Exhibit 99.2
CHINA METRO-RURAL HOLDINGS LIMITED
CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION
(UNAUDITED)
FOR THE SIX MONTHS ENDED
SEPTEMBER 30, 2010 AND 2009
CHINA METRO-RURAL HOLDINGS LIMITED
CONDENSED CONSOLIDATED INCOME STATEMENT
For the six months ended September 30, | ||||||||||||||||
Notes | 2010 US$’000 | 2010 HK$’000 (Unaudited) | As restated 2009 HK$’000 (Unaudited) | |||||||||||||
(Note 29) | (Note 3(c)(i)) | |||||||||||||||
Continuing operation: | ||||||||||||||||
Revenue | 5 | 46,079 | 359,421 | 155,758 | ||||||||||||
Cost of sales | (27,677 | ) | (215,884 | ) | (96,823 | ) | ||||||||||
Gross profit | 18,402 | 143,537 | 58,935 | |||||||||||||
Other income, net | 3,552 | 27,707 | 6,774 | |||||||||||||
Other gains, net | 319 | 2,494 | — | |||||||||||||
Selling expenses | (1,474 | ) | (11,495 | ) | (3,983 | ) | ||||||||||
Administrative expenses | (3,725 | ) | (29,058 | ) | (18,546 | ) | ||||||||||
Operating profit | 17,074 | 133,185 | 43,180 | |||||||||||||
Finance income | 84 | 652 | 180 | |||||||||||||
Finance cost | (23 | ) | (179 | ) | — | |||||||||||
Finance income – net | 61 | 473 | 180 | |||||||||||||
Share of results of an associate | (54 | ) | (419 | ) | — | |||||||||||
Profit before income tax | 7 | 17,081 | 133,239 | 43,360 | ||||||||||||
Income tax expenses | 8 | (7,316 | ) | (57,065 | ) | (18,904 | ) | |||||||||
Profit for the period from continuing operation | 9,765 | 76,174 | 24,456 | |||||||||||||
Discontinued operations: | ||||||||||||||||
Profit for the period from discontinued operations, net of tax | 10 | 3,831 | 29,878 | 14,400 | ||||||||||||
Profit for the period | 13,596 | 106,052 | 38,856 | |||||||||||||
Attributable to: | ||||||||||||||||
Equity holders of the Company | 12,838 | 100,137 | 32,516 | |||||||||||||
Non-controlling interests | 758 | 5,915 | 6,340 | |||||||||||||
13,596 | 106,052 | 38,856 | ||||||||||||||
Dividend – Non-cash | 9 | 59,804 | 466,474 | — | ||||||||||||
Earnings per share from continuing and discontinued operations attributable to equity holders of the Company during the period | ||||||||||||||||
Basic earnings per share | ||||||||||||||||
From continuing operation | US$ 0.15 | HK$ 1.19 | HK$ 0.38 | |||||||||||||
From discontinued operations | US$ 0.05 | HK$ 0.37 | HK$ 0.13 | |||||||||||||
US$ 0.20 | HK$ 1.56 | HK$ 0.51 | ||||||||||||||
Diluted earnings per share | ||||||||||||||||
From continuing operation | US$ 0.15 | HK$ 1.19 | HK$ 0.38 | |||||||||||||
From discontinued operations | US$ 0.05 | HK$ 0.37 | HK$ 0.13 | |||||||||||||
US$ 0.20 | HK$ 1.56 | HK$ 0.51 | ||||||||||||||
The above condensed consolidated income statement should be read in conjunction with the accompanying notes.
F-1
CHINA METRO-RURAL HOLDINGS LIMITED
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six months ended September 30, | ||||||||||||
2010 US$’000 (Unaudited) | 2010 HK$’000 (Unaudited) | As restated 2009 HK$’000 (Unaudited) | ||||||||||
(Note 29) | (Note 3(c)(i)) | |||||||||||
Profit for the period | 13,596 | 106,052 | 38,856 | |||||||||
Other comprehensive income, net of tax: | ||||||||||||
Increase in fair value of leasehold land and buildings, net of deferred income tax | 594 | 4,636 | 9,972 | |||||||||
Exchange difference on translation of foreign operations | 3,152 | 24,588 | 244 | |||||||||
Total comprehensive income for the period | 17,342 | 135,276 | 49,072 | |||||||||
Total comprehensive income for the period attributable to: | ||||||||||||
Equity holders of the Company | 15,103 | 117,807 | 36,814 | |||||||||
Non-controlling interests | 2,239 | 17,469 | 12,258 | |||||||||
17,342 | 135,276 | 49,072 | ||||||||||
The above condensed consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
F-2
CHINA METRO-RURAL HOLDINGS LIMITED
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At September 30, | At March 31, | |||||||||||||||
Notes | 2010 US$’000 (Unaudited) | 2010 HK$’000 (Unaudited) | 2010 HK$’000 (Unaudited) | |||||||||||||
(Note 29) | (Notes 3(b) and 3(c)(i)) | |||||||||||||||
Non-current assets | ||||||||||||||||
Investment properties | 12 | 13,527 | 105,513 | 866,329 | ||||||||||||
Investment properties under construction | 13 | 29,458 | 229,770 | 293,020 | ||||||||||||
Property, plant and equipment | 14 | 10,160 | 79,251 | 183,327 | ||||||||||||
Prepaid lease payments and land use rights | 15 | 1,461 | 11,396 | 22,459 | ||||||||||||
Deposit for acquisition of land use rights | 16 | 26,966 | 210,331 | 115,389 | ||||||||||||
Interest in an associate | 20 | 2,208 | 17,222 | 100 | ||||||||||||
Deferred income tax assets | — | — | 1,289 | |||||||||||||
83,780 | 653,483 | 1,481,913 | ||||||||||||||
Current assets | ||||||||||||||||
Inventories | — | — | 51,646 | |||||||||||||
Completed properties held for sale | 19,131 | 149,225 | 422,755 | |||||||||||||
Properties under development | 17 | 40,002 | 312,017 | 258,046 | ||||||||||||
Prepaid lease payments and land use rights | 15 | 41 | 317 | 2,198 | ||||||||||||
Construction contract | 18 | — | — | 50,557 | ||||||||||||
Trade and other receivables | 24,400 | 190,321 | 229,808 | |||||||||||||
Financial assets at fair value through profit or loss | — | — | 49,194 | |||||||||||||
Tax recoverable | — | — | 5,526 | |||||||||||||
Restricted and pledged bank deposits | 22,474 | 175,301 | 179,752 | |||||||||||||
Cash and cash equivalents | 18,659 | 145,537 | 746,669 | |||||||||||||
124,707 | 972,718 | 1,996,151 | ||||||||||||||
Current liabilities | ||||||||||||||||
Trade payables, other payables and accruals | 18,932 | 147,668 | 454,224 | |||||||||||||
Receipt in advance | 7,555 | 58,933 | 286,372 | |||||||||||||
Current income tax liabilities | 15,733 | 122,717 | 139,428 | |||||||||||||
Bank borrowings | 19 | 28,213 | 220,060 | 277,446 | ||||||||||||
Amount due to an associate | 1 | 5 | 1,530 | |||||||||||||
70,434 | 549,383 | 1,159,000 | ||||||||||||||
Net current assets | 54,273 | 423,335 | 837,151 | |||||||||||||
Total assets less current liabilities | 138,053 | 1,076,818 | 2,319,064 | |||||||||||||
Non-current liabilities | ||||||||||||||||
Deferred income tax liabilities | 6,139 | 47,882 | 132,258 | |||||||||||||
Bank borrowings | 19 | 43,061 | 335,881 | 329,245 | ||||||||||||
49,200 | 383,763 | 461,503 | ||||||||||||||
Net assets | 88,853 | 693,055 | 1,857,561 | |||||||||||||
The above condensed consolidated statement of financial position should be read in conjunction with the accompanying notes.
F-3
CHINA METRO-RURAL HOLDINGS LIMITED
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION – (Continued)
At September 30, | At March 31, | |||||||||||||||
Notes | 2010 | 2010 | 2010 | |||||||||||||
US$’000 | HK$’000 | HK$’000 | ||||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||
(Note 29) | (Notes 3(b) and 3(c)(i)) | |||||||||||||||
Equity | ||||||||||||||||
Equity attributable to equity holders of the Company | ||||||||||||||||
Share capital | 21 | 64 | 500 | 500 | ||||||||||||
Reserves | 88,789 | 692,555 | 1,061,489 | |||||||||||||
88,853 | 693,055 | 1,061,989 | ||||||||||||||
Non-controlling interests | — | — | 795,572 | |||||||||||||
Total equity | 88,853 | 693,055 | 1,857,561 | |||||||||||||
The above condensed consolidated statement of financial position should be read in conjunction with the accompanying notes.
