual
rate of 7.7% in the first nine months of 2009. 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 |
+-------------------------------------------+----------------------------+
| | 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-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 the interim results of Yangtze China Investment Limited
for the six months ended 30 September 2009. At 30 September 2009, the NAV per
share of Yangtze was maintained at US$0.95 (31 March 2009: US$0.97) and the
Company's NAV was US$24.1 million compared to US$24.5 million at the last
year-end.
During the period under review, Yangtze took a cautious approach while global
economies were recovering from the downturn. The Company continues to focus on
post-investment monitoring initiatives and protecting profits in its investee
companies. Although the Company has not yet closed any new investment in the
period, it has contained its operating costs with recurring expenses reduced by
6.3% and the non-recurring impairment loss also reduced by US$5.1 million as
compared to last year.
The effects of the recent global financial downturn in 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. Now that China's economy has shown
signs of recovery, predominantly driven by the rapid and aggressive deployment
of the PRC Government's stimulus package and the relatively strong trend of
domestic consumption, China's economic outlook is encouraging although still be
filled with both challenges and opportunities. The Company remains confident
that China's underlying economic strength and the PRC Government's macroeconomic
stimulus will continue to further position China as one of the world's major
economies.
During the period under review, Aesthetic International Holdings Group Limited,
a beauty spa franchise based in Beijing, China, continued to record impressive
growth in profitability as a result of benefiting from the PRC 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$6.6 million. Whilst the Company
continues to follow a cautious approach, it also continues to pursue actively
potential investments with appropriate due diligence. The Board of Directors
is confident that Yangtze is well positioned to capitalise on the opportunities
ahead.
Wilfred Ying Wai WONG
Chairman
3 December 2009
Investment Adviser's Report
During the period under review, the Company continued to act on its promise as
announced in its interim results last year, and has focused 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 in light of the current economic
conditions. Even though China's economy has shown signs of recovery, Yangtze
will continue to follow this approach.
In addition, the Company continues to explore investment opportunities where the
Company can increase its valuation by investing in companies that are
revenue-generating, ideally profitable or anticipated to generate profits
imminently.
Despite the recent global financial challenge, Yangtze believes that its current
portfolio companies excluding IGO are well positioned to deliver profits and
benefit from China's growing domestic consumer 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. 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 and generates revenues principally through its product sales as well as
licensing and franchising fees. At 30 September 2009, Aesthetic had both
franchised and sub-franchised, through its agents, over 2,000 beauty centres
throughout China, an increase of 13% during the period under review as compared
to the position at 31 March 2009.
* During the period under review, the four regional management centres established
last year in Chengdu, Shenyang, Guangzhou and Dalian have successfully captured
new business opportunities. These regional centres help to enhance purchases
from existing franchisees, serve as an important showcase for attracting new
franchisees, enhance management control over Aesthetic's franchisees and also
facilitate technical as well as logistical support to its beauty centres. To
strengthen its competitive position in the market, Aesthetic will continue to
expand into strategic markets by providing localised supporting services.
* 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, a new cosmetics product line was soft-launched in the 3rd
quarter of 2009 and another new toiletries product line is expected to be rolled
out by the 1st quarter of 2010.
* The medical beauty clinic in Shenyang, which is a joint venture with a renowned
Chinese medicine licensed practice, has been launched in the 4th quarter of
2009. Asethetic is now be able to provide a range of medical cosmetic therapies
and Chinese health and beauty treatments including hair replacement, botox and
cosmetic surgery, and body reshape. With regards to the beauty training school
in Chengdu, Asethetic is awaiting relevant government approvals and confirmation
of curriculum assessment and accreditation before it can officially recruit
students for cosmetology and beauty therapy-related courses. The beauty training
school is expected to commence operation by early 2010.
* Improving operating efficiencies has always been a key focus in Aesthetic's
operations. During the 3rd quarter of 2009, Asethetic moved its headquarters in
Beijing to more spacious premises to cope with its expanding operations, and
completed setting up a call centre to facilitate the communications/conferences
between departments in the headquarters and regional management centres. In
addition, an in-house franchise management system has also been developed and
put into use to strengthen its franchise operations.
Arigata Holdings Inc. ("Onbest")
Onbest, a designer and manufacturer of cash registers, has fine-tuned its
product and market strategy 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. The
certification and verification of industry standards for the handheld POS device
from VISA and MasterCard, which are known to set very strict security
requirements, are at the final stage of approval. It is expected that the whole
data security certification process will be completed by the 1st quarter of
2010. At the same time, the initial orders received from customers in North
America for the handheld POS device are in the process for production for
delivery by then.
* 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. However, considerable time and effort
will be required in order to tap into the China electronic payment market.
* 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.
* Owing to anticipated good response from viewers, an additional 40 minutes of 3-D
content was requested, leading to the completion of the production of the 3-D TV
drama being postponed to September 2009. Accordingly, the TV drama was
re-scheduled for broadcast under China's state-owned TV channel in the 1st
quarter of 2010 and the movie version of which will also be shown in cinemas
afterwards. In addition to receiving revenue income for the production of the
3-D content, Creative Picture will also participate in sharing the copyrights of
the movie.
* Creative Picture continues to deliver their work on the 3-D content production
with another Chinese media company on a cartoon movie which is expected to be
completed by the end of 2009. Y 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. A growing demand for 3-D and 3-D
ready visualisation facilities and other available content is therefore
expected. Creative Picture expects its future revenue to derive primarily from
the content development and sale of visualisation facilities.
* Creative Picture also participated in Screen Media Expo in April 2009 in London
to enhance profile and exposure. To further promote its brand image to overseas
potential customers, Creative Picture plans to increase its participation at
international exhibitions in 2010. Y Creative Picture continues to market its products by means of model showcases
installed at prominent spots, including museums, airports and train stations.
