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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Grand Grp | LSE:GIPO | London | Ordinary Share | KYG405631014 | ORD £0.00004 (DI) |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 10.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMGIPO
RNS Number : 7705R
Grand Group Investment PLC
13 December 2016
Press Release 13 December 2016
Grand Group Investment PLC
("Grand Group", the "Company" or the "Group")
Final Results
Grand Group Investment PLC (AIM:GIPO), a provider of expansion capital and value added services to China-based SMEs with high growth potential, today announces its audited Final Results for the period from 1 January 2015 to 31 December 2015 (the "period").
CHAIRMAN'S STATEMENT
I am pleased to finally present the statements and accounts for the fiscal year ending 2015. 2015 was a busy year, with some successes but also several significant challenges that carried on into 2016, which I will also discuss here as they are relevant to these financial statements.
On 27 January 2015 Grand Group successfully joined the AIM market of the London Stock Exchange raising GBP7.1 million (gross proceeds). In April Grand made a new investment of RMB 20 million (approx. GBP2 million at the time) in Wuxi Jinxuntong Technology Limited ("Jinxuntong" or "JXT") for a 15% stake in the Company. JXT is an online learning solutions provider to China's urban and rural vocational education industry whose business is complementary with that of Victory. Then in November Grand received a cash dividend of RMB 19.8 million (approximately GBP 2.0 million) from its investee company Victory Education Investment Limited ("Victory").
Both JXT and Victory appeared to make good progress during 2015 (and 2016 for that matter). However, during the 2015 audit our auditors were unable to get comfortable with a very large prepayment asset on the books of both Victory and JXT. These prepayments, as far as we can tell, were legitimate, but the size - RMB 330 million and RMB220 million respectively - so dominated the balance sheets that it was felt the only way to get comfortable was a degree of transparency which would be unusual from an invested company in which Grand did not hold a controlling stake. This issue derailed the issuance of the annual report to such an extent that the company's shares were suspended on 29 June 2016 and threatened to lead to delisting. The board determined that that risk to shareholders was unacceptable. The most likely way to resolve the issue before the delisting deadline was to sell both JXT and Victory.
These sales were accomplished and announced on 30 September 2016. Both were sold at prices significantly higher than purchase price:
-- JXT was purchased for RMB 20 million in April 2015 and sold for RMB 30 million, representing a 50% return (33% per annum) on its purchase price.
-- Victory was purchased for RMB 196 million in April 2014 and sold for RMB 235.2 million, representing a return of 20%, or approximately 8% per annum. In addition, though, Victory had already paid Grand a dividend of RMB 20 million in late 2015, so the total return was closer to 11.5% p.a.
-- JXT was carried on the books at the purchase price, so we will be able to recognise a gain on that sale in 2016. However, Victory was revalued upward in the fiscal year 2014 statements before the prepayments issue had come to light. Since Grand sold the holding before the 2015 statements were issued, the value for 2015 has been written down to the actual sales price, leading to a loss after tax of RMB 195.3 million in fiscal year 2015.
Although this process has been very difficult, there is a silver lining: as of year end 2015 Grand's Net Asset Value is RMB 285.9 million, well over GBP30 million at the current exchange rate, well above the value at listing, and that is an extremely well-supported number after some very deep digging by our auditors. As of writing, the cash for those sales has been coming in on time, so we have significant and growing cash for further investments in 2017.
In summary, 2015 and 2016 so far have been extremely challenging. With the resolution of our accounting issue, cash coming in from asset sales, and (we hope) regaining our listing before year end, we have every reason to believe we are now turning the corner and will be able to refocus our efforts on the business of long term investment in rapidly growing companies.
(Please note that this accounting issue at the invested companies was discussed at length in our announcement of 30 September 2016.)
CHAIRMAN'S STATEMENT (CONT'D)
About Grand Group
Grand Group was founded in 2014 by Mr Yang Xiao and other founding shareholders. The Company was established for the purpose of identifying, acquiring and investing in small to medium-sized companies with high growth potential, principally operating in the People's Republic of China ("PRC").
Grand Group is a late stage incubator which focusses on investing in established businesses with either technology or intellectual property which the Board believes will benefit from Grand Group's university research resources.
CORPORATE GOVERNANCE REPORT
As an AIM-listed company, Grand Group Investment PLC ("Grand Group") does not comply with the UK Corporate Governance Code published by the Financial Reporting Council. However, the directors do place a high degree of importance on ensuring that high standards of corporate governance are maintained. The following sections note the governance procedures applied by Grand Group.
Board Responsibilities
Following Stephen Roberts and Ying Ying Gu resignations from Non-Executive Director and Executive Director respectively during 2016, the Board currently comprises two independent Non-Executive Directors ("NED") and three Executive Directors. The Directors expect to be kept fully informed of the Group's performance, and other matters that are relevant to the business of the Group and that should be brought to the attention of the Directors. The Directors have access to the nancial and legal advisers.
The Board has a breadth of experience relevant to the Group, and the Directors believe that any changes to the Board's composition can be managed without undue disruption. The Board believes that the mix of skills, experience, ages and length of service are appropriate to the requirements of the Group.
In advance of a Board meeting, the Board considers agenda items laid out in the formal meeting notice and agenda. Directors may request any agenda items to be added that they consider appropriate for the Board's discussion. Additionally, each Director is required to inform the Board of any potential or actual con icts of interest prior to Board discussion.
All members of the Board are expected to attend each Board meeting, whether by phone or in person, and to arrange their schedules accordingly, although non-attendance is unavoidable in certain circumstances.
Audit Committee
The Audit Committee of the Group, comprising J. Mark Hemmann and James Newman, is chaired by J. Mark Hemmann. The Audit Committee is responsible for ensuring that the Group's nancial performance is properly monitored, controlled and reported. The Audit Committee is responsible for the scope and effectiveness of the external audit and compliance by the Group with statutory and regulatory requirements.
The Audit Committee also meets the Group's Auditors and reviews reports from the Auditors relating to accounts and internal control. The Audit Committee meets with the Auditors as and when the Audit Committee requires. In the period since scal year end, the most signi cant issues that the Audit Committee considered in relation to the nancial statements were the valuations of the Group's investments in Victory China and JinXunTong, with reference to considerations for these investments being disposed after the reporting period; and revaluation of these investments represents significant losses. These were discussed at length, both internally and with the Auditors.
