REG - Jade Road Investmnts - Final Results
30/06/2022 07:16
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RNS Number : 7277Q Jade Road Investments Limited 30 June 2022
30 June 2022
RNS
JADE ROAD INVESTMENTS LIMITED
("Jade Road" or the "Company")
Final Results
Jade Road Investments Limited, the London-quoted, pan-Asian diversified
investment vehicle focused on providing shareholders with attractive
uncorrelated, risk-adjusted long-term returns, is pleased to announce the
publication of its final results for the year ended 31 December 2021.
Hard copies of the Annual Results are available upon request. The Results are
also available on Jade Road's
website: https://jaderoadinvestments.com/investors/financial-reports
(https://jaderoadinvestments.com/investors/financial-reports) .
Financial Highlights
2021 2020 Change
Net Asset Value US$68.0m (GBP55.8m) US$106.4m(GBP78.0m) -36.1%
Gross Portfolio Income US$2.5m (GBP2m) US$2.5m (GBP1.8m) -
Net Portfolio Income US$-35.6m (GBP-29.2m) US$6.7m (GBP4.9m) -623%
Net Profit / Loss US$-38.4m (GBP-31.5m) US$1.6m (GBP1.2m) -2469%
Year-end cash US$0.8m (GBP0.6m) US$3.7m (GBP2.7m) -78.4%
Net Asset Value per share US$0.58m (GBP0.5m) US$0.92m (GBP0.67m) -36.9%
Operational Highlights
- Jade's largest legacy asset (85% effective holding) in China is
Future Metal Holdings Limited (FMHL), the largest magnesium dolomite quarry in
Shanxi Province. According to the Observatory of Economic Complexity (MIT
Media Lab) between December 2020 and December 2021, China's dolomite exports
increased by 135% or US$3.86m to US$6.73m from US$2.87m. China also charges
the highest price for dolomite at around US$30 per tonne. In addition to
providing dolomite for aggregate, FMHL is poised to sell its higher value
products once local supply chains recover
- In June 2021, Meize's state-of-the-art Jiangsu offshore blade
plant completed an expansion and commenced operations to meet rising demand
and is operating at full capacity, producing internationally certified blades
for both onshore and offshore wind turbines.
- In July 2021, the Company announced its expanded
strategy to invest in Asian High Growth Companies via equity in listed
companies and/or pre-IPO investments with a focus in Technology, including
Healthtech, Medtech and Fintech.
Post Period End Activity
- On the 22(nd) of June, Jade Road announced (RNS Number: 7646P) it
has successfully negotiated a partial divestment in Meize Energy Industries
Holdings Limited ("Meize"), currently the third-largest holding in the
Company's portfolio (7.7% of NAV as at announcement). The company has entered
into a share purchase agreement ("SPA") for 112,500 shares of the Series B
Preferred Equity in Meize for consideration of USD1.2 million (the
"Transaction Price"). The Transaction Price implies a valuation of USD10.0
million for the Company's investment in Meize, which indicates a 22.0% premium
to the carrying value as at the 30(th) of June 2021 (USD8.2 million)
John Croft, Chairman of Jade Road Investments, commented:
'Unfortunately, the pandemic situation in China throughout 2021 worsened with
major cities and provinces placed under lockdown measures, including
cross-province and cross-border travel bans, as part of the government's
zero-Covid strategy.
Meanwhile, in Hong Kong (HKSAR), many restaurants were forced to close
permanently in the face of multiple lockdowns. In Japan, tourism ground to a
complete halt.
In the face of these unprecedented headwinds, major impairments across the
asset portfolio have unfortunately become unavoidable.
I am pleased to report that whilst talks remain protracted due to China's
zero-Covid stance, positive developments have been achieved. On that note, I
was delighted that we were recently (post balance sheet) able to announce the
partial disposal of our holding in Meize Energy Industries (Meize). Our
original investment represented a 7.2% stake in Meize. Post this partial sale
generating US$ 1.2m in cash, Jade's residual holding will amount to 6.3% of
the equity.
Jade Road is set to pivot away from China and focus on the broader Asian SME
subsector, which is showing greater resilience than larger companies in terms
of recovery.
In Southeast Asia, SMEs are expected to further embrace sustainability,
doubling down on digitalisation, accelerating automation and scaling up, as
they navigate a post-pandemic recovery.
Therefore, Jade Road's core strategy remains: to build a base of income
generating assets that covers overheads, management fees and finance costs,
with a growing surplus to fund dividends.'
FOR FURTHER INFORMATION, PLEASE CONTACT:
Jade Road Investment Limited +44 (0) 778 531 5588
John Croft
Lionsgate Communications - Communications Adviser +44 (0) 779 189 2509
Jonathan Charles
Hybridian LLP - Corporate Broker +44 (0)203 764 2341
Claire Noyce
WH Ireland Limited - Nominated Adviser +44 (0) 20 7220 1666
James Joyce
James Sinclair Ford
About Jade Road Investments Limited
Jade Road Investments Limited (Jade Road) is quoted on the AIM Market of the
London Stock Exchange and is committed to providing shareholders with
attractive uncorrelated, risk adjusted long-term returns from a combination of
realising sustainable capital growth and delivering dividend income.
The Company is focused on providing growth capital and financing to emerging
and established Small and Medium Enterprises (SME) sector throughout Asia,
well diversified by national geographies, instruments and asset classes. This
vital segment of the economy is underserved by the traditional banking
industry for regulatory and structural reasons.
The Company's investment manager, Harmony Capital, seeks to capitalise on its
team's established investment expertise and broad networks across Asia.
Through rigorous diligence and disciplined risk management, Harmony Capital is
dedicated to delivering attractive income and capital growth for shareholders
with significant downside protection through selectively investing in assets
and proactively managing them.
Harmony Capital is predominately sourcing private opportunities and continues
to create a strong pipeline of attractive income generating assets from
potential investments in growth sectors across Asia, including healthcare,
fintech, hospitality, IT and property.
For further information, please visit the Company's website
at https://jaderoadinvestments.com (https://jaderoadinvestments.com/) and
follow the Company on Twitter (@JadeRoadInvest).
The information contained within this announcement is deemed to constitute
inside information as stipulated under the retained EU law version of the
Market Abuse Regulation (EU) No. 596/2014 (the “UK MAR”) which is part of
UK law by virtue of the European Union (Withdrawal) Act 2018. The information
is disclosed in accordance with the Company’s obligations under Article 17
of the UK MAR. Upon the publication of this announcement, this inside
information is now considered to be in the public domain.
Chairman's Statement 2021
The pandemic-ravaged economies of China and Southeast Asia, compounded by
heavy-handed Covid-19 curbs, continued to severely disrupt local supply chains
and dampen demand, making major impairments across the Jade Road asset
portfolio unavoidable.
Overview
In my statement in the 2021 interim results, I noted that the asset portfolio
had managed to avoid any major impairments. Unfortunately, the pandemic
situation in China throughout 2021 worsened with major cities and provinces
placed under lockdown measures, including cross-province and cross-border
travel bans, as part of the government's zero-Covid strategy.
More recently China's largest city Shanghai was locked down for two whole
months delivering a serious blow to the country's economy and thereby
undermining its chances of achieving the targeted 5.5% GDP growth rate for
2022.
Meanwhile, in Hong Kong (HKSAR), many restaurants were forced to close
permanently in the face of multiple lockdowns. Prior to the 2019 protests and
then the arrival of Covid-19 in the territory, 29 million mainland Chinese
would visit Hong Kong annually, providing a major contribution to the
territory's economy, spending heavily in the retail, property and hospitality
sectors. This source of income was almost completely cut off.
In Japan, tourism ground to a complete halt.
In the face of these unprecedented headwinds, major impairments across the
asset portfolio have unfortunately become unavoidable.
I believe a prudent valuation approach is required and consequently, in
December 2021, the Company reported that it was likely to make a full
provision against its US$26.5 million convertible bond in the Hong Kong-based,
Michelin star restaurant company Fook Lam Moon Holdings. Events since then
have unfortunately done nothing to change our assessment and the 2021 results
presented do include the anticipated full provision.
Net Asset Value (NAV) for the year ended 31st December 2021 decreased to
US$68.0 million, down 36.1% from US$106.4 million the previous year.
I have also stated that Jade Road's investment manager Harmony Capital was
busy driving phase two of a three-phase investment strategy focused on exits,
restructuring our legacy assets and seeking investments in smaller fast
growing companies at IPO or pre-IPO stages.
I am pleased to report that whilst talks remain protracted due to China's
zero-Covid stance, positive developments have been achieved. On that note, I
was delighted that we were recently (post balance sheet) able to announce the
partial disposal of our holding in Meize Energy Industries (Meize). Our
original investment represented a 7.2% stake in Meize. Post this partial sale
generating US$ 1.2 million in cash, JADE's residual holding will amount to
6.3% of the equity.
As is painfully obvious, exiting private equity positions held in Chinese
companies requires patience as well as persistence, but as demonstrated by
this announcement exits can be achieved, and in this case, at a premium to the
value of the asset held in our books. Whilst having no direct connection with
other privately held Chinese assets in our portfolio, it does provide clear
evidence that these assets have real value and that in time realisations can
be made delivering cash returns into the company.
Key Developments
Jade Road's investment manager has been hard at work pivoting away from its
legacy assets in China as exit talks continue unabated.
Jade Road's largest legacy asset (85% effective holding) in China is Future
Metal Holdings Limited (FMHL), the largest magnesium dolomite quarry in Shanxi
Province. According to the Observatory of Economic Complexity (MIT Media Lab)
between December 2020 and December 2021, China's dolomite exports increased by
135% or US$3.86 million to US$6.73 million from US$2.87 million. In addition
to providing dolomite for aggregate, FMHL is poised to sell its higher value
products once local supply chains recover.
Meanwhile, Meize the onshore and offshore wind turbine blade manufacturer, is
showing exceptional resilience. As previously reported, Meize has maintained a
full order book from its clients in 2021 due to exceptionally strong market
demand.
In June 2021, Meize's state-of-the-art Jiangsu offshore blade plant completed
an expansion and commenced operations to meet rising demand and is operating
at full capacity.
As John Adams, second President of the United States, eloquently put it:
"Every problem is an opportunity in disguise."
In July 2021, the Company announced its expanded strategy to invest in Asian
High Growth Companies via equity in listed companies and/or pre-IPO
investments with a focus in Technology, including Healthtech, Medtech and
Fintech.
The total allocation under this expanded investment focus will not be greater
than 10% of Jade Road's present NAV (currently US$68.0 million) and not
greater than 20% once the NAV exceeds US$150m. Investments in each company
will not exceed 5% of the total allocation, in order to mitigate risk through
diversification.
With many high growth start-ups staying private longer, Jade Road is uniquely
poised to eliminate the barriers to investing in these start-ups and
potentially provide its investors with high returns.
ESG Policy
I am pleased to report that Environmental, Social, and Governance ("ESG")
principles play an integral role in Jade Road's investment process.
Harmony Capital, Jade Road's Investment Manager, is a reporting member of the
UN PRI (United Nations Principles for Responsible Investment) and its
investment process has been redesigned to comply with best-in-class,
ESG-focused private investment practices.
I believe that through the provision of expansion capital to assist companies
in their growth, Jade Road can target attractive returns for stakeholders as
well as be a steward of betterment in the ecosystems and communities within
which these portfolio companies operate.
Outlook
China's economy is forecast to recover at a slower rate than previous years as
it tackles a far more transmissible virus variant, weaker growth and a central
government less willing to continue its high levels of financial support.
Jade Road is set to pivot away from China and focus on the broader Asian SME
subsector, which is showing greater resilience than larger companies in terms
of recovery.
In Southeast Asia, SMEs are expected to further embrace sustainability,
doubling down on digitalisation, accelerating automation and scaling up, as
they navigate a post-pandemic recovery.
Therefore, Jade Road's core strategy remains: to build a base of income
generating assets that covers overheads, management fees and finance costs,
with a growing surplus to fund dividends.
By targeting the broad Asian SME subsector, I believe Jade Road can access an
immense market in which it can leverage both its capital, and its investment
manager's direct relevant experience.
In a market in which Asian SMEs are increasingly starved of capital, Jade Road
continues to see opportunities to negotiate and invest in structured
instruments. Its preference for income-generating assets puts an emphasis on
credit instruments such as secured debt or non-mandatory convertible bonds
when structuring investments.
As the world emerges from the challenges of COVID, we face new inflationary
and geopolitical headwinds that are affecting businesses globally.
With this background, your Board's primary focus is to generate income through
disposals whilst actively reviewing opportunities to acquire income generating
assets for the portfolio as capital markets eventually return to growth.
John Croft
29(th) June 2022
Chairman of the Board
Portfolio at 31 December 2021
Principal assets Effective interest Instrument type Valuation at 31 December 2020 Credit income US$ million Credit investment Cash receipts Equity investment/ other movement US$ million Fair value adjustment US$ million Provision Valuation at
% US$ million US$ million US$ million US$ million 31 December 2021
US$ million
Fook Lam Moon Holdings - Convertible Bond 28.4 1.3 - - - (29.7) - -
Future Metal Holdings Limited 84.8 Structured Equity 50.4 0.6 - - - (0.6) - 50.4
Meize Energy Industrial Holdings Ltd 7.9 Redeemable convertible preference shares 8.2 - - - - - - 8.2
DocDoc Pte Ltd - Convertible Bond 2.4 0.2 - - - - - 2.6
Infinity Capital Group - Secured Loan Notes 2.3 0.4 - - - (1.3) - 1.4
Infinity TNP 40 Equity 7.3 - - - - (3.7) - 3.6
GCCF & Other investments - 8.7 - - (0.4) - (2.7) - 5.6
Corporate debt - (3.5) - - - (0.1) - - (3.6)
Other liabilities - (1.5) - - - 0.5 - - (1.0)
Cash 3.7 - - 0.4 (3.3) - - 0.8
Total Net Asset Value 106.4 2.5 - - (2.9) (38.0) - 68.0
Portfolio Overview
Future Metal Holdings Limited
Our largest asset by value is the dolomite quarry project ("Quarry") in China,
Future Metal Holdings Limited ("FMHL"), which was previously known as Hong
Kong Mining Holdings. The Company has an 85% shareholding in FMHL.
In March 2021, the Quarry engaged a new contractor to support operations. We
believe that the new contractor has both the experience to efficiently operate
the Quarry and the local network to sell the Quarry's products to downstream
customers.
In 2021, the price of magnesium skyrocketed and reached a record high in the
last decade. It increased substantially from around RMB15K (USD2.2K) per tonne
in Q1 2021 to above RMB50K (USD7.4K) per tonne towards the end of 2021,
representing a 233.3% increase. The local team has reached out to smelters in
the local region to try to establish sales channels for the dolomite products
in smelting use.
Including loan disbursements provided by the Company to FMHL and its
subsidiaries and accrued PIK interest, the estimated fair value of the
Company's investment is US$50.4 million as of 31 December 2021 (31 December
2020 US$50.4 million).
Fook Lam Moon
The Company holds a convertible bond of US$26.5 million ("Convertible Bond")
in Fook Lam Moon Holdings("FLMH"), which is a shareholder of a Hong Kong-based
restaurant group Fook Lam Moon ("FLM"). The Convertible Bond has a maturity of
5 years and pays a coupon of 5.0% per annum (3.0% paid in cash with the
remainder rolled up with the principal amount outstanding).
