TIDMTCA
RNS Number : 6514S
Terra Capital PLC
27 June 2018
Terra Capital plc/ Market: AIM/ Epic: TCA/ Sector: Equity
Investment Instruments
27 June 2018
Terra Capital Plc ('Terra' or 'the Fund')
Annual Results for the Year Ended 31 December 2017
Terra Capital Plc, the AIM quoted investment company focussed on
investing in value opportunities globally, primarily in frontier
markets, announces annual results for the year ended 31 December
2017.
The Fund undertakes its activities in line with its strategy to
provide high absolute returns by investing in under-evaluated
companies which present significant deep value opportunities. Due
to market inefficiencies, the Fund and its Investment Manager,
Terra Partners Asset Management Limited, believe that frontier
markets provide many such prospects.
For more information, please visit www.terracapitalplc.com or
contact:
Galileo Fund Services Limited (Administrator)
Frazer Pickering
+44 1624 692600
Panmure Gordon (UK) Limited (Nominated adviser and corporate
broker)
Paul Fincham or Jonathan Becher
+44 20 7886 2500
Terra Capital plc.
Ian Dungate, Director
+44 1624 692600
NOTES:
Terra Capital plc is an AIM quoted investment trust focussed on
generating high absolute returns while ensuring volatility is kept
to a minimum. The fund predominantly invests in under-researched
and under-valued companies. The Fund Manager targets companies that
are trading at less than their intrinsic worth and so, aside from
any potential growth prospects, provide scope for capital
appreciation as a result of a reversion towards underlying value.
Investments are also made in companies which are viewed as fair
value but offer opportunities for growth at a reasonable price. Due
to inherent market inefficiencies, the Investment Manager believes
many such 'value' opportunities can be found in Frontier Markets
and utilises in-house teams of analysts on the ground in areas of
interest to investigate suitable opportunities rather than rely on
third party research.
Chairman's statement
Our year end net asset value per share stood at $1.149 against
$1.016 for 2016. This represents an increase for the year of
13.1%.
In accordance with the policy adopted following the
extraordinary general meeting held in January 2015, as a result of
the average discount at which shares traded during 2017, a tender
offer was made to purchase up to ten percent. of the shares in
issue at 31 December 2017.The tender was effected on 12 March 2018
and was taken up in full. As a result of the tender offer it was
determined that no dividend be paid in respect of 2017.
The Investment Manager has continued to maintain a diverse
portfolio of undervalued assets throughout 2017 and equity exposure
at December 31 2016 stood at 81.4% as cash was held in anticipation
of the tender offer.
In addition to the tender offer, as part of the restructuring
proposals approved by shareholders in January 2015, Shareholders
approved a proposal whereby in June 2018 they would be offered an
opportunity to realise all or part of their investment in the
Company at a price equal to the then prevailing net asset value
(less costs associated with the opportunity). As detailed in the
RNS announcement made by the Company on 19 April 2018, following
consultation with Shareholders who between them hold in excess of
60 per cent. of the issued share capital of the Company, it has
become clear to the Board that such Shareholders would accept the
Realisation Opportunity and as such the Company would no longer be
a viable proposition.
In the light of the above consultations the Board determined,
subject to the formal approval of Shareholders to be given in
General Meeting, to dispense with the Realisation Opportunity, and
instead cease all new investments and seek to realise, in an
orderly fashion, the Company's portfolio of investments and return
the net proceeds generated to Shareholders as soon as is
practicable. The Board, having consulted with its advisers, believe
an orderly realisation of the portfolio of investments is
preferable to an immediate liquidation as it is likely to achieve
greater returns to Shareholders.
The proposal outlined above constitutes a change to the
investment policy of the Company and as such is subject to approval
by Shareholders. Accordingly a circular containing details of the
proposed change of investment policy was sent to Shareholders on 15
June 2018 containing a notice of General Meeting to be held on 10
July 2018 at which Shareholders will be asked to approve the
proposed change of investment policy
Further details can be found on the Company's website
www.terracapitalplc.com under News and Reporting "Company
Reports".
Sincerely yours,
Dirk Van den Broeck
Chairman
26 June 2018
Report of Terra Partners Asset Management Limited, the
Investment Manager
The NAV of Terra Capital plc (the "Fund") increased to $1.149 at
December 31, 2017 from $1.016 as of December 31, 2016 with a net
total return of 13.1% for the year.
The Fund's investment level (equity, fixed income and hedging)
decreased from 86.3% at December 31st, 2016 to 81.7% at December
31, 2017. The Fund retained an excess of cash in order to fund the
take-up of the tender offer that was anticipated to occur in early
2018.
Specific Areas of Investment
Americas
The allocation to the Americas decreased from 25.2% to 21.0%
during the year and was tied with Europe as the Fund's largest
regional allocation. During the year the Fund did not add any new
positions and liquidated its positions in Scotia Group (Jamaica)
and Terra Argentine Fund (Argentina).
Europe
The Fund's exposure to Europe increased from 20.1% to 21.1% and
was tied with Americas as the largest regional allocation. During
the year the Fund did not add any new positions and liquidated its
positions in X5 Retail (Russia), BNL Portfolio Immobiliare (Italy),
and Silvano Fashion Group (Estonia).
Asia
The Fund's exposure to Asia decreased from 14.6% to 12.0%.
During the year the Fund did not add any new positions and
liquidated its positions in Ardent Leisure Group (Australia),
Emperador (Philippines), Lotte Chilsung Beverage (Korea), Kumho
Petro (Korea), Shinyoung Securities (Korea) and Bank of Georgia
(Georgia).
Middle East
The Fund's exposure to the Middle East decreased from 16.0% to
14.7%. During the year the Fund added new positions in Amanat
Holdings (UAE), BBK (Bahrian), NBK (Kuwait), and Mezzan Holdings
(Kuwait) and liquidated its positions in Doha Bank (Qatar), Air
Arabia (UAE), Abu Dhabi Commercial Bank (UAE), Amanat Holdings
(UAEf), and Mezzan Holdings (Kuwait).
Africa
The allocation to Africa increased from 9.2% to 12.9%. During
the year the Fund added new positions in African Oxygen (South
Africa) and KCB Group (Kenya) and liquidated its positions in UAC
of Nigeria (Nigeria), Onelogix (South Africa), Cooperative Bank
(Kenya), and Holdsport (HSP)
Fund Details
The following pages detail the Fund's holdings including changes
from the prior year. The numbers provided are based on the
Investment Manager's internal calculations.
Respectfully submitted,
Terra Partners Asset Management Limited
Portomaso Tower Suite 8/5A
Portomaso Ave
St. Julian's Malta STJ4011
Telephone +356-2371-7000
Regulated by Malta Financial Services Authority, Reg No.
C56353
Region Country Security Shares Market % of Change
Value Fund from prior
year
---------- ------------- ------------------------ ------------------------- ------------------------------- ------- -----------
Burkina
AFRICA Faso Onatel BF 60,809 1,064,416 1.51% No Change
Emaar Misr for
Egypt Development 7,361,000 1,469,633 2.08% No Change
Kenya KCB Group 2,867,000 1,187,638 1.68% No Change
Residences Dar
Morocco Saada 60,083 1,002,651 1.42% Increase
Nigeria Nigerian Breweries 833,247 312,236 0.44% No Change
South
Africa African Oxygen 707,000 1,600,867 2.27% No Change
South Holdsport - - 0.00% Liquidated
Africa
Tunisia One Tech Holding 248,305 1,337,150 1.89% No Change
Automobile Reseau
Tunisia Tunisien et Services 246,934 618,033 0.88% No Change
Tunisia Tunisie Leasing 87,818 496,307 0.70% No Change
9,088,931 12.87%
------------------------------------------------- ------------------------- ------------------------------- ------- -----------
National Commercial
AMERICAS Jamaica Bank Jamaica 3,653,441 2,932,716 4.15% Decrease
IRSA Inversiones
y Represent.
Argentina SA GDR 46,798 1,385,221 1.96% Decrease
Argentina Terra Argentine - - 0.00% Liquidated
Fund All Series
BB Votorantim
Brazil FII 54,300 985,186 1.40% No Change
FII Vila Olimpia
Brazil Corporate 34,000 887,849 1.26% No Change
SDI Logistica
Brazil Rio FII 25,244 731,066 1.04% No Change
Brazil FII Torre Almirante 1,020 547,487 0.78% No Change
FII Edificio
Brazil Galeria 518,327 518,327 0.73% No Change
FDO S F Lima
Brazil FII 578,259 485,301 0.69% No Change
FII Imob Projeto
Brazil Agua Branca 1,800 186,113 0.26% No Change
Jamaica Money
Jamaica Market Brokers 8,498,338 1,214,125 1.72% Decrease
Panama Copa Holdings 10,365 1,389,532 1.97% Decrease
Refineria La
Peru Pampilla SA 20,834,070 1,994,769 2.83% No Change
Peru Ferreycorp SAA 1,942,216 1,529,658 2.17% Decrease
14,787,350 20.96%
------------------------------------------------- ------------------------- ------------------------------- ------- -----------
ASIA Bangladesh Square Pharma 515,910 1,883,013 2.67% Decrease
Summit Power
Bangladesh Ltd. 2,786,398 1,209,755 1.71% Increase
Great Wall Motor
China Company 828,600 949,201 1.34% Increase
China Qingling Motors 1,608,955 512,783 0.73% Decrease
Travellers International
Philippines Hotels 19,782,000 1,579,385 2.24% No Change
Philippines Belle Corporation 15,700,000 1,221,986 1.73% No Change
Philippines RFM Corporation 11,003,750 1,097,064 1.55% No Change
8,453,187 11.97%
------------------------------------------------- ------------------------- ------------------------------- ------- -----------
Any Security
EUROPE Hungary Printing 593,457 3,060,770 4.34% No Change
Bulgaria Speedy 47,518 1,262,330 1.79% No Change
Estonia Silvano Fashion - - 0.00% Liquidated
Group AS
Italy QF Polis Fund 1,789 1,264,465 1.79% No Change
Kazakhstan KCELL 397,630 2,167,084 3.07% No Change
Komercijalna
Macedonia Banka A D Skopje 28,845 1,562,883 2.21% No Change
Crnogorski Telecom
Montenegro A.D. 217,624 410,892 0.58% No Change
Fabryki Mebli
Poland Forte 58,000 833,165 1.18% No Change
Galenika-Fitofarmacija
Serbia DP 79,115 2,268,528 3.21% No Change
Slovenia Gorenje Velenje 175,399 1,073,442 1.52% No Change
Kernel Holding
Ukraine SA 61,923 981,923 1.39% Increase
14,885,481 21.08%
------------------------------------------------- ------------------------- ------------------------------- ------- -----------
MIDDLE
EAST Lebanon Blom Bank 137,672 1,748,434 2.48% No Change
Bank of Bahrain
Bahrain and Kuwait 980,000 1,076,009 1.52% No change
Bahrain Gulf Hotel Group 704,700 981,190 1.39% No Change
National Bank
Kuwait of Kuwait 400,000 965,485 1.37% No Change
Kuwait Mezzan Holding - - 0.00% Liquidated
Co.
