TIDMVOC
RNS Number : 5073D
Vision Opportunity China Fund Ltd
03 December 2009
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART INTO THE UNITED
STATES, CANADA, AUSTRALIA, SOUTH AFRICA OR JAPAN
3 December 2009
Vision Opportunity China Fund Limited
(the "Company" or "VOC")
Full Year Results for the year ended 30 September 2009
Vision Opportunity China Fund Limited (AIM: VOC.L), the closed-ended fund traded
on AIM that invests in companies with operations principally within Greater
China, today announces full year results for the year ended September 2009.
Highlights
* NAV per share increase of 71.7% to $2.09 (since 30 September 2008)
* Earnings Per Share increase of 135.2% of $0.6467
* Deployment of US$27 million into five portfolio companies during the year ended
30 September 2009
* US$34.5 million of proceeds realised, representing a return of approximately
34.7%
* Portfolio held nine positions representing 93.9% of NAV as at 30 September 2009
* Assets by industry (as at 30 September 2009): 44.5% consumer staples; 37.7%
industrials; 12.2% alternative energy; 1.7% healthcare and 3.9% in other
* Listing of portfolio company Lihua International Inc. on NASDAQ in September
2009, simultaneously raising US$8 million
* Chinese economic outlook stable, with exciting investment opportunities
Adam Benowitz, Chief Investment Officer of Vision Capital Advisors, LLC,
commented:
"Against a backdrop of challenging financial market conditions and volatility,
VOC and its portfolio companies have produced impressive financial results. The
strong performance emphasises the strength and quality of VOC's investment
processes and together with an improving economic outlook, we are well
positioned to continue to deliver growth in 2010."
Chris Fish, Chairman of the Company, commented:
"The ability of VOC to perform as it has done during an unprecedented period of
turmoil in the global financial markets, is testament to the robust business
model and investment expertise in place. With China showing signs of becoming
one of the fastest-growing large economies, VOC and its shareholders can look
forward to 2010 with optimism and confidence."
Financial Highlights
+--------------------+-----------------+-------------------+------------+
| | Year ended | Year ended | Growth |
| | 30 September | 30 September 2008 | |
| | 2009 | | |
+--------------------+-----------------+-------------------+------------+
| Net investment | $66,594,564 | $37,284,054* | +78.6% |
| income | | | |
+--------------------+-----------------+-------------------+------------+
| Net Asset Value | $138,649,851 | $121,927,144 | +13.7% |
| (NAV) | | | |
+--------------------+-----------------+-------------------+------------+
| Net Asset Value | $2.0947 | $1.2193 | +71.7% |
| (NAV) per Ordinary | | | |
| Share | | | |
+--------------------+-----------------+-------------------+------------+
| Earnings Per Share | $0.6467 | $0.2750* | +135.2% |
| | | | |
+--------------------+-----------------+-------------------+------------+
*From 7 November 2007 to 30 September 2008
For further information, please contact:
Vision Opportunity China Fund Limited
David Benway / Adam Benowitz Tel: +1 (212) 849 8225
www.vocfund.com
Canaccord Adams Limited Tel: +44 (0)20 7050 6500
Robert Finlay / Guy Blakeney
Financial Dynamics Tel: +44 (0)20 7269 7132
Ed Gascoigne-Pees / Ed Berry
NOTE TO EDITORS
Vision Opportunity China Fund Limited is a closed-ended listed fund traded on
AIM. VOC primarily invests directly in listed companies with operations
principally within Greater China.
Greater China is a collective term for the territories administered by the
People's Republic of China, those administered by the Republic of China and
Singapore.
Chairman's Statement
Year ended 30 September 2009
Firstly, I would like to thank our shareholders for their support in what has
been an unprecedented period of turmoil in the global financial markets. The
efforts of the Board and Investment Manager to deliver value to shareholders
during this time have however been successful. It is a privilege to announce the
Company's audited results for the financial year ended 30 September 2009 (the
"Financial Year 2009"). During the period under review the net asset value
("NAV") per ordinary share of no par value in the capital of VOC ("Ordinary
Share") rose by approximately 72% from US$1.2193 on 30 September 2008 to
US$2.0947 per Ordinary Share on 30 September 2009. As at 30 September 2009, the
Company's NAV was US$138,649,851.
The Board believes that the obstacles which arose during the year were managed
with professionalism and with the interests of the Company's shareholders at the
forefront. When the global financial crisis reached its most critical stage last
autumn, the Company elected to return up to US$30 million to shareholders by way
of a tender offer (the "Tender Offer"). The Investment Manager and certain
employees who at the time held 8.04% of the outstanding Ordinary Shares elected
not to participate in the Tender Offer, leaving proportionately more capital
available to other Shareholders. 7,354,397 Ordinary Shares that were the subject
of the Tender Offer were initially held in treasury and then were subsequently
cancelled. At 30 September 2009, the Company had 66,189,574 Ordinary Shares in
issue.
The Company deployed US$27 million in total into five companies in the Financial
Year 2009 (bringing the Company's total deployment of capital since inception to
US$73.4 million across 13 companies1). As the Company was fully-invested
following the Tender Offer, the efforts of the Investment Manager were focused
on the portfolio and assisting portfolio company management teams with numerous
corporate initiatives. The Board was delighted that several portfolio companies
were granted listings on national exchanges and that one private portfolio
company successfully went public by way of an underwritten public offering.
When measured optimism returned to the markets, the Investment Manager took the
opportunity to realise profits in a number of positions. During the Financial
Year 2009, VOC realised approximately US$34.5 million of proceeds from assets
purchased for approximately US$25.6 million, representing a return of
approximately 34.7%. Since inception, the Company has therefore realised
approximately US$46 million of proceeds and approximately US$13 million in
realised gain, representing a return to the Company's shareholders of
approximately 40.5%.
The Board is pleased with the continued progress that the Company made in the
Financial Year 2009 and the Company is once again actively looking to invest in
new opportunities. As markets recover globally, the expectation is that China
will be among the fastest-growing large economies and the Board anticipates that
there will be many opportunities to deploy growth equity capital. The Board
believes that the Company remains strongly positioned to continue its successful
business model and generate meaningful returns for its shareholders.
1 This figure excludes "shell" company purchases (as investment vehicles) and a
short-term loan which was made to Vision Opportunity Master Fund, Ltd. If such
shell companies and the loan were to be included, VOC deployed approximately
US$80.7 million in 16 companies and realised approximately US$53.3 million in
sale proceeds.
Christopher Fish
Chairman
Date: 30 November 2009
Investment Manager's Report
Year ended 30 September 2009
We are pleased to report that during Financial Year 2009 the Company's NAV grew.
The Company's NAV at 30 September 2009 was approximately US$139 million and the
NAV per Ordinary Share was US$2.0947, which was an increase of approximately 72%
from the prior year-end NAV of US$1.2193 per Ordinary Share and 147% from a low
of US$0.8477 per Ordinary Share at 31 January 2009. VOC's share price was
US$1.22 at 30 September 2009, representing an increase of 22% from 30 September
2008. During the same period, the MSCI China Index and the Halter USX China
Index increased by 28.8% and 18.4% respectively.
We believe that our focus on portfolio management has proved successful. China
Integrated Energy, Inc. was uplifted to NASDAQ in June; Lihua International,
Inc. became listed on NASDAQ with a successful underwritten public offering in
September; QKL Stores, Inc was uplifted to NASDAQ in October and in each case,
we consider that there were improvements in liquidity. The Company has also
realised profits in a number of positions, including in Lihua International,
Inc., China Information Security Technology, Inc., China Valve Technology, Inc.,
and Tianyin Pharmaceutical Co, Inc. As of 30 September 2009, the portfolio held
nine positions and four of these positions each accounts for more than 5% of the
NAV and collectively account for 93.9% of the NAV. By industry, 44.5% of VOC's
assets were in consumer staples, 37.7% in industrials, 12.2% in alternative
energy, 1.7% in healthcare and 3.9% in other.
We believe the Chinese economy is undergoing a period of stabilisation and
recovery. Following the global financial crisis, the Chinese government adopted
a series of stimulus measures, including a 4-trillion yuan investment package,
tax cuts and consumer subsidies to maintain growth and employment. According to
data from China's National Bureau of Statistics, China's gross domestic product
("GDP") expanded 8.9% year-on-year in the third quarter and 7.7% year-on-year in
the first nine months of 2009. Initial calculations indicated that consumption
in the first three quarters of 2009 contributed 4 percentage points to GDP
growth, investment accounted for 7.3 percentage points while exports have had a
negative impact on economic growth. The per-capita disposable income of urban
residents grew by a price-adjusted 10.5% in the first three quarters of 2009
compared to the same period in the year before and the income of rural dwellers
was up by 9.2%. Retail sales in the first nine months of 2009 rose by 15.1% to
US$1.31 trillion and fixed-assets investment rose by 33.4% in the same period.
We expect that the Chinese government will continue a proactive fiscal policy
and a moderately eased monetary policy in order to support growth. So far
investment has played an active role in helping reverse the downward trend and
driving relatively fast growth this year. Going forward, we expect domestic
consumption and private sector investment to play an increasingly more important
role in spurring growth.
In choosing companies to recommend to the Company for investment we were careful
to select those that focus on the domestic market and have strong balance sheet
and competitive advantages. As a result, most of VOC's portfolio companies
delivered impressive financial results despite a challenging macro environment.
We believe that VOC is well positioned to continue to deliver growth. With VOC's
recent exits, it is again actively looking to deploy capital. VOC's deal flow
continues to be strong and we will be rigorous as always in selecting high
quality, fast growing companies which are priced attractively.
Adam Benowitz
Chief Investment Officer
Vision Capital Advisors, LLC
Date: 30 November 2009
Directors' Report
Year ended 30 September 2009
The Directors of the Company are pleased to present their second annual report
and audited consolidated financial statements for the year ended 30 September
2009. The comparative period is from 7 November 2007 to 30 September 2008.
The Company
The Company is a Guernsey registered, closed-ended investment company. The
Company commenced business on 28 November 2007 when the Ordinary Shares of the
Company were admitted to trading on AIM.
There have recently been a number of changes to the regulatory regime for
Guernsey funds. A number of provisions which were contained in the Control of
Borrowing (Bailiwick of Guernsey) Ordinance, 1959 to 2003 ('COBO') (which
governed closed ended funds) have been consolidated into the Protection of
Investors (Bailiwick of Guernsey) Law, 1987 as amended (the 'POI Law') (which
governed open-ended funds and licencees) so that the POI Law now governs both
open-ended and closed-ended funds (as well as licensees).
Closed-ended funds are now Category 1 controlled investments under the POI Law.
The changes have also codified in the POI Law a number of standard conditions
and ongoing notification requirements imposed on the licensees of funds which
were listed on the fund's COBO consent, but were not explicitly set out in COBO.
It is intended that the changes will simplify Guernsey's investment fund regime
by categorising all funds (whether open-ended or closed-ended) as either
registered schemes or authorised schemes. The Company has elected to become a
registered scheme.
Investment Policy and Objective
The Company's investment policy is to invest in companies whose operations at
the time of the Group's initial investment are principally in Greater China. Any
variation to the Group's investment policy will only be made following the
approval by ordinary resolution of the Shareholders in a general meeting.
The Company's objective is to achieve long-term capital growth by investment in
companies whose operations at the time of the initial investment are principally
in Greater China ("Investee Companies") or investment vehicles to be used to
acquire the foregoing. The Company intends to provide shareholders with returns
on their investment predominantly through capital appreciation.
The Company will target Investee Companies with annual revenues between US$10
million and US$150 million and annual net income between US$1 million and US$15
million. Investments will be made in Investee Companies which are already listed
on a stock exchange or expected to be listed on a stock exchange concurrently
with the investment by way of reverse takeover of an existing listed company
whose assets are primarily cash. The Company may also invest up to 20% of the
NAV at the time of investment in private Investee Companies. Subject to Board
approval, the Company may make investments which do not fit the criteria.
The Company will not invest (or commit to invest) more than 15% of the NAV (on a
cost basis) in a single investment without the Board's prior approval. The
Company will not without Board approval invest (or commit to invest) less than
$200,000 in any Investee Companies except investment vehicles to be used to
acquire Investee Companies.
The Company does not intend to borrow funds, however, it may be indirectly
exposed to the effects of gearing to the extent that Investee Companies have
outstanding borrowings. The Directors reserve the right to borrow up to 25% of
the NAV at any time. Any such borrowings are subject to Board approval.
Performance Statistics
Net Asset Value per Ordinary Share as of 28 November 2007 (date of admission to
AIM) - US$0.9443
Net Asset Value per Ordinary Share as of 31 December 2007 - US$0.9525
Net Asset Value per Ordinary Share as of 31 March 2008 - US$0.9570
Net Asset Value per Ordinary Share as of 30 June 2008 - US$1.3022
Net Asset Value per Ordinary Share as of 30 September 2008 - US$1.2193
Net Asset Value per Ordinary Share as of 31 December 2008 - US$0.9314
Net Asset Value per Ordinary Share as of 31 March 2009 - US$0.9513
Net Asset Value per Ordinary Share as of 30 June 2009 - US$1.3043
Net Asset Value per Ordinary Share as of 30 September 2009 - US$2.0947
Group Structure
The underlying investments of the Group are held by the Limited Partnership
which was registered as a limited partnership in Guernsey under the Limited
Partnership (Guernsey) Law, 1995. The Company is the limited partner of the
Limited Partnership and the Company's subsidiary, GPCo, is the general partner
of the Limited Partnership.
GPCo was incorporated in Guernsey and is licensed under The Protection of
Investors (Bailiwick of Guernsey) Law 1987, as amended. GPCo's principal
activity is to manage the Limited Partnership which it does by employing the
services of Vision Capital Advisors under the Investment Management Agreement.
GPCo is responsible for the continuing fees of the Investment Manager.
The Company owns all of the issued A Ordinary Share capital of GPCo. The A
Ordinary Shares give the Company the sole control rights over GPCo.
Vision Capital Advisors owns all of the issued B Redeemable Preference Share
capital of GPCo. The B Redeemable Preference Shares give the Investment Manager
the sole economic rights to the performance allocation to which GPCo is entitled
under the terms of the Limited Partnership and the return on the US$100,000
capital invested by Vision Capital Advisors for the B Redeemable Preference
Shares.
Through its interest as a limited partner in the Limited Partnership, the
Company is entitled to a return on the amount it invested in the Limited
Partnership to enable the Group to make investments.
On 2 December 2008, the Company's Shareholders approved the Tender Offer
pursuant to which the Company, through Fairfax, acquired 33,810,426 Ordinary
Shares from Shareholders for an aggregate price (including costs) of US$30
million. Following the Tender Offer, 26,456,029 Ordinary Shares were cancelled
and the issued Ordinary Share capital of the Company became 73,543,971 Ordinary
Shares, of which 7,354,397 were held in treasury. On 25 September 2009 the
7,354,397 Ordinary Shares previously held in treasury were cancelled. Following
the cancellation, as at 30 September 2009, the number of issued Ordinary Shares
of the Company is 66,189,574.
Together the Company, the GPCo and the Limited Partnership form an integrated
fund structure. The Investment Manager's holding in the GPCo is the interest in
the B Redeemable Preference Shares issued by GPCo.
