30 September 2015

 

Origo Partners Plc

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

  

Interim Financial Report for the six months ended 30 June 2015

 

Origo announces its unaudited interim results for the six months ended 30 June 2015 (the "Period")

 

 

Highlights:

 

•             Total investments of US$0.4 million in existing portfolio companies 

•             Investment gain of US$3.2 million (30 June 2014 investment loss: US$25.5 million) 

•             Loss before tax of US$3.8 million (30 June 2014 loss before tax: US$30.6 million) 

•             Net asset value of US$50.7 million (31 December 2014: US$54.3 million)  

•             Total other administrative expenses of US$2.5 million (30 June 2014: US$2.8 million) 

•             Net asset value per share of US$0.14 as at 30 June 2015 (31 December 2014: US$0.16), equivalent to 9 pence (31 December 2014: 10 pence) 

•             Closing net cash position of US$2.8 million as at 30 June 2015

 

 

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

 

Origo Partners plc Niklas Ponnert	niklas@origoplc.com
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

 

Chairman's Statement

 

We made initial progress during the first half of the year in delivering on a number of the objectives set out in the revised strategy approved by Origo's shareholders at the end of 2014.

 

In particular, we successfully reduced administrative costs during the Period following, amongst other things, the outsourcing of the management of the portfolio to Origo Advisors Limited group ("OAL") and the transfer of employees previously employed by the Group to OAL. In addition, Origo's loss before tax for the Period of US$3.8 million was significantly lower than that of the same period of 2014.

 

The Board, working with OAL, monitors the performance of the portfolio closely. The stabilisation of the portfolio's performance during the Period is encouraging. We continue to assess opportunities in conjunction with OAL to divest the portfolio in accordance with Origo's stated investing policy, as adopted in November 2014.

 

Following the Period end, the Isle of Man Court handed down judgment, in favour of the Company following proceedings in respect of a complaint first announced by the Company on 30 June 2014 (the "Judgement"). The Judgement confirmed that the Company's articles (the "Articles") bear the meaning propounded by the Company. The Company was pleased with this positive outcome to the Isle of Man proceedings.

 

Subsequent to the Judgement being handed down, and as announced by the Company on 14 July 2015, the Company was notified of a new complaint in relation to the construction of article 4.17 of the Articles, which primarily addresses a conversion mechanism relating to the Company's convertible zero dividend preference shares.

 

The Company has been working with holders of the convertible zero dividend preference shares to achieve a resolution which would be acceptable to all Origo shareholders.  As announced by the Company on 29 September 2015, the Company is in the process of finalising a set of detailed proposals, which will be put to Origo's shareholders at an extraordinary general meeting as soon as is practicable.

 

Investment Consultant's Report

 

The fair value of the portfolio rose by approximately US$2.7 million during the Period, reflecting a generally more stable performance by Origo's investments compared to the end of 2014.

 

Nevertheless, the economic environment remains challenging. The continued downturn in commodities prices continues to weigh on asset values across the mining sector - impacting both the valuation of investments and prospects for disposal.

 

In addition, recent events in China have generated increasing concern over the health of its economy and a resulting worsening of investor sentiment towards the country. The volatility in equity markets impacts the ability of growth companies to seek financing and the appetite of investors for such assets.

 

Portfolio update

 

The majority of Origo's portfolio companies traded in line with expectations during the Period and as such there was no material change to their carrying values. Notable developments at China Rice Ltd ("China Rice"), Unipower Battery Ltd ("Unipower") Moly World Ltd ("Moly World") and Kincora Copper Ltd ("Kincora") are summarised below.

 

The value of Origo's equity holding in China Rice increased by US$6.4 million, to US$18.5 million, because of a re-rating of the company's peer group.

 

As previously announced, Unipower continues to be heavily impacted by tightening credit conditions for small and medium sized enterprises, limiting its ability to procure required working capital financing to sustain growth. This has resulted in a 20% reduction in the carrying value of this investment to US$9.6 million. 

 

In addition, the value of Origo's stake in Moly World, the owner of a prospective molybdenum and tungsten project in Mongolia, has been written down by US$1.2 million to US$7.5 million as a result of the continued subdued outlook for the junior mining sector.

 

Kincora is continuing exploration activities at its wholly owned Bronze Fox deposit in Mongolia following positive results in 2014. With a view to enhancing Kincora shareholder value, the management team of Kincora is also assessing a range of corporate transactions that would not otherwise be available to Kincora at more favourable points in the commodity cycle.

 

Discussions with Kincora regarding the CAN$2.5 million convertible note held by Origo are ongoing.

 

Financial performance

 

The estimate of the fair value of Origo's portfolio rose from US$120.2 million at 31 December 2014 to US$122.9 million at the end of the Period.

