FFWD.L Regulatory News (FFWD)

22 Dec 2006 09:26

London Asia Chinese Private Equity22 December 2006 LONDON ASIA CHINESE PRIVATE EQUITY FUND LIMITEDUNAUDITED INTERIM RESULTSFOR 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 thisyear, raising £48 million, net of listing and fund raising costs. In the period to 30 September the Fundinvested £24.1 million in seven transactions, with a further £8.4 million invested in four transactionssince 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 becompleted, will mean that the Fund will have insufficient cash available. We shall be discussing withshareholders in the New Year options available for financing the opportunities, which cannot be covered byexisting resources. Of the seven investments completed at the period end, one was already listed in Singapore at the time weinvested, and three have subsequently listed on the UK's PLUS market. The market value of theseinvestments 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 £58.5million, equal to 117.0p per share. The interim results show assets at fair value in accordance with International Accounting Standards. Inmost cases this is cost, except for Asia Water Technology, where trading volumes on Singapore's SESDAQwarrant disclosure at market value. No account has been taken of the remaining £10.0 million uplift invalue in the Income Statement. Investment Environment Two of our investments were in businesses which were already listed at the time we invested. This ispartially as a result of our belief that the market price of these businesses did not reflect their truepotential, and partially as a result of recent changes in the regulatory and investment environment inChina. In September the Chinese Government brought in revised regulations governing the transfer of Chineseassets outside China ("Ordinance 10"). The main impact of the rules is to require central governmentapproval for the transfer of assets and listing of businesses outside China. This adds an additional levelof approval before investments can be made, slowing down the investment process considerably. Ordinance10 is part of a broader change in the attitude of the Chinese Government to investment in China fromoverseas, with the Chinese Government attempting to slow down excessive investment and stamp out abuse, aswell 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 sectorwhere the Fund operates, investments are more likely to be approved given the continued difficulty listinglocally caused by the backlog of applications for listing within China and shortage of finance to thesector. The Chinese Government has indicated the areas of its economy where it favours foreign investment, whichbroadly 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 expandedits office network to 32 offices in China, covering 20 of China's provinces, giving it even greater accessto investment opportunities. The latest Five Year Plan for China's economy emphasizes China's need to protect its environment, reducepollution, switch from fossil fuel to other energy sources and address the problems with its water supplyand quality. We are investing heavily in these areas. We see the new rules and investment environment as being beneficial to our business. They will reducecompetition for deals, bring down prices and the longer time period for listings will mean more companieswill require pre IPO finance. One side-effect of the new regulations is that those businesses alreadylisted outside China or restructured under the old regulations are likely to have increased in value, asthere 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 waspreviously heavily restricted, enabling our existing investments to acquire Chinese businesses usingshares 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 throughtrade sales, IPO's and follow on financings, made easier by the new possibilities opened up by there-opening of the Chinese Stock Markets to new listings, and the surplus capital available for investmentin 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 £'000IncomeBank interest 1,098Fair value adjustment 411 ------------Total income 1,509 ------------ExpensesInvestment 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 £'000Non-current assetsInvestments 23,877 ----------Current assetsCash and cash equivalents 28,460Debtors and prepayments 135 ---------- 28,595 ----------Total assets 52,472 ----------Current liabilitiesOther creditors and accruals (3,971) ----------Net assets 48,501 ---------- Capital and reservesCalled-up share capital 500Warrant reserve 2,293Distributable 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 £'000Net proceeds of placing 500 45,356 2,293 - 48,149Cancellation 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 £'000Net cash outflow from operating activities (105) Investing activitiesPurchase of fair value through profit or loss investments (19,584) ----------Net cash outflow from investing activities (19,584) ----------Financing activitiesIssue of Ordinary Shares and Warrants 49,990Issue 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 FieldTavistock Communications London Asia Capital plc Collins Stewart LimitedTel: 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