Results and Dividends
The results for the year are set out in the Consolidated Statement of
Comprehensive Income on page 13.
The Directors do not recommend the payment of a dividend for the financial year
(period 7 November 2007 to 30 September 2008: US$Nil).
Dividend Policy
The Directors intend to generate returns to Shareholders principally through
capital appreciation and have no current plans to pay any dividends in the short
to medium term. The Board will however review the Company's dividend policy at
appropriate intervals and at least annually.
Directors
The Directors, all of whom are non-executive directors, are as listed below. All
the Directors were appointed on 8 November 2007 and Christopher Fish, Ruiping
Wang and Dr Christopher Polk are independent Directors.
Christopher Norman Fish (Chairman)
Dr Randolph Baer Cohen
David William Benway
Ruiping Wang
Dr Christopher Keith Polk
The Investment Manager
The Investment Manager has been appointed as investment manager to the Group
pursuant to an Investment Management Agreement dated 16 November 2007 between
the Investment Manager and the Company.
The Investment Manager is responsible for sourcing, evaluating, negotiating,
completing, monitoring and managing investments on behalf of the Group. The
appointment of the Investment Manager under the Investment Management Agreement
is for an initial 3 years from Admission and continues thereafter unless
terminated by 12 months' notice in writing, such notice to be given on or after
the third anniversary of Admission. Notwithstanding the above, the Investment
Management Agreement can be terminated immediately, by either party giving
written notice to the other, upon material breach of the Investment Management
Agreement by the other party that is not capable of remedy, or, in the case of a
remediable breach, if such breach is not remedied within 30 days. The Investment
Management Agreement may also be terminated in other prescribed circumstances,
including where one party goes into liquidation.
The Administrator
The Administrator has been appointed administrator of the Group pursuant to an
administration agreement dated 16 November 2007 between the Administrator and
the Company (the "Administration Agreement").
The Administrator provides day-to-day administration and secretarial services to
the Company, GPCo and the Limited Partnership. The Administration Agreement is
terminable by either party giving not less than 180 days' notice in writing and
in certain other circumstances, including material breach of the terms of the
agreement by either party.
Custodian
The Custodian has been appointed as custodian to the Company and in that
capacity has custody of the Groups' investments. In accordance with U.S.
securities laws, the assets of Jefferies' customers are required to be
segregated from Jefferies' proprietary assets.
Prime Broker
The Prime Broker has been appointed as prime broker to the Limited Partnership.
The Limited Partnership pays the Prime Broker commissions and other transaction
fees (for the execution of purchases and sales of securities). These fees are
payable at the Prime Broker's prevailing rates.
Registrar
The Registrar has been appointed to act as registrar of the Group under a
registrar agreement dated 16 November 2007 between the Company and the Registrar
(the "Registrar Agreement"). The Registrar Agreement sets out the fees which the
Registrar will charge for performing its duties as registrar. The Registrar
Agreement may be terminated by either the Company or the Registrar giving not
less than 3 months' notice in writing or otherwise in circumstances where the
Company or the Registrar goes into liquidation or where either party commits and
fails to make good a material breach of the Registrar Agreement. The Registrar
Agreement will also terminate if the Registrar ceases to hold a required
licence, consent, permit or registration.
Nominated Adviser and Broker
Fairfax was appointed to act as nominated adviser and broker in connection
with Admission under a NOMAD and Broker agreement dated 16 November 2007 between
the Company and Fairfax (the "Fairfax NOMAD and Broker Agreement"). The Company
had agreed to consult and discuss with Fairfax all of its announcements and
statements and to provide Fairfax with any information which Fairfax reasonably
requires to enable it to carry out its obligations as a nominated adviser and
broker. The Fairfax NOMAD and Broker Agreement was terminated with effect from
30 September 2009.
With effect from 1 October 2009 Canaccord Adams replaced Fairfax as Nominated
Adviser and Broker to the Company under a NOMAD and Broker agreement dated 1
October 2009 between the Company and Canaccord Adams (the "Canaccord NOMAD and
Broker Agreement"). The Canaccord NOMAD and Broker Agreement is on normal market
terms, and under those terms the Company has agreed, inter alia, to consult and
discuss with Canaccord Adams all of its announcements and statements and to
provide Canaccord Adams with any information which Canaccord Adams reasonably
requires to enable it to carry out its obligations as a Nominated Adviser and
Broker. The Canaccord NOMAD and Broker Agreement is terminable by either party
on 2 months written notice and in certain other circumstances.
Corporate Governance
As a Guernsey incorporated company, the Company is not required by Guernsey law
to comply with the provisions of the AIC Code of Corporate Governance (the
"Code"). However, the Directors believe that high standards of corporate
governance should be maintained and therefore have adopted the provisions of the
Code which the Board believes are relevant to the Company given its status as a
non-UK investment company. The Company has not, to date, made any significant
departures from the requirements of the Code.
Independence of Directors
The Board consists of five members, all of whom are non-executive. With the
exception of Dr Cohen and Mr Benway all other Directors of the Company are
independent. The Board believes that Dr Cohen's and Mr Benway's experience adds
considerable value to the Company. Neither Dr Cohen nor Mr Benway takes part in
discussing any contractual arrangements between the Board and the Investment
Manager due to their interests in the Investment Manager.
The Directors recognise the importance of succession planning for company boards
and review the composition of the Board annually. However, the Board is of the
view that length of service will not necessarily compromise the independence or
contribution of Directors of an investment company where continuity and
experience can be a benefit to the Board. Furthermore, the Board agrees with the
view expressed in the AIC Code of Corporate Governance that long serving
Directors should not be prevented from forming part of an independent majority
or from acting as Chairman. Consequently no limit has been imposed on the
overall length of service of the Directors.
The Directors were initially appointed to the Board on 8 November 2007 and a
third of them will retire, and seek reappointment at each annual general meeting
("AGM"). At the first AGM, held on 22 January 2009, Mr Ruiping Wang retired by
rotation, under the articles of association, and was then re-elected. At the
Company's next AGM, Ordinary Resolutions will be proposed for Mr Fish and Mr
Polk to retire by rotation, under the articles of association, and seek
reappointment.
The Directors believe that the Board has a balance of skills and experience
which enable it to provide effective strategic leadership and proper governance
of the Company.
The Board has contractually delegated external agencies for the management of
the investment portfolio, the custodial services and the day to day accounting
and company secretarial requirements. Each of these contracts was only entered
into after proper consideration by the Board of the quality and services
offered.
Internal Controls
The Directors are responsible for overseeing the effectiveness of the internal
financial control systems of the Company, which are designed to ensure proper
accounting records are maintained, that the financial information on which the
business decisions are made and which is issued for publication is reliable, and
that the assets of the Company are safeguarded. Such a system of internal
financial controls can only provide reasonable and not absolute assurance
against misstatement or loss.
In accordance with the guidance published by the Institute of Chartered
Accountants in England and Wales ("the Turnbull Report"), the Board has reviewed
the Company's internal control procedures. These internal controls are
implemented by the Company's three main service providers, the Investment
Manager, the Administrator and the Custodian. The Board is satisfied with the
internal controls of the Company.
The Directors meet on a quarterly basis to assess Company operations and the
setting and monitoring of investment strategy and investment performance. At
such meetings, the Board receives from the Administrator and Investment Manager
a full report on the Company's holdings and performance. The Board gives
directions to the Investment Manager as to the investment objectives and
limitations, and receives reports in relation to the financial position of the
Company and the custody of its assets.
Internal Controls
Social, ethical and environmental concerns have been considered by the Board.
The Board does not consider it appropriate to put social, ethical and
environmental policies in place within an investment company investing in
financial instruments.
The Board has considered non-financial areas of risk such as disaster recovery
and investment management staffing levels and considers adequate arrangements to
be in place.
Meetings
The table below, details the attendance at Board and Committee meetings during
the year:
+---------------------------+-------------+----------------+---------------------+
| | Board* | Audit | Investment |
| | | Committee** | Committee*** |
+---------------------------+-------------+----------------+---------------------+
| Christopher Fish | 9 | 1 | 1 |
+---------------------------+-------------+----------------+---------------------+
| Dr Randolph Cohen | 7 | N/A | N/A |
+---------------------------+-------------+----------------+---------------------+
| David Benway | 11 | N/A | N/A |
+---------------------------+-------------+----------------+---------------------+
| Ruiping Wang | 9 | 2 | 1 |
+---------------------------+-------------+----------------+---------------------+
| Dr Christopher Polk | 11 | 2 | - |
+---------------------------+-------------+----------------+---------------------+
* 11 Board meetings have been held during the year ended 30 September 2009
** 2 Audit Committee meetings have been held during the year ended 30 September
2009
*** 1 Investment Committee meeting has been held during the year ended 30
September 2009
Audit Committee
An audit committee has been appointed and is responsible for reviewing and
monitoring internal financial control systems and risk management systems on
which the Group is reliant, considering the annual accounts and audit report,
considering the appointment and remuneration of the Company's auditors and
monitoring and reviewing annually their independence, objectivity, effectiveness
and qualifications. The members of the audit committee are Christopher Fish,
Ruiping Wang and Dr Christopher Polk (Chairman). The audit committee has
performed reviews of the internal financial control systems and risk management
systems during the year. The audit committee is satisfied with the internal
financial control systems of the Group. The audit committee will meet
bi-annually.
Investment Committee
The Board has established an Investment Committee comprising the three
independent Directors being Christopher Fish, Ruiping Wang and Dr Christopher
Polk. The Investment Committee meets once a year to supervise the Investment
Manager and its performance under the Investment Management Agreement. It will
also meet on an ad hoc basis to consider investment opportunities which are
outside the investment restrictions and investment decisions where there is a
potential conflict between the Group's interests and those of Vision Capital
Advisors or other funds it manages.
Remuneration and Nomination Committees
Since all of the Directors are non-executive, the Board does not consider it
necessary to establish remuneration and nomination committees.
Directors Interests
As at 30 September 2009 the interests in Ordinary Shares of the Company held by
the Directors who held office during the year, and their families, are set out
below:
+-----------------------------------------+------------------+--+------------------+
| | 30 | | 30 |
| | September 2009 | | September 2008 |
+-----------------------------------------+------------------+--+------------------+
| | No. of Ordinary | | No. of Ordinary |
| | Shares | | Shares |
+-----------------------------------------+------------------+--+------------------+
| Christopher Fish (Chairman) | - | | - |
+-----------------------------------------+------------------+--+------------------+
| Dr Randolph Cohen* | 7,850,000 | | 7,500,000 |
+-----------------------------------------+------------------+--+------------------+
| David Benway | - | | - |
+-----------------------------------------+------------------+--+------------------+
| Ruiping Wang | - | | - |
+-----------------------------------------+------------------+--+------------------+
| Dr Christopher Polk | - | | - |
+-----------------------------------------+------------------+--+------------------+
During the year Vision Capital Advisors' acquired an additional 350,000 Ordinary
Shares in the Company.
*Dr Cohen is interested in 7,850,000 or 11.86% (30 September 2008: 7,500,000 or
7.5%) Ordinary Shares in the Company due to his ownership of a proportion of the
economic rights in Vision Capital Advisors' Ordinary Shares in the Company.
There were no changes in the interests of the Directors prior to the date of
this report.
Dr Cohen has an indirect interest through Vision Capital Advisors' holdings of B
Redeemable Preference Shares in the GPCo.
Other than Dr Cohen, no Director and no connected person of any Director has an
interest in the Ordinary Shares of the Company which, is known to, (or could
with reasonable diligence be ascertained by) the Directors, whether held
directly or through a third party.
Directors Statement
The Directors make the following statement:
* so far as the Directors are aware, there is no relevant audit information of
which the Group's auditors are unaware; and
* that all steps have been taken by the Directors to make themselves aware of any
relevant audit information and to establish that the Group's auditors are aware
of that information.
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Directors' 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 they have elected to prepare the financial
statements in accordance with International Financial Reporting Standards and
applicable law.
The financial statements are required by law to give a true and fair view of the
state of affairs of the Group 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 estimates that are reasonable and prudent;
* state whether applicable accounting standards have been followed, subject to any
material departures disclosed and explained in the financial statements; and
* prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Group will continue in business.
The Directors are responsible for keeping proper accounting records which
disclose with reasonable accuracy at any time the financial position of the
Group and to enable them to ensure that the financial statements comply with the
Companies (Guernsey) Law, 2008. They have general responsibility for taking
such steps as are reasonably open to them to safeguard the assets of the Group
and to prevent and detect fraud and other irregularities.
Status of Taxation
The Income Tax Authority of Guernsey has granted the Company exemption from
Guernsey income tax under the Income Tax (Exempt Bodies) (Guernsey) Ordinance,
1989 and the income of the Company may be distributed or accumulated without
deduction of Guernsey income tax. Exemption under the above mentioned Ordinance
entails payment by the Company of an annual fee of GBP600. It should be noted,
however, that interest and dividend income accruing from the Group's investments
may be subject to withholding tax in the country of origin. With effect from 1
January 2008 the standard rate of income tax for most companies in Guernsey is
zero per cent. Tax Exempt status continues to exist and the Company has been
granted this status for 2009.
The Company has not suffered any withholding tax in the year (period ended 30
September 2008: US$Nil).
Auditors
The auditors of the Company, KPMG Channel Islands Limited, have expressed their
willingness to continue in office and a resolution giving authority to
re-appoint them will be proposed at the forthcoming Annual General Meeting.
Director: Christopher Fish
Director: David Benway
Date: 30 November 2009
On behalf of the Board of Directors
INDEPENDENT AUDITOR'S REPORT TO MEMBERS OF VISION OPPORTUNITY CHINA FUND LIMITED
We have audited the Group financial statements (the "Financial Statements") of
Vision Opportunity China Fund Limited (the "Company") for the year ended 30
September 2009 which comprise the Consolidated Statement of Financial Position,
the Consolidated Statement of Comprehensive Income, the Consolidated Statement
of Changes in Equity, the Consolidated Statement of Cash Flows and the related
notes. These financial statements have been prepared under the accounting
policies set out therein.
This report is made solely to the Company's members, as a body, in accordance
with section 262 of the Companies (Guernsey) Law, 2008. 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.
Respective responsibilities of Directors and auditors
The Directors' responsibilities for preparing the financial statements which
give a true and fair view and are in accordance with International Financial
Reporting Standards and are in compliance with applicable Guernsey law are as
set out in the Statement of Directors' Responsibilities on page 10.
Our responsibility is to audit the financial statements in accordance with
relevant legal and regulatory requirements and International Standards on
Auditing (UK and Ireland).
We report to you our opinion as to whether the financial statements give a true
and fair view, are in accordance with International Financial Reporting
Standards and comply with the Companies (Guernsey) Law, 2008. We also report to
you if, in our opinion, the Company has not kept proper accounting records, or
if we have not received all the information and explanations we require for our
audit.
We read the other information accompanying the financial statements and consider
whether it is consistent with those statements. We consider the implications for
our report if we become aware of any apparent misstatements or material
inconsistencies with the financial statements.
Basis of audit opinion
We conducted our audit in accordance with International Standards on Auditing
(UK and Ireland) issued by the Auditing Practices Board. An audit includes
examination, on a test basis, of evidence relevant to the amounts and
disclosures in the financial statements. It also includes an assessment of the
significant estimates and judgements made by the Directors in the preparation of
the financial statements, and of whether the accounting policies are appropriate
to the Company's circumstances, consistently applied and adequately disclosed.
