admission document

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ADMISSION DOCUMENT
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THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt
about the contents of this document, or about what action to take, you should immediately consult a
professional adviser authorised pursuant to the Financial Services and Markets Act 2000 (“FSMA”) who
specialises in advising on the acquisition of shares and other securities.
This document comprises an admission document for the purposes of the AIM Rules. This document does not
constitute, and the Company is not making, an offer of transferable securities to the public within the meaning of sections
85 and 102B of FSMA or otherwise. This document is not an approved prospectus for the purposes of and as defined
in section 85 of FSMA and it has not been prepared in accordance with the Prospectus Rules nor has it been approved
by the FCA and a copy has not been delivered to the FCA under regulation 3.2 of the Prospectus Rules. An application
has been made for all of the Ordinary Shares in issue (“Enlarged Share Capital”) to be admitted to trading on AIM. It is
expected that Admission will become effective and dealings in the Enlarged Share Capital on AIM will commence on
9 December 2013.
AIM is a market designed primarily for emerging or smaller companies to which a higher investment risk
tends to be attached than to larger or more established companies. AIM securities are not admitted to the
official list of the UK Listing Authority. A prospective investor should be aware of the risks of investing in
such companies and should make the decision to invest only after careful consideration and, if appropriate,
consultation with an independent financial adviser. Each AIM company is required, pursuant to the AIM
Rules for Companies, to have a nominated adviser. The nominated adviser is required to make a declaration
to the London Stock Exchange on admission in the form set out in Schedule Two to the AIM Rules for
Nominated Advisers. The London Stock Exchange has not itself examined or approved the contents of this
document. The rules of AIM are less demanding than those of the Official List.
It is emphasised that no application is being made for admission of the Ordinary Shares to the Official List. The Shares
are not traded on any recognised investment exchange and no application has been made for the Ordinary Shares to
be listed on any other recognised investment exchange. The whole text of this document should be read. The Company
and the Directors, whose names are set out on page 7, accept responsibility, both individually and
collectively, for the information contained in this document and for compliance with the AIM Rules. To the
best of the knowledge and belief of the Company and the Directors, who have taken all reasonable care to
ensure that such is the case, the information contained in this document is in accordance with the facts
and does not omit anything likely to affect the import of such information. No person is authorised to give
any information or make any representations in connection with the Placing or Admission other than is
contained in this document.
Attention is drawn to the risk factors set out in Part 2 of this document.
JQW plc
(Incorporated in Jersey under registration number 113593)
Placing of up to 14,285,714 Ordinary Shares at 70p per share
and
Admission to trading on AIM
Cairn Financial Advisers LLP
Argento Capital Markets Limited
Nominated Adviser and Broker
Financial Adviser and Placing Agent
All of the Ordinary Shares will, upon Admission, rank pari passu in all respects and will rank in full for all dividends and
other distributions declared, paid or made in respect of the Ordinary Shares after Admission.
Cairn Financial Advisers LLP (“Cairn”), which is regulated and authorised in the United Kingdom by the Financial Conduct
Authority, is acting as nominated adviser and broker to the Company in connection with the proposed Admission and
Placing. Its responsibilities as the Company’s Nominated Adviser under the AIM Rules are owed solely to London Stock
Exchange plc and are not owed to the Company or to any director or to any other person in respect of their decision to
acquire shares in the Company in reliance on any part of this document. No representation or warranty, express or
implied, is made by Cairn as to any of the contents of this document. Cairn is not offering advice and is not otherwise
responsible for providing customer protections to recipients of this document or for advising on the contents of this
document or any other matter.
Argento Capital Markets Limited (“Argento”) is the Company’s Financial Adviser and Placing Agent and is acting
exclusively for the Company in connection with the Placing. Argento will not be responsible to anyone other than the
Company for providing the protections afforded to customers of Argento or for advising any other person on the Placing
and other arrangements described in this document.
Copies of this document will be available free of charge to the public during normal business hours on any day
(Saturdays, Sundays and public holidays excepted) at the offices of Cairn Financial Advisers LLP, 61 Cheapside, London
EC2V 6AX from the date of this document until one month from the date of Admission in accordance with Rule 3 of the
AIM Rules.
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A copy of this document has been delivered to the registrar of companies in accordance with Article 5 of the Companies
(General Provisions) (Jersey) Order 2002, and he has given, and has not withdrawn, his consent to its circulation.
The Jersey Financial Services Commission has given, and has not withdrawn, its consent under Article 2 of the Control
of Borrowing (Jersey) Order 1958 to the issue of securities in the company. The Jersey Financial Services Commission
is protected by the Control of Borrowing (Jersey) Law 1947 from any liability arising from the discharge of its functions
under that law.
It must be distinctly understood that, in giving these consents, neither the registrar of companies nor the Jersey Financial
Services Commission takes any responsibility for the financial soundness of the company or for the correctness of any
statements made, or opinions expressed, with regard to it.
If you are in any doubt about the contents of this document you should consult your stockbroker, bank manager, solicitor,
accountant or other financial adviser.
The Directors of the Company have taken all reasonable care to ensure that the facts stated in this document are true
and accurate in all material respects, and that there are no other facts the omission of which would make misleading
any statement in the document, whether of facts or of opinion. All the directors accept responsibility accordingly. It
should be remembered that the price of securities and the income from them can go down as well as up.
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IMPORTANT INFORMATION
The distribution of this document and the making of the Placing in certain jurisdictions may be
restricted by law and therefore persons into whose possession this document comes should
inform themselves about and observe any restrictions, including those set out below. Any failure
to comply with these restrictions may constitute a violation of the securities laws of any such
jurisdiction. In particular, the issue or circulation of this document may be prohibited in countries
other than those in relation to which notices are given below and, in such cases, only in the
circumstances set out in such notices.
The information below is for general guidance only and it is the responsibility of any person or persons in
possession of this document and wishing to make an application for Ordinary Shares to inform themselves
of, and to observe, all applicable laws and regulations of any relevant jurisdiction. No person has been
authorised by the Company to issue any advertisement or to give any information or to make any
representation in connection with the contents of this document and, if issued, given or made, such
advertisement, information or representation must not be relied upon as having been authorised by the
Company. This document does not constitute, and may not be used for the purposes of, an offer or
solicitation to anyone in any jurisdiction in which such offer or solicitation is not authorised or to any person
to whom it is unlawful to make such offer or solicitation. In particular, this document does not constitute an
offer to sell or the solicitation of an offer to buy any of the Ordinary Shares in Canada, Australia, South Africa,
the Republic of Ireland or Japan (collectively, the “Prohibited Territories”) and this document should not be
forwarded or transmitted to or into the Prohibited Territories or to any resident, national, citizen or corporation,
partnership or other entity created or organised under the laws thereof or in any other country outside the
United Kingdom where such distribution may lead to a breach of any legal or regulatory requirement. The
distribution of this document may be restricted and accordingly persons into whose possession this
document comes are required to inform themselves about and to observe such restrictions.
United Kingdom
This document does not constitute a general offer to investors resident in the United Kingdom neither Cairn
nor Argento has not approved this document for the purposes of the Financial Services and Markets Act
2000 as amended (“FSMA”). This document is confidential and only for distribution in the United Kingdom
(i) at any time, to persons reasonably believed by the Company to be investment professionals within the
meaning of Paragraph (5) of Article 19, certified high net worth individuals within the meaning of Paragraph
(2) of Article 48 or to high net worth companies or unincorporated associations within the meaning of
Paragraph (2) of Article 49 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005
(SI 2005/1529), as amended, and (ii) prior to Admission, to persons who are qualified investors within the
meaning of Section 86(7) of FSMA. Outside the United Kingdom (and subject as provided below), this
document is only being sent to persons reasonably believed by the Company to be investment professionals
or to persons to whom it may otherwise be lawful to distribute it. This document is being supplied to you
solely for your information and may not be reproduced, further distributed or published in whole or in part
by any other person. As the Placing Shares will be offered to fewer than 150 persons (other than qualified
investors within the meaning of Section 86(7) of FSMA) per member state of the European Economic Area,
the Placing will be an exempt offer of securities to the public for the purposes of Section 86 of FSMA.
Accordingly, this document is not a prospectus and does not require the approval of the FCA or any other
relevant authority in any other member state of the European Economic Area.
Hong Kong
No action has been taken to permit the offering of the Ordinary Shares or the general distribution of this
prospectus in any jurisdiction other than the United Kingdom and Jersey. Accordingly, this document may
not be used for the purpose of, and does not constitute, an offer or invitation in any jurisdiction or in any
circumstances in which such an offer or invitation is not authorised or to any person to whom it is unlawful
to make such an offer or invitation. No invitation may be made to the public in Hong Kong to subscribe for
or purchase any of the Ordinary Shares. The arrangements for the issue of the Ordinary Shares have not
been authorised as a collective investment scheme by Hong Kong’s Securities and Futures Commission
(“SFC”) pursuant to section 104 of Hong Kong’s Securities and Futures Ordinance (“SFO”), nor has this
document been approved by the SFC pursuant to section 105(1) of SFO or section 342C(5) of Hong Kong’s
Companies Ordinance (“HKCO”) or registered by Hong Kong’s Registrar of Companies pursuant to section
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342C(7) of HKCO. Accordingly, the content and use of this document must comply with each of the following
SFO and HKCO restrictions, namely:
(a)
under the SFO: this document is not and does not contain contrary to section 103 of SFO, an invitation
to the public of Hong Kong to acquire or subscribe for shares, other than (1) an invitation only to
professional investors (as defined in SFO) to do so, or (2) to the extent that this document is not a
prospectus (as defined in the HKCO) by virtue of any of the maximum offer number, minimum
investment amount or other exclusions set out in the 17th schedule to the HKCO (“Prospectus
Exclusions”); and
(b)
under the HKCO: this document must not, contrary to section 342 and 342C of HKCO, be issued,
circulated or distributed to any person in Hong Kong other than (1) to persons whose ordinary business
is to buy or sell shares or debentures, whether as principal or agent, or (2) to professional investors (as
defined in the SFO), or (3) in circumstances in which this document is not a prospectus (as defined in
the HKCO) by virtue of any of the Prospectus Exclusions, or (4) otherwise in circumstances that do
not constitute an offer to the public.
Singapore
This document has not been registered as a prospectus with the Monetary Authority of Singapore.
Accordingly, this document and any other document or material in connection with the offer or sale, or
invitation for subscription or purchase, of the Ordinary Shares may not be circulated or distributed, nor may
the Ordinary Shares be offered or sold, or be made the subject of an invitation for subscription or purchase,
whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section
274 of the Securities and Futures Act, Chapter 289 of Singapore (“SFA”) in accordance with the conditions
set out in Section 276 of the SFA, (ii) to an accredited investor pursuant to Section 275(1) of the SFA in
accordance with the conditions set out in Section 276 of the SFA or (iii) otherwise pursuant to, and in
accordance with the conditions of, any other applicable provisions of the SFA.
FORWARD LOOKING STATEMENTS
This document contains forward-looking statements. These relate to the Company’s future prospects,
developments and strategies. Forward-looking statements are identified by their use of terms and phrases
such as “believe”, “could”, “envisage”, “estimate”, “intend”, “anticipate”, “seek”, “target”, “may”, “plan”, “will”
or the negative of those, variations or comparable expressions, including references to assumptions. The
forward looking statements in this document are based on current expectations and involve risks and
uncertainties that may cause actual results, achievements or performances of the Group to differ materially
from those expressed or implied by such forward looking statements. There can be no assurance that the
results and events contemplated by the forward looking statements contained in this document will, in fact,
occur. These forward looking statements are correct, to the best of the knowledge and belief of the Directors,
only as at the date of this document. The Company will not undertake any obligation to release publicly any
revisions to these forward looking statements to reflect events, circumstances or unanticipated events
occurring after the date of this document except as required by applicable law or by any applicable regulatory
authority.
Information in this Admission Document on the B2B e-commerce market in Mainland China is from
independent market research carried out by Euromonitor International Limited but should not be relied upon
in making, or refraining from making, any investment decision.
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CONTENTS
Page
Placing statistics
6
Directors, secretary and advisers
7
Definitions
9
Glossary
14
Key information
15
Part 1
Information on the Group
20
Part 2
Risk factors
46
Part 3
Accountants’ report on the Company
60
Part 4
Accountants’ report on the Pro Forma Consolidated
Financial Information on the Operating Group
66
Part 5
Unaudited interim financial information of the Operating
Group for the six months ended 30 June 2013
89
Part 6
Unaudited pro forma statement of aggregated net assets
94
Part 7
Additional information
97
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PLACING STATISTICS
Placing Price
70p
Number of Existing Shares
184,000,000
Number of Placing Shares being issued
9,549,991
Number of Ordinary Shares in issue at Admission
193,549,991
Percentage of the Enlarged Share Capital represented by the
Placing Shares at Admission
Number of unissued Ordinary Shares subject to warrants
Fully diluted number of Ordinary Shares on Admission
4.93
5,080,687
198,630,678
Gross proceeds of the Placing
£6,684,994
Estimated net proceeds of the Placing receivable by the Company
£5,684,994
Market capitalisation of the Company at the Placing Price
ISIN for Ordinary Shares
£135,484,994
JE00BGCZHC53
TIDM
JQW
EXPECTED TIMETABLE
2013
Date of this document
9 December
Admission effective and commencement of dealings
9 December
Expected date for CREST accounts to be credited with Placing Shares
9 December
Dispatch of definitive share certificates for Placing Shares
9 December
Each of the times and dates in the above timetable is subject to change. References in this admission
document to a time are to London time unless otherwise stated.
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DIRECTORS, SECRETARY AND ADVISERS
Directors
CAI Yongde
CHEN Daocai
KOOI Wei Boon
Mircle YAP Ching Chai
Jacques-Franck DOSSIN
Duncan James Daragon LEWIS
Principal place of business
1-4/F, Buildings 12(c)
Guangling Information Industry Park
Yangzhou City
Jiangsu Province, 225000
People’s Republic of China
Telephone number
+86-0514-89712999
Financial Adviser and
Placing Agent
Argento Capital Markets Limited
12 Pepper Street
London
E14 9RP
United Kingdom
Nominated Adviser and Broker
Cairn Financial Advisers LLP
61 Cheapside
London
EC2V 6AX
United Kingdom
Auditor and Reporting
Accountant
Crowe Clark Whitehill LLP
St Bride’s House
10 Salisbury Square
London
EC4Y 8EH
United Kingdom
Legal Advisers to Company
As to English Law
Olswang LLP
90 High Holborn
London
WC1V 6XX
United Kingdom
As to Chinese Law
Trend Associates
28/F Zhongshan Building
152 Hudong Road
Fuzhou
People’s Republic of China
As to Hong Kong Law
Brandt Chan and Partners
in association with SNR Denton HK LLP
Suite 3201
Jardine House
1 Connaught Place
Central
Hong Kong S.A.R
7
(Chairman)
(Chief Executive Officer)
(Chief Financial Officer)
(Non-Executive Director)
(Non-Executive Director)
(Non-Executive Director)
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As to Jersey Law
Appleby
13-14 Esplanade
St. Helier
Jersey
JE1 1BD
Legal Adviser to the
Nominated Adviser and
the Financial Adviser
Eversheds LLP
1 Wood St
London
EC2V 7WS
United Kingdom
Registrar
Capita Registrars (Jersey) Limited
12 Castle Street
St. Helier
Jersey
JE2 3RT
Investor Relations
Abchurch Communications Limited
125 Old Broad Street
London
EC2N 1AR
United Kingdom
Website
www.jqw-ir.com
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DEFINITIONS
In this document, where the context permits, the expressions set out below shall bear the following
meanings:
“Admission”
admission of the entire issued and to be issued share capital of the
Company to trading on AIM
“AIM Rules”
together, the AIM Rules for Companies and the AIM Rules for
Nominated Advisers, governing admission to and the operation of
AIM, as published by the London Stock Exchange
“AIM”
the AIM market operated by the London Stock Exchange
“Alibaba”
www.alibaba.com, a global e-commerce platform for small
businesses around the world, part of www.alibaba.com Limited (阿
里巴巴网络有限公司, and/or successor companies)
“Argento” or “Financial Adviser”
Argento Capital Markets Limited, financial adviser and Placing Agent
to the Company, which is an authorised representative of Citation
Capital Management Limited which is authorised and regulated by
the Financial Conduct Authority
“Articles”
the articles of association of the Company from time to time
“Business Search Services”
business search services, a search engine service provided by
www.jqw.com
“CAGR”
compounded annual growth rate
“Cairn”, “Nomad” or “Broker”
Cairn Financial Advisers LLP, nominated adviser and broker to the
Company, for the purposes of the AIM Rules which is authorised
and regulated by the Financial Conduct Authority
“CCW”
Crowe Clark Whitehill LLP, the non-statutory auditor and reporting
accountants to the Company
“CNNIC”
China Internet Network Information Centre
“CREST”
the computerised settlement system used to facilitate the transfer
of title to shares in uncertificated form operated by Euroclear
“CREST Regulations”
the Uncertificated Securities Regulations 2001 (SI2001 No. 3753)
(as amended) and the Companies Uncertificated Securities, (Jersey)
Order 1999 (as amended)
“Company”
JQW plc, incorporated in Jersey with registration number 113593
“Contractual Arrangements”
collectively, the entrusted management agreement, exclusive option
agreement, shareholder proxy voting agreement, and equity pledge
agreement, details of which are set out in paragraph 10.14 of Part 7
of this document
“Directors” or “Board”
the directors of the Company, whose names are set out on page 9
of this document
“Enlarged Share Capital”
the issued share capital of the Company immediately following
Admission, comprising of the Existing Shares and the Placing Shares
“Euroclear”
Euroclear UK and Ireland Limited, the operator of CREST
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“Euromonitor”
Euromonitor International Limited, an independent strategy research
company for consumer markets. Information in this Admission
Document on the B2B e-commerce market in Mainland China is
from independent market research carried out by Euromonitor
International Limited but should not be relied upon in making, or
refraining from making, any investment decision
“Existing Shares”
the 184,000,000 Ordinary Shares in issue prior to the Placing
“FCA”
the Financial Conduct Authority of the United Kingdom
“Fee-paying Members”
users of www.jqw.com who have paid for a Sheng-Yi-Tong
membership package
“Financial Services and Markets Act”
or “FSMA”
the Financial Services and Markets Act 2000
“the Founders”
together, Mr Cai Yongde and Mr Chen Daocai
“Founders’ Share-based Payment
Scheme”
a scheme to incentivise and reward employees as set out
in paragraph 13 of Part 7 of this document
“Free Members”
registered users who utilised the Group’s free services to build a
website and to list up to five products
“GBP” or “£”
Great British Pound
“Group”
together, the Company, the Subsidiaries and any other direct or
indirect subsidiary from time to time of the Company
“GST”
government service tax
“HK”
Hong Kong Special Administration Region
“HKD” or “HK$”
Hong Kong Dollar, the lawful currency of Hong Kong
“ICP Licence”
internet content provider licence
“Indemnity Letters”
letters of indemnity given by (1) Mr Cai Yongde, (2) Mr Chen Daocai,
(3) Mr Cai Peixuan, (4) Mr Tang Liu and (5) Ms Wang Xiufang, details
of which are set out in paragraph 11.6 of Part 7 of this document
“ISIN”
international security identification number
“Jersey”
Bailiwick of Jersey, a British Crown Dependency
“Jersey Law”
The Companies (Jersey) Law 1991, as amended
“JIL”
Junde International Holdings Limited (君德國際控股有限公司),
incorporated in Hong Kong, with registration number 1791570 and
is a wholly owned subsidiary of JQW plc
“www.jqw.com”
the B2B platform owned by the Group
“Jiangsu JQW”
Jiangsu Province JQW Technology Co., Ltd. (江苏省金泉网络科技
有限 公司) incorporated in PRC with registration number
321000000082926 and is a wholly owned subsidiary of Yangzhou
Junde
“JQW Credits”
credits given to certain Sheng-Yi-Tong packages to bid and to
subscribe for services on www.jqw.com
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“Locked-In Parties”
together, (1) Mr Cai Yongde, (2) Mr Chen Daocai, (3) Mr Cai Peixuan,
(4) Ms Wang Xiufang, (5) Ms Lim Geok Tin, (6) the Principal
Shareholders and (7) Fortune United Capital Limited
“Lock-In and Orderly Market
Agreements”
the conditional lock-in and orderly market agreement between the
(1) Company, (2) the Locked-In Parties, (3) Argento and (4) Cairn and
the orderly market agreement between (1) the Company, (2) the
Orderly Market Parties, (3) Argento and (4) Cairn, further details of
which are set out in paragraph 10.10 of Part 7 of this document
“London Stock Exchange”
London Stock Exchange plc
“MIIT”
Ministry of Industry and Information Technology, regulator of the
Internet industry in China
“Official List”
the Official List of the UK Listing Authority
“Orderly Market Parties”
together, (1) Mr Tang Liu, (2) Mr Ke Dongxi, (3) Dato’ Yap Son On,
(4) Ms Bek Lian Ho, (5) Hansen Drison Venture Capital Co., Ltd, (6)
Universe Glory Enterprises Limited, (7) One Capital Group
Investment Limited and (8) Midasi Investment Limited
“Ordinary Shares”
ordinary shares of no par value in the share capital of the Company
“Panel”
the Takeover Panel
“Placing”
the conditional placing by Argento of the Placing Shares at the
Placing Price pursuant to the Placing Agreement
“Placing Agent”
Argento
“Placing Agreement”
the agreement dated 9 December 2013 between (1) Argento,
(2) Cairn, (3) the Company, (4) the Directors and (5) Ms Wang Xiufang
further details of which are set out in paragraph 10.1 of Part 7 of this
document
“Placing Price”
70p per Ordinary Share
“Placing Shares”
Ordinary Shares, which are the subject of the Placing
“PRC” or “China”
People’s Republic of China, which for the purposes of this document
excludes the Hong Kong Special Administrative Region, the Macao
Special Administrative Region of the PRC and Taiwan
“Principal Shareholders”
together, Tian Sheng Enterprises Limited, Cheng Tong International
Limited, Champ Public Limited and Dong Feng Developments
Limited
“Proposals”
together, the Placing and the Admission
“Prospectus Rules”
rules, applying with effect from 1 July 2005, made by the FCA
pursuant to section 73A of FSMA
“Registered Users”
all visitors of www.jqw.com who register for an account including
free members and fee-paying members
“Relationship Agreement”
a conditional agreement entered into between (1) the Company, (2)
Principal Shareholders, (3) Argento, (4) Cairn, (5) Mr Cai Yongde, (6)
Mr Chen Daocai, (7) Mr Cai Peixuan and (8) Ms Wang Xiufang to
regulate the relationship between all parties, further details of which
are set out in paragraph 10.9 of Part 7 of this document
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“RMB”
Renminbi, the lawful currency of the PRC
“Shareholders”
holders of Ordinary Shares in the Company from time to time
“Share Swap Agreement”
a share swap agreement dated 5 September 2013 between, (1) the
Company, (2) JIL and (3) Ms Wang Xiufang, details of which are set
out in paragraph 10.11 of Part 7 of this document
“Sheng-Yi-Tong”
Sheng-Yi-Tong, a membership service provided by www.jqw.com,
comprising seven membership packages of varying cost
“Shenzhen JQW”
Shenzhen JQW Information Co., Ltd. (深圳市金泉网资讯有限公司)
incorporated in PRC with registration number 440301104123072
and is a consolidated affiliated entity of Yangzhou Junde through
Contractual Arrangements and described as a subsidiary of
Yangzhou Junde for the purposes of this document
“SMEs”
small and medium sized enterprises
“Shishi JQW”
Shishi JQW Technology Co., Ltd. (石狮市金泉网络技术有限公司)
incorporated in PRC with registration number 350581100053483
and is a wholly owned subsidiary of Yangzhou Junde
“Subscription Agreement”
the subscription agreement between (1) the Company, (2) Mr Cai
Yongde, (3) Mr Chen Daocai, (4) Mr Cai Peixuan, (5) Champ Public
Limited and (6) Dong Feng Developments Limited, details of which
are set out in paragraph 10.12 of Part 7 of this document
“Subscription Shares”
the 36,468,800 Ordinary Shares which are the subject of and are to
be issued and allotted pursuant to the Subscription Agreement
“Subsidiaries”
collectively, JIL, Yangzhou Junde, Shishi JQW, Jiangsu JQW and
Shenzhen JQW
“the Takeover Code”
the City Code on Takeovers and Mergers published by the Panel (as
amended from time to time)
“UK Act”
the Companies Act 2006 of the United Kingdom
“UK”
the United Kingdom of Great Britain and Northern Ireland
“Visitors”
any person visiting www.jqw.com
“Warrants”
the warrants granted to Cairn and Argento, details of which are set
out in paragraphs 10.4, 10.5 and 10.7 of Part 7 of this document
“WFOE”
wholly foreign owned enterprise
“Xiamen 35.com”
Xiamen 35.com Technology Co., Ltd, a registrar of domain names
in China
“Xiamen Wufeng”
Xiamen Wufeng Trading Co., Limited, a data centre operator in China
“Yangzhou Junde”
Yangzhou Junde Investment Consulting Development Co., Ltd. (扬
州君德投资咨询发展有限公司) incorporated in PRC with
registration number 321000400023807 and is a wholly owned
subsidiary of JIL
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EXCHANGE RATES
The exchange rates below are illustrative only and are set out to assist in the understanding of this document.
GBP 1 = HK$ 12.39
GBP 1 = RMB 9.76
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GLOSSARY
The following is an explanation of technical terms used throughout this document:
Alexa
www.alexa.com, a website that provides Internet statistics. Data is
derived from a set of persons who install a program which monitors
data usage and track site visits. Thus, the statistics provided may
not be accurate or only shows a subset of user usage
BBS
bulletin board system, a computer system running software that
allow logins into the system to perform various functions such as
uploading and downloading software and data, reading news and
bulletins, and exchanging messages, either through email, public
message boards, and sometimes via direct chatting
B2B
business-to-business
B2C
business-to-consumer
C2C
consumer-to-consumer
e-commerce
electronic commerce, buying and selling of product or service is
conducted over electronic systems such as the Internet and other
computer networks
e-payment
electronic payment; facilitates the payment of funds over the Internet
enfodesk
www.enfodesk.com, a website that provides Internet analysis on the
China Internet industry
enquiries messages
box on a website where a person can type a message and send to
the recipient
IP
intellectual property
IT
information technology
instant messengers
online communication software
iresearchchina
www.iresearchchina.com market research firm focusing on the
China internet industry
iwebchoice
www.iwebchoice.com, a website that provides Internet statistics.
Data is derived from pooling information from Alexa
LBS
location based services
microblog
broadcast medium in the form of discussion or point of view of the
writer
QR code
quick response code
SEO
search engine optimisation
SNS
social networking service, a platform to build social networks or
social relations among people who, for example, share interests,
activities, backgrounds, or real-life connections
Sqm
Square meters
14
230260 Alpha pp001-pp019 05/12/2013 14:33 Page 15
KEY INFORMATION
The following is a summary of certain information appearing elsewhere in this Admission
Document and should be read as an introduction to this Admission Document only. This summary
is qualified in its entirety by, and should be read in conjunction with, the more detailed information
and financial information appearing elsewhere in the Admission Document. Any decision to invest
in Ordinary Shares should be based on consideration of this Admission Document as a whole.
Prospective investors should consider the factors and risks attaching to an investment in the
Ordinary Shares and in particular the risk factors set out in Part 2 of this Admission Document.
1. Introduction
The Group operates a B2B e-commerce platform focussed on connecting Chinese buyers with Chinese
sellers. This platform is operated through the domain www.jqw.com. The Group specifically targets small
and medium-sized domestic businesses providing Chinese SMEs with a range of services and an ability to
connect and advertise their products to potential buyers through the Internet. Amongst the online facilities
that its registered users can access are forums, blogs, linkage to instant messengers and enquiry messages,
which enable discussion between registered users and improves communication to encourage trading.
Registration to www.jqw.com is free and 90 per cent. of the membership packages purchased cost RMB
3,000 (approximately £300), or less, in order to attract as many registered users and fee-paying members
as possible to join the website. It also operates what the Directors’ believe to be China’s first dedicated B2B
search engine, www.jqw.cn.
The Group has grown rapidly and www.jqw.com is now one of the leading Chinese B2B e-commerce
platforms.
Sales have increased from RMB 52.1 million in 2010 to RMB 146.2 million (up 181 per cent.) in 2011 and
RMB 287.8 million (up 97 per cent.) in 2012. At the interim stage in 2013, sales reached RMB 180.8 million,
up 26 per cent. on the same period in 2012.
The financial information set out below is extracted from the audited non statutory financial information of
the Operating Group for the three years ended 31 December 2010, 2011 and 2012, which is set out in
Part 4, the Accountants’ Report of this document which should be read in its entirety, and from the unaudited
interim financial information of the Operating Group which is set out in full in Part 5 of this document.
Exchange Rate as of 14 October 2013 GBP £1 : RMB 9.76
Years ended 31 Dec
(Audited)
2010
2011
2012
(RMB million) (RMB million) (RMB million)
Sales
Profit before tax
52.1
1.7
Six months ended 30 June
(Unaudited)
146.2
12.0
287.8
84.1
2012
2013
(RMB million) (RMB million)
Sales
Profit before tax
143.2
28.9
180.8
70.8
This information refers to past performance. Past performance is not reliable indication of future results.
Profit before tax has correspondingly increased from RMB 1.7 million in 2010 to RMB 12 million in 2011
and to RMB 84.1 million in 2012. At the interim stage in 2013 profit before tax was RMB 70.8 million, up
145 per cent. on the corresponding period of 2012. The Group is strongly cash generative, with cash
generated from operating activities of RMB 74.5 million in the first six months of this year while cash and
cash equivalents in the balance sheet at the interim stage were RMB 176.8 million.
15
230260 Alpha pp001-pp019 05/12/2013 14:33 Page 16
The Group now has over 10 million registered users, more than 810,000 online shops and the website
attracts 5 million page views per day. Out of the 10 million registered users, approximately 166,000 are feepaying members of the Group’s Sheng-Yi-Tong membership scheme which offers a range of web-based
services at increasing levels of cost.
The Group currently employs over 440 people. As well as its own dedicated sales force, the Group also has
30 affiliated sales agencies which market its services within China.
As at 30 June 2013, the Group’s domain www.jqw.com ranks second in the top 10 Chinese B2B
e-commerce websites in terms of web traffic. As at 30 June 2013, the Group ranked 95 amongst all web
sites in China and ranked globally at 644.
2. Key Strengths
The Directors believe that the Group has, inter alia, the following key strengths to support the delivery of its
strategy:
●
strong brand recognition in the Chinese B2B sector with an extensive Internet presence, being second
only to Alibaba in web traffic volumes in that sector;
●
approximately 50 industrial sectors being served with 9 million companies’ details and 55 million items
of products information on www.jqw.com;
●
a loyal user base, part of a large JQW online community, with a renewal rate of 83 per cent. for paid
memberships in the first six months of this year;
●
an inexpensive entry point for Chinese SMEs to enter the e-commerce market place;
●
an experienced management team with in-depth industry knowledge;
●
a robust platform;
●
a strong in-house sales and marketing team; and
●
a growing number of 30 sales agencies.
3. Industry Background
As at June 2012, China had over 49 million SMEs, companies manufacturing and producing a vast number
of products for a wide variety of industries for domestic and international consumption. In 2012, total exports
from China amounted to approximately US$2.06 trillion. China is now considered the most competitive
manufacturing nation in the world and despite slowing growth rates, is forecast to remain so for at least the
next five years. B2B marketing plays an increasing role in connecting Chinese companies with companies
both domestically and internationally.
China continues to have a relatively strong economy, with GDP expected to grow at an average of 7.0 per
cent. over the period of China’s 12th Five Year Plan (“FYP”) 2010-2015. The country’s telecommunications
infrastructure is being further developed and there is a rise in Internet usage.
By the end of June 2013, China had registered a total Internet usage population of 591 million, up by 26.6
million compared with the end of 2012, along with an Internet penetration rate reaching 40 per cent., which
is continuing to grow. At the end of 2012 China had approximately 13.4 million domain names registered,
including approximately 7.5 million with the “.CN” domain name (113 per cent. growth in 12 months) and
2.7 million websites (16.8 per cent. growth on a year previous).
This growth in Internet usage has had an impact on China’s e-commerce market, which the Directors believe
will translate into greater opportunities for domestic trade of B2C, C2C and B2B e-commerce.
From 2007 to 2011, China’s e-commerce transaction value enjoyed a dynamic CAGR of 28.4 per cent.
increasing to 31.5 per cent. to reach RMB 5.9 trillion by 2011. Of the e-commerce sectors, B2B e-commerce
dominated with an 83 per cent. value share, equivalent to approximately RMB 4.9 trillion, followed by B2C
and C2C e-commerce transactions, including online retail and online travel booking.
16
230260 Alpha pp001-pp019 05/12/2013 14:33 Page 17
Compared to the western world where B2B e-commerce portals have evolved to become global
marketplaces, B2B e-commerce portals still play an integral part in China to help its SMEs market and
communicate with one another and with the world.
4. Business Description
The Group’s current core business is the operation of a B2B online platform, www.jqw.com, which provides
free members and fee-paying members with links to buyers. Services provided by www.jqw.com include
website design, commercial search services, advertising and the supply of business information and
opportunities. These services are available to the 49 million SMEs in China that are business targets of the
Group.
Websites created for both free members and fee-paying members and their products are uploaded on to
the relevant industry section of www.jqw.com appropriate to the product, where they can be accessed via
the www.jqw.com home page. The Group currently calculates that www.jqw.com has over 810,000 free
and fee-paying member websites, containing information on over 55 million products.
The Group encourages the use of its B2B platform in order to promote mass marketing and encourages as
many potential buyers as possible to access the site to locate products and services. The Group recognises
the importance of marketing its services, spending approximately RMB 5.5 million in advertising and branding
in 2012. It promotes and markets its services through online media, alliances with online portals and
advertising JQW through other search engines like Baidu and Google as well as through outdoor advertising
channels.
Potential buyers are provided access to the websites and products of the Group’s free and fee-paying
members. As a result, www.jqw.com registers over 5 million page views per day, contributing to its brand
recognition in the market.
The Directors believe that the Group’s B2B online platform provides an efficient and reliable method to assist
SME suppliers of products and services, and wholesale buyers to conduct business. Via the www.jqw.com
platform, registered users and buyers can easily target trading partners, communicate directly with each
other through instant messages, blogs, and forums to commence transactions.
17
230260 Alpha pp001-pp019 05/12/2013 14:33 Page 18
5. Financial Summary
The financial information set out below is extracted from the audited non statutory financial information of
the Operating Group for the three years ended 31 December 2010, 2011 and 2012, which is set out in
Part 4, the Accountants’ Report of this document and which should be read in its entirety.
Years ended 31 December
2010
2011
2012
RMB’000
RMB’000
RMB’000
Revenue
Cost of sales
52,056
(36,180)
Gross profit
Other income
Selling and distribution expenses
Administrative expenses
Operating profit
Finance costs
Profit before taxation
Income tax expenses
Profit after taxation and total comprehensive income
Attributable to:
Owners of the parent
Interests under Contractual Arrangements
287,815
(151,463)
––––––––––––
––––––––––––
––––––––––––
15,876
11
(10,214)
(3,972)
48,828
87
(30,626)
(6,313)
136,352
181
(42,411)
(9,984)
––––––––––––
––––––––––––
1,701
–
11,976
–
––––––––––––
84,138
(1)
––––––––––––
––––––––––––
––––––––––––
1,701
(446)
11,976
(3,005)
84,137
(21,199)
––––––––––––
––––––––––––
1,255
8,971
––––––––––––
62,938
––––––––––––
––––––––––––
––––––––––––
––––––––––––
––––––––––––
––––––––––––
1,330
(75)
8,946
25
62,547
391
––––––––––––
––––––––––––
1,255
8,971
––––––––––––
––––––––––––
Earnings per share:
Basic and diluted
146,233
(97,405)
0.007
––––––––––––
––––––––––––
––––––––––––
––––––––––––
0.049
––––––––––––
––––––––––––
––––––––––––
62,938
––––––––––––
––––––––––––
0.342
––––––––––––
––––––––––––
This information refers to past performance. Past performance is not reliable indication of future results.
6. Reasons for Admission and use of proceeds
The Directors believe that the Group has reached a stage in its development where it will benefit from its
shares being admitted to trading on AIM and that this will:
●
raise the Group’s profile and thereby attract more visitors to its B2B platform;
●
facilitate the recruitment of highly qualified employees to enable the Group to adapt to new initiatives
in the B2B sector;
●
enhance the Group’s reputation to enable it to benefit from partnerships and strategic alliances with
other search engines and other media and advertising companies;
●
support the development of the JQW brand in the PRC; and
●
allow greater access to capital to fund future activities as the Internet industry continues to develop
rapidly in China.
The Placing will raise gross proceeds of £6,684,994 million by the issue of 9,549,991 Ordinary Shares at
the Placing Price. The net proceeds of the Placing receivable by the Company are expected to be
approximately £5,684,994 million and will be used for the following purposes:
●
the establishment of new sales agencies targeted to increase to 60 sales agencies by the end of 2015;
●
upgrading and enhancement of hardware and software, to include the Group’s servers to improve
capacity and support data recovery and back-up systems;
18
230260 Alpha pp001-pp019 05/12/2013 14:33 Page 19
●
upgrading and enhancement of the Group’s B2B platform management system as well as improving
a variety of services to include offering mobile platforms for IOS and Android, and to facilitate the
development of other new services;
●
establishing a trading and financial platform through the co-operation with financial institutions to
provide financial services to the Group’s fee-paying members. Services are intended to include finance
assistance, online ordering/contracting, collection and holding of deposits and facilitating e-payment
transactions between fee-paying members and buyers;
●
development of the Group’s Internet media network;
●
development of a bilingual platform to attract international members as well as to promote the Group’s
fee-paying members in China to a global market; and
●
further promotion of SEO by the bulk discount purchase of keywords in other mainstream search
engines, sold onwards to the Group’s members, to attract even more visitors to www.jqw.com.
YOUR ATTENTION IS DRAWN TO THE RISK FACTORS REFERRED TO IN PART 2 OF THIS
DOCUMENT.
19
230260 Alpha pp020-pp045 05/12/2013 14:33 Page 20
PART 1
INFORMATION ON THE GROUP
1. Introduction
The Group operates a B2B e-commerce platform focussed on connecting Chinese buyers with Chinese
sellers. The platform operates through the domain www.jqw.com. The Group specifically targets small and
medium-sized domestic businesses providing Chinese SMEs with a range of services and an ability to
connect and advertise their products to potential buyers through the Internet. Amongst the online facilities
that its registered users can access are forums, blogs, linkage to instant messengers and enquiry messages,
which enable discussion between registered users and improves communication to encourage trading.
Registration to www.jqw.com is free and 90 per cent. of the membership packages purchased cost
RMB 3,000 (approximately £300), or less, in order to attract as many registered users and fee-paying
members as possible to join the website. It also operates what the Directors’ believe to be China’s first
dedicated B2B search engine, www.jqw.cn.
The Group has grown rapidly and www.jqw.com is now one of the leading Chinese B2B e-commerce
platforms.
Sales have increased from RMB 52.1 million in 2010 to RMB 146.2 million (up 181 per cent.) in 2011 and
RMB 287.8 million (up 97 per cent.) in 2012. For the 6 months to 30 June 2013, sales reached RMB
180.8 million, up 26 per cent. on the same period in 2012.
Profit before tax has correspondingly increased from RMB 1.7 million in 2010 to RMB 12 million in 2011
and to RMB 84.1 million in 2012. For the 6 months to 30 June 2013 profit before tax was RMB 70.8 million,
up 145 per cent. on the corresponding period of 2012. The Group is strongly cash generative, with cash
generated from operating activities of RMB 74.5 million in the first six months of 2013 while cash and cash
equivalents in the balance sheet as at 30 June 2013 were RMB 176.8 million.
The Group now has over 10 million registered users, more than 810,000 online shops and the website
attracts 5 million page views per day. Out of the 10 million registered users, approximately 166,000 are
fee-paying members of the Group’s Sheng-Yi-Tong membership scheme that offers a range of web-based
services at varying levels of cost.
The Group currently employs over 440 people. As well as its own dedicated sales force, the Group also has
30 affiliated sales agencies which market its services within China.
As at 30 June 2013, the Group’s domain www.jqw.com was ranked second in the top 10 Chinese B2B
e-commerce websites in terms of web traffic. As at 30 June 2013, the Group ranked 95 amongst all web
sites in China and ranked globally at 644.
2. Background to China’s B2B Industry
As at June 2012, it is estimated that China had over 49 million SMEs companies manufacturing and
producing a vast number of products for a wide variety of industries for domestic and international
consumption. In 2012, total exports from China amounted to approximately US$2.06 trillion. China is now
considered the most competitive manufacturing nation in the world and despite slowing growth rates, is
forecast to remain so for at least the next five years. B2B marketing plays an increasing role in connecting
Chinese companies with companies both domestically and internationally.
China continues to have a relatively strong economy, with GDP expected to grow at an average of
7.0 per cent. over the period of China’s 12th Five Year Plan (“FYP”) 2010-2015. The country’s
telecommunications infrastructure is being further developed and there is a rise in Internet usage.
By the end of June 2013, China had registered a total Internet usage population of 591 million, up by
26.6 million compared with the end of 2012, along with an Internet penetration rate reaching 40 per cent.
which is continuing to grow. At the end of 2012 China had approximately 13.4 million domain names
registered, including approximately 7.5 million with the “.CN” domain name (113 per cent. growth in 12
months) and 2.7 million websites (16.8 per cent. growth on a year previous).
20
230260 Alpha pp020-pp045 05/12/2013 14:33 Page 21
China’s total number of e-commerce
platforms/websites has grown at a 34 per cent CAGR since 2008
e-commerce platforms ’000
40
35
30
25
20
15
10
2008A
2009A
2010A
2011A
2012E
Source: CNNIC, Euromonitor
The number of Chinese B2B platforms has grown at a
21 per cent CAGR since 2008
B2B platforms ’000
12
11
10
9
8
7
6
5
2008A
2009A
2010A
2011A
2012E
Source: CNNIC, Euromonitor
This growth in Internet usage has had an impact on China’s e-commerce market, which the Directors believe
will translate into greater opportunities for domestic trade of B2C, C2C and B2B e-commerce.
From 2007 to 2011, China’s e-commerce transaction value enjoyed a dynamic CAGR of 28.4 per cent.
increasing to 31.5 per cent. to reach RMB 5.9 trillion by 2011. Of the e-commerce sectors, B2B e-commerce
dominated with an 83 per cent. value share, equivalent to approximately RMB 4.9 trillion, followed by B2C
and C2C e-commerce transactions, including online retail and online travel booking.
Compared to the western world where B2B e-commerce portals have evolved to become global
marketplaces, B2B e-commerce portals still play an integral part in China to help its SMEs market and
communicate with one another and with the world.
21
230260 Alpha pp020-pp045 05/12/2013 14:33 Page 22
3. Key Drivers and Trends of China’s e-commerce market
3.1 China’s strong domestic economic growth
It is not yet clear that the current overall world economic environment is leading to a global recovery
following the economic problems of recent years. A recovery may have a positive influence on China’s
B2B e-commerce business with the international market. General Administration of Customs sources
indicate that China’s total import and export value had a sluggish growth of 8 per cent. for the first half
of 2012, down by 18 per cent. over the same period last year. This is even lower than the 10 per cent.
goal set for the entire year of 2012, which had already been recognised as a flat target when compared
to the greater than 20 per cent. actual growth in 2011.
China’s targeted GDP growth for 2013 is 7.5 per cent. However, the weakening export market has
motivated an increased number of Chinese exporters to place a higher premium on targeting the
domestic market, thus driving up domestic B2B online trading to compensate for a depressed export
demand.
3.2 Support from the Chinese government
The Chinese government’s FYP 2010-2015 incorporated a number of proposed new regulations and
industry policies that have impacted, or are likely to impact, the development of China’s B2B
e-commerce market.
The various aspects of legislation include the launch of the National Ministry of Commerce’s Guidance
for the Development of E-commerce during the FYP 2010 – 2015. The FYP 2010 – 2015 has
designated the technology sector as a “Strategic Emerging Industry”. China plans to continue its efforts
to strengthen IP creation, use, protection and management, particularly through support for companies
that provide those services. The country is particularly interested in accelerating the creation of nextgeneration information networks, mobile communications and the Internet.
The guidance thus sets the goal for the import and export value achieved through e-commerce to
reach 10 per cent. of China’s overall foreign trade and for online retail business to exceed 9 per cent.
of the total social retail sales of consumer goods by 2015. Additionally, the guidance encourages
domestic SMEs to employ third party e-commerce platforms more actively.
3.3 E-commerce market growth in China
With the increased development of its telecommunications infrastructure, readily available and cost
effective computers and widely accessed Internet coverage, there has been a wide spread increase in
the application of e-commerce in China across all industries. Along with the growing popularity of the
online retail industry with consumers, B2B online transactions have been extending to upstream
intermediate and raw material supply, as well as to downstream distribution channels.
3.4 Improvement in online payment technology
The third-party online payment market grew at 73 per cent. in 2012, with large-scale annual
transactions exceeding RMB 3.8 trillion. To facilitate the growth, many payment portals such as Tenpay,
99Bill and Chinapnr are accelerating their development and embracing new technology such as QR
codes and LBS.
3.5 Dynamic growth of China’s SMEs
SMEs currently account for 99 per cent. of China’s total number of enterprises, 60 per cent. of the
country’s GDP, 80 per cent. of urban jobs nationwide as well as 50 per cent. of the nation’s tax revenue.
