Source - RNS
RNS Number : 2653L
Origo Partners PLC
30 September 2016
 

30 September 2016

 

Origo Partners Plc

("Origo" or the "Company" and together with its subsidiaries the "Group")

 

Interim Financial Report for the six months ended 30 June 2016 ("the Period")

 

Origo announces its unaudited interim results for the six months ended 30 June 2016.

 

Highlights:

 

·     Agreement reached following the Period end to restructure the Company's share capital and settle ongoing disputes with Brooks Macdonald Group plc ("Brooks Macdonald")

·     Trading on AIM restored on 7 September 2016

·     Investment gain of US$0.9 million (30 June 2015 investment gain: US$3.2 million)

·     Loss after tax of US$4.1 million (30 June 2015 loss after tax: US$4.1 million)

·     Total assets of US$109.7 million (31 December 2015: US$109.5 million)

·     Net asset value of US$26.5 million (31 December 2015: US$30.6 million) reflecting, inter alia, the continued accrued rate of return relating to the Company's convertible zero dividend preference shares ("CZDPs") and the Company's operating costs during the Period

·     Total other administrative expenses of US$1.0 million (30 June 2015: US$2.5 million)

·     Net asset value per share of US$0.07 as at 30 June 2016 (31 December 2015: US$0.09)

·     Closing net cash position of US$0.6 million as at 30 June 2016

 

Chairman's Statement

 

During the first half of 2016, and following the Period end, the Board made significant progress in addressing a number of issues facing the Company.

 

Following extensive discussions with key shareholders, and further to the proposed restructuring of the Company's share capital set out in a circular sent to shareholders in January 2016, a revised set of proposals (the "Proposals") to restructure the Company's share capital, settle the ongoing disputes with Brooks Macdonald, and provide Origo with greater flexibility to implement its Investing Policy were agreed.

 

In particular, the Proposals, which were set out in detail in the Company's announcement of 7 September 2016 and in the related circular sent to shareholders ("the Circular"), were designed to remove the Company's obligations in respect of the redemption of at least 12 million CZDPs, remove any final CZDP redemption and/or maturity date and also make a number of further significant changes to the terms of the CZDPs. Following the publication of the Circular on 7 September 2016, trading in the Company's ordinary shares and CZDPs on the AIM market of the London Stock Exchange ("AIM") resumed.

 

The approval of the Proposals by the requisite majority of ordinary and CZDP shareholders on September 26, 2016 brings to an end a significant period of uncertainty and expense for the Company and its shareholders. We can now work with all of the Company's shareholders to return Origo to a more stable footing.

 

The implementation of the Proposals will have a number of NAV accretive impacts. It will reset the aggregate accreted principal amount of the CZDPs (now renamed 'redeemable preference shares' following implementation of the Proposals) to approximately US$60 million and freeze accruals in respect of the redeemable preference shares until January 1, 2018. It will also reduce ongoing fees and increase the hurdle for any investment performance incentive fee payments to Origo Advisors Ltd ("OAL"), our Investment Consultant.

 

Most importantly, with the resumption of trading of the Company's shares on AIM, the restructuring of the Company's share-capital and the resolution of the disputes with Brooks Macdonald, Origo is in a significantly improved position to deliver its Investing Policy of divesting the Company's entire portfolio by November 2018.

 

Although markets remain difficult, we believe that opportunities for divestment are beginning to emerge and the Origo board of directors (the "Board") will now focus its efforts on working with the Company's investment consultant, Origo Advisers Limited, to identify and progress initiatives to release value from the portfolio and to improve the Company's funding position.

 

Investment Consultant's Report

 

The first half of 2016 saw improved market conditions compared to 2015, with greater stability in commodities markets and a Chinese government stimulus package supporting the sectors in which many of our investee companies operate.

 

Origo's financial performance stabilised compared to previous periods, with the fair value of the portfolio (equity and debt investments) of US$104.3 million, slightly higher compared to US$103.6 million at the end of 2015.

 

Similarly, although Origo's net asset value fell by approximately US$4 million to US$26.5 million during the Period, US$3.1 million of this movement related to the continued accrued rate of return relating to the CZDPs from US$69.4 million to US$72.5 million. Following receipt of shareholder approval for the Proposals described above, the accrued value of the redeemable preference shares has been reset, with a corresponding increase in the Company's net asset value which will be recognised in the results for the year ending 31 December 2016.

 

Reflecting the revised Investing Policy, we continued to adjust our operations and successfully reduced administrative costs by 60 per cent. during the Period compared to the first half of 2015 (H1 2016: US$1.0 million, H1 2015: US$2.5 million).

 

No further investments were made during the Period.

 

The Company recorded a loss after tax of US$4.1 million for the Period, compared to a loss of US$4.1 million in the corresponding period of 2015.

 

At the end of the Period, the Company had cash and cash equivalents of US$0.64 million, down from US$1.30 million at the end of 2015.

 

Outlook

 

With greater stability in commodity prices during the Period, we have seen a return to more positive market conditions.

 

A number of significant resources sector transactions have been announced by Chinese companies at valuations which in some cases have exceeded market expectations in recent months. Whilst these transactions have involved producing assets, we believe they indicate that the prospects for achieving value accretive disposals from Origo's mining and metals portfolio are improving.

 

In the cleantech sector, the Chinese government's support for electric vehicles and other environmentally friendly industries continues to grow, providing underlying support for a number of investments in our portfolio.

 

In addition, the successful restructuring of the CZDPs and resolution of the ongoing disputes with Brooks Macdonald should enable Origo to manage divestments from a stronger, more stable position.

 

Despite these positive developments, debates continue over the future trajectory for Chinese economic growth with concerns focussed on, amongst other things, growing debt levels. Liquidity conditions in China impact, directly or indirectly, all of our Chinese investments as well as the demands for our resource assets outside of China.  

 

Consequently, we remain cautious about the prospects for achieving divestments in the short term and the Company's cash resources remain limited. Accordingly, and as previously announced, the Board is exploring a number of possible options to secure additional working capital for Origo. Following the acceptance of the Proposals, and settlement of the ongoing disputes with Brooks MacDonald, we believe that the Company should be better positioned to obtain such funding though there can be no certainty over the timing or proposed structure of any financing.

 

 

For further information about Origo please visit www.origoplc.com or contact:

 

Origo Partners plc

Niklas Ponnert

 

  [email protected]

 

Nominated Adviser

Smith & Williamson Corporate Finance Limited

Azhic Basirov

Ben Jeynes

 

 

+44 (0)20 7131 4000

Public Relations

Aura Financial

Andy Mills

 

 

+44 (0)20 7321 0000

 

Interim Consolidated Statement of Comprehensive Income

For the six months ended 30 June 2016

 



(Unaudited)

Six months ended

30 June 2016

(Unaudited)

Six months ended

30 June 2015


Notes

US$'000

US$'000

Investment income:

3



Realised gains/(losses) on disposal of investments


26

(978)

Unrealised gains on investments


497

3,819

Income from loans


356

368

 


879

3,209

Fund Consulting fee

4

(966)

(1,044)

Other income


18

65

Performance incentive

5

(71)

(542)

Share-based payments

21

(29)

(54)

Other administrative expenses

6

(951)

(2,526)

Net loss before finance costs and taxation


(1,120)

(892)

Foreign exchange gains/(losses)


92

(103)

Finance income

9

9

-

Finance costs

9

(3,086)

(2,840)

Loss before tax


(4,105)

(3,835)

Income tax

10

(44)

(305)

Loss after tax


(4,149)

(4,140)

Other comprehensive income




Other comprehensive income to be reclassified to profit or loss in subsequent periods:




Exchange differences on translating foreign operations


16

94

Tax on other comprehensive losses


-

-

Net other comprehensive income to be reclassified to profit or loss in subsequent periods


16

94

Total comprehensive loss after tax


(4,133)

(4,046)

 

Loss after tax




Attributable to:




- Owners of the parent


(4,144)

(4,128)

- Non-controlling interests


(5)

(12)



(4,149)

(4,140)

Total comprehensive loss




Attributable to:




- Owners of the parent


(4,128)

(4,034)

- Non-controlling interests


(5)

(12)

 


(4,133)

(4,046)

Basic loss per share

11

(1.18) cents

(1.18) cents

Diluted loss per share

11

(1.18) cents

(1.18) cents

 

The accompanying notes form an integral part of these financial statements.

