TIDMQIL
RNS Number : 8231N
Qannas Investments Limited
26 September 2019
The notification set out below is provided in accordance with
the requirements of the EU Market Abuse Regulation.
Qannas Investments Limited
("Qannas" or the "Company")
Unaudited Interim Financial Statements for the Period Ended 30
June 2019
Qannas (AIM:QIL), the closed-ended investment company listed on
the AIM market, is pleased to announce the release of its unaudited
interim financial statements for the period ended 30 June 2019.
Extracts from these statements are enclosed below.
In accordance with AIM Rule 20, the Company confirms that a copy
of this interim report is available on the Company's website
www.qannasinvestments.com
For further information please contact:
Qannas Investments Limited Tel: 01534 844 806
Nadia Trehiou
ADCM Ltd. (Investment Manager) Tel: +971 2 639 0099
Mustafa Kheriba
finnCap Ltd Tel: 020 7220 0500
Henrik Persson/James Thompson (Corporate Finance)
QANNAS INVESTMENTS LIMITED 1.
GENERAL INFORMATION
FOR THE HALF YEARED 30 JUNE 2019
====================================== ===
DIRECTORS PRINCIPAL BANKERS
Christopher Ward (Chairman) First Abu Dhabi Bank
Main Branch
Richard John Stobart Prosser P.O. Box 6316
Abu Dhabi
Mustafa Kheriba United Arab Emirates
COMPANY NUMBER REGISTRAR
CT 286543 (registered in Cayman Link Asset Services (Jersey) Limited
Islands)
12 Castle Street
St Helier
COMPANY SECRETARY Jersey JE2 3RT
Walkers Corporate Limited Channel Islands
Cayman Corporate Centre
George Town
Grand Cayman KY1-9008 NOMINATED ADVISOR
Cayman Islands finnCap Ltd
60 New Broad Street
London EC2M 1JJ
REGISTERED OFFICE England
Cayman Corporate Centre
27 Hospital Road
George Town NOMINATED BROKER
Grand Cayman KY1-9008 finnCap Ltd
Cayman Islands 60 New Broad Street
London EC2M 1JJ
England
ADMINISTRATOR
Estera Fund Administrators (Jersey)
Limited
13-14 Esplanade LEGAL ADVISORS
St Helier Appleby
Jersey JE1 1EE 13-14 Esplanade
Channel Islands St Helier
Jersey JE1 1BD
Channel Islands
AUDITOR
Deloitte LLP Herbert Smith Freehills LLP
Regency Court Exchange House
Glategny Esplanade Primrose Street
GY1 3HW London EC2A 2HS
Guernsey England
Channel Islands
Walkers (Dubai) LLP
Level 14, Burj Daman
INVESTMENT MANAGER Dubai International Financial Centre
ADCM Ltd ("ADCM") P.O. Box 506513
Codan Trust Company (Cayman) Limited Dubai
Cricket Square, Hutchins Drive, United Arab Emirates
P.O. Box 2681
George Town, Grand Cayman KY1-1111
Cayman Islands
COMPANY WEBSITE
www.qannasinvestments.com
QANNAS INVESTMENTS LIMITED 2.
CHAIRMAN'S REPORT
FOR THE HALF YEARED 30 JUNE 2019
====================================== ===
It is with great pleasure that I present my report on the
performance of Qannas Investments Limited ("QIL" or the "Company")
for the first half of the year 2019, and I am pleased to announce
that QIL has successfully taken a significant step in the direction
of executing its new investment strategy.
Following negotiations during Q2-2019, QIL has entered into
conditional agreements to acquire a portfolio of assets of
approximately AED 1.5bn (approximately $417m) and accompanying
liabilities of AED 1.1bn (approximately $298m) at a NAV of AED 440
million (approximately $120m) ("Portfolio"). The Portfolio
constitutes of GCC listed equities from sectors such as insurance,
real estate and maritime shipping services along with some other
assets. Due to the nature of the transaction, which is classified
as a reverse takeover, QIL shares have been temporarily suspended
from trading, pending completion of this transaction and the
announcement and publication of an admission document.
Details of the Company's new investment and disposals during the
period are contained in the Investment Manager's report, and
proceeds of the sales were partly used to pay down $7.5m of debt,
leaving an outstanding amount of $10m as at 30 June 2019. QIL's NAV
has remained stable at $0.61 per share during H1 2019.
The Board and the investment manager will continuously update
the shareholders on the ongoing transaction. As QIL continues to
evolve and deliver value to shareholders by adapting to the dynamic
global environment, I would like to thank shareholders, the board
of directors, service providers, and the investment manager for
their continued support.
QANNAS INVESTMENTS LIMITED 3.
INVESTMENT MANAGER'S REPORT
FOR THE HALF YEARED 30 JUNE 2019
====================================== ===
ADCM Ltd. ("ADCM"), the investment manager of QIL, is pleased to
present the Investment Manager's report for H1-2019.
Summary
During H1-2019, QIL continued to focus on its investment
strategy by investing in high-yield debt instruments and realising
proceeds from its investments, whilst adhering to its scheduled
debt obligations. During the period, QIL utilised the cash proceeds
of $11 million from IFG, $3.6m from Project JODC and $0.3 million
from ADCM SPEF distributions towards the following:
-- $3.5 million in new investments with a yield of 8.5% per annum
-- $7.5 million repayment of debt
-- $0.5 million in interest and other expenses
During H1-2019, QIL's NAV has been stable at around $0.61 per
share.
Exits in H1 2019
During H1-2019, QIL exited the following investments:
-- Project JODC: QIL has exited its full investment in JODC in
Q1-2019 realizing $3.6 million in sales proceeds and, generating an
exit IRR of 9.85% (in USD) over the investment period
New Investments in H1 2019
During H1-2019, QIL made the following investments:
-- Project Ronin: QIL subscribed to a 5 year Term Investment Certificate worth $3.5m issued by an SPV to acquire an equity interest in a prime real estate luxury hotel in Bahrain at a profit rate of 8.5% p.a. and with a bullet repayment at maturity
Activities post H1-2019
After the adoption of new investment strategy in FY 2018, QIL
has entered into conditional agreements for a reverse takeover to
acquire a substantial portfolio of assets of approximately AED
1.5bn (approximately $417m) and accompanying liabilities of AED
1.1bn (approximately $298m) at a NAV of AED 440 million
(approximately $120m) ("Portfolio") from a consortium of
third-party vendors, in line with its new investment strategy.
The Portfolio includes shareholdings in publicly traded
GCC-focused companies, in sectors such as real estate, maritime
shipping services and insurance. Further Portfolio assets include
two plots of land that have been zoned for commercial or
residential development and units of an open-ended fund that QIL is
currently invested in.
QANNAS INVESTMENTS LIMITED 4.
INVESTMENT MANAGER'S REPORT - continued
FOR THE HALF YEARED 30 JUNE 2019
========================================= ===
Net Asset Value ("NAV") Summary
As of 30 June 2019, QIL's NAV is $36.2 million or $0.61 per
share, including cash of $3 million.
Net Asset Value Summary In $, m
=========================== =============
Investments 30-June-19
Goldilocks $10.3
Project Three $9.8
Project Integration $8.0
Project Palace $6.1
Project Adriatic (HRC) $4.0
Project Beast (ADCM SPEF) $3.6
Project Ronin $3.6
Cash $3.0
Non-current Liabilities ($11.7)
Other Net-current Assets ($0.4)
NAV $36.2
=========================== =============
Shares Outstanding 59.5
NAV per share $0.61
--------------------------- -------------
Investments update
Project Adriatic (HRC)
For the period ending August 2019, Hard Rock Café achieved an
EBITDA of EUR 110k, significantly higher than last year's EBITDA of
EUR 46k for the same period last year.
HRC Sales increased by more than 15% during the period compared
to last year, primarily driven by the additional contribution of
merchandise sales.