F-4
CHINA METRO-RURAL HOLDINGS LIMITED
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the six months ended September 30, | ||||||||||||
2010 US$’000 (Unaudited) | 2010 HK$’000 (Unaudited) | As restated 2009 HK$’000 (Unaudited) | ||||||||||
(Note 29) | (Note 3(c)(i)) | |||||||||||
Net cash (used in)/generated from operating activities | (8,868 | ) | (69,171 | ) | 3,079 | |||||||
Net cash used in investing activities | (86,954 | ) | (678,243 | ) | (28,178 | ) | ||||||
Net cash generated from financing activities | 18,214 | 142,068 | 347,234 | |||||||||
Net (decrease)/increase in cash and cash equivalents | (77,608 | ) | (605,346 | ) | 322,135 | |||||||
Cash and cash equivalents at beginning of the period | 95,727 | 746,669 | 503,912 | |||||||||
Effect of foreign exchange rate changes | 540 | 4,214 | (29 | ) | ||||||||
Cash and cash equivalents at end of the period | 18,659 | 145,537 | 826,018 | |||||||||
The above condensed consolidated statement of cash flows should be read in conjunction with the accompanying notes.
F-5
CHINA METRO-RURAL HOLDINGS LIMITED
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Attributable to owners of the Company | ||||||||||||||||||||||||||||||||||||||||||||
Notes | Property | Accumulated | Statutory | Non- | ||||||||||||||||||||||||||||||||||||||||
Issued | Share | revaluation | translation | Capital | surplus | Retained | controlling | Total | ||||||||||||||||||||||||||||||||||||
capital | premium | reserve | reserve | reserve | reserve | profits | Total | interests | equity | |||||||||||||||||||||||||||||||||||
HK$’000 | HK$’000 | HK$’000 | HK$’000 | HK$’000 | HK$’000 | HK$’000 | HK$’000 | HK$’000 | HK$’000 | |||||||||||||||||||||||||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||||||||||||||||||||||||
Balance at April 1, 2009 as previously reported | 77 | — | 32,907 | 35,498 | 104,228 | 4,771 | 394,123 | 571,604 | 812,052 | 1,383,656 | ||||||||||||||||||||||||||||||||||
Adoption of IAS 17 (Amendment) | 3(c)(i) | — | — | 5,874 | — | — | — | 410 | 6,284 | 9,283 | 15,567 | |||||||||||||||||||||||||||||||||
Balance at April 1, 2009 (As restated) | 77 | — | 38,781 | 35,498 | 104,228 | 4,771 | 394,533 | 577,888 | 821,335 | 1,399,223 | ||||||||||||||||||||||||||||||||||
Profit for the period | — | — | — | — | — | — | 32,516 | 32,516 | 6,340 | 38,856 | ||||||||||||||||||||||||||||||||||
Other comprehensive income: | ||||||||||||||||||||||||||||||||||||||||||||
Increase in fair value of leasehold land and buildings, net of deferred income tax | — | — | 4,026 | — | — | — | — | 4,026 | 5,946 | 9,972 | ||||||||||||||||||||||||||||||||||
Exchange difference on translation of foreign operations | — | — | — | 272 | — | — | — | 272 | (28 | ) | 244 | |||||||||||||||||||||||||||||||||
Total comprehensive income for the period | — | — | 4,026 | 272 | — | — | 32,516 | 36,814 | 12,258 | 49,072 | ||||||||||||||||||||||||||||||||||
Transfer to retained profits upon disposal of properties | — | — | (321 | ) | — | — | — | 321 | — | — | — | |||||||||||||||||||||||||||||||||
Release of property revaluation reserve upon depreciation of leasehold land and buildings | — | — | (88 | ) | — | — | — | 88 | — | — | — | |||||||||||||||||||||||||||||||||
Share-based payments | — | — | — | — | 1,606 | — | — | 1,606 | 2,372 | 3,978 | ||||||||||||||||||||||||||||||||||
Contribution from non-controlling interests | — | — | — | — | — | — | — | — | 9,067 | 9,067 | ||||||||||||||||||||||||||||||||||
Issue of preferred shares to equity holders | 1 | — | — | — | — | — | — | 1 | — | 1 | ||||||||||||||||||||||||||||||||||
Share repurchase | (28 | ) | — | — | — | — | — | — | (28 | ) | — | (28 | ) | |||||||||||||||||||||||||||||||
Balance at September 30, 2009, as restated | 50 | — | 42,398 | 35,770 | 105,834 | 4,771 | 427,458 | 616,281 | 845,032 | 1,461,313 | ||||||||||||||||||||||||||||||||||
The above condensed consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
F-6
CHINA METRO-RURAL HOLDINGS LIMITED
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY – (Continued)
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2010
Attributable to owners of the Company | ||||||||||||||||||||||||||||||||||||||||||
Notes | Issued capital HK$’000 (Unaudited) | Share premium HK$’000 (Unaudited) | Property revaluation reserve HK$’000 (Unaudited) | Accumulated translation reserve HK$’000 (Unaudited) | Capital reserve HK$’000 (Unaudited) | Statutory surplus reserve HK$’000 (Unaudited) | Retained profits HK$’000 (Unaudited) | Total HK$’000 (Unaudited) | Non- controlling interests HK$’000 (Unaudited) | Total equity | ||||||||||||||||||||||||||||||||
Balance at April 1, 2010 as previously reported | 500 | 1,003,200 | 32,377 | 36,834 | (597,316 | ) | 5,067 | 567,838 | 1,048,500 | 775,645 | 1,824,145 | |||||||||||||||||||||||||||||||
Adoption of IAS 17 (Amendment) | 3(c)(i) | — | — | 13,031 | — | — | — | 458 | 13,489 | 19,927 | 33,416 | |||||||||||||||||||||||||||||||
Balance at April 1, 2010 (As restated) | 500 | 1,003,200 | 45,408 | 36,834 | (597,316 | ) | 5,067 | 568,296 | 1,061,989 | 795,572 | 1,857,561 | |||||||||||||||||||||||||||||||
Profit for the period | — | — | — | — | — | — | 100,137 | 100,137 | 5,915 | 106,052 | ||||||||||||||||||||||||||||||||
Other comprehensive income: | ||||||||||||||||||||||||||||||||||||||||||
Increase in fair value of leasehold land and buildings, net of deferred income tax | — | — | 1,868 | — | — | — | — | 1,868 | 2,768 | 4,636 | ||||||||||||||||||||||||||||||||
Exchange difference on translation of foreign operations | — | — | — | 15,802 | — | — | — | 15,802 | 8,786 | 24,588 | ||||||||||||||||||||||||||||||||
Total comprehensive income for the period | — | — | 1,868 | 15,802 | — | — | 100,137 | 117,807 | 17,469 | 135,276 | ||||||||||||||||||||||||||||||||
Transfer to retained profits upon disposal of properties | — | — | (144 | ) | — | — | — | 144 | — | — | — | |||||||||||||||||||||||||||||||
Release of property revaluation reserve upon depreciation of leasehold land and buildings | — | — | (499 | ) | — | — | — | 499 | — | — | — | |||||||||||||||||||||||||||||||
Share-based payments | — | — | — | — | 463 | — | — | 463 | 685 | 1,148 | ||||||||||||||||||||||||||||||||
Issue of new shares by subsidiaries | — | — | — | — | — | — | — | — | 640 | 640 | ||||||||||||||||||||||||||||||||
Deemed payment to non-controlling interests | — | — | — | — | (446 | ) | — | — | (446 | ) | 446 | — | ||||||||||||||||||||||||||||||
Transfer to retained profits upon lapse of share options | — | — | — | — | (58 | ) | — | 58 | — | — | — | |||||||||||||||||||||||||||||||
Deemed disposal of a subsidiary | 20 | — | — | — | — | — | — | — | — | (8,957 | ) | (8,957 | ) | |||||||||||||||||||||||||||||
Dividend – Distribution of subsidiaries | 9 | — | — | — | — | — | — | (466,474 | ) | (466,474 | ) | (805,855 | ) | (1,272,329 | ) | |||||||||||||||||||||||||||
Release of reserve upon distribution of subsidiaries | — | — | (46,633 | ) | (20,284 | ) | (39,966 | ) | (5,067 | ) | 91,666 | (20,284 | ) | — | (20,284 | ) | ||||||||||||||||||||||||||
Balance at September 30, 2010 | 500 | 1,003,200 | — | 32,352 | (637,323 | ) | — | 294,326 | 693,055 | — | 693,055 | |||||||||||||||||||||||||||||||
The above condensed consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
F-7
CHINA METRO-RURAL HOLDINGS LIMITED
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION
1. | GENERAL INFORMATION |
China Metro-Rural Holdings Limited (the “Company”, “we” or “us”) is a limited liability company incorporated and domiciled in the British Virgin Islands (“BVI”) as an international business company under the BVI International Business Companies Act on August 14, 1995 and automatically re-registered as a business company on January 1, 2007 pursuant to the BVI Companies Act.