Solidere - A
Lebanon Shares 114,499 917,137 1.30% No Change
Oman Bank Muscat 1,104,455 1,130,566 1.60% No Change
Oman Ooredoo Oman 699,000 955,246 1.35% No Change
Oman Oman Refreshment 175,000 932,060 1.32% No Change
Oman Oman Cement 478,663 509,877 0.72% Decrease
Gulf Warehousing
Qatar Company 99,107 1,189,554 1.68% No Change
UAE Abu Dhabi Commercial - - 0.00% Liquidated
Bank
UAE Amanat Holdings - - 0.00% Liquidated
10,405,558 14.73%
------------------------------------------------- ------------------------- ------------------------------- ------- -----------
ASIA Bangladesh Square Pharma 515,910 1,883,013 2.67% Decrease
Travellers International
Philippines Hotels 19,782,000 1,579,385 2.24% No Change
Philippines Belle Corporation 15,700,000 1,221,986 1.73% No Change
Summit Power
Bangladesh Ltd. 2,786,398 1,209,755 1.71% Increase
Philippines RFM Corporation 11,003,750 1,097,064 1.55% No Change
Great Wall Motor
China Company 828,600 949,201 1.34% Increase
China Qingling Motors 1,608,955 512,783 0.73% Decrease
8,453,187 11.97%
------------------------------------------------- ------------------------- ------------------------------- ------- -----------
MIDDLE
EAST Lebanon Blom Bank 137,672 1,748,434 2.48% No Change
Gulf Warehousing
Qatar Company 99,107 1,189,554 1.68% No Change
Oman Bank Muscat 1,104,455 1,130,566 1.60% No Change
Bank of Bahrain
Bahrain and Kuwait 980,000 1,076,009 1.52% No change
Bahrain Gulf Hotel Group 704,700 981,190 1.39% No Change
National Bank
Kuwait of Kuwait 400,000 965,485 1.37% No Change
Oman Ooredoo Oman 699,000 955,246 1.35% No Change
Oman Oman Refreshment 175,000 932,060 1.32% No Change
Solidere - A
Lebanon Shares 114,499 917,137 1.30% No Change
Oman Oman Cement 478,663 509,877 0.72% Decrease
UAE Abu Dhabi Commercial - - 0.00% Liquidated
Bank
UAE Amanat Holdings - - 0.00% Liquidated
Kuwait Mezzan Holding - - 0.00% Liquidated
Co.
10,405,558 14.74%
------------------------------------------------- ------------------------- ------------------------------- ------- -----------
Investing Policy
Investment Objective and Policy - Adopted at the Extraordinary
General Meeting held on 26 January 2015.
The Company's investment objective is to provide capital
appreciation to Shareholders. To achieve this objective, the
Company may invest up to 100 per cent of its assets in investments
that, for the purposes of the Company's investment policy, are
categorised as "Frontier Market Investing". The Investment Manager
believes that such markets provide opportunities to take advantage
of market inefficiencies. The Company may also invest up to 30 per
cent of its assets in a variety of instruments that do not meet the
Company's definition of Frontier Market Investing and any such
assets will be invested using the same approach applied to
investing in Frontier Markets.
"Frontier Market Investing", shall mean:
1. An investment made into a "Frontier Market" which, at the
time of the investment, is defined for the purposes of the
Company's investment policy as:
1.1 Any country that is not included in all of the following
indices, or their successors (the "Indices"):
-- MSCI World Index: A stock market index of 1,612 'world'
stocks maintained by MSCI Inc., formerly Morgan Stanley Capital
International, and is used as a common benchmark for 'world' or
'global' stock funds. The index includes a collection of stocks of
all the developed markets in the world, as defined by MSCI.
-- MSCI Emerging Markets Index: An index created by Morgan
Stanley Capital International (MSCI) designed to measure equity
market performance in global emerging markets.
-- S&P Developed BMI Index: A comprehensive benchmark index
that includes stocks from 25 developed markets and which is a
member of the S&P Global BMI series.
-- S&P Emerging Markets BMI Index: An index that captures
all companies domiciled in the emerging markets within the S&P
Global BMI with a float-adjusted market capitalization of at least
USD 100 million and a minimum annual trading liquidity of USD 50
million. The index is segmented by country/region, size (large, mid
and small), style (value and growth), and GICS (sectors/industry
groups).
1.2 Any country included in any of the Indices but which the
Investment Manager believes is undergoing macroeconomic
deterioration or political turbulence, a state often signalled by a
departure of institutional fund flows or impositions of currency
controls, or annual inflation of 15 per cent or more; or
1.3 Any country that the Investment Manager believes is
characterised by rules, laws or other barriers which either (a)
hinder capital flows; (b) limit or prevent the dissemination of
public information concerning securities; or (c) limit otherwise
make access to the country difficult; or (d) other technical
methods which create difficulties in trading, clearing; or (e) in
which access to timely information or market liquidity is in the
process of serious deterioration, or
1.4 Any country whose market accounts for less than 3 per cent
of the MSCI Emerging Markets Index; or
1.5 Any country that had been upgraded to Emerging Market status
by either of S&P or MSCI at any time during the two years prior
to the Company making its investment.
2 An investment in any security of a company that the Investment
Manager believes, at the time of investing, derives a substantial
amount of its income from goods produced or sold, investments made,
or services provided in a Frontier Market (as defined above);
Provided that if, following investment by the Company, an
investment subsequently fails to fall within one of the categories
of Frontier Market Investing as outlined above, the allocation to
such market will continue to be viewed as having been made in the
market as it was originally categorised.
The Company intends to invest primarily in common equity listed
on regulated exchanges; however, as opportunities arise, and
depending on market conditions, it may also invest in any of the
following instruments:
-- preferred and preference shares;
-- debt securities;
-- factoring and trade loans;
-- baskets of non-performing and other distressed loans;
-- participation notes or other such instruments (when they act
as a proxy for investing directly in a country's securities);
-- privately traded funds and shares on non-regulated markets;
-- convertible bonds;
-- Transferable Rights to buy additional shares directly from
the company, either granted to a company's existing shareholders or
to new subscribers
-- Closed-end funds;
-- Investment trusts;
as well as other instruments as such opportunities may
arise.
The Company may use derivatives and other instruments such as
forward contracts, options, and futures for hedging both market and
currency risks, either directly and indirectly (for example, when
hedging a currency partially linked to the Euro by hedging the Euro
if there are no opportunities to hedge the currency directly,
hedging macroeconomic risks related to a specific country's equity
by purchasing credit default notes on a country's bond securities,
and so on).
The Manager intends to invest principally by performing an
in-house "bottom-up" analysis. This means it will first determine
whether a stock presents the opportunity for capital appreciation
through an examination of its most recent publically available
information, such as its balance sheet, income statement, cash
flow, business model, and micro-competitive environment and only
then examining the general industry and macro-economic environment
in which the target company issuing the security operates in. Under
certain circumstances, the Investment Manager may perform a
"top-down" analysis, meaning that it will first gauge a market's
overall macroeconomic growth potential and then endeavour to
identify specific instruments likely to allow the Company to take
advantage of that market's growth potential.
The Company's principal focus will be on "value" investments -
that is, investments that, in the Investment Manager's opinion are
trading for less than their true value and which provide an
opportunity for capital appreciation through a reversion to their
true valuation, in addition to whatever potential growth prospects
the investments might have. Some of the Company's investments will
be in companies which the Investment Manager believes are fairly
valued but which offer an opportunity for growth at a reasonable
price. The Investment Manager will be under no obligation to sell
an investment once it no longer falls into the category of
investment within which it was originally made and will sell
investments at its sole discretion and when it deems
appropriate.
The Company may invest in instruments which represent interests
in financially distressed companies that the Investment Manager
believes have an opportunity to provide capital returns upon
recovery; it may also make investments in distressed macroeconomic
environments and/or take positions for the purpose of activist
investing.
Having consulted with Shareholders the Board believe it is in
the best interests of Shareholders to realise the Company's
portfolio of investments in a timely fashion. Therefore, as set out
in the Chairman's Statement a circular containing details of a
proposed change of investing policy will be sent to shareholders in
the near future. In order to do this the Investment Manager's
current fee structure of 1.25 per cent. of NAV per annum and a
performance fee linked to NAV increases will be replaced by an
incentivised fee equal to 1 per cent. of any distributions made to
shareholders. These new fee arrangements will come into effect on 1
July 2018.
Directors' Report
The Directors hereby submit their annual report together with
the audited consolidated financial statements of Terra Capital plc
(the "Company") for the financial year ended 31 December 2017.
The Company
The Company was incorporated in the Isle of Man as Speymill
Macau Property Company to invest in the high quality commercial and
residential real estate market in the Macau Special Administrative
Region of the People's Republic of China. Following an
extraordinary general meeting held on 24 May 2012, the shareholders
resolved for the company to change its name to Terra Capital plc
and to adopt the current investment policy.
Results and dividends
The results and position of the Company at the year-end are set
out on pages 14 to 44 of the annual report.
Directors
The Directors during the year and up to
the date of this Report were as follows:
Dirk Van den Broeck
Ian Dungate
Peter Bartlett
Directors' interests in the shares of the Company
The interests of the Directors in the share capital of the
Company as at 31 December 2017 are set out below:
Director No. of shares
Dirk Van den Broeck* 801,395
Peter Bartlett** 63,000
Worldwide Opportunity Fund ("WWOF") A class, which owns
5,435,555 shares or 7.81% of the Company is managed by Terra
Partners Asset Management Limited ("TPAM") which is also the
Company's Investment Manager. The principals of TPAM are Filip
Montfort and Yarden Mariuma. Mr Montfort holds 1.20% of the shares
in issue in WWOF (in addition to his direct holding of 913,393
Ordinary Shares in the Company); Mr Mariuma holds 1.10% in WWOF
(and 865,820 Ordinary Shares directly in the company)
*Director Dirk van den Broeck holds the total of 801,395 shares
noted above together with his wife, but not jointly.
