TIDMQIL
RNS Number : 6620J
Qannas Investments Limited
30 June 2017
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 2016.
Extracts from these statements are enclosed below.
QANNAS INVESTMENTS LIMITED
GENERAL INFORMATION
FOR THE YEARED 31 DECEMBER 2016
Jassim Mohamed Alseddiqi (resigned First Gulf Bank
16 March 2016)
Main Branch
Christopher Ward (Chairman) P.O. Box 6316
Abu Dhabi
Richard John Stobart Prosser United Arab Emirates
Richard Green
REGISTRAR
Mustafa Kheriba Capita Registrars (Jersey) Limited
12 Castle Street
St Helier
COMPANY NUMBER Jersey JE2 3RT
CT 286543 (registered in Cayman Channel Islands
Islands)
COMPANY SECRETARY NOMINATED ADVISOR
Codan Trust Company (Cayman) Limited finnCap Ltd
Cricket Square, Hutchins Drive, 60 New Broad Street
P.O. Box 2681
George Town, Grand Cayman KY1-1111 London EC2M 1JJ
Cayman Islands England
REGISTERED OFFICE NOMINATED BROKER
Codan Trust Company (Cayman) Limited finnCap Ltd
Cricket Square, Hutchins Drive, 60 New Broad Street
P.O. Box 2681
George Town, Grand Cayman KY1-1111 London EC2M 1JJ
Cayman Islands England
ADMINISTRATOR LEGAL ADVISORS
Estera Fund Administrators (Jersey) Appleby
Limited
13-14 Esplanade 13-14 Esplanade
St Helier St Helier
Jersey JE1 1EE Jersey JE1 1BD
Channel Islands Channel Islands
Herbert Smith LLP
AUDITOR Exchange House
BDO Limited Primrose Street
Windward House London EC2A 2HS
La Route de la Liberation England
St Helier
Jersey JE1 1BG Conyers Dill & Pearman Limited
Channel Islands Level 2, Gate Village 4
Dubai International Financial
Centre
P.O. Box 506528
INVESTMENT MANAGER Dubai
ADCM Ltd United Arab Emirates
Codan Trust Company (Cayman) Limited
Cricket Square, Hutchins Drive,
P.O. Box 2681
George Town, Grand Cayman KY1-1111 COMPANY WEBSITE
Cayman Islands www.qannasinvestments.com
Jassim Mohamed Alseddiqi (resigned First Gulf Bank
16 March 2016)
Main Branch
QANNAS INVESTMENTS LIMITED
CHAIRMAN'S REPORT
FOR THE YEARED 31 DECEMBER 2016
It is with pleasure that I present my fifth annual report on the
performance of Qannas Investments Limited ("QIL" or the "Company").
Since its IPO in March 2012, QIL has invested across different
investment themes and has successfully built up a diverse portfolio
of investments spread across the Middle East, Eastern Europe and
Central London. However, our investment strategy has been less
successful in attracting investors from outside the Gulf region,
which in turn has held back our growth plans and has failed to
generate the liquidity in the Company's shares which we would have
liked. The Board is therefore embarking on a review of the
Company's investment strategy, which will be presented to
shareholders in due course, and in the meantime, is recommending
that substantially all of the existing investments be realised.
Accordingly, the Company intends to propose at the forthcoming
AGM certain changes to the Company's investment policy which will
result in existing investments being realised in an orderly fashion
over the next one to two years pending a decision on a new
investment strategy. These exits will seek to achieve a balance
between an efficient return of cash to shareholders and maximizing
the value of QIL's investments. Proceeds will be used to repay debt
and make distributions to shareholders, with the first distribution
proposed in July 2017.
As part of the year-end accounts, the Board chose to take a
provision and impair certain assets held by QIL, primarily its
Limited Partnership interests in funds held through ADCM Secondary
Private Equity Fund L.P. and SPE Qannas C Limited. These discounts
have been applied to the reported net asset value provided by the
General Partners of the underlying funds and reflect a marketing
exercise conducted by the investment manager in exploring the exit
of these positions. These provisions were a significant factor
behind the reduction in the Company's Net Asset Value to $0.94 at
the year end.
However, an investment highlight in 2016 was QIL's US$6.5
million investment in Goldilocks, an investment strategy used by
QIL's investment manager to invest in public equities listed on the
GCC stock exchanges. The investment was made in two tranches during
Q1 2016 and had generated a return of 185% by 31 December 2016.
Subsequent to the year end, QIL received back approximately 89% of
its invested capital in Goldilocks by redeeming 25% of its interest
in April 2017, generating a significant realised profit and making
it one of QIL's most successful investments.
The investment in the Goldilocks strategy was originally via a
co-mingled investment pool, alongside over 100 other investors,
which, pending regulatory approval being obtained for the
establishment of an investment Fund under limited liability law of
Abu Dhabi Global Markets ("ADGM"), was managed by Integrated
Capital PJSC, an investment manager authorised and regulated by the
UAE Central Bank and a wholly-owned subsidiary of Integrated
Financial Group LLC in which company QIL has a 47.4% equity stake.
The Company's investment is now represented by units in Goldilocks
Investment Company Limited, managed by ADCM Altus Investment
Management Limited, with an independent fund administrator Apex
Fund Services Limited and with the Bloomberg ticker GOLDILK. As at
8th June 2017, the value of the Company's units in Goldilocks was
$14.8m, even after redeeming 25% of the original investment for $
5.8m.
Confirmations of the Company's investment (share held and
valuation) in the co-mingled pool have been regularly supplied by
Integrated Capital, itself a highly regulated entity which is
subject to regular inspections by the UAE Central Bank as is their
policy; and following the establishment of the fund in ADGM, Apex
too have confirmed the number and value of our units in the Fund.
It is disappointing that the Company's auditors have not accepted
these confirmations as evidence of the ownership, existence and
valuation of this investment, particularly as we understand that
these have been accepted by auditors acting on behalf of other
investors in the co-mingled pool, but nevertheless, I want to
assure shareholders that the Board is confident that the details of
the investment in Goldilocks contained in these accounts are
accurate, and that the financial position of the Company is fairly
stated.
QIL has always sought to deploy and return capital efficiently
for its shareholders and believes the current exits are appropriate
given the current investment climate and focus of the fund. The
Board and the investment manager will continue to update
shareholders on its progress in liquidating assets and returning
capital. As always I would like to thank the 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 2016
====================================
ADCM Ltd. ("ADCM"), the investment manager for QIL, is pleased
to present the annual investment manager's report for the year
ended 31 December 2016.
Investment Summary
During FY 2016, QIL's NAV decreased by US$5.1 million. This was
primarily due to:
-- US$0.85 million share buy back in March 2016.
-- US$11.6 million decline in the carrying value of ADCM
Secondary Private Equity Fund L.P. ("ADCM SPEF") and SPE Qannas C
Limited (" SPE Qannas C") as a result of the investment manager
taking a provision against the carrying value reported by the
General Partners of the underlying Limited Partnership positions as
at 31 December 2016.
-- US$1.6 million decline in the carrying value of the Project
HRC as a result of the investment manager taking an impairment
against the carrying value of Project HRC.
The decline in above investments was largely offset by a US$12.1
million gain in Project Goldilocks. The balance $3.15m decline is
due to expenses and interest cost.
2016 was a year of consolidation where QIL exited its smaller
investments, consolidated its investments in Eastern Europe and
made an investment in Project Goldilocks.
During 2016 QIL exited 4 investments (2 completely and 2
partially).
Exits during FY 2016
1. Project IEEF: realized a partial exit (70%) on the EUR7
million loan to IEEF generation an IRR of 4%.
2. Project Taj: exited US$1.2 million investment in VPL generating an IRR of 13%.
3. Project Broadway: redeemed GBP3.8 million preferred shares in
BLD generating an IRR of 3% (USD).
4. Project PPP: realized a partial exit (52%) on the GBP4.4
million investment in PPP generating an IRR of 5.4%.
Investments in FY 2016
-- Goldilocks: invested a total of US$6.5 million in two
tranches during Q1 2016 (subsequent to the year end, redeemed 25%
of this investment, thereby recovering US$5.8 million (89%) of the
invested capital and generating an IRR of 185%).
-- Project Adriatic (CentreVille Hotel): US$10.2 million
investment in CentreVille Hotel (previously named as TCP[1] Hotel),
as part of a EUR11 million commitment made in the year 2014.
