EIH.L Regulatory News (EIH)

23 Apr 2008 12:37

Evolvence India Holdings PLC23 April 2008 Evolvence India Holdings plc announces its Net Asset Value as at 31 December 2007 and Audited Results for the period 10 November 2006 to 31 December 2007 • Company's net assets are US$ 75. 2 million and net asset value ("NAV") per share is US$ 1.158 Douglas, Isle of Man, 23 April 2008: Evolvence India Holdings plc ("EIH" or "theCompany"), (AIM: EIH.L.), a fund of funds holding company that focuses on India,today announced its audited net asset value of US$ 1.158 per share as at 31December 2007 and audited results for the period 10 November 2006 to 31 December2007. Highlights • The Company's net assets are US$ 75.2 million as at 31 December 2007 • NAV per share is US$ 1.158 as at 31 December 2007 • The current NAV per share represents a growth of 4.4% over the NAV per share of US$ 1.109 as at 30 September 2007 • The Board of Directors has recommended a dividend of US$ 0.03 per share for the year ended 31 December 2007 subject to shareholders' consent in Annual General Meeting • The first Annual General Meeting of the Company shall be held in Dubai on 28 May 2008; a notice to this effect is being sent to shareholders Khaled Al Muhairy, Chairman, Evolvence India Holdings commented: "I am pleased to report the first year results of Evolvence India Holdings plcsince its admission to AIM. The investment objective of EIH is to give investorsaccess to a diversified Indian private equity portfolio while mitigating issuesusually associated with private equity investments, such as lack of liquidityand relatively large minimum investment size. The results for the period are aclear endorsement of the multi-manager approach, achieving a broaddiversification of the Company's portfolio. We are confident that the Company'sfunds are invested with experienced and successful managers and remain committedto pursuing a policy of superior returns with low downside volatility." - Ends- About Evolvence India Holding (EIH): EIH is an Isle of Man incorporated, private equity fund of funds holding companyfocused on India. EIH is promoted by Evolvence Capital Ltd, an alternativeassets management firm with approximately US$ 1.5 billion of assets undermanagement. The company invests in the Middle East and South Asia region andfocuses on private equity, real estate and alternative funds management. EIHinvests in India through the Evolvence India Fund, the Evolvence India LifeSciences Fund and the fund managers' network of relationships. Contacts: Evolvence India Holdings plcKhaled Al Muhairy, Chairman + (971) 4 315 8100 Evolvence CapitalShilpa Mathai, Communications Manager + (971) 4 315 8100 shilpa@evolvence.com Fairfax I.S Plc (Broker)Jonathan Brown + (44) 20 7460 4385 Seymour Pierce (Nominated Adviser)Jonathan Wright, Director, Corporate Finance + (44) 20 7107 8000 Chairman's Statement This year was a positive year for Evolvence India Holdings plc ("EIH" or the "Company"). After a successful initial public offering of common stock on AIM, weare pleased to be able to look back on a successful first year as a publiccompany. Results The Company's net assets, as at 31 December, 2007, are valued at US$ 75.2million and net asset value (NAV) per share is US$ 1.158, based on 65,000,002ordinary shares in issue. The NAV per share of US$ 1.158 as at 31 December, 2007represents a growth of 4.4% over the NAV per share of US$ 1.109 as at 30September, 2007. The Board is happy to recommend a dividend payment of US$ 0.03 per share,subject to shareholders' consent. Enclosed with this report is a Notice ofAnnual General Meeting, detailing the business to be dealt with at the meeting. The past year has been an active year from an investment point of view. We havecommitted to investments in two funds, Evolvence India Fund ("EIF") andEvolvence India Life Sciences Fund ("EILSF"). In addition, we have made fourdirect/structured investments. Outlook Private equity investments into India grew significantly in 2007 as companiesinvested US$ 14.2 billion, twice the outlay of 2006, in more than 387 deals. Outof this pool, EIF, and its underlying funds, participated in around 40 deals.The growth in the Indian private equity industry has continued, with theindustry closing the record amount of investments on the back of good investmentreturns. We expect the Indian private equity industry to continue to grow,albeit at a slower growth than achieved over the past few years. Strategy Evolvence India Holdings is an attractive way of leveraging on India's growthstory, providing institutional and retail investors access to a well diversifiedIndian private equity portfolio. Investment in EIH mitigates issues usuallyassociated with private equity investments, such as lack of liquidity andrelatively large minimum investment size. EIH has continued its positive development during the fourth quarter of 2007.The results for the period are a clear endorsement of the multi-managerapproach, achieving a broad diversification of the Company's portfolio. We areconfident that the Company's