TIDMCBA
RNS Number : 7689W
Ceiba Investments Limited
28 April 2021
28 April 2021
CEIBA INVESTMENTS LIMITED
(the "Company")
(TICKER CBA, ISIN: GG00BFMDJH11)
Legal Entity Identifier: 213800XGY151JV5B1E88
RESULTS FOR THE YEARED 31 DECEMBER 2020
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 Bonds are listed on the The International Stock Exchange,
Guernsey under the symbol CEIB1026 (ISIN: GG00BMV37C27). The
Company is governed by a Board of Directors, the majority of whom
are independent. Like many other investment companies, it
outsources its investment management, administration and other
services 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 own the
underlying properties. The Company also arranges and invests in
financial instruments granted in favour of Cuban borrowers.
FINANCIAL HIGHLIGHTS AS AT 31 DECEMBER 2020 IN GBP AND US$
(FOREX: GBP/US$ = 1.3608)
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 2020 of GBP1:US$1.3608
(2019 GBP1=US$1.3113).
GBP US$
2020 2019 2020 2019
-------------- -------------- -------------- ------------
Total Net Assets GBP142.9m GBP157.7m US$194.4m US$ 206.7m
GBP145.0m GBP160.6m US$197.3m(2) US$ 210.6m
(2) (2) (2)
-------------- -------------- -------------- ------------
NAV per share (1) 103.8p 114.5p US$1.41 US$1.50
105.3p (2) 116.6p (2) US$1.43 US$1.53
(2) (2)
-------------- -------------- -------------- ------------
Market Capitalisation GBP116.3m GBP 97.7m US$158.3m US$128.2m
-------------- -------------- -------------- ------------
Share Price 84.5p 71.0p US$1.15 US$0.93
-------------- -------------- -------------- ------------
Net (Loss)/Gain (GBP14.6m) GBP5.8m (US$19.8m) US$7.6m
to shareholders
(GBP15.3m) GBP5.0m (2) (US$20.8m) US$6.6m
(2) (2) (2)
-------------- -------------- -------------- ------------
(Loss)/Earnings (10.6p) 4.2p (US$0.14) US$0.06
per share
(11.1p) (2) 3.6p (2) (US$0.15) US$0.05
(2) (2)
-------------- -------------- -------------- ------------
NAV Total Return(1) (9.4%) 0.8% (6.0%) 4.9%
(9.7%) (2) 0.3% (2) (6.3%) (2) 4.3% (2)
-------------- -------------- -------------- ------------
Share Price Return
(1,3) 19.0% (26.1%) 22.8% (23.1%)
-------------- -------------- -------------- ------------
Discount to NAV(1) (18.6%) (38.0%) (18.6%) (38.0%)
(19.8 %) (39.1 %) (19.8%) (39.1 %)
(2) (2) (2) (2)
-------------- -------------- -------------- ------------
1 These are considered Alternative Performance Measures. See
glossary for more information.
2 These figures differ from the figures derived from the audited
Consolidated Financial Statements. The figures are calculated in
full accordance with International Financial Reporting Standards
("IFRS"), except that they include the effect of an adjustment
recognising the full amount of US$5.0m / GBP3.9m received from
Aberdeen Standard Fund Managers Limited on 23 November 2018 in
connection with the execution of the Management Agreement in the
Statement of Comprehensive Income for the year ended 31 December
2018, rather than deferring this amount over the five-year term of
the Management Agreement as required by IFRS.
3 Source: Refinitiv
This adjustment resulted in the increase of the net income
attributable to the shareholders of the Company for the year ended
31 December 2018 by US$5.0m / GBP3.9m and decreases the net income
attributable to the shareholders of the Company by the amount of
US$1.0m / GBP0.7m per year over the five year term of the
Management Agreement. Consequently, for the year ended 31 December
2020 the adjustment resulted in a decrease in the net income
attributable to the shareholders of the Company in the amount of
US$1.0m / GBP0.7m.
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 (the "Investment
Manager"). Both ASFML and the Investment Manager are wholly-owned
subsidiaries of Standard Life Aberdeen plc, a publicly-quoted
company on the London Stock Exchange. Aberdeen Standard Investments
("ASI") is a brand of Standard Life Aberdeen plc. References
throughout this document to ASI refer to both the AIFM and the
Investment Manager.
CHAIRMAN'S STATEMENT
Since publication of the 2019 Annual Report of CEIBA Investments
Limited ("CEIBA" or the "Company") in April 2020, both the Company
and Cuba have, in line with most of the rest of the world, been
battling the Covid-19 pandemic. The extreme impact of this virus
was difficult to assess at that time and there still remains
considerable uncertainty about its duration and the long-term
impact, and the expected return to normality.
One of our prime concerns throughout this period has been
ensuring the wellbeing of our people and protecting the safety of
the people working to advance the affairs of the Company. It is
notable that Cuba itself has handled the virus well, with some
103,524 total infections as of writing this report and a death toll
of 604 people since the start of the pan demic , which on a global
basis is an enviable record.
2020 REVIEW
Inmobiliaria Monte Barreto S.A. ("Monte Barreto"), the Cuban
joint venture company in which the Company owns a 49% interest,
owns and operates the Miramar Trade Centre. Given the backdrop, it
has traded very strongly since the onset of the pandemic and
occupancy levels have remained over 98% throughout 2020. Although
revenues were down slightly as compared with the prior year, net
income in 2020 reached US$14.4 million / GBP10.6 million for the
year, representing a small increase over the prior year and making
2020 the most profitable year since incorporation of the joint
venture.
The 2021 outlook for Monte Barreto continues to be positive,
with occupancy percentage levels expected to remain in the high
ninetiesthroughout the year. Furthermore, following the recent
significant monetary reforms in Cuba it is anticipated that there
may be some material savings in the overheads of the Miramar Trade
Centre going forward.
The global hotel industry has been severely impacted by the
Covid-19 pandemic and the hotels in which CEIBA has an interest
have proved to be no exception. CEIBA 's main hotel interests are
held through its 32.5% holding in the Cuban joint venture company,
Miramar S.A. ("Miramar"). Miramar owns three hotels in Varadero and
one hotel in Havana. In Varadero, the Meliã Las Am é ricas and the
Meliã Varadero have remained closed since the end of March 2020
while the Meliã Sol Palmeras remained open for most of the year but
has traded on a heavily scaled-back basis. The Havana-based hotel,
the Meliã Habana, has similarly been open throughout 2020 and
remains open, but also on a reduced basis. Given the trading
environment, Miramar was still able to finish 2020 with a positive
EBITDA of approximately US$ 3.9 million / GBP2.9 million (2019:
US$25.0 million / GBP18.3 million) of which CEIBA's share amounts
to US$1.3 million / GBP0.9 million. Miramar is well capitalised and
is able to continue to operate without recourse to additional
funding and has been using the closures to undertake certain
cosmetic upgrading of rooms and facilities.
CEIBA 's other hotel interest is in its 40% holding in the Cuban
joint venture company, TosCuba S.A. ("TosCuba"), which is
constructing the 400 room Meliã Trinidad Pen í nsula 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. The
construction continued throughout the year, albeit at a reduced
pace. The issue on 31 March 2021 by the Company of EUR25 million
10.00% senior unsecured convertible bonds due 2026 ensures that the
funding for the completion and start-up of operations of this
exciting new property is in place. It is presently anticipated that
completion will take place during the third quarter of 2022 in time
for the 2022-2023 high season.
The Board is also encouraged by the recent investment made in
Grupo B.M. Interinvest Technologies Mariel S.L. ("GBM Mariel")
through which the Company has acquired a 50% shareholding. The
Company has made an initial commitment of EUR1.5 million /
US$1.8million to the project to develop an industrial logistics and
warehousing complex to be constructed on a 11.3 hectare site
situated in the Special Development Zone of Mariel. To date, an
amount of EUR250,000 / US$303,175 has been invested in order to
partially fund the groundworks related to the construction of the
first four warehouses of this multi-phase project .
Results for the year ended 31 December 2020
The NAV per Share at 31 December 2020 was US$1.41 / 103.8p
compared to US$1.50 / 114.5p at 31 December 2019 and the loss per
share for the financial year was US$0.14 / (10.6p) compared to a
profit of US$0.06 / 4.2p for 2019. The valuation of the principal
assets of the Company as well as the earnings generated by the
Hotels of Miramar in respect of the year ended 31 December 2020
have clearly been negatively impacted by the Covid-19 pandemic. The
Hotels have been written down in these financial statements by
US$24.7 million / GBP18.2 million in aggregate from 31 December
2019, reflecting both the present lack of trading as compared to
last year and the uncertain road to full recovery. However, as
there is a much clearer route out of lockdown and towards the
resumption of international travel than was the case in June 2020,
the valuations have been increased from the position at 30 June
2020 by US$16.9 million / GBP12.4 million.
While the NAV total return was (9.4%) in Sterling terms, the
share price total return was 19.0% (2019: (26.1%)). The share price
fell, in line with most instruments, in the wake of the pandemic
and at 30 June 2020 was as low as 64.5p. However, as we came
through the summer, and particularly once news of successful
vaccines and the outcome of the U.S. elections in November improved
the outlook, we saw the share price recover strongly to close at
84.5p.
Cuban economic backdrop
For a country that relies heavily upon tourism to drive its
economy, the Covid-19 pandemic and the continued tightening of
economic sanctions imposed by the Trump administration have been
extremely challenging for Cuba's economy and it experienced an 11%
contraction in 2020.
Against this backdrop and in an effort to create jobs and revive
the economy, the government very recently announced that it would
greatly expand the number of economic activities open to private
enterprise. While there is still a considerable number of
businesses that will remain state controlled, this opening up of
the economy is nonetheless a significant move. In addition, in late
2020 the government, at relatively short notice, announced and has
now initiated the unification of the two Cuban currencies such that
there will now be just one currency - the Cuban peso. While
initially this has and will create operational challenges, in the
longer term the unification of currencies will help drive many
inefficiencies out of the economy and should prove of material
benefit to the day-to-day operations of the Company's hotels and of
the Monte Barreto office complex. The Board believes the changes
implemented will greatly ease the ability to do business in Cuba,
will enhance entrepreneurism and have positive long-term benefits
to the general economy. In addition, although new currency exchange
challenges may be created, full implementation of the reforms may
very well increase the attractiveness of Cuba as a market for
foreign direct investment, improve the autonomy of joint venture
companies and have a material positive impact on the investments of
the Company.
These, and other reforms, are being initiated at the same time
as a significant change in the Cuba's leadership. On 16(th) April
2021, at the start of the 8(th) Congress of Cuba's Communist Party,
Raul Castro announced that he is stepping down as Secretary of the
Party - leaving the island without a Castro guiding affairs for the
the first time in more than six decades - whilst stating that he
will ".. keep one foot in the stirrups to defend the fatherland,
the revolution and socialism". Cuba's President, Miguel Díaz-Canel,
will be his successor tasked with combining "continuity" with
progress and reforms.
U.S. Cuba relations
Under the Trump administration, the economic restrictions
imposed upon Cuba were continuously tightened and no let up was
experienced during the last year of his presidency. In June 2020,
the U.S. expanded the Cuba Restricted List to include Fincimex, a
Cuban financial corporation that handles the majority of US and
many other international family remittances to Cuba, and finally,
on 11 January 2021 the Trump administration chose to reinstate Cuba
to the list of State Sponsors of Terrorism. However, with the new
Biden presidency, we can anticipate a gradual reversal of the Trump
initiatives and a return to the relationship experienced in the
later years of the Obama presidency. We would envisage the initial
steps to include the removal once again of Cuba from the list of
State Sponsors of Terrorism, the relaxation of rules concerning
travel to Cuba by US citizens and the removal of restrictions on
remittances to Cuba. We would also expect a suspension of Title III
of the Helms Burton Act and the restoration of full operations at
the US embassy in Havana. All of these and other initiatives to
open the relationship between the two countries should have a very
positive impact upon the Cuban economy and also on the Company's
assets.
Dividend
It was decided in 2020 that, with the inherent uncertainty
caused by the onset of the Covid pandemic, it was critical that the
Company maintain sufficient cash to meet all of its existing and
future undertakings . Accordingly, the Board took the decision to
suspend the dividend policy and no dividend was paid during 2020.
The Board would very much like to reinstate the payment of
dividends but seeing as there still remains considerable
uncertainty as to how long it will take to see a return of normal
tourism numbers it has decided to maintain the present position for
another year so no dividend will be paid to shareholders in 2021.
This stance will be very much kept under constant review with a
strong desire to reinstate the dividend as soon as appropriate.
Convertible Bonds
On 31 March 2021, the Company raised EUR25million in new funds
through the issue of 10.00% senior unsecured convertible bonds due
2026 (the "Bonds"). Further details of the Bonds are set out in
note 21 to the accounts. The proceeds from this fund raising
significantly enhance the Company's financial position and will
enable it to complete the development of the TosCuba hotel in a
timely manner and also provide capital for additional investment
opportunities as they arise.
25 Years Investing in Cuba
This year CEIBA celebrates 25 years of existence, all of it
investing in the mostly uncharted investment territory of Cuba,and
I believe that the Company has accomplished a great deal during
this period. From a modest start in 1996, and after some initial
fine-tuning to the investment strategy, the long years of asset
growth, solid performance and US$89 million in steady dividend
payments to our shareholders have demonstrated the virtues of a
stable, long-term perspective and an experienced team in
confronting the many uncertainties and ups and downs of the
fascinating and unique Cuban investment market. Despite variable
economic conditions on the island and changing U.S. government
policies, the Company and its investments have led the way in many
respects and have flourished over these years.
I am obliged to the team for their long-standing dedication and
professionalism, and to the Cuban and other partners in each of the
investments of the Company for their collaboration. Without their
efforts, none of the many successes of the Company would have been
possible. As I mark this important milestone and recognise past
accomplishments I look ahead with optimism and trust that the
Company still has a long and prosperous road ahead, with the best
yet to come.
Board
I am grateful to the Board for their commitment and input during
this 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.
The Investment Manager
Aberdeen Standard Fund Managers Limited, a wholly owned
subsidiary of Standard Life Aberdeen 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
challenging and uncertain times.
