TIDMEIH
RNS Number : 2984G
EIH PLC
05 June 2013
5(th) June 2013
EIH plc
Final Results
EIH plc reports its results for the financial year ended 31
December 2012. 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
2013 Annual General Meeting will be posted to shareholders in due
course.
For further information, please contact:
EIH plc
Rhys Davies
Tel: +41 (0)796200215
Nplus1 Singer Advisory LLP
(Nominated Advisor)
Nick Donovan
Tel: +44 (0)207 496 3000
Chairman's Statement
At 31 December 2012, the net asset value of EIH plc ("the
Company") was US$0.727 per share as compared with US$0.794 per
share a year earlier, representing a decrease of 8.4%. Based on the
weighted average number of ordinary shares, the loss per share for
the year was US$0.0373 (2011: loss per share US$0.1631).
It is noted that during the year in review the Company
distributed 3 cents per share, equivalent to approximately
US$1.93m, to shareholders. Following the year end the Company
distributed a further 2 cents per share with a payment date of 15
March 2013.
During the year in review, the Company received distributions of
US$1.6m from the Evolvence India Fund PCC ("EIF"), and invested a
further US$3m in EIF.
Total operating costs during the year were US$0.5m and this
represents a decline of 9% on the prior year. This figure
represents approximately 1% of the Company's Financial Assets at
fair value. In addition, the Company paid certain annual management
fees and expenses to EIF in respect of its commitment. These costs
are embedded in the capital accounts for those two funds and do not
appear in the Company's statement of comprehensive income.
The Company's portfolio now comprises the following (based on
year end Fair Values):
Table 1. Investments Capital Commitment Capital invested Capital Fair value Fair Value
Distribution adjustment
--------------------- ------------------- ----------------- -------------------- -------------------- -----------
US$ US$ US$ US$ US$
Fund Investments
(equity)
Evolvence India Fund
PCC 45,120,000 44,601,127 (14,594,892) 194,241 30,200,476
Direct Investments
(equity)
EIF Co Invest VII
(RSB Group) 6,969,600 6,969,600 (29,235) (2,666,907) 4,273,458
EIF Co Invest X
(Gland Pharma
Limited) 4,510,000 4,510,000 - 7,108,710 11,618,710
56,599,600 56,080,727 (14,624,127) 4,636,044 46,092,644
--------------------- ------------------- ----------------- -------------------- -------------------- -----------
EIF
At the year end the Company had US$30m invested in EIF (capital
called less refund capital contributions), equivalent to 46.5 cents
per share. At the reporting date the fair value of the Company's
investment in EIF was US$30.2m, equivalent to 46.8 cents per share,
representing a 1.01 times multiple over cost.
EIF has now technically 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 continue to
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 advanced by 25.7% and 38.5% respectively in
local currency. The currency picture was largely stable in the
period under review and it is also noted that the Indian Rupee
("INR") declined by 0.5% against the US Dollar during the year in
review.
Against this benign environment EIF's underlying private equity
funds performed reasonably well, although exit activity was muted.
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 increased by approximately 0.2% in
US Dollar terms, while in INR terms this increase was approximately
0.7%. On the same basis of measurement, EIF's direct investments
moderately outperformed its underlying funds although there was a
wide dispersion of performance; in aggregate their value increased
by approximately 5.4% in US Dollar terms, while in INR terms this
increase was approximately 5.9%.
Both EIF's underlying funds and its direct investments hold
exposure to listed equities and EIF's overall weighting was
approximately 8% at the year end, concentrated in the underlying
funds.
EIF's sector exposure is weighted towards Infrastructure (ca.
30%) and Real Estate (ca. 20%). 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 (ca. 20%), Manufacturing (ca. 10%), and Information
Technology (ca. 5%). 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.
A "look through" analysis of the financial performance of the
portfolio companies held in EIF's private equity funds for the 9
month period ending on 31 December 2012 provides an insight into
the aggregate portfolio performance (Real Estate companies were
excluded and data was unavailable for certain other companies).
This "look through" analysis shows that approximately one third of
the portfolio by value generated revenue growth of over 20%, while
another third generated positive revenue growth of below 20%, and a
further sixth suffered negative revenue growth (data was
unavailable for the remainder of the portfolio). Furthermore,
approximately half the portfolio by value generated EBITDA growth
of over 20%, while another fifth generated positive EBITDA growth
of below 20%, and a further fifth suffered negative revenue growth
(data was unavailable for the remainder of the portfolio).
