TIDMJADE
RNS Number : 7277Q
Jade Road Investments Limited
30 June 2022
30 June 2022
RNS
JADE ROAD INVESTMENTS LIMITED
("Jade Road" or the "Company")
Final Results
Jade Road Investments Limited, the London-quoted, pan-Asian
diversified investment vehicle focused on providing shareholders
with attractive uncorrelated, risk-adjusted long-term returns, is
pleased to announce the publication of its final results for the
year ended 31 December 2021.
Hard copies of the Annual Results are available upon request.
The Results are also available on Jade Road's website:
https://jaderoadinvestments.com/investors/financial-reports .
Financial Highlights
2021 2020 Change
Net Asset Value US$68.0m (GBP55.8m) US$106.4m(GBP78.0m) -36.1%
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Gross Portfolio US$2.5m (GBP2m) US$2.5m (GBP1.8m) -
Income
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Net Portfolio Income US$-35.6m (GBP-29.2m) US$6.7m (GBP4.9m) -623%
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Net Profit / Loss US$-38.4m (GBP-31.5m) US$1.6m (GBP1.2m) -2469%
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Year-end cash US$0.8m (GBP0.6m) US$3.7m (GBP2.7m) -78.4%
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Net Asset Value
per share US$0.58m (GBP0.5m) US$0.92m (GBP0.67m) -36.9%
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Operational Highlights
- Jade's largest legacy asset (85% effective holding) in China
is Future Metal Holdings Limited (FMHL), the largest magnesium
dolomite quarry in Shanxi Province. According to the Observatory of
Economic Complexity (MIT Media Lab) between December 2020 and
December 2021, China's dolomite exports increased by 135% or
US$3.86m to US$6.73m from US$2.87m. China also charges the highest
price for dolomite at around US$30 per tonne. In addition to
providing dolomite for aggregate, FMHL is poised to sell its higher
value products once local supply chains recover
- In June 2021, Meize's state-of-the-art Jiangsu offshore blade
plant completed an expansion and commenced operations to meet
rising demand and is operating at full capacity, producing
internationally certified blades for both onshore and offshore wind
turbines.
- In July 2021, the Company announced its expanded strategy to
invest in Asian High Growth Companies via equity in listed
companies and/or pre-IPO investments with a focus in Technology,
including Healthtech, Medtech and Fintech.
Post Period End Activity
- On the 22(nd) of June, Jade Road announced ( RNS Number:
7646P) it has successfully negotiated a partial divestment in Meize
Energy Industries Holdings Limited ("Meize"), currently the
third-largest holding in the Company's portfolio (7.7% of NAV as at
announcement). The company has entered into a share purchase
agreement ("SPA") for 112,500 shares of the Series B Preferred
Equity in Meize for consideration of USD1.2 million (the
"Transaction Price"). The Transaction Price implies a valuation of
USD10.0 million for the Company's investment in Meize, which
indicates a 22.0% premium to the carrying value as at the 30(th) of
June 2021 (USD8.2 million)
John Croft, Chairman of Jade Road Investments, commented:
'Unfortunately, the pandemic situation in China throughout 2021
worsened with major cities and provinces placed under lockdown
measures, including cross-province and cross-border travel bans, as
part of the government's zero-Covid strategy.
Meanwhile, in Hong Kong (HKSAR), many restaurants were forced to
close permanently in the face of multiple lockdowns. In Japan,
tourism ground to a complete halt.
In the face of these unprecedented headwinds, major impairments
across the asset portfolio have unfortunately become
unavoidable.
I am pleased to report that whilst talks remain protracted due
to China's zero-Covid stance, positive developments have been
achieved. On that note, I was delighted that we were recently (post
balance sheet) able to announce the partial disposal of our holding
in Meize Energy Industries (Meize). Our original investment
represented a 7.2% stake in Meize. Post this partial sale
generating US$ 1.2m in cash, Jade's residual holding will amount to
6.3% of the equity.
Jade Road is set to pivot away from China and focus on the
broader Asian SME subsector, which is showing greater resilience
than larger companies in terms of recovery.
In Southeast Asia, SMEs are expected to further embrace
sustainability, doubling down on digitalisation, accelerating
automation and scaling up, as they navigate a post-pandemic
recovery.
Therefore, Jade Road's core strategy remains: to build a base of
income generating assets that covers overheads, management fees and
finance costs, with a growing surplus to fund dividends.'
FOR FURTHER INFORMATION, PLEASE CONTACT:
Jade Road Investment Limited +44 (0) 778 531 5588
John Croft
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Lionsgate Communications - Communications
Adviser +44 (0) 779 189 2509
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Jonathan Charles
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Hybridian LLP - Corporate Broker +44 (0)203 764 2341
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Claire Noyce
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WH Ireland Limited - Nominated Adviser +44 (0) 20 7220 1666
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James Joyce
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James Sinclair Ford
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About Jade Road Investments Limited
Jade Road Investments Limited (Jade Road) is quoted on the AIM
Market of the London Stock Exchange and is committed to providing
shareholders with attractive uncorrelated, risk adjusted long-term
returns from a combination of realising sustainable capital growth
and delivering dividend income.
The Company is focused on providing growth capital and financing
to emerging and established Small and Medium Enterprises (SME)
sector throughout Asia, well diversified by national geographies,
instruments and asset classes. This vital segment of the economy is
underserved by the traditional banking industry for regulatory and
structural reasons.
The Company's investment manager, Harmony Capital, seeks to
capitalise on its team's established investment expertise and broad
networks across Asia. Through rigorous diligence and disciplined
risk management, Harmony Capital is dedicated to delivering
attractive income and capital growth for shareholders with
significant downside protection through selectively investing in
assets and proactively managing them.
Harmony Capital is predominately sourcing private opportunities
and continues to create a strong pipeline of attractive income
generating assets from potential investments in growth sectors
across Asia, including healthcare, fintech, hospitality, IT and
property.
For further information, please visit the Company's website at
https://jaderoadinvestments.com and follow the Company on Twitter
(@JadeRoadInvest).
The information contained within this announcement is deemed to
constitute inside information as stipulated under the retained EU
law version of the Market Abuse Regulation (EU) No. 596/2014 (the
"UK MAR") which is part of UK law by virtue of the European Union
(Withdrawal) Act 2018. The information is disclosed in accordance
with the Company's obligations under Article 17 of the UK MAR. Upon
the publication of this announcement, this inside information is
now considered to be in the public domain.
Chairman's Statement 2021
The pandemic-ravaged economies of China and Southeast Asia,
compounded by heavy-handed Covid-19 curbs, continued to severely
disrupt local supply chains and dampen demand, making major
impairments across the Jade Road asset portfolio unavoidable.
Overview
In my statement in the 2021 interim results, I noted that the
asset portfolio had managed to avoid any major impairments.
Unfortunately, the pandemic situation in China throughout 2021
worsened with major cities and provinces placed under lockdown
measures, including cross-province and cross-border travel bans, as
part of the government's zero-Covid strategy.
More recently China's largest city Shanghai was locked down for
two whole months delivering a serious blow to the country's economy
and thereby undermining its chances of achieving the targeted 5.5%
GDP growth rate for 2022.
Meanwhile, in Hong Kong (HKSAR), many restaurants were forced to
close permanently in the face of multiple lockdowns. Prior to the
2019 protests and then the arrival of Covid-19 in the territory, 29
million mainland Chinese would visit Hong Kong annually, providing
a major contribution to the territory's economy, spending heavily
in the retail, property and hospitality sectors. This source of
income was almost completely cut off.
In Japan, tourism ground to a complete halt.
In the face of these unprecedented headwinds, major impairments
across the asset portfolio have unfortunately become
unavoidable.
I believe a prudent valuation approach is required and
consequently, in December 2021, the Company reported that it was
likely to make a full provision against its US$26.5 million
convertible bond in the Hong Kong-based, Michelin star restaurant
company Fook Lam Moon Holdings. Events since then have
unfortunately done nothing to change our assessment and the 2021
results presented do include the anticipated full provision.
Net Asset Value (NAV) for the year ended 31st December 2021
decreased to US$68.0 million, down 36.1% from US$106.4 million the
previous year.
I have also stated that Jade Road's investment manager Harmony
Capital was busy driving phase two of a three-phase investment
strategy focused on exits, restructuring our legacy assets and
seeking investments in smaller fast growing companies at IPO or
pre-IPO stages.
I am pleased to report that whilst talks remain protracted due
to China's zero-Covid stance, positive developments have been
achieved. On that note, I was delighted that we were recently (post
balance sheet) able to announce the partial disposal of our holding
in Meize Energy Industries (Meize). Our original investment
represented a 7.2% stake in Meize. Post this partial sale
generating US$ 1.2 million in cash, JADE's residual holding will
amount to 6.3% of the equity.
As is painfully obvious, exiting private equity positions held
in Chinese companies requires patience as well as persistence, but
as demonstrated by this announcement exits can be achieved, and in
this case, at a premium to the value of the asset held in our
books. Whilst having no direct connection with other privately held
Chinese assets in our portfolio, it does provide clear evidence
that these assets have real value and that in time realisations can
be made delivering cash returns into the company.
Key Developments
Jade Road's investment manager has been hard at work pivoting
away from its legacy assets in China as exit talks continue
unabated.
Jade Road's largest legacy asset (85% effective holding) in
China is Future Metal Holdings Limited (FMHL), the largest
magnesium dolomite quarry in Shanxi Province. According to the
Observatory of Economic Complexity (MIT Media Lab) between December
2020 and December 2021, China's dolomite exports increased by 135%
or US$3.86 million to US$6.73 million from US$2.87 million. In
addition to providing dolomite for aggregate, FMHL is poised to
sell its higher value products once local supply chains
recover.
Meanwhile, Meize the onshore and offshore wind turbine blade
manufacturer, is showing exceptional resilience. As previously
reported, Meize has maintained a full order book from its clients
in 2021 due to exceptionally strong market demand.
In June 2021, Meize's state-of-the-art Jiangsu offshore blade
plant completed an expansion and commenced operations to meet
rising demand and is operating at full capacity.
As John Adams, second President of the United States, eloquently
put it: "Every problem is an opportunity in disguise."
In July 2021, the Company announced its expanded strategy to
invest in Asian High Growth Companies via equity in listed
companies and/or pre-IPO investments with a focus in Technology,
including Healthtech, Medtech and Fintech.
The total allocation under this expanded investment focus will
not be greater than 10% of Jade Road's present NAV (currently
US$68.0 million) and not greater than 20% once the NAV exceeds
US$150m. Investments in each company will not exceed 5% of the
total allocation, in order to mitigate risk through
diversification.
With many high growth start-ups staying private longer, Jade
Road is uniquely poised to eliminate the barriers to investing in
these start-ups and potentially provide its investors with high
returns.
ESG Policy
I am pleased to report that Environmental, Social, and
Governance ("ESG") principles play an integral role in Jade Road's
investment process.
Harmony Capital, Jade Road's Investment Manager, is a reporting
member of the UN PRI (United Nations Principles for Responsible
Investment) and its investment process has been redesigned to
comply with best-in-class, ESG-focused private investment
practices.
I believe that through the provision of expansion capital to
assist companies in their growth, Jade Road can target attractive
returns for stakeholders as well as be a steward of betterment in
the ecosystems and communities within which these portfolio
companies operate.
Outlook
China's economy is forecast to recover at a slower rate than
previous years as it tackles a far more transmissible virus
variant, weaker growth and a central government less willing to
continue its high levels of financial support.
Jade Road is set to pivot away from China and focus on the
broader Asian SME subsector, which is showing greater resilience
than larger companies in terms of recovery.
In Southeast Asia, SMEs are expected to further embrace
sustainability, doubling down on digitalisation, accelerating
automation and scaling up, as they navigate a post-pandemic
recovery.
Therefore, Jade Road's core strategy remains: to build a base of
income generating assets that covers overheads, management fees and
finance costs, with a growing surplus to fund dividends.
By targeting the broad Asian SME subsector, I believe Jade Road
can access an immense market in which it can leverage both its
capital, and its investment manager's direct relevant
experience.
In a market in which Asian SMEs are increasingly starved of
capital, Jade Road continues to see opportunities to negotiate and
invest in structured instruments. Its preference for
income-generating assets puts an emphasis on credit instruments
such as secured debt or non-mandatory convertible bonds when
structuring investments.
As the world emerges from the challenges of COVID, we face new
inflationary and geopolitical headwinds that are affecting
businesses globally.
With this background, your Board's primary focus is to generate
income through disposals whilst actively reviewing opportunities to
acquire income generating assets for the portfolio as capital
markets eventually return to growth.
John Croft
29(th) June 2022
Chairman of the Board
Portfolio at 31 December 2021
Principal Effective Instrument Valuation Credit Credit Cash Equity Fair Provision Valuation
assets interest type at 31 income investment receipts investment/ value US$ at
% December US$ million US$ million US$ million other adjustment million 31
2020 movement US$ December
US$ US$ million million 2021
million US$
million
Fook Lam
Moon Convertible
Holdings - Bond 28.4 1.3 - - - (29.7) - -
Future
Metal
Holdings Structured
Limited 84.8 Equity 50.4 0.6 - - - (0.6) - 50.4
Meize
Energy Redeemable
Industrial convertible
Holdings preference
Ltd 7.9 shares 8.2 - - - - - - 8.2
DocDoc Convertible
Pte Ltd - Bond 2.4 0.2 - - - - - 2.6
Infinity
Capital Secured
Group - Loan Notes 2.3 0.4 - - - (1.3) - 1.4
Infinity
TNP 40 Equity 7.3 - - - - (3.7) - 3.6
GCCF &
Other
investments - 8.7 - - (0.4) - (2.7) - 5.6
Corporate
debt - (3.5) - - - (0.1) - - (3.6)
Other
liabilities - (1.5) - - - 0.5 - - (1.0)
Cash 3.7 - - 0.4 (3.3) - - 0.8
Total N et
Asset Value 106.4 2.5 - - (2.9) (38.0) - 68.0
------------------------- ------------ ---------- ------------ ------------ ------------ ------------ ----------- ---------- ----------
Portfolio Overview
Future Metal Holdings Limited
Our largest asset by value is the dolomite quarry project
("Quarry") in China, Future Metal Holdings Limited ("FMHL"), which
was previously known as Hong Kong Mining Holdings. The Company has
an 85% shareholding in FMHL.
In M arch 2021, the Quarry engaged a new contractor to support
operations. We believe that the new contractor has both the
experience to efficiently operate the Quarry and the local network
to sell the Quarry's products to downstream customers.
In 2021, the price of magnesium skyrocketed and reached a record
high in the last decade. It increased substantially from around
RMB15K (USD2.2K) per tonne in Q1 2021 to above RMB50K (USD7.4K) per
tonne towards the end of 2021, representing a 233.3% increase. The
local team has reached out to smelters in the local region to try
to establish sales channels for the dolomite products in smelting
use.
Including loan disbursements provided by the Company to FMHL and
its subsidiaries and accrued PIK interest, the estimated fair value
of the Company's investment is US$50.4 million as of 31 December
2021 (31 December 2020 US$50.4 million).
Fook Lam Moon
The Company holds a convertible bond of US$26.5 million
("Convertible Bond") in Fook Lam Moon Holdings("FLMH"), which is a
shareholder of a Hong Kong-based restaurant group Fook Lam Moon
("FLM"). The Convertible Bond has a maturity of 5 years and pays a
coupon of 5.0% per annum (3.0% paid in cash with the remainder
rolled up with the principal amount outstanding).
FLM's business was impacted by the COVID-19 pandemic, as did its
peers' in the food and beverage industry in Hong Kong in 2021. The
regulations imposed by the local government severely limited
inbound tourism, particularly from Mainland China, and local
consumption
In late 2021, the Company became aware that the underlying group
structure of FLM may have changed such that FLMH is no longer the
71% owned controlling shareholder in the Hong Kong based restaurant
group.
