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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Ceiba Investments Limited | LSE:CBA | London | Ordinary Share | GG00BFMDJH11 | ORD NPV |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 28.00 | 24.00 | 32.00 | 28.00 | 28.00 | 28.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Real Estate Investment Trust | 2.76M | -14.28M | -0.1037 | -2.70 | 38.55M |
From Apr 2022 to Apr 2024
TIDMCBA
RNS Number : 7858J
Ceiba Investments Limited
29 April 2022
29 April 2022
CEIBA INVESTMENTS LIMITED
(the "Company")
(TICKER CBA, ISIN: GG00BFMDJH11)
Legal Entity Identifier: 213800XGY151JV5B1E88
RESULTS FOR THE YEARED 31 DECEMBER 2021
COMPANY OVERVIEW
GENERAL
CEIBA Investments Limited ("CEIBA" or the "Company") is a Guernsey-incorporated, closed-ended investment company, with registered number 30083. The Ordinary Shares of the Company are listed on the Specialist Fund Segment ("SFS") of the London Stock Exchange's Main Market under the symbol CBA (ISIN: GG00BFMDJH11). The Company's Bonds are listed on the International Stock Exchange, Guernsey under the symbol CEIB1026 (ISIN: GG00BMV37C27). The governance framework of the Company reflects that as an investment company there are no employees, and the Directors, the majority of whom are independent, are all non-executive. Like many other investment companies, the investment management and administration functions are outsourced to third party providers. Through its consolidated subsidiaries (together with the Company, the "Group"), the Company invests in Cuban real estate and other assets by acquiring shares in Cuban joint venture companies or other entities that have direct interests in the underlying properties. The Company also arranges and invests in financial instruments granted in favour of Cuban borrowers.
FINANCIAL HIGHLIGHTS AS AT 31 DECEMBER 2021 IN GBP AND US$ (FOREX: GBP/US$ = 1.3477)
The Company's Net Asset Value ("NAV") and share price are quoted in Sterling (GBP) but the functional currency of the Company is the U.S. Dollar (US$). As such, the financial highlights of the Company set out below are being provided in both currencies, applying the applicable exchange rate as at 31 December 2021 of GBP1:US$ 1.3477 (2020: GBP1=US$1.3608).
Hot Features
Premium
USD 31-Dec-21 31-Dec-20 % change
( 17.
Total Net Assets (m) $160.3 $194.4 5)%
( 17.5
NAV per Share (1) $1.16 $1.41 )%
Net Loss to shareholders ($ 19.80 ( 45.5
(m) ($ 28.8 ) ) )%
($ 0.21 ( 50.0
Loss per share ) ($ 0.14 ) )%
GBP 31-Dec-21 31-Dec-20 % change
( 16.7
Total Net Assets (m) GBP118.96 GBP142.90 )%
( 16.7
NAV per Share (1) GBP0.864 GBP1.038 )%
( 24.7
Market Capitalisation (m) GBP88.1 GBP116.30 )%
( 24.7
Share price GBP0.64 GBP0.85 )%
Discount (1) ( 25.9 )% ( 18.6 )%
Shares in issue 137,671,576 137,671,576
------------- ------------
Ongoing charges (1) 2.80% 2.91%
1 These are considered Alternative Performance Measures. See glossary for more information.
MANAGEMENT
The Company has appointed Aberdeen Standard Fund Managers Limited ("ASFML" or the "AIFM") as the Company's alternative investment fund manager to provide portfolio and risk management services to the Company. The AIFM has delegated portfolio management to Aberdeen Asset Investments Limited ("AAIL" or the "Investment Manager"). Both ASFML and AAIL are wholly-owned subsidiaries of abrdn plc ("abrdn"), a publicly-quoted company on the London Stock Exchange. References throughout this document to abrdn refer to both the AIFM and the Investment Manager.
CHAIRMAN'S STATEMENT
At the time of publication of the 2020 Annual Report of CEIBA Investments Limited ("CEIBA" or the " Company ") in April 2021, both the Company and Cuba were in the midst of the battle against the Covid-19 pandemic and at that time the long-term impact of the virus and the timing of the expected return to normality were difficult to predict with any degree of certainty. Overall, Cuba has handled the virus well and to date, around 10.6 million people or 94% of the population have received at least one vaccine dose and 87% are fully vaccinated. Consequently, like many other countries, Cuba has now rolled back many of the various restrictions, especially concerning travel, which had been imposed to combat the virus. However, as global travel begins a slow recovery there is no question that CEIBA has been severely impacted throughout 2020 and 2021 and will continue to suffer somewhat until a full return to normal is achieved. Compounding the pandemic issues are the challenges presented by the ongoing U.S. embargo against Cuba, the conflict between Russia and Ukraine and the transitionary effects of recent monetary reforms adopted by the Cuban government. Overall, CEIBA finds itself at present trading in a very challenging environment.
CUBA MONETARY REFORMS
In the second half of 2020, the Cuban government undertook to adopt significant monetary reforms, which your Board considers to be positive overall. These reforms, which are generally referred to as the Tarea Ordenamiento (TO), took effect on 1 January 2021 and included:
- the elimination of the Cuban Convertible Peso (CUC), which previously traded at par with the U.S. Dollar (US$), thereby unifying the dual currency system under a single currency: the Cuban Peso or CUP;
- a fixed official exchange rate between the CUP and the US$ of 24 to 1, and;
- the adoption of a system for allocating hard currency throughout the economy intended to largely decentralise business decisions and provide foreign investment vehicles and Cuban entities with real financial autonomy. This is accomplished through the creation of "liquidity" rights (denominated in US$) that can be used to exchange Cuban Pesos to hard currency for international transfers on a decentralised basis.
While the Board considers these reforms to be a positive move the timing, in hindsight, has been unfortunate. The lack of any easing of the U.S. Cuban embargo under the Biden administration and the very slow resumption of international travel in the face of the pandemic have severely impaired the foreign exchange reserves and general liquidity position of the Cuban economy, through reduced overseas remittances and greatly reduced tourism income.
What we are presently witnessing in Cuba as a result of the poor liquidity position is a shortage of vital imported products, increased inflation and a serious devaluation of the street value of the CUP. The Investment Manager's report describes the reforms and their effects in further detail, but at present the main uncertainty caused by them for CEIBA is in relation to the income generated by Inmobiliaria Monte Barreto S.A. (" Monte Barreto ") and the Company's ability to realise such income in the form of hard currency dividend payments.
RELATIONS WITH THE UNITED STATES
U.S.-Cuba relations had been expected to improve following the inauguration of President Biden in January 2021, but disappointingly to date nothing has changed from the Trump presidency and all U.S. sanctions have remained stubbornly in place during 2021. In respect of U.S. personnel and entities, the U.S. Cuban embargo legislation prohibits investments in Cuba, greatly constrains family and other hard currency remittances, commercial transactions and trade, and severely restricts travel. It is possible that following the mid-term election in November 2022 we may see some relaxation of the rules in accordance with the promises given prior to his election. Any initiatives to improve the relationship between the two countries should have a very positive impact on the Cuban economy and also on the Company's assets.
2021 REVIEW
Similar to its performance throughout the whole of 2020 and despite the backdrop of the Covid-19 pandemic, Monte Barreto, the Cuban joint venture company that owns and operates the Miramar Trade Center, which is Cuba's leading mixed-use office and retail real estate complex, continued to trade strongly throughout 2021 and occupancy levels remained well over 95% throughout the year. Although revenues were down slightly as compared with the prior year, net income in 2021 reached US$15.6 million for the year, representing an 8.5% increase over the prior year and making 2021 the most profitable year since incorporation of the joint venture. This increase in profitability has largely been a result of the lower operating costs as a result of the unification of the currency. The 2022 outlook for Monte Barreto continues to be positive, with occupancy percentage levels expected to remain in the high nineties throughout the year.
While Monte Barreto continues to trade well, there presently remains considerable uncertainty over the impact of Cuba's monetary reforms on the ability of the joint venture company to generate "liquid" hard currency income from its operations (and consequently its ability to pay dividends to its shareholders without depending on allocations of hard currency from the Cuban authorities). This matter remains unresolved at present and discussions are continuing between the joint venture partner and the relevant Cuban government authorities to confirm the position. While this uncertainty remains, the discount rates applied to future cash flows for the purpose of arriving at a valuation for Monte Barreto have increased, resulting in a lower valuation for CEIBA's present interest. In addition, due to the uncertainty on the timing of payment of the dividends owed to the Company by Monte Barreto, the Company has made a provision in its financial statements in the amount of US$12,281,408 representing the outstanding dividends receivable from Monte Barreto.
Throughout 2021, the global travel and hotel industries continued to be severely impacted by the Covid-19 pandemic. During November 2021 Cuba re-opened its borders to international tourism, but then the Omicron variant of the virus spread globally and further delayed any material recovery in the travel trade. As a result, in 2021 Cuba received fewer than 360,000 tourists - 67% less than during 2020, and less than 10% of the 4 million tourists that Cuba hosted during 2019, the last year before the pandemic.
CEIBA's main hotel interests are held through its 32.5% holding in the Cuban joint venture company Miramar S.A. (" Miramar "). Miramar owns three hotels in Varadero and one hotel in Havana. In Varadero, the Meliã Las Américas and the Meliã Varadero re-opened in November 2021, having been closed since arrival of the pandemic in March 2020. The Sol Palmeras remained open for most of the year but traded on a heavily scaled-back basis and mainly to Cuban nationals. The Meliã Habana Hotel in Havana remained open throughout 2021 and was one of the main quarantine hotels on the island, managing to maintain positive operations throughout the year. Miramar had a negative EBITDA of US$4.5 million, including a one-time foreign exchange expense of US$5.4 million relating to the conversion of monetary assets under the monetary reforms. While the recovery in the tourist trade remains slow, a gradual build up throughout 2022 is expected.
CEIBA's other hotel interest is its 40% holding in the Cuban joint venture company TosCuba S.A. (" TosCuba "), which is constructing the 400-room Meliã Trinidad Península Hotel. This hotel is situated on the south coast of Cuba close to the historic city of Trinidad and will be the first modern international-standard beach resort hotel in the area. It should prove to be an excellent addition to the hotel interests of the Company. Construction has continued throughout the year, although at a reduced pace, and the original contractor was replaced in the first half of 2021 following repeated defaults in performance. Completion of the construction process is expected to take place during 2022, with a soft opening scheduled for the first quarter of 2023 and the official launch of the hotel during Cuba's international Tourism Fair in May 2023.
DIVIDS
The Covid pandemic has clearly had a very negative impact on the revenues generated by the Company's hotel interests and it was decided, following its onset, that it was vital that CEIBA should maintain sufficient cash to meet all of its existing and future undertakings. Accordingly, the dividend policy was suspended in 2020 and no dividend has been paid since then. The Board would very much like to reinstate the payment of dividends but, in view of there still being considerable uncertainty as to how long it will take to see a return of normal tourism numbers and with the added uncertainty of the impact of the monetary reforms on the dividends payable by Monte Barreto, it has been decided to maintain the present position for another year. Accordingly, it is not intended that any dividend be paid to shareholders in 2022. This stance will be kept under constant review and it remains the Board's intention to reinstate the dividend as soon as appropriate.
BOARD
I am grateful to the Board for their commitment and input during another challenging year. It is the Board's policy to undertake a regular review of its own performance to ensure that it has the appropriate mix of relevant experience and skills to ensure the effective overall operation of the Company. In this latter regard, I am delighted to welcome Jemma Freeman to the board. She was appointed in October 2021 and is the Executive Chairman of Hunters & Frankau Limited, the exclusive distributor for Habanos S.A.'s cigar portfolio in the United Kingdom. The Freeman family have been involved with cigars since the 1800's and with Cuba since the 1920's when they owned cigar factories in Havana. She brings a wealth of experience, skills and diversity to the Board, in addition to her deep knowledge and understanding of the Cuban business environment, complementing those of our existing directors.
THE INVESTMENT MANAGER
Aberdeen Standard Fund Managers Limited, a wholly owned subsidiary of abrdn plc, has acted as manager of the Group's portfolio of assets throughout the year. There has been no change in the underlying key operational management of the Company and this team continues to be headed by Sebastiaan Berger, who is exclusively focused on the Company's assets and business and has acted in this role for some 20 years. The Board reviewed the work of the Investment Manager during the year and concluded that it was very satisfied with the performance of the Investment Manager and that it was in the best interests of shareholders that ASFML remain as manager of the portfolio.
The Board extends its sincere thanks to the Investment Manager and to the entire management team based in Cuba for their commitment and efforts on behalf of the Company in these very difficult times.
John Herring
Chairman
28 April 2022
STRATEGIC REPORT
INVESTMENT OBJECTIVE
The investment objective of the Company is to provide a regular level of income and substantial capital growth.
INVESTMENT POLICY
The Company is a country fund with a primary focus on Cuban real estate assets. The Company seeks to deliver the investment objective primarily through investment in, and management of, a portfolio of Cuban real estate assets, with a focus on the tourism and commercial property sectors. Cuban real estate assets may also include infrastructure, industrial, retail, logistics, residential and mixed-use assets (including development projects).
The Company may also invest in any type of financial instrument or credit facility secured by Cuba-related cash flows.
In addition, subject to the investment restrictions set out below, the Company may invest in other Cuba-related businesses, where such are considered by the Investment Manager to be complementary to the Company's core portfolio ("Other Cuban Assets"). Other Cuban Assets may include, but are not limited to, Cuba-related businesses in the construction or construction supply, logistics, energy, technology and light or heavy industrial sectors.
Investments may be made through equity investments, debt instruments or a combination of both.
The Company will invest either directly or through holdings in special purpose vehicles ("SPVs"), joint venture vehicles, partnerships, trusts or other structures. The Cuban Foreign Investment Act (Law 118 / 2014) guarantees that the holders of interests in Cuban joint venture companies may transfer their interests, subject always to agreement between the parties and the approval of the Cuban government.
INVESTMENT RESTRICTIONS
The following investment limits and restrictions apply to the Company and its business which, where appropriate, will be measured at the time of investment:
-- the Company will not knowingly or intentionally use or benefit from confiscated property to which a claim is held by a person subject to U.S. jurisdiction;
-- the Company may invest in Cuban and non-Cuban companies, joint ventures and other entities that earn all or a substantial part of their revenues from activities outside Cuba, although such investments will, in aggregate, be limited to less than 10% of the Gross Asset Value;
-- save for Monte Barreto (see the Investment Manager's Review for more information on this asset), the Company's maximum exposure to any one asset will not exceed 30 per cent. of the Gross Asset Value;
-- no more than 20 per cent. of the Gross Asset Value will be invested in Other Cuban Assets; and
-- no more than 20 per cent. of the Gross Asset Value will be exposed to "greenfield" real estate development projects, being new-build construction projects carried out on undeveloped land.
The restrictions above apply at the time of investment and the Company will not be required to dispose of any asset or to re-balance the portfolio as a result of a change in the respective valuations of its assets. The investment limits detailed above will apply to the Group as a whole on a look-through basis, i.e. where assets are held through subsidiaries, SPVs, or equivalent holding vehicles, the Company will look through the holding vehicle to the underlying assets when applying the investment limits.
KEY PERFORMANCE INDICATORS ("KPIs")
The KPIs by which the Company measures its economic performance include:
-- Total income -- Net income -- Total net assets -- Net asset value per share (NAV)* -- Net asset value total return* -- Market capitalisation -- Premium / Discount to NAV * -- Dividend per share -- Gain / Loss per share
* These are considered Alternative Performance Measures.
In addition to the above measures, the Board also regularly monitors the following KPIs of the joint venture companies in which the Company is invested and their underlying real estate assets, all of which are Alternative Performance Measures.
In the case of commercial properties, other KPIs include:
-- Occupancy levels -- Average monthly rate per square meter (AMR) -- Earnings before interest, tax, depreciation and amortisation (EBITDA) -- Net income after tax
In the case of hotel properties, other KPIs include:
-- Occupancy levels -- Average Daily Rate per room (ADR) -- Revenue per available room (RevPAR) -- EBITDA -- Net income after tax
The Board also monitors the financial performance of the Cuban joint venture companies that own the commercial and hotel properties using these KPIs. The Board and the Investment Manager seek to influence the management decisions of the Cuban joint venture companies through representation on their corporate bodies with the objective of generating reliable and growing cash flow for the Cuban joint venture companies, which in turn will be reflected in reliable and growing dividend streams in favour of the Company.
PRINCIPAL RISKS
PRINCIPAL RISKS
Introduction
The Company is exposed to a variety of risks and uncertainties. The Board, through the Audit Committee, is responsible for the management of risk and has put in place a regular and robust process to identify, assess and monitor the principal risks and uncertainties facing the business. A core element of this process is the Company's risk register which identifies the risks facing the Company and identifies how these may impact on operations, performance and solvency and what mitigating actions, if any, can be taken. There are a number of risks which, if they occurred, could have a material adverse effect on the Company and its financial condition, performance and prospects. As part of its risk process, the Board also seeks to identify emerging risks to ensure that they are effectively managed as they develop. In the event that an emerging risk has gained significant weight or importance, that risk is categorised and added to the Company's risk register and is monitored accordingly.
Principal Risks
The Company invests in Cuba, a frontier or pre-emerging market, which may increase the risk as compared to investing in similar assets in other jurisdictions.
In addition to general country-risk, the most significant risks faced by the Company during the financial year appear in the table below, together with a description of the possible impact thereof, mitigating actions taken by the Company and an assessment of how such risks are trending at the present time.
The Board relies upon its external service providers to ensure the Company's compliance with applicable regulations and, from time to time, employs external advisers to advise on specific concerns. The operation of key controls in the Investment Manager's and other third party service providers risk management processes and how these apply to the Company's business are reviewed regularly by the Audit Committee along with internal control reports from these entities.
Type of Risk Description and Possible Mitigating Action Trend
Impact
Emerging Risks relating to the Cuban Financial System
Cuban Financial During the second half The Investment Manager á
Reforms - Financial of 2020 and continuing has closely followed all
Autonomy Rules throughout 2021, in the developments relating to
midst of the economic the adoption and implementation
disruption caused by the of these new measures,
Covid-19 pandemic and and has communicated its
strengthened sanctions views and interacted regularly
maintained in place by at all appropriate levels
the U.S. government, the in order to extend their
Cuban government adopted application to the operations
new financial reforms of the joint venture companies
aimed at creating a new in which the Company has
objective system for the a participation.
allocation of limited Although the interpretation
liquidity reserves within of the new financial autonomy
the economy and intending rules, as well as the practical
to provide "real financial ability of the Cuban financial
autonomy" to Cuban entities, system to successfully
including foreign investment implement them in the short
vehicles such as the joint term, remain subject to
venture companies in which significant uncertainty,
the Company invests. These the Investment Manager
reforms set fixed levels believes that the new financial
of "liquidity" for various autonomy rules will in
types of income and largely most cases create an objective
remove the requirement (non-discretionary) and
to obtain centralised largely decentralised mechanism
foreign exchange approvals for the allocation of liquid
for international payments resources, thereby significantly
(such as the distribution increasing the financial
of dividends to foreign autonomy of joint venture
shareholders) sourced companies and representing
from the "liquid" financial a real reduction in liquidity
resources over which the risk.
entities have autonomous/decentralised Where insufficient liquidity
control. This new "liquidity" may be generated from operations,
generated automatically then the relevant joint
in the course of operations venture companies will
is in addition to the remain subject, as before,
regular centralised/government to the more general system
allocations of liquidity, of centralised allocation
which must still be provided of liquidity, with the
(as was the case prior inherent risks that this
to adoption of the reforms) implies.
in the event that the
financial autonomy rules
do not generate sufficient
liquid resources from
operations to cover international
obligations. However,
these measures are being
implemented gradually
and do not at present
apply to all economic
sectors or to all joint
venture companies. In
particular, the new rules
are not presently being
applied to joint venture
companies in the commercial
real estate sector (such
as Inmobiliaria Monte
Barreto S.A. in which
the Company has a 49%
interest) with the result
that these companies remain
fully dependent on centrally
assigned liquidity for
their international payments.
The new measures may take
time to show the intended
effect or may not have
the stated positive impact
on the liquidity position
of the country, or their
application may not be
fully extended to all
of the joint venture companies
in which the Company has
a participation, which
may have a negative effect
of the affairs of the
Company.
---------------------------------------- ------------------------------------- -------
Currency Reform As part of the 2020-2021 The currency devaluation á
Risk economic reform package risk associated with the
adopted by the Cuban government imposition of the CUP as
in order to continue modernising sole currency for operations
the Cuban economy, new is new and significant.
currency reforms aimed The cash and currency positions
at harmonising exchange of each of the joint venture
rates and eliminating companies in which the
Cuba's dual currency system Company has a participation
required all foreign investment are continuously monitored
vehicles to convert and for the purpose of reducing
denominate their assets currency risk to the greatest
and legal obligations, extent possible. There
and to carry out all transactions, are presently no hedging
in Cuban Pesos (" CUP mechanisms available to
" previously denominated mitigate this new risk.
and carried out in US$).
The Cuban Peso has a fixed
(non-market) exchange
rate of US$1.00 : CUP24,
which may be subject to
further devaluation at
the discretion of the
Cuban Central Bank.
---------------------------------------- ------------------------------------- -------
General Liquidity The continued high levels The Investment Manager á
of the Cuban Financial of tension between the actively monitors and manages
System and Repatriation United States and Cuba the liquidity position
Risk and the maintenance by of the Company, its subsidiaries
the Biden administration and the joint ventures,
of harsh U.S. sanctions in which it invests to
imposed during the Trump the greatest extent possible
administration, which so that cashflows of the
have resulted in steep Company are transferred
reductions in U.S. family to bank accounts outside
remittances and travellers Cuba. The Investment Manager
to Cuba, as well as the has no control or influence
global fall in international over the execution or timing
tourism and other economic of payments to be transferred
shocks associated with by Cuban banks to the Company's
the Covid-19 pandemic, international bank accounts.
together with numerous
transitional difficulties
associated with the implementation
of the currency reform
measures described above,
have had strong negative
impacts on the fragile
economic and liquidity
positions in Cuba. In
the final months of 2021
and through the first
quarter of 2022, there
was a marked deterioration
in the timing of international
transfers from Cuba. The
duration of these negative
effects is unknown, and
they may in turn have
a continuing negative
impact on the ability
of the joint venture companies
in which the Company has
an interest to make distributions
abroad, which in turn
may have a negative impact
on the ability of the
Company to carry out its
investment programme.
