TIDMEIH
RNS Number : 7990D
EIH PLC
22 May 2012
22 May 2012
EIH plc (the "Company")
Final Results
EIH plc reports its results for the financial year ended 31
December 2011. A copy of this announcement will shortly be
available for inspection at
http://www.eihplc.co.uk/regnews.aspx.
Printed copies of the Annual Report together with the Notice of
2012 Annual General Meeting will be posted to shareholders in due
course.
For further information, please contact:
EIH plc
Rhys Davies
Tel: +41 (0)79 620 0215
Singer Capital Markets (Nominated Adviser)
James Maxwell / Nick Donovan
+44 (0)20 3205 7500
Chairman's Statement
At 31 December 2011, the net asset value of EIH plc ("the
Company") was US$0.794 per share as compared with US$1.136 per
share a year earlier, representing a decrease of 30.1%. Based on
the weighted average number of ordinary shares, the loss per share
for the year was US$0.1631 (2010: profit per share US$0.1742).
It is noted that during the year in review the Company
distributed 18 cents per share, equivalent to approximately
US$11.7m, to shareholders and repurchased 500,000 shares for
cancellation (US$0.3m). The Company today separately reported that
it will distribute a further 3 cents per share with a payment date
of 8 June 2012.
During the year in review, the Company received distributions of
US$2.5m from the Evolvence India Fund PCC ("EIF"), and invested a
further US$2.5m in EIF.
Total operating costs during the year were US$0.5m. This figure
represents approximately 1% of the Company's Financial Assets at
fair value. In addition, the Company paid certain annual management
fees and expenses to EIF in respect of its commitment. These costs
are embedded in the capital accounts for those two funds and do not
appear in the Company's statement of comprehensive income.
The Company's portfolio now comprises the following (based on
year end Fair Values):
Table 1. Investments Capital Commitment Capital invested Capital Fair value Fair Value
Distribution adjustment
--------------------- ------------------- ----------------- -------------------- -------------------- -----------
US$ US$ US$ US$ US$
Fund Investments
(equity)
Evolvence India Fund
PCC 45,120,000 41,579,573 (12,967,996) 798,741 29,410,318
Direct Investments
(equity)
EIF Co Invest VII
(RSB Group) 6,969,600 6,969,600 (29,235) 49,825 6,990,190
EIF Co Invest X
(Gland Pharma
Limited) 4,510,000 4,510,000 - 5,692,644 10,202,644
56,599,600 53,059,173 (12,997,231) 6,541,210 46,603,152
--------------------- ------------------- ----------------- -------------------- -------------------- -----------
EIF
At the year end the Company had US$28.6m invested in EIF
(capital called less refund capital contributions), equivalent to
44.4 cents per share. At the reporting date the fair value of the
Company's investment in EIF was US$29.4m, equivalent to 45.6 cents
per share, representing a 1.03 times multiple over cost.
On 9 February 2012, the Company reported that, following a cash
call of US$3.5m, 100% of EIF's committed capital had been drawn
down and EIH had no outstanding commitment to EIF.
The Company today separately reported that it has received a
distribution from EIF of US$1.8m. Approximately US$0.5m represents
a partial return of the capital drawn down by EIF in February 2012,
such that EIF now has technically only drawn down 98.85% of its
committed capital, with 1.15% remaining undrawn. However, EIF's
managers have informed us that this unfunded commitment will likely
be adjusted against future distributions, such that no further cash
calls are likely to be made by EIF.
During the year in review the BSE SENSEX and BSE MIDCAP Indian
stock market indices declined by 24.6% and 34.2% respectively in
local currency. It is also noted that the Indian Rupee ("INR")
declined by 16.4% against the US Dollar during the year in
review.
Against this challenging environment EIF's underlying private
equity funds performed relatively well. On the basis of beginning
and end period fair values, and adjusting for drawdowns and
distributions made during the period, the fair value of EIF's
underlying funds declined by approximately 17% in US Dollar terms,
while in INR terms this decline was approximately 1%. On the same
basis of measurement, EIF's direct investments moderately
outperformed its underlying funds although there was a wide
dispersion of performance.
Both EIF's underlying funds and its direct investments hold
exposure to listed equities and EIF's overall weighting was
approximately 9% at the year end.
EIF's sector exposure is weighted towards Infrastructure (28%)
and Real Estate (19%). Investments in the Infrastructure sector,
and to a lesser extent in Real Estate, tend to be structured in
such a way as to afford mid-to-high teens expected returns. EIF's
next highest sector weightings are to Healthcare and
Pharmaceuticals (16%), Manufacturing (13%), and Information
Technology (7%). EIF's investments in these sectors may be broadly
understood as classic "growth capital" investments where expected
returns are largely a function of the underlying growth in investee
cash flow and profitability, and to a lesser extent by exit
multiples.
The majority of EIF's ten underlying private equity funds have
fully drawn down their committed capital from EIF, and EIF's
remaining commitments are concentrated in two funds (HI-REF
International LLC Fund and NYLIM Jacob Ballas India Fund III).
During the year in review, EIF received net distributions from most
of its mature funds while its drawdowns were concentrated in the
two aforementioned funds.
At the period end the fair value of the Company's interest in
EIF's ten underlying private equity funds was US$15.8m, equivalent
to 24.5 cents per share, while EIF's direct investments had a fair
value of US$12.6m, equivalent to 19.6 cents per share (see Table 2,
below).
The Directors have reviewed certain underlying financial
information provided to us by EIF's Investment Manager and we
remain confident that as EIF's underlying portfolio matures and
further realizations are achieved, further cash distributions will
be received by the Company.
From the period end until 30 April 2012, the BSE SENSEX and BSE
MIDCAP Indian stock market indices had advanced by 12.1% and 23.0%
respectively in INR terms. It is also noted that in the same period
the INR strengthened by 2.5% against the US Dollar.
EILSF
The Company's interest in EILSF was disposed of in June
2011.