funds are invested with experienced and successfulmanagers and remain committed to pursuing a policy of superior returns with lowdownside volatility. Currently, market valuations are under pressure but we remain optimistic on thelong term outlook. EIH is well positioned to further grow its asset base. Wecontinue to see good investment opportunities in our chosen areas and remainconfident of reporting further progress in the delivery of our strategy over theyear ahead. Khaled Al-MuhairyChairman23 April 2008 Directors' Report The Directors hereby submit their annual report together with the auditedfinancial statements of Evolvence India Holdings plc for the financial periodfrom 10 November 2006 (date of incorporation) to 31 December 2007. The Company The Company is incorporated in the Isle of Man and has been established toprovide investors access to a diversified Indian private equity portfolio. Results and Dividends The results of the Company for the period and the financial position of theCompany at the end of the period are set in the attached financial statements. Amount raised in IPO US$ 65.0 million Net proceeds US$ 59.9 million Committed to Evolvence India Fund US$ 45.1 million Committed to Evolvence India Life Sciences Fund US$ 6.0 million Capital committed to direct investments US$ 21.8 million Audited Valuation as at 31 December 2007 * NAV US$ 75.2 million * NAV per unit US$ 1.158 The Company announces its audited net asset value of US$ 1.158 per share as at31 December 2007. The NAV per share of US$ 1.158 as at 31 December 2007represents a growth of 4.4% over the NAV per share of US$ 1.109 as at 30September 2007. EIH has committed US$ 45.1 million of the net proceeds to Evolvence India Fund("EIF"), an established private equity fund of funds, with a co-investment pool,that focuses on growth capital in India. The Company has also committed US$ 6.0million to Evolvence India Life Sciences Fund, a private equity fund investingin life sciences businesses in India. The Company has also committed US$ 21.8million in direct/structured investments; this includes two co-investments withEIF in RSB Group (a leading auto ancillary player in India) and Gland PharmaLimited (a leading Indian generic injectibles company). EIF, a US$ 250 million hybrid fund of funds focused on India, has invested innine underlying Indian private equity funds and seven co-investments as at 31December, 2007. Established in 2005, EIF was amongst the first fund of fundsfocused on India and has built a highly diversified portfolio covering all keysectors in India. The total number of portfolio companies (direct,co-investments and underlying fund investments) is above 90 in well diversifiedgrowth sectors of the Indian economy. The portfolio has had eight successfulfull exits and five partial exits. The portfolio of seven co-investmentsincludes Consolidated Construction Consortium Limited and Zylog Systems Limited,which were listed during 2007. The BSE Sensex has shown a fall of approximately23% in value between 31 December, 2007 and 31 March, 2008. Approximately 43% ofEIF's portfolio is in listed investments. EILSF is a Mauritius based privateequity fund with the investment strategy of investing in the life sciences spacein India. The fund size of EILSF as at 31 December 2007 is US$ 62.5 million.EILSF has made two investments. For the past 11 quarters India's real GDP had been on high growth trajectoryexpanding at above 8.0% and Oct - Dec 2007 quarter was no different. The GDPgrew at 8.4% as compared with 8.9% growth in Jul - Sep 2007 quarter. The primaryreason for the slight decline in GDP growth was the decline in industrial growth(particularly in the manufacturing and construction sectors) from 9.1% in secondquarter to 8.4% in third quarter. As per the Centre for Monitoring the IndianEconomy, the growth receded mostly on account of the slower growth in interestrate sensitive sectors and supply constraints faced by a few commoditiessectors. During 2007, private equity firms invested a record US$ 14.2 billion inover 387 deals in India. The amount invested during 2007 was almost twice thatinvested during the previous year. Directors' Report (Continued) Results and Dividends - continued The sub-prime crisis and a global economic slowdown have made it prudent forinvestors to seek experienced fund managers who can apply their investments in arisk adjusted fashion to benefit from the growth in the Indian economy. Due toits first mover advantage, EIF is well positioned in the fund of funds space inIndia. EIF has created an attractive track record that has demonstrated itsability to select the top tier fund managers as well as provide excess returnsto investors through co-investments. EILSF is being created to make privateequity investments in life sciences businesses that are based in India, asIndia's share in the global pharmaceutical industry is growing at 10 per centper annum, which is faster than the underlying industry growth of 7 per cent.EIH has been able to provide the investment opportunity to its investors,through its exposure to