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 largely concentrated
in the NYLIM Jacob Ballas India Fund III fund.
At the period end the fair value of the Company's interest in
EIF's ten underlying private equity funds was US$15.9m, equivalent
to 24.7 cents per share, while EIF's direct investments had a fair
value of US$12.9m, equivalent to 20.0 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 2013, the BSE SENSEX advanced
by 0.4%, while the BSE MIDCAP declined by 10.8%, both in INR terms.
It is also noted that in the same period the INR strengthened by
1.1% against the US Dollar.
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; compound growth in
both revenue and EBITDA was in excess of 50% annualized over this
period. 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 27.1 cents per share;
while the fair value of the Company's interest in Gland held
through EIF Co Invest X is valued at 18.0 cents per share (see
Table 2, below). These values represent a 2.6 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$8.8m invested in RSB (at cost) compared
to the US$7.0m invested in RSB through EIF Co Invest VII.
Through the above arrangements, and on a look-through basis, the
fair value of Company's interest in RSB is 8.3 cents per share;
while the fair value of the Company's interest in RSB held through
EIF Co Invest VII is 6.6 cents per share (see Table 2, below).
These values represent a 0.6 times multiple over cost. The
Directors have reviewed certain underlying financial information
pertaining to RSB and the valuation basis employed in the fair
valuation calculation thereof.
The decline in the fair value of the Company's interest in RSB
in the period under review is largely due to the decline in trading
multiples of the comparable group. Moreover, the share prices of
the comparable group declined by an average of 6.5% from the period
end until 30 April 2013.
Table 2. Investments (Fair Values) As per LP reports RSB Gland Pro-forma
(EIF) (EIF)
------------------------------------ ------------------ ------------ ------------ -----------
US$ US$ US$ US$
Fund Investments
EIF (PE funds) 15,928,489 15,928,489
EIF (direct investments) 12,917,178 (1,100,177) (5,824,316) 5,992,685
EIF (other) 1,354,809 1,354,809
Direct Investments
RSB Group 4,273,458 1,100,177 5,373,635
Gland Pharma Limited 11,618,710 5,824,316 17,443,026
46,092,644 - - 46,092,644
------------------------------------ ------------------ ------------ ------------ -----------
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, 49.5% of the Company's
Financial Assets at Fair Value (US$22.8m, equivalent to 35.4 cents
per share), is accounted for by its interests in Gland and RSB on
an underlying pro-forma basis.
Table 2 further shows that 34.6% of the Company's Financial
Assets at Fair Value is accounted for by its interests in EIF's ten
PE fund investments, and a further 13.0% by its interests in EIF's
direct investments (excluding Gland and RSB).
Other matters
At the date of this report the Company holds US$0.23m in net
cash balances, equivalent to 0.36 cents per share.
As a Board we will continue to manage operating costs carefully.
Our objective is to realize assets at the appropriate time and
value, and to return the proceeds less expenses to our
shareholders.
On behalf of the Board of Directors, I thank all Shareholders
for their support.