We planned and performed our audit 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 statements
are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statements.
Opinion
In our opinion the financial statements:
* give a true and fair view of the state of the Group's affairs as at 30 September
2009 and of its return for the year then ended;
* are in accordance with International Financial Reporting Standards; and
* comply with the Companies (Guernsey) Law, 2008.
KPMG Channel Islands Limited
Chartered Accountants
Date: 30 November 2009
Consolidated Statement of Financial Position
As at 30 September 2009
+-------------------------------------+--------+----------------+-+----------------+
| | Notes | 30 September | | 30 September |
| | | 2009 | | 2008 |
+-------------------------------------+--------+----------------+-+----------------+
| | | US$ | | US$ |
+-------------------------------------+--------+----------------+-+----------------+
| Investments: | 6 | | | |
+-------------------------------------+--------+----------------+-+----------------+
| Investment designated as: | | | | |
+-------------------------------------+--------+----------------+-+----------------+
| Fair value through profit or loss | | 97,385,577 | | 56,794,508 |
+-------------------------------------+--------+----------------+-+----------------+
| Held for trading | | 35,987,698 | | 15,336,809 |
+-------------------------------------+--------+----------------+-+----------------+
| Total investments | | 133,373,275 | | 72,131,317 |
+-------------------------------------+--------+----------------+-+----------------+
| | | | | |
+-------------------------------------+--------+----------------+-+----------------+
| Current assets: | | | | |
+-------------------------------------+--------+----------------+-+----------------+
| Cash and cash equivalents | 7 | 23,088,891 | | 56,850,049 |
+-------------------------------------+--------+----------------+-+----------------+
| Other receivables | 8 | 581,155 | | 57,243 |
+-------------------------------------+--------+----------------+-+----------------+
| | | 23,670,046 | | 56,907,292 |
+-------------------------------------+--------+----------------+-+----------------+
| | | | | |
+-------------------------------------+--------+----------------+-+----------------+
| Total Assets | | 157,043,321 | | 129,038,609 |
+-------------------------------------+--------+----------------+-+----------------+
| | | | | |
+-------------------------------------+--------+----------------+-+----------------+
| Current liabilities: | | | | |
+-------------------------------------+--------+----------------+-+----------------+
| Bank overdraft | 7 | 180 | | - |
+-------------------------------------+--------+----------------+-+----------------+
| Other payables | 9 | 18,293,290 | | 7,011,465 |
+-------------------------------------+--------+----------------+-+----------------+
| | | 18,293,470 | | 7,011,465 |
+-------------------------------------+--------+----------------+-+----------------+
| | | | | |
+-------------------------------------+--------+----------------+-+----------------+
| Non-current liabilities: | | | | |
+-------------------------------------+--------+----------------+-+----------------+
| B Redeemable Participating Shares | 11 | 100,000 | | 100,000 |
| of GPCo | | | | |
+-------------------------------------+--------+----------------+-+----------------+
| | | | | |
+-------------------------------------+--------+----------------+-+----------------+
| Total Liabilities | | 18,393,470 | | 7,111,465 |
+-------------------------------------+--------+----------------+-+----------------+
| | | | | |
+-------------------------------------+--------+----------------+-+----------------+
| Total net assets | | 138,649,851 | | 121,927,144 |
+-------------------------------------+--------+----------------+-+----------------+
| | | | | |
+-------------------------------------+--------+----------------+-+----------------+
| Represented by Shareholders' | | | | |
| Equity: | | | | |
+-------------------------------------+--------+----------------+-+----------------+
| | | | | |
+-------------------------------------+--------+----------------+-+----------------+
| Share capital | 11 | 64,569,430 | | 94,427,417 |
+-------------------------------------+--------+----------------+-+----------------+
| Reserves | 10 | 74,080,421 | | 27,499,727 |
+-------------------------------------+--------+----------------+-+----------------+
| Total net assets | | 138,649,851 | | 121,927,144 |
+-------------------------------------+--------+----------------+-+----------------+
| | | | | |
+-------------------------------------+--------+----------------+-+----------------+
| | | | | |
+-------------------------------------+--------+----------------+-+----------------+
| Net Asset Value per Ordinary Share | 12 | 2.0947 | | 1.2193 |
+-------------------------------------+--------+----------------+-+----------------+
The financial statements on pages 12 to 37 were approved at a meeting of the
Board of Directors held on
30 November 2009 and signed on its behalf by:
Director: Christopher Fish
Director: David Benway
The accompanying notes on pages 16 to 37 form an integral part of these
financial statements.
Consolidated Statement of Comprehensive Income
For the year ended 30 September 2009
+-------------------------------------+--------+----------------+-+----------------+
| | Notes |1 October 2008 | | 7 November |
| | | to | | 2007 |
| | | 30 September | | to |
| | | 2009 | | 30 September |
| | | | | 2008 |
+-------------------------------------+--------+----------------+-+----------------+
| | | US$ | | US$ |
+-------------------------------------+--------+----------------+-+----------------+
| Income | | | | |
+-------------------------------------+--------+----------------+-+----------------+
| Bank interest | | 6,916 | | 1,474,188 |
+-------------------------------------+--------+----------------+-+----------------+
| Loan interest | 3 | - | | 91,127 |
+-------------------------------------+--------+----------------+-+----------------+
| Dividend income | | 182,657 | | 85,792 |
+-------------------------------------+--------+----------------+-+----------------+
| Movement in net unrealised gains on | 6 | 57,456,161 | | 31,561,514 |
| investments | | | | |
+-------------------------------------+--------+----------------+-+----------------+
| Net realised gains on investments | 6 | 8,951,085 | | 4,078,090 |
+-------------------------------------+--------+----------------+-+----------------+
| Net foreign exchange losses | | (2,255) | | (6,657) |
+-------------------------------------+--------+----------------+-+----------------+
| Net investment income | | 66,594,564 | | 37,284,054 |
+-------------------------------------+--------+----------------+-+----------------+
| | | | | |
+-------------------------------------+--------+----------------+-+----------------+
| | | | | |
+-------------------------------------+--------+----------------+-+----------------+
| Expenses | | | | |
+-------------------------------------+--------+----------------+-+----------------+
| Investment Manager's fees | 3 | 1,781,540 | | 1,780,311 |
+-------------------------------------+--------+----------------+-+----------------+
| Performance allocation | 3 | 17,975,492 | | 6,874,932 |
+-------------------------------------+--------+----------------+-+----------------+
| Realised movement in value of GPCo | 3 | (1,576,076) | | - |
| invested PPU's redeemed during the | | | | |
| year/period | | | | |
+-------------------------------------+--------+----------------+-+----------------+
| Income allocation on B Redeemable | | 142,025 | | 36,358 |
| Preference Shares of GPCo | | | | |
+-------------------------------------+--------+----------------+-+----------------+
| Administrator's fees | 3 | 135,260 | | 153,703 |
+-------------------------------------+--------+----------------+-+----------------+
| Directors' fees and expenses | 4 | 170,048 | | 145,036 |
+-------------------------------------+--------+----------------+-+----------------+
| Auditor's remuneration | | 91,639 | | 68,009 |
+-------------------------------------+--------+----------------+-+----------------+
| Custodian's fees | 3 | 36,289 | | 98,789 |
+-------------------------------------+--------+----------------+-+----------------+
| Registrar's fees | 3 | 17,521 | | 14,588 |
+-------------------------------------+--------+----------------+-+----------------+
| NOMAD & Broker's fees | 3 | 80,992 | | 72,674 |
+-------------------------------------+--------+----------------+-+----------------+
| Prime Broker's commissions | 3 | 388,372 | | 93,714 |
+-------------------------------------+--------+----------------+-+----------------+
| D&O insurance | | 112,421 | | 107,922 |
+-------------------------------------+--------+----------------+-+----------------+
| Annual listing fees | | 11,669 | | 9,251 |
+-------------------------------------+--------+----------------+-+----------------+
| Legal and professional fees | | 323,005 | | 187,585 |
+-------------------------------------+--------+----------------+-+----------------+
| Transaction costs | | 155,859 | | - |
+-------------------------------------+--------+----------------+-+----------------+
| Marketing fees | | 71,435 | | 59,244 |
+-------------------------------------+--------+----------------+-+----------------+
| Other expenses | | 96,379 | | 82,211 |
+-------------------------------------+--------+----------------+-+----------------+
| | | | | |
+-------------------------------------+--------+----------------+-+----------------+
| Total expenses | | 20,013,870 | | 9,784,327 |
+-------------------------------------+--------+----------------+-+----------------+
| | | | | |
+-------------------------------------+--------+----------------+-+----------------+
| Return for the year/period | 10 | 46,580,694 | | 27,499,727 |
| attributable to Ordinary | | | | |
| Shareholders from operations | | | | |
+-------------------------------------+--------+----------------+-+----------------+
| | | | | |
+-------------------------------------+--------+----------------+-+----------------+
| Total comprehensive income for the | | 46,580,694 | | 27,499,727 |
| year/period | | | | |
+-------------------------------------+--------+----------------+-+----------------+
| | | | | |
+-------------------------------------+--------+----------------+-+----------------+
| Earnings per Ordinary Share (basic | 5 | 0.6467 | | 0.2750 |
| and diluted) | | | | |
+-------------------------------------+--------+----------------+-+----------------+
The results from the current year and prior period are derived from continuing
operations.
The accompanying notes on pages 16 to 37 form an integral part of these
financial statements.
Consolidated Statement of Changes in Equity
For the year ended 30 September 2009
+--------------------------+-------+-------------+--------------+-------------+--------------+
| | | 1 October 2008 to 30 September 2009 |
+--------------------------+-------+---------------------------------------------------------+
| |Notes | Revenue | Share | Treasury | Total |
| | | Reserve | Capital | Shares | |
+--------------------------+-------+-------------+--------------+-------------+--------------+
| | | US$ | US$ | US$ | US$ |
+--------------------------+-------+-------------+--------------+-------------+--------------+
| Balance brought forward | | 27,499,727 | 94,427,417 | - | 121,927,144 |
+--------------------------+-------+-------------+--------------+-------------+--------------+
| | | | | | |
+--------------------------+-------+-------------+--------------+-------------+--------------+
| Tender offer | 11 | - | (29,857,987) | - | (29,857,987) |
+--------------------------+-------+-------------+--------------+-------------+--------------+
| | | | | | |
+--------------------------+-------+-------------+--------------+-------------+--------------+
| Repurchase of Ordinary | 11 | - | 6,494,668 | (6,494,668) | - |
| Shares | | | | | |
| - held as Treasury | | | | | |
| Shares | | | | | |
+--------------------------+-------+-------------+--------------+-------------+--------------+
| | | | | | |
+--------------------------+-------+-------------+--------------+-------------+--------------+
| Cancellation of Ordinary | 11 | - | (6,494,668) | 6,494,668 | - |
| Shares - held as | | | | | |
| Treasury Shares | | | | | |
+--------------------------+-------+-------------+--------------+-------------+--------------+
| | | | | | |
+--------------------------+-------+-------------+--------------+-------------+--------------+
| Total comprehensive | 10 | 46,580,694 | - | - | 46,580,694 |
| income for the year | | | | | |
+--------------------------+-------+-------------+--------------+-------------+--------------+
| | | | | | |
+--------------------------+-------+-------------+--------------+-------------+--------------+
| Balance carried forward | | 74,080,421 | 64,569,430 | - | 138,649,851 |
+--------------------------+-------+-------------+--------------+-------------+--------------+
| | | | | | |
+--------------------------+-------+-------------+--------------+-------------+--------------+
For the period 7 November 2007 to 30 September 2008
+--------------------------+-------+-------------+-------------+------------+--------------+
| | | 7 November 2007 to 30 September 2008 |
+--------------------------+-------+-------------------------------------------------------+
| |Notes | Revenue | Share | Treasury | Total |
| | | Reserve | Capital | Shares | |
+--------------------------+-------+-------------+-------------+------------+--------------+
| | | US$ | US$ | US$ | US$ |
+--------------------------+-------+-------------+-------------+------------+--------------+
| | | | | | |
+--------------------------+-------+-------------+-------------+------------+--------------+
| Issue of Ordinary Shares | 11 | - | 100,000,000 | - | 100,000,000 |
+--------------------------+-------+-------------+-------------+------------+--------------+
| | | | | | |
+--------------------------+-------+-------------+-------------+------------+--------------+
| Issue costs on issuance | 11 | - | (5,572,583) | - | (5,572,583) |
| of Ordinary Shares | | | | | |
+--------------------------+-------+-------------+-------------+------------+--------------+
| | | | | | |
+--------------------------+-------+-------------+-------------+------------+--------------+
| Total comprehensive | 10 | 27,499,727 | - | - | 27,499,727 |
| income for the period | | | | | |
+--------------------------+-------+-------------+-------------+------------+--------------+
| | | | | | |
+--------------------------+-------+-------------+-------------+------------+--------------+
| Balance carried forward | | 27,499,727 | 94,427,417 | - | 121,927,144 |
+--------------------------+-------+-------------+-------------+------------+--------------+
| | | | | | |
+--------------------------+-------+-------------+-------------+------------+--------------+
Consolidated Statement of Cash Flows
For the year ended 30 September 2009
+------------------------------------+-------+----------------+-+----------------+
| |Notes |1 October 2008 | | 7 November |
| | | to | | 2007 |
| | | 30 September | | to |
| | | 2009 | | 30 September |
| | | | | 2008 |
+------------------------------------+-------+----------------+-+----------------+
| | | US$ | | US$ |
+------------------------------------+-------+----------------+-+----------------+
| | | | | |
+------------------------------------+-------+----------------+-+----------------+
| Cash flows used in operating | | | | |
| activities | | | | |
+------------------------------------+-------+----------------+-+----------------+
| Bank interest received | | 15,977 | | 1,465,127 |
+------------------------------------+-------+----------------+-+----------------+
| Loan interest received | | - | | 91,127 |
+------------------------------------+-------+----------------+-+----------------+
| Dividends received | | 182,657 | | 85,792 |
+------------------------------------+-------+----------------+-+----------------+
| Operating expenses paid | | (8,728,222) | | (2,821,043) |
+------------------------------------+-------+----------------+-+----------------+
| Amounts paid on purchases of | | (30,144,363) | | (53,709,485) |
| investments | | | | |
+------------------------------------+-------+----------------+-+----------------+
| Sales proceeds received from | | 34,772,855 | | 17,217,771 |
| disposal of investments | | | | |
+------------------------------------+-------+----------------+-+----------------+
| Net cash used in operating | | (3,901,096) | | (37,670,711) |
| activities | | | | |
+------------------------------------+-------+----------------+-+----------------+
| | | | | |
+------------------------------------+-------+----------------+-+----------------+
| | | | | |
+------------------------------------+-------+----------------+-+----------------+
| Cash flows from/(used in) | | | | |
| financing activities | | | | |
+------------------------------------+-------+----------------+-+----------------+
| Amounts received on Ordinary | | - | | 100,000,000 |
| Shares issued | | | | |
+------------------------------------+-------+----------------+-+----------------+
| Issue costs paid on issuance of | | - | | (5,572,583) |
| Ordinary Shares | | | | |
+------------------------------------+-------+----------------+-+----------------+
| Amounts received on B Redeemable | | - | | 100,000 |
| Preference Shares issued by GPCo | | | | |
+------------------------------------+-------+----------------+-+----------------+
| Amounts paid re Tender Offer | | (29,857,987) | | - |
+------------------------------------+-------+----------------+-+----------------+
| Net cash (used in)/from financing | | (29,857,987) | | 94,527,417 |
| activities | | | | |
+------------------------------------+-------+----------------+-+----------------+
| | | | | |
+------------------------------------+-------+----------------+-+----------------+
| Net (decrease)/increase in cash | | (33,759,083) | | 56,856,706 |
| and cash equivalents during the | | | | |
| year/period | | | | |
+------------------------------------+-------+----------------+-+----------------+
| | | | | |
+------------------------------------+-------+----------------+-+----------------+
| Cash and cash equivalents, start | | 56,850,049 | | - |
| of year/period | | | | |
+------------------------------------+-------+----------------+-+----------------+
| | | | | |
+------------------------------------+-------+----------------+-+----------------+
| Effect of exchange rate changes | | (2,255) | | (6,657) |
| during the year/period | | | | |
+------------------------------------+-------+----------------+-+----------------+
| Cash and cash equivalents, end of | 7 | 23,088,711 | | 56,850,049 |
| year/ period | | | | |
+------------------------------------+-------+----------------+-+----------------+
+------------------------------------+-------+----------------+-+----------------+
| Cash and cash equivalents comprise | | | | |
| the following amounts: | | | | |
+------------------------------------+-------+----------------+-+----------------+
| Bank deposits | | 23,088,891 | | 56,850,049 |
+------------------------------------+-------+----------------+-+----------------+
| Bank overdrafts | | (180) | | - |
+------------------------------------+-------+----------------+-+----------------+
| | | 23,088,711 | | 56,850,049 |
+------------------------------------+-------+----------------+-+----------------+
Notes to the Consolidated Financial Statements
For the year ended 30 September 2009
+------------------------------------------+-------------+--------------+----------+
| | | | |
+------------------------------------------+-------------+--------------+----------+
| | | | |
+------------------------------------------+-------------+--------------+----------+
1. The Company:
The Company is a Guernsey registered, closed-ended investment company. The
Company commenced business on 28 November 2007 when the Ordinary Shares of the
Company were admitted to trading on AIM. The registered office of the Company is
Suites 13 and 15, Sarnia House, Le Truchot, St Peter Port, Guernsey, GY1 4NA.
