Myanmar Investments International Limited Annual Report 2015

Plain-text annual report

MMyyaannmmaarr IInnvveessttmmeennttss IInntteerrnnaattiioonnaall LLiimmiitteedd 22001155 AAnnnnuuaall RReeppoorrtt Contents Chairman’s Letter Executive Directors’ Review Board of Directors Directors’ Report Corporate Governance Directors’ Remuneration Report Statement of Directors’ Responsibilities Report of the Directors Independent Auditor’s Report Consolidated Statement of Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to the Consolidated Financial Statements Notice of Annual General Meeting Directors and Advisers Page 02 06 14 16 24 27 28 30 34 35 36 37 38 39 64 66 MMyyaannmmaarr IInnvveessttmmeennttss IInntteerrnnaattiioonnaall LLiimmiitteedd Overview Myanmar Investments International Limited (“Myanmar Investments” or the “Company”) is an AIM quoted investment company focussing exclusively on investing in Myanmar. Myanmar (cid:1)(cid:1) Elections scheduled for 8th November 2015 (cid:1)(cid:1) Continued progress in reforms (cid:1)(cid:1) Rapid growth in mobile phone penetration (cid:1)(cid:1) Progress in the Banking sector especially with the arrival of nine foreign banks (cid:1)(cid:1) Further progress in healthcare, education and power generation (cid:1)(cid:1) Stock Exchange expected to open before the end of the year Myanmar Investments International Limited (cid:1)(cid:1) Two equity fund raisings totalling US$23.7 million (cid:1)(cid:1) As at 24th July 2015 shareholders’ funds were US25.98 million, equivalent to US$0.95 per share (cid:1)(cid:1) Led a US$30 million investment into Apollo Towers, one of Myanmar’s leading telecommunication tower companies (cid:1)(cid:1) Myanmar Finance International Limited, our microﬁnance joint venture, has performed well since our investment in September 2014 (cid:1)(cid:1) A strong pipeline of potential investment opportunities (cid:1)(cid:1) Continued development of proprietary dealﬂow through our extensive local and regional network 01 Annual Report 2015 Chairman’s Letter Dear fellow shareholder It gives me great pleasure to report on the signiﬁcant progress your company has made since I last wrote to you a year ago. The Company has continued to build a ﬁrm foundation for its future growth. This has included: • • • • • two successful equity offerings which raised a total of US$23.74 million; leading a US$30 million into Apollo Towers, one of Myanmar’s leading telecommunication tower companies; investment signiﬁcant improvements at Myanmar Finance International, our joint venture micro-ﬁnance company; broadening our network to increase our deal ﬂow both within Myanmar and neighbouring countries; and enhancing our human resources. Myanmar Country Update is now fourth year of Myanmar its in the unprecedented and historic transition. Despite some analysts questioning whether the reforms are slowing, we believe that the more relevant issue is that the changes achieved so far are entrenched and irreversible. The perception of a slowdown is relative to the euphoric early years when releasing prisoners and freeing the press captured the world’s attention. Progress thereafter has required consensus and realism. This inevitably takes time but now that there is a free press the debate is also being carried out in public. Myanmar, sandwiched between India and China, is a deeply religious country, ethnically diverse and strategically located with both signiﬁcant wealth and poverty. These differences need to be carefully handled as they can cause tension and conﬂicts. New institutions such as vibrant NGOs and civil society, parliament, a free press and even the military are all trying to deﬁne their roles and responsibilities. Each group has its own vision for the future. It will take decades of trial and error before a balance is achieved. However, the key test of a transition is the degree to which the beneﬁts are reaching the people: phones has provided access to a faster and more reliable internet which in turn gives access to news and information from both within and from outside Myanmar. Whilst this is mainly concentrated in the cities, the roll-out of the telecom towers will expand the beneﬁts across the country. The banking sector has expanded to reach more customers by offering debit and ATM cards and soon there will be domestic credit cards. Just the simple act of being able to settle a utility bill via a bank branch has obviated the need to spend a day queuing at the utility in question. The price and availability of cars has meant that there are now many more taxi operators as well as middle class families becoming car owners for the ﬁrst time. The downside is the increasingly appalling trafﬁc jams in Yangon until the ageing road infrastructure is upgraded. The liberalisation of the media means that there is now widespread access to numerous Myanmar and English language journals as well as weekly and daily newspapers. Further media access has been driven by the growth in smartphones which has spawned a surge of interest in on-line activities through the likes of Facebook and Google, both of whom have Myanmar language platforms. The recent mobilisation of relief work and donations for the devastating ﬂoods in July was in large part attributable to the growth in social media. The growth in job opportunities working for foreign companies or companies catering to foreigners, such as those in the tourist industry, has created a surge in demand for English speaking employees. That in turn has attracted many Myanmar technicians and professionals to return to Myanmar and ﬁll some of the skilled labour gaps. • • • • Less visible, but important, the American Center for Strategic & International Studies reports signiﬁcant progress in the health sector: important gains in HIV/AIDS prevention, treatment, and care; control of malaria; and improvements in maternal, new-born, and child mortality rates. The liberalisation of the telecom sector has drastically lowered the costs of owning and using a mobile phone, allowing more people to communicate with one another far more easily. The widespread availability of affordable smart Education reform is also progressing, albeit slowly, but is expected to accelerate after the election. Transition is multi-dimensional encompassing social, economic and political issues. While not all of the • 02 MMyyaannmmaarr IInnvveessttmmeennttss IInntteerrnnaattiioonnaall LLiimmiitteedd political demands expected by the West have been met, and locally some of the issues are not as clearly deﬁned, initial progress in the peace process has started. If successful this can lead to stability in the ethnic regions and pave the way for fairer resource sharing which will be conducive to economic development. In time a federal structure may evolve. We believe that whatever the outcome of the general election on 8th November 2015, it will cement the transition to date and lay the foundation for the next phase of the country’s development. It is said that “Expectation diminishes future joy”. And with high expectations it is possible that there will be disappointments relative to the various stakeholders’ hopes. However, in absolute terms Myanmar’s re-emergence is a multi-decade story and given its long history of resilience and resourcefulness, we expect Myanmar to take its rightful place in ASEAN. Myanmar has noticeably been inundated by curious investors of all types (as well as by tourists) over the past three years and while the opportunities have been signiﬁcant so too have been the challenges. This has meant that while the larger foreign companies have been establishing operations the medium size companies are still preferring to wait until the infrastructure has improved – which is evidenced by: • • • • • In the past two years, 1,105 MW of power generation capacity has been installed; possibly not a huge amount by global standards but nonetheless a 30% increase. The ﬁrst factories are now up and running in the ﬁrst phase of the 2,400 hectare Thilawa Special Economic Zone which was only commissioned at the tail end of 2013. When completed there will be over 40 foreign companies operating there: half of them will be Japanese with the rest including companies from America, Europe, China and ASEAN. In the past year nine banking licenses have been issued to foreign banks wanting to open a branch in Myanmar. The bidding process for a fourth mobile phone network operator has been initiated. Foreign direct investment is up US$20.8 billion to US$56.9 billion in the past 4 years, an increase of 58%. Nearly US$10 billion was achieved in the last year alone. • Oil and gas has attracted the most FDI but there has also been a signiﬁcant increase in investments telecommunications and manufacturing. in These changes are impressive given that they only started a few years ago and resulted in GDP growth in ﬁscal 2014/15 reaching 8.5%. However this increase masks a number of worrying issues. Inﬂation in May 2015 climbed to 8% and because of the weakening Kyat and the extensive ﬂooding this year could rise further. Persistent dollar strength and low natural gas prices could weaken the ﬁscal position. Myanmar has limited manufactured exports to beneﬁt from a weak currency and the costs of imports will widen the trade deﬁcit. Today Myanmar’s foreign reserves held by the Central Bank of Myanmar remains below 3 months of imports and the current account deﬁcit is now 6% of GDP. However our biggest concern is the apparent slowing growth in China, one of Myanmar’s largest trading partners and investors. Against this backdrop, but after the election, we expect to see tighter monetary and ﬁscal policies to curb credit growth as well as attempts to slow the Kyat depreciation. More banking reforms and regulation will also be enacted. The new Yangon Stock Exchange (“YGX”) will also open and will, over time, provide banks and companies access to the long term capital that is lacking in the economy. Strategy “Our vision is to build a diversiﬁed portfolio of investments that will beneﬁt from Myanmar’s emergence” Broadly, our investments will be either “core” or “ﬁnancial” investments. Core investments will be those operating in sectors that are fundamentally important to the economy and these will be held for the long term. These investments will be managed with the view to generating dividends and, where appropriate, encouraged to list on a stock exchange. We expect to continue to hold such investments after listing. Financial investments will be managed with a view to an exit, typically within 5 to 7 years. Investments could be minority or majority shareholdings and range from start-up, expansion capital ﬁnancing to buyouts. 03 Annual Report 2015 Chairman’s Letter (continued) A common thread will be the quality of management and our partners. We only seek to work with experienced managers with and transparency. integrity We also seek industries where there is growth; which play to Myanmar’s strengths or needs; or where our Investee Company is, or can be, within the top three players in its segment. In essence our strategy is to build net asset value per share as well as to generate dividends when it becomes commercially appropriate. Over time this should allow us to generate an attractive total return to our Shareholders. While we are building the portfolio of investments, we will need continually to raise capital as our strategy is not to over-capitalise the Company. To this end we will, in accordance with the strategy set out in the Company’s Admission Document, consider raising additional equity to fund further investments as we see potential opportunities ﬁrm up. During this phase the portfolio is not expected to be broad based but this will even out over time. As at the date of this report we have made two investments. These are detailed in the Executive Directors’ Review. Financial Performance The Directors assessment of the Group’s net asset value as at 31st March 2015 is that it was US$6.61 million, representing US$0.66 per share, based on the shares in issue at that time, up 42% over the year. This included the three tranches of investment in Myanmar Finance International Limited of US$1.5 04 million made prior to the balance sheet date. This investment is held at cost in accordance with the Company’s valuation policy which is to follow the prevailing International Private Equity and Venture Capital Guidelines. For the year to 31st March 2015 the Company’s loss after tax was US$1.74 million. This principally represents the overheads associated with the running of the Company’s business as well as costs associated with investigating investment opportunities that did not come to fruition. In this context, given the work that has been done I am pleased to note that the Executive Directors have done an excellent job in keeping our costs to a minimum. seeks to uphold Corporate Governance the Myanmar Investments fundamental principles of good corporate governance and is guided by the responsibilities laid down for AIM quoted companies. The section of this report headed “Corporate Governance” provides more details on how the Board itself operates as well as the steps taken to ensure that its staff adhere to principles such as compliance with the UK Anti-Bribery Law. Annual General Meeting This year’s Annual General Meeting will be held at the The British Club, Yangon, Myanmar at 2.00pm (Myanmar time) on Tuesday 13th October 2015. Shareholders who cannot attend the Annual General Meeting in person are encouraged to use their proxy votes. Shareholders who hold their shares through CREST are able to lodge their votes electronically. General Outlook I write this at what has been a busy time for the executive management and staff of the Company marked by a signiﬁcant investment in Apollo Towers, robust growth in our microﬁnance operation and capped with two successful equity fund raisings. I should like to express my appreciation to them for the progress they have made and to you the shareholders of the Company for your support. William Knight Chairman 9th September 2015 “We are reviewing potential investments in sectors including ICT, energy, manufacturing, tourism, ﬁnancial services, and the healthcare and education sectors.” Annual Report 2015 Executive Directors’ Review Dear Shareholders It is our pleasure to provide this second review of the Company’s operations. Investment Activities Since establishing our ofﬁce in Yangon we have reviewed over 100 investment opportunities in a wide range of sectors. Tourism 7% Technology 12% Property 7% Oil & gas/ Energy 8% Logistics 6% Media/ Advertising 4% Mining 3% Infrastructure 12% Industrial 7% Hotel 6% Agribusiness 7% Construction 4% Consumer 6% Education 5% Financial 3% Healthcare 3% As the above pie chart illustrates, we look at opportunities across a wide range of industries. At this stage of the country’s evolution we do not think it makes sense to eliminate any particular sector of the economy. One key exception would be real estate (ofﬁces, accommodation and shopping centres) where we currently feel that it is generally signiﬁcantly overvalued and returns depend more on the timing of entry and exit. We focus on situations where our funds will create and/or unlock value. These are typically expansion capital situations but can also be in start- up opportunities with credible partners. Unlike the more developed Asian markets such as Hong Kong or Singapore or even Thailand and Indonesia, Myanmar is characterised by a very limited number of professional intermediaries. As such nearly all of these opportunities were identiﬁed by our team in Yangon. Our ability to develop such a strong and broad-based proprietary dealﬂow is a clear reﬂection of our efforts over the past two years both on the ground and in the neighbouring countries where corporates are looking to expand into Myanmar. Of the 109 opportunities that we have reviewed 24 are currently active. Some of these are moving at a faster pace than others as some can hit road blocks that may take time to overcome. Patience and creativity are very much needed in all frontier markets and Myanmar is no exception. 06 As at the date of this report we have made two investments. Myanmar Finance International (“MFIL”) In August 2014 we invested in MFIL. This is a joint venture with U Htet Nyi, a leading businessman and the Norwegian and Finnish Consul to Myanmar, who transferred his existing microﬁnance business to MFIL. Since becoming a shareholder, and as requested by U Htet Nyi, we were instrumental in recruiting an experienced managing director from Cambodia and in implementing a new MIS system. Today MFIL has 5 branches in Yangon and Bago and over 15,000 borrowers. As at 31st March, 2015 we had invested a total of US$1.51 million in MFIL through three pre-agreed tranches. MFIL is a core investment where we foresee signiﬁcant growth potential not only to increase the loan book but also in terms of the range of services and products that can be offered to consumers and SME customers. In Myanmar this is a relatively new sector and is fragmented with only a handful of well capitalised players. MFIL also has the deposit-taking license. MFIL, as a leading microﬁnance institution, provides small loans (typically around US$100), savings accounts and other basic ﬁnancial services to people who don’t have access to capital to enable them to start a livelihood. It is a key steppingstone in helping people living in poverty to become ﬁnancially independent and better able to provide for their families. Apollo Towers (“Apollo”) On 31st July 2015 we announced that MIL had led an investment of US$30 million for a 14.18% interest in Apollo Towers Pte. Ltd, of which MIL invested US$20 million. a and owns operates Apollo leading telecommunication towers business in Myanmar through its wholly-owned subsidiary Apollo Towers Myanmar Limited. Apollo Myanmar has already constructed over 1,100 telecommunication towers in Myanmar and recently announced a contract with Telenor of Norway, one of the two foreign mobile network operators (“MNOs”) in Myanmar, for the construction of a further 717 telecommunication towers. Telecommunication tower is an essential component of the communication industry, hosting equipment for cellular, wireless, radio and infrastructure MMyyaannmmaarr IInnvveessttmmeennttss IInntteerrnnaattiioonnaall LLiimmiitteedd television broadcast, microwave, and two-way radio communication throughout the world. Apollo was founded by Sanjiv Ahuja and TPG Growth, the middle market and growth equity investment platform of TPG, a leading global private investment ﬁrm with over US$74 billion of assets under management. Mr Ahuja, a global telecom veteran and the former CEO of Orange S.A., and current Chairman of Tillman Global Holdings LLC, has founded several successful telecommunications infrastructure businesses around the globe. Apollo constructs telecommunication towers to order by the MNOs to increase their mobile phone coverage. Telenor has pledged to increase its network coverage to 90% of Myanmar within 5 years and Ooredoo, the other major international MNO, has pledged that 97% of the population will have access to its 3G network by 2018. The incumbent carrier, MPT, is also expanding its coverage network. Given Myanmar’s current developing communication infrastructure, the pledged coverage rates will require a signiﬁcant expansion of the country’s telecommunication tower network, and Apollo is ideally positioned to capitalize not only on the expansion itself but on the co-location opportunities that will arise as competing MNOs seek to expand across a new market. Apollo, by rolling out its network of towers across the country, brings telecommunications within the reach of millions of more Myanmar citizens. This doesn’t just bring conventional the beneﬁts of communication by telephony. For many Myanmar citizens their ﬁrst (possibly their only) exposure to the internet will be through the cheap smart phones