FFWD.L Regulatory News (FFWD)

6 Dec 2007 07:00

London Asia Chinese Private Equity06 December 2007 LONDON ASIA CHINESE PRIVATE EQUITY FUND LIMITEDUNAUDITED INTERIM RESULTSFOR THE PERIOD ENDED 30 SEPTEMBER 2007 Highlights: • Net assets at 30 September 2007 of £68.4 million, equal to 136.7 pence per share;• Profit for the period of £1.8 million, equal to 3.7 pence per share (£2.9 million before foreign exchange losses, equal to 5.7 pence per share);• Company substantially invested; 14 investments held;• Investments up 53% on cost;• One investment sold during the period for £2.6 million, realising a gain of £1.6 million; and• 53% of portfolio by value is quoted. For further information please visit www.lacpefund.com or contact: John West / Andrew Dunn Robert Leighton Simon Littlewood Hugh FieldTavistock Communications Chairman Director Collins Stewart Europe LimitedTel: +44 20 7920 3150 Tel: +44 7918 034 315 Tel: +852 9840 5412 Tel: +44 20 7523 8000 CHAIRMAN'S STATEMENT I am pleased to present the unaudited interim results of the Company for the period ended 30 September 2007. Results The Company continued to build on its profitable first period and made good progress during the six months ended 30September 2007. The Company achieved a net profit for the period ended 30 September 2007 of £1.8 million (30 September2006: £0.4 million), representing a profit per Ordinary Share of 3.7 pence. The net asset value at 30 September 2007was £68.4 million (136.7 pence per Ordinary Share). In line with the Admission Document, the Company did not hedge the exchange rate risk arising from the investmentportfolio. However, the strengthening pound reduced the Company's profit for the period by £1.1 million and the fairvalue of the investments at 30 September 2007 by £1.0 million. The Board has decided to continue with the policy ofnot hedging the Company's exchange rate risk, as set out in the Admission Document. During the period the Company made one further investment, at a cost of £2.2 million, and the investment in DevotionEnergy Group was sold in May 2007 for £2.6 million, realising a gain of £1.6 million. We did not go ahead with thepreviously announced proposed investment in China Synergy as we were unable to finalise acceptable terms with thecompany. Post the period end, we received the proceeds from the sale of FENet of £0.5 million, equal to its cost. At 30 September 2007, the Company's investments had a fair value of £68.4 million, an unrealised gain of 53% on cost.Full details of each of the investments are available at www.lacpefund.com. Since the period end, we have assistedChina CDM Exchange Centre to raise a total of US$10 million in a third party follow-on funding. The implied valuationwould give rise to an unrealised uplift of 443% on the original cost. Only £0.7 million of this £8.0 million uplifthas been reflected in the 30 September 2007 results. The fair value of £9.8 million (14 %) of the investments continue to be shown at original cost, which is deemed to befair value. The remaining investments, with an original cost of £34.9 million, have been shown at a fair value of£58.6 million, an uplift of 68%. Fair value has been determined based on market price where the stock was listed,latest financing valuation where follow on financing was achieved and reflected a true fair value at the balance sheetdate, or a multiple of post tax profits after tax of eight (consistent with the 31 March 2007 valuation) for thoseinvestments not quoted or re-financed. Of the fourteen investments held at the period end, two were already listed in Singapore at the time we invested, andfour floated on the UK's PLUS market post our investment. 53% of our investment portfolio (by fair value) is quoted,providing Shareholders with visibility as to the value of the assets in the Company. Share price During the period under review the price of the Ordinary Shares fell from 120.5 pence at 31 March 2007 to 108.0 penceon 27 September 2007. In accordance with the AIM Rules, on 27 September 2007 all trading of the Company's OrdinaryShares and Warrants on AIM was temporarily suspended, pending the publication of the Company's 31 March 2007 auditedfinancial statements (the "2007 Accounts"). The delay in the publication of the 2007 Accounts arose from unforeseenrequirements resulting from the audit process, which were subsequently resolved and the Ordinary Shares and Warrantsrecommenced trading on AIM on1 November 2007, following the publication of the 2007 Accounts. Although the rise in net asset value and fall in the price of the Ordinary Shares resulted in an increase in thediscount to the published net assets during the period from 9% at 31 March 2007 to 21% at the end of the period,following the lifting of the suspension on 1 November 2007, the Company's share price has risen steadily and at 30November 2007 stood at 115.0 pence. At the date of this report 10 million Warrants, with an exercise price of 120 pence each, were in issue. To date noWarrants have been exercised. Outlook A combination of a good stock picking by the