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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Qannas Investments Limited | LSE:QIL | London | Ordinary Share | KYG7306P1037 | ORD NPV (DI) |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 0.625 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMQIL
RNS Number : 6379C
Qannas Investments Limited
29 June 2016
Qannas Investments Limited
("Qannas" or the "Company")
Audited Financial Statements and Posting of Audited Financial Statements
Qannas (AIM:QIL), the closed-ended investment company listed on the AIM market, is pleased to announce the release of its audited financial statements for the period ending 31 December 2015. Extracts from these statements are enclosed below.
Qannas also advises that the audited financial statements for the period ended 31 December 2015, together with a Notice of the AGM are available on the Company's website at www.qannasinvestments.com and will be posted to shareholders today.
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QANNAS INVESTMENTS LIMITED
GENERAL INFORMATION
FOR THE YEARED 31 DECEMBER 2015
DIRECTORS PRINCIPAL BANKERS
Jassim Mohamed Alseddiqi RBS International
(resigned 16 March 2016)
PO Box 64, Royal Bank
House
Richard John Stobart Prosser 71 Bath Street
St Helier
Christopher Ward (Chairman) Jersey JE4 8PJ
Channel Islands
Richard Green
Mustafa Kheriba REGISTRAR
Capita Registrars (Jersey)
Limited
12 Castle Street
COMPANY NUMBER St Helier
CT 286543 (registered in Jersey JE2 3RT
Cayman Islands)
Channel Islands
COMPANY SECRETARY
Codan Trust Company (Cayman) NOMINATED ADVISOR
Limited
Cricket Square, Hutchins finnCap Ltd
Drive, PO Box 2681
George Town, Grand Cayman 60 New Broad Street
KY1-1111
Cayman Islands London EC2M 1JJ
England
REGISTERED OFFICE
Codan Trust Company (Cayman) NOMINATED BROKER
Limited
Cricket Square, Hutchins finnCap Ltd
Drive, PO Box 2681
George Town, Grand Cayman 60 New Broad Street
KY1-1111
Cayman Islands London EC2M 1JJ
England
ADMINISTRATOR
Estera Fund Administrators LEGAL ADVISORS
(Jersey) Limited
(formerly Appleby Fund Administrators Appleby
(Jersey) Limited)
13-14 Esplanade 13-14 Esplanade
St Helier St Helier
Jersey JE1 1BD Jersey JE1 1BD
Channel Islands Channel Islands
Herbert Smith LLP
AUDITOR Exchange House
BDO Limited Primrose Street
Windward House London EC2A 2HS
La Route de la Liberation England
St Helier
Jersey JE1 1BG Conyers Dill & Pearman
Limited
Channel Islands Level 2, Gate Village
4
Dubai International Financial
Centre
PO Box 506528
INVESTMENT MANAGER Dubai
ADCM Ltd United Arab Emirates
Codan Trust Company (Cayman)
Limited
Cricket Square, Hutchins COMPANY WEBSITE
Drive, PO Box 2681
George Town, Grand Cayman www.qannasinvestments.com
KY1-1111
Cayman Islands
QANNAS INVESTMENTS LIMITED
CHAIRMAN'S REPORT
FOR THE YEARED 31 DECEMBER 2015
It is with great pleasure that I present my fourth report on the performance of Qannas Investments Limited ("QIL" or the "Company") during which it continued to develop, investing in new opportunities and evolving its investment strategy. Since its IPO in March 2012, QIL has invested across different themes to build a diverse portfolio spread across Middle East, Eastern Europe, and Central London.
QIL has been very active on the new investment front. During the year, QIL has further committed to five deals: AED 2.9 million ($0.8 million) for the purchase of residential units in a building in Dubai Marina; GBP3.5m ($5 million) in a preferred equity investment in BL Development Limited, the company behind a mixed use development in Central London; $18.7m in Integrated Financial Group, a UAE-based holding company incorporated for acquiring and consolidating two financial services companies; $4.1m into EE F&B, an entity developing the Hard Rock Café in The Capital Plaza ("TCP"), Podgorica; and AED 4 million ($1.09 million) in a secured Murabaha debt investment in Verne Preferred Limited, the owner of a luxury hotel in Dubai. Full details of QIL's investment activity are in the Investment Manager's Report.
In the year 2015, QIL saw losses of $1.3m, attributable partly to foreign exchange losses, and partly due to the absence of any disposals of investments, itself a matter of timing. However, at the year end, QIL had a net asset value of $1.00 per share, and total cash of $7.3 million.
During 2015, QIL conducted a tender offer program under which the Company purchased a total of 8,414,964 ordinary shares from existing shareholders at the price of $0.95 per share. These are held in treasury. The purchase price represented an approximately 5.6% discount to the unaudited NAV per share of $1.01 as at 30 September 2015. A total of 8,414,964 Ordinary Shares were tendered in connection with the tender offer.
To fuel its growth and successfully capitalize on the pipeline of investments, QIL further extended the $10 million credit facility from First Gulf Bank to $30 million. Of the advance of $20 million, QIL drew down $10 million during Q1 2015 and the remaining $10 million in November 2015. QIL also extended the repayment of the full $30 million credit facility with the bank to 25th November 2016.
QIL has been recognized for its achievements, notably its investment strategy and portfolio returns. Just after the year-end, the parent company of the investment manager of QIL was awarded the "UAE Asset Manager of the Year" award by MENA FM (The Middle East and North Africa Fund Managers Association) at its annual awards event in January 2016. The MENA FM Performance Awards is one of the largest gatherings of fund managers in the industry's calendar, and the award recognizes QIL's investment manager's competitive edge in creating superior returns for its investors.
Subsequent to the year end, QIL bought back 889,840 ordinary shares in the market for cash at a price of $0.95 per ordinary share.
Additionally, Jassim Alseddiqi resigned from his position as a director of the company in March 2016. I would like to warmly thank Jassim for his significant contribution.
As QIL continues to evolve and deliver value to shareholders by executing its investment strategy, I would like to thank shareholders, the board of directors, service providers, and the investment manager for their continued support.
QANNAS INVESTMENTS LIMITED INVESTMENT MANAGER'S REPORT FOR THE YEARED 31 DECEMBER 2015
ADCM Ltd. ("ADCM"), the investment manager for QIL, is pleased to present the annual investment manager's report for the year ended 31 December 2015.
Investment Summary
2015 was a challenging year for QIL which saw losses of $1.3 million primarily due partly to foreign exchange losses and partly due to
the absence of any disposals of investments. Nevertheless, QIL continued to develop, with five new investments and an evolvement of its investment strategy. During the year, QIL completed five new investment deals:
-- Project Apex: AED 2.9 million ($0.8 million) towards the purchase of residential units in Marina 101 building at Dubai Marina
-- Project Broadway: GBP3.5 million ($5 million) towards a preferred equity investment in BL Development Limited
-- Project Taj: AED 4 million ($1.09 million) towards a secured Murabaha debt investment in Verne Preferred Limited
-- Project Integration: $18.7 million towards an equity interest in Integrated Financial Group LLC, a UAE-based holding company incorporated for acquiring and consolidating two financial services companies;
-- Project HRC: EUR3.5 million ($4.1 million) equity investment to develop the Hard Rock Café in The Capital Plaza ("TCP"), Podgorica in 2014.
Subsequent to the year end, QIL has made an equity investment of $6.6 million in the Goldilocks Fund, which primarily invests in public equities listed on the UAE stock exchanges. The investment was made in two tranches of $5.5 million and $1.1 million during February 2016. The Goldilocks Fund is managed by Integrated Capital, which is a UAE Central Bank licensed Investment Firm registered in Abu Dhabi. Integrated Capital is part of the Integrated Financial Group in which QIL has a holding.
QIL's Investments
Project Investment Sector Geography Committed Invested
Name Type /Type (in millions) (in millions)
Committed in 2016
Financial
Goldilocks Equity Services UAE $6.6 $6.6
Committed in 2015
Taj Murabaha Real Estate Central AED 4.0 AED 4.0
Debt London
Broadway Preferred Real Estate Central GBP3.5 GBP3.5
equity London
Apex Equity Real Estate UAE AED 9.1 AED 2.9
Committed in 2014
Financial
Integration Equity Services UAE $20.4 $13.5
Eastern
HRC Equity Hospitality Europe EUR3.0 EUR3.0
Eastern
ACC Hotel Equity Hospitality Europe EUR11.0 $0.4
PPP L.P. Interest Real Estate Central GBP11.0 GBP4.4
London
Real Estate Eastern
IEEF Debt Fund Europe EUR7.0 EUR7.0
Funds of
Beast L.P. Interests funds Diversified $37.1 $37.1
Committed prior to 2014
Madaares Equity Education UAE $0.07 $0.07
There were no exits by QIL during the year. Subsequent to the year end, QIL exited from its investments in Project Broadway and Project Taj.
QIL's Exits so far
Project Date Date of Acquisition Holding Cost NAV at Exit Exit
Name of Period (in millions) exit Multiple IRR
Exit (in millions)
Exits in 2016
Broadway 9-Feb-16 16-Apr-15 10 months $5.3 $5.4 1.02x 2.8%
Taj 26-Feb-16 02-Jun-15 9 months $1.1 $1.2 1.11x 12.9%
Exits in 2014
Marina 19-May-14 20-May-12 24 months $9.9 $14.9 1.51x 22.8%
Gazelle 6-Mar-14 17-May-13 10 months $3.3 $6.1 1.87x 118.1%
Previous Exits
Oilco 8-Dec-13 6-Mar-12 21 months $3.9 $6.7 1.73x 39.1%
Oasis 13-Feb-13 10-Oct-12 4 months $3.3 $4.1 1.24x 87.9%
Net Asset Value ("NAV") Summary
As of 31 December 2015, QIL's NAV was approximately $70.1 million or $1.00 per share, including cash of $7.3 million.
Net Asset Value Summary
Investments 31-Dec-15
Verne Preferred Limited ("VPL") $1.09
BL Development Ltd ("BLD") $5.17
Units in Marina 101 $0.78
Integrated Financial Group ("IFG") $19.61
EE F&B Holding Limited $4.09
Palace Preferred Partners L.P. $7.48
Integrated Eastern European Fund $6.93
ADCM secondary Private Equity
Fund ("ADCM SPEF") $35.79
SPE Qannas C Ltd. ("SPE Qannas
C") $8.19
Madaares $0.07
Other Non-current Assets $7.03
Cash $7.26
Other Net Current Liabilities ($31.38)
Non-current Liabilities ($2.05)
NAV $70.06
Shares Outstanding 69.72
NAV per share $0.99
Investment Strategy and Policy
QIL aims to build a portfolio of investments which it believes offer an opportunity to generate attractive returns. Investments are expected to have an average holding period of three to five years.
QIL intends to create a portfolio in global opportunistic investments. The Company's investment objective is to generate value for shareholders by creating a portfolio of opportunistic investments in real estate, debt, and equities (both public and private) in the MENA region, Europe and North America.
Investments will be made where there is liquidity requirement or portfolio repositioning on the part of a vendor such that assets become available at a discount to their intrinsic value. The Company will aim to acquire such assets and then to dispose of them at a premium to their acquisition cost.
The portfolio of the Company is approximately 54% invested in the GCC (as of 31st December 2015) and it is expected that a majority of the Company's portfolio will continue to be invested in the GCC.
The Company is not restricted in terms of the type of asset in which it may invest and the Company's portfolio may include, without limitation, equity or debt securities in public or private companies and limited partner interests in private equity funds. Furthermore, there are no restrictions on the type of investment in which the Company may invest.
