Annual Report and Accounts

Siam Investment Fund 09 November 2006 SIAM INVESTMENT FUND STATEMENTS OF NET ASSETS AS AT 31 MARCH 2006 (IN LIQUIDATION) AND 2005 US$ 2006 2005 Notes (in liquidation) Investments - net 3, 7 11,582,862 14,177,373 Current assets Cash and cash equivalents 78,962 4,252,625 Dividend receivable 155,494 81,097 Receivable from investor 163,859 - Other current assets - 35,244 Total current assets 398,315 4,368,966 Current liabilities Dividend payable - (2,500,000) Payable to investor - (337,750) Accrued expenses (131,536) (107,797) Total current liabilities (131,536) (2,945,547) Net current assets 266,779 1,423,419 Net assets 11,849,641 15,600,792 Net assets financed by: Share capital 4 12,500 12,500 Share premium 5 7,487,500 7,487,500 Capital reserve 5,046,967 7,867,680 Revenue reserve (697,326) 233,112 Total shareholders' funds 11,849,641 15,600,792 Net asset value per share 4.74 6.24 For and on behalf of Siam Investment Fund: Liquidator SIAM INVESTMENT FUND STATEMENTS OF OPERATIONS FOR THE YEARS ENDED 31 MARCH 2006 (IN LIQUIDATION) AND 2005 US$ 2006 2005 Notes (in liquidation) Investment income Dividend income 297,773 218,599 Interest income 82,065 44,472 Gain on foreign exchange - 50,003 Gain on reversal of bad debt 3 48,287 45,716 Total income 428,125 358,790 Expenses Advisory fees 7 500,000 500,000 Administrative expenses 7, 8 449,141 314,765 Loss from forward contract 317,722 - Loss from foreign exchange 91,700 - Total expenses 1,358,563 814,765 Net loss from investments (930,438) (455,975) Realised and unrealised gain (loss) on investments Realised gain (loss) on investments (1,334,900) 4,216,088 Unrealised loss on investments (1,485,813) (8,454,608) Total realised and unrealised gain (loss) on investments (2,820,713) (4,238,520) Decrease in net operating assets (3,751,151) (4,694,495) Decrease in net operating assets per share (1.50) (1.88) SIAM INVESTMENT FUND STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDED 31 MARCH 2006 (IN LIQUIDATION) AND 2005 Share Share premium Capital Revenue Total capital (Note 5, 6) reserve reserve (Note 4) Balance at 1 April 2004 12,500 12,487,500 12,106,200 689,087 25,295,287 Net loss from operations - - - (455,975) (455,975) Realized gain on investments - - 4,216,088 - 4,216,088 Unrealised loss from investments - - (8,454,608) - (8,454,608) Dividend payments - (5,000,000) - - (5,000,000) Balance at 31 March 2005 12,500 7,487,500 7,867,680 233,112 15,600,792 Balance at 1 April 2005 12,500 7,487,500 7,867,680 233,112 15,600,792 Net loss from operations - - - (930,438) (930,438) Realized loss from investments - - (1,334,900) - (1,334,900) Unrealised loss from investments - - (1,485,813) - (1,485,813) Balance at 31 March 2006 (in liquidation) 12,500 7,487,500 5,046,967 (697,326) 11,849,641 SIAM INVESTMENT FUND STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED 31 MARCH 2006 (IN LIQUIDATION) AND 2005 US$ 2006 2005 Notes (in liquidation) Cash flows from operating activities: Decrease in net operating assets (3,751,151) (4,694,495) Unrealized loss from valuation of investments 1,485,813 8,454,608 Changes in assets and liabilities: Investments 1,108,698 (2,911,787) Receivable from investor (163,859) - Dividend receivable (74,397) 22,138 Deposit for purchase of investment - 2,599,870 Other current assets 35,244 51,315 Payable to investor (337,750) 337,750 Accrued expenses 23,739 96,578 Total cash provided from (used in) operating activities (1,673,663) 3,955,977 Cash flows from financing activity: Dividend payments (2,500,000) (5,000,000) Total cash used in financing activity (2,500,000) (5,000,000) Net decrease in cash and cash equivalents for year (4,173,663) (1,044,023) Cash and cash equivalents at beginning of year 4,252,625 5,296,648 Cash and cash equivalents at end of year 78,962 4,252,625 SIAM INVESTMENT FUND NOTES TO THE FINANCIAL STATEMENTS AS AT 31 MARCH 2006 (IN LIQUIDATION) AND 2005 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. Such investments were previously in the Southeast Asian region, however, following a change in mandate as approved by the shareholders' meeting held on 6 March 1998, the Fund has invested up to 100% of its capital in listed and unlisted companies in Thailand. At the Extraordinary General Meeting of the shareholders held on 22 February 2006, the shareholders considered but did not give their approval to either extending the life of the Fund or placing the Fund into voluntary liquidation. Accordingly, in compliance with the Fund's Memorandum and Articles of Association and in accordance with the laws of the Cayman Islands, the Fund commenced voluntary liquidation with effect from midnight (Cayman Islands time) on 22 February 2006, and the directors of the Fund became the liquidators of the Fund. As a result, the Fund's listing on the London Stock Exchange was suspended on 23 February 2006 onwards. 