Investment Consultant and a strong Chinese economy has resulted in the netasset value of the Company's Ordinary Shares growing steadily from 96.3 pence at launch to 130.9 pence at 31 March 2007and then to 136.7 pence at 30 September 2007. We held a recent Board meeting in Hong Kong at which the independentDirectors discussed a number of improvements in the operational management of the business. These were agreed with theExecutive Directors and will be implemented in the second half of the financial year. My subsequent visit to some ofthe investee businesses in China has reinforced my view that the Company has invested in a number of strong businesses.I am cautiously optimistic that the investments, buoyed by a strong Chinese economy, will generate positive returnsfor the Company and, as a result, we look forward to realising value for Shareholders. R Leighton5 December 2007 INVESTMENT PORTFOLIO as at 30 September 2007 (unaudited) Listing Fair value Percentage of netCompany Activity/Sector assets £'000 %Asia Clean Energy Clean energy Not quoted 4,067 5.9Asia Water Technology Clean technology SESDAQ 9,351 13.7Asia Wind Group Clean energy Not quoted 3,000 4.4Canmake Business Manufacturing Not quoted 6,838 10.0China Biofoods Manufacturing PLUS 3,740 5.5China CDM Exchange Centre Carbon credit PLUS 2,500 3.7 brokerageChina New Energy Clean technology PLUS 12,211 17.9China Real Estate Services Property Not quoted 4,133 6.0China Solar Energy Clean technology Not quoted 4,300 6.3Dalian Business Institute Education PLUS 3,339 4.9FEnet Company Information technology Not quoted 516 0.8Hainan Zhengye Zhongnong High-tech Pesticide production Not quoted 2,233 3.3United Envirotech Environmental Mainboard SGX 4,981 7.2 consultancyWan Wei Oil & Gas Technology Mining technology Not quoted 7,156 10.5 ------------ ------------ 68,365 100.0Other receivables and prepayments 259 0.4Cash and cash equivalents 4,315 6.3Payables and accruals (4,584) (6.7) ------------ ------------Net assets 68,355 100.0 ------------ ------------ Full details of each of the above investments are available at www.lacpefund.com. INCOME STATEMENT for the six months ended 30 September 2007 (unaudited) 1 April 2007 to 23 February 2006 to 23 February 2006 to Note 30 September 2007 30 September 2006 31 March 2007 (unaudited) (unaudited) (audited) £'000 £'000 £'000IncomeNet unrealised change in fair value of 1,267 411 22,428investmentsRealised gain on sale of investments 1,606 - -Other income 457 1,098 1,516 ------------ ------------ ------------Total income 3,330 1,509 23,944Movement in provision for performance fee 4 (458) - (3,345)Introductory fees 4 (78) (415) (832) ------------ ------------ ------------Gross profit 2,794 1,094 19,767 Operating expensesInvestment Consultant's fees 4 (666) (536) (1,009)Administration fees (88) (69) (131)Directors' fees (33) (46) (93)Audit fees (60) (14) (29)Custodian fees (11) (14) (18)Other expenses (104) (63) (113) ------------ ------------ ------------Operating expenses (962) (742) (1,393) ------------ ------------ ------------Profit for the period 1,832 352 18,374 ------------ ------------ ------------Earnings per share - basic and fully diluted 3.66p 0.70p 36.75p ------------ ------------ ------------ BALANCE SHEET as at 30 September 2007 (unaudited) Note 30 September 30 September 31 March 2007 2007 2006 (unaudited) (unaudited) (audited) £'000 £'000 £'000Non-current assetsInvestments at fair value through profit and loss 68,365 23,877 65,905 ---------- ---------- ----------Current assetsFinancial asset at fair value through profit and - - 335lossOther receivables and prepayments 259 135 54Cash and cash equivalents 4,315 28,460 12,321 ---------- ---------- ---------- 4,574 28,595 12,710 ---------- ---------- ----------Total assets 72,939 52,472 78,615 ---------- ---------- ----------Current liabilitiesPayables and accruals (4,584) (3,971) (12,092) ---------- ---------- ----------Net assets 68,355 48,501 66,523 ---------- ---------- ---------- Capital and reservesCalled-up share capital 5 500 500 500Warrant reserve 6 2,293 2,293 2,293Distributable reserves 65,562 45,708 63,730 ---------- ---------- ----------Total equity shareholders' funds 68,355 48,501 66,523 ---------- ---------- ---------- Net Asset Value per Ordinary Share - basic 136.71p 97.00p 133.05pNet Asset Value per Ordinary Share - fully diluted 136.71p 97.00p 130.87p STATEMENT OF CHANGES IN EQUITY for the six months ended 30 September 2007 (unaudited) Share Share Warrant Distributable capital premium reserve reserves Total £'000 £'000 £'000 £'000 £'000Balance at 31 March 2007 500 - 2,293 63,730 66,523Profit for the period - - - 1,832 1,832 ---------- ---------- ---------- ---------- ----------Balance at 30 September 2007 500 - 2,293 65,562 68,355 ---------- ---------- ---------- ---------- ---------- STATEMENT OF CHANGES IN EQUITY for the period from 23 February 2006 to 30 September 2006 (unaudited) Share Share Warrant Distributable capital premium reserve reserves Total £'000 £'000 £'000 £'000 £'000Gross proceeds of placing 500 47,207 2,293 - 50,000Issue