The Company may use equity, fixed income or currency derivatives such as forwards or futures, as it may deem appropriate for hedging or investing purposes.
Investment Update
Project Apex
During Q1 2015, QIL secured the purchase of 2 premium units (penthouses) in the development Marina 101 at Dubai Marina for AED 9.1m ($2.5m). ADCM had sourced these units from the developer at a rate of AED 1,250 ($340) per square foot including all related costs representing a discount of 26.4% to the unfinished selling price of the units and 35.1% to the market rate for a finished unit of similar size in the Dubai Marina area. The units are 3-bedroom penthouses on the 88(th) floor, each with an area of 3,653 square feet and come with underground parking spaces.
Marina 101 is c. 91% complete and the developer expects to reach completion in Q3 2016.
Project PPP
During the year, QIL invested a further GBP1.1m ($1.7m) as part of the second capital call of PPP. QIL had contributed GBP3.3m ($5.3m) in November 2014 as part of the first capital call. In total QIL has invested GBP4.4m ($7.0m) as of 31 December 2015.
QIL had committed to an investment of GBP11 million (c. $18.2 million) in Palace Preferred Partners L.P., an SPV created for the redevelopment of 1 Palace Street ("1PS"), London, in 2014. The investment is part of an overall tranche of GBP50 million, which in turn is invested in the 1 Palace Street development project as preferred equity with a preferred return rate of 15%. It is expected that the redemption of preferred shares and preferred returns will be paid by 2018 when the redevelopment is complete, and sales proceeds are collected. 1PS is located adjacent to Buckingham Palace, with excellent views overlooking Buckingham Palace gardens.
The project is progressing well, and the sales have been good so far.
Project Broadway
During the year, QIL invested a total of LIR3.5m ($5.3m) as a preferred equity investment in BL Development Limited ("BLD"), an SPV incorporated for the development of a mixed use development project in Central London. The proceeds were used towards pre-completion activities including transaction costs incurred during the acquisition of the property, architecture design, obtaining planning consent and preparing development works. Holders of the preferred equity instrument are entitled to a preferred return of 14% per annum.
Subsequent to the year end, QIL completely exited its investment in Project Broadway generating an IRR of 2.8% and a return multiple of 1.02x. The lower returns on Project Broadway are due to the effect of currency devaluation.
Project Taj
During the year, QIL entered into an agreement to invest AED 4.0 million ($1.1 million) in a secured Murabaha issue of AED 52 million by Verne Preferred Limited, an SPV incorporated for the investment by way of preferred equity for the development of the Taj Hotel Downtown Dubai, a 296 room five star luxury hotel in Dubai, the United Arab Emirates.
Holders of the issue are entitled to a preferred return of between 12-17% of their investment per annum depending on the redemption date, with the coupon serviced through a combination of cash and accrued payment in kind. Subsequent to the year end, QIL completely exited its investment in Project Taj generating an IRR of 12.9% and a return multiple of 1.1x.
Project Integration
In November 2014, QIL committed $20.4 million to acquire an equity interest in Integrated Financial Group LLC, a UAE-based holding company incorporated for acquiring and consolidating two financial services companies:
- Integrated Securities (previously known as First Gulf Financial Services LLC), which is in the business of trading securities on the Abu Dhabi and Dubai stock exchanges; and
- Integrated Capital PJSC, which is a fully licensed, UAE central bank-regulated investment company.
QIL's final interest will be 47.4% in IFG. At the year-end, ADFG held the shares of IFG in trust on behalf of QIL.
Project ACC Hotel
During November 2014, QIL committed up to EUR11.0 million for an equity investment in an SPV developing a four star hotel at The Capital Plaza in Podgorica.
The proceeds will be used for financing the development costs of the hotel, which will have a gross floor area (GFA) of 9,500 sqm, with 135 rooms and 90 parking spaces. The hotel will be the second largest hotel in the city post completion.
The Capital Plaza is one of the largest mixed use development projects in the Balkan region (with a c. 89,974 sqm GFA) located in the business district of Podgorica with unique architecture, landmark design and scale, and a truly luxurious hospitality, retail, commercial and residential offering.
Project HRC
The first Hard Rock Café ("HRC") in Podgorica launched its operations in February 2015 and had a grand opening in May 2015, which was attended by over six thousand people. HRC Podgorica is now fully operational.
QIL had committed to invest c. EUR3 million in an equity investment to develop the Hard Rock Café in The Capital Plaza ("TCP"), Podgorica in 2014. This project is part of a larger Area Development Agreement with Hard Rock Limited to develop three Hard Rock Cafés in Podgorica (Montenegro), Belgrade (Serbia) and Sofia (Bulgaria).
The second Hard Rock Café in Belgrade is expected to be operational by Q4 2016. The entity has been set up, and the documentation is complete. The location is identified, and the fit-outs are expected to commence soon.
Project IEEF
During the year, IEEF witnessed significant activity. As part of the rebranding exercise, the name of the entity was changed from Injaz Eastern European Property Development Company ("IEEPDC") to Integrated Eastern European Fund.
QIL had provided a senior secured term loan of EUR7.0 million ($9.4 million) to IEEF in 2014 for a term of two years at 15% interest per annum being rolled up until maturity. The loan is secured by the two land plots in Bulgaria and Montenegro. The loan proceeds were deployed to enable IEEF to buy out third party investors and acquire full control in two land holding companies and to subsequently develop plots in Bulgaria and Montenegro into hospitality-focused assets.
Project Beast
During the year, QIL received a total of $2.2 million in distributions from ADCM SPEF in two tranches
-- $468,123 of distribution from ADCM SPEF in May 2015 -- $1.76m from ADCM SPEF in September 2015
QIL had acquired L.P. interests in two investment funds, ADCM SPEF and SPE Qannas C, at a discount of 20% and 15% respectively (to their estimated NAV at 31 December 2013) in 2014 through the issuance of 44.7 million shares from QIL as consideration.
-- ADCM SPEF is invested in 10 funds and the carrying value of investments (pro-rated for QIL's interest) as of December 31, 2015, is $35.79 million. QIL holds a 96.5% interest in ADCM SPEF.
-- SPE Qannas C is invested in The Abraaj Buyout Fund II L.P. and the carrying value of investments (pro-rated for QIL's interest) as of December 31, 2015, is $8.19 million. QIL holds a 74.3% interest in SPE Qannas C.
NAV of ADCM SPEF (as of 31 December in $'000 2015) Fund Name Attributed NAV SPE Qannas B Ltd. $20,469 Abraaj Real Estate Fund L.P. $3,290 Permal Private Equity Holdings 2000 L.P. $277 Goldman Sachs PEP IX $2,762 Global Opportunistic Fund I $106 Global Opportunistic Fund II $423 Havenvest Private Equity Middle East L.P. $4,591 Gulf Capital Equity Partners Fund II, L.P. $5,158 TNI Growth Capital Fund, L.P. $3,781 Lumina Real Estate SSF I L.P. $595 Net Current (Liabilities) ($5,660) NAV $35,792
Project Scholar
QIL acquired 250,000 shares of Madaares in 2013, a private company which, through its subsidiary Taaleem PJSC, operates 10 schools and nurseries in the UAE with 5,875 students enrolled.
Exits
There were no exits during 2015. Subsequent to the year end, QIL exited from two investments.
-- Project Broadway
In February 2016, QIL completed the redemption of preference shares in BLD and the receipt of LIR3.8 million ($5.5 million) in proceeds. QIL invested a total of LIR3.5m ($5.3 million) in BLD during 2015. QIL generated an IRR of 2.8% and a return multiple of 1.02x from the investment
-- Project Taj
In February 2016, QIL announced the sale of its investment in the secured Murabaha debt in Verne Preferred Limited to Reem Finance (a finance company licensed by the Central Bank of the UAE and incorporated in the Emirate of Abu Dhabi, United Arab Emirates) and the receipt of $1.1m (AED 3.9m) in exit proceeds. The Company invested a total of $1.1m (AED 4m) in Verne Preferred Limited during 2015. QIL generated an IRR of 12.9% and a return multiple of 1.1x from the investment.
Pipeline Investments
Project Goldilocks
Subsequent to the year end, QIL invested $6.6 million in Goldilocks Fund ("Fund"), which primarily invests in public equities listed on the UAE stock exchanges. The investment was made in two tranches of $5.5 million and $1.1 million during February 2016 at the current NAV of the Fund. Integrated Capital ("IC"), a UAE Central Bank licensed Investment Firm registered in Abu Dhabi, manages the Goldilocks Fund.
Market Outlook
2015 was yet another year witnessing a myriad of events which resulted in significant volatility across asset classes and regions. The year started with optimism in the US, followed by volatility across major currencies, the tightening of the Chinese economy and the devaluation of the Chinese currency, negative interest rates in Europe, the decline in oil prices (which continued to fall below $30 in 2016), and finally the increase in US interest rates by 25 bps after seven years.
In such a market environment, the investment manager believes that QIL's portfolio is well positioned and diversified to capitalize on the opportunities presented by the market. The investment opportunities offered by Central London, the strong fundamentals of the UAE and the recovery of Eastern European region continue to offer growth and diversification opportunities to QIL.
The UAE Region
As a result of the decline in oil prices by over 60% to $40 levels from $100+ levels in 2014, the UAE equity markets (DFM) declined by c. 33% since their peak in 2014. Despite the low level of oil prices, the UAE's GDP growth rate in 2015 is estimated at 3%, which is driven by strong fundamentals and the diversification of its economy into non-oil sectors. The UAE's low level of debt (16% of GDP), low inflation (2.2%) and high GDP per capital ($30,984) demonstrates the solid foundation of the UAE economy.
With robust economic indicators the UAE continues to develop its non-oil sector, which accounts for c. 70% of GDP and which is highest among its regional peers. The recent commitment of $82 billion as an investment in building a knowledge-based economy reaffirms its focus on diversification of its economy.
With the strong economic fundamental supported by continued reforms, the UAE offer investment opportunities at the time when markets are at low levels and undervalued.
Global: Central London and Eastern Europe
The investment manager believes that Central London Real Estate market offers a safe investment destination for global investors.
Recent changes to stamp duty land tax in the UK have resulted in some softening of the property market, but also in a flight to quality for prime properties and addresses in London, which is where QIL has exposure. We believe that the Central London prime real estate market continues to offer secure investment opportunities for QIL.
In the Eastern Europe Region, North Atlantic Treaty Organization ("NATO") invited Montenegro to start accession talks to become the 29(th) member of the NATO. We believe that NATO membership is an important step in the Euro-Atlantic integration of the entire Western Balkans region, which will support the growth of the overall region.
On the global front, we believe that 2016 will witness continued levels of volatility driven primarily by a slowing Chinese economy, low level of commodity prices and uncertainty over US interest rate hikes.
In these challenging and continuously evolving market conditions, we believe that QIL portfolio is positioned well to offer growth and diversification opportunities to investors.
QANNAS INVESTMENTS LIMITED DIRECTORS' REPORT FOR THE YEARED 31 DECEMBER 2015
The Directors present their report and the audited financial statements of the Company for the year ended 31 December 2015.
Incorporation
The Company was incorporated and domiciled in Jersey, Channel Islands as a public limited company (registration number 109878) on 17 January 2012. On 31 March 2014 the Company migrated to the Cayman Islands (registration number CT 286543) and ceased to be a Jersey registered Company.
