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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 : 1644S
Qannas Investments Limited
29 September 2017
QANNAS INVESTMENTS LIMITED
UNAUDITED INTERIM FINANCIAL STATEMENTS FOR THE PERIODED 30 JUNE 2017
Qannas (AIM:QIL), the closed-ended investment company listed on the AIM market, is pleased to present its interim report for the period ended June 30, 2017.
For further information please contact:
Qannas Investments Limited Tel: 01534 818 022
Vinod Rajput
ADCM Ltd. (Investment Manager) Tel: +971 2 639 0099
Mustafa Kheriba
finnCap Ltd Tel: 020 7220 0500
Stuart Andrews/James Thompson (Corporate Finance)
Simon Johnson (Corporate Broking)
CHAIRMAN'S REPORT
It is with great pleasure that I present our report for the first half of the 2017 financial year on the performance of Qannas Investments Limited ("QIL" or the "Company"). Since its IPO in March 2012, QIL has invested across different investment themes and built up a diverse portfolio of investments spread across the Middle East, Eastern Europe and Central London. In the fourth quarter of 2016, the Board proposed a review of the Company's investment strategy, as the existing strategy has been less successful in attracting investors from outside the Gulf region.
While reviewing new strategy, QIL continued to exit its investments during the first half of 2017 to consolidate on substantially all of the existing portfolio in the next 12-18 months.
In February 2017, QIL exited 2 premium units in Marina 101 in Q1 2017 at their purchase price and received $0.8m. In the same month, QIL exited shares in Madaares and received $0.1m. QIL had purchased a block of 250,000 shares in Madaares, a private company which operates schools and nurseries in the UAE, through its subsidiary Taleem PJSC.
Additionally, in April 2017, QIL redeemed 25% of its stake in the Goldilocks Fund generating an IRR of 160%. Goldilocks is a successful investment strategy which was used by QIL's investment manager to invest in public equities listed on the GCC stock exchanges.
In May 2017, QIL exited from its interest in Gulf Capital Equity Partners Fund II (an underlying fund of ADCM Secondary Private Equity Fund L.P.). QIL realized a sale price of $3.8 million generating an IRR of 15%. In total, QIL received total distributions of $4.7 million from ADCM Secondary Private Equity Fund L.P., during the half year ended 30 June 2017.
Post the first half of 2017, QIL exited from its interests in Goldman Sachs PEP IX and Glouston PEH 2000, FTE (underlying funds of ADCM Secondary Private Equity Fund L.P.) and received a consideration of $1.4 million, generating an IRR of 17% and 7% respectively.
Subsequent to 30 June 2017, QIL successfully purchased 8,888,889 ordinary shares at a tender price of $0.90 per ordinary share through a tender offer and distributed $8 million to the investors.
As QIL continues to evolve and deliver value to shareholders by adapting to the ever changing global environment, I would like to thank shareholders, the board of directors, service providers, and the investment manager for their continued support.
INVESTMENT MANAGER'S REPORT
ADCM Ltd. ("ADCM"), the investment manager for QIL, is pleased to present their interim Investment Manager's report for the half year ended 30 June 2017.
Summary
During the last six months QIL's NAV has decreased by $2.6 million, which was driven primarily due to:
-- operating expenditure amounting to $1.1 million; -- financing cost of $0.7 million; and
-- decline in the value of investments by $2.5 million, which was partially offset by the gain in the value of Goldilocks by $1.0m.
Exits
During the half year ended 30 June 2017, QIL:
-- redeemed 25% of its investment in the Goldilocks Fund; -- exited from its investment in Project Apex (Marina 101); -- exited from its investment in Project Scholar (Madaares PJSC);
-- exited from its limited partnership in Gulf Capital Equity Partners Fund II ("GCEP") (part of the holding in ADCM Second Private Equity Fund L.P.; also known as Project Beast);
-- exited from its limited partnership in Goldman Sachs PEP IX ("GS PEP IX") (part of the holding in ADCM Second Private Equity Fund L.P.; also known as Project Beast); and
-- exited from its limited partnership in Glouston PEH 2000, FTE Ltd ("Glouston") (part of the holding in ADCM Second Private Equity Fund L.P.; also known as Project Beast).
Hot Features
Premium
Project Date Date of Ownership Holding Cost NAV at Exit Exit
Name of Acquisition Sold Period (in millions) exit Multiple IRR
Exit (in millions)
============= ========== ============= ========= ========= ============== ============== ========= ----
Goldilocks 16-Apr-17 12-Feb-16 25% 15 months $1.9 $5.8 3.1x 160%
Apex 20-Feb-17 02-Feb-15 100% 24 months $0.8 $0.8 1.0x 0%
Before
Scholar 02-Feb-17 2013 100% 48 months $0.07 $0.08 1.2x 6%
GCEP
(Beast) 4-May-17 27-Mar-14 100% 37 months $3.4 $3.8 1.4x 15%
GS PEP
IX (Beast) 30-Jun-17 27-Mar-14 100% 40 months $3.0 $1.3 0.4x 17%
Glouston
(Beast) 30-Jun-17 27-Mar-14 100% 40 months $0.5 $0.1 0.3x 7%
------------- ---------- ------------- --------- --------- -------------- -------------- --------- ----
Net Asset Value ("NAV") Summary
As of 30 June 2017, QIL's NAV is $62.2 million or $0.90 per share, including cash of $11.5 million.
