TIDMH2O
RNS Number : 9983M
Aqua Resources Fund Limited
25 August 2011
AQUA RESOURCES FUND LIMITED
UNAUDITED RESULTS FOR THE SIX MONTH PERIOD ENDED 30 JUNE
2011
25 August 2011 For immediate release
Aqua Resources Fund Limited ("Aqua" or the "Company"), the
Authorised Closed-ended investment scheme managed by FourWinds
Capital Management ("FWCM") and established to invest in global
water opportunities, today issues its unaudited interim results for
the six month period ending 30 June 2011.
HIGHLIGHTS
-- At 30 June 2011, the Company had invested approximately 93%
of its net assets.
-- At 30 June 2011, the unaudited net asset value per ordinary
share of the Company was EUR1.0321.
-- US$2.325 million follow-on investment in Ranhill Water
Technologies (Cayman) Limited.
-- On 27 June 2011, PricewaterhouseCoopers LLP were appointed as
the Company's new auditors.
-- China Hydroelectric Corporation completed the acquisition of
a 15 Megawatt project in April 2011, further increasing installed
capacity to 563.8 Megawatt.
-- In June 2011, Bluewater Bio International executed a US$20
million contract with the Ministry of Works in the Kingdom of
Bahrain to upgrade and expand the Tubli wastewater treatment plant,
and completed the installation of its Hybrid Bacillus Activated
Sludge known as HYBACS process at the Botleng wastewater treatment
plant in South Africa.
-- In April 2011, In-Pipe Technology Company Inc. was awarded
new contracts totalling US$1.75 million for green sewer collection
system treatment in its core North American market.
Kimberly Tara, Chief Executive Officer of FourWinds Capital
Management, commented on the results: "Aqua has an excellent
well-balanced portfolio across the global water sector. The
portfolio companies continue to show strong growth in pipeline and
excellent success rates in winning bids. The key drivers behind
water industry growth remain strong, with global demand for water
expected to outstrip supply by 40% by 2030. Developments made
within the Company's diversified portfolio during the period from
31 December 2010 to 30 June 2011 leave the individual investee
companies well positioned to take advantage of this supply
shortfall. We remain confident that Aqua is well placed to capture
the sector's long term investment opportunities".
Further enquiries:
FourWinds Capital Management, Investment Manager
Kimberly Tara, Chief Executive Officer
Valerie Daoud Henderson, Head of Europe Environment Group
JuiKian Lim, Head of Asia Environment Group
info@fourwindscm.com
Cenkos Securities plc, Corporate Broker
Will Rogers +44 207 397 1920
Dion Di Miceli +44 207 397 1921
HSBC Securities Services (Guernsey) Limited, Administrator
Tel: +44 (0) 1481 707 000
CitigateDeweRogerson, PR Advisor
Sarah Gestetner / Lindsay Noton +44 207 638 9571
Notes to Editors:
Aqua is a Guernsey-domiciled Authorised Closed-ended investment
scheme pursuant to section 8 of the Protection of Investors
(Bailiwick of Guernsey) Law 1987, as amended and rule 6.02 of the
Authorised closed-ended Investment Schemes Rules 2008.
Aqua's ordinary shares were admitted to listing on the Official
List of the UK Listing Authority and to trading on the main market
for listed securities of the London Stock Exchange plc on 24 July
2008.
Aqua's investment objective is to provide long term capital
appreciation through exposure to a diversified portfolio of
water-related investments. Aqua will invest principally in
businesses that are involved in i) water treatment and recycling
(i.e. wastewater and recycling, water treatment and purification),
ii) water infrastructure (i.e. water distribution) or iii) water
application and conversion (water-to-energy and desalination) with
the objective of capturing the growth opportunities emerging from
the attractive long-term dynamics driving the water industry.
MANAGEMENT AND ADMINISTRATION
Directors: Hasan Askari (Chairman)*
Andrea Rossi*
Timothy Betley (up to 22 July 2011)*
Kimberly Tara (up to 2 June 2011)
Jonathan Hooley (from 25 July 2011)*
(all of whom are non executive)
*independent directors
Registered Office: Arnold House
St. Julian's Avenue
St. Peter Port
Guernsey CI
GY1 3NF
Manager: FourWinds Capital Management
Scotiabank Building
PO Box 268GT
George Town
Grand Cayman KY1-1104
Cayman Islands
CORPORATE Broker: Cenkos Securities plc
6,7,8 Tokenhouse Yard
London EC2R 7AS
United Kingdom
Solicitors to the Company: Herbert Smith LLP
(as to English Law) Exchange House
Primrose Street
London EC2A 2HS
United Kingdom
Advocates to the Company: Mourant Ozannes
(as to Guernsey Law) 1 Le Marchant Street
St. Peter Port
Guernsey CI
GY1 4HP
Administrator AND COMPANY SECRETARY: HSBC Securities Services (Guernsey)
Limited
Arnold House
St. Julian's Avenue
St. Peter Port
Guernsey CI
GY1 3NF
Auditors: PricewaterhouseCoopers LLP (from 27
June 2011)
P O Box 321
Royal Bank Place
1 Glategny Esplanade
St Peter Port
Guernsey
GY1 4ND
Ernst & Young LLP (up to 2 June 2011)
Royal Chambers
St. Julian's Avenue
St. Peter Port
Guernsey
GY1 4AF
Registrar: Capita Registrars (Guernsey) Limited
PO Box 627
Longue Hougue House
St. Sampson
Guernsey CI
GY1 4PP
UK Transfer Agent: Capita Registrars Limited
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
United Kingdom
CHAIRMAN'S STATEMENT
FOR THE SIX MONTHS ENDED 30 JUNE 2011
To the Shareholders of Aqua Resources Fund Limited
The Board is pleased to present the Company's Half-Yearly
Management Report.
This Chairman's Statement has been produced solely to provide
additional information to Shareholders as a body, as required by
the UK Listing Authority's Disclosure and Transparency Rules. It
should not be relied upon by Shareholders or any other party for
any other purpose.
This has been a challenging six months for the Aqua Resources
Fund Limited ("Aqua" or the "Company"). A combination of the
volatility in the markets, a lack of liquidity in our shares, a
loss of appetite for private equity investments and a retreat from
credit assets more generally has meant that our share price has
suffered significantly. The Company is not unique in this respect
but it would be fair to say that, at least insofar as its share
price is concerned, it has suffered rather more than other broadly
comparable companies. The Board is acutely aware of the need to
consider steps which might redress this situation and I will return
to this topic later on in this letter.
There is a detailed discussion of the portfolio in the Manager's
Report but I would like to refer here to two of the assets of the
Company. There has been a precipitous decline in the share price of
China Hydroelectric Corporation (the Company's original investment
was for US$20,000,000 or 26.71% of the total assets of the
Company). Shareholders will be aware that Chinese companies listed
on the stock exchanges in the United States are going through a
period of re-assessment and questions have been raised by
international investors about the integrity of some of the
valuations. As far as the Board can tell, these issues have not
been raised about China Hydroelectric Corporation and the Manager
has assured the Board that the company has a sound business
strategy and improving prospects.
Shareholders will also recall that the Board had commented in
the Annual Report on Bluewater Bio International and the unsettled
environment in which it had its principal contract (Bahrain). We
have since been advised by the Manager that Bluewater Bio
International has commenced work on the project and expects to
generate revenue from the project later this year.
I thought I should comment on what happened at the Annual
General Meeting ("AGM") of the Company on 2 June 2011 and our
subsequent enquiries from some shareholders. As you will recall,
the resolutions a) to receive the Report and Accounts of the
Company, b) to re-appoint Ernst & Young LLP as the Company's
auditors and, c) to re-elect Kimberly Tara, who represents the
Manager, FourWinds Capital Management, to the Board were all
defeated, on a low voting turn out. Accordingly, I have, since the
vote, taken the opportunity to meet or speak to some of the
shareholders to understand the reasons behind the vote and would
like to share these views with you.