Principal activities
The Company's principal activity is that of generating value for shareholders by creating a portfolio of opportunistic investments in real estate, debt, and equities (both public and private) in the MENA region, Europe and North America. Investments are made where there is liquidity requirement or portfolio repositioning on the part of a vendor such that assets become available at a discount to their intrinsic value. The Company aims to acquire such assets and subsequently dispose of them at a premium to their acquisition cost.
Results and dividends
The Statement of Comprehensive Income for the year is set out on page 15. The Company generated Total Comprehensive Income of $(1,307,130) for the year ended 31 December 2015 (2014: $9,721,132). The Company made a distribution of $nil during the year (2014: $8,985,342).
Directors
The Directors who held office throughout the year and up to the date of approving the financial statements (unless otherwise indicated) were:
Jassim Mohamed Alseddiqi (resigned 16 March 2016)
Richard John Stobart Prosser
Christopher Ward (Chairman)
Richard Green
Mustafa Kheriba
Details of the financial interests of Directors are disclosed in note 3 of the financial statements.
Secretary
Codan Trust Company (Cayman) Limited were company secretary throughout the year and up to the date of approval of the financial statements.
Registered office
The registered office of the Company throughout the year and up to the date of approving the financial statements was that of Codan Trust Company (Cayman) Limited, Cricket Square, Hutchins Drive, PO Box 2681, George Town, Grand Cayman KY1-1111, Cayman Islands.
Independent auditor
BDO Limited is the independent auditor and has expressed its willingness to continue in office.
Going concern
The company's existing loan facility with First Gulf Bank is due for repayment on 25 November 2016. The Directors have approached First Gulf Bank who has indicated its willingness to extend this loan facility for a foreseeable future. Alternatively, should the existing facility not be extended with First Gulf Bank, the Directors' are confident that a new loan facility can be obtained for at least a year before the existing loan facility expires.
The Directors, having considered the above and after making due enquiries, continue to adopt the going concern basis in preparing the financial statements which assumes that the company will continue in operation for the foreseeable future.
Responsibilities of the Directors
The Directors are responsible for preparing the annual report and financial statements in accordance with International Financial Reporting Standards as endorsed for use in the European Union. In preparing these financial statements, the Directors are required to:
-- select suitable accounting policies and then apply them consistently; -- make judgements and estimates that are reasonable and prudent;
-- specify which generally accepted accounting principles have been followed, subject to any material departures disclosed and explained in the financial statements; and
-- prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping accounting records which are sufficient to show and explain the Company's transactions and are such as to disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements prepared by the Company comply with the requirements of the Alternative Investment Market listing rules. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors confirm that they have complied with the above requirements.
Statement of disclosure to auditors
The Directors confirm that:
-- so far as they are aware there is no relevant audit information of which the Company's Auditors are unaware; and
-- they have taken all steps they ought to have taken to make themselves aware of any relevant audit information and to establish that the Company's Auditors are aware of that information.
INDEPENT AUDITORS' REPORT TO THE MEMBERS OF QANNAS INVESTMENTS LIMITED
[to be inserted]
QANNAS INVESTMENTS LIMITED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 31 DECEMBER 2015
Notes 01.01.15 01.01.14
to to
31.12.15 31.12.14
$ $
Income
Management and performance
fee rebate 20 138,531 7,781,127
Investment income 4 1,258,699 3,131,010
1,397,230 10,912,137
Expenditure
Loss on disposal of available
for sale financial asset 9 - 22,071
Loss on disposal of freehold
land 7 - 40,817
Secretarial and administration
fees 118,346 209,287
Directors' remuneration 3 92,026 92,829
Insurance expense 9,666 12,237
Investment manager fees 1,339,963 1,182,397
Performance fees 20 (246,535) 2,146,759
Legal and professional
fees 263,042 1,233,473
Audit fees 65,399 26,009
Sundry expenses 34,138 97,149
Bank charges 2,083 1,984
------------ ------------
1,678,128 5,065,012
------------ ------------
(Loss)/profit before net
investment income (280,898) 5,847,125
Net gains and losses on
investments 8 (569,253) 4,396,700
Finance costs
Loan interest payable (729,499) (44,907)
Foreign exchange losses
on loans receivable 5 (957,149) (918,126)
Loss on foreign exchange (109,353) (42,089)
Finance income
Interest income - cash
and cash equivalents 4,172 10,519
Interest income - loans
receivable 5 1,334,850 471,910
Interest income - available
for sale financial assets 9 - 1,178,774
------------ ------------
(Loss)/profit for the year
before taxation (1,307,130) 10,899,906
Taxation provision for - -
the year
------------ ------------
(Loss)/profit for the year
after taxation (1,307,130) 10,899,906
Other comprehensive income
Loss on available for sale
financial assets 9 - (1,178,774)
Total comprehensive (loss)/income
for the year (1,307,130) 9,721,132
============ ============
Earnings per share
Basic EPS on (loss)/profit
for the year 17 (0.02) 0.16
============ ============
QANNAS INVESTMENTS LIMITED
STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2015
31.12.15 31.12.14
Notes $ $ $ $
Assets
Non-current assets
Unquoted investments
at fair value
through profit
and loss 4 75,231,608 53,213,946
Loans receivable 5 - 9,463,120
Property investments 6 779,560 -
Trade and other
receivables 10 7,027,920 7,315,202
Total non-current
assets 83,039,088 69,992,268
Current assets
Loans receivable 5 10,743,138 -
Available for sale 9 - -
financial assets
Unquoted investments
at fair value
through profit
and loss 4 5,168,179 -
Trade and other
receivables 10 1,178,927 949,446
Receivable from
investment manager 11 397,575 18,000,000
Cash and cash equivalents 12 7,264,513 3,273,099
----------- -----------
Total current assets 24,752,332 22,222,545
Total assets 107,791,420 92,214,813
============ ============
Equity and liabilities
Equity
Management shares 15 2 2
Participating shares 15 68,644,367 76,638,586
16,
Retained earnings 22 1,416,453 2,723,583
Available for sale 23 - -
reserve
------------ ------------
70,060,822 79,362,171
Liabilities
Current liabilities
Trade and other
payables 13 5,869,740 698,461
Loans payable 14 29,811,219 9,847,233
----------- -----------
Total current liabilities 35,680,959 10,545,694
Non-current liabilities
Trade and other
payables 13 2,049,639 2,306,948
Total liabilities
and equity 107,791,420 92,214,813
============ ============
Representing net
asset value per
Participating share $1.00 $1.02
============ ============
QANNAS INVESTMENTS LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 DECEMBER 2015
Management Participating Retained Available
for
share share earnings sale reserve Total
capital capital
$ $ $ $ $
At 1 January
2014 2 31,965,349 809,019 1,178,774 33,953,144
Issue of participating
shares - 44,673,238 - - 44,673,238
Repurchase of
participating
shares - (1) - - (1)
Distribution - - (8,985,342) - (8,985,342)
Total comprehensive
income - - 10,899,906 (1,178,774) 9,721,132
At 31 December
2014 2 76,638,586 2,723,583 - 79,362,171
----------- -------------- ------------ ------------- ------------
At 1 January
2015 2 76,638,586 2,723,583 - 79,362,171
Purchase of participating
shares under
tender offer - (7,994,219) - - (7,994,219)
Total comprehensive
income - - (1,307,130) - (1,307,130)
At 31 December
2015 2 68,644,367 1,416,453 - 70,060,822
=========== ============== ============ ============= ============
QANNAS INVESTMENTS LIMITED
STATEMENT OF CASH FLOWS
FOR THE YEARED 31 DECEMBER 2015
01.01.15 01.01.14
to to
31.12.15 31.12.14
$ $
Cash flows from operating activities
(Loss)/profit for the year
before taxation (1,307,130) 10,899,906
Loss on disposal of available
for sale financial asset - 22,071
Loss on disposal of freehold
land - 40,817
Net gains and losses on changes
in fair value of unquoted investments 569,253 (4,396,700)
Non-cash investment income - (2,479,493)
Interest income (1,339,022) (1,661,203)
Interest payable 729,499 44,907
Foreign exchange loss on loans
receivable 957,149 918,126
Loss on foreign exchange 109,353 42,089
Decrease/(increase) in trade
receivables 85,286 (7,780,248)
Decrease/(increase) in receivable
from investment manager 17,602,425 (18,000,000)
(Decrease)/increase in trade
payables (406,710) 950,698
Net cash inflows/(outflows)
from operating activities 17,000,103 (21,399,030)
------------- -------------
Investing activities
Interest received 66,774 10,519
Issue of loans receivable (1,027,247) (10,381,246)
Purchase of unquoted investments (23,802,457) (6,430,113)
Capital distributions received
from unquoted investments 1,339,457 4,833,660
Purchase of property investments (779,560) -
Disposal of freehold land - 6,114,420
Disposal of available for sale
financial assets - 14,908,864
Net cash (outflows)/inflows
from investing activities (24,203,033) 9,056,104
------------- -------------
Financing activities
Drawdown of bank loan 19,800,000 9,830,000
Loan interest paid (502,084) -
Purchase of own participating (7,994,219) -
shares under tender offer
Distribution - (8,985,342)
Net cash inflows from financing
activities 11,303,697 844,658
------------- -------------
Net increase/(decrease) in
cash and cash equivalents 4,100,767 (11,498,268)
Effect of foreign exchange
movements (109,353) (42,089)
Cash and cash equivalents brought
forward 3,273,099 14,813,456
Cash and cash equivalents at
end of year 7,264,513 3,273,099
============= =============
QANNAS INVESTMENTS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2015
1. GENERAL INFORMATION
The Company was a limited liability closed-end investment Company incorporated in Jersey on 17 January 2012 with an unlimited life. The Company joined London's Alternative Investment Market ("AIM") on 6 March 2012. The registered office of the Company was 13-14 Esplanade, St Helier, Jersey, JE1 1BD, Channel Islands. On 31 March 2014, the Company migrated to the Cayman Islands as an exempt company and ceased to be a company incorporated under Jersey Company Law on that date. The registered office of the Company is that of Codan Trust Company (Cayman) Limited, Cricket Square, Hutchins Drive, PO Box 2681, George Town, Grand Cayman KY1-1111, Cayman Islands.
The Company's principal activity is that of investing, centred around a theme-based investment approach, which has evolved over the years, starting with a focus on distressed / opportunistic investments in the UAE in 2012 and 2013 and broadening to the acquisition of secondary portfolios of regional PE funds and European real estate investments in 2014. The Company's investment objective is to generate value for shareholders by creating a portfolio of opportunistic investments in real estate, debt, and equities (both public and private) in the MENA region, Europe and North America. Investments will be made where there is liquidity requirement or portfolio repositioning on the part of a vendor such that assets become available at a discount to their intrinsic value. The Company will aim to acquire such assets and then to dispose of them at a premium to their acquisition cost.
2. SIGNIFICANT ACCOUNTING POLICIES
Basis of preparation
The financial statements have been prepared under the historical cost convention, except for the revaluation of certain financial instruments and investments which are included at fair value, and in accordance with applicable International Financial Reporting Standards as endorsed for use in the European Union ("IFRS") and, where applicable, the Association of Investment Companies Statement of Recommended Practice ("AIC SORP"). The principal accounting policies are set out below.
Basis of measurement
The Company classifies its investments in the following categories: investments at fair value through profit or loss, loans and receivables and available-for-sale financial assets. The classification depends on the nature and purpose of each investment. The Directors determine the classification of its investments at initial recognition.
Investments at fair value through profit and loss
The Company classifies its investments in equity and limited partnership interests as financial assets at fair value through profit or loss.
