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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Vision OP China | LSE:VOC | London | Ordinary Share | GG00B28DJ748 | ORD NPV |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 0.115 | 0.00 | 01:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
0 | 0 | N/A | 0 |
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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