Interim Results
December 22 2006 - 4:26AM
UK Regulatory
RNS Number:5447O
London Asia Chinese Private Equity
22 December 2006
LONDON ASIA CHINESE PRIVATE EQUITY FUND LIMITED
UNAUDITED INTERIM RESULTS
FOR THE PERIOD 23 FEBRUARY 2006 TO 30 SEPTEMBER 2006
CHAIRMAN'S STATEMENT
Financial Results
I am pleased to report on a very successful period for the Fund. The Fund was launched in March this
year, raising #48 million, net of listing and fund raising costs. In the period to 30 September the Fund
invested #24.1 million in seven transactions, with a further #8.4 million invested in four transactions
since then, bringing the total invested to date to #32.5 million invested in 11 transactions.
The Board has given conditional approval for a number of additional investments, which, should they be
completed, will mean that the Fund will have insufficient cash available. We shall be discussing with
shareholders in the New Year options available for financing the opportunities, which cannot be covered by
existing resources.
Of the seven investments completed at the period end, one was already listed in Singapore at the time we
invested, and three have subsequently listed on the UK's PLUS market. The market value of these
investments based on the price at which they were listed or the last available trade price exceeds cost by
#10.4 million. The net asset value of the Fund, using these values, as at 30 September 2006 was #58.5
million, equal to 117.0p per share.
The interim results show assets at fair value in accordance with International Accounting Standards. In
most cases this is cost, except for Asia Water Technology, where trading volumes on Singapore's SESDAQ
warrant disclosure at market value. No account has been taken of the remaining #10.0 million uplift in
value in the Income Statement.
Investment Environment
Two of our investments were in businesses which were already listed at the time we invested. This is
partially as a result of our belief that the market price of these businesses did not reflect their true
potential, and partially as a result of recent changes in the regulatory and investment environment in
China.
In September the Chinese Government brought in revised regulations governing the transfer of Chinese
assets outside China ("Ordinance 10"). The main impact of the rules is to require central government
approval for the transfer of assets and listing of businesses outside China. This adds an additional level
of approval before investments can be made, slowing down the investment process considerably. Ordinance
10 is part of a broader change in the attitude of the Chinese Government to investment in China from
overseas, with the Chinese Government attempting to slow down excessive investment and stamp out abuse, as
well as create a more level playing field to enable the development of its own financial services sector.
Much of the fall-out is likely to be for the larger, more high profile transactions - in the SME sector
where the Fund operates, investments are more likely to be approved given the continued difficulty listing
locally caused by the backlog of applications for listing within China and shortage of finance to the
sector.
The Chinese Government has indicated the areas of its economy where it favours foreign investment, which
broadly speaking equates to energy, environment, education and where there is genuine technology transfer.
These are areas in which the Fund Adviser, London Asia Capital plc ("LAC") is strong, and LAC has expanded
its office network to 32 offices in China, covering 20 of China's provinces, giving it even greater access
to investment opportunities.
The latest Five Year Plan for China's economy emphasizes China's need to protect its environment, reduce
pollution, switch from fossil fuel to other energy sources and address the problems with its water supply
and quality. We are investing heavily in these areas.
We see the new rules and investment environment as being beneficial to our business. They will reduce
competition for deals, bring down prices and the longer time period for listings will mean more companies
will require pre IPO finance. One side-effect of the new regulations is that those businesses already
listed outside China or restructured under the old regulations are likely to have increased in value, as
there will be fewer opportunities for foreign investors to invest in new Chinese deals outside China.
The new regulations also introduce the ability to do share swaps to acquire Chinese assets, which was
previously heavily restricted, enabling our existing investments to acquire Chinese businesses using
shares rather than cash. They may also mean that the Fund could invest alongside other lead investors,
including LAC, rather than investing as sole or lead investor, as stated in the Admission Document.
Outlook
With the Fund now fully committed, our focus has shifted to realising the value of the portfolio through
trade sales, IPO's and follow on financings, made easier by the new possibilities opened up by the
re-opening of the Chinese Stock Markets to new listings, and the surplus capital available for investment
in Chinese businesses as a result of the new regulations in China.