---------------------------------------- ------------------------------------- -------
Risks relating Cuba maintains strong Although the conflict resulted á
to the War in historical, political in an abrupt halt of the
Ukraine and economic ties to Russia tourists travelling from
and to Ukraine. The Russian-Ukrainian Russia and Ukraine to Cuba,
conflict that erupted the operator of the Company's
in February 2022 resulted tourism assets has refocused
in an abrupt halt in Russia its marketing efforts to
and Ukraine tourism to attract tourists from its
the island. Since the historical principal tourist
reopening of the tourism supplier (Canada) and other
sector in November 2021, countries.
Cuba welcomed a significant
number of Russian and
Ukranian tourists to the
island. Further aspects
of the Russia-Cuba relationship
may eventually be affected
by the conflict, including
Russian investments in
Cuba, banking relationships
and other areas.
---------------------------------------- ------------------------------------- -------
Public Health Risk
Global Pandemic Although Cuba and many The Board discusses current â
Risk other parts of the world issues with the Investment
appear to have now passed Manager to limit the impact
the worst stage of the of the pandemic on the
Covid-19 pandemic and business of the Company.
to have reached, or be The Board recognises that
on the point of reaching, tourism is particularly
a stage of declining numbers affected by the various
of new cases, hospitalisations travel restrictions that
and deaths, the continued have been imposed and considers
effects of the public that this is a risk that
health risks associated is likely to continue to
with the Covid-19 pandemic, impact upon the operating
including the arrival environment of the Company
of new variants, may have in the short term .
a lasting and as yet unquantifiable The Board's actions are
negative impact on the targeted at (i) protecting
global tourism industry, the welfare of the various
the economy of Cuba, and teams involved in the affairs
the operations and performance of the Company, (ii) ensuring
of the assets of the Company. operations are maintained
The pandemic may directly to the extent possible
or indirectly affect all and to protect and support
other risk categories the assets of the Company
mentioned in this matrix. for the duration of the
present crisis, and (iii)
to mitigate insofar as
possible the longer-term
negative impact of economic
and operational disruption
caused by this and future
pandemics.
---------------------------------------- ------------------------------------- -------
Risks Relating to the Company and its Investment Strategy
Investment Strategy The setting of an unattractive The Company's investment ->
and Objective strategic proposition strategy and objective
to the market and the is subject to regular review
failure to adapt to changes to ensure that it remains
in investor demand may attractive to investors.
lead to the Company becoming The Board considers strategy
unattractive to investors, regularly and receives
a decreased demand for strategic updates from
shares and a widening the Investment Manager,
discount. investor relations reports
and updates on the market
from the Company's Broker.
At each Board meeting,
the Board reviews the shareholder
register and any significant
movements. The Board considers
shareholder sentiment towards
the Company with the Investment
Manager and Broker, and
the level of discount at
which the Company's shares
trade.
---------------------------------------- ------------------------------------- -------
Investment Restrictions Investing outside of the The Board sets, and monitors, ->
investment restrictions its investment restrictions
and guidelines set by and guidelines, and receives
the Board could result regular reports which include
in poor performance and performance reporting on
inability to meet the the implementation of the
Company's objectives, investment policy, the
as well as a discount. investment process and
application of the guidelines.
The Investment Manager
attends all Board meetings.
The Board monitors the
share price relative to
the NAV.
---------------------------------------- ------------------------------------- -------
Portfolio and Operational Risks
Joint Venture The investments of the Prior to entering into ->
Risk Group in Cuban real estate any agreement to acquire
assets are made through an investment, the Investment
Cuban joint venture companies Manager will perform or
in which Cuban government procure the performance
entities hold an equity of due diligence on the
interest, giving rise proposed acquisition target.
to risks relating to the The Group tries to structure
liquidity of investments, its equity investments
government approval, corporate in Cuban joint venture
governance and deadlock. companies so as to include
a viable exit strategy.
The Investment Manager,
or the members of the on-the-ground
team, regularly attend
the Board meetings of the
joint venture companies
through which Group interests
are held, and actively
manage relations with the
management teams of each
joint venture company,
the relevant Cuban shareholders
and relevant third parties
to ensure that Group interests
are enhanced.
---------------------------------------- ------------------------------------- -------
Real Estate Risk As an indirect investor The Investment Manager á
in real estate assets, regularly monitors the
the Company is subject level of real estate risk
to risks relating to property in the Cuban market and
investments, including reports to the Board at
access to capital and each meeting regarding
finance, global capital recent developments. The
and financial market conditions, Investment Manager works
acquisition and development closely with the on-the-ground
risk, competition, tenant team, the external hotel
risk, environmental risk managers and the joint
and others, and the materialisation venture managers to identify,
of these risks could have monitor and actively manage
a negative effect on specific local real estate risk.
properties, development In the case of Monte Barreto,
projects or the Group tenant risk has been augmented
generally. by the new financial autonomy
rules, which result amongst
others in certain categories
of tenants paying their
rents with varying degrees
of liquidity. The Investment
Manager, together with
the management team of
Monte Barreto, now assesses
the impact of the new financial
autonomy rules in all new
leasing decisions.
---------------------------------------- ------------------------------------- -------
Construction Risk As a developer and investor The Investment Manager á
in new construction as regularly monitors all
well as refurbishment construction and refurbishment
projects, the Company activities carried out
is subject to risks relating within Group companies
to the planning, execution and works closely with
and cost of construction the on-the-ground management
works, including the availability team and the joint venture
and transportation of managers to identify, monitor
materials and the cost and actively manage all
thereof, inclement weather, construction risks. The
contractor risk, execution Investment Manager reports
risk and the risk of delay. to the Board at each meeting
The materialisation of regarding recent developments
these risks could have in this respect. In the
a negative effect on the construction context, the
implementation of development availability and transportation
projects of the Group. of construction materials
have been significantly
affected by the Covid-19
pandemic worldwide, thereby
increasing construction
costs.
---------------------------------------- ------------------------------------- -------
Tourism Risk As an indirect investor The Investment Manager â
in hotel assets, the Company regularly monitors the
is subject to numerous local and regional tourism
risks relating to the markets and meets regularly
tourism sector, both in with the external hotel
outbound and inbound markets, management to identify,
including the cost and monitor and manage global
availability of air travel, and local tourism risk
the imposition of travel and to develop appropriate
restrictions by overseas strategies for dealing
governments, seasonal with changing conditions.
variations in cash flow, The Company aims to maintain
demand variations, changes a diversified portfolio
in or significant disruptions of tourism assets spanning
to travel patterns, risk various hotel categories
related to the manager (city hotel / beach resort,
of the hotel properties, business / leisure travel,
and the materialisation luxury / family) in numerous
of these risks could have locations across the island.
a negative impact on specific As the world reemerges
properties or the Company from the Covid-19 pandemic
generally. the Investment Manager
is working closely with
the external hotel management
to optimise the resumption
of full scale operations
at the hotels in which
the Company has an interest.
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Valuation Risk Asset valuations may fluctuate As part of the valuation á
materially between periods process, the Investment
due to changes in market Manager engages an independent
conditions. The combined third party valuer to provide
effects of higher levels an independent valuation
of risk associated with report on each of the indirectly
financial and monetary owned real estate assets
reforms, the continuation of the Group. The valuations
under the Biden administration are also subject to review
of an aggressive U.S. by the Investment Manager's
sanction regime and the Alternatives Pricing Committee.
slower than expected recovery
of the worldwide tourism
market in the face of
the pandemic have resulted
in increased discount
rates and lower income
projections, leading to
a rise in the volatility
of valuations.
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Dependence on The Company is dependent The Board receives reports ->
Third Party Service on the Investment Manager from its service providers
Providers and other third parties on internal controls and
for the provision of all risk management at each
systems and services relating Board meeting. It receives
to its operations and assurance from all its
investments, and any inadequacies significant service providers
in design or execution as well as back-to-back
thereof, control failures assurances where activities
or other gaps in these are themselves sub-delegated
systems and services could to other third party providers
result in a loss or damage with which the Company
to the Company. In addition, has no direct contractual
the continued high level relationship. In the course
of aggression of U.S. of its activities, the
sanctions may limit the Management Engagement Committee
pool of service providers of the Board reviews the
willing or able to work engagements of all third
with the Company. party service providers
on an annual basis. Further
details of the internal
controls which are in place
are set out in the Directors'
Report.
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Loss of Key Fund The loss of key managers Under the Management Agreement, ->
Personnel contracted by the Investment the Investment Manager
Manager to manage the has the obligation to provide
portfolio of investments at all times personnel
of the Group could impact with adequate knowledge,
performance of the Company. experience and contacts
in the Cuban market. In
order to mitigate key manager
risk. The Investment Manager
makes every effort to spread
knowledge and experience
of the Cuban market within
the organisation so as
to reduce reliance on a
small team of individuals.
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Risks Relating to Investment in Cuba and the U.S. Embargo
General Economic, The Group's underlying The Company benefits from
Political, Legal investments are situated the services of its highly
and Financial and operate within a unique experienced on-the-ground
Environment within economic and legal market, management team consisting
Cuba with a comparatively high of eight members. With
level of uncertainty, a well-balanced mix of
and a sensitive political Cuban and foreign professionals
environment. who all have long-standing
expertise in the country,
the team is one of the
most practised investment
groups focused exclusively
on investment in the Cuban
market, which constantly
monitors the economic,
political and financial
environment within Cuba.
The subsidiaries of the
Company have been structured
to benefit from existing
investment protection and
tax treaties to which Cuba
is a party.
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U.S. government Tensions remain high between The Investment Manager ->
restrictions relating the governments of the closely follows developments
to Cuba United States and Cuba relating to the relationship
and the U.S. government between the United States
maintains numerous legal and Cuba and monitors all
restrictions aimed at new restrictions adopted
Cuba, including the inclusion by the United States to
of Cuba on the U.S. list measure their possible
of state sponsors of terrorism. impact on the assets of
Contrary to pre-election the Group. The Group has
campaign statements and adapted its investment
widely held initial expectations, model to the existing sanctions,
the Biden administration but the risk remains of
has not taken any steps further sanctions being
to soften or suspend any adopted in the future.
restrictions against Cuba,
although it is possible
that it might do so in
the future. The rise of
further tensions with
the United States or the
adoption by the U.S. government
of further restrictions
against Cuba could negatively
impact the operations
of the Company and its
access to third-party
service providers, the
value of its investments,
the liquidity or tradability
of its shares, or its
access to international
capital and financial
markets.
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Helms-Burton Risk On 2 May 2019, Title III At the time of acquiring ->
of the Helms-Burton Act each of its interests in
was brought fully into Cuban joint venture companies,
force by the Trump administration the Company carried out
following 23 years of extensive due diligence
successive uninterrupted investigations in order
suspensions. Numerous to ensure that no claims
legal claims were subsequently existed under applicable
launched before U.S. courts U.S. legislation, and in
against U.S. and foreign particular that there were
investors in Cuba, which no claims certified by
has had and could have the U.S. Foreign Claims
a further negative impact Settlement Commission under
on the foreign investment its Cuba claims program
climate in Cuba and may with respect to any of
hinder the ability of the properties in which
the Company to access the Company acquired an
international capital interest. However, given
and financial markets the broad definitions and
in the future. In light terms of the Helms-Burton
of the political nature Act and its purpose of
of the Helms-Burton Act, creating legal uncertainty
and the fact that under on the part of investors
Title III of the Act, in Cuba, as well as the
Cuban persons who were absence of any register
not U.S. Persons at the of uncertified claims or
time their property was case law, there is no certain
expropriated but subsequently way for the Company to
became U.S. Persons have verify beyond doubt whether
the right to make claims, or not a Helms-Burton action
there is also a risk that under Title III could be
legal claims might be brought in respect to a
initiated against the particular property, or
Company or its subsidiaries whether the Company may
before U.S. courts. The be deemed to indirectly
Biden administration has profit or benefit from
not taken any steps to certain activities carried
suspend or repeal Title out by other parties. The
III of the Helms-Burton Company does not have any
Act, although it is possible property or assets in the
that it might do so in United States that could
the future . be subject to seizure.
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Transfer Risk Numerous U.S. legal restrictions The Investment Manager ->
- U.S. Sanctions contained in the Cuban is conscious of and closely
Assets Control Regulations follows developments concerning
and other legal provisions the U.S. legal restrictions
target financial transactions, that target financial transactions
instruments, and other and assets. The Company
assets in which there does not carry out any
is a Cuban connection. international transfers
As a result U.S. and international in U.S. Dollars or through
banks, clearing houses, U.S. banks or intermediaries.
brokers and other financial The Investment Manager
intermediaries may refuse manages the banking relationships
to deal with the Company of the Company and generally
or may freeze, block, acts at all times so as
refuse to honor, reverse to minimise the impact
or otherwise impede legitimate of these legal provisions
transactions or assets on the legitimate transactions
of the Company, even where and assets of the Company.
no U.S. link is established.
---------------------------------------- ------------------------------------- -------
Currency Risk As a result of U.S. sanctions The Company does not hedge á
prohibiting the use of its foreign currency risks.
the U.S. dollar, the Group
deals in numerous currencies
and fluctuations in exchange
rates can have a negative
impact on the performance
of the Group, as well
as the expression of the
Company's NAV in Sterling
and/or USD.
The risk relating to monetary
reforms recently adopted
by the Cuban government
imposing the use of the
CUP are described elsewhere
in this table.
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Risks relating to Regulatory and Tax framework
Tax Risk Changes in the Group's The Investment Manager
tax status or tax treatment regularly reviews the tax
in any of the jurisdictions rules that may affect the
where it has a presence operations or investments
may adversely affect the of the Company and seeks
Company or its shareholders. to structure the activities
of the Company in the most
tax efficient manner possible.
However, the Company holds
investment structures in
numerous jurisdictions
arising from past acquisitions,
and the general direction
of change in many jurisdictions
is not favourable.
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The financial risks associated with the Company include market risk, liquidity risk and credit risk, all of which are described in greater detail in note 19 to the Consolidated Financial Statements.
The Board will continue to assess these risks on an ongoing basis and is confident that the procedures that the Company has put in place are sufficient to ensure that the necessary monitoring of risks and controls has been carried out throughout the reporting period.
INVESTMENT MANAGER'S REVIEW
2021 PERFORMANCE
The performance of CEIBA Investments Limited ("CEIBA" or the " Company ") is largely dependent on the fair values of the properties in which it has an interest as calculated using discounted cash flow models by the independent RICS valuer Arlington Consulting - Consultadoria Imobiliaria Limitada, trading under the name Abacus ("Abacus"). As at 31 December 2021, the fair values of all of the assets in which CEIBA Investments has an interest decreased, mainly as a result of (i) a fall in projected income levels as a result of the continued effects of the Covid-19 pandemic and its negative impact on the Cuban tourism sector and the Cuban economy, (ii) the continuation under the Biden administration of President Trump's intensified Cuba embargo policies, and (iii) increased discount rates as a result of higher levels of perceived risk in the present circumstances, in particular as regards the liquidity issues faced by the country.
As at 31 December 2021, the Net Asset Value of the Company was US$160,322,589 (31 December 2020: US$194,425,614) and the NAV total return for the year was -17.5 % (2020: -6.0 %). The loss on the change in the fair value of the equity investments during the year was US$13,843,717 (2020: loss US$41,914,276). The total dividend income from the Cuban joint venture companies during 2021 was US$3,050,124 (2020: US$13,258,912). The net loss of the Company for 2021 attributable to the shareholders was US$28,811,901 (2020: US$19,808,620).
INTRODUCTION
If there are two things that I have in my DNA, they are positivism and looking at a brighter future instead of looking back.
After another difficult year, during which the country faced extremely challenging conditions, by November 2021 Cuba had demonstrated to the world that its home-grown Abdala and Soberana 2 vaccines were indeed effective in the fight against Covid-19 and that its country-wide vaccination program had been diligently implemented and resulted in rapidly falling numbers of new cases and fatalities, and once again these qualities took the upper hand and I thought that the Cuban economy had hit bottom and would begin rising to a brighter future.
But at the start of Cuba's high tourism season, just as Cuba was reopening its international borders and welcoming international travellers back to the island, the Omicron variant of the Covid-19 virus emerged in South Africa and rapidly spread throughout the world, causing a new wave of restrictive travel measures aimed at slowing the swift pace of infections produced by the new variant. These measures resulted in many travel cancellations from Canada (historically Cuba's most important source of tourists during the very important period from December to April each year). Despite this obvious setback, tourist numbers began to improve, with Russia joining Canada as one of the principal source markets. All of our hotels re-opened, occupancy levels and profitability started to increase, and I hoped that Cuba's precarious liquidity position would soon start to show signs of improvement!
However, once again positive momentum was short-lived.
When on 24 February 2022 Russia invaded Ukraine, all Russian (and Ukrainian) travel came to an abrupt halt and Cuba once again found itself facing the prospect of a difficult high season.
The general lack of liquidity within Cuba's economy during 2021, the continuation under the Biden administration of the strengthened Trump sanctions against Cuba and the present uncertainty regarding the timing of a tourism recovery have all taken their toll and have forced CEIBA to make downward adjustments to our asset valuations.
This has triggered that the 2021 year-end result of the Company is a net loss attributable to the shareholders of US$28,811,901. The outlook for 2022 will largely depend on how long the Russia-Ukraine conflict will last, how it will impact world politics and Cuba's important relationships, and its effect on international travel patterns and the recovery of Cuba's tourism industry. To a lesser extent, the coming year could also be further affected by the rise of any new variant of the Covid-19 virus.
In addition, starting in the final months of 2021 and continuing through to today, the Cuban banking system has experienced significant delays in the execution of payments instructed, even where such payments are made with the required "liquidity" in accordance with the new financial autonomy rules. This shows that the Cuban liquidity position is precarious, and this may make it more challenging to continue implementing its program of monetary reforms.
Monetary Reforms
Cuba's recent monetary reforms, announced in 2020 and implemented in 2021, eliminated Cuba's double currency and were undoubtedly planned on the basis of a projected improvement in the country's precarious liquidity position that was expected to result from a growing (not shrinking) economy. It introduced a fixed official exchange rate of 24 Cuban Pesos to 1 United States Dollar and was aimed primarily at improving financial discipline, transparency and accountability within Cuba's state-owned enterprises.
However, the events described above and the continuation of U.S. sanctions under the Biden administration (particularly those affecting family remittances and U.S. travel) that were widely expected to be relaxed, jointly had a negative impact on the liquidity position of the country and complicated the implementation of the reforms, provoking numerous distortions in both the private and foreign investment sectors.
In addition, the scarcity of hard currency income to pay for imported products, resulting in shortages of basic products for sale in local currency (CUP) shops, triggered significant inflation and a fall in the informal exchange rate so that by the end of 2021 the street rate of exchange had reached CUP75 to USD1, falling further to CUP 110 to USD 1 by 15 April 2022. By contrast, joint ventures, international airlines and all state-owned businesses were obliged to use the official rate of CUP24 to USD1, in turn provoking undesired monetary arbitrage.
The government has not signalled any future devaluation of the CUP and instead has argued that it hopes to close the discrepancy between the official and informal rates through increased national production and an improved supply of basic products in the CUP retail outlets.
By the end of 2021, the lack of liquidity in the economy also began to be noticeable in delays in the execution of international payments made under the financial autonomy rules, which in turn puts significant pressure on one of the principal objectives of the monetary reforms for foreign trade and investment, which is to guarantee financial autonomy and the repatriation of profits.
The Colony
In March 2022 I visited Finca El Rosillo, a small privately owned farm next to the main highway to Pinar del Rio Province where the owners produce a delicious honey made by bees that do not sting. The bees create their colonies in rotten tree trunks and protect them by sealing them off and leaving only a single entry and exit that is constantly guarded to protect the colony from its biggest enemy: hornets (that do sting). This seems to be a good metaphor for the short-term strategy of Cuba: seal all points of entry, grow the internal economy and avoid getting stung by hornets.
US Cuban Embargo - 60 Years Old
On 3 February 2022 the Cuban economy had endured 60 years under the U.S. embargo, it having been first adopted by President Kennedy in 1962 as Proclamation 3447 entitled Embargo on All Trade with Cuba, and having the main purposes of stopping the spread of communism and causing "hunger, desperation and overthrow of government." During the subsequent six decades, the legal measures creating the embargo have ebbed and flowed, gaining or losing strength in accordance with the prevailing political winds in Florida, but the negative impact on the island has been constant.
In its present form, subsequent to the adoption of the Helms-Burton Act of 1996, the U.S. embargo against Cuba is enshrined in law and can only be overturned by Congress, which would be no small feat in today's politically divided reality in the United States. The embargo prohibits trade between U.S. persons and Cuba, but its insidious negative effects also extend extra-territorially to a large number of valid and legitimate transactions between Cuba and its international partners, whether they be other sovereign governments or, most importantly for the Company, foreign investors who invest or trade on the island.
Following a significant relaxation of the embargo rules during the Obama administration, the Trump administration resumed a much harder line and returned the United States to a policy of strong aggression towards its smaller neighbour. So far, the Biden administration has not relaxed any of the harsher sanctions of the Trump era, notwithstanding his stated intent to do so expressed during the presidential campaign in 2020.
In early March 2022, it was announced that the U.S. Embassy in Havana would be re-staffed and would resume a certain number of direct consular services in Havana. The expectation remains that some easing of the present sanctions will be forthcoming, most likely in the areas of family remittances and the facilitation of travel between the U.S. and Cuba.