QANNAS INVESTMENTS LIMITED
INVESTMENT MANAGER'S REPORT
FOR THE YEARED 31 DECEMBER 2016
====================================
Summary on QIL's investments leading up to year end 2016 are as
below:
QIL's Investments
===========================================================================================================
Project Investment Sector Geography Committed[2] Invested
Name Type /Type (in millions) (in millions)
============== ======= ================= ============== =============== ============== ==============
Committed in 2016
Goldilocks Equity Financial UAE AED24.0 US$6.5
Services
Committed in 2015
Taj Murabaha Debt Real Estate Central London AED 4.0 AED 4.0
Broadway Preferred equity Real Estate Central London GBP3.5 GBP3.5
Apex Equity Real Estate UAE AED 9.1 AED 2.9
Committed in 2014
Financial
Integration Equity Services UAE $20.4 $18.7
HRC[3] Equity Hospitality Eastern Europe EUR4.0 EUR4.0
CentreVille
Hotel Equity Hospitality Eastern Europe EUR9.2 EUR9.2
PPP[4] L.P. Interest[5] Real Estate Central London GBP11.0 GBP4.4
Real Estate
IEEF[6] Debt Fund Eastern Europe EUR7.0 EUR7.0
Beast L.P. Interests Fund of Funds Diversified $40.6 $40.6
Committed prior to 2014
Scholar Equity Education UAE $0.07 $0.07
======================= ================= ============== =============== ============== ==============
QANNAS INVESTMENTS LIMITED
INVESTMENT MANAGER'S REPORT
FOR THE YEARED 31 DECEMBER 2016
====================================
Summary of QIL's complete exits up to year-end 2016 and the
subsequent two quarters in 2017 are as below:
QIL's Exits so far
===================================================================================================================
Project Date of Date of Ownership Holding Cost NAV at Exit Multiple Exit
Name Exit Acquisition sold Period (in millions) exit IRR
(in millions)
========== =========== ============= ========= ========= ============== ============== ============= ======
Exits in
2016
PPP[7] 31-Oct-16 29-Oct-14 52% 25 months $3.6 $4.0 1.11x 5.4%
IEEF[8] 21-Jul-17 21-Aug-14 70% 23 months $6.6 $7.1 1.08x 4.0%
Taj 26-Feb-16 02-Jun-15 100% 9 months $1.1 $1.2[9] 1.09x 12.6%
Broadway 19-Feb-16 16-Apr-15 100% 11 months $5.3 $5.4 1.02x 2.8%
Exits in 2014
Marina 19-May-14 20-May-12 100% 24 months $9.9 $14.9 1.51x 22.8%
Gazelle 6-Mar-14 17-May-13 100% 10 months $3.3 $6.1 1.87x 118.1%
Previous Exits
Oilco 8-Dec-13 6-Mar-12 100% 21 months $3.9 $6.7 1.73x 39.1%
Oasis 13-Feb-13 10-Oct-12 100% 4 months $3.3 $4.1 1.24x 87.9%
=========== ========== ============= ========= ========= ============== ============== ============= ======
QANNAS INVESTMENTS LIMITED
INVESTMENT MANAGER'S REPORT
FOR THE YEARED 31 DECEMBER 2016
====================================
Net Asset Value ("NAV") Summary
As of 31 December 2016, QIL had an NAV of approximately $64.7
million or $0.94 per share and total cash of $1.6 million.
Net Asset Value Summary In $,m
====================================== ============
Investments 31-Dec-16
====================================== ============
Project Beast (ADCM SPEF) $26.6
Project Beast (SPE Qannas C Limited) $5.8
Project Goldilocks $18.7
Project Integration $19.6
Project Adriatic (CentreVille Hotel) $9.7
Project Adriatic (HRC) $3.3
Project Palace $3.4
Project Demeter (IEEF) $3.1
Project Apex $0.8
Project Scholar $0.1
Cash $1.6
Non-Current Liabilities ($27.4)
Other Net Assets ($0.4)
NAV $64.9
====================================== ============
Shares Outstanding 68.8
NAV per share $0.94
====================================== ============
QANNAS INVESTMENTS LIMITED
INVESTMENT MANAGER'S REPORT
FOR THE YEARED 31 DECEMBER 2016
====================================
Investment Update
Project PPP
In Q3-2016, QIL exited 52% (GBP2.3 million) of the GBP4.4
million investment (which was part of a total commitment of GBP11
million) in Project PPP. Post exit, QIL's interest in the project
stands at GBP2.1 million with GBP6.6 million of outstanding
commitment. The investment is part of an overall tranche of GBP50
million investment in Palace Preferred Partners L.P., an SPV
created for the redevelopment of 1 Palace Street ("1PS"), London in
2014.
Project Integration
QIL's 47% stake in Integrated Financial Group ("IFG") was valued
at $19.6 million as at 31 December 2016. During Q1 2017, IFG
announced its intention to sell its subsidiaries (Integrated
Securities and Integrated Capital) to SHUAA Capital PSC, a public
listed financial services company in the UAE.
QIL invested in IFG in November 2014 to acquire and consolidate
two financial services companies, namely First Gulf Financial
Services (renamed as "Integrated Securities") and Injazmena
Investment Company (renamed as "Integrated Capital").
Project Adriatic (HRC)
QIL recognised an impairment of USD1.5million (EUR1.8 million)
on Hard Rock Café ("HRC") in FY 2016, of which US$0.5 million
related to the loan and the remainder to the investment, given the
lack of profitability and slow growth in the business. The
impairment primarily reflects operating losses capitalized during
the ramp up phase.
Project Demeter (IEEF)
During the year, QIL exited 70% of the senior secured term loan
of EUR7.0 million it made to Integrated Eastern European Fund
("IEEF") in 2014. The original term of the loan was two years at
15% interest per annum being rolled up until maturity. The loan
proceeds were deployed to enable IEEF to buy out third party
investors and acquire full control in two land holding companies
and to subsequently develop plots in Bulgaria and Montenegro into
hospitality-focused assets.
The remaining portion of the loan (EUR2.75 million) was extended
by two years at an interest rate of 12% per annum (USD based) with
a 3% arrangement fee on the extended amount.
QANNAS INVESTMENTS LIMITED
INVESTMENT MANAGER'S REPORT
FOR THE YEARED 31 DECEMBER 2016
====================================
Project Beast
During 2016, QIL received a total of US$1.5 million in
distributions from ADCM SPEF reflecting the distributions received
from the underlying funds. Subsequent to the year end, QIL received
a further distribution of US$4.8 million, which includes US$3.8
million from the sale of Gulf Capital Equity Partners Fund II, L.P.
("GCEP").
ADCM SPEF is also in the process of exiting its Limited
Partnership positions in Goldman Sachs PEP IX and Glouston PEH 2000
FTE LTD funds by 30 June 2017. The ADCM SPEF portfolio will
continue to liquidate its holdings and use proceeds to pay down
debt and make distributions to shareholders.
During FY 2016, QIL took a provision of US$11.6 million on its
investment in ADCM SPEF and SPE Qannas C Limited, reflecting the
carrying value of underlying funds in the secondary market. This is
a discount to the carrying value reported by General Partners of
the Limited Partnership positions; however the investment manager
chose to impair these assets based on market testing possible sale
values of these assets.
NAV of ADCM SPEF (as of 31 December, 2016) in US$'000
==================================================== =================
Fund Name NAV
==================================================== =================
The Abraaj Buyout Fund II L.P. $2,866
Infrastructure Growth Capital Fund L.P. $13,600
Abraaj Real Estate Fund L.P. $1,890
Glouston PEH 2000 FTE LTD[10] $201
Goldman Sachs PEP IX $1,688
Global Opportunistic Fund I $92
Global Opportunistic Fund II $331
Abraaj Real Estate Fund L.P. $378
Havenvest Private Equity Middle East L.P. $2,724
Gulf Capital Equity Partners Fund II, L.P. $3,889
TNI Growth Capital Fund, L.P. $2,374
Lumina Real Estate SSF I L.P. $339
Net Current Assets (Liabilities) $(3,770)
Carry Refund from SPEF (included within trade and
other receivables) $4,183
==================================================== =================
NAV $30,785
==================================================== =================
QANNAS INVESTMENTS LIMITED
INVESTMENT MANAGER'S REPORT - continued
FOR THE YEARED 31 DECEMBER 2016
========================================
Exits
During FY 2016, QIL exited the following investments:
-- Project Broadway
In February 2016, QIL completed the redemption of preferred
shares in BLD and received LIR3.8 million in proceeds (including
accrued preference dividends). QIL invested a total of LIR3.5
million in 2015 and generated (in USD) an IRR of 2.8% and a return
multiple of 1.08x on exit.
-- Project Taj
In February 2016, QIL announced the exit of its investment in
the secured Murabaha debt in Verne Preferred Limited ("VPL") and
received US$1.06 million (AED 3.9 million) in exit proceeds. QIL
invested a total of US$1.09 million (AED 4 million) in VPL in 2015
and received US$0.13 million in proceeds during the holding period.
QIL generated an IRR of 12.9% and a return multiple of 1.1x on
exit.
In addition to the above investment, QIL also exited partially
from IEEF and Project PPP as highlighted in the Investment Update
section.
Corporate Activity
In Q1-2016, QIL bought back 889,840 Ordinary Shares at a price
of $0.95 per Ordinary Share.
In Q1-2016, Jassim Alansaari Alseddiqi has resigned from his
position as a Board Director of QIL.
QANNAS INVESTMENTS LIMITED
DIRECTORS' REPORT
FOR THE YEARED 31 DECEMBER 2016
====================================
The Directors present their report and the audited financial
statements of the Company for the year ended 31 December 2016.
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 13. The Company suffered Total Comprehensive Loss of
$4,250,397 for the year ended 31 December 2016 (2015: $1,307,130).
The Company made no distributions during the current or prior
year.
Directors
The Directors who held office throughout the year and up to the
date of approving the financial statements (unless otherwise
indicated) were:
Jassim Mohamed Alseddiqi (resigned 16 March 2016)
Richard John Stobart Prosser
Christopher Ward (Chairman)
Richard Green
Mustafa Kheriba
Details of the financial interests of Directors are disclosed in
note 3 of the financial statements.
Secretary
Codan Trust Company (Cayman) Limited were company secretary
throughout the year and up to the date of approval of the financial
statements.
Registered office
The registered office of the Company throughout the year and up
to the date of approving the financial statements was that of Codan
Trust Company (Cayman) Limited, Cricket Square, Hutchins Drive,
P.O. Box 2681, George Town, Grand Cayman KY1-1111, Cayman
Islands.
Independent auditor
BDO Limited is the independent auditor and has expressed its
willingness to continue in office.
QANNAS INVESTMENTS LIMITED
DIRECTORS' REPORT
FOR THE YEARED 31 DECEMBER 2016
====================================
Responsibilities of the Directors
The Directors are responsible for preparing the annual report
and financial statements in accordance with International Financial
Reporting Standards as endorsed for use in the European Union
("IFRS"). In preparing these financial statements, the Directors
are required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and estimates that are reasonable and prudent;
-- specify which generally accepted accounting principles have
been followed, subject to any material departures disclosed and
explained in the financial statements; and
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
The Directors are responsible for keeping accounting records
which are sufficient to show and explain the Company's transactions
and are such as to disclose with reasonable accuracy at any time
the financial position of the Company and enable them to ensure
that the financial statements prepared by the Company comply with
the requirements of the Alternative Investment Market listing
rules. They are also responsible for safeguarding the assets of the
Company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
The Directors confirm that they have complied with the above
requirements.