Auditor objectivity and independence is safeguarded through limiting non-audit services that fall within de ned categories. Non-audit work is approved by the Audit Committee if the committee concludes that it is in the interests of the Group to purchase non-audit work from the external Auditors (rather than another supplier). Any future non-audit work to be performed by Moore Stephens LLP will be monitored and approved by the Audit Committee.
CORPORATE GOVERNANCE REPORT (CONTINUED)
Share Dealing
The Group has adopted a share dealing code for Directors' dealings. The Directors will comply with Rule 21 of the AIM Rules for Companies relating to Directors' dealings and will take all reasonable steps to ensure compliance by the Group's applicable employees as well.
The Takeover Code
As a company incorporated in the Cayman Islands, the Group will not be subject to the Takeover Code. As a result, certain protections that are afforded to Shareholders under the Takeover Code, for example in relation to a takeover of a company or certain stake-holding activities by Shareholders, do not apply to the Group.
However, certain protections have been incorporated into the Group's Articles which, to an extent, mirror the provisions of Rule 9 of the Takeover Code (the "Relevant Code Provisions"). The Articles provide that if an acquisition of Ordinary Shares were to increase the aggregate holding of the acquirer and its concert parties to shares carrying 30% or more of the voting rights of the Group, the acquirer and, depending on the circumstances, the concert parties, will be required (except with the agreement of the Group in a general meeting by ordinary resolution of independent Shareholders) to make a cash offer for the outstanding shares in the Group at a price not less than the highest price paid by the acquirer or its concert parties during the previous 12 months. This requirement would also be triggered by any acquisition of shares by a person holding (together with its concert parties) shares carrying between 30% and 50% of the voting rights in the Group if the effect of such acquisition were to increase the person's percentage of voting rights. The main difference between these provisions and the Relevant Code Provisions is that the Takeover Panel does not have
any jurisdiction to enforce these provisions.
Independent Auditors' Report to the Shareholders of Grand Group Investment Plc
Report on the Financial Statements
We have audited the accompanying consolidated financial statements of Grand Group Investment Plc ("the Company") and its subsidiaries ("the Group"), which comprise the consolidated statement of financial position as at 31st December 2015 and the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year ended 31 December 2015, and a summary of significant accounting policies and other explanatory information.
This report is made solely to the Company's members, as a body, in accordance with the terms of our engagement. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditors' report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards, and for such internal controls as management determines is necessary to enable the preparation of financial statements that are free from material misstatements whether due to fraud or error.
Auditors' Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors' judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal controls relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion the consolidated financial statements present fairly, in all material respects, the financial position of the Group as at 31st December 2015 and its financial performance and its cashflows for the year then ended in accordance with International Financial Reporting Standards.
Moore Stephens LLP
150 Aldersgate Street
London, EC1A 4AB
GRAND GROUP INVESTMENT PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2015
Hot Features
Premium
Period from
4 March 2014
to
31 December 31 December
2015 2014
Note RMB'000 RMB'000
Unrealised (loss) / gain
on unquoted financial
assets 8 (256,560) 284,000
Finance income 19,800 -
Administrative expenses (9,585) (8,020)
Financial expenses (13,138) (5)
(Loss) / Profit before
tax (259,483) 275,975
Taxation 10 64,140 (71,000)
------------ -------------
(Loss) / Profit after
tax (195,343) 204,975
------------ -------------
Other comprehensive income - -
Total comprehensive (loss)
/ profit for the year
/ period (195,343) 204,975
------------ -------------
Attributable to:
Equity holders of the
parent (195,343) 204,975
Non-controlling interests - -
RMB RMB
Earnings per share 12
Basic (5.86) 8.2
------------ -------------
Diluted (5.86) 8.2
------------ -------------
GRAND GROUP INVESTMENT PLC
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 December 2015
2015 2014
Note RMB'000 RMB'000
Assets
Non-current asset:
Unquoted financial assets
at fair value through
profit or loss 8 243,440 480,000
-------- --------
Current assets:
Other receivable 10 -
Cash and cash equivalents 13 66,632 10
-------- --------
66,642 10
-------- --------
Total assets 310,082 480,010
-------- --------
Equity and liabilities
Shareholders' Equity:
Share capital 15 14 10
Share premium 66,936 -
Contributed capital 196,000 196,000
Warrants reserve 17 13,283 -
Retained earnings 9,632 204,975
-------- --------
Equity attributable to
owners of the Company 285,865 400,985
Non controlling interest 10 -
-------- --------
Total equity 285,875 400,985
-------- --------
Non-current liability:
Deferred tax liability 11 6,860 71,000
-------- --------
Current liabilities:
Other payable and accruals 4,299 1,317
Amounts due to shareholders 14 13,048 6,708
-------- --------
17,347 8,025
-------- --------
Total liabilities 24,207 79,025
-------- --------
Total equity and liabilities 310,082 480,010
-------- --------
GRAND GROUP INVESTMENT PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2015
Non-
Share Share Contributed Warrants Retained Sub- controlling Total
capital premium capital reserve earnings Total Interest Equity
RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000 RMB'000
On incorporation 10 - - - - 10 - 10
Capital
contribution - - 196,000 - - 196,000 - 196,000
Total comprehensive
profit for
the period - - - - 204,975 204,975 - 204,975
-------- -------- ------------ ----------- ---------- ---------- ------------- ----------
At 31 December
2014 10 - 196,000 - 204,975 400,985 - 400,985
-------- -------- ------------ ----------- ---------- ---------- ------------- ----------
Issued share
capital 4 66,936 - - - 66,940 - 66,940
Issued warrants - - - 13,283 - 13,283 - 13,283
Total comprehensive
loss for
the year - - - - (195,343) (195,343) - (195,343)
Non- controlling
interest - - - - - - 10 10
At 31 December
2015 14 66,936 196,000 13,283 9,632 285,865 10 285,875
-------- -------- ------------ ----------- ---------- ---------- ------------- ----------
GRAND GROUP INVESTMENT PLC
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 31 December 2015
Period from
4 March
2014 to
31 December 31 December
2015 2014
Note RMB'000 RMB'000
Cashflows from operating
activities
(Loss) / Profit before
tax (259,483) 275,975
Adjustments:
Unrealised loss / (gain)
on unquoted financial
assets 8 256,560 (284,000)
Finance income (19,800) -
Warrant expenses 13,283 -
Increase in other payables
and accruals 2,981 1,317
Net cash outflow from
operating activities (6,459) (6,708)
------------ ------------
Cash flows from investing
activity
Dividend received from 19,800 -
unquoted financial assets
at fair value through
profit or loss
Acquisition of unquoted
financial assets at
fair value through profit
or loss 8 (20,000) -
Net cash outflow from (200) -
investing activity
------------ ------------
Cash flows from financing
activities
Cash proceeds from issue
of shares 66,940 10
Amounts due to shareholders 6,340 6,708
------------ ------------
Net cash inflow from
financing activities 73,281 6,718
------------ ------------
Net increase in cash
and cash equivalents 66,622 10
Cash and cash equivalents 10 -
at the beginning of
period
------------ ------------
Cash and cash equivalents
at the end of year/period 66,632 10
------------ ------------
GRAND GROUP INVESTMENT PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2015
1. GENERAL INFORMATION
Grand Group Investment Plc ("Grand Group" or the "Company") was incorporated and domiciled in the British Cayman Islands on 4 March 2014 and its registered office is 89 Nexus Way, Camana Bay, KY1-9007, British Cayman Islands. The principal place of business is Room 2023, South Building, Lihu Technology Innovation Center, No.11, Wuhu Road, Wuxi City, Jiangsu Province, People's Republic of China.