However, these SMEs usually exhibit limited capital, technology and human resources to set up their
own e-commerce capability. Thus, they heavily rely on low cost third party B2B e-commerce platforms
to access potential trade partners and customers.
CNNIC reports that by the end of December 2012, the application of e-commerce by SMEs still
remained very low, with online sales accounting for 25.3 per cent. of sales and online purchases
accounting for 26.5 per cent. Nonetheless, the Internet had become the preferred channel for SMEs
in China to carry out marketing and promotion rather than traditional print and other media. From a
survey of various Internet marketing methods, it was found that the methods SMEs tended to choose
were e-business platform promotion, search engine marketing, instant messenger marketing, website22
230260 Alpha pp020-pp045 05/12/2013 14:33 Page 23
displayed advertisements and e-mail marketing. Other emerging Internet marketing methods such as
microblog marketing, forum/BBS, SNS and video marketing were also favoured by SMEs.
4. Description of the Group
4.1 History of the Group
The Group’s Founders, Mr Cai (Chairman) and Mr Chen (CEO), have together previously established
businesses involved in the creation of websites. These were the forerunners of the Group as it exists
today. The activities included offering web site design to local businesses in and around the southern
region of China at a time when relatively few businesses had websites.
In order to offer a central website through which clients could also promote their businesses,
www.jqw.com was launched in 2004 as a B2B e-commerce portal for marketing clients’ websites,
initially offering free entry for its clients in order to build up its user base.
In December 2004, the Group incorporated Shenzhen JQW. Improvements to the Group’s platform
continued to be made and in 2006 a business search engine facility was added to enable an easier
interface for visitors to search and find specific products.
Following the appointment of the first sales agency in 2008, the Group’s sales agency network has
grown substantially and it now has 30 sales agencies around Southern China.
The Group has grown rapidly since 2008 and has achieved industry recognition with a number of
Chinese Internet industry awards. In 2009, the Group decided to expand operations through the
creation of Shishi JQW in Shishi, Fujian Province. Shishi JQW expanded quickly, establishing a strong
position in the agricultural sector, particularly in farming, husbandry and machinery. The Group’s B2B
platform continues to support a large number of companies from this sector.
Shenzhen JQW applied for and received its ICP Licence on 9 March 2010. An ICP Licence permits a
Chinese telecommunication services provider to provide and charge a fee for value-added
telecommunications service, the ICP Licence was issued for a period of 5 years, after which time an
application will need to be made to renew the licence. In 2011, the Group introduced the Sheng-YiTong membership scheme, which forms the core of the Group’s income today, allowing fee-paying
members to choose from a range of seven packages offering different levels of service. These vary
from the creation of a very basic website, the “Gold Shop” Sheng-Yi-Tong membership package for a
price of RMB 2,000, up to RMB 398,000 for the “Supreme” Sheng-Yi-Tong membership package,
which provides an enhanced website, SEO services and a variety of advertising and promotional
services, which extend beyond the www.jqw.com site.
Jiangsu JQW commenced operations in July 2012 in Yangzhou, Jiangsu Province. Jiangsu JQW is
now the headquarters for the Group in China. Its role is mainly in sales and marketing as well as to
build up the number of users to www.jqw.com. Assisted by local government incentives to boost
employment on a technology park, the Group added substantially to its office space and boosted the
number of its employees, particularly in sales and marketing.
Until recently, the three operating subsidiaries of the Group, although working closely together, had
different shareholders as a consequence of attracting funding from different sources at different times,
in particular from Ms Wang, a Canadian national, who is also the niece of Mr Cai and from a number
of other investors from South East Asia. The Group has now been restructured so that Shishi JQW
and Jiangsu JQW are both wholly owned subsidiaries of Yangzhou Junde and Yangzhou Junde has
effective managerial, operational and financial control of Shenzhen JQW through the Contractual
Arrangements, which are set out in further detail in paragraph 10.14 of Part 7 below.
The Group not only provides a very low cost entry point for Chinese SMEs to establish and promote
their own websites and products, it also provides a very attractive platform for these companies to
promote themselves across China. For a customer or prospective customer, www.jqw.com now brings
with it:
23
230260 Alpha pp020-pp045 05/12/2013 14:33 Page 24
55 million
Product details
10 million
Registered users
9 million
Companies’ details
5 million
Page views per day
810,000
Sheng-Yi-Tong members with website “shops”
500,000
Purchase and sales enquiries per month
166,000
Fee-paying members
1,350
Internet media relationships
700
Rated in the top 700 websites for global website traffic rankings
30
Sales agencies
2
Second (behind Alibaba) in Chinese B2B website traffic rankings
The Directors believe that this is a highly attractive business proposition for many SMEs, reflected in
the growth rate of the number of fee-paying members from approximately 11,000 in 2009 to around
166,000 now.
4.2 Group Structure
The Group carries out its trading business through its subsidiaries in China. To enable the Group to
seek investors from outside the PRC, the following group structure is in place:
JQW plc
(Jersey)
JIL
(Hong Kong)
International
Mainland China
Yangzhou Junde
(WFOE)
100%
Jiangsu JQW
(Jiangsu)
Contractual
Arrangements
100%
Shishi JQW
(Shishi)
Shenzhen JQW
(Shenzhen)
The PRC government regulates Internet access, the distribution of online information and the conduct
of e-commerce through strict business licensing requirements and other government regulations.
Current PRC laws and regulations limit foreign investment in businesses providing value-added
telecommunications services (including the provision of Internet information services) in China.
JQW plc is a Jersey registered company and its PRC subsidiary, Yangzhou Junde, is a WFOE. As a
WFOE, Yangzhou Junde is restricted (and Jiangsu JQW and Shishi JQ as subsidiaries of a WFOE are
also restricted) from holding the ICP Licence that is necessary for the Group’s online operations in
China.
24
230260 Alpha pp020-pp045 05/12/2013 14:33 Page 25
To comply with these restrictions, Yangzhou Junde has entered into a number of Contractual
Arrangements with Shenzhen JQW, a consolidated affiliated entity that operates the www.jqw.com
website and holds the ICP Licence, and its shareholders (who are the Chairman of the Group, Mr Cai
and the CEO, Mr Chen). This enables the Group to exercise effective managerial, operational and
financial control over Shenzhen JQW and receive substantially all of the economic benefits of Shenzhen
JQW through contracted service fees. To the extent PRC laws may permit in the future, the Group
also has an exclusive option to purchase all of the equity interest in Shenzhen JQW.
Accordingly, the Group has consolidated Shenzhen JQW’s financial results in the Group’s financial
results as if Shenzhen JQW were a wholly owned subsidiary.
A summary of the arrangements that implement the Contractual Arrangements is set out below in
paragraph 10.14 of Part 7 of this document.
4.3 Business Description and Services
The Group’s current core business is the operation of a B2B online platform, www.jqw.com, which
provides free members and fee-paying members with links to buyers. Services provided by
www.jqw.com include website design, commercial search services, advertising and the supply of
business information and opportunities. These services are available to the 49 million SMEs in China
which the business targets.
Websites created for both free members and fee-paying members and their products are uploaded
on to the relevant industry section of www.jqw.com appropriate to the product, where they can be
accessed via the www.jqw.com home page. The Group currently calculates that www.jqw.com has
over 810,000 free and fee-paying member websites, containing information on over 55 million products.
The Group encourages the use of its B2B platform in order to promote mass marketing and
encourages as many potential buyers as possible to access the site to locate products and services.
The Group recognises the importance of marketing its services, spending approximately RMB 5.5
million in advertising and branding in 2012. It promotes and markets its services through online media,
alliances with online portals and advertising JQW through other search engines like Baidu and Google
as well as through outdoor advertising channels.
Potential buyers are provided access to the websites and products of the Group’s free and fee-paying
members. As a result, www.jqw.com registers over 5 million page views per day, contributing to its
brand recognition in the market.
The Group’s B2B online platform provides an efficient and reliable method to assist SME suppliers of
products and services, and wholesale buyers to conduct business. Via the www.jqw.com platform,
registered users and buyers can easily target trading partners, communicate directly with each other
through instant messages, blogs, and forums to commence transactions.
Free members, at the most simple level, can use a free, standard template to publish their company
data on www.jqw.com, enter a directory of five of their products or services and provide information
on business opportunities, such as promotions, discounts or price reductions.
In order to conduct a basic search, visitors can access the www.jqw.com online business directory,
www.dir.jqw.com, which is arranged by company, industry and geographic region. From there, they
are able to read websites covering approximately fifty industries, 9 million SMEs, approximately 840
product categories and the relevant supplying and buying information. The Group has a strong
presence in the agricultural industry although many such registered users are categorised within the
machinery sector below.
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230260 Alpha pp020-pp045 05/12/2013 14:33 Page 26
Source: JQW plc
For those registered users interested in fully promoting their products and services through Internet
marketing, more sophisticated website templates are designed by the Group and available to feepaying members. During July 2013, the 810,000 corporate websites on www.jqw.com published over
3.5 million product information items.
The www.jqw.com website promotes ease of use and efficiency of communication between buyer and
supplier to encourage as many transactions as possible. The amount of product information, the ability
to interact through real-time communication, instigate inquiries, create discussion both direct and via
registered users’ forums at www.tieba.jqw.com and a blog space at www.blog.jqw.com (where
individually or as a group, members can record opinions, information, etc. on a regular basis) and other
easy to use online community functions, encourages interaction and assist sales. It also generates a
large, interactive, online community.
In order to expand the scale of www.jqw.com, all registered users are free to access basic functions
and services. However, fee-paying members are provided additional value-added services according
to the membership package they have purchased. Those services include the purchase of keywords,
subscription for different promotion services through the JQW platform, the improvement of rankings
in search results through SEO, more attractive websites with animation, video and music – services
which the Directors’ believe are designed to increase the fee-paying members’ opportunities to attract
target buyers.
It is the intention of the Group to continue to provide a balance between free and paid services,
encouraging the numbers of registered users to increase, whilst maintaining a growing revenue stream.
At present, the Group does not engage in direct transactions on its website but acts as the introducer
of buyer to seller such that purchases and sales are conducted directly between buyer and seller
themselves. As a B2B e-commerce platform, the items involved in transactions can be of relatively
large value and orders can be complex, however, there are opportunities for the development of
www.jqw.com in online and offline trading that the Group will consider.
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230260 Alpha pp020-pp045 05/12/2013 14:33 Page 27
The diagram below indicates the business and the services provided.
Website
Design and
Display
Revenue
Channels
www.jqw.com Paid Packages
Sales
Agencies
Sheng-Yi-Tong
Membership Scheme
Direct
Sales
Business
Search
Promotion
SEO Website
Optimisation
Mass Media
Promotion
Blogs,
Forums, Chat
Capabilities
Directories
Source: JQW plc
Aside from the B2B online platform, the Group is also developing a dedicated B2B search engine,
www.jqw.cn, which allows visitors to search for products from both within and outside of the Group’s
Sheng-Yi-Tong membership scheme. The Directors believe that www.jqw.cn is the first dedicated
Chinese B2B search engine.
4.4 Operations
The Group’s departments and their employees are spread between its three primary offices as outlined
in the table below. The Group’s head office in Yangzhou, Jiangsu Province, is the largest site containing
some 305 people, whilst Shishi JQW employs 124 and Shenzhen JQW, 14.
The following table sets forth the numbers of employees, categorized by function, as at 30 June 2013:
Shishi
JQW
Department
Administrative
Sales & marketing
Customer service
Branding
IT support, research & development
Human resources
Finance
Total
1
98
9
7
1
3
5
Employee Numbers
Jiangsu
Shenzhen
JQW
JQW
3
230
22
26
11
10
3
–
–
–
–
14
–
–
–––––––––––
–––––––––––
–––––––––––
124
305
14
–––––––––––
–––––––––––
–––––––––––
–––––––––––
–––––––––––
–––––––––––
Total
4
328
31
33
26
13
8
–––––––––––
443
–––––––––––
–––––––––––
The following table sets forth the Group’s total number of employees for the past 3 years:
2010
Total employees
124
As at 31 December
2011
217
2012
435
The Group also employs interns from universities during holiday periods to assist with sales and
marketing. The number of interns taken on during 2012 at Jiangsu JQW reached approximately 30
whilst at Shishi JQW it numbered around 10.
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230260 Alpha pp020-pp045 05/12/2013 14:33 Page 28
4.5 Research and Development
The Group’s research and development and technical team, which oversees amongst other things the
www.jqw.com website, its servers, anti-virus protection comprises of 26 people, 14 who are based in
the Group’s Shenzhen office and 11 who are employed by Jiangsu JQW and one who is employed by
Shishi JQW.
The Group’s servers are situated in Xiamen, Fujian Province within a data centre operated by Xiamen
Wufeng, a distributor of China Telecommunications Corporation, one of the largest telecommunications
providers in China. Back up servers and data recovery are located at Shenzhen JQW such that if a
disaster were to occur at the Xiamen data centre, recovery would occur through the Shenzhen JQW
servers. The Group intends to deploy some of the proceeds of the Placing towards additional backup servers, probably at a different location.
Source: JQW plc
The Group’s domains, www.jqw.com, www.jqw.cn, www.jqw-ir.com, www.jqw.com.cn, www.jqwinc.com, www.jqwmall.com, www.jqwshop.com, www.jqw-mall.com and www.jqw-shop.com are
registered with Xiamen 35.com, which is quoted on ChiNext of the Shenzhen Stock Exchange.
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230260 Alpha pp020-pp045 05/12/2013 14:33 Page 29
4.6 Direct sales
The Group had approximately 330 staff in sales as at the end of December 2012, compared to 150 in
2011 and 70 in 2010. The significant increase in numbers during 2012 reflects the establishment of
Jiangsu JQW.
Sales leads are generated by reviewing the Group’s existing registered users’ database to identify all
the free members using the website as well as fee-paying members who have not renewed their
membership. Leads are also obtained via various directories and online sources. Once these leads
have been identified, they are contacted by the sales and marketing teams.
Each person in the sales and marketing teams has targets to achieve. Each call made is tracked and
the call rates and length of calls are monitored. Commissions are paid to the sales and marketing
teams based on payments collected and additional rewards can be made if targets are exceeded.
Between 2010 and 2011, direct sales increased by some 198 per cent. and between 2011 and 2012
by some 113 per cent., and now account for approximately 30 per cent. of total sales.
4.7 Sales agencies
The Group also utilises external sales agencies to sell Sheng-Yi-Tong memberships on its behalf. All
of the sales agencies work exclusively for the Group.
Sales agencies receive commissions for generating sales of the different Sheng-Yi-Tong membership
packages. Commissions paid in 2012 represented approximately 60 per cent. of revenue generated
by sales agencies.
As at the date of this document, the Group has 30 sales agencies covering the following regions:
Source: JQW plc
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230260 Alpha pp020-pp045 05/12/2013 14:33 Page 30
Region
Number of agencies
Anhui
Fujian
Guangdong
Guangxi
Guizhou
Hubei
Jiangxi
Zhejiang
1
18
3
3
1
2
1
1
The Group has experienced a significant increase in sales from its sales agencies as the number of
sales agency offices has increased from 14 at the end of 2010 to 18 at the end of 2011, 27 at the end
of 2012 and 30 as at the date of this document. Although commissions are paid to sales agencies,
they are seen as a quicker and more cost effective route to extending the Group’s market coverage
across China than by the Group establishing its own sales offices. The larger agents each contribute
over RMB 3 million per annum of revenue to the Group. The Group intends to target the establishment
of at least 60 sales agencies by the end of 2015. These agencies will be a mix of the existing
“independent” agencies and “quasi-franchise” agencies that will have the benefit of some capital
assistance from the Group in the form of computers and other equipment as well as a contribution
towards refurbishment of office space. In return for this assistance, a lower rate of commission will be
paid on the sales generated. The Directors’ believe there is plenty of scope for expanding the
geographical reach of the sales agencies, which are currently most concentrated in Fujian Province.
5. Services
5.1 Free registration
The Group allows Visitors free registration but this only provides access to basic functions and services.
Free registration not only increases the number of products available through www.jqw.com but it
enables new registered users to assess the benefit of listing their products on the site and the Directors
believe that this encourages them to become fee-paying members. These free basic functions include
listing up to five products and being able to conduct searches. The Directors believe that this has
assisted in growing the number of registered users to over 10 million and the number of products listed
on www.jqw.com to over 55 million as at the date of this document.
With a substantial number of registered users and products, the Group’s B2B platform is more likely
to attract further users and products and therefore has a greater chance of bringing about orders and
sales.
5.2 Sheng-Yi-Tong membership scheme
Fee-paying members sign up to one of the seven Sheng-Yi-Tong membership packages. These
membership packages are of different durations and offer varying degrees of services. The main
services offered to fee-paying members include:
●
website design and development;
●
upload of company information to the www.jqw.com business information database and directory;
●
commercial search promotion services; and
●
advertising and marketing services.
All of the Sheng-Yi-Tong membership packages, apart from the “Gold Shop” package, include JQW
credits. The value of credits allotted is dependent on the type of Sheng-Yi-Tong membership package
purchased. Fee-paying members can use their JQW credits to subscribe for a variety of services, for
example, to bid for keywords to get a better ranking during a search result, or to advertise their products
in banner ads or pop-up ads, that are not available under the Sheng-Yi-Tong package they have
subscribed for. Once the JQW credits are used, fee-paying members can either buy more credits or
they can renew their Sheng-Yi-Tong package. In most situations, fee-paying members will choose to
renew their packages as this provides them with the additional services, which come with the package,
as well as an additional amount of JQW credits.
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230260 Alpha pp020-pp045 05/12/2013 14:33 Page 31
The seven Sheng-Yi-Tong membership packages and their related services are listed in the table below.
Gold
Shop
Gold
Shop King
Platinum
Shop
Diamond
Shop
Crown
Shop
King of
the King
Supreme
Subscription fee (RMB) 2,000
Duration
3 months
JQW credits
–
3,000
12 months
2,000
6,800
12 months
4,000
9,800
12 months
7,000
16,800
12 months
12,000
188,000
12 months
30,000
398,000
12 months
100,000
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
Packages Offered
(a) Type of websites
Basic Entrepreneur
Exquisite
(b) Type of
promotions
Website promotion
SEO
JQW business
search promotion
✓
✓
(c) Advertising and
marketing
Nationwide web
media promotion
JQW banner displays
JQW left column
graphics promotion
JQW hover pop-up
banners
✓
Currently, approximately 90 per cent. of the Group’s fee-paying members sign up for the “Gold Shop”
or the “Gold Shop King” Sheng-Yi-Tong membership package. The Group targets SMEs by offering
to provide a low cost website for their company and the ability to market that website and its products
on a cost effective basis. The Directors’ believe that this has assisted in the high growth rate in the
number of fee-paying members. The Directors’ believe that Group has attracted many SMEs through
its restricted free membership, enabling SMEs to “try before they buy”, which the Directors believe will
drive potential fee-paying members to the website due to the volume of products advertised. The
Group not only has a high number of unique visitor levels but it also has a high number of page views,
making its brand one of the most well-recognised in the B2B sector. The Group intends to encourage
its existing fee-paying members to upgrade to its premium rate packages so that they can benefit from
its enhanced e-commerce marketing services.
The individual services listed in the table above are described in more detail below:
5.2.1 Type of websites
Basic Entrepreneur
JQW uses templates to develop websites for the individual fee-paying member, containing
information such as that member’s company profile, business strength, products’ showcase
and contact information. Additional functions include links to employment advertisements,
customer online feedback and direct communication with JQW members via instant messaging
applications such as QQ, MSN and Skype.
Exquisite
In addition to the website functions provided in the “Basic Entrepreneur” service, “Exquisite”
provides animation, promotional video uploads, document downloads and background music.
5.2.2 Type of promotions
Website promotion
The fee-paying member’s product, when searched, will appear at the top of the search result,
before unpaid members’ products and products extracted from other B2B websites.
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230260 Alpha pp020-pp045 05/12/2013 14:33 Page 32
SEO
Localised search engine optimisation service. This service is designed to help fee-paying
members have their products displayed prominently in other mainstream search engines like
Google and Baidu, through the weighting granted by those search engines to www.jqw.com
and the technical configuration set into the fee-paying member’s homepage when initially
designed by JQW. This can mean that a search combination of “city name + products/services
+ industry” will ensure that the Group’s fee-paying members’ products will have a better ranking.
The Directors’ believe this service is tailored to members’ needs to target local business
opportunities and is designed to help SMEs develop their markets.
JQW business search promotion
The use by fee-paying members of various types of promotion services, including:
●
bid for search links – this allows fee-paying members to bid, through an online auction
process, using JQW credits, for a prominent position when a search is undertaken on a
specific word;
●
right column graphic promotion – fee-paying members pay to have a 220 by 170 pixel
product image displayed on the right column side of the website during a search result;
●
hover pop-up banners – this displays a fee-paying member’s product as a 220 by 110
pixel pop-up banner, which will float along the website;
●
display banners – the fee-paying member’s products are displayed at the top of a search
result, along with a product image and description; and
●
left column graphic promotion – fee-paying members can choose up to three keywords
for a search and web banner of a 93 by 93 pixel product image will be displayed on the
left column side of the website during a search result.
The “bid for search links” promotion (above) is bid for by fee-paying members using JQW credits
in an online auction on a daily basis. For the other four promotions listed above, fee-paying
members use JQW credits to pay a fixed price based on different keywords. These promotions
enable the fee-paying member’s products to be listed at a prominent position during a product
listings search result on www.jqw.com and within the business directory, and thereby gain better
visibility for themselves and their products.
The daily minimum bid for each of these promotions start at one JQW credit with an increment
of 0.1 JQW credit for each bid.
5.2.3 Advertising and marketing
Nationwide web media promotion
This provides access to more than 1,350 domestic mainstream websites such as Sina, Netease,
Sohu, People.com.cn and Tencent in order to publish up to 36 blog articles (“advertorials”) to
promote fee-paying members’ products and other related information. This is undertaken
through a cooperation agreement the Group has signed with a media communications company.
The Group has well-established relationships with these media outlets and undertakes integrated
promotion for its fee-paying members through placing advertorials in relevant sections of the
online media. Advertorials are commentary on new products or opportunities from fee-paying
members, but can include news releases, network marketing, crisis public relations, event
marketing, new products promotion, public relations planning and publishing and crisis
monitoring and control.
JQW banner displays
This provides a 980 by 90 pixels banner of a product related to a keyword search via the Group’s
search results page. This service is valid for up to one year to members with Sheng-Yi-Tong
“Platinum Shop” to “Supreme” membership packages, choosing one keyword, which is valid
for the duration of their membership package and is available to the other membership packages
via the use of JQW credits.
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230260 Alpha pp020-pp045 05/12/2013 14:33 Page 33
JQW left column graphics promotion
Fee-paying members can choose three keywords that will allow their company name to appear
at the first fixed position on the left column of the search result website with a photo/graphic
specification of 93 by 93 pixels. This is incorporated within both the Sheng-Yi-Tong “King-ofthe-King” and “Supreme” membership packages and is available to the other membership
packages via the use of JQW credits.
JQW hover pop-up banners
These provide background pop-up banners and play randomly selected pictures supplied by
members with a specification of 250 by 170 pixels. These banners are part of the Sheng-YiTong “Supreme” membership package and are available to other membership packages via the
use of JQW credits.
5.3 Brand Promotion
The Group employs 33 people in its branding department and spent approximately RMB 5.5 million
on promoting its brand in 2012.
Currently, the Group promotes www.jqw.com via the following media:
●
outdoor signage;
●
trade magazines; and
●
other websites.
The brand team is responsible for maintaining and managing the Group’s public relations, supplying
information about the Group’s business and its corporate profile.
The team is also responsible for ensuring good relationships with government agencies, liaising with
trade associations and maintaining contact with universities to develop the Group’s internship
programs.
6. Key Strengths
The Directors believe that the Group has, inter alia, the following key strengths to support the delivery of its
strategy:
●
strong brand recognition in the Chinese B2B sector with an extensive Internet presence, being second
only to Alibaba in web traffic volumes in that sector;
●
approximately 50 industrial sectors being served with 9 million companies’ details and 55 million items
of products information on www.jqw.com;
●
a loyal user base, part of a large JQW online community, with a renewal rate of 83 per cent. for paid
memberships in the first six months of this year;
●
an inexpensive entry point for Chinese SMEs to enter the e-commerce market place;
●
an experienced management team with in-depth industry knowledge;
●
a robust platform;
●
a strong in-house sales and marketing team; and
●
a growing number of 30 sales agencies.
7. Intellectual property
The Group develops a variety of software for the benefit of its own internal use. It has registered the copyright
(below) of a number of software programmes and applications which are used internally. The Group has no
current intention of monetising their value by making them available to external parties and it has not
capitalised their value in its balance sheet. The final three items listed below relate to the Group’s search
engine.
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230260 Alpha pp020-pp045 05/12/2013 14:33 Page 34
7.1 Copyright
The Group currently holds 11 registered software copyrights with the National Copyright Administration
of the People's Republic of China.
The 11 software copyrights registered are:
●
JQW Sheng-Yi-Tong Service Online Selling System
(金泉网生意通服务在线销售软件)
●
JQW Sheng-Yi-Tong Forum/message board Management System
(金泉网生意通服务贴吧信息发布管理系统)
●
JQW Sheng-Yi-Tong Service Bidding System
(金泉网生意通服务时长竞价排名系统)
●
JQW Sheng-Yi-Tong Business Catalogue Posting System
(金泉网生意通服务商业目录信息发布系统)
●
JQW Sheng-Yi-Tong Service Media Advertorial Posting System
(金泉网生意通服务媒体软文发布软件系统)
●
JQW Sheng-Yi-Tong Service Space Information Management System
(金泉网生意通服务空间信息发布管理系统)
●
JQW Sheng-Yi-Tong Service Right Column Graphic Promotion Posting System
(金泉网生意通服务黄金展位发布系统)
●
JQW Sheng-Yi-Tong Service Supply and Demand Enquiries Management System
(金泉网生意通服务供求信息发布系统)
●
JQW Information Filtering System V1.0
(金泉网信息过滤系统V1.0)
●
JQW Word Classification System V1.0
(金泉网搜索分词系统V1.0)
●
JQW Search Crawler System V1.0
(金泉网搜索引擎爬虫系统V1.0)
Further details of these software copyrights are set out in paragraph 19.2 of Part 7 of this document.
7.2 Trademarks
The Group currently holds five registered trademarks with the State Intellectual Property Office of the
People’s Republic of China (“SIPO”). Out of these five trademarks, only two of the trademarks are
currently relevant to the business because they afford the Group protection for the roman letters “JQW”.
These are trademarks with registered number 5819132 and 5819116. These trademarks are registered
in the name of Shishi JQW and licensed to Shenzhen JQW for use in connection with the operation of
the B2B platform.
Shishi JQW has applied to register an additional ten trademarks (the “Trademarks”) with SIPO. These
trademarks are:
●
five Trademarks for “JQW” under class 16, 35, 38, 41 and 42; and
●
five Trademarks for “金泉网” the Chinese name of JQW, under class 16, 35, 38, 41 and 42.
Two of the Trademark applications for “金泉网” with registered number 11219505 under class 38 and
registered number 11195472 under class 42 have been initially rejected due to the similarities to another
trademark already registered. The Company is in the process of appealing these rejections. The
remainder of the eight Trademark applications are still under consideration.
The Company intends to apply for a Community Trade Mark for the mark “JQW” in classes 35, 36, 38
and 42 following Admission.
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230260 Alpha pp020-pp045 05/12/2013 14:33 Page 35
The trademark classification numbers are according to the 10th edition of Classification of Goods and
Services and details are as follow:
Class
16
Category
Paper, cardboard and goods made from these materials, not included in other classes;
printed matter; bookbinding material; photographs; stationery; adhesives for stationery or
household purposes; artists’ materials; paint brushes; typewriters and office requisites
(except furniture); instructional and teaching material (except apparatus); plastic materials
for packaging (not included in other classes); printers’ type; printing blocks
35
Advertising; business management; business administration; office functions
36
Insurance; financial affairs; monetary affairs; real estate affairs
38
Telecommunications
41
Education; providing of training; entertainment; sporting and cultural activities
42
Scientific and technological services and research and design relating thereto; industrial
analysis and research services; design and development of computer hardware and software
Further details of these Trademarks are set out in paragraph 19.1 of Part 7 of this document.
7.3 Domain Names
The Group has registered the following domain names:
No.
Domain Name
Use
1
www.jqw.com
B2B platform
2
www.jqw.cn
Search engine
3
www.jqw-ir.com
Investor relations
4
www.jqw.com.cn
Backup domain
5
www.jqw-inc.com
Dormant
6
www.jqwmall.com
International B2B platform
7
www.jqwshop.com
International B2B platform
8
www.jqw-mall.com
International B2B platform
9
www.jqw-shop.com
International B2B platform
These domains have been registered with the registrar Xiamen 35.com. Xiamen 35.com is an approved
registrar with The Internet Corporation for Assigned Names and Numbers (ICANN) and CNNIC.
The Group has not capitalised any costs in connection with IP.
Further details of these domains are set out in paragraph 19.3 of Part 7 of this document.
8. Competition
Across the e-commerce industry, the Group faces substantial domestic and international competition.
However, the Group concentrates on domestic SME B2B e-commerce. In this sector, www.jqw.com still
has substantial competition, particularly from Alibaba, which dominates the market. However, in terms of
web site traffic, www.jqw.com is ranked second only to Alibaba according to iwebchoice, which utilises data
from Alexa.
Whilst revenue does not necessarily correlate to volume of web traffic, the top 10 Chinese B2B e-commerce
websites by volume of web traffic are listed below. The list includes Alibaba and websites belonging to
quoted companies such as www.HC360.cm, www.made-in-china.com and www.mysteel.com. Aside from
these websites, www.jqw.com also faces indirect competition from other forms of marketing media, including
media advertising and trade shows.
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230260 Alpha pp020-pp045 05/12/2013 14:33 Page 36
Several companies, whose websites are listed below, as well as www.globalsources.com and
www.globalmarket.com, combine a website platform with international trade shows and accreditation of
those suppliers admitted to their websites. The Directors believe that this business model of certain of their
competitors will restrict the client base and increase the costs to clients by the need for prior inspection and
approval in order to provide confidence to international buyers that they are sourcing from companies, which
have gone through a credit check and quality check. At present, the Group concentrates only on China-toChina trade, such that its registered user base is more able to carry out its own checks when considered
necessary. The Group’s free and fee-paying members do also attract buyers from outside China, as the feepaying members have reported buyers coming from Japan, Malaysia, and various other countries.
The top 10 Chinese B2B e-commerce websites according to iwebchoice (utilising statistics from Alexa) for
volume of web traffic as of 30 June 2013 were:
Rank
website
1st
www.alibaba.com
2nd
www.jqw.com
3rd
www.hc360.com
4th
www.made-in-China.com
5th
www.china.cn
6th
www.gongchang.com
7th
www.makepolo.cn
8th
www.jmw.com.cn
9th
www.b2b.com
10th
www.hktdc.com
In a survey by CNIT-Research on B2B sites, the Group again features highly, only behind Alibaba and HC360
in terms of the “brand with the most influence in China’s B2B industry”.
In regards to ranking by revenue for 2011, Euromonitor statistics shows www.jqw.com featured in the top
15 Chinese B2B e-commerce websites. Comparisons were made with www.alibaba.com,
www.globalsources.com,
www.hc360.com,
www.made-in-China.com,
www.dhgate.com,
www.mysteel.com, www.globalmarket.com, www.315.com.cn and www.emedchina.cn.
Since these statistics were compiled, the Group has seen its revenues increased by 97 per cent. in 2012.
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9. Financial Summary
The financial information set out below is extracted from the audited non statutory financial information of
the Operating Group for the three years ended 31 December 2010, 2011 and 2012, which is set out in
Part 4, the Accountants’ Report, of this document and which should be read in its entirety.
Years ended 31 December
2010
2011
2012
RMB’000
RMB’000
RMB’000
Revenue
Cost of sales
52,056
(36,180)
Gross profit
Other income
Selling and distribution expenses
Administrative expenses
Operating profit
Finance costs
Profit before taxation
Income tax expenses
Profit after taxation and total comprehensive income
Attributable to:
Owners of the parent
Interests under Contractual Arrangements
146,233
(97,405)
287,815
(151,463)
––––––––––––
––––––––––––
––––––––––––
15,876
11
(10,214)
(3,972)
48,828
87
(30,626)
(6,313)
136,352
181
(42,411)
(9,984)
––––––––––––
––––––––––––
1,701
–
11,976
–
––––––––––––
84,138
(1)
––––––––––––
––––––––––––
––––––––––––
1,701
(446)
11,976
(3,005)
84,137
(21,199)
––––––––––––
––––––––––––
1,255
8,971
––––––––––––
62,938
––––––––––––
––––––––––––
––––––––––––
––––––––––––
––––––––––––
––––––––––––
1,330
(75)
8,946
25
62,547
391
––––––––––––
––––––––––––
1,255
8,971
––––––––––––
––––––––––––
––––––––––––
––––––––––––
––––––––––––
62,938
––––––––––––
––––––––––––
This information refers to past performance. Past performance is not reliable indication of future results.
10. Interim Figures and Current Trading
The financial information set out below is extracted from the unaudited interim financial information of the
Operating Group for the six months ended 30 June 2013 and the six months ended 30 June 2012, which
are set out in Part 5 of this document and which should be read in its entirety.
Revenue
Cost of sales
Gross profit
Other income
Selling and distribution expenses
Administrative expenses
Operating profit
Finance costs
Profit on ordinary activities before taxation
Income tax expense
Six months
ended
30 June
2012
RMB’000
(Unaudited)
Six months
ended
30 June
2013
RMB’000
(Unaudited)
143,218
(88,797)
180,775
(80,861)
––––––––––––
––––––––––––
54,421
58
(21,145)
(4,406)
99,914
200
(23,070)
(6,208)
––––––––––––
––––––––––––
28,928
–
70,836
–
––––––––––––
––––––––––––
28,928
(7,527)
70,836
(17,966)
––––––––––––
Profit after taxation and total comprehensive income
37
21,401
––––––––––––
––––––––––––
––––––––––––
52,870
––––––––––––
––––––––––––
230260 Alpha pp020-pp045 05/12/2013 14:33 Page 38
Revenue for the 6 month period to 30 June 2013 has increased by 26 per cent. whilst gross margins have
improved from 38 per cent. to 55 per cent. leading to an increase in pre-tax profit from RMB 28.9 million to
RMB 70.8 million, up some 145 per cent.
Margins have improved substantially in the 6 month period to 30 June 2013 partly due to a policy to
encourage members to delay placing of advertorials from the first half of the calendar year, when Chinese
holiday periods are likely to attract a lower level of attention by buyers in advertising in any form, to the
second half of the year. This is therefore likely to move an element of cost to the Group into the second half
rather than the first and margins during the second half may therefore not be as high. However, margins
have also benefited from a fall in domain registration fees to a negligible level as the Group moved from a
policy of registering its fee-paying members’ individual domain names, to making these domain names as
a sub-domain of www.jqw.com and from a fall in sales tax due to a change in Chinese tax regulations.
Cash and cash equivalents in the balance sheet, which can be found in Part 5 of this document, have gone
up by RMB 68.6 million to RMB 176.8 million.
The Group recognises revenue on a conservative basis. Revenue is recognised over the lifetime of the
contracts although the Group’s contracts are non-refundable on signature and the Group tends to be paid
in full up front. The Group therefore carries an element of deferred revenue in its balance sheet, which relates
to the unrecognised portion of those contracts’ revenue. It should be noted that deferred revenue in the
balance sheet has increased by 90 per cent. to RMB 110.3 million. Whist this is not an accurate reflection
of underlying revenue growth as a substantial proportion of contracts are short term (over a period of 3
months) and the mix of higher value contracts can change, nonetheless it provides the Group with an
element of forward visibility to its revenue.
11. Reasons for Admission and Use of Proceeds
The Directors believe that the Group has reached a stage in its development where it will benefit from its
shares being admitted to trading on AIM and that this will:
●
raise the Group’s profile and thereby attract more visitors to its B2B platform;
●
facilitate the recruitment of highly qualified employees to enable the Group to adapt to new initiatives
in the B2B sector;
●
enhance the Group’s reputation to enable it to benefit from partnerships and strategic alliances with
other search engines and other media and advertising companies;
●
support the development of the JQW brand in the PRC; and
●
allow greater access to capital to fund future activities as the Internet industry continues to develop
rapidly in China.
The Placing will raise gross proceeds of £6,684,994 by the issue of 9,549,991 Ordinary Shares at the Placing
Price. The net proceeds of the Placing receivable by the Company are expected to be approximately
£5,684,994 million and will be used for the following purposes:
●
the establishment of new sales agencies targeted to increase to 60 sales agencies by the end of 2015;
●
upgrading and enhancement of hardware and software, to include the Group’s servers to improve
capacity and support data recovery and back-up systems;
●
upgrading and enhancement of the Group’s B2B platform management system as well as improving
a variety of services to include offering mobile platforms for IOS and Android, and to facilitate the
development of other new services;
●
establishing a trading and financial platform through the co-operation with financial institutions to
provide financial services to the Group’s fee-paying members. Services are intended to include finance
assistance, online ordering/contracting, collection and holding of deposits and facilitating e-payment
transactions between free members and fee-paying members with buyers;
●
development of the Group’s Internet media network;
●
development of a bilingual platform to attract international members as well as to promote the Group’s
fee-paying members in China to a global market; and
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230260 Alpha pp020-pp045 05/12/2013 14:33 Page 39
●
further promotion of SEO by the bulk discount purchase of keywords in other mainstream search
engines, sold onwards to the Group’s members, to attract even more users to www.jqw.com.
12. Strategy and Prospects
The Group’s current business strategy is focussed on growing and further strengthening the Group’s offering
as a SME B2B e-commerce service provider in China.
The Group intends to continue to expand its own internal sales and marketing department as well as to
appoint additional sales agencies to market the Group’s Sheng-Yi-Tong membership packages. It believes
it can increase sales opportunities more rapidly by adopting a “quasi-franchise” system to assist additional
sales agencies to be established by entrepreneurs. Under the proposed “quasi-franchise” system, the Group
will provide financial support to sales agencies to acquire computer systems and to refurbish offices, in
return for a lower percentage sales commission. The Directors believe that this will help the Group expand
its presence more rapidly to other provinces in China. The Group’s target is to establish at least 60 sales
agencies in place by the end of 2015, compared to 30 sales agencies which were in place as of the date of
this document.
The Group is at the early stages of investigating the potential for extending its platform within the agricultural
sector (where it has a relatively strong position) to include additional trading and financial services to its
members. These services may include finance assistance, online ordering/contracting, forward contracts,
trade finance, collection and holding of deposits, facilitation of e-payment transactions between free
members and fee-paying members with buyers, authentication and insurance. These services will need to
be offered in partnership with financial institutions and other professional parties. If successful, the Group
may extend these services to other sectors.
A bi-lingual e-commerce platform in English is being developed to allow certain of the Group’s larger
members to consider expanding their sales internationally. However, it is the Group’s intention at the early
stages to open this site only to members in industries where there is an international price competitive
position and where there are lower barriers for exports.
The Group will continue to commit to a substantial marketing and advertising programme to increase
awareness of its JQW brand, as well as developing its awareness through partnerships and strategic
alliances with other Internet media and advertising companies.
The Group’s underlying growth rate requires significant and continuous investment in hardware and software
in order to maintain a robust and efficient B2B platform. Enhancing the Group’s overall services to its
registered users is also pre-requisite for future success. Additional enhancements and investment to the
platform will be made, such as those to improve the mobile platform for ease of use for IOS and Android
software, to include instant messaging, automatic matching of supplier and buyer enquiries, establishing a
broader business networking community, etc, in order to strengthen www.jqw.com’s appeal to both its
existing online community and to attract new registered users.
The Directors are confident of the Group’s future prospects as a result of both favourable trends in the B2B
market in China, and the expected increase in the level of services offered by JQW to its members.
13. Dividend Policy
Although no commitment is being made, it is expected that the Group will pay a dividend, which is dependent
on the Group’s future operations and earnings, capital requirements and surplus capital and other factors
that the Directors may deem relevant.
Subject to the availability of distributable reserves, the Board intends to pursue a dividend policy reflecting
the Group's growth in earnings and cash flow generated from operations, while maintaining an appropriate
level of dividend cover and having regard to further development of the Group’s activities.
The payment and amount of any dividends or distributions to Shareholders will be at the discretion of the
Directors. There is no assurance as to whether the dividend distribution will occur as intended, the amount
of the dividend payment or timing of such payment.
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As a holding company, the ability of the Company to pay dividends will principally depend upon dividends
or interest paid to it by its Subsidiaries.
There are no specific dividend procedures for non-Jersey resident shareholders.
14. Directors and Management
Directors
Cai Yongde (aged 55), Chairman
Mr Cai is the Chairman of the Group. He is a senior economist, an entrepreneur and a real estate developer.
Mr Cai was born in Fujian province. In 1977, Mr Cai started his career in the metal hardware business. He
founded Xie Sheng Real Estate Co., Ltd. in 1998, a property development business in the Ganzhou District
of Jiangsu Province which is involved in the development of real estate projects in Jiangsu Province and
Hunan Province. In 2004, Mr. Cai ventured into the retail business and opened Qinzhou Xiesheng Department
Store Co., Ltd, located in Guangzi Province. Mr Cai is a co-founder of the Group.
Chen Daocai (aged 42), Chief Executive Officer
Mr Chen is the Chief Executive Officer and is responsible for the overall management of the business.
Mr Chen has fifteen years of experience in the Internet industry. He graduated from the Business
Management Institute of Fuzhou University in 1994. After graduation, he worked in Quanzhou Agricultural
Engineering School as a statistics teacher. In 1997, he pursued a career in the Internet industry, engaging
in website construction, Internet network promotion and other Internet business. Mr Chen is a co-founder
of the Group.
Kooi Wei Boon (aged 33), Chief Financial Officer
Mr Kooi has over eight years of experience in the auditing industry, having worked with Ernst & Young
Malaysia and KPMG Beijing. During his tenure with both companies, he has been involved in numerous
IPOs in Hong Kong. Mr Kooi studied for a Bachelor of Accounting degree at Universiti Sains Malaysia
(University of Science, Malaysia) where he was awarded the equivalent of a first class honours. He is fluent
in English, Bahasa Malaysia, Mandarin, Cantonese and other Chinese dialects. Mr Kooi joined the Group in
January 2013.
Mircle Yap (aged 36), Non-Executive Director
Mr Yap has over ten years’ experience in the finance industry, primarily in South East Asia as a director and
investment adviser. Mr Yap currently works as a strategic investment adviser for One Capital Group
Investment Ltd. (“One Capital”) where he is responsible for developing strategies and implementing the
organisation’s financial plans. Prior to working at One Capital, Mr Yap was a strategic investment adviser at
Quarto Capital LLC from 2007 to 2011. He was an executive director at Exalt Global Investment & Co.
Mr Yap is also a non-executive director of Camkids Group plc.
Mr Yap is the chairman of the Group’s Remuneration and Nomination Committee and a member of the Audit
Committee and the AIM Rules Compliance Committee.
Jacques-Franck Dossin (aged 52), Non-Executive Director
Mr Dossin has over 25 years’ experience in the finance industry, primarily as an equity research analyst
specialising in the Branded Consumer Goods sector. Mr Dossin spent twelve years at Goldman Sachs,
London, where he was in charge of the Branded Consumer Goods industries and was the co-ordinator for
the industry on a worldwide basis and was consistently ranked among the top three analysts globally
according to leading independent surveys. Prior to Goldman Sachs, Mr Dossin was Head of French Equity
Research at Credit Suisse First Boston for five years and prior to that he was Head of Consumer Goods
Research at Société Générale-Delahaye for six years. Following his time at Goldman Sachs, Mr Dossin
launched Dossin Advisory, a Mergers & Acquisitions consultancy specialising in the branded consumer
goods sector. Mr Dossin is also a non-executive director of Camkids Group plc.
Mr Dossin is the chairman of the Group’s Audit Committee and a member of the Remuneration and
Nomination Committee and the AIM Rules Compliance Committee.
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230260 Alpha pp020-pp045 05/12/2013 14:33 Page 41
Duncan Lewis (aged 62), Non-Executive Director
Mr Lewis has over 35 years’ work experience in the telecommunications, media and technology industries,
through management roles within both publicly quoted and private companies. Mr Lewis is currently nonexecutive chairman of a number of private technology and telecommunication companies. Mr Lewis is an
independent director of Spirent Communications plc and was previously the chief executive officer of Vislink
plc. He has been senior TMT advisor to The Carlyle Group and was chairman and director of various
companies including Jacobs Rimell, MessageLabs Limited and Sinotel Limited (a Chinese
telecommunications Joint Venture start-up). Mr Lewis was also a non-executive director of Viridian plc. He
was an independent director of CompleTel NV and an advisor to Fujitsu. He sat on the board of NTL prior
to its merger with Telewest. Mr Lewis has also held executive positions at BT plc, Cable & Wireless plc,
Equant NV and GTS Limited.
Mr Lewis is the chairman of the Group’s AIM Rule Compliance Committee and a member of the Audit
Committee and the Remuneration and Nominations Committee.
Management team
Cai Peixuan (aged 29), Deputy Chief Executive Officer
Mr Cai is responsible for assisting the CEO in the development and management of the various business
channels of the Group. He joined the Group in 2009. Mr Cai Peixuan is the son of Mr Cai Yongde.
