TIDMVOC

RNS Number : 7035D

Vision Opportunity China Fund Ltd

21 May 2012

VISION OPPORTUNITY CHINA FUND LIMITED

INTERIM REPORT AND UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD FROM 1 OCTOBER 2011 TO 31 MARCH 2012

Chairman's Statement

Period ended 31 March 2012

In the Annual Report which was published on 20 February 2012, I explained to Shareholders that the previous financial year had been very difficult, although the Company was able to fully exit six investments and opportunistically reduce its two largest holdings, QKL Stores and Shengkai Innovations, as liquidity in those stocks emerged. As a result, at 30 September 2011, the Company held six investments with a total value of US$10.55 million and cash and cash equivalents of US$8.37 million. If I were writing purely about the half year period ending 31 March 2012, I would not be able to report any significant progress in realising the Company's remaining investments. During much of that period, the Company was engaged in discussions regarding the potential sale of its entire investment portfolio which prevented it from reducing its holdings through the market. Those discussions were terminated in late March. Accordingly, at the period end, the Company's investment portfolio still comprised of six companies, which had an aggregate value of US$6.32 million, and the Company held US$7.21 million in cash and cash equivalents.

I am pleased to report that since then, the situation has improved slightly. As announced on 27 April 2012, since the period end the Company managed to monetise its remaining holding in Shengkai Innovations (VALV) and all its warrants in VALV, Tianyin Pharmaceuticals and Keyuan Petrochemicals, achieving gross sale proceeds of US$2.85 million. Whilst the Investment Manager reported to us that the sales were at prices near the historic lows for these positions, the market value of the companies had been falling for some time and, historically, liquidity had been scarce. We endorsed the Investment Manager's recommendation to sell at that time to capitalise on the available liquidity and in the knowledge that the market value of these companies could decline even further.

At 11 May 2012, the Company's portfolio comprised of three companies with an aggregate value of US$3.22 million and cash and cash equivalents of US$9.79 million. The Company's largest holding, QKL Stores, which represented 98.2% of the investment portfolio at 11 May 2012, reported in April the resignation of the director who served as Chairman of the Nominating and Corporate Governance committees and a member of the Audit and Compensation committees. Whilst that director confirmed to QKL Stores that he had no disagreements relating to its operations, policies or practices, he did recommend that it would benefit from a stronger internal governance mechanism and should review its development strategies. Although the Investment Manager has not informed us of any specific concerns flowing from such resignation, the resigning director's recommendations cause us concern in the current environment of heightened sensitivity for US-listed Chinese companies.

Your Board remains focussed on ensuring the Company's ongoing expenditure is kept to a minimum and remains focussed on returning cash to Shareholders once the Company is in a position to do so.

Until the Astrata matter becomes more clear, we are monitoring the market value of the shares in QKL Stores in the hope that the value can recover during the remaining life of the Company. In accordance with International Financial Reporting Standards, the Company's investment in QKL Stores is valued at fair value, which assumes that it will be realised in an orderly manner and sold at closing bid prices without any discount or premium resulting from the large stake the Company holds in it or the illiquid nature of its stock. The exact timing of the realisation of this investment, together with market conditions at the relevant time, could result in actual realised amounts differing significantly from its valuation at that time.

Christopher Fish

Chairman

Vision Opportunity China Fund Limited

Date:18 May 2012

Investment Manager's Report

Period ended 31 March 2012

The Company had net assets of US$13.47 million as at 31 March 2012 (US$0.206 per Ordinary Share), including investments in six portfolio companies valued at US$6.32 million and US$7.21 million in cash and cash equivalents. This level of net assets represents a decline of 25.7% from 30 September 2011, when the Company had net assets of US$18.50 million (US$0.283 per Ordinary Share). The decline is attributable to the performance of the Company's portfolio companies and net expenses of US$0.86 million.

As at 11 May 2012, the Company had net assets of US$13.01 million (US$0.197 per Ordinary Share) including investments valued at US$3.22 million and US$9.79 million in cash and cash equivalents.

Performance

The market value of the Company's portfolio companies fell 40.1% during the six month period ending 31 March 2012. This underperformance far exceeds that of weighted indices such as the MSCI China Index which gained 18.8%, Bloomberg China Reverse Mergers Index which gained 10.6% and Halter USX China Index which gained 12.9%. This underperformance is attributable to significant stock price declines of the Company's two largest holdings, QKL Stores (QKLS) and Shengkai Innovations (VALV). QKLS' stock price, already on a downtrend since it missed projected earnings in November 2010, declined further when, on 15 November 2011, QKLS announced earnings for the quarter ended 30 September 2011 which had missed its expectations. During the six month period ending 31 March 2012, QKLS' stock price declined 37.5%. During the period between 31 March 2012 and 11 May 2012, QKLS' stock price declined 17.3%. The market has also reacted very negatively to VALV's reports of its earnings for the quarters ending 30 September 2011 and 31 December 2011 (announced on 10 November 2011 and 9 February 2012, respectively), during which management issued guidance for each subsequent quarter that indicated further deterioration. During the six month period ending 31 March 2012, VALV's stock price declined 34.4%.

Portfolio Positions

During the 6 months ending 31 March 2012, the Company generated gross proceeds of US$0.54 million from sales of securities. The sale of these positions resulted in an aggregate of US$0.14 million in realised losses.

As at 31 March 2012, the Company's portfolio included two major positions, four minor positions, cash and cash equivalents.

QKL Stores (QKLS) is the Company's largest holding which represented 61.1% of the Company's non-cash portfolio as at 31 March 2012. As at 11 May 2012, QKLS represented 98.2% of the Company's non-cash portfolio. QKLS operates a chain of supermarkets and hypermarkets in Northern China. As at 11 May 2012, QKLS had had 53 store locations. This comprised 33 supermarkets, 16 hypermarkets and four department stores. QKLS has announced plans to open five additional store locations in 2012. On 25 April 2012, QKLS announced that Mr. Zhiguo Jin had resigned as a member of the Board of Directors of QKLS. Although Mr. Jin confirmed to QKLS that he had no disagreements with QKLS relating to its operations, policies or practices, he did suggest that QKLS would benefit from a stronger internal governance mechanism and should review its development strategies. Prior to his resignation, Mr. Jin also served as Chairman of the Nominating and Corporate Governance Committee and as a member of the Audit Committee and Compensation Committee.

