TIDMARCH
RNS Number : 3531O
ARC Capital Holdings Limited
18 September 2013
18 September 2013
ARC Capital Holdings Limited
Unaudited results for the six months ended 30 June 2013
ARC Capital Holdings Limited ('ARCH' or the 'Company') (AIM:
ARCH), the AIM-traded, closed-end investment company with a current
strategy focused on realising its investments in the retail and
consumer goods sectors in China, has today announced its unaudited
financial results for the six month period ended 30 June 2013.
Financial Highlights
-- Net asset value as at 30 June 2013 was US$257.0 million,
representing US$0.87 per share, a 5.6% decrease from 31 December
2012 (US$327.2 million, representing US$0.92 per share).
Company and Portfolio Developments
Distributions
-- The Investment Manager completed a US$55.0 million
distribution to shareholders by way of a mandatory share repurchase
on 26 April 2013. This reduced the shareholding of each ARCH
shareholder by approximately 16.8%.
Significant Portfolio Developments
-- In ARCH's 2012 audited statements, the Company's auditors,
KPMG, maintained their audit qualification in respect of the Orient
Home investment deposit, which had a carrying value of US$53.5
million as at 31 December 2012, as they had not obtained sufficient
audit evidence to satisfy themselves that the carrying amount of
the investment deposit was fairly stated.
-- In May 2013, ARCH's PRC investment vehicle filed a Request
for Arbitration with the China International Economic and Trade
Arbitration Commission ('CIETAC') with respect to the Orient Home
investment deposit and in July 2013 was granted an asset
preservation order against Orient Home by the Beijing First
Immediate People's Court. The order has legally frozen a 14% equity
interest in Beijing Taiyanghuo Culture Industry Investment Co.,
Ltd, which is an equity investment of Orient Home with a registered
capital of RMB280 million. The frozen equity can be enforced
against following the receipt of a favourable arbitration award.
Due to sensitivities surrounding the legal process, specific
details cannot be provided at this time. ARCH expects the
arbitration could take one year or longer to resolve and will
update shareholders on any significant developments.
-- In May 2013, ARCH's PRC investment vehicle filed a Request
for Arbitration with CIETAC with respect to the recovery of the
Jiadeli holdback. Due to sensitivities surrounding the arbitration
process, specific details cannot be provided at this time. ARCH
expects the arbitration could take one year or longer to resolve
and will update shareholders on any significant developments.
The Company understands the importance of resolving the
outstanding issues in the portfolio and remains focused on this
task. It continues to manage the realisation process prudently,
while identifying opportunities to exit investments at the best
value and in the best interests of ARCH's shareholders.
The 2013 Interim Report will be sent to registered shareholders
shortly and a copy will be available on the Company's website
www.arch-fund.com.
For further information, please contact:
MANAGER: NOMINATED ADVISER:
Rachel Chiang, Managing Philip Secrett
Partner Grant Thornton UK LLP
ARC Capital Partners T: (44) 20 7383 5100
Limited Philip.J.Secrett@uk.gt.com
T: (852) 2918 0088
rchiang@arccapitalchina.com
----------------------------- ----------------------------
BROKER: INVESTOR RELATIONS:
Numis Securities Limited Chong Min Yi
David Benda/Hugh Jonathan T: (852) 3719 3319
T: (44) 20 7260 1000 cyi@arccapitalchina.com
d.benda@numiscorp.com
----------------------------- ----------------------------
MEDIA RELATIONS:
Stephanie Barry
T: (852) 3719 3375
pr@arccapitalchina.com
----------------------------- ----------------------------
About ARC Capital Holdings Limited
ARC Capital Holdings Limited ("ARCH") (AIM: ARCH) is a
closed-end investment company with net assets of US$257.0 million
as at 30 June 2013. ARCH was admitted to trading on the AIM Market
of the London Stock Exchange in June 2006. ARCH holds investments
in the retail, consumer goods and consumer services sectors,
principally in China.
For further information about ARC Capital Holdings Limited,
please visit: www.arch-fund.com
Chairman's Statement
On behalf of the Board of Directors, I am pleased to present the
interim financial statements of ARC Capital Holdings Limited
("ARCH" or the "Company") and its subsidiaries (collectively, the
"Fund") for the six month period ending 30 June 2013.
During the first half of 2013, ARCH's share price and NAV per
share declined by 6.2% and 5.6%, respectively, with ARCH's share
price trading at a 41.4% discount to NAV as at 30 June 2013.
In previous years, China experienced strong GDP growth primarily
backed by fixed asset investment and government spending. This
growth model was not without its flaws as overcapacity in the
industrial and manufacturing sectors became widespread,
contributing to the recent slowdown in China's economy. In the past
several quarters, economists have been wary about China's slowdown
and have consistently reduced their quarterly GDP forecasts. Since
Q1 2010 when China reported a year-on-year GDP growth rate of
12.1%, China's government reported a drop in GDP growth each
quarter with the most recent Q2 2013 figures reporting a
year-on-year GDP growth of 7.5%. However, China's retail sales and
private consumption have remained relatively resilient, providing
some optimism in China's economy as its government begins to
transition to a consumption-led economic growth model.
Despite the challenges of a slowing economy and the nature of
the remaining assets of the portfolio, the Investment Manager and
Board of Directors are hopeful that the portfolio will be fully
realised in the next two to three years.
Closing Remarks
There has been no change in ARCH's strategy to effect the
orderly sale of assets at the best possible price so as to return
capital to shareholders in a timely fashion. Although there were no
realisations completed during the first half of 2013, the
Investment Manager completed a US$55.0 million distribution to
shareholders by way of a mandatory share repurchase on 26 April
2013 which reduced the shareholding of each ARCH shareholder by
approximately 16.8%. The task of realising the remaining portfolio
now consists of negotiating trade sales of privately held
investments and the legal resolution of two outstanding receivables
which are now in arbitration.
A slowing growth in China, decrease in valuations across China's
publicly listed companies, as well as the nature of the remaining
assets will provide for a challenging environment for ARCH to
realise its assets, however ARCH's Board of Directors and
Investment Manager remain focused on realising and resolving the
portfolio and its outstanding issues. The latest updates of each
position are summarised in the Investment Manager's report. The
Board is determined to ensure full transparency on each investment,
as well as up to date information on those investments being
arbitrated. All updates will be announced through RNS or reflected
in ARCH's Quarterly Newsletters.
In ARCH's 2012 audited financial statements, the Company's
auditors, KPMG, have maintained their qualification in respect of
the Orient Home investment deposit, which had a carrying value of
US$53.5 million as at 31 December 2012, as they have not obtained
sufficient audit evidence to satisfy themselves that the carrying
amount of the investment deposit was fairly stated.
