Qannas Investments : Annual Financial Report

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 2014. Extracts from these statements are enclosed below.

Qannas also advises that the audited financial statements for the period ended 31 December 2014, together with a Notice of the AGM are available on the Company's website atwww.qannasinvestments.comand will be posted to shareholders today.

It is with great pleasure that I present my third report on the performance of Qannas Investments Limited (the 'Company') during which it witnessed remarkable growth, both in terms of size and income. The Company's journey began with its IPO in March 2012 with the objective of investing opportunistically primarily in the Gulf Cooperation Council countries. Today, the Company has evolved into a successful investment company with a diverse portfolio spread mainly across Middle East, Eastern Europe and Central London.

By the end of its second year (ending 31-Dec-13), the Company had reached several milestones, including: the completion of five deals; the successful exit from two of those at impressive IRRs; distribution of dividends of $3.5 million ($0.18 per share) in April 2013; and a second round of funding to raise $11.5 million during Q2 2013.

The year 2014 witnessed the continued momentum of the Company's aggressive growth strategy. During Q1 2014, the Company acquired interests in two investment funds, ADCM Secondary Private Equity Fund LP and SPE Qannas C Ltd., at a discount of 20% and 15% respectively to their estimated Net Asset Value ('NAV') of $59.3 million as at 31 December 2013 (Project Beast). Since acquisition, these investment funds have distributed an aggregate of $8.7 million to the Company during the year. As a result of this transaction, the Company's issued share base increased from 34.7 million to 78.1 million. As part of Project Beast, the Company also amended its investment policy and investment strategy to provide the investment manager with the flexibility to invest outside the GCC and with greater freedom in portfolio weightings. Additionally, the Company's domicile was moved from Jersey to The Cayman Islands, taking the Company outside the City Code which required shareholders in excess of 30% to make a mandatory full bid. Post Project Beast, the investment manager of the Company is entitled to a quarterly cash management fee assessed as 0.4375% of the Company's NAV as at the last day of each quarter.

The Company has been very active on the new investment front, investing in five projects during the year in addition to Project Beast, and has committed to three more investments since the year end. The Company has also successfully exited from a further two investments. Full details of the Company's investment activity are contained in the Investment Manager's Report.

The year witnessed some key corporate events such as the appointment of Richard Green and Mustafa Kheriba as directors of the Company during Q2 2013. At the same time, Andrew Whelan stepped down from the board and I wish to thank him for his significant contribution. The Company distributed a special dividend of $9 million ($0.115 per share) during Q3 2014, in line with its implied policy of regularly paying out dividends to the shareholders. To fund its growth and invest in the pipeline of opportunities, the Company secured a loan facility of $10 million during 2014 from First Gulf Bank at a rate of 2.5% margin over LIBOR and secured against certain existing assets. In early 2015 this facility was increased by $20 million, bringing the total facility to $30 million.

The Company has been recognized for its achievements, notably its investment strategy and portfolio returns. Just after the year-end, the Company was awarded the 'Outstanding Performance & Innovation' award for the second consecutive year, by MENA FM (Middle East and North Africa Fund Managers) at its annual awards event in January 2015. The MENA FM Performance Awards is one of the largest gatherings of fund managers in the industry's calendar, and the award recognizes the Company's investment manager's (ADCM Ltd) competitive edge in creating superior returns for the Company's shareholders.

I am pleased with the pace at which the Company is evolving and look forward to the Company continuing to deliver value to shareholders by executing its investment strategy in line with our mandate. I would like to thank shareholders, the board of directors, service providers, and the investment manager for their continued support.

ADCM Ltd. ('ADCM'), the investment manager for Qannas Investments Limited (the 'Company'), is pleased to present the annual investment manager's report for the year ending 31 December 2014.

Investment Summary

2014 was an eventful year for the Company where it achieved several milestones and maintained its growth momentum while evolving its investment strategy. During the year, the Company completed six new investment deals and exited two.

During 2014, the Company committed to investments in the following: Integrated Financial Group (Project Integration); ACC Hotel; developing Hard Rock Café Podgorica through EE F&B Holding Limited (Project HRC); Palace Preferred Partners L.P. (Project PPP); loans to Injaz Eastern European Property Development Company Limited (Project IEEPDC); and Limited Partner (L.P.) interests in ADCM Secondary Private Equity Fund L.P. (96.5%) and in SPE Qannas C Ltd (74.3%) (together, Project Beast).