Net Asset Value Summary In $,m ====================================== ============= Investments 30-June-17 ====================================== ============= Project Beast (ADCM Second Private Equity Fund L.P.) $18.6 Project Beast (SPE Qannas C Limited) $5.8 Goldilocks $13.9 Project Integration (Integrated Financial Group, LLC) $19.6 Project Adriatic (Capital Hotel d.o.o.) $9.3 Project Adriatic (EE F&B Holding Limited) $3.7 Project Palace $3.8 Project Demeter (IEEF) $3.4 Cash $11.5 Non-current liabilities ($26.2) Other net assets (1.2) NAV $62.2 ====================================== ============= Shares Outstanding 68.83 NAV per share $0.90 -------------------------------------- -------------
Investments update
Project Adriatic (EE F&B Holding Limited)
QIL recognized an impairment of $1.5 million (EUR1.8 million) on Hard Rock Café ("HRC") in FY 2016 due to lack of profitability and slow growth in the business.
Post H1-2017, HRC started a new shop in Kotor, Montenegro to drive business growth. The new shop has witnessed good progress in its first month of operations.
However, an impairment expense was recognised during the period in the amount of $147,603 in respect of loan interest receivable from EE F&B Holding Limited as the Directors have concerns over its recoverability.
Project Adriatic (Capital Hotel do.o.)
The CenterVille Hotel opened its doors for paying guests in October 2016. QIL made an equity investment to develop this four-star hotel at The Capital Plaza in Podgorica, Montenegro in 2014.
During H1 2017, CenterVille Hotel returned a working capital loan of $1. million (EUR1.1 million) to QIL.
Project Demeter
In 2014, QIL made a debt investment (through a senior secured loan) of EUR7.0 million in Integrated Eastern European Fund ("IEEF") for a term of 2 years.
During Q3-2016, QIL exited 71% of its exposure in a Senior Secured Loan extended to IEEF. The remaining portion of the Loan, EUR2.75 million was extended by two years at an interest rate of 12% per annum (USD based) with a 3% arrangement fee on the extended amount.
Further, during H1 2017, the IEEF loan interest payment terms were changed from a half-yearly payment schedule to PIK.
Post 30 June 2017, IEEF made a $0.2 million distribution to QIL to cover partial accrued interest.
Investments update - continued
Project Integration
QIL has invested $18.7 million in 2014 to acquire 47% interest in Integrated Financial Group ("IFG"), a UAE-based holding company with two subsidiaries - Integrated Capital and Integrated Securities.
Post 30 June 2017, Shuaa Capital - a leading investment bank in the UAE, has executed an agreement for the acquisition of IFG's subsidiaries. Subject to regulatory approvals, the completion of acquisition is expected to be completed in the second half of 2017.
Project Palace
In Q3-2016, QIL exited 52% (GBP2.3 million) of the GBP4.4 million investment (which was part of a total commitment of GBP11 million) in Project PPP. Post exit, QIL's interest in the project stands at GBP2.1 million with GBP6.6 million of outstanding commitment. The investment is part of an overall tranche of GBP50 million investment in Palace Preferred Partners L.P., an SPV created for the redevelopment of 1 Palace Street ("1PS"), London in 2014.
Project Goldilocks
In Q1 2016, QIL had made an equity investment of $6.6 million (in two tranches of $5.5 million and $1.1 million) in Goldilocks Fund, an investment fund investing in public equities listed on the GCC stock exchanges.
QIL has redeemed 25% of its interest in the Goldilocks Fund at a redemption value of $5.8 million, generating an IRR of 160%.
Project Beast
During the period, QIL received a total of $4.7 million in distributions from ADCM SPEF in two tranches:
-- $0.8 million of distribution from ADCM SPEF in February 2017 -- $3.9 million from ADCM SPEF in May 2017
In addition, QIL has also exited from its limited partnership in GCEP at an exit consideration of $3.8 million, generating an IRR of 15%
On 30 June 2017, ADCM SPEF exited from its Limited Partnerships in GS PEP IX and Glouston and received a consideration of $1.4 million, generating IRRs of 17% and 7% respectively.
Investments update - continued
Project Beast - continued
NAV of ADCM SPEF (as of 30 June 2017) in $'000 ========================================= ============== Fund Name Attributed NAV ----------------------------------------- -------------- SPE Qannas B Ltd. $12,663 Abraaj Real Estate Fund L.P. $1,518 Glouston PEH 2000, FTE Ltd $146 Goldman Sachs PEP IX $1,267 Global Opportunistic Fund I $86 Global Opportunistic Fund II $293 Abraaj Real Estate Fund L.P. $304 Havenvest Private Equity Middle East L.P. $2,714 TNI Growth Capital Fund, L.P. $2,500 Lumina Real Estate SSF I L.P. $261 Net Current Assets (Liabilities) ($3,155) Carry Refund from SPEF (included within trade and other payables) $3,538 NAV $22,138 ----------------------------------------- --------------
Exits
Project Apex
QIL had purchased 2 premium units (penthouses) in the development Marina 101 at Dubai Marina for AED 9.1 million ($2.5 million) in FY 2015.
In February 2017, QIL exited its investment in Marina 101 at cost.
