2015 ANNUAL REPORT Unknown Artist, C

2015 ANNUAL REPORT Unknown Artist, c. 1882; Bermuda Regatta, July 4th, 1882; Oil on Canvas; Collection of the Bermuda National Gallery

Sir George Somers was an English naval hero born in 1554, and was an Admiral of the Virginia Company.

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CONTENTS

2 FINANCIAL HIGHLIGHTS

3 KEY INVESTMENTS AND CORPORATE STRUCTURE

4 CORE INVESTMENTS

5 CHAIRMAN’S STATEMENT

6 FINANCIAL REVIEW

7 DIRECTORS

8 STRATEGY

9 INVESTMENT MANAGEMENT TEAM

10 INVESTMENT MANAGER’S REPORT

13 SUMMARY OF CORE INVESTMENTS

19 BOARD RESPONSIBILITIES AND GOVERNANCE

21 PRINCIPAL RISKS AND UNCERTAINTIES

22 INDEPENDENT AUDITOR’S REPORT

23 CONSOLIDATED STATEMENT OF FINANCIAL POSITION

24 CONSOLIDATED STATEMENT OF INCOME

25 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

26 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

27 CONSOLIDATED STATEMENT OF CASH FLOWS

28 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FINANCIAL CALENDAR

ANNUAL GENERAL MEETING MARCH 18, 2016

HALF YEAR MARCH 31, 2016, ANNOUNCEMENT JUNE 2016

FORWARD LOOKING STATEMENTS

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FINANCIAL HIGHLIGHTS

2015 2014 2015 2014 NAV per share $17.74 ($18.96) Total return per ordinary share -4.36% (14.99%) (1) Share price $13.00 ($13.75) Ordinary dividend per share $0.42 ($0.37) Discount to NAV 26.71% (27.46%) Cash from shares issued $4.17m ($1.99m) Shares in issuance (excluding shares held in treasury) 11.79m (11.30m) Cash from warrant exercise $3.45m ($7.45m) Total assets $215.99m ($223.58m)

Figures in brackets are for the prior year. (1) Total return is calculated as change in NAV per ordinary share, plus dividends reinvested.

Net Income - USD Million Total Assets - USD Million Total Equity - USD Million October 2012 to September 2015

40 228 250

200 30 224 150 20 220 100 10 216 50

0 212 0 2013 2014 2015 20132014 20152013 2014 2015

NAV per Common Share (diluted) - USD Earnings per Share (diluted) - USD Dividend per Common Share - USD October 2012 to September 2015 October 2012 to September 2015

20 4 0.44

16 0.41 3 12 0.38 2 8 0.35

4 1 0.32

0 0 0.29 2013 2014 2015 2013 2014 2015 2013 2014 2015

Key transactions in the year • Sale of holding of shares and convertible loan notes in Private and Commercial Finance Group plc to BCB. • Additional investment in Ascot Lloyd Holdings Limited bringing Somers’ total potential economic interest to 44.0%. • Acquisition of an additional 1,222,949 shares in West Hamilton Holdings Limited from BCB bringing Somers’ total holdings to 57.1%. KEY INVESTMENTS AND CORPORATE STRUCTURE 3

KEY INVESTMENTS AND CORPORATE STRUCTURE

INVESTE MENT MANAGER

BANKING / ASSET FINANCING ASSET MANAGEMENT STOCK BROKING PROPERTY

Bermuda Commercial Waverton Investment Ascot Lloyd Merrion Capital Group Stockdale Securities Limited West Hamilton Bank Limited Management Limited Holdings Limited Banking Wealth Management Financial planning company /HDGLQJΖULVKȴQDQFLDOVHUYLFHV Corporate and institutional Property Investment

located in London group; providing corporate VWRFNEURNLQJJURXS /LFHQVHGEDQNLQ%HUPXGD Private wealth management advisory, funds management located in London Property investment Focus on commercial, EXVLQHVVIRUPHUO\NQRZQ Authorised and regulated DQGVWRFNEURNLQJVHUYLFHV and development SULYDWHEDQNLQJDQG DV-2+DPEURΖQYHVWPHQW E\WKH)LQDQFLDO&RQGXFW$XWKRULW\ $GYLVHUDQGEURNHUWR8. company listed on wealth management Management and international companies Bermuda Stock Exchange

7RWDODVVHWVPLOOLRQ $X0RYHUeELOOLRQ $X$eELOOLRQ $X0ȜELOOLRQ 1HWDVVHWVRIPLOOLRQ

Private & Commercial Finance Group plc Asset Origination

$VVHWȴQDQFLQJFRPSDQ\ listed on London Stock Exchange

3RUWIROLRRIUHFHLYDEOHVRI PLOOLRQ 4 SOSOMERSMERS LIMITEDLIMITETED

CORE INVESTMENTS

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Company Country Fair Value ($) % of Total Investments

1 Bermuda Commercial Bank Limited Bermuda

2 Waverton Investment Management Limited UK 51,996,653

3 West Hamilton Holdings Limited Bermuda 25,654,032

4 Ascot Lloyd Holdings Limited UK 15,963,839

5 Merrion Capital Holdings Limited Ireland 3,660,349

6 Stockdale Securities Limited (1) UK 1,408,830

Core Investments 199,511,962

Other investments 10,352,293

Total Investments 209,864,255

1 :HVWKRXVH6HFXULWLHV/LPLWHGFKDQJHGLWVQDPHWR6WRFNGDOH6HFXULWLHV/LPLWHGRQ-DQXDU\ CHAIRMAN’S STATEMENT 5

CHAIRMAN’S STATEMENT

I am pleased to write to you as Chairman of Somers Against the backdrop of market uncertainty, currency total payment for 2015 equates to a dividend yield of 3.2% Limited (“Somers” or the “Company”) and to present the volatility was a feature of 2015 and adverse currency based on the Company’s closing price as at September 30, results for the year ended September 30, 2015. movements negatively impacted Somers’ NAV. Many of our 2015, and a yield of 2.4% based on the closing NAV price. larger investments, in particular Waverton, PCFG and Ascot Shareholders can elect to receive their dividend payment in As an investment holding company, Somers’ total return is Lloyd are denominated in Sterling and over the course of cash or shares. generated predominantly by the realised and unrealised the year Sterling declined by 6.7% versus the Dollar leading returns achieved on our investment portfolio. Our primary to a $6.7 million reduction in Somers’ NAV. Currency Board Changes markets are the UK and Bermuda and both jurisdictions movements and the geographical split of our portfolio During the year, J. Michael Collier retired from the Board. underperformed in 2015 with the UK’s FTSE 100, one of are actively monitored by the Investment Manager in Michael made a very valuable contribution to Somers and on our primary benchmarks, down 8.5%. Somers was not consultation with the Board and are an integral component behalf of the Board, I would like to thank him for the support, immune to this downturn and our 2015 results were of our investment management decisions. enthusiasm and guidance he brought to the Company. impacted by valuation reductions at our two largest holdings, Bermuda Commercial Bank (“BCB” or “the Somers’ principal objective is to make corporate Outlook Bank”) and Waverton Investment Management Limited LQYHVWPHQWV DQG DFTXLVLWLRQV LQ WKH ȴQDQFLDO VHUYLFHV ZDVFKDUDFWHULVHGE\EURDGEDVHGPDFURHFRQRPLF Ȋ:DYHUWRQȋ 2΍VHWWLQJ WKLV WZR RI RXU 8. EDVHG sector with the intention of generating returns through volatility and we remain cautious about the current investments, Private and Commercial Finance Group plc both capital appreciation and income and the period environment. While the US and UK central banks head (“PCFG”) and Ascot Lloyd achieved strong growth for the VLQFH WKH JOREDO ȴQDQFLDO FULVLV KDV SUHVHQWHG D tentatively towards interest rate normalisation and the year. Our investment weighting in these companies is, number of opportunities to make investments at attractive introduction of gradual interest rate increases, most other however, at a relatively lower level and the net overall YDOXDWLRQV DV PDQ\ ODUJHU ȴQDQFLDO LQVWLWXWLRQV UHGXFH central banks are moving in the opposite direction. The result, coupled with the fall in Sterling, was a decrease in WKHLUEDODQFHVKHHWVDQGVSLQR΍QRQFRUHEXVLQHVVOLQHV consequences of the Global Financial Crisis remain with us Somers’ NAV to $17.74 per share from $18.96 a year ago. On page 8 of this report, we have included a new section and as a result, we expect the volatility witnessed in 2015 on strategy which provides more detail on the Company’s to continue in 2016. Somers’ performance is driven by the Of our core investments, BCB is currently investing in its strategy and investment approach. results of our individual investee companies and despite this infrastructure and Waverton was impacted by reduced turbulent environment we expect our investee companies Assets under Management (“AuM”) and the fall in the Share Price Performance to continue to make good progress at the operating level UK equity markets during the year. Despite this, both and Share Buybacks and this should produce positive results for Somers. FRPSDQLHVUHWXUQHGVWURQJSURȴWVIRUDOEHLWVOLJKWO\ The market value of the Company’s common shares on below 2014 levels. Over the course of the year, BCB’s the Bermuda Stock Exchange decreased by 5.5% during Our focus going forward is to maintain strong returns in Board and management team have been strengthened the year ending September 30, 2015, to $13.00 which the medium to long term which we will do by maximising and post the year end, the Bank successfully launched represents a 26.7% discount to NAV. This compares to a the performance from our existing portfolio, adopting a its new core banking system. This will allow the Bank to share price and discount of $13.75 and 27.5% respectively measured and selective approach to new investments and EURDGHQLWVSURGXFWR΍HULQJDQGEHFRPHPRUHFXVWRPHU as at September 30, 2014. keeping an absolute focus on improving every aspect of our centric enabling the Bank to compete for an increased business. We look forward to 2016 with cautious optimism. market share. The carrying value of our investment in The Board continues to monitor Somers’ share price Waverton was reduced on account of lower earnings and and believes that the current market price does not reduced AuM resulting from the transfer of one of the IXOO\ UHȵHFW WKH XQGHUO\LQJ YDOXH RI WKH &RPSDQ\ȇV Waverton funds to a specialist fund manager. investments, and as such, may continue to buyback shares when opportunities arise. During the year, a total Throughout the year, Somers remained fully invested. of 35,282 shares were bought back at an average price Warren McLeland Investment activity was low in 2015 with the year’s main of $13.77 per share. All of these shares were cancelled Chairman transactions for Somers being the transfer of West Hamilton prior to year end. Ʌ Holdings Limited (“West Hamilton”) shares from BCB and the sale of our PCFG holdings to BCB. In addition, we invested Dividend a further £4.0 million in Ascot Lloyd. The PCFG transaction The Board’s objective is to maintain or increase the total enables BCB to diversify and strengthen its earnings, annual dividend while also strengthening the Company’s LPSURYHLWVFDSLWDOHɝFLHQF\DQGGLYHUVLI\LWVJHRJUDSKLFULVN capital position and dividends will generally be increased in BCB can assist PCFG in growing its loan book and PCFG will line with long term trends in earnings per share growth. EHQHȴWIURPWKHVWURQJDQGOLTXLGEDODQFHVKHHWWKDWDEDQN majority owner provides. Somers’ acquisition of the West 7KH&RPSDQ\SDLGDȴQDOGLYLGHQGSHUVKDUHRI Hamilton shares consolidates the Group’s share ownership $0.22). The total dividend payment for the year was $0.42 a in West Hamilton in one group company. share, an increase of $0.05 per share compared to 2014. The 6 SOMERS LIMITED

FINANCIAL REVIEW

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6RPHUVUHFHLYHGGLVWULEXWLRQVRIPLOOLRQGXULQJWKH LQYHVWPHQWV%&%DWPLOOLRQDQG:DYHUWRQDW ȏΖQYHVWHGDIXUWKHUePLOOLRQLQ$VFRW/OR\GEULQJLQJ \HDUFRPSDUHGWRPLOOLRQD\HDUDJR2IWKHGLYLGHQGV PLOOLRQ WRJHWKHU UHSUHVHQW RI WRWDO LQYHVWPHQWV RXUWRWDOSRWHQWLDOHFRQRPLFLQWHUHVWWR UHFHLYHG PLOOLRQ RI GLYLGHQGV ZHUH UHFHLYHG IURP ZLWK:HVW+DPLOWRQDFFRXQWLQJIRUDQDGGLWLRQDO DIRECTORS 7

DIRECTORS

Warren McLeland (Chairman) David Morgan Alasdair Younie 0U0F/HODQGLVD6FLHQFHDQG0%$JUDGXDWHDQGIRUPHU 0U 0RUJDQ KDV RYHU WKLUW\ ȴYH \HDUV RI H[SHULHQFH LQ 0U

Charles Jillings Duncan Saville 0U-LOOLQJVLVDGLUHFWRURIΖ&0/LPLWHGDQGLVDTXDOLȴHG 0U 6DYLOOH LV D GLUHFWRU RI Ζ&0 /LPLWHG DQG D FKDUWHUHG chartered accountant with extensive experience in corporate DFFRXQWDQWZLWKH[SHULHQFHLQFRUSRUDWHȴQDQFHDQGDVVHW ȴQDQFHDQGDVVHWPDQDJHPHQW+HLVUHVSRQVLEOHIRUWKH PDQDJHPHQW+HZDVIRUPHUO\DQRQH[HFXWLYHGLUHFWRURI day to day running of UIL Limited and Utilico Emerging 8WLOLFRΖQYHVWPHQW7UXVWSOFDQGDQRQH[HFXWLYHGLUHFWRURI Markets Limited and has over thirty years of experience in DQXPEHURIOLVWHGDQGXQOLVWHGFRPSDQLHVLQWKHXWLOLW\DQG LQWHUQDWLRQDOȴQDQFLDOPDUNHWV0U-LOOLQJVZDVIRUPHUO\D WHFKQRORJ\VHFWRUV+HLVFXUUHQWO\DQRQH[HFXWLYHGLUHFWRU QRQH[HFXWLYHGLUHFWRURI8WLOLFRΖQYHVWPHQW7UXVWSOFDQG of Infratil Limited, New Zealand Oil and Gas Limited, Utilico Emerging Markets Limited and is an experienced 7RXFKFRUS/LPLWHGDQG:HVW+DPLOWRQ+ROGLQJV/LPLWHG QRQH[HFXWLYH GLUHFWRU +H LV D QRQH[HFXWLYH GLUHFWRU RI Merrion Capital Holdings Limited, Waverton Investment Management Limited, KeyTech Limited and Stockdale 6HFXULWLHV/LPLWHG 8 SOMERS LIMITED

STRATEGY

Somers Limited is a Bermuda exempted investment Business Model Dividends holding company whose shares are listed on the Bermuda The business model the Board has adopted to achieve its Dividends form a key component of the total return to Stock Exchange. Our core investment markets are objective is to appoint an external investment manager to shareholders, and the level of potential dividend payable currently the UK and Bermuda. whom it has contractually delegated the management of and income from the investment portfolio is reviewed at the portfolio. The Company has appointed ICM Limited every Board meeting. As a Bermuda company, Somers The Company’s primary objective is to deliver superior (”ICM”) to manage the portfolio in accordance with the is able to distribute both capital and income returns total shareholder returns through both capital and Board’s strategy of generating a capital and income return. DV GLYLGHQGV DQG WKH %RDUG KDV WKH ȵH[LELOLW\ WR SD\ LQFRPHZKLFKLQWXUQFDQEHH[SHFWHGWREHUHȵHFWHGLQ Details about the ICM investment team responsible for dividends from capital reserves. share price growth. To achieve this, the Company seeks the management of the portfolio are detailed in the WRLQYHVWLQXQGHUYDOXHGFRPSDQLHVZLWKLQWKHȴQDQFLDO Investment Management Team section of this report. Other It is Somers’ intention to pay regular, semi-annual VHUYLFHVVHFWRUDQGKDVWKHȵH[LELOLW\WRPDNHLQYHVWPHQWV administrative functions such as company secretarial, legal dividends to shareholders with the split between the LQDUDQJHRIȴQDQFLDOUHODWHGVHFWRUVDQGPDUNHWV7KH and custody are contracted to external services providers LQWHULP DQG ȴQDO GLYLGHQG ZHLJKWHG WRZDUGV WKH ȴQDO Company will identify and invest in opportunities where which may be related to Somers. The Somers’ Board dividend. The Board’s objective is to maintain or increase WKH XQGHUO\LQJ YDOXH LV QRW UHȵHFWHG LQ WKH PDUNHW RU oversee and monitor the activities of ICM and other service the total annual dividend while also strengthening the purchase price. The perceived undervaluation may arise providers on behalf of shareholders and ensure that the &RPSDQ\ȇVȴQDQFLDOSRVLWLRQ6KDUHKROGHUVFDQHOHFW WR from a variety of factors including the limited number of investment objectives are adhered to. receive shares in lieu of cash dividends. potential buyers, the paucity of bank lending to smaller ȴQDQFLDOVHUYLFHFRPSDQLHVDQGDQDEXQGDQWVXSSO\RI ICM actively monitor and manage all investments from Dividends will generally be increased in line with long ȴQDQFLDO VHUYLFH FRPSDQLHV IRU VDOH DV EDQNV FRQWLQXH point of origination. Portfolio companies are managed WHUPWUHQGVLQHDUQLQJVSHUVKDUHJURZWKZKLOHVXɝFLHQW to deleverage in response to the Global Financial Crisis. through a system of monthly management information SURȴWV ZLOO DOVR EH UHWDLQHG WR VXSSRUW DQWLFLSDWHG Somers will hold investments in unlisted securities when which is supported by ICM’s Valuation Department and business growth and to fund further investments. WKHDWWUDFWLYHQHVVRIWKHLQYHVWPHQWMXVWLȴHVWKHULVNDQG Somers’ Board oversight. Proposed investments are lower liquidity associated with unlisted investments. assessed individually. Overall investment targets are subject Dividends are determined taking into account historic and to periodic reviews and the investment portfolio is also DQWLFLSDWHGSURȴWVFDVKȵRZDQGȴQDQFLDOFRQGLWLRQ7KH Key areas of focus for Somers are wealth and fund UHYLHZHG WR PRQLWRU H[SRVXUH WR VSHFLȴF JHRJUDSKLHV Board will also consider net debt levels and debt service management, banking and asset origination with a economic sectors and asset classes. obligations of the Company and any other factors that the particular bias towards fund and asset management owing Board may deem relevant. All dividend payments will be to its annuity style income, lower capital requirements, Borrowing conditional on meeting the applicable restrictions on the less onerous albeit increasing regulatory requirements, Portfolio investments are generally funded with a mixture of payments of dividends under the Bermuda Companies Act. solid returns, the projected sector growth and the wider debt and shareholders’ funds in order to maximise returns group’s experience in this area. to shareholders whilst maintaining a strong capital base and, as a long term investor, the level of transactions within Somers will generally aim to achieve a control position our portfolio is relatively low. but is equally comfortable with a portfolio position if the SXUFKDVH SULFH RU LQYHVWPHQW LQVWUXPHQW LV VXɝFLHQWO\ Leverage increases the potential risk to shareholders and attractive. The Company aims to maximise value for recourse to external borrowings will only be undertaken shareholders by holding a reasonably concentrated if the Directors and the Investment Manager consider portfolio of investments and maintaining a prudent the prevailing interest rates favourable and that the level of gearing. These investments can be both in the terms and conditions attaching to such borrowings are unlisted and listed arena. Besides looking for ‘bolt-on’ acceptable, having regard to the investment objective opportunities, the Company hopes to extract synergistic and policy of the Company. The Company will also be EHQHȴWVIURPWKHLQYHVWHHFRPSDQLHVRQERWKFRVWVDQG indirectly exposed to borrowings to the extent that entities revenue as companies are encouraged to collaborate with within the investment portfolio are themselves leveraged. each other and share resources where appropriate. Borrowings will be drawn down in US Dollars, Sterling or any currency for which there is a corresponding asset Somers does not expect to be trading its core investments. within the Company’s portfolio. It aims to be supportive of its investee companies, maintain regular dialogue with the management and, where appropriate, provide additional capital to ensure that the companies can develop and grow. INVESTMENT MANAGEMENT TEAM 9

INVESTMENT MANAGEMENT TEAM

The Directors are responsible for the Company’s investment policy and have overall responsibility for the Company’s day to day activities. The Company has, however, entered into an Investment Management Agreement with ICM under which ICM provides investment management services to the Company including investment analysis, portfolio monitoring, UHVHDUFKDQGFRUSRUDWHȴQDQFH

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Ζ&0IRFXVHVRQLGHQWLI\LQJLQYHVWPHQWVDWYDOXDWLRQVWKDWGRQRWUHȵHFWWKHLUWUXHORQJWHUPYDOXH7KHLULQYHVWPHQWDSSURDFKLVWRKDYHDGHHSXQGHUVWDQGLQJRIWKHEXVLQHVV fundamentals of each investment and its environment versus its intrinsic value. ICM manages some $1.7bn directly and has indirect involvement in over $10.0bn in a range of PDQGDWHVΖ&0KDVVWD΍EDVHGLQHLJKWFRXQWULHV7KHLQYHVWPHQWWHDPVDUHOHGE\&KDUOHV-LOOLQJVDQG'XQFDQ6DYLOOHZKRDUHERWKGLUHFWRUVRIΖ&0

The Directors believe that ICM has performed consistently since their appointment by the Company. As such, it is the view of the Directors that it is in the best interests of the shareholders to continue with the current appointment of ICM under the terms agreed.