I have reason to believe that the votes against the resolutions
at the AGM reflected PIRC(2) guidelines which, among other things,
recommend that there is a breakdown in fees earned between the
audit and advisory components (in fact, in our case, there were no
advisory fees paid by the Company to the previous auditors but this
could not be discerned from the face of the Accounts). The
guidelines also advise against the Manager being represented on the
Board. The Accounts remain valid in all respects despite the vote
and were audited with an unqualified opinion. I am sure, however,
that shareholders will be pleased to hear that we have selected an
appropriate successor to Ernst & Young LLP with
PricewaterhouseCoopers LLP being appointed as our auditors as of 25
June 2011.
I pointed out in my statement to the Annual Financial Statements
that the portfolio would not be re-valued except to record the
effect of changes in the applicable foreign exchange rates and
changes in the share price of China Hydroelectric Corporation. The
Manager has reassessed the fair value of the Company's two largest
unlisted investments and has demonstrated that their fair value is
no less than their value at 31 December 2010. In addition the
follow-on investment made by the Company during 2011 in Ranhill
Water Technologies (Cayman) Limited ("RWT") has been recorded in
the financial statements using the same value per share as the
shares already held by the Company in RWT as at 31 December
2010.
I am sad to report that Timothy Betley, who has been a Director
of the Company since its inception and Chairman of the Audit
Committee, has decided to step down from the Board. I would like to
record the Board's appreciation to Tim for his contribution over
the past three years and wish him well for the future. I am
delighted to report that Jonathan Hooley, a former senior partner
of KPMG in Guernsey, has agreed to join the Board (and to chair the
Audit Committee) and we look forward to working with him.
Net Asset Value
As at 30 June 2011 the unaudited net asset value ("NAV") per
ordinary share of the Company ("Ordinary Share") was EUR1.0321,a
decrease of 8.27% since 31 December 2010.
Outlook
The Board is committed to provide value to investors but
recognises that the current discount in the share price to the NAV
and poor liquidity is a source of continuing concern to
shareholders and that the Board needs to consider alternatives to
create an environment where the share price reflects, as for as
possible, the underlying NAV of the portfolio. These alternatives
may include some form of corporate action such as a possible merger
or consolidation with other assets or similar funds and/or an
examination of the merits of the Company maintaining its public
listing. As shareholders will appreciate, an assessment of the
alternatives available to the Company and their feasibility will
take time and further announcements will be made as soon as
practicable.
Subsequent transactions
There have been no subsequent transactions since 30 June
2011.
Principal risks & uncertainties
As we stated in the financial statements for the year ended 31
December 2010, the Company expects to face challenges linked to, on
the one hand, the global macroeconomic environment and, on the
other hand, potential microeconomic challenges linked to the
Company's investments if such investments do not achieve the
expected financial and operating results. Such uncertainties are
linked to the slower than expected pace of global economic
recovery, political instability in large markets such as the Middle
East and North Africa which are a large source of growth for some
of our portfolio companies, additional government regulations in
the water sector and currency risk.
More specifically, the Company is focused on the following key
risks:
Macroeconomic risks
In addition to the specific risks set out above, the performance
of the Company's underlying investment portfolio is also influenced
by a combination of economic growth, interest rates, the
availability of well-priced debt finance, the number of active
trade and private equity buyers and the general level of merger and
acquisition activity. All of these factors have an impact on the
Company's ability to invest and on the Company's ability to exit
from its underlying portfolio or on the levels of profitability
achieved on exit.
Long-term strategic risks
The Company is subject to the risk that its long-term strategy
and its level of performance fail to meet the expectations of its
shareholders.
The Company regularly reviews its investment strategy in light
of prevailing investor sentiment to ensure the Company remains
attractive to its shareholders.
Investment risks
The Company operates in a very competitive market. Changes in
the number of market participants, the availability of funds within
the market, the pricing of assets, or in the ability of the Manager
to access deals on a proprietary basis could have a significant
effect on the Company's competitive position and on the
sustainability of returns. In order to source and execute good
quality investments the Company is primarily dependent on the
Manager having the ability to attract and retain people with the
requisite investment experience and whose compensation is in line
with the Company's objectives. Once invested, the performance of
the Company's portfolio is dependent upon a range of factors. These
include but are not limited to: (i) the quality of the initial
investment decision; (ii) the ability of the investee company to
execute successfully its business strategy; and (iii) actual
outcomes against the key assumptions underlying the investee
company's financial projections. Any one of these factors could
have an impact on the valuation of an investee company and upon the
Company's ability to make a profitable exit from the investment
within the desired timeframe.
A rigorous process is put in place by the Manager for managing
the relationship with each investee company for the period to
anticipated realisation. This includes regular asset reviews and,
in many cases, board representation by one of the Manager's
executives.
Operational risks
The Company's investment management, custody of assets and all
administrative systems are provided or arranged for the Company by
the Manager, the Administrator and other service providers.
Therefore, the Company is exposed to a range of operational risks
which can arise from inadequate or failed processes, people and
systems or from external factors affecting these. The Company's
system of internal control mainly comprises the monitoring of the
services provided by the Manager, including the operational
controls established by the Manager to ensure it meets the
Company's business objectives.
As a result of its investment strategy, the Company is exposed
to various risks including market risk, credit risk and liquidity
risk as further explained in Note 7 of the notes to the
consolidated financial statements for the year ended 31 December
2010 which is available at
http://www.aquaresourcesfund.com/documents/2011-06-30_ARFL_2011_IFS_FINA
L.pdf.
Results
The results for the six months ended 30 June 2011 (the "Period")
are set out in the Condensed Interim Consolidated Statement of
Operations.
Dividends
The Board is not proposing a dividend for the Period.
Related parties
Kimberly Tara is a shareholder of the Manager and was a Director
of the Company up to 2 June 2011. As at 30 June 2011, Kimberly Tara
had an interest in 3,685,000 Ordinary Shares of the Company (31
December 2010: 3,685,000) which are owned by the Manager.
Hasan Askari
Chairman
24 August 2011
MANAGER'S REPORT
FOR THE SIX MONTHS ENDED 30 JUNE 2011
Aqua Resources Fund Limited, the Authorised Closed-ended
investment scheme managed by FourWinds Capital Management and
established to invest in global water opportunities, presents its
unaudited financial results for the six months ended 30 June
2011.
Introduction
The Company reports that the NAV per Ordinary Share at 30 June
2011 was EUR1.0321 per share (EUR0.9791 per share at 30 June 2010).
At 30 June 2011, the Company had invested approximately 93% of its
net assets and the balance was invested conservatively in cash,
with no gearing.
The share price started the Period at EUR0.62 (4 January 2011)
and closed the Period at EUR0.4425 (30 June 2011) which represents
a 28.6% drop and a discount to NAV of 57.1%.
Summary of performance
Unaudited net
assets
attributable Ordinary Increase/(Decrease)
Period to ordinary Unaudited NAV Share in Net Asset Value
ending shareholders per Ordinary price(3) period on period
30 June (EUR) Share (EUR) (EUR) (EUR)
--------- --------------- ---------------- ---------- --------------------
2009 67,906,359 0.9371 0.68 (1,373,788)(4)
--------- --------------- ---------------- ---------- --------------------
2010 70,947,897 0.9791 0.58 3,041,538
--------- --------------- ---------------- ---------- --------------------
2011 74,788,639 1.0321 0.44 3,840,742
--------- --------------- ---------------- ---------- --------------------
The Board has been monitoring both the share price and the
discount to NAV at which the Ordinary Shares have been trading
during the Period. Financial markets have experienced extreme
volatility since the beginning of the Period, in particular during
March and June 2011 which negatively impacted markets and stocks
across the board. Similarly, the Company's share price mirrored
this volatility and ended the Period at a low of EUR0.42 on 23 June
2011. Trading volumes continued to be extremely low, with a monthly
average of less than 0.01% of the shares in issue traded daily(5) .
The Board will be looking actively at discount management
strategies.
