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Share Name | Share Symbol | Market | Type |
---|---|---|---|
China Finance Inc (CE) | USOTC:CHFI | OTCMarkets | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 0.000001 | 0.00 | 01:00:00 |
ITEM
1.
|
REPORTS
TO STOCKHOLDERS.
|
·
|
Inadequate
controls were in place to ensure the Company gained an adequate
understanding of the terms of all relevant transactions and properly
applied United Stated Generally Accepted Accounting Principles (“GAAP”)
when recording these transactions and preparing its financial statements
and related disclosures. Specifically, this matter relates to controls
over the accounting for complex transactions, including accounting for
fair value marketable securities and related revenue
recognition.
|
CONSOLIDATED
FINANCIAL STATEMENTS
|
AT
|
December
31, 2007
|
CHINA
FINANCE, INC. AND SUBSIDIARIES
|
||||||||
CONSOLIDATED
STATEMENTS OF ASSETS AND LIABILITIES
|
||||||||
December
31, 2007
|
December
31,
2006
|
|||||||
ASSETS
|
||||||||
Investments:
|
||||||||
Marketable
Securities, at
fair value (cost $20,356,019 and $5,072,505, respectively)
|
$ | 33,263,952 | $ | 16,080,061 | ||||
Loans
Receivable
|
14,024,255 | 10,490,932 | ||||||
Real
Estate Held for Investment
|
1,444,576 | 1,350,799 | ||||||
Total
Investments
|
48,732,783 | 27,921,792 | ||||||
Cash
denominated in foreign currencies (Cost $344,471 and $7,904,
respectively)
|
344,471 | 7,904 | ||||||
Cash
|
654,937 | 45,770 | ||||||
Restricted
Cash denominated in foreign currencies (Cost $5,054,112 and $0,
respectively)
|
5,054,112 | — | ||||||
Surety
Guarantee Fee Receivables
|
903,074 | — | ||||||
Loan
Guarantee Fee Receivables
|
408,284 | — | ||||||
Prepaid
and Deferred Expenses
|
305,703 | 82,826 | ||||||
Property,
Plant and Equipment – Net
|
556,801 | 479,328 | ||||||
Total
Assets
|
$ | 56,960,165 | $ | 28,537,620 | ||||
LIABILITIES
AND NET ASSETS
|
||||||||
Liabilities
|
||||||||
Accrued
Expenses
|
$ | 984,205 | $ | 71,164 | ||||
Other
payable
|
119,603 | 16,436 | ||||||
Deferred
income
|
198,224 | — | ||||||
Total
Liabilities
|
1,302,032 | 87,600 | ||||||
Net
Assets
|
||||||||
Common
Stock - 100,000,000 Shares Authorized; Par Value $.001;
|
||||||||
57,671,744
Issued and Outstanding in December 31, 2007 and December 31,
2006
|
57,672 | 57,672 | ||||||
Paid-In
Capital
|
13,078,373 | 13,078,373 | ||||||
Accumulated
Undistributed Income
|
||||||||
Accumulated
Undistributed Investment Income-net
|
21,884,338 | 7,365,573 | ||||||
Accumulated
Undistributed Net Realized Gains (Losses) on Investment
Transactions
|
6,297,808 | (3,786,391 | ) | |||||
Net
Unrealized Appreciation (Depreciation) in Value of
Investments
|
12,907,933 | 11,007,556 | ||||||
Accumulated
Unrealized Gain on Translation of Assets and Liabilities in
Foreign
Currency
|
1,432,009 | 727,237 | ||||||
Total Net Assets
(equivalent to $0.97 and $0.49 per share based on 57,671,744
outstanding shares on December 31, 2007 and December 31,
2006)
|
55,658,133 | 28,450,020 | ||||||
Total
Liabilities and Net Assets
|
$ | 56,960,165 | $ | 28,537,620 |
CHINA
FINANCE, INC. AND SUBSIDIARIES
|
||||||||||||
SCHEDULES
OF INVESTMENTS
|
||||||||||||
December
31, 2007
|
||||||||||||
Non-income
producing Common Stocks – 68.26%
(Small