As at 31 March 2012, Shengkai Innovations (VALV) was the Company's second largest holding, representing 36.7% of the Company's portfolio. As previously announced on 27 April 2012, the Company sold its entire holdings in VALV through a series of on-market transactions at close to market prices. The Company first undertook a partial realisation of its investment in VALV on 11 May 2009. The total proceeds from all sales of approximately US$11.94 million in cash had resulted in a realised loss of US$3.38 million on the Company's investment in VALV.

In addition, as at 31 March 2012, the Company had a small holding of shares in Wuhan General Group (WUHN) valued at US$69,582 and small warrant positions in Tianyin Pharmaceuticals (TPI), valued at US$68,248, and Keyuan Petrochemicals (KEYP), valued at US$5,160, accounting for a combined total of 2.3% of the non-cash portfolio. As previously announced, on 23 April 2012, the Company sold all its warrants in VALV, TPI and KEYP through a private sale for aggregate proceeds of US$46,250.

Investment Manager's Report, continued

Period ended 31 March 2012

The Company also continues to hold shares in China Integrated Energy (CBEH), a vertically integrated producer and distributor of biodiesel and petroleum-based fuels in China, which were written down to zero on 30 April 2011 after the NASDAQ halted trading in its shares. CBEH was at one time the Company's third-largest holding. Prior to the halt, the Company was able to realise 82.1%, or US$12.1 million, of the Company's total investment in CBEH.

As previously communicated, we are continuing to explore several avenues for generating liquidity in the remaining portfolio holdings.

Adam Benowitz

Chief Investment Officer, Senior Managing Director

Vision Capital Advisors

Date: 18 May 2012

DIRECTORS

 
At the date of this interim report, the Board comprises three Directors, 
 all of whom are non-executive and entirely independent of the Investment 
 Manager. 
 
 
Christopher Fish, Chairman, age 67 
Mr Fish retired as Managing Director of Close International Private 
 Banking in 2004 and as Chairman of Close Private Bank in 2011. 
 He has over 40 years' experience in banking, investment and fiduciary 
 businesses. Mr Fish was a Senior Executive Director and Group Head 
 of Trusts for Rea Brothers (Guernsey) Limited from 1998 until it 
 was acquired by Close Brothers Plc in 1999. Prior to joining Rea 
 Brothers (Guernsey) Limited he worked for six years at Coutts & 
 Co. in various senior roles including Managing Director of Coutts 
 & Co (Cayman) Ltd and Senior Client Partner and Director of Coutts 
 Offshore Businesses. Mr Fish worked from 1989 to 1992 as Chief 
 Executive of Leopold Joseph Holdings (Guernsey) Limited and he 
 worked from 1973 to 1989 in a number of senior positions for The 
 Royal Bank of Canada. He started his banking career in 1963 at 
 Lloyds Bank, where he remained for 10 years. Mr Fish is a director 
 of a number of other investment funds. 
John Hallam, age 63 
Mr Hallam is a Fellow of the Institute of Chartered Accountants 
 in England and Wales and qualified as an accountant in 1971. Previously, 
 he was a Partner at PricewaterhouseCoopers and retired in 1999 
 after 27 years with the firm in Guernsey and in other countries. 
 Mr Hallam is currently Chairman of Cazenove Absolute Equity Ltd, 
 Dexion Absolute Ltd and Partners Group Global Opportunities Ltd. 
 He is also a director of a number of other financial services companies, 
 some of which are traded on the London Stock Exchange. Mr Hallam 
 served for many years as a member and latterly Chairman of the 
 Guernsey Financial Services Commission, from which he retired in 
 2006. He is chairman of the Board's audit committee. 
Dr Christopher Polk, age 43 
Dr Polk is a Professor of Finance at the London School of Economics 
 and Political Science ("LSE"). He specialises in the behaviour 
 of security prices and investment strategies and researches a wide 
 range of topics, including stock market efficiency, behavioural 
 finance and corporate investment decisions. He has advised several 
 asset management companies on the effectiveness of their investment 
 strategies. Prior to joining the faculty at LSE, Dr Polk was an 
 Assistant Professor of Finance at Northwestern University's Kellogg 
 School of Management for eight years. From 1990 to 1993 he was 
 a senior consultant for Andersen Consulting before leaving to pursue 
 a PhD. He received a BS in Physics and Economics from Duke University 
 in 1990 and a PhD in Finance from the University of Chicago in 
 1998. 
 
 

INVESTMENT POLICY

On 12 August 2011, Shareholders approved the Board's proposed new investment policy, which aimed to maximise Shareholder value through the orderly realisation of the Company's investments and to return surplus cash to Shareholders. Following the approval of the new investment policy at an extraordinary general meeting, the Board instructed the Investment Manager to make no further investments other than in cash equivalents.

In line with the new investment policy and in order to return surplus cash from realisations to Shareholders, on 30 August 2011 the Company returned US$20 million (US$0.3063 or GBP0.1850 per Ordinary Share) of its capital to Shareholders on the register as at 19 August 2011.

The Board continues to seek to implement the new investment policy in as effective and efficient a manner as possible. As announced on 27 April 2012, the Company sold its entire holding in Shangkai Innovations (VALV), which was the Company's second largest holding. However, the rate at which the Company's assets are realised and the subsequent returns of value will depend, in particular, on the ease and speed with which investments can be realised and the Board continues to monitor closely the Investment Manager's selling efforts. The timing and quantum of distributions to Shareholders are uncertain and will, in part, depend on the timing and quantum of the disposal of the assets and the liabilities resulting from the operations and management of the Group.

In the event of any breach of the Company's investment policy, Shareholders will be informed of the actions to be taken by the Investment Manager by an announcement issued through a Regulatory Information Service or a notice sent to Shareholders at their registered addresses in accordance with the Articles.

The Company's investment policy is:

The Company will not purchase or subscribe for new equity investments other than in connection with an exchange of its existing investments. The Company may, however, exercise warrants and convert its preferred stock so that the value of the resulting common stock may be realised.

The Company may invest in short-dated bonds or near cash equivalent securities pending distribution of cash to Shareholders.

The Company may not make any other investments or borrow, save to provide working capital.

Returns to Shareholders will be in such quantum, on such terms and in such manner as the Board may determine in its absolute discretion.

