TIDMYCI
RNS Number : 4845U
Yangtze China Investment Limited
22 December 2011
Press Release 22 December 2011
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 2011 ("the
Period").
Financial Highlights
- NAV stood at US$14.7 million (31 March 2011: US$22.5 million)
- NAV per share at US$0.58 (31 March 2011: US$0.89)
- Current cash and cash equivalents total US$0.9 million
Commenting on the results, Mr Wilfred Wong, Chairman of Yangtze
China Investment Limited, said: "I regret to report that the
Company recorded a loss of approximately US$7.9 million during the
period mainly because of a full impairment of the US$4.1 million
investment in Onbest and an unfavourable fair value change of
US$3.4 million for our investment in Aesthetic. Accordingly, our
NAV per share at 30 September 2011 declined to US$0.58 as compared
to US$0.89 at the last year end."
"As announced earlier on 9 November 2011, owing to the dispute
with an external investor for a personal loan to the founding
shareholder and CEO of Onbest, all the operations of Onbest have
been suspended and resulted in a legal case between the parties.
Since there is a high level of uncertainty that Onbest could
operate as a going concern in the foreseeable future, the carrying
value of Yangtze!|s investment in Onbest amounting to US$4.1
million has been accounted as fully impaired. Additionally, as a
result of a reduced level of profitability and increased
uncertainty over its domestic listing process, there was an
unfavourable fair value change of US$3.4 million on our investment
in Aesthetic during the period."
"2011 has been a difficult year for global investors and this
has included Yangtze with its focus on investment in China. Despite
a volatile global economy, the economy in China continued to report
GDP growth and this growth helped to dispel fears of a hard landing
for the economy amid tightening policies to curb high
inflation."
- Ends -
For further information:
Yangtze China Investment Limited
Wilfred Wong Tel: +852 2281 7222
www.yangtzecn.com
Yangtze Capital Advisory Limited
Richard Zhao Tel: +852 2281 7218
www.yangtzecn.com
Collins Stewart Europe Limited
Matt Goode / Rishi Shah Tel: +44 (0) 20 7523
8350
www.collinsstewart.com
Media enquiries:
Abchurch Communications Ltd
Henry Harrison-Topham / Quincy Allan Tel: +44 (0) 20 7398
7710
quincy.allan@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 typically seeks 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.
For further information, please see www.yangtzecn.com
Chairman's Statement
For the six months ended 30 September 2011, Yangtze China
Investment Limited recorded a loss of approximately US$7.9 million
compared to a loss of approximately US$0.3 million for the same
period in 2010. The loss was mainly attributable to a full
impairment of the US$4.1 million investment in Onbest following the
suspension of its operations and an unfavourable fair value change
of US$3.4 million on the investment in Aesthetic due to a reduced
level of profitability and increased uncertainty over its domestic
listing process. Accordingly, at 30 September 2011, the NAV per
share of Yangtze was at US$0.58 (31 March 2011: US$0.89) and the
Company's NAV was US$14.7 million compared to US$22.5 million at
the last year end.
Despite a volatile global economy, China continued to report GDP
growth supported by the expansion of fixed assets investments,
domestic consumption and exports. This growth helped to dispel
fears of a hard landing for the Chinese economy amid tightening
policies to curb high inflation. We believe China will continue to
treat managing inflation as a top priority and this, coupled with
the uncertainty over rising interest rates for general lending will
exert constraint on both China's financial markets and the business
environment. Tighter credit, surging production costs and weaker
export growth will be a drag on corporate profitability as well as
general consumer spending. Whilst the growth rate in China having
slowed down recently, GDP grew by 9.6 per cent in the first half of
2011 while major developed economies, such as the US, Europe and
Japan, remained in recession.
In the light of the disappointing results that I have had to
report for the first half of the year, our priority must be to
improve the returns from the Company!|s existing investments
although we will continue to examine attractive investment
opportunities.