John Herring
Chairman
27 April 2021
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 (please 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 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)*
-- Non IFRS net asset value per share*
-- Net asset value total return*
-- Market capitalisation
-- Premium / Discount to NAV *
-- Dividend yield *
-- 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 & UNCERTAINTIES
Introduction
The Board, through the Audit Committee, is responsible for the
management of risk and regularly carries out a robust assessment of
the principal risks and uncertainties affecting the business,
discusses 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
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 and Uncertainties
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
currently facing the Company identified by the Board 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.
A detailed description of the risks faced by the Company is
contained in the Company`s Prospectus and should be read in
conjunction with the risks described herein.
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.
Description Description and Possible Mitigating Action Trend
of Risk Impact
Public Health Risk
Global The continued effects of The Board discusses current à
Pandemic the public health risks issues with the Investment
Risk associated with the Covid-19 Manager to limit the impact
or any other pandemic may of the pandemic on the
have a lasting and as yet business of the Company.
unquantifiable negative The Board recognises that
impact on the global tourism tourism is particularly
industry, the economy of affected by the various
Cuba, and the operations travel restrictions being
and performance of the imposed and considers that
assets of the Company. this is a risk that is
The pandemic may directly likely to continue to impact
or indirectly affect all upon the operating environment
other risk categories mentioned of the Company in the short
in this matrix. term .
The Board's actions are
targeted at (i) protecting
the welfare of the various
teams involved in the affairs
of the Company, (ii) ensuring
operations are maintained
to the extent possible
and to protect and support
the assets of the Company
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 The setting of an unattractive The Company's investment ->
Strategy strategic proposition to strategy and objective
and Objective the market and the failure is subject to regular review
to adapt to changes in to ensure that it remains
investor demand may lead attractive to investors.
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 discount. the Investment Manager,
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 Investing outside of the The Board sets, and monitors, ->
Restrictions investment restrictions its investment restrictions
and guidelines set by the and guidelines, and receives
Board could result in poor regular reports which include
performance and inability performance reporting on
to meet the Company's objectives, the implementation of the
as well as a discount. investment policy, the
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 to proposed acquisition target.
risks relating to the liquidity The Group tries to structure
of investments, government its equity investments
approval, corporate governance in Cuban joint venture
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 As an indirect investor The Investment Manager ->
Risk 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 finance, each meeting regarding
global capital and financial recent developments. The
market conditions, acquisition Investment Manager works
and development risk, competition, closely with the on-the-ground
tenant risk, environmental team, the external hotel
risk and others, and the managers and the joint
materialisation of these venture managers to identify,
risks could have a negative monitor and actively manage
effect on specific properties local real estate risk.
or the Group generally.
------------------------------------ ------------------------------------- -------
Construction As a developer and investor The Investment Manager ->
Risk in new construction as regularly monitors all
well as refurbishment projects, construction and refurbishment
the Company is subject activities carried out
to risks relating to the within Group companies
planning and execution and works closely with
of construction works, the on-the-ground management
including the availability team and the joint venture
and transportation of materials, managers to identify, monitor
increment weather, contractor and actively manage all
risk, execution risk and construction risks. The
the risk of delay. The Investment Manager reports
materialisation of these to the Board at each meeting
risks could have a negative regarding recent developments
effect on the implementation in this respect.
of development projects
of the Group.
------------------------------------ ------------------------------------- -------
Tourism As an indirect investor The Investment Manager á
Risk in hotel assets, the Company regularly monitors the
is subject to numerous local and regional tourism
risks relating to the tourism markets and meets regularly
sector, both in outbound with the external hotel
and inbound markets, including management to identify,
the cost and availability monitor and manage global
of air travel, seasonal and local tourism risk
variations in cash flow, and to develop appropriate
demand variations, changes strategies for dealing
in or significant disruptions with changing conditions.
to travel patterns, risk The Company aims to maintain
related to the manager a diversified portfolio
of the hotel properties, of tourism assets spanning
and the materialisation various hotel categories
of these risks could have (city hotel / beach resort,
a negative impact on specific business / leisure travel,
properties or the Company luxury / family) in numerous
generally. locations across the island.
------------------------------------ ------------------------------------- -------
Valuation Asset valuations may fluctuate As part of the valuation ->
Risk materially between periods process, the Investment
due to changes in market Manager engages an independent
conditions. third party valuer to provide
an independent valuation
report on each of the indirectly
owned real estate assets
of the Group. The valuations
are also subject to review
by the Investment Manager's
Alternatives Pricing Committee.
------------------------------------ ------------------------------------- -------
Dependence The Company is dependent The Board receives reports ->
on Third on the Investment Manager from its service providers
Party Service and other third parties on internal controls and
Providers for the provision of all risk management at each
systems and services relating Board meeting. It receives
to its operations and investments, assurance from all its
and any inadequacies in significant service providers
design or execution thereof, as well as back-to-back
control failures or other assurances where activities
gaps in these systems and are themselves sub-delegated
services could result in to other third party providers
a loss or damage to the with which the Company
Company. has no direct contractual
relationship. Further details
of the internal controls
which are in place are
set out in the Directors'
Report.
------------------------------------ ------------------------------------- -------
Loss of The loss of key managers Under the Management Agreement, ->
Key Fund contracted by the Investment the Investment Manager
Personnel Manager to manage the portfolio has the obligation to at
of investments of the Group all times provide personnel
could impact performance with adequate knowledge,
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.
------------------------------------ ------------------------------------- -------
Risks Relating to Investment in Cuba and the U.S. Embargo
General The Group's underlying The Company benefits from
Economic, investments are situated the services of its highly
Political, and operate within a unique experienced on-the-ground
Legal and economic and legal market, management team consisting
Financial with a comparatively high of eight members. With
Environment level of uncertainty, and a well-balanced mix of
within a sensitive political environment. Cuban and foreign professionals
Cuba 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.
------------------------------------ ------------------------------------- -------
U.S. government Tensions remain high between The Investment Manager â
restrictions the governments of the closely follows developments
relating United States and Cuba relating to the relationship
to Cuba and the U.S. government between the United States
maintains numerous legal and Cuba and monitors all
restrictions aimed at Cuba. new restrictions adopted
The rise of further tensions by the United States to
with the United States measure their possible
or the adoption by the impact on the assets of
U.S. government of further the Group. The Group has
restrictions against Cuba adapted its investment
could negatively impact model to the existing sanctions,
the operations of the Company, but the risk remains of
the value of its investments, further sanctions being
the liquidity or tradability adopted in the future.
of its shares, or its access
to international capital
and financial markets.
------------------------------------ ------------------------------------- -------
Helms-Burton On 2 May 2019, Title III At the time of acquiring â
Risk 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 successive extensive due diligence
uninterrupted suspensions. investigations in order
Numerous legal claims were to ensure that no claims
subsequently launched before existed under applicable
U.S. courts against U.S. U.S. legislation, and in
and foreign investors in particular that there were
Cuba, which has had and no claims certified by
could have a further negative the U.S. Foreign Claims
impact on the foreign investment Settlement Commission under
climate in Cuba and may its Cuba claims program
hinder the ability of the with respect to any of
Company to access international the properties in which
capital and financial markets the Company acquired an
in the future. In light interest. However, given
of the political nature the broad definitions and
of the Helms-Burton Act, terms of the Helms-Burton
and the fact that under Act and its purpose of
Title III of the Act, Cuban creating legal uncertainty
persons who were not U.S. on the part of investors
Persons at the time their in Cuba, as well as the
property was expropriated absence of any register
but subsequently became of uncertified claims or
U.S. Persons have the right case law, there is no certain
to make claims, there is way for the Company to
also a risk that legal verify beyond doubt whether
claims might be initiated or not a Helms-Burton action
against the Company or under Title III could be
its subsidiaries before brought in respect to a
U.S. courts. However, in particular property, or
line with a more rational whether the Company may
and favourable U.S. policy be deemed to indirectly
towards Cuba expected to profit or benefit from
be adopted by the new Biden certain activities carried
administration in the United out by other parties. The
States, it is possible Company does not have any
that Title III of the Helms-Burton property or assets in the
Act may once again be suspended United States that could
or repealed. be subject to seizure.
------------------------------------ ------------------------------------- -------
Liquidity The continuation of regional The Investment Manager â
and Transfer tensions between the United actively manages the liquidity
Risk States and Venezuela, as position of the Company,
well as the global fall its subsidiaries and the
in international tourism joint ventures in which
and other economic impacts it invests so that cashflows
associated with the Covid-19 are transferred to bank
pandemic, may continue accounts outside of Cuba.
to negatively impact the In addition, financial
fragile economic and liquidity facilities in which the
position in Cuba, which Company participates are
may in turn have a negative structured so that secured
impact on the position cash flows and debt service
of the Company. payments originate and
During 2020, the Cuban remain outside Cuba. Although
government adopted new the interpretation of the
economic reforms aimed new liquidity rules, as
at creating an objective well as the practical ability
system for the allocation of the Cuban financial
of limited liquidity reserves system to successfully
within the economy and implement them in the short
providing "real financial term, remain subject to
autonomy" to Cuban foreign uncertainty, the Investment
investment vehicles such Manager believes that the
as the joint venture companies new liquidity rules will
in which the Company invests. in most cases create an
These new reforms largely objective (non-discretionary)
remove the requirement and largely decentralised
to obtain foreign exchange mechanism for the allocation
approvals for international of liquid resources, thereby
payments such as the distribution significantly increasing
of dividends to the Company. the financial autonomy
These measures may take of joint venture companies
time to show the intended and representing a real
effect or may not have reduction in liquidity
the stated positive impact risk.
on the liquidity position The Investment Manager
of the country, which may is conscious of and closely
have a negative effect follows developments concerning
of the affairs of the Company. the U.S. legal restrictions
Numerous U.S. legal restrictions that target financial transactions
contained in the Cuban and assets. The Company
Assets Control Regulations does not carry out any
and other legal provisions international transfers
target financial transactions, in U.S. Dollars or through
instruments, and other U.S. banks or intermediaries.
assets in which there is The Investment Manager
a Cuban connection. As manages the banking relationships
a result U.S. and international of the Company and generally
banks, clearing houses, acts at all times so as
brokers and other financial to minimise the impact
intermediaries may refuse of these legal provisions
to deal with the Company on the legitimate transactions
or may freeze, block, refuse and assets of the Company.
to honor, reverse or otherwise
impede legitimate transactions
or assets of the Company,
even where no U.S. link
is established.
------------------------------------ ------------------------------------- -------
Currency The Group deals in numerous The Company does not hedge á
Risk currencies and fluctuations its foreign currency risks.
in exchange rates can have The cash and currency positions
a negative impact on the of each of the joint venture
performance of the Group, companies in which the
as well as the expression Company has a participation
of the Company's NAV in are actively managed for
Sterling and/or USD. the purpose of reducing
As part of the 2020 economic currency risk to the greatest
reform package adopted extent possible. There
by the Cuban government are presently no hedging
in order to continue modernising mechanisms available to
the Cuban economy, new mitigate this new risk.
monetary reforms aimed
at harmonising exchange
rates and eliminating Cuba's
dual currency system will
require all foreign investment
vehicles to denominate
their assets and legal
obligations, and to carry
out all transactions, in
Cuban Pesos (previously
denominated and carried
out in USD). 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.
------------------------------------ ------------------------------------- -------
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.
------------------------------------ ------------------------------------- -------
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 16 to the Consolidated Financial
Statements.
Following the ongoing assessment of the principal and emerging
risks facing the Company, and its current position, the Board is
confident that the Company will be able to continue in operation
and meet its liabilities as they fall due.
INVESTMENT MANAGER'S REVIEW
TWENTY-FIVE
25 years ago
I vividly remember my first visit to Havana in May 1996,
twenty-five years ago. It was evening. Cuba's capital was dark, and
although the Clinton administration had just strengthened the
U.S.-Cuban embargo by implementing the extra-territorial
Helms-Burton Act, there was a lot of energy, interest, hope and
engagement - on all levels. I felt similar sensations when Mick
Jagger stayed in our Meliã Habana hotel, when President Obama was
elected, re-elected, and visited Cuba, and when the U.S. and Cuba
took the first significant steps towards rapprochement.
By contrast, after four years of Donald Trump, a global pandemic
that has profoundly impacted world-wide tourism markets, a
struggling Cuban economy, and conflicting views regarding the best
way forward, it is impossible to deny the serious challenges ahead.
However, my personal conviction remains that mutual respect,
engagement and economic growth are the essential building blocks
upon which the country will move forward and I believe that the
Biden administration shares this view. This reinforces my optimism
that better times lie ahead of us.
2021 is likely to be an extremely important year for Cuba.
Economic recovery will in no small measure depend on the world's
ability to control the Covid-19 pandemic, the restarting of
international travel and the reopening of Cuba for tourism, but may
also be boosted by recently-adopted measures aimed at the overhaul
of Cuba's monetary system, the stimulation of national production
and import substitution and the invigoration of the nascent private
sector.
On the political front, an historic moment took place during the
8(th) Congress of Cuba's Communist Party held in Havana between 16
and 19 April 2021 when Raul Castro (age 89 years) resigned as First
Secretary of the Party and was replaced by Cuba's President, Miguel
Díaz-Canel (age 61 years), making the latter the first non-Castro
appointed to this important position since 1959.
Notwithstanding numerous statements made by President Biden
during the campaign last year with respect to the U.S. Cuban
embargo, and in particular his intention to "... promptly reverse
the failed Trump policies regarding Cuba...", sadly it would appear
that improving the relationship with Cuba is not amongst Biden's
chief foreign policy priorities. Although the restoration of
international cooperation seems to be high on his government's
agenda, it would appear that no immediate need is felt to ease the
Cuba restrictions that are currently in place.
However, following a formal review, we expect the Biden
administration to cancel the designation of Cuba as a "state
sponsor of terrorism", and subsequently to adopt measures aimed at
increasing remittances to Cuba, the easing of travel restrictions
and the restoration of services and staffing at the U.S. embassy in
Havana. One may disagree with President Biden's careful pace, but
gathering bipartisan support for a more substantial overhaul of the
U.S.' Cuba policy may prove to be more sustainable in the long
term.
