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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 May 2019 to May 2024
TIDMQIL
RNS Number : 1224T
Qannas Investments Limited
29 June 2018
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 2017. Extracts from these statements are enclosed below.
In accordance with AIM Rule 20, the Company confirms that a copy of the annual report and accounts is available on the Company's website www.qannasinvestments.com
For further information please contact:
Qannas Investments Limited Tel: 01534 844843
Vinod Rajput
ADCM Ltd. (Investment Manager) Tel: +971 2 639 0099
Mustafa Kheriba
finnCap Ltd Tel: 020 7220 0500
Henrik Persson/ James Thompson (Corporate Finance)
The notification set out below is provided in accordance with the requirements of the EU Market Abuse Regulation.
QANNAS INVESTMENTS LIMITED CHAIRMAN'S REPORT FOR THE YEARED 31 DECEMBER 2017 ====================================
It is with great pleasure that I present my sixth annual report on the performance of Qannas Investments Limited ("QIL" or the "Company"). After building a diversified investment portfolio across the Middle East, Eastern Europe and Central London during the first five years, QIL's Board proposed a review of the Company's investment strategy in FY 2016 while considering the changing market dynamics and limitations faced by QIL in generating liquidity in its shares.
Whilst the new strategy has been under review, QIL has realized $22m from its investment portfolio during 2017, which is in line with its plans to exit its existing portfolio. QIL primarily utilized the exit proceeds towards an $8m distribution to shareholders via a tender offer, $4.5m towards debt repayment, and $3.9m as contribution to Project Palace.
In my last year's Chairman's Report, I explained that the Company's then auditors had not accepted confirmations provided as to the existence, ownership and valuation as at 31 December 2016 of our investment in what is now Goldilocks Investment Company, and hence they qualified our accounts for that year. I did assure shareholders in my Report that the Board was confident that the details of our investment in Goldilocks contained in those accounts were accurate and that the Financial Statements for 2016 were fairly stated. The new auditors have carried out additional procedures on the Goldilocks investment as at 1 January 2017 and have confirmed the accuracy of the investment as shown in last year's accounts, thus vindicating the Directors' opinion, and therefore the Board is pleased to note that there is no repeat of last year's audit qualification.
This year, an issue has arisen in connection with the investments which ADCM Secondary Private Equity Fund L.P. and SPE Qannas C Limited (together, "Project Beast") have in underlying funds managed by Abraaj Investment Management Limited, for which provisional liquidators have been appointed. Provisional liquidators have also been appointed for Abraaj Holdings in moves apparently designed to facilitate a Court-supervised orderly restructuring. In view of the resultant uncertainty, compounded by the absence of 2017 audited accounts for the funds under Abraaj's management, your Board has taken the prudent step of making a full provision against the value of these investments, a total of US$10.7m, which has had the effect of depressing the Net Asset Value to US$38.7m. Rest assured that we will continue to monitor the Abraaj situation closely.
QIL redeemed 8,888,889 participating shares at the price of $0.90 during the year, resulting in a return of $8m to shareholders.
The process of exiting from our existing investments is progressing well. The Board intends to present a new investment strategy for approval by shareholders at the forthcoming AGM. This strategy centres on investing in listed equities in the Gulf region, with a proportion of the fund to be allocated to providing balance through investments in debt instruments (with the intention of generating a cash return to enabling the Company to pay a regular dividend) and in participating in pre-IPO financing rounds. However, the emphasis will continue to be on value investing, leveraging the specialist regional knowledge of the Investment Manager, Abu Dhabi Capital Management to identify opportunities for exceptional returns. Further details will be set out in the forthcoming AGM notice.
In the light of the new strategy, which signals a move away from private equity investing, Richard Green will retire from the Board with effect from the AGM, and we will be seeking to recruit a new director with relevant experience to take his place.
Following the publication by the London Stock Exchange of AIM Notice 50, QIL is in the process of reviewing its corporate governance practices and will, by the implementation date of 28 September 2018, have published details of the corporate governance code it will be following.
As QIL continues to evolve and deliver value to shareholders by adapting to the dynamic global environment, 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 2017 ====================================
ADCM Ltd. ("ADCM"), the investment manager for QIL, is pleased to present the Investment Manager's report for the financial year ended 31 December 2017.
Summary
During the last twelve months QIL's NAV has decreased by $18.3m (net of $8m share buyback), which was driven primarily due to:
- $15.5m decline in the fair value of secondary funds, including a $10.7m additional provision in respect of investments in Project Beast (SPE Qannas C Limited and ACDM Secondary Private Equity Fund L.P.);
- $1.7m decline in the value of Goldilocks; and - $1.3m of expenses.
The decline due to the above investments and expenses was partially offset by $0.3m gain in other investment (net of currency impact).
Exits
In 2017, QIL realized $22m from its investment portfolio, in-line with its plan to exit its existing investments before embarking on a new strategy.
During FY 2017, QIL exited the following investments:
-- Goldilocks: redeemed 25% of its interest to realize $5.8m generating an IRR of 157%. The company intends to continue to exit this investment in the forthcoming 12 months
-- Project Apex: exited its stake to realize $0.8m generating an IRR of 0% -- Project Scholar: exited its stake to realize $0.1m generating an IRR of 4% -- Project Beast:
- realized $3.8m generating an IRR of 15% from its limited partnership interest in Gulf Capital Equity Partners Fund II ("GCEP")
- realized $1.3m generating an IRR of 17% from its limited partnership interest in Goldman Sachs PEP IX ("GS PEP IX")
- realized $0.1m generating an IRR of 7% from its limited partnership interest in Glouston PEH 2000, FTE Ltd ("Glouston")
- realized $8.2m generated an IRR of -11% from its limited partnership interest in The Infrastructure Growth Capital Fund ("IGCF")
Hot Features
Premium
Project Date Holding Ownership Cost Distribution NAV at Exit Exit
Name of Period Sold (in M) (in M) exit Multiple IRR
Exit (in M)
============== ======= ========== ========= ======= ============ ======= ========= ----
Goldilocks Apr-17 15 months 25% $1.9 - $5.8 3.1x 157%
Apex Feb-17 24 months 100% $0.8 - $0.8 1.0x 0%
Scholar Feb-17 48 months 100% $0.1 - $0.1 1.1x 4%
GCEP (Beast) May-17 37 months 100% $3.4 $1.0 $3.8 1.4x 15%
GS PEP
IX (Beast) Jun-17 40 months 100% $3.0 $2.8 $1.3 1.43x 17%
Glouston
(Beast) Jun-17 40 months 100% $0.5 $0.4 $0.1 1.10x 7%
IGCF (Beast) Nov-17 45 months 100% $15.3 $2.6 $8.2 0.7x -11%
-------------- ------- ---------- --------- ------- ------------ ------- --------- ----
QANNAS INVESTMENTS LIMITED
INVESTMENT MANAGER'S REPORT - continued
FOR THE YEARED 31 DECEMBER 2017
========================================
Investments in FY 2017
Project Palace Preferred Partners L.P.: QIL made a further contribution of $3.9m as a part of its outstanding commitment.
Net Asset Value ("NAV") Summary
As of 31 December 2017, QIL's NAV is $38.7m or $0.65 per share, including cash of $5.7m.
Net Asset Value Summary In $,m ====================================== ================= Investments 31-December-17 ====================================== ================= Project Beast (ADCM SPEF) $4.4 Project Beast (SPE Qannas C Limited) $nil Goldilocks $10.1 Project Integration (Integrated Financial Group, LLC) $19.0 Project Adriatic (Capital Hotel d.o.o.) $9.7 Project Adriatic (EE F&B Holding Limited) $3.7 Project Palace (Palace Preferred Partners L.P.) $8.7 Project Demeter (IEEF) $3.4 Cash $5.7
Non-current Liabilities ($19.5) Other Net-current Assets ($6.5) NAV $38.7 ====================================== ================= Shares Outstanding (in M) $59.8 NAV per share $0.65 -------------------------------------- -----------------
Investments update
Project Adriatic (HRC) (EE F&B Holding Limited)
HRC opened its second merchandise store in Kotor during July 2017, which has significantly increased merchandise net sales revenue compared to last year and has resulted in a positive monthly EBITDA. Furthermore, a new menu has been introduced, resulting in higher restaurant sales.
Project Adriatic (CenterVille Hotel) (Capital Hotel d.o.o.)
QIL made an equity investment to develop a four-star hotel at The Capital Plaza in Podgorica, Montenegro.