PERFORMANCE STATISTICS

 
                           Announced     % change 
                             NAV per     in NAV per 
                            Ordinary      Ordinary                    % change 
           Date               Share        Share       Share Price    in Share 
                                                                       Price 
------------------------  -----------  ------------  -------------  ---------- 
 28 November 2007 (date     US$0.944         -          US$1.000         - 
  of Admission) 
------------------------  -----------  ------------  -------------  ---------- 
 31 December 2007           US$0.953       0.95%        US$1.050       5.00% 
------------------------  -----------  ------------  -------------  ---------- 
 31 March 2008              US$0.957       0.42%        US$1.040      -0.95% 
------------------------  -----------  ------------  -------------  ---------- 
 30 June 2008               US$1.302      36.05%        US$1.080       3.85% 
------------------------  -----------  ------------  -------------  ---------- 
 30 September 2008          US$1.219      -6.37%        US$1.030      -4.63% 
------------------------  -----------  ------------  -------------  ---------- 
 31 December 2008           US$0.931      -23.63%       US$0.800      -22.33% 
------------------------  -----------  ------------  -------------  ---------- 
 31 March 2009              US$0.951       2.15%        US$0.780      -2.50% 
------------------------  -----------  ------------  -------------  ---------- 
 30 June 2009               US$1.304      37.12%        US$0.760      -2.56% 
------------------------  -----------  ------------  -------------  ---------- 
 30 September 2009          US$2.095      60.07%        US$1.220      60.53% 
------------------------  -----------  ------------  -------------  ---------- 
 31 December 2009           US$2.256       7.68%        US$1.600      31.15% 
------------------------  -----------  ------------  -------------  ---------- 
 31 March 2010              US$2.752      21.99%        US$1.990      24.38% 
------------------------  -----------  ------------  -------------  ---------- 
 30 June 2010               US$2.314      -15.92%       US$1.810      -9.05% 
------------------------  -----------  ------------  -------------  ---------- 
 30 September 2010          US$2.105      -9.03%        US$1.580      -12.71% 
------------------------  -----------  ------------  -------------  ---------- 
 31 December 2010           US$1.797      -14.63%       US$1.525      -3.48% 
------------------------  -----------  ------------  -------------  ---------- 
 31 March 2011              US$1.138      -36.67%       US$1.085      -28.85% 
------------------------  -----------  ------------  -------------  ---------- 
 30 June 2011               US$0.709      -37.70%       US$0.565      -47.93% 
------------------------  -----------  ------------  -------------  ---------- 
 30 September 2011*         US$0.288      -59.38%       US$0.230      -59.29% 
------------------------  -----------  ------------  -------------  ---------- 
 31 December 2011*          US$0.214      -25.69%       US$0.175      -23.92% 
------------------------  -----------  ------------  -------------  ---------- 
 31 March 2012*             US$0.211       1.40%        US$0.165      -5.72% 
------------------------  -----------  ------------  -------------  ---------- 
 

* announced NAV per Ordinary Share differs to the NAV per Ordinary Share for statutory reporting purposes. A reconciliation of this difference is provided in Note 12 to these financial statements.

RETURNS OF CAPITAL

 
 Payment Date     Capital Returned (in        Record Date 
                   Cash per Ordinary Share) 
---------------  --------------------------  --------------- 
 28 May 2010      US$0.0500                   7 May 2010 
---------------  --------------------------  --------------- 
 30 August 2011   US$0.3063                   19 August 2011 
---------------  --------------------------  --------------- 
 

Consolidated Statement of Financial Position (Unaudited)

As at 31 March 2012

 
                               Notes   Unaudited       Audited      Unaudited 
                                        31 March     30 September    31 March 
                                          2012           2011          2011 
-----------------------------  -----  ------------  -------------  ----------- 
                                          US$            US$ 
Investments:                     6 
Investment designated 
 as: 
 Fair value through profit 
  or loss                                6,190,505      9,787,168   52,202,445 
 Held for trading                          127,315        767,629   10,193,120 
                                      ------------  -------------  ----------- 
Total investments                        6,317,820     10,554,797   62,395,565 
                                      ------------  -------------  ----------- 
 
Current assets: 
Cash and cash equivalents        7       7,205,618      8,372,118    9,799,671 
Other receivables                8         343,193         59,195    2,302,238 
                                      ------------ 
                                         7,548,811      8,431,313   12,101,909 
                                      ------------  -------------  ----------- 
 
Total assets                            13,866,631     18,986,110   74,497,474 
                                      ------------  -------------  ----------- 
 
Current liabilities: 
Bank overdraft                   7               -              -            3 
Other payables                   9         280,173        368,601       70,588 
                                      ------------  -------------  ----------- 
                                           280,173        368,601       70,591 
                                      ------------  -------------  ----------- 
 
Non-current liabilities: 
C Ordinary Shares of 
 GPCo                           11          16,024         16,024       16,024 
B Redeemable Preference 
 Shares of GPCo                 11         100,000        100,000      100,000 
                                      ------------  -------------  ----------- 
                                           116,024        116,024      116,024 
 
Total liabilities                          396,197        484,625      186,615 
                                      ------------  -------------  ----------- 
 
Total net assets                        13,470,434     18,501,485   74,310,859 
                                      ------------  -------------  ----------- 
 
Represented by Shareholders' 
 equity: 
 
Share capital                   11      39,821,755     39,821,755   59,819,952 
Reserves                        10    (26,351,321)   (21,320,270)   14,490,907 
                                      ------------  -------------  ----------- 
 
 Total net assets                       13,470,434     18,501,485   74,310,859 
                                      ------------  -------------  ----------- 
 
 
NAV per Ordinary Share          12          0.2063         0.2834       1.1382 
                                      ------------  -------------  ----------- 
 

The accompanying notes on pages 11 to 20 form an integral part of these financial statements.

Consolidated Statement of Comprehensive Income (Unaudited)

For the period 1 October 2011 to 31 March 2012

 
 
                                               1 October 2011   1 October 2010 
                                       Notes         to               to 
                                               31 March 2012    31 March 2011 
------------------------------------  ------  ---------------  --------------- 
                                                    US$              US$ 
Income 
Bank interest                                             622                1 
Dividend income                                           331           64,787 
Movement in net unrealised losses 
 on investments                          6        (4,046,293)     (61,497,235) 
Net realised (losses)/gains 
 on investments                         6           (137,033)           16,253 
Net foreign exchange gains/(losses)                    12,368          (4,129) 
                                              ---------------  --------------- 
 
 Net investment deficit                           (4,170,005)     (61,420,323) 
                                              ---------------  --------------- 
 
