REG - Ceiba Investments Ld - Annual Financial Report

Ceiba InvestmentsAnnouncement

28/04/2021 07:00

RNS Number : 7689W
  
Ceiba Investments Limited
  
28 April 2021
  
 

28 April 2021
CEIBA INVESTMENTS LIMITED 
(the "Company")
 
(TICKER CBA, ISIN: GG00BFMDJH11)
Legal Entity Identifier: 213800XGY151JV5B1E88
 
RESULTS FOR THE YEAR ENDED 31 DECEMBER 2020
 
COMPANY OVERVIEW
GENERAL
CEIBA Investments Limited ("CEIBA" or the "Company") is a Guernsey-incorporated, closed-ended investment company, with registered number 30083.  The Ordinary Shares of the Company are listed on the Specialist Fund Segment ("SFS") of the London Stock Exchange's Main Market under the symbol CBA (ISIN: GG00BFMDJH11).  The Bonds are listed on the The International Stock Exchange, Guernsey under the symbol CEIB1026 (ISIN: GG00BMV37C27).  The Company is governed by a Board of Directors, the majority of whom are independent.  Like many other investment companies, it outsources its investment management, administration and other services to third party providers.  Through its consolidated subsidiaries (together with the Company, the "Group"), the Company invests in Cuban real estate and other assets by acquiring shares in Cuban joint venture companies or other entities that own the underlying properties.  The Company also arranges and invests in financial instruments granted in favour of Cuban borrowers. 
 
FINANCIAL HIGHLIGHTS AS AT 31 DECEMBER 2020 IN £ AND US$ (FOREX: £/US$ = 1.3608)
The Company's Net Asset Value ("NAV") and share price are quoted in Sterling (£) but the functional currency of the Company is the U.S. Dollar (US$). As such, the financial highlights of the Company set out below are being provided in both currencies, applying the applicable exchange rate as at 31 December 2020 of £1:US$1.3608 (2019 £1=US$1.3113).  




 


£


US$




 


2020


2019


2020


2019




Total Net Assets


£142.9m 
£145.0m2


£157.7m
£160.6m2


US$194.4m
US$197.3m2


US$206.7m
US$210.6m 2




NAV per share1


103.8p 
105.3p2


114.5p
116.6p2


US$1.41
US$1.432


US$1.50
US$1.532




Market Capitalisation
 


£116.3m


£97.7m


US$158.3m


US$128.2m




Share Price


84.5p


71.0p


US$1.15


US$0.93




Net (Loss)/Gain to shareholders


(£14.6m)
(£15.3m)2


£5.8m
£5.0m2


(US$19.8m)
(US$20.8m)2     


US$7.6m
US$6.6m2




(Loss)/Earnings  per share
 


(10.6p)
(11.1p)2


4.2p
3.6p2


(US$0.14)
(US$0.15)2


US$0.06
US$0.052




NAV Total Return1


(9.4%)
(9.7%)2


0.8%
0.3%2


(6.0%)
(6.3%)2


4.9%
4.3%2




Share Price Return 1,3


19.0%


(26.1%)


22.8%


(23.1%)




Discount to NAV1


(18.6%)
(19.8 %)2


(38.0%)
(39.1 %)2


(18.6%)
(19.8%)2


(38.0%)
(39.1 %)2




1 These are considered Alternative Performance Measures.  See glossary for more information.
2 These figures differ from the figures derived from the audited Consolidated Financial Statements.  The figures are calculated in full accordance with International Financial Reporting Standards ("IFRS"), except that they include the effect of an adjustment recognising the full amount of US$5.0m / £3.9m received from Aberdeen Standard Fund Managers Limited on 23 November 2018 in connection with the execution of the Management Agreement in the Statement of Comprehensive Income for the year ended 31 December 2018, rather than deferring this amount over the five-year term of the Management Agreement as required by IFRS.
3 Source: Refinitiv  
This adjustment resulted in the increase of the net income attributable to the shareholders of the Company for the year ended 31 December 2018 by US$5.0m / £3.9m and decreases the net income attributable to the shareholders of the Company by the amount of US$1.0m / £0.7m per year over the five year term of the Management Agreement.  Consequently, for the year ended 31 December 2020 the adjustment resulted in a decrease in the net income attributable to the shareholders of the Company in the amount of US$1.0m / £0.7m.
MANAGEMENT
The Company has appointed Aberdeen Standard Fund Managers Limited ("ASFML" or the "AIFM") as the Company's alternative investment fund manager to provide portfolio and risk management services to the Company.  The AIFM has delegated portfolio management to Aberdeen Asset Investments Limited (the "Investment Manager").  Both ASFML and the Investment Manager are wholly-owned subsidiaries of Standard Life Aberdeen plc, a publicly-quoted company on the London Stock Exchange.  Aberdeen Standard Investments ("ASI") is a brand of Standard Life Aberdeen plc.  References throughout this document to ASI refer to both the AIFM and the Investment Manager. 
CHAIRMAN'S STATEMENT
Since publication of the 2019 Annual Report of CEIBA Investments Limited ("CEIBA" or the "Company") in April 2020, both the Company and Cuba have, in line with most of the rest of the world, been battling the Covid-19 pandemic.  The extreme impact of this virus was difficult to assess at that time and there still remains considerable uncertainty about its duration and the long-term impact, and the expected return to normality. 
One of our prime concerns throughout this period has been ensuring the wellbeing of our people and protecting the safety of the people working to advance the affairs of the Company.  It is notable that Cuba itself has handled the virus well, with some 103,524 total infections as of writing this report and a death toll of 604 people since the start of the pandemic, which on a global basis is an enviable record. 
2020 REVIEW
Inmobiliaria Monte Barreto S.A. ("Monte Barreto"), the Cuban joint venture company in which the Company owns a 49% interest, owns and operates the Miramar Trade Centre.  Given the backdrop, it has traded very strongly since the onset of the pandemic and occupancy levels have remained over 98% throughout 2020.  Although revenues were down slightly as compared with the prior year, net income in 2020 reached US$14.4 million / £10.6 million for the year, representing a small increase over the prior year and making 2020 the most profitable year since incorporation of the joint venture. 
The 2021 outlook for Monte Barreto continues to be positive, with occupancy percentage levels expected to remain in the high ninetiesthroughout the year.  Furthermore, following the recent significant monetary reforms in Cuba it is anticipated that there may be some material savings in the overheads of the Miramar Trade Centre going forward.
The global hotel industry has been severely impacted by the Covid-19 pandemic and the hotels in which CEIBA has an interest have proved to be no exception.  CEIBA's main hotel interests are held through its 32.5% holding in the Cuban joint venture company, Miramar S.A. ("Miramar").  Miramar owns three hotels in Varadero and one hotel in Havana.  In Varadero, the Meliã Las Américas and the Meliã Varadero have remained closed since the end of March 2020 while the Meliã Sol Palmeras remained open for most of the year but has traded on a heavily scaled-back basis.  The Havana-based hotel, the Meliã Habana, has similarly been open throughout 2020 and remains open, but also on a reduced basis.  Given the trading environment, Miramar was still able to finish 2020 with a positive EBITDA of approximately US$ 3.9 million / £2.9 million (2019: US$25.0 million / £18.3 million) of which CEIBA's share amounts to US$1.3 million / £0.9 million.  Miramar is well capitalised and is able to continue to operate without recourse to additional funding and has been using the closures to undertake certain cosmetic upgrading of rooms and facilities.
CEIBA's other hotel interest is in its 40% holding in the Cuban joint venture company, TosCuba S.A. ("TosCuba"), which is constructing the 400 room Meliã Trinidad Península Hotel.  This hotel is situated on the south coast of Cuba close to the historic city of Trinidad and will be the first modern international-standard beach resort hotel in the area.  The construction continued throughout the year, albeit at a reduced pace.  The issue on 31 March 2021 by the Company of €25 million 10.00% senior unsecured convertible bonds due 2026 ensures that the funding for the completion and start-up of operations of this exciting new property is in place.  It is presently anticipated that completion will take place during the third quarter of 2022 in time for the 2022-2023 high season.
The Board is also encouraged by the recent investment made in Grupo B.M. Interinvest Technologies Mariel S.L. ("GBM Mariel") through which the Company has acquired a 50% shareholding.  The Company has made an initial commitment of €1.5 million / US$1.8million to the project to develop an industrial logistics and warehousing complex to be constructed on a 11.3 hectare site situated in the Special Development Zone of Mariel.  To date, an amount of €250,000 / US$303,175 has been invested in order to partially fund the groundworks related to the construction of the first four warehouses of this multi-phase project.
Results for the year ended 31 December 2020 
The NAV per Share at 31 December 2020 was US$1.41 / 103.8p compared to US$1.50 / 114.5p at 31 December 2019 and the loss per share for the financial year was US$0.14 / (10.6p) compared to a profit of US$0.06 / 4.2p for 2019. The valuation of the principal assets of the Company as well as the earnings generated by the Hotels of Miramar in respect of the year ended 31 December 2020 have clearly been negatively impacted by the Covid-19 pandemic.  The Hotels have been written down in these financial statements by US$24.7 million / £18.2 million in aggregate from 31 December 2019, reflecting both the present lack of trading as compared to last year and the uncertain road to full recovery.  However, as there is a much clearer route out of lockdown and towards the resumption of international travel than was the case in June 2020, the valuations have been increased from the position at 30 June 2020 by US$16.9 million / £12.4 million.
While the NAV total return was (9.4%) in Sterling terms, the share price total return was 19.0% (2019: (26.1%)). The share price fell, in line with most instruments, in the wake of the pandemic and at 30 June 2020 was as low as 64.5p. However, as we came through the summer, and particularly once news of successful vaccines and the outcome of the U.S. elections in November improved the outlook, we saw the share price recover strongly to close at 84.5p.
Cuban economic backdrop
For a country that relies heavily upon tourism to drive its economy, the Covid-19 pandemic and the continued tightening of economic sanctions imposed by the Trump administration have been extremely challenging for Cuba's economy and it experienced an 11% contraction in 2020.
Against this backdrop and in an effort to create jobs and revive the economy, the government very recently announced that it would greatly expand the number of economic activities open to private enterprise.  While there is still a considerable number of businesses that will remain state controlled, this opening up of the economy is nonetheless a significant move.  In addition, in late 2020 the government, at relatively short notice, announced and has now initiated the unification of the two Cuban currencies such that there will now be just one currency - the Cuban peso.  While initially this has and will create operational challenges, in the longer term the unification of currencies will help drive many inefficiencies out of the economy and should prove of material benefit to the day-to-day operations of the Company's hotels and of the Monte Barreto office complex.  The Board believes the changes implemented will greatly ease the ability to do business in Cuba, will enhance entrepreneurism and have positive long-term benefits to the general economy.  In addition, although new currency exchange challenges may be created, full implementation of the reforms may very well increase the attractiveness of Cuba as a market for foreign direct investment, improve the autonomy of joint venture companies and have a material positive impact on the investments of the Company.
These, and other reforms, are being initiated at the same time as a significant change in the Cuba's leadership. On 16th April 2021, at the start of the 8th Congress of Cuba's Communist Party, Raul Castro announced that he is stepping down as Secretary of the Party - leaving the island without a Castro guiding affairs for the the first time in more than six decades - whilst stating that he will ".. keep one foot in the stirrups to defend the fatherland, the revolution and socialism". Cuba's President, Miguel Díaz-Canel, will be his successor tasked with combining "continuity" with progress and reforms.
 
U.S. Cuba relations
Under the Trump administration, the economic restrictions imposed upon Cuba were continuously tightened and no let up was experienced during the last year of his presidency.  In June 2020, the U.S. expanded the Cuba Restricted List to include Fincimex, a Cuban financial corporation that handles the majority of US and many other international family remittances to Cuba, and finally, on 11 January 2021 the Trump administration chose to reinstate Cuba to the list of State Sponsors of Terrorism.  However, with the new Biden presidency, we can anticipate a gradual reversal of the Trump initiatives and a return to the relationship experienced in the later years of the Obama presidency.  We would envisage the initial steps to include the removal once again of Cuba from the list of State Sponsors of Terrorism, the relaxation of rules concerning travel to Cuba by US citizens and the removal of restrictions on remittances to Cuba.  We would also expect a suspension of Title III of the Helms Burton Act and the restoration of full operations at the US embassy in Havana.  All of these and other initiatives to open the relationship between the two countries should have a very positive impact upon the Cuban economy and also on the Company's assets.
Dividend
It was decided in 2020 that, with the inherent uncertainty caused by the onset of the Covid pandemic, it was critical that the Company maintain sufficient cash to meet all of its existing and future undertakings. Accordingly, the Board took the decision to suspend the dividend policy and no dividend was paid during 2020.  The Board would very much like to reinstate the payment of dividends but seeing as there still remains considerable uncertainty as to how long it will take to see a return of normal tourism numbers it has decided to maintain the present position for another year so no dividend will be paid to shareholders in 2021. This stance will be very much kept under constant review with a strong desire to reinstate the dividend as soon as appropriate.
Convertible Bonds 
On 31 March 2021, the Company raised €25million in new funds through the issue of 10.00% senior unsecured convertible bonds due 2026 (the "Bonds").  Further details of the Bonds are set out in note 21 to the accounts.  The proceeds from this fund raising significantly enhance the Company's financial position and will enable it to complete the development of the TosCuba hotel in a timely manner and also provide capital for additional investment opportunities as they arise.
25 Years Investing in Cuba
This year CEIBA celebrates 25 years of existence, all of it investing in the mostly uncharted investment territory of Cuba,and I believe that the Company has accomplished a great deal during this period.  From a modest start in 1996, and after some initial fine-tuning to the investment strategy, the long years of asset growth, solid performance and US$89 million in steady dividend payments to our shareholders have demonstrated the virtues of a stable, long-term perspective and an experienced team in confronting the many uncertainties and ups and downs of the fascinating and unique Cuban investment market.  Despite variable economic conditions on the island  and changing U.S. government policies, the Company and its investments have led the way in many respects and have flourished over these years.
I am obliged to the team for their long-standing dedication and professionalism, and to the Cuban and other partners in each of the investments of the Company for their collaboration.  Without their efforts, none of the many successes of the Company would have been possible.  As I mark this important milestone and recognise past accomplishments  I look ahead with optimism and trust that the Company still has a long and prosperous road ahead, with the best yet to come.
Board
I am grateful to the Board for their commitment and input during this challenging year.  It is the Board's policy to undertake a regular review of its own performance to ensure that it has the appropriate mix of relevant experience and skills to ensure the effective overall operation of the Company.
The Investment Manager
Aberdeen Standard Fund Managers Limited, a wholly owned subsidiary of Standard Life Aberdeen plc, has acted as manager of the Group's portfolio of assets throughout the year.  There has been no change in the underlying key operational management of the Company and this team continues to be headed by Sebastiaan Berger, who is exclusively focused on the Company's assets and business and has acted in this role for some 20 years.  The Board reviewed the work of the Investment Manager during the year and concluded that it was very satisfied with the performance of the Investment Manager and that it was in the best interests of shareholders that ASFML remain as manager of the portfolio.
The Board extends its sincere thanks to the Investment Manager and to the entire management team based in Cuba for their commitment and efforts on behalf of the Company in these very challenging and uncertain times. 
John Herring 
Chairman
27 April 2021
STRATEGIC REPORT
INVESTMENT OBJECTIVE
The investment objective of the Company is to provide a regular level of income and substantial capital growth.
INVESTMENT POLICY
The Company is a country fund with a primary focus on Cuban real estate assets.  The Company seeks to deliver the investment objective primarily through investment in, and management of, a portfolio of Cuban real estate assets, with a focus on the tourism and commercial property sectors.  Cuban real estate assets may also include infrastructure, industrial, retail, logistics, residential and mixed-use assets (including development projects).
The Company may also invest in any type of financial instrument or credit facility secured by Cuba-related cash flows.
In addition, subject to the investment restrictions set out below, the Company may invest in other Cuba-related businesses, where such are considered by the Investment Manager to be complementary to the Company's core portfolio ("Other Cuban Assets").  Other Cuban Assets may include, but are not limited to, Cuba-related businesses in the construction or construction supply, logistics, energy, technology and light or heavy industrial sectors.
Investments may be made through equity investments, debt instruments or a combination of both.
The Company will invest either directly or through holdings in special purpose vehicles ("SPVs"), joint venture vehicles, partnerships, trusts or other structures.  The Cuban Foreign Investment Act (Law 118/2014) guarantees that the holders of interests in Cuban joint venture companies may transfer their interests, subject always to agreement between the parties and the approval of the Cuban government.
INVESTMENT RESTRICTIONS 
The following investment limits and restrictions apply to the Company and its business which, where appropriate, will be measured at the time of investment:
·    the Company will not knowingly or intentionally use or benefit from confiscated property to which a claim is held by a person subject to U.S. jurisdiction;
·    the Company may invest in Cuban and non-Cuban companies, joint ventures and other entities that earn all or a substantial part of their revenues from activities outside Cuba, although such investments will, in aggregate, be limited to less than 10% of the Gross Asset Value;
·    save for Monte Barreto (please see the Investment Manager's Review for more information on this asset), the Company's maximum exposure to any one asset will not exceed 30 per cent. of the Gross Asset Value;
·    no more than 20 per cent. of the Gross Asset Value will be invested in Other Cuban Assets; and
·    no more than 20 per cent. of the Gross Asset Value will be exposed to "greenfield" real estate development projects, being new-build construction projects carried out on undeveloped land.
The Company will not be required to dispose of any asset or to re-balance the portfolio as a result of a change in the respective valuations of its assets.  The investment limits detailed above will apply to the Group as a whole on a look through basis, i.e. where assets are held through subsidiaries, SPVs, or equivalent holding vehicles, the Company will look through the holding vehicle to the underlying assets when applying the investment limits.
KEY PERFORMANCE INDICATORS ("KPIs")
The KPIs by which the Company measures its economic performance include:
·     Total income
·     Net income
·     Total net assets
·     Net asset value per share (NAV)*
·     Non IFRS net asset value per share*
·     Net asset value total return*
·     Market capitalisation
·     Premium / Discount to NAV*
·     Dividend yield*
·     Dividend per share
·     Gain/Loss per share
* These are considered Alternative Performance Measures.  
In addition to the above measures, the Board also regularly monitors the following KPIs of the joint venture companies in which the Company is invested and their underlying real estate assets, all of which are Alternative Performance Measures.
In the case of commercial properties, other KPIs include:
·      Occupancy levels
·      Average monthly rate per square meter (AMR)
·      Earnings before interest, tax, depreciation and amortisation (EBITDA)
·      Net income after tax
In the case of hotel properties, other KPIs include:
·      Occupancy levels
·      Average Daily Rate per room (ADR)
·      Revenue per available room (RevPAR)
·      EBITDA
·      Net income after tax
The Board also monitors the financial performance of the Cuban joint venture companies that own the commercial and hotel properties using these KPIs.  The Board and the Investment Manager seek to influence the management decisions of the Cuban joint venture companies through representation on their corporate bodies with the objective of generating reliable and growing cash flow for the Cuban joint venture companies, which in turn will be reflected in reliable and growing dividend streams in favour of the Company. 
PRINCIPAL RISKS
PRINCIPAL RISKS & UNCERTAINTIES
Introduction
The Board, through the Audit Committee, is responsible for the management of risk and regularly carries out a robust assessment of the principal risks and uncertainties affecting the business, discusses how these may impact on operations, performance and solvency and what mitigating actions, if any, can be taken.  There are a number of risks which, if they occurred, could have a material adverse effect on the Company and its financial condition, performance and prospects.  As part of its risk process, the Board seeks to identify emerging risks to ensure that they are effectively managed as they develop.  In the event that an emerging risk has gained significant weight or importance, that risk is categorised and added to the Company's risk register and is monitored accordingly. 
Principal Risks and Uncertainties
The Company invests in Cuba, a frontier or pre-emerging market, which may increase the risk as compared to investing in similar assets in other jurisdictions.
In addition to general country-risk, the most significant risks currently facing the Company identified by the Board appear in the table below, together with a description of the possible impact thereof, mitigating actions taken by the Company and an assessment of how such risks are trending at the present time.  
A detailed description of the risks faced by the Company is contained in the Company`s Prospectus and should be read in conjunction with the risks described herein. 
The Board relies upon its external service providers to ensure the Company's compliance with applicable regulations and, from time to time, employs external advisers to advise on specific concerns.  




Description of Risk


Description and Possible Impact


Mitigating Action


Trend




Public Health Risk




Global Pandemic Risk


The continued effects of the public health risks associated with the Covid-19 or any other pandemic may have a lasting and as yet unquantifiable negative impact on the global tourism industry, the economy of Cuba, and the operations and performance of the assets of the Company. The pandemic may directly or indirectly affect all other risk categories mentioned in this matrix.  
 


The Board discusses current issues with the Investment Manager to limit the impact of the pandemic on the business of the Company.
The Board recognises that tourism is particularly affected by the various travel restrictions being imposed and considers that this is a risk that is likely to continue to impact upon the operating environment of the Company in the short term.
The Board's actions are targeted at (i) protecting the welfare of the various teams involved in the affairs of the Company, (ii) ensuring operations are maintained to the extent possible and to protect and support the assets of the Company for the duration of the present crisis, and (iii) to mitigate insofar as possible the longer-term negative impact of economic and operational disruption caused by this and future pandemics.  


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Risks Relating to the Company and its Investment Strategy




Investment Strategy and Objective


The setting of an unattractive strategic proposition to the market and the failure to adapt to changes in investor demand may lead to the Company becoming unattractive to investors, a decreased demand for shares and a widening discount.


The Company's investment strategy and objective is subject to regular review to ensure that it remains attractive to investors.  The Board considers strategy regularly and receives strategic updates from the Investment Manager, investor relations reports and updates on the market from the Company's Broker.  At each Board meeting, the Board reviews the shareholder register and any significant movements.  The Board considers shareholder sentiment towards the Company with the Investment Manager and Broker, and the level of discount at which the Company's shares trade.   


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Investment Restrictions


Investing outside of the investment restrictions and guidelines set by the Board could result in poor performance and inability to meet the Company's objectives, as well as a discount.


The Board sets, and monitors, its investment restrictions and guidelines, and receives regular reports which include performance reporting on the implementation of the investment policy, the investment process and application of the guidelines.  The Investment Manager attends all Board meetings.  The Board monitors the share price relative to the NAV.


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Portfolio and Operational Risks




Joint Venture Risk


The investments of the Group in Cuban real estate assets are made through Cuban joint venture companies in which Cuban government entities hold an equity interest, giving rise to risks relating to the liquidity of investments, government approval, corporate governance and deadlock. 