Alasdair Younie Sandra Pope Duncan Saville 0U

Charles Jillings Greg Reid 0U-LOOLQJVLVDGLUHFWRURIΖ&0DQGLVDTXDOLȴHGFKDUWHUHG 0U5HLGDFKDUWHUHGDFFRXQWDQWZDVIRUPHUO\WKH&KLHI DFFRXQWDQW ZLWK H[WHQVLYH H[SHULHQFH LQ FRUSRUDWH )LQDQFLDO2ɝFHURI%&%3ULRUWRMRLQLQJ%&%KHZDVWKH ȴQDQFHDQGDVVHWPDQDJHPHQW+HLVUHVSRQVLEOHIRUWKH Controller of a Bermuda based provider of accounting GD\WRGD\UXQQLQJRI8Ζ//LPLWHGDQG8WLOLFR(PHUJLQJ VHUYLFHVWRWKHIXQGLQGXVWU\0U5HLGKDVUHVSRQVLELOLW\ 0DUNHWV/LPLWHGDQGKDVRYHUWKLUW\\HDUVRIH[SHULHQFHLQ IRU ȴQDQFLDO RSHUDWLRQV DW WKH &RPSDQ\ DQG VXSSRUWV LQWHUQDWLRQDOȴQDQFLDOPDUNHWV0U-LOOLQJVZDVIRUPHUO\D WKH&RPSDQ\ȇVULVNDQGLQYHVWPHQWYDOXDWLRQSURFHVVHV QRQH[HFXWLYHGLUHFWRURI8WLOLFRΖQYHVWPHQW7UXVWSOFDQG 0U 5HLG LV D PHPEHU RI WKH ΖQVWLWXWH RI &KDUWHUHG 8WLOLFR(PHUJLQJ0DUNHWV/LPLWHGDQGLVDQH[SHULHQFHG Accountants in Ireland. QRQH[HFXWLYHGLUHFWRU+HLVDQRQH[HFXWLYHGLUHFWRURI 0HUULRQ&DSLWDO+ROGLQJV/LPLWHG:DYHUWRQΖQYHVWPHQW 0DQDJHPHQW /LPLWHG .H\7HFK /LPLWHG DQG 6WRFNGDOH 6HFXULWLHV/LPLWHG 10 SOMERS LIMITED

INVESTMENT MANAGER’S REPORT

Currency movements vs US Dollar Indices movements September 2014 to September 2015 Source Bloomberg September 2014 to September 2015 Source Bloomberg 105 130

100 120

95 110 90 100 85 90 80

75 80

Sep 2014 Nov 2014 Jan 2015 Mar 2015 May 2015 Jul 2015 Sep 2015 Sep 2014 Nov 2014 Jan 2015 Mar 2015 May 2015 Jul 2015 Sep 2015

Sterling Euro Japanese Yen Australian Dollar FTSE All-Share Index S&P 500 Index Euro STOXX 50 ASX Ltd

ICM was the Investment Manager of Somers throughout of the Company’s holdings in PCFG (equity and convertible by the consolidation of the PCFG assets. As at September the year under review. loan notes) for $24.2 million to BCB. Key investments were 30, 2015, BCB’s Tier 1 and total capital ratios were 21.1% the acquisition of 1,222,949 shares in West Hamilton for (2014: 25.0%) and 21.1% (2014: 23.2%) respectively, Somers reported a total loss of 4.4% for the twelve $19.4 million and £4.0 million in Ascot Lloyd to fund its exceeding the prescribed regulatory limits. months to September 30, 2015. As noted earlier in this acquisition of the assets of PFP. report, market volatility, which directly impacts a number BCB is valued by Somers by reference to its book value. As of our investments, continued to increase throughout 6RPHUVȇVKDUHVFRQWLQXHWRWUDGHDWDVLJQLȴFDQWGLVFRXQWWRLWV a result, the valuation of BCB reduced to $100.8 million 2015. Equity markets, in particular, were more volatile NAV. The share price as at September 30, 2015, was $13.00 (2014: $113.8 million) primarily due to the reduction in in 2015 than in previous years and their performance which is a discount of 26.7% to the NAV of $17.74. We would the unrealised value of the Bank’s investment portfolio. has been muted over the last 12 months. The S&P 500 hope that as Somers continues to generate growth from its has decreased by 2.6% since October 1, 2014, and over investments, the share price discount will narrow. This year represented a year of investment for BCB in both the same period the FTSE 100 Total Return Index has its employees and infrastructure. This culminated post decreased by 5.1%. Core Portfolio the year end in BCB completing the successful launch of The Company has a small number of investments which its new core banking system. This will allow the Bank to In addition to volatility in the equity markets there has DUHSULPDULO\IRFXVHGRQWKHȴQDQFLDOVHUYLFHVVHFWRUZLWK EURDGHQLWVSURGXFWR΍HULQJDQGEHFRPHPRUHFXVWRPHU EHHQDVLJQLȴFDQWLQFUHDVHLQWKHYRODWLOLW\LQFXUUHQFLHV 87.8% of the portfolio in this sector. The major exception centric enabling the Bank to compete for an increased 7KH JOREDO &HQWUDO %DQNV DUH DW GL΍HUHQW VWDJHV LQ WKH to this is the Company’s 57.1% holding in West Hamilton, a market share. economic cycle. The US is looking to start the tightening of Bermuda property investment company. Within geographic its monetary policy whilst the ECB and the Chinese Central allocations, Bermuda accounts for 60.3% of the portfolio Banks are under an increasing regulatory burden Bank continue to ease. The US Dollar has continued to (2014: 55.2%), the UK 37.3% (2014: 42.1%) and Ireland which has increased since the Global Financial Crisis. strengthen during the year. With a number of Somers’ 1.8% (2014: 2.1%). This brings with it an increase in the cost of dealing with investments based in the UK, the US Dollar’s appreciation added regulation and, in the case of BCB, a change in against Sterling over the last 12 months by 6.7% has As at September 30, 2015, the top six investments LWV EXVLQHVV PRGHO WR PDNH LW PRUH FDSLWDO HɝFLHQW LQ reduced Somers NAV by approximately $6.8 million. accounted for 95.1% of the portfolio versus 96.9% in the advance of the implementation of Basel III. As a result of prior year. this, Somers agreed to sell its entire holding (equity and Somers’ has had a mixed year with reduced earnings at convertible loan notes) in PCFG to BCB for a total of $24.2 its two largest investments, BCB and Waverton leading BCB is Somers’ largest investment and one of Bermuda’s million. Following this transaction BCB then exercised its WRUHGXFHGYDOXDWLRQVZKLFKKDYHEHHQSDUWLDOO\R΍VHWE\ four licensed banks. It accounts for 48.0% of the portfolio convertible loan notes and as at September 30, 2015, increased valuations at Ascot Lloyd and PCFG. Each of the at the year end (2014: 52.1%). was interested in approximately 75.5% of PCFG. This is an Company’s core investments is reviewed in more detail extremely important transaction for BCB. It reduces BCB’s later in the report. BCB produced strong results in 2015, albeit reduced reliance on its investment portfolio at a time that the bond IURP WKH SULRU \HDU ZLWK SURȴW RI PLOOLRQ PDUNHWVDUHYRODWLOHGLYHUVLȴHVLWVJHRJUDSKLFULVNHQDEOHV During the year to September 30, 2015, Somers realised $9.2 million), total customer deposits of $505.4 million %&%WREHFRPHPRUHFDSLWDOHɝFLHQWDQGRYHUWLPHPD\ $25.9 million from its investments and invested $27.3 (2014: $471.3 million) and total assets of $759.7 million SUHVHQW D SURȴWDEOH OHQGLQJ RSSRUWXQLW\ IRU WKH %DQN million. The main realisation during the year was the sale (2014: $592.6 million). Total assets were boosted in 2015 PCFG reported strong results for the six months ended INVESTMENT MANAGER’S REPORT 11

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/LNHDQXPEHURILQYHVWPHQWPDQDJHUV0HUULRQKDVEHHQ ZKHUH KH ZDV LQVWUXPHQWDO LQ WUDQVIRUPLQJ ERWK RZQHUEHLQJDQLQYHVWPHQWFRPSDQ\UDWKHUWKDQDEDQN QHJDWLYHO\LPSDFWHGE\WKHSHUIRUPDQFHRIWKHPDUNHWVLQ LQYHVWPHQWSHUIRUPDQFHDQGSURȴWDELOLW\ ZKHUHWKHLQYHVWPHQWZDVQRWFDSLWDOHɝFLHQW DQGLQSDUWLFXODUWKHȴ[HGLQFRPHPDUNHWV+RZHYHU WKHDGGLWLRQRIQHZHPSOR\HHVKDVSRVLWLRQHG0HUULRQ LVOLNHO\WREULQJDIRFXVRQJURZLQJ:DYHUWRQȇVFRUH 2Q'HFHPEHU:HVW+DPLOWRQUHOHDVHGLWVUHVXOWV IRUDSURȴWDEOHZKLFKVKRXOGKDYHDSRVLWLYHLPSDFW SULYDWHFOLHQWEXVLQHVVDVZHOODVORRNLQJWRRWKHUDUHDV IRU WKH \HDU HQGHG 6HSWHPEHU 7KH FRPSDQ\ RQ6RPHUVȇKROGLQJ 12 SOMERS LIMITED

INVESTMENT MANAGER’S REPORT (CONTINUED)

Stockdale, previously Westhouse, is a London based million together with a small decrease in shareholders’ corporate and institutional stockbroking group in which equity to $209.2 million from $215.1 million. During the Somers has an 84.6% interest. year the Company bought back 35,828 shares at an average price of $13.77 costing $0.5 million. Stockdale’s trading performance continues to show improvement and with the reduction of operating costs Debt it is anticipated that StockdaleZLOOEHSURȴWDEOHLQWKH Bank debt totalled $6.0 million as at September 30, 2015 FXUUHQWȴQDQFLDO\HDUStockdale is improving the quality (2014: $Nil). The facility expires on July 1, 2016. of its corporate clients which is enabling it to complete better quality transactions and, therefore, increased Revenue Returns fees. As at September 30, 2015, Stockdale had 60 The majority of Somers’ returns are capital in nature; corporate clients with an aggregate market capitalisation however, we also monitor Somers on a revenue return of £4.0 billion and generating recurring revenue of VSHFLȴFEDVLV5HYHQXHUHWXUQV GHDOLQJZLWKLWHPVRID approximately £2.2 million. During the year Stockdale revenue nature) include, but are not limited to, dividend raised £53.3 million for its corporate clients (2014 : LQFRPHRSHUDWLQJH[SHQVHVȴQDQFHFRVWVDQGWD[DWLRQ £43.8 million). LQVRIDU DV WKH\ DUH QRW DOORFDWHG WR FDSLWDO 5HYHQXH income was $2.0 million compared to $7.4 million last For the year ended September 30, 2015, Stockdale year. The reduction was driven primarily by a decrease reported revenue of £10.2 million and an operating loss in dividends received by the Company from BCB. of £1.0 million. Somers’ investment in Stockdale as at 0DQDJHPHQWIHHVZHUHVLJQLȴFDQWO\ORZHUDVDUHVXOWRID September 30, 2015, is valued at £0.9 million. performance fee not being earned in 2015.

Post the year end, Stockdale completed a restructuring The Company reported a loss for the year of $4.1 millionilli n WR UHGXFH RSHUDWLQJ FRVWV LQ RUGHU WR GULYH SURȴWDELOLW\ SURȴW RI PLOOLRQ 7KH UHVXOWDQWHVXOWWDDQWW OR ORVVVV S SHUHU together with an equity recapitalisation. It is anticipated VKDUHZDV7KH&RPSDQ\SDLGDȴQDOGLYLGHQGRIQ\ SDLG DDȴQDO GLYLGGHQG RII that following the approval of a management incentive $0.24 per share bringingg tthehe ttotalottal ddividendividdennd foforor ththehe yeyeareara scheme that Somers’ holding will be reduced to 75.0%. to $0.42 per share. Should Stockdale DFKLHYH LWV SURȴWDELOLW\ KXUGOHV RYHU the next 3 years, employees may increase their interest in Stockdale to 45.0%, reducing Somers’ interest to 55.0% DWWKDWWLPH7KLVUHVWUXFWXULQJKDVVLJQLȴFDQWO\UHGXFHG Stockdale’s cost base, and given the improved corporate FOLHQWEDVHWKHSURVSHFWVIRUDSURȴWDEOHFRPSDQ\DUH enhanced. However, as with other Somers’ investments, the performance of the UK capital markets will be key to Stockdale’s trading performance in 2016.

Other Investments Somers has a number of other smaller investments which are a mixture of both unlisted and listed holdings. The total value of these investments as at September 30, 2015, was $10.4 million. These investments are not deemed to be core investments and it is likely that Somers will hold these investments for a shorter time period than the core investments set out above.

Gearing The Company has a very low level of gearing which as at September 30, 2015, stood at 2.9% (2014: 1.6%). This UHȵHFWV D VPDOO LQFUHDVH LQ GHEW RI PLOOLRQ WR SUMMARY OF CORE INVESTMENTS 13

SUMMARY OF CORE INVESTMENTS

Details of our core investments are provided below. Details of the subsidiary companies are provided in note 4 to the accounts.

BERMUDA COMMERCIAL BANK LIMITED (“BCB” OR THE “BANK”) www.bcb.bm

Peter Horton, CEO – joined BCB in October 2013 having BCB was formed by an Act of Parliament in February For the year ended September 30, 2015, BCB reported previously been &KLHI ([HFXWLYH 2ɝFHU of the Bank of 1969 when it operated under the management of SURȴWRIPLOOLRQ PLOOLRQ WRWDOFXVWRPHU Maldives. He has previously held senior posts at Barclays Barclays Bank plc. GHSRVLWVRIPLOOLRQ PLOOLRQ WRWDO Bank in Kenya, LEA Group in South Africa and First DVVHWV RI PLOOLRQ PLOOLRQ WRWDO Caribbean International Bank in the Bahamas. BCB is one of four licensed banks in Bermuda but is assets were boosted in 2015 by the consolidation of the the only one dedicated to the needs of commercial, 3&)*DVVHWV DQGVKDUHKROGHUIXQGVRIPLOOLRQ Lasantha Thennakoon, CFO – joined BCB in May 2014. Prior FRUSRUDWHDQGKLJKQHWZRUWKFOLHQWV%&%R΍HUVDIXOO PLOOLRQ $VDW6HSWHPEHU%&%ȇV WRMRLQLQJ%&%KHZRUNHGDVDVHQLRUȴQDQFHSURIHVVLRQDO array of banking solutions, including private banking 7LHUDQGWRWDOFDSLWDOUDWLRVZHUH in the banking sector in the APAC region including as and wealth management, business banking, corporate DQG UHVSHFWLYHO\ &KLHI)LQDQFLDO2ɝFHU of Fiji Development Bank and the administration, global custody and brokerage, trust Bank of Maldives. administration and, through the recent acquisition of a KROGLQJLQ3&)*DVVHWȴQDQFLQJ 14 SOMERS LIMITED

WAVERTON INVESTMENT MANAGEMENT LIMITED (“WAVERTON”) www.waverton.co.uk

Andrew Fleming, CEO Ȃ IRUPHUO\ &KLHI ([HFXWLYH 2ɝFHU :DYHUWRQ ZDV IRXQGHG LQ DQG LQ $XJXVW PDQDJHU WR QLQH 'XEOLQ GRPLFLOHG VSHFLDOLVW IXQGV ΖW of Cumulus Group, and from 2005 to 2013 he was Chief 6RPHUV LQ FRQMXQFWLRQ ZLWK :DYHUWRQȇV PDQDJHPHQW KDVHPSOR\HHVLQFOXGLQJSRUWIROLRPDQDJHUVDQG ([HFXWLYH2ɝFHUDQG&KLHIΖQYHVWPHQW2ɝFHURI$HJRQ DQGVWD΍DFTXLUHG:DYHUWRQIURP&UHGLW6XLVVH$*IRUD DVVLVWDQWSRUWIROLRPDQDJHUV $VVHW0DQDJHPHQW WRWDOFDVKFRQVLGHUDWLRQRIePLOOLRQ PLOOLRQ 6RPHUVRZQVRI:DYHUWRQZLWKPDQDJHPHQWDQG :DYHUWRQKDG$X0RIeELOOLRQDVDW6HSWHPEHU David Welch, FD – joined Waverton in 1997 after four VWD΍RZQLQJWKHEDODQFH eELOOLRQ )RUWKH\HDUHQGHG6HSWHPEHU \HDUVLQWUHDVXU\RSHUDWLRQVIRU0DQ*URXS+HEHFDPH :DYHUWRQ HDUQHG UHYHQXH RI e PLOOLRQ )LQDQFH'LUHFWRULQ-XO\ :DYHUWRQ LV D /RQGRQ EDVHG VSHFLDOLVW LQYHVWPHQW ePLOOLRQ (%Ζ7'$RIePLOOLRQ e PDQDJHU ZKLFK IRFXVHV RQ GLVFUHWLRQDU\ SRUWIROLR PLOOLRQ DQG RSHUDWLQJ SURȴW EHIRUH WD[ RI e PLOOLRQ PDQDJHPHQWIRUSULYDWHFOLHQWVFKDULWLHVDQGLQVWLWXWLRQV e PLOOLRQ )ROORZLQJ D PDWHULDO UHGXFWLRQ LQ DV ZHOO DV R΍HULQJ D VXLWH RI LQKRXVH PDQDJHG GHEW:DYHUWRQSDLGDGLYLGHQGGXULQJWKH\HDURIZKLFK LQYHVWPHQW IXQGV :DYHUWRQ LV DOVR WKH LQYHVWPHQW 6RPHUVȇVKDUHZDVePLOOLRQ SUMMARY OF CORE INVESTMENTS 15

ASCOT LLOYD HOLDINGS LIMITED (“ASCOT LLOYD”) www.ascotlloyd.co.uk

Richard Dunbabin, CEOȂDFTXLUHGWKHPDMRULW\LQWHUHVWLQ $VFRW /OR\G GDWHV EDFN WR WKH V EXW IROORZLQJ D )RUWKHQLQHPRQWKVHQGHG6HSWHPEHU$VFRW $VFRW/OR\GLQ3ULRUWRMRLQLQJ$VFRW/OR\GKHZDV corporate transaction in 2003 was renamed Ascot Lloyd /OR\GUHSRUWHGXQDXGLWHGUHYHQXHRIePLOOLRQJURVV DFRQVXOWDQWZLWK0DUVK 0F/HQQDQȇVH%XVLQHVVDQG )LQDQFLDO 6HUYLFHV /LPLWHG 6RPHUV LV LQWHUHVWHG LQ e SURȴWRIePLOOLRQDQG(%Ζ7'$RIePLOOLRQ5HFXUULQJ SURGXFWGLVWULEXWLRQGLYLVLRQ PLOOLRQ FRQYHUWLEOH ORDQ QRWHV DQG e PLOOLRQ RI LQFRPHLVQRZePLOOLRQDQG$X$DUHeELOOLRQ ORDQV RI ZKLFK e PLOOLRQ ZDV GUDZQ GRZQ DV DW Pat O’Hara, Managing DirectorȂKDVEHHQLQYROYHGLQWKH 6HSWHPEHU 2Q D IXOO\ GLOXWHG EDVLV 6RPHUV LQGHSHQGHQWȴQDQFLDODGYLVRU\EXVLQHVVVLQFHZKHQ ZRXOGEHLQWHUHVWHGLQRI$VFRW/OR\G KHIRXQGHGWKHΖ)$ȴUP3URIHVVLRQDOΖQWHUPHGLDU\6HUYLFHV 3ULRUWRWKLVKHZDVDFRQVXOWDQWZLWK6XQ/LIH$VVXUDQFH $VFRW /OR\G LV DQ Ζ)$ ZLWK D QXPEHU RI RɝFHV DFURVV WKH 8.ΖWSURYLGHVȴQDQFLDOSODQQLQJVHUYLFHVIRUSHUVRQDODQG corporate clients incorporating the use of protection products, LQYHVWPHQWSURGXFWVSHQVLRQSODQQLQJDQGWD[SODQQLQJ 16 SOMERS LIMITED

WEST HAMILTON HOLDINGS LIMITED (“WEST HAMILTON”)

Harrichand Sukdeo, CFO ȂMRLQHG:HVW+DPLOWRQ/LPLWHGDV West Hamilton is a Bermuda Stock Exchange listed of interest in the residential development are strong and &KLHI)LQDQFLDO2ɝFHULQ3ULRUWRWKDWKHPDQDJHG property investment company with property assets in the VKRXOGEHDSRVLWLYHFRQWULEXWRUWRHDUQLQJVDQGYDOXHLQ VXEVWDQWLDOFRQVWUXFWLRQFRQWUDFWVLQWKHSURSHUW\PDUNHWIRU west of Hamilton, Bermuda and in which Somers own DQGEH\RQG WHQ\HDUV+HKDVPRUHWKDQWZHQW\\HDUVRIH[SHULHQFHLQ VKDUHVRU WKHȴQDQFLDOVHFWRUZLWKLQWKHLQVXUDQFHPDUNHW 7KH FRPSDQ\ HDUQHG JURVV RSHUDWLQJ LQFRPH RI :HVW +DPLOWRQȇV DVVHWV LQFOXGH D FRPPHUFLDO EXLOGLQJ PLOOLRQ PLOOLRQ LQWKH\HDUHQGHG6HSWHPEHU called the Belvedere Building, a 309 space car parking 30, 2015, with the increase due to a new tenant occupying IDFLOLW\ DQG D VRRQ WR EH FRPSOHWHG QLQH UHVLGHQWLDO DODUJHSRUWLRQRIRɝFHVSDFHWKDWZDVYDFDQWLQ DSDUWPHQW EXLOGLQJ 7KH %HOYHGHUH %XLOGLQJ LV :HVW+DPLOWRQUHSRUWHGQHWLQFRPHIRUWKH\HDURI DSSUR[LPDWHO\ OHW DQG WKH FDU SDUNLQJ IDFLOLW\ LV PLOOLRQ PLOOLRQ DQGWRWDODVVHWVDPRXQWHGWR RFFXSLHGZLWKDVLJQLȴFDQWZDLWLQJOLVWΖQGLFDWLRQV PLOOLRQ PLOOLRQ

SUMMARY OF CORE INVESTMENTS 17

MERRION CAPITAL HOLDINGS LIMITED (“MERRION”) www.merrion-capital.com

Patrick O’Neill, CEO – was previously employed as a fund 0HUULRQ ZDV HVWDEOLVKHG LQ DV DQ LQGHSHQGHQW 0HUULRQ KDV DSSUR[LPDWHO\ Ȝ PLOOLRQ RI $X0 )RU manager for the Merrion Discovery Fund and a partner in ȴQDQFLDOVHUYLFHVȴUPSURYLGLQJVWRFNEURNLQJFRUSRUDWH WKH QLQH PRQWKV HQGHG 6HSWHPEHU 0HUULRQ )LUVW1HZ

Ivan Fox, Non-Executive ChairmanȂKDVRYHUWZHQW\ȴYH\HDUV 0HUULRQ KDV D QXPEHU RI UHYHQXH VWUHDPV LQFOXGLQJ of experience in the investment industry having held senior Private Clients, Retail Asset Management, Fixed Income, positions with the Bank of Ireland Asset Management, Irish Corporate Finance and Merrion Investment Management /LIHΖQYHVWPHQW0DQDJHUVDQG6WDQGDUG/LIH Ȋ0Ζ0ȋ %HWZHHQ0Ζ0DQGWKHSULYDWHFOLHQWEXVLQHVV 18 SOMERS LIMITED

SUMMARY OF CORE INVESTMENTS (CONTINUED)

STOCKDALE SECURITIES LIMITED (“STOCKDALE”) www.stockdalesecurities.com

Mark Brown, Executive Chairman Ȃ MRLQHG 6WRFNGDOH DV Stockdale was formed in 2004 with the demerger of 6WRFNGDOH LV D FRUSRUDWH DQG LQVWLWXWLRQDO VWRFNEURNLQJ ([HFXWLYH&KDLUPDQLQ1RYHPEHU+HZDVSUHYLRXVO\ %URZQ6KLSOH\ȇVFRUSRUDWHȴQDQFHDQGEURNLQJEXVLQHVV group with a focus on sectors such as growth companies &KLHI ([HFXWLYH 2ɝFHU RI &ROOLQV 6WHZDUW +DZNSRLQW DQG LQWR D QHZ FRPSDQ\ SDUW RZQHG E\ .UHGLHWEDQN DQGLQYHVWPHQWIXQGVΖWVWDUJHWHGPDUNHWLVWKHVPDOODQG SULRUWRWKDWZRUNHGDVWKH*OREDO+HDGRI5HVHDUFKIRU$%1 6$ /X[HPERXUJHRLVH DQG SDUW E\ PDQDJHPHQW ΖW PLGPDUNHWFDSLWDOLVHGFRPSDQLHVOLVWHGLQ/RQGRQDQGLW $052DQG+6%&DQGDV&KLHI([HFXWLYH2ɝFHURI$%1ȇV8. was renamed Westhouse Holdings plc in 2010 and generates its revenue through equity research, sales, trading HTXLWLHVEXVLQHVV VXEVHTXHQWO\ DFTXLUHG $UEXWKQRW 6HFXULWLHV LQ DQGFRUSRUDWHȴQDQFHDQGEURNLQJUHYHQXHV)RUWKH\HDU On January 4, 2016, Westhouse was renamed Stockdale HQGHG6HSWHPEHU6WRFNGDOHUHSRUWHGUHYHQXHRI Andrew Proctor, CFOȂMRLQHG6WRFNGDOHLQ-XO\3ULRUWR 6HFXULWLHV/LPLWHG$VDW6HSWHPEHU6RPHUVZDV ePLOOLRQDQGDQRSHUDWLQJORVVRIePLOOLRQ WKDWKHZDV&KLHI)LQDQFLDO2ɝFHUDW16LQJHUDQGVHUYHGLQ LQWHUHVWHGLQRI6WRFNGDOH DVLPLODUUROHLQDQLQWHUQDWLRQDO&)'KRXVHDQGKDVEDQNLQJ DQGFDSLWDOPDUNHWVH[SHULHQFHLQ6LQJDSRUHDQG6RXWK$IULFD BOARD RESPONSIBILITIES AND GOVERNANCE 199