The Company is a Guernsey Registered Closed-ended Investment Scheme and is
subject to the Registered Collective Investment Scheme Rules 2008.
The Company's investment policy is to invest in companies whose operations at
the time of the Group's initial investment are principally in Greater China.
The underlying investments of the Group are held by the Limited Partnership
which was registered as a limited partnership in Guernsey under the Limited
Partnership (Guernsey) Law, 1995. The Company is the limited partner of the
Limited Partnership and the Company's subsidiary, GPCo, is the general partner
of the Limited Partnership.
GPCo was incorporated in Guernsey and is licensed under The Protection of
Investors (Bailiwick of Guernsey) Law 1987, as amended. GPCo's principal
activity is to manage the Limited Partnership which it does by employing the
services of Vision Capital Advisors under the Investment Management Agreement.
GPCo is responsible for the continuing fees of the Investment Manager.
The Company owns all of the issued A Ordinary Share capital of GPCo. The A
Ordinary Shares give the Company the sole control rights over GPCo.
Vision Capital Advisors owns all of the issued B Redeemable Preference Share
capital of GPCo. The B Redeemable Preference Shares give the Investment Manager
the sole economic rights to the performance allocation to which GPCo is entitled
under the terms of the Limited Partnership and the return on the US$100,000
capital invested by Vision Capital Advisors for the B Redeemable Preference
Shares.
Through its interest as a limited partner in the Limited Partnership, the
Company is entitled to a return on the amount invested in the Limited
Partnership to enable the Group to make investments.
The Company, the GPCo and the Limited Partnership together form an integrated
fund structure and consequently the Company has consolidated its interests in
GPCo and the Limited Partnership. The Investment Manager's holding in the GPCo
is the interest in B Redeemable Preference Shares issued by the GPCo.
2.Principal Accounting Policies:
The following accounting policies have been applied consistently in dealing with
items which are considered material in relation to the Group's financial
statements:
(a)Basis of Preparation:
(i) General
The financial statements give a true and fair view. They have been prepared in
accordance with International Financial Reporting Standards ("IFRS") issued by,
or adopted by, the International Accounting Standards Board (the "IASB"),
interpretations issued by the International Financial Reporting Interpretations
Committee and are in compliance with the Companies Guernsey Law, 2008 and the
Listing Rules of the UK Listing Authority.
The financial statements have been prepared under the historical cost convention
modified by the revaluation of investments at fair value.
(ii) Judgements and estimates
The preparation of financial statements in conformity with IFRS requires
management to make judgements, estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. The estimates and
associated assumptions are based on historical experience and other factors that
are considered to be relevant. Actual results could differ from such estimates.
The estimates and underlying assumptions are reviewed on an on-going basis.
Revisions to accounting estimates are recognised in the period in which the
estimate was 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.
The most critical judgements, apart from those involving estimates, that
management has made in the process of applying the Group's accounting policies
and that have the most significant effect on the amounts recognised in the
financial statements are the functional currency of the Company (see note
2(c)(i)) and the fair value of investments classified to be at fair value
through profit or loss (see note 2(f)(i)). The valuation methods/techniques used
by the Company in valuing financial instruments involve critical judgements to
be made and therefore the actual value of financial instruments could differ
significantly from the value disclosed in these financial statements.
(iii) IFRS
A number of new standards, amendments to standards and interpretations are not
yet effective for the year ended 30 September 2009, and have not been applied in
preparing these financial statements. None of these will have an effect on the
financial statements of the Group, except for:
* IFRS 8 - Operating segments which introduces the "management approach" to
segment reporting and it requires a change in the presentation and disclosure of
segment information based on the internal reports regularly reviewed by the
Group's Chief Operating Decision Maker in order to assess each segment's
performance and to allocate resources to them. IFRS 8 which becomes mandatory
for the Group's 2010 financial statements, is not expected to have a significant
impact on the financial statements as the Group's Board of Directors (the
"Board") is of the view that the Group is engaged in a single segment of
business, being investment in companies whose operations are principally in
Greater China and also the Board, as a whole, has been determined as
constituting the Chief Operating Decision Maker of the Group.
* Revised IAS 1 Presentation of Financial Statements (2007) introduces the term
total comprehensive income, which represents changes in equity during a period
other than those changes resulting from transactions with owners in their
capacity as owners. Total comprehensive income may be presented in either a
single statement of comprehensive income (effectively combining both the income
statement and all non-owner changes in equity in a single statement), or in an
income statement and a separate statement of comprehensive income. Revised IAS
1, which becomes mandatory for the Group's 2010 financial statements, has been
adopted early in these financial statements and has a significant impact on the
presentation of the financial statements.
* Amendments to IFRS 7 - Improving disclosures about financial instruments require
enhanced disclosures about fair value measurements and liquidity risk and these
amendments have been made to address application issues of IFRS 7 and provide
useful information to users. These amendments which become mandatory for the
Group's 2010 financial statements are expected to have an impact on the
financial instruments related disclosures in the financial statements.
(b)Basis of Consolidation:
The consolidated financial statements comprise the results of the Company, the
GPCo and the Limited Partnership and there are no non-controlling interests.
(c)Foreign Currency:
(i) Functional and Presentation Currency
These consolidated financial statements are presented in US Dollars. The
Directors consider the US Dollar to be the currency that most faithfully
represents the economic effects of the underlying transactions, events and
conditions.
(ii) Transactions and Balances
Foreign currency transactions of the Company, the Limited Partnership and the
GPCo are translated into the functional currency using the exchange rates
prevailing at the dates of the transactions. The Group's foreign exchange gains
and losses resulting from the settlement of such transactions and from the
translation at period-end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in the Consolidated Statement
of Comprehensive Income. Translation differences on non-monetary financial
assets and liabilities such as equities at fair value through profit or loss are
recognised in the Consolidated Statement of Comprehensive Income.
(d)Income:
Bank interest and loan interest are included in the financial statements on an
accruals basis. Dividend income is included in the financial statements when the
right to receive payment is established.
(e)Financial Instruments:
Financial assets and financial liabilities are recognised in the Consolidated
Statement of Financial Position when the Group becomes a party to the
contractual provisions of the instrument.
(i) Financial Assets
The classification of financial assets at initial recognition depends on the
purpose for which the financial assets were acquired and their characteristics.
The Group's financial assets are categorised as financial assets at fair value
through profit or loss. Unless otherwise indicated the carrying amounts of the
Group's financial assets approximate to their fair values. Gains and losses
arising from changes in the fair value of financial assets classified as fair
value through profit or loss are recognised in the Consolidated Statement of
Comprehensive Income.
A financial asset (in whole or in part) is derecognised either:
* when the Group has transferred substantially all the risk and rewards of
ownership;
*
* when it has not retained substantially all the risk and rewards and when it no longer has control over the asset or a portion of the asset; or when the contractual right to receive cash flow has expired.
(ii) Financial Liabilities
The classification of financial liabilities at initial recognition depends on
the purpose for which the financial liability was issued and its
characteristics.
All financial liabilities are initially recognised at fair value net of
transaction costs incurred. All purchases of financial liabilities are recorded
on trade date, being the date on which the Group becomes party to the
contractual requirements of the financial liability. Unless otherwise indicated
the carrying amounts of the Group's financial liabilities approximate to their
fair values.
Financial liabilities measured at amortised cost include trade payables and
other short-term monetary liabilities, which are initially recognised at fair
value and subsequently carried at amortised cost using the effective interest
rate method.
A financial liability (in whole or in part) is derecognised when the Group has
extinguished its contractual obligations, it expires or is cancelled. Any gain
or loss on derecognition is taken to the Consolidated Statement of Comprehensive
Income.
(f)Investments:
The Group's investments comprise of equities and warrants (for listed equities).
(i) Classification
Equities have been designated as fair value through profit or loss in accordance
with IAS 39 (Revised) "Financial Instruments: Recognition and Measurement".
Warrant investments meet the definition of "Derivatives" under IAS 39 and have
been designated as held for trading in accordance with IAS 39 (Revised)
"Financial Instruments: Recognition and Measurement". They are accounted for as
fair value through profit or loss.
Investments designated as fair value through profit or loss at inception are
those that are managed and their performance evaluated on a fair value basis in
accordance with the Group's documented investment strategy. The Group's policy
is for the Investment Manager and the Board of Directors to evaluate the
information about these investments on a fair value basis together with other
related financial information.
(ii) Measurement
Equities and warrants are initially recognised at fair value. Transaction costs
are expensed in the Consolidated Statement of Comprehensive Income. Subsequent
to initial recognition, equities and warrants are measured at fair value.
Realised gains and losses on disposal of investments, where the disposal
proceeds are higher/lower than the book cost of the investment are presented in
the Consolidated Statement of Comprehensive Income in the period in which they
arise. Unrealised gains and losses arising on the fair value of investments are
presented in the Consolidated Statement of Comprehensive Income in the period in
which they arise. Dividend income, if any, from equity investments at fair value
through profit or loss is recognised in the Consolidated Statement of
Comprehensive Income within dividend income when the Group's right to receive
payments is established.
For new investments made by the Group, the Company's valuation policy requires a
calculation of the discount of the purchase price to the current market price of
equivalent freely tradable public securities. This discount is then applied to
the closing bid for the equivalent freely tradable public securities, with a
minimum of a 20% discount used at the onset. This discount is then amortised to
zero over the period of time until the expected date of registration or the
Group is in a position to sell the securities under Rule 144: Selling Restricted
and Control Securities. The discount is not amortised below 10%, however, until
the security is able to be sold without restrictions.
Warrant values are calculated using the Black-Scholes models using the above
discount. However, this value is then subject to a further 50% discount of the
"time value".
Volatility estimates are those for similar companies, companies with operations
in Greater China that are listed on the OTCBB and have market caps between
US$100 million and US$1 billion. This volatility was 81% for the year ended 30
September 2009 (period ended 30 September 2008: 81%).
(iii) Recognition/derecognition
All regular way purchases and sales of investments are recognised on trade date
- the date on which the Group commits to purchase or sell the investment.
Investments are derecognised when the rights to receive cash flows from the
investments have expired or the Group has transferred substantially all risks
and rewards of ownership.
All financial assets are initially recognised at fair value.
Gains and losses on securities sold are determined on the basis of identified
cost, and are included in the Consolidated Statement of Comprehensive Income.
Unrealised gains and losses arising on revaluation are also included in the
Consolidated Statement of Comprehensive Income.
(iv) Fair value estimation
Quoted investments at fair value through profit or loss are valued at the bid
price on the relevant stock exchange, discounted, where necessary, to reflect
restrictions on resales.
Unquoted investments at fair value through profit or loss are valued in
accordance with valuation techniques that make maximum use of observable market
inputs such as interest rates and volatility.
Private warrants and options exercisable into common, ordinary or preferred
shares of a class which is listed on US, UK or other securities exchange
(including NASDAQ and the OTCBB), or traded on the Pink Sheets, AIM or the
Official List of the London Stock Exchange are valued using the Black-Scholes
model. Observable market inputs to the model such as interest rates and
volatility are used where possible. The time value of the Black-Scholes model is
discounted by 50% as a liquidity adjustment. The Company also holds options to
make additional investments in investee companies by predetermined dates,
generally within 1 year following the investment, on predetermined terms.
Exercise of these warrants is required in order for the underlying associated
warrants included in the package to become vested ("J warrants").The values of J
and associated warrants are calculated as follows: The Black-Scholes value is
calculated as above. This value is added to the stock price in the evaluation of
the J warrant in the Black-Scholes framework as described above. This value
represents the value of the package of warrants.
(g)Impairment of Financial Assets:
Financial assets are assessed at each reporting date to determine whether there
is any objective evidence that they are impaired. A financial asset is
considered to be impaired if objective evidence indicates that one or more
events have had a negative effect on the estimated future cash flows of that
asset.
An impaired loss in respect of a financial asset measured at amortised cost is
calculated as the difference between its carrying amount and the present value
of the estimated future cash flows discounted at the original effective interest
rate.
Individually significant financial assets are tested for impairment on an
individual basis. The remaining financial assets are assessed collectively in
groups that share similar credit risk characteristics.
All impairment losses are recognised in the Consolidated Statement of
Comprehensive Income.
An impairment loss is reversed if the reversal can be related objectively to an
event occurring after the impairment loss was recognised. The reversal is
recognised in the Consolidated Statement of Comprehensive Income.
(h)Expenses:
Expenses are accounted for on an accruals basis. All expenses of the Group are
borne by the Limited Partnership.
(i)Cash and Cash Equivalents:
Cash and cash equivalents are defined as cash in hand, demand deposits and
highly liquid investments readily convertible to known amounts of cash and
subject to insignificant risk of changes in value. For the purposes of the
Consolidated Statement of Cash Flows, cash and cash equivalents consist of cash
in hand, short-term deposits in bank and overdrafts.