 
Expenses 
Investment Manager's fees               3             163,846        1,284,732 
Income allocation on B Redeemable 
 Preference Shares of GPCo                                  -        (230,635) 
Administrator's fees                    3             101,550          127,483 
Directors' fees                         4              98,592          112,668 
Auditor's remuneration                                 37,795           40,510 
Custodian's fees                        3            (36,243)           51,693 
Registrar's fees                        3              28,283           13,329 
NOMAD & Broker's fees                   3              47,436           47,659 
Prime Broker's commissions              3                 772           88,306 
D&O insurance                                         143,824           61,555 
Annual listing fees                                     4,762            5,372 
Legal costs and other professional 
 fees                                                 157,057          126,467 
Transaction costs                                      82,972          307,782 
Marketing fees                                         30,509           37,828 
Other expenses                                          (109)           68,502 
                                              ---------------  --------------- 
 
Total expenses                                        861,046        2,143,251 
                                              ---------------  --------------- 
 
Deficit for the period attributable 
 to Shareholders from operations                  (5,031,051)     (63,563,574) 
                                              ---------------  --------------- 
 
Total comprehensive deficit 
 for the period                         10        (5,031,051)     (63,563,574) 
                                              ---------------  --------------- 
 
Deficit per Ordinary Share (basic 
 and diluted)                            5           (0.0771)         (0.9681) 
                                              ---------------  --------------- 
 

The results from the current and prior periods are derived from continuing operations.

The accompanying notes on pages 11 to 20 form an integral part of these financial statements.

Consolidated Statement of Changes in Equity (Unaudited)

For the period 1 October 2011 to 31 March 2012

 
 
                                              1 October 2011 to 31 March 2012 
                                      Revenue     Share Capital  Treasury     Total 
                            Notes     Reserve                     Shares 
-------------------------  ------  -------------  -------------  --------  ------------ 
                                        US$            US$         US$         US$ 
 
 Balance brought forward            (21,320,270)     39,821,755         -    18,501,485 
 
Total comprehensive 
 deficit for the period      10      (5,031,051)              -         -   (5,031,051) 
 
 
 Balance carried forward            (26,351,321)     39,821,755         -    13,470,434 
                                   -------------  -------------  --------  ------------ 
 
 

For the period 1 October 2010 to 31 March 2011

 
 
                                                 1 October 2010 to 31 March 2011 
                                         Revenue     Share Capital  Treasury      Total 
                               Notes     Reserve                     Shares 
----------------------------  ------  -------------  -------------  --------  ------------- 
                                           US$            US$         US$          US$ 
 
 Balance brought forward                 78,054,481     61,259,952         -    139,314,433 
 
Repurchase and cancellation 
 of Ordinary Shares             11                     (1,440,000)              (1,440,000) 
 
Total comprehensive 
 deficit for the period         10     (63,563,574)              -         -   (63,563,574) 
 
 
 Balance carried forward                 14,490,907     59,819,952         -     74,310,859 
                                      -------------  -------------  --------  ------------- 
 
 

The accompanying notes on pages 11 to 20 form an integral part of these financial statements.

Consolidated Statement of Cash Flows (Unaudited)

For the period 1 October 2011 to 31 March 2012

 
                                                 1 October 2011  1 October 2010 
                                                       to              to 
                                          Notes   31 March 2012   31 March 2011 
---------------------------------------  ------  --------------  -------------- 
                                                      US$             US$ 
 
Cash flows from/(used in) operating 
 activities 
Bank interest received                                      622               1 
Dividends received                                          331          64,787 
Operating expenses paid                             (1,233,473)     (2,759,092) 
Amounts paid on purchases of 
 investments                                                  -     (5,192,853) 
Sales proceeds received from 
 disposal of investments                                 53,651      12,952,840 
                                                 -------------- 
 
 Net cash (used in)/from operating 
 activities                                         (1,178,869)       5,065,683 
                                                 --------------  -------------- 
 
 
Cash flows from/(used in) financing 
 activities 
Amounts received on issue of 
 C Ordinary Shares in GPCo                   11               -          16,024 
Amounts paid re buyback of Ordinary 
 Shares                                      11               -     (1,440,000) 
 
 Net cash used in financing activities                        -     (1,423,976) 
                                                 --------------  -------------- 
 
Net (decrease)/increase in cash 
 and cash equivalents during 
 the period                                         (1,178,869)       3,641,707 
 
Cash and cash equivalents, start 
 of the period                                        8,372,118       6,162,090 
 
Effect of exchange rate changes 
 during the period                                       12,369         (4,129) 
                                                 --------------  -------------- 
 
 Cash and cash equivalents, end 
 of the period                             7          7,205,618       9,799,668 
                                                 --------------  -------------- 
 
 
Cash and cash equivalents comprise 
 the following amounts: 
Bank deposits                        7,205,618  9,799,671 
Bank overdrafts                              -        (3) 
                                     7,205,618  9,799,668 
                                     ---------  --------- 
 

The accompanying notes on pages 11 to 20 form an integral part of these financial statements.

Notes to the Consolidated Financial Statements (Unaudited)

For the period 1 October 2011 to 31 March 2012

 
 
 
 
   1.   The Company: 

The Company is a Guernsey registered, closed-ended investment company and is subject to the Registered Collective Investment Scheme Rules 2008. The Company commenced business on 28 November 2007 when the Ordinary Shares were admitted to trading on AIM. The registered office of the Company is Sarnia House, Le Truchot, St Peter Port, Guernsey, GY1 4NA.

The Company's investment policy is disclosed on page 6.

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. It is not anticipated, based on the current wind down and performance of the Company, that Performance Partnership Units ("PPUs") will be issued in the future.

The C Ordinary Share of the GPCo issued to the Investment Manager entitles the Investment Manager to GBP10,000 which has been fully paid up (or equivalent) on liquidation or winding up of the Company and to no other rights.

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.

The Company, 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.

   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:

The condensed interim financial statements have been prepared in accordance with International Accounting Standard ("IAS") 34 "Interim Financial Reporting", as adopted by the European Union and are in compliance with the Companies (Guernsey) Law, 2008.

(b) Significant Accounting Policies:

The same accounting policies, presentation and methods of computation are followed in the condensed interim financial statements as those followed in the preparation of the Group's annual audited financial statements for the year ended 30 September 2011.

These financial statements have been prepared on a break up basis as the Company may go into voluntary liquidation during the next 12 months. The only impact of adopting the break-up basis compared to the going concern basis on the financial statements is the provision of liquidation costs, because in the Directors opinion the Company's investments are being carried at the best estimate of their realisable value as at the period end.

