ORIGO PARTNERS PLC
REPORT AND FINANCIAL STATEMENTS
YEAR ENDED 31 DECEMBER 2019
CONTENTS
I.
DIRECTORS’ REPORT
Chairman’s letter
Directors’ report
II.
INDEPENDENT AUDITOR’S REPORT
III.
AUDITED FINANCIAL STATEMENTS
Consolidated statement of comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the financial statements
Page
1
2
4
9
10
11
12
13
Chairman’s Letter
Dear Shareholders,
I had not expected to be writing this letter because our plan was that Origo Partners Plc (“the Company”) would be in liquidation
by now but unfortunately, as noted in our 7 May 2020 RNS announcement, this has not been practicable due to the global
pandemic. We continue, however, to take steps to accomplish this objective. Over the last year, we have terminated the
Company’s investment advisor, received the final proceeds from the sale of our stake in Niutech Energy Limited and returned
$2.1 million to shareholders.
Aside from assets with a nil valuation, we continue to maintain investments in Celadon Mining Limited (Celadon) and Gobi Coal
& Energy Ltd. (Gobi Coal). Celadon, as we announced on 12 June 2020, has entered into an agreement with a third party for
the sale of the company’s assets. If the transaction completes, the Company would expect to receive net proceeds of
approximately $4.2 million as compared to a current carrying value of $1.129 million. As outlined in the announcement on 12
June, there are hurdles to completion of this transaction and for that reason we have left the carrying value unchanged. We
hope to have better visibility into the progress of the transaction by the end of the third quarter of this year.
Gobi Coal has informed us that it has completed a small capital raise to meet running costs. The Company did not participate
in that raise and as a result its shareholding in Gobi Coal was diluted, although the Company continues to be a substantial
shareholder. Gobi Coal has also informed the Company that it has reorganized its structure and has completed audits of
subsidiary companies. The Company’s access to information about Gobi Coal is limited, and the Company is unable to
determine if these developments will lead to anything positive for Gobi Coal’s shareholders.
Our objectives continue to be selling the Company’s remaining assets, returning capital to shareholders and putting the
Company into liquidation. As global restrictions are lifted the Company will make further announcements in due course.
Very truly yours,
John D. Chapman
Chairman
Origo Partners Plc
Date: 29 June 2020
- 1 -
Directors’ Report
The Directors present their report together with the audited financial statements for the year ended 31 December 2019.
Results and dividends
The result of the Group for the year is set out on page 9 and shows a loss for the year of US$567,000 (2018: US$8,036,000). The
Directors approved a capital distribution of US$0.02947 to the holders of the Company's redeemable preference and
US$0.00117 to the holders of the Company's ordinary shares at US$0.00117 per ordinary share (2018: US$nil). The retained loss
of the year of US$567,000 (2018: US$8,036,000) has been transferred to reserves.
Principal activities, review of business and future developments
On 20 November 2014, the Company’s Investing Policy changed from that of a closed-ended, permanent capital vehicle to that
of a realisation company with the mandate to return the net proceeds of realisations to shareholders over a four year period.
However, investments will only be realised when the Independent Directors believe the terms are appropriate. A review of the
business of the Company is covered in the Chairman’s Letter.
Directors
At 31 December 2019:
Mr John Chapman
Mr Peter Philip Scales
Mr Hiroshi Funaki
Directors’ responsibilities in respect of the financial statements
The Directors are responsible for the preparation of the financial statements. The Directors have elected to prepare the financial
statements in accordance with applicable law and International Financial Reporting Standards as adopted by the European
Union. In preparing these financial statements, the Directors are required to:
•
•
•
•
select suitable accounting policies and then apply them on a consistent basis;
make judgments and estimates that are reasonable and prudent;
state whether International Financial Reporting Standards have been followed, subject to any
material departures disclosed and explained in the financial statements; and
prepare the financial statements on the going concern basis unless it is inappropriate to presume
that the company will continue in business.
- 2 -
Directors’ Report
The Directors are responsible for keeping reliable accounting records which correctly explain the transactions of the Company,
and which enable the financial position of the Company to be determined with reasonable accuracy. They are also responsible
for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud
and other irregularities.
Corporate Governance Statement
The Board of Origo Partners Plc has adopted the Quoted Companies Alliance 2018 Corporate Governance Code (the "QCA
Code"). The Company is committed to the highest standards of corporate governance, ethical practices and regulatory
compliance. In particular, the Board is committed to ensuring that the Company is governed in a manner to allow efficient and
effective decision making, with robust risk management procedures.
The Company is reliant upon its service providers for many of its operations and as such will maintain an ongoing and rigorous
review of these providers. The Company's compliance with the QCA Code is reported on the Company's website
(www.origopartners.com), and at the back of this report. The Company will provide annual updates on changes to compliance
with the QCA Code.
Going concern
The Board has concluded that the Company and the Group is not considered to be a going concern and as a result of this the
consolidated financial statements for the year ended 31 December 2019 have been prepared on an orderly realisation basis.
The share capital of the Company has been reorganised so that the redemption of the Redeemable Preference Shares
(previously Convertible Preference Shares) will be settled with the proceeds of realisations as and when they occur.
Auditor and disclosure of information to auditor
As far as each Director is aware, there is no relevant audit information of which the Company’s auditor is unaware.
Financial statements are published on the Group’s website in accordance with legislation in the Isle of Man governing the
preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance
and integrity of the Group’s website is the responsibility of the Directors. The Directors’ responsibility also extends to the
ongoing integrity of the financial statements contained therein.
Each of the Directors has taken all the steps they ought to have taken individually as a Director in order to make themselves
aware of any relevant audit information and to establish that the Company’s auditors are aware of that information.
Lubbock Fine, who, being eligible, have expressed their willingness to continue in office in accordance with the Isle of Man
Companies Act 2006.
By Order of the Board
Philip Peter Scales
Date: 29 June 2020
- 3 -
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF ORIGO PARTNERS PLC
(incorporated in the Isle of Man with limited liability)
QUALIFIED OPINION
We have audited the consolidated financial statements of Origo Partners Plc (the 'Company') and its subsidiaries (the 'Group')
for the year ended 31 December 2019, which comprise the Consolidated Statement of Comprehensive Income, the
Consolidated Statement of Financial Position, the Consolidated Statement of Changes in Equity, the Consolidated Statement
of Cash Flows, and the related notes, including a summary of significant accounting policies. The financial reporting framework
that has been applied in their preparation is applicable law and International Financial Reporting Standards as adopted by the
European Union.
In our opinion, except for the possible effects of the matter described in the Basis for Qualified Opinion section of our report,
the accompanying consolidated financial statements present fairly, in all material respects, the financial position of the Group
as at 31 December 2019 and of its consolidated financial performance and its consolidated cash flows for the year then ended
in accordance with International Financial Reporting Standards as adopted by the European Union
BASIS FOR QUALIFIED OPINION
In the year ended 31 December 2018, the Group’s Consolidated Statement of Comprehensive Income included the following:
Realised losses on disposal of investments
Unrealised losses on investments
Bad debt provision
Income tax credit
2018 (US$ ‘000)
(292)
(5,603)
(1,222)
499
We were unable to obtain sufficient appropriate audit evidence as to whether any of these profits or losses should have been
made in periods prior to the year ended 31 December 2018. Consequently, we were unable to determine whether any
adjustments were required to the losses made in the year ended 31 December 2018 and Consolidated Statement of Financial
Position as at 31 December 2017.
We issued a qualified opinion in relation to the financial statements for the year ended 31 December 2018 on the basis of this.
Due to the lack of appropriate audit evidence we are unable to confirm that the amounts presented in these financial statements
for the year ended 31 December 2018 are comparable.
We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those
standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section
of our report. We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of
the consolidated financial statements in the United Kingdom, and we have fulfilled our other ethical responsibilities in
accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our qualified opinion.
CONCLUSIONS RELATING TO GOING CONCERN
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you
where:
•
the directors' use of the going concern basis of accounting in the preparation of the consolidated financial statements
is not appropriate; or
the directors have not disclosed in the consolidated financial statements any identified material uncertainties that
may cast significant doubt about the Group's ability to continue to adopt the going concern basis of accounting for a
period of at least twelve months from the date when the consolidated financial statements are authorised for issue.
•
- 4 -
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF ORIGO PARTNERS PLC
(incorporated in the Isle of Man with limited liability)
EMPHASIS OF MATTER – BASIS OF PREPARATION
As explained in Note 1, the Directors do not consider either the Group or Company to be a Going Concern, and so consider that
the financial statements should be prepared on a basis other than that of going concern. As explained in Note 1, no adjustments
are required to the financial statements as a result of preparing the financial statements on this basis. Our opinion is not
modified in respect of this matter.
KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the
consolidated financial statements of the current period and include the most significant assessed risks of material misstatement
(whether or not due to fraud) we identified, including those which had the greatest effect on: the overall audit strategy, the
allocation of resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on these matters.
Key audit matter
Valuation of investments (Note 11)
How our audit addressed the key audit matter
The Group holds unquoted investments with a fair value at
31 December 2019 of $1,407k.
Obtaining an understanding of the processes and controls
around investment valuation
These are held at fair value and are revalued annually by
management. Unquoted investments have no readily
available market price and so are valued in accordance
with International Private Equity and Venture Capital
Valuation Guidelines by using measurement of value such
as multiples, discounted cash flow and industry valuation
benchmarks.
Due to the significance of these balances to the financial
statements this represents a key audit matter.
Comparability of 2018 figures
Evaluating the appropriateness of the valuation approach
and methodology applied by management.
Challenging key assumptions and inputs into the valuation
models uses
Our audit opinion was modified in the prior year on the
basis that we were unable to obtain sufficient audit
evidence in respect of balances in the Consolidated
Statement of Financial Position at 31 December 2017.
Ultimately we were unable to obtain sufficient audit
evidence in this area in respect of the Consolidated
Statement of Comprehensive Income and our audit report
was modified accordingly.
This represents a key audit matter due to difficulties in
being able to obtain sufficient audit evidence that the
figures presented in the Consolidated Statement of
Comprehensive Income for 2018 are comparable with the
figures for 2019.
- 5 -
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF ORIGO PARTNERS PLC
(incorporated in the Isle of Man with limited liability)
OUR APPLICATION OF MATERIALITY
The scope and focus of our audit was influenced by our assessment and application of materiality. We apply the concept of
materiality both in planning and performing our audit, and in evaluating the effect of misstatements on our audit and on the
consolidated financial statements.