Wilfred Ying Wai WONG
Chairman
22 December 2011
Investment Adviser's Report
The Investment Adviser will emphasisemonitoring existing
investments. In line with managing its portfolio risk, possible
realisation opportunities, including follow-on equity placement or
trade sales to follow-on investor(s), will be explored to recoup a
portion of the cost of investment so as to pave the way for new
investment. The latest information of the Company's investments is
set out below.
Portfolio
V2 International Vision Photography Co., Ltd. ("V2
International")
Yangtze invested US$3.74 million in November 2010 for an equity
interest of not less than 27.5 per cent in V2 International upon
full conversion of the redeemable convertible preferred shares. V2
International is a professional photographic group based in
Chengdu, Sichuan and is engaged in the provision of professional
photographic services marketed under the brand names of "V2" and
"Xiqu!". A wide range of professional photographic services and
products is provided through a network of self-owned and franchised
studios in the PRC together with another one in New Zealand.
The group specialises in high-end outdoor wedding and portrait
photography, offering customers a differentiated, contemporary
style of photography experience. In order to ensure high quality
and artistically appealing portraits, customers are assigned an
exclusive team of a professional photographer, lighting crew,
make-up and hair stylists during their photo-shoot sessions. The
group is believed to be the pioneer in launching and promoting
"Wedding Photography with Travelling" in China and all their
studios are located in cities renowned for stunning scenery and
historic attractions. In addition, the group also provides
professional and amateur photographers with various training
courses to meet market demand driven by the increased popularity of
digital cameras.
V2 International generates revenues principally through the
provision of photographic services and sale of image-related
merchandise. The funds invested by Yangtze have been used to: raise
the group's profile through increased marketing and promotion of
its brands and products, expand the in-house image processing
centre and the photographic training school, and fund the
establishment of a sales and customer management centre as well as
procuring photographic equipment to meet technological changes.
As the disposable income of the Chinese continues to grow,
expenditure on weddings, which are considered a
"once-in-a-lifetime" event, is expected to increase significantly.
Since the post-1980s generation, a large social group is reaching
marriageable age, the wedding sector is expected to maintain strong
growth momentum over the next ten years.
At 30 September 2011, the fair value of the Company's investment
in V2 International remained unchanged at US$3.8 million.
Aesthetic International Holdings Group Limited ("Aesthetic")
Yangtze invested US$5.1 million in July 2008 for an equity
interest of 25 per cent in Aesthetic upon full conversion of the
convertible note. Aesthetic is a beauty spa franchise with its
headquarters in Beijing, China. Aesthetic has developed a variety
of product lines totalling over 350 items which are being marketed
under the different brand names of "Aesthetic", "O'Rola" and
"Befly" targeting female consumers with mid to high levels of
disposable income. Aesthetic generates revenues principally through
its product sales as well as licensing and franchising fees. At 30
September 2011, the number of Aesthetic's franchised and self-owned
beauty centres had increased to over 3,200 and they are located in
30 provinces and 160 cities acrossChina.
Aesthetic completed a second round funding and raised RMB 60
million (approximately US$8.8 million) from a Chinese venture
capital fund in March 2010. Upon satisfaction of certain conditions
including a group re-organisation, this new investor in Aesthetic
will become a 13 per cent holder of the enlarged registered capital
of a PRC subsidiary of Aesthetic and Yangtze's interest in
Aesthetic upon full conversion of the convertible note will then
become approximately 22 per cent. During the period ended 30
September 2011, the convertible note matured and pursuant to the
terms of the convertible note instrument, a notice for full
conversion into shares of Aesthetic was served by Yangtze and the
conversion is in the process of completion which we have been
advised will fully reflect our remaining equity interest of
approximately 22 per cent.
During the period under review, there was a slowdown of the
cosmetics and toiletry retail market in the PRC, significant
inflationary pressure and, for Aesthetic, increased market
competitions. Owing to a reduced level of profitability and also
the increased uncertainty over its domestic listing process, there
has been a decline of approximately US$3.4 million in the fair
value of this investment to US$8.5 million at 30 September
2011.