(j) Segmental Reporting:
The Directors are of the opinion that the Company is engaged in a single segment
of business, being investment business. The Directors are of the opinion that
the Group is engaged in a single geographical segment, being the PRC as
predominantly the Group's financial instruments are securities of groups whose
principal activities are in China.
(k) Other Receivables and Other Payables:
Other receivables are stated at amortised cost less any provision for doubtful
debts. Other payables are stated at amortised cost.
(l) Treasury Shares:
Where the Company purchases its own Ordinary Shares, the consideration paid,
including any directly attributable incremental costs is deducted from equity
attributable to the Company's equity holders until the shares are cancelled,
reissued or disposed of. Where such Ordinary Shares are subsequently sold or
reissued, any consideration received, net of any directly attributable
incremental transaction costs, is included in equity attributable to the
Company's equity holders.
3. Related Parties & Material Contracts:
The Company is responsible for the continuing fees of GPCo, the Administrator,
the Custodian, the NOMAD & Broker, the Prime Broker and the Registrar in
accordance with the Limited Partnership, Administration, Custodian, Canaccord
Nominated Adviser and Broker, Prime Broker and Registrar agreements,
respectively.
The Investment Manager is a related party of the Group as a result of a number
of connections. Dr Randolph Cohen is a Director of the Company and is co-founder
and Senior Managing Director of the Investment Manager. Mr David Benway is a
Director of the Company and is also Director of Research and Investments for the
Investment Manager.
Limited Partnership Agreement
Pursuant to the provisions of the Limited Partnership Agreement dated 22
November 2007, GPCo's compensation consists of all expenses incurred in relation
to the constitution, administration and business of the Limited Partnership,
without limitation or exception.
The GPCo is responsible for the continuing fees of the Investment Manager in
accordance with the Investment Management Agreement.
Investment Management Agreement
Pursuant to the Investment Management Agreement, GPCo pays a management fee to
the Investment Manager of 0.5% of the final month-end NAV of the previous
quarter, paid quarterly in advance. For the first quarter following Admission,
the management fee was 0.5% of the net proceeds pro-rated on a time basis.
As at 30 September 2009 the management fee creditor was US$Nil (30 September
2008: US$Nil).
The Investment Manager is also entitled to a performance allocation, through its
interest in GPCo, in respect of a performance period only if two conditions are
met, namely (i) the performance hurdle test is met; and (ii) the High Watermark
is exceeded.
The performance hurdle test will be met in a performance period if the Adjusted
Closing NAV per Ordinary Share exceeds the Hurdle NAV per Ordinary Share at the
end of such period. The Hurdle NAV per Ordinary Share is the greater of (a) the
Opening NAV per Ordinary Share and (b) the High Watermark, increased over the
relevant performance period by a rate equal to 10% per annum.
The High Watermark will be exceeded if the Adjusted Closing NAV per Ordinary
Share at the end of the relevant performance period is higher than the High
Watermark.
The performance allocation is based on "NAV Increase per Ordinary Share" which
is the amount by which the Adjusted Closing NAV per Ordinary Share exceeds
either (i) the Opening NAV per Ordinary Share; or (ii) in the case where the
High Watermark exceeds the Hurdle NAV per Ordinary Share, the High Watermark.
The performance allocation is an amount equal to 20% of the NAV increase per
Ordinary Share multiplied by the time weighted average of the total number of
Ordinary Shares in issue for the relevant period. Vision Capital Advisors will
not be entitled to any such part of the performance allocation to which it would
otherwise be entitled if allocating such part of the performance allocation
would have caused the performance hurdle test or High Watermark test to not be
met.
The first performance period began on Admission and ended on 30 September 2008.
Each subsequent performance period is a period of one financial year.
The Investment Manager has agreed to treat a portion of its performance
allocation as invested each year. The portion of the performance allocation
which is represented by realised gains, less expenses, from investments will be
distributable in cash by the Limited Partnership to GPCo in arrears at the end
of each performance period (the "Cash Performance Allocation"). Any amount of
the performance allocation which is not represented by realised gains (or which
the Investment Manager via GPCo otherwise elects not to receive in cash as part
of the Cash Performance Allocation) will be treated as invested by GPCo at the
end of each performance period in Performance Partnership Units ("PPUs") in the
Limited Partnership. PPUs will accrue a preferred share of the profits and
losses of the Limited Partnership on the basis of fluctuations in the Market
Price of Ordinary Shares from the date of their allocation to GPCo until the
date PPUs are redeemed, such that GPCo's return on its PPUs will track the
return of an investor in Ordinary Shares over the same period (ignoring dealing
costs).
GPCo is entitled to receive a priority distribution from the Limited Partnership
equivalent to the Cash Performance Allocation and the return on the PPUs. GPCo's
entitlement to the Cash Performance Allocation and the return on the PPUs will
be payable to the Investment Manager as the owner of 100% of the B Redeemable
Preference Shares in GPCo.
At the end of each performance period, the Administrator will calculate the
proposed performance allocation and the split between the Cash Performance
Allocation payable and the amount which will be automatically treated as
invested PPUs (to be reviewed and agreed by the Board) and, if cash is
available, GPCo will pay a dividend on the non-voting B Redeemable Preference
Shares or permit certain of them to be redeemed to pay the Cash Performance
Allocation to the Investment Manager. If cash is not available, or Vision
Capital Advisors elects, the Cash Performance Allocation may be satisfied by the
issue of further PPUs to Vision Capital Advisors. For the financial year ended
30 September 2010, the performance allocation High Watermark is US$2.0947 per
Ordinary Share (30 September 2009: US$ 1.2193).
As at 30 September 2009 the Cash Performance Allocation creditor was
US$1,977,610 (30 September 2008: US$570,629) and the amount which will be
automatically treated as invested PPUs is US$15,997,882 (30 September 2008:
US$6,304,303).
On 26 May 2009 the Investment Manager redeemed the PPU's issued in relation to
the performance period ended 30 September 2008. At the date of this redemption
the PPU's were valued at US$4,728,227, which was a gain to the Group of
US$1,576,076. This gain is reflected in the Statement of Comprehensive Income.
Administration Agreement
Praxis Fund Services Limited has been appointed as Administrator to the Group
under the Administration Agreement dated 16 November 2007. The Administrator
provides day-to-day administration and secretarial services to the Group.
The Administration Agreement may be terminated by either party on not less than
180 days' written notice, or earlier upon certain breaches of the Administration
Agreement or the insolvency or receivership of either party or if the
Administrator ceases to be qualified to act as such.
Pursuant to the provisions of the Administration Agreement, Praxis Fund Services
Limited is entitled to receive the following administration fees from the Group:
* Launch - time based fee capped at GBP15,000;
* Accounting and NAV calculation - a fee based upon 0.10% of NAV subject to a
minimum of GBP4,500 per month;
* Company Secretarial & US Shareholder Reporting - time based fee; and
* GPCo - time based fee subject to a minimum of GBP10,000 per annum.
As at 30 September 2009 the administration fee creditor was US$18,849 (30
September 2008: US$15,744).
Registrar Agreement
Pursuant to the provisions of the Registrar Agreement, Capita Registrars
(Guernsey) Limited is entitled to an annual maintenance fee of GBP2 per
shareholder account, subject to an annual minimum of GBP5,000 per annum,
together with a per deal fee per shareholder transaction.
As at 30 September 2009 the registrar fee creditor was US$8,221 (30 September
2008: US$2,353).
Custodian Agreement
Jefferies & Company Inc. has been appointed as Custodian to the Group and in
that capacity has custody of many of the Groups' investments. In accordance with
U.S. securities laws, the assets of Jefferies' customers are required to be
segregated from Jefferies' proprietary assets.
As at 30 September 2009 the custodian fee creditor was US$Nil (30 September
2008: US$8,094).
Nominated Adviser & Broker Agreement
Pursuant to the provisions of Nominated Adviser and Broker Agreement, Fairfax
was paid a retainer of GBP50,000 per annum in respect of its ongoing services as
the Company's Nominated Adviser and Broker commencing on Admission. The
Nominated Adviser and Broker Agreement with Fairfax ceased with effect from 30
September 2009.
As at 30 September 2009 the fees due to Fairfax were US$23,354 (30 September
2008: US$Nil).
With effect from 1 October 2009 Canaccord Adams replaced Fairfax as Nominated
Adviser and Broker to the Company under a NOMAD and Broker agreement dated 1
October 2009 between the Company and Canaccord Adams (the "Canaccord NOMAD and
Broker Agreement"). The Canaccord NOMAD and Broker Agreement is on normal market
terms, and under those terms the Company has agreed, inter alia, to consult and
discuss with Canaccord Adams all of its announcements and statements and to
provide Canaccord Adams with any information which Canaccord Adams reasonably
requires to enable it to carry out its obligations as a Nominated Adviser and
Broker. The Canaccord NOMAD and Broker Agreement is terminable by either party
on 2 months written notice and in certain other circumstances.
Prime Broker Agreement
Jefferies & Company Inc. has been appointed as Prime Broker to the Limited
Partnership. The Limited Partnership pays the Prime Broker commissions and other
transaction fees (for the execution of purchases and sales of securities). These
fee are payable at the Prime Broker's prevailing rates.
As at 30 September 2009, the Limited Partnership had amounts due to the Prime
Broker of US$4,331 (30 September 2008: US$Nil).
Transactions with the Master Fund
On 10 December 2008 the Limited Partnership sold all the shares of common stock
held by the Group in two shell companies listed on the Over-the-Counter Bulletin
Board, City Language Exchange Incorporated ("CLGX") and First Transaction
Management Incorporated ("FMNG") (together the "Shell Companies") to the Master
Fund. This transaction was carried out on an arms length basis and the total
sale price paid by the Master Fund was US$814,363 which is equal to the price
paid by the Limited Partnership for the investments together with the expenses
incurred on making such investments, such as due diligence and legal fees.
Co-investments with the Master Fund
As at 30 September 2009 the Group held investments in the five underlying
investment companies noted below, which the Master Fund also held an interest
in:
* Astrata Group Inc
* China Integrated Energy Inc
* China Information Technology Inc
* Jingwei International Limited
* Wuhan General Group China Inc
The Limited Partnership, collectively with the Master Fund, does not hold an
aggregated controlling interest in any of the above co-investments.
Directors Interests
As at 30 September 2009 the interests in Ordinary Shares of the Company held by
the Directors who held office during the year, and their families, are set out
below:
+---------------------------------------+-------------------+--+-------------------+
| |30 September 2009 | |30 September 2008 |
+---------------------------------------+-------------------+--+-------------------+
| | No. of Ordinary | | No. of Ordinary |
| | Shares | | Shares |
+---------------------------------------+-------------------+--+-------------------+
| Christopher Fish | - | | - |
| (Chairman) | | | |
+---------------------------------------+-------------------+--+-------------------+
| Dr Randolph Cohen* | 7,850,000 | | 7,500,000 |
+---------------------------------------+-------------------+--+-------------------+
| David Benway | - | | - |
+---------------------------------------+-------------------+--+-------------------+
| Ruiping Wang | - | | - |
+---------------------------------------+-------------------+--+-------------------+
| Dr Christopher Polk | - | | - |
+---------------------------------------+-------------------+--+-------------------+
During the year Vision Capital Advisors' acquired an additional 350,000 Ordinary
Shares in the Company.
*Dr Cohen is interested in 7,850,000 or 11.86% (30 September 2008: 7,500,000 or
7.5%) Ordinary Shares in the Company due to his ownership of a proportion of the
economic rights in Vision Capital Advisors' Ordinary Shares in the Company.
There were no changes in the interests of the Directors prior to the date of
this report.
Dr Cohen has an indirect interest through Vision Capital Advisors' holdings of B
Redeemable Preference Shares in the GPCo.
Other than Dr Cohen, no Director and no connected person of any Director has an
interest in the Ordinary Shares of the Company which, is known to, (or could
with reasonable diligence be ascertained by) the Directors, whether held
directly or through a third party.
Additionally, as at 30 September 2009 Jonathan Shane and Carl Kleidman,
employees of Vision Capital Advisors, held a collective 535,000 (30 September
2008: 535,000) Ordinary Shares in the Company, that carry certain restrictions.
4. Directors' Fees and Expenses:
Each of the Directors has entered into an agreement with the Company providing
for them to act as a non-executive Director of the Company. Their annual fees,
excluding all reasonable expenses incurred in the course of their duties which
will be reimbursed by the Company are as follows:
+---------------------------------------+------------------+--+------------------+
| | 30 | | 30 |
| | September 2009 | | September 2008 |
+---------------------------------------+------------------+--+------------------+
| | Annual Fee | | Annual Fee |
+---------------------------------------+------------------+--+------------------+
| | US$ | | US$ |
+---------------------------------------+------------------+--+------------------+
| Christopher Fish (Chairman) | 70,000 | | 70,000 |
+---------------------------------------+------------------+--+------------------+
| Dr Randolph Cohen | - | | - |
+---------------------------------------+------------------+--+------------------+
| David Benway | - | | - |
+---------------------------------------+------------------+--+------------------+
| Ruiping Wang | 50,000 | | 50,000 |
+---------------------------------------+------------------+--+------------------+
| Dr Christopher Polk | 50,000 | | 50,000 |
+---------------------------------------+------------------+--+------------------+
Dr Cohen and Mr Benway are not entitled to any Directors' fees for the year. As
at 30 September 2009, the Directors' fees creditor was US$12,500 (30 September
2008: US$Nil).
5. Earnings per Ordinary Share:
Earnings per Ordinary Share is based on the return for the year of US$46,580,694
(period ended 30 September 2008: US$27,499,727) and on a weighted average of
72,025,346 (period ended 30 September 2008: 100,000,000) Ordinary Shares in
issue.
