10 May 2018

 

PME African Infrastructure Opportunities plc

("PME" or the "Company")

(AIM: PMEA.L)

 

Final Results for the year ended 31 December 2017

 

PME African Infrastructure Opportunities plc announces its audited results for the year ended 31 December 2017.

 

Financial Highlights

 

·      Net Asset Value of US$5.2 million as at 31 December 2017 (2016: US$9.5 million)

 

·      Net Asset Value per share of US$0.21 (2016: US$0.23)

 

·      US$3.4 million fully subscribed tender offer completed during the period

 

·      Loss attributable to shareholders for the year ended 31 December 2017 was US$0.9 million (2016: profit of US$0.4 million)

 

·      Basic and diluted loss per share of US$0.0241 (2016: profit per share of US$0.0100)

 

  

For further information please contact:

 

Smith & Williamson Corporate Finance Limited Nominated Adviser Azhic Basirov / Ben Jeynes	+44 20 7131 4000
Stifel Nicolaus Europe Limited Broker Neil Winward / Tom Yeadon	+44 20 7710 7600

 

Market Abuse Regulation 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.

 

 

Chairman's Statement

 

On behalf of the Board of Directors (the "Board"), I am pleased to present the annual results for PME African Infrastructure Opportunities plc ("PME" or the "Company" and together with its subsidiaries the "Group") for the year ended 31 December 2017.

 

The remit of the Company's directors (the "Directors") under the Company's investing policy is to seek to realise the remaining assets of the Company and to return both existing cash reserves and the net proceeds of realisation of the remaining assets to shareholders.

 

Investments

 

The Company now has one remaining asset, namely a building in Dar-es-Salaam, Tanzania (the ''Dar-es-Salaam Property").

 

On the 29 June 2017 the Company announced that its wholly-owned subsidiary PME Locomotives (Mauritius) Limited had completed and settled a put option with Sheltam (Mauritius) Limited and that cash consideration of US$4.25 million, together with interest of US$163,000, had been received by the Group.

 

At an Extraordinary General Meeting held on 6 September 2017, shareholders agreed to a tender offer pursuant to which the Company offered to purchase up to 16,389,294 ordinary shares in the Company ("Ordinary Shares"), representing 40 per cent of the Ordinary Shares then in issue, at a price of US$0.21 per Ordinary Share. 16,389,294 Ordinary Shares were validly tendered under the tender offer and were subsequently cancelled on purchase by the Company. From 19 September 2017 the Company's issued share capital consists of 24,583,942 Ordinary Shares and the total number of voting rights in the Company is therefore 24,583,942. The voting rights on all Ordinary Shares are identical.

 

The Dar-es-Salaam Property, which is managed by a local managing agent, is currently 80% let and the investment continues to trade profitably. In 2010 PME Properties Limited acquired the property from Dovetel (T) Limited ("Dovetel"), the Company's former telecommunication investee company in Tanzania.

 

Dovetel was also a tenant of part of the Dar-es-Salaam Property but was in default on the payment of rent.  As previously reported to shareholders, the Company has followed various legal steps to correct the situation. On 19 October 2017, PME Properties Limited issued an eviction notice to Dovetel. On 3 December 2017 the eviction was carried out.

 

Subsequent to the eviction of Dovetel being carried out, First Seal Ltd, Dovetel's parent company, raised complaints with local authorities that the eviction was incorrectly carried out and alleging that PME had attacked the Dar-es-Salaam Property, destroying a building that belonged to Dovetel and thereafter took over the properties/equipment within it. Both the property manager and the lawyer responsible for the eviction were questioned on a number of occasions over a three-day period.

 

The Group has responded to local police in respect of these allegations, through the Group's lawyers appointed by the Group to execute the Dovetel eviction, and considers the claim to have no foundation and will strongly defend itself and its ownership of the building. In its response, the Group has highlighted the background to the Dovetel eviction, confirmed that the eviction was conducted by the landlord through the Court Broker who is legally authorised and provided the police with documentation proving the Group's ownership of the Dar-es-Salaam building and that Dovetel were merely a tenant of the Dar-es-Salaam property. As at the date of writing no further action has been taken by the police who, the Company understands, continue with their investigation. No provision has been made for the Dovetel action. The directors consider it without merit.

