REG - Ceiba Investments Ld - Annual Financial Report
29/04/2022 10:00
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RNS Number : 7858J Ceiba Investments Limited 29 April 2022
29 April 2022
CEIBA INVESTMENTS LIMITED
(the "Company")
(TICKER CBA, ISIN: GG00BFMDJH11)
Legal Entity Identifier: 213800XGY151JV5B1E88
RESULTS FOR THE YEAR ENDED 31 DECEMBER 2021
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 Company's Bonds are listed on the
International Stock Exchange, Guernsey under the symbol CEIB1026 (ISIN:
GG00BMV37C27). The governance framework of the Company reflects that as an
investment company there are no employees, and the Directors, the majority of
whom are independent, are all non-executive. Like many other investment
companies, the investment management and administration functions are
outsourced 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 have direct interests in the underlying
properties. The Company also arranges and invests in financial instruments
granted in favour of Cuban borrowers.
FINANCIAL HIGHLIGHTS AS AT 31 DECEMBER 2021 IN £ AND US$ (FOREX: £/US$ =
1.3477)
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
2021 of £1:US$1.3477 (2020: £1=US$1.3608).
USD 31-Dec-21 31-Dec-20 % change
Total Net Assets (m) $160.3 $194.4 (17.5)%
NAV per Share (1) $1.16 $1.41 (17.5)%
Net Loss to shareholders (m) ($28.8) ($19.80) (45.5)%
Loss per share ($0.21) ($0.14) (50.0)%
GBP 31-Dec-21 31-Dec-20 % change
Total Net Assets (m) £118.96 £142.90 (16.7)%
NAV per Share (1) £0.864 £1.038 (16.7)%
Market Capitalisation (m) £88.1 £116.30 (24.7)%
Share price £0.64 £0.85 (24.7)%
Discount (1) (25.9)% (18.6)%
Shares in issue 137,671,576 137,671,576
Ongoing charges (1) 2.80% 2.91%
1 These are considered Alternative Performance Measures. See glossary for
more information.
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 ("AAIL"
or the "Investment Manager"). Both ASFML and AAIL are wholly-owned
subsidiaries of abrdn plc ("abrdn"), a publicly-quoted company on the London
Stock Exchange. References throughout this document to abrdn refer to both
the AIFM and the Investment Manager.
CHAIRMAN'S STATEMENT
At the time of publication of the 2020 Annual Report of CEIBA Investments
Limited ("CEIBA" or the "Company") in April 2021, both the Company and Cuba
were in the midst of the battle against the Covid-19 pandemic and at that time
the long-term impact of the virus and the timing of the expected return to
normality were difficult to predict with any degree of certainty. Overall,
Cuba has handled the virus well and to date, around 10.6 million people or 94%
of the population have received at least one vaccine dose and 87% are fully
vaccinated. Consequently, like many other countries, Cuba has now rolled
back many of the various restrictions, especially concerning travel, which had
been imposed to combat the virus. However, as global travel begins a slow
recovery there is no question that CEIBA has been severely impacted throughout
2020 and 2021 and will continue to suffer somewhat until a full return to
normal is achieved. Compounding the pandemic issues are the challenges
presented by the ongoing U.S. embargo against Cuba, the conflict between
Russia and Ukraine and the transitionary effects of recent monetary reforms
adopted by the Cuban government. Overall, CEIBA finds itself at present
trading in a very challenging environment.
CUBA MONETARY REFORMS
In the second half of 2020, the Cuban government undertook to adopt
significant monetary reforms, which your Board considers to be positive
overall. These reforms, which are generally referred to as the Tarea
Ordenamiento (TO), took effect on 1 January 2021 and included:
- the elimination of the Cuban Convertible Peso (CUC), which
previously traded at par with the U.S. Dollar (US$), thereby unifying the dual
currency system under a single currency: the Cuban Peso or CUP;
- a fixed official exchange rate between the CUP and the US$ of 24
to 1, and;
- the adoption of a system for allocating hard currency throughout
the economy intended to largely decentralise business decisions and provide
foreign investment vehicles and Cuban entities with real financial autonomy.
This is accomplished through the creation of "liquidity" rights (denominated
in US$) that can be used to exchange Cuban Pesos to hard currency for
international transfers on a decentralised basis.
While the Board considers these reforms to be a positive move the timing, in
hindsight, has been unfortunate. The lack of any easing of the U.S. Cuban
embargo under the Biden administration and the very slow resumption of
international travel in the face of the pandemic have severely impaired the
foreign exchange reserves and general liquidity position of the Cuban economy,
through reduced overseas remittances and greatly reduced tourism income.
What we are presently witnessing in Cuba as a result of the poor liquidity
position is a shortage of vital imported products, increased inflation and a
serious devaluation of the street value of the CUP. The Investment Manager's
report describes the reforms and their effects in further detail, but at
present the main uncertainty caused by them for CEIBA is in relation to the
income generated by Inmobiliaria Monte Barreto S.A. ("Monte Barreto") and the
Company's ability to realise such income in the form of hard currency dividend
payments.
RELATIONS WITH THE UNITED STATES
U.S.-Cuba relations had been expected to improve following the inauguration of
President Biden in January 2021, but disappointingly to date nothing has
changed from the Trump presidency and all U.S. sanctions have remained
stubbornly in place during 2021. In respect of U.S. personnel and entities,
the U.S. Cuban embargo legislation prohibits investments in Cuba, greatly
constrains family and other hard currency remittances, commercial transactions
and trade, and severely restricts travel. It is possible that following the
mid-term election in November 2022 we may see some relaxation of the rules in
accordance with the promises given prior to his election. Any initiatives to
improve the relationship between the two countries should have a very positive
impact on the Cuban economy and also on the Company's assets.
2021 REVIEW
Similar to its performance throughout the whole of 2020 and despite the
backdrop of the Covid-19 pandemic, Monte Barreto, the Cuban joint venture
company that owns and operates the Miramar Trade Center, which is Cuba's
leading mixed-use office and retail real estate complex, continued to trade
strongly throughout 2021 and occupancy levels remained well over 95%
throughout the year. Although revenues were down slightly as compared with
the prior year, net income in 2021 reached US$15.6 million for the year,
representing an 8.5% increase over the prior year and making 2021 the most
profitable year since incorporation of the joint venture. This increase in
profitability has largely been a result of the lower operating costs as a
result of the unification of the currency. The 2022 outlook for Monte
Barreto continues to be positive, with occupancy percentage levels expected to
remain in the high nineties throughout the year.
While Monte Barreto continues to trade well, there presently remains
considerable uncertainty over the impact of Cuba's monetary reforms on the
ability of the joint venture company to generate "liquid" hard currency income
from its operations (and consequently its ability to pay dividends to its
shareholders without depending on allocations of hard currency from the Cuban
authorities). This matter remains unresolved at present and discussions are
continuing between the joint venture partner and the relevant Cuban government
authorities to confirm the position. While this uncertainty remains, the
discount rates applied to future cash flows for the purpose of arriving at a
valuation for Monte Barreto have increased, resulting in a lower valuation for
CEIBA's present interest. In addition, due to the uncertainty on the timing of
payment of the dividends owed to the Company by Monte Barreto, the Company has
made a provision in its financial statements in the amount of US$12,281,408
representing the outstanding dividends receivable from Monte Barreto.
Throughout 2021, the global travel and hotel industries continued to be
severely impacted by the Covid-19 pandemic. During November 2021 Cuba
re-opened its borders to international tourism, but then the Omicron variant
of the virus spread globally and further delayed any material recovery in the
travel trade. As a result, in 2021 Cuba received fewer than 360,000 tourists
- 67% less than during 2020, and less than 10% of the 4 million tourists that
Cuba hosted during 2019, the last year before the pandemic.
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 re-opened in November 2021, having been closed since
arrival of the pandemic in March 2020. The Sol Palmeras remained open for
most of the year but traded on a heavily scaled-back basis and mainly to Cuban
nationals. The Meliã Habana Hotel in Havana remained open throughout 2021
and was one of the main quarantine hotels on the island, managing to maintain
positive operations throughout the year. Miramar had a negative EBITDA of
US$4.5 million, including a one-time foreign exchange expense of US$5.4
million relating to the conversion of monetary assets under the monetary
reforms. While the recovery in the tourist trade remains slow, a gradual
build up throughout 2022 is expected.
CEIBA's other hotel interest is 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. It should prove to be
an excellent addition to the hotel interests of the Company. Construction
has continued throughout the year, although at a reduced pace, and the
original contractor was replaced in the first half of 2021 following repeated
defaults in performance. Completion of the construction process is expected
to take place during 2022, with a soft opening scheduled for the first quarter
of 2023 and the official launch of the hotel during Cuba's international
Tourism Fair in May 2023.
DIVIDENDS
The Covid pandemic has clearly had a very negative impact on the revenues
generated by the Company's hotel interests and it was decided, following its
onset, that it was vital that CEIBA should maintain sufficient cash to meet
all of its existing and future undertakings. Accordingly, the dividend
policy was suspended in 2020 and no dividend has been paid since then. The
Board would very much like to reinstate the payment of dividends but, in view
of there still being considerable uncertainty as to how long it will take to
see a return of normal tourism numbers and with the added uncertainty of the
impact of the monetary reforms on the dividends payable by Monte Barreto, it
has been decided to maintain the present position for another year.
Accordingly, it is not intended that any dividend be paid to shareholders in
2022. This stance will be kept under constant review and it remains the
Board's intention to reinstate the dividend as soon as appropriate.
BOARD
I am grateful to the Board for their commitment and input during another
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. In this latter regard, I am delighted to welcome Jemma Freeman to
the board. She was appointed in October 2021 and is the Executive Chairman
of Hunters & Frankau Limited, the exclusive distributor for Habanos S.A.'s
cigar portfolio in the United Kingdom. The Freeman family have been involved
with cigars since the 1800's and with Cuba since the 1920's when they owned
cigar factories in Havana. She brings a wealth of experience, skills and
diversity to the Board, in addition to her deep knowledge and understanding of
the Cuban business environment, complementing those of our existing directors.
THE INVESTMENT MANAGER
Aberdeen Standard Fund Managers Limited, a wholly owned subsidiary of abrdn
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 difficult times.
John Herring
Chairman
28 April 2022
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 (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 restrictions above apply at the time of investment and 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)*
· Net asset value total return*
· Market capitalisation
· Premium / Discount to NAV*
· 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
Introduction
The Company is exposed to a variety of risks and uncertainties. The Board,
through the Audit Committee, is responsible for the management of risk and has
put in place a regular and robust process to identify, assess and monitor the
principal risks and uncertainties facing the business. A core element of
this process is the Company's risk register which identifies the risks facing
the Company and identifies 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 also 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
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 faced by the
Company during the financial year 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.
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. The operation of key
controls in the Investment Manager's and other third party service providers
risk management processes and how these apply to the Company's business are
reviewed regularly by the Audit Committee along with internal control reports
from these entities.
Type of Risk Description and Possible Impact Mitigating Action Trend
Emerging Risks relating to the Cuban Financial System
Cuban Financial Reforms - Financial Autonomy Rules During the second half of 2020 and continuing throughout 2021, in the midst of The Investment Manager has closely followed all developments relating to the á
the economic disruption caused by the Covid-19 pandemic and strengthened adoption and implementation of these new measures, and has communicated its
sanctions maintained in place by the U.S. government, the Cuban government views and interacted regularly at all appropriate levels in order to extend
adopted new financial reforms aimed at creating a new objective system for the their application to the operations of the joint venture companies in which
allocation of limited liquidity reserves within the economy and intending to the Company has a participation.
provide "real financial autonomy" to Cuban entities, including foreign
investment vehicles such as the joint venture companies in which the Company Although the interpretation of the new financial autonomy rules, as well as
invests. These reforms set fixed levels of "liquidity" for various types of the practical ability of the Cuban financial system to successfully implement
income and largely remove the requirement to obtain centralised foreign them in the short term, remain subject to significant uncertainty, the
exchange approvals for international payments (such as the distribution of Investment Manager believes that the new financial autonomy rules will in most
dividends to foreign shareholders) sourced from the "liquid" financial cases create an objective (non-discretionary) and largely decentralised
resources over which the entities have autonomous/decentralised control. mechanism for the allocation of liquid resources, thereby significantly
This new "liquidity" generated automatically in the course of operations is in increasing the financial autonomy of joint venture companies and representing
addition to the regular centralised/government allocations of liquidity, which a real reduction in liquidity risk.
must still be provided (as was the case prior to adoption of the reforms) in
the event that the financial autonomy rules do not generate sufficient liquid Where insufficient liquidity may be generated from operations, then the
resources from operations to cover international obligations. However, these relevant joint venture companies will remain subject, as before, to the more
measures are being implemented gradually and do not at present apply to all general system of centralised allocation of liquidity, with the inherent risks
economic sectors or to all joint venture companies. In particular, the new that this implies.
rules are not presently being applied to joint venture companies in the
commercial real estate sector (such as Inmobiliaria Monte Barreto S.A. in
which the Company has a 49% interest) with the result that these companies
remain fully dependent on centrally assigned liquidity for their international
payments. The new measures may take time to show the intended effect or may
not have the stated positive impact on the liquidity position of the country,
or their application may not be fully extended to all of the joint venture
companies in which the Company has a participation, which may have a negative
effect of the affairs of the Company.
Currency Reform Risk As part of the 2020-2021 economic reform package adopted by the Cuban The currency devaluation risk associated with the imposition of the CUP as á
government in order to continue modernising the Cuban economy, new currency sole currency for operations is new and significant. The cash and currency
reforms aimed at harmonising exchange rates and eliminating Cuba's dual positions of each of the joint venture companies in which the Company has a
currency system required all foreign investment vehicles to convert and participation are continuously monitored for the purpose of reducing currency
denominate their assets and legal obligations, and to carry out all risk to the greatest extent possible. There are presently no hedging
transactions, in Cuban Pesos ("CUP" previously denominated and carried out in mechanisms available to mitigate this new risk.
