TIDMOPP TIDMOPPP
RNS Number : 9819S
Origo Partners PLC
29 June 2018
Origo Partners PLC
("Origo" or the "Group" or the "Company")
Annual Audited Financial Statements
Origo Partners PLC today announces its audited results for the
year ended 31 December 2017.
For further information, please contact:
Origo Partners plc IOMA House, Hope Street, Douglas
John Chapman Isle of Man, IM1 1AP
Chairman
Nominated Adviser and Broker Arden Partners plc +44 (0)20 7614 5900
Chris Hardie
Ben Cryer
Chairman's Letter
Dear Shareholders,
Origo's net asset value as at year end 2017 was $ 14.1 million
as compared with $46.0 million a year earlier. The drop in NAV is
primarily a function of substantial write downs of Company assets.
China Rice has been written down from $31.4 million to nil;
Unipower has been written down from $15.8 million to nil; Moly
World has been written down from $3.8 million to nil; and, as
explained in more detail below, most other assets have been written
down as well. These write downs follow the appointment and
subsequent election of a new board and our efforts to take a hard
look at the Company, its assets and cost structure to better
implement the realization strategy the shareholders voted for in
November 2014 - a strategy that has not led to much in the way of
realizations and has so far failed to generate distributable
cash.
Origo's New Board
The Origo board was reconstituted over several months with the
addition of three new directors and the resignations of three
directors. In September 2017, Hiroshi Funaki joined the Origo board
as a nominee of Origo's largest ordinary shareholder. On 31 October
2017, I joined the Origo board as a nominee of our largest
preference shareholder. Also on 31 October 2017, Philip Scales
joined the board as an independent director. Concurrent with the
appointments of Philip Scales and me, two of the sitting directors
resigned. On 20 April 2018, the third sitting director resigned in
connection with the restructuring of the advisory arrangement, and
I was elected the Company's Chairman.
In the months the new board has been in place, our primary focus
has been to establish more robust controls over company assets,
strengthen the Company's capital position by repaying debt, reduce
costs, renegotiate the advisory agreement, clarify what the Company
owns and begin to promote the realization of company assets so cash
can be distributed to Origo's shareholders.
Origo Circa Late 2017
Origo is a company that primarily holds minority interests in
very illiquid private equity with a focus on China and natural
resources in Mongolia. The private equity is typically held through
offshore structures far removed from the ultimate assets. The
Company is managed at the board level with a third-party advisor, a
British Virgin Islands (BVI) legal entity, that operates out of a
Company office in Beijing.
Origo typically does not own assets but rather owns equity in
shell companies in offshore jurisdictions. These shell companies
may then own equity in onshore companies, which may then own
physical assets or legal rights to engage in certain activities,
typically rights or purported rights to extract minerals. So, for
example, in 2011 and 2012 the Company invested about $28 million in
"China Rice Ltd.", a company domiciled in the BVI. In return for
its $28 million investment, Origo received unsecured debt and
equity in that BVI company. China Rice owns no assets other than
equity in "Winrich International Industry Limited," a Hong Kong
company. Winrich International Industry Limited owns no assets
other than equity in "Jilin Dechun Grains Processing Company, Ltd."
("Jilin Dechun Grains"). Jilin Dechun Grains is a Chinese
registered legal entity located in Jilin Province, a province in
northern China that in part abuts North Korea. Jilin Dechun Grains
is controlled by one Li Dechun - hence the name Jilin Dechun
Grains.
I will get into Jilin Dechun Grains (a/k/a China Rice) a little
bit later but the point here is that the Company's ownership
interest in any assets that might have value (Jilin Dechun Grains'
inventory, plant and equipment, property, and good will) is far
removed both geographically and legally from Origo's debt and
equity interests in China Rice, a BVI company. Although the China
Rice example may be an extreme example of ownership far removed
from operating assets (the China Rice investment has two layers of
offshore entities), the basic legal structure - Origo owning a
minority interest in an offshore company that owns equity in an
onshore company - is typical. The problem with this layered form of
legal ownership is it is difficult to understand what you really
own since your ownership rights are determined by the laws of
several jurisdictions, which may be inconsistent, and the control
rights typically sit at a different legal layer from where the
assets sit. And, if it is hard to understand what you own, it is a
fortiori hard to understand the value of what you own.
The Company's cash position when we assumed office was
negligible. Prior to the former directors resigning, they had paid
themselves about $259,000 as unpaid accrued board fees, and they
had also paid the Company's investment advisor, Origo Advisors
Limited ("OAL") $1.3 million as unpaid fees to that entity. So,
when we joined the board the Company had a cash position of about
$1 million and, even allowing for the payments listed above, debt
of about $3.2 million. The debt comprised money owed to the OAL and
to a third-party lender. OAL was owed about $700,000 and the third
party a minimum of $2.5 million plus 12% interest with a minimum
repayment obligation.
The obligation to OAL arose from the Company's failure to pay
fees in accordance with a contract the Company entered in 2014 and
purported to bear interest at a minimum of 8% and a maximum of
whatever interest rate the Company was paying others while the OAL
debt remained outstanding. The obligation to the private investor
arose in late 2016 when the Company borrowed $2.5 million to meet
obligations, primarily fees owed to a law firm. The terms of that
loan were that interest accrued at 12% annually with the Company
obliged to repay $3.75 million if the loan was held to its full
term.
Perhaps because of its history, Origo did not have a typical
fund structure. The typical fund structure includes a third-party
manager managing the Company's assets and a third-party
administrator controlling the company's bank accounts and
maintaining the company's books and records. Separation of
functions is important because the manager asking for payment for
some obligation and the third-party administrator, usually a
regulated entity, having signature authority over company bank
accounts, and thus making payment, is a safeguard against fraud. In
Origo, the Company did not technically have a third-party manager
but, rather, an "Advisor" (OAL) with the primary responsibility of
"advising" the board rather than managing the Company's assets. A
principal of OAL also sat on the Origo board and served as Origo's
Executive Director. OAL also controlled the Company bank accounts
and maintained most of the Company's records.
The Defective 2014 Advisory Agreement
In November 2014, the Company entered into an advisory agreement
with OAL. OAL at that time seems to have been controlled by
several, but not all, of the people who were involved in setting up
the Company some years earlier. The 2014 agreement was entered into
concurrent with the shareholder vote in November 2014 for a
"realization strategy" for the disposal of the Company's assets.
The purported purpose of the 2014 Agreement was to provide "asset
realization support services" so the Company could "realise its
portfolio of assets and distribute net realisation proceeds to its
shareholders." The Advisory Agreement had a four-year term and
provided for total fixed fees of $6.5 million over that period plus
incentive fees that kicked in once $90 million had been distributed
to shareholders.
The contract did not properly incentivize OAL to realise assets
in accordance with the 2014 shareholder vote. It is plainly
defective, at least in hindsight, because it failed to accomplish
its purported purpose - promote the realization of assets and cash
distributions to shareholders.
First, it should have been apparent that given the quality of
the Origo portfolio it was highly unlikely that the $90 million
hurdle would be reached within the four-year period and therefore
the contract had no real incentives for asset realization. Second,
the fixed component of the compensation structure was
disproportionately large compared to the incentive component of the
compensation structure and this too should have been apparent at
the time the contract was entered into. Third, there was no claw
back provision in the event that the $90 million hurdle was not
reached so there was no penalty if OAL accomplished very little,
which is how things played out. Fourth, the contract imposed no
real objective duties on OAL in return for the $6.5 million. In
fact, there was no real obligation imposed on OAL to accomplish
much of anything.
Rather, in return for the $6.5 million OAL was obliged to a
provide a menu of anodyne services such as "provide support" to the
Origo board, "provide research and reports" to that same board and
"monitor and analyse the performance of the portfolio." The
advisory contract thus guaranteed OAL a substantial amount of money
in fees, a number certainly very substantial in comparison with a
fair and objective valuation of the portfolio, while it failed to
set any real bar for the payment of those fees.
Not surprisingly, when the 2014 Agreement was terminated with
effect from year end 2017, total realizations over the three-year
period were a little in excess of what OAL received in fees.
Nothing about Origo is ever very clear, but our calculations
indicate that over the period of the contract OAL accrued about
$5.4 million in fees and interest in return for asset realizations
amounting to about $7 million. The Company though had other
operating costs besides the OAL fees, and so, net to the Company,
substantially less was received from asset sales than went to pay
OAL, the Origo board, and various service providers.
The New Board's Efforts to Impose a New Order
Some of these issues are sunk costs, a product of bad decisions
made in the past, while others can be remedied by a new board with
a new focus. Following period end, we repaid the outstanding debt
at the face amount of $2.5 million with no interest or penalties.
We also settled in full the unpaid fees due to OAL as part of the
renegotiation of the advisory arrangement. We terminated the
Company's Nomad and administrator and replaced them with companies
that we believe will offer better services at more appropriate
prices. The Company bank accounts are now under the control of our
third-party administrator and we are trying to collect company
records, so they can be reviewed and maintained by the new
administrator. We terminated the Company's public relations firm,
and I will take care of public relations and shareholder
communications as part of my duties. We retained a new law firm,
which I believe will better meet the Company's needs. We have
renegotiated the audit fee, which has come down this year and we
hope can come down further as assets are sold and the size of the
portfolio is reduced.
Most importantly in terms of cost, we agreed with the advisor to
terminate the former advisory agreement and replaced it with a new
agreement effective 1 January 2018 that is entirely incentive
based. The new advisory agreement waives OAL's entitlement to a
fixed fee of $1 million for 2018 and any future fixed fees in
return for 8% of all cash returned to shareholders with a hold back
of 25% of that amount until Origo's entire portfolio is sold. Board
approval is required for any asset sales to prevent a fire sale and
to ensure realizations are at appropriate prices considering market
conditions. The Company can now terminate the new agreement without
penalty on 90 days' notice.
The Company will continue to fund certain operating costs
incurred in connection with Origo including a modest office share
arrangement in Beijing and limited personnel costs. Origo has
budgeted $280,000 for total Beijing operating costs for 2018 and
will continually review these costs with the objective of bringing
them down further.
Origo's Portfolio
Origo's portfolio can be divided into miscellaneous investments
in China (China Rice, Niutech, and Unipower) and investments in
mining assets primarily, though not entirely, in Mongolia (Celadon,
Kincora, Moly World, and Gobi Coal). With the exception of Niutech,
all of these investments are problematic. Although we have put
substantial effort into understanding the Company's portfolio (in
early July we will be making our third trip to China to meet with
our Advisor, co-investors and investee companies) we are still
endeavouring to understand the real worth of these investments and
then determine realistic realization strategies. I hope that when
our midyear report is published we will have more clarity on these
issues.
Chinese Investments
Our Chinese investments comprise Niutech, China Rice and
Unipower Battery. Niutech is a successful investment, which we are
in the process of exiting, so far at book value. The other two
investments are problematic and have been written down to nil. It
is, as of the date of this letter, unclear whether any of the value
of these two companies is recoverable.
China Rice
China Rice was our largest investment at year end 2016 with a
carrying value of $31.4 million and comprised about a third of the
Company's assets. Based on legal advice from Beijing counsel, we
have written the asset down to nil.
About a month ago OAL informed the Origo Board that Jilin Dechun
Grain was party to a court order made by the Liaoyuan City
Intermediary Court, under which Jilin Dechun Grain's assets were to
be sold to satisfy obligations to the Industrial and Commercial
Bank of China ("ICBC") in connection with the alleged non-payment
of a debt. As explained above, Jilin Dechun Grain is a PRC
registered company that holds the operating assets of Origo's China
Rice investment. If those assets are foreclosed on to satisfy legal
Jilin Dechun Grain's legal obligations, Origo's investment in China
Rice is worthless.
Origo retained Beijing based counsel to investigate this
surprising situation and advise the board on Origo's possible
remedies. Counsel has informed us that Jilin Dechun Grain defaulted
on its obligation to ICBC sometime in 2017 and that pursuant to
enforcement orders Jilin Dechun Grain was ordered to pay ICBC
approximately $42 million, which now, with interest, amounts to
about $45 million. Jilin does not appear to have the $45 million to
satisfy the obligation. It further appears that ICBC has sold the
defaulted debt to a third party, which has approached the principal
of Jilin Dechun Grain, Li Dechun, with an offer to sell that debt
back to the Company at a discounted price. It also appears that
Jilin Dechun Grain has other unsatisfied debts (in addition to the
$45 million) that have been the subject of other court orders.
The full situation at Jilin Dechun Grains is as of this date
unclear. We will be traveling to China in early July to try to meet
Mr. Li and the apparent current owner of the defaulted debt, Great
Wall Investment Group Ltd., a substantial Chinese asset manager, to
determine if any value can be recovered.
China Rice is and always has been a curious investment. Its
operating subsidiary, Jilin Dechun Grain, is not a well-known
company. Its principal, Mr. Li, is not a well-known Chinese
businessman. Jilin Dechun Grain is based not in Beijing but in an
obscure part of north-eastern China. As outlined above, the
Company's investment in Jilin Dechun Grain seems to have been made
in a very indirect way. Origo's debt has a BVI shell company as the
counterparty and is not secured with any assets in China. Origo's
equity is in a BVI company so Origo has no equity in Jilin Dechun
Grains, the legal entity that holds the structure's assets. There
does not seem to be an opinion letter when the investment was made
explaining why this structure was used and how Origo might enforce
its rights in the event of a dispute.
The accounts of Jilin Dechun Grain have to the best of my
knowledge never been audited by a recognized auditing firm and have
not been audited by anyone since year end 2015. The 2015 accounts
purport to have been audited by an unrecognized local auditing firm
so the validity of those accounts is open to question. The
company's unaudited 2016 accounts show that Jilin Dechun Grains'
sales have been declining for a number of years. According to these
financial statements, Jilin Dechun Grains' revenues in 2016 were
about 80% lower than its revenues in 2012. The explanation we have
been given is for this decline in sales is unclear. We travelled to
China in March and endeavoured to meet the China Rice principal,
Mr. Li, but were rebuffed because Mr. Li said he was too "busy" to
meet with us.
As of the date of this letter, we do not have a clear
understanding of why Jilin Dechun Grain defaulted on the debt. As
of the unaudited 2016 balance sheet, Jilin Dechun Grain represented
that its total debt amounted to about 46% of its then current
assets - hardly the kind of numbers that should throw a company
into default. In China a company's managing director has a lot of
authority over company assets so whether company assets were
pledged for obligations unrelated to Origo's investment is a real
possibility.
Origo has an investment agreement with China Rice that provides
Origo with a number of rights including approval rights before any
debt is incurred, but Origo seems never to have asserted its
rights. An individual OAL procured at some point in the past sits
on the board of Jilin Dechun Grains on behalf of Origo but does not
seem to have exercised any board powers over the company's
business, its debt, or the default. Given that at least some of the
issues involving the China Rice investment occurred during the
watch of the old Origo board, we are unclear about how the previous
board monitored this investment. We will be inquiring why they
failed to inform the market of the ICBC default when it occurred -
which according to Chinese counsel was no later than the summer of
2017.
Unipower Battery Ltd.
Unipower is or was a battery manufacturer for electric vehicles.
The company does not appear to be operational, has several
judgments against it and seems to have legal problems. The company
shares office space with OAL in Beijing. Like China Rice, we are
unclear about the circumstances surrounding the original investment
and why the company has fared so poorly. The company now has a plan
to relocate to another province in return for some sort of
assistance from that provincial government. It is unclear if this
plan will come to fruition and if it did how this might benefit
Origo. We have recently retained counsel in Beijing to investigate
this investment but given that it does not appear to be a going
concern we have valued it at nil.
Mining Investments
Origo has a number of mining investments. Most of these
companies are not really going concerns in the sense of companies
that extract minerals and then sell them on to a processor or end
user. Rather they are typically companies that own exploration
licenses or rights to extract minerals. I think it is fair to say
that none of these investments has been satisfactory.
Moly World Ltd.
In 2011 Origo invested $10 million in Moly World Ltd., a BVI
company, for 20% of that company's equity as well as offtake rights
to 20% of that company's future production. Moly World in turn owns
the Mongol Resource Corporation ("MRC"), a Mongolian company that
own the rights to explore a substantial molybdenum deposit in
Mongolia. Molybdenum has had its ups and downs in the world
markets, though in recent years the movement has mostly been down.
On Origo's year end 2016 balance sheet this investment was carried
at US$3.78 million largely because of the decline in global
molybdenum prices.
