REG - Jade Road Investmnts - Final Results
26/05/2023 13:30
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RNS Number : 8469A Jade Road Investments Limited 26 May 2023
26 May 2023
RNS
JADE ROAD INVESTMENTS LIMITED
("Jade Road" or the "Company")
Final Results
Jade Road Investments Limited (AIM: JADE), the London quoted company focused
on seeking the best risk-adjusted returns globally, is pleased to announce the
publication of its final results for the year ended 31 December 2022.
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
2022 2021 Change*
Net Asset Value US$15.1m (GBP12.2m) US$68.0m (GBP55.8m) -77.8%
Gross Portfolio Income US$2.8m (GBP2.2m) US$2.5m (GBP2m) 12%
Net Portfolio Income US$-50.6m (GBP-40.9m) US$-35.6m (GBP-29.2m) -42.1%
Net Profit / Loss US$-52.9m (GBP-42.8m) US$-38.4m (GBP-31.5m) -37.7%
Year-end cash US$0.3m (GBP0.2m) US$0.8m (GBP0.6m) -62.5%
Net Asset Value per share US$0.13 (GBP0.10) US$0.58 (GBP0.5) -77.5%
*Exchange rate as of 25.05.2023
Operational Highlights
- Meize Energy: In 2022, a new factory has been under construction in Mori
Kazak Autonomous County, Xinjiang Province. The plant commenced operations in
September 2022 as the main construction work had been completed. The
construction work is expected to be fully completed in August 2023.
Post Period End Activity
- In February 2023, the Company announced the completion of a conditional
equity fundraise which was conditionally underwritten in its entirety by
Heirloom Investment Management LLC ("HIM"). At the General Meeting all
resolutions were duly approved, including the new investment strategy. In line
with its new amended investment strategy, the Company announced in April that
it had invested USD500,000 in Heirloom Investment Fund SPC - Heirloom Fixed
Return Fund SP, managed by HIM.
- In March 2023, the Company announced that John Batchelor, Non-Executive
Director, had resigned from the Board with immediate effect.
John Croft, Chairman of Jade Road Investments, commented:
'The Company continues to make great strides to pivot from its legacy
portfolio of Asian assets to investing in geographically diverse assets in
more stable regions with stronger legal systems, uncorrelated to the general
market and expected to consistently generate attractive risk-adjusted returns.
As an integral part of this strategy, a primary focus has been on generating
cash through disposals and this has led to some difficult decisions having to
be taken which has resulted in some significant impairment of the portfolio.
The Company has pushed through the majority of its restructuring with a number
of significant changes to its financial and operational structure. The upshot
is that we now have a Company that is primed to push on with its new
investment strategy.
The past year has been challenging for the Company, but the Board now believes
that by adopting a new investment strategy and accelerating the disposals of
its legacy assets, it is in a strong position to fulfil its clear objective of
providing shareholders with attractive uncorrelated, risk-adjusted, long-term
returns to becoming a dividend paying vehicle.'
FOR FURTHER INFORMATION, PLEASE CONTACT:
Jade Road Investments Limited +44 (0) 778 531 5588
John Croft
WH Ireland Limited - Nominated Adviser +44 (0) 20 7220 1666
James Joyce
Andrew de Andrade
Hybridan LLP - Corporate Broker +44 (0) 203 764 2341
Claire Noyce
Jade Road Investments Limited
Annual Report 2022
Company Information
Directors
Mr. John Croft
- Executive Chairman
Hugh Viscount Trenchard
- Non-executive Director
Dr. Lee George Lam
- Non-executive Director
Mr. Stuart Crocker
- Non-executive Director
Investment Manager
Harmony Capital Investors Limited
Intertrust Corporate Services (Cayman) Limited, 190 Elgin Avenue, George Town
Grand Cayman KY1-9005 Cayman Islands
Key Personnel of Investment Manager
Harmony Capital Investors Limited
Mr. Suresh Withana
- Co-founder, Managing Partner
Registered Office
Commence House, Wickhams Cay 1
PO Box 3140
Road Town, Tortola
British Virgin Islands VG1110
Company Secretary
Conyers Trust Company (BVI) Limited
Commence House, Wickhams Cay 1
PO Box 3140
Road Town, Tortola,
British Virgin Islands VG1110
Principal Place of Business
29/F, Infinitus Plaza
199 Des Voeux Road Central, Hong Kong
Registrars
Computershare Investor Services (BVI) Limited, Woodbourne Hall PO Box 3162
Road Town, Tortola, British Virgin Islands
Depositary Interest Registrars
Computer Investor Services PLC
The Pavilions
Bridgwater Road
Bristol BS99 6ZY
Registered Agent
Conyers Trust Company (BVI) Limited
Commence House, Wickhams Cay 1
PO Box 3140
Road Town, Tortola
British Virgin Islands VG1110
Nominated Adviser
WH Ireland Limited
24 Martin Lane
London EC4R 0DR
Broker
Hybridan LLP
1 Poultry,
London
EC2R 8EJ
Auditors
PKF Littlejohn LLP
15 Westferry Circus
London E14 4HD
Legal Advisers
Locke Lord (UK) LLP
Second Floor
201 Bishopsgate
London EC2M 3AB
Conyers Dill & Pearman
Romasco Place, Wickhams Cay 1
PO Box 3140
Road Town, Tortola
British Virgin Islands VG1110
Website
www.jaderoadinvestments.com
Stock Code
AIM: JADE
Frankfurt: 1CP1
Company Description & Investing Policy
Jade Road Investments Limited ("Jade Road" or the "Company") is focused on
providing growth capital and financing to emerging and established Small and
Medium Enterprises ("SMEs") worldwide, well-diversified by national
geographies, instruments and asset classes. This vital segment of the economy
is underserved by the traditional banking industry and capital markets due to
regulatory and structural reasons. The Company is now more globally focused
and aims to provide shareholders with attractive uncorrelated risk-adjusted
returns over the short and longer-term from a diversified portfolio of
investments. Jade Road Investments Limited is an investment company holding
portfolio investments while Harmony Capital Investors Limited acts as its
external Investment Manager.
Our common stock is publicly traded on the Alternative Investment Market
("AIM") market of the London Stock Exchange, under the ticker symbol "JADE".
The Board of Jade Road Investments works together with Harmony Capital
Investors Limited ("Harmony Capital") to execute our investment strategy.
Ultimate authority for investment decisions vests with the Board.
Investing Policy
The Directors believe that there is an excellent long-term opportunity to
provide financing, primarily backed by real assets, with a primary focus on
income-production and a secondary focus on capital gains. The Directors
believe that by investing in asset-backed assets that are income-generating,
the Company will be provided with more certainty when predicting future cash
flows, thus allowing it to plan an appropriate dividend policy in due course.
It is believed that this will allow for the optimal delivery of shareholder
value in the form of the payment of a safe, consistent dividend yield at an
attractive spread to other yielding options, while growing the underlying
capital base of the Company.
In order to take advantage of this opportunity and to deliver this shareholder
value, the Company required an updated Investing Policy that will permit it to
take advantage of the best risk-adjusted investments globally, provided the
majority of them are asset-backed and/or income producing and backed by legal
jurisdictions that the Directors are comfortable with and provide a safe
underpinning to allow for the Company to earn its return and recoup its
investment as per the terms of the financing that it agrees to.
Moreover, given the long-term nature of the Company's investment horizon, the
Directors believe that the updated Investing Policy should enable the Company
to navigate changes in the relative attractiveness of various financing
opportunities through varying economic cycles and geopolitical shifts.
Finally, and most importantly, the Board expects the Company's investment
portfolio to be repositioned over time such that it generates both income and
capital gains.
In order to facilitate the Company's strategic objectives, the Company
approved post year-end the Resolution to amend the Investing Policy to the
following:
1) The Company has an indefinite life, is sector
agnostic and is targeting assets in any class which will produce income
returns, with a secondary focus on capital gains over time for its
Shareholders.
2) The Company will seek the best risk-adjusted
returns globally, with a preference for investments governed by legal
systems that the Company understands and believes to be reliable.
3) The Company may invest directly into listed
securities, over-the-counter traded securities, currencies, companies, real
assets, contractual obligations, or commodities ("Direct Financings").
4) The Company may provide financing to entities,
becoming a lender to, or a limited partner or shareholder of, an affiliated
or third party which itself has a strategy to invest in underlying listed
securities, over-the-counter traded securities, currencies, companies, real
assets, contractual obligations or commodities ("Indirect Financings").
5) The Company shall ensure that at the time of
entering into a Direct Financing, it shall represent not more than 30% of
the Company's net asset value immediately following the relevant transaction.
There is no limit on the number of investments the Company may take.
6) The Company shall ensure that at the time of
entering into an Indirect Financing, no underlying asset of the indirectly
financed entity shall represent more than 30% of the Company's net asset
value immediately following the relevant transaction.
7) There is no restriction on the duration the
Company will hold any investment nor any restriction on the time for the
Company to make its investments in such assets.
8) The Company will pursue a predominantly passive
management strategy. However, on a case by case basis, it may consider
securing additional governance rights such as observer or board appointments
where the situation or asset dictates such additional oversight.