the Evolvence platform. The Directors recommend payment of a dividend of US$0.03 per share. Directors The Directors during the period and up to the date of this Report were asfollows. Appointed Resigned Mr Derek E Myers (Non-executive Director) 10 November 2006 24 November 2006Mr Andrew J Baker (Non-executive Director) 10 November 2006 24 November 2006Mr Neal S Aitken (Non-executive Director) 10 November 2006 24 November 2006Mr Khaled S M H Almehairi (Non-executive Chairman) 24 November 2006 -Mr Jegannathan Venkatarajan (Chief Executive Officer) 24 November 2006 24 January 2008Mr Christopher W Knight (Non-executive Director) 24 November 2006 -Mr Mohamed Abdel-Hadi (Non-executive Director) 24 November 2006 -Mr Mehdi Dazi (Non-executive Director) 22 April 2008 - Directors' and Other Interests Mr Khaled Al-Muhairy is the Director of the Evolvence India Fund PCC ("EIF"), apublic protected cell company formed under the laws of Mauritius. The Companyhas invested in EIF. Mr. Jegannathan Venkatarajan was a Director of EvolvenceIndia Advisors Inc. (The Investment Managers of the Company) and EIF ManagersLimited (The Investment Managers of EIF). None of the Directors nor any person connected with a Director has any interestin the share capital of the Company. EIF Managers Limited held 9.75 millionshares of the Company during the year. The shares were sold during the period inthree tranches as follows: No of Shares Bargain Date Settlement Date7,750,000 15 August 2007 28 August 2007 250,000 7 September 2007 21 September 20071,750,000 11 October 2007 16 October 2007 Independent Auditors KPMG Audit LLC were appointed as auditors during the period. They have expressedtheir willingness to continue in office in accordance with Section 12 (2) of theCompanies Act 1982. On behalf of the Board Khaled Al-MuhairyChairman23 April 2008 Income Statement Notes For the period from 10 November 2006 (date of incorporation) to 31 December 2007 US$ Income Interest income on cash balances 1,235,058 Interest income on short-term loans 539,572 Realised gains on available-for-sale financial assets 1,500,452 Other income 4,949Total income 3,280,031 ExpensesManagement fees 7.2 (77,572)Administrative expenses (202,542)Transaction costs (445,667)Legal and other professional fees (179,418)Audit fees (60,806)Other expenses (68,240)Total operating expenses (1,034,245) Profit before tax 2,245,786 Income tax expense 14 -Retained profit for the period 2,245,786 Basic and fully diluted earnings per share (cents) 12 3.46 The Directors consider that all results derive from continuing activities. The accompanying notes form an integral part of these financial statements. Balance Sheetas at 31 December 2007 Notes 2007 US$ Non-current assetsAvailable-for- sale financial assets 4 53,837,671Total non-current assets 53,837,671 Current assetsTrade and other receivables 9 735,533Short-term loans 5 10,320,000Cash and cash equivalents 8 10,821,106Total current assets 21,876,639Total assets 75,714,310 Issued share capital 11 1,274,510Share premium 58,580,120Revaluation reserve 13,148,279Retained earnings 2,245,786Total equity 75,248,695 Trade and other payables 10 465,615Total current liabilities 465,615Total liabilities 465,615Total equity & liabilities 75,714,310 The accompanying notes form an integral part of these financial statements. Statement of Changes in Equity For the period from 10 November 2006 (date of incorporation) to 31 December 2007 Share Capital Share Premium Revaluation Retained Earnings Total Reserve US$ US$ US$ US$ US$ Balance at 10 November 2006 - - - - -Proceeds from shares issued 1,274,510 63,725,490 - - 65,000,000Share issue expenses - (5,145,370) - - (5,145,370)Net change in fair value of - - 13,148,279 - 13,148,279available-for sale financialassetsRetained profit for the period - - - 2,245,786 2,245,786Balance at 31 December 2007 1,274,510 58,580,120 13,148,279 2,245,786 75,248,695 The accompanying notes form an integral part of these financial statements. Cash Flow Statement Note For the period from 10 November 2006 (date of incorporation) to 31 December 2007 US$ Cash flows from operating activitiesProfit before tax 2,245,786Adjustments for: Interest income on cash balances (1,235,058) Interest income on short-term loans (539,572) Realised gains on available for sale financial assets (1,500,452) Transaction costs 445,667Operating loss before changes in working capital (583,629) Increase in trade and other receivables (82,738)Increase in trade and other payables 162,832Cash used in operations (503,535) Interest received 1,121,835Transaction costs paid (142,884)Net cash generated from operating activities 475,416 Investing activitiesPurchase of financial assets (42,727,600)Issue of short-term loans (10,320,000)Realised gains distribution received 1,500,452Capital distribution received 2,038,208Net cash used in investing activities (49,508,940) Financing activitiesProceeds from the issue of shares 65,000,000Share issue costs (5,145,370)Net cash generated from financing activities 59,854,630 Net increase in cash and cash equivalents 