BOARD RESPONSIBILITIES AND GOVERNANCE

Details of how Somers is governed and managed capital structure, setting long term objectives and strategy, request any agenda item to be added that they consider are provided in this section. Roles, organisation and assessing and managing risk, reviewing investment appropriate for Board discussion. In addition, each composition of the Somers’ Board are explained along performance, monitoring the net borrowing position and Director is required to inform the Board of any potential with information on risk management and organisational consideration of the appropriate use of gearing, undertaking RU DFWXDO FRQȵLFW RI LQWHUHVW SULRU WR %RDUG GLVFXVVLRQ oversight. The Company endeavours to comply with audit committee responsibilities, reviewing Directors’ The Directors also have access where necessary in the HVWDEOLVKHG EHVW SUDFWLFH LQ WKH ȴHOG RI FRUSRUDWH remuneration, undertaking nomination responsibilities and furtherance of their duties to independent professional governance and the Company’s processes, controls and assessing the Investment Manager on an ongoing basis. The advice at the expense of the Company. governance framework are being continually reviewed Board also seeks to ensure that shareholders are provided and updated towards this goal. ZLWKVXɝFLHQWLQIRUPDWLRQLQRUGHUWRXQGHUVWDQGWKHULVN ΖQ WKH ȴQDQFLDO \HDU HQGHG 6HSWHPEHU WKH reward balance to which they are exposed by holding the Board met each quarter to review the activities of the Role of the Board &RPSDQ\ȇVVKDUHVWKURXJKWKHȴQDQFLDOGHWDLOVJLYHQLQWKH Company for that period and held a meeting devoted The Company’s Board of Directors is responsible for overall DQQXDODQGTXDUWHUO\ȴQDQFLDOUHSRUWGLVFORVXUHV solely to strategic issues. Additional meetings were stewardship of the Company, including corporate strategy, held at short notice to consider limited objectives. All corporate governance, risk and controls assessment, overall Matters delegated by the Board to ICM include: Directors received notice of the meetings, the agenda and investment policy and gearing limits. implementation of the Board approved strategy, day to supporting documents, and were able to comment on the day operation of the business including management of matters to be raised at the proposed meeting. In addition The Directors have a duty to promote the success the internal control framework, and the formulation and to the formal quarterly, strategy, and ad-hoc meetings, the of the Company taking into consideration the likely execution of risk management policies and procedures. Board also receives detailed updates from the Investment consequences of any decision in the long term; the ICM periodically report to the Board on risk management, Manager via update calls. need to foster the Company’s business relationships ȴQDQFLDO DQG RSHUDWLRQDO SHUIRUPDQFH DQG SURJUHVV LQ with its Investment Manager and advisers; the impact delivering the Company’s strategic objectives. Additionally, Board Changes of the Company’s operations on the community and the the investment management division of ICM report on the Somers seeks to maintain the right sized board environment; the desirability of the Company maintaining acquisition, management and disposal of investments. commensurate with the business activity of the Company. a reputation for high standards of business conduct; and The current Board has a breadth of experience relevant the need to act fairly to all shareholders of the Company. The Directors monitor performance by regularly to the Company and a balance of skills, experience and The Directors are responsible for both the proper conduct considering a number of performance indicators to age. Applicants are assessed on their range of skills, RIWKH&RPSDQ\ȇVD΍DLUVDQGIRUSURPRWLQJWKHVXFFHVVRI assess the Company’s success in achieving its investment expertise and industry knowledge, and business and WKH&RPSDQ\E\GLUHFWLQJDQGVXSHUYLVLQJLWVD΍DLUVZLWKLQ objectives such as share price and NAV performance, net other experience. DIUDPHZRUNRIH΍HFWLYHFRQWUROVZKLFKHQDEOHULVNWREH FDVKȵRZ52(UHSRUWVDWWKH&RPSDQ\DQGXQGHUO\LQJ assessed and managed. In addition, the Directors are investment levels, risk management and adherence to During the year, Somers added Mr. Duncan Saville to the responsible for ensuring that the Company’s policies and investment guidelines issues. Additionally, the Directors Board of the Company. Mr. Saville is a chartered accountant operations are in the best interests of the Company as a receive regular updates on the performance of the with over thirty years of experience in the securities industry. whole and that the interests of creditors and suppliers to Company’s individual investments. He is an experienced non-executive director. Mr. Saville is the Company are properly considered. not deemed to be independent as he is a substantial Board Meetings EHQHȴFLDO VKDUHKROGHU LQ 6RPHUV DQG WKH RZQHU DQG D A schedule of matters reserved for decision by the Board The Board meets at least four times a year and between director of ICM, the Company’s Investment Manager. and detailing the responsibilities of the Board has been these scheduled meetings there is regular contact between established. The main responsibilities include setting the Directors, the Investment Manager and the Company ΖQ 'HFHPEHU 0U 0LFKDHO &ROOLHU UHWLUHG IURP Company’s objectives, policies and standards, considering Secretary, including strategy meetings and Board update the Board of Somers. Mr. Collier was a member of the any major acquisitions or disposals of portfolio companies, calls. The Directors are kept fully informed of investment %RDUGVLQFHWKH&RPSDQ\ȇVLQFHSWLRQLQDQGPDGHD ensuring that the Company’s obligations to shareholders DQGȴQDQFLDOFRQWUROVDQGRWKHUPDWWHUVWKDWDUHUHOHYDQW valuable contribution over that period. and others are understood and complied with, approving to the business of the Company and should be brought accounting policies and dividend policy, managing the to the attention of the Directors. The Directors may 20 SSOMERSOMMERS LIMITEDLIMLLIIMITETET D

BOARD RESPONSIBILITIES AND GOVERNANCE (CONTINUED)

Board Committees that the Company has adequate resources to continue in 7KH &KDLUPDQ DQG WKH ΖQYHVWPHQW 0DQDJHU ZLOO EH Due to the nature of the Company being an externally operational existence for the foreseeable future, being DYDLODEOHGXULQJHDFK$QQXDO*HQHUDO0HHWLQJWRDQVZHU managed investment company with no executive WDNHQ DV PRQWKV DIWHU WKH VLJQLQJ RI WKH VWDWHPHQW DQ\TXHVWLRQVWKDWDWWHQGLQJVKDUHKROGHUVPD\KDYH employees, the roles typically delegated to sub committees RI ȴQDQFLDO SRVLWLRQ 7KH 'LUHFWRUV FRQVLGHUHG WKH DUHIXOȴOOHGE\WKH%RDUGDVDZKROH+RZHYHUWKLVVWDWXV revenue forecast for the forthcoming year, expected Valuation of Unlisted Investments LVUHJXODUO\UHYLHZHGE\WKH%RDUGDQGDFWLRQZLOOEHWDNHQ FDVKȵRZVIURPLQYHVWPHQWVIXWXUHGLYLGHQGSD\PHQWV The majority of Somers’ investment portfolio consists of WRUHPHG\DQ\VLJQLȴFDQWIDLOLQJVRUZHDNQHVVHVLGHQWLȴHG DQGVLJQLȴFDQWDUHDVRISRVVLEOHOLTXLGLW\ULVNDQGKDYH XQOLVWHGLQYHVWPHQWV7KHYDOXDWLRQRIWKHVHLQYHVWPHQWV 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used are those generally VHUYLFH SURYLGHUV UHYLHZLQJ WKH ȴQDQFLDO VWDWHPHQWV WKDW%RDUGSURFHGXUHVDUHIROORZHGDQGWKDWDSSOLFDEOH XVHG E\ PDUNHW SDUWLFLSDQWV 9DOXDWLRQV DUH FRPSOLDQW of the Company, monitoring the independence of the UXOHV DQG UHJXODWLRQV DUH FRPSOLHG ZLWK 7KH &RPSDQ\ ZLWK Ζ)56 IDLU YDOXH JXLGHOLQHV DQG JXLGHOLQHV LVVXHG H[WHUQDODXGLWRUDQGWKHH΍HFWLYHQHVVRIWKHDXGLWSURFHVV 6HFUHWDU\ LV DOVR UHVSRQVLEOH WR WKH %RDUG IRU HQVXULQJ E\ WKH ΖQWHUQDWLRQDO 3ULYDWH (TXLW\ DQG 9HQWXUH &DSLWDO DQG UHYLHZLQJ WKH ȴQGLQJV RI WKH H[WHUQDO DXGLWRU 7KH timely delivery of information and reports and that valuation board which set out recommended practice %RDUGFRQVLGHUVWKDWJLYHQLWVVL]H ȴYHGLUHFWRUV WKHVL]H WKH VWDWXWRU\ REOLJDWLRQV RI WKH &RPSDQ\ DUH PHW 7KH IRU IDLU YDOXLQJ XQOLVWHG LQYHVWPHQWV ZLWKLQ WKH Ζ)56 of the Company and the low number of transactions, it &RPSDQ\6HFUHWDU\LVUHVSRQVLEOHIRUDGYLVLQJWKH%RDUG IUDPHZRUN7KHYDOXDWLRQRIXQOLVWHGLQYHVWPHQWVUHTXLUHV would not currently be appropriate to establish a separate RQDOOJRYHUQDQFHPDWWHUV WKH H[HUFLVH RI MXGJPHQW DQG HYHU\ H΍RUW LV PDGH WR DXGLWFRPPLWWHH ensure that this judgment is applied objectively and is Shareholder Relations QRWXVHGWRRYHUVWDWHRUXQGHUVWDWHWKHYDOXDWLRQUHVXOW Remuneration Committee Shareholder communications are a high priority for the Valuations of the investment portfolio are performed at 7KH%RDUGDVDZKROHIXOȴOOVWKHIXQFWLRQRIDUHPXQHUDWLRQ %RDUGDQGHYHU\H΍RUWLVPDGHWRHQDEOHVKDUHKROGHUV HDFKTXDUWHUHQGDQGPRUHIUHTXHQWO\DVUHTXLUHG committee in relation to the setting and periodic review WRXQGHUVWDQGWKHVWUDWHJ\GHYHORSPHQWVDQGȴQDQFLDO RIWKHIHHVRIWKH'LUHFWRUVDQGWKH&KDLUPDQ7KH%RDUG SHUIRUPDQFHRIWKH&RPSDQ\$ȴQDQFLDODQQRXQFHPHQW 3OHDVHUHIHUWRQRWHRIWKHDXGLWHGȴQDQFLDOVWDWHPHQWV FRQVLGHUVWKDWJLYHQLWVVL]HDQGWKHVL]HDQGQDWXUHRI detailing the performance of the Company is released to for more details on Somers’ unlisted investments and the the Company, it would not be appropriate to establish a 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basis as they have a reasonable expectation PRINCIPAL RISKS AND UNCERTAINTIES 21

PRINCIPAL RISKS AND UNCERTAINTIES

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ȏ(΍HFWLYHDQGHɝFLHQWFRQWLQXLW\RIRSHUDWLRQV 3OHDVHUHIHUWRQRWHRIWKHDXGLWHGȴQDQFLDOVWDWHPHQWV • Safeguarding of our assets; IRUDPRUHGHWDLOHGGLVFXVVLRQRIWKHDERYHSULQFLSDOULVNV • Preservation and enhancement of our reputation; DQGXQFHUWDLQWLHV ȏ5HOLDELOLW\RILQWHUQDODQGH[WHUQDOUHSRUWLQJ ȏ&RPSOLDQFHZLWKDSSOLFDEOHODZVDQGUHJXODWLRQV Business Operational Risk Business operational risk refers to the risk of loss that may 7KH %RDUG FRQVLGHUV WKDW WKH &RPSDQ\ȇV ULVN SURȴOH arise from running an investment holding company and, KDV UHPDLQHG VWDEOH GXULQJ WKH \HDU ΖQ PDNLQJ WKLV in essence, encompasses everything except investment determination, the Board has considered the continuing ULVN ΖW FDSWXUHV WKH ULVNV DULVLQJ IURP LQDGHTXDWH RU development of internal controls, risk processes and failed internal processes, people and systems, and from WKHFRPSRVLWLRQRIWKHLQYHVWPHQWSRUWIROLR7KH%RDUG H[WHUQDO HYHQWV 7KH ZD\V LQ ZKLFK ULVNV PD\ PDQLIHVW DOVR FRQVLGHUHG WKH PDFURHFRQRPLF HQYLURQPHQW DQG WKHPVHOYHVLQFOXGH IDLOXUHLQH[HFXWLRQGHOLYHU\RU HYROYLQJULVNVVXFKDVF\EHUVHFXULW\ process (such as data entry errors); (2) internal fraud (such as insider trading); (3) external fraud (such as For risk management purposes, the Company categorises forgery); (4) employment practices and workplace ULVN ZLWKLQ WZR EURDG FDWHJRULHVȃLQYHVWPHQW ULVN DQG VDIHW\ SUREOHPV ZLWK FOLHQWV SURGXFWV RU EXVLQHVV EXVLQHVVRSHUDWLRQDOULVN SUDFWLFHV VXFKDVIDLOLQJWRSURWHFWFRQȴGHQWLDOFXVWRPHU LQIRUPDWLRQ EXVLQHVVGLVUXSWLRQDQGV\VWHPIDLOXUHV Investment Risk (such as telecommunications outages); and (7) damage ΖQYHVWPHQWULVNLVLQDEVROXWHWHUPVWKHULVNRILQFXUULQJ WR SK\VLFDO DVVHWV VXFK DV IURP QDWXUDO GLVDVWHUV 7KH any loss in the portfolio in pursuit of investment return, or, FRQVHTXHQFHVRIULVNVPD\EHȴQDQFLDOUHSXWDWLRQDORU in relative terms, the risk of incurring losses greater than, or UHJXODWRU\ %XVLQHVV RSHUDWLRQDO ULVNV GR QRW W\SLFDOO\ RIHDUQLQJJDLQVOHVVWKDQWKRVHRIDEHQFKPDUNLQGH[RU generate positive returns; therefore, the management DOWHUQDWLYHLQYHVWPHQW of these risks entails minimising them to the extent SUDFWLFDEOHDQGVXEMHFWWRUHDVRQDEOHFRVWV 7KH&RPSDQ\DQGLWVLQYHVWPHQWVDUHPDWHULDOO\D΍HFWHG E\DYDULHW\RIULVNVDQGXQFHUWDLQWLHVLQWKHJOREDOȴQDQFLDO Operational risks arise from all of the Company’s activities PDUNHWV DQG HFRQRPLF FRQGLWLRQV WKURXJKRXW WKH ZRUOG DQG WKH &RPSDQ\ȇV REMHFWLYH LV WR PDQDJH RSHUDWLRQDO 7KHVHULVNVDQGXQFHUWDLQWLHVLQFOXGHEXWDUHQRWOLPLWHGWR ULVNVRDVWREDODQFHWKHOLPLWLQJRIȴQDQFLDOORVVHVDQG interest rates, currency, investment prices, credit, liquidity, damage to its reputation while achieving its investment LQYHVWPHQW PDQDJHUV DQG YDOXDWLRQV 7KHVH IDFWRUV DUH REMHFWLYHRIJHQHUDWLQJUHWXUQVWRLQYHVWRUV RXWVLGHWKH&RPSDQ\ȇVFRQWURODQGPD\D΍HFWWKHOHYHODQG YRODWLOLW\ RI VHFXULWLHV SULFHV WKH DPRXQW RI GLVWULEXWLRQV received and the liquidity and value of investments in WKH SRUWIROLR 7KH &RPSDQ\ PD\ EH XQDEOH WR PLWLJDWH 22 SOMERS LIMITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION 23

CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at September 30, 2015 (expressed in United States Dollars)

Assets 2015 2014 Cash and cash equivalents (Note 15) $ 1,108,676 $ 216,418 Other assets (Note 7) 34,682 205,165 Interest receivable (Note 15) 520,134 86,003 Loans and receivables (Note 6, 15) 4,461,285 4,787,759 Financial investments (Note 3, 15) 209,864,255 218,284,392 Total assets 215,989,032 223,579,737

Liabilities Interest payable (Note 15) – 25,890 Other liabilities (Note 8, 15) 813,958 4,943,241 Interest bearing loans and borrowings (Note 9, 15) 6,000,000 3,500,000 Total liabilities 6,813,958 8,469,131

Net assets $ 209,175,074 $ 215,110,606

Equity Capital stock (Note 10) $ 1,179 $ 1,130 Contributed surplus (Note 10) 162,674,966 155,685,600 Treasury shares (Note 10) – (143,580) Accumulated other comprehensive (loss) income (3,838,932) 457,791 Retained earnings 50,337,861 59,109,665 Total equity $ 209,175,074 $ 215,110,606

See accompanying notes.

Signed on behalf of the Board:

Warren McLeland David Morgan Chairman Director 24 SOMERS LIMITED

CONSOLIDATED STATEMENT OF INCOME For the year ended September 30, 2015 (expressed in United States Dollars)

Income 2015 2014 Interest income (Note 13, 15) $ 1,285,818 $ 2,064,080 Interest expense (Note 15) (204,322) (1,369,890) Net interest income 1,081,496 694,190

Dividend income (Note 15) 2,587,780 7,874,758 (Losses) gains on investments (Note 14, 15) (3,129,227) 28,362,934 Other income – 261,436 Net foreign exchange losses (2,675,088) (519,915) ΖPSDLUPHQWORVVHVRQDYDLODEOHIRUVDOHȴQDQFLDOLQYHVWPHQWV 1RWH Ȃ Total income (2,135,039) 35,714,482

Expenses Investment management fees (Note 15) 534,783 2,215,939 Legal and professional fees (Note 15) 659,083 563,181 Audit and accounting fees 327,334 216,364 Directors’ fees (Note 15) 67,333 53,000 General and administrative expenses (Note 15) 387,923 484,293 Total expenses 1,976,456 3,532,777

(Loss) income before tax (4,111,495) 32,181,705 Income tax expense (19,203) (9,170) Net (loss) income $ (4,130,698) $ 32,172,535

See accompanying notes. CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 25

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the year ended September 30, 2015 (expressed in United States Dollars)

2015 2014 Net (loss) income for the year $ (4,130,698) $ 32,172,535

Other comprehensive loss ([FKDQJHGL΍HUHQFHVRQWUDQVODWLRQRIIRUHLJQRSHUDWLRQV 1HW ORVV JDLQRQDYDLODEOHIRUVDOHȴQDQFLDOLQYHVWPHQWV 5HFODVVLȴFDWLRQRIJDLQVRQDYDLODEOHIRUVDOHȴQDQFLDOLQYHVWPHQWVUHDOLVHGLQQHWLQFRPH Ȃ Other comprehensive loss (4,296,723) (358,617)

Total comprehensive (loss) income $ (8,427,421) $ 31,813,918

See accompanying notes. 26 SOMERS LIMITED

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the year ended September 30, 2015 (expressed in United States Dollars)

Other Capital Contributed Treasury Comprehensive Retained Stock Surplus Stock Income (Loss) Earnings Total October 1, 2013 $ 1,070 $ 148,472,640 $ (549,900) $ 816,408 $ 30,885,462 $ 179,625,680 Net income for the year – – – – 32,172,535 32,172,535 Other comprehensive loss – – – (358,617) – (358,617) Issue of share capital (Note 10) 16 1,988,409 – – – 1,988,425 Exercise of warrants (Note 10) 62 7,448,758 – – – 7,448,820 Net purchase of treasury stock (Note 10) – – (1,817,905) – – (1,817,905) Cancellation of treasury stock (Note 10) (18) (2,224,207) 2,224,225 – – – Dividends (Note 12) – – – – (3,948,332) (3,948,332) September 30, 2014 $ 1,130 $ 155,685,600 $ (143,580) $ 457,791 $ 59,109,665 $ 215,110,606

Net loss for the period – – – – (4,130,698) (4,130,698) Other comprehensive loss – – – (4,296,723) – (4,296,723) Issue of share capital (Note 10) 30 4,166,328 – – – 4,166,358 Exercise of warrants (Note 10) 24 3,452,274 – – – 3,452,298 Net purchase of treasury stock (Note 10) – – (485,661) – – (485,661) Cancellation of treasury stock (Note 10) (5) (629,236) 629,241 – – – Dividends (Note 12) – – – – (4,641,106) (4,641,106) September 30, 2015 $ 1,179 $ 162,674,966 $ – $ (3,838,932) $ 50,337,861 $ 209,175,074

See accompanying notes. CONSOLIDATED STATEMENT OF CASH FLOWS 27

CONSOLIDATED STATEMENT OF CASH FLOWS For the year ended September 30, 2015 (expressed in United States Dollars)

Operating activities 2015 2014 Net (loss) income $ (4,130,698) $ 32,172,535 $GMXVWPHQWVWRUHFRQFLOHQHW ORVV LQFRPHWRFDVKȵRZVXVHGLQRSHUDWLQJDFWLYLWLHV Losses (gains) on investments 3,129,227 (28,362,934) Foreign exchange losses on investments 2,363,461 1,101,686 ΖPSDLUPHQWORVVHVRQȴQDQFLDOLQYHVWPHQWV Ȃ Increase in interest receivable (434,131) (43,639) Decrease (increase) in other assets 170,483 (205,165) (Decrease) increase in interest payable (25,890) 25,890 Decrease in other liabilities (4,129,283) (20,668,823) Net cash used in operating activities (3,056,831) (15,021,529)

Investing activities Net decrease in loans and receivables 326,474 32,699,806 3URFHHGVIURPVDOHRIȴQDQFLDOLQYHVWPHQWV 3XUFKDVHVRIȴQDQFLDOLQYHVWPHQWV Net cash (used in) provided by investing activities (1,042,800) 18,311,599

Financing activities Net increase (decrease) in interest bearing loans and borrowings 2,500,000 (8,005,454) Proceeds from issue of shares 7,618,656 9,437,245 Net purchase of treasury stock (485,661) (1,817,905) Dividends paid (4,641,106) (3,948,332) 1HWFDVKSURYLGHGE\ XVHGLQ ȴQDQFLQJDFWLYLWLHV

Net increase (decrease) in cash and cash equivalents 892,258 (1,044,376) Cash and cash equivalents, beginning of year 216,418 1,260,794 Cash and cash equivalents, end of year $ 1,108,676 $ 216,418

See accompanying notes. 28 SOMERS LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS September 30, 2015 (expressed in United States Dollars)

1. Description of Business 6RPHUV/LPLWHG Ȋ6RPHUVȋ LVD%HUPXGDH[HPSWHGLQYHVWPHQWFRPSDQ\OLVWHGRQWKH%HUPXGD6WRFN([FKDQJHZLWKDQXPEHURILQYHVWPHQWVLQWKHȴQDQFLDOVHUYLFHVVHFWRU6RPHUV was incorporated on April 13, 2012, and started commercial operations on September 18, 2012.

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• The Company has obtained funds for the purpose of providing investors with investment management services. • The Company’s business purpose, which was communicated directly to investors, is investing solely for returns from capital appreciation and investment income. • The performance of investments is measured and evaluated on a fair value basis.

Further, the following characteristics which are typical of an investment entity are all present:

• The Company has more than one investment, and more than one investor. • The Company has investors who are not its related parties. • The Company has ownership interests in the form of equity.

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Presentation of Consolidated Financial Statements 7KH&RPSDQ\SUHVHQWVLWVFRQVROLGDWHGVWDWHPHQWRIȴQDQFLDOSRVLWLRQEURDGO\LQRUGHURIOLTXLGLW\$QDQDO\VLVUHJDUGLQJWKHPDWXULW\RUVHWWOHPHQWRIWKHȴQDQFLDODVVHWVDQGOLDELOLWLHV within 12 months after the reporting date (current), and more than 12 months after the reporting date (non-current), is presented in note 16. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 29

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Basis of Consolidation 7KHFRQVROLGDWHGȴQDQFLDOVWDWHPHQWVLQFOXGHWKHȴQDQFLDOVWDWHPHQWVRIWKH&RPSDQ\6Ζ$VVHW0DQDJHPHQW6DUO6RPHUV/X[HPERXUJ6DUO6RPHUV8. +ROGLQJV /LPLWHG6RPHUV37(/WG 6RPHUV7UHDVXU\37

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Estimates, judgments, and assumptions are continually evaluated, and are based on historical experience, and other factors, including expectations of future events, that are believed WREHUHDVRQDEOHXQGHUWKHFLUFXPVWDQFHV7KHHVWLPDWHVMXGJPHQWVDQGDVVXPSWLRQVWKDWKDYHDVLJQLȴFDQWULVNRIFDXVLQJPDWHULDODGMXVWPHQWVWRWKHFRQVROLGDWHGȴQDQFLDO VWDWHPHQWVZLWKLQWKHQH[WȴQDQFLDO\HDUDUHGLVFXVVHGEHORZ

Fair Value of Financial Instruments :KHUHWKHIDLUYDOXHVRIȴQDQFLDODVVHWVDQGȴQDQFLDOOLDELOLWLHVUHFRUGHGRQWKHFRQVROLGDWHGVWDWHPHQWRIȴQDQFLDOSRVLWLRQFDQQRWEHGHULYHGIURPDFWLYHPDUNHWVWKH\DUHGHWHUPLQHG using a variety of valuation techniques that include the use of valuation models. The inputs to these models are derived from observable market data where possible, but where observable market data is not available, judgment is required to establish fair values. The judgments include considerations of liquidity and model inputs such as revenue, EBITDA, HVWLPDWHGIXWXUHFDVKȵRZVPXOWLSOHVRIFRPSDUDEOHFRPSDQLHVYRODWLOLW\DQGGLVFRXQWUDWHV7KHHVWLPDWHVDQGMXGJPHQWVXVHGLQWKHYDOXDWLRQRIȴQDQFLDOLQVWUXPHQWVDUHGHVFULEHG in more detail in note 18.

Impairment Losses on Loans and Advances 7KH&RPSDQ\UHYLHZVLWVLQGLYLGXDOO\VLJQLȴFDQWORDQVDQGDGYDQFHVWRDVVHVVLPSDLUPHQWDWOHDVWRQDQDQQXDOEDVLVΖQSDUWLFXODUPDQDJHPHQWMXGJPHQWLVUHTXLUHGLQWKHHVWLPDWLRQ RIWKHDPRXQWDQGH[SHFWHGWLPLQJRIIXWXUHFDVKȵRZVZKHQGHWHUPLQLQJLPSDLUPHQWORVV7KHVHHVWLPDWHVDUHEDVHGRQDVVXPSWLRQVDERXWDQXPEHURIIDFWRUVDQGDFWXDOUHVXOWV PD\GL΍HUIURPFXUUHQWHVWLPDWHVUHVXOWLQJLQIXWXUHFKDQJHVWRWKHDOORZDQFH

Impairment of Available-for-Sale Financial Investments 7KH&RPSDQ\UHYLHZVLWVVHFXULWLHVFODVVLȴHGDVDYDLODEOHIRUVDOHDWHDFKUHSRUWLQJGDWHDQGPRUHIUHTXHQWO\ZKHQFRQGLWLRQVZDUUDQWDQLPSDLUPHQWDVVHVVPHQW7KLVUHTXLUHVVLPLODU judgments as those applied to the individual assessment of loans and advances.

7KH&RPSDQ\DOVRUHFRUGVLPSDLUPHQWFKDUJHVRQDYDLODEOHIRUVDOHȴQDQFLDOLQYHVWPHQWVZKHQWKHUHKDVEHHQDVLJQLȴFDQWRUSURORQJHGGHFOLQHLQWKHIDLUYDOXHEHORZWKHLUFRVW7KH GHWHUPLQDWLRQRIZKDWLVȆVLJQLȴFDQWȇRUȆSURORQJHGȇUHTXLUHVMXGJPHQWΖQPDNLQJWKLVMXGJPHQWPDQDJHPHQWHYDOXDWHVDPRQJRWKHUIDFWRUVKLVWRULFDOSULFHPRYHPHQWVWKHH[WHQW to which the fair value of an investment is less than its cost and the duration of such decline.