**Director Peter Bartlett holds the total of 63,000 shares noted
above together with his wife, but not jointly.
Director's interests
Ian Dungate is a director of Galileo Fund Services Limited (the
"Administrator").
Save as disclosed above, none of the Directors had any interest
during the year in any material contract for the provision of
services which was significant to the business of the Company.
Corporate governance
Although the Company is not obliged by the listing rules to do
so, the Board intends, where appropriate for a Company of its size,
to comply with the main provisions of the principles of good
governance and code of best practice set out in the UK Corporate
Governance Code ('the Code').
Independent Auditors
KPMG Audit LLC, being eligible, have expressed their willingness
to continue in office in accordance with Section 12 (2) of the
Companies Act 1982.
Responsibilities of the Board
The Directors are responsible for the determination of the
Company's investment policy and strategy and have overall
responsibility for the Company's activities including the review of
the investment activity and performance.
All of the Directors are non-executive.
The Board of Directors delegates to the Investment Manager
through the Investment Management Agreement the responsibility for
the management of the Company's assets in accordance with the
Company's investment policy.
The Company has no executives or employees.
The Articles of Association require that all Directors submit
themselves for election by shareholders at the first opportunity
following their appointment and shall not remain in office longer
than three years since their last election or re-election without
submitting themselves for re-election.
The Board meets formally at least 4 times a year and between
these meetings there is regular contact with the Investment
Manager. Other meetings are arranged as necessary. The Board
considers that it meets sufficiently regularly to discharge its
duties effectively. The Board ensures that at all times it conducts
its business with the interests of all shareholders in mind and in
accord with Directors' duties.
Audit Committee
All Audit Committee responsibilities are performed by the Board,
with specified terms of reference.
The principal terms of reference are to appoint auditors, to set
their fees, to review the scope and results of the audit, to
consider the independence of the auditors, to review the internal
financial and non-financial controls, to approve the contents of
the draft interim and annual reports to shareholders and to review
the accounting policies. In addition, the Board reviews the quality
of the services of all the service providers to the Company and
reviews the Company's compliance with financial reporting and
regulatory requirements.
The Company's internal financial controls and risk management
systems have been reviewed with the Investment Manager and
Advisors. The audit report is considered by the Board and discussed
with the Auditors prior to approving and signing the Financial
Statements.
Realisation Policy
The Board have agreed to cease all new investments and seek to
realise, in an orderly fashion, the Company's portfolio of
investments and return net proceeds generated to Shareholders as
soon as is practicable. The Board believes this orderly realisation
of the portfolio of investments is preferable to an immediate
liquidation as it is likely to achieve greater returns to
Shareholders. In order to do this the Investment Manager's current
fee structure of 1.25 per cent. of NAV per annum and a performance
fee linked to NAV increases will be replaced by an incentivised fee
equal to 1 per cent. of any distributions made to shareholders.
These new fee arrangements will come into effect on 1 July
2018.
On behalf of the Board
Dirk Van den Broeck
Chairman
26 June 2018
Statement of Directors' Responsibilities in Respect of the
Directors' Report and the Financial Statements
The Directors are responsible for preparing the Consolidated
Annual Report and the Group and Parent Company financial statements
in accordance with applicable law and regulations.
Company law requires the Directors to prepare Group and Parent
Company financial statements for each financial year. As required
by the AIM Rules of the London Stock Exchange they are required to
prepare the Group financial statements in accordance with
International Financial Reporting Standards as adopted by the EU
(IFRSs as adopted by the EU), and applicable law and have elected
to prepare the Parent Company financial statements on the same
basis.
Under company law the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and Parent Company and of
their profit or loss for that period. In preparing each of the
Group and Parent Company financial statements, the Directors are
required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and estimates that are reasonable, relevant and reliable;
-- state whether they have been prepared in accordance with IFRSs as adopted by the EU;
-- assess the Group and Parent Company's ability to continue as
a going concern, disclosing, as applicable, matters related to
going concern; and
-- use the going concern basis of accounting unless they either
intend to liquidate the Group or the Parent Company or to cease
operations, or have no realistic alternative but to do so. The
financial statements have been prepared on a non-going concern
basis.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Parent
Company's transactions and disclose with reasonable accuracy at any
time the financial position of the Parent Company and enable them
to ensure that its financial statements comply with the Companies
Acts 1931-2004. They are responsible for such internal control as
they determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to
fraud or error, and have general responsibility for taking such
steps as are reasonably open to them to safeguard the assets of the
Group and to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also
responsible for preparing a Directors' Report that complies with
that law and those regulations.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
company's website. Legislation in the UK governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.
On behalf of the Board
Dirk Van den Broeck
Chairman
Report of the Independent Auditors, KPMG Audit LLC, to the
members of Terra Capital plc
1 Our opinion is unmodified
We have audited the financial statements of Terra Capital plc
("the Company") for the year ended 31 December 2017 which comprise
the Consolidated and Parent Company Income Statements, the
Consolidated and Parent Company Statements of Comprehensive Income,
the Consolidated and Parent Company Balance Sheets, the
Consolidated and Parent Company Statements of Changes in Equity and
the Consolidated and Parent Company Statements of Cash Flows, and
the related notes, including the accounting policies in note 3.
In our opinion the financial statements:
-- give a true and fair view of the state of the Group's and of
the Parent Company's affairs as at 31 December 2017 and of the
Group's profit for the year then ended;
-- have been properly prepared in accordance with International
Financial Reporting Standards as adopted by the European Union;
and
-- have been properly prepared in accordance with the
requirements of the Companies Acts 1931-2004.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) ("ISAs (UK)") and applicable law. Our
responsibilities are described below. We have fulfilled our ethical
responsibilities under, and are independent of the Group in
accordance with, UK ethical requirements including the FRC Ethical
Standard. We believe that the audit evidence we have obtained is a
sufficient and appropriate basis for our opinion.
2 Key audit matters: our assessment of risks of material
misstatement
Key audit matters are those matters that, in our professional
judgment, were of most significance in the audit of the financial
statements and include the most significant assessed risks of
material misstatement (whether or not due to fraud) identified by
us, including those which had the greatest effect on: the overall
audit strategy; the allocation of resources in the audit; and
directing the efforts of the engagement team. These matters were
addressed in the context of our audit of the financial statements
as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters. In arriving at our
audit opinion above, the key audit matters, in decreasing order of
audit significance, were as follows (unchanged from 2016):
The risk Our response
Key Audit
Matter
Carrying amount High value Our procedures included:
of quoted The Group's portfolio * Control design: Documenting and assessing the
equity investments of quoted investments processes in place to record investment transactions
(US$ 57,549,000; makes up 80% (2016: and to value the portfolio;
2016: US$58,143,000) 82%) of the Group's
total assets (by
Refer to notes value) and is considered * Test of detail: Agreeing the valuation of 100 per
3.3, 4, 7,8 to be the key driver cent of investments in the portfolio to externally
and 20 (accounting of results. They quoted prices;
policy and comprise a portfolio
notes relating of investments in
to financial "frontier markets" * Test of detail: For level 2 investments in the fair
assets at (as described in value hierarchy, examine the trading history to
fair value the Investing Policy assess whether the last traded price is a reasonable
through profit on page 5) that reflection of fair value at the year-end date; and
or loss). are measured at
fair value.
* Enquiry of custodians: Agreeing 100 per cent of
The majority of investment holdings in the portfolio to
investments in the independently-received third party confirmations from
portfolio (US$ 55,309,323 investment custodians.
(96%)) are classified
as level 1 in the
fair value hierarchy
(stated at quoted
price in an active
market). The remaining
balance (U$$2,239,835
(4%)) are classified
as level 2 (stated
at last quoted price
but no active market).
---------------------------- ---------------------------------------------------------------
Carrying value High value Our procedures included:
of Parent The carrying value * Tests of detail:
Company's of the Parent Company's
loan to and loan to and investment
investment in subsidiary represents Assessing the loan to
in subsidiary 99% (2016: 96%) and investment in subsidiary
(US$55,166,000 of the Parent Company's to identify, with reference
and US$16,087,000 total assets. The to the subsidiary's accounts,
respectively, assessment of carrying whether it has sufficient
2016: US$57,748,000 value is not at net asset value to cover
and US$9,932,000 a high risk of significant the debt owed; and
respectively) misstatement or * Assessing subsidiary audits:
subject to significant
Refer to note judgement as the
5 (note relating carrying value is A full scope audit of
to loan to equal to the audited the accounts of the subsidiary
and investment net asset value by the group audit engagement
in subsidiary). of the subsidiary. team as part of the audit
However, due to of the consolidated financial
its materiality statements of the Company.
in the context of
the Parent Company
financial statements,
this is considered
to be the area that
had the greatest
effect on our overall
Parent Company audit.
---------------------------- ---------------------------------------------------------------
3 Our application of materiality and an overview of the scope of
our audit
Materiality for the Group and Parent Company financial
statements as a whole was set at US$705,000 (2016: US$707,800),
determined with reference to a benchmark of Group net assets, of
which it represents 1% (2016: 1%).
We agreed to report to the Audit Committee any corrected or
uncorrected identified misstatements exceeding US$35,250 for both
the Group and Parent Company financial statements, in addition to
other identified misstatements that warranted reporting on
qualitative grounds.
The Group's one subsidiary was subjected to full scope audit for
Group purposes by the Group team and subject to the same
materiality level as the Group and Parent Company audits.
4 The financial statements have been prepared on a non - going
concern basis
As the Groups' objective is the orderly realisation of its
assets with a view to returning capital to shareholders thereafter,
the financial statements have been prepared on a non-going concern
basis.
5 We have nothing to report on the other information in the
Consolidated Annual Report
The Directors are responsible for the other information
presented in the Consolidated Annual Report, together with the
financial statements. Our opinion on the financial statements does
not cover the other information and we do not express an audit
opinion or any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in
doing so, consider whether, based on our financial statements audit
work, the information therein is materially misstated or
inconsistent with the financial statements or our audit
knowledge.
Based solely on that work we have not identified material
misstatements in the other information;
6 We have nothing to report on the other matters on which we are
required to report by exception
Under the Companies Acts 1931-2004, we are required to report to
you if, in our opinion:
-- proper books of account have not been kept by the Parent
Company and proper returns adequate for our audit have not been
received from branches not visited by us; or
-- the Parent Company financial statements are not in agreement
with the accounting records and returns; or
-- certain disclosures of directors' remuneration specified by law are not made; or
-- we have not received all the information and explanations we require for our audit.
We have nothing to report in these respects.