Investments made during the period
In January 2011, the Company announced that its wholly owned
subsidiary, Aqua Resources Asia Holdings Limited ("ARAHL"), had
agreed to invest a further US$2,325,000 via a subscription for new
shares to be issued by RWT, the international joint venture
established in March 2009 between the Company and Ranhill Berhad
and its affiliates (the "Ranhill Group") to invest in water and
wastewater operations in the People's Republic of China and
Thailand. The additional investment was made in two equal
instalments of US$1,162,500 each (on 11 January and 16 February
2011, respectively). Following this investment, the shareholdings
of both the Ranhill Group and ARAHL were increased slightly as a
result of subscribing for their respective share entitlement as
existing shareholders and for additional shares in respect of the
entitlement of RWT's minority shareholders, which were not taken up
by those minority shareholders. ARAHL's shareholding interest in
RWT increased to 45.2% from 45%, while the Ranhill Group increased
its shareholding interest in RWT to 52.1% from 51.8% after
investing US$2,675,000. The proceeds of these additional
subscriptions will be used by RWT to undertake investments in two
large wastewater treatment operations in mainland China, in regions
which experience severe shortages of fresh water supplies,
impacting potential economic growth and making this a critical
project to government and commerce.
The Company also committed to invest a further US$2,250,000 in
RWT, subject to the Ranhill Group subscribing alongside it to
maintain its current shareholding ratio at 52.1%. The Company's
commitment is valid until 16 February 2012. The purpose of this
additional commitment is to finance the next stage of RWT's growth
and to fund specific projects in the pipeline which are targeted
for calendar years 2011 and 2012.
On completion of this investment in February 2011, the Company
had invested approximately 93% of its net assets.
Manager's review
At 30 June 2011, the unaudited NAV per Ordinary Share of the
Company was EUR1.0321, a decline of 8.27% from the 31 December 2010
audited NAV of EUR1.1252 per Ordinary Share, and a decline of 7.63%
from the 31 March 2011 unaudited NAV of EUR1.1174 per Ordinary
Share.
Analysis of movements in NAV for the six months ended 30 June
2011(in EUR)
Opening NAV as at 1 January 2011 81,535,743
Investment income 215,597
Management fee (876,694)
Performance fee -
Other costs (339,482)
Net unrealised depreciation of investments (2,968,743)
Foreign currency movements (2,777,782)
Closing NAV as at 30 June 2011 74,788,639
------------------------------------------------------ -------- ------------
The Company's investment objective is to provide capital
appreciation through exposure to a diversified portfolio of water
related
investments.
The Company gives investors unique access to the steadily
growing private water and wastewater treatment sector by investing
in businesses that are established globally or locally with
potential to grow outside of their core markets, and which have a
successful track record in delivering solutions to their
clients.
We believe that the Company's approach will reward investors
with superior performance in the long-term.
Manager's strategy
The Manager seeks to achieve the investment objectives of the
Company by providing shareholders with pure exposure to the
long-term capital appreciation of water companies through
diversified exposure to a global portfolio of growth capital,
water-related investments.
The portfolio is compact, focused, well diversified between
technology and service providers and operators, with very good
prospects at the underlying investments' level. The portfolio is
actively managed with significant time spent on each investment and
synergies built between the different portfolio companies to
extract and deliver superior value.
The Manager carefully considers the exercise of voting rights in
relation to the Company's portfolio companies and votes or refrains
from voting based on a case by case examination, using its best
commercial and financial judgment of the best long-term interests
of the Company and its shareholders. Typically the Manager will,
when making voting decisions, examine the strategic focus and
operating performance of the relevant portfolio company, its
corporate governance and remuneration framework and its
communications and reporting structures.
Portfolio overview
The main contributing factors to the decline of the Company's
NAV during the Period were:
-- A steep decline of 43.8% in the share price of China
Hydroelectric Corporation ("CHC"), resulting in a corresponding
negative impact of 5.54% to the Company's NAV before foreign
currency adjustments;
-- Foreign exchange movements of 3.41%; and
--- Operating expenses of 1.49%.
As a consequence of its follow-on investments in RWT made during
the Period, the Company booked an unrealised gain based upon the
discounted purchase price of the new subscriptions in RWT versus
the fair value of RWT as at 30 June 2011 which partially offset the
aforementioned factors.
The decline in CHC's share price can be explained by the
following factors:
-- Poor sentiment towards small-cap Chinese stocks;
-- A relatively below average set of results for the first half
of 2011 ("H1 2011") due mainly to lower than expected
precipitation, hence impacting the electricity output, and a
decrease in effective tariff;
-- The H1 2011 results were further skewed by an above average
corresponding period in 2010 where unusually favorable weather was
experienced at all project locations.
Notwithstanding CHC's share price decline, the Company's
underlying assets performed in line with expectations during the
Period.
The portfolio has been valued using consistent valuation
approach and methodology as at 31 December 2010 with respect to
each investee company held by the Company. The Company's investment
in CHC is held at market value as at the close of business on 30
June 2011. The Company's unlisted holdings are valued consistently
with the methodologies used as at 31 December 2010.
China Hydroelectric Corporation
CHC is an owner, consolidator, developer and operator of small
hydroelectric power projects in the People's Republic of China. Led
by an international management team, CHC's primary business is to
identify and evaluate acquisition and development opportunities and
acquire and in some case construct, hydroelectric power projects in
China. China produces 22% of its total energy from hydroelectric
energy. CHC currently owns twenty-four operating hydroelectric
power projects in China (consisting of twenty nine operating
stations) in China with a total installed capacity at 30 June 2011
of 563.8 Megawatt ("MW"). These projects are located in four
provinces: Zhejiang, Fujian, Yunnan and Sichuan6.
On 15 August 2011, CHC announced the following unaudited results
for H1 2011:
- First half revenue decreased by 16% compared to the
corresponding period in fiscal year 2010. The company sold 708.8
million kilowatt-hours ("kWh") in the first half of 2011, a
decrease of 10% from 784.6 million kWh in the first half of 2010
("H1 2010"). The decrease in revenues was due to less precipitation
in H1 2011compared to H1 2010 which experienced better than average
precipitation.
-- The effective tariff for H1 2011decreased by 17% to RMB0.30
per kWh compared with RMB0.36 per kWh in H1 2010 caused by a change
in the project mix. A slightly lower revenue contribution from
operating projects in Zhejiang province, a relatively high tariff
region, due to lower precipitation, and a higher revenue
contribution from newly acquired projects in Yunnan province, a
lower tariff region. Tariffs vary at CHC's individual projects,
which causes effective tariffs, which are a consolidated figure, to
vary based on different revenue contribution mixes.
- -- H1 2011 gross profit decreased by 39% to US$16.5 million
with gross margins decreasing by 19% to 52% from 71% in H1
2010.
- -- H1 2011 adjusted EBITDA decreased by 26% to US$20.2 million
with adjusted EBITDA margin at 63% versus 72% in H1 2010.
Installed capacity in H1 2011 increased to 563.8 MW from 430.5
MW as at end H1 2010. CHC's portfolio is becoming increasingly
geographically diversified and the Manager expects this
diversification to reduce the impact of future weather pattern
variations and to give CHC a stable cash flow base from which to
continue to grow.
Summary of CHC's financial performance(7) :
(in US$ millions) 2009 2010 vs. FY 2009 H1 2010 H1 2011 vs. H1 2010
------------------ ---- ---- ----------- ------- ------- -----------
Revenues 36.2 66.7 84.3% 38.3 32.0 -16.4%
------------------ ---- ---- ----------- ------- ------- -----------
Gross Profit 19 41.8 120.0% 27.2 16.5 -39.3%
------------------ ---- ---- ----------- ------- ------- -----------
EBITDA 22.8 42.8 87.7% 27.5 20.2 -26.5%
------------------ ---- ---- ----------- ------- ------- -----------
EPS NA 0.16 NA 0.22 -0.09 -140.9%
------------------ ---- ---- ----------- ------- ------- -----------
Investment summary:
Unrealised Total value Valuation
Cost (EUR'000) value (EUR'000) (EUR'000) methodology
---- -------------- ---------------- ----------- ------------
Market
CHC 13,479 (7,914) 5,565 price
---- -------------- ---------------- ----------- ------------
Bluewater Bio International
Bluewater Bio International ("BBI") is a provider of municipal,
industrial, and commercial wastewater treatment solutions. It
offers hybrid bacillus activated sludge technology, a biological
odorless wastewater treatment process that produces reusable
effluent and removes nutrients. The company also provides plant
design, costing, installation, commissioning, training, and
operation and maintenance services.