During H1 2017, CenterVille Hotel returned a working capital loan of EUR1.1m to QIL.
Since January 2017, CentreVille's occupancy rate has been in an upward trend, recording an average of 42% during FY 2017. The hotel has also achieved 1(st) place in TripAdvisor ranking and a Booking.com score of 9.6/10.
Project Demeter
In 2014, QIL made a debt investment (through a senior secured loan) of EUR7.0m 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, EUR2.75m, was extended by two years at an interest rate of 12% per annum (USD based) with a 3% arrangement fee on the extended amount.
Post H1-2017, IEEF made a $0.2m distribution to QIL to cover partial accrued interest.
QANNAS INVESTMENTS LIMITED INVESTMENT MANAGER'S REPORT - continued FOR THE YEARED 31 DECEMBER 2017 ========================================
Project Integration
QIL's 47% interest in Integrated Financial Group ("IFG"), a UAE-based holding company with two subsidiaries - Integrated Capital and Integrated Securities was valued at $19.0m as at 31 December 2017.
Post H1-2017, Shuaa Capital - a leading investment bank in the UAE, has executed an agreement for the acquisition of IFG's subsidiaries. The acquisition was completed in H2-2017.
Project Palace
QIL's interest in the project stands at GBP5.1m with GBP3.7m of outstanding commitment. The investment is part of an overall tranche of GBP50m investment in Palace Preferred Partners L.P., an SPV created for the redevelopment of 1 Palace Street ("1PS"), London.
During 2017, QIL made a further contribution of $3.9m in Palace Preferred Partners L.P.
Subsequent to the year 2017, QIL further exited GBP1.6m of interest in the Project Palace.
Project Goldilocks
In Q1 2016, QIL had made an equity investment of $6.6m (in two tranches of $5.5m and $1.1m) in Goldilocks Fund, an investment fund primarily focused on public listed equities in the UAE.
During Q2 2017, QIL has redeemed 25% of its interest in the Goldilocks Fund at a redemption value of $5.8m, generating an IRR of 160%.
Project Beast
During the period, QIL received a total of $15.5m in distributions from ADCM SPEF.
In December 2017, QIL made an additional provision of $10.7m (including the impact on the associated reduction in the rebates receivable) for ABOF II and AREF for 100% of their carrying values. This follows the Investment Manager's observations that it is challenging to find a willing buyer for the holdings in the funds due to uncertainty over the General Partner and their underlying assets. Furthermore, as these funds are in liquidation phase and as there is no further incentive for the GP (in terms of fee), the Investment Manager believes that the liquidation of underlying assets could be at a steep discount and could take significant time to realize.
NAV of ADCM SPEF (as of 31 December in $'000 2017) ====================================== ============== Fund Name Attributed NAV -------------------------------------- -------------- Global Opportunistic Fund I $88 Global Opportunistic Fund II $308 Havenvest Private Equity Middle East L.P. $2,148 TNI Growth Capital Fund, L.P. $1,856 Lumina Real Estate SSF I L.P. $225 Net Current Assets (Liabilities) ($26) NAV $4,599 -------------------------------------- --------------
Corporate Activity
In 2017, QIL redeemed 8,888,889 Participating Shares at a price of $0.90, resulting in a return of $8 million to shareholders.
QANNAS INVESTMENTS LIMITED DIRECTORS' REPORT FOR THE YEARED 31 DECEMBER 2017 ====================================
The Directors present their report and the audited financial statements of the Company for the year ended 31 December 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.
Results and dividends
The Statement of Comprehensive Income for the year is set out on page 12. The Company suffered a Total Comprehensive Loss of $18,295,313 for the year ended 31 December 2017 (2016: $4,250,397). A share buy-back was made during 2017 whereby 8,888,889 (2016: 889,840) participating shares were repurchased for $8,000,000 (2016: $845,348).
Directors
The Directors who held office throughout the year and up to the date of approving the financial statements (unless otherwise indicated) were:
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
Conyers Trust Company (Cayman) Limited (formerly known as 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 Conyers Trust Company (Cayman) Limited (formerly known as Codan Trust Company (Cayman) Limited), Cricket Square, Hutchins Drive, P.O. Box 2681, George Town, Grand Cayman KY1-1111, Cayman Islands.
Independent auditor
Deloitte LLP was appointed independent auditor on 12 January 2018 and has expressed its willingness to continue in office.
QANNAS INVESTMENTS LIMITED DIRECTORS' REPORT - continued FOR THE YEARED 31 DECEMBER 2017 ====================================
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;
-- state where applicable accounting standards 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 that 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.
By order of the board
Codan Trust Company (Cayman) Limited
Company Secretary
Date: ...............................................
INDEPENT AUDITOR'S REPORT TO THE MEMBERS OF QANNAS INVESTMENTS LIMITED
Report on the audit of the financial statements
Opinion
====================================================================
In our opinion the financial statements:
* give a true and fair view of the state of the
company's affairs as at 31 December 2017 and of its
loss for the year then ended; and
* have been properly prepared in accordance with
International Financial Reporting Standards (IFRSs)
as adopted by the European Union.
We have audited the financial statements of
Qannas Investments Limited (the 'company') which
comprise:
* the statement of comprehensive income;
* the statement of financial position;
* the statement of changes in equity;
* the statement of cash flows; and
* the related notes 1 to 20.
The financial reporting framework that has been
applied in their preparation is applicable law
and IFRSs as adopted by the European Union.
Basis for opinion
=========================================================
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable
law. Our responsibilities under those standards
are further described in the auditor's responsibilities
for the audit of the financial statements section
of our report.
We are independent of the company in accordance
with the ethical requirements that are relevant
to our audit of the financial statements in
the UK, including the FRC's Ethical Standard
as applied to listed entities, and we have fulfilled
our other ethical responsibilities in accordance
with these requirements. We believe that the
audit evidence we have obtained is sufficient
and appropriate to provide a basis for our opinion.
Summary of our audit approach
=======================================================
Key audit The key audit matters that we identified
matters in the current year were:
* Valuation of investments
* Impairment of loans receivable
------------ =========================================
Materiality The materiality that we used in the
current year was $1,015k which was
determined on the basis of 2% of
forecasted Net Asset Value ("NAV")
at the planning stage.
------------ =========================================
Scoping We involved Deloitte UAE in addressing
the risks of material misstatement
around the key audit matter relating
to the valuation of investments.
------------ =========================================
Conclusions relating to going concern
We are required by ISAs (UK) to We have nothing
report in respect of the following to report in
matters where: respect of these
-- the directors' use of the going matters.
concern basis of accounting in
preparation of the financial statements
is not appropriate; or
-- the directors have not disclosed
in the financial statements any
identified material uncertainties
that may cast significant doubt
about the company's ability to
continue to adopt the going concern
basis of accounting for a period
of at least twelve months from
the date when the financial statements
are authorised for issue.
Key audit matters
===========================================================================================
Key audit matters are those matters that, in
our professional judgement, were of most significance
in our audit of the financial statements of
the current period and include the most significant
assessed risks of material misstatement (whether
or not due to fraud) that we identified. These
matters included those which had the greatest
effect on: the overall audit strategy, the allocation
of resources in the audit; and directing the
efforts of the engagement team.
These matters were addressed in the context
of our audit of the financial statements as
a whole, and in forming our opinion thereon,
and we do not provide a separate opinion on
these matters.
Valuation of Investments
=========================================================================================
Key audit Qannas Investments Limited holds a
matter description number of investments in unquoted
investments which are valued at fair
value through profit or loss under
International Financial Reporting
Standards. These investments total
$43.4m (2016 $74.1m).
The fair value of securities that
are not quoted in an active market
are determined using valuation techniques
in accordance with IFRS 13 "Fair Value
Measurement" and International Private
Equity and Venture Capital Valuation
Guidelines ("IPEV Guidelines").
Palace Preferred Partners L.P ("Palace")
is valued based on the balance on
the company's capital account in the
underlying partnership.
The company's investments in ADCM
Secondary Private Equity Fund L.P
("ADCM SPEF") and SPE Qannas C Limited
are valued based on the net asset
value (NAV) provided by the respective
fund's manager, as adjusted by the
company's investment manager. As described
in note [x], the valuation of these
funds has been heavily discounted
during the year to reflect the discount
applied to the funds' holding in Abraaj
Real Estate Fund (AREF) and Abraaj
Buyout Fund II (ABOF II).