The Company is actively working to secure more information to
clearly understand what potential impact this ownership change may
have on the value attributed to the Convertible Bond and the level
of any new ownership in the Restaurant Group.
In order to be prudent, the Company has decided to apply a 100%
provision against this investment. As of 31 December 2021, the
carrying value of the Convertible Bond was written off to be US$0.0
million (2020: US$28.4 million).
Infinity TNP
Tellus Niseko ceased operation in 2021 due to reduction in local
tourists. The local team has been closely monitoring the local
condition and shall resume business once tourism recovers.
In order to be prudent, the Company has decided to apply a 50%
provision against this investment. As of 31 December 2021, the
carrying value of its investment was US$3.6 million (2020: US$7.3
million).
Infinity Capital Group ("ICG")
Ultimate Prosperity Limited, a 100% owned subsidiary of the
Company incorporated in the British Virgin Islands, holds a Secured
Loan to ICG.
In 2021, as the COVID-19 pandemic continues to impact Japan and
the Hokkaido region, ICG has been working closely with the local
management to monitor the domestic property market and the local
market's response to the pandemic, including construction project
planning and potential movements in property prices.
ICG provided the Company with a detailed proposal to deliver
several undertakings at the end of 2021, including payment
schedule, credit enhancement, etc. The Company is closely
monitoring the development and shall utilise its best effort to
protect its interest.
In order to be prudent, the Company has decided to apply a 50%
provision against this investment. As of 31 December 2021, the
carrying value of the Secured Loan was US$1.4 million taking into
account the current face value of the instrument and cash interest
receivable, less an Expected Credit Loss ("ECL") provision against
aged cash interest receivables.
The Company also received shares of Ultima United Limited
(Listed on ASX), having a fair value of US$0.5 million as at year
end, as additional security for the outstanding cash interest
receivable. These shares are to be returned on receipt of the
outstanding interest. These shares are not reflected in the
financial statements of the Company as they do not meet the
definition of a financial asset under IFRS 9.
Meize Energy Industries Holdings Limited ("Meize")
Swift Wealth Investments Limited, a 100% (2020: 100%) owned
subsidiary of the Company incorporated in the British Virgin
Islands, holds a 7.2% stake in Meize through a redeemable
preference share structure.
Meize is a privately owned company that designs and manufactures
blades for both onshore and offshore wind turbines.
In early 2021, Meize commenced the expansion of its factory in
Jiangsu Province, to meet the growing demand for its products. The
expansion was completed in mid-2021 and the Jiangsu Plant was
operating at full capacity, due to the strong demand from the
offshore wind market.
In August 2021, JADE issued a divestment proposal to Meize
requesting a full or partial exit. JADE is currently in discussions
with Meize regarding the details of the divestment.
As of 31 December 2021, the Company's interest in Meize had a
fair value of US$8.2 million (2020: US$8.2 million) based on a
Discounted Cash Flow analysis. The carrying amount represents a
discount of over 50% to the full redemption value of the Company's
investment.
DocDoc Pte Ltd. ("DocDoc")
DocDoc is a Singapore-headquartered online network of over
23,000 doctors, 600 clinics, and 100 hospitals serving a wide array
of specialties. It uses artificial intelligence, cutting-edge
clinical informatics, and proprietary data to connect patients to
doctors which fit their needs at an affordable price.
In 2021, DocDoc pivoted its business model to become a "Neo
Insurer" and attempts to partner with insurance companies to
enhance their policy offerings. DocDoc is working to offer
fully-digitised insurance products to consumers or businesses,
exclusively through digital channels, with end-to-end digital
service delivery. These offerings will include quoting, binding,
issuing of policies, documentation, proof of insurance, electronic
billing, payment and real time policy management all digitally.
As of 31 December 2021, the carrying value of the Convertible
Bond was US$2.6 million (2020: US$2.4 million). An annual coupon of
8% (4.0% cash and 4% Payment-in-Kind was converted to 8%
Payment-in- Kind .
Greater China Credit Fund LP (the "GCCF")
In 2021, JADE has been trying to obtain the latest statement for
GCCF through its fund administrator. However, all efforts of the
fund administrator to obtain it from Adamas Asset Management
("AAM") have been unsuccessful. As far as we know, the fund is
under liquidation. All the management of the fund is unable to
provide any information to us. We have to put down the valuation
and apply a 100% provision against this investment. As of 31
December 2021, the Company's interest in GCCF has an allocated fair
value of US$0.0 million (2020: US$2.8 million).
Biographies of Directors and Senior Management
Board of Directors
Mr. John Croft, Executive Chairman
John Croft is an experienced Chairman, non-executive Director
and executive with a successful international career in the
technology and financial services sectors.
He is also a non-executive Director at Aura Renewable
Acquisitions PLC and Golden Rock Global PLC, both Special
Acquisitions Companies (SPACs) quoted on the Standard List of the
London Stock Exchange and is also a non-executive Director at
Brazilian Nickel PLC.
He has previously held senior Director level positions in Racal
Electronics and NCR Corporation, following an early career in
banking with HSBC and Citibank.
Hugh Viscount Trenchard, Non-executive Director
Viscount Trenchard began his career as an investment banker at
Kleinwort Benson in 1973. He has more than 40 years' experience of
Japanese business, including 12 years as a resident of Japan. He
ran Kleinwort Benson's East Asian operations for 15 years and was
later Head of Japanese Investment Banking for Robert Fleming &
Co. Limited, before working with Mizuho International plc from 2007
to 2014. He served as a Senior Adviser for Japan and Korea to
Prudential Financial, Inc. from 2002 to 2008. Lord Trenchard is a
member of the House of Lords and a Vice-Chairman of the
British-Japanese Parliamentary Group.
Mr. Charles Stuart Crocker, Non-executive Director
Stuart Crocker served eleven years in the British Army before
starting a banking career primarily with Merrill Lynch and HSBC, in
Europe and the Middle East. Latterly he became the CEO HSBC Private
Bank UAE and Oman, and the Global Head Private Banking Group at Abu
Dhabi Islamic Bank. Stuart has been a member of the Worshipful
Company of International Bankers, and a Freeman of the City of
London, since 2006 and became a Fellow of the Institute of
Directors (FIoD) in 2022.
Since 1994 Stuart has been a Director and then Trustee at St
Martin-in-the-Fields in London. He was a founding investor and the
first Non-Executive Chairman of a renewable forestry company, which
is now one of the largest forestry operations in West Africa having
planted over 20 million trees.
Stuart is a founder advisor and shareholder in a multi-award
winning FinTech company in the Middle East. In 2020 he was the
Interim-Chairman of an advanced technology company for ensuring the
safety, security and efficiency of people and assets in some of the
world's most difficult places, supporting client operations in 35
countries.
In December 2021 Stuart became Chairman of an exclusive
distributor of clean, ethical beauty brands for women and men.
Current distribution is across the GCC through retail,
pharmaceutical, professional channels and e-commerce.
Stuart was honoured to be invested as a Knight of The Order of
St. George (KStG) at Rochester Cathedral in May 2022. The Order is
a non-profit charity registered in England and has had special
consultative status as an NGO at the UN Economic and Social Council
since 2015.
Dr. Lee George Lam, Non-executive Director
Dr. Lam is Chairman of the United Nations Economic and Social
Commission for Asia and the Pacific (UN ESCAP) Sustainable Business
Network (ESBN), Vice Chairman of Pacific Basin Economic Council
(PBEC), Chairman of the Permanent Commission on Economic and
Financial Issues of the World Union of Small and Medium Enterprises
(WUSME), and a member of the Hong Kong Trade Development Council
(HKTDC) Belt and Road and Greater Bay Area Committee. A former
member of the Hong Kong Bar, Dr. Lam is a Solicitor of the High
Court of Hong Kong, an Accredited Mediator of the Centre for
Effective Dispute Resolution (CEDR), a Fellow of Certified
Management Accountants (CMA) Australia, the Hong Kong Institute of
Arbitrators, the Hong Kong Institute of Directors and the Institute
of Corporate Directors Malaysia (ICDM), an Honorary Fellow of
Certified Public Accountants (CPA) Australia, the Hong Kong
Institute of Facility Management and the University of Hong Kong
School of Professional and Continuing Education, and a
Distinguished Fellow of the Hong Kong Innovation and Technology
Development Alliance.
Mr. John Batchelor, Non-executive Director
Mr. Batchelor is a Senior Managing Director with FTI Consulting
and was formerly Co-Lead of Asia and Head of the Corporate Finance
& Restructuring segment in Asia. He has more than 25 years of
experience in restructuring, corporate recovery, and transaction
advisory. Prior to FTI Consulting, Mr. Batchelor was an executive
director of Ferrier Hodgson.
Key Personnel of the Investment Manager, Harmony Capital
Mr. Suresh Withana is the Co-Founder and Managing Partner of
Harmony Capital Investors Limited. Prior to founding Harmony
Capital Investors Limited ("HCIL"), he was most recently Global
Head of Special Situations and Co-Head of Asia at Tikehau Capital,
the listed investment management company with over EUR29 billion in
assets. Previously, he was the Co-Founder and Chief Investment
Officer at Harmony Capital Partners, an affiliate of HCIL, which
managed a fund focused on Asian special situations investments.
Prior to that, he was a Director of the Global Special Situations
Group at Mizuho International Plc in London and a Vice President in
the Investment Banking Group at Merrill Lynch International
(London). In total, he has accumulated 25 years of experience,
including over 18 years of special situations investing primarily
focused on Asia.
Directors' Report
The Board (the "Board") of Directors (the "Directors") are
pleased to present their report on the affairs of the Company and
its subsidiaries (collectively referred to as the "Group"),
together with the audited financial statements for the year ended
31 December 2021.
PRINCIPAL ACTIVITIES
The Company was incorporated with limited liability under the
laws of the British Virgin Islands ("BVI"). The Company's shares
were admitted to the AIM Market of the London Stock Exchange on 19
October 2009 and on the Quotation Board of the Open Market of the
Frankfurt Stock Exchange on 6 December 2012.
RESULTS AND DIVIDS
The Company recorded a loss before taxation of US$38.4 million
(2020: profit US$1.6 million).
The loss reflects fair value decrease on assets in the portfolio
of US$37.7 million (2020: increase US$5.9 million), net finance
income of US$0.8 million (2020: US$0.9 million) and total operating
expenses of US$1.5 million (2020: US$5.2 million). The fair value
decrease on assets included in the period includes income from
investments of US$1.2 million (2020: US$1.1 million) and a fair
value adjustment upon valuation of portfolio assets at the period
end of US$38.2 million (2020: US$4.8 million).
The Directors are not recommending the payment of a dividend for
the year.
REVIEW OF THE BUSINESS
The Group's audited net asset value as at 31 December 2021 stood
at US$68.0 million (2020: US$106.4 million) equivalent to US$0.58
per share (2020: US$0.92), excluding the effect of treasury shares
held by the Group.
The principal investment assets held by the Company at the
year-end, together with their valuations are set out in the
Chairman's statement.
EVENTS AFTER THE REPORTING PERIOD
The significant events after the reporting period are set out in
Note 19 of the financial statements, none of which impact on the
results and net assets reported in these financial statements.
DIRECTORS AND DIRECTORS' INTERESTS
The Directors who served during the year and up to the date of
this report were as follows:
Mr. John Croft
Hugh Viscount Trenchard
Dr. Lee George Lam
Mr. Stuart Crocker
Mr. John Batchelor
The Directors retiring by rotation are Stuart Crocker and Hugh
Viscount Trenchard, who, being eligible, offer themselves for
re-election at the Company's forthcoming annual general
meeting.
With the exception of the related party transactions stated in
Note 17 to the Financial Statements, there were no other
significant contracts, other than Directors' contracts of service,
in which any Director had a material interest. The Directors who
held office as at 31 December 2021 had no beneficial interests in
any of the shares of the Company and Group companies other than as
follows:
Number of ordinary shares of no par value as at 31 December
2021 2020
Direct Indirect Direct Indirect
Mr. John Croft 130,463 10,733 118,463 10,733
Hugh Viscount Trenchard 60,634 - 60,634 -
Dr. Lee George Lam 101,057 - 101,057 -
Mr. Stuart Crocker 80,845 - 80,845 -
Mr. John Batchelor - - - -
Number of warrants over ordinary shares of no par value as at 31
December
2021 2020
Direct Indirect Direct Indirect
Mr. John Croft 877,346 - 877,346 -
Hugh Viscount Trenchard 457,634 - 457,634 -
Dr. Lee George Lam 496,057 - 496,057 -
Mr. Stuart Crocker 76,845 - 76,845 -
Mr. John Batchelor - - - -
SUBSTANTIAL SHAREHOLDINGS IN THE COMPANY
As far as the Directors are aware at the date of signing, the
following persons are interested in 3% or more of the issued share
capital of the Company:
Shareholder Number of Percentage of
ordinary shares issued share capital
Elypsis Solutions Limited 55,225,127 47.9%
Infinity Capital Group 16,179,310 14.0%
Heirloom Investment Management
LLC 10,068,676 8.7%
Harmony Capital Investors
Limited 6,059,306 5.3%
Barry Lau 4,561,400 4.0%
The percentage of shares not in public hands (as defined in the
AIM Rules for Companies) is 79.9%.
The Directors have not been made aware of any other beneficial
shareholdings of 3% or more of the issued share capital of the
Company as of the date of this report.
FINANCIAL INSTRUMENTS
The Group's use of financial instruments is described in Note 9
and Note 15.
FINANCIAL RISK MANAGEMENT OBJECTIVES
Management has adopted certain policies on financial risk
management with the objective of ensuring that appropriate funding
strategies are adopted to meet the Group's short-term and long-term
funding requirements, taking into consideration the cost of
funding, gearing levels, and cash flow projections. The policies
are also set to ensure that appropriate strategies are adopted to
manage related interest and currency risk funding and to ensure
that credit risks on receivables are properly managed. In addition,
Note 15 to the financial statements include the Group's objectives,
policies, and processes for managing its capital, its financial
risk management objectives, details of its financial instruments
and its exposures to credit risk, interest rate risk, liquidity
risk, price risk, and currency risk.
POLICY AND PRACTICE ON PAYMENT OF CREDITORS
The Group seeks to maintain good terms with all of its trading
partners. In particular, it is the Group's policy to agree
appropriate terms and conditions for its transactions with
suppliers and, provided the supplier has complied with its
obligations, to abide by the terms of payment agreed.
SHARE CAPITAL
The Company has a single class of shares which is divided into
ordinary shares of no par value.
At 31 December 2021, the number of ordinary shares in issue was
117,925,673, of which 2,647,804 were held in treasury by the group.
Details of movements in the issued share capital during the year
are set out in Note 14 to the financial statements.
DIRECTORS' INDEMNITY
The Company's Articles of Association provide, subject to the
provisions of BVI legislation, an indemnity for Directors and
officers of the Company in respect of liabilities they may incur in
the discharge of their duties or in the exercise of their powers,
including any liabilities relating to the defence of any
proceedings brought against them which relate to anything done or
omitted, or alleged to have been done or omitted, by them as
officers or employees of the Company.
Appropriate directors' and officers' liability insurance cover
is in place in respect of all of the Directors.
EMPLOYEE INFORMATION
As at 31 December 2021, the Group had Nil (2020: Nil) employees
excluding Directors.
CHARITABLE DONATIONS
The Group has not made any charitable donations during the year
(2020: Nil).
GOING CONCERN
The financial statements are required to be prepared on the
going concern basis unless it is inappropriate to do so. The
Directors, having considered "Going Concern and Liquidity Risk:
Guidance for Directors of UK Companies" issued by The Financial
Reporting Council in 2016, consider the going concern basis of
preparation to be appropriate in preparing the financial
statements.
The key conclusions are summarised below:
-- The Group realises and applies its investment resources in
accordance with its available liquidity.