Subsequent to the year end, the Company has made commitments to three further investments: a preferred equity investment for the development of the Taj Hotel Downtown Dubai (Project Taj), a 296 room five star luxury hotel in Dubai; a preferred equity investment for the development of a mixed use scheme in Central London (Project Broadway); and the purchase of residential units in a building nearing completion in Dubai (Project Apex).

During 2014, the Company disposed of its investment in a land plot on Reem Island, Abu Dhabi (Project Gazelle) and exited from the structured debt investment in Sheffield Holdings (Project Marina).

As of 31 December 2014, the Company had a NAV of approximately $79.4 million or $1.02 per share and total cash of $3.3 million. Additionally, the Company has transferred $18 million to a client account of the investment manager for pipeline investments that are currently in progress (namely: Integration, HRC and ACC Hotel) and this is shown as a receivable from investment manager in the financial statements. During the year, the Company raised a line of credit for $10 million (representing 12.7% of NAV as on December 31, 2014).

Investment Update

Project Beast

During the first quarter of 2014, the Company acquired interests in two investment funds, ADCM SPEF L.P. and SPE Qannas C Ltd., at a discount of 20% and 15% respectively (to their estimated NAV at 31 December 2013). These L.P. interests were acquired through the issuance of 44.7 million shares from the Company as consideration. Post transaction, the Company's NAV increased from $34 million to $91 million and the issued share base increased from 34.7 million to 78.1 million.

ADCM SPEF is invested in 11 funds and the carrying value of investments (pro-rated for the Company's interest) as of December 31, 2014 is $45.7 million. The Company holds a 96.5% interest in ADCM SPEF.

During the year, the Company received a total distribution of $8.5 million from ADCM SPEF L.P. and made a contribution of $0.48 million.

SPE Qannas C Ltd. is invested in The Abraaj Buyout Fund II L.P. and the carrying value of investments (pro-rated for the Company's interest) as of December 31, 2014 is $9.3 million. The Company holds a 74.3% interest in SPE Qannas C. During the year, the Company received a total distribution of $0.2 million from SPE Qannas C.

Since acquisition, the carrying value of ACDM SPEF and SPE Qannas C increased by $4.5 million which represents a gain of 10.8% on the acquisition cost of the portfolio.

Project IEEPDC

During the third quarter of 2014, the Company completed a debt investment (senior secured term loan) of €7.0 million in IEEPDC for a term of two years with the interest being rolled up until maturity. The loan proceeds were deployed to enable IEEPDC to complete the acquisition of two land holding companies and to subsequently develop plots in Bulgaria and Montenegro into hospitality-focused assets.

Project PPP

During October 2014, the Company committed to an investment of £11 million (approximately $18.2 million) in Palace Preferred Partners LP, an SPV created for the redevelopment of 1 Palace Street ('1PS'), London. The investment is part of an overall tranche of £50 million which in turn is invested in the project as preferred equity with a preferred return rate of 15%. It is expected that the debt principal and interest will be paid by 2018, when the redevelopment is complete and sales proceeds are collected. 1PS is located adjacent to Buckingham Palace, with excellent views overlooking Buckingham Palace Gardens. Gross Development Value of 1PS is expected to exceed £500 million based on an MRICS Red Book valuation by Savills. Subsequent to the year 2014, the Company has contributed an amount of £4.4 million, of the total commitment of £11 million.

During the year, full planning consent was acquired for a residential scheme including a restaurant, spa / health centre and a reception / concierge to provide 24 hours service to 72 ultra-luxury apartments.

Post-acquisition, there has been significant progress in the project, including approval of the revised planning consent; design and initial site works; and securing of a £260 million long-term development facility from National Bank of Abu Dhabi to refinance the acquisition bridge loan and further development.