25(th) Anniversary
Following its start of operations in 1996, the Cuba-dedicated
investment trust that is CEIBA today (originally named Beta Gran
Caribe Fund Limited) raised approximately US$29 million in initial
capital and began putting together its Cuban portfolio. At the
time, it was a pioneer and the first investment trust (originally
listed on the Irish Stock Exchange) to benefit from the provisions
of the new Foreign Investment Act adopted by Cuba on 5 September
1995 to pave the way for foreign investment in the country. In
2001-2002, control of the Company passed to new shareholders, the
present executive team was appointed and developed a new investment
strategy, and net asset value, which had shrunk during the first
five years of operation to approximately US$19 million, began to
grow.
This year, CEIBA Investments Limited celebrates its 25(th)
anniversary.
It is now listed on the Specialist Fund Segment of the London
Stock Exchange, its present net asset value is approximately US$194
million / GBP142 million, and during the last 17 years it has
distributed approximately US$89 million in dividends to its
shareholders. We are proud of all that has been achieved over the
years, together with our Cuban partners and our Cuban assets, and
this notwithstanding the US Cuban embargo legislation and many
other challenging circumstances faced over the years. We are also
thankful for our Cuban employees, who have been essential in
getting the Company where it is today.
2020 PERFORMANCE
The performance of the Company is largely dependent on the fair
values of the properties in which it has an interest and the total
amount of annual dividends distributed by the joint venture
companies that own these properties. The fair values of the
properties in which the Company has an interest, which are located
in a frontier market, are calculated by the independent RICS valuer
Arlington Consulting - Consultadoria Imobiliaria Limitada, trading
under the name Abacus ("Abacus") using discounted cash flow models.
As at 31 December 2020, the fair values of all of the assets in
which CEIBA Investments has an interest decreased as a result of a
fall in projected income levels.
The NAV Total Return for the year in US$ was (6.0%) (2019:
(4.9%)), and in GBP it was (9.4%) (2019: 0.8%). As at 31 December
2020, the Net Asset Value of the Company was US$194,425,614 /
GBP142,875,966 (2019: US$206,734,334 / GBP157,656,016) . The loss
on the change in the fair value of the equity investments was
(US$41,914,276) / (GBP30,801,202) (2019: (US$14,658,562) /
(GBP11,178,649)). The total dividend income from the Cuban joint
venture companies during the year ended 31 December 2020 was
US$13,258,912 / GBP9,743,469 (2019: US$20,670,560 / GBP15,763,410
). The net loss of the Company for the year ended 31 December 2020
attributable to the shareholders was (US$19,808,620) /
(GBP14,556,599) (2019: net income of US$7,579,514 /
GBP5,780,152).
During 2020, the hotel investments of the Company were harshly
impacted by the Covid-19 pandemic, although the EBITDA of Miramar
S.A. ("Miramar"), the owner of the Meliã Habana, Meliã Las
Américas, Meliã Varadero and Sol Palmeras hotels (the "Hotels"),
was still positive for the year at US$ 3.9 million ( GBP2.9 million
) as a result of the positive results generated during the first
months of the year. The pandemic also had a significant impact on
the construction of the TosCuba hotel project at Trinidad, which
incurred serious delays.
The principal factor that contributed negatively to the results
was the decrease in the fair value of Miramar S.A. of US$24,703,820
/ GBP18,153,895 (2019: decrease of US$26,742,193 / GBP20,393,650).
The performance of the hotels of Miramar was profoundly impacted by
the ongoing Covid-19 pandemic and the resulting dramatic collapse
in the worldwide tourism and travel industries from March 2020
onwards. With two of its hotels closed from April 2020 onwards and
the other two operating at minimal occupancy rates, the net loss
after tax of Miramar was (US$3.5 million) / (GBP2.6 million) (2019:
net income of US$17.9 million / GBP13.6 million). The combined
occupancy rate of the Hotels for 2020 was 24% compared to a
combined occupancy rate of 78% in 2019. This also resulted in lower
dividend income earned by the Company from Miramar during the year
of US$6,310,596 / GBP4,637,416 compared to US$11,537,327 /
GBP8,798,388 in the prior year.
By contrast, the mixed-use office and retail centre of
Inmobiliaria Monte Barreto S.A. ("Monte Barreto") had its best year
ever, registering net income of US$14.4 million / GBP10.6 million
(2019: US$13.5 million / GBP10.3 million). However, there was a
decrease in the fair value of Monte Barreto of (US$5,268,689) /
(GBP3,871,759) (2019: increase of US$10,537,071 / GBP8,035,591 )
due to a more conservative approach being taken regarding revenue
growth during the next few years considering the pandemic's impact
on the economy. Dividend income earned by the Company from Monte
Barreto during the year was US$6,948,316 / GBP5,106,052 compared to
US$9,133,233 / GBP6,965,022 in 2019.
CUBAN RESPONSE TO COVID-19 PANDEMIC
At the time of writing, Cuba has confirmed just over 100,000
total cases of the Covid-19 virus since the first case was
registered in March 2020, and slightly more than 600 total
deaths.
Cuba was very successful in defending against the virus from its
first arrival in the country until the re-opening of flights in
November 2020. Although strict protocols were imposed, including
PCR testing on arrival in the case of tourists staying at resorts
and a second PCR test five days following arrival as well as a
quarantine period in the case of residents and Cuban expats staying
with family members, the virus appears to have been reintroduced in
a renewed fashion by Cuban expats visiting family without strictly
complying with the mandated self-isolation requirements, especially
around the year-end holidays.
In response to the relapse, authorities have reduced flights,
introduced a new requirement that inbound travellers be able to
show a negative PCR test before boarding and Havana was placed once
again in a state of lockdown. However, few significant problems
seem to have been identified at the tourism resorts, where health
measures appear to have worked as intended.
Throughout the year, Cuba has been working on a number of
vaccines to be used against the virus. The most promising of these
vaccines, called Soberana 2, is presently in the final stage of
phase 3 trials and showing positive results. Final approval of the
vaccine is expected imminently, following which it will be rapidly
rolled out to the population at large. The Finlay Institute, which
developed Soberana 2, has announced a plan to produce up to 100
million doses before the end of 2021 and expects the entire Cuban
population to be vaccinated during 2021, with a large excess of
doses for export to other countries as part of Cuba's medical
diplomacy efforts.
It remains impossible to predict how quickly the Cuban tourism
sector will recover from the worldwide disruption caused by the
Covid-19 pandemic. Although the Cuban Ministry of Tourism has not
modified its projection of approximately 2.0-2.5 million visitors
in 2021, it seems all but certain (given the circumstances in the
principal outbound markets) that the first half of 2021 will
disappoint.
Numerous Cuban tourism resort destinations are presently open,
with a modest number of hotels under operation. Visitors have been
arriving and departing in accordance with available flights and
travel restrictions in outbound markets, with no significant
virus-related issues since reopening of the market in mid-November
2020.
Hotel operators have tentative plans for a gradual reopening of
hotels during 2021, although the ability to implement such plans
will depend on external circumstances as the world emerges from the
present pandemic.
THE ELECTION OF PRESIDENT BIDEN AND THE POTENTIAL IMPACT ON THE
U.S.-CUBAN EMBARGO
Joe Biden was inaugurated as President of the United States on
20 January 2021, which we hope will bring to a final close the
highly toxic chapter of U.S.-Cuba relations dictated by the Trump
administration over the last four years. Regarding Cuba, President
Biden stated during his campaign that he will:
"(...) promptly reverse the failed Trump policies that have
inflicted harm on the Cuban people (...)" and "(...) immediately
restore the Obama policy of engagement".
We believe that this statement of intent represents excellent
news for Cuba and for the Company.
In the waning days of the Trump presidency, following the steady
adoption over the course of the preceding four years of
ever-increasing aggressive measures against Cuba, the U.S.
administration took numerous controversial final steps to further
penalise the island and to complicate the efforts of the incoming
Biden administration to reverse course on Cuba policy. These
included most notably the return of Cuba to the State Sponsor of
Terrorism list, which may take time and effort to undo (since it
will require a formal State Department review, a presidential
certification to Congress and a 45-day waiting period).
However, other than the Terrorism list, the vast majority of
anti-Cuba measures adopted by the Trump administration over the
last four years can be reversed by simple executive order, without
the need for any act of Congress, and so a return to the Obama
policy of engagement with Cuba (leaving intact the underlying
embargo legislation, which can only be revoked through legislative
action) should be attainable with relative ease. We believe that
the most likely first steps in such an effort could include:
1. Increasing U.S. travel to Cuba through the reinstatement of
the general licence for the people-to-people category of authorised
travel, the full restoration of commercial flights and cruise ship
travel, the elimination of the Cuba Restricted List and the Cuba
Restricted Accommodations List of businesses that cannot be engaged
with by U.S. persons, and the reversal of other similar measures
imposed by the Trump administration;
2. Increasing U.S. remittances to Cuba through the immediate removal of remittance limits;
3. Facilitating U.S. agricultural, medical and other exports to Cuba;
4. Facilitating U.S. financial transactions involving Cuba,
including U-turn transactions whereby parties who are not subject
to U.S. jurisdiction are allowed to use the U.S. financial system
(and the U.S. dollar) for transactions related to Cuba that
originate and terminate outside the U.S. and where no U.S. party is
involved;
5. Suspension of Title III of the Helms-Burton Act;
6. Restoring full operations at the U.S. embassy in Havana
(including the appointment of a U.S. ambassador); and
7. Removing Cuba from the list of State Sponsors of Terrorism.
The timing of the hoped-for return to a more productive and
sensible Cuba policy remains uncertain, given the large number of
important domestic and international issues that the new
administration will need to confront, and numerous ongoing issues
could potentially play a role, such as the question of Venezuela
and the still unsolved mystery of U.S. diplomats who suffered ill
health effects while stationed in Havana some years ago.
Moreover, with the newly restored Democratic control over both
houses of Congress, it becomes possible once again to imagine a day
when legislation fully rescinding the antiquated and
counter-productive U.S. Cuban embargo can be introduced and have an
honest chance of success. With the introduction of a new bill
entitled the U.S.-Cuba Trade Act of 2021 to the Senate on 4
February 2021, which aims to repeal all of the legislation making
up the embargo and re-establish normal trade relations and travel
to the island nation, it would appear that Congress will soon have
the opportunity to make this happen.
CUBA - MODERNISATION OF THE ECONOMY AND MONETARY REFORM
Modernisation of the Cuban Economy
Since 2011, the Cuban government has been pursuing a concerted
effort to modernise the Cuban economy, with the principal goal of
increasing efficiency within the economic sphere and elevating the
levels of social and economic development of the country. To this
end, the Cuban Communist Party in 2011 adopted a series of
guidelines (the "2011 Guidelines") on economic and social policy
aimed at transforming all sectors of the economy and liberating the
country's productive forces through the concession of greater
management autonomy to businesses in the state sector, the
development of complementary private sector activities and an
increase in new foreign direct investment and finance. The
principles and actions outlined in the 2011 Guidelines were
subsequently reiterated in later documents and programmes adopted
by the Cuban government, such as its 2030 Development Plan.
However, implementation of the 2011 Guidelines has moved forward
at a very cautious pace over the years since their adoption and
came to a virtual standstill in the face of heightened aggression
from the United States during the Trump administration. The arrival
of the Covid-19 pandemic earlier this year has further pressured
the already bleak economic and liquidity positions of the country
by bringing the Cuban tourism industry to an abrupt halt and
paralysing numerous import activities, resulting in crippling
shortages of food and other basic commodities as well as necessary
inputs for local industry.
Reforms of 16 July 2020
In July 2020, after many years of start-and-stop progress, the
Cuban government returned its economic modernisation strategy, as
originally contemplated in the 2011 Guidelines, to the fore. The
measures adopted last summer were aimed at boosting hard currency
income in the short term through an increase in exports and in the
local production of food and other necessary products that can
substitute imports, and through the creation of a new internal hard
currency market for certain goods and services. They also included
measures meant to augment management control over corporate assets,
financial resources and activities, and decrease government control
over the economy and the centralised allocation of hard currency
resources. The increase of foreign direct investment in the country
and stimulation of private sector activities are core goals of the
recent reforms.
For the joint venture companies in which the Company has a
participation, the most important of these measures was the
adoption of Resolution 115 issued by the Ministry of Economy and
Planning ("Resolution 115") on the allocation of hard currency
resources within the economy, which is expected to provide a much
greater degree of financial autonomy to the management of joint
venture companies and to have a significant positive effect on
their operations.
In mid-December 2020, the final piece of the reform puzzle was
made public with the announcement that the long-planned currency
unification and exchange rate harmonisation would be brought into
effect on 1 January 2021.
Monetary Reforms
Monetary reform has long been called for by observers because
for many years there have been numerous currencies circulating in
parallel in the Cuban economy, with a variety of distinct, mandated
(non-market based) exchange rates between them, depending on
parties and circumstances, causing substantial distortions in the
economy.
The principal Cuban currency, the Cuban peso ("CUP"), has been
officially pegged to the USD at the rate of 1USD : 1CUP since 1959
for financial transactions between Cuban entities, with the
exception of joint venture companies and other foreign direct
investment vehicles. In practice, however, the retail exchange rate
offered at State-owned currency exchange points (Cajas de Cambio or
CADECA) has been 1USD : 24CUP for years. In parallel to the CUP, a
second Cuban currency, the convertible peso ("CUC"), has circulated
in the economy (also at a fixed exchange rate of 1USD : 1CUC) for
the last two decades for local transactions involving a hard
currency component. There were also numerous exchange rates between
the CUC and the CUP. And lastly, certain transactions - including
certain retail sales and the operations of foreign investment
vehicles - have historically been denominated and carried out in
USD.
Since the publication of the 2011 Guidelines, monetary reform
has been recognised as a key component of the planned modernisation
process. With little advance warning, the new measures constituting
the reform were published in mid-December 2020 and came into effect
on 1 January 2021.