The Company's shares were listed on the AIM, a market operated by the London Stock Exchange on 27 January 2015.
The company is a value-added and technology innovation private equity investment vehicle, which principally focuses on investing in small & medium sized enterprises in the People's Republic of China.
2. RECENT ACCOUNTING PRONOUNCEMENTS (a) New interpretations and revised standards effective for the year ended 31 December 2015
The Group has adopted the new interpretations and revised standards effective for the year ended 31 December 2015. The adoption of these interpretations and revised standards had no impact on the disclosures and presentation of the nancial statements during the year.
(b) Standards and interpretations in issue but not yet effective
Standards issued but not yet effective up to the date of issuance of the Group's financial statements, which the Group reasonably expects to be applicable at a further date, are listed below. The Group does not intend to adopt those standards until they become effective.
Effective for
accounting
period on or
after:
IAS 1 Presentation of Financial 1 January 2016
Statements
IAS 27 Separate Financial 1 January 2016
Statements
IAS 39 Financial Instruments: 1 January 2018
Recognition and Measurement
IFRS 7 (amended) Financial Instruments: 1 January 2018
Disclosure
IFRS 9 Financial Instruments 1 January 2018
IFRS 10 (amended) Consolidated Financial 1 January 2016
Statements
IFRS 15 Revenue from contracts 1 January 2018
with customers
The Directors anticipate that the adoption of these standards and interpretations in future periods will have no material impact on the financial statements.
3. ACCOUNTING POLICIES a) Basis of Preparation
The consolidated financial information has been prepared in accordance with International Financial Reporting Standards ("IFRS"), which collective term includes all applicable individual IFRS, International Accounting Standards ("IAS") and Interpretations issued by the International Accounting Standards Board ("IASB") and International Financial Reporting Interpretations Committee ("IFRIC").
The financial information has been prepared on the going concern basis and under the historical cost convention, except for the revaluation of certain financial assets, which have been measured at fair value.
The financial information is presented in Renminbi ("RMB"), rounded to the nearest thousand, unless otherwise stated.
b) Basis of consolidation
The consolidated financial statements comprise the results of the Company and its subsidiaries altogether (the "Group") for the year ended 31 December 2015. Subsidiaries are all entities over which the Company exercises control or owns greater than 50 per cent of the voting rights during the year. Subsidiaries are fully consolidated from the date on which control is transferred to the Company. They are deconsolidated from the date that control ceases. Profit or loss and other comprehensive income of subsidiaries acquired or disposed of during the year are recognised from the effective date of acquisition, or up to the effective date of disposal, as applicable. Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated in full on consolidation.
c) Business combination
The Group applies the acquisition method in accounting for business combinations. The consideration transferred by the Group to obtain control of a subsidiary is calculated as the sum of the acquisition-date fair values of assets transferred, liabilities incurred and the equity interests issued by the Group, which includes the fair value of any asset or liability arising from a contingent consideration arrangement. Acquisition costs are expensed as incurred and included in operating expenses before finance costs.
The Group recognises identifiable assets acquired and liabilities assumed in a business combination regardless of whether they have been previously recognised in the acquiree's financial statements prior to the acquisition. Assets acquired and liabilities assumed are generally measured at their acquisition-date fair values.
d) Foreign currency translation (i) Functional and presentation currency
The financial statements of the Group are presented in the currency of the primary environment in which the Company operates (its functional currency). The Directors have considered the currency to which the underlying investments are exposed. On balance, the Directors believe RMB best represents the functional currency of the Company. Therefore, the books and records are maintained in RMB and for the purpose of the financial statements the results and financial position of the Group are presented in RMB, which is also the presentation currency of the Group.
(ii) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the Consolidated Statement of Comprehensive Income.
3. ACCOUNTING POLICIES (CONT'D) e) Financial Instruments
Financial assets and financial liabilities are recognised in the Consolidated Statement of Financial Position when the Group becomes a party to the contractual provisions of the instruments. Financial assets and financial liabilities are initially measured at fair value.
Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition.
Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.
Unquoted financial assets at fair value through profit or loss
Classification
The Group classifies its unquoted equity interests as financial assets at fair value through profit or loss. These financial assets are designated by the Directors as at fair value through profit or loss at inception.
Financial assets designated as at fair value through profit or loss at inception are those that are managed as part of an investment portfolio and their performance evaluated on a fair value basis in accordance with the Group's investment strategy.
Recognition/derecognition
Purchases and sales of investments are recognised on the trade date - the date on which the Group commits to purchase or sell the investment.
A fair value through profit or loss asset is derecognised when the Group loses control over the contractual rights that comprise that asset. This occurs when rights are realised, expire or are surrendered and the rights to receive cash flows from the investments have expired or the Group has transferred substantially all risks and rewards of ownership. Realised gains and losses on fair value through profit or loss assets sold are calculated as the difference between the sales proceeds and cost. Fair value through profit or loss assets that are derecognised and corresponding receivables from the buyer for the payment are recognised as of the date the Group has transacted an unconditional disposal of the assets.