In May 2013, ARCH's PRC investment vehicle filed a Request for
Arbitration with the China International Economic and Trade
Arbitration Commission ("CIETAC") with respect to the investment
deposit and in July 2013 was granted an asset preservation order
against Orient Home by the Beijing First Immediate People's Court.
The order has legally frozen a 14% equity interest in Beijing
Taiyanghuo Culture Industry Investment Co., Ltd, which is an equity
investment of Orient Home with a registered capital of RMB280
million. The frozen equity can be enforced against following the
receipt of a favorable arbitration award. Due to sensitivities
surrounding the arbitration process specific details cannot be
provided at this time.
Recovery of the RMB480 million investment deposit is of utmost
priority for the Board of Directors and Investment Manager who
continue to exert much of their time and effort into the process.
ARCH expects the arbitration to be a long process which could take
one year or longer to resolve and will update shareholders on any
significant developments.
There has been no change in the valuation since ARCH recommended
that its Valuation Committee make a 30% provision against the
investment deposit in Q4 2012. As at 30 June 2013, the carrying
value was US$54.4 million which reflects a slight difference in
value versus the previous quarter's value of US$53.5 million due to
fluctuations in RMB conversion rates.
As always, I would like to acknowledge the Investment Manager's
team for their continued diligence in managing and realising the
portfolio. I also extend my sincere gratitude to our shareholders
for their continued support and patience.
Steven Feniger
Investment Manager's Report
Since ARCH adopted its realisation strategy on 31 January 2012,
the Investment Manager and Board of Directors have generated
US$90.9 million in proceeds from the sale of portfolio assets.
US$55.0 million of the proceeds was distributed on 26 April 2013 by
way of a mandatory share repurchase which reduced the shareholding
of each ARCH shareholder by approximately 16.8%. The shares were
purchased at US$0.92 per ordinary share, equal to ARCH's unaudited
Net Asset Value per share as at 31 December 2012. Approximately
US$25.0 million of the proceeds were received from the full
realisation of Beijing Science and Technology Management Co. Ltd.
("BSTMC") in December 2012 and have yet to be distributed to
shareholders as the Investment Manager is completing the
repatriation process from Renminbi to US Dollars. We anticipate
completing the repatriation process before the end of 2013, after
which the proceeds will be distributed to shareholders.
Portfolio Activities
As part of ARCH's realisation strategy, the Investment Manager
has focused on identifying exit opportunities, as well as resolving
the outstanding issues with some of the assets in the portfolio.
Details of ARCH's portfolio activities have been provided in the
quarterly newsletters, with the latest Q2 2013 newsletter issued on
16 August 2013.
Since the release of the latest quarterly newsletter, the
Investment Manager held a shareholder conference call on 29 August
2013 to report the following events:
-- Orient Home Investment Deposit: In May 2013, ARCH's PRC
investment vehicle filed a Request for Arbitration with CIETAC with
respect to the investment deposit with Orient Home Company Limited
("Orient Home"), and in July 2013 was granted an asset preservation
order against Orient Home by the Beijing First Immediate People's
Court. The order has legally frozen a 14% equity interest in
Beijing Taiyanghuo Culture Industry Investment Co., Ltd, which is
an equity investment of Orient Home with a registered capital of
RMB280 million. The frozen equity can be enforced against following
the receipt of a favorable arbitration award. It is not possible to
provide a specific timeline, however we believe a significant
amount of time and effort will be necessary to fully resolve this
matter. We believe the process could take one year or longer to
resolve. We will update shareholders on any significant
developments.
-- Funtalk: Performance figures as at 30 June 2013 (FY Q1 2013)
reported a 17% and 4% year-on-year increase in revenue and EBITDA
and a 9% year-on-year drop in net profit. The reported decline in
profitability in the first quarter compared to last year was partly
due to a change in the accounting of deferred tax adopted by
Funtalk. Instead of reviewing its deferred tax asset position at
every month end, the company now conducts its review at the end of
the fiscal year. This has resulted in a higher income tax expense
during the interim months. Retail store count as of the end of June
2013 was 1,838. The carrier business is still performing well with
the total number of bundled contract subscribers acquired in FYQ1
2013 reaching 486,000, representing a QoQ growth of approximately
65%. Realising this investment remains one to two years away.
-- Xian University: In addition to discussions conducted with a
number of third-party potential investors, the Investment Manager
has been discussing a potential buyback of ARCH's shares with the
university's founder. The discussions remain preliminary, and we
will update shareholders on any new developments. As reported in
the Q2 2013 newsletter, Shaanxi Dade sold two of its assets at a
total consideration of RMB82 million, which is expected to be paid
over the next two years. The two assets sold were part of the new
school established to expand the university's program and
contributed to just over 10% of Shaanxi Dade's revenue. The Q2 2013
valuation reflects a decline in the financial performance of the
university and an increase in debt.
-- Xiajin Dairy: Raw milk costs continued to rise across China,
leading to a drop in gross margins. The company managed to pass
along some of the cost to consumers through an increase in bottled
milk prices. Year to date 30 June 2013 performance reported a
year-on-year increase in revenue, EBITDA and net profit of 49%, 11%
and 37%, respectively. ARCH has been engaged in an active sale
process and is in discussions with a number of potential investors
for a possible trade sale.
-- Buchang Pharmaceutical: Year to date 31 December 2012
performance reflected a 20% year-on-year growth in sales and a 2%
year-on-year growth in net profit. The company's management had
originally anticipated the IPO filing process would commence in the
second quarter of 2013, however a revised timeline estimates filing
in September 2013, subject to market conditions, after the company
completes its first half 2013 audit. ARCH maintains a positive
outlook for the company in preparation for its listing, although
delays are expected as the China Securities Regulatory Commission
has not approved any new IPOs since September 2012. ARCH would be
subject to a one year lock up of Buchang shares following listing
and is therefore actively seeking potential buyers for its shares
prior to the IPO.
-- Goodbaby Private: Year to date 30 June 2013 performance
reflected a year-on-year increase of 18% and 10% in revenue and
EBITDA and a year-on-year decrease of 21% in net profit. In the
first half of 2013, performance was largely on track with
management's budget. The company's management expects net
profitability to grow throughout the year driven by a growth in
sales. The Investment Manager is currently negotiating a sale of
this investment.
-- Bridge Loan to "DCSI": The bridge loan was due on 29 December
2012. ARCH and the DCSI executed an agreement that extended the
maturity of the loan to June 2014. ARCH received a RMB1 million
interest payment during the period.