Conflict in Ukraine
In February 2022, Russia invaded Ukraine. Both countries are traditional allies of Cuba and both were important sources of tourists for the island during parts of the pandemic and especially from the full reopening of the Cuban tourism sector in November 2021 until the outbreak of the war. In January and February 2022, Russian travellers were amongst the largest groups of tourists to the island, roughly equal to Canada, which usually is the leading source of travellers. The war has resulted in the cancellation of most direct flights between Russia and Cuba, representing a further blow to the Cuban tourism industry, already hard hit by two years of pandemic-related hotel closures and travel restrictions. It remains unclear at present whether Russian tourism to the island will rebound or whether other markets will be able to make up the shortfall. The war in Ukraine is also expected to have other indirect impacts on the Cuba economy in areas such as the price of oil, shipping costs and the availability of ships to Cuba (especially from Europe). Russian investments on the island may be affected, as well as banking relationships.
PORTFOLIO ACTIVITY
The Miramar Trade Centre / Monte Barreto
The largest real estate holding of the Company is its 49% interest in Inmobiliaria Monte Barreto S.A. ("Monte Barreto"), the Cuban joint venture company that owns and operates the Miramar Trade Centre, a six-building mixed-use commercial real estate complex comprising approximately 56,000 square metres (approximately 600,000 square feet) of net rentable area that constitutes the core of the new Miramar business district in Havana.
Occupancy rates remained largely stable throughout the year, declining a modest 1.6% from 98.2% at the beginning of the year to 96.6% at year-end. The property suffered a small number of departures relating to the pandemic, and the market has tightened somewhat. Revenues declined by 3.6% compared to the prior year as a result of the lower occupancy rate and modest rent incentives granted. However, Monte Barreto registered net income of US$15.6 million during the year (2020: US$14.4 million), representing an 8.5% increase over the prior year and a new record for annual profit. The increase was primarily the result of savings resulting from the monetary reforms implemented during the year, including reduced operational expense (mainly salary and electricity costs).
Demand for international-standard office accommodation in Havana remains strong, predominantly from multi-national companies, NGOs and foreign diplomatic missions. Monte Barreto remains the market leader. As a consequence, the operational outlook for Monte Barreto in 2022 remains positive, as we expect occupancy levels to remain in the high nineties throughout the coming year. However, in light of the present market conditions, which remain uncertain - particularly as regards liquidity - the joint venture is applying its general strategy of rental increases as leases are renewed on a case by case basis.
In accordance with the new provisions of Resolution 115 dealing with financial autonomy and the allocation of hard currency resources, commercial real estate activities have been excluded from some of the general rules relating to "liquid" payments (the ability to transfer funds abroad on an autonomous basis, without foreign exchange controls), and consequently the local payments of many tenants of the joint venture are presently not received with liquidity and conversely most local payments to be made by the joint venture are similarly not made with liquidity. As a result, the joint venture is presently operating under a mixed regime having reduced liquidity requirements, in which certain liquid resources of the joint venture are generated internally through operations, and certain resources are allocated centrally.
Given the present limited financial autonomy of Monte Barreto, in combination with the current economic situation and liquidity difficulties faced by the country, Monte Barreto did not have sufficient liquid resources (whether generated internally or allocated centrally) to pay significant dividends payable to the Company during the past year. Management is currently discussing potential solutions for the liquidity issues of Monte Barreto with the relevant Cuban authorities and pending agreement and implementation of such a solution accumulated profits remain in the joint venture company. In addition to the above, hard currency transfers made by Cuban banks are presently experiencing delays. Dividend income recorded by the Company from Monte Barreto during the year was US$2.6 million, compared to US$6.9 million in 2020. Due to the uncertainty on the timing of payment of the dividends owed to the Company by Monte Barreto, the Company has made a provision in its financial statements in the amount of US$12,281,408 representing the outstanding dividends receivable from Monte Barreto.
The valuation of Monte Barreto has been adjusted downward at 31 December 2021 by US$13.7 million to US$67.7 million, representing a 16.9% decline as compared with the December 2020 valuation. This was driven mainly by an increase in the discount rate to 12.8% (2020: 9.8%) applied in the discounted cash flow model of Monte Barreto in order to take into account the disruption to the Cuban economy caused by the Covid-19 pandemic, continued U.S. aggressive measures and the increased liquidity, transfer and currency risks faced by Monte Barreto and its shareholders.
We expect these headwinds to remain present throughout 2022 and, as a result, we believe that only part of the presently outstanding dividends will be paid during the current year. Nevertheless, we believe that the pace of distribution of dividends will pick up once again when the country re-emerges from the present difficulties, which is not likely to occur until 2023.
The Hotels of Miramar
Through its indirect ownership of a 32.5% interest in Miramar, the Group has interests in the following hotels:
- the Meliã Habana Hotel, a 397-room international-category 5-star business hotel located on prime ocean-front property in Havana (directly opposite the Miramar Trade Center);
- the Meliã Las Americas Hotel, a 340-room international-category 5-star beach resort hotel located in Varadero;
- the Meliã Varadero Hotel, a 490-room international-category 5-star beach resort hotel located in Varadero; and
- the Sol Palmeras Hotel, a 607-room international-category 4-star beach resort hotel located in Varadero.
The Hotels are operated by Meliã Hotels International S.A. ("Meliã Hotels International"), which also has a 17.5% equity interest in Miramar (and a 10% equity interest in TosCuba).
Performance of the Hotels
As a result of the Covid-19 pandemic and the resulting collapse of the worldwide travel industry, the Hotels once again faced an extremely challenging business environment in 2021. While the Sol Palmeras and the Meliã Habana hotels were able to maintain services throughout the year, occupancy and room rates were reduced. The Meliã Las Americas and Meliã Varadero hotels resumed operations towards the end of the year (in November and December 2021, respectively) following the formal reopening of the Cuban tourism industry in November 2021.
With two of its hotels closed throughout most of the year and the other two operating at very low levels, together with the one-time foreign exchange expense of US$5.4 million relating to the conversion of monetary assets under the monetary reforms, the net loss after tax of Miramar was US$9.6 million (2020: net loss of US$3.5 million). This also resulted in lower dividend income earned by the Company from Miramar during the year of US$500 thousand, compared to US$6.3 million in the prior year.
All four of the Hotels of Miramar are presently operating under volatile and unpredictable market conditions. We believe that the Hotels are presently in a very strong competitive position within the Cuban market, given that two of the four operated throughout the year and consequently Miramar has a stronger working capital position and other operational advantages over competitors. However, since the formal re-opening of the Cuban tourism sector in November 2021 (following the success of the Cuban vaccination and other public health efforts to control the pandemic), the subsequent arrival of the Omicron variant in December 2021, closely followed by the Russian invasion of Ukraine, have once again affected the most important outbound tourism markets for Cuba: Canada, Western Europe and Russia. The outlook for 2022 remains uncertain and will depend on numerous factors external to Cuba, including in particular the recovery of international travel patterns and the availability of airlift.
Once hotel operations return to normal as the world emerges from the Covid-19 pandemic and international travel and tourism markets recover from the disruption suffered over the last two years, we expect the liquid resources directly generated by the operations of Miramar under the new liquidity rules to be more than sufficient to allow Miramar to distribute dividends.
The valuation of Miramar has been adjusted downwards at 31 December 2021 to US$94.5 million (2020: US$103.2 million), representing a 9.2% decline. This was driven mainly by an increase in the discount rates applied in the discounted cash flow models of the Hotels in order to take into account the disruption to the Cuban tourism industry caused by the Covid-19 pandemic and the uncertain timing of recovery, continued U.S. aggressive measures, as well as a slightly more conservative approach to the recovery of occupancy rates as the world emerges from the pandemic.
The TosCuba Project
The Company has an 80% interest in Mosaico Hoteles S.A. ("Mosaico Hoteles"), representing a 40% indirect interest in TosCuba, the Cuban joint venture company that is constructing the 401 room Meliã Trinidad Península Hotel.
As at 31 December 2021, all structural works (including windows and roofing) had been substantially completed and electric, plumbing and air-conditioning works had started. The building process has been progressing slowly since the beginning of the Covid-19 pandemic in March 2020 but is now expected to be completed within the next twelve months.
During the first months of 2021 the joint venture, under the leadership of Mosaico Hoteles, undertook a full review and reorganisation of the hotel construction process, which resulted in the termination of the turnkey construction contract with the Cuban-Italian construction partnership (with effect from 30 June 2021) and the renegotiation and increase of existing finance arrangements. TosCuba has now taken full control over the site as well as all stored materials and equipment, and will now complete the construction of the hotel on its own, with technical assistance on pricing, tender procedures and product selection from International Hospitality Projects S.L., a Spanish construction adviser in the hotel sector. Under the new structure, significant progress was made in the second half of 2021 in the tendering and execution of major supply arrangements, and the pace of construction is now ramping up once again to pre-pandemic levels. It is now estimated that construction of the hotel will be completed by the first quarter of 2023.
In April 2018, the Company arranged and executed a US$45 million construction finance facility to be disbursed under two tranches of US$22.5 million each. The terms of the facility were amended in August 2021 to take into account the new construction process and other circumstances. At 31 December 2021, the Company's full participation in the first tranche (Tranche A) in the amount of US$18 million (2020: US$16.1 million) was fully disbursed, and the amount of US$709 thousand was disbursed under the second tranche (Tranche B), the maximum principal amount of which was increased to US$29 million under the August 2021 amendment to the facility. The increased principal of Tranche B includes an amount of US$4 million that may be used for the purchase of equipment needed by the relevant Cuban utility companies to ensure the provision of the required water and electrical services to the hotel.
Repayment of the amended facility is secured by the future income of the hotel, and repayment of Tranche B has also been guaranteed by Cubanacán (the Cuban shareholder in the joint venture company) and is further secured by Cubanacán's dividend entitlements in Miramar.
The total cost of the project - including incorporation of the joint venture company, acquisition of surface rights, construction of the hotel, financing for the acquisition of equipment necessary to guarantee the proper functioning of public utilities and start-up costs - is presently estimated at US$78.8 million. Of this amount, US$16 million represents the share capital invested in TosCuba by the shareholders, of which the Company contributed US$6.4 million (40%), more than US$11.2 million represents grants received under the Spanish Cuban Debt Conversion Programme, and US$4 million represents finance to be granted to third parties (which will be repaid). The remaining funds necessary to complete the project will be disbursed under the construction finance facility.
GBM Interinvest Technologies Mariel S.L.
In December 2020, the Company formalised its participation in a new multi-phase industrial park real estate project to be developed in the Special Development Zone of Mariel, Cuba by acquiring a 50% interest in GBM Interinvest Technologies Mariel S.L., the Spanish company that is developing the project.
Groundworks on the 11.3-hectare site for the construction of the first four warehouses of the project began in the first quarter of 2021 and were completed in June 2021. Discussions with potential tenants are currently being pursued with a view to coordinating the start of construction works with the existence of real demand.
The Company paid an initial amount of US$303,175 for its 50% interest entered into a Convertible Loan Agreement in the principal amount of EUR500,000 (US$566,316) during the course of 2021. The full investment of the Company in this project is expected to be approximately US$1.5 million.
FINTUR Facility
Since 2002, the Company has arranged and participated in numerous secured finance facilities extended to Casa Financiera FINTUR S.A. ("FINTUR"), the Cuban government financial institution for the tourism sector. Under the most recent FINTUR Facility, originally executed in 2016 in the principal amount of EUR24 million and subsequently amended in 2019 through the addition of a second tranche in the principal amount of EUR12 million, the Company initially held a EUR4 million participation under Tranche A and a EUR2 million participation under Tranche B.
This facility generates an 8.00% interest rate and operated successfully without delay or default until the closure of all Cuban hotels in March 2020 as a result of the Covid-19 pandemic. At that time, the income from the hotels that serve as the basis for payments under the FINTUR facility ceased and such income is not expected to resume until Cuba's international tourism operations recover in earnest.
With effect from 1 April 2020, the Company and FINTUR agreed to revise the remaining outstanding payments under the FINTUR facility (combining the two tranches into a new single tranche C) and to provide a one-year period of grace on the payment of principal, with a two-year principal payment period thereafter. The principal payments of the new Tranche C falling due on 30 June 2021, 30 September 2021 and 31 December 2021 were subsequently waived by the lenders as a result of the continued closure of the hotels serving as security for payment of the facility, with the waived principal payments being added to subsequent payments without extending the term.
As at 31 December 2021, the principal amount of US$ 1,943,760 was outstanding under the Company's participation in Tranche C of the Facility.
Only one of the hotels granted as security for the repayment of the FINTUR facility is open at the present time, although FINTUR has transferred funds from other sources to pay all outstanding interest on a current basis throughout the pandemic and for the principal payment made on 31 March 2022. The Investment Manager meets regularly with FINTUR in order to gauge the speed with which the cash flows are likely to return to acceptable levels and to determine whether any additional hotel security should be received.
OUTLOOK
We expect that, as a result of the Covid-19 pandemic, the high level of U.S. sanctions against Cuba and the ongoing transitional effects of monetary and economic reforms adopted by the Cuban government, the very difficult economic circumstances faced by the country throughout 2021 will continue in 2022, and that the local market conditions in which the Company and the joint venture companies in which it holds interests operate will remain very challenging. The very tight hard currency position of the Cuban economy resulting from the above factors is also likely to continue having a negative impact on the timing of dividend and other payments to the Company in the short term.
We expect that the timing of a recovery in Cuba will depend on a number of external factors, including the duration of the war in Ukraine, the actions of the U.S. government and the evolution of world travel markets in the face of the pandemic. Internal factors such as the government's ability to adhere to the planned reform program will also play an important role.
As the world continues to recover from the pandemic, we expect that international leisure travel will increase once again and that the four Miramar Hotels, which are all presently operating, will gradually return to normal levels of occupancy and performance. In addition, it is expected that the Meliã Trinidad Península Hotel will be completed and will begin operations in the first quarter of 2023.
We expect the operational performance of Monte Barreto to remain strong in 2022, although the timing of payment of the resulting dividends will remain uncertain in the short term and we believe that only part of the dividends to be generated in favour of the Company will be paid during the current year. Nevertheless, we believe that the pace of distribution of dividends will pick up once again when the economic headwinds presently affecting the country subside, which is not likely to occur until 2023.
We believe that Cuba's liquidity position, which we monitor closely, will continue to be weak in the short term, but we do anticipate that over the medium term the country's foreign currency reserves will improve. In addition, the new monetary reforms and liquidity rules adopted by the Cuban government will eventually have a positive effect on the Cuban economy as well as on the operations of the joint venture companies of the Company. As a result of these new measures, and in particular the de-centralisation of decision-making that they mandate, management of the joint ventures is expected to have improved control over their hard currency payments and the ability to make timely distributions to shareholders.
Sebastiaan A.C. Berger
Aberdeen Asset Investments Limited
28 April 2022
DIRECTORS' REPORT (EXTRACTS)
ANNUAL GENERAL MEETING
The Notice of the Annual General Meeting ("AGM") is included within this Annual Report and Consolidated Financial Statements. The AGM will take place at the registered office of the Company, Dorey Court, Admiral Park, St. Peter Port, Guernsey, GY1 2HT Channel Islands on 16 June 2022 at 2.00 p.m. An explanation of each resolution to be proposed at the AGM is included in the Letter from the Chairman. All shareholders will have the opportunity to put questions to the Board or the Investment Manager at the Company's AGM. Shareholders are encouraged to vote on the resolutions proposed in advance of the AGM and to submit questions to the Board and the Investment Manager by emailing CEIBA.Investments@abrdn.com .
The Company Secretary is also available to answer general shareholder queries at any time throughout the year.
In the event that the situation surrounding Covid-19 should affect the plans to hold the AGM on 16 June 2022 the Company will update shareholders through an announcement to the London Stock Exchange and will provide further details on the Company's website. As noted above, the Board encourages all shareholders to exercise their votes, and submit any questions, in respect of the meeting in advance. This should ensure that your votes are registered in the event that attendance at the AGM might not be possible.
By order of the Board
28 April 2022
JTC Fund Solutions (Guernsey) Limited
Secretary
Ground Floor
Dorey Court
Admiral Park
St Peter Port
Guernsey GY1 2HT
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report and Consolidated Financial Statements, in accordance with applicable law and regulations.
The Companies (Guernsey) Law, 2008, as amended (the "Law") requires the Directors to prepare financial statements for each financial year. Under the Law, the Directors have elected to prepare the Consolidated Financial Statements in accordance with IFRS. Under the Law, the Directors must not approve the Consolidated Financial Statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.
In preparing these Consolidated Financial Statements, the Directors are required to:
-- select suitable accounting policies and then apply them consistently; -- make judgments and estimates that are reasonable and prudent;
-- prepare the Consolidated Financial Statements on a going concern basis unless it is inappropriate to presume that the Company will continue in business; and
-- state whether all applicable IFRS standards have been followed, subject to any material departures disclosed and explained in the financial statements.
The Directors are responsible for keeping proper accounting records that are sufficient to show and explain the Company's transactions and which disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that it's Consolidated Financial Statements comply with the Law. They are also responsible for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities.
The Directors listed, being the persons responsible, hereby confirm to the best of their knowledge that:
-- the Consolidated Financial Statements, prepared in accordance with the applicable accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company, and all the undertakings included in the consolidation taken as a whole;
-- in the opinion of the Directors, the Annual Report and Consolidated Financial Statements taken as a whole, is fair, balanced and understandable and it provides the information necessary to assess the Company's position and performance, business model and strategy; and
-- the General Information section and Directors' Report include a fair review of the development and performance of the business and the position of the Company and all the undertakings included in the consolidation taken as a whole, and the Principal Risks section provides a description of the principal risks and uncertainties that they face.
-- there is no additional information of which the Company's Auditor is not aware.
For CEIBA Investments Limited
Keith Corbin
28 April 2022
CConsolidated Statement of Financial
Position
As at 31 December 2021
31 Dec 2021 31 Dec
2020
Note US$ US$
----- ------------ ----------------------
Assets
Current assets
Cash and cash equivalents 4 26,228,072 4,270,860
Accounts receivable and accrued income 5 3,821,068 14,581,229
Loans and lending facilities 6 3,372,086 2,827,292
------------ ----------------------
Total current assets 33,421,226 21,679,381
------------ ----------------------
Non-current assets
Accounts receivable and accrued income 5 3,146,333 1,768,447
Loans and lending facilities 6 19,185,524 17,395,343
Equity investments 7 175,828,034 197,618,050
Investment in associate 8 303,175 303,175
Property, plant and equipment 9 515,608 533,598
------------ ----------------------
Total non-current assets 198,978,674 217,618,613
------------ ----------------------
Total assets 232,399,900 239,297,994
------------ ----------------------
Liabilities
Current liabilities
Accounts payable and accrued expenses 10 4,347,187 1,085,590
Short-term borrowings 11 1,004,673 -
Deferred liabilities 17 1,000,000 1,000,000
Total current liabilities 6,351,860 2,085,590
------------ ----------------------
Non-current liabilities
Accounts payable and accrued expenses 10 - 1,129,709
Convertible bonds 12 28,299,353 -
Deferred liabilities 17 833,333 1,833,333
Total non-current liabilities 29,132,686 2,963,042
------------ ----------------------
Total liabilities 35,484,546 5,048,632
------------ ----------------------
Equity
Stated capital 13 106,638,023 106,638,023
Revaluation surplus 319,699 319,699
Retained earnings 46,801,482 75,613,383
Accumulated other comprehensive income 6,563,385 11,854,509
------------ ----------------------
Equity attributable to the shareholders
of the parent 160,322,589 194,425,614
------------ ----------------------
Non-controlling interest 13 36,592,765 39,823,748
Total equity 196,915,354 234,249,362
Total liabilities and equity 232,399,900 239,297,994
------------ ----------------------
NAV 13 160,322,589 194,425,614
NAV per share 13 1.16 1.41
See accompanying notes 1 to 23, which are an integral part of these consolidated financial statements.
These audited Financial Statements were approved by the board of Directors and authorised for issue on 28 April 2022.
They were signed on the Company's behalf;
Keith Corbin, Director
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2021
31 Dec 2021 31 Dec 2020
Note US$ US$
----- ------------- -------------
Income
Dividend income 7 3,050,124 13,258,912
Interest income 1,924,110 1,899,468
Travel agency commissions 7,529 6,113
Foreign exchange gain - 1,157,566
4,981,763 16,322,059
------------- -------------
Expenses
Foreign exchange loss (130,198) -
Interest expense on bonds (2,176,931) -
Loss on change in fair value of equity
investments 7 (13,843,717) (41,914,276)
Expected credit losses 5 (12,281,408) -
Management fees 17 (2,276,574) (1,864,518)
Other staff costs (72,958) (67,035)
Travel (54,204) (51,856)
Operational costs (317,361) (108,302)
Legal and professional fees (1,487,338) (1,368,707)
Administration fees and expenses (344,620) (292,534)
Audit fees 22 (321,625) (270,909)
Miscellaneous expenses (305,075) (136,976)
Directors' fees and expenses 15 (276,111) (232,677)
Depreciation 9 (29,792) (39,645)
(33,917,912) (46,347,435)
------------- -------------
Net loss before taxation (28,936,149) (30,025,376)
------------- -------------
Income taxes 3.7 - -
------------- -------------
Net loss for the year (28,936,149) (30,025,376)
------------- -------------
Other comprehensive income to be
reclassified to profit or loss in
subsequent periods
(Loss)/gain on exchange differences
of translation of foreign operations (8,140,191) 11,538,310
Total comprehensive loss (37,076,340) (18,487,066)
------------- -------------
Net loss for the year attributable
to:
Shareholders of the parent (28,811,901) (19,808,620)
Non-controlling interest (124,248) (10,216,756)
Total comprehensive loss attributable
to:
Shareholders of the parent (34,103,025) (12,308,720)
Non-controlling interest (2,973,315) (6,178,346)
Basic and diluted loss per share 16 (0.21) (0.14)
See accompanying notes 1 to 23, which are an integral part of these consolidated financial statements.