10,821,106Cash and cash equivalents at 10 November 2006 -Cash and cash equivalents at 31 December 2007 8 10,821,106 The accompanying notes form an integral part of these financial statements Notes to the Financial Statements 1 The Company Evolvence India Holdings plc was incorporated and registered in the Isle of Manunder the Isle of Man Companies Act 1931-2004 on 10 November 2006 as a publiccompany with registered number 118297C. Pursuant to a prospectus dated 19 March 2007 there was a placing of up to65,000,000 Ordinary Shares of £0.01 each. The number of Ordinary Shares in issueimmediately following the placing was 65,000,002. The Shares of the Company wereadmitted to trading on the Alternative Investment Market of the London StockExchange ("AIM") following the close of the placing on 23 March 2007. The Company's agents and the Manager perform all significant functions.Accordingly, the Company itself has no employees. Duration The Company currently does not have a fixed life but the Board considers itdesirable that Shareholders should have the opportunity to review the future ofthe Company at appropriate intervals. Accordingly, at the annual general meetingof the Company in 2012 a resolution will be proposed that the Company ceases tocontinue as presently constituted. Shareholders holding at least fifty one percent 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 everythird annual general meeting of the Company thereafter. If the resolution ispassed, the Directors will be required, within 3 months of the resolution, toformulate proposals to be put to Shareholders to reorganise, unitise orreconstruct the Company or for the Company to be wound up. . 2 Significant Accounting Policies The principal accounting policies adopted in the preparation of the financialstatements are set out below. 2.1 Basis of presentation These financial statements have been prepared in accordance with InternationalFinancial Reporting Standards ("IFRS"). The financial statements have beenprepared under the historic cost convention, as modified by the revaluation ofavailable-for-sale financial assets. The preparation of financial statements in conformity with IFRS requiresmanagement to make judgements, estimates and assumptions that affect theapplication of policies and the reported amounts of assets and liabilities,income and expenses. The estimates and associated assumptions are based onhistorical experience and various other factors that are believed to bereasonable under the circumstances, the results of which form the basis ofmaking the judgements about carrying values of assets and liabilities that arenot readily apparent from other sources. Actual results may differ from theseestimates. Judgements made by management in the application of IFRS that have a significantimpact on the financial statements and estimates with a significant risk ofmaterial adjustment in the next financial year relate to valuation ofavailable-for-sale financial assets. 2.2 Available-for-sale financial assets The Company has designated its investments as available-for-sale financialassets. They are included in non-current assets unless management intends todispose of the investment within 12 months of the balance sheet date. Subsequentto initial recognition, they are measured at fair value and changes therein,other than impairment losses and foreign exchange gains and losses onavailable-for-sale monetary items, are recognised directly in equity. When aninvestment is derecognised, the cumulative gain or loss in equity is transferredto profit or loss. The fair value of available-for-sale unlisted equity investments is estimated bythe Directors, with the advice of the Investment Manager. In estimating the fairvalue of the Company's investments in private equity funds consideration istaken of the valuations of underlying investments performed by the directors andmanagers of those funds. The valuation of the unlisted holdings in theco-investments and underlying funds investments are performed by the using themost appropriate valuation technique, including the use of recent arm's lengthmarket transactions, use of comparable's companies valuation method, use ofdiscounted cash flow technique or any other valuation technique that provides areliable estimate. Under the discounted cash flow method, free cash flows to thefirm have been discounted using an appropriate weighted cost of capital. Notes to the Financial Statements continued 2 Significant Accounting Policies - continued 2.2 Available-for-sale financial assets - continued Under the comparable companies method, appropriate multiple (e.g. EV/PBDIT or EV/Revenue or Price to Earnings multiple) has been used. From the equity valuationarrived using the above approaches, proper adjustments have been made forcompany specific discounts/premiums, scale discount, illiquidity discount andforward looking financials discount/premium. Listed holdings in the co-investments and underlying funds investments arevalued based upon prevailing market prices as of the date of valuation. Theexited investments of the underlying funds have been valued using the respectiveexited multiples. 