-- Jiadeli Holdback: In May 2013, ARCH filed a Request for
Arbitration with CIETAC. Although it is not possible to provide a
specific timeline as to when the process will be fully resolved, we
believe a significant amount of time and effort will be necessary
and the process could take one year or longer to resolve. We will
update shareholders on any significant developments.
After having reviewed the current status of the resolution and
arbitration process, ARCH's Valuation Committee deemed it
appropriate to make a 75% provision, which is an additional 25%
from the previous quarter, against the holdback payment amount of
RMB100 million. While the lack of progress in the arbitration
process seems to indicate a 100% recovery is unlikely, the
Investment Manager still believes it can successfully negotiate an
acceptable outcome.
Since the shareholder conference call on 29 August 2013, the
Investment Manager has completed the sale of four properties in
Beijing for net proceeds of approximately RMB7 million. The
properties were part of a real estate portfolio held by one of
ARCH's former portfolio investments and were classified as "Other
Net Assets".
The Investment Manager understands the importance of resolving
the outstanding issues in the portfolio and will continue to manage
the realisation process prudently, while identifying opportunities
to exit investments at the best value to the satisfaction of ARCH's
Board and in the best interests of ARCH's shareholders.
ARC Capital Partners Limited
Investment Manager
CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES
AS AT 30 JUNE 2013
30 June 31 December
2013 2012
US$ US$
Note (unaudited) (audited)
Assets
Investments, at fair value 3 166,980,729 197,098,437
(Cost: 30 June 2013: US$
213,838,467;
31 December 2012: US$
217,569,880)
Investment deposits 7 65,772,040 64,848,036
Other assets 9 12,004,467 26,675,135
Cash and cash equivalents 10 32,759,374 63,194,339
Restricted Cash 10,11(a) 27,177,238 -
___ _________
Total assets 304,693,848 351,815,947
------------------- -------------------
Liabilities
Deferred tax 6 2,345,693 4,169,128
Tax payable 6 6,678,779 5,836,716
Short term loan 11(a) 25,000,000 -
Other payables and accruals 12 13,711,179 14,561,994
Total liabilities 47,735,651 24,567,838
------------------- -------------------
Net assets 256,958,197 327,248,109
========== ===========
Shareholders' equity
Share capital 13 2,951,737 3,548,051
Share premium 13 383,701,418 437,966,017
Accumulated losses (139,453,830) (122,536,243)
Foreign currency translation
reserve 9,758,872 8,270,284
Total shareholders' equity 256,958,197 327,248,109
=========== ===========
Net asset value per share 16(a) 0.87 0.92
=========== ===========
Approved by the Board of Directors on 18 September 2013
The accompanying notes are an integral part of these
consolidated financial statements.
CONSOLIDATED SCHEDULE OF INVESTMENTS
AS AT 30 JUNE 2013
30 June 2013 31 December 2012
% of % of
Cost Fair value net Cost Fair value net
Investment Instrument US$ US$ assets US$ US$ assets
Mobile phone
retail, China
Fortress Group Common
Limited(1) stock 100,800,044 92,819,000 36.12% 90,000,044 93,100,000 28.45%
Child products,
China
Goodbaby Group Common
Note 17(a) stock - 2,605,000 1.01% 9,289,754 31,141,130 9.52%
Airport, China
Hainan Meilan
International
Airport Company
Limited(2) Option - 2,584,163 1.01% - 513,325 0.16%
Home appliance
retail, China
Huiyin Household
Appliances
(Holdings)
Company Limited
("Huiyin") Common
Note 17(b) stock - - - 5,241,659 987,416 0.30%
Home decoration
retail, China
Orient Home
Decoration
& Building
Materials
Company Limited
("Orient Home
Retail")(3) Loan 23,245,008 - - 23,245,008 - -
Dairy, China
Ningxia Xiajin
Dairy Co., Common
Ltd. stock 18,130,000 26,000,000 10.12% 18,130,000 26,000,000 7.95%
Education,
China
Shaanxi Da Common
De Education stock 42,806,849 11,163,000 4.34% 42,806,849 14,000,000 4.28%
Pharmaceutical,
China
Buchang Pharmaceutical Common
Group stock 13,000,000 15,953,000 6.21% 13,000,000 15,500,000 4.74%
Others
A domestic
Chinese strategic
investor ("DCSI")(3) Loan 15,856,566 15,856,566 6.17% 15,856,566 15,856,566 4.85%
Total 213,838,467 166,980,729 64.98% 217,569,880 197,098,437 60.25%
========= ========= ===== ========= ========= =====
Notes:
1. Fortress Group Limited ("Fortress") is a holding company of
Funtalk China Holdings Limited ("Funtalk").
2. The SPV holding the investment in HNA Airport, of which the
Fund had a significant minority stake, was granted certain options
to purchase shares of Hainan Meilan International Airport Company
Limited (0357 HK), as part of the consideration for the sale of HNA
Airport.
3. In December 2011, ARCH sold all its equity interests in
Orient Home Retail to DCSI. The name of the investee is not
disclosed due to a confidentiality arrangement.