Project Integration
QIL has invested $18.7 million in 2014 to acquire 47% interest
in Integrated Financial Group ("IFG"), a UAE-based holding company
with two subsidiaries - Integrated Capital and Integrated
Securities.
Post the first half of 2017, Shuaa Capital - a leading
investment bank in the UAE acquired Integrated Capital and
Integrated Securities.
QIL has received $11m received until 30 June 2019. IFG will be
distributing the remaining proceeds over a period ending March
2020.
Project Palace
In Q4 2014, QIL made a commitment of GBP11 million (as part of
an overall tranche of GBP50 million) in Palace Preferred Partners
L.P., an SPV created for the redevelopment of 1 Palace Street
("1PS").
Of the total commitment of GBP11 million, QIL contributed GBP7.3
million in three tranches with an undrawn commitment of GBP3.65
million.
QIL has already exited GBP3.8 million portion of the GBP7.3
million contribution and GBP3.65 million of its undrawn
commitment.
QANNAS INVESTMENTS LIMITED 5.
INVESTMENT MANAGER'S REPORT - continued
FOR THE HALF YEARED 30 JUNE 2019
========================================= ===
Investments update - continued
Project Goldilocks
In Q1 2016, QIL had made an equity investment of $6.6 million
(in two tranches of $5.5 million and $1.1 million) in Goldilocks
Fund, an investment fund primarily focused on publicly listed
equities in the UAE.
In FY 2017, QIL has redeemed 25% of its interest in the
Goldilocks Fund at a redemption value of $5.8 million, generating
an IRR of 160%.
Project Three
In December 2018, QIL participated in "Project Three", a
consortium debt investment with an annual interest rate of 9.75% in
an independent UAE based Investment Firm for AED 34 million
(approx. $9.3 million) of an overall loan of AED 250 million
(approx. US$68.1 million).
Subsequent to H1-2019, QIL received $0.56 million profit payment
from Project Three
Project Ronin
H Hotels & resorts Management (H Hotels) have signed an
operation agreement for the development of the 5 star hotel.
Project Beast
In H1-2019, ADCM SPEF received $172k distribution from Havenvest
and $17k from Global Opportunistic Fund-I.
NAV of ADCM SPEF (as of 30 June 2019) in $'000
========================================================= ==============
Fund Name Attributed NAV
--------------------------------------------------------- --------------
TNI Growth Capital Fund, L.P. $1,808
Havenvest Private Equity Middle East L.P. ("Havenvest") $1,404
Global Opportunistic Fund II $228
Global Opportunistic Fund I $46
SPE Qannas B $32
Net Current Assets (Liabilities) $85
NAV $3,604
QANNAS INVESTMENTS LIMITED 6.
DIRECTORS' REPORT
FOR THE HALF YEARED 30 JUNE 2019
====================================== ===
The Directors present their interim report and the unaudited
interim financial statements of the Company for the half year ended
30 June 2019.
Principal activities
The Company's principal activity is that of investing in listed
equities in the GCC region, with a proportion of funds to be
allocated in debt instruments and pre-IPO financing. The core
philosophy of the Company continues to be value investing with an
investment objective to achieve long-term and sustainable
attractive returns through a combination of income generation and
long-term capital appreciation.
Responsibilities of the Directors
The Directors are responsible for preparing the annual report
and financial statements in accordance with International Financial
Reporting Standards as endorsed for use in the European Union
("IFRS"). In preparing these financial statements, the Directors
are required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and estimates that are reasonable and prudent;
-- specify which generally accepted accounting principles have
been followed, subject to any material departures disclosed and
explained in the financial statements; and
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
The Directors are responsible for keeping accounting records
which are sufficient to show and explain the Company's transactions
and are such as to disclose with reasonable accuracy at any time
the financial position of the Company and enable them to ensure
that the financial statements prepared by the Company comply with
the requirements of the Alternative Investment Market listing
rules. They are also responsible for safeguarding the assets of the
Company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
The Directors confirm that they have complied with the above
requirements.
By order of the board
Director
Date: ...............................................
QANNAS INVESTMENTS LIMITED 7.
STATEMENT OF COMPREHENSIVE INCOME - UNAUDITED
FOR THE HALF YEARED 30 JUNE 2019
=============================================== ===
01.01.2019 01.01.2018 01.01.2018
to to to
Notes 30.06.2019 30.06.2018 31.12.2018
$ $ $
Income
Movement in management and performance
fee rebate receivable 15 26,729 481,337 383,667
Interest income on loans receivable 5 651,158 457,124 785,568
Realised gain on disposal of investments 4 24,767 - -
Realised gain on repayment of
loans receivable 5 - - 701,855
702,654 938,461 1,871,090
Expenditure
Secretarial and administration
fees (110,516) (80,333) (153,480)
Directors' remuneration 3 (28,955) (43,678) (67,068)
Insurance expense (3,335) (3,684) (6,870)
Investment manager fees 15 (349,959) (466,952) (646,663)
Movement in performance fees 15 (340,801) (109,389) 504,074
Legal and professional fees (79,936) (87,173) (174,210)
Audit fees (29,909) (65,371) (116,605)
Sundry expenses (3,402) (3,833) (6,447)
Bank charges (1,194) (785) (1,999)
Realised loss on disposal of investments 4 - (734,314) (734,314)
(948,007) (1,595,512) (1,403,582)
------------ ------------ ------------
Net (loss) / profit (245,353) (657,051) 467,508
Net movement on changes in fair
value of investments 4 812,766 637,829 (620,589)
Net movement on changes in fair
value of loans receivable 5 - (333,113) (521,481)
Impairment losses arising on loan
interest receivable 6 (77,637) (71,271) (147,538)
Finance costs
Loan interest payable (547,237) (679,032) (1,421,795)
(Loss) on foreign exchange (1,018) (37,538) (27,928)
Finance income
Interest income - cash and cash
equivalents 34,264 788 54,730
(Loss) for the period before taxation (24,215) (1,139,388) (2,217,093)
Taxation provision for the period 13 - - -
------------ ------------ ------------
(Loss) for the period after taxation (24,215) (1,139,388) (2,217,093)
Other comprehensive income - - -
Total comprehensive (loss) for
the period (24,215) (1,139,388) (2,217,093)
============ ============ ============
Earnings / (loss) per share
Basic and diluted EPS on (loss)
for the period 12 0.00 (0.02) (0.04)
============ ============ ============
The notes on pages 11 to 29 form part of these unaudited
financial statements
QANNAS INVESTMENTS LIMITED 8.
STATEMENT OF FINANCIAL POSITION - UNAUDITED
AS AT 30 JUNE 2019
============================================= ===
30.06.2019 30.06.2018 31.12.2018
Notes $ $ $
Assets
Non-current assets
Investments at fair value
through profit and loss 4 17,822,572 28,397,786 28,536,890
Loans receivable at fair value
through profit and loss 5 16,465,277 3,713,576 12,965,277
Total non-current assets 34,287,849 32,111,362 41,502,167
------------- ------------- -------------
Current assets
Investments at fair value
through profit and loss 4 9,139,404 10,598,520 12,449,911
Loans receivable at fair value
through profit and loss 5 - 12,956,158 -
Trade and other receivables 6 1,988,581 2,342,416 1,348,687
Cash and cash equivalents 7 3,044,858 2,303,956 256,920
------------- ------------- -------------
Total current assets 14,172,843 28,201,050 14,055,518
Total assets 48,460,692 60,312,412 55,557,685
============= ============= =============
Equity and liabilities
Equity
Management shares 10 2 2 2
Participating shares 10 59,605,907 59,799,019 59,605,907
Retained earnings 11 (23,370,565) (22,268,645) (23,346,350)
------------- ------------- -------------
Total equity 36,235,344 37,530,376 36,259,559
------------- ------------- -------------
Liabilities
Current liabilities
Trade and other payables 8 1,959,746 992,839 1,860,702
Loans payable 9 9,977,133 10,000,000 17,427,652
------------- ------------- -------------
Total current liabilities 11,936,879 10,992,839 19,288,354
------------- ------------- -------------
Non-current liabilities
Trade and other payables 8 288,469 1,997,994 9,772
Loans payable 9 - 9,791,203 -
------------- ------------- -------------
288,469 11,789,197 9,772
Total liabilities and equity 48,460,692 60,312,412 55,557,685
============= ============= =============
Net asset value per participating
share $0.61 $0.63 $0.61
============= ============= =============
The notes on pages 11 to 29 form part of these unaudited
financial statements
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 9.