Measurement
Financial assets at fair value through profit or loss are initially recognised at fair value. Transaction costs are expensed through profit or loss. Subsequent to initial recognition, all financial assets at fair value through profit or loss are measured at fair value in accordance with IFRS13 'Fair value measurement'. For determining a suitable valuation technique the company applies International Private Equity and Venture Capital Valuation ("IPEVCV") guidelines, as the Company's business is to invest in financial assets with a view to profiting from their total return in the form of capital growth and income.
Gains and losses arising from changes in the fair value of the financial assets at fair value through profit or loss are presented in the period in which they arise.
Impairment of financial assets
An assessment for impairment is undertaken at least at the end of each reporting period whether or not there is objective evidence that a financial asset or a group of financial assets is impaired. Impairment loss on financial assets is recognised when there is objective evidence that the Group will not be able to collect all the amounts due to it in accordance with the original terms of the receivables. The amount of the impairment loss is determined as the difference between the assets carrying amount and the present value of estimated future cash flows.
3. ACCOUNTING POLICIES (CONT'D) e) Financial Instruments (Cont'd)
Financial liabilities
The Group's financial liabilities include amounts due to shareholders and other payable and accruals. Financial liabilities are recognised when the Group becomes a party to the contractual provision of the instrument. All financial liabilities are recognised initially at their fair value, net of transaction costs, and subsequently measured at amortised cost, using the effective interest method, unless the effect of discounting would be insignificant, in which case they are stated at cost.
The Group derecognises financial liabilities when, and only when, the Group's obligations are discharged, cancelled or they expire.
Equity instruments
Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.
f) Cash and cash equivalents
Cash and cash equivalents includes cash in hand, deposits held on call with banks and other short term (having maturity within 3 months) highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value.
g) Revenue recognition
Revenue is recognised when it is probable that the economic benefits will flow to the Company and when the revenue can be measured reliably and on the following basis:
l Dividend income is recognised when the Group's right to receive payment is established.
h) Deferred tax
Deferred tax is the tax expected to be payable or recoverable 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 income, and is accounted for using the statement of financial position liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the statement of comprehensive income, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.
i) Earnings per share
Basic earnings per share is computed using the weighted average number of shares outstanding during the period. Diluted earnings per share is computed using the weighted average number of shares during the period plus the dilutive effect of dilutive potential ordinary shares outstanding during the year.
3. ACCOUNTING POLICIES (CONT'D) j) Related parties
For the purpose of the financial information, related parties are defined as:
1. A person, or a close member of that person's family, is related to the Group if that person:
i. has control or joint control over the Group; ii. has significant influence over the Group ; or iii. is a member of key management personnel of the Group. 2. An entity is related to the Group if any of the following conditions applies: i. The entity and the Group are members of the same group.
ii. One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member).
iii. Both entities are joint ventures of the same third party.
iv. One entity is a joint venture of a third entity and the other entity is an associate of the third entity.
v. The entity is a post employment benefit plan for the benefit of employees of either the Company
or a related entity.
vi. The entity is controlled or jointly controlled by a person identified in (1).
vii. A person identified in (1)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).
4. ACCOUNTING ESTIMATES AND JUDGEMENTS
Preparation of financial information in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about carrying values of assets and liabilities that are not readily apparent from other sources.
In particular, significant areas of estimation, uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amount recognised in the financial information are in the following areas:
Valuation of unquoted investments
In estimating the fair value for an investment, the Group applies a methodology that is appropriate in light of the nature, facts and circumstances of the investment and its materiality in the context of the total investment portfolio using reasonable market-data. Carrying values are dealt with in Note 8.
5. FINANCIAL RISK MANAGEMENT a) Categories of financial instruments
The carrying amounts of the Group's financial assets and liabilities as at the end of each reporting year are as follows:
2015 2014
RMB'000 RMB'000
Financial asset
Cash and cash equivalents 66,632 10
-------- --------
Financial liabilities
Other payables and accruals 4,299 1,317
Amounts due to shareholders 13,048 6,708
-------- --------
17,347 8,025
-------- --------
b) Fair value measurement
i) Fair value hierarchy
The following table presents the fair value of the Group's financial instruments measured at the end of the reporting period on a recurring basis, categorised into the three-level fair value hierarchy as defined in IFRS 13, Fair value measurement. The level into which a fair value measurement is classified is determined with reference to the observability and significance of the inputs used in the valuation technique as follows:
-- Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;
-- Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the assets or liability, either directly or indirectly; and
-- Level 3 fair value measurements are those derived from inputs that are not based on observable market data.
Fair value measurement as at
31 December 2015
Level 1 Level 2 Level 3
RMB'000 RMB'000 RMB'000
Unquoted financial
assets at fair value
through profit or
loss - - 243,440
------------ ------------ ---------
Fair value measurement as at
31 December 2014
Level 1 Level 2 Level 3
RMB'000 RMB'000 RMB'000
Unquoted financial
assets at fair value
through profit or
loss - - 480,000
------------ ------------ ---------
The Group did not hold any Level 1 or Level 2 financial assets at fair value through profit or loss in the period.
5. FINANCIAL RISK MANAGEMENT (CONT'D) c) Financial risk management objectives and policies
The Group is exposed to a variety of financial risks: market risk (including interest rate risk and currency risk), credit risk and liquidity risk. The risk management policies employed by the Group to manage these risks are discussed below. The primary objectives of the financial risk management function are to establish risk limits, and then ensure that exposure to risk stays within these limits. The operational and legal risk management functions are intended to ensure proper functioning of internal policies and procedures to minimise operational and legal risks.
i) Interest rate risks
All cash holdings and cash equivalents are held in accounts with variable rates. The Group does not have any borrowings and therefore is not materially exposed to interest rate rise.
ii) Currency risks
Since the Group operates primarily within its local currency with little exposure to currency fluctuations, management considers that foreign currency exposure is not significant to the Group.
iii) Credit risk
Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial loss to the Group. As at 31 December 2015, the credit risk arises from cash held with banks.
The Group's cash balances were placed with reputable banks.
iv) Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities. The Group's approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group's reputation.
The following tables show the remaining contractual maturities at the end of the reporting period of the Group's financial liabilities.