 

The increase was principally due to the US$6.4 million increase in the carrying value of Origo's investment in China Rice, which was partially offset by reductions in the carrying values of the Company's investments in Unipower and Moly World. 

 

Total other administrative expenses were reduced to US$2.5 million (30 June 2014: US$2.8 million).

 

Total investments in existing portfolio companies amounted to US$0.4 million during the Period.

 

The Company recorded a loss before tax of US$3.8 million for the Period, compared to a loss before tax of US$30.6 million during the corresponding period of 2014.

 

At the end of the Period, the Company had cash and cash equivalents of US$2.8 million, down from US$5.2 million at the end of 2014.

 

The Company reported net asset value of US$50.7 million as at 30 June 2015, representing a net asset value per share of US$0.14. This compares to US$54.3 million as at 31 December 2014 (US$0.16 per share). The decline in the net asset value was attributable to ongoing operating expenses and non-cash based charges relating to interest accrued (US$2.8 million) to the convertible zero-dividend preferred shares.

 

Outlook

 

Recent gyrations in Chinese stock markets have created headlines around the world, and intensified speculation of a "hard landing" in the country's economy. Whilst we continue to monitor developments very closely and assess the impact upon Origo's investments, the extent to which Chinese stock market performance reflects the underlying performance of the economy is not yet clear. Furthermore, the recent devaluation of the Chinese Yuan should stimulate the economy in the medium term whilst Chinese Government policy remains highly supportive of the clean-tech sector.

 

 

AUDITORS' INDEPENDENT REVIEW REPORT

 

Introduction

 

We have been engaged by Origo Partner Plc ("the Group") to review the set of financial statements in the interim financial report for the six months ended 30 June 2015 which comprises the interim consolidated statement of comprehensive income, the interim consolidated statement of financial position, the interim consolidated statement of changes in equity, the interim consolidated statement of cash flows, and the related notes 1 to 23. We have read the other information contained in the interim financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim set of financial statements.

 

This report is made solely to the Group's members, as a body, in accordance with guidance contained in International Standard on Review Engagements 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" ("ISRE 2410") issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Group's members, for our work, for this report, or for the conclusions we have formed.

 

Directors' responsibilities

 

The interim financial report is the responsibility of, and has been approved by the Directors. The Directors are responsible for preparing the interim financial report in accordance with International Accounting Standard 34, "Interim Financial Reporting" ("IAS 34").

 

As disclosed in note 2.1, the interim financial statements of the Group are prepared in accordance with International Financial Reporting Standards issued by the Accounting Standards Board and adopted for the use in the European Union. The set of financial statements in the interim financial report has been prepared in accordance with IAS 34.

 

Our responsibility

 

Our responsibility is to express to the Group a conclusion on the set of financial statements in the interim financial report based on our review.

 

Scope of review

 

We conducted our review in accordance with ISRE 2410 (UK and Ireland) issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly we do not express an audit opinion.

 

Conclusion

 

Based on our review, nothing has come to our attention that causes us to believe that the set of financial statements in the interim financial report for the six months ended 30 June 2015 are not prepared, in all material respects, in accordance with IAS 34.

 

 

Ernst & Young LLC

Chartered Accountants

Isle of Man

29 September 2015

 

 

Interim Consolidated Statement of Comprehensive Income

For the six months ended 30 June 2015

 

		(Unaudited) Six months ended 30 June 2015	(Unaudited) Six months ended 30 June 2014
	Notes	US$'000	US$'000
Investment income/(loss):	3
Realised losses on disposal of investments		(978)	(6,054)
Unrealised gains/(losses) on investments		3,819	(20,041)
Income from loans		368	544
Dividends		-	4
		3,209	(25,547)
Fund Consulting fee		-	98
Consulting services payable	4	(1,044)	(50)
Other income		65	43
Performance incentive	5	(542)	532
Share-based payments	21	(54)	(363)
Other administrative expenses	6	(2,526)	(2,800)
Net loss before finance costs and taxation		(892)	(28,087)
Foreign exchange (losses)/gains		(103)	77
Finance income	9	-	1
Finance costs	9	(2,840)	(2,602)
Loss before tax		(3,835)	(30,611)
Income tax	10	(305)	62
Loss after tax		(4,140)	(30,549)
Other comprehensive income/(loss)
Other comprehensive income/(loss) to be reclassified to profit or loss in subsequent periods:
Exchange differences on translating foreign operations		94	(964)
Tax on other comprehensive losses		-	-
Net other comprehensive income/(loss) to be reclassified to profit or loss in subsequent periods		94	(964)
Total comprehensive loss after tax		(4,046)	(31,513)
Loss after tax
Attributable to:
- Owners of the parent		(4,128)	(30,670)
- Non-controlling interests		(12)	121
		(4,140)	(30,549)
Total comprehensive loss
Attributable to:
- Owners of the parent		(4,034)	(31,634)
- Non-controlling interests		(12)	121
		(4,046)	(31,513)
Basic loss per share	11	(1.18) cents	(8.80) cents
Diluted loss per share	11	(1.18) cents	(8.80) cents