STATEMENT OF CHANGES IN EQUITY - UNAUDITED
FOR THE HALF YEARED 30 JUNE 2019
============================================ ===
Management Participating Retained
share capital share capital earnings Total
$ $ $ $
At 1 January 2018 2 59,799,019 (21,129,257) 38,669,764
Total comprehensive loss - - (1,139,388) (1,139,388)
At 30 June 2018 2 59,799,019 (22,268,645) 37,530,376
-------------- -------------- ------------- ------------
At 1 July 2018 2 59,799,019 (22,268,645) 37,530,376
Purchase of participating
shares - (193,112) - (193,112)
Total comprehensive loss - - (1,077,705) (1,077,705)
At 31 December 2018 2 59,605,907 (23,346,350) 36,259,559
-------------- -------------- ------------- ------------
At 1 January 2019 2 59,605,907 (23,346,350) 36,259,559
Total comprehensive loss - - (24,215) (24,215)
At 30 June 2019 2 59,605,907 (23,370,565) 36,235,314
============== ============== ============= ============
The notes on pages 11 to 29 form part of these unaudited
financial statements
QANNAS INVESTMENTS LIMITED 10.
STATEMENT OF CASH FLOWS - UNAUDITED
FOR THE HALF YEARED 30 JUNE 2019
====================================== ====
01.01.2019 01.01.2018 01.01.2018
to to to
30.06.2019 30.06.2018 31.12.2018
$ $ $
Operating activities
(Loss) for the period before taxation (24,215) (1,139,388) (2,217,093)
Net movement on changes in fair
value of investments (812,766) (637,829) 620,589
Realised (gain) / loss on disposal
of investments (24,767) 734,314 734,314
Realised gain on repayment of loans
receivable - - (701,855)
Interest income (685,422) (457,912) (840,298)
Loan interest payable 547,237 679,032 1,421,795
Net movement on changes in fair
value of loans receivable - 333,113 521,481
Impairment losses arising on loan
interest receivable 77,637 71,271 147,538
Loss on foreign exchange 1,018 37,538 27,928
(Increase)/decrease in trade and
other receivables (33,340) (194,981) 70,441
(Decrease) / increase in trade
and other payables 377,741 (21,044) (1,030,112)
------------ ------------
Net cash flow from operating activities (576,877) (595,886) (1,245,272)
------------ ------------ ------------
Investing activities
Interest received - cash and cash
equivalents 236 786 54,730
Interest received - loans receivable - - 1,524,534
Issue of loans receivable (3,500,000) - (9,251,701)
Repayment of loans receivable - - 12,950,230
Purchase of investments - - (3,500,000)
Proceeds from disposal of investments 14,597,584 3,298,636 3,298,636
Capital distributions received
from investments 264,774 - 251,087
------------ ------------
Net cash flow from investing activities 11,362,594 3,299,422 5,327,516
------------ ------------ ------------
Financing activities
Repayment of bank loan (7,500,000) (5,500,000) (8,000,000)
Loan interest paid (497,756) (616,409) (1,334,015)
Repurchase of own participating
shares - - (193,112)
------------ ------------
Net cash flow from financing activities (7,997,756) (6,116,409) (9,527,127)
------------ ------------ ------------
Net increase / (decrease) in cash
and cash equivalents 2,787,961 (3,412,873) (5,444,883)
Effect of foreign exchange movements (23) 1,116 (13,910)
Cash and cash equivalents brought
forward 256,920 5,715,713 5,715,713
Cash and cash equivalents carried
forward 3,044,858 2,303,956 256,920
============ ============ ============
The notes on pages 11 to 29 form part of these unaudited
financial statements
QANNAS INVESTMENTS LIMITED 11.
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
FOR THE HALF YEARED 30 JUNE 2019
============================================= ====
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 Cayman Corporate Centre, 27 Hospital Road, George
Town, Grand Cayman, KY1-9008, Cayman Islands.
The Company's principal activity is that of investing in listed
equities in the GCC region, with a proportion of funds to be
allocated in debt instruments and pre-IPO financing. The core
philosophy of the Company continues to be value investing with an
investment objective to achieve long-term and sustainable
attractive returns through a combination of income generation and
long-term capital appreciation.
The information presented within these unaudited interim
financial statements (the 'financial statements') is in compliance
with International Accounting standard ('IAS') 34 'Interim
Financial Reporting'. This requires the use of certain accounting
estimates and requires that management exercise judgement in the
process of applying the Company's accounting policies. The areas
involving a high degree of judgement or complexity, or areas where
the assumptions and estimates are significant to the interim
financial statements are disclosed below in note 2.
2. SIGNIFICANT ACCOUNTING POLICIES
Basis of preparation
The financial statements have been prepared under the historical
cost convention, except for the revaluation of certain financial
instruments and investments which are included at fair value, and
in accordance with applicable International Financial Reporting
Standards as endorsed for use in the European Union ("IFRS") and,
where applicable, takes guidance from the Association of Investment
Companies Statement of Recommended Practice ("AIC SORP"). The
principal accounting policies are set out below.
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. It also
carries its loans receivable 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. The Company considers it meets the definition on the basis
it has more than one investment, has more than one investor,
including investors that are not related parties and has ownership
interests in the form of equity or other similar interests.
Basis of measurement
Financial assets
All recognised financial assets are subsequently measured in
their entirety at either amortised cost or fair value, depending on
the classification of the financial assets.
a) Classification of financial assets
Financial assets that are considered to be part of the Company's
core investment operations are held at fair value through profit
and loss as they are measured on a fair value basis.
Other financial assets that are not part of the core investment
operations are measured at amortised cost so long as the below
criteria is met:
-- The financial asset is held within a business model whose
objective is to hold financial assets in order to collect
contractual cash flows; and
-- The contractual terms of the financial asset give rise on
specified dates to cash flows that are solely payments of principal
and interest on the principal amount outstanding.
By default, all other financial assets are subsequently measured
at FVTPL.
QANNAS INVESTMENTS LIMITED 12.
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS - continued
FOR THE HALF YEARED 30 JUNE 2019
========================================================= ====
2. SIGNIFICANT ACCOUNTING POLICIES - continued
Basis of measurement - continued
Financial assets
(i) Amortised cost and effective interest method
At initial recognition financial assets are measured at fair
value plus transaction costs that are directly attributable to the
acquisition of the financial asset. The amortised cost of a
financial asset is the financial amount at which the financial
asset is measured at initial recognition minus the principal
repayments, plus the cumulative amortisation using the effective
interest method of any difference between that initial amount and
the maturity amount, adjusted for any loss allowance. The gross
carrying amount of a financial asset is the amortised costs of a
financial asset before adjusting for any loss allowance.
Interest income is recognised using the effective interest
method for debt instruments measured subsequently at amortised
cost. Interest income is calculated by applying the effective
interest rate to the gross carrying amount of a financial asset.
For financial assets that have subsequently become credit impaired,
interest income is recognised by applying the effective interest
rate to the amortised cost of the financial asset.