The underlying business owned by the
company's investment in Integrated
Financial Group, LLC ("IFG") was sold
in the period and hence the company's
investment in IFG has been valued
based on the proceeds expected to
flow up to the company.
Due to the complexity and degree of
management judgement involved when
determining fair value, in the absence
of quoted market prices and different
valuation methodologies applied across
investments, we considered this a
key audit matter.
Relevant accounting policies and critical
accounting estimates are disclosed
in note 2, and further detail on the
investments is disclosed in notes
4 and 17.
==================== ===================================================================
How the In order to test the valuation of
scope of the investments as at 31 December
our audit 2017, we assessed the design and implementation
responded of controls relating to the valuation
to the key of investments. In addition, the following
audit matter procedures were performed:
In respect of Palace:
* reconciled the company's holding to the capital
account of Palace;
* obtained the audited financial statements of the
underlying entity. This entity is Palace's sole
investment and reconciled the valuation of that
investment in Palace's financial statement to assess
whether this supported the company's investment.
In respect of ADCM-SPEF, SPE Qannas
C:
* confirmed ownership and pricing of underlying
investments to confirmations from underlying managers,
as well as obtaining audited financial statements for
these underlying investments to support the company's
valuation. As described in note [x], the Abraaj Real
Estate Fund and Abraaj Buyout Fund II investments
have been fully provided against.
In respect of Goldilocks:
* confirmed ownership and pricing of underlying
investments to confirmations from the custodians and
independent pricing sources, and obtained the audited
financial statements of Goldilocks.
In respect of IFG:
* obtained the share purchase agreement relating to the
sale of the underlying business and reconciled the
expected proceeds to be received by the company to
the Company's valuation.
==================== ===================================================================
Key observations We did not identify any material misstatements
or disclosure deficiencies and concluded
that the valuation of investments
is appropriate. We also concluded
that appropriate evidence to prove
ownership of the investments was in
place.
We concurred with management's decision
to fully provide against value of
the Abraaj funds held by Qannas C
and ADCM SPEF and concluded that the
circumstances leading to this provision
described in note [x] are appropriate.
==================== ===================================================================
Impairment of Loans Receivable
=========================================================================================
Key audit Qannas Investments Limited holds a
matter description number of loan investments at the
balance sheet date as part of its
investment objective of creating a
portfolio of investments including
investments in debt. This is by way
of loan extension to different entities
at agreed interest rates. It is the
policy of the company, in line with
IAS 39, to recognise the loans as
loans and receivables, carrying these
at amortised cost using the effective
interest rate ("EIR") method, less
impairment. As further detailed in
note 5, at the year end, these loans
were carried at a value of $16.8m.
The company's loans form a substantial
portion of its assets and interest
income. As a result, judgements over
the level of potential impairment
of loan values and recoverability
of loan interest has been identified
as a key audit area. The key areas
of judgement include the determination
of the appropriate assumptions underlying
the impairment analysis, and the impact
of loan-specific matters to cash flow
forecasts.
==================== ===================================================================
How the We performed the following procedures
scope of in order to address the key audit
our audit matter identified above:
responded * Gained an understanding of the key controls within
to the key the valuation and impairment testing process, and
audit matter performed walkthroughs of these processes. Further,
we evaluated design and implementation of these
controls.
* Obtained and reviewed the loan facility agreements to
understand the key terms and conditions on which the
loan has been granted by the company.
* Obtained and reviewed the amortised cost workings
using the EIR method to assess whether the carrying
value has materially.
* Obtained and reviewed the loan impairment reviews in
respect of each loan in existence at the year end,
together with the loan performance report prepared by
the Investment Manager (ADCM Ltd).
* Challenged the assumptions made, and evaluated the
evidence gathered, by the Investment Manager in
assessing whether any impairment event has occurred
at the balance sheet date by reviewing the underlying
collateral and obtained confirmations as at the
year-end date.
* Reviewed each loan to evaluate whether the loan has
breached its covenants and whether the borrower has
defaulted on any loan interest payments due, and
considered other financial information available on
the borrower to assess their ability to meet future
payment commitments.
* Obtained valuations of the underlying collateral for
the loans (including the underlying entity financial
statements if relevant) to assess whether the loan
collateral is of appropriate value to secure the
loans and prevent impairment. We also reviewed
whether appropriate title to the collateral is held
so that security could be enforced if required.
* Scrutinised for existence of third party validation
of the original underlying collateral valuation, and
considered whether the assumptions used in those
valuations remained appropriate at the balance sheet
date, and considered whether the Investment Manager
should obtain any further updated valuations to
support their assumptions.
==================== ===================================================================
Key observations We did not identify any material misstatements
or disclosure deficiencies and concluded
that the valuation of loans receivable
is appropriate.
==================== ===================================================================
Our application of materiality
===============================
We define materiality as the magnitude of misstatement
in the financial statements that makes it probable
that the economic decisions of a reasonably knowledgeable
person would be changed or influenced. We use
materiality both in planning the scope of our
audit work and in evaluating the results of our
work.
Based on our professional judgement, we determined
materiality for the financial statements as a
whole as follows:
Materiality $1,015k
-------------------- ======================================
Basis for 2% of forecasted Net Asset Value
determining ("NAV") at the planning stage. This
materiality represents 2.63% of the NAV as at
31 December 2017.
-------------------- ======================================
Rationale As an investment entity that is
for the benchmark also AIM listed, shareholders are
applied predominantly focussed on the NAV
of Qannas Investments Limited, which
in turn is driven by the value of
the underlying investments.
-------------------- ======================================
We agreed with the Board of Directors that we
would report to them all audit differences in
excess of $20,300, as well as differences below
that threshold that, in our view, warranted reporting
on qualitative grounds. We also report to the
Board of Directors on disclosure matters that
we identified when assessing the overall presentation
of the financial statements.
An overview of the scope of our audit
==================================================================
We have conducted our scoping based on our understanding
of the company and taking into account that
this is a first year audit for Deloitte. This
meant that we audited the opening balances and
liaised with the previous auditor as deemed
appropriate.
Our audit was scoped by obtaining an understanding
of the company and its environment, the investment
manager, including relevant controls, and assessing
the risks of material misstatement.
To address the key audit matter related to valuation
of investments, we issued referral instructions
to Deloitte UAE (the auditors of most of the
underlying investments) and reviewed their key
working paper summaries and findings in order
to gain an understanding of how the valuation
of underlying investments was tested.
Other information
==================================================================
The directors are responsible We have nothing
for the other information. The to report in
other information comprises the respect of these
information included in the annual matters.
report including the Chairman's
Report, the Investment Manager's
Report, and the Director's Report,
other than the financial statements
and our auditor's report thereon.
Our opinion on the financial statements
does not cover the other information
and we do not express any form
of assurance conclusion thereon.
In connection with our audit of
the financial statements, our
responsibility is to read the
other information and, in doing
so, consider whether the other
information is materially inconsistent
with the financial statements
or our knowledge obtained in the
audit or otherwise appears to
be materially misstated.
If we identify such material inconsistencies
or apparent material misstatements,
we are required to determine whether
there is a material misstatement
in the financial statements or
a material misstatement of the
other information. If, based on
the work we have performed, we
conclude that there is a material
misstatement of this other information,
we are required to report that
fact.
Responsibilities of directors
===========================================================
As explained more fully in the directors' responsibilities
statement, the directors are responsible for
the preparation of the financial statements
and for being satisfied that they give a true
and fair view, and for such internal control
as the directors determine is necessary to enable
the preparation of financial statements that
are free from material misstatement, whether
due to fraud or error.
In preparing the financial statements, the directors
are responsible for assessing the company's
ability to continue as a going concern, disclosing
as applicable, matters related to going concern
and using the going concern basis of accounting
unless the directors either intend to liquidate
the company or to cease operations, or have
no realistic alternative but to do so.
Auditor's responsibilities for the audit of
the financial statements
===========================================================
Our objectives are to obtain reasonable assurance
about whether the financial statements as a
whole are free from material misstatement, whether
due to fraud or error, and to issue an auditor's
report that includes our opinion. Reasonable
assurance is a high level of assurance, but
is not a guarantee that an audit conducted in
accordance with ISAs (UK) will always detect
a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered
material if, individually or in the aggregate,
they could reasonably be expected to influence
the economic decisions of users taken on the
basis of these financial statements.
A further description of our responsibilities
for the audit of the financial statements is
located on the Financial Reporting Council's
website at: www.frc.org.uk/auditorsresponsibilities.
This description forms part of our auditor's
report.