The accompanying notes are an integral part of these
consolidated financial statements.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED 30 JUNE 2013
6 months 6 months
ended ended
30 June 2013 30 June 2012
US$ US$
Note (unaudited) (unaudited)
Investment income
Investment interest income - 622,654
Dividend income - 953,876
Bank interest and sundry income 236,123 93,872
Total investment income 236,123 1,670,402
------------------- ------------------
Expenses
Investment management fee 4 1,607,810 2,311,887
Administration, custodian and
registrar fee 97,801 238,705
Professional fees 2,208,173 2,229,961
Directors' fees 5 112,500 94,368
Finance costs 11(b) 263,087 -
Impairment loss 8 3,581,489 -
Other expenses 582,433 711,698
Total expenses 8,453,293 5,586,619
-------------------- ------------------
Net investment loss (8,217,170) (3,916,217)
-------------------- ------------------
Net gain/(loss) on investments
and foreign currencies
Net realised gain on investments
before tax 16,109,247 288,963
Income tax expenses 6 (956,563) -
Net realised gain on investments 15,152,684 288,963
-------------------- --------------------
Net unrealised loss on investments
before tax (26,386,295) (23,630,278)
Deferred tax credit 6 1,982,249 72,172
Net unrealised loss on investments (24,404,046) (23,558,106)
-------------------- --------------------
Net unrealised gain on properties 163,135 -
Net realised and unrealised
gain/(loss) on foreign currencies 387,810 (3,916)
Net loss on investments, properties
and foreign currencies (8,700,417) (23,273,059)
-------------------- --------------------
Net decrease in net assets from
operations (16,917,587) (27,189,276)
=========== ===========
The accompanying notes are an integral part of these
consolidated financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED 30 JUNE 2013
Retained Foreign
earnings/ currency
Share Share Tendered (accumulated translation
capital premium Shares losses) reserve Total
US$ US$ US$ US$ US$ US$
At 1 January
2012 4,295,334 529,989,036 (64,675,541) (84,926,862) 7,288,488 391,970,455
Cancellation
of tendered
shares (469,117) (64,206,424) 64,675,541 - - -
Net
investment
loss - - - (3,916,217) - (3,916,217)
Net realised
gain on
investments - - - 288,963 - 288,963
Net
unrealised
loss on
investments - - - (23,558,106) - (23,558,106)
Net realised
and
unrealised
loss on
foreign
currencies - - - (3,916) - (3,916)
Foreign
currencies
translation
difference _______- - - - 356,434 _356,434
At 30 June
2012 3,826,217 465,782,612 - (112,116,138) 7,644,922 365,137,613
========= ========= ========= =========== ========= ===========
At 1 January
2013 3,548,051 437,966,017 - (122,536,243) 8,270,284 327,248,109
Repurchase
of shares (54,860,913) - - (54,860,913)
Cancellation
of tendered
shares (596,314) (54,264,599) 54,860,913 - - -
Net
investment
loss - - - (8,217,170) - (8,217,170)
Net realised
gain on
investments - - - 15,152,684 - 15,152,684
Net
unrealised
loss on
investments - - - (24,404,046) - (24,404,046)
Net realised
and
unrealised
gain on
foreign
currencies - - - 387,810 - 387,810
Net
unrealised
gain on
properties - - - 163,135 - 163,135
Foreign
currencies
translation
difference ___ _____- ___ _____- ___ ______- ___ ______- _1,488,588 1,488,588
At 30 June
2013 2,951,737 383,701,418 - (139,453,830) 9,758,872 256,958,197
========= ========= ========= =========== ========= ===========
The accompanying notes are an integral part of these
consolidated financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD ENDED 30 JUNE 2013
6 months 6 months
ended ended
30 June 2013 30 June 2012
US$ US$
Note (unaudited) (unaudited)
Cash flows from operating activities
Net decrease in net assets
from operations (16,917,587) (27,189,276)
Adjustments to reconcile net
decrease
in net assets from operations
to net cash
provided by operating activities:
- Net realised gain on investments
before tax (16,109,247) (288,963)
- Net unrealised loss on investments
before tax 26,386,295 23,630,278
- Net unrealised gain on properties (163,135) -
- Proceeds from sale of investments 30,640,660 3,288,963
- Decrease/(increase) in other
assets 9 452,314 (1,626,667)
- Impairment loss for other
assets 8 3,581,489 -
- Increase in restricted cash 10 (27,177,238) -
- Decrease in deferred tax
liabilities (1,823,435) (72,172)
- Increase/(decrease) in tax
payable 842,063 (161,834)
- (Decrease)/increase in other
payable and accruals (850,815) 669,588
- Foreign currencies translation
difference 564,584 651,546
Net cash used in operating
activities (574,052) (1,098,537)
------------------- --------------------
Cash flows from financing activities
Proceeds from borrowings 11(a) 25,000,000 -
Repurchase of shares 13 (54,860,913) -
Net cash used in financing
activities (29,860,913) -
-------------------- -------------------
Net decrease in cash and cash
equivalents (30,434,965) (1,098,537)
Cash and cash equivalents at
beginning of period 63,194,339 39,804,599
Cash and cash equivalents at
end of period 10 32,759,374 38,706,062
=========== ===========
Supplemental cash flow information
- Interest paid (71,930) -
=========== ===========
Supplemental cash flow information
- Tax paid - (161,834)
=========== ===========
The accompanying notes are an integral part of these
consolidated financial statements.
1. General
(a) Organisation
ARC Capital Holdings Limited (the "Company") was incorporated
with limited liability in the Cayman Islands as an exempted company
under the Companies Law on 27 July 2005. On 4 April 2006, the
Company changed its name from Asia Retail Consumer Holdings Limited
to ARC Capital Holdings Limited.
The Company is a closed-end investment company trading on the
AIM Market of the London Stock Exchange. The Company's principal
investment objective is to provide its shareholders with capital
appreciation by investing in listed and unlisted companies in the
retail, consumer goods and consumer service sectors principally in
China and in neighbouring Asian countries. The Company finances
these companies for expansion through buy-outs, pre-IPO
opportunities and other equity and mezzanine securities.
The Company is managed by ARC Capital Partners Limited (the
"Investment Manager"). The Investment Manager is responsible for
the day-to-day management of the Company's investment portfolio,
including, subject to approval by the Investment Committee which is
appointed by the Investment Manager and approved by the Company's
Board of Directors, the day-to-day acquisition and disposal of
investments in accordance with the Company's investment objective
and policies.
2. Summary of significant accounting policies
These consolidated financial statements of the Company and its
subsidiaries (collectively "the Fund") are prepared in accordance
with accounting principles generally accepted in the United States
of America ("US GAAP"), which includes the application of the
provision of the AICPA Audit and Accounting Guide for Investment
Companies (the "Guide"). The following are the significant
accounting policies adopted in the preparation of these financial
statements.
(a) Use of estimates
The preparation of consolidated financial statements in
conformity with US GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the consolidated financial statements and the reported
amounts of revenues and expense during the reporting period. Actual
results could differ from those estimates.
(b) Principles of consolidation
These consolidated financial statements include the financial
statements of the Company and its special purpose vehicles.Special
purpose vehicles ("SPVs") are consolidated from the date on which
control is transferred to the Fund and are deconsolidated from the
date that control ceases. Investments held by the SPVs are not
subject to consolidation and equity accounting as they are
non-investment company investees with the purpose to realise a gain
upon disposal rather than provide services to the Company.
Inter-company transactions and balances have been eliminated on
consolidation.
(c) Investments
(i) Recognition, derecognition and measurement
Regular purchase and sale of investments are accounted for on
the trade day, which is the day the trade is executed. All
investment securities are initially recognised at cost. Costs used
in determining net realised gains or losses on the sale of
investment securities are based on average-cost method. Legal and
due diligence fees and other charges associated with acquiring the
investments are capitalised as part of the cost of the investment
securities.
Transfer of investments is accounted for as a sale when the Fund
has relinquished control over the transferred assets. Any realised
gains or losses from investments are recognised in the consolidated
statement of operations.
Investments are subsequently carried at fair value and changes
in fair value are presented in the consolidated statement of
operations.