For purchased or originated credit impaired financial assets,
the Company recognises interest income by applying the credit
adjusted effective interest rate to the amortised cost of the
financial asset from initial recognition. The calculation does not
revert to the gross basis even if the credit risk of the financial
asset subsequently improves so that the financial asset is no
longer credit impaired.
Interest income is recognised in profit and loss and is included
in the 'interest income' line item.
(ii) Financial assets at fair value through profit and loss
Financial assets that are considered part of the Company's
investment operations or do not meet the criteria for being
measured at amortised cost (see (i) above) are measured at FVTPL
with any fair value gains or losses recognised in profit and loss
to the extent they are not part of a designated hedging
relationship. The net gain or loss recognised in profit and loss
includes any dividend or interest earned on the financial assets.
Fair value is determined in the manner described as follows:
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 13.
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS - continued
FOR THE HALF YEARED 30 JUNE 2019
========================================================= ====
2. SIGNIFICANT ACCOUNTING POLICIES - continued
Basis of measurement - continued
Financial assets
(ii) Financial assets at fair value through profit and loss - continued
The fair value of financial assets and liabilities that are not
traded in an active market is determined using valuation
techniques. The Company uses a variety of methods and makes
assumptions that are based on market conditions existing at each
reporting date. Valuation techniques used include the use of
comparable recent arm's length transactions, reference to other
instruments that are substantially the same, discounted cash flow
analysis, option pricing models and other valuation techniques
commonly used by market participants making the maximum use of
market inputs and relying as little as possible on entity-specific
inputs.
The Company's investments in underlying funds are ordinarily
valued using the values (whether final or estimated) as advised to
the Investment Manager by the managers, general partners or
administrators of the relevant underlying fund. The valuation date
of such investments may not always be coterminous with the
valuation dates of the Company and in such cases the valuation of
the investments as at the last valuation date is used. The net
asset value reported by the administrator may be unaudited and, in
some cases, the notified asset values are based upon estimates. The
Company or the Investment Manager may depart from this policy where
it is considered such valuation is inappropriate and may, at its
discretion, permit any other method of valuation to be used if it
considers that such method of valuation better reflects value
generally or in particular markets or market conditions and is in
accordance with good accounting practice. In the event that a price
or valuation estimate accepted by the Company or by the Investment
Manager in relation to an underlying fund subsequently proves to be
incorrect or varies from the final published price by an immaterial
amount, no retrospective adjustment to any previously announced Net
Asset Value or Net Asset Value per Share will be made.
b) Impairment of financial assets
The Company always recognises lifetime expected credit losses
for trade receivables. The expected credit losses on these
financial assets are estimated using a provision matrix based on
the Company's historical credit loss experience, adjusted for any
factors that are specific to the debtors, general economic
conditions and an assessment of both the current as well as the
forecast direction of conditions at the reporting date, including
time value of money where appropriate.
Cash and cash equivalents
Cash and cash equivalents comprises deposits held on call with
banks.
Trade and other receivables
Trade and other receivables are initially recognised at fair
value and subsequently carried at amortised cost; their carrying
values are a reasonable approximation of fair value.
Trade receivables include the contractual amounts for the
settlement of trades and other obligations due to the Company.
Financial liabilities
All financial liabilities are subsequently measured at amortised
cost using the effective interest method.
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.
QANNAS INVESTMENTS LIMITED 14.
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS - continued
FOR THE HALF YEARED 30 JUNE 2019
========================================================= ====
2. SIGNIFICANT ACCOUNTING POLICIES - continued
Basis of measurement - continued
Financial liabilities - continued
Loans payable
Loans payable are measured initially at cost. Subsequent to
initial recognition, they are measured at amortised cost using the
effective interest rate method. These financial liabilities are
recognised when the Company enters into a loan agreement and are
de-recognised when the loan agreement is terminated.
The effective interest rate method is a method of calculating
the amortised cost of a financial liability and of allocating the
interest expense over the relevant period. The effective interest
rate is the rate that exactly discounts estimated future cash
payments or receipts over the expected life of the financial
instrument, in order that the present value of the future cash
flows, including fees or transaction costs, is equal to the
carrying amount of the financial instrument.
Finance costs associated with loans payable have been spread on
an effective interest rate constant basis over the life of the
loan.
Functional and presentational currency
The performance of the Company is measured and reported to the
investors in US dollars. The Board of Directors considers the US
dollar as the currency that most faithfully represents the economic
effects of the underlying transactions, events and conditions. The
financial statements are presented in US dollars, which is the
Company's functional and presentation currency.
Use of estimates and judgements
The preparation of the financial statements in conformity with
IFRS and applicable law requires the Directors to make judgements,
estimates and assumptions that affect the application of policies
and reported amounts of assets, liabilities, income and expenses.
The estimates and associated assumptions are based on historical
experience and various other factors that are believed to be
reasonable under the circumstances, the results of which form the
basis of making judgements about carrying values of assets and
liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates. The estimates with
the most significant effects on the carrying amounts of the assets
and liabilities in the financial statements are outlined below:
(i) Valuation of unquoted investments - The fair value of these
is determined via valuation techniques. For further details of the
judgements and assumptions made see note 4.
(ii) Valuation of loans receivable - Loans receivable are held
at fair value through profit and loss. The fair value is determined
via valuation techniques. For further details of the investments
and assumptions made see note 5.
(iii) Classification as an investment entity - The Directors
have reviewed the definition of an investment entity and are
satisfied the Company qualifies as such and hence does not
consolidate.
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 and loss are
presented in the Statement of Comprehensive Income within 'net
movement on changes in fair value of investments' or 'net movement
on changes in fair value of loans receivable'.
QANNAS INVESTMENTS LIMITED 15.
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS - continued
FOR THE HALF YEARED 30 JUNE 2019
========================================================= ====
2. SIGNIFICANT ACCOUNTING POLICIES - continued
Shares in issue
Management Shares are not redeemable, do not participate in the
net income or dividends of the Company and are recorded at $1.00
per share.
Participating shares in issue are not redeemable at the
shareholder's option.
Participating shares which are acquired by the Company are
recognised at cost and deducted from equity. No gain or loss is
recognised in the Statement of Comprehensive Income on the
purchase, sale, issue or cancellation of the Company's own equity
instruments.
Revenue recognition
Revenue is measured at the fair value of the consideration
received or receivable in the normal course of business. The
Company recognises revenue when the amount of revenue can be
reliably measured and when it is probable that the future economic
benefits will flow into the Company.
Taxation
The Company is tax resident in Jersey, on the basis that board
meetings and strategic decisions are undertaken in Jersey.
Provision has been made in these financial statements for Jersey
income tax at the rate of 0%.
Expenditure and transaction costs
All items of expenditure, including the performance and
management fees, are recognised on an accruals basis.
The Company receives rebates for performance and management fees
in respect of certain investments. These are included in the
Statement of Comprehensive Income on an accrual 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.
Going concern
The Directors, after making due enquiries, continue to adopt the
going concern basis in preparing the financial statements which
assumes that the Company will continue in operation for the
foreseeable future. The Company is in the process of realising
existing investments in an orderly fashion. As disclosed in note 9,
the Company is due to repay $10,000,000 of loans payable during the
next 6 months. These repayments will be financed by way of existing
cash reserves and the continued realisation of the Company's
investments.
Segmental reporting
The Company is operated as one segment by the Board of Directors
(which is considered to be the Chief Operating Decision Maker).
Operating segments are reported in a manner consistent with the
internal reporting used by the Chief Operating Decision Maker. The
Board of Directors is responsible for allocating resources and
assessing performance of the operating segments.
The Directors make the strategic resource allocations on behalf
of the Company. The Company has determined the operating segments
based on the reports reviewed by the Board of Directors, which are
used to make strategic decisions.
The Board of Directors is responsible for the Company's entire
portfolio. The Board of Directors asset allocation decisions are
based on a single, integrated investment strategy, and the
Company's performance is evaluated on an overall basis.