 

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

 

 

Interim Consolidated Statement of Financial Position

As at 30 June 2015

 

Assets	Notes	(Unaudited) 30 June 2015 US$'000	(Audited) 31 December 2014 US$'000
Non-current assets
Property, plant and equipment		81	96
Intangible assets		5	6
Investments at fair value through profit or loss	13	94,553	91,306
Loans	14	655	653
Derivative financial assets	15	-	11
		95,294	92,072
Current assets
Trade and other receivables	16	4,183	3,896
Loans due within one year	14	27,722	28,246
Cash and cash equivalents		2,812	5,185
		34,717	37,327
Total assets		130,011	129,399
Current liabilities
Trade and other payables	17	1,997	1,249
Performance incentive payable within one year	17	8	8
		2,005	1,257
Non-current liabilities
Convertible zero dividend preference shares	18	66,434	63,609
Provision	19	8,089	7,701
Deferred income tax liability		2,793	2,488
		77,316	73,798
Net assets		50,690	54,344
Equity attributable to owners of the parent
Issued capital	20	56	55
Share premium		150,414	150,262
Share-based payment reserve		7,325	7,147
Retained earnings		(115,612)	(111,484)
Translation reserve		(1,406)	(1,500)
Equity component of convertible zero dividend preference shares	18	8,297	8,297
Other reserve		1,056	995
		50,130	53,772
Non-controlling interests		560	572
Total equity		50,690	54,344
Total equity and liabilities		130,011	129,399

 

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 2015

 

 

                                                                            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 loss	-	-	-	(4,128)	-	-	94	(4,034)	(12)	(4,046)
New issue of shares	1	184	-	-	-	-	-	185	-	185
Own shares acquired	-	(32)	-	-	-	61	-	29	-	29
Share-based payment expense	-	-	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

 

 

                                                                            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 2014	55	150,281	6,741	(49,127)	8,297	(2,193)		(1,248)	112,806	22,163	134,969
Loss for the period	-	-	-	(30,670)	-	-		-	(30,670)	121	(30,549)
Other comprehensive loss	-	-	-	-	-	-		(964)	(964)	-	(964)
Total comprehensive loss	-	-	-	(30,670)	-	-		(964)	(31,634)	121	(31,513)
Capital redemption of CCP fund	-	-	-	-	-	3,162		-	3,162	(9,003)	(5,841)
Share-based payment expense	-	-	352	-	-	-		-	352	-	352
Minority interests	-	-	-	-	-	-		-	-	(7,949)	(7,949)
At 30 June 2014	55	150,281	7,093	(79,797)	8,297		969	(2,212)	84,686	5,332	90,018

 

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 2015

		(Unaudited)	(Unaudited)
		Six months ended	Six months ended
		30 June 2015	30 June 2014
	Notes	US$'000	US$'000
Loss before tax		(3,835)	(30,611)
Adjustments for:
Depreciation and amortisation	6	20	27
Performance incentive	5	542	(532)
Share-based payments	21	54	363
Provision for bad debts	6	49	1
Realised losses on disposal of investments	3	978	6,054
Unrealised (gains)/losses on investments at FVTPL*	3	(4,138)	12,566
Unrealised losses on loans	3	308	7,834
Fair value losses/(gains) on derivative financial assets	3	11	(359)
Income from loans	3	(368)	(544)
Foreign exchange losses/(gains)		103	(77)
Interest expenses of convertible zero dividend preference shares	9	2,826	2,590
Purchases of investments at FVTPL		(21)	(363)
Purchases of loans		(363)	(1,131)
Proceeds from disposals of investments at FVTPL		300	4,654
Repayment of loans		245	650
Operating (losses)/gains before changes in working capital and provisions		(3,289)	1,121
Decrease in trade and other receivables		77	34
Increase/(decrease) in trade and other payables		748	(891)
Decrease in inventories		-	2
Decrease in financial guarantee contracts		-	(413)
Net cash outflow from operations		(2,464)	(147)
Investing activities Purchases of property, plant and equipment		-	(2)
Net cash flows outflow from investing activities		-	(2)
Financing activities
Repayment of short-term borrowings		-	(160)
Redemption China Commodities Absolute Return Ltd		-	(16,625)
Net cash outflow from financing activities		-	(16,785)
Net decrease in cash and cash equivalents		(2,464)	(16,934)
Effect of exchange rate changes on cash and cash equivalents		91	309
Cash and cash equivalents at beginning of period		5,185	35,300
Cash and cash equivalents at end of period		2,812	18,676

 

*   FVTPL refers to fair value through profit or loss

 

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

 

Notes to the Interim Consolidate Financial Statements for the six months ended 30 June 2015                         

 

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 exclusively on growth opportunities created by the urbanization and industrialization of China and Mongolia. 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 2015.