IGO Home Shopping Holdings Limited ("IGO")
As announced in last year'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.
* Owing to the unexpected slowdown of China's retail market after the financial
turmoil in 2008, the increased coverage was not able to generate the necessary
income to offset its higher media cost. In consultation with IGO, Shanghai IGO
scaled down media coverage and retrenched staff in order to conserve its cash
outflow.
* During the period under review, IGO's founding and management shareholders have
raised additional funds to keep IGO afloat and changed IGO's business focus on
e-Commerce sales. IGO has also downsized its TV media coverage to only 2 PRC
cities (previously 15 cities) whereby it is only required to pay for airtime
based on a revenue sharing basis as opposed to a fixed monthly fee for airtime
on TV.
* IGO is actively seeking new investors for additional funding and is 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. According World Bank reports in 2009, China was also
ranked the second largest in terms of purchasing power parity in 2005. China
has been undergoing rapid urbanization due to the rapid growth of its economy.
This has increased the purchasing power of the overall population and
contributed to the significant growth of China's consumer market in recent
years. Therefore, 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 downturn has impacted strongly on 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 and a
relatively strong trend of domestic consumption, China's real GDP grew at a 7.7%
annual rate over the first nine months of 2009, and there have been estimates
(e.g. by the World Bank) that the growth in 2009 will likely be in the region of
8.0%.
Outlook
With global markets showing signs of stabilising and China's economy projected
to remain robust in 2009, Yangtze will continue its focus on post-investment
monitoring initiatives. At the same time, Yangtze will also step up its efforts
to actively look for further investment opportunities. Its current cash
position of US$6.6 million places the Company in an excellent position to invest
in good-quality assets at attractive entry valuations as and when suitable
opportunities arise.
Yangtze Capital Advisory Limited
Investment Adviser
3 December 2009
Portfolio Summary
At 30 September 2009, the Company's total assets amounted to US$24.1 million.
About US$17.6 million were investments in four companies in the form of
convertible note instruments at fair values.
The following table summarises the status of the Company's portfolio at 30
September 2009:
+---------------+------------+------------+----------------+-------------+------------+---------------+
| Description | Industry | Time of | Purchase | As of 30 September 2009 |
| | / Location | Investment | cost (US$) (1) | |
| | | by the | | |
| | | Company | | |
+ + + + +------------------------------------------+
| | | | | Fair | Change on | % of |
| | | | | value (US$) | cost (US$) | ownership (on |
| | | | | | | full |
| | | | | | | conversion |
| | | | | | | into |
| | | | | | | shares)(2) |
| | | | | | | |
+---------------+------------+------------+----------------+-------------+------------+---------------+
| 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 | |
+---------------+------------+------------+----------------+-------------+------------+---------------+
(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.
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 (the "Company") and its subsidiaries (collectively referred
to as the "Group") which comprise the condensed consolidated statement of
financial position as of 30 September 2009, and the related condensed
consolidated statement of comprehensive income, the condensed consolidated
statement of changes in equity and the condensed consolidated statement of cash
flows for the six-month period then ended, 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 the International Accounting Standard 34.
Grant Thornton
Certified Public Accountants
6th Floor, Nexxus Building
41 Connaught Road Central
Hong Kong
3 December 2009
Condensed consolidated statement of comprehensive income for the six months
ended 30 September 2009
+----------------------+--------+--------+-------------------+-------------------+-------------------+
| | | Six months ended 30 | From 5 July 2007 (date of |
| | | September 2009 | incorporation) to |
| | | | 30 September |
| | | | 2008 |
+----------------------+--------+----------------------------+---------------------------------------+
| | Note | US$ | US$ |
+----------------------+--------+----------------------------+---------------------------------------+
| | | (Unaudited) | (Unaudited) |
+----------------------+--------+----------------------------+---------------------------------------+
| | | | (Restated) |
+----------------------+--------+----------------------------+---------------------------------------+
| | | | |
+----------------------+--------+----------------------------+---------------------------------------+
| Impairment | 12 | - | (5,056,970) |
| loss on | | | |
| financial | | | |
| assets at | | | |
| fair value | | | |
| through | | | |
| profit or | | | |
| loss | | | |
+----------------------+--------+----------------------------+---------------------------------------+
| Interest | 6 | 17,660 | 8,685 |
| income | | | |
+----------------------+--------+----------------------------+---------------------------------------+
| | | | |
+----------------------+--------+----------------------------+---------------------------------------+
| | | 17,660 | (5,048,285) |
+----------------------+--------+----------------------------+---------------------------------------+
| | | | |
+----------------------+--------+----------------------------+---------------------------------------+
| Expenses | | | |
+----------------------+--------+----------------------------+---------------------------------------+
| Auditors' | | (16,121) | (38,082) |
| remuneration | | | |
+----------------------+--------+----------------------------+---------------------------------------+
| Administration | 7 | (54,832) | (45,554) |
| fee | | | |
+----------------------+--------+----------------------------+---------------------------------------+
| Advisory | 8 | (231,138) | (170,155) |
| fee | | | |
+----------------------+--------+----------------------------+---------------------------------------+
| Directors' | 9 | (40,000) | (132,500) |
| fees | | | |
+----------------------+--------+----------------------------+---------------------------------------+
| Legal | | (45,693) | - |
| and | | | |
| professional | | | |
| fees | | | |
+----------------------+--------+----------------------------+---------------------------------------+
| Marketing | | (34,214) | (32,397) |
| and | | | |
| communication | | | |
| fees | | | |
+----------------------+--------+----------------------------+---------------------------------------+
| Retainer | | (38,804) | (22,639) |
| fees | | | |
+----------------------+--------+----------------------------+---------------------------------------+
| Other | | (21,532) | (73,687) |
| operating | | | |
| expenses | | | |
+----------------------+--------+----------------------------+---------------------------------------+
| | | | |
+----------------------+--------+----------------------------+---------------------------------------+
| | | (482,334) | (515,014) |
+----------------------+--------+----------------------------+---------------------------------------+
| | | | |