Consolidated Statement of Cash Flows
For the year ended 31 December 2021
31 Dec 2021 31 Dec 2020
Note US$ US$
------- ------------- -------------
Operating activities
Net loss for the year (28,936,149) (30,025,376)
Items not affecting cash:
Depreciation 9 29,792 39,645
Expected credit losses 5 12,281,408 -
Change in fair value of equity
investments 7 13,843,717 41,914,276
Dividend income (3,050,124) (13,258,912)
Interest income (1,924,110) (1,899,468)
Interest expense 2,176,931 -
Foreign exchange loss/(gain) 130,198 (1,157,566)
(5,448,337) (4,387,401)
Decrease/(increase) in accounts
receivable and accrued income 810,460 (4,018,460)
Increase in accounts payable and
accrued expenses 2,131,888 149,086
Non- cash movement in amortisation
of deferred liability 17 (1,000,000) (1,000,000)
Dividend income received 641,756 9,998,244
Interest income received 622,884 160,317
Net cash flows from operating activities (2,241,349) 901,786
------------- -------------
Investing activities
Purchase of investment in associate 8 - (303,175)
Purchase of property, plant & equipment 9 (11,802) (4,897)
Loans and lending facilities disbursed (3,168,711) (6,190,914)
Loans and lending facilities recovered 833,736 (886,001)
Net cash flows from investing activities (2,346,777) (7,384,987)
------------- -------------
Financing activities
Short term borrowings received 1,004,673 -
Issue of convertible bonds 29,312,500 -
Interest paid on convertible bonds (2,176,931) -
Cash distribution to non-controlling
interest 13 (257,668) (3,463,951)
Contributions received from non-controlling
interest - 84,406
Net cash flows from financing activities 27,882,574 (3,379,545)
------------- -------------
Change in cash and cash equivalents 23,294,448 (9,862,746)
Cash and cash equivalents at beginning
of the period 4,270,860 13,102,578
Foreign exchange on cash (1,337,236) 1,031,028
Cash and cash equivalents at end
of the period 26,228,072 4,270,860
------------- -------------
See accompanying notes 1 to 23, which are an integral part of these consolidated financial statements.
Consolidated Statement of Changes in Equity
For the year ended 31 December 2021
For the year ended 31 December 2021
Total Equity
Other attributable
Stated Revaluation Retained comprehensive to the Non-controlling
Capital Surplus Earnings income parent interest Total Equity
Notes US$ US$ US$ US$ US$ US$ US$
Opening Balance 106,638,023 319,699 75,613,383 11,854,509 194,425,614 39,823,748 234,249,362
Revaluation of
assets / Net
other
comprehensive
income/(loss)
to be
reclassified
to profit or
loss
in subsequent
periods 7, 13 - - - (5,291,124) (5,291,124) (2,849,067) (8,140,191)
Net loss for
the
year 13 - - (28,811,901) - (28,811,901) (124,248) (28,936,149)
Capital
increase/
contributions
during the
period 13 - - - - - - -
Cash
distribution
to
non-controlling
interest 13 - - - - - (257,668) (257,668)
Balance at 31
December 2021 106,638,023 319,699 46,801,482 6,563,385 160,322,589 36,592,765 196,915,354
----------- ----------- -------------- ------------- ------------ --------------- ------------
See accompanying notes 1 to 23, which are an integral part of
these consolidated financial statements.
For the year ended 31 December 2020
Total Equity
Other attributable
Stated Revaluation Retained comprehensive to the Non-controlling
Capital Surplus Earnings income parent interest Total Equity
Notes US$ US$ US$ US$ US$ US$ US$
Opening Balance 106,638,023 319,699 95,422,003 4,354,609 206,734,334 49,381,639 256,115,973
Revaluation of
assets / Net
other
comprehensive
income/(loss)
to be
reclassified
to profit or
loss
in subsequent
periods 7, 13 - - - 7,499,900 7,499,900 4,038,410 11,538,310
Net loss for
the
year 13 - - (19,808,620) - (19,808,620) (10,216,756) (30,025,376)
Capital
increase/
contributions
during the
period 13 - - - - - 84,406 84,406
Cash
distribution
to
non-controlling
interest 13 - - - - - (3,463,951) (3,463,951)
Balance at 31
December 2020 106,638,023 319,699 75,613,383 11,854,509 194,425,614 39,823,748 234,249,362
----------- ----------- -------------- ------------- ------------ --------------- ------------
1. Corporate information
These consolidated financial statements for the year ended 31 December 2021 include the accounts of CEIBA Investments Limited and its subsidiaries, which are collectively referred to as the "Group" or "CEIBA".
CEIBA was incorporated in 1995 in Guernsey, Channel Islands as a registered closed-ended collective investment scheme with registered number 30083. In May 2013, the status of CEIBA changed to an unregulated investment company rather than a regulated investment fund. The status of CEIBA was changed back to a registered closed-ended collective investment scheme on 11 September 2018 under The Protection of Investors (Bailiwick of Guernsey) Law, 2020 as amended. The registered office of CEIBA is located at Dorey Court, Admiral Park, St. Peter Port, Guernsey, Channel Islands GY1 2HT.
The principal holding and operating subsidiary of the Group is CEIBA Property Corporation Limited ("CPC") which holds a license issued by the Cuban Chamber of Commerce and has offices in Cuba located at the Miramar Trade Centre, Edificio Barcelona, Suite 401, 5(ta) Avenida, esq. a 76, Miramar, Playa, La Habana, Cuba.
The principal investment objective of CEIBA is to achieve capital growth and dividend income from direct and indirect investment in or with Cuban businesses, primarily in the tourism and commercial real estate sectors, and other revenue-generating investments primarily related to Cuba.
The Group currently invests in Cuban joint venture companies that are active in two major segments of Cuba's real estate industry: (i) the development, ownership and management of revenue-producing commercial properties, and (ii) the development, ownership and management of hotel properties. In addition, the Group occasionally arranges and participates in secured finance facilities and other interest-bearing financial instruments granted in favour of Cuban borrowers, primarily in the tourism sector. The Group's asset base is primarily made up of equity investments in Cuban joint venture companies that operate in the real estate segments mentioned above.
The officers are contracted through third party entities or consultancy agreements. CEIBA and its subsidiaries do not have any obligations in relation to future employee benefits.
On 22 October 2018, CEIBA completed an initial public offering and listed its ordinary shares on the Specialist Fund Segment of the London Stock Exchange, where it trades under the symbol "CBA". The Group also entered into a management agreement, with effect from 1 November 2018, under which the Group has appointed Aberdeen Standard Fund Managers Limited ("ASFML" or the "AIFM") as the Group's alternative investment fund manager to provide portfolio and risk management services to the Group. The AIFM has delegated portfolio management to Aberdeen Asset Investments Limited (the " Investment Manager "). Both the AIFM and the Investment Manager are wholly-owned subsidiaries of abrdn (see note 17).
2. Basis of preparation
2.1 Statement of compliance and basis of measurement
These consolidated financial statements have been prepared under the historical cost convention, except for certain financial instruments as disclosed in note 3.8 and certain property, plant and equipment as disclosed in note 3.11 which are measured at fair value, in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB").
2.2 Functional and presentation currency
These consolidated financial statements are presented in United States Dollars ("US$"), which is also the Company's functional currency. The majority of the Group's income, equity investments and transactions are denominated in US$, subsidiaries are re-translated to US$ to be aligned with the reporting currency of the Group.
2.3 Use of estimates and judgments
The preparation of the Group's consolidated financial statements, in conformity with IFRS, requires management to make judgments, estimates, and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period.
Management judgements
The key management judgements made by management in relation to the financial statements are:
a) That the Group is not an Investment Entity (see note 3.15); b) That the Group is a Venture Capital Organisation (see note 3.16).
c) That the functional currency of the parent company (CEIBA Investments Limited) is US$ (see note 3.18)
Management estimates - valuation of equity investments
Significant areas requiring the use of estimates also include the valuation of equity investments. Actual results could differ from those estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future period affected.
In determining estimates of recoverable amounts and fair values for its equity investments, the Group relies on independent valuations, historical experience, and assumptions regarding applicable industry performance and prospects, as well as general business and economic conditions that prevail and are expected to prevail. Assumptions underlying asset valuations are limited by the availability of reliable comparable data and the uncertainty of predictions concerning future events (see note 7).
By their nature, asset valuations are subjective and do not necessarily result in precise determinations. Should the underlying assumptions change, the carrying amounts could change and, potentially, by a material amount.
Change in Management estimates - valuation of equity investments
The determination of the fair values of the equity investments may include independent valuations of the underlying properties owned by the joint venture companies. These valuations assume a level of working capital required for day-to-day operations of the properties. Management estimates the amount of cash required for these working capital needs to determine if the joint venture companies hold any excess cash that should be added as a component of the fair value of the equity investments.
In regards to the 31 December 2021 valuations of the properties held by Monte Barreto and Miramar performed by the independent valuers, the valuers have noted in their reports that their valuations have been prepared in a period of significant market instability as a result of the Covid-19 pandemic. The impact on the Cuban tourism sector and the economy in general has been dramatic, with significantly lower numbers of international tourists arriving since April 2020, which has had a negative impact on the Cuban economy. As it is not possible to ascertain with any certainty when the tourism sector and the economy will recover, there is a material uncertainty as to the valuation of the subject properties.
Change in Management estimates - expected credit losses in respect of dividends receivable
As explained in note 5, due to the current liquidity constraints placed upon Monte Barreto as a result of the recent Cuban monetary reforms, the timing of receipt of the historical dividends receivable is uncertain. Therefore the dividends receivable from Monte Barreto at year end have been impaired in full in the Statement of Comprehensive Income. However, in the case of Miramar, the same liquidity constraints are not applicable under the monetary reforms, due to a large portion of its income being earned in foreign currency and therefore Miramar has been assigned a higher credit rating. Management expects to receive the full amount of dividends receivable from Miramar in due course.
The total amount of credit impaired receivables at year end is $12,281,408 (2020: nil) and is the balance of the dividend receivable due from Monte Barrreto.
2.4 Reportable operating segments
An operating segment is a distinguishable component of the Group that is engaged in the provision of products or services (business segment). The primary segment reporting format of the Group is determined to be business segments as the Group's business segments are distinguishable by distinct financial information provided to and reviewed by the chief operating decision maker in allocating resources arising from the products or services engaged by the Group.
2.5 Equity investments
Equity investments include the direct and indirect interests of the Group in Cuban joint venture companies, which in turn hold commercial properties, hotel properties and hotel properties under development. Cuban joint venture companies are incorporated under Cuban law and have both Cuban and foreign shareholders.
Equity investments of the Group are measured at fair value through profit or loss in accordance with IFRS 9, Financial Instruments: Recognition and Measurement ("IFRS 9"), on the basis of the option to do so as per IAS 28. Changes in fair value are recognised in the statement of comprehensive income in the period of the change.
2.6 New standards, amendments and interpretations issued but not effective for the financial year beginning 1 January 2021 and not early adopted that are relevant to the Group
IAS 1 'Presentation of financial statements' Classification of Liabilities as Current or Non-current. The IASB issued amendments to paragraphs 69 to 76 of IAS 1 to specify the requirements for classifying liabilities as current or non-current. If the entity has the right at the end of the reporting period to defer settlement of a liability for at least twelve months after the reporting period, then the liability is classified as non-current. The classification is not affected by the likelihood that the entity will exercise its right to defer settlement. Therefore, if the right exists, the liability is classified as non-current even if management intends or expects to settle the liability within twelve months of the reporting period. The effective date is for annual periods beginning on or after 1 January 2023deferred until accounting periods starting not earlier than 1 January 2024. The amendments to the standard are not expected to have a material impact on the financial statements or performance of the Group.
Disclosure of Accounting Policies - Amendments to IAS 1 and IFRS Practice Statement 2. In February 2021, the IASB issued amendments to IAS 1 and IFRS Practice Statement 2 Making Materiality Judgements, in which it provides guidance and examples to help entities apply materiality judgements to accounting policy disclosures. The amendments aim to help entities provide accounting policy disclosures that are more useful by: replacing the requirement for entities to disclose their 'significant' accounting policies with a requirement to disclose their 'material' accounting policies; and adding guidance on how entities apply the concept of materiality in making decisions about accounting policy disclosures. The effective date is for annual periods beginning on or after 1 January 2023. The Group is in the process of assessing the amendments to the standard but it is not expected to have a material impact on the financial statements or performance of the Group.
Definition of Accounting Estimates - Amendments to IAS 8. In February 2021, the IASB issued amendments to IAS 8, in which it introduces a new definition of 'accounting estimates'. The amendments clarify the distinction between changes in accounting estimates and changes in accounting policies and the correction of errors. Also, they clarify how entities use measurement techniques and inputs to develop accounting estimates. The amended standard clarifies that the effects on an accounting estimate of a change in an input or a change in a measurement technique are changes in accounting estimates if they do not result from the correction of prior period errors. The previous definition of a change in accounting estimate specified that changes in accounting estimates may result from new information or new developments. Therefore, such changes are not corrections of errors. This aspect of the definition was retained by the IASB. The effective date is for annual periods beginning on or after 1 January 2023. The standard is not expected to have a material impact on the financial statements or performance of the Group as the amendment is in line with the current treatment by the Group.
There are no other standards, interpretations or amendments to existing standards that are not yet effective that would be expected to have a significant impact on the Group.
2 .7 Changes in accounting policies
Standards and interpretations applicable this period
There are no standards, amendments to standards or interpretations that are effective for years beginning on 1 January 2021 that have a material effect on the financial statements of the Group.
There are no new standards, amendments to standards or interpretations that are effective for years beginning on 1 January 2021 that have a material effect on the financial statements of the Group.
2.8 Convertible Bonds
The 10% unsecured convertible bonds 2026 (the " Bonds ") issued by the Company have been classified as a liability as per IAS 32. The Bonds were initially recognised at fair value and are subsequently measured at amortised cost using the effective interest rate methodology.
3. Summary of significant accounting policies
The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements.
3.1 Consolidation
The consolidated financial statements comprise the financial statements of CEIBA and its subsidiaries as at 31 December 2021. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if and only if the Group has:
-- Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee)
-- Exposure, or rights, to variable returns from its involvement with the investee, and -- The ability to use its power over the investee to affect its returns
When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:
-- The contractual arrangement with the other vote holders of the investee -- Rights arising from other contractual arrangements -- The Group's voting rights and potential voting rights
The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control.
Subsidiaries are consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which control is transferred out of the Group. Where there is a loss of control of a subsidiary, the consolidated financial statements include the results for the part of the reporting period during which the Group has control.
The Group had direct and indirect equity interests in the following entities as at 31 December 2021 and 31 December 2020:
Equity interest
held indirectly
Country by the Group
Entity Name of Incorporation or holding entity
31 Dec 2021 31 Dec
2020
1. CEIBA Property Corporation Limited
(a) (i) Guernsey 100% 100%
1.1. GrandSlam Limited (a) (ii) Guernsey 100% 100%
1.2. CEIBA MTC Properties Inc.(a)
(iii) Panama 100% 100%
1.2.1 Inmobiliaria Monte Barreto
S.A. (b) (iv) Cuba 49% 49%
1.3. CEIBA Tourism B.V. (a) (viii) Netherlands 100% 100%
1.3.1. HOMASI S.A. (a) (iii) Spain 65% 65%
1.3.1.1. Miramar S.A. (b) (vi) Cuba 50% 50%
1.3.2. Mosaico Hoteles S.A. (a)
(iii) Switzerland 80% 80%
1.3.2.1 TosCuba S.A. (b) (vii) Cuba 50% 50%
1.3.3. Mosaico B.V. (a) (v) Netherlands - 80%
1.3.4 Grupo BM Interinvest Technologies
Mariel S.L (c) (ix) Spain 50% 50%
a) Company consolidated at 31 December 2021 and 31 December 2020.
b) Company accounted at fair value at 31 December 2021 and 31 December 2020.
c) Company accounted for as an investment in associate at 31 December 2021 and 31 Decemeber 2020.
(i) Holding company for the Group's interests in real estate investments in Cuba that are facilitated by a representative office in Havana.
(ii) Operates a travel agency that provides services to international clients for travel to Cuba.
(iii) Holding company for underlying investments with no other significant assets. (iv) Joint venture company that holds the Miramar Trade Centre as its principal asset. (v) Mosaico B.V. was liquidated in May 2021
(vi) Joint venture that holds the Meliã Habana Hotel, Meliã Las Americas Hotel, Meliã Varadero Hotel and Sol Palmeras Hotel as its principal assets.
(vii) Joint venture company incorporated to build a beach hotel in Trinidad, Cuba.
(viii) Dutch company responsible for the holding and management of the Group's investments in tourism.
(ix) Spanish company that is developing an industrial logistics warehouse project in the Special Development Zone of Mariel, Cuba.
All inter-company transactions, balances, income, expenses and realised surpluses and deficits on transactions between CEIBA Investments Limited and its subsidiaries have been eliminated on consolidation. Non-controlling interest represent the interests in the operating results and net assets of subsidiaries attributable to minority shareholders.
3.2 Foreign currency translation
Transactions denominated in foreign currencies during the period are translated into the functional currency using the exchange rates prevailing at the date of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated at the reporting date into functional currency at the exchange rate at that date. Foreign currency differences arising on translation are recognised in the consolidated statement of comprehensive income as foreign exchange income (loss).
The financial statements of foreign subsidiaries included in the consolidation are translated into the reporting currency in accordance with the method established by IAS 21, The Effects of Changes in Foreign Exchange Rates. Assets and liabilities are translated at the closing rates at the statement of financial position date, and income and expense items at the average rates for the period. Translation differences are taken to other comprehensive income and shown separately as foreign exchange reserves on consolidation without affecting income. Translation differences during the year ended 31 December 2021 were losses of US$ 8,140,191 (2020: gains of US$ 11,538,310 ).
The exchange rate used in these consolidated financial statements at 31 December 2021 is 1 Euro = US$1.1326 (2020: 1 Euro US$1.2271).
3.3 Dividend income
Dividend income arising from the Group's equity investments is recognised in the consolidated statement of comprehensive income when the Group's right to receive payment is established or cash amounts have been received. 3.4 Interest income
Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable. Interest income is recognised in the consolidated statement of comprehensive income.
3.5 Travel agency commissions
GrandSlam, a wholly-owned subsidiary of the Group, is a travel agency that acts as an intermediary between the customer and airlines, tour operators and hotels. GrandSlam facilitates transactions and earns a commission in return for its service. This commission may take the form of a fixed fee per transaction or a stated percentage of the customer billing, depending on the transaction and the related vendor. Commission is recognised when the respective bookings have been made.
3.6 Fees and expenses
Fees and expenses are recognised in the statement of comprehensive income on the accrual basis as the related services are performed. Transaction costs incurred during the acquisition of an investment are recognised within the expenses in the consolidated statement of comprehensive income and transactions costs incurred on share issues or placements are included within consolidated statement of changes in equity in respect of stated capital.
Transaction costs incurred on the disposal of investments are deducted from the proceeds of sale and transactions costs incurred on shares are deducted from the share issue proceeds.
3.7 Taxation
Deferred taxes are provided for the expected future tax consequences of temporary differences between the carrying amounts and tax bases of assets and liabilities using current corporation tax rate.
Deferred tax liabilities are recognized for temporary differences that will result in taxable amounts in future years. Deferred tax assets are recognised for temporary differences that will result in deductible amounts in future years. Where it is not certain that the temporary difference will be reversed no deferred taxation asset is established. At 31 December 2021 and 31 December 2020 the Group has not established any deferred tax assets or liabilities.
Guernsey Exempt The Netherlands Exempt Panama Exempt Spain Exempt Cuba (i) 15%
(i) The Cuban tax rate does not apply to the Group itself, but is rather the tax rate of the underlying Cuban joint venture companies of the equity investments and is taken into account when determining their fair value (see note 7).
3.8 Financial assets and financial liabilities
(a) Recognition and initial measurement
Financial assets measured at amortised cost
A debt instrument is measured at amortised cost if it is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows and its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal ("SPPI") amount outstanding. The Group includes in this category current and non-current cash and cash equivalents, loans receivables and non-financing accounts receivables and accrued income.
Financial assets and financial liabilities at fair value through profit or loss
Financi al assets and financial liabilities at fair value through profit or loss are measured initially at fair value.
A financial liability other than a financial liability held for trading or contingent consideration of an acquirer in a business combination may be designated as at FVTPL upon initial recognition if either:
-- Such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise
-- The financial liability forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair basis, in accordance with the Group's documented risk management or investment strategy, and information about the grouping is provided internally on that basis
-- It forms part of a contract containing one or more embedded derivatives, and IFRS 9 permits the entire combined contract to be designated as at FVTPL
(b) Classification
The Group has classified financial assets and financial liabilities into the following categories:
Financial assets and financial liabilities classified at fair value through profit or loss:
Financial assets and financial liabilities classified in this category are those that have been designated by management upon initial recognition. Management may only classify an instrument at fair value through profit or loss upon initial recognition when one of the following criteria are met, and designation is determined on an instrument-by-instrument basis:
-- The designation eliminates, or significantly reduces, the inconsistent treatment that would otherwise arise from measuring the assets or liabilities or recognising gains or losses on them on a different basis or,
-- For financial liabilities that are part of a group of financial liabilities, which are managed and their performance evaluated on a fair value basis, in accordance with a documented risk management or investment strategy or,
-- For financial liabilities that contain one or more embedded derivatives, unless they do not significantly modify the cash flows that would otherwise be required by the contract, or it is clear with little or no analysis when a similar instrument is first considered that separation of the embedded derivative(s) is prohibited in relation to financial liabilities.
Financial assets and financial liabilities at fair value through profit or loss are carried in the consolidated statement of financial position at fair value. Changes in fair value are recognised in the statement of comprehensive income.