US$). 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.
General Liquidity of the Cuban Financial System and Repatriation Risk The continued high levels of tension between the United States and Cuba and The Investment Manager actively monitors and manages the liquidity position of á
the maintenance by the Biden administration of harsh U.S. sanctions imposed the Company, its subsidiaries and the joint ventures, in which it invests to
during the Trump administration, which have resulted in steep reductions in the greatest extent possible so that cashflows of the Company are transferred
U.S. family remittances and travellers to Cuba, as well as the global fall in to bank accounts outside Cuba. The Investment Manager has no control or
international tourism and other economic shocks associated with the Covid-19 influence over the execution or timing of payments to be transferred by Cuban
pandemic, together with numerous transitional difficulties associated with the banks to the Company's international bank accounts.
implementation of the currency reform measures described above, have had
strong negative impacts on the fragile economic and liquidity positions in
Cuba. In the final months of 2021 and through the first quarter of 2022,
there was a marked deterioration in the timing of international transfers from
Cuba. The duration of these negative effects is unknown, and they may in
turn have a continuing negative impact on the ability of the joint venture
companies in which the Company has an interest to make distributions abroad,
which in turn may have a negative impact on the ability of the Company to
carry out its investment programme.
Risks relating to the War in Ukraine Cuba maintains strong historical, political and economic ties to Russia and to Although the conflict resulted in an abrupt halt of the tourists travelling á
Ukraine. The Russian-Ukrainian conflict that erupted in February 2022 from Russia and Ukraine to Cuba, the operator of the Company's tourism assets
resulted in an abrupt halt in Russia and Ukraine tourism to the island. has refocused its marketing efforts to attract tourists from its historical
Since the reopening of the tourism sector in November 2021, Cuba welcomed a principal tourist supplier (Canada) and other countries.
significant number of Russian and Ukranian tourists to the island. Further
aspects of the Russia-Cuba relationship may eventually be affected by the
conflict, including Russian investments in Cuba, banking relationships and
other areas.
Public Health Risk
Global Pandemic Risk Although Cuba and many other parts of the world appear to have now passed the The Board discusses current issues with the Investment Manager to limit the â
worst stage of the Covid-19 pandemic and to have reached, or be on the point impact of the pandemic on the business of the Company.
of reaching, a stage of declining numbers of new cases, hospitalisations and
deaths, the continued effects of the public health risks associated with the The Board recognises that tourism is particularly affected by the various
Covid-19 pandemic, including the arrival of new variants, may have a lasting travel restrictions that have been imposed and considers that this is a risk
and as yet unquantifiable negative impact on the global tourism industry, the that is likely to continue to impact upon the operating environment of the
economy of Cuba, and the operations and performance of the assets of the Company in the short term.
Company. The pandemic may directly or indirectly affect all other risk
categories mentioned in this matrix. 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.
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 The Company's investment strategy and objective is subject to regular review →
failure to adapt to changes in investor demand may lead to the Company to ensure that it remains attractive to investors. The Board considers
becoming unattractive to investors, a decreased demand for shares and a strategy regularly and receives strategic updates from the Investment Manager,
widening discount. 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.
Investment Restrictions Investing outside of the investment restrictions and guidelines set by the The Board sets, and monitors, its investment restrictions and guidelines, and →
Board could result in poor performance and inability to meet the Company's receives regular reports which include performance reporting on the
objectives, as well as a discount. 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.
Portfolio and Operational Risks
Joint Venture Risk The investments of the Group in Cuban real estate assets are made through Prior to entering into any agreement to acquire an investment, the Investment →
Cuban joint venture companies in which Cuban government entities hold an Manager will perform or procure the performance of due diligence on the
equity interest, giving rise to risks relating to the liquidity of proposed acquisition target. The Group tries to structure its equity
investments, government approval, corporate governance and deadlock. 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.
Real Estate Risk As an indirect investor in real estate assets, the Company is subject to risks The Investment Manager regularly monitors the level of real estate risk in the á
relating to property investments, including access to capital and finance, Cuban market and reports to the Board at each meeting regarding recent
global capital and financial market conditions, acquisition and development developments. The Investment Manager works closely with the on-the-ground
risk, competition, tenant risk, environmental risk and others, and the team, the external hotel managers and the joint venture managers to identify,
materialisation of these risks could have a negative effect on specific monitor and actively manage local real estate risk.
properties, development projects or the Group generally.
In the case of Monte Barreto, tenant risk has been augmented by the new
financial autonomy rules, which result amongst others in certain categories of
tenants paying their rents with varying degrees of liquidity. The Investment
Manager, together with the management team of Monte Barreto, now assesses the
impact of the new financial autonomy rules in all new leasing decisions.
Construction Risk As a developer and investor in new construction as well as refurbishment The Investment Manager regularly monitors all construction and refurbishment á
projects, the Company is subject to risks relating to the planning, execution activities carried out within Group companies and works closely with the
and cost of construction works, including the availability and transportation on-the-ground management team and the joint venture managers to identify,
of materials and the cost thereof, inclement weather, contractor risk, monitor and actively manage all construction risks. The Investment Manager
execution risk and the risk of delay. The materialisation of these risks reports to the Board at each meeting regarding recent developments in this
could have a negative effect on the implementation of development projects of respect. In the construction context, the availability and transportation of
the Group. construction materials have been significantly affected by the Covid-19
pandemic worldwide, thereby increasing construction costs.
Tourism Risk As an indirect investor in hotel assets, the Company is subject to numerous The Investment Manager regularly monitors the local and regional tourism â
risks relating to the tourism sector, both in outbound and inbound markets, markets and meets regularly with the external hotel management to identify,
including the cost and availability of air travel, the imposition of travel monitor and manage global and local tourism risk and to develop appropriate
restrictions by overseas governments, seasonal variations in cash flow, strategies for dealing with changing conditions. The Company aims to
demand variations, changes in or significant disruptions to travel patterns, maintain a diversified portfolio of tourism assets spanning various hotel
risk related to the manager of the hotel properties, and the materialisation categories (city hotel / beach resort, business / leisure travel, luxury /
of these risks could have a negative impact on specific properties or the family) in numerous locations across the island. As the world reemerges from
Company generally. the Covid-19 pandemic the Investment Manager is working closely with the
external hotel management to optimise the resumption of full scale operations
at the hotels in which the Company has an interest.
Valuation Risk Asset valuations may fluctuate materially between periods due to changes in As part of the valuation process, the Investment Manager engages an á
market conditions. The combined effects of higher levels of risk associated independent third party valuer to provide an independent valuation report on
with financial and monetary reforms, the continuation under the Biden each of the indirectly owned real estate assets of the Group. The valuations
administration of an aggressive U.S. sanction regime and the slower than are also subject to review by the Investment Manager's Alternatives Pricing
expected recovery of the worldwide tourism market in the face of the pandemic Committee.
have resulted in increased discount rates and lower income projections,
leading to a rise in the volatility of valuations.
Dependence on Third Party Service Providers The Company is dependent on the Investment Manager and other third parties for The Board receives reports from its service providers on internal controls and →
the provision of all systems and services relating to its operations and risk management at each Board meeting. It receives assurance from all its
investments, and any inadequacies in design or execution thereof, control significant service providers as well as back-to-back assurances where
failures or other gaps in these systems and services could result in a loss or activities are themselves sub-delegated to other third party providers with
damage to the Company. In addition, the continued high level of aggression which the Company has no direct contractual relationship. In the course of
of U.S. sanctions may limit the pool of service providers willing or able to its activities, the Management Engagement Committee of the Board reviews the
work with the Company. engagements of all third party service providers on an annual basis. Further
details of the internal controls which are in place are set out in the
Directors' Report.
Loss of Key Fund Personnel The loss of key managers contracted by the Investment Manager to manage the Under the Management Agreement, the Investment Manager has the obligation to →
portfolio of investments of the Group could impact performance of the Company. provide at all times 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.
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 The Company benefits from the services of its highly experienced on-the-ground ↑
economic and legal market, with a comparatively high level of uncertainty, and management team consisting of eight members. With a well-balanced mix of
a sensitive political environment. 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.
U.S. government restrictions relating to Cuba Tensions remain high between the governments of the United States and Cuba and The Investment Manager closely follows developments relating to the →
the U.S. government maintains numerous legal restrictions aimed at Cuba, relationship between the United States and Cuba and monitors all new
including the inclusion of Cuba on the U.S. list of state sponsors of restrictions adopted by the United States to measure their possible impact on
terrorism. Contrary to pre-election campaign statements and widely held the assets of the Group. The Group has adapted its investment model to the
initial expectations, the Biden administration has not taken any steps to existing sanctions, but the risk remains of further sanctions being adopted in
soften or suspend any restrictions against Cuba, although it is possible that the future.
it might do so in the future. 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 and its access to
third-party service providers, the value of its investments, the liquidity or
tradability of its shares, or its access to international capital and
financial markets.
Helms-Burton Risk On 2 May 2019, Title III of the Helms-Burton Act was brought fully into force At the time of acquiring each of its interests in Cuban joint venture →
by the Trump administration following 23 years of successive uninterrupted companies, the Company carried out extensive due diligence investigations in
suspensions. Numerous legal claims were subsequently launched before U.S. order to ensure that no claims existed under applicable U.S. legislation, and
courts against U.S. and foreign investors in Cuba, which has had and could in particular that there were no claims certified by the U.S. Foreign Claims
have a further negative impact on the foreign investment climate in Cuba and Settlement Commission under its Cuba claims program with respect to any of the
may hinder the ability of the Company to access international capital and properties in which the Company acquired an interest. However, given the
financial markets in the future. In light of the political nature of the broad definitions and terms of the Helms-Burton Act and its purpose of
Helms-Burton Act, and the fact that under Title III of the Act, Cuban persons creating legal uncertainty on the part of investors in Cuba, as well as the
who were not U.S. Persons at the time their property was expropriated but absence of any register of uncertified claims or case law, there is no certain
subsequently became U.S. Persons have the right to make claims, there is also way for the Company to verify beyond doubt whether or not a Helms-Burton
a risk that legal claims might be initiated against the Company or its action under Title III could be brought in respect to a particular property,
subsidiaries before U.S. courts. The Biden administration has not taken any or whether the Company may be deemed to indirectly profit or benefit from
steps to suspend or repeal Title III of the Helms-Burton Act, although it is certain activities carried out by other parties. The Company does not have
possible that it might do so in the future. any property or assets in the United States that could be subject to seizure.
Transfer Risk - U.S. Sanctions Numerous U.S. legal restrictions contained in the Cuban Assets Control The Investment Manager is conscious of and closely follows developments →
Regulations and other legal provisions target financial transactions, concerning the U.S. legal restrictions that target financial transactions and
instruments, and other assets in which there is a Cuban connection. As a assets. The Company does not carry out any international transfers in U.S.
result U.S. and international banks, clearing houses, brokers and other Dollars or through U.S. banks or intermediaries. The Investment Manager
financial intermediaries may refuse to deal with the Company or may freeze, manages the banking relationships of the Company and generally acts at all
block, refuse to honor, reverse or otherwise impede legitimate transactions or times so as to minimise the impact of these legal provisions on the legitimate
assets of the Company, even where no U.S. link is established. transactions and assets of the Company.
Currency Risk As a result of U.S. sanctions prohibiting the use of the U.S. dollar, the The Company does not hedge its foreign currency risks. á
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.
The risk relating to monetary reforms recently adopted by the Cuban government
imposing the use of the CUP are described elsewhere in this table.
Risks relating to Regulatory and Tax framework
Tax Risk Changes in the Group's tax status or tax treatment in any of the jurisdictions The Investment Manager regularly reviews the tax rules that may affect the ↑
where it has a presence may adversely affect the Company or its shareholders. 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.
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 19
to the Consolidated Financial Statements.
The Board will continue to assess these risks on an ongoing basis and is
confident that the procedures that the Company has put in place are sufficient
to ensure that the necessary monitoring of risks and controls has been carried
out throughout the reporting period.
INVESTMENT MANAGER'S REVIEW
2021 PERFORMANCE
The performance of CEIBA Investments Limited ("CEIBA" or the "Company") is
largely dependent on the fair values of the properties in which it has an
interest as calculated using discounted cash flow models by the independent
RICS valuer Arlington Consulting - Consultadoria Imobiliaria Limitada, trading
under the name Abacus ("Abacus"). As at 31 December 2021, the fair values of
all of the assets in which CEIBA Investments has an interest decreased, mainly
as a result of (i) a fall in projected income levels as a result of the
continued effects of the Covid-19 pandemic and its negative impact on the
Cuban tourism sector and the Cuban economy, (ii) the continuation under the
Biden administration of President Trump's intensified Cuba embargo policies,
and (iii) increased discount rates as a result of higher levels of perceived
risk in the present circumstances, in particular as regards the liquidity
issues faced by the country.
As at 31 December 2021, the Net Asset Value of the Company was US$160,322,589
(31 December 2020: US$194,425,614) and the NAV total return for the year was
-17.5 % (2020: -6.0 %). The loss on the change in the fair value of the
equity investments during the year was US$13,843,717 (2020: loss
US$41,914,276). The total dividend income from the Cuban joint venture
companies during 2021 was US$3,050,124 (2020: US$13,258,912). The net loss of
the Company for 2021 attributable to the shareholders was US$28,811,901
(2020: US$19,808,620).
INTRODUCTION
If there are two things that I have in my DNA, they are positivism and looking
at a brighter future instead of looking back.