costs - (1,851) - - (1,851)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 ---------- ---------- ---------- ---------- ---------- STATEMENT OF CHANGES IN EQUITY for the period from 23 February 2006 to 31 March 2007 (audited) Share Share Warrant Distributable capital premium reserve reserves Total £'000 £'000 £'000 £'000 £'000Gross proceeds of placing 500 47,207 2,293 - 50,000Issue costs - (1,851) - - (1,851)Cancellation of share premium - (45,356) - 45,356 -Profit for the period - - - 18,374 18,374 ---------- ---------- ---------- ---------- ----------Balance at 31 March 2007 500 - 2,293 63,730 66,523 ---------- ---------- ---------- ---------- ---------- CASH FLOW STATEMENT for the six months ended 30 September 2007 (unaudited) 1 April 2007 to 23 February 2006 to 23 February 2006 to 30 September 2007 30 September 2006 31 March 2007 (unaudited) (unaudited) (audited) £'000 £'000 £'000Operating activitiesOther income received 363 1,060 1,486Investment Consultant's fees paid (765) (607) (1,009)Introductory fees paid (171) (413) (636)Administration fees paid (31) (37) (100)Directors' fee paid (49) (30) (63)Other expenses paid (61) (78) (150) ---------- ---------- ----------Net cash outflow from operating activities (714) (105) (472) ---------- ---------- ----------Investing activitiesPurchase of fair value through profit or loss (10,324) (19,584) (35,021)investmentsSale of fair value through profit or loss 3,032 - -investmentsPayment of loan to investee company - - (335) ---------- ---------- ----------Net cash outflow from investing activities (7,292) (19,584) (35,356) ---------- ---------- ----------Financing activitiesIssue of Ordinary Shares and Warrants - 50,000 50,000Issue costs - (1,851) (1,851) ---------- ---------- ----------Net cash inflow from financing activities - 48,149 48,149 ---------- ---------- ---------- ---------- ---------- ----------(Decrease)/increase in cash and cash equivalents (8,006) 28,460 12,321 ---------- ---------- ---------- Cash and cash equivalents brought forward 12,321 - -(Decrease)/increase in cash and cash equivalents (8,006) 28,460 12,321 ---------- ---------- ----------Cash and cash equivalents carried forward 4,315 28,460 12,321 ---------- ---------- ---------- NOTES TO THE INTERIM RESULTS for the six months ended 30 September 2007 (unaudited) 1. Significant Accounting Policies These unaudited interim results have been prepared in accordance with International Accounting Standard 34: Interim Financial Reporting ("IAS 34"). These interim results have adopted the same accounting policies as the last audited financial statements which were prepared in accordance with International Financial Reporting Standards, issued by the International Accounting Standards Board, interpretations issued by the International Financial Reporting Interpretations Committee and applicable legal and regulatory requirements of Guernsey Law and reflect the accounting policies as disclosed in the Company's last audited financial statements, which have been adopted and applied consistently. 2. Critical Accounting Estimates and Judgements Financial assets designated at fair value through profit and loss at inception are those that are managed and their performance evaluated on a fair value basis in accordance with the Company's documented investment strategy. The Company's policy is for the Investment Consultant and the Board of Directors to evaluate the information about these financial assets on a fair value basis together with other related financial information. These financial assets are expected to be realised within 12 to 36 months of the balance sheet date. The Board of Directors and the Investment Consultant makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are outlined below: Fair value of listed securities The fair value of financial instruments traded in active markets (such as publicly traded securities) is based on quoted market prices at the balance sheet date. The quoted market price used for financial assets held by the Company is the period end bid price. Fair value of unquoted and PLUS quoted securities The fair value of unquoted securities that are not quoted in active markets (for example, PLUS quoted securities and unquoted private companies) is determined by using valuation techniques in accordance with the International Private Equity and Venture Capital Guidelines. The valuations used to determine fair values are validated and periodically reviewed by experienced personnel. The valuations are based on a mixture of: - third party financing (if available); - PE ratios; - cost, where the investment has been made within the preceding twelve months and no further information has been available to indicate that cost is not an appropriate valuation; and - bid prices of PLUS quoted investments to support any of the three techniques mentioned above. 3. Segmental Information The Directors are of the opinion that the Company is engaged in a single segment of business, being investment business in China. 