-- The Group held cash and cash equivalents of US$0.8 million at
31 December 2021 and had debt of US$3.6 million.
In considering the appropriateness of this basis of preparation,
the Directors have reviewed the Group's working capital forecasts
for a minimum of 12 months from the date of the approval of this
financial information. Following this assessment, the Directors
have reasonable expectation that the Group has adequate resources
to continue for the foreseeable future and that carrying values of
intangible assets are supported. Thus, they continue to adopt the
going concern basis of accounting in preparing this financial
information.
DIRECTORS' RESPONSIBILITY STATEMENT
The Directors are responsible for preparing the Directors'
Report, and the Financial Statements in accordance with applicable
law and regulations.
Company law requires the Directors to prepare Group Financial
Statements for each financial year. The Directors are required by
the AIM Rules of the London Stock Exchange to prepare Group
financial statements in accordance with International Financial
Reporting Standards ("IFRS") as endorsed by European Union and have
elected under company law to prepare the Financial Statements in
accordance with IFRS.
Under company law the Directors must not approve the Financial
Statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and of the loss of the
Group for that period.
In preparing the Group Financial Statements, the Directors are
required to:
1. select suitable accounting policies and then apply them consistently;
2. make judgements and accounting estimates that are reasonable and prudent;
3. state whether they have been prepared in accordance with IFRS; and
4. prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group will continue
in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group's
transactions and disclose with reasonable accuracy at any time the
financial position of the Group. They are also responsible for
safeguarding the assets of the Group and hence for taking
reasonable steps for the prevention and detection of fraud and
other irregularities.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the Jade
Road Investments Limited website.
AUDITORS
A resolution to re-appoint PKF Littlejohn LLP as the Company's
auditors will be proposed at the Annual General Meeting.
On behalf of the Board
John Croft
29(th) June 2022
Chairman of the Board
Corporate Governance Statement
THE BOARD
The Board of Jade Road Investments Limited, in accordance with
the AIM Rules, adopted an appropriate corporate governance code. It
has decided to apply the Quoted Companies Alliance Corporate
Governance Code (the QCA Code). The QCA Code is a pragmatic and
practical corporate governance tool which adopts a proportionate,
principles-based approach which the Board believes will enable the
explanation of how the Company applies the QCA Code and its overall
corporate governance arrangements. The QCA Code is constructed
around 10 broad principles which are set out below together with an
explanation of how the Company complies with each principle, and
where it does not do so, an explanation for that.
As suggested by the QCA, our Chairman, John Croft makes the
following statement in relation to corporate governance:
"As Chairman of the Company, I lead our Board of Directors and
have primary responsibility for ensuring that the Company meets the
standards of corporate governance expected of an AIM investment
company of our size. Our over-arching role as a Board is to monitor
the Company's progress with its investing policy and to ensure that
it is being properly pursued. In pursuing that strategy, our second
key focus is to supervise, manage and objectively assess the
performance of our Investment Manager, Harmony Capital Investors
Limited. Given there is no executive team in the Company and no
other employees, this relationship is critically important in terms
of delivering value to our shareholders.
We set out below how we as a Board seek to apply the QCA Code,
bearing in mind the particular nature of the Company and its
business. Being an investment company means we are naturally
focused on investment strategy and deploying our cash resources in
the most efficient way to produce returns for shareholders in the
medium to long term, balancing the potential risks and rewards of
each investment which our Investment Manager proposes. We have a
rigorous investment process including third-party legal,
commercial, and financial due diligence, site visits, management
meetings, and independent valuations where relevant. The output of
this work is consolidated and presented to the Board by the
Investment Manager in high-quality investment presentations which
are reviewed and discussed at length at investment board meetings.
We are not a large corporate with multiple stakeholders and, as
noted above, our Board is primarily non-executive as at the year
end. We, therefore, intend to take a pragmatic approach to
governance structures and processes and whilst retaining a
high-performance culture at Board level, adopt policies and
procedures which we think are appropriate to an investment company
on AIM."
The Board, the Investment Manager and Board Committees
The Board is responsible for reviewing and approving the
Company's Investing Policy and for monitoring the performance of
Harmony Capital Investors Limited in the performance of its
obligations under the Services Agreement. The Company holds board
meetings as required and not less than four times annually. The
Board has constituted committees with responsibility for overseeing
audit, remuneration, valuation and investment matters.
The Board has constituted the following Committees:
The Remuneration Committee constituted by Hugh Viscount
Trenchard and Dr Lee George Lam.
The Remuneration Committee reviews the scale and structure of
the Directors' remuneration and the terms of their service or
employment contracts, including warrant schemes and other bonus
arrangements. The remuneration and terms and conditions of the
non-executive Directors are set by the entire Board, with Directors
absenting themselves, at the appropriate time, from discussions on
matters directly reflecting their remuneration.
The Investment Committee constituted by John Croft, Hugh
Viscount Trenchard, Dr Lee George Lam, Stuart Crocker and John
Batchelor.
The Investment Committee has the primary authority to develop
the Company's investment objectives and corporate policies on
investing. It reviews and approves investment opportunities
presented by the Company's Investment Manager. The Committee will
at all times be constituted by all the Company's directors.
The Audit Committee constituted by John Croft and Stuart
Crocker.
The Audit Committee appoints and determines the terms of
engagement of the Group's auditors and will determine, in
consultation with the auditors, the scope of the audit. The Audit
Committee monitors the independence of the Group's auditor, and the
appropriateness of any non-audit services. The Audit Committee
receives and reviews reports from management and the Group's
auditors relating to the interim and annual accounts and the
accounting and internal control systems in use throughout the
Group. The Audit Committee has unrestricted access to the Group's
auditors. The Audit Committee makes recommendations to the
Board.
The Valuation Committee constituted by Hugh Viscount Trenchard
and Dr. Lee George Lam.
The Valuation Committee is responsible for reviewing the
valuation process for all investments, including the application of
appropriate valuation standards, based on the input of the
Company's Investment Manager and on the Company's Valuation Policy
which was formally adopted in 2020. Its members are sourced from
independent directors of the Board. It retains the authority to
engage with independent 3(rd) parties at any time with respect to
valuation matters. The Committee comprises a minimum of two members
and reports directly to the Board.
DELIVER GROWTH
Principle 1 Establish a strategy and business model which
promote long-term value for shareholders
Principle
The Board must be able to express a shared view of the Company's
purpose, business model and strategy. It should go beyond the
simple description of products and corporate structures and set out
how the company intends to deliver shareholder value in the medium
to long term. It should demonstrate that the delivery of long term
growth is underpinned by a clear set of values aimed at protecting
the company from unnecessary risk and securing its long-term
future.
Compliance
The Company provides equity and credit funding to companies,
principally in the Pan-Asian region or with a connection to Asia.
It will do this through investing in direct financings, pre-IPO
investments, growth private equity, event driven special
situations, opportunistic special situations, and indirect
financing.
The Company is sector agnostic in its investment activities.
New investments will be managed actively, including through
appropriate investor protections which will be negotiated on each
transaction as appropriate and relevant.
The Company will consider using debt to finance transactions on
a case-by-case basis and may assume debt on its own balance sheet
when appropriate to enhance returns to Shareholders and/or to
bridge the financing needs of its investment pipeline.
The Company is in the process of a disposal programme for its
"legacy" assets, please refer to the latest RNS published on 22nd
of June 2022. We are actively seeking the buyers for the other
assets.
The Board, together with the Investment Manager, continually
monitors the prevailing investment climate and macro-economic
conditions affecting the Asian region and other macro factors which
will influence and, in some cases, hinder the ability of the
Company to execute its strategy, for example, regulatory and
governmental policy changes.
Principle 2 Seek to understand and meet shareholder needs and
expectations
Principle
Directors must develop a good understanding of the needs and
expectations of all elements of the Company's shareholder base. The
Board must manage shareholders' expectations and should seek to
understand the motivations behind shareholder voting decisions.
Compliance
The Board is aware of the need to protect the interests of
minority shareholders and the balancing of these interests with
those of the majority shareholder. The Board also considers the
terms of the relationship agreement the Company has entered with
its largest shareholder and, where necessary, will enforce any
relevant terms.
The Company holds regular investor events in London, Hong Kong
and Dubai, where the Chairman, other members of the Board and the
Investment Manager update attendees on key developments in the
portfolio. All shareholders are invited to attend these events. The
Chairman is principally responsible for shareholder liaison.
The Company regularly updates the market via its RNS news feed
of any disclosable matters and where appropriate, also uses social
media platforms to engage with a wider audience.
The Company publishes all relevant materials, according to QCA
definitions, on its website. This includes annual reports and
shareholder circulars.
Principle 3 Take into account wider stakeholder and social
responsibilities and their implications for long-term success
Principle
Long-term success relies upon good relations with a range of
different stakeholder groups both internal (workforce) and external
(suppliers, customers, regulators, and others). The Board needs to
identify the Company's stakeholders and understand their needs,
interests, and expectations.
Where matters that relate to the Company's impact on society,
the communities within which it operates or the environment have
the potential to affect the company's ability to deliver
shareholder value over the medium to long term, then those matters
must be integrated into the Company's strategy and business
model.
Feedback is an essential part of all control mechanisms. Systems
need to be in place to solicit, consider and act on feedback from
all stakeholder groups.
Compliance
The balance of economic value to the Group and social impact is
carefully considered, not only throughout the due diligence for any
potential investments but also ongoing monitoring by of periodical
site visits for the invested projects, with the maintenance of high
environmental standards is a key priority. The Board is conscious
of its responsibilities in relation to society, particularly in a
developing economy such as China.
The key resources for the Company are principally the Investment
Manager and the Company's advisory team, including its nominated
adviser, brokers, solicitors, and auditors. The Investment Manager
and therefore the Company rely on a network of intermediaries to
originate investment deal flow. The Board speaks to the advisory
team on a regular basis and takes feedback from it throughout the
year. In particular, it seeks advice in relation to compliance with
the AIM Rules and their impact on its investments from the
nominated adviser and solicitors and from the auditors in relation
to accounting matters including net asset value and the annual
audit.
Principle 4 Embed effective risk management, considering both
opportunities and threats, throughout the organisation
Principle
The Board needs to ensure that the Company's risk management
framework identifies and addresses all relevant risks in order to
execute and deliver strategy; companies need to consider their
extended business, including the Company's supply chain, from key
suppliers to end-customer.
Setting strategy includes determining the extent of exposure to
the identified risks that the company is able to bear and willing
to take (risk tolerance and risk appetite).
Compliance
Effective risk management in relation to the Company's portfolio
is key to the Board's assessment of the Investment Manager's
performance. Measuring risk in each investment case, in terms of
both how it can be mitigated and the potential upside of taking on
such risk are critical elements of the analysis produced by the
Investment Manager and reviewed by the Board on each proposed
investment. Similarly, in conducting the managed disposal
programme, the Board is focused on achieving the best possible
value for the assets being disposed of. At the same time, the Board
assesses the risk of maintaining those positions with the potential
for further value to be eroded at the same time as it requires
additional time to be spent by the Board and by the Investment
Manager.
MAINTAIN A DYNAMIC MANAGEMENT FRAMEWORK
Principle 5 Maintain the Board as a well-functioning, balanced
team led by the Chairman
Principle
The Board members have a collective responsibility to promote
the interests of the company and are collectively responsible for
defining corporate governance arrangements. Ultimate responsibility
for the quality of, and approach to, corporate governance lies with
the Chairman.
The Board (and any committees) should be provided with
high-quality information in a timely manner to facilitate proper
assessment of the matters requiring a decision or insight.
The Board should have an appropriate balance between Executive
and Non-Executive Directors and should have at least two
independent Non-Executive Directors. Independence is a board
judgement.
The Board should be supported by committees (e.g., audit,
remuneration, nomination) that have the necessary skills and
knowledge to discharge their duties and responsibilities
effectively.
Directors must commit the time necessary to fulfill their
roles.
Compliance
The Board consists of the Executive Chairman and four
Non-Executive Directors.
The Executive Chairman has been involved with the Company since
its predecessor company, China Private Equity Investment Holdings
Limited was admitted to AIM in 2009. Viscount Trenchard, Dr. Lee
George Lam, Mr. Stuart Crocker and Mr. John Batchelor have all been
appointed to the Board in 2017 or later. All four Non-Executive
Directors are considered to be independent.
Each Non-Executive Director is engaged on a 12-month contract
with three months' notice on either side and is required to commit
to a minimum of two days per calendar month.
The Executive Chairman's roles and responsibilities include but
are not limited to engaging potential clients across Jade Road's
domain in the APAC region, initiating and agreeing Terms of
Engagement with clients, providing the lead consultancy services to
clients and support the business development of the Company,
liaising with the Company's NOMAD and other advisors in London, and
being the main contact between the Board and the Investment
Manager, approving public announcements, engaging with
Shareholders, Investors and other Stakeholders to promote the
Company and its business objectives.
As explained above, the Board receives detailed investment
papers from the Investment Manager in relation to any asset which
is either recommended for investment or disposal, including an
executive summary of the due diligence findings, results of site
visits and management meetings (including an assessment of the
investee company's management team), key financial metrics, key
risk factors, the potential returns available, security for the
investment and the type of instrument to be used.
Principle 6 Ensure that between them the directors have the
necessary up-to-date experience, skills, and capabilities.
Principle
The Board must have an appropriate balance of sector, financial
and public markets skills and experience, as well as an appropriate
balance of personal qualities and capabilities. The Board should
understand and challenge its own diversity, including gender
balance, as part of its composition.
The Board should not be dominated by one person or a group of
people. Strong personal bonds can be important but can also divide
a board.
As companies evolve, the mix of skills and experience required
on the board will change, and board composition will need to evolve
to reflect this change.
Compliance
Directors who have been appointed to the Company have been
chosen because of the skills and experience they offer. The
identity of each Director and his full biographical details are
provided on the website, which include each Director's relevant
experience, skills, personal qualities, and capabilities. The
current team of Directors offer a mix of investment, quoted
company, sector and geographical expertise and exposure.
The Board has not taken any specific external advice on a
specific matter, other than in the normal course of business as an
AIM-quoted company and in pursuit of the investment policy. There
are no internal advisors to the Board. The Directors rely on the
Company's advisory team to keep their skills up to date and through
attending market updates and other seminars provided by the
advisory team, the London Stock Exchange plc, and other
intermediaries.
The Investment Manager is the key external adviser to the
Board.
Principle 7 Evaluate Board performance based on clear and
relevant objectives, seeking continuous improvement
Principle
The Board should regularly review the effectiveness of its
performance as a unit, as well as that of its committees and the
individual Board members.
The Board performance review may be carried out internally or,
ideally, externally facilitated from time to time. The review
should identify development or mentoring needs of individual
directors or the wider senior management team.
It is healthy for membership of the Board to be periodically
refreshed. Succession planning is a vital task for Boards. No
member of the Board should become indispensable.
Compliance
The Board consists predominantly of Non-Executive Directors, the
Company having no employees. In this regard, Board performance and
oversight lies predominantly with the Chairman and other
stakeholders, particularly shareholders. In early 2020, it was
determined by the Remuneration Committee that John Croft be
designated as Executive Chairman to align with his time commitment
and contribution to the Company's affairs.
Events are held with shareholders where feedback on the
Company's progress is sought on a regular basis, and this
interaction provides valuable input on Board performance. Advice is
also sought on Board composition on an ongoing basis from the
Company's NOMAD.
The composition of the Board is reviewed regularly, and changes
made where appropriate. As the size of the portfolio grows, the
Company may look to broaden its skills and experience base by the
appointment of additional Directors and/or advisors in due
course.
The Board does not carry out a formal review process.
Principle 8 Promote a corporate culture that is based on ethical
values and behaviours
Principle
The Board should embody and promote a corporate culture that is
based on sound ethical values and behaviours and use it as an asset
and source of competitive advantage.