 

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 2014.

 

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 2014.

 

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/(loss)

	(Unaudited) Six months ended 30 June 2015 US$'000	(Unaudited) Six months ended 30 June 2014 US$'000
Realised losses on disposal of investments	(978)	(6,054)
- Investments at FVTPL	(612)	(811)
- Loans	(363)	-
- Subsidiary	(3)	(5,243)
Unrealised gains/(losses) on investments	3,819	(20,041)
- Investments at FVTPL	4,138	(12,566)
- Loans	(308)	(7,834)
- Derivative financial assets	(11)	359
Income from loans	368	544
Dividends	-	4
Total	3,209	(25,547)

 

4       Consulting services receivable/ (payable)

	(Unaudited) Six months  ended 30 June 2015 US$'000	(Unaudited) Six months  ended 30 June 2014 US$'000
Consulting Services receivable	-	5
Consulting Services payable	(1,044)	(55)
Total	(1,044)	(50)

 

5       Performance incentive

 

	(Unaudited) Six months  ended 30 June 2015 US$'000	(Unaudited) Six months  ended 30 June 2014 US$'000
Provision for performance incentive payable over one year	(542)	532
Total	(542)	532

 

A balance sheet provision for future performance incentive for the period ended 30 June 2015 was US$7,946,128 (31 December 2014: US$7,404,454). The performance incentives are accrued and payable to Origo Advisers Ltd refer to Note 22 for details on Origo Advisers Ltd.

 

The amount of performance incentives has been calculated and accrued in accordance with the 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.

 

6       Other administrative expenses

 

	(Unaudited) Six months  ended 30 June 2015 US$'000	(Unaudited) Six months  ended 30 June 2014 US$'000
Employee expenses	(91)	(1,319)
Professional fees	(2,062)	(845)
Including:
-Audit fees	(109)	(124)
Depreciation expenses	(20)	(27)
Provision for bad debts*	(49)	(1)
Others	(304)	(608)
Total	(2,526)	(2,800)

 

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

 

7       Directors' remuneration

 

				(Unaudited) Six months  ended 30 June 2015 US$'000	(Unaudited) Six months  ended 30 June 2014 US$'000
Directors' emoluments				68	410
Share-based payment expenses				79	149
Total				147	559

 

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 Prestsulen***	-	6	-	6	-
Ms. Shonaid Jemmett Page	-	28	-	28	-
	3	65	79	147	12,900,000

 

Directors' remuneration for the six months ended 30 June 2014 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***	19	-	(1)	18	4,000,000
Mr. Chris A Rynning***	165	-	75	240	3,500,000
Mr. Niklas Ponnert	150	-	75	225	5,300,000
Mr. Christopher Jemmett***	-	19	-	19	100,000
Mr. Lionel de Saint Exupery	-	19	-	19	-
Mr. Tom Prestsulen***	-	19	-	19	-
Ms. Shonaid Jemmett Page	-	19	-	19	-
	334	76	149	559	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 2015 and 2014.

 

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 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

 

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 2015 (Unaudited)

 

	Europe	China	Mongolia	South Africa	Total
	$'000	$'000	$'000	$'000	$'000
Investment losses:
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

 

For the six months ended 30 June 2014 (Unaudited)

 

	Unlisted			Listed			Total
	Equity	Debt	Total	Equity	Debt	Total
	$'000	$'000	$'000	$'000	$'000	$'000	$'000
Investment loss:
Realised losses on disposal of  investments	(5,243)	-	(5,243)	(811)	-	(811)	(6,054)
Unrealised (losses)/gains on investments	(15,093)	(7,827)	(22,920)	2,886	(7)	2,879	(20,041)
Income from loans	-	437	437	-	107	107	544
Dividends	-	-	-	4	-	4	4
Total	(20,336)	(7,390)	(27,726)	2,079	100	2,179	(25,547)
Net divestment/(investment)
Net proceeds of divestment	4,500	650	5,150	154	-	154	5,304
Investment	-	(1,131)	(1,131)	(363)	-	(363)	(1,494)
Balance sheet
Investment portfolio	94,055	32,062	126,117	5,359	2,341	7,700	133,817

 

For the six months ended 30 June 2014 (Unaudited)

 

	Europe	China	Mongolia	Rest of Asia	North America	South Africa	Total
	$'000	$'000	$'000	$'000	$'000	$'000	$'000
Investment income/(losses):
Realised losses on disposal of  investments	-	(5,243)	(809)	-	(2)	-	(6,054)
Unrealised gains/(losses) on investments	255	(767)	(11,682)	43	(105)	(7,785)	(20,041)
Income from loans	154	283	107	-	-	-	544
Dividends	-	-	4	-	-	-	4
Total	409	(5,727)	(12,380)	43	(107)	(7,785)	(25,547)
Net divestment/(investment)
Net proceeds of divestment	-	5,150	142	-	12	-	5,304
Investment	(481)	(650)	(363)	-	-	-	(1,494)
Balance sheet
Investment portfolio	7,272	93,668	30,051	370	56	2,400	133,817