More
than
1 year
but less More
Within than than
1 year 5 years 5 years Total
RMB'000 RMB'000 RMB'000 RMB'000
As at 31 December
2015
Other payables
and accruals 4,299 - - 4,299
Amounts due to
shareholders 13,048 - - 13,048
-------- ---------- --------- --------
17,347 - - 17,347
-------- ---------- --------- --------
More
than
1 year
but less More
Within than than
1 year 5 years 5 years Total
RMB'000 RMB'000 RMB'000 RMB'000
As at 31 December
2014
Other payables
and accruals 1,317 - - 1,317
Amounts due to
shareholders 6,708 - - 6,708
-------- ---------- --------- --------
8,025 - - 8,025
-------- ---------- --------- --------
The Group's financial liabilities are primarily amounts due to shareholders. The amounts are unsecured, interest-free and repayable on demand.
6. SEGMENT REPORTING
The Group has adopted IFRS 8, "Operating Segments". IFRS 8 defines operating segments as those activities of an entity about which separate financial information is available and which are evaluated by the Board of Directors to assess performance and determine the allocation of resources. The Board of Directors are of the opinion that under IFRS 8 the Group has only one operating segment, being the equity investment located in PRC. The Board of Directors assess the performance of the operating segment using financial information which is measured and presented in a manner consistent with that in the Financial Statements. Segmental reporting will be reviewed and considered in light of the development of the Group's businesses over the next reporting period.
7. INVESTMENT IN SUBSIDIARIES
Details of the Group's subsidiaries at 31 December 2015 are as follows:
Proportion Proportion
Place of ownership of voting Principal
Name of subsidiary of incorporation interest power held activity
Directly held
Great International
Wealth & Wisdom Investment
Holding Ltd Hong Kong 100% 100% holding
Indirectly
held
Grand (Wuxi)
Investment
Management Investment
Co Ltd PRC 100% 100% holding
Wuxi Gaoruibode
Management
Consulting
Co., Ltd PRC 99% 99% Dormant
Acquisition of subsidiary
On 9 February 2015, the Group obtained control of Great International Wealth & Wisdom Holding Ltd ("Great International") by acquiring 100% of its issued share capital and voting interest.
At the moment of acquisition, Great International was holding 100% of Grand (Wuxi) Investment Management Co., Ltd. ("Grand (Wuxi)") and 99% of Wuxi Gaoruibode Management Consulting Co., Ltd. ("Wuxi Gaoruibode").
(a) Consideration
The Group took up the vendor's amount due to the Great International as consideration for the shares, which was determined at approximately RMB8,000 based on the net assets value of the Great International. No cash flow was involved accordingly.
(b) Acquisition related costs
The Group incurred minimal acquisition costs, being to stamp duty. These costs have been included in the consolidated statement of profit or loss for the year ended 31 December 2015.
(c) Identifiable assets at the date of acquisition as follows:
RMB'000
Other receivable 8
Cash -
--------
8
--------
8. UNQUOTED FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
2015 2014
RMB'000 RMB'000
At 1 January and on incorporation 480,000 -
Additions 20,000 196,000
Fair value change through
profit or loss (256,560) 284,000
---------- --------
At 31 December 243,440 480,000
---------- --------
The Group is outside the scope of IAS 28 "Investments in associates" on the basis it is a private equity investment vehicle. The Group has therefore elected to measure its investment at fair value through profit or loss in accordance with IAS 39 "Financial Instruments: Recognition and Measurement".
(a) Wuxi Victory Media & Culture Co. Ltd ("Victory China")
Wuxi Victory Media and Cultural Co. Limited ("Victory China")'s principal activity is in the production of video course-ware for the training of vocational courses to migrant workers in China.
As PRC law and regulations prohibit foreign control of companies involved in internet content, the Group is unable to take a direct equity interest in Victory China. At 1 January 2015, the Group held an indirect, non-controlling, 33% interest in Victory China via intermediary holding companies as follows:
Victory Education Investment Limited
The Group had a 33% equity interest in Victory Education Investment Limited ("Victory Cayman", a company incorporated in Cayman Islands) under a subscription agreement dated 21 April 2014. This company is a non-trading holding company.
Victory Education Investment Holding Limited
Victory Cayman owned 100% of the equity of Victory Education Investment Holding Limited ("Victory Hong Kong", a company incorporated in Hong Kong). Victory Hong Kong owns 100% of the equity of Victory WOFE.
Weirui Culture Development (Wuxi) Company Limited
Weirui Culture Development (Wuxi) Company Limited ("Victory WOFE") was incorporated in the PRC and held an effective 100% interest in Victory China through a series of contractual arrangements referred to as Variable Interest Entities Agreements dated 3 June 2014.(as described below)
In the opinion of the Company's management, the VIE Agreements provide Victory WOFE with the ability to control Victory China and the entitlement to substantially all of the economic benefits from Victory China. Therefore, indirectly, the VIE Agreements provided the Company with a 33% investment in Victory China. Furthermore, in the opinion of the Company's PRC legal counsel, the VIE Agreements did not violate any current applicable PRC laws, rules and regulations.
Below is the summary of the VIE agreements:
VIE agreements
Whilst Victory WFOE does not hold the equity in Victory China, it has effective control and beneficial ownership of Victory China via the VIE agreements. The risks inherent in the nature of the Company's investment in Victory China are disclosed below.
8. UNQUOTED FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (CONT'D)
(a) Wuxi Victory Media & Culture Co. Ltd ("Victory China") (Cont'd)
VIE agreements (cont'd)
In April 2014, Shenzhen Grand Culture and Technology Development Co. Ltd ("Shenzhen Grand", a related party by virtue of the fact that it has a common shareholder structure) was issued 33% of the equity of Victory China for a total consideration of RMB196m. In June 2014, Shenzhen Grand, together with the other shareholders of Victory China entered into the VIE agreements to transfer their interests in Victory China (as described below) to Victory WFOE.
The VIE agreements include an Exclusive Business Cooperation Agreement, an Exclusive Option Agreement, a Loan Agreement, a series of Equity Pledge Agreements, a Spouse Consent Letter, and a Power of Attorney.
Victory WFOE does not enjoy direct equity ownership of Victory China. Instead, the VIE agreements enable Victory WFOE to:
- Receive substantially all of the economic benefits and residual returns from Victory China as if it were a wholly owned subsidiary;
- Exercise effective control over Victory China; and - Have an exclusive option to acquire all of the equity interests in Victory China.
Exclusive Business Cooperation Agreement
An Exclusive Business Cooperation Agreement was entered into by and between Victory WFOE and Victory China on 3 June 2014, whereby Victory WFOE shall provide Victory China with technical support, consulting services and other services on an exclusive basis in relation to the businesses conducted by Victory China, utilising the advantages of Victory WFOE in technology, human resources and information. Under the terms of the agreement, Victory China shall pay to Victory WFOE a service fee equaling 100% of the net income of Victory China.