Gland Pharma Limited ("Gland")
Gland is a specialized generic pharmaceuticals company based in
Hyderabad. Gland has delivered strong compound revenue growth and
stable EBITDA margins over the past three years. Moreover, it has a
portfolio of US Food and Drugs Administration ("FDA") approved
products and a promising pipeline. The Company's direct investment
in Gland is held through EIF Co Invest X. The shareholders in EIF
Co Invest X are the Company and EIF, which invested US$4.5m and
US$12.5m respectively, for a total investment of US$17.0m. No fees
are payable on the Company's investment in EIF Co Invest X, while
the Company's indirect investments in Gland (through its interest
in EIF) attract standard management and carried interest fee
arrangements. Through the above arrangements, and on a look-through
basis, the Company has a total of US$6.8m invested in Gland (at
cost) compared to the US$4.5m invested in Gland through EIF Co
Invest X.
Through the above arrangements, and on a look-through basis, the
fair value of Company's interest in Gland is 23.7 cents per share;
while the fair value of the Company's interest in Gland held
through EIF Co Invest X is valued at 15.8 cents per share (see
Table 2, below). These values represent a 2.3 times multiple over
cost. The Directors have reviewed certain underlying financial
information pertaining to Gland and the valuation basis employed in
the fair valuation calculation thereof.
RSB Group ("RSB")
RSB is a large automotive components group based in Pune with a
multi-product portfolio comprising of propeller shafts, gears,
axles, machined engine components, trailers and construction
equipment parts. The Company's direct investment in RSB is held
through EIF Co Invest VII. The shareholders in EIF Co Invest VII
are the Company and EIF, which invested US$7.0m and US$10.0m
respectively, for a total investment of US$17.0m. No fees are
payable on the Company's investment in EIF Co Invest VII, while the
Company's indirect investment in RSB (through its interest in EIF)
attracts standard management and carried interest fee arrangements.
Through the above arrangements, and on a look-through basis, the
Company has a total of US$8.7m invested in RSB (at cost) compared
to the US$7.0m invested in RSB through EIF Co Invest VII.
Through the above arrangements, and on a look-through basis, the
fair value of Company's interest in RSB is 13.6 cents per share;
while the fair value of the Company's interest in RSB held through
EIF Co Invest VII is 10.8 cents per share (see Table 2, below).
These values represent a 1.0 times multiple over cost. The
Directors have reviewed certain underlying financial information
pertaining to RSB and the valuation basis employed in the fair
valuation calculation thereof.
The decline in the fair value of the Company's interest in RSB
from 1.6 times multiple over cost at the prior period end is
largely due to the decline in trading multiples of the comparable
group as well as currency effects. In INR terms, RSB was valued at
1.4 times multiple over cost at the year end.
Table 2. Investments (Fair Values) As per LP reports RSB Gland Pro-forma
(EIF) (EIF)
------------------------------------ ------------------ ------------ ------------ -----------
US$ US$ US$ US$
Fund Investments
EIF (PE funds) 15,821,884 15,821,884
EIF (direct investments) 12,662,328 (1,806,984) (5,113,950) 5,741,394
EIF (other) 926,106 926,106
Direct Investments
RSB Group 6,990,190 1,806,984 8,797,174
Gland Pharma Limited 10,202,644 5,113,950 15,316,594
46,603,152 - - 46,603,152
------------------------------------ ------------------ ------------ ------------ -----------
Table 2 extracts the Company's "look through" interests in the
Gland and RSB (from EIF) and adds them to the Company's direct
interests in Gland and RSB (held by EIF Co Invest X and EIF Co
Invest VII respectively). On this basis, 51.7% of the Company's
Financial Assets at Fair Value (US$24.1m, equivalent to 37.4 cents
per share), is accounted for by its interests in Gland and RSB on
an underlying pro-forma basis.
The table also shows that a further 33.9% of the Company's
Financial Assets at Fair Value is accounted for by its interests in
EIF's ten PE fund investments, a further 12.3% by its interests in
EIF's direct investments (excluding Gland and RSB).
Other matters
The Company repurchased 500,000 shares for cancellation (US$0.3
million) during the year.
At the date of this report the Company holds US$3.0m in net cash
balances, equivalent to 4.7 cents per share.
As a Board we will continue to manage operating costs carefully.
Our objective is to realize assets at the appropriate time and
value, and to return the proceeds less expenses to our
shareholders.
Respectfully yours,
Rhys Cathan Davies 21 May 2012
Statement of Comprehensive Income
for the year ended 31 December 2011
Note 31 December 31 December
2011 2010
US$ US$
----------------------------------------- ----- -------------- ------------
Income
Interest income on cash balances 9,795 48,847
Fair value movement on investments
at fair value through profit or
loss 7 (11,169,830) 12,441,576
Profit on disposal of investments
at fair value through profit or
loss 7 1,133,000 -
Other income 1,798 1,763
Net investment (expense)/income (10,025,237) 12,492,186
----------------------------------------- ----- -------------- ------------
Expenses
Administrative expenses 9.2 (281,010) (274,230)
Legal and other professional fees (220,045) (991,543)
Audit fees (52,018) (40,396)
Value Added Tax recovered - 134,993
Total operating expenses (553,073) (1,171,176)
----------------------------------------- ----- -------------- ------------
(Loss)/profit before tax (10,578,310) 11,321,010
Income tax expense 16 - -
(Loss)/profit for the year (10,578,310) 11,321,010
----------------------------------------- ----- -------------- ------------
Other comprehensive income - -
----------------------------------------- ----- -------------- ------------
Total comprehensive (expense)/income
for the year (10,578,310) 11,321,010
----------------------------------------- ----- -------------- ------------
Basic and fully diluted (loss)/earnings
per share (cents) 14 (16.31) 17.42
----------------------------------------- ----- -------------- ------------
The Directors consider that all results derive from continuing
activities.
The accompanying notes form an integral part of these financial
statements.
