Question-and-Answer Session
Michael Dunn
Thanks Romeo. Just a reminder everybody, if you want to ask some questions, please click the, ask a question link on the left hand side of the screen, and that comes directly to us. On page 24, you see the 135 and 10 year records for Romeo's primary fund the China Region Opportunity Fund. And with that let me start with the first question. Romeo please comment on how the Chinese government might continue to deploy their very, very large reserves that they did recently in making investment in private equity company here in the United States?
Romeo Dator
Yes actually, the Chinese government actually set up a group. It's called the, let me see, it is the state-owned investment corporation, SIC, -- it's the SIC and basically what their finding is to actually take part of Chinese Foreign Exchange Reserves and actually buy strategic assets overseas and we think that actually is positive for alot of the resource companies not only in the United States, but also in Latin America, in Africa because what they are going to do is, they're going to take 20% of the excess reserves each year and give it to the SIC to invest overseas and that’s how they trying to actually draw down part of that trillion dollars that they have in Foreign Exchange Reserves.
Michael Dunn
Great, thank you. According to Warren Buffett, 30 of these 33 largest Chinese companies, majority owned by the Chinese government, what do you think of that ownership factor with respect to equity ownership through a mutual fund in either the mainland or Hong Kong?
Romeo Dator
Actually that is a very good question but what's happening is governments are actually, or what the government is doing is what they tend to do is, you still have that state-owned corporation and one of the subsidiaries tends to be a listed company either in China or in Hong Kong. And in order to realize the value of the assets owned by these state-owned enterprises they undertake a company called an asset injection which basically means that our listed company, let’s take for example, China Mobile is not a good example.
Well, let’s take the Sinopack, the refinery in China. Basically they have a parent company in China, that's state-owned by the government, and what they will basically do is they will take, they will allow the listed company Sinopack in this case, to buy assets very cheaply, in some cases pennies on the dollar and inject that into the listed company and in this way basically what the government is doing is they are reducing their holdings and basically realizing value for the assets that they currently own. So, while that is currently a concern, I think that they are actually addressing ways to actually reduce their ownership of a lot of assets that actually isn't listed, it is not formally by IPO, but by actually doing this through not listed company that's subsidiary of the state-owned enterprise.
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