The reform is directly applicable to foreign investment vehicles
operating in the country, including joint venture companies, who
will need to convert all of their accounting records to CUP and
carry out all transactions in CUP going forward. By contrast, all
entities operating in the Special Development Zone of Mariel will
continue to denominate and carry out their operations exclusively
in USD. We have included below, in the relevant sections dealing
with our assets, comments regarding the expected impact of the new
measures.
The principal goals of the reform are:
(i) the unification of the two Cuban currencies through the
elimination of the CUC and the continuation of the CUP,
(ii) the harmonisation of exchange rates at 1USD : 24CUP,
(iii) the reduction or removal of subsidies in the Cuban economy, and
(iv) price and labour (salary, pension and social security)
reforms aimed at correcting price levels.
The reform has been enacted through the adoption by different
ministries of a large number of complex, interrelated resolutions
and new measures continue to be adopted on a regular basis. The
measures taken to date include rules relating to the conversion to
CUP of cash, bank deposits and other monetary assets, as well as
non-monetary items such as accounting records, contractual
obligations and other legal instruments.
The reform will profoundly affect the pricing and payment of
goods and services throughout the economy, including the foreign
investment sector, as well as salaries, pension and social security
payments. In addition, changes have already been made to the new
Resolution 115 system for the allocation of hard currency resources
to harmonise the allocation of financial resources with monetary
reform. We expect further changes to be adopted in the coming
months as problems arise and internal contradictions are
discovered.
Amendments to Resolution 115: Allocation of Hard Currency
Resources within the Economy
Prior to the adoption of Resolution 115, all allocations of hard
currency for payments to be made outside the country (including the
payment of dividends to foreign investors) were made centrally.
This resulted in an inefficient and unfair allocation and numerous
delays, especially during regular periods of reduced liquidity in
the country, when payments to foreign investors appeared at times
to be of secondary importance compared to other public
expenditures.
Resolution 115, as recently amended to take into account
monetary reform, provides for the systemic allocation of a certain
level of "liquidity" (the ability to transfer funds overseas
without the requirement of a prior foreign exchange permit) to the
operations of foreign investment vehicles and other entities .
Since the system is untested it is as yet unclear whether the
criteria used to determine the liquid resources to be allocated
will be sufficient, in practice, to cover all international
payments (imports, payments of dividends to foreign shareholder,
etc.), but since Resolution 115 also includes the possibility to
request exceptions we are confident that in most cases the new
system will be workable, especially since the general rule is that
all joint ventures must have the necessary liquid funds to allow
them to comply at all times with their international obligations,
including the payment of dividends.
We believe that this is a very significant step forward for the
operations of Cuban foreign investment vehicles and in line with
the stated aim of "providing real financial autonomy to foreign
investment vehicles" and thereby reducing their dependence on
centralised foreign exchange decisions. We expect that, following a
transition period during which new working capital reserves will
need to be accumulated, the new rules will provide a sound and
predictable basis upon which joint venture companies will have the
means to manage their international obligations in a timely
fashion, including the payment of dividends to the foreign
shareholder.
Conclusions
The corrective measures taken by the government to reduce the
substantial distortions in the state sector of the Cuban economy
caused by multiple exchange rates between the USD and the CUP, as
well as between the CUC and the CUP, are necessary steps that are
intended to return the Cuban monetary system to an internally
coherent system for regulating and reporting transactions within
the economy.
Similarly, the new system for the allocation of hard currency
reserves represents a significant step forward towards the goal of
greater financial autonomy for foreign investment vehicles.
However, the scope and complexity of both of these projects is
immense, with probable effects throughout the economy, and we
expect the transition to be complicated and not without growing
pains.
In addition, by imposing the use of the CUP as functional and
reporting currency for all foreign investment vehicles going
forward, the Cuban government has introduced a new foreign exchange
risk to the operations of these investment vehicles, and in
particular to their foreign investors, since the CUP will likely be
subject to future devaluations, which could impact investments in
numerous ways. Like in many other countries, this is an additional
factor that will need to be properly managed by investors in order
ensure success.
Areas of concern regarding the possible impacts of the above on
the operations of the joint venture companies in which the Company
has an interest have been identified and we have raised these with
our Cuban partners and government officials. We believe that these
concerns will be properly addressed in due course, either through
the obtention of exceptional treatment or through clarifications or
changes to the applicable rules.
We believe that these reforms constitute significant
transformations to the highly centralised economic model followed
by the Cuban government to date, and that these represent a
significant positive development for the operations of the joint
venture companies in which the Company is invested, as well as
presenting numerous opportunities for the future. We are following
these developments closely. The Cuban government has very clearly
stated that one of its core objectives, both in carrying out
monetary reform and in creating the new system of hard currency
autonomy, is to increase the attractiveness of the country for
foreign investment and finance. Therefore, we trust that this
outcome will be borne out in the final result, notwithstanding the
complicated transition process that is underway.
CUBA - ECONOMIC BACKDROP AND OTHER RECENT DEVELOPMENTS
At the year-end session of the Cuban National Assembly, Minister
of Economy and Planning Alejandro Gil confirmed that the Cuban
economy contracted by 11% in 2020, battered by the pandemic,
increased U.S. sanctions and internal inefficiencies. He forecasts
growth of 6-7% in 2021 as tourism gradually recovers and monetary
reforms create the conditions for new development.
The congress of the Cuban Communist Party that took place on
16-19 April 2021 focused on core issues relating to the country's
economic and social life. The further elaboration of the economic
and social development model and the implementation of the 2011
Guidelines were central, although the stepping down of Raul Castro
as First Secretary of the Party was the prime focus of the
international press.
PORTFOLIO ACTIVITY
General
Overall, the performance of the Miramar Trade Centre, the office
complex of Monte Barreto , in which the Company has a 49% interest,
had its most profitable year ever - occupancy rates remained in the
high nineties throughout the year. Although revenues were similar
to the previous year, net income increased by 6.2%, primarily as a
result of savings in energy costs.
As a result of the Covid-19 pandemic and the resulting collapse
of the worldwide travel industry, the Hotels faced an extremely
challenging business environment, and the results reflect this.
While the Sol Palmeras and the Meliã Habana hotels were able to
maintain services throughout most of the year, occupancy and room
rates were inevitably very much affected, while the Meliã Las
Americas and Meliã Varadero hotels were closed from 1 April 2020
until the end of the year. At present, the Meliã Habana is one of
the few hotels in Havana where arriving travellers can spend their
obligatory isolation period. The ability of the Hotels to reopen
and return to a normal operating environment will depend upon
numerous factors such as the success of vaccination campaigns in
the tourists' home countries, the development and rollout of a
Cuban vaccine, the availability of flights and others. There is
obviously a great deal of uncertainty connected with the
performance of the hotel sector in 2021.
The Miramar Trade Centre / Monte Barreto
The Company holds a 49% interest in Monte Barreto, the Cuban
joint venture company that owns and operates the Miramar Trade
Centre. Occupancy levels of the Miramar Trade Centre remained over
98% throughout 2020, notwithstanding the major disruption caused to
the Cuban economy by the Covid-19 pandemic. Although revenues were
similar to the prior year, net income in 2020 reached US$14.4
million / GBP10.6 million for the year (2019: US$13.5 million /
GBP10.3 million), representing a 6.2% increase over the prior year
and making 2020 the most profitable year since incorporation of the
joint venture.
The principal drivers of the excellent results for the year were
(i) continued high occupancy levels throughout the year, and (ii) a
substantial reduction in operating expenses, primarily as a result
of reduced electricity, consumables, third party services and other
expenses resulting from reduced tenant activities during the
Covid-19 pandemic of 2020.
Demand for international-standard office accommodation in Havana
currently continues to exceed supply, predominantly from
multi-national companies, NGOs and foreign diplomatic missions.
Monte Barreto remains the dominant option in this market segment.
As a consequence, and notwithstanding the Covid-19 pandemic, the
outlook for Monte Barreto in 2021 remains very encouraging, as we
expect occupancy levels to remain in the high nineties and loss of
rental income as a result of the pandemic to be modest. In
addition, further reductions to operating expenses are expected
from the conversion of salaries, electricity and other local costs
to Cuban Pesos, which undoubtedly is a positive outcome of the
monetary reforms. However, in light of the present disruption in
the market, the joint venture has temporarily halted its general
strategy of rental increases as leases are renewed, which has
resulted in a decrease in its fair value.
In accordance with the new provisions of Resolution 115 dealing
with the allocation of hard currency resources, we expect that
Monte Barreto will receive sufficient liquid resources in 2021 to
distribute all profits generated during the year and to gradually
pay out the remaining outstanding dividends from past periods.
Commercial real estate activities have been excluded from some of
the general rules relating to liquid payments, and consequently the
local payments of many tenants of the joint venture will not be
received with liquidity and conversely most local payments to be
made by the joint venture will similarly not require liquidity. As
a result, the joint venture will operate under a mixed regime
having reduced liquidity requirements, where certain liquid
resources of the joint venture will be generated internally and
certain resources will be allocated centrally.
We are presently working with the management team of the joint
venture to calculate the comprehensive liquidity requirements of
the joint venture as well as the expected sources of liquidity
available to it in the coming period in order to ensure that there
will be sufficient liquid resources to distribute all dividends
generated in 2021 and to gradually pay out the remaining
outstanding dividends from past periods.
In December 2020, Monte Barreto paid US$4 million / GBP2.9
million in dividends to CEIBA MTC Properties Inc. by transferring
that amount to TosCuba. These funds will be used by TosCuba in
connection with the construction of the hotel and will be counted
as disbursements under the construction facility as they are used
(see below).
The valuation of Monte Barreto has been adjusted downward in the
year by (US$ 5,268,689) / (GBP3,871,759) , representing a 6%
decline on the December 2019 valuation. This was driven by a more
conservative approach towards revenue growth during the next few
years considering the impact of the pandemic on the Cuban economy
and the resulting decision to halt rental increases temporarily as
leases are renewed.
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 Centre);
- 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"), the Company's strategic partner in
all of its hotel investments. Meliã Hotels International has a
17.5% equity interest in Miramar and a 10% equity interest in
TosCuba, and remains fully committed to Cuba as one of its
principal destinations.
Performance of the Hotels
From arrival of the Covid-19 pandemic in Cuba in March 2020
through the end of the year the Hotels faced an extremely difficult
operating environment. With international borders closed and
international flights grounded, all Cuban hotels were ordered to be
closed. The Sol Palmeras and the Meliã Habana hotels were able to
maintain modest services throughout most of the year, but occupancy
and room rates were at low levels. The Meliã Las Americas and Meliã
Varadero hotels remained closed from 1 April 2020 through the end
of the year (and they remain closed at the date of writing).
The Meliã Habana hotel is one of the few hotels in Havana where
arriving travellers can spend their obligatory isolation period and
the hotel is popular with flight crews and other essential
travellers, so we expect that operations will continue at these
levels until international travel markets recover later this year.
The Sol Palmeras is also expected to remain open in the coming
months, with a modest number of guests from countries that have
resumed flights to Cuba (such as Russia), but our expectation is
that occupancy will remain at very low levels until the Canadian
and European markets resume in earnest when their populations are
fully vaccinated and regular flights from these important outbound
markets resume.
In general, the ability of the Hotels to return to normal
operations will be dependent upon numerous factors such as the
success of the vaccination campaigns in the principal outbound
markets in Canada and Europe, the development and rollout of a
Cuban vaccine, the availability of flights, the implementation by
the Biden administration of a new, more positive Cuba policy, and
others. Like in many other places, there is obviously a great deal
of uncertainty connected with the performance of the Cuban hotel
sector in 2021 and we expect that the effects of the Covid-19
pandemic will continue to be felt throughout the first half of
2021, and possibly through the first three quarters of the year
.
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 year, we expect
the liquid resources directly generated by the operations of
Miramar to be more than sufficient to allow Miramar to distribute
all profits to be generated during the year and to gradually pay
out the remaining outstanding dividends from past periods. This is
because under the new liquidity rules international tourism income
is treated as direct export income (of which 80% of the liquidity
can be retained by the joint venture). In addition, we anticipate
that the adopted monetary reforms may have a positive impact on the
cost structures (and potentially on the profitability) of the
Hotels.
Confirming and Discounting Facility
In December 2019, 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 has attractive economic terms and is secured
by the offshore cash flows generated by the hotels. Given the
limited operations of the Hotels during the last three quarters of
2020, the operations financed under the facility during the year
were largely aimed at resolving past issues with suppliers, rather
than current operations. We expect that confirming and discounting
transactions under the facility will accelerate once again when the
operations of the Hotels return to normal levels.
Planned Investments
The planned refurbishment and development plan of the Hotels has
been delayed by the Covid-19 pandemic and by the implementation of
the monetary reforms. Miramar has profited from the hotel closures
to proceed with maintenance and certain limited improvement works,
as well as with the planning and permitting processes. The board of
the joint venture company will review the timing of the planned
investments in the coming year as the tourism sector recovers and
the full implications of the new monetary rules are clarified.
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
400 room Meliã Trinidad Península Hotel. The remaining 20% interest
in Mosaico Hoteles is held by Meliã Hotels International. The Cuban
shareholder in TosCuba is Cubanac án, with a 50% interest.
As at the end of 2020, all structural works of the hotel were
completed and the project had reached an overall completion level
of approximately 60%. Delays that had accumulated over the course
of the project were exacerbated by the arrival of the Covid-19
pandemic in March 2020. In response to the crisis, the joint
venture company slowed the pace of construction considerably for
the remainder of the year.
During the first quarter of 2021, progress has been made at a
modest pace on external finishing details and internal works,
including doors, windows, flooring and other installations.
The total cost of the project - including incorporation of the
joint venture company, acquisition of surface rights, construction
of the hotel, and start-up costs - is presently estimated at US$76
million. Of this amount, US$16 million represents the share capital
invested in TosCuba by its shareholders (CEIBA, US$6.4 million,
Meliã Hotels International US$1.6 million and Cubanacán US$8
million) and approximately US$12 million represents grants received
or to be received under the Spanish Cuban Debt Conversion
Programme. In accordance with the terms of the Spanish Cuban Debt
Conversion Programme the funds granted should be used by the joint
venture company to fund local purchases of goods and services
delivered under the construction contract by Cuban suppliers,
thereby reducing the external funding that would otherwise need to
be provided.