and Medium Sized Enterprises (or operating companies) in the People’s
Republic of China)
|
Shares
|
Cost
|
Value
|
|||||||||
China
3C Group – 4.78% (par value $0.001)
|
682,128 | $ | 68,213 | $ | 2,329,467 | |||||||
Universal
Travel Group – 4.69% (par value $0.001)
|
600,000 | 360,000 | 2,286,000 | |||||||||
Home
System Group – 1.03% (par value $0.001)
|
480,000 | 480,000 | 504,000 | |||||||||
Gulf
Resources, Inc. – 18.91% (par value $0.001)
|
3,339,000 | 1,836,450 | 9,215,640 | |||||||||
China
Ivy School, Inc. – 2.14% (par value $0.001)
|
3,480,750 | 1,740,375 | 1,044,225 | |||||||||
Gulin
Paper, Inc. – 1.96% (par value $0.001)
|
1,702,762 | 1,277,072 | 953,547 | |||||||||
China
Organic Agriculture, Inc. – 7.77%(par value $0.001)
|
1,729,273 | 2,507,446 | 3,787,108 | |||||||||
China
9D Construction Group – 2.36% (par value $0.001,
restricted until
February 9, 2008
)
|
2,251,621 | 1,148,327 | 1,148,327 | |||||||||
China
9D Construction Group – 0.68% (par value $0.001,
restricted until April 17,
2008
)
|
649,967 | 974,950 | 331,483 | |||||||||
Jade
Art Group, Inc. – 4.45% (par value $0.001,
restricted until April 1,
2008
)
|
4,340,700 | 1,446,900 | 2,170,350 | |||||||||
Jade
Art Group, Inc. – 8.91% (par value $0.001,
restricted until April 1,
2008
)
|
8,681,400 | 2,893,800 | 4,340,700 | |||||||||
Beijing
Logistic, Inc. – 8.65% (par value $0.001,
restricted until April
18,2008
)
|
5,619,124 | 4,214,343 | 4,214,343 | |||||||||
Orient
Paper, Inc. – 1.93% (par value $0.001,
restricted until May 1,
2008
)
|
1,877,525 | 1,408,143 | 938,763 | |||||||||
Total Investments in
Securities
|
$ | 20,356,019 | $ | 33,263,952 | ||||||||
Loans
Receivable – 28.78%
|
Value
|
|||||||||||
Shenzhen
HuaYinTong Electronics – 23.15% (interest rate 9%, due on October
15,2008)
|
$ | 11,282,255 | ||||||||||
Fujian
ZangTianYua – 6.48% (interest rate 6.48%, due on May
22,2008)
|
2,742,000 | |||||||||||
Total
Loans Receivable
|
$ | 14,024,255 | ||||||||||
Real
Estate Held for Investment – 2.96%
|
$ | 1,444,576 | ||||||||||
Total
Investments
|
$ | 48,732,783 | ||||||||||
December
31, 2006
|
||||||||||||
Non-income
producing Common Stocks – 57.59%
|
Shares
|
Cost
|
Value
|
|||||||||
China
3C Group – 36.64% (par value $0.001)
|
2,956,795 | $ | 295,680 | $ | 10,230,511 | |||||||
Universal
Travel Group – 2.11% (par value $0.001, restricted until July 11,
2007)
|
1,200,000 | 720,000 | 588,000 | |||||||||
Home
System Group – 2.05% (par value $0.001, restricted until August 3,
2007)
|
480,000 | 480,000 | 571,200 | |||||||||
Gulf
Resources, Inc. – 8.07% (par value $0.001, restricted until December 7,
2007)
|
1,669,500 | 1,836,450 | 2,253,825 | |||||||||
China
Ivy School, Inc. – 8.73% (par value $0.001, restricted until October 11,
2007)
|
3,480,750 | 1,740,375 | 2,436,525 | |||||||||
Total Investments in
Securities
|
$ | 5,072,505 | $ | 16,080,061 | ||||||||
Loans
Receivable – 37.57%
|
Value
|
|||||||||||
Hong
Kong TianYi – 1.42%(interest rate 6%, due on October 24,
2006)
|
$ | 396,336 | ||||||||||
Shenzhen
KaiBiTe – 36.15%(interest rate 9%, due on March 28,2008)
|
10,094,596 | |||||||||||
Total Loans
Receivable
|
$ | 10,490,932 | ||||||||||
Real
Estate Held for Investment – 4.84%
|
$ | 1,350,799 | ||||||||||
Total
Investments
|
$ | 27,921,792 |
CHINA
