CORAL GROWTH INVESTMENTS LIMITED
ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE PERIOD FROM 1 JANUARY 2009 TO 31 MARCH 2010 CORAL GROWTH INVESTMENTS LIMITED
Contents
Page
Directors 1-2
Management and Administration 3
Investment Portfolio 4
Report of the Investment Manager 5-8
Directors' Report and Statement of Directors' Responsibilities 9-10
Independent Auditor's Report to the Members of Coral Growth Investments Limited 11
Balance Sheet 12
Income Statement 13
Reconciliation of Movement in Shareholders' Funds 14
Cash Flow Statement 15
Notes to the Financial Statements 16-29 CORAL GROWTH INVESTMENTS LIMITED
Directors
Peter Grant CBE (Chairman) Mr. Grant was Deputy Chairman of London Merchant Securities plc, and is Chairman of Egyptian Direct Investment Fund Limited, The Egypt Investment Company Limited and Coral Growth Investments (Parallel) Limited and is a Director of other companies. He retired as Chairman of Sun Life Corporation PLC in April 1995 and was previously with Lazard Brothers & Co, Limited 1952-88, Vice-Chairman 1983-85 and Deputy Chairman 1985-88. He retired as a Director of BNP UK Holdings Limited in April 2005. He was formerly a member of the council of the Institute of Directors and the Civil Aviation Authority and of the Industrial Development Advisory Board of the Department of Trade and Industry and Chairman of the Finance Committee of the British Red Cross. In 1997 he was named as a commander of the Order of the British Empire.
Fahad Al-Rajaan Mr. Al-Rajaan is the Director General of the Public Institution for Social Security in Kuwait. He is also the Chairman of Ahli United Bank-Bahrain, Ahli United Bank (UK), Delta International Bank (Cairo) and Wafra Investment Advisory Group (New York). He is a director of National Industries Group (Kuwait). Mr. Al-Rajaan is a graduate of the American University in Washington D.C. In 1976 he started his career as manager of the “New Issues Department” of the Kuwait Investment Company. In 1981 he joined Kuwait Real Investment Consortium as Chairman and Managing Director. He held the position of Chairman of the Egyptian Gulf Bank (Cairo) and Deputy Chairman of the Industrial Bank of Kuwait (Kuwait). Mr. Al-Rajaan is a Director of Coral Growth Investments (Parallel) Limited.
Richard Blum Richard C. Blum is Chairman and CEO of Blum Capital Partners, L.P., a private equity firm he founded in 1975. Mr. Blum and his partners invest in middle market, usually publicly traded companies. Blum Capital takes significant interests in publicly owned companies and then works cooperatively with management to pursue financial or business strategies that will enhance shareholder value over the long term. Blum Capital Partners, L.P. is based in San Francisco and has approximately US$4 billion of capital under management with 17 investment professionals. Mr. Blum is also co-Founder and co-Chair of TPG Capital L.P. ("TPG"). TPG, established thirteen years ago, is a pioneer in private equity in Asia, managing US$3.2 billion of capital. He also currently serves as Chairman of the Board of Directors of CB Richard Ellis Group, Inc., a global market leader real estate services firm. He is a director of Fairmont Raffles Holding International, Current Media, L.L.C., and is on the board of Myer Pty. Ltd. Mr. Blum has long had philanthropic interests, primarily focused on global poverty and education. He is Founder and Chairman of the American Himalayan Foundation (“AHF”), which was established 25 years ago. AHF has 170 projects providing vital healthcare, educational, environmental and cultural preservation throughout the Himalayan region. He is the Honorary Consul of Mongolia and Nepal. In 2006, with a US$15 million grant from Mr. Blum, the Blum Center for Developing Economies at the University of California, Berkeley, was established. The center fosters student interest in the developing world and in working on projects abroad. Four years ago, Mr. Blum founded the Global Economy and Development Center at The Brookings Institution and the Blum-Brookings Conference, to develop policy research strategy and to work on individual projects. Mr. Blum is now serving as the Chairman of the University of California Board of Regents. He is a trustee and a member of the executive committee of The Carter Center, founded by former President Jimmy Carter. In addition, he is currently on the Boards of The Wilderness Society and The California Academy of Sciences. Mr. Blum earned both his B.A. and M.B.A. from the University of California at Berkeley. In 2006 he received an honorary doctoral degree from the University of San Francisco’s McLaren College of Business. Mr. Blum is a Director of Egyptian Direct Investment Fund Limited and of Coral Growth Investments (Parallel) Limited.