BBI has made very good progress during the Period, having
executed a 7.3 million Bahraini Dinar (c. US$20 million) contract
with the Ministry of Works of the Kingdom of Bahrain to upgrade and
expand the Tubli wastewater treatment plant (Tubli is the largest
of its kind in the country and serves a population equivalent to c.
800,000) and completed the installation of its HYBACS process at
the Botleng wastewater treatment plant in South Africa, (serving
17,000 residents). These developments represent a significant step
forward for BBI and the Manager expects that these reference
plants, together with initiatives being pursued by BBI's management
in other geographies will help cement and grow BBI's position in
the wastewater treatment market.
Investment summary:
Unrealised Total value Valuation
Cost (EUR'000) value (EUR'000) (EUR'000) methodology
---- -------------- ---------------- ----------- ------------
Previous
transaction
BBI 9,375 1,821 11,196 + At cost
---- -------------- ---------------- ----------- ------------
In-Pipe Technology
In-Pipe Technology Company Inc. ("In-Pipe") provides engineered
wastewater treatment technology and services for municipalities in
the United States and internationally. Its technology re-engineers
the sewer biofilm to offer biological nutrient removal, biosolids
management, wastewater recycling, and ultraviolet disinfection
services to pre-treat wastewater in the sewer collection system.
The company's solutions enable customers to achieve environmental
compliance, and eliminate noxious odors and corrosion, as well as
lessen the impact of fats, oils, and grease.
In-Pipe has displayed solid growth in the Period having been
awarded US$1.75 million in new contracts for green sewer collection
system treatment in its core North American market. The management
of In-Pipe has been utilising the platform this growth has
established to explore expansion into other markets including
Europe and South East Asia. In-Pipe now has a strong customer base
in North America, in particular in the municipal market, and the
Manager expects to see In-Pipe capitalise on this base to drive
further growth in its home and overseas markets in the second half
of 2011.
In-Pipe has started the current financial year ahead of the
previous year reflecting improved sales and tighter control of
costs; the company is currently operating around breakeven
EBITDA.
Investment summary:
Unrealised Total value Valuation
Cost (EUR'000) value (EUR'000) (EUR'000) methodology
-------- -------------- ---------------- ----------- -------------
At cost
+ warrant
In-Pipe 3,603 97 3,700 appreciation
-------- -------------- ---------------- ----------- -------------
Waterleau Group
Waterleau Group N.V. ("Waterleau") is a global provider of
wastewater treatment, water treatment, sludge treatment, waste
treatment, energy, and air treatment solutions for industry and
municipalities. Its services include research and development,
audits and consultancy, pilot testing and demonstration tests,
feasibility studies, technology selection, process design,
mechanical design, electricity and instrumentation design, basic
engineering, detailed engineering, and procurement. The company
also provides equipment supply, site supervision, general
contracting, construction, erection, electricity, instrumentation
and control, start-up and commissioning, training, operation and
maintenance, project development, financing, and Build Own
(Operate) Transfer ("BO(O)T") project related services.
Waterleau has delivered a strong performance in industrial
wastewater markets, in particular in the food and beverage sectors,
a traditionally strong industry for Waterleau. Since the latter
part of 2010, Waterleau has experienced an influx of orders to
build wastewater treatment plants on the brewers' sites, with a
focus on Eastern Europe, Russia and Africa. Activity remains
difficult in the more traditional municipal markets and in North
Africa and the Middle East (Egypt, Algeria and Libya).
Summary of Waterleau's financial performance8:
FY FY FY FY FY
ending ending ending ending ending
December December December December December
(in EUR million) 2006 2007 2008 2009 2010 CAGR
------------------ --------- --------- --------- --------- --------- -----
Revenues EUR 35.0 EUR 42.8 EUR 52.6 EUR 55.5 EUR 63.5 16%
------------------ --------- --------- --------- --------- --------- -----
EBITDA EUR 2.0 EUR 4.0 EUR 4.1 EUR 6.6 EUR 6.6 34%
------------------ --------- --------- --------- --------- --------- -----
EBIT EUR 1.7 EUR 0.9 EUR 1.6 EUR 1.5 EUR 3.7 22%
------------------ --------- --------- --------- --------- --------- -----
Investment summary:
Unrealised Total value Valuation
Cost (EUR'000) value (EUR'000) (EUR'000) methodology
---------- -------------- ---------------- ----------- ------------------
Accrued interest
up to 31 December
Waterleau 20,000 3,000 23,000 2010
---------- -------------- ---------------- ----------- ------------------
Ranhill Water Technologies
RWT is a fully integrated water and wastewater company with
in-house expertise in design, construction and operations of water
and wastewater plants across a number of Asian countries. It has
operations in Thailand, Malaysia and China. Currently, RWT owns and
operates 5 Build Own Transfer ("BOT") projects in China with a
total treatment capacity of 160 Million Liters per Day ("MLD") as
well as 5 BOT projects in Thailand.
During its financial year to 30 June 2012, RWT will commence
construction of two new plants in China - the Yingkou 30MLD plant
and Phase 2 of Xiao Lan, a 50MLD expansion adjacent to the
company's existing plant. When construction of these two new plants
is completed, RWT's treatment capacity is expected to reach 240MLD.
RWT also expects to sign a further 2 new BOT contracts with a total
treatment capacity of 150MLD during its financial year to 30 June
2012.
Summary of RWT's financial performance9:
FY ending June FY ending June FY ending June
(in US$ million) 2009 2010 2011 CAGR
------------------ --------------- --------------- --------------- -----
Revenues $ 13.5 $ 22.5 $ 25.9 39%
------------------ --------------- --------------- --------------- -----
EBITDA $ 4.0 $ 3.7 $ 6.2 24%
------------------ --------------- --------------- --------------- -----
EBIT $ 3.9 $ 3.4 $ 6.1 26%
------------------ --------------- --------------- --------------- -----
Net Profit $ 4.3 $ 4.9 $ 5.0 8%
------------------ --------------- --------------- --------------- -----
Investment summary:
Unrealised Total value Valuation
Cost (EUR'000) value (EUR'000) (EUR'000) methodology
---- -------------- ---------------- ----------- ----------------------
Discount to comparable
RWT 11,055 14,942 25,997 multiples
---- -------------- ---------------- ----------- ----------------------
Manager's market commentary and outlook
Water quality and scarcity remain at the forefront of the global
agenda. The Company invests in businesses that address these
issues.
The first half of 2011 has been characterised by continued fears
for the global economy as many countries, particularly in Europe,
have continued to struggle to rid themselves of problems stemming
from the banking sector-led recession. Several countries in the
Eurozone have been forced into stringent austerity measures
following bail out funding from the International Monetary Fund
("IMF") and from the other member states of the European Union
("EU"). Disappointing employment and manufacturing data from the
United States of America ("US") in the early part of 2011 together
with fears of a slowdown in the Chinese economy also contributed
heavily to market volatility and persistent fears that a full and
stable recovery is still some years away.
However, the key drivers behind water industry growth remain
strong. Global demand for water is expected to outstrip supply by
40% by 2030(11) and governments and companies across almost every
sector from pharmaceuticals to mining continue to focus on
efficiency, water re-use and sustainability. The continuing low
carbon agenda is also driving growth in parts of the sector, such
as the hydroelectric market as well as helping to give additional
fuel to the drivers behind water efficiency, resource recovery and
sludge management.
In Europe, stringent regulation and the accession of new
countries to the EU continue to drive investment in infrastructure
upgrades and an increased focus on technology to improve efficiency
and reduce wastage.