FLM's business was impacted by the COVID-19 pandemic, as did its peers' in the
food and beverage industry in Hong Kong in 2021. The regulations imposed by
the local government severely limited inbound tourism, particularly from
Mainland China, and local consumption
In late 2021, the Company became aware that the underlying group structure of
FLM may have changed such that FLMH is no longer the 71% owned controlling
shareholder in the Hong Kong based restaurant group.
The Company is actively working to secure more information to clearly
understand what potential impact this ownership change may have on the value
attributed to the Convertible Bond and the level of any new ownership in the
Restaurant Group.
In order to be prudent, the Company has decided to apply a 100% provision
against this investment. As of 31 December 2021, the carrying value of the
Convertible Bond was written off to be US$0.0 million (2020: US$28.4 million).
Infinity TNP
Tellus Niseko ceased operation in 2021 due to reduction in local tourists. The
local team has been closely monitoring the local condition and shall resume
business once tourism recovers.
In order to be prudent, the Company has decided to apply a 50% provision
against this investment. As of 31 December 2021, the carrying value of its
investment was US$3.6 million (2020: US$7.3 million).
Infinity Capital Group ("ICG")
Ultimate Prosperity Limited, a 100% owned subsidiary of the Company
incorporated in the British Virgin Islands, holds a Secured Loan to ICG.
In 2021, as the COVID-19 pandemic continues to impact Japan and the Hokkaido
region, ICG has been working closely with the local management to monitor the
domestic property market and the local market's response to the pandemic,
including construction project planning and potential movements in property
prices.
ICG provided the Company with a detailed proposal to deliver several
undertakings at the end of 2021, including payment schedule, credit
enhancement, etc. The Company is closely monitoring the development and shall
utilise its best effort to protect its interest.
In order to be prudent, the Company has decided to apply a 50% provision
against this investment. As of 31 December 2021, the carrying value of the
Secured Loan was US$1.4 million taking into account the current face value of
the instrument and cash interest receivable, less an Expected Credit Loss
("ECL") provision against aged cash interest receivables.
The Company also received shares of Ultima United Limited (Listed on ASX),
having a fair value of US$0.5 million as at year end, as additional security
for the outstanding cash interest receivable. These shares are to be returned
on receipt of the outstanding interest. These shares are not reflected in the
financial statements of the Company as they do not meet the definition of a
financial asset under IFRS 9.
Meize Energy Industries Holdings Limited ("Meize")
Swift Wealth Investments Limited, a 100% (2020: 100%) owned subsidiary of the
Company incorporated in the British Virgin Islands, holds a 7.2% stake in
Meize through a redeemable preference share structure.
Meize is a privately owned company that designs and manufactures blades for
both onshore and offshore wind turbines.
In early 2021, Meize commenced the expansion of its factory in Jiangsu
Province, to meet the growing demand for its products. The expansion was
completed in mid-2021 and the Jiangsu Plant was operating at full capacity,
due to the strong demand from the offshore wind market.
In August 2021, JADE issued a divestment proposal to Meize requesting a full
or partial exit. JADE is currently in discussions with Meize regarding the
details of the divestment.
As of 31 December 2021, the Company's interest in Meize had a fair value of
US$8.2 million (2020: US$8.2 million) based on a Discounted Cash Flow
analysis. The carrying amount represents a discount of over 50% to the full
redemption value of the Company's investment.
DocDoc Pte Ltd. ("DocDoc")
DocDoc is a Singapore-headquartered online network of over 23,000 doctors, 600
clinics, and 100 hospitals serving a wide array of specialties. It uses
artificial intelligence, cutting-edge clinical informatics, and proprietary
data to connect patients to doctors which fit their needs at an affordable
price.
In 2021, DocDoc pivoted its business model to become a "Neo Insurer" and
attempts to partner with insurance companies to enhance their policy
offerings. DocDoc is working to offer fully-digitised insurance products to
consumers or businesses, exclusively through digital channels, with end-to-end
digital service delivery. These offerings will include quoting, binding,
issuing of policies, documentation, proof of insurance, electronic billing,
payment and real time policy management all digitally.
As of 31 December 2021, the carrying value of the Convertible Bond was US$2.6
million (2020: US$2.4 million). An annual coupon of 8% (4.0% cash and 4%
Payment-in-Kind was converted to 8% Payment-in- Kind.
Greater China Credit Fund LP (the "GCCF")
In 2021, JADE has been trying to obtain the latest statement for GCCF through
its fund administrator. However, all efforts of the fund administrator to
obtain it from Adamas Asset Management ("AAM") have been unsuccessful. As far
as we know, the fund is under liquidation. All the management of the fund is
unable to provide any information to us. We have to put down the valuation and
apply a 100% provision against this investment. As of 31 December 2021, the
Company's interest in GCCF has an allocated fair value of US$0.0 million
(2020: US$2.8 million).
Biographies of Directors and Senior Management
Board of Directors
Mr. John Croft, Executive Chairman
John Croft is an experienced Chairman, non-executive Director and executive
with a successful international career in the technology and financial
services sectors.
He is also a non-executive Director at Aura Renewable Acquisitions PLC and
Golden Rock Global PLC, both Special Acquisitions Companies (SPACs) quoted on
the Standard List of the London Stock Exchange and is also a non-executive
Director at Brazilian Nickel PLC.
He has previously held senior Director level positions in Racal Electronics
and NCR Corporation, following an early career in banking with HSBC and
Citibank.
Hugh Viscount Trenchard, Non-executive Director
Viscount Trenchard began his career as an investment banker at Kleinwort
Benson in 1973. He has more than 40 years' experience of Japanese business,
including 12 years as a resident of Japan. He ran Kleinwort Benson's East
Asian operations for 15 years and was later Head of Japanese Investment
Banking for Robert Fleming & Co. Limited, before working with Mizuho
International plc from 2007 to 2014. He served as a Senior Adviser for Japan
and Korea to Prudential Financial, Inc. from 2002 to 2008. Lord Trenchard is a
member of the House of Lords and a Vice-Chairman of the British-Japanese
Parliamentary Group.
Mr. Charles Stuart Crocker, Non-executive Director
Stuart Crocker served eleven years in the British Army before starting a
banking career primarily with Merrill Lynch and HSBC, in Europe and the Middle
East. Latterly he became the CEO HSBC Private Bank UAE and Oman, and the
Global Head Private Banking Group at Abu Dhabi Islamic Bank. Stuart has been a
member of the Worshipful Company of International Bankers, and a Freeman of
the City of London, since 2006 and became a Fellow of the Institute of
Directors (FIoD) in 2022.
Since 1994 Stuart has been a Director and then Trustee at St
Martin-in-the-Fields in London. He was a founding investor and the first
Non-Executive Chairman of a renewable forestry company, which is now one of
the largest forestry operations in West Africa having planted over 20 million
trees.
Stuart is a founder advisor and shareholder in a multi-award winning FinTech
company in the Middle East. In 2020 he was the Interim-Chairman of an advanced
technology company for ensuring the safety, security and efficiency of people
and assets in some of the world's most difficult places, supporting client
operations in 35 countries.
In December 2021 Stuart became Chairman of an exclusive distributor of clean,
ethical beauty brands for women and men. Current distribution is across the
GCC through retail, pharmaceutical, professional channels and e-commerce.
Stuart was honoured to be invested as a Knight of The Order of St. George
(KStG) at Rochester Cathedral in May 2022. The Order is a non-profit charity
registered in England and has had special consultative status as an NGO at the
UN Economic and Social Council since 2015.
Dr. Lee George Lam, Non-executive Director
Dr. Lam is Chairman of the United Nations Economic and Social Commission for
Asia and the Pacific (UN ESCAP) Sustainable Business Network (ESBN), Vice
Chairman of Pacific Basin Economic Council (PBEC), Chairman of the Permanent
Commission on Economic and Financial Issues of the World Union of Small and
Medium Enterprises (WUSME), and a member of the Hong Kong Trade Development
Council (HKTDC) Belt and Road and Greater Bay Area Committee. A former
member of the Hong Kong Bar, Dr. Lam is a Solicitor of the High Court of Hong
Kong, an Accredited Mediator of the Centre for Effective Dispute Resolution
(CEDR), a Fellow of Certified Management Accountants (CMA) Australia, the Hong
Kong Institute of Arbitrators, the Hong Kong Institute of Directors and the
Institute of Corporate Directors Malaysia (ICDM), an Honorary Fellow of
Certified Public Accountants (CPA) Australia, the Hong Kong Institute of
Facility Management and the University of Hong Kong School of Professional and
Continuing Education, and a Distinguished Fellow of the Hong Kong Innovation
and Technology Development Alliance.
Mr. John Batchelor, Non-executive Director
Mr. Batchelor is a Senior Managing Director with FTI Consulting and was
formerly Co-Lead of Asia and Head of the Corporate Finance & Restructuring
segment in Asia. He has more than 25 years of experience in restructuring,
corporate recovery, and transaction advisory. Prior to FTI Consulting, Mr.
Batchelor was an executive director of Ferrier Hodgson.
Key Personnel of the Investment Manager, Harmony Capital
Mr. Suresh Withana is the Co-Founder and Managing Partner of Harmony Capital
Investors Limited. Prior to founding Harmony Capital Investors Limited
("HCIL"), he was most recently Global Head of Special Situations and Co-Head
of Asia at Tikehau Capital, the listed investment management company with over
€29 billion in assets. Previously, he was the Co-Founder and Chief
Investment Officer at Harmony Capital Partners, an affiliate of HCIL, which
managed a fund focused on Asian special situations investments. Prior to that,
he was a Director of the Global Special Situations Group at Mizuho
International Plc in London and a Vice President in the Investment Banking
Group at Merrill Lynch International (London). In total, he has accumulated 25
years of experience, including over 18 years of special situations investing
primarily focused on Asia.
Directors' Report
The Board (the "Board") of Directors (the "Directors") are pleased to present
their report on the affairs of the Company and its subsidiaries (collectively
referred to as the "Group"), together with the audited financial statements
for the year ended 31 December 2021.
PRINCIPAL ACTIVITIES
The Company was incorporated with limited liability under the laws of the
British Virgin Islands ("BVI"). The Company's shares were admitted to the AIM
Market of the London Stock Exchange on 19 October 2009 and on the Quotation
Board of the Open Market of the Frankfurt Stock Exchange on 6 December 2012.
RESULTS AND DIVIDENDS
The Company recorded a loss before taxation of US$38.4 million (2020: profit
US$1.6 million).
The loss reflects fair value decrease on assets in the portfolio of US$37.7
million (2020: increase US$5.9 million), net finance income of US$0.8 million
(2020: US$0.9 million) and total operating expenses of US$1.5 million (2020:
US$5.2 million). The fair value decrease on assets included in the period
includes income from investments of US$1.2 million (2020: US$1.1 million) and
a fair value adjustment upon valuation of portfolio assets at the period end
of US$38.2 million (2020: US$4.8 million).
The Directors are not recommending the payment of a dividend for the year.
REVIEW OF THE BUSINESS
The Group's audited net asset value as at 31 December 2021 stood at US$68.0
million (2020: US$106.4 million) equivalent to US$0.58 per share (2020:
US$0.92), excluding the effect of treasury shares held by the Group.
The principal investment assets held by the Company at the year-end, together
with their valuations are set out in the Chairman's statement.
EVENTS AFTER THE REPORTING PERIOD
The significant events after the reporting period are set out in Note 19 of
the financial statements, none of which impact on the results and net assets
reported in these financial statements.
DIRECTORS AND DIRECTORS' INTERESTS
The Directors who served during the year and up to the date of this report
were as follows:
Mr. John Croft
Hugh Viscount Trenchard
Dr. Lee George Lam
Mr. Stuart Crocker
Mr. John Batchelor
The Directors retiring by rotation are Stuart Crocker and Hugh Viscount
Trenchard, who, being eligible, offer themselves for re-election at the
Company's forthcoming annual general meeting.
With the exception of the related party transactions stated in Note 17 to the
Financial Statements, there were no other significant contracts, other than
Directors' contracts of service, in which any Director had a material
interest. The Directors who held office as at 31 December 2021 had no
beneficial interests in any of the shares of the Company and Group companies
other than as follows:
Number of ordinary shares of no par value as at 31 December
2021 2020
Direct Indirect Direct Indirect
Mr. John Croft 130,463 10,733 118,463 10,733
Hugh Viscount Trenchard 60,634 - 60,634 -
Dr. Lee George Lam 101,057 - 101,057 -
Mr. Stuart Crocker 80,845 - 80,845 -
Mr. John Batchelor - - - -
Number of warrants over ordinary shares of no par value as at 31 December
2021 2020
Direct Indirect Direct Indirect
Mr. John Croft 877,346 - 877,346 -
Hugh Viscount Trenchard 457,634 - 457,634 -
Dr. Lee George Lam 496,057 - 496,057 -
Mr. Stuart Crocker 76,845 - 76,845 -
Mr. John Batchelor - - - -
SUBSTANTIAL SHAREHOLDINGS IN THE COMPANY
As far as the Directors are aware at the date of signing, the following
persons are interested in 3% or more of the issued share capital of the
Company:
Shareholder Number of Percentage of
ordinary shares issued share capital
Elypsis Solutions Limited 55,225,127 47.9%
Infinity Capital Group 16,179,310 14.0%
Heirloom Investment Management LLC 10,068,676 8.7%
Harmony Capital Investors Limited 6,059,306 5.3%
Barry Lau 4,561,400 4.0%
The percentage of shares not in public hands (as defined in the AIM Rules for
Companies) is 79.9%.
The Directors have not been made aware of any other beneficial shareholdings
of 3% or more of the issued share capital of the Company as of the date of
this report.
FINANCIAL INSTRUMENTS
The Group's use of financial instruments is described in Note 9 and Note 15.
FINANCIAL RISK MANAGEMENT OBJECTIVES
Management has adopted certain policies on financial risk management with the
objective of ensuring that appropriate funding strategies are adopted to meet
the Group's short-term and long-term funding requirements, taking into
consideration the cost of funding, gearing levels, and cash flow projections.
The policies are also set to ensure that appropriate strategies are adopted to
manage related interest and currency risk funding and to ensure that credit
risks on receivables are properly managed. In addition, Note 15 to the
financial statements include the Group's objectives, policies, and processes
for managing its capital, its financial risk management objectives, details of
its financial instruments and its exposures to credit risk, interest rate
risk, liquidity risk, price risk, and currency risk.
POLICY AND PRACTICE ON PAYMENT OF CREDITORS
The Group seeks to maintain good terms with all of its trading partners. In
particular, it is the Group's policy to agree appropriate terms and conditions
for its transactions with suppliers and, provided the supplier has complied
with its obligations, to abide by the terms of payment agreed.
SHARE CAPITAL
The Company has a single class of shares which is divided into ordinary shares
of no par value.
At 31 December 2021, the number of ordinary shares in issue was 117,925,673,
of which 2,647,804 were held in treasury by the group. Details of movements in
the issued share capital during the year are set out in Note 14 to the
financial statements.
DIRECTORS' INDEMNITY
The Company's Articles of Association provide, subject to the provisions of
BVI legislation, an indemnity for Directors and officers of the Company in
respect of liabilities they may incur in the discharge of their duties or in
the exercise of their powers, including any liabilities relating to the
defence of any proceedings brought against them which relate to anything done
or omitted, or alleged to have been done or omitted, by them as officers or
employees of the Company.
Appropriate directors' and officers' liability insurance cover is in place in
respect of all of the Directors.
EMPLOYEE INFORMATION
As at 31 December 2021, the Group had Nil (2020: Nil) employees excluding
Directors.
CHARITABLE DONATIONS
The Group has not made any charitable donations during the year (2020: Nil).