+----------------------+--------+----------------------------+---------------------------------------+
| Loss | | (464,674) | (5,563,299) |
| before | | | |
| taxation | | | |
+----------------------+--------+----------------------------+---------------------------------------+
| | | | |
+----------------------+--------+----------------------------+---------------------------------------+
| Taxation | 10 | - | - |
+----------------------+--------+----------------------------+---------------------------------------+
| | | | |
+----------------------+--------+----------------------------+---------------------------------------+
| | | | |
+----------------------+--------+----------------------------+---------------------------------------+
| Loss | | (464,674) | (5,563,299) |
| for | | | |
| the | | | |
| period | | | |
+----------------------+--------+----------------------------+---------------------------------------+
| | | | |
+----------------------+--------+----------------------------+---------------------------------------+
| | | | |
+----------------------+--------+----------------------------+---------------------------------------+
| Other | | | |
| comprehensive | | | |
| loss for the | | | |
| period | | | |
+----------------------+--------+----------------------------+---------------------------------------+
| - | | | |
| Exchange | | | |
| loss on | | | |
| translation | | | |
| of | | | |
| financial | | | |
+----------------------+--------+----------------------------+---------------------------------------+
| | | (1,625) | (1,922) |
| statements | | | |
| of foreign | | | |
| operations | | | |
+----------------------+--------+----------------------------+---------------------------------------+
| | | | |
+----------------------+--------+----------------------------+---------------------------------------+
| | | | |
+----------------------+--------+----------------------------+---------------------------------------+
| Total | | (466,299) | (5,565,221) |
| comprehensive | | | |
| loss | | | |
| attributable | | | |
| to | | | |
| shareholders | | | |
| of the | | | |
| Company | | | |
+----------------------+--------+----------------------------+---------------------------------------+
| | | | |
+----------------------+--------+----------------------------+---------------------------------------+
| | | | |
+----------------------+--------+----------------------------+---------------------------------------+
| Loss | 11 | | |
| per | | | |
| share | | | |
| attributable | | | |
| to | | | |
| shareholders | | | |
| of the | | | |
| Company | | | |
| during the | | | |
| period | | | |
+----------------------+--------+----------------------------+---------------------------------------+
| | | | |
+----------------------+--------+----------------------------+---------------------------------------+
| - | | (US$0.02) | (US$0.22) |
| Basic | | | |
+----------------------+--------+----------------------------+---------------------------------------+
| - | | N/A | N/A |
| Diluted | | | |
+----------------------+--------+----------------------------+---------------------------------------+
| | | | |
+----------------------+--------+--------+-------------------+-------------------+-------------------+
Condensed consolidated statement of financial position as at 30 September 2009
+-----------------------------------+------+------------------+---------------+
| | Note | 30 September | 31 March 2009 |
| | | 2009 | |
+-----------------------------------+------+------------------+---------------+
| | | (Unaudited) | (Audited) |
+-----------------------------------+------+------------------+---------------+
| | | US$ | US$ |
+-----------------------------------+------+------------------+---------------+
| | | | |
+-----------------------------------+------+------------------+---------------+
| Non-current assets | | | |
+-----------------------------------+------+------------------+---------------+
| Financial assets at fair | 12 | 17,647,042 | 17,647,042 |
| value through profit or | | | |
| loss | | | |
+-----------------------------------+------+------------------+---------------+
| | | | |
+-----------------------------------+------+------------------+---------------+
| | | | |
+-----------------------------------+------+------------------+---------------+
| Current assets | | | |
+-----------------------------------+------+------------------+---------------+
| Prepayments and other receivables | | 42,354 | 31,219 |
+-----------------------------------+------+------------------+---------------+
| Cash and cash equivalents | 13 | 6,605,282 | 7,025,012 |
+-----------------------------------+------+------------------+---------------+
| | | | |
+-----------------------------------+------+------------------+---------------+
| | | 6,647,636 | 7,056,231 |
+-----------------------------------+------+------------------+---------------+
| | | | |
+-----------------------------------+------+------------------+---------------+
| | | | |
+-----------------------------------+------+------------------+---------------+
| Current liabilities | | | |
+-----------------------------------+------+------------------+---------------+
| Accrued expenses and other | | 169,163 | 138,779 |
| payables | | | |
+-----------------------------------+------+------------------+---------------+
| Amount due to directors | 14 | 1,786 | 44,381 |
+-----------------------------------+------+------------------+---------------+
| Amount due to investment adviser | 14 | 69,915 | - |
+-----------------------------------+------+------------------+---------------+
| | | | |
+-----------------------------------+------+------------------+---------------+
| | | 240,864 | 183,160 |
+-----------------------------------+------+------------------+---------------+
| | | | |
+-----------------------------------+------+------------------+---------------+
| Net current assets | | 6,406,772 | 6,873,071 |
+-----------------------------------+------+------------------+---------------+
| | | | |
+-----------------------------------+------+------------------+---------------+
| Net assets | | 24,053,814 | 24,520,113 |
+-----------------------------------+------+------------------+---------------+
| | | | |
+-----------------------------------+------+------------------+---------------+
| | | | |
+-----------------------------------+------+------------------+---------------+
| Net assets attributable to | | | |
| shareholders of the | | | |
| Company | | | |
+-----------------------------------+------+------------------+---------------+
| Share capital | 15 | 2,538,001 | 2,538,001 |
+-----------------------------------+------+------------------+---------------+
| Share premium | | 19,831,685 | 19,831,685 |
+-----------------------------------+------+------------------+---------------+
| Retained earnings | | 1,684,128 | 2,150,427 |
+-----------------------------------+------+------------------+---------------+
| | | | |
+-----------------------------------+------+------------------+---------------+
| | | 24,053,814 | 24,520,113 |
+-----------------------------------+------+------------------+---------------+
| | | | |
+-----------------------------------+------+------------------+---------------+
| | | | |
+-----------------------------------+------+------------------+---------------+
| Number of ordinary shares in | | 25,380,010 | 25,380,010 |
| issue | | | |
+-----------------------------------+------+------------------+---------------+
| | | | |
+-----------------------------------+------+------------------+---------------+