FINANCE, INC. AND SUBSIDIARIES
|
||||||||
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
||||||||
For
the years ended December 31,
|
2007
|
2006
|
||||||
Investment
Income
|
||||||||
Surety
Guarantee Revenue
|
$ | 16,774,054 | $ | 4,799,025 | ||||
Loan
Guarantee Revenue
|
201,741 | — | ||||||
Loan
Revenue
|
616,480 | 664,768 | ||||||
Interest
income
|
73,877 | 22,854 | ||||||
Total
Investment Income
|
17,666,152 | 5,486,647 | ||||||
Expenses
|
||||||||
Legal
Services
|
191,394 | 81,644 | ||||||
Office
Rent
|
1,362,917 | 196,123 | ||||||
Payroll
|
512,314 | 333,029 | ||||||
Advertising
|
125,087 | 121,413 | ||||||
Depreciation
and Amortization
|
121,112 | 68,105 | ||||||
Other
General and Administrative
|
824,062 | 459,594 | ||||||
Total
Expenses
|
3,136,886 | 1,259,908 | ||||||
Net
Investment Income Before Income Tax Expense
|
14,529,266 | 4,226,739 | ||||||
Income
Tax Expense
|
10,501 | — | ||||||
Net
Investment Income
|
14,518,765 | 4,226,739 | ||||||
Realized
and Unrealized Gain (Loss) From Investments and Foreign
Currency
|
||||||||
Realized
(Loss) on the sale of Property, Plant and Equipment
|
— | (3,979 | ) | |||||
Realized
Gain from Securities Transactions
|
10,084,199 | — | ||||||
Unrealized
Gain on Marketable Securities
|
1,900,377 | 11,007,556 | ||||||
Unrealized
Gain on Translation of Assets and Liabilities in Foreign
Currency
|
704,772 | 416,511 | ||||||
Net
Realized and Unrealized Gain from Investments and Foreign
Currency
|
12,689,348 | 11,420,088 | ||||||
Net
Increase in Net Assets From Operations
|
$ | 27,208,113 | $ | 15,646,827 |
CHINA
FINANCE, INC. AND SUBSIDIARIES
|
||||||||
CONSOLIDATED
STATEMENTS OF CHANGES IN NET ASSETS
|
||||||||
For
the years ended December 31,
|
2007
|
2006
|
||||||
Net
Increase (Decrease) in Net Assets From Operations:
|
||||||||
Net
Investment Income
|
$ | 14,518,765 | $ | 4,226,739 | ||||
Realized
(Loss) on the sale of Property, Plant and Equipment
|
— | (3,979 | ) | |||||
Realized
Gain from Securities Transactions
|
10,084,199 | — | ||||||
Unrealized
Gain on Marketable Securities
|
1,900,377 | 11,007,556 | ||||||
Unrealized
Gain on Translation of Assets and Liabilities in Foreign
Currency
|
704,772 | 416,511 | ||||||
Increase
in Net Assets From Operations
|
$ | 27,208,113 | $ | 15,646,827 | ||||
Capital
Share Transactions
|
— | — | ||||||
Increase
in Net Assets
|
$ | 27,208,113 | $ | 15,646,827 | ||||
Net
Assets:
|
||||||||
Beginning
of period
|
28,450,020 | 12,803,193 | ||||||
End
of period (including $21,884,338
and $7,365,573
undistributed net
investment
income on December 31, 2007 and 2006, respectively)
|
$ | 55,658,133 | $ | 28,450,020 |
CHINA
FINANCE, INC. AND SUBSIDIARIES
|
||||||||
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
||||||||
For
the years ended December 31,
|
2007
|
2006
|
||||||
Cash
Flows from Operating Activities
|
||||||||
Net
Increase
(Decrease) in Net Assets From Operations
|
$ | 27,208,113 | $ | 15,646,827 | ||||
Adjustments
to reconcile net increase in net assets from operations to net cash used
in operating activities:
|
||||||||
Proceeds
from Sale of Marketable Securities
|
10,601,666 | — | ||||||
Receipt
of Marketable Securities for Services Rendered
|
(15,870,981 | ) | (4,776,825 | ) | ||||
Depreciation
and Amortization