Statement of Financial Position as at 31 December 2011
Note 31 December 31 December
2011 2010
US$ US$
-------------------------------- ------ ------------ ------------
Non-current assets
Financial assets at fair value
through profit or loss 7 46,603,152 61,669,218
-------------------------------- ------ ------------ ------------
Total non-current assets 46,603,152 61,669,218
-------------------------------- ------ ------------ ------------
Current assets
Trade and other receivables 11 42,085 88,237
Cash and cash equivalents 10 4,652,483 12,319,933
-------------------------------- ------ ------------ ------------
Total current assets 4,694,568 12,408,170
-------------------------------- ------ ------------ ------------
Total assets 51,297,720 74,077,388
================================ ====== ============ ============
Issued share capital 13 1,264,706 1,274,510
Share premium 46,589,924 58,580,120
Retained earnings 3,372,616 13,950,926
-------------------------------- ------ ------------ ------------
Total equity 51,227,246 73,805,556
-------------------------------- ------ ------------ ------------
Trade and other payables 12 70,474 271,832
Total current liabilities 70,474 271,832
-------------------------------- ------ ------------ ------------
Total liabilities 70,474 271,832
-------------------------------- ------ ------------ ------------
Total equity and liabilities 51,297,720 74,077,388
================================ ====== ============ ============
The financial statements were approved by the Board of Directors
on 21 May 2012 and signed on their behalf by:
Rhys Davies Brett Miller
Director Director
The accompanying notes form an integral part of these financial
statements
Statement of Changes in Equity
for the year ended 31 December 2011
Share Capital Share Premium Retained Earnings Total
US$ US$ US$ US$
-------------------------------------- -------------- -------------- ------------------ --------------
Balance at 1 January 2010 1,274,510 58,580,120 2,629,916 62,484,546
Total comprehensive income
Profit for the year - - 11,321,010 11,321,010
Total comprehensive income - - 11,321,010 11,321,010
-------------------------------------- -------------- -------------- ------------------ --------------
Balance at 31 December 2010 1,274,510 58,580,120 13,950,926 73,805,556
====================================== ============== ============== ================== ==============
Balance at 1 January 2011 1,274,510 58,580,120 13,950,926 73,805,556
Total comprehensive income
Loss for the year - - (10,578,310) (10,578,310)
Other comprehensive income - - - -
-------------------------------------- -------------- -------------- ------------------ --------------
Total comprehensive income - - (10,578,310) (10,578,310)
-------------------------------------- -------------- -------------- ------------------ --------------
Transactions with shareholders
Share buy-backs (9,804) (290,196) - (300,000)
Return of capital to shareholders - (11,700,000) - (11,700,000)
-------------------------------------- -------------- -------------- ------------------ --------------
Total transactions with shareholders (9,804) (11,990,196) - (12,000,000)
-------------------------------------- -------------- -------------- ------------------ --------------
Balance at 31 December 2011 1,264,706 46,589,924 3,372,616 51,227,246
====================================== ============== ============== ================== ==============
The accompanying notes form an integral part of these financial
statements
Statement of Cash Flows
for the year ended 31 December 2011
31 December 31 December
Note 2011 2010
US$ US$
Cash flows from operating activities
(Loss)/profit before tax (10,578,310) 11,321,010
Adjustments:
Interest income on cash balances (9,795) (48,847)
Fair value movement on investments
at fair value through profit or
loss 11,169,830 (12,441,576)
Profit on disposal of investments
at fair value through profit or
loss (1,133,000) -
Operating loss before working capital
changes (551,275) (1,169,413)
Decrease in trade and other receivables 37,153 26,306
(Decrease)/Increase in trade and
other payables (201,358) 58,370
Cash used in operations (715,480) (1,084,737)
Interest received 18,794 54,398
Net cash used by operating activities (696,686) (1,030,339)
----------------------------------------- ----- ------------- -------------
Cash flows from investing activities
Proceeds from sale of investment 7 5,000,000 -
Capital calls 7 (2,482,067) (4,447,505)
Repayment of short term loan - 2,500,000
Capital distribution received 7 2,511,303 4,806,305
----------------------------------------- ----- ------------- -------------
Net cash generated from investing
activities 5,029,236 2,858,800
----------------------------------------- ----- ------------- -------------
Cash flows from financing activities
Share buy-backs (300,000) -
Return of capital to shareholders (11,700,000) -
Net cash used by financing activities (12,000,000) -
----------------------------------------- ----- ------------- -------------
Net (decrease)/increase in cash
and cash equivalents (7,667,450) 1,828,461
Cash and cash equivalents at beginning
of the year 12,319,933 10,491,472
----------------------------------------- ----- ------------- -------------
Cash and cash equivalents at end
of year 10 4,652,483 12,319,933
========================================= ===== ============= =============
The accompanying notes form an integral part of these financial
statements
Notes to the Financial Statements
for the year ended 31 December 2011
1 The Company
EIH plc was incorporated and registered in the Isle of Man under
the Isle of Man Companies Act 1931-2004 on 10 November 2006 as a
public company with registration number 118297C. The company
re-registered under the Isle of Man Companies Act 2006 on 28 March
2011 with registration number 006738V.
Pursuant to a prospectus dated 19 March 2007 there was a placing
of up to 65,000,000 Ordinary Shares of GBP0.01 each. The number of
Ordinary Shares in issue immediately following the placing was
65,000,002. The shares of the Company were admitted to trading on
AIM, a market of that name operated by the London Stock Exchange
plc following the closing of the placing on 23 March 2007. The
Company purchased 500,000 of its own shares for US$ 0.60 each on 30
September 2011.
The Company's agents perform all significant functions.
Accordingly, the Company itself has no employees.
The Company currently does not have a fixed life but the Board
considers it desirable that Shareholders should have the
opportunity to review the future of the Company at appropriate
intervals. Accordingly, at the annual general meeting of the
Company in 2012 a resolution will be proposed that the Company
ceases to continue as presently constituted. Shareholders holding
at least fifty per cent of the shares must vote in favour of this
resolution for it to be passed. If the resolution is not passed, a
similar resolution will be proposed at every third annual general
meeting of the Company thereafter. If the resolution is passed, the
Directors will be required, within 3 months of the resolution, to
formulate proposals to be put to Shareholders to reorganise,
unitise or reconstruct the Company or for the Company to be wound
up.
2 Basis of preparation
2.1 Statement of compliance
These financial statements have been prepared in accordance with
International Financial Reporting Standards ("IFRSs").
The financial statements were authorised for issue by the Board
of Directors on 21 May 2012.
2.2 Basis of measurement
The financial statements have been prepared on the historical
cost basis except for financial assets at fair value through profit
or loss that are measured at fair value in the statement of
financial position.
2.3 Functional and presentation currency
These financial statements are presented in US Dollars, which is
the Company's functional currency. All financial information
presented in US Dollars has been rounded to the nearest Dollar.