1.1 Loans and receivables Loans and receivables are measured at amortised cost using the effectiveinterest method, less any impairment losses. 2.4 Foreign currency translation US Dollar is the functional currency and the presentation currency. Monetaryassets and liabilities denominated in foreign currencies as at the date of thesefinancial statements are translated to US Dollars at exchange rates prevailingon that date. Expenses are translated into US Dollars based on exchange rates onthe date of the transaction. All resulting exchange differences are recognisedin the profit and loss. 2.5 Interest income and dividend income Interest income is recognised on a time-proportionate basis using the effectiveinterest rate method. Dividend income is recognised when the right to receive payment is established. 2.6 Cash and cash equivalents Cash comprises current deposits with banks. Cash equivalents are short-termhighly 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 thepurpose of meeting short-term cash commitments rather than for investment orother purposes. 2.7 Segment reporting The Company has one segment focusing on maximising total returns throughinvesting in an Indian private equity portfolio of investments. No additionaldisclosure is included in relation to segment reporting, as the Company'sactivities are limited to one business and geographic segment. 2.8 Future changes in accounting policies IASB (International Accounting Standards Board) and IFRIC (InternationalFinancial Reporting Interpretations Committee) have issued the followingstandards and interpretations with an effective date after the date of thesefinancial statements: Effective date (accounting periodsInternational Accounting Standards (IAS/IFRS) commencing after) IFRS 8 Operating segments 1 January 2009IAS 23 Amendment - Borrowing costs 1 January 2009 International Financial Reporting Interpretations Committee (IFRIC)IFRIC11 IFRS 2 - Group and Treasury Share Transactions 1 March 2007IFRIC12 Service Concession Arrangements 1 January 2008IFRIC13 Customer loyalty programmes 1 July 2008IFRIC14 IAS 19 - the limit on a defined benefit asset, minimum fundingrequirements and their interaction 1 January 2008 Notes to the Financial Statements continued 2 Significant Accounting Policies - continued 2.8 Future changes in accounting policies - continued IFRS 8 introduces the "management approach" to segment reporting, withinformation based on internal reports. Management are currently assessing theimpact of this on the disclosures to be presented regarding segmental reporting. The Directors do not expect the adoption of the other standards andinterpretations to have a material impact on the Group's financial statements inthe period of initial application. 3 Net Asset Value per Share The net asset value per share as at 31 December 2007 is US$1.158 per share basedon 65,000,002 ordinary shares in issue as at that date. 4 Available-for-sale financial assets The Company holds four investments that have been classified asavailable-for-sale. The objective of the Company is to make indirect investmentsin Indian private equity funds and companies via Mauritian based investmentfunds and to also co-invest directly in certain portfolio companies of theunderlying funds. As at 31 December 2007, the investment portfolio comprised thefollowing assets: Investments (Unlisted) Capital Capital Capital Fair value Fair Commitment invested Distribution adjustment Value US$ US$ US$ US$ US$Fund Investments (equity)Evolvence India Fund PCC 45,120,000 29,328,000 (2,038,208) 13,358,253 40,648,045Evolvence India Life Sciences Fund 6,000,000 1,920,000 - (204,604) 1,715,396 Direct Investments (equity)EIF Co Invest VII (RSB Group) 6,969,600 6,969,600 - (3,922) 6,965,678EIF Co Invest X (Gland Pharma Limited) 4,510,000 4,510,000 - (1,448) 4,508,552 62,599,600 42,727,600 (2,038,208) 13,148,279 53,837,671 The outstanding capital commitment as at 31 December 2007 is US$19,872,000. Evolvence India Fund PCC (EIF) Evolvence India Fund PCC, a Protected Cell Company formed under the laws ofMauritius having limited liability, is a private equity fund of funds with aco-investment pool, focusing primarily on investments in India. The fund size ofEIF is US$250 million, of which approximately sixty percent will be invested indifferent private equity funds (including growth capital, mezzanine and realestate funds) with significant focus on India and the balance, not more thanforty percent, will be invested in co-investment opportunities, primarily inIndian companies or companies with significant operations in India. Evolvence India Life Sciences Fund (EILSF) EILSF is a private equity fund formed under the laws of Mauritius having limitedliability with the Investment strategy of investing in the life sciences spacein India. The fund size of EILSF as at 31 December 2007 is US$62.5 million andhas made two investments. The investment in EILSF has been valued at cost.However, the Company's share of expenses amounting to US$204,604 has beenconsidered in determining the fair value as at 31 December 2007. Notes to the Financial Statements continued 4 Available-for-sale financial assets - continued EIF Co Invest VII EIH has invested US$6,969,600 in RSB Group through as Special Purpose Vehicle(SPV), EIF Co Invest VII. RSB Group is a leading manufacturer of automotivecomponents and construction aggregates. This investment has been valued at cost. EIF Co Invest X EIH invested US$4,510,000 in Gland Pharma Limited through an SPV, EIF Co InvestX. Gland Pharma Limited is a Hyderabad based pharmaceutical company. Theinvestment has been valued at cost. The fair value of the Company's investments has been estimated by the Directorswith the advice of the Investment Manager. 