The policy set by the Board should be visible in the actions and
decisions of the chief executive and the rest of the management
team. Corporate values should guide the objectives and strategy of
the company.
The culture should be visible in every aspect of the business,
including recruitment, nominations, training, and engagement. The
performance and reward system should endorse the desired ethical
behaviours across all levels of the company.
Compliance
The Board is focused on investment returns for its shareholders
and will at all times seek to make ethical investments, but this is
not an investment focus or determinant for an asset being included
in the portfolio. As discussed above, given the Company is an
investment company with no employees or other internal
stakeholders, the Board does not drive a corporate culture within
the business.
Principle 9 Maintain governance structures and processes that
are fit for purpose and support good decision-making by the
Board
Principle
The Company should maintain governance structures and processes
in line with its corporate culture and appropriate to its:
- size and complexity; and
- capacity, appetite, and tolerance for risk. The governance
structures should evolve over time in parallel with the company's
objectives, strategy, and business model to reflect the development
of the company.
Compliance
This section provides full disclosure on the Company's corporate
governance. There are no immediate plans to make any changes to the
governance processes and framework which are described in the
commentary above.
The Chairman has overall responsibility for shareholder
liaison.
There are no specific matters reserved for the Board.
BUILD TRUST
Principle 10 Communicate how the company is governed and is
performing by maintaining a dialogue with shareholders and other
relevant stakeholders
Principle
A healthy dialogue should exist between the Board and all of its
stakeholders, including shareholders, to enable all interested
parties to come to informed decisions about the Company.
In particular, appropriate communication and reporting
structures should exist between the Board and all constituent parts
of its shareholder base. This will assist:
- the communication of shareholders' views to the Board; and
- shareholders' understanding of the unique circumstances and
constraints faced by the Company.
Compliance
The Board attaches great importance to providing shareholders
with clear and transparent information on the Group's activities,
strategy, and financial position. Details of all shareholder
communications are provided on the Company's website, including
historical annual reports and governance-related material together
with notices of all general meetings for the last five years. The
Company discloses outcomes of all general meeting votes.
The Company has appointed a professional Financial Public
Relations firm with an office in London to advise on its
communications strategy and to assist in the drafting and
distribution of regular news and regulatory announcements. Regular
announcements are made regarding the Company's investment portfolio
as well as other relevant market and regional news.
The Company lists contact details on its website and on all
announcements released via RNS, should shareholders wish to
communicate with the Board.
Independent Auditor's Report
Independent Auditor's Report to the Members of Jade Road
Investments Limited
Opinion
We have audited the Group financial statements of Jade Road
Investments Limited (the 'Group') for the year ended 31 December
2021 which comprise the Consolidated Statement of Comprehensive
Income, the Consolidated Statement of Changes in Equity, the
Consolidated Statement of Financial Position, the Consolidated Cash
Flow Statement and Notes to the Financial Statements, including
significant accounting policies. The financial reporting framework
that has been applied in their preparation is applicable law and
International Financial Reporting Standards (IFRSs) as adopted by
the European Union.
In our opinion, the Group financial statements:
-- give a true and fair view of the state of the Group's affairs
as at 31 December 2021 and of its loss for the year then ended;
and
-- have been properly prepared in accordance with IFRSs as adopted by the European Union.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the
Auditor's responsibilities for the audit of the financial
statements section of our report. We are independent of the Group
in accordance with the ethical requirements that are relevant to
our audit of the financial statements in the UK, including the
FRC's Ethical Standard as applied to listed entities, and we have
fulfilled our other ethical responsibilities in accordance with
these requirements. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our
opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the
directors' use of the going concern basis of accounting in the
preparation of the financial statements is appropriate. Our
evaluation of the directors' assessment of the Group's ability to
continue to adopt the going concern basis of accounting
included:
-- a review of the management's cash flow forecasts for the
going concern period being twelve months from the anticipated date
of signing the financial statements;
-- holding discussions with management to understand the going concern model;
-- challenging management on the appropriateness of the going concern model; and
-- a review of post year end information, including committed expenditure.
Based on the work we have performed, we have not identified any
material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the
Group's ability to continue as a going concern for a period of at
least twelve months from when the financial statements are
authorised for issue.
Our responsibilities and the responsibilities of the directors
with respect to going concern are described in the relevant
sections of this report.
Our application of materiality
The scope of our audit was influenced by our application of
materiality. The quantitative and qualitative thresholds for
materiality determine the scope of our audit and the nature, timing
and extent of our audit procedures.
Group materiality for the financial statements as a whole was
US$1,108,000 (2020: US$1,635,000) based on 1.5% of gross assets. We
believe gross assets to be the main driver of the business as the
Group's principal activity is that of an investment company.
We consider the key benchmark for the Group to be gross assets,
given that current and potential investors will be most interested
in the valuation of the investments.
Performance materiality was US$664,800 (2020: US$981,000) being
60% of materiality for the financial statements as a whole. In
determining performance materiality, we considered the following
factors:
our cumulative knowledge of the Group and its environment,
including industry specific trends;
the change in the level of judgement required in key accounting
estimates;
the stability in key management personnel; and
the level of misstatements identified in prior periods.
We agreed to report to Audit Committee all corrected and
uncorrected misstatements we identified through our audit with a
value in excess of US$55,400 (2020: US$81,750). We also agreed to
report any other audit misstatements below that threshold that we
believe warranted reporting on qualitative grounds
Our approach to the audit
In designing our audit, we determined materiality as above and
assessed the risk of material misstatement in the financial
statements. We tailored the scope of our audit to ensure that we
performed sufficient work to be able to give an opinion on the
financial statements as a whole, taking into account the structure
of the Group.
In particular, we looked at areas involving significant
accounting estimates and judgement by the directors, such as the
fair value of investments, and considered future events that are
inherently uncertain.
We also addressed the risk of management override of internal
controls, including evaluating whether there was evidence of bias
by the directors that represented a risk of material misstatement
due to fraud. The Group's key accounting function is based in Hong
Kong and our audit was performed by our team in London with regular
contact maintained with the Group throughout.
The key balance held within the Group relates to the fair value
of investments and is thus considered to be a significant risk and
has been determined to be a key audit matter.
Key audit matters
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to
fraud) we identified, including those which had the greatest effect
on: the overall audit strategy, the allocation of resources in the
audit; and directing the efforts of the engagement team. These
matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters.
Key Audit Matter (Note 2(o), 9, How the scope of our audit responded
10 and 15) to the key audit matter
========================================== ==================================================================
Valuation and classification of
investments
==================================================================
The financial statements include Our work included the following:
investments in unquoted financial * Benchmarking and challenging key assumptions in
assets held at fair value, totalling management's valuation models used to determine fair
US$ 66.2 million. value and/or recoverable amount, including discount
rates used.
In addition to the above, the financial
statements also include investments
in loans and other receivables
held at fair value, totalling US$5.6 * Performing test of the mathematical accuracy of
million. underlying cash flow models, re-performing relevant
calculations and challenging and agreeing the key
All of these investments are measured assumptions to available data.
at fair value based on Level 3
inputs.
* Wherever possible benchmarking the assessments of
value to independent sources. Considering the
Consequently, the valuation of appropriateness of the use of external experts and
investments requires the exercise valuations, the valuation methodologies applied, and
of considerable judgement which considering management's evaluation of the
increases the risk that valuation sensitivity of valuations to changes in assumptions
and presentation of investments and inputs.
may be misstated.
Furthermore, the investments manager,
which is responsible for advising * Reviewing the classification of investments,
on the valuation of investments, disclosure of valuations and inputs within the
is remunerated by reference to financial statements and ensuring that it is
a percentage of the value of investments appropriate and in compliance with IFRS 7 and IFRS 13
and is entitled to receive a performance
incentive fee if certain performance
criteria are met. These remuneration
arrangements increase the risk * Ensuring that any consequent fair value changes
of bias in the calculations. arising from the valuations are appropriately
classified through the Consolidated Statement of
Comprehensive Income
* Reviewing the latest available assessments of the
recoverability of loans and other receivables
prepared by the investment manager and assessing
against the requirements under IFRS 9
==================================================================
Other information
The other information comprises the information included in the
annual report, other than the financial statements and our
auditor's report thereon. The directors are responsible for the
other information contained within the annual report. Our opinion
on the Group financial statements does not cover the other
information and we do not express any form of assurance conclusion
thereon.
Our responsibility is to read the other information and, in
doing so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge
obtained in the course of the audit, or otherwise appears to be
materially misstated. If we identify such material inconsistencies
or apparent material misstatements, we are required to determine
whether this gives rise to a material misstatement in the financial
statements themselves. If, based on the work we have performed, we
conclude that there is a material misstatement of this other
information, we are required to report that fact.
We have nothing to report in this regard.
Responsibilities of directors
As explained more fully in the directors' responsibilities
statement, the directors are responsible for the preparation of the
Group financial statements and for being satisfied that they give a
true and fair view, and for such internal control as the directors
determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to
fraud or error.
In preparing the Group financial statements, the directors are
responsible for assessing the Group's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor's report that includes our opinion. Reasonable assurance is
a high level of assurance but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial
statements.
Irregularities, including fraud, are instances of non-compliance
with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements
in respect of irregularities, including fraud. The extent to which
our procedures are capable of detecting irregularities, including
fraud is detailed below:
We obtained an understanding of the Group and the sector in
which it operates to identify laws and regulations that could
reasonably be expected to have a direct effect on the financial
statements. We obtained our understanding in this regard through
discussions with management and our industry experience. We also
selected a specific audit team based on experience with auditing
entities within this industry, facing similar audit and business
risks.
We determined the principal laws and regulations relevant to the
Group in this regard to be those arising from
-- AIM rules;
-- Disclosure and Transparency Rules;
-- Anti-Bribery Act;
-- Anti Money Laundering Regulations; and
-- Local tax laws and regulations.
We designed our audit procedures to ensure the audit team
considered whether there were any indications of non-compliance by
the Group with those laws and regulations. These procedures
included, but were not limited to:
-- Making enquiries of management;
-- Reviewing board minutes;
-- Reviewing legal ledger accounts; and
-- Reviewing the Regulatory News Service (RNS) announcements.
As in all of our audits, we addressed the risk of fraud arising
from management override of controls by performing audit procedures
which included, but were not limited to: the testing of journals;
reviewing accounting estimates for evidence of bias; and evaluating
the business rationale of any significant transactions that are
unusual or outside the normal course of business.
Because of the inherent limitations of an audit, there is a risk
that we will not detect all irregularities, including those leading
to a material misstatement in the financial statements or
non-compliance with regulation.
This risk increases the more that compliance with a law or
regulation is removed from the events and transactions reflected in
the financial statements, as we will be less likely to become aware
of instances of non-compliance. The risk is also greater regarding
irregularities occurring due to fraud rather than error, as fraud
involves intentional concealment, forgery, collusion, omission or
misrepresentation.
A further description of our responsibilities for the audit of
the financial statements is located on the Financial Reporting
Council's website at: www.frc.org.uk/auditorsresponsibilities. This
description forms part of our auditor's report.
Use of our report
This report is made solely to the Company's members, as a body,
in accordance with our letter of engagement dated 11 December 2020.
Our audit work has been undertaken so that we might state to the
Company's members those matters we are required to state to them in
an auditor's report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone, other than the company and the Company's members as a body,
for our audit work, for this report, or for the opinions we have
formed.
Eric Hindson (Engagement Partner)
For and on behalf of PKF Littlejohn LLP
Registered Auditor
29(th) June 2022
15 Westferry Circus
Canary Wharf
London E14 4HD
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2021
2021 2020
Notes US$'000 US$'000
Income from unquoted financial assets 1,162 1,137
Finance income from loans 1,347 1,337
Gross portfolio income 3 2,509 2,474
--------- -----------
Fair value changes on financial assets
at fair value through profit or loss (38,893) 5,045
Investment provisions 731 (779)
--------- -----------
Net portfolio income 3 (35,653) 6,740
--------- -----------
Management fees (1,861) (1,888)
Incentive fees 17 424 (1,750)
Administrative expenses (812) (1,017)
--------- -----------
Operating (loss)/ profit 5 (37,902) 2,085
--------- -----------
Finance expense 6 (522) (442)
--------- -----------
((Loss)/Profit) before taxation (38,424) 1,643
--------- -----------
Taxation 8 - -
Other comprehensive expense
Foreign currency translation differences - -
(Loss)/Profit and total comprehensive
(expense) / income for the year (38,424) 1,643
========= ===========
(Loss)/Earnings per share
Basic 18 (33.33)
cents 1.56 cents
Diluted 18 (33.33)
cents 1.34 cents
The results reflected above relate to continuing operations.
The accompanying notes on pages 45 to 69 are an integral part of
these financial statements.
Consolidated Statement of Changes in Equity
For the year ended 31 December 2021
Share based payment Accumulated
Share capital Treasury share reserve reserve losses Total
US$'000 US$'000 US$'000 US$'000 US$'000
Group balance at 1
January 2020 145,027 (671) 2,936 (46,415) 100,877
Profits for the
year - - - 1,643 1,643
Other comprehensive
income - - - - -
Total comprehensive
loss for the year - - - 1,643 1,643
-------------- ----------------------- --------------------- ------------ ---------
Issue of shares 3,876 - - - 3,876
Treasury shares
acquired - (201) - - (201)
Treasury shares sold - 257 - - 257
Group balance at 31
December 2020 and 1
January 2021 148,903 (615) 2,936 (44,772) 106,452
Loss for the year - - - (38,424) (38,424)
Other comprehensive
income - - - - -
Total comprehensive
loss for the year - - - (38,424) (38,424)
Issue of shares net -
of costs - - - -
Treasury shares -
acquired - - - -
Treasury shares sold - - - - -
Group balance at 31
December 2021 148,903 (615) 2,936 (83,196) 68,028
-------------- ----------------------- --------------------- ------------ ---------
Note: In October 2020, the Company issued 8,356,663 shares as
part of its first ever equity capital raise (which include 389,000
Placing Commission Fee Shares). It raised a total of GBP2.0 million
(before expenses) via an Open Offer and Placement. The shares were
issued at GBP0.25. In conjunction with the share issuance, the
Company issued 7,967,663 warrants at a strike price of GBP0.40 and
a 3 year maturity.
The following describes the nature and purpose of each reserve
within owners' equity.
Share capital Amount subscribed for share capital at no
par value
Treasury share reserve Cost of the Company's shares re-purchased
and held by the Group
Share based payment The share-based payment reserve represents
reserve amounts in previous and the current periods,
relating to share based payment transactions
granted as options/warrants and under the
Group's share option scheme (Note 16)
Total comprehensive Represents the cumulative net gains and
loss / (Total comprehensive losses recognised in the statement of comprehensive
income) income
The accompanying notes on pages 45 to 69 are an integral part of
these financial statements.
Consolidated Statement of Financial Position
As at 31 December 2021
2021 2020
Notes US$'000 US$'000
Assets
Unquoted financial assets
at fair value through profit
or loss 9 66,202 73,423
Loans and other receivables
at fair value through profit
or loss 10 5,556 34,390
Cash and cash equivalents 848 3,673
Total assets 72,606 111,486
--------- ---------
Liabilities
Other payables and accruals 12 1,010 1,530
--------- ---------
Current liabilities 1,010 1,530
--------- ---------
Loans & borrowings 13 3,568 3,504
--------- ---------
Total liabilities 4,578 5,034
--------- ---------
Net assets 68,028 106,452
========= =========
Equity and reserves
Share capital 14 148,903 148,903
Treasury share reserve 14 (615) (615)
Share based payment reserve 2,936 2,936
Accumulated losses (83,196) (44,772)
--------- ---------
Total equity and reserves
attributable to owners of
the parent 68,028 106,452
========= =========
The financial statements were approved by the Board of Directors
and authorised for issue on
29th June 2022 and signed on its behalf by:
John Croft
Executive Chairman
The accompanying notes on pages 45 to 69 are an integral part of
these financial statements.