GOING CONCERN
The financial statements are required to be prepared on the going concern
basis unless it is inappropriate to do so. The Directors, having considered
"Going Concern and Liquidity Risk: Guidance for Directors of UK Companies"
issued by The Financial Reporting Council in 2016, consider the going concern
basis of preparation to be appropriate in preparing the financial statements.
The key conclusions are summarised below:
§ The Group realises and applies its investment resources in accordance with
its available liquidity.
§ The Group held cash and cash equivalents of US$0.8 million at 31 December
2021 and had debt of US$3.6 million.
In considering the appropriateness of this basis of preparation, the Directors
have reviewed the Group's working capital forecasts for a minimum of 12 months
from the date of the approval of this financial information. Following this
assessment, the Directors have reasonable expectation that the Group has
adequate resources to continue for the foreseeable future and that carrying
values of intangible assets are supported. Thus, they continue to adopt the
going concern basis of accounting in preparing this financial information.
DIRECTORS' RESPONSIBILITY STATEMENT
The Directors are responsible for preparing the Directors' Report, and the
Financial Statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare Group Financial Statements for
each financial year. The Directors are required by the AIM Rules of the London
Stock Exchange to prepare Group financial statements in accordance with
International Financial Reporting Standards ("IFRS") as endorsed by European
Union and have elected under company law to prepare the Financial Statements
in accordance with IFRS.
Under company law the Directors must not approve the Financial Statements
unless they are satisfied that they give a true and fair view of the state of
affairs of the Group and of the loss of the Group for that period.
In preparing the Group Financial Statements, the Directors are required to:
1. select suitable accounting policies and then apply them
consistently;
2. make judgements and accounting estimates that are reasonable and
prudent;
3. state whether they have been prepared in accordance with IFRS; and
4. prepare the financial statements on the going concern basis unless
it is inappropriate to presume that the Group will continue in business.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Group's transactions and disclose with
reasonable accuracy at any time the financial position of the Group. They are
also responsible for safeguarding the assets of the Group and hence for taking
reasonable steps for the prevention and detection of fraud and other
irregularities.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Jade Road Investments
Limited website.
AUDITORS
A resolution to re-appoint PKF Littlejohn LLP as the Company's auditors will
be proposed at the Annual General Meeting.
On behalf of the Board
John Croft
29(th) June 2022
Chairman of the Board
Corporate Governance Statement
THE BOARD
The Board of Jade Road Investments Limited, in accordance with the AIM Rules,
adopted an appropriate corporate governance code. It has decided to apply the
Quoted Companies Alliance Corporate Governance Code (the QCA Code). The QCA
Code is a pragmatic and practical corporate governance tool which adopts a
proportionate, principles-based approach which the Board believes will enable
the explanation of how the Company applies the QCA Code and its overall
corporate governance arrangements. The QCA Code is constructed around 10 broad
principles which are set out below together with an explanation of how the
Company complies with each principle, and where it does not do so, an
explanation for that.
As suggested by the QCA, our Chairman, John Croft makes the following
statement in relation to corporate governance:
"As Chairman of the Company, I lead our Board of Directors and have primary
responsibility for ensuring that the Company meets the standards of corporate
governance expected of an AIM investment company of our size. Our over-arching
role as a Board is to monitor the Company's progress with its investing policy
and to ensure that it is being properly pursued. In pursuing that strategy,
our second key focus is to supervise, manage and objectively assess the
performance of our Investment Manager, Harmony Capital Investors Limited.
Given there is no executive team in the Company and no other employees, this
relationship is critically important in terms of delivering value to our
shareholders.
We set out below how we as a Board seek to apply the QCA Code, bearing in mind
the particular nature of the Company and its business. Being an investment
company means we are naturally focused on investment strategy and deploying
our cash resources in the most efficient way to produce returns for
shareholders in the medium to long term, balancing the potential risks and
rewards of each investment which our Investment Manager proposes. We have a
rigorous investment process including third-party legal, commercial, and
financial due diligence, site visits, management meetings, and independent
valuations where relevant. The output of this work is consolidated and
presented to the Board by the Investment Manager in high-quality investment
presentations which are reviewed and discussed at length at investment board
meetings. We are not a large corporate with multiple stakeholders and, as
noted above, our Board is primarily non-executive as at the year end. We,
therefore, intend to take a pragmatic approach to governance structures and
processes and whilst retaining a high-performance culture at Board level,
adopt policies and procedures which we think are appropriate to an investment
company on AIM."
The Board, the Investment Manager and Board Committees
The Board is responsible for reviewing and approving the Company's Investing
Policy and for monitoring the performance of Harmony Capital Investors Limited
in the performance of its obligations under the Services Agreement. The
Company holds board meetings as required and not less than four times
annually. The Board has constituted committees with responsibility for
overseeing audit, remuneration, valuation and investment matters.
The Board has constituted the following Committees:
The Remuneration Committee constituted by Hugh Viscount Trenchard and Dr Lee
George Lam.
The Remuneration Committee reviews the scale and structure of the Directors'
remuneration and the terms of their service or employment contracts, including
warrant schemes and other bonus arrangements. The remuneration and terms and
conditions of the non-executive Directors are set by the entire Board, with
Directors absenting themselves, at the appropriate time, from discussions on
matters directly reflecting their remuneration.
The Investment Committee constituted by John Croft, Hugh Viscount Trenchard,
Dr Lee George Lam, Stuart Crocker and John Batchelor.
The Investment Committee has the primary authority to develop the Company's
investment objectives and corporate policies on investing. It reviews and
approves investment opportunities presented by the Company's Investment
Manager. The Committee will at all times be constituted by all the Company's
directors.
The Audit Committee constituted by John Croft and Stuart Crocker.
The Audit Committee appoints and determines the terms of engagement of the
Group's auditors and will determine, in consultation with the auditors, the
scope of the audit. The Audit Committee monitors the independence of the
Group's auditor, and the appropriateness of any non-audit services. The Audit
Committee receives and reviews reports from management and the Group's
auditors relating to the interim and annual accounts and the accounting and
internal control systems in use throughout the Group. The Audit Committee has
unrestricted access to the Group's auditors. The Audit Committee makes
recommendations to the Board.
The Valuation Committee constituted by Hugh Viscount Trenchard and Dr. Lee
George Lam.
The Valuation Committee is responsible for reviewing the valuation process for
all investments, including the application of appropriate valuation standards,
based on the input of the Company's Investment Manager and on the Company's
Valuation Policy which was formally adopted in 2020. Its members are sourced
from independent directors of the Board. It retains the authority to engage
with independent 3(rd) parties at any time with respect to valuation matters.
The Committee comprises a minimum of two members and reports directly to the
Board.
DELIVER GROWTH
Principle 1 Establish a strategy and business model which promote long-term
value for shareholders
Principle
The Board must be able to express a shared view of the Company's purpose,
business model and strategy. It should go beyond the simple description of
products and corporate structures and set out how the company intends to
deliver shareholder value in the medium to long term. It should demonstrate
that the delivery of long term growth is underpinned by a clear set of values
aimed at protecting the company from unnecessary risk and securing its
long-term future.
Compliance
The Company provides equity and credit funding to companies, principally in
the Pan-Asian region or with a connection to Asia. It will do this through
investing in direct financings, pre-IPO investments, growth private equity,
event driven special situations, opportunistic special situations, and
indirect financing.
The Company is sector agnostic in its investment activities.
New investments will be managed actively, including through appropriate
investor protections which will be negotiated on each transaction as
appropriate and relevant.
The Company will consider using debt to finance transactions on a
case-by-case basis and may assume debt on its own balance sheet when
appropriate to enhance returns to Shareholders and/or to bridge the financing
needs of its investment pipeline.
The Company is in the process of a disposal programme for its "legacy" assets,
please refer to the latest RNS published on 22nd of June 2022. We are actively
seeking the buyers for the other assets.
The Board, together with the Investment Manager, continually monitors the
prevailing investment climate and macro-economic conditions affecting the
Asian region and other macro factors which will influence and, in some cases,
hinder the ability of the Company to execute its strategy, for example,
regulatory and governmental policy changes.
Principle 2 Seek to understand and meet shareholder needs and expectations
Principle
Directors must develop a good understanding of the needs and expectations of
all elements of the Company's shareholder base. The Board must manage
shareholders' expectations and should seek to understand the motivations
behind shareholder voting decisions.
Compliance
The Board is aware of the need to protect the interests of minority
shareholders and the balancing of these interests with those of the majority
shareholder. The Board also considers the terms of the relationship agreement
the Company has entered with its largest shareholder and, where necessary,
will enforce any relevant terms.
The Company holds regular investor events in London, Hong Kong and Dubai,
where the Chairman, other members of the Board and the Investment Manager
update attendees on key developments in the portfolio. All shareholders are
invited to attend these events. The Chairman is principally responsible for
shareholder liaison.
The Company regularly updates the market via its RNS news feed of any
disclosable matters and where appropriate, also uses social media platforms to
engage with a wider audience.
The Company publishes all relevant materials, according to QCA definitions, on
its website. This includes annual reports and shareholder circulars.
Principle 3 Take into account wider stakeholder and social responsibilities
and their implications for long-term success
Principle
Long-term success relies upon good relations with a range of different
stakeholder groups both internal (workforce) and external (suppliers,
customers, regulators, and others). The Board needs to identify the Company's
stakeholders and understand their needs, interests, and expectations.
Where matters that relate to the Company's impact on society, the communities
within which it operates or the environment have the potential to affect the
company's ability to deliver shareholder value over the medium to long term,
then those matters must be integrated into the Company's strategy and business
model.
Feedback is an essential part of all control mechanisms. Systems need to be in
place to solicit, consider and act on feedback from all stakeholder groups.
Compliance
The balance of economic value to the Group and social impact is carefully
considered, not only throughout the due diligence for any potential
investments but also ongoing monitoring by of periodical site visits for the
invested projects, with the maintenance of high environmental standards is a
key priority. The Board is conscious of its responsibilities in relation to
society, particularly in a developing economy such as China.
The key resources for the Company are principally the Investment Manager and
the Company's advisory team, including its nominated adviser, brokers,
solicitors, and auditors. The Investment Manager and therefore the Company
rely on a network of intermediaries to originate investment deal flow. The
Board speaks to the advisory team on a regular basis and takes feedback from
it throughout the year. In particular, it seeks advice in relation to
compliance with the AIM Rules and their impact on its investments from the
nominated adviser and solicitors and from the auditors in relation to
accounting matters including net asset value and the annual audit.
Principle 4 Embed effective risk management, considering both opportunities
and threats, throughout the organisation
Principle
The Board needs to ensure that the Company's risk management framework
identifies and addresses all relevant risks in order to execute and deliver
strategy; companies need to consider their extended business, including the
Company's supply chain, from key suppliers to end-customer.
Setting strategy includes determining the extent of exposure to the identified
risks that the company is able to bear and willing to take (risk tolerance and
risk appetite).
Compliance
Effective risk management in relation to the Company's portfolio is key to the
Board's assessment of the Investment Manager's performance. Measuring risk in
each investment case, in terms of both how it can be mitigated and the
potential upside of taking on such risk are critical elements of the analysis
produced by the Investment Manager and reviewed by the Board on each proposed
investment. Similarly, in conducting the managed disposal programme, the Board
is focused on achieving the best possible value for the assets being disposed
of. At the same time, the Board assesses the risk of maintaining those
positions with the potential for further value to be eroded at the same time
as it requires additional time to be spent by the Board and by the Investment
Manager.
MAINTAIN A DYNAMIC MANAGEMENT FRAMEWORK
Principle 5 Maintain the Board as a well-functioning, balanced team led by the
Chairman
Principle
The Board members have a collective responsibility to promote the interests of
the company and are collectively responsible for defining corporate governance
arrangements. Ultimate responsibility for the quality of, and approach to,
corporate governance lies with the Chairman.
The Board (and any committees) should be provided with high-quality
information in a timely manner to facilitate proper assessment of the matters
requiring a decision or insight.
The Board should have an appropriate balance between Executive and
Non-Executive Directors and should have at least two independent Non-Executive
Directors. Independence is a board judgement.
The Board should be supported by committees (e.g., audit, remuneration,
nomination) that have the necessary skills and knowledge to discharge their
duties and responsibilities effectively.
Directors must commit the time necessary to fulfill their roles.
Compliance
The Board consists of the Executive Chairman and four Non-Executive Directors.
The Executive Chairman has been involved with the Company since its
predecessor company, China Private Equity Investment Holdings Limited was
admitted to AIM in 2009. Viscount Trenchard, Dr. Lee George Lam, Mr. Stuart
Crocker and Mr. John Batchelor have all been appointed to the Board in 2017 or
later. All four Non-Executive Directors are considered to be independent.
Each Non-Executive Director is engaged on a 12-month contract with three
months' notice on either side and is required to commit to a minimum of two
days per calendar month.
The Executive Chairman's roles and responsibilities include but are not
limited to engaging potential clients across Jade Road's domain in the APAC
region, initiating and agreeing Terms of Engagement with clients, providing
the lead consultancy services to clients and support the business development
of the Company, liaising with the Company's NOMAD and other advisors in
London, and being the main contact between the Board and the Investment
Manager, approving public announcements, engaging with Shareholders, Investors
and other Stakeholders to promote the Company and its business objectives.
As explained above, the Board receives detailed investment papers from the
Investment Manager in relation to any asset which is either recommended for
investment or disposal, including an executive summary of the due diligence
findings, results of site visits and management meetings (including an
assessment of the investee company's management team), key financial metrics,
key risk factors, the potential returns available, security for the investment
and the type of instrument to be used.
Principle 6 Ensure that between them the directors have the necessary
up-to-date experience, skills, and capabilities.
Principle
The Board must have an appropriate balance of sector, financial and public
markets skills and experience, as well as an appropriate balance of personal
qualities and capabilities. The Board should understand and challenge its own
diversity, including gender balance, as part of its composition.
The Board should not be dominated by one person or a group of people. Strong
personal bonds can be important but can also divide a board.
As companies evolve, the mix of skills and experience required on the board
will change, and board composition will need to evolve to reflect this change.
Compliance
Directors who have been appointed to the Company have been chosen because of
the skills and experience they offer. The identity of each Director and his
full biographical details are provided on the website, which include each
Director's relevant experience, skills, personal qualities, and capabilities.
The current team of Directors offer a mix of investment, quoted company,
sector and geographical expertise and exposure.
The Board has not taken any specific external advice on a specific matter,
other than in the normal course of business as an AIM-quoted company and in
pursuit of the investment policy. There are no internal advisors to the Board.
The Directors rely on the Company's advisory team to keep their skills up to
date and through attending market updates and other seminars provided by the
advisory team, the London Stock Exchange plc, and other intermediaries.
The Investment Manager is the key external adviser to the Board.
Principle 7 Evaluate Board performance based on clear and relevant objectives,
seeking continuous improvement
Principle
The Board should regularly review the effectiveness of its performance as a
unit, as well as that of its committees and the individual Board members.
The Board performance review may be carried out internally or, ideally,
externally facilitated from time to time. The review should identify
development or mentoring needs of individual directors or the wider senior
management team.
It is healthy for membership of the Board to be periodically refreshed.
Succession planning is a vital task for Boards. No member of the Board should
become indispensable.
Compliance
The Board consists predominantly of Non-Executive Directors, the Company
having no employees. In this regard, Board performance and oversight lies
predominantly with the Chairman and other stakeholders, particularly
shareholders. In early 2020, it was determined by the Remuneration Committee
that John Croft be designated as Executive Chairman to align with his time
commitment and contribution to the Company's affairs.