(ii) Fair value measurement
The Fund is an investment company under the Guide. As a result,
the Fund records its investments in the consolidated statement of
assets and liabilities at their fair value, with unrealised gains
and losses resulting from changes in fair value recognised in the
consolidated statement of operations.
Fair value is the amount that would be received to sell the
investments in an orderly transaction between market participants
at the measurement date (i.e. the exit price). Fair value of
investments is determined by the Valuation Committee, which is
established by the Board of Directors.
The Valuation Committee uses its best judgement in estimating
fair value. In determining the fair value, the Valuation Committee
engages third party valuation agents to assist in the selection of
valuation techniques and models. However, there are inherent
limitations in any valuation technique due to the lack of
observable inputs. Estimated fair values may differ significantly
from the values that would have been used had a ready market
existed for the securities, and the differences could be material
to the financial statements. Additional information about the level
of market observability associated with investment carried at fair
value is disclosed in Note 3.
(d) Fair value hierarchy
Generally accepted accounting principles establish a fair value
hierarchy that prioritises inputs to measure fair value. The
hierarchy gives the highest priority to unadjusted quoted prices in
active markets for identical assets or liabilities (Level 1
measurements) and the lowest priority to unobservable input (Level
3 measurements).
The three levels of the fair value hierarchy are described
below:
Level 1: Inputs to measure fair values are unadjusted quoted
prices in active markets that are accessible at the measurement
date for identical, unrestricted assets or liabilities;
Level 2: Inputs to measure fair values are quoted prices in
markets that are not active, quoted prices for similar assets or
liabilities in active markets, or prices or valuations for which
all significant inputs are observable, either directly or
indirectly;
Level 3: Inputs to measure fair values are both significant to
the fair value measurement and unobservable.
Inputs to measure fair values broadly refer to the assumptions
that market participants use to make valuation decisions, including
assumptions about risk. Inputs may include price information,
volatility statistics, specific and broad credit data, liquidity
statistics, and other factors. An asset or liability's level within
the fair value hierarchy is based on the lowest level of any input
that is significant to the fair value measurement. However, the
determination of what constitutes "observable" requires significant
judgment. The Valuation Committee considers observable data to be
such market data which is readily available, regularly distributed
or updated, reliable and verifiable, not proprietary, and provided
by multiple, independent sources that are actively involved in the
relevant market. The categorisation of an asset or liability within
the hierarchy is based upon the pricing transparency of the asset
or liability and does not necessarily correspond to the Valuation
Committee's perceived risk of that asset or liability.
Securities traded on a securities exchange are stated at the
last reported sales price on the day of valuation. To the extent
these securities are actively traded and valuation adjustments are
not applied, they are categorised in Level 1 of the fair value
hierarchy. Preferred stock and other equities traded on inactive
markets or valued by reference to similar instruments are
categorised in Level 2.
Restricted securities for which quotations are not readily
available are valued at fair value as determined by the Valuation
Committee. Restricted securities issued by publicly traded
companies are generally valued at a discount to similar publicly
traded securities. Depending on the relative significance of
valuation inputs, these instruments may be classified in either
Level 2 or Level 3 of the fair value hierarchy.
Investments are classified within Level 3 of the fair value
hierarchy if they are traded infrequently and therefore have little
or no price transparency. Such assets and liabilities include
unlisted equities and convertible bonds. Their fair values are
estimated with reference to the valuation techniques recommended by
the International Private Equity and Venture Capital Valuation
Guidelines. Valuation methodologies utilised by the Valuation
Committee include but are not limited to comparable transactions or
performance multiples, latest round of financing, discounted cash
flow, and are supported by independent valuations of underlying
assets. The selection of appropriate valuation techniques may be
affected by the availability of reliable inputs. In some cases, one
valuation technique may provide the best indication of fair value
while in other circumstances, multiple valuation techniques may be
appropriate. Once an appropriate valuation methodology is
determined for an asset or liability, it will continue to be used
until a more appropriate method is determined.
(e) Cash and cash equivalents
Cash and cash equivalents comprise cash at banks placed with
reputable banking institutions with an original maturity of less
than three months.
The Fund classifies cash that is restricted for specific
purposes and is unavailable for general use as restricted cash.
(f) Income and expenses
Dividend income is recognised on the ex-dividend date with the
corresponding foreign withholding taxes recorded as an expense.
Withholding taxes on dividends have been provided for in accordance
with the Fund's understanding of the applicable country's tax rules
and rates.
Interest income and all the expenses are accounted for on an
accruals basis. Offering costs are charged to the Company's share
premium account upon the issuance of shares.
(g) Foreign currency translation
Assets and liabilities denominated in foreign currencies are
translated into US$ at the rates of exchange ruling at the
reporting date. Income and expenses denominated in foreign
currencies during the year are translated into US$ at the rates of
exchange ruling at the transaction dates. All exchange differences
arising are included in the consolidated statement of
operations.
The Fund does not isolate that portion of the results of
operations resulting from changes in foreign currency exchange
rates on investments from the fluctuations arising from changes in
market prices of securities held. Such fluctuations are included
with the net realised and unrealised gain or loss from
investments.
Net realised foreign exchange gains or losses arise from sales
of foreign currencies, currency gains or losses realised between
the trade and settlement dates on securities transactions, and the
difference between the amounts of dividends, interest, and foreign
withholding taxes recorded on the Fund's books and the US$
equivalent of the amounts actually received or paid. Net unrealised
foreign exchange gains and losses arise from changes in the fair
values of assets and liabilities, other than investments in
securities at fiscal period end, resulting from changes in exchange
rates.
If a subsidiary's functional currency is a foreign currency,
translation adjustments result from the process of translating that
entity's financial statements into the reporting currency.
Translation adjustments shall not be included in determining net
income but shall be reported separately and accumulated in a
separate component of equity.
(h) Income taxes
Income taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are recognised for the
future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss and
tax credit carry forwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognised in
the consolidated statement of operations in the period that
includes the enactment date.
The Fund has adopted the authoritative guidance contained in
FASB ASC 740 on accounting for and disclosure of uncertainty in tax
positions, which requires management to determine whether a tax
position of the Fund is more likely than not to be sustained upon
examination, including resolution of any related appeals or
litigation processes, based on the technical merits of the
position. For tax positions meeting the more likely than not
threshold, the tax amount recognised in the consolidated financial
statements is reduced by the largest benefit that has a greater
than 50% likelihood of being realised upon ultimate settlement with
the relevant tax authority. Prior to the adoption of Interpretation
48, the Fund recognised the effect of income tax positions only if
such positions were probable of being sustained.