that are now becoming more commonplace in Myanmar. With this sort of communication comes knowledge and education. Myanmar TF Securities (“MTFS”) In March the Company formed a joint venture company to apply for the securities licenses to operate on the Yangon Stock Exchange (“YGX”). At the outcome of this the date of this report application is still not yet known. Financial Review Since 31st March 2014 MIL has completed two further rounds of equity fund raising; the ﬁrst on 9th December 2014 and then on 21st July 2015, raising an aggregate US$23.74 million. As announced on 24th July 2015 MIL’s net assets stood at US$25.98 million or US$0.95 per share. The Directors’ assessment of the Group’s net asset value as at 31st March 2015 is that it was US$6,608,414, representing US$0.66 per share, based on the shares in issue at that time. At that date the Company had: • • an investment in MFIL (the microﬁnance joint venture) of US$1.51 million, being the cost of the three tranches of investment made to date; and liquid net assets of US$4.98 million, being sufﬁcient to cover its working capital needs for the next 12 months and enable it to make the fourth and ﬁnal tranche investment in MFIL. 07 “A ﬁrm platform has now been built with a proven team in Yangon and a strong proprietary dealﬂow.” MMyyaannmmaarr IInnvveessttmmeennttss IInntteerrnnaattiioonnaall LLiimmiitteedd In the attached audited ﬁnancial statements the net asset value differs from the above stated value of US$6,608,414 due to the following differences: Net asset value per the audited ﬁnancial statements Share of post-acquisition losses for MFIL1 Net asset value per the Directors’ valuation US$ 6,546,109 62,305 6,608,414 Note 1: In accordance with IFRS 11 Joint Arrangements, the investment in MFIL is accounted for as an investment in joint venture using the equity method which requires the share of results to be recorded. As a result the carrying value of MFIL in the audited ﬁnancial statements reﬂects the Group’s share of MFIL’s losses since investment. Whereas in accordance with the Company’s Valuation Policy the Directors’ valuation is based on the International Private Equity and Venture Capital Guidelines. As the investment has been made within the 12 months prior to the balance sheet date, and there has been no impairment, the estimate of fair value is based on the ‘price of recent investment’ which in this instance is equivalent to the original investment cost paid by MIL. For the year to 31st March 2015 the Company’s audited loss after tax was US$1.74 million. This represents: • • • • the post-acquisition losses of MFIL; the overheads associated with running the Company’s business; the impact of the share based payments arising from the Company’s Employee Share Option Plan; and costs associated with investigating investments that did not come to fruition. Barring unforeseen circumstances, we do not expect the level of running costs to ﬂuctuate signiﬁcantly in the foreseeable future. Based on the above we do not recommend payment of a dividend at this time. Outlook 2014/15 has been a busy year marked by two successful equity fund raisings, strong growth in our microﬁnance joint venture and a signiﬁcant investment in Apollo Towers. A ﬁrm platform has now been built with a proven team in Yangon and a strong proprietary dealﬂow. We expect the pace of corporate activity to slow before the result of the election on 8th November 2015 is known. Thereafter, we expect the pace to pick up quickly as the demand for capital in Myanmar is driven by a real need to upgrade the physical infrastructure and for companies to increase capacity to meet higher demands both domestically and in the export markets. We are reviewing potential investments in sectors ICT, energy, manufacturing, tourism, including ﬁnancial services, and the healthcare and education sectors. As and when we believe that an opportunity is credibly near we will return to the market for further funds. We are pleased with the strong support shown by our shareholders in our recent fundraisings. We have signiﬁcantly increased our share capital, broadened our shareholder base and added a number of high quality investors to our share register. With this our market capitalisation has increased and we become more visible to those looking for a focussed conduit to investing in Myanmar. As we increase our size, and range of investments, we will become more visible and this should increase the liquidity in our shares. Aung Htun Managing Director Michael Dean Finance Director 9th September 2015 9th September 2015 09 Spotlight on MIL’s investment into Microﬁnance MIL has committed US$2.84 million to Myanmar Finance International Limited (“MFIL”) for a 55% stake in MFIL in partnership with Myanmar Finance Company Limited (“MFCL”) which owns the other 45%. MFCL was founded in 2012 by U Htet Nyi, a prominent and respected businessman and Norwegian Honorary Consul, securing one of the ﬁrst microﬁnance licenses following the passing of the Microﬁnance Law. Microﬁnance, deﬁned broadly, is the provision of ﬁnancial services to individuals and small enterprises that lack access to more established types of ﬁnancial services. Global interest in the sector took off with the success of Muhammad Yunus’ Grameen Bank. Grameen started in 1976 providing small loans to poor people and eventually became a fully-ﬂedged bank in its own right. Closer to home, ACLEDA Bank from Cambodia has undergone same transformation from microﬁnance operator to full bank, and is now a regional bank with microﬁnance operations in Myanmar as well. the the government has In Myanmar, identiﬁed microﬁnance as a priority sector to achieve poverty reduction targets. This is achieved through the provision of much-needed small loans to the rural, unbanked population to enable them to expand or start small businesses such as roadside stalls, small trading or manufacturing concerns, ﬁshing boats etc. In following this model, MFCL has grown its business from nothing at inception in 2012 to around 10,000 borrowers when the business was transferred into MFIL to over 15,000 borrowers in the six months after MIL invested. Typical borrower: street side cooked food stall Town hall meeting to explain the microﬁnance loan process Typical borrower: Mobile phone street vendor 10 MMyyaannmmaarr IInnvveessttmmeennttss IInntteerrnnaattiioonnaall LLiimmiitteedd This demonstrates not only MFIL’s own strengths and capabilities but also the strong unmet demand for microﬁnance loans in Myanmar: current outreach in the country is estimated at 2.8 million borrowers with a total loan portfolio of cUS$280 million, compared to the estimated demand of US$1 billion. There is a clear opportunity for MFIL to continue to capitalise on this demand and grow. Experience from other countries shows that eventually the strongest and most well-funded microﬁnance operators can transition to become banks with a full range of ﬁnancial services, creating value for shareholders in the process. For instance, in August 2014 media reports indicated a valuation of ACLEDA Bank at nearly US$900 million when Sumitomo Mitsui Bank acquired a 12.25% stake that month, representing a valuation of c2.2x equity book value and 11.5x price-earnings. Globally, a number of microﬁnance institutions have listed, such as SKS Microﬁnance and BRAC Bank, and in the process provided liquidity to their shareholders. In line with our investment philosophy of being a value-added shareholder and partner to investee companies, we have, since our investment, assisted with the recruitment of a new CEO for the company, initiated the upgrade of MFIL’s back ofﬁce MIS systems, actively engaged in product development and spearheaded efforts to secure external debt ﬁnancing. We intend to continue to support and work with the company to achieve its fullest potential. The Group gathers to complete the loan application forms Typical borrower: Street vendor selling tourist souvenirs MFIL staff disbursing money to successful loan applicants 11 Spotlight on MIL’s investment into Telecom Towers Apollo Towers Pte Ltd. (“Apollo”) is MIL’s investment into Myanmar’s bourgeoning telecommunication sector. With one of the world’s lowest mobile penetration rates in 2013, Myanmar’s government made a bold decision to kick-start the sector by tendering two Mobile Network Operator (“MNO”) licenses which were eventually won by two foreign MNOs, Telenor of Norway and Ooredoo of Qatar. Since the MNOs went operational in August 2014 the costs of owning a mobile phone have plunged. In 2013 SIM cards cost hundreds of US dollars and were considered a luxury item for only the very rich. Today SIM cards sell for US$1 (see photo) and with the proliferation of mobile phone shops and street side vendors selling cheap 2G and 3G models mobile phone penetration has surged from less than 10% to almost 40% in less than a year. By building and managing the MNO’s tower infrastructure, Apollo is playing a central role in connecting this vast country and empowering its people. Before Apollo entered the market, Myanmar only had 1,800 towers to service the population with access to the mobile network. As the mobile penetration rate approaches the MNOs’ target rate of around 95% within the next four years, Myanmar will need as many as 28,000 towers and Apollo is well positioned to construct and manage a considerable share of this market. Tower companies earn a revenue stream from each MNO that places equipment on their towers. Each tower is initially built to order by one of the MNOs Street vendor selling SIM cards. Now less than US$2 Ground based telecommunications tower Samsung ofﬁcial outlet and right outside the unofﬁcial stall. Note the “Monsoon promotion”. 12 MMyyaannmmaarr IInnvveessttmmeennttss IInntteerrnnaattiioonnaall LLiimmiitteedd but signiﬁcant additional revenue can be generated by having one or more other MNOs “co-locate” on the tower. Myanmar is unique in that from the start the tower infrastructure is being built by companies independent from the MNOs and therefore the potential for greater co-location will provide a signiﬁcant enhancement to proﬁtability and valuations in the future. The recent announcement of a licence for a 4th MNO adds additional impetus to co-location potential. In becoming a shareholder in Apollo, MIL is joining forces with one of the telecom industry’s most respected leaders in Sanjiv Ahuja, as well as global private equity group TPG (formerly the Texas Paciﬁc Group). Combining MIL’s local knowledge with Sanjiv Ahuja’s industry experience and TPG’s ﬁnancial knowledge puts Apollo in a strong position to become a leader in an industry that boasts EBITDA margins up to 80% in comparable markets. Apollo has already secured an additional order for 717 towers in addition to its existing 1,086 towers, and has arguably become the industry’s best- ﬁnanced tower company. In addition to MIL’s US$30 million syndicated equity investment, OPIC, the US Government’s Development Finance Institution, has also recently indicated its intention to provide Apollo with a US$250 million debt facility. MIL is conﬁdent that Apollo will become a prime example of a Myanmar company run to international standards that is ﬁt for a listing on one of the region’s major bourses. Sule Pagoda … and telecommunications tower Rooftop telecommunications tower The three MNOs (Telenor, Ooredoo and MPT) in close competition 13 Annual Report 2015 Board of Directors Christopher William Knight, Independent Non-Executive Chairman Mr. Knight is an alternative asset investment specialist who has spent almost his entire career dealing with the ﬁnancial development of growth companies in developing economies with particular emphasis on Asia. His early pioneering led to him winning a capital goods export ﬁnance mandate for Myanmar in the early 1980s and establishing the ﬁrst London listed investment fund for Thailand in 1988 and the ﬁrst investment fund for Vietnam in 1991. His experience covers involvement with a number of listing jurisdictions, including AIM, in his capacity as an independent non-executive director. He is a co-founder of Emerisque Brands, is Chairman of JP Morgan Chinese Investment Trust Plc, China Chaintek United Co Ltd, MCS Apparel (HK) Ltd and Henry Cotton’s (Greater China) Ltd. He is also a director of Fidelity Asian Values Trust Plc, Ceylon Guardian Investment Trust Plc and Smith-Tan Asia Phoenix Fund Ltd as well as being a director and Chairman of the Advisory Board of Homestrings Ltd. Maung Aung Htun, Managing Director Mr. Htun is half Myanmar and an engineering graduate from Imperial College. He brings 30 years of hands-on experience of advising, starting, building and managing companies. Mr. Htun started at Kleinwort Benson in London before founding, in 1987, Seamico Securities in Thailand, a company he took public in 1995. In 1999 he founded Thai Strategic Capital, a Bangkok based led private equity investments into, inter alia, B-Quik, Modern Asia Environmental Holdings and Wuttisak Clinic. fund manager where he Mr. Htun brings a wealth of experience and contacts in a diverse range of industries and currently sits on the boards of Draco PCB Plc, Wuttisak Clinic Inter Group Ltd, and Nam Seng Insurance Plc., as well as being a member of the investment committee of Lakeshore Capital Partners. He is a director of the Thai Private Equity & Venture Capital Association which he co-founded in 1989. Anthony Michael Dean, Finance Director Mr. Dean has over 30 years of experience in the ﬁnancial industry in investment banking, private equity and accounting. 25 of these years have been spent in Asia, principally Hong Kong and Singapore. He has held senior management positions with Credit Lyonnais Securities Asia (“CLSA”) including 14 Head of its Investment Banking and co-Head of its Private Equity businesses; was a Director of PPMV Asia (the private equity arm of Prudential plc); and spent a further eight years as chief ﬁnancial ofﬁcer for a global shipping group. Mr. Dean is a non-executive independent director of Singapore main board listed Petra Foods Limited. He is a Fellow of the Institute of Chartered Accountants in England and Wales, an Associate of the Chartered Institute of Taxation and a member of the Singapore Institute of Directors. Craig Robert Martin, Independent Non-Executive Director Mr. Martin has over 20 years of business building and direct investment experience in emerging markets in Southeast Asia. He has lived and worked in Southeast Asia (with a focus on the Greater Mekong region) since 1993, living in Cambodia (seven years), Vietnam (ﬁve years) and Singapore (ten years), and building businesses in Myanmar, Thailand, Cambodia, Vietnam and Laos and investing in many sectors. His telecoms, agribusiness, building materials, education, media, retail, real estate, manufacturing, ﬁnance, logistics, transportation and infrastructure. experience covers Mr. Martin has a Masters of Engineering from the University of York, UK, and a MBA with Distinction from INSEAD, and is a member of the Singapore Institute of Directors. Mr. Martin is co-CEO of CapAsia, a Singapore headquartered private equity fund manager, focusing on investments in emerging markets. Christopher David Appleton, Independent Non-Executive Director Mr. Appleton has worked in ﬁnance since 1982 and in Asia since 1984. Mr. Appleton worked in Japan as equity analyst then equity sales and management. Moving to Hong Kong in 1998 Mr. Appleton worked for Salomon Smith Barney as Head of Asian Sales before becoming Head of Asia for Fox-Pitt, Kelton directly running all the equity functions, as well as responsibility for capital markets and advisory. During this time he also set up their Tokyo ofﬁce. In 2005 he founded Faye Capital as an advisory business and in 2008 acquired a licence for third party asset management. After closing Faye Capital in 2010 Mr. Appleton brieﬂy worked at HSBC Private Bank as Head of Investment Advisory. Since 2011 he has been running his private assets. Mr. Appleton was educated at Oxford University with post graduate studies at Tokyo University. “The Company expects to build a diversiﬁed portfolio.” Annual Report 2015 Directors’ Report The Directors present their annual report and audited consolidated ﬁnancial statements of the Group for the year ended 31st March 2015. The Company Myanmar Investments International Limited (the “Company”) is a public company limited by shares incorporated under the laws of the British Virgin Islands. The Company was admitted to trading on the AIM market of the London Stock Exchange (“AIM”) on 27th June 2013. The Group As at 31st March 2015 the Company had established a wholly-owned subsidiary in Singapore, MIL Management Pte Ltd, which in turn had established a wholly-owned subsidiary in Myanmar, MIL Management Co., Ltd. These two companies are responsible for the management of the Group’s investments. In addition the Company has established three wholly-owned subsidiaries in Singapore to act as investment holding companies for investments in Myanmar. Of these, Myanmar Investments Limited holds a 55% shareholding in Myanmar Finance International Limited (“MFIL”), a Myanmar incorporated microﬁnance joint venture company. The other two companies, MIL No. 2 Pte. Ltd. and MIL No. 3 Pte. Ltd. have not yet commenced business. After the year end, the Company established MIL 4 Limited (“MIL4”), a BVI company, to invest in Apollo Towers Pte Ltd (“Apollo”). MIL4 Limited is 66.7% owned by the Company and holds a 14.18% interest in Apollo. The above named companies comprise the Myanmar Investments Group (the “Group”). Fund raisings On 9th December 2014 the Company concluded a share offering which raised US$3,797,850 (gross) through a subscription of 3,617,000 new ordinary shares at a subscription price of US$1.05 per share. The Company also issued 3,617,000 warrants in the ratio of 1 warrant for every 1 share subscribed for as part of the subscription. share offering which After the year end, on 21st July 2015 the Company concluded a raised US$19,942,395 (gross) through a subscription of 17,341,214 new ordinary shares at a subscription price of US$1.15 per share. The Company also issued 5,780,408 warrants in the ratio of 1 warrant for every 3 shares subscribed for as part of the subscription. Investment Policy The Company’s investment policy was set out in its Admission Document and is reproduced below. There has been no change in its investment policy since Admission. Strategy The Company’s primary objective is to build capital value over the long term by making investments in a diversiﬁed portfolio of Myanmar businesses that the Directors believe will beneﬁt from Myanmar’s re-emergence. In the ﬁrst couple of years it is likely that the portfolio of the Company will be it seeks out new potential concentrated as investments. However, in time and subject to available opportunities the Directors intend to diversify the portfolio. The Company intends to be a proactive investor, seeking to add value to the development of each of its Investee Companies. As such, the Company will usually, where permitted under Myanmar or other applicable law, seek participation in the management process through board representation, with a view to helping improve the performance and growth of the Investee Company. The Company may acquire majority or minority stakes in Investee Companies. Value may be added through advice on such matters as capital structure and introductions to potential foreign lenders, introductions to foreign markets, technical partners, and access implementation of governance issues. If a Myanmar stock exchange is established, Myanmar companies may want to list but are likely to have limited understanding of what is required. foreign to 16 Where appropriate the Company may seek to bring in strategic investors who are capable of adding operational value to the Investee Company. MMyyaannmmaarr IInnvveessttmmeennttss IInntteerrnnaattiioonnaall