Use of our report
===========================================================
This report is made solely to the company's
members, as a body. Our audit work has been
undertaken for compliance with the AIM Listing
Rules (Part 1. 19) and so that we might state
to the company's members those matters we are
required to state to them in an auditor's report
and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume
responsibility to anyone other than the company
and the company's members as a body, for our
audit work, for this report, or for the opinions
we have formed.
QANNAS INVESTMENTS LIMITED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 31 DECEMBER 2017
====================================
Notes 2017 2016
$ $
Income
Movement in management and
performance fee rebate receivable 16 (3,426,058) (1,961,987)
Investment income 4 1,107,502 766,108
Realised gain on disposal
of investments 4 1,099,838 -
(1,218,718) (1,195,879)
Expenditure
Secretarial and administration
fees (134,353) (111,071)
Directors' remuneration 3 (85,290) (75,017)
Insurance expense (7,719) (8,767)
Investment manager fees 16 (1,038,624) (1,291,840)
Movement in performance fees 16 277,707 (490,869)
Legal and professional fees (284,793) (227,270)
Audit fees (51,678) (43,253)
Sundry expenses (3,565) (82,336)
Bank charges (440) (861)
Realised loss on disposal
of investments 4 - (27,956)
(1,328,755) (2,359,240)
------------- ------------
Net loss (2,547,473) (3,555,119)
Net movement on changes in
fair value of investments 4 (16,469,906) 159,597
Impairment of loans receivable
and associated interest 5 (337,422) (512,689)
Finance costs
Loan interest payable 10 (1,671,765) (1,211,791)
Foreign exchange gains / (losses)
on loans receivable 5 1,592,875 (475,819)
Gain on foreign exchange 235,804 144,197
Finance income
Interest income - cash and
cash equivalents 2,625 1,115
Interest income - loans receivable 5 899,949 1,200,112
------------- ------------
Loss for the year before taxation (18,295,313) (4,250,397)
Taxation provision for the 14 - -
year
------------- ------------
Loss for the year after taxation (18,295,313) (4,250,397)
Other comprehensive income - -
Total comprehensive loss for
the year (18,295,313) (4,250,397)
============= ============
Loss per share
Basic and diluted EPS on loss
for the year 13 (0.28) (0.06)
============= ============
The notes on pages 16 to 41 form part of these audited financial statements
QANNAS INVESTMENTS LIMITED
STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2017
================================
31.12.17 31.12.16
Notes $ $ $ $
Assets
Non-current assets
Investments at
fair value
through profit
and loss 4 32,209,713 55,370,362
Loans receivable 5 3,713,576 16,220,609
Trade and other
receivables 7 - 4,663,572
------------- ------------
Total non-current
assets 35,923,289 76,254,543
Current assets
Investments at
fair value
through profit
and loss 4 10,181,714 18,743,835
Loans receivable 5 13,110,632 -
Property investments 6 - 779,560
Trade and other
receivables 7 1,978,874 406,304
Cash and cash equivalents 8 5,715,713 1,619,011
------------- ------------
Total current assets 30,986,933 21,548,710
Total assets 66,910,222 97,803,253
=========== ===========
Equity and liabilities
Equity
Management shares 11 2 2
Participating shares 11 59,799,019 67,799,019
12,
Retained earnings 18 (21,129,257) (2,833,944)
------------- ------------
Total equity 38,669,764 64,965,077
Liabilities
Current liabilities
Trade and other
payables 9 776,883 904,411
Loans payable 10 8,000,000 4,500,000
------------- ------------
Total current liabilities 8,776,883 5,404,411
Non-current liabilities
Trade and other
payables 9 2,259,631 2,537,372
Loans payable 10 17,203,944 24,896,393
------------- ------------
19,463,575 27,433,765
Total liabilities
and equity 66,910,222 97,803,253
=========== ===========
Net asset value
per Participating
share $0.65 $0.94
=========== ===========
The notes on pages 16 to 41 form part of these audited financial statements
The financial statements were approved and authorised for issue by the Board of Directors of Qannas Investments
Limited on ........................................ and signed on their behalf by:
........................................ ........................................
Director Director
QANNAS INVESTMENTS LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 DECEMBER 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 (note 11) - (845,348) - (845,348)
Total comprehensive
loss - - (4,250,397) (4,250,397)
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
Purchase of participating
shares under tender
offer (note 11) - (8,000,000) - (8,000,000)
Total comprehensive
loss - - (18,295,313) (18,295,313)
At 31 December 2017 2 59,799,019 (21,129,257) 38,669,764
=========== ============== ============= ==============
The notes on pages 16 to 41 form part of these audited financial statements
QANNAS INVESTMENTS LIMITED
STATEMENT OF CASH FLOWS
FOR THE YEARED 31 DECEMBER 2017
====================================
2017 2016
$ $
Operating activities
Loss for the year before taxation (18,295,313) (4,250,397)
Net movement on changes in
fair value of investments 15,431,602 (159,597)
Realised (gain) / loss on disposal
of investments (1,099,838) 27,956
Interest income (902,574) (1,201,227)
Loan interest payable 1,671,765 1,211,791
Foreign exchange (gains) /
losses on loans receivable (1,592,875) 475,819
Impairment of loans and interest
receivable 337,422 512,689
Gain on foreign exchange (235,804) (144,197)
Decrease in trade receivables 4,467,328 2,926,700
Decrease in receivable from
investment manager - 397,575
Decrease in trade payables (404,348) (4,470,174)
Net cash flow from operating
activities (622,635) (4,673,062)
------------- -------------
Investing activities
Interest received - cash and
cash equivalents 2,625 1,115
Interest received - loans receivable 182,240 1,227,724
Issue of loans receivable (133,912) (10,251,246)
Repayment of loans receivable 1,204,759 6,948,710
Purchase of investments (3,896,899) (6,539,919)
Proceeds from disposal of investments 5,847,054 9,144,301
Capital distributions received
from investments 14,402,547 848,051
Proceeds from disposal of property 779,560 -
investments
Net cash flow from investing
activities 18,387,974 1,378,736
------------- -------------
Financing activities
Repayment of bank loan (4,500,000) -
Loan interest paid (1,365,135) (940,872)
Loan fees - (640,000)
Purchase of own participating
shares (8,000,000) (845,348)
Net cash flow from financing
activities (13,865,135) (2,426,220)
------------- -------------
Net increase / (decrease) in
cash and cash equivalents 3,900,204 (5,720,546)
Effect of foreign exchange
movements 196,498 75,044
Cash and cash equivalents at
1 January 1,619,011 7,264,513
Cash and cash equivalents at
31 December 5,715,713 1,619,011
============= =============
The notes on pages 16 to 41 form part of these audited financial statements
QANNAS INVESTMENTS LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARED 31 DECEMBER 2017 ==================================== 1. GENERAL INFORMATION
The Company is an exempt closed-ended 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 Conyers Trust Company (Cayman) Limited (formerly known as 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 private equity ("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. As further detailed in the Chairman's Report on page 2, the Company is in the process of proposing a new strategy to shareholders for their approval.
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 financial assets 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 financial assets 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 (against the fair value brought forward) 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.
QANNAS INVESTMENTS LIMITED NOTES TO THE FINANCIAL STATEMENTS - continued FOR THE YEARED 31 DECEMBER 2017 ============================================== 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.
The Company's investments in underlying funds are ordinarily valued using the values (whether final or estimated) as advised to the Investment Manager by the managers, general partners or administrators of the relevant underlying fund. The valuation date of such investments may not always be coterminous with the valuation dates of the Company and in such cases the valuation of the investments as at the last valuation date is used. The net asset value reported by the administrator may be unaudited and, in some cases, the notified asset values are based upon estimates. The Company or the Investment Manager may depart from this policy where it is considered such valuation is inappropriate and may, at its discretion, permit any other method of valuation to be used if it considers that such method of valuation better reflects value generally or in particular markets or market conditions and is in accordance with good accounting practice. In the event that a price or valuation estimate accepted by the Company or by the Investment Manager in relation to an underlying fund subsequently proves to be incorrect or varies from the final published price by an immaterial amount, no retrospective adjustment to any previously announced Net Asset Value or Net Asset Value per Share will be made.
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 or using the discounted cashflows model.
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 purchase or sale. 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 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.