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
Director
Date: ...............................................
INDEPENT AUDITORS' REPORT TO THE MEMBERS OF QANNAS INVESTMENTS
LIMITED
We have audited the financial statements of Qannas Investments
Limited (the 'Company') for the year ended 31 December 2016 which
comprise the Statement of Comprehensive Income, Statement of
Financial Position, Statement of Changes in Equity, Statement of
Cash Flows and the related notes 1 to 22. The financial reporting
framework that has been applied in their preparation is applicable
law and International Financial Reporting Standards as endorsed for
use in the European Union.
This report is made solely to the Company's members as a body.
Our audit work has been undertaken so that we might state to the
Company's members those matters we are required to state to them in
an auditors' 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.
Respective responsibilities of directors and auditor
As explained more fully in the Statement of Directors'
Responsibilities, the directors are responsible for the preparation
of the financial statements and for being satisfied that they give
a true and fair view. Our responsibility is to audit and express an
opinion on the financial statements in accordance with applicable
law and International Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Financial Reporting
Council's (FRC) Ethical Standards for Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and
disclosures in the financial statements sufficient to give
reasonable assurance that the financial statements are free from
material misstatement, whether caused by fraud or error. This
includes an assessment of: whether the accounting policies are
appropriate to the Company's circumstances and have been
consistently applied and adequately disclosed; the reasonableness
of significant accounting estimates made by the directors; and the
overall presentation of the financial statements.
In addition, we read all the financial and non-financial
information in the Chairman's Report, Investment Manager's Report
and the Directors' Report to identify any information that is
apparently materially incorrect based on, or materially
inconsistent with, the knowledge acquired by us in the course of
performing the audit. If we become aware of any apparent material
misstatements or inconsistencies we consider the implication for
our report.
Basis for qualified opinion on the financial statements
As disclosed in note 4 of the financial statements, included
within investments at fair value through profit or loss with a
carrying value of $74,114,197, is an investment in Goldilocks Fund
with a carrying value of $18,662,159. The evidence available to us
in relation to this investment is limited as the Directors of the
Company have been unable to provide sufficient and appropriate
audit evidence to verify its ownership, existence and
valuation.
The following are also directly linked to the above limitation
given the investment in Goldilocks Fund's carrying value and
movement therein contribute to their measurement and
disclosure:
- Included within the net unrealised gain on investments at fair
value through profit or loss of $159,597 is an unrealised gain of
$12,122,241 on the Goldilocks Fund investment;
- Included within the performance fee payable, with a carrying
value of $2,537,372, is an amount of $1,818,336 which is as a
result of the unrealised gain of the Goldilocks Fund
investment;
- Included within the movement in performance fee expense of
$490,869 is the impact of the $1,818,336 which is as a result of
the unrealised gain of the Goldilocks Fund investment;
- The investment management fee payable, with a carrying value
of $655,608, and the investment management fee expense for the year
of $1,291,840, will have increased as a direct result of the
unrealised gain on the Goldilocks Fund investment throughout the
year;
- The completeness and accuracy of the corresponding related
party transactions connected to this investment included in note 20
and other disclosures noted in the Director's Report, Chariman's
Report and Investment Manager's Report in respect of the investment
in the Goldilocks Fund.
Had the information described in the basis for qualified opinion
on the financial statements paragraph been available, we might have
formed a different opinion on the financial statements.
Qualified opinion on financial statements
In our opinion, except for the possible effects of the matters
as discussed in the basis for qualified opinion section of our
report, the financial statements:
-- give a true and fair view of the state of the Company's
affairs as at 31 December 2016 and of its loss for the year then
ended; and
-- have been properly prepared in accordance with International
Financial Reporting Standards as endorsed for use in the European
Union.
BDO Limited
Chartered Accountants
Jersey
29 June 2017
QANNAS INVESTMENTS LIMITED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 31 DECEMBER 2016
====================================
Notes 2016 2015
$ $
Income
Movement in management and performance
fee rebate receivable 17 (1,961,987) 138,531
Investment income 4 766,108 1,258,699
(1,195,879) 1,397,230
Expenditure
Secretarial and administration fees (111,071) (118,346)
Directors' remuneration 3 (75,017) (92,026)
Insurance expense (8,767) (9,666)
Investment manager fees (1,291,840) (1,339,963)
Movement in performance fees 17 (490,869) 246,535
Legal and professional fees (227,270) (263,042)
Audit fees (43,253) (65,399)
Sundry expenses (82,336) (34,138)
Bank charges (861) (2,083)
Realised loss on disposal of investments 4 (27,956) -
(2,359,240) (1,678,128)
------------ ------------
Net loss (3,555,119) (280,898)
Net movement on changes in fair value
of investments 4 159,597 (569,253)
Impairment of loans receivable 5 (512,689) -
Finance costs
Loan interest payable (1,211,791) (729,499)
Foreign exchange losses on loans receivable 5 (475,819) (957,149)
Gain / (loss) on foreign exchange 144,197 (109,353)
Finance income
Interest income - cash and cash equivalents 1,115 4,172
Interest income - loans receivable 5 1,200,112 1,334,850
------------ ------------
Loss for the year before taxation (4,250,397) (1,307,130)
Taxation provision for the year 15 - -
------------ ------------
Loss for the year after taxation (4,250,397) (1,307,130)
Other comprehensive income - -
Total comprehensive (loss) for the
year (4,250,397) (1,307,130)
============ ============
Earnings per share
Basic EPS on (loss) for the year 14 (0.06) (0.02)
============ ============
QANNAS INVESTMENTS LIMITED
STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2016
================================
31.12.16 31.12.15
Notes $ $ $ $
Assets
Non-current assets
Investments at fair
value
through profit and loss 4 55,370,362 75,231,608
Loans receivable 5 16,220,609 -
Property investments 6 - 779,560
Trade and other receivables 7 4,663,572 7,027,920
------------ -----------
Total non-current assets 76,254,543 83,039,088
Current assets
Investments at fair
value
through profit and loss 4 18,743,835 5,168,179
Loans receivable 5 - 10,743,138
Property investments 6 779,560 -
Trade and other receivables 7 406,304 1,178,927
Receivable from investment
manager 8 - 397,575
Cash and cash equivalents 9 1,619,011 7,264,513
------------ -----------
Total current assets 21,548,710 24,752,332
Total assets 97,803,253 107,791,420
=========== ============
Equity and liabilities
Equity
Management shares 12 2 2
Participating shares 12 67,799,019 68,644,367
13,
Retained earnings 19 (2,833,944) 1,416,453
------------ -----------
Total equity 64,965,077 70,060,822
Liabilities
Current liabilities
Trade and other payables 10 904,411 5,869,740
Loans payable 11 4,500,000 29,811,219
------------ -----------
Total current liabilities 5,404,411 35,680,959
Non-current liabilities
Trade and other payables 10 2,537,372 2,049,639
Loans payable 11 24,896,393 -
------------ -----------
27,433,765 2,049,639
Total liabilities and
equity 97,803,253 107,791,420
=========== ============
Representing net asset
value per Participating
share $0.94 $1.00
=========== ============
The financial statements were approved and authorised for issue
by the Board of Directors of Qannas Investments Limited and signed
on their behalf by:
........................................
Director Date
QANNAS INVESTMENTS LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 DECEMBER 2016
====================================
Management Participating Retained
share capital share capital earnings Total
$ $ $ $
At 1 January 2015 2 76,638,586 2,723,583 79,362,171
Purchase of participating shares
under tender offer - (7,994,219) - (7,994,219)
Total comprehensive loss - - (1,307,130) (1,307,130)
At 31 December 2015 2 68,644,367 1,416,453 70,060,822
-------------- -------------- ------------ ------------
At 1 January 2016 2 68,644,367 1,416,453 70,060,822
Purchase of participating shares
under tender offer - (845,348) - (845,348)
Total comprehensive loss - - (4,250,397) (4,250,397)
At 31 December 2016 2 67,799,019 (2,833,944) 64,965,077
============== ============== ============ ============
QANNAS INVESTMENTS LIMITED
STATEMENT OF CASH FLOWS
FOR THE YEARED 31 DECEMBER 2016
====================================
2016 2015
$ $
Operating activities
(Loss) for the year before taxation (4,250,397) (1,307,130)
Net movement on changes in fair value
of investments (159,597) 569,253
Realised loss on disposal of investments 27,956 -
Interest income (1,201,227) (1,339,022)
Loan interest payable 1,211,791 729,499
Foreign exchange losses on loans receivable 475,819 957,149
Impairment of loans receivable 512,689 -
(Gain) / loss on foreign exchange (144,197) 109,353
Decrease in trade receivables 2,926,700 85,286
Decrease in receivable from investment
manager 397,575 17,602,425
Decrease in trade payables (4,470,174) (406,710)
Net cash flow from operating activities (4,673,062) 17,000,103
------------- -------------
Investing activities
Interest received - cash and cash equivalents 1,115 66,774
Interest received - loans receivable 1,227,724
Issue of loans receivable (10,251,246) (1,027,247)
Repayment of loans receivable 6,948,710 -
Purchase of investments (6,539,919) (23,802,457)
Proceeds from disposal of investments 9,144,301 -
Capital distributions received from investments 848,051 1,339,457
Purchase of property investments - (779,560)
Net cash flow from investing activities 1,378,736 (24,203,033)
------------- -------------
Financing activities
Drawdown of bank loan - 19,800,000
Loan interest paid (940,872) (502,084)
Loan fees (640,000) -
Purchase of own participating shares
under tender offer (845,348) (7,994,219)
Net cash flow from financing activities (2,426,220) 11,303,697
------------- -------------
Net (decrease) / increase in cash and
cash equivalents (5,720,546) 4,100,767
Effect of foreign exchange movements 75,044 (109,353)
Cash and cash equivalents at 1 January 7,264,513 3,273,099
Cash and cash equivalents at 31 December 1,619,011 7,264,513
============= =============
QANNAS INVESTMENTS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2016
====================================
1. GENERAL INFORMATION
The Company is an exempt closed-end investment company listed on
London's Alternative Investment Market ("AIM"), with an unlimited
life, incorporated in the Cayman Islands. The registered office of
the Company is that of Codan Trust Company (Cayman) Limited,
Cricket Square, Hutchins Drive, P.O. Box 2681, George Town, Grand
Cayman KY1-1111, Cayman Islands.
