TIDMEIH
RNS Number : 2125J
EIH PLC
26 June 2017
26(th) June 2017
EIH plc
Final Results
Posting of 2016 Annual Report and Notice of AGM
EIH announces its audited final results for the financial year
ended 31 December 2016. A copy of this announcement will shortly be
available for inspection at
http://www.eihplc.co.uk/regnews.aspx.
Printed copies of the Company's Annual Report together with
Notice of 2017 Annual General Meeting have also been posted to
shareholders today. The annual general meeting will be held at the
Company's registered office at Fort Anne, Douglas, Isle of Man on
24 July 2017 at 10 a.m.
For further information, please contact:
EIH plc
Rhys Davies
Tel: +41 (0)796200215
Nplus1 Singer Advisory LLP
(Nominated Advisor)
James Maxwell
Tel: +44 (0)207 496 3000
Chairman's Statement
At 31 December 2016, the net asset value of EIH plc ("the
Company") was US$0.433 per share as compared with US$0.495 per
share a year earlier, a decline of 12.5% in the period. Adjusting
for the capital distribution of 2.5 cents per share made to
shareholders of the Company registered at 8 July 2016, the
Company's NAV declined by 7.7% in the period.
During the year in review, the Company received distributions of
US$1.4m from the Evolvence India Fund PCC ("EIF").
On 13 July 2016, the Company made a capital distribution to
shareholders of 2.5 cents per share, equivalent to approximately
US$1.61m.
After the year end, the Company made a capital distribution of 4
cents per share to shareholders of the Company registered as at 17
February 2017, equivalent to approximately US$2.58m.
Total operating costs during the year were US$0.46m as compared
with US$0.51m in the prior year, a decline of 9.8%. This operating
cost figure represents approximately 1.7% of the Company's
Financial Assets at Fair Value. In addition, the Company paid
certain annual management fees and expenses to EIF in respect of
its commitment. These costs are embedded in the capital accounts
for those two funds and do not appear in the Company's statement of
comprehensive income. These management fees will, in the current
period, be reduced by 60% from the level in the period under
review.
The Company's portfolio now comprises the following (based on
year end Fair Values):
Table 1. Investments Capital Commitment Capital invested Capital Fair value Fair Value
Distribution adjustment
--------------------- ------------------- ----------------- -------------------- -------------------- -----------
US$ US$ US$ US$ US$
Fund Investments
(equity)
Evolvence India Fund
PCC 45,120,000 45,120,000 (25,614,446) 272,819 19,778,373
Direct Investments
(equity)
EIF Co Invest VII
(RSB Group) 6,969,600 6,969,600 (29,235) (1,429,405) 5,510,960
EILSF Co-invest I 466,387 466,387 - 889,781 1,356,168
52,555,987 52,555,987 (25,643,681) (266,805) 26,645,501
--------------------- ------------------- ----------------- -------------------- -------------------- -----------
Evolvence India Fund PCC ("EIF")
At the year end the Company had US$19.5m invested in EIF
(capital called less refund capital contributions), equivalent to
30.2 cents per share. At the reporting date the fair value of the
Company's investment in EIF was US$19.8m, equivalent to 30.7 cents
per share, representing a 1.02 times multiple over cost. EIF is now
fully drawn down.
In local currency terms the S&P BSE SENSEX Indian stock
market index advanced by 1.9% during the year in review. It is also
noted that the Indian Rupee ("INR") declined by 2.4% in value
against the US Dollar during the year in review.
Against this backdrop EIF's underlying private equity funds
performed well. The distributions from realisations increased by
69.7% year-on-year, and the fair value of EIF's underlying funds
increased by approximately 5.2% in US Dollar terms, while in INR
terms this increase was approximately 7.8% (on the basis of
beginning and end period fair values, and adjusting for drawdowns
and distributions made during the period). On the same basis of
measurement, the value of EIF's direct investments decreased by
approximately 4.4% in US Dollar terms, while in INR terms this
decrease was approximately 2.1%. This was substantially driven by a
decline in the fair value of RSB Group.
EIF's private equity exposure is weighted towards funds with
vintages of 2006 and later. The four funds of these vintages
comprise 77.2% of EIF's private equity fund weighting. The
remaining six funds, with a 22.8% weighting, are all 2004 and 2005
vintages. EIF's three largest funds constitute 70.8% of EIF's
private equity fund weighting. These funds are Jacob Ballas India
Fund III (Growth / PIPE category), JMF India Fund I (Growth
category) and HI-REF International LLC (Real Estate category).