The Company trades in a diversified portfolio of securities with
the objective of generating value for shareholders.
The internal reporting provided to the Board of Directors for
the Company's assets, liabilities and performance is prepared on a
consistent basis with the measurement and recognition principles of
IFRS.
There were no changes in the reportable segments during the
period
QANNAS INVESTMENTS LIMITED 16.
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS - continued
FOR THE HALF YEARED 30 JUNE 2019
========================================================= ====
3. DIRECTORS' REMUNERATION AND INTERESTS
The remuneration of the individual Directors who served in the
half year to 30 June 2019 was:
01.01.2019 01.01.2018 01.01.2018
to to to
30.06.2019 30.06.2018 31.12.2018
$ $ $
Richard John Stobart Prosser 12,722 13,289 26,876
Christopher Ward 16,233 16,432 32,416
Richard Green - 13,957 7,776
Mustafa Kheriba - - -
------------ ------------
28,955 43,678 67,068
============ ============ ============
Directors' interests in the shares of the Company, including
family interest, at 30 June 2019 were:
Share Nominal % Held
Participating
Christopher Ward shares 100,000 0.17%
Richard Prosser Participating Nil Nil
shares
Participating
Mustafa Kheriba shares 461,153 0.77%
QANNAS INVESTMENTS LIMITED 17.
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS - continued
FOR THE HALF YEARED 30 JUNE 2019
========================================================= ====
4. INVESTMENTS AT FAIR VALUE THROUGH PROFIT AND LOSS
01.01.2019 01.01.2018 01.01.2018
to to to
30.06.2019 30.06.2018 31.12.2018
$ $ $
Fair value brought forward 40,986,801 42,391,427 42,391,427
Additions - - 3,500,000
Disposals (14,597,584) (3,298,636) (3,298,636)
Realised (losses) / gains 24,767 (734,314) (734,314)
Capital distributions (264,774) - (251,087)
Net movement on changes in fair
value of investments 812,766 637,829 (620,589)
------------- ------------
Fair value carried forward 26,961,976 38,996,306 40,986,801
============= ============ =============
Investments comprise: 30.06.2019 30.06.2018 31.12.2018
Fair value Fair value Fair value
$ $ $
Non-current assets
ADCM Secondary Private
Equity Fund L.P. ("ADCM
SPEF") 3,478,632 4,160,834 3,579,885
SPE Qannas C Limited - - -
EE F&B Holding Limited 326,917 1 326,917
Palace Preferred Partners
L.P. 6,063,015 5,210,255 5,661,520
Integrated Financial
Group, LLC 7,954,008 19,026,696 18,968,568
-------------
17,822,572 28,397,786 28,536,890
------------- ------------ -------------
Current assets
Goldilocks Fund 9,139,404 10,598,520 8,896,152
Jabal Omar Development Sukuk 9.85%
15-Nov-2023 - - 3,553,759
9,139,404 10,598,520 12,449,911
------------- ------------ -------------
Total 26,961,976 38,996,306 40,986,801
============= ============ =============
The investments in Goldilocks Fund and Jabal Omark Development
Sukuk are classified as current assets as on each respective
reporting date it is anticipated they will be disposed of within
the short term.
In 2017, the Company elected to write down the holdings by ADCM
SPEF and SPE Qannas C Limited in Abraaj exposed funds to $nil. This
followed the Investment Manager's observations that it will be
challenging to find a willing buyer for the holdings in Abraaj due
to uncertainty over the General Partner and the funds' underlying
assets. Furthermore, as these funds are in liquidation phase, and
as there is no further incentive for the General Partner, the
Investment Manager believes that the liquidation of underlying
assets could be at a steep discount and could take significant time
to realise. The Investment Manager considers the position is
unchanged at 30 June 2019.
QANNAS INVESTMENTS LIMITED 18.
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS - continued
FOR THE HALF YEARED 30 JUNE 2019
========================================================= ====
4. INVESTMENTS AT FAIR VALUE THROUGH PROFIT AND LOSS - continued
The fair values of the investments are based on the latest
available net asset value reports and / or financial information
available of the underlying companies.
Investments at 30 June 2019 comprise:
Class of No. of Percentage Book
shares shares holding Cost
held
$
SPE Qannas C Limited Preference 8,039,559 74.3% 7,930,886
ADCM Secondary Private
Equity Fund L.P. - - 96.5% 17,760,697
EE F&B Holding Limited Ordinary 1,000 100% 1,006,904
Palace Preferred Partners
L.P. - - 7.1% 3,460,840
Goldilocks Investment
Company Limited Units 3,541,004 4% 4,094,938
Integrated Financial
Group, LLC Ordinary 73,908 47.4% 7,648,119
41,902,384
=============
During the half year ended 30 June 2019, the Company undertook
the following disposals: -
-- The Company exited a portion of its holding of Integrated
Financial Group LLC, generating proceeds of $11,019,058;
-- The Company disposed of its investment in Jabal Omar
Development, generating proceeds of $3,578,526, generating a gain
on disposal of $24,767; and
-- The Company received capital distributions amounting to
$264,774 from ADCM Secondary Private Equity Fund L.P.
The loan due to First Abu Dhabi Bank PJSC is secured by way of a
charge over the Company's investment in ADCM Secondary Private
Equity Fund L.P., SPE Qannas C Limited, Palace Preferred Partners
L.P., EE F&B Holding Limited and Integrated Financial Group
LLC. See note 9 for further details, including covenants.
5. LOANS RECEIVABLE
01.01.2019 01.01.2018 01.01.2018
to to to
30.06.2019 30.06.2018 31.12.2018
$ $ $
Brought forward 12,965,277 16,824,208 16,824,208
Additions 3,500,000 - 9,251,701
Loan interest capitalised / (repaid) - 178,639 (340,776)
Repayments - - (12,950,230)
Gain on repayment - - 701,855
Net movement on changes in fair
value of loans receivable - (333,113) (521,481)
------------ ------------
Carried forward 16,465,277 16,669,734 12,965,277
============ ============ =============
At 30 June 2019, $nil of the above loans were due for repayment
within 12 months, and have been classified as current assets (30
June 2018: $12,956,158).
QANNAS INVESTMENTS LIMITED 19.
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS - continued
FOR THE HALF YEARED 30 JUNE 2019
========================================================= ====
5. LOANS RECEIVABLE - continued
At 30 June 2019, loans receivable comprise: -
Interest Maturity Carrying Carrying
rate date value value
CCY $
EE F&B Holding Limited 4% Not defined EUR3,480,170 3,713,576
Horizon Harbour SPV
Limited TIC 8.5% 2024 USD 3,500,000 3,500,000
Kepler Lending Co.
Limited 9.75% 2021 AED34,000,000 9,251,701
16,465,277
===========
Loan interest in respect of the above loans totalling $651,158
(half year ended 30 June 2018: $457,124; year ended 31 December
2018 $785,568) is included in the Statement of Comprehensive Income
for the period.
During the period to 30 June 2019, a new loan was issued to
Horizon Harbour SPV Limited TIC.
6. TRADE AND OTHER RECEIVABLES
30.06.2019 30.06.2018 31.12.2018
$ $ $
Current
Sundry debtors 34 34 34
Management fee rebate receivable
(note 15) 550,942 533,096 392,045
Performance fee rebate receivable
(note 15) 747,966 1,005,456 880,134
Loan interest and income receivable 671,701 793,454 65,147
Prepayments 17,938 10,376 11,327
----------- -----------
1,988,581 2,342,416 1,348,687
=========== =========== ===========
The performance fee rebate receivable will become due at the
time of completion of the liquidation of the funds of Goldilocks
Investment Company Limited.
An impairment loss in the amount of $77,637 (half year ended 30
June 2018: $71,271; year ended 31 December 2018: $147,538) was
recognised in the period in respect of loan interest receivable
from EE F&B Holding Limited as the Directors have concerns over
the recoverability of the interest.