 

 

Interim Consolidated Statement of Financial Position

As at 30 June 2016

Assets

Notes

(Unaudited)

30 June 2016

US$'000

(Audited)

31 December 2015

US$'000

Non-current assets




Property, plant and equipment


50

64

Intangible assets


3

4

Investments at fair value through profit or loss

13

77,959

77,571

Loans

14

266

350

 


78,278

77,989

Current assets




Trade and other receivables

15

4,461

4,101

Loans due within one year

14

26,300

26,093

Cash and cash equivalents


640

1,272

 


31,401

31,466

Total assets


109,679

109,455

Current liabilities




Trade and other payables

16

3,835

2,701

Performance incentive payable within one year

16

8

8  

Financial guarantee contracts

17

435

435



4,278

3,144

Non-current liabilities




Convertible zero dividend preference shares

18

72,468

69,385

Provision

19

4,309

4,262

Deferred income tax liability


2,125

2,082



78,902

75,729

Net assets


26,499

30,582

Equity attributable to owners of the parent




Issued capital

20

56

56

Share premium


150,414

150,414

Share-based payment reserve


7,626

7,573

Retained earnings


(139,968)

(135,824)

Translation reserve


(1,479)

(1,495)

Equity component of convertible zero

dividend preference shares

18

8,297

8,297

Other reserve


1,056

1,056



26,002

30,377

Non-controlling interests


497

505

Total equity


26,499

30,582

Total equity and liabilities


109,679

109,455

 

The accompanying notes form an integral part of these financial statements.

 

 

Interim Consolidated Statement of Changes in Equity

For the six months ended 30 June 2016

 

                                                                            Attributable to equity holders of the parent


Issued   capital

US$'000

Share premium

US$'000

Share-

based payment reserve

US$'000

Retained earnings

US$'000

Equity component of CZDPs*

US$'000

Other reserve

US$'000

Translation reserve

US$'000

Total

US$'000

Non-controlling interests

US$'000

Total

equity

US$'000

At 1 January 2016

56

150,414

7,573

(135,824)

8,297

1,056

(1,495)

30,077

505

30,582

Loss for the period

-

-

-

(4,144)

-

-

-

(4,144)

(5)

(4,149)

Other comprehensive income

-

-

-

-

-

-

16

16

-

16

Total comprehensive income/

(loss)

-

-

-

(4,144)

-

-

16

(4,128)

(5)

(4,133)

Share-based payment expense

-

-

53

-

-

-

-

53

-

53

Minority interests

-

-

-

-

-

-

-

-

(3)

(3)

At 30 June 2016

56

150,414

7,626

(139,968)

8,297

1,056

(1,479)

26,002

497

26,499

 

 

                                                                            Attributable to equity holders of the parent


Issued  capital

US$'000

Share premium

US$'000

Share-

based payment reserve

US$'000

Retained earnings

US$'000

Equity component of CZDPs*

US$'000

Other reserve

US$'000

Translation reserve

US$'000

Total

US$'000

Non-controlling interests

US$'000

Total

equity

US$'000

At 1 January 2015

55

150,262

7,147

(111,484)

8,297

995

(1,500)

53,772

572

54,344

Loss for the period

-

-

-

(4,128)

-

-

-

(4,128)

(12)

(4,140)

Other comprehensive income

-

-

-

-

-

-

94

94

-

94

Total comprehensive income/

(loss)

-

-

-

(4,128)

-

-

94

(4,034)

(12)

(4,046)

Capital redemption of CCP fund

1

184

-

-

-

-

-

185

-

185

Share-based payment expense

-

(32)

-

-

-

61

-

29

-

29

Minority interests

-

-

178

-

-

-

-

178

-

178

At 30 June 2015

56

150,414

7,325

(115,612)

8,297

1,056

(1,406)

50,130

560

50,690

 

The following describes the nature and purpose of each reserve within parent's equity:

 

Reserve

Description and purpose

Share premium

Amounts subscribed for share capital in excess of nominal value.

Share-based payment reserve

Equity created to recognise share-based payment expense.

Equity component of CZDPs

Convertible zero dividend preference shares.

Other reserve

Equity created to recognise own shares acquired.

Translation reserve

Equity created to recognise foreign currency translation differences.

 

The accompanying notes form an integral part of these financial statements.

 

 

Interim Consolidated Statement of Cash Flows

For the six months ended 30 June 2016



(Unaudited)

(Unaudited)



Six months ended

Six months ended



30 June 2016

30 June 2015


Notes

US$'000

US$'000

Loss before tax


(4,105)

(3,835)

Adjustments for:




Depreciation and amortisation

6

14

20

Performance incentive

5

71

542

Share-based payments

21

29

54

Provision for bad debts

6

-

49

Realised losses on disposal of investments

3

(26)

978

Unrealised gains on investments at FVTPL*

3

(373)

(4,138)

Unrealised (gains)/losses on loans

3

(124)

308

Fair value losses on derivative financial assets

3

-

11

Income from loans

3

(356)

(368)

Foreign exchange (gains)/losses


(92)

103

Interest expenses of convertible zero dividend preference shares

9

3,083

2,826

Purchases of investments at FVTPL


-

(21)

Purchases of loans


-

(363)

Proceeds from disposals of investments at FVTPL


-

300

Repayment of loans


-

245

Operating (losses)/gains before changes in working capital and provisions


(1,879)

(3,289)

Decrease in trade and other receivables


36

77

Increase in trade and other payables


1,206

748

Net cash outflow from operations


(637)

(2,464)

Investing activities




Net cash acquired from subsidiary


8

-

Net cash flows outflow from investing activities


8

-

Financing activities




Repayment of short-term borrowings


-

-

Net cash outflow from financing activities


-

-

Net decrease in cash and cash equivalents


(629)

(2,464)

Effect of exchange rate changes on cash and cash equivalents


(3)

91

Cash and cash equivalents at beginning of period


1,272

5,185

Cash and cash equivalents at end of period


640

2,812

 

*   FVTPL refers to fair value through profit or loss

 

The accompanying notes form an integral part of these financial statements.

 

 

Notes to the Interim Consolidated Financial Statements

 

1       General information

 

Origo Partners Plc is a limited liability company incorporated and domiciled in the Isle of Man whose shares are publicly traded on the AIM market of the London Stock Exchange.

 

The Company and its subsidiaries are collectively referred to as the Group.

 

The principal activities of the Group are private equity investment, focused on growth opportunities created by the urbanization and industrialization of China. The Group's Investing Policy has now changed from that of a closed-ended, permanent capital vehicle to that of a realisation company with the mandate to return the net proceeds of realisations to shareholders.

 

These interim consolidated financial statements have been approved and authorised for issue by the Company's board of directors on 29 September 2016.

 

2       Basis of preparation and significant accounting policies

 

2.1   Basis of preparation

 

These interim consolidated financial statements have been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting".

 

These interim consolidated financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group's annual financial statements for the year ended 31 December 2015.

 

2.2   Significant accounting policies

 

The accounting policies adopted in the preparation of the interim consolidated financial statements are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 31 December 2015.

 

The following new and revised IFRSs did not have any impact on the accounting policies, financial position or performance of the Group:

 

IAS 19 Amendments to defined benefit plans

 

The Group has not early adopted any other standard, interpretation or amendment that was issued but is not yet effective.

 

3         Investment income

 

(Unaudited)

Six months ended

30 June 2016

US$'000

(Unaudited)

Six months ended

30 June 2015

US$'000

Realised gains/(losses) on disposal of investments

26

(978)

- Investments at FVTPL

29

(612)

- Loans

-

(363)

- Subsidiary

(3)

(3)

Unrealised gains/(losses) on investments

497

3,819

- Investments at FVTPL

373

4,138

- Loans

124

(308)

- Derivative financial assets

-

(11)

Income from loans

356

368

Total

879

3,209

 

4       Fund Consulting fee

 

(Unaudited)

Six months

 ended

30 June 2016

US$'000

(Unaudited)

Six months

 ended

30 June 2015

US$'000

Consulting Services payable

(966)

(1,044)

Total

(966)

(1,044)

 

 

5       Performance incentive

 

 

(Unaudited)

Six months

 ended

30 June 2016

US$'000

(Unaudited)

Six months

 ended

30 June 2015

US$'000

Provision for performance incentive payable over one year

(71)

(542)

Total

(71)

(542)

 

A balance sheet provision for future performance incentive for the period ended 30 June 2016 was US$4,265,070 (31 December 2015: US$4,194,262). The performance incentives are accrued and payable to Origo Advisers Ltd ("OAL") (refer to Note 22 for details on Origo Advisers Ltd.)

The amount of performance incentives has been calculated and accrued on the following basis: (i) from the time the Hurdle has been reached, the next US$1,700,000 of Gross Realisations shall be applied towards equal payments of performance incentives; and thereafter (ii) 20 per cent of each subsequent Gross Realisation shall be applied towards an equal further payment of performance incentive.

 

*           Hurdle: US$90,000,000 of Gross Realisations

 

**         Gross Realisation: cumulative gross cash proceeds received by or on behalf of the Group which are derived from the realisation of assets in the Portfolio, after having made full provision for repayment of any third party debt (including any unpaid interest thereon) and any related hedge or other break costs and any prepayment fees and penalties thereon, but before any related transactional costs, fees and expenses and any taxes required to be paid by the relevant selling entity that arise directly as a result of completion of the relevant transaction to dispose of the relevant asset, provided that any amounts of deferred consideration or earn-out shall not be counted towards such realisations until actually received by the relevant selling member of the Group.

 

Effective on 26 September, 2016, the terms of the consulting agreement under which OAL provide services to the Company,  including the definition of the Hurdle as stated above, have been amended.  Please refer to Note 24 for details.