Events are held with shareholders where feedback on the Company's progress is
sought on a regular basis, and this interaction provides valuable input on
Board performance. Advice is also sought on Board composition on an ongoing
basis from the Company's NOMAD.
The composition of the Board is reviewed regularly, and changes made where
appropriate. As the size of the portfolio grows, the Company may look to
broaden its skills and experience base by the appointment of additional
Directors and/or advisors in due course.
The Board does not carry out a formal review process.
Principle 8 Promote a corporate culture that is based on ethical values and
behaviours
Principle
The Board should embody and promote a corporate culture that is based on sound
ethical values and behaviours and use it as an asset and source of competitive
advantage.
The policy set by the Board should be visible in the actions and decisions of
the chief executive and the rest of the management team. Corporate values
should guide the objectives and strategy of the company.
The culture should be visible in every aspect of the business, including
recruitment, nominations, training, and engagement. The performance and reward
system should endorse the desired ethical behaviours across all levels of the
company.
Compliance
The Board is focused on investment returns for its shareholders and will at
all times seek to make ethical investments, but this is not an investment
focus or determinant for an asset being included in the portfolio. As
discussed above, given the Company is an investment company with no employees
or other internal stakeholders, the Board does not drive a corporate culture
within the business.
Principle 9 Maintain governance structures and processes that are fit for
purpose and support good decision-making by the Board
Principle
The Company should maintain governance structures and processes in line with
its corporate culture and appropriate to its:
- size and complexity; and
- capacity, appetite, and tolerance for risk. The governance structures should
evolve over time in parallel with the company's objectives, strategy, and
business model to reflect the development of the company.
Compliance
This section provides full disclosure on the Company's corporate governance.
There are no immediate plans to make any changes to the governance processes
and framework which are described in the commentary above.
The Chairman has overall responsibility for shareholder liaison.
There are no specific matters reserved for the Board.
BUILD TRUST
Principle 10 Communicate how the company is governed and is performing by
maintaining a dialogue with shareholders and other relevant stakeholders
Principle
A healthy dialogue should exist between the Board and all of its stakeholders,
including shareholders, to enable all interested parties to come to informed
decisions about the Company.
In particular, appropriate communication and reporting structures should exist
between the Board and all constituent parts of its shareholder base. This will
assist:
- the communication of shareholders' views to the Board; and
- shareholders' understanding of the unique circumstances and constraints
faced by the Company.
Compliance
The Board attaches great importance to providing shareholders with clear and
transparent information on the Group's activities, strategy, and financial
position. Details of all shareholder communications are provided on the
Company's website, including historical annual reports and governance-related
material together with notices of all general meetings for the last five
years. The Company discloses outcomes of all general meeting votes.
The Company has appointed a professional Financial Public Relations firm with
an office in London to advise on its communications strategy and to assist in
the drafting and distribution of regular news and regulatory announcements.
Regular announcements are made regarding the Company's investment portfolio as
well as other relevant market and regional news.
The Company lists contact details on its website and on all announcements
released via RNS, should shareholders wish to communicate with the Board.
Independent Auditor's Report
Independent Auditor's Report to the Members of Jade Road Investments Limited
Opinion
We have audited the Group financial statements of Jade Road Investments
Limited (the 'Group') for the year ended 31 December 2021 which comprise the
Consolidated Statement of Comprehensive Income, the Consolidated Statement of
Changes in Equity, the Consolidated Statement of Financial Position, the
Consolidated Cash Flow Statement and Notes to the Financial Statements,
including significant accounting policies. The financial reporting framework
that has been applied in their preparation is applicable law and International
Financial Reporting Standards (IFRSs) as adopted by the European Union.
In our opinion, the Group financial statements:
· give a true and fair view of the state of the Group's affairs as at
31 December 2021 and of its loss for the year then ended; and
· have been properly prepared in accordance with IFRSs as adopted by
the European Union.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing
(UK) (ISAs (UK)) and applicable law. Our responsibilities under those
standards are further described in the Auditor's responsibilities for the
audit of the financial statements section of our report. We are independent of
the Group in accordance with the ethical requirements that are relevant to our
audit of the financial statements in the UK, including the FRC's Ethical
Standard as applied to listed entities, and we have fulfilled our other
ethical responsibilities in accordance with these requirements. We believe
that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors'
use of the going concern basis of accounting in the preparation of the
financial statements is appropriate. Our evaluation of the directors'
assessment of the Group's ability to continue to adopt the going concern basis
of accounting included:
· a review of the management's cash flow forecasts for the going
concern period being twelve months from the anticipated date of signing the
financial statements;
· holding discussions with management to understand the going concern
model;
· challenging management on the appropriateness of the going concern
model; and
· a review of post year end information, including committed
expenditure.
Based on the work we have performed, we have not identified any material
uncertainties relating to events or conditions that, individually or
collectively, may cast significant doubt on the Group's ability to continue as
a going concern for a period of at least twelve months from when the financial
statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to
going concern are described in the relevant sections of this report.
Our application of materiality
The scope of our audit was influenced by our application of materiality. The
quantitative and qualitative thresholds for materiality determine the scope of
our audit and the nature, timing and extent of our audit procedures.
Group materiality for the financial statements as a whole was US$1,108,000
(2020: US$1,635,000) based on 1.5% of gross assets. We believe gross assets to
be the main driver of the business as the Group's principal activity is that
of an investment company.
We consider the key benchmark for the Group to be gross assets, given that
current and potential investors will be most interested in the valuation of
the investments.
Performance materiality was US$664,800 (2020: US$981,000) being 60% of
materiality for the financial statements as a whole. In determining
performance materiality, we considered the following factors:
our cumulative knowledge of the Group and its environment, including industry
specific trends;
the change in the level of judgement required in key accounting estimates;
the stability in key management personnel; and
the level of misstatements identified in prior periods.
We agreed to report to Audit Committee all corrected and uncorrected
misstatements we identified through our audit with a value in excess of
US$55,400 (2020: US$81,750). We also agreed to report any other audit
misstatements below that threshold that we believe warranted reporting on
qualitative grounds
Our approach to the audit
In designing our audit, we determined materiality as above and assessed the
risk of material misstatement in the financial statements. We tailored the
scope of our audit to ensure that we performed sufficient work to be able to
give an opinion on the financial statements as a whole, taking into account
the structure of the Group.
In particular, we looked at areas involving significant accounting estimates
and judgement by the directors, such as the fair value of investments, and
considered future events that are inherently uncertain.
We also addressed the risk of management override of internal controls,
including evaluating whether there was evidence of bias by the directors that
represented a risk of material misstatement due to fraud. The Group's key
accounting function is based in Hong Kong and our audit was performed by our
team in London with regular contact maintained with the Group throughout.
The key balance held within the Group relates to the fair value of investments
and is thus considered to be a significant risk and has been determined to be
a key audit matter.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were
of most significance in our audit of the financial statements of the current
period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) we identified, including those
which had the greatest effect on: the overall audit strategy, the allocation
of resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
Key Audit Matter (Note 2(o), 9, 10 and 15) How the scope of our audit responded to the key audit matter
Valuation and classification of investments
The financial statements include investments in unquoted financial assets held Our work included the following:
at fair value, totalling US$ 66.2 million.
· Benchmarking and challenging key assumptions in management's
valuation models used to determine fair value and/or recoverable amount,
including discount rates used.
In addition to the above, the financial statements also include investments in
loans and other receivables held at fair value, totalling US$5.6 million.
· Performing test of the mathematical accuracy of underlying cash flow
models, re-performing relevant calculations and challenging and agreeing the
All of these investments are measured at fair value based on Level 3 inputs. key assumptions to available data.
· Wherever possible benchmarking the assessments of value to
independent sources. Considering the appropriateness of the use of external
experts and valuations, the valuation methodologies applied, and considering
management's evaluation of the sensitivity of valuations to changes in
Consequently, the valuation of investments requires the exercise of assumptions and inputs.
considerable judgement which increases the risk that valuation and
presentation of investments may be misstated.
· Reviewing the classification of investments, disclosure of
valuations and inputs within the financial statements and ensuring that it is
Furthermore, the investments manager, which is responsible for advising on the appropriate and in compliance with IFRS 7 and IFRS 13
valuation of investments, is remunerated by reference to a percentage of the
value of investments and is entitled to receive a performance incentive fee if
certain performance criteria are met. These remuneration arrangements increase
the risk of bias in the calculations. · Ensuring that any consequent fair value changes arising from the
valuations are appropriately classified through the Consolidated Statement of
Comprehensive Income
· Reviewing the latest available assessments of the recoverability of
loans and other receivables prepared by the investment manager and assessing
against the requirements under IFRS 9
Other information
The other information comprises the information included in the annual report,
other than the financial statements and our auditor's report thereon. The
directors are responsible for the other information contained within the
annual report. Our opinion on the Group financial statements does not cover
the other information and we do not express any form of assurance conclusion
thereon.
Our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial
statements or our knowledge obtained in the course of the audit, or otherwise
appears to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are required to
determine whether this gives rise to a material misstatement in the financial
statements themselves. If, based on the work we have performed, we conclude
that there is a material misstatement of this other information, we are
required to report that fact.
We have nothing to report in this regard.
Responsibilities of directors
As explained more fully in the directors' responsibilities statement, the
directors are responsible for the preparation of the Group financial
statements and for being satisfied that they give a true and fair view, and
for such internal control as the directors determine is necessary to enable
the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the Group financial statements, the directors are responsible for
assessing the Group's ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the going concern basis
of accounting unless the directors either intend to liquidate the Group or to
cease operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due to
fraud or error, and to issue an auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance but is not a guarantee that
an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on
the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and
regulations. We design procedures in line with our responsibilities, outlined
above, to detect material misstatements in respect of irregularities,
including fraud. The extent to which our procedures are capable of detecting
irregularities, including fraud is detailed below:
We obtained an understanding of the Group and the sector in which it operates
to identify laws and regulations that could reasonably be expected to have a
direct effect on the financial statements. We obtained our understanding in
this regard through discussions with management and our industry experience.
We also selected a specific audit team based on experience with auditing
entities within this industry, facing similar audit and business risks.
We determined the principal laws and regulations relevant to the Group in this
regard to be those arising from
· AIM rules;
· Disclosure and Transparency Rules;
· Anti-Bribery Act;
· Anti Money Laundering Regulations; and
· Local tax laws and regulations.
We designed our audit procedures to ensure the audit team considered whether
there were any indications of non-compliance by the Group with those laws and
regulations. These procedures included, but were not limited to:
· Making enquiries of management;
· Reviewing board minutes;
· Reviewing legal ledger accounts; and
· Reviewing the Regulatory News Service (RNS) announcements.
As in all of our audits, we addressed the risk of fraud arising from
management override of controls by performing audit procedures which included,
but were not limited to: the testing of journals; reviewing accounting
estimates for evidence of bias; and evaluating the business rationale of any
significant transactions that are unusual or outside the normal course of
business.
Because of the inherent limitations of an audit, there is a risk that we will
not detect all irregularities, including those leading to a material
misstatement in the financial statements or non-compliance with regulation.
This risk increases the more that compliance with a law or regulation is
removed from the events and transactions reflected in the financial
statements, as we will be less likely to become aware of instances of
non-compliance. The risk is also greater regarding irregularities occurring
due to fraud rather than error, as fraud involves intentional concealment,
forgery, collusion, omission or misrepresentation.
A further description of our responsibilities for the audit of the financial
statements is located on the Financial Reporting Council's website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our
auditor's report.
Use of our report
This report is made solely to the Company's members, as a body, in accordance
with our letter of engagement dated 11 December 2020. Our audit work has been
undertaken so that we might state to the Company's members those matters we
are required to state to them in an auditor's report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone, other than the company and the Company's members as
a body, for our audit work, for this report, or for the opinions we have
formed.
Eric Hindson (Engagement Partner)
For and on behalf of PKF Littlejohn LLP
Registered Auditor
29(th) June 2022
15 Westferry Circus
Canary Wharf
London E14 4HD
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2021
2021 2020
Notes US$'000 US$'000
Income from unquoted financial assets 1,162 1,137
Finance income from loans 1,347 1,337
Gross portfolio income 3 2,509 2,474
Fair value changes on financial assets at fair value through profit or loss (38,893) 5,045
Investment provisions 731 (779)
Net portfolio income 3 (35,653) 6,740
Management fees (1,861) (1,888)
Incentive fees 17 424 (1,750)
Administrative expenses (812) (1,017)
Operating (loss)/ profit 5 (37,902) 2,085
Finance expense 6 (522) (442)
((Loss)/Profit) before taxation (38,424) 1,643
Taxation 8 - -
Other comprehensive expense
Foreign currency translation differences - -
(Loss)/Profit and total comprehensive (expense) / income for the year (38,424) 1,643
(Loss)/Earnings per share
Basic 18 (33.33) cents 1.56 cents
Diluted 18 (33.33) cents 1.34 cents
The results reflected above relate to continuing operations.
The accompanying notes on pages 45 to 69 are an integral part of these
financial statements.
Consolidated Statement of Changes in Equity
For the year ended 31 December 2021
Share capital Treasury share reserve Share based payment reserve Accumulated Total
losses
US$'000 US$'000 US$'000 US$'000 US$'000
Group balance at 1 January 2020 145,027 (671) 2,936 (46,415) 100,877
- - - 1,643 1,643
Profits for the year
Other comprehensive income - - - - -
Total comprehensive loss for the year - - - 1,643 1,643
Issue of shares 3,876 - - - 3,876
Treasury shares acquired - (201) - - (201)
Treasury shares sold - 257 - - 257
Group balance at 31 December 2020 and 1 January 2021 148,903 (615) 2,936 (44,772) 106,452
- - - (38,424) (38,424)
Loss for the year
Other comprehensive income - - - - -
Total comprehensive loss for the year - - - (38,424) (38,424)
Issue of shares net of costs - - - - -
Treasury shares acquired - - - - -
Treasury shares sold - - - - -
Group balance at 31 December 2021 148,903 (615) 2,936 (83,196) 68,028
Note: In October 2020, the Company issued 8,356,663 shares as part of its
first ever equity capital raise (which include 389,000 Placing Commission Fee
Shares). It raised a total of £2.0 million (before expenses) via an Open
Offer and Placement. The shares were issued at £0.25. In conjunction with the
share issuance, the Company issued 7,967,663 warrants at a strike price of
£0.40 and a 3 year maturity.
The following describes the nature and purpose of each reserve within owners'
equity.
Share capital Amount subscribed for share capital at no par value
Treasury share reserve Cost of the Company's shares re-purchased and held by the Group
Share based payment reserve The share-based payment reserve represents amounts in previous and the current
periods, relating to share based payment transactions granted as
options/warrants and under the Group's share option scheme (Note 16)
Total comprehensive loss / (Total comprehensive income) Represents the cumulative net gains and losses recognised in the statement of
comprehensive income
The accompanying notes on pages 45 to 69 are an integral part of these
financial statements.
Consolidated Statement of Financial Position
As at 31 December 2021
2021 2020
Notes US$'000 US$'000
Assets
Unquoted financial assets at fair value through profit or loss 9 66,202 73,423
Loans and other receivables at fair value through profit or loss 5,556 34,390
10
Cash and cash equivalents 848 3,673
Total assets 72,606 111,486
Liabilities
Other payables and accruals 12 1,010 1,530
Current liabilities 1,010 1,530
Loans & borrowings 13 3,568 3,504
Total liabilities 4,578 5,034
Net assets 68,028 106,452
Equity and reserves
Share capital 14 148,903 148,903
Treasury share reserve 14 (615) (615)
Share based payment reserve 2,936 2,936
Accumulated losses (83,196) (44,772)
Total equity and reserves attributable to owners of the parent 68,028 106,452
The financial statements were approved by the Board of Directors and
authorised for issue on
29th June 2022 and signed on its behalf by:
John Croft
Executive Chairman
The accompanying notes on pages 45 to 69 are an integral part of these
financial statements.