Prior to entering into any agreement to acquire an investment, the Investment Manager will perform or procure the performance of due diligence on the proposed acquisition target.  The Group tries to structure its equity investments in Cuban joint venture companies so as to include a viable exit strategy.  The Investment Manager, or the members of the on-the-ground team, regularly attend the Board meetings of the joint venture companies through which Group interests are held, and actively manage relations with the management teams of each joint venture company, the relevant Cuban shareholders and relevant third parties to ensure that Group interests are enhanced.


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Real Estate Risk


As an indirect investor in real estate assets, the Company is subject to risks relating to property investments, including access to capital and finance, global capital and financial market conditions, acquisition and development risk, competition, tenant risk, environmental risk and others, and the materialisation of these risks could have a negative effect on specific properties or the Group generally.


The Investment Manager regularly monitors the level of real estate risk in the Cuban market and reports to the Board at each meeting regarding recent developments. The Investment Manager works closely with the on-the-ground team, the external hotel managers and the joint venture managers to identify, monitor and actively manage local real estate risk.


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Construction Risk


As a developer and investor in new construction as well as refurbishment projects, the Company is subject to risks relating to the planning and execution of construction works, including the availability and transportation of materials, increment weather, contractor risk, execution risk and the risk of delay.  The materialisation of these risks could have a negative effect on the implementation of development projects of the Group.


The Investment Manager regularly monitors all construction and refurbishment activities carried out within Group companies and works closely with the on-the-ground management team and the joint venture managers to identify, monitor and actively manage all construction risks. The Investment Manager reports to the Board at each meeting regarding recent developments in this respect.


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Tourism Risk


As an indirect investor in hotel assets, the Company is subject to numerous risks relating to the tourism sector, both in outbound and inbound markets, including the cost and availability of air travel, seasonal variations in cash flow, demand variations, changes in or significant disruptions to travel patterns, risk related to the manager of the hotel properties, and the materialisation of these risks could have a negative impact on specific properties or the Company generally.


The Investment Manager regularly monitors the local and regional tourism markets and meets regularly with the external hotel management to identify, monitor and manage global and local tourism risk and to develop appropriate strategies for dealing with changing conditions.  The Company aims to maintain a diversified portfolio of tourism assets spanning various hotel categories (city hotel / beach resort, business / leisure travel, luxury / family) in numerous locations across the island.


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Valuation Risk


Asset valuations may fluctuate materially between periods due to changes in market conditions.


As part of the valuation process, the Investment Manager engages an independent third party valuer to provide an independent valuation report on each of the indirectly owned real estate assets of the Group.  The valuations are also subject to review by the Investment Manager's Alternatives Pricing Committee. 


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Dependence on Third Party Service Providers


The Company is dependent on the Investment Manager and other third parties for the provision of all systems and services relating to its operations and investments, and any inadequacies in design or execution thereof, control failures or other gaps in these systems and services could result in a loss or damage to the Company.


The Board receives reports from its service providers on internal controls and risk management at each Board meeting.  It receives assurance from all its significant service providers as well as back-to-back assurances where activities are themselves sub-delegated to other third party providers with which the Company has no direct contractual relationship.  Further details of the internal controls which are in place are set out in the Directors' Report.  


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Loss of Key Fund Personnel


The loss of key managers contracted by the Investment Manager to manage the portfolio of investments of the Group could impact performance of the Company. 


Under the Management Agreement, the Investment Manager has the obligation to at all times provide personnel with adequate knowledge, experience and contacts in the Cuban market. In order to mitigate key manager risk, the Investment Manager makes every effort to spread knowledge and experience of the Cuban market within the organisation so as to reduce reliance on a small team of individuals.


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Risks Relating to Investment in Cuba and the U.S. Embargo




General Economic, Political, Legal and Financial Environment within Cuba


The Group's underlying investments are situated and operate within a unique economic and legal market, with a comparatively high level of uncertainty, and a sensitive political environment. 


The Company benefits from the services of its highly experienced on-the-ground management team consisting of eight members.  With a well-balanced mix of Cuban and foreign professionals who all have long-standing expertise in the country, the team is one of the most practised investment groups focused exclusively on investment in the Cuban market, which constantly monitors the economic, political and financial environment within Cuba.  The subsidiaries of the Company have been structured to benefit from existing investment protection and tax treaties to which Cuba is a party. 


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U.S. government restrictions relating to Cuba


Tensions remain high between the governments of the United States and Cuba and the U.S. government maintains numerous legal restrictions aimed at Cuba. The rise of further tensions with the United States or the adoption by the U.S. government of further restrictions against Cuba could negatively impact the operations of the Company, the value of its investments, the liquidity or tradability of its shares, or its access to international capital and financial markets. 


The Investment Manager closely follows developments relating to the relationship between the United States and Cuba and monitors all new restrictions adopted by the United States to measure their possible impact on the assets of the Group.  The Group has adapted its investment model to the existing sanctions, but the risk remains of further sanctions being adopted in the future.


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Helms-Burton Risk


On 2 May 2019, Title III of the Helms-Burton Act was brought fully into force by the Trump administration following 23 years of successive uninterrupted suspensions.  Numerous legal claims were subsequently launched before U.S. courts against U.S. and foreign investors in Cuba, which has had and could have a further negative impact on the foreign investment climate in Cuba and may hinder the ability of the Company to access international capital and financial markets in the future.  In light of the political nature of the Helms-Burton Act, and the fact that under Title III of the Act, Cuban persons who were not U.S. Persons at the time their property was expropriated but subsequently became U.S. Persons have the right to make claims, there is also a risk that legal claims might be initiated against the Company or its subsidiaries before U.S. courts.  However, in line with a more rational and favourable U.S. policy towards Cuba expected to be adopted by the new Biden administration in the United States, it is possible that Title III of the Helms-Burton Act may once again be suspended or repealed. 


At the time of acquiring each of its interests in Cuban joint venture companies, the Company carried out extensive due diligence investigations in order to ensure that no claims existed under applicable U.S. legislation, and in particular that there were no claims certified by the U.S. Foreign Claims Settlement Commission under its Cuba claims program with respect to any of the properties in which the Company acquired an interest.  However, given the broad definitions and terms of the Helms-Burton Act and its purpose of creating legal uncertainty on the part of investors in Cuba, as well as the absence of any register of uncertified claims or case law, there is no certain way for the Company to verify beyond doubt whether or not a Helms-Burton action under Title III could be brought in respect to a particular property, or whether the Company may be deemed to indirectly profit or benefit from certain activities carried out by other parties.   The Company does not have any property or assets in the United States that could be subject to seizure.


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Liquidity and Transfer Risk


The continuation of regional tensions between the United States and Venezuela, as well as the global fall in international tourism and other economic impacts associated with the Covid-19 pandemic, may continue to negatively impact the fragile economic and liquidity position in Cuba, which may in turn have a negative impact on the position of the Company.  
During 2020, the Cuban government adopted new economic reforms aimed at creating an objective system for the allocation of limited liquidity reserves within the economy and providing "real financial autonomy" to Cuban foreign investment vehicles such as the joint venture companies in which the Company invests.  These new reforms largely remove the requirement to obtain foreign exchange approvals for international payments such as the distribution of dividends to the Company.  These measures may take time to show the intended effect or may not have the stated positive impact on the liquidity position of the country, which may have a negative effect of the affairs of the Company.
Numerous U.S. legal restrictions contained in the Cuban Assets Control Regulations and other legal provisions target financial transactions, instruments, and other assets in which there is a Cuban connection.  As a result U.S. and international banks, clearing houses, brokers and other financial intermediaries may refuse to deal with the Company or may freeze, block, refuse to honor, reverse or otherwise impede legitimate transactions or assets of the Company, even where no U.S. link is established.


The Investment Manager actively manages the liquidity position of the Company, its subsidiaries and the joint ventures in which it invests so that cashflows are transferred to bank accounts outside of Cuba.  In addition, financial facilities in which the Company participates are structured so that secured cash flows and debt service payments originate and remain outside Cuba.  Although the interpretation of the new liquidity rules, as well as the practical ability of the Cuban financial system to successfully implement them in the short term, remain subject to uncertainty, the Investment Manager believes that the new liquidity rules will in most cases create an objective (non-discretionary) and largely decentralised mechanism for the allocation of liquid resources, thereby significantly increasing the financial autonomy of joint venture companies and representing a real reduction in liquidity risk.
The Investment Manager is conscious of and closely follows developments concerning the U.S. legal restrictions that target financial transactions and assets.  The Company does not carry out any international transfers in U.S. Dollars or through U.S. banks or intermediaries.  The Investment Manager manages the banking relationships of the Company and generally acts at all times so as to minimise the impact of these legal provisions on the legitimate transactions and assets of the Company.


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Currency Risk


The Group deals in numerous currencies and fluctuations in exchange rates can have a negative impact on the performance of the Group, as well as the expression of the Company's NAV in Sterling and/or USD.
As part of the 2020 economic reform package adopted by the Cuban government in order to continue modernising the Cuban economy, new monetary reforms aimed at harmonising exchange rates and eliminating Cuba's dual currency system will require all foreign investment vehicles to denominate their assets and legal obligations, and to carry out all transactions, in Cuban Pesos (previously denominated and carried out in USD).  The Cuban Peso has a fixed (non-market) exchange rate of US$1.00 : CUP24, which may be subject to further devaluation at the discretion of the Cuban Central Bank.


The Company does not hedge its foreign currency risks.
The cash and currency positions of each of the joint venture companies in which the Company has a participation are actively managed for the purpose of reducing currency risk to the greatest extent possible.  There are presently no hedging mechanisms available to mitigate this new risk.


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Risks relating to Regulatory and Tax framework




Tax Risk


Changes in the Group's tax status or tax treatment in any of the jurisdictions where it has a presence may adversely affect the Company or its shareholders.


The Investment Manager regularly reviews the tax rules that may affect the operations or investments of the Company and seeks to structure the activities of the Company in the most tax efficient manner possible.  However, the Company holds investment structures in numerous jurisdictions arising from past acquisitions, and the general direction of change in many jurisdictions is not favourable.


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The financial risks associated with the Company include market risk, liquidity risk and credit risk, all of which are described in greater detail in note 16 to the Consolidated Financial Statements.  
Following the ongoing assessment of the principal and emerging risks facing the Company, and its current position, the Board is confident that the Company will be able to continue in operation and meet its liabilities as they fall due. 
INVESTMENT MANAGER'S REVIEW
TWENTY-FIVE
25 years ago
I vividly remember my first visit to Havana in May 1996, twenty-five years ago.  It was evening.  Cuba's capital was dark, and although the Clinton administration had just strengthened the U.S.-Cuban embargo by implementing the extra-territorial Helms-Burton Act, there was a lot of energy, interest, hope and engagement - on all levels.  I felt similar sensations when Mick Jagger stayed in our Meliã Habana hotel, when President Obama was elected, re-elected, and visited Cuba, and when the U.S. and Cuba took the first significant steps towards rapprochement.  
By contrast, after four years of Donald Trump, a global pandemic that has profoundly impacted world-wide tourism markets, a struggling Cuban economy, and conflicting views regarding the best way forward, it is impossible to deny the serious challenges ahead.  However, my personal conviction remains that mutual respect, engagement and economic growth are the essential building blocks upon which the country will move forward and I believe that the Biden administration shares this view.  This reinforces my optimism that better times lie ahead of us.
2021 is likely to be an extremely important year for Cuba.  Economic recovery will in no small measure depend on the world's ability to control the Covid-19 pandemic, the restarting of international travel and the reopening of Cuba for tourism, but may also be boosted by recently-adopted measures aimed at the overhaul of Cuba's monetary system, the stimulation of national production and import substitution and the invigoration of the nascent private sector. 
On the political front, an historic moment took place during the 8th Congress of Cuba's Communist Party held in Havana between 16 and 19 April 2021 when Raul Castro (age 89 years) resigned as First Secretary of the Party and was replaced by Cuba's President, Miguel Díaz-Canel (age 61 years), making the latter the first non-Castro appointed to this important position since 1959.
Notwithstanding numerous statements made by President Biden during the campaign last year with respect to the U.S. Cuban embargo, and in particular his intention to "… promptly reverse the failed Trump policies regarding Cuba...", sadly it would appear that improving the relationship with Cuba is not amongst Biden's chief foreign policy priorities.  Although the restoration of international cooperation seems to be high on his government's agenda, it would appear that no immediate need is felt to ease the Cuba restrictions that are currently in place. 
However, following a formal review, we expect the Biden administration to cancel the designation of Cuba as a "state sponsor of terrorism", and subsequently to adopt measures aimed at increasing remittances to Cuba, the easing of travel restrictions and the restoration of services and staffing at the U.S. embassy in Havana.  One may disagree with President Biden's careful pace, but gathering bipartisan support for a more substantial overhaul of the U.S.' Cuba policy may prove to be more sustainable in the long term.
25th Anniversary
Following its start of operations in 1996, the Cuba-dedicated investment trust that is CEIBA today (originally named Beta Gran Caribe Fund Limited) raised approximately US$29 million in initial capital and began putting together its Cuban portfolio.  At the time, it was a pioneer and the first investment trust (originally listed on the Irish Stock Exchange) to benefit from the provisions of the new Foreign Investment Act adopted by Cuba on 5 September 1995 to pave the way for foreign investment in the country.  In 2001-2002, control of the Company passed to new shareholders, the present executive team was appointed and developed a new investment strategy, and net asset value, which had shrunk during the first five years of operation to approximately US$19 million, began to grow.   
This year, CEIBA Investments Limited celebrates its 25th anniversary. 
It is now listed on the Specialist Fund Segment of the London Stock Exchange, its present net asset value is approximately US$194 million / £142 million, and during the last 17 years it has distributed approximately US$89 million in dividends to its shareholders.  We are proud of all that has been achieved over the years, together with our Cuban partners and our Cuban assets, and this notwithstanding the US Cuban embargo legislation and many other challenging circumstances faced over the years.  We are also thankful for our Cuban employees, who have been essential in getting the Company where it is today.
2020 PERFORMANCE
The performance of the Company is largely dependent on the fair values of the properties in which it has an interest and the total amount of annual dividends distributed by the joint venture companies that own these properties.  The fair values of the properties in which the Company has an interest, which are located in a frontier market, are calculated by the independent RICS valuer Arlington Consulting - Consultadoria Imobiliaria Limitada, trading under the name Abacus ("Abacus") using discounted cash flow models.  As at 31 December 2020, the fair values of all of the assets in which CEIBA Investments has an interest decreased as a result of a fall in projected income levels.
The NAV Total Return for the year in US$ was (6.0%) (2019: (4.9%)), and in £ it was (9.4%) (2019: 0.8%).  As at 31 December 2020, the Net Asset Value of the Company was US$194,425,614 / £142,875,966 (2019: US$206,734,334 / £157,656,016). The loss on the change in the fair value of the equity investments was (US$41,914,276) / (£30,801,202) (2019: (US$14,658,562) / (£11,178,649)).  The total dividend income from the Cuban joint venture companies during the year ended 31 December 2020 was US$13,258,912 / £9,743,469 (2019: US$20,670,560 / £15,763,410). The net loss of the Company for the year ended 31 December 2020 attributable to the shareholders was (US$19,808,620) / (£14,556,599) (2019: net income of US$7,579,514 / £5,780,152). 
During 2020, the hotel investments of the Company were harshly impacted by the Covid-19 pandemic, although the EBITDA of Miramar S.A. ("Miramar"), the owner of the Meliã Habana, Meliã Las Américas, Meliã Varadero and Sol Palmeras hotels (the "Hotels"), was still positive for the year at US$3.9 million (£2.9 million) as a result of the positive results generated during the first months of the year.  The pandemic also had a significant impact on the construction of the TosCuba hotel project at Trinidad, which incurred serious delays.
The principal factor that contributed negatively to the results was the decrease in the fair value of Miramar S.A. of US$24,703,820 / £18,153,895 (2019: decrease of US$26,742,193 / £20,393,650).  The performance of the hotels of Miramar was profoundly impacted by the ongoing Covid-19 pandemic and the resulting dramatic collapse in the worldwide tourism and travel industries from March 2020 onwards.  With two of its hotels closed from April 2020 onwards and the other two operating at minimal occupancy rates, the net loss after tax of Miramar was (US$3.5 million) / (£2.6 million) (2019: net income of US$17.9 million / £13.6 million).  The combined occupancy rate of the Hotels for 2020 was 24% compared to a combined occupancy rate of 78% in 2019.  This also resulted in lower dividend income earned by the Company from Miramar during the year of US$6,310,596 / £4,637,416 compared to US$11,537,327 / £8,798,388 in the prior year.
By contrast, the mixed-use office and retail centre of Inmobiliaria Monte Barreto S.A. ("Monte Barreto") had its best year ever, registering net income of US$14.4 million / £10.6 million (2019: US$13.5 million / £10.3 million).  However, there was a decrease in the fair value of Monte Barreto of (US$5,268,689) / (£3,871,759) (2019: increase of US$10,537,071 / £8,035,591) due to a more conservative approach being taken regarding revenue growth during the next few years considering the pandemic's impact on the economy.  Dividend income earned by the Company from Monte Barreto during the year was US$6,948,316 / £5,106,052 compared to US$9,133,233 / £6,965,022 in 2019.
CUBAN RESPONSE TO COVID-19 PANDEMIC
At the time of writing, Cuba has confirmed just over 100,000 total cases of the Covid-19 virus since the first case was registered in March 2020, and slightly more than 600 total deaths. 
Cuba was very successful in defending against the virus from its first arrival in the country until the re-opening of flights in November 2020.  Although strict protocols were imposed, including PCR testing on arrival in the case of tourists staying at resorts and a second PCR test five days following arrival as well as a quarantine period in the case of residents and Cuban expats staying with family members, the virus appears to have been reintroduced in a renewed fashion by Cuban expats visiting family without strictly complying with the mandated self-isolation requirements, especially around the year-end holidays.  
In response to the relapse, authorities have reduced flights, introduced a new requirement that inbound travellers be able to show a negative PCR test before boarding and Havana was placed once again in a state of lockdown.  However, few significant problems seem to have been identified at the tourism resorts, where health measures appear to have worked as intended. 
Throughout the year, Cuba has been working on a number of vaccines to be used against the virus.  The most promising of these vaccines, called Soberana 2, is presently in the final stage of phase 3 trials and showing positive results.  Final approval of the vaccine is expected imminently, following which it will be rapidly rolled out to the population at large.  The Finlay Institute, which developed Soberana 2, has announced a plan to produce up to 100 million doses before the end of 2021 and expects the entire Cuban population to be vaccinated during 2021, with a large excess of doses for export to other countries as part of Cuba's medical diplomacy efforts.  
It remains impossible to predict how quickly the Cuban tourism sector will recover from the worldwide disruption caused by the Covid-19 pandemic.  Although the Cuban Ministry of Tourism has not modified its projection of approximately 2.0-2.5 million visitors in 2021, it seems all but certain (given the circumstances in the principal outbound markets) that the first half of 2021 will disappoint. 
Numerous Cuban tourism resort destinations are presently open, with a modest number of hotels under operation.  Visitors have been arriving and departing in accordance with available flights and travel restrictions in outbound markets, with no significant virus-related issues since reopening of the market in mid-November 2020. 
Hotel operators have tentative plans for a gradual reopening of hotels during 2021, although the ability to implement such plans will depend on external circumstances as the world emerges from the present pandemic.
THE ELECTION OF PRESIDENT BIDEN AND THE POTENTIAL IMPACT ON THE U.S.-CUBAN EMBARGO
Joe Biden was inaugurated as President of the United States on 20 January 2021, which we hope will bring to a final close the highly toxic chapter of U.S.-Cuba relations dictated by the Trump administration over the last four years.  Regarding Cuba, President Biden stated during his campaign that he will:
"(…) promptly reverse the failed Trump policies that have inflicted harm on the Cuban people (…)" and "(…) immediately restore the Obama policy of engagement".  
We believe that this statement of intent represents excellent news for Cuba and for the Company.
In the waning days of the Trump presidency, following the steady adoption over the course of the preceding four years of ever-increasing aggressive measures against Cuba, the U.S. administration took numerous controversial final steps to further penalise the island and to complicate the efforts of the incoming Biden administration to reverse course on Cuba policy.  These included most notably the return of Cuba to the State Sponsor of Terrorism list, which may take time and effort to undo (since it will require a formal State Department review, a presidential certification to Congress and a 45-day waiting period).    
However, other than the Terrorism list, the vast majority of anti-Cuba measures adopted by the Trump administration over the last four years can be reversed by simple executive order, without the need for any act of Congress, and so a return to the Obama policy of engagement with Cuba (leaving intact the underlying embargo legislation, which can only be revoked through legislative action) should be attainable with relative ease.  We believe that the most likely first steps in such an effort could include: 
1.    Increasing U.S. travel to Cuba through the reinstatement of the general licence for the people-to-people category of authorised travel, the full restoration of commercial flights and cruise ship travel, the elimination of the Cuba Restricted List and the Cuba Restricted Accommodations List of businesses that cannot be engaged with by U.S. persons, and the reversal of other similar measures imposed by the Trump administration;
2.    Increasing U.S. remittances to Cuba through the immediate removal of remittance limits;
3.    Facilitating U.S. agricultural, medical and other exports to Cuba;
4.    Facilitating U.S. financial transactions involving Cuba, including U-turn transactions whereby parties who are not subject to U.S. jurisdiction are allowed to use the U.S. financial system (and the U.S. dollar) for transactions related to Cuba that originate and terminate outside the U.S. and where no U.S. party is involved;
5.    Suspension of Title III of the Helms-Burton Act; 
6.    Restoring full operations at the U.S. embassy in Havana (including the appointment of a U.S. ambassador); and
7.    Removing Cuba from the list of State Sponsors of Terrorism.
The timing of the hoped-for return to a more productive and sensible Cuba policy remains uncertain, given the large number of important domestic and international issues that the new administration will need to confront, and numerous ongoing issues could potentially play a role, such as the question of Venezuela and the still unsolved mystery of U.S. diplomats who suffered ill health effects while stationed in Havana some years ago.  
Moreover, with the newly restored Democratic control over both houses of Congress, it becomes possible once again to imagine a day when legislation fully rescinding the antiquated and counter-productive U.S. Cuban embargo can be introduced and have an honest chance of success.  With the introduction of a new bill entitled the U.S.-Cuba Trade Act of 2021 to the Senate on 4 February 2021, which aims to repeal all of the legislation making up the embargo and re-establish normal trade relations and travel to the island nation, it would appear that Congress will soon have the opportunity to make this happen.  
CUBA - MODERNISATION OF THE ECONOMY AND MONETARY REFORM
Modernisation of the Cuban Economy
Since 2011, the Cuban government has been pursuing a concerted effort to modernise the Cuban economy, with the principal goal of increasing efficiency within the economic sphere and elevating the levels of social and economic development of the country.  To this end, the Cuban Communist Party in 2011 adopted a series of guidelines (the "2011 Guidelines") on economic and social policy aimed at transforming all sectors of the economy and liberating the country's productive forces through the concession of greater management autonomy to businesses in the state sector, the development of complementary private sector activities and an increase in new foreign direct investment and finance.  The principles and actions outlined in the 2011 Guidelines were subsequently reiterated in later documents and programmes adopted by the Cuban government, such as its 2030 Development Plan.
However, implementation of the 2011 Guidelines has moved forward at a very cautious pace over the years since their adoption and came to a virtual standstill in the face of heightened aggression from the United States during the Trump administration.  The arrival of the Covid-19 pandemic earlier this year has further pressured the already bleak economic and liquidity positions of the country by bringing the Cuban tourism industry to an abrupt halt and paralysing numerous import activities, resulting in crippling shortages of food and other basic commodities as well as necessary inputs for local industry.
Reforms of 16 July 2020
In July 2020, after many years of start-and-stop progress, the Cuban government returned its economic modernisation strategy, as originally contemplated in the 2011 Guidelines, to the fore.  The measures adopted last summer were aimed at boosting hard currency income in the short term through an increase in exports and in the local production of food and other necessary products that can substitute imports, and through the creation of a new internal hard currency market for certain goods and services.  They also included measures meant to augment management control over corporate assets, financial resources and activities, and decrease government control over the economy and the centralised allocation of hard currency resources.  The increase of foreign direct investment in the country and stimulation of private sector activities are core goals of the recent reforms.
For the joint venture companies in which the Company has a participation, the most important of these measures was the adoption of Resolution 115 issued by the Ministry of Economy and Planning ("Resolution 115") on the allocation of hard currency resources within the economy, which is expected to provide a much greater degree of financial autonomy to the management of joint venture companies and to have a significant positive effect on their operations.
In mid-December 2020, the final piece of the reform puzzle was made public with the announcement that the long-planned currency unification and exchange rate harmonisation would be brought into effect on 1 January 2021.
Monetary Reforms
Monetary reform has long been called for by observers because for many years there have been numerous currencies circulating in parallel in the Cuban economy, with a variety of distinct, mandated (non-market based) exchange rates between them, depending on parties and circumstances, causing substantial distortions in the economy.  
The principal Cuban currency, the Cuban peso ("CUP"), has been officially pegged to the USD at the rate of 1USD : 1CUP since 1959 for financial transactions between Cuban entities, with the exception of joint venture companies and other foreign direct investment vehicles.  In practice, however, the retail exchange rate offered at State-owned currency exchange points (Cajas de Cambio or CADECA) has been 1USD : 24CUP for years.  In parallel to the CUP, a second Cuban currency, the convertible peso ("CUC"), has circulated in the economy (also at a fixed exchange rate of 1USD : 1CUC) for the last two decades for local transactions involving a hard currency component.  There were also numerous exchange rates between the CUC and the CUP.  And lastly, certain transactions - including certain retail sales and the operations of foreign investment vehicles - have historically been denominated and carried out in USD.
Since the publication of the 2011 Guidelines, monetary reform has been recognised as a key component of the planned modernisation process.  With little advance warning, the new measures constituting the reform were published in mid-December 2020 and came into effect on 1 January 2021. 
The reform is directly applicable to foreign investment vehicles operating in the country, including joint venture companies, who will need to convert all of their accounting records to CUP and carry out all transactions in CUP going forward.  By contrast, all entities operating in the Special Development Zone of Mariel will continue to denominate and carry out their operations exclusively in USD.  We have included below, in the relevant sections dealing with our assets, comments regarding the expected impact of the new measures.
The principal goals of the reform are: 
(i)        the unification of the two Cuban currencies through the elimination of the CUC and the continuation of the CUP, 
(ii)       the harmonisation of exchange rates at 1USD : 24CUP, 
(iii)      the reduction or removal of subsidies in the Cuban economy, and 
(iv)      price and labour (salary, pension and social security) reforms aimed at correcting price levels.
 
