About Us

History and Business

Grand Group Investment PLC was incorporated 4 March 2014 for the purpose of identifying, acquiring and investing in small to medium-sized companies with high growth potential, principally operating in the PRC.

The Company's country of incorporation is the Cayman Islands, and its main country of operation is that of the PRC.

Description of Business

Business Activities

Grand Group, an investing company under the AIM Rules, primarily invests in established businesses with either technology or intellectual property which the Board believes will benefit from access to Grand's university research resources. A key component of that business model is the incubation of companies and management teams prior to investment.

On 9 May 2014, Grand entered into a strategic co-operation agreement with the TKK Society, which the Directors believe will give it access to a wide range of Chinese and international academic contacts and their associated research facilities.

The Board of Grand seeks to work closely with potential investee companies even before a financial investment is made, by entering into value-added services ("VAS") agreements some 6 to 12 months beforehand. During this period, Grand management will participate in the day-to-day management of the potential investee, and help shape its strategy as well as providing operational, marketing, commercial, financial and other business support. This approach to investing should give the Grand management a high level of exposure to potential investee companies before investment and thus enable it to avoid investing in targets which appear not, after an initial stage, to meet their investment criteria. The Company intends to identify companies in growing business sectors, often in conjunction with members of the TKK Society. The Company aims to develop its investment opportunities in the identified sectors through cooperation with these partners.

The TKK Society

The Tan Kah Kee Foundation is named after and was initially founded and funded by the family of Mr Tan Kah Kee, a Chinese entrepreneur, philanthropist and leader of overseas Chinese communities. Mr Tan Kah Kee founded several educational establishments in China and Southeast Asia, predominantly in Fujian, including Xiamen University, the first university founded by an overseas-based Chinese individual in the history of China's modern education system and Jimei University. Mr Tan Kah Kee also founded the Hong Kong Chiyu Bank and co-founded OCBC Bank, Singapore's second largest bank (by total assets). The TKK Foundation was set up in 1982 to carry on charitable work and to foster Mr Tan Kah Kee's beliefs in entrepreneurship and education.

Subsequently the TKK Society was founded in 1992 by several world-renowned scholars, including Nobel Prize winners Prof. Yang Zhenning, Prof. Ding Zhaozhong, Prof. Li Yuanzhe, Prof. Tian Changlin (former chancellor of the University of California, Berkeley) and Prof. Wang Gengwu, Chairman of the East Asian Institute, National University of Singapore, and former vice-chancellor of the University of Hong Kong. It aims to promote the ideas of Tan Kah Kee. Apart from promoting educational and scientific activities, the TKK Society also promotes research and development assisting in the establishment of an international network of educational and economic cooperation. Many of its members and affiliates are well-known international and local universities and professors, government and business leaders in South EastAsia (including Robert Kuok, Zhuang Yanlin and Lucio Tan). The TKK Society has also fostered and maintained a broad network of contacts with individuals at local and international higher education institutions, including Jiangnan University, Xiamen University, Jimei University, and Nan Yang Technological University in Singapore, University of Califoria, Berkeley, National University of Singapore, University of Hong Kong, Oxford Brookes University, Keuka College, and University of Greenwich.

Unique PE model

The rapid growth of China SMEs has brought great opportunities since the 1980s for the Chinese PE industry. The Chinese PE market has been historically characterised by short term, low risk & high return investments, as a result of which Chinese PE firms have no incentive to develop value-added services, or to worry about medium to long term development.

By the end of 2012, there were more than 6,000 private equity (PE) investment firms in China.

After 15-20 years of growth, in 2012-2013 China's PE market began to witness its first general decline, which can be seen by the decline of major PE metrics: fundraising, investment and exits.

A large number of Chinese PE firms have invested in many businesses since the start of the PE market in China, but have yet to manage successful exits from these projects. According to the statistics from Zero2IPO Research, between 2006 and 2012, VC/PE firms made 13,728 investments, with only 2,336 exits.

2013 China VC/PE Firms' Value-added Services Report, private equity needs to build a management system of value-added services in order to effectively generate further returns.