2.4 Use of estimates and judgements
The preparation of financial statements in conformity with IFRSs
requires the Directors to make judgements, estimates and
assumptions that affect the application of policies and the
reported amounts of assets and liabilities, income and expenses.
The estimates and associated assumptions are based on historical
experience and various other factors that are believed to be
reasonable under the circumstances, the results of which form the
basis of making the judgements about carrying values of assets and
liabilities which are not readily apparent from other sources.
Actual results may differ from these estimates.
Judgements made by the Directors in the application of IFRSs
that have a significant impact on the financial statements and
estimates with a significant risk of material adjustment in the
next financial year relate to valuation of financial assets at fair
value through profit or loss - see note 4.
3 Significant accounting policies
The accounting policies set out below have been applied
consistently to all periods presented in these financial
statements.
3.1 Investments at fair value through profit or loss
Investments are designated as financial assets at fair value
through profit or loss. They are measured at fair value with gains
and losses recognised through the profit or loss
The fair value of investments at fair value through profit or
loss in unlisted equity investments is estimated by the Directors,
with input from Evolvence India Advisors Inc. In estimating the
fair value of the Company's investments in private equity funds
consideration is taken of the valuations of underlying investments
performed by the directors and managers of those funds. The
valuation of the unlisted holdings in the co-investments and
underlying funds investments are performed by using the most
appropriate valuation techniques, including the use of recent arms'
length market transactions, use of market comparables, use of
discounted cash flows or any other valuation technique that
provides a reliable estimate. Under the discounted cash flow
method, free cash flows have been discounted using an appropriate
weighted cost of capital.
Listed holdings in the co-investments and underlying funds are
valued based upon prevailing market prices as of the date of
valuation. The exited investments have been valued using the
respective exited multiples.
3.2 Foreign currency translation
The US dollar is the functional currency and the presentation
currency. Transactions in foreign currencies are translated to the
functional currency of the Company at exchange rates at the dates
of the transactions. Monetary assets and liabilities denominated in
foreign currencies at the date of these financial statements are
translated to US dollars at exchange rates prevailing on that date.
All resulting exchange differences are recognised in the profit or
loss.
3.3 Interest income and dividend income
Interest income is recognised on a time-proportionate basis
using the effective interest rate method. Dividend income is
recognised when the right to receive payment is established.
3.4 Cash and cash equivalents
Cash comprises current deposits with banks. Cash equivalents are
short-term highly liquid investments that are readily convertible
to known amounts of cash, are subject to an insignificant risk of
changes in value, and are held for the purpose of meeting
short-term cash commitments rather than for investment or other
purposes.
3.5 Earnings per share
The Company presents basic and diluted earnings per share (EPS)
data for its ordinary shares. Basic EPS is calculated by dividing
the profit or loss attributable to ordinary shareholders of the
Company by the weighted average number of ordinary shares
outstanding during the period. Diluted EPS is determined by
adjusting the profit or loss attributable to ordinary shareholders
and the weighted average number of ordinary shares outstanding,
adjusted for the effects of all dilutive potential ordinary
shares.
3.6 Segment reporting
The Company has one segment focusing on maximising total returns
through investing in an Indian private equity portfolio of
investments. No additional disclosure is included in relation to
segment reporting, as the Company's activities are limited to one
business and geographic segment.
3.7 Future changes in accounting policies
IASB (International Accounting Standards Board) and IFRIC
(International Financial Reporting Interpretations Committee) have
issued the following standards and interpretations with an
effective date after the date of these financial statements:
New/Revised International Financial Reporting Standards Effective
(IAS/IFRS) date
(accounting
periods
commencing
on or after)
--------------------------------------------------------- --------------
IAS 1 Presentation of Financial Statements - Amendments 1 July 2012
to revise the way other comprehensive income is
presented (June 2011)
IAS 12 Income Taxes - Limited scope amendment (recovery 1 January
of underlying assets) (December 2010) 2012
IAS 19 Employee Benefits - Amendment resulting 1 January
from Post-Employment Benefits and Termination Benefits 2013
projects (as amended in June 2011)
IAS 27 Consolidated and Separate Financial Statements 1 January
- Reissued as IAS 27 Separate Financial Statements 2013
(as amended in May 2011)
IAS 28 Investments in Associates - Reissued as 1 January
IAS 28 Investments in Associates and Joint Ventures 2013
(as amended in May 2011)
IAS 32 Financial Instruments Presentation - Amendments 1 January
to application guidance on the offsetting of financial 2013
assets and financial liabilities (December 2011)
IFRS 7 Financial Instruments: Disclosures - Amendments 1 July 2011
enhancing disclosures about transfers of financial
assets (October 2010)
IFRS 7 Financial Instruments: Disclosures - Amendments 1 January
enhancing disclosures about offsetting of financial 2013
assets and financial liabilities (December 2011)
IFRS 7 Financial Instruments: Disclosures - Amendments 1 January
requiring disclosures about initial applicability 2015
of IFRS 9 (December 2011)
IFRS 9 Financial Instruments - Classification and 1 January
measurement of financial assets (as amended in 2015
December 2011)
IFRS 9 Financial Instruments - Accounting for financial 1 January
liabilities and derecognition (as amended in December 2015
2011)
IFRS 10 Consolidated Financial Statements (May 1 January
2011) 2013
IFRS 11 Joint Arrangements (May 2011) 1 January
IFRS 12 Disclosure of Interests in Other Entities 2013
(May 2011) 1 January
2013
IFRS 13 Fair Value Measurement (May 2011) 1 January
2013
--------------------------------------------------------- --------------
IFRIC Interpretation
IFRIC 19 Extinguishing Financial Liabilities with 1 January
Equity Instruments 2013
--------------------------------------------------------- --------------
The Directors do not expect the adoption of the standards and
interpretations to have a material impact on the Company's
financial statements in the period of initial application. However,
IFRS 9 Financial Instruments will change classification of
financial assets.
IFRS 9 deals with the classification and measurement of
financial assets and its requirements represent a significant
change from the existing IAS 39 in respect of financial assets. The
standard contains two primary measurement categories for financial
assets: at amortised cost and fair value.