After another difficult year, during which the country faced extremely
challenging conditions, by November 2021 Cuba had demonstrated to the world
that its home-grown Abdala and Soberana 2 vaccines were indeed effective in
the fight against Covid-19 and that its country-wide vaccination program had
been diligently implemented and resulted in rapidly falling numbers of new
cases and fatalities, and once again these qualities took the upper hand and I
thought that the Cuban economy had hit bottom and would begin rising to a
brighter future.
But at the start of Cuba's high tourism season, just as Cuba was reopening its
international borders and welcoming international travellers back to the
island, the Omicron variant of the Covid-19 virus emerged in South Africa and
rapidly spread throughout the world, causing a new wave of restrictive travel
measures aimed at slowing the swift pace of infections produced by the new
variant. These measures resulted in many travel cancellations from Canada
(historically Cuba's most important source of tourists during the very
important period from December to April each year). Despite this obvious
setback, tourist numbers began to improve, with Russia joining Canada as one
of the principal source markets. All of our hotels re-opened, occupancy
levels and profitability started to increase, and I hoped that Cuba's
precarious liquidity position would soon start to show signs of improvement!
However, once again positive momentum was short-lived.
When on 24 February 2022 Russia invaded Ukraine, all Russian (and Ukrainian)
travel came to an abrupt halt and Cuba once again found itself facing the
prospect of a difficult high season.
The general lack of liquidity within Cuba's economy during 2021, the
continuation under the Biden administration of the strengthened Trump
sanctions against Cuba and the present uncertainty regarding the timing of a
tourism recovery have all taken their toll and have forced CEIBA to make
downward adjustments to our asset valuations.
This has triggered that the 2021 year-end result of the Company is a net loss
attributable to the shareholders of US$28,811,901. The outlook for 2022 will
largely depend on how long the Russia-Ukraine conflict will last, how it will
impact world politics and Cuba's important relationships, and its effect on
international travel patterns and the recovery of Cuba's tourism industry.
To a lesser extent, the coming year could also be further affected by the rise
of any new variant of the Covid-19 virus.
In addition, starting in the final months of 2021 and continuing through to
today, the Cuban banking system has experienced significant delays in the
execution of payments instructed, even where such payments are made with the
required "liquidity" in accordance with the new financial autonomy rules.
This shows that the Cuban liquidity position is precarious, and this may make
it more challenging to continue implementing its program of monetary reforms.
Monetary Reforms
Cuba's recent monetary reforms, announced in 2020 and implemented in 2021,
eliminated Cuba's double currency and were undoubtedly planned on the basis of
a projected improvement in the country's precarious liquidity position that
was expected to result from a growing (not shrinking) economy. It introduced
a fixed official exchange rate of 24 Cuban Pesos to 1 United States Dollar and
was aimed primarily at improving financial discipline, transparency and
accountability within Cuba's state-owned enterprises.
However, the events described above and the continuation of U.S. sanctions
under the Biden administration (particularly those affecting family
remittances and U.S. travel) that were widely expected to be relaxed, jointly
had a negative impact on the liquidity position of the country and complicated
the implementation of the reforms, provoking numerous distortions in both the
private and foreign investment sectors.
In addition, the scarcity of hard currency income to pay for imported
products, resulting in shortages of basic products for sale in local currency
(CUP) shops, triggered significant inflation and a fall in the informal
exchange rate so that by the end of 2021 the street rate of exchange had
reached CUP75 to USD1, falling further to CUP 110 to USD 1 by 15 April 2022.
By contrast, joint ventures, international airlines and all state-owned
businesses were obliged to use the official rate of CUP24 to USD1, in turn
provoking undesired monetary arbitrage.
The government has not signalled any future devaluation of the CUP and instead
has argued that it hopes to close the discrepancy between the official and
informal rates through increased national production and an improved supply of
basic products in the CUP retail outlets.
By the end of 2021, the lack of liquidity in the economy also began to be
noticeable in delays in the execution of international payments made under the
financial autonomy rules, which in turn puts significant pressure on one of
the principal objectives of the monetary reforms for foreign trade and
investment, which is to guarantee financial autonomy and the repatriation of
profits.
The Colony
In March 2022 I visited Finca El Rosillo, a small privately owned farm next to
the main highway to Pinar del Rio Province where the owners produce a
delicious honey made by bees that do not sting. The bees create their
colonies in rotten tree trunks and protect them by sealing them off and
leaving only a single entry and exit that is constantly guarded to protect the
colony from its biggest enemy: hornets (that do sting). This seems to be a
good metaphor for the short-term strategy of Cuba: seal all points of entry,
grow the internal economy and avoid getting stung by hornets.
US Cuban Embargo - 60 Years Old
On 3 February 2022 the Cuban economy had endured 60 years under the U.S.
embargo, it having been first adopted by President Kennedy in 1962 as
Proclamation 3447 entitled Embargo on All Trade with Cuba, and having the main
purposes of stopping the spread of communism and causing "hunger, desperation
and overthrow of government." During the subsequent six decades, the legal
measures creating the embargo have ebbed and flowed, gaining or losing
strength in accordance with the prevailing political winds in Florida, but the
negative impact on the island has been constant.
In its present form, subsequent to the adoption of the Helms-Burton Act of
1996, the U.S. embargo against Cuba is enshrined in law and can only be
overturned by Congress, which would be no small feat in today's politically
divided reality in the United States. The embargo prohibits trade between
U.S. persons and Cuba, but its insidious negative effects also extend
extra-territorially to a large number of valid and legitimate transactions
between Cuba and its international partners, whether they be other sovereign
governments or, most importantly for the Company, foreign investors who invest
or trade on the island.
Following a significant relaxation of the embargo rules during the Obama
administration, the Trump administration resumed a much harder line and
returned the United States to a policy of strong aggression towards its
smaller neighbour. So far, the Biden administration has not relaxed any of
the harsher sanctions of the Trump era, notwithstanding his stated intent to
do so expressed during the presidential campaign in 2020.
In early March 2022, it was announced that the U.S. Embassy in Havana would be
re-staffed and would resume a certain number of direct consular services in
Havana. The expectation remains that some easing of the present sanctions
will be forthcoming, most likely in the areas of family remittances and the
facilitation of travel between the U.S. and Cuba.
Conflict in Ukraine
In February 2022, Russia invaded Ukraine. Both countries are traditional
allies of Cuba and both were important sources of tourists for the island
during parts of the pandemic and especially from the full reopening of the
Cuban tourism sector in November 2021 until the outbreak of the war. In
January and February 2022, Russian travellers were amongst the largest groups
of tourists to the island, roughly equal to Canada, which usually is the
leading source of travellers. The war has resulted in the cancellation of
most direct flights between Russia and Cuba, representing a further blow to
the Cuban tourism industry, already hard hit by two years of pandemic-related
hotel closures and travel restrictions. It remains unclear at present
whether Russian tourism to the island will rebound or whether other markets
will be able to make up the shortfall. The war in Ukraine is also expected to
have other indirect impacts on the Cuba economy in areas such as the price of
oil, shipping costs and the availability of ships to Cuba (especially from
Europe). Russian investments on the island may be affected, as well as banking
relationships.
PORTFOLIO ACTIVITY
The Miramar Trade Centre / Monte Barreto
The largest real estate holding of the Company is its 49% interest in
Inmobiliaria Monte Barreto S.A. ("Monte Barreto"), the Cuban joint venture
company that owns and operates the Miramar Trade Centre, a six-building
mixed-use commercial real estate complex comprising approximately 56,000
square metres (approximately 600,000 square feet) of net rentable area that
constitutes the core of the new Miramar business district in Havana.
Occupancy rates remained largely stable throughout the year, declining a
modest 1.6% from 98.2% at the beginning of the year to 96.6% at year-end.
The property suffered a small number of departures relating to the pandemic,
and the market has tightened somewhat. Revenues declined by 3.6% compared to
the prior year as a result of the lower occupancy rate and modest rent
incentives granted. However, Monte Barreto registered net income of US$15.6
million during the year (2020: US$14.4 million), representing an 8.5% increase
over the prior year and a new record for annual profit. The increase was
primarily the result of savings resulting from the monetary reforms
implemented during the year, including reduced operational expense (mainly
salary and electricity costs).
Demand for international-standard office accommodation in Havana remains
strong, predominantly from multi-national companies, NGOs and foreign
diplomatic missions. Monte Barreto remains the market leader. As a
consequence, the operational outlook for Monte Barreto in 2022 remains
positive, as we expect occupancy levels to remain in the high nineties
throughout the coming year. However, in light of the present market
conditions, which remain uncertain - particularly as regards liquidity - the
joint venture is applying its general strategy of rental increases as leases
are renewed on a case by case basis.
In accordance with the new provisions of Resolution 115 dealing with financial
autonomy and the allocation of hard currency resources, commercial real estate
activities have been excluded from some of the general rules relating to
"liquid" payments (the ability to transfer funds abroad on an autonomous
basis, without foreign exchange controls), and consequently the local payments
of many tenants of the joint venture are presently not received with liquidity
and conversely most local payments to be made by the joint venture are
similarly not made with liquidity. As a result, the joint venture is
presently operating under a mixed regime having reduced liquidity
requirements, in which certain liquid resources of the joint venture are
generated internally through operations, and certain resources are allocated
centrally.
Given the present limited financial autonomy of Monte Barreto, in combination
with the current economic situation and liquidity difficulties faced by the
country, Monte Barreto did not have sufficient liquid resources (whether
generated internally or allocated centrally) to pay significant dividends
payable to the Company during the past year. Management is currently
discussing potential solutions for the liquidity issues of Monte Barreto with
the relevant Cuban authorities and pending agreement and implementation of
such a solution accumulated profits remain in the joint venture company. In
addition to the above, hard currency transfers made by Cuban banks are
presently experiencing delays. Dividend income recorded by the Company from
Monte Barreto during the year was US$2.6 million, compared to US$6.9 million
in 2020. Due to the uncertainty on the timing of payment of the dividends
owed to the Company by Monte Barreto, the Company has made a provision in its
financial statements in the amount of US$12,281,408 representing the
outstanding dividends receivable from Monte Barreto.
The valuation of Monte Barreto has been adjusted downward at 31 December 2021
by US$13.7 million to US$67.7 million, representing a 16.9% decline as
compared with the December 2020 valuation. This was driven mainly by an
increase in the discount rate to 12.8% (2020: 9.8%) applied in the discounted
cash flow model of Monte Barreto in order to take into account the disruption
to the Cuban economy caused by the Covid-19 pandemic, continued U.S.
aggressive measures and the increased liquidity, transfer and currency risks
faced by Monte Barreto and its shareholders.
We expect these headwinds to remain present throughout 2022 and, as a result,
we believe that only part of the presently outstanding dividends will be paid
during the current year. Nevertheless, we believe that the pace of
distribution of dividends will pick up once again when the country re-emerges
from the present difficulties, which is not likely to occur until 2023.
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 Center);
- 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"), which also has a 17.5% equity interest in Miramar (and a 10%
equity interest in TosCuba).
Performance of the Hotels
As a result of the Covid-19 pandemic and the resulting collapse of the
worldwide travel industry, the Hotels once again faced an extremely
challenging business environment in 2021. While the Sol Palmeras and the
Meliã Habana hotels were able to maintain services throughout the year,
occupancy and room rates were reduced. The Meliã Las Americas and Meliã
Varadero hotels resumed operations towards the end of the year (in November
and December 2021, respectively) following the formal reopening of the Cuban
tourism industry in November 2021.
With two of its hotels closed throughout most of the year and the other two
operating at very low levels, together with the one-time foreign exchange
expense of US$5.4 million relating to the conversion of monetary assets under
the monetary reforms, the net loss after tax of Miramar was US$9.6 million
(2020: net loss of US$3.5 million). This also resulted in lower dividend
income earned by the Company from Miramar during the year of US$500 thousand,
compared to US$6.3 million in the prior year.
All four of the Hotels of Miramar are presently operating under volatile and
unpredictable market conditions. We believe that the Hotels are presently in
a very strong competitive position within the Cuban market, given that two of
the four operated throughout the year and consequently Miramar has a stronger
working capital position and other operational advantages over competitors.
However, since the formal re-opening of the Cuban tourism sector in November
2021 (following the success of the Cuban vaccination and other public health
efforts to control the pandemic), the subsequent arrival of the Omicron
variant in December 2021, closely followed by the Russian invasion of Ukraine,
have once again affected the most important outbound tourism markets for Cuba:
Canada, Western Europe and Russia. The outlook for 2022 remains uncertain
and will depend on numerous factors external to Cuba, including in particular
the recovery of international travel patterns and the availability of airlift.
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 two years, we expect the liquid resources
directly generated by the operations of Miramar under the new liquidity rules
to be more than sufficient to allow Miramar to distribute dividends.
The valuation of Miramar has been adjusted downwards at 31 December 2021 to
US$94.5 million (2020: US$103.2 million), representing a 9.2% decline. This
was driven mainly by an increase in the discount rates applied in the
discounted cash flow models of the Hotels in order to take into account the
disruption to the Cuban tourism industry caused by the Covid-19 pandemic and
the uncertain timing of recovery, continued U.S. aggressive measures, as well
as a slightly more conservative approach to the recovery of occupancy rates as
the world emerges from the pandemic.
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 401 room Meliã Trinidad Península Hotel.
As at 31 December 2021, all structural works (including windows and roofing)
had been substantially completed and electric, plumbing and air-conditioning
works had started. The building process has been progressing slowly since
the beginning of the Covid-19 pandemic in March 2020 but is now expected to be
completed within the next twelve months.