5 Short-term loans 31 December 2007 US$Aqar Holdings 7,820,000Katra Holdings Limited 2,500,000Total 10,320,000 Aqar Holdings The Company advanced US$7,820,000 to Aqar Holdings in 2007, a Mauritianincorporated private company and is repayable within 12 months from thecommencement of the loan, is unsecured and carries an interest rate of 10% perannum. Katra Holdings Limited The Company advanced US$2,500,000 to Katra Holdings Limited in June 2007, aMauritian incorporated private company and is repayable within 12 months fromthe commencement of the loan, is secured and carries an interest rate of 15%extendable to 30% per annum. 1 Related Party Transactions Parties are considered to be related if one party has the ability to control theother party or to exercise significant influence over the other party in makingfinancial or operational decisions. Mr Khaled Al-Muhairy is the Director of the Evolvence India Fund PCC ("EIF"), apublic protected cell company formed under the laws of Mauritius. The Companyhas invested in EIF. Mr. Jegannathan Venkatarajan was a Director of EvolvenceIndia Advisors Inc. (The Investment Managers of the Company) and EIF ManagersLimited (The Investment Managers of EIF). Save as disclosed above, none of the Directors had any interest during theperiod in any material contract for the provision of services which wassignificant to the business of the Company. 7 Charges and Fees 7.1 Nominated Adviser As nominated adviser to the Company for the purposes of the AIM Rules, SeymourPiece Limited is entitled to receive an annual fee of £25,000 in addition toreasonable costs and expenses incurred in carrying outs its obligations underthe nominated adviser agreement. Advisory fees paid to the Nominated Adviser for the period amounted to US$40,687of which US$9,984 was prepaid as at 31 December 2007. Notes to the Financial Statements continued 7 Charges and Fees continued 7.2 Manager's fees Annual fees The Company entered into an Investment Management Agreement dated 1 March 2007between the Company and the Investment Manager pursuant to which the InvestmentManager agreed to provide investment management services to the Company inrelation to the portfolio of assets held by it from time to time. Inconsideration for its services, whether itself or through sub-contractors, theInvestment Manager is entitled to be paid by the Company an annual managementfees of 1 percent of the Net Asset Value (NAV) of the direct investments,payable bi-annually in advance. Accordingly, no part of this fixed fee ispayable to the Investment Manager in relation to uninvested cash. Annual management fees for the period ended 31 December 2007 amounted toUS$77,572. Performance fees The Investment Manager may also receive a performance fees from the Company asfollows: The Investment Manager will earn a performance fee calculated as 15 percent ofthe excess of the realisation made by the Company upon exiting from any directinvestments over the cost basis of its direct investment (after providing forrelevant expenses incurred in making and exiting such investments). The paymentof the performance fee is conditional on the Investment Manager achieving an 8percent increase in the NAV of the direct investments, before taking intoaccount any distributions of income or capital. No fee will be paid to theInvestment Manager for commitments to Evolvence Capital sponsored funds, whichwill include EIF and EILSF. Performance fees accrued but not payable during the period ended 31 December2007 amounted to US$Nil. 7.3 Administrator and Registrar fees By a deed dated 28 December 2006 between the Company and Equity Limited ("TheAdministrator") agreed to provide general secretarial services to the Companyfor which it receives a fixed annual charge of £15,000; fees incurred on a timespent basis in accordance with the charging rates of Equity Limited in forcefrom time to time; and all disbursements and expenses incurred by Equity Limitedin connection with the provision by it of services to the Company. The fees aresubject to Value Added Tax (VAT). The Company and Equity Limited may terminate the deed on the giving of thirtydays' prior written notice, or earlier in the event of, inter alia, materialbreach of the terms of the deed or commencement of winding up. The governing lawof the deed is that of the Isle of Man. The Administrator may utilise the services of a CREST accredited registrar forthe purposes of settling share transactions through CREST. The cost of thisservice will be borne by the Company. The Company pays the CREST ServiceProvider an annual fee of £1,000 plus a fee for each transfer registered. Administration fees paid for the period ending 31 December 2007 amounted toUS$39,646 and CREST fees were US$21,354. Notes to the Financial Statements continued 8 Cash and Cash Equivalents 31 December 2007 US$Bank balances 821,106Short-term deposits 10,000,000Cash and cash equivalents 10,821,106 The short-term deposits are subject to an interest rate at 4.92% per annum. Theshort-term deposits matured on 9 January 2008. 