A financial asset would be measured at amortised cost if it is
held within a business model whose objective is to hold assets in
order to collect contractual cash flows, and the asset's
contractual terms give rise on specified dates to cash flows that
are solely payments of principal and interest on the principal
outstanding. All other financial assets would be measured at fair
value. The standard eliminates the existing IAS 39 categories of
held to maturity, available for sale and loans and receivables.
For an investment in an equity instrument that is not held for
trading, the standard permits an irrevocable election, on initial
recognition, on an individual share-by-share basis, to present all
fair value changes from the investment in other comprehensive
income. No amount recognised in other comprehensive income would
ever be reclassified to profit or loss. However, dividends on such
investments are recognised in profit or loss, rather than other
comprehensive income unless they clearly represent a partial
recovery of the cost of the investment. Investments in equity
instruments in respect of which the entity does not expect to
present fair value changes in other comprehensive income would be
measured at fair value with changes in fair value recognised in
profit or loss.
The standard is not expected to have an impact on the
measurement basis of the financial assets since the majority of the
Company's financial assets are measured at fair value through
profit or loss.
4 Use of estimates and judgements
These disclosures supplement the commentary on financial risk
management (see note 17).
Key sources of estimation uncertainty
Determining fair values
The determination of fair values for financial assets for which
there is no observable market prices requires the use of valuation
techniques as described in accounting policy 3.1. For financial
instruments that trade infrequently and have little price
transparency, fair value is less objective, and requires varying
degrees of judgement depending on liquidity, concentration,
uncertainty of market factors, pricing assumptions and other risks
affecting the specific instrument. See also "Valuation of financial
instruments" below.
Critical judgements in applying the Company's accounting
policies
Valuation of financial instruments
The Company's accounting policy on fair value measurements is
discussed in accounting policy 3.1. The Company measures fair value
using the following hierarchy that reflects the significant of
inputs used in making the measurements:
-- Level 1: Quoted market price (unadjusted) in an active market for an identical instrument.
-- Level 2: Valuation techniques based on observable inputs,
either directly (i.e., as prices) or indirectly (i.e., derived from
prices). This category included instruments valued using: quoted
market prices in active markets for similar instruments: quoted
market prices for identical or similar instruments in markets that
are considered less than active; or other valuation techniques
where all significant inputs are directly or indirectly observable
from market data.
-- Level 3: Valuation techniques using significant unobservable
inputs. This category includes all instruments where the valuation
technique includes inputs not based on observable data and the
unobservable inputs have a significant effect on the instrument's
valuation. This category includes instruments that are valued based
on quoted prices for similar instruments where significant
unobservable adjustments or assumptions are required to reflect
differences between the instruments. For all financial instruments,
the Company determines fair values using valuation techniques as
described in accounting policy note 3.1 and note 7 "Financial
assets at fair value through profit or loss".
The table below analyses financial instruments measured at fair
value at the end of the reporting period, by the level in the fair
value hierarchy into which the fair value measurements are
categorised:
Level 1 Level 2 Level 3
US$ US$ US$
Financial assets at fair value
through profit or loss (note 7)
Evolvence India Fund PCC - - 29,410,318
EIF Co Invest VII (RSB Group) - 6,990,190
EIF Co Invest X (Gland Pharma Limited) - - 10,202,644
--------- --------- ----------------------
- - 46,603,152
========= ================================================== ======================
The table in note 7 shows a reconciliation from the beginning
balances to the ending balances for investments, all of which are
categorised as level 3 in the fair value hierarchy.
5 Net asset value per share
The net asset value per share as at 31 December 2011 is US$0.794
per share based on 64,500,002 ordinary shares in issue as at that
date (2010: US$1.136 per share based on 65,000,002 ordinary
shares).
6 Dividends
The Directors do not propose to declare a dividend for the year
ended 31 December 2011 (2010: US$Nil).
7 Financial assets at fair value through profit or loss
The objective of the Company is to make indirect investments in
Indian private equity funds and companies via Mauritian based
investment funds and to also co-invest directly in certain
portfolio companies of the underlying funds. As at 31 December
2011, the investment portfolio comprised the following assets:
Investments Capital Commitment Capital Invested Capital Fair value Fair Value
(unlisted) Distribution Adjustment
--------------------- ------------------- ----------------- -------------------- -------------------- -----------
US$ US$ US$ US$ US$
Fund Investments
(equity)
Evolvence India Fund
PCC 45,120,000 41,579,573 (12,967,996) 798,741 29,410,318
Direct Investments
(equity)
EIF Co Invest VII
(RSB Group) 6,969,600 6,969,600 (29,235) 49,825 6,990,190
EIF Co Invest X
(Gland Pharma
Limited) 4,510,000 4,510,000 - 5,692,644 10,202,644
56,599,600 53,059,173 (12,997,231) 6,541,210 46,603,152
--------------------- ------------------- ----------------- -------------------- -------------------- -----------
The fair value of the Company's investments has been estimated
by the Directors with advice from Evolvence India Advisors Inc. The
movement in investments in the year was as follows:
31 December 2011 31 December 2010
US$ US$
Fair value brought forward 61,669,218 49,586,442
Disposal of investment at cost (3,867,000) -
Capital calls 2,482,067 4,447,505
Capital distributions (2,511,303) (4,806,305)
Movement in fair value (11,169,830) 12,441,576
Fair value at year end 46,603,152 61,669,218
-------------------------------- ----------------- -----------------
The outstanding capital commitments as at 31 December 2011 were
US$3,540,427 (2010: US$8,155,494). The Company sold its investment
in Evolvence India Life Sciences Fund ("EILSF") on 27 June 2011. At
this date the outstanding capital commitment to EILSF was
US$2,133,000.
Evolvence India Fund PCC (EIF)
Evolvence India Fund PCC, a protected cell company formed under
the laws of Mauritius having limited liability, is a private equity
fund of funds with a co-investment pool, focusing primarily on
investments in India. The fund size of EIF is US$250 million, of
which approximately two-thirds have been invested in different
private equity funds (including growth capital, mezzanine and real
estate funds) with significant focus on India and the balance has
been invested in co-investment opportunities, primarily in Indian
companies or companies with significant operations in India. The
fund investments of EIF include Baring India Private Equity Fund
II, IDFC Private Equity Fund II, India Value Fund II (Formerly GW
Capital), Leverage India Fund, New York Life Investment Management
India Fund II, Ascent India Fund, JM Financial India Fund I, HI-REF
International LLC Fund, NYLIM Jacob Ballas India Fund III and IDFC
Private Equity Fund III.