Activity in the water utility-led part of the European water
market will be driven byprivatisations as debt-ridden countries
attempt to raise funds through asset sales. In Portugal and Greece
analysis is under way into theprivatisation of their water
utilities and whilst Italy has rejectedprivatisation, question
marks remain over where the debt ridden government will find the
EUR64 billion needed to upgrade its water system to European
standards without recourse to private finance. In Ireland it was a
condition of the EUR85 billion IMF / EU bailout that Ireland
introduces water charges for domestic customers and discussions are
currently underway to divert over EUR500 million of government cash
that was expected to be spent on water meters into upgrading
Ireland's water network to increase its efficiency and reduce
losses.
The North American water market has recently seen the rapid
development of some new, high growth segments in particular the
produced water market which had already reached US$5 billion in
2010(12) . Technology developments and high commodity prices have
increased drilling for shale gas which uses high volumes of water
in the "fracking" process required to release the gas from within
the shale. The drilling has also raised concerns about treatment of
the wastewater generated by the process. Each well requires
approximately 4.5 million gallons opening up and then uses up to
1.7 gallons of water per 1000m(3) of gas produced(13) , which
subsequently becomes highly contaminated in the process. These
water demands and the potential for groundwater pollution have led
to a greatly increased focus on water treatment and re-use to
protect local water resources and it is expected that the produced
water from oil and gas segment of the water industry has the
possibility to grow to US$10 billion per year(14) .
Whilst there have been some fears of overheating in the Chinese
economy as growth in the second quarter of 2011 fell to 9.5%(15) ,
the outlook for the water industry continues to be robust during
the period of the 12(th) five year plan which runs from 2011 to
2015. During this period, investment in water related
infrastructure is expected to be up to US$90 billion and will
include the upgrading of over 2000 wastewater treatment plants and
the installation of over 2300 new water production and treatment
plants capable of producing 40 million m(3) per day(16) . There
will also be a significant focus on water re-use and sludge
treatment, the funding allocations for which have been increased
threefold and four and a half fold respectively over the 11(th)
five-year plan(17) .
The so-called "Arab Spring" had an enormous impact on the water
industry across the Middle East and North Africa initially through
changes to government, civil unrest and related issues which caused
project delays. However governments across the region both new and
old became even more sharply focused on developing their water and
wastewater infrastructure as one of the key elements to improving
the quality of life of their peoples. There are likely to be
continued project delays in some countries, with Egypt waiting
until at the earliest after elections in November. However large
scale investment in other countries where the impact of the unrest
was less direct looks set to go ahead very quickly - in Saudi
Arabia's two main cities alone, Jeddah and Riyadh, over US$2.7
billion is expected to be spent on water infrastructure over the
next 2 years with total spend of over US$30 billion anticipated for
the period 2010 to 2016(18) .
It is likely that this kind of spending across the region will
also help stimulate European and US economies as companies from
those regions work with local construction partners to roll out the
infrastructure which is typically required to include best in class
technology solutions many of which are provided by European and
American companies. One recent example is the Tubli Bay US$20
million(19) wastewater treatment plant upgrade in Bahrain where the
technology is being provided by BBI, the London based wastewater
treatment business part owned by the Company.
Whilst default fears continue to plague Europe's sovereign debt
markets, expectations for a "soft-landing" in China and cautious
optimism for the US coupled with heavy infrastructure spending by
the cash rich oil nations of the Middle East have meant that the
outlook for the water sector remains positive. This outlook is
reinforced by both the breadth of the sector and its being
underpinned by fundamentals uncorrelated to the global economic
conditions.
FourWinds Capital Management
August 2011
DIRECTORS' RESPONSIBILITY STATEMENT
For the period from 1 January 2011 to 30 June 2011
To the best of the knowledge of the Directors:
The Highlights, the Chairman's Statement and the Manager's
Report comprise the Half-Yearly Management Report.
This Half-Yearly Management Report and Unaudited Condensed
Interim Consolidated Financial Statements gives a true and fair
view of the assets, liabilities, financial position and profit or
loss of the Company and has been prepared in accordance with the
accounting principles generally accepted in the US.
The Half-Yearly Management Report includes a fair review of the
information required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being
an indication of important events that have occurred in the first
six months of the financial year and their impact on the condensed
set of financial statements; and a description of the principal
risks and uncertainties for the remaining six months of the year;
and
(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being
related party transactions that have taken place in the first six
months of the current financial year and that have materially
affected the financial position or performance of the entity during
that period; and any changes in the related party transactions
described in the last annual report that could do so.
Signed on behalf of the Board of Directors by:
Hasan Askari Jonathan Hooley
Director Director
Date: 24 August 2011
CONDENSED INTERIM CONSOLIDATED STATEMENT OF ASSETS AND
LIABILITIES
AS AT 30 JUNE 2011
Audited
Unaudited 31 December
30 June 2011 2010
Notes EUR EUR
Assets
Cash 4,881,457 8,181,382
Investments at fair value (cost 2011:
EUR57,511,827 and 2010:
EUR55,803,352) 2 69,458,917 73,458,458
Interest receivable 50,000 -
Prepaid expenses 488,597 16,496
Total assets 74,878,971 81,656,336
-------------- -------------
Liabilities
Directors' fees payable 23,505 24,742
Other payables 3 66,827 95,851
Total liabilities 90,332 120,593
-------------- -------------
NET ASSETS 74,788,639 81,535,743
============== =============
Net Assets consist of:
Ordinary Shares (no par value,
authorised to issue unlimited number
of Ordinary Shares, of which
72,464,340 (2010: 72,464,340) were
issued and outstanding) 4 70,030,004 70,030,004
Retained earnings 4,758,635 11,505,739
74,788,639 81,535,743
============== =============
Net asset value per Ordinary Share 1.0321 1.1252
============== =============
CONDENSED INTERIM CONSOLIDATED SCHEDULE OF INVESTMENTS
AT 30 JUNE 2011
Quantity/ Fair Value % of
Investments Notional EUR NAV
INVESTMENTS AT FAIR VALUE
Bonds
Belgium (cost: EUR20,000,000)
Waterleau Group N.V. Convertible Loan EUR20,000,000 23,000,000 30.75
Cayman Islands (cost: EUR2,979,301)
Bluewater Bio International Convertible
Loans GBP2,500,000 2,765,322 3.70
Total investments in bonds (cost:
EUR22,979,301) 25,765,322 34.45
----------- ------
Unlisted Companies
Belgium (cost: EUR277)
Waterleau Group N.V. 1 277 -
Cayman Islands (cost: EUR17,468,605)
Bluewater Bio International 49,170,112 8,430,219 11.27
Ranhill Water Technologies (Cayman)
Limited 14,880,000 25,997,547 34.76
United States of America (cost:
EUR3,602,651)
In-Pipe Technology Company Inc. 474,834 3,244,941 4.34
Total investments in unlisted companies
(cost: EUR21,071,533) 37,672,984 50.37
----------- ------
Listed Companies
China (cost: EUR13,478,451)
China Hydroelectric Corporation -
American Depository Shares 1,980,537 5,565,148 7.44
Total investments in listed companies
(cost: EUR13,478,451) 5,565,148 7.44
----------- ------
Warrants
Cayman Islands (cost: EUR1)
Bluewater Bio International - Warrant