(i) Share Capital
Ordinary shares are classified as equity. Where any group
company purchases the Company's equity share capital (tendered
shares), the consideration paid, including any directly
attributable incremental costs (net of income taxes) is deducted
from equity attributable to the Company's equity holders until the
shares are cancelled or reissued. Where such ordinary shares are
subsequently reissued, any consideration received, net of any
directly attributable incremental transaction costs and the related
income tax effects, is included in equity attributable to the
Company's equity holders. The holders of tendered shares have no
voting and participation rights.
3. Securities valuation
Investments Investments Investments
-common
stock -loan -option Total
US$ US$ US$ US$
As at 30 June
2013
Level 1 - - - -
Level 2 - - - -
Level 3 148,540,000 15,856,566 2,584,163 166,980,729
Total investments 148,540,000 15,856,566 2,584,163 166,980,729
=========== =========== =========== ===========
The following table summarises the changes in fair value of the
Fund's investments by captions:
Investments Investments Investments
-common
stock -loan -option Total
US$ US$ US$ US$
As at 31
December
2012
Level 1 29,428,546 - - 29,428,546
Level 2 - - - -
Level 3 151,300,000 15,856,566 513,325 167,669,891
Total investments 180,728,546 15,856,566 513,325 197,098,437
=========== =========== =========== ===========
The following is a reconciliation of investments for which Level
3 inputs were used in determining fair value:
Investments-common
stock Investments-loan Investments-option Total
US$ US$ US$ US$
As at 1 January
2012 162,193,684 30,808,003 906,219 193,907,906
Proceeds from
sales - (27,475,803) - (27,475,803)
Net unrealised
gain/(loss) on
investments (10,893,684) 9,912,226 (392,894) (1,374,352)
Net realised
gain on sale
of investments - 2,612,140 - 2,612,140
As at 31 December
2012 151,300,000 15,856,566 513,325 167,669,891
=========== ========== ========== ==========
Settlement of
shares 10,800,000 - - 10,800,000
Net unrealised
gain/(loss) on
investments (13,560,000) - 2,070,838 (11,489,162)
As at 30 June
2013 148,540,000 15,856,566 2,584,163 166,980,729
=========== ========== ========== ==========
The following table summarises the net unrealised loss on
investment before tax included in consolidated statement of
operations attributable to Level 3 instruments still held as at 30
June 2013 by caption:
30 June 31 December
2013 2012
Net unrealised loss before
tax US$ US$
Investments - common stock (13,560,000) (10,893,684)
Investments - loan - -
Investments - option 2,070,838 (392,894)
Total (11,489,162) (11,286,578)
============ ============
The following table summarises quantitative information about
the valuation techniques and the significant unobservable inputs
used for Level 3 investments:
Fair value
at 30 June Valuation Significant Unobservable
Industry/Type 2013 methodology inputs Inputs
US$
Child products 2,605,000 NAV approach Minority discount 30%
EV/EBITDA multiple
Mobile phone Market Marketability
retail 92,819,000 approach(1) discount 8.7x 30%
EV/EBITDA multiple
Market Marketability
Dairy 26,000,000 approach(1) discount 8.1x 30%
EV/EBITDA multiple
Market Marketability
Education 11,163,000 approach(1) discount 4.9x 30%
EV/EBITDA multiple
Market Marketability 27.6x
Pharmaceutical 15,953,000 approach(1) discount 30%
Loan receivable 15,856,566 Cost approach Not applicable Not applicable
Option
pricing Volatility of
Option 2,584,163 model underlying assets 28.8%
166,980,729
==========
Note:
1. Earnings multiples are based on comparable public companies
and transactions with comparable companies.
4. Investment management fee and realisation fee
The Investment Manager was previously entitled to receive an
investment management fee of 2% per annum of the Fund's net asset
value ("NAV") calculated at the beginning of each quarter based on
the average month end NAV of the Fund of the previous quarter and
payable in advance.
Since 31 January 2012, the investment management fee was reduced
from 2% to 1% per annum of the Fund's NAV.
For the period ended 30 June 2013, the Fund incurred an
investment management fee of US$1,607,810 (for the period ended 30
June 2012: US$2,311,887). All amounts were settled as of both
period ends.
With effect from 31 January 2012, as an incentive to realise the
best possible exit value for the Fund's assets, the Investment
Manager shall be entitled to receive a realisation fee equal to a
percentage of the net proceeds received by the Fund on the
realisation of each asset (the "Fee Percentage"), to be paid once
the "Company Realisation Value" (being the aggregate net proceeds
received by the Fund on the disposal of the assets) exceeds the
Fund's audited NAV at 31 December 2011. For assets realised in
2012, the Fee Percentage shall be 2.8%, and this will reduce to
2.52% for assets realised in 2013 and will further reduce to 2.268%
for assets realised in 2014. Thereafter, the Fee Percentage shall
continue to reduce by 10% per annum until the Fund's last asset is
realised.
For the period ended 30 June 2013, the Fund has not accrued a
realisation fee (nil for the period ended 30 June 2012).
5. Directors' fees and remuneration
The Company pays each of its directors an annual fee of
US$30,000, and an additional US$10,000 per annum for chairing any
committee of the Board and an additional US$5,000 per annum for
serving as a regular member of any committee of the Board. During
the period, Christopher Marcus Gradel agreed to waive his annual
fee for so long as he has an equity interest in the Investment
Manager.
In January 2012, the Company entered into separate 3-year
consulting service agreements with Helen Wong and Steven Feniger
regarding the divestment of certain portfolio investments and other
matters as requested by the Company. Consulting fees are subject to
a maximum of US$40,000 each per annum. During the period ended 30
June 2013, consulting fees of US$20,000 were payable to each which
was subsequently settled in July 2013.
Consulting fees of US$12,000 were paid to Tian-Cho Chu during
the period ended 30 June 2013.
6. Current and deferred income taxes
(a) No provision for Cayman Islands taxes are provided as the
Fund is not currently subject to income tax in the Cayman Islands.
The Fund has obtained an undertaking from the Governor in Cabinet
of the Cayman Islands that for a period of 20 years from 9 August
2005:
-- no law which is thereafter enacted in the Cayman Islands
imposing any tax to be levied on profits, income, capital gains or
appreciations shall apply to the Fund or its operations; and
-- no aforesaid tax or withholding tax, nor estate duty or
inheritance tax shall be payable on or in respect of the share
debentures or other obligations of the Fund.
(b) The Fund may be subject to taxes imposed in other countries
in which it invests. Such taxes are generally based on income
and/or gains generated. Dividend and interest income received by
the Fund may be subject to withholding tax imposed in the country
of origin. This income is recorded gross of such taxes and the
withholding tax, if any, is recognised separately in the
consolidated statement of operations.
