Interim Report Part II
Siam Investment Fund
24 December 2002
SIAM INVESTMENT FUND
STATEMENTS OF OPERATIONS
FOR THE 6-MONTH PERIOD ENDED 30 SEPTEMBER 2002 AND 2001
US$
2002 2001
Notes (Restated)
Income
Interest income 12,981 162,489
Dividend income 399,369 340,010
Net unrealized gain on foreign exchange
relating to carrying value
of investments 14 535,737 447,464
Net realized gain on sale of investments 14 3,194,384 864,588
Other income - 136,400
Total income 4,142,471 1,950,951
Expenses
Advisory fees 9.1 249,996 249,996
Administrative expenses 10 99,747 100,778
Net unrealized loss on valuation of investments 14 7,263,106 1,760,654
Net realized loss on foreign exchange relating
to carrying value of investments 14 262,893 152,539
Total expenses 7,875,742 2,263,967
Net loss for the period (3,733,271) (313,016)
Loss per share (1.49) (0.13)
The accounting policies and the notes on pages 5 to 17 form an integral part of
these financial statements.
1
SIAM INVESTMENT FUND
BALANCE SHEETS
AS AT 30 SEPTEMBER 2002 AND 2001
US$
Notes 2002 2001
Investments 4 19,852,711 17,299,411
Current assets
Cash and cash equivalents 1,550,305 335,289
Forward contract receivable, net 5 - 123,362
Interest receivable - 1,019,639
Other assets 7,587 3,083
Total current assets 1,557,892 1,481,373
Current liabilities
Accrued expenses (34,596) (30,132)
Total current liabilities (34,596) (30,132)
Net current assets 1,523,296 1,451,241
Net assets 21,376,007 18,750,652
Net assets financed by:
Share capital 6 12,500 12,500
Share premium 7 24,987,500 24,987,500
Capital reserve (4,276,778) (6,845,816)
Revenue reserve 652,785 596,468
Total shareholders' funds 21,376,007 18,750,652
Net asset value per share 8 8.55 7.50
For and on behalf of Siam Investment Fund:
............................................... Director
............................................... Director
The accounting policies and the notes on pages 5 to 17 form an integral part of
these financial statements.
2
SIAM INVESTMENT FUND
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE 6-MONTH PERIOD ENDED 30 SEPTEMBER 2002 AND 2001
Revenue
Share Share Capital reserve Total
capital premium reserve (Restated)
Balance at 1 April 2001 12,500 24,987,500 (6,244,675) 308,343 19,063,668
Net loss for the period - - - (313,016) (313,016)
Appropriated for:
Net unrealized loss on valuation
of investments - - (1,760,654) 1,760,654 -
Net realized loss on foreign exchange - - (152,539) 152,539 -
Net unrealized gain on foreign
exchange relating to carrying
value of investments - - 447,464 (447,464) -
Net realized gain on sale of - - 864,588 (864,588) -
investments
Balance at 30 September 2001 12,500 24,987,500 (6,845,816) 596,468 18,750,652
Balance at 1 April 2002 12,500 24,987,500 (480,900) 590,178 25,109,278
Net loss for the period - - - (3,733,271) (3,733,271)
Appropriated for:
Net unrealized loss on valuation
of investments - - (7,263,106) 7,263,106 -
Net realized loss on foreign exchange - - (262,893) 262,893 -
Net unrealized gain on foreign
exchange relating to carrying
value of investments - - 535,737 (535,737) -
Net realized gain on sale of investments - - 3,194,384 (3,194,384) -
Balance at 30 September 2002 12,500 24,987,500 (4,276,778) 652,785 21,376,007
The accounting policies and the notes on pages 5 to 17 form an integral part of
these financial statements.