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 HI-REF International LLC.
During the year in review, EIF received net distributions from all
except one of its funds, while drawdowns were extremely
limited.
At the year end the fair value of the Company's interest in
EIF's ten underlying private equity funds was US$11.6m, equivalent
to 18.0 cents per share, while EIF's direct investments had a fair
value of US$7.7m, equivalent to 11.9 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 year end until 31 May 2016, the S&P BSE SENSEX
advanced by 17.0% in INR terms. It is also noted that in the same
period the INR strengthened by 5.0% against the US Dollar.
EILSF Co-invest I / Gland Pharma Limited ("Gland")
On a "look through" basis the Company retains an approximately
US$2.0m interest in EILSF Co-invest I (held through EIF Co Invest X
and EIF) representing its share of the Gland proceeds retained to
address any potential contingencies. The final distribution
amounting to US$1.4m comprising largely of the Company's share of
its interest in EILSF Co-invest I occurred in January 2017.
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$6.9m invested in RSB (at cost) compared
to the US$7.0m invested in RSB through EIF Co Invest VII.
Through the above arrangements, and on a look-through basis, the
fair value of Company's total interest in RSB is 10.7 cents per
share; while the fair value of the Company's direct interest in RSB
(held through EIF Co Invest VII) is 8.5 cents per share. These
values represent a 0.8 times multiple over cost. The Directors have
reviewed certain underlying financial information pertaining to RSB
and the valuation basis employed in the fair valuation calculation
which is based on the trading multiples of RSB's comparable group
and the application of company specific factors.
Table 2. Investments (Fair Values) As per LP reports RSB Gland Pro-forma
(EIF) (EIF)
------------------------------------ ------------------ ------------ ---------- -----------
US$ US$ US$ US$
Fund Investments
EIF (PE funds) 11,554,049 11,554,049
EIF (direct investments) 7,664,554 (1,424,575) (679,740) 5,560,239
EIF (other) 559,770 559,770
Direct Investments
RSB Group 5,510,960 1,424,575 6,935,535
EILSF Co-invest I 1,356,168 679,740 2,035,908
26,645,501 - - 26,645,501
------------------------------------ ------------------ ------------ ---------- -----------
Table 2 extracts the Company's "look through" interests in EILSF
Co-invest I and RSB (from EIF) and adds them to the Company's
direct interests in EILSF Co-invest I and RSB (held by EIF Co
Invest X and EIF Co Invest VII respectively). On this basis, 33.7%
of the Company's Financial Assets at Fair Value (US$9.0m,
equivalent to 13.9 cents per share), is accounted for by its
interests in Gland and RSB on an underlying pro-forma basis.
Table 2 further shows that 43.4% 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 20.9% by its interests in EIF's
direct investments (excluding Gland and RSB).
Board changes
Paul Garnett has resigned from the Board effective today and the
Board would like to thank him for his contribution since 2013.
Brett Miller has today joined the Board in place of Paul
Garnett.
Other matters
At the date of signing this report the Company holds US$1.24m in
net cash balances, equivalent to 1.92 cents per share.
As a Board we will continue to manage operating costs carefully.
Our objective is to realize assets at the appropriate time and
value, and to return the proceeds less expenses to our
shareholders.
On behalf of the Board of Directors, I thank all Shareholders
for their support.
Sincerely yours,
Rhys Cathan Davies
Chairman
26 June 2017
Statement of Comprehensive Income
for the year ended 31 December 2016
Note
31 December 31 December
2016 2015
US$ US$
------------------------------------- ----- -------------- --------------
Income
Interest receivable 1,482 -
Fair value movement on
investments at fair value
through profit or loss 7 (1,921,292) 308,041
Other expenditure (13,352) (8,339)
Net investment (expenditure)/income (1,933,162) 299,702
------------------------------------- ----- -------------- --------------
Expenses
Administrative expenses 9.2 (290,740) (332,773)
Legal and other professional
fees (135,686) (136,882)
Audit fees (36,697) (43,474)
Total operating expenses (463,123) (513,129)
------------------------------------- ----- -------------- --------------
Loss before tax (2,396,285) (213,427)
Income tax expense 16 - -
Loss for the year (2,396,285) (213,427)
------------------------------------- ----- -------------- --------------
Other comprehensive income - -
------------------------------------- ----- -------------- --------------
Total comprehensive expenditure
for the year (2,396,285) (213,427)
------------------------------------- ----- -------------- --------------
Basic and fully diluted
loss per share (cents) 14 (3.72) (0.33)
------------------------------------- ----- -------------- --------------
The Directors consider that all results derive from continuing
activities.