9) The Company may utilise gearing when
appropriate. The Company will continue to exercise prudence in determining
whether prevailing market conditions and investor expectations warrant the
utilisation of any leverage over its portfolio.
10) The Company will consider issuing its own shares
as consideration for interests in other companies but such cross holdings will
be limited to 20 per cent. of the Company's issued shares in aggregate from
time to time.
The Directors believe that the change of Investing Policy will broaden the
Company's activities and allow it to build a portfolio of investments
producing income and with the potential for capital gains. The Directors
further believe that the change of Investing Policy also enables the Company
to:
· Increase the breadth of the transactions and
opportunities it can consider.
· Lower its overall investment risk by
increasing diversification and shifting geographic focus toward more stable
geographies with stronger legal systems; and
· Implement its long-term objective of
providing Shareholders with a stock that produces income and retains the
potential for appreciation.
The Board and the Investment Manager each have extensive international
experience across a range of industries and asset classes.
Income-producing assets which are backed by real assets have already been
indicatively assessed as part of the Investment Manager's internal processes
and while no specific commitments have been entered into, the Board and
Investment Manager are comfortable in their ability to execute the New
Investing Policy.
Chairman's Statement
The Company continues to make great strides to pivot from its legacy portfolio
of Asian assets to investing in geographically diverse assets in more stable
regions with stronger legal systems, uncorrelated to the general market and
expected to consistently generate attractive risk-adjusted returns. As an
integral part of this strategy, a primary focus has been on generating cash
through disposals and this has led to some difficult decisions having to be
taken which has resulted in some significant impairment of the portfolio.
Overview
Solid progress was made to transition the Company away from its legacy asset
portfolio of Asian SMEs towards a more globally diverse portfolio.
As part of the Company's new amended investment strategy to continue to deploy
capital into multiple asset-backed and/or income-generating investments but
shift the geographical focus, the Company completed a significant (post
balance sheet) investment in a highly diversified and low-correlated fund,
managed by Delaware-based Heirloom Investment Management.
To enable this, the Company successfully restructured its US
Dollar-denominated secured debt, extending its maturity to 31 December 2023.
In terms of its current Asian asset portfolio, the Investment Manager is
conducting an accelerated disposal programme. In August, the Company received
the third and final equal tranche payment of US$400,000 from China-based Meize
Energy Industries, thereby completing the partial disposal transaction.
These developments, consisting of the new amended investment strategy,
significant new investment and accelerated disposal programme, have placed the
Company on a much firmer footing and I believe is now heading in the right
direction to achieve its long-term aim of becoming a dividend-paying vehicle.
New Investment Strategy: Seeking the best risk-adjusted returns globally
Last year, I wrote about the economic and geopolitical challenges facing China
and Southeast Asia and how the Company had been hard at work pivoting away
from its legacy assets in the region. The new investment strategy, approved by
an overwhelming number of shareholders at the Company's recent General
Meeting, allows the Company to expand beyond its previous focus on Asian
investments to a global approach.
The intention is to create a geographically diverse portfolio as well as
benefit from an environment where inflation levels are higher than interest
rates. The long-term aim is to create strong risk-adjusted returns with the
capability to generate regular income in addition to capital gains, and become
a dividend paying vehicle.
In order to facilitate this transformation, productive talks were held with
the holders of the Company's US Dollar-denominated bonds totaling USD3.6
million. The Board was able to extend the maturity of the Loan Notes to 31
December 2023 on 1(st) December 2022; albeit with a modest increase in the
interest rate payable on the principal amount of the Loan Notes outstanding to
15% per year, and an increase in the interest rate payable on the principal
amount of the outstanding Loan Notes to 16% per year where US$1.8 million or
more of the principal amount of the Loan Notes remain outstanding by 30 June
2023.
In addition, a "priority return" provision was agreed requiring the Company to
prioritise proceeds received by it pursuant to an equity placing of more than
£10,000,000, or of any sale (including any contractual rights) within the
Company's existing portfolio in making repayments on the Notes. Any such
repayment would be limited to 10% of the net proceeds received by the Company
pursuant to a Qualifying Placing, or 65% of the net proceeds received by the
Company following an asset sale.
Finally, it was agreed that the Loan Note holders would be issued with 3-year
warrants equivalent to 5% of the next share issuance undertaken by the Company
with a strike price at a 50% premium to the price of such share issuance on
22(nd) March 2023.
The Board believes that the new agreement with the Loan Note holders and the
amended investment strategy will prove more attractive to the Company's
shareholders than its current investment portfolio.
Legacy Portfolio: Clearing the decks
The Company turned its focus in 2022 to accelerating the disposal of its
mainly China based assets as a first step in its strategy to pivot away from
Asia.
Its Investment Manager embarked on a programme to seek buyers for its major
assets, with a prime focus on generating cash that could be reinvested in
other geographies and income generating assets.
During the year, Jade Road completed the successful partial disposal of Meize
Energy Industries, a leading privately owned wind turbine blade manufacturing
company in China at a 22% premium. The Company continues to retain a 7.08%
stake in Meize valued at USD8.8 million. Importantly, the deal demonstrated
that international transactions can still be done in China.
The Company's largest shareholding is an 85% stake in Future Metal Holdings
Limited (FMHL), the largest magnesium dolomite quarry in Shanxi Province,
China. As previously announced, the local management team remains committed to
seeking divestment opportunities with two potential buyers lodging formal
letters of interest to acquire the Quarry. To be conservative, the Company's
investment has effectively been written down from US$50.4 million to US$5.3
million.
Singapore-headquartered DocDoc describes itself as the world's first patient
intelligence company, harnessing the power of AI to provide patients with the
information they need to make optimal health care decisions. As of 31 December
2022, the carrying value of the Convertible Bond was US$2.8 million.
Additional investments in Asian SMEs include a senior secured loan investment
in Japanese luxury real estate developer Infinity Capital Group (ICG) and a
40% holding in Infinity TNP, a wholly owned subsidiary of ICG. During 2022 ICG
faced certain difficulties caused by the COVID lock down in Japan. After
failing to make a number of due interest payments to Jade, the Company decided
to take legal action to recover its loan principal and accrued interest. In
November 2022, the High Court in Hong Kong upheld Jade's claim in full and the
Company is now seeking enforcement of this judgement. The Company had
previously taken an interest credit default charge against this investment and
in order to be prudent, the Company decided to maintain the same US$1.4
million carrying value for ICG, while for Infinity TNP it was decided to take
a 100% provision against this investment in the light of the legal dispute
with its parent company ICG.
Whilst action is being taken to accelerate asset disposals, the Company is
also focused on reducing its cost base where possible and to implement this
repositioning, the Company signed an amended Services Agreement with its
Investment Manager, Harmony Capital Investors Limited to reduce its management
fee to US$350,000 per year as it shifts its focus to the orderly monetisation
of its Asian assets. HCIL will also receive an incentive fee amounting to 20%
of the cash received by the Company (or any of its Associates) from the sale
of any Investment that is part of the Legacy Portfolio and is sold to an HCIL
Buyer. The HCIL agreement is for an initial period of one year.
As the Board believes that the current value of its portfolio has not been
reflected in its current share price, and by having taken the tough decisions
with its legacy portfolio, this will place it in good stead going forward and
therefore it is anticipated that any future disposals will represent an upside
in valuation to the Company.
Post balance sheet events: New Investment
In February of this year, the Company announced the completion of a
conditional equity fundraise which was conditionally underwritten in its
entirety by Heirloom Investment Management LLC ("HIM"). The gross placing
amount for this fundraise is $1,750,000.
At the General Meeting all resolutions were duly approved, including the new
investment strategy.
In line with its new amended investment strategy, the Company announced in
April that it had invested USD500,000 in Heirloom Investment Fund SPC -
Heirloom Fixed Return Fund SP, managed by HIM.
The new fund is geographically diverse with low correlation to most markets or
major asset classes, such as equities, fixed income and real estate. Current
themes include asset-backed lending, equipment leasing, agriculture (farm
business), niche real estate (US single family rental), infrastructure,
litigation finance and music royalties.
An important aspect is that the fixed return class of shares in the fund are
supported by Loss Absorption Shares, owned by the manager of the Fund, which
absorbs any negative monthly losses. This provides strong downside risk
protection while offering the ability to generate modest returns. The fund has
established a fixed return rate of 6% to provide clarity and transparency to
investors.
The Company believes that the fund ticks all its boxes, providing a
diversified portfolio of primarily asset-backed and/or income producing
investments targeted to deliver an attractive risk-adjusted return over the
long term: Currently, the fund has a target yield of 7% and target net returns
of 10-12%, and represents a precise example of the type of new investments it
intends to seek in future.
The Board
In March 2023, the Company announced that John Batchelor, Non-Executive
Director, had resigned from the Board with immediate effect. The Board would
like to use this opportunity to once more thank John for his contribution over
the last two and half years.
Outlook
The Company has pushed through the majority of its restructuring with a number
of significant changes to its financial and operational structure. The upshot
is that we now have a Company that is primed to push on with its new
investment strategy.
The past year has been challenging for the Company, but the Board now believes
that by adopting a new investment strategy and accelerating the disposals of
its legacy assets, it is in a strong position to fulfil its clear objective of
providing shareholders with attractive uncorrelated, risk-adjusted, long-term
returns to becoming a dividend paying vehicle.
