ORIENTAL_CITY_GROUP_PLC - Accounts

The directors present the strategic report for the year ended 31 March 2019.

The Group continued to be engaged in investment holding during the year ended 31 March 2019.

The income for the year ended 31 March 2019 was generated solely from the Group's investment trading business.

Overall earnings from investment business decreased from £80,591 in 2018 to £59,913. The Group's loss attributable to its equity shareholders for the year ended 31 March 2019 was £348,823 compared to £410,047 in the previous year.

The full results for the group for the year ended 31 March 2019 are set out in the consolidated profit and loss account on page 7.

The Group's operations expose it to financial risks that include liquidity risk, interest rate risk, credit risk, foreign exchange risk and equity price risk.

Given the small size of the Group and of its Board, the Directors have not delegated the responsibility of monitoring financial risk management to a sub-committee of the Board. The Group's finance department implements the policies set by the Board.

Liquidity risk:

Management of the Group aims at maintaining a sufficient level of cash and cash equivalents to finance the Group's operations and expected expansion. The Group's primary cash requirement includes payments for operating expenses and investments. The Group finances its working capital requirements mainly by the funds generated from operations and bank borrowings.

Interest rate risk:

The Group's exposure to market risk for changes in interest rates is related primarily to interest-bearing financial assets of bank balances and interest-bearing financial liabilities of bank borrowings. At the end of the year, the Group held £537,622 (2018: £263,604) in interest bearing cash deposits and owed £405,303 (2018: £545,691) in bank borrowings subject to varying rates of interest. Management estimates that a general increase/decrease of 100 basis point in interest rates, with all other variables held constant, would have no significant effect to the Group's loss for the year.

Credit risk:

The group's principal financial assets are available-for-sale financial assets, financial assets at fair value through profit and loss and bank deposits. The maximum credit risk attributable to these assets amounted to £1,157,974 (2018: £1,594,140). The credit risk on the liquid funds is limited because of the close involvement of management in overseeing the recovery of the assets. Management considers the credit risk in respect of bank deposits is minimal because the counter parties are authorised financial institutions with high credit ratings. Other financial assets were issued by reputable large corporations with satisfactory credit ratings for either the issuers or the notes.

Foreign exchange risk:

The Group operates in Hong Kong with a majority of business transactions being denominated and settled in Hong Kong dollars, which is the functional currency of the operating subsidiary. The Group's debt and equity instruments, bank balances and other debtors are denominated in US Dollars, Euros, UK Pounds and Renminbi. The functional presentation currency of the parent company is the UK Pound.

Equity Price risk:

The Group is exposed to equity price changes arising from equity instruments held for trading and non trading purposes. Other than unquoted securities held for strategic purposes, all of these investments are listed. The Group's listed equity investments are listed on the stock exchanges of Hong Kong and USA. The decisions to buy or sell listed investments are based on monitoring of the performance of individual securities compared to that of the Index and industry indicators, as well as the Group's liquidity needs.

The Group continues to identify and explore opportunities for enhancing its income on a stable and long term basis. The Board of Directors will continue to seek new business opportunities which are in the best interest of the shareholders of the Company.

On behalf of the board

The directors present their annual report and financial statements for the year ended 31 March 2019.

The directors who held office during the year and up to the date of signature of the financial statements were as follows:

The results for the year are set out on page 7.

No ordinary dividends were paid. The directors do not recommend payment of a further dividend.

In accordance with the company's articles, a resolution proposing that Clarkson Hyde LLP be reappointed as auditor of the group will be put at a General Meeting.

The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the group and company, and of the profit or loss of the group for that period. In preparing these financial statements, the directors are required to:

•     select suitable accounting policies and then apply them consistently;

•     make judgements and accounting estimates that are reasonable and prudent;

•     state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;

•     prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the group’s and company’s transactions and disclose with reasonable accuracy at any time the financial position of the group and company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the group and company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

So far as each person who was a director at the date of approving this report is aware, there is no relevant audit information of which the auditor of the company is unaware. Additionally, the directors individually have taken all the necessary steps that they ought to have taken as directors in order to make themselves aware of all relevant audit information and to establish that the auditor of the company is aware of that information.

We have audited the financial statements of Oriental City Group Plc (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 March 2019 which comprise the group profit and loss account, the group statement of comprehensive income, the group balance sheet, the company balance sheet, the group statement of changes in equity, the company statement of changes in equity, the group statement of cash flows and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).