Consolidated Cash Flow Statement
For the year ended 31 December 2021
2021 2020
US$'000 US$'000
Cash flows from operating activities
(Loss)/Profit before taxation (38,424) 1,643
Adjustments for:
Finance income (1,347) (1,336)
Finance expense 522 442
Foreign exchange 23 (197)
Fair value changes on unquoted financial assets at fair value through profit 7,222 (5,923)
or loss
Fair value changes on loans and receivables at fair value through profit or 30,459 -
loss
Share-based expenses - 479
Decrease in other receivables (295) 776
Increase in other payables and accruals (520) 202
Net cash used in operating activities (2,359) (3,914)
Cash flows from investing activities (Note A)
Purchase of unquoted financial assets at fair value through profit or loss - (207)
Net cash used in investing activities - (207)
Cash flows from financing activities (Note B)
Issue of shares net of issue costs - 2,367
Proceeds from loans and borrowings - 1,720
Payment of interest (459) (476)
Sale of treasury shares - 257
Purchase of treasury shares - (201)
Net cash (used in) / generated in funding activities (459) 3,667
Net decrease in cash and cash equivalents (2,819) (454)
Cash and cash equivalents and net debt at the beginning of the year 3,673 4,071
Foreign exchange on cash balances (6) 56
Cash and cash equivalents and net debt at the end of the 848 3,673
year
Note A - The following investing activities were undertaken which did not
require the use of cash and have been excluded from the statement of cash
flows:
2021 2020
US$'000 US$'000
Purchase of unquoted financial assets - share interest in FMHL - (56)
Note B - The following financing activities were undertaken which did not
require the use of cash and have been excluded from the statement of cash
flows:
2021 2020
US$'000 US$'000
Issue of shares to minority investor - share interest in FMHL - 56
Issue of shares to HCIL - 1,453
The accompanying notes on pages 45 to 69 are an integral part of these
financial statements.
Note B - The following financing activities were undertaken which did not
require the use of cash and have been excluded from the statement of cash
flows:
2021 2020
US$'000 US$'000
Issue of shares to minority investor - share interest in FMHL - 56
Issue of shares to HCIL - 1,453
The accompanying notes on pages 45 to 69 are an integral part of these
financial statements.
Notes to the Financial Statements
For the year ended 31 December 2021
1. GENERAL INFORMATION
The Company is a limited (by shares) company incorporated in the British
Virgin Islands ("BVI") under the BVI Business Companies Act 2004 on 18 January
2008. The address of the registered office is Commerce House, Wickhams Cay 1,
PO Box 3140, Road Town, Tortola, British Virgin Islands VG1110 and its
principal place of business is c/o Harmony Capital, 29/F, Level 29, Infinitus
Plaza, 199 Des Voeux Road Central, Hong Kong.
The Company is the holding company of a group of companies comprising a
subsidiary, Jade Road Investments (HK) Limited and a number of wholly owned
special purpose vehicles ("SPV") each of which holds investments.
The Company is quoted on the AIM Market of the London Stock Exchange (code:
JADE) and the Quotation Board of the Open Market of the Frankfurt Stock
Exchange (code: 1CP1).
The Company is targeting delivery of income and capital gain from a
diversified mix of pan-Asian investments in the Small- and Medium-Sized
Enterprise ("SME") sector.
2. ACCOUNTING POLICIES
a) Basis of Preparation
The principal accounting policies adopted in the preparation of the financial
statements are set out below.
The Group's financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRSs and IFRIC interpretations)
as adopted by the EU. The financial statements have been prepared under the
historical cost convention. Financial instruments are measured at fair value
at the end of each reporting period.
Historical cost is generally based on the Fair Value of the consideration
given in exchange for goods and services.
Fair Value Measurements:
Fair Value is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at
the measurement date under current market conditions.
The Fair Value of investments is first based on quoted prices, where
available. Where quoted prices are not available, the Fair Value is estimated
using consistent valuation techniques across periods of measurement.
The Group's private credit and equity investments are recorded at Fair Value
or at amounts whose carrying values approximate Fair Value. Net gains and
losses, including any interest or dividend income, are recognised in its
profit or loss statement.
In accordance with IFRS 13, Fair Value measurements are categorised into Level
I, II or III based on the degree to which the inputs to the Fair Value
measurements are observable and the significance of the inputs to the Fair
Value measurement in its entirety. These are described as follows:
Level I Fair Value measurements are those derived from quoted prices
(unadjusted) in active markets for identical assets or liabilities.
Level II Fair Value measurements are those derived from inputs other than
quoted prices included within Level I that are observable for the assets or
liability, either directly or indirectly.
Level III Fair Value measurements are those derived from inputs that are not
based on observable market data.
b) Basis of Consolidation
The consolidated financial statements incorporate the financial statements of
the Company and entities (other than structured entities) controlled by the
Company. Control is achieved where the Company:
§ has the power over the investee;
§ is expected, or has rights, to variable returns from its involvement with
the investee; and
§ has the ability to use its power to affect its returns.
The Company reassesses whether or not it controls a subsidiary if facts and
circumstances indicate that there are changes to one or more of the three
elements of control listed above.
The Company holds investments through a number of unlisted wholly owned
special purpose vehicles ("SPVs"). The directors have considered the
definition of an investment entity in IFRS10 and the associated application
guidance and consider that the Company meets that definition. Consequently,
the Group's investments in SPVs and the underlying investments are accounted
for at fair value through profit and loss and the SPVs are not consolidated as
subsidiaries. Please see Note 4(o) Critical accounting estimates and
judgements for description of fair value methodology.
Consolidation of a subsidiary other than those held for investment purposes
begins when the Company obtains control over the subsidiary and ceases when
the Company loses control of the subsidiary. Specifically, income and expenses
of a subsidiary acquired or disposed of during the year are included in the
consolidated statement of profit or loss and other comprehensive income from
the date the Company gains control until the date when the Company ceases to
control the subsidiary.
The results of subsidiaries acquired or disposed of during the year are
included in the consolidated statement of comprehensive income from the
effective date of acquisition and up to the effective date of disposal, as
appropriate.
Where necessary, adjustments are made to the financial statements of
subsidiaries to bring their accounting policies into line with those used by
other members of the Group.
All intra-group transactions, balances, income and expenses are eliminated in
full on consolidation. Associates are those entities in which the Group has
significant influence, but not control, over the financial and operating
activities.
Investments that are held as part of the Group's investment portfolio are
carried in the balance sheet at fair value even though the Group may have
significant influence over those companies. This treatment is permitted by IAS
28 - Investment in Associates, which requires investment held by venture
organisations to be excluded from its scope where those investments are
designated, upon initial recognition, as at fair value through profit or loss
and accounted for in accordance with IFRS9, with changes in fair value
recognised in the statement of comprehensive income in the period of change.
The Group has no interests in associates through which it carries on its
business.
c) Going Concern
The Company's primary source of income comprises finance charges under debt
instruments and, from time to time, realisations from investment exits. The
Company's expenses primarily consist of advisory and incentive fees paid to
the Investment Manager, part of which are paid in shares, Directors' and
professional fees. The level of day-to-day overheads payable in cash is
relatively low. In addition, the Company makes investments by the issue of
shares and also by the application of cash reserves. Cash reserves are
enhanced from time to time by the issue of equity and the realisation of
portfolio investments. Investment decisions are made based on detailed
appraisals of the investment opportunity and also on the Directors' assessment
of the availability of any funding requirement.
In considering the appropriateness of the going concern basis of preparation,
the Directors have reviewed the Group's working capital forecasts for a
minimum of 12 months from the date of the approval of these financial
statements. Following this assessment, the Directors have reasonable
expectation that the Group has adequate resources to continue for the
foreseeable future and that carrying values of intangible assets are
supported. Thus, they continue to adopt the going concern basis of accounting
in preparing this financial information. Whilst the COVID-19 pandemic may have
an impact on the Company's ability to exit from some of its investments, in
the short to medium term, the Directors assessment of going concern is not
predicated on the availability of cash proceeds from investment exits in the
period.
d) Segment Reporting
Operating segments are reported in a manner consistent with the internal
reporting provided to the senior management and Board members. The senior
management and Board members, who are responsible for allocating resources and
assessing performance of the operating segments, have been identified as the
senior management and Board members that make strategic decisions. The Group
is principally engaged in investment business, the Directors consider there is
only one business activity significant enough for disclosure. This activity
consists of entities which operate in two geographical locations, i.e., BVI
and Hong Kong.
e) Revenue Recognition
Revenue is recognised when it is probable that the economic benefits will flow
to the Group and when the revenue and costs, if applicable, can be measured
reliably and on the following basis:
§ Dividend income is recognised when the Company's right to receive payment
is established.
§ Interest revenue is accrued on a time basis, by reference to the principal
outstanding and at the effective interest rate applicable, which is the rate
that exactly discounts estimated future cash receipts through the expected
life of the financial asset to that asset's net carrying amount.
§ Fair value changes on financial assets represents the overall changes in
net assets from the investment portfolio net of deal-related costs.
Other income comprised management recharges from the parent
company to its subsidiary which are eliminated on consolidation.
f) Impairment of Non-Financial Assets
At each balance sheet date, the Group reviews internal and external sources of
information to determine whether its fixtures, fittings and equipment and
investment in subsidiaries have suffered an impairment loss or impairment loss
previously recognised no longer exists or may be reduced. If any such
indication exists, the recoverable amount of the asset is estimated, based on
the higher of its fair value less costs to sell and value in use. Where it is
not possible to estimate the recoverable amount of an individual asset, the
Group estimates the recoverable amount of the smallest group of assets that
generates cash flows independently (i.e., cash-generating unit).
If the recoverable amount of an asset or a cash-generating unit is estimated
to be less than its carrying amount, the carrying amount of the asset or
cash-generating unit is reduced to its recoverable amount. Impairment losses
are recognised as an expense immediately.
A reversal of impairment loss is limited to the carrying amount of the asset
or cash-generating unit that would have been determined had no impairment loss
been recognised in prior years. Reversal of impairment loss is recognised as
income immediately.
g) Financial Instruments
Financial assets and financial liabilities are recognised on the balance sheet
when a group entity becomes a party to the contractual provisions of the
instrument. Financial assets and financial liabilities are initially measured
at fair value. Financial assets at fair value through profit or loss includes
loans and receivables.
Transaction costs that are directly attributable to the acquisition or issue
of financial assets and financial liabilities (other than financial assets and
financial liabilities at fair value through profit or loss) are added to or
deducted from the fair value of the financial assets or financial liabilities,
as appropriate, on initial recognition.
Transaction costs directly attributable to the acquisition of financial assets
or financial liabilities at fair value through profit or loss are recognised
immediately in profit or loss.
Financial assets are classified, at initial recognition, as subsequently
measured at amortised cost or fair value through profit or loss. The
classification of financial assets at initial recognition depends on the
financial asset's contractual cash flow characteristics and the Group's
business model for managing them.
Unquoted Financial Assets:
Classification
The Group classifies its unquoted financial assets as financial assets at fair
value through profit or loss. These financial assets are designated by the
directors as at fair value through profit or loss at inception.
Financial assets designated as at fair value through profit or loss at
inception are those that are managed as part of an investment portfolio and
their performance evaluated on a fair value basis in accordance with the
Group's Investment Strategy.
Recognition/Derecognition
Regular-way purchases and sales of investments are recognised on the trade
date - the date on which the Group commits to purchase or sell the investment.
A fair value through profit or loss asset is derecognised when the Group loses
control over the contractual rights that comprise that asset. This occurs when
rights are realised, expire or are surrendered and the rights to receive cash
flows from the investments have expired or the Group has transferred
substantially all risks and rewards of ownership. Realised gains and losses on
fair value through profit or loss assets sold are calculated as the difference
between the sales proceeds and cost. Fair value through profit or loss assets
that are derecognised and corresponding receivables from the buyer for the
payment are recognised as of the date the Group has transacted an
unconditional disposal of the assets.
Measurement
Financial assets at fair value through profit or loss are initially recognised
at fair value. Transaction costs are expensed through the profit or loss.
Subsequent to initial recognition, all financial assets at fair value through
profit or loss are measured at fair value in accordance with the Group's
valuation policy, as the Group's business is to invest in financial assets
with a view to profiting from their total return in the form of capital growth
and income. Gains and losses arising from changes in the fair value of the
financial assets at fair value through profit or loss are presented in the
period in which they arise. For more information on valuation principles
applied, please see section 4(o) Critical Accounting Estimates.
Quoted Financial Assets:
The fair values of financial assets with standard terms and conditions and
traded on active liquid markets are determined with reference to quoted market
bid prices and are classified as current assets. Purchases and sales of quoted
investments are recognised on the trade date where a contract of sale exists
whose terms require delivery within a time frame determined by the relevant
market.
In the opinion of the Directors, cash flows arising from transactions in
equity investments represent cash flows from investing activities.
Allowance for Expected Credit Losses:
An allowance for ECLs may be established for amounts due from credit contracts
within Loans and Receivables where evidence of credit deterioration is
observed. In order to assess credit deterioration, the Group considers
reasonable and supportable information that is relevant and available without
undue cost or effort. This includes both quantitative and qualitative
information and analysis, based on its historical experience and informed
credit assessment, that includes forward-looking information. The main factors
considered include material financial deterioration of the borrower, breach of
contract such as default or delinquency in interest or principal repayments,
probability that a borrower will enter bankruptcy or financial re-organisation
and material decline in the value of the underlying applicable security. ECL
allowances are distinguished from Likely Credit Loss ("LCL") allowances based
on the expectation of a loss. An LCL reserve is established when a loss is
both probable and the amount is known.
ECLs are a probability-weighted estimate of lifetime credit losses. Under the
ECL model, the Group calculates the allowance for credit losses by considering
on a discounted basis the cash shortfalls it would incur in various default
scenarios for prescribed future periods and multiplying the shortfalls by the
probability of each scenario occurring. The allowance is the sum of these
probability weighted outcomes. Credit losses are measured as the present value
of all cash shortfalls (i.e., the difference between the cash flows due to the
entity in accordance with the contract and the cash flows that the Group
expects to receive) with a discount factor applied.
Cash and Cash Equivalents:
For the purpose of the cash flow statement, cash equivalents represent
short-term highly liquid investments which are readily convertible into known
amounts of cash, and which are subject to an insignificant risk of change in
value, net of bank overdrafts.
Financial Liabilities
The Group's financial liabilities include other payables and accruals and
amounts due to related parties. All financial liabilities except for
derivatives are recognised initially at their fair value and subsequently
measured at amortised cost, using effective interest method, unless the effect
of discounting would be insignificant, in which case they are stated at cost.
Equity Instruments
Equity instruments issued by the Group are recorded at the proceeds received,
net of direct issue costs.
h) Investment in Subsidiaries
Investments in subsidiaries are stated at cost less provision for any
impairment in value. Under IFRS 10, where the parent company is qualified as
an investment entity, the subsidiaries have been deconsolidated from the Group
financial statements.
i) Taxation
The charge for current income tax is based on the results for the period as
adjusted for items that are non-assessable or disallowed. It is calculated
using tax rates that have been enacted or substantively enacted by the balance
sheet date.