The Company, through its subsidiaries (together referred to as the “Group”), develops and operates large-scale integrated agricultural logistics platform in the People’s Republic of China (“PRC”). Specifically, the Group operates in (1) the property development which engages in the development of integrated agricultural logistics centers and supporting residential properties; (2) the property investment which invests in integrated agricultural logistics and trade centers and supporting facilities; and (3) the property management which engages in the management of the development properties within the integrated agricultural logistics platform. During the six months ended September 30, 2010, the Company declared a dividend (“Special Dividend”) to its shareholders which was satisfied by way of distribution in specie of the equity interest in Man Sang International Limited (“MSIL”), held by the Company, represented approximately 494 million ordinary shares in MSIL (the “Distribution”), which was completed during the current period. Upon the completion of the Distribution, the Group no longer held interest in MSIL and has discontinued its Jewelry and real estate businesses and presented those busineses as “discontinued operations” in the condensed consolidated income statement for all periods presented. Further details of the Group’s discontinued operations are set out in note 10 to the condensed consolidated interim financial information.
The shares of the Company have been listed on the NYSE Amex under the ticker symbol of “CNR”.
The condensed consolidated interim financial information has been approved and authorized for issue by the Board of Directors on January 18, 2011.
The condensed consolidated interim financial information has not been audited.
2. | BASIS OF PREPARATION |
This condensed consolidated interim financial information for the six months ended September 30, 2010 has been prepared in accordance with International Accounting Standards (“IAS”) 34, “Interim financial reporting”. The unaudited condensed consolidated financial information furnished reflects all adjustments which are, in the opinion of management, necessary to a fair statement of the results for the interim period presented. All such adjustments are of a normal recurring nature. The condensed consolidated interim financial information should be read in conjunction with the re-presented annual financial statements for the three years ended March 31, 2010 included in a separate report on Form 6-K furnished on January 18, 2011 (the “Related 6-K Report”), which have been prepared in accordance with International Financial Reporting Standards (“IFRSs”).
3. | ACCOUNTING POLICIES |
The accounting policies are consistent with those of the annual financial statements for the year ended March 31, 2010, except as described below. Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.
F-8
CHINA METRO-RURAL HOLDINGS LIMITED
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION
(a) | Reclassifications as a result of the Distribution |
Certain reclassifications have been made to prior period’s amounts due to the Distribution where the operating results of MSIL for the period prior to the distribution are classified as discontinued operations for the periods presented in the Group’s condensed consolidated income statement.
Given the distributed non-cash assets are ultimately controlled by the same parties before and after the Distribution, the Company, for its individual financial statements, chose to recognize the Distribution at the carrying amount of the investment in MSIL immediate prior to the Distribution.
(b) | Classification of Bank Loans |
In November 2010, the IFRS Interpretation Committee (the “IFRIC”) confirmed its conclusion at its meeting from September 2010 that a liability, which contains a clause which gives the lender the unconditional right to demand repayment at any time, should be classified as a current liability in accordance with IAS 1 – Presentation of financial statements (“IAS 1”) irrespective of the probability that the lender will invoke the clause without cause. The market practice in Hong Kong previously has been to classify term loans as a non-current liability based on the agreed schedule repayment date(s). The unconditional right was considered to be protective and the likelihood of it being exercised was remote or would only be exercised in adverse conditions. However, the IFRIC’s conclusion provided additional clarity on the application of IAS 1. Accordingly, in order to comply with the requirements of IFRIC, the Group changed its accounting policy on the classification of loan agreements that contain a repayment on demand clause and adjustments were made to the Group’s historical financial statements and certain financial information for prior years to reflect the IFRIC’s conclusion.
The new accounting policy has been applied retrospectively by representing the opening balances at April 1, 2009, with consequential reclassification adjustments to comparatives for the year ended March 31, 2010. The adjustments are non-cash and had no impact on the consolidated statement of income statement or consolidated statement of cash flow. As at March 31, 2010, the current portion of bank borrowings has increased by approximately HK$28,392,000, whereas the non-current portion of bank borrowings has decreased by approximately HK$28,392,000.
(c) | New and amended standards adopted by the Group |
(i) | Adoption of IAS 17 (Amendment) Leases |
IAS 17 (Amendment) ‘Leases’ (effective January 1, 2010) deletes specific guidance regarding classification of leases of land, so as to eliminate the inconsistency with the general guidance on lease classification. As a result, leases of land should be classified as either finance or operating lease using the general principles of IAS 17, i.e. whether the lease transfers substantially all the risks and rewards incidental to ownership of an asset to the lessee.
Prior to the amendment, land interest which title is not expected to pass to the Group by the end of the lease term was classified as operating lease under “Prepaid lease payments and land use rights”, and amortized over the lease term.
F-9
CHINA METRO-RURAL HOLDINGS LIMITED
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION
IAS 17 (Amendment) has been applied retrospectively for annual periods beginning on or after April 1, 2010 in accordance with the effective date and transitional provisions of the amendment. The Group has reassessed the classification of unexpired prepaid lease payment and land use rights as at April 1, 2010 on the basis of information existing at the inception of those leases, and recognized the prepaid lease payment in Hong Kong as finance lease retrospectively. As a result of the reassessment, the Group has reclassified certain prepaid lease payment from operating leases to finance leases.
If the property interest is classified as finance lease and held for own use, that land interest is accounted for as ‘Property, plant and equipment’ and is stated at fair value based on periodic valuations less subsequent depreciation according to the Group’s adopted accounting policies.
The effect on the adoption of this revised standard, where the effects only have impacts to the Discontinued Operations, is analyzed as follows:
(a) | Effect on the comparative figures of the unaudited condensed consolidated income statement |
For the six months ended September 30, 2009
As previously reported HK$’000 | IAS 17 (Amendment) | As restated HK$’000 | ||||||||||
Increase/(decrease) in profit: | ||||||||||||
Depreciation | (4,102 | ) | (592 | ) | (4,694 | ) | ||||||
Amortization of prepaid land lease payments | (855 | ) | 353 | (502 | ) | |||||||
Income tax expense | (20,980 | ) | 39 | (20,941 | ) | |||||||
Net profit attributable to: | ||||||||||||
Equity holders of the Company | 32,597 | (81 | ) | 32,516 | ||||||||
Non-controlling interests | 6,459 | (119 | ) | 6,340 | ||||||||
39,056 | (200 | ) | 38,856 | |||||||||
(b) | Effect on the comparative figures of the unaudited condensed consolidated statement of comprehensive income which is mainly attributable to the change in fair value of leasehold land and buildings |
For the six months ended September 30, 2009
As previously reported HK$’000 | IAS 17 (Amendment) | As restated HK$’000 | ||||||||||
Increase in comprehensive income: | ||||||||||||
Total comprehensive income attributable to: | ||||||||||||
Equity holders of the Company | 32,869 | 3,945 | 36,814 | |||||||||
Non-controlling interests | 6,431 | 5,827 | 12,258 | |||||||||
39,300 | 9,772 | 49,072 | ||||||||||
F-10
CHINA METRO-RURAL HOLDINGS LIMITED
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION
(c) | Effect on the comparative figures of the unaudited condensed consolidated statement of changes in equity |
At April 1, 2009
As previously reported HK$’000 | IAS 17 (Amendment) HK$’000 | As restated HK$’000 | ||||||||||
Increase in equity: | ||||||||||||
Within equity attributable to the Company | ||||||||||||
Other property revaluation reserve | 32,907 | 5,874 | 38,781 | |||||||||
Retained profits | 394,123 | 410 | 394,533 | |||||||||
Within equity attributable to non-controlling interests | 812,052 | 9,283 | 821,335 | |||||||||
At April 1, 2010
As previously reported HK$’000 | IAS 17 (Amendment) HK$’000 | As restated HK$’000 | ||||||||||
Increase in equity: | ||||||||||||
Within equity attributable to the Company | ||||||||||||
Other property revaluation reserve | 32,377 | 13,031 | 45,408 | |||||||||
Retained profits | 567,838 | 458 | 568,296 | |||||||||
Within equity attributable to non-controlling interests | 775,645 | 19,927 | 795,572 | |||||||||
F-11
CHINA METRO-RURAL HOLDINGS LIMITED
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION
(d) | Effect on the comparative figures of the unaudited condensed consolidated statement of financial positions |
At March 31, 2010
As previously reported HK$’000 | IAS 17 (Amendment) | HK$’000 | ||||||||||
Increase/(decrease) in assets: | ||||||||||||
Property, plant and equipment | 116,477 | 66,850 | 183,327 | |||||||||
Prepaid land lease payments | 51,488 | (26,831 | ) | 24,657 | ||||||||
Increase in liabilities: | ||||||||||||
Deferred tax liabilities | 125,655 | 6,603 | 132,258 | |||||||||
Increase in equity: | ||||||||||||
Within equity attributable to the Company | ||||||||||||
Other property revaluation reserve | 32,377 | 13,031 | 45,408 | |||||||||
Retained profits | 567,838 | 458 | 568,296 | |||||||||
Within equity attributable to non-controlling interests | 775,645 | 19,927 | 795,572 | |||||||||
(ii) | Adoption of IFRS 3 (revised) Business combinations |
IFRS 3 (revised), ‘Business combinations’, and consequential amendments to IAS 27, ‘Consolidated and separate financial statements’, IAS 28, ‘Investments in associates’, and IAS 31, ‘Interests in joint ventures’, are effective prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after July 1, 2009.