Foreign Currency Translation 7KHFRQVROLGDWHGȴQDQFLDOVWDWHPHQWVDUHSUHVHQWHGLQ8QLWHG6WDWHV'ROODUV7KH&RPSDQ\DQGHDFKRILWVVXEVLGLDULHVGHWHUPLQHVLWVRZQIXQFWLRQDOFXUUHQF\DQGLWHPVLQFOXGHGLQ WKHȴQDQFLDOVWDWHPHQWVRIHDFKHQWLW\DUHPHDVXUHGXVLQJWKDWIXQFWLRQDOFXUUHQF\

%HUPXGD'ROODUEDODQFHVDQGWUDQVDFWLRQVDUHWUDQVODWHGLQWR8QLWHG6WDWHV'ROODUVDWSDU0RQHWDU\DVVHWVDQGOLDELOLWLHVLQRWKHUFXUUHQFLHVDUHWUDQVODWHGLQWR8QLWHG6WDWHV'ROODUV at the rates of exchange prevailing at the reporting date and non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated into United States Dollars at historic rates or the rates of exchange prevailing at the dates of the transactions.

Income and expense items in other currencies are translated into United States Dollars at the rates prevailing at the dates of the transactions. Realised and changes in unrealised gains and losses on foreign currency positions are reported under net exchange gains or losses in the consolidated statement of income.

On consolidation, the assets and liabilities of foreign operations are translated into US Dollars at the rate of exchange on the reporting date, and their statements of income and FRPSUHKHQVLYHLQFRPHDUHWUDQVODWHGDWWKHZHLJKWHGDYHUDJHH[FKDQJHUDWHVIRUWKHSHULRG([FKDQJHGL΍HUHQFHVDULVLQJRQWUDQVODWLRQDUHUHFRJQLVHGLQDVHSDUDWHFRPSRQHQW of equity within other comprehensive income. On disposal of a foreign entity, the deferred cumulative amount recognised in equity relating to that particular foreign operation is recognised in the consolidated statement of income as part of the gain or loss on sale.

Cash and Cash Equivalents &DVKDQGFDVKHTXLYDOHQWVLQWKHFRQVROLGDWHGVWDWHPHQWRIFDVKȵRZVFRQVLVWRIFDVKDQGWHUPGHSRVLWVZKLFKDUHUHDGLO\FRQYHUWLEOHWRNQRZQDPRXQWVRIFDVKDUHVXEMHFWWRDQ LQVLJQLȴFDQWULVNRIFKDQJHVLQYDOXHDQGKDYHRULJLQDOPDWXULWLHVRIWKUHHPRQWKVRUOHVV&DVKDQGFDVKHTXLYDOHQWVPD\DOVRLQFOXGHPRQH\PDUNHWIXQGVZKLFKKDYHGDLO\OLTXLGLW\ and invest in highly liquid instruments, such as term deposits and commercial paper. 30 SOMERS LIMITED

Financial Instruments – Initial Recognition and Subsequent Measurement Date of Recognition $OOȴQDQFLDODVVHWVDQGȴQDQFLDOOLDELOLWLHVDUHLQLWLDOO\UHFRJQLVHGRQWKHWUDGHGDWHEDVLVZKLFKLVWKHGDWHWKDWWKH&RPSDQ\EHFRPHVDSDUW\WRWKHFRQWUDFWXDOSURYLVLRQVRIWKH LQVWUXPHQW7KLVLQFOXGHVSXUFKDVHVRUVDOHVRIȴQDQFLDODVVHWVWKDWUHTXLUHGHOLYHU\RIDVVHWVZLWKLQWKHWLPHIUDPHJHQHUDOO\HVWDEOLVKHGE\UHJXODWLRQRUFRQYHQWLRQLQWKHPDUNHWSODFH

Initial Recognition of Financial Instruments 7KHFODVVLȴFDWLRQRIȴQDQFLDOLQVWUXPHQWVDWLQLWLDOUHFRJQLWLRQGHSHQGVRQWKHSXUSRVHIRUZKLFKWKHȴQDQFLDOLQVWUXPHQWVZHUHDFTXLUHGDQGWKHLUFKDUDFWHULVWLFV$OOȴQDQFLDO LQVWUXPHQWVDUHPHDVXUHGLQLWLDOO\DWWKHLUIDLUYDOXHSOXVWUDQVDFWLRQFRVWVH[FHSWLQWKHFDVHRIȴQDQFLDODVVHWVDQGȴQDQFLDOOLDELOLWLHVDWIDLUYDOXHWKURXJKSURȴWRUORVV

7KH&RPSDQ\FODVVLȴHVLWVȴQDQFLDODVVHWVLQWRWKHIROORZLQJFDWHJRULHV

)LQDQFLDO$VVHWVDQG)LQDQFLDO/LDELOLWLHV'HVLJQDWHGDW)DLU9DOXHWKURXJK3URȴWRU/RVV )LQDQFLDODVVHWVDQGȴQDQFLDOOLDELOLWLHVGHVLJQDWHGDWIDLUYDOXHWKURXJKSURȴWRUORVVDUHGHVLJQDWHGDVVXFKE\PDQDJHPHQWRQLQLWLDOUHFRJQLWLRQZKHQWKHIROORZLQJFULWHULDDUHPHW

ȏ 7KHGHVLJQDWLRQHOLPLQDWHVRUVLJQLȴFDQWO\UHGXFHVWKHLQFRQVLVWHQWWUHDWPHQWWKDWZRXOGRWKHUZLVHDULVHIURPPHDVXULQJDVVHWVRUOLDELOLWLHVRUUHFRJQLVLQJJDLQVRUORVVHVRQ WKHPRQDGL΍HUHQWEDVLVRU ȏ 7KHDVVHWVDQGOLDELOLWLHVDUHSDUWRIDJURXSRIȴQDQFLDODVVHWVȴQDQFLDOOLDELOLWLHVRUERWKZKLFKDUHPDQDJHGDQGWKHLUSHUIRUPDQFHHYDOXDWHGRQDIDLUYDOXHEDVLVLQ DFFRUGDQFHZLWKDGRFXPHQWHGULVNPDQDJHPHQWRULQYHVWPHQWVWUDWHJ\RU ȏ 7KHȴQDQFLDOLQVWUXPHQWFRQWDLQVDQHPEHGGHGGHULYDWLYHXQOHVVWKHHPEHGGHGGHULYDWLYHGRHVQRWVLJQLȴFDQWO\PRGLI\WKHFDVKȵRZVRILWVKRVWFRQWUDFWRULWLVFOHDUZLWKOLWWOH RUQRDQDO\VLVWKDWLWZRXOGQRWEHVHSDUDWHO\UHFRUGHG7KLVFDWHJRU\FRPSULVHVȴQDQFLDODVVHWVKHOGIRUWUDGLQJ$ȴQDQFLDODVVHWLVFODVVLȴHGLQWKLVFDWHJRU\LIDFTXLUHGSULQFLSDOO\ for the purpose of selling in the short term, or if so designated by management. Derivatives are also categorised as held for trading, unless they are designated as hedges.

$VWKH&RPSDQ\ȇVEXVLQHVVLVLQYHVWLQJLQȴQDQFLDODVVHWVZLWKDYLHZWRSURȴWLQJIURPWKHLUWRWDOUHWXUQLQWKHIRUPRIGLYLGHQGVLQWHUHVWRULQFUHDVHVLQIDLUYDOXHLWVLQYHVWPHQWV LQFOXGLQJWKRVHRUGLQDULO\FODVVLȴHGDVVXEVLGLDULHVXQGHUΖ)56EXWH[HPSWHGE\WKDWȴQDQFLDOUHSRUWLQJVWDQGDUGIURPWKHUHTXLUHPHQWWREHFRQVROLGDWHG DUHGHVLJQDWHGDWIDLU YDOXHWKURXJKSURȴWRUORVVRQLQLWLDOUHFRJQLWLRQ

)LQDQFLDODVVHWVDQGȴQDQFLDOOLDELOLWLHVDWIDLUYDOXHWKURXJKSURȴWRUORVVDUHUHFRUGHGLQWKHFRQVROLGDWHGVWDWHPHQWRIȴQDQFLDOSRVLWLRQDWIDLUYDOXH&KDQJHVLQWKHLUIDLUYDOXHDUH recorded in the consolidated statement of income.

Financial Assets or Liabilities Held for Trading 7KHVHDVVHWVDQGOLDELOLWLHVDUHUHFRUGHGLQWKHFRQVROLGDWHGVWDWHPHQWRIȴQDQFLDOSRVLWLRQDWIDLUYDOXH$ȴQDQFLDODVVHWLVFODVVLȴHGLQWKLVFDWHJRU\LIDFTXLUHGSULQFLSDOO\IRUWKH SXUSRVHRIVHOOLQJLQWKHVKRUWWHUPRULIVRGHVLJQDWHGE\PDQDJHPHQWΖWHPVZKLFKPD\EHLQFOXGHGLQWKLVFODVVLȴFDWLRQDUHGHEWVHFXULWLHVHTXLWLHVDQGFXVWRPHUORDQVZKLFKKDYH been acquired for the purpose of selling or repurchasing in the near term.

'HULYDWLYHV5HFRUGHGDW)DLU9DOXHWKURXJK3URȴWRU/RVV Derivatives include foreign exchange forward contracts, index and equity option contracts, interest rate swap contracts, and warrants. Derivatives are recorded at fair value and carried as assets when the fair value is positive and as liabilities when the fair value is negative.

'HULYDWLYHVHPEHGGHGLQȴQDQFLDOLQVWUXPHQWVVXFKDVZDUUDQWVDQGWKHFRQYHUVLRQRSWLRQLQDQDFTXLUHGFRQYHUWLEOHERQGDUHWUHDWHGDVVHSDUDWHGHULYDWLYHVDQGUHFRUGHGDWIDLU YDOXHLIWKHLUHFRQRPLFFKDUDFWHULVWLFVDQGULVNVDUHQRWFORVHO\UHODWHGWRWKRVHRIWKHKRVWFRQWUDFWDQGWKHKRVWFRQWUDFWLVQRWFODVVLȴHGDVKHOGIRUWUDGLQJRUGHVLJQDWHGDWIDLUYDOXH WKURXJKSURȴWRUORVV

The embedded derivatives separated from the host contract are carried at fair value in the trading portfolio.

Changes in the fair value of derivatives are reported under gains or losses on investments for option contracts and under net exchange gains or losses for forward contracts in the consolidated statement of income.

Loans and Advances /RDQVDQGDGYDQFHVDUHQRQGHULYDWLYHȴQDQFLDODVVHWVZLWKȴ[HGRUGHWHUPLQDEOHSD\PHQWVWKDWDUHQRWTXRWHGLQDQDFWLYHPDUNHW7KH\DUHQRWHQWHUHGLQWRZLWKWKHLQWHQWLRQRI LPPHGLDWHRUVKRUWWHUPUHVDOHDQGDUHQRWFODVVLȴHGDVKHOGIRUWUDGLQJGHVLJQDWHGDVDYDLODEOHIRUVDOHRUGHVLJQDWHGDWIDLUYDOXHWKURXJKSURȴWRUORVV$IWHULQLWLDOPHDVXUHPHQW ORDQVDQGDGYDQFHVDUHPHDVXUHGDWDPRUWLVHGFRVWXVLQJWKHH΍HFWLYHLQWHUHVWUDWH (Ζ5 PHWKRGOHVVDQ\DOORZDQFHIRULPSDLUPHQW$PRUWLVHGFRVWLVFDOFXODWHGE\WDNLQJLQWRDFFRXQW any discount or premium on acquisition and fees that are an integral part of the EIR. The EIR amortisation is reported under interest income and losses arising from impairment are reported separately in the consolidated statement of income. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31

Available-for-Sale Financial Investments $YDLODEOHIRUVDOHȴQDQFLDOLQYHVWPHQWVLQFOXGHHTXLW\LQYHVWPHQWVGHEWVHFXULWLHVDQGSRUWIROLRIXQGV(TXLW\LQYHVWPHQWVFODVVLȴHGDVDYDLODEOHIRUVDOHDUHWKRVHWKDWDUHQHLWKHU FODVVLȴHGDVKHOGIRUWUDGLQJQRUGHVLJQDWHGDWIDLUYDOXHWKURXJKSURȴWRUORVV'HEWVHFXULWLHVLQWKLVFDWHJRU\DUHWKRVHWKDWDUHLQWHQGHGWREHKHOGIRUDQLQGHȴQLWHSHULRGRIWLPHDQG WKDWPD\EHVROGLQUHVSRQVHWRQHHGVIRUOLTXLGLW\RULQUHVSRQVHWRFKDQJHVLQPDUNHWFRQGLWLRQV$IWHULQLWLDOPHDVXUHPHQWDYDLODEOHIRUVDOHȴQDQFLDOLQYHVWPHQWVDUHVXEVHTXHQWO\ measured at fair value. Changes in unrealised gains and losses, with the exception of foreign exchange gains and losses, which are recorded in the consolidated statement of income, are recognised directly in equity under other comprehensive income or loss. When the investment is disposed of, the cumulative gain or loss previously recognised in equity is included in the gains or losses on investments in the consolidated statement of income.

ΖQWHUHVWRQDYDLODEOHIRUVDOHȴQDQFLDOLQYHVWPHQWVLVUHSRUWHGXQGHULQWHUHVWLQFRPHRUH[SHQVHLQWKHFRQVROLGDWHGVWDWHPHQWRILQFRPHXVLQJWKH(Ζ5PHWKRGDQGGLYLGHQGV are recorded as dividend income in the consolidated statement of income or loss when the right of the payment has been established. The losses arising from impairment of such LQYHVWPHQWVDUHUHSRUWHGXQGHULPSDLUPHQWORVVHVRQDYDLODEOHIRUVDOHȴQDQFLDOLQYHVWPHQWVLQWKHFRQVROLGDWHGVWDWHPHQWRILQFRPH

ΖQYHVWPHQWVLQSRUWIROLRIXQGVDUHLQLWLDOO\UHFRUGHGDWFRVWDQGWKHQFDUULHGDWWKHLUQHWDVVHWYDOXH 1$9 SHUXQLWDWWKHFRQVROLGDWHGȴQDQFLDOSRVLWLRQGDWHZKLFKLIWKHUHDUHQR restrictions on their redemption, represents the fair value of the investment.

Derecognition of Financial Assets and Financial Liabilities Financial Assets $ȴQDQFLDODVVHW RUZKHUHDSSOLFDEOHDSDUWRIDȴQDQFLDODVVHWRUSDUWRIDJURXSRIVLPLODUȴQDQFLDODVVHWV LVGHUHFRJQLVHGZKHQ

ȏ 7KHULJKWVWRUHFHLYHFDVKȵRZVIURPWKHDVVHWKDYHH[SLUHGRU • The Company has transferred substantially all the risks and rewards of the asset.

Financial Liabilities $ȴQDQFLDOOLDELOLW\LVGHUHFRJQLVHGZKHQWKHREOLJDWLRQXQGHUWKHOLDELOLW\LVGLVFKDUJHGRUFDQFHOOHGRUH[SLUHV

Determination of Fair Value 7KHIDLUYDOXHVRIȴQDQFLDOLQVWUXPHQWVWUDGHGLQDFWLYHPDUNHWVDWWKHUHSRUWLQJGDWHDUHGHWHUPLQHGEDVHGRQWKHLUTXRWHGPDUNHWSULFHRUGHDOHUSULFHTXRWDWLRQV ELGSULFHIRUORQJ SRVLWLRQVDQGDVNSULFHIRUVKRUWSRVLWLRQV ZLWKRXWDQ\GHGXFWLRQVIRUWUDQVDFWLRQFRVWV)RUDOORWKHUȴQDQFLDOLQVWUXPHQWVQRWWUDGHGLQDQDFWLYHPDUNHWWKHIDLUYDOXHLVGHWHUPLQHG using appropriate valuation techniques.

$QDQDO\VLVRIIDLUYDOXHVRIȴQDQFLDOLQVWUXPHQWVDQGIXUWKHUGHWDLOVDVWRKRZWKH\DUHPHDVXUHGLVSURYLGHGLQQRWH

Impairment of Financial Assets 7KH&RPSDQ\DVVHVVHVDWHDFKUHSRUWLQJGDWHZKHWKHUWKHUHLVDQ\REMHFWLYHHYLGHQFHWKDWDȴQDQFLDODVVHWRUDJURXSRIȴQDQFLDODVVHWVLVLPSDLUHG$ȴQDQFLDODVVHWRUDJURXSRI ȴQDQFLDODVVHWVLVGHHPHGWREHLPSDLUHGLIWKHUHLVREMHFWLYHHYLGHQFHRILPSDLUPHQWDVDUHVXOWRIRQHRUPRUHHYHQWVWKDWKDVRFFXUUHGDIWHUWKHLQLWLDOUHFRJQLWLRQRIWKHDVVHW DQ LQFXUUHGORVVHYHQW DQGWKHORVVHYHQWKDVDQLPSDFWRQWKHHVWLPDWHGIXWXUHFDVKȵRZVRIWKHȴQDQFLDODVVHWRUWKHJURXSRIȴQDQFLDODVVHWVWKDWFDQEHUHOLDEO\HVWLPDWHG

ΖQDVVHVVLQJHYLGHQFHRILPSDLUPHQWWKH&RPSDQ\HYDOXDWHVDPRQJRWKHUIDFWRUVFRXQWHUSDUW\LVVXHUERUURZHUȴQDQFLDOLQIRUPDWLRQWKHDVVHWȇVKLVWRULFDOVKDUHSULFHFRXQWHUSDUW\ UDWLQJVKLVWRU\RIGHIDXOWVVXERUGLQDWLRQWUDQVDFWLRQQDWXUHDQGRWKHUPDUNHWDQGVHFXULW\VSHFLȴFIDFWRUV

ΖIWKHUHLVREMHFWLYHHYLGHQFHWKDWDQLPSDLUPHQWORVVKDVEHHQLQFXUUHGWKHȴQDQFLDODVVHWLVZULWWHQGRZQWRLWVUHDOLVDEOHYDOXHZLWKWKHLPSDLUPHQWORVVEHLQJUHFRJQLVHGLQWKH consolidated statement of income. Any subsequent increase in the fair value of such assets that can be objectively related to an event that occurred after the impairment was initially recognised will result in a reversal of the impairment loss in the period in which the event occurs.

Financial Assets at Amortised Cost )RUȴQDQFLDODVVHWVFDUULHGDWDPRUWLVHGFRVW VXFKDVORDQVDQGDGYDQFHV WKH&RPSDQ\ȴUVWDVVHVVHVLQGLYLGXDOO\ZKHWKHUREMHFWLYHHYLGHQFHRILPSDLUPHQWH[LVWVIRUȴQDQFLDODVVHWV WKDWDUHLQGLYLGXDOO\VLJQLȴFDQWRUFROOHFWLYHO\IRUȴQDQFLDODVVHWVWKDWDUHQRWLQGLYLGXDOO\VLJQLȴFDQWΖIWKH&RPSDQ\GHWHUPLQHVWKDWQRREMHFWLYHHYLGHQFHRILPSDLUPHQWH[LVWVIRUDQ LQGLYLGXDOO\DVVHVVHGȴQDQFLDODVVHWLWLQFOXGHVWKHDVVHWLQDJURXSRIȴQDQFLDODVVHWVZLWKVLPLODUFUHGLWULVNFKDUDFWHULVWLFVDQGFROOHFWLYHO\DVVHVVHVWKHPIRULPSDLUPHQW$VVHWVWKDW are individually assessed for impairment and for which an impairment loss is, or continues to be, recognised are not included in a collective assessment of impairment.

ΖIWKHUHLVREMHFWLYHHYLGHQFHWKDWDQLPSDLUPHQWORVVKDVEHHQLQFXUUHGWKHDPRXQWRIWKHORVVLVPHDVXUHGDVWKHGL΍HUHQFHEHWZHHQWKHDVVHWȇVFDUU\LQJDPRXQWDQGWKHSUHVHQW YDOXHRIHVWLPDWHGIXWXUHFDVKȵRZV H[FOXGLQJIXWXUHH[SHFWHGFUHGLWORVVHVWKDWKDYHQRW\HWEHHQLQFXUUHG 7KHFDUU\LQJDPRXQWRIWKHDVVHWLVUHGXFHGWKURXJKWKHXVHRIDQ allowance account and the amount of loss is recognised in the consolidated statement of income. Interest income continues to be accrued on the reduced carrying amount and is DFFUXHGXVLQJWKHUDWHRILQWHUHVWXVHGWRGLVFRXQWWKHIXWXUHFDVKȵRZVIRUWKHSXUSRVHRIPHDVXULQJWKHLPSDLUPHQWORVV/RDQVWRJHWKHUZLWKWKHDVVRFLDWHGDOORZDQFHDUHZULWWHQR΍ when there is no realistic prospect of future recovery and all collateral has been realised or has been transferred to the Company. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was initially recognised, the previously recognised impairment loss is increased or reduced E\DGMXVWLQJWKHDOORZDQFHDFFRXQWΖIDIXWXUHZULWHR΍LVODWHUUHFRYHUHGWKHUHFRYHU\LVUHFRJQLVHGLQWKHFRQVROLGDWHGVWDWHPHQWRILQFRPH$Q\LPSDLUPHQWORVVRUUHFRYHU\RI impairment loss is reported separately in the consolidated statement of income. 32 SOMERS LIMITED

Available-for-Sale Financial Investments )RUDYDLODEOHIRUVDOHȴQDQFLDOLQYHVWPHQWVWKH&RPSDQ\DVVHVVHVDWHDFKUHSRUWLQJGDWHZKHWKHUWKHUHLVHYLGHQFHWKDWDQLQYHVWPHQWLVLPSDLUHG

ΖQWKHFDVHRIHTXLW\LQYHVWPHQWVFODVVLȴHGDVDYDLODEOHIRUVDOHREMHFWLYHHYLGHQFHZRXOGLQFOXGHDVLJQLȴFDQWRUSURORQJHGGHFOLQHLQWKHIDLUYDOXHRIWKHLQYHVWPHQWEHORZLWV FRVWȊ6LJQLȴFDQWȋLVHYDOXDWHGDJDLQVWWKHRULJLQDOFRVWRIWKHLQYHVWPHQWDQGȊSURORQJHGȋDJDLQVWWKHSHULRGLQZKLFKWKHIDLUYDOXHKDVEHHQEHORZLWVRULJLQDOFRVW:KHQWKHUHLV HYLGHQFHRILPSDLUPHQWWKHFXPXODWLYHORVVPHDVXUHGDVWKHGL΍HUHQFHEHWZHHQWKHDFTXLVLWLRQFRVWDQGWKHFXUUHQWIDLUYDOXHOHVVDQ\LPSDLUPHQWORVVRQWKDWLQYHVWPHQWSUHYLRXVO\ UHFRJQLVHGLVUHFODVVLȴHGIURPHTXLW\DQGUHFRJQLVHGLQWKHFRQVROLGDWHGVWDWHPHQWRILQFRPHΖPSDLUPHQWORVVHVRQHTXLW\LQYHVWPHQWVDUHQRWUHYHUVHGWKURXJKWKHFRQVROLGDWHG VWDWHPHQWRILQFRPHLQFUHDVHVLQWKHIDLUYDOXHDIWHULPSDLUPHQWDUHUHFRJQLVHGLQRWKHUFRPSUHKHQVLYHLQFRPH

ΖQWKHFDVHRIGHEWLQVWUXPHQWVFODVVLȴHGDVDYDLODEOHIRUVDOHLPSDLUPHQWLVDVVHVVHGEDVHGRQWKHVDPHFULWHULDDVȴQDQFLDODVVHWVFDUULHGDWDPRUWLVHGFRVW+RZHYHUWKHDPRXQW UHFRUGHGIRULPSDLUPHQWLVWKHFXPXODWLYHORVVPHDVXUHGDVWKHGL΍HUHQFHEHWZHHQWKHDPRUWLVHGFRVWDQGWKHFXUUHQWIDLUYDOXHOHVVDQ\LPSDLUPHQWORVVRQWKDWLQYHVWPHQW previously recognised in the consolidated statement of income. Future interest income continues to be accrued based on the reduced carrying amount of the asset, using the interest UDWHXVHGWRGLVFRXQWWKHIXWXUHFDVKȵRZVIRUWKHSXUSRVHRIPHDVXULQJWKHLPSDLUPHQWORVVΖILQDVXEVHTXHQW\HDUWKHIDLUYDOXHRIDGHEWLQVWUXPHQWLQFUHDVHVDQGWKHLQFUHDVH can be objectively related to an event occurring after the impairment loss was recognised, the impairment loss is reversed through the consolidated statement of income.

Impairment of Non-Financial Assets 7KH&RPSDQ\DVVHVVHVDWHDFKUHSRUWLQJGDWHZKHWKHUWKHUHLVDQLQGLFDWLRQWKDWDQRQȴQDQFLDODVVHWPD\EHLPSDLUHGΖIDQ\LQGLFDWLRQH[LVWVRUZKHQDQQXDOLPSDLUPHQWWHVWLQJIRU an asset is required, the Company estimates the asset’s recoverable amount. The recoverable amount of the asset is calculated as the greater of its value in use and its fair value less costs to sell. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.