Exclusive Option Agreement
An Exclusive Option Agreement was entered into by and between Victory WFOE, Victory China and the shareholders of Victory China (namely Jie Zhou, Haijun Liu, Xian Huang, Min Li, Jiazhong Yang, Xiurong Wu, Ming Zhou, Xiaofeng Gao, Jun Zhang, Shenzhen Grand Culture and Technology Development Co.Ltd ("Shenzhen Grand"), together the "Victory China Shareholders"), on 3 June 2014,where by Shenzhen Grand granted Victory WFOE an irrevocable and exclusive right to purchase, or to designate one or more persons to purchase the equity interests in Victory China then held by any of them. The purchase price for Victory WFOE to purchase the above equity interest from Shenzhen Grand was RMB 10.The purchase price for Victory WFOE to purchase the above equity interests from Jie Zhou, Haijun Liu, Xian Huang, Min Li, Jiazhong Yang, Xiurong Wu, Ming Zhou, Xiaofeng Gao, and Jun Zhang shall be equal to the principal amount of the loan made by Victory WFOE to Jie Zhou, Haijun Liu, Xian Huang, Min Li, Jiazhong Yang, Xiurong Wu, Ming Zhou, Xiaofeng Gao, and Jun Zhang respectively under the Loan Agreement (as described below).
Loan Agreement
A Loan Agreement was entered into by and between Victory WFOE, JieZhou, HaijunLiu, XianHuang, MinLi, JiazhongYang, XiurongWu, MingZhou, XiaofengGao, and JunZhang on 3 June 2014, where by JieZhou, HaijunLiu, XianHuang, MinLi, JiazhongYang, XiurongWu, MingZhou, XiaofengGao, and Jun Zhang have obtained from Victory WFOE loans in the amount of RMB262,625, RMB66,650, RMB66,025, RMB6,900, RMB24,000, RMB6,900, RMB6,900, RMB37,500 and RMB22,500 respectively. The term of the above loans shall be 10 years from the effective date of the Loan Agreement.
8. UNQUOTED FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (CONT'D)
(a) Wuxi Victory Media & Culture Co. Ltd ("Victory China") (Cont'd)
VIE agreements (cont'd)
Equity Pledge Agreements
An Equity Pledge Agreement was entered into by and between each of the Victory China Shareholders, Victory China and Victory WFOE on 14 May 2014 and a respective equity pledge registration certificate issued by Wuxi Huishan State Administration of Industry and Commerce on 14 May 2014, where by each of the Victory China shareholders has pledged their respective equity interests in Victory China to Victory WFOE for the purpose of securing these shareholders and Victory China's full performance of their obligations under the Loan Agreement, the Exclusive Business Cooperation Agreement, the Exclusive Option Agreement and the Power of Attorney.
Spouse Consent Letters
Spousal Consent Letters issued respectively by the spouse of Jie Zhou, Haijun Liu, Xian Huang, Min Li, Jiazhong Yang, Xiurong Wu, Xiaofeng Gao respectively on 3 June 2014, where by the respective spouse of Jie Zhou, Haijun Liu, Xian Huang, Min Li, Jiazhong Yang, Xiurong Wu, and Xiaofeng Gao have agreed to the execution of the other VIE Agreements by their spouse and the disposal of the equity interests of Victory China held by their spouse and to provide other assistance as to the appropriate performance of the other VIE Agreements.
Power of Attorneys
Power of Attorneys were issued by the Victory China Shareholders respectively on 3 June 2014, where by the Victory China Shareholders have authorised Victory WFOE to act on behalf of them as their exclusive agent and attorney with respect to all matters concerning their shareholding in the Victory China, to execute all the documents they shall sign as stipulated in the Exclusive Option Agreement and the Equity Pledge Agreement, and to perform the terms of the Exclusive Option Agreement and the Equity Pledge Agreements.
8. UNQUOTED FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (CONT'D)
(a) Wuxi Victory Media & Culture Co. Ltd ("Victory China") (Cont'd)
VIE agreements risk
However, due to the uncertain ties regarding the interpretation and enforcement of PRC laws, rules and regulations, including but not limited to the laws, rules and regulations with respect to the validity and enforcement of the VIE Agreements or the contractual arrangements, the risk of being challenged by PRC regulatory authorities may not be completely ruled out.
If the Group's ownership structure and the VIE Agreements were found to be in violation of any existing or future PRC laws or regulations by the relevant regulatory authorities, the Group may be subject to penalties, which may include but not be limited to, revocation of the business licenses or operating licenses of its PRC associates or that of Victory China, being required to restructure the Group's operations or discontinue the Group's operating activities. If any of these penalties result in its in ability to receive economic benefit from Victory China, the Group's investment in Victory China may be impaired.
In addition, if Victory China or its shareholders fail to perform their obligations under the VIE Agreements, the Group and its investee companies may have to incur substantial costs and expend resources to enforce the Company's rights under the contracts.
The Group and its associates may have to rely on legal remedies under PRC law, including seeking specific performance or injunctive relief and claiming damages, which may not be effective. All of these VIE Agreements are governed by PRC law and provide for the resolution of disputes through arbitration in the PRC. Accordingly, these contracts would be interpreted in accordance with PRC law and any disputes would be resolved in accordance with PRC legal procedures. The legal system in PRC is not as developed as in other jurisdictions, such as the United Kingdom. As a result, uncertainties in the PRC legal system could limit the Group's ability to enforce these VIE Agreements. Under PRC law, rulings by arbitrators are final, parties cannot appeal the arbitration results in courts, and prevailing parties may only enforce the arbitration awards in PRC courts through arbitration award recognition proceedings, which would incur additional expenses and delay. In the event the Group and its associates are unable to enforce these VIE Agreements, the Group may not be able to receive economic benefit from Victory China and its investment in Victory China may be impaired.
Substitution for VIE agreements
On 9 February 2015, Grand (Wuxi), an indirect 100% subsidiary, acquired 33% of equity of Victory China from a related company. As a result, the Group effectively has the equity interest in Victory China indirectly. Having consulted with the Wuxi Administration of Industry and Commerce, which approves foreign control of companies involved in internet content, Grand (Wuxi) is able to hold such equity. Therefore, this acquisition provides a substitution for the VIE agreements.