The revised standard continues to apply the acquisition method to business combinations but with some significant changes compared with IFRS 3. For example, all payments to purchase a business are recorded at fair value at the acquisition date, with contingent payments classified as debt subsequently re-measured through the income statement. There is a choice on an acquisition-by-acquisition basis to measure the non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net assets. All acquisition-related costs are expensed.
As the Group has adopted IFRS 3 (revised), it is required to adopt IAS 27 (revised), ‘Consolidated and separate financial statements’, at the same time. IAS 27 (revised) requires the effects of all transactions with non-controlling interests to be recorded in equity if there is no change in control and these transactions will no longer result in goodwill or gains and losses. The standard also specifies the accounting when control is lost. Any remaining interest in the entity is re-measured to fair value, and a gain or loss is recognized in profit or loss. There has been no impact of IAS 27 (revised) on the current period.
F-12
CHINA METRO-RURAL HOLDINGS LIMITED
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION
(d) | Standards, amendments and interpretations to existing standards effective in current period but not relevant to the Group: |
• | IFRIC 17, ‘Distribution of non-cash assets to owners’, effective for annual periods beginning on or after July 1, 2009. This is not currently applicable to the Group, as MSIL remained under the control of shareholders of the Company before and after the Distribution. |
• | IFRIC 18, ‘Transfers of assets from customers’, effective for transfer of assets received on or after July 1, 2009. This is not relevant to the Group, as it has not received any assets from customers. |
• | ‘Additional exemptions for first-time adopters’ (Amendment to IFRS 1) was issued in July 2009. The amendments are required to be applied for annual periods beginning on or after January 1, 2010. This is not relevant to the Group as it is an existing IFRS preparer. |
• | ‘Group cash-settled share-based payment transactions’ (Amendment to IFRS 2) as issued in June 2009. The amendment is required to be applied for annual periods beginning on or after January 1, 2010. This is not relevant to the Group as it does not have cash-settled share-based payment transactions. |
• | ‘Classification of rights issues’ (Amendments to IAS 32) was issued in October 2009. The amendment is required to be applied for annual periods beginning on or after February 1, 2010. This is not relevant to the Group as it has no rights issues in the current period. |
• | Improvements to International Financial Reporting Standards 2009 were issued in April 2009. The effective dates vary standard by standard but most are effective January 1, 2010. |
(e) | New standards, new interpretations and amendments to standards and interpretations have been issued but are not effective for the financial year beginning on or after April 1, 2010 and have not been early adopted. The Group is yet to assess the full impact of these following new standards, new interpretations and amendments to standards and interpretation: |
• | ‘Deferred tax: Recovery of underlying assets’ (Amendments to IAS 12), issued in December 2010. The amendments provide a practical approach for measuring deferred tax liabilities and deferred tax assets when investment property is measured using the fair value model in IAS 40 Investment Property. The amendments introduce a presumption that an investment property is recovered entirely through sale. This presumption is rebutted if the investment property is held within a business model whose objective is to consume substantially all of the economic benefits embodied in the investment property over time, rather than through sale. The amendment should be applied for annual periods beginning on or after January 1, 2012. |
• | IFRS 9, ‘Financial instruments’, issued in December 2009. This addresses the classification and measurement of financial assets and is likely to affect the Group’s accounting for its financial assets. The standard is not applicable until January 1, 2013 but is available for early adoption. |
• | Revised IAS 24, ‘Related party disclosures’, issued in November 2009. It supersedes IAS 24, ‘Related party disclosures’, issued in 2003. The revised IAS 24 is required to be applied from January 1, 2011. Earlier application for either the entire standard or the government-related entity is permitted. The Group will apply the revised IAS 24 from April 1, 2011. |
F-13
CHINA METRO-RURAL HOLDINGS LIMITED
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION
• | Under ‘Classification of rights issued’ (Amendments to IAS 32), for rights issues offered for a fixed amount of foreign currency, current practice appears to require such issues to be accounted for as derivative liabilities. The amendment states that if such rights are issued pro rata to all the entity’s existing shareholders in the same class for a fixed amount of currency, they should be classified as equity regardless of the currency in which the exercise price is denominated. The amendment should be applied for annual periods beginning on or after February 1, 2010. Earlier application is permitted. |
• | ‘Prepayments of a minimum funding requirement’ (Amendments to IFRIC 14), issued in November 2009. The amendments correct an unintended consequence of IFRIC 14, ‘IAS 19 – The limit on a defined benefit asset, minimum funding requirements and their interaction’. Without the amendments, entities are not permitted to recognize as an asset some voluntary prepayments for minimum funding contributions. This was not intended when IFRIC 14 was issued, and the amendments correct the problem. The amendments are effective for annual periods beginning January 1, 2011. Earlier application is permitted. The amendments should be applied retrospectively to the earliest comparative period presented. |
• | IFRIC 19, ‘Extinguishing financial liabilities with equity instruments’. This clarifies the requirements of IFRSs when an entity renegotiates the terms of a financial liability with its creditor and the creditor agrees to accept the entity’s shares or other equity instruments to settle the financial liability fully or partially. The interpretation is effective for annual periods beginning on or after July 1, 2010. Earlier application is permitted. |
• | Improvements to International Financial Reporting Standards 2010 were issued in May 2010. The effective dates vary standard by standard but most are effective January 1, 2010. |
4. | SEASONALITY OF OPERATIONS |
The Group’s revenues and operating profits are subject to seasonal fluctuation with peak operations in the first half of the fiscal year. This is due to the seasonal nature of the northeastern part of China where it can become severely cold in the second half of the fiscal year whereby it delays the construction progress of the Group’s property development projects. Accordingly, higher revenues and operating profits are usually expected in the first half than in the second half of the fiscal year.
F-14
CHINA METRO-RURAL HOLDINGS LIMITED
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION
5. | REVENUE |
Revenue represents (i) the amounts received and receivable from customers in respect of goods sold, less returns and allowances, (ii) the proceeds received and receivable from the sales of properties during the period and (iii) the amounts received and receivable in respect of leasing and property management fee of investment properties.
For the six months ended September 30, | ||||||||
2010 HK$’000 (Unaudited) | 2009 HK$’000 (Unaudited) | |||||||
Continuing operation | ||||||||
Sales of properties | 357,568 | 155,758 | ||||||
Rental and property management income | 1,853 | — | ||||||
359,421 | 155,758 | |||||||
Discontinued operations | ||||||||
Sales of pearls and jewelry | 88,300 | 116,155 | ||||||
Sales of properties | 57,574 | 20,060 | ||||||
Rental income | 11,578 | 12,387 | ||||||
157,452 | 148,602 | |||||||
516,873 | 304,360 | |||||||
6. | SEGMENT INFORMATION |
The Group determines its operating segments based on the reports reviewed by the executive board of directors that are used to make strategic decision.
The Group has three reportable operating segments, where two of which were discontinued during the current period as a result of the Distribution. The Group’s operating businesses are structured and managed separately according to nature of the operations and the product perspectives. Each of the Group’s reportable segments represents a strategic business unit that is subject to risks and returns that are different from other reportable operating segment. Details of the reportable operating segment are as follows:
Continuing operation:
Agricultural logistics – Development, sales and leasing of properties of integrated agricultural logistics and trade platform in the PRC
Discontinued operations:
Pearls and jewelry – Purchasing, processing, assembling, merchandising, wholesale distribution of pearls and jewelry products; and
Property development and investment – Development, sales and leasing of properties, including industrial complex in Shenzhen, the PRC, a market center with various supporting facilities in Zhuji, the PRC and commercial properties in Hong Kong.