2 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 affect the reported amounts and disclosure in the financial statements. Actual results could differ from these estimates. b) Cash equivalents The Fund considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. c) Investments All securities for which market quotations are readily available are valued at the closing market prices. Securities for which market quotations are not readily available are valued by the Directors at cost 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. Realized 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 prevailing on the transaction dates. All monetary assets and liabilities expressed in foreign currencies at the balance sheet date are translated into United States dollars at the rate of exchange prevailing at that date. Realized and unrealized gains and losses on translation of foreign currencies relating to the carrying value of investments are charged directly to income before being appropriated as the capital reserves. All other realized and unrealized gains and losses on translation of foreign currencies are included in the statement of operations. e) Interest income Interest income is recognised under the accrual basis. f) Net asset value per share Net asset value per share is determined by dividing the net asset value by the weighted average number of shares in issue during the year. 3 Investments - net US$ 2006 2005 (in liquidation) Listed securities, at market value 10,245,583 12,955,854 Unlisted securities, at valuation given by Directors 1,337,279 1,221,519 Investments - net 11,582,862 14,177,373 Cost of investments 18,696,661 19,853,642 The costs of investments (Note 3.1 and 3.2) reflect the costs at the date of acquisition and do not include any subsequent foreign exchange adjustments. An analysis of the Company's investments is as follows: 2006 2005 (in liquidation) Market Market % of net assets Cost value Cost value of the Fund Industry % holding US$ US$ % holding US$ US$ 2006 2005 3.1 Listed investments TISCO Finance Plc. Finance - - - 0.27% 1,116,929 922,757 - 5.91 Kim Eng Securities (Thailand) Plc. Finance - - - 0.02% 162,113 91,234 - 0.58 Phatra Securities Plc. Finance 0.01% 311,814 331,747 - - - 2.80 - Bangkok Bank Plc. Banking 0.01% 768,894 784,879 - - - 6.62 - The Siam Commercial Bank Plc. Banking 0.02% 362,711 497,621 - - - 4.20 - Charoen Pokphand Foods Plc. Agribusiness - - - 0.12% 709,072 688,321 - 4.41 Robinson Department Store Plc. Commerce - - - 0.33% 376,819 462,902 - 2.97 Hana Microelectronics Plc. Electrical Components 0.10% 444,813 622,348 0.09% 378,317 397,890 5.25 2.55 KCE Electronics Plc. Electrical Components 0.28% 128,514 112,148 0.28% 128,514 122,682 0.95 0.79 SVI Plc. Electrical Components 0.01% 224,672 298,316 - - - 2.52 - Singer Thailand Plc. Electrical Products 0.37% 166,461 103,896 0.37% 166,461 138,002 0.88 0.88 Asian Insulators Plc. Energy 0.35% 608,285 434,964 0.38% 664,855 621,758 3.67 3.99 Banpu Plc. Energy 0.05% 546,849 555,613 - - - 4.69 - PTT Plc. Energy 0.01% 806,228 782,307 - - - 6.60 - Tycoons Worldwide Building& Group (Thailand) Furnishing Plc. Materials 0.49% 947,377 597,145 0.49% 947,377 965,275 5.04 6.19 Millennium Steel Construction Plc. Materials 0.13% 559,218 290,601 0.22% 559,218 498,339 2.45 3.19 G Steel Plc. Construction Materials 0.39% 1,520,144 1,205,478 0.46% 1,520,144 2,683,363 10.17 17.20 The Siam Cement Plc. Construction Materials 0.01% 1,029,262 1,062,106 - - - 8.96 - 2006 2005 (in liquidation) Market Market % of net assets Cost value Cost value of the Fund Industry % holding US$ US$ % holding US$ US$ 2006 2005 3.1 Listed investments (continued) Golden Land Property Development Plc. Property - - - 0.16% 327,588 213,391 - 1.37 Natural Park Plc. Property 