 

6       Other administrative expenses

 

 

(Unaudited)

Six months

 ended

30 June 2016

US$'000

(Unaudited)

Six months

 ended

30 June 2015

US$'000

Employee expenses

(162)

(91)

Professional fees

(682)

(2,062)

Including:



 -Audit fees

(2)

(109)

Depreciation expenses

(14)

(20)

Provision for bad debts*

-

(49)

Others

(93)

(304)

Total

(951)

(2,526)

 

*           Provision has been recognised only on receivables where it is considered that there is a greater than 50% risk of failure of collection.

 

7       Directors' remuneration

 

 

 

 

 

(Unaudited)

Six months

 ended

30 June 2016

US$'000

(Unaudited)

Six months

 ended

30 June 2015

US$'000

Directors' emoluments




153

68

Share-based payment expenses




45

79

Total 

 

 

 

 198

147

 

Directors' remuneration for the six months ended 30 June 2016 and number of options held were as follows:

 

Name

Salaries*
US$'000

Director Fee
US$'000

Share-based payments**
US$'000

Total
US$'000


Number of options

Mr. Wang Chao Yong***

-

-

7

7

4,000,000

Mr. Chris A Rynning***

-

-

19

19

3,500,000

Mr. Niklas Ponnert

-

-

19

19

5,300,000

Mr. Christopher Jemmett***

-

-

-

-

100,000

Mr. Lionel de Saint Exupery

-

78

-

78

-

Mr. Tom Preststulen***

-

-

-

-

-

Ms. Shonaid Jemmett Page

-

75

-

75

-


-

153

45

198

12,900,000

 

Directors' remuneration for the six months ended 30 June 2015 and number of options held were as follows:

Name

Salaries*
US$'000

Director Fee
US$'000

Share-based payments**
US$'000

Total
US$'000


Number of options

Mr. Wang Chao Yong***

3

-

(9)

(6)

4,000,000

Mr. Chris A Rynning***

-

-

44

44

3,500,000

Mr. Niklas Ponnert

-

-

44

44

5,300,000

Mr. Christopher Jemmett***

-

3

-

3

100,000

Mr. Lionel de Saint Exupery

-

28

-

28

-

Mr. Tom Preststulen***

-

6

-

6

-

Ms. Shonaid Jemmett Page

-

28

-

28

-


3

65

79

147

12,900,000

 

*           Short term employee benefits

 

**         Share-based payments refer to expenses arising from the Company's share option scheme (see note 21 for details).

 

***       Mr. Wang Chao Yong, Mr. Chris A Rynning, Mr. Christopher Jemmett and Mr. Tom Preststulen resigned as Directors of the Company on 16 February 2015. The remaining directors of the Company are Shonaid Jemmett-Page (Non-executive Chairman), Lionel de Saint-Exupery (Non-executive Director) and Niklas Ponnert (Executive Director).

 

 

8       Operating segment information

 

Operating segments are components of the entity whose results are regularly reviewed by the entity's chief operating decision-maker to make decisions about resources to be allocated to the segment and to assess its performance. The chief operating decision-maker for the Group is considered to be the Executive Director. The Group's operating segments has been defined based on the types of investments which was equity investment and debt instrument in 2016 and 2015.

 

For the six months ended 30 June 2016 (Unaudited)

 


Unlisted

Listed

Total


Equity

Debt

Total

Equity

Debt

Total


 

$'000

$'000

$'000

$'000

$'000

$'000

$'000

Investment income/(loss):








Realised gains on disposal of  investments

4

-

4

22

-

22

26

Unrealised gains/(losses) on investments

(540)

(3)

(543)

913

127

1,040

497

Income from loans

-

271

271

-

85

85

356

Total

(536)

268

(268)

935

212

1,147

879

 

Net divestment/(investment)








Net proceeds of divestment

-

-

-

-

-

-

-

Investment

-

-

-

-

-

-

-









Balance sheet








Investment portfolio

75,585

24,646

100,231

2,374

1,920

4,294

104,525

 

The Group's geographical areas, based on the location of investment assets (non-current assets), are defined primarily as China, Mongolia, Europe and South Africa as presented in the following table.

 

For the six months ended 30 June 2016 (Unaudited)

 


Europe

China

Mongolia

South Africa

Total

 

$'000

$'000

$'000

$'000

$'000

Investment income/loss:






Realised gains/(losses) on disposal of investments

-

(3)

29

-

26

Unrealised gains/(losses) on investments

(75)

534

38

-

497

Income from loans

-

271

85

-

356

Total

(75)

802

152

-

879







Net divestment/(investment)






Net proceeds of divestment

-

-

-

-

-

Investment

-

-

-

-

-







Balance sheet






Investment portfolio

1,025

88,000

15,500

-

104,525

 

For the six months ended 30 June 2015 (Unaudited)

 

 


Unlisted

Listed

Total


Equity

Debt

Total

Equity

Debt

Total


 

$'000

$'000

$'000

$'000

$'000

$'000

$'000

Investment income/(loss):








Realised losses on disposal of  investments

(3)

(363)

(366)

(612)

-

(612)

(978)

Unrealised gains/(losses) on investments

3,324

(187)

3,137

803

(121)

682

3,819

Income from loans

-

282

282

-

86

86

368

Total

3,321

(268)

3,053

191

(35)

156

3,209

 

Net divestment/(investment)








Net proceeds of divestment

-

245

245

300

-

300

545

Investment

(21)

(363)

(384)

-

-

-

(384)









Balance sheet








Investment portfolio

92,203

26,360

118,563

2,350

2,017

4,367

122,930

 

For the six months ended 30 June 2015 (Unaudited)

 


Europe

China

Mongolia

South Africa

Total

 

$'000

$'000

$'000

$'000

$'000

Investment income/(loss):






Realised losses on disposal of investments

(366)

-

(612)

-

(978)

Unrealised gains/(losses) on investments

328

4,307

(547)

(269)

3,819

Income from loans

-

282

86

-

368

Total

(38)

4,589

(1,073)

(269)

3,209







Net divestment/(investment)






Net proceeds of divestment

-

245

300

-

545

Investment

(384)

-

-

-

(384)







Balance sheet






Investment portfolio

1,843

94,287

25,220

1,580

122,930

 

9       Finance income and costs

 

 

 

(Unaudited)

Six months ended

30 June 2016

US$'000

(Unaudited)

Six months ended

30 June 2015

US$'000

Finance income




Bank interest


9

-



9

-

Finance costs




Bank charges


(3)

(15)

Interest expenses of convertible zero

dividend preference shares


(3,083)

(2,825)



(3,086)

(2,840)

Total


(3,077)

(2,840)

 

10           Income tax

 

No provision for current tax was made for the year as the subsidiaries had no assessable profit. As the Group is not in receipt of income from Manx land, property or retail activity and does not hold a Manx banking licence, it is taxed at the standard rate of zero per cent on the Isle of Man.


(Unaudited)

Six months ended

30 June 2016
US$'000

(Unaudited)

Six months ended

30 June 2015
US$'000

Current taxes



Current year

-

-

Deferred taxes



Deferred income taxes*

(44)

(305)

Total income taxes in the statement of comprehensive income

(44)

(305)

 

*           The deferred income tax relates to net change in fair value gains/(losses) of Celadon Mining Ltd, China Rice Ltd, Unipower Battery Ltd, Shanghai Yi Rui Tech New Energy Technology Ltd and Niutech Energy Ltd, estimated in accordance with the relevant tax laws and regulations of the PRC based on a tax rate of 10 per cent.



11     Earnings per share

 

Numerator

(Unaudited)

Six months ended

30 June 2016

US$'000

(Unaudited)

Six months ended

30 June 2015

US$'000

Loss for the period attributable to owners of the parent

as used in the calculation of basic loss per share

(4,144)

(4,128)

Loss for the period attributable to owners of the parent

as used in the calculation of diluted loss per share

(4,144)

(4,128)




Denominator

(Unaudited)

30 June 2016

Number of shares

(Unaudited)

30 June 2015

Number of shares

Weighted average number of ordinary shares for basic LPS

351,035,389

350,387,378

Weighted average number of ordinary shares adjusted for the effect of dilution

351,035,389

350,387,378

Basic LPS

(1.18) cents

(1.18) cents

Diluted LPS

(1.18) cents

(1.18) cents

         

12     Investments in subsidiaries

 

The principal subsidiaries of the Company, all of which have been included in these consolidated financial statements, are as follows:

 

Name

Country of incorporation

Proportion of

ownership interest

                     at 30 June 2016

Proportion of ownership interest

at 31 December 2015

Ascend Ventures Ltd

Malaysia

100%

100%

Origo Resource Partners Ltd

Guernsey

100%

100%

PHI International Holding Ltd

Bermuda

100%

100%

PHI International (Bermuda) Holding Ltd*

Bermuda

100%

100%

Ascend (Beijing) Consulting Ltd**

China

100%

100%

China Cleantech Partners, L.P.