LLiimmiitteedd Investment Categories Investments will fall into two categories, core investments and ﬁnancial investments: Core investments The Company intends that its core investments will be in businesses which, in the Directors’ opinion: • • • are considered essential to the domestic economy in Myanmar; are businesses where there are limited opportunities, creating a medium term barrier to entry; and/or are capable of being built franchises in Myanmar. into leading For core investments, the Company will seek to help the Investee Company enhance its return on equity and, as soon as it is prudent, generate dividends. When appropriate, the Investee Company will be encouraged to list on a stock exchange although the Group will generally expect to continue to hold its investment for a further period of time. It is expected that core investments will be held until such time as the Directors believe that long term growth rates have started to moderate. As such there will not be an expectation of a near term disposal unless a compelling opportunity for full or partial divestment arises. Financial investments The Company’s ﬁnancial investments are intended to be ‘private equity style’ investments where the Company sees potential for capital gains and liquidity. investments Financial therefore, unlike core investments, are expected to be made only when there is a realistic and credible exit plan. As such they are likely to be disposed of within a ﬁve to seven year time horizon, though this may be adjusted in appropriate circumstances. Exits may be achieved through listings, in Myanmar (when a Myanmar stock exchange is set up) or on suitable overseas stock exchanges, trade sales or share swaps. It is expected, in the initial years, that the Company’s investments will typically range between US$5 million and US$25 million, although it may consider larger or smaller investments. Investments that are larger than the Company’s existing resources are expected to be funded through further equity issues. Additionally, where an Investment Target is larger than the Company’s appetite or does not fall within the Investment Policy, the Group may seek to generate fee income (for example placement and management fees and carried interests) through placements to its Cornerstone Investors (as deﬁned in the Company’s Admission Document) as well as other investors. The Company has granted co- investment rights to its Cornerstone Investors which are described in more detail in its Admission Document. Sanctions and Restrictions The Company will comply with any sanctions and restrictions imposed by the EU, the UK, the BVI and Singapore. The Directors will also take into consideration other actions by jurisdictions relevant to the business of the Company relating to investment in and trade with Myanmar. Should there be any addition to or re-imposition of sanctions or restrictions at any time in the future, the Directors will seek to ensure compliance with such regulations. Portfolio The Company expects to build a diversiﬁed portfolio. However, this will take some time and as a consequence, particularly during the early life of the Company, investment portfolio will be concentrated in a limited number of Investee Companies. its There is no minimum or maximum number of companies that the Company can invest in at any one time. Similarly there are no sector limits nor minimum or maximum exposure limits to any one company or joint venture partner. 17 Annual Report 2015 Directors’ Report (continued) Geographical Diversity The Company will primarily make investments in companies, businesses or assets located in Myanmar. This will include Myanmar businesses that are listed on foreign stock exchanges but also foreign companies that have a material exposure to doing business with or in Myanmar. Forms of Investment The Company may employ all forms of permitted investment mechanisms, utilising instruments and structures to allow that might be suitable participation in Investment Targets in a manner that seeks to minimise risks and maximise rewards. The Company may invest in equity, quasi-equity or debt instruments, which may or may not represent shareholding or management control. Investments are likely to be made through special purpose vehicles established speciﬁcally for each Investee Company, or by way of legal joint ventures or nominee or trust structures. In some circumstances the Company may invest via contracts that grant an economic interest in an asset. to Because Myanmar businesses are relatively small compared their more developed Asian counterparts, the Company’s investments are more likely to be in the form of expansion capital than buyouts and may also be in greenﬁeld businesses. Funding of Investments In order to ﬁnance future Investments, the Company will issue further Ordinary Shares to raise capital as and when investment opportunities become available. The Company may also consider issuing Ordinary Shares as consideration for acquiring Investments or have the Company or one of its subsidiaries issue debt or hybrid ﬁnancial instruments. Borrowings The Directors believe that an appropriate amount of appropriately structured debt could enhance the overall returns from the Company’s Investments. It is the Directors’ present intention that any borrowings taken on in support of an Investment should ideally be raised at a subsidiary level on a non-recourse basis. Where this is not available and the Directors consider that the assumption of debt will enhance the overall return from an investment without giving rise to a disproportionate risk, then the Company may borrow directly or may provide guarantees to its subsidiaries for such borrowings. 18 The Directors do not intend to take on borrowings of more than 50% of the prevailing NAV of the Company, though if the NAV were to decline this benchmark might be breached. The Company or its subsidiaries may also issue hybrid ﬁnancial instruments and may borrow in any currency that the Directors consider appropriate. It is not expected that the Company will borrow to fund its operating expenses. Sectors The Company does not plan to limit itself to any speciﬁc sectors. However, at this time there are certain sectors falling within its Investment Policy which, given the large funding requirements typically required, it would not currently look to focus on. These sectors include large real estate development, infrastructure development and exploration and production of natural resources. However, the Company would consider establishing sector speciﬁc vehicles in the future – possibly with suitable joint venture partners – to participate in such opportunities. Whilst the Investment Policy is not sector speciﬁc, in assessing which sectors the Company may invest in, the following themes will be considered: • • • • Regulatory framework: under present foreign investment regulations there are limitations and prohibitions imposed with regard to foreign investment in certain speciﬁed sectors. However these regulations may be subject to change and reﬁnement. Ease of upgrading: the Directors believe that there are many areas of the Myanmar economy that can beneﬁt from practices and technology that are commonplace in Western and other Asian economies without the need to introduce advanced technology. Relatively easy to implement changes can have a signiﬁcant improvement on efﬁciency and proﬁtability. These might be in manufacturing industries but also in services such as distribution and retailing. Scalability: the Company will be looking at sectors where there are opportunities for signiﬁcant scalability given their potential, both domestically as well as in export markets. Barriers to entry: in some sectors being ﬁrst to market may help secure key retail locations or licences, giving rise to competitive advantages. MMyyaannmmaarr IInnvveessttmmeennttss IInntteerrnnaattiioonnaall LLiimmiitteedd • Leverage: into the Company will consideration the availability of locally sourced debt where that may be inﬂuenced by the nature of the underlying business. take Investment Policy Review The Directors will review the Investment Policy on an annual basis and, subject to their review and in the absence of unforeseen circumstances, the Company intends to adhere to the Investment Policy for at least three years following Admission. Notwithstanding the above, should the Company wish to make a material change to its Investment Policy, which may be prompted, inter alia, by in government policies or economic changes conditions which alter, introduce investment opportunities, the Company will seek prior Shareholder consent at a general meeting. reduce or In the event of a breach of the Investment Policy or any restrictions imposed on the Investment Policy, if the Board considers the breach to be material, notiﬁcation shall be made to a Regulatory Information Service provider. Results and dividends During the year to 31st March 2015 the Group invested in MFIL as described in more detail in the Executive Directors’ Report. Since the year end the Group invested in Apollo Towers as described in more detail in the Executive Directors’ Report. In addition the Company has built up a pipeline of potential investments and the Directors believe that, barring unforeseen circumstances, the Group should be able to consummate one or more investments within the next ﬁnancial year. The Directors assessment of the Group’s net asset value as at 31st March 2015 is that it was US$6,608,414 (2014: US$4,647,214), representing US$0.66 per share (2014: US$0.73 per share), a 42% increase over the period. This change principally reﬂects the proceeds from the fund raising in December 2014 less the running costs for the year. The results for the year are set out in more detail in the consolidated statement of comprehensive income. The Directors do not recommend the payment of a dividend for the period ended 31st March 2015. Review of the Company’s Business and Future Outlook The Chairman’s Letter and the Executive Directors’ Report provide further details as to the development of the business in the period under review as well as the future outlook. Directors The members of the Board are listed in the section headed “Board of Directors”. Aung Htun and Michael Dean served as Executive Directors throughout the period under review. William Knight, Craig Martin and Christopher Appleton, independent Non-Executive Directors, also served throughout the period under review. all of whom are In accordance with the Company’s Articles of Association Aung Htun and Craig Martin retire by rotation and offer themselves for re-election at the Company’s Annual General Meeting. The means by which the Board administers its responsibilities are set out in more detail in the section headed “Corporate Governance”. Directors’ Shareholdings There are no requirements in place pursuant to the Company’s Articles of Association for the Directors to own shares in the Company. At the date of signing this report, the Directors’ interests in the equity of the Company was as follows: Director William Knight Aung Htun Michael Dean Craig Martin Christopher Appleton Ordinary Shares Warrants Share options 28,000 20,000 3,000 373,000 123,000 242,000 98,000 198,000 223,000 30,000 195,000 145,000 40,000 98,000 148,000 Share Option Plan The Company established its Share Option Plan as a long term incentive scheme for its employees, Directors and advisers, built around the fundamental principle of aligning their interests with those of our Shareholders. The Share Option Plan is designed to reward a participant only if there is an appreciation in value of the Company’s share price. The Share Option Plan is administered by the Remuneration Committee. 19 Annual Report 2015 Directors’ Report (continued) The Share Option Plan provides that Share Options available for granting by the Company shall constitute a maximum of one-tenth of the number of the total number of Ordinary Shares in issue on the date preceding the date of grant (excluding shares held by the Company as treasury shares and Founder Shares). Following Admission there were 6,342,619 Ordinary Shares in issue and up to 584,261 Share Options available for issue. After the share offering in December 2014 a further 3,617,000 Ordinary Shares were issued giving rise to a further 361,700 Share Options making a total of 945,961 Share Options in the Share Option Plan as at the year end. After the share offering in July 2015 a further 17,341,214 Ordinary Shares were issued giving rise to a further 1,734,121 Share Options making a total of 2,680,082 Share Options in the Share Option Plan as at the date of this report. Any issue of Ordinary Shares by the Company will enable the Remuneration Committee to grant further Share Options which will be granted with an exercise price set at a 10% premium to the subscription price paid by Shareholders for the issue of Ordinary Shares that gave rise to the availability of each tranche of the Share Options. However, the Share Options that arose as a result of the Ordinary Shares issued in connection with the Admission have an exercise price of US$1.10. Share Options can be exercised at any time after the ﬁrst anniversary and any time up to the tenth anniversary of the grant of the Share Options (as may be determined by the Remuneration Committee in its absolute discretion). Share Options will not be admitted to trading on AIM but application will be made for Ordinary Shares that are issued upon the exercise of the Share Options to be admitted to trading on AIM. Series Series 1 Series 2 Occasion Number of Share Options Admission placing December 2014 placing 584,261 361,700 945,961 Options Granted as at 31 March 2015 574,061 – 574,061 Options available to be granted 10,200 361,700 371,900 Exercise price (US$) 1.10 1.155 Insurance The Group maintains appropriate insurance including D&O insurance in respect of its Directors and ofﬁcers. Related Party Transactions Other than the Directors compensation, details of which are described in the section headed “Directors’ remuneration”, the Group has not undertaken any related party transactions during the period under review. Substantial Interests As at 9th September 2015, the following interests of 3% or more of the issued ordinary share capital had been notiﬁed to the Group: Name LIM Asia Special Situations Master Fund Limited First State Investment Manager (UK) Limited Red Oak Operations Limited Incagrove Limited Alpha Investments Asia FCP-SIF Fund Finanzverwaltungs GbR Langen II Pachira Holdings Limited Crystal Consultancy Services Limited Bank Alpinum AG Number of Ordinary Shares Percentage of Issued Capital 7,141,742 26.2% 2,608,695 1,845,565 1,795,566 1,304,346 1,298,565 976,000 976,000 900,000 9.6% 6.8% 6.6% 4.8% 4.8% 3.6% 3.6% 3.3% 20 MMyyaannmmaarr IInnvveessttmmeennttss IInntteerrnnaattiioonnaall LLiimmiitteedd Going Concern Based on the Group’s current resources and projected cash ﬂows, the Board believes that the Group will be able to satisfy its working capital requirements for at least the next twelve months. The Board has therefore concluded that it is appropriate to continue to adopt the going concern basis in preparing the ﬁnancial statements. Litigation The Group is not engaged in any litigation or claim of material importance, nor, so far as the Directors are aware, is any litigation or claim of material importance pending or threatened against the Group. Business Integrity The Directors place great emphasis on Business Integrity in all aspects of the Group’s operations. Whilst conforming to appropriate regulations this emphasis goes further and is embodied in the Group’s culture. Speciﬁcally the Group’s Business Integrity culture seeks to ensure compliance with a broad range of ethical considerations, not all of which are ﬁnancial in nature. These include: • • • • • Sanctions; Financial Action Task Force recommendations; (“FATF”) Anti-Money laundering (“AML”); Countering the Financing of Terrorism (“CFT”); Anti-Bribery procedures; • Whistleblowing procedures; • Politically Exposed Persons (“PEP”); • • • Conﬁdentiality; Share Dealing; and Social and environmental considerations. In furtherance of these aims all staff receive training in all of these areas. Additionally the Group conducts a risk-focussed approach to all its business dealings with third parties. This will include conducting appropriate enquiries as to the background and sources of funding of signiﬁcant counter-parties including potential new shareholders (where a new equity issue is involved), potential Investee Companies and potential staff. This may involve retaining third party research and assessment functions. Payment to Suppliers The Group’s policy is to agree the terms of payment with suppliers prior to engaging them; to ensure that suppliers are made aware of the terms of payment; and to abide by the terms of payment. Transparency to Shareholders The Company seeks to be open and transparent to its Shareholders. In accordance with AIM rules the Company will use the RNS of the London Stock Exchange to announce signiﬁcant milestones. It has also established a website that allows viewing of published information. Additionally it has established a periodic newsletter to highlight some of the general issues faced by Myanmar. All Shareholders are encouraged to attend the Annual General Meeting and ask further questions. Internal Controls The Directors acknowledge their responsibility for the Group’s system of internal control and for reviewing its effectiveness. However, the system of internal controls is designed to manage rather than eliminate the risk of failure to achieve business objectives and as such can only provide reasonable, but not absolute, assurance against material misstatement or loss. The Board also considers the process for identifying, evaluating and managing any signiﬁcant risks faced by the Company. The Audit Committee has reviewed the Group’s risk management and internal control systems and believes that the controls are satisfactory given the size and nature of the Group. 21 Annual Report 2015 Directors’ Report (continued) framework. The Group’s Financial Risk Proﬁle The Directors have overall responsibility for the establishment and oversight of the Group’s risk management risk management policies are established to set out its overall business strategies, tolerance of risk and general risk management philosophy. Risk management policies and systems are reviewed regularly to reﬂect changes in market conditions and the Group’s activities. Auditors BDO LLP were appointed as auditors to the Group during the period and have expressed their willingness to continue in ofﬁce and a resolution for their re-appointment will be proposed at the forthcoming Annual General Meeting. On behalf of the Board of Directors Prior to the Group making its ﬁrst investment, the main risk which the Group faces is the credit risk of the ﬁnancial its US dollar institution holding denominated cash deposits. William Knight Chairman Aung Htun Managing Director 9th September 2015 9th September 2015 Further details on ﬁnancial risk management objectives and policies are given in the notes to the consolidated ﬁnancial statements. Disclosure of Information to Auditors All of the Directors conﬁrm that they have taken all the steps that they ought to have taken to make themselves aware of any information needed by the Company’s auditors for the purposes of their audit and to establish that the auditors are aware of that information. The Directors are not aware of any relevant audit information of which the auditors are unaware. 