We define financial statements materiality as the magnitude by which misstatements, including omissions, could influence the
economic decisions taken on the basis of the consolidated financial statements by reasonable users.
We also determine a level of performance materiality, which we use to determine the extent of testing needed to reduce to an
appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality
for the consolidated financial statements as a whole.
• Overall materiality - We determine materiality for the consolidated financial statements as a whole to be $78,000.
This was based on the key performance indicator, being 2% of gross assets. We believe gross asset values are the
most appropriate bench mark due to the minimal income statement activity during the year and existence of key
balance sheet items.
•
Performance materiality - On the basis of our risk assessment, together with our assessment of the company’s
control environment, our judgement is that performance materiality for the consolidated financial statements should
be 55% of materiality, amounting to $43,000.
AN OVERVIEW OF THE SCOPE OF OUR AUDIT
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the consolidated
financial statements. In particular, we looked at where the directors made subjective judgements, for example in respect of
significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain.
We tailored the scope of our audit to ensure that we performed sufficient work to be able to give an opinion on the financial
statements as a whole, taking into account an understanding of the structure of the Group, its activities, the accounting
processes and controls, and the industry in which they operate. Our planned audit testing was directed accordingly and was
focused on areas where we assessed there to be the highest risk of material misstatement. During the audit, we reassessed and
re-valuated audit risks and tailored our approach accordingly.
The audit testing included substantive testing on significant transactions, balances and disclosures, the extent of which was
based on various factors such as our overall assessment of the control environment, the effectiveness of controls and
management of specific risk.
We communicated with those charged with governance regarding, among other matters, the planned scope and timing of the
audit and significant findings, including any significant deficiencies in internal control that we identify during the audit.
- 6 -
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF ORIGO PARTNERS PLC
(incorporated in the Isle of Man with limited liability)
OTHER INFORMATION
The directors are responsible for the other information. The other information comprises the information included in the Annual
Report, other than the consolidated financial statements and our Auditors' Report thereon. Our opinion on the consolidated
financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report,
we do not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in
doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our
knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies
or apparent material misstatements, we are required to determine whether there is a material misstatement in the consolidated
financial statements or a material misstatement of the other information. If, based on the work we have performed, we
conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
RESPONSIBILITIES OF DIRECTORS
The directors are responsible for the preparation and fair presentation of the consolidated financial statements in accordance
with International Financial Reporting Standards as adopted by the European Union, and for such internal control as the
directors determine is necessary to enable the preparation of consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the directors are responsible for assessing the Group’s ability to continue as
a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting
unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.
The directors are also responsible for overseeing the Group’s financial reporting process. The audit committee of the Company
(the “Audit Committee”) assists the directors in discharging their responsibility in this regard.
AUDITORS' RESPONSIBILITIES FOR THE AUDIT OF THE GROUP FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free
from material misstatement, whether due to fraud or error, and to issue an Auditors' Report that includes our opinion.
Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK)
will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users
taken on the basis of these consolidated financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism
throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error,
design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and
appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from
fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion of the effectiveness of the
Group's internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and
related disclosures made by the directors.
•
- 7 -
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF ORIGO PARTNERS PLC
(incorporated in the Isle of Man with limited liability)
AUDITORS' RESPONSIBILITIES FOR THE AUDIT OF THE GROUP FINANCIAL STATEMENTS (continued)
•
•
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the
audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast
significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty
exists, we are required to draw attention in our Auditors' Report to the related disclosures in the financial
statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit
evidence obtained up to the date of our Auditors' Report. However future events or conditions may cause the Group
or the parent company to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and
whether the financial statements represent the underlying transactions and events in a manner that achieves fair
presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities
within the group to express an opinion on the consolidated financial statements. We are responsible for the
direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the
audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought
to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most
significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters.
We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when,
in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse
consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
USE OF OUR REPORT
This report is made solely to the Company's members, as a body, in accordance with our engagement letter dated 2 October
2018. Our audit work has been undertaken so that we might state to the Company's members those matters we are required
to state to them in an Auditors' Report and for no other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Company and the Company's members, as a body, for our audit work, for this
report, or for the opinions we have formed.
Lubbock Fine
Chartered Accountants & Statutory Auditors
3rd Floor Paternoster House
65 St Paul's Churchyard
London
EC4M 8AB
Date: 29 June 2020
- 8 -
Origo Partners Plc
Consolidated statement of comprehensive income
For the year ended 31 December 2019
Investment loss:
Realised losses on disposal of investments
Unrealised losses on investments
Other income
Other administrative expenses
Bad debt provision
Share based payment
Financial guarantee derecognition
Foreign exchange loss
Net loss before finance costs and taxation
Finance costs
Loss before tax
Income tax credit
Loss after tax
Other comprehensive income
Other comprehensive income to be reclassified to profit or loss
in subsequent periods:
Exchange differences on translating foreign operations
Net other comprehensive income to be reclassified to profit
or loss in subsequent periods
Tax on other comprehensive income
Other comprehensive income net of tax
Total comprehensive loss after tax
Notes
2
3
4
22
16
6
7
Loss after tax
Attributable to:
- Owners of the parent
- Non-controlling interests
Total comprehensive loss
Attributable to:
- Owners of the parent
- Non-controlling interests
2019
US$'000
2018
US$'000
(75)
-
(75)
-
(1,270)
-
103
435
(3)
(810)
(4)
(814)
247
(567)
(41)
(41)
-
(41)
(608)
(567)
-
(567)
(608)
-
(608)
(292)
(5,843)
(6,135)
139
(1,644)
(1,222)
-
-
(11)
(8,873)
338
(8,535)
499
(8,036)
146
146
-
146
(7,890)
(8,036)
-
(8,036)
(7,890)
-
(7,890)
Basic loss per ordinary share
Diluted loss per ordinary share
Basic loss per redeemable zero dividend preference share
Diluted loss per redeemable zero dividend preference share
8
8
8
8
(0.03) cents
(0.03) cents
(3.24) cents
(3.24) cents
(0.45) cents
(0.45) cents
(42.10) cents
(42.10) cents
The accompanying notes form an integral part of these consolidated financial statements.
- 9 -
Origo Partners Plc
Consolidated statement of financial position
At 31 December 2019
Assets
Non-current assets
Property, plant and equipment
Investments at fair value through profit or loss
Loans
Current assets
Investments at fair value through profit or loss
Loans due within one year
Trade and other receivables
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Financial guarantee contracts
Current tax liabilities
Non-current liabilities
Provision
Deferred income tax liability
Total liabilities
Net assets
Equity attributable to owners of the parent
Issued capital
Share premium
Share-based payment reserve
Accumulated losses
Translation reserve
Other reserve
Non-controlling interests
Total equity
Notes
2019
US$'000
2018
US$'000
9
11
12
11
12
13
14
15
16
22
7
18
19
-
-
-
-
1,407
-
34
2,455
3,896
3,896
296
-
-
296
-
-
-
296
3,600
56
150,027
5,048
(200,216)
(1,379)
50,064
3,600
-
3,600
5
-
-
5
3,527
-
27
3,883
7,437
7,442
382
435
-
817
103
247
350
1,167
6,275
56
150,414
5,048
(199,649)
(1,338)
51,744
6,275
-
6,275
The consolidated financial statements were approved by the Board of Directors and authorised for issue. They were signed on
its behalf by:
Philip Peter Scales
Director
29 June 2020
The accompanying notes form an integral part of these consolidated financial statements.
- 10 -
Origo Partners Plc
Consolidated statement of changes in equity
For the year ended 31 December 2019
Attributable to equity holders of the parent
Share-
based
Non-
Issued
Share
payment
Accumulated
Translation
Other
controlling
Total
capital
premium
reserve
losses
reserve
reserve
Total
interests
equity
Notes US$'000 US$'000 US$'000
US$'000
US$'000 US$'000 US$'000
US$'000 US$'000
At 1 January 2018
Loss for the year
Other comprehensive income
Total comprehensive
income/(loss)
At 31 December 2018
Loss for the year
Other comprehensive income
Total comprehensive
income/(loss)
Capital distribution
At 31 December 2019
56
150,414
5,048
(191,613)
(1,484)
51,744
14,165
-
-
-
-
-
-
-
-
-
(8,036)
-
-
146
(8,036)
146
-
-
-
(8,036)
146
(7,890)
56
150,414
5,048
(199,649)
(1,338)
51,744
6,275
-
-
-
-
-
-
-
(387)
-
-
-
-
(567)
-
-
(41)
(567)
(41)
-
-
-
(567)
(41)
(608)
-
-
(1,680)
(2,067)
56
150,027
5,048
(200,216)
(1,379) 50,064
3,600
-
-
-
-
-
-
-
-
-
-
14,165
(8,036)
146
(7,890)
6,275
(567)
(41)
(608)
(2,067)
3,600
The following describes the nature and purpose of each reserve within parent’s equity:
Reserve
Share premium
Amounts subscribed for share capital in excess of nominal value.
Description and purpose
Share-based payment reserve
Equity created to recognise share-based payment expense.
Accumulated losses
Translation reserve
Other reserve
Cumulative net gains and losses recognised in profit or loss.
Equity created to recognise foreign currency translation differences.
Own shares acquired, EBT (as defined in Note 22) shares and capital redemption and
capitalisation of redeemable zero dividend preference shares (“RZDP”).
The accompanying notes form an integral part of these consolidated financial statements.
- 11 -
Origo Partners Plc
Consolidated statement of cash flows
For the year ended 31 December 2019
Loss before tax
Adjustments for:
Depreciation and amortisation
Share-based payments
Provision for bad debts
Realised losses on disposal of investments
Unrealised losses on investments at FVTPL*
Foreign exchange gains
Interest expenses
Other adjustment
Operating loss before changes in working capital and provisions
Proceeds from disposals of investments at FVTPL*
Movement in loans
Current and deferred tax paid
Increase in trade and other receivables
Decrease in trade and other payables
Derecognition of financial guarantee
Net cash inflow from operations
Investing activities
Disposal of property, plant and equipment
Net cash inflow from investing activities
Financing activities
Capital distribution
Repayment of borrowing
Net cash outflow from financing activities
Net (decrease)/increase in cash and cash equivalents
Effect of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
* FVTPL refers to fair value through profit or loss
Notes
2019
US$'000
(814)
2018
US$'000
(8,535)
3
22
4
2
2
11
12
16
14
5
(103)
-
75
-
15
-
(23)
(845)
2,045
-
-
(7)
(86)
(435)
672
-
-
(2,100)
-
(2,100)
(1,428)
-
3,883
2,455
16
-
1,222
292
5,843
14
-
-
(1,148)
7,383
734
(550)
(371)
(999)
-
5,049
-
-
-
(2,500)
(2,500)
2,549
135
1,199
3,883
The accompanying notes form an integral part of these consolidated financial statements.