Project Madaares
During Q4 2012, QIL acquired 250,000 shares in Madaares - a private school operator in the UAE, at a cost of AED 1 per share.
In February 2017, QIL sold 100% of these shares at AED 1.2 per share, generating at IRR of 6%.
DIRECTORS' REPORT
The Directors present their interim report and the unaudited financial statements of the Company for the half year ended 30 June 2017.
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 and Europe. 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.
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 ("IFRS"). 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.
By order of the board
Director
Date: ...............................................
STATEMENT OF COMPREHENSIVE INCOME - UNAUDITED
FOR THE HALF YEARED 30 JUNE 2017
==============================================
01.01.2017 01.01.2016 01.01.2016
to to to
Notes 30.06.2017 30.06.2016 31.12.2016
$ $ $
Income
Movement in management
and performance fee rebate
receivable 17 (663,051) (364,368) (1,961,987)
Realised gain on disposal
of investments 4 1,099,838 - -
Investment income 4 566,818 266,662 766,108
------------
1,003,605 (97,706) (1,195,879)
Expenditure
Secretarial and administration
fees (80,603) (58,771) (111,071)
Directors' remuneration 3 (41,442) (42,213) (75,017)
Insurance expense (4,194) (4,585) (8,767)
Investment manager fees (661,376) (633,227) (1,291,840)
Movement in performance
fees 17 (215,893) 96,600 (490,869)
Legal and professional
fees (59,458) (139,840) (227,270)
Audit fees (14,649) (29,217) (43,253)
Sundry expenses (1,226) (15,822) (82,336)
Bank charges (318) (576) (861)
Realised loss on disposal
of investments 4 - (167,080) (27,956)
------------
(1,079,159) (994,731) (2,359,240)
------------ ------------ ------------
Net (loss) (75,554) (1,092,437) (3,555,119)
Net movement on changes
in fair value of investments 4 (3,559,798) (32,620) 159,597
Impairment of loan interest
receivable 7 (147,603) - -
Impairment of loans receivable 5 - - (512,689)
Finance costs
Loan interest payable (745,146) (582,246) (1,211,791)
Foreign exchange gains
/ (losses) on loans receivable 5 1,132,109 133,612 (475,819)
Gain on foreign exchange 173,290 4,179 144,197
Finance income
Interest income - cash
and cash equivalents 956 902 1,115
Interest income - loans
receivable 5 443,767 694,243 1,200,112
------------ ------------ ------------
Loss for the year before
taxation (2,777,979) (874,367) (4,250,397)
Taxation provision for 15 - - -
the year
------------ ------------ ------------
Loss for the year after
taxation (2,777,979) (874,367) (4,250,397)
Other comprehensive income - - -
------------
Total comprehensive (loss)
for the year (2,777,979) (874,367) (4,250,397)
============ ============ ============
Earnings per share
Basic EPS on (loss) for
the year 14 (0.04) (0.01) (0.06)
============ ============ ============
STATEMENT OF FINANCIAL POSITION - UNAUDITED
AS AT 30 JUNE 2017
============================================
30.06.17 30.06.16 31.12.16
Notes $ $ $
Assets
Non-current assets
Investments at fair value
through profit and loss 4 47,770,660 81,501,293 55,370,362
Loans receivable 5 16,398,595 - 16,220,609
Property investments 6 - 779,560 -
Trade and other receivables 7 3,820,246 6,459,921 4,663,572
------------ ------------ ------------
Total non-current assets 67,989,501 88,740,774 76,254,543
------------ ------------ ------------
Current assets
Investments at fair value
through profit and loss 4 13,906,975 - 18,743,835
Loans receivable 5 - 9,786,832 -
Property investments 6 - - 779,560
Trade and other receivables 7 708,419 1,605,999 406,304
Receivable from investment
manager 8 - 397,575 -
Cash and cash equivalents 9 11,534,486 802,623 1,619,011
------------ ------------ ------------
Total current assets 26,149,880 12,593,029 21,548,710
Total assets 94,139,381 101,333,803 97,803,253
============ ============ ============
Equity and liabilities
Equity
Management shares 12 2 2 2
Participating shares 12 67,799,019 67,799,019 67,799,019
Retained earnings 13 (5,611,923) 542,086 (2,833,944)
------------ ------------ ------------
Total equity 62,187,098 68,341,107 64,965,077
------------ ------------ ------------
Liabilities
Current liabilities
Trade and other payables 10 1,236,069 1,125,182 904,411
Loans payable 11 4,500,000 29,903,701 4,500,000
------------ ------------ ------------
Total current liabilities 5,736,069 31,028,883 5,404,411
------------ ------------ ------------
Non-current liabilities
Trade and other payables 10 2,753,231 1,963,813 2,537,372
Loans payable 11 23,462,983 - 24,896,393
------------ ------------ ------------
26,216,214 1,963,813 27,433,765
Total liabilities and
equity 94,139,381 101,333,803 97,803,253
============ ============ ============
Representing net asset
value per participating
share $0.90 $0.99 $0.94
============ ============ ============
The financial statements were approved and authorised for issue by the Board of Directors of Qannas Investments Limited and signed on their behalf by:
........................................ ........................................
