DGAP-News: Powerland AG / Key word(s): AGM/EGM/Final Results Powerland AG: Powerland calls an AGM and publishes consolidated financial statements for the full year of 2012 14.02.2014 / 07:21 --------------------------------------------------------------------- Powerland calls an AGM and publishes consolidated financial statements for the full year of 2012 Frankfurt/Main, 14 February 2014 - Today, Powerland AG (ISIN DE000PLD5558 / Prime Standard), the leading Chinese manufacturer of handbags, leather goods and accessories, invites its shareholders to the Annual General Meeting for the Business Year 2012. The AGM will take place on 26 March 2014 in Frankfurt am Main. During the AGM, the Management Board and Supervisory Board will propose the shareholders to approve the group financial statements of Powerland AG dated 31 December 2012 in the presented version. This proposition is backed by the results of an independent audit carried out by Ernst & Young; it avoids any further time consuming forensic audits and allows Powerland to return to a normal business track. Taking into account the issues regarding the financial statements, the Management Board and the Supervisory Board have decided to not distribute any dividend. (Please find further information on the results of the independent auditor's investigations in the Appendix of this press release.) In addition, the Supervisory Board will propose Moore Stephens Düsseldorf AG Wirtschaftsprüfungsgesellschaft, Düsseldorf, to be appointed as the auditor of the (stand-alone) financial statements as well as the consolidated financial statements for the business year 2013. Furthermore, the AGM will resolve changes within the Supervisory Board: The members of the Supervisory Board Dr. Peter Diesch and Volker Potthoff in agreement with the Management Board will resign from office with effect as of the end of the Annual General Meeting. It is proposed that the two Supervisory Board seats will be taken over by Binghui Lu, self-employed investor, resident in Bejing (China), and Stephan Oehen, self-employed PR consultant, resident in Zurich (Switzerland). During their careers, both gained relevant practical experience. (Please find further information on Binghui Lu and Stephan Oehen in the Appendix of this press release.) Yachen Jiang, CFO of Powerland since July 2013, comments: 'From the current perspective of 2014, the year 2012 seems to be a long time ago. Powerland experienced two rounds of forensic audits after the completion of the initial 2012 annual audit. The whole exercise has laid tremendous strain on the Company's staff and business partners, and most importantly, lead to fading investors' confidence. We would like to take this opportunity to apologize to you for this and want to assure you that Powerland will make every effort to prevent such complication in future. The Company will put an even higher emphasis on transparency as well as better internal control and external communication mechanisms. We are looking forward using the AGM as a starting point to put the past behind us and look forwards.' Please find more information on the AGM on http://www.powerland.ag/investor-relations/annual-general-meeting. APPENDIX - Further information on the results of the independent auditor's investigations As communicated, BDO AG, Powerland's statutory auditor, announced on 2 July 2013 that they would issue an adverse opinion on the Company's consolidated and unconsolidated financial statements for 2012. On 15 July 2013 Powerland informed of the hindering factors underlying the adverse opinion and gave an own analysis. In August 2013, the Supervisory Board and the Management Board engaged Ernst & Young GmbH, Wirtschaftsprüfungsgesellschaft, as an independent auditor to investigate into the hindering factors brought forward by BDO. Ernst & Young completed the field work in early November 2013 and finalized a forensic audit report in early January 2014. Powerland would like to share its view as well as the results of the independent auditor's investigations into the hindering factors and the resulting adverse opinion: 1. Export revenue The statutory auditor is unconvinced about the validity of the export revenue, which constituted approximately 18% of the Group's total revenue in 2012. This argument is based on the inconsistency of information contained in export documents, the fact that certain incoming payments would not be matched with individual orders, and transactions made by the Company with related entities. The Management Board deems the inconsistent information as irrelevant for revenue recognition, as payments have been fully collected and the delivered goods were fairly priced. In addition, detailed explanations have been made that inconsistent information such as consignee name and delivery address, as well as collective payments, which resulted in the payment mismatch, is customary in international trades. Furthermore, the Company has elaborated on the nature of the questioned transactions and proven that these transactions are reasonable. The Company has even arranged for BDO to pay on-site visits of our South African business partners. During the trip, BDO physically verified the existence of the export business. During the forensic audit, Ernst & Young reviewed the export documentation of our export revenues once provided to BDO, with a special focus on documents from trust worthy credit-worthy third-parties, i.e. the Chinese Tax Bureau, the Chinese Customs Office and the State Administration of Foreign Exchange. In the meantime, intensive interviews were conducted with relevant personnel and external shipping agents. In addition, sample testing of container information and other substantive procedures were performed. On the aforementioned information basis, Ernst & Young reports that all interviewees confirmed the accuracy of the stated activities. Transactional testing on sample export sales source documents also confirmed the consistency of container numbers in the bills of lading (BOL), custom declaration notes and packaging lists. In general, there is no significant finding regarding the concerns raised by BDO. 2. Cash and demand deposits The statutory auditor cast doubts on existence of the Company's cash and demand deposits as at 31 December 2012 of EUR 61.1 million. The amount of bank deposits was confirmed by written evidence provided to BDO when BDO paid on-site visits to the local branches of the account-keeping banks. However, BDO requested to visit the headquarters of the account-keeping Chinese banks as an extended audit procedure and the Management Board denied this request. The Management Board deems BDO's request highly uncustomary for audit procedures in China. The Company does not have a relationship with the banks' headquarters who are not legally obliged to provide the bank deposit information. BDO's request is beyond the scope of what the Company could possibly accommodate for. During the forensic audit, Ernst & Young visited local Chinese banks and obtained bank statements of 2012 (sealed with official chops). Ernst & Young also performed a sample testing of bank transactions above 5 million CNY in December 2012/January 2013 and had access to Powerland's accounts via the Internet online banking system. This inspection demonstrated the balances/transactions in the past six months and confirmed the year-end balance of 2012 by back-calculation. Ernst & Young concluded that bank balance and transaction procedures revealed no exception as at December 31, 2012. Therefore, BDO's concerns with regard to our bank deposit are not justified. 