Investments are recognised and de-recognised on the trade date - the date on which the Company commits to purchase or sell an investment. Investments are initially recognised at cost. Transaction costs are expensed as incurred in the statement of comprehensive income. Investments 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.
Subsequent to initial recognition, investments are measured at their fair value. Gains and losses arising from changes in the fair value are presented in the statement of comprehensive income within net gains and losses on investments in the period in which they arise.
Dividend income is recognised in the statement of comprehensive income within investment income when the Company's right to receive payments is established.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value of financial assets and liabilities traded in active markets (such as publicly traded securities) are based on quoted market prices at the close of trading on the reporting date. The Company utilises the last traded market price for both financial assets and financial liabilities where the last traded price falls within the bid-ask spread. In circumstances where the last traded price is not within the bid-ask spread, the Directors will determine the point within the bid-ask spread that is most representative of fair value.
Investments at fair value through profit and loss - continued
The fair value of financial assets and liabilities 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 arm's length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, option pricing models and other valuation techniques commonly used by market participants making the maximum use of market inputs and relying as little as possible on entity-specific inputs.
Loans receivable
Loans receivable are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are classified as loans and receivables.
Loans receivable are recognised on the date on which the Company commits to provide a loan. The loans are initially recognised at cost. Transaction costs associated with the loans expensed as incurred within the statement of comprehensive income. Loans receivable are derecognised when the rights to receive interest income have expired and the loan has been repaid.
Subsequent to initial recognition, loans receivable are measured at amortised cost using the effective interest rate method, less provision for impairment.
Interest income is recognised in the statement of comprehensive income within interest income - loans receivable when the Company's right to receive payments is established.
Available for sale financial assets
Available for sale ('AFS') investments are initially recognised and subsequently carried at fair value. Gains and losses arising from changes in the fair value are recognised in other comprehensive income. When securities classified as AFS are sold or impaired, the accumulated fair value adjustments recognised in other comprehensive income are included in the statement of profit and loss as 'Loss on disposal of available for sale financial asset'.
Interest on AFS debt instruments is calculated using the effective interest method and is recognised in the statement of comprehensive income as interest income - available for sale financial assets.
Freehold land and Property investments
The Company classifies freehold land and completed property investments as a financial asset at fair value through profit or loss.
Acquisitions of property under construction are made in stages with deposits paid to secure the Company's investment. Such payments are recognised at cost and subsequently measured at fair value on completion of the development.
These investments are recognised and de-recognised on the trade date - the date on which the Company commits to purchase or sell a plot. These investments are initially recognised at fair value. Transaction costs are expensed as incurred in the statement of comprehensive income. These investments are derecognised when the rights to receive cash flows have expired or the Company has transferred substantially all risks and rewards of ownership.
Subsequent to initial recognition, these investments are measured at fair value. Gains and losses arising from changes in the fair value are presented in the statement of comprehensive income within net gains and losses on investments in the period in which they arise.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
Functional and presentational currency
The performance of the Company is measured and reported to the investors in US dollars. The Board of Directors considers the US dollar as the currency that most faithfully represents the economic effects of the underlying transactions, events and conditions. The financial statements are presented in US dollars, which is the Company's functional and presentation currency.
Use of estimates and judgements
The preparation of the financial statements in conformity with IFRS and applicable Statute law requires the Directors to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates with the most significant effects on the carrying amounts of the assets and liabilities in the financial statements are outlined below:
(i) Valuation of unquoted investments - The fair value of these is determined via valuation techniques. For further details of the judgements and assumptions made see note 21.
(ii) Valuation of quoted investments - These are valued at the last traded price on the reporting date and in accordance with IFRS, no discount is applied for the liquidity of the stock or any dealing restrictions.
(iii) Valuation of loans receivable - Loans receivable are held at amortised cost. The Directors undertake regular impairment reviews of loans receivable to ensure that they remain recoverable.
(iv) Valuation of freehold land and property investments - These are valued with reference to comparison to similar sales transactions. Prices of comparable transactions in similar locations are adjusted for key differences in attributes such as size. For further details on the judgements and assumptions made see note 21.
(v) Valuation of available for sale financial assets - These are valued using a discounted cash flow methodology. For further details of the judgements and assumptions made see note 21.
Foreign currencies
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign currency assets and liabilities are translated into the functional currency using the exchange rate prevailing at the statement of financial position date.
Foreign exchange gains and losses arising from translation are included in the statement of comprehensive income. Foreign exchange gains and losses relating to cash and cash equivalents are presented in the statement of comprehensive income within '(loss) / gain on foreign exchange. Foreign exchange gains and losses relating to the financial assets and liabilities carried at fair value through profit or loss are presented in the statement of comprehensive income within 'net gains and losses on investments'.
Financial assets and liabilities
The Company classifies its financial assets and liabilities as follows:
Cash and cash equivalents
Cash and cash equivalents includes cash in hand, deposits held at call with banks and other short-term investments in an active market with original maturities of less than three months.
Trade and other receivables
Trade and other receivables are initially recognised at fair value and subsequently carried at amortised cost; their carrying values are a reasonable approximation of fair value.
Trade receivables include the contractual amounts for the settlement of trades and other obligations due to the Company.
Receivable from investment manager
Receivable from investment manager comprises deposits held by the Investment Manager in order to allow them to facilitate on-going transactions arising from structures at different stages of formation.
Trade and other payables
Trade and other payables are initially recognised at fair value and subsequently carried at amortised cost; their carrying values are a reasonable approximation of fair value.
Trade and other payables represent contract amounts and obligations due by the Company.
Loans payable
Loans payable are measured initially at cost. Subsequent to initial recognition, they are measured at amortised cost using the effective interest rate method. They are classified as loans and receivables. These financial liabilities are recognised when the Company enters into a Loan Agreement and are derecognised when the loan agreement is terminated.
The effective interest rate method is a method of calculating the amortised cost of a financial liability and of allocating the interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts over the expected life of the financial instrument, in order that the present value of the future cash flows, including fees or transaction costs, is equal to the carrying amount of the financial instrument.
Finance costs associated with loans payable have been spread on an effective interest rate constant basis over the life of the loan.
Shares in issue
Management Shares are not redeemable, do not participate in the net income or dividends of the Company and are recorded at $1.00 per share.
Participating shares in issue are not redeemable at the shareholder's option.
Participating shares which are acquired are recognised at cost and deducted from equity. No gain or loss is recognised in the statement of comprehensive income on the purchase, sale, issue or cancellation of the Company's own equity instruments. Any differences between the carrying amount and the consideration are recognised in retained earnings.
Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable in the normal course of business. The Company recognises revenue when the amount of revenue can be reliably measured and when it is probable that the future economic benefits will flow into the Company.
Taxation
The Company is domiciled in the Cayman Islands and is treated as resident for tax purposes and is subject to the zero per cent standard income tax rate.
Expenditure and transaction costs
All items of expenditure including the performance and management fees are recognised on an accruals basis.
Distributions payable
The payment of dividends will depend on the availability of distributable reserves, cash resources and the working capital requirements of the Company. Dividends paid are included in the Company financial statements in the period in which the related dividends are declared.
Non consolidation
The Company fulfils the definition of an investment entity under IFRS 10 ("Consolidated Financial Statements") and as a result does not consolidate investments in subsidiaries but instead measures its investment at fair value through profit and loss. IFRS 10 defines an investment entity as one that obtains funds from investors for the purpose of providing investors with investment management services, commits to its investors that its purpose is to invest funds solely for returns from capital appreciation, investment income or both and measures and evaluates the performance of substantially all its investments on a fair value basis.
Going concern
The company's existing loan facility with First Gulf Bank is due for repayment on 25 November 2016 (note 14). The Directors have approached First Gulf Bank who has indicated its willingness to extend this loan facility for a foreseeable future. Alternatively, should the existing facility not be extended with First Gulf Bank, the Directors' are confident that a new loan facility can be obtained for at least a year before the existing loan facility expires.
The Directors, having considered the above and after making due enquiries, continue to adopt the going concern basis in preparing the financial statements which assumes that the company will continue in operation for the foreseeable future.
Segmental reporting
The Company is operated as one segment by the Board of Directors (which is considered to be the Chief Operating Decision Maker).
Operating segments are reported in a manner consistent with the internal reporting used by the chief operating decision-maker. The Board of Directors is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors.
The Directors make the strategic resource allocations on behalf of the Company. The Company has determined the operating segments based on the reports reviewed by the Board of Directors, which are used to make strategic decisions.
The Board of Directors is responsible for the Company's entire portfolio and considers the business to have a single operating segment. The Board of Directors asset allocation decisions are based on a single, integrated investment strategy, and the Company's performance is evaluated on an overall basis.
The Company trades in a diversified portfolio of securities with the objective of generating value for shareholders.
The internal reporting provided to the Board of Directors for the Company's assets, liabilities and performance is prepared on a consistent basis with the measurement and recognition principles of IFRS.
There were no changes in the reportable segments during the year.
Adoption of new and revised standards
The Directors have assessed the impact, or potential impact, of all new accounting requirements. In the opinion of the Directors, there are no mandatory new accounting requirements applicable in the current year that have any material effect on the reported performance, financial position, or disclosures of the Company. The Company has not adopted any new accounting requirements that are not mandatory.
Amendments adopted early by the Company
There were no standards, amendments and interpretations which are effective for the financial year beginning on 1 January 2015 that were material to the Company.
New standards and interpretations not yet adopted
A number of new standards and amendments to standards and interpretations are effective for annual periods beginning after 1 January 2015, and have not been applied in preparing these financial statements. None of these is expected to have a significant effect on the financial statements of the Company, except the following:
Amendments to IFRS10, IFRS12 and IAS28 in respect of the application of the consolidation exemption to investment entities which will be effective for accounting periods beginning on or after 1 January 2016.
Amendments to IFRS11 in respect of Accounting for Acquisitions of Interest in Joint Operations which will be effective for accounting periods beginning on or after 1 January 2016.
Amendments to IAS1 in respect of determining what information to disclose in annual financial statements which will be effective for accounting periods beginning on or after 1 January 2016.
Amendments to IAS27 to allow entities to use the equity method to account for investments in subsidiaries, joint ventures and associates which will be effective for accounting periods beginning on or after 1 January 2016.
IFRS 9 Financial Instruments
IFRS 9 addresses the classification, measurement and recognition of financial assets and financial liabilities. The complete version of IFRS 9 was issued in July 2014. It replaces the guidance in IAS 39 that relates to the classification and measurement of financial instruments. IFRS 9 retains but simplifies the mixed measurement model and establishes three primary measurement categories for financial assets: amortised cost, fair value through OCI and fair value through P&L. The basis of classification depends on the entity's business model and the contractual cash flow characteristics of the financial asset. Investments in equity instruments are required to be measured at fair value through profit or loss with the irrevocable option at inception to present changes in fair value in OCI not recycling. There is now a new expected credit losses model that replaces the incurred loss impairment model used in IAS 39.
For financial liabilities there were no changes to classification and measurement except for the recognition of changes in own credit risk in other comprehensive income, for liabilities designated at fair value through profit or loss. IFRS 9 relaxes the requirements for hedge effectiveness by replacing the bright line hedge effectiveness tests. It requires an economic relationship between the hedged item and hedging instrument and for the 'hedged ratio' to be the same as the one the Directors actually use for risk management purposes. Contemporaneous documentation is still required but is different to that currently prepared under IAS 39. The standard is effective for accounting periods beginning on or after 1 January 2018. Early adoption is permitted, subject to EU endorsement.