- 12 -
Notes to the financial statements
1
Accounting policies
1.1 Corporate information
The Company is a limited liability company incorporated and domiciled in the Isle of Man whose shares are publicly traded
on the Alternative Investment Market (“AIM”) of the London Stock Exchange. The registered office is located at 55 Athol
Street, Douglas, Isle of Man IM1 1LA. The principal activity of the Group is that of an Investment vehicle. The Group
currently holds investments in companies including unquoted interests, and illiquid publicly traded equity interests, based
or principally active in China and Mongolia. On 20 November 2014, the Company’s shareholders voted to amend the
Company’s investing policy to that of a realisation vehicle.
1.2 Basis of preparation
The Financial Statements have been prepared in accordance with International Financial Reporting Standards as adopted
by the European Union (“IFRS”). These comprise standards and interpretations approved by the International Accounting
Standards Board (“IASB”), together with interpretations of the International Accounting Standards and Standing
Interpretations Committee approved by the International Accounting Standards Committee that remain in effect, to the
extent that IFRS have been adopted by the EU.
Going concern
The Board has concluded that the Company and the Group is not considered to be a going concern and as a result of this
the consolidated financial statements for the year ended 31 December 2019 have been prepared on an orderly realisation
basis. There was no impact to the financial information as result of changing to this basis.
The comparative information is for the year from 1 January 2018 to 31 December 2018.
1.3 Functional and presentation currency
The consolidated financial statements are presented in United States dollars, which is also the parent company’s
functional currency. For each group entity the Group determines functional currency and items included in the financial
statements of each entity are measured using that functional currency.
1.4 Use of judgments and estimates
In preparing these consolidated financial statements, management has made judgments and estimates that affect the
application of the Group’s accounting policies and the reported amounts of assets, liabilities, income and expenses.
Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognised
prospectively.
The following is a list of accounting policies which cover areas that the Directors consider require estimates and
judgements which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities
within the next financial year:
(a) Fair value of unquoted equity instruments
The Group has estimated the value of each of its unquoted equity instruments by using their judgement to select
the most appropriate valuation methodology for each investment based on the recommendations of the
International Private Equity and Venture Capital Valuation Guidelines (the “Guidelines”). For more information on
estimation, refer to Note 11. Valuation methodologies mainly include multiples, discounted cash flow, industry
valuation benchmarks, available market prices and so on, which may apply individually or in combination. Key
assumptions and judgements of each methodology concerning the future and other key sources of estimation
uncertainty will have a significant risk of causing a material adjustment to the fair value of the instruments within
the next financial year.
- 13 -
1
Accounting policies
1.4 Use of judgments and estimates (continued)
(b) Assessment of the Company as investment entity
Entities that meet the definition of an investment entity within IFRS 10 are required to account for most investments
in controlled entities as held at fair value through profit or loss. Subsidiaries that provide investment related services
or engage in permitted investment related activities with investees continue to be consolidated unless they are also
investment entities. The directors have concluded that the Company meets the definition of an investment entity.
(c) Assessment of the subsidiaries as investment entities
The Company controls the voting rights and ownership interests in its subsidiaries as stated in Note 10 for which the
countries of incorporation for those subsidiaries are included in the same note.
Per IFRS 10, there is a requirement for the Board to assess whether each subsidiary is itself an investment entity.
The Board has performed the assessments and has concluded that the subsidiaries stated in Note 10 are not
operating subsidiaries of the Group for the reasons below:
(I)
The subsidiaries do not provide services to the Group (including administrative services to the Board of the
Group, buying / selling securities as well as managing the portfolios on a fair value basis); and
(II) The subsidiaries are not remunerated for these services.
(III) Each subsidiary is itself not deemed to be an investment entity investing solely for capital appreciation and
investment income and therefore the subsidiaries are consolidated.
(d) Share-based payments
The Group has applied the requirements of IFRS 2 “Share-based payments” in these consolidated financial
statements.
The Group has issued share options, which are equity-settled share-based payments, to an ex director, certain ex-
employees and to its advisors for services provided in respect of the admission of the Company to trading on the
AIM of the London Stock Exchange. Equity-settled share-based payments to directors and employees are measured
at the fair value of equity instruments awarded at the date of grant. Equity-settled share-based payments to non-
employees are measured at the fair value of goods or services rendered at the date when the goods or services are
received. Where equity investments are granted subject to vesting conditions, equity-settled share-based
payments are expensed to the profit or loss on a straight-line basis over the vesting period, based on the Group’s
estimate of the number of shares that will eventually vest. Fair value is measured by use of the Binominal option
pricing model.
The Group has also granted upper share rights/contingent share awards, which are cash-settled share-based
payments, to an ex director and certain ex-employees under the Company’s JSOS (as defined in Note 22). The cost
of cash-settled share-based payments is measured initially at fair value at the grant date using the Binominal Tree
model. This fair value is expensed over the period until the vesting date with recognition of a corresponding liability.
The liability is remeasured to fair value at each reporting date up to and including the settlement date, with changes
in fair value recognised in expense.
When estimating the value of the share options, the upper share rights and contingent share awards, significant
assumptions such as the expected life of the share options and the upper share rights, and expected volatility of the
shares have been applied based on management’s best estimates.
- 14 -
1
Accounting policies (continued)
1.5 Summary of significant accounting policies
The accounting policies which follow set out those policies which apply in preparing the Financial Statements for the
period 1 January 2019 to 31 December 2019.
Standards and amendments effective for the period beginning 1 January 2019 or later
A number of other new standards are effective from 1 January 2019 but they do not have a material effect on the
Company’s financial statements.
IFRS 16 introduced a single, on-balance sheet accounting model for lessees. The Company is not a lessee or a lessor. The
adoption of IFRS 16 had no impact on the net assets attributable to holders of shares or the Company and no restatement
of comparative information was required from the adoption of this new accounting standard.
A number of new standards are effective for annual periods beginning after 1 January 2019 and earlier application is
permitted; however, the Group has not early adopted the new or amended standards in preparing these consolidated
financial statements.
The following amended standards and interpretations are not expected to have a significant impact on the Group’s
consolidated financial statements:
• Amendments to References to Conceptual Framework in IFRS Standards;
• Definition of a Business (Amendments to IFRS 3);
• Definition of Material (Amendments to IAS 1 and IAS 8); and
•
IFRS 17 Insurance Contracts.
Financial instruments
i) Recognition and initial measurement
The Company initially recognises financial assets and financial liabilities at fair value through profit or loss (“FVTPL”) on
the trade date, which is the date on which the Company becomes a party to the contractual provisions of the instrument.
Other financial assets and financial liabilities are recognised on the date on which they are originated.
A financial asset or financial liability is measured initially at fair value plus, for an item not at FVTPL, transaction costs that
are directly attributable to its acquisition or issue.
- 15 -
1
Accounting policies (continued)
1.5 Summary of significant accounting policies (continued)
Financial instruments (continued)
ii) Classification and subsequent measurement
Classification of financial assets
On initial recognition, the Company classifies financial assets as measured at amortised cost or FVTPL.
A financial asset is measured at amortised cost if it meets both the following conditions and is not designated as at FVTPL.
- it is held within a business model whose objective is to hold assets to collect contractual cash flows; and
- its contractual terms give rise on specified dates to cash flows that are solely payment of principal and interest (“SPPI”).
All other financial assets of the Fund are measured at FVTPL.
Business model assessment
In making an assessment of the objective of the business model in which a financial asset is held, the Company considers
all of the relevant information about how the business is managed, including:
- the documented investment strategy and the execution of this strategy in practice. This includes expected cash outflows
or realising cash flows through the sale of assets;
- how the performance of the portfolio is evaluated and reported to the Company’s management;
- the risks that affect the performance of the business model (and the financial assets held within that business model)
and how those risks are managed; and
- the frequency, volume and timing of sales of financial assets and expectations about the future sales activity.
Transfers of financial assets to third parties in transactions that do not qualify for derecognition are not considered sales
for this purpose, consistent with the Company’s continuing recognition of the assets.
The Company has determined that it has two business models.
- Held-to-collect business model: this includes cash and cash equivalents and receivables. These financial assets are held to
collect contractual cash flow.
- Other business model: this includes equity investments. These financial assets are managed and their performance is
evaluated, on a fair value basis, with frequent sales taking place.
Assessment whether contractual cash flows are SPPI
For the purposes of this assessment, ‘principal’ is defined as the fair value of the financial asset on initial recognition.
‘Interest’ is defined as consideration for the time value of money and for the credit risk associated with the principal
amount outstanding during a particular period of time and for other basic lending risks and costs (e.g. liquidity risk and
administrative costs), as well as a profit margin.
In assessing whether the contractual cash flows are SPPI, the Company considers the contractual terms of the instrument.
This includes assessing whether the financial asset contains a contractual term that could change the timing or amount
of contractual cash flows such that it would not meet this condition. In making this assessment, the Company considers:
- contingent events that would change the amount or timing of cash flows;
- prepayment and extension features;
- terms that limit the Company’s claim to cash flows from specified assets (e.g. non-recourse features); and
- features that modify consideration of the time value of money (e.g. periodical reset of interest rates).
- 16 -
1
Accounting policies (continued)
1.5 Summary of significant accounting policies (continued)
Financial instruments (continued)
Reclassifications
Financial assets are not reclassified subsequent to their initial recognition unless the Company were to change its business
model for managing financial assets, in which case all affected financial assets would be reclassified on the first day of the
first reporting period following the change in the business model.
Subsequent measurement of financial assets
Financial assets at FVTPL
These assets are subsequently measured at fair value. Net gains and losses, including foreign exchange gains and losses,
are recognised in the statement of comprehensive income.
Equity investments and derivative financial instruments are included in this category.
Financial assets at amortised cost
These assets are subsequently measured at amortised cost using the effective interest method. Interest income is
recognised in ‘interest income calculated using the effective interest method’, foreign exchange gains and losses are
recognised in ‘net foreign exchange loss’ and impairment is recognised in ‘impairment losses on financial instruments’ in
the statement of comprehensive income. Any gain or loss on derecognition is also recognised in profit or loss.
Cash and cash equivalents, receivables and balances due from brokers are included in this category.
Financial liabilities – Classification, subsequent measurement and gains and losses
Financial liabilities are classified as measured at amortised cost or FVTPL.
A financial liability is classified as at FVTPL if it is classified as held-for-trading, it is a derivative or it is designated as such
on initial recognition. Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any
interest expense, are recognised in profit or loss.
Other financial liabilities are subsequently measured at amortised cost using the effective interest method. Interest
expense and foreign exchange gains and losses are recognised in profit or loss. Any gain or loss on derecognition is also
recognised in profit or loss.
Financial liabilities at amortised cost:
-
This includes trade and other payables.
Financial guarantee contracts:
Financial guarantee contracts issued by the Group are those contracts that require a payment to be made to reimburse
the holder for a loss it incurs because the specified debtor fails to make a payment when due in accordance with the terms
of a debt instrument. Financial guarantee contracts are recognised initially as a liability at fair value, adjusted for
transaction costs that are directly attributable to the issuance of the guarantee. Subsequently, the liability is measured at
the higher of the best estimate of the expenditure required to settle the present obligation at the reporting date and the
amount recognised less cumulative amortisation.
Redeemable zero dividend preference shares:
On initial recognition, redeemable zero dividend preference shares are recognised at the fair value, which are determined
using the prevailing market interest of similar non-convertible debts, net of issue costs incurred. In subsequent periods,
redeemable zero dividend preference shares are carried at amortised cost using the effective interest method.
- 17 -
1.5 Summary of significant accounting policies (continued)
Financial instruments (continued)
iii) Amortised cost measurement
The ‘amortised cost’ of a financial asset or financial liability is the amount at which the financial asset or financial liability
is measured on initial recognition minus the principal repayments, plus or minus the cumulative amortisation using the
effective interest method of any difference between that initial amount and the maturity amount and, for financial assets,
adjusted for any loss allowance.
Equity instrument
Financial instruments shall reclassify a financial liability as equity from the date when there is no existence of a contractual
obligation to deliver cash or another financial asset by the issuer. The equity instruments are recorded at the fair value of
the equity instruments issued. The difference between the carrying amount of the financial liability extinguished and the
fair value of the equity instruments issued shall be recognised in profit or loss. The equity instruments issued shall be
recognised initially and measured at the date the financial liability is extinguished.
Basis of consolidation
The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at 31
December 2019. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement
with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group
controls an investee if, and only if, the Group has:
-
-
-
Power over the investee (i.e. existing rights that give the current ability to direct relevant activities of the investee);
Exposure, or rights, to variable returns from its involvement with the investee; and
The ability to use its power over the investee to affect its returns.
Generally, there is a presumption that a majority of voting rights results in control. To support this presumption and when
the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and
circumstances in assessing whether it has power over an investee, including:
-
-
-
The contractual arrangement(s) with the other vote holders of the investee;
Rights arising from other contractual arrangements; and
The Group’s voting rights and potential voting rights.
The Group does not consolidate its subsidiaries other than those that solely provide it with services that relate to its
investment activities. Subsidiaries that provide services to the Group are fully consolidated from the date of acquisition,
being the date on which the Group obtains control, and continue to be consolidated until the date when such control
ceases. The financial statements of the subsidiaries are prepared for the same reporting period as the parent company,
using consistent accounting policies. All intra-group balances, transactions, unrealised gains and losses resulting from
intra-group transactions and dividends are eliminated in full.
Profit or loss and each component of other comprehensive income are attributed to the equity holders of the parent of
the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance.
A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction.
Subsequent to acquisition, the carrying amount of non-controlling interests that represent present ownership interests
in the subsidiary is the amount of those interests at initial recognition plus such non-controlling interest’s share of
subsequent changes in equity. Total comprehensive income is attributed to such non-controlling interests even if this
results in those non-controlling interests having a deficit balance.
Non-controlling interests represent the portion of profit or loss and net assets that is not held by the Group and are
presented separately in the consolidated statement of comprehensive income and within equity in the consolidated
statement of financial position, separately from parent shareholders’ equity.
- 18 -
1.5 Summary of significant accounting policies (continued)
Associates
Associates are all entities over which the Group has significant influence but not control, generally accompanying a
shareholding of between 20% and 50% of the voting rights. The Group elects to measure investments in associates at fair
value through profit or loss as, in the opinion of the directors, the Company meets the definition of venture capital
organisation. This treatment is permitted under IAS 28 “Investments in Associates and Joint Ventures”.
Foreign currencies
Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates
of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the
translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are
recognised in the statement of comprehensive income.
Non-monetary financial assets and liabilities that are carried at historic cost are translated using the exchange rate as at
the date of initial transactions and are not re-measured. Translation differences on non-monetary financial assets and
liabilities, such as equities held at fair value through profit or loss, are recognised in profit or loss as part of the fair value
gain or loss.
Group companies
The results and financial position of all group entities, none of which has the currency of a hyperinflationary economy,
that have a functional currency different from the presentation currency are translated into the presentation currency as
follows:
(I)
(II)
assets and liabilities for each statement of financial position are translated at the closing rate at the date
of that statement of financial position;
income and expenses for each statement of comprehensive income are translated at average exchange
rates (unless this average is not a reasonable approximation of the cumulative effect of the rates
prevailing on the transaction dates, in which case income and expenses are translated at the date of the
transaction); and
(III) all resulting exchange differences are recognised in the statement of comprehensive income as other
comprehensive income.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and
liabilities of the foreign entity and translated at the closing rate.
Cash and bank and borrowings
Cash and bank is defined as cash in hand, demand deposits, time deposit and short-term, highly liquid investments that
are readily convertible into known amounts of cash. They are subject to an insignificant risk of changes in value, and have
a short maturity, generally less than three months, less bank overdrafts which are repayable on demand and form an
integral part of the Group’s cash management. For the purpose of the consolidated statement of financial position, cash
and bank balances comprise cash on hand and at banks, including term deposits, which are not restricted as to use.
Borrowings are financial liabilities at amortised cost and are initially measured at fair value, net of directly attributable
costs incurred. It is subsequently measured at amortised cost, using the effective interest method. The related interest
expense is recognised in profit or loss.
- 19 -
1.5 Summary of significant accounting policies (continued)
Share-based payments
Ex employees (including former senior executives) of the Group received remuneration in the form of share-based
payment transactions (i.e. share options), whereby employees render services as consideration for equity instruments
(“equity-settled transactions”). Certain ex director, executives and key employees of the Group were granted share
appreciation rights (including upper share rights and contingent share awards), which can only be settled in cash (“cash-
settled transactions”). Advisors received equity-settled options in relation to the Company’s admission to trading on the
AIM of the London Stock Exchange.
The cost of these options with ex employees are measured by reference to the fair value of the equity instruments
awarded at the date of grant, whereas those with non-employees are measured at the fair value of goods or services
received at the date when the goods or services have been received. The fair value is determined by using binominal tree
model, further details of which are given in Note 22.
Equity-settled transactions
The cost of equity-settled transactions (share options) is recognised, together with a corresponding increase in equity,
over the period in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant
ex employees become fully entitled to the award (the “vesting date”). The cumulative expense recognised for equity-
settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has
expired and the Group’s best estimate of the number of equity instruments that will ultimately vest. Movements in the
liability (other than cash payments) are recognised in profit or loss.
No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a
market or non-vesting condition, which are treated as vesting irrespective of whether or not the market condition is
satisfied, provided that all other performance and/or service conditions are satisfied.
The dilutive effect of outstanding options is reflected as additional share dilution in the computation of earnings per share.
Cash-settled transactions
The cost of cash-settled transactions (upper share rights and contingent share awards) is measured initially at fair value
at the grant date using binominal tree model, further details of which are given in Note 22. This fair value is expensed over
the period until the vesting date with recognition of a corresponding liability. The liability is remeasured to fair value at
each reporting date up to and including the settlement date, with changes in fair value recognised in expense.
Taxes
Current Income Tax
Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered
from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted
or substantively enacted at the reporting date.
Current income tax relating to items recognised directly in equity is recognised in equity and not in the statement of
comprehensive income. Management periodically evaluates positions taken in the tax returns with respect to situations
in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
Deferred Tax
Deferred tax is provided using the liability method on temporary differences at the reporting date between the tax bases
of assets and liabilities and their carrying amounts for financial reporting purposes.
- 20 -
1
Accounting policies (continued)
1.5 Summary of significant accounting policies (continued)
Taxes (continued)
Deferred tax liabilities are recognised for all taxable temporary differences, except:
(I) where the deferred tax liability arises from goodwill or the initial recognition of an asset or liability in a
transaction that is not a business combination and, at the time of the transaction, affects neither the
accounting profit nor taxable profit or loss; and
in respect of taxable temporary differences associated with investments in subsidiaries and associates where
the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary
differences will not reverse in the foreseeable future.
(II)
Deferred tax assets are recognised for all deductible temporary differences, carry forward of unused tax credits and
unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible
temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised, except:
(I) where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition
of an asset or liability in a transaction that is not a business combination and, at the time of the transaction,
affects neither the accounting profit nor taxable profit or loss; and
in respect of deductible temporary differences associated with investments in subsidiaries and associates,
deferred tax assets are recognised only to the extent that it is probable that the temporary differences will
reverse in the foreseeable future and taxable profit will be available against which the temporary differences
can be utilised.
(II)
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer
probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised.
Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has
become probable that future taxable profit will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is
realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the
reporting date.
Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets
against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.
Income taxes are recognised in the profit or loss or directly in equity except when a tax exemption has been granted.
Investment income/loss
Investment income/loss derived from the investment activities is equivalent to “revenue” for the purposes of IAS 1.
Investment income/loss is analysed into the following components:
-
-
-
Realised gains/losses on the disposal of investments are the difference between the fair value of the consideration
received less any directly attributable costs, on the sale of equity and the repayment of loans and receivables, and
its carrying value at the start of the accounting period.
Unrealised gains/losses on the revaluation of investments are the movement in the carrying value of investments
measured at fair value between the start and end of the accounting period and the impairment of amortised cost
loans.
Income/loss from loans is recognised on a time proportion basis as it accrues by reference to the principal
outstanding and the effective interest rate applicable.
- 21 -
1
Accounting policies (continued)
1.5 Summary of significant accounting policies (continued)
Provisions and contingent liabilities
Provisions are recognised for liabilities of uncertain timing or amount when the Group has a legal or constructive
obligation arising as a result of a past event, which will probably result in an outflow of economic benefits that can be
reasonably estimated.
Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably,
the obligation is disclosed as a contingent liability, unless the probability of an outflow of economic benefits is remote.
Possible obligations, the existence of which will only be confirmed by the occurrence or non-occurrence of one or more
future events, are also disclosed as contingent liabilities unless the probability of an outflow of economic benefits is
remote.
2
Investment loss
Realised losses on disposal of investments
- Investments at FVTPL
- Loans at FVTPL
- Subsidiary
Unrealised losses on investments
- Investments at FVTPL
- Loans at FVTPL
- Loans at amortised cost
Income from loans
Total
3
Other administrative expenses
Recurring expenses:
- Directors fees
- Audit fees
- Depreciation expenses
- Amortisation expenses
- Other
Non-recurring expenses*
Total
2019
US$'000
(75)
(75)
-
-
-
-
-
-
-
2018
US$'000
(292)
(292)
-
-
(5,843)
(5,843)
-
-
-
(75)
(6,135)
2019
US$'000
2018
US$'000
(928)
(210)
(58)
(5)
(1)
(654)
(342)
(826)
(205)
(62)
(15)
(1)
(543)
(818)
(1,270)
(1,644)
* Non-recurring expenses include professional fees of an ad-hoc nature and previous advisor fees.
- 22 -
4
Bad debt provision
Loans with Staur Aqua
Loans with Unipower
Other receivables
Total
5
Directors’ remuneration
Directors' emoluments
Share-based payment expenses
2019
US$'000
-
-
-
-
2019
US$'000
(210)
-
(210)
2018
US$'000
(734)
(182)
(306)
(1,222)
2018
US$'000
(205)
-
(205)
Directors’ remuneration for the year 2019 and the number of options held were as follows:
Name
Mr. Hiroshi Funaki
Mr. Philip Peter Scales
Mr. John Chapman
Salaries*
US$'000
Director fee
US$'000
Share-based
payment**
US$'000
Total
US$'000
2019
Number of
options
-
-
-
-
75
55
80
210
-
-
-
-
75
55
80
210
-
-
-
-
Directors’ remuneration for the year 2018 and the number of options held were as follows:
Name
Mr. Hiroshi Funaki
Mr. Philip Peter Scales
Mr. John Chapman
Salaries*
US$'000
Director fee
US$'000
Share-based
payment**
US$'000
Total
US$'000
2018
Number of
options
-
-
-
-
75
50
80
205
-
-
-
-
75
50
80
205
-
-
-
-
Short term employee benefits.
*
** Share-based payment refers to expenses arising from the Company’s share option scheme (Note 22).
- 23 -
6
Finance costs
Interest expenses of borrowing
Bank charges
7
Income tax
2019
US$'000
2018
US$'000
-
(4)
(4)
335
3
338
As the Company is not in receipt of income from Manx land, certain related business or property and does not hold a Manx
banking licence, it is taxed at the standard rate of 0% on the Isle of Man. The Company is resident for tax purposes in the
Isle of Man and subject to corporate income tax at the standard rate of 0% and as such no provision for tax in the Isle of
Man has been made.
Current tax
Current year*
Deferred tax
Deferred income tax **
Total income tax credit in the consolidated statement of comprehensive income
2019
US$'000
2018
US$'000
-
247
247
499
-
499
*
The current year tax credit in 2018 represents a reversal of a 2011 audit adjustment relating to Six Waves investment.
** The deferred income tax credit in 2019 relates to the write-back of the 2018 deferred tax provision, which was
reversed after the disposal of Niutech (see below).
The income tax for the year can be reconciled per the consolidated statement of comprehensive income as follows:
Loss before tax
Loss before tax multiplied by rate of corporate income tax in the Isle
of Man of 0% (2018: 0%)
Deferred tax
Effects of:
Release of deferred tax provision **
Release of current taxation provision
Total income tax credit in the consolidated statement of comprehensive income
Deferred income tax liability:
Deferred income tax liability**
Total deferred income tax liability
2019
US$'000
(1,106)
2018
US$'000
(8,535)
-
247
-
247
-
-
499
499
2019
US$'000
-
-
2018
US$'000
247
247
** As at 31 December 2019, the deferred income tax liability was US$nil (2018: US$247,000). The amount at 31
December 2018 was in respect of the investment held in Niutech. This investment has been disposed of and the final
funds were received in the year ended 31 December 2019 from the sale of this investment from the State
Administration of Foreign Exchange (SAFE) in China.
- 24 -
8
Loss per share (“LPS”)
Numerator
Loss for the year attributable to ordinary shareholders of the parent
as used in the calculation of basic loss per share
Loss for the year attributable to redeemable zero dividend preference
shareholders of the parent as used in the calculation of basic loss per share
Loss for the year attributable to ordinary shareholders of the parent
as used in the calculation of diluted loss per share
Loss for the year attributable to redeemable zero dividend preference
shareholders of the parent as used in the calculation of diluted loss per share
Denominator
Weighted average number of ordinary shares for basic LPS
Effect of dilution*:
Share options
Weighted average number of ordinary shares adjusted for the effect of dilution
Weighted average number of redeemable zero dividend preference shares for
basic LPS before and after adjusted for the effect of dilution
Basic LPS of ordinary shares
Diluted LPS of ordinary shares
Basic LPS of redeemable zero dividend preference shares
Diluted LPS of redeemable zero dividend preference shares
2019
US$'000
2018
US$'000
(122)
(486)
(122)
(486)
(1,578)
(6,312)
(1,578)
(6,312)
2019
Number of
Shares
2018
Number of
shares
351,035,389
351,035,389
-
-
351,035,389
351,035,389
14,991,781
14,991,781
(0.03) cents
(0.45) cents
(0.03) cents
(0.45) cents
(3.24) cents
(42.10) cents
(3.24) cents
(42.10) cents
* Diluted loss per share for the years ended 31 December 2019 and 31 December 2018 is the same as the basic loss per
share, as the Company’s outstanding share options and convertible zero dividend preference shares had an anti-dilutive
effect on the basic loss per share for the years ended 31 December 2019 and 31 December 2018.
9
Property, plant and equipment
Cost
At 1 January 2019
Disposal
At 31 December 2019
Accumulated depreciation
At 1 January 2018
Charge for the year 2018
Disposal
At 31 December 2018
Charge for the year 2019
At 31 December 2019
Net book value
At 31 December 2018
At 31 December 2019
- 25 -
Vehicles
US$'000
85
-
85
65
15
-
80
5
85
5
-
10
Investments in subsidiaries
The principal subsidiaries of the Group are as follows:
Name
Ascend Ventures Ltd
Origo Resource Partners Ltd
PHI International Holding Ltd
PHI International (Bermuda) Holding Ltd*
Ascend (Beijing) Consulting Ltd**
*
**
Owned by Origo Resource Partners Ltd
Owned by Ascend Ventures Ltd
11
Investments at fair value through profit or loss
Country of
incorporation
Malaysia
Guernsey
Bermuda
Bermuda
China
Proportion of
ownership interest
at 31 December 2019
100%
Proportion of
ownership interest
at 31 December 2018
100%
100%
100%
100%
100%
100%
100%
100%
100%
As at 31 December 2019
Name
Celadon Mining Ltd
Six Waves Inc
Gobi Coal & Energy Ltd
Marula Mines Ltd
Fram Exploration AS
Staur Aqua AS
Unipower (Note b)
China Rice (Note b)
Country of
incorporation
Fair value
hierarchy
level
Proportion of
ownership
interest
Cost
US$’000
Fair value
US$’000
British Virgin Islands
British Virgin Islands
British Virgin Islands
South Africa
Norway
Norway
Cayman Islands
British Virgin Islands
3
3
3
3
3
3
3
3
8.9%
1.1%
7.5%
0.9%
0.6%
9.2%
16.5%
13,069
240
14,960
250
1,223
719
4,301
32.1%
13,000
1,129
-
275
-
-
-
-
-
Moly World Ltd (Note b)
British Virgin Islands
Other quoted investments
-
3
1,407
The shares held in China Rice and Unipower are all convertible preference shares whilst the remaining investments held
in the other entities are all ordinary equity shares. The 'proportion of ownership interest' represents the percentage of
the shares held by the Group in all share classes.
10,000
593
20.0%
3
1
- 26 -
11
Investments at fair value through profit or loss (continued)
As at 31 December 2018
Name
Niutech (Note a)
Celadon Mining Ltd
Kincora (Note b)
Six Waves Inc
Gobi Coal & Energy Ltd
Marula Mines Ltd
Fram Exploration AS
Staur Aqua AS
Unipower (Note b)
China Rice (Note b)
Country of
incorporation
Fair value
hierarchy
level
Proportion of
ownership
interest
Cost
US$’000
Fair value
US$’000
British Virgin Islands
British Virgin Islands
Canada
British Virgin Islands
British Virgin Islands
South Africa
Norway
Norway
Cayman Islands
British Virgin Islands
3
3
3
3
3
3
3
3
3
3
3.7%
2,654
8.9%
30.9%
1.1%
7.5%
0.9%
0.6%
9.2%
16.5%
13,069
8,571
240
14,960
250
1,223
719
4,301
32.1%
13,000
2,120
1,129
-
-
275
-
-
-
-
-
Moly World Ltd (Note b)
British Virgin Islands
Other quoted investments
-
3
3,527
The shares held in China Rice and Unipower are all convertible preference shares whilst the remaining investments held
in the other entities are all ordinary equity shares. The 'proportion of ownership interest' represents the percentage of
the shares held by the Group in all share classes.
10,000
593
20.0%
3
1
Notes
a.
b.
The Company held 95.3% interest in Niutech Energy Ltd, by which Niutech is indirectly held. This investment was
disposed of in 2019.
These investments are associates of the Group measured at fair value through profit or loss.
In accordance with IFRS 13 “Fair Value Measurement”, investments recognised at fair value are required to be analysed
between those whose fair value is based on:
a) Quoted prices in active markets for identical assets or liabilities (Level 1);
b) Those involving inputs other than quoted prices included in level 1 that are observable for the asset or liability, either
directly (as prices) or indirectly (derived from prices) (Level 2); and
c) Those with inputs for the asset or liability that are not based on observable market data (unobservable inputs) (Level
3).
For assets and liabilities that are recognised in the consolidated financial statements on a recurring basis, the Group
determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the
lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period. In 2017,
the Group transferred an investment with fair value of approximately US$1,607,000 as at 31 December 2017 from Level 1
to Level 3, primarily related to an equity security traded in active markets while there have been no transfers between
levels during the year of 2018.
- 27 -
11
Investments at fair value through profit or loss (continued)
The following table provides an analysis of investments carried at fair value by level of fair value hierarchy:
Investments at fair value through profit or loss
-
-
Unlisted equity investments
Listed equity investments
Investments at fair value through profit or loss
-
-
Unlisted equity investments
Listed equity investments
2019
Level 1
US$’000
Level 2
US$’000
Level 3
US$’000
Total
US$’000
3
-
3
-
-
-
2018
-
1,404
1,404
3
1,404
1,407
Level 1
US$’000
Level 2
US$’000
Level 3
US$’000
Total
US$’000
3
-
3
-
-
-
2,120
1,404
3,524
2,123
1,404
3,527
Changes in investments at fair value through profit or loss based on Level 3:
Opening balance
Proceeds from disposals of investments
Realised gain/(losses) on disposals of investments
Movement in unrealised losses on investments
- In profit or loss
Closing balance
2019
US$’000
3,524
(2,042)
(75)
-
1,407
2018
US$’000
17,012
(7,378)
(292)
(5,818)
3,524
- 28 -
11
Investments at fair value through profit or loss (continued)
Description of significant unobservable inputs to valuation:
As at 31 December 2019
Celadon Mining Ltd
Multiples method
Valuation technique
Significant
unobservable inputs
Discount for lack of
marketability
Range
80%
Gobi Coal & Energy Ltd
Consensus pricing
method
Offered quote
$275,348
As detailed in Note 27, Celadon Mining Ltd have announced the sale of their assets for approximately RMB 330m on
deferred payment terms. If this amount was to be received, converted at current exchange rates, and the amounts paid
directly to Origo through a share buyback mechanism, the Board believe that this could result in a return of around $4.2m.
However, due to the uncertainties around the deferred payment and the lack of information available to the Board in
respect of this transaction, the inability of Origo to exert control to convert this settlement into a payment to Origo, and
the global pandemic of the novel coronavirus COVID-19 occurring between the year end and the date of this transaction,
the Board do not consider that this announcement represents sufficient evidence to base a fair value of the investment at
31 December 2019.
As at 31 December 2018
Celadon Mining Ltd
Multiples method
Valuation technique
Significant
unobservable inputs
Discount for lack of
marketability
Range
80%
Gobi Coal & Energy Ltd
Consensus pricing
method
Offered quote
$275,348
- 29 -
12
Loans
The Group has entered into convertible credit agreements and has the right to convert the outstanding principal balance
of relevant loans into borrower’s shares according to certain conversion conditions, and loan agreements with certain
investee companies as set forth in the table below.
As at 31 December 2019:
Borrower
Convertible credit agreements*
Loan
rates
%
Loan
principal
US$'000
Loans
due
within
one year
US$'000
Loans
due after
one year
US$'000
Fair value
US$'000
Staur Aqua AS
0-15
3,848
-
-
-
-
-
-
The convertible loan issued to Staur Aqua was fully impaired in 2018.
As at 31 December 2018:
Loan
rates
%
Loan
principal
US$'000
Loans
due
within
one year
US$'000
Loans
due after
one year
US$'000
Fair value
US$'000
Borrower
Convertible credit agreements*
Staur Aqua AS
0-15
3,848
-
-
-
-
-
-
*
Loans in relation to convertible credit agreements are measured at fair value. Loans in relation to loan agreements
are measured at amortised cost using the effective interest rate method less any identified impairment losses.
13
Trade and other receivables
Trade debtors
Other debtors
Prepayment
Total
14 Cash and cash equivalents
Current account
Total cash and cash equivalents
2019
US$'000
2018
US$'000
-
8
26
34
-
22
5
27
2019
US$'000
2,455
2,455
2018
US$'000
3,883
3,883
- 30 -
15
Trade and other payables
Trade payables
Other payables
Total
16
Financial guarantee contracts
Financial guarantee contracts*
Total
*
2019
US$'000
-
296
296
2019
US$'000
-
-
2018
US$'000
-
382
382
2018
US$'000
435
435
In July 2013, the Group entered into a purported guarantee agreement with IRCA Holdings Ltd and ABSA Bank
Limited purportedly to guarantee the repayment of loan facilities of up to Rand 6,769,000 extended by ABSA
Bank Limited to IRCA Holdings Ltd, which has applied for liquidation, so the Group recognised the purported
guarantee as a liability.
IRCA Holdings Ltd was struck off the company register in British Virgin Islands in the year ended 31 December
2018, and in the period since strike-off the Company has received no request for payment of any amounts under
this guarantee. Given the time lapse since the guarantee was purportedly given and that IRCA Holdings Ltd., the
counterparty has been stricken from the Companies’ Register, the Board now considers that the possibility of the
purported guarantee being exercised as remote. The Board has therefore decided to no longer recognize the
purported guarantee as a Company liability.
17 Redeemable / convertible zero dividend preference shares
Number of
shares
Liability
component
Equity
component
US$'000
US$'000
Balance at 1 January 2018
Interest expense on redeemable zero dividend
preference shares
Capitalisation of redeemable zero dividend
preference shares
Balance at 31 December 2018
Distribution to redeemable preference share
holders
Balance at 31 December 2019
57,000,000
-
-
57,000,000
-
57,000,000
-
-
-
-
-
-
-
-
-
-
-
-
Other
reserve
US$'000
50,688
-
-
50,688
(1,068)
49,620
In September 2017, the Company restructured the terms of its existing convertible zero dividend preference shares, where
the conversion feature has been removed, which were revised as redeemable zero dividend preference shares. The
principal terms of restructure includes: i) removal of redemption of at least 12 million convertible zero dividend preference
shares and/or maturity date; ii) reset of the accreted principal amount per preference shares to US$1.0526 each; iii) no
rate of return on the outstanding amount will begin to accrete until 1 January 2018 and, iv) in respect of each preference
share still in issue on 1 January 2018, its principal amount of US$1.0526 shall be subject to the accretion of a rate of return
equal to 4 per cent per annum from (and including) 1 January 2018 to (and including) the date on which such amount is
redeemed, with such return accruing on a simple and not compound basis. Due to the revised terms, the convertible zero
dividend preference shares were regarded as an extinguishment and redeemable zero dividend preference shares were
therefore recognised.
On 27 September 2017, the rights attaching to the redeemable zero dividend preference shares and the ordinary shares
changed so that they rank alongside each other, and the redeemable zero dividend preference shareholders receive
distributions when ordinary shareholders do. Post 27 September 2017, the redeemable zero dividend preference shares
are accounted for as an equity instrument in accordance with the accounting policies disclosed in Note 1.5.
- 31 -
17 Redeemable / convertible zero dividend preference shares (continued)
All future distributions to ordinary and redeemable zero dividend preference shareholders are on the following basis (pro
rata within the respective classes of shares):
• in respect of the first US$15 million of distributions, 80 percent (i.e. US$12 million) to the redeemable zero dividend
preference shareholders and 20 percent (i.e. US$3 million) to the ordinary shareholders;
• in respect of distributions in excess of the first US$15 million: until such time as all redeemable zero dividend preference
shares have been redeemed in full, 44 percent to the redeemable zero dividend preference shareholders and 56 percent
to the ordinary shareholders; thereafter, 100 percent to the ordinary shareholders.
The redeemable zero dividend preference shares are now subject to the distribution in accordance with articles 4.10 to
4.12 of the Articles. In summary, the distributions will be made, at such reasonable time as the Board shall decide, when:
(i)
the Company has available funds, which is the aggregate amount of the Company’s net cash less working capital
requirements for the following 12 months and;
the Company would be able to comply with the solvency test under the Companies Act 2006 (“Solvency Test”)
immediately after distribution.
(j)
In the year ended 31 December 2019 a distribution of US$1,680,000 was made to holders of the redeemable zero dividend
preference shares.
18
Issued capital
Authorised
Number of shares
£'000 Number of shares
£'000
Ordinary shares of £ 0.0001 each
500,000,000
50
500,000,000
50
2019
2018
Issued and fully paid
Number of shares US$'000 Number of shares US$'000
Ordinary shares of £ 0.0001 each
At beginning and end of the year
Redeemable zero dividend preference shares of no
par value (note 19)
At 1 January
At 31 December
19 Other reserve
358,746,814
56
358,746,814
56
57,000,000
-
57,000,000
-
-
-
57,000,000
-
57,000,000
-
-
-
This mainly comprised 57,000,000 (US$50,688,000) redeemable zero dividend preference shares at no par value
capitalised in September 2017 (see note 17).
- 32 -
20 Note to the consolidated statement of cash flows
(a) Major non-cash transaction
During the year ended 31 December 2019, interest expenses of US$nil (2018: (US$335,000)) related to interest on
borrowings and redeemable zero dividend preference shares.
21
Financial instruments - Risk management
The Group are exposed through their operations to one or more of the following risks:
-
-
-
-
-
-
Fair value risk
Cash flow interest rate risk
Currency risk
Liquidity risk
Concentration risk
Price risk
The policy for managing these risks is set by the board. The policy for each of the above risks is described in more detail
below:
Fair value risk
The Group’s financial assets are predominantly investments in unquoted companies, and the fair value of each investment
depends upon a combination of market factors and the performance of the underlying asset. The Group does not hedge
the market risk inherent in the portfolio but manages asset performance risk on an asset-specific basis by continuously
monitoring each asset’s performance and charging the change of each asset’s fair value to the consolidated statement of
comprehensive income as necessary.
Cash flow interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of
changes in market interest rates. The Group’s exposure to the risk of changes in market interest rates is relatively small
as the Group’s outstanding debt is fixed rate. Meanwhile, the interest income is not material in the context of the total
portfolio return as a whole.
Currency risk
Some of the Group’s assets, liabilities, income and expenses are effectively denominated in currencies other than US
Dollars (the Group’s presentation and functional currency). Fluctuations in the exchanges rates between these currencies
and US Dollars will have an effect on the reported value of those items.
The following table demonstrates the sensitivity of the Group’s loss before tax due to a change in the fair value of
monetary assets and liabilities resulting from a reasonably possible change in the US dollar, with all other variables held
constant.
2019
2018
Appreciation/
(depreciation) in US$
+10%
-10%
Effect on loss before tax
US$'000
72
(72)
Effect on net asset value
US$'000
72
(72)
+10%
-10%
69
(69)
69
(69)
The assumed movement for currency rate sensitivity analysis is based on the currently observable market environment.
