During the year ended 31 December 2011, the Investment Manager
agreed to receive 1,719,857 tendered shares from the Fund to settle
its obligation in respect of the share portion of the 2010
performance fee of US$3,085,252. Had the Fund opted for issuing new
shares at NAV to settle the outstanding performance fee payable as
at 31 December 2010, the Company's total number of issued shares
would have increased by 1,719,857.
During the year ended 31 December 2010, the Investment Manager
agreed to receive a cash of US$2,396,374 from the Fund to settle
its obligation in respect of the share portion of the 2009
performance fee of US$3,606,249 and a gain of US$1,209,875 was
recognized by the Fund as other income in the consolidated
statement of operations. Had the Fund opted for issuing new shares
at NAV to settle the outstanding performance fee payable as at 31
December 2009, the Company's total number of issued shares would
have increased by 2,594,424. With the cash proceeds received from
the Fund, the Investment Manager purchased 2,594,424 shares from
the market.
12 Investment agency fees
During the year ended 31 December 2011, to facilitate the
disposal of an investment, the Fund has entered into a consulting
agreement with an unrelated third party (the "Consultant") which is
also the party facilitated the acquisition of the same investment.
Under the agreement, the Fund is obligated to pay an investment
agency fee to the Consultant based on a percentage of the net
realised gain earned by the Fund. As at 31 December 2011, a
provision of US$7,841,354 (2010: US$ Nil) was made based on the
realised and unrealised gain on the investment net of certain
expenses and tax attributable to the investment of which
approximately US$3.8 million is payable in the first half of
2012.
13 Related party transactions
The Fund had the following significant related-party
transactions.
(a) Restructuring with PACL II Limited
On 2 March 2009, the Company held an extraordinary general
meeting to approve a tender offer that allowed shareholders to
exchange all or part of their shares for shares in PACL II Limited
("PACL II"), a Cayman Islands private vehicle that will be used to
realize and distribute cash from exited investments based on the
investment and asset positions held by the Fund as at 31 December
2008 ("Tender Offer Portfolio"). PACL II is also managed by the
Investment Manager. It will, without any further action on the part
of its shareholders, automatically wind up and dissolve in 3 years
upon when its ordinary shares were first issued. On 5 January 2012,
the duration of PACL II has been extended by 1 year to 2 March 2013
with written election by the Investment Manager.
As part of this restructuring, the Company repurchased
180,166,107 shares at a tender price of US$1.01 per share in
exchange for holders of these shares receiving the same number of
shares in PACL II.
Under the terms of the tender offer, PACL II is entitled to
receive 50.33% of the proceeds from the Tender Offer Portfolio,
which reflects a 5% discount of its proportionate share of the
Tender Offer Portfolio. As such, the amount due to PACL II is
recorded as a payable by the Fund, adjusted at each period end
based on the movement in the fair value of the underlying assets
and the income and expense attributable to the Tender Offer
Portfolio. The amount is unsecured, non-interest bearing.
The following table summarizes the movements in payable to PACL
II.
2011 2010
US$ US$
At 1 January 101,159,458 115,042,310
Distributions to PACL II (44,142,178) (23,286,109)
Net loss on loan related expense allocated
to PACL II 1,256,155 -
Net (decrease)/increase in payable
from (loss)/gain attributable to PACL
II (2,383,238) 9,403,257
-------------------- --------------------
At 31 December 55,890,197 101,159,458
(b) Management fees and performance fees to the Investment
Manager
The Investment Manager is entitled to management fee and
performance fees. See Note 11 for details.
(c) Directors' remuneration
The Company pays each of its director annual fees of US$30,000
(2010: US$30,000). If a director is a member of the Valuation
Committee or Audit Committee, the director also receives an
additional fee of US$10,000, or US$5,000 if they are Chairman of
either Committee. During the year 2010 and 2011, Chris Gradel,
Horst Geicke and Jon-Paul Toppino agreed to waive their directors'
fees and committee fees.
(d) Bank loan arrangement with PACL II
The Fund entered an arrangement with PACL II. See Note 7 for
details.
14 Financial highlights
Net asset value per share at the end of the year is as
follows:
2011 2010
US$ US$
Per share data (for a share outstanding
throughout the year)
Net asset value at 1 January 1.7480 1.3800
Net investment loss (0.2924) (0.3036)
Net realized and unrealized gains from
investments 0.6517 0.6716
-------------- --------------
Net asset value 31 December 2.1073 1.7480
The following represents the ratios to average net assets and
other supplemental information:
2011 2010
Total return before performance fees
(1) 25.68% 33.14%
Performance fees 5.13% 6.47%
Total return after performance fees (1) 20.55% 26.67%
Ratios to average net assets (2)
Total expenses (18.46%) (20.77%)
Net investment loss (15.58%) (19.77%)
(1) Total return represents the change in NAV (before and after
performance fees), adjusted for cash flows in relation to capital
transactions for the year.
(2) Average net assets is derived from the beginning and ending
NAV, adjusted for cash flows in relation to capital transactions
for the year. For the year ended 31 December 2011, the average net
assets amounted to US$262,492,897 (2010: US$212,219,678).
15 Commitment and contingency
In the normal course of business, the Fund may enter into
arrangements that contain a variety of representations and
warranties that provide general indemnification under certain
circumstances. The Fund's maximum exposure under these arrangements
is unknown, as this would involve future claims that may be made
against the Fund and which have not yet occurred. However, based on
experience, the directors expect the risk of loss to be remote,
and, therefore, no provision has been recorded.
16 Subsequent events
Management has performed a subsequent events review from 1
January 2012 through to 2 April 2012, being the date that the
financial statements were available to be issued.
In March 2012, approximately US$31 million (representing 27% of
the cash balance as at year-end) has been converted from Renminbi
to United States Dollars and repatriated out of China.
Refer to Note 7 for details of the settlement of the Loan.
17 New accounting pronouncements
In 2011, the FASB issued an Accounting Standards Update ("ASU")
No. 2011-04 relating to Topic 820 "Fair Value Measures and
Disclosures". This ASU generally provides clarifications to Topic
820, but also include some instances where a particular principle
or requirement for measuring fair value or disclosing information
about fair value measurements has changed. This ASU results in
common principles and requirements for measuring fair value and for
disclosing information about fair value measurements in accordance
with US GAAP and International Financial Reporting Standards. The
amendments are effective for periods beginning after December 15,
2011 and have not been early adopted by the Fund. The directors of
the Fund considered the adoption of this ASU will not materially
impact the Fund's consolidated financial statements.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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