I would like to take this opportunity to personally thank everyone involved in
the successful completion of the partial divestment in Meize, the extension of
the maturity date of the US Dollar-denominated corporate bonds and the new
amended investment strategy.
Finally, on behalf of the board, I would like to extend my thanks to all of
our shareholders for your continued support.
John Croft
26 May 2023
Chairman of the Board
Portfolio at 31 December 2022
Principal assets Effective interest Instrument type Valuation at 31 December 2021 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 2022
US$ million
Fook Lam Moon Holdings - Convertible Bond - 1.4 - - - - (1.4) -
Future Metal Holdings Limited 84.8 Structured Equity 50.4 0.6 - - - (45.1) (0.6) 5.3
Meize Energy Industrial Holdings Ltd 6.3 Redeemable convertible preference shares 8.2 0.3 - - (1.2) 1.5 - 8.8
DocDoc Pte Ltd - Convertible Bond 2.6 0.2 - - - - - 2.8
Infinity Capital Group - Secured Loan Notes 1.4 0.3 - - - - (0.3) 1.4
Infinity TNP 40 Equity 3.6 - - - - (3.6) - -
Project Nicklaus - 1.9 - - - - (0.1) - 1.8
Loan to HKMH 3.7 - - - - - (3.7) -
Corporate debt - (3.6) - - - (0.3) - - (3.9)
Other liabilities - (1.0) - - - (0.4) - - (1.4)
Cash 0.8 - - 1.2 (1.7) - - 0.3
Total Net Asset Value 68.0 2.8 - 1.2 (3.6) (47.3) (6.0) 15.1
Portfolio Overview
Future Metal Holdings Limited
The Company has an 85% shareholding in FMHL.
In 2022, due to the continued severe Covid-19 situation in Mainland China, as
compared to the resurgence of economic activity almost without exception in
Asia, and the Chinese government's tight regulations on travel and logistical
activities, the Quarry carried out production for less than 4 months. Despite
these severe restrictions, the local management managed to preserve the asset
while ensuring that the Company was not required to provide any additional
investment.
Due to these extreme conditions throughout the year, coupled with the
Company's decision to change its Investment Policy and strategic direction, it
has been determined that substantial investment would be required to keep the
mines operating. As a result, a decision was taken to accelerate the
divestment of the Quarry in 2022, particularly towards the later part of the
year. Due to this focus on an accelerated divestment, rather than seeking to
hold the investment to maximise its value in the medium to long term, the
Company sourced two potential buyers that lodged written letters of interest
to acquire the Quarry. Both interested parties, from the Quarry's local
region, were aware of the Company's motivated sale of the asset and their
indicative bids reflected this.
Historically the asset was valued with reference to its fundamental value,
derived from an independent assessment of its core asset being its Magnesium
Dolomite Reserves. Given the accelerated divestment focus, the Investment
Manager has recommended that a more accurate valuation of the asset in 2022
would be to recognise the potential near term 'recovery value' implied by the
two expressions of interest received from the domestic Chinese acquirers.
In accordance with this view, the Company has decided to apply a 100%
provision against its carrying value of its equity investment in the asset.
It has further provisioned against historical loans it has made to the
Quarry. The result is that the value of the Company's investment will be
US$5.3 million as of 31 December 2022 (31 December 2021 US$50.4 million) .
Loan to HKMH
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 that
CASIL had been granted in the past against FMHL. Considering the heightened
emphasis on divestment, the Investment Manager has proposed a revised
valuation approach for the asset in 2022. This approach seeks to reflect the
potential "recovery value" in the near term. According to the loan agreement,
the original repayment date was set for ten years after the contract was
signed in 2019. Therefore, seeking short-term investment recovery can indeed
be quite challenging due to the extended timeline specified in the agreement.
To be conservative, the Company has decided to apply a 100% provision against
this receivable in 2022. As of 31 December 2022, the carrying value of the
Receivable was US$0.0 million (2021: US$3.7 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 2022. FLM has faced significant
challenges due to the impact of COVID-19, which greatly affected its business
development and revenue. Additionally, factors such as the restructuring of
its equity structure have further contributed to the current lack of prospects
for near-term recovery in the case of FLM.
In order to be prudent, the Company decided to apply a 100% provision against
this investment in 2021. And the Company wrote off its credit income in 2022.
As of 31 December 2022, the carrying value of the Convertible Bond was US$0.0
million (2021: US$0.0 million)
Infinity TNP
Tellus Niseko ceased operation in 2022 due to reduction in local tourists. The
local team has been closely monitoring the local condition and shall resume
business once tourism recovers.
Due to an ongoing dispute with ICG, a major shareholder of Infintiy TNP, ICG
has also breached a number of its undertakings and the Company is considering
legal action in order to exit / recover its investment in due course. As a
result of the uncertainty of this situation, the Company has taken a 100%
Provision against this investment.
As of 31 December 2022, the carrying value of this investment was US$0.0
million (2021: US$3.6 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 early 2022, we did not receive any response regarding the interest payment
due to us. The Company launched a lawsuit against ICG to recoup its investment
and the High Court of the Hong Kong Special Administrative Region ruled
completely in the Company's favour on a hearing dated the 25(th) of November
2022. As a result of this ruling, the Company is now pursuing various options
for recovering its investment including enforce against a personal guarantee
provided by the Principal of ICG.
The Company will provide further updates in a timely manner should there be
any material developments.
The claimed amount for compensation is around $8 million. In order to be
prudent, the Company decided to maintain the same US$ 1.4 million carrying
value, given the uncertainty over the outcome of the litigation.
Meize Energy Industries Holdings Limited ("Meize")
Swift Wealth Investments Limited, a 100% (2021: 100%) owned subsidiary of the
Company incorporated in the British Virgin Islands, holds a 7.08% 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 2022, the highlight is that since March, a new factory has been under
construction in Mori Kazak Autonomous County, Xinjiang Province. The plant
commenced operations in September 2022 as the main construction work had been
completed. The construction work is expected to be fully completed in August
2023.
In June 2022, JADE announced a partial divestment in Meize by divesting
112,500 shares of the Series B Preferred Equity for consideration of
US$1.million ("Transaction Price"). The number of shares sold in this partial
divestment represents 12.0% of JADE's holding in Meize.
Paid in three equal tranches, the Transaction Price was fully received by JADE
in August 2022.
Post this partial divestment, JADE holds approximately 7.08% interest in
Meize.
As of 31 December 2022, the Company's interest in Meize had a fair value of
US$8.8 million (2021: US$8.2 million) based on the Transaction Price.
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 2022, DocDoc successfully raised over USD 1 million through a convertible
bond offering. The funding was secured from one of our existing investors
based in Japan.
On the 13(th) of October 2022, DocDoc announced a collaboration with QBE
Singapore to launch Group Medical Prestige, a group health insurance product.
This product was offered in Singapore starting October 2022 and subsequently
other markets in Asia.
On the 8(th) of November 2022, DocDoc announced offering its health insurance
solutions to Aon's clients. Starting with Singapore in October 2022, these
solutions was offered to employers via insurers across multiple markets in
Asia.
As of 31 December 2022, the carrying value of the Convertible Bond was US$2.8
million (2021: US$2.6 million).
Project Nicklaus (Changtai Jinhongbang Real Estate Development Co. Ltd)
Lead Winner Limited ("LWL") is a 100% (2021: 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
On 13 July, a court session was held at the Xiamen Intermediate People's Court
regarding the litigation against Fuzhou R&F Properties. Subsequently, on 2
November 2022, the Court issued a ruling in favor of the Plaintiffs. Following
the ruling, Fuzhou R&F Properties filed an appeal to the Fujian Higher
People's Court on the 2 December 2022. In response, on 13 December 2022, CJRE
engaged solicitors to proceed with further legal processes related to the
litigation. Once this payment is received by CJRE, it is the Company's
expectation that the outstanding loan will be repaid in full.
As at 31 December 2022, the fair value of the loan was US$1.8 million (2021:
US$1.9 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 and Liveryman 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.
In May 2022 Stuart was honoured to be invested as a Knight of The Order of St.
George (KStG) at Rochester Cathedral. 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 Chair 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 Belt and Road and Greater Bay Area
Committee of the Hong Kong Trade Development Council. 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 and the Hong Kong Institute of Directors, 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, an International Affiliate of the Hong
Kong Institute of Certified Public Accountants, and a Distinguished Fellow of
the Hong Kong Innovative Technology Development Association.
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 26
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 2022.
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$52.9 million (2021: loss
US$38.4 million).
The loss reflects fair value decrease on assets in the portfolio of US$51.9
million (2021: decrease US$37million), net finance income of US$0.8 million
(2021: US$0.8 million) and total operating expenses of US$1.8 million (2021:
US$2.3 million). The fair value decrease on assets included in the period
includes income from investments of US$1.2 million (2021: US$1.2 million) and
a fair value adjustment upon valuation of portfolio assets at the period end
of US$53.1 million (2021: US$38.2 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 2022 stood at US$15.1
million (2021: US$68.0 million) equivalent to US$0.13 per share (2021:
US$0.58), 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 18 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 (resigned Mar 2023)
John Batchelor, Non-Executive Director, has resigned from the Board of Jade
Road Investments on 24 March 2023.