Zhong Tianbao (aged 44), Chief Technology Officer
Mr Zhong is responsible for the Group’s technology development and management. He has more than ten
years’ experience working in the Internet Industry. Mr Zhong graduated from the National Defence University
of Taiwan. Between 1991 and 2004, he worked for various IT companies in Taiwan including Baisheng
Computer Technology Holdings, Taipei City Zhen Han Information Holdings, Taipei City Yangming Information
Holdings, Taiwan Institute of Semantic Analysis Group and later in Hong Kong at the Hong Kong Flexible
Science and Technology Limited as a senior technical manager. In 2004, he joined the Group as CTO.
Du Bingwu (aged 31), Chief Marketing Officer
Mr Du has seven years’ experience working in the Internet industry. He is responsible for the Group’s market
development and management. Mr Du graduated with a Major in Computer Application and Maintenance
at Pingdingshan Institute of Technology. During the period 2004-2008, he worked in Global Market Group
(Asia) Ltd.and Shenzhen City Internet Era Network Co., Ltd. as a Marketing Manager. Mr Du is also the
Deputy Secretary-General for the Shenzhen Electronic Commerce Association. He joined the Group in 2009.
15. Corporate Governance
The Directors recognise the importance of sound corporate governance and intend that the Group will
comply with the provisions of the UK Corporate Governance Code insofar as they are appropriate, given
the Group’s size, stage of development and resources.
The Board comprises 3 executive Directors and 3 non-executive Directors. All of the non-executive Directors
are considered to be “independent” under the criteria identified by the Quoted Companies Alliance in their
publication entitled “Corporate Governance for AIM Companies”. The Board is responsible for formulating,
reviewing and approving the Group’s strategy, budgets and corporate actions. Following Admission, the
Company intends to hold Board meetings on a monthly basis and at other times as and when required.
The Company has established and properly constituted an Audit Committee, a Remuneration and
Nomination Committee and an AIM Rules Compliance Committee of the Board with formally delegated
duties and responsibilities.
The Audit Committee has primary responsibility for monitoring the quality of internal financial controls and
ensuring that the financial performance of the Group is properly measured and reported upon. It will receive
and review reports from the Group’s management and auditors relating to the interim and annual accounts
and the accounting and internal control systems in use throughout the Group. The Audit Committee will
meet not less than twice in each financial year and will have unrestricted access to the Group’s auditors.
Members of the Audit Committee are Mr Mircle Yap, Mr Jacques-Franck Dossin and Mr Duncan Lewis.
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230260 Alpha pp020-pp045 05/12/2013 14:33 Page 42
The Remuneration and Nomination Committee will review the performance of the executive directors and
certain employees and make recommendations to the Board on matters relating to their remuneration and
terms of employment. The Remuneration and Nomination Committee will also make recommendations to
the Board on proposals for the granting of share options and other equity incentives pursuant to any share
option scheme or equity incentive scheme in operation from time to time. Further, the committee will lead
the process for considering future appointments to the Board and make recommendations to the Board of
candidates for appointment and annual election. The Remuneration and Nomination Committee will meet
at least twice in each financial year and at such other times as the chairman of the committee shall require.
In exercising this role, the Directors shall consider the recommendations put forward in the UK Corporate
Governance Code. Members of the Remuneration and Nomination Committee are Mr Mircle Yap,
Mr Jacques-Franck Dossin and Mr Duncan Lewis.
The AIM Rules Compliance Committee will, following Admission, ensure that procedures, resources and
controls are in place to ensure AIM Rules compliance by the Company is operating effectively at all times
and that the executive directors are communicating as necessary with the Company’s Nominated Adviser
regarding ongoing compliance with the AIM Rules and in relation to all announcements and notifications
and proposed or potential transactions. Members of the AIM Rules Compliance Committee are Mr Mircle
Yap, Mr Jacques-Franck Dossin and Mr Duncan Lewis.
The Company complies with the corporate governance regime in Jersey.
16. Working Capital
The Directors are of the opinion that, having made due and careful enquiry, the working capital available to
the Company and the Group is sufficient for its present requirements that is for at least 12 months from the
date of Admission.
17. Relationship Agreement
The Company, Argento, Cairn, the Principal Shareholders, Mr Cai Yongde, Mr Chen Daocai, Mr Cai Peixuan
and Ms Wang Xiufang entered into a Relationship Agreement on 9 December 2013 to regulate aspects of
the continuing relationship between the Company and the Principal Shareholders, to ensure that the
Company is capable at all times of carrying on its business independently of the Principal Shareholders and
that future transactions between the Company and the Principal Shareholders are on arm’s length terms
and on a normal commercial basis.
Further details on the Relationship Agreement are set out in paragraph 10.9 of Part 7 of this Admission
Document.
18. Insurance
Except for social insurance for its employees, which is mandatory in China, the Group does not purchase
any type of asset insurance, liability insurance, nor business interruption insurance. The Directors believe
that the cost of replacing servers, computer equipment or other office equipment in the event of an adverse
event can be borne by the Group from its existing cash balances.
The Directors believe the Group’s insurance coverage to be in line with similar businesses in China. However,
significant uninsured damage to any of its facilities, or other assets, whether as a result of fire, or any other
causes, could have a material adverse effect on the Group’s results.
19. Share Option Scheme
The Directors consider that share options will be an important part of the Company's remuneration and
incentive policy for senior management and Directors. Accordingly, the Company has adopted the Share
Option Scheme, the purpose of which is to align the interests of employees with shareholding of the
Company, improve employee retention and provide an additional focus for management on key measures
of the long term business performance of the Company. Further details on the Share Option Scheme are
set out in paragraph 12 of Part 7 of this Admission Document. The Directors will not grant Options totalling,
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230260 Alpha pp020-pp045 05/12/2013 14:33 Page 43
in aggregate, more than 10 per cent. of the Company's then issued share capital from time to time. As at
the date of this document no share options have been granted under the Share Option Scheme.
20. Founders’ Share-based Payment Scheme
The Founders, Mr Cai and Mr Chen, through the holding company Champ Public Limited, established the
Founders’ Share-based Payment Scheme, the purpose of which is to incentivise and reward employees.
Under this scheme, Champ Public Limited will make discretionary transfers of Ordinary Shares held by it
(up to a maximum of 2 per cent. of the Enlarged Share Capital) to certain employees with at least 12 months’
service following Admission who meet certain performance criteria set by the Directors.
Further details on the Founders’ Share-based Payment Scheme are set out in paragraph 13 of Part 7 of
this Admission Document.
21. Warrants
The Company has issued or has committed to issue the Warrants. A total of 5,684,994 Ordinary Shares are
issuable under the Warrants issued and issuable immediately upon Admission.
Further details of the Warrants are set out in paragraph 10.4 of Part 7 of this document.
22. Share Dealing Code
The Directors will comply with Rule 21 of the AIM Rules for Companies relating to directors’ and applicable
employees’ dealings in the securities of an AIM company. The Company has adopted a share dealing code
for directors of the Company and employees of the Group who are likely to be in possession of unpublished,
price sensitive information relating to the Group or the Ordinary Shares, in line with the code for dealings by
directors and certain employees of a company listed on the Official List in shares of that company, as
prescribed by the listing rules of the UK Listing Authority, and will take proper steps to ensure compliance
by the Board and relevant employees. The share dealing code restricts the ability of the Directors and
applicable employees from dealing in Ordinary Shares at certain times.
23. Placing
Argento has, pursuant to the Placing and as agent for the Company, conditionally placed 9,549,991 Placing
Shares at the Placing Price, representing approximately 4.93 per cent. of the Enlarged Share Capital. The
Placing is conditional upon, inter alia, Admission taking place by 8.00 a.m. on 9 December 2013 (or such
later date, being not later than 5.00 p.m. on 15 January 2014, as the Company, Argento and Cairn may
agree). The Placing has not been underwritten. The Placing Shares issued pursuant to the Placing will rank
pari passu in all respects with the Existing Shares.
The Placing will raise £6,684,994 before expenses. On Admission and at the Placing Price, the Company
will have a market capitalisation of approximately £135.5 million.
Following Admission, the Directors and Ms Wang Xiufang will hold or otherwise be interested in 134,835,200
issued Ordinary Shares, representing approximately 69.66 per cent. of the undiluted Enlarged Share Capital.
The Placing Agreement contains provisions entitling Argento and Cairn to terminate the Placing at any time
prior to Admission in certain circumstances.
Further details of the Placing Agreement are set out in paragraph 10.1 of Part 7 of this document.
24. Lock-in and Orderly Market Agreements
Lock-in Agreements
The Locked-in parties will on Admission hold 153,051,200 Ordinary Shares, approximately 79.0 per cent.
of the Enlarged Share Capital.
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Each of the Locked-in Parties has agreed with the Company, Cairn and Argento not to dispose of any
Ordinary Shares held by them for a period of 12 months following the date of Admission and in the following
12 months period not to dispose of their Ordinary Shares without the prior written consent of Cairn and
Argento, save in certain limited circumstances.
Orderly Market Agreements
The Orderly Market Parties will on Admission hold 30,948,800 Ordinary Shares, approximately 16.0 per
cent. of the Enlarged Share Capital.
Each of the Orderly Market Parties has agreed with the Company, Cairn and Argento not to dispose of any
Ordinary Shares held by them for a period of 12 months following the date of Admission without the prior
written consent of Cairn and Argento, save in certain limited circumstances.
In the following 6 months period each of the Orderly Market Parties has agreed not to dispose of their
Ordinary Shares without the prior written consent of Cairn and Argento, such consent not to be unreasonably
withheld or delayed.
Further details of the Lock-in and Orderly Market Agreements are set out in paragraph 10.10 of Part 7 of
this document.
25. The City Code on Takeovers and Mergers
Prior to 30 September 2013, the Takeover Code only applied to a company whose shares are admitted to
trading on AIM if that company’s registered office is in the United Kingdom, the Channel Islands or the Isle
of Man and additionally if the Panel considers that company to have its place of central management and
control in one of these jurisdictions (the “Residency Test”).
However, pursuant to a response statement of the Panel published on 15 May 2013, the Residency Test
has been removed from the Takeover Code in respect of companies listed on AIM, and accordingly the
Takeover Code will apply to the Company in its entirety.
26. Admission, Settlement and Dealings
The Placing is subject to the satisfaction of certain conditions in the Placing Agreement including Admission
occurring by 8.00 a.m. on 9 December 2013 or such later time and/or date as Argento and Cairn may
agree, being not later than 5.00 p.m. on 15 January 2014.
Application has been made to the London Stock Exchange for the Enlarged Share Capital to be admitted
to trading on AIM. It is expected that Admission will become effective and that dealings in the Ordinary
Shares will commence on 9 December 2013.
All the Ordinary Shares will be in registered form.
Trades of shares on AIM are conventionally made through the CREST system, a paperless settlement
procedure enabling securities to be evidenced otherwise than by a certificate and transferred electronically
in accordance with the CREST Regulations. Securities issued by Jersey registered companies, such as the
Company, can be held or transferred directly in the CREST system. Accordingly, following Admission,
Settlement of transactions in the Ordinary Shares may take place within the CREST System if a shareholder
so wishes. CREST is a voluntary system and Shareholders who wish to receive and retain Share Certificates
are able to do so.
CREST accounts will be credited with Placing Shares in uncertified form on 9 December 2013 and, where
appropriate, share certificates in respect of Placing Shares in certified form will be despatched by post no
later than 9 December 2013. Temporary documents of title will not be issued. Pending the despatch by the
Company’s registrars of definitive share certificates, transfers will be certified against the register held by the
Company’s registrars.
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27. Taxation
The attention of investors is drawn to the information regarding taxation in relation to the Placing and
Admission, which is set out in paragraph 23 of Part 7 of this document. These details are intended, however,
only as a general guide to the current tax position under UK and Jersey taxation law. Shareholders who are
in any doubt as to their tax position or who are subject to tax in a jurisdiction other than the UK and Jersey
are strongly advised to consult their professional advisers.
28. Shareholder Notification and Disclosure Requirements
Following Admission, the Company will be required to comply with Rule 17 of the AIM Rules for Companies.
Jersey Law does not require directors of a Jersey company to disclose to the company their beneficial
ownership of any shares in the company (although they must disclose to the company the nature and extent
of any direct or indirect interest which conflicts with, or may conflict with, a transaction into which the
company or any of its subsidiaries has entered or is proposing to enter). Similarly, Jersey Law does not grant
the directors of a Jersey company a statutory power to request information concerning the beneficial
ownership of shares. However, provisions equivalent to the powers conferred by section 793 of the Act and
the Disclosure and Transparency Rules have been incorporated in the Articles, so as to enable the Directors
to request information in order to comply with their obligations under the AIM Rules for Companies, which
require directors and other persons discharging managerial responsibilities to disclose certain transactions
involving shares, as well as requiring substantial shareholders to disclose to the company their beneficial
ownership of shares in the company.
Further details of these notification and disclosure requirements are summarised in paragraphs 8.21 and
14.1 of Part 7 of this Admission Document. Shareholders should consider their notification and disclosure
obligations carefully as a failure to make a disclosure to the Company may result in disenfranchisement.
29. Bribery Policy
The Board has adopted an anti-bribery and corruption statement which is a high level statement by the
Board committing the Company to carrying out its business fairly, openly and honestly and to preventing
bribery and corruption by persons associated with the Group. The Board has also adopted an anti-bribery
and corruption procedure in order to implement this commitment. It is based on industry best practice
principles, and all employees of the Group are required to comply with the procedure. To this end the
employees of the Group will be trained on the impact of the relevant legislation (so far as it applies to the
Group) and procedures will be put in place to allow for reporting and communication by the employees and
Board of any matters which may or may not be relevant in ensuring that the daily operations are maintained
in light of such policy.
30. Further Information
Your attention is drawn to the further information set out in Parts 2 to 7 of this document, in particular Part 2,
which is titled “Risk Factors”.
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PART 2
RISK FACTORS
The attention of prospective investors is drawn to the fact that ownership of Ordinary Shares in
JQW plc will involve a variety of risks which, if they occur, may have a materially adverse effect
on the Group and the market price of the Ordinary Shares could decline and an investor might
lose all or part of his or her investment.
In addition to the information set out elsewhere in this document, the following risk factors should
be considered carefully in evaluating whether to make an investment in the Company. The
following factors do not purport to be an exhaustive list or explanation of all the risk factors
involved in investing in the Company and they are not set out in any order of priority. In particular,
the Company’s performance might be affected by changes in market and/or economic conditions
and/or in legal, regulatory and tax requirements.
If any of the circumstances identified below were to materialise, the Group’s business, financial
condition and results of operations could be materially and adversely affected. In such
circumstances, the market price of the Ordinary Shares in the Company could decline and
investors may lose all or part of their investment. Additionally, there may be risks and
uncertainties of which the Board are not aware or believe to be immaterial which may, in the
future, adversely affect the Group’s business and the market price of the Ordinary Shares in the
Company.
An investment in the Company may not be suitable for all recipients of this document. An
investment in the Company involves a higher than normal degree of risk. Potential investors are,
accordingly, strongly recommended to consult an independent financial adviser authorised
pursuant to FSMA who specialises in advising on the acquisition of shares and other securities
before making a decision to proceed with an investment in the Company.
RISKS RELATING TO THE GROUP’S BUSINESS, OPERATION AND INDUSTRY
Economic Conditions
Changes in economic conditions in China (for example in relation to interest rates, inflation, rates of tax,
industry conditions, regulatory protection, competition, social, political and diplomatic events and other
factors) or other adverse economic conditions in China could substantially and adversely affect the
Company’s prospects and returns.
GDP growth in China has been slowing down in the last few years and is expected by many economists to
remain more subdued. This might lead customers not to renew their service packages or to downgrade
their subscriptions to a lower priced service package for a number of reasons, including the cessation of
their business, a change in their business focus or marketing personnel or reduction of marketing budgets.
Expansion within China
The Group’s operations are currently essentially focussed on China’s South-East provinces. In particular,
the Group is heavily geared towards the Fujian province, with 18 of its current 30 sales agencies operating
in the Fujian province. This amounts to some element of concentration of risks on China’s South-East
provinces, and on the Fujian province in particular.
The directors believe that enlarging the Group’s geographical presence within China represents a large
potential for growth. There is however a risk that the Group’s potentially lower brand awareness could affect
its success in newly-targeted provinces.
Expansion into overseas/new markets
Currently, the Group’s future growth is dependent on the Chinese market, but the Group may look to
generate new business in additional geographical markets in due course. Whilst the Directors believe that
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geographical expansion will prove rewarding, there is no guarantee that the Group will be able to generate
the required level of sales or profitability if the costs of entry into and operating in these new geographical
areas prove to be higher than expected. Other anticipated barriers to entry include language and the legal
and regulatory regimes of the geography concerned. There is also no guarantee that expansion into
additional geographical markets will not cause disruption and harm to the Group’s existing business.
Uninsured risks
Some forms of insurance protection used in western countries may be unavailable in the PRC. Furthermore,
projects in which the Group may invest may become subject to liability for hazards that cannot be insured
against or against which the Group may elect not to become so insured because of high premium costs.
The Group may incur a liability to third parties (in excess of any insurance cover) arising from product liability
or other damage or injury.
The Group has no keyman insurance in place at the date of this Admission Document.
The Group does not have the insurance coverage that is customary in more economically developed
countries for a business of the Group’s size. Insurance companies in the PRC do not normally offer as
extensive insurance protection for businesses as insurance companies in more developed economies. A
lack of insurance coverage may expose the Group to substantial financial risks for the realisation of which
the Group may not be adequately compensated. The Group does not maintain separate funds or otherwise
set aside reserves for the realisation of risks for which it does not maintain insurance coverage. Any uninsured
occurrence of loss or damage or litigation may result in the Group incurring substantial costs and the
diversion of resources, which could have a material adverse effect on the Group’s business, financial
performance and results of operations.
Material litigation, claim or arbitration or legal uncertainties
The Group is not engaged in any material litigation, claim and arbitration, either as plaintiff or defendant,
which has a material effect on its financial position, and the Directors do not know of any proceedings
pending or threatened or of any facts likely to give rise to any proceedings which might materially and
adversely affect the Group’s position or business.
However, there can be no assurance that there would be no proceedings in the future that could adversely
affect the position, financial performance, prospects or business of the Group.
Trading Performance
The Group has experienced significant growth in revenue and gross profit in the past three years. There is
no assurance that the Group will be able to maintain its revenue growth or gross profit margins at historical
levels, or at all. Moreover, the Group’s operating results may fluctuate significantly as a result of, besides
sales and gross margins discussed above, numerous factors, many of which are outside of its control. These
factors include, among others:
●
the Group’s ability to attract new customers, retain existing customers and replace customers who do
not renew their membership;
●
the Group’s ability to maintain its existing base of registered buyers and attract new buyers to its
marketplaces;
●
the success of the Group’s marketing and brand building efforts;
●
the Group’s ability to develop service enhancements at a reasonable cost and in a timely manner;
●
continued acceptance of the Internet as a medium for commerce and communication in the face of
increasing publicity on fraud, identity and data theft, viruses and other risks of conducting business
activities over the Internet;
●
the maintenance of an appropriate Internet infrastructure worldwide and especially in China that
includes a network backbone with the necessary speed, data capacity and security, as well as the
timely development of complementary products, for providing reliable Internet access and services;
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●
the amount and timing of capital and other expenditures relating to the maintenance and expansion of
the Group’s businesses, operations and infrastructure; and
●
general economic conditions in China and elsewhere in the world as well as those economic conditions
specific to the Internet, B2B e-commerce and China’s export industries.
These factors may also cause operating results to fluctuate significantly, which may result in substantial
volatility in the trading price of the Ordinary Shares. Furthermore, many of these and other conditions are
beyond the Group’s control, making operating results difficult to predict. The Group also operates in a rapidly
changing and evolving industry, and, as a result, investors should not rely on historical operating results as
an indication of future performance.
Web site traffic and revenues generated by a website are not necessarily tightly correlated. Although the
Group has been ranked second in China in term of web traffic in the B2B sector by iwebchoice (which
utilises data from Alexa), it only ranked number 13 with regards to revenue for 2011, according to
Euromonitor.
Separately, as described above, customers’ renewal rates will influence the Group’s future business. The
renewal rate achieved by the Group, though quite high in absolute terms in the Directors’ opinion, has
gradually declined: from 91 per cent. to 90 per cent. and 78 per cent. in financial years 2010, 2011 and
2012 respectively. A prolonged or marked decline would affect the Group’s future performance. Arguably,
the renewal rate rebounded to 83 per cent. in the first half of 2013.
Corporate Structure and Restrictions
Substantial uncertainties and restrictions exist with respect to the interpretation and application of PRC laws
and regulations relating to online commerce and the distribution of Internet content in China. If the PRC
government finds that the structure adopted by the Group for its business operations does not comply with
PRC laws and regulations, the Group could be subject to severe penalties, including the shutting down of
www.jqw.com. The Group is also at risk that future changes in such regulation might translate into high
required investments by the Group to comply to new rules; or even in substantial difficulties or incapacity to
comply.
The Group relies on Contractual Arrangements with its consolidated affiliated entity and its shareholders for
the operation of its business, which may not be as effective as direct ownership. If the Group’s consolidated
affiliated entity and its shareholders fail to perform their obligations under these Contractual Arrangements,
the Group may have to resort to arbitration or litigation to enforce its rights, which may be time-consuming,
unpredictable, expensive and damaging to our operations and reputation.
The shareholders of the Group’s consolidated affiliated entity have potential conflicts of interest which may
adversely affect the Group’s business.
The Group may lose the ability to use and enjoy assets held by its consolidated affiliated entity that are
important to the operation of the Group’s business if such entity goes bankrupt or becomes subject to a
dissolution or liquidation proceeding.
The Group may have difficulties to repatriate and use the revenue and cash flow generated by its
consolidated affiliated entity.
The Group’s Contractual Arrangements with its consolidated affiliated entity may result in adverse tax
consequences to the Group.
PRC laws, rules and regulations are relatively new and may be subject to change, and their official
interpretation and enforcement, which may be applied retroactively, involve substantial uncertainty. If the
Group’s consolidated affiliated entity fails to obtain and maintain or is deemed to have failed to obtain and
maintain the requisite assets, licences and approvals required under PRC law, the Group’s business, financial
condition and results of operations may be materially and adversely affected.
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Regulatory environment
The B2B e-commerce sector is fairly concentrated in China, in particular given the barriers to entry created
by the regulatory constraints. In particular, international industry participants have been largely prevented to
operate into China. There is a possibility that the Chinese government may gradually relax such regulatory
constraints, which might translate into a strong increase in competition from local as well as international
players.
This is particularly more relevant as the Group has been able to generate high margins, as evidenced by its
2012 and first half 2013 accounts. Such levels of margin would normally translate into a sharp increase in
competition as new entrants would try to take a share of such a lucrative market. The Company has so far
been protected by strict regulations, making it difficult for new comers to enter this market. A possible
relaxation of rules could therefore potentially be a very clear risk to the Group.
Internet Content Provider Licence
The Group’s provides value added telecommunication services, accordingly under PRC law the Group is
required to obtain a licence under the PRC telecommunications Regulation. An ICP licence permits a Chinese
telecommunication provider to provide value-added telecommunications service and charge a fee for such
service provided. An ICP licence to provide value added telecommunication services was granted to
Shenzhen JQW on 9 March 2010, the licence was granted for a period of 5 years and therefore will be
required to be renewed by 9 March 2015. If the licence is unable to be renewed this would have a material
adverse impact on the Group’s ability to continue trading.
Technology
The Group’s IT systems depend on each other and failure to maintain the satisfactory performance, security
and integrity of its website and systems may materially and adversely affect the Group’s business, reputation,
financial condition and results of operations. The Group is therefore reliant on numerous IT systems to
manage the entire process from building the customer’s websites, search engine algorithm, bidding
procedures and the various services available through the Sheng-Yi-Tong membership packages.
The different user interfaces are dependent on each other to be able to complete their processes. Therefore,
a failure of any of the core IT systems may result in failures of other IT systems as well, which in turn could
result in interruption to the efficient operation of the website.
The Group relies to a significant degree on the efficient and uninterrupted operation of both its own servers
and software and that of third parties, including the Internet. Customer access to the website and the speed
with which customers and potential buyers navigate and interact on the website affects the sales of the
Group and the attractiveness of its services. Any failure of the Internet generally or any failure of current or
new computer and communication systems could impair the success of the Group’s B2B platform, the
processing and storage of data and the day-to-day management of the Group’s business.
It is also important for the Group to successfully adopt new technologies or adapt its website and systems
to changing customer requirements or emerging industry standards to ensure that the Group continues to
grow and to meet market demands.
The Group is currently not being involved in carrying-out transactions or processing payments for its
customers. Payment portals are being developed in China. It appears that a number of payment portals
such as Tenpay, 99Bill and Chinapnr are accelerating their development and embracing new online payment
technology. It could therefore seem important that the Group be able to directly or indirectly provide such
service in the future. Inability to do so would lead to a risk of losing market share to players offering a broader
range of service, in particular payment related services.
Operating risks
The Group’s revenue is dependent on the continued operation of the Group’s servers which are located in
Xiamen, Fujian Province within a data centre operated by Xiamen Wufeng Trading Co., Limited a distributor
of China Telecommunications Corporation. The Group’s servers are subject to risks beyond the Company’s
control including, amongst others, the breakdown, failure or sub-standard performance of the equipment,
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as well as physical risks for example but not limited to fire, water damage, or theft. Frequent or prolonged
occurrence of any of the previously mentioned factors may have material and/or adverse effect on the
Group’s financial performance and brand reputation as the Group’s business depend greatly on the
continuous running of the Group’s servers.
The Group’s business and results of operations may be materially and adversely affected if the Group is
unable to provide high quality customer service.
Any harm to the JQW brand or failure to maintain the Group’s reputation may materially and adversely affect
its business and growth prospects.
If the Group is unable to manage its growth or execute its strategies effectively, the Group’s business and
prospects may be materially and adversely affected.
To a certain extent, the Group is reliant on various third parties for the continued operation of its business.
This will include Xiamen 35.com and Xiamen Wufeng. The withdrawal of any one of these services or
licences, or the poor execution thereof, would have a detrimental effect on the Group’s prospects although
the Directors believe that alternative third party providers can be sourced. The Group is also reliant on thirdparty sales agencies (30 currently), who accounted for some 60 per cent. of sales in 2012.
The Group also plans to reduce the level of commission granted to new “quasi-franchise” sales agencies in
the future (arguably in return for the Group financing equipment and leasehold improvement on behalf of
the sales agencies). There is a risk that these new potential sales agencies may instead turn to the
competition in search for higher margins.
The Group’s future performance will also depend on its ability to increase its number of sales agencies.
Historically, the Group worked with already established sales agencies, including some who previously
worked for the Group’s competitors. Management have a strategic plan to provide financing incentives to
help individuals, including current employees, to set up sales agencies in geographic areas not yet covered
by the existing sales agencies. There is therefore a risk that sales which will be generated by newlyestablished sales agencies could be less than the historical average sales per sales agency.
The Group largely relies on its sales agencies as far as the relationship with its end customers lie. A bad or
deficient service by sales agencies could therefore affect the Group’s brand image and reception by its
customers, and affect its future prospects.
The Group has been able to register a strong increase in its average package price lately, largely as a result
of consumers shifting to more expensive service packages. This might be a reflection of customers feeling
the need to upgrade their service package in order to obtain the level of service which they require. Price
elasticity has not been measured, and there is a risk that customers might eventually be deterred by the
price of the packages needed to obtain the required services, which would affect the Group’s future
performance.
The Group maintains rather substantial cash balance with banks. Any deterioration in the solvency of such
banks would therefore translate into a risk for the Group.
The Group is contemplating getting gradually involved in the provision of financial assistance to its customers.
If that were to materialise, it seems that the Group would be required to deposit RMB 100 million with a
Bank (e.g. Central Bank of China), in order to provide liquidity to enable the Bank to lend (to the Group’s
customers) loans of up to 2.5 times the deposit amount. These customers would be responsible for servicing
the loan and in providing the required loan security. Management would introduce a possible 1 per cent.
commission charge to those customers who take advantage of this financial assistance facility. Management
could potentially contemplate increasing the deposit to RMB 200 million by July 2015. It therefore seems
that such financial assistance facility could absorb a significant portion of the Group’s assets, whilst
commanding a meaningfully lower return on capital than currently derived from the Group’s core operations.
Security
The Group cannot guarantee absolute protection against unauthorised attempts to access its IT systems,
including malicious third party applications that may interfere with or exploit security flaws in its products
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and services. Viruses, worms and other malicious software programs could jeopardise the security of
information stored in a user’s computer or in the Group’s computer systems or attempt to change the Internet
experience of registered users by interfering with the Group’s ability to connect with its registered users. If
any compromise in the Group’s security measures were to occur and the Group’s efforts to combat this
breach are unsuccessful, the Group’s reputation may be harmed leading to an adverse effect on the Group’s
financial condition and future prospects. In addition, even without actual security breaches, the perceived
risks, or threat of such risks, might deter customers from conducting or renewing its business with the
Group.
The Group also processes personal data (some of which may be sensitive) as part of its business. There is
a risk that such data could become public if there were a security breach in respect of such data and, if one
were to occur, the Group could face liability under data protection laws and lose the goodwill of its customers,
which may have an adverse effect on the Group’s financial condition and future prospects.
Data recovery
While the Group has disaster recovery and business continuity contingency plans, no assurance can be
given that, if a serious disaster affecting the business, systems or operations occurred such plans would be
sufficient to enable the Group to recommence trading without loss of business.
Furthermore, the Group has, from time to time, experienced operational “bugs’’ in its systems and
technologies which have resulted in errors. The Group expects operational bugs to continue to occur from
time to time due to a combination of one or more of the following: electro-mechanical equipment failures,
computer server or system failures, network outages, software performance problems or power failures.
The efficient operation of the Group’s business systems and IT is critical to attracting and retaining customers.
If the Group is unable to meet customer demand or service expectations due to one or more of the
aforementioned issues arising, a deterioration in the Group’s financial condition and future prospects may
occur.
Management and employees
The Group’s development and prospects are dependent upon the continued services and performance of
its Directors, senior management and other key personnel. The loss of the services of any of the Directors,
senior management or key personnel or a substantial number of experienced employees or key consultants,
could cause disruption or the loss of experience, skills or customer relationships of such personnel, which
could have a material adverse effect on the Group’s business, financial condition and results of operations.
The Cai family holds significant managerial positions in the Group, at different levels within the Group. Mr Cai
Yongde is a significant shareholder of Shenzhen JQW. He is also the supervisor for Shenzhen JQW and the
legal representative of Jiangsu JQW, Yangzhou Junde and Shishi JQW. He is also the chairman of the Board
of Directors for Jiangsu JQW. Mr Cai Peixuan, a son of Mr Cai Yongde, is one of the initial shareholders of
Shishi JQW, and the current deputy chief executive officer of the Group.
Mr Chen Daocai is the legal representative of Shenzhen JQW and is also the chief executive officer of the
Group.
Several key shareholders or managers within the Group have provided some form of guarantees to cover
certain events which could adversely impact the Group. In such event, the ability of the Group to be
indemnified would depend, among other things, on the financial status of such key shareholders or managers
at that time.
Ability to recruit and retain skilled personnel
The Group believes that it has the appropriate incentive structures to attract and retain the calibre of
employees necessary to ensure the efficient management and development of the Group. However, any
difficulties encountered in hiring appropriate employees and the failure to do so may have a detrimental
effect upon the trading performance of the Group. The ability to attract new employees with the appropriate
expertise and skills cannot be guaranteed.
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Confidentiality
The Group takes precautionary measures to protect its proprietary rights and information, including the use
of confidentiality agreements with its employees and consultants, and with its academic and commercial
relationships. There is no guarantee that agreements will not be violated or that there will be an adequate
remedy available for a violation of an agreement.
Competition
There are a number of well-established and substantial companies engaged in the SME B2B e-commerce
business. Many of these companies are more experienced than the Group and represent significant
competition for the Group’s products and services. The success of the Group’s competitors in the future in
the sector in which the Group operates could have a materially adverse impact on the Group’s business, for
example through the Group losing market shares to its competitors.
Some B2C sites are starting to enter the B2B market. This could lead to a potentially significant increase in
competition for the Group.
Intellectual property
The Group regards the “JQW,” “JQW.com” and “金泉网” (“JQW” in Chinese) brand names as critical to its
success. The Group relies on a combination of trademarks, service marks and domain name registrations,
common law copyright protection and contractual restrictions to establish and protect their intellectual
property. Any third party may challenge the Group’s intellectual property. The Group may incur substantial
costs in defending any claims relating to its intellectual property rights.
The Group has registered five trademarks in China with a further ten trademarks under application. However,
the application for trademark registration of the “金泉网” logo in China has been rejected under two classes,
38 and 42. This is due to a prior similar trademark registration by a third party and what the relevant PRC
authorities deemed to be potentially confusing to consumers, as two of the JQW Chinese characters are
similar to what have been registered. The Group has appealed against the rejections but the Company
cannot guarantee the appeal will be approved on a timely basis, if at all. If the Group were unable to obtain
registrations for these trademarks, or were unable to adequately protect these brand names using other
available means, in particular, if any third party successfully applies for or registers the trademark “金泉网”
logo in China, the value built in such brand names could be harmed or lost. In such instance the Group
would adopt certain other Chinese characters for its logo in China which would be very similar in nature and
in sound, but which would nonetheless incur costs in alteration of branding. However, the Directors believe
that this will not impact on the “JQW” brand itself.
The Group holds 11 registered copyrights in respect of software that it has developed. There can be no
guarantee that third parties have not and/or will not manage to independently develop software with the
same functionality as the Group’s products without infringing the Group’s intellectual property rights, and
there can be no guarantee that any such competing software would not have a material adverse effect on
the position, financial performance, prospects or business of the Group. Whilst it is impossible for the
Directors to be aware of all third party intellectual property, they are of the opinion on the date of this
Admission Document that the Group’s products and services do not infringe the intellectual property rights
of any third party. Third parties may potentially bring claims against the Group purporting that the Group
and/or the products or services it delivers to customers infringe intellectual property rights belonging to
those third parties. Any such claims, with or without merit, could be time consuming and expensive to defend
or settle and could divert management resources and information.
The Group may also not be able to prevent others from unauthorised use of its intellectual property, which
could harm the Group’s business and competitive position both before and after the final approval by the
China authority is received.
The Directors are currently unaware of any such unauthorised use.
Further details on the intellectual property held by the Group appear at paragraph 19 of Part 7 of this
document.
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Establishment of collaborative relationships and strategic partnerships
The Group has built a network of 30 sales agencies to market and sell the Group’s Sheng-Yi-Tong
membership packages. The Group intends to build up the number of sales agencies but there are no
assurance from the Group that it will be able to do this and also to retain the current sales agencies.
The Group has also built up relationships and strategic partnerships with various online media websites,
trade magazines and advertisers to market its services and to attract customers to its B2B platform. This
has proven to be a successful method for increasing the number of customers. Going forward, there is no
guarantee that these relationships will continue.
Aside from these, the Group also has relationships with suppliers and sub-contractors where by the Group
enters into a yearly agreement with. These agreements are settled either up front or at on a monthly basis.
There is a risk that these agreements will not be renewed or the agreements are not entered into properly.
Thus, it could be difficult to enforce the contractual rights and to resolve any potential disputes. The Group
also faces the risk that these agreements might not be performed in an effective way.
Availability of future financing
The Group may require additional capital in the future for expansion, activities and/or business development,
whether from equity or debt sources. There can be no guarantee that the necessary funds will be available
on a timely basis, on favourable terms, or at all, or that such funds if raised, would be sufficient. If additional
funds are raised by issuing equity securities, dilution to the then existing shareholdings may result. The level
and timing of future expenditure will depend on a number of factors, many of which are outside the Group’s
control. If the Group is not able to obtain additional capital on acceptable terms, or at all, it may be forced
to curtail or abandon such expansion, activities and/or business development which could adversely impact
upon the Group, its business, development, financial condition, operating results or prospects.
Contractual Arrangements risk
On 25 September 2000, the PRC State Council promulgated the “PRC Telecommunications Regulation.”
The regulation classified all telecommunication services into either basic telecommunication service or
valued-added telecommunication service and provided broad guidelines about various facets of Chinese
telecommunication service industry. According to the PRC Telecommunications Regulation, any Chinese
telecommunication services provider must obtain a license from the MIIT or an equivalent provincial
department. The “Catalog of Telecommunications Business”, an attachment to the Telecom Regulations
and updated by the MIIT’s Notice on Adjusting the Catalog of Telecommunications Business effective from
1 April 2003, categorises various types of telecommunications and telecommunications-related activities
into basic or value-added telecommunications services, according to which, Internet information services,
or ICP services, are classified as value-added telecommunications businesses.
The business operated by Shenzhen JQW requires an ICP Licence. Shenzhen JQW currently holds an ICP
Licence issued by Guangdong Province Communications Management Bureau on 9 March 2010, which is
valid from 9 March 2010 to 9 March 2015.
Due to the foreign ownership restrictions on Internet-based businesses, the Group has put in place
Contractual Arrangements which make it possible for the Group to conduct its business through the ICP
Licence holder Shenzhen JQW. The Company has been advised by its PRC counsel, Trend Associates,
that the Contractual Arrangements are in compliance with applicable PRC laws and regulations that are
currently in effect.
Shenzhen JQW has signed separate contracts with both Shishi JQW and Jiangsu JQW such that Shishi
JQW and Jiangsu JQW will act as agents of Shenzhen JQW in conducting its business. In acting as agents,
Jiangsu JQW and Shishi JQW is engaged to develop the customer and sales agency base for Shenzhen
JQW.
However, there can be no assurance that the PRC government would not ultimately take a view contrary to
the opinion of the PRC counsel. There can be no assurance that all the agreements under the Group’s
Contractual Arrangements (or any of them) would not be regarded by any PRC governmental or judicial
authorities to be in violation of the applicable PRC laws and regulations.
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There can also be no assurance that there will be no future laws and regulations promulgated by the PRC
government that would limit the implementation of the Group’s Contractual Arrangements. If the Group’s
ownership structure, Contractual Arrangements and businesses of the Company, any of its Subsidiaries,
(including Shenzhen JQW) or any of its shareholders are found to be in violation of any existing or future
PRC laws, rules or regulations, the relevant PRC regulatory authorities, including the MIIT, the Ministry of
Commerce (MOFCOM), which is the primary regulator of foreign investment in China, and the National
Development and Reform Commission (NDRC) would have broad discretion in dealing with these violations,
including:
●
revoking the business and operating licences of the Company’s PRC operating Subsidiaries (including
the ICP Licence held by Shenzhen JQW);
●
confiscating relevant income and imposing fines and other penalties;
●
shutting down the Group’s servers or blocking its websites;
●
discontinuing or restricting the business and operations of the Company’s PRC operating Subsidiaries
(including Shenzhen JQW);
●
requiring the Company or its Subsidiaries to restructure the relevant ownership structure or operations;
●
restricting or prohibiting the use of the proceeds of the Placing to finance the Group’s businesses and
operations in China; or
●
imposing conditions or requirements with which the Company or its PRC operating Subsidiaries
(including Shenzhen JQW) may not be able to comply.
The imposition of any of these penalties would materially impair the Group’s ability to conduct the business,
as well as having a material adverse effect on the Group’s financial condition and results of operations.
Risk relating to control over Shenzhen JQW
The Group has decided to consolidate Shenzhen JQW in its accounts. Yet, the Group’s Contractual
Arrangements with Shenzhen JQW and its Shareholders may not be as effective in providing control over
Shenzhen JQW as direct ownership. If Shenzhen JQW and its shareholders fail to perform their obligations
under these Contractual Arrangements, the Group may have to resort to litigation to enforce its rights, which
may be time-consuming, unpredictable, expensive and damaging to the Group’s operations and reputation.
The Group has no equity ownership interest in Shenzhen JQW and therefore relies on Contractual
Arrangements with Shenzhen JQW and its Shareholders to control and operate the B2B platform in China.
These Contractual Arrangements may not be as effective in providing the Group with control over Shenzhen
JQW as direct equity ownership. If the Group had direct equity ownership of Shenzhen JQW, it would be
able to exercise its rights as a shareholder to effect changes in the boards of directors of Shenzhen JQW,
which in turn could effect changes, subject to any applicable fiduciary obligations, at the management level
of Shenzhen JQW. However, if Shenzhen JQW or its shareholders fail to perform their respective obligations
under these Contractual Arrangements, the Group may have to incur substantial costs and resources to
enforce these arrangements, and rely on legal remedies available under applicable PRC laws, including
seeking specific performance or injunctive relief, and claiming damages, which may not be sufficient or
effective. In particular, if shareholders of Shenzhen JQW were to refuse to transfer their equity interests in
Shenzhen JQW to the Group or designated persons when the Group exercises the purchase option pursuant
to these Contractual Arrangements, the Group may have to take legal action to compel them to fulfil their
contractual obligations. All of these Contractual Arrangements are governed by PRC law and provide for
the resolution of disputes through arbitration in China.
The legal environment in China is not as developed as in some 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
Contractual Arrangements. If the Group is unable to enforce these Contractual Arrangements, or if the Group
fails to renew these Contractual Arrangements upon their expiration, or if the Group suffers significant delay
or other obstacles in the process of enforcing these contractual arrangements, the Group may not be able
to exert effective control over Shenzhen JQW and may be precluded from operating its B2B platform in
China, which would have a material adverse effect on the Group’s financial condition and results of
operations.
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RISKS RELATING TO THE PRC
Risks generally associated with the Chinese economy
China has a long history of a planned economy and is subject to five-year plans formulated by the Chinese
government. In recent years, the Chinese government has introduced economic reforms aimed at
transforming its economy from a planned economy into a market economy with socialist characteristics.
These economic reforms allow greater use of market forces in the allocation of resources and greater
autonomy for enterprises in their operations. However, many rules and regulations implemented by the PRC
government are still in the early stages of development, and further refinements and amendments might be
necessary to enable the economic system to develop into a more sophisticated form. It is unclear how future
economic reforms and macroeconomic measures to be adopted by the PRC government will affect the
economic development of China. Further, there can be no assurance that such measures will be applied
consistently and effectively or that the Group will benefit from or will be able to capitalise on such reforms.
Indeed, the business of the Group may be adversely affected by any reform. Economic, political, judicial,
administrative, taxation or other regulatory issues China has been undergoing a series of political reforms
since 1978. The Directors expect that such reforms will continue. Such reforms have in the past resulted in
significant economic growth and social progress. However, there can be no assurance that any future reform
policy of the Chinese government will be effective. The Group’s business may be affected by such future
reforms. Since 1979, many laws and regulations dealing with economic matters with respect to general and
foreign investments have been promulgated in China. In 1982, the Chinese National People’s Congress
amended the constitution to attract foreign investments and to safeguard the “lawful rights and interests” of
foreign investors in China. Since then, the trend of legislation has been to enhance the protection afforded
to foreign investors and to allow more active control by foreign investors. However, despite significant
improvements in its legal system, there might exist difficulties in obtaining swift and equitable judgements
and in obtaining enforcement of judgements by a court of another jurisdiction in China. Further, as a result
of political changes, the interpretation of statutes and regulations may be subject to government policies
(including taxation policy). Such uncertainties may affect the Group’s operations and accordingly, its
profitability.
Foreign exchange risk
The external value of the RMB is subject to changes in policies of the Chinese government and to
international, economic and political developments. From 1994, the conversion of the RMB into foreign
currencies was based on rates set by the People’s Bank of China, which was set daily based on the previous
day’s interbank foreign exchange market rates and current exchange rates on the world financial markets.
The rate of exchange between the RMB and the US dollar experienced volatility prior to 1994, including
periods of sharp devaluation and the Chinese government was under international pressure to allow this
rate to float. On 21 July 2005, the People’s Bank of China reformed the RMB exchange rate regime by
moving to a managed floating exchange rate based on market supply and demand with reference to a
basket of currencies, but suspended the managed floating system in July 2008, effectively re-pegging the
currency to the dollar to try to protect its economy from the global financial crisis.
On 19 June 2010, the People’s Bank of China released a statement indicating that it would proceed further
with reform of the RMB exchange rate regime and increase the RMB exchange rate flexibility. According to
the announcement, continued emphasis will be placed on reflecting market supply and demand with
reference to a basket of currencies and the exchange rate floating bands will remain the same as previously
announced in the inter-bank foreign exchange market. As a consequence, the RMB exchange rate will be
more flexible than before. There is therefore a risk that the fluctuations in the RMB exchange rate may be
greater than were previously experienced and any large appreciation or devaluation of the RMB against the
US dollar could have an adverse effect on the Group’s business and operating results. In addition, financial
markets in many Asian countries have in the past experienced severe volatility. As a result, some Asian
currencies have been subject to significant devaluation from time to time. Under the current regulations on
foreign exchange control in China, foreign investment enterprises are allowed to distribute their profits or
dividends in foreign currencies to foreign investors through designated foreign exchange banks without the
prior approval of the State Administration for Foreign Exchange of China. However, the exchange of the
RMB into foreign currencies for capital items such as direct investment, loans and security investment, is
under strict control and requires the approval of the State Administration for Foreign Exchange of China.
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Any appreciation of RMB may result in the funds raised by the Company pursuant to the Placing in pounds
sterling, when converted into RMB, being less than that required for the Group’s future plans and strategies,
as set out Part 1 of this document.
The distribution of the Group’s profits and dividends may be adversely affected if the Chinese government
imposes greater control on the ability of the RMB to be exchanged into foreign currencies. There can be no
assurance that the Group will be able to obtain sufficient foreign exchange to pay dividends or satisfy other
foreign exchange requirements in the future.