The directors have reviewed the structure of the Fund's
investment portfolio and considered that the Fund's exposure to
Hong Kong and China profits tax has been properly reflected in the
Fund's consolidated financial statements.
7. Investment deposits
In December 2007, the Fund transferred US$13.6 million to Orient
Group Industrial Co. Ltd. ("Orient Group") as an investment
deposit. In December 2011, the Fund recognised an impairment of
US$2.2 million for the deposit resulting from the intention to
offset the US$11.4 million payable balance (Refer to Note 12). No
further impairment has been recognised as at 30 June 2013.
In December 2010, the Fund transferred US$76.2 million (or
RMB480 million) to Orient Home Company Ltd ("Orient Home"), a
controlled affiliate of Orient Group, as an investment deposit, to
secure its exclusive right to invest in Orient Home's real estate
portfolio under the Equity Purchase Agreement dated 10 December
2010 (the "Agreement"). Orient Home failed to fulfil the terms of
the Agreement and the Fund has not received any repayment from
Orient Home as of the date of this report.
In May 2013, the Fund's PRC investment vehicle filed a Request
for Arbitration with the China International Economic and Trade
Arbitration Commission ("CIETAC") with respect to the investment
deposit, and in July 2013 was granted an asset preservation order
against Orient Home by the Beijing First Immediate People's Court.
The order has legally frozen a 14% equity interest in Beijing
Taiyanghuo Culture Industry Investment Co., Ltd, which is an equity
investment of Orient Home with a registered capital of RMB280
million. The frozen equity can be enforced against following the
receipt of a favorable arbitration award. It is expected the
arbitration will be a long process and could take one year or
longer to resolve.
In view of the situation, the Directors considered the 30%
provision against the investment deposit initially made in December
2012 should remain as at 30 June 2013.
8. Impairment loss
30 June 31 December
2013 2012
US$ US$
Provision on investment deposit - 22,909,872
Provision on Jiadeli sale
proceeds and dividends (Note
9(b)) 3,581,489 8,846,876
Provision on Funtalk receivable - 4,146,040
Total impairment loss 3,581,489 35,902,788
=========== ===========
9. Other assets
At 30 June 2013 and 31 December 2012, other assets were as
follows:
30 June 31 December
2013 2012
US$ US$
Funtalk receivable (Note
9(a)) - 10,800,000
Jiadeli sale proceeds and
dividends (Note 9(b)) 4,499,898 8,846,876
Properties 4,073,135 3,697,399
Loan interest receivable 1,288,170 1,272,771
Others 2,143,264 2,058,089
Total other assets 12,004,467 26,675,135
========== ===========
(a) On 31 January 2013, the Fund received common shares of
Funtalk to settle the outstanding receivable of US$10.8 million
from Funtalk's management, thereby increasing the Fund's total
ownership stake in Funtalk to approximately 20.6% from 18.5%, on a
fully diluted basis.
(b) The Fund sold its entire interest in Shanghai Jiadeli
Supermarket Co., Ltd ("Jiadeli") for RMB1.1 billion, with RMB100
million of the consideration withheld by the purchaser for any
post-closing adjustment to the purchase price. Adjustments to the
total purchase price, if any, shall not exceed RMB100 million and
can only be claimed from the withheld amount.
As part of the sale of Jiadeli in October 2010 for a total
consideration of RMB1.1 billion, it was agreed that a holdback of
RMB100 million would be paid to the Fund 12 months after closing,
subject to adjustments based on the result of a post-closing audit
by the purchaser. The Fund and the purchaser could not agree on the
result of the closing audit. In accordance with the sale and
purchase agreement an independent third-party mediator was
appointed by both parties to resolve the dispute.
In May 2013, the Fund filed a Request for Arbitration with
CIETAC. It is expected the arbitration will be a long process and
could take one year or longer to resolve.
A 50% impairment was made against the holdback payment amount in
December 2012, and having reviewed the current status of the
holdback and arbitration process, the Board has deemed it
appropriate to recognise a further 25% provision against the
holdback payment amount of RMB100 million for the period ended 30
June 2013.
10. Cash and cash equivalents
Cash and cash equivalents as at 30 June 2013 and 31 December
2012 consisted of:
30 June 31 December
2013 2012
US$ US$
US$ 32,270,742 1,809,580
RMB 484,228 29,730,213
HK$ 4,404 31,654,546
Total cash and cash equivalents 32,759,374 63,194,339
=========== ===========
Restricted cash as at 30 June 2013 and 31 December 2012
consisted of:
30 June 31 December
2013 2012
US$ US$
RMB (11(a)) 27,177,238 -
Total restricted cash 27,177,238 -
=========== ===========
11. Borrowings and finance costs
(a) Borrowings
At 30 June 2013 and 31 December 2012, borrowings were repayable
as follows:
30 June 31 December
2013 2012
US$ US$
Within one year 25,000,000 -
Total borrowings 25,000,000 -
========== ==========
In April 2013, the Fund obtained a 1 year term loan of US$25
million, which is secured by a pledged deposit of RMB167.9 million
(equivalent to US$27.2 million) (Note 10). The interest rate for
the loan is London Interbank Offered Rate ("LIBOR") plus 1.5 per
cent per annum.
(b) Finance costs
The finance costs mainly included interest expenses of US$71,930
and loan arrangement fees of US$156,782.
12. Other payables
At 30 June 2013, other payables and accruals were as
follows:
30 June 31 December
2013 2012
US$ US$
Payable for an investment 11,391,668 11,391,668
Other creditors 2,319,511 3,170,326
Total other payables and accruals 13,711,179 14,561,994
========== ==========
The payable for an investment represents the remaining
consideration payable to Orient Group as a result of the
acquisition of Orient Home Retail in 2007. The Fund expects to
settle the payable balance by offsetting it against investment
deposits provided to Orient Group as detailed in Note 7.
13. Share capital, share premium and tendered shares
Number Tendered
of shares Share capital Share Premium Shares Total
outstanding US$ US$ US$ US$
As at 1 January
2012 382,621,663 4,295,334 529,989,036 (64,675,541) 469,608,829
Tender offer (27,816,593) - - (28,094,761) (28,094,761)
Cancellation
of tendered shares - (747,283) (92,023,019) 92,770,302 -
As at 31 December
2012 354,805,070 3,548,051 437,966,017 - 441,514,068
Repurchase of
shares (59,631,427) - - (54,860,913) (54,860,913)
Cancellation
of tendered shares - (596,314) (54,264,599) 54,860,913 -
As at 30 June
2013 295,173,643 2,951,737 383,701,418 - 386,653,155
========== ========== ========== ========== ==========
On 23 April 2013, 59,631,427 ordinary shares were repurchased
and cancelled by the Company at a price of US$0.92 per share,
representing approximately 16.8% of the Company's ordinary shares
in issue. The shares were repurchased for a total consideration of
approximately US$55 million. Following the repurchase and
cancellation, the Company has a total of 295,173,643 ordinary
shares in issue as at 30 June 2013.