In April 2018, MRC received a notification from the Mineral
Resource Authority for Mongolia cancelling the mining license
issued to MRC in August 2017. It appears that there are questions
whether the mining license was validly granted given that the
Mongolian governmental authority claims that the company's mineral
deposits overlap with a protected area. One would typically expect
an investor like Origo to have a legal opinion as to the validity
of the rights being purchased but that opinion, as with China Rice,
does not seem to exist. Moly World has retained counsel to protect
its rights over the mining license. Given the uncertainty of MRC's
legal right to mine the mineral and the additional uncertainty of
the judicial process in Mongolia, Origo's board believes that the
appropriate carrying value for this asset is nil.
Kincora Copper Limited
Kincora is a public company listed on the Toronto venture
exchange. As of the end of March, Kincora had a market
capitalization of about $8 million and an enterprise value of about
$6 million. Origo owned about a quarter of the company. Kincora's
story is that it owns mining rights to possible copper deposits in
Mongolia that some think promising given the proximity of those
rights to substantial copper deposits. Nonetheless, Kincora's most
recent drilling efforts have been unsuccessful, and we have seen no
objective evidence that these exploration rights have real
value.
Kincora does not seem to have sufficient funds to engage in full
scale exploration as Kincora's last reported net cash position is
about $2.1 million. It would thus appear that any substantial
future exploration will require additional capital and hence the
issuance of more equity or the formation of a joint venture with a
third party. Kincora's managers are not based in Mongolia. Nor have
they made significant cash investments in the company. Their
compensation most recently has been with Kincora shares. Given the
company's diminutive size and dwindling cash position we had asked
the Kincora board to put the company up for sale but were rebuffed.
We retained Canadian counsel and explored the possibility of a more
aggressive approach to Kincora but concluded that the costs would
likely outweigh any likely benefit. In light of Kincora's obvious
corporate governance issues, weak capital position and lack of
demonstrable success we determined that this investment was
entirely speculative. Earlier this month we exited our entire
position in Kincora for net proceeds of about $1.5 million, which
represented the market price of these shares as of the sale
date.
Celadon Mining Ltd.
Origo invested $13.1 million for about 8.9% of Celadon Mining,
which is a private company with mining rights to the Chang Tang
West thermal coal deposits in Ordos, Inner Mongolia (i.e., China).
The year end 2017 carrying value of Celadon Mining is about $4.5
million as compared with $20.1 million as at year end 2016. The
majority shareholder has reported that he is in complex
negotiations to monetize the Chang Tang West asset. As a minority
shareholder, Origo is not a participant in the negotiations and
depends on reports from the majority shareholder leading the
negotiation. We have written down this investment because of the
apparent lack of clear progress in the negotiations for the sale of
the Chang Tang West asset and the uncertainty over the timing and
amount of subsequent cash flows to Origo if the sale were
concluded.
Gobi Coal and Energy Ltd.
Origo invested, net of a subsequent divestiture, $15 million in
Gobi Coal, which is a BVI registered holding company that through
its ownership of local companies in Mongolia has mining rights for
coking coal and uranium in that country. Origo owns 7.5% of Gobi
Coal but the company is controlled by Aabar, which I am told is an
Abu Dhabi sovereign wealth fund. Origo earlier had a board seat but
was forced off the board some years ago and consequently has no
current ability to direct this investment. The company has had a
series of legal disputes resulting in the freezing and confiscation
of their licenses that seem to have been resolved in 2018. Gobi
Coal's management, put in place by Aabar, say they will monetize
this investment over the next several years. Subsequent to year-end
2017, Origo acquired 377,894 additional Gobi Coal shares at $0.01
per share for about $6,000 in total. Origo carries this investment
at about $1.1 million, which represents a write down of about 60%
from its 2016 carrying value because of corporate governance issues
and the absence of clear visibility for any exit.
The Origo story is obviously unsatisfactory. Large amounts of
money were invested in companies that now appear worthless or of
limited value. For certain investments, the issues seem
longstanding rather than a function of some event that transpired
between the publication of the Company's last set of accounts and
this one. Although the Company has been in a realization mode for
close to four years, no cash has been returned to shareholders, and
the current prospects of cash distributions are uncertain. Private
equity and emerging markets are risky asset classes. When you
combine the two asset classes the risks may increase exponentially
rather than arithmetically. Nonetheless, my overriding impression
of Origo is that proper care has not been exercised in a number of
respects over a substantial period of time. There may be other
issues as well. We are working with lawyers in various
jurisdictions on a prudent basis to best determine how to recover
value. I will report further in due course.
Very truly yours,
John D. Chapman
Chairman
Origo Partners Plc
Date: 28 June 2018
Directors' Report
The Directors present their report together with the audited
financial statements for the year ended 31 December 2017.
Results and dividends
The result of the Group for the year shows a loss for the year
of US$82,984,000 (2016:US$12,257,000). The performance, and the
share capital structure of the Group, neither justifies nor allows
the payment of a dividend at the current time. The Directors are
therefore not able to recommend the payment of a dividend for 2017
(2016: US$nil). The retained loss of the year of US$82,984,000
(2016:US$12,257,000) has been transferred to reserves.
Principal activities, review of business and future
developments
On 20 November 2014, the Company's Investing Policy changed from
that of a closed-ended, permanent capital vehicle to that of a
realisation company with the mandate to return the net proceeds of
realisations to shareholders over a 4 year period. However,
investments will only be realised when the Independent Directors
believe the terms are appropriate. A detailed review of the
business of the Company is covered in the Chairman's Report.
Directors
At 31 December 2017
Ordinary shares
Options Shares in
Subsidiaries
-------------------------------- --------------------------------- ------------------------------ ---------------
Mr John Chapman (appointed
October 2017)
Mr Peter Philip Scales
(appointed
October 2017)
Mr Hiroshi Funaki (appointed
September 2017)
Mr. Niklas Ponnert (resigned
April 2018) 4,500,000 2,691,009* 1**
Ms. Shonaid Jemmett-Page
(resigned
October 2017) 560,000
Mr. Lionel de Saint-Exupery
(resigned October 2017) 560,000
--------------------------------- -------------------------------- ------------------------------ ---------------
* 400,000 Shares are held in Niklas Ponnert's name, 691,385
Shares are held through Paracelsus Holdings Ltd, and 1,599,624
Shares are held jointly with the EBT pursuant to the Company's
Joint Share Ownership Plan.
** 1 Ordinary share with voting right accounted for 50% of CCF
which is one of subsidiaries of the Group is held in Niklas
Ponnert's name.
Directors' responsibilities in respect of the financial
statements
The Directors are responsible for the preparation of the
financial statements. The Directors have elected to prepare the
financial statements in accordance with applicable law and
International Financial Reporting Standards as adopted by the
European Union. In preparing these financial statements, the
Directors are required to:
-- select suitable accounting policies and then apply them on a consistent basis;
-- make judgments and estimates that are reasonable and prudent;
-- state whether International Financial Reporting Standards
have been followed, subject to any material departures disclosed
and explained in the financial statements; and
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the company will
continue in business.
The Directors are responsible for keeping reliable accounting
records which correctly explain the transactions of the company,
and which enable the financial position of the company to be
determined with reasonable accuracy. They are also responsible for
safeguarding the assets of the company and hence for taking
reasonable steps for the prevention and detection of fraud and
other irregularities.
Going concern
The Board has concluded that the Company and the Group is
considered to be a going concern and as a result of this the
consolidated financial statements for the year ended 31 December
2017 have been prepared on a going concern basis. Notably, previous
disputes with Brooks Macdonald Asset Management (International)
Limited have been settled and the share capital of the Company has
been reorganised so that the redemption of the Redeemable
Preference Shares (previously Convertible Preference Shares) will
be settled with the proceeds of realisations as and when they
occur.
Auditor and disclosure of information to auditor
As far as each Director is aware, there is no relevant audit
information of which the Company's auditor is unaware.
Financial statements are published on the Group's website in
accordance with legislation in the Isle of Man governing the
preparation and dissemination of financial statements, which may
vary from legislation in other jurisdictions. The maintenance and
integrity of the Group's website is the responsibility of the
Directors. The Directors' responsibility also extends to the
ongoing integrity of the financial statements contained
therein.
Each of the Directors has taken all the steps they ought to have
taken individually as a Director in order to make themselves aware
of any relevant audit information and to establish that the
Company's auditors are aware of that information.
Auditor
The auditor, BDO Limited, has indicated their willingness to
continue in office.
By Order of the Board
Philip Peter Scales
Director
Date: 28 June 2018
INDEPENT AUDITOR'S REPORT
TO THE MEMBERS OF ORIGO PARTNERS PLC
(incorporated in the Isle of Man with limited liability)
OPINION
We have audited the consolidated financial statements of Origo
Partners Plc (the "Company") and its subsidiaries (together the
"Group") which comprise the consolidated statement of financial
position as at 31 December 2017, and the consolidated statement of
comprehensive income, the consolidated statement of changes in
equity and the consolidated statement of cash flows for the year
then ended, and notes to the consolidated financial statements,
including a summary of significant accounting policies.
In our opinion, the consolidated financial statements give a
true and fair view of the consolidated financial position of the
Group as at 31 December 2017 and of its consolidated financial
performance and its consolidated cash flows for the year then ended
in accordance with International Financial Reporting Standards
("IFRS") issued by the International Accounting Standards Board
("IASB") as adopted by the European Union.
Basis for Opinion
We conducted our audit in accordance with International
Standards on Auditing ("ISAs"). Our responsibilities under those
standards are further described in the "Auditor's Responsibilities
for the Audit of the Consolidated Financial Statements" section of
our report. We are independent of the Group in accordance with the
International Ethics Standards Board for Accountants' Code of
Ethics for Professional Accountants (the "IESBA Code"), and we have
fulfilled our other ethical responsibilities in accordance with the
IESBA Code. We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
Key Audit Matter
Key audit matters are those matters that, in our professional
judgement, were of most significance in our audit of the
consolidated financial statements of the current period. These
matters were addressed in the context of our audit of the
consolidated financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these
matters.
VALUATION OF UNQUOTED INVESTMENTS
Refer to notes 1.4(d), 14 and 15 to the consolidated financial
statements
Out of the total investments of US$17,779,000 as at 31 December
2017, US$7,584,000 of the total investments have no quoted market
price available. Unlisted investments comprise investments at fair
value through profit or loss and convertible credit agreements.
Unquoted investments are measured at fair value, which is
established in accordance with IFRS 13 with reference to the
International Private Equity and Venture Capital Valuation
Guidelines by using measurement of value such as multiples,
discounted cash flow and industry valuation benchmarks. Investments
are subject to annual valuation by management. Due to the
significance in the context of the consolidated financial
statements as a whole, they are considered to be one of the areas
which had the greatest effect on our overall audit strategy and
allocation of resources in planning and completing our audit.
Our response:
Our audit procedures included:
-- Enquiring of management to obtain understanding and assessing
the design and implementation of valuation processes and control in
place;
-- Assessing investment realisations in the period, comparing
actual sales proceeds to prior year-end valuations to understand
the reasons for significant variances and determine whether they
are indicative of bias or error in the Group's approach to
valuations;
-- Challenging key judgments affecting valuations in the context
of observed industry best practice and the provisions of the
International Private Equity and Venture Capital Valuation
Guidelines. In particular, challenging the appropriateness of the
valuation basis selected as well as the underlying assumptions,
such as discount factors, and the chosen of benchmark for
multiples; and
-- Evaluating the appropriateness of valuation methodology used
by management and result with the assistance of valuation
specialists.
Other information
The directors are responsible for the other information. The
other information comprises the information included in the
Company's annual report, but does not include the consolidated
financial statements and our auditor's report thereon.
Our opinion on the consolidated financial statements does not
cover the other information and we do not express any form of
assurance conclusion thereon.
In connection with our audit of the consolidated financial
statements, our responsibility is to read the other information
and, in doing so, consider whether the other information is
materially inconsistent with the consolidated financial statements
or our knowledge obtained in the audit or otherwise appears to be
materially misstated. 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.
Directors' responsibility for the consolidated financial
statements
The directors are responsible for the preparation and fair
presentation of the consolidated financial statements in accordance
with International Financial Reporting Standards as adopted by the
European Union, and for such internal control as the directors
determine is necessary to enable the preparation of consolidated
financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the consolidated 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.
The directors are also responsible for overseeing the Group's
financial reporting process. The audit committee of the Company
(the "Audit Committee") assists the directors in discharging their
responsibility in this regard.
Auditor's responsibility for the audit of the consolidated
financial statements
Our objectives are to obtain reasonable assurance about whether
the consolidated 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. This report is made
solely to you, as a body, in accordance with the terms of our
engagement, and for no other purpose. We do not assume
responsibility towards or accept liability to any other person for
the contents of this report.
Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with ISAs 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 consolidated financial statements.
As part of an audit in accordance with ISAs, we exercise
professional judgement and maintain professional skepticism
throughout the audit. We also:
-- identify and assess the risks of material misstatement of the
consolidated financial statements, whether due to fraud or error,
design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide
a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal
control.
-- obtain an understanding of internal control relevant to the
audit in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Group's internal control.
-- evaluate the appropriateness of accounting policies used and
the reasonableness of accounting estimates and related disclosures
made by the directors.
-- conclude on the appropriateness of the directors' use of the
going concern basis of accounting and, based on the audit evidence
obtained, whether a material uncertainty exists related to events
or conditions that may cast significant doubt on the Group's
ability to continue as a going concern. If we conclude that a
material uncertainty exists, we are required to draw attention in
our auditor's report to the related disclosures in the consolidated
financial statements or, if such disclosures are inadequate, to
modify our opinion. Our conclusions are based on the audit evidence
obtained up to the date of our auditor's report. However, future
events or conditions may cause the Group to cease to continue as a
going concern.
-- evaluate the overall presentation, structure and content of
the consolidated financial statements, including the disclosures,
and whether the consolidated financial statements represent the
underlying transactions and events in a manner that achieves fair
presentation.
-- obtain sufficient appropriate audit evidence regarding the
financial information of the entities or business activities within
the Group to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and
performance of the group audit. We remain solely responsible for
our audit opinion.
We communicate with the Audit Committee regarding, among other
matters, the planned scope and timing of the audit and significant
audit findings, including any significant deficiencies in internal
control that we identify during our audit.
We also provide the Audit Committee with a statement that we
have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and
other matters that may reasonably be thought to bear on our
independence, and where applicable, related safeguards.
From the matters communicated with the Audit Committee, we
determine those matters that were of most significance in the audit
of the consolidated financial statements of the current period and
are therefore the key audit matters. We describe these matters in
our auditor's report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare
circumstances, we determine that a matter should not be
communicated in our report because the adverse consequences of
doing so would reasonably be expected to outweigh the public
interest benefits of such communication.
BDO Limited
Certi ed Public Accountants
Alfred Lee
Practising Certi cate Number P04960
Hong Kong, 28 June 2018
Consolidated statement of comprehensive income
For the year ended 31 December 2017
2017 2016
Notes US$'000 US$'000
------------------------------------- ------ --------------- -------------
Investment loss: 2
Realised gains/(losses) on disposal
of investments 423 (142)
Unrealised losses on investments (74,440) (6,069)
Income from loans - 627
(74,017) (5,584)
------------------------------------- ------ --------------- -------------
Consulting services payable 3 (1,390) (1,769)
Other income 29 134
Performance fee
- Performance incentive 4 - 4,195
Other administrative expenses 5 (4,856) (3,618)
Share-based payments 27 (21) (67)
Foreign exchange gains 50 178
------------------------------------- ------ --------------- -------------
Net loss before finance costs and
taxation (80,205) (6,531)
Finance costs 9 (3,598) (5,791)
------------------------------------- ------ --------------- -------------
Loss before tax (83,803) (12,322)
Income tax credit 10 819 65
------------------------------------- ------ --------------- -------------
Loss after tax (82,984) (12,257)
------------------------------------- ------ --------------- -------------
Other comprehensive income
------------------------------------- ------ --------------- -------------
Other comprehensive income to be
reclassified to profit or loss
in subsequent periods:
Exchange differences on translating
foreign operations 6 5
------------------------------------- ------ --------------- -------------
Net other comprehensive income
to be reclassified to profit or
loss in subsequent periods 6 5
Tax on other comprehensive income - -
Other comprehensive income net
of tax 6 5
Total comprehensive loss after
tax (82,978) (12,252)
Loss after tax
------------------------------------- ------ --------------- -------------
Attributable to:
- Owners of the parent (82,984) (12,244)
- Non-controlling interests - (13)
------------------------------------- ------ --------------- -------------
(82,984) (12,257)
------------------------------------- ------ --------------- -------------
Total comprehensive loss
------------------------------------- ------ --------------- -------------
Attributable to:
- Owners of the parent (82,978) (12,239)
- Non-controlling interests - (13)
------------------------------------- ------ --------------- -------------
(82,978) (12,252)
------------------------------------- ------ --------------- -------------
Basic loss per ordinary share 11 (11.70) cents (3.49) cents
------------------------------------- ------ --------------- -------------
Diluted loss per ordinary share 11 (11.70) cents (3.49) cents
------------------------------------- ------ --------------- -------------
Basic loss per redeemable zero
dividend preference share 11 (279.57) cents N/A
------------------------------------- ------ --------------- -------------
Diluted loss per redeemable zero
dividend preference share 11 (279.57) cents N/A
------------------------------------- ------ --------------- -------------
The accompanying notes form an integral part of these
consolidated financial statements.