Judicial, administrative and regulatory issues
The PRC legal system is a civil law system based on written statutes. Unlike common law systems, it is a
system in which decided legal cases have little precedential value. The PRC legal system is relatively new,
and the Chinese government is still in the process of developing a comprehensive system of laws. The
overall effect of legislation over the past 25 years has significantly enhanced the protections afforded to
various forms of foreign investment in the PRC. However, foreign investors may be adversely affected by
new laws, frequent changes to existing laws (or interpretations thereof) and pre-emption of provincial or
local regulations by national laws or regulations. Moreover, the administrative and judicial interpretation,
implementation and resolution of commercial disputes may be subject to the exercise of considerable
discretion by both administrative and judicial bodies and may be influenced by external forces unrelated to
the legal merits of a particular matter or dispute.
At present, the PRC does not have treaties providing for the reciprocal recognition and enforcement of
judgments with major economies such as the United States of America, the UK and Japan. Therefore, it
would be difficult for the Company to enforce in the PRC any judgments it obtained in a foreign court. These
uncertainties could limit the legal protections available to the Group in the PRC and foreign investors. In
addition, it is difficult to predict the effect of future developments in the PRC legal system, including the
promulgation of new laws, changes to existing laws or the interpretation or enforcement thereof, or the preemption of local regulations by national laws. Even where adequate laws exist and contractual terms are
clearly stated, there can be no assurance of swift and equitable enforcement of fights. The PRC has adopted
a broad range of laws, administrative rules and regulations that govern the conduct and operations of
companies in the PRC which receive capital from foreign investors (known as foreign investment enterprises
(“FIEs”). These laws, rules and regulations provide some incentives to encourage the flow of investment
into the PRC but they also subject FIEs to a set of restrictions that may not always apply to domestic
companies in the PRC. For example, FIEs are prohibited from participating in certain industries. While the
PRC has committed to loosening the restrictions on foreign investors in many industries after its entry into
the World Trade Organisation, many investment restrictions may still place the PRC subsidiaries of the
Company at a disadvantage in relation to PRC domestic companies and may adversely affect the Group’s
competitive position.
Further, as a result of political changes, the interpretation of statutes and regulations may be subject to
government policies. Such uncertainties may affect the Group’s operations and, accordingly, its profitability.
Tax uncertainty
Tax laws and regulations are under constant development and often subject to change as a result of
changing government policy. Such changes may occur without sufficient warning. Implementation of various
taxes may affect consumption in certain product sectors. There is a risk that changes in tax policy and
regulations may adversely affect the demand for certain products or services of the Company.
Expansion risks
There are also potential risks associated with rapid economic growth of the magnitude China has
experienced. Business infrastructure, including logistics and supply chains, human resources and training,
competition for real estate and locations, among others, may create bottlenecks for business growth, thereby
delaying the Company’s ability to achieve its projections.
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Restriction on foreign investment and market access
Government policies and regulations continue to impose certain restrictions on foreign investment in China
in terms of market access to certain industries and business sectors. Such restrictions may take the form
of additional or stricter governmental approval requirements for FIEs to enter certain industries and business
sectors or heightened enforcement of existing rules prohibiting or restricting them from conducting business
or undertaking projects in certain industries or business sectors that are open to Chinese domestic
enterprises. The existence and implementation of such restrictions may have an adverse impact on the
business operations and performance of the Group in the event any of the Group fail to gain market access
to certain industries or business sectors due to such restrictions.
RISKS RELATING TO THE ORDINARY SHARES
Investment in AIM securities and liquidity of the Company’s Shares
An investment in companies whose shares are traded on AIM is perceived to involve a higher degree of risk
and be less liquid than an investment in companies whose shares are listed on the Official List. AIM is a
market designed primarily for emerging or smaller companies. The rules of this market are less demanding
than the Official List. The future success of AIM and liquidity in the market for Ordinary Shares cannot be
guaranteed. In particular, the market for Ordinary Shares may become or may be relatively illiquid and
therefore, such Ordinary Shares may be or may become difficult to sell, and/or sell orders might result in a
drop in the market price of the Ordinary Shares due to a lack of liquidity.
The market of the Group’s shares following Admission may be highly volatile and subject to wide fluctuations
in response to a variety of factors which could lead to losses for Shareholders. These potential factors include
amongst others: any additions or departures of key personnel, litigation and press, newspaper and/or other
media reports.
Prospective investors should be aware that the value of the Ordinary Shares may go down as well as up,
that the market price of the Ordinary Shares may go down as well as up and that the market price of the
Ordinary Shares may not reflect the underlying value of the Company. Investors may, therefore, realise less
than or lose all of their investment.
Trading market for the Ordinary Shares
The share price of emerging companies can be highly volatile and shareholdings illiquid. The market price
of the Ordinary Shares may be subject to wide fluctuations in response to many factors, some specific to
the Company and its operations and others to the AIM market in general including, but not limited to,
variations in the operating results of the Group, divergence in financial results from analysts’ expectations,
changes in earnings estimates by stock market analysts, general economic conditions or legislative changes
in the Group’s sector. In addition, stock markets have from time to time experienced extreme price and
volume fluctuations, which, as well as general economic and political conditions, could adversely affect the
market price for the Ordinary Shares. The trading of the Ordinary Shares on AIM should not be taken as
implying that there will be a liquid market for the Ordinary Shares and there is no guarantee that an active
market will develop or be sustained after Admission. It may be more difficult for an investor to realise his
investment in the Company than in a company whose shares are quoted on the Official List.
Absence of prior public trading
Prior to the Placing, there has been no public market for the Ordinary Shares. The Placing Price may not be
indicative of the market price for the Ordinary Shares following Admission. The subsequent market price of
the Ordinary Shares may be, irrespective of the Group’s actual financial, trading or operational performance,
subject to wide fluctuations in response to many factors, including stock market fluctuations, general
economic conditions, changes in political sentiment or other factors referred to in this Part 2. It may also be
influenced by investors’ perception of the Group’s management and future strategy; or more broadly of
Chinese or internet stocks.
Control Risks
As at the date of Admission, the Company’s executive management are expected to be interested in up to
22.3 per cent. of the Ordinary Shares, depending on the size of the Placing.
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Ms Wang Xiufang is expected to be interested in up to 50.5 per cent. of the Ordinary Shares, depending on
the size of the Placing.
This means that the executive management, and indirectly Ms Wang, has the power to exercise significant
influence over all matters requiring shareholder approval, including the election and removal of the Company’s
Directors, amendments to its Articles, approval of dividends and share buybacks, compromises and
schemes of arrangement under Jersey law and mergers.
This could have the effect of preventing the Company from entering into transactions that could be beneficial
to it or its other shareholders. Any significant changes in the executive management’s interest in Ordinary
Shares through sale or other disposition, or significant acquisitions by others, or the Ordinary Shares in the
public market or by way of private transactions, could result in changes in business focus or practices that
may affect the profitability of the Company’s business.
This risk is mitigated to an extent by way of the described in paragraph 10.9 of Part 7 of this document.
Dilution of shareholders’ interest as a result of additional equity fundraising
As mentioned above, the Group may need to raise additional funds in the future to finance, amongst other
things, working capital, expansion of the business, new developments relating to existing operations or
acquisitions. If additional funds are raised through the issuance of new equity or equity-linked securities of
the Company other than on a pro rata basis to existing Shareholders, the percentage ownership and voting
rights of the existing Shareholders may be reduced. Shareholders may also experience subsequent dilution
and/or such securities may have preferred rights, options and pre-emption rights senior to the Ordinary
Shares.
Dividends
There can be no assurance as to the level of future dividends. The declaration, payment and amount of any
future dividends of the Company are subject to the discretion of the Shareholders or, in the case of interim
dividends to the discretion of the Directors, and will depend upon, among other things, the Company’s
earnings, financial position, cash requirements, availability of profits, as well as provisions for relevant laws
or generally accepted accounting principles from time to time.
Limitations on the ability of the Company’s operating Subsidiaries to pay dividends or make other
distributions on equity to the Company may prevent the Company from obtaining sufficient funds from its
operating Subsidiaries to satisfy the Company’s cash or financing requirements, if such requirements arise
in the future.
RISKS RELATING TO THE LAWS AND REGULATIONS
Regulations
The application or modification of existing laws or regulations, or adoption of new laws and regulations
relating to the Internet and online operations in China and worldwide, could adversely affect the manner in
which the Group currently conducts its business. The law of the Internet remains largely unsettled, even in
areas where there has been some legislative action. In addition, the growth and development of the market
for online service provision may lead to more stringent customer protection laws which may impose
additional burdens on the Group, all of which may have an adverse effect on the Group’s financial condition
and future prospects.
Jersey company law
The Company is a company incorporated in Jersey. As a result, the rights of the Shareholders will be
governed by the laws of Jersey and the memorandum and articles of association of the Company.
Taxation
The attention of potential investors is drawn to paragraph 23 of Part 7 of this Admission Document headed
“Taxation”. The tax rules, including stamp duty provisions and their interpretation relating to an investment
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in the Group may change during the life of the Group. The levels of, and reliefs from, taxation may change.
The tax reliefs referred to in this Admission Document are those currently available and their value depends
upon the individual circumstances of investors. Any change in the Group’s tax status or the tax applicable
to holding Ordinary Shares or in taxation legislation or its interpretation, could affect the value of the
investments held by the Group, affect the Group’s ability to provide returns to Shareholders and/or alter the
post-tax returns to Shareholders. Statements in this Admission Document concerning the taxation of the
Group and its investors are based upon current tax law and practice which is subject to change.
Forward looking statements
This document contains forward-looking statements, which include all statements other than statements of
historical fact, including (without limitation) those regarding the Group’s financial position, business strategy,
plans and objectives of management for future operations. These relate to the Group’s future prospects,
developments and strategies. Forward-looking statements are identified by their use of terms and phrases
such as “believe”, “could”, “would”, “should”, “envisage”, “estimate”, “intend”, “seek”, “may”, “plan”, “will”
or the negative of those, variations or comparable expressions, including references to assumptions. These
statements are primarily contained in Part 1 of this document. The forward-looking statements in this
document are based on current expectations and are subject to risks and uncertainties that could cause
actual results to differ materially from those expressed or implied by those statements. These forward-looking
statements speak only as at the date of this document. The Group expressly disclaims any obligation or
undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to
reflect any change in the Group’s expectations with regard thereto or any change in events, conditions or
circumstances on which any such statements are based. As a result of these factors, the events described
in the forward-looking statements in this document may not occur.
Investors should therefore consider carefully whether investment in the Company is suitable for
them, in light of the risk factors outlined above, their personal circumstances and the financial
resources available to them.
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PART 3
ACCOUNTANTS’ REPORT ON THE COMPANY
Crowe Clark Whitehill LLP
Chartered Accountants
Member of Crowe Horwath International
St Bride’s House
10 Salisbury Square
London EC4Y 8EH, UK
+44 (0)20 7842 7100
+44 (0)20 7583 1720
9 December 2013
The Directors
JQW plc
13-14 Esplanade
St Helier
Jersey
JE1 1BD
The Directors
Cairn Financial Advisers LLP
61 Cheapside
London
EC2V 6AX
Dear Sirs
Introduction
We report on the financial information of JQW plc (the “Company”). This financial information has been
prepared for inclusion in Part 3 of the AIM Admission Document date 9 December 2013 of the Company
(the “Document”), on the basis of the accounting policies set out in note 2 to the financial information. This
report is required by paragraph (a) of Schedule Two to the AIM Rules for Companies (the “AIM Rules”) and
is given for the purposes of complying with the AIM Rules and for no other purpose.
Responsibilities
The Directors are responsible for preparing the financial information on the basis of preparation set out
below and in accordance with International Financial Reporting Standards as endorsed by the European
Commission (“IFRS”).
It is our responsibility to form an opinion on the financial information as to whether the financial information
gives a true and fair view, for the purposes of the Document and to report our opinion to you.
Save for any responsibility arising under paragraph (a) of Schedule Two of the AIM Rules for Companies to
any person as and to the extent there provided, to the fullest extent permitted by law we do not assume
any responsibility and will not accept any liability to any person other than the addressees of this letter for
any loss suffered by any such person as a result of, arising out of, or in connection with this report or our
statement, required by and given solely for the purposes of complying with paragraph (a) of Schedule Two
of the AIM Rules for Companies, consenting to its inclusion in the Document.
Basis of Opinion
We conducted our work in accordance with Standards of Investment Reporting issued by the Auditing
Practices Board in the United Kingdom. Our work included an assessment of evidence relevant to the
amounts and disclosures in the financial information. It also included an assessment of significant estimates
and judgments made by those responsible for the preparation of the underlying financial information and
whether the accounting policies are appropriate to the entity’s circumstances, consistently applied and
adequately disclosed.
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We planned and performed our work so as to obtain all the information and explanations which we
considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the
financial information is free from material misstatement, whether caused by fraud or other irregularity
or error.
Opinion
In our opinion, the financial information gives, for the purposes of the Document, a true and fair view of the
state of affairs of the Company as at the dates stated and of the results, cash flows and changes in equity
for the periods then ended in accordance with the basis of preparation set out in Note 2 to the financial
information and has been prepared in accordance with IFRS and has been prepared in a form that is
consistent with the accounting policies adopted by the Company.
Declaration
For the purposes of paragraph (a) of Schedule Two of the AIM Rules for Companies, we are responsible
for this report as part of the Document and declare that we have taken all reasonable care to ensure that
the information contained in this report is, to the best of our knowledge, in accordance with the facts and
contains no omission likely to affect its import. This declaration is included in the Document in compliance
with paragraph (a) of Schedule Two of the AIM Rules.
Yours faithfully
Crowe Clark Whitehill LLP
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STATEMENT OF FINANCIAL POSITION
The statement of financial position of the Company as at 31 July 2013 is stated below:
Note
Assets
Current assets
Cash and cash equivalents
GBP £
2
–––––––––––
Total assets
2
–––––––––––
–––––––––––
Equity and liabilities
Capital and reserves
Share capital
4
Total equity attributable to equity holders
2
–––––––––––
2
–––––––––––
Total liabilities
–
–––––––––––
Total equity and liabilities
2
–––––––––––
–––––––––––
STATEMENT OF COMPREHENSIVE INCOME
The statement of comprehensive income of the Company for the period from incorporation on 26 July
2013 to 31 July 2013 is stated below:
Total comprehensive income attributable to equity owner
Earnings per share
Basic and diluted (GBP£ per share)
–
–––––––––––
3
–
–––––––––––
–––––––––––
STATEMENT OF CHANGES IN EQUITY
The statements of changes in equity of the Company for period from incorporation on 26 July 2013 to
31 July 2013 are set out below:
Share
capital
GBP £
On incorporation
Result for the period
2*
–
–––––––––––
As at 31 July 2013
2*
–––––––––––
–––––––––––
The share capital comprises the ordinary issued share capital of the Company.
* On 26 July 2013, the Company was incorporated with an unlimited authorised share capital of no par value and on the same date
issued two (2) subscriber shares at no par value for £1 per share.
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STATEMENT OF CASH FLOWS
The statement of cash flows of the Company for the period from incorporation on 26 July 2013 to 31 July
2013 is as follows:
GBP £
Financing activities
Proceeds from issue of share capital
2
–––––––––––
Net cash from financing activities
2
–––––––––––
Net increase in cash and cash equivalents
2
–––––––––––
Cash and cash equivalents at end of period
2
–––––––––––
–––––––––––
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NOTES TO THE FINANCIAL INFORMATION
1. General Information
The Company was incorporated as a private limited company in Jersey on 26 July 2013 with the name
JQW Limited. On 27 November 2013 the Company re-registered as a public limited company with the
name JQW plc. The Company did not trade during the period under review and its registered office is at
13-14 Esplanade, St Helier, Jersey JEI 1BD. The nature of the Company’s operations is that of an
investment holding and its operating subsidiaries are engaged principally in the provision of business-tobusiness (“B2B”) ecommerce services in the People’s Republic of China (the “PRC”).
2.
Accounting Policies
2.1 Basis of preparation
This financial information of the Company has been prepared on a historical basis as varied by the use of
fair value in accordance with IFRS, International Accounting Standards (IASs) and International Financial
Reporting Interpretations Committee (IFRIC) interpretations as adopted by the European Union.
The financial information of the Company is presented in Great British Pound (“GBP£”).
2.2 Standards and interpretations issued but not yet applied
At the date of authorisation of this consolidated financial information, the IASB and IFRIC have issued the
following standards and interpretations which are effective for annual accounting periods beginning on or
after the stated effective date.
IAS 1 Amendment – Presentation of items of other comprehensive income
IAS 19 Amendment – Employee Benefits
IAS 27 Separate Financial Statements
IAS 28 Investments in Associates and Joint Ventures
IFRS 1 Amendments – Government Loans
IFRS 7 and IAS 32 Offsetting financial assets and financial liabilities
IFRS 9 Financial Instruments
IFRS 10 Consolidated Financial Statements
IFRS 11 Joint Arrangements
IFRS 12 Disclosure of Interests in Other Entities
IFRS 13 Fair Value Measurement
IFRIC 20: Stripping Costs in the Production Phase of a Surface Mine
2.3 Comparative figures
No comparative figures have been presented as the financial information covers the period from
incorporation on 26 July 2013 to 31 July 2013.
2.4 Cash and cash equivalents
The Company considers any cash on short-term deposits and other short term investments to be cash
equivalents.
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3. Earnings per share
The calculation for earnings per share (basic and diluted) for the relevant period is based on the profit after
income tax attributable to equity holder for the period from incorporation on 26 July 2013 to 31 July 2013
and is as follows:
GBP £
Profit/(loss) attributable to equity holders
Weighted average number of shares
–
2
–––––––––––
Earnings/(loss) per share
–
–––––––––––
–––––––––––
4. Share capital
On 26 July 2013, the Company was incorporated with an unlimited authorised share capital of no par value
and on the same date issued two (2) subscriber shares at no par value for £1 per share.
5. Subsequent Events
On 15 August 2013, two subscriber shares in JQW plc were transferred from Central One Limited and
Central Two Limited to Ms Wang Xiufang.
On 23 August 2013, two subscriber shares were transferred from Ms Wang Xiufang to Tian Sheng
Enterprises Limited.
On 21 November 2013, one Ordinary Share was transferred from Tian Sheng Enterprises Limited to Cheng
Tong International Limited.
On 3 December 2013, JQW plc issued and allotted 184,000,000 Ordinary Shares to the nominees of the
holder of the share capital of Junde International Holdings Limited (“JIL”) in consideration for the transfer
of the entire issued and paid up capital of JIL to JQW plc pursuant to the Share Swap Agreement.
On 9 December 2013, the Company raised £6.685 million by the issue of 9,549,991 Ordinary Shares.
6. Nature of financial Information
The financial information presented above does not constitute statutory accounts for the period under
review.
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PART 4
ACCOUNTANTS’ REPORT ON THE PRO FORMA CONSOLIDATED FINANCIAL
INFORMATION ON THE OPERATING GROUP
Crowe Clark Whitehill LLP
Chartered Accountants
Member of Crowe Horwath International
St Bride’s House
10 Salisbury Square
London EC4Y 8EH, UK
+44 (0)20 7842 7100
+44 (0)20 7583 1720
9 December 2013
The Directors
JQW plc
13-14 Esplanade
St Helier
Jersey
JE1 1BD
The Directors
Cairn Financial Advisers LLP
61 Cheapside
London
EC2V 6AX
Dear Sirs
We report on the pro forma consolidated financial information set out below on Junde International
Holdings Limited (“JIL”) and its subsidiaries, together referred as the (“Operating Group”). This has been
prepared for inclusion in the AIM Admission Document (the “Document”) dated 9 December 2013 of JQW
plc (the “Company”) on the basis of the principal accounting policies set out in Note 2 to the financial
information. This report is required by Schedule Two of the AIM Rules and is given for the purpose of
complying with that schedule and for no other purpose.
Responsibilities
The Directors of the Company are responsible for preparing the Financial Information on the basis set out
below and in accordance with applicable International Financial Reporting Standards (“IFRS”) as adopted
by the European Commission.
It is our responsibility to form an opinion as to whether the Financial Information gives a true and fair view,
for the purposes of the Document, and to report our opinion to you.
Save for any responsibility arising under paragraph (a) of Schedule Two of the AIM Rules for Companies to
any person as and to the extent there provided, to the fullest extent permitted by law we do not assume
any responsibility and will not accept any liability to any person other than the addressees of this letter for
any loss suffered by any such person as a result of, arising out of, or in connection with this report or our
statement, required by and given solely for the purposes of complying with paragraph (a) of Schedule Two
of the AIM Rules for Companies, consenting to its inclusion in the Document.
Basis of opinion
We conducted our work in accordance with Standards for Investment Reporting issued by the Auditing
Practices Board in the United Kingdom. Our work included an assessment of evidence relevant to the
amounts and disclosures in the Financial Information. It also included an assessment of significant
estimates and judgements made by those responsible for the preparation of the Financial Information
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underlying the financial statements and whether the accounting policies are appropriate to the entity’s
circumstances, consistently applied and adequately disclosed.
We planned and performed our work so as to obtain all the information and explanations which we
considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the
Financial Information is free from material misstatement whether caused by fraud or other irregularity or
error.
Opinion
In our opinion the Financial Information gives, for the purposes of the Document dated 9 December 2013,
a true and fair view of the state of affairs of the Operating Group as at the dates stated and of its profits
and cash flows for the periods then ended in accordance with the basis of preparation set out below and
in accordance with applicable IFRS and has been prepared in a form that is consistent with the accounting
policies adopted by the Company.
Declaration
For the purposes of paragraph (a) of Schedule Two of the AIM Rules we are responsible for this report as
part of the Document and declare that we have taken all reasonable care to ensure that the information
contained in this report is, to the best of our knowledge, in accordance with the facts and contains no
omission likely to affect its import. This declaration is included in the Document in compliance with
Schedule Two of the AIM Rules.
Yours faithfully
Crowe Clark Whitehill LLP
Chartered Accountants
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Consolidated Statements of Financial Position
The pro forma consolidated statements of financial position of the Operating Group as at 31 December
2010, 2011 and 2012, are set out below:
Note
Non-current assets
Equipment
Intangible assets
4
2.7
Total
Current assets
Trade and other receivables
Deferred tax asset
Cash and cash equivalents
5
11
6
As at 31 December
2010
2011
2012
RMB’000
RMB’000
RMB’000
860
–
–––––––––––
–––––––––––
860
823
7
Issued capital and reserves attributable to
owners of the parent
Share capital
Statutory reserve
Reconstruction reserve
Accumulated profits
8
9
8
2,305
1,419
5,788
8,329
6,809
30,220
11,392
14,089
108,148
–––––––––––
–––––––––––
9,512
45,358
46,181
133,629
–––––––––––
137,562
–––––––––––
–––––––––––
–––––––––––
–––––––––––
1,532
7,465
219
23,685
29,025
1,344
18,694
58,146
8,657
–––––––––––
–––––––––––
9,216
54,054
–––––––––––
85,497
–––––––––––
–––––––––––
–––––––––––
–
–
1,000
(844)
–
500
3,000
(12,373)
–
500
–
50,565
–––––––––––
1,000
–––––––––––
10,372
–––––––––––
–––––––––––
68
–––––––––––
–––––––––––
–––––––––––
–––––––––––
156
Total Equity and Liabilities
3,933
–––––––––––
–––––––––––
–––––––––––
Interests under Contractual Arrangements
–––––––––––
–––––––––––
–––––––––––
10,372
Current liabilities
Other payables
Deferred revenue
Income tax payable
3,933
–
–––––––––––
–––––––––––
–––––––––––
Total Assets
823
–
–––––––––––
(8,873)
–––––––––––
1,000
–––––––––––
46,181
–––––––––––
–––––––––––
–––––––––––
51,065
–––––––––––
1,000
–––––––––––
137,562
–––––––––––
–––––––––––
230260 Alpha pp066-pp088 05/12/2013 14:34 Page 69
Consolidated Statements of Comprehensive Income
The pro forma consolidated statements of comprehensive income of the Operating Group for each of the
three years ended 31 December 2012 are set out below:
Note
Revenue
Cost of sales
As at 31 December
2010
2011
2012
RMB’000
RMB’000
RMB’000
52,056
(36,180)
146,233
(97,405)
287,815
(151,463)
–––––––––––
–––––––––––
–––––––––––
Gross profit
15,876
48,828
136,352
Other income
Selling and distribution expenses
Administrative expenses
11
(10,214)
(3,972)
87
(30,626)
(6,313)
181
(42,411)
(9,984)
Operating profit
Finance costs
–––––––––––
–––––––––––
–––––––––––
1,701
11,976
84,138
–
Profit before taxation
10
Income tax expenses
11
Profit after taxation and total comprehensive
income
–––––––––––
1,701
11,976
84,137
(446)
–––––––––––
12
69
(3,005)
–––––––––––
8,971
(21,199)
–––––––––––
62,938
–––––––––––
–––––––––––
–––––––––––
–––––––––––
–––––––––––
–––––––––––
1,330
(75)
8,946
25
62,547
391
–––––––––––
–––––––––––
1,255
8,971
–––––––––––
–––––––––––
Earnings per share:
Basic and diluted
(1)
–––––––––––
1,255
Attributable to:
Owners of the parent
Interests under Contractual Arrangements
–
–––––––––––
0.007
–––––––––––
–––––––––––
–––––––––––
–––––––––––
0.049
–––––––––––
–––––––––––
–––––––––––
62,938
–––––––––––
–––––––––––
0.342
–––––––––––
–––––––––––
230260 Alpha pp066-pp088 05/12/2013 14:34 Page 70
Consolidated Statements of Changes in Equity
The pro forma consolidated statements of changes in equity of the Operating Group for each of the three
years ended 31 December 2010, 2011 and 2012 are set out below:
Attributable to the owners of the parents
Interests
under
ReconContractual Accumulated
Statutory
struction
Arrangements
profits
reserve
reserve
Total
RMB’000
RMB’000
RMB’000
RMB’000
RMB’000
Balance at 1 January 2010
Comprehensive income
Profit for the year
Transfer to merger reserve
Total comprehensive income
for the year
Transaction with owners
Withholding taxes
Dividends payable (Note 13)
Total transaction with owners
Transfer to statutory reserve
Balance at 31 December 2010
Comprehensive income
Issue of shares net of costs
Profit for the year
Total comprehensive income
for the year
Transaction with owners
Dividends payable (Note 13)
Total transaction with owners
Transfer to statutory reserve
Balance at 31 December 2011
Comprehensive income
Issuance of share
Repayment of loan to ex-shareholders
arising from restructuring exercise
Profit for the year
Total comprehensive income
for the year
Transaction with owners
Dividends payable (Note 13)
Total transaction with owners
Adjustment arising from restructuring
exercise
Transfer to statutory reserve
Balance at 31 December 2012
1,000
(2,099)
–
1,000
(99)
–
–
1,255
–
–
–
–
–
1,255
–
––––––––––
––––––––––
1,000
(844)
––––––––––
––––––––––
–
–
––––––––––
––––––––––
–
–
––––––––––
––––––––––
–
–
––––––––––
––––––––––
1,000
(844)
––––––––––
–
––––––––––
–
––––––––––
–
––––––––––
–
––––––––––
–
––––––––––
1,000
––––––––––
–
––––––––––
–
––––––––––
–
––––––––––
–
––––––––––
1,156
––––––––––
–
––––––––––
–
––––––––––
–
––––––––––
1,156
––––––––––
––––––––––
––––––––––
––––––––––
––––––––––
––––––––––
––––––––––
––––––––––
––––––––––
––––––––––
–
–
–
8,971
–
–
2,000
–
2,000
8,971
––––––––––
––––––––––
1,000
8,127
––––––––––
––––––––––
–
(20,000)
––––––––––
––––––––––
–
(20,000)
––––––––––
––––––––––
–
(500)
––––––––––
––––––––––
1,000
(12,373)
––––––––––
–
––––––––––
–
––––––––––
–
––––––––––
500
––––––––––
500
––––––––––
3,000
––––––––––
–
––––––––––
–
––––––––––
–
––––––––––
3,000
––––––––––
12,127
––––––––––
(20,000)
––––––––––
(20,000)
––––––––––
–
––––––––––
(7,873)
––––––––––
––––––––––
––––––––––
––––––––––
––––––––––
––––––––––
––––––––––
––––––––––
––––––––––
––––––––––
–
–
–
8,507
8,507
–
–
–
62,938
–
–
(11,507)
–
(11,507)
62,938
––––––––––
––––––––––
1,000
50,565
––––––––––
––––––––––
–
–
––––––––––
––––––––––
–
–
––––––––––
––––––––––
–
–
––––––––––
––––––––––
1,000
50,565
––––––––––
––––––––––
––––––––––
––––––––––
70
––––––––––
500
––––––––––
–
––––––––––
–
––––––––––
–
––––––––––
500
––––––––––
––––––––––
––––––––––
–
––––––––––
–
––––––––––
–
––––––––––
–
––––––––––
–
––––––––––
––––––––––
––––––––––
52,065
––––––––––
–
––––––––––
–
––––––––––
–
––––––––––
52,065
––––––––––
––––––––––
230260 Alpha pp066-pp088 05/12/2013 14:34 Page 71
Consolidated Statements of Cash Flows
The consolidated statements of cash flow statements of the Operating Group for each of the three years
ended 31 December 2010, 2011 and 2012 are set out below:
Years ended 31 December
2010
2011
2012
RMB’000
RMB’000
RMB’000
Cash Flow from operating activities
Profit for the period before taxation
Adjustment for:
Loss on disposal of equipment
Depreciation of equipment
Interest income
Operating cash flows before movements in working capital
Increase in trade and other receivables
Increase in deferred tax asset
Increase in deferred revenue
Increase in other payables and accruals
Cash generated from operating activities
Income tax paid
Net cash generated from operating activities
Cash flow from investing activities
Interest received
Proceeds from disposal of equipment
Acquisition of equipment
1,701
11,976
84,137
–
300
(7)
–
394
(59)
4
1,936
(181)
–––––––––––
–––––––––––
1,994
(1,394)
(1,419)
5,676
875
12,311
(6,024)
(5,390)
21,561
2,153
–––––––––––
–––––––––––
5,732
(320)
24,611
(1,881)
–––––––––––
–––––––––––
5,412
22,730
–––––––––––
–––––––––––
7
–
(112)
59
–
(357)
–––––––––––
Net cash used in investing activities
(105)
Cash flow from financing activities
Issuance of share capital
Dividends paid
–
Net cash used in financing activities
Net Increase in cash & cash equivalents
Cash and equivalent at beginning of period
Cash and equivalent at end of period
(298)
85,896
(3,061)
(7,280)
29,120
3,506
–––––––––––
108,181
(13,886)
–––––––––––
94,295
–––––––––––
181
3
(5,058)
–––––––––––
(4,874)
–––––––––––
–––––––––––
–––––––––––
–
–
2,000
(20,000)
8,507
–––––––––––
–––––––––––
–
2,000
–––––––––––
(11,493)
–––––––––––
–––––––––––
–––––––––––
5,307
481
24,432
5,788
77,928
30,220
–––––––––––
–––––––––––
5,788
30,220
–––––––––––
–––––––––––
71
–––––––––––
–––––––––––
–––––––––––
–––––––––––
–––––––––––
108,148
–––––––––––
–––––––––––
230260 Alpha pp066-pp088 05/12/2013 14:34 Page 72
NOTES TO THE FINANCIAL INFORMATION
(Amounts in thousands of Renminbi (“RMB”)
1. Corporate information
The Operating Group consists of, Junde International Holdings Limited (“JIL”), Yangzhou Junde Investment
Consulting Development Co., Ltd. (“Yangzhou Junde”), Jiangsu Province JQW Technology Co., Ltd.
(“Jiangsu JQW”), Shishi JQW Technology Co., Ltd. (“Shishi JQW”) and Shenzhen JQW Information Co.,
Ltd. (“Shenzhen JQW”).
The accompanying pro forma consolidated financial information includes the financial statements of JIL, its
controlled subsidiaries and an entity under Contractual Arrangements. JIL and its subsidiaries are
collectively referred to as the “Operating Group”.
JIL does not conduct any substantive operations on its own but instead conducts its business operations
through its subsidiaries.
The pro forma consolidated financial information reflects the historical operations of the Operating Group
as if the current organisation structure had existed since 1 January 2010.
The Directors present their report and non statutory financial statements of the Operating Group for the
year ended 31 December 2010, 2011 and 2012.
Primary activity
The primary business of the Operating Group is principally engaged in is the provision of business-tobusiness (“B2B”) e-commerce services in the People’s Republic of China (“PRC”).
2. Summary of significant accounting policies
2.1 Basis of preparation
The financial information has been prepared in accordance with IFRS as adopted by the EU issued by the
International Accounting Standards Board (“IASB”), including related Interpretations issued by the
International Financial Reporting Interpretations Committee (“IFRIC”).
The financial information is measured and presented in the currency of the primary economic environment
in which the entity operates (its functional currency). The financial information of the Operating Group is
presented in Chinese Renminbi (“RMB”), which is the presentational currency for the pro forma
consolidated financial information. The functional currency of the Operating Group is also RMB. All financial
information presented in RMB has been recorded to the nearest thousand.
2.2 Standards, amendments and interpretations to published standards not yet effective
At the date of authorisation of this consolidated financial information, the IASB and IFRIC have issued the
following standards and interpretations which are not yet effective and have not been early adopted. They
are not expected to have a material impact on reported results.
IAS 1 Amendment – Presentation of items of other comprehensive income
IAS 19 Amendment – Employee Benefits
IAS 27 Separate Financial Statements
IAS 28 Investments in Associates and Joint Ventures
IFRS 1 Amendments – Government Loans
IFRS 7 and IAS 32 Offsetting financial assets and financial liabilities
IFRS 9 Financial Instruments
IFRS 10 Consolidated Financial Statements
IFRS 11 Joint Arrangements
IFRS 12 Disclosure of Interests in Other Entities
IFRS 13 Fair Value Measurement
IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine
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230260 Alpha pp066-pp088 05/12/2013 14:34 Page 73
2.3 Basis of consolidation
The pro forma consolidated financial information incorporates the financial information of JIL and its
subsidiaries. Subsidiaries are entities (including special purposes entities) over which JIL has the power to
govern the financial operating policies, generally accompanied by a shareholding giving rise to the majority
of the voting rights, as to obtain benefits from their activities.
A subsidiary is consolidated from the date on which control is transferred to the Operating Group up to the
effective date on which control ceases, as appropriate.
Intra-Operating Group balances and transactions and any income and expenses arising from intraOperating Group transactions are eliminated on consolidation. Unrealised gains and losses arising from
transactions with associates and joint ventures are eliminated against the investment to the extent of the
Operating Group’s interest in the investee.
The financial information of the subsidiaries is prepared for the same reporting period as that of JIL using
consistent accounting policies.
Interests under Contractual Arrangements (non-controlling interest) in the net assets of consolidated
subsidiaries are identified separately from the Operating Group’s equity. Interests under Contractual
Arrangements consist of the amount of those interests at the date of the business combination (see note
2.4 below) and the interests under Contractual Arrangements share of changes in equity since the date of
the combination.
2.4 Contractual Arrangements
The significant terms of the arrangements are listed below:
As at 31 December 2012, the Operating Group operates the www.jqw.com website through Contractual
Arrangements. Shenzhen JQW holds a license to provide Internet information services in China. Yangzhou
Junde has entered into a series of Contractual Arrangements with Shenzhen JQW so that Yangzhou Junde
has the right to collect the economic benefits of Shenzhen JQW and to exercise effective managerial,
operational and financial control over Shenzhen JQW.
The series of Contractual Arrangements include an Entrusted Management Agreement, and Exclusive
Option Agreement, a Shareholder Proxy Voting Agreement, and an Equity Pledge Agreement.
The Operating Group does not enjoy direct equity ownership of Shenzhen JQW. Instead, the Contractual
Arrangements enable the Operating Group to:
●
exercise effective control over Shenzhen JQW;
●
receive substantially all of the economic benefits and residual returns, and absorb all the risks of the
expected losses from Shenzhen JQW as if it were a wholly owned subsidiary; and
●
have an exclusive option to acquire all of the equity interests in Shenzhen JQW.
The Operating Group, through these Contractual Arrangements, gained control of Shenzhen JQW. These
Contractual Arrangements allow Shenzhen JQW to be treated as part of the Operating Group for
accounting purposes.
2.5 Business combinations outside the scope of IFRS 3
The Directors considered IFRS 3 “Business Combinations” (Revised 2008) as the appropriate accounting
treatment. However, they concluded that this Operating Group fell outside the scope of IFRS 3 (revised
2008) since the Operating Group represents a combination of entities under common control.
In accordance with IAS 8 “Accounting policies, changes in accounting estimates and errors”, in developing
an appropriate accounting policy, the Directors have considered the pronouncements of other standard
setting bodies and specifically looked to accounting principles generally accepted in the United Kingdom
(“UK GAAP”) for guidance (FRS 6 – Acquisitions and mergers) which does not conflict with IFRS and
reflects the economic substance of the transaction.
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230260 Alpha pp066-pp088 05/12/2013 14:34 Page 74
Under UK GAAP, the assets and liabilities of both entities are recorded at book value, not fair value
(although adjustments are made to achieve uniform accounting policies), intangible assets and contingent
liabilities are recognised only to the extent that they were recognised by the legal acquirer in accordance
within applicable IFRS, no goodwill is recognised, any expenses of the combination are written off
immediately to the income statement and comparative amounts, if applicable, are restated as if the
combination had taken place at the beginning of the earliest accounting period presented.
Therefore, although the Operating Group reconstruction did not become unconditional until Admission, the
pro forma consolidated non-statutory financial information is presented as if the Operating Group structure
has always been in place throughout the period under review, including the activity from incorporation of
the Operating Group’s subsidiary. All entities had the common management as well as majority
shareholders.
On this basis, the Directors have decided that it is appropriate to reflect the combination using merger
accounting principles as group reconstruction under FRS 6 – Acquisitions and mergers in order to give a
true and fair view. No fair value adjustments have been made as a result of the combination.
2.6 Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and any accumulated
impairment losses. The cost of property, plant and equipment includes its purchase price and any costs
directly attributable to bringing the asset to the location and condition necessary for it to be capable of
operating in the manner intended by management. Dismantlement, removal or restoration costs are
included as part of the cost of property, plant and equipment if the obligation for dismantlement, removal
or restoration is incurred as a consequence of acquiring or using the property, plant and equipment.
Depreciation of property, plant and equipment is calculated using the straight-line method to allocate their
depreciable amounts over their estimated useful lives as follows:
Years
Furniture and fittings
Motor vehicles
Office equipment
1–5
4
3
The carrying values of property, plant and equipment are reviewed for impairment when events or changes
in circumstances indicate that the carrying value may not be recoverable.
The estimated useful lives, residual values and depreciation methods are reviewed, and adjusted as
appropriate, at the end of each financial year.
The gain or loss arising on disposal or retirement of an item of property, plant and equipment is determined
as the difference between the sales proceeds and the carrying amount of the asset and is recognised in
comprehensive income statement.
Fully depreciated plant and equipment are retained in the financial statements until they are no longer in
use.
2.7 Intangible assets (Domain names)
www.jqw.com and www.jqw.cn have a life of 64 years and 16 years registered on 15 September 1999 and
17 March 2003 respectively. These were gifted to the Operating Group by one of the founder of the
business, therefore, the cost is shown as nil.
2.8 Impairment of tangible and intangible assets excluding goodwill
At the end of each financial year, the Operating Group reviews the carrying amounts of its tangible and
intangible assets to determine whether there is any indication that those assets have suffered an
impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to
determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable
amount of an individual asset, the Operating Group estimates the recoverable amount of the cashgenerating unit to which the asset belongs. Intangible assets with indefinite useful lives and intangible
74
230260 Alpha pp066-pp088 05/12/2013 14:34 Page 75
assets not yet available for use are tested for impairment annually, and whenever there is an indication that
the asset may be impaired.
The recoverable amount of an asset or cash-generating unit is the higher of its fair value less costs to sell
and its value in use. In assessing value in use, the estimated future cash flows are discounted to their
present value using a pre-tax discount rate that reflects current market assessments of the time value of
money.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying
amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An
impairment loss is recognised immediately in comprehensive income statement, unless the relevant asset
is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit)
is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount
does not exceed the carrying amount that would have been determined had no impairment loss been
recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised
immediately in comprehensive income statement, unless the relevant asset is carried at a revalued amount,
in which case the reversal of the impairment loss is treated as a revaluation increase.
2.9 Income tax
Income tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for each year. Taxable profit differs from profit as
reported comprehensive income statement because it excludes items of income or expense that are
taxable or deductible in other years and it further excludes items that are not taxable or tax deductible. The
Operating Group’s liability for current tax is calculated using tax rates (and tax laws) that have been enacted
or substantively enacted in countries where JIL and its subsidiaries operate by the end of the financial
period.
Deferred tax is recognised on the differences between the carrying amounts of assets and liabilities in the
financial information and the corresponding tax bases used in the computation of taxable profit, and are
accounted for using the 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. Such assets and liabilities are not recognised if the temporary
difference arises from goodwill or from the initial recognition (other than in a business combination) of other
assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised on taxable temporary differences arising on investment in subsidiary,
except where the Operating Group is able to control the reversal of the temporary difference and it is
probable that the temporary difference will not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at the end of each financial year and reduced to
the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of
the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled
or the asset realised based on the tax rates (and tax laws) that have been enacted or substantively enacted
by the end of the financial year. Deferred tax is charged or credited to comprehensive income statement,
except when it relates to items charged or credited directly to equity, in which case the deferred tax is also
dealt with in equity, or where they arise from the initial accounting for a business combination. In the case
of a business combination, the tax effect is taken into account in calculating goodwill or determining the
excess of the acquirer’s interest in the net fair value of the acquirer’s identifiable assets, liabilities and
contingent liabilities over cost.
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230260 Alpha pp066-pp088 05/12/2013 14:34 Page 76
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax
assets against current tax liabilities and when they relate to income taxes levied by the same taxation
authority and the Operating Group intends to settle its current tax assets and liabilities on a net basis.
2.10 Financial instruments
Financial assets and financial liabilities are recognised on the Operating Group’s pro forma consolidated
statement of financial position when the Operating Group becomes a party to the contractual provisions of
the instrument.
Effective interest method
The effective interest method is a method of calculating the amortised cost of a financial instrument and
allocating the interest income or expense over the relevant period. The effective interest rate is the rate that
exactly discounts estimated future cash receipts or payments (including all fees on points paid or received
that form an integral part of the effective interest rate, transaction costs and other premiums or discounts)
through the expected life of the financial instrument, or where appropriate, a shorter period, to the net
carrying amount of the financial instrument. Income and expense are recognised on an effective interest
basis for debt instruments other than those financial instruments at fair value through comprehensive
income statement.
Financial assets
Financial assets within the scope of IAS 39 are classified as either:
(i)
financial assets at fair value through profit or loss
(ii)
loans and receivables
(iii)
held-to-maturity investments
(iv)
available-for-sale financial assets
The classification depends on the purpose for which the financial assets were acquired. Management
determines the classification of its financial assets at initial recognition and re-evaluates this classification
at every reporting date. As at the financial position date of the financial statements, the Operating Group
did not have any financial assets at fair value through profit or loss, and in the categories of held-to-maturity
investments and available-for-sale financial assets.
All regular way purchases and sales of financial assets are recognised on the trade date, i.e. the date that
the Operating Group commits to purchase the asset. Regular way purchases and sales are purchases or
sales of financial assets that require delivery of the financial assets within the period generally established
by regulation or convention of the market place concerned.
Financial assets are derecognised when the rights to receive cash flow from the financial assets have
expired or have been transferred and the Operating Group has transferred substantially all risks and
rewards of ownership.
Financial assets at fair value through profit or loss (FVTPL)
Financial assets are classified in this category if they are acquired for the purpose of selling in the short
term. Gains or losses on investments held for trading are recognised in the comprehensive income
statement.
Loans and receivables
Trade receivables, loans and other receivables that have fixed or determinable payments that are not
quoted in active market are classified as loans and receivables. Loans and receivables are measured at
amortised cost, using the effective interest method less impairment. Interest is recognised by applying the
effective interest method, except for short-term receivables when the recognition of interest would be
immaterial.
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230260 Alpha pp066-pp088 05/12/2013 14:34 Page 77
Impairment of financial assets
Financial assets, other than FVTPL, are assessed for indicators of impairment at the end of each financial
year. Financial assets are impaired where there is objective evidence that, as a result of one or more events
that occurred after the initial recognition of the financial asset, the estimated future cash flows of the
investment have been impacted.
For financial assets carried, at amortised cost, the amount of the impairment is the difference between the
asset’s carrying amount and the present value of estimated future cash flows, discounted at the original
effective interest rate.
The carrying amounts of all financial assets are reduced by the impairment loss directly with the exception
of trade receivables where the carrying amount is reduced through the use of an allowance account.
Changes in the carrying amount of the allowance account are recognised in comprehensive income
statement.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related
objectively to an event occurring after the impairment loss was recognised, the previously recognised
impairment loss is reversed through comprehensive income statement to the extent the carrying amount
of the investment at the date the impairment is reversed does not exceed what the amortised cost would
have been had the impairment not been recognised.
In respect of available-for-sale equity instruments, any subsequent increase in fair value after an impairment
loss is recognised directly in equity.
Derecognition of financial assets
The Operating Group derecognises a financial asset only when the contractual rights to the cash flows from
the asset expire, or it transfers the financial asset and substantially all the risks and rewards of ownership
of the asset to another entity. If the Operating Group neither transfers nor retains substantially all the risks
and rewards of ownership of the financial asset and continues to control the transferred asset, the
Operating Group recognises its retained interest in the asset and an associated liability for amounts it may
have to pay. If the Operating Group retains substantially all the risks and rewards of ownership of a
transferred financial asset, the Operating Group continues to recognise the financial asset and also
recognises a collateralised borrowing for the proceeds receivables.