The Directors anticipate that the application of IFRS 9 in the future may have an impact on the presentation of the Company's financial assets. However, it is not practicable to provide a reasonable estimate of the effect of IFRS 9 until a detailed review has been completed. The Directors will undertake this review in due course.
IFRS 15 Revenue from Contracts with Customers
IFRS 15 deals with revenue recognition and establishes principles for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity's contracts with customers. Revenue is recognised when a customer obtains control of a good or service and thus has the ability to direct the use and obtain the benefits from the good or service. The standard replaces IAS 18 'Revenue' and IAS 11 'Construction contracts' and related interpretations. The standard is effective for annual periods beginning on or after 1 January 2018 and earlier application is permitted, subject to EU adoption. The Company is in the process of assessing the impact of IFRS 15.
1. DIRECTORS' REMUNERATION AND INTERESTS
The remuneration of the individual Directors who served in the year to 31 December 2015 was:
31.12.15 31.12.14
$ $
Jassim Mohamed Alseddiqi - -
Richard John Stobart Prosser 26,344 28,796
Christopher Ward 35,759 33,746
Andrew Noel Whelan - 14,452
Richard Green 29,923 15,835
Mustafa Kheriba - -
92,026 92,829
========= =========
Directors' interests in the shares of the Company including family interest, at 31 December 2015 were:
Share Nominal % Held
Participating
Jassim Mohamed Alseddiqi shares 2,018,778 * 2.90%
Participating
Christopher Ward shares 100,000 0.14%
Participating
Richard Green shares 100,000 0.14%
Participating
Mustafa Kheriba shares 531,278 0.76%
* In addition to the above, Jassim Mohamed Alseddiqi also has an indirect interest in 5,601,579 shares.
2. UNQUOTED INVESTMENTS AT FAIR VALUE THROUGH PROFIT AND LOSS
31.12.15 31.12.14
$ $
Fair value brought forward 53,213,946 68,063
Additions 29,094,551 54,331,232
Capital distributions (1,339,457) (5,582,049)
Disposals - -
Unrealised (losses) / gains
on the revaluation of investments (569,253) 4,396,700
Fair value at 31 December 80,399,787 53,213,946
============ ============
Unquoted investments comprise:
31.12.15 31.12.14
Fair Fair Value
Value
$ $
Madaares PJSC 68,063 68,063
SPE Qannas C Ltd. 8,193,775 8,260,249
ADCM Secondary Private Equity
Fund L.P. ("ADCM SPEF") 35,791,687 39,004,778
EE F&B Holding
Limited 4,089,162 660,137
Palace Preferred
Partners L.P. 7,480,803 5,220,719
BL Development 5,167,180 -
Limited
Verne Preferred 999 -
Limited
Integrated Financial 19,608,118 -
Group
80,399,787 53,213,946
=========== ===========
The fair values of the unquoted investments are based on the latest available net asset value reports and / or financial information available of the underlying companies.
Post year end, the company disposed of its holdings in BL Development Limited and Verne Preferred Limited. As such these investments are held within current assets at 31 December 2015. See note 26 for further details.
Unquoted investments at 31 December 2015 comprise:
Class No. of Percentage Book
of
shares shares holding cost
held
$
Madaares PJSC Ordinary 250,000 0.03% 68,063
SPE Qannas C Ltd. Preference 8,039,559 74.3% 7,930,886
ADCM Secondary
Private Equity
Fund L.P. - - 96.5% 33,527,154
EE F&B Holding
Limited Ordinary 1,000 100% 4,089,161
Palace Preferred
Partners L.P. - - 22% 6,956,400
BL Development
Limited Preference 3,500,000 100% 5,332,500
Verne Preferred
Limited Ordinary 1000 100% 999
Integrated Financial
Group LLC Ordinary 73,908 47.4% 18,667,177
76,572,340
===========
The Company's investments in Madaares PJSC, EE F&B Holding Limited, and Verne Preferred Limited are valued at cost which the Directors consider the best approximation of fair value at the year-end.
During the year ended 31 December 2015, the Company made the following investments: -
-- A further investment into EE F&B Holding Limited of $3,429,064, a company that has signed a franchise agreement with Hard Rock Limited to run the Hard Rock Café in Podgorica, Montenegro;
-- A further investment into Palace Preferred Partners L.P. of $1,664,850 (GBP1,100,000), an entity providing mezzanine finance to a company developing luxury residential apartments at a property located in London, United Kingdom;
-- An initial investment of $5,332,500 (GBP3,500,000) was made into BL Development Limited, a special purpose vehicle incorporated for the development of a mixed use development project in Central London;
-- An initial investment of $999 into Verne Preferred Limited, a special purpose vehicle incorporated for investment holding; and
-- An initial investment of $13,463,095 into Integrated Financial Group LLC, a UAE based financial services company. A further investment of $5,204,082 was committed at 31 December 2015 and is included within trade and other payables - this was subsequently paid in March 2016.
During the year ended 31 December 2015, the Company received the following income from its unquoted investments: -
-- $892,971 (2014: $3,058,562) from ADCM Second Private Equity Fund L.P.; -- $365,728 (2014: $nil) from BL Development Limited; and -- $nil (2014: $72,448) from SPE Qannas C Ltd.
At 31 December 2015 the Company had entered into the following commitments:
Total Commitment
Commitment Outstanding
at
31.12.15
Palace Preferred Partners L.P. GBP11,000,000 GBP6,600,000
BL Development Limited GBP3,500,000 GBPnil
The loan due to First Gulf Bank PJSC (as detailed in note 14) is secured by way of a charge over the Company's investment in ADCM Secondary Private Equity Fund L.P., SPE Qannas C Ltd and Palace Preferred Partners L.P.
4. LOANS RECEIVABLE
31.12.15 31.12.14
$ $
Brought forward 9,463,120 -
Additions 1,089,918 10,381,246
Capitalised loan interest 1,147,249 -
Disposals - -
Losses on foreign exchange (957,149) (918,126)
10,743,138 9,463,120
=========== ===========
At 31 December 2015, loans receivable comprise:
Interest Maturity Carrying Carrying
rate Date value value
CCY $
Integrated Eastern August
European Fund 15.00% 2016 EUR3,529,500 3,856,120
Integrated Eastern August
European Fund 15.00% 2016 EUR2,809,000 3,068,945
Lucice Montenegro August
d.o.o. 15.00% 2016 EUR59,000 64,460
August
Arqutino EAD 15.00% 2016 EUR603,000 658,802
Capitalised interest
on above loans - - EUR1,050,075 1,147,249
Integrated EE November
Holdings d.o.o. 4.00% 2016 EUR785,000 857,644
Verne Preferred
Limited 11.50% June 2017 AED4,000,000 1,089,918
10,743,138
===========
Each of the loans is denominated in EUR or AED with movements arising on revaluation included within the Statement of Comprehensive Income as foreign exchange losses on loans receivable.
During the year a new loan facility was granted to Verne Preferred Limited by way of secured commodity Murabaha debt agreement. Verne Preferred Limited is a special purpose vehicle incorporated for the investment in Downtown Investments Limited by way of preferred equity. Downtown Investments Limited owns the freehold of the Taj Hotel Downtown Dubai, a 296 room luxury hotel in Dubai, United Arab Emirates, which is currently in development.
The loan to Verne Preferred Limited was repaid in early 2016 and as such it has been included within current assets at 31 December 2015. See note 26 for further details.
Loan interest in respect of the above loans totalling $1,334,850 (2014: $471,910) is included in the Statement of Comprehensive Income for the year.
The loans to Integrated Eastern European Fund (formerly European Injaz Eastern Property Development Company Limited), Lucice Montenegro d.o.o. and Arqutino EAD are secured by way of share pledges and mortgage agreements in the underlying companies.
5. PROPERTY INVESTMENTS
31.12.15 31.12.14
$ $
Fair value brought forward - -
Additions 779,560 -
Disposals - -
Loss on disposal - -
Unrealised gains on the revaluation - -
of freehold land
Fair value at 31 December 779,560 -
========= =========
This represents the deposit paid by the Company to acquire 2 premium units (the 'units') in the development Marina 101 at Dubai Marina. The total cost of the units will be AED 9.1m ($2.5m), of which AED 2.9m ($779,560) had been paid at 31 December 2015.
The units each have three bedrooms and are located on the 88th floor, one with a seaside view and one with a view over the Sheikh Zayed Road. The units are 3,653 square feet in size and come with underground parking spaces. Marina 101 is approximately 85% complete and the developer expects to reach completion in the first quarter of 2016.
6. FREEHOLD LAND
31.12.15 31.12.14
$ $
Fair value brought forward - 6,155,237
Additions - -
Disposals - (6,114,420)
Loss on disposal - (40,817)
Unrealised gains on the revaluation - -
of freehold land
Fair value at 31 December - -
=========== ============
On 17 May 2013, the Company purchased land at Reem Island, Abu Dhabi with permission to build up to 63,000 sq. ft. of residential space. The land was purchased at a cost of $3.26 million (AED 12 million). The land was sold in March 2014 for net sales proceeds of $6,114,420 realising a profit of $2,854,542 over purchase price of $3,259,878. The disposal resulted in a reduction of $40,817 over fair value as at 31 December 2013.
7. NET GAINS AND LOSSES ON INVESTMENTS
31.12.15 31.12.14
$ $
(Loss) / gain on movement in
fair value of unquoted investments
(see note 4) (569,253) 4,396,700
Net gains and losses on investments
at 31 December (569,253) 4,396,700
========== ==========
8. AVAILABLE FOR SALE FINANCIAL ASSETS
31.12.15 31.12.14
$ $
Fair value brought forward - 14,930,935
Interest income - 1,178,774
Disposals - (14,908,864)
Loss on disposal - (22,071)
Unrealised gains on the revaluation
of available for sale financial
asset - (1,178,774)
Fair value at 31 December - -
=========== =============
In May 2012, the Company entered into a property sale and repurchase agreement with Sheffield Holdings Limited ("Sheffield"), the developer of Marina 101, a landmark high-rise hotel and apartment building located at the Dubai Marina. The Company invested $9.9 million (AED 36,231,500) in this transaction. Sheffield was obliged to repurchase the property at a premium to the acquisition price on or before two years from the acquisition date.
Marina 101 was classified as an available for sale financial asset and was carried at a value equal to the principal amount multiplied by the repayment multiple of 1.51x. Interest was charged on a daily basis at a constant rate using an effective interest rate of 21%. Unrealised gains on revaluation are recognised in other comprehensive income.
The asset was sold during May 2014 for net sale proceeds of $14,908,864 (AED 54.8 million) realising a profit of $5,008,913 over purchase price of $9,899,951 (AED 36.3 million). The disposal resulted in a reduction of $22,071 over fair value as at 31 December 2013.
9. TRADE AND OTHER RECEIVABLES
31.12.15 31.12.14
$ $
Non-current
Performance fee rebate receivable
(see note 20) 7,027,920 7,315,202
========== ==========
Current
Sundry debtors 34 34
Management fee rebate receivable
(see note 20) 318,552 465,925
Loan interest receivable 497,143 471,910
Investment income receivable 352,687 -
Prepayments 10,511 11,577
1,178,927 949,446
========== ==========
The performance fee rebate receivable will become due at the time of completion of the liquidation of the funds of ADCM Secondary Private Equity Fund L.P. and SPE Qannas C Ltd.
The Directors consider that the carrying amount of trade and other receivables approximates to their fair value.