Notes to the Consolidated Financial Statements, continued

For the period 1 October to 31 March 2012

 
 
 
 
   3.   Related Parties & Material Contracts: 

The Company is responsible for the continuing fees of GPCo, the Administrator, the Custodian, the Prime Broker, the NOMAD & Broker and the Registrar in accordance with the Limited Partnership, Administration, Custodian, Prime Broker, NOMAD & Broker and Registrar agreements, respectively.

The Investment Manager is a related party of the Group.

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. The Investment Management Agreement will terminate with effect from 30 June 2012 unless the Company and the Investment Manager agree to extend it in writing.

As at 31 March 2012, the management fee creditor was US$Nil (30 September 2011: US$Nil & 31 March 2011: prepaid US$16,053).

Under the terms of the Investment Management Agreement. the Investment Manager is entitled to a performance allocation, details of the circumstances under which it could become entitled to such an allocation are set out in the Company's Annual Report for the year end 30 September 2011. It is not anticipated based on the current wind down and performance that there will be any performance allocations in the future.

Administration Agreement

Praxis Fund Services Limited was appointed as Administrator to the Group under an administration agreement dated 16 November 2007 (the "Administration Agreement"). 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, the Administrator is entitled to receive the following administration fees from the Group:

-- 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 31 March 2012, the administration fee creditor was US$19,930 (30 September 2011: US$15,201 & 31 March 2011: US$19,582).

Other support services

In addition to the services catalogued above, the Group utilises support services from other providers. As at 31 March 2012, the fee creditor for such support services was US$3,882 (30 September 2011: US$3,827 & 31 March 2011: US$3,857).

Notes to the Consolidated Financial Statements, continued

For the period 1 October to 31 March 2012

 
 
 
 
   3.   Related Parties & Material Contracts, continued: 

Custodian & Prime Broker Agreement

Jefferies & Company Inc. was appointed as custodian to the Group and in that capacity currently has custody of all of the Group's investments. In accordance with US securities laws, the assets of the Custodian's customers are required to be segregated from the Custodian's proprietary assets.

As at 31 March 2012, the custodian and prime broker fee creditor was US$863 (30 September 2011: US$2,872 & 31 March 2011: US$8,806).

Jefferies & Company Inc. has also 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 sales of securities). These fees are payable at the Prime Broker's prevailing rates.

NOMAD & Broker Agreement

Canaccord is the NOMAD & Broker to the Company under a nominated adviser and Broker agreement dated 1 October 2009 between the Company and Canaccord (the "NOMAD & Broker Agreement"). The NOMAD & Broker Agreement is on normal market terms, and under those terms the Company has agreed, inter alia, to consult and discuss with Canaccord all of its announcements and statements and to provide Canaccord with any information which Canaccord reasonably requires to enable it to carry out its obligations as a NOMAD and Broker. The NOMAD & Broker Agreement is terminable by either party on 2 months' written notice and in certain other circumstances.

As at 31 March 2012, the fees paid in advance to Canaccord were US$Nil (30 September 2011 US$Nil & 31 March 2011: US$1,918).

Co-investments with the Master Fund

The Master Fund is a related party as a result of also being managed by the Investment Manager. As at 31 March 2012, the Group held investments in the two underlying investment companies noted below, which the Master Fund also held an interest in:

-- China Integrated Energy Inc

-- 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 31 March 2012, the Directors, who held office during the period, had no interests in Ordinary Shares. There were no changes in the interests of the Directors prior to the date of this report.

No Director and no connected person of any Director has an interest in the Ordinary Shares 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 31 March 2012, Carl Kleidman and Lisa Snow, employees of Vision Capital Advisors, held a collective 85,000 (30 September 2011: Carl Kleidman and Lisa Snow, employees of Vision Capital Advisors, held a collective 85,000; 31 March 2011: Carl Kleidman, Lisa Snow and Jonathan Shane, employees of Vision Capital Advisors, held a collective 585,000) Ordinary Shares that carry certain restrictions.

Adam Benowitz and Randolph Cohen (a former Director of the Company), the principals of VCA, together beneficially hold 7,187,845 Ordinary Shares in the Company, which are held indirectly through their wholly owned holding company Tiberius Jersey.

Notes to the Consolidated Financial Statements, continued

For the period 1 October 2011 to 31 March 2012

 
 
 
 
   4.   Directors' Fees: 

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 and are included in other expense, are as follows:

 
                                 31 March 2012   30 September2011    31 March 
                                                                       2011 
                                  Annualised        Annualised      Annualised 
                                      Fee               Fee             Fee 
                                --------------  -----------------  ----------- 
                                      US$              US$             US$ 
  Christopher Fish (Chairman)           52,500             70,000       70,000 
  David Benway (resigned                     -                  -            - 
   24 January 2012) 
  Ruiping Wang (resigned 
   21 March 2012)                            -             50,000       50,000 
  Dr Christopher Polk                   37,500             50,000       50,000 
  John Hallam*                          41,250             55,000       55,000 
 

* as chairman of the Audit Committee, Mr Hallam's fee includes a further US$5,000 per annum.

All the Directors have taken a 25% reduction in fees with effect from 1 January 2012.

Mr Benway was not entitled to any Directors' fees during the period. As at 31 March 2012, the Directors' fees creditor was US$10,313 (30 September 2011 & 31 March 2011: US$Nil).

For the period ended 31 March 2012, Directors' fees were US$98,592 (30 September 2011: US$233,383 & 31 March 2011: US$112,668).

   5.   Basic & Diluted Deficit per Ordinary Share: 

Basic and diluted deficit per Ordinary Share is based on the deficit for the period of US$5,031,051 (31 March 2011: US$63,563,574 loss) and on a weighted average of 65,289,574 (31 March 2011: 65,660,453) Ordinary Shares in issue.