2.11 Financial liabilities and equity instruments
Classification as debt or equity
Financial liabilities and equity instruments issued by the Operating Group are classified according to the
substance of the Contractual Arrangements entered into and the definitions of a financial liability and an
equity instrument.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of the Operating Group
after deducting all of its liabilities. Equity instruments are recorded at the proceeds received, net of direct
issue costs.
Financial liabilities
Financial liabilities are classified as either financial liabilities at fair value through comprehensive income
statement or other financial liabilities.
Financial liabilities are classified as at fair value through comprehensive income statement if the financial
liability is either held for trading or it is designated as such upon initial recognition.
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230260 Alpha pp066-pp088 05/12/2013 14:34 Page 78
Other financial liabilities
Trade and other payables
Trade and other payables are initially measured at fair value, net of transaction costs, and are subsequently
measured at amortised cost, where applicable, using the effective interest method, with interest expense
recognised on an effective yield basis.
Derecognition of financial liabilities
The Operating Group derecognises financial liabilities when, and only when, the Operating Group’s
obligations are discharged, cancelled or they expire.
2.12 Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits, and other short-term highly
liquid investments which are readily convertible to known amounts of cash and are subject to insignificant
risk of changes in value.
2.13 Leases
2.13.1 Operating Leases
Rentals payable under operating leases are charged to comprehensive income statement on
a straight-line basis over the term of the relevant lease unless another systematic basis is
more representative of the time pattern in which economic benefits from the leased asset are
consumed. Contingent rentals arising under operating leases are recognised as an expense
in the period in which they are incurred.
In the event that lease incentives are received to enter into operating leases, such incentives
are recognised as a liability. The aggregate benefit of incentives is recognised as a reduction
of rental expense on a straight-line basis, except where another systematic basis is more
representative of the time pattern in which economic benefits from the leased asset are
consumed.
2.14 Provisions
Provisions are recognised when the Operating Group has a present legal or constructive obligation as a
result of a past event, it is probable that the Operating Group will be required to settle the obligation, and
a reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the
present obligation at the end of each financial year, taking into account the risks and uncertainties
surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the
present obligation, its carrying amount is the present value of those cash flows.
When some or all of the economic benefits required to settle a provision are expected to be recovered from
a third party, the receivable is recognised as an asset if it is virtually certain that reimbursement will be
received and the amount of the receivable can be measured reliably.
Changes in the estimated timing or amount of the expenditure or discount rate are recognised in
comprehensive income statement when the changes arise.
2.15 Retirement benefit costs
Defined contribution plans are post-employment benefit plans under which the Operating Group pays fixed
contributions into separate entities such as the social security plan in PRC on a mandatory, contractual or
voluntary basis. The Operating Group has no further payment obligations once the contributions have been
paid.
Contributions to defined contribution plans are recognised as an expense in the Statement of
Comprehensive Income in the same financial year as the employment that gives rise to the contributions.
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230260 Alpha pp066-pp088 05/12/2013 14:34 Page 79
The expenses recognised for defined contribution plans are RMB 971,000 for the year ended
31 December 2010, RMB 1,679,000 for the year ended 31 December 2011 and RMB 3,744,000 for the
year ended 31 December 2012.
2.16 Revenue recognition
Revenue
Revenue is derived from providing B2B e-commerce services to small to medium sized suppliers in PRC
who pay varying service fees depending on the service packages they subscribe for.
Revenue is recognised upon the transfer of significant risks and rewards of ownership of the services to
the customers, which generally coincides with delivery time and recognised over the life specified in the
terms of the contracts.
Revenue from operating activities is made up of the sale of packages directly to customers or through
agencies. The revenue stated in the Statement of Consolidated Comprehensive Income is gross of
commission paid to agencies.
Deferred revenue is spread over a period of three months to one year depending on the service package
subscribed for by customers.
Interest income
Interest income is accrued on a time basis, by reference to the principal outstanding and at the applicable
effective interest rate.
2.17 Dividend distribution
Dividend distribution to shareholders is recognised as a liability in the Operating Group’s financial
information in the period in which the dividends are approved by the Company’s shareholders.
JIL is a holding company incorporated in Hong Kong. The ability of JIL to pay dividends depends
substantially on the receipt of dividends from its subsidiaries. In particular, each of the subsidiaries in the
PRC may pay dividends only out of its accumulated distributable profits, if any, determined in accordance
with its articles of association, and the accounting standards and regulations in China.
Moreover, pursuant to relevant PRC laws and regulations applicable to the subsidiaries in the PRC, a
certain percentage of after-tax profits are required to be set aside in a statutory common reserve fund.
Allocations to these statutory reserves may only be used for specific purposes and are not distributable to
JIL in the form of loans, advances, or cash dividends.
Furthermore, if any of the JIL’s subsidiaries incurs debt on its own behalf in the future, the instruments
governing the debt may restrict its ability to pay dividends or make other payments to JIL.
3. Critical accounting judgments and key sources of estimation uncertainty
In the application of the Operating Group’s accounting policies, which are described in Note 2,
management made judgements, estimates and assumptions about the carrying amounts of assets and
liabilities that were not readily apparent from other sources. The estimates and associated assumptions
were based on historical experience and other factors that were considered to be reasonable under the
circumstances. Actual results may differ from these estimates.
These estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting
estimates are recognised in the period in which the estimate is revised if the revision affects only that period
or in the period of the revision and future periods if the revision affects both current and future periods.
There are no key assumptions concerning the future and other key sources of estimation uncertainty at the
end of the financial year, that have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year.
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4.
Equipment
As at 31 December 2010
Cost
At 1 January 2010
Additions
At 31 December 2010
Accumulated depreciation
At 1 January 2010
Charge for the year
At 31 December 2010
Net book value
At 31 December 2010
As at 31 December 2011
Cost
At 1 January 2011
Additions
At 31 December 2011
Accumulated depreciation
At 1 January 2011
Charge for the year
At 31 December 2011
Net book value
At 31 December 2011
As at 31 December 2012
Cost
At 1 January 2012
Additions
Disposals
At 31 December 2012
Accumulated depreciation
At 1 January 2012
Charge for the year
Disposal
At 31 December 2012
Net book value
At 31 December 2012
Furniture
and fittings
RMB’000
Motor
vehicles
RMB’000
Office
equipment
RMB’000
Total
RMB’000
146
–
110
–
915
112
1,171
112
–––––––––––
–––––––––––
–––––––––––
146
110
1,027
–––––––––––
1,283
–––––––––––
–––––––––––
–––––––––––
–––––––––––
11
28
11
26
101
246
123
300
–––––––––––
–––––––––––
–––––––––––
39
37
347
–––––––––––
107
–––––––––––
73
–––––––––––
680
–––––––––––
423
–––––––––––
860
–––––––––––
–––––––––––
–––––––––––
–––––––––––
–––––––––––
–––––––––––
–––––––––––
–––––––––––
146
–
110
–
1,027
357
1,283
357
–––––––––––
–––––––––––
–––––––––––
146
110
1,384
–––––––––––
1,640
–––––––––––
–––––––––––
–––––––––––
–––––––––––
39
28
37
26
347
340
423
394
–––––––––––
–––––––––––
–––––––––––
67
63
687
–––––––––––
79
–––––––––––
47
–––––––––––
–––––––––––
–––––––––––
–––––––––––
146
3,162
–
110
380
–
–––––––––––
697
–––––––––––
–––––––––––
1,384
1,516
(263)
–––––––––––
–––––––––––
–––––––––––
3,308
490
2,637
–––––––––––
–––––––––––
67
1,259
–
63
94
–
–––––––––––
687
583
(251)
–––––––––––
–––––––––––
–––––––––––
1,326
157
1,019
–––––––––––
1,982
–––––––––––
–––––––––––
80
–––––––––––
333
–––––––––––
–––––––––––
–––––––––––
1,618
–––––––––––
–––––––––––
–––––––––––
817
–––––––––––
823
–––––––––––
–––––––––––
1,640
5,058
(263)
–––––––––––
6,435
–––––––––––
817
1,936
(251)
–––––––––––
2,502
–––––––––––
3,933
–––––––––––
–––––––––––
230260 Alpha pp066-pp088 05/12/2013 14:34 Page 81
5.
Trade and other receivables
As at 31 December
2010
2011
2012
RMB’000
RMB’000
RMB’000
Trade receivables
Other receivables
1,960
345
6,505
1,824
–––––––––––
–––––––––––
2,305
8,329
–––––––––––
–––––––––––
–––––––––––
–––––––––––
10,553
839
–––––––––––
11,392
–––––––––––
–––––––––––
The carrying amounts of trade and other receivables approximate their fair values.
6.
Cash and cash equivalents
As at 31 December
2010
2011
2012
RMB’000
RMB’000
RMB’000
Cash at banks
Cash on hand
5,695
93
–––––––––––
–––––––––––
5,788
30,220
–––––––––––
–––––––––––
7.
30,085
135
–––––––––––
–––––––––––
107,993
155
–––––––––––
108,148
–––––––––––
–––––––––––
Other payables
As at 31 December
2010
2011
2012
RMB’000
RMB’000
RMB’000
Rent incentives
Dividend payable
Other payable
Other tax payable
Accrued liabilities
–
–
–
266
1,266
–
20,000
–
765
2,920
–––––––––––
–––––––––––
1,532
23,685
–––––––––––
–––––––––––
–––––––––––
–––––––––––
993
–
11,510
945
5,246
–––––––––––
18,694
–––––––––––
–––––––––––
The carrying amounts of other payables approximate their fair values.
During the year ended 31 December 2011, the directors of Shishi JQW declared the distribution of
dividends totaling RMB 20 million. The dividends were paid in January 2012. Relevant PRC statutory laws
and regulations permit payments of dividends by the Operating Group’s PRC subsidiaries only out of their
retained earnings, if any, as determined in accordance with PRC accounting standards and regulations.
The results of operations reflected in the financial statements prepared of the Operating Group in
accordance with IFRS differ from those reflected in the individual financial statements of the PRC
subsidiaries.
8.
Share capital
As at 31 December
2010
2011
2012
RMB’000
RMB’000
RMB’000
Authorised, issued and fully paid:
1 ordinary share of RMB 1.00 each
–
–––––––––––
–––––––––––
–
–––––––––––
–––––––––––
–
–––––––––––
–––––––––––
As described in Note 2.5 above, although the Operating Group reconstruction did not become
unconditional until Admission, share capital is presented as if the Operating Group structure had always
been in place during the period under review.
Restructuring reserve arose from the combination of the Operating Group’s entities under common control
as a result of the group reconstruction.
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9. Statutory reserve
According to the relevant PRC regulations and the Articles of Association of the subsidiaries, it is required
to transfer 10 per cent. of its profit after income tax to the statutory surplus reserve until the reserve balance
reaches 50 per cent. of their registered capital. The transfer to this reserve must be made before the
distribution of dividends to equity owners. Statutory surplus reserve can be used to make good previous
years’ losses, if any, and be converted into paid-in capital in proportion to the existing interests of equity
owners, provided that the balance after such conversion is not less than 25 per cent. of the registered
capital.
10. Profit before taxation
Years ended 31 December
2010
2011
2012
RMB’000
RMB’000
RMB’000
Staff costs
Depreciation of equipment
8,917
300
–––––––––––
–––––––––––
17,954
394
–––––––––––
–––––––––––
38,292
1,936
–––––––––––
–––––––––––
11. Income tax expenses
Years ended 31 December
2010
2011
2012
RMB’000
RMB’000
RMB’000
Current income tax
Deferred tax
Original and reversal of temporary differences
1,865
(1,419)
–––––––––––
Income tax expenses recognised
446
–––––––––––
–––––––––––
8,395
(5,390)
–––––––––––
3,005
–––––––––––
–––––––––––
28,479
(7,280)
–––––––––––
21,199
–––––––––––
–––––––––––
The tax rate used for the reconciliations below is the effective weighted average rate of tax applicable in
the jurisdiction concerned.
The deferred tax is derived from the deferred revenue stated in the following table:
Years ended 31 December
2010
2011
2012
RMB’000
RMB’000
RMB’000
Deferred revenue after balance for the prior year
Deferred revenue balance for the year
(1,789)
7,464
Temporary difference
Profit multiplied by standard rate of 25%
Deferred tax asset opening balance
(7,464)
29,025
–––––––––––
–––––––––––
5,675
21,561
(29,025)
58,146
–––––––––––
29,121
–––––––––––
–––––––––––
–––––––––––
–––––––––––
–––––––––––
–––––––––––
1,419
–
5,390
1,419
7,280
6,809
–––––––––––
–––––––––––
1,419
6,809
–––––––––––
–––––––––––
–––––––––––
–––––––––––
–––––––––––
14,089
–––––––––––
–––––––––––
The inclusion of a deferred tax asset in the accounts in each of the three years ended 31 December 2012
is derived from deferred revenue.
The above deferred tax assets are recognised to the extent that it is probable that the future taxable profits
will allow the deferred tax assets to be recovered.
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The charge for each year can be reconciled to the profit or loss per the consolidated income statements
as follows:
Years ended 31 December
2010
2011
2012
RMB’000
RMB’000
RMB’000
Profit before taxation
1,701
Profit multiplied by standard rate of 25%
Effect of:
Tax effect on IFRS adjustments not adjusted
11,976
84,137
–––––––––––
–––––––––––
–––––––––––
–––––––––––
–––––––––––
–––––––––––
425
2,994
21,034
21
–––––––––––
446
–––––––––––
–––––––––––
11
–––––––––––
3,005
–––––––––––
–––––––––––
165
–––––––––––
21,199
–––––––––––
–––––––––––
12. Earnings per share
The calculation for basic earnings per share for the relevant period is based on the profit after income tax
attributable to equity holder for each of the years ended 31 December 2010, 2011, and 2012 are as
follows:
Years ended 31 December
2010
2011
2012
RMB’000
RMB’000
RMB’000
Profit attributable to equity holders
Weighted average number of shares
1,255
8,971
62,938
184,000,000 184,000,000 184,000,000
–––––––––––
–––––––––––
Earnings per share (basic and diluted)
0.007
–––––––––––
–––––––––––
–––––––––––
–––––––––––
0.049
–––––––––––
–––––––––––
–––––––––––
–––––––––––
0.342
–––––––––––
–––––––––––
13. Dividends
Years ended 31 December
2010
2011
2012
RMB’000
RMB’000
RMB’000
Dividends payable
–
–––––––––––
–––––––––––
83
20,000
–––––––––––
–––––––––––
–
–––––––––––
–––––––––––
230260 Alpha pp066-pp088 05/12/2013 14:34 Page 84
14. Subsidiaries
The details of the subsidiaries are as follows:
Name of subsidiary
Place of
incorporation
Effective equity interest
held by JIL
As at 31 December
2010
2011
2012
Principal activity
Yangzhou Junde
Investment Consulting
Development Co., Ltd.
PRC
Wholly Foreign Owned
Enterprise
100%
100%
100%
Jiangsu Province
JQW Technology Co.,
Ltd.
PRC
B2B e-commerce
services
100%
100%
100%
Shishi JQW Technology
Co. Ltd.
PRC
B2B e-commerce
services
100%
100%
100%
Shenzhen JQW
Technology Co., Ltd.
PRC
IT support and B2B
e-commerce services
Nil
Nil
Nil
As described in note 2.5 above, although the Operating Group reconstruction did not become
unconditional until Admission, share capital is presented as if the Operating Group structure has always
been in place.
Shenzhen JQW is controlled through Contractual Arrangements as described in note 2.4.
15. Operating lease commitments
As at each of the financial position dates, the future aggregated minimum lease payments under noncancellable operating leases contracted for but not recognised as liabilities, are as follows:
As at 31 December
2010
2011
2012
RMB’000
RMB’000
RMB’000
Within one year
After one year but before five years
48
–
55
–
–––––––––––
–––––––––––
48
55
–––––––––––
–––––––––––
–––––––––––
–––––––––––
1,053
3,970
–––––––––––
5,023
–––––––––––
–––––––––––
16. Significant related party transactions
The ultimate controlling party is JQW plc with effect from Admission.
Certain of the Operating Group’s transactions and arrangements are with related parties and the effect of
these on the basis determined between the parties is reflected in this consolidation financial information.
The balances are unsecured, interest-free and repayable on demand unless otherwise stated.
During the period under review, JIL obtained financing from the ultimate shareholder, Ms Wang Xiufang, of
USD 80,000 for the incorporation capital of Yangzhou Junde.
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230260 Alpha pp066-pp088 05/12/2013 14:34 Page 85
16.1 Key management compensation
Key management personnel compensation is analysed as follows:
Years ended 31 December
2010
2011
2012
RMB’000
RMB’000
RMB’000
Salaries and other short-term employee benefits
1,939
–––––––––––
–––––––––––
2,507
–––––––––––
–––––––––––
3,524
–––––––––––
–––––––––––
17. Financial risk management
The main risks arising from the Operating Group’s financial statements are credit risk, liquidity risk and
foreign currency risk. The Operating Group reviews and agrees policies for managing each of these risks
and they are summarised below:
17.1 Credit risk
Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in a loss to
the Operating Group. The Operating Group has adopted a policy of only dealing with creditworthy
counterparties and obtaining sufficient collateral where appropriate, as a means of mitigating the risk of
financial loss from defaults. The Operating Group performs ongoing credit evaluation of its counterparties’
financial condition and does not hold any collateral as security over its customers. The Operating Group’s
major classes of financial assets are cash and cash equivalents, and other receivables and payables.
As at the end of each financial year, the Operating Group’s maximum exposure to credit risk is represented
by the carrying amount of each class of financial assets recognised in the consolidated statements of
financial position.
As at 31 December 2010, 2011, and 2012 substantially all the cash and cash equivalents as detailed in
Notes 6 to the consolidated financial information are held in major financial institutions which are regulated
and located in the PRC, which management believes are of high credit quality. The management of the
Operating Group does not expect any losses arising from non-performance by these counterparties.
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure
to credit risk at the reporting date of the Operating Group is as follows:
As at 31 December
2010
2011
2012
RMB’000
RMB’000
RMB’000
Cash and cash equivalents
Trade receivables
Other receivables
5,788
1,960
345
30,220
6,505
1,824
–––––––––––
–––––––––––
8,093
38,549
–––––––––––
–––––––––––
–––––––––––
–––––––––––
108,148
10,553
838
–––––––––––
119,539
–––––––––––
–––––––––––
The Operating Group has no significant concentrations of credit risk. Cash is placed with established
financial institutions. The maximum exposure to credit risk is represented by the carrying amount of each
financial asset in the statement of financial position.
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230260 Alpha pp066-pp088 05/12/2013 14:34 Page 86
Trade receivables not impaired
Operating Group’s trade receivables that are not impaired are as follows:
As at 31 December
2010
2011
2012
RMB’000
RMB’000
RMB’000
Current
31 – 60 days
61 – 90 days
91 to 120 days
1,960
–
–
6,505
–
–
–––––––––––
–––––––––––
1,960
6,505
–––––––––––
–––––––––––
–––––––––––
–––––––––––
10,553
–
–
–––––––––––
10,553
–––––––––––
–––––––––––
17.2 Currency risk
The Operating Group has no significant exposure to foreign exchange risk as its cash flows and financial
assets and liabilities are mainly denominated in Renminbi.
17.3 Interest rate risk
The Operating Group has no interest rate risk as the Operating Group has no loan facilities, term loans or
overdraft facilities as at financial position date.
17.4 Liquidity risk
Liquidity risk arises from the Operating Group’s management of working capital. It is the risk that the
Operating Group will encounter difficulty in meeting its financial obligations as they fall due.
The Operating Group’s policy is to ensure that it will always have sufficient cash to allow it to meet its
liabilities when they become due. The principal liabilities of the Operating Group arise in respect of trade
and other payables. Other payables and tax are all payable within 12 months.
The Board reviews cash flow projections on a regular basis as well as information on cash balances.
17.5 Derivatives, financial instruments and risk management
The Operating Group does not use derivative instruments or other financial instruments to manage its
exposure to fluctuations in foreign currency exchange rates, interest rates and commodity prices.
17.6 Capital risk management
The primary objective of the Operating Group’s capital management is to ensure that it maintains a strong
credit rating and healthy capital ratios in order to support its business and maximise shareholder value.
The Operating Group manages its capital structure and makes adjustments to it, in light of changes in
economic conditions. To maintain or adjust the capital structure, the Operating Group may adjust the return
capital to shareholders or issue new shares. No changes were made in the objectives, policies or
processes during each of the years ended 31 December 2010, 2011, and 2012.
18. Fair value of financial instruments
The carrying amount of the financial assets and financial liabilities in the financial information approximate
their fair values due to the relative short term maturity of these financial instruments. The fair values of other
classes of financial assets and liabilities are disclosed in the respective notes to the financial information.
The fair values of financial assets and financial liabilities are determined as follows:
(i)
the fair value of financial assets and financial liabilities with standard terms and conditions and trade
on active liquid markets are determined with reference to quoted market prices;
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230260 Alpha pp066-pp088 05/12/2013 14:34 Page 87
(ii)
the fair value of other financial assets and financial liabilities (excluding derivative instruments) are
determined in accordance with generally accepted pricing models based on discounted cash flow;
and
(iii)
the fair value of derivative instruments are calculated using quoted prices. Where such prices are not
available, discounted cash flow analysis is used, based on the applicable yield curve of the duration
of the instruments for non-optional derivatives, and option pricing models for optional derivatives.
19. Segment Information
Operating segments are based on internal reports about components of the Operating Group which are
regularly reviewed by the Board of Directors by the Chief Operating Decision Makers (“CODM”) for strategic
decision making and resources allocation in order to allocate resources to the segment and to assess its
performance.
The Group reporting segments are direct sales and distribution sales.
Only segmental revenues are considered by the CODM for strategic decision making purposes. The
activities of the Operating Group took place solely in the PRC and as such no geographical segment
information is stated during the period under review.
Year ended 31 December 2010
Revenue and results:
Revenues from external customers
Segment profit
Unallocated other income and expenses
Direct
sales
RMB’000
Distribution
sales
RMB’000
10,306
41,750
Total
RMB’000
52,056
15,876
(14,175)
–––––––––––
Profit before tax
1,701
–––––––––––
Assets and liabilities
Assets
Liabilities
10,372
9,216
The segment information provided to management for the reportable segments for the year ended
31 December 2011 is as follows:
Year ended 31 December 2011
Revenue and results:
Revenues from external customers
Segment profit
Unallocated other income and expenses
Direct
sales
RMB’000
Distribution
sales
RMB’000
30,699
115,534
Total
RMB’000
146,233
48,828
(36,852)
–––––––––––
Profit before tax
11,976
–––––––––––
Assets and liabilities
Assets
Liabilities
46,181
54,054
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230260 Alpha pp066-pp088 05/12/2013 14:34 Page 88
The segment information provided to management for the reportable segments for the year ended
31 December 2012 is as follows:
Year ended 31 December 2012
Revenue and results:
Revenues from external customers
Segment profit
Unallocated other income and expenses
Direct
sales
RMB’000
Distribution
sales
RMB’000
81,211
206,604
Total
RMB’000
287,815
136,352
(52,215)
–––––––––––
Profit before tax
84,137
–––––––––––
Assets and liabilities
Assets
Liabilities
137,562
85,497
Revenues from the Operating Group’s top three customers represent approximately 1.32 per cent. of the
total revenue in 2012 (2011 and 2010: <1%). The top customers were selected based on the values of the
packages purchased.
There is no single customer from whom the revenue amounts to 10 per cent. or more of the Operating
Group’s revenue, during the period under review.
20. Commitments
The Operating Group had not entered into any material capital commitments as at 31 December 2012.
21. Contingencies
As at 31 December 2012, the Operating Group had a contingent liability of RMB 4 million if it fails to meet
certain financial and operational milestones stipulated in the property lease agreement in Jiangsu JQW.
22. Subsequent events
On 3 December 2013, JQW plc issued and allotted 184,000,000 Ordinary Shares to the nominees of the
holder of the share capital of JIL in consideration for the transfer of the entire issued and paid up capital of
JIL to JQW plc pursuant to the Share Swap Agreement.
23. Nature of financial information
The financial information presented above does not constitute statutory financial statements for the
Operating Group the period under review.
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PART 5
UNAUDITED INTERIM FINANCIAL INFORMATION OF THE OPERATING GROUP
FOR THE SIX MONTHS ENDED 30 JUNE 2013
Set out below are the unaudited results of the Operating Group for the six months ended 30 June 2013,
together with the unaudited results for the comparative six month period ended 30 June 2012.
Statements of Consolidated Comprehensive Income
Note
Revenue
Cost of sales
Six months
ended
30 June
2013
RMB’000
(Unaudited)
Six months
ended
30 June
2012
RMB’000
(Unaudited)
180,775
(80,861)
143,218
(88,797)
–––––––––––
–––––––––––
Gross profit
99,914
54,421
Other income
Selling and distribution expenses
Administrative expenses
200
(23,070)
(6,208)
58
(21,145)
(4,406)
Operating profit
Finance costs
–––––––––––
–––––––––––
70,836
28,928
–
Profit on ordinary activities before taxation
Income tax expense
3
Profit after taxation and total comprehensive income
Total comprehensive income attributable to owners of
the parent
Owners of the parent
Interests under Contractual Arrangements
–––––––––––
70,836
28,928
(17,966)
–––––––––––
52,870
–––––––––––
52,870
52,749
121
–––––––––––
52,870
–––––––––––
–––––––––––
Earnings per share:
Basic and diluted
0.287
–––––––––––
–––––––––––
89
–
–––––––––––
(7,527)
–––––––––––
21,401
–––––––––––
21,401
21,443
(42)
–––––––––––
21,401
–––––––––––
–––––––––––
0.116
–––––––––––
–––––––––––
230260 Alpha pp089-pp093 05/12/2013 14:35 Page 90
Statements of Consolidated Financial Position
The pro-forma statements of consolidated financial position of the Operating Group as at 30 June 2013
and at 31 December 2012 are set out below:
Note
Non-current assets
Equipment
Domain names
As at
As at
30 June 31 December
2013
2012
RMB’000
RMB’000
(Unaudited)
(Audited)
2,392
–
–––––––––––
2,392
Current assets
Trade and other receivables
Deferred tax asset
Cash and cash equivalents
3,933
–
–––––––––––
3,933
–––––––––––
–––––––––––
32,397
27,008
176,780
11,392
14,089
108,148
–––––––––––
236,185
–––––––––––
133,629
–––––––––––
–––––––––––
Total Assets
238,577
137,562
Current liabilities
Other payables
Deferred revenue
Income tax payable
9,368
110,318
19,956
18,694
58,146
8,657
Total Liabilities
Issued capital and reserves attributable to owners of
the parent
Share Capital
Statutory reserves
Accumulated profits
4
–––––––––––
–––––––––––
139,642
85,497
–
500
97,435
–
500
50,565
–––––––––––
97,935
–––––––––––
Interests under Contractual Arrangements
1,000
–––––––––––
Total Equity and Liabilities
238,577
–––––––––––
–––––––––––
90
–––––––––––
51,065
–––––––––––
1,000
–––––––––––
137,562
–––––––––––
–––––––––––
230260 Alpha pp089-pp093 05/12/2013 14:35 Page 91
Statements of Consolidated Changes in Equity
The pro-forma Consolidated Statements of Consolidated Changes in Equity for the six months ended
30 June 2013
Interests
under
Contractual
Arrangements
RMB’000
Balance at
31 December 2012
Comprehensive income
Profit for the period
Movements in reserve
Total comprehensive
income for the period
Transaction with owners
Dividends paid
Balance at
30 June 2013
1,000
Share
capital
RMB’000
–
Attributable to the owners of the parents
Capital Accumulated
Statutory
reserve
profits
reserve
RMB’000
RMB’000
RMB’000
–
50,565
500
Total
RMB’000
52,065
–––––––––––
–––––––––––
–––––––––––
–––––––––––
–––––––––––
–––––––––––
–
–
–
–
–
–
52,870
–
–
–
52,870
–
–––––––––––
1,000
–––––––––––
–
–––––––––––
1,000
–––––––––––
–––––––––––
–––––––––––
–
–––––––––––
–
–––––––––––
–
–––––––––––
–––––––––––
–––––––––––
–
–––––––––––
–
–––––––––––
–
–––––––––––
–––––––––––
–––––––––––
103,435
–––––––––––
(6,000)
–––––––––––
97,435
–––––––––––
–––––––––––
–––––––––––
500
–––––––––––
–
–––––––––––
500
–––––––––––
–––––––––––
–––––––––––
104,935
–––––––––––
(6,000)
–––––––––––
98,935
–––––––––––
–––––––––––
Accumulated profits comprise the Operating Group’s cumulative comprehensive profits since
incorporation.
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Statements of Consolidated Cash Flows
The pro-forma statements of consolidated cash flows for the Operating Group for the six months ended
30 June 2013 and 30 June 2012 are set out below:
Cash Flow from Operating Activities
Profit for the period before taxation
Adjustment for:
Depreciation of property, plant and equipment
Interest income
Six months
ended
30 June
2013
RMB’000
(Unaudited)
Six months
ended
30 June
2012
RMB’000
(Unaudited)
70,836
28,927
1,608
(200)
273
(58)
–––––––––––
–––––––––––
Operating cash flows before movements in working capital
72,244
29,142
Increase in trade and other receivables
Increase in deferred tax asset
Increase in deferred revenue
Decrease in other payables and accruals
(21,013)
(12,919)
52,172
(9,318)
(3,321)
(4,021)
16,082
(15,366)
Cash generated from operating activities
Income tax paid
–––––––––––
–––––––––––
81,166
22,516
(6,668)
–––––––––––
Net cash generated from operating activities
74,498
–––––––––––
(6,520)
–––––––––––
15,996
–––––––––––
Cash flow from investing activities
Interest received
Proceeds from disposal of property, plant and equipment
Acquisition of property, plant and equipment
Net cash used in investing activities
200
(66)
–
–––––––––––
134
–––––––––––
Cash flow from financing activities
Issuance of share capital
Dividends declared and paid
–
(6,000)
–––––––––––
Net cash used in financing activities
(6,000)
Net Increase in Cash & Cash Equivalents
Cash and equivalent at beginning of period
(2,660)
–––––––––––
2,000
–
–––––––––––
2,000
–––––––––––
68,632
15,336
108,148
176,780
–––––––––––
–––––––––––
92
–––––––––––
–––––––––––
–––––––––––
Cash and equivalent at end of period
58
–
(2,718)
30,220
–––––––––––
45,556
–––––––––––
–––––––––––
230260 Alpha pp089-pp093 05/12/2013 14:35 Page 93
Notes to the Interim Financial Information
1. Presentation currency
The Financial Information has been presented in Renminbi (“RMB”) and rounded to the nearest thousand.
2. Summary of significant accounting policies
2.1 Basis of preparation
The Financial Information has been prepared in accordance with International Financial Reporting
Standards (“IFRS”) and on the historical cost convention, unless otherwise indicated in this summary of
significant accounting policies.
3. Income Tax expense
The tax charge on profits assessable has been calculated at the rates of tax prevailing in the countries in
which the Operating Group operates, based on existing legislation, interpretation and practices in respect
thereof.
4.
Share capital
As at
30 June
2013
RMB’000
Authorised, issued and fully paid:
1 ordinary share of RMB1 each
–
–––––––––––
–––––––––––
As at
30 June
2012
RMB’000
–
–––––––––––
–––––––––––
Although the Operating Group’s reconstruction did not become unconditional until Admission, share capital
is presented as if the Operating Group structure has always been in place.
5. Subsequent events
On 3 December 2013, the Company issued and allotted 184,000,000 Ordinary Shares to the nominees of
the holder of the Share Capital of Junde International Holdings Limited (“JIL”) in consideration for the
transfer of the entire issued and paid up capital of JIL to JQW plc pursuant to the Share Swap Agreement.
On 9 December 2013, the Company raised £6.685 million by the issue of 9,549,991 Ordinary Shares.
6. Nature of financial information
The financial information does not constitute Statutory Accounts for the period under review.
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PART 6
UNAUDITED PRO FORMA STATEMENT OF THE AGGREGATED NET ASSETS
Crowe Clark Whitehill LLP
Chartered Accountants
Member of Crowe Horwath International
St Bride’s House
10 Salisbury Square
London EC4Y 8EH, UK
+44 (0)20 7842 7100
+44 (0)20 7583 1720
9 December 2013
The Directors
JQW plc
13-14 Esplanade
St Helier
Jersey
JE1 1BD
The Directors
Cairn Financial Advisers LLP
61 Cheapside
London
EC2V 6AX
Dear Sirs
Introduction
We report on the unaudited pro forma financial information of JQW plc (the “Company”) and its
subsidiaries (together, the “Group”) set out in Part 6 of the AIM Admission Document (the “Document”)
dated 9 December 2013, which has been prepared on the basis described, for illustrative purposes only,
to provide information about how the Placing and Admission might have affected the net assets presented
on the basis of the accounting policies adopted by the Company in preparing the unaudited interim
financial information for the period ended 30 June 2013. This report is required by Schedule Two of the
AIM Rules and is given for the purpose of complying with that scheduled and for no other purpose.
Responsibilities
It is the responsibility of the Directors of the Company to prepare the unaudited pro forma financial
information in accordance with Schedule Two of the AIM Rules.
It is our responsibility to form an opinion, in accordance with Schedule Two of the AIM Rules, as to the
proper compilation of the Pro Forma Financial Information and to report that opinion to you.
In providing this opinion we are not updating or refreshing any reports or opinions previously made by us
on any financial information used in the compilation of the Pro Forma Financial Information, nor do we
accept responsibility for such reports or opinions beyond that owed to those to whom those reports or
opinions were addressed by us at the dates of their issue.
Basis of opinion
We conducted our work in accordance with Standards of Investment Reporting issued by the Auditing
Practices Board in the United Kingdom. The work that we performed for the purpose of making this report,
which involved no independent examination of any of the underlying financial information, consisted
primarily of comparing the unadjusted financial information with the source documents, considering the
evidence supporting the adjustments and discussing the Pro Forma Financial Information with the
Directors.
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230260 Alpha pp094-pp096 05/12/2013 14:35 Page 95
We planned and performed our work so as to obtain all the information and explanations which we
considered necessary in order to provide us with reasonable assurance that the Pro Forma Financial
Information has been properly compiled on the basis stated and that such basis is consistent with the
accounting policies of the Company.
Our work has not been carried out in accordance with auditing or other standards and practices generally
accepted in jurisdictions outside the United Kingdom and accordingly should not be relied upon as if it had
been carried out in accordance with those standards and practices.
Opinion
In our opinion:
(a)
the Pro Forma Financial Information has been properly complied on the basis stated; and
(b)
such basis is consistent with the accounting policies of the Company.
Declaration
For the purpose of paragraph a of Schedule Two of the AIM Rules, we are responsible for this report as
part of the Document and declare that we have taken all reasonable care to ensure that the information
contained in this report is, to the best of our knowledge, in accordance with the facts and contains no
omission likely to affect its import. This declaration is included in the Document in compliance with
Schedule Two of the AIM Rules.
Yours faithfully
Crowe Clark Whitehill LLP
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230260 Alpha pp094-pp096 05/12/2013 14:35 Page 96
Set out below is an unaudited pro forma statement of aggregated net assets of the Group, which has been
prepared on the basis of the Company’s unaudited financial information for the period ended 31 July 2013
and the pro forma aggregated financial information of the Operating Group for the six months ended 30
June 2013, as adjusted for the IPO placing proceeds, as set out in the notes below. The unaudited pro
forma statement has been prepared for illustrative purposes only and, because of its nature, will not
represent the actual consolidated financial position of the Company at the date of Admission.
Unaudited pro forma statement of aggregated net assets
Non-current asset
Equipment
Domain Names
Current assets
Trade and other receivables
Deferred tax asset
Cash and cash equivalents
The
Company
RMB’000
31 July
2013
Unaudited
Operating
Group
RMB’000
30 June
2013
Unaudited
–
–
2,392
–
Current liabilities
Trade and other payables
Deferred revenue
Income tax payable
Unaudited
–
–
2,392
–
–––––––––––
–––––––––––
–
2,392
–
–––––––––––
2,392
–––––––––––
–––––––––––
–––––––––––
–––––––––––
–
–
–
32,397
27,008
176,780
–
–
56,850
32,397
27,008
233,630
–––––––––––
–––––––––––
–––––––––––
–
236,185
56,850
–
–––––––––––
238,577
–––––––––––
56,850
–––––––––––
293,035
–––––––––––
295,427
–––––––––––
–––––––––––
–––––––––––
–––––––––––
–
–
–
9,368
110,318
19,956
–
–
–
9,368
110,318
19,956
–––––––––––
–––––––––––
–––––––––––
–
139,642
–
–––––––––––
Net assets
Unaudited
–––––––––––
–––––––––––
Total assets
Unaudited
Pro forma
Placing net assets of
adjustments
the Group
RMB’000
RMB’000
–
–––––––––––
–––––––––––
–––––––––––
98,935
–––––––––––
–––––––––––
–––––––––––
56,850
–––––––––––
–––––––––––
–––––––––––
139,642
–––––––––––
155,785
–––––––––––
–––––––––––
Notes:
1.
The statement of financial position of the Company as at 31 July 2013 has been extracted and converted from its reporting
currency of British Pound Sterling to Chinese Renminbi (approximately GBP£ 1: RMB 10), being the presentation currency of
the Operating Group, without further adjustments from the Company’s financial information set out in Part 3 of the Admission
Document. No account has been taken of the activities of the Company subsequent to 31 July 2013.
2.
The statement of financial position of the Operating Group as at 30 June 2013 has been extracted without adjustment from
the Operating Group’s financial information set out in Part 5 of the Admission Document. No account has been taken of the
activities of the Operating Group subsequent to 30 June 2013.
3.
The Company raised £6.685 million (approximately RMB 66.85 million) (gross) from the Placing. Associated costs of the placing
were approximately £1 million (approximately RMB 10 million).
4.
The Directors consider that the substance of the acquisition of the Operating Group by the Company is that of a reverse
acquisition and that, in order to give a true and fair view, the reverse acquisition accounting method, as permitted by IFRS 3
“Business combinations”, will be adopted as the basis of consolidation in the first published accounts of the Company following
completion of the acquisition. Any goodwill arising under reverse acquisition accounting will be accounted for within the Income
Statement on consolidation.
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PART 7
ADDITIONAL INFORMATION
1.
Responsibility
The Directors, whose names are set out on page 7 of this Admission Document and the Company, accept
(subject to any specific qualifications set out herein) responsibility both individually and collectively, for all the
information contained in this document, and compliance with the AIM Rules. To the best of the knowledge
and belief of the Directors and the Company (each of whom has taken all reasonable care to ensure that
such is the case), the information contained in this document is in accordance with the facts underlying that
information and does not omit anything likely to affect the import of such information.
2.
2.1
The Company and its Subsidiaries
The Company was incorporated and registered as a private limited company with no par value in
Jersey on 26 July 2013 under the name JQW Limited and was subsequently re-registered as a
public limited company under the name JQW plc. The Company’s registration number is 113593.
Pursuant to a special resolution of the Shareholders passed on 22 November 2013 the Company
changed its name to JQW plc and changed its status to be a public limited company. The Company
is governed by its Memorandum and Articles of Association and by Jersey Law and complies with
the Jersey corporate governance regime.
2.2
The liability of the members of the Company is limited. The Company has an unlimited life unless it
is dissolved, wound up or enters into any reconstruction, amalgamation or merged into, or
transferred into, another entity in accordance with Jersey Law.
2.3
The registered office of the Company is at 13-14 Esplanade, St Helier, Jersey JE1 1BD. The
Company is domiciled in Jersey.
2.4
The principal place of business of the Group is at 1-4/F, Buildings 12(c), Guangling Information
Industry Park, Yangzhou City, Jiangsu Province, 225000 China. The telephone number of the
Company at its principal place of business is+86-0514-89712999. The register of members of the
Company is kept at its registered office. The Group’s websites are: www.jqw.com, www.jqw.cn and
www.jqw-ir.com.
2.5
The Company is a holding company and its principal activity is the holding of investments in its
Subsidiaries. As a newly incorporated Company, there have been no important events in the
development of the business thus far, save for the acquisition of the entire issued share capital of
JIL pursuant to the Share Swap Agreement. The Company has not developed, nor is it developing,
any new services.
2.6
The ISIN number of the Ordinary Shares is JE00BGCZC53 and the Ordinary Shares are registered
form and are capable of being held in either certificated or uncertificated form.
2.7
As at the date of this document, the Company has the following subsidiary undertakings, all of which
are directly or indirectly wholly owned, apart from Shenzhen JQW, which is subject to the
Contractual Arrangements set out in paragraphs 2.8 and 10.6 below:
Name of
subsidiary
Junde
International
Holdings
Limited
Company number
1791570
Date and
country of
incorporation
Ownership,
Interest and
Voting Power
24 August 2012,
Hong Kong
The Company,
100%
97
Registered
address
Principal
Activities
12th Floor
Ruttonjee House
11 Duddell Street
Central
Hong Kong
Holding
company
230260 Alpha pp097-imp 05/12/2013 14:32 Page 98
Name of
subsidiary
Yangzhou
Junde
Investment
Consulting
Development
Co., Ltd
Date and
country of
incorporation
Ownership,
Interest and
Voting Power
321000400023807
29 September
2012, PRC
350581100053483
Company number
Registered
address
Principal
Activities
JIL, 100%
No.37 Tangwang
Road
Guangling
District
Yangzhou City
PRC
Holding
company
8 April 2009,
PRC
Yangzhou
Junde,100%
3rd Floor,
Sewing
Machine
House,
Garment
City,
Nanyang
Road,
Shishi City,
PRC
24 October
2011, PRC
Yangzhou
Junde, 100%
F1-F4, C
Marketing of
Base, Nei
the JQW
Building 12,
platform and
Information
developing the
Service
registered
Industry Base, member base
Yangzhou,
Jiangsu
Province, PRC
14 December
2004, PRC
Cai Yongde,
51%; and
Chen Daocai,
49% (see
paragraph
10.6 below)
Guangdong
Province
Shenzhen
City Luohu
District Road,
building
15A16,
15A17 PRC
扬州君德投资
咨询发展有限
公司
Shishi JQW
Technology
Co., Ltd
石狮金泉网络
技术有限公司
Jiangsu
321000000082926
Province JQW
Technology
Co., Ltd.
江苏省金泉网
络技术有限公司
Shenzhen
JQW
Information
Co., Ltd
440301104123072
深圳市金泉网
资讯有限公司
Marketing of
the JQW
platform and
developing the
registered
member base
Operator of
the B2B ecommerce
platform and
provider of
website
design
services
2.8
The Company does not enjoy direct equity ownership in Shenzhen JQW. Instead, Yangzhou Junde
has Contractual Arrangements with Shenzhen JQW and its shareholders that allows Yangzhou
Junde to exercise effective managerial, operational and financial control over Shenzhen JQW and
consolidate its financial results as if it were Yangzhou Junde’s wholly owned Subsidiary. More details
are set out in paragraph 10.14 of Part 7 of this document.
2.9
The Company’s accounting reference date is 31 December.
2.10 The non-statutory auditors of the Company and of the Subsidiaries for each of the three financial
years ended 31 December 2012 are Crowe Clark Whitehill LLP, St Bride’s House, 10 Salisbury
Square, London EC4Y 8EH. CCW is registered by the Institute of Chartered Accountants in England
and Wales to carry out company audit work in the UK.
2.11 Statutory auditors of the Subsidiaries for the financial year ended 31 December 2012 were as
follows:
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2.11.1 Yangzhou Junde: Yangzhou Junde was incorporated on 24 August 2012 hence there has not
been any requirements to file any statutory audits;
2.11.2 Jiangsu JQW: Chinese Certified Public Accountants Zhu Xinhua and Bao Guomin from
Yangzhou Xinyang Certified Public Accountants which is registered to conduct company audit
work and is regulated by Finance Department of Jiangsu Province;
2.11.3 Shishi JQW: Chinese Certified Public Accountants Dong Rushan and Han Ping from Xiamen
Chengxiangyuan Associated Certified Public Accountants which is registered to conduct
company audit work and is regulated by Finance Department of Fujian Province;
2.11.4 Shenzhen JQW: Chinese Certified Public Accountants Li Qingming and Yu Zhenhuafrom
Shenzhen Guoxintai Certified Public Accountants (Common Cooperate); registered to
conduct company audit work and is regulated by Finance Committee of Shenzhen City.
2.12 On 3 December 2013, by or pursuant to resolutions passed by the Shareholders, the Company
approved the adoption of new Articles, the terms of which are summarised in paragraph 8 of this
Part 7 of this document.
3.
3.1
Share capital of the Company
On incorporation, the Company had an unlimited authorised share capital of no par value, of which
two shares were issued, fully paid to the subscribers to the Memorandum of Association of the
Company, being Central One Limited and Central Two Limited.
3.2
On 15 August 2013, by resolutions of the Board, the Board approved the transfer of the two
subscriber shares in the Company from Central One Limited and Central Two Limited to Ms Wang
Xiufang.
3.3
On 23 August 2013, by resolutions of the Board, the Board approved the transfer of the two
subscriber shares from Ms Wang Xiufang to Tian Sheng Enterprises Limited.
3.4
On 21 November 2013, by resolution of the Board, the Board approved the transfer of one ordinary
share from Tian Sheng Enterprises Limited to Cheng Tong International Limited.
3.5
On 3 December 2013, by resolutions of the Board, the Board issued and allotted 183,999,998
Ordinary Shares to the nominees of the holder of the share capital of JIL at the time and certain other
persons as specified in the Share Swap Agreement (in such proportions as specified in each of the
Share Swap Agreement), in consideration for the transfer of the entire issued and paid up capital of
JIL to the Company pursuant to the Share Swap Agreement and to the subscribers under the
Subscription Agreement. Further information on the Share Swap Agreement and the Subscription
Agreement is set out in paragraphs 10.11 and 10.12 below.