6. Investments:
+-----------------------------------------+------------------+--+------------------+
| Loans: | 1 October 2008 | | 7 November 2007 |
| | to | | to |
| | 30 September | | 30 September |
| | 2009 | | 2008 |
+-----------------------------------------+------------------+--+------------------+
| | US$ | | US$ |
+-----------------------------------------+------------------+--+------------------+
| | | | |
+-----------------------------------------+------------------+--+------------------+
| Opening fair value | - | | - |
| | | | |
+-----------------------------------------+------------------+--+------------------+
| Purchases | - | | 6,500,000 |
+-----------------------------------------+------------------+--+------------------+
| Sales - proceeds | - | | (6,500,000) |
+-----------------------------------------+------------------+--+------------------+
| Closing fair value | - | | - |
| at 30 September | | | |
+-----------------------------------------+------------------+--+------------------+
| | | | |
+-----------------------------------------+------------------+--+------------------+
| Closing book cost | - | | - |
| at 30 September | | | |
+-----------------------------------------+------------------+--+------------------+
| Closing net | - | | - |
| unrealised gain | | | |
+-----------------------------------------+------------------+--+------------------+
| Closing fair value | - | | - |
| at 30 September | | | |
+-----------------------------------------+------------------+--+------------------+
+------------------------------------------+------------------+--+------------------+
| Fair Value | 1 October 2008 | | 7 November 2007 |
| Through | to | | to |
| Profit or | 30 September | | 30 September |
| Loss | 2009 | | 2008 |
| Investments: | | | |
+------------------------------------------+------------------+--+------------------+
| | US$ | | US$ |
+------------------------------------------+------------------+--+------------------+
| Listed | 80,184,124 | | 22,285,280 |
| equity | | | |
| securities | | | |
| (freely | | | |
| tradeable) | | | |
+------------------------------------------+------------------+--+------------------+
| Listed | 17,201,453 | | 34,509,228 |
| equity | | | |
| securities | | | |
| (restricted) | | | |
+------------------------------------------+------------------+--+------------------+
| | 97,385,577 | | 56,794,508 |
+------------------------------------------+------------------+--+------------------+
| | | | |
+------------------------------------------+------------------+--+------------------+
| Opening fair value | 56,794,508 | | - |
+------------------------------------------+------------------+--+------------------+
| Purchases | 30,144,363 | | 47,202,306 |
+------------------------------------------+------------------+--+------------------+
| Sales - proceeds | (35,141,651) | | (10,717,771) |
+------------------------------------------+------------------+--+------------------+
| Sales - realised | 8,783,085 | | 4,078,090 |
| gains on disposals | | | |
+------------------------------------------+------------------+--+------------------+
| Movement in net | 36,805,272 | | 16,231,883 |
| unrealised gains | | | |
+------------------------------------------+------------------+--+------------------+
| Closing fair value | 97,385,577 | | 56,794,508 |
| at 30 September | | | |
+------------------------------------------+------------------+--+------------------+
| | | | |
+------------------------------------------+------------------+--+------------------+
| Closing book cost | 44,348,422 | | 40,562,625 |
| at 30 September | | | |
+------------------------------------------+------------------+--+------------------+
| Closing net | 53,037,155 | | 16,231,883 |
| unrealised gains | | | |
+------------------------------------------+------------------+--+------------------+
| Closing fair value | 97,385,577 | | 56,794,508 |
| at 30 September | | | |
+------------------------------------------+------------------+--+------------------+
+-----------------------------------------+------------------+--+------------------+
| Held for Trading | 1 October 2008 | | 7 November 2007 |
| Investments: | to | | to |
| | 30 September | | 30 September |
| | 2009 | | 2008 |
+-----------------------------------------+------------------+--+------------------+
| | US$ | | US$ |
+-----------------------------------------+------------------+--+------------------+
| Unlisted | 35,987,698 | | 15,336,809 |
| investments - | | | |
| warrants | | | |
+-----------------------------------------+------------------+--+------------------+
| | | | |
+-----------------------------------------+------------------+--+------------------+
| Opening fair value | 15,336,809 | | - |
| | | | |
+-----------------------------------------+------------------+--+------------------+
| Purchases | - | | 7,178 |
+-----------------------------------------+------------------+--+------------------+
| Sales - proceeds | (168,000) | | - |
+-----------------------------------------+------------------+--+------------------+
| Sales - realised | 168,000 | | - |
| gains on disposals | | | |
+-----------------------------------------+------------------+--+------------------+
| Movement in net | 20,650,889 | | 15,329,631 |
| unrealised gains | | | |
+-----------------------------------------+------------------+--+------------------+
| Closing fair value | 35,987,698 | | 15,336,809 |
| at 30 September | | | |
+-----------------------------------------+------------------+--+------------------+
| | | | |
+-----------------------------------------+------------------+--+------------------+
| Closing book cost | 7,178 | | 7,178 |
| at 30 September | | | |
+-----------------------------------------+------------------+--+------------------+
| Closing net | 35,980,520 | | 15,329,631 |
| unrealised gains | | | |
+-----------------------------------------+------------------+--+------------------+
| Closing fair value at 30 September | 35,987,698 | | 15,336,809 |
+-----------------------------------------+------------------+--+------------------+
+------------------------------------------+------------------+--+------------------+
| Total Investments: | 1 October 2008 | | 7 November 2007 |
| | to | | to |
| | 30 September | | 30 September |
| | 2009 | | 2008 |
+------------------------------------------+------------------+--+------------------+
| | US$ | | US$ |
+------------------------------------------+------------------+--+------------------+
| Listed | 80,184,124 | | 22,285,280 |
| equity | | | |
| securities | | | |
| (freely | | | |
| tradeable) | | | |
+------------------------------------------+------------------+--+------------------+
| Listed | 17,201,453 | | 34,509,228 |
| equity | | | |
| securities | | | |
| (restricted) | | | |
+------------------------------------------+------------------+--+------------------+
| Warrants | 35,987,698 | | 15,336,809 |
+------------------------------------------+------------------+--+------------------+
| | 133,373,275 | | 72,131,317 |
+------------------------------------------+------------------+--+------------------+
| | | | |
+------------------------------------------+------------------+--+------------------+
| Opening fair value | 72,131,317 | | - |
+------------------------------------------+------------------+--+------------------+
| Purchases | 30,144,363 | | 53,709,484 |
+------------------------------------------+------------------+--+------------------+
| Sales - proceeds | (35,309,651) | | (17,217,771) |
+------------------------------------------+------------------+--+------------------+
| Sales - realised | 8,951,085 | | 4,078,090 |
| gains on disposals | | | |
+------------------------------------------+------------------+--+------------------+
| Movement in net | 57,456,161 | | 31,561,514 |
| unrealised gains | | | |
+------------------------------------------+------------------+--+------------------+
| Closing fair value | 133,373,275 | | 72,131,317 |
| at 30 September | | | |
+------------------------------------------+------------------+--+------------------+
| | | | |
+------------------------------------------+------------------+--+------------------+
| Closing book cost | 44,355,600 | | 40,569,803 |
| at 30 September | | | |
+------------------------------------------+------------------+--+------------------+
| Closing net | 89,017,675 | | 31,561,514 |
| unrealised gains | | | |
+------------------------------------------+------------------+--+------------------+
| Closing fair value at 30 September | 133,373,275 | | 72,131,317 |
+------------------------------------------+------------------+--+------------------+
7. Cash and Cash Equivalents:
+-----------------------------------------+------------------+--+------------------+
| | 30 September | | 30 September |
| | 2009 | | 2008 |
+-----------------------------------------+------------------+--+------------------+
| | US$ | | US$ |
+-----------------------------------------+------------------+--+------------------+
| Cash at bank | 23,088,891 | | 56,850,049 |
+-----------------------------------------+------------------+--+------------------+
| Bank overdraft | (180) | | - |
+-----------------------------------------+------------------+--+------------------+
| | 23,088,711 | | 56,850,049 |
+-----------------------------------------+------------------+--+------------------+
| | | | |
+-----------------------------------------+------------------+--+------------------+
8. Other Receivables:
+-----------------------------------------+------------------+--+------------------+
| | 30 September | | 30 September |
| | 2009 | | 2008 |
+-----------------------------------------+------------------+--+------------------+
| | US$ | | US$ |
+-----------------------------------------+------------------+--+------------------+
| Unsettled | 536,796 | | - |
| investment sales | | | |
+-----------------------------------------+------------------+--+------------------+
| Bank interest | - | | 9,061 |
| receivable | | | |
+-----------------------------------------+------------------+--+------------------+
| Prepayments | 44,359 | | 48,182 |
+-----------------------------------------+------------------+--+------------------+
| | 581,155 | | 57,243 |
+-----------------------------------------+------------------+--+------------------+
The Directors consider that the carrying amount of other receivables
approximates fair value.
9. Other Payables:
+-----------------------------------------+------------------+--+------------------+
| | 30 September | | 30 September |
| | 2009 | | 2008 |
+-----------------------------------------+------------------+--+------------------+
| | US$ | | US$ |
+-----------------------------------------+------------------+--+------------------+
| Performance | 17,975,492 | | 6,874,932 |
| allocation | | | |
+-----------------------------------------+------------------+--+------------------+
| Income allocation on B Redeemable | 142,189 | | 36,358 |
| Preference Shares | | | |
+-----------------------------------------+------------------+--+------------------+
| Administrator's | 18,849 | | 15,744 |
| fee | | | |
+-----------------------------------------+------------------+--+------------------+
| Custodian's fee | - | | 8,094 |
+-----------------------------------------+------------------+--+------------------+
| Registrar's fee | 8,221 | | 2,353 |
+-----------------------------------------+------------------+--+------------------+
| NOMAD & Broker's | 23,354 | | - |
| fees | | | |
+-----------------------------------------+------------------+--+------------------+
| Prime Broker fees | 4,331 | | - |
+-----------------------------------------+------------------+--+------------------+
| Legal & | 15,868 | | 4,743 |
| professional fees | | | |
+-----------------------------------------+------------------+--+------------------+
| Directors fees | 12,500 | | - |
+-----------------------------------------+------------------+--+------------------+
| Audit fee | 73,573 | | 62,119 |
+-----------------------------------------+------------------+--+------------------+
| Travel & marketing | 8,491 | | - |
+-----------------------------------------+------------------+--+------------------+
| Sundry payables | 10,422 | | 7,122 |
+-----------------------------------------+------------------+--+------------------+
| | 18,293,290 | | 7,011,465 |
+-----------------------------------------+------------------+--+------------------+
The Directors consider that the carrying amount of other payables approximates
fair value.
10. Revenue reserve:
+-----------------------------------------+------------------+--+------------------+
| | 1 October 2008 | | 7 November 2007 |
| | to | | to |
| | 30 September | | 30 September |
| | 2009 | | 2008 |
+-----------------------------------------+------------------+--+------------------+
| | US$ | | US$ |
+-----------------------------------------+------------------+--+------------------+
| Opening revenue | 27,499,727 | | - |
| reserve | | | |
+-----------------------------------------+------------------+--+------------------+
| Total comprehensive | 46,580,694 | | 27,499,727 |
| income for the | | | |
| year/period | | | |
+-----------------------------------------+------------------+--+------------------+
| Closing revenue reserve as at 30 | 74,080,421 | | 27,499,727 |
| September | | | |
+-----------------------------------------+------------------+--+------------------+
11. Share Capital:
+-------------------------------------------------------+------+------------------+
| | | 30 September |
| | | 2009 |
| | | & |
| | | 30 September |
| | | 2008 |
+-------------------------------------------------------+------+------------------+
| Authorised Share Capital | | US$ |
+-------------------------------------------------------+------+------------------+
| Unlimited shares of no par | | - |
| value that may be | | |
| issued as Ordinary Shares | | |
+-------------------------------------------------------+------+------------------+
+-----------------------------------------+------------------+--+------------------+
| | 1 October 2008 | | 7 November 2007 |
| | to | | to |
| | 30 September | | 30 September |
| | 2009 | | 2008 |
+-----------------------------------------+------------------+--+------------------+
| Allotted, Issued and | No. | | No. |
| Fully Paid | | | |
+-----------------------------------------+------------------+--+------------------+
| Brought forward | 100,000,000 | | - |
+-----------------------------------------+------------------+--+------------------+
| 100,000,000 Ordinary | - | | 100,000,000 |
| Shares issued for | | | |
| US$1 each | | | |
+-----------------------------------------+------------------+--+------------------+
| Tender Offer | (33,810,426) | | - |
+-----------------------------------------+------------------+--+------------------+
| Repurchased Ordinary | 7,354,397 | | - |
| Shares held in | | | |
| treasury repurchased | | | |
+-----------------------------------------+------------------+--+------------------+
| Ordinary Shares held | (7,354,397) | | - |
| in treasury cancelled | | | |
+-----------------------------------------+------------------+--+------------------+
| | 66,189,574 | | 100,000,000 |
+-----------------------------------------+------------------+--+------------------+
| | | | |
+-----------------------------------------+------------------+--+------------------+
| Share Capital | US$ | | US$ |
+-----------------------------------------+------------------+--+------------------+
| Share capital brought | 94,427,417 | | - |
| forward | | | |
+-----------------------------------------+------------------+--+------------------+
| Share capital on | - | | 100,000,000 |
| issues during the | | | |
| period | | | |
+-----------------------------------------+------------------+--+------------------+
| Issue costs on | - | | (5,572,583) |
| issuance of Ordinary | | | |
| Shares | | | |
+-----------------------------------------+------------------+--+------------------+
| Share capital on | (29,857,987) | | - |
| Tender Offer during | | | |
| the year | | | |
+-----------------------------------------+------------------+--+------------------+
| Share capital on | 6,494,668 | | - |
| repurchase of | | | |
| Ordinary Shares held | | | |
| in treasury of during | | | |
| the year | | | |
+-----------------------------------------+------------------+--+------------------+
| Share capital on | (6,494,668) | | - |
| cancellation Ordinary | | | |
| Shares held in | | | |
| treasury of during | | | |
| the year | | | |
+-----------------------------------------+------------------+--+------------------+
| Share capital carried forward | 64,569,430 | | 94,427,417 |
+-----------------------------------------+------------------+--+------------------+
On 2 December 2008, the Company's Shareholders approved the Tender Offer
pursuant to which the Company, through Fairfax, acquired 33,810,426 Ordinary
Shares from Shareholders for an aggregate price (including costs) of US$30
million. Following the Tender Offer, 26,456,029 Ordinary Shares were cancelled
and the issued Ordinary Share capital of the Company became 73,543,971 Ordinary
Shares, of which 7,354,397 were held in treasury. On 25 September 2009 the
7,354,397 Ordinary Shares previously held in treasury were cancelled. Following
the cancellation, as at 30 September 2009, the issued Ordinary Shares of the
Company was 66,189,574.
The repurchase of Ordinary Shares by the Company was funded from the Company's
cash resources.
+-----------------------------------------+------------------+--+------------------+
| | 1 October 2008 | | 7 November 2007 |
| | to | | to |
| | 30 September | | 30 September |
| | 2009 | | 2008 |
+-----------------------------------------+------------------+--+------------------+
| Treasury Shares | US$ | | US$ |
+-----------------------------------------+------------------+--+------------------+
| Repurchase of | 6,494,668 | | - |
| 7,354,397 Treasury | | | |
| Shares | | | |
+-----------------------------------------+------------------+--+------------------+
| Cancellation of | (6,494,668) | | - |
| 7,354,397 Treasury | | | |
| Shares | | | |
+-----------------------------------------+------------------+--+------------------+
| | - | | - |
+-----------------------------------------+------------------+--+------------------+
The Company's authorised capital structure comprises an unlimited number of
shares of no par value.
Ordinary Shareholders have the following rights:
(i)Dividends
During the period Shareholders (other than the Company itself where it holds its
own Ordinary Shares as treasury Ordinary Shares) are entitled to receive, and
participate in, any dividends or other distributions out of the profit of the
Company available for dividend and resolved to be distributed in respect of any
accounting period or other income or right to participate therein.
(ii)Winding up
On a winding up, Shareholders (other than the Company itself where it holds its
own Ordinary Shares as treasury Ordinary Shares) shall be entitled to the
surplus assets remaining after payment of all the creditors of the Company.
(iii)Voting
Shareholders (other than the Company itself where it holds its own Ordinary
Shares as treasury Ordinary Shares) shall have the right to receive notice of
and to attend and vote at general meetings of the Company and each Shareholder
being present in person or by proxy or by a duly authorised representative (if a
corporation) at a meeting shall upon a show of hands have one vote and upon a
poll each such holder present in person or by proxy or by a duly authorised
representative (if a corporation) shall have one vote in respect of every
Ordinary Share held by him.