During the first months of 2021 the joint venture, under the leadership of
Mosaico Hoteles, undertook a full review and reorganisation of the hotel
construction process, which resulted in the termination of the turnkey
construction contract with the Cuban-Italian construction partnership (with
effect from 30 June 2021) and the renegotiation and increase of existing
finance arrangements. TosCuba has now taken full control over the site as
well as all stored materials and equipment, and will now complete the
construction of the hotel on its own, with technical assistance on pricing,
tender procedures and product selection from International Hospitality
Projects S.L., a Spanish construction adviser in the hotel sector. Under the
new structure, significant progress was made in the second half of 2021 in the
tendering and execution of major supply arrangements, and the pace of
construction is now ramping up once again to pre-pandemic levels. It is now
estimated that construction of the hotel will be completed by the first
quarter of 2023.
In April 2018, the Company arranged and executed a US$45 million construction
finance facility to be disbursed under two tranches of US$22.5 million each.
The terms of the facility were amended in August 2021 to take into account the
new construction process and other circumstances. At 31 December 2021, the
Company's full participation in the first tranche (Tranche A) in the amount of
US$18 million (2020: US$16.1 million) was fully disbursed, and the amount of
US$709 thousand was disbursed under the second tranche (Tranche B), the
maximum principal amount of which was increased to US$29 million under the
August 2021 amendment to the facility. The increased principal of Tranche B
includes an amount of US$4 million that may be used for the purchase of
equipment needed by the relevant Cuban utility companies to ensure the
provision of the required water and electrical services to the hotel.
Repayment of the amended facility is secured by the future income of the
hotel, and repayment of Tranche B has also been guaranteed by Cubanacán (the
Cuban shareholder in the joint venture company) and is further secured by
Cubanacán's dividend entitlements in Miramar.
The total cost of the project - including incorporation of the joint venture
company, acquisition of surface rights, construction of the hotel, financing
for the acquisition of equipment necessary to guarantee the proper functioning
of public utilities and start-up costs - is presently estimated at US$78.8
million. Of this amount, US$16 million represents the share capital invested
in TosCuba by the shareholders, of which the Company contributed US$6.4
million (40%), more than US$11.2 million represents grants received under the
Spanish Cuban Debt Conversion Programme, and US$4 million represents finance
to be granted to third parties (which will be repaid). The remaining funds
necessary to complete the project will be disbursed under the construction
finance facility.
GBM Interinvest Technologies Mariel S.L.
In December 2020, the Company formalised its participation in a new
multi-phase industrial park real estate project to be developed in the Special
Development Zone of Mariel, Cuba by acquiring a 50% interest in GBM
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 and were
completed in June 2021. Discussions with potential tenants are currently
being pursued with a view to coordinating the start of construction works with
the existence of real demand.
The Company paid an initial amount of US$303,175 for its 50% interest entered
into a Convertible Loan Agreement in the principal amount of €500,000
(US$566,316) during the course of 2021. The full investment of the Company
in this project is expected to be approximately US$1.5 million.
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 principal payments of the new Tranche C falling due on 30
June 2021, 30 September 2021 and 31 December 2021 were subsequently waived by
the lenders as a result of the continued closure of the hotels serving as
security for payment of the facility, with the waived principal payments being
added to subsequent payments without extending the term.
As at 31 December 2021, the principal amount of US$1,943,760 was outstanding
under the Company's participation in Tranche C of the Facility.
Only one of the hotels granted as security for the repayment of the FINTUR
facility is open at the present time, although FINTUR has transferred funds
from other sources to pay all outstanding interest on a current basis
throughout the pandemic and for the principal payment made on 31 March 2022.
The Investment Manager meets regularly with FINTUR in order to gauge the speed
with which the cash flows are likely to return to acceptable levels and to
determine whether any additional hotel security should be received.
OUTLOOK
We expect that, as a result of the Covid-19 pandemic, the high level of U.S.
sanctions against Cuba and the ongoing transitional effects of monetary and
economic reforms adopted by the Cuban government, the very difficult economic
circumstances faced by the country throughout 2021 will continue in 2022, and
that the local market conditions in which the Company and the joint venture
companies in which it holds interests operate will remain very challenging.
The very tight hard currency position of the Cuban economy resulting from the
above factors is also likely to continue having a negative impact on the
timing of dividend and other payments to the Company in the short term.
We expect that the timing of a recovery in Cuba will depend on a number of
external factors, including the duration of the war in Ukraine, the actions of
the U.S. government and the evolution of world travel markets in the face of
the pandemic. Internal factors such as the government's ability to adhere to
the planned reform program will also play an important role.
As the world continues to recover from the pandemic, we expect that
international leisure travel will increase once again and that the four
Miramar Hotels, which are all presently operating, will gradually return to
normal levels of occupancy and performance. In addition, it is expected that
the Meliã Trinidad Península Hotel will be completed and will begin
operations in the first quarter of 2023.
We expect the operational performance of Monte Barreto to remain strong in
2022, although the timing of payment of the resulting dividends will remain
uncertain in the short term and we believe that only part of the dividends to
be generated in favour of the Company will be paid during the current year.
Nevertheless, we believe that the pace of distribution of dividends will pick
up once again when the economic headwinds presently affecting the country
subside, which is not likely to occur until 2023.
We believe that Cuba's liquidity position, which we monitor closely, will
continue to be weak in the short term, but we do anticipate that over the
medium term the country's foreign currency reserves will improve. In
addition, the new monetary reforms and liquidity rules adopted by the Cuban
government will eventually have a 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 improved control over their hard currency payments and the
ability to make timely distributions to shareholders.
Sebastiaan A.C. Berger
Aberdeen Asset Investments Limited
28 April 2022
DIRECTORS' REPORT (EXTRACTS)
ANNUAL GENERAL MEETING
The Notice of the Annual General Meeting ("AGM") is included within this
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 16 June 2022 at 2.00 p.m. An
explanation of each resolution to be proposed at the AGM is included in the
Letter from the Chairman. 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@abrdn.com (mailto:CEIBA.Investments@abrdn.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 16 June 2022 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
28 April 2022
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;
· 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
Keith Corbin
28 April 2022
CConsolidated Statement of Financial Position
As at 31 December 2021
31 Dec 2021 31 Dec 2020
Note US$ US$
Assets
Current assets
Cash and cash equivalents 4 26,228,072 4,270,860
Accounts receivable and accrued income 5 3,821,068 14,581,229
Loans and lending facilities 6 3,372,086 2,827,292
Total current assets 33,421,226 21,679,381
Non-current assets
Accounts receivable and accrued income 5 3,146,333 1,768,447
Loans and lending facilities 6 19,185,524 17,395,343
Equity investments 7 175,828,034 197,618,050
Investment in associate 8 303,175 303,175
Property, plant and equipment 9 515,608 533,598
Total non-current assets 198,978,674 217,618,613
Total assets 232,399,900 239,297,994
Liabilities
Current
liabilities
Accounts payable and accrued expenses 10 4,347,187 1,085,590
Short-term borrowings 11 1,004,673 -
Deferred liabilities 17 1,000,000 1,000,000
Total current liabilities 6,351,860 2,085,590
Non-current liabilities
Accounts payable and accrued expenses 10 - 1,129,709
Convertible bonds 12 28,299,353 -
Deferred liabilities 17 833,333 1,833,333
Total non-current liabilities 29,132,686 2,963,042
Total liabilities 35,484,546 5,048,632
Equity
Stated capital 13 106,638,023 106,638,023
Revaluation surplus 319,699 319,699
Retained earnings 46,801,482 75,613,383
Accumulated other comprehensive income 6,563,385 11,854,509
Equity attributable to the shareholders of the parent 160,322,589 194,425,614
Non-controlling interest 13 36,592,765 39,823,748
Total equity 196,915,354 234,249,362
Total liabilities and equity 232,399,900 239,297,994
NAV 13 160,322,589 194,425,614
NAV per share 13 1.16 1.41
See accompanying notes 1 to 23, 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 28 April 2022.
They were signed on the Company's behalf;
Keith Corbin,
Director
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2021
31 Dec 2021 31 Dec 2020
Note US$ US$
Income
Dividend income 7 3,050,124 13,258,912
Interest income 1,924,110 1,899,468
Travel agency commissions 7,529 6,113
Foreign exchange gain - 1,157,566
4,981,763 16,322,059
Expenses
Foreign exchange loss (130,198) -
Interest expense on bonds (2,176,931) -
Loss on change in fair value of equity investments 7 (13,843,717) (41,914,276)
Expected credit losses 5 (12,281,408) -
Management fees 17 (2,276,574) (1,864,518)
Other staff costs (72,958) (67,035)
Travel (54,204) (51,856)
Operational costs (317,361) (108,302)
Legal and professional fees (1,487,338) (1,368,707)
Administration fees and expenses (344,620) (292,534)
Audit fees 22 (321,625) (270,909)
Miscellaneous expenses (305,075) (136,976)
Directors' fees and expenses 15 (276,111) (232,677)
Depreciation 9 (29,792) (39,645)
(33,917,912) (46,347,435)
Net loss before taxation (28,936,149) (30,025,376)
Income taxes 3.7 - -
Net loss for the year (28,936,149) (30,025,376)
Other comprehensive income to be reclassified to profit or loss in subsequent
periods
(Loss)/gain on exchange differences of translation of foreign operations (8,140,191) 11,538,310
Total comprehensive loss (37,076,340) (18,487,066)
Net loss for the year attributable to:
Shareholders of the parent (28,811,901) (19,808,620)
Non-controlling interest (124,248) (10,216,756)
Total comprehensive loss attributable to:
Shareholders of the parent (34,103,025) (12,308,720)
Non-controlling interest (2,973,315) (6,178,346)
Basic and diluted loss per share 16 (0.21) (0.14)
See accompanying notes 1 to 23, which are an integral part of these
consolidated financial statements.
Consolidated Statement of Cash Flows
For the year ended 31 December 2021
31 Dec 2021 31 Dec 2020
Note US$ US$
Operating activities
Net loss for the year (28,936,149) (30,025,376)
Items not affecting cash:
Depreciation 9 29,792 39,645
Expected credit losses 5 12,281,408 -
Change in fair value of equity investments 7 13,843,717 41,914,276
Dividend income (3,050,124) (13,258,912)
Interest income (1,924,110) (1,899,468)
Interest expense 2,176,931 -
Foreign exchange loss/(gain) 130,198 (1,157,566)
(5,448,337) (4,387,401)
Decrease/(increase) in accounts receivable and accrued income 810,460 (4,018,460)
Increase in accounts payable and accrued expenses 2,131,888 149,086
Non- cash movement in amortisation of deferred liability 17 (1,000,000) (1,000,000)
Dividend income received 641,756 9,998,244
Interest income received 622,884 160,317
Net cash flows from operating activities (2,241,349) 901,786
Investing activities
Purchase of investment in associate 8 - (303,175)
Purchase of property, plant & equipment 9 (11,802) (4,897)
Loans and lending facilities disbursed (3,168,711) (6,190,914)
Loans and lending facilities recovered 833,736 (886,001)
Net cash flows from investing activities (2,346,777) (7,384,987)
Financing activities
Short term borrowings received 1,004,673 -
Issue of convertible bonds 29,312,500 -
Interest paid on convertible bonds (2,176,931) -
Cash distribution to non-controlling interest 13 (257,668) (3,463,951)
Contributions received from non-controlling interest - 84,406
Net cash flows from financing activities 27,882,574 (3,379,545)
Change in cash and cash equivalents 23,294,448 (9,862,746)
Cash and cash equivalents at beginning of the period 4,270,860 13,102,578
Foreign exchange on cash (1,337,236) 1,031,028
Cash and cash equivalents at end of the period 26,228,072 4,270,860
See accompanying notes 1 to 23, which are an integral part of these
consolidated financial statements.
Consolidated Statement of Changes in Equity
For the year ended 31 December 2021
For the year ended 31 December 2021
Stated Capital Revaluation Surplus Retained Earnings Other comprehensive income Total Equity attributable to the parent Non-controlling interest Total Equity
US$ US$ US$ US$ US$ US$ US$
Notes
Opening Balance 106,638,023 319,699 75,613,383 11,854,509 194,425,614 39,823,748 234,249,362
Revaluation of assets / Net other comprehensive income/(loss) to be 7, 13 - - - (5,291,124) (5,291,124) (2,849,067) (8,140,191)
reclassified to profit or loss in subsequent periods
13 - - - (28,811,901) (124,248) (28,936,149)
Net loss for the year (28,811,901)
Capital increase/ contributions during the period 13 - - - - - - -
Cash distribution to non-controlling interest 13 - - - - - (257,668) (257,668)
Balance at 31 December 2021 106,638,023 319,699 46,801,482 6,563,385 160,322,589 36,592,765 196,915,354
See accompanying notes 1 to 23, which are an integral part of these
consolidated financial statements.
For the year ended 31 December 2020
Stated Capital Revaluation Surplus Retained Earnings Other comprehensive income Total Equity attributable to the parent Non-controlling interest Total Equity
US$ US$ US$ US$ US$ US$ US$
Notes
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 7, 13 - - - 7,499,900 4,038,410 11,538,310
reclassified to profit or loss in subsequent periods
7,499,900
13 - - - (19,808,620) (10,216,756) (30,025,376)
Net loss for the year (19,808,620)
Capital increase/ contributions during the period 13 - - - - - 84,406 84,406
Cash distribution to non-controlling interest 13 - - - - - (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
1. Corporate information
These consolidated financial statements for the year ended 31 December 2021
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, 2020 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, 5(ta) 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
abrdn (see note 17).
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 3.8 and certain property, plant and equipment as disclosed
in note 3.11 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 3.15);
b) That the Group is a Venture Capital Organisation (see note 3.16).
c) That the functional currency of the parent company (CEIBA
Investments Limited) is US$ (see note 3.18)
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.