The VIE agreements remain in place as previously discussed.
Fair value
Based on the events after the reporting period (note 21), the Group valued its investments at fair value through profit or loss. With reference to the gain on disposal, which was calculated at 8% per annum over 30-months holding period from April 2014 to September 2016, the Group recognised partial of the gain from April 2014 to 31 December 2015 being cumulative change of the fair value.
8. UNQUOTED FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (CONT'D)
(b) Wuxi Jin Xun Tong Technology Ltd ("JinXunTong")
The Group indirectly holds a non-controlling, 15% interest in Wuxi Jin Xun Tong Technology Ltd ("Jin Xun Tong"), which was acquired on 18 May 2015, via Grand Wuxi. Jin Xun Tong is an online learning solutions provider to China's urban and rural vocational education industry that was incorporated in 2010 in WuXi City, China.
Fair value
The Group has adopted the "recent investment methodology" prescribed in the IPEVCV guidelines to value its investment at fair value through profit or loss. Applying this methodology, the Company has used RMB 20m, the purchase consideration paid for shares in JinXunTong, as the basis to estimate the fair value of the investment. The Directors consider that the events - after the reporting period (note 21) would not result in a material fair value change.
9. STAFF COSTS AND KEY MANAGEMENT EMOLUMENTS
Period from
14 March
2014 to
31 December 31 December
2015 2014
RMB'000 RMB'000
(a) Staff costs
Wages and salaries 1,502 147
Social security costs 41 -
1,543 147
------------ -------------
(b) Key management emoluments
Remuneration 2,862 -
2,862 -
------------ -------------
The annual remuneration of the key management was as follows, with no other cash or non-cash benefits, share options or pension contributions:
RMB'000
Executive Directors
Xiao Yang 500
Jiang Zhou 450
Ying Ying Gu 500
Chuang Li 500
Non Executive
Directors
James Newman 384
J. Mark Hemmann 240
Stephen Roberts 288
--------
2,862
--------
10. TAXATION
(a) Recognised in the statement of comprehensive income
Period from
14 March
Year ended 2014 to
31 December 31 December
2015 2014
RMB'000 RMB'000
Corporation tax
Current year charge - -
Deferred Enterprise Income
Tax (credit) / expense (see
note 11) (64,140) 71,000
------------- -------------
Income Tax (credit)/ expense
attributable to the Group (64,140) 71,000
------------- -------------
Under current British Cayman Island law, the Company is not obligated to pay any taxes in the British Cayman Islands on either income, profits or capital gains.
According to the PRC Enterprise Income Tax Law and its Detailed Implementing Rules, a foreign company established out of China where management is located inside China will be regarded as a Tax Resident Enterprise in China and subject to tax in China. Management is defined as the management and control on the overall production/business operation, personnel, books and records, and assets of the Company.
(b) Reconciliation of taxation
Tax expense for the year/period can be reconciled to the (loss) / profit per the consolidated statement of comprehensive income as follows:
Period from
14 March
2014 to
31 December 31 December
2015 2014
RMB'000 RMB'000
(Loss) / Profit before tax (259,483) 275,975
------------ -------------
Tax at the EIT rate of 25%
(2014: 25%) (64,871) 68,994
Tax effect of non-deductible
expenses 731 2,006
Tax charge for the year (64,140) 71,000
------------ -------------
11. DEFERRED TAX LIABILITY
Under PRC Enterprise Income Tax Law unrealised gains on investment fair value reflected through profit or loss are not taxable in China. However, if Grand Group Investment Plc would be regarded as a Tax Resident Enterprise in China, it will have PRC tax exposure on the gains realised at transfer of shares in the future. The deferred tax liability is based on the tax rate and tax base that are consistent with the manner of recovery or settlement of the asset i.e. through sale, and has been determined based on a PRC corporate income tax rate of 25%.
RMB'000
On incorporation -
Charge to statement of comprehensive
income 71,000
---------
At 31 December 2014 71,000
Credit to statement of comprehensive
income (64,140)
---------
At 31 December 2015 6,860
---------
12. EARNINGS PER SHARE
Basic earnings per share amounts are calculated by dividing net profit or loss for the year attributable to owners of the Parent by the weighted average number of ordinary shares outstanding the year.
The calculation of the basic profit per share is based on the following data:
Period from
14 March
2014 to
31 December 31 December
2015 2014
RMB'000 RMB'000
(Loss) / Profit
(Loss) / Profit attributable
to owners of the Group (195,343) 204,975
------------ -------------
Number of shares
Shares
Basic
Weighted average number
of ordinary shares in issue
at the end of the year 33,314,909 25,000,000
RMB RMB
Earnings per share (5.86) 8.2
There is no difference between the basic and
diluted earnings per share for both years.
13. CASH AND CASH EQUIVALENTS
2015 2014
RMB'000 RMB'000
Cash at bank equivalents 66,632 10
Cash at bank earns interest at floating rates based on daily bank deposit rates.
The China government has imposed foreign exchange controls on Renminbi that currency flows in and out of the China are restricted.
14. AMOUNTS DUE TO SHAREHOLDERS
2015 2014
RMB'000 RMB'000
Shareholders' loan 13,048 6,708
The shareholders' loan as at 31 December 2015 is unsecured, interest free and repayable on demand.
15. SHARE CAPITAL
Number
of shares Nominal value
Equivalent
GBP to RMB
Authorised
Ordinary shares of GBP
0.00004 each (note i) 625,000,000 25,000 250,000
-------
Issued and fully paid
On incorporation, 1,000 1,000 10,000
Subdivided share capital -
(note i) 24,999,000 -
At 31 December 2014 25,000,000 1,000 10,000
Issue of shares upon placing
(note ii) 8,952,631 358 3,580
------------ ------- -----------
At 31 December 2015 33,952,631 1,358 13,580
------------ ------- -----------
Note:
i) The Company was incorporated in Cayman Islands on 4 March 2014 and was authorised to issue 25,000 shares of GBP1.00 (approximately RMB 10) each.
On 4 September 2014, it was resolved to subdivide the Company's share capital by a ratio of 1:25,000. The resulting authorised and issued share capital amounts to 625,000,000 shares and 25,000,000 shares respectively.