The accompanying notes on pages 12 to 21 form an integral part
of these financial statements.
Statement of Financial Position
as at 31 December 2016
Note 31 December 31 December
2016 2015
US$ US$
------------------------------ ------ ------------ ------------
Non-current assets
Financial assets at
fair value through
profit or loss 7 26,645,501 29,922,302
------------------------------ ------ ------------ ------------
Total non-current assets 26,645,501 29,922,302
------------------------------ ------ ------------ ------------
Current assets
Trade and other receivables 11 17,929 18,753
Cash and cash equivalents 10 1,314,051 2,114,333
------------------------------ ------ ------------ ------------
Total current assets 1,331,980 2,133,086
------------------------------ ------ ------------ ------------
Total assets 27,977,481 32,055,388
============================== ====== ============ ============
Issued share capital 13 1,264,706 1,264,706
Share premium 24,982,423 26,594,923
Retained earnings 1,666,787 4,063,072
------------------------------ ------ ------------ ------------
Total equity 27,913,916 31,922,701
------------------------------ ------ ------------ ------------
Trade and other payables 12 63,565 132,687
Total current liabilities 63,565 132,687
------------------------------ ------ ------------ ------------
Total liabilities 63,565 132,687
------------------------------ ------ ------------ ------------
Total equity and liabilities 27,977,481 32,055,388
============================== ====== ============ ============
The financial statements were approved by the Board of Directors
on 26 June 2017 and signed on their behalf by:
Rhys Cathan Davies Ramanan Raghavendran
Director Director
The accompanying notes on pages 12 to 21 form an integral part
of these financial statements.
Statement of Changes in Equity
for the year ended 31 December 2016
Share Capital Share Premium Retained Earnings Total
US$ US$ US$ US$
-------------------------------------- -------------- -------------- ------------------ --------------
Balance at 1 January 2015 1,264,706 26,594,923 4,276,499 32,136,128
Total comprehensive income
Loss for the year - - (213,427) (213,427)
Other comprehensive income - - - -
-------------------------------------- -------------- -------------- ------------------ --------------
Total comprehensive income - - (213,427) (213,427)
-------------------------------------- -------------- -------------- ------------------ --------------
Transactions with shareholders
Return of capital to shareholders - - - -
-------------------------------------- -------------- -------------- ------------------ --------------
Total transactions with shareholders
- - - -
-------------------------------------- -------------- -------------- ------------------ --------------
Balance at 31 December 2015 1,264,706 26,594,923 4,063,072 31,922,701
====================================== ============== ============== ================== ==============
Balance at 1 January 2016 1,264,706 26,594,923 4,063,072 31,922,701
Total comprehensive income
Loss for the year - - (2,396,285) (2,396,285)
Other comprehensive income - - - -
-------------------------------------- -------------- -------------- ------------------ --------------
Total comprehensive income - - (2,396,285) (2,396,285)
-------------------------------------- -------------- -------------- ------------------ --------------
Transactions with shareholders
Return of capital to shareholders - (1,612,500) - (1,612,500)
-------------------------------------- -------------- -------------- ------------------ --------------
Total transactions with shareholders - (1,612,500) - (1,612,500)
-------------------------------------- -------------- -------------- ------------------ --------------
Balance at 31 December 2016 1,264,706 24,982,423 1,666,787 27,913,916
====================================== ============== ============== ================== ==============
The accompanying notes on pages 12 to 21 form an integral part
of these financial statements.
Statement of Cash Flows
for the year ended 31 December 2016
31 December 31 December
Note 2016 2015
US$ US$
Cash flows from operating
activities
Loss before tax (2,396,285) (213,427)
Adjustments:
Fair value movement on
investments at fair value
through profit or loss 7 1,921,292 (308,041)
Interest receivable (1,482) -
Operating loss before working
capital changes (476,475) (521,468)
Decrease in trade and other
receivables 824 1,959
(Decrease)/increase in
trade and other payables (69,122) 82,246
Net cash used by operating
activities (544,773) (437,263)
----------------------------------- ----- ------------ ------------
Cash flows from investing
activities
Capital distributions received 7 1,355,509 1,012,113
Net cash generated from
investing activities 1,355,509 1,012,113
----------------------------------- ----- ------------ ------------
Cash flows from financing
activities
Interest receivable 1,482 -
Return of capital to shareholders (1,612,500) -
Net cash used by financing
activities (1,611,018) -
----------------------------------- ----- ------------ ------------
Net (decrease)/increase
in cash and cash equivalents (800,282) 574,850
Cash and cash equivalents
at beginning of the year 2,114,333 1,539,483
----------------------------------- ----- ------------ ------------
Cash and cash equivalents
at end of year 10 1,314,051 2,114,333
=================================== ===== ============ ============
The accompanying notes on pages 12 to 21 form an integral part
of these financial statements.