The remaining funds necessary to complete the project will be
disbursed under the construction finance facility that was
originally extended in April 2018 as a US$45 million facility to be
disbursed under two tranches of US$22.5 million / GBP16.5 million
each. The first tranche (Tranche A) is presently being disbursed by
CEIBA (80%) and Meliã (20%). Disbursements under Tranche B will
only begin once Tranche A is fully disbursed. The construction
finance facility is more fully described below. The EUR25 million
in new funds raised through the issue of the Bonds in March 2021
will ensure the availability of funding for Tranche B of the
facility and therefore that that the construction of the project
can now proceed to completion.
The final terms of amendments to Tranche B of the construction
finance facility are presently being negotiated, together with the
construction contract, to take into account the new circumstances
caused by the Covid-19 delay and other factors. A mended facility
and construction agreements are expected to be executed shortly
with a view to completing construction and start-up of the hotel
before the start of the 2022-2023 high season .
Grupo B.M. Interinvest Technologies Mariel S.L.
In December 2020, the Company formalised its participation in a
new multi-phase industrial logistics project to be developed in the
Special Development Zone of Mariel, Cuba by acquiring a 50%
interest in Grupo B.M. 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.
The Company has paid an initial amount of US$303,175 /
GBP222,792 for its 50% interest and is expected to invest a further
US$1.5million / GBP1.1million during the course of 2021.
FINTUR and TosCuba Finance Facilities
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 first
principal payment of the new Tranche C falls due on 30 June 2021.
Interest payments were suspended until 31 December 2020, at which
time interest accumulated during the year became payable.
FINTUR transferred funds from other sources to the collection
account under the Facility and made the required interest payments
at 31 December 2020 and at 31 March 2021.
As at 31 December 2020, the principal amount of US$2,110,795 /
GBP1,551,143 was outstanding under the Company's participation in
Tranche C of the Facility.
Cuba has reopened its borders to international travel and the
tourism industry has resumed operations, although arrivals remain
very modest at present because of numerous travel restrictions in
outbound markets related to the Covid-19 pandemic as well as
limited airlift at the present time. Operations are expected to
gradually increase in the second half of 2021 and beyond as
restrictions are lifted in outbound markets and airlines increase
flights to the island.
All of the hotels granted as security for the repayment of the
Facility remain closed at the present time. The Investment Manager
meets regularly with FINTUR in order to gauge the speed with which
the cash flows are likely return to acceptable levels and to
determine whether any additional hotel security should be
received.
TosCuba - Construction Finance Facility
CEIBA is the principal lender in the secured construction
finance facility that was extended to TosCuba in 2018 in order to
provide funding for the construction of the Meliã Trinidad
Península Hotel. Originally, the facility was to be disbursed in
two equal tranches of US$22.5 million. CEIBA (80%) and Meliã (20%)
act as lenders under Tranche A. CEIBA is presently the sole lender
under Tranche B, the repayment of which is fully guaranteed by
Cubanacán.
The first disbursement under the facility was made in November
2018 in the lead-up period to the formal construction start of the
project in December 2018, and as at 31 December 2020 the principal
amount of US$16,106,466 / GBP11,836,027 had been disbursed under
the Company's participation in Tranche A. The remainder of Tranche
A of the facility is presently being disbursed. In order to
complete the construction and start-up of the hotel, CEIBA intends
to increase the maximum principal amount of Tranche B of the
facility to US$29 million and negotiations are presently ongoing in
this respect.
The facility may be syndicated and is secured by the future
income of the hotel under construction. Tranche B of the facility
is further secured by a guarantee given by Cubanacán, backed by
offshore tourism income from another Cubanacán hotel in Cuba. Debt
service under the facility is expected to start in 2023 and
includes a repayment period of 9 years for Tranche A and 7 years
for Tranche B.
OUTLOOK
We expect that, as a result of the Covid-19 pandemic, the very
difficult economic circumstances faced by Cuba during 2020 will
continue well into 2021, and that the local market conditions in
which the Group operates will remain very challenging throughout a
good part of the year. The further accentuation of the liquidity
challenges faced by the Cuban economy as a result of the pandemic
and the U.S. Cuban embargo may also negatively impact the timing of
dividend and other payments to the Company.
However, as the world recovers from the pandemic, we expect that
travel restrictions will start to be eased and that all of the
Miramar hotels will re-open in 2021 and that all of our underlying
Cuban real estate assets, the Cuban joint ventures in which we are
invested and the loan facilities in which we participate will
return to profitable trading.
We expect that the new monetary reforms and liquidity rules
adopted by the Cuban government during the year will over time have
a strong 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 a much greater degree of
control over the financial resources generated by their operations,
which we expect to be largely beneficial for new investments,
ongoing operations, performance and the ability to make timely
distributions to shareholders.
In addition, the election of Joe Biden to the presidency of the
United States brings a welcome sense of relief after the turbulent
years of the Trump administration. We look forward to a new era
where U.S. policy towards Cuba is once again driven by policy
experts in the State Department rather than the rough and tumble
forces of election politics in Florida. We expect that during the
course of the coming year tensions will be lowered between the two
countries and the new Biden administration will adopt numerous new
measures that will gradually allow more U.S. travel to Cuba, more
U.S. funds to flow to Cuba and ultimately a significant improvement
to the foreign investment climate in the country, all of which will
be very positive for the people of both countries, as well as for
the Company and its assets.
Moreover, having successfully raised EUR25 million in new funds
through the issuance of the Bonds at a very difficult time,
demonstrating strong confidence on the part of our investors, for
which we are grateful, we enter into an exciting new period of
development for the Company. With immediate deployment capacity, we
are very strongly positioned to enhance our position in the Cuban
market by driving ahead, with completion of the new hotel in
Trinidad and construction of the first phase of the new industrial
logistics project in Mariel. We will also be on the lookout for new
opportunities.
Sebastiaan A.C. Berger
Aberdeen Asset Investments Limited
27 April 2021
DIRECTORS' REPORT (EXTRACTS)
ANNUAL GENERAL MEETING
The Notice of the Annual General Meeting ("AGM") is included
within the 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 17 June 2021 at 2.00pm. An explanation of each
resolution to be proposed at the AGM is included in the Letter from
the Chairman below. 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@aberdeenstandard.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 17 June 2021 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
27 April 2021
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;
-- that 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
John Herring
Chairman
27 April 2021
Consolidated Statement of Financial
Position
As at 31 December 2020 31 Dec 2020 31 Dec
2019
Note US$ US$
----- -------------- ------------
Assets
Current assets
Cash and cash equivalents 4 4,270,860 13,102,578
Accounts receivable and accrued income 5 14,581,229 2,211,832
Loans and lending facilities 6 2,827,292 2,558,018
-------------- ------------
Total current assets 21,679,381 17,872,428
-------------- ------------
Non-current assets
Accounts receivable and accrued income 5 1,768,447 5,646,484
Loans and lending facilities 6 17,395,343 10,587,702
Equity investments 7 197,921,225 227,340,559
Property, plant and equipment 8 533,598 568,346
-------------- ------------
Total non-current assets 217,618,613 244,143,091
-------------- ------------
Total assets 239,297,994 262,015,519
-------------- ------------
Liabilities
Current liabilities
Accounts payable and accrued expenses 9 1,085,590 2,066,213
Deferred liabilities 14 1,000,000 1,000,000
Total current liabilities 2,085,590 3,066,213
-------------- ------------
Non-current liabilities
Accounts payable and accrued expenses 9 1,129,709 -
Deferred liabilities 14 1,833,333 2,833,333
-------------- ------------
Total non-current liabilities 2,963,042 2,833,333
-------------- ------------
Total liabilities 5,048,632 5,899,546
-------------- ------------
Equity
Stated capital 10 106,638,023 106,638,023
Revaluation surplus 319,699 319,699
Retained earnings 75,613,383 95,422,003
Accumulated other comprehensive income 11,854,509 4,354,609
-------------- ------------
Equity attributable to the shareholders
of the parent 194,425,614 206,734,334
-------------- ------------
Non-controlling interest 10 39,823,748 49,381,639
Total equity 234,249,362 256,115,973
Total liabilities and equity 239,297,994 262,015,519
-------------- ------------
NAV 10 194,425,614 206,734,334
NAV per share 10 1.41 1.50
See accompanying notes 1 to 20, 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 27 April 2021.
They were signed on the Company's behalf;
Keith Corbin, Director Peter Cornell, Director
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2020
31 Dec 2020 31 Dec 2019
Note US$ US$
----- ------------- -------------
Income
Dividend income 7 13,258,912 20,670,560
Interest income 1,899,468 820,588
Travel agency commissions 6,113 15,426
Foreign exchange gain 1,157,566 -
16,322,059 21,506,574
------------- -------------
Expenses
Foreign exchange loss - (383,162)
Loss on change in fair value of equity
investments 7 (41,914,276) (14,658,562)
Management fees 14 (1,864,518) (1,985,429)
Other staff costs (67,035) (73,080)
Travel (51,856) (82,055)
Operational costs (108,302) (144,783)
Legal and professional fees (1,368,707) (1,028,242)
Administration fees and expenses (292,534) (266,250)
Audit fees 19 (270,909) (465,514)
Miscellaneous expenses (136,976) (196,509)
Directors' fees and expenses 12 (232,677) (239,085)
Depreciation 8 (39,645) (38,062)
(46,347,435) (19,560,733)
------------- -------------
Net (loss)/ income before taxation (30,025,376) 1,945,841
------------- -------------
Income taxes 3.7 - -
------------- -------------
Net (loss) / income for the year (30,025,376) 1,945,841
------------- -------------
Other comprehensive income to be
reclassified to profit or loss in
subsequent periods
Gain on exchange differences of translation
of foreign operations 11,538,310 3,158,328
Other comprehensive income that will
not be reclassified to profit or
loss in subsequent periods
Revaluation reserve movements - 21,250
Total comprehensive (loss)/Income (18,487,066) 5,125,419
------------- -------------
Net (loss)/Income for the year attributable
to:
Shareholders of the parent (19,808,620) 7,579,514
Non-controlling interest (10,216,756) (5,633,673)
Total comprehensive (loss)/Income
attributable to:
Shareholders of the parent (12,308,720) 9,653,677
Non-controlling interest (6,178,346) (4,528,258)
Basic and diluted (loss)/earnings
per share 13 (0.14) 0.06
See accompanying notes 1 to 20, which are an integral part of
these consolidated financial statements.
Consolidated Statement of Cash Flows
For the year ended 31 December 2020
31 Dec 2020 31 Dec 2019
Note US$ US$
------- ------------- ----------------------
Operating activities
Net (loss)/ income for the year (30,025,376) 1,945,841
Items not affecting cash:
Depreciation 8 39,645 38,062
Change in fair value of equity
investments 7 41,914,276 14,658,562
Dividend income receivable (13,258,912) (20,670,560)
Interest income (1,899,468) (820,588)
Foreign exchange (gain)/loss (1,157,566) 383,162
(4,387,401) (4,465,521)
(Decrease)/increase in accounts
receivable and accrued income (4,018,460) 98,064
(Increase)/decrease in accounts
payable and accrued expenses 149,086 (136,740)
Non- cash movement in amortisation
of deferred liability 14 (1,000,000) (1,000,000)
Dividend income received 9,998,244 14,997,092
Interest income received 160,317 227,628
Net cash flows from operating activities 901,786 9,720,523
------------- ----------------------
Investing activities
Purchase of equity investments 7 (303,175) -
Purchase of property, plant & equipment 8 (4,897) (47,893)
Loans and lending facilities disbursed (6,190,914) (7,408,813)
Loans and lending facilities recovered (886,001) 1,777,407
Net cash flows from investing activities (7,384,987) (5,679,299)
------------- ----------------------
Financing activities
Cash distribution to non-controlling
interest 10 (3,463,951) (1,786,874)
Payment of cash dividends - (8,560,689)
Contributions received from non-controlling
interest 84,406 22,401
Net cash flows from financing activities (3,379,545) (10,325,162)
------------- ----------------------
Change in cash and cash equivalents (9,862,746) (6,283,938)
Cash and cash equivalents at beginning
of the period 13,102,578 19,814,790
Foreign exchange on cash 1,031,028 (428,274)
Cash and cash equivalents at end
of the period 4,270,860 13,102,578
------------- ----------------------
See accompanying notes 1 to 20, which are an integral part of
these consolidated financial statements
Consolidated Statement of Changes in Equity
For the year ended 31 December 2020
For the year ended 31 December 2019
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 106,638,023 298,449 96,403,178 2,301,696 205,641,346 55,674,370 261,315,716
Revaluation
of assets
/ Net other
comprehensive
income/(loss)
to be
reclassified
to profit
or loss in
subsequent
periods 7,10 - 21,250 - 2,052,913 2,074,163 1,105,415 3,179,578
Net income/(loss)
for the year 10 - - 7,579,514 - 7,579,514 (5,633,673) 1,945,841
Capital increase/
contributions
during the
period 10 - - - - - 22,401 22,401
Cash
distribution
to
non-controlling
interest 10 - - - - - (1,841,703) (1,841,703)
Payable
transferred
to
non-controlling
interests 10 - - - - - 54,829 54,829
Dividend
declared
during the
year - - (8,560,689) - ( 8,560,689) - (8,560,689)
Balance at
31 December
2019 106,638,023 319,699 95,422,003 4,354,609 206,734,334 49,381,639 256,115,973
----------- ----------- ---------------- ------------- ----------------- --------------- -----------------
See accompanying notes 1 to 20, 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, 10 - - - 7,499,900 7,499,900 4,038,410 11,538,310
Net loss for
the
year 10 - - (19,808,620) - (19,808,620) (10,216,756) (30,025,376)
Capital
increase/
contributions
during the
period 10 - - - - - 84,406 84,406
Cash
distribution
to
non-controlling
interest 10 - - - - - (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
----------- ----------- -------------- ------------- ------------ --------------- ------------
See accompanying notes 1 to 20, which are an integral part of
these consolidated financial statements.