John Manser
21 December 2006
INCOME STATEMENT
for the period from 23 February 2006 to 30 September 2006 (unaudited)
23 February 2006 to
30 September 2006
Note
#'000
Income
Bank interest 1,098
Fair value adjustment 411
------------
Total income 1,509
------------
Expenses
Investment Consultant's fees 2 (536)
Administration fees 2 (69)
Commission fees (415)
Custodian fees (14)
Audit fees (14)
Directors' fees (46)
Other expenses (63)
------------
Total expenses (1,157)
------------
Profit for the period 352
------------
Earnings per share - basic and fully diluted 3 0.70p
------------
BALANCE SHEET
as at 30 September 2006 (unaudited)
Note 30 September 2006
#'000
Non-current assets
Investments 23,877
----------
Current assets
Cash and cash equivalents 28,460
Debtors and prepayments 135
----------
28,595
----------
Total assets 52,472
----------
Current liabilities
Other creditors and accruals (3,971)
----------
Net assets 48,501
----------
Capital and reserves
Called-up share capital 500
Warrant reserve 2,293
Distributable reserve 45,708
----------
Total equity shareholders' funds 48,501
----------
Net Asset Value per Ordinary Share - basic and fully diluted 4 97.00p
----------
STATEMENT OF CHANGES IN EQUITY
for the period from 23 February 2006 to 30 September 2006 (unaudited)
Share Share Warrant Distributable
capital premium reserve reserve Total
#'000 #'000 #'000 #'000 #'000
Net proceeds of placing 500 45,356 2,293 - 48,149
Cancellation of share premium - (45,356) - 45,356 -
Profit for the period - - - 352 352
---------- ---------- ---------- ---------- ----------
Balance at 30 September 2006 500 - 2,293 45,708 48,501
---------- ---------- ---------- ---------- ----------
CASH FLOW STATEMENT
for the period from 23 February 2006 to 30 September 2006 (unaudited)
23 February 2006 to
30 September 2006
#'000
Net cash outflow from operating activities (105)
Investing activities
Purchase of fair value through profit or loss investments (19,584)
----------
Net cash outflow from investing activities (19,584)
----------
Financing activities
Issue of Ordinary Shares and Warrants 49,990
Issue costs (1,841)
----------
Net cash inflow from financing activities 48,149
----------
----------
Increase in cash and cash equivalents 28,460
----------
NOTES TO THE INTERIM RESULTS
for the period from 23 February 2006 to 30 September 2006 (unaudited)
1. Significant Accounting Policies
a) Basis of preparation
The results for the period from 23 February 2006 to 30 September 2006 are unaudited.
b) Investments
Designation
In accordance with IAS 39, all investments are designated as "fair value through profit or loss".
The portfolio of financial assets is managed and its performance evaluated on a fair value basis,
in accordance with a documented investment strategy. Information about the portfolio is provided
internally to the Company's Board of Directors.
Recognition
The Company recognises financial assets held as fair value through profit or loss assets on the
date it commits to purchase the instruments. From this date any gains and losses arising from the
changes in fair value of the assets are recognised through the Income Statement.
Measurement
For investments actively traded in organised financial markets, fair value is determined by
reference to Stock Exchange quoted market bid prices as at the close of business on the balance
sheet date. The fair value of other investments is determined in accordance with the
International Private Equity and Venture Capital Guidelines.
2. Management and Administration Fees
During the financial period London Asia Capital (S) PTE Limited (the "Investment Consultant") acted as
Investment Consultant to the Company.
3. Earnings per Share
The earnings per share is based on profit for the period of #352,311 and on a weighted average number of
50,000,000 Ordinary Shares in issue. At 30 September 2006 the price of the Ordinary Shares was 109.0p
and at no point during the period did the share price reach the exercise price of the Warrants (exercise
price of 120p). As the average price of the Ordinary Shares during the period was less than the exercise
price of the Warrants there was no dilution in the return per Ordinary Share.
4. Net asset value per Ordinary Share
The basic net asset value per Ordinary Share is based on the net assets attributable to equity
shareholders of #48,501,013 and on 50,000,000 Ordinary Shares in issue at the end of the period. As
the price of the Ordinary Shares (109.0p) was below the exercise price of the Warrants (exercise price
of 120.0p) there was no dilution in the Net Asset Value per Ordinary Share.
For further information please visit www.londonasiafunds.com or contact:
John West / Matt Ridsdale Simon Littlewood Hugh Field
Tavistock Communications London Asia Capital plc Collins Stewart Limited
Tel: 020 7920 3150 Tel: 020 7355 7928 Tel: 020 7523 8000
This information is provided by RNS
The company news service from the London Stock Exchange
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