3
SIAM INVESTMENT FUND
STATEMENTS OF CASH FLOWS
FOR THE 6-MONTH ENDED 30 SEPTEMBER 2002 AND 2001
US$
2002 2001
(Restated)
Cash flows from operating activities:
Net loss for the period (3,733,271) (313,016)
Unrealized loss on valuation of investments 7,263,106 1,760,654
Unrealized gain on foreign exchange relating to
carrying value of investments (535,737) (324,102)
Unrealized gain on foreign exchange forward contracts - (123,362)
2,994,098 1,000,174
Changes in assets and liabilities:
Accounts receivable 545,788 -
Interest receivable - (266,728)
Other current assets 5,413 9,250
Investment 1,458,299 (697,754)
Dividend payable (3,750,000) -
Accrued expenses 25,466 19,106
Total cash provided from
operating activities 1,279,064 64,048
Increase in cash and cash equivalents for period 1,279,064 64,048
Cash and cash equivalents at beginning of the period 271,241 271,241
Cash and cash equivalents at end of the period 1,550,305 335,289
The accounting policies and the notes on pages 5 to 17 form an integral part of
these financial statements.
4
SIAM INVESTMENT FUND
NOTES TO THE FINANCIAL STATEMENTS
AS AT 30 SEPTEMBER 2002 AND 2001
1 Business activities
Siam Investment Fund ('the Fund') is a closed-end investment fund and was
incorporated as an exempted company with limited liability in the Cayman Islands
on 22 February 1996. The Fund obtained a listing for its shares on the London
Stock Exchange on 25 April 1996. The Fund's investment objective is to achieve
long-term capital appreciation through investments primarily in unlisted
companies, joint ventures and projects. Previously, such investments were in
the Southeast Asian region; however, following a change in mandate, approved at
a shareholders meeting held on 6 March 1998, the Fund may now invest up to 100%
of its capital in listed and unlisted companies in Thailand.
2 Duration
The Fund may be dissolved on 31 March 2006. However, with the approval
from the holders of at least two-thirds of the shares of the Fund, approved at
or prior to the annual general meeting in 2006, the term of the Fund may be
extended for an additional two years to 31 March 2008.
3 Significant accounting policies
a) Basis of preparation
The financial statements have been prepared in accordance with and are
generally consistent with the International Accounting Standards. These require
the Fund's Directors to make estimates and assumptions that effect the reported
amounts and disclosure in the financial statements. Actual results could differ
from these estimates. The financial statements are prepared under the historical
cost convention as modified by the revaluation of certain marketable securities
and investment properties.
b) Cash equivalents
The Fund considers all highly liquid investments with a maturity of three months
or less when purchased to be cash equivalents.
5
c) Investments
The Fund's income, which is derived from investments and interest on deposits
(excluding capital gains) after paying fees and other expenses of the Fund, may
be distributed to Shareholders in the form of dividend. It is the intention of
the Directors that dividends will not be paid out of unrealised gains. Realised
gains (net of any realised losses or unrealised provisions for losses) may be
distributed, if approved by the Board, provided that the Fund generally expects
that it will reinvest the original cost of each realised investment. As a result
of this dividend policy, realised and unrealised gains and losses on
investments, including those relating to foreign exchange translation of the
original cost of investment into US Dollars at the balance sheet date, are
appropriated as capital reserve.
Any distributions to shareholders are recorded on the ex-dividend date.
All securities for which market quotations are readily available are valued at
the closing market price. Securities for which market quotations are not readily
available are valued by the Directors at cost to the Fund or at a valuation
based on third-party transactions in the same or in similar investments or at
fair market value taking into consideration the cost of the investments, the
quoted prices of investments of comparable publicly traded companies, market
conditions, the underlying collateral, financial data and projections of the
issuer of any relevant securities, and such other factors as the Directors may
deem relevant.
Investment transactions are accounted for on the trade date. Realised gains and
losses from securities transactions are reported on an identified cost basis.
Dividend and interest income is accounted for on an accrual basis. Discounts on
securities purchased are amortised over the life of the respective securities.
d) Foreign currency transactions
Transactions denominated in foreign currencies are translated into United States
dollars at the rates of exchange ruling on the transaction dates. All assets
and liabilities expressed in foreign currencies at the balance sheet date are
translated into United States dollars at the rate of exchange ruling at that
date.