31/07/2012 1 - -
Bluewater Bio International - Part 2
Warrant 31/03/2013 1 1 -
United States of America (cost: EUR1)
In-Pipe Technology Company Inc. -
Warrants 30/06/2012 74,225 455,462 0.61
Total investments in warrants (cost:
EUR2) 455,463 0.61
----------- ------
Total investments at fair value (cost:
EUR57,511,827) 69,458,917 92.87
=========== ======
AT 31 DECEMBER 2010
Quantity/ Fair Value % of
Investments Notional EUR NAV
INVESTMENTS AT FAIR VALUE
Bonds
Belgium (cost: EUR20,000,000)
Waterleau Group N.V. Convertible Loan EUR20,000,000 23,000,000 28.21
Cayman Islands (cost: EUR2,979,301)
Bluewater Bio International Convertible
Loans GBP2,500,000 2,910,809 3.57
Total investments in bonds (cost:
EUR22,979,301) 25,910,809 31.78
----------- ------
Unlisted Companies
Belgium (cost: EUR277)
Waterleau Group N.V. 1 277 -
Cayman Islands (cost: EUR15,742,670)
Bluewater Bio International 49,170,112 8,873,739 10.88
Ranhill Water Technologies (Cayman)
Limited 12,555,000 23,752,000 29.13
United States of America (cost:
EUR3,602,651)
In-Pipe Technology Company Inc. 474,834 3,513,669 4.31
Total investments in unlisted companies
(cost: EUR19,345,598) 36,139,685 44.32
----------- ------
Listed Companies
China (cost: EUR13,478,451)
China Hydroelectric Corporation -
American Depository Shares 1,980,537 10,914,781 13.39
Total investments in listed companies
(cost: EUR13,478,451) 10,914,781 13.39
----------- ------
Warrants
Cayman Islands (cost: EUR1)
Bluewater Bio International - Part 1
Warrant 20/04/2011, Part 2 Warrant
31/03/2013 2 2 -
Bluewater Bio International -Warrant
31/07/2012 1 - -
United States of America (cost: EUR1)
In-Pipe Technology Company Inc. -
Warrants 30/06/2012 74,225 493,181 0.60
Total investments in warrants (cost:
EUR2) 493,183 0.60
----------- ------
Total investments at fair value (cost:
EUR55,803,352) 73,458,458 90.09
=========== ======
CONDENSED INTERIM CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED 30 JUNE 2011
Unaudited Unaudited
30 June 2011 30 June 2010
Notes EUR EUR
Investment Income
Interest income 215,000 479,967
Other income 597 1,730
-------------- --------------
Total investment income 215,597 481,697
-------------- --------------
Operating Expenses
Administrator fees 59,589 59,589
Audit fees 15,827 20,537
Fees for non-audit services 3 - -
Professional fees 43,986 54,344
Brokerage fees 40,610 20,010
Directors' fees 47,557 49,598
Directors' expenses 8,900 29,989
Due diligence expenses 6 27,830 211,412
Management fees 6 876,694 752,493
Marketing expense - 6,062
Miscellaneous expenses 95,183 58,111
-------------- --------------
Total operating expense 1,216,176 1,262,145
-------------- --------------
Net investment loss (1,000,579) (780,448)
-------------- --------------
Realised and unrealised loss from
investments and foreign currency
Net realised and unrealised
(loss)/gain from foreign currency (21,049) 7,936
Net unrealised depreciation of
investments (5,725,476) (2,334,071)
-------------- --------------
(5,746,525) (2,326,135)
-------------- --------------
Decrease in net assets resulting from
operations (6,747,104) (3,106,583)
============== ==============
Net investment loss per Ordinary
Share (annualised):
Basic & diluted (0.0138) (0.0108)
Net loss per Ordinary Share
(annualised):
Basic & diluted (0.0931) (0.0429)
Weighted average number of Ordinary
Shares outstanding:
Basic & diluted 72,464,340 72,464,340
CONDENSED INTERIM CONSOLIDATED STATEMENT OF CHANGES IN NET
ASSETS
FOR THE SIX MONTHS ENDED 30 JUNE 2011
Unaudited Unaudited
30 June 2011 30 June 2010
Notes EUR EUR
Operations
Net investment loss (1,000,579) (780,448)
Net realised and unrealised
(loss)/gain from foreign currencies (21,049) 7,936
Net unrealised depreciation of
investments (5,725,476) (2,334,071)
-------------- --------------
Net decrease in net assets resulting
from operations (6,747,104) (3,106,583)
-------------- --------------
Share capital transactions
Issuance of capital - -
Redemption of capital - -
-------------- --------------
Net increase in net assets resulting
from share capital transactions - -
-------------- --------------
Net decrease in net assets (6,747,104) (3,106,583)
Net assets at beginning of the period 81,535,743 74,054,480
Net assets at end of the period 74,788,639 70,947,897
-------------- --------------
Net asset value per Ordinary Share 1.0321 0.9791
-------------- --------------
Number of Ordinary Shares issued and
outstanding at end of the period 4 72,464,340 72,464,340
============== ==============
CONDENSED INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED 30 JUNE 2011
Unaudited Unaudited
30 June 2011 30 June 2010
EUR EUR
Operating activities
Decrease in net assets resulting from
operations (6,747,104) (3,106,583)
Adjustment to reconcile decrease in net
assets resulting from operations to net
cash used in operating activities:
Net unrealised depreciation of investments 5,725,476 2,334,071
Increase in interest receivable (50,000) (479,967)
Increase in prepaid expenses (472,101) (366,811)
Decrease in other payables (30,261) (132,029)
-------------- --------------
Net cash used in operating activities (1,573,990) (1,751,319)
-------------- --------------
Investment activities
Purchase of investments (1,725,935) (20,570,802)
-------------- --------------
Net cash used in investment activities (1,725,935) (20,570,802)
-------------- --------------
Net decrease in cash (3,299,925) (22,322,121)
Cash at beginning of the period 8,181,382 35,177,646
-------------- --------------
Cash at end of the period 4,881,457 12,855,525
============== ==============
CONDENSED INTERIM CONSOLIDATED FINANCIAL HIGHLIGHTS
FOR THE SIX MONTHS ENDED 30 JUNE 2011
Unaudited Unaudited
30 June 2011 30 June 2010
Per share data(20)
Net asset value at beginning of the period 1.1252 1.0219
-------------- --------------
Net investment loss (0.0138) (0.0108)
Net realised and unrealised foreign currency
(loss)/ gain (0.0007) 0.0001
Total from investment operations (0.0786) (0.0321)
-------------- --------------
Change in net asset value for the period (0.0931) (0.0428)
Net asset value at end of the period 1.0321 0.9791
============== ==============
Ratios/supplemental data
Net asset value per share at end of period 1.0321 0.9791
============== ==============
Total return (8.27%) (4.19%)
============== ==============
Number of Ordinary Shares outstanding
at end of the period 72,464,340 72,464,340
Weighted average number of Ordinary Shares 72,464,340 72,464,340
Net assets at end of the Period (in EUR) 74,788,639 70,947,897
Average net assets21 (in EUR) 77,878,370 70,707,369
Ratio of operating expenses to average
net assets(22) (3.12%) (3.57%)
Ratio of net investment loss to average
net assets(22) (2.57%) (2.21%)
NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2011
1. Summary of Significant Accounting Policies
a) Basis of Presentation
This Unaudited Condensed Interim Consolidated Financial
Statements ("Interim Financial Statements") have been prepared in
accordance with accounting principles generally acceptable in the
US.
The Company applied the same policies and principles in
preparing these Interim Financial Statements as were used for the
2010 Annual Report and Audited Consolidated Financial
Statements.
The Company's Interim Financial Statements are presented in Euro
which is the functional and the reporting currency of the
Company.
b) Basis of Consolidation
Under the Accounting Standard Codification ("ASC") Topic 810,
"Consolidation" ("ASC 810"), consolidation by an investment company
of a non-investment company investee is not appropriate within the
scope of Topic 946 Financial Services - "Investment Companies". An
exception to this general principle occurs if the investment
company has an investment in an operating company that provides
services to the investment company. The consolidated financial
statements consolidate the financial statements of the three wholly
owned subsidiaries of the Company;
-- Aqua Resources (In-Pipe) Holdings Limited ("ARIHL"), a
Guernsey limited company formed in August 2009;
-- ARAHL, an exempt company incorporated in the Cayman Islands
formed in October 2008; and
-- Cooperative Aqua Netherlands Holdings UA, a Dutch
co-operative company formed on 22 March 2010.