QANNAS INVESTMENTS LIMITED NOTES TO THE FINANCIAL STATEMENTS - continued FOR THE YEARED 31 DECEMBER 2017 ============================================== 2. SIGNIFICANT ACCOUNTING POLICIES - continued
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 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. For further details of the judgements and assumptions made see notes 4 and 17. Particular reference is drawn to the write down in values of the company's investments in SPE Qannas C Limited and ADCM Second Private Equity Fund L.P., which arises on their holdings in funds managed by Abraaj Investment Management Limited (further details on this matter can be found in the Chairman's Report and the Investment Manager's Report).
(ii) 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.
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 at 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.
QANNAS INVESTMENTS LIMITED NOTES TO THE FINANCIAL STATEMENTS - continued FOR THE YEARED 31 DECEMBER 2017 ============================================== 2. SIGNIFICANT ACCOUNTING POLICIES - continued
Financial assets and liabilities - continued
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.
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 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 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.
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 tax resident in Jersey, on the basis that board meetings and strategic decisions are undertaken in Jersey. Provision has been made in these financial statements for Jersey income tax at the rate of 0%.
Expenditure and transaction costs
All items of expenditure, including the performance and management fees, are recognised on an accruals basis.
The Company receives rebates for performance and management fees in respect of certain investments. These are included in the Statement of Comprehensive Income 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.
QANNAS INVESTMENTS LIMITED NOTES TO THE FINANCIAL STATEMENTS - continued FOR THE YEARED 31 DECEMBER 2017 ============================================== 2. SIGNIFICANT ACCOUNTING POLICIES - continued
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 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. The Company is in the process of realising existing investments in an orderly fashion pending a decision on a new investment strategy, as further detailed in the Chairman's Report. As disclosed in note 10, the Company is due to repay $8,000,000 of loans payable during 2018. These repayments will be financed by way of existing cash reserves and the continued realisation of the Company's investments.
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, that have 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 2017 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 2018, and have not been adopted in preparing these financial statements. None of these are expected to have a significant effect on the financial statements of the Company, except the following:
QANNAS INVESTMENTS LIMITED NOTES TO THE FINANCIAL STATEMENTS - continued FOR THE YEARED 31 DECEMBER 2017 ============================================== 2. SIGNIFICANT ACCOUNTING POLICIES - continued
Adoption of new and revised standards - continued
New standards and interpretations not yet adopted - continued
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 have undertaken a preliminary assessment of the impact of IFRS 9 and are in the process of conducting a full assessment ahead of the preparation of the 30 June 2018 interim financial statements.
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 Directors have undertaken a preliminary assessment of the impact of IFRS 15 and are in the process of conducting a full assessment ahead of the preparation of the 30 June 2018 interim financial statements.
3. DIRECTORS' REMUNERATION AND INTERESTS
The remuneration of the individual Directors who served in the year to 31 December 2017 was:
31.12.17 31.12.16
$ $
Richard John Stobart Prosser 26,210 24,546
Christopher Ward 32,277 25,255
Richard Green 26,803 25,216
Mustafa Kheriba - -
85,290 75,017
========= =========
QANNAS INVESTMENTS LIMITED
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEARED 31 DECEMBER 2017
==============================================
3. DIRECTORS' REMUNERATION AND INTERESTS - continued
Directors' interests in the shares of the Company, including family interest, at 31 December 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%
4. INVESTMENTS AT FAIR VALUE THROUGH PROFIT AND LOSS
31.12.17 31.12.16
$ $
Fair value brought forward 74,114,197 80,399,787
Additions 3,896,899 6,539,918
Disposals (5,847,054) (12,109,098)
Realised gains/(losses) 1,099,838 (27,956)
Capital distributions (14,402,547) (848,051)
Unrealised (loss)/gain on the
revaluation of investments (16,469,906) 159,597
Fair value at 31 December 42,391,427 74,114,197
============= =============
Investments comprise:
31.12.17 31.12.16
Fair Fair Value
Value
$ $
Non-current assets
SPE Qannas C Limited - 5,789,942
ADCM Secondary Private Equity
Fund L.P. ("ADCM SPEF") 4,439,078 26,602,072
EE F&B Holding
Limited 1 1
Palace Preferred
Partners L.P. 8,743,938 3,370,229
Integrated Financial
Group, LLC 19,026,696 19,608,118
32,209,713 55,370,362
----------- -----------
Current assets
Goldilocks Fund 10,181,714 18,662,159
Madaares PJSC - 81,676
----------- -----------
10,181,714 18,743,835
----------- -----------
Total 42,391,427 74,114,197
=========== ================
Included in the unrealised loss on the revaluation of investments, amounting to $15.4 million, is $10.7 million which arises following the decision to write down the holdings by ADCM SPEF and SPE Qannas C Limited in Abraaj related entities to $nil. This follows the Investment Manager's observations that it will be challenging to fund a willing buyer for the holdings in Abraaj due to uncertainty over the General Partner and the fund's underlying assets. Furthermore, as these funds are in liquidation phase, and as there is no further incentive for the GP, the Investment Manager believes that the liquidation of underlying assets could be at a steep discount and could take significant time to realize.
The investment in Goldilocks Fund is classified as a current asset as it is anticipated it will be disposed of within the short term.
QANNAS INVESTMENTS LIMITED NOTES TO THE FINANCIAL STATEMENTS - continued FOR THE YEARED 31 DECEMBER 2017 ============================================== 4. INVESTMENTS AT FAIR VALUE THROUGH PROFIT AND LOSS - continued
The fair values of the investments are based on the latest available net asset value reports and / or financial information available for the underlying companies. Further details can be seen in note 17.
Investments at 31 December 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% 18,276,558
EE F&B Holding
Limited Ordinary 1,000 100% 1
Palace Preferred
Partners L.P. - - 17.43% 7,240,145
Goldilocks Investment
Company Limited
(formally Goldilocks
Fund) Units 17,341,475 4% 4,094,938
Integrated Financial
Group, LLC Ordinary 73,908 47.4% 18,667,177
56,209,705
===========
During the year, the Company made total contributions to its investment in Palace Preferred Partners L.P. amounting to $3,896,899 (GBP2,947,184). This has reduced the outstanding commitment as detailed below.
During the year, 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 year, the Company received distributions amounting to $15,510,049 in respect of its holding in ADCM Secondary Private Equity Fund L.P.. Of these distributions, $14,402,457 were capital in nature, and hence recognised as a reduction to the investment, and $1,107,502 were profit in nature, and hence recognised in the Statement of Comprehensive Income for the period.
During the year ended 31 December 2017, the company's investment in Goldilocks Fund was transferred to Goldilocks Investment Company Limited (the "Fund"), a company incorporated under limited liability law of Abu Dhabi Global Market. The Fund is managed by ADCM Altus Investment Management Limited, with an independent fund administrator Apex Fund Services Limited.
During the year ended 31 December 2017, the Company received the following income from its investments: -
-- $1,107,502 (2016: $693,856) from ADCM Secondary Private Equity Fund L.P.; and -- $nil (2016: $72,252) from BL Development Limited.
At 31 December 2017 the Company had a total commitment to Palace Preferred Partners L.P. amounting to GBP8,741,641 (2016: GBP8,741,641), of which GBP3,652,816 was outstanding at 31 December 2017 (2016: GBP6,600,000).
The loan due to First Gulf Bank PJSC (as detailed in note 10) is secured by way of a charge over the Company's investments in ADCM Secondary Private Equity Fund L.P., SPE Qannas C Limited and Palace Preferred Partners L.P.
QANNAS INVESTMENTS LIMITED
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEARED 31 DECEMBER 2017
==============================================
5. LOANS RECEIVABLE
31.12.17 31.12.16
$ $
Brought forward 16,220,609 10,743,138
Additions 133,912 13,215,045
Capitalised loan interest 180,001 160,775
Repayments (1,204,759) (6,909,841)
Impairment (98,430) (512,689)
Gains / (losses) on foreign
exchange 1,592,875 (475,819)
16,824,208 16,220,609
============ ============
At 31 December 2017, loans receivable comprise: -
Interest Maturity Carrying Carrying
rate Date value Value
CCY $
Capital Hotel
d.o.o. 4% July 2018 8,140,501 9,751,181
EE F&B Holding
Limited 4% Not defined 3,480,170 3,713,576
Integrated Eastern August
European Fund 12% 2018 1,386,490 1,521,950
Integrated Eastern August
European Fund 12% 2018 1,103,457 1,211,265
Lucice Montenegro August
d.o.o. 12% 2018 23,177 25,441
August
Arqutino EAD 12% 2018 236,876 260,019
Capitalised interest
on above 4 facilities 340,776
Belcafe Limited N N / A - -
/
A
16,824,208
===========
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.