In regards to the 31 December 2021 valuations of the properties held by Monte
Barreto and Miramar performed by the independent valuers, the valuers have
noted in their reports that their valuations have been prepared in a period of
significant market instability as a result of the Covid-19 pandemic. The
impact on the Cuban tourism sector and the economy in general has been
dramatic, with significantly lower numbers of international tourists arriving
since April 2020, which has had a negative impact on the Cuban economy. As it
is not possible to ascertain with any certainty when the tourism sector and
the economy will recover, there is a material uncertainty as to the valuation
of the subject properties.
Change in Management estimates - expected credit losses in respect of
dividends receivable
As explained in note 5, due to the current liquidity constraints placed upon
Monte Barreto as a result of the recent Cuban monetary reforms, the timing of
receipt of the historical dividends receivable is uncertain. Therefore the
dividends receivable from Monte Barreto at year end have been impaired in full
in the Statement of Comprehensive Income. However, in the case of Miramar, the
same liquidity constraints are not applicable under the monetary reforms, due
to a large portion of its income being earned in foreign currency and
therefore Miramar has been assigned a higher credit rating. Management expects
to receive the full amount of dividends receivable from Miramar in due course.
The total amount of credit impaired receivables at year end is $12,281,408
(2020: nil) and is the balance of the dividend receivable due from Monte
Barrreto.
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 option to do so as 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 2021 and not early adopted that are
relevant to the Group
IAS 1 'Presentation of financial statements' Classification of Liabilities as
Current or Non-current. The IASB issued amendments to paragraphs 69 to 76 of
IAS 1 to specify the requirements for classifying liabilities as current or
non-current. If the entity has the right at the end of the reporting period to
defer settlement of a liability for at least twelve months after the reporting
period, then the liability is classified as non-current. The classification is
not affected by the likelihood that the entity will exercise its right to
defer settlement. Therefore, if the right exists, the liability is classified
as non-current even if management intends or expects to settle the liability
within twelve months of the reporting period. The effective date is for
annual periods beginning on or after 1 January 2023deferred until accounting
periods starting not earlier than 1 January 2024. The amendments to the
standard are not expected to have a material impact on the financial
statements or performance of the Group.
Disclosure of Accounting Policies - Amendments to IAS 1 and IFRS Practice
Statement 2. In February 2021, the IASB issued amendments to IAS 1 and IFRS
Practice Statement 2 Making Materiality Judgements, in which it provides
guidance and examples to help entities apply materiality judgements to
accounting policy disclosures. The amendments aim to help entities provide
accounting policy disclosures that are more useful by: replacing the
requirement for entities to disclose their 'significant' accounting policies
with a requirement to disclose their 'material' accounting policies; and
adding guidance on how entities apply the concept of materiality in making
decisions about accounting policy disclosures. The effective date is for
annual periods beginning on or after 1 January 2023. The Group is in the
process of assessing the amendments to the standard but it is not expected to
have a material impact on the financial statements or performance of the
Group.
Definition of Accounting Estimates - Amendments to IAS 8. In February 2021,
the IASB issued amendments to IAS 8, in which it introduces a new definition
of 'accounting estimates'. The amendments clarify the distinction between
changes in accounting estimates and changes in accounting policies and the
correction of errors. Also, they clarify how entities use measurement
techniques and inputs to develop accounting estimates. The amended standard
clarifies that the effects on an accounting estimate of a change in an input
or a change in a measurement technique are changes in accounting estimates if
they do not result from the correction of prior period errors. The previous
definition of a change in accounting estimate specified that changes in
accounting estimates may result from new information or new developments.
Therefore, such changes are not corrections of errors. This aspect of the
definition was retained by the IASB. The effective date is for annual periods
beginning on or after 1 January 2023. The standard is not expected to have a
material impact on the financial statements or performance of the Group as the
amendment is in line with the current treatment by 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.
2.7 Changes in accounting policies
Standards and interpretations applicable this period
There are no standards, amendments to standards or interpretations that are
effective for years beginning on 1 January 2021 that have a material effect on
the financial statements of the Group.
There are no new standards, amendments to standards or interpretations that
are effective for years beginning on 1 January 2021 that have a material
effect on the financial statements of the Group.
2.8 Convertible Bonds
The 10% unsecured convertible bonds 2026 (the "Bonds") issued by the Company
have been classified as a liability as per IAS 32. The Bonds were initially
recognised at fair value and are subsequently measured at amortised cost using
the effective interest rate methodology.
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 2021. 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 2021 and 31 December 2020:
Country of Incorporation Equity interest held indirectly by the Group
or holding entity
Entity Name
31 Dec 2021 31 Dec 2020
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) Netherlands 100% 100%
1.3.1. HOMASI S.A. (a) (iii) Spain 65% 65%
1.3.1.1. Miramar S.A. (b) (vi) Cuba 50% 50%
1.3.2. Mosaico Hoteles S.A. (a) (iii) Switzerland 80% 80%
1.3.2.1 TosCuba S.A. (b) (vii) Cuba 50% 50%
1.3.3. Mosaico B.V. (a) (v) Netherlands - 80%
1.3.4 Grupo BM Interinvest Technologies Mariel S.L (c) Spain 50% 50%
(ix)
a) Company consolidated at 31 December 2021 and 31
December 2020.
b) Company accounted at fair value at 31 December 2021 and
31 December 2020.
c) Company accounted for as an investment in associate at 31
December 2021 and 31 Decemeber 2020.
(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) Mosaico B.V. was liquidated in May 2021
(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) Spanish company that is developing an industrial logistics
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 date 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
2021 were losses of US$8,140,191 (2020: gains of US$11,538,310).
The exchange rate used in these consolidated financial statements at 31
December 2021 is 1 Euro = US$1.1326 (2020: 1 Euro US$1.2271).
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 2021 and
31 December 2020 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 measured at amortised cost
A debt instrument is measured at amortised cost if it is held within a
business model whose objective is to hold financial assets in order to collect
contractual cash flows and its contractual terms give rise on specified dates
to cash flows that are solely payments of principal and interest on the
principal ("SPPI") amount outstanding. The Group includes in this category
current and non-current cash and cash equivalents, loans receivables and
non-financing accounts receivables and accrued income.
Financial assets and financial liabilities at fair value through profit or
loss
Financial assets and financial liabilities at fair value through profit or
loss are measured initially at fair value.
A financial liability other than a financial liability held for trading or
contingent consideration of an acquirer in a business combination may be
designated as at FVTPL upon initial recognition if either:
· Such designation eliminates or significantly
reduces a measurement or recognition inconsistency that would otherwise arise
· The financial liability forms part of a group of
financial assets or financial liabilities or both, which is managed and its
performance is evaluated on a fair basis, in accordance with the Group's
documented risk management or investment strategy, and information about the
grouping is provided internally on that basis
· It forms part of a contract containing one or
more embedded derivatives, and IFRS 9 permits the entire combined contract to
be designated as at FVTPL
(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, except for accounts receivables which are
measured at transaction price, 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.
Dividend income is recognised when the Group's right to receive the income is
established, which is generally when shareholders of the underlying investee
companies approve the dividend. Financial assets and financial liabilities
measured at amortised cost are the following:
· Accounts payable and accrued expenses
· Short-term borrowings
· Convertible bonds
(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.
If the credit risk of the loan increases significantly and the resulting
credit quality is not considered to be low credit risk, full lifetime expected
losses are recognised. Lifetime expected credit losses are only recognised if
the credit risk increases significantly from when the entity originates or
purchases the financial instruments but that do not have objective evidence of
a credit loss event.
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 accounts receivable and accrued income in note 5.
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 Investments in associates
Investments in associates are accounted for using the equity method.
The carrying amount of the investment in associates is increased or decreased
to recognise the Group's share of the profit or loss and other comprehensive
income of the associate, adjusted where necessary to ensure consistency with
the accounting policies of the Group.
Unrealised gains and losses on transactions between the Group and its
associates are eliminated to the extent of the Group's interest in those
entities. Where unrealized losses are eliminated, the underlying asset is also
tested for impairment.
3.15 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.
Although the principal income sources of the CEIBA is derived from the changes
in fair value and dividends received from its equity investments, the Group is
not limited to this type of investment. This is evidenced by CEIBA's
wholly-owned subsidiary, GrandSlam Limited, that operates a travel agency
providing Cuban related tourism products and services. The income from
GrandSlam is shown on the face of the Consolidated Statement of Comprehensive
Income as Travel Agency Commissions. Therefore the Group does not invest
funds solely for returns from capital appreciation or investment income.
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
changes.
3.16 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.
3.17 Going concern
The Directors have reviewed cash flow projections that detail revenue and
liabilities and will continue to receive cashflow projections as part of the
full-year reporting and monitoring processes. 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.
3.18 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$.
3.19 Embedded derivatives
An embedded derivative is a component of a hybrid contract that also includes
a non-derivative host- with the effect that some of the cash flows of the
combined instrument vary in a way similar to a stand-alone derivative.
Derivatives embedded in hybrid contracts with a financial asset host within
the scope of IFRS 9 are not separated.
Derivatives embedded in hybrid contracts with hosts that are not financial
assets within the scope of IFRS 9 (e.g. financial liabilities) are treated as
separate derivatives when they meet the definition of a derivative, their
risks and characteristics are not closely related to those of the host
contracts and the host contracts are not measured at FVTPL.
An embedded derivative is presented as a non-current asset or non-current
liability if the remaining maturity of the hybrid instrument to which the
embedded derivative relates is more than 12 months and is not expected to be
realised or settled within 12 months.
The embedded derivative relating to the option of the Bondholder to convert
their holdings 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) was determined by management to have no value at
initial recognition and at year end.
The embedded derivative relating to the option of the issuer to repay the
convertible bond from the end of year 3 is deemed to be closely related to the
host contract and has therefore not been separated at initial recognition.
The embedded derivative is considered by management to have no value at year
end as prepayment risk is considered to be low.
4. Cash and cash equivalents
31 Dec 2021 31 Dec 2020
US$ US$
Cash on hand 51,251 5,480
Bank current accounts 26,176,821 4,265,380
5. Accounts receivable and accrued
income
31 Dec 2021 31 Dec 2020
US$ US$
Loan interest receivable 3,146,526 1,716,307
TosCuba deposit (i) 3,180,786 4,000,000
Other accounts receivable and deposits 329,493 449,733
Dividends receivable from Miramar S.A. 310,596 312,352
Dividends receivable from Inmobiliaria Monte Barreto S.A. 12,281,408 9,871,284
19,248,809 16,349,676
Expected credit loss (refer to note 2.3) (12,281,408) -
6,967,401 16,349,676
Current portion 3,821,068 14,581,229
Non-current portion 3,146,333 1,768,447
(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.
Accounts receivable and accrued income have the following future maturities:
31 Dec 2021 31 Dec 2020
US$ US$
Up to 30 days 106,235 553,216
Between 31 and 90 days 390,797 249,214
Between 91 and 180 days 92,810 5,336,284
Between 181 and 365 days 3,231,226 8,442,515
Over 365 days 3,146,333 1,768,447
6,967,401 16,349,676
$12,592,004 of the accounts receivable and accrued income balance is made up
of dividends receivable. The impairment on the dividends receivable has been
assessed as low in the case of Miramar and high in the case of Monte Barreto
in terms of the 3 stage model per IFRS 9 by assessing the credit risk of the
counterparty who declared the dividend. The delay in payment of the dividends
receivable from Monte Barreto is due in part to the current liquidity position
of the Cuban financial system caused by the pandemic, increased U.S. sanctions
and the transitional effects of the Cuban monetary reforms. In the current
year, the overall credit risk for Monte Barretto has significantly increased
from the preceding year. This has resulted in the receivable moving from Stage
2 to Stage 3 of the IFRS ECL impairment model in the current year, which
therefore requires management to assess the expected credit loss over time.
Accordingly in the current year management has made an assessment of the
expected credit loss over timetaking into account all reasonable and
supportable information that is available that includes both internal and
external information.
Due to the current liquidity constraints placed upon Monte Barreto as a result
of the recent Cuban monetary reforms, the timing of receipt of historical
dividends receivable is uncertain amounting to US$12,281,408 (2020:
US$9,871,284). Therefore, the dividends receivable from Monte Barreto at year
end have been impaired in full in the Statement of Comprehensive Income.
However, in the case of Miramar, the same liquidity constraints do not apply
under the monetary reforms due to a large portion of its income being earned
in foreign currency and therefore Miramar has been assigned a higher credit
rating. Management expects to receive the full amount of dividends receivable
from Miramar in due course.
In the prior year, the overall credit risk for Toscuba significantly increased
from the preceding year due to COVID 19 and the resulting prevailing economic
conditions. This resulted in the receivable moving from Stage 1 to Stage 2 of
the IFRS ECL impairment model (where it remains), which therefore requires
management to assess the expected credit loss over the lifetime of the
receivable. Accordingly in the current year management has made an assessment
of the expected credit loss over the lifetime of the receivable 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. Management
believes the probability of default is low (see note 6).
Other accounts receivable 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 total amount of credit impaired receivables at year end is $12,281,408
related to the balance of the dividend receivable due from Monte Barrreto.
6. Loans and lending facilities
31 Dec 2021 31 Dec 2020
US$ US$
TosCuba S.A. (i) 18,708,861 16,106,466
Casa Financiera FINTUR S.A. (ii) 1,943,760 2,110,795
Miramar Facility (iii) 1,338,673 2,005,374
Grupo B.M. Interinvest Technologies Mariel S.L. (iv) 566,316 -
22,557,610 20,222,635
Current portion 3,372,086 2,827,292
Non-current portion 19,185,524 17,395,343
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 was originally executed in the maximum principal amount of up to
US$45,000,000, divided into two separate tranches of US$22,500,000 each. The
terms of the facility were amended in August 2021 to take into account the new
construction process and other circumstances and in particular the maximum
principal amount of Tranche B thereof was increased to US$29,000,000. The
increased principal of Tranche B includes an amount of US$4 million that may
be used for the purchase of equipment needed by the relevant Cuban utility
companies to ensure the provision of the required water and electrical
services to the hotel. 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
("Cubanacán" - the Cuban shareholder of TosCuba) as well as by Cubanacán's
dividend entitlements in Miramar.