F-15
CHINA METRO-RURAL HOLDINGS LIMITED
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION
The segment information provided to the executive board of directors for the reporting segments for the six months ended September 30, 2010 is as follows:
Segment results:
Continuing operation | Discontinued operations | |||||||||||||||||||||||
Agricultural Logistics HK$’000 | Sub-total HK$’000 | Pearls and Jewelry HK$’000 | Property Development and Investment HK$’000 | Sub-total HK$’000 | Total HK$’000 | |||||||||||||||||||
For the six months ended September 30, 2010 (Unaudited) | ||||||||||||||||||||||||
Segment revenue | 359,421 | 359,421 | 88,300 | 69,485 | 157,785 | 517,206 | ||||||||||||||||||
Inter-segment revenue | — | — | — | (333 | ) | (333 | ) | (333 | ) | |||||||||||||||
Revenue to external customers | 359,421 | 359,421 | 88,300 | 69,152 | 157,452 | 516,873 | ||||||||||||||||||
Segment operating profit | 135,762 | 135,762 | 7,174 | 7,613 | 14,787 | 150,549 | ||||||||||||||||||
Finance income | 651 | 651 | 696 | 358 | 1,054 | 1,705 | ||||||||||||||||||
Finance costs | (179 | ) | (179 | ) | (919 | ) | (49 | ) | (968 | ) | (1,147 | ) | ||||||||||||
Share of results of associates | (419 | ) | (419 | ) | — | 17 | 17 | (402 | ) | |||||||||||||||
Segment profit before tax | 135,815 | 135,815 | 6,951 | 7,939 | 14,890 | 150,705 | ||||||||||||||||||
Continuing operation | Discontinued operations | |||||||||||||||||||||||
Agricultural Logistics HK$’000 | Sub-total HK$’000 | Pearls and Jewelry HK$’000 | As restated Property Development and Investment HK$’000 | As restated Sub-total HK$’000 | As restated Total HK$’000 | |||||||||||||||||||
For the six months ended September 30, 2009 (Unaudited) | ||||||||||||||||||||||||
Segment revenue | ||||||||||||||||||||||||
Inter-segment revenue | 155,758 | 155,758 | 116,155 | 32,845 | 149,000 | 304,758 | ||||||||||||||||||
Revenue to external customers | — | — | — | (398 | ) | (398 | ) | (398 | ) | |||||||||||||||
155,758 | 155.758 | 116,155 | 32,447 | 148,602 | 304,360 | |||||||||||||||||||
Segment operating profit | 47,703 | 47,703 | 11,082 | 4,492 | 15,574 | 63,277 | ||||||||||||||||||
Finance income | 177 | 177 | 586 | 250 | 836 | 1,013 | ||||||||||||||||||
Finance costs | — | — | — | (255 | ) | (255 | ) | (255 | ) | |||||||||||||||
Share of results of associates | — | — | — | 49 | 49 | 49 | ||||||||||||||||||
Segment profit before tax | 47,880 | 47,880 | 11,668 | 4,536 | 16,204 | 64,084 | ||||||||||||||||||
F-16
CHINA METRO-RURAL HOLDINGS LIMITED
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION
Segment assets:
Continuing operation | Discontinued operations | |||||||||||||||||||||||
Agricultural Logistics HK$’000 | Sub-total HK$’000 | Pearls and Jewelry HK$’000 | Property Development and Investment HK$’000 | Sub-total HK$’000 | Total HK$’000 | |||||||||||||||||||
Total segment assets | ||||||||||||||||||||||||
As at September 30, 2010 | 1,611,172 | 1,611,172 | — | — | — | 1,611,172 | ||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||
As at March 31, 2010 | 1,378,464 | 1,378,464 | 533,734 | 1,452,932 | 1,986,666 | 3,365,130 | ||||||||||||||||||
A reconciliation of “segment profit before tax” to the Group’s “Profit before tax” is provided as follows:
For the six months ended September 30, | ||||||||||||||||||||||||
2010 | 2009 | |||||||||||||||||||||||
Continuing operation HK$’000 (Unaudited) | Discontinued Operations HK$’000 (Unaudited) | Total HK$’000 (Unaudited) | Continuing operation HK$’000 (Unaudited) | As restated Discontinued Operations HK$’000 (Unaudited) | As restated Total HK$’000 (Unaudited) | |||||||||||||||||||
Total profit before tax for reportable segments | 135,815 | 14,890 | 150,705 | 47,880 | 16,204 | 64,084 | ||||||||||||||||||
Gain on disposals of financial assets at fair value through profit or loss | — | 1,128 | 1,128 | — | 6,595 | 6,595 | ||||||||||||||||||
Net unrealized loss on financial assets at fair value through profit or loss | — | (51 | ) | (51 | ) | — | (1,396 | ) | (1,396 | ) | ||||||||||||||
Share based payments | — | (1,148 | ) | (1,148 | ) | — | (3,978 | ) | (3,978 | ) | ||||||||||||||
Dividend income | — | 1,112 | 1,112 | — | 374 | 374 | ||||||||||||||||||
Recycling of exchange difference to profit or loss upon Distribution (note 10) | — | 20,284 | 20,284 | — | — | — | ||||||||||||||||||
Corporate finance income | 1 | 1 | 2 | 3 | 40 | 43 | ||||||||||||||||||
Corporate expenses | (2,577 | ) | (286 | ) | (2,863 | ) | (4,523 | ) | (1,402 | ) | (5,925 | ) | ||||||||||||
Profit before tax of the Group | 133,239 | 35,930 | 169,169 | 43,360 | 16,437 | 59,797 | ||||||||||||||||||
The amounts provided to the executive board of directors with respect to total assets are measured in a manner consistent with that of the financial statements. These assets are allocated based on the operations of the segment and the physical location of the asset.
F-17
CHINA METRO-RURAL HOLDINGS LIMITED
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION
7. | PROFIT BEFORE TAX |
The following items have been charged/(credited) to the Group’s profit before tax from continuing operation:
For the six months ended September 30, | ||||||||
2010 | 2009 | |||||||
HK$’000 | HK$’000 | |||||||
(Unaudited) | (Unaudited) | |||||||
Finance costs: | ||||||||
Interest on bank borrowings | 12,148 | 10,396 | ||||||
Less: amount capitalized | (11,969 | ) | (10,396 | ) | ||||
179 | — | |||||||
Cost of completed properties held for sale | 214,577 | 96,823 | ||||||
Cost of services provided | 1,307 | — | ||||||
Government grants | (16,480 | ) | (2,266 | ) | ||||
Employee benefit expenses (including directors’ emoluments | 7,039 | 4,586 | ||||||
Depreciation of property, plant and equipment | 1,564 | 321 | ||||||
Amortization of prepaid lease payments and land use rights | 182 | 498 | ||||||
Provision for impairment of trade and other receivables | 5,081 | — | ||||||
Land use tax | 8,773 | 8,580 | ||||||
Contract income, net | (10,857 | ) | (4,435 | ) | ||||
Gain on deemed disposal of a subsidiary | (90 | ) | — | |||||
Gain on disposals of land use rights | (2,174 | ) | — | |||||
8. | INCOME TAX EXPENSE |
The Group’s income tax expense attributable to continuing operation as presented on the face of the condensed consolidated income statement is analyzed as follows:
For the six months ended September 30, | ||||||||
2010 | 2009 | |||||||
HK$’000 | HK$’000 | |||||||
(Unaudited) | (Unaudited) | |||||||
Current income tax: | ||||||||
PRC corporate income tax | 28,575 | 9,930 | ||||||
PRC land appreciation tax | 29,061 | 9,795 | ||||||
Other | (571 | ) | 579 | |||||
57,065 | 20,304 | |||||||
Deferred tax | — | (1,400 | ) | |||||
Tax charge for the period from continuing operation | 57,065 | 18,904 | ||||||
F-18
CHINA METRO-RURAL HOLDINGS LIMITED
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION
Hong Kong profits tax
Hong Kong profits tax has been provided at a rate of 16.5% (six months ended September 30, 2009: 16.5%) on estimated assessable profits arising in Hong Kong during the period.
PRC corporate income tax
The PRC corporate income taxes in respect of operations in mainland China is calculated at the applicable tax rates on estimated assessable profits for the period based on existing legislation, interpretations and practices in respect thereof.
PRC land appreciation tax
PRC land appreciation tax is levied at progressive rates ranging from 30% to 60% on the appreciation of land value, being the proceeds of sales of properties less deductible expenditures including cost of land use rights and all property expenditures.