1.09% 2,667,820 1,307,422 1.12% 2,743,910 2,165,714 11.03 13.88 UOB Apartment Property Fund1 Property 0.01% 1,416 1,018 0.01% 1,545 1,296 0.01 0.01 Krisda Mahanakorn Plc. Property - - - 0.71% 1,260,186 337,337 - 2.16 CH. Karnchang Plc. Property 0.14% 514,783 420,470 0.14% 514,783 502,172 3.55 3.22 Syntech Construction Plc. Property 0.66% 647,800 185,582 0.33% 533,838 166,113 1.57 1.06 Hemaraj Land Property and Development Plc. Development 0.08% 119,678 137,585 - - - 1.16 - Pranda Jewelry Plc. Fashion - - - 0.31% 166,775 162,280 - 1.04 Pranda Jewelry Plc. -Warrants Fashion 6.87% 583,465 514,337 6.19% 583,465 467,672 4.34 3.00 Thai Cane Paper Plc. Paper & Printing Materials - - - 0.34% 399,772 389,012 - 2.49 Thoresen Thai Agencies. Plc. Transportation - - - 0.16% 944,403 958,344 - 6.14 Total - listed investments 12,960,204 10,245,583 14,206,084 12,955,854 86.46 83.03 3.2 Unlisted investments 3.2.1 Equity investments 2006 2005 (in liquidation) Directors' Directors' % of net assets Cost valuation Cost valuation of the Fund Industry % holding US$ US$ % holding US$ US$ 2006 2005 Northbridge Communities Ltd. International School 6.25% 2,462,569 - 6.25% 2,462,569 - - - Manager Media Group Plc. Non-performing Group 1.37% 59,978 - 1.37% 59,978 - - - Samakkhisan (Dokya) Plc. Printing 3.52% 51,549 - 3.52% 51,549 - - - Krisda Mahanakorn Plc.-Warrant Property - - - 1.41% - 30,613 - 0.20 PAE (Thailand) Plc. (a) Non-compliance 6.96% 404,350 411,473 6.96% 404,350 408,897 3.47 2.62 JP-One Asset Co., Ltd. (b) Resources and Energy 6.00% 915,498 925,806 6.00% 778,312 782,009 7.81 5.01 Total - unlisted equity investments 3,893,944 1,337,279 3,756,758 1,221,519 11.28 7.83 3.2.2 Debt investments Convertible term loan to Monterey Pizza Co., Ltd. (c) Foods - 1,842,513 - - 1,890,800 - - - Total-unlisted debt investment - 1,842,513 - - 1,890,800 - - - Total-unlisted investments 5,736,457 1,337,279 5,647,558 1,221,519 11.28 7.83 Investments - net 18,696,661 11,582,862 19,853,642 14,177,373 97.74 90.86 (a) PAE (Thailand) Public Company Limited PAE (Thailand) Public Company Limited (PAE) is a construction company which was listed in the Stock Exchange of Thailand ('SET'). The company was founded in 1964 as a subsidiary of an American company carrying out engineering projects in Thailand. PAE expanded its construction and engineering operations rapidly during 1994-1997. To keep up with the growth, PAE entered into significant foreign currency loan contracts. As a result of the Baht devaluation in July 1997, liabilities grew substantially from Baht 761 million to Baht 3,249 million while the company was unable to secure any new sizable contract after the Baht crisis. The Company, therefore, was unable to service its debts. The management had no choice but to enter the Bank of Thailand CDRAC process in an effort to reach an arrangement with its creditors to restructure its debt. At the end of CDRAC process, PAE decided to file for business reorganization with the Central Bankruptcy Court. The Court granted an order for rehabilitation of PAE on 22 February 2000 and appointed GTT Planners Co., Ltd. as the Plan Administrator. The Rehabilitation Plan was approved and amended several times. The final Rehabilitation Plan was approved by the Central Bankruptcy Court on 15 November 2002. Under this plan, the existing capital of PAE was to be decreased. Subsequently, Freeinternet Co., Ltd. and a group of new investors were to inject capital funds of Baht 210 million to subscribe to 35 million newly issued shares of PAE at the price of Baht 6 per share (Baht 10 par value). These funds were to be used as a payment to the priority creditors. On 26 January 2004, a group of new investors including Siam Investment Fund injected capital totaling Baht 210 million to subscribe to 35 million shares. The Central Bankruptcy Court, on 28th April 2004, issued their acceptance of the completion of the Rehabilitation Plan of PAE as the decrease and increase in capital and the new shares issued to the investors as well as the payment to the priority creditors, secured creditors and non-secured creditors were completed. In 2006, PAE will continue to focus on its core construction and telecommunication business. PAE has already filed to resume trading on the SET and could potentially get approval by the fourth quarter