|
121,112 | 68,105 | ||||||
Loss
on Sale of Property, Plant and Equipment
|
— | 3,979 | ||||||
Realized
(Gain) from Marketable Securities
|
(10,084,199 | ) | — | |||||
Marketable
Securities Written-off Expenses
|
70,000 | — | ||||||
Unrealized
(Gain) Loss on Marketable Securities
|
(1,900,377 | ) | (11,007,556 | ) | ||||
Unrealized
(Gain) Loss on Foreign Currency Translation
|
(704,772 | ) | (416,511 | ) | ||||
Changes
in Loans Receivable
|
(3,533,323 | ) | (9,553,060 | ) | ||||
Changes
in Investment in Real Estate
|
— | (1,316,661 | ) | |||||
Changes
in Noninvestment Assets and Liabilities
|
||||||||
Surety
Guarantee Fee Receivables
|
(903,074 | ) | — | |||||
Loan
Guarantee Fee Receivables
|
(408,284 | ) | — | |||||
Receivable
for Marketable Securities Sold
|
— | 580,481 | ||||||
Prepaid
and Deferred Expenses
|
(222,877 | ) | (80,426 | ) | ||||
Accrued
Expense
|
913,041 | 34,446 | ||||||
Deferred
Revenue
|
198,224 | — | ||||||
Other
Payable
|
103,167 | 16,156 | ||||||
Net
Cash Used in Operating Activities
|
5,587,436 | (10,801,045 | ) | |||||
Cash
Flows from Investing Activities
|
||||||||
Proceeds
from Sale of Property, Plant and Equipment
|
— | 50,932 | ||||||
Acquisition
of Property, Plant and Equipment
|
(170,091 | ) | (383,774 | ) | ||||
Leasehold
Improvement
|
— | (198,909 | ) | |||||
Changes
in Restricted Cash Denominated in Foreign Currencies
|
(5,054,112 | ) | — | |||||
Net
Cash Used in Investing Activities
|
(5,224,203 | ) | (531,751 | ) | ||||
Cash
Flows from Financing Activities
|
— | — | ||||||
Effect
on Change of Foreign Exchange Rate
|
582,501 | 54,820 | ||||||
Change
in Cash
|
945,734 | (11,277,976 | ) | |||||
Cash
- Beginning of Year
|
53,674 | 11,331,650 | ||||||
Cash
- End of Year
|
$ | 999,408 | $ | 53,674 | ||||
Supplementary
Cash Flow Disclosures:
|
||||||||
Interest
Paid
|
$ | — | $ | — | ||||
Income
Taxes Paid
|
$ | 10,501 | $ | — |
·
|
its
portfolio securities are subject to restrictions on resale because they
have not been held by the Company for six
months;
|
·
|
there
are few transactions or market-makers in the
security;
|
·
|
the
spread between the bid and asked price is large;
and
|
·
|
there
are substantial variations in the price quotations over
time.
|
·
|
the
financial standing of the issuer;
|
·
|
the
business and financial plan of the issuer and comparison of actual results
with the plan;
|
·
|
the
cost of the securities as of the date received by the
Company;
|
·
|
the
size of position held and the liquidity of the
market;
|
·
|
contractual
and statutory restrictions on
disposition;
|
·
|
any
pending public offering with respect to the financial
instrument;
|
·
|
any
pending reorganization activity affecting the financial instrument (such
as merger proposals, tender offers, debt restructurings, and
conversions);
|
·
|
the
reported prices and the extent of public trading in similar financial
instruments of the issuer or comparable
companies;
|
·
|
the
ability of the issuer to obtain needed
financing;
|
·
|
any
changes in the economic conditions affecting the
issuer;
|
·
|
recent
purchases or sales of securities of the issuers of the
securities;
|
·
|
Pricing
by other dealers in similar securities;
and
|
·
|
the
financial statements of the issuers of the
securities.