Consolidated Cash Flow Statement
For the year ended 31 December 2021
2021 2020
US$'000 US$'000
Cash flows from operating activities
(Loss)/Profit before taxation (38,424) 1,643
Adjustments for:
Finance income (1,347) (1,336)
Finance expense 522 442
Foreign exchange 23 (197)
Fair value changes on unquoted financial
assets at fair value through profit
or loss 7,222 (5,923)
Fair value changes on loans and receivables
at fair value through profit or loss 30,459 -
Share-based expenses - 479
Decrease in other receivables (295) 776
Increase in other payables and accruals (520) 202
--------- --------
Net cash used in operating activities (2,359) (3,914)
--------- --------
Cash flows from investing activities
(Note A)
Purchase of unquoted financial assets
at fair value through profit or loss - (207)
Net cash used in investing activities - (207)
--------- --------
Cash flows from financing activities
(Note B)
Issue of shares net of issue costs - 2,367
Proceeds from loans and borrowings - 1,720
Payment of interest (459) (476)
Sale of treasury shares - 257
Purchase of treasury shares - (201)
--------- --------
Net cash (used in) / generated in
funding activities (459) 3,667
--------- --------
Net decrease in cash and cash equivalents (2,819) (454)
Cash and cash equivalents and net
debt at the beginning of the year 3,673 4,071
Foreign exchange on cash balances (6) 56
Cash and cash equivalents and net
debt at the end of the
year 848 3,673
========= ========
Note A - The following investing activities were undertaken
which did not require the use of cash and have been excluded
from the statement of cash flows:
2021 2020
US$'000 US$'000
Purchase of unquoted financial assets
- share interest in FMHL - (56)
Note B - The following financing activities were undertaken
which did not require the use of cash and have been excluded
from the statement of cash flows:
2021 2020
US$'000 US$'000
Issue of shares to minority investor
- share interest in FMHL - 56
Issue of shares to HCIL - 1,453
The accompanying notes on pages 45 to 69 are an integral
part of these financial statements.
Notes to the Financial Statements
For the year ended 31 December 2021
1. GENERAL INFORMATION
The Company is a limited (by shares) company incorporated in the
British Virgin Islands ("BVI") under the BVI Business Companies Act
2004 on 18 January 2008. The address of the registered office is
Commerce House, Wickhams Cay 1, PO Box 3140, Road Town, Tortola,
British Virgin Islands VG1110 and its principal place of business
is c/o Harmony Capital, 29/F, Level 29, Infinitus Plaza, 199 Des
Voeux Road Central, Hong Kong.
The Company is the holding company of a group of companies
comprising a subsidiary, Jade Road Investments (HK) Limited and a
number of wholly owned special purpose vehicles ("SPV") each of
which holds investments.
The Company is quoted on the AIM Market of the London Stock
Exchange (code: JADE) and the Quotation Board of the Open Market of
the Frankfurt Stock Exchange (code: 1CP1).
The Company is targeting delivery of income and capital gain
from a diversified mix of pan-Asian investments in the Small- and
Medium-Sized Enterprise ("SME") sector.
2. ACCOUNTING POLICIES
a) Basis of Preparation
The principal accounting policies adopted in the preparation of
the financial statements are set out below.
The Group's financial statements have been prepared in
accordance with International Financial Reporting Standards (IFRSs
and IFRIC interpretations) as adopted by the EU. The financial
statements have been prepared under the historical cost convention.
Financial instruments are measured at fair value at the end of each
reporting period.
Historical cost is generally based on the Fair Value of the
consideration given in exchange for goods and services.
Fair Value Measurements:
Fair Value is the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between
market participants at the measurement date under current market
conditions.
The Fair Value of investments is first based on quoted prices,
where available. Where quoted prices are not available, the Fair
Value is estimated using consistent valuation techniques across
periods of measurement.
The Group's private credit and equity investments are recorded
at Fair Value or at amounts whose carrying values approximate Fair
Value. Net gains and losses, including any interest or dividend
income, are recognised in its profit or loss statement.
In accordance with IFRS 13, Fair Value measurements are
categorised into Level I, II or III based on the degree to which
the inputs to the Fair Value measurements are observable and the
significance of the inputs to the Fair Value measurement in its
entirety. These are described as follows:
Level I Fair Value measurements are those derived from quoted
prices (unadjusted) in active markets for identical assets or
liabilities.
Level II Fair Value measurements are those derived from inputs
other than quoted prices included within Level I that are
observable for the assets or liability, either directly or
indirectly.
Level III Fair Value measurements are those derived from inputs
that are not based on observable market data.
b) Basis of Consolidation
The consolidated financial statements incorporate the financial
statements of the Company and entities (other than structured
entities) controlled by the Company. Control is achieved where the
Company:
-- has the power over the investee;
-- is expected, or has rights, to variable returns from its
involvement with the investee; and
-- has the ability to use its power to affect its returns.
The Company reassesses whether or not it controls a subsidiary
if facts and circumstances indicate that there are changes to one
or more of the three elements of control listed above.
The Company holds investments through a number of unlisted
wholly owned special purpose vehicles ("SPVs"). The directors have
considered the definition of an investment entity in IFRS10 and the
associated application guidance and consider that the Company meets
that definition. Consequently, the Group's investments in SPVs and
the underlying investments are accounted for at fair value through
profit and loss and the SPVs are not consolidated as subsidiaries.
Please see Note 4(o) Critical accounting estimates and judgements
for description of fair value methodology.
Consolidation of a subsidiary other than those held for
investment purposes begins when the Company obtains control over
the subsidiary and ceases when the Company loses control of the
subsidiary. Specifically, income and expenses of a subsidiary
acquired or disposed of during the year are included in the
consolidated statement of profit or loss and other comprehensive
income from the date the Company gains control until the date when
the Company ceases to control the subsidiary.
The results of subsidiaries acquired or disposed of during the
year are included in the consolidated statement of comprehensive
income from the effective date of acquisition and up to the
effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial
statements of subsidiaries to bring their accounting policies into
line with those used by other members of the Group.
All intra-group transactions, balances, income and expenses are
eliminated in full on consolidation. Associates are those entities
in which the Group has significant influence, but not control, over
the financial and operating activities.
Investments that are held as part of the Group's investment
portfolio are carried in the balance sheet at fair value even
though the Group may have significant influence over those
companies. This treatment is permitted by IAS 28 - Investment in
Associates, which requires investment held by venture organisations
to be excluded from its scope where those investments are
designated, upon initial recognition, as at fair value through
profit or loss and accounted for in accordance with IFRS9, with
changes in fair value recognised in the statement of comprehensive
income in the period of change. The Group has no interests in
associates through which it carries on its business.
c) Going Concern
The Company's primary source of income comprises finance charges
under debt instruments and, from time to time, realisations from
investment exits. The Company's expenses primarily consist of
advisory and incentive fees paid to the Investment Manager, part of
which are paid in shares, Directors' and professional fees. The
level of day-to-day overheads payable in cash is relatively low. In
addition, the Company makes investments by the issue of shares and
also by the application of cash reserves. Cash reserves are
enhanced from time to time by the issue of equity and the
realisation of portfolio investments. Investment decisions are made
based on detailed appraisals of the investment opportunity and also
on the Directors' assessment of the availability of any funding
requirement.
In considering the appropriateness of the going concern basis of
preparation, the Directors have reviewed the Group's working
capital forecasts for a minimum of 12 months from the date of the
approval of these financial statements. Following this assessment,
the Directors have reasonable expectation that the Group has
adequate resources to continue for the foreseeable future and that
carrying values of intangible assets are supported. Thus, they
continue to adopt the going concern basis of accounting in
preparing this financial information. Whilst the COVID-19 pandemic
may have an impact on the Company's ability to exit from some of
its investments, in the short to medium term, the Directors
assessment of going concern is not predicated on the availability
of cash proceeds from investment exits in the period.
d) Segment Reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the senior management and Board
members. The senior management and Board members, who are
responsible for allocating resources and assessing performance of
the operating segments, have been identified as the senior
management and Board members that make strategic decisions. The
Group is principally engaged in investment business, the Directors
consider there is only one business activity significant enough for
disclosure. This activity consists of entities which operate in two
geographical locations, i.e., BVI and Hong Kong.
e) Revenue Recognition
Revenue is recognised when it is probable that the economic
benefits will flow to the Group and when the revenue and costs, if
applicable, can be measured reliably and on the following
basis:
-- Dividend income is recognised when the Company's right to
receive payment is established.
-- Interest revenue is accrued on a time basis, by reference to
the principal outstanding and at the effective interest rate
applicable, which is the rate that exactly discounts estimated
future cash receipts through the expected life of the financial
asset to that asset's net carrying amount.
-- Fair value changes on financial assets represents the overall
changes in net assets from the investment portfolio net of
deal-related costs.
Other income comprised management recharges from the parent
company to its subsidiary which are eliminated on
consolidation.
f) Impairment of Non-Financial Assets
At each balance sheet date, the Group reviews internal and
external sources of information to determine whether its fixtures,
fittings and equipment and investment in subsidiaries have suffered
an impairment loss or impairment loss previously recognised no
longer exists or may be reduced. If any such indication exists, the
recoverable amount of the asset is estimated, based on the higher
of its fair value less costs to sell and value in use. Where it is
not possible to estimate the recoverable amount of an individual
asset, the Group estimates the recoverable amount of the smallest
group of assets that generates cash flows independently (i.e.,
cash-generating unit).
If the recoverable amount of an asset or a cash-generating unit
is estimated to be less than its carrying amount, the carrying
amount of the asset or cash-generating unit is reduced to its
recoverable amount. Impairment losses are recognised as an expense
immediately.
A reversal of impairment loss is limited to the carrying amount
of the asset or cash-generating unit that would have been
determined had no impairment loss been recognised in prior years.
Reversal of impairment loss is recognised as income
immediately.
g) Financial Instruments
Financial assets and financial liabilities are recognised on the
balance sheet when a group entity becomes a party to the
contractual provisions of the instrument. Financial assets and
financial liabilities are initially measured at fair value.
Financial assets at fair value through profit or loss includes
loans and receivables.
Transaction costs that are directly attributable to the
acquisition or issue of financial assets and financial liabilities
(other than financial assets and financial liabilities at fair
value through profit or loss) are added to or deducted from the
fair value of the financial assets or financial liabilities, as
appropriate, on initial recognition.
Transaction costs directly attributable to the acquisition of
financial assets or financial liabilities at fair value through
profit or loss are recognised immediately in profit or loss.
Financial assets are classified, at initial recognition, as
subsequently measured at amortised cost or fair value through
profit or loss. The classification of financial assets at initial
recognition depends on the financial asset's contractual cash flow
characteristics and the Group's business model for managing
them.
Unquoted Financial Assets:
Classification
The Group classifies its unquoted financial assets as financial
assets at fair value through profit or loss. These financial assets
are designated by the directors as at fair value through profit or
loss at inception.
Financial assets designated as at fair value through profit or
loss at inception are those that are managed as part of an
investment portfolio and their performance evaluated on a fair
value basis in accordance with the Group's Investment Strategy.
Recognition/Derecognition
Regular-way purchases and sales of investments are recognised on
the trade date - the date on which the Group commits to purchase or
sell the investment.
A fair value through profit or loss asset is derecognised when
the Group loses control over the contractual rights that comprise
that asset. This occurs when rights are realised, expire or are
surrendered and the rights to receive cash flows from the
investments have expired or the Group has transferred substantially
all risks and rewards of ownership. Realised gains and losses on
fair value through profit or loss assets sold are calculated as the
difference between the sales proceeds and cost. Fair value through
profit or loss assets that are derecognised and corresponding
receivables from the buyer for the payment are recognised as of the
date the Group has transacted an unconditional disposal of the
assets.
Measurement
Financial assets at fair value through profit or loss are
initially recognised at fair value. Transaction costs are expensed
through the profit or loss. Subsequent to initial recognition, all
financial assets at fair value through profit or loss are measured
at fair value in accordance with the Group's valuation policy, as
the Group's business is to invest in financial assets with a view
to profiting from their total return in the form of capital growth
and income. Gains and losses arising from changes in the fair value
of the financial assets at fair value through profit or loss are
presented in the period in which they arise. For more information
on valuation principles applied, please see section 4(o) Critical
Accounting Estimates.
Quoted Financial Assets:
The fair values of financial assets with standard terms and
conditions and traded on active liquid markets are determined with
reference to quoted market bid prices and are classified as current
assets. Purchases and sales of quoted investments are recognised on
the trade date where a contract of sale exists whose terms require
delivery within a time frame determined by the relevant market.
In the opinion of the Directors, cash flows arising from
transactions in equity investments represent cash flows from
investing activities.
Allowance for Expected Credit Losses:
An allowance for ECLs may be established for amounts due from
credit contracts within Loans and Receivables where evidence of
credit deterioration is observed. In order to assess credit
deterioration, the Group considers reasonable and supportable
information that is relevant and available without undue cost or
effort. This includes both quantitative and qualitative information
and analysis, based on its historical experience and informed
credit assessment, that includes forward-looking information. The
main factors considered include material financial deterioration of
the borrower, breach of contract such as default or delinquency in
interest or principal repayments, probability that a borrower will
enter bankruptcy or financial re-organisation and material decline
in the value of the underlying applicable security. ECL allowances
are distinguished from Likely Credit Loss ("LCL") allowances based
on the expectation of a loss. An LCL reserve is established when a
loss is both probable and the amount is known.
ECLs are a probability-weighted estimate of lifetime credit
losses. Under the ECL model, the Group calculates the allowance for
credit losses by considering on a discounted basis the cash
shortfalls it would incur in various default scenarios for
prescribed future periods and multiplying the shortfalls by the
probability of each scenario occurring. The allowance is the sum of
these probability weighted outcomes. Credit losses are measured as
the present value of all cash shortfalls (i.e., the difference
between the cash flows due to the entity in accordance with the
contract and the cash flows that the Group expects to receive) with
a discount factor applied.
Cash and Cash Equivalents:
For the purpose of the cash flow statement, cash equivalents
represent short-term highly liquid investments which are readily
convertible into known amounts of cash, and which are subject to an
insignificant risk of change in value, net of bank overdrafts.
Financial Liabilities
The Group's financial liabilities include other payables and
accruals and amounts due to related parties. All financial
liabilities except for derivatives are recognised initially at
their fair value and subsequently measured at amortised cost, using
effective interest method, unless the effect of discounting would
be insignificant, in which case they are stated at cost.
Equity Instruments
Equity instruments issued by the Group are recorded at the
proceeds received, net of direct issue costs.
h) Investment in Subsidiaries
Investments in subsidiaries are stated at cost less provision
for any impairment in value. Under IFRS 10, where the parent
company is qualified as an investment entity, the subsidiaries have
been deconsolidated from the Group financial statements.
i) Taxation
The charge for current income tax is based on the results for
the period as adjusted for items that are non-assessable or
disallowed. It is calculated using tax rates that have been enacted
or substantively enacted by the balance sheet date.
Deferred tax is provided, using the liability method, on all
temporary differences at the balance sheet date between the tax
bases of assets and liabilities and their carrying amounts in the
financial statements. However, if the deferred tax arises from
initial recognition of an asset or liability in a transaction other
than a business combination that at the time of the transaction
affects neither the accounting profit nor taxable profit or loss,
it is not accounted for.
The deferred tax liabilities and assets are measured at the tax
rates that are expected to apply to the period when the asset is
recovered or the liability is settled, based on tax rates and tax
laws that have been enacted or substantively enacted at the balance
sheet date. Deferred tax assets are recognised to the extent that
it is probable that future taxable profit will be available against
which the deductible temporary differences, tax losses and credits
can be recognised.
j) Leasing
At the lease commencement date, the Group recognises a
right-of-use asset and a lease liability, except for short-term
leases that have a lease term of 12 months or less and leases of
low-value assets, which are expensed to the profit & loss over
the expense term.