| Net asset value per ordinary | 16 | US$0.95 | US$0.97 |
| share | | | |
+-----------------------------------+------+------------------+---------------+
| | | | |
+-----------------------------------+------+------------------+---------------+
Condensed consolidated statement of cash flow for the six months ended 30
September 2009
+-----------------------------------+----+----------------+-------------------+
| | | Six months | From 5 July 2007 |
| | | ended 30 | (date of |
| | | September 2009 | incorporation) |
| | | | to |
| | | | 30 September |
| | | | 2008 |
+-----------------------------------+----+----------------+-------------------+
| | | US$ | US$ |
+-----------------------------------+----+----------------+-------------------+
| | | (Unaudited) | (Unaudited) |
+-----------------------------------+----+----------------+-------------------+
| Net cash (outflow)/ inflow from : | | | |
+-----------------------------------+----+----------------+-------------------+
| | | | |
+-----------------------------------+----+----------------+-------------------+
| Operating activities | | (419,730) | (404,296) |
+-----------------------------------+----+----------------+-------------------+
| Investing activities | | - | (5,136,718) |
+-----------------------------------+----+----------------+-------------------+
| Financing activities | | - | 12,985,480 |
+-----------------------------------+----+----------------+-------------------+
| | | | |
+-----------------------------------+----+----------------+-------------------+
| | | | |
+-----------------------------------+----+----------------+-------------------+
| Net (decrease)/increase in | | (419,730) | 7,444,466 |
| cash and cash equivalents | | | |
+-----------------------------------+----+----------------+-------------------+
| | | | |
+-----------------------------------+----+----------------+-------------------+
| Cash and cash equivalents | | 7,025,012 | - |
| at beginning of period | | | |
+-----------------------------------+----+----------------+-------------------+
| | | | |
+-----------------------------------+----+----------------+-------------------+
| | | | |
+-----------------------------------+----+----------------+-------------------+
| Cash and cash equivalents | | 6,605,282 | 7,444,466 |
| at end of period | | | |
+-----------------------------------+----+----------------+-------------------+
| | | | |
+-----------------------------------+----+----------------+-------------------+
| | | | |
+-----------------------------------+----+----------------+-------------------+
| Analysis of balances of | | | |
| cash and cash equivalents: | | | |
+-----------------------------------+----+----------------+-------------------+
| | | | |
+-----------------------------------+----+----------------+-------------------+
| Cash at bank | | 105,282 | 944,466 |
+-----------------------------------+----+----------------+-------------------+
| Short term bank deposits | | 6,500,000 | 6,500,000 |
+-----------------------------------+----+----------------+-------------------+
| | | | |
+-----------------------------------+----+----------------+-------------------+
| | | 6,605,282 | 7,444,466 |
+-----------------------------------+----+----------------+-------------------+
| | | | |
+-----------------------------------+----+----------------+-------------------+
Condensed consolidated statement of
changes in equity for the six months ended 30 September 2009
+---------------------------------+-------------+-------------+--------------+-------------+
| | Share | Share | Retained | Total |
| | capital | premium | earnings/ | |
| | | | (Accumulated | |
| | | | losses) | |
+---------------------------------+-------------+-------------+--------------+-------------+
| | (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 | 2,538,000 | 19,831,685 | - | 22,369,685 |
| subscription on | | | | |
| admission to AIM | | | | |
| of London Stock | | | | |
| Exchange | | | | |
+---------------------------------+-------------+-------------+--------------+-------------+
| | | | | |
+---------------------------------+-------------+-------------+--------------+-------------+
| Transactions with shareholders | 2,538,001 | 19,831,685 | - | 22,369,686 |
+---------------------------------+-------------+-------------+--------------+-------------+
| | | | | |
+---------------------------------+-------------+-------------+--------------+-------------+
| Loss for the period (restated) | - | - | (5,563,299) | (5,563,299) |
+---------------------------------+-------------+-------------+--------------+-------------+
| Other comprehensive loss | | | | |
+---------------------------------+-------------+-------------+--------------+-------------+
| - Exchange loss on translation | | | | |
| of | | | | |
+---------------------------------+-------------+-------------+--------------+-------------+
| financial statements of | - | - | (1,922) | (1,922) |
| foreign operations | | | | |
+---------------------------------+-------------+-------------+--------------+-------------+
| | | | | |
+---------------------------------+-------------+-------------+--------------+-------------+
| Total comprehensive loss for | - | - | (5,565,221) | (5,565,221) |
| the period | | | | |
+---------------------------------+-------------+-------------+--------------+-------------+
| | | | | |
+---------------------------------+-------------+-------------+--------------+-------------+
| At 30 September 2008 | 2,538,001 | 19,831,685 | (5,565,221) | 16,804,465 |
| (unaudited) (restated) | | | | |
+---------------------------------+-------------+-------------+--------------+-------------+
| | | | | |
+---------------------------------+-------------+-------------+--------------+-------------+
| | | | | |
+---------------------------------+-------------+-------------+--------------+-------------+
| At 1 April 2009 | 2,538,001 | 19,831,685 | 2,150,427 | 24,520,113 |
+---------------------------------+-------------+-------------+--------------+-------------+
| Loss for the period | - | - | (464,674) | (464,674) |
+---------------------------------+-------------+-------------+--------------+-------------+
| Other comprehensive loss | | | | |
+---------------------------------+-------------+-------------+--------------+-------------+
| - Exchange loss on translation | | | | |
| of | | | | |
+---------------------------------+-------------+-------------+--------------+-------------+
| financial | - | - | (1,625) | (1,625) |
| statements of | | | | |
| foreign | | | | |
| operations | | | | |
+---------------------------------+-------------+-------------+--------------+-------------+
| | | | | |
+---------------------------------+-------------+-------------+--------------+-------------+
| Total comprehensive loss for | - | - | (466,299) | (466,299) |
| the period | | | | |
+---------------------------------+-------------+-------------+--------------+-------------+
| | | | | |
+---------------------------------+-------------+-------------+--------------+-------------+
| At 30 September 2009 | 2,538,001 | 19,831,685 | 1,684,128 | 24,053,814 |
| (unaudited) | | | | |
+---------------------------------+-------------+-------------+--------------+-------------+
| | | | | |
+---------------------------------+-------------+-------------+--------------+-------------+
Notes to the condensed consolidated
interim financial information
1. GENERAL INFORMATION
Yangtze China Investment Limited (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.