|
Electronic
Equipment
|
5
Years
|
Furniture
and Fixtures
|
5
Years
|
Automobile
|
10
Years
|
Leasehold
Improvements
|
Term
of Lease or Useful Life
|
December
31,
|
2007
|
2006
|
Year
End
1US
Dollar =
|
7.290
RMB
|
7.800
RMB
|
Weighted
Average
1US
Dollar =
|
7.595
RMB
|
7.964
RMB
|
2007
|
2006
|
|||||||
Cost:
|
||||||||
Electronic
Equipment and Office Furniture
|
$ | 228,907 | $ | 54,998 | ||||
Automobile
|
308,200 | 288,194 | ||||||
Total
Cost
|
$ | 537,107 | $ | 343,192 | ||||
Less: Accumulated
Depreciation
|
(69,089 | ) | (19,985 | ) | ||||
$ | 468,018 | $ | 323,207 | |||||
Leasehold
Improvement, Net
|
88,783 | 156,121 | ||||||
Net
Property, Plant and Equipment
|
$ | 556,801 | $ | 479,328 |
2008
|
2009
|
2010
|
2011
|
2012
|
||||||||||||||
$ | 2,400,000 | $ | 2,400,000 | $ | 2,200,000 | $ | 2,100,000 | $ | 2,200,000 |
Per Share Operating Performance
(For a share of common stock outstanding throughout the
period)
|
2007
|
2006
|
2005
|
For the Period from Inception (June 24, 2004)
through December 31, 2004
|
||||||||||||
Net Assets Value,
beginning of period
|
$ | 0.49 | $ | 0.22 | $ | 0.27 | $ | — | ||||||||
Income
from Operations:
|
||||||||||||||||
Net
Investment Income (Loss)
|
0.26 | 0.07 | (0.01 | ) | 0.06 | |||||||||||
Net
Gains (Loss) on Securities (both realized and unrealized)
|
0.22 | 0.20 | (0.04 | ) | 0.21 | |||||||||||
Total Income from
Operations
|
0.48 | 0.27 | (0.05 | ) | 0.27 | |||||||||||
Net Assets Value,
end of
period
|
0.97 | 0.49 | 0.22 | 0.27 | ||||||||||||
Net Assets,
end of
period
|
$ | 55,658,133 | $ | 28,450,020 | $ | 12,803,193 | $ | 15,512,444 | ||||||||
Per Share Market Value
,
end of period
|
$ | 1.15 | $ | 0.98 | $ | 0.40 | $ | 2.20 | ||||||||
Total
Investment Return
|
17.35 | % | 145.00 | % | (81.82 | %) | 80.33 | % | ||||||||
Ratio
of Expenses to Average Net Assets
|
7.46 | % | 6.13 | % | 5.40 | % | 9.20 | % (1) | ||||||||
Ratio
of Net Investment Income to Average Net Assets
|
34.52 | % | 20.47 | % | (2.59 | %) | 24.47 | % (1) | ||||||||
Portfolio
Turnover Rate
|
42.97 | % | 0 | % | 14.99 | % | 0 | % |
Name, Age and Address
|
Title
and Length of
Service
with the
Company
|
Principal
Occupations
During
the Last Five
Years
|
Other
Directorships
Held
|
Zhiyong
Xu*
Age:
32
c/o
China Finance, Inc.
1330
Ave of Americas,
21st
floor
New
York NY 10019
|
Director,
CEO & Secretary since 2004; Chief Compliance Officer since
2007
|
Chief
Compliance officer since 2007; CEO, Chairman & Secretary since October
2004; February 2003- September 2004, Director and Secretary of Industries
International, Inc.; November 2002-February 2003, Vice
President of Shenzhen Wonderland Telecommunication Technology Co.;
November 2000-November 2002, General Manager of Shenzhen Chuang Li Xing
Power Company Limited, a battery manufacturer.
|
None
|
Name, Age and Address
|
Title
and Length of
Service
with the
Company
|
Principal
Occupations
During
the Last Five
Years
|
Other
Directorships
Held
|
Yifang
Li
Age:
48
No.
44 New Street,
Xiangcheng
District
Xiangfan
City, Hubei Province, P.R. China
|
Director
since 2007
|
President
and Secretary of Xiangyang Institute of Business Studies.
|
None
|
Denming
Yung
Age:
40
No.
7 Yunji Road,
Fandong
District
Xiangfan
City, Hubei Province, P.R. China
|
Director
since 2007
|
Manager
of Department of Finance Management of People’s Bank of China, XiangFan
City Center Branch.
|
None
|
Name, Age and Address
|
Title
and Length of
Service
with the
Company
|
Principal
Occupations
During
the Last Five
Years
|
Other
Directorships
Held
|
Liang
Liao
Age:
31
c/o
China Finance, Inc.