Arigata Holdings Inc. ("Onbest")
The Company invested US$3.0 million in May 2008 for an equity
interest of 30 per cent in Onbest upon full conversion of the
convertible note. Onbest, initially a designer and manufacturer of
cash registers, had changed its strategy to develop handheld
Point-of-Sales ("POS")devices that feature certain ATM functions
with advanced security. The strategic move has proved to be sound
as Onbest had received encouraging market feedback together with
initial sales orders.
During the period under review, and as announced on 9 November
2011, the founding shareholder and CEO of Onbest and the sole
operating subsidiary of Onbest (the "Onbest Sub") were involved in
litigation regarding the RMB 15 million portion of a personal loan
for a total sum of RMB 20 million that was granted in November 2010
to the founding shareholder and CEO of Onbest. The personal loan is
interest bearing and secured by a corporate guarantee from Onbest
Sub and the pledge of certain shareholdings in Onbest held by the
founding shareholder and CEO of Onbest. The plaintiff requested the
Court in the PRC to cancel the loan agreement and return the loan
plus interest to the plaintiff. The Court in the PRC has sealed up
certain inventories and cash balances held by Onbest Sub. The
litigation is still in progress at the date of this announcement
and does not affect the cash position of Yangtze.
Owing to the dispute, all the operations of Onbest have been
suspended and a majority of its employees have resigned from
Onbest. It is believed that there is a high level of uncertainty
that Onbest could operate as a going concern in the foreseeable
future, the carrying value of Yangtze's investment in Onbest
amounting to US$4.1 million, has been accounted as fully impaired
during the period under review.
Creative Picture Development Limited ("Creative Picture")
The Company invested US$1.3 million in May 2008 for an equity
interest of 12.5 per cent in Creative Picture upon full conversion
of the convertible note. Creative Picture carries out technological
research, production and sales of 3-D display technology in China.
Creative Picture possesses a number of patents over the glass-free
3-D display technology for seamless joint panels, notebook
computers, photo-frames and outdoor LED panels, and is focused on
3-D content production and licensing of rights to marketers of
traditional display devices.
The 3-D technology now possessed by Creative Picture is expected
to be widely used across a range of business areas but the future
revenue of Creative Picture is expected to be derived primarily
from content development and the licensing of rights.
At 30 September 2011, the fair value of the Company's investment
in Creative Picture remained unchanged atUS$1.6 million.
China's Economy
China's GDP increased 9.6 per cent in the first half of
2011.
The Chinese government's strategy of expanding domestic
consumption via increases in the minimum wage and continuing
job-creation has been largely effective, with total retail sales of
consumer goods rising by 18.4 per cent in 2010. However, strong
consumer demand has in turn created substantial inflationary
pressure. The CPI and PPI rose 3.3 per cent and 5.5 per cent
respectively in 2010 which suggests the higher cost in raw
materials to the manufacturing sector is being passed on to
consumers. In response, policymakers have stepped up efforts to
stabilise the prices of both consumer goods and raw materials
through price control and monetary measures. Containing inflation
has moved to the top of the government's agenda for 2011, while
labour costs, assets prices and RMB appreciation will continue to
be closely monitored. In 2010 and early 2011, the Chinese
government introduced a number of monetary tightening measures.
Income distribution reforms and economic development policies
targeting urban areas announced in March 2011 under the 12(th)
Five-Year Plan for National Economic and Social Development suggest
that future economic conditions will mostly favour low and middle
income earners. The Plan also states that the Chinese government
will target GDP growth of 8 per cent in 2011 and an average 7 per
cent growth from 2011 to 2015. We believe that such an outcome will
continue to stimulate the growth of the consumer sector.
Outlook
The Chinese government's plans for urbanisation and social
benefits should help support growth in the consumer and the retail
sectors, which have been at the core of Yangtze's strategy since
its inception. While the Investment Adviser continues to look for
further investment opportunities, its priority is to maximise the
return from its existing investment.