Financial assets and financial liabilities measured at fair value through profit or loss are the following:
-- Equity Investments are classified at fair value through profit or loss, with changes in fair value recognised in the statement of comprehensive income for the period.
Financial assets and financial liabilities measured at amortised cost:
Financial assets and financial liabilities measured at amortised cost are initially recognised at fair value, except for accounts receivables which are measured at transaction price, and are subsequently measured at amortised cost using the effective interest rate methodology, in respect of financial assets less allowance for impairment. A debt instrument is measured at amortised cost if the objective of the business model is to hold the financial asset for the collection of the contractual cash flows and the contractual cash flows under the instrument solely represent payments of principal and interest (SPPI). Amortised cost is calculated by taking into account any discount or premium on acquisition and fees and costs that are an integral part of the effective interest rate. Therefore, the Group recognises interest income using a rate of return that represents the best estimate of a constant rate of return over the expected behavioural life of the loan, hence, recognising the effect of potentially different interest rates charged at various stages, and other characteristics of the product life cycle (prepayments, penalty interest and charges). If expectations are revised the adjustment is booked a positive or negative adjustment to the carrying amount in the statement of financial position with an increase or reduction in interest income. The adjustment is subsequently amortised through Interest and similar income in the income statement.
Dividend income is recognised when the Group's right to receive the income is established, which is generally when shareholders of the underlying investee companies approve the dividend. Financial assets and financial liabilities measured at amortised cost are the following:
-- Accounts payable and accrued expenses -- Short-term borrowings -- Convertible bonds (c) Fair value measurement
Fair value is the amount for which an asset can be exchanged, or a liability settled, between knowledgeable, willing parties in an arm's-length transaction on the measurement date.
The Group does not have any instruments quoted in an active market. A market is regarded as active if quoted prices are readily and regularly available and represent actual and regularly occurring market transactions on an arm's length basis.
As the financial instruments of the Group are not quoted in an active market, the Group establishes their fair values using valuation techniques. Valuation techniques include using recent arm's length transactions between knowledgeable, willing parties (if available), reference to the current fair value of other instruments that are substantially the same, estimated replacement costs and discounted cash flow analyses. The chosen valuation technique makes maximum use of market inputs, relies as little as possible on estimates specific to the Group, incorporates all factors that market participants would consider in setting a price, and is consistent with accepted economic methodologies for pricing financial instruments. Inputs to valuation techniques reasonably represent market expectations and measures of the risk-return factors inherent in the financial instrument. The Group calibrates valuation techniques and tests them for validity using prices from observable current market transactions of similar instruments or based on other available observable market data.
The best evidence of the fair value of a financial instrument at initial recognition is the transaction price, i.e. the fair value of the consideration given or received, unless the fair value of the instrument is evidenced by comparison with other observable current market transactions in the other instruments that are substantially the same or based on a valuation technique whose variables include only data from observable markets.
All changes in fair value of financial assets, other than interest and dividend income, are recognised in the consolidated statement of comprehensive income as change in fair value of financial instruments at fair value through profit or loss.
(d) Identification and measurement of impairment
IFRS 9 Financial Instruments requires the Group to measure and recognise impairment on financial assets at amortised cost based on Expected Credit Losses. The Group was required to revise its impairment methodology under IFRS 9 for each class of financial asset.
From 1 January 2018, the Group assesses on a forward-looking basis the expected credit losses ("ECL") associated with its debt instruments carried at amortised cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk.
While cash and cash equivalents are also subject to the impairment requirements of IFRS 9, the identified impairment loss was immaterial. Investments held at fair value through profit or loss are not subject to IFRS 9 impairment requirements.
Loans receivable measured at amortised cost fall within the scope of ECL impairment under IFRS 9. As per IFRS 9, a loan has a low credit risk if the borrower has a strong capacity to meet its contractual cash flow obligations in the near term, and adverse changes in economic and business conditions in the longer term might, but will not necessarily, reduce the ability of the borrower to fulfil its obligations. For loans that are low credit risk, IFRS 9 allows a 12-month expected credit loss to be recognised.
If the credit risk of the loan increases significantly and the resulting credit quality is not considered to be low credit risk, full lifetime expected losses are recognised. Lifetime expected credit losses are only recognised if the credit risk increases significantly from when the entity originates or purchases the financial instruments but that do not have objective evidence of a credit loss event.
The Group's approach to ECLs reflects a probability- weighted outcome, the time value of money and reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and forecasts of future economic conditions.
(e) Derecognition
The Group derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, or when it transfers the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred or in which the Group neither transfers nor retains substantially all the risks and rewards of ownership and does not retain control of the financial asset. Any interest in transferred financial assets that qualify for derecognition that is created or retained by the Group is recognised as a separate asset or liability in the consolidated statement of financial position.
On derecognition of a financial asset, the difference between the carrying amount of the asset (or the carrying amount allocated to the portion of the asset derecognised) and the consideration received (including any new asset obtained less any new liability assumed) is recognised in the consolidated statement of comprehensive income.
The Group derecognises a financial liability when its contractual obligations are discharged or cancelled or expire.
3.9 Cash and cash equivalents
Cash and cash equivalents are defined as cash on hand and short-term deposits and other short-term highly liquid investments with remaining maturities at the time of acquisition of three months or less.
3.10 Loans and lending facilities
Loans and lending facilities comprise investments in unquoted interest-bearing debt instruments. They are carried at amortised cost. Interest receivable is included in accounts receivable and accrued income in note 5.
3.11 Property, plant and equipment
Property, plant and equipment, with the exception of works of art, held by the Group and its subsidiaries are stated at cost less accumulated depreciation and impairment. Depreciation is calculated at rates to write off the cost of each asset on a straight-line basis over its expected useful life, as follows:
Office furniture and equipment 4 to 7 years Motor vehicles 5 years
The carrying amounts are reviewed at each statement of financial position date to assess whether they are recorded in excess of their recoverable amounts, and where carrying values exceed this estimated recoverable amount, assets are written down to their recoverable amount. Works of art are carried at their revalued amount, which is the fair value at the date of revaluation. Increases in the net carrying amount are recognised in the related revaluation surplus in shareholders' equity. Valuations of works of art are conducted with sufficient regularity to ensure the value correctly reflects the fair value at the statement of financial position date. Valuations are mostly based on active market prices, adjusted for any difference in the nature or condition of the specific asset.
3.12 Stated capital
Ordinary shares are classified as equity if they are non-redeemable, or redeemable only at CEIBA's option.
3.13 Acquisitions of subsidiary that is not a business
Where a subsidiary is acquired, via corporate acquisitions or otherwise, management considers the substance of the assets and activities of the acquired entity in determining whether the acquisition represents the acquisition of a business.
Where such acquisitions are not judged to be an acquisition of a business, they are not treated as business combinations. Rather, the cost to acquire the corporate entity or assets and liabilities is allocated between the identifiable assets and liabilities (of the entity) based on their relative values at the acquisition date. Accordingly, no goodwill or deferred taxation arises.
3.14 Investments in associates
Investments in associates are accounted for using the equity method.
The carrying amount of the investment in associates is increased or decreased to recognise the Group's share of the profit or loss and other comprehensive income of the associate, adjusted where necessary to ensure consistency with the accounting policies of the Group.
Unrealised gains and losses on transactions between the Group and its associates are eliminated to the extent of the Group's interest in those entities. Where unrealized losses are eliminated, the underlying asset is also tested for impairment.
3.15 Assessment of investment entity status
Entities that meet the definition of an investment entity within IFRS 10 "Consolidated Financial Statements" are required to measure their subsidiaries at fair value through profit and loss rather than consolidate them. The criteria which define an investment entity are, as follows:
-- An entity that obtains funds from one or more investors for the purpose of providing those investors with investment management services;
-- An entity that commits to its investors that its business purpose is to invest funds solely for returns from capital appreciation, investment income, or both; and
-- An entity that measures and evaluates the performance of substantially all of its investments on a fair value basis.
The Group's objective includes providing investment management services to investors to achieve capital growth and dividend income from direct and indirect investment in or with Cuban businesses, primarily in the tourism and commercial real estate sectors, and other revenue-generating investments primarily related to Cuba.
Although the principal income sources of the CEIBA is derived from the changes in fair value and dividends received from its equity investments, the Group is not limited to this type of investment. This is evidenced by CEIBA's wholly-owned subsidiary, GrandSlam Limited, that operates a travel agency providing Cuban related tourism products and services. The income from GrandSlam is shown on the face of the Consolidated Statement of Comprehensive Income as Travel Agency Commissions. Therefore the Group does not invest funds solely for returns from capital appreciation or investment income.
In addition to reviewing fair values, the Group also reports to its Directors, via internal management reports, various other performance indicators in relation to the operating performance of the investments. Therefore Management is not measuring and evaluating the performance of the investments solely on a fair value basis.
Accordingly, Management has concluded that the Group does not meet all the characteristics of an investment entity. These conclusions will be reassessed on a continuous basis, if any of these criteria or characteristics changes.
3.16 Assessment of venture capital organisation
There is no specific definition of a "venture capital organisation". However, venture capital organisations will commonly invest in start-up ventures or investments with long-term growth potential.
Venture capital organisations will also frequently obtain board representation for the investments that it has acquired an equity interest. The Group has representation on all of the board of directors of the joint venture companies in which it has an interest and participates in strategic policy decisions of its investments, but does not exercise management control.
Accordingly Management has concluded that the Group is a venture capital organisation and has applied the exemption in IAS 28 "Investments in Associates and Joint Ventures" to measures it investments in joint venture companies at fair value through profit or loss.
3.17 Going concern
The Directors have reviewed cash flow projections that detail revenue and liabilities and will continue to receive cashflow projections as part of the full-year reporting and monitoring processes. As a result, the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future and has significant liquid funds to do so. Accordingly, the Directors have adopted the going concern basis in preparing the financial statements.
3.18 Assessment of functional currency of parent company
An entity's functional currency is the currency of the primary economic environment in which the entity operates (i.e. the environment in which it primarily generates and expends cash). Any other currency is considered a foreign currency. Management has made an assessment of the primary economic environment of the parent company, CEIBA Investments Limited, and the currency of its principal income and expenses. Based on this assessment, Management has determined that the functional currency of the parent is US$.
3.19 Embedded derivatives
An embedded derivative is a component of a hybrid contract that also includes a non-derivative host- with the effect that some of the cash flows of the combined instrument vary in a way similar to a stand-alone derivative.
Derivatives embedded in hybrid contracts with a financial asset host within the scope of IFRS 9 are not separated.
Derivatives embedded in hybrid contracts with hosts that are not financial assets within the scope of IFRS 9 (e.g. financial liabilities) are treated as separate derivatives when they meet the definition of a derivative, their risks and characteristics are not closely related to those of the host contracts and the host contracts are not measured at FVTPL.
An embedded derivative is presented as a non-current asset or non-current liability if the remaining maturity of the hybrid instrument to which the embedded derivative relates is more than 12 months and is not expected to be realised or settled within 12 months.
The embedded derivative relating to the option of the Bondholder to convert their holdings to Ordinary Shares of the Company, at any time, at a conversion price equal to the Euro equivalent of GBP1.043 (at the time of conversion, subject to adjustments) was determined by management to have no value at initial recognition and at year end.
The embedded derivative relating to the option of the issuer to repay the convertible bond from the end of year 3 is deemed to be closely related to the host contract and has therefore not been separated at initial recognition. The embedded derivative is considered by management to have no value at year end as prepayment risk is considered to be low.
4. Cash and cash equivalents
31 Dec 2021 31 Dec 2020
US$ US$
------------ ------------
Cash on hand 51,251 5,480
Bank current accounts 26,176,821 4,265,380
------------ ------------
5. Accounts receivable and accrued income
31 Dec 2021 31 Dec 2020
US$ US$
------------- ------------
Loan interest receivable 3,146,526 1,716,307
TosCuba deposit (i) 3,180,786 4,000,000
Other accounts receivable and deposits 329,493 449,733
Dividends receivable from Miramar S.A. 310,596 312,352
Dividends receivable from Inmobiliaria
Monte Barreto S.A. 12,281,408 9,871,284
------------- ------------
19,248,809 16,349,676
Expected credit loss (refer to note 2.3) (12,281,408) -
------------- ------------
6,967,401 16,349,676
------------- ------------
Current portion 3,821,068 14,581,229
------------- ------------
Non-current portion 3,146,333 1,768,447
------------- ------------
(i) TosCuba deposit relates to amount held in the bank account of TosCuba on behalf of CEIBA that will be applied against the TosCuba construction facility for the construction of the hotel.
Accounts receivable and accrued income have the following future maturities:
31 Dec 2021 31 Dec 2020
US$ US$
------------ ------------
Up to 30 days 106,235 553,216
Between 31 and 90 days 390,797 249,214
Between 91 and 180 days 92,810 5,336,284
Between 181 and 365 days 3,231,226 8,442,515
Over 365 days 3,146,333 1,768,447
------------ ------------
6,967,401 16,349,676
------------ ------------
$ 12,592,004 of the accounts receivable and accrued income balance is made up of dividends receivable. The impairment on the dividends receivable has been assessed as low in the case of Miramar and high in the case of Monte Barreto in terms of the 3 stage model per IFRS 9 by assessing the credit risk of the counterparty who declared the dividend. The delay in payment of the dividends receivable from Monte Barreto is due in part to the current liquidity position of the Cuban financial system caused by the pandemic, increased U.S. sanctions and the transitional effects of the Cuban monetary reforms. In the current year, the overall credit risk for Monte Barretto has significantly increased from the preceding year. This has resulted in the receivable moving from Stage 2 to Stage 3 of the IFRS ECL impairment model in the current year, which therefore requires management to assess the expected credit loss over time. Accordingly in the current year management has made an assessment of the expected credit loss over timetaking into account all reasonable and supportable information that is available that includes both internal and external information.
Due to the current liquidity constraints placed upon Monte Barreto as a result of the recent Cuban monetary reforms, the timing of receipt of historical dividends receivable is uncertain amounting to US$12,281,408 (2020: US$9,871,284). Therefore, the dividends receivable from Monte Barreto at year end have been impaired in full in the Statement of Comprehensive Income. However, in the case of Miramar, the same liquidity constraints do not apply under the monetary reforms due to a large portion of its income being earned in foreign currency and therefore Miramar has been assigned a higher credit rating. Management expects to receive the full amount of dividends receivable from Miramar in due course.
In the prior year, the overall credit risk for Toscuba significantly increased from the preceding year due to COVID 19 and the resulting prevailing economic conditions. This resulted in the receivable moving from Stage 1 to Stage 2 of the IFRS ECL impairment model (where it remains), which therefore requires management to assess the expected credit loss over the lifetime of the receivable. Accordingly in the current year management has made an assessment of the expected credit loss over the lifetime of the receivable taking into account all reasonable and supportable information that is available that includes both internal and external information and this has resulted in an assessed expected credit loss that is immaterial to the Group. Management believes the probability of default is low (see note 6).
Other accounts receivable and deposits are assessed in terms of the simplified approach for expected credit losses per IFRS 9 due to the trade receivables not containing a significant financing component. These relate to the receivables of the travel agency activities of GrandSlam, a wholly owned subsidiary of the Group.
The total amount of credit impaired receivables at year end is $12,281,408 related to the balance of the dividend receivable due from Monte Barrreto.
6. Loans and lending facilities
31 Dec 2021 31 Dec 2020
US$ US$
------------ ------------
TosCuba S.A. (i) 18,708,861 16,106,466
Casa Financiera FINTUR S.A. (ii) 1,943,760 2,110,795
Miramar Facility (iii) 1,338,673 2,005,374
Grupo B.M. Interinvest Technologies 566,316 -
Mariel S.L. (iv)
22,557,610 20,222,635
------------ ------------
Current portion 3,372,086 2,827,292
------------ ------------
Non-current portion 19,185,524 17,395,343
------------ ------------
In April 2018, the Group entered into a construction finance facility agreement (the "Construction Facility") with TosCuba S.A. ("TosCuba") for the purpose of extending to TosCuba part of the funding necessary for the construction of the Meliã Trinidad Península Hotel. The Construction Facility was originally executed in the maximum principal amount of up to US$45,000,000, divided into two separate tranches of US$22,500,000 each. The terms of the facility were amended in August 2021 to take into account the new construction process and other circumstances and in particular the maximum principal amount of Tranche B thereof was increased to US$29,000,000. The increased principal of Tranche B includes an amount of US$4 million that may be used for the purchase of equipment needed by the relevant Cuban utility companies to ensure the provision of the required water and electrical services to the hotel. The Group has an 80% participation in Tranche A of the Construction Facility and a 100% participation in Tranche B. The Group has the right to syndicate Tranche B of the Construction Facility to other lenders.
The principal terms of the Construction Facility include, (i) a grace period for principal and interest during the construction period of the hotel, (ii) upon expiry of the grace period, accumulated interest will be repaid, followed by a repayment period of eight years during which blended payments of principal and interest will be made, (iii) interest will accrue on amounts outstanding under the Construction Facility at the rate of 8 per cent.
The first disbursement under the Construction Facility was made on 23 November 2018. Repayment of the Construction Facility is secured by an assignment in favour of the lenders of all of the future income of the Meliã Trinidad Península Hotel following start-up of operations. In addition, Tranche B of the Construction Facility is also secured by a guarantee provided by Cubanacán S.A., Corporaciön de Turismo y Comercio Internacional (" Cubanacán " - the Cuban shareholder of TosCuba) as well as by Cubanacán's dividend entitlements in Miramar.
The Construction Facility represents a financial asset, based on the terms of the loan the loan is not repayable on demand and there is no expectation to be repaid within 12 months since there is a grace period during the construction period of the hotel and a further 8 year payment period. In the prior year, the credit risk significantly increased due to COVID 19 and the resulting prevailing economic conditions. The loan is assessed at Stage 2 (same as for the year ended 31 December 2020) of the IFRS ECL impairment model which therefore requires management to assess the expected credit loss over the lifetime of the loan. Accordingly, management has made an assessment of the expected credit loss over the lifetime of the loan taking into account all reasonable and supportable information that is available that includes both internal and external information and this has resulted in an assessed expected credit loss that is immaterial to the Group. Management believes the probability of default is low due to the fact that the repayment of the facility is secured by the future income of the hotel which will be in the form of Euro-denominated off-shore tourism proceeds payable to TosCuba. As well repayment of Tranche B has also been guaranteed by Cubanacán and is further secured by Cubanacán's dividend entitlements in Miramar. Payments of the facility are scheduled to begin once the hotel starts operations.
(i) In July 2016, the Group arranged and participated in a EUR24,000,000 (US$27,182,400 equivalent at 31 December 2021) syndicated facility provided to Casa Financiera FINTUR S.A. (" FINTUR "). The facility was subsequently amended in May 2019 through the addition of a second tranche in the principal amount of EUR12,000,000 (US$13,591,200 equivalent at 31 December 2021). The Group had an initial participation of EUR4,000,000 (US$4,530,400 equivalent at 31 December 2021) under the first tranche and a EUR2,000,000 (US$2,265,200 equivalent at 31 December 2021) participation under the second tranche. The term of the facility was due to expire in June 2021 but, with the closure of nearly all Cuban hotels as a result of the Covid-19 pandemic, an additional grace period was granted and the term was extended to March 2023. The facility has a fixed interest rate of 8%, and under the renegotiated terms interest was accumulated until 31 December 2020 and then paid in quarterly instalments. With effect from 1 April 2020, the Company and FINTUR agreed to revise the remaining outstanding payments under the FINTUR facility (combining the two tranches into a new single tranche C) and to provide a one-year period of grace on the payment of principal, with a two-year principal payment period thereafter. The first principal payment of the new Tranche C fell due on 30 June 2021 but subsequently the principal payments of 30 June, 30 September and 31 December 2021 were waived and have been prorated amongst the remaining scheduled principal payment dates as a result of the continued closure of the hotels serving as security for payment of the facility. The payment of interest on the facility was current at 31 December 2021. This facility is secured by Euro-denominated off-shore tourism proceeds payable to FINTUR by certain international hotel operators managing hotels in Cuba. The loan to FINTUR represents a financial asset. The loan is not repayable on demand. In the prior year, the FINTUR facility had a significant increase in credit risk since its initial recognition. The loan is assessed at Stage 2 (same as for the year ended 31 December 2020) of the IFRS ECL impairment model which therefore requires management to assess the expected credit loss over the lifetime of the loan. Accordingly, management has made an assessment of the expected credit loss over the lifetime of the loan taking into account all
reasonable and supportable information that is available that includes both internal and external information and this has resulted in an assessed expected credit loss that is immaterial to the Group.
The Company's subsidiary HOMASI (the foreign shareholder of Miramar) executed a US$7 million confirming and discounting facility with Miramar for the purpose of confirming and discounting supplier invoices relating to the operations of the four Hotels owned by the joint venture company. The facility is financed in part by a EUR3.5 million credit line received by HOMASI from a Spanish bank for this purpose. The facility is secured by the cash flows generated by the Hotels of Miramar. At 31 December 2021, a total of EUR1,181,947 (US$1,338,673) was disbursed under the facility. The loan is not repayable on demand. In the prior year, the Miramar facility had a significant increase in credit risk since its initial recognition. The loan is assessed at Stage 2 (same as for the year ended 31 December 2020) of the IFRS ECL impairment model which therefore requires management to assess the expected credit loss over the lifetime of the loan. Accordingly management has made an assessment of the expected credit loss over the lifetime of the loan taking into account all reasonable and supportable information that is available that includes both internal and external information and this has resulted in an assessed expected credit loss that is immaterial to the Group.
(ii) In May 2021, the Group entered into a Convertible Loan Agreement in the principal amount of EUR500,000 (US$566,316) with Grupo B.M. Interinvest Technologies Mariel S.L. ("GBM Mariel"). The loan has an annual interest rate of 5% and an original term of 6 months which was subsequently extended to 1 year in November 2021. The loan principal and accrued interest is convertible into common shares of GBM Mariel following the conversion of the company from an S.L. (limited liability company) to a S.A. (company limited by shares). No assessment of the ECL associated with the convertible loans was done by the Group as the balance is immaterial.