 

9       Finance income and costs

 

		(Unaudited) Six months ended 30 June 2015 US$'000	(Unaudited) Six months ended 30 June 2014 US$'000
Finance income
Bank interest		-	1
		-	1
Finance costs
Bank charges		(15)	(12)
Interest expenses of convertible zero dividend preference shares		(2,825)	(2,590)
		(2,840)	(2,602)
Total		(2,840)	(2,601)

 

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 2015 US$'000	(Unaudited) Six months ended 30 June 2014 US$'000
Current taxes
Current year	-	-
Deferred taxes
Deferred income taxes*	(305)	62
Total income taxes in the statement of comprehensive income	(305)	62

 

*         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 in the PRC based on a tax rate of 10 per cent.

 

11     Earnings per share

 

Numerator	(Unaudited) Six months ended 30 June 2015 US$'000	(Unaudited) Six months ended 30 June 2014 US$'000
Loss for the period attributable to owners of the parent as used in the calculation of basic loss per share	(4,128)	(30,670)
Loss for the period attributable to owners of the parent as used in the calculation of diluted loss per share	(4,128)	(30,670)
Denominator	(Unaudited) 30 June 2015 Number of shares	(Unaudited) 30 June 2014 Number of shares
Weighted average number of ordinary shares for basic LPS	350,387,378	348,595,389
Weighted average number of ordinary shares adjusted for the effect of dilution	350,387,378	348,595,389
Basic LPS	(1.18) cents	(8.80) cents
Diluted LPS	(1.18) cents	(8.80) 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 2015	Proportion of ownership interest at 31 December 2014
Ascend Ventures Ltd	Malaysia	100%	100%
Origo Resource Partners Ltd	Guernsey	100%	100%
PHI International Holding Ltd	Bermuda	100%	100%
Origo Partners MGL LLC	Mongolia	100%	100%
PHI International (Bermuda) Holding Ltd*	Bermuda	100%	100%
Ascend (Beijing) Consulting Ltd**	China	100%	100%
Origo Asset Management Ltd	Cayman	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%
China Venture Capital GP Ltd***	Cayman	-	100%

 

*           Owned by Origo Resource Partners Ltd

 

**         Owned by Ascend Ventures Ltd

 

***       Struck off

 

13     Investments at fair value through profit or loss

 

As at 30 June 2015 (Unaudited)

 

Name	Country of incorporation	Fair Value hierarchy level	Proportion of ownership interest	Cost US$'000	Fair value US$'000
TPL GmbH***	Germany	3	54.8%	18	-
IRCA Holdings Ltd.	British Virgin Islands	3	49.1%	9,505	-
Shanghai Yi Rui Tech New Energy Technology Ltd	China	3	49.0%	675	695
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	18,450
Kincora Copper Ltd**	Canada	1	26.3%	7,389	1,972
R.M.Williams Agricultural Holdings Pty Ltd	Australia	3	24.0%	20,214	-
Niutech Energy Ltd	British Virgin Islands	3	21.1%	6,350	11,807
Moly World Ltd	British Virgin Islands	3	20.0%	10,000	7,459
Unipower Battery Ltd	Cayman Islands	3	16.5%	4,301	9,584
Fans Media Co., Ltd	British Virgin Islands	3	14.3%	2,360	-
Gobi Coal & Energy Ltd**	British Virgin Islands	3	14.0%	14,960	13,394
Celadon Mining Ltd	British Virgin Islands	3	9.7%	13,069	24,790
Staur Aqua AS	Norway	3	9.2%	719	43
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	3,303
Kooky Panda Ltd	Cayman Islands	3	1.2%	25	-
Six Waves Inc	British Virgin Islands	3	1.1%	240	956
Marula Mines Ltd**	South Africa	3	0.9%	250	418
Fram Exploration AS	Norway	3	0.6%	1,223	1,304
Other quoted investments**		1		1,401	378
Total				128,809	94,553

 

As at 31 December 2014 (Audited)

 