Cayman

100%

100%

China Commodities Absolute Return Ltd

Isle of Man

95.3%

95.3%

ISAK International Holding Ltd**

British Virgin Islands

71.2%

71.2%

 

*           Owned by Origo Resource Partners Ltd

 

**         Owned by Ascend Ventures Ltd

 

13      Investments at fair value through profit or loss

 

As at 30 June 2016 (Unaudited)

 

Name

Country of incorporation

Fair Value hierarchy level

Proportion of ownership interest

Cost

US$'000

Fair value

US$'000

IRCA Holdings Ltd.

 British Virgin Islands

3

49.1%

9,505

-

Shanghai Yi Rui Tech New Energy Technology Ltd

 China

                              3

49.0%

675

450

Resources Investment Capital Ltd.

 British Virgin Islands

                 3

38.5%

287

-

Roshini International Bio Energy Corporation

 British Virgin Islands

                              3

35.9%

17,050

-

China Rice Ltd

 British Virgin Islands

             3

32.1%

13,000

16,050

Kincora Copper Ltd**

 Canada

             1

26.5%

1,925

R.M.Williams Agricultural Holdings Pty Ltd

 Australia

                              3

24.0%

20,214

-

Moly World Ltd

 British Virgin Islands

             3

20.0%

10,000

5,383

Niutech Energy Ltd

 British Virgin Islands

             3

19.1%

6,350

11,467

Unipower Battery Ltd

 Cayman Islands

              3

16.5%

4,301

5,820

Fans Media Co., Ltd

 British Virgin Islands

           3

14.3%

2,360

-

Gobi Coal & Energy Ltd**

 British Virgin Islands

              3

10.8%

14,960

5,693

Celadon Mining Ltd

 British Virgin Islands

            3

9.7%

13,069

24,637

Staur Aqua AS

 Norway

             3

9.2%

719

373

Ares Resources**

 Mongolia

          3

5.0%

148

-

Bach Technology GmbH

 Germany

         3

2.5%

60

-

Rising Technology Corporation Ltd/
Beijing Rising Information Technology Ltd
*

 British Virgin Islands/China

                              3

2%/1.6%

5,565

  3,964

Kooky Panda Ltd

 Cayman Islands

           3

1.2%

25

-

Six Waves Inc

 British Virgin Islands

             3

1.1%

240

1,461

Marula Mines Ltd**

South Africa

3

0.9%

250

129

Fram Exploration AS

 Norway

            3

0.6%

1,223

157

Other quoted investments**


1


1,569

450

Total




128,298

77,959

 

As at 31 December 2015 (Audited)

 

Name

Country of

incorporation

Fair Value hierarchy

level

Proportion of ownership

interest

Cost

US$'000

Fair value

US$'000

IRCA Holdings Ltd.

 British Virgin Islands

3

49.1%

   9,505

             -  

Shanghai Yi Rui Tech New Energy Technology Ltd

 China

                              3

49.0%

                       675

                793

Resources Investment Capital Ltd.

 British Virgin Islands

                 3

38.5%

       287

                -

Roshini International Bio Energy Corporation

 British Virgin Islands

                              3

35.9%

                  17,050

                    -  

China Rice Ltd

 British Virgin Islands

             3

32.1%

13,000

  16,417

Kincora Copper Ltd**

 Canada

             1

26.1%

  6,728

    1,180

R.M.Williams Agricultural Holdings Pty Ltd

 Australia

                              3

24.0%

                  20,214

                    -  

Moly World Ltd

 British Virgin Islands

             3

20.0%

10,000

5,419

Niutech Energy Ltd

 British Virgin Islands

             3

19.1%

 6,350

  11,531







Unipower Battery Ltd

 Cayman Islands

              3

16.5%

  4,301

  5,795

Fans Media Co., Ltd

 British Virgin Islands

           3

14.3%

 2,360

            -  

Gobi Coal & Energy Ltd**

 British Virgin Islands

              3

14.0%

14,960

6,575

Celadon Mining Ltd

 British Virgin Islands

            3

9.7%

13,069

23,674

Staur Aqua AS

 Norway

             3

9.2%

     719

       373

Ares Resources**

 Mongolia

          3

5.0%

     148

         -

Bach Technology GmbH

 Germany

         3

2.5%

   60

        -  

Rising Technology Corporation Ltd/
Beijing Rising Information Technology Ltd
*

 British Virgin Islands/China

                              3

2%/
1.6%

                  5,565

             3,884

Kooky Panda Ltd

 Cayman Islands

           3

1.2%

   25

             -  

Six Waves Inc

 British Virgin Islands

             3

1.1%

    240

    1,218

Marula Mines Ltd**

South Africa

3

0.9%

250

214

Fram Exploration AS

 Norway

            3

0.6%

  1,223

       232

Other quoted investments**


1


1,569

   266

Total




128,298

77,571

*              2% equity stake in Rising Technology Corporation Ltd and 1.6% beneficial interest (under a nominee arrangement) in Beijing Rising Information Technology Ltd, a company incorporated in the PRC.

**            Investments held partially by China Commodities Absolute Return Ltd ("CCF"), a fund managed by the Group. The investments were transferred to the Company on Jan 6, 2016.

 

As at 30 June 2016 the proportion of ownership interest held by CCF in investments is as follows:

Name

Proportion of ownership interest

Cost

US$'000

Fair value

US$'000

Gobi Coal & Energy Ltd

0.2%

252

96

 

In accordance with IFRS 7: Financial Instruments: Disclosures, financial instruments recognized at fair value are required to be analysed between those whose fair value is based on:

a)   Quoted prices in active markets for identical assets or liabilities (Level 1);

b)   Those involving inputs other than quoted prices included in level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices) (Level 2); and

c)   Those with inputs for the asset or liability that are not based on observable market data (unobservable inputs) (Level 3).

 

In according with IFRS 13: For assets and liabilities that are recognized in the financial statements on a recurring basis, the Group determines whether transfers have occurred between Levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement at a whole) at the end of each reporting period. There have been no transfers between Levels during the period of first six months of 2016. There have been no transfers between Levels during the period of 2015.

Statement of changes in investments at fair value through profit or loss based on level 3:

 


(Unaudited)

Six month ended

30 June 2016

US$'000

(Audited)

2015

US$'000

Opening balance

76,125

88,860

Acquisitions

-

20

Proceeds from disposals of investments

-

-

Realised losses on disposals of investments

-

-

Realised losses on write-off of investments

-

-

Net exchange difference

(2,148)

(1,327)

Movement in unrealised gains/(losses) on investments

-


- In profit or loss

1,607

(11,428)

Transfers out of Level 3

-

-

Closing balance

75,584

76,125

 

The fair value decrease on investments categorised within Level 3 of US$540,849 (2015: US$12,754,500), was recorded in the statement of comprehensive income.

Description of significant unobservable inputs to valuation:

as at 30 June 2016


Valuation technique

Significant

unobservable inputs

Range

Investments in unquoted equity shares - metal & mining sector

DCF method

WACC

19%



Discount for lack of marketability

20% - 30%

Investments in unquoted equity shares - metal & mining sector

Multiples method

Discount for lack of marketability

20% - 30%

Investments in unquoted equity shares - cleantech sector

Multiples method

Discount for lack of marketability

30%

Investments in unquoted equity shares - agriculture sector

Multiples method

Discount for lack of marketability

30%

Investments in unquoted equity shares - TMT sector

Multiples method

Discount for lack of marketability

30%

 

as at 31 December 2015


Valuation technique

Significant

unobservable inputs

Range

Investments in unquoted equity shares - metal & mining sector

DCF method

WACC

19%



Discount for lack of marketability

20% - 30%

Investments in unquoted equity shares - metal & mining sector

Multiples method

Discount for lack of marketability

20% - 30%

Investments in unquoted equity shares - cleantech sector

Multiples method

Discount for lack of marketability

30%

Investments in unquoted equity shares - agriculture sector

Multiples method

Discount for lack of marketability

30%

Investments in unquoted equity shares - TMT sector

Multiples method

Discount for lack of marketability

30%

 

 

Risk management activities

Fair value risk

The Group's financial assets are predominantly investments in unquoted companies, and the fair value of each investment depends upon a combination of market factors and the performance of the underlying asset. The Group does not hedge the market risk inherent in the portfolio but manage asset performance risk on an asset-specific basis by continuously monitoring each asset's performance and charging the change of each asset's fair value to the statement of comprehensive income as necessary.

Cash flow interest rate risk

The Group currently view interest rate risk as low since the fixed rate return from interest generating assets is not material in the context of the portfolio return as a whole and the Group's investments are financed mainly by shareholders' funds with investment needs being met ahead of planned investments.

Other risk management activities

As a result of its international activities, some of the Group's assets, liabilities, income and expenses are effectively denominated in currencies other than US Dollars (the Group's reporting currency). Fluctuations in the exchanges rates between these currencies and US Dollars will have an effect on the reported value of those items.