Project Integration

During November 2014, the Company committed to invest $20.4 million to acquire an equity interest of approximately 49% in Integrated Financial Group LLC ('IFG'), a UAE-based holding company incorporated for the purposes of acquiring and consolidating two financial services companies (the 'Transaction'). At the year-end, IFG was in the process of acquiring, by means of a share-for-share swap with the existing shareholders, a controlling interest in two UAE-focused financial services companies:

·First Gulf Financial Services LLC (to be renamed to 'Integrated Securities' or 'IS'), which is in the business of trading securities on the Abu Dhabi and Dubai stock exchanges; and

·Integrated Capital PJSC ('IC'), which is a fully licensed, UAE central bank-regulated investment company.

The transaction consists of two steps: the acquisition of interests from shareholders of IC and IS seeking to exit; and the swapping of shares of the remaining shareholders for shares in IFG. The process is currently in progress and is expected to be completed by the H1 2015.

Note: Abu Dhabi Financial Group (ADFG) owns 100% of ADCM.

Project ACC Hotel

During November 2014, the Company committed up to €11.0 million for an equity investment in an SPV developing a four star hotel at Atlas Capital Centar ('ACC') in Podgorica, the capital of Montenegro.

The proceeds will be used for financing the development costs. The hotel will have a gross floor area (GFA) of 9,500 sqm, with 135 rooms and 90 parking spaces. The hotel will be the second largest hotel in the city.

ACC is one of the largest mixed use development projects in the Balkan region (with approximately 89,974 sqm GFA) located in the central business district of Podgorica with unique architecture, landmark design and scale, and a truly luxurious hospitality, retail, commercial and residential offering.

Project HRC

During the fourth quarter of 2014, the Company committed to invest approximately €3 million in an equity investment to develop the Hard Rock Café in the ACC (Podgorica). The proceeds were used for the construction, equipment and pre-operating costs of HRC. This project is part of a larger Area Development Agreement with Hard Rock Limited to develop three Hard Rock Cafés in Podgorica (Montenegro), Belgrade (Serbia) and Sofia (Bulgaria).

Subsequent to the year-end, the first Hard Rock Café in Podgorica, launched its operations on 8th Feb 2015, had a grand opening in May 2015 attended by over six thousand people, and is now fully operational.

Project Scholar

The Company acquired 250,000 shares of Madaares in 2013, a private company which, through its subsidiary Taaleem PJSC, operates 10 schools and nurseries in the UAE with 5,875 students enrolled.

Exits

In the year 2014, the Company exited from two investments: -

·Reem Plot

In March 2014, the Company sold its investment in the 29,267 sq. ft. plot of land on Reem Island in Abu Dhabi for AED 22.68 million ($6.2 million) in cash. This plot was purchased by the Company in May 2013 for AED 12 million ($3.3 million). In the ten months, the Company generated a multiple of 1.89x the capital invested and an annualized IRR of 118.1%.

·Marina 101

Corporate Activity

During 2014, the Company secured a two year term loan facility of $10 million from First Gulf Bank to fund its growth and invest in the pipeline of opportunities. The loan has a rate of 2.5% margin over LIBOR and is secured against certain existing assets of the Company. Subsequent to the year end, this loan facility has been increased to $30 million.

The Company distributed a special dividend of $9 million ($0.115 per share) during the third quarter of 2014, in line with its ambition of regularly paying out dividends to the shareholders.

Pipeline Investments

Subsequent to the year end, the Company has made commitments to three further transactions:

Project Apex

The Company has committed to an equity investment of AED 9.1 million ($2.5 million) for the purchase of 2 premium units of 3,653 sq ft area each (3-bedroom penthouses on the 88th floor) at the development Marina 101 at Dubai Marina, Dubai UAE. One of the units has a sea view (West) while the other has views to the East.

ADCM, the investment manager, has sourced the units from the developer at a discounted price of AED 1,250 per sq ft ($340 psf), including all related costs. Currently, 3- bedroom units of a similar floor area in the Dubai Marina micro-market are selling at the rate of AED 1,900-1,950 per sq ft.

Previously, the Company participated in a structured debt arrangement with the developer of the project. Recently, ADCM secured Hard Rock Hotels International as the operator of the 5 star hotel, which will be operated within the building (up to 32nd floor). The project is c 85% complete, with completion targeted for second quarter of 2016.