2΍VHWWLQJ)LQDQFLDOΖQVWUXPHQWV )LQDQFLDODVVHWVDQGȴQDQFLDOOLDELOLWLHVDUHR΍VHWDQGWKHQHWDPRXQWUHSRUWHGLQWKHFRQVROLGDWHGVWDWHPHQWRIȴQDQFLDOSRVLWLRQRQO\ZKHQWKHUHLVDOHJDOO\HQIRUFHDEOHULJKWWRR΍VHWWKH UHFRJQLVHGDPRXQWVDQGWKHUHLVDQLQWHQWLRQWRVHWWOHRQDQHWEDVLVRUWRUHDOLVHWKHDVVHWVDQGVHWWOHWKHOLDELOLWLHVVLPXOWDQHRXVO\7KHUHODWHGLQFRPHDQGH[SHQVHZLOOQRWEHR΍VHW LQWKHFRQVROLGDWHGVWDWHPHQWRILQFRPHXQOHVVUHTXLUHGRUSHUPLWWHGE\DQ\DFFRXQWLQJVWDQGDUGRULQWHUSUHWDWLRQDVVSHFLȴFDOO\GLVFORVHGLQWKHDFFRXQWLQJSROLFLHVRIWKH&RPSDQ\

Derivative Financial Instruments The Company may use derivatives to manage its credit and market risk exposures. The Company does not use derivatives for trading or for speculative purposes, although certain derivatives may be embedded in the investments held by the Company.

'HULYDWLYHVDUHFDUULHGDWIDLUYDOXHDQGVKRZQLQWKHFRQVROLGDWHGVWDWHPHQWRIȴQDQFLDOSRVLWLRQRQDJURVVEDVLV7KHVHLQFOXGHH[FKDQJHWUDGHGRSWLRQVZDUUDQWVDQGRWKHU GHULYDWLYHVWKDWDUHHPEHGGHGLQȴQDQFLDORUQRQȴQDQFLDOFRQWUDFWVWKDWDUHQRWFORVHO\UHODWHGWRWKHKRVWFRQWUDFWV$QHPEHGGHGGHULYDWLYHLVDFRPSRQHQWRIDK\EULGLQVWUXPHQW WKDWLQFOXGHVDQRQGHULYDWLYHKRVWFRQWUDFWZLWKWKHH΍HFWWKDWVRPHRIWKHFDVKȵRZVRIWKHK\EULGLQVWUXPHQWYDU\LQDZD\VLPLODUWRDVWDQGDORQHGHULYDWLYH:KHQDQHPEHGGHG derivative is separated, the host contract is accounted for based on accounting standards applicable to contracts of that type without the embedded derivative.

Property and Equipment 3URSHUW\DQGHTXLSPHQWLVFDUULHGDWKLVWRULFDOFRVWOHVVDFFXPXODWHGGHSUHFLDWLRQDQGDQ\LPSDLUPHQWORVVHV+LVWRULFDOFRVWLQFOXGHVH[SHQGLWXUHWKDWLVGLUHFWO\DWWULEXWDEOHWR WKHDFTXLVLWLRQRIWKHSURSHUW\DQGHTXLSPHQW'HSUHFLDWLRQLVFDOFXODWHGXVLQJWKHVWUDLJKWOLQHPHWKRGRYHUWKHHVWLPDWHGXVHIXOOLYHVRIWKHUHODWHGDVVHWVZKLFKDUHXSWRȴIW\ \HDUVIRUEXLOGLQJVXSWRWZHQW\ȴYH\HDUVIRUHTXLSPHQWXSWRWHQ\HDUVIRUIXUQLWXUHDQGȴ[WXUHVXSWRIRXU\HDUVIRUFRPSXWHUKDUGZDUHDQGWKHWHUPRIWKHOHDVHIRUOHDVHKROG improvements. Land and certain property are not depreciated.

6XEVHTXHQWFRVWVVXFKDVUHSDLUVDQGPDLQWHQDQFHDUHFKDUJHGWRWKHFRQVROLGDWHGVWDWHPHQWRILQFRPHGXULQJWKHȴQDQFLDOSHULRGLQZKLFKWKH\DUHLQFXUUHG

3URSHUW\DQGHTXLSPHQWLVGHUHFRJQLVHGRQGLVSRVDORUZKHQQRIXWXUHHFRQRPLFEHQHȴWVDUHH[SHFWHGIURPLWVXVH$Q\JDLQRUORVVRQGHUHFRJQLWLRQRIWKHDVVHW FDOFXODWHG DVWKHGL΍HUHQFHEHWZHHQWKHQHWGLVSRVDOSURFHHGVDQGWKHFDUU\LQJDPRXQWRIWKHDVVHW LVUHFRJQLVHGLQRWKHURSHUDWLQJLQFRPHLQWKHFRQVROLGDWHGVWDWHPHQWRILQFRPHLQ the period the asset is derecognised.

Interest-Bearing Loans and Borrowings All loans and borrowings are initially recognised at the fair value of the consideration received, less directly attributable transaction costs. After initial recognition, interest-bearing loans DQGERUURZLQJVDUHVXEVHTXHQWO\PHDVXUHGDWDPRUWLVHGFRVWXVLQJWKHH΍HFWLYHLQWHUHVWPHWKRG*DLQVDQGORVVHVDUHUHFRJQLVHGLQWKHFRQVROLGDWHGVWDWHPHQWRILQFRPHZKHQWKH liabilities are derecognised.

Recognition of Income 5HYHQXHLVUHFRJQLVHGWRWKHH[WHQWWKDWLWLVSUREDEOHWKDWWKHHFRQRPLFEHQHȴWVZLOOȵRZWRWKH&RPSDQ\DQGWKHUHYHQXHFDQEHUHOLDEO\PHDVXUHG7KHIROORZLQJVSHFLȴFUHFRJQLWLRQ criteria must also be met before revenue is recognised:

Interest Income ΖQWHUHVWLQFRPHLVUHFRJQLVHGLQWKHFRQVROLGDWHGVWDWHPHQWRILQFRPHIRUDOOLQWHUHVWEHDULQJLQVWUXPHQWVRQWKHDFFUXDOEDVLVXVLQJWKHH΍HFWLYHLQWHUHVWUDWHPHWKRG NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 33

Fees and Commissions )HHVDQGFRPPLVVLRQVLQFOXGHIHHVDQGFRPPLVVLRQVHDUQHGIURPEDQNLQJDQGFXVWRGLDOVHUYLFHVIXQGDGPLQLVWUDWLRQWUXVWFRPSDQ\PDQDJHPHQWȴQDQFLDODQGFRUSRUDWHUHJLVWUDUVHUYLFHV

Income is recognised as revenue on the accrual basis over the period during which the services are provided.

Dividend Income Dividend income is recognised when the Company’s right to receive the payment is established.

Expenses ([SHQVHVDUHUHFRJQLVHGLQWKHFRQVROLGDWHGVWDWHPHQWRILQFRPHRQWKHDFFUXDOEDVLVΖQWHUHVWH[SHQVHLVFDOFXODWHGXVLQJWKHH΍HFWLYHLQWHUHVWUDWHPHWKRG

Dividends on Common Shares Dividends on common shares are recognised as a liability and are deducted from equity in the period in which they are declared.

Earnings Per Share Basic earnings per share (EPS), is calculated by dividing net income attributable to shareholders by the weighted average number of common shares outstanding during the period. The diluted EPS calculation assumes that stock warrants are only exercised and converted when the exercise price is below the average market price of the shares. It also assumes that the Company will use any proceeds to purchase its common shares at their average market price during the period. Consequently, there is no imputed income on the proceeds, and ZHLJKWHGDYHUDJHVKDUHVDUHRQO\LQFUHDVHGE\WKHGL΍HUHQFHEHWZHHQWKHQXPEHURIZDUUDQWVH[HUFLVHGRXWVWDQGLQJZDUUDQWVDQGWKHQXPEHURIVKDUHVSXUFKDVHGE\WKH&RPSDQ\

Treasury Stock The Company’s own equity acquired by Somers or by any of its subsidiaries (treasury stock) is recognised at cost and deducted from equity. Consideration paid or received on the purchase, sale, issue or cancellation of the Company’s own equity instruments is recognised directly in equity.

No gain or loss is recognised in net income on the purchase, sale, issue or cancellation of the Company’s own equity instruments.

:KHQWKH&RPSDQ\KROGVLWVRZQHTXLW\LQVWUXPHQWVRQEHKDOIRILWVFOLHQWVWKRVHKROGLQJVDUHQRWLQFOXGHGLQWKH&RPSDQ\ȇVFRQVROLGDWHGVWDWHPHQWRIȴQDQFLDOSRVLWLRQ

Income Taxes Somers and its subsidiaries domiciled in Bermuda are not subject to income tax on the net income for the period. Somers’ subsidiaries domiciled in other jurisdictions are subject to the tax laws of those jurisdictions. The Company records income taxes based on the tax rates applicable in the relevant jurisdiction and an income tax expense of $19,203 (2014:$9,170) ZDVUHFRUGHGLQWKHFRQVROLGDWHGȴQDQFLDOVWDWHPHQWV

Provisions 3URYLVLRQVDUHUHFRJQLVHGZKHQWKH&RPSDQ\KDVDSUHVHQWREOLJDWLRQ OHJDORUFRQVWUXFWLYH DVDUHVXOWRIDSDVWHYHQWLWLVSUREDEOHWKDWDQRXWȵRZRIUHVRXUFHVHPERG\LQJHFRQRPLF EHQHȴWVZLOOEHUHTXLUHGWRVHWWOHWKHREOLJDWLRQDQGDUHOLDEOHHVWLPDWHFDQEHPDGHRIWKHDPRXQWRIWKHREOLJDWLRQ7KHH[SHQVHUHODWLQJWRDQ\SURYLVLRQLVSUHVHQWHGLQWKH consolidated statement of income, net of any reimbursement.

1HZ6WDQGDUGVΖQWHUSUHWDWLRQVDQG$PHQGPHQWVWR3XEOLVKHG6WDQGDUGV5HOHYDQWWRWKH&RPSDQ\ 7KHIROORZLQJVWDQGDUGVDQGDPHQGPHQWVWRH[LVWLQJVWDQGDUGVH΍HFWLYHIRUDQQXDOSHULRGVEHJLQQLQJRQRUDIWHU2FWREHUWKDWDUHUHOHYDQWKDYHEHHQDGRSWHGE\WKH&RPSDQ\

Annual Improvements to IFRSs 2010-2012 Cycle (Amendments to IAS 24, ‘Related Party Disclosures’) 2Q'HFHPEHUWKHΖQWHUQDWLRQDO$FFRXQWLQJ6WDQGDUGV%RDUG Ζ$6% LVVXHG$QQXDOΖPSURYHPHQWVWRΖ)56V&\FOHZKLFKSURYLGHGFODULȴFDWLRQRQȆPDQDJHPHQW entity’. The IASB considered that an entity that provides key management personnel services to the reporting entity or to the parent of the reporting entity is also a related party of WKDWUHSRUWLQJHQWLW\7KHVHDPHQGPHQWVDUHH΍HFWLYHIRUSHULRGVEHJLQQLQJRQRUDIWHU-XO\7KH'LUHFWRUVKDYHDGRSWHGWKHVHDPHQGPHQWVDQGWKHUHLVQRLPSDFWRQWKH &RPSDQ\ȇVȴQDQFLDOVWDWHPHQWV

IFRS 12 Disclosures of Interests in Other Entities Ζ)56GRHVQRWD΍HFWWKHDPRXQWVUHFRJQLVHGLQWKHȴQDQFLDOVWDWHPHQWVEXWUHTXLUHVQHZGLVFORVXUHVDERXWMXGJHPHQWVPDGHE\WKH%RDUGWRGHWHUPLQHZKHWKHUFRQWUROH[LVWV DQGWRUHTXLUHVXPPDULVHGLQIRUPDWLRQRQWKH&RPSDQ\ȇVLQYHVWHHV7KHVHDPHQGPHQWVDUHH΍HFWLYHIRUSHULRGVEHJLQQLQJRQRUDIWHU-DQXDU\7KH'LUHFWRUVKDYHDGRSWHG WKHVHDPHQGPHQWVDQGWKHUHLVQRLPSDFWRQWKH&RPSDQ\ȇVȴQDQFLDOVWDWHPHQWV

7KHUHDUHQRRWKHUVWDQGDUGVLQWHUSUHWDWLRQVRUDPHQGPHQWVWRH[LVWLQJVWDQGDUGVWKDWDUHH΍HFWLYHIRUWKHȴUVWWLPHLQWKHȴQDQFLDO\HDUEHJLQQLQJ2FWREHUWKDWZRXOGEH H[SHFWHGWRKDYHDPDWHULDOH΍HFWRQWKH&RPSDQ\ 34 SOMERS LIMITED

New Standards and Amendments to Existing Standards That Are Relevant But Have Not Yet Been Adopted by The Company 6WDQGDUGVLVVXHGEXWQRW\HWH΍HFWLYHXSWRWKHGDWHRILVVXDQFHRIWKH&RPSDQ\ȇVFRQVROLGDWHGȴQDQFLDOVWDWHPHQWVDQGWKDWPD\EHUHOHYDQWWRWKH&RPSDQ\DUHOLVWHGEHORZ7KLV listing is of standards and interpretations issued, which the Company reasonably expects to be applicable at a future date. The Company does not intend to adopt these standards early.

IFRS 9 Financial Instruments Ζ)56SXEOLVKHGLQ-XO\UHSODFHVWKHH[LVWLQJJXLGDQFHLQΖ$6)LQDQFLDOΖQVWUXPHQWV5HFRJQLWLRQDQG0HDVXUHPHQWΖ)56LQFOXGHVUHYLVHGJXLGDQFHRQWKHFODVVLȴFDWLRQDQG PHDVXUHPHQWRIȴQDQFLDOLQVWUXPHQWVLQFOXGLQJDQHZH[SHFWHGFUHGLWORVVPRGHOIRUFDOFXODWLQJLPSDLUPHQWRQȴQDQFLDODVVHWVDQGWKHQHZJHQHUDOKHGJHDFFRXQWLQJUHTXLUHPHQWV ΖWDOVRFDUULHVIRUZDUGWKHJXLGDQFHRQUHFRJQLWLRQDQGGHUHFRJQLWLRQRIȴQDQFLDOLQVWUXPHQWVIURPΖ$6Ζ)56LVH΍HFWLYHIRUDQQXDOUHSRUWLQJSHULRGVEHJLQQLQJRQRUDIWHU-DQXDU\ 1, 2018, with early adoption permitted.

IAS 1, Presentation of Financial Statements This has been amended to clarify or state the following:

ȏ 6SHFLȴFVLQJOHGLVFORVXUHVWKDWDUHQRWPDWHULDOGRQRWKDYHWREHSUHVHQWHGHYHQLIWKH\DUHWKHPLQLPXPUHTXLUHPHQWRIDVWDQGDUG ȏ 7KHRUGHURIQRWHVWRWKHȴQDQFLDOVWDWHPHQWVLVQRWSUHVFULEHG ȏ /LQHLWHPVRQWKHVWDWHPHQWRIȴQDQFLDOSRVLWLRQDQGWKHVWDWHPHQWRISURȴWRUORVVDQGRWKHUFRPSUHKHQVLYHLQFRPH 2&Ζ VKRXOGEHGLVDJJUHJDWHGLIWKLVSURYLGHVKHOSIXO LQIRUPDWLRQWRXVHUV/LQHLWHPVFDQEHDJJUHJDWHGLIWKH\DUHQRWPDWHULDO ȏ 6SHFLȴFFULWHULDLVQRZSURYLGHGIRUSUHVHQWLQJVXEWRWDOVRQWKHVWDWHPHQWRIȴQDQFLDOSRVLWLRQDQGLQWKHVWDWHPHQWRISURȴWRUORVVDQG2&ΖZLWKDGGLWLRQDOUHFRQFLOLDWLRQ UHTXLUHPHQWIRUWKHVWDWHPHQWRISURȴWRUORVVDQG2&ΖDQG • The presentation in the statement of OCI of items of OCI arising from joint ventures and associates accounted for using the equity method follows the IAS 1 approach of splitting LWHPVWKDWPD\RUWKDWZLOOQHYHUEHUHFODVVLȴHGWRSURȴWRUORVV

7KHDPHQGPHQWLVH΍HFWLYHIRUDFFRXQWLQJSHULRGVEHJLQQLQJRQRUDIWHU-DQXDU\ZLWKHDUO\DGRSWLRQSHUPLWWHG

Investment Entities, Applying the Consolidation Exception (Amendments to IFRS 10, IFRS 12 and IAS 28) 7KHDPHQGPHQWVLQWURGXFHFODULȴFDWLRQVRQZKLFKVXEVLGLDULHVRIDQLQYHVWPHQWHQWLW\DUHFRQVROLGDWHGLQVWHDGRIEHLQJPHDVXUHGDWIDLUYDOXHWKURXJKSURȴWRUORVVΖ)56ZDV DPHQGHGWRFRQȴUPWKDWWKHH[HPSWLRQIURPSUHSDULQJFRQVROLGDWHGȴQDQFLDOVWDWHPHQWVLVDYDLODEOHWRDSDUHQWHQWLW\WKDWLVDVXEVLGLDU\RIDQLQYHVWPHQWHQWLW\$QLQYHVWPHQWHQWLW\ VKDOOPHDVXUHDWIDLUYDOXHWKURXJKSURȴWRUORVVDOORILWVVXEVLGLDULHVWKDWDUHWKHPVHOYHVLQYHVWPHQWHQWLWLHVΖ$6ZDVDPHQGHGWRSURYLGHDQH[HPSWLRQIURPDSSO\LQJWKHHTXLW\ method for investment entities that are subsidiaries and that hold interests in associates and joint ventures. IFRS 12 was amended to clarify that the relevant disclosure requirements LQWKHVWDQGDUGDSSO\WRDQLQYHVWPHQWHQWLW\LQZKLFKDOORILWVVXEVLGLDULHVDUHPHDVXUHGDWIDLUYDOXHWKURXJKSURȴWRUORVV

7KHDPHQGPHQWVDUHH΍HFWLYHIRUDQQXDOSHULRGVEHJLQQLQJRQRUDIWHU-DQXDU\(DUOLHUDSSOLFDWLRQLVSHUPLWWHG7KH&RPSDQ\ZLOODSSO\WKHQHZUHTXLUHPHQWVZKHQWKHVH DPHQGPHQWVEHFRPHH΍HFWLYH7KH'LUHFWRUVEHOLHYHWKDWWKHDGRSWLRQRIWKHVHDPHQGPHQWVZLOOQRWKDYHDPDWHULDOLPSDFWLQWKHȴQDQFLDOVWDWHPHQWVRIWKH&RPSDQ\

7KHUHDUHQRRWKHUVWDQGDUGVLQWHUSUHWDWLRQVRUDPHQGPHQWVWRH[LVWLQJVWDQGDUGVWKDWDUHQRW\HWH΍HFWLYHWKDWZRXOGEHH[SHFWHGWRKDYHDVLJQLȴFDQWLPSDFWRQWKH&RPSDQ\

3. Financial Investments The following table is an analysis of the investment portfolio disclosing fair value balances by category:

2015 2014 )LQDQFLDODVVHWVDWIDLUYDOXHWKURXJKSURȴWRUORVV Equity investments $ 188,816,911 $ 195,356,074 Debt securities 20,192,084 20,102,115 Total $ 209,008,995 $ 215,458,189

$YDLODEOHIRUVDOHȴQDQLFDODVVHWV Equity investments $ 855,260 $ 2,826,203 Total $ 855,260 $ 2,826,203

7RWDOȴQDQFLDOLQYHVWPHQWV NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 35

The following table is an analysis of the investment portfolio disclosing fair value balances and fair value movements of the investments:

2015 2014 )LQDQFLDODVVHWVDWIDLUYDOXHWKURXJKSURȴWRUORVV Fair value at beginning of year $ 215,458,189 $ 166,812,881 Purchase of investments 27,266,800 21,736,450 Proceeds from disposal of investments (24,169,928) – Net fair value movement in the year (including foreign exchange gains and losses) (9,546,066) 26,908,858 Fair value at end of year $ 209,008,995 $ 215,458,189

$YDLODEOHIRUVDOHȴQDQFLDODVVHWV Fair value at beginning of year $ 2,826,203 $ 11,139,594 Purchase of investments – 4,467,643 Proceeds from disposal of investments (1,727,598) (11,815,886) Net fair value movement in the year (including foreign exchange gains and losses) (243,345) (965,148) Fair value at end of year $ 855,260 $ 2,826,203

7RWDOȴQDQFLDOLQYHVWPHQWV

Impairment Losses on Financial Investments 'XULQJWKHSULRU\HDUWKH&RPSDQ\UHFRJQLVHGLPSDLUPHQWORVVHVRQDYDLODEOHIRUVDOHȴQDQFLDOLQYHVWPHQWVIRUZKLFKWKHUHKDGEHHQDVLJQLȴFDQWSURORQJHGGHFOLQHLQIDLUYDOXH below their cost, as follows:

2015 2014 $YDLODEOHIRUVDOHȴQDQFLDODVVHWV Equity investments $ – $ 958,921 Total $ – $ 958,921

4. Subsidiary Undertakings The following were subsidiary undertakings of the Company at September 30, 2015 and September 30, 2014.

&RXQWU\RIRSHUDWLRQ +ROGLQJVDQGYRWLQJULJKWV registration and incorporation 2015 2014 6Ζ$VVHW0DQDJHPHQW6DUO /X[HPERXUJ 6RPHUV/X[HPERXUJ6DUO /X[HPERXUJ 6RPHUV8. +ROGLQJV /LPLWHG 8QLWHG.LQJGRP 6RPHUV37(/WG 6LQJDSRUH 6RPHUV$037

7KH&RPSDQ\IURP-XO\HDUO\DGRSWHGInvestment Entities (Amendments to IFRS 10, IFRS 12, and IAS 27). In accordance with IFRS 10, subsidiaries held as part of the Company’s LQYHVWPHQWSRUWIROLRDUHQRWFRQVROLGDWHGEXWDUHDFFRXQWHGIRUDVLQYHVWPHQWVDQGFDUULHGDWIDLUYDOXHWKURXJKSURȴWRUORVV

Details of these undertakings are as follows:

West Resimac Waverton Hamilton Bermuda Treasury Investment Stockdale Holdings Commercial Services Management Securities Limited Bank Limited (UK) Ltd. Limited Limited (“West (“BCB”) (“RTSL”) (“Waverton”) (“Stockdale”) Hamilton”) &RXQWU\RIUHJLVWUDWLRQLQFRUSRUDWLRQDQGRSHUDWLRQV %HUPXGD 8. 8. 8. %HUPXGD Number of ordinary shares held 7,003,318 100 10,750,000 311,675,119 1,659,390 3HUFHQWDJHRIRUGLQDU\VKDUHVKHOG

6RPHUVDFTXLUHGRI576/RQ-XQH

:HVWKRXVH6HFXULWLHV/LPLWHGFKDQJHGLWVQDPHWR6WRFNGDOH6HFXULWLHV/LPLWHGRQ-DQXDU\ 36 SOMERS LIMITED

$W6HSWHPEHU6RPHUVKHOG RI:HVW+DPLOWRQȇVFRPPRQVKDUHVΖQ6HSWHPEHU6RPHUVDFTXLUHGIURP%&% RI:HVW+DPLOWRQȇV FRPPRQVKDUHVEULQJLQJLWVWRWDOKROGLQJWR DVDW6HSWHPEHU

$W6HSWHPEHU6RPHUVKHOGRI3&)*ȇVFRPPRQVKDUHVDQGZDVGHHPHGWRKDYHFRQWURORYHU3&)*E\YLUWXHRISRWHQWLDOYRWLQJVKDUHVUHVXOWLQJIURPFRQYHUWLEOHORDQ notes that Somers held and its representation on the board of directors of PCFG. In September 2015 Somers sold its entire holding of shares and convertible loan notes in PCFG to BCB and at that point PCFG became a subsidiary of BCB.

Transactions with these related party undertakings are disclosed in note 15.