The right-of-use asset is initially recognised at cost, which
comprises the initial amount of the lease liability plus any lease
payments made at or before the commencement date, plus any initial
direct costs incurred, plus any costs associated with restoring the
asset to its original condition, less any lease incentive received.
The right-of-use asset is subsequently stated at cost less
accumulated depreciation and impairment losses.
Lease payments included in the measurement of the lease
liability comprise the following:
-- fixed payments, including in-substance fixed payments;
-- variable lease payments that depend on an index or rate,
initially measured using the index or rate at the commencement
date;
-- amounts expected to be payable under a residual value
guarantee; and
-- the exercise price under a purchase option that the group is
reasonably certain to exercise, lease payments in an optional
renewal period if the group is reasonably certain to exercise such
an option to extend and penalties for early termination of a lease
unless the group is reasonably certain not to terminate early.
The lease liability is measured at amortised cost using the
effective interest method. The liability recognised at inception of
the lease comprises the present value of future payments payable
under the lease contract, discounted at the rate implicit in the
lease. If there is no discount rate implicit in the lease, then the
incremental rate of borrowing is used. The liability is remeasured
when there is a change in future lease payments arising from a
change in an index or rate, or there is a change in the Group's
estimate of the amount expected to be payable under a residual
value guarantee, or there is a change arising from the reassessment
of whether the Group will be reasonably certain to exercise a
purchase, extension or termination option. When the lease liability
is remeasured in this way, a corresponding adjustment is made to
the carrying amount of the right-of-use asset, or is recorded in
profit or loss if carrying amount has been reduced to zero. The
Group presents lease liabilities within loans and borrowings within
the statement of financial position
k) Dividends
Dividends payable are recorded in the financial statements in
the period in which they meet the IAS 32 definition of having been
declared.
l) Share Based Payments
The Group has applied the requirements of IFRS 2 "Share Based
Payments". The Group issues share options/warrants as an incentive
to certain key management and staff (including Directors) and its
Investment Manager. The fair value of options/warrants granted to
Directors, management personnel, employees and Investment Manager
under the Company's share option/warrant scheme is recognised as an
expense with a corresponding credit to the share-based payment
reserve. The fair value is measured at grant date and spread over
the period during which the awards vest. The fair value is measured
using the Black Scholes Option pricing model.
The Group, on special occasions as determined by the Directors,
may issue options/warrants to key consultants, advisers and
suppliers in payment or part payment for services or supplies
provided to the Group. The fair value of options/warrants granted
is recognised as an expense with a corresponding credit to the
share-based payment reserve. The fair value is measured at grant
date and spread over the period during which the options/warrants
vest. The fair value is measured at the fair value of receivable
services or supplies.
The options/warrants issued by the Group are subject to both
market-based and non-market based vesting conditions.
Non-market vesting conditions are not taken into account when
estimating the fair value of awards as at grant date; such
conditions are taken into account through adjusting the equity
instruments that are expected to vest.
The proceeds received, net of any attributable transaction
costs, are credited to share capital when options/warrants are
converted into ordinary shares.
m) Earnings Per Share
The Group calculates both basic and diluted earnings per share
in accordance with IAS 33 "Earnings per Share". Under IAS 33, basic
earnings per share is computed using the weighted average number of
shares outstanding during the period. Diluted earnings per share is
computed using the weighted average number of shares during the
period plus the period dilutive effect of options outstanding
during the period. Potential ordinary shares are only treated as
dilutive if their conversion to shares would decrease earnings per
share or increase loss per share from continuing operations.
n) Share Issue Expenses
Share issue expenses are written off against the share capital
account arising on the issue of share capital.
o) Critical Accounting Estimates and Judgements
Preparation of financial statements in conformity with IFRS
requires management to make judgements, estimates and assumptions
that affect the application of accounting policies and the reported
amounts of assets, liabilities, income and expenses. The estimates
and associated assumptions are based on historical experience and
various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis of making
judgements about carrying values of assets and liabilities that are
not readily apparent from other sources.
In particular, significant areas of estimation, uncertainty and
critical judgements in applying accounting policies that have the
most significant effect on the amount recognised in the Financial
Statements are in the following areas:
Assessment of accounting treatment under IFRS 10, IFRS 12, and
IAS 27 - Investment entities
The directors have concluded that the Company meets the
definition of an Investment Entity because the Company:
a. obtains funds from one or more investors for the purpose of
providing those investor(s) with investment management
services;
b. commits to its investor(s) that its business purpose is to
invest funds solely for returns from capital appreciation,
investment income, or both; and
c. measures and evaluates the performance of substantially all
of its investments on a fair value basis.
The investment objective of the Company is to produce returns
from capital growth and to pay shareholders a dividend. The Group
has multiple unrelated investors and indirectly holds multiple
investments. Investment positions are in the form of structured
loans or equity instruments in private companies operating which is
valued on a fair value basis.
As a result, the unlisted open-ended investments, also referred
to as SPVs, and in which the Company invests in are not
consolidated in the Group financial statements.
Assessment of Accounting Treatment under IAS 28 - Investment in
Associates
The Group has taken advantage of the exemption under IAS28
Investments in Associates whereby IAS 28's requirements do not
apply to investments in associates held by venture capital
organisations. This exemption is conditional on the investments
being designated as at fair value through profit and loss or being
classified as held for trading upon initial recognition. Such
investments are measured at fair value with changes in fair value
being recognised in the income statement.
Valuation of Investments
The Group's investment portfolio includes a number of
investments in the form of structured loans or equity instruments
in private companies operating in emerging markets. Investee
companies are often at early or growth stages in their development
and operating in an environment of uncertainty in capital markets.
Should planned development prove successful, the value of the
Group's investment is likely to increase, although there can be no
guarantee that this will be the case. Should planned development
prove unsuccessful, there is a material risk that the Group's
investments may incur fair value losses. The carrying amounts of
investments are therefore highly sensitive to the assumption that
the strategies of these investee companies will be successfully
executed.
The Group has adopted a valuation policy with respect to its
portfolio of investments, based on the International Private Equity
and Venture Capital Valuation Guidelines ("IPEV Guidelines")
valuation practices to derive Fair Value (please see Note 2(a)
Basis of preparation for definition of Fair Value). The IPEV
Guidelines set out recommendations intended to represent current
best practices on the valuation of private capital (unlisted)
investments, as well as compliance with IFRS.
The majority of the Group's current and expected investments are
credit instruments and as such are likely to be valued based on
Level III principles (please see Note 2(a) Basis of preparation for
definition of Fair Value measurement categories). The inputs into
the determination of Fair Value require significant management
judgment or estimation and are subjective in nature. The types of
financial instruments generally included in this category are
private portfolio companies, real assets investments and credit
investments. Details of the Group's Level III valuation
methodologies per investment type are as follows:
Private Credit Investments
For credit-focused investments that are not publicly traded or
whose market prices are not readily available, the Group may
utilise the Discounted Cash Flow ("DCF") method or a Market
Approach. In valuing credit-focused investments, the Group
exercises prudent judgement. In addition, the Group exercises
judgment in selecting the appropriate valuation technique(s) most
appropriate for a credit-focused investment:
-- The DCF method projects the expected cash flows of the credit
instrument based on contractual terms and discounts such cash flows
back to the valuation date using a market-based yield. The
market-based yield is estimated using yields of publicly-traded
credit instruments issued by companies operating in similar
industries as the subject investment, with similar leverage
statistics and time to maturity.
-- The Market Approach is generally used to determine the
enterprise value of the issuer of a credit investment and considers
valuation multiples of comparable companies or transactions. The
resulting enterprise value will dictate whether or not such credit
investment has adequate enterprise value coverage. In cases of
distressed credit instruments, the market approach may be used to
estimate a recovery value in the event of a restructuring.
Private Equity Investments
The Fair Value of equity investments are determined by reference
to projected net earnings, earnings before interest, taxes,
depreciation and amortisation ("EBITDA"), the DCF method, public
market or private transactions, valuations for comparable companies
and other measures which, in many cases, are based on unaudited
information at the time received.
Valuations may be derived by reference to observable valuation
measures for comparable companies or transactions (for example,
multiplying a key performance metric of the investee company such
as EBITDA by a relevant valuation multiple observed in the range of
comparable companies or transactions), adjusted by management for
differences between the investment and the referenced comparables,
and in some instances by reference to option pricing models or
other similar methods. Where a DCF method is used, a terminal value
is derived by reference to EBITDA or price/earnings exit multiples.
The Group will exercise prudent judgment in valuing equity
investments and in selecting the appropriate Valuation Technique(s)
most appropriate for an equity investment.
Private Convertible & Quasi-Credit Instruments
Private convertible and quasi-credit instruments are hybrids of
credit and equity financing. The Fair Value of convertible credit
instruments, such as a Convertible Bond, may be determined as a
normal private credit instrument (taking into account features such
as mandatory / non-mandatory conversion features) or by (i) adding
the independent value of the straight credit instrument and (ii)
the independent value of the conversion option.
The independent value of the straight credit instrument may be
assessed using the DCF method or Market Approach described in
Private Credit Investments. The independent value of the conversion
option can be determined by first deriving the terminal value of
using the DCF method or the comparables method described Private
Equity Investments, then adjusting for any conversion premium or
discount, the conversion ratio and other conversion mechanisms.
Similarly, the Fair Value for quasi-credit instruments, such as
mezzanine financing, can be determined by adding the independent
value of the straight credit and the independent value of the
conversion option and/or embedded equity instrument features, such
as warrants. In valuing both private convertible and quasi-credit
instruments the Group exercises its prudent judgment.
Non-US$ Investments
The Group reports its performance in US$. Where this is
different from the currency in which the investment is denominated,
translation into US$ for reporting purposes is done using the
exchange rate prevailing at the Measurement Date.
p) Foreign currency translation
- Functional and Presentation Currency
Both the function and presentation currency of the Group's
entities are the United States Dollar. The financial statements are
presented in United States Dollars and rounded to the nearest
thousand dollars, except when otherwise indicated.
Transactions in foreign currencies are converted into the
functional currency on initial recognition, using the exchange
rates approximating those ruling at the transaction dates. Monetary
assets and liabilities at the end of the reporting period are
translated at the rates ruling as of that date. Non-monetary assets
and liabilities are translated using exchange rates that existed
when the values were determined. All exchange differences are
recognised in profit or loss.
- Group Companies
The results and financial position of all the Group entities,
including the parent company, (none of which has the currency of a
hyperinflationary economy) that have a functional currency
different from the presentation currency are translated into the
presentation currency as follows:
-- assets and liabilities for each balance sheet presented are
translated at the closing rate at the date of that balance
sheet;
-- income and expenses for each income statement are translated
at average exchange rates (unless this average is not a reasonable
approximation of the cumulative effect of the rates prevailing on
the transaction dates, in which case income and expenses are
translated at the rate on the dates of the transactions); and
-- all resulting exchange differences are recognised as a
separate component of equity.
New Standards, Amendments to Standards or Interpretations
adopted in these financial statements:
No standards, amendments or interpretations which became
effective from 1 January 2021 had an impact on the Group Financial
Statements.
At the date of approval of these financial statements, the
following standards and interpretations which have not been applied
in these financial statements were in issue but not yet effective
(and in some cases have not yet been adopted by the EU):
-- Amendments to IAS 1: Presentation of Financial Statements
Disclosure of accounting policies (effective 1 January 2023)*
-- Amendments to IAS 1: Presentation of Financial Statements
Classification of Liabilities as Current or Non-current (effective
date not yet confirmed)*
-- Amendments to IFRS 3: Business Combinations - Reference to
Conceptual Framework (effective 1 January 2022)*
-- Amendments to IAS 16: Property, Plant and Equipment (effective 1 January 2022)*
-- Amendments to IAS 37: Provisions, Contingent Liabilities and
Contingent Assets (effective 1 January 2022)*
-- Annual Improvements to IFRS Standards 2018-2020 Cycle (effective 1 January 2022)*
-- Amendments to IAS 8: Accounting Policies, Changes to
Accounting Estimates and Errors (effective 1 January 2023)*
-- Amendments to IAS 12: Income Taxes - Deferred Tax arising
from a Single Transaction (effective 1 January 2023)*
*subject to EU endorsement
The Directors do not expect that their adoption will have a
material impact on the financial statements of the company in
future years. The Directors continue to monitor the impact of
future changes to the reporting requirements but do not believe the
proposed changes will significantly impact the financial
statements.
3. SEGMENT INFORMATION
The operating segment has been determined and reviewed by the
senior management and Board members to be used to make strategic
decisions. The senior management and Board members consider there
to be a single business segment, being that of investing activity.
The reportable operating segment derives its revenue primarily from
structured equity and debt investment in several companies and
unquoted investments.
Senior management and Board members assess the performance of
the operating segments based on a measure of adjusted EBITDA. This
measurement basis excludes the effects of non-recurring expenditure
from the operating segments such as restructuring costs. The
measure also excludes the effects of equity-settled share-based
payments and unrealised gains/losses on financial instruments.
The amounts provided to the senior management and Board members
with respect to total assets are measured in a manner consistent
with that of the financial statements. These assets are allocated
based on the strategic operations of the segment.
The segment information provided to the Board for the reportable
operating segment is as follows:
Income statement: 2021 2020
Note US$'000 US$'000
Income on unquoted financial
assets 4 1,162 1,137
Financial income on loans
& receivables 6 1,347 1,336
Gross portfolio income 2,509 2,473
--------- --------
Expected credit loss provision 5 731 (529)
Other provisions 5 - (250)
Foreign exchange 4 (53) 215
Fair value adjustments 4 (38,840) 4,831
Portfolio income through
profit or loss (35,653) 6,740
Operating (loss)/profit
Net assets:
FMHL 50,400 50,400
Meize 8,200 8,200
GCCF - 2,745
DocDoc 2,592 2,395
ICG 1,343 2,346
Infinity TNP 3,650 7,320
Other 17 17
--------- --------
Unquoted assets at fair
value through the profit
or loss 66,202 73,423
--------- --------
Loans and other receivables
at fair value through the
profit or loss (third party) 5,556 34,390
Cash 848 3,673
Liabilities (4,578) (5,034)
--------- --------
Net assets 68,028 106,452
--------- --------
Gross portfolio income generated from the Company's investments
is derived from income from investments held through wholly owned
special purpose vehicles (Unquoted Financial Assets) and direct
investments (Loans & Receivables).
4. FAIR VALUE CHANGES ON FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
2021 2020
Unquoted Financial Assets US$'000 US$'000
Income through profit or
loss 1,162 1,137
Equity fair value adjustments:
- FMHL (583) 4,831
- GCCF (2,745)
- ICG (1,384) -
- Infinity TNP (3,670) -
-------- --------
(8,382) 4,831
Expected credit loss provision:
- ICG 27 (62)
Foreign exchange on unquoted
financial assets at fair
value through profit or loss (29) 17
Total fair value changes
on unquoted financial assets
at fair value through profit
or loss (7,222) 5,923
======== ========
2021 2020
Loans & Receivables financial
assets US$'000 US$'000
Income through profit or
loss 1,347 1,336
Fair value adjustments:
- FMHL (loan principal) (26,500) -
- FMHL (Accrued interest) (3,959) -
(30,459) -
Expected credit loss provision:
- FLMHL 704 (467)
Other movements 118 (342)
Foreign exchange on Loans
& Receivables at fair value
through profit or loss (21) 142
Total fair value changes
on Loans & Receivables at
fair value through profit
or loss (28,311) 669
========= ========
The impact of foreign exchange on the investments in the
portfolio is as follows:
2021 2020
US$'000 US$'000
FMHL (29) 17
Meize - -
GCCF - -
DocDoc - -
-------- --------
Foreign exchange on unquoted
financial assets at fair
value through profit or loss (29) 17
CJRE (16) 112
FLMH - -
Other receivables (2) 30
-------- --------
Foreign exchange on loans
and receivables (18) 142
Cash (6) 56
-------- --------
Foreign exchange on portfolio (53) 215
======== ========
5. OPERATING LOSS
Operating loss is stated after charging expenses:
2021 2020
US$'000 US$'000
Investment Manager fee 1,861 1,888
Investment Manager incentive
fee (424) 1,750
Expected credit loss provision (731) 529
Fees to the Group's auditor
for audit of the
Company and its subsidiaries 55 55
Directors' remuneration 309 256
Professional fees 366 580
Promotion and marketing 16 40
Business travel expenses 11 24
Bank charges 13 16
Foreign exchange (1) 5
Other expenses 43 41
-------- --------
Total expenses 1,518 5,184
======== ========
The Investment Manager's incentive fee is only payable in any
given year depending on the performance of the Company's net asset
value. The charge above is a result of warrants owed (not yet
issued) revalued to their prevailing share price at 31 December
2021. (also see Note 17).