10. RECEIVABLE FROM INVESTMENT MANAGER
Receivable from investment manager represents amounts advanced to ADCM Ltd during the year ended 31 December 2014 for deployment into various investments following the year end.
The majority of the funds were utilised during 2015 and either converted into investments or returned to the Company. At 31 December 2015, $397,575 (2014: $18,000,000) remained uninvested.
11. CASH AND CASH EQUIVALENTS
31.12.15 31.12.14
$ $
First Gulf Bank 7,001,437 3,025,001
Barclays Private Clients International - 41
HSBC - 265
Royal Bank of Scotland International 263,076 247,792
----------
7,264,513 3,273,099
========== ==========
The bank accounts held with HSBC and Barclays Private Clients International were closed during the year.
12. TRADE AND OTHER PAYABLES
31.12.15 31.12.14
$ $
Non-current
Performance fees 2,049,639 2,306,948
========== ==========
Current
Director fees 30,080 23,964
Secretarial, administration
and accountancy fees 73,414 85,238
Sundry expenses 3,552 89,523
Investment manager fees 313,822 403,990
Audit fees 31,092 19,639
Legal and professional fees 58,651 48,432
Loan interest payable 91,104 27,674
Loan interest received in advance 52,169 -
Investments payable 999 -
Performance fees 10,774 -
Unquoted investment purchase 5,204,082 -
payable
Participating shares 1 1
----------
5,869,740 698,461
========== ==========
The Directors consider that the carrying amount of trade and other payables approximates to their fair value.
13. LOANS PAYABLE
31.12.15 31.12.14
$ $
Loan Capital
Brought forward 10,000,000 -
Drawn down in year 20,000,000 10,000,000
Capitalised Costs
Brought forward (152,767) -
Incurred in the year (200,000) (170,000)
Amortised during the year 163,986 17,233
29,811,219 9,847,233
=========== ===========
The Company has a loan facility with First Gulf Bank for up to $30,000,000. The facility was renegotiated during 2015 - it bears interest at the rate of LIBOR + 2.5% per annum and is repayable in full on 25 November 2016.
The loan is secured by way of a pledge with First Gulf Bank PJSC in respect of the receivable accounts held by the Company and by way of a charge over the Company's investment in ADCM Second Private Equity Fund L.P., SPE Qannas C Ltd, Palace Preferred Partners L.P. and BL Development Limited.
The loan is initially measured at its net proceeds with the issue costs being spread at a constant rate using the effective interest rate over the life of the loan.
14. SHARE CAPITAL
31.12.15 31.12.14
Management shares
Authorised:
2 ordinary non-participating
shares of no par value 2 2
============== ===========
$ $
Issued and fully paid:
2 shares of $1 each 2 2
============== ===========
Participating shares
Authorised:
Unlimited participating - -
shares of no par value
============== ===========
$ $
Issued and fully paid:
69,718,445 (2014: 78,133,409)
participating shares
of
no par value at various
issue prices 76,638,587 76,638,587
============== ===========
Treasury shares:
9,612,909 (2014: 1,197,945)
participating shares
of no par value redeemed
at various prices (7,994,220) (1)
============== ===========
In addition to the above, the Company has two further share classes - redeemable 'B' and redeemable 'C'. Both of these share classes have an unlimited number of participating shares of no par value authorised for issue. At 31 December 2015 and 31 December 2014 no redeemable 'B' shares and redeemable 'C' shares were in issue.
Management shares
The Management Shares carry no right to receive any dividends, whether by way of finance costs, return of capital or otherwise, other than the return (on a winding up) of the issue price paid on such shares, are non-redeemable and are recorded at $1.00 per share.
Participating shares
Participating Shares carry the right to receive a dividend out of the income of the Company in such amounts and at such times that the Directors shall determine, and to receive a dividend on a return of capital of the assets of the Company on a winding up, in proportion to the number of shares held. Participating shares in issue are redeemable at the option of the Company.
During the year, the Company redeemed 8,414,964 $1 participating shares as part of a tender offer at a price of $0.95 per share. These shares are held as treasury shares and as such are not entitled to any dividends paid by the Company or any rights to vote at meetings of the Company.
During the prior year, the Company issued an additional 44,673,238 $1 participating shares in exchange for 96.5% Limited Partnership interest in ADCM Second Private Equity Fund L.P. and 74.3% of the issued preference shares of SPE Qannas C Ltd.
During the prior year, the Company agreed to accept the return of 1,197,945 participating shares from the Investment Manager for an aggregate price of $1. These shares are held as treasury shares and as such are not entitled to any dividends paid by the Company or any rights to vote at meetings of the Company. At the year end, this amount had not been paid and hence was held within Trade and other payables.
B Shares
This class of share has no rights to receive dividends, to receive notice of or vote at general meetings of the Company or to receive amounts available for distribution on a winding up, for the purpose of a reorganisation or otherwise or upon any distribution of capital.
C Shares
The Directors are authorised to issue C Shares of different classes which are convertible into Participating Shares. If the shares were converted into Participating Shares, then these shares would rank equal to, and hold the same rights attaching to, Participating Shares currently in issue at the date of conversion.
This class of share will be entitled to receive such dividends as the Directors may resolve to pay to such shares out of the assets attributable to this class of share. This class of share carries no right to attend or vote at any general meeting of the Company. The capital and assets of the Company on a winding up or on a return of capital attributable to this class of share shall be divided amongst the shareholders of this class of share according to their holding.
15. RETAINED EARNINGS - UNREALISED AND REALISED SPLIT
Retained earnings at 31 December 2015 comprise the following revenue items, split between realised and unrealised income:
Unrealised Realised Total
$ $ $
Balance at 1 January 2015 11,259,701 (8,536,118) 2,723,583
Income 138,531 1,258,699 1,397,230
Expenditure - (1,678,128) (1,678,128)
Net gains and losses on
unquoted investments (569,253) - (569,253)
Loan interest payable - (729,499) (729,499)
Foreign exchange losses
on loans receivable (957,149) - (957,149)
Loss on foreign exchange (102,306) (7,047) (109,353)
Interest income - cash
and cash equivalents - 4,172 4,172
Interest income - loans
receivable - 1,334,850 1,334,850
----------- ------------ ------------
Balance at 31 December
2015 9,769,524 (8,353,071) 1,416,453
=========== ============ ============
The retained earnings are distributable to the investors at the discretion of the Directors if, in their opinion, the profits of the Company justify such payments. The Directors consider the future requirements of the Company when making such distributions.
16. EARNINGS PER SHARE
Earnings per share is calculated by dividing the profit attributable to the participating shareholders of the Company by the weighted average number of participating shares in issue during the year, excluding the average number of participating shares purchased by the Company and held as treasury shares.
Up until 7 December 2015, there were 78,133,409 preference shares in issue. On 7 December 2015 the Company repurchased 8,414,964 preference shares which are held in equity as treasury shares. The average number of shares in issue during the year ended 31 December 2015 was 77,369,081.
31.12.15 31.12.14
Total (loss) / profit for the
year after taxation ($) (1,307,130) 10,899,906
Weighted average number of
participating shares in issue 77,369,081 66,974,225
Basic earnings per share ($
per share) (0.02) 0.16
============ ===========
The Company has not issued any shares or other instruments that are considered to have dilutive potential.
17. TAXATION
Provision has been made in these financial statements for Cayman Islands income tax at 0%.
18. DISTRIBUTIONS
Distributions of $nil (2014: $8,985,342) were paid during the year. The Company repurchased 8,414,964 participating shares during the year (see note 15 for full details) which are held in equity as treasury shares. No distributions are made to treasury shares once held by the Company.
19. PERFORMANCE FEES
The Investment Manager is entitled to a fee based upon the performance of the investments (the "Performance Fee"). The calculation for this fee changed in the prior year following the acquisition of ADCM SPEF and SPE Qannas C Ltd.
Performance Fee calculation to 27 March 2014
Up until 27 March 2014, the Performance Fee was payable once the Company had made aggregate distributions in cash to the shareholders, in accordance with the following methodology:
The Company firstly had to make distributions to shareholders equivalent to:
i) their gross share subscription price paid (the "contributed capital"), and
ii) a premium of "simple" interest of 7% per annum on the contributed capital (the "preferred return").
When the thresholds had been met then:
i) on the event of any further cash distributions to shareholders the Investment Manager was entitled to an equal amount until he had received payments which in total are equivalent to 20% of the amounts distributed to the shareholders in excess of the contributed capital.
ii) when the 20% has been achieved, the Investment Manager is entitled to 20% of any further cash distributions.
The above calculation was replaced by a new method of calculation that was applied from 27 March 2014.
Performance Fee calculation since 27 March 2014
Under the new method of calculation, the Investment Manager is entitled to be paid a performance fee in respect of each asset in the Company's portfolio from time to time.
On the disposal by the Company of the whole or part of its interest in any Asset, the Investment Manager shall be entitled to a Performance Fee equal to 15 per cent. of the amount by which the net disposal proceeds (after deducting the costs incurred and any taxes payable in connection with such disposal) together with the net proceeds of any previous disposal of interests in such Asset (together, the "Total Proceeds") are greater than the cost (including any fees and expenses) of acquiring the Asset (the "Acquisition Cost").
For the unquoted investments of ADCM SPEF and SPE Qannas C Ltd, acquired in March 2014, each of their underlying fund investments will be considered as separate Assets. As such the Acquisition Cost in respect of each underlying fund investment shall be deemed to be such proportion of the ADCM SPEF and SPE Qannas C Ltd consideration (after being adjusted for the net receivables from ADCM SPEF and SPE Qannas C Ltd investors (on an individual basis)) as is attributable to such ADCM SPEF and SPE Qannas C Ltd Assets. Similarly, the date of acquisition of any ADCM SPEF and SPE Qannas C Ltd asset shall be deemed to be the effective date of 27 March 2014 relating to ADCM SPEF and SPE Qannas C Ltd.
Any Performance Fee payable by the Company to the Investment Manager shall be reduced to the extent required to ensure that, in respect of the Asset to which the Performance Fee relates, an amount equal to a simple 7 per cent per annum return on the Acquisition Cost of such Asset from the date of its acquisition to the date on which the Total Proceeds first exceed the Acquisition Cost has been retained by the Company before the payment of any Performance Fee to the Investment Manager.
Any Performance Fee payable by the Company to the Investment Manager shall be paid to the Investment Manager within 10 days of the receipt by the Company of the relevant disposal proceeds.
As a result of the above mentioned change in Performance Fee structure, the Performance Fee accrual has been reduced by $1,149,109.69 during the first quarter of 2014. The Investment Manager has also returned 1,197,945 participating shares for an aggregate price of $1 which were issued under original agreement to the Investment Manager in lieu of management fee before 27 March 2014 (see note 15).
Rebates
Following the acquisition of ADCM SPEF, in order to prevent the double-charging of Management and Performance Fees ADCM Ltd (in its capacity as Investment Manager to ADCM SPEF) and ADCM SPEF GP Limited (in its capacity as general partner of ADCM SPEF) entered into an agreement with the Company, such that they shall rebate to the Company any Management Fee or Performance Fee that they receive from ADCM SPEF, which is attributable to the Company's percentage ownership of ADCM SPEF
Following the acquisition of SPE Qannas C, in order to prevent the double-charging of Performance Fees ADCM Ltd (in its capacity as Investment Manager to SPE Qannas C) entered into an agreement with the Company, such that they shall rebate to the Company any Performance Fee that they receive from SPE Qannas C.