Project Broadway

The Company has entered into an agreement to participate in a preferred equity investment of ₤3.5 million in BL Development Ltd ('BLD'), an SPV incorporated for the development of a mixed use development project in Central London. Holders of the preferred equity instrument are entitled to a preferred return of 14% of their investment per annum.

The proceeds will be used towards pre-completion activities including transaction costs incurred during the acquisition of the property, architecture design, obtaining planning consent and preparing development works.

Project Taj

The Company has entered into an agreement to invest AED 4.0 million in a secured Murabaha issue of AED 52 million by Verne Preferred Limited, an SPV incorporated for the investment by way of preferred equity for the development of the Taj Hotel Downtown Dubai, a 296 room five star luxury hotel in Dubai, the United Arab Emirates. Holders of the issue are entitled to a preferred return of between 12-17% of their investment per annum depending on redemption date, with the coupon serviced through a combination of cash and accrued payment in kind.

The hotel started its operations and soft-launched on 2nd June 2015.

Market Outlook

2014 was an eventful year, which saw significant turbulence across certain asset classes. The year opened with geopolitical uncertainties in the Middle East and Russia, stagnation in the real estate prices in the UAE, currency shocks (Swiss franc appreciation, volatility in the Euro and the GB Pound against the USD) and closed with uncertainty over the UK election and US interest rates, volatility in the fixed income markets and a sharp slump in the oil prices which further exacerbated the Russian crisis.

However, the macroeconomic events during the year presented several opportunities which the Company exploited to build a portfolio across the Central London, Eastern Europe and UAE market. The investment manager believes that the real estate investment opportunities offered by Central London, the recovery of Eastern European region and the growth in the UAE offer growth and diversification opportunities to the Company.

The UAE Region

ADCM believes that the UAE growth story will continue, helped by recovering oil prices in 2015 and driven by growth in the non-oil sectors. Despite declining oil prices in 2014, the growth in UAE's GDP in 2015 is estimated at 3.5%, driven by the non-oil sectors of the economy which is approximately 70% of GDP. The UAE's economy is more diversified than its regional peers and is ranked 12 out of 144 countries in the World Economic Forum's Competiveness Index. In 2014, the real estate sector witnessed lukewarm response from buyers, particularly due to the Russian Rouble crisis as well as the overall negative sentiment during the falling equity markets and the decline in oil prices. The impact of falling oil prices on the equity markets was evident in the drop in average daily trading volumes across the regional stock exchanges. However, subsequent to the year-end, oil has bounced back to $60 in May 2015 and so have the equity markets, with renewed interest in IPOs.

Central London

ADCM believes that the Central London Real Estate market offers a safe investment destination for global investors.

This was evident during the Swiss franc shock which led to a surge in the number of enquiries from Swiss-based investors looking to move their money into London real estate as a safe haven.

The change in the Stamp Duty Law in 2014 has further increased the attractiveness of Central London as an investment destination for real estate investors. Subsequent to the year-end, Central London's prime property market declined marginally, but primarily due to the uncertainty related to the general election and fears over a possible mansion tax (tax on homes worth more than £2 million) supported by the UK's Labour Party. However, Central London's prime property market regained confidence and stability after the UK election results, which delivered a majority government led by Conservative Party.

Eastern Europe / Montenegro

The Eastern European region remained largely unaffected by the oil price fall and the Russian crisis. Montenegro recently unveiled its privatization plans for 2015 to attract more foreign investors. Montenegro has gained global recognition as a tourist destination since Forbes listed it as a 'must see' destination and the luxury hotel operator One&Only is scheduled to open its first European property on Tivat Bay in 2016.

On the global front, the US economy grew 2.4% in 2014 and the unemployment rate declined by 100 basis points to 5.6%. We note that in the first quarter of 2015, the US economic growth declined to 0.2%, primarily due to harsh winter weather and a strong dollar. However, the recent statement in May 2015 by the US Fed Chair reinforcing that the Fed will take the initial step to raise the federal funds rate if the economy continues to improve, reflects signs of US growth.