Notes to the Consolidated Financial Statements
For the year ended 31 December 2020
1. Corporate information
These consolidated financial statements for the year ended 31
December 2020 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, 1987 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 Standard Life Aberdeen plc (see note
14).
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 3.9 and certain property, plant
and equipment as disclosed in note 3.12 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 3.14);
b) That the Group is a Venture Capital Organisation (see note 3.15).
c) That the functional currency of the parent company (Ceiba
Investments Limited) is US$ (see note 3.17)
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.
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 exception provided for 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 2020 and not
early adopted that are relevant to 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.
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 2020.
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 2020 and 31 December 2019:
Equity interest
held indirectly
Country by the Group
Entity Name of Incorporation or holding entity
31 Dec 2020 31 Dec
2019
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% 80%
1.3.4 Grupo BM Interinvest Technologies
Mariel S.L (a) (ix) Spain 50% -
a) Company consolidated at 31 December 2020 and 31 December 2019.
b) Company accounted at fair value at 31 December 2020 and 31 December 2019.
(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) On 11 March 2019, all of the shares in Mosaico Hoteles S.A.
held by Mosaico B.V., together with (i) the full outstanding value
of the shareholder loan extended by Mosaico B.V. to Mosaico Hoteles
S.A., and (ii) all payables owed by Mosaico B.V., were transferred
by Mosaico B.V. to CEIBA Tourism B.V. (80%) and to Meliã Hotels
International (20%) in accordance with their shareholdings in
Mosaico B.V., with the result that Mosaico Hoteles S.A. is now
owned directly by CEIBA Tourism B.V. (80%) and Meliã Hotels
International S.A. (20%) and Mosaico B.V. no longer has any assets
or liabilities. Mosaico B.V. is in the process of being
liquidated.
(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) a Spanish company that is developing an industrial
logisitics 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 dates 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 2020 were gains of
US$ 11,538,310 (2019: gains of US$3,158,328).
The exchange rate used in these consolidated financial
statements at 31 December 2020 is 1 Euro = US$1.2271 (2019: 1 Euro
= US$1.2030).
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 2020 and 31 December
2019 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 and financial liabilities at fair value through
profit or loss are measured initially at fair value.
(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 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.
Financial assets and financial liabilities measured at amortised
cost are the following:
-- Cash and cash equivalents,
-- Accounts receivable and accrued income,
-- Loan and advances,
-- Accounts payable and accrued expenses
(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.
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 accrued income.
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 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.
However, 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 change.
3.15 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.
3.16 Going concern
The Company's only external debt obligations is the Bond Issue
completed in March 2021 (see note 20), and the Board does not
anticipate the need for further external finance over the next 12
months. The Company also has significant commitments under the
Construction Facility extended to TosCuba for the purpose of
funding the construction of the Meliã Trinidad Península Hotel (see
note 6). The Directors have reviewed cash flow projections that
detail the revenue and commitments of the Group taking into account
the above. 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.
3.17 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$.
4. Cash and cash equivalents
31 Dec 2020 31 Dec 2019
US$ US$
------------ ------------
Cash on hand 5,480 16,183
Bank current accounts 4,265,380 13,086,395
4,270,860 13,102,578
------------ ------------
5. Accounts receivable and accrued income
31 Dec 2020 31 Dec 2019
US$ US$
------------ ------------
Dividends receivable from Miramar S.A. 312,352 -
Dividends receivable from Inmobiliaria
Monte Barreto S.A. 9,871,284 6,922,968
Loan interest receivable from TosCuba
S.A. 1,716,307 633,070
TosCuba deposit (i) 4,000,000 -
Other accounts receivable and deposits 449,733 302,278
16,349,676 7,858,316
------------ ------------
Current portion 14,581,229 2,211,832
------------ ------------
Non-current portion 1,768,447 5,646,484
------------ ------------
(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.
(ii) Presented below is the ageing of receivables and accrued
income based on their contractual terms of repayment
31 Dec 2020 31 Dec 2019
US$ US$
------------ ------------
Up to 30 days 553,216 120,898
Between 31 and 90 days 249,214 66,335
Between 91 and 180 days 5,336,284 2,010,678
Between 181 and 365 days 8,442,515 13,921
Over 365 days 1,768,447 5,646,484
------------ ------------
16,349,676 7,858,316
------------ ------------
The majority of the balance is made up of dividends receivable.
The impairment on the dividends receivable has been assessed as low
in terms of 3 stage model per IFRS 9 by assessing the credit risk
of the counterparties who declared the dividend (Monte Barretto and
Miramar). The overall credit risk for Toscuba has significantly
increased from the prior year due to COVID 19 and the resulting
prevailing economic conditions. This has resulted in the loan
moving from Stage 1 to Stage 2 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. Other accounts receivables
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 overall potential impairment
loss on the total balance has been estimated to be immaterial.
6. Loans and lending facilities
31 Dec 2020 31 Dec 2019
US$ US$
------------ ------------
TosCuba S.A. (i) 16,106,466 9,915,549
Casa Financiera FINTUR S.A. (ii) 2,110,795 3,230,171
Miramar Facility (iii) 2,005,374 -
20,222,635 13,145,720
------------ ------------
Current portion 2,827,292 2,558,018
------------ ------------
Non-current portion 17,395,343 10,587,702
------------ ------------
(i) 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 is in the maximum
principal amount of up to US$45,000,000, divided into two separate
tranches of US$22,500,000 each. 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 (the Cuban
shareholder of TosCuba) as well as by a security assignment in
favour of the Group (in its capacity as Tranche B lender) of all
international tourism proceeds generated by the Meliã Santiago de
Cuba Hotel. 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. The credit risk has
significantly increased from the prior year due to COVID 19 and the
resulting prevailing economic conditions. This has resulted in the
loan moving from Stage 1 to Stage 2 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 July 2016, the Group arranged and participated in a
EUR24,000,000 (US$29,450,400) 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$14,725,200). The Group had an
initial participation of EUR4,000,000 (US$4,908,400) under the
first tranche and a EUR2,000,000 (US$2,454,200) 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 has
been granted and the term has been extended to March 2023. In
addition, the amounts outstanding under the two existing tranches
of the facility were consolidated into a single tranche. The
facility has a fixed interest rate of 8%, and under the
renegotiated terms interest was accumulated until 31 December 2020
and is then to be paid in quarterly instalments. Eight quarterly
principal payments will be due beginning in June 2021 and ending in
March 2023. 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. Based on historical analysis FINTUR has made all
payments on time with no defaults since the inception of this
facility as well with previous loan facilities. The loan is not
repayable on demand. The credit risk has significantly increased
from the prior year due to COVID 19 and the resulting prevailing
economic conditions. This has resulted in the loan moving from
Stage 1 to Stage 2 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.
(iii) 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
offshore cash flows generated by the Hotels of Miramar. At 31
December 2020, a total of EUR1,634,238 (US$2,005,374) was disbursed
under the facility. The loan is not repayable on demandThe credit
risk has significantly increased from the prior year due to COVID
19 and the resulting prevailing economic conditions. This has
resulted in the loan moving from Stage 1 to Stage 2 of the IFRS ECL
impairment model which therefore requires management to assess the
expected credit loss over the lifetime of the loan. Accordingly
management has made an assessment of the expected credit loss over
the lifetime of the loan taking into account all reasonable and
supportable information that is available that includes both
internal and external information and this has resulted in an
assessed expected credit loss that is immaterial to the Group.
The following table details the expected maturities of the loans
and lending facilities portfolio based on contractual terms:
31 Dec 2020 31 Dec 2019
US$ US$
------------ ------------
Up to 30 days 555,101 504,135
Between 31 and 90 days 1,365,797 802,882
Between 91 and 180 days 404,897 802,882
Between 181 and 365 days 501,497 448,119
Over 365 days 17,395,343 10,587,702
------------ ------------
20,222,635 13,145,720
------------ ------------
7. Equity investments
31 Dec 2020 31 Dec 2019
US$ US$
------------ ------------
Miramar S.A. 103,184,163 127,887,983
Inmobiliaria Monte Barreto
S.A. 81,433,887 86,702,576
TosCuba S.A. 13,000,000 12,750,000
Grupo B.M. I nterinvest T 303,175 -
echnologies Mariel S.L.
------------ ------------
197,921,225 227,340,559
------------ ------------
Monte
Miramar Barreto TosCuba GBM Mariel Total
(i) US$ (ii) US$ US$
US$ US$
------------- ------------ ----------- ------------- -------------
Balance at 31 December
2018 154,630,176 76,165,505 8,000,000 - 238,795,681
Foreign currency translation
reserve 3,203,440 - - - 3,203,440
Change in fair value
of equity investments (29,945,633) 10,537,071 4,750,000 - (14,658,562)
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)
Share equity acquired - - - 303,175 303,175
Balance at 31 December
2020 103,184,163 81,433,887 13,000,000 303,175 197,921,225
------------- ------------ ----------- ------------- -------------
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 2020, the amount of Excess Cash that is included in the
fair value of Monte Barreto stated in these financial statements is
US$2,494,887 (2019: US$1,197,575).
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 2020 31 Dec 2019
Discount rate (after tax) (i) 9.78% 9.75%
Occupancy year 1 97.3% 100%
Average occupancy year 2 to 8 97.3% 98.9%
Occupancy year 8 and subsequent periods 97.5% 97.5%
Average rental rates per square meter per US$27.23 US$28.28
month - year 1 to 6
Annual increase in rental rates subsequent
to year 7 (ii) 2.5% 3.0%
Capital investments as percentage of rental
revenue 3% 2%
(i) The effective tax rate is estimated to be 19% (2019: 19%).
(ii) 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 2020 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 2020,
the amount of Excess Cash that is included in the fair value of
Miramar stated in these financial statements is US$12,984,162
(2019: US$21,680,176). 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 2020 31 Dec 2019
Meliã Habana
Discount rate (after tax) (i) 12.5% 12.5%
Average occupancy year 1 to 3 60.3% 69.3%
Occupancy year 4 and subsequent periods 72.2% 71.5%
Average daily rate per guest - year 1 US$134.19 US$137.75
Average increase in average daily rate
per guest - year 2 to 6 4.9% 7.5%
Increase in average daily rate per guest
subsequent to year 6 (ii) 2.5% 3%
Capital investments as percentage of total
revenue 7% 7%
31 Dec 2020 31 Dec 2019
Meliã Las Americas
Discount rate (after tax) (iii) 12.9% 12.25%
Average occupancy year 1 to 3 63% 78%
Occupancy year 4 and subsequent periods 79.5% 79.5%
Average daily rate per guest - year 1 US$110.93 US$145.48
Average increase in average daily rate
per guest - year 2 to 6 11% 3.8 %
Increase in average daily rate per guest
subsequent to year 6 (ii) 2.5% 3%
Capital investments as percentage of total
revenue 7% 7%
31 Dec 2020 31 Dec 2019
Meliã Varadero
Discount rate (after tax) (iii) 12.9% 12.25%
Average occupancy year 1 to 3 64.6% 80.2%
Occupancy year 4 and subsequent periods 80.3% 80.4%
Average daily rate per guest - year 1 US$97.88 US$104.57
Average increase in average daily rate
per guest - year 2 to 6 6% 4%
Increase in average daily rate per guest
subsequent to year 6 (ii) 2.5% 3%
Capital investments as percentage of total
revenue 7% 7%
Sol Palmeras
Discount rate (after tax) (iii) 12.9% 12.25%
Average occupancy year 1 to 3 65.1% 78.9%
Occupancy year 4 and subsequent periods 81.8% 80.3%
Average daily rate per guest - year 1 US$86.75 US$95.12
Increase in average daily rate per guest
- year 2 12% 5%
Average increase in average daily rate
per guest - year 3 to 6 5% 4%
Increase in average daily rate per guest
subsequent to year 6 (ii) 2.5% 3%
Capital investments as percentage of total
revenue 7% 7%
(i) The effective tax rate is estimated to be 19% (2019: 19%).
(ii) The increase in the average daily rate per guest in
subsequent periods is in-line with the estimated rate of long-term
inflation.
(iii) The effective tax rate is estimated to be 21% (2019: 21%).
Sensitivity to changes in the estimated rental rates / average
daily rates
The discounted cash flow models include estimates of the future
rental rates / average daily rates of the joint venture companies.
Actual rental rates / average daily rates may differ from these
estimates due to several factors including the general business
climate and economic conditions, the strength of the overall
tourism market and the influence of competitors. Therefore, the
following tables detail the change in fair values of the equity
investments, when applying what Management considers to be the
reasonable possible spread in rental rates / average daily rates of
between 15% lower and 15% higher compared to the rates used in
these consolidated financial statements .
The following table details the fair values of the equity
investments at 31 December 2020 when applying lower rental rates /
average daily rates:
Financial
statements -5% -10% -15%
US$ 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
The following table details the fair values of the equity
investments at 31 December 2019 when applying lower rental rates /
average daily rates:
Financial
statements -5% -10% -15%
US$ US$ US$ US$
------------ ------------ ------------ ------------
Monte Barreto 86,702,576 82,380,413 78,058,250 73,736,088
Miramar 127,887,983 124,636,618 121,384,942 118,096,999
The following table details the fair values of the equity
investments at 31 December 2019 when applying higher rental rates /
average daily rates:
Financial
statements +5% +10% +15%
US$ US$ US$ US$
------------ ------------ ------------ ------------
Monte Barreto 86,702,576 91,328,282 95,346,901 99,669,063
Miramar 127,887,983 131,139,349 134,390,715 137,642,082
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 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%.