The principal activity of the Company is investment holding. Details of the
Company's subsidiaries are set out in note 17 to the condensed consolidated
interim 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 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 unaudited interim financial information of the Group for the six months
ended 30 September 2009 were authorised for issue by the directors of the
Company on 3 December 2009.
2. ADOPTION OF NEW OR AMENDED IFRSs
In the current period, the Group has applied for the first time the following
new or amended IFRSs issued by the IASB, which are relevant to and effective for
the Group's financial statements for the annual financial period beginning on 1
April 2009.
+---------------------+---------------------------------------------+
| IAS 1 (Revised) | Presentation of Financial |
| | Statements |
+---------------------+---------------------------------------------+
| IAS 23 (Revised) | Borrowing Costs |
+---------------------+---------------------------------------------+
| IAS 32, | Puttable Financial |
| IAS39 and | Instruments and Obligations |
| IFRS7 | Arising on Liquidation |
| (Amendments) | |
+---------------------+---------------------------------------------+
| IFRS 1 and | Cost of an Investment in a |
| IAS 27 | Subsidiary, Jointly Controlled |
| (Amendment) | Entity or an Associate |
+---------------------+---------------------------------------------+
| IFRS 2 | Share-based Payment - Vesting |
| (Amendment) | Conditions and Cancellations |
+---------------------+---------------------------------------------+
| IFRS 7 | Improving Disclosures about |
| (Amendment) | Financial Instruments |
+---------------------+---------------------------------------------+
| IFRS 8 | Operating Segments |
+---------------------+---------------------------------------------+
| IFRIC - Int | Reassessment of Embedded |
| 9 & IAS 39 | Derivatives |
| (Amendment) | |
+---------------------+---------------------------------------------+
| Various | Annual Improvements to IFRSs |
| | 2008 |
+---------------------+---------------------------------------------+
Other than as noted below, the adoption of these new or amended IFRSs did not
change the Group's accounting policies as followed in the preparation of the
Group's financial statements for the period ended 31 March 2009.
IAS 1 (Revised) - Presentation of financial statements
The adoption of IAS 1 (Revised) makes certain changes to the format and titles
of the primary financial statements and to the presentation of some items within
these statements. It also gives rise to additional disclosures. The measurement
and recognition of the Group's assets, liabilities, income and expenses is
unchanged. However, some items that were recognised directly in equity are now
recognised in other comprehensive income. IAS 1 affects the presentation of
owner changes in equity and introduces a "Statement of comprehensive income".
Comparatives have been restated to conform with the revised standard.
IFRS 8 Operating segments
The adoption of IFRS 8 has not affected the identified and reportable operating
segments for the Group. However, reported segment information is now based on
internal management reporting information that is regularly reviewed by the
chief operating decision maker. In the previous annual financial statements,
segments were identified by reference to the dominant source and nature of the
Group's risks and returns.