Consolidated statement of financial position
At 31 December 2017
2017 2016
Assets Notes US$'000 US$'000
-------------------------------------------------- ------ ---------- -----------
(Restated)
Non-current assets
Property, plant and equipment 12 20 33
Intangible assets - 2
Investments at fair value through profit or loss 14 - 72,023
Loans 15 350 350
370 72,408
-------------------------------------------------- ------ ---------- -----------
Current assets
Investments at fair value through profit or loss 14 17,045 -
Loans due within one year 15 384 24,290
Trade and other receivables 16 881 4,007
Cash and cash equivalents 17 1,199 1,786
-------------------------------------------------- ------ ---------- -----------
19,509 30,083
-------------------------------------------------- ------ ---------- -----------
Total assets 19,879 102,491
-------------------------------------------------- ------ ---------- -----------
Current liabilities
Short-term borrowing 20 2,500 -
Trade and other payables 18 1,381 3,472
Performance incentive payable within one year 18 - 8
Financial guarantee contracts 19 435 435
Current tax liabilities 499 499
-------------------------------------------------- ------ ---------- -----------
4,815 4,414
-------------------------------------------------- ------ ---------- -----------
Non-current liabilities
Long-term borrowing 20 - 2,500
Provision 21 103 82
Redeemable zero dividend preference shares 22 - 47,469
Deferred income tax liability 10 796 2,017
899 52,068
-------------------------------------------------- ------ ---------- -----------
Total liabilities 5,714 56,482
-------------------------------------------------- ------ ---------- -----------
Net assets 14,165 46,009
-------------------------------------------------- ------ ---------- -----------
Equity attributable to owners of the parent
Issued capital 23 56 56
Share premium 150,414 150,414
Share-based payment reserve 5,048 5,048
(109,567)
Accumulated losses (191,613) )
Translation reserve (1,484) (1,490)
Other reserve 24 51,744 1,056
-------------------------------------------------- ------ ---------- -----------
14,165 45,517
Non-controlling interests - 492
-------------------------------------------------- ------ ---------- -----------
Total equity 14,165 46,009
-------------------------------------------------- ------ ---------- -----------
Total equity and liabilities 19,879 102,491
-------------------------------------------------- ------ ---------- -----------
Philip Peter Scales
Director
28 June 2018
The consolidated financial statements were approved by the Board
of Directors and authorised for issue. They were signed on its
behalf by:
The accompanying notes form an integral part of these
consolidated financial statements.
Consolidated statement of changes in equity
For the year ended 31 December 2017
Attributable to equity holders of the parent
Share- Equity
based component
Issued Share payment Accumulated Translation of Other Non-controlling Total
capital premium reserve losses reserve CZDP reserve Total interests equity
Notes US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
---------------- ------ -------- -------- -------- ------------ ------------ ---------- -------- --------- ----------------- ---------
At 1 January
2016 56 150,414 7,573 (135,824) (1,495) 8,297 1,056 30,077 505 30,582
---------------- ------ -------- -------- -------- ------------ ------------ ---------- -------- --------- ----------------- ---------
Loss for the
year - - - (12,244) - - - (12,244) (13) (12,257)
Other
comprehensive
income - - - - 5 - - 5 - 5
Total
comprehensive
income/(loss) - - - (12,244) 5 - - (12,239) (13) (12,252)
Share-based
payment
expense 27 - - 52 - - - - 52 - 52
Lapsed of
share-based
payment 27 - - (2,577) 2,577 - - - - - -
Change of
fair value
upon
extinguishment
of convertible
zero dividend
preference
shares 22 - - - - - 27,627 - 27,627 - 27,627
Released upon
extinguishment
of convertible
zero dividend
preference
shares 22 - - - 35,924 - (35,924) - - - -
---------------- ------ -------- -------- -------- ------------ ------------ ---------- -------- --------- ----------------- ---------
At 31 December
2016 56 150,414 5,048 (109,567) (1,490) - 1,056 45,517 492 46,009
---------------- ------ -------- -------- -------- ------------ ------------ ---------- -------- --------- ----------------- ---------
Loss for the
year - - - (82,984) - - - (82,984) - (82,984)
Other
comprehensive
income - - - - 6 - - 6 - 6
---------------- ------ -------- -------- -------- ------------ ------------ ---------- -------- --------- ----------------- ---------
Total
comprehensive
income/(loss) - - - (82,984) 6 - - (82,978) - (82,978)
Capitalisation
of RZDP 22 - - - - - - 50,688 50,688 - 50,688
Disposal of
subsidiaries - - - 938 - - - 938 (492) 446
At 31 December
2017 56 150,414 5,048 (191,613) (1,484) - 51,744 14,165 - 14,165
---------------- ------ -------- -------- -------- ------------ ------------ ---------- -------- --------- ----------------- ---------
The following describes the nature and purpose of each reserve
within parent's equity:
Reserve Description and purpose
-------------------- ------------------------------------------------------
Share premium Amounts subscribed for share capital in excess
of nominal value.
-------------------- ------------------------------------------------------
Share-based payment Equity created to recognise share-based payment
reserve expense.
-------------------- ------------------------------------------------------
Accumulated losses Cumulative net gains and losses recognised
in profit or loss.
-------------------- ------------------------------------------------------
Translation reserve Equity created to recognise foreign currency
translation differences.
-------------------- ------------------------------------------------------
Equity component of Difference between the proceeds of the convertible
CZDP zero dividend preference shares ("CZDP")
issued and the fair value of the liability
component of CZDP.
-------------------- ------------------------------------------------------
Other reserve Own shares acquired, EBT (as defined in Note
24) shares and capital redemption and capitalisation
of redeemable zero dividend preference shares
("RZDP").
-------------------- ------------------------------------------------------
The accompanying notes form an integral part of these
consolidated financial statements.
Consolidated statement of cash flows
For the year ended 31 December 2017
2017 2016
Notes US$'000 US$'000
--------------------------------------------- ------ --------- ---------
Loss before tax (83,803) (12,322)
--------------------------------------------- ------ --------- ---------
Adjustments for:
Depreciation and amortisation 5 14 26
Release of provision for performance
incentive 4 - (4,195)
Share-based payments 27 21 67
Provision for bad debts 5 3,386 1,008
Realised (gains)/losses on disposal of
investments 2 (423) 142
Unrealised losses on investments at FVTPL* 2 50,526 6,059
Unrealised losses on loans 2 23,914 10
Income from loans 2 - (627)
Gain recognised upon extinguishment of
CZDP** 22 - (62)
Foreign exchange gains (50) (178)
Interest expenses 9 3,554 5,773
Operating loss before changes in working
capital and provisions (2,861) (4,299)
--------------------------------------------- ------ --------- ---------
Proceeds from disposals of investments
at FVTPL* 8 4,954 765
Proceeds from repayment of loans 15 - 383
Increase in trade and other receivables (345) (287)
(Decrease)/increase in trade and other
payables (2,395) 1,270
Net cash outflow from operations (647) (2,168)
--------------------------------------------- ------ --------- ---------
Investing activities
Disposal of property, plant and equipment - 7
Net cash inflow from investing activities - 7
--------------------------------------------- ------ --------- ---------
Financing activities
Proceeds from borrowing 20 - 2,500
Net cash inflow from financing activities - 2,500
--------------------------------------------- ------ --------- ---------
Net (decrease)/increase in cash and cash
equivalents (647) 339
--------------------------------------------- ------ --------- ---------
Effect of exchange rate changes on cash
and cash equivalents 60 175
Cash and cash equivalents at beginning
of year 1,786 1,272
--------------------------------------------- ------ --------- ---------
Cash and cash equivalents at end of year 17 1,199 1,786
--------------------------------------------- ------ --------- ---------
* FVTPL refers to fair value through profit or loss
** CZDP refers to convertible zero dividend preference
shares
The accompanying notes form an integral part of these
consolidated financial statements.
Accounting policies
1.1 Corporate information
The consolidated financial statements of Origo Partners Plc
("Origo" or the "Company") and its subsidiaries (together the
"Group") for the year ended 31 December 2017 were authorised for
issue in accordance with a resolution of the directors on 28 June
2018. The Company is a limited liability company incorporated and
domiciled in the Isle of Man whose shares are publicly traded on
the Alternative Investment Market ("AIM") of the London Stock
Exchange. The registered office is located at 33-37 Athol Street,
Douglas, Isle of Man IM1 1LB. The principal activity of the Group
is that of an Investment vehicle. The Group currently holds
investments in companies including unquoted interests, and illiquid
publicly traded equity interests, based or principally active in
China and Mongolia. On 20 November 2014, the Company's shareholders
voted to amend the Company's investing policy to that of a
realisation vehicle.
1.2 Basis of preparation
The Group's consolidated financial statements are prepared in
accordance with International Financial Reporting Standards
("IFRS") issued by the International Accounting Standard Board
("IASB") and adopted for use in the European Union ("EU") and also
to comply with relevant Isle of Man law.
The principal accounting policies applied in the preparation of
the consolidated financial information are set out below. These
policies have been consistently applied to all the periods
presented, unless otherwise stated.
(a) The financial information set out below is based on the
financial statements of the Company and its subsidiaries for the
year ended 31 December 2017.
(b) The consolidated financial information has been prepared
under the historical cost convention except for certain financial
instruments, which have been measured at fair value, and in
accordance with IFRS and International Financial Reporting
Interpretations Committee's interpretations ("IFRIC") (collectively
"IFRSs") issued by the IASB.
The financial statements have been prepared under the historical
cost basis.
1.3 Significant accounting judgements, estimates and assumptions
The preparation of consolidated financial information in
conformity with IFRSs requires the use of certain critical
accounting estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of contingent
assets and liabilities at the date of the consolidated financial
information and the reported amounts of revenue and expenses during
the reporting period. Although these estimates are based upon
management's best knowledge of current events and actions, actual
results may differ from those estimates.
The following is a list of accounting policies which cover areas
that the directors consider require estimates and judgements which
have a significant risk of causing a material adjustment to the
carrying amount of assets and liabilities within the next financial
year:
(a) Fair value of unquoted equity instruments
The Group has estimated the value of each of its unquoted equity
instruments by using their judgement to select the most appropriate
valuation methodology for each investment based on the
recommendations of the International Private Equity and Venture
Capital Valuation Guidelines (the "Guidelines"). For more
information on estimation, refer to Note 14. Valuation
methodologies mainly include multiples, discounted cash flow,
industry valuation benchmarks, available market prices and so on,
which may apply individually or in combination. Key assumptions and
judgements of each methodology concerning the future and other key
sources of estimation uncertainty will have a significant risk of
causing a material adjustment to the fair value of the instruments
within the next financial year.
(b) Assessment of the Company as investment entity
Entities that meet the definition of an investment entity within
IFRS 10 are required to account for most investments in controlled
entities as held at fair value through profit or loss. Subsidiaries
that provide investment related services or engage in permitted
investment related activities with investees continue to be
consolidated unless they are also investment entities. The
directors have concluded that the Company meets the definition of
an investment entity.
(c) Assessment of the subsidiaries as investment entities
The Company controls the voting rights and ownership interests
in its subsidiaries as stated in Note 13 for which the countries of
incorporation for those subsidiaries are included in the same
note.
Per IFRS 10, there is a requirement for the Board to assess
whether each subsidiary is itself an investment entity. The Board
has performed the assessments and has concluded that the
subsidiaries stated in Note 13 are operating subsidiaries of the
Group for the reasons below:
(I) Each subsidiary has its own board of directors;
(II) The subsidiaries provide services to the Group (including
administrative services to the Board of the Group, buying / selling
securities as well as managing the portfolios on a fair value
basis); and
(III) The subsidiaries are remunerated for these services.
Furthermore, each subsidiary stated in Note 13 is itself not
deemed to be an investment entity investing solely for capital
appreciation and investment income and therefore the subsidiaries
are consolidated.
(d) Share-based payments
The Group has applied the requirements of IFRS 2 "Share-based
payment" in these consolidated financial statements.
The Group has issued share options, which are equity-settled
share-based payments, to a director, certain ex-employees and to
its advisors for services provided in respect of the admission of
the Company to trading on the AIM of the London Stock Exchange.
Equity-settled share-based payments to directors and employees are
measured at the fair value of equity instruments awarded at the
date of grant. Equity-settled share-based payments to non-employees
are measured at the fair value of goods or services rendered at the
date when the goods or services are received. Where equity
investments are granted subject to vesting conditions,
equity-settled share-based payments are expensed to the profit or
loss on a straight-line basis over the vesting period, based on the
Group's estimate of the number of shares that will eventually vest.
Fair value is measured by use of the Binominal option pricing
model.
The Group has also granted upper share rights/contingent share
awards, which are cash-settled share-based payments, to a director
and certain ex-employees under the Company's JSOS (as defined in
Note 27). The cost of cash-settled share-based payments is measured
initially at fair value at the grant date using the Binominal Tree
model. This fair value is expensed over the period until the
vesting date with recognition of a corresponding liability. The
liability is remeasured to fair value at each reporting date up to
and including the settlement date, with changes in fair value
recognised in expense.
When estimating the value of the share options, the upper share
rights and contingent share awards, significant assumptions such as
the expected life of the share options and the upper share rights,
and expected volatility of the shares have been applied based on
management's best estimates.
1.4 Summary of significant accounting policies
The following principal accounting policies have been applied
consistently throughout the year in dealing with items which are
considered material in relation to the consolidated financial
information.
(a) Basis of consolidation
The consolidated financial statements comprise the financial
statements of the Company and its subsidiaries as at 31 December
2017. Control is achieved when the Group is exposed, or has rights,
to variable returns from its involvement with the investee and has
the ability to affect those returns through its power over the
investee. Specifically, the Group controls an investee if, and only
if, the Group has:
-- Power over the investee (i.e., existing rights that give it
the current ability to direct the relevant activities of the
investee);
-- Exposure, or rights, to variable returns from its involvement with the investee; and
-- The ability to use its power over the investee to affect its returns.
Generally, there is a presumption that a majority of voting
rights results in control. To support this presumption and when the
Group has less than a majority of the voting or similar rights of
an investee, the Group considers all relevant facts and
circumstances in assessing whether it has power over an investee,
including:
-- The contractual arrangement(s) with the other vote holders of the investee;
-- Rights arising from other contractual arrangements; and
-- The Group's voting rights and potential voting rights.
The Group does not consolidate its subsidiaries other than those
that solely provide it with services that relate to its investment
activities. Subsidiaries that provide services to the Group are
fully consolidated from the date of acquisition, being the date on
which the Group obtains control, and continue to be consolidated
until the date when such control ceases. The financial statements
of the subsidiaries are prepared for the same reporting period as
the parent company, using consistent accounting policies. All
intra-group balances, transactions, unrealised gains and losses
resulting from intra-group transactions and dividends are
eliminated in full.
Profit or loss and each component of other comprehensive income
("OCI") are attributed to the equity holders of the parent of the
Group and to the non-controlling interests, even if this results in
the non-controlling interests having a deficit balance.
A change in the ownership interest of a subsidiary, without a
loss of control, is accounted for as an equity transaction.
Goodwill is initially measured at cost being the excess of the
aggregate of the consideration transferred and the amount
recognised for non-controlling interest over the net identifiable
assets acquired and liabilities assumed. If this consideration is
lower than the fair value of the net assets of the subsidiary
acquired, the difference is recognised in profit or loss.