In this respect, the Directors believe Grand is well-placed to meet the competition, as it provides value-added services in the pre-investment period as well as the post investment period.

In a similar manner to incubators in the high-tech sector, Grand Group has the ability to bring more than just investment capital to investment opportunities. Grand intends to invest at a much later stage than one might expect to see in a technology incubator business model. Whereas incubators often start with very new intellectual property, often working directly with scientists or laboratories that have made new discoveries, Grand seeks only to make a financial commitment once the developing entrepreneur has already established a viable business.

Given the combination of VAS and financial know-how that Grand can bring, the Directors believe that they can shorten the time period between when the Company makes an investment and when it can show a realisation event or partial exit.

Investing Policy

The Company seeks to be an active value-added investor and to operate as a later stage, value adding incubator fund. The Company will seek to identify potential investee companies where its access to research, technology and university support can have a positive effect on the investee companies.

The Company aims to provide equity and equity-related investment capital, such as convertible loans, to companies which are seeking capital for growth and development, consolidation or acquisition, or as a pre-IPO round of financing. These investments may be made in combination with additional debt or equity-related financing and, in appropriate circumstances, in collaboration with other financial and/or strategic investors.

The Company will aim to invest primarily in private companies with high growth potential, where a timely investment will allow the investee to increase market share and create shareholder value. The Company will target small and mid-sized companies and will seek substantial minority stakes with potential or actual board representation to enable participation in management with a view to improving performance and growth of the investee business. The Company intends to work closely with the management of each investee company to create value by focusing on driving growth through revenue creation, margin enhancement and extracting cost efficiencies, as well as by creating appropriate capital structures to enhance returns. The Company may on occasion take controlling stakes where sufficient separation is maintained between the Company and the investment to ensure that the Company does not become a trading company.

The Company may also invest up to 15 per cent. of its gross assets at the time of investment in publicly traded securities. No restrictions will be placed on the size of any public companies in which the Company may make an investment. The Company may in addition invest up to 20 per cent. of its gross assets at the time of investment in other collective investment undertakings, which themselves have substantially similar investing policies as the Company. Crossholdings between investments are possible. The Company will not invest in derivative financial instruments, money market instruments or currencies other than for the purposes of efficient portfolio management.

Grand will invest in companies operating within the Greater China Region. The Company will not invest in the natural resource or real estate sectors. Investments will be primarily in education or training related sectors or in sectors where investee company access to research, technology or university support should enhance or enable commercialisation of products or services. The Company will not invest in fundamental scientific research.

Typical investments are expected to range in size from £3 million - £50 million. There is no limit on the maximum size of an investment, nor any minimum number of investments.As investments are made and new opportunities arise, further equity funding of the Company may be required although the Company will not raise additional funds until at least 70 per cent. of the Placing proceeds have been invested.

It is not intended for the Company to use borrowings for long term structural gearing, and it is intended that any borrowing would only be used on a tactical basis where the Directors believe gearing will enhance returns to Shareholders. The Company will not be subject to any borrowing or leveraging limits.

The Company expects to derive returns on investments principally through capital gains and/or the receipt of dividends from investee companies. For private investee companies, the typical investment holding period is currently expected to be between two and four years. Exits may be effected by flotation on an international or domestic stock exchange, trade sale, secondary private equity buy-out, sale to institutional and/or private investors, or structured exit by contract. On flotation of any investee company, Grand would likely retain a part of its investment in the listed entity going forward. For publicly quoted investee companies the objective is to maximize capital appreciation without any generally expected investment holding period. Should the Company consider that any capital appreciation of a particular public equity investment has peaked or is likely to or has begun to decline, then the Company will consider the sale of that investment.

The Directors are confident that the Investing Policy can be substantially implemented within eighteen months of Admission, failing which they will seek the consent of Shareholders for the Investing Policy at the Company's next ensuing annual general meeting and on an annual basis thereafter until such time as its Investing Policy has been substantially implemented. If it appears unlikely that the Investing Policy can be substantially implemented at any time, the Directors may consider returning any remaining funds to Shareholders. The Investing Policy can only be varied materially by the prior consent of Shareholders in a general meeting.

 

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27 June 2017

Annual Financial Report