Yangtze Capital Advisory Limited
Investment Adviser
22 December 2011
Portfolio Summary
At 30 September 2011, the Company's total assets amounted to
US$14.9million. About US$13.9 million were investments in the form
of redeemable convertible preferred shares and convertible notes at
fair values.
The following table summarises the status of the Group's
portfolio at 30 September 2011:
Description Industry Time of Investment % of ownership
/ Location investment cost (1) (on full
by the US$ conversion
Company to shares)
Fair value (2)
-----------------------------------
At At At
30 Sep 31 Mar 30 Sep
2011 2011 Change 2010
------- ------- --------
US$ US$ US$ US$
Investment in the form of
redeemable convertible preferred
shares:
V2 International
Vision Professional
Photography photographic
Co., Ltd. services
((4) () / China Nov 2010 3.8m 3.8m 3.8m - - 27.5%
Investment in the form of
convertible notes:
Aesthetic Beauty
International spa franchise
Holdings / 25.0%((3)
Group Limited China July 2008 5.1m 8.5m 11.9m (3.4m) 12.3m ()
Fiscal
Arigata / POS solutions
Holdings /
Inc. China May 2008 3.0m - 4.1m (4.1m) 4.0m 30.0%
Creative
Picture 3-D display
Development technology
Limited / China May 2008 1.3m 1.6m 1.6m - 1.8m 12.5%
----------------- ----------------- ------------- ----------- ------- ------- -------- -------
Total 13.2m 13.9m 21.4m (7.5m) 18.1m
--------------------------------------------------- ----------- ------- ------- -------- -------
1. Includes capitalised directly attributable investment expenses.
2. For reference only. The percentage of ownership represents,
upon full conversion to ordinary shares, the stake in the entire
equity share capital of the investee company on a fully diluted
basis.
3. During the period ended 30 September 2011, the convertible
notes matured and pursuant to the terms of the convertible note
instrument, the Group has served a conversion notice to the issuer.
The conversion is still in progress at the date of this
announcement as Aesthetic is currently undergoing a group
restructure and certain terms of the conversion needs to be
renegotiated. Nevertheless, the Investment Adviser is of the view
that the rights and benefits entitled to Yangtze will not be
changed. Upon satisfaction of certain conditions including a group
re-organisation, the new investor of Aesthetic will become a 13 per
cent holder of the enlarged registered capital of a PRC subsidiary
of Aesthetic and Yangtze!|s interest in Aesthetic upon full
conversion of the convertible note will then become approximately
22 per cent.
4. On 30 November 2010, Yangtze successfully closed a
US$3,740,000 investment in V2 International Vision Photography Co.,
Ltd in the form of redeemable convertible preferred shares and,
upon full conversion, represents an equity interest of not less
than 27.5 per cent.
Member of Grant Thornton International Ltd
Report on review of the
interim financial report
To the board of directors of
Yangtze China Investment Limited
(incorporated in the Cayman Islands with limited liability)
Introduction
We have reviewed the interim financial report which comprises
the condensed consolidated statement of financial position of
Yangtze China Investment Limited asat 30 September 2011 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 explanatory notes. The Alternative
Investment Market Rules for Companies of the 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
are responsible for the preparation and presentation of this
interim financial report in accordance with International
Accounting Standard 34.
Our responsibility is to express a conclusion on this interim
financial report 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 an interim financial report 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 interim financial report is not
prepared, in all material respects, in accordance with the
International Accounting Standard 34.