5. Associate Undertakings 7KHDVVRFLDWHXQGHUWDNLQJVDUHKHOGDVSDUWRIWKHLQYHVWPHQWSRUWIROLRDQGFRQVHTXHQWO\DUHFDUULHGDWIDLUYDOXHWKURXJKSURȴWRUORVV7KH&RPSDQ\KDGWKHIROORZLQJDVVRFLDWH undertakings at September 30, 2015:

Ascot Lloyd Merrion Capital Incol Holdings Limited Holdings Limited Limited (“Ascot Lloyd”) (“Merrion”) (“Incol”) &RXQWU\RIUHJLVWUDWLRQLQFRUSRUDWLRQDQGRSHUDWLRQV 8. ΖUHODQG ΖUHODQG Number of ordinary shares held 0 3,138 100,000 3HUFHQWDJHRIRUGLQDU\VKDUHVKHOG (1) (2)

£ (3) € (4) € (5) (Unaudited) (Unaudited) (Unaudited) $VVRFLDWHȇVFRQVROLGDWHGVWDWHPHQWRIȴQDQFLDOSRVLWLRQ Current assets 2,366,954 16,199,706 357,455 Non-current assets 22,003,583 2,176,976 – Current liabilities (1,567,163) (3,918,708) (21,550) Non-current liabilities (22,136,498) (2,500,000) – Equity 666,876 11,957,974 335,905

$VVRFLDWHȇVFRQVROLGDWHGSURȴWRUORVV Revenue 13,828,200 11,104,493 6,681 Expenses (12,754,958) (11,160,709) (720,776) 1HWSURȴW ORVV DIWHUWD[

6RPHUVZDVGHHPHGWRKDYHDFTXLUHGVLJQLȴFDQWLQȵXHQFHRYHU$VFRW/OR\GD8.KROGLQJFRPSDQ\E\YLUWXHRISRWHQWLDOYRWLQJVKDUHVUHVXOWLQJIURPFRQYHUWLEOHORDQQRWHVWKDW Somers held as of September 30, 2015 and its representation on the board of directors of Ascot Lloyd. 6RPHUVZDVGHHPHGWRKDYHDFTXLUHGVLJQLȴFDQWLQȵXHQFHRYHU0HUULRQDQΖULVKKROGLQJFRPSDQ\E\YLUWXHRISRWHQWLDOYRWLQJVKDUHVUHVXOWLQJIURPFRQYHUWLEOHORDQQRWHVWKDW 6RPHUVKHOGDVRI6HSWHPEHUDQGLWVUHSUHVHQWDWLRQRQWKHERDUGRIGLUHFWRUVRI0HUULRQ (3) Amounts reported are based on the latest Ascot Lloyd accounts for the year to September 30, 2015. Figures are unaudited. $PRXQWVUHSRUWHGDUHEDVHGRQWKHODWHVW0HUULRQDFFRXQWVIRUWKH\HDUWR6HSWHPEHU)LJXUHVDUHXQDXGLWHG (5) Amounts reported are based on the latest Incol accounts for the year to September 30, 2015. Figures are unaudited.

Transactions with associate undertakings are disclosed in note 15.

6. Loans and Receivables Loans and receivables at September 30 were as follows:

2015 2014 Loans to unconsolidated subsidiaries $ – $ 3,248,094 Loans to associates 4,461,285 1,539,665 Total $ 4,461,285 $ 4,787,759 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 37

7. Other Assets Other assets at September 30 were as follows:

2015 2014 Accounts receivable $ – $ 205,165 Prepayments and other receivables 34,682 – Total $ 34,682 $ 205,165

Accounts receivable are not interest-bearing and are generally on terms of up to 30 days. The maximum exposure to credit risk and the fair value of the accounts receivable equate to the carrying amounts.

8. Other Liabilities Other liabilities at September 30 were as follows:

2015 2014 Accounts payable $ 182,987 $ 112,409 3D\DEOHVIRUȴQDQFLDOLQYHVWPHQWVSXUFKDVHG Ȃ Accrued investment management fees – 4,638,057 Accrued liabilities 375,571 192,775 Total $ 813,958 $ 4,943,241

9. Interest-Bearing Loans and Borrowings Interest bearing loans and borrowings at September 30 were as follows:

2015 2014 /RDQRIUHSD\DEOH-XO\ Ȃ Loan of $3,500,000 repaid November 2014 – 3,500,000 Total $ 6,000,000 $ 3,500,000

/RDQ 7KLVYDULDEOHUDWHORDQIURPWKH%DQNRI17%XWWHUȴHOGLVVHFXUHGE\DJXDUDQWHHIRUIURPΖ&0/LPLWHGDQGLVUHSD\DEOHLQIXOOLQ-XO\7KHORDQFDUULHVDQLQWHUHVWUDWH RIWKH%XWWHUȴHOG%DQN86EDVHUDWH DVDW6HSWHPEHU SOXVSHUDQQXP

/RDQ 7KLVȴ[HGLQWHUHVWUDWHORDQIURP8WLOLFRΖQYHVWPHQWV/LPLWHGZDVXQVHFXUHGDQGZDVUHSD\DEOHLQIXOOLQ'HFHPEHU7KHORDQFDUULHGDQLQWHUHVWUDWHRISHUDQQXPDQG was repaid in full in November 2014.

Compliance With Loan Covenants 6RPHUVKDVFRPSOLHGZLWKWKHȴQDQFLDOFRYHQDQWVRILWVERUURZLQJIDFLOLWLHVGXULQJWKHDQGUHSRUWLQJSHULRGVVHHQRWHIRUGHWDLOV

10. Equity All shares are common shares with a par value of $0.0001 each.

Authorised Issued & Fully Contributed Shares Par Value Paid Shares Par Value Surplus Balance at October 1, 2013 120,000,000 $ 12,000 10,695,790 $ 1,070 $ 148,472,640 Issuance of 165,702 shares under dividend reinvestment plan – – 165,702 16 1,988,409 Exercise of 620,735 warrants – – 620,735 62 7,448,758 Cancellation of treasury stock – – (181,143) (18) (2,224,207) Balance at September 30, 2014 120,000,000 $ 12,000 11,301,084 $ 1,130 $ 155,685,600

Issuance of 297,597 shares under dividend reinvestment plan – – 297,597 30 4,166,328 Exercise of 240,746 warrants – – 240,746 24 3,452,274 Cancellation of treasury stock – – (46,622) (5) (629,236) Balance at September 30, 2015 120,000,000 $ 12,000 11,792,805 $ 1,179 $ 162,674,966 38 SOMERS LIMITED

Treasury Stock 2015 2014 Number Number of Shares Amount of Shares Amount Balance at beginning of year 11,340 $ 143,580 45,388 $ 549,900 Purchase of treasury stock 35,282 485,661 148,095 1,829,905 Sale of treasury stock – – (1,000) (12,000) Cancellation of treasury stock (46,622) (629,241) (181,143) (2,224,225) Balance at end of year – $ – 11,340 $ 143,580

Regulatory Capital Certain of Somers’ unconsolidated subsidiaries have external regulatory capital requirements. BCB has complied with all minimum capital requirements prescribed by its regulator, the %HUPXGD0RQHWDU\$XWKRULW\IRUWKHFXUUHQW\HDU:DYHUWRQȇVOHDGUHJXODWRUWKH)LQDQFLDO&RQGXFW$XWKRULW\VHWVDQGPRQLWRUVFDSLWDOUHTXLUHPHQWVIRU:DYHUWRQDQGQREUHDFKHVZHUH reported during the year. Stockdale’s regulator, the Financial Conduct Authority, sets and monitors capital requirements for Stockdale and no breaches were reported during the year.

With the exception of BCB, Waverton and Stockdale the other subsidiaries are not subject to external regulatory capital requirements.

Loan Covenants 8QGHUWKHWHUPVRILWVEDQNERUURZLQJIDFLOLW\6RPHUVLVUHTXLUHGWRFRPSO\ZLWKWKHIROORZLQJȴQDQFLDOFRYHQDQWV

(a) Cash income to be a minimum of three times annual interest expense, and E 0LQLPXPQHWDVVHWVRI

Somers has complied with these covenants throughout the year.

Capital Management The Company’s capital levels are continuously reviewed by the Board of Directors in light of changes in economic conditions and the risk characteristics of the Company’s activities. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividend payments to shareholders, return capital to shareholders, or issue new capital securities.

There were no changes in the Company’s approach to capital management during the year.

Warrants Issued On December 14, 2012, the Company issued 240,746 warrants over Somers shares to Utilico. The warrants had an exercise price of $14.34 per share and were due to expire on December 31, 2015. During the year all 240,746 warrants were exercised by Utilico for an exercise consideration of $3,452,298. At September 30, 2015, there are no warrants outstanding.

Dividend Reinvestment Plan 7KH&RPSDQ\KDVHVWDEOLVKHGDGLYLGHQGUHLQYHVWPHQWSODQXQGHUZKLFKKROGHUVRIRUGLQDU\VKDUHVPD\HOHFWWRKDYHDOORUSDUWRIWKHLUGLYLGHQGHQWLWOHPHQWVVDWLVȴHGE\WKHLVVXH of new ordinary shares rather than by being paid in cash. Shares are issued under the plan based on the average share price on the Bermuda Stock Exchange for a predetermined period prior to the dividend payment date.

11. Earnings Per Share Weighted (Loss) Earnings Net (Loss) Earnings Average Shares Per Share 2015 basic loss per share Net loss $ (4,130,698) 11,624,454 $ (0.36) Add: incremental shares from assumed exercise of stock warrants (Note 10) – Adjusted weighted average shares outstanding 11,624,454

Diluted loss per share Net loss $ (4,130,698) 11,624,454 $ (0.36)

2014 basic earnings per share 1HWSURȴW Add: incremental shares from assumed exercise of stock warrants (Note 10) – Adjusted weighted average shares outstanding 11,135,076

Diluted earnings per share 1HWSURȴW NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 39

12. Dividends The Company declared and paid dividends as follows:

2015 2014 Final dividend for the year ended September 30, 2014 of 22.0 cents (2013:20.0 cents) per common share. Paid February 2015 $ 2,538,463 $ 2,251,292 Interim dividend for the year ended September 30, 2015 of 18.0 cents FHQWV SHUFRPPRQVKDUH3DLG-XO\ Total $ 4,641,106 $ 3,948,332

'LYLGHQGVSDLGLQFDVKRUVDWLVȴHGE\WKHLVVXHRIVKDUHVXQGHUWKHGLYLGHQGUHLQYHVWPHQWSODQGXULQJWKH\HDUVHQGHG6HSWHPEHUDQGZHUHDVIROORZV

2015 2014 Paid in cash 474,748 1,959,907 6DWLVȴHGE\LVVXHRIVKDUHV Total $ 4,641,106 $ 3,948,332

13. Interest Income The Company earned interest income as follows:

2015 2014 Loans and receivables $ 122,400 $ 1,762,672 )LQDQFLDODVVHWVDWIDLUYDOXHWKURXJKSURȴWRUORVV Total $ 1,285,818 $ 2,064,080

14. Gains on Investments The Company recorded the following (losses) gains on investments:

2015 2014 )LQDQFLDODVVHWVDWIDLUYDOXHWKURXJKSURȴWRUORVV Unrealised (losses) gains on investments $ (12,456,916) $ 28,271,077 Realised gains on sale of investments 9,148,468 – Total $ (3,308,448) $ 28,271,077

$YDLODEOHIRUVDOHȴQDQFLDODVVHWV Unrealised gains on investments $ – $ – Realised gains on sale of investments 179,221 91,857 Total $ 179,221 $ 91,857

Total (losses) gains on investments $ (3,129,227) $ 28,362,934

15. Related-Party Disclosures $VDW6HSWHPEHUWKHΖQYHVWRU*URXSKHOGLQDJJUHJDWH RI6RPHUVȇFRPPRQVKDUHV'HWDLOVRIWKHΖQYHVWRU*URXSDUHGLVFORVHGLQQRWH

7KHIROORZLQJDUHFRQVLGHUHGUHODWHGSDUWLHVRIWKH&RPSDQ\WKHΖQYHVWRU*URXS*HQHUDO3URYLQFLDO/LIH3HQVLRQ)XQG / /LPLWHGZKLFKKROGVRI8WLOLFRȇVRUGLQDU\VKDUHV0U 'XQFDQ6DYLOOHZKRRZQVRI3HUPDQHQW3HUPDQHQW0XWXDODQGΖ&0HQWLWLHVFRQWUROOHGE\WKHVHHQWLWLHVDQGLQGLYLGXDOVWKHVXEVLGLDULHVRIWKH&RPSDQ\VHWRXWXQGHUQRWH 4, the associates of the Company set out under note 5, and the Board of Somers.

The following transactions were carried out during the year ended September 30, 2015, between the Company and its related parties above:

Bermuda Commercial Bank Limited Somers uses BCB for banking services and enters into transactions with BCB under the same terms as an unrelated party would receive. For the year ended September 30, 2015, Somers paid BCB interest and fees of approximately $53,005 (2014: $594,173) for banking services provided to Somers.

At September 30, 2015, Somers had deposits with BCB amounting to $823,303 (2014: $159,107).

Somers received $1,600,000 (2014: $7,500,000) of dividends during the year from BCB consisting of cash received of $1,005,257 (2014: $7,500,000) and a non-cash dividend in the IRUPRIe3&)*FRQYHUWLEOHORDQQRWHVZLWKDIDLUYDOXHRI 40 SOMERS LIMITED

2Q6HSWHPEHU6RPHUVVROGWR%&%VKDUHVLQ3&)*DWWKHLUIDLUYDOXHRIDQGeRI3&)*FRQYHUWLEOHORDQQRWHVDWWKHLUIDLUYDOXHRI IRUDWRWDOFRQVLGHUDWLRQRI7KHFRQVLGHUDWLRQUHFHLYHGIURP%&%FRPSULVHGDFDVKFRQVLGHUDWLRQRIDQGVKDUHVLQ:HVW+DPLOWRQ +ROGLQJV/LPLWHGDWWKHLUFDUU\LQJYDOXHWR%&%RI1RYDOXDWLRQRIWKHVKDUHVLQ:HVW+DPLOWRQZDVSHUIRUPHGDWWKHWLPHRIWKHWUDQVDFWLRQ7KHIDLUYDOXHRIWKH shares at September 30, 2015, is $18,906,690, and together with Somers’ existing holding of 436,441 shares, are carried at their combined fair value of $25,654,032 (see note 18).

On December 30, 2014, Somers provided a guarantee to BCB in relation to loans of £1,225,000 provided by BCB to Stockdale.

Private & Commercial Finance Group plc ΖQ2FWREHU6RPHUVUHFHLYHGDGLYLGHQGLQWKHIRUPRIe3&)*FRQYHUWLEOHORDQQRWHVIURP%&%ΖQ6HSWHPEHU6RPHUVVROGWR%&%LWVHQWLUHKROGLQJRI VKDUHVLQ3&)*DQGLWVHQWLUHKROGLQJRIe3&)*FRQYHUWLEOHORDQQRWHV6RPHUVUHFHLYHGLQWHUHVWRI IURP3&)*LQUHODWLRQWRWKHVHFRQYHUWLEOH loan notes during the year.

Waverton Investment Management Limited Somers received $987,780 (2014: $Nil) of dividends during the year from Waverton.

During the prior year Somers provided loans to Waverton. These loans were fully repaid by Waverton during the year ended September 30, 2014. Waverton paid interest of $Nil to Somers in 2015 (2014: $1,517,839).

Stockdale Securities Limited At September 30, 2014, the balance of loans advanced from Somers to Stockdale Securities Limited amounted to £1,915,000. On December 17, 2014, Somers and Stockdale agreed WRFRQYHUWWKHVHORDQVLQWRSHUSHWXDOXQVHFXUHGQRQFXPXODWLYHFRQYHUWLEOHORDQQRWHVZLWKDIDFHYDOXHRIe7KHORDQQRWHVFDUU\Dȴ[HGLQWHUHVWUDWHRIIRUFDOHQGDU \HDULQFUHDVLQJWRWKHUHDIWHU7KHORDQQRWHVPD\EHFRQYHUWHGDWDQ\WLPHDQGXSRQFRQYHUVLRQ6RPHUVZRXOGRZQRI6WRFNGDOHȇVLVVXHGVKDUHFDSLWDO'XULQJWKH\HDU Somers charged Stockdale interest of $203,269 (2014: $224,601) on these loan notes of which $334,464 was receivable at September 30, 2015.

At September 30, 2015, Somers held £50,000 (2014: £50,000) Stockdale perpetual convertible loan notes issued on August 9, 2010.

During the year Somers paid Stockdale $15,932 (2014: $42,117) for consultancy services, which is included in legal and professional fees in the consolidated statement of income.

Somers has issued a guarantee to a third party asset manager in relation to brokerage operations provided by Stockdale to that asset manager. The Directors believe the probability of the guarantee being called upon is remote and no fee was charged for this guarantee.

West Hamilton Holdings Limited ΖQ6HSWHPEHU6RPHUVDFTXLUHGIURP%&%VKDUHVLQ:HVW+DPLOWRQDWWKHLUFDUU\LQJYDOXHWR%&%RI7KLVWUDQVDFWLRQUHGXFHG%&%ȇVKROGLQJRI:HVW +DPLOWRQVKDUHVWRQLODQGLQFUHDVHG6RPHUVȇKROGLQJWRVKDUHVUHSUHVHQWLQJRI:HVW+DPLOWRQȇVLVVXHGVKDUHV

6RPHUVUHFHLYHG1LO GLYLGHQGVGXULQJWKH\HDUIURP:HVW+DPLOWRQ

Resimac Limited (“Resimac”) Resimac is a related party as it is controlled by entities that also control Somers. In September 2015 Somers acquired, from a third party, 490,452 equity shares in Resimac, representing RI5HVLPDFȇVLVVXHGVKDUHFDSLWDOIRUDFRQVLGHUDWLRQRI$XVWUDOLDQ'ROODUV Ȋ$ȋ 7KHVKDUHVZHUHDFTXLUHGRQDQDUPȇVOHQJWKEDVLV

During the year, Somers sold available-for-sale securities to Resimac at a market value of A$795,662.

Resimac Treasury Services (UK) Ltd (“RTSL”) ΖQ-XQH6RPHUVDFTXLUHGRI576/IURP5HVLPDF/LPLWHGDUHODWHGSDUW\IRUDFRQVLGHUDWLRQRI$

576/ȇVSULPDU\DVVHWLVDVXERUGLQDWHGWUDQFKHRIPRUWJDJHEDFNHGȵRDWLQJUDWHQRWHVRI5HVLPDF8.50%61RSOF Ȋ8.50%6ȋ ZLWKDIDFHYDOXHRIe8.50%6LVDVSHFLDO SXUSRVHYHKLFOHVHWXSWRLVVXHPRUWJDJHEDFNHGȵRDWLQJUDWHQRWHVDVSDUWRIWKHVHFXULWLVDWLRQRIDSRUWIROLRRI8.UHVLGHQWLDOPRUWJDJHORDQV8QGHUWKHWHUPVRIWKHDFTXLVLWLRQ agreement, Somers assumed all of RTSL’s liabilities including promissory notes with a face value of £10,000,000.

1RYDOXDWLRQRI576/ZDVSHUIRUPHGDWWKHWLPHRIWKHDFTXLVLWLRQ7KHIDLUYDOXHRIWKHLQWHUHVWLQ576/DW6HSWHPEHULV7KHGL΍HUHQFHEHWZHHQWKHSXUFKDVH SULFHDQGWKH\HDUHQGIDLUYDOXHLVUHFRUGHGLQWKHFRQVROLGDWHGVWDWHPHQWRILQFRPHDVDJDLQRQȴQDQFLDOLQYHVWPHQWV

There were no other transactions with RTSL during the current or prior year. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 41

Ascot Lloyd Holdings Limited 'XULQJWKH\HDU6RPHUVDFTXLUHGDFRQYHUWLEOHORDQQRWHLQ$VFRW/OR\GZLWKDSDUYDOXHRIePLOOLRQDQGDVDW6HSWHPEHUKDGWKUHHFRQYHUWLEOHORDQQRWHVZLWKD FRPELQHGSDUYDOXHRIePLOOLRQ8SRQFRQYHUVLRQRIWKHWKUHHFRQYHUWLEOHORDQV6RPHUVZRXOGRZQRI$VFRW/OR\GȇVGLOXWHGLVVXHGVKDUHFDSLWDO

In addition, during the year Somers provided a loan facility to Ascot Lloyd of £2.0 million bringing total loan facilities to £3.2 million, of which £2.95 million was drawn down as at 6HSWHPEHU7KHIDFLOLWLHVKDYHȴYH\HDUWHUPVZLWKLQWHUHVWFXUUHQWO\SD\DEOHDW

During the year Ascot Lloyd paid interest of $448,178 (2014: $188,367) to Somers of which $161,501 was receivable at September 30, 2015.

Merrion Capital Holdings Limited ΖQ-XO\6RPHUVDFTXLUHGHTXLW\VKDUHVLQ0HUULRQIRUDFRQVLGHUDWLRQRIȜPLOOLRQDQGDFTXLUHGȜPLOOLRQRIFRQYHUWLEOHORDQQRWHVLVVXHGE\0HUULRQ8SRQFRQYHUVLRQ RIWKHFRQYHUWLEOHORDQQRWHV6RPHUVZRXOGRZQRI0HUULRQȇVGLOXWHGLVVXHGVKDUHFDSLWDO'XULQJWKH\HDU6RPHUVUHFHLYHGLQWHUHVWRI IURP0HUULRQ

Incol Limited ΖQ-XO\6RPHUVDFTXLUHGDLQWHUHVWLQΖQFRO7KHUHZHUHQRWUDQVDFWLRQVZLWKΖQFROGXULQJWKHFXUUHQW\HDU

Utilico Investments Limited ΖQ6HSWHPEHU6RPHUVUHFHLYHGDORDQIURP8WLOLFR7KLVXQVHFXUHGORDQFDUULHGDȴ[HGLQWHUHVWUDWHRIDQGZDVUHSD\DEOHRQ'HFHPEHU7KHORDQZDV repaid in full in November 2014. During the current year Somers received additional loan facilities of $2,750,000 from Utilico of which $2,665,000 was drawn down. These loans were XQVHFXUHGFDUULHGDȴ[HGLQWHUHVWUDWHRIDQGZHUHUHSD\DEOHRQ0DUFK7KHVHORDQVZHUHUHSDLGLQIXOORQ6HSWHPEHUDQGWKHORDQIDFLOLWLHVZHUHWHUPLQDWHG on that date. Somers paid interest of $70,494 (2014: $25,890) to Utilico on these loans.

ICM Limited Ζ&0/LPLWHGLVWKHLQYHVWPHQWPDQDJHURI6RPHUV%&%8WLOLFRDQGLQYHVWPHQWDGYLVRUWR%&%7KH'LUHFWRUVRIΖ&0DUH'XQFDQ6DYLOOH&KDUOHV-LOOLQJVDQG$ODVGDLU

ΖQ'HFHPEHU6RPHUVHQWHUHGLQWRDUHYLVHGLQYHVWPHQWDGYLVHUDJUHHPHQWZLWKΖ&07KLVUHYLVHGDJUHHPHQWUHSODFHGDQDJUHHPHQWHQWHUHGLQWRLQ'HFHPEHUDQG UHPDLQVLQIRUFHXQWLOWHUPLQDWHGE\6RPHUVE\JLYLQJΖ&0QRWOHVVWKDQVL[PRQWKȇVZULWWHQQRWLFHRIWHUPLQDWLRQRUE\Ζ&0JLYLQJ6RPHUVQRWOHVVWKDQWKUHHPRQWKVZULWWHQQRWLFHRI WHUPLQDWLRQRUVXFKOHVVHUSHULRGRIQRWLFHDV6RPHUVDQGΖ&0DJUHH

6RPHUVKDVDJUHHGWRSD\Ζ&0DQDQQXDOIHHIRULWVDGYLVRU\VHUYLFHVHTXDOWR SD\DEOHTXDUWHUO\LQDUUHDUV RIWKHJURVVDVVHWYDOXHRI6RPHUVȇȴQDQFLDOLQYHVWPHQWV)RUWKH\HDU ended September 30, 2015, this fee amounted to $534,783 (2014: $383,865), of which $Nil remained payable at year end. Included within the terms of the revised investment adviser DJUHHPHQWLVDSHUIRUPDQFHIHHSD\DEOHWRΖ&0LIWKHJURZWKLQWKH&RPSDQ\ȇVVKDUHKROGHUVȇHTXLW\H[FHHGVDKXUGOHUDWHHTXDOWRWKHKLJKHURIRUSOXVWKH8.5HWDLO3ULFHΖQGH[ LQȵDWLRQ Ȋ+XUGOH5DWHȋ 7KHIHHDUUDQJHPHQWLVSD\DEOHDWDUDWHRIRQWKHDPRXQWE\ZKLFKWKHJURZWKLQWKH&RPSDQ\ȇVVKDUHKROGHUVȇHTXLW\H[FHHGVWKH+XUGOH5DWH7KHJURZWK LQ6RPHUVȇVKDUHKROGHUVȇHTXLW\GLGQRWH[FHHGWKH+XUGOH5DWHLQDQGWKHUHIRUHQRSHUIRUPDQFHIHHZDVSD\DEOHIRUWKH\HDUHQGHG6HSWHPEHU

Ζ&0SURYLGHGDGPLQLVWUDWLRQDQGRWKHUSURIHVVLRQDOVHUYLFHVWR6RPHUVIRUZKLFK6RPHUVSDLGIHHVRI

'XULQJWKH\HDU6RPHUVHQWHUHGLQWRDQDJUHHPHQWZLWKΖ&0ZKHUHE\Ζ&0DJUHHGWRJXDUDQWHHDEDQNORDQREWDLQHGE\6RPHUV7KHDQQXDOIHHIRUWKLVJXDUDQWHHLV ($60,000) of which $15,000 was expensed in the year ended September 30, 2015.