 

Further renovations to the building have been carried out. The Dar-es-Salaam Property has three tenants. One tenant has a lease agreement for 809 square metres with approximately 18 months to run on the lease. The second tenant rents 628 square metres on a five year lease ending in May 2021 with rental increases built into the agreement. The third tenant leases 1,206 square metres under a two year lease ending in February 2020.

 

There is still uncertainty about the economic position of Tanzania. Investment decisions continue to be postponed which in turn has reduced the demand for high end offices. The prospect of selling the Dar-es-Salaam Property in the short term for a reasonable price is still uncertain.

 

The Directors have decreased the value of the Dar-es-Salaam Property to US$4.66m. This valuation is in line with an updated value assessed by the local expert and accounts for both current vacancy levels and the current economic climate.  For the year end 31 December 2016, the local expert had a market value of US$4.95 million on the Dar-es-Salaam Property.

 

Financial Results

 

The loss for the year to 31 December 2017 was US$0.9 million (2016: profit of US$0.4 million), representing a US$0.0241 loss per Ordinary Share (2016: profit per Ordinary Share US$0.0100). The loss for the period was made up of the net loss in the fair value of assets plus ongoing operating and administrative costs.

 

The Directors, having considered the latest valuation of the Dar-es-Salaam Property, are of the opinion that the Dar-es-Salaam Property is reflected in the balance sheet at realistic fair value.

 

As at 31 December 2017, PME's Net Asset Value attributable to ordinary shareholders in accordance with IFRS was US$5.2 million (US$0.21 per share), compared to the US$9.5 million (US$0.23 per share) that was reported as at 31 December 2016.

 

Return of Cash and Outlook

 

The Directors will continue with the marketing process for the sale of the Dar-es-Salaam Property in 2018, provided the local economic uncertainty has receded, the vacant space has been relet and the Group has received confirmation that the police investigation in relation to the Dovetel eviction has been finalised with no further action being taken.

 

A further and final tender offer will be proposed once the building has been sold.

 

 

Paul Macdonald

Chairman

9 May 2018

 

Statement of Comprehensive Income

		Year ended 31 December 2017	Year ended  31 December 2016
	Note	US$'000	US$'000
Net (losses)/gains on financial assets at fair value through profit or loss	3	(204)	1,230
Dividend income		226	-
Operating and administration expenses	9	(898)	(802)
Foreign exchange gain/(loss)		1	(17)
(Loss)/profit before income tax		(875)	411
Income tax	14	-	-
(Loss)/profit and total comprehensive(expense)/ income for the year		(875)	411
Basic and diluted (loss)/profit per share (cents) attributable to the equity holders of the Company during the year	5	(2.41)	1.00

 

 

Balance Sheet

	Note	As at 31 December 2017	As at 31 December 2016
		US$'000	US$'000
Assets
Current assets
Financial assets at fair value through profit or loss	3	4,687	9,260
Trade and other receivables		26	69
Cash and cash equivalents		554	261
Total current assets		5,267	9,590
Total assets		5,267	9,590
Equity and liabilities
Equity
Issued share capital	6	246	410
Capital redemption reserve	7	1,559	1,395
Retained earnings		3,365	7,682
Total equity		5,170	9,487
Current liabilities
Trade and other payables	8	97	103
Total current liabilities		97	103
Total liabilities		97	103
Total equity and liabilities		5,267	9,590

 

The financial statements were approved and authorised for issue by the Board of Directors on 9 May 2018 and signed on its behalf by:

 

Paul Macdonald                                                    Lawrence Kearns               

Director                                                                   Director

 

 

 

Statement of Changes in Equity

 

 

	Share capital		Capital redemption reserve			Retained earnings			Total
	US$'000		US$'000			US$'000			US$'000
Balance at 1 January 2016		410		1,395	7,271			9,076
Comprehensive income
Profit for the year		-		-	411			411
Total comprehensive income  for the year		-		-	411			411
Balance at 31 December 2016		410		1,395	7,682			9,487