The reform has been enacted through the adoption by different ministries of a large number of complex, interrelated resolutions and new measures continue to be adopted on a regular basis.  The measures taken to date include rules relating to the conversion to CUP of cash, bank deposits and other monetary assets, as well as non-monetary items such as accounting records, contractual obligations and other legal instruments.  
The reform will profoundly affect the pricing and payment of goods and services throughout the economy, including the foreign investment sector, as well as salaries, pension and social security payments.  In addition, changes have already been made to the new Resolution 115 system for the allocation of hard currency resources to harmonise the allocation of financial resources with monetary reform.  We expect further changes to be adopted in the coming months as problems arise and internal contradictions are discovered.
Amendments to Resolution 115: Allocation of Hard Currency Resources within the Economy
Prior to the adoption of Resolution 115, all allocations of hard currency for payments to be made outside the country (including the payment of dividends to foreign investors) were made centrally.  This resulted in an inefficient and unfair allocation and numerous delays, especially during regular periods of reduced liquidity in the country, when payments to foreign investors appeared at times to be of secondary importance compared to other public expenditures.
Resolution 115, as recently amended to take into account monetary reform, provides for the systemic allocation of a certain level of "liquidity" (the ability to transfer funds overseas without the requirement of a prior foreign exchange permit) to the operations of foreign investment vehicles and other entities.
Since the system is untested it is as yet unclear whether the criteria used to determine the liquid resources to be allocated will be sufficient, in practice, to cover all international payments (imports, payments of dividends to foreign shareholder, etc.), but since Resolution 115 also includes the possibility to request exceptions we are confident that in most cases the new system will be workable, especially since the general rule is that all joint ventures must have the necessary liquid funds to allow them to comply at all times with their international obligations, including the payment of dividends.
We believe that this is a very significant step forward for the operations of Cuban foreign investment vehicles and in line with the stated aim of "providing real financial autonomy to foreign investment vehicles" and thereby reducing their dependence on centralised foreign exchange decisions.  We expect that, following a transition period during which new working capital reserves will need to be accumulated, the new rules will provide a sound and predictable basis upon which joint venture companies will have the means to manage their international obligations in a timely fashion, including the payment of dividends to the foreign shareholder. 
Conclusions
The corrective measures taken by the government to reduce the substantial distortions in the state sector of the Cuban economy caused by multiple exchange rates between the USD and the CUP, as well as between the CUC and the CUP, are necessary steps that are intended to return the Cuban monetary system to an internally coherent system for regulating and reporting transactions within the economy.  
Similarly, the new system for the allocation of hard currency reserves represents a significant step forward towards the goal of greater financial autonomy for foreign investment vehicles.  However, the scope and complexity of both of these projects is immense, with probable effects throughout the economy, and we expect the transition to be complicated and not without growing pains.  
In addition, by imposing the use of the CUP as functional and reporting currency for all foreign investment vehicles going forward, the Cuban government has introduced a new foreign exchange risk to the operations of these investment vehicles, and in particular to their foreign investors, since the CUP will likely be subject to future devaluations, which could impact investments in numerous ways.  Like in many other countries, this is an additional factor that will need to be properly managed by investors in order ensure success.
Areas of concern regarding the possible impacts of the above on the operations of the joint venture companies in which the Company has an interest have been identified and we have raised these with our Cuban partners and government officials.  We believe that these concerns will be properly addressed in due course, either through the obtention of exceptional treatment or through clarifications or changes to the applicable rules. 
We believe that these reforms constitute significant transformations to the highly centralised economic model followed by the Cuban government to date, and that these represent a significant positive development for the operations of the joint venture companies in which the Company is invested, as well as presenting numerous opportunities for the future.  We are following these developments closely.  The Cuban government has very clearly stated that one of its core objectives, both in carrying out monetary reform and in creating the new system of hard currency autonomy, is to increase the attractiveness of the country for foreign investment and finance.  Therefore, we trust that this outcome will be borne out in the final result, notwithstanding the complicated transition process that is underway.
CUBA - ECONOMIC BACKDROP AND OTHER RECENT DEVELOPMENTS
 
At the year-end session of the Cuban National Assembly, Minister of Economy and Planning Alejandro Gil confirmed that the Cuban economy contracted by 11% in 2020, battered by the pandemic, increased U.S. sanctions and internal inefficiencies.  He forecasts growth of 6-7% in 2021 as tourism gradually recovers and monetary reforms create the conditions for new development. 
The congress of the Cuban Communist Party that took place on 16-19 April 2021 focused on core issues relating to the country's economic and social life.  The further elaboration of the economic and social development model and the implementation of the 2011 Guidelines were central, although the stepping down of Raul Castro as First Secretary of the Party was the prime focus of the international press. 
PORTFOLIO ACTIVITY
General
Overall, the performance of the Miramar Trade Centre, the office complex of Monte Barreto, in which the Company has a 49% interest, had its most profitable year ever - occupancy rates remained in the high nineties throughout the year.  Although revenues were similar to the previous year, net income increased by 6.2%, primarily as a result of savings in energy costs. 
As a result of the Covid-19 pandemic and the resulting collapse of the worldwide travel industry, the Hotels faced an extremely challenging business environment, and the results reflect this.  While the Sol Palmeras and the Meliã Habana hotels were able to maintain services throughout most of the year, occupancy and room rates were inevitably very much affected, while the Meliã Las Americas and Meliã Varadero hotels were closed from 1 April 2020 until the end of the year.  At present, the Meliã Habana is one of the few hotels in Havana where arriving travellers can spend their obligatory isolation period.  The ability of the Hotels to reopen and return to a normal operating environment will depend upon numerous factors such as the success of vaccination campaigns in the tourists' home countries, the development and rollout of a Cuban vaccine, the availability of flights and others.  There is obviously a great deal of uncertainty connected with the performance of the hotel sector in 2021.
The Miramar Trade Centre / Monte Barreto
The Company holds a 49% interest in Monte Barreto, the Cuban joint venture company that owns and operates the Miramar Trade Centre.  Occupancy levels of the Miramar Trade Centre remained over 98% throughout 2020, notwithstanding the major disruption caused to the Cuban economy by the Covid-19 pandemic.  Although revenues were similar to the prior year, net income in 2020 reached US$14.4 million / £10.6 million for the year (2019: US$13.5 million / £10.3 million), representing a 6.2% increase over the prior year and making 2020 the most profitable year since incorporation of the joint venture.
The principal drivers of the excellent results for the year were (i) continued high occupancy levels throughout the year, and (ii) a substantial reduction in operating expenses, primarily as a result of reduced electricity, consumables, third party services and other expenses resulting from reduced tenant activities during the Covid-19 pandemic of 2020. 
Demand for international-standard office accommodation in Havana currently continues to exceed supply, predominantly from multi-national companies, NGOs and foreign diplomatic missions.  Monte Barreto remains the dominant option in this market segment.  As a consequence, and notwithstanding the Covid-19 pandemic, the outlook for Monte Barreto in 2021 remains very encouraging, as we expect occupancy levels to remain in the high nineties and loss of rental income as a result of the pandemic to be modest.  In addition, further reductions to operating expenses are expected from the conversion of salaries, electricity and other local costs to Cuban Pesos, which undoubtedly is a positive outcome of the monetary reforms.  However, in light of the present disruption in the market, the joint venture has temporarily halted its general strategy of rental increases as leases are renewed, which has resulted in a decrease in its fair value.
In accordance with the new provisions of Resolution 115 dealing with the allocation of hard currency resources, we expect that Monte Barreto will receive sufficient liquid resources in 2021 to distribute all profits generated during the year and to gradually pay out the remaining outstanding dividends from past periods.  Commercial real estate activities have been excluded from some of the general rules relating to liquid payments, and consequently the local payments of many tenants of the joint venture will not be received with liquidity and conversely most local payments to be made by the joint venture will similarly not require liquidity.  As a result, the joint venture will operate under a mixed regime having reduced liquidity requirements, where certain liquid resources of the joint venture will be generated internally and certain resources will be allocated centrally. 
We are presently working with the management team of the joint venture to calculate the comprehensive liquidity requirements of the joint venture as well as the expected sources of liquidity available to it in the coming period in order to ensure that there will be sufficient liquid resources to distribute all dividends generated in 2021 and to gradually pay out the remaining outstanding dividends from past periods. 
In December 2020, Monte Barreto paid US$4 million / £2.9 million in dividends to CEIBA MTC Properties Inc. by transferring that amount to TosCuba.  These funds will be used by TosCuba in connection with the construction of the hotel and will be counted as disbursements under the construction facility as they are used (see below).
The valuation of Monte Barreto has been adjusted downward in the year by (US$5,268,689) / (£3,871,759), representing a 6% decline on the December 2019 valuation.  This was driven by a more conservative approach towards revenue growth during the next few years considering the impact of the pandemic on the Cuban economy and the resulting decision to halt rental increases temporarily as leases are renewed. 
The Hotels of Miramar 
Through its indirect ownership of a 32.5% interest in Miramar, the Group has interests in the following hotels:
-      the Meliã Habana Hotel, a 397-room international-category 5-star business hotel located on prime ocean-front property in Havana (directly opposite the Miramar Trade Centre); 
-      the Meliã Las Americas Hotel, a 340-room international-category 5-star beach resort hotel located in Varadero;
-      the Meliã Varadero Hotel, a 490-room international-category 5-star beach resort hotel located in Varadero; and
-      the Sol Palmeras Hotel, a 607-room international-category 4-star beach resort hotel located in Varadero.  
The Hotels are operated by Meliã Hotels International S.A. ("Meliã Hotels International"), the Company's strategic partner in all of its hotel investments.  Meliã Hotels International has a 17.5% equity interest in Miramar and a 10% equity interest in TosCuba, and remains fully committed to Cuba as one of its principal destinations.
Performance of the Hotels
From arrival of the Covid-19 pandemic in Cuba in March 2020 through the end of the year the Hotels faced an extremely difficult operating environment.  With international borders closed and international flights grounded, all Cuban hotels were ordered to be closed.  The Sol Palmeras and the Meliã Habana hotels were able to maintain modest services throughout most of the year, but occupancy and room rates were at low levels.  The Meliã Las Americas and Meliã Varadero hotels remained closed from 1 April 2020 through the end of the year (and they remain closed at the date of writing).  
The Meliã Habana hotel is one of the few hotels in Havana where arriving travellers can spend their obligatory isolation period and the hotel is popular with flight crews and other essential travellers, so we expect that operations will continue at these levels until international travel markets recover later this year.  The Sol Palmeras is also expected to remain open in the coming months, with a modest number of guests from countries that have resumed flights to Cuba (such as Russia), but our expectation is that occupancy will remain at very low levels until the Canadian and European markets resume in earnest when their populations are fully vaccinated and regular flights from these important outbound markets resume.  
In general, the ability of the Hotels to return to normal operations will be dependent upon numerous factors such as the success of the vaccination campaigns in the principal outbound markets in Canada and Europe, the development and rollout of a Cuban vaccine, the availability of flights, the implementation by the Biden administration of a new, more positive Cuba policy, and others.  Like in many other places, there is obviously a great deal of uncertainty connected with the performance of the Cuban hotel sector in 2021 and we expect that the effects of the Covid-19 pandemic will continue to be felt throughout the first half of 2021, and possibly through the first three quarters of the year.
Once hotel operations return to normal as the world emerges from the Covid-19 pandemic and international travel and tourism markets recover from the disruption suffered over the last year, we expect the liquid resources directly generated by the operations of Miramar to be more than sufficient to allow Miramar to distribute all profits to be generated during the year and to gradually pay out the remaining outstanding dividends from past periods. This is because under the new liquidity rules international tourism income is treated as direct export income (of which 80% of the liquidity can be retained by the joint venture).  In addition, we anticipate that the adopted monetary reforms may have a positive impact on the cost structures (and potentially on the profitability) of the Hotels.
Confirming and Discounting Facility
In December 2019, HOMASI (the foreign shareholder of Miramar) executed a US$7 million confirming and discounting facility with Miramar for the purpose of confirming and discounting supplier invoices relating to the operations of the four hotels owned by the joint venture company.  The facility is financed in part by a €3.5 million credit line received by HOMASI from a Spanish bank for this purpose.  The facility has attractive economic terms and is secured by the offshore cash flows generated by the hotels.  Given the limited operations of the Hotels during the last three quarters of 2020, the operations financed under the facility during the year were largely aimed at resolving past issues with suppliers, rather than current operations.  We expect that confirming and discounting transactions under the facility will accelerate once again when the operations of the Hotels return to normal levels.
Planned Investments
The planned refurbishment and development plan of the Hotels has been delayed by the Covid-19 pandemic and by the implementation of the monetary reforms.  Miramar has profited from the hotel closures to proceed with maintenance and certain limited improvement works, as well as with the planning and permitting processes.  The board of the joint venture company will review the timing of the planned investments in the coming year as the tourism sector recovers and the full implications of the new monetary rules are clarified.
The TosCuba Project                                                                                                                                                                      
The Company has an 80% interest in Mosaico Hoteles S.A. ("Mosaico Hoteles"), representing a 40% indirect interest in TosCuba, the Cuban joint venture company that is constructing the 400 room Meliã Trinidad Península Hotel.  The remaining 20% interest in Mosaico Hoteles is held by Meliã Hotels International.  The Cuban shareholder in TosCuba is Cubanacán, with a 50% interest.
 As at the end of 2020, all structural works of the hotel were completed and the project had reached an overall completion level of approximately 60%.  Delays that had accumulated over the course of the project were exacerbated by the arrival of the Covid-19 pandemic in March 2020.  In response to the crisis, the joint venture company slowed the pace of construction considerably for the remainder of the year.  
During the first quarter of 2021, progress has been made at a modest pace on external finishing details and internal works, including doors, windows, flooring and other installations.  
The total cost of the project - including incorporation of the joint venture company, acquisition of surface rights, construction of the hotel, and start-up costs - is presently estimated at US$76 million.  Of this amount, US$16 million represents the share capital invested in TosCuba by its shareholders (CEIBA, US$6.4 million, Meliã Hotels International US$1.6 million and Cubanacán US$8 million) and approximately US$12 million represents grants received or to be received under the Spanish Cuban Debt Conversion Programme.  In accordance with the terms of the Spanish Cuban Debt Conversion Programme the funds granted should be used by the joint venture company to fund local purchases of goods and services delivered under the construction contract by Cuban suppliers, thereby reducing the external funding that would otherwise need to be provided.  
The remaining funds necessary to complete the project will be disbursed under the construction finance facility that was originally extended in April 2018 as a US$45 million facility to be disbursed under two tranches of US$22.5 million / £16.5 million each.  The first tranche (Tranche A) is presently being disbursed by CEIBA (80%) and Meliã (20%).  Disbursements under Tranche B will only begin once Tranche A is fully disbursed.  The construction finance facility is more fully described below.  The €25 million in new funds raised through the issue of the Bonds in March 2021 will ensure the availability of funding for Tranche B of the facility and therefore that that the construction of the project can now proceed to completion. 
The final terms of amendments to Tranche B of the construction finance facility are presently being negotiated, together with the construction contract, to take into account the new circumstances caused by the Covid-19 delay and other factors.  Amended facility and construction agreements are expected to be executed shortly with a view to completing construction and start-up of the hotel before the start of the 2022-2023 high season.   
Grupo B.M. Interinvest Technologies Mariel S.L.
In December 2020, the Company formalised its participation in a new multi-phase industrial logistics project to be developed in the Special Development Zone of Mariel, Cuba by acquiring a 50% interest in Grupo B.M. Interinvest Technologies Mariel S.L., the Spanish company that is developing the project.  
Groundworks on the 11.3-hectare site for the construction of the first four warehouses of the project began in the first quarter of 2021. 
The Company has paid an initial amount of US$303,175 / £222,792 for its 50% interest and is expected to invest a further US$1.5million / £1.1million during the course of 2021.
FINTUR and TosCuba Finance Facilities
FINTUR Facility
Since 2002, the Company has arranged and participated in numerous secured finance facilities extended to Casa Financiera FINTUR S.A. ("FINTUR"), the Cuban government financial institution for the tourism sector.  Under the most recent FINTUR Facility, originally executed in 2016 in the principal amount of €24 million and subsequently amended in 2019 through the addition of a second tranche in the principal amount of €12 million, the Company initially held a €4 million participation under Tranche A and a €2 million participation under Tranche B. 
This facility generates an 8.00% interest rate and operated successfully without delay or default until the closure of all Cuban hotels in March 2020 as a result of the Covid-19 pandemic.  At that time, the income from the hotels that serve as the basis for payments under the FINTUR facility ceased and such income is not expected to resume until Cuba's international tourism operations recover in earnest. 
With effect from 1 April 2020, the Company and FINTUR agreed to revise the remaining outstanding payments under the FINTUR facility (combining the two tranches into a new single tranche C) and to provide a one-year period of grace on the payment of principal, with a two-year principal payment period thereafter.  The first principal payment of the new Tranche C falls due on 30 June 2021.  Interest payments were suspended until 31 December 2020, at which time interest accumulated during the year became payable. 
FINTUR transferred funds from other sources to the collection account under the Facility and made the required interest payments at 31 December 2020 and at 31 March 2021.  
As at 31 December 2020, the principal amount of US$2,110,795 / £1,551,143 was outstanding under the Company's participation in Tranche C of the Facility.  
Cuba has reopened its borders to international travel and the tourism industry has resumed operations, although arrivals remain very modest at present because of numerous travel restrictions in outbound markets related to the Covid-19 pandemic as well as limited airlift at the present time.  Operations are expected to gradually increase in the second half of 2021 and beyond as restrictions are lifted in outbound markets and airlines increase flights to the island. 
All of the hotels granted as security for the repayment of the Facility remain closed at the present time. The Investment Manager meets regularly with FINTUR in order to gauge the speed with which the cash flows are likely return to acceptable levels and to determine whether any additional hotel security should be received.
TosCuba - Construction Finance Facility
CEIBA is the principal lender in the secured construction finance facility that was extended to TosCuba in 2018 in order to provide funding for the construction of the Meliã Trinidad Península Hotel.  Originally, the facility was to be disbursed in two equal tranches of US$22.5 million.  CEIBA (80%) and Meliã (20%) act as lenders under Tranche A.  CEIBA is presently the sole lender under Tranche B, the repayment of which is fully guaranteed by Cubanacán.
The first disbursement under the facility was made in November 2018 in the lead-up period to the formal construction start of the project in December 2018, and as at 31 December 2020 the principal amount of US$16,106,466 / £11,836,027 had been disbursed under the Company's participation in Tranche A.  The remainder of Tranche A of the facility is presently being disbursed.  In order to complete the construction and start-up of the hotel, CEIBA intends to increase the maximum principal amount of Tranche B of the facility to US$29 million and negotiations are presently ongoing in this respect.  
The facility may be syndicated and is secured by the future income of the hotel under construction.  Tranche B of the facility is further secured by a guarantee given by Cubanacán, backed by offshore tourism income from another Cubanacán hotel in Cuba.  Debt service under the facility is expected to start in 2023 and includes a repayment period of 9 years for Tranche A and 7 years for Tranche B.
OUTLOOK
We expect that, as a result of the Covid-19 pandemic, the very difficult economic circumstances faced by Cuba during 2020 will continue well into 2021, and that the local market conditions in which the Group operates will remain very challenging throughout a good part of the year.  The further accentuation of the liquidity challenges faced by the Cuban economy as a result of the pandemic and the U.S. Cuban embargo may also negatively impact the timing of dividend and other payments to the Company.  
However, as the world recovers from the pandemic, we expect that travel restrictions will start to be eased and that all of the Miramar hotels will re-open in 2021 and that all of our underlying Cuban real estate assets, the Cuban joint ventures in which we are invested and the loan facilities in which we participate will return to profitable trading.  
We expect that the new monetary reforms and liquidity rules adopted by the Cuban government during the year will over time have a strong positive effect on the Cuban economy as well as on the operations of the joint venture companies of the Company.  As a result of these new measures, and in particular the de-centralisation of decision-making that they mandate, management of the joint ventures is expected to have a much greater degree of control over the financial resources generated by their operations, which we expect to be largely beneficial for new investments, ongoing operations, performance and the ability to make timely distributions to shareholders.
In addition, the election of Joe Biden to the presidency of the United States brings a welcome sense of relief after the turbulent years of the Trump administration.  We look forward to a new era where U.S. policy towards Cuba is once again driven by policy experts in the State Department rather than the rough and tumble forces of election politics in Florida.  We expect that during the course of the coming year tensions will be lowered between the two countries and the new Biden administration will adopt numerous new measures that will gradually allow more U.S. travel to Cuba, more U.S. funds to flow to Cuba and ultimately a significant improvement to the foreign investment climate in the country, all of which will be very positive for the people of both countries, as well as for the Company and its assets. 
Moreover, having successfully raised €25 million in new funds through the issuance of the Bonds at a very difficult time, demonstrating strong confidence on the part of our investors, for which we are grateful, we enter into an exciting new period of development for the Company.  With immediate deployment capacity, we are very strongly positioned to enhance our position in the Cuban market by driving ahead, with completion of the new hotel in Trinidad and construction of the first phase of the new industrial logistics project in Mariel.  We will also be on the lookout for new opportunities.
Sebastiaan A.C. Berger
Aberdeen Asset Investments Limited
27 April 2021
DIRECTORS' REPORT (EXTRACTS)
ANNUAL GENERAL MEETING 
The Notice of the Annual General Meeting ("AGM") is included within the Annual Report and Consolidated Financial Statements.  The AGM will take place at the registered office of the Company, Dorey Court, Admiral Park, St. Peter Port, Guernsey, GY1 2HT Channel Islands on 17 June 2021 at 2.00pm.  An explanation of each resolution to be proposed at the AGM is included in the Letter from the Chairman below.  All shareholders will have the opportunity to put questions to the Board or the Investment Manager at the Company's AGM.  Shareholders are encouraged to vote on the resolutions proposed in advance of the AGM and to submit questions to the Board and the Investment Manager by emailing CEIBA.Investments@aberdeenstandard.com.  
The Company Secretary is also available to answer general shareholder queries at any time throughout the year.  
In the event that the situation surrounding Covid-19 should affect the plans to hold the AGM on 17 June 2021 the Company will update shareholders through an announcement to the London Stock Exchange and will provide further details on the Company's website.  As noted above, the Board encourages all shareholders to exercise their votes, and submit any questions, in respect of the meeting in advance. This should ensure that your votes are registered in the event that attendance at the AGM might not be possible. 
By order of the Board
27 April 2021
JTC Fund Solutions (Guernsey) Limited 
Secretary
Ground Floor
Dorey Court
Admiral Park
St Peter Port
Guernsey GY1 2HT 
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report and Consolidated Financial Statements, in accordance with applicable law and regulations.
The Companies (Guernsey) Law, 2008, as amended (the "Law") requires the Directors to prepare financial statements for each financial year.  Under the Law, the Directors have elected to prepare the Consolidated Financial Statements in accordance with IFRS.  Under the Law, the Directors must not approve the Consolidated Financial Statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.
In preparing these Consolidated Financial Statements, the Directors are required to:
·    select suitable accounting policies and then apply them consistently;
·    make judgments and estimates that are reasonable and prudent; 
·    prepare the Consolidated Financial Statements on a going concern basis unless it is inappropriate to presume that the Company will continue in business; and
·    state whether all applicable IFRS standards have been followed, subject to any material departures disclosed and explained in the financial statements.
The Directors are responsible for keeping proper accounting records that are sufficient to show and explain the Company's transactions and which disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that it's Consolidated Financial Statements comply with the Law.  They are also responsible for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities.
The Directors listed, being the persons responsible, hereby confirm to the best of their knowledge that:
·    the Consolidated Financial Statements, prepared in accordance with the applicable accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company, and all the undertakings included in the consolidation taken as a whole;
·    that in the opinion of the Directors, the Annual Report and Consolidated Financial Statements taken as a whole, is fair, balanced and understandable and it provides the information necessary to assess the Company's position and performance, business model and strategy; and
·    the General Information section and Directors' Report include a fair review of the development and performance of the business and the position of the Company and all the undertakings included in the consolidation taken as a whole, and the Principal Risks section provides a description of the principal risks and uncertainties that they face.
·    there is no additional information of which the Company's Auditor is not aware.
 