With the exception of the related party transactions stated in Note 16 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 2022 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
2022 2021
Direct Indirect Direct Indirect
Mr. John Croft 130,463 10,733 130,463 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
2022 2021
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 31 December 2022, the following persons
were 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 Limited 16,179,310 14.0%
Heirloom Group 10,068,676 8.7%
Harmony Capital Investors Limited 6,059,306 5.3%
Barry Lau 4,561,400 4%
The percentage of shares not in public hands (as defined in the AIM Rules for
Companies) is 79.9%.
On 20 February 2023, the company issued an additional 201,996,350 shares with
a gross placing proceeds of $1,750,000. This includes 20,046,667 shares issued
pursuant to the underwriting fee (net proceeds $1,566,573). The total number
of new ordinary shares issued to Heirloom Group is 179,770,672. Afterward, the
following persons were interested in 3% or more of the issued share capital of
the Company:
Shareholder Number of Percentage of
ordinary shares issued share capital
Heirloom Group 189,508,269 59.24%
- Heirloom SPV 2022 II 155,703,842 48.67%
- Ocorian Singapore Trust Company Pte Ltd as Trustee of Fidelis Fund 21,135,665 6.61%
- Heirloom Investment Management LLC 7,785,192 2.43%
- Heirloom Fixed Return Fund 4,883,570 1.53%
Elypsis Solutions Limited 55,225,127 17.26%
Infinity Capital Group Limited 16,179,310 5.06%
First Equity Limited 10,000,000 3.13%
Heirloom SPV 2022 II, Heirloom Investment Management LLC, Ocorian Singapore
Trust Company Pte Ltd as Trustee of Fidelis Fund and Heirloom Fixed Return
Fund are under one controlling group - Heirloom Group. The total
shareholdings of Heirloom Group are 59.24%.
FINANCIAL INSTRUMENTS
The Group's use of financial instruments is described in Note 9 and Note 14.
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 14 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 2022, 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 13 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 2022, the Group had Nil (2021: Nil) employees excluding
Directors.
CHARITABLE DONATIONS
The Group didn't make any charitable donations during the year (2021: Nil).
GOING CONCERN
Notwithstanding the operating loss of US$52.4Mn and operating cash outflows of
USD$1.5Mn for the year ended 31 December 2022 and net current liabilities of
$4.8Mn at year-end, the group has prepared the financial statements under the
going concern.
In considering the appropriateness of the going concern basis of preparation,
the Directors have reviewed the Group's cash 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 can
secure adequate resources to continue for the foreseeable future through
financing and realisation of carrying value of investments and loan
receivables to meet proposed investment requirements and working capital needs
as they fall due. Whilst management is confident that they can secure funding
based on the advance discussion with investors and buyers, there is no
certainty that such funding would be secured within the required timelines.
Accordingly, the financial statements have been prepared on a going concern
basis and do not include any adjustments that would result if the group was
unable to continue as a going concern.
The auditors refer to going concern by way of material uncertainty within
their audit report.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report and Financial
Statements in accordance with applicable laws and regulations.
Company Law requires the Directors to prepare financial statements for each
financial year. Under that law the Directors have prepared the Group financial
statements in conformity with EU-adopted International Financial Reporting
Standards. 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 the profit and loss of the Group for
that period.
In preparing the financial statements the Directors are required to:
• Select suitable accounting policies and then apply them
consistently.
• Make judgements and accounting estimates that are reasonable
and prudent;
• Ensure statements are in conformity with EU-adopted
International Financial Reporting Standards; and 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 and enable
them to ensure that the Group financial statements comply with EU-adopted
International Financial Reporting Standards. 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 Financial Statements are published on the Group's website
https://jaderoadinvestments.com (https://jaderoadinvestments.com) . The work
carried out by the Auditor does not involve consideration of the maintenance
and integrity of this website and accordingly, the Auditor accepts no
responsibility for any changes that have occurred to the financial statements
since they were initially presented on the website. Visitors to the website
need to be aware that legislation in the United Kingdom covering the
preparation and dissemination of the financial statements may differ from
legislation in their jurisdiction.
AUDITOR INFORMATION
The Directors who held office at the date of approval of the Directors' Report
confirm that, so far as they are each aware, there is no relevant audit
information of which the Group's Auditor is unaware; and each Director has
taken all the steps that he ought to have taken as a director to make himself
aware of any relevant audit information and to establish that the Group's
Auditor is aware of that information.
On behalf of the Board
John Croft
26 May 2023
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, and Stuart Crocker.
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.
Currently, we have received offers from two potential buyers for our quarry.
We are actively seeking buyers for the other assets.
The Board, in collaboration with the Investment Manager, maintains a vigilant
watch over the current investment climate and macro-economic conditions
worldwide.
These factors have the potential to impact and, at times, pose challenges to
the Company's strategic execution. This includes considerations of regulatory
and governmental policy changes that may arise, requiring the Company to adapt
and navigate accordingly.
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 three 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 were all appointed to the Board in 2017 or
later. These four individuals serve as Non-Executive Directors and are
regarded as independent members. However, it is important to note that as of
March 2023, Mr. John Batchelor has departed from the Board.
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 to the Members of Jade Road Investments Limited
Opinion
We have audited the financial statements of Jade Road Investments Limited (the
'group') for the year ended 31 December 2022 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 financial statements:
• give a true and fair view of the state of the group's affairs
as at 31 December 2022 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.
Material uncertainty related to going concern
We draw attention to note 2(c) in the financial statements, which indicates
that the group is reliant on securing further financing and realisation of
carrying value of investments and loan receivables to meet proposed investment
requirements and working capital needs as they fall due. Whilst management is
confident that they can secure funding based on the advance discussion with
investors and buyers, there is no guarantee that such funding would be secured
within the required timelines. As stated in Note 2(c), these events or
conditions, indicate that a material uncertainty exists that may cast
significant doubt on the group's ability to continue as a going concern. Our
opinion is not modified in respect of this matter.
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:
• consideration of the group's objectives, policies and processes
in managing its working capital as well as exposure to financial, credit and
liquidity risks;
• discussing with management regarding the future plans and
availability of funding;
• reviewing the cash flow forecasts for the ensuing twelve months
from the date of approval of these financial statements and assessment
thereof;
• obtaining corroborative supporting for the key assumptions and
estimates used in the cashflow forecast;
• challenging the reasonableness of the key assumptions included
in the cashflow forecast; and
• reviewing the adequacy and completeness of disclosures in the
financial statements.
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
For the purposes of determining whether the financial statements are free from
material misstatement, we define materiality as a magnitude of misstatement,
including omission, that makes it probable that the economic decisions of a
reasonably knowledgeable person, relying on the financial statements, would be
changed or influenced.
We have also considered those misstatements including omissions that would be
material by nature and would impact the economic decisions of a reasonably
knowledgeable person based our understanding of the business, industry and
complexity involved.
We also determine a level of performance materiality which we use to assess
the extent of testing needed to reduce to an appropriately low level the
probability that the aggregate of uncorrected and undetected misstatements
exceeds materiality for the financial statements as a whole.
We apply the concept of materiality both in planning and performing our audit,
and in evaluating the effect of misstatements. Materiality is used to
determine the financial statements areas that are included within the scope of
our audit and the extent of sample sizes during the audit. No significant
changes have come to light during the audit which required a revision to our
materiality for the financial statements as a whole.
Group materiality for the financial statements as a whole was US$422,000
(2021: US$1,108,000) This was calculated based on 1.5% of gross assets (2021:
1.5% of gross assets) based on the draft financial statements at planning. The
benchmark used is the one which we determined, in our professional judgment,
to be the principal benchmark within the financial statements relevant to
shareholders in assessing financial performance of the group as the principal
activity is that of an investment company and that current and potential
investors will be most interested in the valuation of the investments.
Performance materiality was US$253,200 (2021: US$664,800) being 60% of
headline materiality.
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 respect of
the key accounting estimates;
• significant transactions during the year;
• the stability in key management personnel; and
• the level of misstatements identified in prior periods.
The materiality and performance materiality thresholds for the significant
components of the group were calculated considering the same factors as for
group materiality.
We agreed to report to audit committee all corrected and uncorrected
misstatements we identified through our audit with a value in excess of
US$21,100 (2021: US$55,400). We also agreed to report any other audit
misstatements below that threshold that we believe warranted reporting on
qualitative grounds.
Due to audit adjustments, the materiality benchmark has reduced significantly.
As all the audit adjustments and significant transactions have been tested,
the risk of material misstatement based on the planning materiality has not
increased. We therefore believe that the materiality determined at the
planning stage is still applicable as the audit evidence we have obtained
through audit procedures is sufficient and appropriate to provide a basis for
our opinion.
Our approach to the audit
Our audit was risk based and was designed to focus our efforts on the areas at
greatest risk of material misstatement, together with areas subject to
significant management judgement.
The group includes the listed parent company, Jade Road Investments Limited
('Jade BVI'), and its subsidiary, Jade Road Investments (HK) Limited ('Jade
HK').