Valuation basis
Audited financial statements for EIF for the year ended 31
December 2011 are not yet available. The investment in EIF has been
fair valued based on a valuation performed by its investment
manager of the portfolio at 31 December 2011, as adjusted for EIF
and underlying funds' expenses. Underlying listed investments have
been valued as per the closing market prices of the respective
companies listed on the Bombay Stock Exchange. For unlisted
underlying investments, the following valuation methodologies have
been used depending on the nature of the investment:
-- comparables methodology - valuation of comparable listed
companies was used as a benchmark to arrive at the valuation of
portfolio companies.
-- comparable transactions were utilised to arrive at the
valuation where listed comparables were
not available.
-- discounted cash flows (DCF) methodology - free cash flows of
portfolio companies were discounted by the weighted average cost of
capital for the portfolio companies. The Capital Asset Pricing
Model was used to calculate the cost of equity.
-- where DCF could not be performed, the investment was valued at cost.
After the equity valuation of the portfolio companies calculated
using the above valuation techniques, a set of discounts/premium
factors were applied to arrive at the final valuation. These
factors may include: company premium discount, scale discount and
illiquidity discount.
-- For some unlisted investments, where the lead investor
provided a detailed valuation report as at the valuation date
certified by an independent third party, the investment in that
portfolio company was valued on the basis of such detailed
valuation report.
Evolvence India Life Sciences Fund (EILSF)
On 27 June 2011, the Company sold its investment in EILSF for
consideration of US$5.0m, realising a gain of U$1.1m against cost.
At this date the outstanding capital commitment to EILSF was
US$2,133,000.
EIF Co Invest VII
EIH has invested US$6,969,600 in RSB Group through a special
purpose vehicle (SPV), EIF Co Invest VII. RSB Group is a leading
manufacturer of automotive components and construction aggregates.
The valuation in RSB Group which is unlisted, is based on a
valuation performed by EIF's investment manager and is based on an
average valuation multiple of comparable companies giving a fair
valuation gain of US$49,825 (2010: US$4,155,126).
EIF Co Invest X
EIH has invested US$4,510,000 in Gland Pharma Limited through an
SPV, EIF Co Invest X. Gland Pharma Limited is a Hyderabad based
pharmaceutical company. The investment in Gland Pharma has been
fair valued as at 31 December 2011 based on the value included in
the audited financial statements of EILSF as described above.
8 Related parties and related party transactions
Parties are considered to be related if one party has the
ability to control the other party or to exercise significant
influence over the other party in making financial or operational
decisions.
Mr Rhys Davies and Mr Brett Miller are Directors of Damille
Investments Limited which holds 11,450,000 ordinary shares,
representing 17.75% of the issued share capital of the Company.
Save as disclosed above, none of the Directors had any interest
during the period in any material contract for the provision of
services which was significant to the business of the Company.
9 Charges and Fees
9.1 Nominated Adviser's fees
With effect from 14 May 2010 Singer Capital Markets Limited
replaced Seymour Pierce as the nominated adviser. As nominated
adviser to the Company for the purposes of the AIM Rules, Singer
Capital Markets Limited is entitled to receive an annual fee of
GBP45,000 in addition to reasonable costs and expenses incurred in
carrying out its obligations under the nominated adviser
agreement.
Advisory fees paid to the Nominated Adviser for the year
amounted to US$71,707 (2010: US$79,124) of which US$nil (2010:
US$17,401) was prepaid as at 31 December 2011.
9.2 Administrator's and Registrar's fees
By a deed dated 28 December 2006 between the Company and Cains
Fiduciaries Limited (CFL), CFL agreed to provide general
secretarial services to the Company for which it receives a fixed
annual charge of GBP15,000; fees incurred on a time spent basis in
accordance with the charging rates of CFL in force from time to
time; and all disbursements and expenses incurred by CFL in
connection with the provision by it of services to the Company. The
fees are subject to Value Added Tax (VAT).
The Company and Cains Fiduciaries Limited may terminate the deed
on the giving of thirty days' prior written notice, or earlier in
the event of, inter alia, material breach of the terms of the deed
or commencement of winding up. The governing law of the deed is
that of the Isle of Man.
Cains Fiduciaries Limited may utilise the services of a CREST
accredited registrar for the purpose of settling share transactions
through CREST. The cost of this service will be borne by the
Company. The Company pays the CREST Service Provider an annual fee
of GBP5,195 plus a fee for each holding and transfer
registered.
Administration fees for the year amounted to US$38,792 (2010:
US$118,488) of which US$1,419 was outstanding at 31 December 2011
(2010: US$3,190).
CREST fees were US$15,795 (2010: US$ 15,229) of which US$3,472
was outstanding at 31 December 2011 (2010: US$3,388).
10 Cash and cash equivalents
31 December 2011 31 December 2010
US$ US$
--------------------------- ----------------- -----------------
Bank balances 4,652,483 1,319,933
Short-term deposits - 11,000,000
--------------------------- ----------------- -----------------
Cash and cash equivalents 4,652,483 12,319,933
--------------------------- ----------------- -----------------
11 Trade and other receivables
31 December 2011 31 December 2010
US$ US$
-------------------------------------------- ----------------- -----------------
Interest receivable on short-term deposits - 8,999
Prepaid expenses 24,433 52,531
Trade debtors and other receivables 12,365 16,580
VAT receivable 5,287 10,127
-------------------------------------------- ----------------- -----------------
Total 42,085 88,237
-------------------------------------------- ----------------- -----------------
12 Trade and other payables
31 December 2011 31 December 2010
US$ US$
----------------- ----------------- -----------------
Other creditors 11,123 31,986
Accruals 59,351 239,846
----------------- ----------------- -----------------
Total 70,474 271,832
----------------- ----------------- -----------------
13 Issued share capital
Ordinary Shares of 1p each Number US$
----------------------------------- ----------- ----------
In issue at the start of the year 65,000,002 1,274,510
Reduction in issued share capital (500,000) (9,804)
In issue at 31 December 2011 64,500,002 1,264,706
----------------------------------- ----------- ----------
The authorised share capital of the Company is GBP700,000
divided into 70 million Ordinary Shares of GBP0.01 each. The
holders of ordinary shares are entitled to receive dividends as
declared from time to time and are entitled to one vote per share
at meetings of the Company. All shares rank equally with regards to
the Company's assets.