Realised and unrealised gains and losses on translation of foreign currencies
relating to the carrying value of investments are charged directly to income
statements before being appropriated as the capital reserves. All other realised
and unrealised gains and losses on translation of foreign currencies are
included in the income and expenditure account.
e) Interest income
Interest income is recognised under the accrual basis. For the period ended 30
September 2002, interest income arising from cash and cash equivalents was US$
12,981 (2001: US$ 13,041) and no interest income arising from investments (2001:
US$ 149,448).
6
4 Investments
US$
2002 2001
Listed securities, at market value 17,907,624 13,398,066
Unlisted securities, at Directors valuation 1,945,087 3,901,345
Investments - net 19,852,711 17,299,411
Cost of investments 25,578,993 22,663,439
The cost of investments shown above and in 4.1 and 4.2 below reflect the cost at
the date of acquisition and do not include any subsequent foreign exchange
adjustments.
7
An analysis of the Company's investments is as follows:
2002 2001
_______________________________ ________________________________________
% of
net
Market Market assets
Industry % Cost value % Cost value of the
holding US$ US$ holding US$ US$ Fund
2002 2001
4.1 Listed
investments
Nation
Multimedia
Group Public
Co., Ltd. Publishing 5.59% 2,743,165 2,466,956 9.64% 4,720,635 3,087,529 11.54 16.47
SE - Education
Public Co., Publishing 6.14% 799,105 1,677,663 19.37% 2,057,458 2,758,919 7.85 14.71
Ltd.
TISCO Finance
Public Co., Finance 0.27% 484,363 359,425 2.37% 1,203,758 1,051,264 1.68 5.60
Ltd
Thai Military
Bank
Public Co., Banking 0.20% 1,267,692 419,306 0.20% 1,267,692 424,686 1.96 2.26
Ltd.
Bangkok Bank
Public Co., Banking 0.08% 1,559,377 1,222,919 0.06% 796,383 639,014 5.72 3.41
Ltd.
The Siam
Cement
Public Co., Building - - - 0.03% 512,943 365,919 - 1.95
Ltd
Telecom Asia
Corp
Public Co., Communication 0.07% 815,493 204,550 0.03% 626,869 182,577 0.96 0.97
Ltd.
Advanced Info
Services
Public Co., Communication 0.03% 1,058,184 739,884 0.01% 204,798 206,278 3.46 1.10
Ltd
Shinawatra
Satellite
Public Co., Communication 0.22% 543,381 394,728 - - - 1.85 -
Ltd
8
2002 2001
_______________________________ _______________________________________
% of net
Market Market assets
Industry % holding Cost value % holding Cost value of the
US$ US$ US$ US$ Fund
2002 2001
4.1 Listed
investments
(continued)
Singer (Thailand)
Public Co., Ltd. Electrical
Products - - - 1.80% 367,996 349,345 - 1.86
Compass East
Industry (Thailand)
Public Co., Ltd Electrical
Products - - - 0.46% 270,572 375,614 - 2.00
Delta Electronics
(Thailand)
Public Co., Ltd Electrical
Components 0.08% 604,346 566,601 0.06% 363,737 288,361 2.65 1.54
Hana
Microelectronics
Public Co., Ltd Electrical
Components 0.19% 553,273 441,399 0.15% 428,574 230,560 2.06 1.23
KCE Electronics
Public Co., Ltd Electrical
Components 1.50% 625,587 527,168 0.77% 368,808 211,435 2.47 1.13
K.R Precision
Public Co., Ltd Electrical
Components - - - 0.49% 251,925 104,610 - 0.56
Cal-Comp Electronic
Public Co., Ltd Electrical
Components - - - 0.12% 241,490 164,798 - 0.88
9
2002 2001
_______________________________ ____________________________________
% of
net
Market Market assets
Industry % Cost value % Cost value of the
holding US$ US$ holding US$ US$ Fund
2002 2001
4.1 Listed investments
(continued)