Overall ADCM remains optimistic on global economic growth. Post Project Beast, the Company's broader mandate to look at global opportunities gives it the flexibility to invest in opportunistic investments outside the GCC, particularly in Central London and Eastern Europe that offer lucrative opportunities. The Company is currently completing the pipeline projects in these markets and anticipates further growth in the Company's NAV driven by the portfolio's exposure to these markets.

The directors present their report and the audited financial statements of the Company for the year ended 31 December 2014.

Incorporation

The Company was incorporated and domiciled in Jersey, Channel Islands as a public limited company (registration number 109878) on 17 January 2012. On 31 March 2014 the Company migrated to the Cayman Islands (registration number CT 286543) and ceased to be a Jersey registered Company.

Principal activities

The Company's principal activity is that of generating value for Shareholders by creating a portfolio of opportunistic investments in real estate, debt, and equities (both public and private) in the MENA region, Europe and North America. Investments are made where there is liquidity requirement or portfolio repositioning on the part of a vendor such that assets become available at a discount to their intrinsic value. The Company aims to acquire such assets and subsequently dispose of them at a premium to their acquisition cost.

Results and dividends

The Statement of Comprehensive Income for the year is set out on page 9. The Company generated Total Comprehensive Income of $9,721,132 for the year ended 31 December 2014 (2013: $3,004,243). The Company made a distribution of $8,985,342 during the year (2013: $3,545,694).

Directors

The directors who held office throughout the year and up to the date of approving the financial statements were:

Jassim Mohamed Alseddiqi

Richard John Stobart Prosser

Christopher Ward (Chairman)

Andrew Noel Whelan (resigned 17 June 2014)

Richard Green (appointed 17 June 2014)

Mustafa Kheriba (appointed 17 June 2014)

Details of the financial interests of directors are disclosed in note 3 of the financial statements.

Secretary

Appleby Secretaries (Jersey) Limited resigned as company secretary on 31 March 2014 and Codan Trust Company (Cayman) Limited were appointed in their place.

Registered office

The registered office of the Company from 31 March 2014 and up to the date of approving the financial statements was that of Codan Trust Company (Cayman) Limited, Cricket Square, Hutchins Drive, PO Box 2681, George Town, Grand Cayman KY1-1111, Cayman Islands.

Independent auditor

BDO Limited is the independent auditor and has expressed its willingness to continue in office.

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.

We have audited the financial statements of Qannas Investments Limited (the 'Company') for the year ended 31 December 2014 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 25. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards as adopted by the European Union.

This report is made solely to the Company's members. 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.

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 Auditing Practices Board's 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.

In our opinion the financial statements:

·give a true and fair view of the state of the Company's affairs as at 31 December 2014 and of its profit for the year then ended; and

·have been properly prepared in accordance with International Financial Reporting Standards as adopted by the European Union.

BDO Limited

Chartered Accountants

Jersey

29 June 2015

1. GENERAL INFORMATION

The Company was a limited liability closed-end investment Company incorporated in Jersey on 17 January 2012 with an unlimited life. The Company joined London's Alternative Investment Market ('AIM') on 6 March 2012. The registered office of the Company was 13-14 Esplanade, St Helier, Jersey, JE1 1BD, Channel Islands. On 31 March 2014, the Company migrated to the Cayman Islands as an exempt company and ceased to be a company incorporated under Jersey Company Law on that date. The registered office of the Company is that of Codan Trust Company (Cayman) Limited, Cricket Square, Hutchins Drive, PO Box 2681, George Town, Grand Cayman KY1-1111, Cayman Islands.

The Company's principal activity is that of investing, centred around a theme-based investment approach, which have evolved over the years, starting with a focus on distressed / opportunistic investments in the UAE in 2012 and 2013 and broadening to the acquisition of secondary portfolios of regional PE funds and European real estate investments in 2014. The Company's investment objective is to generate value for Shareholders by creating a portfolio of opportunistic investments in real estate, debt, and equities (both public and private) in the MENA region, Europe and North America. Investments will be made where there is liquidity requirement or portfolio repositioning on the part of a vendor such that assets become available at a discount to their intrinsic value. The Company will aim to acquire such assets and then to dispose of them at a premium to their acquisition cost.