6. NET FINANCE INCOME
2021 2020
US$'000 US$'000
Interest from financial
assets measured at fair
value through profit and
loss 1,347 1,336
-------- --------
Finance income 1,347 1,336
-------- --------
Interest payable on debt (522) (442)
Interest expense on lease
liabilities - -
------ ------
Finance cost (522) (442)
------ ------
Net finance income 825 894
====== ======
Finance income in the year is from the Convertible Bond issued
by Fook Lam Moon Holdings.
7. DIRECTORS' REMUNERATION
Short term employment benefits 2021 2020
US$ US$
John Croft 156,137 122,422
Hugh Trenchard 49,572 44,405
Lee George Lam 46,305 44,482
Stuart Crocker 56,567 44,405
308,581 255,714
-------- --------
Directors' remuneration includes all applicable social security
payments. There was no pension cost incurred during 2021 (2020:US$
Nil).
There are no employees within the group other than the Directors
(2020: Nil)
8. TAXATION
The Company is incorporated in the BVI and is not subject to any
income tax.
9. UNQUOTED FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
2021 2021 2020 2020
Unquoted Loans Unquoted Loans and
financial and financial receivables
assets receivables assets
US$'000 US$'000 US$'000 US$'000
Balance as at 1 January 73,423 34,390 67,172 33,720
Additions - - 264 70
Cash receipts - (417) (81) -
Reclassification - - 156 (156)
Fair value changes through
profit or loss (7,248) (30,468) 5,975 (114)
ECL 27 704 (62) (467)
Finance income on loans - 1,347 - 1,337
Balance as at 31 December 66,202 5,556 73,423 34,390
----------- ------------- ----------- -------------
The Group values its investments at fair value through profit or
loss, as prescribed by the investment methodology
adopted by the Board which is summarised in Note 2(o) Critical
accounting estimates and judgements.
Future Metal Holdings Limited
The Company holds an 84.8% interest in Linfen Zhuangpeng
Magnesium Co. Ltd, which owns a dolomite magnesium limestone quarry
operation in the province of Shanxi, China.
During 1Q 2021, the Quarry engaged a new mining contractor to
carry out production. The product quality and sales have been
improved since then.
In June 2021, several mining accidents occurred in Shanxi
Province. Given this, all mining assets in the province, including
our Quarry, were required to immediately suspend operations. In
early August 2021, after a thorough review and site visits by local
officials, it was approved for the Quarry to recommence
operations.
Currently, the products of the Quarry are mainly for
construction purposes. However, the market observed a surge in
magnesium's price in 2021, driven by the increasing costs from raw
material prices, such as coal and ferrosilicon, and the reduced
supply resulting from the shutdown or maintenance of magnesium
smelters in China. The local Management Team of the Quarry has been
actively reaching out to different smelting plants in nearby
cities/counties to seek potential collaborations and establish
sales channels.
Including loan disbursements provided by the Company to Future
Metal Holdings and its subsidiaries and accrued PIK interest, the
estimated fair value of the Company's investment is US$50.4 million
as of 31 December 2021. (2020: US$50.4 million)
Fook Lam Moon Holdings Limited
The Company holds a Convertible Bond of US$26.5 million in FLMH.
The Convertible Bond has a maturity of 5 years and pays a coupon of
5.0% per annum (3.0% paid in cash payable quarterly with the
remainder rolled up with the principal amount outstanding).
In late 2021, JADE became aware that the underlying group
structure of FLM may have changed such that FLMH is no longer the
71% owned controlling shareholder in the Hong Kong based restaurant
group.
The Company is actively working to secure more information to
clearly understand what potential impact this ownership change may
have on the value attributed to the Convertible Bond and the level
of any new ownership in the Restaurant Group.
In order to be prudent, the Company decided to apply a 100%
provision against this investment. As of 31 December 2021, the
carrying value of the Convertible Bond was US$0.0 million (2020:
US$28.4 million).
Meize Energy Industries Holdings Limited
Swift Wealth Investments Limited, a 100% (2020: 100%) owned
subsidiary of the Company incorporated in the British Virgin
Islands, holds a 7.2% stake in Meize through a redeemable
preference share structure.
Meize has three production facilities, which are located in
Inner Mongolia, Ningxia Province and Jiangsu Province. The
factories in Inner Mongolia and Ningxia Province produce wind
blades for onshore wind farms. The Jiangsu plant produces wind
blades for offshore wind farms.
Meize's Jiangsu plant, including its Phase II expansion,
operated at full capacity in 2021 due to the strong demand from the
offshore wind market. Due to high order volumes for offshore wind
blades, the Jiangsu site operated 24/7, with staff working in 3
shifts, to fulfil orders from clients.
In 2021, JADE had discussions with Meize regarding a partial
divestment. Initial consent on the transaction has been achieved.
Currently, both parties are finalising legal documents for the
partial divestment.
As of 31 December 2021, the Company's interest in Meize had a
fair value of US$8.2 million (2020: US$8.2 million).
DocDoc Pte Ltd
Eastern Champion Limited, a 100% (2020: 100%) owned subsidiary
of the Company incorporated in the British Virgin Islands, holds a
Convertible Bond in DocDoc.
DocDoc is a privately owned company operating in the healthtech
space across Asia and it is headquartered in Singapore. It is
Asia's leading patient empowerment company with a presence in over
8 countries and more than 23,000 doctors listed on its doctor
discovery platform. The company uses artificial intelligence to
find the right medical professional for patients as well as to
provide access to qualified professionals who initially assess the
patients' needs.
Since 2021, DocDoc has pivoted its business model to become a
"Neo Insurer" and currently is in discussion with various insurance
companies for potential business collaboration.
As of 31 December 2021, the carrying value of the Convertible
Bond was US$2.6 million taking into PIK interest accrued and cash
interest receivable (2020: US$2.4 million)
Infinity Capital Group ("ICG")
Ultimate Prosperity Limited, a 100% owned subsidiary of the
Company incorporated in the British Virgin Islands, holds a Secured
Loan to ICG.
ICG develops premium residential projects in Hirafu Village, a
world-class ski village in Niseko, Japan - one of the most popular
winter travel destinations in the world.
As COVID-19 continues to have a severe impact on the hospitality
industry in Japan, there are no material business updates regarding
this portfolio company in 2021. We will continue to monitor the
pandemic situation and expect the business to be resumed once the
border is open and tourism rebounds.
In order to be prudent, the Company decided to apply a 50%
provision against this investment. As at 31 December 2021 the
carrying value of the Secured Loan was US$1.4 million taking into
account cash interest receivable (2020: US$2.6 million).
The Company also received shares of Ultima United Limited
(Listed on ASX) having fair value of US$0.5 million as at year end,
as additional security for the outstanding cash interest
receivable. These shares are to be returned on receipt of the
outstanding interest. These shares are not reflected in the
financial statements as they do not meet the definition of a
financial asset under IFRS 9.
Infinity TNP
In November 2019, the Company acquired 40% of ICG's wholly owned
subsidiary Infinity TNP, which holds units in a luxury hotel
condominium called Tellus Niseko, in exchange for US$7.2m in shares
in the Company.
Tellus Niseko is a unique development in Hirafu Village, with
its high-end concierge service, a Michelin star chef-managed
restaurant, in-room onsen (hot spring) baths and prime location
just minutes away from the Grand Hirafu ski lifts.
The occupancy at Tellus Niseko in 2021 has been negatively
impacted by the spread of COVID-19 in Japan. Local management has
monitored the COVID-19 situation in Japan closely and implemented a
series of measures at the property to ensure guests' safety and
hygiene.
In order to be prudent, the Company decides to apply a 50%
provision against this investment. As of 31 December 2021, the
carrying value of its investment was US$3.6 million. (2020: US$7.3
million).
Legacy Portfolio Investments:
Greater China Credit Fund LP (the "GCCF")
The Company invested in GCCF in 2013, a private equity
investment fund launched by Adamas Asset Management (HK) Limited
("Adamas"), a Hong Kong-based investment management firm. The fund
targets high-return investments in Small and Medium Enterprises
("SMEs") predominantly in Greater China.
In order to be prudent, the Company decides to apply a 100%
provision against this investment. As of 31 December 2021, the
Company's interest in GCCF has an allocated fair value of US$0.0
million (2020: US$2.8 million) within the legacy portfolio.
Changtai Jinhongbang Real Estate Development Co. Ltd
("CJRE")
Lead Winner Limited ("LWL") is a 100% (2020: 100%) owned
subsidiary of the Company incorporated in the British Virgin
Islands.
LWL held a 15% stake in CJRE, the owner of a luxury resort and
residential development project in Fujian Province, Eastern China.
The Company divested its entire investment in 2017, however, the
transaction was structured such that an outstanding amount of
RMB12.0 million (approximately US$1.8 million), remained receivable
on or before 21 December 2018. This 'tail' payment from the
original divestment was characterised as a loan and was dependent
on CJRE itself receiving funds from the underlying project which
was being developed.
CJRE has launched a lawsuit against the buyer in November 2021
to claim end payment. Once this payment is received by CJRE, it is
the Company's expectation that the outstanding loan will be repaid
in full. The Company is working closely with CJRE to recover the
amount owed and it has received confirmation of the outstanding
amount with a good faith undertaking to ensure it is settled as
soon as funds are received from the underlying project.
As at 31 December 2021, the fair value of the loan was US$1.8
million (2020: US$1.8 million).
SPVs
The unlisted open-ended investments below are defined as SPVs
and are reported at the fair value of their underlying investments
described above at 31 December 2021.
Country
of Percentage
Name of SPV Incorporation owned Principal activities
2021 2020
Lead Winner Limited BVI 100% 100% Investment Holdings
Dynamite Win Limited BVI 100% 100% Investment Holdings
Future Metal Holdings
Limited BVI 100% 100% Investment Holdings
Swift Wealth Investments
Limited BVI 100% 100% Investment Holdings
Ultimate Prosperity
Limited BVI 100% 100% Investment Holdings
TNP Asia Limited BVI 100% 100% Investment Holdings
Further details of financial assets are set out in Note 15, and
investment valuation methodologies are set out in Note 2(o)
Critical accounting estimates and judgements.
10. LOANS AND OTHER RECEIVABLES AT FAIR VALUE THROUGH PROFIT OR LOSS
2021 2020
US$'000 US$'000
Loans - 28,408
Other receivables 5,556 5,982
Amounts receivable from related
parties - -
-------- --------
5,556 34,390
======== ========
As at 31 December 2021, Loans represent the Convertible Bond
issued by Fook Lam Moon Holdings plus accrued Paid-in-Kind ("PIK")
and cash interest. The Group has assessed the recoverability of
Loans in accordance with its policy and has decided to provide
against the full value of the convertible debt and accrued
interest. This has been recognised as a fair value adjustment
through profit or loss. The Expected Credit Allowance ("ECL")
allowance associated with the cash interest payable has been
released to profit or loss in full.
2021 2020
US$'000 US$'000
Loan principal 26,500 26,500
Accrued PIK interest 1,685 1,132
Accrued interest payable in cash 2,274 1,479
Fair Value Adjustments - Principal (26,500) -
Fair Value Adjustments - Accrued
Interest (3,959) -
--------- --------
Gross loans receivable - 29,111
--------- --------
Less lifetime ECL allowance recognized - (704)
Net loans receivable - 28,407
--------- --------
Reconciliation of ECL allowance balance:
2021
US$'000
Balance as at 1
January 704
ECL allowance released
to profit or loss (704)
--------
Balance as at 31
December -
--------
Other receivables include a US$3.7 million loan provided by the
Company but that was disbursed by the issuance of Company shares to
CASIL, a former minority shareholder, in return for the
cancellation of a put option which CASIL had been granted in the
past against FMHL.
12. OTHER PAYABLES AND ACCRUALS
2021 2020
US$'000 US$'000
Accounts payable 870 6
Accruals 140 1,524
----------- -----------
Other payables and accruals 1,010 1,530
=========== ===========
13. LOANS AND BORROWINGS
2021 2020
US$'000 US$'000
Corporate debt 3,568 3,504
Loans and borrowings 3,568 3,504
======== ========
i. Terms and conditions of the outstanding debt is as follows:
Interest Year
Currency rate of maturity
Secured loan notes US$ 12.5% 2022
The corporate debt US$3.5 million are proceeds from loan notes
issued to a family office investor, with a related debenture which
constitutes a fixed and floating charge over the assets and
undertakings of the Company. There are US$ 0.1m capitalised debt
issue costs, being amortised over the term of the debt.
ii. Reconciliation of movements of liabilities & equity to
cashflows arising from financing activities
Loans & Share capital/ Treasury
borrowings premium reserve
US$'000 US$'000 US$'000
Opening balance at 1 January
2021 3,504 148,903 (615)
Changes from cashflows
Payment of interest (459)
------------ --------------- ---------
Total changes from financing
cashflows (459) - -
------------ --------------- ---------
Other changes:
Interest expense 522
------------ --------------- ---------
Total other changes to
liabilities 522 - -
------------ --------------- ---------
Closing balance at 31
December 2021 3,568 148,903 (615)
============ =============== =========
14. SHARE CAPITAL AND TREASURY SHARE RESERVE
Share capital
Number of shares amount
US$'000
Authorised, called-up and fully
paid ordinary shares of no par
value each at 1 January 2020 101,595,575 144,356
----------------- --------
Share issuance minor shareholder
of FMHL June 2020 159,847 57
Sale of treasury shares February
2020 1,264,000 257
Purchase of treasury shares September
2020 (595,000) (201)
Share issue October 2020 - open
offer and placement 8,356,663 2,699
Share issue October 2020 - HCIL
incentive fees 4,496,784 1,453
Share issue costs October 2020 - (333)
----------------- --------
Issued share capital excluding
treasury shares at 31 December
2020 115,277,869 148,288
================= ========
Issued share capital excluding
treasury shares at 31 December
2021 115,277,869 148,288
================= ========
Consisting of:
Authorised, called-up and fully
paid ordinary shares of no par
value each at 31 December 2021 117,925,673 148,903
Authorised, called-up and fully
paid ordinary shares of no par
value held as treasury shares
by the Company at 31 December
2021 (2,647,804) (615)
================= ========
15. FINANCIAL INSTRUMENTS
Financial Risk Management Objectives and Policies
Management has adopted certain policies on financial risk
management with the objective of ensuring that:
(i) appropriate funding strategies are adopted to meet the
Company's and Group's short-term and long-term funding requirements
taking into consideration the cost of funding, gearing levels, and
cash flow projections;
(ii) appropriate strategies are also adopted to manage related
interest and currency risk funding; and
(iii) credit risks on receivables are properly managed.