3.6
On 3 December 2013, by or pursuant to, unanimous special written resolutions, the members of the
Company:
3.6.1 approved, conditional on Admission, the adoption of the Share Option Scheme. Further
information on the Share Option Scheme is set out in paragraph 12 below;
3.6.2 authorised the Directors, to allot the Placing Shares conditional on Admission and the
Ordinary Shares referred to in paragraph 3.5;
3.6.3 authorised the Directors, conditional on Admission to allot up to a number equal to
15 per cent. of the Enlarged Share Capital at any time from Admission until the first annual
general meeting of the Company; and
3.6.4 disapplied pre-emption rights in relation to any such allotment of Ordinary Shares referred to
in paragraph 3.6.2 and otherwise up to a number equal to total warrant shares plus 3.6.3 plus
15 per cent. Enlarged Share Capital at any time from Admission until the first annual general
meeting of the Company, including such allotment of Ordinary Shares as the result of the
exercise of the Warrants.
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230260 Alpha pp097-imp 05/12/2013 14:32 Page 100
3.7
The authorised and issued share capital of the Company (i) at the date of this document and (ii) as
it will be immediately after Admission, is as follows:
Date
Number of Authorised
Ordinary Shares
Number of Issued
Ordinary Shares
Unlimited
Unlimited
184,000,000
193,549,991
As at the date of this document
Immediately after Admission
3.8
Jersey statutes and common law do not grant shareholders the benefit of pre-emption rights in
relation to the allotment of new shares in a company unless otherwise specifically included in that
company’s articles of association. The Company has therefore voluntarily adopted pre-emption
provisions in its Articles which are intended to replicate the pre-emption rights set out in the UK Act,
details of which are set out in the summary of the Articles in paragraph 8 below.
3.9
The Placing Shares will rank pari passu in all respects with the Existing Shares and shall rank pari
passu for all dividends or other distributions hereafter declared, paid or made on Existing Shares.
3.10 The Ordinary Shares are issued pursuant to Jersey Law and the Memorandum and Articles of the
Company.
3.11 As at the date of this document, more than ten (10) per cent. of the Existing Shares were allotted
for consideration other than cash.
3.12 There is no class of shares in issue other than Ordinary Shares and no Ordinary Shares have been
issued other than as fully paid.
3.13 The Ordinary Shares are freely transferable provided that they are fully paid.
3.14 Save as disclosed in this document, the Company does not have in issue any securities not
representing share capital and there are no securities in the Company held by or on behalf of the
Company or by any member of the Group.
3.15 The Company has not issued or granted any options, warrants, exchangeable securities, securities
with warrants or any convertible securities of the Company save as detailed in paragraph 10 of Part
7 of this document.
3.16 Save as set out in this document:
3.16.1 no loan capital of the Company has been issued or is proposed to be issued;
3.16.2 there are no shares in the capital of the Company currently in issue with a fixed date on which
entitlement to a dividend arises and there are no arrangements in force whereby future
dividends are waived or agreed to be waived;
3.16.3 no person has any preferential subscription rights for any share capital of the Company;
3.16.4 none of the Ordinary Shares have been sold or made available to the public in conjunction
with the application for Admission;
3.16.5 no commissions, discounts, brokerages or other special terms have been granted by the
Company since its incorporation in connection with the issue or sale of any share or loan
capital of the Company; and
3.16.6 there is no other undertaking to increase capital.
3.17 The Company has unrestricted corporate capacity and can borrow, guarantee and give security.
3.18 The Ordinary Shares have not been admitted to dealing on any recognised investment exchange or
other trading facility nor has any application for such admission been made and it is not intended to
make such arrangements for dealings in the Ordinary Shares on any such exchange other than the
application to be made in connection with the Admission.
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3.19 Save as described in paragraph 10 of this Part 7:
3.19.1 the Company does not have in issue any securities not representing share capital nor are
there any outstanding convertible securities with warrants in the Company; and
3.19.2 no share capital of the Company is under option or has been granted conditionally or
unconditionally to be put under option.
4.
4.1
Significant Shareholders
Except for the interests of the Directors, which are set out in paragraph 5.1 below, and save the
interests disclosed in paragraph 4.2 below, the Company is not aware of any holdings of Ordinary
Shares as at the date of this document and immediately following Admission directly or indirectly
(within the meaning of Part V of FSMA and the Disclosure and Transparency Rules) in or representing
three per cent. (3 per cent.) or more of the Enlarged Share Capital.
4.2
In addition to the holdings are set out in paragraph 5.1 below, the Company is aware of the following
holdings of Ordinary Shares which on the date of this document represent, and at Admission will
represent, three per cent. (3 per cent.) or more of the Enlarged Share Capital (the “Significant
Shareholders”):
As at the date of
this document
Name of shareholder
Wang Xiufang¹
Fortune United Capital Limited
Hansen Drison Venture Capital Co. Ltd
Universe Glory Enterprises Limited
Pershing Nominees Limited a/c WRCTL
Dong Feng Developments Limited²
On Admission
Number of
Ordinary
Shares
% of total
number of
issued
Ordinary
Shares
Number of
Ordinary
Shares
% of total
number of
issued
Ordinary
Shares
92,901,600
23,680,800
10,009,600
10,009,600
–
7,286,400
50.49%
12.87%
5.44%
5.44%
–
3.96%
92,901,600
23,680,800
10,009,600
10,009,600
7,836,279
7,286,400
48.00%
12.23%
5.17%
5.17%
4.05%
3.76%
Notes:
1. Wang Xiufang’s beneficial shareholding in the Company is 92,901,600 Ordinary Shares (representing 50.49 per cent. of
the issued share capital) comprising (i) 43.56 per cent. of the issued share capital directly held by Tian Sheng Enterprises
Limited, a British Virgin Islands company of which 100 per cent. is directly wholly owned by Wang Xiufang and (ii) 6.93
per cent. of the issued share capital directly held by Cheng Tong International Limited, a British Virgin Islands company of
which 100 per cent. is directly wholly owned by Wang Xiufang.
2. Dong Feng Developments Limited is a British Virgin Islands company of which 100 per cent. is directly wholly owned by
Cai Peixuan, the Deputy Chief Executive Officer of the Company.
4.3
The persons referred to in paragraph 4.2 and 5.1 of Part 7 of this document do not have voting
rights in respect of the share capital of the Company (issued or to be issued) which differ from any
Shareholder.
4.4
Save as disclosed in this document, none of the Directors nor the Company is aware of (having
made due and proper enquiries) any arrangements, the operation of which may at a subsequent
date result in a change of control of the Company.
4.5
Save as disclosed in this Admission Document, none of the Directors nor the Company is aware of
(having made due and proper enquiries) any person or corporation has an interest on the share
capital of the Company or voting rights which is subject to notice under either Jersey, Hong Kong
or PRC laws.
4.6
Save as disclosed at paragraph 4.2 above, the Company and the Directors are not aware of any
person or persons or corporations who directly or indirectly, jointly or severally, exercise or could
exercise control of the Company or any arrangements the operation of which may, at a subsequent
date, result in a change in the control of the Company.
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5.
5.1
Directors’ interests and other interests
The interests of the Directors, their immediate families (within the meaning set out in AIM Rules) and,
as far as they are aware (having made due and careful enquiries), the interests of persons connected
with them (within the meaning of sections 252 to 254 of the UK Act), in the share capital of the
Company as at the date of this document and at Admission are set out below (all of which are
beneficial unless otherwise stated):
As at the date
of this document
Name of shareholder
Champ Public Limited¹
Dong Feng Developments Limited3
One Capital Group Investment Limited2
Duncan James Daragon Lewis
Jacques-Franck Dossin
Kooi Wei Boon
Number of
Ordinary
Shares
29,182,400
7,286,400
5,464,800
–
–
–
% of total
number
of issued
Ordinary
Shares
On Admission
Number of
Ordinary
Shares
% of total
number
of issues
Ordinary
Shares
15.86% 29,182,400
3.96%
7,286,400
2.97%
5,464,800
–
–
–
–
–
–
15.08%
3.76%
2.82%
–
–
–
Notes:
1. Champ Public Limited is a British Virgin Islands company of which 54.7 per cent. of the issued share capital is directly
owned by Mr Cai Yongde and 45.3 per cent. of which is directly owned by Mr Chen Daocai.
2. One Capital Group Investment Limited is a British Virgin Islands company of which 100 per cent. of the issued share
capital is directly owned by Dato’ Yap Son On, who is Mircle Yap’s father.
3. Dong Feng Developments Limited is a British Virgin Islands Company of which 100 per cent. is directly owned by Cai
Peixuan who is the son of Cai Yongde.
5.2
Except as disclosed in paragraph 5.1 above, none of the Directors, nor any member of their
respective immediate families (within the meaning set out in AIM Rules), nor any person connected
with them (within the meaning of sections 252 to 254 of the UK Act), holds or is or will on Admission
be, Interested, whether beneficially or non-beneficially, directly or indirectly, in the share or loan
capital of the Company, any option to subscribe, for Ordinary Shares, any voting rights In respect of
Ordinary Shares or any Securities convertible into shares of the Company or the Subsidiaries.
5.3
No Director is or has been interested in any transactions with or on behalf of the Company which
are or were unusual in their nature or conditions, which are or were significant to the business of the
Company (taken as a whole) which was effected by the Company since its incorporation and which
remain in any respect outstanding or unperformed.
5.4
There are no outstanding loans or guarantees provided by the Group to or for the benefit of any
Directors.
5.5
None of the Directors has any potential conflicts of interest between their duties to the Company
and their private interests and/or other duties they may also have.
5.6
None of the Directors nor any member of his respective families (within the meaning set out in AIM
Rules) or persons connected with them within the meaning of sections 252 to 254 of the UK Act
has a related financial product (as defined in the AIM Rules) referenced to the Ordinary Shares.
5.7
The Directors are not required to hold any Ordinary Shares under the Articles.
5.8
Other than the protections afforded to Shareholders in the Articles or as described in paragraph 10
below, there are no controls in place to ensure that any Shareholder having a controlling interest in
the Company does not abuse that interest.
5.9
None of the Directors has any interest, direct or indirect, in any assets which have been or are
proposed to be acquired or disposed of by, or leased to, the Group and, save as disclosed in
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paragraph 10 or 11, no contract or arrangement exists in which any Director is materially interested
and which is significant in relation to the business of the Group.
5.10 There is no arrangement under which any Director has agreed to waive future emoluments nor has
there been any waiver of emoluments during the financial year preceding the date of this document.
6.
Directors’ Service Agreements and Letters of Appointment
The following are particulars of the Directors’ service agreements and letters of appointment with the
Group, including details of the Directors’ fees and remuneration:
6.1
Executive Directors
6.1.1 Mr Cai Yongde entered into a service agreement with the Company dated 9 December 2013
to serve as Chairman of the Company conditional on and with effect from Admission. Mr Cai
Yongde’s remuneration is RMB 90,000 per month. The service agreement is for an initial fixed
term of six months and can be terminated at any time by either party giving to the other not
fewer than three months’ prior notice in writing, such notice to be given to expire at any time
after the initial term of six months. Mr Cai Yongde will report to the Board or such person as
the Board may from time to time determine and at all times keep the Board (or such other
person) fully informed of his activities and will promptly provide such information and
explanations as may be requested from time to time by the Board (or such other person). Mr
Cai Yongde shall devote his whole time and attention and abilities to carrying out his duties
under the service agreement. During his employment, Mr Cai Yongde may, at the discretion
of the Board, be eligible to receive from time to time a performance-related bonus based on
individual and Group performance conditions to be determined from time to time by the
Board. Subject to rules and eligibility requirements from time to time in force Mr Cai Yongde
will be entitled to be a member of a private medical care scheme and to participate in any
permanent health insurance scheme from time to time operated by the Company. Mr Cai
Yongde may be eligible to participate in the Company’s occupational pension scheme.
6.1.2 Mr Chen Daocai entered into a service agreement with the Company dated 9 December 2013
to serve as Chief Executive Officer of the Company conditional on and with effect from
Admission. Mr Chen Daocai’s remuneration is RMB 55,000 per month. The service
agreement is for an initial fixed term of six months and can be terminated at any time by either
party giving to the other not fewer than three months’ prior notice in writing, such notice to
be given to expire at any time after the initial term of six months. Mr Chen Daocai will report
to the Board or such person as the Board may from time to time determine and at all times
keep the Board (or such other person) fully informed of his activities and will promptly provide
such information and explanations as may be requested from time to time by the Board (or
such other person). Mr Chen Daocai shall devote his whole time and attention and abilities to
carrying out his duties under the service agreement. During his employment, Mr Chen Daocai
may, at the discretion of the Board, be eligible to receive from time to time a performancerelated bonus based on individual and Group performance conditions to be determined from
time to time by the Board. Subject to rules and eligibility requirements from time to time in
force Mr Chen Daocai will be entitled to be a member of a private medical care scheme and
to participate in any permanent health insurance scheme from time to time operated by the
Company. Mr Chen Daocai may be eligible to participate in the Company’s occupational
pension scheme.
6.1.3 Mr Kooi Wei Boon entered into a service agreement with the Company dated
9 December 2013 to serve as Chief Financial Officer of the Company conditional on and with
effect from Admission. Mr Kooi Wei Boon’s remuneration is RMB 40,000 per month. The
service agreement is for an initial fixed term of six months and can be terminated at any time
by either party giving to the other not fewer than three months’ prior notice in writing, such
notice to be given to expire at any time after the initial term of six months. Mr Kooi Wei Boon
will report to the Board or such person as the Board may from time to time determine and at
all times keep the Board (or such other person) fully informed of his activities and will promptly
provide such information and explanations as may be requested from time to time by the
Board (or such other person). Mr Kooi Wei Boon shall devote his whole time and attention
and abilities to carrying out his duties under the service agreement. During his employment,
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Mr Kooi Wei Boon may, at the discretion of the Board, be eligible to receive from time to time
a performance-related bonus based on individual and Group performance conditions to be
determined from time to time by the Board. Subject to rules and eligibility requirements from
time to time in force Mr Kooi Wei Boon will be entitled to be a member of a private medical
care scheme and to participate in any permanent health insurance scheme from time to time
operated by the Company. Mr Kooi Wei Boon may be eligible to participate in the Company’s
occupational pension scheme.
6.2
Non-executive Directors
6.2.1 Pursuant to a letter of appointment dated 9 December, the Company appointed Mr Mircle
Yap as an independent non-executive director of the Company conditional on and with effect
from the date of Admission. The appointment will begin on the date of Admission and will be
for an initial term of three years unless terminated by either party giving to the other at least
3 months’ notice, such notice not to be given before the period of 12 months after the date
of Admission. Continuation of the appointment is at all times conditional upon satisfactory
performance. Mr Mircle Yap is expected to prepare for and attend approximately 8 meetings
in a year, one of which will be conducted in Hong Kong, PRC or Jersey and serve on each of
the Company’s audit and remuneration committees (and such other committees as the Board
may require from time to time). It is anticipated that Mr Mircle Yap’s duties will involve an
annual commitment to the Company of approximately 20 to 25 days per year. The Company
will pay Mr Mircle Yap a fee of GBP 40,000 per annum, inclusive of any entitlement to holiday
pay, payable in 12 monthly equal instalments. The Board may review the fee paid to Mr Mircle
Yap from time to time. Mr Mircle Yap will not be eligible for any other benefits. The Company
will reimburse all reasonable expenses properly incurred in connection with Mr Mircle Yap’s
appointment, including travel and accommodation costs to attend meetings in Hong Kong
and/or Jersey and/or PRC; and long haul flights of more than 5 hours shall be by way of
business class flights. The Company has not granted any benefits on termination of
employment.
6.2.2 Pursuant to a letter of appointment dated 9 December, the Company appointed Mr JacquesFranck Dossin as an independent non-executive director of the Company conditional on and
with effect from the date of Admission. The appointment will begin on the date of Admission
and will be for an initial term of three years unless terminated by either party giving to the other
at least 3 months’ notice, such notice not to be given before the period of 12 months after
the date of Admission. Continuation of the appointment is at all times conditional upon
satisfactory performance. Mr Jacques-Franck Dossin is expected to prepare for and attend
approximately eight meetings of in a year, one of which will be conducted in Hong Kong, PRC
or Jersey and will attend meetings of and serve on each of the Company’s audit and
remuneration committees (and such other committees as the Board may require from time to
time). It is anticipated that Mr Jacques-Franck Dossin’s duties will involve an annual
commitment to the Company of approximately 20 to 25 days per year. The Company will pay
Mr Jacques-Franck Dossin a fee of GBP 40,000 per annum, inclusive of any entitlement to
holiday pay, payable in 12 monthly equal instalments. The Board may review the fee paid to
Mr Jacques-Franck Dossin from time to time. Mr Jacques-Franck Dossin will not be eligible
for any other benefits. The Company will reimburse all reasonable expenses properly incurred
in connection with Mr Jacques-Franck Dossin’s appointment, including travel and
accommodation costs to attend meetings in Hong Kong and/or Jersey and/or PRC; and long
haul flights of more than 5 hours shall be by way of business class flights. The Company has
not granted any benefits on termination of employment.
6.2.3 Pursuant to a letter of appointment dated 9 December, the Company appointed Mr Duncan
Lewis as an independent non-executive director of the Company conditional on and with
effect from the date of Admission. The appointment will begin on the date of Admission and
will be for an initial term of three years unless terminated by either party giving to the other at
least 3 months’ notice, such notice not to be given before the period of 12 months after the
date of Admission. Continuation of the appointment is at all times conditional upon
satisfactory performance. Mr Duncan Lewis is expected to prepare for and attend
approximately eight meetings of in a year, one of which will be conducted in Hong Kong, PRC
or Jersey and will attend meetings of and serve on each of the Company’s audit and
remuneration committees (and such other committees as the Board may require from time to
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time). It is anticipated that Mr Duncan Lewis’s duties will involve an annual commitment to the
Company of approximately 20 to 25 days per year. The Company will pay Mr Duncan Lewis
a fee of GBP 40,000 per annum, inclusive of any entitlement to holiday pay, payable in 12
monthly equal instalments. The Board may review the fee paid to Mr Duncan Lewis from time
to time. Mr Duncan Lewis will not be eligible for any other benefits. The Company will
reimburse all reasonable expenses properly incurred in connection with Mr Duncan Lewis’s
appointment, including travel and accommodation costs to attend meetings in Hong Kong
and/or Jersey and/or PRC; and long haul flights of more than 5 hours shall be by way of
business class flights. The Company has not granted any benefits on termination of
employment.
6.3
Save as set out above, there are no existing or proposed service agreements between any of the
Directors and the Company or any other member of the Group and there are no existing or
proposed service contracts between any of the Directors and the Company or any other member
of the Group which provide for benefits upon termination of employment.
7.
Further information about the Directors
7.1 The Directors currently hold, or have during the five years preceding the date of this document held,
the following directorships and/or interests in companies and/or partnerships in addition to their
directorships within the Group:
During the five years preceding the
date of this document
As at the date of this document
Partnership or
other interest
Directorship
Partnership or
other interest
None
None
None
Chen Daocai
None
None
None
None
Kooi Wei Boon
None
None
None
None
Mircle Yap
Camkids plc
Progressive Asia (M) Sdn. Bhd.
Telegraph Settlements Sdn. Bhd.
European Corporate
Governance Institute
Exalt Capital Sdn. Bhd.
Progressive Asia Group Sdn.
Bhd.
Reit Asia Pacific Autominent
Sdn. Bhd.
DHI-Electro Plus Sdn. Bhd.
Progressive Asia Technologies
(M) Sdn. Bhd.
Exalt Capital Pte Ltd
None
Dossin Advisory – 100%
Traditional Arts None
Camkids plc
Directorship
Cai Yongde
Xie Sheng Department Store Co Ltd
(Qinzhou Guangxi Province)
Xie Sheng Real Estate Co Ltd
(Yang Zhou Jiangsu Province)
Qinzhou Guangxi Province Xie
Sheng Department Store Co Ltd
Yang Zhou Jiangsu
Province Xie Sheng Real Estate Co Ltd
Shishi Xian Sheng Hardware Products
Co Ltd
Jacques-Franck Dossin
Camkids plc
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During the five years preceding the
date of this document
As at the date of this document
Directorship
Duncan Lewis
euNetworks Group Limited
Goldacre Data Limited
Harlow DC GP Limited
Mobbu Limited
MPme Limited
NextiraOne nv
Niu Solutions Holdings Limited
SkyDox Limited
Spirent Communications plc
Teletique Limited
7.2
Partnership or
other interest
Directorship
None
Partnership or
other interest
12 Charles Street
None
(Tenants) Limited
12 Charles Street
(Freehold) Limited
Advent Communications
Limited
Microwave Limited
DC Machine Vision Limited
euNetworks Group Limited
Euphony Holdings Limited
Goldacre Data Limited
Link Research Limited
Molynx Holdings Limited
Thomson Reuters Mobile
Products Limited
Vislink plc
Vislink Communications Limited
Vislink Holdings Limited
Vislink International Limited
Vislink Technology Limited
Vislink Security Limited
Workshare Limited
None of the Directors have:
7.2.1 any unspent criminal convictions in relation to indictable offences;
7.2.2 had a bankruptcy order made against him or entered into any form of individual voluntary
arrangements;
7.2.3 been a director of a company which has been placed in receivership, compulsory liquidation,
creditors’ voluntary liquidation, administrations, company voluntary arrangement or any
composition or arrangement with its creditors generally or any class of its creditors of any
company where he was a director at that time of or within the 12 months preceding such
events;
7.2.4 been a partner in a firm which has been placed in compulsory liquidation or administration or
which has entered into a partnership voluntary arrangement whilst he or she was at the firm
at that time or within the 12 months preceding such events;
7.2.5 had any asset of belonging to him or her placed in receivership or been a partner in a
partnership whose assets have been placed in receivership whilst he was a partner of that
firm, or within the 12 months preceding, such events; or
7.2.6 been the subject of any public criticisms by any statutory or regulatory authorities (including
recognised professional bodies) nor disqualified by a court from acting as a director of a
company or from acting in the management or conduct of the affairs of any company.
7.3
No Director has been interested in any transaction with the Company that was unusual in its nature
or conditions or was significant to the business of the Company taken as a whole and which was
effected by the Company since its incorporation and which at the date of this document remain
outstanding or unperformed.
7.4
No loan has been granted to, nor any guarantee provided for, the benefit of any Director by the
Company.
8.
Memorandum and Articles
8.1
Memorandum of Association
The Memorandum of the Company does not restrict the activities of the Company and thus the
Company will have unlimited legal capacity. Paragraph 2 of the Memorandum provides that the
objects of the Company are unrestricted.
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8.2
Articles of Association
For the purpose of this paragraph 8, the following definitions shall apply:
“DTR” means the United Kingdom Disclosure and Transparency Rules as amended from time to
time relating to the disclosure of information in respect of financial instruments which have been
admitted to trading on a regulated market or for which a request for admission to trading on such a
market has been made, as published by the Financial Conduct Authority of the United Kingdom;
“Exempt Transfer” in relation to any share is a transfer pursuant to:
(a)
a sale of the share on AIM or a regulated market in the United Kingdom on which shares of
that class are listed or normally traded; and/or
(b)
a sale of the whole beneficial interest in the share to a person whom the Board is satisfied is
unconnected with the existing holder or with any other person appearing to be interested in
the share; or
(c)
acceptance of a takeover offer;
“Operator” has the same meaning as “authorised operator” as provided for in the CREST
Regulations;
“participating class” a class of shares title to which is permitted by an Operator to be transferred
by a relevant system;
“relevant securities” means:
(a)
(b)
shares in the Company other than shares allotted pursuant to:
(i)
an employee share scheme;
(ii)
a right to subscribe for shares in the Company where the grant of the right itself
constituted a relevant security; or
(iii)
a right to convert securities into shares in the Company where the grant of the right
itself constituted a relevant security; and
any right to subscribe for, or to convert any security into, shares in the Company other than
rights to subscribe for or convert any security into shares allotted pursuant to an employee
share scheme, and a reference to the allotment of relevant securities includes the grant of
such a right; and
“special resolution” means a resolution of the Company passed as a special resolution in
accordance with Jersey Law by a majority of three-fourths of the votes cast on that resolution.
The Articles were adopted by the Company by a special resolution passed on 3 December 2013
and include, inter alia, provisions to the following effect. Persons seeking a detailed explanation of
any provisions of Jersey law or the difference between it and the laws of England and Wales, or any
other jurisdiction with which they may be more familiar, should seek specific legal advice.
8.3
Stated capital account
The Company shall maintain a stated capital account in accordance with Jersey Law for each class
of issued shares. A stated capital account may be expressed in any currency.
8.4
Alteration of share capital
The Company may by special resolution alter its share capital in any manner permitted by Article 38
of Jersey Law. In accordance with (and subject to) the provisions of Article 61 of Jersey Law, the
Company may by special resolution reduce its stated capital account and capital redemption reserve
in any way.
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8.5
Purchase of own shares
Subject to and in accordance with Jersey Law and without prejudice to any special rights attached
to any class of shares, the Company may purchase any of its own shares of any class (including,
without limitation, redeemable shares) in any way and at any price and may hold such shares as
treasury shares.
8.6
Share rights
Subject to Jersey Law and without prejudice to any rights attached to any existing shares, any share
in the Company may be issued with or have attached to it such rights and restrictions as the
Company may by ordinary resolution decide or, if no such resolution has been passed or so far as
the resolution does not make specific provision, as the Board may decide. No share issued by the
Company shall have a nominal value. Subject to Jersey Law and to any rights attached to any
existing shares, the Company may issue shares which are to be redeemed, or at the option of the
Company or the holder are liable to be redeemed.
8.7
Allotment of securities and pre-emption rights
Subject to the provisions of Jersey Law, the Articles and any resolution of the Company passed by
the Company conferring authority on the Directors to allot shares, as referred to below and without
prejudice to any rights attached to existing shares, all unissued shares are at the disposal of the
Board which may reclassify, allot, grant options over or otherwise dispose of them to persons at
such times and on such terms and conditions as the Board may decide.
The Board has the power to allot relevant securities subject to authority granted by the Company by
ordinary resolution which shall provide for: (i) the number of relevant securities which may be issued
by the Board generally and unconditionally; and (ii) may specify the issue price of such relevant
securities.
Although Jersey Law does not provide any statutory pre-emption rights, the Articles provide that
equity securities allotted by the Company must first be offered to existing Shareholders in proportion
to their respective holdings of Ordinary Shares except that such pre-emption rights shall not apply
where they are dis-applied by way of special resolution of the holders of shares of the class who
(being entitled to do so) vote in person or by proxy at a separate general meeting of such holders in
relation to: (i) bonus shares; (ii) equity securities wholly or partly paid up otherwise than in cash; or
(iii) equity securities issued in connection with an employee share scheme.
8.8
Share certificates
Every member on becoming the holder of any certificated share (except a recognised person in
respect of whom the Company is not by law required to issue a certificate) whose name is entered
on the Company’s register of members as a holder of any certificated shares is entitled, without
payment, to one certificate in respect of all shares of any class held by him. In the case of joint
holders, delivery of a certificate to one of the joint holders shall be sufficient delivery to all.
The Company’s board may permit title to some or all of the shares of any class to be evidenced
otherwise than by a certificate and title to such shares to be transferred in accordance with the rules
of a relevant system pursuant to which title to units of a security can be evidenced and transferred
in accordance with the CREST Regulations, without a written instrument. The Articles are consistent
with CREST membership.
8.9
Call, forfeiture and lien
The Board may from time to time make calls upon the members in respect of any moneys unpaid
on their shares. Each member shall (subject to being given at least 14 clear days’ notice specifying
where and when payment is to be made) pay to the Company the specified amount called on his
shares. If any call or instalment of a call remains unpaid on or after the due date for payment, the
person from whom it is due and payable shall pay interest on the amount unpaid from the day it
became due and payable until it is paid. Interest shall be paid at a fixed rate, fixed by the terms of
the allotment of the share or in the notice of call or if no rate is fixed, the rate determined by the
Board not exceeding five per cent. per annum, or, if higher, the appropriate rate (as determined by
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the UK Secretary of State and defined in the UK Act). The Board may also (on giving not less than
14 clear days’ notice requiring payment of the amount unpaid together with interest and costs
incurred) forfeit the shares by resolution of the Board. The forfeiture shall include all dividends or
monies payable in respect of the forfeited share. The forfeited shares may be sold, re-allotted or
otherwise disposed of by the Board in such manner as it determines.
The Company shall have a first and paramount lien on every share (not being a fully paid share) for
all monies payable to the Company (whether presently or not) in respect of that share. The Board
may at any time (generally or in a particular case) waive any lien or declare any share to be wholly
or in part exempt from the relevant provisions of the Articles. The Company’s lien on a share shall
extend to any amount (including without limitation dividends) payable in respect of it.
8.10 Variation of rights
Subject to the provisions of Jersey Law and to any rights attached to existing shares (and except in
the case where there is only one holder of the issued shares in which case all rights attached to an
existing class of shares may be varied only with the consent in writing of that holder), all or any of
the rights attached to any class of shares may be varied either with the written consent of the
holders of not less than three-fourths in number of the issued shares of the class or the sanction of
a special resolution passed at a separate general meeting of the holders of shares of the class duly
convened and held.
8.11 Transfer of shares
Without prejudice to any power of the Company to register as a shareholder a person to whom the
right to any share has been transmitted by operation of law, the instrument of transfer of a
certificated share may be in the usual form or in any other form approved by the Board and shall be
signed by or on behalf of the transferor and, unless the share is fully paid, by or on behalf of the
transferee.
Any member may transfer all or any of his shares which are in uncertificated form, subject to the
CREST Regulations, by means of a relevant system provided that legal title to such shares shall not
pass until the transfer is entered in the register.
The Board may refuse to register the transfer of a share in certificated form unless the instrument of
transfer:
(a)
is lodged, duly stamped (if stampable), at the office or at another place appointed by the
Board accompanied by the certificate for the share to which it relates and such other
evidence as the Board may reasonably require to show the right of the transferor to make the
transfer;
(b)
is in respect of only one class of shares; and
(c)
is in favour of not more than four transferees.
If the Board refuses to register a transfer of a share in certificated form it shall send the transferee
notice of its refusal within two months after the date on which the instrument of transfer was lodged
with the Company.
No fee shall be charged for the registration of any instrument of transfer or other document relating
to or affecting the title to a share, or for making any other entry in the register.
Any member may transfer all or any of his shares which are in uncertificated form, subject to the rules
and regulations of the relevant system, provided that legal title to such shares shall not pass until the
transfer is entered in the Company’s register of members. Subject to Jersey Law, the AIM Rules for
Companies and any applicable laws, rules and regulations relating to a relevant system, no provision
of the Articles shall apply or have effect to the extent that it is inconsistent in any respect with:
(a)
the holding of shares of that class in uncertificated form;
(b)
the transfer of title to shares of that class by means of a relevant system;
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(c)
the exercise of any powers or functions by the Company or the effecting by the Company of
any actions by means of a relevant system; and
(d)
any provision of the CREST Regulations.
The Directors may lay down regulations not included in the Articles which (in addition to, or in
substitution for, any provisions in the Articles):
(e)
apply to the issue, holding or transfer of shares in uncertificated form;
(f)
set out (where appropriate) the procedures for conversion and/or redemption of shares in
uncertificated form; and/or
(g)
the Directors consider necessary or appropriate to ensure that these Articles are consistent
with the CREST Regulations and/or the Operator’s rules and practices.
The Articles provide that the Board may suspend the registration of transfers of shares or of transfers
of any class of shares at such times and for such periods (not exceeding 30 days in any year) as the
Board may determine, except that the Board may not suspend the registration of transfers of any
participating class without the consent of the Operator of the relevant system.
8.12 Disclosure of interests in shares
The provisions of DTR 5 shall be deemed to apply to the Company, so that members are required
under the Articles to notify the Company of the percentage of their voting rights if the percentage of
voting rights which they hold as a shareholder or through their direct or indirect holding of financial
instruments falling within paragraph 5.1.3R of DTR 5 (or a combination of such holdings) reaches,
exceeds or falls below three per cent., four per cent., five per cent., six per cent., seven per cent.,
eight per cent., nine per cent., 10 per cent., and each one per cent. threshold thereafter up to 100
per cent., or reaches or exceeds or falls below any of these thresholds as a result of events changing
the breakdown of voting rights and on the basis of information disclosed by the Company in
accordance with paragraph 5.6.1R of DTR 5. Paragraph 5.8 of DTR 5 notes that a shareholder must
make the notification required under paragraph 5.1 of DTR 5 as soon as possible and in any event
not later than two trading days after the date on which the person: (i) learns of the acquisition or
disposal or of the possibility of exercising voting rights or having regard to the circumstances should
have learned of it regardless of the date on which the acquisition, disposal or possibility of exercising
voting rights takes effect; or (ii) is informed on the basis of information disclosed by the Company of
events changing the breakdown of voting rights which results in the person reaching, exceeding or
falling below a relevant threshold.
If any member fails to comply with these requirements, the Directors may, by notice to the holder of
the shares, suspend their rights as to voting, dividends and transfer (except pursuant to an Exempt
Transfer). Such suspension shall have effect from the date on which the default notice is delivered
to the shareholder until a date that is not more than seven days after the Board has determined that
the holder of the shares has cured the non-compliance. During the period of such suspension any
dividend or other amount payable in respect of the shares shall be retained by the Company without
any obligation to pay interest thereon.
The Directors have the power, by giving notice, to require any member to disclose to the Company
the identity of any person other than the member who is interested in the shares held by the member
or who has been at any time during the preceding three years been so interested, in both cases
together with details of the nature of such interest. If any member has been duly served with such
a notice and is in default of the prescribed period in supplying the information required, certain
restrictions shall apply. A disclosure notice may direct that the member shall not be entitled to vote
at a general meeting or meeting of the holders of any class of shares of the Company or exercise
any other right conferred by membership in relation to the meetings of the Company or holders of
any class of shares. Where the default shares represent at least 0.25 per cent. of the issued shares
of that class, any dividend or other money which would otherwise be payable may also be retained
by the Company and transfers of default shares will be restricted until the restrictions cease to apply.
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8.13 General meetings
The Board shall convene and the Company shall hold general meetings as annual general meetings
in accordance with Jersey Law. The Board may convene general meetings whenever it thinks fit. At
least 14 clear days’ notice shall be given of every annual general meeting and of all other general
meetings, including without limitation, every general meeting called for the passing of a special
resolution. The Company may determine that the members entitled to receive a notice of a general
meeting of the Company are the members on the register at the close of business on a day
determined by the Company, which day may not be more than 21 days before the day that notices
of the meeting are sent.
The notice shall specify the place, day and time of the meeting and the general nature of the
business to be transacted at the meeting. In the case of an annual general meeting, the notice shall
specify the meeting as such. In the case of a meeting to pass a special resolution the notice shall
specify the intention to propose the resolution as a special resolution.
For the purpose of determining whether a person is entitled as a member to attend or vote at a
meeting and how many votes such person may cast, the Company may specify in the notice of the
meeting a time not more than 48 hours before the time fixed for the meeting, by which a person who
holds shares in registered form must be entered on the register in order to have the right to attend
or vote at the meeting or to appoint a proxy to do so.
The Board may resolve to enable persons entitled to attend a general meeting to do so by
simultaneous attendance and participation at a satellite meeting place anywhere in the world and
any members in attendance in person or by proxy at any such meeting place shall be counted in the
quorum and entitled to vote at the general meeting.
Members representing at least five per cent. of the total voting rights of all members who are entitled
to vote on the resolution at the annual general meeting to which the request relates (excluding any
voting rights attached to any shares in the Company held as treasury shares), or not less than 100
members who have a relevant right to vote on such resolution and who hold shares in the Company
on which there has been paid up an average sum, per member, of at least £100, may require the
Company to circulate notice of a resolution which may be, and is intended to be, moved at that
annual general meeting to members and if so required, the Company shall, unless the resolution
would if passed be ineffective, is defamatory of any person or is frivolous or vexatious, give such
notice in the same manner as notice of the meeting and at the same time as, or as soon as
reasonably practicable after it gives notice of the meeting.
Members representing at least five per cent. of the total voting rights of all members who, in relation
to a proposed resolution, are entitled to vote on that resolution at the meeting to which the request
relates, or in relation to any other matter, are entitled to vote at the meeting to which the request
relates (a “relevant right to vote”) (excluding any voting rights attached to any shares in the Company
held as treasury shares) or, not less than 100 members who have a relevant right to vote and on
which there has been paid up an average sum, per member, of at least £100, may require the
Company to circulate to members an explanatory statement of not more than 1,000 words with
respect to a matter referred to in the proposed resolution to be dealt with at the meeting to which
the request relates, or to any other business to be dealt with at that meeting. However, the Company
has the right to apply to the Royal Court of Jersey to seek a ruling that it is not required to circulate
a members’ statement on the basis that the rights in the Articles are being abused.
Members representing at least five per cent. of the total voting rights of all members who are entitled
to vote on the matter to which a poll relates (excluding any voting rights attributed to any shares in
the Company held as treasury shares) or not less than 100 members who have a relevant right to
vote and on which there has been paid up an average sum per member of at least £100 may require
the Directors to obtain an independent report on any poll taken or to be taken at a general meeting
of the Company.
A member of the Company may nominate a person, on whose behalf he holds shares, to enjoy
rights to receive a copy of all communications that the Company sends to its members.
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All resolutions put to the vote of a general meeting shall be decided upon by a show of hands unless
a poll is validly demanded. Subject to any rights and restrictions attached to any shares, members
and their duly appointed proxies shall have the right to attend and speak at general meetings and
to vote, and to demand, or join in demanding, a poll.
On a show of hands every member who is present in person shall have one vote and every proxy
present who has been duly appointed by a member entitled to vote on the resolution has one vote.
On a poll every member present or by proxy shall have one vote for every share of which he is the
holder.
No member shall be entitled to vote at a general meeting or at a separate meeting of the holders of
any class of shares unless all monies presently payable by him or in respect of his shares have been
paid.
A Director shall, notwithstanding that he is not a member, be entitled to attend and speak at any
general meeting and at any separate meeting of the holders of any class of shares in the capital of
the Company.
The chairman may with the consent of a meeting at which a quorum is present, adjourn the meeting.
8.14 Power to require website publication of audit concerns
Where so requested by members representing at least five per cent. of the total voting rights of all
the members who have a right to vote at the general meeting at which the accounts of the Company
are laid, or by at least 100 members who have such right to vote and hold shares in the Company
on which there has been paid up an average sum, per member, of at least £100, the Company shall
publish on its website a statement setting out any matter relating to the audit of the Company’s
accounts or any circumstances connected with an auditor of the Company ceasing to hold office
except where the Board believes in good faith that the rights so conferred are being abused.
8.15 Voting rights
Subject to any special terms as to voting attached to any shares and to the Articles, on a show of
hands every member who is present in person or by proxy shall have one vote and on a poll every
member who is present in person or by proxy shall have one vote for every share of which he is the
holder. On a poll, a member entitled to more than one vote need not use all his votes or cast all the
votes he uses in the same way. A member may appoint more than one proxy.
No member shall be entitled to vote at any general meeting unless all monies presently payable by
him in respect of shares in the Company have been paid.
In the case of joint shareholders only, the vote of the senior joint holder shall be accepted. In the
case of an equality of votes, the chairman of the meeting shall be entitled to a casting vote in addition
to any other vote he may have.
8.16 Directors
8.16.1 Appointment of Directors
Unless otherwise determined by ordinary resolution, the number of Directors shall be not less
than two or more than 10. Directors may be appointed by ordinary resolution or by the Board.
At every annual general meeting one-third of the Directors or, if their number is not three or a
multiple of three, the number nearest to and exceeding one-third shall retire from office; but if
any Director has at the start of the annual general meeting been in office for three years or
more since his last appointment or re-appointment, he shall retire at that annual general
meeting.
Any Director may appoint any other Director or other person approved by resolution of the
Board and willing to act, to be an alternate Director.
Subject to the provisions of Jersey Law, the Board may appoint one or more of its body to
be the holder of any executive office (except that of auditor) in the Company and may enter
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into an agreement or arrangement with any Director for his employment by the Company or
for the provision by him of any services outside the scope of the ordinary duties of a Director.
Any such appointment, agreement or arrangement may be made on such terms, including
without limitation terms as to remuneration, as the Board determines. The Board may revoke
or vary any such appointment but without prejudice to any rights or claims which the person
whose appointment is revoked or varied may have against the Company because of the
revocation or variation.
8.16.2 No share qualification
A Director shall not be required to hold any shares in the capital of the Company by way of
qualification.
8.16.3 Retirement of Directors by rotation
The Directors to retire by rotation shall be first, those who wish to retire and not be reappointed to office, and second, those who have been in office longest since their last
appointment or reappointment. As between persons who became or were last re-appointed
Directors on the same day those to retire shall (unless they otherwise agree among
themselves) be determined by lot. No Director shall be required to retire or be relieved from
retiring or to be retired by reason of any change in the number or identity of the Directors after
the date of the notice but before the close of the meeting.
8.16.4 Remuneration of Directors
The emoluments of any executive Director shall be determined by the Board. The ordinary
remuneration of the Directors who do not hold executive office for their services (excluding
amounts payable under any other provision of the Articles) shall not exceed in aggregate such
amount as the Company may from time to time by ordinary resolution determine. Subject
thereto, each such Director shall be paid a fee for his services (which shall be deemed to
accrue from day to day) at such rate as may from time to time be determined by the Board.
Any Director who does not hold executive office and who performs special services which, in
the opinion of the Board, go beyond the ordinary duties of a Director, may be paid such extra
remuneration as the Board may determine. The Directors may be paid all travelling, hotel, and
other expenses properly incurred by them in connection with their attendance at meetings of
the Board or committees of the Board, general meetings or separate meetings of the holders
of any class of shares or of debentures of the Company or otherwise in connection with the
discharge of their duties.
The Board may (by establishment of, or maintenance of, schemes or otherwise) provide
benefits, whether by the payment of gratuities or pensions or by insurance or otherwise, for
any past or present Director or employee of the Company or any of its subsidiary
undertakings or any body corporate associated with, or any business acquired by, any of
them, and for any member of his family (including a spouse, a civil partner, a former spouse
and a former civil partner) or any person who is or was dependent on him, and may (as well
before as after he ceases to hold such office or employment) contribute to any fund and pay
premiums for the purchase or provision of any such benefit.
8.16.5 Compensation for loss of office
The provisions contained in sections 215 to 221 of the UK Act in relation to payments made
to Directors (or a person connected to such Directors) for loss of office and the circumstances
in which such payments would require the approval of members apply to the Company such
that the Company may not make payment for loss of office to a director unless approved by
a resolution of the members of the Company. Such resolution must not be passed unless a
memorandum setting out the particulars of the proposed payment (including its amount) is
made available to the members of the Company.
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8.16.6 Permitted interests of Directors
Subject to the provisions of Jersey Law and provided that where a Director, to his knowledge,
is in any way directly or indirectly interested in a contract, transaction or arrangement with the
Company and such interest conflicts or may conflict to a material extent with the interests of
the Company, has disclosed to the Board (at the meeting of the Board at which the question
of entering into the contract, arrangement, transaction or proposal is first considered, if he
knows his interest then exists or, in any other case as soon as practical after that meeting, by
notice in writing delivered to the secretary, at the first meeting of the Board after he knows
that he is or has become so interested) the nature and extent of his interest, a Director,
notwithstanding his office:
8.16.6.1 may enter into or otherwise be interested in any contract, arrangement, transaction
or proposal with the Company (including in relation to any insurance proposal which
the Company proposes to maintain or purchase for the benefit of the Directors) or
in which the Company is otherwise interested;
8.16.6.2 may hold any other office or place of profit under the Company (except that of
auditor or of auditor of a subsidiary of the Company) in conjunction with the office
of Director and may act by himself or through his firm in a professional capacity for
the Company, and in any such case on such terms as the Board may arrange,
either in addition to or in lieu of any remuneration provided for by any other provision
of the Articles;
8.16.6.3 may be a Director or other officer of, or employed by, or a party to any transaction
or arrangement with, or otherwise interested in, any body corporate promoted by
the Company or in which the Company is otherwise interested or as regards which
the Company has any powers of appointment; and
8.16.6.4 shall not be liable to account to the Company for any profit, remuneration or other
benefit realised by any such office, employment, contract, arrangement, transaction
or proposal, and no such contract, arrangement, transaction or proposal shall be
avoided on the grounds of any such interest or benefit.
8.16.7 Powers of Directors
Subject to the provisions of Jersey Law and the Articles and any direction given by special
resolution, the business of the Company shall be managed by the Board which may exercise
all powers of the Company. The Board may delegate any of its powers to any committee
consisting of one or more Directors. The Board may also delegate any of its powers to any
Director holding any executive office.
8.16.8 Proceedings of Directors
A Director may, and the secretary at the request of a Director shall, call a meeting of the Board
by giving notice of the meeting to each Director.
Questions arising at a meeting shall be decided by a majority of votes. In the case of an
equality of votes, the chairman shall have a second or casting vote, provided that the
chairman may not exercise any such second or casting vote at any meeting at which only two
of the Directors who are present are entitled to vote. Any Director may waive notice of a
meeting and any such waiver may be retrospective.
The quorum for the transaction of the business of the Board may be fixed by the Board and
unless so fixed at any other number shall be two. A person who holds office only as an
alternate Director may, if his appointor is not present, be counted in the quorum.