PTT Public Co., Ltd Energy 0.04% 890,362 947,977 - - - 4.43 -
Siam Makro
Public Co., Ltd Commerce 0.28% 658,451 733,309 - - - 3.43 -
BEC World
Public Co., Ltd Entertainment 0.06% 717,848 588,208 - - - 2.75 -
Sansiri
Public Co., Ltd Property 5.18% 1,607,415 1,515,376 - - - 7.09 -
Golden Land Property
Development
Public Co., Ltd Property 0.17% 332,260 200,000 - 51,337 47,758 0.94 0.25
Thai Airways
International
Public Co., Ltd Transportation 0.02% 225,729 138,714 0.83% 335,100 234,014 0.65 1.25
Regional Container
Lines
Public Co., Ltd Transportation 0.40% 271,102 283,935 0.19% 159,058 131,096 1.33 0.70
Pranda Jewelry
Public Co., Ltd Jewelry 1.91% 477,330 407,278 0.10% 166,059 190,126 1.91 1.01
Thai Reinsurance
Public Co., Ltd Insurance 0.47% 362,648 369,884 - - - 1.73 -
SE-Education-Warrants
Public Co., Ltd Publishing - 385,210 1,449,809 - - 647,359 6.79 3.46
10
2002 2001
Market Market % of net
Industry % holding Cost value % holding Cost value assets
US$ US$ US$ US$ 2002 of the
Fund
2001
Phoenix Pulp and Paper
Public Co., Ltd Pulp
& Paper - - - 0.48% 460,610 422,896 - 2.26
Serm Suk
Public Co., Ltd Food
& Beverages - - - 0.59% 286,121 502,816 - 2.68
Thai Union Frozen Products
Public Co., Ltd Food
& Beverages 0.17% 336,680 582,052 0.83% 336,680 425,744 2.72 2.27
Surapon Foods
Public Co., Ltd Food
& Beverages 0.81% 150,013 104,805 - - - 0.49 -
Miscellaneous investments nil 73,827 288,094 - 283,906 272,738 1.35 1.46
Asia Pacific Resources Potash
Ltd. (c) Fertilizer 43.38% 3,573,583 1,277,584 - 438,361 82,610 5.98 0.44
Total-listed investments 21,116,424 17,907,624 16,200,870 13,398,066 83.79 71.45
11
4.2 Unlisted investments
4.2.1 Equity investments
2002 2001
Directors' Directors' % of net assets
Industry % holding Cost valuation % holding Cost valuation of the Fund
US$ US$ US$ US$ 2002 2001
Northbridge Communities
Ltd. (a) International
School 6.25% 2,462,569 1,445,087 6.25% 2,462,569 1,401,345 6.76 7.47
Total-unlisted equity
investment 2,462,569 1,445,087 2,462,569 1,401,345 6.76 7.47
4.2.2 Debt investments
Convertible term loan to
Monterey Pizza Co.,
Ltd. (b) Foods - 2,000,000 500,000 - 2,000,000 500,000 2.33 2.67
Convertible term debenture to
Asia Pacific Resources
Ltd. (c) Potash
Fertilizer - - - - 2,000,000 2,000,000 - 10.67
Total-unlisted debt
investments 2,000,000 500,000 4,000,000 2,500,000 2.33 13.34
Total-unlisted investments 4,462,569 1,945,087 6,462,569 3,901,345 9.09 20.81
Investments - net 25,578,993 19,852,711 22,663,439 17,299,411 92.88 92.26
12
(a) Northbridge Communities Ltd.
Northbridge Communities Ltd. ('NCL') operates international schools and related
property developments in Thailand and Cambodia.
The operation from both sites has been doing well since July 2001. International
School Eastern Seaboard (ISE) in Thailand has generated a cash surplus, which
will be applied to their loan with a bank. Northbridge International School
Cambodia (NISC) in Cambodia recorded a loss last year but should break even this
year. Houses in Thailand are fully rented. Construction of apartment facilities
in Cambodia has been completed and 15 of the 16 units are rented out. The Thai
Export - Import Bank has approved in providing US$ 1.2 million with interest
rate of LIBOR+3.25% p.a. payable every 3 months financing for the housing
development in Cambodia. This project will include 11 houses, 7 of which will be
leased out and 4 will be sold.
(b) Monterey Pizza Co., Ltd.