The Company's principal activity is that of investing, centred
around a theme-based investment approach, which has evolved over
the years, starting with a focus on distressed / opportunistic
investments in the UAE in 2012 and 2013 and broadening to the
acquisition of secondary portfolios of regional PE funds and
European real estate investments since 2014. The Company's
investment objective is to generate value for shareholders by
creating a portfolio of opportunistic investments in real estate,
debt, and equities (both public and private) in the MENA region and
Europe. Investments will be made where there is a liquidity
requirement or portfolio repositioning on the part of a vendor such
that assets become available at a discount to their intrinsic
value. The Company will aim to acquire such assets and then to
dispose of them at a premium to their acquisition cost.
2. SIGNIFICANT ACCOUNTING POLICIES
Basis of preparation
The financial statements have been prepared under the historical
cost convention, except for the revaluation of certain financial
instruments and investments which are included at fair value, and
in accordance with applicable International Financial Reporting
Standards as endorsed for use in the European Union ("IFRS") and,
where applicable, the Association of Investment Companies Statement
of Recommended Practice ("AIC SORP"). The principal accounting
policies are set out below.
Basis of measurement
The Company classifies its investments in the following
categories: investments at fair value through profit or loss and
loans and receivables. The classification depends on the nature and
purpose of each investment. The Directors determine the
classification of its investments at initial recognition.
Investments at fair value through profit and loss
The Company classifies its investments in equity and limited
partnership interests as financial assets at fair value through
profit or loss.
Investments are recognised and de-recognised on the trade date -
the date on which the Company commits to purchase or sell an
investment. Investments are initially recognised at cost.
Transaction costs are expensed as incurred in the Statement of
Comprehensive Income. Investments are de-recognised when the rights
to receive cash flows from the investments have expired or the
Company has transferred substantially all risks and rewards of
ownership.
Subsequent to initial recognition, investments are measured at
their fair value. Gains and losses arising from changes in the fair
value are presented in the Statement of Comprehensive Income in the
period in which they arise.
Dividend income is recognised in the Statement of Comprehensive
Income when the Company's right to receive payments is
established.
Fair value is the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. The fair value of
financial assets and liabilities traded in active markets (such as
publicly traded securities) are based on quoted market prices at
the close of trading on the reporting date. The Company utilises
the last traded market price for both financial assets and
financial liabilities where the last traded price falls within the
bid-ask spread. In circumstances where the last traded price is not
within the bid-ask spread, the Directors will determine the point
within the bid-ask spread that is most representative of fair
value.
QANNAS INVESTMENTS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2016
====================================
2. SIGNIFICANT ACCOUNTING POLICIES
Investments at fair value through profit and loss -
continued
The fair value of financial assets and liabilities that are not
traded in an active market is determined using valuation
techniques. The Company uses a variety of methods and makes
assumptions that are based on market conditions existing at each
reporting date. Valuation techniques used include the use of
comparable recent arm's length transactions, reference to other
instruments that are substantially the same, discounted cash flow
analysis, option pricing models and other valuation techniques
commonly used by market participants making the maximum use of
market inputs and relying as little as possible on entity-specific
inputs.
Loans receivable
Loans receivable are non-derivative financial assets with fixed
or determinable payments that are not quoted in an active market.
They are classified as loans and receivables.
Loans receivable are recognised on the date on which the Company
commits to provide a loan. The loans are initially recognised at
cost. Transaction costs associated with the loans are spread over
the life of the facility using the effective interest rate method.
Loans receivable are derecognised when the rights to receive
interest income have expired and the loan has been repaid.
Subsequent to initial recognition, loans receivable are measured
at amortised cost using the effective interest rate method, less
provision for impairment.
Interest income is recognised in the Statement of Comprehensive
Income when the Company's right to receive payments is
established.
Property investments
The Company classifies property investments at fair value
through profit or loss.
Acquisition of property under construction is made in stages
with deposits paid to secure the Company's investment. Such
payments are recognised at cost and subsequently measured at fair
value on completion of the development.
These investments are recognised and de-recognised on the trade
date - the date on which the Company commits to 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.
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.
QANNAS INVESTMENTS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2016
====================================
2. SIGNIFICANT ACCOUNTING POLICIES
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 note 18.
(ii) Valuation of quoted investments - These are valued at the
last traded price on the reporting date and in accordance with
IFRS, no discount is applied for the liquidity of the stock or any
dealing restrictions.
(iii) Valuation of loans receivable - Loans receivable are held
at amortised cost. The Directors undertake regular impairment
reviews of loans receivable to ensure that they remain
recoverable.
(iv) Valuation of property investments - These are valued with
reference to similar sales transactions. Prices of comparable
transactions in similar locations are adjusted for key differences
in attributes such as size.
Foreign currencies
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of the
transactions. Foreign currency assets and liabilities are
translated into the functional currency using the exchange rate
prevailing at the Statement of Financial Position date.
Foreign exchange gains and losses arising from translation are
included in the Statement of Comprehensive Income. Foreign exchange
gains and losses relating to cash and cash equivalents are
presented in the Statement of Comprehensive Income. Foreign
exchange gains and losses relating to the financial assets and
liabilities carried at fair value through profit or loss are
presented in the Statement of Comprehensive Income within 'net
movement on changes in fair value of investments'.
Financial assets and liabilities
The Company classifies its financial assets and liabilities as
follows:
Cash and cash equivalents
Cash and cash equivalents comprises deposits held 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
FOR THE YEARED 31 DECEMBER 2016
====================================
2. SIGNIFICANT ACCOUNTING POLICIES
Financial assets and liabilities - continued
Receivable from investment manager
Receivable from investment manager comprises deposits held by
the Investment Manager in order to allow them to facilitate
on-going transactions arising from structures at different stages
of formation.
Trade and other payables
Trade and other payables are initially recognised at fair value
and subsequently carried at amortised cost; their carrying values
are a reasonable approximation of fair value.
Trade and other payables represent contractual amounts and
obligations due by the Company.
Loans payable
Loans payable are measured initially at cost. Subsequent to
initial recognition, they are measured at amortised cost using the
effective interest rate method. They are classified as loans and
receivables. These financial liabilities are recognised when the
Company enters into a loan agreement and are derecognised when the
loan agreement is terminated.
The effective interest rate method is a method of calculating
the amortised cost of a financial liability and of allocating the
interest expense over the relevant period. The effective interest
rate is the rate that exactly discounts estimated future cash
payments or receipts over the expected life of the financial
instrument, in order that the present value of the future cash
flows, including fees or transaction costs, is equal to the
carrying amount of the financial instrument.
Finance costs associated with loans payable have been spread on
an effective interest rate constant basis over the life of the
loan.
Shares in issue
Management Shares are not redeemable, do not participate in the
net income or dividends of the Company and are recorded at $1.00
per share.
Participating shares in issue are not redeemable at the
shareholder's option.
Participating shares which are acquired by the Company are
recognised at cost and deducted from equity. No gain or loss is
recognised in the Statement of Comprehensive Income on the
purchase, sale, issue or cancellation of the Company's own equity
instruments. Any differences between the carrying amount and the
consideration are recognised in retained earnings.
Revenue recognition
Revenue is measured at the fair value of the consideration
received or receivable in the normal course of business. The
Company recognises revenue when the amount of revenue can be
reliably measured and when it is probable that the future economic
benefits will flow into the Company.
Taxation
The Company is domiciled in the Cayman Islands and is treated as
resident for tax purposes and is subject to the zero per cent
standard income tax rate.
Expenditure and transaction costs
All items of expenditure, including the performance and
management fees, are recognised on an accruals basis.
Distributions payable
The payment of dividends will depend on the availability of
distributable reserves, cash resources and the working capital
requirements of the Company. Dividends paid are included in the
Company financial statements in the period in which the related
dividends are declared.
QANNAS INVESTMENTS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2016
====================================
2. SIGNIFICANT ACCOUNTING POLICIES
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.
Segmental reporting
The Company is operated as one segment by the Board of Directors
(which is considered to be the Chief Operating Decision Maker).
Operating segments are reported in a manner consistent with the
internal reporting used by the Chief Operating Decision Maker. The
Board of Directors is responsible for allocating resources and
assessing performance of the operating segments, has been
identified as the Board of Directors.
The Directors make the strategic resource allocations on behalf
of the Company. The Company has determined the operating segments
based on the reports reviewed by the Board of Directors, which are
used to make strategic decisions.
The Board of Directors is responsible for the Company's entire
portfolio and considers the business to have a single operating
segment. The Board of Directors asset allocation decisions are
based on a single, integrated investment strategy, and the
Company's performance is evaluated on an overall basis.
The Company trades in a diversified portfolio of securities with
the objective of generating value for shareholders.
The internal reporting provided to the Board of Directors for
the Company's assets, liabilities and performance is prepared on a
consistent basis with the measurement and recognition principles of
IFRS.
There were no changes in the reportable segments during the
year.