9 Trade and other receivables 31 December 2007 US$Interest receivable on short-term loans 539,572Interest receivable on short-term deposits 113,223Prepaid expenses 66,636Other receivables 16,102Total 735,533 10 Trade and other payables 31 December 2007 US$Transaction costs payable 302,783Other creditors 162,832Total 465,615 11 Share Capital Ordinary Shares of 1p each Number US$ In issue at the start of the period - -Issued during the period 65,000,002 1,274,510In issue at 31 December 2007 65,000,002 1,274,510 The authorised share capital of the Company is £700,000 divided into 70 millionOrdinary Shares of £0.01 each. The holders of ordinary shares are entitled toreceive dividends as declared from time to time and are entitled to one vote pershare at meetings of the Company. All shares rank equally with regards to theCompany's assets. Capital management The Board's policy is to maintain a strong capital base so as to maintaininvestor, creditor and market confidence and to sustain future development ofthe business. The Board manages the Company's affairs to achieve shareholderreturns through capital growth rather than income, and monitors the achievementof this through growth in net asset value per share. The Company's capital comprises share capital, share premium and reserves. TheCompany is not subject to externally imposed capital requirements. Notes to the Financial Statements continued 12 Earnings per Share Basic and Fully Diluted Basic and fully diluted earnings per share is calculated by dividing the profitattributable to equity holders of the Company by the weighted average number ofordinary shares in issue during the period 2007 Profit attributable to equity holders of the Group (US$) 2,245,786Weighted average number of ordinary shares in issue 65,000,002Basic earnings per share (cents per share) 3.46 There is no difference between the basic and fully diluted earnings per sharefor the period. 13 Directors' Remuneration The maximum amount of remuneration payable to the Directors permitted under theArticles of Association is £200,000 per annum. The Directors are each entitledto receive reimbursement of any expenses incurred in relation to theirappointment. Total fees and expenses paid to the Directors for the period ended31 December 2007 amounted to fees of US$106,710 and insurance expenses ofUS$29,098. 14 Taxation The Company is resident for taxation purposes in the Isle of Man by virtue ofbeing incorporated in the Isle of Man and is technically subject to taxation onits income but the rate of tax is zero. The Company is required to pay an annualcorporate charge of £250 per annum. 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 taxon the investee companies and to Indian tax on underlying investments of thosecompanies. However, pursuant to the Double Taxation Treaty between India andMauritius, the Mauritian incorporated companies and funds are entitled tosignificant tax benefits. There is no Mauritian tax payable on distributions paid to the Company fromMauritian investee companies. 15 Financial instruments The Company's activities expose it to a variety of financial risks: market pricerisk, foreign exchange risk, credit risk, liquidity risk and cash flow interestrate risk. Market price risk The Company's investments are subject to market price risk. The investments areconcentrated in India. The Company's strategy on the management of investmentrisk is driven by the Company's investment objective. The main objective of theGroup is to maximise the total returns to investors by making investments inIndian private equity funds and direct investments in a wide range of industrysectors in India. Investments in India may be difficult, slow or impossible torealise. The Company is subject to general risks incidental to equityinvestments in the relevant market sectors, including general economicconditions, poor management of the target company, increasingly competitivemarket conditions, changing sediments and increasing costs, amongst others. Themarketability and value of any investment will depend on many factors beyond thecontrol of the Company and therefore no assurance that an exit through variousavenues including trade sale, buyback or listing of the Company's interest inany target company will be realised. A substantial portion of the Company's investments are or will be in unlistedcompanies, whose