The following table details the expected maturities of the loans and lending facilities portfolio based on contractual terms:
31 Dec 2021 31 Dec 2020
US$ US$
------------ ------------
Up to 30 days - 555,101
Between 31 and 90 days 817,597 1,365,797
Between 91 and 180 days 1,181,363 404,897
Between 181 and 365 days 1,373,126 501,497
Over 365 days 19,185,524 17,395,343
------------ ------------
22,557,610 20,222,635
------------ ------------
7. Equity investments
31 Dec 2021 31 Dec 2020
US$ US$
------------ ------------
Miramar S.A. 94,511,908 103,184,163
Inmobiliaria Monte Barreto
S.A. 67,692,462 81,433,887
TosCuba S.A. 13,623,664 13,000,000
175,828,034 197,618,050
------------ ------------
Monte
Miramar Barreto TosCuba Total
(i) US$ (ii) US$
US$ US$
------------- ------------- ----------- -------------
Balance at 31 December
2019 127,887,983 86,702,576 12,750,000 227,340,559
Foreign currency translation
reserve 12,191,767 - - 12,191,767
Change in fair value
of equity investments (36,895,587) (5,268,689) 250,000 (41,914,276)
Balance at 31 December
2020 103,184,163 81,433,887 13,000,000 197,618,050
Foreign currency translation
reserve (7,946,299) - - (7,946,299)
Change in fair value
of equity investments (725,956) (13,741,425) 623,664 (13,843,717)
Balance at 31 December
2021 94,511,908 67,692,462 13,623,664 175,828,034
------------- ------------- ----------- -------------
(i) The value of Miramar represents the 50% foreign equity interest in Miramar S.A. including non-controlling interests.
(ii) The value of TosCuba represents the 50% foreign equity interest in TosCuba S.A. including non-controlling interests.
Below is a description of the equity investments of the Group and the key assumptions used to estimate their fair values.
Monte Barreto
The Group holds the full foreign equity interest of 49% in the Cuban joint venture company Monte Barreto, incorporated in 1996 for the construction and subsequent operation of the Miramar Trade Centre. The Miramar Trade Centre is a six-building complex comprising approximately 80,000 square meters of constructed area of which approximately 56,000 square meters is net rentable area.
The Group is the sole foreign investor in Monte Barreto and holds its 49% interest in the joint venture company through its wholly-owned subsidiary CEIBA MTC Properties Inc. ("CEIBA MTC"), incorporated in Panama. The remaining 51% interest in Monte Barreto is held by the Cuban partner in the joint venture company.
The incorporation and operations of Monte Barreto are governed by a deed of incorporation (including an association agreement and corporate by-laws) dated 7 March 1996 between CEIBA MTC and the Cuban shareholder. Under the Monte Barreto deed of incorporation, Monte Barreto was incorporated for an initial term of 50 years expiring in 2046. All decisions at shareholder meetings require the unanimous agreement of the Cuban and foreign shareholders.
Key assumptions used in the estimated fair value of Monte Barreto:
The fair value of the equity investment in Monte Barreto is determined by the Directors of CEIBA taking into consideration various factors, including estimated future cash flows from the investment, estimated replacement costs, transactions in the private market and other available market evidence to arrive at an appropriate value. The Group also engages an independent valuation firm to perform an independent valuation of the property owned by the joint venture.
The Directors may also take into account additional relevant information that impacts the fair value of the equity investment that has not been considered in the valuation of the underlying property of the joint venture. One such fair value consideration is cash held by the joint venture in excess of its working capital needs ("Excess Cash"). As the valuation of the underlying property only assumes a level of working capital to allow for day-to-day operations, the existence of any Excess Cash needs to be included as an additional component of the fair value of the joint venture company.
In the case of Monte Barreto, the amount of cash required for working capital needs is estimated as the sum of: (i) 30% of tenant deposits, (ii) taxes payable, (iii) dividends declared and payable, (iv) a reserve for employee bonuses, and (v) 2 months of estimated operating expenses. The sum of these amounts are deducted from the balance of cash and cash equivalents of the joint venture with the remaining balance, if any, being considered Excess Cash. At 31 December 2021, the amount of Excess Cash that is included in the fair value of Monte Barreto stated in these financial statements is US$9,529,462 (2020: US$2,494,887 ).
Cash flows have been estimated for a ten year period. Cash flows from year 11 onward are equal to the capitalised amount of the cash flows at year 10. The key assumptions used in the discounted cash flow model are the following:
31 Dec 2021 31 Dec 2020
Discount rate (after tax) (i) 12.8% 9.8%
Occupancy year 1 96.2% 97.3%
Average occupancy year 2 to 8 96.5% 97.3%
Occupancy year 8 and subsequent periods 97.0% 97.5%
Average rental rates per square meter per US$26.33 US$27.23
month - year 1 to 6
Annual increase in rental rates subsequent
to year 6 (ii) 2.5% 2.5%
Capital investments as percentage of rental
revenue 3% 3%
(iii) The effective tax rate is estimated to be 19% (2020: 19%).
(iv) The increase in rental rates in subsequent periods is in-line with the estimated rate of long-term inflation.
Miramar
HOMASI is the foreign shareholder (incorporated in Spain) that owns a 50% share equity interest in the Cuban joint venture company Miramar, which owns the Meli ã Habana Hotel in Havana, a 5-star hotel that has 397 rooms. Miramar also owns t hree beach resort hotels in Varadero known as the Meli ã Las Americas, Meli ã Varadero and Sol Palmeras Hotels, having an aggregate total of 1,437 rooms (the "Varadero Hotels") . The Meli ã Las Americas Hotel and Bungalows is a 5-star luxury beach resort hotel with 340 rooms, including 90 bungalows and 14 suites and began operations in 1994. The 5-star Meli ã Varadero Hotel is located next to the Meli ã Las Americas Hotel and has 490 rooms, including 7 suites and began operations in 1992. The 4-star Sol Palmeras Hotel is located next to the Meli ã Varadero Hotel and has 607 rooms, including 200 bungalows, of which 90 are of suite or deluxe standard and began operations 1990. The remaining share equity interest in Miramar is held by Cubanacán (as to 50%). All decisions at shareholder meetings require the unanimous agreement of the Cuban and foreign shareholders. In 2018, the surface rights for the four hotels of Miramar were extended / granted to 2042.
At 31 December 2021 the Group holds 65% of the share equity of HOMASI, representing a 32.5% interest in Miramar. The remaining 35% interest in HOMASI is held by Meliã Hotels International, representing a 17.5% interest in Miramar, and has been accounted for as a non-controlling interest in these consolidated financial statements.
Key assumptions used in the estimated fair value of Miramar:
The fair value of the equity investment in Miramar is determined by the Directors taking into consideration various factors, including estimated future cash flows from the investment in US$, estimated replacement costs, transactions in the private market and other available market evidence to arrive at an appropriate value. The Group also engages an independent valuation firm to perform independent valuations in US$ of the properties held by the joint venture.
The Directors may also take into account additional relevant information that impacts the fair value of the equity investment that has not been considered in the valuations of the underlying properties of the joint venture. One such fair value consideration is cash held by the joint venture in excess of its working capital needs. As the valuations of the underlying properties only assume a level of working capital to allow for day-to-day operations, the existence of any Excess Cash needs to be included as an additional component of the fair value of the joint venture company.
In the case of Miramar, the amount of cash required for working capital needs is estimated as the sum of: (i) taxes payable, (ii) dividends declared and payable, (iii) trade payables greater than 90 days outstanding, and (iv) 2 months of estimated operating expenses. The sum of these amounts is deducted from the balance of cash and cash equivalents of the joint venture with the remaining balance, if any, being considered Excess Cash. At 31 December 2021, the amount of Excess Cash that is included in the fair value of Miramar stated in these financial statements is US$10,411,908 (2020: US$12,984,162 ). Cash flows have been estimated for a ten year period. Cash flows from year 11 onward are equal to the capitalised amount of the cash flows at year 10. The key assumptions used in the discounted cash flow model are the following:
31 Dec 2021 31 Dec 2020
Meliã Habana
Discount rate (after tax) (i) 14.7% 12.5%
Average occupancy year 1 to 3 60.0% 60.3%
Occupancy year 4 and subsequent periods 70.0% 72.2%
Average daily rate per guest - year 1 US$127.50 US$134.19
Average increase in average daily rate
per guest - year 2 to 6 6.1% 4.9%
Increase in average daily rate per guest
subsequent to year 6 (ii) 3.0% 2.5%
Capital investments as percentage of total
revenue 7% 7%
31 Dec 2021 31 Dec 2020
Meliã Las Americas
Discount rate (after tax) (iii) 14.4% 12.9%
Average occupancy year 1 to 3 60% 63%
Occupancy year 4 and subsequent periods 79.3% 79.5%
Average daily rate per guest - year 1 $120.56 US$110.93
Average increase in average daily rate
per guest - year 2 to 6 10.6% 11%
Increase in average daily rate per guest
subsequent to year 6 (ii) 3.0% 2.5%
Capital investments as percentage of total
revenue 7% 7%
31 Dec 2021 31 Dec 2020
Meliã Varadero
Discount rate (after tax) (iii) 14.4% 12.9%
Average occupancy year 1 to 3 62.3% 64.6%
Occupancy year 4 and subsequent periods 79.3% 80.3%
Average daily rate per guest - year 1 US$108.02 US$97.88
Average increase in average daily rate
per guest - year 2 to 6 4.9% 6%
Increase in average daily rate per guest
subsequent to year 6 (ii) 3.0% 2.5%
Capital investments as percentage of total
revenue 7% 7%
Sol Palmeras
Discount rate (after tax) (iii) 14.4% 12.9%
Average occupancy year 1 to 3 66.3% 65.1%
Occupancy year 4 and subsequent periods 80.7% 81.8%
Average daily rate per guest - year 1 US$94.91 US$86.75
Increase in average daily rate per guest
- year 2 5% 12%
Average increase in average daily rate
per guest - year 3 to 6 3.1% 5%
Increase in average daily rate per guest
subsequent to year 6 (ii) 3.0% 2.5%
Capital investments as percentage of total
revenue 7% 7%
(i) The effective tax rate is estimated to be 19% (2020: 19%).
(ii) The increase in the average daily rate per guest in subsequent periods is in-line with the estimated rate of long-term inflation.
(iii) The effective tax rate is estimated to be 21% (2020: 21%).
Sensitivity to changes in the estimated rental rates / average daily rates
The discounted cash flow models include estimates of the future rental rates / average daily rates of the joint venture companies. Actual rental rates / average daily rates may differ from these estimates due to several factors including the general business climate and economic conditions, the strength of the overall tourism market and the influence of competitors. Therefore, the following tables detail the change in fair values of the equity investments, when applying what Management considers to be the reasonable possible spread in rental rates / average daily rates of between 15% lower and 15% higher compared to the rates used in these consolidated financial statements .
The following table details the fair values of the equity investments at 31 December 2021 when applying lower rental rates / average daily rates:
Financial
statements -5% -10% -15%
US$ US$ US$ US$
------------ ----------- ----------- -----------
Monte Barreto 67,692,462 64,822,429 61,952,395 59,082,362
Miramar 94,511,908 90,812,298 87,106,569 83,384,347
The following table details the fair values of the equity investments at 31 December 2021 when applying higher rental rates / average daily rates:
Financial
statements +5% +10% +15%
US$ US$ US$ US$
------------ ----------- ------------ ------------
Monte Barreto 67,692,462 70,562,495 73,432,528 76,302,561
Miramar 94,511,908 98,211,518 101,911,129 105,610,740
The following table details the fair values of the equity investments at 31 December 2020 when applying lower rental rates / average daily rates:
Financial
statements -5% -10% -15%
US$ US$ US$ US$
------------ ----------- ----------- -----------
Monte Barreto 81,433,887 77,430,040 73,426,194 69,422,348
Miramar 103,184,163 99,236,033 95,287,903 91,330,479
The following table details the fair values of the equity investments at 31 December 2020 when applying higher rental rates / average daily rates:
Financial
statements +5% +10% +15%
US$ US$ US$ US$
------------ ------------ ------------ ------------
Monte Barreto 81,433,887 85,437,733 89,441,579 93,445,426
Miramar 103,184,163 107,132,293 111,080,424 115,028,555
Sensitivity to changes in the occupancy rates
The discounted cash flow models include estimates of the future occupancy rates of the joint venture companies. Actual occupancy rates may differ from these estimates due to several factors including the general business climate and economic conditions, the strength of the overall tourism market and the influence of competitors. Therefore, the following tables detail the change in fair values of the equity investments, when applying what Management considers to be the reasonable possible spread in occupancy rates of between 15% lower and 15% higher compared to the rates used in these consolidated financial statements.
The following table details the fair values of the equity investments at 31 December 2021 when applying lower occupancy rates:
Financial
statements -5% -10% -15%
US$ US$ US$ US$
------------- ----------- ----------- -----------
Monte Barreto 67,692,462 64,839,935 61,988,052 59,136,932
Miramar 94,511,908 89,683,071 84,828,731 79,946,598
The following table details the fair values of the equity investments at 31 December 2021 when applying higher occupancy rates:
Financial
statements +5% +10% +15%
US$ US$ US$ US$
------------- ----------- ------------ ------------
Monte Barreto (i) 67,692,462 69,620,366 n/a n/a
Miramar 94,511,908 99,340,746 104,169,585 108,998,426
(i) In the case of Monte Barreto, only a constant occupancy rate of 100% is shown under the increase of 5% as projected occupancy is already above or equal to 95%.
The following table details the fair values of the equity investments at 31 December 2020 when applying lower occupancy rates:
Financial
statements -5% -10% -15%
US$ US$ US$ US$
------------ ----------- ----------- -----------
Monte Barreto 81,433,887 77,438,281 73,442,960 69,447,975
Miramar 103,184,163 98,256,156 93,324,630 88,330,847
The following table details the fair values of the equity investments at 31 December 2020 when applying higher occupancy rates:
Financial
statements +5% +10% +15%
US$ US$ US$ US$
------------ ------------ ------------ ------------
Monte Barreto (i) 81,433,887 86,441,244 n/a n/a
Miramar 103,184,163 108,112,170 113,040,178 117,968,186
(i) In the case of Monte Barreto, only a constant occupancy rate of 100% is shown under the increase of 5% as projected occupancy is already above or equal to 95%.
Sensitivity to changes in the discount and capitalisation rates
The discount and capitalisation rates used in the discounted cash flow models have been estimated taking into account various factors including the current risk-free interest rate, country risk rate and other industry factors. Different methodologies or assumptions may lead to an increase or decrease in the discount and capitalisation rates. Therefore, the following tables detail the change in fair values of the equity investments when applying what Management considers to be the reasonable possible spread in the discount and capitalisation rates of between 3% lower and 3% higher compared to the rates used in these consolidated financial statements. The following table details the fair values of the equity investments at 31 December 2021 when applying lower discount and capitalization rates:
Financial
statements -1% -2% -3%
US$ US$ US$ US$
------------- ------------ ------------ ------------
Monte Barreto 67,692,462 73,048,490 79,662,418 88,048,776
Miramar 94,511,908 102,737,618 112,607,405 124,671,680
The following table details the fair values of the equity investments at 31 December 2021 when applying higher discount and capitalization rates:
Financial
statements +1% +2% +3%
US$ US$ US$ US$
------------ ----------- ----------- -----------
Monte Barreto 67,692,462 63,261,635 59,531,353 56,344,447
Miramar 94,511,908 87,550,431 81,582,595 76,410,376
The following table details the fair values of the equity investments at 31 December 2020 when applying lower discount and capitalization rates:
Financial
statements -1% -2% -3%
US$ US$ US$ US$
------------ ------------ ------------ ------------
Monte Barreto 81,433,887 92,593,656 107,725,093 129,348,178
Miramar 103,184,163 113,376,155 125,923,155 141,725,407
The following table details the fair values of the equity investments at 31 December 2020 when applying higher discount and capitalization rates:
Financial
statements +1% +2% +3%
US$ US$ US$ US$
------------ ----------- ----------- -----------
Monte Barreto 81,433,887 72,875,764 66,111,224 60,633,360
Miramar 103,184,163 94,749,345 87,659,357 81,620,744
Sensitivity to changes in the estimation of Excess Cash
The fair values of the equity investments have been estimated using the discounted cash flow method and adjusted for the Excess Cash held by the joint venture companies. Within the calculation of Excess Cash, it is estimated that the joint ventures will maintain a sufficient cash balance for working capital purposes equal to the equivalent of two months' operating expenses.
The amount of cash on hand required for working capital purposes may fluctuate due to a change in the aging of receivables and payables of the joint venture companies. Management believes that the maximum amount of cash that would be required to be kept on hand would not exceed three months of operating expenses. Therefore the following table details the changes in fair values of the equity investments at 31 December 2021 if the number of months of operating expenses used in the calculation is increased by an additional 1 to 3 months in comparison to the calculation used in these consolidated financial statements.
Financial
statements + 1 month + 2 months + 3 months
US$ US$ US$ US$
------------ ------------ ------------- -------------
Monte Barreto 67,692,462 67,479,165 67,265,868 67,052,571
Miramar 94,511,908 92,633,477 90,755,047 88,876,616
The following table details the changes in fair values of the equity investments at 31 December 2020 if the number of months of operating expenses used in the calculation is increased by an additional 1 to 3 months in comparison to the calculation used in these consolidated financial statements.
Financial
statements + 1 month + 2 months + 3 months
US$ US$ US$ US$
------------ ------------ ------------- -------------
Monte Barreto 81,433,887 81,195,665 80,957,443 80,719,222
Miramar 103,184,163 101,161,741 99,139,318 97,116,896
A reduction in the number of months of operating expenses used in the calculation would increase the changes in fair values of the equity investments at 31 December 2021 and 2020, however this is considered unlikely and therefore the related sensitivities have not been shown .
TosCuba
At 31 December 2021 and 2020 the Group owned an indirect 80% interest in Mosaico Hoteles S.A. ("Mosaico Hoteles"), which in turn has a 50% share equity interest in TosCuba, a Cuban joint venture company that is developing a 400 room 4-star hotel at Playa Maria Aguilar near the city of Trinidad, Cuba. The Group has made capital contributions of US$8,000,000 (2020: US$8,000,000) to TosCuba.
In 2019, TosCuba was awarded a US$10 million grant under the Spanish Cuban Debt Conversion Programme, a Spanish-Cuba initiative aimed at promoting Spanish private sector investments in Cuba under which outstanding bilateral debts owed to Spain by Cuba may be settled through awards granted to investment projects in Cuba from a special countervalue fund created for this purpose. In 2021, TosCuba was awarded an additional US$1,247,328 under the programme. Under these awards, local currency invoices relating to services and materials received in Cuba in the course of constructing the projects are paid from the countervalue fund on behalf of the joint venture. As of 31 December 2021, TosCuba has received cash grants under the programme totalling US$11,247,328 (2020: US$10,000,000). The 50% interest of the Group in amounts received under the programme by TosCuba have been recorded as a change in the fair value in the investment in TosCuba.
The capital contributions made by the Company plus its share of the cash grants received by Toscuba under the Spanish Cuban Debt Conversion Programme have been determined to be the best observable measure of the Company's interest in the fair value of Toscuba. The construction has been progressing slowly since the beginning of the Covid-19 pandemic in March 2020. As at 31 December 2021, all structural works have been completed and the project has reached an overall completion level of approximately 63% and it is estimated that the construction will be completed by the first quarter of 2023. Taking into consideration the estimated cost to completion, the projected value of the hotel upon completion, the projected value of the hotel upon completion and current debt level of Toscuba, the Directors determined that the cost to date on the project approximates the fair value of Toscuba.
Dividend income from equity investments
Dividend income from the equity investments above during the year is as follows:
31 Dec 2021 31 Dec 2020
US$ US$
------------ ------------
Monte Barreto 2,550,124 6,948,316
Miramar 500,000 6,310,596
3,050,124 13,258,912
------------ ------------
Financial information of joint venture companies
The principal financial information of the joint venture companies for the years ended 31 December 2021 and 2020 is as follows:
Monte Barreto Miramar(i) TosCuba (ii)
(i)
2020 2021 2020 2021 2020
US$ US$ US$ US$
2021 000's US$
US$ 000's 000's 000's
000's 000's
-------- -------- --- -------- ------- --- -------
Cash and equivalents 42,366 26,725 39,340 42,908 4,026 4,049
Other current
assets 1,666 1,480 21,705 16,943 4,028 3,718
Non-current
assets 45,419 46,865 131,653 135,464 54,163 48,459
Current financial
liabilities 27,428 23,450 16,610 15,659 2,026 1,874
Other current
liabilities - - - - - -
Non-current
financial liabilities 3,820 3,696 569 1,055 32,958 28,352
Other non-current
liabilities - - - - - -
Revenue 22,557 23,390 19,546 29,379 - -
Interest income 692 62 - - - -
Interest expense - - - - - -
Depreciation
and amortisation 1,653 1,656 7,255 7,396 - -
Taxation paid
(recovered) 2,754 2,533 (2,226) - - -
Profit (loss)
from continuing
operations 15,600 14,378 (9,578) (3,511) - -
Other comprehensive
income - - - - - -
Total comprehensive
income (loss) 15,600 14,378 (9,578) (3,511) - -
(i) Figures obtained from financial statements prepared under IFRS.
(ii) Figures obtained from financial statements prepared under Cuban GAAP. The difference in accounting standard has no impact in the consolidated financial statements.