During the year 500,000 shares were bought back at US$0.60 per
share. The shares were cancelled.
Capital management
The Board's policy is to maintain a strong capital base so as to
maintain investor, creditor and market confidence and to sustain
future development of the business. The Board manages the Company's
affairs to achieve shareholder returns through capital growth
rather than income, and monitors the achievement of this through
growth in net asset value per share.
The Directors have prepared a schematic cash flow model, based
on input from the managers of EIF, that incorporates various exit
scenarios for the private equity holdings and direct
co-investments. The Directors have also considered scenarios for
Gland and RSB, which are direct holdings of the Company through
SPVs managed by the manager of EIF. Finally, the Directors have
examined various scenarios for the likely timing and magnitude of
any further drawdowns.
The preparation and analysis of this cash flow model, while
subject to the uncertainties described above, has given the
Directors satisfaction that the Company will continue to be able to
meet its investment objective, notwithstanding that its outstanding
capital commitments will exceed its net cash balances.
At Annual General Meeting (AGM) held on 29 June 2010 the
Company's new investment policy was unanimously approved by
shareholders:
"The Company shall not make any new investments, save for
commitments already entered into. The Company will actively manage
its investments and seek to realise such investments in a managed
way at an appropriate time, returning proceeds to Shareholders as
soon as practicable.
Shareholder returns are expected to be delivered by way of
return of capital on their shares, whether by dividend, repurchase,
tender or otherwise."
The Company's capital comprises share capital, share premium and
reserves. The Company is not subject to externally imposed capital
requirements.
14 Earnings per share
Basic and fully diluted earnings per share is calculated by
dividing the profit attributable to equity holders of the Company
by the weighted average number of ordinary shares in issue during
the year:
2011 2010
(Loss)/profit attributable to equity holders of the Company (US$) (10,578,310) 11,321,010
Weighted average number of ordinary shares in issue 64,875,000 65,000,002
------------------------------------------------------------------- ------------- -----------
Basic (loss)/earnings per share (cents per share) (16.31) 17.42
------------------------------------------------------------------- ------------- -----------
There is no difference between the basic and fully diluted
(loss)/earnings per share for the year.
15 Directors' remuneration
The maximum amount of remuneration payable to the Directors
permitted under the Articles of Association is GBP200,000 per
annum. The Directors are each entitled to receive reimbursement of
any expenses incurred in relation to their appointment. Total fees
and expenses paid to the Directors for the year amounted to
US$214,630 (year ended 31 December 2010: US$161,508) and insurance
expenses of US$30,801 (year ended 31 December 2010: US$34,625).
Director 31 December 2011 31 December 2010
US$ US$
----------------------------- ----------------- -----------------
Michael Gerald Maloney - 18,542
Christopher William Knight - 26,244
Alexander Anderson Whammond - 19,664
Rhys Cathan Davies 72,037 26,824
Brett Lance Miller 72,037 26,824
Ramanan Raghavendran 70,556 43,410
----------------------------- ----------------- -----------------
Total 214,630 161,508
----------------------------- ----------------- -----------------
The fees for Rhys Davies and Brett Miller are paid to Damille
Investments Limited, a related party as detailed in note 8.
16 Taxation
The Company is resident for taxation purposes in the Isle of Man
by virtue of being incorporated in the Isle of Man and is subject
to taxation on its income but the rate of tax is zero.
The Company invests in a number of Mauritian incorporated
companies and funds, which in turn invest in India. The Company is
therefore exposed to Mauritian tax on the investee companies and to
Indian tax on underlying investments of those companies. However,
pursuant to the Double Taxation Treaty between India and Mauritius,
the Mauritian incorporated companies and funds are entitled to
significant tax benefits.
There is no Mauritian tax payable on distributions paid to the
Company from Mauritian investee companies.
17 Financial risk management
The Company's activities expose it to a variety of financial
risks: equity market risks, foreign exchange risk, credit risk,
liquidity risk and interest rate risk.
Equity market risks
The Company's investments are subject to equity market risks.
The investments are concentrated in India. The Company's strategy
on the management of investment risk is driven by the Company's
investment objective. The main objective of the Company is to
maximise the total returns to investors by making investments in
Indian private equity funds and direct investments in a wide range
of industry sectors in India. Investments in India may be
difficult, slow or impossible to realise.
The Company is subject to general risks incidental to equity
investments in the relevant market sectors, including general
economic conditions, poor management of the target company,
increasingly competitive market conditions, changing sentiments and
increasing costs, amongst others. The marketability and value of
any investment will depend on many factors beyond the control of
the Company and therefore the Company can give no assurance that an
exit from any investment will be achieved.
The investment portfolio is subject to market price sensitivity
related to the Indian equity market.
A substantial portion of the Company's investments are or will
be in unlisted companies, whose securities are considered to be
illiquid. Illiquidity may affect the ability of the primary and
underlying funds to acquire and dispose of such investments.
Foreign exchange risk
A significant portion of the investments of the Company, the
primary funds and the underlying funds are made in securities of
companies in India and the income and capital realisations received
from such investments as well as the income and capital
realisations received from any direct investments will be
denominated in Indian Rupees, whereas the capital contributions by
the Company are in US Dollars. The Company's other operations are
also conducted in other jurisdictions which generate revenue,
expenses, assets and liabilities in currencies other than the US
Dollars. As a result, the Company is subject to the effects of
exchange rate fluctuations with respect to these currencies. The
currency giving rise to this risk is primarily the Indian
Rupee.
The Company's policy is not to enter into any currency hedging
transactions.