2. SIGNIFICANT ACCOUNTING POLICIES

Basis of preparation

The financial statements have been prepared under the historical cost convention, except for the revaluation of certain financial instruments and investments which are included at fair value, and in accordance with applicable International Financial Reporting Standards as endorsed for us in the European Union ('IFRS'). The principal accounting policies are set out below.

Basis of measurement

The Company classifies its investments in the following categories: investments at fair value through profit or loss, loans and receivables and available-for-sale financial assets. The classification depends on the nature and purpose of each investment. The directors determine the classification of its investments at initial recognition.

Investments at fair value through profit and loss

The Company classifies its investments in equity and limited partnership interests as financial assets at fair value through profit or loss.

Investments are recognised and de-recognised on the trade date - the date on which the Company commits to purchase or sell an investment. Investments are initially recognised at cost. Transaction costs are expensed as incurred in the statement of comprehensive income. Investments are derecognised when the rights to receive cash flows from the investments have expired or the Company has transferred substantially all risks and rewards of ownership.

Subsequent to initial recognition, investments are measured at their fair value. Gains and losses arising from changes in the fair value are presented in the statement of comprehensive income within net gains on investments in the period in which they arise.

Dividend income is recognised in the statement of comprehensive income within investment income when the Company's right to receive payments is established.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value of financial assets and liabilities traded in active markets (such as publicly traded securities) are based on quoted market prices at the close of trading on the reporting date. The Company utilises the last traded market price for both financial assets and financial liabilities where the last traded price falls within the bid-ask spread. In circumstances where the last traded price is not within the bid-ask spread, the directors will determine the point within the bid-ask spread that is most representative of fair value.

The fair value of financial assets and liabilities that are not traded in an active market is determined using valuation techniques. The Company uses a variety of methods and makes assumptions that are based on market conditions existing at each reporting date. Valuation techniques used include the use of comparable recent arm's length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, option pricing models and other valuation techniques commonly used by market participants making the maximum use of market inputs and relying as little as possible on entity-specific inputs.

Loans receivable

Loans receivable are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are classified as loans and receivables.

Loans receivable are recognised on the date on which the Company commits to provide a loan. The loans are initially recognised at cost. Transaction costs associated with the loans expensed as incurred within the statement of comprehensive income. Loans receivable are derecognised when the rights to receive interest income have expired and the loan has been repaid.

Subsequent to initial recognition, loans receivable are measured at amortised cost using the effective interest rate method, less provision for impairment.

Interest income is recognised in the statement of comprehensive income within interest income - loans receivable when the Company's right to receive payments is established.

Available for sale financial assets

Available for sale ('AFS') investments are initially recognised and subsequently carried at fair value. Gains and losses arising from changes in the fair value are recognised in other comprehensive income. When securities classified as AFS are sold or impaired, the accumulated fair value adjustments recognised in other comprehensive income are included in the statement of profit and loss as 'Loss on disposal of available for sale financial asset'.

Interest on AFS debt instruments is calculated using the effective interest method and is recognised in the statement of comprehensive income as interest income - available for sale financial assets.

Freehold land

The Company classifies its investments in freehold land as a financial asset at fair value through profit or loss.

Freehold land is recognised and de-recognised on the trade date - the date on which the Company commits to purchase or sell a plot. Freehold land is initially recognised at fair value. Transaction costs are expensed as incurred in the statement of comprehensive income. Freehold land is derecognised when the rights to receive cash flows from the land has expired or the Company has transferred substantially all risks and rewards of ownership.

Subsequent to initial recognition, freehold land is measured at fair value. Gains and losses arising from changes in the fair value are presented in the statement of comprehensive income within net gains on investments in the period in which they arise.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Functional and presentational currency

The performance of the Company is measured and reported to the investors in US dollars. The board of directors considers the US dollar as the currency that most faithfully represents the economic effects of the underlying transactions, events and conditions. The financial statements are presented in US dollars, which is the Company's functional and presentation currency.

Use of estimates and judgements

The preparation of the financial statements in conformity with IFRS and applicable Statute law requires the directors to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates with the most significant effects on the carrying amounts of the assets and liabilities in the financial statements are outlined below:

(i) Valuation of unquoted investments - The fair value of these is determined via valuation techniques. For further details of the judgements and assumptions made see note 20.