After initial recognition, goodwill is measured at cost less any
accumulated impairment losses. For the purpose of impairment
testing, goodwill acquired in a business combination is, from the
acquisition date, allocated to each of the Group's cash-generating
units that are expected to benefit from the combination,
irrespective of whether other assets or liabilities of the acquiree
are assigned to those units.
Subsequent to acquisition, the carrying amount of
non-controlling interests that represent present ownership
interests in the subsidiary is the amount of those interests at
initial recognition plus such non-controlling interest's share of
subsequent changes in equity. Total comprehensive income is
attributed to such non-controlling interests even if this results
in those non-controlling interests having a deficit balance.
Non-controlling interests represent the portion of profit or
loss and net assets that is not held by the Group and are presented
separately in the consolidated statement of comprehensive income
and within equity in the consolidated statement of financial
position, separately from parent shareholders' equity.
(b) Associates
Associates are all entities over which the Group has significant
influence but not control, generally accompanying a shareholding of
between 20% and 50% of the voting rights. The Group elects to
measure investments in associates at fair value through profit or
loss as, in the opinion of the directors, the Company meets the
definition of venture capital organisation. This treatment is
permitted under IAS 28 "Investments in Associates and Joint
Ventures".
(c) Foreign currencies
-- Functional and presentation currency
The consolidated financial statements are presented in United
States dollar, which is also the parent company's functional
currency. For each group entity the Group determines functional
currency and items included in the financial statements of each
entity are measured using that functional currency.
-- Transactions and balances
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation at
year-end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in the statement
of comprehensive income.
Non-monetary financial assets and liabilities that are carried
at historic cost are translated using the exchange rate as at the
date of initial transactions and are not re-measured. Translation
differences on non-monetary financial assets and liabilities, such
as equities held at fair value through profit or loss, are
recognised in profit or loss as part of the fair value gain or
loss.
-- Group companies
The results and financial position of all group entities, 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:
(I) assets and liabilities for each statement of financial
position are translated at the closing rate at the date of that
statement of financial position;
(II) income and expenses for each statement of comprehensive
income 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 date of the transaction);
and
(III) all resulting exchange differences are recognised in the
statement of comprehensive income as other comprehensive
income.
Goodwill and fair value adjustments arising on the acquisition
of a foreign entity are treated as assets and liabilities of the
foreign entity and translated at the closing rate.
(d) Financial assets
The Group classifies its financial assets, at initial
recognition, into one of the following categories: investments at
fair value through profit or loss, loans and receivables and other
financial assets depending on the purpose for which the asset was
acquired. The Group's accounting policy for each category is as
follows:
-- Investments at fair value through profit or loss
The investments at fair value through profit or loss are
designated by the board of directors at fair value through profit
or loss at inception. These include debt and equity securities,
convertible credit agreements and derivatives, on the basis that
they are part of a group of financial assets which are managed and
have their performance evaluated on a fair value basis, in
accordance with the risk management and investment strategies of
the Group.
Recognition / Derecognition:
Acquisitions and disposals of investments are recognised on the
trade date on which the Group received acquisitions of investments
or delivered disposals of investments. Investment fair value
through profit or loss is derecognised when the Group loses control
over the contractual rights that comprise that asset. This occurs
when the rights to receive cash flows from the asset have expired
or the Group has transferred its rights to receive cash flows from
the asset or has assumed an obligation to pay the received cash
flows in full without material delay to a third party under a
'pass-through' arrangement; and either (a) the Group has
transferred substantially all the risks and rewards of the asset,
or (b) the Group has neither transferred nor retained substantially
all the risks and rewards of the asset, but has transferred control
of the asset. When the Group commits to sell an asset, Investments
at fair value through the profit or loss are derecognised and
corresponding receivables from the buyer for the payment are
recognised as of that date.
Measurement:
Investment at fair value through the profit or loss is initially
recognised at fair value. Transaction costs are expensed into the
profit or loss. Subsequent to initial recognition, all financial
assets and financial liabilities are measured at fair value. Gains
and losses arising from changes in the fair value of the financial
assets held at fair value through profit or loss are presented in
the profit or loss in the period in which they arise.
Fair value estimation:
The fair value of financial instruments traded in active markets
(such as publicly traded securities) is based on quoted market
prices at the reporting date. The quoted market price used for
financial assets held by the Group is the current bid price. The
fair value of financial instruments that are not traded in an
active market is determined by using valuation techniques in
accordance with the Guidelines. Pursuant to the Guidelines, the
Group believes the following techniques applied individually, or in
combination, are the most suitable ones for the Group's current
portfolios:
(I) Multiples: When valuing investments on a multiple basis, the
Group has abided by the following principles:
i. apply a multiple that is appropriate and reasonable (giving
the risk profile and earnings growth prospects of the underlying
company) to the maintainable earnings of the underlying
company;
ii. adjust the amount derived in (i) above for surplus assets or
excess liabilities and other relevant factors to derive the
enterprise value for the underlying company;
iii. deduct from the enterprise value all amounts relating to
financial instruments ranking ahead of the highest ranking
instrument of the Group in a liquidation and taking into account
the effect of any instrument that may dilute the Group's
investments in order to derive the gross attributable enterprise
value;
iv. apply an appropriate marketability discount to the gross
attributable enterprise value derived in (iii) above in order to
derive the net attributable enterprise value. The marketability
discount relates to an investment rather than to the underlying
business. Marketability discounts will vary from situation to
situation and is a question of judgement. When a discount is
applied, relevant factors in determining the appropriate
marketability discount in each particular situation will be
considered. A discount in the range of 20% to 30% (in steps of 5%)
is generally used in practice, depending upon the particular
circumstances; and
v. apportion the net attributable enterprise value appropriately
between the relevant financial instruments.
(II) Discounted cash flow: Fair value is estimated by deriving
the present value of the investment using reasonable assumptions of
expected future cash flows of the underlying business and the
terminal value and date, and the appropriate risk-adjusted discount
rate that quantifies the risk inherent to the investment. The
discount rate is estimated with reference to the market risk-free
rate, a risk adjusted premium and information specific to the
investment or market sector.
(III) Industry valuation benchmarks: The use of industry
benchmarks is only likely to be appropriate as the main basis of
estimating fair value in limited situations, and is more likely to
be useful as a sense check of values produced using other
methodologies. The Group has primarily relied on such metrics to
validate the outcome produced by other valuation techniques.
-- Loans and receivables
These assets are non-derivative financial assets with fixed or
determinable payments that are not quoted on an active market.
Income from loans and receivables is recognised as it accrues by
reference to the principal outstanding and the effective interest
rate applicable, which is the rate that exactly discounts the
estimated future cash flows through the expected life of the
financial asset to the asset's carrying value. The losses arising
from impairment are recognised in the statement of comprehensive
income.
This category generally applies to trade and other receivables.
For more information on receivables, refer to Note 16.
-- Derivative financial instruments
Derivative financial instruments are held at fair value and
changes in fair value are recognised in profit or loss of the
consolidated statement of comprehensive income.
-- Impairment of financial assets
For amortised cost loans and receivables, the Group assesses, at
each reporting date, whether there is objective evidence that a
financial asset or a group of financial assets is impaired. An
impairment exists if one or more events that have occurred since
the initial recognition of the asset (an incurred 'loss event'),
have an impact on the estimated future cash flows of the financial
asset or the group of financial assets that can be reliably
estimated. Evidence of impairment may include indications that the
debtor is experiencing significant financial difficulty, default or
delinquency in interest or principal payments, the probability that
they will enter bankruptcy or other financial reorganisation and
observable data indicating that there is a measurable decrease in
the estimated future cash flows, such as changes in arrears or
economic conditions that correlate with defaults.
(e) Financial liabilities
The Group's financial liabilities include trade and other
payables, borrowing and financial guarantee contracts.
All financial liabilities are recognised initially at fair value
and, in the case of loans and borrowings and payables, net of
directly attributable transaction costs.
The measurement of financial liabilities depends on their
classification, as described below:
-- Financial liabilities at amortised cost
Financial liabilities (including trade and other payables and
borrowing) are subsequently measured at amortised cost using the
effective interest method.
The effective interest method is a method of calculating the
amortised cost of a financial liability and of allocating interest
expense over the relevant period. The effective interest rate is
the rate that exactly discounts estimated future cash payments
(including all fees and points paid or received that form an
integral part of the effective interest rate, transaction costs and
other premiums or discounts) through the expected life of the
financial liability, or where appropriate a shorter period, to the
net carrying amount on initial recognition.
-- Financial guarantee contracts
Financial guarantee contracts issued by the Group are those
contracts that require a payment to be made to reimburse the holder
for a loss it incurs because the specified debtor fails to make a
payment when due in accordance with the terms of a debt instrument.
Financial guarantee contracts are recognised initially as a
liability at fair value, adjusted for transaction costs that are
directly attributable to the issuance of the guarantee.
Subsequently, the liability is measured at the higher of the best
estimate of the expenditure required to settle the present
obligation at the reporting date and the amount recognised less
cumulative amortisation.
-- Redeemable zero dividend preference shares
On initial recognition, redeemable zero dividend preference
shares are recognised at the fair value, which are determined using
the prevailing market interest of similar non-convertible debts,
net of issue costs incurred. In subsequent periods, redeemable zero
dividend preference shares are carried at amortised cost using the
effective interest method.
-- Derecognition
A financial liability is derecognised when the obligation under
the liability is discharged or cancelled, or expires.
(f) Equity instrument
Financial instruments shall reclassify a financial liability as
equity from the date when there is no existence of a contractual
obligation to deliver cash or another financial assets by the
issuer. The equity instruments are recorded at the fair value of
the equity instruments issued. The difference between the carrying
amount of the financial liability extinguished and the fair value
of the equity instruments issued shall be recognised in profit or
loss. The equity instruments issued shall be recognised initially
and measured at the date the financial liability is
extinguished.
(g) Cash and bank and borrowings
Cash and bank is defined as cash in hand, demand deposits, time
deposit and short-term, highly liquid investments that are readily
convertible into known amounts of cash. They are subject to an
insignificant risk of changes in value, and have a short maturity,
generally less than three months, less bank overdrafts which are
repayable on demand and form an integral part of the Group's cash
management. For the purpose of the consolidated statement of
financial position, cash and bank balances comprise cash on hand
and at banks, including term deposits, which are not restricted as
to use.
Borrowings are financial liabilities at amortised cost and are
initially measured at fair value, net of directly attributable
costs incurred. It is subsequently measured at amortised cost,
using the effective interest method. The related interest expense
is recognised in profit or loss.
(h) Share-based payments
Employees (including senior executives) of the Group receive
remuneration in the form of share-based payment transactions (i.e.
share options), whereby employees render services as consideration
for equity instruments ("equity-settled transactions"). Certain
director, executives and key employees of the Group are granted
share appreciation rights (including upper share rights and
contingent share awards), which can only be settled in cash
("cash-settled transactions"). Advisors receive equity-settled
options in relation to the Company's admission to trading on the
AIM of the London Stock Exchange.
The cost of these options with employees are measured by
reference to the fair value of the equity instruments awarded at
the date of grant, whereas those with non-employees are measured at
the fair value of goods or services received at the date when the
goods or services have been received. The fair value is determined
by using binominal tree model, further details of which are given
in Note 27.
Equity-settled transactions
The cost of equity-settled transactions (share options) is
recognised, together with a corresponding increase in equity, over
the period in which the performance and/or service conditions are
fulfilled, ending on the date on which the relevant employees
become fully entitled to the award (the "vesting date"). The
cumulative expense recognised for equity-settled transactions at
each reporting date until the vesting date reflects the extent to
which the vesting period has expired and the Group's best estimate
of the number of equity instruments that will ultimately vest.
Movements in the liability (other than cash payments) are
recognised in profit or loss.
No expense is recognised for awards that do not ultimately vest,
except for awards where vesting is conditional upon a market or
non-vesting condition, which are treated as vesting irrespective of
whether or not the market condition is satisfied, provided that all
other performance and/or service conditions are satisfied.
The dilutive effect of outstanding options is reflected as
additional share dilution in the computation of earnings per
share.
Cash-settled transactions
The cost of cash-settled transactions (upper share rights and
contingent share awards) is measured initially at fair value at the
grant date using binominal tree model, further details of which are
given in Note 27. This fair value is expensed over the period until
the vesting date with recognition of a corresponding liability. The
liability is remeasured to fair value at each reporting date up to
and including the settlement date, with changes in fair value
recognised in expense.
(i) Taxes
Current Income Tax
Current tax assets and liabilities for the current and prior
periods are measured at the amount expected to be recovered from or
paid to the taxation authorities. The tax rates and tax laws used
to compute the amount are those that are enacted or substantively
enacted at the reporting date.
Current income tax relating to items recognised directly in
equity is recognised in equity and not in the statement of
comprehensive income. Management periodically evaluates positions
taken in the tax returns with respect to situations in which
applicable tax regulations are subject to interpretation and
establishes provisions where appropriate.
Deferred Tax
Deferred tax is provided using the liability method on temporary
differences at the reporting date between the tax bases of assets
and liabilities and their carrying amounts for financial reporting
purposes.
Deferred tax liabilities are recognised for all taxable
temporary differences, except:
(I) where the deferred tax liability arises from goodwill or the
initial recognition of an asset or liability in a transaction that
is not a business combination and, at the time of the transaction,
affects neither the accounting profit nor taxable profit or loss;
and
(II) in respect of taxable temporary differences associated with
investments in subsidiaries and associates where the timing of the
reversal of the temporary differences can be controlled and it is
probable that the temporary differences will not reverse in the
foreseeable future.
Deferred tax assets are recognised for all deductible temporary
differences, carry forward of unused tax credits and unused tax
losses, to the extent that it is probable that taxable profit will
be available against which the deductible temporary differences,
and the carry forward of unused tax credits and unused tax losses
can be utilised, except:
(I) where the deferred tax asset relating to the deductible
temporary difference arises from the initial recognition of an
asset or liability in a transaction that is not a business
combination and, at the time of the transaction, affects neither
the accounting profit nor taxable profit or loss; and
(II) in respect of deductible temporary differences associated
with investments in subsidiaries and associates, deferred tax
assets are recognised only to the extent that it is probable that
the temporary differences will reverse in the foreseeable future
and taxable profit will be available against which the temporary
differences can be utilised.
The carrying amount of deferred tax assets is reviewed at each
reporting date and reduced to the extent that it is no longer
probable that sufficient taxable profit will be available to allow
all or part of the deferred tax asset to be utilised. Unrecognised
deferred tax assets are reassessed at each reporting date and are
recognised to the extent that it has become probable that future
taxable profit will allow the deferred tax asset to be
recovered.
Deferred tax assets and liabilities are measured at the tax
rates that are expected to apply to the period when the asset is
realised or the liability is settled, based on tax rates (and tax
laws) that have been enacted or substantively enacted at the
reporting date.
Deferred tax assets and deferred tax liabilities are offset if a
legally enforceable right exists to set off current tax assets
against current tax liabilities and the deferred taxes relate to
the same taxable entity and the same taxation authority.
Income taxes are recognised in the profit or loss or directly in
equity except when a tax exemption has been granted.
(j) Performance incentive payable
Performance incentive payable is only accrued on those
investments (classified as investments at fair value through profit
or loss and loans) in which the investment's performance
conditions, measured at the end of each reporting period, would be
achieved if those investments were realised at fair value. Fair
value is determined using the Group's valuation methodology and is
measured at the end of each reporting period.
Any changes in the performance incentive provision will be
reflected in the line item of performance fee in the consolidated
statement of comprehensive income in which the expense establishing
the provision was originally recorded.
(k) Investment income/loss
Investment income/loss derived from the investment activities is
equivalent to "revenue" for the purposes of IAS 1. Investment
income/loss is analysed into the following components:
-- Realised gains/losses on the disposal of investments are the
difference between the fair value of the consideration received
less any directly attributable costs, on the sale of equity and the
repayment of loans and receivables, and its carrying value at the
start of the accounting period.
-- Unrealised gains/losses on the revaluation of investments are
the movement in the carrying value of investments measured at fair
value between the start and end of the accounting period and the
impairment of amortised cost loans.
-- Income/loss from loans is recognised on a time proportion
basis as it accrues by reference to the principal outstanding and
the effective interest rate applicable.