A resolution in writing agreed by all the Directors entitled to receive notice of and vote at a
meeting of the Board or of a committee of the Board (not being less than the number of
Directors required to form a quorum of the Board) shall be as valid and effectual as if it had
been passed at a meeting of the Board or (as the case may be) a committee of the Board
duly convened and held.
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A person entitled to be present at a meeting of the Board or of a committee of the Board shall
be deemed to be present for all purposes if he is able (directly or by electronic
communication) to speak to and be heard by all those present or deemed to be present
simultaneously. A Director so deemed to be present shall be entitled to vote and be counted
in a quorum accordingly.
8.16.9 Restrictions on voting
Except as otherwise provided in the Articles, a Director shall not vote on (but shall still be
counted in the quorum in relation to) any resolution of the Board or a committee of the Board
concerning a contract, transaction or arrangement in which he has an interest which (taken
together with any interests of any person connected with him) is, to his knowledge, a material
interest, otherwise than by virtue of his interests in shares or debentures or other securities of
or otherwise in or through the Company, unless the resolution concerns any of the following
matters:
8.16.9.1 the giving of any guarantee, security or indemnity in respect of money lent or
obligations incurred by him or any other person at the request of or for the benefit
of the Company or any of its subsidiary undertakings;
8.16.9.2 the giving of any guarantee, security or indemnity in respect of a debt or obligation
of the Company or any of its subsidiary undertakings for which he himself has
assumed responsibility in whole or in part under a guarantee or indemnity or by the
giving of security;
8.16.9.3 any proposal concerning an offer of shares or debentures or other securities of or
by the Company or any of its subsidiary undertakings in which offer he is or may be
entitled to participate as a holder of securities or in the underwriting or subunderwriting of which he is to participate;
8.16.9.4 any proposal concerning any other body corporate in which he (together with
persons connected with him within the meaning of sections 252, 253 and 254 of
the UK Act) does not to his knowledge have an interest in 1 per cent. or more of
the issued equity share capital of any class of such body corporate or of the voting
rights available to members of such body corporate;
8.16.9.5 any proposal relating to an arrangement for the benefit of the employees of the
Company or any of its subsidiary undertakings which does not award him any
privilege or benefit not generally awarded to the employees to whom such
arrangement relates; or
8.16.9.6 any proposal concerning insurance which the Company proposes to maintain or
purchase for the benefit of Directors or for the benefit of persons who include
Directors.
Subject to Jersey Law, the Company may by ordinary resolution suspend or relax the above
provisions to any extent or ratify any transaction not duly authorised by reason of a
contravention of such provisions.
A Director shall not vote (but shall be counted in the quorum) on any resolution of the Board
or committee of the Board concerning his own appointment (including fixing or varying the
terms of his appointment or its termination) as the holder of any office or place of profit with
the Company or any body corporate in which the Company is interested. Where proposals
are under consideration concerning the appointment of two or more Directors to offices or
places of profit with the Company or any body corporate in which the Company is interested,
such proposals may be divided and a separate resolution considered in relation to each
Director. In such case, each of the Directors concerned (if not otherwise debarred from voting
under these Articles) shall be entitled to vote in respect of each resolution except that
concerning his own appointment and for the avoidance of doubt shall be still be counted in
the quorum for any resolution concerning his own appointment.
An interest of a person who is for the purposes of the UK Act connected with a Director shall
be treated as an interest of the Director, provided that the Director is aware of such interest.
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8.17 Indemnity of officers
The Law restricts indemnities or exemptions from liability given by Jersey companies to their
directors and officers. In general, directors and officers of a Jersey company cannot be exempted
from or receive an indemnity in respect of any liability which would otherwise attach to that director
or officer under law by reason of the fact that they are or were a director or officer of the company.
There are exemptions to this restriction, in particular in respect of proceedings where the director or
officer is not held liable or the matter is discontinued, where the director or officer acted in good faith
in the best interests of the company and in respect of any liability for which the company normally
maintains insurance. The Articles provide that a Director, alternate Director, secretary or other officer
may be indemnified out of the assets of the Company to the extent this is legally permissible under
Jersey Law and subject to the rules made by London Stock Exchange plc in connection with AIM
(or by the competent authority of any other regulated market or other stock exchange on which the
shares of the Company may be listed).
8.18 Dividends and other distributions
Subject to the provisions of Jersey Law, the Company may by ordinary resolution declare dividends
but no such dividend shall exceed the amount recommended by the Board. Subject to the
provisions of Jersey Law, the Board may pay interim dividends if it appears to the Board to be
justified by the cash flow position of the Company. A general meeting declaring a dividend may, on
the recommendation of the Board, by ordinary resolution direct that it shall be satisfied wholly or
partly by the distribution of assets, including without limitation paid up shares or debentures of
another body corporate. The Board may make any arrangements it thinks fit to settle any difficulty
arising in connection with the distribution, including without limitation: (i) the fixing of the value for
distribution of any assets; (ii) the payment of cash to any member on the basis of that value in order
to adjust the rights of members; and (iii) the vesting of any asset in a trustee.
The Board may, if authorised by an ordinary resolution of the Company, offer any holder of shares
the right to elect to receive shares, credited as fully paid, instead of cash in respect of the whole (or
some part, to be determined by the Board) of all or any dividend specified by such ordinary
resolution.
Except as otherwise provided by the rights attaching to or terms of issue of any shares, all dividends
shall be apportioned and paid pro rata according to the amounts paid on the shares during any
portion or portions of the period in respect of which the dividend is paid.
No dividend or other monies payable in respect of a share shall bear interest against the Company,
unless otherwise provided by the rights attached to the share.
The Board may deduct from any dividend or other monies payable to any member in respect of a
share any monies presently payable by him to the Company in respect of that share. Where a person
is entitled by transmission to a share, the Board may retain any dividend payable in respect of that
share until that person (or that person’s transferee) becomes the holder of that share.
Any dividend or other monies payable in respect of a share may be paid by, any direct debit, bank
or other funds transfer system to the holder or person entitled to payment or, if practicable, to a
person designated by notice to the Company by the holder or person entitled to payment; or by any
other method approved by the Board and agreed by the holder or person entitled to payment
including without limitation in respect of an uncertificated share by means of the relevant system
(subject to the facilities and requirements of the relevant system).
Subject to applicable laws, any dividend or other monies unclaimed after a period of 12 years from
the date on which it became payable shall, if the Board so resolves, be forfeited and cease to remain
owing by the Company.
8.19 Capitalisation of profits and reserves
The Board may with the authority of an ordinary resolution of the Company (or a special resolution
if required under Jersey Law) resolve to capitalise any undistributed profits of the Company not
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required for paying any preferential dividend or any sum standing to the credit of any reserve or other
fund of the Company.
8.20 Winding-up
Under Jersey Law, except as provided by the rights and restrictions attached to any class of shares,
the holders of Ordinary Shares will be entitled to participate in any surplus assets in a winding-up in
proportion to their shareholdings. Pursuant to the Articles, the Company may, with the sanction of
a special resolution and any other sanction required by Jersey Law, divide among the members in
kind the whole or any part of the assets of the Company and may, for that purpose, value any assets
and determine how the division shall be carried out as between the members or different classes of
members.
8.21 Disclosure of beneficial ownership
Although Jersey Law does not contain equivalent provisions to section 793 of the UK Act, the
Articles provide that, if at any time any holder of shares, or any other person (as appropriate) has
been served with a disclosure notice from the Company and has not complied with such notice or
supplied the information required to the Company within the relevant period, then certain restrictions
will apply as follows:
(a)
if the default shares in which any one person is interested or appears to the Company to be
interested represent less than 0.25 per cent. of the issued shares of the class, the holders of
the default shares shall not be entitled, in respect of those shares, to attend or to vote, either
personally or by proxy, at any general meeting or at any separate general meeting of the
holders of any class of shares in the Company, or to exercise any other right conferred by
membership in relation to meetings of the Company; or
(b)
if the default shares in which any one person is interested or appears to the Company to be
interested represent at least 0.25 per cent. of the issued shares of the class, the holders of
the default shares shall not be entitled unless otherwise determined by the board from time
to time, in respect of those shares:
(i)
to attend or to vote, either personally or by proxy, at any general meeting or at any
separate general meeting of the holders of any class of shares in the Company, or to
exercise any other right conferred by membership in relation to meetings of the
Company; or
(ii)
to receive any payment by way of dividend and no share shall be allotted in lieu of
payment of a dividend; or
(iii)
to transfer or agree to transfer any of those shares or any rights in them.
8.22 Distribution of assets in a liquidation
Pursuant to Jersey Law, subject to any enactment as to the order of payment of debts, the
Company’s property on a winding up will be applied in satisfaction of the Company’s liabilities pari
passu and any remaining property of the Company will be distributed among the members
according to their rights and interests in the Company.
If the Company is wound up, the Directors or the liquidator (as the case may be) may, with the
sanction of a special resolution of the Company and any other sanction required by Jersey Law,
divide among the members in specie the whole or any part of the assets of the Company and may,
for that purpose, value any assets and determine how the division shall be carried out as between
the members or different classes of members. Any such division may be otherwise than in
accordance with the existing rights of the members, but if any division is resolved otherwise than in
accordance with such rights, the members shall have the right to dissent in writing within seven days
of the passing of the resolution, requiring the liquidator either to abstain from carrying the resolution
into effect or to purchase his interest at a price to be determined by agreement or arbitration.
The Directors or the liquidator may, with the like sanction, vest the whole or any part of the assets
in trustees on such trusts for the benefit of the members as they/he with the like sanction shall
determine, but no member shall be compelled to accept any assets on which there is a liability.
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8.23 Borrowing powers
The Directors shall restrict the borrowings of the Company and exercise all voting and other rights
or powers of control exercisable by the Company in relation to its subsidiaries so as to secure (as
regards subsidiaries so far as by such exercise they can secure) that the aggregate amount for the
time being remaining undischarged of all moneys borrowed by the Group and for the time being
owing to persons outside the Group shall not, without the previous sanction of an ordinary resolution
of the Company, exceed an amount equal to two times the adjusted capital and reserves. Subject
to the foregoing restriction, the Directors may exercise all the powers of the Company to borrow or
raise money, to mortgage or charge all or any of its undertaking, property, assets and uncalled
capital, to issue debentures and other securities, and to give security whether outright or as
collateral security for any debt, liability or obligation of the Company, any subsidiary of the Company
or of any third party.
9.
9.1
Comparison of Jersey Law and English Law
There are a number of differences between company law in England and company law in Jersey,
which may impact upon the holders of Ordinary Shares. However, where permitted by Jersey Law
and considered to be appropriate, rights and protections similar to those provided to shareholders
under English law have been conferred on holders of Ordinary Shares by the Articles, including as
described in the summary of certain provisions of the Articles set out in paragraph 8.2 of this Part 7.
9.2
Key differences between company law in England and company law in Jersey include (without
limitation) the following:
(a)
Jersey Law does not confer statutory pre-emption rights on shareholders relating to new
share issues; however, pre-emption rights broadly based on the provisions of the UK Act have
been enshrined in the Articles;
(b)
under Jersey Law, the directors of a company do not need the sanction of the shareholders
to issue and allot shares; however, the requirement to obtain such sanction has been
enshrined in the Articles;
(c)
Jersey law allows for partly paid shares to be allotted even if they are not paid up to at least
one quarter of its nominal value;
(d)
under Jersey Law, any change to the authorised share capital of the Company requires a
special resolution (two-thirds majority) rather than an ordinary resolution (a simple majority);
(e)
under Jersey Law a special resolution is required to be passed by two-thirds of shareholders
present (in person or by proxy) at the relevant meeting, compared with a three-quarters
majority required under English law. Thus, for example, a buy-back of shares requiring the
sanction of a special resolution will only require a two-thirds majority instead of a threequarters majority;
(f)
the circumstances in which Jersey Law permits a Jersey company to indemnify its directors
in respect of liabilities incurred by its directors in carrying out their duties are limited, and differ
slightly to the analogous rules under English law. There is, however, no general prohibition on
the granting of loans by a company to its directors (but directors remain subject to fiduciary
duties when considering the grant of any such loans) and any costs incurred in defending any
proceedings which relate to anything done or omitted to be done by that director in carrying
out his duties may be funded by way of loans;
(g)
Jersey law does not require that shareholders approve compensation payments made to
directors for loss of office, whereas under English law a payment by a company for loss of
office to a director of a company or its holding company must be approved by a resolution of
shareholders;
(h)
unless the articles of association of a public company provide otherwise, proxies are not
entitled to speak or vote on a show of hands under Jersey law. Jersey law does not permit
the appointment of more than one corporate representative by a member in respect of the
same shareholding;
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(i)
any general meeting of a Jersey company may be convened on 14 days’ notice (rather than
21 days’ notice required under English law in certain circumstances, including for the passing
of a special resolution);
(j)
Jersey Law does not require the directors of a Jersey company to disclose to the company
their beneficial ownership of any shares in the company (although they must disclose to the
company the nature and extent of any direct or indirect interest which conflicts, or may
conflict to a material extent with, a transaction into which the company or any of its
subsidiaries is proposing to enter);
(k)
Jersey Law does not grant the directors of a Jersey company a statutory power to request
information concerning the beneficial ownership of shares, but powers based on section 793
of the UK Act have been incorporated into the Articles entitling the Directors to request
information to establish details of interests in shares in the Company;
(l)
under Jersey Law, shareholders holding not less than one-tenth of the total voting rights of
the shareholders of the Company may requisition a meeting of shareholders (whereas under
the UK Act, this right may be exercised by shareholders representing at least 10 per cent. of
the paid up voting capital of a company);
(m)
Jersey Law does not confer on members the right to an independent scrutiny of a poll taken,
or to be taken, at a general meeting, nor does it confer rights on members to require a
company to circulate resolutions proposed to be moved by members at the next annual
general meeting, or to circulate explanatory statements relating to any matter relating to a
proposed resolution at a general meeting, or rights for a nominee holder of shares to have
information rights granted to the underlying beneficial owner of the share;
(n)
there is no restriction on donations by a company to political organisations under Jersey law;
(o)
under Jersey Law, at a meeting of shareholders a poll may be demanded in respect of any
question by:
(i)
no fewer than five shareholders having the right to vote on the question; or
(ii)
a shareholder or shareholders representing not less than one tenth of the total voting
rights of all shareholders having the right to vote on the question (whereas, under the
UK Act, a shareholder or shareholders representing 10 per cent. of the total sum paid
up on all shares giving the right to vote may also demand a poll);
(p)
Jersey companies are permitted to make distributions to shareholders without reference to
distributable reserves. Instead, distributions may be made out of a company’s assets (other
than its nominal capital account or any capital redemption reserve), provided the directors
approving the distribution give the appropriate solvency statement required by Jersey Law (to
the effect that the company will be able to continue its business and meet its liabilities as they
fall due for the next 12 months);
(q)
Jersey companies are permitted to make distributions to shareholders without reference to
distributable reserves. Instead, distributions may be made out of a company’s assets (other
than its nominal capital account or any capital redemption reserve), provided the directors
approving the distribution give the appropriate solvency statement required by Jersey Law (to
the effect that the company will be able to continue its business and meet its liabilities as they
fall due for the next 12 months);
(r)
a Jersey company’s redeemable shares may be redeemed out of any capital source which,
in particular, allows shares to be redeemed in whole or in part out of share capital accounts
without the need for capital redemption reserves, provided such shares are fully paid;
(s)
a Jersey company may, by special resolution, apply a capital redemption reserve in issuing
shares to be allotted as fully paid bonus shares;
(t)
under Jersey law, it is harder for shareholders to bring a derivative claim against a company
than is the case under the UK Act. However, Jersey law includes an equivalent provision
relating to protection of shareholders against unfair prejudice and Jersey has (subject to
certain exceptions) a broadly similar position under customary law to the common law
position under English law; and
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(u)
under Jersey law, the two procedures for dissolving a Jersey company are winding up and
desastre. Concepts such as receivership, administration and voluntary arrangements do not
exist under Jersey law. The concept of a winding up is broadly similar to that under English
law, except that under Jersey law, a winding up may only be commenced by the Jersey
company and not by one of its creditors. If the company is solvent the winding up will be a
summary winding up. If the company is insolvent, the winding up will be a creditors’ winding
up. A creditor wishing to dissolve a Jersey company would seek to have the company’s
property declared en desastre (literally meaning “in disaster”). If the company’s property is
declared en desastre, all of the powers and property of the company (whether present or
future or situated in Jersey or elsewhere) are vested in the Viscount (an officer of the court).
The role of the Viscount is similar to that of a liquidator. The Viscount’s principal duty is to act
for the benefit of the company’s creditors. He is not under an obligation to call any creditors’
meetings, although he may do so.
This list is intended to be illustrative only and does not purport to be exhaustive or to
constitute legal advice. Any shareholder wishing to obtain further information regarding
his rights as a holder of Ordinary Shares under Jersey law should consult his Jersey legal
advisers.
Following and subject to Admission, the Company will be required to comply with the AIM Rules for
Companies (including rules relating to related party transactions, and significant transactions) and
the Disclosure Rules and Transparency Rules. In certain of the instances where the AIM Rules for
Companies and the Disclosure Rules and Transparency Rules apply differently to an overseas
company, provision has been made in the Articles to apply the rules as if the Company was a
company incorporated in the UK.
The Company has adopted those elements of the Model Code which the Directors consider
appropriate to a Company of its size whose shares are traded on AIM.
It should be noted that insider dealing legislation set out in the UK Criminal Justice Act 1993, as well
as provisions relating to market abuse, will apply to the Company and dealings with Ordinary Shares,
alongside the relevant provisions of Jersey law.
10. Material Contracts
Other than as set out below and in paragraph 6 of Part 7 of this document, and other than contracts in
the ordinary course of business, no Group company has entered into any contracts in the two years
immediately prior to the date of this document which are or may be material, or which contain any provision
under which any Group company has any obligation or entitlement which is material to the Group as at
that date of this document:
10.1 Placing Agreement
A placing agreement dated 9 December 2013 and made between (1) the Company (2) the Directors
(3) Cairn, (4) Argento and (5) Ms Wang Xiufang pursuant to which Argento have agreed, subject to
certain conditions, to act as Placing Agent for the Company and to use its reasonable endeavours
to procure placees to subscribe for the Placing Shares at the Placing Price.
The Placing Agreement is conditional upon, inter alia, Admission occurring on or before 8.00 a.m.
on 9 December 2013 (or such later date as the Company and Argento may agree, being not later
than 8.00 a.m. on 31 January 2014). The Placing Agreement contains warranties from the Company,
the Directors and Ms Wang Xiufang in favour of Argento and Cairn in relation to, inter alia, the
accuracy of the information in this document and other matters relating to the Group and its
business. In addition, the Company, the Executive Directors and Ms Wang Xiufang have agreed to
indemnify Argento and Cairn in respect of certain liabilities it may incur in respect of the Admission.
Argento and Cairn each have the right to terminate the Placing Agreement in certain circumstances
prior to Admission, in particular, in the event of a material breach of the warranties or a force majeure
event.
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Under the Placing Agreement and subject to it becoming unconditional and not being terminated in
accordance with its terms, the Company has agreed to pay Argento a commission of 5 per cent. on
the value at the Placing Price of the Placing Shares, together with any applicable VAT.
Additionally, the Company has agreed to pay all of the costs and expenses (including any applicable
VAT) of the Issue.
10.2 Financial Adviser Ongoing Engagement Letter
A letter of engagement dated 9 December 2013 and made between (1) Argento and (2) the
Company (the “Engagement Letter”) pursuant to which the Company appointed Argento as its
financial adviser following the admission of the share capital of the Company to trading on AIM. The
Company has agreed to pay Argento a corporate finance fee of £20,000 per annum.
10.3 Nominated Adviser and Broker Agreement
A nominated adviser and broker agreement dated 9 December 2013 and made between (1) the
Company, (2) the Directors and (3) Cairn pursuant to which the Company has appointed Cairn to
act as nominated adviser to the Company for the purposes of the AIM Rules, and as its broker. The
Company has agreed to pay Cairn a fee of £35,000 plus VAT per annum for its services as
nominated adviser and broker under this agreement. The agreement contains certain undertakings
and indemnities given by the Company and the Directors to Cairn. The agreement is for a fixed term
of 12 months and thereafter is terminable upon not less than three months’ prior written notice by
either the Company or Cairn, such notice not to expire prior to the expiry of the initial 12 months
term.
10.4 Warrant Deed
A warrant deed dated 9 December 2013 entered into by the Company. Pursuant to the Placing
Agreement, the Company has agreed to (1) grant Cairn upon Admission a warrant to subscribe for
shares in the Company with a value equal to 0.625 per cent. of the enlarged issued share capital,
as enlarged by the Placing and (2) grant Argento upon Admission a warrant to subscribe for shares
in the Company with a value equal to 1.250 per cent. of the enlarged issued share capital, as
enlarged by the Placing. The warrants may be exercised for a period of five years, at the Placing
Price. The warrants issued to Argento may only be exercised from the first anniversary of Admission.
Each warrant will be capable of exercise for a period of five years from Admission, at the Placing
Price.
The Company will grant upon Admission to Argento additional warrants over 0.25 per cent. of the
enlarged share capital on the same terms upon each £1.5 million of funds raised under the Placing,
up to a total of 0.75 per cent. of the enlarged share capital.
10.5 Argento Engagement Letter
A letter of engagement dated 20 March 2013 between Argento and Jiangsu JQW (as amended by
a letter dated 9 December 2013) (the “Argento Engagement Letter”) pursuant to which Jiangsu JQW
appointed Argento as financial adviser to the Company in relation to the pre-initial public offering
preparation, the Placing and the Admission.
Jiangsu JQW has agreed to pay or provide Argento the following fees (exclusive of VAT and
disbursements):
(1) an advisory fee of £117,500; (2) a commission of 5 per cent. of the aggregate value of the
Placing shares subscribed for by the Placees introduced by Argento; and (3) immediately upon
Admission, the grant of a warrant or an option to subscribe for shares in the Company with a value
equal to 1.25 per cent. of the enlarged issued share capital, as enlarged by the Placing. This warrant
will be capable of exercise for a period of five years from Admission, at the Placing Price.
Furthermore, additional warrants over 0.25 per cent. of the enlarged share capital on the same terms
as above will be granted upon each £1.5m of funds raised under the Placing, up to a total of 0.75
per cent. of the enlarged share capital.
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10.6 Argento Research Engagement Letter
A letter of engagement dated 20 March 2013 between Argento and Jiangsu JQW dated 10 May
2013 pursuant to which Jiangsu JQW engaged Argento to produce a research report for marketing
purposes.
10.7 Nomad Engagement Letter
A letter of engagement dated 17 September 2013 between Cairn and the Company (the “Nomad
Engagement Letter”) pursuant to which the Company appointed Cairn as nominated adviser to the
Company in relation to the Admission. Under the terms of the letter the Company agreed to pay a
corporate finance fee and a warrant to subscribe for shares representing 0.625 per cent. of the
issued share capital immediately following Admission.
10.8 Libertas Engagement Letter
A letter of engagement dated 3 April 2013 between Libertas and Jiangsu JQW pursuant to which
Jiangsu JQW appointed Libertas as nominated adviser and broker to the Company in relation to the
Placing and the Admission and paid work-in-progress fees of £20,000. The letter of engagement
was terminated on 9 December 2013, and pursuant to an agreement dated 9 December 2013 the
Company appointed Libertas as placing agent to use its reasonable endeavours to procure placees
to subscribe for the Placing Shares at the Placing Price. The Company has agreed to pay Libertas
a commission of 3 per cent. on the value at the Placing Price of the Placing Shares placed by
Libertas, together with any applicable VAT.
10.9 Relationship Agreement
On Admission, the Principal Shareholders will hold approximately 66.84 per cent. of the Enlarged
Share Capital and will control the Company. On 9 December 2013, (1) the Company, (2) Argento,
(3) Cairn, (4) the Principal Shareholders, (5) Mr Cai Yongde, (6) Mr Chen Daocai, (7) Mr Cai Peixuan,
and (8) Ms Wang Xiufang entered into a relationship agreement. To regulate aspects of the
continuing relationship between the Company and the Principal Shareholders, to ensure that the
Company is capable at all times of carrying on its business independently of the Principal
Shareholders and that future transactions between the Company and the Principal Shareholders are
on arm’s length terms and on a normal commercial basis. The Relationship Agreement will
terminate, amongst other things, upon notice by either party in writing or at any time when the voting
rights attaching to the Principal Shareholders’ Shareholding represent in aggregate 25 per cent. of
all voting rights or when the Ordinary Shares cease to trade on AIM provided that, in the event that
any time thereafter the voting rights attaching to the Shareholding again represent in aggregate 25
per cent. or more of all voting rights, the Principal Shareholders, Mr Cai Yongde, Mr Chen Daocai,
Mr Cai Peixuan and Ms Wang Xiufang shall enter into a new agreement in favour of the Company,
Argento and Cairn.
10.10 Lock-In and Orderly Market Agreements
A lock-in and orderly market agreement dated 9 December 2013 made between (1) Cairn, (2)
Argento (3) the Company and (4) the Locked-in Parties, and an orderly market agreement dated
9 December 2013 made between (1) Cairn (2) Argento (3) the Company and (4) the Orderly Market
Parties.
10.10.1 Locked-in Parties
On 9 December 2013, the Locked-In Parties, being Tian Sheng Enterprises Limited, Cheng
Tong International Limited, Champ Public Limited, Dong Feng Developments Limited, Fortune
United Capital Limited and the individuals who control those Shareholders, Mr Cai Yongde,
Mr Chen Daocai, Mr Cai Peixuan, Ms Wang Xiufang, and Ms Lim Geok Tin, have undertaken
with the Company, Cairn and Argento, subject to certain limited exceptions, not to sell,
transfer, grant any option or charge over or otherwise dispose or agree to dispose of the legal
or beneficial interest in any Ordinary Shares held or acquired by them for a period of
12 months from the date of Admission (the “Lock-Up Period”).
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The Locked-In Parties have further undertaken with the Company, Cairn and Argento not to
dispose of any Ordinary Shares held by them for a period of 12 months following the expiry
of the Lock-Up Period without the prior written consent of Cairn and Argento, save in certain
limited circumstances.
10.10.2 Orderly Market Parties
On 9 December 2013, the Orderly Market Parties, being Hansen Drison Venture Capital Co.,
Ltd, Universe Glory Enterprises Limited, One Capital Group Investment Limited and Midasi
Investment Limited and the individuals who control those Shareholders, Mr Tang Liu, Mr Ke
Dongxi, Dato’ Yap Son On and Ms Bek Lian Ho have undertaken with the Company, Cairn
and Argento, subject to certain exceptions (which for One Capital Group Investment Limited
only, includes the ability to make such disposals as are required to recoup the cost to it of the
admission process), not to dispose or agree to dispose of the legal and beneficial interest in
any Ordinary Shares held by them for a period of 12 months from the date of Admission (the
“Orderly Market Period”) without the prior written consent of Cairn and Argento, save in
certain limited circumstances
The Orderly Market Parties have further undertaken with the Company, Cairn and Argento not
to dispose or agree to dispose of the legal and beneficial interest in any Ordinary Shares held
by them for a period of 6 months following the expiry of the Orderly Market Period without the
prior written consent of Cairn and Argento, such consent not to be unreasonably withheld or
delayed.
10.11 Share Swap Agreement
Pursuant to a share swap agreement dated 5 September 2013 between, inter alia, (1) the Company,
(2) JIL and (3) Ms Wang Xiufang, the Company acquired 1 share of HKD 1 in the issued share capital
of JIL in consideration for the issue of 147,531,198 Ordinary Shares of no par value in the capital of
the Company at a price of 70 pence per Ordinary Share (the “Consideration Shares”). The Share
Swap Agreement contained certain customary covenants as to title. The Share Swap Agreement is
governed by the law of Hong Kong.
Pursuant to the Share Swap Agreement, the Consideration Shares were allotted, 92,901,598
Ordinary Shares to Ms Wang Xiufang (to be held through Tian Sheng Enterprises Limited and Cheng
Tong International Limited), 10,009,600 Ordinary Shares to Hansen Drison Venture Capital Co. Ltd,
10,009,600 Ordinary Shares to Universe Glory Enterprises Limited, 23,680,800 Ordinary Shares to
Fortune United Capital Limited, 5,464,800 Ordinary Shares to One Capital Group Investment Limited
and 5,464,800 Ordinary Shares to Midasi Investment Limited by way of performance of certain
investment agreements entered into between persons connected with the allottees and Ms Wang
Xiufang.
10.12 Subscription Agreement
Pursuant to a subscription agreement dated 5 September 2013 between (1) the Company, (2)
Mr Cai Yongde, (3) Mr Chen Daocai, (4) Mr Cai Peixuan, (5) Champ Public Limited, a BVI company
wholly owned by Mr Cai Yongde and Mr Chen Daocai and (6) Dong Feng Developments Limited, a
BVI company wholly owned by Mr Cai Peixuan. Champ Public Limited was allotted 29,182,400
Ordinary Shares and Dong Feng Developments Limited was allotted 7,286,400 Ordinary Shares in
consideration for services provided by Mr Cai Yongde, Mr Chen Daocai and Mr Cai Peixuan to the
Company.
10.13 Deed of Termination and Waiver
A deed of termination and waiver dated 5 September 2013 and made between each of (1) Mr Tang
Liu, Mr Ke Dongxi, Ms Lim Geok Tin, Dato’ Yap Son On and Ms Bek Lian Ho (the “Investors”),
(2) Ms Wang Xiufang, (3) the Company and (4) JIL pursuant to which each of the Investors and
Ms Wang Xiufang agree to terminate certain investment agreements and release each other from all
liabilities associated with such investment agreements. Each of the Investors confirms that the
allotment of shares to his or her nominee pursuant to the Share Swap Agreement referred to in
paragraph 10.11 above is in full and final settlement of all claims in respect of (i) the investment
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agreements entered into with Ms Wang Xiufang (ii) any other investment in the Group (iii) any
undertaking to allot shares to him or her and (iv) any statement, representation, assurance or
warranty made to him or her prior to Admission in respect of the financial or trading position or
prospects of the Group.
10.14 Contracts relating to the Group’s Contractual Arrangements structure
10.14.1 Entrusted Management Agreement
An Entrusted Management Agreement dated 20 November 2012 and made between the
shareholders of Shenzhen JQW, Mr Cai Yongde and Mr Chen Daocai, Shenzhen JQW and
Yangzhou Junde. According to the Entrusted Management Agreement, in consideration for
the provision of management services by Yangzhou Junde to Shenzhen JQW, Shenzhen
JQW will pay Yangzhou Junde a management fee equal to Shenzhen JQW’s pre-tax income.
Such arrangements allow Yangzhou Junde to receive all of the economic benefits of
Shenzhen JQW. In addition, to prevent Shenzhen JQW, which holds the domain names and
the ICP licence, from going insolvent, Yangzhou Junde agrees to bear any of Shenzhen
JQW’s deficits; and should the risk of Shenzhen JQW’s insolvency arise, Yangzhou Junde
agrees to pay off all of Shenzhen JQW’s debts. The Entrusted Management Agreement is
effective beginning on November 20, 2012 and will remain in effect until Shenzhen JQW stops
operating, or a subsequent company manifests, or Yangzhou Junde completes its acquisition
of Shenzhen JQW. According to the agreement, Yangzhou Junde is responsible for the day
to day operations of Shenzhen JQW, including appointing and dismissing members of the
Board of Directors, hiring management personnel, etc. The shareholders of Shenzhen JQW,
including proxy voters, are obliged to pass shareholder resolutions and Board of Directors
resolutions in accordance with the directions of Yangzhou Junde. According to the
agreement, Yangzhou Junde has the right to manage and control all of Shenzhen JQW’s
assets, including its cash. Shenzhen JQW should create an entrusted bank account or
designate a preexisting bank account as the entrusted bank account. Yangzhou Junde has
the right to decide on how the funds in the entrusted account are used. Yangzhou Junde also
has the right to appoint or approve the manager of the entrusted bank account. All of
Shenzhen JQW’s funds should be placed in the entrusted bank account including, but not
limited to: currently available operational funds, fees received from providing any type of
service to a third party, and proceeds from sales of production equipment, raw materials, and
storage, and funds to pay outstanding accounts. All payments should be made using the
entrusted bank account including, but not limited to: currently due accounts and operational
fees, salaries, asset procurement costs, and payment for services. Any operational proceeds
should also be kept in the entrusted bank account.
10.14.2 Exclusive Option Agreement
An Exclusive Option Agreement dated 20 November 2012 and made between Shenzhen
JQW and its shareholders, Mr Cai Yongde and Mr Chen Daocai, and Yangzhou Junde.
According to the Exclusive Option Agreement, when Yangzhou Junde deems it necessary,
and PRC law permitting, Shenzhen JQW should transfer all of its assets to Yangzhou Junde
and Shenzhen JQW’s shareholders should transfer all of Shenzhen JQW’s equity to Yangzhou
Junde. According to the agreement, Yangzhou Junde’s aforementioned rights are irrevocable.
In addition, prior to the complete transfer of the aforementioned rights to Yangzhou Junde,
Shenzhen JQW’s shareholders should pledge all of their equity to Yangzhou Junde and are
forbidden from transferring any of Shenzhen JQW’s assets or equity to any party besides
Yangzhou Junde and/or a third party designated by Yangzhou Junde pursuant to the Equity
Pledge Agreement. Assuming that Chinese law permits such actions, Yangzhou Junde has
the right purchase all of Shenzhen JQW’s assets and equity according to the Exclusive Option
Agreement.
10.14.3 Shareholder Proxy Voting Agreement
A Shareholder Proxy Voting Agreement dated 20 November 2012 made between Shenzhen
JQW’s shareholders, Mr Cai Yongde and Mr Chen Daocai, and Yangzhou Junde. According
to the Shareholder Proxy Voting Agreement, Shenzhen JQW’s shareholders agree irrevocably
to allow Yangzhou Junde to appoint personnel to exercise all voting rights at Shenzhen JQW’s
shareholders meetings. This agreement cannot be terminated prior to Yangzhou Junde
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completing its acquisition of all of Shenzhen JQW’s assets or equity. According to an
amendment to the Shareholder Proxy Voting Agreement, Yangzhou Junde may, at its
discretion, appoint any person they see fit to exercise the voting rights. Currently Yangzhou
Junde has appointed Mr Cai Yongde and Mr Chen Daocai to exercise the voting rights. Such
an appointment is valid and permitted by PRC law and in compliance with Shenzhen JQW’s
articles of association. According to the Shareholder Proxy Voting Agreement, we believe that
through the appointed personnel, Yangzhou Junde will always be aware of Shenzhen JQW’s
shareholders’ arrangement for the company’s operations and be able to exert actual influence
on the arrangements.
10.14.4 Equity Pledge Agreement
An Equity Pledge Agreement dated 20 November 2012, between Shenzhen JQW’s
shareholders, Mr Cai Yongde and Mr Chen Daocai, and Yangzhou Junde. According to the
Equity Pledge Agreement, prior to Yangzhou Junde acquiring all of the assets of and/or equity
interest in Shenzhen JQW, Shenzhen JQW’s shareholders pledge all of their equity interest in
Shenzhen JQW to Yangzhou Junde. According to the Equity Pledge Agreement, Shenzhen
JQW’s equity is pledged to Yangzhou Junde and the pledge is registered at Shenzhen United
Assets and Equity Exchange Center. The agreement is such that Shenzhen JQW’s
shareholders cannot terminate the pledge agreement without consent from Yangzhou Junde
and cannot transfer Shenzhen JQW’s equity to any other party.
10.15 Registrar Agreement
A registrar agreement dated 3 December 2013 made between the (1) Company and the (2)
Registrar pursuant to which the Company has appointed the Registrar to act as its share registrar.
Under this agreement, the Company has agreed to pay an annual fee for which the Registrar will
perform the services of the Company’s share registrar in relation to the trading of the Ordinary
Shares on AIM. Unless terminated in accordance with the early termination provisions, the
agreement shall continue for a fixed term of three years (the “Initial Period”) and shall renew for
successive periods of twelve months (the “Successive Period” until terminated by either party
giving to the other party not less than three months’ notice should the parties not reach an
agreement regarding any increase of the fees or otherwise at the end of the Initial Period (or the
Successive Period), provided that not less than six months’ notice is given to the other party prior
to the end of the relevant period.
10.16 Administration Agreement
An administration agreement dated 31 July 2013 made between the Company and Appleby Trust
(Jersey) Limited (“Appleby Trust”) pursuant to which the Company has appointed Appleby Trust to
act as corporate administrator to the Company in Jersey. The Company has agreed to pay Appleby
Trust administration fees for the services described in the agreement. The agreement contains
certain undertakings and indemnities given by the Company in respect of, inter alia, compliance with
applicable laws and regulations and the administration of the Company.
11. Related party transactions
Save as disclosed below or elsewhere in this document, the Group has not entered into any related party
transaction in the financial period covered by the report in Part 4 of this document or from the end of that
period to the date of this document:
11.1 In relation to the Company:
11.1.1 Loan Agreement
An agreement dated 22 November 2013 entered into between Mr Cai Yongde and the
Company pursuant to which Mr Cai Yongde made an interest free, unsecured, on demand
loan of HKD 10,000 to the Company for the purpose of subscribing for additional share
capital in JIL.
The Loan Agreement is governed by Jersey Law.
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11.2 In relation to Yangzhou Junde
11.2.1 Contracts relating to the Group’s Contractual Arrangements structure
Full details of the Group’s Contractual Arrangements are set out in paragraph 10.14 of this
document.
11.3 In relation to Jiangsu JQW
11.3.1 Domain Name Use Agreement with Shenzhen JQW
Shenzhen JQW and Jiangsu JQW entered into a domain name use agreement (“Domain
Name Use Agreement”) on 20 November 2011 such that Jiangsu JQW has the right to use
domain names www.jqw.com, www.jqw.com.cn and www.jqw.cn at a total of RMB 775,000
per year. As the legal and registered owner of the domain names. Shenzhen JQW agrees to
allow Jiangsu JQW to use the domain names and Jiangsu JQW may not license the domain
names for use by a third party, without prior written consent of Shenzhen JQW. It was agreed
that a failure by Jiangsu JQW to pay a licensing or usage fee for the domain names will not
be the reason for terminating the agreement. This agreement can only be terminated by
notice in writing by Jiangsu JQW. This agreement is governed by PRC law.
11.3.2 Agency Agreement with Shenzhen JQW
Shenzhen JQW entered into an agency agreement (“Agency Agreement”) with Jiangsu
JQW on 20 November 2011 appointing Jiangsu JQW as agent for Shenzhen JQW in
conducting its business. In acting as an agent, Jiangsu JQW engages in developing the
customer and sales agency base for Shenzhen JQW. It is set out in the Agency Agreement
that Shenzhen JQW will bear any losses or legal liabilities raised against the Agency
Agreement. This agreement provides for agent fees to Jiangsu JQW will be as determined by
both parties. This agreement is governed by PRC law.
11.3.3 Memorandum of Understanding on Agent Fees with Shenzhen JQW
Shenzhen JQW entered into a memorandum of understanding with Jiangsu JQW on
20 November 2011 in that both parties agree that the amount of agent fees payable under
the Agency Agreement for developing a customer base for Shenzhen JQW will be of an
amount equivalent to the total amount of service fees received by Jiangsu JQW from its
customers. This memorandum is governed by PRC law.
11.3.4 Memorandum of Understanding on Server Maintenance Fees with Shishi JQW
Shishi JQW and Jiangsu JQW signed a memorandum of understanding on 20 November
2011 whereby Jiangsu JQW would be responsible for a portion of the upkeep fees of the
servers owned by Shishi JQW beginning 2013. This memorandum of understanding
provides, inter alia, that the servers currently owned by Shishi JQW would remain the property
of Shishi JQW and both Jiangsu JQW and Shishi JQW would enter into a separate contract
with Xiamen Wufeng for the maintenance and upkeep of the said servers. The amount of fee
paid by each company will be decided by mutual agreement between the parties at the time
of entering into the contract with Xiamen Wufeng. This memorandum is governed by PRC
law.
11.3.5 Server Use Agreement with Shishi JQW
Jiangsu JQW and Shishi JQW entered into a server use agreement (“Server Use
Agreement”) dated 20 November 2011. The Server Use Agreement between Shishi JQW
and Jiangsu JQW whereby Shishi JQW agrees to allow Jiangsu JQW to use the servers
currently owned by Shishi JQW and any servers that Shishi JQW may own in the future
without any restrictions on use and for free. Jiangsu JQW may not license the server for use
by a third party without prior written consent of Shishi JQW. Failure by Jiangsu JQW to pay a
license or usage fee for the servers cannot be the reason for terminating this agreement. This
agreement can be terminated only with written consent from both parties. This agreement is
governed by PRC law.
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11.3.6 Trademark Use Agreement with Shishi JQW
Shishi JQW entered into a trademark use agreement (“Trademark Use Agreement”) with
Jiangsu JQW on 24 October 2011 whereby Shishi JQW as the legal and registered owner of
the trademarks, agrees to allow Jiangsu JQW to use all of the trademarks currently owned by
Shishi JQW and any trademarks Shishi JQW may own in the future without any restrictions
on use for free. Jiangsu JQW may not license the trademarks for use by a third party, without
prior written consent of Shishi JQW. Failure by Jiangsu JQW to pay a licensing or usage fee
for the trademarks cannot be the reason for terminating this agreement. This agreement can
only be terminated with written consent from both parties. This agreement is governed by
PRC law.
11.3.7 Copyright Use Agreements with Shenzhen JQW
Jiangsu JQW entered into copyright use agreements (“Copyright Use Agreements”) with
Shenzhen JQW on 26 December 2012 where by Jiangsu JQW as the legal and registered
owner of the copyrights, agrees to allow Shenzhen JQW to use all of the copyrights currently
owned by Jiangsu JQW and any copyrights that Jiangsu JQW may own in the future without
any restrictions on use for free. Shenzhen JQW may not license the copyright for use by a
third party without Jiangsu’s prior written consent. Failure by Shenzhen JQW to pay a
licensing or usage fee for the copyrights cannot be the reason for terminating this agreement.
This agreement can only be terminated when both parties have given written consent. This
agreement is governed by PRC law.
11.3.8 Copyright Use Agreements with Shishi JQW
Jiangsu JQW entered into Copyright Use Agreements with Shishi JQW on 26 December
2012 where by Jiangsu JQW as the legal and registered owner of the copyrights, agrees to
allow Shishi JQW to use all of the copyrights currently owned by Jiangsu JQW and any
copyrights that Jiangsu JQW may own in the future without any restrictions on use for free.
Shishi JQW may not license the copyright for use by a third party without Jiangsu’s prior
written consent. Failure by Shishi JQW to pay a licensing or usage fee for the copyrights
cannot be the reason for terminating this agreement. This agreement can only be terminated
when both parties have given written consent. This agreement is governed by PRC law.
11.4 In relation to Shishi JQW
11.4.1 Memorandum of understanding on Server Maintenance Fee with Jiangsu JQW, full details are
set out in paragraph 11.3.4 of this document.
11.4.2 Agency Agreement With Shenzhen JQW
Shenzhen JQW entered into an Agency Agreement with and Shishi JQW on 10 April 2009
appointing Shishi JQW as agent for Shenzhen JQW in conducting its business. In acting as
an agent, Shishi JQW engages in developing the customer and sales agency base for
Shenzhen JQW. It is set out in the Agency Agreement that Shenzhen JQW will bear any
losses or legal liabilities raised against the Agency Agreement. The agreement provides for
agent fees for Shishi JQW will be as determined by both parties. This agreement is governed
by PRC law.
11.4.3 Memorandum of Understanding on Agent Fees with Shenzhen JQW
Shenzhen JQW entered into a memorandum of understanding with Shishi JQW on 10 April
2009 in that both parties agree that the amount of agent fees payable under the Agency
Agreement for developing a customer base for Shishi JQW will be of an amount equivalent to
the total amount of service fees received by Shishi JQW from its customers. This
memorandum is governed by PRC law.
11.4.4 Server Use Agreement with Jiangsu JQW and Shenzhen JQW, full details are as set out in
paragraphs 11.3.5 and 11.5.4 of this document.
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11.4.5 Trademark Use Agreement with Jiangsu JQW and Shenzhen JQW, full details are as set out
in paragraphs 11.3.6 and 11.5.5 of this document.
11.4.6 Copyright Use Agreement with Jiangsu JQW and Shenzhen JQW, full details are as set out
in paragraphs 11.3.8 and 11.5.7 of this document.
11.4.7 Domain Name Use Agreement With Shenzhen JQW
Shenzhen JQW and Shishi JQW entered into a Domain Name Use Agreement on 10 April
2009 such that Shishi JQW has the right to use domain names www.jqw.com,
www.jqw.com.cn and www.jqw.cn at no cost. As the legal and registered owner of the
domain names. Shenzhen JQW agrees to allow Shishi JQW to use the domain names and
Shishi JQW may not license the domain name for use by a third party, without prior written
consent of Shenzhen JQW. It was agreed that a failure by Shishi JQW to pay any licensing or
usage fee for the domain names will not be the reason for terminating this agreement. This
agreement can only be terminated by notice in writing by Shishi JQW. This agreement is
governed by PRC law.
11.4.8 Trademark Assignment Agreement with Shenzhen JQW
A trademark assignment agreement dated 29 August 2013 entered into between Shishi JQW
and Shenzhen JQW pursuant to which Shishi JQW irrevocably and unconditionally undertook
to assign to Shenzhen JQW:
(a)
each trademark registered by Shishi JQW with the Trademark Office of State
Administration for Industry and Commerce on the registration of each such mark (the
“Trademark Office”); and
(b)
registered trademarks (with registration number 5819132 under Class 16 and
5819116 under Class 42) (which are no longer in use by the Group) on the registration
and transfer to Shenzhen JQW both of the pending trademark applications (with
application number 11439170 under Class 16 and 111195714 under Class 42, both
of which are for the roman letters “JQW”).