 

Balance at 1 January 2017	410	1,395	7,682		9,487
Comprehensive expense
Loss for the year	-	-	(875)		(875)
Total comprehensive expense  for the year	-	-	(875)		(875)
Transactions with owners
Tender offer (note 6)	(164)	164	(3,442)		(3,442)
Total transactions with owners	(164)	164	(3,442)		(3,442)
Balance at 31 December 2017	246	1,559	3,365		5,170

 

 

 

Cash Flow Statement

 

 

	Note	Year ended 31 December 2017	Year ended 31 December 2016
		US$'000	US$'000
Cash flows from operating activities
Purchase of financial assets - loans to investee companies	3	(14)	(174)
Proceeds from sale of financial assets - return of capital	3	4,400	-
Dividends received		226	-
Operating, administrative and project related expenses paid		(879)	(891)
Net cash generated from/(used in) operating activities		3,733	(1,065)
Financing activities
Tender offer	6	(3,442)	-
Net cash used in financing activities		(3,442)	-
Net increase/(decrease) in cash and cash equivalents		291	(1,065)
Cash and cash equivalents at beginning of year		261	1,331
Foreign exchange gains/(losses) on cash and cash equivalents		2	(5)
Cash and cash equivalents at end of year		554	261

 

 

 

 

Notes to the Financial Statements

1              General Information

 

PME African Infrastructure Opportunities plc (the "Company") was incorporated and is registered and domiciled in the Isle of Man under the Isle of Man Companies Acts 1931 to 2004 on 19 June 2007 as a public limited company with registered number 120060C. The investment objective of PME African Infrastructure Opportunities plc and its subsidiaries (the "Group") was to achieve significant total return to investors through investing in various infrastructure projects and related opportunities across a range of countries in sub-Saharan Africa. On 19 October 2012 the shareholders approved the revision of the Company's investing policy which is now to realise the remaining assets of the Company and to return both existing cash reserves and the proceeds of realisation of the remaining assets to shareholders.

 

The Company's investment activities were managed by PME Infrastructure Managers Limited (the "Investment Manager") to 6 July 2012. No alternate has been appointed and the Board of Directors has assumed responsibility for the management of the Company's remaining assets. The Company's administration is delegated to Galileo Fund Services Limited (the "Administrator"). The registered office of the Company is Millennium House, 46 Athol Street, Douglas, Isle of Man, IM1 1JB.

 

Pursuant to its AIM admission document dated 6 July 2007, there was an original placing of up to 180,450,000 Ordinary Shares with Warrants attached on the basis of 1 Warrant for every 5 Ordinary Shares. Following the close of the placing on 12 July 2007, 180,450,000 Shares and 36,090,000 Warrants were issued. The Warrants lapsed in July 2012. The Shares of the Company were admitted to trading on AIM, a market of the London Stock Exchange, on 12 July 2007 when dealings also commenced.

 

Financial year end

The financial year end for the Company is 31 December in each year.

 

Dividends

In the year to 31 December 2017 the Company declared and paid dividends of US$nil (2016: US$nil).

 

Going concern

In assessing the going concern basis of preparation of the financial statements for the year ended 31 December 2017, the Directors have taken into account the status of current negotiations on the realisation of the remaining assets. The Directors consider that the Group has sufficient funds for its ongoing operations for the foreseeable future and therefore have continued to adopt the going concern basis in preparing these financial statements.

 

2              Summary of Significant Accounting Policies

 

This note provides a list of the significant accounting policies adopted in the preparation of these financial statements to the extent that they have not already been disclosed in the other notes below. These policies have been consistently applied to all years presented unless otherwise stated.

 

2.1           Basis of preparation

 

The financial information contained in this announcement does not constitute the Company's statutory accounts for 2016 or 2017.  Statutory accounts for the year ended 31 December 2016 and for the year ended 31 December 2017 have been reported on by the independent Auditors.  The Auditors' Reports for both years were unqualified and did not include references to any matters by way of emphasis.

