Annual Report & Consolidated Financial Statements

For the Year Ended 31 December 2021

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DIRECTORS, MANAGEMENT AND ADVISERS

COMPANY OVERVIEW

CHAIRMAN’S STATEMENT

STRATEGIC REPORT

DIRECTORS’ REMUNERATION REPORT

REPORT OF THE AUDIT COMMITTEE

STATEMENT OF DIRECTORS’ RESPONSIBILITIES

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF CEIBA INVESTMENTS LIMITED

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

CONSOLIDATED STATEMENT OF CASH FLOWS

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

INVESTOR INFORMATION

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financial advice from your stockbroker, bank manager, solicitor, accountant or other financial adviser authorised under

the Financial Services and Markets Act 2000 (as amended by the Financial Services Act 2012) if you are in the United

Kingdom or, if not, from another appropriately authorised financial adviser. If you have sold or otherwise transferred

all your Ordinary Shares in CEIBA Investments Limited, please forward this document, together with the accompanying

documents immediately to the purchaser or transferee, or to the stockbroker, bank or agent through whom the sale or

transfer was effected for transmission to the purchaser or transferee.

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DIRECTORS, MANAGEMENT AND ADVISERS

DIRECTORS (ALL NON-EXECUTIVE)

John Herring (Chairman)

Trevor Bowen

ALTERNATIVE INVESTMENT FUND MANAGER (AIFM)

Bow Bells House, 1 Bread Street

London EC4M 9HH

JTC Fund Solutions (Guernsey) Limited

Ground Floor, Dorey Court

Admiral Park, St Peter Port

Guernsey GY1 2HT

REGISTRAR

Link Market Services (Guernsey) Limited

Mont Crevelt House,

Bulwer Avenue, St Sampson

AUDITOR

ADVOCATES TO THE COMPANY (AS TO GUERNSEY LAW)

St Peter Port

Guernsey GY1 4BZ

BOND REGISTRAR

JTC Registrars Limited

Ground Floor, Dorey Court

Admiral Park, St Peter Port

Guernsey GY1 2HT

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GENERAL

the London Stock Exchange’s Main Market under the symbol CBA (ISIN: GG00BFMDJH11). The Company’s Bonds are listed

framework of the Company reflects that as an investment company there are no employees, and the Directors, the

management and administration functions are outsourced to third party providers. Through its consolidated subsidiaries

(together with the Company, the “Group”), the Company invests in Cuban real estate and other assets by acquiring shares

in Cuban joint venture companies or other entities that have direct interests in the underlying properties. The Company

The Company’s Net Asset Value (“NAV”) and share price are quoted in Sterling (£) but the functional currency of the

both currencies, applying the applicable exchange rate as at 31 December 2021 of £1:US$1.3477 (2020: £1=US$1.3608).

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$1.16 $1.41 (17.5%)

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(25.9%) (18.6%)

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2.80% 2.91%

MANAGEMENT

The Company has appointed Aberdeen Standard Fund Managers Limited (“ASFML” or the “AIFM”) as the Company’s

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CHAIRMAN’S STATEMENT

At the time of publication of the 2020 Annual Report of CEIBA Investments Limited (“CEIBA” or the “Company”) in April

2021, both the Company and Cuba were in the midst of the battle against the Covid-19 pandemic and at that time the

have received at least one vaccine dose and 87% are fully vaccinated. Consequently, like many other countries, Cuba

the virus. However, as global travel begins a slow recovery there is no question that CEIBA has been severely impacted

the pandemic issues are the challenges presented by the ongoing U.S. embargo against Cuba, the conflict between

Russia and Ukraine and the transitionary effects of recent monetary reforms adopted by the Cuban government. Overall,

CEIBA finds itself at present trading in a very challenging environment.

considers to be positive overall. These reforms, which are generally referred to as the Tarea Ordenamiento (TO), took

thereby unifying the dual currency system under a single currency: the Cuban Peso or CUP;

• the adoption of a system for allocating hard currency throughout the economy intended to largely decentralise

business decisions and provide foreign investment vehicles and Cuban entities with real financial autonomy. This is

accomplished through the creation of “liquidity” rights (denominated in US$) that can be used to exchange Cuban

Pesos to hard currency for international transfers on a decentralised basis.