(ii) Valuation of quoted investments - These are valued at the last traded price on the reporting date and in accordance with IFRS, no discount is applied for the liquidity of the stock or any dealing restrictions.

(iii) Valuation of loans receivable - Loans receivable are held at amortised cost. The directors undertake regular impairment reviews of loans receivable to ensure that they remain recoverable.

(iv) Valuation of freehold land - This is valued with reference to comparison to similar sales transactions. For further details on the judgements and assumptions made see note 20.

(v) Valuation of available for sale financial assets - These are valued using a discounted cash flow methodology. For further details of the judgements and assumptions made see note 20.

Foreign currencies

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign currency assets and liabilities are translated into the functional currency using the exchange rate prevailing at the statement of financial position date.

Foreign exchange gains and losses arising from translation are included in the statement of comprehensive income. Foreign exchange gains and losses relating to cash and cash equivalents are presented in the statement of comprehensive income within '(loss) / gain on foreign exchange. Foreign exchange gains and losses relating to the financial assets and liabilities carried at fair value through profit or loss are presented in the statement of comprehensive income within 'net gains on investments'.

Financial assets and liabilities

The Company classifies its financial assets and liabilities as follows:

Cash and cash equivalents

Cash and cash equivalents includes cash in hand, deposits held at call with banks and other short-term investments in an active market with original maturities of less than three months.

Trade and other receivables

Trade and other receivables are initially recognised at fair value and subsequently carried at amortised cost; their carrying values are a reasonable approximation of fair value.

Trade receivables include the contractual amounts for the settlement of trades and other obligations due to the Company.

Receivable from investment manager

Receivable from investment manager comprises deposits held by the investment manager in order to allow them to facilitate on-going transactions arising from structures at different stages of formation at the year end.

Trade and other payables

Trade and other payables are initially recognised at fair value and subsequently carried at amortised cost; their carrying values are a reasonable approximation of fair value.

Trade and other payables represent contract amounts and obligations due by the Company.

Loans payable

Loans payable are measured initially at cost. Subsequent to initial recognition, they are measured at amortised cost using the effective interest rate method. They are classified as loans and receivables. These financial liabilities are recognised when the Company enters into a Loan Agreement and are derecognised when the loan agreement is terminated.

The effective interest rate method is a method of calculating the amortised cost of a financial liability and of allocating the interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts over the expected life of the financial instrument, in order that the present value of the future cash flows, including fees or transaction costs, is equal to the carrying amount of the financial instrument.

Finance costs associated with loans payable have been spread on an effective interest rate constant basis over the life of the loan.

Shares in issue

Management Shares are not redeemable, do not participate in the net income or dividends of the Company and are recorded at $1.00 per share.

Participating shares in issue are not redeemable at the shareholder's option.

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable in the normal course of business. The Company recognises revenue when the amount of revenue can be reliably measured and when it is probable that the future economic benefits will flow into the Company.

Taxation

The Company is domiciled in the Cayman Islands and is treated as resident for tax purposes and is subject to the zero per cent standard income tax rate.

Expenditure and transaction costs

All items of expenditure including the performance and management fees are recognised on an accruals basis.

Distributions payable

The payment of dividends will depend on the availability of distributable reserves, cash resources and the working capital requirements of the Company. Dividends paid are included in the Company financial statements in the period in which the related dividends are declared.

Non consolidation

The Company fulfils the definition of an investment entity under IFRS 10 ('Consolidated Financial Statements') and as a result does not consolidate investments in subsidiaries but instead measures its investment at fair value through profit and loss. IFRS 10 defines an investment entity as one that obtains funds from investors for the purpose of providing investors with investment management services, commits to its investors that its purpose is to invest funds solely for returns from capital appreciation, investment income or both and measures and evaluates the performance of substantially all its investments on a fair value basis.

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 2014 that were material to the Company.

New standards and interpretations not yet adopted

A number of new standards and amendments to standards and interpretations are effective for annual periods beginning after 1 January 2014, and have not been applied in preparing these financial statements. None of these is expected to have a significant effect on the financial statements of the Company, except the following:

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 2017 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 2014 was:

Directors' interests in the shares of the Company including family interest, at 31 December 2014 were: