TIDMJADE
RNS Number : 8469A
Jade Road Investments Limited
26 May 2023
26 May 2023
RNS
JADE ROAD INVESTMENTS LIMITED
("Jade Road" or the "Company")
Final Results
Jade Road Investments Limited (AIM: JADE), the London quoted
company focused on seeking the best risk-adjusted returns globally,
is pleased to announce the publication of its final results for the
year ended 31 December 2022.
Hard copies of the Annual Results are available upon request.
The Results are also available on Jade Road's website:
https://jaderoadinvestments.com/investors/financial-reports .
Financial Highlights
2022 2021 Change*
Net Asset Value US$15.1m (GBP12.2m) US$68.0m (GBP55.8m) -77.8%
---------------------- ----------------------- --------
Gross Portfolio
Income US$2.8m (GBP2.2m) US$2.5m (GBP2m) 12%
---------------------- ----------------------- --------
Net Portfolio Income US$-50.6m (GBP-40.9m) US$-35.6m (GBP-29.2m) -42.1%
---------------------- ----------------------- --------
Net Profit / Loss US$-52.9m (GBP-42.8m) US$-38.4m (GBP-31.5m) -37.7%
---------------------- ----------------------- --------
Year-end cash US$0.3m (GBP0.2m) US$0.8m (GBP0.6m) -62.5%
---------------------- ----------------------- --------
Net Asset Value
per share US$0.13 (GBP0.10) US$0.58 (GBP0.5) -77.5%
---------------------- ----------------------- --------
*Exchange rate as of 25.05.2023
Operational Highlights
- Meize Energy: In 2022, a new factory has been under
construction in Mori Kazak Autonomous County, Xinjiang Province.
The plant commenced operations in September 2022 as the main
construction work had been completed. The construction work is
expected to be fully completed in August 2023.
Post Period End Activity
- In February 2023, the Company announced the completion of a
conditional equity fundraise which was conditionally underwritten
in its entirety by Heirloom Investment Management LLC ("HIM"). At
the General Meeting all resolutions were duly approved, including
the new investment strategy. In line with its new amended
investment strategy, the Company announced in April that it had
invested USD500,000 in Heirloom Investment Fund SPC - Heirloom
Fixed Return Fund SP, managed by HIM.
- In March 2023, the Company announced that John Batchelor,
Non-Executive Director, had resigned from the Board with immediate
effect.
John Croft, Chairman of Jade Road Investments, commented:
'The Company continues to make great strides to pivot from its
legacy portfolio of Asian assets to investing in geographically
diverse assets in more stable regions with stronger legal systems,
uncorrelated to the general market and expected to consistently
generate attractive risk-adjusted returns. As an integral part of
this strategy, a primary focus has been on generating cash through
disposals and this has led to some difficult decisions having to be
taken which has resulted in some significant impairment of the
portfolio.
The Company has pushed through the majority of its restructuring
with a number of significant changes to its financial and
operational structure. The upshot is that we now have a Company
that is primed to push on with its new investment strategy.
The past year has been challenging for the Company, but the
Board now believes that by adopting a new investment strategy and
accelerating the disposals of its legacy assets, it is in a strong
position to fulfil its clear objective of providing shareholders
with attractive uncorrelated, risk-adjusted, long-term returns to
becoming a dividend paying vehicle.'
FOR FURTHER INFORMATION, PLEASE CONTACT:
Jade Road Investments Limited +44 (0) 778 531 5588
John Croft
WH Ireland Limited - Nominated
Adviser +44 (0) 20 7220 1666
James Joyce
Andrew de Andrade
Hybridan LLP - Corporate Broker +44 (0) 203 764 2341
Claire Noyce
Jade Road Investments Limited
Annual Report 2022
Company Information
Directors
Mr. John Croft
- E xecutive Chairman
Hugh Viscount Trenchard
- Non-e xecutive Director
Dr. Lee George Lam
- Non-executive Director
Mr. Stuart Crocker
- Non-executive Director
Investment Manager
Harmony Capital Investors Limited
Intertrust Corporate Services (Cayman) Limited, 190 Elgin
Avenue, George Town
Grand Cayman KY1-9005 Cayman Islands
Key Personnel of Investment Manager
Harmony Capital Investors Limited
Mr. Suresh Withana
- Co-founder, Managing Partner
Registered Office
Commence House , Wickhams Cay 1
PO Box 3140
Road Town , Tortola
British Virgin Islands VG1110
Company Secretary
Conyers Trust Company (BVI) Limited
Commence House , Wickhams Cay 1
PO Box 3140
Road Town , Tortola,
British Virgin Islands VG1110
Principal Place of Business
29/F, Infinitus Plaza
199 Des Voeux Road Central, Hong Kong
Registrars
Computershare Investor Services (BVI) Limited, Woodbourne Hall
PO Box 3162 Road Town, Tortola, British Virgin Islands
Depositary Interest Registrars
Computer Investor Services PLC
The Pavilions
Bridgwater Road
Bristol BS99 6ZY
Registered Agent
Conyers Trust Company (BVI) Limited
Commence House , Wickhams Cay 1
PO Box 3140
Road Town, Tortola
British Virgin Islands VG1110
Nominated Adviser
WH Ireland Limited
24 Martin Lane
London EC4R 0DR
Broker
Hybridan LLP
1 Poultry,
London
EC2R 8EJ
Auditors
PKF Littlejohn LLP
15 Westferry Circus
London E14 4HD
Legal Advisers
Locke Lord (UK) LLP
Second Floor
201 Bishopsgate
London EC2M 3AB
Conyers Dill & Pearman
Romasco Place, Wickhams Cay 1
PO Box 3140
Road Town , Tortola
British Virgin Islands VG1110
Website
www. jaderoadinvestments .com
Stock Code
AIM: JADE
Frankfurt: 1CP1
Company Description & Investing Policy
Jade Road Investments Limited ("Jade Road" or the "Company") is
focused on providing growth capital and financing to emerging and
established Small and Medium Enterprises ("SMEs") worldwide,
well-diversified by national geographies, instruments and asset
classes. This vital segment of the economy is underserved by the
traditional banking industry and capital markets due to regulatory
and structural reasons. The Company is now more globally focused
and aims to provide shareholders with attractive uncorrelated
risk-adjusted returns over the short and longer-term from a
diversified portfolio of investments. Jade Road Investments Limited
is an investment company holding portfolio investments while
Harmony Capital Investors Limited acts as its external Investment
Manager.
Our common stock is publicly traded on the Alternative
Investment Market ("AIM") market of the London Stock Exchange,
under the ticker symbol "JADE". The Board of Jade Road Investments
works together with Harmony Capital Investors Limited ("Harmony
Capital") to execute our investment strategy. Ultimate authority
for investment decisions vests with the Board.
Investing Policy
The Directors believe that there is an excellent long-term
opportunity to provide financing, primarily backed by real assets,
with a primary focus on income-production and a secondary focus on
capital gains. The Directors believe that by investing in
asset-backed assets that are income-generating, the Company will be
provided with more certainty when predicting future cash flows,
thus allowing it to plan an appropriate dividend policy in due
course. It is believed that this will allow for the optimal
delivery of shareholder value in the form of the payment of a safe,
consistent dividend yield at an attractive spread to other yielding
options, while growing the underlying capital base of the
Company.
In order to take advantage of this opportunity and to deliver
this shareholder value, the Company required an updated Investing
Policy that will permit it to take advantage of the best
risk-adjusted investments globally, provided the majority of them
are asset-backed and/or income producing and backed by legal
jurisdictions that the Directors are comfortable with and provide a
safe underpinning to allow for the Company to earn its return and
recoup its investment as per the terms of the financing that it
agrees to.
Moreover, given the long-term nature of the Company's investment
horizon, the Directors believe that the updated Investing Policy
should enable the Company to navigate changes in the relative
attractiveness of various financing opportunities through varying
economic cycles and geopolitical shifts.
Finally, and most importantly, the Board expects the Company's
investment portfolio to be repositioned over time such that it
generates both income and capital gains.
In order to facilitate the Company's strategic objectives, the
Company approved post year-end the Resolution to amend the
Investing Policy to the following:
1) The Company has an indefinite life, is sector agnostic and is
targeting assets in any class which will produce income returns,
with a secondary focus on capital gains over time for its
Shareholders.
2) The Company will seek the best risk-adjusted returns
globally, with a preference for investments governed by legal
systems that the Company understands and believes to be
reliable.
3) The Company may invest directly into listed securities,
over-the-counter traded securities, currencies, companies, real
assets, contractual obligations, or commodities ("Direct
Financings").
4) The Company may provide financing to entities, becoming a
lender to, or a limited partner or shareholder of, an affiliated or
third party which itself has a strategy to invest in underlying
listed securities, over-the-counter traded securities, currencies,
companies, real assets, contractual obligations or commodities
("Indirect Financings").
5) The Company shall ensure that at the time of entering into a
Direct Financing, it shall represent not more than 30% of the
Company's net asset value immediately following the relevant
transaction. There is no limit on the number of investments the
Company may take.
6) The Company shall ensure that at the time of entering into an
Indirect Financing, no underlying asset of the indirectly financed
entity shall represent more than 30% of the Company's net asset
value immediately following the relevant transaction.
7) There is no restriction on the duration the Company will hold
any investment nor any restriction on the time for the Company to
make its investments in such assets.
8) The Company will pursue a predominantly passive management
strategy. However, on a case by case basis, it may consider
securing additional governance rights such as observer or board
appointments where the situation or asset dictates such additional
oversight.
9) The Company may utilise gearing when appropriate. The Company
will continue to exercise prudence in determining whether
prevailing market conditions and investor expectations warrant the
utilisation of any leverage over its portfolio.
10) The Company will consider issuing its own shares as
consideration for interests in other companies but such cross
holdings will be limited to 20 per cent. of the Company's issued
shares in aggregate from time to time.
The Directors believe that the change of Investing Policy will
broaden the Company's activities and allow it to build a portfolio
of investments producing income and with the potential for capital
gains. The Directors further believe that the change of Investing
Policy also enables the Company to:
-- Increase the breadth of the transactions and opportunities it can consider.
-- Lower its overall investment risk by increasing
diversification and shifting geographic focus toward more stable
geographies with stronger legal systems; and
-- Implement its long-term objective of providing Shareholders
with a stock that produces income and retains the potential for
appreciation.
The Board and the Investment Manager each have extensive
international experience across a range of industries and asset
classes. Income-producing assets which are backed by real assets
have already been indicatively assessed as part of the Investment
Manager's internal processes and while no specific commitments have
been entered into, the Board and Investment Manager are comfortable
in their ability to execute the New Investing Policy.
Chairman's Statement
The Company continues to make great strides to pivot from its
legacy portfolio of Asian assets to investing in geographically
diverse assets in more stable regions with stronger legal systems,
uncorrelated to the general market and expected to consistently
generate attractive risk-adjusted returns. As an integral part of
this strategy, a primary focus has been on generating cash through
disposals and this has led to some difficult decisions having to be
taken which has resulted in some significant impairment of the
portfolio.
Overview
Solid progress was made to transition the Company away from its
legacy asset portfolio of Asian SMEs towards a more globally
diverse portfolio.
As part of the Company's new amended investment strategy to
continue to deploy capital into multiple asset-backed and/or
income-generating investments but shift the geographical focus, the
Company completed a significant (post balance sheet) investment in
a highly diversified and low-correlated fund, managed by
Delaware-based Heirloom Investment Management.
To enable this, the Company successfully restructured its US
Dollar-denominated secured debt, extending its maturity to 31
December 2023.
In terms of its current Asian asset portfolio, the Investment
Manager is conducting an accelerated disposal programme. In August,
the Company received the third and final equal tranche payment of
US$400,000 from China-based Meize Energy Industries, thereby
completing the partial disposal transaction.
These developments, consisting of the new amended investment
strategy, significant new investment and accelerated disposal
programme, have placed the Company on a much firmer footing and I
believe is now heading in the right direction to achieve its
long-term aim of becoming a dividend-paying vehicle.
New Investment Strategy: Seeking the best risk-adjusted returns
globally
Last year, I wrote about the economic and geopolitical
challenges facing China and Southeast Asia and how the Company had
been hard at work pivoting away from its legacy assets in the
region. The new investment strategy, approved by an overwhelming
number of shareholders at the Company's recent General Meeting,
allows the Company to expand beyond its previous focus on Asian
investments to a global approach.
The intention is to create a geographically diverse portfolio as
well as benefit from an environment where inflation levels are
higher than interest rates. The long-term aim is to create strong
risk-adjusted returns with the capability to generate regular
income in addition to capital gains, and become a dividend paying
vehicle.
In order to facilitate this transformation, productive talks
were held with the holders of the Company's US Dollar-denominated
bonds totaling USD3.6 million. The Board was able to extend the
maturity of the Loan Notes to 31 December 2023 on 1(st) December
2022; albeit with a modest increase in the interest rate payable on
the principal amount of the Loan Notes outstanding to 15% per year,
and an increase in the interest rate payable on the principal
amount of the outstanding Loan Notes to 16% per year where US$1.8
million or more of the principal amount of the Loan Notes remain
outstanding by 30 June 2023.
In addition, a "priority return" provision was agreed requiring
the Company to prioritise proceeds received by it pursuant to an
equity placing of more than GBP10,000,000, or of any sale
(including any contractual rights) within the Company's existing
portfolio in making repayments on the Notes. Any such repayment
would be limited to 10% of the net proceeds received by the Company
pursuant to a Qualifying Placing, or 65% of the net proceeds
received by the Company following an asset sale.
Finally, it was agreed that the Loan Note holders would be
issued with 3-year warrants equivalent to 5% of the next share
issuance undertaken by the Company with a strike price at a 50%
premium to the price of such share issuance on 22(nd) March
2023.
The Board believes that the new agreement with the Loan Note
holders and the amended investment strategy will prove more
attractive to the Company's shareholders than its current
investment portfolio.
Legacy Portfolio: Clearing the decks
The Company turned its focus in 2022 to accelerating the
disposal of its mainly China based assets as a first step in its
strategy to pivot away from Asia.
Its Investment Manager embarked on a programme to seek buyers
for its major assets, with a prime focus on generating cash that
could be reinvested in other geographies and income generating
assets.
During the year, Jade Road completed the successful partial
disposal of Meize Energy Industries, a leading privately owned wind
turbine blade manufacturing company in China at a 22% premium. The
Company continues to retain a 7.08% stake in Meize valued at USD8.8
million. Importantly, the deal demonstrated that international
transactions can still be done in China.
The Company's largest shareholding is an 85% stake in Future
Metal Holdings Limited (FMHL), the largest magnesium dolomite
quarry in Shanxi Province, China. As previously announced, the
local management team remains committed to seeking divestment
opportunities with two potential buyers lodging formal letters of
interest to acquire the Quarry. To be conservative, the Company's
investment has effectively been written down from US$50.4 million
to US$5.3 million.
Singapore-headquartered DocDoc describes itself as the world's
first patient intelligence company, harnessing the power of AI to
provide patients with the information they need to make optimal
health care decisions. As of 31 December 2022, the carrying value
of the Convertible Bond was US$2.8 million.
Additional investments in Asian SMEs include a senior secured
loan investment in Japanese luxury real estate developer Infinity
Capital Group (ICG) and a 40% holding in Infinity TNP, a wholly
owned subsidiary of ICG. During 2022 ICG faced certain difficulties
caused by the COVID lock down in Japan. After failing to make a
number of due interest payments to Jade, the Company decided to
take legal action to recover its loan principal and accrued
interest. In November 2022, the High Court in Hong Kong upheld
Jade's claim in full and the Company is now seeking enforcement of
this judgement. The Company had previously taken an interest credit
default charge against this investment and in order to be prudent,
the Company decided to maintain the same US$1.4 million carrying
value for ICG, while for Infinity TNP it was decided to take a 100%
provision against this investment in the light of the legal dispute
with its parent company ICG.
Whilst action is being taken to accelerate asset disposals, the
Company is also focused on reducing its cost base where possible
and to implement this repositioning, the Company signed an amended
Services Agreement with its Investment Manager, Harmony Capital
Investors Limited to reduce its management fee to US$350,000 per
year as it shifts its focus to the orderly monetisation of its
Asian assets. HCIL will also receive an incentive fee amounting to
20% of the cash received by the Company (or any of its Associates)
from the sale of any Investment that is part of the Legacy
Portfolio and is sold to an HCIL Buyer. The HCIL agreement is for
an initial period of one year.
As the Board believes that the current value of its portfolio
has not been reflected in its current share price, and by having
taken the tough decisions with its legacy portfolio, this will
place it in good stead going forward and therefore it is
anticipated that any future disposals will represent an upside in
valuation to the Company.
Post balance sheet events: New Investment
In February of this year, the Company announced the completion
of a conditional equity fundraise which was conditionally
underwritten in its entirety by Heirloom Investment Management LLC
("HIM"). The gross placing amount for this fundraise is
$1,750,000.
At the General Meeting all resolutions were duly approved,
including the new investment strategy.
In line with its new amended investment strategy, the Company
announced in April that it had invested USD500,000 in Heirloom
Investment Fund SPC - Heirloom Fixed Return Fund SP, managed by
HIM.
The new fund is geographically diverse with low correlation to
most markets or major asset classes, such as equities, fixed income
and real estate. Current themes include asset-backed lending,
equipment leasing, agriculture (farm business), niche real estate
(US single family rental), infrastructure, litigation finance and
music royalties.
An important aspect is that the fixed return class of shares in
the fund are supported by Loss Absorption Shares, owned by the
manager of the Fund, which absorbs any negative monthly losses.
This provides strong downside risk protection while offering the
ability to generate modest returns. The fund has established a
fixed return rate of 6% to provide clarity and transparency to
investors.
The Company believes that the fund ticks all its boxes,
providing a diversified portfolio of primarily asset-backed and/or
income producing investments targeted to deliver an attractive
risk-adjusted return over the long term: Currently, the fund has a
target yield of 7% and target net returns of 10-12%, and represents
a precise example of the type of new investments it intends to seek
in future.
The Board
In March 2023, the Company announced that John Batchelor,
Non-Executive Director, had resigned from the Board with immediate
effect. The Board would like to use this opportunity to once more
thank John for his contribution over the last two and half
years.
Outlook
The Company has pushed through the majority of its restructuring
with a number of significant changes to its financial and
operational structure. The upshot is that we now have a Company
that is primed to push on with its new investment strategy.
The past year has been challenging for the Company, but the
Board now believes that by adopting a new investment strategy and
accelerating the disposals of its legacy assets, it is in a strong
position to fulfil its clear objective of providing shareholders
with attractive uncorrelated, risk-adjusted, long-term returns to
becoming a dividend paying vehicle.
I would like to take this opportunity to personally thank
everyone involved in the successful completion of the partial
divestment in Meize, the extension of the maturity date of the US
Dollar-denominated corporate bonds and the new amended investment
strategy.
Finally, on behalf of the board, I would like to extend my
thanks to all of our shareholders for your continued support.
John Croft
26 May 2023
Chairman of the Board
Portfolio at 31 December 2022
Principal Effective Instrument Valuation Credit Credit Cash Equity Fair Provision Valuation
assets interest type at 31 income investment receipts investment/ value US$ at
% December US$ US$ million US$ other adjustment million 31
2021 million million movement US$ December
US$ US$ million million 2022
million US$
million
Fook Lam
Moon Convertible
Holdings - Bond - 1.4 - - - - (1.4) -
Future
Metal
Holdings Structured
Limited 84.8 Equity 50.4 0.6 - - - (45.1) (0.6) 5.3
Meize
Energy Redeemable
Industrial convertible
Holdings preference
Ltd 6.3 shares 8.2 0.3 - - (1.2) 1.5 - 8.8
DocDoc Convertible
Pte Ltd - Bond 2.6 0.2 - - - - - 2.8
Infinity
Capital Secured
Group - Loan Notes 1.4 0.3 - - - - (0.3) 1.4
Infinity
TNP 40 Equity 3.6 - - - - (3.6) - -
Project
Nicklaus - 1.9 - - - - (0.1) - 1.8
Loan to
HKMH 3.7 - - - - - (3.7) -
Corporate
debt - (3.6) - - - (0.3) - - (3.9)
Other
liabilities - (1.0) - - - (0.4) - - (1.4)
Cash 0.8 - - 1.2 (1.7) - - 0.3
Total N et
Asset Value 68.0 2.8 - 1.2 (3.6) (47.3) (6.0) 15.1
------------------------- ------------ ---------- -------- ------------ --------- ------------ ----------- ---------- ----------
Portfolio Overview
Future Metal Holdings Limited
The Company has an 85% shareholding in FMHL.
In 2022, due to the continued severe Covid-19 situation in
Mainland China, as compared to the resurgence of economic activity
almost without exception in Asia, and the Chinese government's
tight regulations on travel and logistical activities, the Quarry
carried out production for less than 4 months. Despite these severe
restrictions, the local management managed to preserve the asset
while ensuring that the Company was not required to provide any
additional investment.
Due to these extreme conditions throughout the year, coupled
with the Company's decision to change its Investment Policy and
strategic direction, it has been determined that substantial
investment would be required to keep the mines operating. As a
result, a decision was taken to accelerate the divestment of the
Quarry in 2022, particularly towards the later part of the year.
Due to this focus on an accelerated divestment, rather than seeking
to hold the investment to maximise its value in the medium to long
term, the Company sourced two potential buyers that lodged written
letters of interest to acquire the Quarry. Both interested parties,
from the Quarry's local region, were aware of the Company's
motivated sale of the asset and their indicative bids reflected
this.
Historically the asset was valued with reference to its
fundamental value, derived from an independent assessment of its
core asset being its Magnesium Dolomite Reserves. Given the
accelerated divestment focus, the Investment Manager has
recommended that a more accurate valuation of the asset in 2022
would be to recognise the potential near term 'recovery value'
implied by the two expressions of interest received from the
domestic Chinese acquirers.
In accordance with this view, the Company has decided to apply a
100% provision against its carrying value of its equity investment
in the asset. It has further provisioned against historical loans
it has made to the Quarry. The result is that the value of the
Company's investment will be US$5.3 million as of 31 December 2022
(31 December 2021 US$50.4 million) .
Loan to HKMH
Other receivables include a US$3.7 million loan provided by the
Company but that was disbursed by the issuance of Company shares to
CASIL, a former minority shareholder, in return for the
cancellation of a put option that CASIL had been granted in the
past against FMHL. Considering the heightened emphasis on
divestment, the Investment Manager has proposed a revised valuation
approach for the asset in 2022. This approach seeks to reflect the
potential "recovery value" in the near term. According to the loan
agreement, the original repayment date was set for ten years after
the contract was signed in 2019. Therefore, seeking short-term
investment recovery can indeed be quite challenging due to the
extended timeline specified in the agreement.
To be conservative, the Company has decided to apply a 100%
provision against this receivable in 2022. As of 31 December 2022,
the carrying value of the Receivable was US$0.0 million (2021:
US$3.7 million).
Fook Lam Moon
The Company holds a convertible bond of US$26.5 million
("Convertible Bond") in Fook Lam Moon Holdings("FLMH"), which is a
shareholder of a Hong Kong-based restaurant group Fook Lam Moon
("FLM"). The Convertible Bond has a maturity of 5 years and pays a
coupon of 5.0% per annum (3.0% paid in cash with the remainder
rolled up with the principal amount outstanding).
FLM's business was impacted by the COVID-19 pandemic, as did its
peers' in the food and beverage industry in Hong Kong in 2022. FLM
has faced significant challenges due to the impact of COVID-19,
which greatly affected its business development and revenue.
Additionally, factors such as the restructuring of its equity
structure have further contributed to the current lack of prospects
for near-term recovery in the case of FLM.
In order to be prudent, the Company decided to apply a 100%
provision against this investment in 2021. And the Company wrote
off its credit income in 2022.
As of 31 December 2022, the carrying value of the Convertible
Bond was US$0.0 million (2021: US$0.0 million)
Infinity TNP
Tellus Niseko ceased operation in 2022 due to reduction in local
tourists. The local team has been closely monitoring the local
condition and shall resume business once tourism recovers.
Due to an ongoing dispute with ICG, a major shareholder of
Infintiy TNP, ICG has also breached a number of its undertakings
and the Company is considering legal action in order to exit /
recover its investment in due course. As a result of the
uncertainty of this situation, the Company has taken a 100%
Provision against this investment.
As of 31 December 2022, the carrying value of this investment
was US$0.0 million (2021: US$3.6 million).
Infinity Capital Group ("ICG")
Ultimate Prosperity Limited, a 100% owned subsidiary of the
Company incorporated in the British Virgin Islands, holds a Secured
Loan to ICG.
In early 2022, we did not receive any response regarding the
interest payment due to us. The Company launched a lawsuit against
ICG to recoup its investment and the High Court of the Hong Kong
Special Administrative Region ruled completely in the Company's
favour on a hearing dated the 25(th) of November 2022. As a result
of this ruling, the Company is now pursuing various options for
recovering its investment including enforce against a personal
guarantee provided by the Principal of ICG.
The Company will provide further updates in a timely manner
should there be any material developments.
The claimed amount for compensation is around $8 million. In
order to be prudent, the Company decided to maintain the same US$
1.4 million carrying value, given the uncertainty over the outcome
of the litigation.
Meize Energy Industries Holdings Limited ("Meize")
Swift Wealth Investments Limited, a 100% (2021: 100%) owned
subsidiary of the Company incorporated in the British Virgin
Islands, holds a 7.08% stake in Meize through a redeemable
preference share structure.
Meize is a privately owned company that designs and manufactures
blades for both onshore and offshore wind turbines.
In 2022, the highlight is that since March, a new factory has
been under construction in Mori Kazak Autonomous County, Xinjiang
Province. The plant commenced operations in September 2022 as the
main construction work had been completed. The construction work is
expected to be fully completed in August 2023.
In June 2022, JADE announced a partial divestment in Meize by
divesting 112,500 shares of the Series B Preferred Equity for
consideration of US$1.million ("Transaction Price"). The number of
shares sold in this partial divestment represents 12.0% of JADE's
holding in Meize.
Paid in three equal tranches, the Transaction Price was fully
received by JADE in August 2022.
Post this partial divestment, JADE holds approximately 7.08%
interest in Meize.
As of 31 December 2022, the Company's interest in Meize had a
fair value of US$8.8 million (2021: US$8.2 million) based on the
Transaction Price.
DocDoc Pte Ltd. ("DocDoc")
DocDoc is a Singapore-headquartered online network of over
23,000 doctors, 600 clinics, and 100 hospitals serving a wide array
of specialties. It uses artificial intelligence, cutting-edge
clinical informatics, and proprietary data to connect patients to
doctors which fit their needs at an affordable price.
In 2022, DocDoc successfully raised over USD 1 million through a
convertible bond offering. The funding was secured from one of our
existing investors based in Japan.
On the 13(th) of October 2022, DocDoc announced a collaboration
with QBE Singapore to launch Group Medical Prestige, a group health
insurance product. This product was offered in Singapore starting
October 2022 and subsequently other markets in Asia.
On the 8(th) of November 2022, DocDoc announced offering its
health insurance solutions to Aon's clients. Starting with
Singapore in October 2022, these solutions was offered to employers
via insurers across multiple markets in Asia.
As of 31 December 2022, the carrying value of the Convertible
Bond was US$2.8 million (2021: US$2.6 million).
Project Nicklaus (Changtai Jinhongbang Real Estate Development
Co. Ltd)
Lead Winner Limited ("LWL") is a 100% (2021: 100%) owned
subsidiary of the Company incorporated in the British Virgin
Islands.
LWL held a 15% stake in CJRE, the owner of a luxury resort and
residential development project in Fujian Province, Eastern China.
The Company divested its entire investment in 2017, however, the
transaction was structured such that an outstanding amount of
RMB12.0 million (approximately US$1.8 million), remained receivable
on or before 21 December 2018. This 'tail' payment from the
original divestment was characterised as a loan and was dependent
on CJRE itself receiving funds from the underlying project which
was being developed.
CJRE has launched a lawsuit against the buyer in November 2021
to claim end payment
On 13 July, a court session was held at the Xiamen Intermediate
People's Court regarding the litigation against Fuzhou R&F
Properties. Subsequently, on 2 November 2022, the Court issued a
ruling in favor of the Plaintiffs. Following the ruling, Fuzhou
R&F Properties filed an appeal to the Fujian Higher People's
Court on the 2 December 2022. In response, on 13 December 2022,
CJRE engaged solicitors to proceed with further legal processes
related to the litigation. Once this payment is received by CJRE,
it is the Company's expectation that the outstanding loan will be
repaid in full.
As at 31 December 2022, the fair value of the loan was US$1.8
million (2021: US$1.9 million).
Biographies of Directors and Senior Management
Board of Directors
Mr. John Croft, Executive Chairman
John Croft is an experienced Chairman, non-executive Director
and executive with a successful international career in the
technology and financial services sectors.
He is also a non-executive Director at Aura Renewable
Acquisitions PLC and Golden Rock Global PLC, both Special
Acquisitions Companies (SPACs) quoted on the Standard List of the
London Stock Exchange and is also a non-executive Director at
Brazilian Nickel PLC.
He has previously held senior Director level positions in Racal
Electronics and NCR Corporation, following an early career in
banking with HSBC and Citibank.
Hugh Viscount Trenchard, Non-executive Director
Viscount Trenchard began his career as an investment banker at
Kleinwort Benson in 1973. He has more than 40 years' experience of
Japanese business, including 12 years as a resident of Japan. He
ran Kleinwort Benson's East Asian operations for 15 years and was
later Head of Japanese Investment Banking for Robert Fleming &
Co. Limited, before working with Mizuho International plc from 2007
to 2014. He served as a Senior Adviser for Japan and Korea to
Prudential Financial, Inc. from 2002 to 2008. Lord Trenchard is a
member of the House of Lords and a Vice-Chairman of the
British-Japanese Parliamentary Group.
Mr. Charles Stuart Crocker, Non-executive Director
Stuart Crocker served eleven years in the British Army before
starting a banking career primarily with Merrill Lynch and HSBC, in
Europe and the Middle East. Latterly he became the CEO HSBC Private
Bank UAE and Oman, and the Global Head Private Banking Group at Abu
Dhabi Islamic Bank. Stuart has been a member and Liveryman of the
Worshipful Company of International Bankers, and a Freeman of the
City of London, since 2006 and became a Fellow of the Institute of
Directors (FIoD) in 2022.
Since 1994 Stuart has been a Director and then Trustee at St
Martin-in-the-Fields in London. He was a founding investor and the
first Non-Executive Chairman of a renewable forestry company, which
is now one of the largest forestry operations in West Africa having
planted over 20 million trees.
Stuart is a founder advisor and shareholder in a multi-award
winning FinTech company in the Middle East. In 2020 he was the
Interim-Chairman of an advanced technology company for ensuring the
safety, security and efficiency of people and assets in some of the
world's most difficult places, supporting client operations in 35
countries. In December 2021 Stuart became Chairman of an exclusive
distributor of clean, ethical beauty brands for women and men.
Current distribution is across the GCC through retail,
pharmaceutical, professional channels and e-commerce.
In May 2022 Stuart was honoured to be invested as a Knight of
The Order of St. George (KStG) at Rochester Cathedral. The Order is
a non-profit charity registered in England and has had special
consultative status as an NGO at the UN Economic and Social Council
since 2015.
Dr. Lee George Lam, Non-executive Director
Dr. Lam is Chair of the United Nations Economic and Social
Commission for Asia and the Pacific (UN ESCAP) Sustainable Business
Network (ESBN), Vice Chairman of Pacific Basin Economic Council
(PBEC), Chairman of the Permanent Commission on Economic and
Financial Issues of the World Union of Small and Medium Enterprises
(WUSME), and a member of the Belt and Road and Greater Bay Area
Committee of the Hong Kong Trade Development Council. A former
member of the Hong Kong Bar, Dr. Lam is a Solicitor of the High
Court of Hong Kong, an Accredited Mediator of the Centre for
Effective Dispute Resolution (CEDR), a Fellow of Certified
Management Accountants (CMA) Australia, the Hong Kong Institute of
Arbitrators and the Hong Kong Institute of Directors, an Honorary
Fellow of Certified Public Accountants (CPA) Australia, the Hong
Kong Institute of Facility Management and the University of Hong
Kong School of Professional and Continuing Education, an
International Affiliate of the Hong Kong Institute of Certified
Public Accountants, and a Distinguished Fellow of the Hong Kong
Innovative Technology Development Association.
Key Personnel of the Investment Manager, Harmony Capital
Mr. Suresh Withana is the Co-Founder and Managing Partner of
Harmony Capital Investors Limited. Prior to founding Harmony
Capital Investors Limited ("HCIL"), he was most recently Global
Head of Special Situations and Co-Head of Asia at Tikehau Capital,
the listed investment management company with over EUR29 billion in
assets. Previously, he was the Co-Founder and Chief Investment
Officer at Harmony Capital Partners, an affiliate of HCIL, which
managed a fund focused on Asian special situations investments.
Prior to that, he was a Director of the Global Special Situations
Group at Mizuho International Plc in London and a Vice President in
the Investment Banking Group at Merrill Lynch International
(London). In total, he has accumulated 26 years of experience,
including over 18 years of special situations investing primarily
focused on Asia.
Directors' Report
The Board (the "Board") of Directors (the "Directors") are
pleased to present their report on the affairs of the Company and
its subsidiaries (collectively referred to as the "Group"),
together with the audited financial statements for the year ended
31 December 2022.
PRINCIPAL ACTIVITIES
The Company was incorporated with limited liability under the
laws of the British Virgin Islands ("BVI"). The Company's shares
were admitted to the AIM Market of the London Stock Exchange on 19
October 2009 and on the Quotation Board of the Open Market of the
Frankfurt Stock Exchange on 6 December 2012.
RESULTS AND DIVIDS
The Company recorded a loss before taxation of US$52.9 million
(2021: loss US$38.4 million).
The loss reflects fair value decrease on assets in the portfolio
of US$51.9 million (2021: decrease US$37million), net finance
income of US$0.8 million (2021: US$0.8 million) and total operating
expenses of US$1.8 million (2021: US$2.3 million). The fair value
decrease on assets included in the period includes income from
investments of US$1.2 million (2021: US$1.2 million) and a fair
value adjustment upon valuation of portfolio assets at the period
end of US$53.1 million (2021: US$38.2 million).
The Directors are not recommending the payment of a dividend for
the year.
REVIEW OF THE BUSINESS
The Group's audited net asset value as at 31 December 2022 stood
at US$15.1 million (2021: US$68.0 million) equivalent to US$0.13
per share (2021: US$0.58), excluding the effect of treasury shares
held by the Group.
The principal investment assets held by the Company at the
year-end, together with their valuations are set out in the
Chairman's statement.
EVENTS AFTER THE REPORTING PERIOD
The significant events after the reporting period are set out in
Note 18 of the financial statements, none of which impact on the
results and net assets reported in these financial statements.
DIRECTORS AND DIRECTORS' INTERESTS
The Directors who served during the year and up to the date of
this report were as follows:
Mr. John Croft
Hugh Viscount Trenchard
Dr. Lee George Lam
Mr. Stuart Crocker
Mr. John Batchelor (resigned Mar 2023)
John Batchelor, Non-Executive Director, has resigned from the
Board of Jade Road Investments on 24 March 2023.
With the exception of the related party transactions stated in
Note 16 to the Financial Statements, there were no other
significant contracts, other than Directors' contracts of service,
in which any Director had a material interest. The Directors who
held office as at 31 December 2022 had no beneficial interests in
any of the shares of the Company and Group companies other than as
follows:
Number of ordinary shares of no par value as at 31 December
2022 2021
Direct Indirect Direct Indirect
Mr. John Croft 130,463 10,733 130,463 10,733
Hugh Viscount Trenchard 60,634 - 60,634 -
Dr. Lee George Lam 101,057 - 101,057 -
Mr. Stuart Crocker 80,845 - 80,845 -
Mr. John Batchelor - - - -
Number of warrants over ordinary shares of no par value as at 31
December
2022 2021
Direct Indirect Direct Indirect
Mr. John Croft 877,346 - 877,346 -
Hugh Viscount Trenchard 457,634 - 457,634 -
Dr. Lee George Lam 496,057 - 496,057 -
Mr. Stuart Crocker 76,845 - 76,845 -
Mr. John Batchelor - - - -
SUBSTANTIAL SHAREHOLDINGS IN THE COMPANY
As far as the Directors are aware at 31 December 2022, the
following persons were interested in 3% or more of the issued share
capital of the Company:
Shareholder Number of Percentage of
ordinary shares issued share capital
Elypsis Solutions Limited 55,225,127 47.9%
Infinity Capital Group Limited 16,179,310 14.0%
Heirloom Group 10,068,676 8.7%
Harmony Capital Investors
Limited 6,059,306 5.3%
Barry Lau 4,561,400 4%
The percentage of shares not in public hands (as defined in the
AIM Rules for Companies) is 79.9%.
On 20 February 2023, the company issued an additional
201,996,350 shares with a gross placing proceeds of $1,750,000.
This includes 20,046,667 shares issued pursuant to the underwriting
fee (net proceeds $1,566,573). The total number of new ordinary
shares issued to Heirloom Group is 179,770,672. Afterward, the
following persons were interested in 3% or more of the issued share
capital of the Company:
Shareholder Number of Percentage of
ordinary shares issued share capital
Heirloom Group 189,508,269 59.24%
* Heirloom SPV 2022 II 155,703,842 48.67%
* Ocorian Singapore Trust Company Pte Ltd as Trustee of
Fidelis Fund 21,135,665 6.61%
* Heirloom Investment Management LLC 7,785,192 2.43%
* Heirloom Fixed Return Fund 4,883,570 1.53%
Elypsis Solutions Limited 55,225,127 17.26%
Infinity Capital Group Limited 16,179,310 5.06%
First Equity Limited 10,000,000 3.13%
Heirloom SPV 2022 II, Heirloom Investment Management LLC,
Ocorian Singapore Trust Company Pte Ltd as Trustee of Fidelis Fund
and Heirloom Fixed Return Fund are under one controlling group -
Heirloom Group. The total shareholdings of Heirloom Group are
59.24%.
FINANCIAL INSTRUMENTS
The Group's use of financial instruments is described in Note 9
and Note 14.
FINANCIAL RISK MANAGEMENT OBJECTIVES
Management has adopted certain policies on financial risk
management with the objective of ensuring that appropriate funding
strategies are adopted to meet the Group's short-term and long-term
funding requirements, taking into consideration the cost of
funding, gearing levels, and cash flow projections. The policies
are also set to ensure that appropriate strategies are adopted to
manage related interest and currency risk funding and to ensure
that credit risks on receivables are properly managed. In addition,
Note 14 to the financial statements include the Group's objectives,
policies, and processes for managing its capital, its financial
risk management objectives, details of its financial instruments
and its exposures to credit risk, interest rate risk, liquidity
risk, price risk, and currency risk.
POLICY AND PRACTICE ON PAYMENT OF CREDITORS
The Group seeks to maintain good terms with all of its trading
partners. In particular, it is the Group's policy to agree
appropriate terms and conditions for its transactions with
suppliers and, provided the supplier has complied with its
obligations, to abide by the terms of payment agreed
SHARE CAPITAL
The Company has a single class of shares which is divided into
ordinary shares of no par value.
At 31 December 2022, the number of ordinary shares in issue was
117,925,673, of which 2,647,804 were held in treasury by the group.
Details of movements in the issued share capital during the year
are set out in Note 13 to the financial statements.
DIRECTORS' INDEMNITY
The Company's Articles of Association provide, subject to the
provisions of BVI legislation, an indemnity for Directors and
officers of the Company in respect of liabilities they may incur in
the discharge of their duties or in the exercise of their powers,
including any liabilities relating to the defence of any
proceedings brought against them which relate to anything done or
omitted, or alleged to have been done or omitted, by them as
officers or employees of the Company.
Appropriate directors' and officers' liability insurance cover
is in place in respect of all of the Directors.
EMPLOYEE INFORMATION
As at 31 December 2022, the Group had Nil (2021: Nil) employees
excluding Directors.
CHARITABLE DONATIONS
The Group didn't make any charitable donations during the year
(2021: Nil).
GOING CONCERN
Notwithstanding the operating loss of US$52.4Mn and operating
cash outflows of USD$1.5Mn for the year ended 31 December 2022 and
net current liabilities of $4.8Mn at year-end, the group has
prepared the financial statements under the going concern.
In considering the appropriateness of the going concern basis of
preparation, the Directors have reviewed the Group's cash forecasts
for a minimum of 12 months from the date of the approval of these
financial statements. Following this assessment, the Directors have
reasonable expectation that the Group can secure adequate resources
to continue for the foreseeable future through financing and
realisation of carrying value of investments and loan receivables
to meet proposed investment requirements and working capital needs
as they fall due. Whilst management is confident that they can
secure funding based on the advance discussion with investors and
buyers, there is no certainty that such funding would be secured
within the required timelines.
Accordingly, the financial statements have been prepared on a
going concern basis and do not include any adjustments that would
result if the group was unable to continue as a going concern.
The auditors refer to going concern by way of material
uncertainty within their audit report.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report
and Financial Statements in accordance with applicable laws and
regulations.
Company Law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
have prepared the Group financial statements in conformity with
EU-adopted International Financial Reporting Standards. Under
Company Law the directors must not approve the financial statements
unless they are satisfied that they give a true and fair view of
the state of affairs of the Group and the profit and loss of the
Group for that period.
In preparing the financial statements the Directors are required
to:
-- Select suitable accounting policies and then apply them consistently.
-- Make judgements and accounting estimates that are reasonable and prudent;
-- Ensure statements are in conformity with EU-adopted
International Financial Reporting Standards; and prepare the
financial statements on the going concern basis unless it is
inappropriate to presume that the Group will continue in
business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group's
transactions and disclose with reasonable accuracy at any time the
financial position of the Group and enable them to ensure that the
Group financial statements comply with EU-adopted International
Financial Reporting Standards. They are also responsible for
safeguarding the assets of the Group and hence for taking
reasonable steps for the prevention and detection of fraud and
other irregularities.
The Financial Statements are published on the Group's website
https://jaderoadinvestments.com . The work carried out by the
Auditor does not involve consideration of the maintenance and
integrity of this website and accordingly, the Auditor accepts no
responsibility for any changes that have occurred to the financial
statements since they were initially presented on the website.
Visitors to the website need to be aware that legislation in the
United Kingdom covering the preparation and dissemination of the
financial statements may differ from legislation in their
jurisdiction.
AUDITOR INFORMATION
The Directors who held office at the date of approval of the
Directors' Report confirm that, so far as they are each aware,
there is no relevant audit information of which the Group's Auditor
is unaware; and each Director has taken all the steps that he ought
to have taken as a director to make himself aware of any relevant
audit information and to establish that the Group's Auditor is
aware of that information.
On behalf of the Board
John Croft
26 May 2023
Chairman of the Board
Corporate Governance Statement
THE BOARD
The Board of Jade Road Investments Limited, in accordance with
the AIM Rules, adopted an appropriate corporate governance code. It
has decided to apply the Quoted Companies Alliance Corporate
Governance Code (the QCA Code). The QCA Code is a pragmatic and
practical corporate governance tool which adopts a proportionate,
principles-based approach which the Board believes will enable the
explanation of how the Company applies the QCA Code and its overall
corporate governance arrangements. The QCA Code is constructed
around 10 broad principles which are set out below together with an
explanation of how the Company complies with each principle, and
where it does not do so, an explanation for that.
As suggested by the QCA, our Chairman, John Croft makes the
following statement in relation to corporate governance:
"As Chairman of the Company, I lead our Board of Directors and
have primary responsibility for ensuring that the Company meets the
standards of corporate governance expected of an AIM investment
company of our size. Our over-arching role as a Board is to monitor
the Company's progress with its investing policy and to ensure that
it is being properly pursued. In pursuing that strategy, our second
key focus is to supervise, manage and objectively assess the
performance of our Investment Manager, Harmony Capital Investors
Limited. Given there is no executive team in the Company and no
other employees, this relationship is critically important in terms
of delivering value to our shareholders.
We set out below how we as a Board seek to apply the QCA Code,
bearing in mind the particular nature of the Company and its
business. Being an investment company means we are naturally
focused on investment strategy and deploying our cash resources in
the most efficient way to produce returns for shareholders in the
medium to long term, balancing the potential risks and rewards of
each investment which our Investment Manager proposes. We have a
rigorous investment process including third-party legal,
commercial, and financial due diligence, site visits, management
meetings, and independent valuations where relevant. The output of
this work is consolidated and presented to the Board by the
Investment Manager in high-quality investment presentations which
are reviewed and discussed at length at investment board meetings.
We are not a large corporate with multiple stakeholders and, as
noted above, our Board is primarily non-executive as at the year
end. We, therefore, intend to take a pragmatic approach to
governance structures and processes and whilst retaining a
high-performance culture at Board level, adopt policies and
procedures which we think are appropriate to an investment company
on AIM."
The Board, the Investment Manager and Board Committees
The Board is responsible for reviewing and approving the
Company's Investing Policy and for monitoring the performance of
Harmony Capital Investors Limited in the performance of its
obligations under the Services Agreement. The Company holds board
meetings as required and not less than four times annually. The
Board has constituted committees with responsibility for overseeing
audit, remuneration, valuation and investment matters.
The Board has constituted the following Committees:
The Remuneration Committee constituted by Hugh Viscount
Trenchard and Dr Lee George Lam.
The Remuneration Committee reviews the scale and structure of
the Directors' remuneration and the terms of their service or
employment contracts, including warrant schemes and other bonus
arrangements. The remuneration and terms and conditions of the
non-executive Directors are set by the entire Board, with Directors
absenting themselves, at the appropriate time, from discussions on
matters directly reflecting their remuneration.
The Investment Committee constituted by John Croft, Hugh
Viscount Trenchard, Dr Lee George Lam, and Stuart Crocker.
The Investment Committee has the primary authority to develop
the Company's investment objectives and corporate policies on
investing. It reviews and approves investment opportunities
presented by the Company's Investment Manager. The Committee will
at all times be constituted by all the Company's directors.
The Audit Committee constituted by John Croft and Stuart
Crocker.
The Audit Committee appoints and determines the terms of
engagement of the Group's auditors and will determine, in
consultation with the auditors, the scope of the audit. The Audit
Committee monitors the independence of the Group's auditor, and the
appropriateness of any non-audit services. The Audit Committee
receives and reviews reports from management and the Group's
auditors relating to the interim and annual accounts and the
accounting and internal control systems in use throughout the
Group. The Audit Committee has unrestricted access to the Group's
auditors. The Audit Committee makes recommendations to the
Board.
The Valuation Committee constituted by Hugh Viscount Trenchard
and Dr. Lee George Lam.
The Valuation Committee is responsible for reviewing the
valuation process for all investments, including the application of
appropriate valuation standards, based on the input of the
Company's Investment Manager and on the Company's Valuation Policy
which was formally adopted in 2020. Its members are sourced from
independent directors of the Board. It retains the authority to
engage with independent 3(rd) parties at any time with respect to
valuation matters. The Committee comprises a minimum of two members
and reports directly to the Board.
DELIVER GROWTH
Principle 1 Establish a strategy and business model which
promote long-term value for shareholders
Principle
The Board must be able to express a shared view of the Company's
purpose, business model and strategy. It should go beyond the
simple description of products and corporate structures and set out
how the company intends to deliver shareholder value in the medium
to long term. It should demonstrate that the delivery of long term
growth is underpinned by a clear set of values aimed at protecting
the company from unnecessary risk and securing its long-term
future.
Compliance
The Company provides equity and credit funding to companies,
principally in the Pan-Asian region or with a connection to Asia.
It will do this through investing in direct financings, pre-IPO
investments, growth private equity, event driven special
situations, opportunistic special situations, and indirect
financing.
The Company is sector agnostic in its investment activities.
New investments will be managed actively, including through
appropriate investor protections which will be negotiated on each
transaction as appropriate and relevant.
The Company will consider using debt to finance transactions on
a case-by-case basis and may assume debt on its own balance sheet
when appropriate to enhance returns to Shareholders and/or to
bridge the financing needs of its investment pipeline.
The Company is in the process of a disposal programme for its
"legacy" assets. Currently, we have received offers from two
potential buyers for our quarry. We are actively seeking buyers for
the other assets.
The Board, in collaboration with the Investment Manager,
maintains a vigilant watch over the current investment climate and
macro-economic conditions worldwide.
These factors have the potential to impact and, at times, pose
challenges to the Company's strategic execution. This includes
considerations of regulatory and governmental policy changes that
may arise, requiring the Company to adapt and navigate
accordingly.
Principle 2 Seek to understand and meet shareholder needs and
expectations
Principle
Directors must develop a good understanding of the needs and
expectations of all elements of the Company's shareholder base. The
Board must manage shareholders' expectations and should seek to
understand the motivations behind shareholder voting decisions.
Compliance
The Board is aware of the need to protect the interests of
minority shareholders and the balancing of these interests with
those of the majority shareholder. The Board also considers the
terms of the relationship agreement the Company has entered with
its largest shareholder and, where necessary, will enforce any
relevant terms.
The Company holds regular investor events in London, Hong Kong
and Dubai, where the Chairman, other members of the Board and the
Investment Manager update attendees on key developments in the
portfolio. All shareholders are invited to attend these events. The
Chairman is principally responsible for shareholder liaison.
The Company regularly updates the market via its RNS news feed
of any disclosable matters and where appropriate, also uses social
media platforms to engage with a wider audience.
The Company publishes all relevant materials, according to QCA
definitions, on its website. This includes annual reports and
shareholder circulars.
Principle 3 Take into account wider stakeholder and social
responsibilities and their implications for long-term success
Principle
Long-term success relies upon good relations with a range of
different stakeholder groups both internal (workforce) and external
(suppliers, customers, regulators, and others). The Board needs to
identify the Company's stakeholders and understand their needs,
interests, and expectations.
Where matters that relate to the Company's impact on society,
the communities within which it operates or the environment have
the potential to affect the company's ability to deliver
shareholder value over the medium to long term, then those matters
must be integrated into the Company's strategy and business
model.
Feedback is an essential part of all control mechanisms. Systems
need to be in place to solicit, consider and act on feedback from
all stakeholder groups.
Compliance
The balance of economic value to the Group and social impact is
carefully considered, not only throughout the due diligence for any
potential investments but also ongoing monitoring by of periodical
site visits for the invested projects, with the maintenance of high
environmental standards is a key priority. The Board is conscious
of its responsibilities in relation to society, particularly in a
developing economy such as China.
The key resources for the Company are principally the Investment
Manager and the Company's advisory team, including its nominated
adviser, brokers, solicitors, and auditors. The Investment Manager
and therefore the Company rely on a network of intermediaries to
originate investment deal flow. The Board speaks to the advisory
team on a regular basis and takes feedback from it throughout the
year. In particular, it seeks advice in relation to compliance with
the AIM Rules and their impact on its investments from the
nominated adviser and solicitors and from the auditors in relation
to accounting matters including net asset value and the annual
audit.
Principle 4 Embed effective risk management, considering both
opportunities and threats, throughout the organisation
Principle
The Board needs to ensure that the Company's risk management
framework identifies and addresses all relevant risks in order to
execute and deliver strategy; companies need to consider their
extended business, including the Company's supply chain, from key
suppliers to end-customer.
Setting strategy includes determining the extent of exposure to
the identified risks that the company is able to bear and willing
to take (risk tolerance and risk appetite).
Compliance
Effective risk management in relation to the Company's portfolio
is key to the Board's assessment of the Investment Manager's
performance. Measuring risk in each investment case, in terms of
both how it can be mitigated and the potential upside of taking on
such risk are critical elements of the analysis produced by the
Investment Manager and reviewed by the Board on each proposed
investment. Similarly, in conducting the managed disposal
programme, the Board is focused on achieving the best possible
value for the assets being disposed of. At the same time, the Board
assesses the risk of maintaining those positions with the potential
for further value to be eroded at the same time as it requires
additional time to be spent by the Board and by the Investment
Manager.
MAINTAIN A DYNAMIC MANAGEMENT FRAMEWORK
Principle 5 Maintain the Board as a well-functioning, balanced
team led by the Chairman
Principle
The Board members have a collective responsibility to promote
the interests of the company and are collectively responsible for
defining corporate governance arrangements. Ultimate responsibility
for the quality of, and approach to, corporate governance lies with
the Chairman.
The Board (and any committees) should be provided with
high-quality information in a timely manner to facilitate proper
assessment of the matters requiring a decision or insight.
The Board should have an appropriate balance between Executive
and Non-Executive Directors and should have at least two
independent Non-Executive Directors. Independence is a board
judgement.
The Board should be supported by committees (e.g., audit,
remuneration, nomination) that have the necessary skills and
knowledge to discharge their duties and responsibilities
effectively.
Directors must commit the time necessary to fulfill their
roles.
Compliance
The Board consists of the Executive Chairman and three
Non-Executive Directors.
The Executive Chairman has been involved with the Company since
its predecessor company, China Private Equity Investment Holdings
Limited was admitted to AIM in 2009. Viscount Trenchard, Dr. Lee
George Lam, Mr. Stuart Crocker, and Mr. John Batchelor were all
appointed to the Board in 2017 or later. These four individuals
serve as Non-Executive Directors and are regarded as independent
members. However, it is important to note that as of March 2023,
Mr. John Batchelor has departed from the Board.
Each Non-Executive Director is engaged on a 12-month contract
with three months' notice on either side and is required to commit
to a minimum of two days per calendar month.
The Executive Chairman's roles and responsibilities include but
are not limited to engaging potential clients across Jade Road's
domain in the APAC region, initiating and agreeing Terms of
Engagement with clients, providing the lead consultancy services to
clients and support the business development of the Company,
liaising with the Company's NOMAD and other advisors in London, and
being the main contact between the Board and the Investment
Manager, approving public announcements, engaging with
Shareholders, Investors and other Stakeholders to promote the
Company and its business objectives.
As explained above, the Board receives detailed investment
papers from the Investment Manager in relation to any asset which
is either recommended for investment or disposal, including an
executive summary of the due diligence findings, results of site
visits and management meetings (including an assessment of the
investee company's management team), key financial metrics, key
risk factors, the potential returns available, security for the
investment and the type of instrument to be used.
Principle 6 Ensure that between them the directors have the
necessary up-to-date experience, skills, and capabilities.
Principle
The Board must have an appropriate balance of sector, financial
and public markets skills and experience, as well as an appropriate
balance of personal qualities and capabilities. The Board should
understand and challenge its own diversity, including gender
balance, as part of its composition.
The Board should not be dominated by one person or a group of
people. Strong personal bonds can be important but can also divide
a board.
As companies evolve, the mix of skills and experience required
on the board will change, and board composition will need to evolve
to reflect this change.
Compliance
Directors who have been appointed to the Company have been
chosen because of the skills and experience they offer. The
identity of each Director and his full biographical details are
provided on the website, which include each Director's relevant
experience, skills, personal qualities, and capabilities. The
current team of Directors offer a mix of investment, quoted
company, sector and geographical expertise and exposure.
The Board has not taken any specific external advice on a
specific matter, other than in the normal course of business as an
AIM-quoted company and in pursuit of the investment policy. There
are no internal advisors to the Board. The Directors rely on the
Company's advisory team to keep their skills up to date and through
attending market updates and other seminars provided by the
advisory team, the London Stock Exchange plc, and other
intermediaries.
The Investment Manager is the key external adviser to the
Board.
Principle 7 Evaluate Board performance based on clear and
relevant objectives, seeking continuous improvement
Principle
The Board should regularly review the effectiveness of its
performance as a unit, as well as that of its committees and the
individual Board members.
The Board performance review may be carried out internally or,
ideally, externally facilitated from time to time. The review
should identify development or mentoring needs of individual
directors or the wider senior management team.
It is healthy for membership of the Board to be periodically
refreshed. Succession planning is a vital task for Boards. No
member of the Board should become indispensable.
Compliance
The Board consists predominantly of Non-Executive Directors, the
Company having no employees. In this regard, Board performance and
oversight lies predominantly with the Chairman and other
stakeholders, particularly shareholders. In early 2020, it was
determined by the Remuneration Committee that John Croft be
designated as Executive Chairman to align with his time commitment
and contribution to the Company's affairs.
Events are held with shareholders where feedback on the
Company's progress is sought on a regular basis, and this
interaction provides valuable input on Board performance. Advice is
also sought on Board composition on an ongoing basis from the
Company's NOMAD.
The composition of the Board is reviewed regularly, and changes
made where appropriate. As the size of the portfolio grows, the
Company may look to broaden its skills and experience base by the
appointment of additional Directors and/or advisors in due
course.
The Board does not carry out a formal review process.
Principle 8 Promote a corporate culture that is based on ethical
values and behaviours
Principle
The Board should embody and promote a corporate culture that is
based on sound ethical values and behaviours and use it as an asset
and source of competitive advantage.
The policy set by the Board should be visible in the actions and
decisions of the chief executive and the rest of the management
team. Corporate values should guide the objectives and strategy of
the company.
The culture should be visible in every aspect of the business,
including recruitment, nominations, training, and engagement. The
performance and reward system should endorse the desired ethical
behaviours across all levels of the company.
Compliance
The Board is focused on investment returns for its shareholders
and will at all times seek to make ethical investments, but this is
not an investment focus or determinant for an asset being included
in the portfolio. As discussed above, given the Company is an
investment company with no employees or other internal
stakeholders, the Board does not drive a corporate culture within
the business.
Principle 9 Maintain governance structures and processes that
are fit for purpose and support good decision-making by the
Board
Principle
The Company should maintain governance structures and processes
in line with its corporate culture and appropriate to its:
- size and complexity; and
- capacity, appetite, and tolerance for risk. The governance
structures should evolve over time in parallel with the company's
objectives, strategy, and business model to reflect the development
of the company.
Compliance
This section provides full disclosure on the Company's corporate
governance. There are no immediate plans to make any changes to the
governance processes and framework which are described in the
commentary above.
The Chairman has overall responsibility for shareholder
liaison.
There are no specific matters reserved for the Board.
BUILD TRUST
Principle 10 Communicate how the company is governed and is
performing by maintaining a dialogue with shareholders and other
relevant stakeholders
Principle
A healthy dialogue should exist between the Board and all of its
stakeholders, including shareholders, to enable all interested
parties to come to informed decisions about the Company.
In particular, appropriate communication and reporting
structures should exist between the Board and all constituent parts
of its shareholder base. This will assist:
- the communication of shareholders' views to the Board; and
- shareholders' understanding of the unique circumstances and
constraints faced by the Company.
Compliance
The Board attaches great importance to providing shareholders
with clear and transparent information on the Group's activities,
strategy, and financial position. Details of all shareholder
communications are provided on the Company's website, including
historical annual reports and governance-related material together
with notices of all general meetings for the last five years. The
Company discloses outcomes of all general meeting votes.
The Company has appointed a professional Financial Public
Relations firm with an office in London to advise on its
communications strategy and to assist in the drafting and
distribution of regular news and regulatory announcements. Regular
announcements are made regarding the Company's investment portfolio
as well as other relevant market and regional news.
The Company lists contact details on its website and on all
announcements released via RNS, should shareholders wish to
communicate with the Board.
Independent Auditor's Report to the Members of Jade Road
Investments Limited
Opinion
We have audited the financial statements of Jade Road
Investments Limited (the 'group') for the year ended 31 December
2022 which comprise the Consolidated Statement of Comprehensive
Income, the Consolidated Statement of Changes in Equity, the
Consolidated Statement of Financial Position, the Consolidated Cash
Flow Statement and notes to the financial statements, including
significant accounting policies. The financial reporting framework
that has been applied in their preparation is applicable law and
International Financial Reporting Standards (IFRSs) as adopted by
the European Union.
In our opinion, the financial statements:
-- give a true and fair view of the state of the group's affairs
as at 31 December 2022 and of its loss for the year then ended;
and
-- have been properly prepared in accordance with IFRSs as adopted by the European Union.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the
Auditor's responsibilities for the audit of the financial
statements section of our report. We are independent of the Group
in accordance with the ethical requirements that are relevant to
our audit of the financial statements in the UK, including the
FRC's Ethical Standard as applied to listed entities, and we have
fulfilled our other ethical responsibilities in accordance with
these requirements. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our
opinion.
Material uncertainty related to going concern
We draw attention to note 2(c) in the financial statements,
which indicates that the group is reliant on securing further
financing and realisation of carrying value of investments and loan
receivables to meet proposed investment requirements and working
capital needs as they fall due. Whilst management is confident that
they can secure funding based on the advance discussion with
investors and buyers, there is no guarantee that such funding would
be secured within the required timelines. As stated in Note 2(c),
these events or conditions, indicate that a material uncertainty
exists that may cast significant doubt on the group's ability to
continue as a going concern. Our opinion is not modified in respect
of this matter.
In auditing the financial statements, we have concluded that the
directors' use of the going concern basis of accounting in the
preparation of the financial statements is appropriate. Our
evaluation of the directors' assessment of the group's ability to
continue to adopt the going concern basis of accounting
included:
-- consideration of the group's objectives, policies and
processes in managing its working capital as well as exposure to
financial, credit and liquidity risks;
-- discussing with management regarding the future plans and availability of funding;
-- reviewing the cash flow forecasts for the ensuing twelve
months from the date of approval of these financial statements and
assessment thereof;
-- obtaining corroborative supporting for the key assumptions
and estimates used in the cashflow forecast;
-- challenging the reasonableness of the key assumptions
included in the cashflow forecast; and
-- reviewing the adequacy and completeness of disclosures in the financial statements.
Our responsibilities and the responsibilities of the directors
with respect to going concern are described in the relevant
sections of this report.
Our application of materiality
For the purposes of determining whether the financial statements
are free from material misstatement, we define materiality as a
magnitude of misstatement, including omission, that makes it
probable that the economic decisions of a reasonably knowledgeable
person, relying on the financial statements, would be changed or
influenced.
We have also considered those misstatements including omissions
that would be material by nature and would impact the economic
decisions of a reasonably knowledgeable person based our
understanding of the business, industry and complexity
involved.
We also determine a level of performance materiality which we
use to assess the extent of testing needed to reduce to an
appropriately low level the probability that the aggregate of
uncorrected and undetected misstatements exceeds materiality for
the financial statements as a whole.
We apply the concept of materiality both in planning and
performing our audit, and in evaluating the effect of
misstatements. Materiality is used to determine the financial
statements areas that are included within the scope of our audit
and the extent of sample sizes during the audit. No significant
changes have come to light during the audit which required a
revision to our materiality for the financial statements as a
whole.
Group materiality for the financial statements as a whole was
US$422,000 (2021: US$1,108,000) This was calculated based on 1.5%
of gross assets (2021: 1.5% of gross assets) based on the draft
financial statements at planning. The benchmark used is the one
which we determined, in our professional judgment, to be the
principal benchmark within the financial statements relevant to
shareholders in assessing financial performance of the group as the
principal activity is that of an investment company and that
current and potential investors will be most interested in the
valuation of the investments.
Performance materiality was US$253,200 (2021: US$664,800) being
60% of headline materiality.
In determining performance materiality, we considered the
following factors:
-- our cumulative knowledge of the group and its environment,
including industry specific trends;
-- the change in the level of judgement required in respect of the key accounting estimates;
-- significant transactions during the year;
-- the stability in key management personnel; and
-- the level of misstatements identified in prior periods.
The materiality and performance materiality thresholds for the
significant components of the group were calculated considering the
same factors as for group materiality.
We agreed to report to audit committee all corrected and
uncorrected misstatements we identified through our audit with a
value in excess of US$21,100 (2021: US$55,400). We also agreed to
report any other audit misstatements below that threshold that we
believe warranted reporting on qualitative grounds.
Due to audit adjustments, the materiality benchmark has reduced
significantly. As all the audit adjustments and significant
transactions have been tested, the risk of material misstatement
based on the planning materiality has not increased. We therefore
believe that the materiality determined at the planning stage is
still applicable as the audit evidence we have obtained through
audit procedures is sufficient and appropriate to provide a basis
for our opinion.
Our approach to the audit
Our audit was risk based and was designed to focus our efforts
on the areas at greatest risk of material misstatement, together
with areas subject to significant management judgement.
The group includes the listed parent company, Jade Road
Investments Limited ('Jade BVI'), and its subsidiary, Jade Road
Investments (HK) Limited ('Jade HK').
The scope of our audit was based on the significance of
component operations and materiality. Each component was assessed
as to whether they were significant or not to the group by either
their size or risk. The parent company was identified as a
significant component due to their size and identified risks.
Due to Jade BVI being a significant component of the group, we
performed a full scope audit. The work on this significant
component of the group has been performed by us as group auditor.
Jade HK is a non-significant component of the group and group
auditor has performed analytical review over the financial
information.
In designing our audit, we determined materiality, as above, and
assessed the risk of material misstatement in the financial
statements. We tailored the scope of our audit to ensure that we
performed sufficient work to be able to give an opinion on the
financial statements, considering the structure of the group.
We considered those areas which were deemed to involve
significant judgement by the directors, such as the key audit
matters relating to the valuation of unquoted financial assets and
other receivables. Other judgemental areas were the consideration
of future events that are inherently uncertain impacting going
concern. We also addressed the risk of management override of
controls, including evaluating whether there was evidence of bias
by the directors that represented a risk of material misstatement
due to fraud.
The group's key accounting function is based in both Hong Kong
and the United Kingdom and our audit was performed by our team in
London with regular contact maintained with the group
throughout.
Key audit matters
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to
fraud) we identified, including those which had the greatest effect
on: the overall audit strategy, the allocation of resources in the
audit; and directing the efforts of the engagement team. These
matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters. In addition to
the matter described in the Material uncertainty related to going
concern section, we have determined the matters described below to
be the key audit matters to be communicated in our report.
We have determined the matters described below to be the key
audit matters to be communicated in our report.
Key Audit Matter How our scope addressed this
matter
Valuation of unquoted
financial
assets and other
receivables
(Refer Note 2(g), 2(n), 9,
10
and 14)
========================================================================================
The financial statements Our work in this area included:
include * Obtaining an understanding of the valuation process
investments in unquoted followed by management;
financial
assets at fair value
through * Involving our internal valuation expert to benchmark
profit and loss of and challenge key assumptions in management's
US$18.2Mn. valuation models used to determine fair value and/or
All these investments are recoverable amount, including discount rates used;
measured
at fair value based on
Level * Involving our internal valuation expert to consider
3 (unobservable) inputs. the appropriateness of the valuation methodologies
applied and management's evaluation of the
The financial statements sensitivity of valuations to changes in assumptions
include and inputs;
other receivables at fair
value
through profit and loss of * Reviewing the latest available assessments of the
US$1.8 recoverability of loans and other receivables
million. All these prepared by the investment manager and assessing
receivables against the requirements under IFRS 9; and
are tested for impairment
in
line with IFRS 9- Financial * Reviewing the classification, disclosure of
Instruments. valuations and inputs within the financial statements
and ensuring that it was appropriate and in
Consequently, the valuation compliance with IFRS 7 and IFRS 13
of unquoted financial
assets
and other receivables The unquoted investments include
requires an investment in Future Metal
the exercise of Holdings Limited (FMHL) which
considerable in turn holds an investment
judgement which increases in a mining company in China
the amounting to US$ 5.3Mn at the
risk that valuation and year end. The group intend to
presentation exit the investment and is under
may be misstated due to advance discussions with the
management potential buyer.
override. We draw attention to the fact
that the mining licence held
Furthermore, the by mining company expired in
Investments March 2023 and the local management
Manager, which is have filed for renewal of the
responsible mining licence which is yet
for advising on the to be granted. The good standing
valuation, of this licence is critical
is remunerated by reference for subsequent value extraction.
to a percentage of the If future renewal applications
value were to be unsuccessful and
of investments and is proposed sale does not materialise,
entitled this may result in an impairment
to receive a performance of the carrying value of the
incentive investment.
fee if certain performance
criteria We further draw attention to
are met. These remuneration the fact that the mining company
arrangements increase the needs deployment of resources
risk for working capital, development
of bias in the of infrastructure and comply
calculations. with local laws. The mining
company is dependent on FMHL
This risk is considered to for future funding and FMHL
be in turn is reliant on the group.
key audit matter due to Considering the current financial
complexity position of the group, the group
around valuation, risk of may not be able to meet the
management funding requirements. in the
override and fraud. ensuing 12 months which may
increase the requirement for
an impairment of this investment.
========================================================================================
Other information
The other information comprises the information included in the
annual report, other than the financial statements and our
auditor's report thereon. The directors are responsible for the
other information contained within the annual report. Our opinion
on the group financial statements does not cover the other
information and, except to the extent otherwise explicitly stated
in our report, we do not express any form of assurance conclusion
thereon. Our responsibility is to read the other information and,
in doing so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge
obtained during the audit, or otherwise appears to be materially
misstated. If we identify such material inconsistencies or apparent
material misstatements, we are required to determine whether this
gives rise to a material misstatement in the financial statements
themselves. If, based on the work we have performed, we conclude
that there is a material misstatement of this other information, we
are required to report that fact.
We have nothing to report in this regard.
Responsibilities of directors
As explained more fully in the statement of directors'
responsibilities, the directors are responsible for the preparation
of the group financial statements and for being satisfied that they
give a true and fair view, and for such internal control as the
directors determine is necessary to enable the preparation of
financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the group financial statements, the directors are
responsible for assessing the group's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the group or to cease
operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor's report that includes our opinion. Reasonable assurance is
a high level of assurance but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial
statements.
Irregularities, including fraud, are instances of non-compliance
with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements
in respect of irregularities, including fraud. The extent to which
our procedures are capable of detecting irregularities, including
fraud is detailed below:
We obtained an understanding of the Group and the sector in
which it operates to identify laws and regulations that could
reasonably be expected to have a direct effect on the financial
statements. We obtained our understanding in this regard through
discussions with management and cumulative industry experience. We
also selected a specific audit team based on experience with
auditing entities within this industry facing similar audit and
business risks.
We determined the principal laws and regulations relevant to the
Group in this regard to be those arising from AIM rules; Disclosure
and Transparency Rules; General Data Protection Regulations;
Anti-Bribery Act;Anti Money Laundering Regulations; and Local tax
laws and regulations.
We designed our audit procedures to ensure the audit team
considered whether there were any indications of non-compliance by
the Group with those laws and regulations. These procedures
included, but were not limited to: enquiries of management;
obtaining confirmation from third parties on compliance with laws
and regulations; reviewing of board minutes and RNS announcements;
and
reviewing the nature of legal and professional fees incurred in
the year.
We also identified the risks of material misstatement of the
financial statements due to fraud. We considered, in addition to
the non-rebuttable presumption of a risk of fraud arising from
management override of controls and revenue recognition,
inappropriate application of the going concern assessment in the
financial statements and management bias in determining key
accounting estimates and judgements used in relation to valuation
of unquoted financial assets and other receivables. We addressed
this by challenging the estimates/judgements made by management
when auditing these significant accounting estimates/judgements
(refer to the key audit matter and going concern section).
As in all of our audits, we addressed the risk of fraud arising
from management override of controls by performing audit
procedures, which included, but were not limited to testing of
journals, reviewing key accounting judgement used in valuation of
unquoted financial assets and other receivables for evidence of
bias (refer to the key audit matter section) and evaluating the
business rationale of any significant transactions that are unusual
or outside the normal course of business.
Because of the inherent limitations of an audit, there is a risk
that we will not detect all irregularities, including those leading
to a material misstatement in the financial statements or
non-compliance with regulation. This risk increases the more that
compliance with a law or regulation is removed from the events and
transactions reflected in the financial statements, as we will be
less likely to become aware of instances of non-compliance. The
risk is also greater regarding irregularities occurring due to
fraud rather than error, as fraud involves intentional concealment,
forgery, collusion, omission, or misrepresentation.
A further description of our responsibilities for the audit of
the financial statements is located on the Financial Reporting
Council's website at: www.frc.org.uk/auditorsresponsibilities. This
description forms part of our auditor's report.
Use of our report
This report is made solely to the company's members, as a body,
in accordance with our engagement letter dated 11 December 2020.
Our audit work has been undertaken so that we might state to the
company's members those matters we are required to state to them in
an auditor's report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone, other than the company and the company's members as a body,
for our audit work, for this report, or for the opinions we have
formed.
Eric Hindson (Engagement Partner)
For and on behalf of PKF Littlejohn LLP
Registered Auditor
26 May 2023
15 Westferry Circus
Canary Wharf
London E14 4HD
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2022
2022 2021
Notes US$'000 US$'000
Income from unquoted financial assets 1,174 1,162
Finance income from loans 1,359 1,347
Realised gains 300 -
Gross portfolio income 3 2,833 2,509
--------- ---------
Fair value changes on financial assets
at fair value through profit or loss 4 (47,409) (38,893)
Investment provisions (6,003) 731
--------- ---------
Net portfolio loss 3 (50,579) (35,653)
--------- ---------
Management fees (1,200) (1,861)
Incentive fees 16 158 424
Administrative expenses (763) (812)
--------- ---------
Operating loss 5 (52,384) (37,902)
--------- ---------
Finance expense 6 (520) (522)
--------- ---------
Loss before taxation (52,904) (38,424)
--------- ---------
Taxation 8 - -
Total comprehensive loss for the
year (52,904) (38,424)
========= =========
Loss per share
Basic loss per share 17 (45.89) (33.33)
cents cents
Diluted loss per share 17 (45.89) (33.33)
cents cents
The results reflected above relate to continuing operations.
The accompanying notes on pages 47 to 72 are an integral part of
these financial statements.
Consolidated Statement of Changes in Equity
For the year ended 31 December 2022
Share based payment Accumulated
Share capital Treasury share reserve reserve losses Total
US$'000 US$'000 US$'000 US$'000 US$'000
Group balance at 1
January 2021 148,903 (615) 2,936 (44,772) 106,452
Loss for the year - - - (38,424) (38,424)
Other comprehensive
income - - - - -
Total comprehensive
loss for the year - - - (38,424) (38,424)
-------------- ----------------------- --------------------- ------------ ---------
Group balance at 31
December 2021 and 1
January 2022 148,903 (615) 2,936 (83,196) 68,028
Loss for the year - - - (52,904) (52,904)
Other comprehensive
income - - - - -
Total comprehensive
loss for the year - - - (52,904) (52,904)
Group balance at 31
December 2022 148,903 (615) 2,936 (136,100) 15,124
-------------- ----------------------- --------------------- ------------ ---------
The following describes the nature and purpose of each reserve
within owners' equity.
Share capital Amount subscribed for share capital at no
par value
Treasury share reserve Cost of the Company's shares re-purchased
and held by the Group
Share based payment The share-based payment reserve represents
reserve amounts in previous and the current periods,
relating to share-based payment transactions
granted as options/warrants and under the
Group's share option scheme (Note 15)
Accumulated losses Represents the cumulative net gains and
losses recognised in the statement of comprehensive
income
The accompanying notes on pages 47 to 72 are an integral part of
these financial statements.
Consolidated Statement of Financial Position
As at 31 December 2022
2022 2021
Notes US$'000 US$'000
Assets
Unquoted financial assets
at fair value through profit
or loss 9 18,227 66,202
Other receivables at fair
value through profit or loss 10 1,769 5,556
Cash and cash equivalents 321 848
Total assets 20,317 72,606
---------- ---------
Current Liabilities
Other payables and accruals 11 1,334 1,010
Loans & borrowings 12 3,859 3,568
---------- ---------
Total liabilities 5,193 4,578
---------- ---------
Net assets 15,124 68,028
========== =========
Equity and reserves
Share capital 13 148,903 148,903
Treasury share reserve 13 (615) (615)
Share based payment reserve 2,936 2,936
Accumulated losses (136,100) (83,196)
---------- ---------
Total equity and reserves
attributable to owners of
the parent 15,124 68,028
========== =========
The financial statements were approved by the Board of Directors
and authorised for issue on
26th May 2023 and signed on its behalf by:
John Croft
Executive Chairman
The accompanying notes on pages 47 to 72 are an integral part of
these financial statements.
Consolidated Cash Flow Statement
For the year ended 31 December 2022
2022 2021
US$'000 US$'000
Cash flows from operating activities
Loss before taxation (52,904) (38,424)
Adjustments for:
Finance income (1,359) (1,347)
Finance expense 520 522
Foreign exchange 83 23
Fair value changes on unquoted financial
assets at fair value through profit
or loss 47,071 7,222
Fair value changes on loans and receivables
at fair value through profit or loss 5,059 30,459
Realised gain on investments (300) -
Decrease/(increase) in other receivables 28 (295)
Increase/(decrease) in other payables
and accruals 325 (520)
--------- ---------
Net cash used in operating activities (1,477) (2,360)
--------- ---------
Cash flows from investing activities
Sale proceeds of unquoted financial 1,200 -
assets at fair value through
profit or loss
Net cash used in investing activities 1,200 -
--------- ---------
Cash flows from financing activities
Payment of interest (228) (459)
Net cash used in financing activities (228) (459)
--------- ---------
Net decrease in cash and cash equivalents (505) (2,819)
Cash and cash equivalents and net
debt at the beginning of the year 848 3,673
Foreign exchange on cash balances (22) (6)
Cash and cash equivalents and net
debt at the end of the
year 321 848
========= =========
The accompanying notes on pages 47 to 72 are an integral part of
these financial statement
JADE ROAD INVESTMENTS LTD
Notes to the Financial Statements
For the year ended 31 December 2022
1. GENERAL INFORMATION
The Company is a limited (by shares) company incorporated in the
British Virgin Islands ("BVI") under the BVI Business Companies Act
2004 on 18 January 2008. The address of the registered office is
Commerce House, Wickhams Cay 1, PO Box 3140, Road Town, Tortola,
British Virgin Islands VG1110 and its principal place of business
is c/o Harmony Capital, 35/F, Level 35, Infinitus Plaza, 199 Des
Voeux Road Central, Hong Kong.
The Company is the holding company of a group of companies
comprising a subsidiary, Jade Road Investments (HK) Limited. The
address of the registered office and its principal place of
business is c/o Harmony Capital, 35/F, Level 35, Infinitus Plaza,
199 Des Voeux Road Central, Hong Kong and a number of wholly owned
special purpose vehicles ("SPV") each of which holds
investments.
The Company is quoted on the AIM Market of the London Stock
Exchange (code: JADE) and the Quotation Board of the Open Market of
the Frankfurt Stock Exchange (code: 1CP1).
The Company is targeting delivery of income and capital gain
from a diversified mix of pan-Asian investments in the Small- and
Medium-Sized Enterprise ("SME") sector.
2. ACCOUNTING POLICIES
a) Basis of Preparation
The principal accounting policies adopted in the preparation of
the financial statements are set out below.
The Group's financial statements have been prepared in
accordance with International Financial Reporting Standards (IFRSs
and IFRIC interpretations) as adopted by the EU. The financial
statements have been prepared under the historical cost convention.
Financial instruments are measured at fair value at the end of each
reporting period.
Historical cost is generally based on the fair value of the
consideration given in exchange for goods and services.
Fair Value Measurements:
Fair Value is the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between
market participants at the measurement date under current market
conditions.
The fair value of investments is first based on quoted prices,
where available. Where quoted prices are not available, the fair
value is estimated using consistent valuation techniques across
periods of measurement.
The Group's private credit and equity investments are recorded
at fair value or at amounts whose carrying values approximate fair
value. Net gains and losses, including any interest or dividend
income, are recognised in its profit or loss statement.
In accordance with IFRS 13, fair value measurements are
categorised into Level I, II or III based on the degree to which
the inputs to the fair value measurements are observable and the
significance of the inputs to the fair value measurement in its
entirety. These are described as follows:
Level I Fair value measurements are those derived from quoted
prices (unadjusted) in active markets for identical assets or
liabilities.
Level II Fair value measurements are those derived from inputs
other than quoted prices included within Level I that are
observable for the assets or liability, either directly or
indirectly.
Level III Fair value measurements are those derived from inputs
that are not based on observable market data.
b) Basis of Consolidation
The consolidated financial statements incorporate the financial
statements of the Company and entities (other than structured
entities) controlled by the Company. Control is achieved where the
Company:
-- has the power over the investee;
-- is expected, or has rights, to variable returns from its
involvement with the investee; and
-- has the ability to use its power to affect its returns.
The Company reassesses whether or not it controls a subsidiary
if facts and circumstances indicate that there are changes to one
or more of the three elements of control listed above.
The Company holds investments through a number of unlisted
wholly owned special purpose vehicles ("SPVs"). The directors have
considered the definition of an investment entity in IFRS10 and the
associated application guidance and consider that the Company meets
that definition. Consequently, the Group's investments in SPVs and
the underlying investments are accounted for at fair value through
profit and loss and the SPVs are not consolidated as subsidiaries.
Please see Note 4(o) Critical accounting estimates and judgements
for description of fair value methodology.
Consolidation of a subsidiary other than those held for
investment purposes begins when the Company obtains control over
the subsidiary and ceases when the Company loses control of the
subsidiary. Specifically, income and expenses of a subsidiary
acquired or disposed of during the year are included in the
consolidated statement of profit or loss and other comprehensive
income from the date the Company gains control until the date when
the Company ceases to control the subsidiary.
The results of subsidiaries acquired or disposed of during the
year are included in the consolidated statement of comprehensive
income from the effective date of acquisition and up to the
effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial
statements of subsidiaries to bring their accounting policies into
line with those used by other members of the Group.
All intra-group transactions, balances, income and expenses are
eliminated in full on consolidation. Associates are those entities
in which the Group has significant influence, but not control, over
the financial and operating activities.
Investments that are held as part of the Group's investment
portfolio are carried in the balance sheet at fair value even
though the Group may have significant influence over those
companies. This treatment is permitted by IAS 28 - Investment in
Associates, which requires investment held by venture organisations
to be excluded from its scope where those investments are
designated, upon initial recognition, as at fair value through
profit or loss and accounted for in accordance with IFRS 9, with
changes in fair value recognised in the statement of comprehensive
income in the period of change. The Group has no interests in
associates through which it carries on its business.
c) Going Concern
Notwithstanding the operating loss of US$52.4Mn and operating
cash outflows of USD$1.5Mn for the year ended 31 December 2022 and
net current liabilities of $4.8Mn at year-end, the group has
prepared the financial statements under the going concern.
In considering the appropriateness of the going concern basis of
preparation, the Directors have reviewed the Group's cash forecasts
for a minimum of 12 months from the date of the approval of these
financial statements. Following this assessment, the Directors have
reasonable expectation that the Group can secure adequate resources
to continue for the foreseeable future through financing and
realisation of carrying value of investments and loan receivables
to meet proposed investment requirements and working capital needs
as they fall due. Whilst management is confident that they can
secure funding based on the advance discussion with investors and
buyers, there is no certainty that such funding would be secured
within the required timelines.
Accordingly, the financial statements have been prepared on a
going concern basis and do not include any adjustments that would
result if the group was unable to continue as a going concern.
The auditors refer to going concern by way of material
uncertainty within their audit report.
d) Segment Reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the senior management and Board
members. The senior management and Board members, who are
responsible for allocating resources and assessing performance of
the operating segments, have been identified as the senior
management and Board members that make strategic decisions. The
Group is principally engaged in investment business, the Directors
consider there is only one business activity significant enough for
disclosure. This activity consists of entities which operate in two
geographical locations, i.e., BVI and Hong Kong.
e) Revenue Recognition
Revenue is recognised when it is probable that the economic
benefits will flow to the Group and when the revenue and costs, if
applicable, can be measured reliably and on the following
basis:
-- Dividend income is recognised when the Company's right to
receive payment is established.
-- Interest revenue is accrued on a time basis, by reference to
the principal outstanding and at the effective interest rate
applicable, which is the rate that exactly discounts estimated
future cash receipts through the expected life of the financial
asset to that asset's net carrying amount.
-- Fair value changes on financial assets represents the overall
changes in net assets from the investment portfolio net of
deal-related costs.
Other income comprised management recharges from the parent
company to its subsidiary which are eliminated on
consolidation.
f) Impairment of Non-Financial Assets
At each balance sheet date, the Group reviews internal and
external sources of information to determine whether its fixtures,
fittings and equipment and investment in subsidiaries have suffered
an impairment loss or impairment loss previously recognised no
longer exists or may be reduced. If any such indication exists, the
recoverable amount of the asset is estimated, based on the higher
of its fair value less costs to sell and value in use. Where it is
not possible to estimate the recoverable amount of an individual
asset, the Group estimates the recoverable amount of the smallest
group of assets that generates cash flows independently (i.e.,
cash-generating unit).
If the recoverable amount of an asset or a cash-generating unit
is estimated to be less than its carrying amount, the carrying
amount of the asset or cash-generating unit is reduced to its
recoverable amount. Impairment losses are recognised as an expense
immediately.
A reversal of impairment loss is limited to the carrying amount
of the asset or cash-generating unit that would have been
determined had no impairment loss been recognised in prior years.
Reversal of impairment loss is recognised as income
immediately.
g) Financial Instruments
Financial assets and financial liabilities are recognised on the
balance sheet when a group entity becomes a party to the
contractual provisions of the instrument. Financial assets and
financial liabilities are initially measured at fair value.
Financial assets at fair value through profit or loss includes
loans and receivables.
Transaction costs that are directly attributable to the
acquisition or issue of financial assets and financial liabilities
(other than financial assets and financial liabilities at fair
value through profit or loss) are added to or deducted from the
fair value of the financial assets or financial liabilities, as
appropriate, on initial recognition.
Transaction costs directly attributable to the acquisition of
financial assets or financial liabilities at fair value through
profit or loss are recognised immediately in profit or loss.
Financial assets are classified, at initial recognition, as
subsequently measured at amortised cost or fair value through
profit or loss. The classification of financial assets at initial
recognition depends on the financial asset's contractual cash flow
characteristics and the Group's business model for managing
them.
Unquoted Financial Assets:
Classification
The Group classifies its unquoted financial assets as financial
assets at fair value through profit or loss. These financial assets
are designated by the directors as at fair value through profit or
loss at inception.
Financial assets designated as at fair value through profit or
loss at inception are those that are managed as part of an
investment portfolio and their performance evaluated on a fair
value basis in accordance with the Group's Investment Strategy.
Recognition/Derecognition
Regular-way purchases and sales of investments are recognised on
the trade date - the date on which the Group commits to purchase or
sell the investment.
A fair value through profit or loss asset is derecognised when
the Group loses control over the contractual rights that comprise
that asset. This occurs when rights are realised, expire or are
surrendered and the rights to receive cash flows from the
investments have expired or the Group has transferred substantially
all risks and rewards of ownership. Realised gains and losses on
fair value through profit or loss assets sold are calculated as the
difference between the sales proceeds and cost. Fair value through
profit or loss assets that are derecognised and corresponding
receivables from the buyer for the payment are recognised as of the
date the Group has transacted an unconditional disposal of the
assets.
Measurement
Financial assets at fair value through profit or loss are
initially recognised at fair value. Transaction costs are expensed
through the profit or loss. Subsequent to initial recognition, all
financial assets at fair value through profit or loss are measured
at fair value in accordance with the Group's valuation policy, as
the Group's business is to invest in financial assets with a view
to profiting from their total return in the form of capital growth
and income. Gains and losses arising from changes in the fair value
of the financial assets at fair value through profit or loss are
presented in the period in which they arise. For more information
on valuation principles applied, please see section 4(o) Critical
Accounting Estimates.
Quoted Financial Assets:
The fair values of financial assets with standard terms and
conditions and traded on active liquid markets are determined with
reference to quoted market bid prices and are classified as current
assets. Purchases and sales of quoted investments are recognised on
the trade date where a contract of sale exists whose terms require
delivery within a time frame determined by the relevant market.
In the opinion of the Directors, cash flows arising from
transactions in equity investments represent cash flows from
investing activities.
Allowance for Expected Credit Losses:
An allowance for ECLs may be established for amounts due from
credit contracts within Loans and Receivables where evidence of
credit deterioration is observed. In order to assess credit
deterioration, the Group considers reasonable and supportable
information that is relevant and available without undue cost or
effort. This includes both quantitative and qualitative information
and analysis, based on its historical experience and informed
credit assessment, that includes forward-looking information. The
main factors considered include material financial deterioration of
the borrower, breach of contract such as default or delinquency in
interest or principal repayments, probability that a borrower will
enter bankruptcy or financial re-organisation and material decline
in the value of the underlying applicable security. ECL allowances
are distinguished from Likely Credit Loss ("LCL") allowances based
on the expectation of a loss. An LCL reserve is established when a
loss is both probable and the amount is known.
ECLs are a probability-weighted estimate of lifetime credit
losses. Under the ECL model, the Group calculates the allowance for
credit losses by considering on a discounted basis the cash
shortfalls it would incur in various default scenarios for
prescribed future periods and multiplying the shortfalls by the
probability of each scenario occurring. The allowance is the sum of
these probability weighted outcomes. Credit losses are measured as
the present value of all cash shortfalls (i.e., the difference
between the cash flows due to the entity in accordance with the
contract and the cash flows that the Group expects to receive) with
a discount factor applied.
Cash and Cash Equivalents:
For the purpose of the cash flow statement, cash equivalents
represent short-term highly liquid investments which are readily
convertible into known amounts of cash, and which are subject to an
insignificant risk of change in value, net of bank overdrafts.
Financial Liabilities
The Group's financial liabilities include other payables and
accruals and amounts due to related parties. All financial
liabilities except for derivatives are recognised initially at
their fair value and subsequently measured at amortised cost, using
effective interest method, unless the effect of discounting would
be insignificant, in which case they are stated at cost.
Equity Instruments
Equity instruments issued by the Group are recorded at the
proceeds received, net of direct issue costs.
h) Investment in Subsidiaries
Investments in subsidiaries are stated at cost less provision
for any impairment in value. Under IFRS 10, where the parent
company is qualified as an investment entity, the subsidiaries have
been deconsolidated from the Group financial statements.
i) Taxation
The charge for current income tax is based on the results for
the period as adjusted for items that are non-assessable or
disallowed. It is calculated using tax rates that have been enacted
or substantively enacted by the balance sheet date.
Deferred tax is provided, using the liability method, on all
temporary differences at the balance sheet date between the tax
bases of assets and liabilities and their carrying amounts in the
financial statements. However, if the deferred tax arises from
initial recognition of an asset or liability in a transaction other
than a business combination that at the time of the transaction
affects neither the accounting profit nor taxable profit or loss,
it is not accounted for.
The deferred tax liabilities and assets are measured at the tax
rates that are expected to apply to the period when the asset is
recovered or the liability is settled, based on tax rates and tax
laws that have been enacted or substantively enacted at the balance
sheet date. Deferred tax assets are recognised to the extent that
it is probable that future taxable profit will be available against
which the deductible temporary differences, tax losses and credits
can be recognised.
j) Dividends
Dividends payable are recorded in the financial statements in
the period in which they meet the IAS 32 definition of having been
declared.
k) Share Based Payments
The Group has applied the requirements of IFRS 2 "Share Based
Payments". The Group issues share options/warrants as an incentive
to certain key management and staff (including Directors) and its
Investment Manager. The fair value of options/warrants granted to
Directors, management personnel, employees and Investment Manager
under the Company's share option/warrant scheme is recognised as an
expense with a corresponding credit to the share-based payment
reserve. The fair value is measured at grant date and spread over
the period during which the awards vest. The fair value is measured
using the Black Scholes Option pricing model.
The Group, on special occasions as determined by the Directors,
may issue options/warrants to key consultants, advisers and
suppliers in payment or part payment for services or supplies
provided to the Group. The fair value of options/warrants granted
is recognised as an expense with a corresponding credit to the
share-based payment reserve. The fair value is measured at grant
date and spread over the period during which the options/warrants
vest. The fair value is measured at the fair value of receivable
services or supplies.
The options/warrants issued by the Group are subject to both
market-based and non-market based vesting conditions.
Non-market vesting conditions are not taken into account when
estimating the fair value of awards as at grant date; such
conditions are taken into account through adjusting the equity
instruments that are expected to vest.
The proceeds received, net of any attributable transaction
costs, are credited to share capital when options/warrants are
converted into ordinary shares.
l) Earnings Per Share
The Group calculates both basic and diluted earnings per share
in accordance with IAS 33 "Earnings per Share". Under IAS 33, basic
earnings per share is computed using the weighted average number of
shares outstanding during the period. Diluted earnings per share is
computed using the weighted average number of shares during the
period plus the period dilutive effect of options outstanding
during the period. Potential ordinary shares are only treated as
dilutive if their conversion to shares would decrease earnings per
share or increase loss per share from continuing operations.
m) Share Issue Expenses
Share issue expenses are written off against the share capital
account arising on the issue of share capital.
n) Critical Accounting Estimates and Judgements
Preparation of financial statements in conformity with IFRS
requires management to make judgements, estimates and assumptions
that affect the application of accounting policies and the reported
amounts of assets, liabilities, income and expenses. The estimates
and associated assumptions are based on historical experience and
various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis of making
judgements about carrying values of assets and liabilities that are
not readily apparent from other sources.
In particular, significant areas of estimation, uncertainty and
critical judgements in applying accounting policies that have the
most significant effect on the amount recognised in the Financial
Statements are in the following areas:
Assessment of accounting treatment under IFRS 10, IFRS 12, and
IAS 27 - Investment entities
The directors have concluded that the Company meets the
definition of an Investment Entity because the Company:
a. obtains funds from one or more investors for the purpose of
providing those investor(s) with investment management
services;
b. commits to its investor(s) that its business purpose is to
invest funds solely for returns from capital appreciation,
investment income, or both; and
c. measures and evaluates the performance of substantially all
of its investments on a fair value basis.
The investment objective of the Company is to produce returns
from capital growth and to pay shareholders a dividend. The Group
has multiple unrelated investors and indirectly holds multiple
investments. Investment positions are in the form of structured
loans or equity instruments in private companies operating which is
valued on a fair value basis.
As a result, the unlisted open-ended investments, also referred
to as SPVs, and in which the Company invests in are not
consolidated in the Group financial statements.
Assessment of Accounting Treatment under IAS 28 - Investment in
Associates
The Group has taken advantage of the exemption under IAS28
Investments in Associates whereby IAS 28's requirements do not
apply to investments in associates held by venture capital
organisations. This exemption is conditional on the investments
being designated as at fair value through profit and loss or being
classified as held for trading upon initial recognition. Such
investments are measured at fair value with changes in fair value
being recognised in the statement of comprehensive income.
Valuation of Investments
The Group's investment portfolio includes a number of
investments in the form of structured loans or equity instruments
in private companies operating in emerging markets. Investee
companies are often at early or growth stages in their development
and operating in an environment of uncertainty in capital markets.
Should planned development prove successful, the value of the
Group's investment is likely to increase, although there can be no
guarantee that this will be the case. Should planned development
prove unsuccessful, there is a material risk that the Group's
investments may incur fair value losses. The carrying amounts of
investments are therefore highly sensitive to the assumption that
the strategies of these investee companies will be successfully
executed.
The Group has adopted a valuation policy with respect to its
portfolio of investments, based on the International Private Equity
and Venture Capital Valuation Guidelines ("IPEV Guidelines")
valuation practices to derive Fair Value (please see Note 2(a)
Basis of preparation for definition of Fair Value). The IPEV
Guidelines set out recommendations intended to represent current
best practices on the valuation of private capital (unlisted)
investments, as well as compliance with IFRS.
The Group utilizes various valuation methods to assess the value
of its assets. For example, in the case of the Quarry valuation
this year, the Group takes into account the estimated realizable
value of the asset. This estimated value serves as an important
factor in evaluating the potential returns and feasibility of the
divestment.
The majority of the Group's current and expected investments are
credit instruments and as such are likely to be valued based on
Level III principles (please see Note 2(a) Basis of preparation for
definition of Fair Value measurement categories). The inputs into
the determination of Fair Value require significant management
judgment or estimation and are subjective in nature. The types of
financial instruments generally included in this category are
private portfolio companies, real assets investments and credit
investments. Details of the Group's Level III valuation
methodologies per investment type are as follows:
Private Credit Investments
For credit-focused investments, the Group may utilize a Market
Approach. In valuing credit-focused investments, the Group
exercises prudent judgment and selects the appropriate valuation
technique(s) most appropriate for such investments.
The Market Approach is generally used to determine the
enterprise value of the issuer of a credit investment and considers
valuation multiples of comparable companies or transactions. The
resulting enterprise value will dictate whether or not such credit
investment has adequate enterprise value coverage. In cases of
distressed credit instruments, the market approach may be used to
estimate a recovery value in the event of a restructuring. Based on
the Company's decision to seek an accelerated realisation of its
legacy investments, the primary methodology utilised for
instruments in this asset class is to estimate the realisable value
of a particular investment. This process applies a significant
amount of judgement while considering prevailing market conditions,
any potential or actual legal action being taken by the Company to
seek recovery of an investment and/or bids from 3rd parties even on
an indicative basis.
Private Equity Investments
The Fair Value of equity investments are determined by reference
to public market or private transactions, valuations for comparable
companies and other measures which, in many cases, are based on
unaudited information at the time received.
Valuations may be derived by reference to observable valuation
measures for comparable companies or transactions (for example,
multiplying a key performance metric of the investee company such
as EBITDA by a relevant valuation multiple observed in the range of
comparable companies or transactions), adjusted by management for
differences between the investment and the referenced comparables,
and in some instances by reference to option pricing models or
other similar methods.
Based on the Company's decision to seek an accelerated
realisation of its legacy investments, the primary methodology
utilised for instruments in this asset class is to estimate the
realisable value of a particular investment. This process applies a
significant amount of judgement while considering prevailing market
conditions, any potential or actual legal action being taken by the
Company to seek recovery of an investment and/or bids from 3rd
parties even on an indicative basis.
Private Convertible & Quasi-Credit Instruments
Private convertible and quasi-credit instruments are hybrids of
credit and equity financing. The Fair Value of convertible credit
instruments, such as a Convertible Bond, may be determined as a
normal private credit instrument (taking into account features such
as mandatory / non-mandatory conversion features) or by (i) adding
the independent value of the straight credit instrument and (ii)
the independent value of the conversion option.
The independent value of the straight credit instrument may be
assessed using Market Approach described in Private Credit
Investments. The independent value of the conversion option can be
determined by first deriving the terminal value of using the
comparables method described Private Equity Investments, then
adjusting for any conversion premium or discount, the conversion
ratio and other conversion mechanisms.
Similarly, the Fair Value for quasi-credit instruments, such as
mezzanine financing, can be determined by adding the independent
value of the straight credit and the independent value of the
conversion option and/or embedded equity instrument features, such
as warrants. In valuing both private convertible and quasi-credit
instruments the Group exercises its prudent judgment.
Based on the Company's decision to seek an accelerated
realisation of its legacy investments, the primary methodology
utilised for instruments in this asset class is to estimate the
realisable value of a particular investment. This process applies a
significant amount of judgement while considering prevailing market
conditions, any potential or actual legal action being taken by the
Company to seek recovery of an investment and/or bids from 3rd
parties even on an indicative basis.
Non-US$ Investments
The Group reports its performance in US$. Where this is
different from the currency in which the investment is denominated,
translation into US$ for reporting purposes is done using the
exchange rate prevailing at the Measurement Date.
o) Foreign currency translation
- Functional and Presentation Currency
Both the functional and presentational currency of the Group's
entities are the United States Dollar. The financial statements are
presented in United States Dollars and rounded to the nearest
thousand dollars, except when otherwise indicated.
Transactions in foreign currencies are converted into the
functional currency on initial recognition, using the exchange
rates approximating those ruling at the transaction dates. Monetary
assets and liabilities at the end of the reporting period are
translated at the rates ruling as of that date. Non-monetary assets
and liabilities are translated using exchange rates that existed
when the values were determined. All exchange differences are
recognised in profit or loss.
New Standards, Amendments to Standards or Interpretations
adopted in these financial statements:
No standards, amendments or interpretations which became
effective from 1 January 2022 had an impact on the Group Financial
Statements.
New and amended standards effective from 1 January 2022 and
adopted by the Group
The Group has applied the following standards and amendments for
the first time for its annual reporting period commencing 1 January
2022:
-- Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37);
-- Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16);
-- Annual Improvements to IFRS Standards 2018-2020 (Amendments
to IFRS 1, IFRS 9, IFRS 16 and IAS 41); and
-- References to Conceptual Framework (Amendments to IFRS 3).
The amendments listed above did not have any impact on the
amounts recognised in prior periods and do not significantly affect
the current or future periods.
New and amended standards not yet effective and not adopted by
the Group
Certain new accounting standards and interpretations have been
published that are not mandatory for 31 December 2022 reporting
periods and have not been early adopted by the Group.
Effective from 1 January 2023:
-- Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2);
-- Definition of Accounting Estimates (Amendments to IAS 8); and
-- Deferred Tax Related to Assets and Liabilities arising from a
Single Transaction (Amendments to IAS 12).
-- IAS 1 Presentation of Financial Statements (Amendment -
Classification of Liabilities as Current or Non-current)
Effective from 1 January 2024:
-- IFRS 16 Leases (Amendment - Liability in a Sale and Leaseback)
-- IAS 1 Presentation of Financial Statements (Amendment -
Non-current Liabilities with Covenants)
The Directors do not expect that their adoption will have a
material impact on the financial statements of the company in
future years. The Directors continue to monitor the impact of
future changes to the reporting requirements but do not believe the
proposed changes will significantly impact the financial
statements.
3. SEGMENT INFORMATION
The operating segment has been determined and reviewed by the
senior management and Board members to be used to make strategic
decisions. The senior management and Board members consider there
to be a single business segment, being that of investing activity.
The reportable operating segment derives its revenue primarily from
structured equity and debt investment in several companies and
unquoted investments.
Senior management and Board members assess the performance of
the operating segments based on a measure of adjusted EBITDA. This
measurement basis excludes the effects of non-recurring expenditure
from the operating segments such as restructuring costs. The
measure also excludes the effects of equity-settled share-based
payments and unrealised gains/losses on financial instruments.
The amounts provided to the senior management and Board members
with respect to total assets are measured in a manner consistent
with that of the financial statements. These assets are allocated
based on the strategic operations of the segment.
The segment information provided to the Board for the reportable
operating segment is as follows:
Income statement: 2022 2021
Note US$'000 US$'000
Realised gain on disposal 300 -
Income on unquoted financial
assets 4 1,174 1,162
Financial income on loans
& receivables 6 1,359 1,347
Gross portfolio income 2,833 2,509
--------- ---------
Expected credit loss provision 4,5 (6,003) 731
Foreign exchange 4 (113) (53)
Fair value adjustments 4 (47,296) (38,840)
Portfolio loss through profit
or loss (50,579) (35,653)
Net assets:
FMHL 5,270 50,400
Meize 8,801 8,200
GCCF - -
DocDoc 2,806 2,592
ICG 1,335 1,343
Infinity TNP - 3,650
Other 15 17
--------- ---------
Unquoted assets at fair
value through the profit
or loss 18,227 66,202
--------- ---------
Loans and other receivables
at fair value through the
profit or loss (third party) 1,769 5,556
Cash 321 848
Liabilities (5,193) (4,578)
--------- ---------
Net assets 15,124 68,028
--------- ---------
Gross portfolio income generated from the Company's investments
is derived from income from investments held through wholly owned
special purpose vehicles (Unquoted Financial Assets) and direct
investments (Loans & Receivables).