Adoption of new or amended IFRSs
The Group has not early adopted the following new and amended IFRSs, which have
been published but are not yet effective:
+--------------------+----------------------------------------------------+
| IAS 24 (Revised) | Related Party Disclosures 5 |
+--------------------+----------------------------------------------------+
| IAS 27 (Revised) | Consolidated and Separate Financial Statements 1 |
+--------------------+----------------------------------------------------+
| IAS 32 (Amendment) | Financial Instruments: Presentation - |
| | Classification of Rights Issues 4 |
+--------------------+----------------------------------------------------+
| IAS 39 (Amendment) | Eligible Hedged Items 1 |
+--------------------+----------------------------------------------------+
| IFRS 1 (Revised) | First-time Adoption of Hong Kong Financial |
| | Reporting Standards 1 |
+--------------------+----------------------------------------------------+
| IFRS 1 (Amendment) | Additional Exemptions for First-time Adopters 3 |
+--------------------+----------------------------------------------------+
| IFRS 2 (Amendment) | Group Cash-Settled Share-Based Payment |
| | Transactions 3 |
+--------------------+----------------------------------------------------+
| IFRS 3 (Revised) | Business Combinations 1 |
+--------------------+----------------------------------------------------+
| IFRS 9 | Financial Instruments 7 |
+--------------------+----------------------------------------------------+
| IFRIC - Int 14 | IAS19 - The Limit on a Defined Benefit Asset, |
| (Amendment) | Minimum Funding Requirements and their Interaction |
| | 6 |
+--------------------+----------------------------------------------------+
| IFRIC - Int 17 | Distributions of Non-cash Assets to Owners 1 |
+--------------------+----------------------------------------------------+
| IFRIC - Int 18 | Transfer of Assets from Customers 2 |
+--------------------+----------------------------------------------------+
| IFRIC - Int 19 | Extinguishing Financial Liabilities with Equity |
| | Instruments 5 |
+--------------------+----------------------------------------------------+
| Various | Annual Improvements to IFRSs 2009 8 |
+--------------------+----------------------------------------------------+
+---+---------------------------------------------------------------------+
| 1 | Effective for annual periods beginning on or after 1 July 2009 |
+---+---------------------------------------------------------------------+
| 2 | Effective for transfer received on or after 1 July |
| | 2009 |
+---+---------------------------------------------------------------------+
| 3 | Effective for annual periods beginning on or after 1 |
| | January 2010 |
+---+---------------------------------------------------------------------+
| 4 | Effective for annual periods beginning on or after 1 |
| | February 2010 |
+---+---------------------------------------------------------------------+
| 5 | Effective for annual periods beginning on or after 1 |
| | July 2010 |
+---+---------------------------------------------------------------------+
| 6 | Effective for annual periods beginning on or after 1 |
| | January 2011 |
+---+---------------------------------------------------------------------+
| 7 | Effective for annual periods beginning on or after 1 |
| | January 2013 |
+---+---------------------------------------------------------------------+
| 8 | Generally effective for annual periods beginning on or |
| | after 1 January 2010 unless otherwise stated in the |
| | specific IFRSs |
+---+---------------------------------------------------------------------+
The directors of the Company anticipate that all of the pronouncements will be
adopted in the Group's accounting policy for the first period beginning after
the effective date of the pronouncement.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of preparation
The unaudited interim financial information have been prepared in accordance
with the applicable disclosure provisions of the AIM Rules and International
Accounting Standard ("IAS") 34 "Interim Financial Reporting" as adopted by the
EU.
The interim financial report does not include all the information and
disclosures required in the annual financial statements, and should be read in
conjunction with the Group's annual financial statements for the period ended 31
March 2009.
(b) CONSOLIDATION
The Group's financial statements consolidate those of the Company and all of its
subsidiaries drawn up to 30 September 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 consistently 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 disposals, as applicable.
(c) FINANCIAL ASSETS
The Group's financial assets are convertible notes designated as 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 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.
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 designed 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 asset 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 deigned 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 separate 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 reporting 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 profit or loss. The net gain or loss recognised in
the profit or loss. The net gain or loss recognised in the profit or loss
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 reporting 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 designed 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 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 profit or loss.
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 profit or loss.
(f) FOREIGN CURRENCIES
The unaudited interim financial information are presented in the currency of
United States Dollars ("US$"), which is the presentation and functional currency
of the Group.
Items included in the Group's unaudited interim financial information are
measured using the currency of the primary economic environment in which the
entities within the Group operate (the "functional currency"). Transactions in
foreign currencies are translated into the respective functional currencies at
the approximate rates ruling on the dates of the transactions. Monetary assets
and liabilities denominated in foreign currencies are translated into the
respective functional currencies at the approximate rates ruling on the
reporting date. Gains and losses arising on exchange are dealt with in the
profit or loss.
In the consolidated financial statements, all individual financial statements of
foreign operations, originally presented in a currency different from the
Group's presentation currency, have been converted into US$. Assets and
liabilities have been translated into US$ at the closing rate at the reporting
date. Income and expenses have been converted into US$ at the exchange rates
ruling at the transaction dates, or at the average rates over the reporting
period, provided that the exchange rate do not fluctuate significantly. Any
differences on translation of financial statements of foreign operations are
recognised in the other comprehensive income and accumulated in equity.
(g) 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.
(h) 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 profit or loss because it
excludes items of income and expense that are taxable or deductible in other
periods, and it further excludes profit or loss 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
reporting 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.
Deferred tax assets and liabilities are not recognised if the temporary
difference arises from initial recognition of assets and liabilities in a
transaction that not a business combination and 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 note reverse in the foreseeable
future.
(i) 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 recognised at fair value and subsequently measured at amortised cost
using the effective interest method, less any impairment losses.
(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/INVESTMENT ADVISER
Amounts due to directors/investment adviser 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.
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 profit or
loss and the carrying amount of these financial assets at fair value through
profit or loss included in the consolidated balance sheet.
5. SEGMENT INFORMATION
Under IFRS 8, reported segment information is based on internal management
reporting information that is regularly reviewed by the Directors. The Directors
assess segment profit or loss using a measure of operating profit. The
measurement policies the Group uses for segment reporting under IFRS 8 are the
same as those used in its IFRS financial statements.
On adoption of IFRS 8, based on the regular internal financial information
reported to the Group's directors for their decisions about resources allocation
to the Group's business components and review of these components' performance,
the Group has identified only one reportable operating segment, investment
business. Accordingly, segment disclosures are not presented.
6. INTEREST INCOME
+-------------------------------------+----------------+--------------------+
| | Six months | From 5 July 2007 |
| | ended 30 | (date of |
| | September | incorporation) to |
| | 2009 | 30 September |
| | | 2008 |
+-------------------------------------+----------------+--------------------+
| | (Unaudited) | (Unaudited) |
+-------------------------------------+----------------+--------------------+
| | US$ | US$ |
+-------------------------------------+----------------+--------------------+
| | | |
+-------------------------------------+----------------+--------------------+
| Income arising from the cash held | 17,660 | 8,685 |
| at a bank | | |
+-------------------------------------+----------------+--------------------+
| | | |
+-------------------------------------+----------------+--------------------+
7. 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.