The issued shares have nominal value of each share of GBP0.00004 and are fully paid at par. There are no restrictions on the distribution of dividends and the repayment of capital.
ii) On 27 January 2015, a total of 8,952,631 ordinary shares of GBP0.00004 each were issued by way of placing with institutional and other investors at a placing price of GBP0.825 per placing share for cash consideration GBP7.1 million (before expenses) (equivalent to RMB 70 million) on the AIM market of the London Stock Exchange. The excess of the placing price over the par value of the shares issued was credited to the share premium account.
Funds received were deposited in the bank account of Grand Wuxi Limited, the Company's wholly owned subsidiary. WOFE status was granted to this entity in May 2015, with effective ownership being transferred to the Company on 9 February 2015 through its new 100% interest in Great International Wealth and Wisdom, registered in Hong Kong.
16. CONTRIBUTED CAPITAL
2015 2014
RMB'000 RMB'000
Contributed capital 196,000 196,000
--------------------- -------- --------
The capital reserve arose as a result of capital contributions made by the shareholders of the Company in transferring effective control and beneficial ownership of their interests in Victory China under the VIE Agreements in 2014.
17. WARRANT RESERVE
On 21 January 2015, the Company granted 1,697,631 warrants. Pursuant to the instrument, the warrant holder was entitled to subscribe for 1,697,631 Ordinary shares as is equal to 5%, of the fully diluted share capital of the Company on admission at an exercise price of GBP0.00004, until the anniversary of the Company's admission to trading on AIM. As at 31 December 2015, none of the above warrants have been exercised.
Details of the warrant movements in the year are as follows:
Exercise No. of
price warrant RMB'000
--------------------- ------------ ---------- --------
At the beginning of - - -
the year
--------------------- ------------ ---------- --------
Granted GBP0.00004 1,697,631 13,283
---------------------- ------------- ---------- --------
At the end of the
year 1,697,631 13,283
------------------------------------- ---------- --------
The charge for the year ended 31 December 2015 of RMB13,283,000 has been charged to profit and loss in the Statement of Comprehensive Income with a corresponding credit to Warrant Reserve at 31 December 2015.
Valuation
Upon admission of the Company's shares to the AIM, the warrant holder could convert those warrants into the ordinary shares at once by paying the exercise price only, which would be disposable at the current trading price. As there was no other vesting condition, the valuation of the warrants was not subject to any adjustments and was considered the same as the market price of the underlying convertible shares at the date of admission to the AIM.
18. CAPITAL MANAGEMENT
The Group manages its capital to ensure that it will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the balance between debt and equity.
The capital structure of the Group as at 31 December 2015 consisted of shareholders' loans of RMB 13.048M (Note 14) and equity attributable to the equity holders of the Company, comprising paid in capital of RMB66.950M, contributed capital of RMB196M, warrants reserve of RMB13.283M and retained earnings of RMB9.632M (disclosed in the statement of changes in equity).
The Group reviews the capital structure on an on-going basis. As part of this review, the directors consider the cost of capital and the risks associated with each class of capital. The Group will balance its overall capital structure through the payment of dividends, new share issues and the issue of new debt or the repayment of existing debt.
The Group monitors capital using the net debt-to-capital ratio, details of which as at 31 December 2015 and 31 December 2014 were as follows:
2015 2014
RMB'000 RMB'000
Amounts due to shareholders 13,048 6,708
Less: bank balances and cash (66,632) (10)
--------- --------
Net debt (53,586) 6,698
Equity 285,865 400,985
--------- --------
19. RELATED PARTY TRANSACTIONS
a) The remuneration of the Directors and Officers, the key management personnel of the Group, is set out in aggregate in note 9b.
b) Shenzhen Grand Culture and Technology Development Co. Ltd ("Shenzhen Grand"), is a related party by virtue of the fact that the Company and Shenzhen Grand are subject to the same ownership structure. The Company has a ten year Strategic Cooperation Agreement (dated 24 November 2014) with Shenzhen Grand where by the Company is required to pay a 0.5% finder's fee for any investment introduced. This is included with in other payable and accruals.
Period from
4 March
2014 to
31 December 31 December
2015 2014
RMB'000 RMB'000
Victory China finder's fee
payable
Strategic Cooperation Agreement
includes a no competition
clause in relation to investment
activities - 980
-------------- -------------
20. LEGAL REPRESENTATIVE
Every business established in China, whether domestic or foreign, is required to have a legal representative. He/she is the main principal of the Company and is the employee with the legal power to represent - and enter into binding - on behalf of the Company in accordance with the law or articles of association of the Company. The legal representative is authorised to perform all acts regarding the general administration of a Company according to the Company's aims and objectives, which includes:
l Acting to conserve the company's assets;
l Executing powers of attorney on the company's behalf;
l Authorizing legal representation of and litigation by the company; and
l And executing any legal transactions that are within the nature and scope of that company's business.
In China, every company is required to have a "chop", or company seal, which will be in the custody of the legal representative. Control of the chop is important in order to minimise risks. The legal representative's chop is required on numerous company documents and is regarded as a signature. The legal representative can, by using the chop, bind the company. If a legal representative is to be changed, such a change has to be chopped and approved by the outgoing legal representative. The Company's legal representative in China is Mr. Xiaoyong Wu.
21. EVENTS AFTER REPORTING PERIOD
On 30 September 2016, the Group announced that it has contracted for the sale of its entire holdings in its investments, Wuxi Victory Media and Culture Co Ltd, and WuXi Jin Xun Tong Technology Ltd.
Its 33% share in Victory China was disposed for RMB235.2m, to be settled in twelve instalments. The first payment of RMB20m would be made within 10 days from signing the agreement. It follows by 10 monthly payment of RMB 20m each and the final payment of RMB15.2m to be made before 30 September 2017. This represents a premium of RMB39.2 million to its original investment.
Its stake in Jin Xun Tong was disposed for RMB30.0 million, to be settled in two instalments. The first payment of RMB15m would made within 30 days from signing the agreement. Then the second payment of RMB15m would be made before 31 December 2016. This also represents a premium of RMB10.0 million to its original investment.
For further information:
Grand Group Investment PLC James Newman, Non-Executive Tel: +44 (0) Chairman 20 7398 7714 Yang Xiao, Executive Director www.grandgroupplc.com ZAI Corporate Finance Limited Ray Zimmerman / Ivy Wang / Tel: +44 (0) Ruby Qu (Nomad) 20 7060 2220 Andrew Wilson (Broker) www.zaicf.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
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December 13, 2016 13:18 ET (18:18 GMT)
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