Grant Thornton Jingdu Tianhua
Certified Public Accountants
20th Floor, Sunning Plaza
10 Hysan Avenue
Causeway Bay
Hong Kong
22 December 2011
Condensed consolidated statement of comprehensive income
for the six months ended 30 September 2011
Six months ended 30 September
2011 2010
Notes US$ US$
(Unaudited) (Unaudited)
Income
Net gain on financial assets at fair value through profit
or loss 8 - 189,601
Bank interest income 719 5,539
------------------------ ------------------------
719 195,140
------------------------ ------------------------
Expenses
Auditors!| remuneration (13,488) (18,453)
Administration fee (48,285) (50,715)
Advisory fee (221,335) (221,927)
Business valuation fee (28,427) (15,465)
Directors!| fees (40,000) (40,000)
Legal and professional fees (25,911) (38,036)
Marketing and communication fees (35,261) (36,109)
Net loss on financial assets at fair value through profit
or loss 8 (7,431,992) -
Other operating expenses (29,068) (31,038)
------------------------ ------------------------
(7,873,767) (451,743)
------------------------ ------------------------
Loss before income tax (7,873,048) (256,603)
Income tax expense 6 - -
------------------------ ------------------------
Loss and total comprehensive loss for the period
attributable to owners of the Company (7,873,048) (256,603)
------------------------ ------------------------
Loss per share for loss attributable to owners of the
Company during the period 7
- Basic and diluted (0.31) (0.01)
------------------------ ------------------------
Condensed consolidated statement of financial position
as at 30 September 2011
Notes At At At
30 September 30 September 31 March
2011 2010 2011
US$ US$ US$
(Unaudited) (Unaudited) (Audited)
ASSETS AND LIABILITIES
Non-current assets
Financial assets at fair
value through profit or
loss 8 13,949,758 18,044,922 21,381,750
-------------- --------------- ---------------
Current assets
Prepayments and other receivables 9 53,626 3,868,377 29,574
Cash and cash equivalents 875,508 1,777,028 1,237,830
-------------- --------------- ---------------
929,134 5,645,405 1,267,404
-------------- --------------- ---------------
Current liabilities
Accrued expenses and other
payables 220,229 168,137 117,443
-------------- --------------- ---------------
Net current assets 708,905 5,477,268 1,149,961
-------------- --------------- ---------------
Net assets 14,658,663 23,522,190 22,531,711
-------------- --------------- ---------------
EQUITY
Share capital 10 2,538,001 2,538,001 2,538,001
Reserves 12,120,662 20,984,189 19,993,710
-------------- --------------- ---------------
Total equity 14,658,663 23,522,190 22,531,711
-------------- --------------- ---------------
Number of ordinary shares
in issue 25,380,010 25,380,010 25,380,010
-------------- --------------- ---------------
Net asset value per ordinary
share 11 0.58 0.93 0.89
-------------- --------------- ---------------
Condensed consolidated statement of cash flows
for the six months ended 30 September 2011
Six months ended 30 September
2011 2010
US$ US$
(Unaudited) (Unaudited)
Net cash used in operating activities (362,322) (382,706)
Net cash used in investing activities - (3,822,523)
--------------------- ---------------------
Net decrease in cash and cash
equivalents (362,322) (4,205,229)
Cash and cash equivalents at
beginning of period 1,237,830 5,982,257
--------------------- ---------------------
Cash and cash equivalents at
end of period 875,508 1,777,028
--------------------- ---------------------
Condensed consolidated statement of changes in equity
for the six months ended 30 September 2011
Retained
Share Share profits/ Total
capital premium* (losses)* equity
US$ US$ US$ US$
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Balance at 1 April 2010 2,538,001 19,831,685 1,409,107 23,778,793
Total comprehensive loss
for the period - - (256,603) (256,603)
------------ ------------ ------------ ------------
Balance at 30 September
2010 2,538,001 19,831,685 1,152,504 23,522,190
------------ ------------ ------------ ------------
Balance at 1 April 2011 2,538,001 19,831,685 162,025 22,531,711
Total comprehensive loss
for the period - - (7,873,048) (7,873,048)
------------ ------------ ------------ ------------
Balance at 30 September
2011 2,538,001 19,831,685 (7,711,023) 14,658,663
------------ ------------ ------------ ------------
* These reserves accounts comprise the Group!|s reserves of
US$12,120,662 (At 30 September 2010: US$20,984,189) in the
condensed consolidated statement of financial position.