Financial instruments by category
The accounting policies for financial instruments have been
applied to the line items below:
Financial assets
2021 2020
US$'000 US$'000
Unquoted financial assets
at fair value 66,202 73,423
Loans at fair value - 28,408
Other receivables at fair
value 5,521 5,956
Cash and cash equivalents 848 3,673
-------- --------
Financial assets 72,571 111,460
======== ========
Financial liabilities
2021 2020
US$'000 US$'000
Other payables and accruals
at amortised cost 1,010 1,530
Corporate debt at amortised
cost 3,568 3,504
---------- ----------
Financial liabilities 4,578 5,034
========== ==========
The Corporate Bond is due for repayment in October 2022. All
other financial liabilities are due within 12 months.
Financial assets at fair value through profit or loss
The following table provides an analysis of financial
instruments that are measured subsequent to initial recognition at
fair value, grouped into Levels 1, 2, or 3 based on the degree to
which the fair value is observable as described in Note 2(a) Basis
of preparation:
2021 2020
US$'000 US$'000
Level 3
Unquoted financial assets at fair value
through profit or loss (Note 9) 66,202 73,423
Loans and other receivables at fair value
through the profit or loss (Note 9) 5,556 34,390
-------- --------
71,757 107,813
-------- --------
There were no transfers between levels in the current period.
Carrying values of all financial assets and liabilities are
approximate to fair values.
Significant unobservable inputs used in measuring fair value -
Level 3
Description Fair value at Fair value Valuation Significant Relationship
31 Dec 2021 US$'000 hierarchy technique unobservable of unobservable
input(s) inputs to
fair value
------------------- ----------- ---------------- ------------------- -------------------
84.81% equity Level 3 Income Risk appropriate The higher
investment Approach market-based the discount
in Future Metal - in this discount rate applied,
Holdings Limited approach, rate applied, the lower
engaged in mining the discounted ranging from the fair
project - US$50.4m; cash flow 15.0-25.0% value.
(2020: US$50.4m) method (2020: 15.0-25.0%)
was used
to capture
the present
value of
the expected
future
economic
benefits
to be derived
from the
ownership
of these
investments.
Private equity
investments 7.2% preferred
equity investment
in Meize Energy
Industries Holdings
Limited engaged
in designing and
manufacturing blades
for wind turbines
- US$8.2m; (2020:
US$8.2m)
40% equity investment
(with guaranteed
income yield) in
Infinity TNP, holding
units in luxury
hotel condominium
Tellus Niseko -
$3.6m; (2020: US$7.3m)
Level 3 Unadjusted Not applicable Not applicable
Private credit NAV
fund - Greater
China Credit Fund
LP US$0.0m ; (2020:
US$ 2.8 m)
Credit investments Level 3 Income Revenue and Not applicable
Convertible Bond Approach expense growth
- Fook Lam Moon - see above rate 5% -
US$0.0m 10%, discount
(2020: US$28.4m) rate 6%
----------- ----------------
Secured Loan Notes
- Infinity Capital
Group US$1.4m
(2020:US$2.3m)
------------------------ ----------- ---------------- -----------------------
The above table sets out information about significant
unobservable inputs used at 31 December 2021 in measuring material
financial instruments categorised as Level 3 in the fair value
hierarchy.
The discount of 17% (2020: 17%) is applied to the externally
derived Project Value in estimating fair value of the investment in
FMHL is a key unobservable input into the valuation model. In the
event that other possible discounts had been applied the impact on
carrying value of the investment would be as follows:
Discount rate applied Impact on carrying value (US$
million)
10% 4.4
------------------------------
25% (5.1)
------------------------------
30% (8.2)
------------------------------
35% (11.4)
------------------------------
Credit Risk
The Group's credit risk is primarily attributable to other
receivables. Management has a credit policy in place and the
exposure to credit risks are monitored on an ongoing basis.
In respect of other receivables, individual credit evaluations
are performed whenever necessary. During the year, an ECL provision
was recognised in respect of aged interest on the Convertible Bond
issued to Fook Lam Moon, see Note 10 for details.
The Group's maximum exposure to credit risk is represented by
the total financial assets held by the Group.
Interest Rate Risks
The Group currently operates with positive cash and cash
equivalents as a result of issuing share capital and corporate debt
in anticipation of future funding requirements.
Other receivables bear interest at a fixed annual rate,
therefore there is no exposure to market interest rate risk on
these financial assets. The effect of a 10% increase or fall in
interest rates obtainable on cash and on short-term deposits would
be to increase or decrease the Group's operating results by not
more than US$1,000 (2020: US$1,000).
The Group has a US$10 million debt facility with a private
family office investor, under which the Company has issued US$3.6
million loan notes, with an associated fixed interest rate of 12.5%
for a term of 3 years. As the interest rate has been fixed for the
term of the facility, there is no interest rate risk associated
with the instruments.
Liquidity Risk
The Group manages its liquidity requirements by the use of both
short-term and long-term cash flow forecasts. The Group's policy to
ensure facilities are available as required is to issue equity
share capital and/or loan notes in accordance with long-term cash
flow forecasts.
The Group's financial liabilities are primarily operational
costs and debt instruments. All operational costs are due for
payment in accordance with agreed settlement terms with
professional firms, and all are due within one year. Debt principal
and related interest are due for settlement in October 2022.
Price and Valuation Risks
The Group's investment portfolio is susceptible to risk arising
from uncertainties about future values of the investment
securities, either in relation to market prices (for quoted
securities) or fair values (for unquoted securities). This risk is
that the fair value or future cash flows will fluctuate because of
changes in market prices or valuations, whether those changes are
caused by factors specific to the individual investment or
financial instrument or its holder or factors affecting all similar
financial instruments or investments traded in the market. The
Group's investment committee provides the Board of Directors with
investment recommendations that are consistent with the Group's
objectives. The investment committee recommendations are carefully
reviewed by the Board of Directors before the investment decisions
are implemented.
During the year under review, the Group did not hedge against
movements in the value of its investments. A 10% increase/decrease
in the fair value of investments would result in an US$11.0m (2020:
US$11.0m) increase/ decrease in the net asset value.
While investments in companies whose business operations are
based in China may offer the opportunity for significant capital
gains, such investments also involve a degree of business and
financial risk, in particular for unquoted investment.
Generally, the Group prepares to hold the unquoted investments
for a middle to long term time frame, in particular, if admission
to trading on a stock exchange is considered likely in the future.
Sales of securities in unquoted investments may result in a
discount to the book value at the time of future disposal.
Currency Risks
Management considers that foreign currency exposure is not
significant to the Group and as such, there is no hedging of
foreign currencies.
Capital Management
The Group's financial strategy is to utilise its resources to
further grow the Group's portfolio. The Group keeps investors and
the market informed of its progress with its portfolio through
regular announcements and raises additional equity finance at
appropriate times when market conditions allow.
The Company regularly reviews and manages its capital structure
for the portfolio companies to maintain a balance between the
higher shareholder returns that might be possible with certain
levels of borrowings for the portfolio and the advantages and
security afforded by a sound capital position, and makes
adjustments to the capital structure of the portfolio in the light
of changes in economic conditions.
The capital structure of the Company and the Group consists of
cash and cash equivalents, loans and equity comprising issued
capital and reserves.
16. SHARE BASED PAYMENTS
16.1 Ownership-Based Compensation Scheme for Senior
Management
The Group has an ownership-based compensation scheme for senior
management of the Group. In accordance with the provisions of the
plan, senior management may be granted warrants to purchase
ordinary shares. Each warrant converts into one ordinary share of
Jade Road Investments Limited on exercise. No amounts are paid or
payable by the recipient of the warrants. The warrants carry
neither rights to dividends nor voting rights. Warrants may be
exercised at any time from the date of vesting to the date of their
expiry.
At 31 December 2021, there were 1,907,882 warrants outstanding,
issued to the Company's Directors in previous periods in respect of
services provided to the Group with at an exercise price of US$1.21
per share, equivalent to GBP0.89 at 31 December 2021. The warrants
will expire in 2027, 10 years after the date of grant. All warrants
are equity-settled and may be exercised at any time from the date
of grant to the date of their expiry.
In the event that a Director's appointment is terminated for any
reason, then in such circumstances each Director's subscription
rights shall, to the extent he/she has not been issued or exercised
either (i) prior to the date of termination (Date of Termination);
or (ii) within the period of 60 days immediately following the Date
of Termination, be immediately cancelled.
16.2 Equity Compensation Scheme for Harmony Capital Investors
Limited (the " Investment Manager ")
The Group has an equity compensation scheme for Investment
Manager of the Group. In accordance with the provision of the
scheme, the Investment Manager is granted warrants to subscribe for
20 million (before share consolidation undertaken by the Company on
20 September 2017) ordinary shares, which is to be issued in five
equal tranches. No amounts are paid or payable by the recipient of
the warrants. The warrants carry neither rights to dividends nor
voting rights. Warrants may be exercised at any time from the date
of vesting to the date of their expiry. Any equity compensation
shares issued to or acquired by Investment Manager are subject to
an orderly market period, which is 12 months after each date of
issue. During each orderly market period, the Investment Manager
undertakes to the Company and the broker not to effect a disposal
of the relevant shares unless the Investment Manager gives written
notice to do so.
All warrants are equity-settled, the only conditions for all
warrants granted is that the warrants holder remains in the office
when exercises.
The number of warrants due to the Investment Manager to
subscribe for ordinary shares in respect of services provided to
the Group were recalculated pursuant to paragraph 2 of Section 2 of
the warrant instruction to reflect the share consolidation
undertaken by the Company on 20 September 2017. The warrants have
an exercise price of US$1.21 per share, equivalent to GBP0.89 at 31
December 2021. The warrants will expire 10 years after the date of
grant. In total the Investment Manager owns 8,000,000 warrants as
at 31 December 2021 (2020: 8,000,000).
2021 2020
Weighted Weighted
average average
exercise exercise
Number Number price Number Number price
of options of warrants US$ of options of warrants US$
Balance at beginning
of the financial
year - 17,567,663 0.84 - 9,600,000 1.21
Issuance during
the financial year
* Investment manager - - - - - -
* Directors - - - - - -
* Shareholders - - - - 7, 967,663 0.40
Expired during the
financial year - - - - - -
------------- ------------- ---------- ------------ ------------- ----------
Balance at end of
financial year - 17,567,663 0.84 - 17,567,663 0.84
------------- ------------- ---------- ------------ ------------- ----------
Exercisable at end
of financial year - 17,567,663 0.84 - 17,567,663 0.84
The weighted-average remaining contractual life of outstanding
warrants at 31 December 2021 was 4 years and 3 months (2020: 6
years and 10 months). During the year there has been a
charge/(credit) of $(0.4) (2020: $1.8m relating to share-based
compensation of the Investment Manager. This relates to the
revaluation of the shares issued yet to issued to HCIL in respect
of the 2020 accrued incentive fee, due to the price at grant being
lower than the accrued price. There was no incentive fee charged in
2021.
16.3 Equity-Settled Share-Based Payment for Investment Manager
as Incentive Fee
Investment Manager is entitled to receive an incentive fee from
the Company in the event that the audited net asset value for each
year is (1) equal to or greater than the audited net asset value
for the last year in relation to which an incentive fee became
payable ("High Water Mark"); and (2) in excess of 105% of the
audited net asset value as at the last calendar year end ("the
Hurdle"). Subject to the High Water Mark and Hurdle being excessed
in respect of any calendar year, the incentive fee will be equal to
20% of the difference between the current year end NAV and the
previous year end NAV. 50% of the incentive fee shall be paid in
cash and the remaining 50% of the incentive fee shall be paid by
ordinary shares.
The remaining 50% of incentive fee ("Equity Compensation
Amount") shall be satisfied by the Company issuing to Investment
Manager such number of ordinary shares as have a Fair Market Value
which in aggregate is equal to the Equity Compensation Amount. The
Fair Market Value is the closing Volume Weighted Average Price
("VWAP") for the ordinary shares trading on AIM for the ninety
prior trading days as at the relevant calculation period year end,
i.e., 31 December 2017. The shares issued to or acquired as
incentive fee by Investment Manager is subject to an orderly market
period, which is 12 months after each date of issue. During each
orderly market period, Investment Manager undertakes to the Company
and the broker not to effect a disposal of the relevant shares
unless the Investment Manager gives written notice to do so.
No incentive fee was accrued in 2021 (2020: $1.3m).
17. RELATED PARTY TRANSACTIONS
During the year, the Company and the Group entered into the
following transactions with related parties and connected parties
under existing contracts:
2021 2020
Notes US$'000 US$'000
Remuneration payable to Directors
(see Note 7) (i) 309 256
Harmony Capital Investors Limited (ii)
- Management fee 1,861 1,888
- Incentive fee (424) 1,750
Amount due to Harmony Capital Investors
Limited at 31 December 865 1,289
Note: Incentive Fee includes:
- US$0.461 million adjustment expense for the FYE2019 Incentive
Fee to Harmony Capital paid in shares. The Incentive Fee was
calculated using a 90-day volume weighted average share price as of
the year-end 2019 but as the Incentive Fee shares were issued in
4Q2020, there was a c.47% share price increase at the issue date.
Shares are valued at the point at which they are issued (as opposed
to a historical rate), thus, this is reflected as a charge in 2020.
A credit of $(0.424) was recognized in respect of shares yet to be
issued, revalued as at 31 December 2021.
(i) The key management personnel of the Company are considered
to be the Directors and appropriate disclosure with respect to them
is made in Note 7 of the financial statements. There are no other
contracts of significance in which any Director has or had during
the year a material interest.
(ii) Harmony Capital Investors Limited is the Investment Manager
of the Group. The management fee, which was calculated and paid
bi-annually in advance calculated at a rate of 0.875% of the net
asset value of the Group's portfolio of assets as at 30 June and 31
December in each calendar year.
Harmony Capital Investors Limited is entitled to receive an
incentive fee from the Company in the event that the audited net
asset value for each year is (1) equal to or greater than the
audited net asset value for the last year in relation to which an
incentive fee became payable ("High Water Mark"); and (2) in excess
of 105% of the audited net asset value as at the last calendar year
end ("the Hurdle"). Subject to the High Water Mark and Hurdle being
excessed in respect of any calendar year, the incentive fee will be
equal to 20% of the difference between the current year end NAV and
the previous year end NAV. 50% of incentive fee shall be paid in
cash and the remaining 50% of incentive fee shall be paid by
ordinary shares.
18. EARNINGS PER SHARE
The calculation of the basic and diluted profit/(loss) per share
attributable to the ordinary equity holders of the Company is based
on the following:
2021 2020
US$'000 US$'000
Numerator
Basic/Diluted: Net (Loss)/Profit (38,424) 1,643
--------- -----------
No. of No. of
shares shares
'000 '000
Denominator
Basic: Weighted average shares 115,278 105,518
Dilutive effect of
warrants - 17,568
Adjusted weighted
Diluted: average shares 115,278 123,086
--------- -----------
Earnings per
share:
Basic (33.33) 1.56 cents
cents
--------- -----------
Diluted (33.33) 1.34 cents
cents
--------- -----------
Treasury shares issued by the company totaling 2,647,804 as at
the reporting date, have been excluded from the weighted average
shares calculation.
19. EVENTS AFTER THE REPORTING PERIOD
On the 22nd of June, Jade Road announced (RNS Number: 7646P) it
has successfully negotiated a partial divestment in Meize Energy
Industries Holdings Limited ("Meize"), currently the third-largest
holding in the Company's portfolio (7.7% of NAV as at
announcement). The company has entered into a share purchase
agreement ("SPA") for 112,500 shares of the Series B Preferred
Equity in Meize for consideration of USD1.2 million (the
"Transaction Price"). Before the release of this RNS, the Company
had received the First Tranche Price of USD400,000.
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END
FR FFFEIRFIAFIF
(END) Dow Jones Newswires
June 30, 2022 02:00 ET (06:00 GMT)
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