For CEIBA Investments Limited
 
John Herring
Chairman
27 April 2021






Consolidated Statement of Financial Position 
As at 31 December 2020


 


 


 
 
31 Dec 2020


 


 
 
31 Dec 2019




 


Note


 


US$


 


US$




Assets


 


 


 


 


 




Current assets


 


 


 


 


 




Cash and cash equivalents


4


 


4,270,860


 


13,102,578




Accounts receivable and accrued income


5


 


14,581,229


 


2,211,832




Loans and lending facilities


6


 


2,827,292


 


2,558,018




Total current assets


 


 


21,679,381


 


17,872,428




 


 


 


 


 


 




Non-current assets


 


 


 


 


 




Accounts receivable and accrued income


5


 


1,768,447


 


5,646,484




Loans and lending facilities


6


 


17,395,343


 


10,587,702




Equity investments


7


 


197,921,225


 


227,340,559




Property, plant and equipment


8


 


533,598


 


568,346




Total non-current assets


 


 


217,618,613


 


244,143,091




Total assets


 


 


239,297,994


 


262,015,519




 


 


 


 


 


 




Liabilities


 


 


 


 


 




Current liabilities


 


 


 


 


 




Accounts payable and accrued expenses


9


 


1,085,590


 


2,066,213




Deferred liabilities


14


 


1,000,000


 


1,000,000




Total current liabilities


 


 


2,085,590


 


3,066,213




 


 


 


 


 


 




Non-current liabilities


 


 


 


 


 




Accounts payable and accrued expenses


9


 


1,129,709


 


-




Deferred liabilities


14


 


1,833,333


 


2,833,333




Total non-current liabilities


 


 


2,963,042


 


2,833,333




                                                                                                                                         


 


 


 


 


 




Total liabilities


 


 


5,048,632


 


5,899,546




Equity


 


 


 


 


 




Stated capital 


10


 


106,638,023


 


106,638,023




Revaluation surplus


 


 


319,699


 


319,699




Retained earnings


 


 


75,613,383


 


95,422,003




Accumulated other comprehensive income 


 


 


11,854,509


 


4,354,609




Equity attributable to the shareholders of the parent


 


 


194,425,614


 


206,734,334




 


 


 


 


 


 




Non-controlling interest


10


 


39,823,748


 


49,381,639




Total equity


 


 


234,249,362


 


256,115,973




 


 


 


 


 


 




Total liabilities and equity


 


 


239,297,994


 


262,015,519




NAV


10


 


194,425,614


 


206,734,334




NAV per share


10


 


1.41


 


1.50




See accompanying notes 1 to 20, which are an integral part of these consolidated financial statements.
These audited Financial Statements were approved by the board of Directors and authorised for issue on 27 April 2021.
They were signed on the Company's behalf;
 
Keith Corbin, Director                                                                                                                                            Peter Cornell, Director
 
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2020
 




 


 


 


31 Dec 2020


 


31 Dec 2019




 


Note


 


US$


 


US$




Income


 


 


 


 


 




Dividend income


7


 


13,258,912


 


20,670,560




Interest income


 


 


1,899,468


 


820,588




Travel agency commissions


 


 


6,113


 


15,426




Foreign exchange gain


 


 


1,157,566


 


-




 


 


 


16,322,059


 


21,506,574




Expenses


 


 


 


 


 




Foreign exchange loss


 


 


-


 


(383,162)




Loss on change in fair value of equity investments


7


 


(41,914,276)


 


(14,658,562)




Management fees


14


 


(1,864,518)


 


(1,985,429)




Other staff costs


 


 


(67,035)


 


(73,080)




Travel


 


 


(51,856)


 


(82,055)




Operational costs


 


 


(108,302)


 


(144,783)




Legal and professional fees


 


 


(1,368,707)


 


(1,028,242)




Administration fees and expenses


 


 


(292,534)


 


(266,250)




Audit fees


19


 


(270,909)


 


(465,514)




Miscellaneous expenses


 


 


(136,976)


 


(196,509)




Directors' fees and expenses


12


 


(232,677)


 


(239,085)




Depreciation


8


 


(39,645)


 


(38,062)




 


 


 


(46,347,435)


 


(19,560,733)




Net (loss)/ income before taxation


 


 


(30,025,376)


 


1,945,841




Income taxes


3.7


 


-


 


-




Net (loss) / income for the year


 


 


(30,025,376)


 


1,945,841




Other comprehensive income to be reclassified to profit or loss in subsequent periods


 


 


 


 


 




Gain on exchange differences of translation of foreign operations 


 


 


11,538,310


 


3,158,328




Other comprehensive income that will not be reclassified to profit or loss in subsequent periods


 


 


 


 


 




Revaluation reserve movements


 


 


-


 


21,250




Total comprehensive (loss)/Income


 


 


(18,487,066)


 


5,125,419




 


 


 


 


 


 




Net (loss)/Income for the year attributable to:


 


 


 


 


 




Shareholders of the parent


 


 


(19,808,620)


 


7,579,514




Non-controlling interest


 


 


(10,216,756)


 


(5,633,673)




Total comprehensive (loss)/Income attributable to:


 


 


 


 


 




Shareholders of the parent


 


 


(12,308,720)


 


9,653,677




Non-controlling interest


 


 


(6,178,346)


 


(4,528,258)




 


 


 


 


 


 




Basic and diluted (loss)/earnings per share


13


 


(0.14)


 


0.06




 




See accompanying notes 1 to 20, which are an integral part of these consolidated financial statements.
 




Consolidated Statement of Cash Flows
For the year ended 31 December 2020




 


 
Note


 


31 Dec 2020
US$


 


31 Dec 2019
US$




Operating activities


 


 


 


 


 




Net (loss)/ income for the year


 


 


(30,025,376)


 


1,945,841




Items not affecting cash:


 


 


 


 


 




Depreciation


8


 


39,645


 


38,062




Change in fair value of equity investments


7


 


41,914,276


 


14,658,562




Dividend income receivable


 


 


(13,258,912)


 


       (20,670,560) 




Interest income 


 


 


(1,899,468)


 


             (820,588) 




Foreign exchange (gain)/loss


 


 


(1,157,566)


 


383,162




 


 


 


(4,387,401)


 


(4,465,521)




                                                                                                                                                                                                                


 


 


 


 


 




(Decrease)/increase in accounts receivable and accrued income


 


 


(4,018,460)


 


98,064




(Increase)/decrease in accounts payable and accrued expenses


 


 


149,086


 


(136,740)




Non- cash movement in amortisation of deferred liability 


14


 


(1,000,000)


 


(1,000,000)




Dividend income received


 


 


9,998,244


 


         14,997,092 




Interest income received 


 


 


160,317


 


227,628 




Net cash flows from operating activities


 


 


901,786


 


           9,720,523 




 


 


 


 


 


 




Investing activities


 


 


 


 


 




Purchase of equity investments


7


 


(303,175)


 


-




Purchase of property, plant & equipment


8


 


(4,897)


 


(47,893)




Loans and lending facilities disbursed


 


 


(6,190,914)


 


(7,408,813)




Loans and lending facilities recovered


 


 


(886,001)


 


1,777,407




Net cash flows from investing activities


 


 


(7,384,987)


 


(5,679,299)




                                                                                                                                                                                                                


 


 


 


 


 




Financing activities


 


 


 


 


 




Cash distribution to non-controlling interest


10


 


(3,463,951)


 


(1,786,874)




Payment of cash dividends


 


 


-


 


(8,560,689)




Contributions received from non-controlling interest


 


 


84,406


 


22,401




Net cash flows from financing activities


 


 


(3,379,545)


 


(10,325,162) 




 


 


 


 


 


 




Change in cash and cash equivalents


 


 


(9,862,746)


 


(6,283,938)




Cash and cash equivalents at beginning of the period


 


 


13,102,578


 


19,814,790




Foreign exchange on cash


 


 


1,031,028


 


(428,274)




Cash and cash equivalents at end of the period


 


 


4,270,860


 


13,102,578




See accompanying notes 1 to 20, which are an integral part of these consolidated financial statements
 




Consolidated Statement of Changes in Equity
For the year ended 31 December 2020
 
For the year ended 31 December 2019




 
 


 
 
Notes


Stated Capital
US$


 


Revaluation Surplus
US$


 


Retained Earnings
US$


 


Other comprehensive income
US$


 


Total Equity attributable to the parent
US$


 


Non-controlling interest
US$


 


Total Equity
US$




Opening Balance


 


106,638,023


 


298,449


 


96,403,178


 


2,301,696


 


205,641,346


 


55,674,370


 


261,315,716




Revaluation of assets / Net other comprehensive income/(loss) to be reclassified to profit or loss in subsequent periods


 
7,10


-


 


21,250


 


-


 


  
2,052,913


 


2,074,163


 


1,105,415


 


3,179,578




Net income/(loss) for the year


10


-


 


-


 


7,579,514


 


-


 


7,579,514


 


(5,633,673)


 


1,945,841




Capital increase/ contributions during the period 


10


-


 


-


 


-


 


-


 


-


 


22,401


 


22,401




 
Cash distribution to non-controlling interest 


10


-


 


-


 


-


 


-


 


-


 


(1,841,703)


 


(1,841,703)




Payable transferred to non-controlling interests 


10


-


 


-


 


-


 


-


 


-


 


54,829


 


54,829




Dividend declared during the year 


 


-


 


-


 


      (8,560,689)


 


-


 


      ( 8,560,689)


 


-


 


       (8,560,689)




Balance at 31 December 2019


 


106,638,023


 


319,699


 


95,422,003


 


4,354,609


 


206,734,334


 


49,381,639


 


256,115,973




See accompanying notes 1 to 20, which are an integral part of these consolidated financial statements.
 




For the year ended 31 December 2020




 
 


 
 
Notes


Stated Capital
US$


 


Revaluation Surplus
US$


 


Retained Earnings
US$


 


Other comprehensive income
US$


 


Total Equity attributable to the parent
US$


 


Non-controlling interest
US$


 


Total Equity
US$




Opening Balance


 


106,638,023


 


319,699


 


95,422,003


 


4,354,609


 


206,734,334


 


49,381,639


 


256,115,973




Revaluation of assets / Net other comprehensive income/(loss) to be reclassified to profit or loss in subsequent periods


7, 10


-


 


-


 


-


 


  
7,499,900


 


7,499,900


 


4,038,410


 


11,538,310




 
Net loss for the year


10


-


 


-


 


 
(19,808,620)


 


-


 


(19,808,620)


 


(10,216,756)


 


(30,025,376)




Capital increase/ contributions during the period


10


-


 


-


 


-


 


-


 


-


 


84,406


 


84,406




Cash distribution to non-controlling interest


10


-


 


-


 


-


 


-


 


-


 


(3,463,951)


 


(3,463,951)




Balance at 31 December 2020


 


106,638,023


 


319,699


 


75,613,383


 


11,854,509


 


194,425,614


 


39,823,748


 


234,249,362




See accompanying notes 1 to 20, which are an integral part of these consolidated financial statements.
 
Notes to the Consolidated Financial Statements
For the year ended 31 December 2020
 




1.                    Corporate information 
 
These consolidated financial statements for the year ended 31 December 2020 include the accounts of CEIBA Investments Limited and its subsidiaries, which are collectively referred to as the "Group" or "CEIBA".  
CEIBA was incorporated in 1995 in Guernsey, Channel Islands as a registered closed-ended collective investment scheme with registered number 30083. In May 2013, the status of CEIBA changed to an unregulated investment company rather than a regulated investment fund.  The status of CEIBA was changed back to a registered closed-ended collective investment scheme on 11 September 2018 under The Protection of Investors (Bailiwick of Guernsey) Law, 1987 as amended.  The registered office of CEIBA is located at Dorey Court, Admiral Park, St. Peter Port, Guernsey, Channel Islands GY1 2HT.
The principal holding and operating subsidiary of the Group is CEIBA Property Corporation Limited ("CPC") which holds a license issued by the Cuban Chamber of Commerce and has offices in Cuba located at the Miramar Trade Centre, Edificio Barcelona, Suite 401, 5ta Avenida, esq. a 76, Miramar, Playa, La Habana, Cuba.
The principal investment objective of CEIBA is to achieve capital growth and dividend income from direct and indirect investment in or with Cuban businesses, primarily in the tourism and commercial real estate sectors, and other revenue-generating investments primarily related to Cuba.
The Group currently invests in Cuban joint venture companies that are active in two major segments of Cuba's real estate industry: (i) the development, ownership and management of revenue-producing commercial properties, and (ii) the development, ownership and management of hotel properties.  In addition, the Group occasionally arranges and participates in secured finance facilities and other interest-bearing financial instruments granted in favour of Cuban borrowers, primarily in the tourism sector.  The Group's asset base is primarily made up of equity investments in Cuban joint venture companies that operate in the real estate segments mentioned above.  
The officers are contracted through third party entities or consultancy agreements.  CEIBA and its subsidiaries do not have any obligations in relation to future employee benefits.
On 22 October 2018, CEIBA completed an initial public offering and listed its ordinary shares on the Specialist Fund Segment of the London Stock Exchange, where it trades under the symbol "CBA".  The Group also entered into a management agreement, with effect from 1 November 2018, under which the Group has appointed Aberdeen Standard Fund Managers Limited ("ASFML" or the "AIFM") as the Group's alternative investment fund manager to provide portfolio and risk management services to the Group.  The AIFM has delegated portfolio management to Aberdeen Asset Investments Limited (the "Investment Manager").  Both the AIFM and the Investment Manager are wholly-owned subsidiaries of Standard Life Aberdeen plc (see note 14).
2.                    Basis of preparation
2.1 Statement of compliance and basis of measurement
These consolidated financial statements have been prepared under the historical cost convention, except for certain financial instruments as disclosed in note 3.9 and certain property, plant and equipment as disclosed in note 3.12 which are measured at fair value, in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB").
2.2 Functional and presentation currency
These consolidated financial statements are presented in United States Dollars ("US$"), which is also the Company's functional currency.  The majority of the Group's income, equity investments and transactions are denominated in US$, subsidiaries are re-translated to US$ to be aligned with the reporting currency of the Group.
2.3 Use of estimates and judgments
The preparation of the Group's consolidated financial statements, in conformity with IFRS, requires management to make judgments, estimates, and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. 
Management judgements
The key management judgements made by management in relation to the financial statements are:
a)      That the Group is not an Investment Entity (see note 3.14);
b)      That the Group is a Venture Capital Organisation (see note 3.15).
c)       That the functional currency of the parent company (Ceiba Investments Limited) is US$ (see note 3.17)
Management estimates - valuation of equity investments
Significant areas requiring the use of estimates also include the valuation of equity investments. Actual results could differ from those estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future period affected.
In determining estimates of recoverable amounts and fair values for its equity investments, the Group relies on independent valuations, historical experience, and assumptions regarding applicable industry performance and prospects, as well as general business and economic conditions that prevail and are expected to prevail. Assumptions underlying asset valuations are limited by the availability of reliable comparable data and the uncertainty of predictions concerning future events (see note 7).
By their nature, asset valuations are subjective and do not necessarily result in precise determinations. Should the underlying assumptions change, the carrying amounts could change and, potentially, by a material amount. 
Change in Management estimates - valuation of equity investments 
The determination of the fair values of the equity investments may include independent valuations of the underlying properties owned by the joint venture companies.  These valuations assume a level of working capital required for day to day operations of the properties.  Management estimates the amount of cash required for these working capital needs to determine if the joint venture companies hold any excess cash that should be added as a component of the fair value of the equity investments.  
2.4 Reportable operating segments
An operating segment is a distinguishable component of the Group that is engaged in the provision of products or services (business segment). The primary segment reporting format of the Group is determined to be business segments as the Group's business segments are distinguishable by distinct financial information provided to and reviewed by the chief operating decision maker in allocating resources arising from the products or services engaged by the Group.  
2.5 Equity investments
Equity investments include the direct and indirect interests of the Group in Cuban joint venture companies, which in turn hold commercial properties, hotel properties and hotel properties under development.  Cuban joint venture companies are incorporated under Cuban law and have both Cuban and foreign shareholders. 
Equity investments of the Group are measured at fair value through profit or loss in accordance with IFRS 9, Financial Instruments: Recognition and Measurement ("IFRS 9"), on the basis of the exception provided for per IAS 28.  Changes in fair value are recognised in the statement of comprehensive income in the period of the change.  
2.6 New standards, amendments and interpretations issued but not effective for the financial year beginning 1 January 2020 and not early adopted that are relevant to the Group
There are no other standards, interpretations or amendments to existing standards that are not yet effective that would be expected to have a significant impact on the Group.
3.                    Summary of significant accounting policies
 
The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements.
3.1 Consolidation
The consolidated financial statements comprise the financial statements of CEIBA and its subsidiaries as at 31 December 2020.  Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.  Specifically, the Group controls an investee if and only if the Group has:
·      Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee)
·      Exposure, or rights, to variable returns from its involvement with the investee, and
·      The ability to use its power over the investee to affect its returns
When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:
·      The contractual arrangement with the other vote holders of the investee
·      Rights arising from other contractual arrangements
·      The Group's voting rights and potential voting rights
The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control.
Subsidiaries are consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which control is transferred out of the Group.  Where there is a loss of control of a subsidiary, the consolidated financial statements include the results for the part of the reporting period during which the Group has control. 
 