Notes to the condensed consolidated interim financial report
1. GENERAL INFORMATION
Yangtze China Investment Limited (the "Company") is a closed-end
investment companyincorporated in the Cayman Islands with limited
liability. The address of its registered office is One Capital
Place, P.O. Box 847, Grand Cayman KY1-1103, Cayman Islands.
The Company was admitted to the Alternative Investment Market
("AIM") of the London Stock Exchange on 14 May 2008.
The principal activity of the Company and its subsidiaries (the
"Group") is investment holding. The investment objective of the
Group is to provide owners of the Company with an attractive return
on its investments, predominantly through capital appreciation by
making minority equity and equity-related investments both directly
and through convertible note instruments in small and medium-sized
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") whilst the
Company's Administrator is Trident Trust Company (Cayman)
Limited.
The unaudited interim financial report of the Group for the six
months ended 30 September 2011 was approved for issue by the board
of directors on 22 December 2011.
2. BASIS OF PREPARATION AND ACCOUNTING POLICIES
The unaudited condensed consolidated interim financial report
(the "Interim Financial Report") has been prepared in accordance
with International Accounting Standard 34 "Interim Financial
Reporting" and applicable disclosure requirements of the AIM Rules
for Companies of the London Stock Exchange.
The accounting policies and methods of computation used in the
preparation of the Interim Financial Report are consistent with
those used in the annual financial statements for the year ended 31
March 2011 except for the adoption of the new or amended
International Financial Reporting Standards ("IFRSs"), which
includes individual International Financial Reporting Standards,
International Accounting Standards and Interpretations, as
disclosed in note 3 to this Interim Financial Report.
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 year ended 31 March 2011.
3. ADOPTION OF NEW OR AMENDED IFRSs
In the current period, the Group has applied for the first time
the following new standards, amendments and interpretations (the
"new IFRSs") issued by the International Accounting Standards
Board, which are relevant to and effective for the Group's
financial statements for the annual period beginning on 1 April
2011:
Various V Annual Improvements to IFRSs 2010
IAS 24 Related Party Disclosures (Revised 2009)
The adoption of the new IFRSs had no material impact on how the
results and financial position for the current and prior periods
have been prepared and presented.
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.
4.1 Critical accounting estimates and assumptions
The Group makes estimates and assumptions concerning the future.
The resulting accounting estimates will, by definition, seldom
equal the related actual results. The estimates and assumptions
that have a significant risk of causing a material adjustment to
the carrying amounts of assets and liabilities within the next
financial period are discussed below:
Fair value of financial assets not quoted in an active
market
The fair value of financial assets at fair value 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 Jones Lang LaSalle Sallmanns Limited, an
independent professional valuer. Changes in assumptions used in the
valuation could affect the reported fair values of financial
instruments.
5. SEGMENT INFORMATION
No segment information has been presented for period ended 30
September 2011 and 2010 as the Group is principally engaged in
investment business, which accounts for the total revenue and loss
of the Group for the periods. The Group uses consolidated loss
before income tax as a measure of segment profit or loss. The
Group's consolidated income represents net gain on financial assets
at fair value through profit or loss and bank interest income,
which are all attributable to a single geographical region, namely
the PRC.
6. 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 the
Cayman Islands and the British Virgin Islands.
Pursuant to the relevant rules and regulations in the PRC, the
Group is subject to PRC capital gain tax of an amount equal to 10%
of any gain from the transfer (directly or indirectly) of equity
interest of a PRC resident company. No provision for deferred tax
has been made on the revaluation of the investments in V2
International Vision Photography Co., Ltd. and Aesthetic
International Holdings Group Limited as the amount is
immaterial.
7. LOSS PER SHARE
The calculation of basic loss per share is based on the loss
attributable to owners of the Company for the period ended 30
September 2011 of US$7,873,048 (2010: US$256,603) and onthe
weighted average of 25,380,010 (2010: 25,380,010) ordinary shares
in issue during the period.