8. Investment in associate
31 Dec 2021 31 Dec 2020
US$ US$
------------ ------------
Grupo B.M. Interinvest Technologies
Mariel S.L. 303,175 303,175
------------ ------------
303,175 303,175
------------ ------------
At 31 December 2021 and 2020 the Group owned an indirect 50% share equity interest in Grupo BM Interinvest Technologies Mariel S.L. ("GBM Mariel") , a Spanish company that is developing a new multi-phase industrial and logistics park real estate project in the Special Development Zone of Mariel, Cuba. The Group has made capital contributions of US$303,175 (2020: US$303,175) to GBM Mariel . The Company does not control GBM Mariel and has therefore accounted for its interest as an investment in associate. This is evidenced by the fact that only two of the five directors of GBM Mariel are represented by the Company and all major decisions require approval of 51% of the shareholders of GBM Mariel.
9. Property, plant and equipment
Office furniture Works of
Motor vehicles and equipment art Total
US$ US$ US$ US$
----------------- ----------------- ----------- ----------
Cost:
At 1 January 2020 374,502 185,887 463,300 1,023,689
Additions - 4,897 - 4,897
At 31 December
2020 374,502 190,784 463,300 1,028,586
Additions - 11,802 - 11,802
At 31 December
2021 374,502 202,586 463,300 1,040,388
Accumulated Depreciation:
At 1 January 2020 319,938 135,405 - 455,343
Charge 22,372 17,273 39,645
At 31 December
2020 342,310 152,678 - 494,988
Charge 12,243 17,549 29,792
At 31 December
2021 354,553 170,227 - 524,780
Net book value:
At 1 January 2020 54,564 50,482 463,300 568,346
At 31 December
2020 32,192 38,106 463,300 533,598
At 31 December
2021 19,949 32,359 463,300 515,608
10. Accounts payable and accrued expenses
31 Dec 2021 31 Dec 2020
US$ US$
------------ ------------
Due to shareholders 5,457 5,926
Due to Meliã Hotels International 10,878 176,941
Due to Miramar 801,426 -
Accrued professional fees 312,921 223,349
Management fees payable (see note
17) 2,978,727 1,565,065
Other accrued expenses 221,877 186,127
Other accounts payable 15,901 57,891
------------ ------------
4,347,187 2,215,299
------------ ------------
Current portion 4,347,187 1,085,590
------------ ------------
Non-current portion - 1,129,709
------------ ------------
The future maturity profile of accounts payable and accrued expenses is as follows:
31 Dec 2021 31 Dec 2020
US$ US$
------------ ------------
Up to 30 days 1,124,902 179,136
Between 31 and 90 days 1,540,653 -
Between 91 and 180 days 521,779 606,842
Between 181 and 365 days 1,159,853 299,612
Greater than 365 days - 1,129,709
4,347,187 2,215,299
------------ ------------
11. Short-term borrowings
31 Dec 2021 31 Dec 2020
US$ US$
------------ ------------
Short-term finance facility (i) 1,004,673 -
1,004,673 -
------------ ------------
(i) The amount represents the balance outstanding of a EUR3.5 million credit line received by HOMASI from a Spanish bank for the purpose of financing the Miramar confirming and discounting facility (see note 6).
12. Convertible bonds
31 Dec 2021 31 Dec 2020
US$ US$
------------- ------------
Convertible bonds issued (i) 29,312,500 -
Foreign exchange movements (1,013,147) -
28,299,353 -
------------- ------------
Current portion - -
------------- ------------
Non-current portion 28,299,353 -
------------- ------------
(i) On 31 March 2021, the Company completed the issue of EUR25,000,000 (US$29,312,500 equivalent at date of issue) 10.00% senior unsecured convertible bonds ("Bonds"). The Bonds were listed on The International Stock Exchange (Channel Islands) on 13 April 2021. The Bonds have a term of 5 years expiring on 31 March 2026, an interest rate of 10.00%, payable quarterly, and are convertible at the option of the Bondholder to Ordinary Shares of the Company, at any time, at a conversion price equal to the Euro equivalent of GBP1.043 (at the time of conversion, subject to adjustments).
After three years, the Company may redeem the Bonds in advance of their expiry in principal amounts of EUR2,500,000 or multiples thereof.
The interest expense related to the Bonds during the year was US$2,176,931.
The future maturity profile of the Bonds is as follows:
31 Dec 2021 31 Dec 2020
US$ US$
------------ ------------
Greater than 365 days 28,299,353 -
28,299,353 -
------------ ------------
13. Stated capital and net asset value
Authorised
The Group has the power to issue an unlimited number of shares. The issued shares of the Group are ordinary shares of no par value.
Issued
The following table shows the movement of the issued shares during the year:
Number of Stated capital
ordinary US$
shares
------------ ---------------
Stated capital
Stated capital at 31 December
2020 137,671,576 106,638,023
------------ ---------------
Stated capital at 31 December
2021 137,671,576 106,638,023
------------ ---------------
Net asset value
The net asset value attributable to the shareholders of the Group ("NAV") is calculated as follows:
31 Dec 2021 31 Dec 2020
US$ US$
------------- -------------
Total assets 232,399,900 239,297,994
Total liabilities (35,484,546) (5,048,632)
Less: non-controlling interests (36,592,765) (39,823,748)
------------- -------------
NAV 160,322,589 194,425,614
Number of ordinary shares
issued 137,671,576 137,671,576
NAV per share 1.16 1.41
Non-controlling interest
At 31 December 2021, the non-controlling interest corresponds to the 35% participation of Meliã Hotels International in the equity of HOMASI and the 20% participation of Meliã Hotels International in the equity of Mosaico Hoteles.
The non-controlling interests in the above companies are as follows:
31 Dec 2021 31 Dec 2020
US$ US$
------------ ------------
Non-controlling interest in
HOMASI 33,923,378 37,235,538
Non-controlling interest in
Mosaico Hoteles 2,669,387 2,588,210
Total non-controlling interests 36,592,765 39,823,748
------------ ------------
The movement of the non-controlling interests is as follows:
31 Dec 2021 31 Dec 2020
US$ US$
------------ -------------
Initial balance 39,823,748 49,381,639
Interest of non-controlling interest
in net loss (124,248) (10,216,756)
Net other comprehensive (loss)/income
to be reclassified to profit or loss
in subsequent periods (2,849,067) 4,038,410
Cash distribution to non-controlling
interest (257,668) (3,463,951)
Capital contributions from non-controlling
interest - 84,406
------------ -------------
Final balance 36,592,765 39,823,748
------------ -------------
The movement of the non-controlling interest in HOMASI is as follows:
31 Dec 2021 31 Dec 2020
US$ US$
------------ -------------
Initial balance 37,235,538 46,878,858
Interest of non-controlling interest
in net (loss)/income (205,425) (10,217,779)
Net other comprehensive income/(loss)
to be reclassified to
profit or loss in subsequent periods (2,849,067) 4,038,410
Cash distribution to non-controlling
interest (257,668) (3,463,951)
Final balance 33,923,378 37,235,538
------------ -------------
The movement of the non-controlling interest in Mosaico Hoteles is as follows:
31 Dec 2021 31 Dec 2020
US$ US$
------------ ------------
Initial balance 2,588,210 2,502,781
Interest of non-controlling interest
in net income 81,177 1,023
Capital contributions from non-controlling
interest - 84,406
------------ ------------
Final balance 2,669,387 2,588,210
------------ ------------
The principal financial information of HOMASI and Mosaico Hoteles for the years ended 31 December 2021 and 2020 is as follows:
HOMASI Mosaico Hoteles
-------------------------- --------------------
2021 2020 2021 2020
US$ US$ US$ US$
000's 000's 000's 000's
--------- --- ---------- --------- ---------
Current assets 4,313 3,347 256 24
Non-current assets 94,526 103,184 13,624 13,000
Current liabilities (1,915) (144) (533) (83)
Equity (96,924) (106,387) (13,347) (12,941)
Income 861 6,311 633 250
Expenses (2,184) (46,055) (227) (245)
Depreciation - - - -
Taxation - - - -
Net (loss)/income
for the year (1,323) (39,744) 406 (5)
Other comprehensive
(loss)/income (8,140) 12,192 - -
Total comprehensive
(loss)/income (9,463) (27,552) 406 (5)
14. Reportable operating segments
IFRS 8 requires the Group to report on where primary business activities are engaged and where the Group earns revenue, incurs expenses and where operating results are reviewed by chief operating decision makers about resources allocated to the segment and assess its performance and for which discrete financial information is available. The primary segment reporting format of the Group is determined to be business segments as the Group's business segments are distinguishable by distinct financial information provided to and reviewed by the chief operating decision makers in allocating resources arising from the products or services engaged by the Group. No geographical information is reported since all investment activities are located in Cuba and all revenues are generated from assets held in Cuba. The operating businesses are organised and managed separately through different companies. For management purposes, the Group is currently organised into three business segments:
Ø Commercial property: Activities concerning the Group's interests in commercial real estate investments in Cuba.
Ø Tourism / Leisure: Activities concerning the Group's interests in hotel investments in Cuba and operations of a travel agency that provides services to international clients for travel to Cuba.
Ø Other: Includes interest from loans and lending facilities, the Group entered into the Construction Facility with TosCuba for the purpose of extending to TosCuba part of the funding necessary for the construction of the Meliã Trinidad Playa Hotel and a facility provided to FINTUR (see note 6). Other also includes the convertible bonds.
Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating income or loss and is measured consistently with operating income or loss in the consolidated financial statements. The Group has applied judgment by aggregating its operating segments according to the nature of the underlying investments. Such judgment considers the nature of operations, types of customers and an expectation that operating segments within a reportable segment have similar long-term economic characteristics.
31 December 2021
US$
---------------------------------------------------------
Commercial Tourism Other Total
property / Leisure
Total assets 80,622,834 131,124,444 20,652,622 232,399,900
Total liabilities (2,042,488) (5,142,705) (28,299,353) (35,484,546)
------------- ------------ ------------- -------------
Total net assets 78,580,346 125,981,739 (7,646,731) 196,915,354
Dividend income 2,550,124 500,000 - 3,050,124
Interest income - 370,064 1,554,046 1,924,110
Other income - 7,529 - 7,529
Change in fair value of
equity investments (13,741,425) (102,292) - (13,843,717)
Interest expense - - (2,176,931) (2,176,931)
Allocated expenses (13,371,754) (2,307,409) (2,087,903) (17,767,066)
Foreign exchange loss - - (130,198) (130,198)
------------- ------------ ------------- -------------
Net loss (24,563,055) (1,532,108) (2,840,986) (28,936,149)
Other comprehensive loss - (8,140,191) - (8,140,191)
------------- ------------ ------------- -------------
Total comprehensive loss (24,563,055) (9,672,299) (2,840,986) (37,076,340)
Other segment information:
Property, plant and equipment
additions 2,120 9,682 - 11,802
Depreciation 24,674 13,048 - 29,792
31 December 2020
US$
---------------------------------------------------------------- --------------------------
Commercial Tourism Other Total
property / Leisure
Total assets 85,371,003 123,678,118 30,248,873 239,297,994
Total liabilities (1,977,422) (3,071,210) - (5,048,632)
------------ ------------- ----------- -------------
Total net assets 83,393,581 120,606,908 30,248,873 234,249,362
Dividend income 6,948,316 6,310,596 - 13,258,912
Interest income - 639,982 1,259,486 1,899,468
Other income - 6,113 - 6,113
Change in fair value of equity
investments (5,268,689) (36,645,587) - (41,914,276)
Allocated expenses (1,819,091) (2,272,417) (341,651) (4,433,159)
Foreign exchange gain - - 1,157,566 1,157,566
------------ ------------- ----------- -------------
Net income (139,464) (31,961,313) 2,075,401 (30,025,376)
Other comprehensive income - 11,538,310 - 11,538,310
------------ ------------- ----------- -------------
Total comprehensive income/(loss) (139,464) (20,423,003) 2,075,401 (18,487,066)
Other segment information:
Property, plant and equipment
additions 4,897 - - 4,897
Depreciation 34,305 5,340 - 39,645
15. Related party disclosures
Compensation of Directors
Each Director receives a fee of GBP35,0 00 (US$47,170) per annum with the Chairman receiving GBP 40,000 (US$53,908). The Chairman of the Audit Committee also receives an annual fee of GBP40,000 ( US$53,908 ). The Chairman and Directors are also reimbursed for other expenses properly incurred by them in attending meetings and other business of the Group. No other compensation or post-employment benefits are provided to Directors. Total Directors' fees, including the fees of the Chairman, for the year ended 31 December 2021 were US$276,111 (year ended 31 December 2020: US$232,677).
Transactions with other related parties
Transactions and balances between the Group and the joint venture companies included within the equity investments of the Group are detailed in notes 5, 6, 7 and 8.
CPC and GrandSlam Limited, wholly-owned subsidiaries of the Group, lease office space totalling 319 square meters from Monte Barreto, a commercial property investment in which the Group holds a 49% interest. The rental charges paid under these leases are accounted for in operational costs and for the year ended 31 December 2021 amounted to US$12,555 (2020: US$ US$24,500) with an average rental charge per square meter at 31 December 2021 of US$18.84 (2020: US$37.64) plus an administration fee of US$6.07 (2020: US$9.75) per square meter. The Group has elected to use the recognition exemption for lease contracts that, at the commencement date, have a lease term of 12 months or less and do not contain a purchase option.
Transactions with Investment Manager
ASFML is a wholly-owned subsidiary of Standard Life Aberdeen plc which has an interest at 31 December 2021 in 9,747,852 shares of the stated capital (2020: 9,747,852). For further discussion regarding transactions with the Investment Manager see note 17.
Interests of Directors and Executives in the stated capital
At 31 December 2021 John Herring, a Director of CEIBA, had an indirect interest in 40,000 shares (2020: 40,000 shares).
At 31 December 2021 Peter Cornell, a Director of CEIBA, has an indirect interest in 100,000 shares (2020: 100,000 shares).
At 31 December 2021 Trevor Bowen, a Director of CEIBA, has an indirect interest in 43,600 shares (2020: 43,600 shares).
At 31 December 2021 Colin Kingsnorth, a Director of CEIBA, is a director and shareholder of Ursus Capital Limited, which holds 12,252,338 shares (2020: Colin Kingsnorth was a director and shareholder of Laxey Partners Limited, which owned and served as the investment manager for an aggregate of 30,979,316 shares).
At 31 December 2021 Sebastiaan A.C. Berger, the Investment Manager's fund manager and Chief Executive Officer of CEIBA, has an interest in 3,273,081 s hares (2020: 3,273,081 s hares ).
At 31 December 2021 Cameron Young, Chief Operating Officer of CEIBA, has an indirect interest in 4,129,672 shares (2020: 4,129,672 shares).
At 31 December 2021 Paul S. Austin, Chief Financial Officer of CEIBA, has an interest in 144,000 shares (2020: 144,000).
Interests of Directors, Executives and Shareholders in the Convertible Bonds
At 31 December 2021, Directors had an interest of EURnil (US$nil), Executives had an interest of EURnil (US$nil), and Shareholders of CEIBA had a interest of EUR10,900,000 (US$12,345,340) in the Bonds (see note 12).
16. Basic and diluted loss per share
Basic loss per share
The loss per share has been calculated on a weighted-average basis and is arrived at by dividing the net income for the year attributable to shareholders by the weighted-average number of shares in issue.
31 Dec 31 Dec
2021 2020
US$ US$
------------- -------------
Weighted average of ordinary shares in issue 137,671,576 137,671,576
Net loss for the year attributable to the
shareholders (28,811,901) (19,808,620)
Basic loss per share (0.21) (0.14)
Diluted loss per share
The diluted loss per share is considered to be equal to the basic loss per share, as the impact of senior unsecured convertible bonds on loss per share is anti-dilutive for the period(s) presented. The convertible bonds could potentially dilute basis earning per share in the future.
17. Investment Manager
On 31 May 2018, the Group entered into a Management Agreement under which ASFML was appointed as the Group's alternative investment fund manager to provide portfolio and risk management services to the Group. The Management Agreement took effect on 1 November 2018. ASFML has delegated portfolio management to the Investment Manager. Both ASFML and the Investment Manager are wholly-owned subsidiaries of abrdn plc.
Pursuant to the terms of the Management Agreement, ASFML is responsible for portfolio and risk management on behalf of the Group and will carry out the on-going oversight functions and supervision and ensure compliance with the applicable requirements of the AIFM Rules. Under the terms of the Management Agreement, ASFML is entitled, with effect from 1 November 2018, to receive an annual management fee at the rate of 1.5 per cent of Total Assets. For this purpose, the term Total Assets means the aggregate of the assets of the Company less liabilities on the last business day of the period to which the fee relates (excluding from liabilities any proportion of principal borrowed for investment and treated in the accounts of the Company as current liabilities). The annual management fee payable by the Group to ASFML will be lowered by the annual running costs of the Havana operations of CEIBA Property Corporation Limited, a subsidiary of the Group. The management fees earned by the Investment Manager for the year ended 31 December 2021 were US$3,276,574 (2020: US$2,864,518). In the prior year, in order to assist the Group with its cash flow requirements the Investment Manager agreed to defer payment of a portion of its fees earned during 2020 totaling US$1,154,396 until 2022.
There are no performance, acquisition, exit or property management fees payable to ASFML or the Investment Manager.
In connection with the Management Agreement, ASFML paid the Group US$5,000,000 for the purpose of compensating the Group for the costs related to the initial public offering and the listing of its shares on the SFS as well as for releasing and making available the Group's internal management team to ASFML. In the event that the Management Agreement is terminated prior to the fifth anniversary of its coming into effect, the Group must pay to ASFML a prorated amount of the US$5,000,000 based on the amount of time remaining in the five year period. As such, this payment has been recorded as a deferred liability and is being amortised over the five year period. The amount amortised each period is accounted for as a reduction of the management fee and the original effective interest rate applied in calculating the instruments amortised cost is materially equal to a market interest rate. At 31 December 2021, the amount of the payment recorded as a deferred liability is US$1,833,333 (2020: US$2,833,333) with US$1,000,000 (2020: US$1,000,000) being the current portion and US$833,334 (2020: US$1,833,333) being the non-current portion.
For the year ended 31 December 2021, the amount of the payment amortised and recorded as a reduction of the management fee expense in the consolidated statement of comprehensive income was US$1,000,000 (2020: US$1,000,000):
2021 2020
US$ US$
------------
Management fees earned 3,276,574 2,864,518
Amortisation of deferred liability (1,000,000) (1,000,000)
------------ ------------
Management fee expense 2,276,574 1,864,518
------------ ------------
18. Commitments and contingencies
Operating lease commitments
The rental charges paid under operating leases accounted for in operational costs of the statement of comprehensive income for the year ended 31 December 2021 amounted to US$12,555 (2020: US$24,500).
TosCuba Construction Facility
In April 2018, the Group entered into the TosCuba Construction Facility for the purpose of extending to TosCuba part of the funding necessary for the construction of the Meli ã Trinidad Península Hotel. The Construction Facility is in the maximum principal amount of US$51,500,000, divided into two separate tranches: Tranche A of US$22,500,000 and Tranche B of US$29,000,000. As at 31 December 2021, the full US$22,500,000 of Tranche A has been disbursed (2020: US$20,502,533) and US$708,860 of Tranche B has been disbursed (2020: nil). The Group has the right to syndicate Tranche B of the Construction Facility to other lenders (see note 6).
In August 2021 the TosCuba Construction Facility was amended for the purpose, amongst others, of (i) increasing the principal amount of Tranche B to US$29,000,000, (ii) providing that an amount of up to US$4,000,000 may be onlent by the borrower (TosCuba) to Cuban utility companies for investments in the infrastructure that will serve the hotel, and (iii) modifying the security received by the Group. The prior security assignment relating to the Meliã Santiago de Cuba Hotel was released and a new secondary guarantee was received from Miramar in support of the primary guarantee received from Cubanacán (see note 6).
FINTUR Facility
Since 2002, the Company has arranged and participated in numerous secured finance facilities extended to FINTUR, the Cuban government financial institution for Cuba's tourism sector. The rights of the Company under these facilities are limited to receiving principal and interest payments (SPPI model). The facilities are fully secured by tourism proceeds from numerous internationally managed hotels.
The Group has a successful 19-year track record of arranging and participating in over EUR150 million of facilities extended to FINTUR, with no defaults occurring during this period.
The Company had a EUR4,000,000 participation in Tranche A as well as a EUR2,000,000 participation in Tranche B of the most recent facility executed in March 2016 and amended in 2019. The total four-year facility had a full principal amount of EUR36,000,000 with an 8% interest rate. The facility was operating successfully without delay or default until March 2020, at which time all Cuban hotels were ordered to be closed as a result of the Covid-19 pandemic. The Company subsequently granted a further grace period to FINTUR and consolidated all amounts then outstanding under the two existing tranches into a new Tranche C. As at 31 December 2021 the principal amount of EUR1,716,667 (US$1,943,760) (2020: EUR1,716,667 (US$2,110,795)) was outstanding under the Company's participation in Tranche C of the facility.
19. Financial risk management
Introduction
The Group is exposed to financial risks that are managed through a process of identification, measurement and monitoring and subject to risk limits and other controls. The objective of the Group is, consequently, to achieve an appropriate balance between risk and benefits, and to minimise potential adverse effects arising from its financial activity.
The main risks arising from the Group's financial instruments are market risk, credit risk and liquidity risks. Management reviews policies for managing each of these risks and they are summarised below. These policies have remained unchanged since the beginning of the period to which these consolidated financial statements relate.
Market risk
Market risk is the risk that the fair value of future cash flows of financial instruments will fluctuate due to changes in market variables. Market price risk comprises two types of risks: foreign currency risk and interest rate risk. The Group is not materially exposed to market price risk.
(i) Foreign currency risk
Currency risk is the risk that the value of a financial instrument denominated in a currency other than the functional currency will fluctuate due to changes in foreign exchange rates.
The statement of comprehensive income and the net value of assets can be affected by currency translation movements as certain assets and income are denominated in currencies other than US$.