Director Date
STATEMENT OF CHANGES IN EQUITY - UNAUDITED
FOR THE HALF YEARED 30 JUNE 2017
===========================================
Management Participating Retained
share share earnings Total
capital capital
$ $ $ $
At 1 January 2016 2 68,644,367 1,416,453 70,060,822
Purchase of participating
shares under tender
offer - (845,348) - (845,348)
Total comprehensive
loss - - (874,367) (874,367)
At 30 June 2016 2 67,799,019 542,086 68,341,107
----------- -------------- ------------ ------------
At 1 July 2016 2 67,799,019 542,086 68,341,107
Total comprehensive
loss - - (3,376,030) (3,376,030)
At 31 December 2016 2 67,799,019 (2,833,944) 64,965,077
----------- -------------- ------------ ------------
At 1 January 2017 2 67,799,019 (2,833,944) 64,965,077
Total comprehensive
loss - - (2,777,979) (2,777,979)
At 30 June 2017 2 67,799,019 (5,611,923) 62,187,098
=========== ============== ============ ============
STATEMENT OF CASH FLOWS - UNAUDITED
01.01.2017 01.01.2016 01.01.2016
to to to
30.06.2017 30.06.2016 31.12.2016
$ $ $
Operating activities
Loss for the year before
taxation (2,777,979) (874,367) (4,250,397)
Net movement on changes
in fair value of investments 3,559,798 32,620 (159,597)
Realised (gain) / loss
on disposal of investments (1,099,838) 167,080 27,956
Interest income (444,723) (695,145) (1,201,227)
Loan interest payable 745,146 582,246 1,211,791
Foreign exchange (gains)
/ losses on loans receivable (1,132,109) (133,612) 475,819
Impairment of loans receivable - - 512,689
Impairment of loan interest 147,603 - -
receivable
Gain on foreign exchange (173,290) (4,179) (144,197)
Decrease in trade receivables 666,661 939,209 2,926,700
Decrease in receivable
from investment manager - - 397,575
(Decrease) / increase in
trade payables 545,528 421,289 (4,470,174)
------------ -------------
Net cash flow from operating
activities 36,797 435,141 (4,673,062)
------------ ------------- -------------
Investing activities
Interest received - cash
and cash equivalents 956 902 1,115
Interest received - loans
receivable 17,486 - 1,227,724
Issue of loans receivable (35,183) - (10,251,246)
Disposal of property investments 779,560 - -
Repayment of loans receivable 1,168,938 1,056,101 6,948,710
Purchase of investments - (11,744,000) (6,539,919)
Proceeds from disposal
of investments 5,847,054 5,000,100 9,144,301
Capital distributions received
from investments 4,129,549 126,718 848,051
------------
Net cash flow from investing
activities 11,908,360 (5,560,179) 1,378,736
------------ ------------- -------------
Financing activities
Repayment of bank loan (1,500,000) - -
Loan interest paid (676,567) (464,187) (940,872)
Loan issue costs - (20,000) (640,000)
Purchase of own participating
shares under tender offer - (845,348) (845,348)
------------ -------------
Net cash flow from financing
activities (2,176,567) (1,329,535) (2,426,220)
------------ ------------- -------------
Net increase / (decrease)
in cash and cash equivalents 9,768,590 (6,454,573) (5,720,546)
Effect of foreign exchange
movements 146,885 (7,317) 75,044
Cash and cash equivalents
brought forward 1,619,011 7,264,513 7,264,513
Cash and cash equivalents
carried forward 11,534,486 802,623 1,619,011
============ ============= =============
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
1. GENERAL INFORMATION
The Company is an exempt closed-end investment company listed on London's Alternative Investment Market ("AIM"), with an unlimited life, incorporated in the Cayman Islands. The registered office of the Company is that of Codan Trust Company (Cayman) Limited, Cricket Square, Hutchins Drive, P.O. 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 since 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 and Europe. Investments will be made where there is a 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 information presented within these unaudited interim financial statements (the 'financial statements') is in compliance with International Accounting standard ('IAS') 34 'Interim Financial Reporting'. This requires the use of certain accounting estimates and requires that management exercise judgement in the process of applying the Company's accounting policies. The areas involving a high degree of judgement or complexity, or areas where the assumptions and estimates are significant to the interim financial statements are disclosed below in note 2.
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, and loans and receivables. 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 de-recognised 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 in the period in which they arise.
Dividend income is recognised in the Statement of Comprehensive 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.
2. SIGNIFICANT ACCOUNTING POLICIES - continued
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 are spread over the life of the facility using the effective interest rate method. 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 when the Company's right to receive payments is established.
Property investments
The Company classifies property investments at fair value through profit or loss.
Acquisition of property under construction is 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 a purchase or sale. Transaction costs are expensed as incurred in the Statement of Comprehensive Income. These investments are de-recognised 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 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.
2. SIGNIFICANT ACCOUNTING POLICIES - continued
Use of estimates and judgements
The preparation of the financial statements in conformity with IFRS and applicable law requires the Directors to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, 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.
(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 property investments - These are valued with reference to similar sales transactions. Prices of comparable transactions in similar locations are adjusted for key differences in attributes such as size.
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. 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 movement on changes in fair value of investments'.
Financial assets and liabilities
The Company classifies its financial assets and liabilities as follows:
Cash and cash equivalents
Cash and cash equivalents comprises deposits held on call with banks.
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 contractual amounts and obligations due by the Company.