 

The financial information contained in this announcement has been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union. The financial statements have been prepared under the historical cost convention, as modified by the revaluation of financial assets at fair value through profit or loss, and the requirements of the Isle of Man Companies Acts 1931 to 2004. The preparation of financial statements in conformity with IFRS requires the use of accounting estimates. It also requires management to exercise its judgement in the process of applying the Company's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in note 3.

 

In accordance with IFRS 10, 'Consolidated financial statements', the Directors have concluded that the Company falls under the definition of an investment entity because the Company has the following characteristics:

 

·      the Company has obtained funds for the purpose of providing investors with investment management services;

·      the Company's investing policy, which was communicated directly to investors, is investment solely for returns from capital appreciation and investment income; and

·      the performance of investments is measured and evaluated on a fair value basis.

 

As a result, the Company does not consolidate its subsidiaries, instead it is required to account for these subsidiaries at fair value through profit or loss in accordance with IAS 39, 'Financial instruments: recognition and measurement' and prepares separate company financial statements only.

 

a) New and amended standards and interpretations adopted by the Company

 

There are no new international standards, amendments or interpretations that are effective for the first time for the financial year ended 31 December 2017 that have had a significant effect on the financial statements.

 

b) New standards, amendments and interpretations to existing standards relevant to the Company, that are not yet effective and have not been early adopted by the Company

 

IFRS 9, 'Financial instruments', final version issued July 2014. This standard replaces the guidance in IAS 39, 'Financial instruments: recognition and measurement'. IFRS 9 retains but simplifies the mixed measurement model and establishes two primary categories for financial assets: amortised cost and fair value. The basis of classification depends on the entity's business model and the contractual cash flow characteristics of the financial asset. For financial liabilities, IFRS 9 retains most of the IAS 39 requirements, but in cases where the fair value option is taken, the part of a fair value change in a financial liability due to an entity's own credit risk is recorded in other comprehensive income rather than the income statement (unless this creates an accounting mismatch). The standard became applicable on 1 January 2018 and was not early adopted. The adoption of the revised standard will not have a material effect on the Company's financial statements.

 

2.2           Foreign currency translation

 

a) Functional and presentation currency

Items included in the financial statements are measured using the currency of the primary economic environment in which the entity operates ('the functional currency'). These financial statements are presented in US Dollars, which is the Company's functional and presentation currency.

 

b) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of comprehensive income.

 

2.3           Revenue and expense recognition

 

Interest income is recognised in the financial statements on a time-proportionate basis using the effective interest method. Interest expense for borrowings is recognised in the financial statements using the effective interest method.

 

Dividend income is recognised when the right to receive payment is established.

 

Expenses are accounted for on an accruals basis.

 

2.4           Financial assets and financial liabilities

 

The Company classifies its financial assets in the following categories: at fair value through profit or loss, and loans and receivables. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition.

 

The Company designates its investments, including equity, related loans and similar instruments (note 3), as at fair value through profit or loss on initial recognition if they are not classified as held for trading but are managed, and their performance is evaluated on a fair value basis in accordance with the Company's investing policy.

 

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the balance sheet date which are classified as non-current assets. The Company's loans and receivables comprise 'trade and other receivables' and 'cash at bank' in the balance sheet. Loans and receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for impairment is established when there is objective evidence that the Company will not be able to collect all amounts due according to the original terms of the receivables.

 

The Company classifies its financial liabilities as other liabilities. Other liabilities are 'trade and other payables' in the balance sheet (note 8).

 

2.5           Cash and cash equivalents

 

Cash and cash equivalents comprise cash deposited with banks held with original maturities of less than three months.

 

3              Financial Assets at Fair Value through Profit or Loss

 

Investments are designated at fair value through profit or loss on initial recognition. Such investments are initially recorded at fair value, and transaction costs for all financial assets carried at fair value through profit or loss are expensed as incurred. Gains and losses arising from changes in the fair value of financial assets, including foreign exchange movements, are recognised in the statement of comprehensive income.