9. | DIVIDEND |
Note | For the six months ended | |||||||||||
September 30, | ||||||||||||
2010 | 2009 | |||||||||||
HK$’000 | HK$’000 | |||||||||||
(Unaudited) | (Unaudited) | |||||||||||
Special Dividend – HK$7.27 (2009: Nil) per ordinary share | 11 | 466,474 | — | |||||||||
10. | DISCONTINUED OPERATIONS |
As detailed in note 1 to the condensed consolidated financial information, upon completion of the Distribution during the current period, the Group discontinued its pearls and jewelry, and property development and investment businesses. These businesses distributed were reported in the condensed consolidated financial information for the six months ended September 30, 2010 as discontinued operations.
F-19
CHINA METRO-RURAL HOLDINGS LIMITED
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION
Financial information relating to the discontinued operations for the six months ended September 30, 2010 up to the date of the Distribution is set out below
(a) | Financial performance information |
For the six months ended | ||||||||
September 30, | ||||||||
2010 | 2009 | |||||||
HK$’000 | HK$’000 | |||||||
(Unaudited) | (Unaudited) | |||||||
Revenue | 157,452 | 148,602 | ||||||
Cost of sales | (117,241 | ) | (94,903 | ) | ||||
Gross profit | 40,211 | 53,699 | ||||||
Other income and gains, net | 7,722 | 6,654 | ||||||
Recycling of exchange difference to profit or loss upon the Distribution (Note) | 20,284 | — | ||||||
Expenses | (33,983 | ) | (44,586 | ) | ||||
Increase in fair value of investment properties | 1,592 | — | ||||||
Finance income, net | 87 | 621 | ||||||
Share of result of an associate | 17 | 49 | ||||||
Profit before income tax | 35,930 | 16,437 | ||||||
Income tax expense | (6,052 | ) | (2,037 | ) | ||||
Profit from discontinued operations | 29,878 | 14,400 | ||||||
Attributable to: | ||||||||
Equity holders of the Company | 23,950 | 8,060 | ||||||
Non-controlling interests | 5,928 | 6,340 | ||||||
29,878 | 14,400 | |||||||
Note: | The financial performance of the discontinued operations included a release of translation reserve during the six months ended September 30, 2010. |
(b) | Cash flows information |
For the six months ended | ||||||||
September 30, | ||||||||
2010 | 2009 | |||||||
HK$’000 | HK$’000 | |||||||
(Unaudited) | (Unaudited) | |||||||
Net cash inflow from operating activities | 79,856 | 89,099 | ||||||
Net cash outflow from investing activities (2010 includes cash outflow of HK$596,993,000 (note 11) from the Distribution) | (600,504 | ) | (4,193 | ) | ||||
Net cash inflow from financing activities | 17,640 | 11,297 | ||||||
Net (decrease)/increase in cash generated by the discontinued operations | (503,008 | ) | 96,203 | |||||
F-20
CHINA METRO-RURAL HOLDINGS LIMITED
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION
11. | DISTRIBUTION OF MSIL |
The assets and liabilities of MSIL as of July 28, 2010 distributed by the Company as a result of the Distribution (as detailed in note 1) during the current period are as follows:
Notes | HK$’000 | |||||||
(Unaudited) | ||||||||
Net assets distributed: | ||||||||
Investment properties | 12 | 844,560 | ||||||
Investment properties under construction | 13 | 77,404 | ||||||
Property, plant and equipment | 14 | 114,068 | ||||||
Prepaid lease payments | 15 | 9,237 | ||||||
Interest in an associate | 119 | |||||||
Deferred tax assets | 1,337 | |||||||
Inventories | 56,232 | |||||||
Completed properties held for sale | 220,304 | |||||||
Properties under development | 17 | 493 | ||||||
Trade receivables | 138,987 | |||||||
Financial assets at fair value through profit or loss | 51,630 | |||||||
Income tax receivable | 4,834 | |||||||
Cash and cash equivalents | 10 | 596,993 | ||||||
Trade payables, other payables and accruals | (305,657 | ) | ||||||
Deposits received / Receipt in advance | (185,965 | ) | ||||||
Income tax payable | (82,151 | ) | ||||||
Interest-bearing bank borrowing | 19 | (183,998 | ) | |||||
Amount due to an associate | (1,557 | ) | ||||||
Deferred tax liability | (84,541 | ) | ||||||
Non-controlling interests | (805,855 | ) | ||||||
Special Dividend | 9 | 466,474 | ||||||
12. | INVESTMENT PROPERTIES |
During the six months ended September 30, 2010, the Group acquired investment properties of approximately HK$4,340,000 (2009: Nil), transferred investment properties of approximately HK$75,310,000 (2009: Nil) from investment properties under construction upon completion, disposed of certain investment properties at a consideration of approximately HK$17,185,000 (2009: Nil), resulted in a gain on disposal of approximately HK$5,795,000 (2009: Nil) and disposal of investment properties of approximately HK$844,560,000 (note 11) as a result of the Distribution (2009: Nil).
For the interim period ended September 30, 2010, the Company did not engage any independent firms of professional property valuers. The Company’s investment properties were last valued at March 31, 2010 by management based in part on valuation by independent firms of property valuers, on market value basis. The valuations were arrived at by reference to comparable market transaction and where appropriate, on the basis of capitalization of net income. As there have been no major changes in the surrounding conditions since March 31, 2010, in the opinion of directors, the carrying values of investment properties approximate to their fair values.
F-21
CHINA METRO-RURAL HOLDINGS LIMITED
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION
13. | INVESTMENT PROPERTIES UNDER CONSTRUCTION |
During the six months ended September 30, 2010, the Group capitalized construction costs of approximately HK$80,705,000 (2009: HK$37,271,000) to investment properties under construction, transferred investment properties under construction of approximately HK$75,310,000 (2009: Nil) to investment properties upon completion and disposed investment properties under construction of approximately HK$77,404,000 (note 11) as a result of the Distribution (2009: Nil). In addition, an amount of approximately HK$29,970,000 was transferred to property under development during the six months ended September 30, 2009. There is no such transfer in current period.
14. | PROPERTY, PLANT AND EQUIPMENT |
During the six months ended September 30, 2010, the Group acquired items of property, plant and equipment of approximately HK$2,775,000 (2009: HK$2,345,000) and disposed certain items of property, plant and equipment of approximately HK$114,068,000 (note 11) as a result of the Distribution (2009: Nil). During the six months ended September 30, 2009, the Group disposed certain items of property, plant and equipment at a consideration of approximately HK$5,000, resulted a loss of approximately HK$2,000 on disposal of property, plant and equipment. There is no such disposal in current period.
15. | PREPAID LEASE PAYMENTS AND LAND USE RIGHTS |
During the six months ended September 30, 2010, the Group injected a land use rights into its associate at a consideration of approximately HK$3,876,000, resulted in a gain on disposal of land use rights of approximately HK$2,174,000 (2009: Nil) and disposal of land use rights of approximately HK$9,237,000 (note 11) as a result of the Distribution (2009: Nil).
16. | DEPOSIT FOR ACQUISITION OF LAND USE RIGHTS |
During the six months ended September 30, 2010, the Group has entered into an agreement with the PRC local government where the Group provided an escrow money of RMB80,000,000 (approximately HK$92,657,000) to the PRC local government (The “Escrow Money”) as an expression of good faith on the Group’s determination to acquire land use rights in respect of certain land plots situated in mainland China. The Escrow Money will be fully refunded upon completion of the acquisitions of those land use rights.
17. | PROPERTIES UNDER DEVELOPMENT |
During the six months ended September 30, 2010, the Group capitalized construction costs of approximately HK$259,830,000 (2009: HK$223,057,000) and interest expense of HK$12,181,000 (2009:HK$11,782,000) to properties under development, disposed properties under development of approximately HK$493,000 (note 11) as a result of the Distribution (2009: Nil), transferred properties of approximately HK$195,220,000 (2009: Nil) to completed properties held for sale upon completion and disposed properties under development of approximately HK$27,199,000 (note 20) as a result of a deemed disposal of a subsidiary (2009: Nil). In addition, an amount of approximately HK$29,970,000 was transferred from investment properties under construction during the six months ended September 30, 2009. There is no such transfer in current period.
F-22
CHINA METRO-RURAL HOLDINGS LIMITED
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION
18. | CONSTRUCTION CONTRACT |
During the six months ended September 30, 2010, the Group’s construction contract was completed and as a result, an aggregate payment of approximately HK$14,537,000 received from the customer and recorded in the Group’s “Receipts in advance” at March 31, 2010 was used to offset against the construction contract, which was derecognized in the current period. Net income from the construction contract of approximately HK$10,857,000 (2009: HK$4,435,000) was recognized during the current period.