Notes to the Financial Statements
for the year ended 31 December 2016
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 2015 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 26 June 2017.
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 IFRS, as
adopted by the EU, 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
IFRS 13, Fair Value Measurement, has been adopted from 1 January
2013. It establishes a single source of guidance for measuring fair
value and requires disclosure about the fair value measurements.
Fair value under IFRS 13 is an exit price regardless of whether
that price is directly observable or estimated using another
valuation technique. Also IFRS 13 includes disclosure
requirements.
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 Company's investments at fair value through profit or loss
comprise funds and co-investment vehicles, where fair value is
estimated by the Directors to be the Company's share of net asset
value per latest financial results reported by the underlying fund
administrator.
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
dividing 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 (see note 7). 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
A number of new standards and amendments to standards are
effective for annual periods beginning after 1 January 2016, and
have not been applied in preparing these financial statements. The
only new standard relevant to the Company is IFRS 9: Financial
Instruments, which is discussed below. The Company does not plan to
adopt IFRS 9 early.
IFRS 9, published in July 2014, will replace the existing
guidance in IAS 39. It includes revised guidance on the
classification and measurement of financial instruments, including
a new expected credit loss model for calculating impairment on
financial assets, and the new general hedge accounting
requirements. It also carries forward the guidance on recognition
and derecognition of financial instruments from IAS 39.
IFRS 9 is effective for annual reporting periods beginning on or
after 1 January 2018, with early adoption permitted. Based on the
initial assessment, this standard is not expected to have a
material impact on the Company's financial statements.
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. The eventual outcome may differ
from the value estimate. 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 IFRS 13 fair value hierarchy that reflects the
significance of the 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. The Company's investments in
funds and co-investment vehicles are classified as level 3, as the
underlying investments are private entities, valued using valuation
techniques (see note 7).
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 - - 19,778,373
EIF Co Invest VII (RSB
Group) - 5,510,960
EIF Co Invest X (Gland
Pharma Limited) - - 1,356,168
------- ------- -----------
- - 26,645,501
======= ================================== ===========
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 2016 is US$0.433
per share based on 64,500,002 ordinary shares in issue as at that
date (2015: US$0.495 per share based on 64,500,002 ordinary
shares).
6 Dividends and capital distributions
The Directors do not propose to declare a dividend for the year
ended 31 December 2016 (2015: US$Nil). During the year a capital
distribution of 2.5 cents per share, equivalent to approximately
US$1.61m, was made to the shareholders of the Company (2015: No
capital distribution was made).
7 Financial assets at fair value through profit or loss
The objective of the Company is to make indirect investments in
Indian private equity funds and companies via Mauritian based
investment funds and to also co-invest directly in certain
portfolio companies of the underlying funds. As at 31 December
2016, the investment portfolio comprised the following assets:
Investments Capital Commitment Capital Invested Capital Fair value Fair Value
(unlisted) Distribution Adjustment
--------------------- ------------------- ----------------- -------------------- -------------------- -----------
US$ US$ US$ US$ US$
Fund Investments
(equity)
Evolvence India Fund
PCC 45,120,000 45,120,000 (25,614,446) 272,819 19,778,373
Direct Investments
(equity)
EIF Co Invest VII
(RSB Group) 6,969,600 6,969,600 (29,235) (1,429,405) 5,510,960
EIF Co Invest X
(Gland Pharma
Limited) 466,387 466,387 - 889,781 1,356,168
52,555,987 52,555,987 (25,643,681) (266,805) 26,645,501
--------------------- ------------------- ----------------- -------------------- -------------------- -----------
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 2016 31 December 2015
US$ US$
Fair value brought forward 29,922,302 30,626,374
Capital distributions (1,355,509) (1,012,113)
Movement in fair value (1,921,292) 308,041
Fair value at year end 26,645,501 29,922,302
------------------------------ ----------------- -----------------
The outstanding capital commitments as at 31 December 2016 were
US$nil (2015: US$nil).