The Company has accrued Management Fee rebate income in respect of ADCM SPEF of $318,552 at 31 December 2015 (2014: $465,925). The Company has accrued Performance Fee rebate income in respect of ADCM SPEF and SPE Qannas C Ltd of $7,027,920 at 31 December 2015 (2014: $7,315,202).
The timing of receipt of the Performance Fee rebate is uncertain and is dependent on the realisation of the underlying investments held by ADCM SPEF and SPE Qannas C Ltd. As such, the Performance Fee rebate has been classified as a non-current asset within the Statement of Financial Position.
20. FINANCIAL RISK MANAGEMENT
The Company's activities expose it to a variety of financial risks: market risk (including price risk, interest rate risk and foreign currency risk), credit risk and liquidity risk. The Company's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Company's financial performance.
The management of these risks is performed by the Board of Directors. The policies for managing each of these risks are summarised below.
Management of market risk
Price risk
The Company is exposed to market price risk in respect of its portfolio of investments via equity securities price risk. The risk arises from investments held by the Company for which prices in the future are uncertain. Where non-monetary financial instruments are denominated in currencies other than the US dollar, the price initially expressed in foreign currency and then converted into US dollar will also fluctuate because of changes in foreign exchange rates (further details on the foreign exchange risk can be seen later in this note).
The Company mitigates price risk by having established investment appraisal processes and asset monitoring procedures which are subject to overall review by the board. The Company also manages the risk by appropriate diversification of its assets.
Details of the Company's investments are given in notes 4, 5, 6, 7 and 9.
Price risk sensitivity
The table below summarises the impact on the Company's profit before taxation for the year and on equity of a 10 per cent increase / decrease in the price of the investment portfolio. The sensitivity is based on the effect of the market volatility in the current climate and previous experience with regards to the Company's quoted investment.
2015 2014
-------------------------- --------------------------
Impact of a Unquoted Total Unquoted Total
10% price change Investments Investments
Investment portfolio $8,039,979 $8,039,979 $5,321,394 $5,321,394
============= =========== ============= ===========
Interest rate risk
The Company's interest rate risk principally arises from borrowings in the form of the loan payable (see note 14) and receivables in the form of loans receivable (see note 5).
The Company relies on receipt of investment income and realised gains on investments to meet interest obligations due on the Loan Payable. The loan payable is a short term two year facility which bears interest at 2.5% plus US LIBOR. The board has, in consultation with the Investment Manager, reviewed the terms of the loan and are satisfied that the risk of significant movements in US LIBOR over the term of the loan is low. Through cash flow projections and the structuring of the Company, the Board of Directors believe the Company will have sufficient cash available to meets its obligations as they fall due and therefore, there is no material interest rate risk.
The Loans receivable carry fixed rates of interest and so there is no risk arising from movement in interest rates on income receivable by the Company.
Foreign exchange risk
The Company operates internationally and is exposed to foreign exchange risk arising from various currency exposures.
Foreign exchange risk is the risk that the fair value of future transactions, recognised monetary and non-monetary assets and liabilities denominated in other currencies fluctuate due to changes in foreign exchange rates. Trade payables are settled within short time periods in order to minimise the fluctuation between expected and actual expenditure.
The Company's investments in financial instruments are valued in US dollars. The Company holds cash deposits denominated in a currency other than US dollars, the functional/presentational currency. Some of the Company's payables are transacted in currencies other than US dollars.
The significant currency assets of the Company are held in AED, GBP and EUR. The AED is 'pegged' to USD and the Investment Manager monitors EUR and GBP currency movements and proposes any action deemed appropriate.
The table below summarises the Company's assets and liabilities, monetary and non-monetary, which are denominated in a currency other than the US dollar.
(amounts in 31.12.15 31.12.14
US dollars)
EUR GBP AED EUR GBP AED
Assets
Monetary assets - 262,881 137 - 243,958 137
Non-monetary
assets 10,150,363 12,759,568 1,870,477 9,935,030 2,357 68,063
Liabilities
Monetary liabilities - - - - - -
Non-monetary
liabilities - 168,165 - - 152,355 101,595
The below table summarises the sensitivity of the Company's monetary and non-monetary assets and liabilities to changes in foreign exchange movements at 31 December. The analysis is based on the assumptions that the relevant foreign exchange rate increased/decreased by the percentage disclosed in the table below, with all other variables held constant. This represents the Directors' best estimate of a reasonable possible shift in the foreign exchange rates, having regard to historical volatility of those rates.
Reasonable Reasonable
possible possible
Currency rate 31.12.15 rate 31.12.14
shift shift
$ $
Euros (EUR)
+ / - + / -
Monetary 5% - 5% -
+ / - + / - + / -
Non-monetary 5% 507,518 5% + /- 496,751
Pound Sterling
(GBP)
+ / - + / - + / - + / -
Monetary 5% 13,144 5% 12,198
+ / - + / - + / - + / -
Non-monetary 5% 629,570 5% 7,500
As disclosed above, the AED is 'pegged' to the USD and so no sensitivity analysis has been prepared for AED denominated amounts.
Credit risk
The Company's principal financial assets are Trade & other receivables, Receivable from investment manager, Cash & cash equivalents and Loans receivable.
Credit risk on Trade and other receivables is managed by regular review by the Board of Directors of the positions with debtors to ensure that amounts included remain recoverable. The Board of Directors is satisfied that amounts included within Trade and other receivables are recoverable. The Company's maximum exposure in respect of Trade & other receivables is detailed in note 10.
The Company seeks to limit the level of credit risk on the cash balances by only depositing surplus liquid funds with counterparty banks with high credit ratings. The Company does not hold any derivative financial instruments.
The credit risk associated with trading and portfolio investments is considered minimal.
Credit Risk Sensitivity
31.12.15 31.12.14
$ $
Cash and cash equivalents
AA 7,001,437 3,025,307
A 263,076 247,792
7,264,513 3,273,099
========== ==========
The maximum exposure to credit risk on the Company's financial assets is represented by their carrying amount, as outlined in the categorisation of bank balances as seen in note 12.
The Company has significant Loans receivable at the year end. The Board of the Directors reviews the position of the counterparty prior to entering into any loan arrangement and the Investment Manager provides subsequent quarterly updates. The Investment Manager's review includes review of external ratings, where available, and financial information in respect of the counterparty. Further disclosure in respect of Loans receivable can be seen in note 5.
The Company does not consider that any changes in fair value of financial assets in the year are attributable to credit risk.
No aged analysis of financial assets is presented as no financial assets are past due at the reporting date.
The maximum exposure to credit risk before any credit enhancements at 31 December is the carrying amount of the financial assets as set out below.
31.12.15 31.12.14
$ $
Loans receivable 10,743,138 9,463,120
Trade and other receivables 8,206,847 8,264,648
Receivable from investment
manager 397,575 18,000,000
Cash and cash equivalents 7,264,513 3,273,099
26,612,073 39,000,867
=========== ===========
Liquidity risk
The Company seeks to manage liquidity risk to ensure that sufficient liquidity is available to meet foreseeable needs and to invest cash assets safely and profitably. The Company deems there is sufficient liquidity for the foreseeable future. The Company has a strong relationship with various financial institutions and has utilised these relationships to borrow funds when necessary. The Board of Directors is comfortable that the Company has sufficient resources to meet the requirements of the Company.
During the prior year the Company entered into a facility for $30 million from First Gulf Bank and drew down the full loan during the current year. The loan is due for repayment in November 2016 (see note 14). The Directors have approached First Gulf Bank who has indicated its willingness to extend this loan facility for a foreseeable future. Alternatively, should the existing facility not be extended with First Gulf Bank, the Directors' are confident that a new loan facility can be obtained for at least a year before the existing loan facility expires.
The table below analyses the Company's financial liabilities into relevant maturity groupings based on the remaining period at the statement of financial position date. The amounts in the table are the undiscounted cash flows.
Less 1 to 3 to 6 to More
than 3 months 6 months 12 months than
1 month 12 months
$ $ $ $ $
Trade and other
payables 665,658 - - - 2,049,639
Loans payable - - - 29,811,219 -
--------- ---------- ---------- ----------- -----------
665,658 - - 29,811,219 2,049,639
========= ========== ========== =========== ===========
Capital risk management
The Company manages its capital to ensure that it will be able to continue as a going concern while maximising the return to stakeholders.
The capital of the Company is represented by the share capital of the Company. The Company has sufficient assets to cover the Company's liabilities at the statement of financial position date and for the foreseeable future. As such at 31 December 2015 the Company had $68,644,369 of share capital (2014: $76,638,588).
To maintain or adjust the capital structure, the Company may propose dividend payment to the shareholders, buy back shares or issue new shares.
Concentration risk
The Company aims to mitigate concentration risk through investing in companies that operate in a variety of different markets.
Fair value measurements recognised in the Statement of Comprehensive Income
IFRS 13 requires the disclosure of fair value measurements by level of the following fair value measurement hierarchy:
-- Quoted prices (unadjusted) in active markets for identical assets (level 1).
-- Inputs other than quoted prices included within level 1 that are observable for the asset, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2).
-- Inputs for the asset that are not based on observable market data (that is, unobservable inputs) (level 3).
The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.
If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.
The following table shows an analysis of the fair values of the financial instrument recognised in the Statement of Financial Position by level of the fair value hierarchy:
Level Level Level Total
1 2 3
$ $ $ $
2015
Unquoted investments - - 80,399,787 80,399,787
2014
Unquoted investments - - 53,213,946 53,213,946
Investments whose values are based on quoted market prices in active markets, and are therefore classified within level 1, include active listed equities. The Company does not adjust the quoted price for these instruments.
Financial instruments that trade in markets that are not considered to be active but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs are classified within level 2. As level 2 investments include positions that are not traded in active markets and/or are subject to transfer restrictions, valuations may be adjusted to reflect illiquidity and/or non-transferability, which are generally based on available market information.
Investments classified within level 3 have significant unobservable inputs, as they trade infrequently. Level 3 instruments include corporate debt positions. As observable prices are not available for these securities, the Company has used valuation techniques to derive the fair value.
The following table sets out the valuation techniques used in the determination of fair values within level 3 including the key unobservable inputs used and the relationship between unobservable inputs to fair value.
Item and valuation approach Key unobservable Relationship
input between unobservable
inputs and
fair value
Unquoted investments - Value of the An increase
ADCM SPEF and SPE Qannas underlying in the value
C Ltd investments shown in the
The carrying value of the within the financial reports
investments is based on funds. of the underlying
valuations provided by fund would
the General Partners of result in the
the underlying funds. These year end valuation
valuations are based on being higher
the latest available reports and vice-versa.
for the quarter ending
31-Dec-15 which are prepared
in line with IPEV Guidelines.
Unquoted investment - Madaares Share price An increase
The carrying value represents in the recent in the share
the cost of the investment exit proposal price would
as it is a small position from the investment result in the
in an unquoted security. position. year end valuation
Recent proposal for exit being higher
from Madaares confirm the and vice-versa.
par value of the investment,
therefore it is considered
that the cost approximates
to the fair value.
Unquoted investment - EE The value The value of
F&B Holding Limited of the Hard the brand impacts
The carrying value represents Rock brand on the year-end
the cost of acquiring the may be impaired carrying value.
rights for using the brand but this cannot
name of Hard Rock Cafe. yet be determined
The investment is held with any reliability
at cost as it is still as the facility
in the set-up stage. Operations has recently
commenced in 2015 and subsequently opened.
the methodology will be
switched to DCF approach
for estimating fair value
in future years.