The scope of our audit was based on the significance of component operations
and materiality. Each component was assessed as to whether they were
significant or not to the group by either their size or risk. The parent
company was identified as a significant component due to their size and
identified risks.
Due to Jade BVI being a significant component of the group, we performed a
full scope audit. The work on this significant component of the group has been
performed by us as group auditor. Jade HK is a non-significant component of
the group and group auditor has performed analytical review over the financial
information.
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, considering the structure of the
group.
We considered those areas which were deemed to involve significant judgement
by the directors, such as the key audit matters relating to the valuation of
unquoted financial assets and other receivables. Other judgemental areas were
the consideration of future events that are inherently uncertain impacting
going concern. We also addressed the risk of management override of 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 both Hong Kong and the United
Kingdom and our audit was performed by our team in London with regular contact
maintained with the group throughout.
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. In addition to the matter
described in the Material uncertainty related to going concern section, we
have determined the matters described below to be the key audit matters to be
communicated in our report.
We have determined the matters described below to be the key audit matters to
be communicated in our report.
Key Audit Matter How our scope addressed this matter
Valuation of unquoted financial assets and other receivables (Refer Note 2(g),
2(n), 9, 10 and 14)
The financial statements include investments in unquoted financial assets at Our work in this area included:
fair value through profit and loss of US$18.2Mn. All these investments are
measured at fair value based on Level 3 (unobservable) inputs. · Obtaining an understanding of the valuation process followed by
management;
· Involving our internal valuation expert to benchmark and challenge
The financial statements include other receivables at fair value through key assumptions in management's valuation models used to determine fair value
profit and loss of US$1.8 million. All these receivables are tested for and/or recoverable amount, including discount rates used;
impairment in line with IFRS 9- Financial Instruments.
· Involving our internal valuation expert to consider the
appropriateness of the valuation methodologies applied and management's
evaluation of the sensitivity of valuations to changes in assumptions and
Consequently, the valuation of unquoted financial assets and other receivables inputs;
requires the exercise of considerable judgement which increases the risk that
valuation and presentation may be misstated due to management override. · Reviewing the latest available assessments of the recoverability of
loans and other receivables prepared by the investment manager and assessing
against the requirements under IFRS 9; and
Furthermore, the Investments Manager, which is responsible for advising on the · Reviewing the classification, disclosure of valuations and inputs
valuation, is remunerated by reference to a percentage of the value of within the financial statements and ensuring that it was appropriate and in
investments and is entitled to receive a performance incentive fee if certain compliance with IFRS 7 and IFRS 13
performance criteria are met. These remuneration arrangements increase the
risk of bias in the calculations. The unquoted investments include an investment in Future Metal Holdings
Limited (FMHL) which in turn holds an investment in a mining company in China
amounting to US$ 5.3Mn at the year end. The group intend to exit the
investment and is under advance discussions with the potential buyer.
This risk is considered to be key audit matter due to complexity around
valuation, risk of management override and fraud. We draw attention to the fact that the mining licence held by mining company
expired in March 2023 and the local management have filed for renewal of the
mining licence which is yet to be granted. The good standing of this licence
is critical for subsequent value extraction. If future renewal applications
were to be unsuccessful and proposed sale does not materialise, this may
result in an impairment of the carrying value of the investment.
We further draw attention to the fact that the mining company needs deployment
of resources for working capital, development of infrastructure and comply
with local laws. The mining company is dependent on FMHL for future funding
and FMHL in turn is reliant on the group. Considering the current financial
position of the group, the group may not be able to meet the funding
requirements. in the ensuing 12 months which may increase the requirement for
an impairment of this investment.
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, except to the extent otherwise explicitly stated in
our report, 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 during 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 statement of directors' responsibilities, 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 cumulative 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;
General Data Protection Regulations; 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: enquiries of
management; obtaining confirmation from third parties on compliance with laws
and regulations; reviewing of board minutes and RNS announcements; and
reviewing the nature of legal and professional fees incurred in the year.
We also identified the risks of material misstatement of the financial
statements due to fraud. We considered, in addition to the non-rebuttable
presumption of a risk of fraud arising from management override of controls
and revenue recognition, inappropriate application of the going concern
assessment in the financial statements and management bias in determining key
accounting estimates and judgements used in relation to valuation of unquoted
financial assets and other receivables. We addressed this by challenging the
estimates/judgements made by management when auditing these significant
accounting estimates/judgements (refer to the key audit matter and going
concern section).
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 testing of journals, reviewing key
accounting judgement used in valuation of unquoted financial assets and other
receivables for evidence of bias (refer to the key audit matter section) 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 engagement letter 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
26 May 2023
15 Westferry Circus
Canary Wharf
London E14 4HD
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2022
2022 2021
Notes US$'000 US$'000
Income from unquoted financial assets 1,174 1,162
Finance income from loans 1,359 1,347
Realised gains 300 -
Gross portfolio income 3 2,833 2,509
Fair value changes on financial assets at fair value through profit or loss 4 (47,409) (38,893)
Investment provisions (6,003) 731
Net portfolio loss 3 (50,579) (35,653)
Management fees (1,200) (1,861)
Incentive fees 16 158 424
Administrative expenses (763) (812)
Operating loss 5 (52,384) (37,902)
Finance expense 6 (520) (522)
Loss before taxation (52,904) (38,424)
Taxation 8 - -
Total comprehensive loss for the year (52,904) (38,424)
Loss per share
Basic loss per share 17 (45.89) cents (33.33) cents
Diluted loss per share 17 (45.89) cents (33.33) cents
The results reflected above relate to continuing operations.
The accompanying notes on pages 47 to 72 are an integral part of these
financial statements.
Consolidated Statement of Changes in Equity
For the year ended 31 December 2022
Share capital Treasury share reserve Share based payment reserve Accumulated Total
losses
US$'000 US$'000 US$'000 US$'000 US$'000
Group balance at 1 January 2021 148,903 (615) 2,936 (44,772) 106,452
- - - (38,424) (38,424)
Loss for the year
Other comprehensive income - - - - -
Total comprehensive loss for the year - - - (38,424) (38,424)
Group balance at 31 December 2021 and 1 January 2022 148,903 (615) 2,936 (83,196) 68,028
- - - (52,904) (52,904)
Loss for the year
Other comprehensive income - - - - -
Total comprehensive loss for the year - - - (52,904) (52,904)
Group balance at 31 December 2022 148,903 (615) 2,936 (136,100) 15,124
The following describes the nature and purpose of each reserve within owners'
equity.
Share capital Amount subscribed for share capital at no par value
Treasury share reserve Cost of the Company's shares re-purchased and held by the Group
Share based payment reserve The share-based payment reserve represents amounts in previous and the current
periods, relating to share-based payment transactions granted as
options/warrants and under the Group's share option scheme (Note 15)
Accumulated losses Represents the cumulative net gains and losses recognised in the statement of
comprehensive income
The accompanying notes on pages 47 to 72 are an integral part of these
financial statements.
Consolidated Statement of Financial Position
As at 31 December 2022
2022 2021
Notes US$'000 US$'000
Assets
Unquoted financial assets at fair value through profit or loss 9 18,227 66,202
Other receivables at fair value through profit or loss 1,769 5,556
10
Cash and cash equivalents 321 848
Total assets 20,317 72,606
Current Liabilities
Other payables and accruals 11 1,334 1,010
Loans & borrowings 12 3,859 3,568
Total liabilities 5,193 4,578
Net assets 15,124 68,028
Equity and reserves
Share capital 13 148,903 148,903
Treasury share reserve 13 (615) (615)
Share based payment reserve 2,936 2,936
Accumulated losses (136,100) (83,196)
Total equity and reserves attributable to owners of the parent 15,124 68,028
The financial statements were approved by the Board of Directors and
authorised for issue on
26th May 2023 and signed on its behalf by:
John Croft
Executive Chairman
The accompanying notes on pages 47 to 72 are an integral part of these
financial statements.
Consolidated Cash Flow Statement
For the year ended 31 December 2022
2022 2021
US$'000 US$'000
Cash flows from operating activities
Loss before taxation (52,904) (38,424)
Adjustments for:
Finance income (1,359) (1,347)
Finance expense 520 522
Foreign exchange 83 23
Fair value changes on unquoted financial assets at fair value through profit 47,071 7,222
or loss
Fair value changes on loans and receivables at fair value through profit or 5,059 30,459
loss
Realised gain on investments (300) -
Decrease/(increase) in other receivables 28 (295)
Increase/(decrease) in other payables and accruals 325 (520)
Net cash used in operating activities (1,477) (2,360)
Cash flows from investing activities
Sale proceeds of unquoted financial assets at fair value through 1,200 -
profit or loss
Net cash used in investing activities 1,200 -
Cash flows from financing activities
Payment of interest (228) (459)
Net cash used in financing activities (228) (459)
Net decrease in cash and cash equivalents (505) (2,819)
Cash and cash equivalents and net debt at the beginning of the year 848 3,673
Foreign exchange on cash balances (22) (6)
Cash and cash equivalents and net debt at the end of the 321 848
year
The accompanying notes on pages 47 to 72 are an integral part of these
financial statement
JADE ROAD INVESTMENTS LTD
Notes to the Financial Statements
For the year ended 31 December 2022
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, 35/F, Level 35, 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. The address of the registered
office and its principal place of business is c/o Harmony Capital, 35/F, Level
35, Infinitus Plaza, 199 Des Voeux Road Central, Hong Kong 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 IFRS 9, 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
Notwithstanding the operating loss of US$52.4Mn and operating cash outflows of
USD$1.5Mn for the year ended 31 December 2022 and net current liabilities of
$4.8Mn at year-end, the group has prepared the financial statements under the
going concern.