Deferred tax is provided, using the liability method, on all temporary
differences at the balance sheet date between the tax bases of assets and
liabilities and their carrying amounts in the financial statements. However,
if the deferred tax arises from initial recognition of an asset or liability
in a transaction other than a business combination that at the time of the
transaction affects neither the accounting profit nor taxable profit or loss,
it is not accounted for.
The deferred tax liabilities and assets are measured at the tax rates that are
expected to apply to the period when the asset is recovered or the liability
is settled, based on tax rates and tax laws that have been enacted or
substantively enacted at the balance sheet date. Deferred tax assets are
recognised to the extent that it is probable that future taxable profit will
be available against which the deductible temporary differences, tax losses
and credits can be recognised.
j) Leasing
At the lease commencement date, the Group recognises a right-of-use asset and
a lease liability, except for short-term leases that have a lease term of 12
months or less and leases of low-value assets, which are expensed to the
profit & loss over the expense term.
The right-of-use asset is initially recognised at cost, which comprises the
initial amount of the lease liability plus any lease payments made at or
before the commencement date, plus any initial direct costs incurred, plus any
costs associated with restoring the asset to its original condition, less any
lease incentive received. The right-of-use asset is subsequently stated at
cost less accumulated depreciation and impairment losses.
Lease payments included in the measurement of the lease liability comprise the
following:
§ fixed payments, including in-substance fixed payments;
§ variable lease payments that depend on an index or rate, initially measured
using the index or rate at the commencement date;
§ amounts expected to be payable under a residual value guarantee; and
§ the exercise price under a purchase option that the group is reasonably
certain to exercise, lease payments in an optional renewal period if the group
is reasonably certain to exercise such an option to extend and penalties for
early termination of a lease unless the group is reasonably certain not to
terminate early.
The lease liability is measured at amortised cost using the effective interest
method. The liability recognised at inception of the lease comprises the
present value of future payments payable under the lease contract, discounted
at the rate implicit in the lease. If there is no discount rate implicit in
the lease, then the incremental rate of borrowing is used. The liability is
remeasured when there is a change in future lease payments arising from a
change in an index or rate, or there is a change in the Group's estimate of
the amount expected to be payable under a residual value guarantee, or there
is a change arising from the reassessment of whether the Group will be
reasonably certain to exercise a purchase, extension or termination option.
When the lease liability is remeasured in this way, a corresponding adjustment
is made to the carrying amount of the right-of-use asset, or is recorded in
profit or loss if carrying amount has been reduced to zero. The Group presents
lease liabilities within loans and borrowings within the statement of
financial position
k) Dividends
Dividends payable are recorded in the financial statements in the period in
which they meet the IAS 32 definition of having been declared.
l) Share Based Payments
The Group has applied the requirements of IFRS 2 "Share Based Payments". The
Group issues share options/warrants as an incentive to certain key management
and staff (including Directors) and its Investment Manager. The fair value of
options/warrants granted to Directors, management personnel, employees and
Investment Manager under the Company's share option/warrant scheme is
recognised as an expense with a corresponding credit to the share-based
payment reserve. The fair value is measured at grant date and spread over the
period during which the awards vest. The fair value is measured using the
Black Scholes Option pricing model.
The Group, on special occasions as determined by the Directors, may issue
options/warrants to key consultants, advisers and suppliers in payment or part
payment for services or supplies provided to the Group. The fair value of
options/warrants granted is recognised as an expense with a corresponding
credit to the share-based payment reserve. The fair value is measured at grant
date and spread over the period during which the options/warrants vest. The
fair value is measured at the fair value of receivable services or supplies.
The options/warrants issued by the Group are subject to both market-based and
non-market based vesting conditions.
Non-market vesting conditions are not taken into account when estimating the
fair value of awards as at grant date; such conditions are taken into account
through adjusting the equity instruments that are expected to vest.
The proceeds received, net of any attributable transaction costs, are credited
to share capital when options/warrants are converted into ordinary shares.
m) Earnings Per Share
The Group calculates both basic and diluted earnings per share in accordance
with IAS 33 "Earnings per Share". Under IAS 33, basic earnings per share is
computed using the weighted average number of shares outstanding during the
period. Diluted earnings per share is computed using the weighted average
number of shares during the period plus the period dilutive effect of options
outstanding during the period. Potential ordinary shares are only treated as
dilutive if their conversion to shares would decrease earnings per share or
increase loss per share from continuing operations.
n) Share Issue Expenses
Share issue expenses are written off against the share capital account arising
on the issue of share capital.
o) Critical Accounting Estimates and Judgements
Preparation of financial statements in conformity with IFRS requires
management to make judgements, estimates and assumptions that affect the
application of accounting policies and the reported amounts of assets,
liabilities, income and expenses. The estimates and associated assumptions are
based on historical experience and various other factors that are believed to
be reasonable under the circumstances, the results of which form the basis of
making judgements about carrying values of assets and liabilities that are not
readily apparent from other sources.
In particular, significant areas of estimation, uncertainty and critical
judgements in applying accounting policies that have the most significant
effect on the amount recognised in the Financial Statements are in the
following areas:
Assessment of accounting treatment under IFRS 10, IFRS 12, and IAS 27 -
Investment entities
The directors have concluded that the Company meets the definition of an
Investment Entity because the Company:
a. obtains funds from one or more investors for the purpose
of providing those investor(s) with investment management services;
b. commits to its investor(s) that its business purpose is
to invest funds solely for returns from capital appreciation, investment
income, or both; and
c. measures and evaluates the performance of substantially
all of its investments on a fair value basis.
The investment objective of the Company is to produce returns from capital
growth and to pay shareholders a dividend. The Group has multiple unrelated
investors and indirectly holds multiple investments. Investment positions are
in the form of structured loans or equity instruments in private companies
operating which is valued on a fair value basis.
As a result, the unlisted open-ended investments, also referred to as SPVs,
and in which the Company invests in are not consolidated in the Group
financial statements.
Assessment of Accounting Treatment under IAS 28 - Investment in Associates
The Group has taken advantage of the exemption under IAS28 Investments in
Associates whereby IAS 28's requirements do not apply to investments in
associates held by venture capital organisations. This exemption is
conditional on the investments being designated as at fair value through
profit and loss or being classified as held for trading upon initial
recognition. Such investments are measured at fair value with changes in fair
value being recognised in the income statement.
Valuation of Investments
The Group's investment portfolio includes a number of investments in the form
of structured loans or equity instruments in private companies operating in
emerging markets. Investee companies are often at early or growth stages in
their development and operating in an environment of uncertainty in capital
markets. Should planned development prove successful, the value of the Group's
investment is likely to increase, although there can be no guarantee that this
will be the case. Should planned development prove unsuccessful, there is a
material risk that the Group's investments may incur fair value losses. The
carrying amounts of investments are therefore highly sensitive to the
assumption that the strategies of these investee companies will be
successfully executed.
The Group has adopted a valuation policy with respect to its portfolio of
investments, based on the International Private Equity and Venture Capital
Valuation Guidelines ("IPEV Guidelines") valuation practices to derive Fair
Value (please see Note 2(a) Basis of preparation for definition of Fair
Value). The IPEV Guidelines set out recommendations intended to represent
current best practices on the valuation of private capital (unlisted)
investments, as well as compliance with IFRS.
The majority of the Group's current and expected investments are credit
instruments and as such are likely to be valued based on Level III principles
(please see Note 2(a) Basis of preparation for definition of Fair Value
measurement categories). The inputs into the determination of Fair Value
require significant management judgment or estimation and are subjective in
nature. The types of financial instruments generally included in this category
are private portfolio companies, real assets investments and credit
investments. Details of the Group's Level III valuation methodologies per
investment type are as follows:
Private Credit Investments
For credit-focused investments that are not publicly traded or whose market
prices are not readily available, the Group may utilise the Discounted Cash
Flow ("DCF") method or a Market Approach. In valuing credit-focused
investments, the Group exercises prudent judgement. In addition, the Group
exercises judgment in selecting the appropriate valuation technique(s) most
appropriate for a credit-focused investment:
§ The DCF method projects the expected cash flows of the credit instrument
based on contractual terms and discounts such cash flows back to the valuation
date using a market-based yield. The market-based yield is estimated using
yields of publicly-traded credit instruments issued by companies operating in
similar industries as the subject investment, with similar leverage statistics
and time to maturity.
§ The Market Approach is generally used to determine the enterprise value
of the issuer of a credit investment and considers valuation multiples of
comparable companies or transactions. The resulting enterprise value will
dictate whether or not such credit investment has adequate enterprise value
coverage. In cases of distressed credit instruments, the market approach may
be used to estimate a recovery value in the event of a restructuring.
Private Equity Investments
The Fair Value of equity investments are determined by reference to projected
net earnings, earnings before interest, taxes, depreciation and amortisation
("EBITDA"), the DCF method, public market or private transactions, valuations
for comparable companies and other measures which, in many cases, are based on
unaudited information at the time received.
Valuations may be derived by reference to observable valuation measures for
comparable companies or transactions (for example, multiplying a key
performance metric of the investee company such as EBITDA by a relevant
valuation multiple observed in the range of comparable companies or
transactions), adjusted by management for differences between the investment
and the referenced comparables, and in some instances by reference to option
pricing models or other similar methods. Where a DCF method is used, a
terminal value is derived by reference to EBITDA or price/earnings exit
multiples. The Group will exercise prudent judgment in valuing equity
investments and in selecting the appropriate Valuation Technique(s) most
appropriate for an equity investment.
Private Convertible & Quasi-Credit Instruments
Private convertible and quasi-credit instruments are hybrids of credit and
equity financing. The Fair Value of convertible credit instruments, such as a
Convertible Bond, may be determined as a normal private credit instrument
(taking into account features such as mandatory / non-mandatory conversion
features) or by (i) adding the independent value of the straight credit
instrument and (ii) the independent value of the conversion option.
The independent value of the straight credit instrument may be assessed using
the DCF method or Market Approach described in Private Credit Investments. The
independent value of the conversion option can be determined by first deriving
the terminal value of using the DCF method or the comparables method described
Private Equity Investments, then adjusting for any conversion premium or
discount, the conversion ratio and other conversion mechanisms.
Similarly, the Fair Value for quasi-credit instruments, such as mezzanine
financing, can be determined by adding the independent value of the straight
credit and the independent value of the conversion option and/or embedded
equity instrument features, such as warrants. In valuing both private
convertible and quasi-credit instruments the Group exercises its prudent
judgment.
Non-US$ Investments
The Group reports its performance in US$. Where this is different from the
currency in which the investment is denominated, translation into US$ for
reporting purposes is done using the exchange rate prevailing at the
Measurement Date.
p) Foreign currency translation
- Functional and Presentation Currency
Both the function and presentation currency of the Group's entities are the
United States Dollar. The financial statements are presented in United States
Dollars and rounded to the nearest thousand dollars, except when otherwise
indicated.
Transactions in foreign currencies are converted into the
functional currency on initial recognition, using the exchange rates
approximating those ruling at the transaction dates. Monetary assets and
liabilities at the end of the reporting period are translated at the rates
ruling as of that date. Non-monetary assets and liabilities are translated
using exchange rates that existed when the values were determined. All
exchange differences are recognised in profit or loss.
- Group Companies
The results and financial position of all the Group entities,
including the parent company, (none of which has the currency of a
hyperinflationary economy) that have a functional currency different from the
presentation currency are translated into the presentation currency as
follows:
§ assets and liabilities for each balance sheet presented are translated at
the closing rate at the date of that balance sheet;
§ income and expenses for each income statement are translated at average
exchange rates (unless this average is not a reasonable approximation of the
cumulative effect of the rates prevailing on the transaction dates, in which
case income and expenses are translated at the rate on the dates of the
transactions); and
§ all resulting exchange differences are recognised as a separate component
of equity.
New Standards, Amendments to Standards or Interpretations adopted in these
financial statements:
No standards, amendments or interpretations which became effective from 1
January 2021 had an impact on the Group Financial Statements.
At the date of approval of these financial statements, the following standards
and interpretations which have not been applied in these financial statements
were in issue but not yet effective (and in some cases have not yet been
adopted by the EU):
· Amendments to IAS 1: Presentation of Financial Statements Disclosure
of accounting policies (effective 1 January 2023)*
· Amendments to IAS 1: Presentation of Financial Statements
Classification of Liabilities as Current or Non-current (effective date not
yet confirmed)*
· Amendments to IFRS 3: Business Combinations - Reference to Conceptual
Framework (effective 1 January 2022)*
· Amendments to IAS 16: Property, Plant and Equipment (effective 1
January 2022)*
· Amendments to IAS 37: Provisions, Contingent Liabilities and
Contingent Assets (effective 1 January 2022)*
· Annual Improvements to IFRS Standards 2018-2020 Cycle (effective 1
January 2022)*
· Amendments to IAS 8: Accounting Policies, Changes to Accounting
Estimates and Errors (effective 1 January 2023)*
· Amendments to IAS 12: Income Taxes - Deferred Tax arising from a
Single Transaction (effective 1 January 2023)*
*subject to EU
endorsement
The Directors do not expect that their adoption will have a material impact on
the financial statements of the company in future years. The Directors
continue to monitor the impact of future changes to the reporting requirements
but do not believe the proposed changes will significantly impact the
financial statements.
3. SEGMENT INFORMATION
The operating segment has been determined and reviewed by the senior
management and Board members to be used to make strategic decisions. The
senior management and Board members consider there to be a single business
segment, being that of investing activity. The reportable operating segment
derives its revenue primarily from structured equity and debt investment in
several companies and unquoted investments.
Senior management and Board members assess the performance of the operating
segments based on a measure of adjusted EBITDA. This measurement basis
excludes the effects of non-recurring expenditure from the operating segments
such as restructuring costs. The measure also excludes the effects of
equity-settled share-based payments and unrealised gains/losses on financial
instruments.
The amounts provided to the senior management and Board members with respect
to total assets are measured in a manner consistent with that of the financial
statements. These assets are allocated based on the strategic operations of
the segment.
The segment information provided to the Board for the reportable operating
segment is as follows:
Income statement: 2021 2020
Note US$'000 US$'000
Income on unquoted financial assets 4 1,162 1,137
Financial income on loans & receivables 6 1,347 1,336
Gross portfolio income 2,509 2,473
Expected credit loss provision 5 731 (529)
Other provisions 5 - (250)
Foreign exchange 4 (53) 215
Fair value adjustments 4 (38,840) 4,831
Portfolio income through profit or loss (35,653) 6,740
Operating (loss)/profit
Net assets:
FMHL 50,400 50,400
Meize 8,200 8,200
GCCF - 2,745
DocDoc 2,592 2,395
ICG 1,343 2,346
Infinity TNP 3,650 7,320
Other 17 17
Unquoted assets at fair value through the profit or loss 66,202 73,423
Loans and other receivables at fair value through the profit or loss (third 5,556 34,390
party)
Cash 848 3,673
Liabilities (4,578) (5,034)
Net assets 68,028 106,452
Gross portfolio income generated from the Company's investments is derived
from income from investments held through wholly owned special purpose
vehicles (Unquoted Financial Assets) and direct investments (Loans &
Receivables).