At the reporting date the Company had the following
exposure:
31 December 2011 31 December 2010
% %
----------------- ----------------- -----------------
Pounds Sterling 0.22 0.13
Indian Rupee 90.80 83.55
US Dollar 8.98 16.32
----------------- ----------------- -----------------
Total 100.00 100.00
----------------- ----------------- -----------------
The following table sets out the Company's total exposure to
foreign currency risk and the net exposure to foreign currencies of
the monetary assets and liabilities:
Monetary Assets Monetary Net Exposure
Liabilities
US$ US$
US$
31 December 2011
------------------ ---------------- ------------- -------------
Pound Sterling 110,091 (64,526) 45,565
Indian Rupee 46,603,152 - 46,603,152
US Dollar 4,584,477 (5,948) 4,578,529
51,297,720 (70,474) 51,227,246
------------------ ---------------- ------------- -------------
Monetary Assets Monetary Net Exposure
Liabilities
US$ US$
US$
31 December 2010
------------------ ---------------- ------------- -------------
Pound Sterling 190,909 (97,432) 93,477
Indian Rupee 61,669,218 - 61,669,218
US Dollar 12,217,261 (174,400) 12,042,861
74,077,388 (271,832) 73,805,556
------------------ ---------------- ------------- -------------
At 31 December 2011, had the Indian Rupee strengthened or
weakened by 5% in relation to all currencies, with all other
variables held constant, net assets attributable to equity holders
of the Company and the profit per the statement of comprehensive
income would have increased or decreased by US$2,330,158 (2010:
US$3,083,461).
Credit risk
Credit risk is the risk that a counterparty to a financial
instrument will fail to discharge an obligation or commitment that
it has entered into with the Company.
The carrying amounts of financial assets best represent the
maximum credit risk exposure at the balance sheet date. This
relates also to financial assets carried at amortised cost, as they
have a short term maturity.
At the reporting date, the Company's financial assets exposed to
credit risk amounted to the following:
31 December 2011 31 December 2010
US$ US$
------------------------------------------------------- ----------------- -----------------
Financial assets at fair value through profit or loss 46,603,152 61,669,218
Trade and other receivables 42,085 88,237
Cash and cash equivalents 4,652,483 12,319,933
------------------------------------------------------- ----------------- -----------------
Total 51,297,720 74,077,388
------------------------------------------------------- ----------------- -----------------
The maximum exposure to credit risk is represented by the
carrying amount of each financial asset in the balance sheet. The
Directors do not expect any counterparty to fail to meet its
obligations.
Liquidity risk
Liquidity risk is the risk that the Company will encounter
difficulty in meeting obligations associated with its financial
liabilities that are settled by delivering cash or another
financial asset. The Company manages its liquidity risk by
maintaining sufficient cash balances to meet its obligations. The
Company's liquidity position is monitored by the Investment Manager
and the Board of Directors.
Residual undiscounted contractual maturities of financial
liabilities:
31 December 2011 Less than 1-3 3 months 1-5 years Over No stated
1 month months to 1 year 5 years maturity
------------------------- ---------- -------- ----------- ---------- --------- ----------
US$ US$ US$ US$ US$ US$
Financial liabilities
Trade and other payables 70,474 - - - - -
------------------------- ---------- -------- ----------- ---------- --------- ----------
70,474 - - - - -
------------------------- ---------- -------- ----------- ---------- --------- ----------
31 December 2010 Less than 1-3 3 months 1-5 years Over No stated
1 month months to 1 year 5 years maturity
------------------------- ---------- -------- ----------- ---------- --------- ----------
US$ US$ US$ US$ US$ US$
Financial liabilities
Trade and other payables 271,832 - - - - -
------------------------- ---------- -------- ----------- ---------- --------- ----------
271,832 - - - - -
------------------------- ---------- -------- ----------- ---------- --------- ----------
Capital commitments outstanding to private equity funds as at 31
December 2011 amounted to US$3,540,427 (2010: US$8,155,494). These
are payable when called by the respective funds.
Interest rate risk
Cash held by the Company is invested at short-term market
interest rates.
The table below summarises the Company's exposure to interest
rate risks. It includes the Company's financial assets and
liabilities at the earlier of contractual re-pricing or maturity
date, measured by the carrying values of assets and
liabilities:
31 December 2011 Less than 1-3 months 3 months 1-5 years Over Non-interest Total
1month to 1 5 bearing
year years
US$ US$ US$ US$ US$ US$ US$
Financial Assets
Financial assets
at fair value
through profit
or loss - - - - - 46,603,152 46,603,152
Trade and other
receivables - - - - - 42,085 42,085
Cash and cash
equivalents 4,652,483 - - - - - 4,652,483
----------------------- ----------- ----------- --------- ---------- ------- ------------- ------------
Total financial
assets 4,652,483 - - - - 46,645,237 51,297,720
Financial Liabilities
Trade and other
payables - - - - - (70,474) (70,474)
----------------------- ----------- ----------- --------- ---------- ------- ------------- ------------
Total financial
liabilities - - - - - (70,474) (70,474)
Total interest
rate sensitivity 4,652,483 - - - -
gap
----------------------- ----------- ----------- --------- ---------- ------- ------------- ------------
31 December 2010 Less than 1-3 months 3 months 1-5 years Over Non-interest Total
1month to 1 year 5 bearing
years
US$ US$ US$ US$ US$ US$ US$
Financial Assets
Financial assets
at fair value
through profit
or loss - - - - - 61,669,218 61,669,218
Trade and other
receivables - - - - - 88,237 88,237
Cash and cash
equivalents 9,319,933 - 3,000,000 - - - 12,319,933
Total financial
assets 9,319,933 - 3,000,000 - - 61,757,455 74,077,388
Financial Liabilities
Trade and other
payables - - - - - (271,832) (271,832)
Total financial
liabilities - - - - - (271,832) (271,832)
Total interest
rate 9,319,933 - 3,000,000 - -
sensitivity gap
----------------------- ----------- ----------- ----------- ---------- ------- ------------- ------------
No financial assets are subject to fair value interest rate
risk. No sensitivity is provided with respect to variable interest
rate movements as the effect is considered not significant.
18 Subsequent events
On 9 February 2012, the Company reported that, following a cash
call of US$3.5m, 100% of EIF's committed capital had been drawn
down and EIH had no outstanding commitment to EIF.
The Company today separately reported that it has received a
distribution from EIF of US$1.8m. Approximately US$0.5m represents
a partial return of the capital drawn down by EIF in February 2012,
such that EIF now has technically only drawn down 98.85% of its
committed capital, with 1.15% remaining undrawn. However, EIF's
managers have informed us that this unfunded commitment will likely
be adjusted against future distributions, such that no further cash
calls are likely to be made by EIF.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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