Diluted loss per share for the period ended 30 September 2011
and 2010 equates the basic loss per share as there is no dilutive
potential share in existence during the period.
8. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
The entire portfolio of the Group's financial instruments
comprises unlisted convertible notes and redeemable convertible
preferred shares.
At the reporting dates, the unlisted convertible notes have
maturities ranging from 7 months to 17 months as at 30 September
2011 (At 31 March 2011: 1 month to 23 months; At 30 September 2010:
ranging from 7 months to 29 months) and with coupon interest rates
ranging from 10% to 15% (At 31 March 2011 and 30 September 2010:
10% to 15%) per annum. All the convertible note instruments contain
a share conversion feature and a put option. The convertible note
instrumentsissued by Aesthetic International Holdings Group Limited
and Arigata Holdings Inc. also contain a call option.
The redeemable convertible preferred shares contain a put option
and cumulative dividend of 12% per annum (At 31 March 2011: 12%; At
30 September 2010: nil).
The Group's convertible note instruments and redeemable
convertible preferred shares at the reporting dates, designated at
fair value through profit or loss, are set out below:
At At At
30 September 30 September 31 March
2011 2010 2011
US$ US$ US$
(Unaudited) (Unaudited) (Audited)
Convertible notes at fair
value, as issued by:
* Aesthetic International Holdings Group Limited
("Aesthetic")* 8,550,000 12,327,321 11,883,111
* Arigata Holdings Inc. ("Onbest") - 3,967,182 4,098,881
* Creative Picture Development Limited** 1,588,972 1,750,419 1,588,972
-------------- -------------- -----------
10,138,972 18,044,922 17,570,964
Redeemable convertible
preferred shares at fair
value, as issued by:
* V2 International Vision Photography Co., Ltd. ("V2
International")(#) 3,810,786 - 3,810,786
-------------- -------------- -----------
13,949,758 18,044,922 21,381,750
-------------- -------------- -----------
* During the period ended 30 September 2011, the convertible
notes matured and pursuant to the terms of the convertible note
instrument, the Group has served a conversion notice to the issuer.
The conversion is still in progress at the date of this report as
Aesthetic is currently undergoing a group restructure and certain
terms of the conversion need to be renegotiated. Nonetheless, the
Investment Adviser is of the view that its rights and the benefits
entitled to the Group in Aesthetic will not be changed.
** During the period ended 30 September 2011, a Supplemental
Agreement was entered into among all relevant parties that the
maturity date of the convertible note was further extended for one
year to 24 April 2012.
(#) During the year ended 31 March 2011, the Group has acquired
2,750 Redeemable Convertible Preferred Shares in V2 International
(the "V2 International Convertible Preferred Shares"). The Group is
able to exercise significant influence over V2 International as it
holds more than 20% of voting power in V2 International and has
other certain investor rights in accordance with the investment
guidelines.
As disclosed in note 12, the Group invests in each of above
investments through four wholly-owned subsidiaries of the
Group.
The movements in financial assets at fair value through profit
or loss during the period/year are as follows:
Six months Six months Year
ended ended ended
30 September 30 September 31 March
Notes 2011 2010 2011
US$ US$ US$
(Unaudited) (Unaudited) (Audited)
At the beginning of
the period/year 21,381,750 17,855,321 17,855,321
Additions - - 3,810,786
Fair value (loss)/gain (a) (3,333,111) 189,601 (284,357)
Impairment loss (b) (4,098,881) - -
-------------- -------------- -----------
At end of the period/year 13,949,758 18,044,922 21,381,750
-------------- -------------- -----------
Notes:
(a) The fair value of the Group's convertible notes and
redeemable convertible preferred shares has been measured as
described in note 4. At the reporting dates, the valuation of the
convertible notes and redeemable convertible preferred shares were
carried out by the directors of the Company with the assistance of
an independent professional valuer, Jones Lang LaSalle Sallmanns
Limited. Fair value gain/loss has been recognised in the
consolidated statement of comprehensive income.