Name	Country of incorporation	Fair Value hierarchy level	Proportion of ownership interest	Cost US$'000	Fair value US$'000
TPL GmbH***	Germany	3	54.8%	18	-
IRCA Holdings Ltd.	British Virgin Islands	3	49.1%	9,505	-
Shanghai Yi Rui Tech New Energy Technology Ltd	China	3	49.0%	675	695
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	12,027
Kincora Copper Ltd**	Canada	1	26.3%	7,389	1,755
R.M.Williams Agricultural Holdings Pty Ltd	Australia	3	24.0%	20,214	-
Niutech Energy Ltd	British Virgin Islands	3	21.1%	6,350	11,891
Moly World Ltd	British Virgin Islands	3	20.0%	10,000	8,688
Unipower Battery Ltd	Cayman Islands	3	16.5%	4,301	12,053
Fans Media Co., Ltd	British Virgin Islands	3	14.3%	2,360	-
Gobi Coal & Energy Ltd**	British Virgin Islands	3	14.0%	14,960	13,394
Celadon Mining Ltd	British Virgin Islands	3	9.7%	13,069	24,634
Staur Aqua AS	Norway	3	9.2%	719	43
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	3	2%/ 1.6%	5,565	3,174
Kooky Panda Ltd	Cayman Islands	3	1.2%	25	-
Six Waves Inc	British Virgin Islands	3	1.1%	240	804
Marula Mines Ltd**	South Africa	3	0.9%	250	501
Fram Exploration AS	Norway	3	0.6%	1,202	956
Other quoted investments**		1		2,296	691
Total				129,683	91,306

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

**            Investments held partially by China Commodities Absolute Return Ltd ("CCF"), the funds managed by the Group.

***         A company focusing on cleantech sectors, jointly formed and co-managed by the Group and Niutech Energy Solution B.V.

 

As at 30 June 2015 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	226
Kincora Copper Ltd	2.3%	1,063	170

 

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 2015. In 2014, the transfer from level 3 to level 1 reflects the maturity of lock-up period of Kincora Copper Ltd on 18 July 2014.

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

 

	(Unaudited) Six month ended 30 June 2015 US$'000	(Audited) 2014 US$'000
Opening balance	88,860	110,750
Acquisitions	21	-
Proceeds from disposals of investments	-	(294)
Realised losses on disposals of investments	-	(32)
Realised losses on write-off of investments	-	(306)
Net exchange difference	190	(1,692)
Movement in unrealised gains/(losses) on investments	-
- In profit or loss	3,132	(17,965)
Transfers out of Level 3	-	(1,601)
Closing balance	92,203	88,860

 

The fair value increase on investments categorised within Level 3 of US$3,321,624 (2014: US$19,994,687), was recorded in the statement of comprehensive income.

 

Description of significant unobservable inputs to valuation:

as at 30 June 2015

	Valuation technique	Significant unobservable inputs	Range
Investments in unquoted equity shares - metal & mining sector	DCF method	WACC	17%
		Discount for lack of marketability	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%
Investments in unquoted loans - metal & mining sector	DCF method	WACC	8.44 - 14.46%
		Discount for lack of marketability	20%

 

as at 31 December 2014

	Valuation technique	Significant unobservable inputs	Range
Investments in unquoted equity shares - metal & mining sector	DCF method	WACC	15%
		Discount for lack of marketability	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%
Investments in unquoted loans - metal & mining sector	DCF method	WACC	10.56 - 13.85%
		Discount for lack of marketability	20%

 

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 do 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 presentation 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 have 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 of each methodology concerning the future and other key sources of estimation uncertainty will have a significant risk of causing a material adjustment to the fair value of the instruments within the next reporting period.

Inputs applied in the valuation methodologies are sensitive to assumptions made when ascertaining 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$2,453,113 or 2.03% 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 2015 (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	658	-	658
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	2,469	2,017	-	2,017
Roshini International Bio Energy Corporation	3	-	424	-	-	-
Sub-total			45,476	26,820	350	27,170

 

		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	197	305	502
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	540	-	540
China Silvertone Investment Co Ltd		-	478	-	-	-
Unipower Battery Ltd		12	164	165	-	165
View Step Corporation Ltd		-	25	-	-	-
Sub-total			15,618	902	305	1,207
Total			61,094	27,722	655	28,377

 

*          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. There are no breaches under the terms and conditions of loan agreements.

 

As at 31 December 2014
	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	764	-	764
R.M. Williams Agricultural Holdings Pty Ltd	3	8-20	3,090	-	-	-
Staur Aqua AS	3	0-15	3,848	267	228	495
Kincora Copper Ltd	3	8.7	2,469	2,138	-	2,138
Roshini International Bio Energy Corporation	3	-	424	-	-	-
Sub-total			45,476	27,169	228	27,397

 

 

		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	158	425	583
TPL GmbH		10	4,170	-	-	-
R.M.William Agricultural Holdings   Pty Ltd		15.5+RBA cash rate	1,725	-	-	-
Shanghai Evtech New Energy Technology Ltd		-	510	510	-	510
China Silvertone Investment Co Ltd		-	478	-	-	-
Unipower Battery Ltd		12	409	409	-	409
View Step Corporation Ltd		-	25	-	-	-
Sub-total			15,863	1,077	425	1,502
Total			61,339	28,246	653	28,899