In considering the appropriateness of the going concern basis of preparation,
the Directors have reviewed the Group's cash 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 can
secure adequate resources to continue for the foreseeable future through
financing and realisation of carrying value of investments and loan
receivables to meet proposed investment requirements and working capital needs
as they fall due. Whilst management is confident that they can secure funding
based on the advance discussion with investors and buyers, there is no
certainty that such funding would be secured within the required timelines.
Accordingly, the financial statements have been prepared on a going concern
basis and do not include any adjustments that would result if the group was
unable to continue as a going concern.
The auditors refer to going concern by way of material uncertainty within
their audit report.
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) Dividends
Dividends payable are recorded in the financial statements in the period in
which they meet the IAS 32 definition of having been declared.
k) 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.
l) 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.
m) Share Issue Expenses
Share issue expenses are written off against the share capital account arising
on the issue of share capital.
n) 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 statement of comprehensive income.
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 Group utilizes various valuation methods to assess the value of its
assets. For example, in the case of the Quarry valuation this year, the Group
takes into account the estimated realizable value of the asset. This estimated
value serves as an important factor in evaluating the potential returns and
feasibility of the divestment.
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, the Group may utilize a Market Approach. In
valuing credit-focused investments, the Group exercises prudent judgment and
selects the appropriate valuation technique(s) most appropriate for such
investments.
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. Based on the Company's
decision to seek an accelerated realisation of its legacy investments, the
primary methodology utilised for instruments in this asset class is to
estimate the realisable value of a particular investment. This process
applies a significant amount of judgement while considering prevailing market
conditions, any potential or actual legal action being taken by the Company to
seek recovery of an investment and/or bids from 3rd parties even on an
indicative basis.
Private Equity Investments
The Fair Value of equity investments are determined by reference to 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.
Based on the Company's decision to seek an accelerated realisation of its
legacy investments, the primary methodology utilised for instruments in this
asset class is to estimate the realisable value of a particular investment.
This process applies a significant amount of judgement while considering
prevailing market conditions, any potential or actual legal action being taken
by the Company to seek recovery of an investment and/or bids from 3rd parties
even on an indicative basis.
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
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 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.
Based on the Company's decision to seek an accelerated realisation of its
legacy investments, the primary methodology utilised for instruments in this
asset class is to estimate the realisable value of a particular investment.
This process applies a significant amount of judgement while considering
prevailing market conditions, any potential or actual legal action being taken
by the Company to seek recovery of an investment and/or bids from 3rd parties
even on an indicative basis.
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.
o) Foreign currency translation
- Functional and Presentation Currency
Both the functional and presentational 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.
New Standards, Amendments to Standards or Interpretations adopted in these
financial statements:
No standards, amendments or interpretations which became effective from 1
January 2022 had an impact on the Group Financial Statements.
New and amended standards effective from 1 January 2022 and adopted by the
Group
The Group has applied the following standards and amendments for the first
time for its annual reporting period commencing 1 January 2022:
● Onerous Contracts - Cost of Fulfilling a Contract (Amendments to
IAS 37);
● Property, Plant and Equipment: Proceeds before Intended Use
(Amendments to IAS 16);
● Annual Improvements to IFRS Standards 2018-2020 (Amendments to
IFRS 1, IFRS 9, IFRS 16 and IAS 41); and
● References to Conceptual Framework (Amendments to IFRS 3).
The amendments listed above did not have any impact on the amounts recognised
in prior periods and do not significantly affect the current or future
periods.
New and amended standards not yet effective and not adopted by the Group
Certain new accounting standards and interpretations have been published that
are not mandatory for 31 December 2022 reporting periods and have not been
early adopted by the Group.
Effective from 1 January 2023:
● Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS
Practice Statement 2);
● Definition of Accounting Estimates (Amendments to IAS 8); and
● Deferred Tax Related to Assets and Liabilities arising from a
Single Transaction (Amendments to IAS 12).
● IAS 1 Presentation of Financial Statements (Amendment -
Classification of Liabilities as Current or Non-current)
Effective from 1 January 2024:
● IFRS 16 Leases (Amendment - Liability in a Sale and Leaseback)
● IAS 1 Presentation of Financial Statements (Amendment -
Non-current Liabilities with Covenants)
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: 2022 2021
Note US$'000 US$'000
Realised gain on disposal 300 -
Income on unquoted financial assets 4 1,174 1,162
Financial income on loans & receivables 6 1,359 1,347
Gross portfolio income 2,833 2,509
Expected credit loss provision 4,5 (6,003) 731
Foreign exchange 4 (113) (53)
Fair value adjustments 4 (47,296) (38,840)
Portfolio loss through profit or loss (50,579) (35,653)
Net assets:
FMHL 5,270 50,400
Meize 8,801 8,200
GCCF - -
DocDoc 2,806 2,592
ICG 1,335 1,343
Infinity TNP - 3,650
Other 15 17
Unquoted assets at fair value through the profit or loss 18,227 66,202
Loans and other receivables at fair value through the profit or loss (third 1,769 5,556
party)
Cash 321 848
Liabilities (5,193) (4,578)
Net assets 15,124 68,028
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
2022 2021
Unquoted Financial Assets US$'000 US$'000
Income through profit or loss 1,174 1,162
Equity fair value adjustments:
- Meize/ Swift Wealth 1,500 -
- FMHL (45,146) (583)
- GCCF - (2,745)
- ICG - (1,384)
- Infinity TNP (3,650) (3,670)
(47,296) (8,382)
Realised Gain 300 -
Expected credit loss provision:
- ICG (363) 27
- FMHL (581)
Foreign exchange on unquoted financial assets at fair value through profit or
loss
(8) (29)
Total fair value changes on unquoted financial assets at fair value through (46,774) (7,222)
profit or loss
2022 2021
Loans & Receivables financial assets US$'000 US$'000
Income through profit or loss 1,359 1,347
Fair value adjustments:
- FMHL (loan principal) - (26,500)
- FMHL (Accrued interest) - (3,959)
- CJRE (Project Nichlaus) (83) -
Expected credit loss provision:
- FLMHL - 704
- FLMHL (Accrued interest) (1,359)
- HKMH (Loan principal) (3,700) -
Other movements - 118
Foreign exchange on Loans & Receivables at fair value through profit or
loss
(22) (21)
Total fair value changes on Loans & Receivables at fair value through (3,805) (28,311)
profit or loss
Expected Credit Loss Provision
Balance at 1 January 35 766
ECL charged (released) to profit or loss 6,003 (731)
Balance at 31 December 6,038 35
The impact of foreign exchange on the investments in the portfolio is as
follows:
2022 2021
US$'000 US$'000
FMHL (8) (29)
Meize - -
GCCF - -
DocDoc - -
Foreign exchange on unquoted financial assets at fair value through profit or (8) (29)
loss
CJRE (83) (16)
FLMH - -
Other receivables - (2)
Foreign exchange on loans and receivables (83) (18)
Cash (22) (6)
Foreign exchange on portfolio (113) (53)
5. OPERATING LOSS
Operating loss is stated after charging expenses:
2022 2021
US$'000 US$'000
Investment Manager fee 1,200 1,861
Investment Manager incentive fee (158) (424)
Fees to the Group's auditor for audit of the 53 55
Company and its subsidiaries
Directors' remuneration 260 309
Professional fees 414 366
Promotion and marketing - 16
Business travel expenses 4 11
Bank charges 9 13
Foreign exchange 1 (1)
Other expenses 22 43
Total expenses 1,805 2,249
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 2022. (also see Note 16).
6. NET FINANCE INCOME
2022 2021
US$'000 US$'000
Interest from financial assets measured at fair value through profit and loss 1,359 1,347
Finance income 1,359 1,347
Interest payable on debt (520) (522)
Finance cost (520) (522)
Net finance income 839 825
Finance income in the year is from the Convertible Bond issued by FLMH.
7. DIRECTORS' REMUNERATION
Short term employment benefits 2022 2021
US$ US$
John Croft 120,755 156,137
Hugh Trenchard 44,223 49,572
Lee George Lam 45,971 46,305
Stuart Crocker 49,112 56,567
260,061 308,581
Directors' remuneration includes all applicable social security payments.
There was no pension cost incurred during 2022 (2021:US$ Nil).
There are no employees within the group other than the Directors (2021: Nil)
8. TAXATION
The Company is incorporated in the BVI and Hong Kong. Not subject to any
income tax in the BVI. The company does not engage in any business activities
or generate income in Hong Kong; therefore it is not subject to taxation in
Hong Kong.