Loan interest in respect of the above loans totalling $899,949 (2016: $1,200,112) is included in the Statement of Comprehensive Income for the year. Following a review by the investment manager $238,992 (2016 $Nil) of loan interest receivable is considered impaired and has been reflected in the statement of Comprehensive Income accordingly.
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 in the underlying companies, which hold land assets.
The loans to Capital Hotel d.o.o., EE F&B Holding Limited and Belcafe Limited are unsecured. EE F&B Holding Limited owns the Master Franchise rights to operate Hard Rock Cafes in Podgorica, Montenegro, Sofia, Bulgaria and Belgrade, Serbia.
During the year ended 31 December 2017, the Company made the following additions / disposals: -
-- An additional loan of $35,183 (EUR32,000) was made to EE F&B Holding Limited which was subsequently repaid;
-- An loan of $98,729 (EUR82,000) was made to Belcafe Limited during the year and impaired at the year end; 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 $1,169,576 (EUR1,097,137) of capital and $16,847 (EUR16,412) of interest.
QANNAS INVESTMENTS LIMITED
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEARED 31 DECEMBER 2017
==============================================
6. PROPERTY INVESTMENTS
31.12.17 31.12.16
$ $
Fair value brought forward 779,560 779,560
Disposals (779,560) -
Fair value at 31 December - 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 year for $779,560, which was equivalent to their fair value at 31 December 2016.
7. TRADE AND OTHER RECEIVABLES
31.12.17 31.12.16
$ $
Non-current
Performance fee rebate receivable
(see note 16) - 4,663,572
========== ==========
Current
Sundry debtors 34 34
Management fee rebate receivable
(see note 16) 404,229 98,618
Performance fee rebate receivable 931,903 -
(see note 16)
Loan interest and income receivable 624,894 286,872
Prepayments 17,814 20,780
1,978,874 406,304
========== ==========
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.
The Directors consider that the carrying amount of trade and other receivables approximates to their fair value.
8. CASH AND CASH EQUIVALENTS
31.12.17 31.12.16
$ $
First Gulf Bank 5,660,640 1,545,898
Royal Bank of Scotland International 55,073 73,113
----------
5,715,713 1,619,011
========== ==========
QANNAS INVESTMENTS LIMITED
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEARED 31 DECEMBER 2017
==============================================
9. TRADE AND OTHER PAYABLES
31.12.17 31.12.16
$ $
Non-current
Performance fees 2,259,631 2,537,372
========== ==========
Current
Secretarial, administration and
accountancy fees 60,249 24,790
Director fees 41,823 13,565
Investment manager fees 466,952 655,608
Performance fees - 13,911
Legal and professional fees 36,397 28,060
Audit fees 33,728 28,364
Sundry expenses 1,805 3,263
Loan interest payable (see note
10) 135,928 136,849
Participating shares 1 1
----------
776,883 904,411
========== ==========
The Directors consider that the carrying amount of trade and other payables approximates to their fair value.
10. LOANS PAYABLE
31.12.17 31.12.16
$ $
Loan Capital
Brought forward 30,000,000 30,000,000
Repayments in the year (4,500,000) -
------------ -----------
Carried forward 25,500,000 30,000,000
Issue Costs
Brought forward (603,607) (188,781)
Incurred in the year - (640,000)
Amortised during the year 307,551 225,174
------------ -----------
(296,056) (603,607)
25,203,944 29,396,393
============ ===========
The Company has a loan facility with First Gulf Bank for up to $30,000,000. The loan facility was refinanced in November 2016 and now bears interest at the rate of US LIBOR + 3.5% per annum (previously US LIBOR + 2.5% per annum) and is repayable in quarterly instalments commencing 30 June 2017, with a final repayment date of 31 December 2019. Amounts due within the next 12 months total $8,000,000.
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 investment in ADCM Second Private Equity Fund L.P., SPE Qannas C Limited, Palace Preferred Partners L.P. and Integrated Financial Group LLC.
Following the write-down of ADCM SPEF and Qannas C, as disclosed in note 4, the coverage ratio required under the loan facility is below the required threshold. Under the loan facility the Company has the option to ratify this position and offer sufficient alternate security to reach the required threshold. The Company is in the process of negotiating this position with the Bank and ratify in line with the loan facility requirements.
The loan is 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.
QANNAS INVESTMENTS LIMITED
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEARED 31 DECEMBER 2017
==============================================
11. SHARE CAPITAL
31.12.17 31.12.16
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:
79,331,354 (2016: 79,331,354)
participating shares
of
no par value at various
issue prices 76,638,587 76,638,587
=============== ==============
Treasury shares:
19,391,642 (2016: 10,502,749)
participating shares
of no par value redeemed
at various prices (16,839,568) (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 31 December 2017 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 the year, the Company redeemed 8,888,889 $1 participating shares at a price of $0.90 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.
In the prior year, 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.
QANNAS INVESTMENTS LIMITED NOTES TO THE FINANCIAL STATEMENTS - continued FOR THE YEARED 31 DECEMBER 2017 ============================================== 11. 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.
12. RETAINED EARNINGS - UNREALISED AND REALISED SPLIT
Retained earnings at 31 December 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 (3,426,058) 2,207,340 (1,218,718)
Expenditure - (1,328,755) (1,328,755)
Net gains and losses
on investments (16,469,906) - (16,469,906)
Impairment of loans receivable
and associated interest (337,422) (337,422)
Loan interest payable - (1,671,765) (1,671,765)
Foreign exchange losses
on loans receivable 1,592,875 - 1,592,875
Gain on foreign exchange - 235,804 235,804
Interest income - cash
and cash equivalents - 2,625 2,625
Interest income - loans
receivable - 899,949 899,949
------------- ------------ -------------
Balance at 31 December
2017 (11,324,463) (9,804,794) (21,129,257)
============= ============ =============
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.
13. LOSS PER SHARE
Loss per share is calculated by dividing the loss 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.
On 15 August 2017, the Company repurchased 8,888,889 participating shares which are held in equity as treasury shares. The average number of shares in issue during the year ended 31 December 2017 was 65,279,303 (2016: 69,013,416).
QANNAS INVESTMENTS LIMITED
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEARED 31 DECEMBER 2017
==============================================
13. EARNINGS PER SHARE - continued
31.12.17 31.12.16
Total loss for the year after
taxation ($) (18,295,313) (4,250,397)
Weighted average number of
participating shares in issue 65,279,303 69,013,416
Basic and diluted earnings
per share ($ per share) (0.28) (0.06)
============= ============
The Company has not issued any shares or other instruments that are considered to have dilutive potential and hence basic and diluted earnings per share are the same.
14. TAXATION
The Company is tax resident in Jersey, on the basis that board meetings and strategic decisions are undertaken in Jersey. Provision has been made in these financial statements for Jersey income tax at the rate of 0%.
15. DISTRIBUTIONS
Distributions of $nil (2016: $nil) were paid during the year.
16. INVESTMENT MANAGER AND PERFORMANCE FEES
The Investment Manager is entitled to a quarterly management fee equal to 0.4375% of the net asset value of the company at each quarter end (being 31 March, 30 June, 30 September and 31 December).
In addition to the management fee, 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 2014 following the acquisition of interests in ADCM SPEF and SPE Qannas C Limited.
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 they have 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.
QANNAS INVESTMENTS LIMITED NOTES TO THE FINANCIAL STATEMENTS - continued FOR THE YEARED 31 DECEMBER 2017 ============================================== 16. INVESTMENT MANAGER AND PERFORMANCE FEES - continued
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 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.
As a result of the above mentioned change in Performance Fee structure, the Performance Fee accrual was reduced by $1,149,109.69 during 2014. The Investment Manager 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.
Rebates
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.
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 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.
The Company has accrued Management Fee rebate income in respect of ADCM SPEF of $297,828 at 31 December 2017 (2016: $98,618). The Company has accrued Performance Fee rebate income in respect of ADCM SPEF and SPE Qannas C Ltd of $Nil at 31 December 2017 (2016: $4,663,572). These are settled when investments are sold and are based on the fair value gains realised on the disposal.
Abu Dhabi Financial Group, the investment manager of Goldilocks Fund, provide a rebate to the company in respect of Management and Performance Fees it charges to Goldilocks Fund. At 31 December, $106,401 (2016: $nil) was due in respect of Management Fees and $931,903 (2016: $nil) in respect of Performance Fees. These are included in trade and other receivables and are considered a current asset, in line with the investment itself.