The Group had direct and indirect equity interests in the following entities as at 31 December 2020 and 31 December 2019:
 




 
 
Entity Name


Country of Incorporation


Equity interest held indirectly by the Group 
or holding entity 




 


 


31 Dec 2020


31 Dec 2019




1. CEIBA Property Corporation Limited (a) (i)


Guernsey


100%


100%




1.1. GrandSlam Limited (a) (ii)


Guernsey


100%


100%




1.2. CEIBA MTC Properties Inc.(a) (iii)


Panama


100%


100%




1.2.1 Inmobiliaria Monte Barreto S.A. (b) (iv)


Cuba


49%


49%




1.3. CEIBA Tourism B.V. (a) (viii)
         1.3.1. HOMASI S.A. (a) (iii)
       1.3.1.1. Miramar S.A. (b) (vi)
          1.3.2. Mosaico Hoteles S.A. (a) (iii)
                     1.3.2.1 TosCuba S.A. (b) (vii)
          1.3.3. Mosaico B.V. (a) (v)
          1.3.4  Grupo BM Interinvest Technologies Mariel S.L (a) (ix)
                                          


Netherlands
Spain
Cuba
Switzerland
Cuba 
Netherlands
Spain
 


100%
65%
50%
80%
50%
80%
50%
 


100%
65%
50%
80%
50%
80%
-
 




a)          Company consolidated at 31 December 2020 and 31 December 2019.
b)          Company accounted at fair value at 31 December 2020 and 31 December 2019.
 
(i)                 Holding company for the Group's interests in real estate investments in Cuba that are facilitated by a representative office in Havana.
(ii)        Operates a travel agency that provides services to international clients for travel to Cuba.
(iii)       Holding company for underlying investments with no other significant assets.
(iv)       Joint venture company that holds the Miramar Trade Centre as its principal asset.
(v)         On 11 March 2019, all of the shares in Mosaico Hoteles S.A. held by Mosaico B.V., together with (i) the full outstanding value of the shareholder loan extended by Mosaico B.V. to Mosaico Hoteles S.A., and (ii) all payables owed by Mosaico B.V., were transferred by Mosaico B.V. to CEIBA Tourism B.V. (80%) and to Meliã Hotels International  (20%) in accordance with their shareholdings in Mosaico B.V., with the result that Mosaico Hoteles S.A. is now owned directly by CEIBA Tourism B.V. (80%) and Meliã Hotels International S.A. (20%) and Mosaico B.V. no longer has any assets or liabilities.  Mosaico B.V. is in the process of being liquidated. 
(vi)       Joint venture that holds the Meliã Habana Hotel, Meliã Las Americas Hotel, Meliã Varadero Hotel and Sol Palmeras Hotel as its principal assets.
(vii)      Joint venture company incorporated to build a beach hotel in Trinidad, Cuba.
(viii)    Dutch company responsible for the holding and management of the Group's investments in tourism. 
(ix)       a Spanish company that is developing an industrial logisitics warehouse project in the Special Development Zone of Mariel, Cuba.
 
All inter-company transactions, balances, income, expenses and realised surpluses and deficits on transactions between CEIBA Investments Limited and its subsidiaries have been eliminated on consolidation.  Non-controlling interest represent the interests in the operating results and net assets of subsidiaries attributable to minority shareholders.
3.2 Foreign currency translation
Transactions denominated in foreign currencies during the period are translated into the functional currency using the exchange rates prevailing at the dates of the transactions.  Monetary assets and liabilities denominated in foreign currencies are translated at the reporting date into functional currency at the exchange rate at that date.  Foreign currency differences arising on translation are recognised in the consolidated statement of comprehensive income as foreign exchange income (loss).
The financial statements of foreign subsidiaries included in the consolidation are translated into the reporting currency in accordance with the method established by IAS 21, The Effects of Changes in Foreign Exchange Rates.  Assets and liabilities are translated at the closing rates at the statement of financial position date, and income and expense items at the average rates for the period.  Translation differences are taken to other comprehensive income and shown separately as foreign exchange reserves on consolidation without affecting income. Translation differences during the year ended 31 December 2020 were gains of US$11,538,310 (2019: gains of US$3,158,328).
The exchange rate used in these consolidated financial statements at 31 December 2020 is 1 Euro = US$1.2271 (2019: 1 Euro = US$1.2030).
3.3 Dividend income
Dividend income arising from the Group's equity investments is recognised in the consolidated statement of comprehensive income when the Group's right to receive payment is established or cash amounts have been received.
3.4 Interest income
Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable. Interest income is recognised in the consolidated statement of comprehensive income.
3.5 Travel agency commissions
GrandSlam, a wholly-owned subsidiary of the Group, is a travel agency that acts as an intermediary between the customer and airlines, tour operators and hotels. GrandSlam facilitates transactions and earns a commission in return for its service.  This commission may take the form of a fixed fee per transaction or a stated percentage of the customer billing, depending on the transaction and the related vendor. Commission is recognised when the respective bookings have been made. 
3.6 Fees and expenses
Fees and expenses are recognised in the statement of comprehensive income on the accrual basis as the related services are performed. Transaction costs incurred during the acquisition of an investment are recognised within the expenses in the consolidated statement of comprehensive income and transactions costs incurred on share issues or placements are included within consolidated statement of changes in equity in respect of stated capital.
Transaction costs incurred on the disposal of investments are deducted from the proceeds of sale and transactions costs incurred on shares are deducted from the share issue proceeds.
3.7 Taxation
Deferred taxes are provided for the expected future tax consequences of temporary differences between the carrying amounts and tax bases of assets and liabilities using current corporation tax rate.
Deferred tax liabilities are recognized for temporary differences that will result in taxable amounts in future years.  Deferred tax assets are recognised for temporary differences that will result in deductible amounts in future years.  Where it is not certain that the temporary difference will be reversed no deferred taxation asset is established.  At 31 December 2020 and 31 December 2019 the Group has not established any deferred tax assets or liabilities.




Guernsey


Exempt




The Netherlands


Exempt




Panama


Exempt




Spain


Exempt




Cuba (i)


15%




(i)                    The Cuban tax rate does not apply to the Group itself, but is rather the tax rate of the underlying Cuban joint venture companies of the equity investments and is taken into account when determining their fair value (see note 7).
3.8 Financial assets and financial liabilities
(a)      Recognition and initial measurement
Financial assets and financial liabilities at fair value through profit or loss are measured initially at fair value.
(b)      Classification
The Group has classified financial assets and financial liabilities into the following categories:
Financial assets and financial liabilities classified at fair value through profit or loss: 
Financial assets and financial liabilities classified in this category are those that have been designated by management upon initial recognition. Management may only classify an instrument at fair value through profit or loss upon initial recognition when one of the following criteria are met, and designation is determined on an instrument-by-instrument basis:
·      The designation eliminates, or significantly reduces, the inconsistent treatment that would otherwise arise from measuring the assets or liabilities or recognising gains or losses on them on a different basis or, 
·      For financial liabilities that are part of a group of financial liabilities, which are managed and their performance evaluated on a fair value basis, in accordance with a documented risk management or investment strategy or, 
·      For financial liabilities that contain one or more embedded derivatives, unless they do not significantly modify the cash flows that would otherwise be required by the contract, or it is clear with little or no analysis when a similar instrument is first considered that separation of the embedded derivative(s) is prohibited in relation to financial liabilities.
 
Financial assets and financial liabilities at fair value through profit or loss are carried in the consolidated statement of financial position at fair value. Changes in fair value are recognised in the statement of comprehensive income.
Financial assets and financial liabilities measured at fair value through profit or loss are the following:
·      Equity Investments are classified at fair value through profit or loss, with changes in fair value recognised in the statement of comprehensive income for the period. 
 
Financial assets and financial liabilities measured at amortised cost: 
Financial assets and financial liabilities measured at amortised cost are initially recognised at fair value and are subsequently measured at amortised cost using the effective interest rate methodology, in respect of financial assets less allowance for impairment. A debt instrument is measured at amortised cost if the objective of the business model is to hold the financial asset for the collection of the contractual cash flows and the contractual cash flows under the instrument solely represent payments of principal and interest (SPPI). Amortised cost is calculated by taking into account any discount or premium on acquisition and fees and costs that are an integral part of the effective interest rate.  Therefore, the Group recognises interest income using a rate of return that represents the best estimate of a constant rate of return over the expected behavioural life of the loan, hence, recognising the effect of potentially different interest rates charged at various stages, and other characteristics of the product life cycle (prepayments, penalty interest and charges).  If expectations are revised the adjustment is booked a positive or negative adjustment to the carrying amount in the statement of financial position with an increase or reduction in interest income.  The adjustment is subsequently amortised through Interest and similar income in the income statement. 
Financial assets and financial liabilities measured at amortised cost are the following:
·      Cash and cash equivalents,
·      Accounts receivable and accrued income,
·      Loan and advances,
·      Accounts payable and accrued expenses
 
(c)       Fair value measurement
Fair value is the amount for which an asset can be exchanged, or a liability settled, between knowledgeable, willing parties in an arm's-length transaction on the measurement date.
The Group does not have any instruments quoted in an active market.  A market is regarded as active if quoted prices are readily and regularly available and represent actual and regularly occurring market transactions on an arm's length basis.
As the financial instruments of the Group are not quoted in an active market, the Group establishes their fair values using valuation techniques.  Valuation techniques include using recent arm's length transactions between knowledgeable, willing parties (if available), reference to the current fair value of other instruments that are substantially the same, estimated replacement costs and discounted cash flow analyses.  The chosen valuation technique makes maximum use of market inputs, relies as little as possible on estimates specific to the Group, incorporates all factors that market participants would consider in setting a price, and is consistent with accepted economic methodologies for pricing financial instruments. Inputs to valuation techniques reasonably represent market expectations and measures of the risk-return factors inherent in the financial instrument.  The Group calibrates valuation techniques and tests them for validity using prices from observable current market transactions of similar instruments or based on other available observable market data.
The best evidence of the fair value of a financial instrument at initial recognition is the transaction price, i.e. the fair value of the consideration given or received, unless the fair value of the instrument is evidenced by comparison with other observable current market transactions in the other instruments that are substantially the same or based on a valuation technique whose variables include only data from observable markets. 
All changes in fair value of financial assets, other than interest and dividend income, are recognised in the consolidated statement of comprehensive income as change in fair value of financial instruments at fair value through profit or loss.
(d)      Identification and measurement of impairment
IFRS 9 Financial Instruments requires the Group to measure and recognise impairment on financial assets at amortised cost based on Expected Credit Losses. The Group was required to revise its impairment methodology under IFRS 9 for each class of financial asset.
From 1 January 2018, the Group assesses on a forward-looking basis the expected credit losses ("ECL") associated with its debt instruments carried at amortised cost.  The impairment methodology applied depends on whether there has been a significant increase in credit risk.
 
While cash and cash equivalents are also subject to the impairment requirements of IFRS 9, the identified impairment loss was immaterial.  Investments held at fair value through profit or loss are not subject to IFRS 9 impairment requirements.
 
Loans receivable measured at amortised cost fall within the scope of ECL impairment under IFRS 9.  As per IFRS 9, a loan has a low credit risk if the borrower has a strong capacity to meet its contractual cash flow obligations in the near term, and adverse changes in economic and business conditions in the longer term might, but will not necessarily, reduce the ability of the borrower to fulfil its obligations.  For loans that are low credit risk, IFRS 9 allows a 12-month expected credit loss to be recognised. 
 
The Group's approach to ECLs reflects a probability-weighted outcome, the time value of money and reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and forecasts of future economic conditions.
 
(e)       Derecognition
The Group derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, or when it transfers the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred or in which the Group neither transfers nor retains substantially all the risks and rewards of ownership and does not retain control of the financial asset.  Any interest in transferred financial assets that qualify for derecognition that is created or retained by the Group is recognised as a separate asset or liability in the consolidated statement of financial position.
On derecognition of a financial asset, the difference between the carrying amount of the asset (or the carrying amount allocated to the portion of the asset derecognised) and the consideration received (including any new asset obtained less any new liability assumed) is recognised in the consolidated statement of comprehensive income.
The Group derecognises a financial liability when its contractual obligations are discharged or cancelled or expire.
3.9 Cash and cash equivalents
Cash and cash equivalents are defined as cash on hand and short-term deposits and other short-term highly liquid investments with remaining maturities at the time of acquisition of three months or less.
3.10 Loans and lending facilities
Loans and lending facilities comprise investments in unquoted interest-bearing debt instruments.  They are carried at amortised cost. Interest receivable is included in accrued income.
3.11 Property, plant and equipment
Property, plant and equipment, with the exception of works of art, held by the Group and its subsidiaries are stated at cost less accumulated depreciation and impairment.  Depreciation is calculated at rates to write off the cost of each asset on a straight-line basis over its expected useful life, as follows:




Office furniture and equipment


4 to 7 years




Motor vehicles


5 years




 
The carrying amounts are reviewed at each statement of financial position date to assess whether they are recorded in excess of their recoverable amounts, and where carrying values exceed this estimated recoverable amount, assets are written down to their recoverable amount.  Works of art are carried at their revalued amount, which is the fair value at the date of revaluation. Increases in the net carrying amount are recognised in the related revaluation surplus in shareholders' equity.  Valuations of works of art are conducted with sufficient regularity to ensure the value correctly reflects the fair value at the statement of financial position date.  Valuations are mostly based on active market prices, adjusted for any difference in the nature or condition of the specific asset.
3.12 Stated capital
Ordinary shares are classified as equity if they are non-redeemable, or redeemable only at CEIBA's option. 
 
3.13 Acquisitions of subsidiary that is not a business 
Where a subsidiary is acquired, via corporate acquisitions or otherwise, management considers the substance of the assets and activities of the acquired entity in determining whether the acquisition represents the acquisition of a business.
Where such acquisitions are not judged to be an acquisition of a business, they are not treated as business combinations.  Rather, the cost to acquire the corporate entity or assets and liabilities is allocated between the identifiable assets and liabilities (of the entity) based on their relative values at the acquisition date.  Accordingly, no goodwill or deferred taxation arises.
3.14 Assessment of investment entity status
Entities that meet the definition of an investment entity within IFRS 10 "Consolidated Financial Statements" are required to measure their subsidiaries at fair value through profit and loss rather than consolidate them. The criteria which define an investment entity are, as follows: 
·      An entity that obtains funds from one or more investors for the purpose of providing those investors with investment management services;
·      An entity that commits to its investors that its business purpose is to invest funds solely for returns from capital appreciation, investment income, or both; and
·      An entity that measures and evaluates the performance of substantially all of its investments on a fair value basis.
 
The Group's objective includes providing investment management services to investors to achieve capital growth and dividend income from direct and indirect investment in or with Cuban businesses, primarily in the tourism and commercial real estate sectors, and other revenue-generating investments primarily related to Cuba.
However, in addition to reviewing fair values, the Group also reports to its Directors, via internal management reports, various other performance indicators in relation to the operating performance of the investments.  Therefore Management is not measuring and evaluating the performance of the investments solely on a fair value basis.
Accordingly, Management has concluded that the Group does not meet all the characteristics of an investment entity.  These conclusions will be reassessed on a continuous basis, if any of these criteria or characteristics change.
3.15 Assessment of venture capital organisation
There is no specific definition of a "venture capital organisation".  However, venture capital organisations will commonly invest in start-up ventures or investments with long-term growth potential.
Venture capital organisations will also frequently obtain board representation for the investments that it has acquired an equity interest.  The Group has representation on all of the board of directors of the joint venture companies in which it has an interest and participates in strategic policy decisions of its investments, but does not exercise management control. 
Accordingly Management has concluded that the Group is a venture capital organisation and has applied the exemption in IAS 28 "Investments in Associates and Joint Ventures" to measures it investments in joint venture companies at fair value through profit or loss.
3.16 Going concern
The Company's only external debt obligations is the Bond Issue completed in March 2021 (see note 20), and the Board does not anticipate the need for further external finance over the next 12 months.  The Company also has significant commitments under the Construction Facility extended to TosCuba for the purpose of funding the construction of the Meliã Trinidad Península Hotel (see note 6).  The Directors have reviewed cash flow projections that detail the revenue and commitments of the Group taking into account the above.  As a result, the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future and has significant liquid funds to do so.  Accordingly, the Directors have adopted the going concern basis in preparing the financial statements. 
 
3.17 Assessment of functional currency of parent company
An entity's functional currency is the currency of the primary economic environment in which the entity operates (i.e. the environment in which it primarily generates and expends cash).  Any other currency is considered a foreign currency.  Management has made an assessment of the primary economic environment of the parent company, CEIBA Investments Limited, and the currency of its principal income and expenses. Based on this assessment, Management has determined that the functional currency of the parent is US$.
 
4.                    Cash and cash equivalents




 


 


31 Dec 2020


 


31 Dec 2019




 


 


US$


 


US$




 


 


 


 


 




Cash on hand


 


5,480


 


16,183




Bank current accounts 


 


4,265,380


 


13,086,395




 


 


4,270,860


 


13,102,578




 
5.                    Accounts receivable and accrued income




 


 


31 Dec 2020


 


31 Dec 2019




 


 


US$


 


US$




 


 


 


 


 




Dividends receivable from Miramar S.A.


 


312,352


 


-




Dividends receivable from Inmobiliaria Monte Barreto S.A.


 


9,871,284


 


6,922,968




Loan interest receivable from TosCuba S.A.


 


1,716,307


 


633,070




TosCuba deposit (i)


 


4,000,000


 


-




Other accounts receivable and deposits


 


449,733


 


302,278




 


 


16,349,676


 


7,858,316




 


 


 


 


 




Current portion 


 


14,581,229


 


2,211,832




Non-current portion 


 


1,768,447


 


5,646,484




(i)                    TosCuba deposit relates to amount held in the bank account of TosCuba on behalf of CEIBA that will be applied against the TosCuba construction facility for the construction of the hotel. 
(ii)                  Presented below is the ageing of receivables and accrued income based on their contractual terms of repayment




 


 


31 Dec 2020


 


31 Dec 2019




 


 


US$


 


US$




 


 


 


 


 




 Up to 30 days


 


553,216


 


120,898




 Between 31 and 90 days


 


249,214


 


66,335




 Between 91 and 180 days


 


5,336,284


 


2,010,678




 Between 181 and 365 days


 


8,442,515


 


13,921




 Over 365 days


 


1,768,447


 


5,646,484




 


 


16,349,676


 


7,858,316




 
The majority of the balance is made up of dividends receivable.  The impairment on the dividends receivable has been assessed as low in terms of 3 stage model per IFRS 9 by assessing the credit risk of the counterparties who declared the dividend (Monte Barretto and Miramar). The overall credit risk for Toscuba has significantly increased from the prior year due to COVID 19 and the resulting prevailing economic conditions. This has resulted in the loan moving from Stage 1 to Stage 2 of the IFRS ECL impairment model which therefore requires management to assess the expected credit loss over the lifetime of the loan. Accordingly management has made an assessment of the expected credit loss over the lifetime of the loan taking into account all reasonable and supportable information that is available that includes both internal and external information and this has resulted in an assessed expected credit loss that is immaterial to the Group.  Other accounts receivables and deposits are assessed in terms of the simplified approach for expected credit losses per IFRS 9 due to the trade receivables not containing a significant financing component.  These relate to the receivables of the travel agency activities of GrandSlam, a wholly owned subsidiary of the Group. The overall potential impairment loss on the total balance has been estimated to be immaterial.
6.                   Loans and lending facilities
 




 


 


31 Dec 2020


 


31 Dec 2019




 


 


US$


 


US$




TosCuba S.A.  (i)


 


16,106,466


 


9,915,549




Casa Financiera FINTUR S.A.  (ii)


 


2,110,795


 


3,230,171




Miramar Facility  (iii)


 


2,005,374


 


-




 


 


20,222,635


 


13,145,720




 


 


 


 


 




Current portion 


 


2,827,292


 


2,558,018




Non-current portion 


 


17,395,343


 


10,587,702




(i)          In April 2018, the Group entered into a construction finance facility agreement (the "Construction Facility") with TosCuba S.A. ("TosCuba") for the purpose of extending to TosCuba part of the funding necessary for the construction of the Meliã Trinidad Península Hotel.  The Construction Facility is in the maximum principal amount of up to US$45,000,000, divided into two separate tranches of US$22,500,000 each. The Group has an 80% participation in Tranche A of the Construction Facility and a 100% participation in Tranche B.  The Group has the right to syndicate Tranche B of the Construction Facility to other lenders. 
The principal terms of the Construction Facility include, (i) a grace period for principal and interest during the construction period of the hotel, (ii) upon expiry of the grace period, accumulated interest will be repaid, followed by a repayment period of eight years during which blended payments of principal and interest will be made, (iii) interest will accrue on amounts outstanding under the Construction Facility at the rate of 8 per cent. 
The first disbursement under the Construction Facility was made on 23 November 2018. Repayment of the Construction Facility is secured by an assignment in favour of the lenders of all of the future income of the Meliã Trinidad Península Hotel following start-up of operations.  In addition, Tranche B of the Construction Facility is also secured by a guarantee provided by Cubanacán S.A., Corporaciön de Turismo y Comercio Internacional (the Cuban shareholder of TosCuba) as well as by a security assignment in favour of the Group (in its capacity as Tranche B lender) of all international tourism proceeds generated by the Meliã Santiago de Cuba Hotel.  The Construction Facility represents a financial asset, based on the terms of the loan the loan is not repayable on demand and there is no expectation to be repaid within 12 months since there is a grace period during the construction period of the hotel and a further 8 year payment period. The credit risk has significantly increased from the prior year due to COVID 19 and the resulting prevailing economic conditions. This has resulted in the loan moving from Stage 1 to Stage 2 of the IFRS ECL impairment model which therefore requires management to assess the expected credit loss over the lifetime of the loan. Accordingly management has made an assessment of the expected credit loss over the lifetime of the loan taking into account all reasonable and supportable information that is available that includes both internal and external information and this has resulted in an assessed expected credit loss that is immaterial to the Group..
(ii)         In July 2016, the Group arranged and participated in a €24,000,000 (US$29,450,400) syndicated facility provided to Casa Financiera FINTUR S.A. ("FINTUR").  The facility was subsequently amended in May 2019 through the addition of a second tranche in the principal amount of €12,000,000 (US$14,725,200).  The Group had an initial participation of €4,000,000 (US$4,908,400) under the first tranche and a €2,000,000 (US$2,454,200) participation under the second tranche.  The term of the facility was due to expire in June 2021 but, with the closure of nearly all Cuban hotels as a result of the Covid-19 pandemic, an additional grace period has been granted and the term has been extended to March 2023. In addition, the amounts outstanding under the two existing tranches of the facility were consolidated into a single tranche. The facility has a fixed interest rate of 8%, and under the renegotiated terms interest was accumulated until 31 December 2020 and is then to be paid in quarterly instalments. Eight quarterly principal payments will be due beginning in June 2021 and ending in March 2023. This facility is secured by Euro-denominated off-shore tourism proceeds payable to FINTUR by certain international hotel operators managing hotels in Cuba. The loan to FINTUR represents a financial asset. Based on historical analysis FINTUR has made all payments on time with no defaults since the inception of this facility as well with previous loan facilities. The loan is not repayable on demand.  The credit risk has significantly increased from the prior year due to COVID 19 and the resulting prevailing economic conditions. This has resulted in the loan moving from Stage 1 to Stage 2 of the IFRS ECL impairment model which therefore requires management to assess the expected credit loss over the lifetime of the loan. Accordingly management has made an assessment of the expected credit loss over the lifetime of the loan taking into account all reasonable and supportable information that is available that includes both internal and external information and this has resulted in an assessed expected credit loss that is immaterial to the Group.
(iii)       The Company's subsidiary HOMASI (the foreign shareholder of Miramar) executed a US$7 million confirming and discounting facility with Miramar for the purpose of confirming and discounting supplier invoices relating to the operations of the four Hotels owned by the joint venture company.  The facility is financed in part by a €3.5 million credit line received by HOMASI from a Spanish bank for this purpose.  The facility is secured by the offshore cash flows generated by the Hotels of Miramar.  At 31 December 2020, a total of €1,634,238 (US$2,005,374) was disbursed under the facility. The loan is not repayable on demandThe credit risk has significantly increased from the prior year due to COVID 19 and the resulting prevailing economic conditions. This has resulted in the loan moving from Stage 1 to Stage 2 of the IFRS ECL impairment model which therefore requires management to assess the expected credit loss over the lifetime of the loan. Accordingly management has made an assessment of the expected credit loss over the lifetime of the loan taking into account all reasonable and supportable information that is available that includes both internal and external information and this has resulted in an assessed expected credit loss that is immaterial to the Group.
The following table details the expected maturities of the loans and lending facilities portfolio based on contractual terms:




 


 


31 Dec 2020


 


31 Dec 2019




 


 


US$


 


US$




 


 


 


 


 




 Up to 30 days


 


555,101


 


504,135




 Between 31 and 90 days


 


1,365,797


 


802,882




 Between 91 and 180 days


 


404,897


 


802,882




 Between 181 and 365 days


 


501,497


 


448,119




 Over 365 days


 


17,395,343


 


10,587,702




 


 


20,222,635


 


13,145,720




7.                    Equity investments




 


 


31 Dec 2020


 


31 Dec 2019




 


 


US$


 


US$




 


 


 


 


 




Miramar S.A. 