While the Board considers these reforms to be a positive move the timing, in hindsight, has been unfortunate. The lack

of any easing of the U.S. Cuban embargo under the Biden administration and the very slow resumption of international

travel in the face of the pandemic have severely impaired the foreign exchange reserves and general liquidity position of

the Cuban economy, through reduced overseas remittances and greatly reduced tourism income.

What we are presently witnessing in Cuba as a result of the poor liquidity position is a shortage of vital imported products,

increased inflation and a serious devaluation of the street value of the CUP. The Investment Manager’s report describes

the reforms and their effects in further detail, but at present the main uncertainty caused by them for CEIBA is in relation

to the income generated by Inmobiliaria Monte Barreto S.A. (“Monte Barreto”) and the Company’s ability to realise such

income in the form of hard currency dividend payments.

disappointingly to date nothing has changed from the Trump presidency and all U.S. sanctions have remained stubbornly

in place during 2021. In respect of U.S. personnel and entities, the U.S. Cuban embargo legislation prohibits investments

Barreto, the Cuban joint venture company that owns and operates the Miramar Trade Center, which is Cuba’s leading

mixed-use office and retail real estate complex, continued to trade strongly throughout 2021 and occupancy levels

remained well over 95% throughout the year. Although revenues were down slightly as compared with the prior year,

net income in 2021 reached US$15.6 million for the year, representing an 8.5% increase over the prior year and making

2021 the most profitable year since incorporation of the joint venture. This increase in profitability has largely been a

result of the lower operating costs as a result of the unification of the currency. The 2022 outlook for Monte Barreto

continues to be positive, with occupancy percentage levels expected to remain in the high nineties throughout the year.

While Monte Barreto continues to trade well, there presently remains considerable uncertainty over the impact of

Cuba’s monetary reforms on the ability of the joint venture company to generate “liquid” hard currency income from

its operations (and consequently its ability to pay dividends to its shareholders without depending on allocations of

5CHAIRMAN’S STATEMENT

Barreto.

spread globally and further delayed any material recovery in the travel trade. As a result, in 2021 Cuba received fewer

2019, the last year before the pandemic.

CEIBA’s main hotel interests are held through its 32.5% holding in the Cuban joint venture company Miramar S.A.

(“Miramar”). Miramar owns three hotels in Varadero and one hotel in Havana. In Varadero, the Meliã Las Américas

and the Meliã Varadero re-opened in November 2021, having been closed since arrival of the pandemic in March 2020.

assets under the monetary reforms. While the recovery in the tourist trade remains slow, a gradual build up throughout

constructing the 400-room Meliã Trinidad Península Hotel. This hotel is situated on the south coast of Cuba close to

defaults in performance. Completion of the construction process is expected to take place during 2022, with a soft

opening scheduled for the first quarter of 2023 and the official launch of the hotel during Cuba’s international Tourism

Fair in May 2023.

DIVIDENDS

The Covid pandemic has clearly had a very negative impact on the revenues generated by the Company’s hotel interests

and it was decided, following its onset, that it was vital that CEIBA should maintain sufficient cash to meet all of its existing

and future undertakings. Accordingly, the dividend policy was suspended in 2020 and no dividend has been paid since

then. The Board would very much like to reinstate the payment of dividends but, in view of there still being considerable

uncertainty as to how long it will take to see a return of normal tourism numbers and with the added uncertainty of the

impact of the monetary reforms on the dividends payable by Monte Barreto, it has been decided to maintain the present

position for another year. Accordingly, it is not intended that any dividend be paid to shareholders in 2022. This stance

will be kept under constant review and it remains the Board’s intention to reinstate the dividend as soon as appropriate.

BOARD

I am grateful to the Board for their commitment and input during another challenging year. It is the Board’s policy to

and skills to ensure the effective overall operation of the Company. In this latter regard, I am delighted to welcome

Jemma Freeman to the board. She was appointed in October 2021 and is the Executive Chairman of Hunters & Frankau

portfolio of assets throughout the year. There has been no change in the underlying key operational management of

the Company and this team continues to be headed by Sebastiaan Berger, who is exclusively focused on the Company’s

assets and business and has acted in this role for some 20 years. The Board reviewed the work of the Investment

Manager during the year and concluded that it was very satisfied with the performance of the Investment Manager and

that it was in the best interests of shareholders that ASFML remain as manager of the portfolio.

The Board extends its sincere thanks to the Investment Manager and to the entire management team based in Cuba for

their commitment and efforts on behalf of the Company in these very difficult times.