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. In the prior year,
the credit risk significantly increased due to COVID 19 and the resulting
prevailing economic conditions. The loan is assessed at Stage 2 (same as for
the year ended 31 December 2020) 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. Management believes the
probability of default is low due to the fact that the repayment of the
facility is secured by the future income of the hotel which will be in the
form of Euro-denominated off-shore tourism proceeds payable to TosCuba. As
well repayment of Tranche B has also been guaranteed by Cubanacán and is
further secured by Cubanacán's dividend entitlements in Miramar. Payments of
the facility are scheduled to begin once the hotel starts operations.
(i) In July 2016, the Group arranged and participated in a
€24,000,000 (US$27,182,400 equivalent at 31 December 2021) 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$13,591,200 equivalent at 31
December 2021). The Group had an initial participation of €4,000,000
(US$4,530,400 equivalent at 31 December 2021) under the first tranche and a
€2,000,000 (US$2,265,200 equivalent at 31 December 2021) 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 was granted and the term was extended to
March 2023. The facility has a fixed interest rate of 8%, and under the
renegotiated terms interest was accumulated until 31 December 2020 and then
paid in quarterly instalments. 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 fell due on 30 June 2021 but subsequently the principal
payments of 30 June, 30 September and 31 December 2021 were waived and have
been prorated amongst the remaining scheduled principal payment dates as a
result of the continued closure of the hotels serving as security for payment
of the facility. The payment of interest on the facility was current at 31
December 2021. 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. The loan is
not repayable on demand. In the prior year, the FINTUR facility had a
significant increase in credit risk since its initial recognition. The loan is
assessed at Stage 2 (same as for the year ended 31 December 2020) 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 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
cash flows generated by the Hotels of Miramar. At 31 December 2021, a total
of €1,181,947 (US$1,338,673) was disbursed under the facility. The loan is
not repayable on demand. In the prior year, the Miramar facility had a
significant increase in credit risk since its initial recognition. The loan is
assessed at Stage 2 (same as for the year ended 31 December 2020) 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 May 2021, the Group entered into a Convertible Loan
Agreement in the principal amount of €500,000 (US$566,316) with Grupo B.M.
Interinvest Technologies Mariel S.L. ("GBM Mariel"). The loan has an annual
interest rate of 5% and an original term of 6 months which was subsequently
extended to 1 year in November 2021. The loan principal and accrued interest
is convertible into common shares of GBM Mariel following the conversion of
the company from an S.L. (limited liability company) to a S.A. (company
limited by shares). No assessment of the ECL associated with the convertible
loans was done by the Group as the balance is immaterial.
The following table details the expected maturities of the loans and lending
facilities portfolio based on contractual terms:
31 Dec 2021 31 Dec 2020
US$ US$
Up to 30 days - 555,101
Between 31 and 90 days 817,597 1,365,797
Between 91 and 180 days 1,181,363 404,897
Between 181 and 365 days 1,373,126 501,497
Over 365 days 19,185,524 17,395,343
22,557,610 20,222,635
7. Equity investments
31 Dec 2021 31 Dec 2020
US$ US$
Miramar S.A. 94,511,908 103,184,163
Inmobiliaria Monte Barreto S.A. 67,692,462 81,433,887
TosCuba S.A. 13,623,664 13,000,000
175,828,034 197,618,050
Monte Barreto
Miramar (i) US$ TosCuba (ii) Total
US$ US$ US$
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)
Balance at 31 December 2020 103,184,163 81,433,887 13,000,000 197,618,050
Foreign currency translation reserve (7,946,299) - - (7,946,299)
Change in fair value of equity investments (725,956) (13,741,425) 623,664 (13,843,717)
Balance at 31 December 2021 94,511,908 67,692,462 13,623,664 175,828,034
(i) The value of Miramar represents the 50% foreign equity
interest in Miramar S.A. including non-controlling interests.
(ii) The value of TosCuba represents the 50% foreign equity
interest in TosCuba S.A. including non-controlling interests.
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 2021, the amount of Excess Cash that is included in the
fair value of Monte Barreto stated in these financial statements is
US$9,529,462 (2020: US$2,494,887 ).
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 2021 31 Dec 2020
Discount rate (after tax) (i) 12.8% 9.8%
Occupancy year 1 96.2% 97.3%
Average occupancy year 2 to 8 96.5% 97.3%
Occupancy year 8 and subsequent periods 97.0% 97.5%
Average rental rates per square meter per month - year 1 to 6 US$26.33 US$27.23
Annual increase in rental rates subsequent to year 6 (ii) 2.5% 2.5%
Capital investments as percentage of rental revenue 3% 3%
(iii) The effective tax rate is estimated to be 19% (2020: 19%).
(iv) 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 2021 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
2021, the amount of Excess Cash that is included in the fair value of Miramar
stated in these financial statements is US$10,411,908 (2020: US$12,984,162 ).
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 2021 31 Dec 2020
Meliã Habana
Discount rate (after tax) (i) 14.7% 12.5%
Average occupancy year 1 to 3 60.0% 60.3%
Occupancy year 4 and subsequent periods 70.0% 72.2%
Average daily rate per guest - year 1 US$127.50 US$134.19
Average increase in average daily rate per guest - year 2 to 6 6.1% 4.9%
Increase in average daily rate per guest subsequent to year 6 (ii) 3.0% 2.5%
Capital investments as percentage of total revenue 7% 7%
31 Dec 2021 31 Dec 2020
Meliã Las Americas
Discount rate (after tax) (iii) 14.4% 12.9%
Average occupancy year 1 to 3 60% 63%
Occupancy year 4 and subsequent periods 79.3% 79.5%
Average daily rate per guest - year 1 $120.56 US$110.93
Average increase in average daily rate per guest - year 2 to 6 10.6% 11%
Increase in average daily rate per guest subsequent to year 6 (ii) 3.0% 2.5%
Capital investments as percentage of total revenue 7% 7%
31 Dec 2021 31 Dec 2020
Meliã Varadero
Discount rate (after tax) (iii) 14.4% 12.9%
Average occupancy year 1 to 3 62.3% 64.6%
Occupancy year 4 and subsequent periods 79.3% 80.3%
Average daily rate per guest - year 1 US$108.02 US$97.88
Average increase in average daily rate per guest - year 2 to 6 4.9% 6%
Increase in average daily rate per guest subsequent to year 6 (ii) 3.0% 2.5%
Capital investments as percentage of total revenue 7% 7%
Sol Palmeras
Discount rate (after tax) (iii) 14.4% 12.9%
Average occupancy year 1 to 3 66.3% 65.1%
Occupancy year 4 and subsequent periods 80.7% 81.8%
Average daily rate per guest - year 1 US$94.91 US$86.75
Increase in average daily rate per guest - year 2 5% 12%
Average increase in average daily rate per guest - year 3 to 6 3.1% 5%
Increase in average daily rate per guest subsequent to year 6 (ii) 3.0% 2.5%
Capital investments as percentage of total revenue 7% 7%
(i) The effective tax rate is estimated to be 19% (2020:
19%).
(ii) The increase in the average daily rate per guest in
subsequent periods is in-line with the estimated rate of long-term inflation.
(iii) The effective tax rate is estimated to be 21% (2020: 21%).
Sensitivity to changes in the estimated rental rates / average daily rates
The discounted cash flow models include estimates of the future rental rates /
average daily rates of the joint venture companies. Actual rental rates /
average daily rates may differ from these estimates due to several factors
including the general business climate and economic conditions, the strength
of the overall tourism market and the influence of competitors. Therefore,
the following tables detail the change in fair values of the equity
investments, when applying what Management considers to be the reasonable
possible spread in rental rates / average daily rates of between 15% lower and
15% higher compared to the rates used in these consolidated financial
statements.
The following table details the fair values of the equity investments at 31
December 2021 when applying lower rental rates / average daily rates:
Financial
statements -5% -10% -15%
US$ US$ US$ US$
Monte Barreto 67,692,462 64,822,429 61,952,395 59,082,362
Miramar 94,511,908 90,812,298 87,106,569 83,384,347
The following table details the fair values of the equity investments at 31
December 2021 when applying higher rental rates / average daily rates:
Financial
statements +5% +10% +15%
US$ US$ US$ US$
Monte Barreto 67,692,462 70,562,495 73,432,528 76,302,561
Miramar 94,511,908 98,211,518 101,911,129 105,610,740
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
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 2021 when applying lower occupancy rates:
Financial
statements -5% -10% -15%
US$ US$ US$ US$
Monte Barreto 67,692,462 64,839,935 61,988,052 59,136,932
Miramar 94,511,908 89,683,071 84,828,731 79,946,598
The following table details the fair values of the equity investments at 31
December 2021 when applying higher occupancy rates:
Financial
statements +5% +10% +15%
US$ US$ US$ US$
Monte Barreto (i) 67,692,462 69,620,366 n/a n/a
Miramar 94,511,908 99,340,746 104,169,585 108,998,426
(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 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%.
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 account 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 2021 when applying
lower discount and capitalization rates:
Financial
statements -1% -2% -3%
US$ US$ US$ US$
Monte Barreto 67,692,462 73,048,490 79,662,418 88,048,776
Miramar 94,511,908 102,737,618 112,607,405 124,671,680
The following table details the fair values of the equity investments at 31
December 2021 when applying higher discount and capitalization rates:
Financial
statements +1% +2% +3%
US$ US$ US$ US$
Monte Barreto 67,692,462 63,261,635 59,531,353 56,344,447
Miramar 94,511,908 87,550,431 81,582,595 76,410,376
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
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 2021 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 67,692,462 67,479,165 67,265,868 67,052,571
Miramar 94,511,908 92,633,477 90,755,047 88,876,616
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
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 2021 and 2020, however this is considered unlikely
and therefore the related sensitivities have not been shown.
TosCuba
At 31 December 2021 and 2020 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 (2020: 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. In 2021, TosCuba was awarded an additional US$1,247,328 under the
programme. 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 venture. As of 31
December 2021, TosCuba has received cash grants under the programme totalling
US$11,247,328 (2020: US$10,000,000). The 50% interest of the Group in
amounts received under the programme by TosCuba have been recorded as a change
in the fair value in the investment in TosCuba.
The capital contributions made by the Company plus its share of the cash
grants received by Toscuba under the Spanish Cuban Debt Conversion Programme
have been determined to be the best observable measure of the Company's
interest in the fair value of Toscuba. The construction has been progressing
slowly since the beginning of the Covid-19 pandemic in March 2020. As at 31
December 2021, all structural works have been completed and the project has
reached an overall completion level of approximately 63% and it is estimated
that the construction will be completed by the first quarter of 2023. Taking
into consideration the estimated cost to completion, the projected value of
the hotel upon completion, the projected value of the hotel upon completion
and current debt level of Toscuba, the Directors determined that the cost to
date on the project approximates the fair value of Toscuba.
Dividend income from equity investments
Dividend income from the equity investments above during the year is as
follows:
31 Dec 2021 31 Dec 2020
US$ US$
Monte Barreto 2,550,124 6,948,316
Miramar 500,000 6,310,596
3,050,124 13,258,912
Financial information of joint venture companies
The principal financial information of the joint venture companies for the
years ended 31 December 2021 and 2020 is as follows:
Monte Barreto (i) Miramar(i) TosCuba (ii)
2021 2020 2021 2020 2021 2020
US$ 000's US$ 000's US$ US$ US$ US$
000's 000's 000's 000's
Cash and equivalents 42,366 26,725 39,340 42,908 4,026 4,049
Other current assets 1,666 1,480 21,705 16,943 4,028 3,718
Non-current assets 45,419 46,865 131,653 135,464 54,163 48,459
Current financial liabilities 27,428 23,450 16,610 15,659 2,026 1,874
Other current liabilities - - - - - -
Non-current financial liabilities 3,820 3,696 569 1,055 32,958 28,352
Other non-current liabilities - - - - - -
Revenue 22,557 23,390 19,546 29,379 - -
Interest income 692 62 - - - -
Interest expense - - - - - -
Depreciation and amortisation 1,653 1,656 7,255 7,396 - -
Taxation paid (recovered) 2,754 2,533 (2,226) - - -
Profit (loss) from continuing operations 15,600 14,378 (9,578) (3,511) - -
Other comprehensive income - - - - - -
Total comprehensive income (loss) 15,600 14,378 (9,578) (3,511) - -
(i) Figures obtained from financial statements prepared under
IFRS.
(ii) Figures obtained from financial statements prepared under Cuban
GAAP. The difference in accounting standard has no impact in the consolidated
financial statements.
8. Investment in associate
31 Dec 2021 31 Dec 2020
US$ US$
Grupo B.M. Interinvest Technologies Mariel S.L. 303,175 303,175
303,175 303,175
At 31 December 2021 and 2020 the Group owned an indirect 50% share equity
interest in Grupo BM Interinvest Technologies Mariel S.L. ("GBM Mariel"), a
Spanish company that is developing a new multi-phase industrial and logistics
park real estate project in the Special Development Zone of Mariel, Cuba. The
Group has made capital contributions of US$303,175 (2020: US$303,175) to GBM
Mariel. The Company does not control GBM Mariel and has therefore accounted
for its interest as an investment in associate. This is evidenced by the fact
that only two of the five directors of GBM Mariel are represented by the
Company and all major decisions require approval of 51% of the shareholders of
GBM Mariel.