8. 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.
9. 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 as
below:
+-------------------------------------+----------------+--------------------+
| | Six months | From 5 July 2007 |
| | ended 30 | (date of |
| | September | incorporation) to |
| | 2009 | 30 September |
| | | 2008 |
+-------------------------------------+----------------+--------------------+
| | US$ | US$ |
+-------------------------------------+----------------+--------------------+
| | (Unaudited) | (Unaudited) |
+-------------------------------------+----------------+--------------------+
| | | |
+-------------------------------------+----------------+--------------------+
| Directors' fees in respect of | | |
| services and duties : | | |
+-------------------------------------+----------------+--------------------+
| Timothy Gwynne Barker | 10,000 | 33,125 |
+-------------------------------------+----------------+--------------------+
| Anthony Nigel Clifton Griffiths | 10,000 | 33,125 |
+-------------------------------------+----------------+--------------------+
| Hoon Tai Meng | 10,000 | 33,125 |
+-------------------------------------+----------------+--------------------+
| Stephen Shu Kwan Ip | 10,000 | 33,125 |
+-------------------------------------+----------------+--------------------+
| | | |
+-------------------------------------+----------------+--------------------+
| | 40,000 | 132,500 |
+-------------------------------------+----------------+--------------------+
| | | |
+-------------------------------------+----------------+--------------------+
The interests in ordinary shares of the non-executive chairman/director and
their immediate families, who held office during the period, at 30 September
2009 and 30 September 2008, are set out below:
+-------------------------------------+----------------+--------------------+
| | Six months | From 5 July 2007 |
| | ended 30 | (date of |
| | September | incorporation) to |
| | 2009 | 30 September |
| | | 2008 |
+-------------------------------------+----------------+--------------------+
| | Number of | Number of shares |
| | shares | |
+-------------------------------------+----------------+--------------------+
| | | |
+-------------------------------------+----------------+--------------------+
| Wilfred Ying Wai Wong | 10 | 10 |
+-------------------------------------+----------------+--------------------+
| Timothy Gwynne Barker | 60,000 | 60,000 |
+-------------------------------------+----------------+--------------------+
| | | |
+-------------------------------------+----------------+--------------------+
10. 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.
11. LOSS PER SHARE
The calculation of basic loss per share is based on the loss for the period of
US$464,674 (period ended 30 September 2008: US$5,563,299 as restated) and on
25,380,010 ordinary shares (period ended 30 September 2008: 25,380,010 ordinary
shares) in issue during the period.
Diluted loss per share for the six months ended 30 September 2009 and period
ended 30 September 2008 are not presented as there is no dilutive potential
share.
12.FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
The entire portfolio of the Group's financial instruments is unlisted
convertible note instruments, maturing ranging from 2 months to 41 months as at
30 September 2009 and carrying at coupon interest rates ranging from 8% to 15%
per annum. All the convertible note instruments contain a share conversion
feature, a put option, and a call option, except for the convertible note
instrument as issued by Creative Picture Development Limited which does not
contain the call option.
The Group's convertible note instruments at 30 September 2009 and 31 March 2009,
designated at fair value through profit or loss, are set out below:
+--------------------------------------+----------------------+--------------------+
| | 30 September 2009 | 31 March 2009 |
+--------------------------------------+----------------------+--------------------+
| | US$ | US$ |
+--------------------------------------+----------------------+--------------------+
| | (Unaudited) | (Audited) |
+--------------------------------------+----------------------+--------------------+
| | | |
+--------------------------------------+----------------------+--------------------+
| Convertible notes at | | |
| fair value, as | | |
| issued by : | | |
+--------------------------------------+----------------------+--------------------+
| - IGO Home Shopping | - | - |
| Holdings Limited | | |
+--------------------------------------+----------------------+--------------------+
| - Creative Picture | 1,786,999 | 1,786,999 |
| Development Limited | | |
+--------------------------------------+----------------------+--------------------+
| - Arigata Holdings | 3,948,274 | 3,948,274 |
| Inc. | | |
+--------------------------------------+----------------------+--------------------+
| - | 11,911,769 | 11,911,769 |
| Aesthetic | | |
| International | | |
| Holdings | | |
| Group Limited | | |
+--------------------------------------+----------------------+--------------------+
| | | |
+--------------------------------------+----------------------+--------------------+
| | 17,647,042 | 17,647,042 |
+--------------------------------------+----------------------+--------------------+
| | | |
+--------------------------------------+----------------------+--------------------+
As disclosed in note 17, the Group invests in each of above four convertible
note instruments through four wholly-owned subsidiaries of the Group.
Notes:
(a) At 31 March 2009, the valuation of the convertible note
instruments was carried out by an
independent
professional valuer, Jones Lang LaSalle Sallmanns Limited. A further review was
undertaken by the valuer that there are no material
changes in the fair value of the instruments for
the
period from 1 April 2009 to 30 September 2009. Accordingly, no fair value
changes have been
recognised in the profit or loss
during this interim period.
(b) 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 30 September 2009
and 31
March 2009, there is no fair value in the
convertible notes issued by IGO. The carrying amounts of
the investment in the convertible notes as issued by IGO, amounted to
US$5,056,970, were fully
impaired during the period
ended 30 September 2008.