Management has identified the following three main areas of foreign currency risk:
-- Movements in rates affecting the value of loans and advances denominated in Euros;
-- Movements in rates affecting the value of cash and cash equivalents denominated in Euros; and
-- Movements in rates affecting any interest income received from loans and advances denominated in Euros.
-- Movements in rates affecting any interest paid on convertible bonds denominated in Euros.
The sensitivity of the income (loss) and equity to a variation of the exchange rate (EUR/US$) in relation to Euro denominated assets and liabilities is the following:
Effect of the
variation in
the foreign exchange
rate
% Income (loss) Equity Income (loss) Equity
31 Dec 2021 31 Dec 2021 31 Dec 2020 31 Dec 2020
US$ US$ US$ US$
---------------------- --------------- -------------- --------------- --------------
+15 (523,606) 530,915 778,646 423,698
+20 (698,142) 707,886 1,038,185 564,931
-15 523,606 (530,915) (778,646) (423,698)
-20 698,142 (707,886) (1,038,185) (564,698)
(ii) Interest rate risk
Interest rate risk is the risk that the fair value of future cash flows may fluctuate due to changes in market interest rates.
At any time that it is not fully invested in equities, surplus funds may be invested in fixed-rate and floating-rate securities both in Euro and in currencies other than Euro. Although these are generally short-term in nature, any change to the interest rates relevant for particular securities may result in either income increasing or decreasing, or management being unable to secure similar returns on the expiry of contracts or the sale of securities. In addition, changes to prevailing rates or changes in expectations of future rates may result in an increase or decrease in the value of securities held. In general, if interest rates rise, income potential also rises but the value of fixed rate securities may decline. A decline in interest rates will in general have the opposite effect.
As the only interest-bearing financial instruments held by the Group are fixed rate assets measured at amortised cost, the Group has no material interest rate risk and therefore no sensitivity analysis has been presented.
The interest rate risk profile of the Group's consolidated financial assets and liabilities was as follows:
Fixed Floating Non-interest
Total rate rate bearing
US$ US$ US$ US$
----------- ------------ ------------------ ------------
31 December 2021
Equity investments (US$) 176,131,209 - - 176,131,209
Loans and lending facilities
(EUR) 2,866,271 2,866,271 - -
Loans and lending facilities
(US$) 19,691,339 19,691,339 - -
Accounts receivable and accrued
income (US$) 6,680,404 - - 6,680,404
Accounts receivable and accrued
income (EUR) 286,997 - - 286,997
Cash at bank (EUR) 25,434,352 - - 25,434,352
Cash at bank (US$) 731,041 - - 731,041
Cash at bank (GBP) 11,427 - - 11,427
Cash on hand (GBP) 270 - - 270
Cash on hand (EUR) 6,319 - - 6,319
Cash on hand (US$) 10,010 - - 10,010
Cash on hand (CUP) 34,602 - - 34,602
Short-term borrowings (EUR) (1,004,673) (1,004,673) - -
Convertible bonds (EUR) (28,299,353) (28,299,353) - -
Fixed Floating Non-interest
Total rate rate bearing
US$ US$ US$ US$
----------- ---------- ------------------ ------------
31 December 2020
Equity investments (US$) 197,921,225 - - 197,921,225
Loans and lending facilities
(EUR) 4,116,169 4,116,169 - -
Loans and lending facilities
(US$) 16,106,466 16,106,466 - -
Accounts receivable and accrued
income (US$) 16,052,751 - - 16,052,751
Accounts receivable and accrued
income (EUR) 296,925 - - 296,925
Cash at bank (EUR) 3,992,756 - - 3,992,756
Cash at bank (US$) 210,970 - - 210,970
Cash at bank (GBP) 61,654 - - 61,654
Cash on hand (GBP) 272 - - 272
Cash on hand (EUR) 130 - - 130
Cash on hand (US$) 1,058 - - 1,058
Cash on hand (CUC) 4,020 - - 4,020
Credit risk
Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation, expected credit losses are measured using probability of default, exposure at default and loss given default. Management considers both historical analysis and forward-looking information in determining an expected credit loss. Refer to note 6 for the assessment of the expected credit loss for loans and lending facilities.
Maximum exposure to credit risk
The table below shows the maximum exposure to credit risk for each component of the consolidated statement of financial position as well as future loan commitments, irrespective of guarantees received:
31 Dec 2021 31 Dec 2020
US$ US$
------------ ------------
Loans and lending facilities 22,557,610 20,222,635
Future loan commitments (TosCuba Construction
Facility) (i) 28,291,140 30,997,467
Accounts receivable and accrued income
(ii)* 19,248,809 16,349,676
Cash and cash equivalents 26,228,072 4,270,860
------------ ------------
Total maximum exposure to credit risk 96,325,631 71,840,638
------------ ------------
*Accounts receivable and accrued income after ECL is US$6,967,401 (see note 5).
(i) The TosCuba Construction Facility is secured by future income of the hotel under construction and Tranche B of the Construction Facility is further secured by a guarantee given by Cubanacán, the Cuban shareholder of TosCuba, backed by a new secondary guarantee received from Miramar in support of the primary guarantee received from Cubanacán . The facilities are assessed at stage 2 of the IFRS ECL impairment model, management has assessed the expected credit loss over the lifetime of the future loan commitments to be immaterial to the Group. Management believes the probability of default is low due to the fact that the Group is a 50% shareholder of TosCuba and has a 50% representation on the Board of Directors. Repayment of the facility is secured by the future income of the hotel and repayment of Tranche B has also been guaranteed by Cubanacán and is further secured by Cubanacán's dividend entitlements in Miramar. Payments of the facility are scheduled to begin once the hotel starts operations.
(ii) $ 12,592,004 of the accounts receivable and accrued income balance is made up of dividends receivable. The impairment on the dividends receivable has been assessed as low in the case of Miramar and high in the case of Monte Barreto in terms of the 3 stage model per IFRS 9 by assessing the credit risk of the counterparty who declared the dividend. The delay in payment of the dividends receivable from Monte Barreto is due in part to the current liquidity position of the Cuban financial system caused by the pandemic, increased U.S. sanctions and the transitional effects of the Cuban monetary reforms. In the current year, the overall credit risk for Monte Barretto significantly increased as compared to the preceding year. This resulted in the account receivable moving from Stage 2 to Stage 3 of the IFRS ECL impairment model, which therefore requires management to assess the expected credit loss over time. Accordingly, in the current year management has made an assessment of the expected credit loss over timetaking into account all reasonable and supportable information that is available that includes both internal and external information. As a result, the total amount of credit impaired receivables at year end is $12,281,408 related to the balance of the dividend receivable due from Monte Barrreto.
Due to the current liquidity constraints placed upon Monte Barreto as a result of the recent Cuban monetary reforms, the timing of receipt of the historical dividends receivable is uncertain. Therefore the dividends receivable from Monte Barreto at year end have been impaired in full in the Statement of Comprehensive Income. However, in the case of Miramar, the same liquidity constraints do not apply under the monetary reforms, due to a large portion of its income being earned in foreign currency and therefore Miramar has been assigned a higher credit rating. Management expects to receive the full amount of dividends receivable from Miramar in due course.
The Group holds its cash and cash equivalents at financial institutions located in the countries listed below. Also included in the following table are the credit ratings of the corresponding financial institutions, as determined by Moody's:
Credit 31 Dec 2021 31 Dec 2020
Rating US$ US$
-------- ------------ ------------
Cash at bank
Cuba Caa2 727,453 183,540
Guernsey A2 21,828,192 152,420
Spain Ba3 1,631,197 2,956,003
Spain A2 19,048 20,538
Spain Baa2 1,826,198 952,879
Spain A3 144,733 -
26,176,821 4,265,380
------------ ------------
Cash on hand
Cuba 51,251 5,480
51,251 5,480
------------ ------------
Total cash and cash equivalents 26,228,072 4,270,680
------------ ------------
At 31 December 2021 and 31 December 2020, all cash and short-term deposits that are held with counter-parties have been assessed for probability of default; as a result no loss allowance has been recognised based on 12-month expected credit losses as any such impairment would be wholly insignificant to the Group.
Guarantees received
The amount and type of guarantees required depends on an assessment of the credit risk of the counter-party. The Group has neither financial nor non-financial assets obtained as property on executed guarantees. See note 6 regarding guarantees obtained for loans and lending facilities.
Liquidity risk
Liquidity risk is the risk that the Group will encounter in realising its non-cash assets or otherwise raising funds to meet financial commitments. Assets principally consist of unlisted securities and loans, which are not readily realisable. If the Group, for whatever reason, wished to dispose of these assets quickly, the realisation values may be lower than those at which the relevant assets are held in the consolidated statement of financial position. (For maturities of financial assets and liabilities refer to notes 5, 6 and 10).
Although the Group has a number of liabilities (see note 10 - Accounts payable and accrued expenses, note 11 - Short-term borrowings and note 18 - commitments and contingencies), Management assesses the liquidity risk of the Group to be low because the Group has a sufficient amount of cash and cash equivalents.
On 31 March 2021, the Company completed the issue of EUR25,000,000 (US$29,312,500 equivalent at date of issue) in convertible bonds (see note 12). The Bonds have a term of 5 years expiring on 31 March 2026, an interest rate of 10.00%, payable quarterly, and are convertible at the option of the Bondholders to Ordinary Shares of the Company. The Group currently has sufficient cash and cash equivalents to cover the quarterly interest payments.
The estimated timing of the undiscounted contracted cash flows associated with the Bonds issued on 31 March 2021 including interest and principal payments are as follows:
31 Dec 2021 31 Dec 2020
US$ US$
------------ ------------
Between 1 and 30 days - -
Between 31 and 90 days 707,875 -
Between 91 and 180 days 715,740 -
Between 181 and 1 year 1,447,211 -
Between 1-2 years 2,870,826 -
Between 2-3 years 2,878,692 -
Between 3-4 years 2,870,826 -
Between 4-5 years 29,022,875 -
40,514,045 -
------------ ------------
The Group also has entered into the Construction Facility for the purpose of extending to TosCuba part of the funding necessary for the construction of the Meli ã Trinidad Península Hotel (see note 6). The Construction Facility is in the maximum principal amount of US$51,500,000, divided into two separate tranches: Tranche A of US$22,500,000 and Tranche B of US$29,000,000. As at 31 December 2021, the full US$22,500,000 of Tranche A has been disbursed (2020: US$20,502,533) and US$708,860 of Tranche B has been disbursed (2020: nil). The Group has the right to syndicate Tranche B of the Construction Facility to other lenders.
The principal of the Construction Facility is to be disbursed gradually in accordance with the construction schedule and the supply of materials and equipment for the hotel. Prior to the COVID-19 pandemic, it was anticipated that the full amount of the Construction Facility would be disbursed by the end of 2020. However, the timing of construction has been affected by the pandemic and consequently the disbursement of the principal under the Construction Facility has been delayed and it is now anticipated that the Construction Facility will be substantially disbursed by the end of the first quarter of 2022. The Group currently has sufficient cash and cash equivalents to cover the full disbursement of the Construction Facility (see note 12 concerning the Bond Issue).
The estimated timing of cash outflows under the TosCuba Construction Facility entered into in April 2018 are as follows:
31 Dec 2021 31 Dec 2020
US$ US$
------------ ------------
Between 1 and 30 days 1,279,779 -
Between 31 and 90 days 1,813,996 485,606
Between 91 and 180 days 6,887,133 3,011,861
Between 181 and 1 year 15,185,406 19,000,000
Between 1-2 years 3,124,826 8,500,000
28,291,140 30,997,467
------------ ------------
Capital management
The Group maintains an actively managed capital base to cover risks inherent in the business. The Group manages its capital structure and makes adjustments in the light of changes in economic conditions and the risk characteristics of its activities. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividend payment to shareholders. No changes were made in the objectives, policies, and processes from the previous period.
The capital base managed by the Group is composed of stated capital, reserves and retained profits that amount at 31 December 2021 and 2020 to a total of US$196,915,354 and US$234,249,362, respectively. The Group is not subject to external capital requirements.
20. Fair value disclosures
The fair values of cash and cash equivalents, and accounts receivable and accrued income (excluding loan interest) balances after adjusting for expected credit losses (see note 5) are considered to approximate their carrying amount largely due to the short-term maturities and credit quality of these instruments. The fair value of loans and lending facilities (and interest) receivables are considered to approximate their carrying amount largely due to the fixed interest rates considered to be in line with market, as well as due to the maturities, security provided and credit quality of these instruments (see notes 6 and 19 for further details).
Key sources of estimation uncertainty
Determining fair values
The determination of fair values for investment and financial assets and liabilities for which there is no observable market price requires the use of valuation techniques as described in note 3.8 (c). For financial instruments that trade infrequently and have little price transparency, fair value is less objective, and requires varying degrees of judgement depending on liquidity, concentration, uncertainty of market factors, pricing assumptions and other risks affecting the specific instrument.
Critical accounting judgements in applying the Group's accounting estimates
Valuation of financial instruments
The Group's accounting policy on fair value measurements is discussed in note 3.8 (c).
The Group measures fair values using the following fair value hierarchy that reflects the significance of the inputs used in making the measurements:
-- Level 1: Quoted price (unadjusted) in an active market for an identical instrument.
-- Level 2: Valuation techniques based on observable inputs, either directly (i.e. as prices) or indirectly (i.e. derived from prices). This category includes instruments valued using: quoted prices in active markets for similar instruments; quoted prices for identical or similar instruments in markets that are considered less than active; or other valuation techniques for which all significant inputs are directly or indirectly observable from market data.
-- Level 3: Valuation techniques using significant unobservable inputs. This category includes all instruments for which the valuation technique includes inputs not based on observable data and the unobservable inputs have a significant effect on the instrument's valuation. This category includes instruments that are valued based on quoted prices for similar instruments for which significant unobservable adjustments or assumptions are required to reflect differences between the instruments.
Fair values of financial assets and financial liabilities that are traded in active markets are based on quoted prices or dealer price quotations. The Group does not currently have any financial assets or financial liabilities trading in active markets.
For all other financial instruments, the Group determines fair values using valuation techniques. Valuation techniques include net present value and discounted cash flow models, comparison to similar instruments for which market observable prices exist and other valuation models. Assumptions and inputs used in valuation techniques include risk-free and benchmark interest rates and foreign currency exchange rates. The objective of valuation techniques is to arrive at a fair value determination that reflects the price of the financial instrument at the reporting date that would have been determined by market participants acting at arm's length.
For certain instruments, the Group uses proprietary valuation models, which usually are developed from recognised valuation models. Some or all of the significant inputs into these models may not be observable in the market are derived from market prices or rates or are estimated based on assumptions. Examples of instruments involving significant unobservable inputs include the equity investments of the Group in Cuban joint venture companies. Valuation models that employ significant unobservable inputs require a higher degree of management judgement and estimation in the determination of fair value. Management judgement and estimation are usually required for selection of the appropriate valuation model to be used, determination of expected future cash flows on the financial instrument being valued, selection of appropriate discount rates and an estimate of the amount of cash required for working capital needs of the joint ventures in order to determine if they hold any Excess Cash.
The table below analyses financial instruments measured at fair value at the end of the reporting period by the level in the fair value hierarchy into which the fair value measurement is categorised:
31 December 2021
US$
Level 1 Level 2 Level 3 Total
--------- --------- ------------ ------------
Financial assets at
fair value through
profit or loss
Equity investments - - 175,828,034 175,828,034
- - 175,828,034 175,828,034
---------- ---------- ------------------- ------------ ------------
31 December 2020
US$
Level 1 Level 2 Level 3 Total
--------- --------- ------------ ------------
Financial assets at
fair value through
profit or loss
Equity investments - - 197,618,050 197,618,050
- - 197,618,050 197,618,050
---------- ---------- ------------------- ------------ ------------
The following table shows a reconciliation from the beginning balances to the ending balances for fair value measurements in Level 3 of the fair value hierarchy:
31 Dec 2021 31 Dec 2020
Unlisted private equity investments US$ US$
------------- -------------
Initial balance 197,618,050 227,340,559
Total gains recognised in
income or loss (13,843,717) (41,914,276)
Foreign currency translation
reserve (7,946,299) 12,191,767
Final balance 175,828,034 197,618,050
------------- -------------
Total losses for the year
included in income or loss
relating to assets and liabilities
held at the end of the reporting
year (13,843,717) (41,914,276)
------------- -------------
(13,843,717) (41,914,276)
------------- -------------
21. Classifications of financial assets and liabilities
The table below provides a reconciliation of the line items in the Group's consolidated statement of financial position to the categories of financial instruments.
31 December 2021
US$
Cash and
Fair value Financial Financial
through assets liabilities Total
profit or at amortised at amortised carrying
Note loss cost cost amount
------------ -------------- -------------- ------------
Cash and cash equivalents 4 - 26,228,072 - 26,228,072
Accounts receivable
and accrued income 5 - 6,967,401 - 6,967,401
Loans and lending
facilities 6 - 22,557,610 - 22,557,610
Equity investments 7 175,828,034 - - 175,828,034
Investment in associate 8 - 303,175 303,175
175,828,034 56,056,258 - 231,884,292
------------ -------------- -------------- ------------
Accounts payable
and accrued expenses 10 - - 4,347,187 4,347,187
Short-term borrowings 11 1,004,673 1,004,673
Convertible bonds 12 - - 28,299,353 28,299,353
Deferred liabilities 17 - - 1,833,333 1,833,333
- - 35,484,546 35,484,546
------------ -------------- -------------- ------------
31 December 2020
US$
Cash and
Fair value Financial Financial
through assets liabilities Total
profit or at amortised at amortised carrying
Note loss cost cost amount
------------ -------------- -------------- ------------
Cash and cash equivalents 4 - 4,270,860 - 4,270,860
Accounts receivable
and accrued income 5 - 16,349,676 - 16,349,676
Loans and lending
facilities 6 - 20,222,635 - 20,222,635
Equity investments 7 197,618,050 - - 197,618,050
Investment in associate 8 - 303,175 - 303,175
197,618,050 41,146,346 - 238,764,396
------------ -------------- -------------- ------------
Accounts payable
and accrued expenses 10 - - 2,215,299 2,215,299
Deferred liabilities 17 - - 2,833,333 2,833,333
- - 5,048,632 5,048,632
------------ -------------- -------------- ------------
There were no reclassifications of financial assets during the year ended 31 December 2021 (year ended 31 December 2020: nil).
22. Audit fees
Audit fees incurred for the year were as follows:
31 Dec 2021 31 Dec 2020
US$ US$
------------ ------------
Audit fee expense 321,625 270,909
------------ ------------
23. Events after the reporting period
The Russian invasion of Ukraine has had an impact on Russian tourist arrivals to Cuba generally and is expected to continue doing so going forward. However, Russian tourists did not represent a substantial segment of the guest occupancy of the Hotels prior to the conflict and the first quarter 2022 results of the Hotels are above budget.
There may be other indirect impacts of the conflict on the Cuban or global economies, but at this stage M anagement is not able to reliably estimate the potential scope of such impacts for the Company, as events are unfolding day-by- day.
ALTERNATIVE PERFORMANCE MEASURES
Alternative Performance Measures
Alternative performance measures are numerical measures of the Company's current, historical or future performance, financial position or cash flows, other than financial measures defined or specified in the applicable financial framework. The Directors assess the Company's performance against a range of criteria which are viewed as particularly relevant for closed-end investment companies.
Discount to NAV
The discount reflects the amount by which the share price of the Company is below the NAV per share expressed as a percentage of the NAV per share. As at 31 December 2021, the share price was 64.0p / US$0.86 and the net asset value per share was 86.4p / US$1.16, and the discount was therefore 25.9%.
NAV Per Share
The net asset value ('NAV') is the value of the investment company's assets, less any liabilities it has. The NAV per share is the NAV divided by the number of shares in issue.
The NAV per share was US$1.16 / 86.4p as at 31 December 2021.
NAV Return
The table below provides information relating to the NAV of the Company for the years ending 31 December 2020 and 2021.
2021 2020
Opening NAV 194,425,614 206,734,334
------------- -------------
Dividends paid - -
------------- -------------
Net comprehensive loss for
the year (34,115,831) (12,308,720)
------------- -------------
Closing NAV 160,309,783 194,425,614
------------- -------------
Ongoing charges
The ongoing charges are based on actual costs incurred in the year excluding any non-recurring fees in accordance with the AIC methodology. Expense items have been excluded in the calculation of the ongoing charges figure when they are not deemed to meet the following AIC definition: "Ongoing charges are those expenses of a type which are likely to recur in the foreseeable future, whether charged to capital or revenue, and which relate to the operation of the investment company as a collective fund, excluding the costs of acquisition/disposal of investments, financing charges and gains/losses arising on investments. Ongoing charges are based on costs incurred in the year as being the best estimate of future costs."
The table below provides information relating to the ongoing charges of the Company for the years ending 31 December 2021 and 2020 .
2021 2020
Total Expenses per statement
of comprehensive income 33,917,912 46,347,435
------------- -------------
Adjustments (items to exclude):
------------- -------------
Foreign exchange (loss)/gain (130,198) 1,157,566
------------- -------------
Interest expense on bonds (2,176,931) -
------------- -------------
Loss on change in fair value
of equity investments (13,843,717) (41,914,276)
------------- -------------
Expected credit losses (12,281,408) -
------------- -------------
Non-recurring bond issuance (395,228) -
costs
------------- -------------
Total Annualised ongoing
charges 5,090,430 5,590,725
------------- -------------
Average undiluted net asset
value in the period 181,554,628 192,301,944
------------- -------------
Ongoing charges (%) 2.80 % 2.91%
------------- -------------
For further information, please contact:
Aberdeen Standard Fund Managers Limited Tel: +44 (0)20 7463 Sebastiaan Berger / Evan Bruce-Gardyne 6000 Singer Capital Markets Tel: +44 (0)20 7496 James Maxwell (Corporate Finance) 3000 James Waterlow (Sales) JTC Fund Solutions (Guernsey) Limited Tel: +44 (0) 1481 702400
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
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END
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