of 2006. The Fund owns 2.6 million shares of PAE which represents 6.96% holding of the company. The remainder is held by Freeinternet and other minority investors. (b) JP-One Assets Co., Ltd. JP-One Assets Co., Ltd., ('JP-One'), was incorporated under the laws of Thailand in November 2003 by Bangkok Aviation Fuel Services Public Company Limited ('BAFS '), the company which supplies aviation fuel to Bangkok's existing international airport, with the participation of, amongst others, the Fund. JP-One was established to receive the award of a contract for the supply of aviation fuel to the new international airport in Bangkok (Suvarnabhumi Airport). BAFS arranged the issue of the shares in JP-One to cover the cost of building a pipeline extension to the new airport. The Fund made the investment in anticipation of the new airport being completed in September 2005, which was the projected timetable at the date of the investment. However, it became apparent late in 2004 that construction of the new airport was well behind schedule and that completion of the new airport and its certification by the International Air Transport Association would not be achieved by September 2005. The Fund understands that latest estimates are for a delay of upwards of nine months. In light of that delay, the Fund has sold part of its stake in JP-One at cost to its related party, FFM, in March 2005. See details discussed for the related party transactions in Note 7.1. As at 31 March 2006 and 2005, the Fund owns 0.36 million share of JP-One which represents a 6.00% holding of the Company. The remainder is owned by Finansa Fund Management Ltd. ('FFM') and other investors. Under certain agreements entered into during 2004-2005, the Fund agreed to hold shares presenting 15.67% of JP-One, as at 31 March 2006, for the benefit of other investors (31 March 2005: totaling 36.50% of which 15.67% is for the benefit of other investors and 20.83% was owned by FFM). (c) Monterey Pizza Co., Ltd. The convertible term loan to Monterey Pizza Co., Ltd. ('Monterey') was denominated in US$ and carries interest at six month US$ LIBOR, payable every six months. The loan was secured by the major shareholders of Monterey and was scheduled for 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). Monterey has experienced financial difficulties since 1997. Interest was not paid when due. The Fund had stopped accruing interest since December 1997. A legal demand for payment of principal and accrued interest was made to Monterey as well as to two directors who had guaranteed the loan. The court ruled in favor of the Fund's demand for Baht 108 million. The defendants were asked by the court to settle with the Fund. The loan was written down to zero in 2003. In 2004, the case was finalized by the Thai Appeals Court that the Fund getting payment of Baht 2.5 million (approximately US$ 63,484) each year for 7 years, totalling Baht 17.5 million (approximately US$ 444,388). Repayment of the principal amounting US$ 48,287 in 2006 (2005 : US$ 45,716 ) has been charged to gain from reversal of bad debt in the statement of operations since the provision for possible loan loss was provided in full since 2003. The Fund has taken a conservative approach to establish full provisions for possible loss of such problematic unlisted investments (Note 3.2) as at 31 March 2006 and 2005. The Fund's directors believe that the provision is adequately estimated to cover the possible loss of such investments. 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. Fair values Listed and unlisted investments are respectively stated at market values and Directors' valuations. At 31 March 2006, 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 Fund which account for more than 5% of net assets as at 31 March 2006 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 BBL Banking 0.01% 768,894 0.06984 784,879 N-Park Property 1.09% 2,667,820 (0.0008) 1,307,422 G Steel Materials 0.39% 1,520,144 0.00077 1,205,478 SCC Materials 0.01% 1,029,262 0.20457 1,062,106 HANA Electronics 0.10% 444,813 0.01452 622,348 PTT Energy 0.01% 806,228 0.21705 782,307 TYCN Materials 0.49% 947,377 (0.00874) 597,145 JP-One Energy 6.00% 915,498 (0.01183) 925,806 The Fund received dividends from the above investments during the year totaling US$ 297,773 (2005: US$ 218,599). 