2Q$SULO6RPHUVREWDLQHGDORDQIDFLOLW\IURPΖ&07KLVORDQZDVXQVHFXUHGFDUULHGDȴ[HGLQWHUHVWUDWHRIDQGZDVUHSD\DEOHRQ0DUFK7KHORDQ ZDVUHSDLGLQIXOORQ6HSWHPEHUDQGWKHORDQIDFLOLW\ZDVWHUPLQDWHGRQWKDWGDWH6RPHUVSDLGLQWHUHVWRIWRΖ&0RQWKHORDQ

The Board of Directors 'LUHFWRUVKDGWKHIROORZLQJEHQHȴFLDOLQWHUHVWLQWKH&RPSDQ\ȇVLVVXHGVKDUHFDSLWDO

2015 2014 'LUHFWRUVEHQHȴFLDOVKDUHLQWHUHVWV Duncan Saville 4,677,540 4,584,591 &KDUOHV-LOOLQJV :DUUHQ0F/HODQG 'DYLG0RUJDQ

0LFKDHO&ROOLHUZKRUHWLUHGDVD'LUHFWRURQ'HFHPEHUKHOGVKDUHVDVDW6HSWHPEHU

The Company’s directors’ fees for the year ended September 30, 2015, amounted to $67,333 (2014: $53,000). 42 SOMERS LIMITED

&KDUOHV-LOOLQJVZDVDGLUHFWRURI:DYHUWRQGXULQJWKH\HDUHQGHG6HSWHPEHUDQGUHFHLYHGGLUHFWRUVȇIHHVRIIRUWKH\HDU $ODVGDLU

BCB also provides banking services to directors under normal commercial terms. At September 30, 2015, directors and parties associated with directors had deposit balances with BCB of $516,233, (2014: $58,167). At September 30, 2015, total loans and advances provided to directors by BCB amounted to $8,196 (2014: $1,901,370).

Other In addition, the following transactions were carried out during the year between the Company’s subsidiaries and related parties:

BCB BCB provides banking services and enters into transactions with related parties of Somers under the same terms as an unrelated party would receive. Outstanding balances and/or transactions with related parties of Somers were as follows:

Available-for-sale Financial Investments At September 30, 2015, BCB held $Nil investments in its available-for-sale portfolio which are considered related (2014: $5,445,552).

BCB sold $Nil securities to related parties during the year (2014: $1,500,000).

BCB purchased $Nil securities from related parties during the year (2014: $1,500,000).

Loans and Advances to Customers At September 30, 2015, BCB had total loans and advances receivable from related parties of Somers amounting to $16,946,833 (2014: $18,130,111), of which $5,973,481 (2014: $2,038,645) was unsecured and $10,973,352 (2014: $16,091,465) was secured by the related parties’ cash and portfolio assets managed/custodied by BCB. The undrawn portion of credit facilities with related parties of Somers at September 30, 2015 totaled $393,924 (2014: $557,764).

For the year ended September 30, 2015, BCB earned net interest and fees of $669,805 (2014: $969,853) for banking services provided to related parties of Somers.

At September 30, 2015, BCB had investments in asset-backed notes in various securitisation entities established by Resimac, totaling $28,237,946 (2014: $31,653,936).

Deposit Liabilities At September 30, 2015, BCB had deposit balances placed by Somers’ related parties amounting to $132,164 (2014: $4,189,776).

Investment Adviser Agreement with ICM %&%KDVHQWHUHGLQWRDQLQYHVWPHQWDGYLVHUDJUHHPHQWZLWKΖ&0DQGKDVDJUHHGWRSD\Ζ&0DQDQQXDOIHHIRULWVDGYLVRU\VHUYLFHVHTXDOWRRIWKHYDOXHRI%&%ȇVLQYHVWPHQW portfolio. For the year ended September 30, 2015, such fees amounted to $1,051,132 (2014: $1,198,804) of which $Nil remained payable at year end (2014: $Nil). In addition, SXUVXDQWWRDFRQVXOWDQF\DJUHHPHQWDIHHRI ZDVSDLGWRΖ&0IRULWVFRQVXOWDQF\VHUYLFHV

In addition, depending upon the performance of the portfolio, BCB may, in its sole discretion, determine that the Investment Adviser should receive a payment on account of the services provided. During the year ended September 30, 2015, BCB paid the Investment Adviser a discretionary performance fee of $710,307 (2014: $1,300,000) of which $441,307 remained payable at year end (2014: $Nil).

RTSL 576/ZDVDFTXLUHGE\6RPHUVRQ-XQH3ULRUWRWKDWGDWH576/KDGERUURZHGIXQGVDQGLVVXHGSURPLVVRU\QRWHVWRHQWLWLHVUHODWHGWR6RPHUVZLWKDWRWDOIDFHYDOXHRI eZLWKDQLQWHUHVWUDWHRIWZHOYHPRQWK6WHUOLQJ/Ζ%25SOXV$W6HSWHPEHUWKHSURPLVVRU\QRWHVZHUHKHOGE\WKHIROORZLQJHQWLWLHV

2015 Bermuda Commercial Bank Limited £ 7,000,000 Utilico Investments Limited £ 2,000,000 Resimac Limited £ 1,000,000 Total £ 10,000,000

ΖQWKHSHULRG-XQHWR6HSWHPEHU576/DFFUXHGLQWHUHVWH[SHQVHVRIeRQWKHSURPLVVRU\QRWHVDQGDW6HSWHPEHUWRWDOLQWHUHVWSD\DEOHZDVe

$W6HSWHPEHU576/KDGDPRXQWVRZLQJWR5HVLPDFRI$UHODWLQJWRFRVWVLQFXUUHGE\5HVLPDFRQEHKDOIRI576/SULRUWR-XQH NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 43

16. Risk Management 7KH&RPSDQ\ȇVLQYHVWPHQWREMHFWLYHLVWRPD[LPLVHVKDUHKROGHUUHWXUQVE\LGHQWLI\LQJDQGLQYHVWLQJLQLQYHVWPHQWVZKHQWKHXQGHUO\LQJYDOXHLVQRWUHȵHFWHGLQWKHPDUNHWSULFH

The Company seeks to meet its investment objective by investing principally in a portfolio of unlisted companies. Derivative instruments may be used for purposes of hedging the XQGHUO\LQJSRUWIROLRRILQYHVWPHQWV7KH&RPSDQ\KDVWKHSRZHUWRHQWHULQWRVKRUWDQGORQJWHUPERUURZLQJVΖQSXUVXLQJWKHREMHFWLYHWKH&RPSDQ\LVH[SRVHGWRȴQDQFLDOULVNV 7KHVHȴQDQFLDOULVNVDUHSULQFLSDOO\UHODWHGWRWKHPDUNHW FXUUHQF\PRYHPHQWVLQWHUHVWUDWHFKDQJHVDQGVHFXULW\SULFHPRYHPHQWV OLTXLGLW\DQGFUHGLWDQGFRXQWHUSDUW\ULVN7KH %RDUGRI'LUHFWRUVLVUHVSRQVLEOHIRUWKH&RPSDQ\ȇVULVNPDQDJHPHQW7KH'LUHFWRUVȇSROLFLHVDQGSURFHVVHVIRUPDQDJLQJWKHȴQDQFLDOULVNVDUHVHWRXWLQ D WR H EHORZ

(a) Market Risk 7KHIDLUYDOXHRIȴQDQFLDOVHFXULWLHVKHOGLQWKH&RPSDQ\ȇVSRUWIROLRȵXFWXDWHZLWKFKDQJHVLQPDUNHWSULFHV0DUNHWULVNHPERGLHVFXUUHQF\ULVNLQWHUHVWUDWHULVNDQGSULFHULVN3ULFHV DUHD΍HFWHGE\PRYHPHQWVLQFXUUHQFLHVDQGLQWHUHVWUDWHVDQGE\RWKHUȴQDQFLDOLVVXHVLQFOXGLQJWKHPDUNHWSHUFHSWLRQRIIXWXUHULVNV7KH&RPSDQ\ȇVLQYHVWPHQWVPD\EHPDWHULDOO\ D΍HFWHGE\HFRQRPLFFRQGLWLRQVLQWKHJOREDOȴQDQFLDOPDUNHWVDQGWKRVHPDUNHWVZKHUH6RPHUVKDVPDWHULDOH[SRVXUH&DSLWDODQGFUHGLWPDUNHWVKDYHH[SHULHQFHGVLJQLȴFDQW YRODWLOLW\DQGGLVUXSWLRQRYHUUHFHQWSHULRGV8QFHUWDLQW\FUHDWHGE\PDUNHWDQGHFRQRPLFFRQGLWLRQVDQGDWLJKWHQLQJRIFUHGLWFRXOGOHDGWRGHFOLQHVLQYDOXDWLRQVRIȴQDQFLDOVHFXULWLHV ZLWKRXWUHJDUGWRWKHXQGHUO\LQJȴQDQFLDOFRQGLWLRQRIWKHLVVXHU

The Board sets policies for managing these risks within the Company’s objectives and meets regularly to review full, timely and relevant information on investment performance and ȴQDQFLDOUHVXOWV7KHΖQYHVWPHQW0DQDJHUDVVHVVHVH[SRVXUHWRPDUNHWULVNVZKHQPDNLQJHDFKLQYHVWPHQWGHFLVLRQDQGPRQLWRUVRQJRLQJPDUNHWULVNZLWKLQWKHSRUWIROLR7KH ΖQYHVWPHQW0DQDJHUFRQVXOWVZLWKWKH%RDUGRI'LUHFWRUVRQDTXDUWHUO\EDVLVRUPRUHIUHTXHQWO\DVUHTXLUHG

7KH&RPSDQ\ȇVRWKHUDVVHWVDQGOLDELOLWLHVPD\EHGHQRPLQDWHGLQFXUUHQFLHVRWKHUWKDQ86'ROODUVDQGPD\DOVREHH[SRVHGWRH[FKDQJHUDWHULVNV7KHΖQYHVWPHQW0DQDJHUDQGWKH Board regularly monitor these risks.

7KH&RPSDQ\GRHVQRWQRUPDOO\KROGVLJQLȴFDQWFDVKEDODQFHV%RUURZLQJVDUHOLPLWHGWRDPRXQWVDQGFXUUHQFLHVFRPPHQVXUDWHZLWKWKHSRUWIROLRȇVH[SRVXUHWRWKRVHFXUUHQFLHV thereby limiting the Company’s exposure to future changes in exchange rates.

Borrowings may be short or long term, in US Dollars and foreign currencies, and enable the Company to take a long term view of the countries and markets in which it is invested ZLWKRXWKDYLQJWREHFRQFHUQHGDERXWVKRUWWHUPYRODWLOLW\ΖQFRPHHDUQHGLQIRUHLJQFXUUHQFLHVLVFRQYHUWHGWR86'ROODUVRQUHFHLSW7KH%RDUGUHJXODUO\PRQLWRUVWKHH΍HFWVRQQHW revenue of interest earned on deposits and paid on borrowings.

Currency Exposure &XUUHQF\ULVNDULVHVIURPWKHSRVVLELOLW\WKDWȵXFWXDWLRQVLQIRUHLJQFXUUHQF\H[FKDQJHUDWHVZLOOD΍HFWWKHYDOXHRIWKH&RPSDQ\ȇVDVVHWVDQGOLDELOLWLHVWKH1HW$VVHW9DOXHDQGWKHPDUNHW price of the US Dollar equity shares. The Company’s functional currency is the US Dollar. As a result, foreign currency assets and liabilities are translated to US Dollars. The Company maintains LQYHVWPHQWVLQ6WHUOLQJ(XURV$XVWUDOLDQ'ROODUVDQGRWKHUFXUUHQFLHVDQGPD\LQYHVWLQȴQDQFLDOLQVWUXPHQWVDQGHQWHULQWRWUDQVDFWLRQVGHQRPLQDWHGLQFXUUHQFLHVRWKHUWKDQ86'ROODUV

When valuing investments that are denominated in currencies other than the functional currency, the Company is required to convert the values of such investments into its functional currency based on prevailing exchange rates as at the end of the applicable accounting period. Changes in exchange rates between the functional currency and other currencies could OHDGWRVLJQLȴFDQWFKDQJHVLQWKH1HW$VVHW9DOXHVWKDWWKH&RPSDQ\UHSRUWVIURPWLPHWRWLPHDQGFRXOGVXEMHFWVXFK1HW$VVHW9DOXHVWRIDYRXUDEOHRUXQIDYRXUDEOHȵXFWXDWLRQV $PRQJWKHIDFWRUVWKDWPD\D΍HFWFXUUHQF\YDOXHVDUHWUDGHEDODQFHVOHYHOVRIVKRUWWHUPLQWHUHVWUDWHVGL΍HUHQFHVLQUHODWLYHYDOXHVRIVLPLODUDVVHWVLQGL΍HUHQWFXUUHQFLHVORQJWHUP opportunities for investment and capital appreciation and political developments.

7KH&RPSDQ\PD\HQJDJHLQFXUUHQF\KHGJLQJWROLPLWWKH&RPSDQ\ȇVH[SRVXUHWRFXUUHQF\ȵXFWXDWLRQV&XUUHQF\KHGJLQJE\WKH&RPSDQ\PD\EHE\PHDQVRIVSRWDQGIRUZDUG IRUHLJQH[FKDQJHFRQWUDFWVRURSWLRQVRQVXFKFRQWUDFWVRUE\XVLQJVXFKRWKHUGHULYDWLYHLQVWUXPHQWVDVPD\EHDYDLODEOHDQGKDYLQJWKHVDPHRUVLPLODUH΍HFW7RGDWHWKH&RPSDQ\ has not engaged in currency hedging.

7KH&RPSDQ\ȇVXQGHUO\LQJLQYHVWPHQWVDUHGHQRPLQDWHGLQ6WHUOLQJ(XURV$XVWUDOLDQ'ROODUV1HZ=HDODQG'ROODUVDQG86'ROODUV7KHΖQYHVWPHQW0DQDJHUFRQVLGHUVFXUUHQF\ULVN ZKHQPDNLQJLQYHVWPHQWVLQWRQRQ86'ROODUGHQRPLQDWHGDVVHWVDQGPRQLWRUVFXUUHQF\PRYHPHQWVRQDQRQJRLQJEDVLV7KHΖQYHVWPHQW0DQDJHUGLVFXVVHVLWVSROLFLHVZLWKWKH Board of Directors on a regular basis and may choose to alter its asset allocation or currency risk strategies as a result.

$WWKHUHSRUWLQJGDWHWKHFDUU\LQJYDOXHRIWKH&RPSDQ\ȇVȴQDQFLDODVVHWVDQGȴQDQFLDOOLDELOLWLHVKHOGLQLQGLYLGXDOIRUHLJQFXUUHQFLHVDQGWKHQHWH[SRVXUHWRIRUHLJQFXUUHQFLHVZHUHDVIROORZV

2015 % of Company Financial Financial Net Financial Net Financial Hedging Net Assets Liabilities Assets Assets Contracts Exposure 6WHUOLQJ Ȃ (XUR Ȃ $XVWUDOLDQ'ROODU Ȃ Ȃ 1HZ=HDODQG'ROODU Ȃ 7RWDO Ȃ 44 SOMERS LIMITED

2014 % of Company Financial Financial Net Financial Net Financial Hedging Net Assets Liabilities Assets Assets Contracts Exposure 6WHUOLQJ Ȃ (XUR Ȃ $XVWUDOLDQ'ROODU Ȃ Ȃ 6LQJDSRUH'ROODU Ȃ Ȃ 7RWDO Ȃ

%DVHGRQWKHȴQDQFLDODVVHWVDQGOLDELOLWLHVKHOGDQGWKHH[FKDQJHUDWHVDWHDFKUHSRUWLQJGDWHDVWUHQJWKHQLQJRUZHDNHQLQJRIWKH86'ROODUDJDLQVWHDFKRIWKHVHFXUUHQFLHVE\ ZRXOGKDYHKDGWKHIROORZLQJDSSUR[LPDWHH΍HFWRQDQQXDOLVHGLQFRPHDIWHUWD[DQGRQ1HW$VVHW9DOXH 1$9 SHUVKDUH

Strengthening of US Dollar

2015 Australian New Zealand Singapore Sterling Euro Dollar Dollar Dollar Net income for the year $ (8,341,859) $ (398,671) $ (71,745) $ (25,540) $ – 1$9SHUVKDUHEDVLF Ȃ

2014 Australian New Zealand Singapore Sterling Euro Dollar Dollar Dollar Net income for the year $ (9,725,313) $ (449,306) $ (99,568) $ – $ (32,323) 1$9SHUVKDUHEDVLF Ȃ

Weakening of US Dollar 7KHUHOHYDQWZHDNHQLQJRIWKHUHSRUWLQJFXUUHQF\DJDLQVWWKHDERYHFXUUHQFLHVZRXOGKDYHUHVXOWHGLQDQHTXDOEXWRSSRVLWHH΍HFWRQQHWLQFRPHDQG1$9SHUVKDUHE\DPRXQWVVKRZQ above, on the basis that all other variables remain constant.

7KHVHDQDO\VHVDUHEURDGO\UHSUHVHQWDWLYHRIWKH&RPSDQ\ȇVDFWLYLWLHVGXULQJWKHFXUUHQW\HDUDVDZKROHDOWKRXJKWKHOHYHORIWKH&RPSDQ\ȇVH[SRVXUHWRFXUUHQFLHVȵXFWXDWHV throughout the year in accordance with the investment and risk management processes.

Interest Rate Exposure 7KH&RPSDQ\ȇVH[SRVXUHWRWKHULVNRIFKDQJHVLQLQWHUHVWUDWHVUHODWHVSULPDULO\WRLWVKROGLQJRIFRQYHUWLEOHGHEWVHFXULWLHVZLWKLQLWVȴQDQFLDOLQYHVWPHQWVSRUWIROLRDQGLWV YDULDEOHUDWHEDQNORDQ$SDUWIURPWKLVEDQNORDQWKH&RPSDQ\KDGQRȵRDWLQJUDWHGHEWREOLJDWLRQVDW6HSWHPEHURU6HSWHPEHU7KH&RPSDQ\KDVLQFXUUHGDQG expects to continue to incur, indebtedness to leverage certain investments. Due to the foregoing, the Company is, and believes that it will continue to be, exposed to risks associated ZLWKPRYHPHQWVLQSUHYDLOLQJLQWHUHVWUDWHV$QLQFUHDVHLQLQWHUHVWUDWHVFRXOGPDNHLWPRUHGLɝFXOWRUH[SHQVLYHWRREWDLQGHEWȴQDQFLQJFRXOGQHJDWLYHO\LPSDFWWKHYDOXHVRIȴ[HG income investments, and could decrease the returns that investments generate or cause them to generate losses.

$W6HSWHPEHUWKH&RPSDQ\KHOGFRQYHUWLEOHGHEWVHFXULWLHVZLWKDIDLUYDOXHRI 7KHVHVHFXULWLHVKDGȴ[HGLQWHUHVWUDWHV$SDUWIURPRQH VHFXULW\ZLWKDIDLUYDOXHRIWKDWKDGQRFRQWUDFWXDOPDWXULW\WKHUHPDLQLQJWHUPWRPDWXULW\YDULHGEHWZHHQWZRDQGȴYH\HDUVZLWKDZHLJKWHGDYHUDJHRI\HDUV 2.6 years). Changes to prevailing interest rates or changes in expectations of future rates may result in an increase or decrease in the value of these securities. In general, if interest UDWHVULVHWKHYDOXHRIȴ[HGLQFRPHVHFXULWLHVZLOOGHFOLQHDQGDGHFOLQHLQLQWHUHVWUDWHVZLOOKDYHWKHRSSRVLWHH΍HFW

The Company is, and believes that it will continue to be, subject to additional risks associated with changes in prevailing interest rates due to the fact that its capital is invested in underlying SRUWIROLRFRPSDQLHVZKRVHFDSLWDOVWUXFWXUHVPD\KDYHDVLJQLȴFDQWGHJUHHRILQGHEWHGQHVVΖQYHVWPHQWVLQOHYHUDJHGFRPSDQLHVDUHLQKHUHQWO\PRUHVHQVLWLYHWRGHFOLQHVLQUHYHQXHVLQFUHDVHV in expenses and interest rates and adverse economic, market and industry developments. A leveraged company’s income and net assets also tend to increase or decrease at a greater rate than would be the case if leverage was absent. As a result, the risk of loss associated with an investment in a leveraged company is generally greater than for companies with comparably less debt.

([WHUQDOERUURZLQJVZLOORQO\EHXQGHUWDNHQLIWKH'LUHFWRUVDQGWKHΖQYHVWPHQW0DQDJHUFRQVLGHUWKHSUHYDLOLQJLQWHUHVWUDWHVIDYRXUDEOHDQGWKDWWKHWHUPVDQGFRQGLWLRQVDWWDFKLQJ to such borrowings are acceptable, having regard to the investment objectives of the Company. As at September 30, 2015, the Company had bank loans of $6,000,000 (2014: $Nil) with a variable interest rate, and non-bank loans of $Nil (2014: $3,500,000)

7KHPDMRULW\RIWKH&RPSDQ\ȇVDVVHWVDUHQRQLQWHUHVWEHDULQJDQGWKHDVVHWVWKDWGRKDYHLQWHUHVWUDWHH[SRVXUHDUHHQWLUHO\DWȴ[HGUDWHV([FHVVFDVKKHOGE\WKH&RPSDQ\PD\EH LQYHVWHGLQVKRUWWHUPȴ[HGGHSRVLWDFFRXQWVWKDWDUHUROOHGRYHURQDUHJXODUEDVLVDQGDUHLPSDFWHGE\LQWHUHVWUDWHȵXFWXDWLRQVDVVXFKJLYLQJWKH&RPSDQ\YDULDEOHORDQVDQGFDVK GHSRVLWVΖWLVQRWVLJQLȴFDQWO\H[SRVHGWRLQWHUHVWUDWHULVNRQLWVRWKHUDVVHWVDQGOLDELOLWLHV NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 45

ΖQUHVSHFWRILQFRPHHDUQLQJȴQDQFLDODVVHWVDQGLQWHUHVWEHDULQJȴQDQFLDOOLDELOLWLHVWKHIROORZLQJWDEOHFODVVLȴHVWKHȴQDQFLDODVVHWVDQGOLDELOLWLHVE\ȴ[HGDQGYDULDEOHUDWHLQVWUXPHQWV

2015 2014 Fixed rate instruments Financial assets $ 24,653,369 $ 24,889,874 Financial liabilities – (3,500,000) $ 24,653,369 $ 21,389,874

Variable rate instruments Financial assets $ – $ – Financial liabilities (6,000,000) – $ (6,000,000) $ –

Total interest rate sensitivity gap $ 18,653,369 $ 21,389,874

An increase in 100 basis points in interest rates as at the reporting date would have decreased net interest income by $60,000 (2014: $Nil). A decrease of 100 basis points would have increased net interest income by $60,000 (2014: $Nil).

$VGHVFULEHGDERYHDFKDQJHLQLQWHUHVWUDWHVPD\LPSDFWWKHIDLUYDOXHRIWKH&RPSDQ\ȇVȴ[HGUDWHGHEWLQVWUXPHQWV$QLQFUHDVHLQEDVLVSRLQWVLQLQWHUHVWUDWHVDVDWWKHUHSRUWLQJ date would have reduced annual net income and shareholders’ equity by approximately $625,731 (2014: $415,030). A decrease of 100 basis points would have had an equal but RSSRVLWHH΍HFWRQQHWLQFRPHDQGVKDUHKROGHUVȇHTXLW\

Exposure to Other Price Risk 2WKHUSULFHULVNLVWKHULVNWKDWWKHYDOXHRIWKHLQVWUXPHQWZLOOȵXFWXDWHDVDUHVXOWRIFKDQJHVLQPDUNHWSULFHV RWKHUWKDQWKRVHDULVLQJIURPLQWHUHVWUDWHULVNRUFXUUHQF\ULVN ZKHWKHUFDXVHG E\IDFWRUVVSHFLȴFWRDQLQGLYLGXDOLQYHVWPHQWLWVLVVXHURUDOOIDFWRUVD΍HFWLQJDOOLQVWUXPHQWVWUDGHGLQWKDWPDUNHW$VPDQ\RIWKH&RPSDQ\ȇVȴQDQFLDOLQVWUXPHQWVDUHFDUULHGDWIDLUYDOXH ZLWKIDLUYDOXHFKDQJHVUHFRJQLVHGLQWKHVWDWHPHQWRIFRPSUHKHQVLYHLQFRPHVXFKFKDQJHVLQPDUNHWFRQGLWLRQVZLOOD΍HFWQHWJDLQVRQLQYHVWPHQWVDQGWKH&RPSDQ\ȇVQHWDVVHWYDOXH

7KHYDOXDWLRQRIXQTXRWHGLQYHVWPHQWVGHSHQGVXSRQDFRPELQDWLRQRIPDUNHWIDFWRUVDQGWKHSHUIRUPDQFHRIWKHXQGHUO\LQJDVVHWV7KHΖQYHVWPHQW0DQDJHUPRQLWRUVSULFHULVNDQG consults with the Board of Directors on a quarterly basis, or more frequently as the case may be. The impact on valuations of the Company’s larger unquoted investments from changing FHUWDLQXQREVHUYDEOHLQSXWVXVHGLQWKH&RPSDQ\ȇVYDOXDWLRQVZKHUHWKHYDOXHLVHVWLPDWHGE\WKH'LUHFWRUVDQGΖQYHVWPHQW0DQDJHULVSUHVHQWHGLQQRWH

7KH&RPSDQ\DOVRKDVGLUHFWH[SRVXUHWRDVVHWVWKDWDUHSXEOLFO\WUDGHGRQYDULRXVHTXLW\PDUNHWV7KHVHUHSUHVHQW RIWKH&RPSDQ\ȇVSRUWIROLRIDLUYDOXHDVDW September 30, 2015.