Shenzhen
Central Business Tower
1706-1709
Fuhua Yi Road
Futian,
Shenzhen, Guangdong 51800, P.R. China
|
CFO
since 2005
|
Chief
Financial Officer since March 2005; December 2003-March 2005, Chief
Financial Officer of Shenzhen Mingtai Industrial Development Co, Ltd., an
electronics distributor; September 2002-November 2003, Senior Auditing
Manager of Shenzhen Meishi Power Industries Co. Ltd.; March 2000-August
2002, Finance Manager of Shenzhen Xieli Paper Co., Ltd.
|
None
|
Name/Position
|
Aggregate
Annual Compensation
|
Zhiyong
Xu, Director & Chief Executive Officer
|
$180,000
|
Liang
Liao, Chief Financial Officer
|
$48,000
|
ITEM
2.
|
CODE
OF ETHICS.
|
(a)
|
The
registrant, as of the end of the period covered by this report, has
adopted a code of ethics that applies to its Principal Executive Officer,
Principal Financial Officer, and Principal Accounting Officer(s), or
persons performing similar functions, regardless of whether these
individuals are employed by the registrant or a third
party.
|
(c)
|
There
have been no amendments to any provisions of such code of ethics during
the period covered by this report.
|
(d)
|
The
registrant has not granted, during the period covered by this report, any
waivers, including an implicit waiver, from any provision of such code of
ethics.
|
(e)
|
|
Not
applicable.
|
(f)(1)
|
A
copy of the code of ethics that applies to the registrant’s Principal
Executive Officer and Principal Financial Officer is filed pursuant to
Item 12.(a)(1) below.
|
ITEM
3.
|
AUDIT
COMMITTEE FINANCIAL EXPERT.
|
(a)(1)
|
The
registrant does not have an audit committee financial expert serving on
its audit committee.
|
(a)(2)
|
Not
applicable.
|
(a)(3)
|
At
this time, the registrant believes that the collective experience provided
by the members of the audit committee together offer the registrant
adequate oversight for the registrant's level of financial
complexity.
|
ITEM
4.
|
PRINCIPAL
ACCOUNTANT FEES AND SERVICES.
|
(a)
|
Audit
Fees – Audit fees for the registrant for the fiscal years ended December
31, 2006 and December 31, 2007 were $16,000 and $17,500, respectively.
These amounts represent aggregate fees billed by Rotenberg & Co.,
LLP (“Accountant”) in connection with the annual audit of the
registrant’s financial statements and for services normally provided by
the Accountant in connection with the registrant’s statutory and
regulatory filings.
|
(b)
|
Audit-Related
Fees – There were no additional fees billed in the fiscal years ended
December 31, 2006 or December 31, 2007 for assurance and related services
by the Accountant that were reasonably related to the performance of the
audit of the registrant’s financial statements that were not reported in
paragraph (a) of this Item.
|
(c)
|
Tax
Fees – The tax fees in the fiscal years ended December 31, 2006 and
December 31, 2007 for professional services rendered by the Accountant for
tax compliance, tax advice, and tax planning were $2,000 and $2,200,
respectively. These services were for the completion of the
fund’s federal and state income tax returns and excise tax
returns.
|
(d)
|
All
Other Fees –The Accountant billed $10,975 for consulting services during
the fiscal year ended December 31, 2007. There were no other
fees billed by the Accountant which were not disclosed in paragraphs (a)
through (c) of this Item during the fiscal year ended December 31,
2006.
|
(e)(1)
|
The
registrant’s Board of Trustees pre-approved the engagement of the
Accountant for the last two fiscal years at an audit committee meeting of
Board of Trustees called for such purpose and will pre-approve the
Accountant for each fiscal year thereafter at an audit committee meeting
called for such purpose. The charter of the audit committee
states that the audit committee should pre-approve any audit services and,
when appropriate, evaluate and pre-approve any non-audit services provided
by the Accountant to the
registrant.
|
(e)(2)
|
There
were no services as described in each of paragraph (b) through (d) of this
Item that were approved by the audit committee pursuant to paragraph
(c)(7)(i)(C) of Rule 2-01 of Regulation
S-X.
|
(f)
|
|
Not
applicable.
|
(g)
|
|
Not
applicable.
|
(h)
|
|
Not
applicable.
|
ITEM
5.