The following table details the fair values of the equity
investments at 31 December 2019 when applying lower occupancy
rates:
Financial
statements -5% -10% -15%
US$ US$ US$ US$
------------ ------------ ------------ ------------
Monte Barreto 86,702,576 82,279,267 77,852,944 73,423,072
Miramar 127,887,983 121,797,791 115,682,917 109,515,239
The following table details the fair values of the equity
investments at 31 December 2019 when applying higher occupancy
rates:
Financial
statements +5% +10% +15%
US$ US$ US$ US$
------------ ------------ ------------ ------------
Monte Barreto (i) 86,702,576 91,123,299 n/a n/a
Miramar 127,887,983 133,978,176 140,068,370 146,158,565
(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 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 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
The following table details the fair values of the equity
investments at 31 December 2019 when applying lower discount and
capitalization rates:
Financial
statements -1% -2% -3%
US$ US$ US$ US$
------------ ------------ ------------ ------------
Monte Barreto 86,702,576 98,365,774 114,227,257 137,096,450
Miramar 127,887,983 139,993,689 155,101,777 174,476,187
The following table details the fair values of the equity
investments at 31 December 2019 when applying higher discount and
capitalization rates:
Financial
statements +1% +2% +3%
US$ US$ US$ US$
------------ ------------ ------------ ------------
Monte Barreto 86,702,576 77,753,412 70,660,355 65,941,079
Miramar 127,887,983 117,974,292 109,709,199 102,714,755
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 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
The following table details the changes in fair values of the
equity investments at 31 December 2019 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 86,702,576 86,464,354 86,226,132 85,987,911
Miramar 127,887,983 125,617,753 123,347,522 121,077,292
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 2019 and 2018, however this is
considered unlikely and therefore the related sensitivities have
not been shown .
TosCuba
At 31 December 2020 and 2019 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 (2019: 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. 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 ventures. As
of 31 December 2020, TosCuba has received cash grants under the
programme totalling US$10,000,000 (2019: US$9,500,000). The 50%
interest of the Group in amounts received under the programme by
TosCuba have been recorded as a change in the fair value in the
investment in TosCuba.
The capital contributions made by the Company plus its share of
the cash grants received by TosCuba under the Spanish Cuban Debt
Conversion Programme have been determined to be the best observable
measure of the Company's interest in the fair value of TosCuba. The
Director's have determined that the fair value of TosCuba is
reasonable taking into consideration the current percentage of
completion of the hotel construction and the estimated cost to
completion, the projected value of the hotel upon completion and
current debt level of TosCuba.
Dividend income from equity investments
Dividend income (including participation payments) from the
equity investments above during the period is as follows:
31 Dec 2020 31 Dec 2019
US$ US$
------------ ------------
Monte Barreto 6,948,316 9,133,233
Miramar 6,310,596 11,537,327
13,258,912 20,670,560
------------ ------------
Financial information of joint venture companies
The principal financial information of the joint venture
companies for the years ended 31 December 2020 and 2019 is as
follows:
Monte Barreto Miramar (i) TosCuba (ii)
(i)
2019 2020 2019 2020 2019
US$ US$ US$ US$
2020 000's US$
US$ 000's 000's 000's
000's 000's
-------- -------- --- -------- ------- --- -------
Cash and equivalents 26,725 19,141 42,908 56,399 4,049 2,407
Other current
assets 1,480 2,206 16,943 21,434 3,718 5,483
Non-current
assets 46,865 48,507 135,464 138,054 48,459 32,828
Current financial
liabilities 23,450 18,389 15,659 20,099 1,874 2,554
Other current
liabilities - - - - - -
Non-current
financial liabilities 3,696 3,687 1,055 1,055 28,352 12,164
Other non-current
liabilities - - - - - -
Revenue 23,390 23,867 29,379 85,759 - -
Interest income 62 31 - - - -
Interest expense - - - - - -
Depreciation
and amortisation 1,656 1,658 7,396 6,831 - -
Taxation 2,533 2,919 - 263 - -
Profit (loss)
from continuing
operations 14,378 13,536 (3,511) 17,872 - -
Other comprehensive
income - - - - - -
Total comprehensive
income (loss) 14,378 13,536 (3,511) 17,872 - -
(i) Figures obtained from financial statements prepared under IFRS.
(ii) Figures obtained from financial statements prepared under Cuban GAAP.
8. Property, plant and equipment
Office furniture Works of
Motor vehicles and equipment art Total
US$ US$ US$ US$
----------------- ----------------- ----------- ----------
Cost:
At 1 January 2019 330,172 182,324 442,050 954,546
Additions 44,330 3,563 - 47,893
Revaluation - - 21,250 21,250
At 31 December
2019 374,502 185,887 463,300 1,023,689
Additions - 4,897 - 4,897
Revaluation - - - -
At 31 December
2020 374,502 190,784 463,300 1,028,586
Accumulated Depreciation:
At 1 January 2019 299,783 117,498 - 417,281
Charge 20,155 17,907 - 38,062
At 31 December
2019 319,938 135,405 - 455,343
Charge 22,372 17,273 39,645
At 31 December
2020 342,310 152,678 - 494,988
Net book value:
At 31 December
2019 54,564 50,482 463,300 568,346
At 31 December
2020 32,192 38,106 463,300 533,598
9. Accounts payable and accrued expenses
31 Dec 2020 31 Dec 2019
US$ US$
------------ ------------
Due to shareholders 5,926 5,399
Due to Meliã Hotels International
SA (i) 176,941 354,581
Accrued professional fees 223,349 586,981
Management fees payable (see note
14) 1,565,065 1,041,950
Accrued Directors' fees - 1,617
Other accrued expenses 186,127 57,116
Other accounts payable 57,891 18,569
------------ ------------
2,215,299 2,066,213
------------ ------------
Current portion 1,085,590 2,066,213
------------ ------------
Non-current portion 1,129,709 -
------------ ------------
(i) Amounts due to Meliã Hotels International S.A. represent
funds held for disbursement under the TosCuba Construction
Facility, scheduled to be disbursed to the constructor in January
2020.
The future maturity profile of accounts payable and accrued
expenses based on undiscounted contractual payments:
31 Dec 2020 31 Dec 2019
US$ US$
------------ ------------
Up to 30 days 179,136 409,709
Between 31 and 90 days - 1,115,552
Between 91 and 180 days 606,842 535,553
Between 181 and 365 days 299,612 5,399
Greater than 365 days 1,129,709 -
2,215,299 2,066,213
------------ ------------
10. 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
2019 137,671,576 106,638,023
------------ ---------------
Stated capital at 31 December
2020 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 2020 31 Dec 2019
US$ US$
------------- -------------
Total assets 239,297,994 262,015,519
Total liabilities (5,048,632) (5,899,546)
Less: non-controlling interests (39,823,748) (49,381,639)
------------- -------------
NAV 194,425,614 206,734,334
Number of ordinary shares
issued 137,671,576 137,671,576
NAV per share 1.41 1.50
Non-controlling interest
At 31 December 2020, the non-controlling interest corresponds to
the 35% participation of Meliã Hotels International S.A. in the
equity of HOMASI and the 20% participation of Meliã Hotels
International S.A. in the equity of Mosaico Hoteles.
The non-controlling interests in the above companies are as
follows:
31 Dec 2020 31 Dec 2019
US$ US$
------------ ------------
Non-controlling interest of
HOMASI 37,235,538 46,878,858
Non-controlling interest of
Mosaico Hoteles 2,588,210 2,502,781
Total non-controlling interests 39,823,748 49,381,639
------------ ------------
The movement of the non-controlling interests is as follows:
31 Dec 2020 31 Dec 2019
US$ US$
------------- ------------
Initial balance 49,381,639 55,674,370
Interest of non-controlling interest
in net (loss)/income (10,216,756) (5,633,673)
Net other comprehensive income/(loss)
to be reclassified to profit or loss
in subsequent periods 4,038,410 1,105,415
Cash distribution to non-controlling
interest (3,463,951) (1,786,874)
Capital contributions from non-controlling
interest 84,406 22,401
------------- ------------
Final balance 39,823,748 49,381,639
------------- ------------
The movement of the non-controlling interests HOMASI is as
follows:
31 Dec 2020 31 Dec 2019
US$ US$
------------- ------------
Initial balance 46,878,858 54,161,837
Interest of non-controlling interest
in net (loss)/income (10,217,779) (6,546,691)
Net other comprehensive income/(loss)
to be reclassified to
profit or loss in subsequent periods 4,038,410 1,105,415
Cash distribution to non-controlling
interest (3,463,951) (1,841,703)
Final balance 37,235,538 46,878,858
------------- ------------
The movement of the non-controlling interests of Mosaico Hoteles
is as follows:
31 Dec 2020 31 Dec 2019
US$ US$
------------ ------------
Initial balance 2,502,781 -
Interest of non-controlling interest
in net income 1,023 913,019
Non-controlling interest transferred
from Mosaico B.V. - 1,567,361
Capital contributions from non-controlling
interest 84,406 22,401
------------ ------------
Final balance 2,588,210 2,502,781
------------ ------------
The movement of the non-controlling interests of Mosaico B.V. is
as follows:
31 Dec 2020 31 Dec 2019
US$ US$
------------- ------------
Initial balance - 1,512,533
Interest of non-controlling interest
in net loss - (1)
Capital contributions from non-controlling
interest - -
Non-controlling interest transferred
to Mosaico Hoteles S.A. - (1,512,532)
------------ ------------
Final balance - -
------------ ------------
The principal financial information of HOMASI, Mosaico Hoteles
and Mosaico B.V. for the years ended 31 December 2020 and 2019 is
as follows:
Mosaico Hoteles
HOMASI S.A. Mosaico BV.
--------------------------- -------------------- ---------------------
2020 2019 2020 2019 2020 2019
US$ US$ US$ US$ US$ US$
000's 000's 000's 000's 000's 000's
---------- --- ---------- --------- --------- ------- --- -------
Current assets 3,347 6,316 24 104 - -
Non-current assets 103,184 127,888 13,000 12,750 - -
Current liabilities (144) (264) (83) (340) - -
Equity (106,387) (133,940) (12,941) (12,514) - -
Income 6,311 11,615 250 4,751 - -
Expenses (46,055) (30,320) (245) (186) - -
Depreciation - - - - - -
Taxation - - - - - -
Net income/(loss)
for the year (39,744) (18,705) (5) 4,565 - (7)
Other comprehensive
income 12,192 3,158 - - - -
Total comprehensive
income/(loss) (27,552) (15,547) (5) 4,565 - (7)
11. 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 maker 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 maker 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. 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 also
includes a facility provided to FINTUR (see note 6).
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 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
Other income 58 6,113 1,899,410 1,905,581
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 (139,406) (32,601,295) 2,715,325 (30,025,376)
Other comprehensive loss 11,538,310 11,538,310
------------ ------------- ----------- -------------
Total comprehensive income/(loss) (139,406) (21,062,985) 2,715,325 (18,487,066)
Other segment information:
Property, plant and equipment
additions 4,897 4,897
Depreciation 34,305 5,340 39,645
31 December 2019
US$
Commercial Tourism Other Total
property / Leisure
Total assets 91,969,762 149,273,530 20,772,227 262,015,519
Total liabilities (2,345,827) (3,553,719) - (5,899,546)
------------ ------------- ----------- -------------
Total net assets 89,623,935 145,719,811 20,772,227 256,115,973
Dividend income 9,133,233 11,537,327 - 20,670,560
Other income - 15,426 820,588 836,014
Change in fair value of
equity investments 10,537,071 (25,195,633) - (14,658,562)
Allocated expenses (2,525,970) (1,913,614) (79,425) (4,519,009)
Foreign exchange gain - - (383,162) (383,162)
------------ ------------- ----------- -------------
Net income 17,144,334 (15,556,494) 358,001 1,945,841
Other comprehensive loss - 3,158,328 21,250 3,179,578
Total comprehensive income/(loss) 17,144,334 (12,398,166) 379,251 5,125,419
Other segment information:
Property, plant and equipment
additions 47,893 - - 47,893
Depreciation 32,416 5,646 - 38,062
12. Related party disclosures
Compensation of Directors
Each Director receives a fee of GBP35,0 00 (US$47,628) per annum
with the Chairman receiving GBP 40,000 (US$54,432). The Chairman of
the Audit Committee also receives an annual fee of GBP40,000 (
US$54,432 ). 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 2020 were US$232,677 (year ended 31 December
2019: US$239,085).
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 2020 amounted to US$24,500 (2019: US$ US$24,500) with an
average rental charge per square meter at 31 December 2020 of
US$37.64 (2019: US$37.64) plus an administration fee of 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. The Group has assessed that there is not a material impact
to the consolidated financial statements as a result of the
adoption of IFRS 16.
Transactions with Investment Manager
ASFML is a wholly-owned subsidiary of Standard Life Aberdeen plc
which has an interest at 31 December 2020 in 9,747,852 shares of
the stated capital (2019: 9,747,852). For further discussion
regarding transactions with the Investment Manger see note 14.
Interests of Directors and Executives in the stated capital
At 31 December 2020 John Herring, a Director of CEIBA, had an
indirect interest in 40,000 shares (2019: 40,000 shares).
At 31 December 2020 Peter Cornell, a Director of CEIBA, has an
indirect interest in 100,000 shares (2019: 100,000 shares).
At 31 December 2020 Trevor Bowen a Director of CEIBA, has an
indirect interest in 43,600 shares (2019: 43,600 shares).
At 31 December 2020 Colin Kingsnorth, a Director of CEIBA, is a
director and shareholder of Laxey Partners Limited ("Laxey"). Laxey
holds 23,736,481 shares (2019: 17,303,252 shares). Funds managed by
Laxey hold 7,242,835 shares (2019: 13,676,064 shares) .
At 31 December 2020 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 (2019: 3,273,081 s hares ).
At 31 December 2020 Cameron Young, Chief Operating Officer of
CEIBA, has an indirect interest in 4,129,672 shares (2019:
4,129,672 shares).
At 31 December 2020 Paul S. Austin, Chief Financial Officer of
CEIBA, has an interest in 144,000 shares (2019: 144,000).
13. Basic and diluted earnings per share
The earnings (loss) per share have been calculated on a
weighted-average basis and are arrived at by dividing the net
income for the year/period attributable to shareholders by the
weighted-average number of shares in issue.
31 Dec 31 Dec
2020 2019
US$ US$
------------- ------------
Weighted average of ordinary shares in issue 137,671,576 137,671,576
Net (loss)/income for the year attributable
to the shareholders (19,808,620) 7,579,514
Basic and diluted (loss)/earnings per share (0.14) 0.06
14. 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 Standard Life Aberdeen 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
2020 were US$2,864,518 (2019: US$ 2,985,429 ). In order to assist
the Group with its cash flow requirements the Investment Manager
has agreed to defer payment of a portion of its fees earned during
2020 totaling US$1,129,709 until 2022 (see note 9).