 

The Company makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are in relation to the financial assets at fair value through profit or loss.

 

Fair value is the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date. The fair value of financial assets that are not traded in an active market is determined using valuation techniques. The Company uses a variety of methods and makes assumptions that are based on market conditions existing at each reporting date. Valuation techniques used include the use of comparable recent or proposed arm's length transactions, discounted cash flow analysis and other valuation techniques commonly used by market participants.

 

Regular purchases and sales of financial assets are recognised on the trade date, being the date on which the Company commits to purchase or sell the asset. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or the Company has transferred substantially all risks and rewards of ownership.

 

The following subsidiaries of the Company are held at fair value in accordance with IFRS 10:

 

	Country of incorporation	Percentage of shares held
PME Locomotives (Mauritius) Limited	Mauritius	100%
PME TZ Property (Mauritius) Limited	Mauritius	100%

 

The following company is an indirect investment of the Company and is included within the fair value of the direct investments:

 

	Country of incorporation	Percentage of shares held	Parent company
PME Properties Limited	Tanzania	100%	PME TZ Property (Mauritius) Limited

 

The following table shows a reconciliation of the opening balances to the closing balances for fair value measurements:

 

	31 December 2017	31 December 2016
	US$'000	US$'000
Start of the year	9,260	7,856
Increase in loans to investee companies	14	174
Subsidiary expenses to be paid by the Company*	17	-
Return of capital**	(4,400)	-
Movement in fair value of financial assets	(204)	1,230
End of the year	4,687	9,260

* The bank account for PME Locomotives (Mauritius) Limited was closed during the year and all money transferred to the Company's bank account. The Company is therefore responsible for its subsidiary's creditors at the year-end (note 8).

** The return of capital relates to a share buyback conducted by PME Locomotives (Mauritius) Limited in July 2017.

 

Assets carried at amounts based on fair value are defined as follows:

 

·      Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1).

·      Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (Level 2).

·      Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (Level 3).

 

The fair values of all financial assets at fair value through profit or loss are determined using valuation techniques using significant unobservable inputs. Accordingly, the fair values are classified as level 3.  There were no transfers between levels during the year. The valuation techniques and the significant unobservable inputs are shown below.

 

 

	Fair value as at 31 December 2017   US$'000	Fair value as at 31 December 2016   US$'000	Valuation techniques and inputs	Significant unobservable inputs	Sensitivity to significant unobservable inputs
Rail assets (PME Locomotives (Mauritius) Limited	4	4,270	Value of net assets	N/A	N/A
Real estate investments (PME TZ Property (Mauritius) Limited)	4,683	4,990	Discounted cash flow property valuation (inputs including rental income, operating costs, vacancy and discount rate) plus value of other net assets	Discount rate	If the discount rate were 1% higher/lower the estimated fair value would (decrease)/increase by US$40,000
Total	4,687	9,260

 

 

4              Net Asset Value per Share

	As at 31 December 2017	As at 31 December 2016
Net assets attributable to equity holders of the Company (US$'000)	5,170	9,487
Shares in issue (thousands)	24,584	40,973
NAV per share (US$)	0.21	0.23

 

The NAV per share is calculated by dividing the net assets attributable to equity holders of the Company by the number of Ordinary Shares in issue.

 

5              Basic and Diluted (Loss)/Profit per Share

 

Basic (loss)/profit per share is calculated by dividing the (loss)/profit attributable to equity holders of the Company by the weighted average number of Ordinary Shares in issue during the year.

	Year ended  31 December 2017	Year ended  31 December 2016
(Loss)/profit attributable to equity holders of the Company (US$'000)	(875)	411
Weighted average number of Ordinary Shares in issue (thousands)	36,303	40,973
Basic (loss)/profit per share (cents) for the year	(2.41)	1.00

 

There is no difference between basic and diluted Ordinary Shares as there are no potential dilutive Ordinary Shares.

 

6              Share Capital

 

Ordinary Shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds.