9. UNQUOTED FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
2022 2022 2021 2021
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 66,202 5,556 73,423 34,390
Additions - - - -
Cash receipts - - - (417)
Reclassification - - - -
Fair value changes through profit or loss (46,131) (87) (7,248) (30,468)
Disposal (1,200) - - -
Realised gain 300 - - -
ECL (944) (5,059) 27 704
Finance income on loans - 1,359 - 1,347
Balance as at 31 December 18,227 1,769 66,202 5,556
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. Over the course of 2022, the Quarry carried out production
activities for less than 4 months, due to the severe Covid-19 situation and
restrictions that were imposed by local authorities.
Currently, the Quarry is in the process of renewing its mining rights. This is
a process that was undertaken 3 years ago with a successful renewal of the
required licence. Due to the issues faced in China, the Company has
accelerated its divestment efforts and has thus far secured indicative
interest from local buyers at a material discount to the carrying value of the
investment.
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$5.3 million as of 31 December 2022 (2021: US$50.4
million).
Loan to HKMH
The Group provided in full against a loan balance receivable from Hong Kong
Mining Holdings Limited in 2022. As of 31 December 2022, the carrying value of
the loan was US$0.0 million (2021: US$3.7 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).
The Company had written down this investment in 2021.
As of 31 December 2022, the carrying value of the Convertible Bond was US$0.0
million (2021: US$0.0 million).
Meize Energy Industries Holdings Limited
Swift Wealth Investments Limited, a 100% (2021: 100%) owned subsidiary of the
Company incorporated in the British Virgin Islands, holds a 7.08% stake in
Meize through a redeemable preference share
structure.
The Company has three production facilities, which are located in Inner
Mongolia, Jiangsu Province, and Xinjiang Province.
The newly established Xinjiang plant commenced operations in September 2022 as
the main construction work had been completed. The construction work is
expected to be fully completed in August 2023.
Product-wise, 9 different models were under production and the designed life
span of each model is around 20 to 25 years.
· Inner Mongolia: In 2022, the Inner Mongolia plant maintained a
full order book, a total of 530 blades were produced with 455 blades being
Model B765 and 75 blades being Model B900B. These blades were fully sold and
related trade receivables were received except for some Quality Deposits.
· Xinjiang: Since the 16(th) of September 2022, the production
activities have been ongoing and a total of 81 blades of Model 186 were
produced.
During the year, the Company entered into a share purchase agreement for
112,500 shares of the series B Preferred Equity in Meize for the consideration
of US$1.2 million. The Transaction Price implied a valuation of US$10.0
million, a 22% premium to the carrying value as at the 31(st) December 2021.
As of 31 December 2022, the Company's interest in Meize had a fair value of
US$8.8 million (2021: US$8.2 million).
DocDoc Pte Ltd
Eastern Champion Limited, a 100% (2021: 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. 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.
In 2022, DocDoc successfully raised over US$1.0MM in the form of a convertible
bond from one of its existing investors in Japan and announced collaborations
with QBE Singapore and Aon.
As of 31 December 2022, the carrying value of the Convertible Bond was US$2.8
million including accrued interest (2021: US$2.6 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.
In 2022, due to ongoing disputes over the payment of interest and other
matters, and in light of the personal guarantee provided by ICG, the Company
launched a lawsuit against ICG to recoup its investments.
The Hong Kong courts have ruled in the Company's favour in a hearing scheduled
at the High Court of the Hong Kong Special Administrative Region. The Company
will seek to enforce and recover amounts owing as a result of this outcome.
As of 31 December 2022, the carrying value of the Secured Loan was US$1.4
million including accrued unpaid interest (2021: US$1.4 million).
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.
Due to the dispute with ICG, Infintiy TNP has also breached a number of its
undertakings and the Company is considering legal action in order to exit /
recover its investment in due course.
As of 31 December 2022, a 100% provision was applied to the investment (2021:
US$3.6 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 decided to apply a 100% provision against
this investment in 2021.
As of 31 December 2022, the Company's interest in GCCF has an allocated fair
value of US$0.0 million (2021: US$0.0 million).
Changtai Jinhongbang Real Estate Development Co. Ltd ("CJRE")
Lead Winner Limited ("LWL") is a 100% (2021: 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.
As at 31 December 2022, the fair value of the loan was US$1.7 million (2021:
US$1.8 million).
SPVs
The unlisted open-ended investments below are defined as SPVs and are reported
at the fair value of their underlying investments described above at 31
December 2022.
Name of SPV Country of Percentage owned Principal activities
Incorporation
2022 2021
Lead Winner Limited BVI 100% 100% Investment Holdings
Dynamite Win Limited BVI 100% 100% Investment Holdings
Future Metal Holdings Limited BVI 100% 100% Investment Holdings
Swift Wealth Investments Limited BVI 100% 100% Investment Holdings
Ultimate Prosperity Limited BVI 100% 100% Investment Holdings
TNP Asia Limited BVI 100% 100% Investment Holdings
Further details of financial assets are set out in Note 14, and investment
valuation methodologies are set out in Note 2(o) Critical accounting estimates
and judgements.
10. LOANS AND OTHER RECEIVABLES AT FAIR VALUE THROUGH PROFIT OR LOSS
2022 2021
US$'000 US$'000
Other receivables 1,769 5,556
1,769 5,556
As at 31 December 2022, Loans represent the Convertible Bond issued by Fook
Lam Moon Holdings plus accrued Paid-in-Kind ("PIK") and cash interest. In 2021
the Group 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 was recognised as a fair value adjustment through
profit or loss and the associated ECL allowance associated with the cash
interest payable was also released in the statement of comprehensive income.
The recoverability assessment remains the same in 2022 and therefore the
accrued Paid-in-kind (PIK) and cash interest has been fully provided against.
The Group also re-assessed the recoverability of a loan to Hong Kong Mining
Holdings Limited and provided against the full loan balance of US$3.7m at the
year-end date.
The remaining balance above as at 31 December 2022 includes an amount
receivable from CJRE as explained in note 9.
2022 2021
US$'000 US$'000
FLMHL
Loan principal 26,500 26,500
Accrued PIK interest 2,248 1,685
Accrued interest payable in cash 3,070 2,274
Fair Value Adjustments - Principal (26,500) (26,500)
Fair Value Adjustments - Accrued Interest (5,318) (3,959)
Gross loans receivable - -
HKMH
Loan principal 3,700 3,700
Fair Value Adjustments - Principal (3,700) -
Gross loans receivable - 3,700
11. OTHER PAYABLES AND ACCRUALS
2022 2021
US$'000 US$'000
Accounts payable 1,254 870
Accruals 80 140
Other payables and accruals 1,334 1,010
12. LOANS AND BORROWINGS
2022 2021
US$'000 US$'000
Corporate debt 3,859 3,568
Loans and borrowings 3,859 3,568
The movement in loans and borrowings is as follows
2022 2021
US$'000 US$'000
Opening balance 3,568 3,504
Borrowing costs amortised 52 64
Interest expense accrued 467 459
Payment of interest liability (228) (459)
Closing balance 3,859 3,568
i. Terms and conditions of the outstanding debt is as follows:
Currency Interest rate Year of maturity
Secured loan notes US$ 15% 2023
The corporate debt US$3.9 million are proceeds from loan notes issued to a
family office investor, with a related debenture which constitutes a fixed
over the assets and undertakings of the Company. Capitalised debt issue costs
have been fully amortised.
The loan notes reached maturity in October 2022. The Company has not yet
realised sufficient funds from its current program of legacy asset disposals
to redeem these bonds. In December 2022 the Company agreed an extended
maturity of the loan notes issued to 31 December 2023 and an increased
interest rate of 15% from December 2022. The interest rate payable on the
principal amount of the loan notes will increase to 16% per annum where
US$1.8m or more of the principal amount remains outstanding by 30 June 2023.
ii. Reconciliation of movements of liabilities & equity to cashflows
arising from financing activities
Loans & borrowings Share capital/ premium Treasury reserve
US$'000 US$'000 US$'000
Opening balance at 1 January 2022 3,568 148,903 (615)
Changes from cashflows
Payment of interest (228) - -
Total changes from financing cashflows (228) - -
Other changes:
Interest expense 519 - -
Total other changes to liabilities 519 - -
Closing balance at 31 December 2022 3,859 148,903 (615)
For non-cash movement on account of investing activities refer note 4.
13. SHARE CAPITAL AND TREASURY SHARE RESERVE
Share capital
Number of shares amount
US$'000
Issued share capital excluding treasury shares at 31 December 2021 115,277,869 148,288
Issued share capital excluding treasury shares at 31 December 2022 115,277,869 148,288
Consisting of:
Authorised, called-up and fully paid ordinary shares of no par value each at 117,925,673
31 December 2022
Authorised, called-up and fully paid ordinary shares of no par value held as (2,647,804)
treasury shares by the Company at 31 December 2022
14. FINANCIAL INSTRUMENTS
Financial Risk Management Objectives and Policies
Management has adopted certain policies on financial risk management with the
objective of ensuring that:
(i) appropriate funding strategies are adopted to meet the
Company's and Group's short-term and long-term funding requirements taking
into consideration the cost of funding, gearing levels, and cash flow
projections;
(ii) appropriate strategies are also adopted to manage related
interest and currency risk funding; and
(iii) credit risks on receivables are properly managed.