22 “The Directors place great emphasis on Business Integrity in all aspects of the Group’s operations.” Annual Report 2015 Corporate Governance The Company is committed to high standards of corporate governance and has established a framework which it believes is appropriate given its size and Investment Policy. As a BVI incorporated company, the UK Corporate Governance Code does not formally apply to the Company. Nonetheless, the Directors recognise that it is in the best interests of the Company and its Shareholders to apply its principles so far as they are appropriate for a company of this size. The Directors seek to comply with the recommendations on corporate governance made by the Quoted Companies Alliance in its ‘Corporate Governance Code for Small and Mid-Size Quoted Companies 2013’ guide as far as is practicable, taking into account the Company’s size and stage of development. Board Responsibilities, composition and Committees The Board of Myanmar Investments comprises a well balanced mix of professionals whose individual skill sets and extensive experiences complement each other to ensure that the Board has the requisite resources to enable the Company to achieve its strategic goals. The Board is responsible for setting the strategy for the Company and then ensuring that the Company has the requisite wherewithal to achieve that strategy. In this context the Board is also responsible for managing the risks inherent in the strategy and the implementation. The Board seeks to maintain an open dialogue with the Company’s Shareholders through the RNS system of the London Stock Exchange. Out of a total of ﬁve directors, the board of directors (the “Board”) comprises two executive directors and three non-executive directors. There is a clear separation of the roles of the Managing Director and the Chairman. The Board meets regularly and is provided with timely updates and information from the two Executive Directors. As and when there are urgent commercial or other corporate matters, Board meetings are convened to seek guidance from the Board or to elicit a decision. All directors are expected to act in good faith and to act in the interests of the Company. The Chairman oversees the Agenda for all the Board Meetings liaising closely with the executive and non-executive directors. The same applies for the meetings of the various committees outlined below 24 and their respective chairmen. The Chairman is speciﬁcally responsible for the Chairman’s Report, the governance statements in the Annual Report and answerable to the Shareholders on behalf of the board for it. The Chairman is ultimately responsible to Shareholders for the ethos, and oversight of good practice, of the executive management. The Board Investment is supported by the Committee, the Audit Committee, the Remuneration Committee and the Nomination and Corporate Governance Committee. The committees have been established with clear Terms of Reference and they regularly review matters within their purview. The Directors have access to the Company’s Nomad, Broker, legal advisers, auditor, Company Secretary and, should it prove necessary in the furtherance of their duties, to independent professional advice at the expense of the Group. Unless there is an unexpected event, Board and Committee meetings are scheduled well in advance at a time and place that will enable the Directors to participate. All members of the Board are expected to attend each Board meeting and to arrange their schedules accordingly, although non-attendance is unavoidable in certain circumstances. An agenda and supporting papers are circulated to the Board and the relevant Committees well in advance of the meeting. Directors may request any agenda items be added that they consider appropriate for Board discussion. Additionally, each Director is required to inform the Board of any potential or actual conﬂicts of interest prior to Board discussion. During the period under review there were eight Board meetings and all directors attended all of them. During the period under review there were appropriately timed meetings of each of the Investment Committee, Audit Committee, Remuneration Committee and Nomination and Corporate Governance Committee and all the members of the various committees attended all of their respective meetings. Where appropriate, administrative matters requiring the Board’s approval are dealt with by way of circulating resolutions in writing. Directors’ and Ofﬁcers’ liability insurance cover is maintained by the Company on behalf of the Directors. MMyyaannmmaarr IInnvveessttmmeennttss IInntteerrnnaattiioonnaall LLiimmiitteedd Investment Committee The Investment Committee comprises Aung Htun, Michael Dean and Craig Martin and is chaired by Aung Htun. During the period under review there were nine meetings of the Investment Committee and all the members of the committee attended all of the meetings. The Investment Committee has responsibility for, amongst other things, establishing the Investment Policy, guiding Management in the execution of this policy, monitoring the deal ﬂow and investments in progress, supervising Management’s management of Investments, and planning the realisation of Investments. During the period under review it assessed a number of speciﬁc investment opportunities as well as reviewed and prioritised the deal ﬂow of potential investment opportunities. It has made recommendations to the Board regarding making investments and is responsible for computing the Company’s net asset value for the Board’s consideration. Audit Committee The Audit Committee comprises Craig Martin and William Knight and is chaired by Craig Martin. During the period under review there were four meetings of the Audit Committee and all the members of the committee attended all of the meetings. The audit committee has responsibility for, amongst other things, the planning and review of the Company’s annual report and accounts and half-yearly reports and the involvement of the Company’s auditors in that process. The Audit Committee also has oversight of the Company’s cashﬂow projections. The committee focuses in particular on compliance with legal requirements, accounting standards and on ensuring that an effective system of internal ﬁnancial control is maintained over the Group’s underlying assets and liabilities as well as the books and records. The ultimate responsibility for reviewing and approval of the annual report and accounts and the half-yearly reports remains with the Board. The Audit Committee also advises the Board on the appointment of the external Auditors, reviews their fees and the audit plan. It approves the external Auditors’ terms of engagement, their remuneration and any non-audit work. Auditors without the presence of the executive directors. Auditor objectivity and independence is safeguarded through limiting non-audit services to tax work. Remuneration Committee is responsible there were four meetings of The Remuneration Committee comprises William Knight, Craig Martin and Christopher Appleton and is chaired by William Knight. During the period under review the Remuneration Committee and all the members of the committee attended all of the meetings. The for Remuneration Committee establishing a formal and transparent procedure for developing policy on executive remuneration and to set the remuneration packages of individual Directors. This includes agreeing with the Board the framework for remuneration of the Managing Director and the Finance Director and such other members of the executive management of the Company as it is designated to consider. This includes the administration of the Share Option Plan. It is also responsible for determining the total individual remuneration packages of each Director including, where appropriate, bonuses, incentive payments and allocation of Share Options. No Director plays a part in any decision about his own remuneration. Nomination Committee The Nomination and Corporate Governance Committee (“NCGC”) comprises Christopher Appleton, William Knight, Craig Martin and Aung Htun and is chaired by Christopher Appleton. During the period under review there were two meetings of the NCGC and all the members of the committee attended all of the meetings. The NCGC is responsible for assessing the performance of the Board and the various committees and also considering new or replacement appointments to the Board or senior management. This committee is also responsible for ensuring the Company’s compliance with the AIM Rules for Companies as well as other relevant corporate governance standards. The Audit Committee also meets the Group’s Auditors and reviews reports from the Auditors relating to accounts and internal control systems. The Audit Committee meets with the Auditors as and when the Audit Committee requires and, in conformity with good practice, has met with the The NCGC formally assesses the effectiveness of the Board, the balance of skills represented and the composition and performance of its various committees. The NCGC concluded that the Board has an appropriate balance of skills and experience in relation to the activities of the Group. 25 Share Dealing The Company has adopted a share dealing code for the Directors which is appropriate for a company whose Ordinary Shares and Warrants are admitted to trading on AIM and which is consistent with the obligations set out in Rule 21 of the AIM Rules for Companies relating to directors’ dealings in Ordinary Shares and Warrants. The Company takes all reasonable steps to ensure compliance by the Directors and the Group’s applicable employees as well. The Takeover Code As the Company was incorporated in the BVI, it is not treated by the Panel on Takeovers and Mergers as resident in the UK, the Channel Islands or the Isle of Man and therefore it is not subject to the Takeover Code. However, the Company has incorporated certain provisions in its Articles of Association which are broadly similar to those of Rules 4, 5, 6 and 9 of the Takeover Code. It should however be noted that, as the Takeover Panel will have no role in the interpretation of these provisions, Shareholders will not necessarily be afforded the same level of protection as is available to a company subject to the Takeover Code which now has the effect of law for those companies within its jurisdiction. Additionally, the Directors have the right to waive the application of these provisions. On behalf of the Board of Directors William Knight Chairman Aung Htun Managing Director 9th September 2015 9th September 2015 Annual Report 2015 Corporate Governance (continued) considering appointment When and the reappointment of Directors, the NCGC and the Board consider whether the Board and its committees have the appropriate balance of skills, experience, independence, knowledge and diversity to enable them to discharge their respective duties and responsibilities effectively. The NCGC also established guidelines to determine the independence of each of the Directors and afﬁrmed that all the Directors were found to be independent. The Board currently comprises of ﬁve Directors. The Board does not believe that it is currently in the best interests of the Group to seek to appoint a new Director, in addition to the current Directors, to broaden the diversity of the Board. Shareholders vote on the re-appointment of at least one Director at each Annual General Meeting, with every Director’s appointment being voted on by Shareholders every three years. During the period under review the NCGC ensured that all new employees received appropriate training and the employment handbook which includes adequate explanation on such topics as share dealing, anti-money laundering and whistle blowing. anti-bribery legislation, The NCGC has direct access to the Company’s Nomad and, in conformity with good practice, non-executive members of the committee have met with the Nomad without the presence of the executive directors during the period under review. 26 MMyyaannmmaarr IInnvveessttmmeennttss IInntteerrnnaattiioonnaall LLiimmiitteedd Directors’ Remuneration Report Remuneration Policy The Remuneration Committee is responsible for determining the Remuneration Policy of the Company. It is the Group’s policy to ensure that compensation arrangements are appropriate and are fairly applied across the Group. The Group’s long term incentive plan is embodied within the Share Option Plan which is fundamentally driven around the principle of aligning interests with our Shareholders by pricing the options out of the money and by making them vest over a prolonged period. Directors’ Remuneration The Directors’ remuneration for the nine month period ended 31st March 2014 and the year to 31st March 2015 was (all amounts in US dollars): Director Fees Salaries Fees Salaries 2015 2014 William Knight 30,000 – 22,829 Aung Htun1 Michael Dean1 Craig Martin – – 334,315 279,903 – – Christopher Appleton 25,000 25,000 – – 19,023 19,023 80,000 614,218 60,875 132,968 Note 1 – Under the terms of their initial service contracts Messrs Htun and Dean agreed to forgo 50% of their compensation unless and until, in accordance with Rule 8 of the AIM Rules for Companies, the Company had “substantially implemented its Investment Policy” or the Shareholders agreed to extend the period for implementing the investment policy. If neither of these events occurred then their entitlement to this deferred element would lapse without any compensation. As at 31st March 2014, this contingent compensation amounted to US$132,968 and was not included in the results for that ﬁnancial period. However, by virtue of the investment in Myanmar Finance International Ltd. in September 2014, the conditions were fulﬁlled and as such the Company recognised and settled this liability in the ﬁnancial year to 31st March 2015. This effective deferral from 2014 to 2015 is reﬂected within the numbers presented above. – 75,982 56,986 – – The remuneration of the Executive Directors is determined by the Remuneration Committee. Following the satisfaction of the conditions referred to in Note 1 above, the Remuneration Committee increased the Executive Directors’ compensation but to sub-market rates to reﬂect the size of the Company’s balance sheet. The remuneration of the Non-Executive Directors is determined by the Remuneration Committee but no director may vote on his own compensation arrangements. No additional sums were paid in the year to Directors for work on behalf of the Company outside their normal duties. The Group’s Share Option Plan is described in the Directors’ Report. There are no further cash payments or beneﬁts provided to Directors. Each of the Non-Executive Directors of the Company, William Knight, Craig Martin and Christopher Appleton, have entered into a letter of appointment with the Company under the terms of which they each agreed to act as a Non-Executive Director of the Company. Each Non-Executive Director’s appointment is subject to retirement by rotation in accordance with the Articles and is terminable by either party on one month’s notice. 27 Annual Report 2015 Statement of Directors’ Responsibilities of the Company and ensure that the ﬁnancial statements and the Directors’ Remuneration Report comply with the BVI Business Companies Act, 2004. They also are responsible for safeguarding the assets of the Company and therefore for taking reasonable steps for the prevention of fraud and other irregularities. Under the applicable law and regulations the Directors are also responsible for preparing a Directors’ Report and Statement of Corporate Governance that comply with that law and those regulations. accounts on are The www.myanmarinvestments.com which is maintained by the Company. The Company is responsible for the integrity of the website as far as it relates to the Company. published Each of the Directors, whose names and functions are listed in the Directors’ Report conﬁrms to the best of his knowledge: • • the ﬁnancial statements, which have been prepared in accordance with IFRS give a true and fair view of the assets, liabilities, ﬁnancial position of the Company; and the Directors’ Report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces. Legislation in the British Virgin Islands governing the preparation and dissemination of ﬁnancial statements may differ from legislation in other jurisdictions. For and on behalf of the Board of Directors William Knight Chairman 9th September 2015 The Directors are responsible for preparing the Annual Report, the Directors’ Remuneration Report and the ﬁnancial statements in accordance with applicable law and regulations. Company law requires the Directors to prepare ﬁnancial statements for each ﬁnancial year. Under that law the directors have elected to prepare the ﬁnancial statements in accordance with International Financial Reporting Standards (“IFRS”) as adopted by the European Union. the information necessary Under company law the Directors must not approve the ﬁnancial statements unless they are satisﬁed that, taken as a whole, the annual report and accounts provide the Shareholders to assess the Company’s performance, business model and strategy and that they give a true and fair view of the state of affairs of the Company for that period. The directors are also required in accordance with the AIM Rules for Companies. to prepare ﬁnancial statements for In preparing these ﬁnancial statements, the Directors are required to: • • • • select suitable accounting policies and then apply them consistently; make judgments and accounting estimates that are reasonable and prudent; state whether they have been prepared in accordance with IFRS as adopted by the European Union, 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 Board conﬁrms that the annual report and accounts taken as a whole are fair, balanced and information understandable and provide necessary the for Shareholders performance model and strategy of the Company. The Directors are responsible for keeping proper accounting records that are sufﬁcient to show and explain the Company’s activities and disclose with reasonable accuracy at any time the ﬁnancial position the to assess 28 MMyyaannmmaarr IInnvveessttmmeennttss IInntteerrnnaattiioonnaall LLiimmiitteedd (Company registration number: 1774652) REPORT OF THE DIRECTORS AND FINANCIAL STATEMENTS Annual Report 2015 Report of the Directors The Directors of the Company present their report to the members together with the audited ﬁnancial statements of Group for the ﬁnancial year ended 31 March 2015. 1. Directors The Directors of the Company in ofﬁce at the date of this report are: Christopher William Knight Maung Aung Htun Anthony Michael Dean Craig Robert Martin Christopher David Appleton 2. Arrangements to enable directors to acquire shares and debentures Except as disclosed in the ﬁnancial statements, neither at the end of nor at any time during the ﬁnancial period was the Company a party to any arrangement whose object was to enable the Directors of the Company to acquire beneﬁts by means of the acquisition of shares in or debentures of the Company or any other body corporate. 