4. FAIR VALUE CHANGES ON FINANCIAL ASSETS AT FAIR VALUE THROUGH
PROFIT OR LOSS
2021 2020
Unquoted Financial Assets US$'000 US$'000
Income through profit or loss 1,162 1,137
Equity fair value adjustments:
- FMHL (583) 4,831
- GCCF (2,745)
- ICG (1,384) -
- Infinity TNP (3,670) -
(8,382) 4,831
Expected credit loss provision:
- ICG 27 (62)
Foreign exchange on unquoted financial assets at fair value through profit or
loss
(29) 17
Total fair value changes on unquoted financial assets at fair value through (7,222) 5,923
profit or loss
2021 2020
Loans & Receivables financial assets US$'000 US$'000
Income through profit or loss 1,347 1,336
Fair value adjustments:
- FMHL (loan principal) (26,500) -
- FMHL (Accrued interest) (3,959) -
(30,459) -
Expected credit loss provision:
- FLMHL 704 (467)
Other movements 118 (342)
Foreign exchange on Loans & Receivables at fair value through profit or
loss
(21) 142
Total fair value changes on Loans & Receivables at fair value through (28,311) 669
profit or loss
The impact of foreign exchange on the investments in the
portfolio is as follows:
2021 2020
US$'000 US$'000
FMHL (29) 17
Meize - -
GCCF - -
DocDoc - -
Foreign exchange on unquoted financial assets at fair value through profit or (29) 17
loss
CJRE (16) 112
FLMH - -
Other receivables (2) 30
Foreign exchange on loans and receivables (18) 142
Cash (6) 56
Foreign exchange on portfolio (53) 215
5. OPERATING LOSS
Operating loss is stated after charging expenses:
2021 2020
US$'000 US$'000
Investment Manager fee 1,861 1,888
Investment Manager incentive fee (424) 1,750
Expected credit loss provision (731) 529
Fees to the Group's auditor for audit of the 55 55
Company and its subsidiaries
Directors' remuneration 309 256
Professional fees 366 580
Promotion and marketing 16 40
Business travel expenses 11 24
Bank charges 13 16
Foreign exchange (1) 5
Other expenses 43 41
Total expenses 1,518 5,184
The Investment Manager's incentive fee is only payable in any given year
depending on the performance of the Company's net asset value. The charge
above is a result of warrants owed (not yet issued) revalued to their
prevailing share price at 31 December 2021. (also see Note 17).
6. NET FINANCE INCOME
2021 2020
US$'000 US$'000
Interest from financial assets measured at fair value through profit and loss 1,347 1,336
Finance income 1,347 1,336
Interest payable on debt (522) (442)
Interest expense on lease liabilities - -
Finance cost (522) (442)
Net finance income 825 894
Finance income in the year is from the Convertible Bond issued by Fook Lam
Moon Holdings.
7. DIRECTORS' REMUNERATION
Short term employment benefits 2021 2020
US$ US$
John Croft 156,137 122,422
Hugh Trenchard 49,572 44,405
Lee George Lam 46,305 44,482
Stuart Crocker 56,567 44,405
308,581 255,714
Directors' remuneration includes all applicable social security payments.
There was no pension cost incurred during 2021 (2020:US$ Nil).
There are no employees within the group other than the Directors (2020: Nil)
8. TAXATION
The Company is incorporated in the BVI and is not subject to any income tax.
9. UNQUOTED FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
2021 2021 2020 2020
Unquoted financial assets Loans and Unquoted financial assets Loans and
receivables receivables
US$'000 US$'000 US$'000 US$'000
Balance as at 1 January 73,423 34,390 67,172 33,720
Additions - - 264 70
Cash receipts - (417) (81) -
Reclassification - - 156 (156)
Fair value changes through profit or loss (7,248) (30,468) 5,975 (114)
ECL 27 704 (62) (467)
Finance income on loans - 1,347 - 1,337
Balance as at 31 December 66,202 5,556 73,423 34,390
The Group values its investments at fair value through profit or loss, as
prescribed by the investment methodology
adopted by the Board which is summarised in Note 2(o) Critical accounting
estimates and judgements.
Future Metal Holdings Limited
The Company holds an 84.8% interest in Linfen Zhuangpeng Magnesium Co. Ltd,
which owns a dolomite magnesium limestone quarry operation in the province of
Shanxi, China.
During 1Q 2021, the Quarry engaged a new mining contractor to carry out
production. The product quality and sales have been improved since then.
In June 2021, several mining accidents occurred in Shanxi Province. Given
this, all mining assets in the province, including our Quarry, were required
to immediately suspend operations. In early August 2021, after a thorough
review and site visits by local officials, it was approved for the Quarry to
recommence operations.
Currently, the products of the Quarry are mainly for construction purposes.
However, the market observed a surge in magnesium's price in 2021, driven by
the increasing costs from raw material prices, such as coal and ferrosilicon,
and the reduced supply resulting from the shutdown or maintenance of magnesium
smelters in China. The local Management Team of the Quarry has been actively
reaching out to different smelting plants in nearby cities/counties to seek
potential collaborations and establish sales channels.
Including loan disbursements provided by the Company to Future Metal Holdings
and its subsidiaries and accrued PIK interest, the estimated fair value of the
Company's investment is US$50.4 million as of 31 December 2021. (2020: US$50.4
million)
Fook Lam Moon Holdings Limited
The Company holds a Convertible Bond of US$26.5 million in FLMH. The
Convertible Bond has a maturity of 5 years and pays a coupon of 5.0% per annum
(3.0% paid in cash payable quarterly with the remainder rolled up with the
principal amount outstanding).
In late 2021, JADE became aware that the underlying group structure of FLM may
have changed such that FLMH is no longer the 71% owned controlling shareholder
in the Hong Kong based restaurant group.
The Company is actively working to secure more information to clearly
understand what potential impact this ownership change may have on the value
attributed to the Convertible Bond and the level of any new ownership in the
Restaurant Group.
In order to be prudent, the Company decided to apply a 100% provision against
this investment. As of 31 December 2021, the carrying value of the Convertible
Bond was US$0.0 million (2020: US$28.4 million).
Meize Energy Industries Holdings Limited
Swift Wealth Investments Limited, a 100% (2020: 100%) owned subsidiary of the
Company incorporated in the British Virgin Islands, holds a 7.2% stake in
Meize through a redeemable preference share
structure.
Meize has three production facilities, which are located in Inner Mongolia,
Ningxia Province and Jiangsu Province. The factories in Inner Mongolia and
Ningxia Province produce wind blades for onshore wind farms. The Jiangsu plant
produces wind blades for offshore wind farms.
Meize's Jiangsu plant, including its Phase II expansion, operated at full
capacity in 2021 due to the strong demand from the offshore wind market. Due
to high order volumes for offshore wind blades, the Jiangsu site operated
24/7, with staff working in 3 shifts, to fulfil orders from clients.
In 2021, JADE had discussions with Meize regarding a partial divestment.
Initial consent on the transaction has been achieved. Currently, both parties
are finalising legal documents for the partial divestment.
As of 31 December 2021, the Company's interest in Meize had a fair value of
US$8.2 million (2020: US$8.2 million).
DocDoc Pte Ltd
Eastern Champion Limited, a 100% (2020: 100%) owned subsidiary of the Company
incorporated in the British Virgin Islands, holds a Convertible Bond in
DocDoc.
DocDoc is a privately owned company operating in the healthtech space across
Asia and it is headquartered in Singapore. It is Asia's leading patient
empowerment company with a presence in over 8 countries and more than 23,000
doctors listed on its doctor discovery platform. The company uses artificial
intelligence to find the right medical professional for patients as well as to
provide access to qualified professionals who initially assess the patients'
needs.
Since 2021, DocDoc has pivoted its business model to become a "Neo Insurer"
and currently is in discussion with various insurance companies for potential
business collaboration.
As of 31 December 2021, the carrying value of the Convertible Bond was US$2.6
million taking into PIK interest accrued and cash interest receivable (2020:
US$2.4 million)
Infinity Capital Group ("ICG")
Ultimate Prosperity Limited, a 100% owned subsidiary of the Company
incorporated in the British Virgin Islands, holds a Secured Loan to ICG.
ICG develops premium residential projects in Hirafu Village, a world-class ski
village in Niseko, Japan - one of the most popular winter travel destinations
in the world.
As COVID-19 continues to have a severe impact on the hospitality industry in
Japan, there are no material business updates regarding this portfolio company
in 2021. We will continue to monitor the pandemic situation and expect the
business to be resumed once the border is open and tourism rebounds.
In order to be prudent, the Company decided to apply a 50% provision against
this investment. As at 31 December 2021 the carrying value of the Secured Loan
was US$1.4 million taking into account cash interest receivable (2020: US$2.6
million).
The Company also received shares of Ultima United Limited (Listed on ASX)
having fair value of US$0.5 million as at year end, as additional security for
the outstanding cash interest receivable. These shares are to be returned on
receipt of the outstanding interest. These shares are not reflected in the
financial statements as they do not meet the definition of a financial asset
under IFRS 9.
Infinity TNP
In November 2019, the Company acquired 40% of ICG's wholly owned subsidiary
Infinity TNP, which holds units in a luxury hotel condominium called Tellus
Niseko, in exchange for US$7.2m in shares in the Company.
Tellus Niseko is a unique development in Hirafu Village, with its high-end
concierge service, a Michelin star chef-managed restaurant, in-room onsen (hot
spring) baths and prime location just minutes away from the Grand Hirafu ski
lifts.
The occupancy at Tellus Niseko in 2021 has been negatively impacted by the
spread of COVID-19 in Japan. Local management has monitored the COVID-19
situation in Japan closely and implemented a series of measures at the
property to ensure guests' safety and hygiene.
In order to be prudent, the Company decides to apply a 50% provision against
this investment. As of 31 December 2021, the carrying value of its investment
was US$3.6 million. (2020: US$7.3 million).
Legacy Portfolio Investments:
Greater China Credit Fund LP (the "GCCF")
The Company invested in GCCF in 2013, a private equity investment fund
launched by Adamas Asset Management (HK) Limited ("Adamas"), a Hong Kong-based
investment management firm. The fund targets high-return investments in Small
and Medium Enterprises ("SMEs") predominantly in Greater China.
In order to be prudent, the Company decides to apply a 100% provision against
this investment. As of 31 December 2021, the Company's interest in GCCF has an
allocated fair value of US$0.0 million (2020: US$2.8 million) within the
legacy portfolio.
Changtai Jinhongbang Real Estate Development Co. Ltd ("CJRE")
Lead Winner Limited ("LWL") is a 100% (2020: 100%) owned subsidiary of the
Company incorporated in the British Virgin Islands.
LWL held a 15% stake in CJRE, the owner of a luxury resort and residential
development project in Fujian Province, Eastern China. The Company divested
its entire investment in 2017, however, the transaction was structured such
that an outstanding amount of RMB12.0 million (approximately US$1.8 million),
remained receivable on or before 21 December 2018. This 'tail' payment from
the original divestment was characterised as a loan and was dependent on CJRE
itself receiving funds from the underlying project which was being developed.
CJRE has launched a lawsuit against the buyer in November 2021 to claim end
payment. Once this payment is received by CJRE, it is the Company's
expectation that the outstanding loan will be repaid in full. The Company is
working closely with CJRE to recover the amount owed and it has received
confirmation of the outstanding amount with a good faith undertaking to ensure
it is settled as soon as funds are received from the underlying project.
As at 31 December 2021, the fair value of the loan was US$1.8 million (2020:
US$1.8 million).
SPVs
The unlisted open-ended investments below are defined as SPVs and are reported
at the fair value of their underlying investments described above at 31
December 2021.
Name of SPV Country of Percentage owned Principal activities
Incorporation
2021 2020
Lead Winner Limited BVI 100% 100% Investment Holdings
Dynamite Win Limited BVI 100% 100% Investment Holdings
Future Metal Holdings Limited BVI 100% 100% Investment Holdings
Swift Wealth Investments Limited BVI 100% 100% Investment Holdings
Ultimate Prosperity Limited BVI 100% 100% Investment Holdings
TNP Asia Limited BVI 100% 100% Investment Holdings
Further details of financial assets are set out in Note 15, and investment
valuation methodologies are set out in Note 2(o) Critical accounting estimates
and judgements.
10. LOANS AND OTHER RECEIVABLES AT FAIR VALUE THROUGH PROFIT OR LOSS
2021 2020
US$'000 US$'000
Loans - 28,408
Other receivables 5,556 5,982
Amounts receivable from related parties - -
5,556 34,390
As at 31 December 2021, Loans represent the Convertible Bond issued by Fook
Lam Moon Holdings plus accrued Paid-in-Kind ("PIK") and cash interest. The
Group has assessed the recoverability of Loans in accordance with its policy
and has decided to provide against the full value of the convertible debt and
accrued interest. This has been recognised as a fair value adjustment through
profit or loss. The Expected Credit Allowance ("ECL") allowance associated
with the cash interest payable has been released to profit or loss in full.
2021 2020
US$'000 US$'000
Loan principal 26,500 26,500
Accrued PIK interest 1,685 1,132
Accrued interest payable in cash 2,274 1,479
Fair Value Adjustments - Principal (26,500) -
Fair Value Adjustments - Accrued Interest (3,959) -
Gross loans receivable - 29,111
Less lifetime ECL allowance recognized - (704)
Net loans receivable - 28,407
Reconciliation of ECL allowance balance:
2021
US$'000
Balance as at 1 January 704
ECL allowance released to profit or loss (704)
Balance as at 31 December -
Other receivables include a US$3.7 million loan provided by the Company but
that was disbursed by the issuance of Company shares to CASIL, a former
minority shareholder, in return for the cancellation of a put option which
CASIL had been granted in the past against FMHL.
12. OTHER PAYABLES AND ACCRUALS
2021 2020
US$'000 US$'000
Accounts payable 870 6
Accruals 140 1,524
Other payables and accruals 1,010 1,530
13. LOANS AND BORROWINGS
2021 2020
US$'000 US$'000
Corporate debt 3,568 3,504
Loans and borrowings 3,568 3,504
i. Terms and conditions of the outstanding debt is as follows:
Currency Interest rate Year of maturity
Secured loan notes US$ 12.5% 2022
The corporate debt US$3.5 million are proceeds from loan notes issued to a
family office investor, with a related debenture which constitutes a fixed and
floating charge over the assets and undertakings of the Company. There are
US$0.1m capitalised debt issue costs, being amortised over the term of the
debt.
ii. Reconciliation of movements of liabilities & equity to cashflows
arising from financing activities
Loans & borrowings Share capital/ premium Treasury reserve
US$'000 US$'000 US$'000
Opening balance at 1 January 2021 3,504 148,903 (615)
Changes from cashflows
Payment of interest (459)
Total changes from financing cashflows (459) - -
Other changes:
Interest expense 522
Total other changes to liabilities 522 - -
Closing balance at 31 December 2021 3,568 148,903 (615)
14. SHARE CAPITAL AND TREASURY SHARE RESERVE
Share capital
Number of shares amount
US$'000
Authorised, called-up and fully paid ordinary shares of no par value each at 1 101,595,575 144,356
January 2020
Share issuance minor shareholder of FMHL June 2020 159,847 57
Sale of treasury shares February 2020 1,264,000 257
Purchase of treasury shares September 2020 (595,000) (201)
Share issue October 2020 - open offer and placement 8,356,663 2,699
Share issue October 2020 - HCIL incentive fees 4,496,784 1,453
Share issue costs October 2020 - (333)
Issued share capital excluding treasury shares at 31 December 2020 115,277,869 148,288
Issued share capital excluding treasury shares at 31 December 2021 115,277,869 148,288
Consisting of:
Authorised, called-up and fully paid ordinary shares of no par value each at 117,925,673 148,903
31 December 2021
Authorised, called-up and fully paid ordinary shares of no par value held as (2,647,804) (615)
treasury shares by the Company at 31 December 2021
15. FINANCIAL INSTRUMENTS
Financial Risk Management Objectives and Policies
Management has adopted certain policies on financial risk management with the
objective of ensuring that:
(i) appropriate funding strategies are adopted to meet the
Company's and Group's short-term and long-term funding requirements taking
into consideration the cost of funding, gearing levels, and cash flow
projections;
(ii) appropriate strategies are also adopted to manage related
interest and currency risk funding; and
(iii) credit risks on receivables are properly managed.