The Group has considered the possibility of further aggressive fluctuations in exchange rates, however, due to the level of assets and liabilities denominated in currencies other than US Dollars, the Group do not believe the potential foreign exchange fluctuations would have a material effect on the Group's financial statements.

Valuation techniques

The fair value of financial instruments traded in active markets (such as publicly traded securities) is based on quoted market prices at the reporting date. The quoted market price used for financial assets held by the Group is the current closing price.

The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. The Group has estimated the value of each of its unquoted equity instruments by using judgement to select the most appropriate valuation methodology for each investment based on the recommendations of the International Private Equity and Venture Capital Valuation Guidelines. Valuation methodologies mainly include the price of recent investments, multiples, discounted cash flows or earnings, industry valuation benchmarks, available market prices and so on, which may apply individually or in combination. Key assumptions and judgements applied under each methodology concerning the future and other key sources of estimation uncertainty will have a significant risk of causing a material adjustment to the fair value of the instruments within the next reporting period.

Inputs applied in the valuation methodologies are sensitive to assumptions made when ascertaining the fair value of financial assets. A reasonable alternative assumption would be to apply a standard marketability discount of 25% for all unquoted financial instruments rather than the specific approach adopted. This would have a positive impact on the portfolio of US$1,920,035 or 2.54% of total unquoted financial instruments.

14    Loans

 

The Group has entered into convertible credit agreements and has the right to convert the outstanding principal balance of relevant loans into borrower's shares according to certain conversion conditions, and loan agreements with certain investee companies, as set forth in the table below.

 

As at 30 June 2016 (Unaudited)


Fair value hierarchy

 level

Loan

rates

Loan

 principal

Loans due within

one year

Loans  due after

one year

Fair value

Borrower

%

US$'000

US$'000

US$'000

US$'000

Convertible credit agreements*







China Rice Ltd

3

4

15,000

15,000

-

15,000

Unipower Battery Ltd

3

6

9,000

9,000

-

9,000

IRCA Holdings Ltd

3

1.5-8

11,645

-

-

-

R.M. Williams Agricultural Holdings Pty Ltd

3

8-20

3,090

-

-

-

Staur Aqua AS

3

0-15

3,848

229

266

495

Kincora Copper Ltd

3

8.7

2,254

1,920

-

1,920

Roshini International Bio Energy Corporation

3

-

424

-

-

-

Sub-total



45,261

26,149

266

26,415

 


 

 

Loan

rates

Loan principal

Loans due within

one year

Loans due

 after

one year

Amortised cost

Borrower


%

US$'000

US$'000

US$'000

US$'000

Loan agreements*







 IRCA Holdings Ltd


6-10

8,909

-

-

-

TPL GmbH


10

3,807

-

-

-

R.M.William Agricultural Holdings   Pty Ltd


15.5+RBA

cash rate

1,725

-

-

-

Shanghai Evtech New Energy Technology Ltd


-

510

-

-

-

 China Silvertone Investment Co Ltd


-

478

-

-

-

 Unipower Battery Ltd


12

164

151

-

151

 View Step Corporation Ltd


-

25

-

-

-

Sub-total



15,618

151

-

151

Total



60,879

26,300

266

26,566

 

*           Loans in relation to convertible credit agreements are measured at fair value, which is estimated by discounting future cash flows using rates currently available for debt on similar terms, credit risk and remaining maturities. Loans in relation to loan agreements are measured at amortised cost using the effective interest rate method less any identified impairment losses. The carrying value of loans in relation to loan agreements is a reasonable approximation of fair value.

 

As at 31 December 2015








Fair value hierarchy

 level

Loan

rates

Loan

 principal

Loans due within

one year

Loans  due after

one year

Fair value

Borrower

%

US$'000

US$'000

US$'000

US$'000

Convertible credit agreements*







China Rice Ltd

3

 4

 15,000

15,000

-

 15,000

Unipower Battery Ltd

3

 6

 9,000

9,000

-

 9,000

IRCA Holdings Ltd

3

1.5-8

11,645

-

-

-

R.M. Williams Agricultural Holdings Pty Ltd

3

 8-20

3,090

-

-

-

Staur Aqua AS

3

 0-15

3,848

145

350

495

Kincora Copper Ltd

3

8.7

 2,254

1,793

-

 1,793

Roshini International Bio Energy Corporation

3

-

 424

-

-

   -

Sub-total



45,261

25,938

350

26,288

 

 


 

 

Loan

Rates

Loan principal

Loans due within

one year

Loans due

 after

one year

Amortised cost

Borrower


%

US$'000

US$'000

US$'000

US$'000

Loan agreements*







 IRCA Holdings Ltd


6-10

 8,909

-

-

-

TPL GmbH


10

3,807

-

-

-

R.M.William Agricultural Holdings   Pty Ltd


15.5+RBA cash rate

 1,725

-

-

-

Shanghai Evtech New Energy Technology Ltd


-

 510

-

-

-

China Silvertone Investment Co Ltd


-

 478

-

-

-

Unipower Battery Ltd


12

164

155

-

155

View Step Corporation Ltd


-

 25

-

-

   -

Sub-total



15,618

155

-

155

Total



60,879

26,093

350

26,443

 

Statement of changes in loans:

 


(Unaudited)

Six months ended

30 June 2016

US$'000

(Audited)

2015

US$'000

Opening balance

26,443

28,899

Additions

-

363

Repayment

-

(459)

Write-offs

-

(363)

Revaluation

123

(894)

Impairment

-

(1,103)

Closing balance

26,566

26,443

 

Statement of changes in convertible credit agreements based on level 3:


(Unaudited)

Six months ended

30 June 2016

US$'000

(Audited)

2015

US$'000

Opening balance

26,288

27,397

Additions

-

-

Repayment

-

(215)

Write-offs

-

-

Movement in unrealised loss on investments

-

-

- In profit or loss

127

(894)

Closing balance

26,415

26,288

 

The fair value decrease on convertible credit agreements categorised within Level 3 of US$227,345 (2014: US$6,851,090), was recorded in the statement of profit or loss.

 

15     Trade and other receivables

 


(Unaudited)

30 June 2016 

US$'000

(Audited)

31 December 2015

US$'000

Trade debtors

5

5

Other debtors

1,331

1,378

Loan interest receivables

3,046

2,676

Prepayments

79

42

Total

4,461

4,101

 

 

16     Trade and other payables

 

 

(Unaudited)

30 June 2016

US$'000

(Audited)

31 December 2015 US$'000

Trade payables

5

5

Other payables

3,830

2,696

Performance incentive payable within one year*

8

8

Total

3,843

2,709

 

*           Refer to note 5 for total performance incentive expenses.

 

17           Financial guarantee contracts

 

 

(Unaudited)

30 June 2016

US$'000

(Audited)

31 December 2015 US$'000

Financial guarantee contracts*

435

435

Total

435

435

 

         *    In July 2013, the Group entered into a guarantee agreement with IRCA Holding Ltd and ABSA Bank Limited to guarantee the repayment of loan facilities of up to Rand 6,769,000 extended by ABSA Bank Limited to IRCA Holdings Ltd.  A potential claim related to this guarantee is expected in the next 12 months. A provision has been made for the total amount of the guarantee.

 

 

18     Liability component of convertible zero dividend preference shares 

 

 


 

 

Number of

Liability

Component

Equity

component

Early redemption option derivative



Shares

US$'000

US$'000

US$'000

Balance at 1 January 2015


57,000,000

63,609

8,297

-

Interest expenses on convertible zero    dividend preference shares


-

5,776

-

-

Balance at 31 December 2015


57,000,000

69,385

8,297

-

Interest expenses on convertible zero    dividend preference shares


-

3,083

-

-

Balance at 30 June 2016


57,000,000

72,468

8,297

-

 

         On 8 March 2011, the Group issued 60 million convertible zero dividend preference shares ("Convertible Preference Shares") at a price of US$1.00 per share. The Convertible Preference Shares have a maturity period of five years from the issue date and can be converted into 1 ordinary share of the Group at the conversion price of US$0.95 per share at the holder's option at any time between more than 40 dealing days after 8 March 2011 up to 5 dealing days prior to the maturity date and, if it has not been converted, it will be redeemed on maturity at the redemption price of US$1.28 per share (representing a gross redemption yield of 5 per cent per annum at issue). 

 

         The Convertible Preference Shares contain a redemption feature which allows for early redemption at the option of issuer. The issuer has the option to redeem all or some of the Convertible Preference Shares subject to the restrictions on redemption described below:

 

(a)   at any time after the second anniversary of 8 March 2011, for a cash sum of US$1.28 per Convertible Preference Share redeemed;

(b)   at any time after the second anniversary of 8 March 2011, if in any period of 30 consecutive dealing days the closing middle market price of the ordinary shares of the Company exceeds US$1.235 per ordinary share of the Company on 20 or more of those days, for a cash sum equal to the Accreted Principal Amount in respect of the Convertible Preference Shares being redeemed;

(c)    at any time, if less than 15 per cent of the Convertible Preference Shares remain outstanding, for a cash sum equal to the Accreted Principal Amount in respect of the Convertible Preference Shares being redeemed.