ARAHL wholly owns a subsidiary, Robinson Investments Limited,
which is an exempt company incorporated in the Cayman Islands
formed in October 2008 and Cooperative Aqua Netherlands Holdings UA
wholly owns a subsidiary, Aqua Netherlands Holdings BV, which is a
Dutch special purpose vehicle formed on 26 March 2010. All
intercompany accounts are eliminated on consolidation.
Segment Reporting
The Directors are of the opinion that the Company is engaged in
a single segment of business, being water related investment
opportunities.
2. INVESTMENTS
The following tables show an analysis of assets and liabilities
recorded at fair value, between those whose fair value is based on
quoted market prices (Level 1), those involving valuation
techniques where model inputs are observable in the market (Level
2) and those where the valuation technique involves the use of
non-market observable inputs (Level 3).
Quoted prices
in active Other
markets for market-based
Assets at fair identical observable Unobservable
value as of 30 assets inputs (Level inputs
June 2011 Total (Level 1) 2) (Level 3)
Class EUR EUR EUR EUR
Listed equities 5,565,148 5,565,148 - -
Unlisted
equities 37,672,984 - - 37,672,984
Convertible
bonds 25,765,322 - - 25,765,322
Warrants 455,463 - - 455,463
Total 69,458,917 5,565,148 - 63,893,769
=========== ============== ================ =============
Quoted prices
in active Other
markets for market-based
Assets at fair identical observable Unobservable
value as of 31 assets inputs (Level inputs
December 2010 Total (Level 1) 2) (Level 3)
Class EUR EUR EUR EUR
Listed equities 10,914,781 10,914,781 - -
Unlisted
equities 36,139,685 - - 36,139,685
Convertible
bonds 25,910,809 - - 25,910,809
Warrants 493,183 - - 493,183
Total 73,458,458 10,914,781 - 62,543,677
=========== ============== ================ =============
The table below shows a reconciliation of beginning to ending
balances for Level 3 investments and the amount of total gains or
losses for the period included in earnings attributable to the
change in unrealised gains or losses relating to assets and
liabilities held at 30 June 2011.
Fair value measurements: A reconciliation of the movement in Level 3 assets
is presented below:
Bonds
Total Equities securities Warrants
EUR EUR EUR EUR
Opening balance 1
January 2011 62,543,677 36,139,685 25,910,809 493,183
Purchases of
investments 1,725,935 1,725,935 - -
Change in net
unrealised
depreciation (375,843) (192,636) (145,487) (37,720)
Closing balance 30 June
2011 63,893,769 37,672,984 25,765,322 455,463
============ ============ ============ ==========
Total unrealised gains
at 30 June 2011 19,860,393 16,601,451 2,803,481 455,461
The table below shows a reconciliation of beginning to ending
balances for Level 3 investments and the amount of total gains or
losses for the year included in earnings attributable to the change
in unrealised gains or losses relating to assets and liabilities
held at 31 December 2010.
Fair value measurements: A reconciliation of the movement in Level 3 assets
is presented below:
Bonds
Total Equities securities Warrants
EUR EUR EUR EUR
Opening balance 1
January 2010 39,046,630 39,046,628 - 2
Purchases of
investments 24,490,328 1,511,027 22,979,301 -
Change in net
unrealised
appreciation 16,377,293 12,952,604 2,931,508 493,181
Transfer to level 123 (17,370,574) (17,370,574) - -
Closing balance 31
December 2010 62,543,677 36,139,685 25,910,809 493,183
============== ============= =========== =========
Total unrealised gains
at 31 December 2010 20,218,776 16,794,087 2,931,508 493,181
The portfolio has been valued using consistent valuation
approach and methodology as at 31 December 2010 with respect to
each investee company held by the Company.
As at 30 June 2011, the investments held by the Company which
were valued using an estimate of fair value, were as follows:
China Hydroelectric Corporation
The Company owns approximately 4% of CHC's ordinary shares
(1,980,537 American Depository Shares ("ADS")) and the appropriate
valuation of the Company's investment in CHC is based on the
closing price on 30 June 2011 on an active market of US$4.08 per
ADS.
Bluewater Bio International
The Company purchased its equity interest in BBI in a number of
tranches during 2009 and subscribed to two loan instruments during
the year 2010. The equity portion, the final tranche of which was
acquired in September 2009, was part of a wider fundraising
exercise by BBI and the shares offered by BBI were subscribed for
by a number of existing shareholders, including the Company, at
GBP0.155 per share. This fundraising exercise established a fair
value for the shares in BBI at the time. The Company has kept the
valuation of the equity portion at the same level as at 31 December
2010, e.g. at GBP0.155 per share. Furthermore, the Company
considers that a market participant considering purchasing the
investment in the secondary market would value the two loan notes
at 30 June 2011 at a value which is not materially different from
their cost. Accordingly, the Company has measured these two
instruments at 30 June 2011 at their original cost.
In-Pipe Technology
The Company's holding in In-Pipe is comprised of preferred
equity and warrants. The Company has valued the equity portion of
the investment at cost and has re-valued the in-the-money warrants
to a level that reflects the latest fundraising by In-Pipe which
established a fair value for the shares in In-Pipe. This was valued
by calculating the enterprise value and taking into account the
dilutive effect, then splitting the value between equity shares and
warrants. Given there is no restriction on the ability to exercise
the warrants held by the Company at any time, it has applied the
financial instrument rules of US GAAP: recognised the warrants as a
financial instrument and considered their value as well as the
value of the equity. The fair value of the Company's holding in
In-Pipe has been determined by keeping the equity portion at cost
and revaluing the warrants to the latest price paid for the equity
which established a fair value for the shares in In-Pipe.
Waterleau Group
The Company's holding in Waterleau is valued using the
conversion feature of the instrument that includes cost plus the
implied value of interest earned during the holding period. The
Company has accrued interest up to 31 December 2010.
Ranhill Water Technologies
The Company's holding in RWT is valued using a consistent
methodology as the one applied at 31 December 2010 which was based
on a combination of net earnings and book value multiples to which
was applied a conservative discount of 30% to a range of comparable
peer group sector relevant multiples. This adjustment factor
reflects the relative illiquidity and non-transferability of RWT's
shares to a third party. Furthermore, as a consequence of its
follow-on investments in RWT made during the Period, the Company
booked an unrealised gain based upon the discounted purchase price
of the new subscriptions in RWT versus the fair value of RWT as at
30 June 2011.
3. OTHER PAYABLES
31 December
30 June 2011 2010
EUR EUR
Financial reporting fees 5,000 5,000
Administrator fees 24,931 25,205
Audit fees 20,000 40,000
Other accrued expenses 16,896 25,646
------------- ------------
66,827 95,851
============= ============
For the six months ended 30 June 2011 there were no non-audit
services provided by either Ernst & Young LLP or
PricewaterhouseCoopers LLP. For the six months ended 30 June 2010
there were no non-audit services provided by Ernst & Young.
4. SHAREHOLDERS' EQUITY
The authorised share capital of the Company is represented by an
unlimited number of Ordinary Shares of no par value which are
denominated in Euro.
The holders of Ordinary Shares are entitled to:
- receive and participate in any dividends or other
distributions out of the profits of the Company available for
dividend or distribution;
- the right to the surplus assets remaining after payment of all
the creditors of the Company in the case of winding up; and
- the right to receive notice of, and to attend and vote at,
general meetings of the Company and each holder of Ordinary Shares
being present in person or by attorney at a meeting upon a show of
hands has one vote and upon a poll each such holder present in
person or by proxy or by attorney has one vote in respect of each
share held by him.
Under the Company's Articles of Incorporation, the Company may
purchase its own Ordinary Shares in accordance with the Guernsey
Company Law. The Company may hold any Ordinary Shares purchased by
it whether out of distributable profits or the proceeds of a fresh
issue of Ordinary Shares as treasury shares in accordance with the
Guernsey Company Law. Shares held in treasury do not carry the
rights as set out above in respect of Ordinary Shares.
Issued capital
30 June 2011 Number of
Ordinary Shares EUR
Ordinary Shares at 1 January 2011 72,464,340 70,030,004
Ordinary Shares outstanding at 30 June 2011 72,464,340 70,030,004
================ ===========
No shares were issued or repurchased by the Company during the
Period.