3. Directors’ interests in shares or debentures The following directors, who held ofﬁce at the end of the ﬁnancial period, had interests in shares in the Company (other than wholly-owned subsidiaries) as stated below: Name of directors and companies in which interests are held Company Myanmar Investments International Limited Number of ordinary shares Christopher William Knight Maung Aung Htun Anthony Michael Dean Craig Robert Martin Christopher David Appleton Number of warrants to subscribe for ordinary shares of the Company Christopher William Knight Maung Aung Htun Anthony Michael Dean Craig Robert Martin Christopher David Appleton Shareholdings registered in name of director or nominee At 1 April 2014 At 31 March 2015 25,000 325,000 175,000 100,000 100,000 – 75,000 50,000 50,000 50,000 28,000 373,000 223,000 195,000 148,000 3,000 123,000 98,000 145,000 98,000 30 MMyyaannmmaarr IInnvveessttmmeennttss IInntteerrnnaattiioonnaall LLiimmiitteedd 3. Directors’ interests in shares or debentures (continued) Name of directors and companies in which interests are held Company (continued) Myanmar Investments International Limited Number of share options to subscribe for ordinary shares of the Company Christopher William Knight Maung Aung Htun Anthony Michael Dean Craig Robert Martin Christopher David Appleton Shareholdings registered in name of director or nominee At 1 April 2014 At 31 March 2015 20,000 180,000 140,000 30,000 40,000 20,000 242,000 198,000 30,000 40,000 4. Directors’ contractual beneﬁts Except as disclosed in the ﬁnancial statements, since the end of the last ﬁnancial year, no director of the Company has received or become entitled to receive a beneﬁt by reason of a contract made by the Company or a related corporation with the director, or with a ﬁrm of which the director is a member, or with a company in which the director has a substantial ﬁnancial interest. Share option plan 5. The Company has established a Share Option Plan (the “Plan”) for the employees, Directors and advisers of the Group, as well as the employees, directors and advisers of its Investee Companies (“Participants”). The Plan is administered by the Remuneration Committee whose members are: • William Knight (Chairman) • • Craig Robert Martin Christopher David Appleton The Plan in respect of unissued ordinary shares in the Company was adopted by the Company on 21 June 2013. The Plan is designed to reward a Participant only if there is an appreciation in value of the Company’s share price. The Plan provides that share options granted by the Company under the terms of the Plan shall constitute a maximum of one-tenth of the number of the total number of ordinary shares in issue on the date preceding the date of grant. Any issue of ordinary shares by the Company will enable the Remuneration Committee to grant further share options which will be granted with an exercise price set at a 10 percent premium to the subscription price paid by shareholders for the issue of ordinary shares that gave rise to the availability of each tranche of the share options. However, the share options that arise as a result of the new ordinary shares being issued in connection with admission have an exercise price of US$1.10. Share options can be exercised at any time after the ﬁrst anniversary and before the tenth anniversary of the grant (as may be determined by the remuneration committee in its absolute discretion) of the respective share options. 31 Annual Report 2015 Report Of The Directors (continued) Share Option Plan (continued) 5. Any share options which have not been allocated or which have not vested will not be eligible for conversion into ordinary shares. Where a Participant ceases to be in the employment of or engaged by the Group entities before their Share Options have fully vested, then in the case of a ‘good leaver’, the Remuneration Committee shall determine in its absolute discretion whether any unvested share options shall continue to be retained by the Participant or lapse without any claim against the Company. The Remuneration Committee has the discretion to re-allocate the number of ordinary shares underlying the portion of any lapsed or unvested share options to be the subject of further options granted under the Plan, subject to certain conditions. During the ﬁnancial year, there were 510,961 share options available for issue. Of these 139,061 share options were granted to Directors and employees during the ﬁnancial period as follows: Date of grant 25 September 2014 Granted Exercise price per share Exercisable period 139,061 US$1.10 To 24 September 2024 There were no shares issued during the ﬁnancial period by virtue of the exercise of options to take up unissued shares of the Company or its subsidiaries. There were 371,900 share options unallocated as at the end of the ﬁnancial year. The information on Directors of the Company participating in the Plan is as follows: Aggregate options granted since commencement of the Plan to the end of ﬁnancial year Aggregate options exercised since commencement of the Plan to the end of ﬁnancial year Aggregate options lapsed since commencement of the Plan to the end of ﬁnancial year Aggregate options outstanding as at end of the ﬁnancial year Options granted during the ﬁnancial year – 62,000 58,000 – – 20,000 242,000 198,000 30,000 40,000 – – – – – – – – – – 20,000 242,000 198,000 30,000 40,000 Name of Director Christopher William Knight Maung Aung Htun Anthony Michael Dean Craig Robert Martin Christopher David Appleton 6. Auditors The auditors, BDO LLP, have expressed their willingness to accept reappointment. On behalf of the Board of Directors Anthony Michael Dean Director 1 September, 2015 Maung Aung Htun Director 32 MMyyaannmmaarr IInnvveessttmmeennttss IInntteerrnnaattiioonnaall LLiimmiitteedd Statement by the Directors In the opinion of the Board of Directors, (a) the accompanying consolidated statement of ﬁnancial position of the Group as at 31 March 2015, consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash ﬂows together with notes thereon are drawn up in accordance with International Financial Reporting Standards so as to give a true and fair view of the state of affairs of the Group as at 31 March 2015 and the results of the business, changes in equity and cash ﬂows of the Group for the ﬁnancial year ended 31 March 2015; and (b) at the date of this statement, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they fall due. On behalf of the Board of Directors Anthony Michael Dean Director 1 September 2015 Maung Aung Htun Director 33 Annual Report 2015 Independent Auditor’s Report To the Members of Myanmar Investments International Limited Report on the consolidated ﬁnancial statements We have audited the accompanying consolidated ﬁnancial statements of Myanmar Investments International Limited (the “Company”) and its subsidiaries (the “Group”) which comprise the consolidated statement of ﬁnancial position of the Group as at 31 March 2015, the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash ﬂows for the ﬁnancial year ended 31 March 2015, and a summary of signiﬁcant accounting policies and other explanatory information. Management’s responsibility for the consolidated ﬁnancial statements Management is responsible for the preparation of these consolidated ﬁnancial statements that give a true and fair view in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated ﬁnancial statements that are free from material misstatement, whether due to fraud or error. Auditor’s responsibility Our responsibility is to express an opinion on these consolidated ﬁnancial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated ﬁnancial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated ﬁnancial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the consolidated ﬁnancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of the consolidated ﬁnancial statements that give a true and fair view 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 entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated ﬁnancial statements. We believe that the audit evidence we have obtained is sufﬁcient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated ﬁnancial statements of the Group are properly drawn up in accordance with the International Financial Reporting Standards so as to give a true and fair view of the state of affairs of the Group as at 31 March 2015 and of the results, changes in equity and cash ﬂows of the Group for the ﬁnancial year ended 31 March 2015. BDO LLP Public Accountants and Chartered Accountants Singapore 1 September 2015 34 MMyyaannmmaarr IInnvveessttmmeennttss IInntteerrnnaattiioonnaall LLiimmiitteedd Consolidated Statement of Comprehensive Income For the ﬁnancial year ended 31 March 2015 Revenue Other item of income Interest income Foreign exchange gain, net Items of expense Employee beneﬁts expense Depreciation expense Other operating expenses Finance costs Share of results of joint venture, net of tax Loss before income tax Income tax expense Loss for the ﬁnancial year/period, representing total comprehensive income for the ﬁnancial year/period Loss per share (cents) – Basic and diluted Year ended 31 March 2015 US$ Note Period from 17 May 2013 to 31 March 2014 US$ – – 216 216 (1,011,340) (12,996) (642,099) (11,718) (62,305) (1,740,242) – 3,413 – 3,413 (395,686) (3,595) (462,824) (8,196) – (866,888) (3,156) – (1,743,398) (866,888) (23.58) (15.26) 4 10 5 9 6 7 8 The accompanying notes form an integral part of these consolidated ﬁnancial statements. 35 Annual Report 2015 Consolidated Statement of Financial Position As at 31 March 2015 ASSETS Non-current assets Investment in joint venture Plant and equipment Current assets Other receivables Cash and bank balances Total assets EQUITY AND LIABILITIES Equity Share capital Share option reserve Accumulated losses Total equity LIABILITIES Current liability Other payables Income tax payable Total liabilities Total equity and liabilities Note 2015 US$ 2014 US$ 9 10 12 13 14 15 16 1,450,195 24,252 1,474,447 – 32,025 32,025 88,854 5,049,268 99,235 4,579,666 5,138,122 4,678,901 6,612,569 4,710,926 8,996,282 160,113 (2,610,286) 5,439,353 74,749 (866,888) 6,546,109 4,647,214 65,195 1,265 66,460 63,712 – 63,712 6,612,569 4,710,926 The accompanying notes form an integral part of these consolidated ﬁnancial statements. 36 MMyyaannmmaarr IInnvveessttmmeennttss IInntteerrnnaattiioonnaall LLiimmiitteedd Consolidated Statement of Changes in Equity For the ﬁnancial year ended 31 March 2015 At 1 April 2014 Loss for the ﬁnancial year Total comprehensive loss for the ﬁnancial year Share Share option Accumulated losses reserve capital US$ US$ US$ Total US$ Note 5,439,353 74,749 (866,888) 4,647,214 – – – (1,743,398) (1,743,398) – (1,743,398) (1,743,398) Contributions by and distributions to owners Issue of shares Share issue expenses Total contributions by and distributions to owners Others Grant of share options to employees Total others At 31 March 2015 14 14 3,797,850 (240,921) 3,556,929 – – – 15 – – 85,364 85,364 – – – – – 3,797,850 (240,921) 3,556,929 85,364 85,364 8,996,282 160,113 (2,610,286) 6,546,109 Issue of 1 subscriber’s shares at 17 May 2013 (date of incorporation) Loss for the ﬁnancial period Total comprehensive income for the ﬁnancial period –* – – Contributions by and distributions to owners Issue of shares Share issue expenses Total contributions by and distributions to owners 14 14 6,184,793 (745,440) 5,439,353 – – – – – – Others Grant of share options to employees Total others At 31 March 2014 * Share capital at date of incorporation is US$0.10. 15 – – 74,749 74,749 5,439,353 74,749 (866,888) 4,647,214 – –* (866,888) (866,888) (866,888) (866,888) – – – – – 6,184,793 (745,440) 5,439,353 74,749 74,749 The accompanying notes form an integral part of these consolidated ﬁnancial statements. 37 Annual Report 2015 Consolidated Statement of Cash Flows For the ﬁnancial year ended 31 March 2015 Operating activities Loss before income tax Adjustments for: Interest income Depreciation of plant and equipment Share-based payment expense Share of results of joint venture, net of tax Year ended 31 March 2015 US$ Period from 17 May 2013 to 31 March 2014 US$ (1,740,242) (866,888) – 12,996 85,364 62,305 (3,413) 3,595 74,749 – Operating cash ﬂows before working capital changes (1,579,577) (791,957) Changes in working capital: Decrease/(increase) in other receivables Increase in other payables Cash used in operations Interest received Income tax paid Net cash ﬂows used in operating activities Investing activity Investment in Joint Venture Purchase of plant and equipment Net cash ﬂows used in investing activities Financing activities Net proceeds from issuance of shares Increased in short-term deposits pledged Net cash ﬂows generated from ﬁnancing activities Net change in cash and bank balances Cash and bank balances at beginning of the year 10,381 1,483 (1,567,713) – (1,891) (1,569,604) (1,512,500) (5,223) (1,517,723) (99,235) 63,712 (827,480) 3,413 – (824,067) – (35,620) (35,620) 3,556,929 (35,981) 5,439,353 – 3,520,948 5,439,353 433,621 4,579,666 4,579,666 – Cash and bank balances at the end of ﬁnancial year 5,013,287 4,579,666 The accompanying notes form an integral part of these consolidated ﬁnancial statements. 38 MMyyaannmmaarr IInnvveessttmmeennttss IInntteerrnnaattiioonnaall LLiimmiitteedd Notes to the Consolidated Financial Statements For the ﬁnancial year ended 31 March 2015 1. General corporate information Myanmar Investments International Limited (“the Company”) is a limited liability company incorporated and domiciled in the British Virgin Islands (“BVI”). The Company’s registered ofﬁce is at Jayla Place, Wickhams Cay I, Road Town, Tortola, British Virgin Islands. The Company’s ordinary shares and warrants are traded on the AIM market of the London Stock Exchange under the ticker symbols MIL and MILW respectively. The Company can raise additional capital as described in Note 14 to the consolidated ﬁnancial statements. The Company has been established for the purpose of identifying and investing in, and disposing of, businesses operating in or with business exposure to Myanmar. The Company will target businesses operating in sectors that the Directors believe have strong growth potential and thereby can be expected to provide attractive yields, capital gains or both. The principal activities of the subsidiaries are disclosed in Note 11 to the consolidated ﬁnancial statements. The consolidated ﬁnancial statements of the Company and its subsidiaries (the “Group”) for the ﬁnancial year ended 31 March 2015 were approved by the Board of Directors on 1 September 2015. 1.1 Going concern After due and careful enquiries, the Directors have a reasonable expectation that the Company has adequate ﬁnancial resources to continue in operational existence for the foreseeable future. This expectation is based on a review of the Company’s existing ﬁnancial resources; its present and expected future commitments in terms of its overheads and running costs; and its commitments to its existing investments. Accordingly, the Directors have adopted the going concern basis in preparing the consolidated ﬁnancial statements. Summary of signiﬁcant accounting policies 2. 2.1 Basis of preparation of the consolidated ﬁnancial statements The consolidated ﬁnancial statements, which are expressed in United States dollars, have been prepared in accordance with International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”) which comprise standards and interpretations approved by IASB and International Financial Reporting Interpretations Committee (“IFRIC”). The consolidated ﬁnancial statements have been prepared on an historical cost basis, except as disclosed in the accounting policies below. For the purpose of IFRS 8 Operating Segments, the Group has only one segment, being “Investments” which is mainly the investment in the joint venture as disclosed in Note 9 to the consolidated ﬁnancial statements. No further operating segment ﬁnancial information is therefore disclosed. The preparation of the consolidated ﬁnancial statements in conformity with IFRSs requires the management to exercise judgement in the process of applying the Group’s and the Company’s accounting policies and requires the use of accounting estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the end of the reporting period, and the reported amounts of revenue and expenses during the ﬁnancial year. Although these estimates are based on the management’s best knowledge of historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances, actual results may ultimately differ from those estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. 39 Annual Report 2015 Notes to the Consolidated Financial Statements (continued) Summary of signiﬁcant accounting policies (continued) 2. 2.1 Basis of preparation of the consolidated ﬁnancial statements (continued) In the current ﬁnancial period, the Group has adopted all the new and revised IFRS and interpretations that are relevant to its operations and effective for the current ﬁnancial period. The adoption of these new/revised FRS and interpretations did not result in any substantial changes to the Group’s accounting policies and has no material effect on the amounts reported for the current period. Revisions to accounting estimates are recognised in the ﬁnancial year in which the estimate is revised if the revision affects only that ﬁnancial year, or in the ﬁnancial year of the revision and future ﬁnancial years if the revision affects both current and future ﬁnancial years. Critical accounting judgements and key sources of estimation uncertainty used that are signiﬁcant to the consolidated ﬁnancial statements are disclosed in Note 3 to the consolidated ﬁnancial statements. New or amended standards and interpretations that have been issued but are not yet effective At the date of authorisation of these ﬁnancial statements, the following IFRS that are relevant to the Group were issued but not yet effective, and have not been adopted early in these ﬁnancial statements: IFRS 9 IFRS 11 (Amendments) IFRS 15 IFRS 10 and IAS 28 (Amendments) IAS 1 (Amendments) IAS 16 (Amendments) IAS 19 (Amendments) IAS 38 (Amendments) Annual Improvements 2010-2012 Cycle2 Annual Improvements 2011-2013 Cycle1 Annual Improvements 2012-2014 Cycle3 Financial Instruments5 Accounting for Acquisitions of Interests in Joint Operations3 Revenue from Contracts with Customers4 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture3 Disclosure Initiative3 Clariﬁcation of Acceptable Methods of Depreciation and Amortisation3 Deﬁned Beneﬁt Plans: Employee Contributions1 Clariﬁcation of Acceptable Methods of Depreciation and Amortisation3 1 Effective for annual periods beginning on or after 1 July 2014 2 Effective for annual periods beginning, or transactions occurring, on or after 1 July 2014 3 Effective for annual periods beginning on or after 1 January 2016 4 Effective for annual periods beginning on or after 1 January 2017 5 Effective for annual periods beginning on or after 1 January 2018 The Directors have considered the above and are of the opinion that the above Standards and Interpretations will have no material impact on the Group’s consolidated ﬁnancial statements, except as discussed below. IFRS 9 – Financial Instruments IFRS 9 supersedes IAS 39 Financial Instruments: Recognition and Measurement with new requirements for the classiﬁcation and measurement of ﬁnancial assets and liabilities, impairment of ﬁnancial assets and hedge accounting. Under IFRS 9, ﬁnancial assets are classiﬁed into ﬁnancial assets measured at fair value or at amortised cost depending on the Group’s business model for managing the ﬁnancial assets and the contractual cash ﬂow characteristics of the ﬁnancial assets. Fair value gains or losses will be recognised in proﬁt or loss except for certain equity investments, for which the Group will have a choice to recognise the gains and losses in other comprehensive income. A third measurement category has been added for debt instruments – fair value through other comprehensive income. This measurement category applies to debt instruments that meet the “Solely Payments of Principal and Interest” contractual cash ﬂow characteristics test and where the Group is holding the debt instrument to both collect the contractual cash ﬂows and to sell the ﬁnancial assets. 40 MMyyaannmmaarr IInnvveessttmmeennttss IInntteerrnnaattiioonnaall LLiimmiitteedd Summary of signiﬁcant accounting policies (continued) 2. 