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 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 2020,
the amount of the payment recorded as a deferred liability is
US$2,833,333 (2019: US$3,833,333) with US$1,000,000 (2019:
US$1,000,000) being the current portion and US$1,833,333 (2019:
US$2,833,333) being the non-current portion.
For the year ended 31 December 2020, 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 (2019: US$1,000,000):
2020 2019
US$ US$
------------
Management fees earned 2,864,518 2,985,429
Amortisation of deferred liability (1,000,000) (1,000,000)
------------ ------------
Management fee expense 1,864,518 1,985,429
------------ ------------
15. 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 2020 amounted to US$24,500 (2019:
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$45,000,000, divided into two separate
tranches of US$22,500,000 each, US$20,502,533 (2019: US$10,928,702)
of which has been advanced as at 31 December 2020. The Group has
the right to syndicate Tranche B of the Construction Facility to
other lenders (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 offshore 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 2020 the principal amount of EUR1,716,667 (US$2,110,795)
(2019: EUR2,883,333 (US$3,230,171)) was outstanding under the
Company's participation in Tranche C of the facility.
16. Financial risk management
Introduction
The Group is exposed to financial risks that are managed through
a process of identification, measurement and monitoring and subject
to risk limits and other controls. The objective of the Group is,
consequently, to achieve an appropriate balance between risk and
benefits, and to minimise potential adverse effects arising from
its financial activity.
The main risks arising from the Group's financial instruments
are market risk, credit risk and liquidity risks. Management
reviews policies for managing each of these risks and they are
summarised below. These policies have remained unchanged since the
beginning of the period to which these consolidated financial
statements relate.
Market risk
Market risk is the risk that the fair value of future cash flows
of financial instruments will fluctuate due to changes in market
variables. Market price risk comprises two types of risks: foreign
currency risk and interest rate risk. The Group is not materially
exposed to market price risk.
(i) Foreign currency risk
Currency risk is the risk that the value of a financial
instrument denominated in a currency other than the functional
currency will fluctuate due to changes in foreign exchange
rates.
The statement of comprehensive income and the net value of
assets can be affected by currency translation movements as certain
assets and income are denominated in currencies other than US$.
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.
The sensitivity of the income (loss) to a variation of the
exchange rate (EUR/US$) in relation to Euro denominated assets is
the following:
Effect of the
variation in the
foreign exchange
rate
% Income (loss) Income (loss)
31 Dec 2020 31 Dec 2019
US$ US$
------------------ --------------- ---------------
+15 1,202,344 1,882,162
+20 1,603,125 2,509,549
-15 (1,202,344) (1,882,162)
-20 (1,603,125) (2,509,549)
(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 was as follows:
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$) 1,058 - - 1,058
Cash on hand (CUC) 4,020 - - 4,020
Fixed Floating Non-interest
Total rate rate bearing
US$ US$ US$ US$
----------- --------- ------------------ ------------
31 December 2019
Equity investments (US$) 227,340,559 - - 227,340,559
Loans and lending facilities
(EUR) 3,230,171 3,230,171 - -
Loans and lending facilities
(US$) 9,915,549 9,915,549 - -
Accounts receivable and accrued
income (US$) 7,736,695 - - 7,736,695
Accounts receivable and accrued
income (EUR) 121,621 - - 121,621
Cash at bank (EUR) 11,230,891 - - 11,230,891
Cash at bank (US$) 1,191,898 - - 1,191,898
Cash at bank (GBP) 663,606 - - 663,606
Cash on hand (EUR) 996 - - 996
Cash on hand (US$) 1,724 - - 1,724
Cash on hand (CUC) 13,463 - - 13,463
Credit risk
Credit risk is the risk that one party to a financial instrument
will cause a financial loss for the other party by failing to
discharge an obligation, expected credit losses are measured using
probability of default, exposure at default and loss given default.
Management considers both historical analysis and forward-looking
information in determining an expected credit loss. Refer to note 6
for the assessment of the expected credit loss for loans and
lending facilities.
Maximum exposure to credit risk
The table below shows the maximum exposure to credit risk for
each component of the consolidated statement of financial position
as well as future loan commitments, irrespective of guarantees
received:
31 Dec 2020 31 Dec 2019
US$ US$
------------ ------------
Loans and lending facilities 20,222,635 13,145,720
Future loan commitments (TosCuba Construction
Facility) (i) 30,997,467 30,584,451
Accounts receivable and accrued income 16,349,676 2,142,673
Cash and cash equivalents 4,270,860 13,102,578
------------ ------------
Total maximum exposure to credit risk 71,840,638 58,975,422
------------ ------------
(i) The TosCuba Construction Facility is secured by future
income of the hotel under construction and 50% of the principal
construction facility amount is further secured by a guarantee
given by Cubanacán S.A., Corporación de Turismo y Comercio
Internacional, the Cuban shareholder of TosCuba S.A., backed by
income from another hotel in Cuba. The credit risk has
significantly changed from the prior year due to COVID 19 and the
prevailing economic conditions. As a result of the risk moving from
stage 1 to 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.
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 2020 31 Dec 2019
Rating US$ US$
-------- ------------ ------------
Cash at bank
Cuba Caa2 183,540 1,083,763
Guernsey A2 152,420 725,110
Spain Ba3 2,956,003 2,678,694
Spain A2 20,538 18,913
Spain Baa2 952,879 8,579,915
4,265,380 13,086,395
------------ ------------
Cash on hand
Spain - 100
Cuba 5,480 16,083
The Netherlands - -
------------ ------------
5,480 16,183
------------ ------------
Total cash and cash equivalents 4,270,680 13,102,578
------------ ------------
At 31 December 2020 and 31 December 2019, 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 note 5, 6 and 9).
Although the Group has a number of liabilities (see note 9 -
Accounts payable and accrued expenses, note 10 - Short-term
borrowings and note 16 - 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.
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$45,000,000 of which US$20,502,533 was disbursed as at
31 December 2020 (31 December 2019: US$10,928,702 and the
participation of the Group was US$16,106,466 (31 December 2019:
US$9,915,552). The Group has the right to syndicate Tranche B of
the Construction Facility to other lenders
The principal of the Construction Facility is to be disbursed on
a monthly basis on the percentage of construction completed in each
preceding month. Prior to the Covid-19 pandemic, it was anticipated
that the full amount of the Construction Facility would be
disbursed by the end of 2020. However, the timing of construction
has been affected by the pandemic and consequently the disbursement
of the principal under the Construction Facility has been delayed
and it is now anticipated that the final disbursement under the
Construction Facility will be in July 2022. The Group currently has
sufficient cash and cash equivalents to cover the full disbursement
of the Construction Facility (see note 20 concerning the Bond
Issue).
The estimated timing of cash outflows under the TosCuba
Construction Facility entered into in April 2018 are as
follows:
31 Dec 2020 31 Dec 2019
US$ US$
------------ ------------
Between 31 and 90 days 485,606 1,151,827
Between 91 and 180 days 3,011,861 1,317,800
Between 181 and 1 year 19,000,000 2,400,000
Over 365 days 8,500,000 25,714,823
------------ ------------
30,997,467 30,584,450
------------ ------------
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
2020 and 2019 to a total of US$ 234,249,362 and US$256,115,973,
respectively. The Group is not subject to external capital
requirements.
17. Fair value disclosures
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
3.9 (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 3.9 (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, and 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 2020
US$
Level 1 Level 2 Level 3 Total
--------- --------- ------------ ------------
Financial assets at
fair value through
profit or loss
Equity investments 197,921,225 197,921,225
197,921,225 197,921,225
----------------------------------------- ------------ ------------
31 December 2019
US$
Level 1 Level 2 Level 3 Total
--------- --------- ------------ ------------
Financial assets at
fair value through
profit or loss
Equity investments - - 227,340,559 227,340,559
- - 227,340,559 227,340,559
---------- ---------- ------------------- ------------ ------------
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 2020 31 Dec 2019
Unlisted private equity investments US$ US$
------------- -------------
Initial balance 227,340,559 238,795,681
Total gains recognised in
income or loss (41,914,276) (14,658,562)
Foreign currency translation
reserve 12,191,767 3,203,440
Acquisitions and capital contributions 303,175 -
Final balance 197,921,225 227,340,559
------------- -------------
Total losses for the year/period
included in income or loss
relating to assets and liabilities
held at the end of the reporting
year/period (41,914,276) (14,658,562)
------------- -------------
(41,914,276) (14,658,562)
------------- -------------
18. 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 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 7 197,921,225 - - 197,921,225
197,921,225 40,843,171 - 238,764,396
------------ -------------- -------------- ------------
Accounts payable
and accrued expenses 9 - - 2,215,299 2,215,299
Deferred liabilities 14 - - 2,833,333 2,833,333
- - 5,048,632 5,048,632
------------ -------------- -------------- ------------
31 December 2019
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 - 13,102,578 - 13,102,578
Accounts receivable
and accrued income 5 - 7,858,316 - 7,858,316
Loans and lending
facilities 6 - 13,145,720 - 13,145,720
Equity investments 7 227,340,559 - - 227,340,559
227,340,559 34,106,614 - 261,447,173
------------ -------------- -------------- ------------
Accounts payable
and accrued expenses 9 - - 2,066,213 2,066,213
Deferred liabilities 14 - - 3,833,333 3,833,333
- - 5,899,546 5,899,546
------------ -------------- -------------- ------------
There were no reclassifications of financial assets during the
year ended 31 December 2020 (year ended 31 December 2019: nil).
19. Audit fees
Audit fees incurred for the period below:
31 Dec 2020 31 Dec 2019
US$ US$
------------ ------------
Audit fee expense 270,909 465,514
------------ ------------
20. Events after the reporting period
Cuban Monetary Reforms
On 1 January 2021 new monetary reforms adopted by the Cuban
government came into effect. The principal goals of the reforms
include: (i) the unification of the two parallel Cuban currencies
through the elimination of the Cuban Convertible Peso and the
continuation of the Cuban Peso ("CUP"), (ii) the harmonisation of
exchange rates at US$1 : CUP24, (iii) the reduction or removal of
subsidies in the Cuban economy, and (iv) price and labour (salary,
pension and social security) reforms aimed at correcting price
levels.
The reforms are directly applicable to foreign investment
vehicles operating in the country, including joint venture
companies, who will need to convert all of their accounting records
to CUP and carry out all local transactions within the economy in
CUP going forward. By contrast, all entities operating in the
Special Development Zone of Mariel will continue to denominate and
carry out their operations exclusively in US$.
The reforms will profoundly affect the pricing and payment of
goods and services throughout the economy, including the foreign
investment sector, as well as salaries, pension and social security
payments. They are expected to remove significant distortions
caused in the past by numerous exchange rates.
The Company is presently determining the full impact that the
new measures will have on the operations and financial reporting of
the joint venture companies in which it participates, but it is
likely that the functional currency of the joint venture companies
will change from US$ to CUP as a result of the reforms.
Bond Issue
On 31 March 2021, the Company completed the issue of EUR25
million (US$29,312,500) 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
proceeds of the Bonds will be used by the Company (i) to complete
its funding obligations under the Construction Finance Facility
relating to the construction of the Meliã Trinidad Península hotel,
(ii) to advance the development of the GBM Mariel industrial
logistics project, and (iii) for general corporate purposes.
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.
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$1.41 / 103.8p as at 31 December
2020.
NAV Total Return
NAV total return involves investing the same net dividend in the
NAV of the Company with debt at fair value on the date on which
that dividend was earned. The table below provides information
relating to the NAV of the Company for the years ending 31 December
2019 and 2020.
2020 2019
Opening NAV 206,734,334 205,641,346
------------- ------------
Dividends paid - (8,560,689)
------------- ------------
Net comprehensive (loss)
/ income for the year (12,308,720) 9,653,677
------------- ------------
IFRS Closing NAV 194,425,614 206,734,334
------------- ------------
Non-IFRS adjustment 2,833,333 3,833,333
------------- ------------
Non-IFRS Closing NAV 197,258,947 210,567,667
------------- ------------
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 2020, the share price was 84.5p /
US$1.15 and the net asset value per share was 103.8p / US$1.41, the
discount was therefore 18.6%.
ADDITIONAL NOTES TO THE ANNUAL FINANCIAL REPORT
The Annual General Meeting will take place at the registered
office of the Company, Dorey Court, Admiral Park, St. Peter Port,
Guernsey, GY1 2HT Channel Islands on 17 June 2021 at 2.00pm
Please note that past performance is not necessarily a guide to
the future and that the value of investments and the income from
them may fall as well as rise. Investors may not get back the
amount they originally invested.
The Annual Financial Report Announcement is not the Company's
statutory accounts. The above results for the year ended 31
December 2020 are an abridged version of the Company's full
financial statements, which have been approved and audited with an
unqualified report. The Annual Report and financial statements will
be delivered to the Guernsey Financial Services Commission in due
course.
The audited Annual Report and financial statements will be
posted in May 2021. Copies may be obtained during normal business
hours from the Company's Registered Office, JTC Fund Solutions
(Guernsey) Limited, Dorey Court, Admiral Park, St. Peter Port,
Guernsey, GY1 2HT Channel Islands or from the Company's website,
ceibalimited.co.uk*.
* Neither the content of the Company's website nor the content
of any website accessible from hyperlinks on the Company's website
(or any other website) is (or is deemed to be) incorporated into,
or forms (or is deemed to form) part of this announcement.
By Order of the Board
JTC Fund Solutions (Guernsey) Limited
Secretary
27 April 2021
For further information, please contact:
Aberdeen Standard Fund Managers Limited Tel: +44 (0)20 7463
Sebastiaan Berger / Evan Bruce-Gardyne 6000
Nplus1 Singer Advisory LLP Tel: +44 (0)20 7496
James Maxwell / James Moat (Corporate Finance) 3000
James Waterlow (Sales)
JTC Fund Solutions (Guernsey) Limited Tel: +44 (0) 1481 702400
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END
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