In our opinion the financial statements:

• give a true and fair view of the state of the group's and the parent company's affairs as at 31 March 2019 and of the group's loss for the year then ended;

• have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and

• have been prepared in accordance with the requirements of the Companies Act 2006.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern

We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:

• the directors' use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or

• the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the group's or the parent company’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue.

Other information

The directors are responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of our audit:

• the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and

• the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.

In the light of the knowledge and understanding of the group and the parent company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report and the directors' report.

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or

• the parent company financial statements are not in agreement with the accounting records and returns; or

• certain disclosures of directors' remuneration specified by law are not made; or

• we have not received all the information and explanations we require for our audit.

As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the group's and the parent company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so.

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at: http://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.

Use of our report

This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

The profit and loss account has been prepared on the basis that all operations are continuing operations.

As permitted by s408 Companies Act 2006, the company has not presented its own profit and loss account and related notes. The company’s loss for the year was £15,408 (2018 - £13,586 loss).

Oriental City Group Plc (“the company”) is a limited company domiciled and incorporated in England and Wales. The registered office is c/o Clarkson Hyde, 3rd Floor Chancery House, St Nicholas Way, Sutton, Surrey, SM1 1JB

The group consists of Oriental City Group Plc and all of its subsidiaries.

These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.

The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.

The financial statements have been prepared under the historical cost convention, modified to include certain financial instruments at fair value. The principal accounting policies adopted are set out below.

The company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The company has therefore taken advantage of exemptions from the following disclosure requirements for parent company information presented within the consolidated financial statements:

• Section 7 ‘Statement of Cash Flows’ – Presentation of a statement of cash flow and related notes and disclosures;

• Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instrument Issues’ – Carrying amounts, interest income/expense and net gains/losses for each category of financial instrument; basis of determining fair values; details of collateral, loan defaults or breaches, details of hedges, hedging fair value changes recognised in profit or loss and in other comprehensive income.

In the parent company financial statements, the cost of a business combination is the fair value at the acquisition date of the assets given, equity instruments issued and liabilities incurred or assumed, plus costs directly attributable to the business combination. The excess of the cost of a business combination over the fair value of the identifiable assets, liabilities and contingent liabilities acquired is recognised as goodwill. The cost of the combination includes the estimated amount of contingent consideration that is probable and can be measured reliably, and is adjusted for changes in contingent consideration after the acquisition date. Provisional fair values recognised for business combinations in previous periods are adjusted retrospectively for final fair values determined in the 12 months following the acquisition date. Investments in subsidiaries, joint ventures and associates are accounted for at cost less impairment.

The consolidated financial statements incorporate those of Oriental City Group Plc and all of its subsidiaries (ie entities that the group controls through its power to govern the financial and operating policies so as to obtain economic benefits). Subsidiaries acquired during the year are consolidated using the purchase method. Their results are incorporated from the date that control passes.

All financial statements are made up to 31 March 2019. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the group.

All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.

At the time of approving the financial statements, the directors have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. Thus the directors continue to adopt the going concern basis of accounting in preparing the financial statements.

Other net income is recognised as follows:

Revenue is measured at the fair value of the consideration received or receivable. Provided it is probable that the economic benefits will flow to the group and the revenue and costs, if applicable, can be measured reliably, revenue is recognised in profit and loss as follows:

(i)    Dividend income from listed investments is recognised when the share price of the dividend goes ex-    dividend.

(ii)    Interest income is recognised as it accrues using the effective interest method.

(iii)    Net gains/losses on financial assets at fair value through profit or loss and those held for trading include     realised gains/losses which are recognised on the transaction dates when the relevant contract notes are     executed and entered, and unrealised fair value gains/losses are recognised in the period in which they     arise.

(iv)    Sundry income is recognised whenever it is received or receivable.

Tangible fixed assets are initially measured at cost and subsequently measured at cost or valuation, net of depreciation and any impairment losses.

Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:

The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is recognised in the profit and loss account.

Equity investments are measured at fair value through profit or loss, except for those equity investments that are not publicly traded and whose fair value cannot otherwise be measured reliably, which are recognised at cost less impairment until a reliable measure of fair value becomes available.