2.1 Basis of preparation of the consolidated ﬁnancial statements (continued) IFRS 9 carries forward the recognition, classiﬁcation and measurement requirements for ﬁnancial liabilities from IAS 39, except for ﬁnancial liabilities that are designated at fair value through proﬁt or loss, where the amount of change in fair value attributable to change in credit risk of that liability is recognised in other comprehensive income unless that would create or enlarge an accounting mismatch. In addition, IFRS 9 retains the requirements in IAS 39 for de-recognition of ﬁnancial assets and ﬁnancial liabilities. IFRS 9 introduces a new forward-looking impairment model based on expected credit losses to replace the incurred loss model in IAS 39. This determines the recognition of impairment provisions as well as interest revenue. For ﬁnancial assets at amortised cost or fair value through other comprehensive income, the Group will always recognise (at a minimum) 12 months of expected losses in proﬁt or loss. Lifetime expected losses will be recognised on these assets when there is a signiﬁcant increase in credit risk after initial recognition. IFRS 9 also introduces a new hedge accounting model designed to allow entities to better reﬂect their risk management activities in their ﬁnancial statements. The Group plans to adopt IFRS 9 in the ﬁnancial year beginning on 1 April 2018 with retrospective effect in accordance with the transitional provisions. There may be a potentially signiﬁcant impact on the accounting for ﬁnancial instruments on initial adoption. Due to the recent release of this standard, the Group has not yet made a detailed assessment of the impact of this standard, however the Group will be required to reassess the classiﬁcation and measurement of ﬁnancial assets and the new impairment requirements are expected to result in changes for impairment provisions on trade receivables and other ﬁnancial assets not measured at fair value through proﬁt or loss. IFRS 15 – Revenue from Contracts with Customers IFRS 15 establishes principles for reporting useful information to users of ﬁnancial statements about the nature, amount, timing and uncertainty of revenue and cash ﬂows arising from an entity’s contracts with customers. The core principle is that a company should recognise revenue to depict the transfer of promised goods or services to the customer in an amount that reﬂects the consideration to which the Company expects to be entitled in exchange for those goods or services. The amendments are applied retrospectively subject to certain transitional provisions. The Group is in the process of making an assessment of the potential impact of these new or amended IFRSs. This standard is effective for accounting periods beginning on or after 1 January 2017. 2.2 Basis of consolidation Where the Company has control over an investee, it is classiﬁed as a subsidiary. The Company controls an investee if all three of the following elements are present: power over the investee, exposure to variable returns from the investee, and the ability of the investor to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control. Inter-company transactions, balances, income and expenses between group companies are eliminated. Accounting policies of subsidiaries are changed where necessary to ensure consistency with the policies adopted by the Group. The consolidated ﬁnancial statements present the results of the Company and its subsidiaries (“the Group”) as if they formed a single entity. Intercompany transactions and balances between group companies are therefore eliminated in full. 41 Annual Report 2015 Notes to the Consolidated Financial Statements (continued) Summary of signiﬁcant accounting policies (continued) 2. 2.2 Basis of consolidation (continued) Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. The carrying amounts of the Group’s interests and the non-controlling interests are adjusted to reﬂect the changes in their relative interests in the subsidiary. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the parent. When the Group loses control of a subsidiary, the proﬁt or loss on disposal is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests. Amounts previously recognised in other comprehensive income in relation to the subsidiary are accounted for (i.e. reclassiﬁed to proﬁt or loss or transferred directly to accumulated proﬁts) in the same manner as would be required if the relevant assets or liabilities were disposed of. The fair value of any investments retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under IAS 39 Financial Instruments: Recognition and Measurement or, when applicable, the cost on initial recognition of an investment in an associate or joint venture. 2.3 Joint arrangements The Group is a party to a joint arrangement when there is a contractual arrangement that confers joint control over the relevant activities of the arrangement to the Group and at least one other party. Joint control is assessed under the same principles as control over subsidiaries. The Group classiﬁes its interests in joint arrangements as either: – – Joint ventures: where the group has rights to only the net assets of the joint arrangement Joint operations: where the group has both the rights to assets and obligations for the liabilities of the joint arrangement. In assessing the classiﬁcation of interests in joint arrangements, the Group considers: – – – – The structure of the joint arrangement The legal form of joint arrangements structured through a separate vehicle The contractual terms of the joint arrangement agreement Any other facts and circumstances (including any other contractual arrangements). The Group’s interest in joint ventures are accounted for using the equity method. Under the equity method, the investment in joint ventures are carried in the statement of ﬁnancial position at cost plus post-acquisition changes in the Group’s share in net assets of the joint ventures. The share of results of the joint ventures are recognised in proﬁt or loss. Where there have been a change recognised directly to equity of the joint ventures, the Group recognises its share of such changes. After application of the equity method, the Group determines whether it is necessary to recognise any additional impairment loss with respect to the Group’s net investment in the joint ventures. The Group’s share of results and reserves of a joint venture acquired or disposed of are included in the ﬁnancial statements from the date of acquisition up to the date of disposal or cessation of joint control over the relevant activities of the arrangements. 42 MMyyaannmmaarr IInnvveessttmmeennttss IInntteerrnnaattiioonnaall LLiimmiitteedd Summary of signiﬁcant accounting policies (continued) 2. 2.4 Revenue recognition Interest income Interest income is recognised on an accruals basis using the effective interest rate (“EIR”) method. EIR is the rate that exactly discounts the estimated future cash payments or receipts over the expected life of the ﬁnancial instrument or a shorter period, where appropriate, to the net carrying amount of the ﬁnancial asset or liability. 2.5 Foreign currency translation Transactions in currencies other than US dollars, which is the functional currency of all of the respective Group entities, are recorded at the rate of exchange prevailing on the date of the transactions. At the end of each reporting period, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rate prevailing at the end of the reporting period. Non-monetary items carried at fair value which are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Foreign exchange gains and losses arising on the settlement of monetary items, and on the retranslation of monetary items, are included in net proﬁt or loss for the period, except for differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised directly in equity in which cases, the exchange differences are also recognised directly in equity. 2.6 Income tax Income tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on the taxable proﬁt for the year. Taxable proﬁt differs from net proﬁt as reported in proﬁt or loss if it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted at the end of the ﬁnancial year. Deferred tax is recognised on all temporary differences between the carrying amounts of assets and liabilities in the consolidated ﬁnancial statements and the corresponding tax bases used in the computation of taxable proﬁt, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable proﬁts will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the tax proﬁt nor the accounting proﬁt. The carrying amount of deferred tax assets, if any, is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufﬁcient taxable proﬁts will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised based on the tax rates (and tax laws) that have been enacted or substantially enacted by the end of the ﬁnancial year. Deferred tax is charged or credited in proﬁt or loss, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. 43 Annual Report 2015 Notes to the Consolidated Financial Statements (continued) Summary of signiﬁcant accounting policies (continued) 2. 2.7 Plant and equipment Plant and equipment are all stated at cost less accumulated depreciation and any impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the items. The cost of an asset comprises its purchase price and any directly attributable costs of bringing the asset to its working condition and location for its intended use. Expenditure incurred after the plant and equipment have been put into operation, such as repairs and maintenance, is normally charged to proﬁt or loss in the period in which it is incurred. In situations where it can be clearly demonstrated that the expenditure has resulted in an increase in the future economic beneﬁts expected to be obtained from the use of the plant and equipment, the expenditure is capitalised as an additional cost of that asset. Subsequent expenditure on an item of plant and equipment is added to the carrying amount of the item if it is probable that future economic beneﬁts associated with the item will ﬂow to the Group and the cost can be measured reliably. All other costs of servicing are recognised in proﬁt or loss when incurred. Disposals An item of property, plant and equipment is derecognised upon disposal or when no future economic beneﬁts are expected from its use or disposal. The gain or loss arising from disposal of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in proﬁt or loss. Depreciation Depreciation is provided to write off the cost of plant and equipment, using the straight line method, over their useful lives. The principal annual rates are as follows: Ofﬁce equipment Computer equipment Furniture and ﬁttings Years 3 3 3 The residual values, useful lives and depreciation method are reviewed at each ﬁnancial year-end to ensure that the residual values, period of depreciation and depreciation method are consistent with previous estimates and the expected pattern of consumption of the future economic beneﬁts embodied in the items of plant and equipment. Fully depreciated assets still in use are retained in the consolidated ﬁnancial statements. 2.8 Impairment of non-ﬁnancial assets The carrying amounts of non-ﬁnancial assets are reviewed at the end of each reporting period to determine whether there is any indication of impairment loss and whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If any such indication exists, or when annual impairment testing for an asset is required, the asset’s recoverable amount is estimated. An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. A cash-generating unit is the smallest identiﬁable asset group that generates cash ﬂows that largely are independent from other assets and groups of assets. Impairment losses are recognised in proﬁt or loss, unless they reverse a previous revaluation, credited to other comprehensive income, in which case they are charged to other comprehensive income up to the amount of any previous revaluation. 44 MMyyaannmmaarr IInnvveessttmmeennttss IInntteerrnnaattiioonnaall LLiimmiitteedd Summary of signiﬁcant accounting policies (continued) 2. 2.8 Impairment of non-ﬁnancial assets (continued) The recoverable amount of an asset or cash-generating unit is the higher of a) its fair value less costs to sell and b) its value in use. Recoverable amount is determined for individual assets, unless the asset does not generate cash inﬂows that are largely independent of those from other assets or groups of assets. If this is the case, the recoverable amount is determined for the cash-generating unit to which the assets belong. The fair value less costs to sell is the amount obtainable from the sale of an asset or cash- generating unit in an arm’s length transaction between knowledgeable, willing parties, less costs of disposal. Value in use is the present value of estimated future cash ﬂows expected to be derived from the continuing use of an asset and from its disposal at the end of its useful life, discounted at pre-tax rate that reﬂects current market assessment of the time value of money and the risks speciﬁc to the asset or cash-generating unit for which the future cash ﬂow estimates have not been adjusted. An assessment is made at the end of each reporting period as to whether there is any indication that an impairment loss recognised in prior periods for an asset may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. An impairment loss recognised in prior periods is reversed only if there has been a change in the estimates used to determine the recoverable amount since the last impairment loss was recognised. If that is the case, the carrying amount of the asset is increased to its recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss has been recognised. Reversals of impairment loss are recognised in proﬁt or loss unless the asset is carried at revalued amount, in which case the reversal in excess of impairment loss recognised in proﬁt or loss in prior periods is treated as a revaluation increase. After such a reversal, the depreciation or amortisation is adjusted in future periods to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life. 2.9 Financial assets The Group classiﬁes its ﬁnancial assets as loans and receivables. The classiﬁcation depends on the purpose of which the assets are acquired. The management determines the classiﬁcation of the ﬁnancial assets at initial recognition and re-evaluates this designation at the end of the reporting period, where allowed and appropriate. (i) Loans and receivables Loans and receivables are non-derivative ﬁnancial assets with ﬁxed or determinable payments that are not quoted in an active market. Loans and receivables comprise “Other receivables (excluding prepayments)” and “Cash and bank balances” on the consolidated statement of ﬁnancial position. Recognition and derecognition Financial assets are recognised on the statements of ﬁnancial position when, and only when, the Group becomes parties to the contractual provisions of the ﬁnancial instruments. Financial assets are derecognised when the rights to receive cash ﬂows from the ﬁnancial assets have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. On derecognition of a ﬁnancial asset, the difference between the carrying amount and the net consideration proceeds is recognised in proﬁt or loss. Initial and subsequent measurement Financial assets are initially recognised at fair value plus directly attributable transaction costs. After initial recognition, other receivables (excluding prepayments) are carried at amortised cost using the effective interest method, less impairment loss, if any. 45 Annual Report 2015 Notes to the Consolidated Financial Statements (continued) Summary of signiﬁcant accounting policies (continued) 2. 2.9 Financial assets (continued) The effective interest method is a method of calculating the amortised cost of a ﬁnancial instrument and allocating the interest income or expense over the relevant period. The effective interest rate exactly discounts estimated future cash receipts or 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 instrument, or where appropriate, a shorter period, to the net carrying amount of the ﬁnancial instrument. Income and expense are recognised on an effective interest basis for debt instruments other than those ﬁnancial instruments at fair value through proﬁt or loss. Impairment The Group assesses at the end of each reporting period whether there is objective evidence that a ﬁnancial asset or a group of ﬁnancial assets is impaired. (i) Other receivables An allowance for impairment loss of other receivables is recognised when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. The amount of allowance is the difference between the asset’s carrying amount and the present value of estimated future cash ﬂows, discounted at the original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account. The amount of the loss is recognised in proﬁt or loss. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment loss was recognised, the previously recognised impairment loss is reversed either directly or by adjusting an allowance account. Any subsequent reversal of an impairment loss is recognised in proﬁt or loss, to the extent that the carrying amount of the asset does not exceed its amortised cost at the reversal date. 2.10 Financial liabilities Financial liabilities are classiﬁed as other ﬁnancial liabilities. The accounting policies adopted for other ﬁnancial liabilities are set out below: (i) Other payables Other payables are initially measured at fair value, net of transaction costs, and are subsequently measured at amortised cost, where applicable, using the effective interest method. Recognition and derecognition Financial liabilities are recognised on the consolidated statement of ﬁnancial position when, and only when, the Group becomes parties to the contractual provisions of the ﬁnancial instruments. Financial liabilities are derecognised when the contractual obligation has been discharged or cancelled or expired. On derecognition of a ﬁnancial liability, the difference between the carrying amount and the consideration paid is recognised in proﬁt or loss. When an existing ﬁnancial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modiﬁed, such an exchange or modiﬁcation is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in proﬁt or loss. 46 MMyyaannmmaarr IInnvveessttmmeennttss IInntteerrnnaattiioonnaall LLiimmiitteedd Summary of signiﬁcant accounting policies (continued) 2. 2.11 Offsetting of ﬁnancial instruments Financial assets and ﬁnancial liabilities are offset and the net amount reported in the statement of ﬁnancial position if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously. 2.12 Cash and cash equivalents Cash and cash equivalents include cash on hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. 2.13 Equity instruments An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Ordinary shares are classiﬁed as equity and recognised at the fair value of the consideration received. Incremental costs directly attributable to the issuance of new equity instruments are shown in equity as a deduction from the proceeds. 2.14 Share-based payments Where equity settled share options are awarded to employees, the fair value of the options at the date of grant is charged to the consolidated statement of comprehensive income over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each reporting date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. Non-vesting conditions and market vesting conditions are factored into the fair value of the options granted. As long as all other vesting conditions are satisﬁed, a charge is made irrespective of whether the market vesting conditions are satisﬁed. The cumulative expense is not adjusted for failure to achieve a market vesting condition or where a non-vesting condition is not satisﬁed. Where the terms and conditions of options are modiﬁed before they vest, the increase in the fair value of the options, measured immediately before and after the modiﬁcation, is also charged to the consolidated statement of comprehensive income over the remaining vesting period. Where equity instruments are granted to persons other than employees, the consolidated statement of comprehensive income is charged with the fair value of goods and services received. Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award, and is designated as a replacement award on the date that is granted, the cancelled and new awards are treated as if they were a modiﬁcation of the original award, as described in the previous paragraph. All cancellation of equity-settled transaction awards are treated equally. Fair value is measured using the Black-Scholes option pricing model. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations. 47 Annual Report 2015 Notes to the Consolidated Financial Statements (continued) Summary of signiﬁcant accounting policies (continued) 2. 2.15 Operating leases When the Group is the lessee of operating leases Leases of assets in which a signiﬁcant portion of the risks and rewards of ownership are retained by the lessor are classiﬁed as operating leases. Payments made under operating leases are recognised in proﬁt or loss on a straight-line basis over the period of the lease. When an operating lease is terminated before the lease period has expired, any payment required to be made to the lessor by way of penalty is recognised as an expense in the ﬁnancial year in which termination takes place. 2.16 Provisions Provisions are recognised when the Group has a present legal or constructive obligation as a result of a past event, it is probable that the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the ﬁnancial year, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash ﬂows estimated to settle the present obligation, its carrying amount is the present value of those cash ﬂows. When some or all of the economic beneﬁts required to settle a provision are expected to be recovered from a third party, the receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably. Changes in the estimated timing or amount of the expenditure or discount rate are recognised in proﬁt or loss when the changes arise. 2.17 Contingent liabilities A contingent liability is: (a) a possible obligation that arises from past events and whose existence will be conﬁrmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group; or (b) a present obligation that arises from past events but is not recognised because: (i) it is not probable that an outﬂow of resources embodying economic beneﬁts will be required to settle the obligation; or (ii) the amount of the obligation cannot be measured with sufﬁcient reliability. Contingent liabilities are not recognised on the consolidated statement of ﬁnancial position of the Group. Signiﬁcant accounting judgements and estimates 3. The preparation of the Group’s consolidated ﬁnancial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the accompanying disclosures, and the disclosure of contingent liabilities at the reporting date. Uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of the asset or liability affected in the future periods. 48 MMyyaannmmaarr IInnvveessttmmeennttss IInntteerrnnaattiioonnaall LLiimmiitteedd Signiﬁcant accounting judgements and estimates (continued) 3. 3.1 Judgements made in applying accounting policies In the process of applying the Group’s accounting policies, management has made the following judgements which have the most signiﬁcant effect on the amounts recognised in the consolidated ﬁnancial statements: (i) Impairment of investment in subsidiaries and joint venture The Group follows the guidance of IAS 36 on determining whether investments in subsidiary and joint ventures are impaired. This determination requires signiﬁcant judgement. The Group evaluates, among other factors, the duration and extent to which the fair value of an investment is less than its cost and the ﬁnancial health of and near-term business outlook for the investment, including factors such as industry and sector performance, changes in technology and operational and ﬁnancing cash ﬂows. (ii) Classiﬁcation of joint arrangements For all joint arrangements structured in separate vehicles, the Group must assess the substance of the joint arrangement in determining whether it is classiﬁed as a joint venture or joint operation. This assessment requires the Group to consider whether it has rights to the joint arrangement’s net assets (in which case it is classiﬁed as a joint venture), or rights to and obligations for speciﬁc assets, liabilities, expenses, and revenues (in which case it is classiﬁed as a joint operation). Factors the group must consider include: – – – – Structure Legal form Contractual agreement Other facts and circumstances. Upon consideration of these factors, the Group has determined that its investment in a joint arrangement structured through a separate vehicle gives it rights to the net assets and it is therefore classiﬁed as a joint venture as disclosed in Note 9 to the consolidated ﬁnancial statements. 3.2 Key sources of estimation uncertainty The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a signiﬁcant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next ﬁnancial year, are described below. The Group based its assumptions and estimates on parameters available when the consolidated ﬁnancial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising beyond the control of the Group. Such changes are reﬂected in the assumptions when they occur. Impairment of investment in joint venture In determining whether investment in joint venture is impaired requires an estimation of the recoverable amount of the investment in joint venture as at the end of the ﬁnancial year. Management has assessed the value-in-use using the future cash ﬂows expected to arise from the joint venture over a period of ﬁve years using a discount rate of 16% per annum. Estimates of future cash ﬂows are based on a forecast annual growth in revenue of 50% based on committed capital funding by the joint venture partners to grow the business. The carrying amounts of the Group’s investment in joint venture as at 31 March 2015 was US$1,450,195 (2014: Nil) as disclosed in Note 9 to the consolidated ﬁnancial statements. 49 Annual Report 2015 Notes to the Consolidated Financial Statements (continued) Signiﬁcant accounting judgements and estimates (continued) 3. 3.2 Key sources of estimation uncertainty(continued) Employee share option plan The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. Estimating fair value for share-based payment transactions requires determining the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also requires determining the most appropriate inputs to the valuation model including expected life of the share option, volatility and dividend yield and making assumptions about them. The assumptions and model for estimating fair value for share- based payment transactions are set out in Note 15 to the consolidated ﬁnancial statements. The carrying amount of the Group’s share option reserve at 31 March 2015 is US$160,113 (2014: US$74,749). 4. Employee beneﬁts expense Salaries, wages, bonuses and other staff beneﬁts Share option expenses Year ended 31 March 2015 US$ 925,976 85,364 1,011,340 Period from 17 May 2013 to 31 March 2014 US$ 320,937 74,749 395,686 The employee beneﬁts expense includes the remuneration of Directors as disclosed in Note 17 to the consolidated ﬁnancial statements. Finance costs 5. Finance costs represent bank charges for the ﬁnancial year/period. Loss before income tax 6. In addition to the charges and credits disclosed elsewhere in the notes to the consolidated ﬁnancial statements, the above includes the following charges and credits: Year ended 31 March 2015 US$ Period from 17 May 2013 to 31 March 2014 US$ 34,131 107,681 80,000 – 113,320 44,275 80,569 30,914 34,307 60,875 8,746 70,573 76,325 86,015 Auditor’s remuneration Consultants fees Directors’ fees Foreign exchange loss, net Operating lease expenses Professional fees Travel and accommodation 50 MMyyaannmmaarr IInnvveessttmmeennttss IInntteerrnnaattiioonnaall LLiimmiitteedd 7. Income tax Current income tax – current ﬁnancial year – under-provision in prior ﬁnancial year Year ended 31 March 2015 US$ Period from 17 May 2013 to 31 March 2014 US$ 1,265 1,891 3,156 – – – A reconciliation of income tax applicable to loss before income tax at the statutory income tax rate of 25% (2014: 25%) in Myanmar is as follows: Loss before income tax Share of results of joint venture, net of tax Income tax at the applicable tax rates Effects of different income tax rates in other countries Under-provision in prior ﬁnancial year Expenses not deductible for tax purposes Others Income tax for the ﬁnancial year/period Year ended 31 March 2015 US$ (1,740,242) 62,305 (1,677,937) (419,984) 1,236 1,891 419,023 990 3,156 Period from 17 May 2013 to 31 March 2014 US$ (866,888) – (866,888) (216,722) (751) – 217,473 – – Loss per share 8. Basic loss per share is calculated by dividing the loss for the ﬁnancial period attributable to owners of the parent by the weighted average number of ordinary shares outstanding during the ﬁnancial period. The following reﬂects the loss and share data used in the basic and diluted loss per share computation: Loss for the ﬁnancial year/period attributable to owners of the Company (US$) Weighted average number of ordinary shares during the ﬁnancial year/period applicable to basic loss per share Loss per share Basic and diluted (cents) 2015 2014 (1,743,398) (866,888) 7,393,035 5,682,268 (23.58) (15.26) Diluted loss per share is the same as the basic loss per share because the potential ordinary shares to be converted are anti-dilutive as the effect of the shares conversion would be to decrease the loss per share. 51 Annual Report 2015 Notes to the Consolidated Financial Statements (continued) 9. Investment in joint venture Equity shares, at cost Share of results of joint venture, net of tax 2015 US$ 1,512,500 (62,305) 1,450,195 2014 US$ – – – On 26 August, 2014 the Company’s wholly-owned subsidiary, Myanmar Investments Limited (“MIL”), signed a joint venture agreement (“JVA”) with Myanmar Finance Company Limited (“MFC”) by which, the two parties agreed to establish a Myanmar microﬁnance joint venture company, Myanmar Finance International Ltd. (“MFIL”). Under the terms of the JVA, MFC injected its existing microﬁnance business into the joint venture which is jointly managed by MIL and MFC. The two partners agreed to a four-phased contribution of US$4.8 million in capital (MIL’s share being US$2.75 million) with MIL owning 55 per cent of the new company and MFC holding the remaining 45 per cent. As at 31 March 2015, three out of the four tranches of the equity capital contribution had been called. For MIL this totalled US$1,512,500 with a further commitment, the fourth tranche, outstanding of US$1,327,500. MFC is a well-established provider of microﬁnance loans to small-scale business operators in rural and urban areas of Yangon and neighbouring Bago. It is believed to be the ﬁrst foreign microﬁnance joint venture in Myanmar. Following this investment, the Company fulﬁlled the requirement to have “substantially implemented its Investment Policy” in accordance with Rule 8 of the AIM Rules for Companies within the stipulated eighteen months from the date of admission to the AIM market of the London Stock Exchange. The detail of the joint venture is as follows: Name of joint venture (Country of incorporation/ place of business) Principal activities Effective equity Interest held by the Company 2015 % 2014 % Myanmar Finance International Limited(1) (Myanmar) Provider of microﬁnance loans 55 – (1) Audited by JF Group Audit Firm, Yangon, Myanmar. The Group has 55% equity interest at a cost of US$1,512,500 in the joint venture company. Myanmar Finance International Limited is deemed to be a joint venture of the Company as the appointment of its directors and the allocation of voting rights for key business decisions require the unanimous approval of its shareholders. 52 MMyyaannmmaarr IInnvveessttmmeennttss IInntteerrnnaattiioonnaall LLiimmiitteedd Investment in joint venture (continued) 9. The summarised ﬁnancial information below reﬂects the amounts presented in the ﬁnancial statements of the joint venture (and not the Company’s share of those amounts), adjusted for differences in accounting policies between the Company and the joint venture. 2015 US$ 2014 US$ Assets and liabilities Cash and cash equivalents Trade receivables Other current assets Current assets Non-current assets Total assets Current liabilities Total liabilities Net assets Investment in joint venture Share of net assets Currency re-alignment 945,056 1,886,233 79,718 2,911,007 153,863 3,064,870 552,659 552,659 2,512,211 55% 1,381,716 68,479 1,450,195 Included in the current liabilities are: Current ﬁnancial liabilities (excluding trade and other payables and provision) 459,164 Income and expenses Revenue Other income Operating expenses Depreciation Interest expenses Loss after income tax from continuing operations Investment in joint venture (55%) Cost Share of post-tax loss Carrying value 215,949 91,655 (382,321) (9,837) (28,728) (113,282) 1,512,500 (62,305) 1,450,195 – – – – – – – – – – – – – – – – – – – – – – – 53 Annual Report 2015 Notes to the Consolidated Financial Statements (continued) 10. Plant and equipment Group 2015 Cost Balance at 1 April 2014 Additions Balance at 31 March 2015 Accumulated depreciation Balance at 1 April 2014 Depreciation for the ﬁnancial year Balance at 31 March 2015 Carrying amount Balance at 31 March 2015 2014 Cost Balance at 17 May 2013 (date of incorporation) Additions Balance at 31 March 2014 Accumulated depreciation Balance at date of incorporation Depreciation for the ﬁnancial period Balance at 31 March 2014 Carrying amount Balance at 31 March 2014 Computer equipment US$ Ofﬁce equipment US$ Furniture and ﬁttings US$ Total US$ 6,405 4,344 10,749 566 3,038 3,604 1,418 879 2,297 158 594 752 27,797 – 27,797 2,871 9,364 12,235 35,620 5,223 40,843 3,595 12,996 16,591 7,145 1,545 15,562 24,252 – 6,405 6,405 – 566 566 – 1,418 1,418 – 158 158 – 27,797 27,797 – 2,871 2,871 – 35,620 35,620 – 3,595 3,595 5,839 1,260 24,926 32,025 54 MMyyaannmmaarr IInnvveessttmmeennttss IInntteerrnnaattiioonnaall LLiimmiitteedd Investment in subsidiaries 11. Details of the investments in which the Group has a controlling interest are as follows: Name of subsidiaries Country of incorporation/ principal place of business Principal activities Proportion of ownership interest 2014 2015 % % Myanmar Investments Limited(1) Singapore MIL Management Pte. Ltd.(1) Singapore MIL No. 2 Pte. Ltd.(3) Singapore MIL No. 3 Pte. Ltd.(3) Singapore Held by MIL Management Pte. Ltd. MIL Management Co., Ltd(2) Myanmar Investment holding company Provision of management services to the Group Investment holding company Investment holding company 100 100 100 100 100 100 – – Provision of management services to the Group 100 100 (1) Audited by BDO LLP, Singapore. (2) Audited by JF Group Audit Firm, Yangon, Myanmar. (3) Newly-incorporated and not required to be audited as the subsidiary is dormant since the date of its incorporation. Incorporation of subsidiaries 11.1 MIL No. 2 Pte. Ltd. On 26 September 2014, the Company incorporated a 100% owned subsidiary, namely MIL No. 2 Pte. Ltd. in Singapore with an issued and paid up share capital of S$5,000 (US$3,927 equivalent) comprising 5,000 ordinary shares. 11.2 MIL No. 3 Pte. Ltd. On 20 October 2014, the Company incorporated a 100% owned subsidiary, namely MIL No. 3 Pte. Ltd. in Singapore with an issued and paid up share capital of S$5,000 (US$3,927 equivalent) comprising 5,000 ordinary shares. 12. Other receivables Other receivables Deposits Prepayments Other receivables are denominated in the following currencies: United States dollar Myanmar kyat 2015 US$ 4,077 10,398 74,379 88,854 2015 US$ 85,993 2,861 88,854 2014 US$ 4,683 17,096 77,456 99,235 2014 US$ 82,801 16,434 99,235 55 Annual Report 2015 Notes to the Consolidated Financial Statements (continued) 13. Cash and bank balances Cash and bank balances Short-term deposit 2015 US$ 5,013,287 35,981 5,049,268 2014 US$ 4,579,666 – 4,579,666 The short-term deposit bears interest at an average rate of 0.25% per annum and is for a tenure of approximately 12 months. The short-term deposit of the Company amounting to US$35,981 is pledged to bank to secure credit facilities. Cash and bank balances are denominated in the following currencies: United States dollar Singapore dollar Myanmar kyat 2015 US$ 4,912,866 132,955 3,447 5,049,268 2014 US$ 4,461,003 109,789 8,874 4,579,666 For the purpose of the statement of cash ﬂows, cash and cash equivalents comprise the following at the end of the ﬁnancial year/period: Bank balances Less: short-term deposits pledged 14. Share capital Issued and fully-paid share capital: Ordinary shares at the beginning of the ﬁnancial year/the date of incorporation Issuance of ordinary shares during the ﬁnancial year/period Share issuance expenses *Share capital at date of incorporation is US$0.10. Equity Instruments in issue 2015 Ordinary Shares Warrants At the beginning of the ﬁnancial year/ 6,342,619 5,842,619 the date of incorporation 2015 US$ 5,049,268 (35,981) 5,013,287 2014 US$ 4,579,666 – 4,579,666 2015 US$ 2014 US$ 5,439,353 3,797,850 (240,921) 8,996,282 –* 6,184,793 (745,440) 5,439,353 2014 Ordinary Shares 1 Warrants – Issuance during the ﬁnancial year/period At the end of the ﬁnancial year/period 3,617,000 9,959,619 3,617,000 9,459,619 6,342,618 6,342,619 5,842,619 5,842,619 The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share without restriction at meetings of the Company. 56 MMyyaannmmaarr IInnvveessttmmeennttss IInntteerrnnaattiioonnaall LLiimmiitteedd 14. Share capital (continued) All ordinary shares rank equally with regard to the Company’s residual assets except for 500,000 ordinary shares held by the Directors that were subscribed for prior to the Company’s Admission to the AIM market of the London Stock Exchange at US$0.10 per share (the “Founders Shares”) on 17 May 2013. In recognition of the difference between the subscription price paid for these Founder Shares and the Issue Price paid for the other shares issued at the time of Admission, the Founders had agreed that should the Company be liquidated following a vote of its shareholders as a result of the Company being unable to substantially implement its Investing Policy then the Founders shall return a sum equal to 90 percent of the amount otherwise receivable by each of them in respect of the Founders Shares and shall work with the Company’s liquidator to distribute such monies amongst the remainder of the Shareholders in proportion to their shareholdings. In the event that any part of such monies cannot be so distributed within six months of completion of a liquidation then the net amount remaining will be donated to one or more children’s charities in Myanmar. On 21 May 2013, the Memorandum of Association of the Company was amended to allow the issue of an unlimited number of Ordinary Shares. On 28 May 2013, the Company allotted 499,999 ordinary shares to the Directors as Founder Shares at an effective subscription price of US$0.10 each. On 21 June 2013, the Company allotted 5,842,619 Ordinary Shares pursuant to the Placing and Subscription undertaken as part of the Admission. On 9 December 2014, the Company allotted 3,617,000 Ordinary Shares pursuant to a subscription for new shares (the “Second Subscription”). All the shares have been admitted to trading on AIM under the ticker MIL. The new ordinary shares issued during the ﬁnancial year ranked pari passu in all respects with the existing ordinary shares of the Company. Warrants On 21 June 2013, the Company allotted 5,842,619 Warrants pursuant to the Placing and Subscription undertaken as part of the Admission. The Company had agreed that for every Ordinary Share subscribed for by a Subscriber or a Placee, such Subscriber or Placee would receive one Warrant at nil cost. On 9 December 2014, the Company allotted 3,617,000 Warrants pursuant to the Second Subscription. The Company had agreed that for every Ordinary Share subscribed for by a subscriber they would receive one Warrant at nil cost. The Warrants entitle the holder to subscribe for an Ordinary share at an exercise price of US$0.75. The Warrants may be exercised at any time from 21 June 2015 to the ﬁfth anniversary of the date of the Warrant Instrument, being 21 June 2018. All Warrants have been admitted to trading on AIM under the ticker MILW. 57 Annual Report 2015 Notes to the Consolidated Financial Statements (continued) 15. Share option reserve Details of the Share Option Plan (the “Plan”) The Plan allows for the total number of shares issuable under share options to constitute a maximum of one tenth of the number of the total number of ordinary shares in issue (excluding shares held by the Company as treasury shares and shares issued to the Founders prior to Admission). Any future issuance of shares will give rise to the ability of the Remuneration Committee to award additional share options. Such share options will be granted with an exercise price set at a 10 percent premium to the subscription price paid by shareholders on the relevant issue of shares that gave rise to the availability of each tranche of share options. Share options can be exercised any time after the ﬁrst anniversary and before the tenth anniversary of the grant (as may be determined by the Remuneration Committee in its absolute discretion) of the respective share options. Share options are not admitted to trading on AIM but application will be made for shares that are issued upon the exercise of the share options to be admitted to trading on AIM. As at 31 March 2015, there were 945,961 (2014: 584,261) share options available for issue under the Plan of which 574,061 have been granted. These share options have a weighted average exercise price of US$1.121 (2014: US$1.10) per share. Of the 945,961 share options available they were created under the following series: Series Series 1 Series 2 Occasion Admission Placing and Subscription Second Subscription Exercise price (USD) 1.10 1.155 Number 584,261 361,700 945,961 The following share-based payment arrangement were in existence during the current ﬁnancial year: Option series Series 1 Series 1 Series 1 Number of share options Grant date Expiry date 410,000 25,000 26 June 2023 8 December 2023 139,061 25 September 2014 24 September 2024 27 June 2013 9 December 2013 Exercise price (USD) 1.10 1.10 1.10 Fair value at grant date 153,487 19,015 66,173 Share options that are allocated to a Participant will be subject to a three year vesting period during which the rights to the share options will be transferred to the Participant in three equal annual instalments provided, save in certain circumstances, that they are still in employment with or engaged by the Company. 