13.CASH AND CASH EQUIVALENTS
+-------------------------------+----------------------+--------------------+
| | 30 September 2009 | 31 March 2009 |
+-------------------------------+----------------------+--------------------+
| | US$ | US$ |
+-------------------------------+----------------------+--------------------+
| | (Unaudited) | (Audited) |
+-------------------------------+----------------------+--------------------+
| | | |
+-------------------------------+----------------------+--------------------+
| Cash at bank | 105,282 | 3,010,412 |
+-------------------------------+----------------------+--------------------+
| Short term bank | 6,500,000 | 4,014,600 |
| deposits (maturing | | |
| within 3 months) | | |
+-------------------------------+----------------------+--------------------+
| | | |
+-------------------------------+----------------------+--------------------+
| | 6,605,282 | 7,025,012 |
+-------------------------------+----------------------+--------------------+
| | | |
+-------------------------------+----------------------+--------------------+
14.AMOUNTS DUE TO DIRECTORS/INVESTMENT ADVISER
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
+------------------------------------+-----------------+--------------------+
| | 30 | 31 March 2009 |
| | September 2009 | |
+------------------------------------+-----------------+--------------------+
| | US$ | US$ |
+------------------------------------+-----------------+--------------------+
| | (Unaudited) | (Audited) |
+------------------------------------+-----------------+--------------------+
| Authorised: | | |
+------------------------------------+-----------------+--------------------+
| 200,000,000 ordinary shares of | 20,000,000 | 20,000,000 |
| US$0.1 each | | |
+------------------------------------+-----------------+--------------------+
| | | |
+------------------------------------+-----------------+--------------------+
| | | |
+------------------------------------+-----------------+--------------------+
| Issued and fully paid: | | |
+------------------------------------+-----------------+--------------------+
| 25,380,010 ordinary shares of | 2,538,001 | 2,538,001 |
| US$0.1 each | | |
+------------------------------------+-----------------+--------------------+
| | | |
+------------------------------------+-----------------+--------------------+
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 2009 amounted to US$24,053,814 (31 March 2009: US$24,520,113) is
considered sufficient by the directors giving due cognizance to the projected
return on net assets and the forecast investment opportunities.
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$24,053,814 (31 March
2009: US$24,520,113) and on the ordinary shares in issue of 25,380,010 shares at
30 September 2009 and 31 March 2009.
17.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 interests | activities |
| | incorporation/ | and | held by | |
| | registration/ | fully paid | the Company | |
| | operations | up capital | | |
+---------------+----------------+--------------+---------------------+------------+
| | | | Direct | Indirect | |
+---------------+----------------+--------------+----------+----------+------------+
| | | | | | |
+---------------+----------------+--------------+----------+----------+------------+
| Ace Aim | British | US$1 | 100% | - | Investment |
| Investments | Virgin | | | | holding |
| Limited <note | Islands | | | | |
| a> | | | | | |
+---------------+----------------+--------------+----------+----------+------------+
| | | | | | |
+---------------+----------------+--------------+----------+----------+------------+
| Mission | British | US$1 | 100% | - | Investment |
| Deluxe | Virgin | | | | holding |
| International | Islands | | | | |
| Limited <note | | | | | |
| a> | | | | | |
+---------------+----------------+--------------+----------+----------+------------+
| | | | | | |
+---------------+----------------+--------------+----------+----------+------------+
| Mission Rich | British | US$1 | 100% | - | Investment |
| International | Virgin | | | | holding |
| Limited <note | Islands | | | | |
| a> | | | | | |
+---------------+----------------+--------------+----------+----------+------------+
| | | | | | |
+---------------+----------------+--------------+----------+----------+------------+
| Camay | British | US$1 | 100% | - | Investment |
| International | Virgin | | | | holding |
| Limited | Islands | | | | |
+---------------+----------------+--------------+----------+----------+------------+
Note:
* 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 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 equivalent to US$9,384,206)
in exchange of these three subsidiaries' entire share interests and respective
subsidiaries' convertible note investments as the initial portfolio..
All subsidiaries of the Company were solely established and acquired, as special
purpose entities and as investment holding companies, to hold the Company's
investments in the convertible notes.
18. MAJOR NON-CASH TRANSACTIONS
No major non-cash transactions were incurred during the six months ended 30
September 2009.
As disclosed in note 17(a), there was a major non-cash transaction for the
period ended 30 September 2008 where 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.
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 Adviser
is regarded as a related party. For the six months period ended 30 September
2009, the Group incurred a total advisory fee of US$231,138 (period ended 30
September 2008: US$170,155) payable/ paid to the Investment Adviser.
(b) For the period ended 30 September 2008, as Wilfred Ying Wai Wong, the
non-executive chairman of the Company, is also the vice chairman 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 of the Company, worth equivalent to US$12,820,000
during the period.
(c) For the period ended 30 September 2008, as disclosed in note 9, 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.
20. RISK MANAGEMENT OBJECTIVES AND POLICIES
The Group's activities exposes 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 a 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 full
impairment provision has been made against the convertible notes issued by IGO.
The credit risk pertaining to cash and cash equivalents is considered limited.
Concentration risk
At 30 September 2009, the Group's financial assets exposed to credit risk are
concentrated in four unlisted convertible note instruments which approximate to
73 percent (31 March 2009: 72 percent) of the net assets of the Group as at the
reporting 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.
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.
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 reporting 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.
21.COMPARATIVE FIGURES
In the 2008 Interim Report, the Group recognised the interest income arising
from the convertible loan notes on the profit or loss which was included in
interest income. No interest income shall be accrued as the effective interest
income has been taken into account when valuing the plain bond portion of the
investment, the interest income shall be included in the net gain on financial
assets at fair value through profit or loss. Adjustments have been made to
restate this treatment and the comparative figures were amended accordingly. No
restatement is required for the condensed consolidated statement of financial
position at 31 March 2009.
- Ends -
This information is provided by RNS
The company news service from the London Stock Exchange
END
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