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 2016 per
its results as reported by the underlying fund administrator. 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 2016. 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
The Company 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 2016 per its financial results as reported by the
underlying fund administrator. 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 the trading multiples of RSB's comparable
group and the application of a liquidity discount thereto.
EIF Co Invest X
The Company held its interest in Gland Pharma Limited through an
SPV, EIF Co Invest X. EIF Co Invest X sold its interest in Gland
Pharma Limited during the year ended 31 December 2014, but retained
an amount of the sale proceeds to address any possible
contingencies. The fair value of the investment in EIF Co Invest X
is based on the Company's share of the net assets of EIF Co Invest
X at 31 December 2016 per its financial results as reported by the
underlying fund administrator. The financial statements of EIF Co
Invest X are prepared under IFRS. The Company received its final
distribution of US$1,352,515 in respect of this interest on 24
January 2017.
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.
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 is entitled to receive an annual
fee of GBP30,000 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$41,763 (2015: US$45,433).
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 CFL 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.
CFL 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 GBP6,168 plus a fee for
each holding and transfer registered.
Administration fees for the year amounted to US$24,111 (2015:
US$23,141) of which US$nil was outstanding at 31 December 2016
(2015: US$nil).
CREST fees were US$19,964 (2015:US$22,214) of which US$4,672 was
outstanding at 31 December 2016 (2015: US$5,284).
9.3 Consultancy fees
Mr Brett Miller has been retained by the Company as a
consultant. Consultancy fees are paid at the same rate as directors
fees and expenses. Consultancy fees payable for the year ended 31
December 2016 amounted to US$62,642 (2015: US$70,526).
10 Cash and cash equivalents
31 December 2016 31 December 2015
US$ US$
--------------------------- ----------------- -----------------
Bank balances 1,314,051 2,114,333
Cash and cash equivalents 1,314,051 2,114,333
--------------------------- ----------------- -----------------
11 Trade and other receivables
31 December 2016 31 December 2015
US$ US$
------------------ ----------------- -----------------
Prepaid expenses 13,084 13,617
VAT receivable 4,845 5,136
------------------ ----------------- -----------------
Total 17,929 18,753
------------------ ----------------- -----------------
12 Trade and other payables
31 December 2016 31 December 2015
US$ US$
----------------- ----------------- -----------------
Other creditors 23,824 21,150
Accruals 39,741 111,537
----------------- ----------------- -----------------
Total 63,565 132,687
----------------- ----------------- -----------------
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 2016 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 28 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 Loss per share
Basic and fully diluted loss per share is calculated by dividing
the loss attributable to equity holders of the Company by the
weighted average number of ordinary shares in issue during the
year:
2016 2015
Loss attributable to equity holders of the Company (US$) (2,396,285) (213,427)
Weighted average number of ordinary shares in issue 64,500,002 64,500,002
---------------------------------------------------------- ------------ -----------
Basic loss per share (cents per share) (3.72) (0.33)
---------------------------------------------------------- ------------ -----------
There are no dilutive potential ordinary shares in issue,
therefore 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$179,534 (year ended 31 December 2015: US$207,672) and insurance
expenses totalled US$16,226 (year ended 31 December 2015:
US$16,192).
Director 31 December 2016 31 December 2015
US$ US$
---------------------- ----------------- -----------------
Rhys Cathan Davies 62,642 70,526
Ramanan Raghavendran 62,642 70,526
Paul Mark Garnett 54,250 66,620
---------------------- ----------------- -----------------
Total 179,534 207,672
---------------------- ----------------- -----------------
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 co-investment vehicles. Underlying
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 underlying 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 2016 31 December 2015
% %
----------------- ----------------- -----------------
Pounds Sterling - -
Indian Rupee 95.40 93.65
US Dollar 4.60 6.35
----------------- ----------------- -----------------
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 2016
------------------ ----------- ------------- -------------
Pound Sterling 45,914 (63,565) (17,651)
Indian Rupee 26,645,501 - 26,645,501
US Dollar 1,286,066 - 1,286,066
27,977,481 (63,565) 27,913,916
------------------ ----------- ------------- -------------
Monetary Monetary Net Exposure
Assets Liabilities
US$
US$ US$
31 December 2015
------------------ ----------- ------------- -------------
Pound Sterling 104,775 (132,687) (27,912)
Indian Rupee 29,922,302 - 29,922,302
US Dollar 2,028,311 - 2,028,311
32,055,388 (132,687) 31,922,701
------------------ ----------- ------------- -------------
At 31 December 2016, 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 loss per the statement of comprehensive
income would have increased or decreased by US$1,332,275 (2015:
US$1,496,115).