John Herring

Chairman

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STRATEGIC REPORT

INVESTMENT OBJECTIVE

INVESTMENT POLICY

The Company is a country fund with a primary focus on Cuban real estate assets. The Company seeks to deliver the

a focus on the tourism and commercial property sectors. Cuban real estate assets may also include infrastructure,

industrial, retail, logistics, residential and mixed-use assets (including development projects).

Cuban Assets”). Other Cuban Assets may include, but are not limited to, Cuba-related businesses in the construction or

parties and the approval of the Cuban government.

GROUP STRUCTURE

7STRATEGIC REPORT

• the Company will not knowingly or intentionally use or benefit from confiscated property to which a claim is held by

a person subject to U.S. jurisdiction;

substantial part of their revenues from activities outside Cuba, although such investments will, in aggregate, be

maximum exposure to any one asset will not exceed 30 per cent. of the Gross Asset Value;

• no more than 20 per cent. of the Gross Asset Value will be invested in Other Cuban Assets; and

The restrictions above apply at the time of investment and the Company will not be required to dispose of any asset or

above will apply to the Group as a whole on a look-through basis, i.e. where assets are held through subsidiaries, SPVs,

the investment limits.

The KPIs by which the Company measures its economic performance include:

• Total income

• Net income

• Total net assets

• Net asset value per share (NAV)*

• Net asset value total return*

• Market capitalisation

• Premium / Discount to NAV*

• Dividend per share

• Gain/Loss per share

In addition to the above measures, the Board also regularly monitors the following KPIs of the joint venture companies in

which the Company is invested and their underlying real estate assets, all of which are Alternative Performance Measures.

In the case of commercial properties, other KPIs include:

• Occupancy levels

• Average monthly rate per square meter (AMR)

• EBITDA

• Net income after tax

The Board also monitors the financial performance of the Cuban joint venture companies that own the commercial and hotel

properties using these KPIs. The Board and the Investment Manager seek to influence the management decisions of the

Cuban joint venture companies through representation on their corporate bodies with the objective of generating reliable

and growing cash flow for the Cuban joint venture companies, which in turn will be reflected in reliable and growing dividend

streams in favour of the Company.

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PRINCIPAL RISKS

PRINCIPAL RISKS

The Company is exposed to a variety of risks and uncertainties. The Board, through the Audit Committee, is responsible

risks and uncertainties facing the business. A core element of this process is the Company’s risk register which identifies

mitigating actions, if any, can be taken. There are a number of risks which, if they occurred, could have a material

adverse effect on the Company and its financial condition, performance and prospects. As part of its risk process, the

Board also seeks to identify emerging risks to ensure that they are effectively managed as they develop. In the event that

similar assets in other jurisdictions.

In addition to general country-risk, the most significant risks faced by the Company during the financial year appear in the

The Board relies upon its external service providers to ensure the Company’s compliance with applicable regulations and,

from time to time, employs external advisers to advise on specific concerns. The operation of key controls in the Investment

Manager’s and other third party service providers risk management processes and how these apply to the Company’s

business are reviewed regularly by the Audit Committee along with internal control reports from these entities.

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VIABILITY STATEMENT

VIABILITY STATEMENT

VIABILITY STATEMENT

The Board continually considers the prospects for the Company over the longer term. Based on the Company’s current

a Cuban investment and closed-ended investment company perspective, the Board believes that the Company has a

For the purposes of this viability statement, the Board has decided that a period of four years is an appropriate period

over which to report. In assessing the viability of the Company over the review period, the Directors have conducted a

• The ongoing relevance of the Company’s investment objective in the current environment;

• The level of income generated by the Company and forecast income; and

• The valuation of the Company’s property portfolio, the Investment Manager’s portfolio strategy for the future and

assessing the viability of the Company and, in particular, considered:

• The impact on the general liquidity position of Cuba and the ability of Miramar and Monte Barreto to distribute

dividends to their shareholders, including the Group;

• The impact on the Cuban tourism industry and the financial results of Miramar; and

• The impact on the timing of construction of the TosCuba Project due in part to delays in the receipt of construction

imports from Europe.

Following review, the Directors have a reasonable expectation that the Company will be able to continue in operation and

meet its liabilities as they fall due for the period of assessment, which is four years from the date of this Annual Report.