 

Ordinary Shares of US$0.01 each	31 December 2017 and 2016 Number	31 December 2017 and 2016 US$'000
Authorised	500,000,000	5,000

 

 

C Shares of US$1 each	31 December 2017 and 2016  Number	31 December 2017 and 2016  US$'000
Authorised	5,000,000	5,000
Issued	-	-

 

Ordinary Shares of US$0.01 each	31 December 2017 US$'000	31 December 2016 US$'000
24,583,942 (31 December 2016: 40,973,236) Ordinary Shares in issue, with full voting rights	246	410

 

At incorporation the authorised share capital of the Company was US$10,000,000 divided into 500,000,000 Ordinary Shares of US$0.01 each and 5,000,000 C Shares of US$1.00 each. The holders of Ordinary Shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company.

 

The holders of C Shares would be entitled to one vote per share at the meetings of the Company. The C Shares can be converted into Ordinary Shares on the approval of the Directors. On conversion each C share would be sub-divided into 100 C Shares of US$0.01 each and will be automatically converted into New Ordinary Shares of US$0.01 each.

 

A tender offer took place in September 2017. Up to 16,389,294 Ordinary Shares were available for tender at a price of US$0.21 per share. A total of 16,389,294 Ordinary Shares with an aggregate nominal value of US$163,893 were validly tendered and were cancelled upon completion on 19 September 2017. Retained earnings were reduced by US$3,441,752, being the consideration paid for these shares.

 

Dividends and tender offers are recognised as a liability in the year in which they are declared and approved.

 

7              Capital Redemption Reserve

 

The capital redemption reserve is created on the cancellation of shares equal to the par value of shares cancelled. This reserve is not distributable.

 

8              Trade and Other Payables

 

Trade and other payables are recognised initially at fair value and subsequently at amortised cost using the effective interest method.

 

	31 December 2017 US$'000	31 December 2016 US$'000
Administration fees payable	19	20
Audit fee payable	42	53
CREST service provider fee payable	6	5
Subsidiary expenses to be paid by the Company (note 3)	17	-
Other sundry creditors	13	25
	97	103

 

The fair value of the above financial liabilities approximates their carrying amounts.

 

9              Operating and Administration Expenses

	Year ended 31 December 2017 US$'000	Year ended 31 December 2016 US$'000
Administration expenses	167	148
Administrator and Registrar fees	84	86
Audit fees	41	56
Directors' fees	222	219
Professional fees	336	255
Other	48	38
Operating and administration expenses	898	802

 

Administrator and Registrar fees

The Administrator receives a fee of 10 basis points per annum of the net assets of the Company between £0 and £50 million; 8.5 basis points per annum of the net assets of the Company between £50 and £100 million and 7 basis points per annum of the net assets of the Company in excess of £100 million, subject to a minimum monthly fee of £4,000 and a maximum monthly fee of £12,500 payable quarterly in arrears.

 

Administration fees expensed by the Company for the year ended 31 December 2017 amounted to US$76,313 (31 December 2016: US$77,842).

 

The Administrator provides general secretarial services to the Company, for which it receives a minimum annual fee of £5,000. Additional fees, based on time and charges, will apply where the number of Board meetings exceeds four per annum. For attendance at meetings not held in the Isle of Man, an attendance fee of £750 per day or part thereof will be charged. The fees payable by the Company for general secretarial services for the year ended 31 December 2017 amounted to US$7,949 (31 December 2016: US$7,722).

 

Administration fees of the Mauritian subsidiaries for the year ended 31 December 2017 amounted to US$17,325 (31 December 2016: US$23,845).

 

Administration fees of PME Properties Limited for the year ended 31 December 2017 amounted to US$53,405 (31 December 2016: US$42,538).

 

Directors' remuneration

The maximum amount of basic remuneration payable by the Company by way of fees to the Directors permitted under the Articles of Association is £200,000 per annum. The Directors are each entitled to receive reimbursement of any expenses incurred in relation to their appointment. The Executive Directors are entitled to receive annual basic salaries of £75,000.

 

Total fees and basic remuneration (including VAT where applicable) and expenses payable by the Company for the year ended 31 December 2017 amounted to US$222,143 (31 December 2016: US$218,546) and was split as below. Directors' insurance cover payable amounted to US$30,000 (31 December 2016: US$30,028).  