Adoption of new and revised standards
The Directors have assessed the impact, or potential impact, of
all new accounting requirements. In the opinion of the Directors,
there are no mandatory new accounting requirements applicable in
the current year that have any material effect on the reported
performance, financial position, or disclosures of the Company. The
Company has not adopted any new accounting requirements that are
not mandatory.
Amendments adopted early by the Company
There were no standards, amendments and interpretations which
are effective for the financial year beginning on 1 January 2016
that were material to the Company, except for the amendments to
IFRS10, IFRS12 and IAS28 in respect of the application of the
consolidation exemption to investment entities.
The changes to IFRS10, IFRS12 and IAS28 have been applied within
these financial statements historically.
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 2017, and have not been adopted in preparing these
financial statements: -
QANNAS INVESTMENTS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2016
====================================
2. SIGNIFICANT ACCOUNTING POLICIES
Adoption of new and revised standards
New standards and interpretations not yet adopted
IFRS 9 Financial Instruments
IFRS 9 addresses the classification, measurement and recognition
of financial assets and financial liabilities. The complete version
of IFRS 9 was issued in July 2014. It replaces the guidance in IAS
39 that relates to the classification and measurement of financial
instruments. IFRS 9 retains but simplifies the mixed measurement
model and establishes three primary measurement categories for
financial assets: amortised cost, fair value through OCI and fair
value through P&L. The basis of classification depends on the
entity's business model and the contractual cash flow
characteristics of the financial asset. Investments in equity
instruments are required to be measured at fair value through
profit or loss with the irrevocable option at inception to present
changes in fair value in OCI not recycling. There is now a new
expected credit losses model that replaces the incurred loss
impairment model used in IAS 39.
For financial liabilities there were no changes to
classification and measurement except for the recognition of
changes in own credit risk in other comprehensive income, for
liabilities designated at fair value through profit or loss. IFRS 9
relaxes the requirements for hedge effectiveness by replacing the
bright line hedge effectiveness tests. It requires an economic
relationship between the hedged item and hedging instrument and for
the 'hedged ratio' to be the same as the one the Directors actually
use for risk management purposes. Contemporaneous documentation is
still required but is different to that currently prepared under
IAS 39. The standard is effective for accounting periods beginning
on or after 1 January 2018. Early adoption is permitted, subject to
EU endorsement.
The Directors anticipate that the application of IFRS 9 in the
future may have an impact on the presentation of the Company's
financial assets. However, it is not practicable to provide a
reasonable estimate of the effect of IFRS 9 until a detailed review
has been completed. The Directors will undertake this review in due
course.
IFRS 15 Revenue from Contracts with Customers
IFRS 15 deals with revenue recognition and establishes
principles for reporting useful information to users of financial
statements about the nature, amount, timing and uncertainty of
revenue and cash flows arising from an entity's contracts with
customers. Revenue is recognised when a customer obtains control of
a good or service and thus has the ability to direct the use and
obtain the benefits from the good or service. The standard replaces
IAS 18 'Revenue' and IAS 11 'Construction contracts' and related
interpretations. The standard is effective for annual periods
beginning on or after 1 January 2018 and earlier application is
permitted, subject to EU adoption. The Company is in the process of
assessing the impact of IFRS 15.
3. DIRECTORS' REMUNERATION AND INTERESTS
The remuneration of the individual Directors who served in the
year to 31 December 2016 was:
31.12.16 31.12.15
$ $
Jassim Mohamed Alseddiqi - -
Richard John Stobart Prosser 24,546 26,344
Christopher Ward 25,255 35,759
Richard Green 25,216 29,923
Mustafa Kheriba - -
75,017 92,026
========= =========
QANNAS INVESTMENTS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2016
====================================
3. DIRECTORS' REMUNERATION AND INTERESTS
Directors' interests in the shares of the Company, including
family interest, at 31 December 2016 were:
Share Nominal % Held
Participating
Jassim Mohamed Alseddiqi shares 2,018,778 * 2.90%
Participating
Christopher Ward shares 100,000 0.14%
Participating
Richard Green shares 100,000 0.14%
Participating
Mustafa Kheriba shares 531,278 0.76%
* In addition to the above, Jassim Mohamed Alseddiqi also has an
indirect interest in 5,601,579 shares.
4. INVESTMENTS AT FAIR VALUE THROUGH PROFIT AND LOSS
31.12.16 31.12.15
$ $
Fair value brought forward 80,399,787 53,213,946
Additions 6,539,918 29,094,551
Disposals (12,109,098) -
Realised losses (27,956) -
Capital distributions (848,051) (1,339,457)
Unrealised gain/(losses) on the revaluation
of investments 159,597 (569,253)
Fair value at 31 December 74,114,197 80,399,787
============= ============
Investments comprise:
31.12.16 31.12.15
Fair Value Fair Value
$ $
Non-current assets
Madaares PJSC - 68,063
SPE Qannas C Limited 5,789,942 8,193,775
ADCM Secondary Private Equity Fund
L.P. ("ADCM SPEF") 26,602,072 35,791,687
EE F&B Holding Limited 1 4,089,162
Palace Preferred Partners
L.P. 3,370,229 7,480,803
BL Development Limited - 5,167,180
Verne Preferred Limited - 999
Integrated Financial
Group, LLC 19,608,118 19,608,118
55,370,362 80,399,787
----------- -----------
Current assets
Goldilocks Fund 18,662,159 -
Madaares PJSC 81,676 -
-----------
18,743,835 -
-----------
Total 74,114,197 80,399,787
=========== ===========
The fair values of the investments are based on the latest
available net asset value reports and / or financial information
available of the underlying companies.
QANNAS INVESTMENTS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2016
====================================
4. INVESTMENTS AT FAIR VALUE THROUGH PROFIT AND LOSS
Investments at 31 December 2016 comprise:
Class of No. of Percentage Book
shares shares holding Cost
held
$
Madaares PJSC Ordinary 250,000 0.03% 68,063
SPE Qannas C Limited Preference 8,039,559 74.3% 7,930,886
ADCM Secondary Private
Equity Fund L.P. - - 96.5% 32,679,105
EE F&B Holding Limited Ordinary 1,000 100% 1
Palace Preferred Partners
L.P. - - 10.57% 3,343,247
Goldilocks Fund Units 17,341,475 7.7% 6,539,918
Integrated Financial
Group, LLC Ordinary 73,908 47.4% 18,667,177
69,228,397
===========
In February 2016, the Company made an equity investment of $5.45
million in Project Goldilocks ("Goldilocks"), an investment
strategy used by the Company's investment manager to invest in
public equities listed on the GCC stock exchanges. The investment
was in units in a co-mingled pool and made at the then NAV of $0.37
per unit. In the same month, the Company made another $1.1m
investment as a follow-on investment in Goldilocks at the then NAV
of $0.44 per unit.
Goldilocks was managed by Integrated Capital ("IC"), a UAE
Central Bank licensed Investment Firm based in Abu Dhabi, UAE and a
wholly-owned subsidiary of Integrated Financial Group, LLC. QIL
made the investments in Goldilocks on the basis of a Subscription
Service Agreement with IC signed in February 2016.
Subsequent to the year end, the investment 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 2016, the Company divested the
following investments: -
-- The holding in BL Development, realising proceeds of
$5,000,100 (GBP3,500,000). The disposal resulted in a reduction of
$167,080 over cost as at 31 December 2015;
-- The holding in Verne Preferred Limited realising proceeds of
$999. There was no gain or loss arising on disposal; and
-- Part of the holding in Palace Preferred Partners L.P. for
proceeds of $4,025,741 (GBP3,300,000). The disposal resulted in a
gain of $139,124 over cost as at 31 December 2015.
-- Part of the holding in EE F&B Holding Limited, which was
previously invested through Abu Dhabi Financial Group, amounting to
$2,963,798 (EUR2,695,710) was converted into a loan receivable
during the year. The remaining balance of the investment was
written down to $1 based on anticipated cash flows, which are
considered to relate to the loan balance.
During the year ended 31 December 2016, the Company received the
following income from its investments: -
-- $693,856 (2015: $892,971) from ADCM Secondary Private Equity Fund L.P.; and
-- $72,252 (2015: $365,728) from BL Development Limited.
At 31 December 2016 the Company had entered into the following
commitment:
Total Commitment
Commitment Outstanding
at
31.12.16
Palace Preferred Partners L.P. GBP8,741,641 GBP6,600,000
The loan due to First Gulf Bank PJSC (as detailed in note 11) is
secured by way of a charge over the Company's investment in ADCM
Secondary Private Equity Fund L.P., SPE Qannas C Limited and Palace
Preferred Partners L.P.
QANNAS INVESTMENTS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2016
====================================
5. LOANS RECEIVABLE
31.12.16 31.12.15
$ $
Brought forward 10,743,138 9,463,120
Additions 13,215,045 1,089,918
Capitalised loan interest 160,775 1,147,249
Disposals (6,909,841) -
Impairment (512,689) -
Losses on foreign exchange (475,819) (957,149)
16,220,609 10,743,138
============ ===========
At 31 December 2016, loans receivable comprise: -
Interest Maturity Carrying Carrying
rate Date value Value
CCY $
Capital Hotel d.o.o. 4% 24 July 2018 EUR9,237,638 9,732,406
EE F&B Holding Limited 4% Not defined EUR3,480,710 3,308,753
Integrated Eastern
European Fund 12% August 2018 EUR1,386,490 1,521,950
Integrated Eastern
European Fund 12% August 2018 EUR1,103,457 1,211,265
Lucice Montenegro
d.o.o. 12% August 2018 EUR23,177 25,441
Arqutino EAD 12% August 2018 EUR236,876 260,019
Capitalised interest EUR146,466 160,775
16,220,609
===========
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.
During the year the loan facility with Verne Preferred Limited
was repaid in full as were parts of the loan facilities with
Integrated Eastern European Fund, Lucice Montenegro d.o.o. and
Arquinto EAD.