7 Respective responsibilities
Directors' responsibilities
As explained more fully in their statement set out on page 9,
the Directors are responsible for: the preparation of the financial
statements including being satisfied that they give a true and fair
view; such internal control as they determine is necessary to
enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error; assessing the
Group and Parent Company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern; and
using the going concern basis of accounting unless they either
intend to liquidate the Group or the Parent Company or to cease
operations, or have no realistic alternative but to do so.
Auditor's responsibilities
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue our
opinion in an auditor's report. Reasonable assurance is a high
level of assurance, but does not guarantee that an audit conducted
in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in aggregate,
they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial
statements.
A fuller description of our responsibilities is provided on the
FRC's website at www.frc.org.uk/auditorsresponsibilities.
8 The purpose of our audit work and to whom we owe our
responsibilities
This report is made solely to the Company's members, as a body,
in accordance with Section 15 of the Companies Act 1982. 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
auditor's report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the Company and the Company's members, as a body,
for our audit work, for this report, or for the opinions we have
formed.
KPMG Audit LLC
Chartered Accountants
Heritage Court
41 Athol Street
Douglas
Isle of Man, IM99 1HN
26 June 2018
Consolidated Income Statement
Notes For the year For the year
ended 31 ended 31
December December
2017 2016
US$'000 US$'000
Net changes in fair value on financial assets at fair value through
profit or loss 3,486 3,143
Realised gain on sale of financial assets at fair value through
profit or loss 4,400 2,977
Interest income on cash balances 12 9
Dividend income on quoted equity investments 2,985 2,942
Total income 10,883 9,071
--------------------------------------------------------------------- ------------- ------------- -------------
Manager's fees 11,12.4 (853) (581)
Incentive fees 11,12.4 (1,043) (712)
Audit and professional fees 12.3 (96) (84)
Other expenses 12.1,12.2,18 (594) (657)
Administrative and other expenses (2,586) (2,034)
--------------------------------------------------------------------- ------------- ------------- -------------
Profit before tax 8,297 7,037
Taxation 19 (383) 1,375
Profit for the year 7,914 8,412
Basic and diluted earnings per share (cents per share) for year 15 12.65 12.32
The Directors consider all activities to derive from
discontinued activities, following the decision to commence the
orderly realisation of assets and return of capital to
shareholders.
Consolidated Statement of Comprehensive Income
For the year For the year
ended 31 December 2017 ended 31 December 2016
US$'000 US$'000
----------------------------------------- ------------------------ ------------------------
Profit for the year 7,914 8,412
------------------------------------------ ------------------------ ------------------------
Other comprehensive income for the year - -
----------------------------------------- ------------------------ ------------------------
Total comprehensive income for the year 7,914 8,412
------------------------------------------ ------------------------ ------------------------
Company Income Statement
Note For the year For the year
ended 31 December ended 31 December
2017 2016
US$'000 US$'000
---------------------------- ------ ------------------- -------------------
Income
Net change in investment
in and amounts due from
subsidiary 6,155 5,795
Intercompany loan interest
income 2,308 2,605
Other income 4 2,232
Total income 8,467 10,632
------------------------------------ ------------------- -------------------
Expenses
Expenses (553) (611)
Total operating expenses (551) (611)
------------------------------------ ------------------- -------------------
Profit before tax 7,914 10,021
Taxation 19 - -
---------------------------- ------ ------------------- -------------------
Profit for the year 7,914 10,021
------------------------------------ ------------------- -------------------
Company Statement of Comprehensive Income
For the year For the year
ended 31 December 2017 ended 31 December 2016
US$'000 US$'000
--------------------------------------------------------------- ------------------------ ------------------------
Profit for the year 7,914 10,021
Other comprehensive income
Items that are or may be reclassified subsequently to profit
or loss:
Currency translation differences - -
--------------------------------------------------------------- ------------------------ ------------------------
Total items that are or may be reclassified subsequently to - -
profit or loss
--------------------------------------------------------------- ------------------------ ------------------------
Other comprehensive income for the year (net of tax) - -
--------------------------------------------------------------- ------------------------ ------------------------
Total comprehensive profit for the year 7,914 10,021
---------------------------------------------------------------- ------------------------ ------------------------
Consolidated Balance Sheet
Notes 31 December 2017 31 December 2016
US$'000 US$'000
------------------------------------------------------- ------ ----------------- -----------------
Cash and cash equivalents 14 14,127 12,430
Financial assets at fair value through profit or loss 8 57,549 58,143
Trade and other receivables 13 323 208
Total assets 71,999 70,781
-------------------------------------------------------- ------ ----------------- -----------------
Issued share capital 16 6,830 7,726
Retained earnings 57,598 56,377
Capital redemption reserve 6,170 5,274
Total equity 70,598 69,377
-------------------------------------------------------- ------ ----------------- -----------------
Trade and other payables 17 856 1,031
Withholding tax 19 545 373
Total liabilities 1,401 1,404
-------------------------------------------------------- ------ ----------------- -----------------
Total equity & liabilities 71,999 70,781
-------------------------------------------------------- ------ ----------------- -----------------
Net asset value per share 10 1.15 1.02
-------------------------------------------------------- ------ ----------------- -----------------
Approved by the Board of Directors on 26 June 2018
Ian Dungate Dirk Van den Broeck
Director Director
Company Balance Sheet
Notes 31 December 2017 31 December 2016
US$'000 US$'000
------------------------------------------ ------ ----------------- -----------------
Cash and cash equivalents 14 6 2,540
Trade and other receivables 13 24 35
Intercompany balances 5 55,166 57,748
Investments in subsidiary 5 16,087 9,932
Total assets 71,283 70,255
------------------------------------------- ------ ----------------- -----------------
Issued share capital 16 6,830 7,726
Retained earnings 57,598 56,377
Capital redemption reserve 6,170 5,274
Total equity 70,598 69,377
------------------------------------------- ------ ----------------- -----------------
Trade and other payables 17 685 878
Total liabilities 685 878
------------------------------------------- ------ ----------------- -----------------
Total equity & liabilities 71,283 70,255
------------------------------------------- ------ ----------------- -----------------
Net asset value per parent company share 1.15 1.02
------------------------------------------- ------ ----------------- -----------------
The profit made by the Company for the year ended 31 December
2017 was US$7,914,000 (year ended 31 December 2016, profit
US$10,021,000).
Approved by the Board of Directors on 26 June 2018
Ian Dungate Dirk Van den Broeck
Director Director
Consolidated Statement of Changes in Equity
Share capital Retained earnings Capital redemption reserve Total
US$'000 US$'000 US$'000 US$'000
------------------------------------------- -------------- ------------------ --------------------------- --------
Balance at 1 January 2016 7,726 50,177 5,274 63,177
------------------------------------------- -------------- ------------------ --------------------------- --------
Profit for the year - 8,412 - 8,412
Other comprehensive income - - - -
Total comprehensive income for the year - 8,412 - 8,412
------------------------------------------- -------------- ------------------ --------------------------- --------
Transactions with owners:
Dividends paid - (2,212) - (2,212)
Shares in treasury cancelled - - - -
Shares subject to tender offer - - - -
Total contributions by and distributions
to owners - (2,212) - (2,212)
Balance at 31 December 2016 7,726 56,377 5,274 69,377
------------------------------------------- -------------- ------------------ --------------------------- --------
Share capital Retained earnings Capital redemption reserve Total
US$'000 US$'000 US$'000 US$'000
------------------------------------------- -------------- ------------------ --------------------------- --------
Balance at 1 January 2017 7,726 56,377 5,274 69,377
------------------------------------------- -------------- ------------------ --------------------------- --------
Profit for the year - 7,914 - 7,914
Other comprehensive income - - - -
Total comprehensive income for the year - 7,914 - 7,914
------------------------------------------- -------------- ------------------ --------------------------- --------
Transactions with owners:
Dividends paid - - - -
Shares in treasury cancelled (896) - 896 -
Shares repurchased to be held in treasury - (6,693) - (6,693)
Total contributions by and distributions
to owners (896) (6,693) 896 (6,693)
Balance at 31 December 2017 6,830 57,598 6,170 70,598
------------------------------------------- -------------- ------------------ --------------------------- --------
Company Statement of Changes in Equity
Share Retained Capital redemption
Capital Earnings Reserve Total
US$'000 US$'000 US$'000 US$'000
---------------------------------------------------- -------- --------- ------------------- --------
Balance as 1 January 2016 7,726 48,568 5,274 61,568
---------------------------------------------------- -------- --------- ------------------- --------
Profit for the year - 10,021 - 10,021
---------------------------------------------------- -------- --------- ------------------- --------
Total comprehensive income for the year - 10,021 - 10,021
---------------------------------------------------- -------- --------- ------------------- --------
Transactions with owners:
Dividends paid - (2,212) - (2,212)
Shares in treasury cancelled - - - -
Shares subject to tender offer - - - -
---------------------------------------------------- -------- --------- ------------------- --------
Total contributions by and distributions to owners - (2,212) - (2,212)
---------------------------------------------------- -------- --------- ------------------- --------
Balance at 31 December 2016 7,726 56,377 5,274 69,377
---------------------------------------------------- -------- --------- ------------------- --------
Share Retained Capital redemption
Capital Earnings Reserve Total
US$'000 US$'000 US$'000 US$'000
---------------------------------------------------- -------- --------- ------------------- --------
Balance as 1 January 2017 7,726 56,377 5,274 69,377
---------------------------------------------------- -------- --------- ------------------- --------
Profit for the year - 7,914 - 7,914
---------------------------------------------------- -------- --------- ------------------- --------
Total comprehensive income for the year - 7,914 - 7,914
---------------------------------------------------- -------- --------- ------------------- --------
Transactions with owners:
Dividends paid - - - -
Shares in treasury cancelled (896) - 896 -
Shares subject to tender offer (6,693) (6,693)
Total contributions by and distributions to owners (896) (6,693) 896 (6,693)
Balance at 31 December 2017 6,830 57,598 6,170 70,598
---------------------------------------------------- -------- --------- ------------------- --------
Consolidated Statement of Cash Flows
Notes For the year ended For the year ended
31 December 2017 31 December 2016
US$'000 US$'000
---------------------------------------------------------- ------ ------------------- -------------------
Operating activities
Group profit before tax 8,297 7,037
Adjustments for:
Net changes in fair value on financial assets (3,486) (3,143)
Realised gain on sale of investments (4,400) (2,977)
Interest income (12) (9)
Operating income before changes in working capital 399 908
(Increase)/decrease in trade and other receivables (115) 29
(Decrease)/increase in trade and other payables (175) 867
Cash generated from operations 109 1,804
Interest received 12 9
Income tax paid (211) (421)
Cash flows (used in)/generated from operating activities (90) 1,392
---------------------------------------------------------- ------ ------------------- -------------------
Investing activities
Net sale/(purchase) of financial assets 8,480 (188)
Decrease in funds held in escrow - 2,256
Cash flows generated from investing activities 8,480 2,068
---------------------------------------------------------- ------ ------------------- -------------------
Financing activities
Cash used in tender offer (6,693) -
Dividends paid - (2,212)
Cash flows used in financing activities (6,693) (2,212)
---------------------------------------------------------- ------ ------------------- -------------------
Net increase in cash and cash equivalents 1,697 1,248
Cash and cash equivalents at beginning of year 12,430 11,182
Cash and cash equivalents at end of year 14 14,127 12,430
---------------------------------------------------------- ------ ------------------- -------------------
Company Statement of Cash Flows
Note For the year ended For the year ended
31 December 2017 31 December 2016
US$'000 US$'000
---------------------------------------------------------------- ----- ------------------- -------------------
Operating activities
Company profit before tax 7,914 10,021
Adjustment for net change in value of investment in subsidiary (6,155) -
Operating income before changes in working capital 1,759 10,021
Decrease/(increase) in trade and other receivables 11 (1)
(Decrease)/increase in trade and other payables (193) 804
Cash flows generated from operating activities 1,577 10,824
---------------------------------------------------------------- ----- ------------------- -------------------
Investing activities
Repayment/(advance) of intercompany loans 2,582 (9,939)
Cash flows generated from/(used in) investing activities 2,582 (9,939)
---------------------------------------------------------------- ----- ------------------- -------------------
Financing activities
Cash used in tender offer (6,693) -
Dividends paid - (2,212)
Cash flows used in financing activities (6,693) (2,212)
---------------------------------------------------------------- ----- ------------------- -------------------
Net decrease in cash and cash equivalents (2,534) (1,327)
Cash and cash equivalents at beginning of year 2,540 3,867
Cash and cash equivalents at end of year 14 6 2,540
---------------------------------------------------------------- ----- ------------------- -------------------
Notes to the Consolidated Financial Statements
1 The Company
Terra Capital plc (formerly Speymill Macau Property Company plc)
(the "Company") was incorporated and registered in the Isle of Man
under the Isle of Man Companies Acts 1931 to 2004 on 31 October
2006 as a public company with registered number 118202C.