(l) Provisions and contingent liabilities
Provisions are recognised for liabilities of uncertain timing or
amount when the Group has a legal or constructive obligation
arising as a result of a past event, which will probably result in
an outflow of economic benefits that can be reasonably
estimated.
Where it is not probable that an outflow of economic benefits
will be required, or the amount cannot be estimated reliably, the
obligation is disclosed as a contingent liability, unless the
probability of an outflow of economic benefits is remote. Possible
obligations, the existence of which will only be confirmed by the
occurrence or non-occurrence of one or more future events, are also
disclosed as contingent liabilities unless the probability of an
outflow of economic benefits is remote.
(m) New and revised IFRS that are effective or early adopted in 2017
The following new and revised IFRSs have been applied by the
Group in the current year and have affected the presentation and
disclosures set out in these consolidated financial statements.
IFRSs (Amendments) Annual Improvements 2014-2016 Cycle
Amendments to IAS Disclosure Initiative
7
Amendments to IAS Recognition of Deferred Tax Assets
12 for Unrealised Losses
The application of the above new and revised IFRSs in the
current year had no material impact on the Group's financial
performance and financial position for the current and prior years
and/or on the disclosures set out in these consolidated financial
statements.
Amendments to IAS 7 - Disclosure Initiative
The amendments introduce an additional disclosure that will
enable users of financial statements to evaluate changes in
liabilities arising from financing activities.
The adoption of the amendments has led to the additional
disclosure presented in the note to the consolidated statement of
cash flows, note 25.
(n) Standards issued but not yet effective
Standards issued but not yet effective up to the date of
issuance of the Group's consolidated financial statements are
listed below. This listing is of standards, amendments and
interpretations issued that the Group reasonably expects to be have
an impact on disclosures, financial position or performance when
applied at a future date.
Amendments to IFRSs Annual Improvements 2014-2016 Cycle(1)
Amendments to IFRSs Annual Improvements 2015-2017 Cycle
(2*)
IFRS 9 Financial instruments(1)
IFRS 15 Revenue from Contracts with Customers(1)
IFRS 16 Leases(2)
IFRS 17 Insurance Contrants(3*)
Amendments to IFRS Classification and Measurement of Share-based
2 Payment Transactions(1*)
Amendments to IFRS Applying IFRS 9 Financial Instruments
4 with IFRS 4 Insurance Contracts(1)
Amendments to IFRS Revenue From Contracts with Customers
15 (Clarification to IFRS 15)(1)
Amendments to IAS Transfer of Investment Property(1)
40
IFRIC 22 Foreign Currency Transactions and Advance
Consideration(1)
IFRIC 23 Uncertainty over income tax treatment(2*)
1 Effective in the EU for annual periods beginning
on or after 1 January 2018
2 Effective in the EU for annual periods beginning
on or after 1 January 2019
3 Effective in the EU for annual periods beginning
on or after 1 January 2021
* Not yet endorsed by the European Union
Except for the new and amendments to IFRSs and interpretation
mentioned below, the directors anticipate that the application of
all other new and amendments to IFRSs will have no material impact
on the consolidated nancial statements in the foreseeable
future.
IFRS 9 "Financial instruments"
IFRS 9 introduces new requirements for the classi cation and
measurement of nancial assets, nancial liabilities and impairment
requirements for nancial assets. A preliminary assessment of IFRS 9
performed by the Group, which is subject to changes arising from a
more detailed ongoing analysis, is as follows:
(a) Classification and measurement
The Group's debt securities currently classified as financial
assets at fair value through profit or loss ("FVTPL") will not be
significantly affected in respect of the accounting treatment, upon
adoption of IFRS 9.
The Group's equity securities currently classified as financial
assets at FVTPL will continue to be classified under this category.
The measurement requirements for financial assets at FVTPL under
IFRS 9 are largely unchanged.
(b) Impairment
IFRS 9 requires an impairment on debt instruments recorded at
amortised cost or at fair value through other comprehensive income,
lease receivables, loan commitments and financial guarantee
contracts that are not accounted for at fair value through profit
or loss under IFRS 9, to be recorded based on an expected credit
loss model either on a twelve-month basis or a lifetime basis. The
Group will apply the simplified approach and record lifetime
expected losses that are estimated based on the present values of
all cash shortfalls over the remaining life of all of its trade
receivables. Furthermore, the Group will apply the general approach
and record twelve-month expected credit losses that are estimated
based on the possible default events on its other receivables
within the next twelve months. The Group does not expect the
adoption of IFRS 9 will have a significant impact on the impairment
of its financial instruments.
IFRS 15 "Revenue from contracts with customers"
In 2016, the IASB issued classifications to IFRS15 in relation
to the identification of performance obligations, principal versus
agent considerations as well as licensing application guidance.
The directors anticipate that the application of IFRS 15 in the
future may result in more disclosures. However, the directors do
not anticipate that the application of IFRS 15 will have a material
impact on the timing and amounts of revenue recognised in the
respective reporting periods.
1.5 Change in accounting estimate
During the year ended 31 December 2017, the Group has reassessed
the fair value of certain investments measured at fair value
through profit or loss. China Rice Ltd ("China Rice"), Unipower
Battery Ltd ("Unipower") and Moly World Ltd were remeasured by
using expected recoverable method and Kincora Copper Ltd
("Kincora") by using consensus pricing method to better reflect the
expected fair value of the investments. Such change in accounting
estimate has been applied prospectively from 1 January 2017
onwards. As a result, unrealised losses on investments for the year
ended 31 December 2017 and the carrying of investment as at 31
December 2017 has increased and decreased by approximately
US$52,431,000 respectively.
2 Investment loss
2017 2016
US$'000 US$'000
------------------------------------- --------- ---------
Realised gains/(losses) on disposal
of investments 423 (142)
------------------------------------- --------- ---------
- Investments at FVTPL 882 (269)
- Loans at FVTPL - 127
- Subsidiary (459) -
------------------------------------- --------- ---------
Unrealised losses on investments (74,440) (6,069)
------------------------------------- --------- ---------
- Investments at FVTPL (50,526) (6,059)
- Loans at FVTPL (23,761) -
- Loans at amortised cost (153) (10)
Income from loans - 627
Total (74,017) (5,584)
------------------------------------- --------- ---------
3 Consulting services payable
2017 2016
US$'000 US$'000
----------------------------- --------- ---------
Consulting services payable (1,390) (1,769)
----------------------------- --------- ---------
Total (1,390) (1,769)
----------------------------- --------- ---------
4 Performance incentive
2017 2016
US$'000 US$'000
-------------------------------------- ---------- ---------
Release of provision for performance
incentive payable over one year - 4,195
-------------------------------------- ---------- ---------
Total - 4,195
-------------------------------------- ---------- ---------
A provision within the consolidated statement of financial
position for future performance incentive for the year ended 31
December 2017 was US$Nil (2016: US$Nil). The performance incentives
are accrued and payable to Origo Advisors Ltd. Refer to Note 28 for
details on Origo Advisors Ltd. The release of provision in 2016 was
derived from the amendment agreement of Asset Realisation Support
Agreement (the "Amendment Agreement") signed between the Group and
Origo Advisors Ltd. on 6 September 2016.
5 Other administrative expenses
2017 2016
US$'000 US$'000
-------------------------------------- --------- ---------
Employee expenses (154) (161)
Professional fees (648) (1,769)
Audit fees (120) (139)
--------- ---------
- Current year (120) (158)
- Over-provision in respect of prior
years - 19
--------- ---------
Depreciation expenses (13) (24)
Amortisation expenses (1) (2)
Provision for bad debts (3,386) (1,008)
Others (534) (515)
-------------------------------------- --------- ---------
Total (4,856) (3,618)
-------------------------------------- --------- ---------
6 Information regarding directors and employees
2017 2016
US$'000 US$'000
-------------------------------------- ---------- ---------
The aggregate payroll costs of these
employees were as follows:
Wages and salaries (154) (161)
Share-based payments (9) (67)
(163) (228)
-------------------------------------- ---------- ---------
* Most employees of the Group have been transferred to and
employed by Origo Advisors Ltd. in January 2015, which is
controlled by entities whose ultimate beneficiaries include Niklas
Ponnert (director of the Company who resigned in April 2018) and
Chris A Rynning (former director of the Company).
7 Directors' remuneration
2017 2016
US$'000 US$'000
------------------------------ --------- ---------
Directors' emoluments (152) (153)
Share-based payment expenses (9) (33)
------------------------------ --------- ---------
(161) (186)
------------------------------ --------- ---------
Directors' remuneration for the year 2017 and the number of
options held were as follows:
Director Share-based 2017
Salaries* fee payment** Total Number
Name US$'000 US$'000 US$'000 US$'000 of options
-------------------------------- ----------- --------- ------------ --------- ------------
Mr. Niklas Ponnert*** - - 9 9 4,500,000
Mr. Lionel de Saint-Exupery*** - 59 - 59 -
Ms. Shonaid Jemmett
Page*** - 59 - 59 -
Mr. Hiroshi Funaki*** - 16 - 16 -
Mr. Philip Peter
Scales*** - 9 - 9 -
Mr. John Chapman*** - 9 - 9 -
- 152 9 161 4,500,000
-------------------------------------------- --------- ------------ --------- ------------
Directors' remuneration for the year 2016 and the number of
options held were as follows:
Director Share-based 2016
Salaries* fee payment** Total Number
Name US$'000 US$'000 US$'000 US$'000 of options
----------------------------- ----------- --------- ------------ --------- ------------
Mr. Niklas Ponnert - - 33 33 4,500,000
Mr. Lionel de Saint-Exupery - 78 - 78 -
Ms. Shonaid Jemmett
Page - 75 - 75 -
- 153 33 186 4,500,000
----------------------------------------- --------- ------------ --------- ------------
* Short term employee benefits.
** Share-based payment refers to expenses arising from the
Company's share option scheme (Note 27).
*** Mr. Lionel de Saint-Exupery and Ms. Shonaid Jemmett Page
resigned as non-executive directors of the Company in October 2017.
Mr. Hiroshi Funaki was appointed as director of the Company in
September 2017, and Mr. Philip Peter Scales and Mr. John Chapman
were appointed as directors of the Company in October 2017. Mr.
Niklas Ponnert resigned as executive director of the Company in
April 2018.
8 Operating segment information
Operating segments are components of the entity whose results
are regularly reviewed by the entity's chief operating
decision-maker to make decisions about resources to be allocated to
the segment and to assess its performance. The chief operating
decision-maker of the Group is considered to be the board of
directors. The Group's operating segments have been defined based
on the types of investments which was equity investment and debt
instrument in 2017 and 2016.
For the year ended 31 December 2017
Unlisted Listed Total
Equity Debt Total Equity Debt Total
US$'000 US $'000 US $'000 US $'000 US $'000 US $'000 US $'000
------------------------- --------- --------- --------- --------- --------- --------- ---------
Investment
loss:
Realised (losses)/gains
on disposal
of investments (481) - (481) 904 - 904 423
Unrealised
losses on
investments (44,986) (23,914) (68,900) (5,540) - (5,540) (74,440)
Total (45,467) (23,914) (69,381) (4,636) - (4,636) (74,017)
Provision
for bad debts (3,386) - (3,386) - - - (3,386)
Unallocated
interest expense (3,598)
Unallocated
depreciation
and amortisation
expenses (14)
Unallocated
corporate
expenses (2,788)
Loss before
tax (83,803)
Income tax
credit 819 - 819 - - - 819
Loss for the
year (82,984)
Net divestment
Net proceeds
of divestment 1,000 - 1,000 3,954 - 3,954 4,954
------------------------- --------- --------- --------- --------- --------- --------- ---------
Statement
of financial
position
Investment
portfolio 6,850 734 7,584 10,195 - 10,195 17,779
------------------------- --------- --------- --------- --------- --------- --------- ---------
The Group's geographical areas based on the location of
investment assets, are defined primarily as China, Mongolia, South
Africa and Europe, as presented in the following table.
Europe China Mongolia South Africa Total
US$'000 US $'000 US $'000 US $'000 US $'000
-------------------------- -------- --------- --------- ------------- ---------
Investment loss:
Realised gains/(losses)
on disposal of
investments - 437 (14) - 423
Unrealised losses
on investments (335) (65,338) (8,798) 31 (74,440)
Total (335) (64,901) (8,812) 31 (74,017)
-------------------------- -------- --------- --------- -------------
Provision for
bad debts - (3,386) - - (3,386)
Unallocated interest
expense s (3,598)
Unallocated depreciation
and amortisation
expenses (14)
Unallocated corporate
expenses (2,788)
Loss before tax (83,803)
Income tax credit - 819 - - 819
Loss for the year (82,984)
Net divestment
Net proceeds of
divestment - 4,918 36 - 4,954
-------------------------- -------- --------- --------- ------------- ---------
Statement of financial
position
Investment portfolio 867 14,097 2,653 162 17,779
-------------------------- -------- --------- --------- ------------- ---------
For the year ended 31 December 2016
Unlisted Listed Total
Equity Debt Total Equity Debt Total
US$'000 US $'000 US $'000 US $'000 US $'000 US $'000 US $'000
------------------------- ----------- --------- ----------- ----------- --------- ----------- ---------
Investment (Restated) (Restated) (Restated) (Restated)
loss:
Realised (losses)/gains
on disposal
of investments (440) - (440) 171 127 298 (142)
Unrealised
(losses)/gains
on investments (8,337) (10) (8,347) 2,278 - 2,278 (6,069)
Income from
loans - 542 542 - 85 85 627
---------
Total (8,777) 532 (8,245) 2,449 212 2,661 (5,584)
------------------------- ----------- --------- ----------- ----------- --------- -----------
Unallocated
interest expense
s (5,791)
Unallocated
depreciation
and amortisation
expenses (26)
Unallocated
corporate
expenses (921)
Loss before
tax (12,322)
Income tax
credit 65 - 65 - - - 65
Loss for the
year (12,257)
Net divestment
Net proceeds
of divestment 353 - 353 412 383 795 1,148
Statement
of financial
position
Investment
portfolio 52,835 24,640 77,475 19,188 - 19,188 96,663
------------------------- ----------- --------- ----------- ----------- --------- ----------- ---------
Europe China Mongolia South Africa Total
US$'000 US $'000 US $'000 US $'000 US $'000
----------------------------- -------- --------- --------- ------------- ---------
Investment loss:
Realised (losses)/gains
on disposal of
investments - (440) 298 - (142)
Unrealised gains/(losses)
on investments 102 (2,833) (3,255) (83) (6,069)
Income from loans - 542 85 - 627
----------------------------- -------- --------- --------- ------------- ---------
Total 102 (2,731) (2,872) (83) (5,584)
----------------------------- -------- --------- --------- -------------
Unallocated interest
expense s (5,791)
Unallocated depreciation
and amortisation
expenses (26)
Unallocated corporate
expenses (921)
Loss before tax (12,322)
Income tax credit - 65 - - 65
Loss for the year (12,257)
Net divestment/(investment)
Net proceeds of
divestment - 353 795 - 1,148
Statement of financial
position
Investment portfolio 1,202 83,840 11,490 131 96,663
----------------------------- -------- --------- --------- ------------- ---------
9 Finance costs
2017 2016
US$'000 US$'000
--------------------------------------------- --------- ---------
Interest expenses of redeemable/convertible
zero dividend preference shares (3,219) (5,773)
Interest expenses of borrowing (335) -
Bank charges (44) (18)
---------------------------------------------- --------- ---------
(3,598) (5,791)
--------------------------------------------- --------- ---------
10 Income tax
As the Company is not in receipt of income from Manx land,
certain related business or property and does not hold a Manx
banking licence, it is taxed at the standard rate of 0% on the Isle
of Man. The Company is resident for tax purposes in the Isle of Man
and subject to corporate income tax at the standard rate of 0% and
as such no provision for tax in the Isle of Man has been made.
2017 2016
US$'000 US$'000
--------------------------------------------- --------- ---------
Current tax
Current year - -
Deferred tax
Deferred income tax* 819 65
Total income tax credit in the consolidated
statement of comprehensive income 819 65
--------------------------------------------- --------- ---------
* As at 31 December 2017, the deferred income tax liability US$
796,000 (2016: US$2,017,000) relates to fair value gain of Niutech
Environment Technology Corporation ("Niutech") (2016: Celadon
Mining Ltd., China Rice, Niutech and Unipower), estimated in
accordance with the relevant tax laws and regulations in the
People's Republic of China ("PRC") based on a tax rate of 10%.
The income tax for the year can be reconciled per the
consolidated statement of comprehensive income as follows:
2017 2016
US$'000 US$'000
--------------------------------------------------- --------- ---------
Loss before tax (83,803) (12,322)
--------------------------------------------------- --------- ---------
Loss before tax multiplied by rate of corporate
income tax in the Isle
of Man of 0% (2016: 0%) - -
Effects of:
Deferred tax on unrealised gains on investments 819 65
Total income tax credit in the consolidated
statement of comprehensive income 819 65
--------------------------------------------------- --------- ---------
Deferred income tax
2017 2016
US$'000 US$'000
------------------------------------------- --------- ---------
Opening deferred income tax liability
Income in accounts taxable in the future 2,017 2,082
2,017 2,082
------------------------------------------- --------- ---------
Recognised through consolidated statement
of comprehensive income
Income in accounts taxable in the future (819) (65)
Realised through investment realisation (402) -
------------------------------------------- --------- ---------
(1,221) (65)
------------------------------------------- --------- ---------
Closing deferred income tax liability
Income in accounts taxable in the future 796 2,017
------------------------------------------- --------- ---------
796 2,017
------------------------------------------- --------- ---------
No deferred tax asset has been recognised in respect of certain
unused tax losses of US$ 236,000 (2016: US$ 153,000), for
offsetting against future taxable profits of the relevant entity in
the Group in which the losses arose, due to the unpredictability of
future profit streams. The unused tax losses will expire within a
maximum period of five years in the PRC.
11 Loss per share ("LPS")
2017 2016
Numerator US$'000 US$'000
-------------------------------------------------- ------------ -------------
Loss for the year attributable to ordinary
shareholders of the parent
as used in the calculation of basic loss
per share (41,071) (12,244)
-------------------------------------------------- ------------ -------------
Loss for the year attributable to redeemable
zero dividend preference
shareholders of the parent as used in
the calculation of basic loss per share (41,913) N/A
-------------------------------------------------- ------------ -------------
Loss for the year attributable to ordinary
shareholders of the parent
as used in the calculation of diluted
loss per share (41,071) (12,244)
-------------------------------------------------- ------------ -------------
Loss for the year attributable to redeemable
zero dividend preference
shareholders of the parent as used in
the calculation of diluted loss per share (41,913) N/A
-------------------------------------------------- ------------ -------------
2017
Number 2016
of Number of
Denominator Shares shares
-------------------------------------------------- ------------ -------------
Weighted average number of ordinary shares
for basic LPS 351,035,389 351,035,389
-------------------------------------------------- ------------ -------------
Effect of dilution*:
Share options - -
Weighted average number of ordinary shares
adjusted for the effect of dilution 351,035,389 351,035,389
-------------------------------------------------- ------------ -------------
Weighted average number of redeemable zero
dividend preference shares for
basic LPS before and after adjusted for
the effect of dilution 14,991,781 -
-------------------------------------------------- ------------ -------------
(11.70)
Basic LPS of ordinary shares cents (3.49) cents
-------------------------------------------------- ------------ -------------
(11.70)
Diluted LPS of ordinary shares cents (3.49) cents
-------------------------------------------------- ------------ -------------
Basic LPS of redeemable zero dividend preference (279.57)
shares cents N/A
-------------------------------------------------- ------------ -------------
Diluted LPS of redeemable zero dividend (279.57)
preference shares cents N/A
-------------------------------------------------- ------------ -------------
* Diluted loss per share for the years ended 31 December 2017
and 31 December 2016 is the same as the basic loss per share, as
the Company's outstanding share options and convertible zero
dividend preference shares had an anti-dilutive effect on the basic
loss per share for the years ended 31 December 2017 and 31 December
2016.
12 Property, plant and equipment
Vehicles
US$'000
-------------------------- ---------
Cost
At 1 January 2016 144
------------------------------ ---------
Disposal (59)
------------------------------ ---------
At 31 December
2016 and 2017 85
------------------------------ ---------
Accumulated depreciation
At 1 January 2016 80
------------------------------ ---------
Charge for the
year 2016 24
Disposal (52)
------------------------------ ---------
At 31 December
2016 52
------------------------------ ---------
Charge for the
year 2017 13
At 31 December
2017 65
------------------------------ ---------
Net book value
-------------------------- ---------
At 31 December
2016 33
At 31 December
2017 20
------------------------------ ---------
13 Investments in subsidiaries
The principal subsidiaries of the Group are as follows:
Proportion Proportion
of ownership of ownership
interest interest
Country of at 31 December at 31 December
Name incorporation 2017 2016
----------------------------- ---------------- ---------------- ----------------
Ascend Ventures Ltd Malaysia 100% 100%
Origo Resource Partners
Ltd Guernsey 100% 100%
PHI International Holding
Ltd Bermuda 100% 100%
PHI International (Bermuda)
Holding Ltd* Bermuda 100% 100%
Ascend (Beijing) Consulting
Ltd** China 100% 100%
China Cleantech Partners,
L.P. ("CCP Fund") Cayman Islands 100% 100%
ISAK International Holding British Virgin
Ltd*** Islands - 71.2%
----------------------------- ---------------- ---------------- ----------------
* Owned by Origo Resource Partners Ltd
** Owned by Ascend Ventures Ltd
*** Struck off
14 Investments at fair value through profit or loss
As at 31 December 2017
Fair
value Proportion Fair
Country of hierarchy of ownership Cost value
Name incorporation level interest US$'000 US$'000
-------------------------- ----------------- ----------- -------------- --------- ---------
British Virgin
Niutech (Note b) Islands 3 11.8% 4,819 8,555
British Virgin
Celadon Mining Ltd Islands 3 8.9% 13,069 4,477
Kincora (Notes c and
d) Canada 3 30.9% 8,571 1,607
British Virgin
Six Waves Inc Islands 3 1.1% 240 1,065
Gobi Coal & Energy British Virgin
Ltd (Note c and e) Islands 3 7.5% 14,960 1,013
Marula Mines Ltd South Africa 3 0.9% 250 162
Fram Exploration AS Norway 3 0.6% 1,223 133
Staur Aqua AS Norway 3 9.2% 719 -
Unipower (Note d) Cayman Islands 3 16.5% 4,301 -
British Virgin
China Rice (Note d) Islands 3 32.1% 13,000 -
Moly World Ltd (Note British Virgin
d) Islands 3 20.0% 10,000 -
Other quoted investments
(Note c) 1 593 33
17,045
-------------------------------------------- ----------- -------------- --------- ---------
The shares held in China Rice and Unipower are all convertible
preference shares whilst the remaining investments held in the
other entities are all ordinary equity shares. The 'proportion of
ownership interest' represents the percentage of the shares held by
the Group in all share classes.
As at 31 December 2016
Fair
value Proportion Fair
Country of hierarchy of ownership Cost value
Name incorporation level interest US$'000 US$'000
-------------------------- ----------------- ----------- -------------- --------- ---------
British Virgin
Niutech (Note b) Islands 3 18.4% 6,350 14,160
British Virgin
Celadon Mining Ltd Islands 3 8.9% 13,069 20,059
Kincora (Notes c and
d) Canada 1 30.9% 8,571 4,957
British Virgin
Six Waves Inc Islands 3 1.1% 240 1,464
Gobi Coal & Energy British Virgin
Ltd (Note c and e) Islands 3 10.8% 14,960 2,679
Marula Mines Ltd South Africa 3 0.9% 250 131
Fram Exploration AS Norway 3 0.6% 1,223 145
Staur Aqua AS Norway 3 9.2% 719 562
Unipower (Note d) Cayman Islands 3 16.5% 4,301 6,648
British Virgin
China Rice (Note d) Islands 3 32.1% 13,000 16,364
Moly World Ltd (Note British Virgin
d) Islands 3 20.0% 10,000 3,783
Rising Technology
Corporation Ltd/Beijing
Rising Information
Technology Ltd (Note British Virgin 2%/
f) Islands 3 1.6% 5,565 1,000
Other quoted investments
(Note c) 1 685 71
72,023
-------------------------------------------- ----------- -------------- --------- ---------
Notes
a. There are no significant restrictions that will have an
impact on ability to transfer these investments.
b. The Company holds 95.3% interest in Niutech Energy Ltd, by
which Niutech is indirectly held.
c. Investments held partially by China Commodities Absolute
Return Ltd, one of the subsidiaries of the Group, in 2015. During
the year 2016, the investments had been transferred and held by the
Company.
d. These investments are associates of the Group measured at
fair value through profit or loss.
e. During the course of 2017, certain licenses of Gobi Coal
& Energy Ltd were subject to freezing and confiscation orders
imposed by Mongolian courts in relation to a dispute between the
former chairman of the company and one if its shareholders. As of
31 December 2017 these orders were still in effect.
f. 2% equity stake in Rising Technology Corporation Ltd and 1.6%
beneficial interest in Beijing Rising Information Technology Ltd, a
company incorporated in the PRC, under a nominee agreement. The
investment was disposed in during the year.
In accordance with IFRS 13 "Fair Value Measurement", investments
recognised at fair value are required to be analysed between those
whose fair value is based on:
a) Quoted prices in active markets for identical assets or liabilities (Level 1);
b) Those involving inputs other than quoted prices included in
level 1 that are observable for the asset or liability, either
directly (as prices) or indirectly (derived from prices) (Level 2);
and
c) Those with inputs for the asset or liability that are not
based on observable market data (unobservable inputs) (Level
3).
For assets and liabilities that are recognised in the
consolidated financial statements on a recurring basis, the Group
determines whether transfers have occurred between levels in the
hierarchy by re-assessing categorisation (based on the lowest level
input that is significant to the fair value measurement as a whole)
at the end of each reporting period. In 2017, the Group transferred
an investment with fair value of approximately US$1,607,000 as at
31 December 2017 from Level 1 to Level 3, primarily related to an
equity security traded in active markets while there have been no
transfers between levels during the year of 2016. The Group has
used a quoted offered price of Kincora from a market pricing
service agent in 2017 (2016: quoted price in active market) due to
lack of liquidity from reduced daily transaction volume during the
year in the active market.
The following table provides an analysis of investments carried
at fair value by level of fair value hierarchy:
2017
Level Level Level Total
1 2 3
US$'000 US$'000 US$'000 US$'000
------------------------------------ -------- -------- -------- --------
Investments at fair value
through profit or loss
* Listed equity investments 33 - 10,162 10,195
* Unlisted equity investments - - 6,850 6,850
33 - 17,012 17,045
------------------------------------ -------- -------- -------- --------
2016
Level Level Level Total
1 2 3
US$'000 US$'000 US$'000 US$'000
------------------------------------ -------- -------- ----------- --------
Investments at fair value (Restated)
through profit or loss
* Listed equity investments 5,028 - 14,160 19,188
* Unlisted equity investments - - 52,835 52,835
5,028 - 66,995 72,023
------------------------------------ -------- -------- ----------- --------
Changes in investments at fair value through profit or loss
based on Level 3:
2017 2016
US$'000 US$'000
---------------------------------------------- --------- ---------
Opening balance 66,995 76,125
Proceeds from disposals of investments (4,918) (353)
Realised gain/(losses) on disposals of
investments 918 (440)
Bank charges (11) -
Transaction costs (402) -
Transfer from Level 1 1,607 -
Net exchange difference 1,832 (4,657)
Movement in unrealised losses on investments
- In profit or loss (49,009) (3,680)
Closing balance 17,012 66,995
---------------------------------------------- --------- ---------
The fair value decrease on investments categorised within Level
3 of US$47,177,000 (2016: US$8,337,000) was recorded in the
consolidated statement of comprehensive income.
Description of significant unobservable inputs to valuation:
As at 31 December 2017
Significant
unobservable
Valuation technique inputs Range
-------------------------- --------------------- ------------------------ --------------
Investments in quoted Consensus pricing
equity shares - Kincora method Offered quote USD 1,607,000
Investments in unquoted
equity shares - Celadon Discount for
Mining Ltd, Gobi Multiples method lack of marketability 20% - 30%
Coal & Energy Ltd
and Fram Exploration
AS Share price volatility 80%
Investments in unquoted
equity shares - Marula Consensus pricing
Mines Ltd method Offered quote USD 162,000
Investments in unquoted
equity shares - Six Discount for
Waves Inc Multiples method lack of marketability 30%
As at 31 December 2016
Significant
unobservable
Valuation technique inputs Range
------------------------- --------------------- ------------------------ ----------
Investments in unquoted Discounted Weighted average
equity shares - Moly cash flow cost of
World Ltd method capital ("WACC") 23%
Discount for
lack of marketability 20% - 30%
Investments in unquoted
equity shares - others Discount for
in Mining Investments* Multiples method lack of marketability 20% - 30%
Investments in unquoted
equity shares - China Discount for
Investments* Multiples method lack of marketability 30%
Investments in unquoted
equity shares - Staur Discount for
Aqua AS Multiples method lack of marketability 30%
Investments in unquoted
equity shares - Six Discount for
Waves Inc Multiples method lack of marketability 30%
* Investments disclosed in the Origo's Portfolio in Chairman's
Letter.
Risk management activities
Fair value risk
The Group's financial assets are predominantly investments in
unquoted companies, and the fair value of each investment depends
upon a combination of market factors and the performance of the
underlying asset. The Group does not hedge the market risk inherent
in the portfolio but manages asset performance risk on an
asset-specific basis by continuously monitoring each asset's
performance. Changes of each asset's fair value is taken to the
statement of comprehensive income as necessary. The Group believes
that the carrying amount is a reasonable approximation of fair
value for their financial assets and liabilities.
Valuation techniques
The fair value of financial instruments traded in active markets
(such as publicly traded securities) is based on quoted market
prices at the reporting date. The quoted market price used for
financial assets held by the Group is the current closing
price.
The fair value of financial instruments that are not traded in
an active market is determined by using valuation techniques. The
Group has estimated the value of each of its unquoted equity
instruments by using judgement to select the most appropriate
valuation methodology for each investment based on the
recommendations of the Guidelines. Valuation methodologies mainly
include multiples, discounted cash flow, industry valuation
benchmarks, available market prices and so on, which may apply
individually or in combination. Key assumptions and judgements of
each methodology concerning the future and other key sources of
estimation uncertainty will have a significant risk of causing a
material adjustment to the fair value of the instruments within the
next reporting period.
Sensitivity risk of investments at fair value through profit or
loss based at Level 3
Level 3 inputs are sensitive to assumptions made when
ascertaining fair value of financial assets. A reasonable
alternative assumption would be to apply a standard marketability
discount of 25% for all assets rather than the specific approach
adopted. This would have a negative impact on the portfolio of
US$180,000 (2016: increased US$2,442,000) or 1.17% (2016: increased
3.70%) of total investments at fair value through profit or loss
based at level 3.
Increase in WACC by 1% would decrease/increase the fair value by
nil (2016: US$282,000).
15 Loans
The Group has entered into convertible credit agreements and has
the right to convert the outstanding principal balance of relevant
loans into borrower's shares according to certain conversion
conditions, and loan agreements with certain investee companies as
set forth in the table below.
As at 31 December 2017
Loans
due within Loans
Loan Loan one year due after Fair
rates principal one year value
Borrower % US$'000 US$'000 US$'000 US$'000
-------------------- ------- ----------- ------------ ------------ --------
Convertible credit
agreements*
Staur Aqua AS 0-15 3,848 384 350 734
384 350 734
-------------------- ------- ----------- ------------ ------------ --------
* Loans in relation to convertible credit agreements are
measured at fair value. Loans in relation to loan agreements are
measured at amortised cost using the effective interest rate method
less any identified impairment losses.