   6.   Investments: 
 
                                          1 October 2011   1 October 2010     1 October 
        Fair Value Through Profit               to               to              2010 
        or Loss Investments:               31 March 2012    30 September          to 
                                                                2011         31 March 2011 
                                         ---------------  ---------------  --------------- 
                                               US$              US$              US$ 
 Listed equity securities 
  (freely tradeable)                           6,190,505        4,180,905       15,875,148 
 Listed equity securities 
  (restricted)                                         -        5,606,263       36,327,297 
                                         ---------------  --------------- 
                                               6,190,505        9,787,168       52,202,445 
                                         ---------------  ---------------  --------------- 
 
       Opening fair value                      9,787,168       99,696,687       99,696,687 
       Purchases                                       -        5,201,963        5,192,853 
       Sales - proceeds                         (53,651)     (32,990,882)     (15,098,022) 
       Sales - realised (losses)/gains 
        on disposals                           (137,033)      (5,558,528)           16,253 
       Movement in net unrealised 
        (losses)                             (3,405,979)     (56,562,072)     (37,605,326) 
                                         ---------------  ---------------  --------------- 
       Closing fair value                      6,190,505        9,787,168       52,202,445 
                                         ---------------  ---------------  --------------- 
 
       Closing book cost                      19,423,148       21,094,831       44,553,362 
       Closing net unrealised 
        (losses)/gains                        13,232,643     (11,307,663)        7,649,083 
                                         ---------------  ---------------  --------------- 
       Closing fair value                      6,190,505        9,787,168       52,202,445 
                                         ---------------  ---------------  --------------- 
 

Notes to the Consolidated Financial Statements, continued

For the period 1 October 2011 to 31 March 2012

 
 
 
 
   6.   Investments, continued: 
 
                                                          1 October 2010 
        Held for Trading Investments:       1 October           to          1 October 2010 
                                              2011         30 September           to 
                                               to              2011         31 March 2011 
                                          31 March 2012 
                                        ---------------  ---------------  ---------------- 
                                              US$              US$               US$ 
 
        Unlisted investments-warrants           127,315          767,629        10,193,120 
                                        ---------------  ---------------  ---------------- 
 
       Opening fair value                       767,629       34,089,070        34,089,070 
       Purchases                                      -                -                 - 
       Sales - proceeds                               -                -           (4,041) 
       Movement in net unrealised 
        losses                                (640,314)     (33,321,441)      (23,891,909) 
                                        ---------------  ---------------  ---------------- 
       Closing fair value                       127,315          767,629        10,193,120 
                                        ---------------  ---------------  ---------------- 
 
       Closing book cost                         93,486           93,486            89,445 
       Closing net unrealised 
        gains                                    33,829          674,143        10,103,675 
                                        ---------------  ---------------  ---------------- 
       Closing fair value                       127,315          767,629        10,193,120 
                                        ---------------  ---------------  ---------------- 
 
 
                                            1 October      1 October 2010   1 October 2010 
                                               2011              to               to 
        Total Investments:                      to          30 September     31 March 2011 
                                           31 March 2012        2011 
                                         ---------------  ---------------  --------------- 
                                               US$              US$              US$ 
 
  Listed equity securities 
  (freely tradeable)                           6,190,505        4,180,905       15,875,148 
 Listed equity securities 
  (restricted)                                         -        5,606,263       36,327,297 
       Warrants                                  127,315          767,629       10,193,120 
                                         ---------------  ---------------  --------------- 
                                               6,317,820       10,554,797       62,395,565 
                                         ---------------  ---------------  --------------- 
 
       Opening fair value                     10,554,797      133,785,757      133,785,757 
       Purchases                                       -        5,201,963        5,192,853 
       Sales - proceeds                         (53,652)     (32,990,882)     (15,102,063) 
       Sales - realised (losses)/gains 
        on disposals                           (137,032)      (5,558,528)           16,253 
       Movement in net unrealised 
        losses                               (4,046,293)     (89,883,513)     (61,497,235) 
                                         ---------------  ---------------  --------------- 
       Closing fair value                      6,317,820       10,554,797       62,395,565 
                                         ---------------  ---------------  --------------- 
 
       Closing book cost                      20,997,632       21,188,317       44,642,807 
       Closing net unrealised 
        gains                               (14,679,812)     (10,633,520)       17,752,758 
                                         ---------------  ---------------  --------------- 
       Closing fair value                      6,317,820       10,554,797       62,395,565 
                                         ---------------  ---------------  --------------- 
 
   7.   Cash and Cash Equivalents: 
 
                         31 March 2012   30 September   31 March 2011 
                                             2011 
                        --------------  -------------  -------------- 
                              US$            US$             US$ 
       Cash at bank          7,205,618      8,372,118       9,799,671 
       Bank overdraft                -              -             (3) 
                        --------------  -------------  -------------- 
                             7,205,618      8,372,118       9,799,668 
                        --------------  -------------  -------------- 
 
 

Notes to the Consolidated Financial Statements, continued

For the period 1 Ocrober 2011 to 31 March 2012

 
 
 
 
   8.   Other Receivables: 
 
                               31 March 2012   30 September   31 March 2011 
                                                   2011 
                              --------------  -------------  -------------- 
                                    US$            US$             US$ 
       Unsettled investment 
        sales                              -              -       2,149,224 
       Prepayments                   343,193         59,195         153,014 
                              --------------  -------------  -------------- 
                                     343,193         59,195       2,302,238 
                              --------------  -------------  -------------- 
 

The Directors consider that the carrying amount of other receivables approximates fair value.

   9.   Other Payables: 
 
                                   31 March 2012   30 September   31 March 2011 
                                                       2011 
                                  --------------  -------------  -------------- 
                                        US$            US$             US$ 
       Income allocation on 
        B Redeemable Preference 
        Shares                         (101,293)      (101,293)       (101,293) 
       Administrator's fee                19,930         15,201          19,582 
       Registrar's fee                     3,882          3,827           3,857 
       NOMAD & Broker's fees                   -              -           1,918 
       Prime Broker fees                     863          2,872           8,806 
       Legal & professional 
        fees                             273,523        325,444          69,566 
       Consultancy fees                    5,387          5,387           8,558 
       Audit fee                          40,408         74,803          48,581 
       Travel & marketing                  4,513          4,790               - 
       Directors' fees                    10,313              -               - 
       Sundry payables                    22,647         37,570          11,013 
                                  --------------  -------------  -------------- 
                                         280,173        368,601          70,588 
                                  --------------  -------------  -------------- 
 

The Directors consider that the carrying amount of other payables approximates fair value.