The annual report of the Company as at and for the year ended 31
December 2017 comprises the Company and its subsidiaries (together
referred to as the "Group").
The Board have agreed to cease all new investments and seek to
realise, in an orderly fashion, the Company's portfolio of
investments and return net proceeds generated to Shareholders as
soon as is practicable.
2 Basis of preparation
2.1 Statement of compliance
The consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards (IFRSs)
as adopted by the EU.
The consolidated financial statements were authorised for issue
by the Board of Directors on 26 June 2018.
2.2 Basis of preparation
These consolidated financial statements have been prepared in
accordance with IFRS as adopted by the EU. The financial statements
have been prepared under the historic cost convention, as modified
by the revaluation of financial assets held at fair value through
profit or loss.
As the Group's objective is the orderly realisation of its
assets with a view to returning capital to the shareholders
thereafter, these financial statements have not been prepared on a
going concern basis. During the realisation period the Group
expects to trade in an orderly fashion and, in the Directors'
opinion, the valuation bases applied to the assets and liabilities
(as disclosed elsewhere within the accounting policies) are such
that there would be no material adjustments to the financial
statements if they had been prepared on a going concern basis. The
costs of liquidation are expected to be minimal.
2.3 Functional and presentation currency
These consolidated financial statements are presented in United
States Dollars (US$), which is the Company's presentation currency.
The functional currency of Terra Capital Cayman a subsidiary
company is the United States Dollar. This subsidiary holds the
investment portfolio. The United States Dollar is the currency of
the primary economic environment in which the Company operates
("the functional currency").
2.4 Use of estimates and judgements
The preparation of the consolidated financial statements in
conformity with IFRSs as adopted by the EU requires management to
make judgements, estimates and assumptions that affect the
application of accounting policies and the reported amounts of
assets, liabilities, income and expenses. Actual results may differ
from these estimates.
Estimates and underlying assumptions are reviewed on an on-going
basis. Revisions to accounting estimates are recognised in the
period in which the estimate is revised and in any future periods
affected.
Certain investments are in illiquid/inactive markets and
classified as Level 2 in the IFRS 7 fair value Hierarchy (see note
7). The pricing for these investments is based on last traded price
and is a key estimate in the preparation of the financial
statements.
3. Significant accounting policies
The accounting policies set out below have been applied
consistently to all periods presented in these consolidated
financial statements, and have been applied consistently by Group
entities.
The accompanying financial statements have been prepared in
accordance with International Financial Reporting Standards (IFRS)
as adopted by the EU. The Fund's accounting principles are
summarised below, all of which have been applied consistently
throughout the year.
Certain comparatives have been restated in order to ensure
consistent presentation with the current year figures. The
presentation of the balance sheets has been changed to show assets
and liabilities in order of liquidity.
3.1 Basis of consolidation
Subsidiaries
Subsidiaries are those enterprises controlled by the Company.
Control exists where the Company has the power, directly or
indirectly, to govern the financial and operating policies of an
enterprise so as to obtain benefits from its activities. The
financial statements of subsidiaries are included in the
consolidated financial statements from the date that control
effectively commences until the date that control effectively
ceases.
Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised income
and expenses arising from intra-group transactions, are eliminated
in full in preparing the consolidated financial statements.
3.2 Foreign currency
The individual financial statements of each group entity are
presented in the currency of the primary economic environment in
which the entity operates (its functional currency). For the
purpose of the consolidated financial statements, the results and
financial position of each group entity are expressed in United
States Dollars, which is the presentation currency for the
consolidated financial statements.
In preparing the financial statements of the individual
entities, transactions in currencies other than the entity's
functional currency (foreign currencies) are recognised at the
rates of exchange prevailing at the dates of the transactions. At
the end of each reporting period, monetary items denominated in
foreign currencies are retranslated at the rates prevailing at that
date. Non-monetary items carried at fair value that are denominated
in foreign currencies are retranslated at the rates prevailing at
the date when the fair value was determined. Non-monetary items
that are measured in terms of historical cost in a foreign currency
are not retranslated.
Exchange differences are recognised in profit or loss in the
period in which they arise.
For the purpose of presenting consolidated financial statements,
the assets and liabilities of the subsidiaries are expressed in
United States Dollars using exchange rates prevailing at the end of
the reporting period. Income and expense items are translated at
the average exchange rates for the period, unless exchange rates
fluctuated significantly during that period, in which case the
exchange rates at the dates of the transactions are used. Exchange
differences arising, if any, are recognised in other comprehensive
income and accumulated in equity (attributed to non-controlling
interests as appropriate).
3.3 Financial instruments
(i) Non-derivative financial assets
IFRS13 has been adopted from 1 January 2013. It establishes a
single source of guidance for measuring fair value and requires
disclosures about fair value measurements. Fair value under IFRS13
is an exit price regardless of whether that price is directly
observable or estimated using another valuation technique.
"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 in the
principal or, in its absence, the most advantageous market to which
the Fund has access at that date. The fair value of a liability
reflects its non-performance risk.
When available, the Fund measures the fair value of an
instrument using quoted prices in an active market for that
instrument. A market is regarded as active if quoted prices are
readily and regularly available and represent actual and regularly
occurring market transactions on an arm's length basis.
The fair value of financial assets and liabilities traded in
active markets (such as publicly traded derivatives and trading
securities) are based on quoted market prices at the close of
trading on the year end date. The fair value of financial assets
and liabilities traded in relatively illiquid/inactive markets is
based on the last traded price.
Investments are designated at fair value through profit or loss
on initial recognition. The Group invests in quoted equities and
debt securities for which fair value is based on quoted market
prices. The Group also had one investment in a limited partnership,
which was valued at the audited net asset value, this was sold
during the year.
The Group derecognises a financial asset when its contractual
rights expire or it is transferred.
(ii) Non-derivative financial liabilities
Purchases and sales of investments are recognised on trade date
- the date on which the Group commits to purchase or sell the
asset. Investments are initially recorded at fair value, and
transaction costs for all financial assets and financial
liabilities carried at fair value through profit and loss are
expensed as incurred.
Gains and losses arising from changes in the fair value of the
financial assets and liabilities are included in the income
statement in the year in which they arise.
The Group initially recognises financial liabilities on the date
at which the Group becomes a party to the contractual provisions of
the instrument.
The Group derecognises a financial liability when its
contractual obligations are discharged or cancelled or expire.
The Group has the following non-derivative financial
liabilities: amounts due to broker for investment purchases falling
due after the balance sheet date and other payables.
(iii) Share capital
Ordinary Shares
Ordinary Shares are classified as equity. Incremental costs
directly attributable to the issue of Ordinary Shares and share
options are recognised as a deduction from equity, net of any tax
effects.
3.4 Revenue recognition
Interest income and dividend income
Interest income is recognised on a time-proportionate basis
using the effective interest rate method. Dividend income is
recognised when the right to receive payment is established.
Foreign currency gains and losses are reported on a net basis
and are recognised in profit or loss.
3.5 Impairment
Financial assets
A financial asset not carried at fair value through profit or
loss is assessed at each reporting date to determine whether there
is objective evidence that it is impaired. A financial asset is
impaired if objective evidence indicates that a loss event has
occurred after the initial recognition of the asset, and that the
loss event had a negative effect on the estimated future cash flows
of that asset that can be estimated reliably.
Losses are recognised in profit or loss and reflected in an
allowance account against receivables. When a subsequent event
causes the amount of impairment loss to decrease, the decrease in
impairment loss is reversed through profit or loss.
Non-financial assets
The carrying amounts of the Group's non-financial assets, other
than investment property are reviewed at each reporting date to
determine whether there is any indication of impairment. If any
such indication exists, then the asset's recoverable amount is
estimated. For goodwill, the recoverable amount is estimated each
year at the same time. The recoverable amount of an asset or
cash-generating unit is the greater of its value in use and its
fair value less costs to sell.
An impairment loss in respect of goodwill is not reversed. In
respect of other assets, impairment losses recognised in prior
periods are assessed at each reporting date for any indications
that the loss has decreased or no longer exists. An impairment loss
is reversed if there has been a change in the estimates used to
determine the recoverable amount. An impairment loss is reversed
only to the extent that the asset's carrying amount does not exceed
the carrying amount that would have been determined, net of
depreciation or amortisation, if no impairment loss had been
recognised.