(b) Onbest is principally engaged in the design, manufacture and
sales of fiscal and POS solutions in the PRC. During the period
ended 30 September 2011, Mr. David Tian, the beneficial shareholder
and founder of Onbest, and the sole operating subsidiary of Onbest
(the "Onbest Sub") were involved in a litigation regarding the
RMB15 million portion of a loan for a total sum of RMB20 million.
The loan is interest-bearing and repayable in full in December
2011. The loan is secured by a corporate guarantee from Onbest Sub
and the pledge of certain equity interest in the intermediate
holding company of Onbest Sub held by Mr. David Tian. The plaintiff
requested the Court to cancel the loan agreement and return the
loan plus interest to the plaintiff. The Court has sealed up
certain inventories and cash balances held by Onbest Sub. The
litigation is still in progress at the date of this report.
Due to the dispute, Onbest and its subsidiaries have suspended
their operations and the majority of their employees have resigned
from the business. As Onbest and its subsidiaries had been loss
making during the period ended 30 September 2011 and were in a net
liability positions, the directors believe that there is a high
uncertainty in the foreseeable future that Onbest could be operated
as a going concern. As such, the directors are of the view that, at
30 September 2011, there was no fair value in the convertible notes
issued by Onbest. Accordingly, the carrying amounts of the
investment in the convertible notes as issued by Onbest, amounting
to US$4,098,881, were fully impaired during the period ended 30
September 2011.
9. PREPAYMENTS AND OTHER RECEIVABLES
At 30 September 2010, included in prepayments and other
receivables is an amount of US$3,740,000 which was a temporary
payment for the investment in V2 International Convertible
Preferred Shares (note 8).
The directors of the Group consider that the fair values of
prepayments and other receivables are not materially different from
their carrying amounts because these balances have short maturity
periods on their inception.
10. SHARE CAPITAL
At At At
30September 30 September 31 March
2011 2010 2011
US$ US$ US$
(Unaudited) (Unaudited) (Audited)
Authorised:
200,000,000 ordinary shares
of US$0.1 each 20,000,000 20,000,000 20,000,000
------------- -------------- -----------
Issued and fully paid:
25,380,010 ordinary shares
of US$0.1 each 2,538,001 2,538,001 2,538,001
------------- -------------- -----------
11. NET ASSET VALUE PER ORDINARY SHARE
The net asset value per ordinary share of the Group is based on
net assets attributable to owners of the Company of US$14,658,663
(At 31 March 2011: US$22,531,711; At 30 September 2010:
US$23,522,190) and on the 25,380,010 ordinary shares in issue at
the reporting dates.
12. INVESTMENTS IN SUBSIDIARIES
All subsidiaries of the Company were solely established or
acquired, as special purpose entities and as investment holding
companies, to hold the Company!|s investments in the convertible
note instruments or redeemable convertible preferred shares.
Particulars of the subsidiaries at 30 September 2011 are as
follows:
Country/place Particulars Percentage
of incorporation/ of issued of equity
registration/ and fully interests Principal
Name operations paid up held by the activities
capital Company
Direct Indirect
Mission Deluxe British Virgin US$1 100% - Investment
International Islands holding
Limited
Mission Rich British Virgin US$1 100% - Investment
International Islands holding
Limited
Camay International British Virgin US$1 100% - Investment
Limited Islands holding
Fonnex Investment British Virgin US$1 100% - Investment
Limited Islands holding
13. RELATED PARTY TRANSACTIONS
The Investment Adviser has been appointed to provide investment
advisory services to the Group. The non-executive chairman of the
Company, Mr. Wilfred Ying Wai Wong, is also the sole shareholder of
the Investment Adviser and therefore the Investment Adviser is
regarded as a related party. During the period ended 30 September
2011, the Group incurred a total advisory fee of US$221,335 (2010:
US$ US$221,927) paid/payable to the Investment Adviser.
- Ends -
This information is provided by RNS
The company news service from the London Stock Exchange
END
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