 


103,184,163


 


127,887,983




Inmobiliaria Monte Barreto S.A.


 


81,433,887


 


86,702,576




TosCuba S.A.


 


13,000,000


 


12,750,000




Grupo B.M. Interinvest Technologies Mariel S.L.


 


303,175


 


-




 


 


197,921,225


 


227,340,559




 




 


 


 
Miramar (i)
US$


 


Monte Barreto
US$


 


 
TosCuba (ii)
US$


 


 
GBM Mariel
US$


 


 
Total
US$




 


 


 


 


 


 


 


 


 


 


 




 


 


 


 


 


 


 


 


 


 


 




Balance at 31 December 2018


 


154,630,176


 


76,165,505


 


8,000,000


 


-


 


238,795,681




 


 


 


 


 


 


 


 


 


 


 




Foreign currency translation reserve


 


3,203,440


 


-


 


-


 


-


 


3,203,440




Change in fair value of equity investments


 


(29,945,633)


 


10,537,071


 


4,750,000


 


-


 


(14,658,562)




 


 


 


 


 


 


 


 


 


 


 




 


 


 


 


 


 


 


 


 


 


 




Balance at 31 December 2019


 


127,887,983


 


86,702,576


 


12,750,000


 


-


 


227,340,559




 


 


 


 


 


 


 


 


 


 


 




Foreign currency translation reserve


 


12,191,767


 


-


 


-


 


-


 


12,191,767




Change in fair value of equity investments


 


(36,895,587)


 


(5,268,689)


 


250,000


 


-


 


(41,914,276)




Share equity acquired


 


-


 


-


 


-


 


303,175


 


303,175




 


 


 


 


 


 


 


 


 


 


 




Balance at 31 December 2020


 


103,184,163


 


81,433,887


 


13,000,000


 


303,175


 


197,921,225




Below is a description of the equity investments of the Group and the key assumptions used to estimate their fair values.
Monte Barreto
The Group holds the full foreign equity interest of 49% in the Cuban joint venture company Monte Barreto, incorporated in 1996 for the construction and subsequent operation of the Miramar Trade Centre. The Miramar Trade Centre is a six-building complex comprising approximately 80,000 square meters of constructed area of which approximately 56,000 square meters is net rentable area.
The Group is the sole foreign investor in Monte Barreto and holds its 49% interest in the joint venture company through its wholly-owned subsidiary CEIBA MTC Properties Inc. ("CEIBA MTC"), incorporated in Panama.  The remaining 51% interest in Monte Barreto is held by the Cuban partner in the joint venture company.
The incorporation and operations of Monte Barreto are governed by a deed of incorporation (including an association agreement and corporate by-laws) dated 7 March 1996 between CEIBA MTC and the Cuban shareholder.  Under the Monte Barreto deed of incorporation, Monte Barreto was incorporated for an initial term of 50 years expiring in 2046. All decisions at shareholder meetings require the unanimous agreement of the Cuban and foreign shareholders.
Key assumptions used in the estimated fair value of Monte Barreto:
The fair value of the equity investment in Monte Barreto is determined by the Directors of CEIBA taking into consideration various factors, including estimated future cash flows from the investment, estimated replacement costs, transactions in the private market and other available market evidence to arrive at an appropriate value. The Group also engages an independent valuation firm to perform an independent valuation of the property owned by the joint venture. 
The Directors may also take into account additional relevant information that impacts the fair value of the equity investment that has not been considered in the valuation of the underlying property of the joint venture. One such fair value consideration is cash held by the joint venture in excess of its working capital needs ("Excess Cash").  As the valuation of the underlying property only assumes a level of working capital to allow for day-to-day operations, the existence of any Excess Cash needs to be included as an additional component of the fair value of the joint venture company. 
In the case of Monte Barreto, the amount of cash required for working capital needs is estimated as the sum of: (i) 30% of tenant deposits, (ii) taxes payable, (iii) dividends declared and payable, (iv) a reserve for employee bonuses, and (v) 2 months of estimated operating expenses.  The sum of these amounts are deducted from the balance of cash and cash equivalents of the joint venture with the remaining balance, if any, being considered Excess Cash.  At 31 December 2020, the amount of Excess Cash that is included in the fair value of Monte Barreto stated in these financial statements is US$2,494,887 (2019: US$1,197,575). 
Cash flows have been estimated for a ten year period. Cash flows from year 11 onward are equal to the capitalised amount of the cash flows at year 10.  The key assumptions used in the discounted cash flow model are the following:




 


31 Dec 2020


 


31 Dec 2019




Discount rate (after tax) (i)


9.78%


 


9.75%




Occupancy year 1


97.3%


 


100%




Average occupancy year 2 to 8


97.3%


 


98.9%




Occupancy year 8 and subsequent periods


97.5%


 


97.5%




Average rental rates per square meter per month - year 1 to 6


US$27.23


 


US$28.28




Annual increase in rental rates subsequent to year 7 (ii)


2.5%


 


3.0%




Capital investments as percentage of rental revenue


3%


 


2%




(i)          The effective tax rate is estimated to be 19% (2019: 19%).
(ii)         The increase in rental rates in subsequent periods is in-line with the estimated rate of long-term inflation.
Miramar
HOMASI is the foreign shareholder (incorporated in Spain) that owns a 50% share equity interest in the Cuban joint venture company Miramar, which owns the Meliã Habana Hotel in Havana, a 5-star hotel that has 397 rooms.  Miramar also owns three beach resort hotels in Varadero known as the Meliã Las Americas, Meliã Varadero and Sol Palmeras Hotels, having an aggregate total of 1,437 rooms (the "Varadero Hotels"). The Meliã Las Americas Hotel and Bungalows is a 5-star luxury beach resort hotel with 340 rooms, including 90 bungalows and 14 suites and began operations in 1994.  The 5-star Meliã Varadero Hotel is located next to the Meliã Las Americas Hotel and has 490 rooms, including 7 suites and began operations in 1992.  The 4-star Sol Palmeras Hotel is located next to the Meliã Varadero Hotel and has 607 rooms, including 200 bungalows, of which 90 are of suite or deluxe standard and began operations 1990. The remaining share equity interest in Miramar is held by Cubanacán (as to 50%).  All decisions at shareholder meetings require the unanimous agreement of the Cuban and foreign shareholders.   In 2018, the surface rights for the four hotels of Miramar were extended / granted to 2042.
At 31 December 2020 the Group holds 65% of the share equity of HOMASI, representing a 32.5% interest in Miramar.  The remaining 35% interest in HOMASI is held by Meliã Hotels International, representing a 17.5% interest in Miramar, and has been accounted for as a non-controlling interest in these consolidated financial statements. 
Key assumptions used in the estimated fair value of Miramar:
The fair value of the equity investment in Miramar is determined by the Directors taking into consideration various factors, including estimated future cash flows from the investment in US$, estimated replacement costs, transactions in the private market and other available market evidence to arrive at an appropriate value. The Group also engages an independent valuation firm to perform independent valuations in US$ of the properties held by the joint venture. 
The Directors may also take into account additional relevant information that impacts the fair value of the equity investment that has not been considered in the valuations of the underlying properties of the joint venture.  One such fair value consideration is cash held by the joint venture in excess of its working capital needs.  As the valuations of the underlying properties only assume a level of working capital to allow for day-to-day operations, the existence of any Excess Cash needs to be included as an additional component of the fair value of the joint venture company. 
In the case of Miramar, the amount of cash required for working capital needs is estimated as the sum of: (i) taxes payable, (ii) dividends declared and payable, (iii) trade payables greater than 90 days outstanding, and (iv) 2 months of estimated operating expenses.  The sum of these amounts is deducted from the balance of cash and cash equivalents of the joint venture with the remaining balance, if any, being considered Excess Cash.  At 31 December 2020, the amount of Excess Cash that is included in the fair value of Miramar stated in these financial statements is US$12,984,162 (2019: US$21,680,176).  Cash flows have been estimated for a ten year period.  Cash flows from year 11 onward are equal to the capitalised amount of the cash flows at year 10. The key assumptions used in the discounted cash flow model are the following:




 


31 Dec 2020


 


31 Dec 2019




Meliã Habana


 


 


 




Discount rate (after tax) (i)


12.5%


 


12.5%




Average occupancy year 1 to 3


60.3%


 


69.3%




Occupancy year 4 and subsequent periods


72.2%


 


71.5%




Average daily rate per guest - year 1


US$134.19


 


US$137.75




Average increase in average daily rate per guest - year 2 to 6


4.9%


 


7.5%




Increase in average daily rate per guest subsequent to year 6 (ii)


2.5%


 


3%




Capital investments as percentage of total revenue


7%


 


7%




 


 
 
31 Dec 2020


 


 
 
31 Dec 2019




Meliã Las Americas


 


 


 




Discount rate (after tax) (iii)


12.9%


 


12.25%




Average occupancy year 1 to 3


63%


 


78%




Occupancy year 4 and subsequent periods


79.5%


 


79.5%




Average daily rate per guest - year 1


US$110.93


 


US$145.48




Average increase in average daily rate per guest - year 2 to 6


11%


 


3.8 %




Increase in average daily rate per guest subsequent to year 6 (ii)


2.5%


 


3%




Capital investments as percentage of total revenue


7%


 


7%




 




 


31 Dec 2020


 


31 Dec 2019




Meliã Varadero


 


 


 




Discount rate (after tax) (iii)


12.9%


 


12.25%




Average occupancy year 1 to 3


64.6%


 


80.2%




Occupancy year 4 and subsequent periods


80.3%


 


80.4%




Average daily rate per guest - year 1


US$97.88


 


US$104.57




Average increase in average daily rate per guest - year 2 to 6


6%


 


4%




Increase in average daily rate per guest subsequent to year 6 (ii)


2.5%


 


3%




Capital investments as percentage of total revenue


7%


 


7%




 




Sol Palmeras


 


 


 




Discount rate (after tax) (iii)


12.9%


 


12.25%




Average occupancy year 1 to 3


65.1%


 


78.9%




Occupancy year 4 and subsequent periods


81.8%


 


80.3%




Average daily rate per guest - year 1


US$86.75


 


US$95.12




Increase in average daily rate per guest - year 2


12%


 


5%




Average increase in average daily rate per guest - year 3 to 6


5%


 


4%




Increase in average daily rate per guest subsequent to year 6 (ii)


2.5%


 


3%




Capital investments as percentage of total revenue


7%


 


7%




 
(i)          The effective tax rate is estimated to be 19% (2019: 19%).
(ii)         The increase in the average daily rate per guest in subsequent periods is in-line with the estimated rate of long-term inflation.
(iii)       The effective tax rate is estimated to be 21% (2019: 21%).
Sensitivity to changes in the estimated rental rates / average daily rates
The discounted cash flow models include estimates of the future rental rates / average daily rates of the joint venture companies.  Actual rental rates / average daily rates may differ from these estimates due to several factors including the general business climate and economic conditions, the strength of the overall tourism market and the influence of competitors.  Therefore, the following tables detail the change in fair values of the equity investments, when applying what Management considers to be the reasonable possible spread in rental rates / average daily rates of between 15% lower and 15% higher compared to the rates used in these consolidated financial statements.
The following table details the fair values of the equity investments at 31 December 2020 when applying lower rental rates / average daily rates:




 


Financial
statements


 


 
-5%


 


 
-10%


 


 
-15%




 


US$


 


US$


 


US$


 


US$




 


 


 


 


 


 


 


 




Monte Barreto


81,433,887


 


77,430,040


 


73,426,194


 


69,422,348




 


 


 


 


 


 


 


 




Miramar 


103,184,163


 


99,236,033


 


95,287,903


 


91,330,479




 
The following table details the fair values of the equity investments at 31 December 2020 when applying higher rental rates / average daily rates:




 


Financial
statements


 


 
+5%


 


 
+10%


 


 
+15%




 


US$


 


US$


 


US$


 


US$




 


 


 


 


 


 


 


 




Monte Barreto


81,433,887


 


85,437,733


 


89,441,579


 


93,445,426




 


 


 


 


 


 


 


 




Miramar 


103,184,163


 


107,132,293


 


111,080,424


 


115,028,555




 
The following table details the fair values of the equity investments at 31 December 2019 when applying lower rental rates / average daily rates:




 


Financial
statements


 


 
-5%


 


 
-10%


 


 
-15%




 


US$


 


US$


 


US$


 


US$




 


 


 


 


 


 


 


 




Monte Barreto


86,702,576


 


82,380,413


 


78,058,250


 


73,736,088




 


 


 


 


 


 


 


 




Miramar 


127,887,983


 


124,636,618


 


121,384,942


 


118,096,999




 


 


 


 


 


 


 


 




 
The following table details the fair values of the equity investments at 31 December 2019 when applying higher rental rates / average daily rates:




 


Financial
statements


 


 
+5%


 


 
+10%


 


 
+15%




 


US$


 


US$


 


US$


 


US$




 


 


 


 


 


 


 


 




Monte Barreto


86,702,576


 


91,328,282


 


95,346,901


 


99,669,063




 


 


 


 


 


 


 


 




Miramar 


127,887,983


 


131,139,349


 


134,390,715


 


137,642,082




 


 


 


 


 


 


 


 




Sensitivity to changes in the occupancy rates
The discounted cash flow models include estimates of the future occupancy rates of the joint venture companies.  Actual occupancy rates may differ from these estimates due to several factors including the general business climate and economic conditions, the strength of the overall tourism market and the influence of competitors.  Therefore, the following tables detail the change in fair values of the equity investments, when applying what Management considers to be the reasonable possible spread in occupancy rates of between 15% lower and 15% higher compared to the rates used in these consolidated financial statements. 
The following table details the fair values of the equity investments at 31 December 2020 when applying lower occupancy rates:




 


Financial
statements


 


 
-5%


 


 
-10%


 


 
-15%




 


US$


 


US$


 


US$


 


US$




 


 


 


 


 


 


 


 




Monte Barreto


81,433,887


 


77,438,281


 


73,442,960


 


69,447,975




 


 


 


 


 


 


 


 




Miramar 


103,184,163


 


98,256,156


 


93,324,630


 


88,330,847




 
The following table details the fair values of the equity investments at 31 December 2020 when applying higher occupancy rates:




 


Financial
statements


 


 
+5%


 


 
+10%


 


 
+15%




 


US$


 


US$


 


US$


 


US$




 


 


 


 


 


 


 


 




Monte Barreto (i)


81,433,887


 


86,441,244


 


n/a


 


n/a




 


 


 


 


 


 


 


 




Miramar 


103,184,163


 


108,112,170


 


113,040,178


 


117,968,186




 


 


 


 


 


 


 


 




(i)          In the case of Monte Barreto, only a constant occupancy rate of 100% is shown under the increase of 5% as projected occupancy is already above or equal to 95%.
The following table details the fair values of the equity investments at 31 December 2019 when applying lower occupancy rates:




 


Financial
statements


 


 
-5%


 


 
-10%


 


 
-15%




 


US$


 


US$


 


US$


 


US$




 


 


 


 


 


 


 


 




Monte Barreto


86,702,576


 


82,279,267


 


77,852,944


 


73,423,072




 


 


 


 


 


 


 


 




Miramar 


127,887,983


 


121,797,791


 


115,682,917


 


109,515,239




 


 


 


 


 


 


 


 




The following table details the fair values of the equity investments at 31 December 2019 when applying higher occupancy rates:




 


Financial
statements


 


 
+5%


 


 
+10%


 


 
+15%




 


US$


 


US$


 


US$


 


US$




 


 


 


 


 


 


 


 




Monte Barreto (i)


86,702,576


 


91,123,299


 


n/a


 


n/a




 


 


 


 


 


 


 


 




Miramar 


127,887,983


 


133,978,176


 


140,068,370


 


146,158,565




 


 


 


 


 


 


 


 




(i)          In the case of Monte Barreto, only a constant occupancy rate of 100% is shown under the increase of 5% as projected occupancy is already above or equal to 95%.
Sensitivity to changes in the discount and capitalisation rates 
The discount and capitalisation rates used in the discounted cash flow models have been estimated taking into various factors including the current risk-free interest rate, country risk rate and other industry factors.  Different methodologies or assumptions may lead to an increase or decrease in the discount and capitalisation rates.  Therefore, the following tables detail the change in fair values of the equity investments when applying what Management considers to be the reasonable possible spread in the discount and capitalisation rates of between 3% lower and 3% higher compared to the rates used in these consolidated financial statements.  The following table details the fair values of the equity investments at 31 December 2020 when applying lower discount and capitalization rates:




 


Financial
statements


 


 
-1%


 


 
-2%


 


 
-3%




 


US$


 


US$


 


US$


 


US$




 


 


 


 


 


 


 


 




Monte Barreto


81,433,887


 


92,593,656


 


107,725,093


 


129,348,178




 


 


 


 


 


 


 


 




Miramar 


103,184,163


 


113,376,155


 


125,923,155


 


141,725,407




The following table details the fair values of the equity investments at 31 December 2020 when applying higher discount and capitalization rates:




 


Financial
statements


 


 
+1%


 


 
+2%


 


 
+3%




 


US$


 


US$


 


US$


 


US$




 


 


 


 


 


 


 


 




Monte Barreto


81,433,887


 


72,875,764


 


66,111,224


 


60,633,360




 


 


 


 


 


 


 


 




Miramar 


103,184,163


 


94,749,345


 


87,659,357


 


81,620,744




 
 
The following table details the fair values of the equity investments at 31 December 2019 when applying lower discount and capitalization rates:




 


Financial
statements


 


 
-1%


 


 
-2%


 


 
-3%




 


US$


 


US$


 


US$


 


US$




 


 


 


 


 


 


 


 




Monte Barreto


86,702,576


 


98,365,774


 


114,227,257


 


137,096,450




 


 


 


 


 


 


 


 




Miramar 


127,887,983


 


139,993,689


 


155,101,777


 


174,476,187




 


 


 


 


 


 


 


 




The following table details the fair values of the equity investments at 31 December 2019 when applying higher discount and capitalization rates:




 


Financial
statements


 


 
+1%


 


 
+2%


 


 
+3%




 


US$


 


US$


 


US$


 


US$




 


 


 


 


 


 


 


 




Monte Barreto


86,702,576


 


77,753,412


 


70,660,355


 


65,941,079




 


 


 


 


 


 


 


 




Miramar 


127,887,983


 


117,974,292


 


109,709,199


 


102,714,755




 


 


 


 


 


 


 


 




Sensitivity to changes in the estimation of Excess Cash  
The fair values of the equity investments have been estimated using the discounted cash flow method and adjusted for the Excess Cash held by the joint venture companies.  Within the calculation of Excess Cash, it is estimated that the joint ventures will maintain a sufficient cash balance for working capital purposes equal to the equivalent of two months' operating expenses. 
The amount of cash on hand required for working capital purposes may fluctuate due to a change in the aging of receivables and payables of the joint venture companies.  Management believes that the maximum amount of cash that would be required to be kept on hand would not exceed three months of operating expenses.  Therefore the following table details the changes in fair values of the equity investments at 31 December 2020 if the number of months of operating expenses used in the calculation is increased by an additional 1 to 3 months in comparison to the calculation used in these consolidated financial statements. 




 


Financial
statements


 


 
+ 1 month


 


 
+ 2 months


 


 
+ 3 months




 


US$


 


US$


 


US$


 


US$




 


 


 


 


 


 


 


 




Monte Barreto


81,433,887


 


81,195,665


 


80,957,443


 


80,719,222




 


 


 


 


 


 


 


 




Miramar 


103,184,163


 


101,161,741


 


99,139,318


 


97,116,896




 
The following table details the changes in fair values of the equity investments at 31 December 2019 if the number of months of operating expenses used in the calculation is increased by an additional 1 to 3 months in comparison to the calculation used in these consolidated financial statements. 
 




 


Financial
statements


 


 
+ 1 month


 


 
+ 2 months


 


 
+ 3 months




 


US$


 


US$


 


US$


 


US$




 


 


 


 


 


 


 


 




Monte Barreto


86,702,576


 


86,464,354


 


86,226,132


 


85,987,911




 


 


 


 


 


 


 


 




Miramar 


127,887,983


 


125,617,753


 


123,347,522


 


121,077,292




 


 


 


 


 


 


 


 




A reduction in the number of months of operating expenses used in the calculation would increase the changes in fair values of the equity investments at 31 December 2019 and 2018, however this is considered unlikely and therefore the related sensitivities have not been shown.
TosCuba
At 31 December 2020 and 2019 the Group owned an indirect 80% interest in Mosaico Hoteles S.A. ("Mosaico Hoteles"), which in turn has a 50% share equity interest in TosCuba, a Cuban joint venture company that is developing a 400 room 4-star hotel at Playa Maria Aguilar near the city of Trinidad, Cuba. The Group has made capital contributions of US$8,000,000 (2019: US$8,000,000) to TosCuba.
 