(b) Liquidity Risk Exposure 7KH&RPSDQ\ȇVȴQDQFLDOLQVWUXPHQWVSULPDULO\LQFOXGHLQYHVWPHQWVLQXQOLVWHGHTXLW\LQYHVWPHQWVWKDWDUHQRWSXEOLFO\WUDGHGDQGWKHUHIRUHPD\EHLOOLTXLG$VDUHVXOWWKH&RPSDQ\ may not be able to liquidate some of its investments in these instruments at an amount close to their fair value, or in a timely manner, should such liquidation be necessary to meet liquidity requirements.

7KHULVNRIWKH&RPSDQ\KDYLQJLQVXɝFLHQWOLTXLGLW\LVQRWFRQVLGHUHGE\WKH%RDUGWREHVLJQLȴFDQWJLYHQWKHORZOHYHORIOHYHUDJHWKHDEVHQFHRIRXWVWDQGLQJXQGUDZQFRPPLWPHQWV and other obligations and the amount of quoted investments held in the Company’s portfolio.

7KH&RPSDQ\ȇVH[SRVXUHWROLTXLGLW\ULVNLVDFWLYHO\PDQDJHGDQGPRQLWRUHGRQDQRQJRLQJEDVLVE\WKHΖQYHVWPHQW0DQDJHUDQGE\WKH%RDUG7KHΖQYHVWPHQW0DQDJHUIUHTXHQWO\ review upcoming capital requirements as well as potential exit and other monetisation events. Allocations to new investments take into consideration the near term capital needs ZLWKLQWKH&RPSDQ\ȇVEURDGHUHTXLW\SRUWIROLR:KHUHWKHΖQYHVWPHQW0DQDJHUEHOLHYHVWKHUHPD\EHXSFRPLQJOLTXLGLW\UHTXLUHPHQWVWKH\ZLOOWDNHQHFHVVDU\DFWLRQWRHQVXUHWKDW adequate funds are available. 46 SOMERS LIMITED

7KHFRQWUDFWXDOPDWXULWLHVRIȴQDQFLDOOLDELOLWLHVDQGȴQDQFLDODVVHWVEDVHGRQWKHHDUOLHVWGDWHRQZKLFKSD\PHQWFDQEHUHTXLUHGDUHDVIROORZV

2015 Less than 1 month 1-3 months 3 months - 1 year More than 1 year Total Financial asset by type Cash and cash equivalents $ 1,108,676 $ – $ – $ – $ 1,108,676 Other assets – – – – – Interest receivable 520,134 – – – 520,134 Loans and receivables – – – 4,461,285 4,461,285 Financial investments – – – 10,655,460 10,655,460 Total $ 1,628,810 $ – $ – $ 15,116,745 $ 16,745,555

Financial liability by type Interest payable $ – $ – $ – $ – $ – Other liabilities 813,958 – – – 813,958 Interest-bearing loans and borrowings – – 6,000,000 – 6,000,000 Total $ 813,958 $ – $ 6,000,000 $ – $ 6,813,958

2014 Less than 1 month 1-3 months 3 months - 1 year More than 1 year Total Financial asset by type Cash and cash equivalents $ 216,418 $ – $ – $ – $ 216,418 Other assets 205,165 – – – 205,165 Interest receivable 69,876 16,127 – – 86,003 Loans and receivables – – – 4,787,759 4,787,759 Financial investments – – – 20,102,115 20,102,115 Total $ 491,459 $ 16,127 $ – $ 24,889,874 $ 25,397,460

Financial liability by type Interest payable $ 25,890 $ – $ – $ – $ 25,890 Other liabilities 112,409 – 4,638,057 – 4,750,466 Interest-bearing loans and borrowings 3,500,000 – – – 3,500,000 Total $ 3,638,299 $ – $ 4,638,057 $ – $ 8,276,356

Assets and liabilities with no contractual maturity are not included in this table.

(c) Credit Risk and Counterparty Exposure The Company is exposed to potential failure by counterparties to deliver securities for which the Company has paid, or to pay for securities which the Company has delivered. The Company’s overall credit risk is managed by the Board of Directors. The Board approves all counterparties used in such transactions, which must be settled on a basis of delivery against payment (except where local market conditions do not permit). Cash and deposits are held with reputable banks including BCB, a subsidiary of the Company.

The Company is exposed to the risk of non-payment of loans and debt securities provided to investee companies. No collateral is received from the underlying companies. It is believed that the risk of default is low, and the capital repayments and interest payments will be made in accordance with the agreed terms and conditions. No terms and conditions have been renegotiated.

7KH&RPSDQ\ȇVSULQFLSDOFXVWRGLDQVDUH%&%DQG-30RUJDQ&KDVH%DQN7KH&RPSDQ\KDVDQRQJRLQJFRQWUDFWZLWK%&%IRUWKHSURYLVLRQRIFXVWRG\VHUYLFHVDQG6RPHUVXVHV -30RUJDQ&KDVH%DQNWRVSHFLȴFDOO\FXVWRG\LWVOLVWHGLQYHVWPHQWV'HWDLOVRIVHFXULWLHVKHOGLQFXVWRG\RQEHKDOIRIWKH&RPSDQ\DUHUHFHLYHGDQGUHFRQFLOHGPRQWKO\

7RWKHH[WHQWWKDWΖ&0FDUULHVRXWGXWLHV RUFDXVHVLPLODUGXWLHVWREHFDUULHGRXWE\WKLUGSDUWLHV RQWKH&RPSDQ\ȇVEHKDOIWKH&RPSDQ\LVH[SRVHGWRFRXQWHUSDUW\ULVN7KH%RDUG DVVHVVHVWKLVULVNUHJXODUO\WKURXJKPHHWLQJVZLWKΖ&0

7KH&RPSDQ\ȇVSROLF\LVWRSURYLGHȴQDQFLDOJXDUDQWHHVRQO\IRUVXEVLGLDULHVȇOLDELOLWLHV$VVHWRXWLQQRWHDW6HSWHPEHUWKH&RPSDQ\KDGLVVXHGRQHJXDUDQWHHWRDWKLUG party asset manager in relation to brokerage operations provided by a subsidiary. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 47

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2015 2014 Cash and cash equivalents $ 1,108,676 $ 216,418 Other assets – 205,165 Interest receivable 520,134 86,003 Loans and receivables 4,461,285 4,787,759 Financial investments 20,192,084 20,102,115 Total $ 26,282,179 $ 25,397,460

(d) Fair Values of Financial Assets and Liabilities 7KHDVVHWVDQGOLDELOLWLHVRIWKH&RPSDQ\DUHLQWKHRSLQLRQRIWKH'LUHFWRUVUHȵHFWHGLQWKHFRQVROLGDWHGVWDWHPHQWRIȴQDQFLDOSRVLWLRQDWIDLUYDOXH%RUURZLQJVXQGHUORDQIDFLOLWLHVGR QRWKDYHDYDOXHPDWHULDOO\GL΍HUHQWIURPWKHLUFDSLWDOUHSD\PHQWDPRXQW%RUURZLQJVLQIRUHLJQFXUUHQFLHVDUHFRQYHUWHGLQWR86'ROODUVDWH[FKDQJHUDWHVUXOLQJDWHDFKYDOXDWLRQGDWH

Unquoted investments are valued based on assumptions and professional advice that may not be supported by prices from available current market transactions or by observable market data. The Directors make use of recognised valuation techniques and may take account of recent arms’ length transactions in the same or similar investments. Details of the valuation process for unquoted investments are set out in note 18.

(e) Reliance on Investment Manager 7KH&RPSDQ\UHOLHVRQWKHΖQYHVWPHQW0DQDJHUDQGLWVDELOLW\WRHYDOXDWHLQYHVWPHQWRSSRUWXQLWLHVDQGWRIXUWKHUGHYHORSWKH&RPSDQ\ȇVLQYHVWPHQWV7KHΖQYHVWPHQW0DQDJHU H[HUFLVHVDFHQWUDOUROHLQWKHLQYHVWPHQWGHFLVLRQPDNLQJSURFHVV$FFRUGLQJO\WKHUHWXUQVRIWKH&RPSDQ\ZLOOGHSHQGRQWKHSHUIRUPDQFHRIWKHΖQYHVWPHQW0DQDJHU

17. Segment Information The Directors are of the opinion that the Company’s activities comprise a single operating segment, which is identifying and investing in investments where the underlying value is not UHȵHFWHGLQWKHPDUNHWSULFHWRPD[LPLVHVKDUHKROGHUUHWXUQV

18. Financial Instruments 7KH&RPSDQ\XVHVWKHIROORZLQJKLHUDUFK\IRUGHWHUPLQLQJDQGGLVFORVLQJWKHIDLUYDOXHRIȴQDQFLDOLQVWUXPHQWVE\YDOXDWLRQWHFKQLTXH

/HYHOTXRWHG XQDGMXVWHG SULFHVLQDFWLYHPDUNHWVIRULGHQWLFDOȴQDQFLDOLQVWUXPHQWV /HYHORWKHUWHFKQLTXHVIRUZKLFKDOOLQSXWVZKLFKKDYHDVLJQLȴFDQWH΍HFWRQWKHUHFRUGHGIDLUYDOXHDUHREVHUYDEOHHLWKHUGLUHFWO\RULQGLUHFWO\DQG /HYHOWHFKQLTXHVZKLFKXVHLQSXWVZKLFKKDYHDVLJQLȴFDQWH΍HFWRQWKHUHFRUGHGIDLUYDOXHWKDWDUHQRWEDVHGRQREVHUYDEOHPDUNHWGDWD

Financial Instruments Recorded at Fair Value Available-for-Sale Financial Investments 7KHUHZHUHQRDYDLODEOHIRUVDOHȴQDQFLDODVVHWVYDOXHGXVLQJYDOXDWLRQWHFKQLTXHVGXULQJWKH\HDUHQGHG6HSWHPEHURU

)DLU9DOXH7KURXJK3URȴWRU/RVV)LQDQFLDOΖQYHVWPHQWV )LQDQFLDODVVHWVDW)DLU9DOXHWKURXJK3URȴWRU/RVVWKDWDUHYDOXHGXVLQJYDOXDWLRQWHFKQLTXHVLQFOXGHXQTXRWHGHTXLW\DQGGHEWVHFXULWLHV7KHVHDVVHWVDUHYDOXHGXVLQJPRGHOVWKDW XVHERWKREVHUYDEOHDQGXQREVHUYDEOHGDWD7KHXQREVHUYDEOHLQSXWVWRWKHPRGHOVLQFOXGHDVVXPSWLRQVUHJDUGLQJWKHIXWXUHȴQDQFLDOSHUIRUPDQFHRIWKHLQYHVWHHLWVULVNSURȴOH and economic assumptions regarding the industry, and geographical jurisdiction in which the investee operates.

Valuation Methodology 7KHREMHFWLYHRIXVLQJYDOXDWLRQWHFKQLTXHVLVWRDUULYHDWDIDLUYDOXHPHDVXUHPHQWWKDWUHȵHFWVWKHSULFHWKDWZRXOGEHUHFHLYHGWRVHOOWKHDVVHWRUSDLGWRWUDQVIHUWKHOLDELOLW\LQDQ orderly transaction between market participants at the measurement date.

7KH&RPSDQ\XVHVSURSULHWDU\YDOXDWLRQPRGHOVZKLFKDUHXVXDOO\GHYHORSHGIURPUHFRJQLVHGYDOXDWLRQPRGHOV6RPHRUDOORIWKHVLJQLȴFDQWLQSXWVLQWRWKHVHPRGHOVPD\QRWEHREVHUYDEOHLQWKH PDUNHWDQGDUHGHULYHGIURPPDUNHWSULFHVRUUDWHVRUDUHHVWLPDWHGEDVHGRQDVVXPSWLRQV9DOXDWLRQPRGHOVWKDWHPSOR\VLJQLȴFDQWXQREVHUYDEOHLQSXWVUHTXLUHDKLJKHUGHJUHHRIPDQDJHPHQW MXGJHPHQWDQGHVWLPDWLRQLQWKHGHWHUPLQDWLRQRIIDLUYDOXH0DQDJHPHQWMXGJHPHQWDQGHVWLPDWLRQDUHXVXDOO\UHTXLUHGIRUWKHVHOHFWLRQRIWKHDSSURSULDWHYDOXDWLRQPRGHOWREHXVHGGHWHUPLQDWLRQ RIH[SHFWHGIXWXUHFDVKȵRZVRQWKHȴQDQFLDOLQVWUXPHQWEHLQJYDOXHGGHWHUPLQDWLRQRIWKHSUREDELOLW\RIFRXQWHUSDUW\GHIDXOWDQGSUHSD\PHQWVDQGVHOHFWLRQRIDSSURSULDWHGLVFRXQWUDWHV

)DLUYDOXHHVWLPDWHVREWDLQHGIURPVXFKPRGHOVDUHDGMXVWHGIRUDQ\RWKHUIDFWRUVVXFKDVFRQWUROOLQJLQWHUHVWKLVWRULFDODQGSURMHFWHGȴQDQFLDOGDWDHQWLW\VSHFLȴFVWUHQJWKVDQG weaknesses, or model uncertainties, to the extent that the Company believes that a third party market participant would take them into account in pricing a transaction. Where DSSURSULDWHWKH'LUHFWRUVPD\DOVRHQJDJHWKHVHUYLFHVRIDWKLUGSDUW\YDOXDWLRQȴUPWRDVVLVWZLWKYDOXLQJFHUWDLQDVVHWV

7KH'LUHFWRUVKDYHVDWLVȴHGWKHPVHOYHVDVWRWKHPHWKRGRORJLHVXVHGWKHGLVFRXQWUDWHVDQGNH\DVVXPSWLRQVDSSOLHGDQGWKHHVWLPDWHGYDOXDWLRQ7KH/HYHODVVHWVFRPSULVHD number of unlisted investments at various stages of development and each has been assessed based on its industry, location, and place in the business cycle. Where sensible, the 'LUHFWRUVKDYHWDNHQLQWRDFFRXQWREVHUYDEOHGDWDDQGHYHQWVWRXQGHUSLQWKHYDOXDWLRQV8QOLVWHGYDOXDWLRQVZKLFKDUHEDVHGRQREVHUYDEOHGDWDKDYHEHHQGLVFRXQWHGWRUHȵHFWWKH LOOLTXLGQDWXUHRIWKHLQYHVWPHQW7KHVHGLVFRXQWVKDYHUDQJHGEHWZHHQDQGGHSHQGLQJRQWKHQDWXUHDQGFKDUDFWHULVWLFVRIHDFKLQYHVWPHQW 48 SOMERS LIMITED

Waverton - UK Incorporated 9DOXDWLRQLQSXWV0DLQWDLQDEOH(9(%Ζ7'$PXOWLSOHRIWLPHV8QOLVWHGGLVFRXQWDSSOLHGRI

9DOXDWLRQ0HWKRGRORJ\:DYHUWRQKDVEHHQYDOXHGEDVHGRQSHHUFRPSDULVRQVDQGLQSDUWLFXODU(9(%Ζ7'$/LVWHGSHHUYDOXDWLRQVDYHUDJHWLPHVIRU$IWHUDSSO\LQJDGLVFRXQWWKH YDOXDWLRQLVePLOOLRQ ePLOOLRQ 6RPHUVKROGVDHTXLW\LQWHUHVWLQ:DYHUWRQDQGDVDW6HSWHPEHUFDUULHGWKLVLQYHVWPHQWDWePLOOLRQ ePLOOLRQ

Sensitivities: Should the EBITDA of Waverton move by £1.0 million the gain or loss in valuation would be £6.1 million. Should the peer group multiple ascribed to Waverton’s EBITDA be reduced/increased by 1.0 the change in valuation for Somers would be £3.6 million.

BCB - Bermuda Incorporated 9DOXDWLRQLQSXWV6XPRIWKHSDUWVYDOXDWLRQ

9DOXDWLRQ0HWKRGRORJ\)DLUYDOXHRI%&%ȇVLGHQWLȴDEOHDVVHWVDQGOLDELOLWLHV6RPHUVKDVDLQWHUHVWLQ%&%DQGWKLVZDVYDOXHGDWPLOOLRQ PLOOLRQ

6HQVLWLYLWLHV6KRXOG%&%ȇVQHWDVVHWVLQFUHDVHGHFOLQHE\WKHUHZRXOGEHDQHTXDOFKDQJHLQWKHYDOXDWLRQ

West Hamilton - Bermuda Incorporated 9DOXDWLRQLQSXWV)DLUYDOXHRI:HVW+DPLOWRQȇVLGHQWLȴDEOHDVVHWVDQGOLDELOLWLHV

9DOXDWLRQ0HWKRGRORJ\6RPHUVKDVDLQWHUHVWLQ:HVW+DPLOWRQ6RPHUVȇKROGLQJZKLFKZDVYDOXHGDWPLOOLRQDW6HSWHPEHU$W6HSWHPEHU6RPHUV KDGDGLUHFWLQWHUHVWLQ:HVW+DPLOWRQYDOXHGDWPLOOLRQ

6HQVLWLYLWLHV6KRXOG:HVW+DPLOWRQȇVQHWDVVHWVLQFUHDVHGHFOLQHE\PLOOLRQWKHJDLQORVVLQYDOXDWLRQZRXOGEHPLOOLRQ

Ascot Lloyd - UK Incorporated 9DOXDWLRQLQSXWV0DLQWDLQDEOH(9(%Ζ7'$PXOWLSOHRIWLPHV8QOLVWHGGLVFRXQWDSSOLHGRI

9DOXDWLRQ0HWKRGRORJ\7KH$VFRW/OR\GFRQYHUWLEOHORDQQRWHVDUHYDOXHGE\VHSDUDWHO\YDOXLQJWKHLUORDQDQGRSWLRQFRPSRQHQWVDQGDJJUHJDWLQJWKHWZRYDOXHV$VFRW/OR\GȇVHTXLW\ ZKLFKIRUPVWKHEDVLVIRUWKHYDOXDWLRQRIWKHRSWLRQFRPSRQHQWKDVEHHQYDOXHGEDVHGRQSHHUFRPSDULVRQVDQGLQSDUWLFXODU(9(%Ζ7'$/LVWHGSHHUYDOXDWLRQVDYHUDJHWLPHV IRU$IWHUDSSO\LQJDGLVFRXQW$VFRW/OR\GZDVYDOXHGDWePLOOLRQ

6HQVLWLYLWLHV6RPHUVȇKROGLQJRI$VFRW/OR\GFRQYHUWLEOHQRWHVZDVYDOXHGDWePLOOLRQDW6HSWHPEHU6KRXOGWKHYDOXHRI$VFRW/OR\GȇVHTXLW\LQFUHDVHGHFUHDVHE\ there would be a £1.0 million increase/£1.0 million decrease in valuation for Somers.

Other 9DOXDWLRQ0HWKRGRORJ\6RPHUVKDVDIXUWKHUVL[XQOLVWHGKROGLQJVZLWKYDOXHVIURPPLOOLRQWRPLOOLRQHDFK7KHVHZHUHYDOXHGXVLQJDPL[WXUHRIFRVWIRUUHFHQWLQYHVWPHQWV ZKHUHQRPDWHULDOHYHQWVKDGWDNHQSODFHVLQFHDFTXLVLWLRQZKLFKZRXOGLPSDFWIDLUYDOXH(9(%Ζ7'$(95HYHQXHIDLUYDOXHRIQHWDVVHWVGLVFRXQWHGFDVKȵRZVXVLQJPDUNHWUDWHV and using fair value for the equity portion of convertible loan notes. The total value of these six holdings was $14.6 million at September 30, 2015.

7KHIROORZLQJWDEOHVKRZVDQDQDO\VLVRIȴQDQFLDOLQYHVWPHQWVUHFRUGHGDWIDLUYDOXHE\OHYHORIWKHIDLUYDOXHKLHUDUFK\

2015 Level 1 Level 2 Level 3 Total )LQDQFLDODVVHWVDWIDLUYDOXHWKURXJKSURȴWRUORVV Equity investments $ – $ – $ 188,816,911 $ 188,816,911 Debt securities – – 20,192,084 20,192,084 $ – $ – $ 209,008,995 $ 209,008,995

$YDLODEOHIRUVDOHȴQDQFLDODVVHWV Equity investments $ 855,260 $ – $ – $ 855,260 855,260 – – 855,260

Total $ 855,260 $ – $ 209,008,995 $ 209,864,255 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 49

2014 Level 1 Level 2 Level 3 Total )LQDQFLDODVVHWVDWIDLUYDOXHWKURXJKSURȴWRUORVV Equity investments $ 3,403,086 $ – $ 191,952,988 $ 195,356,074 Debt securities – 11,678,090 8,424,025 20,102,115 3,403,086 11,678,090 200,377,013 215,458,189

$YDLODEOHIRUVDOHȴQDQFLDODVVHWV Equity investments 2,826,203 – – 2,826,203 2,826,203 – – 2,826,203

Total $ 6,229,289 $ 11,678,090 $ 200,377,013 $ 218,284,392

0RYHPHQWLQ/HYHOȴQDQFLDOLQVWUXPHQWVPHDVXUHGDWIDLUYDOXH

Equity Investments Debt Securities Total )LQDQFLDODVVHWVDWIDLUYDOXHWKURXJKSURȴWRUORVV At October 1, 2013 $ 161,840,509 2,832,200 164,672,709 7RWDOJDLQV ORVVHV UHFRUGHGLQSURȴW Purchases 6,511,708 5,891,585 12,403,293 Disposals – – – At September 30, 2014 191,952,988 8,424,025 200,377,013

7RWDO ORVVHV JDLQVUHFRUGHGLQSURȴW Purchases 20,588,756 6,085,945 26,674,701 Disposals – – – At September 30, 2015 $ 188,816,911 20,192,084 209,008,995

7KHUHZHUHQR/HYHODYDLODEOHIRUVDOHȴQDQFLDODVVHWVKHOGGXULQJWKH\HDUVHQGHG6HSWHPEHUDQG6HSWHPEHU

7KHUHZHUHQR/HYHOȴQDQFLDOOLDELOLWLHVKHOGGXULQJWKH\HDUVHQGHG6HSWHPEHUDQG6HSWHPEHU

There were no transfers between fair value levels during the year or the prior year.

19. Subsequent Events (΍HFWLYH'HFHPEHUWKH%RDUGRI'LUHFWRUVUHVROYHGWRSD\DȴQDOGLYLGHQGIRUWKH\HDUHQGHG6HSWHPEHULQWKHDPRXQWRISHUVKDUHWRVKDUHKROGHUVRIUHFRUG DW-DQXDU\DQGWKLVZDVSDLGRQ-DQXDU\ 50 SOMERS LIMITED

Notes NOTES 51

Notes 52 SOMERS LIMITED

Notes COMPANY INFORMATION

Company Number: 46441 www.somers.bm

Directors Registered Auditor Warren McLeland (Chairman) .30*$XGLW/LPLWHG David Morgan Crown House Alasdair Younie 3DUOD9LOOH5RDG Charles Jillings Hamilton HM 08 Duncan Saville Bermuda

Secretary 5HJLVWHUHG2ɝFH BCB Charter Corporate Services Limited 3DUOD9LOOH5RDG 0LQWȵRZHU3ODFH Hamilton HM 11 3DUOD9LOOH5RDGWK)ORRU Bermuda Hamilton HM 08 Bermuda Legal Adviser to the Company (as to English law) Investment Manager 1RUWRQ5RVH)XOEULJKW//3 ICM Limited 3 More London Riverside VW)ORRU London SE1 2AQ 3DUOD9LOOH5RDG United Kingdom Hamilton HM 11 Bermuda Legal Adviser to the Company (as to Bermuda law) Company Banker &RQ\HUV'LOO 3HDUPDQ/LPLWHG Bermuda Commercial Bank Limited Clarendon House 3DUOD9LOOH5RDG 2 Church Street Hamilton HM 11 Hamilton HM 11 Bermuda Bermuda

Registrar Custodians BCB Charter Corporate Services Limited Bermuda Commercial Bank Limited 0LQWȵRZHU3ODFH 3DUOD9LOOH5RDG 3DUOD9LOOH5RDGWK)ORRU Hamilton HM 11 Hamilton HM 08 Bermuda Bermuda -30RUJDQ&KDVH%DQN1$ %DQN6WUHHW Canary Wharf /RQGRQ(-3 United Kingdom SOMERS LIMITED | 19 PAR-LA-VILLE ROAD | HAMILTON HM 11 | BERMUDA