At 30 June 2013, the total authorised number of ordinary shares
was 500,000,000 (31 December 2012: 500,000,000) with par value of
US$0.01 (31 December 2012: US$0.01) per share.
14. Concentration of market, industry, credit, currency and
liquidity risks
The Fund's activities (including both investments and loans) may
expose it to a variety of risks: mainly market risk, industry risk,
credit risk, currency risk and liquidity risk.
(a) Market risk
Market risk is the risk that the value of a financial instrument
will fluctuate as a result of changes in market variables such as
interest, foreign exchange rates and equity prices, whether those
changes are caused by factors specific to the particular security
or factors that affect all securities in the markets. Investments
are typically made with a specific focus on Greater China and thus
are concentrated in that region. Political or economic conditions
and the possible imposition of adverse governmental laws or
currency exchange restrictions in that region could cause any of
the Fund's investments and their markets to be less liquid and
prices more volatile. The Fund is exposed to market risk on all of
its investments.
(b) Industry risk
The Fund's investments may be concentrated in a particular
industry or sector and performance of the particular industry or
sector may have a significant impact on the Fund.
The Fund's investments may also be subject to the risk
associated with investing in private equity securities. Investments
in private equity securities may be illiquid, can be subject to
various restrictions on resale and there can be no assurance that
the Fund will be able to realise the value of such investments in a
timely manner.
(c) Credit risk
Credit risk is the risk that an issuer/counterparty will be
unable or unwilling to meet its commitments to the Fund. Financial
assets that are potentially subject to significant credit risk
consist of cash and cash equivalents, investments in convertible
bonds, investment deposits and receivables.
The maximum credit risk exposure of these items is their
carrying value.
(d) Currency risk
The Fund has assets and liabilities denominated in currencies
other than the US$, the functional currency. The Fund is therefore
exposed to currency risk as the value of assets and liabilities
denominated in other currencies will fluctuate due to changes in
exchange rates.
The table below summarises the Fund's net exposure to each
currency as at 30 June 2013 and 31 December 2012.
30 June 31 December
2013 2012
US$ US$
US$ 136,430,153 144,582,758
RMB 117,939,477 121,068,934
HK$ 2,588,567 61,596,417
Total 256,958,197 327,248,109
=========== ==========
(e) Liquidity risk
The Fund is exposed to liquidity risk as the Fund's investments
are largely illiquid while the majority of the Fund's liabilities
are with short maturity. Illiquid investments include any
securities or instruments which are not actively traded on any
major securities market or for which no established secondary
market exists where the investments can be readily converted into
cash. Reduced liquidity resulting from the absence of an
established secondary market may have an adverse effect on the
prices of the Fund's investments and the Fund's ability to dispose
of them where necessary to meet liquidity requirements. As a
result, the Fund may be exposed to significant liquidity risk.
China currently has foreign exchange restrictions, especially in
relation to the repatriation of foreign funds. Any unexpected
foreign exchange control in China may cause difficulties in the
repatriation of funds. The Fund invests in China and is exposed to
the risk of repatriating funds out of China to meet its obligations
on a timely basis.
15. Related party transactions
(a) Certain directors of the Company are shareholders and
directors of the Investment Manager, which provides investment
management services to the Company and earns an investment
management fee. In addition the Investment Manager is entitled to a
realisation fee if certain conditions are met (Note 4).
(b) As at 30 June 2013, the Investment Manager and its
subsidiary held 2,691,653 ordinary shares of the Company (31
December 2012: 3,235,424).
16. Financial highlights
(a) Per share operating performance
6 months 6 months
ended ended
30 June 2013 30 June 2012
US$ US$
Net asset value per share,
start of period 0.92 1.02
--------- ---------
Income from investment operations:
- net investment loss (0.03) (0.01)
- net realised and unrealised
gain/(loss) on
investments and foreign currencies (0.02) (0.06)
Total from investment operations (0.05) (0.07)
--------- ---------
Net asset value per share,
end of period 0.87 0.95
===== =====
The net asset value per share is calculated based on the total
number of shares issued and outstanding excluding tendered shares
(Note 13).
(b) Ratios to average net assets and other supplemental
information
6 months
6 months ended
ended 30 June
30 June 2013 2012
US$ US$
Ratio of net investment loss
to average net assets (2.7%) (1.0%)
====== ======
Ratio of expenses to average
net assets
Operating expenses before
incentive fees (2.8%) (1.4%)
Incentive fees (1) - -
Total expenses (2.8%) (1.4%)
====== ======
Cumulative internal rate of return
("IRR") since
inception through the period
end (1) (4.7%) (4.2%)
====== ======
Note:
1. The IRR is computed net of all incentive fees (being
performance fees and realisation fees as defined in the Investment
Management Agreement entered into between the Company and the
Investment Manager dated 20 June 2006, as amended on 1 April 2009
and 31 January 2012) based on the Fund's actual dates of the cash
inflows (capital contributions), outflows (cash and stock
distributions) and the ending NAV at the end of the period
(residual value) as of each measurement date.
17. Disposal of investments
(a) Disposal of Goodbaby Listco
In June 2006, the Fund invested US$23.9 million for a 25.3%
ownership stake in the Goodbaby Group which would later be
reorganised into two separate businesses, Goodbaby Listco (design,
manufacturing and international branded sales) and Goodbaby Private
(domestic retailing platform). In November 2010, Goodbaby Listco
was publicly listed on the Hong Kong Stock Exchange.
On 8 January 2013, the Fund completed the sale of its entire
holding in Goodbaby Listco. The Fund has realised a total of
HK$420.8 million (approximately US$54.3 million) since September
2012, when the Fund initiated a realisation strategy to sell its
shares in the market through multiple block trades. Together with a
small realisation in November 2010 during its public listing, the
Fund's investment in Goodbaby Listco has realised a total of
US$64.5 million.The Fund continues to hold its minority stake in
Goodbaby Private.
(b) Disposal of Huiyin
On 2 January 2013, the Fund completed the sale of its entire
holding in Huiyin. The Fund has realised a total of HK$65.1 million
(approximately US$8.3 million) since August 2012 by selling its
shares in the market through multiple tranches.
18 Subsequent events
On 26 August 2013, the Fund and the DCSI executed an agreement
that extended the maturity of the RMB100 million bridge loan to 30
June 2014.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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