In July 2016, the company granted a loan facility to Capital
Hotel d.o.o.. The loan term is for 2 years from issue and bears
interest at the rate 4%.
The company increased the loan facility with EE F&B Holding
Limited during 2016 by $2,693,798 (EUR2,595,710) in July 2016
following a reassignment of its investment. This loan and
investment was subsequently impaired by $512,689 at the year-end
following a review of the counterparty by the investment
manager.
Loan interest in respect of the above loans totalling $1,200,112
(2015: $1,334,850) is included in the Statement of Comprehensive
Income for the year.
The loans to Integrated Eastern European Fund (formerly European
Injaz Eastern Property Development Company Limited), Lucice
Montenegro d.o.o. and Arqutino EAD are secured by way of share
pledges and mortgage agreements in the underlying companies.
QANNAS INVESTMENTS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2016
====================================
6. PROPERTY INVESTMENTS
31.12.16 31.12.15
$ $
Fair value brought forward 779,560 -
Additions - 779,560
Fair value at 31 December 779,560 779,560
========= =========
This represents the deposit paid by the Company to acquire 2
premium units (the 'units') in the development Marina 101 at Dubai
Marina. The total cost of the units will be AED 9.1m ($2.5m), of
which AED 2.9m ($779,560) had been paid at 31 December 2016.
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.
7. TRADE AND OTHER RECEIVABLES
31.12.16 31.12.15
$ $
Non-current
Performance fee rebate receivable (see
note 17) 4,663,572 7,027,920
========== ==========
Current
Sundry debtors 34 34
Management fee rebate receivable (see note
17) 98,618 318,552
Loan interest and income receivable 286,872 497,143
Investment income receivable - 352,687
Prepayments 20,780 10,511
406,304 1,178,927
========== ==========
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. RECEIVABLE FROM INVESTMENT MANAGER
Receivable from investment manager represented amounts advanced
to ADCM Ltd during the year ended 31 December 2014 for deployment
into various investments following the year end.
As at 31 December 2016 all of the funds have been utilised and
either converted into investments or returned to the Company. At 31
December 2015 $397,575 remained uninvested.
QANNAS INVESTMENTS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2016
====================================
9. CASH AND CASH EQUIVALENTS
31.12.16 31.12.15
$ $
First Gulf Bank 1,545,898 7,001,437
Royal Bank of Scotland International 73,113 263,076
----------
1,619,011 7,264,513
========== ==========
10. TRADE AND OTHER PAYABLES
31.12.16 31.12.15
$ $
Non-current
Performance fees 2,537,372 2,049,639
========== ==========
Current
Secretarial, administration and accountancy
fees 24,790 73,414
Director fees 13,565 30,080
Investment manager fees 655,608 313,822
Performance fees 13,911 10,774
Legal and professional fees 28,060 58,651
Audit fees 28,364 31,092
Sundry expenses 3,263 3,552
Loan interest payable 136,849 91,104
Loan interest received in advance - 52,169
Investments payable - 999
Unquoted investment purchase payable - 5,204,082
Participating shares 1 1
----------
904,411 5,869,740
========== ==========
The Directors consider that the carrying amount of trade and
other payables approximates to their fair value.
QANNAS INVESTMENTS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2016
====================================
11. LOANS PAYABLE
31.12.16 31.12.15
$ $
Loan Capital
Brought forward 30,000,000 10,000,000
Drawn down in year - 20,000,000
Issue Costs
Brought forward (188,781) (152,767)
Incurred in the year (640,000) (200,000)
Amortised during the year 225,174 163,986
29,396,393 29,811,219
=========== ===========
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 LIBOR + 3.5% per annum
(previously 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
$4,500,000.
The loan is secured by way of a pledge with First Gulf Bank PJSC
in respect of the receivable accounts held by the Company and by
way of a charge over the Company's investment in ADCM Second
Private Equity Fund L.P., SPE Qannas C Limited, Palace Preferred
Partners L.P., Integrated Financial Group LLC and Marina 101.
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.
12. SHARE CAPITAL
31.12.16 31.12.15
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:
68,828,605 (2015: 69,718,445)
participating shares of
no par value at various issue
prices 76,638,587 76,638,587
============== ==============
Treasury shares:
10,502,749 (2015: 9,612,909)
participating shares of no par
value redeemed at various prices (8,839,568) (7,994,220)
============== ==============
QANNAS INVESTMENTS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2016
====================================
12. SHARE CAPITAL - continued
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 2016 and 31 December
2015 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 889,840 $1 participating
shares at a price of $0.95 per share. These shares are held as
treasury shares and as such are not entitled to any dividends paid
by the Company or any rights to vote at meetings of the
Company.
During the prior year, the Company redeemed 8,414,964 $1
participating shares as part of a tender offer at a price of $0.95
per share. These shares are held as treasury shares and as such are
not entitled to any dividends paid by the Company or any rights to
vote at meetings of the Company.
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.
QANNAS INVESTMENTS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2016
====================================
13. RETAINED EARNINGS - UNREALISED AND REALISED SPLIT
Retained earnings at 31 December 2016 comprise the following
revenue items, split between realised and unrealised income: -
Unrealised Realised Total
$ $ $
Balance at 1 January 2016 9,769,524 (8,353,071) 1,416,453
Income (1,961,987) 766,108 (1,195,879)
Expenditure - (2,359,240) (2,359,240)
Net gains and losses on investments 159,597 - 159,597
Impairment of loans receivable (512,689) - (512,689)
Loan interest payable - (1,211,791) (1,211,791)
Foreign exchange losses on loans
receivable (475,819) - (475,819)
Gain on foreign exchange - 144,197 144,197
Interest income - cash and cash
equivalents - 1,115 1,115
Interest income - loans receivable - 1,200,112 1,200,112
------------ ------------ ------------
Balance at 31 December 2016 6,978,626 (9,812,570) (2,833,944)
============ ============ ============
The retained earnings are distributable to the investors at the
discretion of the Directors if, in their opinion, the profits of
the Company justify such payments. The Directors consider the
future requirements of the Company when making such
distributions.
14. EARNINGS PER SHARE
Earnings per share is calculated by dividing the profit
attributable to the participating shareholders of the Company by
the weighted average number of participating shares in issue during
the year, excluding the average number of participating shares
purchased by the Company and held as treasury shares.
Up until 18 March 2016, there were 69,718,445 preference shares
in issue. On 18 March 2016 the Company repurchased 889,840
preference shares which are held in equity as treasury shares. The
average number of shares in issue during the year ended 31 December
2016 was 69,013,416.
31.12.16 31.12.15
Total loss for the year after taxation
($) (4,250,397) (1,307,130)
Weighted average number of participating
shares in issue 69,013,416 77,369,081
Basic earnings per share ($ per share) (0.06) (0.02)
============ ============
The Company has not issued any shares or other instruments that
are considered to have dilutive potential.
15. TAXATION
Provision has been made in these financial statements for Cayman
Islands income tax at 0%.
16. DISTRIBUTIONS
Distributions of $nil (2015: $nil) were paid during the
year.
QANNAS INVESTMENTS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2016
====================================
17. PERFORMANCE FEES
The Investment Manager is entitled to a fee based upon the
performance of the investments (the "Performance Fee"). The
calculation for this fee changed in 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.
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.
QANNAS INVESTMENTS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2016
====================================
17. PERFORMANCE FEES - continued
Rebates
Following the acquisition of ADCM SPEF, in order to prevent the
double-charging of Management and Performance Fees ADCM Ltd (in its
capacity as Investment Manager to ADCM SPEF) and ADCM SPEF GP
Limited (in its capacity as general partner of ADCM SPEF) entered
into an agreement with the Company, such that they shall rebate to
the Company any Management Fee or Performance Fee that they receive
from ADCM SPEF, which is attributable to the Company's percentage
ownership of ADCM SPEF.
Following the acquisition of SPE Qannas C Limited, in order to
prevent the double-charging of Performance Fees, ADCM Ltd (in its
capacity as Investment Manager to SPE Qannas C Limited) entered
into an agreement with the Company, such that they shall rebate to
the Company any Performance Fee that they receive from SPE Qannas C
Limited.
The Company has accrued Management Fee rebate income in respect
of ADCM SPEF of $98,618 at 31 December 2016 (2015: $318,552). The
Company has accrued Performance Fee rebate income in respect of
ADCM SPEF and SPE Qannas C Ltd of $4,663,572 at 31 December 2016
(2015: $7,027,920).
The timing of receipt of the Performance Fee rebate is uncertain
and is dependent on the realisation of the underlying investments
held by ADCM SPEF and SPE Qannas C Limited. As such, the
Performance Fee rebate has been classified as a non-current asset
within the Statement of Financial Position.
A reconciliation of the rebate recognised in the statement of
comprehensive income can be seen below:
31.12.16 31.12.15
$ $
Opening performance fee rebate receivable
(note 7) (7,027,920) (7,315,202)
Opening management fee rebate receivable
(note 7) (318,552) (465,925)
Management fee rebate received in the
year 622,295 573,186
Closing performance fee rebate receivable
(note 7) 4,663,572 7,027,920
Closing management fee rebate receivable
(note 7) 98,618 318,552
(1,961,987) 138,531
============ ============
18. FINANCIAL RISK MANAGEMENT
The Company's activities expose it to a variety of financial
risks: market risk (including price risk, interest rate risk and
foreign currency risk), credit risk and liquidity risk. The
Company's overall risk management programme focuses on the
unpredictability of financial markets and seeks to minimise
potential adverse effects on the Company's financial
performance.
The management of these risks is performed by the Board of
Directors. The policies for managing each of these risks are
summarised below.
Management of market risk
Price risk
The Company is exposed to market price risk in respect of its
portfolio of investments via equity securities price risk. The risk
arises from investments held by the Company for which prices in the
future are uncertain. Where non-monetary financial instruments are
denominated in currencies other than the US dollar, the price
initially expressed in foreign currency and then converted into US
dollar will also fluctuate because of changes in foreign exchange
rates (further details on the foreign exchange risk can be seen
later in this note).