3.6 Income tax expense
Income tax expense comprises current tax. Income tax expense is
recognised in the consolidated income statement except to the
extent that it relates to items recognised directly in equity, in
which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income
for the year, using tax rates enacted or substantively enacted at
the reporting date, and any adjustment to tax payable in respect of
previous years.
3.7 Earnings per share
The Group presents basic and diluted earnings per share (EPS)
data for its Ordinary Shares. Basic EPS is calculated by dividing
the profit or loss attributable to ordinary shareholders of the
Company by the weighted average number of Ordinary Shares
outstanding during the period, adjusted for own shares held.
Diluted EPS is determined by adjusting the profit or loss
attributable to ordinary shareholders and the weighted average
number of Ordinary Shares outstanding, adjusted for own shares
held, for the effects of all dilutive potential Ordinary
Shares.
3.8 Dividends
Dividends are recognised as a liability in the period in which
they are declared and approved.
3.9 Segment reporting
An operating segment is a component of the Group that engages in
business activities from which it may earn revenues and incur
expenses, including revenues and expenses that relate to
transactions with any of the Group's other components. The
operating result of the single operating segment is reviewed
regularly by the Group's Board of Directors to make decisions about
resources to be allocated and assess its performance.
4. Financial risk management
Overview
The Group has exposure to the following risks from its use of
financial instruments:
-- credit risk
-- liquidity risk
-- market risk (including foreign exchange risk)
-- operational risk
This note presents information about the Group's exposure to
each of the above risks, the Group's objectives, policies and
processes for measuring and managing risk, and the Group's
management of capital. Further quantitative disclosures are
included throughout these consolidated financial statements.
Risk management framework
The Board of Directors has overall responsibility for the
establishment and oversight of the Group's risk management
framework.
The Group's risk management policies are established to identify
and analyse the risks faced by the Group, to set appropriate risk
limits and controls, and to monitor risks and adherence to limits.
Risk management policies and systems are reviewed regularly to
reflect changes in market conditions and the Group's activities.
The Group aims to develop a disciplined and constructive control
environment.
The Group Audit Committee oversees how management monitors
compliance with the Group's risk management policies and
procedures, and reviews the adequacy of the risk management
framework in relation to the risks faced by the Group.
Credit risk
Credit risk is the risk of financial loss to the Group if a
customer or counterparty to a financial instrument fails to meet
its contractual obligations, and arises principally from the
Group's financial assets.
Cash and cash equivalents
The Group limits its exposure to credit risk by investing only
with counterparties that have high credit ratings. Management
actively monitors credit ratings and does not expect any
counterparty to fail to meet its obligations.
Liquidity risk
Liquidity risk is the risk that the Group will encounter
difficulty in meeting the obligations associated with its financial
liabilities that are settled by delivering cash or another
financial asset.
The Group's approach to managing liquidity is to ensure, as far
as possible, that it will always have sufficient liquidity to meet
its liabilities when due, under both normal and stressed
conditions, without incurring unacceptable losses or risking damage
to the Group's reputation. The Group manages liquidity risk by
maintaining adequate reserves and banking facilities, by
continuously monitoring forecast and actual cash flows, and by
matching the maturity profiles of financial assets and
liabilities.
Market risk (including foreign exchange risk)
The Group's strategy for the management of investment risk is
driven by the Group's investment objective. The main objective of
the Group is to achieve capital appreciation while attempting to
reduce risk primarily by applying a disciplined and diversified
value investing philosophy.
All investments present a risk of loss of capital through
movements in market prices. The Investment Manager moderates this
risk through a careful selection of securities within specified
limits. The Investment Manager reviews the position on a day to day
basis and the Directors review the position at Board meetings.
The Group's market price risk is managed through the
diversification of the investment portfolio.
The Group operates internationally and is exposed to foreign
exchange risk (see note 20). Foreign exchange risk arises in
respect of those recognised monetary financial assets and
liabilities, income and expenses that are not in the functional
currency of the Group.
Operational risk
Operational risk is the risk of direct or indirect loss arising
from a wide variety of causes associated with the Group's
processes, service providers, technology and infrastructure, and
from external factors other than credit, market and liquidity risks
such as those arising from legal and regulatory requirements and
generally accepted standards of corporate behaviour. Operational
risks arise from all of the Group's operations.
The Group's objective is to manage operational risk so as to
balance the avoidance of financial losses and damage to the Group's
reputation with overall cost effectiveness. The Group has developed
standards for the management of operational risk in the following
areas:
-- requirements for appropriate segregation of duties
-- requirements for the reconciliation and monitoring of transactions
-- compliance with regulatory and other legal requirements
-- documentation of controls and procedures
-- requirements for the periodic assessment of operational risks
faced, and the adequacy of controls and procedures to address the
risks identified
-- ethical and business standards
Capital management
The Board's policy is to maintain a strong capital base so as to
maintain investor, creditor and market confidence and to sustain
future development of the business.
The capital structure of the Group consists of the equity of the
Group (comprising issued capital as detailed in note 16, reserves
and retained earnings). The Board reviews the capital structure of
the Group on a semi-annual basis.
The Board of Directors monitors the net asset value per share,
which the Group defines as the total shareholders' equity divided
by the total number of shares in issue. The Board of Directors also
monitors the level of dividends to ordinary shareholders.
5 Investment in subsidiaries and intercompany balances.
At the end of the year, the Company owned a controlling interest
in the following subsidiaries:
Country of incorporation Percentage of shares held
---------------------- -------------------------- --------------------------
Terra Capital Cayman Cayman Islands 100%
The Company owns 100% of Terra Capital Cayman, which is a Cayman
Islands incorporated entity. Investment in subsidiary is stated at
fair value. Intercompany loans from the Company to Terra Capital
Cayman are stated at cost. They are repayable on demand and bear
interest at the US Prime rate per annum.
6 Segment reporting
No additional disclosure is included in relation to segment
reporting as the Group's activities are limited to one business
segment, being investing in accordance with the Company's
investment objective.
7 Fair value hierarchy
IFRS 7 requires the Company to classify fair value measurements
using a fair value hierarchy that reflects the significance of the
inputs used in making the measurements. The fair value hierarchy
has the following levels:
-- Quoted prices (unadjusted) in active markets for identical
assets or liabilities (level 1).
-- Inputs other than quoted prices included within level 1 that
are observable for the asset or liability, either directly (that
is, as prices) or indirectly (that is, derived from prices) (level
2).
-- Inputs for the asset or liability that are not based on
observable market data (that is, unobservable inputs) (level
3).
US$55,309,000 (2016: US$49,328,000) of the Company's investments
are classed as level 1 investments and
US$2,240,000 (2016: US$8,815,000) of the Company's investments
are classed as level 2 investments.
8 Financial assets at fair value through profit or loss
Group
31 December 2017: Financial assets at fair value through profit
or loss; principally quoted equity securities:
Security name Number US$'000
African Oxygen 707,000 1,599
Allami Nyomda (Hungarian Printing Company) 593,457 3,057
Artes SA (Automobile Reseau Tunisien) 246,934 623
Bank Muscat 1,104,454 1,124
Bank of Bahrain & Kuwait 980,000 1,086
BB Votorantim JHSF CI JARD 54,300 984
Belle Corp 15,700,000 1,217
BLOM BANK GDS GDS REPR 1 ORD'B'SHS LBP10000(REG S) 137,672 1,748
Cmorgorski Telekom AD Podgoric (TECG) 217,624 411
Copi Holdi NPV Class A 10,365 1,390
Emaar Misr for Development 7,361,000 1,486
Faryki Mebli Forte 58,000 832
FDO S F Lima 578,259 485
Ferreycorp S.A.A 1,942,216 1,528
FI IMOB Projecto Agua Branca 1,800 186
Fii BM Edeficio Galeria 39,200 518
Fii Torre Almirante 1,020 547
Fii Vila Olimpia Corporate 34,000 887
Galenika Fitofarmacija 79,115 2,280
Gorenje Velenje 175,399 1,073
Great Wall Motor Company 828,600 949
Gulf Hotel Group* 704,700 980
Gulf Warehousing 99,107 1,170
IRSA Inversiones Y 46,798 1,385
JMMB Group Ltd 6,050,000 1,217
KCB Group 2,867,000 1,188
KCELL JT 397,630 2,167
Kernel Holdings SA 71,923 981
Komercijalan Banka AD (KMB) 28,845 1,551
National Bank of Kuwait 400,000 964
NCB Financial Group 3,653,441 2,940
Nigerian Breweries PLC 833,247 312
Oman Cement Company 478,663 509
---------------------------------------------------- ------------ --------
Security name Number US$'000
Oman Refreshment Company 175,000 931
Onatel 60,809 1,034
One Tech Holding 248,305 1,347
Ooredoo 699,000 944
Polis Ban QF 1,789 1,264
PUT 100 Grupo EXP 01-19-18 @35* 500 -
PUT 100 Grupo EXP 01-19-18 @40* 460 -
Qingling Motors Ltd 1,608,955 513
Refineria La Pampi 20,834,070 1,992
Residences Dar Saada 61,283 1,003
RFM Corporation 11,003,750 1,093
SDI Logistica Rio Fii 25,244 730
Solidere GDS EACH REP 1 USD10'A'(Lebanese GDS) 114,499 917
Speedy EAD-Safia* 47,518 1,259
Square Pharma 515,910 1,872
Summit Power Ltd 2,786,398 1,203
Travellers International Hot 19,782,000 1,573
Tunisie Leasing 84,522 481
Tunisie Leasing Rights 3,296 19
------------------------------------------------ ------------ --------
Total 57,549
-------
*Level 2 investments: stated at last traded price.