 

The Convertible Preference Shares contain three components, a liability component, an equity component and the early redemption option derivative. The effective interest rate of the liability component is 6.5 per cent. The early redemption option derivative is presented as derivative financial assets in the consolidated statement of financial position and is measured at fair value subsequent to initial recognition with changes in fair value recognized in profit and loss.

 

In March 2013, the Company restructured the terms of its existing Convertible Preference Shares, the principal terms of restructure includes: i) extension of the maturity date of the Convertible Preference Shares by 18 months from 8 March 2016 to 8 September 2017 (the "Extended Period"); ii) amendment of the final capital value ("FCV") of the Convertible Preference Shares to US$1.41 each, with the accrued rate of return for the Extended Period equivalent to 10 per cent of the accrued value of the Convertible Preference Shares at the start of the Extended Period; iii) a commitment by the Company to repurchase, by means of tender offers to holders, at least 12 million Convertible Preference Shares by 8 March 2016, the original maturity date (see note 23 for details); and iv) the Company to set aside, for the funding of Convertible Preference Shares tender offers, 50 per cent of the next US$24 million of net proceeds (post transaction costs and management incentives) from investment realisations by the Company. The new effective interest rate of the liability component is 9.0%. In addition to the restructure, the Company has repurchased 3 million Convertible Preference Shares from holders at a price of US$1.00 per Convertible Preference Shares on the same date. Finance cost of US$4.2 million was credited to reverse the liability component after the payoff of US$3 million of cash for repurchase.

 

Effective on 26 September 2016, the terms of the Convertible Preference Shares have been amended.  Please refer to Note 24 for details.

 

19     Provision

 

 

(Unaudited)

30 June 2016

US$'000

(Audited)

31 December 2015

US$'000

USR/contingent share awards *

44

67

Performance incentive provision**

4,265

4,195

Total

4,309

4,262

 

*           The provision relates to the fair value of Upper Share Rights ("USR") and share awards granted to certain directors, executives and key employees under the Company's joint share ownership scheme.  Further details about the USR and shared awards are included in note 21 to the financial statements.

 

**         Refer to note 5 for total performance incentive expenses. Effective on 26 September 2016, the terms of the consulting agreement under which OAL provide services to the Company have been amended.  Please refer to Note 24 for details

 

20     Issued capital

 


(Unaudited)

30 June 2016

(Audited)

31 December 2015

Authorized

Number of shares

£'000

Number of shares

£'000

Ordinary shares of £ 0.0001 each

500,000,000

50

500,000,000

50

 

 

 

 

 

Issued and fully paid

Number of shares

US$'000

Number of shares

US$'000

At beginning of the period/year

358,746,814

56

356,706,814

55

New issued shares

-

-

2,390,000

1

Buyback shares

-

-

(350,000)


At end of the period/year

358,746,814

56

358,746,814

56

 

21     Share-based payments     

 

The Group has a number of share schemes that allow employees to acquire shares in the Company.

 

The total cost recognized in the statement of comprehensive income is shown below:

 


(Unaudited)

Six months ended

30 June 2016
US$'000

(Unaudited)

Six months ended

30 June 2015
US$'000

Equity-settled option

(53)

(178)

USR/contingent share awards

24

124


(29)

(54)

 

The following table illustrates the number ("No.") and weighted average exercise prices ("WAEP") of, and movements in share options during the six months ended 30 June 2016 and year ended 31 December 2015.

 


(Unaudited)

30 June 2016

(Audited)

31 December 2015

 

No.

WAEP

No.

WAEP

Outstanding at 1 January

23,001,932

27.24p

21,451,932

26.97p

Granted during the period/year



-

-

Forfeited during the period/year



(500,000)

(31.00p)

Exercised during the period/year



-

-

Expired during the period/year



-

-

Outstanding at the end of the period/year

23,001,932

27.24p

20,951,932

26.87p






Exercisable at the end of the period/year

11,451,932

23.45p

11,451,932

23.45p

 

The weighted average remaining contractual life for the share options outstanding as at 30 June 2016 was 3.06 years (31 December 2015: 3.56 years).

 

The range of exercise prices for options outstanding at the end of the period was 20 pence to 59.85 pence (31 December 2015: 20 pence to 59.85 pence).

 

Outstanding options include 6,800,000, 3,500,000, 500,000 and 13,600,000 equity-settled options granted on 26 October 2006, 13 March 2008, 06 February 2009 and 02 February 2012 respectively to certain directors and employees of the Company and 651,932 equity-settled options granted on 21 December 2006 to Seymour Pierce Ltd, the Company's former nominated adviser. The Company did not enter into any share-based transactions with parties other than employees during the six months ended 30 June 2015 and2014, except as described above.

 

The following table illustrates the number ("No.") and weighted average exercise prices ("WAEP") of, and movements in USRs and contingent share awards during the six months ended 30 June 2016 and year ended 31 December 2015.

 


(Unaudited)

30 June 2016

(Audited)

31 December 2015

 

No.

WAEP

No.

WAEP

Outstanding at 1 January

7,711,425

9.48p

8,061,425

9.07p

Granted during the period/year



-

-

Forfeited during the period/year



-

-

Exercised during the period/year



(350,000)*

                       -  

Expired during the period/year



-

-

Outstanding at the end of the period/year

7,711,425

9.48p

7,711,425

9.48p






Exercisable at the end of the period/year

7,711,425

9.48p

7,711,425

9.48p

 

*           The weighted average share price at the date of exercise of these options was 5.70 pence.

 

The weighted average remaining contractual life for the share options outstanding as at 30 June 2016 was 5.02 years (31 December 2015: 5.51 years).

 

The range of exercise prices for options outstanding at the end of the period was zero to 15.5 pence (31 December 2015: zero to 15.5 pence).

 

On 16 October 2009, 4,847,099 of Upper Share Rights ("USR") were granted to certain directors, executives and key employees under the Company's joint share ownership scheme ("JSOS"). 50 per cent of USR will vest 12 months from the date of grant and 50% of USR will vest 24 months from the date of grant. The exercise price of the USR granted is 15.50 pence compounded at 3.5 per cent per annum over the year from the grant date to the exercise date of USR. The fair value of the USRs is estimated at the end of each reporting period using the Binomial Tree option pricing model. The contractual life of each USR granted is 10 years.

 

On 20 July 2012, 1,120,000 of contingent share awards were granted to certain directors, executives and key employees under the Company's JSOS, which will vest 197 days from the date of grant. The contractual life of each contingent share awards granted is 10 years.

 

On 30 December 2014, 2,423,358 of shares awards were granted to certain key employees under the Company's JSOS, which will vest immediately at the date of the grant. The contractual life of each share offers granted is 10 years.

 

The following table lists the inputs to the model used to calculate the fair value of USRs for the period.

 


(Unaudited)

30 June 2016

(Audited)

31 December 2015

Underlying stock price (pence)

0.01

1.50

Exercise price (pence)

15.5

15.5

Expected life of option (years)

2

2

Expected volatility (%)

196.62

34.53

Expected dividend yield (%)

-

-

Risk-free interest rate (%)

0.50

0.50

 

The volatility assumption, measured at the standard deviation of expected share price returns, was based on a statistical analysis of the Company's daily share prices from 1 July 2012 to 30 June 2015 using source data from Reuters.

 

The carrying amount of the liability relating to the USR and contingent share awards as at 30 June 2016 is US$44,075 and the expense recognized as share-based payments during the period is (US$22,820).

 

22     Related party transactions

 

Identification of related parties

 

The Group has a related party relationship with its subsidiaries, jointly controlled entites, associates and key management personnel. The company receives and pays certain debtors and creditors on behalf of its subsidiaries and the amounts are recharged to the entities. The amount in current period was (US$278,886) and the balance at the end of the period was (US$15,831,673). Transactions between the Company and its subsidiaries have been eliminated on consolidation.

 

Transactions with key management personnel

 

The Group's key management personnel are the Executive and Non-executive Directors as identified in the director's report.

 

Trading transactions

 

The following table provides the total amount of significant transactions that have entered into with related parties during the six months ended 30 June 2016 and 30 June 2015, as well as balances with related parties at 30 June 2016 and 31 December 2015.


(Unaudited)

(Audited)


30 June 2016

US$'000

31 December 2015

US$'000

Loans to related parties



Subsidiaries:



ISAK International Holding Ltd

870

870

China Cleantech Partners, L.P.

340

340



 

 


(Unaudited)

(Audited)


30 June 2016

US$'000

31 December 2015

US$'000

Amounts due from/(to) related parties*



Key management personnel:



Lionel de Saint-Exupery***

(84)

(25)

Shonaid Jemmett Page***

(156)

(100)




Other:



Origo Advisers Ltd**

(5,827)

(5,039)

 

 

 

(Unaudited)

Six months ended

(Unaudited)

Six months ended


30 June 2016

US$'000

30 June 2015

US$'000

Transactions



Origo Advisers Ltd**

788

3,209

 

*           The amounts are unsecured and have no fixed terms of repayment

**         Origo Advisers Ltd is controlled by entities whose ultimate beneficiaries include Niklas Ponnert (Directors of the Company), Chris A Rynning and Luke Leslie.