 

Statement of changes in loans:

 

	(Unaudited) Six months ended 30 June 2015 US$'000	(Audited) 2014 US$'000
Opening balance	28,899	41,756
Additions	363	2,121
Repayment	(245)	(732)
Write-offs	(363)	(3,867)
Revaluation	(277)	(10,379)
Closing balance	28,377	28,899

 

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

	(Unaudited) Six months ended 30 June 2015 US$'000	(Audited) 2014 US$'000
Opening balance	27,397	34,248
Additions	-	-
Repayment	-	-
Write-offs	-	-
Movement in unrealised loss on investments
- In profit or loss	(227)	(6,851)
Closing balance	27,170	27,397

 

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     Derivative financial assets

 

	Fair Value hierarchy level	(Unaudited) 30 June 2015  US$'000	(Audited) 31 December 2014 US$'000
Warrants	3	-	11
Total		-	11

 

In accordance with the fair value hierarchy described in note 13, derivative financial instruments are measured using level 3 for warrants.

 

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

	(Unaudited) Six months ended 30 June 2015 US$'000	(Audited) 2014 US$'000
Opening balance	11	109
Expired	-	-
Movement in unrealized loss on investments
- In profit or loss Revaluation	(11)	(98)
Closing balance	-	11

 

The fair value decrease on derivative financial instruments categorised within Level 3 of US$11,092 (2014: US$97,701), was recorded in the statement of profit or loss.

 

16     Trade and other receivables

 

	(Unaudited) 30 June 2015  US$'000	(Audited) 31 December 2014 US$'000
Trade debtors	7	4
Other debtors	1,590	1,382
Loan interest receivables	2,491	2,127
Prepayments	95	383
Total	4,183	3,896

 

17     Trade and other payables

 

	(Unaudited) 30 June 2015 US$'000	(Audited) 31 December 2014 US$'000
Trade payables	5	2
Other payables	1,992	1,247
Performance incentive payable within one year*	8	8
Total	2,005	1,257

 

*           Refer to note 5 for total performance incentive expenses.

 

 

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 2014		57,000,000	58,313	8,297	-
Interest expenses on convertible zero    dividend preference shares		-	5,296	-	-
Balance at 31 December 2014		57,000,000	63,609	8,297	-
Interest expenses on convertible zero    dividend preference shares		-	2,825	-	-
Balance at 30 June 2015		57,000,000	66,434	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.

 

19     Provision

 

	(Unaudited) 30 June 2015 US$'000	(Audited) 31 December 2014 US$'000
USR/contingent share awards *	143	297
Performance incentive provision**	7,946	7,404
Total	8,089	7,701

 

*          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

 

20     Issued capital

 

	(Unaudited) 30 June 2015		(Audited) 31 December 2014
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	356,706,814	55	356,706,814	55
New issued shares*	2,040,000	1	-	-
At end of the period/year	358,746,814	56	356,706,814	55

 

*          In February 2015, a total of 2,040,000 new ordinary shares have been issued at an effective issue price of 5.875 pence per ordinary share to the Non-executive Directors and former Non-executive Directors.

 

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 2015 US$'000	(Unaudited) Six months ended 30 June 2014 US$'000
Equity-settled option	(178)	(353)
USR/contingent share awards	124	(10)
	(54)	(363)

 

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 2015 and year ended 31 December 2014.

 

	(Unaudited) 30 June 2015		(Audited) 31 December 2014
	No.	WAEP	No.	WAEP
Outstanding at 1 January	21,451,932	26.97p	23,001,932	27.24p
Granted during the period/year	-	-	-	-
Forfeited during the period/year	-	-	(1,550,000)	(31.00p)
Exercised during the period/year	-	-	-	-
Expired during the period/year	-	-	-	-
Outstanding at the end of the period/year	21,451,932	26.97p	21,451,932	26.97p
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 2015 was 4.06 years (31 December 2014: 4.56 years).

 

The range of exercise prices for options outstanding at the end of the period was 20 pence to 59.85 pence (30 December 2014: 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 2015 and year ended 31 December 2014.

 

	(Unaudited) 30 June 2015		(Audited) 31 December 2014
	No.	WAEP	No.	WAEP
Outstanding at 1 January	8,061,425	9.07p	5,688,067	12.85p
Granted during the period/year	-	-	2,423,358	-
Forfeited during the period/year	-	-	-	-
Exercised during the period/year	(350,000)*	-	(50,000)**	-
Expired during the period/year	-	-	-	-
Outstanding at the end of the period/year	7,711,425	9.48p	8,061,425	9.07p
Exercisable at the end of the period/year	7,711,425	9.48p	8,061,425	9.07p

 

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

 

**        The weighted average share price at the date of exercise of these options was 7.88 pence.

 

The weighted average remaining contractual life for the share options outstanding as at 30 June 2015 was 6.02 years (31 December 2014: 6.64 years).