The Directors consider that the carrying amount of trade and
other receivables approximates to their fair value.
QANNAS INVESTMENTS LIMITED 20.
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS - continued
FOR THE HALF YEARED 30 JUNE 2019
========================================================= ====
7. CASH AND CASH EQUIVALENTS
30.06.2019 30.06.2018 31.12.2018
$ $ $
First Abu Dhabi Bank 242,315 803,956 256,920
Royal Bank of Scotland International - 1,500,000 -
SHUAA Capital psc 77,747 - -
Gulf Finance Corporation 2,724,796 - -
3,044,858 2,303,956 256,920
=========== =========== ===========
In April 2019, the Company made a short-term AED10 million
deposit with Gulf Finance Corporation, generating an interest rate
of 6% per annum.
8. TRADE AND OTHER PAYABLES
30.06.2019 30.06.2018 31.12.2018
$ $ $
Non-current
Performance fees 288,469 1,997,994 9,772
=========== =========== ===========
Current
Secretarial, administration and
accountancy fees 110,335 82,391 36,288
Director fees 20,307 40,523 13,968
Investment manager fees 349,959 700,428 349,959
Performance fees 1,436,863 - 1,374,759
Legal and professional fees 8,802 8,889 27,100
Audit fees 31,725 46,405 57,106
Sundry expenses 1,754 2,910 1,521
Loan interest payable - 112,292 -
Participating shares 1 1 1
----------- ----------- -----------
1,959,746 992,839 1,860,702
=========== =========== ===========
The performance fee payable has been allocated between current
and non-current in line with the classification of the respective
investment / loan to which it relates.
The Directors consider that the carrying amount of trade and
other payables approximate to their fair value.
9. LOANS PAYABLE
01.01.2019 01.01.2018 01.01.2018
to to to
30.06.2019 30.06.2018 31.12.2018
$ $ $
Loan Capital
Brought forward 17,500,000 25,500,000 25,500,000
Repayments in the period (7,500,000) (5,500,000) (8,000,000)
------------ ------------ ------------
Carried forward 10,000,000 20,000,000 17,500,000
Issue Costs
Brought forward (72,348) (296,056) (296,056)
Amortised during the period 49,481 87,259 223,708
------------ ------------ ------------
(22,867) (208,797) (72,348)
------------ ------------
9,977,133 19,791,203 17,427,652
============ ============ ============
QANNAS INVESTMENTS LIMITED 21.
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS - continued
FOR THE HALF YEARED 30 JUNE 2019
======================================================================== =====
9. LOANS PAYABLE - continued
The Company has a loan facility with First Abu Dhabi Bank which
bears interest at the rate of LIBOR + 3.5% per annum and is
repayable in quarterly instalments, with the final instalment due
on 31 December 2019.
The loan is secured by way of a pledge with First Abu Dhabi Bank
in respect of the receivable accounts held by the Company and by
way of a charge over the Company's investments in ADCM Second
Private Equity Fund L.P., SPE Qannas C Limited, Palace Preferred
Partners L.P. and Integrated Financial Group LLC.
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.
10. SHARE CAPITAL
30.06.2019 30.06.2018 31.12.2018
Management shares $ $ $
Authorised:
2 ordinary non-participating shares
of no par value 2 2 2
=============== =============== ===============
$ $ $
Issued and fully paid:
2 shares of $1 each 2 2 2
=============== =============== ===============
Participating shares
Authorised:
Unlimited participating shares - - -
of no par value
=============== =============== ===============
Issued and fully paid:
79,331,354 participating shares
of
no par value at various issue
prices 76,638,587 76,638,587 76,638,587
=============== =============== ===============
Treasury shares:
19,820,779 (30 June 2018: 19,391,642;
31 December 2018: 19,820,779)
participating shares of no par
value redeemed at various prices (17,032,680) (16,839,568) (17,032,680)
=============== =============== ===============
In addition to the above, the Company has two further share
classes - redeemable 'B' and redeemable 'C'. Both of these share
classes have an unlimited number of participating shares of no par
value authorised for issue. At 30 June 2019, 30 June 2018 and 31
December 2018 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.
QANNAS INVESTMENTS LIMITED 22.
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS - continued
FOR THE HALF YEARED 30 JUNE 2019
========================================================= ====
10. SHARE CAPITAL - continued
Participating Shares
During the year ended 31 December 2018, the Company repurchased
429,137 participating shares at a price of $0.45 per share. These
shares are held as treasury shares and as such are not entitled to
any dividends paid or 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.
11. RETAINED EARNINGS - UNREALISED AND REALISED SPLIT
Retained earnings at 30 June 2019 comprise the following revenue
items, split between realised and unrealised income: -
Unrealised Realised Total
$ $ $
Balance at 1 January 2019 (12,082,866) (11,263,484) (23,346,350)
Movement in rebate income 26,729 - 26,729
Realised gain on disposal of
investments - 24,767 24,767
Interest income - loans receivable - 651,158 651,158
Expenditure - (948,007) (948,007)
Net gains and losses on fair
value of investments 812,766 - 812,766
Loan interest payable - (547,237) (547,237)
Loss on foreign exchange - (1,018) (1,018)
Interest income - cash and cash
equivalents - 34,264 34,264
Impairment of loan interest
receivable - (77,637) (77,637)
------------- ------------- -------------
Balance at 30 June 2019 (11,243,371) (12,127,194) (23,370,565)
============= ============= =============
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.
There are currently no restrictions on distributions for the
company save for prior notification of any distribution to being
provided to First Abu Dhabi Bank.
QANNAS INVESTMENTS LIMITED 23.
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS - continued
FOR THE HALF YEARED 30 JUNE 2019
========================================================= ====
12. EARNINGS / (LOSS) PER SHARE
Earnings / (loss) per share is calculated by dividing the loss
attributable to the participating shareholders of the Company by
the weighted average number of participating shares in issue during
the period, excluding the average number of participating shares
purchased by the Company and held as treasury shares.
30.06.19 30.06.18 31.12.18
Total profit / (loss) for the period
after taxation ($) (24,215) (1,139,388) (2,217,093)
Weighted average number of participating
shares in issue 59,510,575 59,939,712 59,859,767
Basic and diluted earnings per
share ($ per share) 0.00 (0.02) (0.04)
The Company has not issued any shares or other instruments that
are considered to have dilutive potential and hence basic and
diluted earnings per share are the same.
13. TAXATION
The Company is tax resident in Jersey, on the basis that board
meetings and strategic decisions are undertaken in Jersey.
Provision has been made in these financial statements for Jersey
income tax at the rate of 0%.
14. DISTRIBUTIONS
Distributions of $nil (half year ended 30 June 2018: $nil; year
ended 31 December 2018: $nil) were paid during the period.
15. INVESTMENT MANAGER AND PERFORMANCE FEES
The Investment Manager is entitled to a quarterly management fee
equal to 0.4375% of the net asset value of the company at each
quarter end (being 31 March, 30 June, 30 September and 31
December). $349,959 was recognised during the period (half year to
30 June 2018: $466,952; year to 31 December 2018: $646,663).
In addition to the management fee, the Investment Manager is
entitled to a fee based upon the performance of the investments
(the "Performance Fee"). The movement in the performance fee
payable in the half year was $340,801 (half year to 30 June 2018:
$109,389; year ended 31 December 2018: $(504,074)). 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").
QANNAS INVESTMENTS LIMITED 24.
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS - continued
FOR THE HALF YEARED 30 JUNE 2019
========================================================= ====
15. INVESTMENT MANAGER AND PERFORMANCE FEES - continued
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.