***       Lionel de Saint-Exupery (Non-executive Director of the Company); Shonaid Jemmett Page (Non-executive Chairman of the Company).

 

23     Commitments and contingencies

 

In February 2014, the Company made an announcement regarding a complaint raised by Brooks Macdonald with the Company in respect of the terms of Convertible Zero Dividend Preference Shares ("Convertible Preference Shares" or the "CZDP") (the "First Complaint").  Brooks Macdonald contends that the change of control provisions should have included an option exercisable by the holders of the CZDP to redeem the CZDP upon a change of control in respect of Origo (a "CZDP COC Redemption Option"). This is on the basis on a reference in a short-form term sheet (the "CZDP Term Sheet") that was appended to the placing letter entered into between Origo's Broker and NOMAD (on behalf of Origo) and Spearpoint (now part of the Brook MacDonald group) for the subscription by Spearpoint of the CZDP (the CZDP Admission Document and Articles, as amended, having not yet been prepared when the placing letter was signed). The CZDP Term Sheet contained a provision that Brooks Macdonald argued should be interpreted as indicating that Spearpoint would have a CZDP COC Redemption Option.

 

The CZDP Term Sheet contained only brief details of the CZDP and Spearpoint's subscription was subject (amongst other things) to detailed documentation being produced and approved (i.e. the CZDP Admission Document and the Articles, as amended). Spearpoint had the opportunity to review this detailed documentation prior to its acquisition of the CZDP and should have made its actual subscription for the CZDP based on the final information contained in the CZDP Admission Document and the Articles. No query regarding the purported non-inclusion in the terms of the CZDP of a CZDP COC Redemption Option was raised by Spearpoint at the time of issue of the CZDP in 2011 or subsequently (including at the time of the 2013 CZDP Amendment), until the communication by Brooks Macdonald of its complaint.

 

Brooks Macdonald has indicated that it may commence legal proceedings if the terms of the CZDP are not amended to provide a CZDP COC Redemption Option.  Such an amendment could only be made if shareholders approve the relevant changes to the Articles at a general meeting. Origo has also sought legal advice in respect of the First Complaint. On the basis of that legal advice, Board considers that a legal claim against Origo, in respect of the First Complaint if initiated by Brooks Macdonald, would be unlikely to succeed.

              

To date, no legal proceedings have been commenced by Brooks MacDonald in relation to the First Complaint, although Brooks MacDonald has not withdrawn its threat to bring such legal proceedings.

 

Separately, Brooks MacDonald, through its lawyers in the Isle of Man (where the Company is incorporated), has raised a further complaint (the "Second Complaint"). Brooks MacDonald asserted that the resolution passed on 8 March 2011 ("March 2011 Resolution") to amend the Company's Articles to reflect the creation of the CZDP shares was not validly passed. This assertion rested on an argument that  a "75% Resolution" (as defined in the Articles), which is required in order to amend the Company's Articles, requires a majority of holders of 75% of all issued and outstanding shares to have voted in favour of it rather than a majority of 75% of votes cast. Brooks MacDonald, therefore, contended that if the March 2011 Resolution was not validly passed it would have a legal claim for the return from the Company of the consideration paid for the purchase of the CZDP.

                                                                                                                                                                         

On July 9, 2015, the Isle of Man Court handed down judgment in favour of the Company in respect of the Second Complaint, confirming that the Articles bear the meaning propounded by the Company.

 

Following the hearings of the Second Complaint, Brooks MacDonald has notified the Company of a claim in relation to the construction of a provision of the Company's Articles (the "Third Complaint").  This claim is in relation to article 4.17 of the Articles, which primarily addresses a conversion mechanism relating to the Company's convertible zero dividend preference shares.

 

On 29 September 2015, after extensive consultations with Brooks MacDonald, and other shareholders, the Company announced a set of proposals which would restructure the CZDPs and provide Origo with greater flexibility to implement its orderly realisation strategy. The proposals, if approved by Shareholders, would also have served to settle the ongoing dispute with Brooks Macdonald. At the relevant general meeting of the Company held on 4 February 2016, the proposals were voted down by the Company's shareholders by way of poll.

 

On 10 February 2016, Brooks MacDonald issued proceedings in the Isle of Man Court in respect of the Third Complaint, seeking a declaration as to the correct interpretation of article 4.17. Those proceedings were subsequently stayed by consent and Brooks MacDonald has made no attempt to prosecute that claim.

 

The Company announced on 8 March 2016 that, whilst the Company's Articles include a requirement for the Company to have redeemed US$12 million of CZDP by 8 March 2016, it was not in a position to redeem US$12 million of CZDPs at the current time.  The 8 March 2016 announcement went on to confirm that the Company remains under a continuing obligation to undertake the redemption of US$12 million of CZDPs as and when it is legally able to do so.

 

The Articles expressly envisage the possibility that the Company will not have the available funds to redeem CZDP shares on the relevant redemption date (whether 8 March 2016 or later). Article 4.8 provides:

 

"If on any date fixed for redemption the Company is unable to redeem in full the relevant number of Convertible Preference Shares [CZDPs], if as a result of so doing the Company would be unable to satisfy the Solvency Test immediately thereafter, on any date fixed for redemption, the Company shall redeem as many of such Convertible Preference Shares as can lawfully and properly be redeemed and the Company shall redeem the balance as soon as it is lawfully and properly able to do so."

 

Further, under the Isle of Man Companies Act of 2006,  no Redemption of the CZDP may be made by the Company if, immediately following any such redemption, the Company would be unable to satisfy the Solvency Test under the 2006 Act, the effect of the 2006 Act is to postpone the obligation to redeem those CZDP which cannot be redeemed due to the Solvency Test until such time as the Company can redeem and pass the Solvency Test, and to avoid the Company becoming insolvent by converting CZDP shareholders to creditors when the Company cannot afford to redeem.

 

On 10 March 2016, the Company was notified by Brooks Macdonald Asset Management (International) Limited that it has filed a Claim Form, dated 9 March 2016, at the Isle of Man High Court seeking an order to wind-up the Company on the grounds that it is just and equitable to do so and/or as relief under section 180 of the Isle of Man Companies Act 2006.

 

On 7 April 2016, the first hearing of this Winding-up Claim was heard in the Isle of Man Courts of Justice and certain directions were made. The presentation of Brooks Macdonald's claim to the Isle of Man Court for winding up is deemed to have commenced a winding up by the Isle of Man Court, under section 169(2) of the Isle of Man Companies Act 1931.  Section 167 of the Isle of Man Companies Act 1931 states that any disposition of the property of the Company after the commencement of the winding up by the Isle of Man Court is void unless the court orders otherwise. Consequently, whilst the Company judged that its daily operations should remain broadly unaffected, disposals of its assets without Court approval may be rendered void. The Company has received legal advice that the Isle of Man Court is likely to validate realisations where no person will be prejudiced by them which are for fair value and on arm's length, and also that the provisions of section 167 of the Isle of Man Companies Act 1931 may extend to any transfer of the Company's shares. As a result, At the request of the Company trading on AIM for the under-mentioned securities was temporarily suspended 0n 11 March, 2016, pending clarification of the Company's financial position.

 

There were no other material contracted commitments or contingent assets or liabilities at 30 June 2016 (31 December 2015: none) that have not been disclosed in the consolidated financial statements.

 

24     Events after the reporting period

                                                                                                                                                                            

On 28 July, 2016, Kincora Copper Limited (TSX.V: KCC) ("Kincora") announced that it had closed a non-brokered private placement for gross proceeds of C$1,053,060 through the issuance of 3,510,200 shares at a price of C$0.30 per share (the "Offering"). Concurrent with, and on the same terms of the offering, 6,666,667 shares were issued to Origo for settlement of an outstanding convertible note in the amount of C$2,000,000. Funds in escrow of C$500,000 were returned to Origo and, subsequently, accrued interest was converted into Kincora share, fully settling the note.

 

On 19 August 2016, the Company announced that, following extensive discussions with its key shareholders and further to the proposed restructuring of the Company's share capital set out in the circular sent to shareholders in January 2016, a revised set of proposals (the "Proposals") had been agreed and would be put to shareholders for their approval.

 

In August 2016, with the agreement of the Company, Brooks Macdonald Group PLC and Pacific Alliance Asia Opportunity Fund L.P. ("PAX"), the Isle of Man Court granted validation orders such that: (i) transfers of the Company's issued shares shall not be void by virtue of section 167 of the 1931 Act in the event of a winding up order being made (the "Share Transfer Validation Order"); and (ii) dispositions of the property of the Company made in the ordinary course of business for proper value shall not be void by virtue of the provisions of section 167 of the 1931 Act notwithstanding the presentation of the Winding-up Claim.

 

On 7 September 2016 the Company posted a Circular to Shareholders providing details of the proposed restructuring of the Company's share capital together with notices convening a general meeting, a CZDP class meeting and an ordinary share class meeting (together the "Meetings") for the purpose of putting the Proposals to shareholders.