QANNAS INVESTMENTS LIMITED NOTES TO THE FINANCIAL STATEMENTS - continued FOR THE YEARED 31 DECEMBER 2017 ============================================== 16. INVESTMENT MANAGER AND PERFORMANCE FEES - continued
A reconciliation of the rebate recognised in the statement of comprehensive income can be seen below:
31.12.17 31.12.16
$ $
Opening performance fee rebate
receivable (note 7) (4,663,572) (7,027,920)
Opening management fee rebate
receivable (note 7) (98,618) (318,552)
Management fee rebate received
in the year - 622,295
Closing performance fee rebate
receivable (note 7) 931,903 4,663,572
Closing management fee rebate
receivable (note 7) 404,229 98,618
(3,426,058) (1,961,987)
============ ============
17. 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 financial assets are given in notes 4, 5 and 6.
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 investments that are based on a recent / year end price. 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. Ten percent has been selected as the directors consider this to be a reasonably foreseeable change.
2017 2016
------------------------- -------------------------
Impact of a Investments Total Investments Total
10% price change
Investment portfolio $3,024,671 $3,024,674 $3,835,195 $3,835,195
============ =========== ============ ===========
Interest rate risk
The Company's interest rate risk principally arises from borrowings in the form of the loan payable (see note 10) and receivables in the form of loans receivable (see note 5).
QANNAS INVESTMENTS LIMITED NOTES TO THE FINANCIAL STATEMENTS - continued FOR THE YEARED 31 DECEMBER 2017 ============================================== 17. FINANCIAL RISK MANAGEMENT - continued
Management of market risk - continued
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.
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 (under 12 months) 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, USD, 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.
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 31.12.17 31.12.16
US dollars)
EUR GBP AED EUR GBP AED
Assets
Monetary assets 9,726 9,793 137 - 1,549,799 137
Non-monetary
assets 17,449,102 8,750,360 1,387 16,507,481 3,376,648 862,632
Liabilities
Monetary liabilities - - - - - -
Non-monetary
liabilities - 173,713 - - 92,031 13,911
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.
QANNAS INVESTMENTS LIMITED NOTES TO THE FINANCIAL STATEMENTS - continued FOR THE YEARED 31 DECEMBER 2017 ============================================== 17. FINANCIAL RISK MANAGEMENT - continued
Management of market risk - continued
Foreign exchange risk - continued
Reasonable Reasonable
possible possible
Currency rate 31.12.17 rate 31.12.16
shift shift
(2017) (2016)
$ $
Euros (EUR)
+ / - + / -
Monetary 5% 486 5% -
+ / - + / - + / -
Non-monetary 5% 872,455 5% 825,374
Pounds Sterling
(GBP)
+ / - + / - + / -
Monetary 5% 490 5% 77,490
+ / - + / - + / -
Non-monetary 5% 437,518 5% 164,231
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 and other receivables, 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 (at least A grade). The Company does not hold any derivative financial instruments.
The credit risk associated with trading and portfolio investments is considered minimal.
Credit quality
31.12.17 31.12.16
$ $
Cash and cash equivalents
AA 5,660,640 1,545,898
A 55,073 73,113
5,715,713 1,619,011
========== ==========
The maximum exposure to credit risk on the Company's financial assets is represented by their carrying amount, as detailed in notes 4 to 8.
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 financial information in respect of the counterparty. Further disclosure in respect of loans receivable and relevant collateral can be seen in note 5.
QANNAS INVESTMENTS LIMITED NOTES TO THE FINANCIAL STATEMENTS - continued FOR THE YEARED 31 DECEMBER 2017 ============================================== 17. FINANCIAL RISK MANAGEMENT - continued
Credit risk - continued
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. Further disclosure in respect of this investment can be seen in note 4.
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:
31.12.17 31.12.16
$ $
Loans receivable 16,824,208 16,220,609
Trade and other receivables 1,978,874 5,069,876
Cash and cash equivalents 5,715,713 1,619,011
24,518,795 22,909,496
=========== ===========
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 the prior year. The loan was refinanced in November 2016 and is now due for repayment quarterly (see note 10). The Directors are confident that, if required, a new loan facility can be obtained 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 776,883 - - - 2,259,631
Loans payable - 1,500,000 1,500,000 5,000,000 17,500,000
--------- ---------- ---------- ----------- -----------
776,883 1,500,000 1,500,000 5,000,000 19,759,631
========= ========== ========== =========== ===========
QANNAS INVESTMENTS LIMITED
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEARED 31 DECEMBER 2017
==============================================
17. FINANCIAL RISK MANAGEMENT - continued
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 less retained losses. 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 2017 the Company had $38,669,764 of capital (2016: $64,965,077).
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); or
-- 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 1 Level Level Total
2 3
$ $ $ $
2017
Investments - 10,181,714 32,209,713 42,391,427
2016
Investments - 18,662,159 55,452,038 74,114,197
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.
The following table sets out the valuation technique used in determination of fair values within level 2 including the key inputs used.
QANNAS INVESTMENTS LIMITED NOTES TO THE FINANCIAL STATEMENTS - continued FOR THE YEARED 31 DECEMBER 2017 ============================================== 17. FINANCIAL RISK MANAGEMENT - continued
Fair value measurements recognised in the Statement of Comprehensive Income - continued
The valuation of the level 2 investment, Goldilocks Fund, is based upon the net asset value of underlying assets, which comprise publically listed companies in the UAE, held by the Fund.
Item Valuation approach and inputs
used
Investments at The fair value is determined based
fair value through on market values of underlying
profit and loss assets, which comprise publically
- Goldilocks listed companies in the UAE.
Fund
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 Fair Fair Key un-observable Input Input Relationship
valuation value value inputs value value between
approach at at 31.12.17 31.12.16 unobservable
inputs
and fair
value
31.12.17 31.12.16
$ $
Investments
at fair
value through
profit and
loss - ADCM Value
Secondary of the
Private underlying
Equity Fund investments
L.P. within
the funds An increase
The carrying and the in the
value of discount value
the investments factor shown
is based applied in the
on valuations (in 2017 financial
provided the value reports
by the General of certain of the
Partners underlying underlying
of the underlying holdings fund and
funds. A were premium
discount written / discount
is then down on underlying
applied due to assets
to the valuations uncertainty in the
by the Investment surrounding secondary
Manager the underlying market
to consider holdings, would
the funds further result
the Company details in the
can expect of which year-end
to realise can be valuation
if disposed seen NAV provided NAV provided being
in the short in note by General by General higher
term. 4,439,078 26,602,072 4). Partner Partner and vice-versa.
QANNAS INVESTMENTS LIMITED
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEARED 31 DECEMBER 2017
==============================================
17. FINANCIAL RISK MANAGEMENT - continued
Fair value measurements recognised in the Statement of Comprehensive Income - continued
Item and Fair Fair Key un-observable Input Input Relationship
valuation value value inputs value value between
approach at at 31.12.17 31.12.16 unobservable
inputs
and fair
value
31.12.17 31.12.16
$ $
Investments - 5,789,942 Value of NAV NAV An increase
at fair value the underlying provided provided in the
through profit investments by by value
and loss within the General General shown
- SPE Qannas funds and Partner Partner in the
C Limited the discount financial
factor applied reports
The carrying (in 2017 of the
value of the value underlying
the investments was written fund and
is based down due premium
on valuations to uncertainty / discount
provided surrounding on underlying
by the General the underlying assets
Partners holdings, in the
of the underlying further secondary
funds. An details market
assessment of which would
is then undertaken can be seen result
of whether in note in the
any further 4). year-end
discount valuation
is required being
(as was the higher
case in 2017 and vice-versa.
- see note
4) before
a multiple
is applied
by the Investment
Manager to
consider
the funds
the Company
can expect
to realise
if disposed
in the short
term.
Investments - 81,676 Share price N / AED1.2 For 2016,
at fair value in the recent A (exited if the
through profit exit proposal during share
and loss from the 2017) price
- Madaares investment increased
PJSC position. to AED1.4
the Value
The carrying would
value is be $95,288
based on whilst
the price if the
achieved share
in a recent price
exit. decreased
to AED1.0
the value
would
be $68,063.