While the Covid-related travel restrictions and the Russian invasion of Ukraine have had an impact on tourist numbers

and are expected to continue doing so going forward, the first quarter 2022 results of the Hotels are above budget, so

the Directors are confident that the Company remains viable. In addition, the above expectation has been tested under

a variety of scenarios, including delays in the receipt of projected dividend income, and it has been determined that in

be available if necessary, such that the Company will be able to continue in operation and meet its liabilities as they fall

of the Russia-Ukraine conflict, a deterioration of the outlook for Cuba, the further strengthening of the U.S embargo, the

resurgence of health and economic impacts of the pandemic, or changes in investor sentiment could have an impact on

Viability Statement on page 15. The Directors have reviewed cash flow projections that detail revenue and liabilities and

will continue to receive cashflow projections as part of the full-year reporting and monitoring processes. The Directors

believe that the Company has adequate financial resources to continue its operational existence for the foreseeable

future and at least 12 months from the date of the approval of these Financial Satements.

Accordingly, the Directors believe that it is appropriate to continue to adopt the going concern basis in preparing the

Financial Statements.

16 VIABILITY STATEMENT

describe in this Annual Report how the matters set out in Section 172 of the UK Companies Act 2006 have been considered

in their board discussions and decision-making. This section therefore serves as the Company’s section 172 statement

need to foster relationships with all stakeholders, the desire for high standards of business conduct, the impact of the

The Company is a closed-ended investment company, has no executive directors or direct employees and is governed

by the Board of Directors. Its main stakeholders are Shareholders in the Company, the holders of Bonds issued by the

Manager and, either directly or through the Investment Manager, the Company has engaged key suppliers to provide

share registration, amongst others. All decisions relating to the Company’s investment policy, investment objective,

quarterly and receives full information on the Company’s performance, financial position and any other relevant

manage the Company, and its relations with its stakeholders, effectively and that their continued appointment is in the

best long-term interests of the stakeholders as a whole.

Shareholders and Bondholders

The Board’s primary focus is to promote the long-term success of the Company for the benefit of its stakeholders as a

whole. The Board oversees the delivery of the investment objective, policy and strategy, as agreed by the Company’s

shareholders.

Shareholders and Bondholders are key stakeholders and the Board places great importance on communication with

them. The Board welcomes all shareholder and Bondholder views and aims to act fairly on them. Through investment in

the Company, the Board believes that the Company’s shareholders seek exposure to Cuban real estate assets, substantial

capital growth, a well-executed sustainable investment policy, responsible capital allocation and value for money.

The Investment Manager and the Company’s broker regularly meet with shareholders, and prospective shareholders,

to discuss Company initiatives and seek feedback. The views of shareholders and Bondholders are discussed by the

Manager provide regular updates to shareholders and Bondholders and the market through the Annual Report, Half-

In the event of any changes to strategy, the Board will proactively engage with major shareholders to determine their

shareholders as possible to attend the Company’s AGM and to provide feedback on the Company. In the event that

the situation surrounding Covid-19 should affect the plans to hold the AGM on 16 June 2022 the Company will update

shareholders through an announcement to the London Stock Exchange and will provide further details on the Company’s

website.

Investee Companies

Another key stakeholder group is that of the special purpose vehicles, joint venture vehicles, partnerships, trusts and

other structures through which the Company invests. Representatives of the Company are appointed to the boards of the

underlying investment vehicles and, acting in the best interests of the Company’s stakeholders, influence management

decisions to ensure that the investee companies are run in accordance with the Company’s expectations.

17VIABILITY STATEMENT

managers and managers of office complexes who are responsible for running the Company’s properties. This allows

the Investment Manager to fully understand the operational risks associated with the management of the Company’s

subsequently. The Investment Manager has continued to manage the Company’s assets in accordance with the mandate

provided by shareholders, with the oversight of the Board. The Board receives presentations from the Investment

Manager at every Board meeting to help it to exercise effective oversight of the Investment Manager and the Company’s

the Investment Manager with regular communications and meetings. The Board, via the Management Engagement

relationships in detail. The aim is to ensure that contractual arrangements remain in line with best practice, services

The Community and the Environment

The Board and the Investment Manager are committed to investing in a responsible manner. There are a number of

geopolitical, technological, social and demographic trends underway that can, and do, influence real estate investments

– many of these changes fall under the umbrella of the Environment and Community, or Environmental, Social and

Governance (“ESG”), considerations. As a result, the Investment Manager will integrate ESG factors into its investment

decision-making and governance process.