3. Bank borrowings The statutory auditor believed that our bank borrowings were not sufficiently proven. BDO requested a 'Borrowing Card' report from the People's Bank of China (PBOC) for reference and the Company refused to collaborate. The Company has provided sufficient supporting documentation from local account-keeping banks to evidence the borrowing balances. There was no necessity to provide supplementary documents to verify the borrowings. Moreover, the request for a PBOC confirmation is beyond the scope of what the Company could possibly accommodate for. Ernst & Young obtained a borrowing card report for the Company's Chinese entities when Ernst & Young visited the local banks. Though there was a discrepancy between borrowing card information and the Company's book, it was mainly due to the fact that the latest information had not been updated by the lending banks and this phenomenon was confirmed by the People's Bank of China. Therefore, Ernst & Young states that the review of reconciliation of bank borrowing balance differences as prepared by the management revealed no exceptions. Powerland's borrowing balances as at 31 December 2012 are fairly stated. 4. Related parties The statutory auditor believed that the Company's major export counterparties, i.e. Suntec and Fimont, as well as Duerde, one of the Company's major domestic distributors, could be related parties of the Company. The Management Board has provided sufficient documents and explanations on the relationship between the Company and the aforesaid business partners. Ernst & Young has inspected legal documents and declarations such as business licenses and in the meantime, conducted interviews with the relevant personnel, particularly the Company's management. Ernst & Young states that more conclusive evidence may be required to effectively support the management's position. Nevertheless, the reviewed documentation as well as the interviews does not support BDO's assumption that the above business partners are related parties of the Company. Based on the above, the Management Board has come to the conclusion that BDO was not justified to issue an adverse opinion on the basis of the allegedly hindering factors. The Management Board also had intensive discussions with the Supervisory Board regarding the possibility of adjusting and restating the financial statements and presenting the restated financial statements to BDO for a re-audit. However, the Management Board is still convinced that the financial statements are correct and was further strengthened in its position by the Ernst & Young report. Moreover, a re-audit process would again be time-consuming and taking into account BDO's position would not necessarily guarantee the issuance of an audit opinion by BDO. Evidently, the Company does not have adequate time. Therefore, the Management Board has decided together with the Supervisory Board that it is in the best interest of the Company as well as the shareholders to inform the shareholders on the situation regarding the financial statements 2012 and to give them the opportunity to decide on the adoption of the consolidated and unconsolidated financial statements for 2012. This will enable the shareholders to make their own decisions on the basis of the reports of the Supervisory Board and of the Management Board as well as the results reported by Ernst & Young. Further information on Binghui Lu and Stephan Oehen Binghui Lu is an investment specialist living in Beijing, P.R. China. From 2010 to 2012, he worked as Private Equity Principal for Kohlberg Kravis Roberts & Co. in Beijing where he was mainly responsible for proprietary deal sourcing, transaction execution and post-investment management. Prior to that - starting in 2005 - he worked for Goldman Sachs within the Investment Banking China Business. During that time, he gained extensive experience of both domestic and overseas deals where he was mainly responsible for deal origination, client coverage and the deal execution management. He started his career as an investment banking analyst at Bank of China International Holdings Limited in Beijing, where he led or participated in equity/debt financings and gained M&A experience. Binghui Lu was born in 1975 and has a Master degree in Economics from Peking University as well as a Bachelor degree in Philosophy from Peking University. His mother tongue is Mandarin and he is fluent in English. Stephan Oehen is a communications strategist living in Zollikon-Zurich, Switzerland. He is owner of Oehen PR and also founded InvestinSwitzerland, a unique one-stop business services platform for investors in Switzerland. From 2011 to 2013 he was CEO of Grayling Switzerland where he restructured the operational business. Prior to that, he served as non-executive board member of Grayling Investments in Switzerland as well as of Rich International Ltd., which published an exclusive series of leisure and luxury brand magazines in the German speaking countries. He started his career in journalism for the daily press. Stephan Oehen is a member of the Swiss Public Relations Society and the Swiss Public Affairs Society. Stephan Oehen was born in 1968 and studied economics and law. His mother tongue is German and he is fluent in French, English, Spanish and Italian. For more information, please contact: Powerland AG Investor Relations Director Lyoner Strasse 14 60528 Frankfurt am Main Germany Phone: +49 (0) 69 66 554 - 459 Fax: +49 (0) 69 66 554 - 276 E-mail: [email protected] Home: http://www.powerland.ag End of Corporate News --------------------------------------------------------------------- 14.02.2014 Dissemination of a Corporate News, transmitted by DGAP - a company of EQS Group AG. The issuer is solely responsible for the content of this announcement. DGAP's Distribution Services include Regulatory Announcements, Financial/Corporate News and Press Releases. Media archive at www.dgap-medientreff.de and www.dgap.de --------------------------------------------------------------------- Language: English Company: Powerland AG Lyoner Straße 14 60528 Frankfurt am Main Germany Phone: +49 69 - 66554-459 Fax: +49 69 - 66554-276 E-mail: [email protected] Internet: www.powerland.ag ISIN: DE000PLD5558 WKN: PLD555 Listed: Regulierter Markt in Frankfurt (Prime Standard); Freiverkehr in Berlin, Düsseldorf, Hamburg, München, Stuttgart End of News DGAP News-Service --------------------------------------------------------------------- 252628 14.02.2014