B Redeemable Preference Share
Proceeds from the issue of B Redeemable Preference Shares in the GPCo are
classified as debt in these financial statements in accordance with IFRS and
have the following special rights:
a)At any time the B Redeemable Preference Shareholders of the GPCo shall be
entitled on liquidation of the Company to a sum equal to any undistributed
vested performance allocation, due from the Limited Partnership, plus any
amounts due to the Company under the Limited Partnership Agreement allocated
between such Shareholders pro rata to the number of B Redeemable Preference
Shares they hold at the date of distribution in priority to any other
distributions on the Company's A Ordinary Shares.
b)Subject to the provisions of the Law, on each annual NAV publication date, of
the Limited Partnership, an amount equal to any undistributed vested performance
allocation, in the Limited Partnership, shall become distributable to the B
Redeemable Preference Shareholders of the GPCo.
c)Should the Company be unable to pay a dividend equal to any undistributed
vested performance allocation, due from the Limited Partnership, in accordance
with (b) above, the Company shall pay a maximum dividend it is permitted to pay
to the B Redeemable Preference Shareholders of the GPCo and the remainder of the
undistributed vested performance allocation shall be dealt with in accordance
with (d) below.
d)In relation to any remaining undistributed vested performance allocation, any
B Redeemable Preference Shareholders of the GPCo may deliver an election in
writing to the GPCo (the "Election") requesting that the GPCo redeems one of the
B Redeemable Preference Shares held by the B Redeemable Preference Shareholder
for a cash payment representing the Shareholder's share of the greater of (i)
the undistributed vested performance allocation at that time and (ii) the
maximum amount payable by the GPCo under the Law, such share to be calculated on
the basis of the proportion calculated by dividing the number of B Redeemable
Preference Shares held by such a Shareholder prior to any redemptions by that
Shareholder pursuant under this section by the number of B Redeemable Preference
Shares in issue prior to any redemptions pursuant under this clause by any
Shareholder. Subject to the provisions of the Law, the GPCo shall then redeem
such B Redeemable Preference Shares accordingly within two business days of
receipt of the election and shall within one month thereafter give notice in
writing of such redemption to HM Greffier.
e)The B Redeemable Preference Shares of the GPCo shall have no voting rights,
save where any undistributed vested performance allocation remains outstanding
for more than 5 business days when each B Redeemable Preference Share in the
GPCo shall carry 10 votes at any general meeting of the GPCo.
f)The B Redeemable Preference Shareholders of the GPCo have the sole economic
rights to the performance allocation to which the Company is entitled under the
terms of the limited partnership agreement and the return on the US$100,000
capital invested by the B Redeemable Preference Shareholders of the GPCo for the
B Redeemable Preference Shares in the GPCo.
12. Net Asset Value per Ordinary Share:
The net asset value per Ordinary Share is based on the net assets attributable
to Ordinary Shareholders of US$138,649,851 (30 September 2008: US$121,927,144)
and on the Ordinary Shares at the year end in issue of 66,189,574 (30 September
2008: 100,000,000).
13. Financial Instruments:
(a) Significant accounting policies:
Details of the significant accounting policies and methods adopted, including
the criteria for recognition, the basis of measurement and the basis on which
income and expenses are recognised, in respect of its financial assets and
financial liabilities are disclosed in note 2 to these financial statements.
(b) Categories of financial instruments:
Financial instruments comprise equities, warrants, cash and cash equivalents,
receivables and payables. The warrants are derivative instruments and have been
classified as held for trading and are accounted for as fair value through
profit or loss. All other financial instruments have been classified as fair
value through profit or loss. A financial asset is classified as fair value
through profit or loss if it is classified as held for trading or is designated
as such upon initial recognition. Financial assets are designated at fair value
through profit or loss if the Group manages such investments and makes purchase
and sale decisions based on their fair value in accordance with the Group's
documented risk management or investment strategy. Upon initial recognition,
attributable transaction costs are recognised in the Consolidated Statement of
Comprehensive Income. Financial assets at fair value through profit or loss are
measured at fair value, and changes therein are recognised in the Consolidated
Statement of Comprehensive Income.
+-----------------------------+--------------+---------------+-------------+--------------+
| | 1 October 2008 | 7 November 2007 |
| | to | to |
| | 30 September 2009 | 30 September 2008 |
+-----------------------------+------------------------------+----------------------------+
| | Fair | Percentage of | Fair Value | Percentage |
| | Value | net assets | | of net |
| | | attributable | | assets |
| | | to holders of | | attributable |
| | | Ordinary | | to holders |
| | | Shares | | of Ordinary |
| | | | | Shares |
+-----------------------------+--------------+---------------+-------------+--------------+
| | | | | |
+-----------------------------+--------------+---------------+-------------+--------------+
| Assets | US$ | % | US$ | % |
+-----------------------------+--------------+---------------+-------------+--------------+
| Financial assets at fair | | | | |
| value through profit or | | | | |
| loss: | | | | |
+-----------------------------+--------------+---------------+-------------+--------------+
| Listed equity securities | | 57.83 | | 18.28 |
| (freely tradeable) | 80,184,124 | | 22,285,280 | |
+-----------------------------+--------------+---------------+-------------+--------------+
| Listed equity securities | | 12.41 | | 28.30 |
| (restricted) | 17,201,453 | | 34,509,228 | |
+-----------------------------+--------------+---------------+-------------+--------------+
| Warrants | 35,987,698 | 25.95 | 15,336,809 | 12.58 |
+-----------------------------+--------------+---------------+-------------+--------------+
| | 133,373,275 | 96.19 | 72,131,317 | 59.16 |
+-----------------------------+--------------+---------------+-------------+--------------+
| | | | | |
+-----------------------------+--------------+---------------+-------------+--------------+
| Cash and cash equivalents | 23,088,891 | 16.66 | 56,850,049 | 46.62 |
+-----------------------------+--------------+---------------+-------------+--------------+
| Other receivables | 581,155 | 0.42 | 57,243 | 0.05 |
+-----------------------------+--------------+---------------+-------------+--------------+
| | | | | |
+-----------------------------+--------------+---------------+-------------+--------------+
| | 157,043,321 | 113.27 | 129,038,609 | 105.83 |
+-----------------------------+--------------+---------------+-------------+--------------+
| Liabilities | | | | |
+-----------------------------+--------------+---------------+-------------+--------------+
| Bank overdraft | (180) | - | - | - |
+-----------------------------+--------------+---------------+-------------+--------------+
| Other payables | (18,293,290) | (13.20) | (7,011,465) | (5.75) |
+-----------------------------+--------------+---------------+-------------+--------------+
| | | | | |
+-----------------------------+--------------+---------------+-------------+--------------+
| | (18,293,470) | (13.20) | (7,011,465) | (5.75) |
+-----------------------------+--------------+---------------+-------------+--------------+
| | | | | |
+-----------------------------+--------------+---------------+-------------+--------------+
| B Redeemable Participating | | | | |
| Shares of GPCo | (100,000) | (0.07) | (100,000) | (0.08) |
+-----------------------------+--------------+---------------+-------------+--------------+
| | | | | |
+-----------------------------+--------------+---------------+-------------+--------------+
| | (18,393,470) | (13.27) | (7,111,465) | (5.83) |
+-----------------------------+--------------+---------------+-------------+--------------+
(c)Net gains and losses on financial assets:
+--------------------------------------------------+-------------+------------+-------------+------------+
| | 1 October 2008 | 7 November 2007 |
| | to | to |
| | 30 September 2009 | 30 September 2008 |
+--------------------------------------------------+--------------------------+--------------------------+
| |Movement in | Net |Movement in | Net |
| | net | realised | net | realised |
| | unrealised | gains on | unrealised | gains on |
| | gains | disposals | gains | disposals |
+--------------------------------------------------+-------------+------------+-------------+------------+
| | US$ | US$ | US$ | US$ |
+--------------------------------------------------+-------------+------------+-------------+------------+
| Financial | | | | |
| assets at | | | | |
| fair | | | | |
| value | | | | |
| through | | | | |
| profit or | | | | |
| loss: | | | | |
+--------------------------------------------------+-------------+------------+-------------+------------+
| | 30,311,609 | 4,849,743 | 10,324,093 | |
| Listed | | | | 4,078,090 |
| equity | | | | |
| securities | | | | |
| (freely | | | | |
| tradeable) | | | | |
+--------------------------------------------------+-------------+------------+-------------+------------+
| | 6,493,663 | 3,933,342 | 5,907,790 | - |
| Listed | | | | |
| equity | | | | |
| securities | | | | |
| (restricted) | | | | |
+--------------------------------------------------+-------------+------------+-------------+------------+
| | 20,650,889 | 168,000 | 15,329,631 | - |
| Warrants | | | | |
+--------------------------------------------------+-------------+------------+-------------+------------+
| | 57,456,161 | 8,951,085 | 31,561,514 | 4,078,090 |
+--------------------------------------------------+-------------+------------+-------------+------------+
(d) Derivatives:
The following table details the Company's investments in derivative contracts,
by maturity, outstanding as at 30 September 2009.
Warrants
+-------------------------------------------+-----------------+--+------------------+
| | 30 September | | 30 September |
| | 2009 | | 2008 |
+-------------------------------------------+-----------------+--+------------------+
| Maturity | Fair Value | | Fair Value |
+-------------------------------------------+-----------------+--+------------------+
| | US$ | | US$ |
+-------------------------------------------+-----------------+--+------------------+
| 2-3 | - | | 164,104 |
| years | | | |
+-------------------------------------------+-----------------+--+------------------+
| 3-4 | 31,264,331 | | |
| years | | | |
+-------------------------------------------+-----------------+--+------------------+
| 4-5 | 3,618,374 | | 14,781,076 |
| years | | | |
+-------------------------------------------+-----------------+--+------------------+
| 5-6 | 1,104,993 | | |
| years | | | |
+-------------------------------------------+-----------------+--+------------------+
| 6-7 | - | | 391,629 |
| years | | | |
+-------------------------------------------+-----------------+--+------------------+
| Total | 35,987,698 | | 15,336,809 |
+-------------------------------------------+-----------------+--+------------------+
A warrant is a derivative financial instrument which gives the right, but not
the obligation to buy a specific amount of a given stock, at a specified price
(strike price) by a specific date. The fair value of the warrants are classified
as financial assets at fair value through profit or loss, as disclosed in note
(b) above. The warrants are valued using a 50% discount to the time value of the
Black Scholes model as a liquidity adjustment (see note 2f (iv)).
14. Financial Risk Management:
Strategy in Using Financial Instruments:
The Company's investment objective is to provide Shareholders with an attractive
return on their investment predominantly through capital appreciation. The Group
will primarily invest by negotiating direct investments in companies which are
listed or soon to be listed on a stock exchange. The Group will primarily target
investment into companies whose annual revenues between US$10 million and US$150
million and annual net income between US$1 million and US$15 million. Such
investments will typically provide investee companies with funding options which
are not widely available in their local market.
The Group's activities expose it to a variety of financial risks: market risk
(including currency risk, interest rate risk and price risk), credit risk and
liquidity risk. The overall risk management policies employed by the Group focus
on the unpredictability of financial markets and seek to minimise potential
adverse effects on the Group's financial performance to these risks and are
discussed below.
Market Price Risk:
Market price risk results mainly from the uncertainty about future prices of
financial instruments held. It represents the potential loss the Group may
suffer through holding market positions in the face of price movements and
changes in interest rates or foreign exchange rates, with the maximum risk
resulting from financial instruments being determined by the fair value of the
financial instruments. The Group's investment portfolio is monitored by the
Investment Manager and the Directors in pursuance of the investment objectives
as set out in the Directors' Report.
All investments present a risk of loss of capital. The Investment Manager
moderates this risk through a careful selection of securities and other
financial instruments within specified limits in accordance with the Group's
investment restrictions. The maximum risk resulting from financial instruments
is determined by the fair value of the financial instruments. The Group's
portfolio and investment strategy is reviewed continuously by the Investment
Manager and on a quarterly basis by the Board.
The profitability of a significant portion of the Group's investment programme
depends to a great extent upon correctly assessing the future course of
movements in share prices, interest rates, currencies and other investments.
There can be no assurance that the Investment Manager will be able to predict
accurately these price movements. The Investment Manager moderates this risk
through a careful selection of securities and other financial instruments within
specified limits. The maximum risk resulting from financial instruments is
determined by the fair value of the financial instruments. The Group's portfolio
and investment strategy is reviewed continuously by the Investment Manager and
on a quarterly basis by the Board.
The following details the Group's sensitivity to a 5% increase and decrease in
market prices of equities, with 5% being the sensitivity rate used when
reporting price risk internally to key management personnel and representing
management's assessment of the possible changes in market prices.
At 30 September 2009, the Group's market risk is affected by four main
components: changes in actual market prices, credit risk, interest rate and
foreign currency movements. Credit risk, interest rate and foreign currency
movements are covered below. A 5% increase in the value of equity investments,
with all other variables held constant, would bring about a 3.51% or
US$4,869,279 (30 September 2008: 2.33% or US$2,841,298) increase in net assets
attributable to equity shareholders due to an increase in the value of the
Group's equity investments at fair value through profit and loss. If the value
of equity investments had been 5% lower, with all other variables held constant,
net assets attributable to equity shareholders would have fallen by 3.51% or
US$4,869,279 (30 September 2008: 2.33% or US$2,838,303) due to the decrease in
value of the Group's equity investments at fair value through profit and loss.
Warrants by their nature may be more sensitive to changes in the value of the
underlying equity instrument dependent upon a number of factors including time
to expire and whether or not they are in the money or not. As at 30 September
2009 a 5% increase in the value of underlying equity prices for derivatives
held, with all other variables held constant, would bring about a 2.66% or
US$3,684,901 (30 September 2008: 1.08% or US$1,314,730) increase in net assets
attributable to equity shareholders due to the increase in the value of the
Group's warrant investments held for trading. A 5% decrease in the value of
underlying equity prices for derivatives held, with all other variables held
constant, would bring about a 2.63% or US$3,652,119 (30 September 2008: 1.07% or
US$1,305,187) decrease in net assets attributable to equity shareholders due to
the decrease in the value of the Group's warrant investments held for trading.
Currency Risk:
Currency risk is the risk that the fair value of future cash flows of a
financial instrument will fluctuate because of changes in foreign exchange
rates.
The Group's assets are denominated principally in US Dollars however the Group
may invest in securities and other investments that are denominated in
currencies different to the reporting currency. Accordingly, the value of an
investment may be affected favourably or unfavourably by fluctuations in
exchange rates. The Group may through forward foreign exchange contracts hedge
its exposure back to the US Dollar but has not done so during the year.
Currency Exposure:
At the reporting date, a proportion of the net assets of the Group are
denominated in currencies other than US Dollars. The carrying amounts of these
assets and liabilities are as follows:
+----------------------------+----------------+-+------------------+-+------------------+
| | Monetary | | Monetary | | Net Exposure |
| | Assets | | Liabilities | | |
+----------------------------+----------------+-+------------------+-+------------------+
| | 30 September | | 30 September | | 30 September |
| | 2009 | | 2009 | | 2009 |
+----------------------------+----------------+-+------------------+-+------------------+
| | US$ | | US$ | | US$ |
+----------------------------+----------------+-+------------------+-+------------------+
| | | | | | |
+----------------------------+----------------+-+------------------+-+------------------+
| Sterling | 37,054 | | (151,294) | | (114,240) |
+----------------------------+----------------+-+------------------+-+------------------+
+----------------------------+----------------+-+------------------+-+------------------+
| | Monetary | | Monetary | | Net Exposure |
| | Assets | | Liabilities | | |
+----------------------------+----------------+-+------------------+-+------------------+
| | 30 September | | 30 September | | 30 September |
| | 2008 | | 2008 | | 2008 |
+----------------------------+----------------+-+------------------+-+------------------+
| | US$ | | US$ | | US$ |
+----------------------------+----------------+-+------------------+-+------------------+
| | | | | | |
+----------------------------+----------------+-+------------------+-+------------------+
| Sterling | 110,630 | | (99,340) | | 11,290 |
+----------------------------+----------------+-+------------------+-+------------------+
The Group has a minimal exposure to Sterling currency risk as detailed above.