|
AUDIT
COMMITTEE OF LISTED REGISTRANTS.
|
|
The
registrant has a separately-designated standing audit committee comprised
of independent trustees. The members of the audit committee are as
follows:
|
|
YiFang
Li
|
|
DenMing
Yung
|
ITEM
6.
|
SCHEDULE
OF INVESTMENTS.
|
|
A
copy of the schedule of investments of unaffiliated issuers as of the
close of the reporting period is included as part of the report to
shareholders filed under Item 1 of this
Form.
|
ITEM
7.
|
DISCLOSURE
OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT
INVESTMENT COMPANIES.
|
|
A
copy of the registrant’s Proxy Voting Policies and Procedures is set forth
below.
|
I.
|
Introduction
|
II.
|
Specific
Proxy Voting Policies and
Procedures
|
|
1.
|
General
|
|
2.
|
Procedures
|
III.
|
Voting
Guidelines
|
|
1.
|
Corporate
Governance
|
·
|
Limit
directors’ liability and broaden directors’ indemnification
rights;
|
|
And
expects to generally
vote
against
proposals to:
|
·
|
Adopt
or continue the use of a classified Board structure;
and
|
·
|
Add
special interest directors to the board of directors (e.g., efforts to
expand the board of directors to control the outcome of a particular
decision).
|
|
b.
|
Audit
Committee Approvals
|
|
c.
|
Shareholder
Rights
|
·
|
Adopt
confidential voting and independent tabulation of voting results;
and
|
·
|
Require
shareholder approval of poison
pills;
|
·
|
Adopt
super-majority voting requirements;
and
|
·
|
Restrict
the rights of shareholders to call special meetings, amend the bylaws or
act by written consent.
|
·
|
Prohibit
the payment of greenmail (i.e., the purchase by the company of its own
shares to prevent a hostile
takeover);
|
·
|
Adopt
fair price requirements (i.e., requirements that all shareholders be paid
the same price in a tender offer or takeover context), unless the Proxy
Manager deems them sufficiently limited in scope;
and
|
·
|
Require
shareholder approval of “poison
pills.”
|
·
|
Adopt
classified boards of directors;
|
·
|
Reincorporate
a company where the primary purpose appears to the Proxy Manager to be the
creation of takeover defenses; and
|
·
|
Require
a company to consider the non-financial effects of mergers or
acquisitions.
|
|
3.
|
Capital
Structure Proposals
|
·
|
Eliminate
preemptive rights.
|
|
4.
|
Compensation
|
|
a.
|
General
|
·
|
Require
shareholders approval of golden parachutes;
and
|
·
|
Adopt
golden parachutes that do not exceed 1 to 3 times the base compensation of
the applicable executives.
|
·
|
Adopt
measures that appear to the Proxy Manager to arbitrarily limit executive
or employee benefits.
|
|
5.
|
Stock
Option Plans and Share Issuances
|
·
|
Establish
or continue stock option plans and share issuances that are not in the
best interest of the shareholders.
|
|
6.
|
Corporate
Responsibility and Social Issues
|
IV.
|
Conflicts
|
V.
|
Company
Disclosure
|
|
A.
|
Disclosure
of Company Policies and Procedures With Respect to Voting Proxies Relating
to Portfolio Securities
|
|
B.
|
Disclosure
of the Fund’s Complete Proxy Voting
Record
|
(i)
|
The
name of the issuer of the portfolio
security;
|
(ii)
|
The
exchange ticker symbol of the portfolio security (if available through
reasonably practicable means);
|
(iii)
|
The
Council on Uniform Security Identification Procedures (“CUSIP”) number for
the portfolio security (if available through reasonably practicable
means);
|
(iv)
|
The
shareholder meeting date;
|
(v)
|
A
brief identification of the matter voted
on;
|
(vi)
|
Whether
the matter was proposed by the issuer or by a security
holder;
|
(vii)
|
Whether
the Company cast its vote on the
matter;
|
(viii)
|
How
the Company cast its vote (e.g., for or against proposal, or abstain; for
or withhold regarding election of directors);
and
|
|
(ix)
|
Whether
the Company cast its vote for or against
management.
|
VI.