The Board has instructed the Investment Manager to develop an appropriate ESG Policy and associated operational

procedures and is committed to environmental management in all phases of the investment process. The status of this

effort is described below in the section entitled Environmental Social Governance Strategy. The Company aims to invest

responsibly, to achieve environmental and social benefits alongside returns.

Strategic Activity during the Year

key decisions taken during the year and subsequently. Notable actions where the interests of stakeholders were actively

• Dividend – with the ongoing inherent uncertainty surrounding the operation of many of the Company’s assets,

• Construction of TosCuba Project – the principal investment activity of the Company during the year was the ongoing

construction of the Meliã Trinidad Península Hotel. Following the termination of the original turn-key construction

contract (as a result of non-compliance by the constructor), the joint venture company took full direct control over

the construction process and all purchasing decisions. During the second half of the year, new tendering rules and

procedures were developed and implemented with the assistance of the foreign technical advisor. Construction

continued throughout the year at a reduced pace, and subsequent to year-end the tempo of construction increased

once again.

As set out above, the Board considers the long-term consequences of its decisions on its stakeholders to ensure the long-

term sustainability of the Company.

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INVESTMENT MANAGER’S REVIEW

2021 PERFORMANCE

Arlington Consulting – Consultadoria Imobiliaria Limitada, trading under the name Abacus (“Abacus”). As at 31 December

fall in projected income levels as a result of the continued effects of the Covid-19 pandemic and its negative impact on the

intensified Cuba embargo policies, and (iii) increased discount rates as a result of higher levels of perceived risk in the

present circumstances, in particular as regards the liquidity issues faced by the country.

attributable to the shareholders was US$28,811,901 (2020: US$19,808,620).

After another difficult year, during which the country faced extremely challenging conditions, by November 2021 Cuba

had demonstrated to the world that its home-grown Abdala and Soberana 2 vaccines were indeed effective in the fight

against Covid-19 and that its country-wide vaccination program had been diligently implemented and resulted in rapidly

falling numbers of new cases and fatalities, and once again these qualities took the upper hand and I thought that the

Cuban economy had hit bottom and would begin rising to a brighter future.

But at the start of Cuba’s high tourism season, just as Cuba was reopening its international borders and welcoming

international travellers back to the island, the Omicron variant of the Covid-19 virus emerged in South Africa and rapidly

spread throughout the world, causing a new wave of restrictive travel measures aimed at slowing the swift pace of

infections produced by the new variant. These measures resulted in many travel cancellations from Canada (historically

19INVESTMENT MANAGER’S REVIEW

When on 24 February 2022 Russia invaded Ukraine, all Russian (and Ukrainian) travel came to an abrupt halt and Cuba

once again found itself facing the prospect of a difficult high season.

strengthened Trump sanctions against Cuba and the present uncertainty regarding the timing of a tourism recovery have

US$28,811,901. The outlook for 2022 will largely depend on how long the Russia-Ukraine conflict will last, how it will

impact world politics and Cuba’s important relationships, and its effect on international travel patterns and the recovery

of Cuba’s tourism industry. To a lesser extent, the coming year could also be further affected by the rise of any new

required “liquidity” in accordance with the new financial autonomy rules. This shows that the Cuban liquidity position is

Pesos to 1 United States Dollar and was aimed primarily at improving financial discipline, transparency and accountability

within Cuba’s state-owned enterprises.

However, the events described above and the continuation of U.S. sanctions under the Biden administration (particularly

those affecting family remittances and U.S. travel) that were widely expected to be relaxed, jointly had a negative impact

on the liquidity position of the country and complicated the implementation of the reforms, provoking numerous

distortions in both the private and foreign investment sectors.

In addition, the scarcity of hard currency income to pay for imported products, resulting in shortages of basic products

for sale in local currency (CUP) shops, triggered significant inflation and a fall in the informal exchange rate so that by the

end of 2021 the street rate of exchange had reached CUP75 to USD1, falling further to CUP 110 to USD 1 by 15 April 2022.

By contrast, joint ventures, international airlines and all state-owned businesses were obliged to use the official rate of

CUP24 to USD1, in turn provoking undesired monetary arbitrage.

The government has not signalled any future devaluation of the CUP and instead has argued that it hopes to close the

discrepancy between the official and informal rates through increased national production and an improved supply of