- 33 -
21
Financial instruments - Risk management (continued)
The Group’s assets and liabilities that are effectively denominated in currencies other than the functional currency, US
Dollars, are:
2019
GBP
NOK
RMB
HKD
CAD
ZAR
Total
US$'000
US$'000
US$'000
US$'000
US$'000
US$'000
US$'000
Cash and bank balances
Investments at FVTPL*
Loans
Trade and other receivables
Total Assets
Trade and other payables
Financial guarantee contracts
Provision
Total Liabilities
2018
Cash and bank balances
Investments at FVTPL*
Loans
Trade and other receivables
Total Assets
Trade and other payables
Financial guarantee contracts
Provision
Total Liabilities
Liquidity risk
24
-
-
-
24
-
-
-
-
-
-
-
-
-
-
-
-
-
1
-
-
(4)
(3)
-
-
-
-
63
-
-
-
63
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
88
-
-
(4)
84
-
-
-
-
GBP
NOK
RMB
HKD
CAD
ZAR
Total
US$'000
US$'000
US$'000
US$'000
US$'000
US$'000
US$'000
126
-
-
-
126
-
-
(103)
(103)
-
-
-
-
-
-
-
-
-
1
-
-
(4)
(3)
-
-
-
-
66
-
-
-
66
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(435)
-
(435)
193
-
-
(4)
189
-
(435)
(103)
(538)
The table below analyses the Group’s financial liabilities into relevant maturity groupings based on the remaining period
at the end of reporting period to the contractual maturity date or, if earlier, the expected date on which the financial
liabilities will be settled. The amounts in the table are the contractual undiscounted cash flows.
Less than
1 month
1-3 months
3-12
months
over 12
months
Total
US$'000
US$'000
US$'000
US$'000
US$'000
-
-
-
-
-
-
-
-
-
435
-
-
-
-
-
296
-
-
296
435
Liabilities
31 December 2019
Other payables
Upper share rights
/contingent share awards
Short-term borrowing
Carrying
amount
US$'000
296
-
-
Total
296
296
-
-
296
Financial guarantees issued
Maximum amount
guaranteed
435
-
- 34 -
21
Financial instruments - Risk management (continued)
Liquidity risk (continued)
Liabilities
31 December 2018
Other payables
Upper share rights
/contingent share awards
Short-term borrowing
Carrying
amount
US$'000
382
103
-
Total
485
Financial guarantees issued
Maximum amount
guaranteed
435
-
Concentration risk
Less than
1 month
1-3 months
3-12
months
over 12
months
Total
US$'000
US$'000
US$'000
US$'000
US$'000
382
-
-
382
-
-
-
-
-
-
-
-
-
-
103
-
103
382
103
-
485
435
-
435
The main concentration risk for Origo is that the largest investments are concentrated in China for the amount of
US$1,133,000 (2018: US$3,249,000), 81% (2018: 86%) out of the total portfolio value of US$1,407,000 (2018:
US$3,527,000).
Price risk
Price risk may affect the value of listed and unlisted investments as a result of changes in market prices (other than arising
from interest rate risk or currency risk), whether caused by factors specific to an individual investment, its issuer or factors
affecting all instruments traded in the market.
As the majority of financial instruments are carried at fair value, with fair value changes recognised in the consolidated
statement of comprehensive income, all changes in market conditions will directly affect reported portfolio returns.
Price risk is managed by constructing a diversified portfolio of instruments traded on various markets and hedging where
appropriate.
The following table details the sensitivity to a 10% variation in equity prices. The sensitivity analysis includes all equity
investments held at fair value through profit or loss and adjusts their valuation at the year-end for a 10% change in value.
Increase in price
Decrease in price
2019
US$'000
141
(141)
2018
US$'000
353
(353)
The sensitivity to equity and fund investments has not increased during the year due to net investments and investment
portfolio loss in the year.
- 35 -
22 Share-based payments
The Group has a number of share schemes that allow an ex-director, certain ex-employees and its advisors to acquire
shares in the Company, as detailed in Note 1.4(d).
The total cost recognised in the consolidated statement of comprehensive income is shown below:
Equity-settled option
Upper share rights/contingent share awards
Total
2019
US$'000
-
(103)
(103)
2018
US$'000
-
-
-
The following table illustrates the number (“No.”) and weighted average exercise prices (“WAEP”) of, and movements in,
share options during the years ended 31 December 2019 and 31 December 2018.
Outstanding at 1 January
Granted during the year
Forfeited during the year
Exercised during the year
Expired during the year
Outstanding at 31 December
2019
No.
10,000,000
2019
WAEP
32.37p
2018
No.
13,500,000
-
-
-
500,000
9,500,000
-
-
-
-
-
-
-
3,500,000
2018
WAEP
29.22p
-
-
-
-
31.00p
10,000,000
32.37p
Exercisable at 31 December
9,500,000
31.00p
10,000,000
32.37p
The weighted average remaining contractual life for the share options outstanding as at 31 December 2019 was 2.09 years
(31 December 2018: 2.94 years).
Outstanding options include 500,000 and 9,500,000 equity-settled options granted on 6 February 2009 and 2 February
2012 respectively to certain directors and employees of the Company. The Company did not enter into any share-based
transactions with parties other than employees during the years from 2007 to 2018, except as described above.
During the years 2018 and 2019, there were no options granted, forfeited or exercised.
- 36 -
22 Share-based payments (continued)
The following table illustrates the number (“No.”) and weighted average exercise prices (“WAEP”) of, and movements in
upper share rights and contingent share awards during the years ended 31 December 2019 and 31 December 2018.
Outstanding at 1 January
Granted during the year
Forfeited during the year
Exercised during the year
Expired during the year
Outstanding at the end of the year
2019
No.
7,711,425
2019
WAEP
9.48p
2018
No.
7,711,425
-
-
-
4,718,067
2,993,358
-
-
-
-
-
-
-
-
2018
WAEP
9.48p
-
-
-
-
9.48p
7,711,425
9.48p
Exercisable at the end of the year
2,993,358
9.48p
7,711,425
9.48p
The weighted average remaining contractual life for the share options outstanding as at 31 December 2019 was 4.29 years
(2018: 2.53 years).
On 16 October 2009, 4,847,099 of upper share rights were granted to certain director, executives and key employees
under the Company’s joint share ownership scheme ("JSOS"). 50% of upper share rights vested 12 months from the date
of grant and 50% of upper share rights vested 24 months from the date of grant. The fair value of the upper share rights
is estimated at the end of each reporting period using the binomial tree option pricing model. The contractual life of each
upper share rights granted is 10 years and therefore these all expired in the year ended 31 December 2019.
On 20 July 2012, 1,120,000 of contingent share awards were granted to certain directors, executives and key employees
under the Company’s JSOS, which vested 197 days from the date of grant. The contractual life of each contingent share
award granted is 10 years.
On 30 December 2014, 2,423,358 of share awards were granted to certain key employees under the Company’s JSOS,
which vested immediately at the date of grant. The contractual life of each share offer granted is 10 years.
The carrying amount of the liability relating to the upper share rights and the contingent share award as at 31 December
2019 is US$nil (2018: US$103,000) and the credit expense recognised as share-based payments during the year is
US$103,000 (2018: US$nil).
- 37 -
23 Related party transactions
Identification of related parties
The Group has a related party relationship with its subsidiaries, associates and key management personnel. The Company
receives and pays certain debtors and creditors on behalf of its subsidiaries and the amounts are recharged to the entities.
Transactions between the Company and its subsidiaries have been eliminated on consolidation.
Transactions with key management personnel
The Group’s key management personnel are the non-executive directors as identified in the director’s report.
The following balances were included in trade and other payables and were outstanding in respect of Directors
remuneration at the year end.
Amounts due to related parties
Key management personnel:
Hiroshi Funaki
Philip Peter Scales
John Chapman
24 Capital management
2019
US$'000
2018
US$'000
(19)
(15)
(35)
(19)
(13)
(35)
The primary objectives of the Group’s capital management are to safeguard the Group’s ability to continue as a going
concern and to maintain healthy capital ratios in order to support its business and maximise shareholders’ value.
The Group manages and makes appropriate adjustments to its capital structure on an ongoing basis in light of changes in
economic conditions and the risk characteristic of the underlying assets. To maintain or adjust the capital structure, the
Group may adjust dividend payments to shareholders, return capital to shareholders and/or issue new shares. The Group
is not subject to any externally imposed capital requirements. No changes were made in the objectives, policies or
processes during the years ended 31 December 2019 and 31 December 2018.
The Group monitors capital using a gearing ratio, which is net debt divided by capital plus net debt. Net debt includes
total liabilities less cash and bank balances. Capital includes equity attributable to equity holders of the parent company.
The gearing ratios as at the reporting dates were as follows:
2019
US$’000
2018
US$’000
296
(2,455)
(2,159)
3,600
3,600
1,441
(150%)
1,167
(3,883)
(2,716)
6,275
6,275
3,559
(76%)
Total liabilities
Less: Cash and bank balances
Net debt
Equity attributable to equity holders of the parent
Capital
Capital and net debt
Gearing ratio
- 38 -
25 Summary of financial assets and financial liabilities by category
Financial assets
Cash
Financial assets at amortised cost
Fair value through profit or loss – designated
Financial liabilities
Financial liabilities measured at amortised cost
Financial guarantee contracts
2019
US$’000
2018
US$’000
2,455
34
1,407
3,896
296
-
296
3,883
28
3,527
7,438
485
435
920
26 Commitments and contingencies
There were no material contracted commitments or contingent assets or liabilities at 31 December 2019 (31 December
2018: none) that have not been disclosed in the consolidated financial statements.
27 Subsequent events
In June 2020, the Company were informed by the controlling shareholder of Celadon Mining Ltd. ("Celadon") that Celadon
has entered into an agreement with a third party to sell Celadon's assets for approximately RMB 330 million net to Celadon
or approximately $47 million ("the net sale proceeds") with closing scheduled for the earlier of (i) the lifting of certain
restrictions on travel in connection with the global pandemic or (ii) 31 December 2020. The controlling shareholder then
expects to return the net sale proceeds to Celadon's shareholders through a share buyback. If this occurs the Company
would receive approximately USD 4.2 million. The Company invested approximately USD 13.1 million in Celadon in 2011.
In the Company's last published accounts dated 30 June 2019, the Celadon investment was carried at a "fair value" of
$1.129 million. The Company has not been involved in the negotiations for the sale of the Celadon assets and has no direct
insight into whether closing will occur as planned.