4 Share capital US$ 2006 2005 (in liquidation) 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 5 Share premium US$ 2006 2005 (in liquidation) 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) Dividend declarations (17,500,000) (17,500,000) 7,487,500 7,487,500 6 Dividend During the fiscal year 2005, resolutions were passed by the Board of Directors' Meetings held in the first and fourth quarters approving a dividend payment of US$1 per share, US$ 2.5 million each quarter, totaling US$ 5 million. 7 Related party transactions 7.1 Sales of unlisted equity investment In light of the delay of the construction of the new airport which was scheduled for completion by September 2005, which delay would cause a project cost overrun by JP-One, as fully described in Note 3(b) to the financial statements, and a desire on the part of the directors of the Fund to return cash to shareholders, the Fund entered into a sales transaction of its stake in JP-One to Finansa Fund Management Ltd. ('FFM'), its related party, on 29 March 2005. The Fund sold a 12.33% stake in JP-One shares (totaling 740,000 ordinary shares, par value US$ 2.50 each, 85% (US$ 2.125 each) paid - up, equivalent to US$ 1.57 million) to FFM at the cost value of those shares. The Fund's view was that FFM was a ready and willing purchaser and it was unlikely that there would be any other buyer of the JP-One shares, an unlisted company, which could be found prior to the maturity of the Fund. It came to the attention of the Board of Directors of the Fund at a meeting on 22 April 2005 that the sale transaction may have failed fully to comply with the requirements of Chapter 11 of the London Stock Exchange Listing Rules concerning related party transactions. The Board of the Fund has investigated and notified the UK Listing Authority (the Financial Services Authority) of this issue. The Board of the Fund, however, has taken such steps, which it believes are appropriate steps to ensure that a lapse in compliance with Chapter 11 does not occur in the future. 7.2 Advisory and performance fees Finansa Fund Management Ltd. ('FFM'), 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$ 500,000 (2005: US$ 500,000) were charged for the year. 7.3 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 year ended 31 March 2006 and 2005, such amount of US$ 60,000 was approved for payment to the Directors. In addition, the Fund reimburses Directors for travel and out-of-pocket expenses incurred in connection with the Board of Directors' meetings and meetings of committees of the Board of Directors. 7.4 Directors' interest in contracts of significance Mr. James Marshall is a shareholder of Finansa Public Company Limited, a shareholder in Finansa Fund Management Ltd., ('FFM'), the investment advisor to the Fund. Mr. Marshall is also a director of FFM. 8 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 dated 1 July 2004 with Maples Finance Limited ('Maples'), successor to Bank of Bulterfield International (Cayman) Ltd. for a minimum annual fee of US$ 7,500, Maples acts as administrator of the Fund, and is entitled to receive a fee from the Fund calculated and payable annually in advance in the amount of US$ 7,500 per year Custodial and administrative fees totaling US$ 3,029 and US$ 13,125, respectively (2005: US$ 3,650 and US$ 8,750, respectively) were charged for the year. 9 Liquidators Liquidators as of 31 March 2006 are as follows: Andrew Pegge James Marshall M.L. Plaichumpol Kitiyakara Nguyen Van Huong 10 Interest in shares Shareholders who hold an interest of 3% or more in the Fund as at 31 March 2006 are as follows: Shareholder Number of shares Percentage Citivic Nominees Limited 1,284,750 51.39% (Formerly MGTB Nominees Limited) Finansa Fund Management Limited 1,215,250 48.61% 2,500,000 100.00% 11 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. 12 Subsequent events The liquidators of the Fund have announced the following interim payments out of the proceeds of liquidation of the Fund: Interim payments of liquidation proceeds Pay to shareholders of record as of US$ 2.00 per share 25 April 2006 US$ 1.25 per share 26 May 2006 US$ 0.80 per share 27 July 2006 This information is provided by RNS The company news service from the London Stock Exchange

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