Respectfully yours,
Rhys Cathan Davies
4 June 2013
Statement of Comprehensive Income
for the year ended 31 December 2012
Note
31 December 31 December
2012 2011
US$ US$
----------------------------------- ----- -------------- ---------------
Income
Interest income on cash
balances - 9,795
Fair value movement on
investments at fair value
through profit or loss 7 (1,905,167) (11,169,830)
Profit on disposal of investments
at fair value through profit
or loss 7 - 1,133,000
Other income 1,271 1,798
Net investment expense (1,903,896) (10,025,237)
----------------------------------- ----- -------------- ---------------
Expenses
Administrative expenses 9.2 (291,388) (281,010)
Legal and other professional
fees (168,861) (220,045)
Audit fees (41,557) (52,018)
Total operating expenses (501,806) (553,073)
----------------------------------- ----- -------------- ---------------
Loss before tax (2,405,702) (10,578,310)
Income tax expense 16 - -
Loss for the year (2,405,702) (10,578,310)
----------------------------------- ----- -------------- ---------------
Other comprehensive income - -
----------------------------------- ----- -------------- ---------------
Total comprehensive expense
for the year (2,405,702) (10,578,310)
----------------------------------- ----- -------------- ---------------
Basic and fully diluted
loss per share (cents) 14 (3.73) (16.31)
----------------------------------- ----- -------------- ---------------
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 2012
Note 31 December 31 December
2012 2011
US$ US$
------------------------------ ------ ------------ ------------
Non-current assets
Financial assets at
fair value through
profit or loss 7 46,092,644 46,603,152
------------------------------ ------ ------------ ------------
Total non-current assets 46,092,644 46,603,152
------------------------------ ------ ------------ ------------
Current assets
Trade and other receivables 11 17,595 42,085
Cash and cash equivalents 10 840,417 4,652,483
------------------------------ ------ ------------ ------------
Total current assets 858,012 4,694,568
------------------------------ ------ ------------ ------------
Total assets 46,950,656 51,297,720
============================== ====== ============ ============
Issued share capital 13 1,264,706 1,264,706
Share premium 44,654,924 46,589,924
Retained earnings 966,914 3,372,616
------------------------------ ------ ------------ ------------
Total equity 46,886,544 51,227,246
------------------------------ ------ ------------ ------------
Trade and other payables 12 64,112 70,474
Total current liabilities 64,112 70,474
------------------------------ ------ ------------ ------------
Total liabilities 64,112 70,474
------------------------------ ------ ------------ ------------
Total equity and liabilities 46,950,656 51,297,720
============================== ====== ============ ============
The financial statements were approved by the Board of Directors
on 4 June 2013 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 2012
Share Capital Share Premium Retained Earnings Total
US$ US$ US$ US$
-------------------------------------- -------------- --------------- ------------------ ---------------
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
====================================== ============== =============== ================== ===============
Balance at 1 January 2012 1,264,706 46,589,924 3,372,616 51,227,246
Total comprehensive income
Loss for the year - - (2,405,702) (2,405,702)
Other comprehensive income - - - -
-------------------------------------- -------------- --------------- ------------------ ---------------
Total comprehensive income - - (2,405,702) (2,405,702)
-------------------------------------- -------------- --------------- ------------------ ---------------
Transactions with shareholders
Share buy-backs - - - -
Return of capital to shareholders - (1,935,000) - (1,935,000)
-------------------------------------- -------------- --------------- ------------------ ---------------
Total transactions with shareholders - (1,935,000) - (1,935,000)
-------------------------------------- -------------- --------------- ------------------ ---------------
Balance at 31 December 2012 1,264,706 44,654,924 966,914 46,886,544
====================================== ============== =============== ================== ===============
The accompanying notes form an integral part of these financial
statements.
Statement of Cash Flows
for the year ended 31 December 2012
31 December 31 December
Note 2012 2011
US$ US$
Cash flows from operating
activities
Loss before tax (2,405,702) (10,578,310)
Adjustments:
Interest income on cash
balances - (9,795)
Fair value movement on
investments at fair value
through profit or loss 7 1,905,167 11,169,830
Profit on disposal of investments
at fair value through profit
or loss - (1,133,000)
Operating loss before working
capital changes (500,535) (551,275)
Decrease in trade and other
receivables 24,490 37,153
Decrease in trade and other
payables (6,362) (201,358)
Cash used in operations (482,407) (715,480)
Interest received - 18,794
Net cash used by operating
activities (482,407) (696,686)
----------------------------------- ----- ------------ -------------
Cash flows from investing
activities
Proceeds from sale of investment 7 - 5,000,000
Capital calls 7 (3,021,555) (2,482,067)
Capital distribution received 7 1,626,896 2,511,303
----------------------------------- ----- ------------ -------------
Net cash (used by)/generated
from investing activities (1,394,659) 5,029,236
----------------------------------- ----- ------------ -------------
Cash flows from financing
activities
Share buy-backs - (300,000)
Return of capital to shareholders (1,935,000) (11,700,000)
Net cash used by financing
activities (1,935,000) (12,000,000)
----------------------------------- ----- ------------ -------------
Net decrease in cash and
cash equivalents (3,812,066) (7,667,450)
Cash and cash equivalents
at beginning of the year 4,652,483 12,319,933
----------------------------------- ----- ------------ -------------
Cash and cash equivalents
at end of year 10 840,417 4,652,483
=================================== ===== ============ =============
The accompanying notes form an integral part of these financial
statements.