Credit risk
Credit risk is the risk that a counterparty to a financial
instrument will fail to discharge an obligation or commitment that
it has entered into with the Company.
The carrying amounts of financial assets best represent the
maximum credit risk exposure at the balance sheet date. This
relates also to financial assets carried at amortised cost, as they
have a short term maturity.
At the reporting date, the Company's financial assets exposed to
credit risk amounted to the following:
31 December 2016 31 December 2015
US$ US$
------------------------------------------------------- ----------------- -----------------
Financial assets at fair value through profit or loss 26,645,501 29,922,302
Trade and other receivables 17,929 18,753
Cash and cash equivalents 1,314,051 2,114,333
------------------------------------------------------- ----------------- -----------------
Total 27,977,481 32,055,388
------------------------------------------------------- ----------------- -----------------
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 Board of
Directors.
Residual undiscounted contractual maturities of financial
liabilities:
31 December 2016 Less 1-3 3 months 1-5 Over No stated
than months to 1 years 5 years maturity
1 month year
---------------------- --------- -------- --------- ------- --------- ----------
Financial liabilities US$ US$ US$ US$ US$ US$
Trade and other 63,565 - - - - -
payables
---------------------- --------- -------- --------- ------- --------- ----------
63,565 - - - - -
---------------------- --------- -------- --------- ------- --------- ----------
31 December 2015 Less 1-3 3 months 1-5 Over No stated
than months to 1 years 5 years maturity
1 month year
---------------------- --------- -------- --------- ------- --------- ----------
Financial liabilities US$ US$ US$ US$ US$ US$
Trade and other 132,687 - - - - -
payables
---------------------- --------- -------- --------- ------- --------- ----------
132,687 - - - - -
---------------------- --------- -------- --------- ------- --------- ----------
Capital commitments outstanding to private equity funds as at 31
December 2016 amounted to US$nil (2015: US$nil).
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
2016 than months to years 5 bearing
1month 1 year years
Financial US$ US$ US$ US$ US$ US$ US$
Assets
Financial
assets at
fair value
through profit
or loss - - - - - 26,645,501 26,645,501
Trade and
other receivables - - - - - 17,929 17,929
Cash and cash
equivalents 1,314,051 - - - - - 1,314,051
-------------------- ------------ -------- --------- ------- ------- ------------- -------------
Total financial
assets 1,314,051 - - - - 26,663,430 27,977,481
-------------------- ------------ -------- --------- ------- ------- ------------- -------------
Financial
Liabilities
Trade and
other payables - - - - - (63,565) (63,565)
-------------------- ------------ -------- --------- ------- ------- ------------- -------------
Total financial
liabilities - - - - - (63,565) (63,565)
-------------------- ------------ -------- --------- ------- ------- ------------- -------------
Total interest
rate sensitivity 1,314,051 - - - -
gap
-------------------- ------------ -------- --------- ------- ------- ------------- -------------
31 December Less 1-3 3 months 1-5 Over Non-interest Total
2015 than months to years 5 bearing
1month 1 year years
Financial US$ US$ US$ US$ US$ US$ US$
Assets
Financial
assets at
fair value
through profit
or loss - - - - - 29,922,302 29,922,302
Trade and
other receivables - - - - - 18,753 18,753
Cash and cash
equivalents 2,114,333 - - - - - 2,114,333
Total financial
assets 2,114,333 - - - - 29,941,055 32,055,388
Financial
Liabilities
Trade and
other payables - - - - - (132,687) (132,687)
Total financial
liabilities - - - - - (132,687) (132,687)
-------------------- ------------ -------- --------- ------- ------- ------------- -------------
Total interest
rate sensitivity 2,114,333 - - - -
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 January 2017 the Company received a final distribution of
US$1.4m from EILSF Co-invest I. In January 2017 and April 2017, the
Company received further distributions from EIF of US$0.9m and
US$0.5m, respectively. As disclosed in the Chairman's Statement,
the Company made a capital distribution of 4 cents per share to
shareholders of the Company registered as at 17 February 2017.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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