31 December 2016: Financial assets at fair value through profit
or loss; principally quoted equity securities:
Security name Number US$'000
ABU DHABI Commercial Bank 593,000 1,114
AIR ARABIA 2,947,000 1,067
Al Meera Consumer Goods Co 21,218 1,019
Allami Nyomda (Hungarian Printing Co) 553,679 2,139
Ardent Leisure Group NPV 372,606 628
Artes SA 246,934 838
Bank Muscat 995,671 1,221
Bank of Georgia Holdings PLC 12,480 460
BB Votorantim 54,300 921
Belle Corp 12,000,000 773
BLOM Bank GDS* 173,272 1,889
Co-operative Bank of Kenya 2,974,100 383
Copa Holdings 15,265 1,387
Crnogorski Telekom AD Podgoric 222,624 661
Doha Bank 83,692 802
Emaar Misr for Development 2,998,000 476
Emperador Inc 4,279,000 603
Fabryki Mebli Forte 34,955 634
FDO S F Lima 589,582 398
Ferreycorp SAA 1,827,387 918
FI IMOB Projecto Agua Branca 1,800 162
Fii BM Edificio Galeria 39,200 612
Fii Torre Almirante 1,020 582
Fii Vila Olimpia Corporate 34,000 761
Galenika Fitofarmacija* 79,115 1,834
Gorenje Velenje 175,399 1,106
Great Wall Motor Company 569,000 531
Gulf Hotel Group 444,273 754
Gulf Warehousing 40,750 626
Holdsport Limited 230,501 988
IRSA-SP ADR 81,433 1,502
JMMB Group Limited 8,500,000 953
KCELL JT 318,630 1,020
Kernel Holdings SA 86,323 1,316
Komercijalna Banka AD 28,845 1,413
--------------------------------------- -------------------------- --------
31 December 2016: Financial assets at fair value through profit
or loss; principally quoted equity securities: (continued)
Security name Number US$'000
Kumho Petro Chem 17,850 433
Lotte Chilsung Beverage Co-PFD* 749 441
National Commercial Bank Jamaica Ltd 5,431,719 2,099
Nigerian Breweries 70,000 34
Oman Cement Company 464,950 572
Oman Refreshment Company* 175,000 980
Onatel BF 29,509 562
One Tech Holding 248,305 917
Onelogix Group Limited 2,128,792 519
Ooredoo 59,031 101
Polis Banc QF 1,789 1,538
QF BNL Portfolio IMM 845 415
Qingling Motors Co Ltd 3,042,615 922
Refineria La Pampilla SA 12,664,695 877
Residences Dar Saada 55,843 1,020
RFM Corporation 11,003,750 1,129
Scotia Group Jamaica 5,429,031 1,542
SDI Logistica Rio Fii 25,244 623
Shinyoung Securities Co Ltd 8,370 347
Silvano Fashion Group 148,299 462
Solidere 109,849 1,098
Speedy EAD-Sofia* 16,818 327
Square Pharma 692,707 2,167
Summit Power Ltd 2,596,398 1,207
Terra Argentina Fund LP - Series 1* 340,000 583
Terra Argentina Fund LP - Series 2* 510,000 894
Terra Argentina Fund LP - Series 3* 510,000 781
Terra Argentina Fund LP - Series 4* 340,000 414
Travellers International Hotel 9,300,000 616
Tunisie Leasing* 84,522 674
Tunisie Leasing Rights 3,296 26
UAC of Nigeria 1,043,009 57
X5 Retail Group NV 39,416 1,276
Total 58,143
--------
9 Net finance income
2017 2016
US$'000 US$'000
---------------------------------- -------- --------
Interest income on bank balances 12 9
---------------------------------- -------- --------
Finance income 12 9
---------------------------------- -------- --------
Bank charges (5) (9)
Finance cost (5) (9)
---------------------------------- -------- --------
Net finance income 7 -
---------------------------------- -------- --------
10 Net asset value per share
The consolidated net asset value per share as at 31 December
2017 is US$1.149 based on 61,469,312 Ordinary Shares in issue as at
that date (2016: US$1.02 based on 68,299,236 shares) excluding
shares held in treasury .
11 Related party transactions
Balances and transactions between the Company and its
subsidiaries, which are related parties of the Company, have been
eliminated on consolidation and are not disclosed in this note.
Details of transactions between the Group and other related parties
are disclosed below.
Parties are considered to be related if one party has the
ability to control the other party or to exercise significant
influence over the party making financial or operational
decisions.
Directors of the Company
Ian Dungate is a director of the administrator.
Details of director's remuneration is set out in Note 18.
The Investment Manager
Following the EGM held on 24 May 2012, the Company appointed
Terra Partners Asset Management ("TPAM") as its Investment Manager.
The level of fees payable to the investment manager were adjusted
following resolutions passed at an Extraordinary General Meeting
held on 26 January 2015.
Term and termination
The Investment Management Agreement may be terminated by either
party giving to the other not less than 12 months' notice expiring
on or at any time after the third anniversary of the commencement
date of the agreement or otherwise, in circumstances, inter alia,
where one of the parties has a receiver appointed over its assets
or if an order is made or an effective resolution passed for the
winding-up of one of the parties.
Management fee
The Investment Manager shall be entitled to receive a management
fee equal to 1.25 per cent. per annum of the aggregate Net Asset
Value of the Company during the relevant fee payment period,
calculated on the first day of each month, accrued on a daily basis
and payable monthly in arrears (or pro rata for lesser
periods).
Performance fee
The Manager is also entitled to receive a performance fee equal
to 12 per cent. of the increase (if any) in the Net Asset Value per
Share (with dividends and other distributions added back and
ignoring any accrued performance fee) as at each semi-annual
performance fee calculation period above the Net Asset Value as at
the commencement of each such semi-annual performance fee
calculation period, provided that any performance fee shall be
payable only to the extent that the Net Asset Value of the Share
exceeds the Net Asset Value immediately following the settlement of
the Tender Offer or, if a performance fee has been paid, the Net
Asset Value per Share when a performance fee was last paid. The
performance fee shall be calculated on 30 June and 31 December in
each year and paid following such calculation.
Expenses
In addition, the Company shall be responsible for the payment of
all out-of-pocket expenses reasonably incurred by the Manager in
the proper performance of the Investment Management Agreement up to
a maximum of US$75,000 per annum.
Worldwide Opportunity Fund ("WWOF") A class, which owns
5,435,555 shares or 7.81% of the Company is managed by Terra
Partners Asset Management Limited ("TPAM") which is also the
Company's Investment Manager. The principals of TPAM are Filip
Montfort and Yarden Mariuma. Mr Montfort holds 1.30% of the shares
in issue in WWOF (in addition to his direct holding of 863,393
Ordinary Shares in the Company); Mr Mariuma holds 1.20% in WWOF
(and 865,820 Ordinary Shares directly in the company)
The Administrator
The Administrator shall be paid by the Company a fixed fee of
US$100,000 per annum, payable quarterly in arrears.
For the preparation of the financial statements the
Administrator shall be paid by the Company US$3,000 per set.
In the event that the Administrator provides secretarial
services to the Company, the Administrator shall be paid an annual
fee of US$8,000. The Administrator shall be entitled to additional
fees for such general secretarial services based on time and
charges where the number of board meetings or general meetings
exceeds for per annum. The Administrator shall be entitled to an
attendance fee of US$750 per day or part thereof where the
Administrator attends a board meeting or general meeting which is
not held in the Isle of Man.
12 Charges and fees
12.1 Nominated adviser and broker fees
As nominated adviser and broker to the Company for the purposes
of the AIM rules, the Nominated Adviser and Broker is entitled to
receive an annual fee of GBP60,000 payable quarterly in
advance.
Total advisory fees payable to the Nominated Adviser and Broker
for the year ended 31 December 2017 amounted to US$78,159 (2016:
US$81,644) with US$ Nil due at 31 December 2017 (2016 US$ Nil).
12.2 Administrator and Registrar fees
Administration fees payable for the year ended 31 December 2017
amounted to US$120,000 (31 December 2016: US$121,500) and Crest
fees US$8,000 (2016: US$8,979) with administration fees of
US$31,500 still due at 31 December 2017 (31 December 2016:
US$31,500).
12.3 Audit and professional fees
Audit fees for the year ended 31 December 2017 amounted to
US$30,000 (31 December 2016: US$32,036).
Professional fees for the year ended 31 December 2017 amounted
to US$66,098 (31 December 2016: US$52,333).
12.4 Manager's fees
Management fees payable for the year ended 31 December 2016
amounted to US$852,946 (2016: US$580,894, including a rebate from
Terra Argentina Fund) and the amount accrued but not paid at the
period end was $147,410 (31 December 2016: $73,085).
Performance fees payable for the year ended 31 December 2017
amounted to US$1,043,631 (2016: US$711,673).
Performance fees accrued but not paid for the year ended 31
December 2017 amounted to US$534,790 (31 December 2016:
US$711,673)
13 Trade and other receivables
Group Company Group Company
31 December 31 December 31 December 31 December
2017 2017 2016 2016
US$'000 US$'000 US$'000 US$'000
--------------------------------------------- ------------ ------------ ------------ ------------
Prepayments and other receivables (note 20) 323 24 208 35
Total 323 24 208 35
--------------------------------------------- ------------ ------------ ------------ ------------
14 Cash and cash equivalents
Cash and cash equivalents comprise cash in hand and deposits
held with banks and amounts held by brokers. All cash and bank
balances are available for operational use in the Group and Parent
Company.
15 Basic and diluted earnings per share
Basic earnings per share is calculated by dividing the profit
attributable to owners of the Company by the weighted-average
number of Ordinary Shares in issue during the year.
31 December 2017 31 December 2016
-------------------------------------------------------------------------------- ----------------- -----------------
Profit attributable to owners of the Company (US$'000) 7,914 8,412
Weighted average number of Ordinary Shares in issue (thousands)(excluding
shares held in Treasury) 62,573 68,299
-------------------------------------------------------------------------------- ----------------- -----------------
Basic and diluted earnings per share (cents per share) 12.65 12.32
-------------------------------------------------------------------------------- ----------------- -----------------
16 Share capital
31 December 31 December
2017 2016
US$'000 US$'000
-------------------------------------------- ------------ ------------
Authorised:
-------------------------------------------- ------------ ------------
400,000,000 Ordinary shares of US$0.10
each 40,000,000 40,000,000
-------------------------------------------- ------------ ------------
Allotted, Called-up and Fully-Paid:
-------------------------------------------- ------------ ------------
61,469,312 (31 December 2016: 68,299,236)
Ordinary shares of US$0.10 each in issue,
with full voting rights 6,147 6,830
6,829,924 (31 December 2016: 8,956,423)
Ordinary shares of US$0.10 each held
in Treasury 683 896
-------------------------------------------- ------------ ------------
6,830 7,726
-------------------------------------------- ------------ ------------
8,956,423 (31 December 2016: Nil) shares held in Treasury were
cancelled in the year. As a result of the tender offer 6,829,924
Ordinary shares were repurchased by the Company and retained in
Treasury at the year end. The Ordinary shares held in Treasury have
no voting rights and are not entitled to dividends.