4. Management Fees During the financial period London Asia Capital (S) PTE Limited (the "Investment Consultant") acted as Investment Consultant to the Company. Investment Consultant fee In consideration for the services rendered by the Investment Consultant the Company pays the Consultant a fee of 2.0% per annum of the Net Asset Value, payable quarterly in advance. Performance fee In addition, the Investment Consultant is entitled to a performance fee on realised profits in certain circumstances. This fee is payable by reference to the increase in Adjusted NAV per Ordinary Share over the course of a 'performance period'. The first performance period began on Admission and ended on 31 March 2007; each subsequent period is a period of one financial year. The Investment Consultant becomes entitled to a performance fee in respect of a performance period only if two conditions are met. First, a performance hurdle condition must be met. The performance hurdle is that Adjusted NAV per Ordinary Share at the end of the relevant performance period exceeds an amount equal to the Placing Price increased at a rate of 6.0% per annum on a compounding basis up to the end of the relevant performance period. The second condition to be met (a 'high watermark' test) is that the Adjusted NAV per Ordinary Share at the end of the relevant performance period is higher than the highest previously recorded Adjusted NAV per Ordinary Share at the end of a performance period in relation to which a performance fee was last earned (or if no performance fee has been earned since Admission, is higher than the Placing Price). If the performance hurdle is met, and the high watermark exceeded, the performance fee is equal to 20.0% of the realised increase in the Adjusted NAV per Ordinary Share multiplied by the time weighted average of the total number of Ordinary Shares in issue since the performance period in respect of which a performance fee was last earned (or since Admission, if no performance fee has yet been earned), together with an amount equal to the VAT thereon. For the period ended 30 September 2007, no performance fees were paid. The performance fee that is disclosed in the Income Statement is not due until investment gains are realised. At 30 September 2007, £1,606,000 of the £4,628,000 performance fee accrued was due to the Investment Consultant as a result of the realised gain made on the sale of the Devotion Energy Group investment. Introductory fees It is common practice in China to pay introductory fees to intermediaries who introduce investee companies to investors. Such fees, which typically equate to 3% to 5% of the value of the investment, are paid by the Company. Where the intermediary introducing the investment to the Company is a representative of the London Asia Group, such fees are payable to a member of the London Asia Group. Payment of any fees in respect of such services to a member of the London Asia Group (or any third party) are subject to the approval of the Non-Executive Directors. If an investment is sourced directly by either of the Executive Directors, no introductory fees are payable to the relevant Executive Director nor to the London Asia Group. 1 April 2007 to 23 February 2006 to 23 February 2006 to 30 September 2007 30 September 2006 31 March 2007 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Income Statement: Investment Consultant's fees 666 536 1,009 Movement in provision for performance fee 458 - 3,345 Introductory fees 78 415 832 30 September 2007 30 September 2006 31 March 2007 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Prepayment/(creditor): Management fee (9) 71 - Provision for performance fee (3,803) - (3,345) Introductory fees (204) (87) (95) 5. Share Capital 30 September 2007 30 September 2006 31 March 2007 (unaudited) (unaudited) (audited) Authorised: £'000 £'000 £'000 200,000,000 Ordinary Shares of 1p 2,000 2,000 2,000 --------------- --------------- --------------- Allotted, called up and fully paid: 50,000,000 Ordinary Shares of 1p 500 500 500 --------------- --------------- --------------- Pursuant to the authority granted at an extraordinary general meeting and renewed at the first annual general meeting, the Company has authority to utilise the distributable reserve to buy back up to 14.99% of the Ordinary Shares issued at the Placing for cancellation. No shares were purchased for cancellation during the period. A resolution enabling the Company to purchase up to 10% of the Ordinary Shares in issue and hold them as treasury shares was passed at the first annual general meeting. 6. Warrants At the placing on 15 March 2006, for every five Ordinary Shares received the subscriber also received one Warrant. Exercise Price End of Allotted Subscription period Warrants 120 pence 31 March 2011 10,000,000 Registered holders of Warrants shall have the right to subscribe for one Ordinary Share in the Company in cash in the period up to 31 March 2011 for each Warrant held at the price of 120 pence per Ordinary Share. www.lacpefund.com This information is provided by RNS The company news service from the London Stock Exchange