9. Property, plant and equipment
Office furniture and equipment
Motor vehicles US$ Works of art Total
US$ US$ US$
Cost:
At 1 January 2020 374,502 185,887 463,300 1,023,689
Additions - 4,897 - 4,897
At 31 December 2020 374,502 190,784 463,300 1,028,586
Additions - 11,802 - 11,802
At 31 December 2021 374,502 202,586 463,300 1,040,388
Accumulated Depreciation:
At 1 January 2020 319,938 135,405 - 455,343
Charge 22,372 17,273 39,645
At 31 December 2020 342,310 152,678 - 494,988
Charge 12,243 17,549 29,792
At 31 December 2021 354,553 170,227 - 524,780
Net book value:
At 1 January 2020 54,564 50,482 463,300 568,346
At 31 December 2020 32,192 38,106 463,300 533,598
At 31 December 2021 19,949 32,359 463,300 515,608
10. Accounts payable and accrued expenses
31 Dec 2021 31 Dec 2020
US$ US$
Due to shareholders 5,457 5,926
Due to Meliã Hotels International 10,878 176,941
Due to Miramar 801,426 -
Accrued professional fees 312,921 223,349
Management fees payable (see note 17) 2,978,727 1,565,065
Other accrued expenses 221,877 186,127
Other accounts payable 15,901 57,891
4,347,187 2,215,299
Current portion 4,347,187 1,085,590
Non-current portion - 1,129,709
The future maturity profile of accounts payable and accrued expenses is as
follows:
31 Dec 2021 31 Dec 2020
US$ US$
Up to 30 days 1,124,902 179,136
Between 31 and 90 days 1,540,653 -
Between 91 and 180 days 521,779 606,842
Between 181 and 365 days 1,159,853 299,612
Greater than 365 days - 1,129,709
4,347,187 2,215,299
11.
Short-term borrowings
31 Dec 2021 31 Dec 2020
US$ US$
Short-term finance facility (i) 1,004,673 -
1,004,673 -
(i) The amount represents the balance outstanding of a
€3.5 million credit line received by HOMASI from a Spanish bank for the
purpose of financing the Miramar confirming and discounting facility (see note
6).
12. Convertible bonds
31 Dec 2021 31 Dec 2020
US$ US$
Convertible bonds issued (i) 29,312,500 -
-
Foreign exchange movements (1,013,147)
28,299,353 -
Current portion - -
Non-current portion 28,299,353 -
(i) On 31 March 2021, the Company completed the issue of
€25,000,000 (US$29,312,500 equivalent at date of issue) 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 interest expense related to the Bonds during the year was US$2,176,931.
The future maturity profile of the Bonds is as follows:
31 Dec 2021 31 Dec 2020
US$ US$
Greater than 365 days 28,299,353 -
28,299,353 -
13. 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 2020 137,671,576 106,638,023
Stated capital at 31 December 2021 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 2021 31 Dec 2020
US$ US$
Total assets 232,399,900 239,297,994
Total liabilities (35,484,546) (5,048,632)
Less: non-controlling interests (36,592,765) (39,823,748)
NAV 160,322,589 194,425,614
Number of ordinary shares issued 137,671,576 137,671,576
NAV per share 1.16 1.41
Non-controlling interest
At 31 December 2021, the non-controlling interest corresponds to the 35%
participation of Meliã Hotels International in the equity of HOMASI and the
20% participation of Meliã Hotels International in the equity of Mosaico
Hoteles.
The non-controlling interests in the above companies are as follows:
31 Dec 2021 31 Dec 2020
US$ US$
Non-controlling interest in HOMASI 33,923,378 37,235,538
Non-controlling interest in Mosaico Hoteles 2,669,387 2,588,210
Total non-controlling interests 36,592,765 39,823,748
The movement of the non-controlling interests is as follows:
31 Dec 2021 31 Dec 2020
US$ US$
Initial balance 39,823,748 49,381,639
Interest of non-controlling interest in net loss (124,248) (10,216,756)
Net other comprehensive (loss)/income to be reclassified to profit or loss in (2,849,067) 4,038,410
subsequent periods
Cash distribution to non-controlling interest (257,668) (3,463,951)
Capital contributions from non-controlling interest - 84,406
Final balance 36,592,765 39,823,748
The movement of the non-controlling interest in HOMASI is as follows:
31 Dec 2021 31 Dec 2020
US$ US$
Initial balance 37,235,538 46,878,858
Interest of non-controlling interest in net (loss)/income (205,425) (10,217,779)
Net other comprehensive income/(loss) to be reclassified to
profit or loss in subsequent periods (2,849,067) 4,038,410
Cash distribution to non-controlling interest (257,668) (3,463,951)
Final balance 33,923,378 37,235,538
The movement of the non-controlling interest in Mosaico Hoteles is as follows:
31 Dec 2021 31 Dec 2020
US$ US$
Initial balance 2,588,210 2,502,781
Interest of non-controlling interest in net income 81,177 1,023
Capital contributions from non-controlling interest - 84,406
Final balance 2,669,387 2,588,210
The principal financial information of HOMASI and Mosaico Hoteles for the
years ended 31 December 2021 and 2020 is as follows:
HOMASI Mosaico Hoteles
2021 2020 2021 2020
US$ US$ US$ US$
000's 000's 000's 000's
Current assets 4,313 3,347 256 24
Non-current assets 94,526 103,184 13,624 13,000
Current liabilities (1,915) (144) (533) (83)
Equity (96,924) (106,387) (13,347) (12,941)
Income 861 6,311 633 250
Expenses (2,184) (46,055) (227) (245)
Depreciation - - - -
Taxation - - - -
Net (loss)/income for the year (1,323) (39,744) 406 (5)
Other comprehensive (loss)/income (8,140) 12,192 - -
Total comprehensive (loss)/income (9,463) (27,552) 406 (5)
14. 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 makers 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 makers 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
and all revenues are generated from assets held 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 a facility provided to FINTUR (see note 6).
Other also includes the convertible bonds.
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 2021
US$
Commercial property Tourism / Leisure Other Total
Total assets 80,622,834 131,124,444 20,652,622 232,399,900
Total liabilities (2,042,488) (5,142,705) (28,299,353) (35,484,546)
Total net assets 78,580,346 125,981,739 (7,646,731) 196,915,354
Dividend income 2,550,124 500,000 - 3,050,124
Interest income - 370,064 1,554,046 1,924,110
Other income - 7,529 - 7,529
Change in fair value of equity investments (13,741,425) (102,292) - (13,843,717)
Interest expense - - (2,176,931) (2,176,931)
Allocated expenses (13,371,754) (2,307,409) (2,087,903) (17,767,066)
Foreign exchange loss - - (130,198) (130,198)
Net loss (24,563,055) (1,532,108) (2,840,986) (28,936,149)
- (8,140,191) - (8,140,191)
Other comprehensive loss
Total comprehensive loss (24,563,055) (9,672,299) (2,840,986) (37,076,340)
Other segment information:
Property, plant and equipment additions 2,120 9,682 - 11,802
Depreciation 24,674 13,048 - 29,792
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
Interest income - 639,982 1,259,486 1,899,468
Other income - 6,113 - 6,113
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 (139,464) (31,961,313) 2,075,401 (30,025,376)
- 11,538,310 - 11,538,310
Other comprehensive income
Total comprehensive income/(loss) (139,464) (20,423,003) 2,075,401 (18,487,066)
Other segment information:
Property, plant and equipment additions 4,897 - - 4,897
Depreciation 34,305 5,340 - 39,645
15. Related party disclosures
Compensation of Directors
Each Director receives a fee of £35,000 (US$47,170) per annum with the
Chairman receiving £40,000 (US$53,908). The Chairman of the Audit Committee
also receives an annual fee of £40,000 (US$53,908). 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 2021 were
US$276,111 (year ended 31 December 2020: US$232,677).
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 2021 amounted to US$12,555 (2020: US$ US$24,500)
with an average rental charge per square meter at 31 December 2021 of US$18.84
(2020: US$37.64) plus an administration fee of US$6.07 (2020: US$9.75) per
square meter. The Group has elected to use the recognition exemption for
lease contracts that, at the commencement date, have a lease term of 12 months
or less and do not contain a purchase option.
Transactions with Investment Manager
ASFML is a wholly-owned subsidiary of Standard Life Aberdeen plc which has an
interest at 31 December 2021 in 9,747,852 shares of the stated capital (2020:
9,747,852). For further discussion regarding transactions with the
Investment Manager see note 17.
Interests of Directors and Executives in the stated capital
At 31 December 2021 John Herring, a Director of CEIBA, had an indirect
interest in 40,000 shares (2020: 40,000 shares).
At 31 December 2021 Peter Cornell, a Director of CEIBA, has an indirect
interest in 100,000 shares (2020: 100,000 shares).
At 31 December 2021 Trevor Bowen, a Director of CEIBA, has an indirect
interest in 43,600 shares (2020: 43,600 shares).
At 31 December 2021 Colin Kingsnorth, a Director of CEIBA, is a director and
shareholder of Ursus Capital Limited, which holds 12,252,338 shares (2020:
Colin Kingsnorth was a director and shareholder of Laxey Partners Limited,
which owned and served as the investment manager for an aggregate of
30,979,316 shares).
At 31 December 2021 Sebastiaan A.C. Berger, the Investment Manager's fund
manager and Chief Executive Officer of CEIBA, has an interest in 3,273,081
shares (2020: 3,273,081 shares).
At 31 December 2021 Cameron Young, Chief Operating Officer of CEIBA, has an
indirect interest in 4,129,672 shares (2020: 4,129,672 shares).
At 31 December 2021 Paul S. Austin, Chief Financial Officer of CEIBA, has an
interest in 144,000 shares (2020: 144,000).
Interests of Directors, Executives and Shareholders in the Convertible Bonds
At 31 December 2021, Directors had an interest of €nil (US$nil), Executives
had an interest of €nil (US$nil), and Shareholders of CEIBA had a interest
of €10,900,000 (US$12,345,340) in the Bonds (see note 12).
16. Basic and diluted loss per share
Basic loss per share
The loss per share has been calculated on a weighted-average basis and is
arrived at by dividing the net income for the year attributable to
shareholders by the weighted-average number of shares in issue.
31 Dec 2021 31 Dec 2020
US$ US$
Weighted average of ordinary shares in issue 137,671,576 137,671,576
Net loss for the year attributable to the shareholders (28,811,901) (19,808,620)
Basic loss per share (0.21) (0.14)
Diluted loss per share
The diluted loss per share is considered to be equal to the basic loss per
share, as the impact of senior unsecured convertible bonds on loss per share
is anti-dilutive for the period(s) presented. The convertible bonds could
potentially dilute basis earning per share in the future.
17. 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 abrdn 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 2021 were US$3,276,574
(2020: US$2,864,518). In the prior year, in order to assist the Group with its
cash flow requirements the Investment Manager agreed to defer payment of a
portion of its fees earned during 2020 totaling US$1,154,396 until 2022.
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 a 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 2021, the amount of the payment recorded as a deferred liability
is US$1,833,333 (2020: US$2,833,333) with US$1,000,000 (2020: US$1,000,000)
being the current portion and US$833,334 (2020: US$1,833,333) being the
non-current portion.
For the year ended 31 December 2021, 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 (2020: US$1,000,000):
2021 2020
US$ US$
Management fees earned 3,276,574 2,864,518
Amortisation of deferred liability (1,000,000) (1,000,000)
Management fee expense 2,276,574 1,864,518
18. 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
2021 amounted to US$12,555 (2020: 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$51,500,000, divided into two
separate tranches: Tranche A of US$22,500,000 and Tranche B of US$29,000,000.
As at 31 December 2021, the full US$22,500,000 of Tranche A has been disbursed
(2020: US$20,502,533) and US$708,860 of Tranche B has been disbursed (2020:
nil). The Group has the right to syndicate Tranche B of the Construction
Facility to other lenders (see note 6).
In August 2021 the TosCuba Construction Facility was amended for the purpose,
amongst others, of (i) increasing the principal amount of Tranche B to
US$29,000,000, (ii) providing that an amount of up to US$4,000,000 may be
onlent by the borrower (TosCuba) to Cuban utility companies for investments in
the infrastructure that will serve the hotel, and (iii) modifying the security
received by the Group. The prior security assignment relating to the Meliã
Santiago de Cuba Hotel was released and a new secondary guarantee was received
from Miramar in support of the primary guarantee received from Cubanacán (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 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 2021 the principal amount of
€1,716,667 (US$1,943,760) (2020: €1,716,667 (US$2,110,795)) was
outstanding under the Company's participation in Tranche C of the facility.
19. Financial risk management
Introduction
The Group is exposed to financial risks that are managed through a process of
identification, measurement and monitoring and subject to risk limits and
other controls. The objective of the Group is, consequently, to achieve an
appropriate balance between risk and benefits, and to minimise potential
adverse effects arising from its financial activity.
The main risks arising from the Group's financial instruments are market risk,
credit risk and liquidity risks. Management reviews policies for managing each
of these risks and they are summarised below. These policies have remained
unchanged since the beginning of the period to which these consolidated
financial statements relate.
Market risk
Market risk is the risk that the fair value of future cash flows of financial
instruments will fluctuate due to changes in market variables. Market price
risk comprises two types of risks: foreign currency risk and interest rate
risk. The Group is not materially exposed to market price risk.
(i) Foreign currency risk
Currency risk is the risk that the value of a financial instrument denominated
in a currency other than the functional currency will fluctuate due to changes
in foreign exchange rates.
The statement of comprehensive income and the net value of assets can be
affected by currency translation movements as certain assets and income are
denominated in currencies other than US$.
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.
· Movements in rates affecting any interest paid on convertible bonds
denominated in Euros.