17 Trade and other payables
Group Company Group Company
31 December 31 December 2017 31 31 December 2016
2017 December
2016
US$'000 US$'000 US$'000 US$'000
------------------------------- ------------- ------------------ ---------- ------------------
Current liabilities
Sundry creditors and accruals 856 685 1,031 878
------------------------------- ------------- ------------------ ---------- ------------------
Total 856 685 1,031 878
------------------------------- ------------- ------------------ ---------- ------------------
18 Directors' remuneration
Mr Van den Broeck, as Chairman, is entitled to remuneration of
US$45,000 per annum from the date of his appointment and Mr Dungate
and Mr Bartlett are each entitled to remuneration of US$30,000 per
annum. The Cayman Company pays an annual fee US$10,000 for
Directorship services to Estera Trust (Isle of Man) Limited.
At 31 December 2017 Directors' fees payable were US$ Nil (2016:
US$ Nil)
19 Taxation
2017 2016
US$'000 US$'000
-------------------------------------------------- --------- --------
Balance at 1 January - 1,940
Macau tax (release of)/addition to tax provision - (1,940)
Balance at 31 December - -
-------------------------------------------------- --------- --------
Withholding tax
2017 2016
US$'000 US$'000
------------------------ -------- --------
Balance at 1 January 373 229
Charge for the year 383 565
Paid in the year (211) (421)
Balance at 31 December 545 373
------------------------ -------- --------
Isle of Man taxation
The Company is resident in the Isle of Man for tax purposes and
pays income tax at 0%. The Company pays a corporate charge of
GBP380 to the Isle of Man Government for each tax year.
20 Financial instruments
The Group's activities expose it to a variety of financial
risks: market price risk, foreign exchange risk, credit risk,
liquidity risk and cash flow interest rate risk.
All financial instruments are considered to be stated at amounts
which approximate their fair value.
Market price risk
The Group's strategy for the management of investment risk is
driven by the Group's investment objective. The main objective of
the Group is to achieve capital appreciation while attempting to
reduce risk primarily by applying a disciplined and diversified
value investing philosophy.
All investments present a risk of loss of capital through
movements in market prices. The Investment Manager moderates this
risk through a careful selection of securities within specified
limits. The Investment Manager reviews the position on a day to day
basis and the Directors review the position at Board meetings.
The Group's market risk is managed through the diversification
of the investment portfolio. Certain investments are in
illiquid/inactive markets and classified as Level 2 in the fair
value hierarchy.
At 31 December 2017, if the market value of the investment
portfolio had increased/decreased by 1.5% with all other variables
held constant, this would have increased/decreased net assets
attributable to shareholders by approximately US$ 863,000 (31
December 2016 : US$872,000).
Foreign exchange risk
The Group's operations are conducted in jurisdictions which
generate revenue, expenses, assets and liabilities in currencies
other than the United States Dollar (the Functional Currency). As a
result, the Group is subject to the effects of exchange rate
fluctuations with respect to these currencies.
The following table sets out the Group's total exposure to
foreign currency risk and the net exposure to foreign currencies of
the monetary assets and liabilities:
Monetary Monetary Net
Assets Liabilities Exposure
31 December 2017 US$'000 US$'000 US$'000
--------------------- --------- ------------- ----------
United Arab Emirate
Dirham 2,437 - 2,437
Bangaldeshi Taka 3,252 (244) 3,008
Bulgarian Lev 1,259 - 1,259
Bahraini Dinar 2,066 - 2,066
Brazilian Real 4,337 (84) 4,253
Egyptian Pound 1,486 - 1,486
Euro 2,761 - 2,761
British Pound 16 - 16
Hong Kong Dollar 1,503 - 1,503
Hungarian Forint 3,057 - 3,057
Jamaican Dollar 4,191 (3) 4,188
Kenyan Shilling 1,188 - 1,188
Kuwaiti Dinar 964 - 964
Moroccan Dirham 1,003 - 1,003
Macedonian Denar 1,778 - 1,778
Nigerian Naira 390 (2) 388
Omani Rial 3,543 - 3,543
Peruvian Nueva Sol 3,520 - 3,520
Philippine Peso 3,884 - 3,884
Polish Zloty 1,813 - 1,813
Qatari Rial 1,170 - 1,170
Serbian Dinar 2,285 (213) 2,072
Tunisian Dinar 2,470 - 2,470
CFA Franc 1,035 - 1,035
South African Rand 1,599 - 1,599
US Dollar 18,992 (855) 18,137
--------------------- --------- ------------- ----------
71,999 (1,401) 70,598
--------------------- --------- ------------- ----------
Monetary Monetary Net
Assets Liabilities Exposure
31 December 2016 US$'000 US$'000 US$'000
--------------------- --------- ------------- ----------
United Arab Emirate
Dirham 2,226 - 2,226
Australian Dollar 640 - 640
Bangaldeshi Taka 3,401 (205) 3,196
Bulgarian Lev 328 - 328
Bahraini Dinar 754 - 754
Brazilian Real 4,076 - 4,076
Egyptian Pound 476 - 476
Euro 4,197 - 4,197
British Pound 460 - 460
Hong Kong Dollar 1,453 - 1,453
Croatian Kuna - - -
Hungarian Forint 2,139 - 2,139
Jamaican Dollar 4,593 - 4,593
Kenyan Shilling 383 - 383
South Korean Won 1,239 (4) 1,235
Moroccan Dirham 1,020 - 1,020
Macedonian Denar 1,538 - 1,538
Nigerian Naira 147 (2) 145
Omani Rial 2,874 - 2,874
Peruvian Nueva Sol 1,795 - 1,795
Philippine Peso 3,120 - 3,120
Polish Zloty 1,937 - 1,937
Qatari Rial 2,580 - 2,580
Serbian Dinar 1,839 (163) 1,676
Tunisian Dinar 2,455 - 2,455
Uganda Shilling 40 - 40
Vietnamese Dong - - -
CFA Franc 562 - 562
South African Rand 1,526 - 1,526
US Dollar 22,983 (1,030) 21,953
70,781 (1,404) 69,377
--------------------- --------- ------------- ----------
Credit risk
Credit risk is the risk that a counterparty to a financial
instrument will fail to discharge an obligation or commitment that
it has entered into with the Group.
The carrying amounts of financial assets best represent the
maximum credit risk exposure at the balance sheet date. This
relates also to financial assets carried at amortised cost, as they
have a short term maturity.
At the reporting date, the Group's financial assets exposed to
credit risk amounted to the following:
31 December 31 December
2017 2016
US$'000 US$'000
-------------------------------- ------------ ------------
Financial assets at fair value
through profit or loss 57,549 58,143
Trade and other receivables 323 208
Cash at bank 14,127 12,430
-------------------------------- ------------ ------------
71,999 70,781
-------------------------------- ------------ ------------
The maximum exposure to credit risk is represented by the
carrying amount of each financial asset in the balance sheet.
The Group manages its credit risk by monitoring the
creditworthiness of counterparties regularly. Cash transactions and
balances are limited to high-credit-quality financial institutions.
The Investment Manager and the Board of Directors do not expect any
losses from non-performance by these counterparties.
Liquidity risk
The Group manages its liquidity risk by maintaining sufficient
cash and the availability of funding through an adequate amount of
committed credit facilities. The Group's liquidity position is
monitored by the Manager and the Board of Directors. Residual
undiscounted contractual maturities of financial liabilities at the
reporting dates were:
Less than 3 months No stated
1 month 1-3 months to 1 year 1-5 years maturity
Financial liabilities US$'000 US$'000 US$'000 US$'000 US$'000
------------------------- ---------- ----------- ----------- ---------- ----------
2017
------------------------- ---------- ----------- ----------- ---------- ----------
Trade and other payables 1,401 - - - -
1,401 - - - -
------------------------- ---------- ----------- ----------- ---------- ----------
2016
------------------------- ---------- ----------- ----------- ---------- ----------
Trade and other payables 1,404 - - - -
------------------------- ---------- ----------- ----------- ---------- ----------
1,404 - - - -
------------------------- ---------- ----------- ----------- ---------- ----------
Interest rate risk
Cash held by the Group is invested at short-term market interest
rates. As a result, the Company is not exposed to fair value
interest rate risk due to fluctuations in the prevailing levels of
market interest rates. However, it is exposed to interest rate cash
flow risk.
The table below summarises the Group's exposure to interest rate
risks at 31 December 2017. It includes the Groups' financial assets
and liabilities at the earlier of contractual re-pricing or
maturity date, measured by the carrying values of assets and
liabilities:
Less than 1-3 months Non-interest Total
1 month bearing
31 December 2017 US$'000 US$'000 US$'000 US$'000
----------------------- ---------- ----------- ------------- --------
Financial assets
Investments at
fair value through
profit or loss - - 57,549 57,549
Trade and other
receivables - - 323 323
Cash 14,127 - - 14,127
----------------------- ---------- ----------- ------------- --------
Total financial
assets 14,127 - 57,872 71,999
----------------------- ---------- ----------- ------------- --------
Financial liabilities
Trade and other
payables - - 1,401 1,401
Total financial
liabilities - - 1,401 1,401
----------------------- ---------- ----------- ------------- --------
Total interest
rate sensitivity
gap 14,127 - - 14,127
----------------------- ---------- ----------- ------------- --------
Less than 1-3 months Non-interest Total
1 month Bearing
31 December 2016 US$'000 US$'000 US$'000 US$'000
----------------------- ---------- ----------- ------------- --------
Financial assets
Investments at
fair value through
profit or loss - - 58,143 58,143
Trade and other
receivables - - 208 208
Cash 12,430 - - 12,430
----------------------- ---------- ----------- ------------- --------
Total financial
assets 12,430 - 58,351 70,781
Financial liabilities
Trade and other
payables - - 1,404 1,404
Total financial
liabilities 1,404 1,404
----------------------- ---------- ----------- ------------- --------
Total interest
rate sensitivity
gap 12,430 - - 12,430
----------------------- ---------- ----------- ------------- --------
21 Post balance sheet events
Realisation Policy
The Board have agreed to cease all new investments and seek to
realise, in an orderly fashion, the Company's portfolio of
investments and return net proceeds generated to Shareholders as
soon as is practicable. The Board believes this orderly realisation
of the portfolio of investments is preferable to an immediate
liquidation as it is likely to achieve greater returns to
Shareholders. In order to do this the Investment Manager's current
fee structure of 1.25 per cent. of NAV per annum and a performance
fee linked to NAV increases will be replaced by an incentivised fee
equal to 1 per cent. of any distributions made to shareholders.
These new fee arrangements will come into effect on 1 July
2018.
22 Capital commitments
None.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
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(END) Dow Jones Newswires
June 27, 2018 02:00 ET (06:00 GMT)
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