 

	Year ended  31 December2017 US$'000	Year ended  31 December 2016 US$'000
Paul Macdonald	99	97
Lawrence Kearns	111	108
Expense reimbursement	12	14
	222	219

 

10            Operating Segments

 

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker is the person or group that allocates resources to and assesses the performance of the operating segments of an entity.  The chief operating decision-makers have been identified as the Board of Directors.

 

The Board reviews the Company's internal reporting in order to assess performance and allocate resources. It has determined the operating segments based on these reports. The Board considers the business on a project by project basis by type of business. The type of business is transport (railway) and leasehold property.

 

Year ended 31 December 2017			Transport	Leasehold Property	Other*	Total
		PME Locomotives		PME TZ Property
		US$'000		US$'000	US$'000	US$'000
Net gains/(losses) on financial assets at fair value through profit or loss		116		(320)	-	(204)
Dividend income		-		226	-	226
Profit/(loss) for the year		116		(94)	(897)	(875)
Segment assets		4		4,683	580	5,267
Segment liabilities		-		-	(97)	(97)

 

* Other refers to income and expenses of the Company not specific to any specific sector such as income on un-invested funds and corporate expenses. Other assets comprise cash and cash equivalents US$554,414 and other assets US$26,460.

 

Year ended 31 December 2016	Transport		Leasehold Property	Other**	Total
		PME Locomotives	PME TZ Property
		US$'000	US$'000	US$'000	US$'000
Net gains/(losses) on financial assets at fair value through profit or loss		184	1,058	(12)	1,230
Profit/(loss) for the year		184	1,058	(831)	411
Segment assets		4,270	4,990	330	9,590
Segment liabilities		-	-	(103)	(103)

 

** Other refers to income and expenses of the Company not specific to any specific sector such as income on un-invested funds and corporate expenses. Other assets comprise cash and cash equivalents US$261,333 and other assets US$69,479.

 

11            Risk Management

 

The Company's activities expose it to a variety of financial risks: market risk (including foreign currency risk and interest rate risk), credit risk and liquidity risk. The financial risks relate to the following financial instruments: financial assets at fair value through profit or loss, trade and other receivables, cash and cash equivalents and trade and other payables. The accounting policies with respect to the significant financial instruments are described in notes 2, 3 and 8.

 

Risk management is carried out by the Executive Directors

 

Foreign currency risk

Foreign currency risk is the risk that the value of financial instruments will fluctuate due to changes in foreign exchange rates. Certain of the Company's operations are conducted in jurisdictions which generate revenue, expenses, assets and liabilities in currencies other than US Dollars. As a result, the Company is subject to the effects of exchange rate fluctuations with respect to these currencies. The currencies giving rise to this risk are Euro and Pound Sterling.

 

The Company's policy is not to enter into any currency hedging transactions.

 

The table below summarises the Company's exposure to foreign currency risk:

 

31 December 2017	Monetary Assets US$'000	Monetary Liabilities US$'000	Total US$'000
Euro	-	-	-
Pound Sterling	22	(80)	(58)
	22	(80)	(58)

 

31 December 2016	Monetary Assets US$'000	Monetary Liabilities US$'000	Total US$'000
Euro	-	(6)	(6)
Pound Sterling	66	(97)	(31)
	66	(103)	(37)

 

The Board of Directors monitors and reviews the Company's currency position on a continuous basis and act accordingly.

 

At 31 December 2017, had the US Dollar weakened by 3% (2016: weakened by 1%) in relation to Euro and Pound Sterling, with all other variables held constant, the shareholders' equity would have (decreased)/increased by the amounts shown below:

 

	2017 US$'000	2016 US$'000
Euro	-	-
Pound Sterling	2	-
Effect on net assets	2	-

 

Interest rate risk

Interest rate risk is the risk that the value of financial instruments will fluctuate due to changes in market interest rates. The Company is not exposed to significant interest rate risk from the cash held in interest bearing accounts at floating rates or short term deposits of one month or less. The Board of Directors monitor and review the interest rate fluctuations on a continuous basis and act accordingly.