 

As a result of the Share Transfer Validation Order and the publication of the Circular, which contained full details of the Proposals and the likely implications for the Company should the Proposals be rejected, the Company applied for the resumption in trading in the Company's securities on AIM. The temporary suspension was lifted on 9 September, 2016.

 

On September 27 2016, the Company announced that the Proposals were duly approved by the Meetings, and hence the Proposals were implemented.

 

The Proposals restructured the share-capital of the Company and provides Origo with greater flexibility to implement its orderly realisation strategy with a view to maximising value on behalf of Origo's shareholders.  The key elements of the Proposals included the following:

 

·      the removal of all obligations of the Company in respect of the redemption of at least 12 million CZDPs and the removal of any final CZDP redemption and/or maturity date;

 

·      the reset of the accreted principal amount per CZDP to US$1.0526;

 

·      that all distributions made to CZDP Shareholders shall upon receipt by CZDP Shareholders operate to redeem the relevant whole number of issued CZDPs (pro rata as between CZDP Shareholders in direct proportion to the numbers of CZDPs which they respectively hold);

 

·      that no rate of return on the CZDPs will begin to accrete until 1 January 2018 and, in respect of each CZDP still in issue on 1 January 2018, its principal amount of US$1.0526 shall be subject to the accretion of a rate of return equal to 4 per cent. per annum from (and including) 1 January 2018 to (and including) the date on which such CZDP is redeemed, with such return accruing on a simple and not compound basis;

 

·      that the current liquidation preference of the CZDPs shall be removed, except if a winding up of the Company is commenced within 365 days of the Settlement Date (other than such a winding up which is initiated in breach of the BM Undertaking or otherwise initiated by Brooks Macdonald or any of its group entities), as further explained below;

 

·      that the rights attaching to the CZDPs and the Ordinary Shares will be amended such that, other than on a winding up (other than any such winding up which is initiated in breach of the BM Undertaking or which is otherwise initiated by Brooks Macdonald or any entity or person which controls or is controlled by or is under common control with any Brooks Macdonald entity) commencing within 365 days of the Settlement Date, Ordinary Shareholders shall receive a proportion of all future distributions alongside CZDP Shareholders on the following basis (pro rata within the respective classes of shares):

 

in respect of the first US$15 million of distributions, 80 per cent. (i.e. US$12 million) to the CZDP Shareholders and 20 per cent. (i.e. US$3 million) to the Ordinary Shareholders;

 

in respect of distributions in excess of the first US$15 million:

 

-  until such time as all CZDPs have been redeemed in full, 44 per cent. to the CZDP Shareholders and 56 per cent. to the Ordinary Shareholders;

 

-  thereafter, 100 per cent. to the Ordinary Shareholders;

 

·      that until such time as all CZDPs have been redeemed in full:

 

distributions on Ordinary Shares will be made solely in the proportions set out above, and at the same time as distributions are made to the CZDP Shareholders, after which time former CZDP Shareholders will no longer be entitled to receive any further distributions or other amounts from the Company;

 

the CZDPs will have priority in respect of the balance of their accreted principal amount over the Ordinary Shares on a winding up of the Company (other than any such winding up which is initiated in breach of the BM Undertaking, or which is otherwise initiated by Brooks Macdonald or any entity or person which controls or is controlled by or is under common control with any Brooks Macdonald entity) provided such winding up commences within 365 days of the Settlement Date;

 

That the CZDP conversion provisions will all be removed;

 

That the Articles also be amended so that any single person holding the greatest number of Ordinary Shares and any single person holding the greatest number of CZDPs shall each have the right to nominate an independent person to be appointed as a non-executive director of the Company, such appointment being subject to relevant regulatory requirements;

 

·      That the rights attaching to the CZDPs will be amended such that, for so long as there are CZDPs in issue, the Company shall not, and shall procure that no member of the Group shall:

 

without CZDP Majority Shareholder Consent:

 

-    undertake or permit or incur (i) any borrowings (or enter into or vary any contracts for financial indebtedness or arrangements for financial indebtedness), or (ii) any other financial indebtedness on the part of any member of the Group, other than in each case for the purposes of discharging liabilities of any member of the Group existing as at 19 August 2016 towards fees or disbursements of professional advisers (excluding the fees and disbursements of OAL), but which in any event shall not exceed £2 million in aggregate;

 

-    without prejudice to the obligation of the directors of the Company to have due regard to the interests of all shareholders as a whole, cease to have due regard to the interests of the CZDP Shareholders as a class and do anything materially prejudicial to them;

 

-    change the terms of engagement or appointment or the fees payable to any investment manager (including OAL) of any member of the Group;

 

-    if any CZDPs remain in issue on 1 January 2019, extend the Asset Realisation Support Agreement (further details of which are set out in paragraph 7 below) beyond that date;

 

-    enter into, or permit the entry into of, any transaction or arrangement between any member of the Group on the one hand and any of Pacific Alliance Group Asset Management Limited and/or PAX ("PAG Entity") and/or any affiliate of any PAG Entity who or which is a "related party" (as defined in the AIM Rules for Companies) of the Company and/or any agent of any PAG Entity or such affiliate thereof (including, without limitation, any fund manager) and/or any shareholder of the Company from time to time owning more than 10 per cent. of the voting rights of the Company and/or persons acting in concert with any of them, on the other hand save in respect of issues of any further Ordinary Shares in the Company issued on bona fide arm's length terms; and

 

-    allot or issue any shares or securities or rights to subscribe for or to convert or exchange any securities into shares or securities or reclassify any shares or permit any of the foregoing by any member of the Group (other than (i) issues of Ordinary Shares made to the Company or any wholly owned subsidiary of it; and (ii) issues of any further Ordinary Shares in the Company in every case issued on bona fide arm's length terms); and;

 

without CZDP Ordinary Consent, make or permit any change in its Investing Policy;

 

The Company and OAL are party to an asset realisation support agreement (the "Asset Realisation Support Agreement"), the terms of which were approved by shareholders on 20 November 2014. The Asset Realisation Support Agreement became effective on 13 January 2015. On 6 September 2016, the Company entered into an amendment agreement with OAL to the Asset Realisation Support Agreement (the "Amendment Agreement"). Following shareholder approval of the Proposals at the Meetings, the Asset Realisation Support Agreement has been amended as follows:

 

The aggregate annual fees payable to OAL for the provision of services pursuant to the Asset Realisation Support Agreement has been reduced as follows:

 

US$1.6 million (previously US$1.8 million) in respect of the second year of the Asset Realisation Support Agreement (i.e. the year commencing on 13 January 2016);

 

US$1.2 million (previously US$1.6 million) in respect of the third year of the Asset Realisation Support Agreement (i.e. the year commencing on 13 January 2017);

 

US$1 million (previously US$1.05 million) in respect of the fourth year of the Asset Realisation Support Agreement (i.e. the period commencing on 13 January 2018 and ending on 31 December 2018);

 

·      The Existing Performance Hurdle (as defined below) will be removed and instead OAL shall be entitled to receive the performance fee under has been removed and instead OAL shall be entitled to receive the performance fee under the Asset Realisation Support Agreement only if the Company has made aggregate Distributions in excess of US$90 million to Shareholders during the period from the date on which the Proposals were approved until the termination of the Asset Realisation Support Agreement (the "New Performance Hurdle"); and

 

·      Realisation Support Agreement will be a fixed term expiring on 31 December 2018 and will be subject to termination for cause.

 

Under the terms of the Asset Realisation Support Agreement, OAL were to receive an additional performance fee if the Group has received realised gross cash proceeds from the realisation of assets in its portfolio (net of repayment of third party debts, any related hedge or other break costs and any prepayment fees and penalties, but before any related transactional costs, fees and expenses and any taxes payable) ("Gross Realisations") in excess of US$90 million (the "Existing Performance Hurdle"). The Existing Performance Hurdle will be amended pursuant to the Amendment Agreement as set out above such that OAL will be entitled to a performance fee (the quantum of which reflects the existing terms of the Asset Realisation Support Agreement) of 20 per cent. of Gross Realisations over the New Performance Hurdle, subject to the first US$1.7 million of Gross Realisations over the New Performance Hurdle being payable to OAL

 

Finally, in connection with the Proposals, the Company entered into a settlement deed (the "Settlement Deed") with Brooks Macdonald Group PLC ("BM"), Pacific Alliance Group Asset Management Limited ("PAGAML") and certain of their affiliates.  The Settlement Deed was conditional on, inter alia, the Proposals being approved by shareholders.  The Settlement Deed, once it becomes effective, disposes of the legal claims pursued and/or intimated by BM to date and BM has agreed to take all required steps to discontinue the proceedings it has brought in respect of the Conversion Claim and the Winding-up Claim.

 

Market Abuse Regulation (MAR) Disclosure

Certain information contained in this announcement would have been deemed inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 until the release of this announcement.

 

 

 

 

 

 



 

 

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
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