The sensitivity analysis below has been determined based on the sensitivity of
the Group's outstanding foreign currency denominated financial assets and
liabilities to a 10% increase/decrease in the US Dollar against Sterling,
translated at the reporting date.
10% is the sensitivity rate used when reporting foreign currency risk internally
to key management personnel and represents management's assessment of the
possible change in foreign exchange rates.
As at 30 September 2009 if US Dollar had weakened by 10% against the Sterling,
with all other variables held constant, the increase in net assets attributable
to Ordinary Shares would have been US$11,424 (30 September 2008: US$1,129
higher) lower. Conversely, if US Dollar had strengthened by 10% against the
Sterling, with all other variables held constant, the increase in net assets
attributable to Ordinary Shares would have been US$11,424 (30 September 2008:
US$1,129 lower) higher.
Interest Rate Risk:
The Group is exposed to risks associated with the effects of fluctuations in the
prevailing levels of market interest rates on its financial instruments and
future cash flows.
The Group is exposed to interest rate risk on cash and cash equivalents which
are invested at short term rates. The Investment Manager manages the Group's
exposure to interest rate risk daily in accordance with the Group's investment
objectives and policies. The Group's overall exposure to interest rate risk is
monitored on a quarterly basis by the Board of Directors.
The table below summarises the Group's exposure to interest rate risk:
+-----------------------------------+-------------------------+--------------+------------+-------------+
| | 30 September 2009 | 30 September 2008 |
+-----------------------------------+----------------------------------------+--------------------------+
| | Weighted | Total | Weighted | Total |
| | average | | average | |
| | effective | | effective | |
| | interest | | interest | |
| | rate | | rate | |
+-----------------------------------+-------------------------+--------------+------------+-------------+
| | % | US$ | % | US$ |
+-----------------------------------+-------------------------+--------------+------------+-------------+
| Assets | | | | |
+-----------------------------------+-------------------------+--------------+------------+-------------+
| Floating | 0.00* | 23,088,891 | 0.36 | |
| interest | | | | 56,850,049 |
| rate | | | | |
| cash at | | | | |
| bank | | | | |
+-----------------------------------+-------------------------+--------------+------------+-------------+
| Non-interest | - | 133,954,430 | - | 72,188,560 |
| bearing | | | | |
+-----------------------------------+-------------------------+--------------+------------+-------------+
| Total | | 157,043,321 | | 129,038,609 |
| assets | | | | |
+-----------------------------------+-------------------------+--------------+------------+-------------+
| | | | | |
+-----------------------------------+-------------------------+--------------+------------+-------------+
| Liabilities | | | | |
| | | | | |
+-----------------------------------+-------------------------+--------------+------------+-------------+
| Floating | 0.00* | (180) | - | - |
| interest | | | | |
| rate | | | | |
| bank | | | | |
| overdrafts | | | | |
+-----------------------------------+-------------------------+--------------+------------+-------------+
| Non-interest | - | (18,393,290) | - | (7,111,465) |
| bearing | | | | |
+-----------------------------------+-------------------------+--------------+------------+-------------+
| Total | | (18,393,470) | | (7,111,465) |
| liabilities | | | | |
+-----------------------------------+-------------------------+--------------+------------+-------------+
| | | | | |
+-----------------------------------+-------------------------+--------------+------------+-------------+
* - as at 30 September 2009 the weighted average effective interest rate on the
Groups cash and cash equivalents was nil.
The sensitivity analysis below have been determined based on the Group's
exposure to interest rates for interest bearing assets and liabilities (included
in the interest rate exposure table above) at the reporting date and the
stipulated change taking place at the beginning of the financial period and held
constant through the reporting period in the case of instruments that have
floating rates.
A 200 basis point increase or decrease is used when reporting interest rate risk
internally to key management personnel and represents management's assessment of
the possible change in interest rates.
If interest rates had been 200 basis points higher throughout the year, based on
assets and liabilities as at 30 September 2009 that are subject to changing
interest rates, and all other variables were held constant, the Group's net
assets attributable to Ordinary Shares for the year ended 30 September 2009
would have been US$461,778 (period ended 30 September 2008: US$1,031,089)
higher due to the increase in the interest earned on the Group's cash balances.
If interest rates had been 200 basis points lower throughout the year, based on
assets and liabilities as at 30 September 2009 that are subject to changing
interest rates, and all other variables were held constant, the Group's net
assets attributable to Ordinary Shares for the year ended 30 September 2009
would have been US$Nil (period ended 30 September 2008: US$185,596) lower due to
the decrease in the interest earned on the Group's cash balances.
Liquidity Risk:
Liquidity risk is the risk that the Group will encounter in realising assets or
otherwise raising funds to meet financial commitments.
The Group uses complex contracts to structure its investments in investee
companies. Such contracts may not be marketable or may have a limited
marketability. Investments in securities of investee companies may also suffer
illiquidity, and the lack of marketability of an investment may severely reduce
its value. If the Group acquires securities which for the purposes of US
securities laws may not be sold or re-sold in or into the US otherwise than
pursuant to an exemption provided by the Securities Act, it may be unable to
secure their registration with the SEC, which may also severely reduce the
returns on such investments.
Where the Group has significant investments in Investee Companies which are
listed entities and which include restricted securities purchased directly from
an issuer in a private placement, registration of those securities for public
resale is typically affected under Rule 415 of the Securities Act ("Rule 415").
Recently, the SEC has articulated a more restrictive interpretation of a
company's ability to register its shares under Rule 415, under which a company
which has issued shares may not register more than 33 per cent. of the shares in
public hands under certain circumstances. As a result, the registration of some
of the Group's securities may be significantly delayed. If not registered, the
Group may only be able to sell such securities after a six month holding period
under Rule 144 (and in some cases subject to volume limitations) of the
Securities Act ("Rule 144") or under other exemptions from the registration
requirements under the Securities Act.
Unless and until registration occurs or applicable holding periods under Rule
144 have elapsed, there is likely to be an extremely limited market for any
restricted securities held by the Group, the sale of any such securities may be
possible only at substantial discounts and it may be extremely difficult at
times to value any such investments accurately.
The Group may also purchase securities of Investee Companies which are
private companies and which intend to become listed in the short term.
Until such an Investee Company obtains a listing, such securities will not
publicly trade and such securities may only be sold in a private transaction,
making the purchase or sale of such securities at desired prices or in desired
quantities difficult or impossible. It will also be extremely difficult to value
investments accurately.
The following table details the maturity profile of the Company's financial
instruments:
Maturity Analysis
+------------------------------------+---------------------+------------+-----------+-----------+------------+--------------+
| At | less than | 3-4 years |4-5 years | 5-6 | No fixed | Total |
| 30 | 1 year | | | years | maturity | |
| September | | | | | | |
| 2009 | | | | | | |
+------------------------------------+---------------------+------------+-----------+-----------+------------+--------------+
| Assets | US$ | US$ | US$ | US$ | US$ | US$ |
+------------------------------------+---------------------+------------+-----------+-----------+------------+--------------+
| Financial | | | | | | |
| assets at | | | | | | |
| fair | | | | | | |
| value | | | | | | |
| through | | | | | | |
| profit or | | | | | | |
| loss: | | | | | | |
+------------------------------------+---------------------+------------+-----------+-----------+------------+--------------+
| | - | | | | 80,184,124 | 80,184,124 |
| Listed | | - | - | - | | |
| equity | | | | | | |
| securities | | | | | | |
| (freely | | | | | | |
| tradeable) | | | | | | |
+------------------------------------+---------------------+------------+-----------+-----------+------------+--------------+
| | - | | | | 17,201,453 | 17,201,453 |
| Listed | | - | - | - | | |
| equity | | | | | | |
| securities | | | | | | |
| (restricted) | | | | | | |
+------------------------------------+---------------------+------------+-----------+-----------+------------+--------------+
| | - | 31,264,331 | 3,618,374 | 1,104,993 | - | 35,987,698 |
| Warrants | | | | | | |
+------------------------------------+---------------------+------------+-----------+-----------+------------+--------------+
| Cash | 23,088,891 | | | | | 23,088,891 |
| and | | - | - | - | - | |
| cash | | | | | | |
| equivalents | | | | | | |
+------------------------------------+---------------------+------------+-----------+-----------+------------+--------------+
| Other | 581,155 | - | - | - | - | 581,155 |
| receivables | | | | | | |
+------------------------------------+---------------------+------------+-----------+-----------+------------+--------------+
| | 23,670,046 | 31,264,331 | 3,618,374 | 1,104,993 | 97,385,577 | 157,043,321 |
+------------------------------------+---------------------+------------+-----------+-----------+------------+--------------+
| | | | | | | |
+------------------------------------+---------------------+------------+-----------+-----------+------------+--------------+
| Liabilities | | | | | | |
+------------------------------------+---------------------+------------+-----------+-----------+------------+--------------+
| Bank | (180) | - | - | - | - | (180) |
| overdraft | | | | | | |
+------------------------------------+---------------------+------------+-----------+-----------+------------+--------------+
| Other | (18,293,290) | - | - | - | - | (18,293,290) |
| payables | | | | | | |
+------------------------------------+---------------------+------------+-----------+-----------+------------+--------------+
| B | - | - | - | - | (100,000) | (100,000) |
| Redeemable | | | | | | |
| Participating | | | | | | |
| Shares of | | | | | | |
| GPCo | | | | | | |
+------------------------------------+---------------------+------------+-----------+-----------+------------+--------------+
| | (18,293,470) | - | - | - | (100,000) | (18,393,470) |
+------------------------------------+---------------------+------------+-----------+-----------+------------+--------------+
Liquidity Risk, continued:
+------------------------------------+---------------------+---------+------------+---------+------------+-------------+
| At | less than | 2-3 | 4-5 years | 6-7 | No fixed | Total |
| 30 | 1 year | years | | years | maturity | |
| September | | | | | | |
| 2008 | | | | | | |
+------------------------------------+---------------------+---------+------------+---------+------------+-------------+
| Assets | US$ | US$ | US$ | US$ | US$ | US$ |
+------------------------------------+---------------------+---------+------------+---------+------------+-------------+
| Financial | | | | | | |
| assets at | | | | | | |
| fair | | | | | | |
| value | | | | | | |
| through | | | | | | |
| profit or | | | | | | |
| loss: | | | | | | |
+------------------------------------+---------------------+---------+------------+---------+------------+-------------+
| | - | | | | 22,285,280 | 22,285,280 |
| Listed | | - | - | - | | |
| equity | | | | | | |
| securities | | | | | | |
| (freely | | | | | | |
| tradeable) | | | | | | |
+------------------------------------+---------------------+---------+------------+---------+------------+-------------+
| | - | | | | 34,509,228 | 34,509,228 |
| Listed | | - | - | - | | |
| equity | | | | | | |
| securities | | | | | | |
| (restricted) | | | | | | |
+------------------------------------+---------------------+---------+------------+---------+------------+-------------+
| | - | 164,104 | 14,781,076 | 391,629 | - | 15,336,809 |
| Warrants | | | | | | |
+------------------------------------+---------------------+---------+------------+---------+------------+-------------+
| Cash | 56,850,049 | | | | | 56,850,049 |
| and | | - | - | - | - | |
| cash | | | | | | |
| equivalents | | | | | | |
+------------------------------------+---------------------+---------+------------+---------+------------+-------------+
| Other | 57,243 | - | - | - | - | 57,243 |
| receivables | | | | | | |
+------------------------------------+---------------------+---------+------------+---------+------------+-------------+
| | 56,907,292 | 164,104 | 14,781,076 | 391,629 | 56,794,508 | 129,038,609 |
+------------------------------------+---------------------+---------+------------+---------+------------+-------------+
| | | | | | | |
+------------------------------------+---------------------+---------+------------+---------+------------+-------------+
| Liabilities | | | | | | |
+------------------------------------+---------------------+---------+------------+---------+------------+-------------+
| Other | (7,011,465) | - | - | - | - | (7,011,465) |
| payables | | | | | | |
+------------------------------------+---------------------+---------+------------+---------+------------+-------------+
| B | - | - | - | - | (100,000) | (100,000) |
| Redeemable | | | | | | |
| Participating | | | | | | |
| Shares of | | | | | | |
| GPCo | | | | | | |
+------------------------------------+---------------------+---------+------------+---------+------------+-------------+
| | (7,011,465) | - | - | - | (100,000) | (7,111,465) |
+------------------------------------+---------------------+---------+------------+---------+------------+-------------+
Credit Risk:
Credit risk is the risk that an issuer or counterparty will be unable or
unwilling to meet a commitment that it has entered into with the Group. The
maximum exposure to credit risk that the Group faces is equal to the fair value
of the cash and cash equivalents held by the Group. The credit risk on cash and
cash equivalents is partially mitigated as it is held with counterparties that
are regulated entities with credit-ratings assigned by international
credit-rating agencies.
The Group's credit risk exposure is moderated by the careful selection of
securities and other financial instruments by the Investment Manager. The
Group's portfolio and investment strategy is reviewed continuously by the
Investment Manager and on a quarterly basis by the Board. The credit risk on
cash transactions is partially mitigated as the transactions are through
counterparties that are regulated entities subject to prudential supervision or
with credit-ratings assigned by international credit-rating agencies.
Concentration Risk
While the Investment Manager will attempt to spread the Group's assets among a
number of investments in accordance with the investment policies adopted by the
Group, at times the Group may hold a relatively small number of investments each
representing a relatively large portion of the Group's net assets. Losses
incurred in such investments could have a materially adverse effect on the
Group's overall financial condition. Whilst the Group's portfolio is diversified
in terms of the companies in which it invests, the investment portfolio of the
Group may be subject to more rapid change in value than would be the case if the
Group were required to maintain a wider diversification among types of
securities, countries and industry groups.
15. Dividend:
The Directors do not recommend the payment of a dividend for the year ended 30
September 2009 (period ended 30 September 2008: US$Nil).
16. Taxation:
The Company is exempt from Guernsey income tax under the Income Tax (Exempt
Bodies) (Guernsey) Ordinance, 1989 and is charged an annual exemption fee of
GBP600.
17. Capital Management:
The Company has the ability to borrow up to 25% of net assets in order to meet
ongoing expenses and obligations. Any such borrowing requires Board approval.
The Company has been granted authority to make market purchases of up to 14.99%
of its own Ordinary Shares. Any such purchases require shareholders approval.
The Company has the ability to apply to the Financial Services Authority for a
Placing and Offer to increase the size of the Company through further share
issuance.
18. Post Year End Events:
There were no significant post year end events that require disclosure in these
financial statements.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR FLLLBKLBLFBD
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