Financial instruments by category
The accounting policies for financial instruments have been applied to the
line items below:
Financial assets
2022 2021
US$'000 US$'000
Unquoted financial assets at fair value 18,227 66,202
Other receivables at fair value 1,738 5,521
Cash and cash equivalents 321 848
Financial assets 20,286 72,571
Financial liabilities
2022 2021
US$'000 US$'000
Other payables and accruals at amortised cost 1,334 1,010
Corporate debt at amortised cost 3,859 3,568
Financial liabilities 5,193 4,578
The Company has agreed an extended maturity of the loan notes issued to 31
December 2023. Capitalised debt issue costs have been fully amortised. All
other financial liabilities are due within 12 months.
Financial assets at fair value through profit or loss
The following table provides an analysis of financial instruments that are
measured subsequent to initial recognition at fair value, grouped into Levels
1, 2, or 3 based on the degree to which the fair value is observable as
described in Note 2(a) Basis of preparation:
2022 2021
US$'000 US$'000
Level 3
Unquoted financial assets at fair value through profit or loss (Note 9) 18,227 66,202
Other receivables at fair value through the profit or loss (Note 9) 1,769 5,556
19,996 71,758
There were no transfers between levels in the current period. Carrying values
of all financial assets and liabilities (not measured at fair value through
profit or loss) are approximate to their fair values.
Significant unobservable inputs used in measuring fair value - Level 3
Description Fair value at 31 Dec 2022 US$'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 Market Approach Not applicable Not applicable
project - US$5.3m;
- in this approach, the value of an asset is determined by comparing it to
similar assets in the marketplace based on recent transaction prices and
(2021: US$50.4m) terms. for FMHL, the net realizable value is calculated based on the bid
received from potential buyers.
Private equity investments
7.2% preferred equity investment in Meize Energy Industries Holdings Limited
engaged in designing and manufacturing blades for wind turbines - US$8.8m;
(2021: US$8.2m)
15% equity investment in Changtai Jinhongbang Real Estate Development Co.
Limited engaged in a luxury resort and residential development project -
US$1.8m;
(2021: US$1.9m)
Level 3 Net Realisable Value Not applicable Not applicable
Private credit fund - Greater China Credit Fund LP US$0.0m; (2021: US$0.0m)
40% equity investment (with guaranteed income yield) in Infinity TNP, holding
units in luxury hotel condominium Tellus Niseko - $0m; (2021: US$3.6m)
Credit investments Level 3 Net Realisable Value Not applicable Not applicable
Convertible Bond - Fook Lam Moon
US$0.0m Net Realisable Value
(2021: US$0.0m)
Convertible Bond - DocDoc Pte Ltd US$2.8m
(2021: US$2.6m)
Secured Loan Notes - Infinity Capital Group US$1.4m (2021:US$1.4m)
The above table sets out information about significant unobservable inputs
used at 31 December 2022 in measuring material financial instruments
categorised as Level 3 in the fair value hierarchy.
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 Infinity Capital Group, 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 1% 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$3,000.
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 15.0% and a maturity date of 31 December
2023. There is an increase interest rate payable on the principal amount of
the outstanding loan notes of 16% per annum where US$1.8m or more of the
principal amount remains outstanding by 30 June 2023. 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 December
2023.
Market (Price and valuation) Risk
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$2m (2021: US$7.2m) 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.
15. SHARE BASED PAYMENTS
15.1 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 2022, there were 1,907,882 warrants outstanding, issued to the
Company's Directors in previous periods in respect of services provided to the
Group. 1,600,000 warrants have an exercise price of US$1.21 per share,
equivalent to £1.00 at 31 December 2022. The warrants will expire in 2027, 10
years after the date of grant. 307,882 warrants have an exercise price of
US$0.40 per share, equivalent to £0.33 at 31 December 2022. The warrants will
expire in 2023, 3 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.
15.2 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 the warrant is
exercised.
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$1.21 per share, equivalent to £0.89 at 31
December 2022. The warrants will expire 10 years after the date of grant. In
total the Investment Manager owns 8,000,000 warrants as at 31 December 2022
(2021: 8,000,000).
2022 2021
Number of options Number of warrants Weighted average exercise price US$ Number of options Number of warrants Weighted average exercise price US$
Balance at beginning of the financial year - 17,567,663 0.84 - 17,567,663 0.84
Issuance during the financial year
-Investment manager - - - - - -
-Directors - - - - - -
-Shareholders - - - - - -
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 2022 was 3 years and 3 months (2021: 4 years and 3 months). During
the year there has been a credit of $0.2m (2021: $0.4m) relating to
share-based compensation of the Investment Manager. This relates to the
revaluation of the shares yet to be issued to HCILin 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 2022.
15.3 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 2022 (2021: $0.0m).
16. RELATED PARTY TRANSACTIONS
During the year, the Company and the Group entered into the following
transactions with related parties and connected parties under existing
contracts:
2022 2021
Notes US$'000 US$'000
Remuneration payable to Directors (see Note 7) (i) 260 309
Harmony Capital Investors Limited (ii)
- Management fee 1,200 1,861
- Incentive fee (158) (424)
Amount due to Harmony Capital Investors Limited at 31 December 1,234 865
Note: Incentive Fee includes:
- A credit of $0.158m (2021 $0.424m) was recognized in respect of
Incentive Fee shares yet to be issued, revalued as at 31 December 2022.
(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. $18k of the total remuneration payable, due
from Jade Road Investments (HK) Limited, to John Croft, was still outstanding
at 31 December 2022. There are no other contracts of significance in which any
Director has or had during the year a material interest.
(ii) Harmony Capital Investors Limited is the Investment Manager of the
Group. The management fee, which was calculated and paid bi-annually in
advance calculated at a rate of 0.875% of the net asset value of the Group's
portfolio of assets as at 30 June and 31 December in each calendar year.
Harmony Capital Investors Limited is entitled to receive an
incentive fee from the Company in the event that the audited net asset value
for each year is (1) equal to or greater than the audited net asset value for
the last year in relation to which an incentive fee became payable ("High
Water Mark"); and (2) in excess of 105% of the audited net asset value as at
the last calendar year end ("the Hurdle"). Subject to the High Water Mark and
Hurdle being excessed in respect of any calendar year, the incentive fee will
be equal to 20% of the difference between the current year end NAV and the
previous year end NAV. 50% of incentive fee shall be paid in cash and the
remaining 50% of incentive fee shall be paid by ordinary shares.
17. LOSS PER SHARE
The calculation of the basic and diluted loss per share attributable to the
ordinary equity holders of the Company is based on the following:
2022 2021
US$'000 US$'000
Numerator
Basic/Diluted: Net loss (52,904) (38,424)
No. of shares No. of shares
'000 '000
Denominator
Basic/Diluted: Weighted average shares 115,278 115,278
Loss per share:
Basic/Diluted (45.89) cents (33.33) 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.
18. EVENTS AFTER THE REPORTING PERIOD
On 20 February 2023, the company issued an additional 201,996,350 shares with
a gross placing proceeds of $1,750,000. This includes 20,046,667 shares issued
pursuant to the underwriting fee (net proceeds $1,566,573). The company issued
amended and restated Memorandum and Articles of Association on 26(th) February
2023.
On 22 March 2023, the company issued 3-year warrants to the Loan Note holders.
The strike price for these warrants is set at a 50% premium to the price of
the respective share issuance.
On 24 March 2023, John Batchelor, Non-Executive Director, has resigned from
the Board of Jade Road Investments.
On 27 March 2023, the company released an RNS providing details of revision to
its investment management agreement with HCIL. Pursuant to an agreement
amending the Services Agreement to be entered into between the Company and
HCIL:
1. HCIL will, subject to the overall supervision and control of the
Board, advise the Board and the Company on the orderly disposal of those
assets and investments currently owned by it (the "Legacy Portfolio") and
advise on any proposed new investments to be made in accordance with the new
Investment Policy recently approved by shareholders. HCIL shall, subject to
the overall supervision and control of the Board, also undertake general
administrative, investor relations, marketing, portfolio management and risk
management functions for the Company.
2. In place of the original fee arrangements whereby HCIL received an
annual management fee of 1.75% of Net Asset Value and an annual incentive fee
of 20 % of any year on year increase in audited Net Asset Value subject to a
high water mark and performance hurdle it will now be paid a fixed fee of
US350,000 for its services in connection with the orderly disposal and
management of the Legacy Portfolio and supporting the Company in its
operations. This represents a substantial reduction in fees as compared to the
previous agreement. Additionally, upon the realisation of any assets comprised
in the Legacy Portfolio, HCIL will also be entitled to an incentive fee of 20%
calculated as a percentage of the net proceeds received by the Company
therefrom, such fee only being payable once aggregate net proceeds from all
such disposals exceed an agreed hurdle.
3. HCIL's appointment under these revised terms is for a fixed term of
one year, capable of extension by mutual agreement between HCIL and the
Company.
On the 5 April 2023 the company invested US$500,000 in Heirloom Investment
Fund SPC. The Fund's Portfolio represents a mix of geographically diverse
assets and ads diversification to Jade's portfolio.
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. END FR FLFELETIRFIVRecent news on Jade Road Investments
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