Financial instruments by category
The accounting policies for financial instruments have been applied to the
line items below:
Financial assets
2021 2020
US$'000 US$'000
Unquoted financial assets at fair value 66,202 73,423
Loans at fair value - 28,408
Other receivables at fair value 5,521 5,956
Cash and cash equivalents 848 3,673
Financial assets 72,571 111,460
Financial liabilities
2021 2020
US$'000 US$'000
Other payables and accruals at amortised cost 1,010 1,530
Corporate debt at amortised cost 3,568 3,504
Financial liabilities 4,578 5,034
The Corporate Bond is due for repayment in October 2022. All other financial
liabilities are due within 12 months.
Financial assets at fair value through profit or loss
The following table provides an analysis of financial instruments that are
measured subsequent to initial recognition at fair value, grouped into Levels
1, 2, or 3 based on the degree to which the fair value is observable as
described in Note 2(a) Basis of preparation:
2021 2020
US$'000 US$'000
Level 3
Unquoted financial assets at fair value through profit or loss (Note 9) 66,202 73,423
Loans and other receivables at fair value through the profit or loss (Note 9) 5,556 34,390
71,757 107,813
There were no transfers between levels in the current period. Carrying values
of all financial assets and liabilities are approximate to fair values.
Significant unobservable inputs used in measuring fair value - Level 3
Description Fair value at 31 Dec 2021 US$'000 Fair value hierarchy Valuation technique Significant unobservable input(s) Relationship of unobservable inputs to fair value
84.81% equity investment in Future Metal Holdings Limited engaged in mining Level 3 Income Approach Risk appropriate market-based discount rate applied, ranging from 15.0-25.0% The higher the discount rate applied, the lower the fair value.
project - US$50.4m;
- in this approach, the discounted cash flow method was used to capture the (2020: 15.0-25.0%)
present value of the expected future economic benefits to be derived from the
(2020: US$50.4m) ownership of these investments.
Private equity investments
7.2% preferred equity investment in Meize Energy Industries Holdings Limited
engaged in designing and manufacturing blades for wind turbines - US$8.2m;
(2020: US$8.2m)
40% equity investment (with guaranteed income yield) in Infinity TNP, holding
units in luxury hotel condominium Tellus Niseko - $3.6m; (2020: US$7.3m)
Level 3 Unadjusted NAV Not applicable Not applicable
Private credit fund - Greater China Credit Fund LP US$0.0m; (2020: US$2.8m)
Credit investments Level 3 Income Approach - see above Revenue and expense growth rate 5% - 10%, discount rate 6% Not applicable
Convertible Bond - Fook Lam Moon
US$0.0m
(2020: US$28.4m)
Secured Loan Notes - Infinity Capital Group US$1.4m (2020:US$2.3m)
The above table sets out information about significant unobservable inputs
used at 31 December 2021 in measuring material financial instruments
categorised as Level 3 in the fair value hierarchy.
The discount of 17% (2020: 17%) is applied to the externally derived Project
Value in estimating fair value of the investment in FMHL is a key unobservable
input into the valuation model. In the event that other possible discounts had
been applied the impact on carrying value of the investment would be as
follows:
Discount rate applied Impact on carrying value (US$ million)
10% 4.4
25% (5.1)
30% (8.2)
35% (11.4)
Credit Risk
The Group's credit risk is primarily attributable to other receivables.
Management has a credit policy in place and the exposure to credit risks are
monitored on an ongoing basis.
In respect of other receivables, individual credit evaluations are performed
whenever necessary. During the year, an ECL provision was recognised in
respect of aged interest on the Convertible Bond issued to Fook Lam Moon, see
Note 10 for details.
The Group's maximum exposure to credit risk is represented by the total
financial assets held by the Group.
Interest Rate Risks
The Group currently operates with positive cash and cash equivalents as a
result of issuing share capital and corporate debt in anticipation of future
funding requirements.
Other receivables bear interest at a fixed annual rate, therefore there is no
exposure to market interest rate risk on these financial assets. The effect of
a 10% increase or fall in interest rates obtainable on cash and on short-term
deposits would be to increase or decrease the Group's operating results by not
more than US$1,000 (2020: US$1,000).
The Group has a US$10 million debt facility with a private family office
investor, under which the Company has issued US$3.6 million loan notes, with
an associated fixed interest rate of 12.5% for a term of 3 years. As the
interest rate has been fixed for the term of the facility, there is no
interest rate risk associated with the instruments.
Liquidity Risk
The Group manages its liquidity requirements by the use of both short-term and
long-term cash flow forecasts. The Group's policy to ensure facilities are
available as required is to issue equity share capital and/or loan notes in
accordance with long-term cash flow forecasts.
The Group's financial liabilities are primarily operational costs and debt
instruments. All operational costs are due for payment in accordance with
agreed settlement terms with professional firms, and all are due within one
year. Debt principal and related interest are due for settlement in October
2022.
Price and Valuation Risks
The Group's investment portfolio is susceptible to risk arising from
uncertainties about future values of the investment securities, either in
relation to market prices (for quoted securities) or fair values (for unquoted
securities). This risk is that the fair value or future cash flows will
fluctuate because of changes in market prices or valuations, whether those
changes are caused by factors specific to the individual investment or
financial instrument or its holder or factors affecting all similar financial
instruments or investments traded in the market. The Group's investment
committee provides the Board of Directors with investment recommendations that
are consistent with the Group's objectives. The investment committee
recommendations are carefully reviewed by the Board of Directors before the
investment decisions are implemented.
During the year under review, the Group did not hedge against movements in the
value of its investments. A 10% increase/decrease in the fair value of
investments would result in an US$11.0m (2020: US$11.0m) increase/ decrease in
the net asset
value.
While investments in companies whose business operations are based in China
may offer the opportunity for significant capital gains, such investments also
involve a degree of business and financial risk, in particular for unquoted
investment.
Generally, the Group prepares to hold the unquoted investments for a middle to
long term time frame, in particular, if admission to trading on a stock
exchange is considered likely in the future. Sales of securities in unquoted
investments may result in a discount to the book value at the time of future
disposal.
Currency Risks
Management considers that foreign currency exposure is not significant to the
Group and as such, there is no hedging of foreign currencies.
Capital Management
The Group's financial strategy is to utilise its resources to further grow the
Group's portfolio. The Group keeps investors and the market informed of its
progress with its portfolio through regular announcements and raises
additional equity finance at appropriate times when market conditions allow.
The Company regularly reviews and manages its capital structure for the
portfolio companies to maintain a balance between the higher shareholder
returns that might be possible with certain levels of borrowings for the
portfolio and the advantages and security afforded by a sound capital
position, and makes adjustments to the capital structure of the portfolio in
the light of changes in economic conditions.
The capital structure of the Company and the Group consists of cash and cash
equivalents, loans and equity comprising issued capital and reserves.
16. SHARE BASED PAYMENTS
16.1 Ownership-Based Compensation Scheme for Senior Management
The Group has an ownership-based compensation scheme for senior management of
the Group. In accordance with the provisions of the plan, senior management
may be granted warrants to purchase ordinary shares. Each warrant converts
into one ordinary share of Jade Road Investments Limited on exercise. No
amounts are paid or payable by the recipient of the warrants. The warrants
carry neither rights to dividends nor voting rights. Warrants may be exercised
at any time from the date of vesting to the date of their expiry.
At 31 December 2021, there were 1,907,882 warrants outstanding, issued to the
Company's Directors in previous periods in respect of services provided to the
Group with at an exercise price of US$1.21 per share, equivalent to £0.89 at
31 December 2021. The warrants will expire in 2027, 10 years after the date of
grant. All warrants are equity-settled and may be exercised at any time from
the date of grant to the date of their expiry.
In the event that a Director's appointment is terminated for any reason, then
in such circumstances each Director's subscription rights shall, to the extent
he/she has not been issued or exercised either (i) prior to the date of
termination (Date of Termination); or (ii) within the period of 60 days
immediately following the Date of Termination, be immediately cancelled.
16.2 Equity Compensation Scheme for Harmony Capital Investors Limited (the
"Investment Manager")
The Group has an equity compensation scheme for Investment Manager of the
Group. In accordance with the provision of the scheme, the Investment Manager
is granted warrants to subscribe for 20 million (before share consolidation
undertaken by the Company on 20 September 2017) ordinary shares, which is to
be issued in five equal tranches. No amounts are paid or payable by the
recipient of the warrants. The warrants carry neither rights to dividends nor
voting rights. Warrants may be exercised at any time from the date of vesting
to the date of their expiry. Any equity compensation shares issued to or
acquired by Investment Manager are subject to an orderly market period, which
is 12 months after each date of issue. During each orderly market period, the
Investment Manager undertakes to the Company and the broker not to effect a
disposal of the relevant shares unless the Investment Manager gives written
notice to do so.
All warrants are equity-settled, the only conditions for all warrants granted
is that the warrants holder remains in the office when exercises.
The number of warrants due to the Investment Manager to subscribe for ordinary
shares in respect of services provided to the Group were recalculated pursuant
to paragraph 2 of Section 2 of the warrant instruction to reflect the share
consolidation undertaken by the Company on 20 September 2017. The warrants
have an exercise price of US$1.21 per share, equivalent to £0.89 at 31
December 2021. The warrants will expire 10 years after the date of grant. In
total the Investment Manager owns 8,000,000 warrants as at 31 December 2021
(2020: 8,000,000).
2021 2020
Number of options Number of warrants Weighted average exercise price US$ Number of options Number of warrants Weighted average exercise price US$
Balance at beginning of the financial year - 17,567,663 0.84 - 9,600,000 1.21
Issuance during the financial year
-Investment manager - - - - - -
-Directors - - - - - -
-Shareholders - - - - 7, 967,663 0.40
Expired during the financial year - - - - - -
Balance at end of financial year - 17,567,663 0.84 - 17,567,663 0.84
Exercisable at end of financial year - 17,567,663 0.84 - 17,567,663 0.84
The weighted-average remaining contractual life of outstanding warrants at 31
December 2021 was 4 years and 3 months (2020: 6 years and 10 months). During
the year there has been a charge/(credit) of $(0.4) (2020: $1.8m relating to
share-based compensation of the Investment Manager. This relates to the
revaluation of the shares issued yet to issued to HCIL in respect of the 2020
accrued incentive fee, due to the price at grant being lower than the accrued
price. There was no incentive fee charged in 2021.
16.3 Equity-Settled Share-Based Payment for Investment Manager as Incentive
Fee
Investment Manager is entitled to receive an incentive fee from the Company in
the event that the audited net asset value for each year is (1) equal to or
greater than the audited net asset value for the last year in relation to
which an incentive fee became payable ("High Water Mark"); and (2) in excess
of 105% of the audited net asset value as at the last calendar year end ("the
Hurdle"). Subject to the High Water Mark and Hurdle being excessed in respect
of any calendar year, the incentive fee will be equal to 20% of the difference
between the current year end NAV and the previous year end NAV. 50% of the
incentive fee shall be paid in cash and the remaining 50% of the incentive fee
shall be paid by ordinary shares.
The remaining 50% of incentive fee ("Equity Compensation Amount") shall be
satisfied by the Company issuing to Investment Manager such number of ordinary
shares as have a Fair Market Value which in aggregate is equal to the Equity
Compensation Amount. The Fair Market Value is the closing Volume Weighted
Average Price ("VWAP") for the ordinary shares trading on AIM for the ninety
prior trading days as at the relevant calculation period year end, i.e., 31
December 2017. The shares issued to or acquired as incentive fee by Investment
Manager is subject to an orderly market period, which is 12 months after each
date of issue. During each orderly market period, Investment Manager
undertakes to the Company and the broker not to effect a disposal of the
relevant shares unless the Investment Manager gives written notice to do so.
No incentive fee was accrued in 2021 (2020: $1.3m).
17. RELATED PARTY TRANSACTIONS
During the year, the Company and the Group entered into the following
transactions with related parties and connected parties under existing
contracts:
2021 2020
Notes US$'000 US$'000
Remuneration payable to Directors (see Note 7) (i) 309 256
Harmony Capital Investors Limited (ii)
- Management fee 1,861 1,888
- Incentive fee (424) 1,750
Amount due to Harmony Capital Investors Limited at 31 December 865 1,289
Note: Incentive Fee includes:
- US$0.461 million adjustment expense for the FYE2019 Incentive
Fee to Harmony Capital paid in shares. The Incentive Fee was calculated using
a 90-day volume weighted average share price as of the year-end 2019 but as
the Incentive Fee shares were issued in 4Q2020, there was a c.47% share price
increase at the issue date. Shares are valued at the point at which they are
issued (as opposed to a historical rate), thus, this is reflected as a charge
in 2020. A credit of $(0.424) was recognized in respect of shares yet to be
issued, revalued as at 31 December 2021.
(i) The key management personnel of the Company are considered to be
the Directors and appropriate disclosure with respect to them is made in Note
7 of the financial statements. There are no other contracts of significance in
which any Director has or had during the year a material interest.
(ii) Harmony Capital Investors Limited is the Investment Manager of the
Group. The management fee, which was calculated and paid bi-annually in
advance calculated at a rate of 0.875% of the net asset value of the Group's
portfolio of assets as at 30 June and 31 December in each calendar year.
Harmony Capital Investors Limited is entitled to receive an
incentive fee from the Company in the event that the audited net asset value
for each year is (1) equal to or greater than the audited net asset value for
the last year in relation to which an incentive fee became payable ("High
Water Mark"); and (2) in excess of 105% of the audited net asset value as at
the last calendar year end ("the Hurdle"). Subject to the High Water Mark and
Hurdle being excessed in respect of any calendar year, the incentive fee will
be equal to 20% of the difference between the current year end NAV and the
previous year end NAV. 50% of incentive fee shall be paid in cash and the
remaining 50% of incentive fee shall be paid by ordinary shares.
18. EARNINGS PER SHARE
The calculation of the basic and diluted profit/(loss) per share attributable
to the ordinary equity holders of the Company is based on the following:
2021 2020
US$'000 US$'000
Numerator
Basic/Diluted: Net (Loss)/Profit (38,424) 1,643
No. of shares No. of shares
'000 '000
Denominator
Basic: Weighted average shares 115,278 105,518
Dilutive effect of warrants - 17,568
Diluted: Adjusted weighted average shares 115,278 123,086
Earnings per share:
Basic (33.33) cents 1.56 cents
Diluted (33.33) cents 1.34 cents
Treasury shares issued by the company totaling 2,647,804 as at the reporting
date, have been excluded from the weighted average shares calculation.
19. EVENTS AFTER THE REPORTING PERIOD
On the 22nd of June, Jade Road announced (RNS Number: 7646P) it has
successfully negotiated a partial divestment in Meize Energy Industries
Holdings Limited ("Meize"), currently the third-largest holding in the
Company's portfolio (7.7% of NAV as at announcement). The company has entered
into a share purchase agreement ("SPA") for 112,500 shares of the Series B
Preferred Equity in Meize for consideration of USD1.2 million (the
"Transaction Price"). Before the release of this RNS, the Company had received
the First Tranche Price of USD400,000.
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