 

During the year ended 31 December 2017 should interest rates have increased by 100 basis points, with all other variables held constant, the shareholders' equity and the result for the year would have been US$4,000 (2016: decreased 100 basis points US$nil) higher as a result of the impact on bank balances.

 

Credit risk

Credit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Company.

 

The carrying amounts of financial assets best represent the maximum credit risk exposure at the balance sheet date. This relates also to financial assets carried at amortised cost. Any change in credit quality of financial assets at fair value through profit or loss is reflected in the fair value of the asset.

 

Credit risk (continued)

At the reporting date, the Company's financial assets exposed to credit risk amounted to the following:

 

	31 December 2017 US$'000	31 December 2016 US$'000
Trade and other receivables	-	43
Cash and cash equivalents	554	261
	554	304

 

The Company's financial assets at fair value through profit or loss are equity investments of the Company which would not usually be subject to credit risk. Portions of the underlying investments are in the form of loans and receivables, cash and cash equivalents or other instruments that are subject to credit risk, and therefore the value attributable to such instruments is provided in the credit risk table above. None of the financial assets are either past due or impaired. In addition, the Company has indirect credit risk within its financial asset at fair value through profit or loss, whose underlying assets includes cash and cash equivalents of US$282,835 (31 December 2016: US$401,279) and receivables of US$100,401 (31 December 2016: US$248,077).

 

The Company manages its credit risk by monitoring the creditworthiness of counterparties regularly. Cash transactions and balances are limited to high-credit-quality financial institutions (at least an Aa2 credit rating).

 

Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its obligations as they fall due. The Company currently manages its liquidity risk by maintaining sufficient cash. The Company and the Group's liquidity positions are monitored by the Board of Directors.

 

The residual undiscounted contractual maturities of financial liabilities are as follows:

 

31 December 2017	Less than 1 month	1-3 months	3 months to 1 year	1-5 years	Over 5 years	No stated maturity
	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000
Financial liabilities
Trade and other payables	97	-	-	-	-	-
	97	-	-	-	-	-

 

31 December 2016	Less than 1 month	1-3 months	3 months to 1 year	1-5 years	Over 5 years	No stated maturity
	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000
Financial liabilities
Trade and other payables	103	-	-	-	-	-
	103	-	-	-	-	-

 

Capital risk management

The Company's primary objective when managing its capital base was to safeguard the Company's ability to continue as a going concern in order to realise the remaining assets of the Company at a time and under such conditions as the Directors may determine in order to maximise value on behalf of the shareholders of the Company and to return both existing cash reserves and the proceeds of realisation of the remaining assets to shareholders.

 

Company capital comprises share capital and reserves.

 

No changes were made in respect of the objectives, policies or processes in respect of capital management during the years ended 31 December 2016 and 2017.

 

12            Contingent Liabilities and Commitments

 

The Company has no contingent liability. In relation with its financial asset at fair value through profit or loss, PME Properties Limited has entered into a number of operating lease agreements in respect of property. The lease terms are between one and ten years and the majority of the lease agreements are renewable at the end of the lease period at market rates.

 

The Groups' future aggregate minimum lease payments, by virtue of its indirect investment in PME Properties Limited, under operating leases are as follows:

 

	31 December 2017 US$'000	31 December 2016 US$'000
Amounts payable under operating leases:
Within one year	19	25
In the second to fifth years inclusive	277	300
Beyond five years	1,160	1,220
	1,456	1,545

 

13            Related Party Transactions

 

Parties are considered to be related if one party has the ability to control the other party or to exercise significant influence over the other party in making financial or operational decisions. Key management is made up of the Board of Directors.

 

The Directors of the Company are considered to be related parties by virtue of their influence over making operational decisions. Directors' remuneration is disclosed in note 9.

 

14            Income Tax Expense

 

The Company is resident for taxation purposes in the Isle of Man and is subject to income tax at a rate of zero per cent (2016: zero per cent).