In 2019, TosCuba was awarded a US$10 million grant under the Spanish Cuban Debt Conversion Programme, a Spanish-Cuba initiative aimed at promoting Spanish private sector investments in Cuba under which outstanding bilateral debts owed to Spain by Cuba may be settled through awards granted to investment projects in Cuba from a special countervalue fund created for this purpose.  Under these awards, local currency invoices relating to services and materials received in Cuba in the course of constructing the projects are paid from the countervalue fund on behalf of the joint ventures.  As of 31 December 2020, TosCuba has received cash grants under the programme totalling US$10,000,000 (2019: US$9,500,000).  The 50% interest of the Group in amounts received under the programme by TosCuba have been recorded as a change in the fair value in the investment in TosCuba.
 
The capital contributions made by the Company plus its share of the cash grants received by TosCuba under the Spanish Cuban Debt Conversion Programme have been determined to be the best observable measure of the Company's interest in the fair value of TosCuba. The Director's have determined that the fair value of TosCuba is reasonable taking into consideration the current percentage of completion of the hotel construction and the estimated cost to completion, the projected value of the hotel upon completion and current debt level of TosCuba.
Dividend income from equity investments
Dividend income (including participation payments) from the equity investments above during the period is as follows: 




 


31 Dec 2020


 


31 Dec 2019




 


US$


 


US$




 


 


 


 




Monte Barreto 


6,948,316


 


9,133,233




Miramar


6,310,596


 


11,537,327




 


13,258,912


 


20,670,560




Financial information of joint venture companies
The principal financial information of the joint venture companies for the years ended 31 December 2020 and 2019 is as follows:




 


Monte Barreto (i)


 


Miramar (i)


 


 


TosCuba (ii)




 


2020
US$ 000's


 


2019
US$ 000's


 


2020
US$
000's


 


2019
US$
000's


 


 


2020
US$
000's


 


2019
US$
000's 




Cash and equivalents


26,725


 


19,141


 


42,908


 


56,399


 


 


4,049


 


2,407




Other current assets


1,480


 


2,206


 


16,943


 


21,434


 


 


3,718


 


5,483




Non-current assets


46,865


 


48,507


 


135,464


 


138,054


 


 


48,459


 


32,828




Current financial liabilities


23,450


 


18,389


 


15,659


 


20,099


 


 


1,874


 


2,554




Other current liabilities


-


 


-


 


-


 


-


 


 


-


 


-




Non-current financial liabilities


3,696


 


3,687


 


1,055


 


1,055


 


 


28,352


 


12,164




Other non-current liabilities


-


 


-


 


-


 


-


 


 


-


 


-




 


 


 


 


 


 


 


 


 


 


 


 


 




Revenue


23,390


 


23,867


 


29,379


 


85,759


 


 


-


 


-




Interest income


62


 


31


 


-


 


-


 


 


-


 


-




Interest expense


-


 


-


 


-


 


-


 


 


-


 


-




Depreciation and amortisation


1,656


 


1,658


 


7,396


 


6,831


 


 


-


 


-




Taxation


2,533


 


2,919


 


-


 


263


 


 


-


 


-




Profit (loss) from continuing operations


14,378


 


13,536


 


(3,511)


 


17,872


 


 


-


 


-




Other comprehensive income


-


 


-


 


-


 


-


 


 


-


 


-




Total comprehensive income (loss)


14,378


 


13,536


 


(3,511)


 


17,872


 


 


-


 


-




 


 


 


 


 


 


 


 


 


 


 


 


 




(i)        Figures obtained from financial statements prepared under IFRS. 
(ii)      Figures obtained from financial statements prepared under Cuban GAAP.
 
8.                    Property, plant and equipment




 


 
Motor vehicles
US$


 


Office furniture and equipment
US$


 


 
Works of art
US$


 


 
Total
US$




 


 


 


 


 


 


 


 




Cost: 


 


 


 


 


 


 


 




At 1 January 2019


330,172


 


182,324


 


442,050


 


954,546




Additions


44,330


 


3,563


 


-


 


47,893




Revaluation


-


 


-


 


21,250


 


21,250




At 31 December 2019


374,502


 


185,887


 


463,300


 


1,023,689




 


 


 


 


 


 


 


 




Additions


-


 


4,897


 


-


 


4,897




Revaluation 


-


 


-


 


-


 


-




At 31 December 2020


374,502


 


190,784


 


463,300


 


1,028,586




 


 


 


 


 


 


 


 




 


 


 


 


 


 


 


 




Accumulated Depreciation:


 


 


 


 


 


 


 




At 1 January  2019


299,783


 


117,498


 


-


 


417,281




Charge


20,155


 


17,907


 


-


 


38,062




At 31 December 2019


319,938


 


135,405


 


-


 


455,343




 


 


 


 


 


 


 


 




Charge


22,372


 


17,273


 


 


 


39,645




At 31 December 2020


342,310


 


152,678


 


-


 


494,988




 


 


 


 


 


 


 


 




Net book value:


 


 


 


 


 


 


 




At 31 December 2019


54,564


 


50,482


 


463,300


 


568,346




At 31 December 2020


32,192


 


38,106


 


463,300


 


533,598




 
9.                    Accounts payable and accrued expenses




 


 


31 Dec 2020


 


31 Dec 2019




 


 


US$


 


US$




Due to shareholders 
Due to Meliã Hotels International SA (i)


 


5,926
176,941


 


5,399
354,581




Accrued professional fees


 


223,349


 


586,981




Management fees payable (see note 14)


 


1,565,065


 


1,041,950




Accrued Directors' fees


 


-


 


1,617




Other accrued expenses


 


186,127


 


57,116




Other accounts payable


 


57,891


 


18,569




 


 


2,215,299


 


2,066,213




 


 


 


 


 




Current portion 


 


1,085,590


 


2,066,213




Non-current portion 


 


1,129,709


 


-




(i)          Amounts due to Meliã Hotels International S.A. represent funds held for disbursement under the TosCuba Construction Facility, scheduled to be disbursed to the constructor in January 2020. 
The future maturity profile of accounts payable and accrued expenses based on undiscounted contractual payments:




 


 


31 Dec 2020


 


31 Dec 2019




 


 


US$


 


US$




 


 


 


 


 




Up to 30 days


 


179,136


 


409,709




Between 31 and 90 days


 


-


 


1,115,552




Between 91 and 180 days


 


606,842


 


535,553




Between 181 and 365 days


 


299,612


 


5,399




Greater than 365 days 


 


1,129,709


 


-




 


 


2,215,299


 


2,066,213




 
10.                 Stated capital and net asset value
Authorised
The Group has the power to issue an unlimited number of shares. The issued shares of the Group are ordinary shares of no par value. 
Issued
The following table shows the movement of the issued shares during the year:




 


 


Number of ordinary shares 


 


Stated capital
US$ 




Stated capital 


 


 


 


 




 


 


 


 


 




Stated capital at 31 December 2019


 


137,671,576


 


106,638,023




 


 


 


 


 




Stated capital at 31 December 2020


 


137,671,576


 


106,638,023




 
Net asset value
The net asset value attributable to the shareholders of the Group ("NAV") is calculated as follows:




 


 


 


31 Dec 2020
US$


 


31 Dec 2019
US$




 


 


 


 


 


 




Total assets


 


 


239,297,994


 


262,015,519




Total liabilities


 


 


(5,048,632)


 


(5,899,546)




Less: non-controlling interests


 


 


(39,823,748)


 


(49,381,639)




NAV


 


 


194,425,614


 


206,734,334




Number of ordinary shares issued 


 


 


137,671,576


 


137,671,576




NAV per share


 


 


1.41


 


1.50




Non-controlling interest
At 31 December 2020, the non-controlling interest corresponds to the 35% participation of Meliã Hotels International S.A. in the equity of HOMASI and the 20% participation of Meliã Hotels International S.A. in the equity of Mosaico Hoteles.  
The non-controlling interests in the above companies are as follows:




 


 


 


31 Dec 2020
US$


 


31 Dec 2019
US$




 


 


 


 


 


 




Non-controlling interest of HOMASI


 


 


37,235,538


 


46,878,858




Non-controlling interest of Mosaico Hoteles


 


 


2,588,210


 


2,502,781




Total non-controlling interests


 


 


39,823,748


 


49,381,639




 
The movement of the non-controlling interests is as follows:




 


 


 


31 Dec 2020
US$


 


31 Dec 2019
US$




 


 


 


 


 


 




Initial balance 


 


 


49,381,639


 


55,674,370




Interest of non-controlling interest in net (loss)/income


 


 


(10,216,756)


 


(5,633,673)




Net other comprehensive income/(loss) to be reclassified to profit or loss in subsequent periods


 


 


4,038,410


 


1,105,415




Cash distribution to non-controlling interest


 


 


(3,463,951)


 


(1,786,874)




Capital contributions from non-controlling interest


 


 


84,406


 


22,401




Final balance


 


 


39,823,748


 


49,381,639




 


 


 


 


 


 




The movement of the non-controlling interests HOMASI is as follows:




 


 


31 Dec 2020
US$


 


31 Dec 2019
US$


 




 


 


 


 


 


 




Initial balance 


 


46,878,858


 


54,161,837


 




Interest of non-controlling interest in net (loss)/income 


 


(10,217,779)


 


(6,546,691)


 




Net other comprehensive income/(loss) to be reclassified to


 


 


 


 


 




profit or loss in subsequent periods


 


4,038,410


 


1,105,415


 




Cash distribution to non-controlling interest


 


(3,463,951)


 


(1,841,703)


 




 


 


 


 


 


 




Final balance


 


37,235,538


 


46,878,858


 




 
 
The movement of the non-controlling interests of Mosaico Hoteles is as follows:




 


 


 


31 Dec 2020
US$


 


31 Dec 2019
US$


 




 


 


 


 


 


 


 




Initial balance 


 


 


2,502,781


 


-


 




Interest of non-controlling interest in net income


 


 


1,023


 


913,019


 




Non-controlling interest transferred from Mosaico B.V.


 


 


-


 


1,567,361


 




Capital contributions from non-controlling interest


 


 


84,406


 


22,401


 




Final balance


 


 


2,588,210


 


2,502,781


 




 


 


 


 


 


 


 




The movement of the non-controlling interests of Mosaico B.V. is as follows:




 


 


 


31 Dec 2020
US$


 


31 Dec 2019
US$


 




 


 


 


 


 


 


 




Initial balance 


 


 


-


 


1,512,533


 




Interest of non-controlling interest in net loss


 


 


-


 


(1)


 




Capital contributions from non-controlling interest


 


 


-


 


-


 




Non-controlling interest transferred to Mosaico Hoteles S.A.


 


 


-


 


(1,512,532)


 




Final balance


 


 


-


 


-


 




 


 


 


 


 


 


 




The principal financial information of HOMASI, Mosaico Hoteles and Mosaico B.V. for the years ended 31 December 2020 and 2019 is as follows:




 


 


HOMASI


 


Mosaico Hoteles S.A.


 


Mosaico BV.


 




 


 


2020
US$
000's


 


2019
US$
000's


 


2020
US$
000's


2019
US$
000's


 


2020
US$
000's


 


2019
US$
000's


 




 


 


 


 


 


 


 


 


 


 


 


 


 




Current assets


 


3,347


 


6,316


 


24


104


 


-


 


-


 




Non-current assets


 


103,184


 


127,888


 


13,000


12,750


 


-


 


-


 




Current liabilities


 


(144)


 


(264)


 


(83)


(340)


 


-


 


-


 




Equity


 


(106,387)


 


(133,940)


 


(12,941)


(12,514)


 


-


 


-


 




 


 


 


 


 


 


 


 


 


 


 


 


 




 


 


 


 


 


 


 


 


 


 


 


 


 




Income


 


6,311


 


11,615


 


250


4,751


 


-


 


-


 




Expenses


 


(46,055)


 


(30,320)


 


(245)


(186)


 


-


 


-


 




Depreciation


 


-


 


-


 


-


-


 


-


 


-


 




Taxation


 


-


 


-


 


-


-


 


-


 


-


 




Net income/(loss) for the year


 


(39,744)


 


(18,705)


 


(5)


4,565


 


-


 


(7)


 




Other comprehensive income


 


12,192


 


3,158


 


-


-


 


-


 


-


 




Total comprehensive income/(loss)


 


(27,552)


 


(15,547)


 


(5)


4,565


 


-


 


(7)


 




 
11.                 Reportable operating segments
IFRS 8 requires the Group to report on where primary business activities are engaged and where the Group earns revenue, incurs expenses and where operating results are reviewed by chief operating decision maker about resources allocated to the segment and assess its performance and for which discrete financial information is available.  The primary segment reporting format of the Group is determined to be business segments as the Group's business segments are distinguishable by distinct financial information provided to and reviewed by the chief operating decision maker in allocating resources arising from the products or services engaged by the Group.  No geographical information is reported since all investment activities are located in Cuba.  The operating businesses are organised and managed separately through different companies.  For management purposes, the Group is currently organised into three business segments: 
Ø Commercial property: Activities concerning the Group's interests in commercial real estate investments in Cuba.
Ø Tourism / Leisure: Activities concerning the Group's interests in hotel investments in Cuba and operations of a travel agency that provides services to international clients for travel to Cuba.
Ø Other: Includes interest from loans and lending facilities, the Group entered into the Construction Facility with TosCuba for the purpose of extending to TosCuba part of the funding necessary for the construction of the Meliã Trinidad Playa Hotel and also includes a facility provided to FINTUR (see note 6).
Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment.  Segment performance is evaluated based on operating income or loss and is measured consistently with operating income or loss in the consolidated financial statements.  The Group has applied judgment by aggregating its operating segments according to the nature of the underlying investments. Such judgment considers the nature of operations, types of customers and an expectation that operating segments within a reportable segment have similar long-term economic characteristics.




 


31 December 2020
US$




 


Commercial property


Tourism / Leisure


Other


Total
 




Total assets


85,371,003


123,678,118


30,248,873


239,297,994




Total liabilities


(1,977,422)


(3,071,210)


-


(5,048,632)




Total net assets


83,393,581


120,606,908


30,248,873


234,249,362




 


 


 


 


 




Dividend income


6,948,316


6,310,596


-


13,258,912




Other income


58


6,113


1,899,410


1,905,581




Change in fair value of equity investments


(5,268,689)


(36,645,587)


-


(41,914,276)




Allocated expenses 


(1,819,091)


(2,272,417)


(341,651)


(4,433,159)




Foreign exchange gain 


-


-


1,157,566


1,157,566




Net income


(139,406)


(32,601,295)


2,715,325


(30,025,376)




 
Other comprehensive loss


 


11,538,310


 


11,538,310




Total comprehensive income/(loss)


(139,406)


(21,062,985)


2,715,325


(18,487,066)




 


 


 


 


 




Other segment information:


 


 


 


 




Property, plant and equipment additions


4,897


 


 


4,897




Depreciation


34,305


5,340


 


39,645




 


 


 


 


 




 
 


31 December 2019
US$
 




 


Commercial property


Tourism / Leisure


Other


Total
 




 


 


 


 


 




Total assets


91,969,762


149,273,530


20,772,227


262,015,519




Total liabilities


(2,345,827)


(3,553,719)


-


(5,899,546)




Total net assets


89,623,935


145,719,811


20,772,227


256,115,973




 


 


 


 


 




Dividend income


9,133,233


11,537,327


-


20,670,560




Other income


-


15,426


820,588


836,014




Change in fair value of equity investments


10,537,071


(25,195,633)


-


(14,658,562)




Allocated expenses 


(2,525,970)


(1,913,614)


(79,425)


(4,519,009)




Foreign exchange gain


-


-


(383,162)


(383,162)




Net income


17,144,334


(15,556,494)


358,001


1,945,841




 
Other comprehensive loss


-


3,158,328


21,250


3,179,578




 


 


 


 


 




Total comprehensive income/(loss)


17,144,334


(12,398,166)


379,251


5,125,419




Other segment information:


 


 


 


 




Property, plant and equipment additions


47,893


-


-


47,893




Depreciation


32,416


5,646


-


38,062




12.                 Related party disclosures
Compensation of Directors
Each Director receives a fee of £35,000 (US$47,628) per annum with the Chairman receiving £40,000 (US$54,432).  The Chairman of the Audit Committee also receives an annual fee of £40,000 (US$54,432).  The Chairman and Directors are also reimbursed for other expenses properly incurred by them in attending meetings and other business of the Group.  No other compensation or post-employment benefits are provided to Directors. Total Directors' fees including the fees of the Chairman, for the year ended 31 December 2020 were US$232,677 (year ended 31 December 2019: US$239,085). 
Transactions with other related parties
Transactions and balances between the Group and the joint venture companies included within the equity investments of the Group are detailed in notes 5, 6, 7 and 8.  
CPC and GrandSlam Limited, wholly-owned subsidiaries of the Group, lease office space totalling 319 square meters from Monte Barreto, a commercial property investment in which the Group holds a 49% interest.  The rental charges paid under these leases are accounted for in operational costs and for the year ended 31 December 2020 amounted to US$24,500 (2019: US$ US$24,500) with an average rental charge per square meter at 31 December 2020 of US$37.64 (2019: US$37.64) plus an administration fee of US$9.75 per square meter.  The Group has elected to use the recognition exemption for lease contracts that, at the commencement date, have a lease term of 12 months or less and do not contain a purchase option. The Group has assessed that there is not a material impact to the consolidated financial statements as a result of the adoption of IFRS 16.
 
Transactions with Investment Manager
ASFML is a wholly-owned subsidiary of Standard Life Aberdeen plc which has an interest at 31 December 2020 in 9,747,852 shares of the stated capital (2019: 9,747,852).  For further discussion regarding transactions with the Investment Manger see note 14.
 
Interests of Directors and Executives in the stated capital
At 31 December 2020 John Herring, a Director of CEIBA, had an indirect interest in 40,000 shares (2019: 40,000 shares).
At 31 December 2020 Peter Cornell, a Director of CEIBA, has an indirect interest in 100,000 shares (2019: 100,000 shares).
At 31 December 2020 Trevor Bowen a Director of CEIBA, has an indirect interest in 43,600 shares (2019: 43,600 shares).
At 31 December 2020 Colin Kingsnorth, a Director of CEIBA, is a director and shareholder of Laxey Partners Limited ("Laxey").  Laxey holds 23,736,481 shares (2019: 17,303,252 shares).  Funds managed by Laxey hold 7,242,835 shares (2019: 13,676,064 shares).
At 31 December 2020 Sebastiaan A.C. Berger, the Investment Manager's fund manager and Chief Executive Officer of CEIBA, has an interest in 3,273,081 shares (2019: 3,273,081 shares).
At 31 December 2020 Cameron Young, Chief Operating Officer of CEIBA, has an indirect interest in 4,129,672 shares (2019: 4,129,672 shares).  
At 31 December 2020 Paul S. Austin, Chief Financial Officer of CEIBA, has an interest in 144,000 shares (2019: 144,000).
13.                 Basic and diluted earnings per share
The earnings (loss) per share have been calculated on a weighted-average basis and are arrived at by dividing the net income for the year/period attributable to shareholders by the weighted-average number of shares in issue. 




 


31 Dec 2020
US$


 


31 Dec 2019
US$




Weighted average of ordinary shares in issue


137,671,576


 


137,671,576




Net (loss)/income for the year attributable to the shareholders


(19,808,620)


 


7,579,514




Basic and diluted (loss)/earnings per share


(0.14)


 


0.06




14.                 Investment Manager   
On 31 May 2018, the Group entered into a Management Agreement under which ASFML was appointed as the Group's alternative investment fund manager to provide portfolio and risk management services to the Group.  The Management Agreement took effect on 1 November 2018.  ASFML has delegated portfolio management to the Investment Manager.  Both ASFML and the Investment Manager are wholly-owned subsidiaries of Standard Life Aberdeen plc.   
Pursuant to the terms of the Management Agreement, ASFML is responsible for portfolio and risk management on behalf of the Group and will carry out the on-going oversight functions and supervision and ensure compliance with the applicable requirements of the AIFM Rules. Under the terms of the Management Agreement, ASFML is entitled, with effect from 1 November 2018, to receive an annual management fee at the rate of 1.5 per cent of Total Assets.  For this purpose, the term Total Assets means the aggregate of the assets of the Company less liabilities on the last business day of the period to which the fee relates (excluding from liabilities any proportion of principal borrowed for investment and treated in the accounts of the Company as current liabilities). The annual management fee payable by the Group to ASFML will be lowered by the annual running costs of the Havana operations of CEIBA Property Corporation Limited, a subsidiary of the Group. The management fees earned by the Investment Manager for the year ended 31 December 2020 were US$2,864,518 (2019: US$2,985,429). In order to assist the Group with its cash flow requirements the Investment Manager has agreed to defer payment of a portion of its fees earned during 2020 totaling US$1,129,709 until 2022 (see note 9). 
There are no performance, acquisition, exit or property management fees payable to ASFML or the Investment Manager.
In connection with the Management Agreement, ASFML paid the Group US$5,000,000 for the purpose of compensating the Group for the costs related to the initial public offering and the listing of its shares on the SFS as well as for releasing and making available the Group's internal management team to ASFML.  In the event that the Management Agreement is terminated prior to the fifth anniversary of its coming into effect, the Group must pay to ASFML a prorated amount of the US$5,000,000 based on the amount of time remaining in the five year period. As such, this payment has been recorded as deferred liability and is being amortised over the five year period.  The amount amortised each period is accounted for as a reduction of the management fee and the original effective interest rate applied in calculating the instruments amortised cost is materially equal to a market interest rate.  At 31 December 2020, the amount of the payment recorded as a deferred liability is US$2,833,333 (2019: US$3,833,333) with US$1,000,000 (2019: US$1,000,000) being the current portion and US$1,833,333 (2019: US$2,833,333) being the non-current portion. 
For the year ended 31 December 2020, the amount of the payment amortised and recorded as a reduction of the management fee expense in the consolidated statement of comprehensive income was US$1,000,000 (2019: US$1,000,000):




 


2020


 


2019




 


US$


 


US$




Management fees earned 


2,864,518


 


2,985,429




Amortisation of deferred liability 


(1,000,000)


 


(1,000,000)




Management fee expense


1,864,518


 


1,985,429




 


 


 


 