This agreement is governed by PRC law.
11.5 In relation to Shenzhen JQW
11.5.1 Domain Name Use Agreement with Shishi JQW and Jiangsu JQW full details are set out in
paragraphs 11.4.7 and 11.3.1 of this document.
11.5.2 Agency Agreement with Shishi JQW and Jiangsu JQW, full details are set out in paragraphs
11.4.2 and 11.3.2 of this document.
11.5.3 Memorandum of understanding on Agent Fees with Shishi JQW and Jiangsu JQW, full details
are set out in paragraphs 11.4.3 and 11.3.3 of this document.
11.5.4 Server Use Agreement with Shishi JQW
Shenzhen JQW and Shishi JQW entered into a Server Use Agreement dated 1 July 2009. The
server use agreement between Shishi JQW and Shenzhen JQW whereby Shishi JQW agrees
to allow Shenzhen JQW to use the servers currently owned by Shishi JQW and any servers
that Shishi JQW may own in the future without any restrictions on use and for free. Shenzhen
JQW may not license the server for use by a third party without prior written consent of Shishi
JQW. Failure by Shenzhen JQW to pay a license or usage fee for the servers cannot be the
reason for terminating this agreement. This agreement can only be terminated with written
consent from both parties. This agreement is governed by PRC law.
11.5.5 Trademark Use Agreement with Shishi JQW
Shenzhen JQW entered into a Trademark Use Agreement with Shishi JQW on 15 February
2010 whereby Shishi JQW as the legal and registered owner of the trademarks, agrees to
allow Shenzhen JQW to use all of the trademarks currently owned by Shishi JQW and any
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trademarks Shishi JQW may own in the future without any restrictions on use for free.
Shenzhen JQW may not license the trademarks for use by a third party, without prior written
consent of Shishi JQW. Failure by Shenzhen JQW to pay a licensing or usage fee for the
trademarks cannot be the reason for terminating this agreement. This agreement can only be
terminated with written consent from both parties. This agreement is governed by PRC law.
11.5.6 Copyright Use Agreements with Jiangsu JQW
Shenzhen JQW entered into Copyright Use Agreements with Jiangsu JQW on 31 March
2013 whereby Shenzhen JQW as the legal and registered owner of the copyrights, agrees to
allow Jiangsu JQW to use all of the copyrights currently owned by Shenzhen JQW and any
copyrights Shenzhen JQW may own in the future without any restrictions on use for free.
Jiangsu JQW may not license the copyrights for use by a third party, without prior written
consent of Shenzhen JQW. Failure by Jiangsu JQW to pay a licensing or usage fee for the
copyrights cannot be the reason for terminating this agreement. This agreement can only be
terminated with written consent from both parties. This agreement is governed by PRC law.
11.5.7 Copyright Use Agreement with Shishi JQW
Shenzhen JQW entered into Copyright Use Agreements with Shishi JQW on 31 March 2013
whereby Shenzhen JQW is the legal and registered owner of the copyrights, agrees to allow
Shishi JQW to use all of the copyrights currently owned by Shenzhen JQW and any
copyrights Shenzhen JQW may own in the future without any restrictions on use for free.
Shishi JQW may not license the copyrights for use by a third party, without prior written
consent of Shenzhen JQW. Failure by Shishi JQW to pay a licensing or usage fee for the
copyrights cannot be the reason for terminating this agreement. This agreement can only be
terminated with written consent from both parties. This agreement is governed by PRC law.
11.5.8 Contracts relating to the Group’s Contractual Arrangements structure, full details are set out
in paragraph 10.6 of this document.
11.6 Indemnity Letters
11.6.1 Indemnity Letter from Mr Cai Yongde and Mr Chen Daocai
An Indemnity Letter dated 9 December 2013 given by Mr Cai Yongde and Mr Chen Daocai,
to the Group Company, pursuant to which both jointly and severally shall indemnify and hold
the Group Company harmless against, amongst other things:
(a)
any losses caused by the transfer of shares in Shishi JQW into the Group, including
any tax liability;
(b)
any losses caused by the transfer of shares in Jiangsu JQW into the Group, including
any tax liability;
(c)
any losses caused by the penalty that Shenzhen JQW might be subject to in respect
of the period between when Shenzhen JQW began charging for services provided
online and the receipt of the ICP Licence;
(d)
any losses caused by any litigation or administrative penalties that Yangzhou Junde,
Jiangsu JQW, Shishi JQW and Shenzhen JQW should be subject to;
(e)
any losses caused by a breach by Shenzhen JQW of the Contractual Arrangements;
(f)
any losses caused by the Contractual Arrangements being determined by any PRC
authority to be illegal, invalid, contrary to existing public policy, existing regulation or
law, non-binding or unenforceable under existing PRC law.
11.6.2 Indemnity Letters from Mr Cai Yongde
●
An Indemnity Letter dated 22 July 2013 given by Mr Cai Yongde, to JIL and Yangzhou
Junde, pursuant to which Mr Cai Yongde shall indemnify and hold JIL and Yangzhou
Junde harmless against any losses caused by the penalty that the share transfer
relating to Jiangsu JQW;
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●
An Indemnity Letter dated 22 July 2013 given by Mr Cai Yongde, to JIL and Yangzhou
Junde, pursuant to which Mr Cai Yongde shall indemnify and hold JIL and Yangzhou
Junde harmless against any losses caused by the penalty that Shenzhen JQW might
be subject to for the period between Shenzhen JQW began charging for services
provided online and the receipt of the ICP Licence;
●
An Indemnity Letter dated 2 August 2013 given by Mr Cai Yongde, to JIL and
Yangzhou Junde, pursuant to which Mr Cai Yongde shall indemnify and hold JIL and
Yangzhou Junde harmless against any losses caused by the penalty that Yangzhou
Junde, Jiangsu JQW, Shishi JQW and Shenzhen JQW should be subject to due to any
litigation and administrative penalties from 29 September 2012 to 31 July 2013;
●
An Indemnity Letter dated 9 August 2013 given by Mr Cai Yongde to Yangzhou Junde,
pursuant to which Mr Cai Yongde shall indemnify and hold Yangzhou Junde harmless
against any losses caused by Shenzhen JQW’s breach of the exclusive option
agreement; and
●
An Indemnity Letter dated 9 August 2013 given by Mr Cai Yongde to Yangzhou Junde,
pursuant to which Mr Cai Yongde shall indemnify and hold Yangzhou Junde harmless
against any losses caused by Shenzhen JQW’s breach of the entrusted management
agreement.
The Indemnity Letters given by Mr Cai Yongde are governed by PRC law.
11.6.3 Indemnity Letters from Mr Chen Daocai
●
An Indemnity Letter dated 22 July 2013 given by Mr Chen Daocai to JIL and Yangzhou
Junde, pursuant to which Mr Chen Daocai shall indemnify and hold JIL and Yangzhou
Junde harmless against any losses caused by the penalty that the share transfer
relating to Jiangsu JQW and Shishi JQW;
●
An Indemnity Letter dated 22 July 2013 given by Mr Chen Daocai, to JIL and Yangzhou
Junde, pursuant to which Mr Chen Daocai shall indemnify and hold JIL and Yangzhou
Junde harmless against any losses caused by the penalty that Shenzhen JQW might
be subject to for the period between Shenzhen JQW began charging for services
provided online and the receipt of the ICP Licence;
●
An Indemnity Letter dated 2 August 2013 given by Mr Chen Daocai, to JIL and
Yangzhou Junde, pursuant to which Mr Chen Daocai shall indemnify and hold JIL and
Yangzhou Junde harmless against any losses caused by the penalty that Yangzhou
Junde, Jiangsu JQW, Shishi JQW and Shenzhen JQW should be subject to due to any
litigation and administrative penalties from 29 September 2012 to 31 July 2013;
●
An Indemnity Letter dated 9 August 2013 given by Mr Chen Daocai to Yangzhou
Junde, pursuant to which Mr Chen Daocai shall indemnify and hold Yangzhou Junde
harmless against any losses caused by Shenzhen JQW’s breach of the exclusive
option agreement; and
●
An Indemnity Letter dated 9 August 2013 given by Mr Chen Daocai to Yangzhou
Junde, pursuant to which Mr Chen Daocai shall indemnify and hold Yangzhou Junde
harmless against any losses caused by Shenzhen JQW’s breach of the entrusted
management agreement.
The Indemnity Letters given by Mr Chen Daocai are governed by PRC law.
11.6.4 Indemnity Letter from Mr Cai Peixuan
An Indemnity Letter dated 22 July 2013 given by Mr Cai Peixuan to the JIL and Yangzhou
Junde, pursuant to which Mr Cai Peixuan shall indemnify and hold JIL and Yangzhou Junde
harmless against any losses caused by the penalty that the share transfer relating to Shishi
JQW.
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The Indemnity Letters given by Mr Cai Peixuan is governed by PRC law.
11.6.5 Indemnity Letter from Mr Tang Liu
An Indemnity Letter dated 22 July 2013 given by Mr Tang Liu to the JIL and Yangzhou Junde,
pursuant to which Mr Tang Liu shall indemnify and hold JIL and Yangzhou Junde harmless
against any losses caused by the penalty that the share transfer relating to Jiangsu JQW.
The Indemnity Letters given by Mr Tang Liu is governed by PRC law.
11.6.6 Shareholder Indemnity Letter
A letter of indemnity dated 5 September 2013, given by Ms Wang Xiufang, a major
shareholder of the Company and the niece of Mr Cai Yongde, the Executive Chairman of the
Company, to the Company and JIL (the “Indemnified Parties”) pursuant to which Ms Wang
Xiufang shall indemnify and hold the Indemnified Parties harmless against:
(a)
breach of the investment agreements made between Ms Wang Xiufang and each of Mr
Tang Liu, Mr Ke Dongxi, Ms Lim Geok Tin, Dato’ Yap Son On and Ms Bek Lian Ho;
(b)
any investment any person has made or purported to make in the Group prior to
Admission;
(c)
any undertaking to allot shares in the capital of any member of the Group prior to
Admission; and
(d)
any representation, statement, assurance or warranty in relation to the financial or
trading position or prospects of the Group.
12. Share Option Scheme
12.1 By a resolution of the Board dated 3 December 2013, the Company adopted the Share Option
Scheme, the purpose of which is to align the interests of employees with shareholders of the
Company, improve employee retention and provide an additional focus for management on key
measures of the long term business performance of the Company.
12.2 The principal terms of the Share Option Scheme are:
12.2.1 Eligibility
Options may be granted to bona fide employees (including executive directors) of any
companies in the Group and any other person (whether or not an employee) who provides
services to the Group. No Option shall be granted to a Director unless such grant has been
previously approved in writing by a majority of the other Directors.
12.2.2 Timing of awards
An Option may be granted at any time on or after the date on which the Share Option
Scheme was adopted by the Board. No Option may be granted under the Share Option
Scheme later than 10 years after the adoption date.
12.2.3 Performance-related conditions of exercise
The exercise of an Option may be conditional upon the performance of the person who has
been granted an Option (the “Optionholder”) and/or the performance of the Company or any
other Group company over such period and measured against such objective criteria as shall
be determined by the Board and notified to the Optionholder at the date on which the option
is granted (the “Date of Grant”). The Board may, in appropriate circumstances, amend any
performance related condition of exercise following the grant of an Option.
12.2.4 Exercise of Options and lapse of Options
An Option may not be exercised later than the 10th anniversary of the Date of Grant or such
earlier time as the Company (the “Grantor) shall determine and notify to the Optionholder at
the Date of Grant. Save as provided in the Share Option Scheme, an Option may not be
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exercised earlier than 3 years from the Date of Grant or such earlier or later time as the
Directors shall specify at the relevant Date of Grant.
12.2.5 Tax treatment
If a person who is a resident or ordinarily resident in the UK (so as to be chargeable to income
tax on his general earnings) is granted an Option over Ordinary Shares no charge to income
tax will arise on the grant of the Option.
12.2.6 Overall limit on the granting of Options
The number of Ordinary Shares in respect of which Options may be granted on any given day
in any year when added to the number of Ordinary Shares in respect of which Options have
been previously granted (and, if not exercised, have not ceased to be exercised) in that year
and the 9 preceding years, shall not exceed 10 per cent. of the issued ordinary share capital
of the Company on that day.
12.2.7 Variation of share capital
In the event of any alteration of the ordinary share capital by way of capitalisation or rights
issue, or sub-division, consolidation or reduction or any other variation in the share capital of
the Company, the Grantor may make such adjustments as it considers appropriate, including:
(a) to the aggregate number or amount of Ordinary Shares subject to any Option; and/or (b)
to the exercise price per Ordinary Share upon the exercise of that Option.
12.2.8 Alteration of the Share Option Scheme
The Directors may at any time alter or add to any of the provisions of the Share Option
Scheme in any respect save that no amendments may detrimentally affect an Optionholder
as regards an Option granted prior to the amendment being made. In addition, no
amendment may be made to the scheme which would make the terms on which Options
may be granted materially more generous without the prior approval of the Company in
general meeting.
12.2.9 Relationship with contract of employment
The grant of an Option does not form part of the Optionholder’s entitlement to remuneration
or benefits pursuant to his contract of employment nor does the existence of a contract of
employment between any person and the Company or any group company give such person
any right or entitlement to have an Option granted to him in respect of any number of Ordinary
Shares or any expectation that an Option might be granted to him whether subject to any
conditions or at all.
The above summary of the principal terms of the Share Option Scheme does not form part of
the rules of the Share Option Scheme and should not be taken as affecting the interpretation of
the detailed terms and conditions. The Board reserves the right to make amendments and any
additions to the rules of the Share Option Scheme that they consider necessary or appropriate,
provided that any amendment may not conflict in any material respect with the above summary.
13. Founders’ Share-based Payment Scheme
By execution of the Founders’ Share-based Payment Agreement, Mr Cai Yongde and Mr Chen Daocai,
through the holding company Champ Public Limited, established the Founders’ Share-based Payment
Scheme, the purpose of which is to incentivise and reward employees. Under this scheme, Champ Public
Limited will make discretionary transfers of Ordinary Shares held by it to certain employees with at least
12 months’ service following Admission who meet certain performance criteria set by the Directors. Any
transfers of Ordinary Shares by Champ Public Limited will be subject to the terms of any agreements that
Champ Public Limited is bound by and the Company’s share dealing code and made in accordance with
applicable law. The maximum percentage of Ordinary Shares which may be transferred pursuant to the
scheme is two per cent. of the Enlarged Share Capital. The scheme will not involve the allotment of
Ordinary Shares by the Company.
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14. Regulations
14.1 Following and subject to Admission, the Company will be required to comply with the AIM Rules
(including rules relating to related party transactions, and significant transactions) and certain of the
Disclosure and Transparency Rules. In certain of the instances where the AIM Rules and the Disclosure
and Transparency Rules apply differently to an overseas company, provision has been made in the
Articles to apply certain of the rules as if the Company was a company incorporated in the UK.
14.2 The Company has adopted those elements of Model Code which Directors consider appropriate to
a Company of its size of which the shares are traded on AIM.
14.3 It should be noted that insider dealing legislation set out in the UK Criminal Justice Act 1993, as well
as provisions relating to market abuse, will apply to the Company and dealings with Ordinary Shares,
alongside the relevant provisions of Jersey law
15. Working Capital
The Directors are of the opinion, having made due and careful enquiry, that the working capital available to
the Company and the Group will be sufficient for its requirements that is for at least twelve months from
the date of Admission.
16. Litigation
Neither the Company nor any other member of the Group is or has during the 12 months preceding the
date of this document engaged in any governmental, legal or arbitration proceedings nor, as far as the
Directors are aware, are there any governmental, legal or arbitration proceedings pending or threatened
against the Company or any other Group company, which may have or have had during the 12 months
preceding the date of this document, a significant effect on the Group’s financial position or profitability.
17. Employees
17.1 As at the date of this document, the Company has 3 employees.
17.2 As at the date of this document, the Group has a total of 443 employees, details of which are set
out in paragraph 4.4 of Part 1 of this document.
18. Summary of Premises and Principal Establishment
The Group does not own any premises or plants. All premises are leased and details are listed below:
Location
Parties to the Lease
Term of Lease
No.37, Tangwang
Road, Guangling
District, Yangzhou
City, Fujian Province,
China
Lessor: Yangzhou
Tangwang
Nonggongshang Co., Ltd
3 September
2012
––––––––––––––––––––––––––––––
2 September
2015
3rd Floor, Sewing
Machine Hall, City of
Clothing, Shishi City,
Fujian Province, China
Lessor: Shishi Garment
City Development Co., Ltd
1 June 2013
––––––––––––––––––––––––––––––
31 May 2014
3rd Floor, Sewing
Machine Hall, City of
Clothing, Shishi City,
Fujian Province, China
Lessee: Yangzhou Junde
Floor Area
(Sqm)
Yearly Rent
100
RMB 25,000
205.28
RMB 12,000
468.80
RMB 24,000
–––
–––
Lessee: Shishi JQW
Lessor: Shishi Garment
City Development Co., Ltd
1 January
2013
–––––––––––––––––––––––––––––– –––
Lessee: Shishi JQW
31 December
2013
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Location
Parties to the Lease
Term of Lease
1-4/F, Buildings 12
(c), Guangling
Information Industry
Park, Yangzhou City,
Jiangsu Province, China
Lessor: Yangzhou
Shenggu
Information Industry
Development Co., Ltd
Tenancy will begin on
1 January
2012.
Floor Area
(Sqm)
Yearly Rent
4,595
RMB 1.2 Per
Square
Meter Per
Day
102.13
RMB 8,170
per Month
––––––––––––––––––––––––––––––
Lessee: Jiangsu JQW
15A16, Jazz
Mansion, Jia Bin
Road, Luo Hu
District, Shenzhen
City, Guangdong
Province, China
Lessors: Li Rongrong;
Luo Ruoer
1 September
2012
–––––––––––––––––––––––––––––– –––
Lessee: Shenzhen JQW
31 August 2013
19. Intellectual Property
Save for those disclosed below, the Group has no intellectual property rights, know-how, licences or other
intellectual property and/or know-how related contracts that are of a fundamental importance to the
Group’s business:
19.1 Trademarks
The Group currently holds five registered trademarks with the State Intellectual Property Office of the
People’s Republic of China (“SIPO”). Out of these five trademarks, only two of the trademarks are
currently relevant to the business because they afford the Group protection for the roman letters
“JQW”. These are trademarks with registered number 5819132 and 5819116. These trademarks
are registered in the name of Shishi JQW and licensed to Shenzhen JQW for use in connection with
the operation of the B2B platform. Two other trademarks with registered number 5819129 and
5819128 are not relevant to the business anymore and will not be transferred to Shenzhen JQW.
Shishi JQW has applied to register an additional ten trademarks (the “Trademarks”) with SIPO.
These trademarks are:
●
five Trademarks for “JQW” under class 16, 35, 38, 41 and 42; and
●
five Trademarks for “金泉网” the Chinese name of JQW, under class 16, 35, 38, 41 and 42.
Two of the Trademark applications for “金泉网” with registered number 11219505 under class 38
and registered number 11195472 under class 42 have been initially rejected due to the similarities
to another trademark already registered. The Company is in the process of appealing these
rejections. The remainder of the eight Trademark applications are still under consideration.
Ownership of each of the Trademarks will be transferred to Shenzhen JQW on registration at the
Trademark Office. In addition, once the trademark applications for “JQW” under application numbers
11439170 and 111195714 have been registered and transferred to Shenzhen JQW, ownership of
the two registered Trademarks currently in use by the Group will also be transferred to Shenzhen
JQW. Please see paragraph 11.4.8 of Part 7 for further information.
The Company intends to apply for a Community Trade Mark for the mark “JQW” in classes 35, 36,
38 and 42 following Admission.
On 13 July 2006, the MIIT issued the Notice on Strengthening the Administration of Foreign
Investment in Value-added Telecommunication Services (the “MIIT Notice”). The MIIT Notice
specifically requires that registered trademarks and domain names that a provider of value added
telecommunication services uses be legally held by the service provider. If a service provider violates
the MIIT Notice, the service provider will be instructed to rectify the violation. If the violation is not
rectified within a grace period decided by the provincial branch of the MIIT, the ICP Licence will be
revoked.
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Shishi JQW has applied to Trademark Office of State Administration for Industry and Commerce (the
“Trademark Office”) for registration of the 10 Trademarks currently used by Shenzhen JQW. Since
the Trademarks that Shenzhen JQW is currently using are not yet registered trademarks, the
Company’s PRC counsel is of the view that Shenzhen JQW is not at the present time in the violation
of the MIIT Notice.
To mitigate the risk that Shenzhen JQW is found to be in violation of the MIIT Notice on registration
of the trademarks which Shishi JQW has applied for, Shenzhen JQW and Shishi JQW have entered
into the Trademark Assignment Agreement to transfer the Trademarks on registration. However,
there can be no assurance that the MIIT will regard the assignment as sufficient rectification of the
violation and that it will not revoke or invalidate the ICP Licence granted to Shenzhen JQW.
Registered/
Application
Number
Registered
Proprietor/
Applicant
Territory
Date of
Registration/
Application
Class
Status
11219505
Shishi JQW (to
be transferred to
Shenzhen JQW
on registration)
China
17 July 2012
38
Initially
rejected
and under
appealed
11439635
Shishi JQW (to
be transferred to
Shenzhen JQW
on registration)
China
3 September
2012
41
Applied
11195472
Shishi JQW (to
be transferred to
Shenzhen JQW
on registration)
China
11 July 2012
42
Initially
rejected
and under
appealed
11438848
Shishi JQW (to
be transferred to
Shenzhen JQW
on registration)
China
3 September
2012
16
Applied
11439742
Shishi JQW (to
be transferred to
Shenzhen JQW
on registration)
China
3 September
2012
35
Applied
11219389
Shishi JQW (to
be transferred to
Shenzhen JQW
on registration)
China
17 July 2012
38
Applied
111195714
Shishi JQW (to
be transferred to
Shenzhen JQW
on registration)
China
11 July 2012
42
Applied
11439227
Shishi JQW (to
be transferred to
Shenzhen JQW
on registration)
China
9 September
2012
35
Applied
Name or
Representation
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Registered/
Application
Number
Registered
Proprietor/
Applicant
11439452
Shishi JQW (to
be transferred to
Shenzhen JQW
on registration)
China
11439170
Shishi JQW (to
be transferred to
Shenzhen JQW
on registration)
5819129
Name or
Representation
Territory
Date of
Registration/
Application
Class
Status
3 September
2012
41
Applied
China
3 September
2012
16
Applied
Shishi JQW
China
15 June 2009
42
Registered
5819128
Shishi JQW
China
15 June 2009
35
Registered
5819132
Shishi JQW (to
be transferred to
Shenzhen JQW
on registration)
China
30 December
2006
16
Registered
5819116
Shishi JQW (to
be transferred to
Shenzhen JQW
on registration)
China
30 December
2006
42
Registered
4458360
Shenzhen JQW
China
7 November
2008
42
Registered
The trademark classification numbers are according to the 10th edition of Classification of Goods and
Services and details are as follow:
Class
16
Category
Paper, cardboard and goods made from these materials, not included in other classes; printed
matter; bookbinding material; photographs; stationery; adhesives for stationery or household
purposes; artists’ materials; paint brushes; typewriters and office requisites (except furniture);
instructional and teaching material (except apparatus); plastic materials for packaging (not
included in other classes); printers’ type; printing blocks
35
Advertising; business management; business administration; office functions
36
Insurance; financial affairs; monetary affairs; real estate affairs
38
Telecommunications
41
Education; providing of training; entertainment; sporting and cultural activities
42
Scientific and technological services and research and design relating thereto; industrial analysis
and research services; design and development of computer hardware and software
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19.2 Copyrights
The Group holds 11 copyrights registered with the National Copyright Administration of the People’s
Republic of China and the Copyright Protection Centre of China, the particulars of which are set out
as follows:
Copyright
Registration No.
Registrant/
Applicant
金泉网生意通服务在线
销售软件
JQW Sheng-Yi-Tong
Service Online
Selling System
2013SR018680
Jiangsu JQW
Internal Operations: Used by
sales staff to manage customer
information.
2
金泉网生意通服务贴吧
信息发布管理系统
JQW Sheng-Yi-Tong
Forum/message board
Management System
2013SR025483
Jiangsu JQW
Internal Operations: Used to
manage and filter the information
that is posted onto Tieba (a
forum/message board) by
registered users.
3
金泉网生意通服务时长
竞价排名系统
JQW Sheng-Yi-Tong
Service Bidding System
2013SR023313
Jiangsu JQW
External Operations: Used by
customer to bid for prominent
position when a search is
undertaken on a specific word
through JQW platform
4
金泉网生意通服务商业
目录信息发布系统
JQW Sheng-Yi-Tong
Business Catalogue
Posting System
2013SR018682
Jiangsu JQW
Internal Operations: Used by the
company to display information
of SMEs in a catalogue form
5
金泉网生意通服务媒体
软文发布软件系统
JQW Sheng-Yi-Tong
Service Media
Advertorial Posting
System
2013SR022739
Jiangsu JQW
Internal Operations: Used to
mass publish advertorials to
various partnered websites.
6
金泉网生意通服务空间 2013SR022734
信息发布管理系统
JQW Sheng-Yi-Tong
Service Space
Information Management
System
Jiangsu JQW
Internal Operations: System
used to manage and filter
information uploaded by
registered users to the business
community section of the
website (including blogs, photos,
articles, and videos; located at
the subdomain blog.jqw.com).
7
金泉网生意通服务黄金
展位发布系统
JQW Sheng-Yi-Tong
Service Right Column
Graphic Promotion
Posting System
2013SR023283
Jiangsu JQW
Internal Operations: Control
system to manage the posting of
photos and information on the
website
8
金泉网生意通服务供求
信息发布系统
JQW Sheng-Yi-Tong
Service Supply and
Demand Enquiries
Management System
2013SR018684
Jiangsu JQW
External Operations: Website
publishing management system
used directly by members to
post their supply and demand
enquiries
No.
Software
1
137
Description
230260 Alpha pp097-imp 05/12/2013 14:33 Page 138
Copyright
Registration No.
Registrant/
Applicant
金泉网信息过滤系统
V1.0
JQW Information
Filtering System V1.0
2013SR064855
Shenzhen JQW
Internal Operations: Internal full
website information manager:
filter, deletion, editing of
information published on the
website; log function to track
changes.
10
金泉网搜索分词系统
V1.0
JQW Word
Classification System
V1.0
2013SR064854
Shenzhen JQW
Internal Operations:
Classification of keywords for
search purposes
11
金泉网搜索引擎爬虫系
统V1.0
JQW Search Crawler
System V1.0
2013SR064853
Shenzhen JQW
Internal Operations: Crawler for
information from the Internet
No.
Software
9
Description
19.3 Domain Names
Set out below are details of domain names owned by the Group:
No.
Domain Name
Registration Date
Expiration Date
Use
1
2
3
4
5
6
7
8
9
www.jqw.com
www.jqw.cn
www.jqw.com.cn
www.jqw-inc.com
www.jqw-ir.com
www.jqwmall.com
www.jqwshop.com
www.jqw-mall.com
www.jqw-shop.com
15 September 1999
17 March 2003
15 October 2002
9 March 2013
29 April 2013
25 September 2013
23 September 2013
25 September 2013
21 September 2013
15 September 2063
14 March 2019
13 October 2019
9 March 2014
29 April 2022
24 September 2016
22 September 2016
24 September 2016
20 September 2016
B2B platform
Search engine
Backup domain
Backup domain
Investor relations
International B2B p/form
International B2B p/form
International B2B p/form
International B2B p/form
20. Takeover Code, Squeeze-out and Sell Out Provisions
20.1 Takeover Code
The Takeover Code applies to the Company. Under the Takeover Code, if an acquisition of Ordinary
Shares were to increase the aggregate holding of the acquirer and its concert parties to Ordinary
Shares carrying 30 per cent. or more of the voting rights in the Company, the acquirer (and depending
on the circumstances, its concert parties, if any) would be required, except with the consent of the
Panel on Takeovers and Mergers, to make a cash offer for the Ordinary Shares in the Company not
already owned by the acquirer and its concert parties at a price not less than the highest price paid
for any interests in Ordinary Shares by the acquirer or its concert parties during the previous 12
months. This requirement would also be triggered by an acquisition of shares by a person holding
(together with its concert parties, if any) Ordinary Shares carrying between 30 and 50 per cent. of the
voting rights in the Company if the effect of such acquisition were to increase the percentage of the
aggregate voting rights held by that person and its concert parties.
20.2 Squeeze-out
Jersey Law provides that, where a person (the “Offeror’’) makes a takeover offer to acquire all of the
shares (or all of the shares in any class) in a Jersey company (other than any shares already held by
the Offeror at the date of the offer), if the Offeror has, by virtue of acceptance of the offer, acquired or
contracted to acquire not less than 90 per cent. in nominal value of the shares (or class of shares) to
which the offer relates, the Offeror may (subject to the requirements of Jersey Law), by notice to the
holders of the shares (or class of shares) to which the offer relates which the Offeror has not already
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acquired or contracted to acquire, compulsorily acquire those shares. A holder of any shares who
receives a notice of compulsory acquisition may (within six weeks from the date on which such notice
was given) apply to the Jersey court for an order that the Offeror not be entitled and bound to purchase
the holder’s shares or that the Offeror purchase the holder’s shares on terms different to those of the
offer.
20.3 Sell-out
Where, before the end of the period within which the takeover offer can be accepted, the Offeror has
by virtue of acceptance of the offer acquired or contracted to acquire not less than 90 per cent. in
nominal value of all of the shares (or all of the shares of a particular class) of the Jersey company, the
holder of any shares (or class of shares) to which the offer relates who has not accepted the offer
may, by written notice to the Offeror, require the Offeror to acquire the holder’s shares. The Offeror
shall (subject to the requirements of Jersey Law) be entitled and bound to acquire the holder’s shares
on the terms of the offer or on such other terms as may be agreed. Where a holder gives the Offeror
a notice of compulsory acquisition, each of the Offeror and the holder of the shares is entitled to apply
to the Jersey court for an order that the terms on which the Offeror is entitled and bound to acquire
the holder’s shares shall be such as the court thinks fit.
21. Investments
Save as set out in this document:
21.1 no company within the Group has made any investments, or its proposing to make, or has agreed
to make any investments which are significant; or
21.2 future investments upon which the Company or its management bodies have already made firm
commitments which are significant to the Company.
22. Environmental Issues
Neither the Company nor the Directors are aware of any environmental issues or risks affecting the utilization
of the property, plant or machinery of the Group.
23.
Taxation
23.1 United Kingdom Tax Laws
23.1.1 The following information is based on the tax law currently in force in the UK and HM Revenue
& Customs practice as at the date of this document. This information is not exhaustive and
potential investors should consult their professional advisers as to the implications of
subscribing for, acquiring, holding, redeeming or disposing of Ordinary Shares under the laws
of the jurisdictions in which they may be liable to taxation.
23.1.2 The statements below are intended as a general summary of the position and do not constitute
advice to any Shareholder. Persons who are in any doubt as to their tax position should consult
their own professional adviser. Investors should note that tax law and interpretation can change
and that, in particular, the levels and bases of, and reliefs from, taxation may change and that
changes may alter the benefits of investment in the Company.
23.1.3 The information only applies to persons who are resident in (and only in) the UK and only applies
to persons who hold their Ordinary Shares as investments and are the absolute beneficial
owners of them.
23.2 Tax treatment of the Company
23.2.1 Provided that the Company is not resident in the UK for taxation purposes and does not carry
on any trade in the UK (whether or not through a permanent establishment situated there), the
Company should not be liable for UK taxation on its income and gains, other than in respect
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of interest and other income received by the Company from a UK source (to the extent that it
is subject to the withholding of basic rate income tax in the UK).
23.2.2 It is the intention of the Directors to conduct the affairs of the Company so that the central
management and control of the Company continues to exercised outside the UK in order that
the Company does not become resident in the UK for taxation purposes. The Directors further
intend, insofar as this is within their control, that the affairs of the Company are conducted so
that the Company is not treated as carrying on a trade in the UK through a permanent
establishment.
23.3 Tax treatment of UK investors
23.3.1 Taxation of dividends received from the Company – withholding tax
The Company is not obliged to make any withholding on account of UK tax on the payment
of any dividends.
23.3.2 Dividends – individuals
23.3.3UK resident individual Shareholders who are domiciled in the UK, and who hold their Ordinary
Shares as investments, will be subject to UK income tax on the gross amount of dividends
received from the Company. UK resident individuals who are not domiciled in the UK may be
eligible to make a claim to be taxed on the “remittance basis”, the effect of which is that they
will generally be subject to UK income tax only if the dividend is remitted, or deemed to be
remitted, to the UK, provided that the shares are not UK assets. If the Ordinary Shares are
regarded as UK assets the position is as for those domiciled in the UK.
23.3.4To the extent that such a dividend is brought within the charge to UK tax, the shareholder may
be entitled to a UK tax credit which may be offset against the income tax liability arising on the
dividend. If available, the tax credit will be equal to 10 per cent. of the gross dividend (i.e. the
tax credit will be one ninth of the amount of the net cash dividend). A shareholder who is not
subject to income tax on the dividend will not be entitled to reclaim any of the tax credit.
23.3.5For 2013-2014, Shareholders who are liable to income tax at the basic rate will be liable to
income tax at the rate of 10 per cent. of the gross dividend so that the tax credit will satisfy in
full that shareholder’s liability to income tax. Shareholders who are liable to income tax at the
ordinary rate will be liable to income tax at the rate of 32.5 per cent. of the gross dividend but
will be able to offset the tax credit against this liability so that the shareholder will have to
account for additional income tax equal to 25 per cent. of the net cash dividend received.
Shareholders who are liable to income tax at above the higher rate tax band of £150,000 will
be subject to income tax at 37.5 per cent. The tax credit will have the effect that such
shareholders will have to account for additional UK tax equal to 30.6 per cent. of the net cash
dividend received.
23.3.6 Dividends – companies
Companies that are resident in the UK for tax purposes will generally be exempt from
corporation tax on dividends received. There are various exceptions to this exemption,
depending on the size of the shareholder, and whether certain anti-avoidance provisions apply.
Corporate shareholders should confirm their tax position with a specialist tax adviser.
23.3.7 Chargeable gains – individuals
In the case of those Shareholders who are individuals or otherwise not within the charge to
corporation tax and who hold their Shares as investments, capital gains tax may be payable
on a disposal of Ordinary Shares. The rate of capital gains tax is 18 per cent. for basic rate
taxpayers and 28 per cent. for higher rate taxpayers.
23.3.8 Chargeable gains – companies
23.3.9 Shareholders within the charge to UK corporation tax may be subject to corporation tax on
chargeable gains in respect of any gain arising on a disposal of Ordinary Shares. Indexation
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allowance may apply to reduce any chargeable gain arising on a disposal of Ordinary Shares.
Certain reliefs are available to corporate shareholders that could exempt gains where they have
substantial shareholdings and other conditions are met. Such shareholders should seek further
advice to determine their eligibility.
23.3.10 A UK resident corporate Shareholder who, together with connected or associated persons, is
deemed to control the Company, in accordance with the Taxation (International and Other
Provisions) (TIOPA) Act 2010 Sections 371RB to 371RE should note the provisions of the
controlled foreign companies legislation contained in TIOPA 2010 Sections 371AA to 371VJ.
23.3.11 Stamp duty and stamp duty reserve tax
23.3.12 No liability to stamp duty or stamp duty reserve tax (“SDRT”) will arise on the issue of Ordinary
Shares by the Company.
23.3.13 An instrument effecting or evidencing the issue or transfer of Ordinary Shares which is executed
in the UK (or, where executed outside the UK, which relates to any matter or thing done in the
UK) may not, except in criminal proceedings, be given in evidence or be available for any
purpose in the UK unless it is duly stamped. Whether an instrument is stamped, however, will
not affect the registration of the transfer in the Company’s registers of Ordinary Shares so long
as that register is kept outside of the UK.
23.3.14 Any subsequent conveyance or transfer on sale of Ordinary Shares outside CREST will not
normally be subject to stamp duty or SDRT provided the instrument of transfer is not executed
in the UK and there is no matter or thing in relation to such transfer done, or to be done, in the
UK.
23.3.15 Under the CREST system for paperless share transfers, no stamp duty or SDRT will arise on
a transfer of shares into the system, unless the transfer into CREST is itself for consideration
in money or moneys’ worth, in which case a liability to SDRT will arise, usually at the rate of
0.5 per cent. of the amount or value of consideration given. Transfers of shares within CREST
are generally not liable to SDRT.
23.4 Other UK tax considerations
23.4.1 Section 13 of the Taxation of Chargeable Gains Act 1992
Shareholders who are resident or, if an individual, domiciled in the UK, and who have more
than a one-quarter interest (when aggregated with persons connected with them) in the
chargeable gains of the Company may, in the event that the Company would be treated as
“close” if it were resident in the UK, be liable to UK tax on a proportion of any chargeable gains
realised by the Company. Such Shareholders will be liable to UK capital gains tax on the
proportion of the gains of the Company that is equal to their interest in the Company.
23.4.2 Transfer of assets abroad
The attention of individuals resident in the UK is drawn to the provisions of sections 714 to
751 of the Income Taxes Act 2007, under which income accruing to the Company may be
attributed to such a Shareholder and may (in certain circumstances) be liable to UK income
tax in the hands of the Shareholder. However, the provisions should not apply if such a
Shareholder can satisfy HM Revenue & Customs that, either:
(i)
it would not be reasonable to draw the conclusion, from all the relevant circumstances,
that the purpose of avoiding liability to taxation was the purpose or one of the purposes
for which the relevant transactions or any of them were effected; or
(ii)
all the relevant transactions were genuine commercial transactions and that it would not
be reasonable to draw the conclusion, from all the relevant circumstances, that any one
or more of those transactions was more than incidentally designed for the purpose of
avoiding liability to taxation.
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23.4.3 Controlled foreign companies
If the Company were controlled by persons resident in the UK, legislation applying to so called
“controlled foreign companies” may apply. Under that legislation, income profits accruing to
the Company may be apportioned to those UK resident corporate Shareholders who have an
interest in the Company, in which case, such Shareholders may be liable to corporation tax on
amounts apportioned to them. However, this will only apply if the apportionment to that
Shareholder (when aggregated with persons connected or associated with that shareholder)
they control the Company.
23.5 Non-UK investors
23.5.1 Shareholders who are neither resident nor temporarily non-resident in the UK and who do not
carry on a trade, profession or vocation through a branch, agency or permanent establishment
in the UK with which the Ordinary Shares are connected should not normally be liable to UK
taxation on dividends paid by the Company or on capital gains arising on the sale or other
disposal of Ordinary Shares. Such Shareholders should consult their own tax advisers
concerning their tax liabilities generally.
23.6 Jersey Tax Laws
The following summary of the anticipated tax treatment in Jersey of the Company and holders of the
Shares is based on Jersey taxation law and practice as they are understood to apply at the date of
this document. It does not constitute, nor should it be considered to be, legal or tax advice and does
not address all aspects of Jersey tax law and practice (including without limitation such tax law and
practice as they apply to any land or building situated in Jersey, or as they apply to certain types of
person, such as persons holding or acquiring shares in the course of trade, collective investment
schemes or insurance companies). Shareholders should consult their professional advisers on the
implications of acquiring, buying, holding, selling or otherwise disposing of Shares in the Company
under the laws of any jurisdictions in which they may be liable to taxation. Shareholders should be
aware that tax rules and practice and their interpretation may change.
23.6.1 Taxation of the Company
The Company is regarded as resident for tax purposes in Jersey and on the basis that the
Company is neither a financial services company nor a utility company for the purposes of the
Income Tax (Jersey) Law 1961, as amended, the Company is subject to income tax in Jersey
at a rate of zero per cent. (or potentially 10 per cent. or 20 per cent. depending upon certain
circumstances). Dividends on shares may be paid by the Company without withholding or
deduction for or on account of Jersey income tax and holders of shares (other than residents
of Jersey) will not be subject to any tax in Jersey in respect of the holding, sale or other
disposition of such shares.
23.6.2 Goods and Services Tax
Jersey charges a tax on goods and services supplied in the Island (“GST”). On the basis that
the Company has obtained international services entity status, GST is not chargeable on
supplies of goods and/or services made by the Company. The Directors intend to conduct the
business of the Company such that no GST will be incurred by the Company.
23.6.3 Taxation of Jersey resident shareholders
An individual who is tax resident in Jersey can be liable to pay tax on relevant distributions
made to them in respect of their allocated share of specified profits of the company. A relevant
distribution can include dividends, payments on liquidation, share buybacks, repayments of
loans made by shareholders to companies, transfers of assets from companies to shareholders,
transfers of liabilities from shareholders to companies etc. An individual’s allocated share of
specified profits is the proportion of the taxable profits, correlating to their percentage
shareholding, arising during any financial period in which the individual owns more than 2 per
cent. of the ordinary share capital of the company. Any amount of the individual’s allocation of
specified profits which remains undistributed is designated to that individual and will be
accounted for and matched for tax purposes on any future relevant distribution.
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23.6.4 Stamp duty
In Jersey, no stamp duty is levied on the issue or transfer of the Shares except that stamp duty
is payable on Jersey grants of probate and letters of administration, which will generally be
required to transfer Shares on the death of a holder of such Shares. In the case of a grant of
probate or letters of administration, stamp duty is levied according to the size of the estate
(wherever situate in respect of a holder of Shares domiciled in Jersey, or situate in Jersey in
respect of a holder of Shares domiciled outside Jersey) and is payable on a sliding scale at a
rate of up to 0.75 per cent. of such estate.
23.6.5 Under current Jersey law, Jersey does not otherwise levy taxes upon capital, inheritances,
capital gains or gifts nor are there other estate duties.
The Company has no present plans to apply for any certifications or registrations, or to take
any other actions under the laws of any jurisdictions which would afford relief to local investors
therein from the normal tax regime otherwise applicable to an investment in Shares. It is the
responsibility of all persons interested in purchasing Shares to inform themselves as to any
income or other tax consequences arising in the jurisdictions in which they are resident or
domiciled for tax purposes, as well as any foreign exchange or other fiscal or legal restrictions,
which are relevant to their particular circumstances in connection with the acquisition, holding
or disposition of Shares.
Any person who is in any doubt as to their tax position is strongly advised to consult an
appropriate professional adviser.
24. General
24.1 The total costs and expenses payable by the Company in connection with or incidental to the
Admission, including London Stock Exchange fees, printing and advertising, distribution costs and
legal, accounting and corporate finance fees are estimated to amount to approximately £1m (excluding
any applicable VAT payable thereon).
24.2 Save as disclosed in this document, no person (excluding professional advisers otherwise disclosed
in this document and trade suppliers and counterparties of contracts being in the ordinary course of
business) has:
24.2.1 received directly or indirectly from the Company within twelve months preceding the Company’s
application for Admission; or
24.2.2 entered into Contractual Arrangements (not otherwise disclosed in this document) to receive,
directly or indirectly, from the Company on or after Admission any of the following:
24.2.3 fees totalling £10,000 or more; or
24.2.4 securities in the Company with a value of £10,000 or more; or
24.2.5 any other benefit with a value of £10,000 or more at the date of Admission.
24.3 Save for the information set out in Part 4 of this document, no other audited information is included
in the document and no financial information contained in this document is intended to represent or
constitute a forecast of profits by the Company nor to constitute publication of accounts by it. The
financial information relating to the Group set out in the accountants report in Parts 3, 5 and 6 of this
document does not compromise statutory accounts within the meaning of Article 105 of Jersey Law.
24.4 CCW, the reporting accountants of the Company, has given and not withdrawn its written consent to
the inclusion of its reports and references to its name in the form and context in which they appear.
24.5 Cairn, the nominated adviser and broker of the Company, has given and not withdrawn its written
consent to the inclusion in this document of references to its name in the form and context in which
it appears.
24.6 Argento, the financial adviser of the Company, has given and not withdrawn its written consent to
the inclusion in this document of references to its name in the form and context in which it appears.
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24.7 Euromonitor, the market research company appointed by the Company to prepare an independent
market research report on the B2B e-commerce market in China has given, and not withdrawn its
written consent to the inclusion in this document of references to its name in the form and context in
which it appears.
24.8 No public takeover bids have been made by third parties in respect of the Company’s issued share
capital since its incorporation until the date of this document.
24.9 Save as disclosed in this document, the Directors are unaware of any trends, uncertainties, demands,
commitments or events that are reasonably likely to have a material effect on the Group’s prospects
for the current financial year.
24.10 Save as disclosed in this document, there are no principal investments in progress, nor, save as
disclosed in this document, have there been any principal investments to date or any future plans for
principal investments.
25. No Significant Change
Save as disclosed in this document, there has been no significant change in the trading or financial position
of the Group since 31 December 2012. No exceptional factors have influenced the Company’s activities.
26. Third Party Information
Where information has been sourced from a third party, the information has been accurately reproduced
and, as far as the Company and the Directors are aware and are able to ascertain from information published
by that third party, no facts have been omitted which would render the reproduced information inaccurate
or misleading. Reference materials include various historical and recent publications. A comprehensive list
of reports and information used in the preparation of this document is available if required.
27. Documents available for inspection
Copies of this document will be available to the public free of charge from the date of this document until
the date which is one month after Admission, from the offices of Olswang LLP, 90 High Holborn, London
WC1V 6XX, for a period of thirty days from the date of this document during normal business hours (except
for Saturdays and Sundays), as well as from the Company’s website www.jqw-ir.com.
9 December 2013
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