Investments
at fair value
through profit
and loss
- EE F&B
Holding Limited
The carrying
value is An increase
based on in the
applying multiple
a multiple applied
to projected would
EBITDA forecasts result
associated in a higher
with the Multiple Multiple valuation
licence and, of of and a
due to the The discount 12x 13x decrease
market volatility, rate and Discount Discount would a discount multiple rate rate result rate has utilised of of in a lower been applied. 1 1 in the valuations. 10% 10% valuation. QANNAS INVESTMENTS LIMITED NOTES TO THE FINANCIAL STATEMENTS - continued FOR THE YEARED 31 DECEMBER 2017 ================================================================================================= ================= 17. FINANCIAL RISK MANAGEMENT - continued
Fair value measurements recognised in the Statement of Comprehensive Income - continued
Item and valuation Fair Fair Key un-observable Input Input Relationship
approach value value inputs value value between
at at 31.12.17 31.12.16 unobservable
inputs
and fair
value
31.12.17 31.12.16
$ $
Investments
at fair value
through profit
and loss -
Palace Preferred
Partners LP
The carrying
value of the
investment
is based on
the valuation
provided by An increase
the General in the
Partner of value
Palace Preferred of Palace
Partners LP. Preferred
These valuations Partners
are based LP investment
on the latest The value would
available of the result
report for underlying in the
the quarter investments NAV NAV year-end
ending 31-Dec-17 of Palace provided provided valuation
prepared in Preferred by by being
line with Partners General General higher
IPEV Guidelines 8,743,938 3,370,229 LP Partner Partner and vice-versa.
Investments
at fair value
through profit An increase
and loss - in the
Integrated multiple
Financial applied
Group would
result
In 2017, the in a higher
carrying value valuation
of the investment and a
is based on decrease
a recent transaction would
price, while result
in 2016 the in a lower
carrying value valuation.
is derived
from applying An increase
a multiple in the
to earnings discount
based on other rate applied
similar entities. would
The multiple result
is subject in a lower
to a discount Discount valuation
to reflect rate: and a
the specific The discount 30% increase
circumstances rate and would
of Integrated multiple EBITDA result
Financial applied N / multiple: in a lower
Group. 19,026,696 19,608,118 to earnings. A 13x valuation.
QANNAS INVESTMENTS LIMITED
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEARED 31 DECEMBER 2017
==============================================
17. FINANCIAL RISK MANAGEMENT - continued
Fair value measurements recognised in the Statement of Comprehensive Income - continued
Reconciliation of level 3 fair value measurements of financial assets
31.12.17 31.12.16
$ $
Balance brought forward 55,452,038 80,399,787
Purchases 3,896,899 -
Capital distributions (14,402,547) (848,051)
Disposals (81,676) (12,109,098)
Revaluations (12,655,001) (11,990,600)
Balance at 31 December 32,209,713 55,452,038
============= =============
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 2017
Investments at fair value
through profit and loss - 42,391,427 42,391,427
Loans receivable 16,824,208 - 16,824,208
Trade and other receivables 1,978,874 - 1,978,874
Cash and cash equivalents 5,715,713 - 5,715,713
--------------- ------------- -----------
Total assets 24,518,795 42,391,427 66,910,222
--------------- ------------- -----------
31 December 2016
Investments at fair value
through profit and loss - 74,114,197 74,114,197
Loans receivable 16,220,609 - 16,220,609
Trade and other receivables 5,069,876 - 5,069,876
Cash and cash equivalents 1,619,011 - 1,619,011
--------------- ------------- -----------
Total assets 22,909,496 74,114,197 97,023,693
--------------- ------------- -----------
Liabilities per statement Liabilities Other Total
of financial position at fair financial
value through liabilities
profit $
and loss $
$
31 December 2017
Trade and other payables - 3,036,514 3,036,514
Loans payable - 25,203,944 25,203,944
--------------- ------------- -----------
Total liabilities - 28,240,458 28,240,458
--------------- ------------- -----------
31 December 2016
Trade and other payables - 3,441,783 3,441,783
Loans payable - 29,396,393 29,396,393
--------------- ------------- -----------
Total liabilities - 32,838,176 32,838,176
--------------- ------------- -----------
QANNAS INVESTMENTS LIMITED
NOTES TO THE FINANCIAL STATEMENTS - continued
FOR THE YEAR ENDED 31 DECEMBER 2017
==============================================
18. RETAINED EARNINGS
31.12.17 31.12.16
$ $
Balance brought forward (2,833,944) 1,416,453
Total loss after taxation (18,295,313) (4,250,397)
Balance at 31 December (21,129,257) (2,833,944)
============= ============
Retained earnings represent the cumulative Comprehensive Income net of distributions to owners.
19. RELATED PARTY TRANSACTIONS
Richard John Stobart Prosser, a Director of the Company, is also an officer of Estera Fund Administrators (Jersey) Limited (formerly Appleby Fund Administrator (Jersey) Limited), which acts as administrator. Secretarial and administration fees incurred by the Company with Estera Fund Administrator (Jersey) Limited for the year ended 31 December 2017 were $161,195 (2016: $111,071), of which $76,640 (2016: $24,790) was outstanding at 31 December 2017.
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 2017 were $1,038,624 (2016: $1,291,840), of which $466,952 (2016: $655,608) was outstanding at 31 December 2017. At 31 December 2017, the Investment Manager held $nil (2016: $nil) on behalf of the Company for onward investment.
The Investment Manager may be entitled to be paid a performance fee by the Company if certain conditions are met, full details of which can be seen in note 16. Movement in performance fees incurred by the Company with ADCM Ltd for the year ended 31 December 2017 were ($277,707) (2016: $490,869). A total of $2,259,631 (2016: $2,551,283) was accrued at 31 December 2017.
ADCM Ltd, the Investment Manager, owns 2 (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 $8,743,938 in Palace Preferred Partners LP at 31 December 2017 (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.
Mustafa Kheriba, a Director of the Company, is also a director of SPE Qannas C Limited. The Company has an investment of $Nil at 31 December 2017 (2016: $5,789,942) in SPE Qannas C Limited. No dividends were received from SPE Qannas C Limited during the current or prior year.
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 31 December 2017 this was held at fair value of $4,439,078 (2016: $26,602,073). Dividends totalling $1,107,502 (2016: $693,856) were received from ADCM SPEF during the year.
Mustafa Kheriba, a Director of the Company, is also a director of EE F&B Holding Limited. The Company has loan of $3,713,576 at 31 December 2017 (2016: $3,308,753) and an investment of $1 (2016: $1) in EE F&B Holding Limited. Interest totalling $158,265 (2016: $63,516) was receivable from EE F&B Holding Limited during the year of which $238,992 (2016: $63,516) remained outstanding at the year end.
QANNAS INVESTMENTS LIMITED NOTES TO THE FINANCIAL STATEMENTS - continued FOR THE YEAR ENDED 31 DECEMBER 2017 ============================================== 19. RELATED PARTY TRANSACTIONS - continued
The loans receivable from Integrated Eastern European Fund, Lucice Montenegro d.o.o. and Arqutino EAD (the "IEEF") which totalled $3,359,451 at 31 December 2017 (2016: $3,179,450), 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. 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 $362,241 (2016: $1,015,100) was recognised in the Statement of Comprehensive Income of the Company in respect of loans to IEEF.
The Company operated an investment account with IC in the year and originally invested $6,539,918 (AED 24 million), shown as an investment in Goldilocks Fund in note 4. Further, the Company is entitled to management fee and performance fee rebates as detailed in note 16. 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.
Integrated Capital owned 787,408 participating shares in the Company as at 31 December 2017 (2016: 907,030).
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. 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. The loan was fully repaid during the year ended 31 December 2016. The Company recognised loan interest amounting to $18,352 during the year ended 31 December 2016.
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. The holding in BL Development Limited was divested during the year ended 31 December 2016 realising proceeds of $5,000,100 (GBP3,500,000) and a loss on disposal of $167,080. Included within investment income for the year ended 31 December 2016 was preference dividend income of $74,252.
ADFG, the ultimate controlling shareholder of the Company's Investment Manager, has a 10% shareholding in Integrated Financial Group, LLC. At 31 December 2017, the Company's investment in Integrated Financial Group, LLC was carried at $19,026,696 (2016: $19,608,118). No dividends were received from Integrated Financial Group, LLC during the current or prior year.
ADFG owned 11,283,125 participating shares in the Company as at 31 December 2017 (2016: 12,997,235).
20. IMMEDIATE HOLDING COMPANY AND ULTIMATE CONTROLLING PARTY
In the Directors' opinion there is no controlling or ultimate controlling party.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
FR UKRSRWVANUAR
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