Notes to the Financial Statements
for the year ended 31 December 2012
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 was proposed that the Company ceases
to continue as presently constituted. No Shareholders voted in
favour of this resolution, therefore 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"), and
interpretations as adopted by the European Union ("EU").
The financial statements were authorised for issue by the Board
of Directors on 4 June 2013.
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, as adopted by the EU, 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 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 EU Effective date
Financial Reporting Standards (accounting periods
(IAS/IFRS) commencing on or
after)
------------------------------------------ -----------------------
IAS 1 Presentation of Financial Endorsed (5 June
Statements - Amendments to 2012)
revise the way other comprehensive
income is presented (June
2011)
IAS 12 Income Taxes - Limited EU effective date
scope amendment (recovery 1 January 2014
of underlying assets) (December
2010)
IAS 19 Employee Benefits - Endorsed (5 June
Amendment resulting from Post-Employment 2012)
Benefits and Termination Benefits
projects (as amended in June
2011)
IAS 27 Consolidated and Separate EU effective date
Financial Statements - Reissued 1 January 2014
as IAS 27 Separate Financial
Statements (as amended in EU effective date
May 2011) 1 January 2014
IAS 28 Investments in Associates
- Reissued as IAS 28 Investments Endorsed (13 December
in Associates and Joint Ventures 2012)
(as amended in May 2011)
IAS 32 Financial Instruments
Presentation - Amendments
to application guidance on
the offsetting of financial
assets and financial liabilities
(December 2011)
IFRS 7 Financial Instruments: Endorsed (13 December
Disclosures - Amendments enhancing 2012)
disclosures about transfers
of financial assets (October
2010)
IFRS 7 Financial Instruments: Endorsed (13 December
Disclosures - Amendments enhancing 2012)
disclosures about offsetting
of financial assets and financial
liabilities (December 2011)
IFRS 7 Financial Instruments: Endorsed (13 December
Disclosures - Amendments requiring 2012)
disclosures about initial
applicability of IFRS 9 (December Not yet endorsed
2011) IASB effective date
IFRS 9 Financial Instruments 1 January 2015
- Classification and measurement Not yet endorsed
of financial assets (as amended IASB effective date
in December 2011) 1 January 2015
IFRS 9 Financial Instruments EU effective date
- Accounting for financial 1 January 2014
liabilities and derecognition EU effective date
(as amended in December 2011) 1 January 2014
IFRS 10 Consolidated Financial EU effective date
Statements (May 2011) 1 January 2014
IFRS 11 Joint Arrangements
(May 2011)
IFRS 12 Disclosure of Interests
in Other Entities (May 2011)
IFRS 13 Fair Value Measurement Endorsed (11 December
(May 2011) 2012)
------------------------------------------ -----------------------
IFRIC Interpretation
IFRIC 19 Extinguishing Financial 1 January 2013
Liabilities with Equity Instruments
------------------------------------------ -----------------------
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.
3.7 Future changes in accounting policies - continued
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 Level Level
1 2 3
US$ US$ US$
Financial assets at fair
value through profit or
loss (note 7)
Evolvence India Fund PCC - - 30,200,476
EIF Co Invest VII (RSB
Group) - 4,273,458
EIF Co Invest X (Gland
Pharma Limited) - - 11,618,710
------- ------- ------------------
- - 46,092,644
======= ================================== ==================
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 2012 is US$0.727
per share based on 64,500,002 ordinary shares in issue as at that
date (2011: US$0.794 per share based on 64,500,002 ordinary
shares).