|
Recordkeeping
|
(i)
|
A
copy of this Policy;
|
(ii)
|
Proxy
Statements received regarding the Company’s
securities;
|
(iii)
|
Records
of votes cast on behalf of the Company;
and
|
(iv)
|
A
record of each shareholder request for proxy voting information and the
Company’s response, including the date of the request, the name of the
shareholder, and the date of the
response.
|
VII.
|
Proxy
Voting Committee
|
A.
|
General
|
B.
|
Powers
and Methods of Operation
|
VIII.
|
Other
|
|
This
Policy may be amended, from time to time, as determined by the
Board.
|
ITEM
8.
|
PORTFOLIO
MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT
COMPANIES.
|
(a)(1)
|
As
of December 31, 2007, the overall management of the business and affairs
of the Registrant is vested in its Board of Directors in accordance with
applicable corporate laws and the Registrant’s organizational
documents. The Registrant does not have an investment
adviser. The decisions related to the day-to-day management of
the Registrant’s portfolio are made by Registrant management, subject to
the oversight of the Board of
Directors.
|
|
Zhiyong
Xu has been the Director, Chief Executive Officer & Secretary of the
Registrant since 2004 and the Chief Compliance Officer of the Registrant
since 2007. Mr. Xu has primary responsibility for making
investment decisions regarding the Registrant’s
portfolio. Prior to joining the Registrant, Mr. Xu was the
General Manager of Shenzhen Chuang Li Xing Power Registrant Limited, a
battery manufacture, a Vice President of Shenzhen Wonderland
Telecommunication Technology Co., and, most recently, the Director and
Secretary of Industries International,
Inc.
|
|
Yifang
Li has been a Director of the Registrant since 2007. Ms. Li
assists the CEO in making investment decisions regarding the Registrant’s
portfolio. Ms. Li is also the President and Secretary of
Xiangyang Institute of Business
Studies.
|
|
Denming
Yung has been a Director since 2007. Mr. Yung assists the CEO
in making investment decisions regarding the Registrant’s portfolio. Mr.
Yung is also the Manager of the Department of Finance Management of
People’s Bank of China, XiangFan City Center
Branch.
|
(a)(2)
|
None
of the people identified in (a)(1) above managed any other
portfolios.
|
(a)(3)
|
As
of December 31, 2007, the only person identified in (a)(1) above that
received any compensation is Zhiyong Xu. He receives a fixed
salary of $90,000 per year from the Registrant for his role of Chief
Executive Officer of the
Registrant.
|
(a)(4)
|
As
of December 31, 2007, none of the people identified in (a)(1) above
beneficially owned any equity securities of the
Registrant.
|
(b)
|
|
Not
applicable.
|
ITEM
9.
|
PURCHASES
OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND
AFFILIATED PURCHASERS.
|
|
Not
applicable.
|
ITEM
10.
|
SUBMISSION
OF MATTERS TO A VOTE OF SECURITY
HOLDERS.
|
|
Not
applicable.
|
ITEM
11.
|
CONTROLS
AND PROCEDURES.
|
(a)
|
The
Principal Executive Officer and the Principal Financial Officer have
concluded that the registrant’s disclosure controls and procedures are
effective based on their evaluation of the disclosure controls and
procedures as of a date within 90 days of the filing of this
report.
|
(b)
|
There
were no changes in the registrant's internal controls over financial
reporting that occurred during the second fiscal quarter of the period
covered by this report that has materially affected, or is reasonably
likely to materially affect, the registrant’s internal control over
financial reporting.
|
ITEM
12.
|
EXHIBITS.
|
|
(a)(1)
|
Code
of Ethics required by Item 2 of Form N-CSR is filed herewith as Exhibit
12.(a)(1).
|
(a)(2)
|
Certifications
required by Item 12.(a)(2) of Form N-CSR are filed herewith as Exhibit
12.(a)(2).
|
(a)(3)
|
Not
applicable.
|
(b)
|
Certifications
required by Item 12.(b) of Form N-CSR are filed herewith as Exhibit
12.(b).
|
China
Finance, Inc.
|
By: /s/ ZhiYong Xu |
ZhiYong Xu, Chief Executive Officer |
Date: March 6, 2008 |
By: /s/ ZhiYong Xu |
ZhiYong Xu, Chief Executive Officer |
Date: March 6, 2008 |
By: /s/ Liang Liao |
Liang Liao, Chief Financial Officer |
Date: March 6, 2008 |
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