As at 31 December 2016
Loans
due within Loans
Loan Loan one year due after Fair
rates principal one year value
Borrower % US$'000 US$'000 US$'000 US$'000
-------------------- ------- ----------- ------------ ------------ --------
Convertible credit
agreements*
China Rice 4 15,000 15,000 - 15,000
Unipower 6 9,000 9,000 - 9,000
Staur Aqua AS 0-15 3,848 145 350 495
Sub-total 24,145 350 24,495
-------------------- ------- ----------- ------------ ------------ --------
Loan agreements*
Unipower 12 164 145 - 145
Sub-total 145 - 145
------------------ --- ---- ------- ---- -------
Total 24,290 350 24,640
------------------ --- ---- ------- ---- -------
Statement of changes in loans:
2017 2016
US$'000 US$'000
-------------------------------------------- --------- ---------
Opening balance 24,640 26,443
Repayment - (383)
Converted into ordinary shares - (1,532)
Net exchange difference 8 (5)
Movement in realised and unrealised losses
on investments
- In profit or loss (23,914) 117
Closing balance 734 24,640
-------------------------------------------- --------- ---------
Changes in convertible credit agreements based on Level 3:
2017 2016
US$'000 US$'000
-------------------------------------------- --------- ---------
Opening balance 24,495 26,288
Repayment - (383)
Converted into ordinary shares - (1,532)
Net exchange difference - (5)
Movement in realised and unrealised losses
on investments
- In profit or loss (23,761) 127
Closing balance 734 24,495
-------------------------------------------- --------- ---------
The fair value decrease on convertible credit agreements
categorised within Level 3 of US$23,914,000(2016: increase of
US$117,000) was recorded in the consolidated statement of
comprehensive income.
Convertible loans issued to China Rice of US$15,000,000 and
Unipower of US$9,000,000 were fully impaired in 2017.
16 Trade and other receivables
2017 2016
US$'000 US$'000
--------------------------- --------- ---------
Trade debtors 278 5
Other debtors 596 889
Loan interest receivables - 3,113
Prepayment 7 -
Total 881 4,007
----------------------------- --------- ---------
2017 Aging for the Group
0-30 31-60 61-90 91-180 181-365 Over
days days days days days 365 days Total
-------------------
Aging for the
Group US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
------------------- -------- -------- -------- -------- -------- ---------- --------
Trade debtors 278 - - - - - 278
Other debtors
and
prepayment 51 17 1 16 113 1,925 2,123
Loan interest
receivables - - - - - 8,161 8,161
Provision against
loan interest
receivables - - - - - (8,161) (8,161)
Provision of
bad debts - - - - - (1,520) (1,520)
------------------- -------- -------- -------- -------- -------- ---------- --------
Total 329 17 1 16 113 405 881
------------------- -------- -------- -------- -------- -------- ---------- --------
Percentage 37% 2% 0% 2% 13% 46% 100%
------------------- -------- -------- -------- -------- -------- ---------- --------
2016 Aging for the Group
31-60 61-90 91-180 181-365 Over
0-30 days days days days days 365 days Total
-----------------------
Aging for
the Group US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
----------------------- ---------- -------- -------- -------- -------- ---------- --------
Trade debtors - - - - - 5 5
Other debtors 19 240 2 10 14 2,941 3,226
Loan interest
receivables 46 44 46 136 223 7,666 8,161
Provision
against loan
interest receivables - - - - - (5,048) (5,048)
Provision
of bad debts - - - - - (2,337) (2,337)
----------------------- ---------- -------- -------- -------- -------- ---------- --------
Total 65 284 48 146 237 3,227 4,007
----------------------- ---------- -------- -------- -------- -------- ---------- --------
Percentage 2% 7% 1% 4% 6% 80% 100%
----------------------- ---------- -------- -------- -------- -------- ---------- --------
The below table reconciles the impairment loss of trade debtors
for the year:
2017 2016
US$'000 US$'000
---------------------------- --------- ---------
At 1 January 7,385 10,753
Impairment loss recognised 3,386 1,008
Bad debts written off (1,090) (4,376)
Total 9,681 7,385
------------------------------ --------- ---------
The Group identified an impairment of US$3,386,000 (2016:
US$1,008,000) on trade and other receivables, and the impairment is
recognised within the other administrative expenses.
17 Cash and cash equivalents
2017 2016
US$'000 US$'000
--------------------------------- --------- ---------
Current account 1,199 1,786
Total cash and cash equivalents 1,199 1,786
----------------------------------- --------- ---------
18 Trade and other payables
2017 2016
US$'000 US$'000
------------------------------- --------- ---------
Trade payables - 5
Other payables 1,381 3,467
Performance incentive payable
within one year - 8
--------------------------------- --------- ---------
Total 1,381 3,480
--------------------------------- --------- ---------
19 Financial guarantee contracts
2017 2016
US$'000 US$'000
-------------------------------- --------- ---------
Financial guarantee contracts* 435 435
--------------------------------- --------- ---------
Total 435 435
--------------------------------- --------- ---------
* In July 2013, the Group entered into a guarantee agreement
with IRCA Holdings Ltd and ABSA Bank Limited to guarantee the
repayment of loan facilities of up to Rand 6,769,000 extended by
ABSA Bank Limited to IRCA Holdings Ltd, which has applied for
liquidation, so the Group recognised it as a liability. The payment
request related to this provision is expected at any time requested
by ABSA Bank.
20 Short-term/Long-term borrowing
2017 2016
Current liabilities US$'000 US$'000
--------------------------- --------- ---------
Short-term borrowing * 2,500 -
Non-current liabilities
Long-term borrowing * - 2,500
Total borrowing 2,500 2,500
----------------------------- --------- ---------
* On 2 December 2016, the Company entered into an unsecured loan
agreement with an independent third party for an unsecured loan
US$2,500,000 (the "Facility"). The Facility carries a rate of
return (payable at repayment) of the higher of 12% per annum
(calculated on a non-compounding basis) and US$1,250,000 (accrued
on a day to day basis).
. The proceeds of the Facility will be applied in accordance
with article 13.1.1 of the Company's articles of association
("Articles").
The Facility is repayable on the earlier of (i) 2 December 2020;
and (ii) when the Company has distributed US$6,000,000 to the
Company's shareholders in accordance with articles 4.10 to 4.12 of
the Company's Articles provided it has sufficient funds to repay
the Facility. The Company may at any time prepay the Facility, in
whole or in part, without penalty. As at 31 December 2017, no
distribution had been made in accordance with articles 4.10 to 4.12
of the Company's Articles. The Company expected to settle the
borrowing in 2018, and thus, management reclassified the borrowing
as short-term borrowing as at 31 December 2017.
21 Provision
2017 2016
US$'000 US$'000
-------------------------------------------- --------- ---------
Upper share rights/contingent share awards
* 103 82
Total 103 82
-------------------------------------------- --------- ---------
2017 2016
US$'000 US$'000
----------------------------------------------- --------- ---------
Opening balance 82 4,262
Movement in upper share rights/contingent
share awards * 21 15
Movement in performance incentive provision** - (4,195)
----------------------------------------------- --------- ---------
Total 103 82
----------------------------------------------- --------- ---------
* The provision relates to the fair value of upper share rights
and contingent share awards granted to certain directors,
executives and ex-employees under the Company's joint share
ownership scheme. Further details about the upper share rights and
contingent share awards are included in Note 27. The provision is
expected to be utilised in the next 8 years provided the upper
share rights are exercised.
** Refer to Note 4 for total performance incentive expenses. The
provision is expected to be utilised when investments are realised
and the hurdle is reached.
22 Redeemable / convertible zero dividend preference shares
Number Other
of Liability Equity reserve
shares component component
US$'000 US$'000 US$'000
-------------------------------------- ----------- ----------- ----------- ----------
Balance at 1 January 2016 57,000,000 69,385 8,297 -
--------------------------------------- ----------- ----------- ----------- ----------
Interest expense on convertible
zero dividend preference -
shares - 4,674 -
Interest expense on redeemable
zero dividend preference -
shares 1,099 -
Gain recognised upon extinguishment* - (62) - -
Change in fair value upon -
extinguishment - - 27,627
Released upon extinguishment - (73,997) (35,924) -
Recognition of redeemable
zero dividend preference -
shares - 46,370 -
-------------------------------------- ----------- ----------- ----------- ----------
Balance at 31 December
2016 57,000,000 47,469 - -
--------------------------------------- ----------- ----------- ----------- ----------
Interest expense on redeemable
zero dividend preference -
shares - 3,219 -
Capitalisation of redeemable
zero dividend preference
shares - (50,688) - 50,688
--------------------------------------- ----------- ----------- ----------- ----------
Balance at 31 December
2017 57,000,000 - - 50,688
--------------------------------------- ----------- ----------- ----------- ----------
* Gain recognised upon extinguishment was recognised in other
income during the year 2016.
In September 2016, the Company restructured the terms of its
existing convertible zero dividend preference shares, where the
conversion feature has been removed, which were revised as
redeemable zero dividend preference shares. The principal terms of
restructure includes: i) removal of redemption of at least 12
million convertible zero dividend preference shares and/or maturity
date; ii) reset of the accreted principal amount per preference
shares to US$1.0526 each; iii) no rate of return on the outstanding
amount will begin to accrete until 1 January 2018 and, iv) in
respect of each preference share still in issue on 1 January 2018,
its principal amount of US$1.0526 shall be subject to the accretion
of a rate of return equal to 4 per cent per annum from (and
including) 1 January 2018 to (and including) the date on which such
amount is redeemed, with such return accruing on a simple and not
compound basis. Due to the revised terms, the convertible zero
dividend preference shares were regarded as an extinguishment and
redeemable zero dividend preference shares were therefore
recognised. The redeemable zero dividend preference shares
effective interest rate is 9.18% per annum.
On 27 September 2017, the rights attaching to the redeemable
zero dividend preference shares and the ordinary shares changed so
that they rank alongside each other, and the redeemable zero
dividend preference shareholders receive distributions when
ordinary shareholders do. Post 27 September 2017, the redeemable
zero dividend preference shares are accounted for as an equity
instrument in accordance with the accounting policies disclosed in
Note 1.4(f).
All future distributions to ordinary and redeemable zero
dividend preference shareholders are on the following basis (pro
rata within the respective classes of shares):
-- in respect of the first US$15 million of distributions, 80
percent (i.e. US$12 million) to the redeemable zero dividend
preference shareholders and 20 percent (i.e. US$3 million) to the
ordinary shareholders;
-- in respect of distributions in excess of the first US$15
million: until such time as all redeemable zero dividend preference
shares have been redeemed in full, 44 percent to the redeemable
zero dividend preference shareholders and 56 percent to the
ordinary shareholders; thereafter, 100 percent to the ordinary
shareholders.
22 Redeemable / convertible zero dividend preference shares
The redeemable zero dividend preference shares are now subject
to the distribution in accordance with articles 4.10 to 4.12 of the
Articles. In summary, the distribution is mandatory to distribute
when:
(i) the Company has available funds, which is the aggregate
amount of the Company's net cash less working capital requirements
for the following 12 months and;
(j) the Company would be able to comply with the solvency test
under the Companies Act 2006 ("Solvency Test") immediately after
distribution.
23 Issued capital
2017 2016
Number of Number of
Authorised shares GBP'000 shares GBP'000
------------------------------- ------------ -------- ------------ --------
Ordinary shares of GBP 0.0001
each 500,000,000 50 500,000,000 50
------------------------------- ------------ -------- ------------ --------
Number of Number of
Issued and fully paid shares US$'000 shares US$'000
------------------------------- ------------ -------- ------------ --------
Ordinary shares of GBP 0.0001
each
------------------------------- ------------ -------- ------------ --------
At beginning and end of the
year 358,746,814 56 358,746,814 56
------------------------------- ------------ -------- ------------ --------
Redeemable zero dividend
preference shares of no par
value
------------------------------- ------------ -------- ------------ --------
At 1 January - - - -
------------------------------- ------------ -------- ------------ --------
Capitalisation of redeemable
zero dividend preference
shares (note 22) 57,000,000 - - -
------------------------------- ------------ -------- ------------ --------
At 31 December 57,000,000 - - -
------------------------------- ------------ -------- ------------ --------
24 Other reserve
This mainly comprised of 57,000,000 (US$50,688,000) redeemable
zero dividend preference shares at no par value capitalised in
September 2017 (2016: the debit amount of US$2,106,000 from
7,711,425 shares of the Company held by Employee Benefit Trust
("EBT") and the amounts of US$3,162,000 credited from the capital
redemption of CCP Fund in 2014).
25 Note to the consolidated statement of cash flows
(a) Major non-cash transaction
During the year ended 31 December 2017, interest expenses of
US$3,554,000 (2016: US$5,773,000) related to interest on borrowings
and redeemable zero dividend preference shares.
(b) Reconciliation of liabilities arising from financing activities:
Borrowing Redeemable zero dividend preference shares
US$'000 US$'000
------------------------------------------------------------- ---------- -------------------------------------------
At 1 January 2017 2,500 47,469
------------------------------------------------------------- ---------- -------------------------------------------
Changes include in financing cash flows:
Interest expenses paid 335 3,219
Other changes:
Capitalisation of redeemable zero dividend preference shares - (50,688)
Interest expenses (335) -
------------------------------------------------------------- ---------- -------------------------------------------
At 31 December 2017 2,500 -
------------------------------------------------------------- ---------- -------------------------------------------
26 Financial instruments - Risk management
The Group are exposed through their operations to one or more of
the following risks:
- Fair value risk
- Cash flow interest rate risk
- Currency risk
- Credit risk
- Liquidity risk
- Concentration risk
- Price risk
The policy for managing these risks is set by the board. The
policy for each of the above risks is described in more detail
below:
Fair value risk
The Group's financial assets are predominantly investments in
unquoted companies, and the fair value of each investment depends
upon a combination of market factors and the performance of the
underlying asset. The Group does not hedge the market risk inherent
in the portfolio but manages asset performance risk on an
asset-specific basis by continuously monitoring each asset's
performance and charging the change of each asset's fair value to
the consolidated statement of comprehensive income as
necessary.
Cash flow interest rate risk
Interest rate risk is the risk that the fair value or future
cash flows of a financial instrument will fluctuate because of
changes in market interest rates. The Group's exposure to the risk
of changes in market interest rates is relatively small as the
Group's outstanding debt is fixed rate. Meanwhile, the interest
income is not material in the context of the total portfolio return
as a whole.
Currency risk
Some of the Group's assets, liabilities, income and expenses are
effectively denominated in currencies other than US Dollars (the
Group's presentation and functional currency). Fluctuations in the
exchanges rates between these currencies and US Dollars will have
an effect on the reported value of those items.
The following table demonstrates the sensitivity of the Group's
loss before tax due to a change in the fair value of monetary
assets and liabilities resulting from a reasonably possible change
in the US dollar, with all other variables held constant.
Appreciation/ Effect on loss Effect on net
(depreciation) before tax asset value
in US$ US$'000 US$'000
------ ---------------- --------------- --------------
2017 +10% 701 701
-10% (701) (701)
2016 +10% 2,739 2,739
-10% (2,739) (2,739)
------ ---------------- --------------- --------------
The assumed movement for currency rate sensitivity analysis is
based on the currently observable market environment.
The Group's assets and liabilities that are effectively
denominated in currencies other than the functional currency, US
Dollars, are:
GBP NOK RMB HKD CAD ZAR Total
2017 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
--------------------- --------- --------- --------- --------- --------- --------- ---------
Cash and bank
balances 62 - 3 49 - - 114
Investments at
FVTPL* 4,484 133 - - 1,635 - 6,252
Loans - 734 - - - - 734
Trade and other
receivables - - 488 - - - 488
Total Assets 4,546 867 491 49 1,635 - 7,588
--------------------- --------- --------- --------- --------- --------- --------- ---------
Trade and other
payables - - (42) - - - (42)
Financial guarantee
contracts - - - - - (435) (435)
Provision (103) - - - - - (103)
Total Liabilities (103) - (42) - - (435) (580)
--------------------- --------- --------- --------- --------- --------- --------- ---------
GBP NOK RMB HKD CAD ZAR Total
2016 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
--------------------- --------- --------- --------- --------- --------- --------- ---------
Cash and bank
balances 176 - 141 50 - - 367
Investments at
FVTPL * 20,065 707 - - 5,023 - 25,795
Loans - 495 145 - - - 640
Trade and other
receivables - - 385 - - - 385
Total Assets 20,241 1,202 671 50 5,023 - 27,187
--------------------- --------- --------- --------- --------- --------- --------- ---------
Trade and other
payables - - (78) - - - (78)
Financial guarantee
contracts - - - - - (435) (435)
Provision (82) - - - - - (82)
Total Liabilities (82) - (78) - - (435) (595)
--------------------- --------- --------- --------- --------- --------- --------- ---------
Credit risk
The Group is primarily exposed to credit risk from the loans
including convertible credit agreements and loan agreements
extended to unquoted portfolio companies, loan interest receivables
and other debtors, in which the directors consider the maximum
credit risk to be the carrying value of the convertible credit
agreements, loan agreements, loan interest receivables and other
debtors which amounted to US$1,615,000 (2016: US$28,647,000).