2. SIGNIFICANT ACCOUNTING POLICIES - continued
Financial assets and liabilities - continued
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. These financial liabilities are recognised when the Company enters into a loan agreement and are de-recognised 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 by the Company 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.
1. SIGNIFICANT ACCOUNTING POLICIES - continued
Going concern
The Directors, 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.
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. 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.
2. DIRECTORS' REMUNERATION AND INTERESTS
The remuneration of the individual Directors who served in the half year to 30 June 2017 was:
01.01.2017 01.01.2016 01.01.2016
to to to
30.06.2017 30.06.2016 31.12.2016
$ $ $
Richard John Stobart Prosser 12,747 12,520 24,546
Christopher Ward 15,630 16,396 25,255
Richard Green 13,065 13,297 25,216
Mustafa Kheriba - - -
------------ ------------
41,442 42,213 75,017
============ ============ ============
Directors' interests in the shares of the Company, including family interest, at 30 June 2017 were:
Share Nominal % Held
Participating
Christopher Ward shares 100,000 0.14%
Participating
Richard Green shares 100,000 0.14%
Participating
Mustafa Kheriba shares 531,278 0.76%
3. INVESTMENTS AT FAIR VALUE THROUGH PROFIT AND LOSS
01.01.2017 01.01.2016 01.01.2016
to to to
30.06.2017 30.06.2016 31.12.2016
$ $ $
Fair value brought forward 74,114,197 80,399,787 80,399,787
Additions - 6,539,918 6,539,918
Disposals (5,847,054) (5,001,099) (12,109,098)
Realised gains / (losses) 1,099,838 (167,080) (27,956)
Capital distributions (4,129,548) (237,613) (848,051)
Unrealised gain/(losses)
on the revaluation of
investments (3,559,798) (32,620) 159,597
------------
Fair value carried forward 61,677,635 81,501,293 74,114,197
============ ============ =============
Investments comprise:
30.06.2017 30.06.2016 31.12.2016
Fair Fair Fair
Value Value Value
$ $ $
Non-current assets
Madaares PJSC - 68,063 -
SPE Qannas C Limited 5,785,992 8,130,431 5,789,942
ADCM Secondary Private
Equity Fund L.P. 18,599,512 33,196,572 26,602,072
EE F&B Holding
Limited 1 4,089,162 1
Palace Preferred
Partners L.P. 3,777,037 7,147,730 3,370,229
Goldilocks Fund - 9,261,217 -
Integrated Financial
Group, LLC 19,608,118 19,608,118 19,608,118
-----------
47,770,660 81,501,293 55,370,362
----------- ----------- -----------
Current assets
Goldilocks Fund 13,906,975 - 18,662,159
Madaares PJSC - - 81,676
----------- ----------- -----------
13,906,975 - 18,743,835
----------- ----------- -----------
Total 61,677,635 81,501,293 74,114,197
=========== =========== ===========
The fair values of the investments are based on the latest available net asset value reports and / or financial information available of the underlying companies.
Investments at 30 June 2017 comprise:
Class No. of Percentage Book
of
shares shares holding Cost
held
$
SPE Qannas C Limited Preference 8,039,559 74.3% 7,930,886
ADCM Secondary
Private Equity
Fund L.P. - - 96.5% 28,549,556
EE F&B Holding
Limited Ordinary 1,000 100% 1,006,904
Palace Preferred
Partners L.P. - - 10.57% 3,343,247
Goldilocks Fund Units 17,341,475 7.7% 4,904,938
Integrated Financial
Group, LLC Ordinary 73,908 47.4% 18,667,177
64,402,708
===========
4. INVESTMENTS AT FAIR VALUE THROUGH PROFIT AND LOSS - continued
During the half year ended 30 June 2017, the Company made the following disposals: -
-- 25% of its holding in Goldilocks Fund, raising proceeds of $5,765,378 against a cost of $1,874,378 and a fair value at 31 December 2016 of $4,665,540; and
-- 100% of its holding in Madaares PJSC, raising proceeds of $81,676 against a cost of $68,063 and a fair value at 31 December 2016 of $81,676.
During the half year ended 30 June 2017, the Company received distributions amounting to $4,696,366. Of these distributions, $4,129,548 were capital in nature, and hence recognised as a reduction to the investment, and $566,818 were profit in nature, and hence recognised in the Statement of Comprehensive Income for the period.
At 30 June 2017 the Company had entered into the following commitment:
Total Commitment
Commitment Outstanding
at
30.06.2017
Palace Preferred Partners L.P. GBP8,741,641 GBP6,600,000
The loan due to First Gulf Bank PJSC (as detailed in note 11) is secured by way of a charge over the Company's investment in ADCM Secondary Private Equity Fund L.P., SPE Qannas C Limited and Palace Preferred Partners L.P.