4. FAIR VALUE CHANGES ON FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
2022 2021
Unquoted Financial Assets US$'000 US$'000
Income through profit or
loss 1,174 1,162
--------- --------
Equity fair value adjustments:
- Meize/ Swift Wealth 1,500 -
- FMHL (45,146) (583)
- GCCF - (2,745)
- ICG - (1,384)
- Infinity TNP (3,650) (3,670)
--------- --------
(47,296) (8,382)
Realised Gain 300 -
Expected credit loss provision:
- ICG (363) 27
- FMHL (581)
Foreign exchange on unquoted
financial assets at fair
value through profit or loss (8) (29)
Total fair value changes
on unquoted financial assets
at fair value through profit
or loss (46,774) (7,222)
========= ========
2022 2021
Loans & Receivables financial
assets US$'000 US$'000
Income through profit or
loss 1,359 1,347
-------- ---------
Fair value adjustments:
- FMHL (loan principal) - (26,500)
- FMHL (Accrued interest) - (3,959)
- CJRE (Project Nichlaus) (83) -
Expected credit loss provision:
- FLMHL - 704
- FLMHL (Accrued interest) (1,359)
- HKMH (Loan principal) (3,700) -
Other movements - 118
Foreign exchange on Loans
& Receivables at fair value
through profit or loss (22) (21)
Total fair value changes
on Loans & Receivables at
fair value through profit
or loss (3,805) (28,311)
======== =========
Expected Credit Loss Provision
Balance at 1 January 35 766
ECL charged (released) to
profit or loss 6,003 (731)
Balance at 31 December 6,038 35
======== =========
The impact of foreign exchange on the investments in the
portfolio is as follows:
2022 2021
US$'000 US$'000
FMHL (8) (29)
Meize - -
GCCF - -
DocDoc - -
-------- --------
Foreign exchange on unquoted
financial assets at fair
value through profit or loss (8) (29)
CJRE (83) (16)
FLMH - -
Other receivables - (2)
-------- --------
Foreign exchange on loans
and receivables (83) (18)
Cash (22) (6)
-------- --------
Foreign exchange on portfolio (113) (53)
======== ========
5. OPERATING LOSS
Operating loss is stated after charging expenses:
2022 2021
US$'000 US$'000
Investment Manager fee 1,200 1,861
Investment Manager incentive
fee (158) (424)
Fees to the Group's auditor
for audit of the
Company and its subsidiaries 53 55
Directors' remuneration 260 309
Professional fees 414 366
Promotion and marketing - 16
Business travel expenses 4 11
Bank charges 9 13
Foreign exchange 1 (1)
Other expenses 22 43
-------- --------
Total expenses 1,805 2,249
======== ========
The Investment Manager's incentive fee is only payable in any
given year depending on the performance of the Company's net asset
value. The charge above is a result of warrants owed (not yet
issued) revalued to their prevailing share price at 31 December
2022. (also see Note 16).
6. NET FINANCE INCOME
2022 2021
US$'000 US$'000
Interest from financial
assets measured at fair
value through profit and
loss 1,359 1,347
-------- --------
Finance income 1,359 1,347
-------- --------
Interest payable on debt (520) (522)
Finance cost (520) (522)
------ ------
Net finance income 839 825
====== ======
Finance income in the year is from the Convertible Bond issued
by FLMH.
7. DIRECTORS' REMUNERATION
Short term employment benefits 2022 2021
US$ US$
John Croft 120,755 156,137
Hugh Trenchard 44,223 49,572
Lee George Lam 45,971 46,305
Stuart Crocker 49,112 56,567
260,061 308,581
-------- --------
Directors' remuneration includes all applicable social security
payments. There was no pension cost incurred during 2022 (2021:US$
Nil).
There are no employees within the group other than the Directors
(2021: Nil)
8. TAXATION
The Company is incorporated in the BVI and Hong Kong. Not
subject to any income tax in the BVI. The company does not engage
in any business activities or generate income in Hong Kong;
therefore it is not subject to taxation in Hong Kong.
9. UNQUOTED FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
2022 2022 2021 2021
Unquoted Loans Unquoted Loans and
financial and financial receivables
assets receivables assets
US$'000 US$'000 US$'000 US$'000
Balance as at 1 January 66,202 5,556 73,423 34,390
Additions - - - -
Cash receipts - - - (417)
Reclassification - - - -
Fair value changes through
profit or loss (46,131) (87) (7,248) (30,468)
Disposal (1,200) - - -
Realised gain 300 - - -
ECL (944) (5,059) 27 704
Finance income on loans - 1,359 - 1,347
Balance as at 31 December 18,227 1,769 66,202 5,556
----------- ------------- ----------- -------------
The Group values its investments at fair value through profit or
loss, as prescribed by the investment methodology
adopted by the Board which is summarised in Note 2(o) Critical
accounting estimates and judgements.
Future Metal Holdings Limited
The Company holds an 84.8% interest in Linfen Zhuangpeng
Magnesium Co. Ltd, which owns a dolomite magnesium limestone quarry
operation in the province of Shanxi, China. Over the course of
2022, the Quarry carried out production activities for less than 4
months, due to the severe Covid-19 situation and restrictions that
were imposed by local authorities.
Currently, the Quarry is in the process of renewing its mining
rights. This is a process that was undertaken 3 years ago with a
successful renewal of the required licence. Due to the issues faced
in China, the Company has accelerated its divestment efforts and
has thus far secured indicative interest from local buyers at a
material discount to the carrying value of the investment.
Including loan disbursements provided by the Company to Future
Metal Holdings and its subsidiaries and accrued PIK interest, the
estimated fair value of the Company's investment is US$5.3 million
as of 31 December 2022 (2021: US$50.4 million).
Loan to HKMH
The Group provided in full against a loan balance receivable
from Hong Kong Mining Holdings Limited in 2022. As of 31 December
2022, the carrying value of the loan was US$0.0 million (2021:
US$3.7 million).
Fook Lam Moon Holdings Limited
The Company holds a Convertible Bond of US$26.5 million in FLMH.
The Convertible Bond has a maturity of 5 years and pays a coupon of
5.0% per annum (3.0% paid in cash payable quarterly with the
remainder rolled up with the principal amount outstanding).
The Company had written down this investment in 2021.
As of 31 December 2022, the carrying value of the Convertible
Bond was US$0.0 million (2021: US$0.0 million).
Meize Energy Industries Holdings Limited
Swift Wealth Investments Limited, a 100% (2021: 100%) owned
subsidiary of the Company incorporated in the British Virgin
Islands, holds a 7.08% stake in Meize through a redeemable
preference share structure.
The Company has three production facilities, which are located
in Inner Mongolia, Jiangsu Province, and Xinjiang Province.
The newly established Xinjiang plant commenced operations in
September 2022 as the main construction work had been completed.
The construction work is expected to be fully completed in August
2023.
Product-wise, 9 different models were under production and the
designed life span of each model is around 20 to 25 years.
-- Inner Mongolia: In 2022, the Inner Mongolia plant maintained
a full order book, a total of 530 blades were produced with 455
blades being Model B765 and 75 blades being Model B900B. These
blades were fully sold and related trade receivables were received
except for some Quality Deposits.
-- Xinjiang: Since the 16(th) of September 2022, the production
activities have been ongoing and a total of 81 blades of Model 186
were produced.
During the year, the Company entered into a share purchase
agreement for 112,500 shares of the series B Preferred Equity in
Meize for the consideration of US$1.2 million. The Transaction
Price implied a valuation of US$10.0 million, a 22% premium to the
carrying value as at the 31(st) December 2021.
As of 31 December 2022, the Company's interest in Meize had a
fair value of US$8.8 million (2021: US$8.2 million).
DocDoc Pte Ltd
Eastern Champion Limited, a 100% (2021: 100%) owned subsidiary
of the Company incorporated in the British Virgin Islands, holds a
Convertible Bond in DocDoc.
DocDoc is a privately owned company operating in the healthtech
space across Asia and it is headquartered in Singapore. The company
uses artificial intelligence to find the right medical professional
for patients as well as to provide access to qualified
professionals who initially assess the patients' needs.
In 2022, DocDoc successfully raised over US$1.0MM in the form of
a convertible bond from one of its existing investors in Japan and
announced collaborations with QBE Singapore and Aon.
As of 31 December 2022, the carrying value of the Convertible
Bond was US$2.8 million including accrued interest (2021: US$2.6
million)
Infinity Capital Group ("ICG")
Ultimate Prosperity Limited, a 100% owned subsidiary of the
Company incorporated in the British Virgin Islands, holds a Secured
Loan to ICG.
ICG develops premium residential projects in Hirafu Village, a
world-class ski village in Niseko, Japan - one of the most popular
winter travel destinations in the world.
In 2022, due to ongoing disputes over the payment of interest
and other matters, and in light of the personal guarantee provided
by ICG, the Company launched a lawsuit against ICG to recoup its
investments.
The Hong Kong courts have ruled in the Company's favour in a
hearing scheduled at the High Court of the Hong Kong Special
Administrative Region. The Company will seek to enforce and recover
amounts owing as a result of this outcome.
As of 31 December 2022, the carrying value of the Secured Loan
was US$1.4 million including accrued unpaid interest (2021: US$1.4
million).
Infinity TNP
In November 2019, the Company acquired 40% of ICG's wholly owned
subsidiary Infinity TNP, which holds units in a luxury hotel
condominium called Tellus Niseko, in exchange for US$7.2m in shares
in the Company.
Tellus Niseko is a unique development in Hirafu Village, with
its high-end concierge service, a Michelin star chef-managed
restaurant, in-room onsen (hot spring) baths and prime location
just minutes away from the Grand Hirafu ski lifts.
Due to the dispute with ICG, Infintiy TNP has also breached a
number of its undertakings and the Company is considering legal
action in order to exit / recover its investment in due course.
As of 31 December 2022, a 100% provision was applied to the
investment (2021: US$3.6 million).
Legacy Portfolio Investments:
Greater China Credit Fund LP (the "GCCF")
The Company invested in GCCF in 2013, a private equity
investment fund launched by Adamas Asset Management (HK) Limited
("Adamas"), a Hong Kong-based investment management firm. The fund
targets high-return investments in Small and Medium Enterprises
("SMEs") predominantly in Greater China.
In order to be prudent, the Company decided to apply a 100%
provision against this investment in 2021.
As of 31 December 2022, the Company's interest in GCCF has an
allocated fair value of US$0.0 million (2021: US$0.0 million).
Changtai Jinhongbang Real Estate Development Co. Ltd
("CJRE")
Lead Winner Limited ("LWL") is a 100% (2021: 100%) owned
subsidiary of the Company incorporated in the British Virgin
Islands.
LWL held a 15% stake in CJRE, the owner of a luxury resort and
residential development project in Fujian Province, Eastern China.
The Company divested its entire investment in 2017, however, the
transaction was structured such that an outstanding amount of
RMB12.0 million (approximately US$1.8 million), remained receivable
on or before 21 December 2018. This 'tail' payment from the
original divestment was characterised as a loan and was dependent
on CJRE itself receiving funds from the underlying project which
was being developed.
CJRE has launched a lawsuit against the buyer in November 2021
to claim end payment. Once this payment is received by CJRE, it is
the Company's expectation that the outstanding loan will be repaid
in full.
As at 31 December 2022, the fair value of the loan was US$1.7
million (2021: US$1.8 million).
SPVs
The unlisted open-ended investments below are defined as SPVs
and are reported at the fair value of their underlying investments
described above at 31 December 2022.
Country
of Percentage
Name of SPV Incorporation owned Principal activities
2022 2021
Lead Winner Limited BVI 100% 100% Investment Holdings
Dynamite Win Limited BVI 100% 100% Investment Holdings
Future Metal Holdings
Limited BVI 100% 100% Investment Holdings
Swift Wealth Investments
Limited BVI 100% 100% Investment Holdings
Ultimate Prosperity
Limited BVI 100% 100% Investment Holdings
TNP Asia Limited BVI 100% 100% Investment Holdings
Further details of financial assets are set out in Note 14, and
investment valuation methodologies are set out in Note 2(o)
Critical accounting estimates and judgements.
10. LOANS AND OTHER RECEIVABLES AT FAIR VALUE THROUGH PROFIT OR LOSS
2022 2021
US$'000 US$'000
Other receivables 1,769 5,556
1,769 5,556
======== ========
As at 31 December 2022, Loans represent the Convertible Bond
issued by Fook Lam Moon Holdings plus accrued Paid-in-Kind ("PIK")
and cash interest. In 2021 the Group assessed the recoverability of
Loans in accordance with its policy and has decided to provide
against the full value of the convertible debt and accrued
interest. This was recognised as a fair value adjustment through
profit or loss and the associated ECL allowance associated with the
cash interest payable was also released in the statement of
comprehensive income. The recoverability assessment remains the
same in 2022 and therefore the accrued Paid-in-kind (PIK) and cash
interest has been fully provided against. The Group also
re-assessed the recoverability of a loan to Hong Kong Mining
Holdings Limited and provided against the full loan balance of
US$3.7m at the year-end date.
The remaining balance above as at 31 December 2022 includes an
amount receivable from CJRE as explained in note 9.
2022 2021
US$'000 US$'000
FLMHL
Loan principal 26,500 26,500
Accrued PIK interest 2,248 1,685
Accrued interest payable in cash 3,070 2,274
Fair Value Adjustments - Principal (26,500) (26,500)
Fair Value Adjustments - Accrued
Interest (5,318) (3,959)
--------- ---------
Gross loans receivable - -
--------- ---------
HKMH
Loan principal 3,700 3,700
Fair Value Adjustments - Principal (3,700) -
Gross loans receivable - 3,700
-------- ------
11. OTHER PAYABLES AND ACCRUALS
2022 2021
US$'000 US$'000
Accounts payable 1,254 870
Accruals 80 140
----------- -----------
Other payables and accruals 1,334 1,010
=========== ===========
12. LOANS AND BORROWINGS
2022 2021
US$'000 US$'000
Corporate debt 3,859 3,568
Loans and borrowings 3,859 3,568
======== ========
The movement in loans and borrowings
is as follows
2022 2021
US$'000 US$'000
Opening balance 3,568 3,504
Borrowing costs amortised 52 64
Interest expense accrued 467 459
Payment of interest liability (228) (459)
Closing balance 3,859 3,568
======== ========
i. Terms and conditions of the outstanding debt is as follows:
Interest Year
Currency rate of maturity
Secured loan notes US$ 15% 2023
The corporate debt US$3.9 million are proceeds from loan notes
issued to a family office investor, with a related debenture which
constitutes a fixed over the assets and undertakings of the
Company. Capitalised debt issue costs have been fully
amortised.
The loan notes reached maturity in October 2022. The Company has
not yet realised sufficient funds from its current program of
legacy asset disposals to redeem these bonds. In December 2022 the
Company agreed an extended maturity of the loan notes issued to 31
December 2023 and an increased interest rate of 15% from December
2022. The interest rate payable on the principal amount of the loan
notes will increase to 16% per annum where US$1.8m or more of the
principal amount remains outstanding by 30 June 2023.
ii. Reconciliation of movements of liabilities & equity to
cashflows arising from financing activities
Loans & Share capital/ Treasury
borrowings premium reserve
US$'000 US$'000 US$'000
Opening balance at 1 January
2022 3,568 148,903 (615)
Changes from cashflows
Payment of interest (228) - -
------------ --------------- ---------
Total changes from financing
cashflows (228) - -
------------ --------------- ---------
Other changes:
Interest expense 519 - -
------------ --------------- ---------
Total other changes to
liabilities 519 - -
------------ --------------- ---------
Closing balance at 31
December 2022 3,859 148,903 (615)
============ =============== =========
For non-cash movement on account of investing activities refer
note 4.
13. SHARE CAPITAL AND TREASURY SHARE RESERVE
Share capital
Number of shares amount
US$'000
Issued share capital excluding
treasury shares at 31 December
2021 115,277,869 148,288
----------------- --------
Issued share capital excluding
treasury shares at 31 December
2022 115,277,869 148,288
================= ========
Consisting of:
Authorised, called-up and fully
paid ordinary shares of no par
value each at 31 December 2022 117,925,673
Authorised, called-up and fully
paid ordinary shares of no par
value held as treasury shares
by the Company at 31 December
2022 (2,647,804)
================= ========
14. FINANCIAL INSTRUMENTS
Financial Risk Management Objectives and Policies
Management has adopted certain policies on financial risk
management with the objective of ensuring that:
(i) appropriate funding strategies are adopted to meet the
Company's and Group's short-term and long-term funding requirements
taking into consideration the cost of funding, gearing levels, and
cash flow projections;
(ii) appropriate strategies are also adopted to manage related
interest and currency risk funding; and
(iii) credit risks on receivables are properly managed.