The Company mitigates price risk by having established
investment appraisal processes and asset monitoring procedures
which are subject to overall review by the board. The Company also
manages the risk by appropriate diversification of its assets.
Details of the Company's investments are given in notes 4, 5 and
6.
QANNAS INVESTMENTS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2016
====================================
18. FINANCIAL RISK MANAGEMENT - continued
Management of market risk - continued
Price risk sensitivity
The table below summarises the impact on the Company's profit
before taxation for the year and on equity of a 10 per cent
increase / decrease in the price of the investment portfolio. The
sensitivity is based on the effect of the market volatility in the
current climate and previous experience with regards to the
Company's quoted investment.
2016 2015
------------------------- ---------------------
Impact of a 10% Investments Total Investments Total
price change
Investment portfolio $1,874,385 $1,874,385 $6,806 $6,806
============ =========== ============ =======
Interest rate risk
The Company's interest rate risk principally arises from
borrowings in the form of the loan payable (see note 11) and
receivables in the form of loans receivable (see note 5).
The Company relies on receipt of investment income and realised
gains on investments to meet interest obligations due on the Loan
Payable. The loan payable bears interest at 3.5% plus US LIBOR. The
board has, in consultation with the Investment Manager, reviewed
the terms of the loan and are satisfied that the risk of
significant movements in US LIBOR over the term of the loan is low.
Through cash flow projections and the structuring of the Company,
the Board of Directors believe the Company will have sufficient
cash available to meets its obligations as they fall due and
therefore, there is no material interest rate risk.
The Loans receivable carry fixed rates of interest and so there
is no risk arising from movement in interest rates on income
receivable by the Company.
Foreign exchange risk
The Company operates internationally and is exposed to foreign
exchange risk arising from various currency exposures.
Foreign exchange risk is the risk that the fair value of future
transactions, recognised monetary and non-monetary assets and
liabilities denominated in other currencies fluctuate due to
changes in foreign exchange rates. Trade payables are settled
within short time periods in order to minimise the fluctuation
between expected and actual expenditure.
The Company's investments in financial instruments are valued in
US dollars. The Company holds cash deposits denominated in
currencies other than US dollars, the functional and presentational
currency. Some of the Company's payables are transacted in
currencies other than US dollars.
The significant currency assets of the Company are held in AED,
GBP and EUR. The Board considers that its exposure to foreign
exchange risk is limited. The AED is 'pegged' to USD and the
Investment Manager monitors EUR and GBP currency movements and
proposes any action deemed appropriate.
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 US 31.12.16 31.12.15
dollars)
EUR GBP AED EUR GBP AED
Assets
Monetary assets - 1,549,799 137 - 262,881 137
Non-monetary
assets 16,507,481 3,376,648 862,632 10,150,363 12,759,568 1,870,477
Liabilities
Monetary liabilities - - - - - -
Non-monetary
liabilities - 92,031 13,911 - 168,165 -
QANNAS INVESTMENTS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2016
====================================
18. FINANCIAL RISK MANAGEMENT
Management of market risk
Foreign exchange risk - continued
The below table summarises the sensitivity of the Company's
monetary and non-monetary assets and liabilities to changes in
foreign exchange movements at 31 December. The analysis is based on
the assumptions that the relevant foreign exchange rate
increased/decreased by the percentage disclosed in the table below,
with all other variables held constant. This represents the
Directors' best estimate of a reasonable possible shift in the
foreign exchange rates, having regard to historical volatility of
those rates.
Reasonable Reasonable
possible possible
Currency rate 31.12.16 rate 31.12.15
shift shift
$ $
Euros (EUR)
Monetary + / - 5% - + / - 5% -
Non-monetary + / - 5% + / - 825,374 + / - 5% + / - 507,518
Pound Sterling (GBP)
Monetary + / - 5% + / - 77,490 + / - 5% + / - 13,144
Non-monetary + / - 5% + / - 164,231 + / - 5% + / - 629,570
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, receivable from investment manager, cash & cash
equivalents and loans receivable.
Credit risk on trade and other receivables is managed by regular
review by the Board of Directors of the positions with debtors to
ensure that amounts included remain recoverable. The Board of
Directors is satisfied that amounts included within trade and other
receivables are recoverable. The Company's maximum exposure in
respect of Trade & other receivables is detailed in note 7.
The Company seeks to limit the level of credit risk on the cash
balances by only depositing surplus liquid funds with counterparty
banks with high credit ratings. The Company does not hold any
derivative financial instruments.
The credit risk associated with trading and portfolio
investments is considered minimal.
Credit quality
31.12.16 31.12.15
$ $
Cash and cash equivalents
AA 1,545,898 7,001,437
A 73,113 263,076
1,619,011 7,264,513
========== ==========
The maximum exposure to credit risk on the Company's financial
assets is represented by their carrying amount, as outlined in the
categorisation of bank balances as seen in note 9.
QANNAS INVESTMENTS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2016
====================================
18. FINANCIAL RISK MANAGEMENT
Credit risk
The Company has significant loans receivable at the year end.
The Board of the Directors reviews the position of the counterparty
prior to entering into any loan arrangement and the Investment
Manager provides subsequent quarterly updates. The Investment
Manager's review includes review of external ratings, where
available, and financial information in respect of the
counterparty. Further disclosure in respect of loans receivable can
be seen in note 5.
Further, Goldilocks Fund is managed by Integrated Capital, a
central bank licensed investment firm in Abu Dhabi, UAE. The
Investment Manager's review includes review of external ratings,
where available, and financial information in respect of the
counterparty. 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:
31.12.16 31.12.15
$ $
Loans receivable 16,220,609 10,743,138
Trade and other receivables 5,069,876 8,206,847
Receivable from investment manager - 397,575
Cash and cash equivalents 1,619,011 7,264,513
22,909,496 26,612,073
=========== ===========
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 from 30 June 2017 (see note 11). The Directors
are confident that, if required, a new loan facility can be
obtained before the existing loan facility expires.
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 than 1 to 3 3 to 6 6 to 12 More than
1 month months months months 12 months
$ $ $ $ $
Trade and other
payables 248,803 327,804 327,804 - 2,537,372
Loans payable - - 1,500,000 3,000,000 24,896,393
---------- -------- ---------- ---------- -----------
248,803 327,804 1,827,804 3,000,000 27,433,765
========== ======== ========== ========== ===========
QANNAS INVESTMENTS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2016
====================================
18. FINANCIAL RISK MANAGEMENT
Capital risk management
The Company manages its capital to ensure that it will be able
to continue as a going concern while maximising the return to
stakeholders.
The capital of the Company is represented by the share capital
of the Company. The Company has sufficient assets to cover the
Company's liabilities at the Statement of Financial Position date
and for the foreseeable future. As such at 31 December 2016 the
Company had $67,799,021 of share capital (2015: $68,644,369).
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 Level Level Total
1 2 3
$ $ $ $
2016
Investments - 18,662,159 55,452,038 74,114,197
2015
Investments - - 80,399,787 80,399,787
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
FOR THE YEARED 31 DECEMBER 2016
====================================
18. FINANCIAL RISK MANAGEMENT
Fair value measurements recognised in the Statement of
Comprehensive Income - continued
The valuation of the level 2 investment, Goldilocks Fund, is
based upon market prices of underlying assets, which comprise
publically listed companies in the UAE, held by the Fund.
Item Valuation approach and inputs used
Investments at fair The fair value is determined based on market
value through profit values of underlying assets, which comprise
and loss - Goldilocks publically 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 valuation Fair value Fair value Key un-observable Input value Input value Relationship
approach at at inputs 31.12.16 31.12.15 between
unobservable
inputs
and fair
value
31.12.16 31.12.15
$ $
Investments
at fair value
through profit
and loss -
ADCM Secondary
Private Equity
Fund L.P.
An increase
The carrying in the
value of the value shown
investments in the
is based on financial
valuations reports
provided by of the
the General underlying
Partners of fund and
the underlying premium
funds. A multiple / discount
if then applied on underlying
to the valuations assets
by the Investment in the
Manager to secondary
consider the market
funds the Company Value would result
can expect of the in the
to realise underlying year end
if disposed investments valuation
in the short within Management Management being higher
term. 26,602,072 35,791,687 the funds. Accounts Accounts and vice-versa.
QANNAS INVESTMENTS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2016
====================================
18. FINANCIAL RISK MANAGEMENT - continued
Fair value measurements recognised in the Statement of
Comprehensive Income - continued
Item and valuation Fair value Fair value Key un-observable Input Input Relationship
approach at at inputs value value between
31.12.16 31.12.15 unobservable
inputs and
fair value
31.12.16 31.12.15
$ $
Investments
at fair value
through profit
and loss - SPE
Qannas C Limited
The carrying
value of the An increase
investments in the value
is based on shown in
valuations provided the financial
by the General reports
Partners of of the underlying
the underlying fund and
funds. A multiple premium
if then applied / discount
to the valuations on underlying
by the Investment assets in
Manager to consider the secondary
the funds the Value market would
Company can of the result in
expect to realise underlying the year
if disposed investments end valuation
in the short within Management Management being higher
term. 5,789,942 8,193,775 the funds. Accounts Accounts and vice-versa.
For 2016,
if the share
price increased
Investments to AED1.4
at fair value the fair
through profit value would
and loss - Madaares Share be $95,288
PJSC price whilst if
in the the share
The carrying recent price decreased
value is based exit proposal to AED1.0
on the price from the the fair
achieved in investment value would
a recent exit. 81,676 68,063 position. AED1.2 AED1 be $68,063.