6 Dividends
The Directors do not propose to declare a dividend for the year
ended 31 December 2012 (2011: US$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
2012, 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 44,601,127 (14,594,892) 194,241 30,200,476
Direct Investments
(equity)
EIF Co Invest VII
(RSB Group) 6,969,600 6,969,600 (29,235) (2,666,907) 4,273,458
EIF Co Invest X
(Gland Pharma
Limited) 4,510,000 4,510,000 - 7,108,710 11,618,710
56,599,600 56,080,727 (14,624,127) 4,636,044 46,092,644
--------------------- ------------------- ----------------- -------------------- -------------------- -----------
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 2012 31 December 2011
US$ US$
Fair value brought forward 46,603,152 61,669,218
Disposal of investment at cost - (3,867,000)
Capital calls 3,021,555 2,482,067
Capital distributions (1,626,896) (2,511,303)
Movement in fair value (1,905,167) (11,169,830)
Fair value at year end 46,092,644 46,603,152
-------------------------------- ----------------- -----------------
The outstanding capital commitments as at 31 December 2012 were
US$518,873 (2011: US$3,540,427).
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
The fair value of the investment in EIF is based on the
Company's share of the net assets of EIF at 31 December 2012 per
its financial statements. The financial statements of EIF are
prepared under IFRS, with all investments stated at fair value. The
valuation of the investment portfolio of EIF has been performed by
its investment manager at 31 December 2012. The investment
portfolio comprises investments in private equity funds, where fair
value is based on reported net asset values, and co-investments in
private companies where fair values are based on valuation
techniques.
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 fair value of the investment in Co Invest VII is based on the
Company's share of the net assets of Co Invest VII at 31 December
2012 per its financial statements . The financial statements of EIF
Co Invest VII are prepared under IFRS, with all investments stated
at fair value. The underlying valuation of RSB Group, which is
unlisted, is based on a valuation technique.
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 fair value of the investment in Co
Invest X is based on the Company's share of the net assets of Co
Invest X at 31 December 2012 per its financial statements. The
financial statements of EIF Co Invest X are prepared under IFRS,
with all investments stated at fair value. The underlying valuation
of Gland Pharma, which is unlisted, is based on a valuation
technique.
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 held 12,200,000 ordinary shares,
representing 18.91% of the issued share capital of the Company at
31 December 2012. Damille Investments Limited disposed of this
holding on 13 March 2013.
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
As nominated adviser to the Company for the purposes of the AIM
Rules, Nplus1 Singer Advisory LLP (formerly 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$71,029 (2011: US$71,707).
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$26,469 (2011:
US$38,792) of which US$1,327 was outstanding at 31 December 2012
(2011: US$1,419).
CREST fees were US$16,462 (2011:US$15,795) of which US$3,668 was
outstanding at 31 December 2012 (2011: US$3,472).
10 Cash and cash equivalents
31 December 2012 31 December 2011
US$ US$
--------------------------- ----------------- -----------------
Bank balances 840,717 4,652,483
Cash and cash equivalents 840,717 4,652,483
--------------------------- ----------------- -----------------
11 Trade and other receivables
31 December 2012 31 December 2011
US$ US$
------------------------------------- ----------------- -----------------
Prepaid expenses 13,884 24,433
Trade debtors and other receivables - 12,365
VAT receivable 3,711 5,287
------------------------------------- ----------------- -----------------
Total 17,595 42,085
------------------------------------- ----------------- -----------------
12 Trade and other payables
31 December 2012 31 December 2011
US$ US$
----------------- ----------------- -----------------
Other creditors 5,260 11,123
Accruals 58,852 59,351
----------------- ----------------- -----------------
Total 64,112 70,474
----------------- ----------------- -----------------
13 Issued share capital
Ordinary Shares of 1p each Number US$
----------------------------------- ----------- ----------
In issue at the start of the year 64,500,002 1,264,706
Movement in issued share capital - -
In issue at 31 December 2012 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.
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.
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:
2012 2011
Loss attributable to equity holders of the Company (US$) (2,405,702) (10,578,310)
Weighted average number of ordinary shares in issue 64,500,002 64,875,000
---------------------------------------------------------- ------------ -------------
Basic loss per share (cents per share) (3.73) (16.31)
---------------------------------------------------------- ------------ -------------
There is no difference between the basic and fully diluted loss
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$213,189 (year ended 31 December 2011: US$214,630) and insurance
expenses of US$25,925 (year ended 31 December 2011: US$30,801).