Financial instruments by category
The accounting policies for financial instruments have been
applied to the line items below:
Financial assets
2022 2021
US$'000 US$'000
Unquoted financial assets
at fair value 18,227 66,202
Other receivables at fair
value 1,738 5,521
Cash and cash equivalents 321 848
-------- --------
Financial assets 20,286 72,571
======== ========
Financial liabilities
2022 2021
US$'000 US$'000
Other payables and accruals
at amortised cost 1,334 1,010
Corporate debt at amortised
cost 3,859 3,568
--------- ---------
Financial liabilities 5,193 4,578
========= =========
The Company has agreed an extended maturity of the loan notes
issued to 31 December 2023. Capitalised debt issue costs have been
fully amortised. All other financial liabilities are due within 12
months.
Financial assets at fair value through profit or loss
The following table provides an analysis of financial
instruments that are measured subsequent to initial recognition at
fair value, grouped into Levels 1, 2, or 3 based on the degree to
which the fair value is observable as described in Note 2(a) Basis
of preparation:
2022 2021
US$'000 US$'000
Level 3
Unquoted financial assets at fair value
through profit or loss (Note 9) 18,227 66,202
Other receivables at fair value through
the profit or loss (Note 9) 1,769 5,556
-------- --------
19,996 71,758
-------- --------
There were no transfers between levels in the current period.
Carrying values of all financial assets and liabilities (not
measured at fair value through profit or loss) are approximate to
their fair values.
Significant unobservable inputs used in measuring fair value -
Level 3
Description Fair value at Fair value Valuation Significant Relationship
31 Dec 2022 US$'000 hierarchy technique unobservable of unobservable
input(s) inputs to
fair value
------------------- ----------- ---------------- --------------- -------------------
84.81% equity investment Level 3 Market Not applicable Not applicable
in Future Metal Approach
Holdings Limited - in this
engaged in mining approach,
project - US$5.3m; the value
(2021: US$50.4m) of an asset
is determined
by comparing
it to similar
assets
in the
marketplace
based on
recent
transaction
prices
and terms.
for FMHL,
the net
realizable
value is
calculated
based on
the bid
received
from potential
buyers.
Private equity
investments 7.2% preferred
equity investment
in Meize Energy
Industries Holdings
Limited engaged
in designing and
manufacturing blades
for wind turbines
- US$8.8m; (2021:
US$8.2m)
15% equity investment
in Changtai Jinhongbang
Real Estate Development
Co. Limited engaged
in a luxury resort
and residential
development project
- US$1.8m;
(2021: US$1.9m)
Level 3 Net Realisable Not applicable Not applicable
Private credit Value
fund - Greater
China Credit Fund
LP US$0.0m ; (2021:
US$ 0.0m )
40% equity investment
(with guaranteed
income yield) in
Infinity TNP, holding
units in luxury
hotel condominium
Tellus Niseko -
$0m; (2021: US$3.6m)
Credit investments Level 3 Net Realisable Not applicable Not applicable
Convertible Bond Value
- Fook Lam Moon
US$0.0m Net Realisable
(2021: US$0.0m) Value
Convertible Bond
- DocDoc Pte Ltd
US$2.8m
(2021: US$2.6m)
----------- ----------------
Secured Loan Notes
- Infinity Capital
Group US$1.4m
(2021:US$1.4m)
---------------------------- ----------- ---------------- -----------------
The above table sets out information about significant
unobservable inputs used at 31 December 2022 in measuring material
financial instruments categorised as Level 3 in the fair value
hierarchy.
Credit Risk
The Group's credit risk is primarily attributable to other
receivables. Management has a credit policy in place and the
exposure to credit risks are monitored on an ongoing basis.
In respect of other receivables, individual credit evaluations
are performed whenever necessary. During the year, an ECL provision
was recognised in respect of Infinity Capital Group, see Note 10
for details.
The Group's maximum exposure to credit risk is represented by
the total financial assets held by the Group.
Interest Rate Risks
The Group currently operates with positive cash and cash
equivalents as a result of issuing share capital and corporate debt
in anticipation of future funding requirements.
Other receivables bear interest at a fixed annual rate,
therefore there is no exposure to market interest rate risk on
these financial assets. The effect of a 1% increase or fall in
interest rates obtainable on cash and on short-term deposits would
be to increase or decrease the Group's operating results by not
more than US$3,000.
The Group has a US$10 million debt facility with a private
family office investor, under which the Company has issued US$3.6
million loan notes, with an associated fixed interest rate of 15.0%
and a maturity date of 31 December 2023. There is an increase
interest rate payable on the principal amount of the outstanding
loan notes of 16% per annum where US$1.8m or more of the principal
amount remains outstanding by 30 June 2023. As the interest rate
has been fixed for the term of the facility, there is no interest
rate risk associated with the instruments.
Liquidity Risk
The Group manages its liquidity requirements by the use of both
short-term and long-term cash flow forecasts. The Group's policy to
ensure facilities are available as required is to issue equity
share capital and/or loan notes in accordance with long-term cash
flow forecasts.
The Group's financial liabilities are primarily operational
costs and debt instruments. All operational costs are due for
payment in accordance with agreed settlement terms with
professional firms, and all are due within one year. Debt principal
and related interest are due for settlement in December 2023.
Market (Price and valuation) Risk
The Group's investment portfolio is susceptible to risk arising
from uncertainties about future values of the investment
securities, either in relation to market prices (for quoted
securities) or fair values (for unquoted securities). This risk is
that the fair value or future cash flows will fluctuate because of
changes in market prices or valuations, whether those changes are
caused by factors specific to the individual investment or
financial instrument or its holder or factors affecting all similar
financial instruments or investments traded in the market. The
Group's investment committee provides the Board of Directors with
investment recommendations that are consistent with the Group's
objectives. The investment committee recommendations are carefully
reviewed by the Board of Directors before the investment decisions
are implemented.
During the year under review, the Group did not hedge against
movements in the value of its investments. A 10% increase/decrease
in the fair value of investments would result in an US$2m (2021:
US$7.2m) increase/ decrease in the net asset value.
While investments in companies whose business operations are
based in China may offer the opportunity for significant capital
gains, such investments also involve a degree of business and
financial risk, in particular for unquoted investment.
Generally, the Group prepares to hold the unquoted investments
for a middle to long term time frame, in particular, if admission
to trading on a stock exchange is considered likely in the future.
Sales of securities in unquoted investments may result in a
discount to the book value at the time of future disposal.
Currency Risks
Management considers that foreign currency exposure is not
significant to the Group and as such, there is no hedging of
foreign currencies.
Capital Management
The Group's financial strategy is to utilise its resources to
further grow the Group's portfolio. The Group keeps investors and
the market informed of its progress with its portfolio through
regular announcements and raises additional equity finance at
appropriate times when market conditions allow.
The Company regularly reviews and manages its capital structure
for the portfolio companies to maintain a balance between the
higher shareholder returns that might be possible with certain
levels of borrowings for the portfolio and the advantages and
security afforded by a sound capital position, and makes
adjustments to the capital structure of the portfolio in the light
of changes in economic conditions.
The capital structure of the Company and the Group consists of
cash and cash equivalents, loans and equity comprising issued
capital and reserves.
15. SHARE BASED PAYMENTS
15.1 Ownership-Based Compensation Scheme for Senior
Management
The Group has an ownership-based compensation scheme for senior
management of the Group. In accordance with the provisions of the
plan, senior management may be granted warrants to purchase
ordinary shares. Each warrant converts into one ordinary share of
Jade Road Investments Limited on exercise. No amounts are paid or
payable by the recipient of the warrants. The warrants carry
neither rights to dividends nor voting rights. Warrants may be
exercised at any time from the date of vesting to the date of their
expiry.
At 31 December 2022, there were 1,907,882 warrants outstanding,
issued to the Company's Directors in previous periods in respect of
services provided to the Group. 1,600,000 warrants have an exercise
price of US$1.21 per share, equivalent to GBP1.00 at 31 December
2022. The warrants will expire in 2027, 10 years after the date of
grant. 307,882 warrants have an exercise price of US$0.40 per
share, equivalent to GBP0.33 at 31 December 2022. The warrants will
expire in 2023, 3 years after the date of grant. All warrants are
equity-settled and may be exercised at any time from the date of
grant to the date of their expiry.
In the event that a Director's appointment is terminated for any
reason, then in such circumstances each Director's subscription
rights shall, to the extent he/she has not been issued or exercised
either (i) prior to the date of termination (Date of Termination);
or (ii) within the period of 60 days immediately following the Date
of Termination, be immediately cancelled.
15.2 Equity Compensation Scheme for Harmony Capital Investors
Limited (the " Investment Manager ")
The Group has an equity compensation scheme for Investment
Manager of the Group. In accordance with the provision of the
scheme, the Investment Manager is granted warrants to subscribe for
20 million (before share consolidation undertaken by the Company on
20 September 2017) ordinary shares, which is to be issued in five
equal tranches. No amounts are paid or payable by the recipient of
the warrants. The warrants carry neither rights to dividends nor
voting rights. Warrants may be exercised at any time from the date
of vesting to the date of their expiry. Any equity compensation
shares issued to or acquired by Investment Manager are subject to
an orderly market period, which is 12 months after each date of
issue. During each orderly market period, the Investment Manager
undertakes to the Company and the broker not to effect a disposal
of the relevant shares unless the Investment Manager gives written
notice to do so.
All warrants are equity-settled, the only conditions for all
warrants granted is that the warrants holder remains in the office
when the warrant is exercised.
The number of warrants due to the Investment Manager to
subscribe for ordinary shares in respect of services provided to
the Group were recalculated pursuant to paragraph 2 of Section 2 of
the warrant instruction to reflect the share consolidation
undertaken by the Company on 20 September 2017. The warrants have
an exercise price of US$1.21 per share, equivalent to GBP0.89 at 31
December 2022. The warrants will expire 10 years after the date of
grant. In total the Investment Manager owns 8,000,000 warrants as
at 31 December 2022 (2021: 8,000,000).
2022 2021
Weighted Weighted
average average
exercise exercise
Number Number price Number Number price
of options of warrants US$ of options of warrants US$
Balance at beginning
of the financial
year - 17,567,663 0.84 - 17,567,663 0.84
Issuance during
the financial year
* Investment manager - - - - - -
* Directors - - - - - -
* Shareholders - - - - - -
Expired during the
financial year - - - - - -
------------- ------------- ---------- ------------ ------------- ----------
Balance at end of
financial year - 17,567,663 0.84 - 17,567,663 0.84
------------- ------------- ---------- ------------ ------------- ----------
Exercisable at end
of financial year - 17,567,663 0.84 - 17,567,663 0.84
The weighted-average remaining contractual life of outstanding
warrants at 31 December 2022 was 3 years and 3 months (2021: 4
years and 3 months). During the year there has been a credit of
$0.2m (2021: $0.4m) relating to share-based compensation of the
Investment Manager. This relates to the revaluation of the shares
yet to be issued to HCILin respect of the 2020 accrued incentive
fee, due to the price at grant being lower than the accrued price.
There was no incentive fee charged in 2022.
15.3 Equity-Settled Share-Based Payment for Investment Manager
as Incentive Fee
Investment Manager is entitled to receive an incentive fee from
the Company in the event that the audited net asset value for each
year is (1) equal to or greater than the audited net asset value
for the last year in relation to which an incentive fee became
payable ("High Water Mark"); and (2) in excess of 105% of the
audited net asset value as at the last calendar year end ("the
Hurdle"). Subject to the High Water Mark and Hurdle being excessed
in respect of any calendar year, the incentive fee will be equal to
20% of the difference between the current year end NAV and the
previous year end NAV. 50% of the incentive fee shall be paid in
cash and the remaining 50% of the incentive fee shall be paid by
ordinary shares.
The remaining 50% of incentive fee ("Equity Compensation
Amount") shall be satisfied by the Company issuing to Investment
Manager such number of ordinary shares as have a Fair Market Value
which in aggregate is equal to the Equity Compensation Amount. The
Fair Market Value is the closing Volume Weighted Average Price
("VWAP") for the ordinary shares trading on AIM for the ninety
prior trading days as at the relevant calculation period year end,
i.e., 31 December 2017. The shares issued to or acquired as
incentive fee by Investment Manager is subject to an orderly market
period, which is 12 months after each date of issue. During each
orderly market period, Investment Manager undertakes to the Company
and the broker not to effect a disposal of the relevant shares
unless the Investment Manager gives written notice to do so.
No incentive fee was accrued in 2022 (2021: $0.0m).
16. RELATED PARTY TRANSACTIONS
During the year, the Company and the Group entered into the
following transactions with related parties and connected parties
under existing contracts:
2022 2021
Notes US$'000 US$'000
Remuneration payable to Directors
(see Note 7) (i) 260 309
Harmony Capital Investors Limited (ii)
- Management fee 1,200 1,861
- Incentive fee (158) (424)
Amount due to Harmony Capital Investors
Limited at 31 December 1,234 865
Note: Incentive Fee includes:
- A credit of $0.158m (2021 $0.424m) was recognized in respect
of Incentive Fee shares yet to be issued, revalued as at 31
December 2022.
(i) The key management personnel of the Company are considered
to be the Directors and appropriate disclosure with respect to them
is made in Note 7 of the financial statements. $18k of the total
remuneration payable, due from Jade Road Investments (HK) Limited,
to John Croft, was still outstanding at 31 December 2022. There are
no other contracts of significance in which any Director has or had
during the year a material interest.
(ii) Harmony Capital Investors Limited is the Investment Manager
of the Group. The management fee, which was calculated and paid
bi-annually in advance calculated at a rate of 0.875% of the net
asset value of the Group's portfolio of assets as at 30 June and 31
December in each calendar year.
Harmony Capital Investors Limited is entitled to receive an
incentive fee from the Company in the event that the audited net
asset value for each year is (1) equal to or greater than the
audited net asset value for the last year in relation to which an
incentive fee became payable ("High Water Mark"); and (2) in excess
of 105% of the audited net asset value as at the last calendar year
end ("the Hurdle"). Subject to the High Water Mark and Hurdle being
excessed in respect of any calendar year, the incentive fee will be
equal to 20% of the difference between the current year end NAV and
the previous year end NAV. 50% of incentive fee shall be paid in
cash and the remaining 50% of incentive fee shall be paid by
ordinary shares.
17. LOSS PER SHARE
The calculation of the basic and diluted loss per share
attributable to the ordinary equity holders of the Company is based
on the following:
2022 2021
US$'000 US$'000
Numerator
Basic/Diluted: Net loss (52,904) (38,424)
--------- --------------
No. of No. of shares
shares
'000 '000
Denominator
Basic/Diluted: Weighted average shares 115,278 115,278
--------- --------------
Loss per share:
Basic/Diluted (45.89) (33.33)
cents cents
--------- --------------
Treasury shares issued by the company totaling 2,647,804 as at
the reporting date, have been excluded from the weighted average
shares calculation.
18. EVENTS AFTER THE REPORTING PERIOD
On 20 February 2023, the company issued an additional
201,996,350 shares with a gross placing proceeds of $1,750,000.
This includes 20,046,667 shares issued pursuant to the underwriting
fee (net proceeds $1,566,573). The company issued amended and
restated Memorandum and Articles of Association on 26(th) February
2023.
On 22 March 2023, the company issued 3-year warrants to the Loan
Note holders. The strike price for these warrants is set at a 50%
premium to the price of the respective share issuance.
On 24 March 2023, John Batchelor, Non-Executive Director, has
resigned from the Board of Jade Road Investments.
On 27 March 2023, the company released an RNS providing details
of revision to its investment management agreement with HCIL.
Pursuant to an agreement amending the Services Agreement to be
entered into between the Company and HCIL:
1. HCIL will, subject to the overall supervision and control of
the Board, advise the Board and the Company on the orderly disposal
of those assets and investments currently owned by it (the "Legacy
Portfolio") and advise on any proposed new investments to be made
in accordance with the new Investment Policy recently approved by
shareholders. HCIL shall, subject to the overall supervision and
control of the Board, also undertake general administrative,
investor relations, marketing, portfolio management and risk
management functions for the Company.
2. In place of the original fee arrangements whereby HCIL
received an annual management fee of 1.75% of Net Asset Value and
an annual incentive fee of 20 % of any year on year increase in
audited Net Asset Value subject to a high water mark and
performance hurdle it will now be paid a fixed fee of US350,000 for
its services in connection with the orderly disposal and management
of the Legacy Portfolio and supporting the Company in its
operations. This represents a substantial reduction in fees as
compared to the previous agreement. Additionally, upon the
realisation of any assets comprised in the Legacy Portfolio, HCIL
will also be entitled to an incentive fee of 20% calculated as a
percentage of the net proceeds received by the Company therefrom,
such fee only being payable once aggregate net proceeds from all
such disposals exceed an agreed hurdle.
3. HCIL's appointment under these revised terms is for a fixed
term of one year, capable of extension by mutual agreement between
HCIL and the Company.
On the 5 April 2023 the company invested US$500,000 in Heirloom
Investment Fund SPC. The Fund's Portfolio represents a mix of
geographically diverse assets and ads diversification to Jade's
portfolio.
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END
FR FLFELETIRFIV
(END) Dow Jones Newswires
May 26, 2023 08:16 ET (12:16 GMT)
Grafico Azioni Jade Road Investments (AQSE:JADE.GB)
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Grafico Azioni Jade Road Investments (AQSE:JADE.GB)
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