15.                 Commitments and contingencies 
Operating lease commitments 
The rental charges paid under operating leases accounted for in operational costs of the statement of comprehensive income for the year ended 31 December 2020 amounted to US$24,500 (2019: US$24,500).
TosCuba Construction Facility 
In April 2018, the Group entered into the TosCuba Construction Facility for the purpose of extending to TosCuba part of the funding necessary for the construction of the Meliã Trinidad Península Hotel.  The Construction Facility is in the maximum principal amount of US$45,000,000, divided into two separate tranches of US$22,500,000 each, US$20,502,533 (2019: US$10,928,702) of which has been advanced as at 31 December 2020.  The Group has the right to syndicate Tranche B of the Construction Facility to other lenders (see note 6). 
FINTUR Facility
Since 2002, the Company has arranged and participated in numerous secured finance facilities extended to FINTUR, the Cuban government financial institution for Cuba's tourism sector.  The rights of the Company under these facilities are limited to receiving principal and interest payments (SPPI model). The facilities are fully secured by offshore tourism proceeds from numerous internationally managed hotels.  
The Group has a successful 19-year track record of arranging and participating in over €150 million of facilities extended to FINTUR, with no defaults occurring during this period.
The Company had a €4,000,000 participation in Tranche A as well as a €2,000,000 participation in Tranche B of the most recent facility executed in March 2016 and amended in 2019.  The total four-year facility had a full principal amount of €36,000,000 with an 8% interest rate.  The facility was operating successfully without delay or default until March 2020, at which time all Cuban hotels were ordered to be closed as a result of the Covid-19 pandemic.  The Company subsequently granted a further grace period to FINTUR and consolidated all amounts then outstanding under the two existing tranches into a new Tranche C.  As at 31 December 2020 the principal amount of €1,716,667 (US$2,110,795) (2019: €2,883,333 (US$3,230,171)) was outstanding under the Company's participation in Tranche C of the facility.  
16.                 Financial risk management
Introduction
The Group is exposed to financial risks that are managed through a process of identification, measurement and monitoring and subject to risk limits and other controls.  The objective of the Group is, consequently, to achieve an appropriate balance between risk and benefits, and to minimise potential adverse effects arising from its financial activity.
The main risks arising from the Group's financial instruments are market risk, credit risk and liquidity risks. Management reviews policies for managing each of these risks and they are summarised below.  These policies have remained unchanged since the beginning of the period to which these consolidated financial statements relate.
Market risk
Market risk is the risk that the fair value of future cash flows of financial instruments will fluctuate due to changes in market variables.  Market price risk comprises two types of risks: foreign currency risk and interest rate risk.  The Group is not materially exposed to market price risk.
(i) Foreign currency risk 
Currency risk is the risk that the value of a financial instrument denominated in a currency other than the functional currency will fluctuate due to changes in foreign exchange rates.
The statement of comprehensive income and the net value of assets can be affected by currency translation movements as certain assets and income are denominated in currencies other than US$. 
Management has identified the following three main areas of foreign currency risk:
·     Movements in rates affecting the value of loans and advances denominated in Euros;
·     Movements in rates affecting the value of cash and cash equivalents denominated in Euros; and
·     Movements in rates affecting any interest income received from loans and advances denominated in Euros.
The sensitivity of the income (loss) to a variation of the exchange rate (EUR/US$) in relation to Euro denominated assets is the following:  




Effect of the variation in the foreign exchange rate
%


 


 
Income (loss) 
31 Dec 2020
US$


 
Income (loss) 
31 Dec 2019
US$




+15
+20
-15
-20


 


1,202,344
1,603,125
(1,202,344)
(1,603,125)


1,882,162
2,509,549
(1,882,162)
(2,509,549)




(ii) Interest rate risk
Interest rate risk is the risk that the fair value of future cash flows may fluctuate due to changes in market interest rates. 
At any time that it is not fully invested in equities, surplus funds may be invested in fixed-rate and floating-rate securities both in Euro and in currencies other than Euro.  Although these are generally short-term in nature, any change to the interest rates relevant for particular securities may result in either income increasing or decreasing, or management being unable to secure similar returns on the expiry of contracts or the sale of securities.  In addition, changes to prevailing rates or changes in expectations of future rates may result in an increase or decrease in the value of securities held. In general, if interest rates rise, income potential also rises but the value of fixed rate securities may decline.  A decline in interest rates will in general have the opposite effect.
As the only interest-bearing financial instruments held by the Group are fixed rate assets measured at amortised cost, the Group has no material interest rate risk and therefore no sensitivity analysis has been presented.
The interest rate risk profile of the Group's consolidated financial assets was as follows:
 




 


Total
US$


 


Fixed
rate
US$


 


Floating
rate
US$


 


Non-interest
bearing
US$




 


 


 


 


 


 


 


 




31 December 2020


 


 


 


 


 


 


 




Equity investments (US$)


197,921,225


 


-


 


-


 


197,921,225




Loans and lending facilities (€)


4,116,169


 


4,116,169


 


-


 


-




Loans and lending facilities (US$)


16,106,466


 


16,106,466


 


-


 


-




Accounts receivable and accrued income (US$)


16,052,751


 


-


 


-


 


16,052,751




Accounts receivable and accrued income (€)


296,925


 


-


 


-


 


296,925




Cash at bank (€)


3,992,756


 


-


 


    -


 


3,992,756




Cash at bank (US$)


210,970


 


-


 


                  -


 


210,970




Cash at bank (GBP)


61,654


 


-


 


-


 


61,654




Cash on hand (GBP)


272


 


-


 


-


 


272




Cash on hand (€)


130


 


-


 


-


 


130




Cash on hand (US$)


1,058


 


-


 


-


 


1,058




Cash on hand (CUC)


4,020


 


-


 


-


 


4,020




 




 


Total
US$


 


Fixed
rate
US$


 


Floating
rate
US$


 


Non-interest
bearing
US$




31 December 2019


 


 


 


 


 


 


 




Equity investments (US$)


227,340,559


 


-


 


-


 


227,340,559




Loans and lending facilities (€)


3,230,171


 


3,230,171


 


-


 


-




Loans and lending facilities (US$)


9,915,549


 


9,915,549


 


-


 


-




Accounts receivable and accrued income (US$)


7,736,695


 


-


 


-


 


7,736,695




Accounts receivable and accrued income (€)


121,621


 


-


 


-


 


121,621




Cash at bank (€)


11,230,891


 


-


 


    -


                


11,230,891




Cash at bank (US$)


1,191,898


 


-


 


                  -


          


1,191,898




Cash at bank (GBP)


663,606


 


-


 


-


 


663,606




Cash on hand (€)


996


 


-


 


-


 


996




Cash on hand (US$)


1,724


 


-


 


-


 


1,724




Cash on hand (CUC)


13,463


 


-


 


-


 


13,463




Credit risk                                                                                                                                                                                                 
Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation, expected credit losses are measured using probability of default, exposure at default and loss given default.  Management considers both historical analysis and forward-looking information in determining an expected credit loss. Refer to note 6 for the assessment of the expected credit loss for loans and lending facilities. 
Maximum exposure to credit risk
The table below shows the maximum exposure to credit risk for each component of the consolidated statement of financial position as well as future loan commitments, irrespective of guarantees received: 




 


31 Dec 2020
US$


 


31 Dec 2019
US$




 


 


 


 




Loans and lending facilities


20,222,635


 


13,145,720




Future loan commitments (TosCuba Construction Facility) (i)


30,997,467


 


30,584,451




Accounts receivable and accrued income


16,349,676


 


2,142,673




Cash and cash equivalents


4,270,860


 


13,102,578




Total maximum exposure to credit risk


71,840,638


 


58,975,422




(i) The TosCuba Construction Facility is secured by future income of the hotel under construction and 50% of the principal construction facility amount is further secured by a guarantee given by Cubanacán S.A., Corporación de Turismo y Comercio Internacional, the Cuban shareholder of TosCuba S.A., backed by income from another hotel in Cuba. The credit risk has significantly changed from the prior year due to COVID 19 and the prevailing economic conditions. As a result of the risk moving from stage 1 to 2 of the IFRS ECL impairment model, management has assessed the expected credit loss over the lifetime of the future loan commitments to be immaterial to the Group.
The Group holds its cash and cash equivalents at financial institutions located in the countries listed below. Also included in the following table are the credit ratings of the corresponding financial institutions, as determined by Moody's:




 


Credit


 


31 Dec 2020


 


31 Dec 2019




 


Rating


 


US$


 


US$




Cash at bank


 


 


 


 


 




Cuba 


Caa2


 


183,540


 


1,083,763




Guernsey


A2


 


152,420


 


725,110




Spain


Ba3


 


2,956,003


 


2,678,694




Spain


A2


 


20,538


 


18,913




Spain


Baa2


 


952,879


 


8,579,915




 


 


 


4,265,380


 


13,086,395




Cash on hand


 


 


 


 


 




Spain 


 


 


-


 


100




Cuba


 


 


5,480


 


16,083




The Netherlands


 


 


-


 


-




 


 


 


5,480


 


16,183




 


 


 


 


 


 




Total cash and cash equivalents


 


 


4,270,680


 


13,102,578




 
At 31 December 2020 and 31 December 2019, all cash and short-term deposits that are held with counter-parties have been assessed for probability of default; as a result no loss allowance has been recognised based on 12-month expected credit losses as any such impairment would be wholly insignificant to the Group. 
 
Guarantees received 
The amount and type of guarantees required depends on an assessment of the credit risk of the counter-party.  The Group has neither financial nor non-financial assets obtained as property on executed guarantees. See note 6 regarding guarantees obtained for loans and lending facilities.
Liquidity risk
Liquidity risk is the risk that the Group will encounter in realising its non-cash assets or otherwise raising funds to meet financial commitments. Assets principally consist of unlisted securities and loans, which are not readily realisable.  If the Group, for whatever reason, wished to dispose of these assets quickly, the realisation values may be lower than those at which the relevant assets are held in the consolidated statement of financial position. (For maturities of financial assets and liabilities refer to note 5, 6 and 9).
Although the Group has a number of liabilities (see note 9 - Accounts payable and accrued expenses, note 10 - Short-term borrowings and note 16 - commitments and contingencies), Management assesses the liquidity risk of the Group to be low because the Group has a sufficient amount of cash and cash equivalents.
The Group also has entered into the Construction Facility for the purpose of extending to TosCuba part of the funding necessary for the construction of the Meliã Trinidad Península Hotel (see note 6). The Construction Facility is in the maximum principal amount of US$45,000,000 of which US$20,502,533 was disbursed as at 31 December 2020 (31 December 2019: US$10,928,702 and the participation of the Group was US$16,106,466 (31 December 2019: US$9,915,552).  The Group has the right to syndicate Tranche B of the Construction Facility to other lenders
The principal of the Construction Facility is to be disbursed on a monthly basis on the percentage of construction completed in each preceding month. Prior to the Covid-19 pandemic, it was anticipated that the full amount of the Construction Facility would be disbursed by the end of 2020. However, the timing of construction has been affected by the pandemic and consequently the disbursement of the principal under the Construction Facility has been delayed and it is now anticipated that the final disbursement under the Construction Facility will be in July 2022. The Group currently has sufficient cash and cash equivalents to cover the full disbursement of the Construction Facility (see note 20 concerning the Bond Issue).
The estimated timing of cash outflows under the TosCuba Construction Facility entered into in April 2018 are as follows:




 


 


31 Dec 2020


 


31 Dec 2019




 


 


US$


 


US$




 


 


 


 


 




 Between 31 and 90 days


 


485,606


 


1,151,827




 Between 91 and 180 days


 


3,011,861


 


1,317,800




 Between 181 and 1 year


 


19,000,000


 


2,400,000




 Over 365 days


 


8,500,000


 


25,714,823




 


 


30,997,467


 


30,584,450




 
Capital management
The Group maintains an actively managed capital base to cover risks inherent in the business.  The Group manages its capital structure and makes adjustments in the light of changes in economic conditions and the risk characteristics of its activities. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividend payment to shareholders.  No changes were made in the objectives, policies, and processes from the previous period.
The capital base managed by the Group is composed of stated capital, reserves and retained profits that amount at 31 December 2020 and 2019 to a total of US$234,249,362 and US$256,115,973, respectively.  The Group is not subject to external capital requirements.
17.                 Fair value disclosures
 
Key sources of estimation uncertainty
Determining fair values
The determination of fair values for investment and financial assets and liabilities for which there is no observable market price requires the use of valuation techniques as described in note 3.9 (c).  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.
Critical accounting judgements in applying the Group's accounting estimates
Valuation of financial instruments
The Group's accounting policy on fair value measurements is discussed in note 3.9 (c).
The Group measures fair values using the following fair value hierarchy that reflects the significance of the inputs used in making the measurements:
·      Level 1: Quoted 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 includes instruments valued using: quoted prices in active markets for similar instruments; quoted prices for identical or similar instruments in markets that are considered less than active; or other valuation techniques for which all significant inputs are directly or indirectly observable from market data.
·      Level 3: Valuation techniques using significant unobservable inputs. This category includes all instruments for which 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 for which significant unobservable adjustments or assumptions are required to reflect differences between the instruments.
Fair values of financial assets and financial liabilities that are traded in active markets are based on quoted prices or dealer price quotations. The Group does not currently have any financial assets or financial liabilities trading in active markets.
For all other financial instruments, the Group determines fair values using valuation techniques.  Valuation techniques include net present value and discounted cash flow models, comparison to similar instruments for which market observable prices exist and other valuation models.  Assumptions and inputs used in valuation techniques include risk-free and benchmark interest rates and foreign currency exchange rates.  The objective of valuation techniques is to arrive at a fair value determination that reflects the price of the financial instrument at the reporting date that would have been determined by market participants acting at arm's length.
For certain instruments, the Group uses proprietary valuation models, which usually are developed from recognised valuation models. Some or all of the significant inputs into these models may not be observable in the market, and are derived from market prices or rates or are estimated based on assumptions.  Examples of instruments involving significant unobservable inputs include the equity investments of the Group in Cuban joint venture companies.  Valuation models that employ significant unobservable inputs require a higher degree of management judgement and estimation in the determination of fair value.  Management judgement and estimation are usually required for selection of the appropriate valuation model to be used, determination of expected future cash flows on the financial instrument being valued, selection of appropriate discount rates and an estimate of the amount of cash required for working capital needs of the joint ventures in order to determine if they hold any Excess Cash.
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 measurement is categorised:




 


 


31 December 2020
US$




 


 


Level 1 


 


Level 2


 


Level 3


Total




Financial assets at fair value through profit or loss


 


 


 


 


 


 


 




Equity investments


 


 


 


 


 


197,921,225


197,921,225




 


 


 


 


 


 


197,921,225


197,921,225




 


 


 




 


 


31 December 2019
US$




 


 


Level 1 


 


Level 2


 


Level 3


Total




Financial assets at fair value through profit or loss


 


 


 


 


 


 


 




Equity investments


 


-


 


-


 


227,340,559


227,340,559




 


 


-


 


-


 


227,340,559


227,340,559




 


 


 


 


 


 


 


 




The following table shows a reconciliation from the beginning balances to the ending balances for fair value measurements in Level 3 of the fair value hierarchy:




 


 


31 Dec 2020


 


31 Dec 2019




Unlisted private equity investments


 


US$


 


US$




 


 


 


 


 




Initial balance


 


227,340,559


 


238,795,681




Total gains recognised in income or loss


 


(41,914,276)


 


(14,658,562)




Foreign currency translation reserve


 


12,191,767


 


3,203,440




Acquisitions and capital contributions 


 


303,175


 


-




Final balance


 


197,921,225


 


227,340,559




 


 


 


 


 




Total losses for the year/period included in income or loss relating to assets and liabilities held at the end of the reporting year/period


 


(41,914,276)


 


(14,658,562)




 


 


(41,914,276)


 


(14,658,562)




18.                 Classifications of financial assets and liabilities
The table below provides a reconciliation of the line items in the Group's consolidated statement of financial position to the categories of financial instruments.




 


 


31 December 2020
US$




 
 


Note


Fair value through 
profit or loss 


 


Cash and Financial assets  at amortised cost  


 


Financial liabilities at amortised cost


Total
carrying
amount




 


 


 


 


 


 


 


 




Cash and cash equivalents


4


-


 


4,270,860


 


-


4,270,860




Accounts receivable and accrued income


5


-


 


16,349,676


 


-


16,349,676




Loans and lending facilities


6


-


 


20,222,635


 


-


20,222,635




Equity investments


7


197,921,225


 


-


 


-


197,921,225




 


 


197,921,225


 


40,843,171


 


-


238,764,396




 


 


 


 


 


 


 


 




Accounts payable and accrued expenses


9


-


 


-


 


2,215,299


2,215,299




Deferred liabilities


14


-


 


-


 


2,833,333


2,833,333




 


 


-


 


-


 


5,048,632


5,048,632




 


 


 




 


 


31 December 2019
US$




 


Note


Fair value through
profit or loss


 


Cash and Financial assets  at amortised cost  


 


Financial liabilities at amortised cost


Total
carrying
amount




 


 


 


 


 


 


 


 




Cash and cash equivalents


4


-


 


13,102,578


 


-


13,102,578




Accounts receivable and accrued income


5


-


 


7,858,316


 


-


7,858,316




Loans and lending facilities


6


-


 


13,145,720


 


-


13,145,720




Equity investments


7


227,340,559


 


-


 


-


227,340,559




 


 


227,340,559


 


34,106,614


 


-


261,447,173




 


 


 


 


 


 


 


 




Accounts payable and accrued expenses


9


-


 


-


 


2,066,213


2,066,213




Deferred liabilities


14


-


 


-


 


3,833,333


3,833,333




 


 


-


 


-


 


5,899,546


5,899,546




 
 
There were no reclassifications of financial assets during the year ended 31 December 2020 (year ended 31 December 2019: nil).
19.                 Audit fees  
Audit fees incurred for the period below: 




 


31 Dec 2020
US$


 


31 Dec 2019
US$




 


 


 


 




Audit fee expense 


270,909


 


465,514




20.                 Events after the reporting period
Cuban Monetary Reforms
On 1 January 2021 new monetary reforms adopted by the Cuban government came into effect.  The principal goals of the reforms include: (i) the unification of the two parallel Cuban currencies through the elimination of the Cuban Convertible Peso and the continuation of the Cuban Peso ("CUP"), (ii) the harmonisation of exchange rates at US$1 : CUP24, (iii) the reduction or removal of subsidies in the Cuban economy, and (iv) price and labour (salary, pension and social security) reforms aimed at correcting price levels.
The reforms are directly applicable to foreign investment vehicles operating in the country, including joint venture companies, who will need to convert all of their accounting records to CUP and carry out all local transactions within the economy in CUP going forward.  By contrast, all entities operating in the Special Development Zone of Mariel will continue to denominate and carry out their operations exclusively in US$.   
The reforms will profoundly affect the pricing and payment of goods and services throughout the economy, including the foreign investment sector, as well as salaries, pension and social security payments.  They are expected to remove significant distortions caused in the past by numerous exchange rates.  
The Company is presently determining the full impact that the new measures will have on the operations and financial reporting of the joint venture companies in which it participates, but it is likely that the functional currency of the joint venture companies will change from US$ to CUP as a result of the reforms.
Bond Issue
On 31 March 2021, the Company completed the issue of €25 million (US$29,312,500) 10.00% senior unsecured convertible Bonds ("Bonds").  The Bonds were listed on The International Stock Exchange (Channel Islands) on 13 April 2021.  The Bonds have a term of 5 years expiring on 31 March 2026, an interest rate of 10.00%, payable quarterly, and are convertible at the option of the Bondholder to Ordinary Shares of the Company, at any time, at a conversion price equal to the EURO equivalent of £1.043 (at the time of conversion, subject to adjustments).   After three years, the Company may redeem the Bonds in advance of their expiry in principal amounts of €2,500,000 or multiples thereof.  The proceeds of the Bonds will be used by the Company (i) to complete its funding obligations under the Construction Finance Facility relating to the construction of the Meliã Trinidad Península hotel, (ii) to advance the development of the GBM Mariel industrial logistics project, and (iii) for general corporate purposes.
ALTERNATIVE PERFORMANCE MEASURES
Alternative Performance Measures
 
Alternative performance measures are numerical measures of the Company's current, historical or future performance, financial position or cash flows, other than financial measures defined or specified in the applicable financial framework. The Directors assess the Company's performance against a range of criteria which are viewed as particularly relevant for closed-end investment companies.
 
NAV Per Share
The net asset value ('NAV') is the value of the investment company's assets, less any liabilities it has. The NAV per share is the NAV divided by the number of shares in issue. 
 
The NAV per share was US$1.41 / 103.8p as at 31 December 2020.
 
NAV Total Return
 
NAV total return involves investing the same net dividend in the NAV of the Company with debt at fair value on the date on which that dividend was earned. The table below provides information relating to the NAV of the Company for the years ending 31 December 2019 and 2020.




 


2020


2019




Opening NAV


206,734,334 


205,641,346 




Dividends paid


-


(8,560,689)




Net comprehensive (loss) / income for the year


(12,308,720) 


9,653,677 




IFRS Closing NAV 


194,425,614 


206,734,334 




Non-IFRS adjustment


2,833,333 


3,833,333 




Non-IFRS Closing NAV 


197,258,947 


210,567,667 




 
Discount to NAV
 
The discount reflects the amount by which the share price of the Company is below the NAV per share expressed as a percentage of the NAV per share. As at 31 December 2020, the share price was 84.5p / US$1.15 and the net asset value per share was 103.8p / US$1.41, the discount was therefore 18.6%.
 
ADDITIONAL NOTES TO THE ANNUAL FINANCIAL REPORT
 
The Annual General Meeting will take place at the registered office of the Company, Dorey Court, Admiral Park, St. Peter Port, Guernsey, GY1 2HT Channel Islands on 17 June 2021 at 2.00pm
 
Please note that past performance is not necessarily a guide to the future and that the value of investments and the income from them may fall as well as rise.  Investors may not get back the amount they originally invested.
 
The Annual Financial Report Announcement is not the Company's statutory accounts.  The above results for the year ended 31 December 2020 are an abridged version of the Company's full financial statements, which have been approved and audited with an unqualified report.  The Annual Report and financial statements will be delivered to the Guernsey Financial Services Commission in due course.
 
The audited Annual Report and financial statements will be posted in May 2021. Copies may be obtained during normal business hours from the Company's Registered Office, JTC Fund Solutions (Guernsey) Limited, Dorey Court, Admiral Park, St. Peter Port, Guernsey, GY1 2HT Channel Islands or from the Company's website, ceibalimited.co.uk*.
 
* Neither the content of the Company's website nor the content of any website accessible from hyperlinks on the Company's website (or any other website) is (or is deemed to be) incorporated into, or forms (or is deemed to form) part of this announcement.
 
By Order of the Board
JTC Fund Solutions (Guernsey) Limited 
Secretary
27 April 2021
For further information, please contact:




Aberdeen Standard Fund Managers Limited
Sebastiaan Berger / Evan Bruce-Gardyne


Tel:  +44 (0)20 7463 6000




 


 




Nplus1 Singer Advisory LLP
James Maxwell / James Moat (Corporate Finance)
James Waterlow (Sales)


Tel: +44 (0)20 7496 3000




 
JTC Fund Solutions (Guernsey) Limited


 
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