10. Reserves:

 
                                    1 October 2011  1 October 2010  1 October 2010 
                                          to              to              to 
                                     31 March 2012   30 September    31 March 2011 
                                                         2011 
                                    --------------  --------------  -------------- 
                                         US$             US$             US$ 
      Opening revenue reserve         (21,320,270)      78,054,481      78,054,481 
      Total comprehensive deficit 
       for the period/year             (5,031,051)    (99,374,751)    (63,563,574) 
                                    --------------  --------------  -------------- 
      Closing revenue reserve         (26,351,321)    (21,320,270)      14,490,907 
                                    --------------  --------------  -------------- 
 

Notes to the Consolidated Financial Statements, continued

For the period 1 October 2011 to 31 March 2012

 
 
 
 

11. Share Capital:

 
                                                        31 March 2012, 
                                                          30 September 
                                                         2011 & 31 March 
                                                              2011 
                                                       ----------------- 
      Authorised Share Capital:                               US$ 
      Unlimited shares of no par value that may be 
       issued as Ordinary Shares                                       - 
                                                       ----------------- 
 
 
                             1 October 2011  1 October 2010  1 October 2010 
                                   to              to              to 
                              31 March 2012   30 September    31 March 2011 
                                                  2011 
                             --------------  --------------  -------------- 
      Allotted, Issued and        No.             No.             No. 
       Fully Paid: 
      Brought forward            65,289,574      66,189,574      66,189,574 
      Repurchased Ordinary 
       Shares cancelled                   -       (900,000)       (900,000) 
      Carried forward            65,289,574      65,289,574      65,289,574 
                             --------------  --------------  -------------- 
 
 
 
                                    1 October 2011  1 October 2010  1 October 2010 
                                          to              to              to 
                                     31 March 2012   30 September    31 March 2011 
                                                         2011 
                                    --------------  --------------  -------------- 
      Share Capital:                     US$             US$             US$ 
      Share capital brought 
       forward                          39,821,755      61,259,952      61,259,952 
      Capital distribution                       -    (19,998,197)               - 
      Repurchase and cancellation 
       of Ordinary Shares held 
       in treasury during the 
       period/year                               -     (1,440,000)     (1,440,000) 
                                    --------------  --------------  -------------- 
      Share capital carried 
       forward                          39,821,755      39,821,755      59,819,952 
                                    --------------  --------------  -------------- 
 

On 14 December 2010, in accordance with the Company's buy-back programme in relation to its distribution policy in respect of the year ended 30 September 2010, the Company acquired 900,000 Ordinary Shares from Shareholders for an aggregate price of US$1.44 million. On 17 December 2010, those Ordinary Shares of the Company that were being held in treasury were cancelled. Following the cancellation, as at 31 March 2012, the number of issued Ordinary Shares of the Company was 65,289,574.

On 30 August 2011, in accordance with the Company's distribution policy, the Company paid to Shareholders (on the register as at close of business on 19 August 2011) a return of capital of US$0.3063 per Ordinary Share, amounting to US$20.0million in aggregrate.

The repurchase of Ordinary Shares by the Company was funded from the Company's cash resources.

The Company's authorised capital structure comprises an unlimited number of shares of no par value.

Notes to the Consolidated Financial Statements, continued

For the period 1 October 2011 to 31 March 2012

 
 
 
 

11. Share Capital, continued:

Ordinary Shareholders have the following rights:

   (i)         Dividends 

During the year 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 profits 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 Shares

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 A Ordinary Shares of the GPCo.

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. There is no vested performance allocation at 31 March 2012 and it is not expected that any further performance allocation will vest in future.

Notes to the Consolidated Financial Statements, continued

For the period 1 October 2011 to 31 March 2012

 
 
 
 

11. Share Capital, continued:

d) 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.

e) 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. The value of the B Redeemable Preference Shares is classified as a liability in these financial statements.

C Ordinary Share

A C Ordinary Share in GPCo was issued to VCA to enable it to comply with certain capital adequacy requirements. The Share carries no rights to vote at general meetings, no rights to dividends or other distributions (including on a return of capital) and only the right to receive GBP10,000 on a liquidation or winding up of GPCo. The value of the C Ordinary Share is classified as a liability in these financial statements.

12. NAV per Ordinary Share:

The NAV per Ordinary Share is based on the net assets attributable to Shareholders of US$13,470,434 (30 September 2011: US$18,501,485 & 31 March 2011: US$74,310,859) and on the Ordinary Shares at the period end in issue of 65,289,574 (30 September 2011 & 31 March 2011: 65,289,574).

 
                                         31 March 2012   30 September   31 March 2011 
                                                             2011 
                                        --------------  -------------  -------------- 
                                              US$            US$             US$ 
       Announced NAV per Ordinary 
        Share                                    0.210          0.288           1.138 
       Adjustment re litigation 
        and liquidation fees                     0.004          0.004               - 
                                        --------------  -------------  -------------- 
       Statutory financial statements 
        NAV per Ordinary Share                   0.206          0.284           1.138 
                                        --------------  -------------  -------------- 
 

13. Dividend:

The Directors do not recommend the payment of a dividend for the period ended 31 March 2012 (31 March 2011: US$Nil).

14. Distribution:

On 14 December 2010, in accordance with the Company's buy-back programme in relation to its distribution policy in respect of the year ended 30 September 2010, the Company acquired 900,000 Ordinary Shares from Shareholders for an aggregate price of US$1.44 million. On 17 December 2010, those Ordinary Shares of the Company that were being held in treasury were cancelled. Following the cancellation, as at 31 March 2012, the number of issued Ordinary Shares of the Company was 65,289,574.

On 30 August 2011, the Company paid to Shareholders a return of capital amounting to US$20 million in aggregate. The remaining amount to be distributed to Shareholders as at 30 September 2011 was US$Nil.

15. 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.

Notes to the Consolidated Financial Statements, continued

For the period 1 October 2011 to 31 March 2012

 
 
 
 

16. 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.

17. Contingent Liability:

In 2010, legal proceedings were brought against the Company, the Limited Partnership and other defendants in the United States Bankruptcy Court for the District of Nevada by the Trustee of the Litigation Trust of Astrata Group, Inc., a former Investee of the Company. At a hearing on 23 January 2012, the court allowed certain causes of action against the Company and the Limited Partnership to continue but dismissed the more substantial damage claims related to the loss of certain contracts. The remaining damage claims alleged in the complaint are those related to other lost "key contracts", bankruptcy administrative costs, the loss of "enterprise value" and cash flow, disgorgement and restitution. Based on the advice of counsel that has been engaged to defend the Company, the Company disputes the merits of the remaining claims. However, mindful of the potential litigation costs in this matter, and also with the advice and assistance of counsel, the Company is engaged in settlement negotiations with the Litigation Trustee.

Based on the complaint, the alleged value of the claims relating to other lost "key contracts" and bankruptcy administrative costs is now approximately US$35 million. An amount has not yet been alleged in relation to the claims for loss of "enterprise value" and cash flow, or for punitive and exemplary damages, attorneys' fees, pre-judgment interest, disgorgement or restitution. At the present time, the Company considers it not possible to know the outcome of the remaining claims. The legal costs incurred to date have been expensed. The Directors have decided to make a provision of US$250,000 against the future costs of vigorously defending or otherwise settling the proceedings and pursuing counterclaims and/or setoffs and defences against the plaintiff.