The convertible term loan to Monterey Pizza Co., Ltd. ('Monterey') is
denominated in US$ and carries interest at six month US$ LIBOR, payable every
six months. The loan is secured by the major shareholders of Monterey and was
repayable in full prior to 20 December 1998. As part of the loan agreement, the
Fund has the right to convert a portion of the term loan into Monterey Shares
equivalent to 250,000 Monterey shares (with par value of Baht 100 per share)
which have been placed in escrow.
Monterey has experienced financial difficulties since 1997. Interest has not
been paid when due. The Fund has stopped accruing interest since December 1997.
A legal demand for payment of principal and accrued interest has been made to
Monterey as well as to 2 directors who have guaranteed the loan. The court ruled
in favor of the Fund's demand for Baht 108 million. The defendants have been
asked by the court to settle with the Fund. The loan has already been written
down to US$ 500,000.
(c) Asia Pacific Resources Ltd.
In 1998, the Fund invested US$ 2 million in a convertible term debenture issue
by Asia Pacific Resources Ltd. ('APQ') The debenture was originally due to
mature on 13 August 2000 but this was subsequently extended by one year. The
debenture carried interest at 10%. As part of the debenture agreement, the Fund
had the right to convert the term debenture into APQ shares at US$ 2.32 per
share.
In December 2001, the maturity of the debenture was further extended to 28
February 2002. In February 2002, the Company announced a significant refinancing
exercise which included both a rights issue and the conversion of the
convertible debentures at a revised conversion price of C$ 0.20 per share. Under
the financing terms, Crew Development Corporation, the principal shareholder in
APQ and Olympus Capital Holdings Asia I, L.P., the principal holder of the
convertible debenture, undertook to provide interim financing and a minimum
funding injection of up to a combined C$ 10 million in the event that the
subscriptions amounted to less than C$ 20 million.
13
In the event, the Fund received a total of 25,590,466 shares in APQ as a result
of the conversion. These shares were delivered on 17 April 2002.
APQ shares are listed on the Toronto Stock Exchange. The market value of APQ
common share as at 30 September 2002 was US$ 0.0504 (2001: US$ 0.2849) per
share.
Credit risk
The Fund has significant investments in Thailand which may involve greater risk
than investments in more developed markets. The prices of such investments may
be volatile. The yields of emerging market debt obligations reflect, amongst
other matters, perceived credit risk. The consequences of political, social or
economic changes in Thailand may have disruptive effects on the market prices of
the Fund's investments and the income they generate.
Currency risk
All of the Fund's equity investments where the investee company is incorporated
in Thailand are subject to currency risk as the investee shares are denominated
in Thai Baht. The Fund's debt investments are denominated in US$ and is thus
not exposed to currency risk.
Fair values
Listed and unlisted investments are stated at market values and Directors'
valuations respectively. At 30 September 2002, in the opinion of the Directors,
the carrying values of the listed and unlisted investments approximate their
fair values.
Additional information related to all investments of the Group which account for
more than 5% of net assets as at 30 September 2002 is as follows:
EPS per Market value/
Cost of latest audited Directors'
% of issued investment accounts valuation
Investment Industry share capital US$ US$ US$
Equity investments
NATION Publishing 5.59% 2,743,165 (0.0363) 2,466,956
SE - ED Publishing 6.14% 799,105 0.1253 1,677,663
BBL Banking 0.08% 1,559,377 0.0955 1,222,919
SANSIRI Property 5.18% 1,607,415 (0.0058) 1,515,376
Northbridge International
School 6.25% 2,462,569 0.0948 1,445,087
SE-ED-WI Publishing 6.14% 385,210 0.1253 1,449,809
APQ Potash Fertlizer 43.38% 3,573,583 (0.1449) 1,277,584
The Group received dividends from the above investments during the period
totaling US$ 399,369 (2001: US$ 340,010).
14
5 Forward foreign exchange contracts
The Fund entered into off-balance sheet forward foreign exchange and option
contracts to buy and sell specified amounts of foreign currencies in the future
at a pre-determined exchange rate. The contracts were entered into in order to
hedge the Fund's assets denominated in Thai Baht.