19. | BORROWINGS |
During the six months ended September 30, 2010, the Group repaid bank loans of approximately HK$74,552,000 (2009: HK$45,200,000) and obtained new bank loans of approximately HK$194,470,000 (2009: HK$396,402,000). In addition, the Group disposed of bank borrowings of approximately HK$183,998,000 (note 11) during the current period as a result of the Distribution as detailed in note 1 to the condensed consolidated financial information (2009: Nil).
As at September 30, 2010, the contractual maturities of the Group’s non-derivative financial liabilities were as follows:
Contractual maturities of financial liabilities | Less than 1 year HK$’000 (Unaudited) | Between 1 and 2 years HK$’000 (Unaudited) | Between 2 and 5 | Total contractual cash flows HK$’000 (Unaudited) | Carrying amount HK$’000 (Unaudited) | |||||||||||||||
At September 30, 2010 | ||||||||||||||||||||
Trade and other payables | 127,596 | — | — | 127,596 | 127,596 | |||||||||||||||
Bank borrowings | 220,060 | 138,985 | 196,896 | 555,941 | 555,941 | |||||||||||||||
Interest obligations | 28,534 | 16,178 | 7,422 | 52,134 | 52,134 | |||||||||||||||
Amount due to an associate | 5 | — | — | 5 | 5 | |||||||||||||||
376,195 | 155,163 | 204,318 | 735,676 | 735,676 | ||||||||||||||||
At March 31, 2010 | ||||||||||||||||||||
Trade and other payables | 432,005 | — | — | 432,005 | 432,005 | |||||||||||||||
Bank borrowings | 277,446 | 136,287 | 192,958 | 606,691 | 606,691 | |||||||||||||||
Interest obligations | 28,050 | 15,288 | 9,412 | 52,750 | 52,750 | |||||||||||||||
Amount due to an associate | 1,530 | — | — | 1,530 | 1,530 | |||||||||||||||
739,031 | 151,575 | 202,370 | 1,092,976 | 1,092,976 | ||||||||||||||||
The carrying amounts of the Group’s bank borrowings approximate to their fair values. All bank borrowings are denominated in Renminbi and are carried at amortized costs with effective interest rates ranging from 5.31% to 7.02% per annum (March 31, 2010: 4.8% to 6.1% per annum).
F-23
CHINA METRO-RURAL HOLDINGS LIMITED
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION
20. | DEEMED DISPOSAL OF A SUBSIDIARY |
During the six months ended September 30, 2010, China Northeast Logistic City Co., Ltd., a wholly-owned subsidiary of the Company, entered into an agreement with the non-controlling interest of Tieling Motor Vehicles Trading Co., Ltd. (“Motor Vehicles Company”), a then non-wholly owned subsidiary of the Company, whereby both parties agreed to revise their shareholdings in Motor Vehicles Company as follows: (1) China Northeast Logistic City Co., Ltd. to ultimately hold 40% equity interest in Motor Vehicles Company by further injecting parcels of lands with an aggregate deemed fair value of RMB18,000,000 (approximately HK$20,443,000), where HK$3,876,000 (note 15) of which was injected to Motor Vehicles Company in the current period; and (2) the non-controlling interest of Motor Vehicles Company to ultimately hold 60% equity interest in Motor Vehicles Company by further injecting cash amounting to RMB37,000,000 (approximately HK$42,022,000) where the entire amount was injected into Motor Vehicles Company in the current period. As a result of this transaction, Motor Vehicles Company has become an associate of China Northeast Logistic City Co., Ltd and is no longer consolidated. The following is an analysis of the net assets on the date which Motor Vehicles Company was being disposed of:
Note | For the six months ended | |||||||||||
September 30, | ||||||||||||
2010 | 2009 | |||||||||||
HK$’000 | HK$’000 | |||||||||||
(Unaudited) | (Unaudited) | |||||||||||
Net assets deemed disposed of: | ||||||||||||
Cash and bank balances | 9,256 | — | ||||||||||
Prepayments and other receivables | 3,484 | — | ||||||||||
Property under development | 17 | 27,199 | — | |||||||||
Accounts payable | (3,842 | ) | — | |||||||||
Due to a non-controlling interest | (13,705 | ) | — | |||||||||
Non-controlling interest | (8,957 | ) | — | |||||||||
13,435 | — | |||||||||||
Gain on deemed disposal of a subsidiary | 90 | — | ||||||||||
13,525 | — | |||||||||||
Satisfied by: | ||||||||||||
Interest in an associate upon deemed disposal | 13,525 | ��� | ||||||||||
An analysis of the net outflow of cash and cash equivalents in respect of the deemed disposal of a subsidiary is as follows:
For the six months ended | ||||||||
September 30, | ||||||||
2010 | 2009 | |||||||
HK$’000 | HK$’000 | |||||||
(Unaudited) | (Unaudited) | |||||||
Cash and bank balances disposed of and net outflow of cash and cash equivalents in respect of the deemed disposal of a subsidiary | 9,256 | — | ||||||
F-24
CHINA METRO-RURAL HOLDINGS LIMITED
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION
21. | SHARE CAPITAL |
Number of shares | Share capital | |||||||||||||||
September 30, | March 31, | September 30, | March 31, | |||||||||||||
2010 | 2010 | 2010 | 2009 | |||||||||||||
‘000 | ‘000 | HK$’000 | HK$’000 | |||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||
Authorised: | ||||||||||||||||
Preferred shares of US$0.001 par value | 200 | 200 | 2 | 2 | ||||||||||||
Ordinary shares of US$0.001 par value | 1,000,000 | 1,000,000 | 7,793 | 7,793 | ||||||||||||
1,000,200 | 1,000,200 | 7,795 | 7,795 | |||||||||||||
Issued and fully paid: | ||||||||||||||||
Preferred shares | 100 | 100 | 1 | 1 | ||||||||||||
Ordinary shares | 64,126 | 64,126 | 499 | 499 | ||||||||||||
64,226 | 64,226 | 500 | 500 | |||||||||||||
22. | SHARE OPTION SCHEME |
On August 2, 2002, MSIL, a subsidiary of the Group prior to the Distribution, adopted a new share option scheme (the “2002 Scheme”) and terminated the share option scheme adopted on September 8, 1997 (the “1997 Scheme”).
The purpose of the 2002 Scheme was to provide incentive to the eligible participants to contribute to the Group and to enable the Group to recruit high-caliber employees and attract resources that are valuable to the Group. Under the 2002 Scheme, the board of directors of MSIL may grant options to any person being an employee, officer, agent, or consultant of the Group including executive or non-executive directors of MSIL and its subsidiaries, to subscribe for shares in MSIL at a price to be determined by the board of directors being the highest of (a) the closing price of the shares on The Hong Kong Stock Exchange Limited on the date of grant of the option, which must be a trading day; (b) the average closing price of the shares of The Hong Kong Stock Exchange Limited for the five trading days immediately preceding the date of grant of the option and (c) the nominal value of the shares.
The total number of share in respect of which the 2002 Scheme and any other share option schemes of the Group is not permitted to exceed 10% of the number of shares in issue at the date of adoption of the 2002 Scheme or such number of shares as result of a sub-division of consolidation of the number of shares at that date. Subject to as provided for in the 2002 Scheme, but the total number of shares which may be issued under the 2002 Scheme must not exceed 30% of the number of shares in issue from time to time.
No participant shall be granted an option which, if accepted and exercised in full, would result in the participant becoming entitled to subscribe for such number of shares as, when aggregated with the total number of shares already issued and which may be issued upon exercise of all options granted and to be granted to him, together with all options granted and to be granted to him under any other share option schemes of the Company and/or any subsidiaries, within the 10-month period immediately preceding the proposed date of grant (including exercised, cancelled and outstanding options), would exceed 1% of the number of shares in issue as at the proposed date of grant.
F-25
CHINA METRO-RURAL HOLDINGS LIMITED
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION
The 2002 Scheme shall be valid and effective for a period of 10 years commencing August 2, 2002.
Options granted must be taken up within 28 days of the date of grant upon payment of HK$ for each grant of options. Subject as provided in the 2002 Scheme, options may be exercised at any time during the option period, which is to be notified by the board of directors to each grantee, commencing on the date of grant or such later date as the board of directors may decide and expiring on such date as the board of directors may determine, provided that such period is not to exceed ten years from the date of grant, and subject to any restrictions that may be imposed by the board of directors in its discretion.
Details of the principal terms of the 2002 Scheme are set out in the circular of MSIL dated July 4, 2002.
The following tables disclose details of MSIL’s share options held by MSIL’s directors and employees and movements in such holding during the six months ended September 30, 2010 prior to the Distribution.