Rebates
In order to prevent the double-charging of Management and
Performance Fees, ADCM Ltd (in its capacity as Investment Manager
to ADCM SPEF) and ADCM SPEF GP Limited (in its capacity as general
partner of ADCM SPEF) entered into an agreement with the Company,
such that they shall rebate to the Company any Management Fee or
Performance Fee that they receive from ADCM SPEF, which is
attributable to the Company's percentage ownership of ADCM
SPEF.
In order to prevent the double-charging of Performance Fees,
ADCM Ltd (in its capacity as Investment Manager to SPE Qannas C
Limited) entered into an agreement with the Company, such that they
shall rebate to the Company any Performance Fee that they receive
from SPE Qannas C Limited.
QANNAS INVESTMENTS LIMITED 25.
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS - continued
FOR THE HALF YEARED 30 JUNE 2019
========================================================= ====
15. INVESTMENT MANAGER AND PERFORMANCE FEES - continued
The timing of receipt of the Performance Fee rebate is uncertain
and is dependent on the realisation of the underlying investments
held by ADCM SPEF and SPE Qannas C Limited. As such, the
Performance Fee rebate has been classified as a non-current asset
within the Statement of Financial Position.
The Company has accrued Management Fee rebate income in respect
of ADCM SPEF of $169,444 at 30 June 2019 (30 June 2018: $349,004
and 31 December 2018: $120,859). The Company has accrued
Performance Fee rebate income in respect of ADCM SPEF and SPE
Qannas C Ltd of $nil at 30 June 2019 (30 June 2018: $nil and 31
December 2018: $Nil). These are settled when investments are sold
and are based on the fair value gains realised on the disposal.
Abu Dhabi Financial Group, the investment manager of Goldilocks
Fund, provide a rebate to the company in respect of Management and
Performance Fees it charges to Goldilocks Fund. At 30 June 2019,
$381,498 (30 June 2018: $184,092 and 31 December 2018: $271,186)
was due in respect of Management Fees and $747,966 (30 June 2018:
$1,005,456 and 31 December 2018: $880,134) in respect of
Performance Fees. These are included in trade and other receivables
and are considered a current asset, in line with the investment
itself.
A reconciliation of the rebate recognised in the statement of
comprehensive income can be seen below:
01.01.2019 01.01.2018 01.01.2018
To to to
30.06.2019 30.06.2018 31.12.2018
$ $ $
Opening performance fee rebate
receivable (880,134) (931,903) (931,903)
Opening management fee rebate
receivable (392,045) (404,229) (404,229)
Management fee rebate received
in the period - 278,917 447,620
Closing performance fee rebate
receivable (note 6) 747,966 1,005,456 880,134
Closing management fee rebate
receivable (note 6) 550,942 533,096 392,045
----------- -----------
26,729 481,337 383,667
=========== =========== ===========
16. FINANCIAL RISK MANAGEMENT
The Company's activities expose it to a variety of financial
risks: market risk (including price risk, interest rate risk and
foreign currency risk), credit risk and liquidity risk. The
Company's overall risk management programme focuses on the
unpredictability of financial markets and seeks to minimise
potential adverse effects on the Company's financial
performance.
The management of these risks is performed by the Board of
Directors. The policies for managing each of these risks are
summarised below.
Management of market risk
Price risk
The Company is exposed to market price risk in respect of its
portfolio of investments via equity securities price risk. The risk
arises from investments held by the Company for which prices in the
future are uncertain. Where non-monetary financial instruments are
denominated in currencies other than the US dollar, the price
initially expressed in foreign currency and then converted into US
dollar will also fluctuate because of changes in foreign exchange
rates (further details on the foreign exchange risk can be seen
later in this note).
The Company mitigates price risk by having established
investment appraisal processes and asset monitoring procedures
which are subject to overall review by the board. The Company also
manages the risk by appropriate diversification of its assets.
Details of the Company's financial assets are given in notes 4,
5, 6 and 7.
QANNAS INVESTMENTS LIMITED 26.
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS - continued
FOR THE HALF YEARED 30 JUNE 2019
========================================================= ====
16. FINANCIAL RISK MANAGEMENT - continued
Interest rate risk
The Company's interest rate risk principally arises from
borrowings in the form of the loan payable (see note 9) 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,
USD, GBP and EUR. The Board considers that its exposure to foreign
exchange risk is limited. The AED is 'pegged' to USD and the
Investment Manager monitors EUR and GBP currency movements and
proposes any action deemed appropriate.
Credit risk
For the Company, credit risk arises from cash and cash
equivalents and contractual cash flows of debt instruments as well
as credit exposures arising on outstanding trade and other
receivables.
The maximum exposure to credit risk on the Company's financial
assets is represented by their carrying amount, as detailed in
notes 5 to 7.
Cash and cash equivalents
The company seeks to limit the level of credit risk on the cash
balances by only depositing surplus liquid funds with counterparty
banks with high credit ratings (at least A grade in accordance with
Fitch). The company does not hold any derivative financial
instruments.
Trade and other receivables
The Company applies the simplified approach to measuring
expected credit losses which uses a lifetime expected loss
allowance for all trade and other receivables.
To measure the expected credit losses, trade and other
receivables have been grouped based on shared credit risk
characteristics and the days past due.
Trade and other receivables are written off when there is no
reasonable expectation of recovery. Indicators that there is no
reasonable expectation of recovery include, amongst others, the
failure of a counterparty to engage in a repayment plan with the
Company, and a failure to make contractual payments in a reasonable
time frame.
Impairment losses on trade and other receivables are presented
as impairment within loss for the period. Subsequent recoveries of
amounts previously written off are credited against the same line
item.
QANNAS INVESTMENTS LIMITED 27.
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS - continued
FOR THE HALF YEARED 30 JUNE 2019
========================================================= ====
16. FINANCIAL RISK MANAGEMENT - continued
Credit risk - continued
Loans receivable
The company mitigates credit risk on loans receivable by only
entering into agreements which have sufficient security held
against the loans or where the operating strength of the
counterparty is considered sufficient to support the amounts
outstanding.
Credit risk is determined on initial recognition of each loan
and re-assessed at each reporting date. The risk assessment is
undertaken by the Investment Manager.
The Board of Directors reviews the position of the counterparty
prior to entering into any loan arrangement and the Investment
Manager provides subsequent quarterly updates. The Investment
Manager's review includes review of financial information in
respect of the counterparty. Further disclosure in respect of loans
receivable and relevant collateral can be seen in note 5. The
Investment Manager is responsible for evaluating and proposing loan
proposals, as well as monitoring their recoverability and taking
any action on any doubtful amounts.
Loans receivable are held at fair value through profit and loss
and the above factors are considered when assessing the period end
fair value.
Other assets
The credit risk associated with trading and portfolio
investments is considered minimal.
Further, Goldilocks Investment Company Limited is managed by
ADCM Altus. 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
Goldilocks Fund can be seen in note 4.
The company does not consider that any changes in fair value of
financial assets in the period to be attributable to credit
risk.
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 Abu Dhabi Bank, which is repaid quarterly. This
repayment will be financed by way of existing cash reserves and the
continued realisation of the Company's investments. The Company, as
at June 2019, currently has $3,044,858 in cash and cash equivalents
in order to meet its $10m loan repayments. In Q3 and Q4 of 2019,
the Company intends to realise its investments in IFG, PPP and ADCM
SPEF and the Directors are confident that the realisation of these
investments will be sufficient to repay the balance of the bank
loan by December 2019. Whilst the investments in PPP and ADCM SPEF
are illiquid, the investment in IFG is considered liquid with the
distributions controlled by the parent company of the Company
Investment Manager acting as manager to IFG. Should the projected
realisations not occur in the timeframes expected, the Company will
look to liquidate a further element of its holding in Goldilocks
Investment Company Limited.
Capital risk management
The Company manages its capital to ensure that it will be able
to continue as a going concern while maximising the return to
stakeholders.