The sensitivity of the income (loss) and equity to a variation of the
exchange rate (EUR/US$) in relation to Euro denominated assets and liabilities
is the following:
Effect of the variation in the foreign exchange rate
% Income (loss) Equity Income (loss) Equity
31 Dec 2021 31 Dec 2021 31 Dec 2020 31 Dec 2020
US$ US$ US$ US$
+15 (523,606) 530,915 778,646 423,698
+20 (698,142) 707,886 1,038,185 564,931
-15 523,606 (530,915) (778,646) (423,698)
-20 698,142 (707,886) (1,038,185) (564,698)
(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
and liabilities was as follows:
Total Fixed Floating Non-interest
US$ rate rate bearing
US$ US$ US$
31 December 2021
Equity investments (US$) 176,131,209 - - 176,131,209
Loans and lending facilities (€) 2,866,271 2,866,271 - -
Loans and lending facilities (US$) 19,691,339 19,691,339 - -
Accounts receivable and accrued income (US$) 6,680,404 - - 6,680,404
Accounts receivable and accrued income (€) 286,997 - - 286,997
Cash at bank (€) 25,434,352 - - 25,434,352
Cash at bank (US$) 731,041 - - 731,041
Cash at bank (GBP) 11,427 - - 11,427
Cash on hand (GBP) 270 - - 270
Cash on hand (€) 6,319 - - 6,319
Cash on hand (US$) 10,010 - - 10,010
Cash on hand (CUP) 34,602 - - 34,602
Short-term borrowings (€) (1,004,673 ) (1,004,673) - -
Convertible bonds (€) (28,299,353 ) (28,299,353) - -
Total Fixed Floating Non-interest
US$ rate rate bearing
US$ US$ 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$) 1,058 - - 1,058
Cash on hand (CUC) 4,020 - - 4,020
Credit
risk
Credit risk is the risk that one party to a financial instrument will cause a
financial loss for the other party by failing to discharge an obligation,
expected credit losses are measured using probability of default, exposure at
default and loss given default. Management considers both historical
analysis and forward-looking information in determining an expected credit
loss. Refer to note 6 for the assessment of the expected credit loss for loans
and lending facilities.
Maximum exposure to credit risk
The table below shows the maximum exposure to credit risk for each component
of the consolidated statement of financial position as well as future loan
commitments, irrespective of guarantees received:
31 Dec 2021 31 Dec 2020
US$ US$
Loans and lending facilities 22,557,610 20,222,635
Future loan commitments (TosCuba Construction Facility) (i) 28,291,140 30,997,467
Accounts receivable and accrued income (ii)* 19,248,809 16,349,676
Cash and cash equivalents 26,228,072 4,270,860
Total maximum exposure to credit risk 96,325,631 71,840,638
*Accounts receivable and accrued income after ECL is US$6,967,401 (see note
5).
(i) The TosCuba Construction Facility is secured by future income of the hotel
under construction and Tranche B of the Construction Facility is further
secured by a guarantee given by Cubanacán, the Cuban shareholder of TosCuba,
backed by a new secondary guarantee received from Miramar in support of the
primary guarantee received from Cubanacán. The facilities are assessed at
stage 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. Management believes the probability of default is low due to the
fact that the Group is a 50% shareholder of TosCuba and has a 50%
representation on the Board of Directors. Repayment of the facility is secured
by the future income of the hotel and repayment of Tranche B has also been
guaranteed by Cubanacán and is further secured by Cubanacán's dividend
entitlements in Miramar. Payments of the facility are scheduled to begin once
the hotel starts operations.
(ii) $12,592,004 of the accounts receivable and accrued income balance is
made up of dividends receivable. The impairment on the dividends receivable
has been assessed as low in the case of Miramar and high in the case of Monte
Barreto in terms of the 3 stage model per IFRS 9 by assessing the credit risk
of the counterparty who declared the dividend. The delay in payment of the
dividends receivable from Monte Barreto is due in part to the current
liquidity position of the Cuban financial system caused by the pandemic,
increased U.S. sanctions and the transitional effects of the Cuban monetary
reforms. In the current year, the overall credit risk for Monte Barretto
significantly increased as compared to the preceding year. This resulted in
the account receivable moving from Stage 2 to Stage 3 of the IFRS ECL
impairment model, which therefore requires management to assess the expected
credit loss over time. Accordingly, in the current year management has made an
assessment of the expected credit loss over timetaking into account all
reasonable and supportable information that is available that includes both
internal and external information. As a result, the total amount of credit
impaired receivables at year end is $12,281,408 related to the balance of the
dividend receivable due from Monte Barrreto.
Due to the current liquidity constraints placed upon Monte Barreto as a
result of the recent Cuban monetary reforms, the timing of receipt of the
historical dividends receivable is uncertain. Therefore the dividends
receivable from Monte Barreto at year end have been impaired in full in the
Statement of Comprehensive Income. However, in the case of Miramar, the same
liquidity constraints do not apply under the monetary reforms, due to a large
portion of its income being earned in foreign currency and therefore Miramar
has been assigned a higher credit rating. Management expects to receive the
full amount of dividends receivable from Miramar in due course.
The Group holds its cash and cash equivalents at financial institutions
located in the countries listed below. Also included in the following table
are the credit ratings of the corresponding financial institutions, as
determined by Moody's:
Credit 31 Dec 2021 31 Dec 2020
Rating US$ US$
Cash at bank
Cuba Caa2 727,453 183,540
Guernsey A2 21,828,192 152,420
Spain Ba3 1,631,197 2,956,003
Spain A2 19,048 20,538
Spain Baa2 1,826,198 952,879
Spain A3 144,733 -
26,176,821 4,265,380
Cash on hand
Cuba 51,251 5,480
51,251 5,480
Total cash and cash equivalents 26,228,072 4,270,680
At 31 December 2021 and 31 December 2020, 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 notes
5, 6 and 10).
Although the Group has a number of liabilities (see note 10 - Accounts payable
and accrued expenses, note 11 - Short-term borrowings and note 18 -
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.
On 31 March 2021, the Company completed the issue of €25,000,000
(US$29,312,500 equivalent at date of issue) in convertible bonds (see note
12). The Bonds have a term of 5 years expiring on 31 March 2026, an interest
rate of 10.00%, payable quarterly, and are convertible at the option of the
Bondholders to Ordinary Shares of the Company. The Group currently has
sufficient cash and cash equivalents to cover the quarterly interest payments.
The estimated timing of the undiscounted contracted cash flows associated with
the Bonds issued on 31 March 2021 including interest and principal payments
are as follows:
31 Dec 2021 31 Dec 2020
US$ US$
Between 1 and 30 days - -
Between 31 and 90 days 707,875 -
Between 91 and 180 days 715,740 -
Between 181 and 1 year 1,447,211 -
Between 1-2 years 2,870,826 -
Between 2-3 years 2,878,692 -
Between 3-4 years 2,870,826 -
Between 4-5 years 29,022,875 -
40,514,045 -
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$51,500,000, divided into two separate
tranches: Tranche A of US$22,500,000 and Tranche B of US$29,000,000. As at 31
December 2021, the full US$22,500,000 of Tranche A has been disbursed (2020:
US$20,502,533) and US$708,860 of Tranche B has been disbursed (2020: nil). The
Group has the right to syndicate Tranche B of the Construction Facility to
other lenders.
The principal of the Construction Facility is to be disbursed gradually in
accordance with the construction schedule and the supply of materials and
equipment for the hotel. Prior to the COVID-19 pandemic, it was anticipated
that the full amount of the Construction Facility would be disbursed by the
end of 2020. However, the timing of construction has been affected by the
pandemic and consequently the disbursement of the principal under the
Construction Facility has been delayed and it is now anticipated that the
Construction Facility will be substantially disbursed by the end of the first
quarter of 2022. The Group currently has sufficient cash and cash equivalents
to cover the full disbursement of the Construction Facility (see note 12
concerning the Bond Issue).
The estimated timing of cash outflows under the TosCuba Construction Facility
entered into in April 2018 are as follows:
31 Dec 2021 31 Dec 2020
US$ US$
Between 1 and 30 days 1,279,779 -
Between 31 and 90 days 1,813,996 485,606
Between 91 and 180 days 6,887,133 3,011,861
Between 181 and 1 year 15,185,406 19,000,000
Between 1-2 years 3,124,826 8,500,000
28,291,140 30,997,467
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 2021 and 2020 to a total of
US$196,915,354 and US$234,249,362, respectively. The Group is not subject to
external capital requirements.
20. Fair value disclosures
The fair values of cash and cash equivalents, and accounts receivable and
accrued income (excluding loan interest) balances after adjusting for expected
credit losses (see note 5) are considered to approximate their carrying amount
largely due to the short-term maturities and credit quality of these
instruments. The fair value of loans and lending facilities (and interest)
receivables are considered to approximate their carrying amount largely due to
the fixed interest rates considered to be in line with market, as well as due
to the maturities, security provided and credit quality of these instruments
(see notes 6 and 19 for further details).
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 3.8 (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
3.8 (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 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 2021
US$
Level 1 Level 2 Level 3 Total
Financial assets at fair value through profit or loss
Equity investments - - 175,828,034 175,828,034
- - 175,828,034 175,828,034
31 December 2020
US$
Level 1 Level 2 Level 3 Total
Financial assets at fair value through profit or loss
Equity investments - - 197,618,050 197,618,050
- - 197,618,050 197,618,050
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 2021 31 Dec 2020
Unlisted private equity investments US$ US$
Initial balance 197,618,050 227,340,559
Total gains recognised in income or loss (13,843,717) (41,914,276)
Foreign currency translation reserve (7,946,299) 12,191,767
Final balance 175,828,034 197,618,050
Total losses for the year included in income or loss relating to assets and (13,843,717) (41,914,276)
liabilities held at the end of the reporting year
(13,843,717) (41,914,276)
21. 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 2021
US$
Note Fair value through Cash and Financial assets at amortised cost Financial liabilities at amortised cost Total
profit or loss carrying
amount
Cash and cash equivalents 4 - 26,228,072 - 26,228,072
Accounts receivable and accrued income 5 - 6,967,401 - 6,967,401
Loans and lending facilities 6 - 22,557,610 - 22,557,610
Equity investments 7 175,828,034 - - 175,828,034
Investment in associate 8 - 303,175 303,175
175,828,034 56,056,258 - 231,884,292
Accounts payable and accrued expenses 10 - - 4,347,187 4,347,187
Short-term borrowings 11 1,004,673 1,004,673
Convertible bonds 12 - - 28,299,353 28,299,353
Deferred liabilities 17 - - 1,833,333 1,833,333
- - 35,484,546 35,484,546
31 December 2020
US$
Note Fair value through Cash and Financial assets at amortised cost Financial liabilities at amortised cost Total
profit or loss 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 7 197,618,050 - - 197,618,050
Investment in associate 8 - 303,175 - 303,175
197,618,050 41,146,346 - 238,764,396
Accounts payable and accrued expenses 10 - - 2,215,299 2,215,299
Deferred liabilities 17 - - 2,833,333 2,833,333
- - 5,048,632 5,048,632
There were no reclassifications of financial assets during the year ended 31
December 2021 (year ended 31 December 2020: nil).
22. Audit fees
Audit fees incurred for the year were as follows:
31 Dec 2021 31 Dec 2020
US$ US$
Audit fee expense 321,625 270,909
23. Events after the reporting period
The Russian invasion of Ukraine has had an impact on Russian tourist arrivals
to Cuba generally and is expected to continue doing so going forward.
However, Russian tourists did not represent a substantial segment of the
guest occupancy of the Hotels prior to the conflict and the first quarter 2022
results of the Hotels are above budget.
There may be other indirect impacts of the conflict on the Cuban or global
economies, but at this stage Management is not able to reliably estimate the
potential scope of such impacts for the Company, as events are unfolding
day-by- day.
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.
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 2021, the share price was 64.0p / US$0.86 and the net asset value
per share was 86.4p / US$1.16, and the discount was therefore 25.9%.
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$1.16 / 86.4p as at 31 December 2021.
NAV Return
The table below provides information relating to the NAV of the Company for
the years ending 31 December 2020 and 2021.
2021 2020
Opening NAV 194,425,614 206,734,334
Dividends paid - -
Net comprehensive loss for the year (34,115,831) (12,308,720)
Closing NAV 160,309,783 194,425,614
Ongoing charges
The ongoing charges are based on actual costs incurred in the year excluding
any non-recurring fees in accordance with the AIC methodology. Expense items
have been excluded in the calculation of the ongoing charges figure when they
are not deemed to meet the following AIC definition: "Ongoing charges are
those expenses of a type which are likely to recur in the foreseeable future,
whether charged to capital or revenue, and which relate to the operation of
the investment company as a collective fund, excluding the costs of
acquisition/disposal of investments, financing charges and gains/losses
arising on investments. Ongoing charges are based on costs incurred in the
year as being the best estimate of future costs."
The table below provides information relating to the ongoing charges of the
Company for the years ending 31 December 2021 and 2020.
2021 2020
Total Expenses per statement of comprehensive income 33,917,912 46,347,435
Adjustments (items to exclude):
Foreign exchange (loss)/gain (130,198) 1,157,566
Interest expense on bonds (2,176,931) -
Loss on change in fair value of equity investments (13,843,717) (41,914,276)
Expected credit losses (12,281,408) -
Non-recurring bond issuance costs (395,228) -
Total Annualised ongoing charges 5,090,430 5,590,725
Average undiluted net asset value in the period 181,554,628 192,301,944
Ongoing charges (%) 2.80 % 2.91%
For further information, please contact:
Aberdeen Standard Fund Managers Limited Tel: +44 (0)20 7463 6000
Sebastiaan Berger / Evan Bruce-Gardyne
Singer Capital Markets Tel: +44 (0)20 7496 3000
James Maxwell (Corporate Finance)
James Waterlow (Sales)
JTC Fund Solutions (Guernsey) Limited Tel: +44 (0) 1481 702400
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