Unquoted investment - Palace The value An increase
Preferred Partners LP of the underlying in the value
The carrying value of the investments of Palace Preferred
investment is based on of Palace Partners LP
the valuation provided Preferred investment
by the General Partner Partners LP. would result
of Palace Preferred Partners. in the year
These valuations are based end valuation
on the latest available being higher
report for the quarter and vice-versa.
ending 31-Dec-15 prepared
in line with IPEV Guidelines.
(as per Section II, Clause
4.1 Valuing Fund Interests
- IPEV Guidelines).
Unquoted investment - Verne Share price An increase
Preferred Limited of company. in the share
Held at cost which is considered price would
a fair approximation to result in the
fair value, as it is an year end valuation
unquoted security and is being higher
not considered to be significant. and vice-versa.
Item and valuation approach Key unobservable Relationship
input between unobservable
inputs and
fair value
Unquoted investment - BL The value An increase
Development Limited of preference in the valuation
The carrying value of the share capital. of preference
investment in preference shares will
shares is based on the increase the
value of the initial investment year-end valuation.
plus accrued interest (which
is included within trade
and other receivables).
The investment was exited
in early 2016 and the proceeds
received equalled initial
cost plus accrued interest.
Unquoted investment - Integrated The multiple An increase
Financial Group applied to in the multiple
The carrying value of the earnings. applied would
investment is derived from result in a
applying a multiple to higher valuation
earnings based on other and a decrease
similar entities. The multiple would result
is subject to a discount in a lower
to reflect the specific valuation.
circumstances of Integrated
Financial Group.
Reconciliation of level 3 fair value measurements of financial assets
31.12.15 31.12.14
$ $
Balance brought forward 53,213,946 14,998,998
Purchases (note 4) 29,094,551 54,231,232
Capital distributions (note
4) (1,339,457) (5,582,049)
Disposals (note 9) - (14,930,935)
Revaluations (note 8) (569,253) 4,396,700
Balance at 31 December 80,399,787 53,213,946
============ =============
The Company's policy is to recognise transfers into and out of fair value hierarchy levels as at the date of the event of change in circumstances that cause the transfer.
The following table analyses the Company's financial assets and liabilities by category:
Assets per statement of Loans and Assets Total
financial position receivables at fair
value
$ through $
profit
and loss
$
31 December 2015
Unquoted investments at
fair value through profit
and loss - 80,399,787 80,399,787
Property investments - 779,560 779,560
Receivable from investment
manager 397,575 - 397,575
Loans receivable 10,743,138 - 10,743,138
Trade and other receivables 8,206,847 - 8,206,847
Cash and cash equivalents 7,264,513 - 7,264,513
--------------- ------------- ------------
Total assets 26,612,073 81,179,347 107,791,420
31 December 2014
Unquoted investments at
fair value through profit
and loss - 53,213,946 53,213,946
Loans receivable 9,463,120 - 9,463,120
Trade and other receivables 8,264,648 - 8,264,648
Receivable from investment
manager 18,000,000 - 18,000,000
Cash and cash equivalents 3,273,099 - 3,273,099
--------------- ------------- ------------
Total assets 39,000,867 53,213,946 92,214,813
Liabilities per statement Liabilities Other Total
of financial position at fair financial
value through liabilities
profit
and loss $ $
$
31 December 2015
Trade and other payables - 7,919,379 7,919,379
Loans payable - 29,811,219 29,811,219
--------------- ------------- ------------
Total liabilities - 37,730,598 37,730,598
--------------- ------------- ------------
31 December 2014
Trade and other payables - 3,005,409 3,005,409
Loans payable - 9,847,233 9,847,233
--------------- ------------- ------------
- 12,852,642 12,852,642
--------------- ------------- ------------
21. RETAINED EARNINGS
31.12.15 31.12.14
$ $
Balance brought forward 2,723,583 809,019
Total (loss)/profit after taxation (1,307,130) 10,899,906
Dividend paid - (8,985,342)
Balance at 31 December 1,416,453 2,723,583
============ ============
Retained earnings represent the cumulative Comprehensive Income net of distributions to owners.
22. AVAILABLE FOR SALE RESERVE
31.12.15 31.12.14
$ $
Balance brought forward - 1,178,774
Unrealised gain on the revaluation
of available for sale financial
asset - (1,178,774)
Balance at 31 December - -
=========== ============
Available for sale reserve represents the cumulative increase in value on available for sale financial assets during the year, less interest.
23. RELATED PARTY TRANSACTIONS
Richard John Stobart Prosser, a Director of the Company, is also an officer of Estera Fund Administrator (Jersey) Limited (formerly Appleby Fund Administrator (Jersey) Limited), which acts as administrator. Secretarial and administration fees and legal and professional fees incurred by the Company with Estera Fund Administrator (Jersey) Limited for the year ended 31 December 2015 were $126,382 (2014: $268,554) of which $73,932 (2014: $85,239) was outstanding at 31 December 2015.
Jassim Alseddiqi, a former Director of the Company, is also a director of ADCM Ltd, which acts as Investment Manager to the Company. Investment manager fees incurred by the Company with ADCM Ltd for the year ended 31 December 2015 were $1,339,963 (2014: $1,182,397) of which $313,822 (2014: $403,990) was outstanding at 31 December 2015. At 31 December 2015, the Investment Manager held $397,575 (2014: $18,000,000) on behalf of the Company for onward investment. The Investment Manager returned 1,197,945 shares in the Company for a total consideration of $1 from ADCM Ltd during the prior year.
The Investment Manager will be entitled to be paid a performance fee by the Company, full details of which can be seen in note 20. Performance fees accrued by the Company with ADCM Ltd for the year ended 31 December 2015 were $(246,535) (2014: $2,146,759) and $2,060,413 (2014: $2,306,948) were outstanding at 31 December 2015.
Divyesh Mahajan owns 250,655 shares (2014: 287,487) in the Company. Divyesh Mahajan is a full time employee of the Investment Manager.
ADCM Ltd, the Investment Manager, owns 2 management shares in the Company.
Richard John Stobart Prosser, a Director of the Company, is also a director of Palace Investors Holdings Limited and Mustafa Kheriba, Director of the Company, and Jassim Alseddiqi, a former Director of the Company, are also directors of Palace Real Estate Partners GP Ltd. The Company has an investment of $7,480,803 (2014: $5,220,719) in Palace Preferred Partners LP at 31 December 2015 which hold shares indirectly in Palace Investors Holdings Limited and of which Palace Real Estate Partners GP is the general partner.
Mustafa Kheriba, a Director of the Company, is also a director of SPE Qannas C Ltd. The Company has an investment of $8,193,775 (2014: $8,260,249) at 31 December 2015 in SPE Qannas C Ltd. Dividends totalling $nil (2014: $72,448) were received from SPE Qannas C Ltd during the year and was included as part of investment income within the statement of comprehensive income.
Mustafa Kheriba, a Director of the Company, is also a director of ADCM SPEF GP Ltd. ADCM SPEF GP Ltd is the general partner of ADCM SPEF which the Company had an investment of $35,791,687 (2014: $39,004,778) at 31 December 2015. Dividends totalling $892,971 (2014: $3,058,562) were received from ADCM SPEF during the year and was included as part of investment income within the statement of comprehensive income.
The loans receivable from Integrated Eastern European Fund, Lucice Montenegro d.o.o. and Arqutino EAD (the "IEEF") which totalled $8,795,576 (2014: $8,508,968) at the year-end, were arranged by Integrated Alternative Finance ("IAF"), a wholly owned subsidiary of Abu Dhabi Financial Group (which is the ultimate parent company of ADCM Ltd, the Company's Investment Manager) and regulated by the Dubai Financial Services Authority. Jassim Alseddiqi, a former Director of the Company, is also managing director of Abu Dhabi Financial Group ("ADFG"), and chairman and director of Integrated Capital ("IC"). IEEF will pay a fee to IAF of 3% of the value of the Loan on completion. Interest of $1,226,918 (2014: $468,624) was recognised in the statement of comprehensive income of the Company in respect of loans to IEEF. None of the interest income has been received and is either held in trade and other receivables or has been capitalised as part of the loan facility and is included within loans receivable.
ADFG, the ultimate controlling shareholder of the Company's Investment Manager, is a co-investor in the issue of shares by Verne Preferred Limited. The Issue was arranged by IAF, a related company to ADFG, which is regulated by the Dubai Financial Services Authority. Mustafa Kheriba, Director of the Company, is also a director of IAF. Jassim Alseddiqi, a former Director of the Company, is also managing director of ADFG. On completion, the Verne Preferred Limited's investment (Downtown Hotel Limited) will pay a fee to IAF of 1.75% of the value of the Issue. At 31 December 2015, the Company's loan to Verne Preferred Limited was carried at $1,089,918 (2014: $nil) and the Company had recognised loan interest amounting to $73,104 (2014: $nil) in the statement of comprehensive income within interest income - loans receivable. Included in trade and other payables is interest income received in advance of $52,169 (2014: $nil) in respect of this facility.
ADFG, the ultimate controlling shareholder of the Company's Investment Manager, is also the owner of BL Development Limited and Jassim Alseddiqi, a former Director of the Company, is also a director of BL Development Limited. At 31 December 2015 the Company had an investment of $5,167,180 (2014: $nil) in BL Development Limited. Preference dividend income of $365,728 (2014: $nil) was included within investment income in the statement of comprehensive income, which was included within trade and other receivables at 31 December 2015.
24. IMMEDIATE HOLDING COMPANY AND ULTIMATE CONTROLLING PARTY
In the Directors' opinion there is no controlling or ultimate controlling party.
25. POST BALANCE SHEET EVENTS
On 9 February 2016, the Company's holding of preference shares in BL Development Limited was redeemed and the accrued preference dividend was repaid for a total of GBP3, 797,452.
In February 2016, the Company made an equity investment of $5,450,000 in the Goldilocks Fund, which primarily invests in public equities listed on the UAE stock exchanges. The investment was made at a NAV of $0.37 per unit (AED 1.37 per unit). The Goldilocks Fund is managed by Integrated Capital ('IC'), which is a UAE Central Bank licensed Investment Firm registered in Abu Dhabi. Jassim Alseddiqi, a former Director of the Company, and Mustafa Kheriba, a Director of the Company, are also directors of IC. IC is owned by ADFG. ADCM Ltd, the Investment Manager of Qannas is a wholly owned subsidiary of ADFG.
In February 2016, the Company disposed of its investment in the secured Murabaha debt in Verne Preferred Limited ("VPL") to Reem Finance ("RF") and the receipt of $1.1m (AED 3.9m) in exit proceeds. The company reinvested the exit proceeds of $1.1m in a follow on investment in Goldilocks Fund at the NAV of $0.44 per unit (AED 1.61 per unit). Jassim Alseddiqi, a former Director of the Company, and Mustafa Kheriba, a Director of the Company, are also directors of RF. Mustafa Kheriba, a Director of the Company, is also a director of VPL. Subsequent to the year end, Mustafa Kheriba resigned as a director of VPL on 23 February 2016.
On 18 March 2016, the Company bought back 889,840 ordinary shares of no par value in the capital of the Company ("Ordinary Shares") in the market for cash at a price of $0.95 per Ordinary Share (the "Purchase"). This Purchase was made in accordance with the Company's articles of association and following the Purchase, the Ordinary Shares will be held in treasury.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR UKAKRNAANURR
(END) Dow Jones Newswires
June 29, 2016 05:16 ET (09:16 GMT)
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