 

The range of exercise prices for options outstanding at the end of the period was zero to 18.86 pence (31 December 2014: zero to 18.54 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.

 

Underlying stock price (pence)			4.125
Expected life of option (years)			10
Expected volatility (%)			43.10%
Expected dividend yield (%)			-
Risk-free interest rate (%)			1.41%

 

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 2015 is US$143,195 and the expense recognized as share-based payments during the period is (US$124,395).

 

22     Related party transactions

 

Identification of related parties

 

The Group has a related party relationship with its subsidiaries, jointly controlled entity, 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 2015 and 30 June 2014, as well as balances with related parties at 30 June 2015 and 31 December 2014.

	(Unaudited)	(Audited)
	30 June 2015 US$'000	31 December 2014 US$'000
Loans to related parties
Subsidiaries:
ISAK International Holding Ltd	870	870
China Cleantech Partners, L.P.	340	340
China Venture Capital GP Ltd	-	318

 

 

 

	(Unaudited)	(Audited)
	30 June 2015 US$'000	31 December 2014 US$'000
Amounts due from/(to) related parties*
Key management personnel:
Wang Chao Yong***	-	(47)
Christopher Jemmett***	-	(47)
Lionel de Saint-Exupery***	-	(47)
Shonaid Jemmett Page***	-	(47)
Luke Leslie***	(12)	(12)
Other:
Origo Advisers Ltd**	(7,690)	(7,117)
	(Unaudited) Six months ended	(Unaudited) Six months ended
	30 June 2015 US$'000	30 June 2014 US$'000
Transactions
Key management personnel:
Luke Leslie****	-	(9)
Other:
Origo Advisers Ltd**	(1,567)	(538)

 

*          The amounts are unsecured, non-interest bearing 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.

 

***     Chris A Rynning (former Director of the Company); Niklas Ponnert (Director of the Company); Wang Chao Yong, Christopher Jemmett, Tom Preststulen were former Non-executive directors of the Company; Lionel de Saint-Exupery (Non-executive Director of the Company); Shonaid Jemmett Page (Non-executive Chairman of the Company); Luke Leslie is a director of CCF which is one of subsidiaries of the Group.

 

****  The amount is the management fee according to the advisory agreement between CCF and the Group.

 

23     Commitments and contingencies

 

·     In August 2013, the Company entered into a payment guarantee agreement with ABSA Bank Ltd ("ABSA") to guarantee IRCA's repayment obligation under the facilities extended from ABSA, for an aggregate amount up to R6,769,000.

 

·     Subject to the provisions of the Company's Articles (the "Articles"), the Company shall procure the redemption by way of tender offer, at a price per Convertible Preference Share equal to the Accredited Principal Amount at the date the relevant tender offer is made, of at least 12 million Convertible Preference Shares by 8 March 2016. No Redemption of the Convertible Preference Shares may be made by the Company if, immediately following any such redemption, the Company would be unable to satisfy the Solvency Test under the Articles. The effect of the Articles is to postpone the obligation to redeem those Convertible Preference Shares 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 Convertible Preference Shares shareholders to creditors when the Company cannot afford to redeem.

 

·     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 of what was mentioned in a short-form term sheet (the "CZDP Term Sheet") that was appended to the placing letter entered into between Liberum (on behalf of Origo) and Spearpoint 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 suggest 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 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 consulted a limited number of its key shareholders to discuss the complaint and understands that shareholders would be unlikely to approve the amendments to the Articles proposed by Brooks Macdonald if they were put to shareholders. Origo has also sought legal advice in respect of Brooks Macdonald's complaint. On the basis of that legal advice, Origo considers that a legal claim against Origo, 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.

 

In addition, on 13 March 2014 Brooks MacDonald, through its lawyers in the Isle of Man (where the Company is incorporated), 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 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.   

 

The Company issued an application in the Isle of Man Court for a declaration that the Articles bear the meaning propounded by the Company. The final hearing in the Declaratory Proceedings was been held on 10 June 2015. The Isle of Man Court handed down judgment in favour of the Company on 9 July 2015, and has confirmed that the Articles bear the meaning propounded by the Company.

 

On 14 July 2015, Brooks MacDonald has notified the Company of a complaint in relation to the construction of a provision of the Company's articles of association (the "Articles"). This complaint is in relation to article 4.17 of the Articles, which primarily addresses a conversion mechanism relating to the Company's CZDP.

 

The Company remains committed to attempting to work with Brooks Macdonald and other shareholders to achieve a mutually acceptable resolution to the complaints it has raised. 

 

There were no other material contracted commitments or contingent assets or liabilities at 30 June 2015 (31 December 2014: none) that have not been disclosed in the consolidated financial statements.