Director 31 December 2012 31 December 2011
US$ US$
---------------------- ----------------- -----------------
Rhys Cathan Davies 71,687 72,037
Brett Lance Miller 71,687 72,037
Ramanan Raghavendran 69,815 70,556
---------------------- ----------------- -----------------
Total 213,189 214,630
---------------------- ----------------- -----------------
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 2012 31 December 2011
% %
----------------- ----------------- -----------------
Pounds Sterling 0.25 0.22
Indian Rupee 98.31 90.80
US Dollar 1.44 8.98
----------------- ----------------- -----------------
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 Monetary Net Exposure
Assets Liabilities
US$
US$ US$
31 December 2012
------------------ ----------- ------------- -------------
Pound Sterling 179,438 (64,112) 115,326
Indian Rupee 46,092,644 - 46,092,644
US Dollar 678,574 - 678,574
46,950,656 (64,112) 46,886,544
------------------ ----------- ------------- -------------
Monetary Monetary Net Exposure
Assets 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) 4,578,829
51,297,720 (70,474) 51,227,246
------------------ ----------- ------------- -------------
At 31 December 2012, 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$2,304,632 (2011:
US$2,330,158).
Credit risk
Credit risk is the risk that a counterparty to a financial
instrument will fail to discharge an obligation or commitment that
it has entered into with the Company.
The carrying amounts of financial assets best represent the
maximum credit risk exposure at the balance sheet date. This
relates also to financial assets carried at amortised cost, as they
have a short term maturity.
At the reporting date, the Company's financial assets exposed to
credit risk amounted to the following:
31 December 2012 31 December 2011
US$ US$
------------------------------------------------------- ----------------- -----------------
Financial assets at fair value through profit or loss 46,092,644 46,603,152
Trade and other receivables 17,595 42,085
Cash and cash equivalents 840,417 4,652,483
------------------------------------------------------- ----------------- -----------------
Total 46,950,656 51,297,720
------------------------------------------------------- ----------------- -----------------
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 2012 Less 1-3 3 months 1-5 Over No stated
than months to 1 years 5 years maturity
1 month year
---------------------- --------- -------- --------- ------- --------- ----------
US$ US$ US$ US$ US$ US$
Financial liabilities
Trade and other 64,112 - - - - -
payables
---------------------- --------- -------- --------- ------- --------- ----------
64,112 - - - - -
---------------------- --------- -------- --------- ------- --------- ----------
31 December 2011 Less 1-3 3 months 1-5 Over No stated
than months to 1 years 5 years maturity
1 month year
---------------------- --------- -------- --------- ------- --------- ----------
US$ US$ US$ US$ US$ US$
Financial liabilities
Trade and other 70,474 - - - - -
payables
---------------------- --------- -------- --------- ------- --------- ----------
70,474 - - - - -
---------------------- --------- -------- --------- ------- --------- ----------
Capital commitments outstanding to private equity funds as at 31
December 2012 amounted to US$518,873 (2011: US$3,540,427). These
are payable when called by the respective funds.
Interest rate risk
Cash held by the Company is invested at short-term market
interest rates.
The table below summarises the Company's exposure to interest
rate risks. It includes the Company's financial assets and
liabilities at the earlier of contractual re-pricing or maturity
date, measured by the carrying values of assets and
liabilities:
31 December Less 1-3 3 months 1-5 Over Non-interest Total
2012 than months to years 5 bearing
1month 1 year years
US$ US$ US$ US$ US$ US$ US$
Financial
Assets
Financial
assets at
fair value
through profit
or loss - - - - - 46,092,644 46,092,644
Trade and
other receivables - - - - - 17,595 17,595
Cash and cash
equivalents 840,417 - - - - - 840,417
-------------------- ---------- -------- --------- ------- ------- ------------- -------------
Total financial
assets 840,417 - - - - 46,110,239 46,950,656
Financial
Liabilities
Trade and
other payables - - - - - (64,112) (64,112)
-------------------- ---------- -------- --------- ------- ------- ------------- -------------
Total financial
liabilities - - - - - (64,112) (64,112)
Total interest
rate sensitivity 840,417 - - - -
gap
-------------------- ---------- -------- --------- ------- ------- ------------- -------------
31 December Less 1-3 3 months 1-5 Over Non-interest Total
2011 than months to years 5 bearing
1month 1 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 4,652,483 - - - -
rate
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
In February 2013 the Company received a further distribution of
US$0.9m from EIF and on 15 March 2013 a distribution of US$0.02 per
share, equivalent to approximately US$1.29m, was paid to
shareholders.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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