31 December 2010 Number of
Ordinary Shares EUR
Ordinary Shares at 1 January 2010 72,464,340 70,030,004
Ordinary Shares outstanding at 31 December
2010 72,464,340 70,030,004
================ ===========
No shares were issued or repurchased by the Company during the
year ended 31 December 2010.
5. TAXATION
The Company is a Guernsey Exempt Company and is therefore not
subject to taxation on its income under the Income Tax (Exempt
Bodies) (Guernsey) Ordinance, 1989. In jurisdictions other than the
Cayman Islands, in some cases foreign taxes will be withheld at
source on dividends and interest received by the Company. Capital
gains derived by the Company in such jurisdictions generally will
be exempt from foreign income or withholding taxes at source.
The Company recognizes the tax benefits of uncertain tax
positions only where the position is "more likely than not" to be
sustained assuming examination by tax authorities.
At 31 December 2010, the Manager analysed the Company's tax
positions, and has concluded that no liability for unrecognized tax
benefits should be recorded related to uncertain tax positions for
open tax years (2008-2009) and the positions to be taken for tax
year ended 31 December, 2010. The Company recognizes interest and
penalties, if any, related to unrecognized tax benefits as income
tax expense in the Statement of Operations. During the period ended
31 December, 2010, the Company did not incur any interest or
penalties. The Company identifies its major tax jurisdictions as
Belgium and China where the Company makes significant investments;
however the Company is not aware of any tax positions for which it
is reasonably possible that total amounts of unrecognized tax
benefits will change materially in the next twelve months.
6. RELATED PARTIES
Kimberly Tara is a shareholder of the Manager and was a Director
of the Company up to 2 June 2011. At 30 June 2011, Kimberly Tara
had an interest in 3,685,000 (31 December 2010: 3,685,000) Ordinary
Shares of the Company which are owned by the Manager.
At the time of the Company's initial investments in BBI and RWT,
Kimberly Tara became a director of each of those companies.
At the time of the Company's initial investments in In-Pipe and
Waterleau, Valerie Daoud Henderson, an employee of the Manager's
group in the role of Head of Europe Environment Group, became a
director of each of those companies.
At the time of the Company's initial investment in RWT, Jui Kian
Lim, an employee of the Manager's group in the role of Head of Asia
Environment Group, became a director of that company.
At the time of the Company's initial investment in Waterleau,
Lydia Whyatt, an employee of the Manager's group in the role of
Managing Director, Environment Group, became a director of that
company.
During the period the Company paid EUR876,694 in Management
Fees.
The following expenses are also paid by the Manager on behalf of
the Company and were reimbursed:
a.
30 June 2011 30 June 2010
EUR EUR
Due diligence expenses 27,830 176,366
Marketing expense - 6,062
27,830 182,428
------------- -------------
A subsidiary of the Manager subleases office space to an
investee company. The sub-lease commenced on 1 September 2010 and
expires on 21 March 2013. The annual rent under this agreement is
GBP151,900 (approximately EUR176,861).
The Directors' interests in the share capital of the Company at
30 June 2011 were:
30 June 2011 Number of Ordinary Shares
Hasan Askari 62,500
Andrea Rossi 18,750
Timothy Betley 12,500
The Directors' interests in the share capital of the Company at
31 December 2010 were:
31 December 2010 Number of Ordinary Shares
Hasan Askari 62,500
Andrea Rossi 18,750
Timothy Betley 12,500
Kimberly Tara(*) (up to 2 June 2011) 3,685,000
* Kimberly Tara's interest is in respect of Ordinary Shares
owned by the Manager of which she is a director and
shareholder.
7. Comparative figures
Comparative figures used in these Interim Financial Statements
are for the period from 1 January 2010 to 30 June 2010 for the
Condensed Interim Consolidated Statement of Operations, the
Condensed Interim Consolidated Statement of Changes in Net Assets,
the Condensed Interim Consolidated Statement of Cash Flows and the
Condensed Interim Consolidated Financial Highlights. The
comparative figures used for the Condensed Interim Consolidated
Statement of Assets and Liabilities and the Condensed Interim
Consolidated Schedule of Investments are at the year ended 31
December 2010.
8. SIGNIFICANT events DURING THE PERIOD
On 12 January 2011, the Company announced that its wholly owned
subsidiary, ARAHL, had agreed to invest a further US$2,325,000
(approximately EUR1.8 million) via a subscription for new shares to
be issued by RWT, which is the international joint venture
established in March 2009 by the Company and the Ranhill Group to
invest in water and wastewater operations in the People's Republic
of China and Thailand. At that time, the Company had previously
invested US$12,555,000 (EUR9.3 million) for a 45% interest in RWT.
The additional investment was made in two equal installments of
US$1,162,500 each (on 11 January and 16 February 2011).
Following this investment, the shareholdings of both the Ranhill
Group and ARAHL were increased slightly as a result of subscribing
for their respective share entitlement as existing shareholders and
for additional shares in respect of the entitlement of RWT's
minority shareholders, which were not taken up by those minority
shareholders. ARAHL's shareholding interest in RWT increased to
45.2% from 45%, while the Ranhill Group increased its shareholding
interest in RWT to 52.1% from 51.8% after investing US$2,675,000.
The proceeds of these additional subscriptions will be used by RWT
to undertake investments in two large wastewater treatment
operations in mainland China, in regions which experience severe
shortages of fresh water supplies, impacting potential economic
growth and making this a critical project to government and
commerce.
The Company also committed to invest a further US$2,250,000 in
RWT, subject to the Ranhill Group subscribing alongside it to
maintain its current shareholding ratio at 52.1%. The Company's
commitment is valid for a period of 12 months post-closing of the
most recent additional subscriptions. The purpose of this
additional commitment is to finance the next stage of RWT's growth
and to fund specific projects in the pipeline which are targeted
for calendar years 2011 and 2012.
At the annual general meeting held on 2 June 2011, Kimberly Tara
was not re-elected as a Director of the Company and Ernst &
Young LLP were not re-appointed as the Company's auditors.
On 27 June 2011, PricewaterhouseCoopers LLP were appointed as
the new auditors of the Company.
9. SUBSEQUENT eventS
Timothy Betley (the Chairman of the Audit Committee) resigned as
a Director of the Company on 22 July 2011. Jonathan Hooley was
appointed as a Director of the Company (and as the Chairman of the
Audit Committee) on 25 July 2011.
Footnotes
(1) Carbon Disclosure Project Water Disclosure 2010 Global
Report.
(2) PIRC: Pensions and Investment Research Consultants Ltd.
(3) Closing share price at 30 June for each Period.
(4) For the six months from December 2008 to June 2009.
(5) Capital IQ.
(6) CHC's data.
(7) Audited figures for years ended 31 December 2009 and 2010,
unaudited figures for H1 2010 and H1 2011.
(8) Audited figures.
(9) Audited figures for years ended June 2009 and June 2010.
Company's estimated figures for year ended June 2011.
(10) RWT's EUR2.038 million unrealised price gain represents an
unrealised gain based upon the discounted purchase price of the
follow on investments versus RWT's fair value as at 30 June
2011.
(11) Carbon Disclosure Project Water Disclosure 2010 Global
Report.
(12) American Water Intelligence, April 2011.
(13) Chesapeake Energy Fact Sheet, May 2011.
(14) Global Water Intelligence, October 2010.
(15) Financial Times, 13 July 2011.
(16) China Daily News, 7 July 2011.
(17) Global Water Intelligence, April 2011.
(18) MSN Arabia, May 2011.
(19) Bluewater Bio International press release, 9 June 2011.
(20) Basic weighted average per share data
(21) Average net assets calculated using the quarterly estimated
net assets during the Period
(22) Ratios based on reporting periods of less than twelve
months are annualised
(23) The transfer of EUR17,370,574 relates to CHC which became a
publicly traded stock on 25 January 2010 on the NYSE.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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