The extent of the impact of the coronavirus (“COVID-19”) outbreak on the financial performance of the company’s
investments will depend on future developments, including the duration and spread of the outbreak and related
advisories and restrictions and the impact of COVID-19 on the financial markets and the overall economy, all of which are
highly uncertain and cannot be predicted. If the financial markets and/or the overall economy are impacted for an
extended period, the company’s investment results may be materially adversely affected.
- 39 -
Statement of Compliance with the QCA Corporate Governance Code
(This disclosure was last reviewed and updated on 25 June 2020)
Introduction
The Board of Origo Partners Plc (the “Company”) has adopted the 2018 QCA Corporate Governance Code (the “QCA Code”).
The Board intends to take appropriate measures to ensure that the Company complies with the QCA Code.
Principle 1 - Establish a strategy and business model which promote long-term value for shareholders
The Company is now in realisation mode and entered into an amended Asset Realisation Agreement with the Company’s
investment consultant Origo Advisers Limited on 20 April 2018. This Agreement was terminated for cause in March 2019.
The Company holds a portfolio of unquoted interests and illiquid, publicly traded, equity interests, in companies principally
based or active in China and Mongolia (“Portfolio”).
The Company shall, through an orderly realisation program, seek to divest the entire Portfolio over a period of no longer than
4 years (“Realisation Period”) at such time and under such conditions as the Independent Directors may determine in order to
maximize value on behalf of Shareholders. The 4-year period ended on 20 November 2018. On 24 December 2019, the
Company announced its intention to put the remaining assets up for auction. On 7 May 2020 the Company announced that
the auction process had been delayed due to the effect of the Covid-19 pandemic.
The Company’s realisation policy will not result in any immediate or accelerated sales; investments will only be realised when,
in the opinion of the Independent Directors, appropriate terms can be agreed.
During the Realisation Period, the Company shall maintain the ability at its discretion, to pursue follow-on investments in the
existing Portfolio companies in order to maximize value and/or facilitate future divestments.
All divestments, and any follow-on investments relating to a Portfolio company, above a cumulative threshold of
US$500,000, will be considered and approved by the Independent Directors.
Net proceeds of divestments shall, pursuant to the Company’s Articles of Association, be distributed to shareholders at such
time as determined by the Board of Directors, at its absolute discretion, for the purpose of maximizing returns to
shareholders while maintaining sufficient liquidity for working capital and provisions for follow-on investments.
Principle 2 - Seek to understand and meet shareholder needs and expectations
Although the Company is in realisation mode the Directors actively seek to build a relationship with its shareholders and
continue to manage shareholder’s expectations. The Company remains committed to listening and communicating openly
with its shareholders to ensure that its strategy and performance are clearly understood. Meetings are held with
shareholders, typically following the issuing of results.
- 40 -
For shareholders the AGM is the main forum for dialogue with the Board and Directors are available to answer questions
raised by shareholders. The results of the AGM are subsequently published on the Company’s website.
There are also periodic class meetings held which is another forum for dialogue with the Directors, the results of these class
meetings are also published on the Company’s website. The Directors are the main point of contact for the shareholders.
Principle 3 - Take into account wider stakeholder and social responsibilities and their implications for long-term success.
This principle now has limited applicability, given that the investment policy of the Company is to realise its portfolio and to
return the net proceeds to shareholders. The Board has oversight, accountability and contact with key resources and
relationships.
The group’s stakeholders include shareholders, auditors, regulators and industry bodies.
Engaging with stakeholders strengthens relationships and helps with business decisions in order to deliver the investment
policy.
Principle 4 - Embed effective risk management, considering both opportunities and threats, throughout the organisation.
The Company’s investment activities expose it to various types of risks, which are associated with the financial instruments
and markets in which it invests. The Board needs to ensure that the Company’s risk management framework identifies and
addresses all relevant risks.
The Board is responsible for reviewing and evaluating risk and considers the risks to the business at regular board meetings.
The Group is exposed through their operations to one or more of the following risks:
•
•
•
•
•
•
•
•
Country risk
Fair value risk
Cash flow interest rate risk
Currency risk
Credit risk
Liquidity risk
Concentration risk
Price risk
The policy for managing these risks is set by the board and is available to view on the Company’s website.
The Board has overall responsibility for the Company’s systems of internal controls, for reviewing their effectiveness and
ensuring efficient day to day operations. These controls aim to ensure that assets of the Company are safeguarded, proper
accounting records are maintained and the financial information used within the business and for publication are reliable.
- 41 -
Following their appointment in 2017, the new board appointed FIM Capital Limited as Administrator in order to improve the
levels of corporate governance, accounting and day to day management of the Company.
Principle 5 - Maintain the board as a well-functioning, balanced team led by the chair.
The Origo board was reconstituted in late 2017 with the appointment of three new directors and the resignations of two of
the incumbent directors. In September 2017, Hiroshi Funaki joined the Origo board as a nominee of Origo’s largest ordinary
shareholder. On 31 October 2017, John Chapman joined the Origo board as a nominee of our largest preference shareholder.
Also, on 31 October 2017, Philip Scales joined the board as an independent director. John Chapman was elected the
Company’s Chairman. In April 2018, Niklas Ponnert an employee of the investment adviser resigned from the Board.
In the period since the new board was appointed, the primary focus has been to establish more robust controls over company
assets, strengthen the Company’s capital position by repaying debt, reduce costs, renegotiate the advisory agreement, clarify
the assets owned and begin to accelerate the realization of company assets in order to be able to return cash to shareholders
The Board now comprises three non- executive directors, John Chapman (Chairman), Hiroshi Funaki and Philip Scales and all
three have an effective and an appropriate balance of skills and experience for a company of this size.
The Board holds regular meetings, a minimum of at least 4 times per annum, either formally in person or informally by
telephone and ad hoc meetings are held as required. For the year ended 31 December 2019 nine board meetings took place.
All meetings were attended by all directors.
Principle 6 - Ensure that between them the directors have the necessary up-to-date experience, skills and capabilities.
The Board currently consists of three Non- Executive Directors. The Board is satisfied that between the Directors it has an
effective and appropriate balance of skills and experience, reflecting a broad range of commercial and professional skills
across geographies and industries that is necessary to ensure the Company is equipped to deliver is investment objective.
Additionally, each Director has experience with public companies.
John Chapman is an experienced investment company director with significant experience in managing and advising
investment companies in many emerging and developed markets. Mr. Chapman is a member of the New York State Bar and
holds the Chartered Financial Analyst (CFA) credential.
Hiroshi Funaki worked at Edmond de Rothschild Securities from 2000 to 2015 where he led the Investment Companies team,
focusing on Emerging Markets and Alternative Assets. Prior to that, he was Head of Research at Robert Fleming Securities,
also specialising in closed-end funds. He currently acts as a consultant to a number of emerging market investors. He has a BA
in Mathematics and Philosophy from Oxford University.
- 42 -
Philip Scales has over 40 years’ experience working in offshore corporate, trust, and third party administration. For 18 years,
he was Managing Director of Barings Isle of Man (subsequently to become Northern Trust) where he specialised in
establishing offshore fund structures, latterly in the closed-ended arena (both listed and unlisted entities). Mr. Scales
subsequently co-founded FIM Capital Limited where he is Deputy Chairman. He is a Fellow of the Institute of Chartered
Secretaries and Administrators and holds a number of directorships of listed companies and collective investment schemes.
FIM Capital Limited (“FIM”) is the Fund’s administrator, registrar and registered agent, and provide specialist fund
administration services to a variety of closed ended funds and collective investment schemes. Many of the closed ended
schemes are quoted on the London Stock Exchange. FIM Capital Limited act as secretary to the Company and are available to
advise and support the Board on corporate governance and secretarial matters.
Legal firms in London and China have been appointed to specifically provide advice to the Board on all matters relating to the
sale of the portfolio of assets.
Principle 7 - Evaluate board performance based on clear and relevant objectives, seeking continuous improvement.
The Directors intend to carry out board evaluations annually.
Principle 8 - Promote a corporate culture that is based on ethical values and behaviours.
It is the Board who set the standard/culture within the organisation and they ensure that there are appropriate codes of
practice in place.
Principle 9 - Maintain governance structures and processes that are fit for purpose and support good decision-making by the
board.
The Board has joint authority and decision-making powers for all aspects of the Company’s activities.
The Board has adopted appropriate delegations of authority that set out matters that are reserved to the Board.
The Non-Executive Chairman is responsible for the effectiveness of the Board together with the responsibility to oversee the
Company’s corporate governance practices.
The responsibility for the Company's day-to-day operations has been delegated by the Board to FIM.
There are no separate committees as the board does not feel these are necessary given the size of the Board, the Company
and the investment objective of realising all assets matters normally considered by a committee are considered by the Board
as a whole.
- 43 -
Whilst there has been no formal adoption of matters reserved for the Board, the Directors review and approve the following:
•
•
•
•
•
•
Strategy and management
Policies and procedures
Financial reporting and controls
Capital structure
Contracts
Shareholder documents / Press announcements
• Adherence to Corporate Governance and best practice procedures
Principle 10 - Communicate how the Company is governed and is performing by maintaining a dialogue with shareholders and
other relevant stakeholders.
There are no additional committees and the board does not feel it is necessary at this time due to the size of the Company
and the fact that it is in realisation mode.
If a significant proportion of votes (e.g. 20% of independent votes) have been cast against a resolution at any general
meeting, the Company will include, on a timely basis, an explanation of what actions it intends to take to understand the
reasons behind that vote result, and, where appropriate, any different action it has taken, or will take, as a result of the vote.
The results of votes taken at meetings are published on the Company’s website. Historical annual reports and notices are also
published on the website.
COMMITTEES
As detailed in Principle 5 there are no Board committees (and therefore no committee reports) and this will be highlighted in
future Reports and Accounts.
The Company will monitor and review the need to form Committees to support the function of the Board.
- 44 -
Origo Partners Plc
Directors, Advisors and Other Information
Directors
John Chapman, Non-Executive Chairman
Hiroshi Funaki, Non-Executive Director
Philip Peter Scales, Non-Executive Director
Niklas Ponnert, Director
(resigned in April 2018)
Country of incorporation of parent company
Isle of Man
Company number
005681V
Auditor
Nominated adviser and broker
UK legal advisers
Lubbock Fine
Paternoster House
65 St Paul’s Churchyard
London EC4M 8AB
Arden Partners Plc
125 Old Broad Street,
London EC2N 1AR
Travers Smith LLP
10 Snow Hill,
London EC1A 2AL
- 45 -
174003