securities are considered to be illiquid. Illiquidity mayaffect the ability of the primary and underlying funds to acquire and dispose ofsuch investments. Notes to the Financial Statements continued 15 Financial instruments - continued Foreign exchange risk A significant portion of the investments of the Company, the primary funds andthe underlying funds are made in securities of companies in India and the incomeand capital realisations received from such investments as well as the incomeand capital realisations received from any direct investments will bedenominated in Indian Rupees, whereas the capital contributions by the Companyis in US Dollars. The Company other operations are also conducted in otherjurisdictions which generate revenue, expenses, assets and liabilities incurrencies other than the US Dollars. As a result, the Company is subject to theeffects of exchange rate fluctuations with respect to these currencies. Thecurrency giving rise to this risk is primarily 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: Currency 31 December 2007 % Pound Sterling (0.07)Indian Rupee 71.54US Dollars 28.53 The following table sets out the Company's total exposure to foreign currencyrisk and the net exposure to foreign currencies of the monetary assets andliabilities: Monetary Assets Monetary Liabilities Net Exposure US$ US$ US$31 December 2007 Pound Sterling 9,984 (64,462) (54,478)Indian Rupee 53,837,671 - 53,837,671US Dollars 21,866,655 (401,153) 21,465,502 75,714,310 (465,615) 75,248,695 At 31 December 2007, had the Indian Rupee strengthened by 5% in relation to allcurrencies, with all other variables held constant, net assets attributable toequity holders of the Company and the profit per the income statement would havedecreased by the amounts shown below. 31 December 2007 US$ Pound Sterling -Indian Rupee 657,414US Dollars -Effect on net assets 657,414 Notes to the Financial Statements continued 15 Financial instruments - continued Credit risk Credit risk is the risk that counterparty to a financial instrument will fail todischarge an obligation or commitment that it has entered into with the Company. The carrying amounts of financial assets best represent the maximum credit riskexposure at the balance sheet date. This relates also to financial assetscarried at amortised cost, as they have a short term maturity. At the reporting date, the Company's financial assets exposed to credit riskamounted to the following: 31 December 2007 US$Available-for-sale financial assets 53,837,671Trade and other receivables 735,533Short-term loans 10,320,000Cash and cash equivalents 10,821,106 75,714,310 The maximum exposure to credit risk is represented by the carrying amount ofeach financial asset in the balance sheet. Management does not expect anycounterparty to fail to meet its obligations. Liquidity risk The Company manages its liquidity risk by maintaining sufficient cash balancesto meet its obligations. The Company's liquidity position is monitored by theInvestment Manager and the Board of Directors. Residual undiscounted contractual maturities of financial liabilities: Less than 1-3 3 months to 1 1-5 years Over 5 years No stated 1 month months year maturity US$ US$ US$ US$ US$ US$Financial liabilitiesTrade and other payables 465,615 - - - - - 465,615 - - - - - Interest rate risk Short-term loans bear interest at fixed rates as detailed in note 9. Cash heldby the Company is invested at short-term market interest rates as detailed innote 8. Notes to the Financial Statements continued 15 Financial instruments continued Interest rate risk continued The table below summarises the Company's exposure to interest rate risks. Itincludes the Groups' financial assets and liabilities at the earlier ofcontractual re-pricing or maturity date, measured by the carrying values ofassets and liabilities: Less than 1-3 months 3 months 1-5 years Over 5 Non-interest Total 1month to 1 year years bearing US$ US$ US$ US$ US$ US$ US$Financial AssetsAvailable-for-sale - - - - - 53,837,671 53,837,671financial assetsTrade and other 113,223 - 539,572 - - 82,738 735,733receivablesShort-term loans - - 10,320,000 - - - 10,320,000Cash and cash equivalents 10,821,106 - - - - - 10,821,106Total financial assets 10,934,329 - 10,859,572 - - 53,920,409 75,714,310 Financial LiabilitiesTrade and other payables (302,783) - - - - (162,832) (465,615)Total financial (302,783) - - - - (162,832) (465,615)liabilities Total interest rate 10,631,546 - 10,859,572 - -sensitivity gap At 31 December 2007, should the interest rates have increased/decreased by 5%with all other variables remaining constant, the increase/decrease in net assetsattributable to shareholders for the period would amount to approximatelyUS$88,732. 16 Post Balance Sheet Events Mr. Jegannathan Venkatarajan, has stepped down from his position of CEO of theCompany in January 2008. The Board of Directors proposed a dividend of US$0.03 per share for thefinancial year ended 31 December 2007. This information is provided by RNS The company news service from the London Stock Exchange