5. LOANS RECEIVABLE
01.01.2017 01.01.2016 01.01.2016
to to to
30.06.2017 30.06.2016 31.12.2016
$ $ $
Brought forward 16,220,609 10,743,138 10,743,138
Additions 35,183 - 13,215,045
Capitalised loan interest 179,632 - 160,775
Disposals (1,168,938) (1,089,918) (6,909,841)
Impairment - - (512,689)
Gains / (losses) on foreign
exchange 1,132,109 133,612 (475,819)
------------
Carried forward 16,398,595 9,786,832 16,220,609
============ ============ ============
At 30 June 2017, loans receivable comprise: -
Interest Maturity Carrying Carrying
rate Date value Value
CCY $
Capital Hotel 24 July
d.o.o. 4% 2018 EUR8,140,501 9,290,754
EE F&B Holding
Limited 4% Not defined EUR3,250,110 3,748,759
Integrated Eastern August
European Fund 12% 2018 EUR1,386,490 1,521,950
Integrated Eastern August
European Fund 12% 2018 EUR1,103,457 1,211,265
Lucice Montenegro August
d.o.o. 12% 2018 EUR23,177 25,441
August
Arqutino EAD 12% 2018 EUR236,876 260,019
Capitalised interest 340,407
16,398,595
===========
Each of the loans is denominated in EUR with movements arising on revaluation included within the Statement of Comprehensive Income as foreign exchange losses on loans receivable. However, certain loans which are denominated in Euros are repayable in a fixed amount of US Dollars.
Loan interest in respect of the above loans totalling $443,767 (Half year ended 30 June 2016: $694,243; year ended 31 December 2016 $1,200,112) is included in the Statement of Comprehensive Income for the period.
During the half year ended 30 June 2017, the Company made the following additions / disposals: -
-- An additional loan of $35,183 (EUR32,000) was made to EE F&B Holding Limited; and
-- A repayment of $1,186,423 (EUR1,113,549) was received in respect of part of the loan made to Capital Hotel d.o.o. This comprised $1,168,938 (EUR1,097,137) of capital and $17,486 (EUR16,412) of interest.
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.
6. PROPERTY INVESTMENTS
01.01.2017 01.01.2016 01.01.2016
to to to
30.06.2017 30.06.2016 31.12.2016
$ $ $
Fair value brought forward 779,560 779,560 779,560
Disposals (779,560) - -
------------
Fair value carried forward - 779,560 779,560
============ ============ ============
This represented the deposit paid by the Company to acquire 2 premium units (the 'units') in the development Marina 101 at Dubai Marina. 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.
The units were disposed of during the half year ended 30 June 2017 for $779,560, which is equivalent to their cost and the fair value at 31 December 2016.
7. TRADE AND OTHER RECEIVABLES
30.06.2017 30.06.2016 31.12.2016
$ $ $
Non-current
Performance fee rebate
receivable (note 17) 3,820,246 6,459,921 4,663,572
=========== =========== ===========
Current
Sundry debtors 34 34 34
Management fee rebate receivable
(note 17) 278,893 203,631 98,618
Loan interest and income
receivable 412,322 1,184,530 286,872
Distributions receivable - 201,627 -
Prepayments 17,170 16,177 20,780
-----------
708,419 1,605,999 406,304
=========== =========== ===========
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 Limited.
An impairment loss in the amount of $147,603 (half year ended 30 June 2016: $nil; year ended 31 December 2016: $nil) was recognised in the period in respect of loan interest receivable from EE F&B Holding Limited as the Directors have concerns over its recoverability.
The Directors consider that the carrying amount of trade and other receivables approximates to their fair value.
8. RECEIVABLE FROM INVESTMENT MANAGER
Receivable from investment manager represented amounts advanced to ADCM Ltd during the year ended 31 December 2014 for deployment into various investments following the year end.
As at 30 June 2017 and 31 December 2016 all of the funds have been utilised and either converted into investments or returned to the Company. At 30 June 2016, $397,575 remained uninvested.
9. CASH AND CASH EQUIVALENTS
30.06.2017 30.06.2016 31.12.2016
$ $ $
First Gulf Bank 11,479,413 661,512 1,545,898
Royal Bank of Scotland
International 55,073 141,111 73,113
----------- -----------
11,534,486 802,623 1,619,011
=========== =========== ===========
10. TRADE AND OTHER PAYABLES
30.06.2017 30.06.2016 31.12.2016
$ $ $
Non-current
Performance fees 2,753,321 1,963,813 2,537,372
=========== =========== ===========
Current
Secretarial, administration
and accountancy fees 45,286 30,378 24,790
Director fees 20,797 14,579 13,565
Investment manager fees 987,738 947,049 655,608
Performance fees - - 13,911
Legal and professional
fees 13,298 8,475 28,060
Audit fees 29,246 27,885 28,364
Sundry expenses 865 134 3,263
Loan interest payable 138,838 96,681 136,849
Participating shares 1 1 1
----------- -----------
1,236,069 1,125,182 904,411
=========== =========== ===========
The Directors consider that the carrying amount of trade and other payables approximate to their fair value.
11. LOANS PAYABLE
01.01.2017 01.01.2016 01.01.2016
to to to
30.06.2017 30.06.2016 31.12.2016
$ $ $
Loan Capital
Brought forward 30,000,000 30,000,000 30,000,000
Repaid (1,500,000) - -
Issue Costs
Brought forward (603,607) (188,781) (188,781)
Incurred in the period - (20,000) (640,000)
Amortised during the period 66,590 112,482 225,174
------------
27,962,983 29,903,701 29,396,393
============ ============ ============
The Company has a loan facility with First Gulf Bank which bears interest at the rate of LIBOR + 3.5% per annum and is repayable in quarterly instalments, with the final instalment due on 31 December 2019. Amounts due within the next 12 months at 30 June 2017 total $4,500,000.