Investments
at fair value
through profit
and loss - EE An increase
F&B Holding in the multiple
Limited applied
would result
The carrying The discount in a higher
value is based rate and Multiple valuation
on the applying multiple of 13x and a decrease
a multiple to utilised Discount would result
project EBITDA in the rate of in a lower
forecasts. 1 4,089,162 valuations. 10% N / A valuation.
QANNAS INVESTMENTS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2016
====================================
18. FINANCIAL RISK MANAGEMENT - continued
Fair value measurements recognised in the Statement of
Comprehensive Income - continued
Item and valuation Fair value Fair value Key un-observable Input Input Relationship
approach at at inputs value value between unobservable
31.12.16 31.12.15 inputs and
fair value
31.12.16 31.12.15
$ $
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 the General An increase
Partner of Palace in the value
Preferred Partners of Palace
LP. These valuations The value Preferred
are based on of the Partners
the latest available underlying LP investment
report for the investments would result
quarter ending of Palace in the year
31-Dec-16 prepared Preferred end valuation
in line with Partners Management Management being higher
IPEV Guidelines 3,370,229 7,480,803 LP Accounts Accounts and vice-versa.
Investments
at fair value
through profit An increase
and loss - in the multiple
Integrated applied would
Financial Group result in
a higher
The carrying valuation
value of the and a decrease
investment is would result
derived from in a lower
applying a multiple valuation.
to earnings
based on other An increase
similar entities. in the discount
The multiple rate applied
is subject to Discount Discount would result
a discount to rate: rate: in a lower
reflect the The discount 30% 30% valuation
specific rate and and a increase
circumstances multiple EBITDA EBITDA would result
of Integrated applied multiple: multiple: in a lower
Financial Group. 19,608,118 19,608,118 to earnings. 13x 14.1x valuation.
QANNAS INVESTMENTS LIMITED 41.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2016
===================================== ====
18. FINANCIAL RISK MANAGEMENT
Reconciliation of level 3 fair value measurements of financial
assets
31.12.16 31.12.15
$ $
Balance brought forward 80,399,787 53,213,946
Purchases - 29,094,551
Capital distributions (848,051) (1,339,457)
Disposals (12,109,098) -
Revaluations (11,990,600) (569,253)
Balance at 31 December 55,452,038 80,399,787
============= ============
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.
Fair value measurements recognised in the Statement of
Comprehensive Income - continued
The following table analyses the Company's financial assets and
liabilities by category: -
Assets per statement of financial Loans and Assets at Total
position receivables fair value
through profit
$ and loss $
$
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
---------------- ---------------- ------------
31 December 2015
Investments at fair value through
profit and loss - 80,399,787 80,399,787
Receivable from investment manager 397,575 - 397,575
Loans receivable 10,743,138 - 10,743,138
Trade and other receivables 8,206,847 - 8,206,847
Cash and cash equivalents 7,264,513 - 7,264,513
---------------- ---------------- ------------
Total assets 26,612,073 80,399,787 107,011,860
---------------- ---------------- ------------
Liabilities per statement of financial Liabilities Other financial Total
position at fair value liabilities
through profit
and loss $ $
$
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
---------------- ---------------- ------------
31 December 2015
Trade and other payables - 7,919,379 7,919,379
Loans payable - 29,811,219 29,811,219
---------------- ---------------- ------------
Total liabilities - 37,730,598 37,730,598
---------------- ---------------- ------------
QANNAS INVESTMENTS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
====================================
19. RETAINED EARNINGS
31.12.16 31.12.15
$ $
Balance brought forward 1,416,453 2,723,583
Total (loss) after taxation (4,250,397) (1,307,130)
Dividend paid - -
Balance at 31 December (2,833,944) 1,416,453
============ ============
Retained earnings represent the cumulative Comprehensive Income
net of distributions to owners.
20. 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 2016 were $111,071 (2015: $126,382), of
which $24,790 (2015: $73,932) was outstanding at 31 December
2016.
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 2016 were $1,291,840 (2015:
$1,339,963), of which $655,608 (2015: $313,822) was outstanding at
31 December 2016. At 31 December 2016, the Investment Manager held
$nil (2015: $397,575) on behalf of the Company for onward
investment.
The Investment Manager will be entitled to be paid a performance
fee by the Company, full details of which can be seen in note 17.
Movement in performance fees incurred by the Company with ADCM Ltd
for the year ended 31 December 2016 were $490,869 (2015:
$(246,535)). A total of $2,551,283 (2015: $2,060,413) was accrued
at 31 December 2016.
ADCM Ltd, the Investment Manager, owns 2 (2015: 2) management
shares in the Company.
Richard John Stobart Prosser, a Director of the Company, is also
a director of Palace Investors Holdings Limited and Mustafa
Kheriba, a Director of the Company, is also a director of Palace
Real Estate Partners GP Ltd. The Company has an investment of
$3,370,229 in Palace Preferred Partners LP at 31 December 2016
(2015: $7,480,803) which hold shares indirectly in Palace Investors
Holdings Limited and of which Palace Real Estate Partners GP is the
general partner. Part of the holding in Palace Preferred Partners
LP was divested during the year ended 31 December 2016 realising
proceeds of $4,025,741 (GBP3,300,000) and a gain on disposal of
$139,124.
Mustafa Kheriba, a Director of the Company, is also a director
of SPE Qannas C Limited. The Company has an investment of
$5,789,942 at 31 December 2016 (2015: $8,193,775) 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 2016
this was held at fair value of $26,602,073 (2015: $35,791,687).
Dividends totalling $693,856 (2015: $892,971) 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 $3,308,753
at 31 December 2016 (2015: $857,644) and an investment of $1 (2015:
$4,089,162) in EE F&B Holding Limited. Interest totalling
$63,516 (2015: $34,306) was receivable from EE F&B Holding
Limited during the year of which $63,516 (2015: $34,306) remained
outstanding at the year end.
QANNAS INVESTMENTS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
====================================
20. RELATED PARTY TRANSACTIONS
The loans receivable from Integrated Eastern European Fund,
Lucice Montenegro d.o.o. and Arqutino EAD (the "IEEF") which
totalled $3,189,450 at 31 December 2016 (2015: $8,795,576), were
arranged by Integrated Alternative Finance ("IAF"), a wholly owned
subsidiary of Abu Dhabi Financial Group (which is the ultimate
parent company of ADCM Ltd, the Company's Investment Manager) and
regulated by the Dubai Financial Services Authority. Jassim
Alseddiqi, a former Director of the Company, is also managing
director of Abu Dhabi Financial Group ("ADFG"), and chairman and
director of Integrated Capital ("IC"). IEEF will pay a fee to IAF
of 3% of the value of the Loan on completion. Interest of
$1,015,100 (2015: $1,226,918) 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 invested USD 6,539,918 (AED 24 millions), shown as an
investment in Goldilocks Fund in note 4. ADFG holds no units in
Goldilocks Fund and charges 1.5% management fee and 15% performance
fee on Goldilocks through its wholy owned subsidiary, ADCM
Altus.
Integrated Capital owned 907,030 participating shares in the
Company as at 31 December 2016 (2015: nil).
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. At 31 December 2016, the Company's loan
to Verne Preferred Limited was carried at $nil (2015: $1,089,918)
and the Company had recognised loan interest amounting to $18,352
(2015: $73,104). Included in trade and other payables at 31
December 2016 is interest income received in advance of $nil (2015:
$52,169) in respect of this facility. The loan was fully repaid
during the year ended 31 December 2016 (see note 5).
ADFG, the ultimate controlling shareholder of the Company's
Investment Manager, is also the owner of BL Development Limited and
Jassim Alseddiqi, a former Director of the Company, is also a
director of BL Development Limited. At 31 December 2016 the Company
had an investment of $nil (2015: $5,167,180) in BL Development
Limited. Preference dividend income of $72,252 was included within
investment income for the year ended 31 December 2016 (2015:
$365,728). 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.
ADFG, the ultimate controlling shareholder of the Company's
Investment Manager, has a 10% shareholding in Integrated Financial
Group, LLC. At 31 December 2016, the Company's investment in
Integrated Financial Group, LLC was carried at $19,608,118 (2015:
$19,608,118). No dividends were received from Integrated Financial
Group, LLC during the current or prior year.
ADFG owned 12,997,235 participating shares in the Company as at
31 December 2016 (2015: nil).
21. IMMEDIATE HOLDING COMPANY AND ULTIMATE CONTROLLING PARTY
In the Directors' opinion there is no controlling or ultimate
controlling party.
22. POST BALANCE SHEET EVENTS
In February 2017, the Company exited its investment in Marina
101, at cost, realising proceeds of $779,560.
In February 2017, the Company sold its entire holding (250,000
shares) in Madaares at a price of AED 1.2 per share, realising
proceeds of approximately $80,000, equating approximately to its
fair value at 31 December 2016.
In April 2017, the Company redeemed 25% of its stake in
Goldilocks realising proceeds of approximately $5.8 million. The
remaining stake was transferred to Goldilocks Investment Company
Limited (the "Fund"), a company incorporated under limited
liability law of Abu Dhabi Global Market.
ADCM SPEF is also in the process of exiting its Limited
Partnership positions in Goldman Sachs PEP IX and Glouston PEH 2000
FTE LTD funds by 30 June 2017.
[1] The Capital Plaza
[2] Amount committed indicates the total amount to be invested
in the deal by QIL
[3] Hard Rock Café operated through Podcafe Montenegro doo
[4] Palace Preferred Partners L.P.
[5] Investment in Project PPP is made as part of an overall
tranche of GBP50 million (as a L.P. interest in the partnership)
which in turn is invested in the project as preferred equity
with a preferred return rate of 15%.
[6] Integrated Eastern European Fund
[7] Cost and NAV at exit represents 52% interest
[8] Cost and NAV at exit represents 70% interest
[9] Including the interest payments received
[10] Previously named as Permal Private Equity Holdings 2000
L.P.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR BRGDLXGDBGRC
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