In the parent company financial statements, investments in subsidiaries, associates and jointly controlled entities are initially measured at cost and subsequently measured at cost less any accumulated impairment losses.

A subsidiary is an entity controlled by the group. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.

At each reporting period end date, the group reviews the carrying amounts of its tangible 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 company estimates the recoverable amount of the cash-generating unit to which the asset belongs.

The group has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.

Financial instruments are recognised in the group's balance sheet when the group becomes party to the contractual provisions of the instrument.

Financial assets and liabilities are offset and the net amounts presented in the financial statements when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.

Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.

Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.

Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.

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 have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.

If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.

Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the group transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities.

Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.

Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.

Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.

Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.

Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value though profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.

Financial liabilities are derecognised when the group's contractual obligations expire or are discharged or cancelled.

Equity instruments issued by the group are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the group.

The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.

The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.

Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.

Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.

Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation are included in the profit and loss account for the period.

In the application of the group’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.

Exchange differences recognised in profit or loss during the year, except for those arising on financial instruments measured at fair value through profit or loss, amounted to £2,455 (2018 - £1,254).

The average monthly number of persons (including directors under employments contracts) employed by the group and company during the year was:

Their aggregate remuneration comprised:

During the year, no directors received any remuneration or benefits (2018: £nil).

The actual charge for the year can be reconciled to the expected credit for the year based on the profit or loss and the standard rate of tax as follows:

Fixed asset investments comprise available for sale debt securities totalling £599,893 (2018: £873,338) and equity securities totalling £20,459 (2018: £nil).

Debt securities are bonds listed in USA with fixed interest rates. Equity securities are listed in Hong Kong and are designated non current.

Details of the company's subsidiaries at 31 March 2019 are as follows:

The investment in Able Wise Limited is held by Oriental City Group Asia Limited.

As permitted by the reduced disclosure framework within FRS 102, the company has taken advantage of the exemption from disclosing the carrying amount of certain classes of financial instruments, denoted by 'n/a' above.

In the current period, all equity securities have been designated as non current assets.

Cash at bank and in hand includes restricted cash of £169,233 (2018: £97,439) mainly denominated in United States Dollars. Restricted cash represents a cash deposit pledged to secure the bank borrowings (note 19).

At 31 March 2019, 0% (2018: 16%) were denominated in Japanese Yen, 100% (2018: 29%) were denominated in Hong Kong Dollars and 0% (2018: 55%) were denominated in United States Dollars. The bank borrowings are repayable on demand.

Bank borrowings were interest-bearing at percentage rates per annum which were the sum of: (a) the advances margin 1% (2018: 1%), (b) the applicable base rate, and (c) the costs of complying with any reserve, deposit, monetary or liquidity requirement imposed by any authority, if applicable.

These borrowings were secured by the group's restricted cash (note 17), debt instruments of £600,137 and guaranteed in full by Mr Cheng Nga Ming, Vincent, a director of Able Wise Limited (2018: listed equity securities of £441,154, debt securities of £873,338 and guaranteed in full by Mr Cheng Nga Ming, Vincent).

Total banking facilities at 31 March 2019 were £2,291,065 (2018: £2,223,060).

A defined contribution pension scheme is operated for all qualifying employees. The assets of the scheme are held separately from those of the group in an independently administered fund.

The company has one class of ordinary share which carries no right to fixed income.

Deferred shares carry (i) no rights to receive notice of, attend and vote at general meetings; and (ii) no rights of redemption. The holders of deferred shares are not entitled to the company's dividends and have a right to a return of capital equal to the paid up nominal value only after the holders of ordinary shares have received an aggregate capital repayment of £10,000,000.

Other reserves comprise a Merger Reserve - this represents the difference between the nominal value of the share capital and share premium of the subsidiaries acquired in a group reorganisation carried out in prior years and the nominal value of the share capital of the company issued in exchange thereof.

At the reporting end date the group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:

During the year, the group incurred consultancy and management fees of £124,248 (2018: £112,034) payable to 深圳市海勝投資咨詢有限公司 (Shenzhen Shi Hai Sheng Tou Zi Zi Xun You Xian Gong Si) a company of which Mr Cheng Nga Ming, Vincent, is the sole director as well as being a director of Able Wise Limited (group company of Oriental City Group Plc). These fees were incurred on a normal commercial basis in exchange for the provision of services.