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 investments in ADCM Second Private Equity Fund L.P., SPE Qannas C Limited, Palace Preferred Partners L.P. and Integrated Financial Group LLC.
12. SHARE CAPITAL
30.06.2017 30.06.2016 31.12.2016
Management shares $ $ $
Authorised:
2 ordinary non-participating
shares of no par value 2 2 2
============== ============== ==============
$ $
Issued and fully paid:
2 shares of $1 each 2 2 2
============== ============== ==============
Participating shares
Authorised:
Unlimited participating - - -
shares of no par value
============== ============== ==============
Issued and fully paid:
68,828,605 participating
shares of
no par value at various
issue prices 76,638,587 76,638,587 76,638,587
============== ============== ==============
Treasury shares:
10,502,749 participating
shares of no par value
redeemed at various prices (8,839,568) (8,839,568) (8,839,568)
============== ============== ==============
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 30 June 2017, 30 June 2016 and 31 December 2016 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 2016, the Company redeemed 889,840 $1 participating shares 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 2015, 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.
12. SHARE CAPITAL - continued
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.
13. RETAINED EARNINGS - UNREALISED AND REALISED SPLIT
Retained earnings at 30 June 2017 comprise the following revenue items, split between realised and unrealised income: -
Unrealised Realised Total
$ $ $
Balance at 1 January
2017 6,978,626 (9,812,570) (2,833,944)
Income (663,051) 1,666,656 1,003,605
Transfer of gains realised
upon disposal (2,791,162) 2,791,162 -
Expenditure - (1,079,159) (1,079,159)
Net gains and losses
on investments (3,559,798) - (3,559,798)
Loan interest payable - (745,146) (745,146)
Foreign exchange gains
on loans receivable 1,132,109 - 1,132,109
Gain on foreign exchange - 173,290 173,290
Interest income - cash
and cash equivalents - 956 956
Interest income - loans
receivable - 443,767 443,767
Impairment of loan interest
receivable - (147,603) (147,603)
------------ ------------ ------------
Balance at 30 June 2017 1,096,724 (6,708,647) (5,611,923)
============ ============ ============
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.
14. 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.
The Company has not issued any shares or other instruments that are considered to have dilutive potential.
15. TAXATION
Provision has been made in these financial statements for Cayman Islands income tax at 0%.
16. DISTRIBUTIONS
Distributions of $nil (half year ended 30 June 2016: $nil; year ended 31 December 2016: $nil) were paid during the period.
17. PERFORMANCE FEES
The Investment Manager is entitled to a fee based upon the performance of the investments (the "Performance Fee"). 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 percent 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 Limited, 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 Limited consideration (after being adjusted for the net receivables from ADCM SPEF and SPE Qannas C Limited investors (on an individual basis)) as is attributable to such ADCM SPEF and SPE Qannas C Limited assets. Similarly, the date of acquisition of any ADCM SPEF and SPE Qannas C Limited asset shall be deemed to be the effective date of 27 March 2014 relating to ADCM SPEF and SPE Qannas C Limited.
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.
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 Limited, in order to prevent the double-charging of Performance Fees, ADCM Ltd (in its capacity as Investment Manager to SPE Qannas C Limited) 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 Limited.
The Company has accrued Management Fee rebate income in respect of ADCM SPEF of $278,893 at 30 June 2017 (30 June 2016: $203,631; 31 December 2016: $98,618). The Company has accrued Performance Fee rebate income in respect of ADCM SPEF and SPE Qannas C Ltd of $3,820,246 at 30 June 2017 (30 June 2016: $6,459,921; 31 December 2016: $4,663,572).
17. PERFORMANCE FEES - continued
Rebates - continued
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 Limited. As such, the Performance Fee rebate has been classified as a non-current asset within the Statement of Financial Position.
A reconciliation of the rebate recognised in the Statement of Comprehensive Income can be seen below:
01.01.2017 01.01.2016 01.01.2016
to to to
30.06.2017 30.06.2016 31.12.2016
$ $ $
Opening performance fee
rebate receivable (note
7) (4,663,572) (7,027,920) (7,027,920)
Opening management fee
rebate receivable (note
7) (98,618) (318,552) (318,552)
Management fee rebate received
in the year - 318,552 622,295
Closing performance fee
rebate receivable (note
7) 3,820,246 6,459,921 4,663,572
Closing management fee
rebate receivable (note
7) 278,893 203,631 98,618
------------
(663,051) (364,368) (1,961,987)
============ ============ ============
18. 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 and 6.
Interest rate risk
The Company's interest rate risk principally arises from borrowings in the form of the loan payable (see note 11) 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 bears interest at 3.5% 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.
18. FINANCIAL RISK MANAGEMENT - continued
Management of market risk - continued
Interest rate risk - continued
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 currencies other than US dollars, the functional and 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 Board considers that its exposure to foreign exchange risk is limited. The AED is 'pegged' to USD and the Investment Manager monitors EUR and GBP currency movements and proposes any action deemed appropriate.
Credit risk
The Company's principal financial assets are trade and 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 7.
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.
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.
Further, Goldilocks Fund is managed by Integrated Capital, a central bank licensed investment firm in Abu Dhabi, UAE. The Investment Manager's review includes review of external ratings, where available, and financial information in respect of the counterparty.
The Company does not consider that any changes in fair value of financial assets in the year are attributable to credit risk.