Date of grant | Exercisable Period | Exercise Price | Outstanding At April 1, 2010 | Granted | Exercised | Lapsed | Outstanding at July 28, 2010 | |||||||||||||||||||||||
Directors of MSIL | ||||||||||||||||||||||||||||||
May 2, 2006 | May 2, 2006 to May 1, 2012 | 0.253 | 12,000,000 | — | — | — | 12,000,000 | |||||||||||||||||||||||
September 1, 2009 | September 1, 2009 to August 31, 2012 | Note i | 0.450 | 8,000,000 | — | — | — | 8,000,000 | ||||||||||||||||||||||
September 1, 2009 | September 1, 2009 to August 31, 2012 | Note ii | 0.450 | 10,000,000 | — | — | — | 10,000,000 | ||||||||||||||||||||||
30,000,000 | — | — | — | 30,000,000 | ||||||||||||||||||||||||||
Employees | ||||||||||||||||||||||||||||||
May 2, 2006 | May 2, 2006 to May 1, 2012 | 0.253 | 15,000,000 | — | — | — | 15,000,000 | |||||||||||||||||||||||
September 18, 2006 | September 18, 2006 to September 17, 2011 | 0.233 | 7,000,000 | — | — | — | 7,000,000 | |||||||||||||||||||||||
March 13, 2007 | January 1, 2008 to March 12, 2012 | 0.500 | 5,000,000 | — | — | — | 5,000,000 | |||||||||||||||||||||||
August 27, 2009 | August 27, 2009 to August 26, 2012 | Note iii | 0.397 | 20,050,000 | — | (1,600,000 | ) | (750,000 | ) | 17,700,000 | ||||||||||||||||||||
47,050,000 | — | (1,600,000 | ) | (750,000 | ) | 44,700,000 | ||||||||||||||||||||||||
77,050,000 | — | (1,600,000 | ) | (750,000 | ) | 74,700,000 | ||||||||||||||||||||||||
Weighted average exercise price | HK$ | 0.351 | HK$ | 0.349 | ||||||||||||||||||||||||||
Options vested | 55,550,000 | 53,950,000 | ||||||||||||||||||||||||||||
Weighted average exercise price of options vested | HK$ | 0.318 | HK$ | 0.315 | ||||||||||||||||||||||||||
Weighted average remaining contractual life | 2.18 years | 1.84 years |
During the current period prior to the Distribution, no share options were granted, 1,600,000 share options were exercised and 750,000 share options were lapsed.
Notes:
(i) | 2,500,000 options were vested on the date of grant, another 2,500,000 options can be exercised from September 1, 2010 and the remaining 3,000,000 options can be exercised from September 1, 2011. |
(ii) | 5,000,000 options can be exercised from September 1, 2010 and the remaining 5,000,000 options can be exercised from September 1, 2011. |
(iii) | 14,750,000 options were vested on the date of grant, 3,000,000 options can be exercised from August 27, 2010 and the remaining 3,000,000 options can be exercised from August 27, 2011. |
F-26
CHINA METRO-RURAL HOLDINGS LIMITED
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION
23. | RELATED PARTY TRANSACTIONS |
The Group entered into the following related party transactions, which were carried out in the ordinary course of business:
For the six months ended | ||||||||||
September 30, | ||||||||||
2010 | 2009 | |||||||||
Related party relationship | Nature of transaction | HK$’000 | HK$’000 | |||||||
(Unaudited) | (Unaudited) | |||||||||
Key management personnel including directors | Salaries and other allowance | 7,315 | 8,051 | |||||||
Retirement benefit | 32 | 28 | ||||||||
Share-based payments | 1,004 | 1,618 | ||||||||
8,351 | 9,697 | |||||||||
An entity which is significantly influenced by a key management personnel of the Company | Reimbursement of rental charges paid on behalf | 639 | 939 | |||||||
24. | PLEDGE OF ASSETS |
At the statement of financial position date, the Group had pledged the following assets to banks to secure banking facilities granted to the Group:
September 30, | March 31, | |||||||
2010 | 2010 | |||||||
HK$’000 | HK$’000 | |||||||
(Unaudited) | ||||||||
Pledge bank deposits | — | 17,000 | ||||||
Land | 7,737 | 16,027 | ||||||
Investment properties | 105,513 | 268,771 | ||||||
Completed properties held for sale | 21,575 | 16,303 | ||||||
Property, plant and equipment | 54,346 | 26,031 | ||||||
Properties under development | 13,116 | 11,856 | ||||||
Investment properties under construction | — | 66,323 | ||||||
202,287 | 422,311 | |||||||
F-27
CHINA METRO-RURAL HOLDINGS LIMITED
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION
25. | CAPITAL COMMITMENTS |
September 30, | March 31, | |||||||
2010 | 2010 | |||||||
HK$’000 | HK$’000 | |||||||
(Unaudited) | ||||||||
Capital injection in respect of investment in a subsidiary in the PRC | 389,220 | — | ||||||
Capital expenditure in relation to construction of properties and acquisition of land contracted for but not provided in the condensed consolidated financial statements | 249,708 | 115,007 | ||||||
26. | OPERATING LEASE ARRANGEMENTS |
The Group as lessee
At the statements of financial position date, the Group had outstanding commitments for future minimum lease payments in respect of non-cancellable operating leases which fall due as follows:
September 30, | March 31, | |||||||
2010 | 2010 | |||||||
HK$’000 | HK$’000 | |||||||
(Unaudited) | ||||||||
Operating leases which expire: | ||||||||
Within one year | 370 | 8,887 | ||||||
In the second to fifth year inclusive | 447 | 2,519 | ||||||
817 | 11,406 | |||||||
Leases are negotiated for an average term of one to five years and rentals are fixed during the relevant lease period.
F-28
CHINA METRO-RURAL HOLDINGS LIMITED
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION
The Group as lessor
Property rental income earned during the six months ended September 30, 2010 was HK$13,195,000 (2009: HK$12,387,000). Most of the investment properties held have committed tenants for the next one to three years.
At the statements of financial position date, the Group had contracted with tenants for the following future minimum lease receivables:
September 30, | March 31, | |||||||
2010 | 2010 | |||||||
HK$’000 | HK$’000 | |||||||
(Unaudited) | ||||||||
Within one year | 2,465 | 25,982 | ||||||
In the second to fifth year inclusive | 706 | 10,350 | ||||||
3,171 | 36,332 | |||||||
27. | CONTINGENT LIABILITIES |
On August 25, 2009, at the general meeting, the shareholders of Man Sang Holdings, Inc., the former immediate holding company, resolved that Man Sang Holdings, Inc. be dissolved and liquidated, whereby Man Sang Holdings, Inc. had been succeeded by the Company. From its inception in August 1995 through the completion of the dissolution and liquidation on August 25, 2009, the Company was a wholly-owned subsidiary of Man Sang Holdings, Inc. The liquidation did not result in tax for Man Sang Holdings, Inc. Such result is subject to assessment by U.S. tax authority. As the Company has succeeded Man Sang Holdings, Inc. and contractually assumed all of Man Sang Holdings Inc.’s rights, obligations and liabilities, if the assessment differs from actual result, it may give rise to the possibility of outflow in settlement of tax by the Company. The directors are of the view that the likelihood of an indemnification liability arising from such dissolution at year ended March 31, 2010 is remote. There has been no new development as at the date of this condensed consolidated interim financial information was approved and authorized for issue by the Board of Directors. Accordingly, no accrual has been made.
28. | POST BALANCE SHEET EVENT |
On November 22, 2010, a wholly-owned subsidiary of the Company entered into a cooperation agreement with an independent third party, Hero Key Limited (“Hero Key), whereby Hero Key was allotted 15 ordinary shares of HK$1 each, representing 15% equity interest, in a newly incorporated subsidiary of the Company (the “Subsidiary”) at their nominal values to jointly invest in the Group’s logistics platform project in Dezhou, Shandong of the PRC. An amount of approximately HK$12,000,000 was advanced from Hero Key as a shareholder’s loan to the Subsidiary. The shareholder’s loan from Hero Key is unsecured, interest free, has no fixed terms of repayment and is repayable upon the Subsidiary starts retaining profits.
F-29
CHINA METRO-RURAL HOLDINGS LIMITED
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION
29. | US DOLLAR EQUIVALENTS |
The US dollar equivalents of the figures shown in the condensed consolidated income statement, condensed consolidated statement of comprehensive income, condensed consolidated statement of financial position and condensed consolidated statement of cash flows are supplementary information and have been translated at HK$7.8 to US$1.00. Such translation should not be construed as representations that the Hong Kong dollar amounts represent, or have been or could be converted into, US dollars at that or any other rate.
F-30