58 MMyyaannmmaarr IInnvveessttmmeennttss IInntteerrnnaattiioonnaall LLiimmiitteedd 15. Share option reserve (continued) Fair value of share options granted in the ﬁnancial period The weighted average fair value of the share options granted during the ﬁnancial year is US$0.476 (2014: US$0.397). Share options were priced using Black-Scholes option pricing model. Where relevant, the expected life used in the model has been adjusted based on management’s best estimate for the effects of non-transferability, exercise restrictions (including the probability of meeting market conditions attached to the option), and behavioural considerations. Expected volatility is based on historical share price volatility from the date of grant of the share options. The Black-Scholes option pricing model uses the following assumptions: Grant date share price (US$) Exercise price (US$) Expected volatility Option life Risk-free annual interest rates 27 June 2013 1.05 1.10 22.88% 10 years 2.46% Grant date 9 December 2013 1.50 1.10 22.88% 10 years 2.82% 25 September 2014 1.20 1.10 21.48% 10 years 2.49% The Group recognised total expenses of US$85,364 related to equity-settled share-based payment transactions during the ﬁnancial year. Movement in share option during the ﬁnancial year/period The following reconciles the share options outstanding at the start of the year and at the end of the year/period. Balance at start of the ﬁnancial year/period Granted Balance at end of ﬁnancial year/period 2015 Weighted average exercise price US$ 1.10 1.10 Number 435,000 139,061 574,061 2014 Weighted average exercise price US$ – 1.10 Number – 435,000 435,000 No share options were exercised during the ﬁnancial period. Share option outstanding at the end of the ﬁnancial year/period The share options outstanding at the end of ﬁnancial period had a weighted average exercise price of US$1.10 and a weighted average contractual life of 8.57 years (2014: 9.27 years). 59 Annual Report 2015 Notes to the Consolidated Financial Statements (continued) 16. Other payables Accruals Other payables are denominated in the following currencies: Singapore dollar United States dollar Euro British pound Myanmar kyat 2015 US$ 2014 US$ 65,195 63,712 2015 US$ 39,037 9,251 1,908 14,999 – 65,195 2014 US$ 43,587 7,716 – 6,595 5,814 63,712 17. Signiﬁcant related party disclosures For the purposes of these consolidated ﬁnancial statements, parties are considered to be related to the Group and the Company if the Group and the Company have the ability, directly or indirectly, to control the party or exercise signiﬁcant inﬂuence over the party in making ﬁnancial and operating decisions, or vice versa, or where the Group and the Company and the party are subject to common control or common signiﬁcant inﬂuence. Related parties may be individuals or other entities. Compensation of key management personnel For period from 17 May 2013 (date of incorporation) to 31 March 2014 and for the ﬁnancial year to 31 March 2015, no emoluments were paid by the Group to the Directors as an inducement to join or upon joining the Group or as compensation for loss of ofﬁce. The remuneration of Directors for the period from 17 May 2013 (date of incorporation) to 31 March 2014 and for the ﬁnancial year to 31 March 2015 are as follows: Executive directors Maung Aung Htun Anthony Michael Dean Independent non-executive directors Christopher William Knight Craig Robert Martin Christopher David Appleton Directors’ fee US$ Financial year ended 31 March 2015 Short term employee beneﬁts US$ Share option plan US$ Total US$ – – 334,315(1) 279,903(1) 33,370 27,412 367,685 307,315 30,000 25,000 25,000 80,000 – – – 2,681 4,022 5,363 32,681 29,022 30,363 614,218 72,848 767,066 60 MMyyaannmmaarr IInnvveessttmmeennttss IInntteerrnnaattiioonnaall LLiimmiitteedd Executive directors Maung Aung Htun Anthony Michael Dean Independent non-executive directors Christopher William Knight Craig Robert Martin Christopher David Appleton 17 May 2013 (date of incorporation) to 31 March 2014 Directors’ fee US$ Short term employee beneﬁts US$ Share option plan US$ Total US$ – – 75,982(1) 56,986(1) 31,251 24,307 107,233 81,293 22,829 19,023 19,023 60,875 – – – 132,968 3,472 5,209 6,945 71,184 26,301 24,232 25,968 265,027 (1) During the ﬁnancial period ended 31 March 2014 the Executive Directors had agreed to forgo 50% of their compensation unless and until, in accordance with Rule 8 of the AIM Rules for Companies, the Company had “substantially implemented its Investment Policy”. This condition was fulﬁlled with the investment in Myanmar Finance International Limited in September 2014. As such the contingent liability of the unpaid compensation, which amounted to US$132,968 as at 31 March 2014, was recognised and settled in the ﬁnancial year ended 31 March 2015. This amount is included in the Short Term Employee Beneﬁts in the ﬁnancial year ended 31 March 2015. 18. Commitments Operating lease commitments – as lessee The Group leases the Yangon ofﬁce and accommodation for Directors under non-cancellable operating leases. The operating lease commitments are based on rental rates as speciﬁed in the lease agreements. The Group has the options to renew certain agreements on the leased premises for another one year. In accordance with prevailing market conditions in Yangon, lease payments are paid in advance. Future minimum rentals payable under non-cancellable operating leases at the reporting date are as follows: Within one ﬁnancial year After one ﬁnancial year but within ﬁve ﬁnancial years 2015 US$ 2,100 14,700 16,800 2014 US$ 13,906 30,625 44,531 19. Dividends The Directors of the Company do not recommend any dividend in respect of the ﬁnancial years ended 31 March 2015 and 31 March 2014. 20. Financial risk management objectives and policies The Group has risk management policies that systematically manage the risks that could prevent it from achieving its objectives. These policies are intended to manage risks identiﬁed in such a way that opportunities to deliver the Group’s objectives are achieved. The Group’s risk management takes place in the context of day-to-day operations and normal business processes such as strategic and business planning and are kept under review by the Directors. The Directors have identiﬁed each risk and are responsible for coordinating and continuously improving risk strategies, processes and measures in accordance with the Group’s established business objectives. The Group’s principal ﬁnancial instruments consist of investments, other receivables, cash and bank balances and other payables. The main risks arising from the Company’s ﬁnancial instruments and the policies for managing each of these risks are summarised below. 61 Annual Report 2015 Notes to the Consolidated Financial Statements (continued) 20. Financial risk management objectives and policies (continued) 20.1 Credit risk Credit risk is the risk of loss associated with the counterparty’s inability to fulﬁl its obligations. The Group’s credit risk is primarily attributable to other receivables and cash and bank balances with the maximum exposure being the reported balance in the consolidated statement of ﬁnancial position. The Group has a nominal level of debtors and as such the Company believes that the credit risk to these is minimal. The Group holds available cash with licensed banks which have a strong history. The Group considers the credit ratings of banks in which it holds funds in order to reduce exposure to credit risk. 20.2 Market risks Foreign currency risks The Group incurs foreign currency risk on transactions and balances that are denominated in currencies other than its functional currency, the United States dollar. The main currencies giving rise to this risk are the Singapore dollar, Myanmar kyat and British Pound. Exposure to foreign currency risk is monitored on an on-going basis to ensure that the net exposure is at an acceptable level. The Group monitors its foreign currency exchange risks closely and maintains funds in various currencies to minimise currency exposure. Currency translation risk arises when commercial transactions, recognised assets and liabilities and net investment in foreign operations are denominated in the currency that is not the entity’s functional currency. The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities at the end of the reporting period were as follows: United States dollar Singapore dollar Euro Myanmar kyat British pound Assets Liabilities 2015 US$ 4,998,859 132,955 – 6,308 – 5,138,122 2014 US$ 4,543,804 109,789 – 25,308 – 4,678,901 2015 US$ 9,251 39,037 1,908 – 14,999 65,195 2014 US$ 7,716 43,587 – 5,814 6,595 63,712 Foreign currency sensitivity analysis No sensitivity test was performed as the exposure to foreign currency risk is not signiﬁcant to the consolidated ﬁnancial statements. Interest rate risk The Group does not have any signiﬁcant exposure to interest rate risk as the Group does not have any signiﬁcant interest bearing liabilities and its interest earning assets are producing relatively low yields. 20.3 Liquidity risk The Group is exposed to liquidity risk to the extent that it holds investments that it may not be able to sell quickly at close to fair value. The risk is managed by the Group by means of cash ﬂow planning to ensure that future cash requirements are anticipated and, where ﬁnancial instruments have to be sold to meet these requirements, the process is carried out in a controlled manner intended to minimise the liquidity risk involved. As at 31 March 2015, the Group’s principal ﬁnancial instruments consist mainly of cash and bank balances. As such the investments are highly liquid and capable of being realised at their fair value. 62 MMyyaannmmaarr IInnvveessttmmeennttss IInntteerrnnaattiioonnaall LLiimmiitteedd 20. Financial risk management objectives and policies (continued) 20.4 Fair value of ﬁnancial assets and ﬁnancial liabilities The carrying amounts of the Group’s current ﬁnancial assets and ﬁnancial liabilities approximate their respective fair values due to the short term maturity of these ﬁnancial instruments. 20.5 Capital management The Group manages its capital to ensure that the Group is able to continue as going concern and to maintain an optimal capital structure so as to maximise shareholders’ value. The management constantly reviews the capital structure to ensure the Group is able to service any debt obligations and contracted overheads based on its operating cash ﬂows. At present the Group has taken on no debt obligations, other than other payables, and therefore has no difﬁculties in settling its debts as they fall due. Rule 8 of the AIM Rules for Companies, requires that within eighteen months from the date of admission to the AIM market of the London Stock Exchange the Company is required to have “substantially implemented its Investment Policy”. This requirement was fulﬁlled during the ﬁnancial year with the investment in the joint venture as disclosed in Note 9 of the consolidated ﬁnancial statements. The Group is not subjected to any externally imposed capital requirements for the ﬁnancial year ended 31 March 2015 and the ﬁnancial period ended 31 March 2014. 21. Comparatives The ﬁnancial statements for 2014 cover the ﬁnancial period from 17 May 2013 (date of incorporation) to 31 March 2014. The ﬁnancial statements for 2015 cover the twelve months ended 31 March 2015. Therefore, the comparative amounts for the statement of comprehensive income, statement of changes in equity and statement of cash ﬂow and related notes are not entirely comparable. 22. Subsequent event review Equity fund raising On 21 July 2015, the Company raised US$19,942,395 through the issuance of 17,341,214 new ordinary shares. As part of this fund raising the Company also issued 5,780,408 new warrants. Investment On 31 July 2015 the Company’s newly incorporated subsidiary, MIL 4 Limited (“MIL 4”) invested US$30 million into Apollo Towers Pte. Ltd. (“Apollo”) for an equity interest of 14.18%. Apollo owns and operates a telecommunication towers business in Myanmar through its wholly-owned subsidiary Apollo Towers Myanmar Limited. The Company contributed US$20 million for a 66.67% shareholding in MIL 4. LIM Asia Special Situations Master Fund Limited, a substantial shareholder of the Company, contributed US$9.8 million for a 32.67% shareholding in MIL 4 and the remaining 0.67% of MIL 4 is held by a third-party. MIL 4’s investment in Apollo represents a 14.18% interest in Apollo. The terms of the Investment include, inter alia, protections for MIL 4 relating to the future disclosure of ﬁnancial information and the securing of third-party debt ﬁnancing by Apollo. 63 Annual Report 2015 Notice of Annual General Meeting Myanmar Investments International Limited (Company Number 1774652) Notice is hereby given that the 2015 Annual General Meeting of Myanmar Investments International Limited (the “Company”) will be held at the British Club, Yangon, Myanmar at 2.00pm (Myanmar time) on 13th October, 2015 for the purpose of considering and if thought ﬁt, passing the following resolutions: Ordinary Resolutions 1. To receive and adopt the Company’s annual accounts for the ﬁnancial year ended 31st March 2015 together with the last directors’ report and auditors’ report on those accounts. 2. 3. 4. To reappoint BDO LLP as the auditors of the Company at a remuneration to be determined by the directors. To reappoint Maung Aung Htun as director who retires by rotation as required by Article 8.5 of the Articles of Association of the Company. To reappoint Craig Robert Martin as director who retires by rotation as required by Article 8.5 of the Articles of Association of the Company. By Order of the Board Appleby Corporate Services (BVI) Limited Secretary 9th September 2015 Registered Ofﬁce: Jayla Place Wickhams Cay 1 Road Town Tortola VG1110 British Virgin Islands 64 MMyyaannmmaarr IInnvveessttmmeennttss IInntteerrnnaattiioonnaall LLiimmiitteedd NOTES Resolutions 1-4 will be passed if approved by more than ﬁfty per cent. of the votes of those members entitled to vote and voting on the resolutions. A Member entitled to attend and vote at the above meeting is entitled to appoint a proxy or one or more proxies to attend and, on a poll, vote in his place. A proxy need not be a member of the Company. Forms of Direction from holders of depositary interests must be deposited at the ofﬁce of the Depositary, Capita Asset Services, PXS 1, 34 Beckenham Road, Beckenham, Kent BR3 4ZF, United Kingdom not later than 72 hours before the time of the meeting. Proxies from holders of ordinary shares must be received by the Registrar not later than 48 hours before the time of the meeting. The Company, pursuant to regulation 41 of the Uncertiﬁcated Securities Regulations 2001, speciﬁes that only those shareholders registered in the register of members of the Company by no later than 48 hours for the time ﬁxed for the meeting shall be entitled to attend or vote at the meeting in respect of the number of ordinary shares registered in their name at that time. Changes in entries on the relevant register of members after such time and date shall be disregarded in determining the rights of any person to attend or vote at this meeting. 65 Annual Report 2015 Directors and Advisers Company data Website: www.myanmarinvestments.com Email: enquiries@myanmarinvestments.com Listed on the AIM market of the London Stock Exchange: Ticker symbol for the Ordinary Shares Ticker symbol for the Warrants MIL MILW The Company is incorporated in the British Virgin Islands with registration number 1774652 Directors Christopher William Knight, Independent Non-Executive Chairman Maung Aung Htun, Managing Director Anthony Michael Dean, Finance Director Craig Robert Martin, Independent Non-Executive Director Christopher David Appleton, Independent Non-Executive Director Registered Ofﬁce Jayla Place Wickhams Cay I Road Town Tortola VG1110 British Virgin Islands Nominated Adviser Grant Thornton UK LLP 30 Finsbury Square London EC2P 2YU United Kingdom Legal Advisers to the Company (as to English Law) Reed Smith LLP The Broadgate Tower 20 Primrose Street London EC2A 2RS United Kingdom Legal Advisers to the Company (as to British Virgin Islands law) Appleby Jayla Place Wickhams Cay I Road Town Tortola British Virgin Islands Independent Auditor Myanmar Ofﬁce Suite 11-B Pansodan Business Tower 123/133 Anawrahta Road PO Box 817 Kyauktada Township Yangon, Myanmar Telephone: +95 1 391 804 to 7 Broker Allenby Capital Limited 3 St. Helens Place London EC3A 6AB United Kingdom Legal Advisers to the Company (as to Myanmar Law) DFDL Legal & Tax 134A Thanlwin Road Golden Valley Ward (1) Bahan Township Yangon Myanmar Company Secretary Appleby Corporate Services (BVI) Limited Jayla Place Wickhams Cay I Road Town Tortola British Virgin Islands BDO LLP Public Accountants and Chartered Accountants 21 Merchant Road #05-01 Singapore 058267 Partner-in-charge: Adrian Lee Yu-Min (Appointed since the ﬁnancial period ended 31 March 2014) Registrars Capita Registrars (Guernsey) Limited Mont Crevelt House Bulwer Avenue St. Sampson Guernsey GY2 4LH Warrant Registrar Capita Registrars Limited The Registry 34 Beckenham Road Beckenham Kent BR3 4TU United Kingdom 66 Depository Capita IRG Trustees Limited The Registry 34 Beckenham Road Beckenham Kent BR3 4TU United Kingdom Printed by Rubicon Corporate Print — 25625-01

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