The capital of the Company is represented by the share capital
of the Company. The Company has sufficient assets to cover the
Company's liabilities at the Statement of Financial Position date
and for the foreseeable future. As such the Company had $36,235,344
of capital at 30 June 2019, 30 June 2018: $37,530,376 and 31
December 2018: $36,259,559.
To maintain or adjust the capital structure, the Company may
propose dividend payment to the shareholders, buy back shares or
issue new shares.
QANNAS INVESTMENTS LIMITED 28.
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS - continued
FOR THE HALF YEARED 30 JUNE 2019
========================================================= ====
16. FINANCIAL RISK MANAGEMENT - continued
Concentration risk
The Company aims to mitigate concentration risk through
investing in companies that operate in a variety of different
markets.
17. RELATED PARTY TRANSACTIONS
Richard John Stobart Prosser, a Director of the Company, is also
an officer of Estera Fund Administrators (Jersey) Limited, which
acts as administrator. Secretarial and administration fees incurred
by the Company with Estera Fund Administrator (Jersey) Limited for
the half year ended 30 June 2019 were $110,516 (half year ended 30
June 2018: $80,333; year ended 31 December 2018: $182,121), of
which $110,335 was outstanding at 30 June 2019 (30 June 2018:
$82,391; 31 December 2018: $43,282).
ADCM Ltd, the Investment Manager, owns 2 (30 June 2018: 2; 31
December 2018: 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
$6,063,015 in Palace Preferred Partners LP at 30 June 2019 (30 June
2018: $5,210,255; 31 December 2018: $5,661,520) which hold shares
indirectly in Palace Investors Holdings Limited and of which Palace
Real Estate Partners GP is the general partner.
Mustafa Kheriba, a Director of the Company, is also a director
of SPE Qannas C Limited. The Company has an investment of $nil at
30 June 2019 (30 June 2018: $nil; 31 December 2018: $nil) in SPE
Qannas C Limited.
Mustafa Kheriba, a Director of the Company, is also a director
of ADCM SPEF GP Ltd. ADCM SPEF GP Ltd is the general partner of
ADCM SPEF, an investment of the Company. As at 30 June 2019 this
was held at fair value of $3,478,632 (30 June 2018: $4,160,834; 31
December 2018: $3,579,885). Dividends totalling $nil were received
from ADCM SPEF during the half year (half year ended 30 June 2018:
$nil; year ended 31 December 2018: $nil).
Mustafa Kheriba, a Director of the Company, is also a director
of EE F&B Holding Limited. The Company has loan of $3,713,576
at 30 June 2019 (30 June 2018: $3,713,576; 31 December 2018:
$3,713,576) and an investment of $326,917 (30 June 2018: $1; 31
December 2018: $326,917) in EE F&B Holding Limited. Accrued
interest of $78,632 (half year ended 30 June 2018: $83,087; year
ended 31 December 2018: $117,989) was receivable from EE F&B
Holding Limited during the period of which $nil (30 June 2018:
$nil; 31 December 2018: $nil) remained outstanding at the period
end.
The loans receivable from Integrated Eastern European Fund,
Lucice Montenegro d.o.o. and Arqutino EAD (the "IEEF") which were
repaid during the year ended 31 December 2018 (30 June 2018:
$5,538,089; 31 December 2018: $3,359,451), 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. Interest of $253,654 (half year
ended 30 June 2018: $179,639; year ended 31 December 2018:
$253,654) 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
period, and originally invested $6,539,918 (AED 24 million) shown
as an investment in Goldilocks Fund in note 4. Further, the company
is entitled to management fee and performance fee rebates as
detailed in note 15. Abu Dhabi Financial Group, LLC ("ADFG")
charges 1.5% management fee and 15% performance fee on Goldilocks
through its wholly owned subsidiary, ADCM Altus.
Integrated Capital owned 787,408 participating shares in the
Company as at (30 June 2018: 787,408 and 31 December 2018:
787,408).
QANNAS INVESTMENTS LIMITED 29.
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS - continued
FOR THE HALF YEARED 30 JUNE 2019
========================================================= ====
17. RELATED PARTY TRANSACTIONS - continued
Shuaa Capital acted as arranger and placement agent for an AED
500 million issuance of JODC sukuk in exchange for a fee. Mustafa
Kheriba, a Director of the Company, is also a board member of Shuaa
Capital. ADFG, the ultimate controlling party of the Company's
Investment Manager, has a shareholding in Shuaa Capital.
ADFG, the ultimate controlling shareholder of the Company's
Investment Manager, has a 10% shareholding in Integrated Financial
Group, LLC. At 30 June 2018, the Company's investment in Integrated
Financial Group, LLC was carried at $7,954,008 (30 June 2018:
$19,026,696; 31 December 2018: $18,968,568).
The Company redeemed its loan with Capital Hotel d.o.o. during
the year ended 31 December 2018, resulting in the receipt of
proceeds of $9,931,555 in 2018 and $839,545 of accrued
interest.
ADFG owned 11,283,125 participating shares in the Company as at
30 June 2019 (30 June 2018:11,283,125 and 31 December 2018:
11,283,125).
18. IMMEDIATE HOLDING COMPANY AND ULTIMATE CONTROLLING PARTY
In the Directors' opinion there is no controlling or ultimate
controlling party.
19. EVENTS AFTER THE REPORTING PERIOD
On 9 July 2019, ADFG acquired a further 33,081,771 participating
shares in the Company at a price of $0.63 per share. As a result,
ADFG's total direct and indirect interest in participating shares
of the Company has increased to 45,152,304, representing 75.87%
percent of the voting rights. ADCM Ltd, the Investment Manager, is
a wholly owned subsidiary of ADFG.
On 3 September 2019, the Company entered into conditional
agreements to acquire a substantial portfolio of attractive
investment assets (the "Portfolio") from a consortium of
third-party vendors (the "Transaction"). The Portfolio includes
shareholdings in a number of publicly traded GCC-focused companies,
in sectors such as real estate, maritime shipping services and
insurance. Further Portfolio assets include two plots of land that
have been zoned for commercial or residential development and units
of an open-ended fund that the Company is currently invested in.
The Transaction (which remains subject to change, due diligence and
market adjustments) attributes a value to the Portfolio of
approximately AED 1.5bn (approximately $417m), representing a
compelling discount to the market value of the Portfolio as at 31
July 2019 of approximately AED 2.2bn (approximately $600m). The
Company will also assume accompanying liabilities of approximately
AED 1.1bn (approximately $298m). The Company estimates that it will
issue approximately 196 million new ordinary shares of no-par value
("New Qannas Shares") in consideration for the Portfolio, dependent
inter alia on the Company's net asset value as of 31 July 2019. The
Transaction, therefore, presents the Company with the opportunity
to acquire a Portfolio with an estimated net asset value implied by
the Transaction of approximately AED 440 million (approximately
$120m) on highly attractive terms. The Transaction and subsequent
balance of assets across the Company is consistent with the
Company's investment strategy and policy. The Transaction is to be
implemented by way of a transfer of the legal and/or beneficial
interests in the Portfolio and the accompanying liabilities to one
or more special purpose vehicles to be established in the UAE by or
on behalf of the consortium of third-party vendors. The consortium
of third-party vendors will thereafter procure the transfer of the
holding companies to Qannas Investments Limited and/or a nominee
appointed by the Company, and the Company will issue the New Qannas
Shares to the consortium of third-party vendors pro rata to their
respective beneficial interest in and to the Portfolio. Details of
the Implementation Agreements with regard to the Transaction and
certain associated related party transactions are set out in the
announcement make to the market on 3 September 2019. The Company
will in due course propose certain resolutions to be approved by
shareholders with regard to the Transaction and will make
further
announcements in due course.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR LLFVLAAIRFIA
(END) Dow Jones Newswires
September 26, 2019 07:56 ET (11:56 GMT)
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