18. Post Period End Events:

Since the period end the Company managed to monetise its remaining holding in Shengkai Innovations (VALV) and all its warrants in VALV, Tianyin Pharmaceuticals and Keyuan Petrochemicals, achieving gross sale proceeds of US$2.86 million.

There were no other significant post period end events that require disclosure in these financial statements.

DEFINITIONS

 
 Adjusted Closing NAV          the NAV at the end of a performance period 
  per Ordinary Share            (for the avoidance of doubt, after deducting 
                                the performance allocation accrued in any previous 
                                performance period) divided by the number of 
                                Ordinary Shares in issue at the time 
 Administrator                 Praxis Fund Services Limited 
 Admission                     the admission of the Ordinary Shares to trading 
                                on AIM which occurred on 28 November 2007 
 AIM                           AIM, a market operated by the London Stock 
                                Exchange 
 AIM Rules                     the AIM Rules for Companies of the London Stock 
                                Exchange 
 A Ordinary Shares             A Ordinary Shares issued by GPCo 
 B Redeemable Preference       B Redeemable Preference Shares issued by GPCo 
  Shares 
 Board                         the board of directors of the Company 
 Canaccord                     Canaccord Genuity Limited, the Company's nominated 
                                adviser & broker 
 Company or VOC                Vision Opportunity China Fund Limited 
 C Ordinary Shares             C Ordinary Shares issued by GPCo 
 Custodian                     Jefferies & Company Inc. 
 Directors                     the directors of the Company 
 GPCo                          Vision Opportunity China GP Limited 
 Group                         the Company, GPCo, the Limited Partnership 
                                and their subsidiary undertakings from time 
                                to time 
 High Watermark                the highest previously recorded Opening NAV 
                                per Ordinary Share as reduced by the sum of 
                                all dividends and distributions paid, made 
                                or declared per Ordinary Share since the date 
                                such highest Opening NAV per Ordinary Share 
                                was established 
 Hurdle NAV                    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 
 Investee Company              a company in which an investment is held 
 Investment Management         the investment management agreement dated 16 
  Agreement                     November 2007, amended and restated investment 
                                management agreement dated 12 August 2011 and 
                                the 3 month extension agreement dated 31 March 
                                2012 between the Company and the Investment 
                                Manager 
 Investment Manager            Vision Capital Advisors, LLC, a limited liability 
  or Vision Capital Advisors    corporation incorporated in Delaware, US and 
                                the investment manager of the Company 
 Limited Partnership           Vision Opportunity China LP 
 Limited Partnership           the agreement between VOC and GPCo establishing 
  Agreement                     the Limited Partnership 
 London Stock Exchange         London Stock Exchange plc 
 Master Fund                   Vision Opportunity Master Fund, Ltd, a Cayman 
                                Island exempt corporation managed by Vision 
                                Capital Advisors, including any other fund 
                                to which Vision Opportunity Master Fund, Ltd 
                                transfers a portion of its assets and which 
                                will continue to be managed by Vision Capital 
                                Advisors 
 

DEFINITIONS, continued

 
 NAV                        the net asset value of the Group or of an Ordinary 
                             Share (as the context requires) calculated 
                             in accordance with the investment valuation 
                             policy and the accounting policies of the Group 
                             from time to time 
 NOMAD & Broker             Canaccord 
 Opening NAV per Ordinary   the NAV at the beginning of a performance period 
  Share                      (for the avoidance of doubt, after deducting 
                             the performance allocation accrued in any previous 
                             performance period) divided by the number of 
                             Ordinary Shares in issue at the time 
 Ordinary Shares or         ordinary shares of no par value in the share 
  Shares                     capital of the Company 
 Prime Broker               Jefferies & Company Inc. 
 Registrar                  Capita Registrars (Guernsey) Limited 
 Shareholders               the shareholders of the Company 
 Treasury Shares            Ordinary Shares held in treasury by the Company 
 US                         the United States of America 
 US$                        US dollars, the lawful currency of the US 
 GBP or Sterling            pounds sterling, the lawful currency of the 
                             United Kingdom 
 

COMPANY INFORMATION

Directors: Christopher Fish (Non-executive Independent Chairman)

John Hallam(Non-executive Independent Director)

Dr Christopher Polk (Non-executive Independent Director)

David Benway (Non-executive Director), (resigned 24 January 2012)

Ruiping Wang (Non-executive Independent Director), (resigned 21 March 2012)

   Registered Office:                                                       Sarnia House 

Le Truchot

St Peter Port

Guernsey, GY1 4NA

   Administrator & Secretary                                        Praxis Fund Services Limited 

Sarnia House

Le Truchot

St Peter Port

Guernsey, GY1 4NA

Registrar: Capita Registrars (Guernsey) Limited

Mont Crevelt House

Bulwer Avenue

St Sampson

Guernsey, GY2 4LH

   Investment Manager:                                                 Vision Capital Advisors, LLC 

20 West 55(th) Street

5(th) Floor

New York, NY10019

USA

Auditors: KPMG Channel Islands Limited

PO Box 20

New Street, St Peter Port

Guernsey, GY1 4AN

   Nominated Adviser & Broker:                                   Canaccord Genuity Limited 

9(th) Floor

88 Wood Street

London, EC2V 7QR

   English Solicitors:                                                       Travers Smith LLP 

10 Snow Hill

London, EC1A 2AL

   Guernsey Advocates:                                                 Mourant Ozannes 

1 Le Marchant Street

St Peter Port

Guernsey, GY1 4HP

   Custodian, Prime Broker & Banker:                        Jefferies & Company Inc. 

520 Madison Avenue

12(th) Floor

New York, NY10022

USA

Banker: Lloyds TSB Offshore Limited

Corporate Banking

PO Box 123

Sarnia House

Le Truchot

St Peter Port

Guernsey, GY1 4EF

   Company Number:                                                      47999 (Registered in Guernsey) 

Sources of Further Information:

The Ordinary Shares are quoted on AIM. Information updates are available on the Company's website, www.vocfund.com.

Frequency of NAV Publication:

The Company's NAV is released via a Regulatory Information Service weekly.

This information is provided by RNS

The company news service from the London Stock Exchange

END

IR BLGDUUBBBGDI

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