Directors consider cash and cash equivalents do not expose to
significant credit risk, because the cash is held at reputable
banks. The credit risk exposure is managed on an asset-specific
basis by management.
2017 2016
2017 more 2016 more
2017 up to than 2017 2016 up to than 2016
not 12 months 12 months Total not 12 months 12 months Total
past past past US$'000 past past past US$'000
due due due due due due
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
------------------- ---------- ----------- ----------- ---------- --------- ----------- ----------- ----------
Convertible
credit agreements - 384 350 734 - - 24,495 24,495
Loan agreements - - - - - - 145 145
Trade and
other receivables - 476 405 881 - 780 3,227 4,007
Total - 860 755 1,615 - 780 27,867 28,647
------------------- ---------- ----------- ----------- ---------- --------- ----------- ----------- ----------
Liquidity risk
The table below analyses the Group's financial liabilities into
relevant maturity groupings based on the remaining period at the
end of reporting period to the contractual maturity date or, if
earlier, the expected date on which the financial liabilities will
be settled. The amounts in the table are the contractual
undiscounted cash flows.
Liabilities
Carrying Less 3-12 over Total
amount than 1-3 months months 12 months
31 December 2017 1 month
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
---------------------- --------------------- ---------- ------------- --------- ------------ ---------
Other payables 1,880 1,545 - - 1,250 2,795
Upper share rights
/contingent share
awards 103 - - - 103 103
Short-term borrowing 2,500 - - - 2,500 2,500
Total 4,483 1,545 - - 3,853 5,398
---------------------- --------------------- ---------- ------------- --------- ------------ ---------
Financial guarantees
issued
Maximum amount
guaranteed 435 - - 435 - 435
---------------------- ------ ---- ----
Liabilities
Carrying Less over
amount than 3-12 12
31 December 2016 1 month 1-3 months months months Total
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
----------------------- --------- ---------- ------------ --------- --------- ---------
Trade payables 5 5 - - - 5
Other payables 3,966 3,966 - - - 3,966
Performance incentive
payable 8 - - 8 - 8
Upper share rights
/contingent share
awards 82 - - - 82 82
Long-term borrowing 2,500 - - - 2,500 2,500
Redeemable zero
dividend preference
shares 47,469 - - - 57,000 57,000
Contractual interest
payable - - - - 13,777 13,777
----------------------- --------- ---------- ------------ --------- --------- ---------
Total 54,030 3,971 - 8 73,359 77,338
----------------------- --------- ---------- ------------ --------- --------- ---------
Financial guarantees
issued
Maximum amount
guaranteed 435 - - 435 - 435
----------------------
Total 435 - - 435 - 435
---------------------- ------ ---- ----
Concentration risk
The main concentration risk for Origo is that the largest
investments are concentrated in China for the amount of
US$14,097,000 (2016: US$83,840,000), 79% (2016: 87%) out of the
total portfolio value of US$17,779,000 (2016: US$96,663,000).
Price risk
Price risk may affect the value of listed and unlisted
investments as a result of changes in market prices (other than
arising from interest rate risk or currency risk), whether caused
by factors specific to an individual investment, its issuer or
factors affecting all instruments traded in the market.
As the majority of financial instruments are carried at fair
value, with fair value changes recognised in the consolidated
statement of comprehensive income, all changes in market conditions
will directly affect reported portfolio returns.
Price risk is managed by constructing a diversified portfolio of
instruments traded on various markets and hedging where
appropriate.
The following table details the sensitivity to a 10% variation
in equity prices. The sensitivity analysis includes all equity
investments held at fair value through profit or loss and adjusts
their valuation at the year end for a 10% change in value.
2017 2016
US$'000 US$'000
------------------- --------- ---------
Increase in price 1,705 7,202
Decrease in price (1,705) (7,202)
------------------- --------- ---------
The sensitivity to equity and fund investments has not increased
during the year due to net investments and investment portfolio
loss in the year.
27 Share-based payments
The Group has a number of share schemes that allow a director,
certain ex-employees and its advisors to acquire shares in the
Company, as detailed in Note 1.3(c).
The total cost recognised in the consolidated statement of
comprehensive income is shown below:
2017 2016
US$'000 US$'000
-------------------------------------------- --------- ---------
Equity-settled option - (52)
Upper share rights/contingent share awards (21) (15)
Total (21) (67)
-------------------------------------------- --------- ---------
The following table illustrates the number ("No.") and weighted
average exercise prices ("WAEP") of, and movements in, share
options during the years ended 31 December 2017 and 31 December
2016.
2017 2017 2016 2016
No. WAEP No. WAEP
---------------------------- ----------- ------- ------------ ---------
Outstanding at 1 January 13,500,000 29.22p 20,951,932 26.87p
---------------------------- ----------- ------- ------------ ---------
Granted during the year - - - -
Forfeited during the year - - - -
Exercised during the year - - - -
Expired during the year - - (7,451,932) (22.62p)
Outstanding at 31 December 13,500,000 29.22p 13,500,000 29.22p
---------------------------- ----------- ------- ------------ ---------
Exercisable at 31 December 13,500,000 29.22p 13,500,000 29.22p
---------------------------- ----------- ------- ------------ ---------
The weighted average remaining contractual life for the share
options outstanding as at 31 December 2017 was 1.56 years (31
December 2016: 2.56 years).
The range of exercise prices for options outstanding at the end
of the year was 20 pence to 59.85 pence (31 December 2016: 20 pence
to 59.85 pence).
During the year 2016, options including 6,800,000 equity-settled
options granted on 26 October 2006 and 651,932 equity-settled
options granted on 21 December 2006 have expired.
Outstanding options include 3,500,000, 500,000 and 13,600,000
equity-settled options granted on 13 March 2008, 6 February 2009
and 2 February 2012 respectively to certain directors and employees
of the Company. The Company did not enter into any share-based
transactions with parties other than employees during the years
from 2007 to 2016, except as described above.
During the year 2017, there were no options granted, forfeited,
exercised or expired.
The following table illustrates the number ("No.") and weighted
average exercise prices ("WAEP") of, and movements in upper share
rights and contingent share awards during the years ended 31
December 2017 and 31 December 2016.
2017 2017 2016 2016
No. WAEP No. WAEP
--------------------------- ---------- ------ ---------- ------
Outstanding at 1 January 7,711,425 9.48p 7,711,425 9.48p
--------------------------- ---------- ------ ---------- ------
Granted during the year - - - -
Forfeited during the year - - - -
Exercised during the year - - - -
Expired during the year - - - -
Outstanding at the end of
the year 7,711,425 9.48p 7,711,425 9.48p
--------------------------- ---------- ------ ---------- ------
Exercisable at the end of
the year 7,711,425 9.48p 7,711,425 9.48p
--------------------------- ---------- ------ ---------- ------
* The weighted average share price at the date of exercise of
these options was 9.48 pence.
The weighted average remaining contractual life for the share
options outstanding as at 31 December 2017 was 3.51 years (2016:
4.51 years).
The range of exercise prices for options outstanding at the end
of the year was zero to 15.5 pence (2016: zero to 15.5 pence).
On 16 October 2009, 4,847,099 of upper share rights were granted
to certain director, executives and key employees under the
Company's joint share ownership scheme ("JSOS"). 50% of upper share
rights vested 12 months from the date of grant and 50% of upper
share rights vested 24 months from the date of grant. The fair
value of the upper share rights is estimated at the end of each
reporting period using the binomial tree option pricing model. The
contractual life of each upper share rights granted is 10
years.
On 20 July 2012, 1,120,000 of contingent share awards were
granted to certain directors, executives and key employees under
the Company's JSOS, which vested 197 days from the date of grant.
The contractual life of each contingent share award granted is 10
years.
On 30 December 2014, 2,423,358 of share awards were granted to
certain key employees under the Company's JSOS, which vested
immediately at the date of grant. The contractual life of each
share offer granted is 10 years.
The following table lists the inputs to the model used to
calculate the fair value of upper share rights for the year.
2017 2016
Underlying stock price (pence) 1.575 2.125
Exercise price (pence) 15.4 15.4
Expected life of option (years) 2 2
Expected volatility (%) 182.20 373.64
Expected dividend yield (%) - -
Risk-free interest rate (%) 0.50 0.50
---------------------------------- ------- -------
The volatility assumption, measured at the standard deviation of
expected share price returns, was based on a statistical analysis
of the Company's daily share prices from 1 January 2014 to 31
December 2017 using source data from Reuters.
The carrying amount of the liability relating to the upper share
rights and the contingent share award as at 31 December 2017 is
US$103,000 (2016: US$82,000) and the credit expense recognised as
share-based payments during the year is US$21,000 (2016: credit
expense of US$67,000).
28 Related party transactions
Identification of related parties
The Group has a related party relationship with its
subsidiaries, associates and key management personnel. The Company
receives and pays certain debtors and creditors on behalf of its
subsidiaries and the amounts are recharged to the entities.
Transactions between the Company and its subsidiaries have been
eliminated on consolidation.
Transactions with key management personnel
The Group's key management personnel are the executive and
non-executive directors as identified in the director's report
(Note 7).
Service receiving transactions
The following table provides the total amount of significant
transactions and outstanding balances which have been entered into
with related parties during the years ended 31 December 2017 and 31
December 2016.
2017 2016
---------------------------------
US$'000 US$'000
--------------------------------- -------- --------
Amounts due to related parties*
Key management personnel:
Lionel de Saint-Exupery*** - (66)
Shonaid Jemmett Page*** - (138)
Hiroshi Funaki*** (8) -
Philip Peter Scales*** (9) -
John Chapman*** (9) -
Other:
Origo Advisors Ltd** (760) (2,422)
Amounts due from related parties*
Origo Advisors Ltd** 278 189
2017 2016
-------------------------------------------------------
US$'000 US$'000
------------------------------------------------------- -------- --------
Transactions
Origo Advisors Ltd**
* Consulting services payable (1,390) (1,769)
* Release of provision for performance incentive - 4,195
------------------------------------------------------- -------- --------
As at 31 December 2017 and 31 December 2016, the Group is
committed to pay Origo Advisors Ltd for consulting services fee as
below:
2017 2016
---------------------------------
US$'000 US$'000
--------------------------------- -------- --------
Within 1 year 1,000 1,200
After 1 year but within 5 years - 1,000
--------------------------------- -------- --------
Total 1,000 2,200
--------------------------------- -------- --------
* The amount due to Origo Advisors Ltd is unsecured, has no
fixed terms of repayment, and bears interest at 8 percent per
annum. The other amounts are unsecured, non-interest bearing and
have no fixed terms of repayment.
** Origo Advisors Ltd is controlled by entities whose ultimate
beneficiaries include Niklas Ponnert (director of the Company who
resigned in April 2018) and Chris A Rynning (former director of the
Company). The transactions were mutually agreed by both parties at
a fixed sum or charged based on cost incurred. The agreement was
signed for four years up to 31 December 2018. A new Asset
Realisation Support Agreement was signed in May 2018 to waive the
fixed sum of US$1 million for 2018 as disclosed in Note 28 above
and Note 33.
*** Ms. Shonaid Jemmett Page and Mr. Lionel de Saint-Exupery
resigned as non-executive directors of the Company in October 2017.
Mr. Hiroshi Funaki was appointed as director of the Company in
September 2017, and Mr. Philip Peter Scales and Mr. John Chapman
were appointed as directors of the Company in October 2017.
29 Capital management
The primary objectives of the Group's capital management are to
safeguard the Group's ability to continue as a going concern and to
maintain healthy capital ratios in order to support its business
and maximise shareholders' value.
The Group manages and makes appropriate adjustments to its
capital structure on an ongoing basis in light of changes in
economic conditions and the risk characteristic of the underlying
assets. To maintain or adjust the capital structure, the Group may
adjust dividend payments to shareholders, return capital to
shareholders and/or issue new shares. The Group is not subject to
any externally imposed capital requirements. No changes were made
in the objectives, policies or processes during the years ended 31
December 2017 and 31 December 2016.
The Group monitors capital using a gearing ratio, which is net
debt divided by capital plus net debt. Net debt includes total
liabilities less cash and bank balances. Capital includes equity
attributable to equity holders of the parent company. The gearing
ratios as at the reporting dates were as follows:
2017 2016
US$'000 US$'000
------------------------------ -------- -----------
(restated)
Total liabilities 5,714 56,482
Less: Cash and bank balances (1,199) (1,786)
Net debt 4,515 54,696
------------------------------ -------- -----------
2017 2016
US$'000 US$'000
--------------------------------------- -------- -----------
(restated)
Equity attributable to equity holders
of the parent 14,165 45,517
Capital 14,165 45,517
--------------------------------------- -------- -----------
Capital and net debt 18,680 100,213
--------------------------------------- -------- -----------
Gearing ratio 24% 55%
--------------------------------------- -------- -----------
30 Summary of financial assets and financial liabilities by category
2017 2016
US$'000 US$'000
--------------------------------------------- -------- --------
Financial assets
Loans and receivables 2,073 5,938
Fair value through profit or loss -
designated* 17,779 96,518
--------------------------------------------- -------- --------
19,852 102,456
--------------------------------------------- -------- --------
Financial liabilities
Financial liabilities measured at amortised
cost 3,984 53,940
Financial guarantee contracts 435 435
--------------------------------------------- -------- --------
4,419 54,375
--------------------------------------------- -------- --------
* Included investments in associates of the Group that measured
at fair value through profit or loss of US$1,607,000 (2016:
US$31,752,000).
31 Commitments and contingencies
There were no material contracted commitments or contingent
assets or liabilities at 31 December 2017 (31 December 2016: none)
that have not been disclosed in the consolidated financial
statements.
32 Comparative figures
Certain comparative figures have been reclassified to conform
the current year's presentation.
33 Subsequent events
(a) In February and April 2018, the Company announced that the
sale of a 4.6% and a 3.5% beneficial interest respectively in
Niutech, the operating company of Niutech Energy Ltd., to Chinese
institutional and other investors, for net cash proceeds of US$5.4
million in total. Post the sales, Origo continues to hold a 3.7 %
indirect interest in Niutech.
(b) In April 2018, the Company repaid the US$2.5 million loan
that the Company entered into on 5 December 2016 by repaying the
US$2.5 million principal amount of the loan in full satisfaction of
the obligation with no interest or penalty payments. The terms of
the loan had required the accrual of 12% annual interest with full
repayment of principal and interest no later than December 2020 in
an amount no less than US$3.75 million.
(c) In April 2018, the Company announced the appointment of
Arden Partners plc as its nominated advisor and broker and the
resignation of Niklas Ponnert from the Board with immediate
effect.
(d) In May 2018, the Company announced that, following the passing of relevant resolutions at the Extraordinary General Meeting held on 18 May 2018, the 2014 Asset Realisation Support Agreement with the Company's investment consultant Origo Advisers Limited had been replaced with a new agreement effective 1 January 2018 (the "New ARA"). The New ARA waives Origo Advisers Limited's entitlement to a fixed fee of US$1 million for 2018 and any future fixed fees in return for an ongoing fee of 8 percent of all cash returned to shareholders with a hold back of 25 percent of that amount until all the Group's assets are sold.
(e) In June 2018, the Company disposed of a 30.9% beneficial
interest respectively in Kincora for net cash proceeds of US$1.5
million in total. Post the sales, Origo holds no interest in
Kincora.
Origo Partners Plc
Directors, Advisors and Other Information
Directors John Chapman, Non-Executive Chairman
(appointed in October 2017)
Hiroshi Funaki, Non-Executive Director
(appointed in September 2017)
Philip Peter Scales, Non-Executive Director
(appointed in October 2017)
Niklas Ponnert, Director
(resigned in April 2018)
Shonaid Jemmett-Page, Non-Executive Director
(resigned in October 2017)
Lionel de Saint-Exupery, Non-Executive Director
(resigned in October 2017)
Country of incorporation of parent company Isle of Man
Company number 005681V
Auditor BDO Limited
25/F, Wing On Centre
111 Connaught Road Central
Hong Kong
Nominated adviser and broker Arden Partners Plc
125 Old Broad Street,
London EC2N 1AR
UK legal advisers Travers Smith LLP
10 Snow Hill,
London EC1A 2AL
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR FKFDBKBKBKAB
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June 29, 2018 02:00 ET (06:00 GMT)
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