6 Share capital
US$
2002 2001
Authorised:
10,000,000 ordinary shares of
US$ 0.005 each 50,000 50,000
Issued and fully paid
2,500,000 ordinary shares of
US$ 0.005 each 12,500 12,500
7 Share premium
US$
2002 2001
Arising on the issue of 2,500,000 ordinary
shares at a premium of US$ 10.295
per share, fully paid 25,737,500 25,737,500
Less: Placement fee (750,000) (750,000)
24,987,500 24,987,500
8 Net asset value per share
The calculation of the net asset value per share is based on the net assets of
US$ 21,376,007 (2001: US$ 18,750,652) divided by the number of shares, being
2,500,000.
15
9 Related party transactions
9.1 Advisory and performance fees
Finansa Fund Management Ltd, a related company incorporated in the Cayman
Islands, serves as the investment adviser to the Fund and receives the
following.: (i) a monthly advisory fee in an amount equal to 2% per annum of the
contributed capital (defined as the aggregate paid-up share capital of the Fund,
inclusive of share premium) of the Fund; and (ii) a performance fee of 20% of
the amounts by which distributions to shareholders exceed a cumulative compound
rate of return on the Fund's contributed capital of 12% per annum.
Advisory fees totaling US$ 249,996 (2001: US$ 249,996) were charged for the
period. No performance fees (2001: Nil) were charged for the period.
9.2 Directors' fees and reimbursements
The Fund's Articles of Association provide that the Fund may pay up to an
aggregate of US$ 100,000 per year to its Directors. For the period ended 30
September 2002, an amount of US$ 30,000 (2001: US$ 50,000) was approved for
payment to the Directors. In addition, the Fund reimburses Directors for travel
and out-of-pocket expenses incurred in connection with Board of Directors
meetings and meetings of committees of the Board of Directors.
9.3 Directors' interest in contracts of significance
Mr. Eugene S. Davis is a director and shareholder of Finansa Plc., a
shareholder in Finansa Fund Management Ltd., ('FFM'), the investment advisor to
the Fund. Mr. Davis is also a director of FFM.
10 Custodial and administrative fees
Under a custodial agreement with Citibank, N.A. (Hong Kong Branch)
('Citibank')., Citibank acts as custodian for the Fund, and is entitled to
receive a fee from the Fund, computed and paid monthly in arrears, comprising
the following: (i) a fee calculated at a 3.5 - 7.0 basis points per annum of the
value of the portion held by the custodian; and (ii) a transaction fee of US$ 35
- US$ 90 per transaction.
Under an administrative agreement with Bank of Butterfield International
(Cayman) Ltd. ('Butterfield')., Butterfield acts as administrator of the Fund,
and is entitled to receive a fee from the Fund calculated and payable quarterly
in arrears at a rate of US$ 100 per hour on a time spent basis, subject to a
minimum of US$ 7,500 per year.
Custodial and administrative fees totaling US$ 4,933 and US$ 3,750 respectively
(2001: US$ 3,733 and US$ 3,750) were charged for the period.
16
11 Directors
The non-executive directors during the period ended 30 September 2002 were as
follows:
Eugene S. Davis
M.L. Plaichumpol Kitiyakara
Van Huong Nguyen
David Roberts
Enghug Nontikarn
Mungkorn Kriengwatana (Appointed on 13 December 2001)
Martin Michael Adams (Appointed on 14 November 2002)
12 Interest in shares
Shareholders who held an interest of 3% or more in the Fund as of 30
September 2002 were as follows:
Shareholder Number of shares Percentage
Citivic Nominees Limited 2,500,000 100%
(formerly MGTB Nominees Limited)
13 Taxation
The Fund is exempt from Cayman Islands income tax and accordingly its only
liability is the payment of an annual registration fee to the government of the
Cayman Islands, amounting to US$ 500 per annum.
It is possible that the Fund could be assessed for income tax in other
jurisdictions. No assessments have been raised and the Directors consider the
likelihood of a significant tax liability arising to be remote.
14 Correction of error
In 2001, the Fund had taken realized and unrealized gains and losses on
investments, including those relating to foreign exchange translation of the
original cost of investment directly to the capital reserves account instead of
charging to income statement when incurred. However, the comparative financial
statements for the period ended 30 September 2001 had been restated to correct
this error.
17
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