18. FINANCIAL RISK MANAGEMENT - continued
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 2014 the Company entered into a facility for $30 million from First Gulf Bank and drew down the full loan during 2015. The loan was refinanced in November 2016 and is being repaid in quarterly instalments from 30 June 2017 (see note 11). The Directors are confident that, if required, a new loan facility can be obtained before the existing loan facility expires.
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 the Company had $67,799,021 of share capital at 30 June 2017, 30 June 2016 and 31 December 2016.
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.
19. RELATED PARTY TRANSACTIONS
Richard John Stobart Prosser, a Director of the Company, is also an officer of Estera Fund Administrators (Jersey) Limited, which acts as administrator. Secretarial and administration fees incurred by the Company with Estera Fund Administrator (Jersey) Limited for the half year ended 30 June 2017 were $80,603 (half year ended 30 June 2016: $58,771; year ended 31 December 2016: $111,071), of which $45,286 was outstanding at 30 June 2017 (30 June 2016: $30,378; 31 December 2016: $24,790).
ADCM Ltd, the Investment Manager, owns 2 (30 June 2016: 2; 31 December 2016: 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, a Director of the Company, is also a director of Palace Real Estate Partners GP Ltd. The Company has an investment of $3,777,037 in Palace Preferred Partners LP at 30 June 2017 (30 June 2016: $7,147,730; 31 December 2016: $3,370,229) which hold shares indirectly in Palace Investors Holdings Limited and of which Palace Real Estate Partners GP is the general partner. Part of the holding in Palace Preferred Partners LP was divested during the year ended 31 December 2016 realising proceeds of $4,025,741 (GBP3,300,000).
Mustafa Kheriba, a Director of the Company, is also a director of SPE Qannas C Limited. The Company has an investment of $5,785,992 at 30 June 2017 (30 June 2016: $8,130,431; 31 December 2016: $5,789,942) in SPE Qannas C Limited.
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, an investment of the Company. As at 30 June 2017 this was held at fair value of $18,599,512 (30 June 2016: $33,196,572; 31 December 2016: $26,602,072). Dividends totalling $566,818 were received from ADCM SPEF during the half year (half year ended 30 June 2016: $194,410; year ended 31 December 2016: $693,856).
19. RELATED PARTY TRANSACTIONS - continued
Mustafa Kheriba, a Director of the Company, is also a director of EE F&B Holding Limited. The Company has loan of $3,748,759 at 30 June 2017 (30 June 2016: $869,515; 31 December 2016: $3,308,753) and an investment of $1 (30 June 2016: $4,089,162; 31 December 2016: $1) in EE F&B Holding Limited. Interest totalling $75,565 (half year ended 30 June 2016: $17,129; year ended 31 December 2016: $29,210) was receivable from EE F&B Holding Limited during the period of which $nil (30 June 2016: $52,026; 31 December 2016: $63,516) remained outstanding at the period end. An impairment expense was recognised during the period in the amount of $147,603 (half year ended 30 June 2016: $nil; year ended 31 December 2016: $nil) in respect of the interest receivable from EE F&B Holding Limited as the Directors have concerns over its recoverability.
The loans receivable from Integrated Eastern European Fund, Lucice Montenegro d.o.o. and Arqutino EAD (the "IEEF") which totalled $3,359,082 at 30 June 2017 (30 June 2016: $8,917,317; 31 December 2016: $3,189,450), 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. IEEF will pay a fee to IAF of 3% of the value of the Loan on completion. Interest of $179,632 (half year ended 30 June 2016: $658,762; year ended 31 December 2016: $1,015,100) was recognised in the Statement of Comprehensive Income of the Company in respect of loans to IEEF.
The Company operates an investment account with IC valued at $13,906,975 at 30 June 2017 (30 June 2016: $9,261,217; 31 December 2016: $18,662,159), shown as an investment in Goldilocks Fund in note 4. ADFG holds no units in Goldilocks Fund and charges 1.5% management fee and 15% performance fee on Goldilocks through its wholly owned subsidiary, ADCM Altus. Part of the holding in Goldilocks Fund was divested during the half year ended 30 June 2017 realising proceeds of $5,765,378.
Integrated Capital owned 907,030 participating shares in the Company as at 30 June 2017 and 31 December 2016.
ADFG, the ultimate controlling shareholder of the Company's Investment Manager, has a 10% shareholding in Integrated Financial Group, LLC. At 30 June 2017, the Company's investment in Integrated Financial Group, LLC was carried at $19,608,118 (30 June 2016: $19,608,118; 31 December 2016: $19,608,118). No dividends were received from Integrated Financial Group, LLC during the current or prior period.
ADFG owned 12,997,235 participating shares in the Company as at 30 June 2017 and 31 December 2016.
20. IMMEDIATE HOLDING COMPANY AND ULTIMATE CONTROLLING PARTY
In the Directors' opinion there is no controlling or ultimate controlling party.
21. SUBSEQUENT EVENTS
In July 2017 the Company announced a tender offer of up to 8,888,889 participating shares at a price of $0.90 per share.
22. INTERIM FINANCIAL STATEMENT
A copy of these financial statements will be distributed to the shareholders and is also available on the Company's website at www.qannasinvestments.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR SEAFMAFWSELU
(END) Dow Jones Newswires
September 29, 2017 02:00 ET (06:00 GMT)
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