Ove Hoegh Mr. Hoegh is the former senior partner of Hoegh Invest A/S, a family owned company. Mr. Hoegh is a graduate of the Royal Norwegian Naval Academy and has an MBA from Harvard Business School. From 1966 to 1974 he was Managing Director of Leif Hoegh & Co A/S and from 1974 to 1979 was Chairman of the same company. Mr. Hoegh has served on the boards of a number of Norwegian companies and associations. He is a director of The Egyptian Growth Investment Company Limited and of Coral Growth Investments (Parallel) Limited.
1 CORAL GROWTH INVESTMENTS LIMITED
Directors (continued)
Bertrand Viriot Mr. Viriot was the Managing Director of the Saudi French Bank in Riyadh. This bank is a joint venture between the Crédit Agricole Indosuez and leading Saudi businessmen and is one of the most successful joint venture banks in Saudi Arabia. Mr. Viriot started his career in investment banking with Morgan Stanley & Co. in New York and joined the Suez Group in 1967 in Paris. In 1969 he became Director of Suez American Corporation in New York until 1973. He returned to Paris at that time with the Suez Group which had then become Crédit Agricole Indosuez. From 1973 to date, Mr. Viriot took senior assignments for Crédit Agricole Indosuez in Paris, New York and Hong Kong in 1987 when he became Senior Country Officer for the Group in Hong Kong and China. In 1993 Mr. Viriot spent a year as Senior Country Officer in the United Kingdom. From 1994 to 1997 he was Senior Country Officer for Australia and New Zealand based in Australia. Mr. Viriot is a graduate of the University of Paris and a graduate of the Paris Law School and Institute of Political Sciences. Mr. Viriot is a Director of Coral Growth Investments (Parallel) Limited.
Mohamed Younes Mr. Younes is the Chairman of the Concord Group. From July 1977 to December 1979 Mr. Younes was President of Industrial Holdings Limited in New York. Prior to that, he was head of International Corporate Finance and a member of the Board of Directors of Kidder, Peabody & Co. Incorporated. From December 1979 to February 1987 he was Chairman and Chief Executive of Kidder, Peabody International Limited. He was appointed Chairman of the Concord Group in 1988 and concurrently served as Chairman of Baring Brothers & Co., Inc., the New York based corporate finance affiliate of Baring Brothers & Co., Limited, until 1992. Mr. Younes is a graduate of Cairo University and has a MBA from the Harvard Business School. He has served on the boards of Directors of Euroclear Clearance System, UBAF Arab American Bank, New York and Baring Brothers & Co. Limited, London. He has served on a number of advisory committees on securities-related issues, including the Advisory Committee on International Capital Markets to the Board of the New York Stock Exchange and the International Capital Committee of the Securities Industry Association, New York. Mr. Younes served two terms as a member of the Board of Directors of the Central Bank of Egypt. He was the Chairman of the International Advisory Board of the Cairo Stock Exchange and a founder and member of the board of directors of the Egyptian Investment Management Association. He is vice chairman and a director of Pioneer Securities and a member of the boards of directors of Bisco Misr, Lecico Egypt, Amoun Pharmaceuticals, IT Investments, The Egyptian Investment Company, The Egypt Investment Company Limited, The Egyptian Direct Investment Company Limited, Coral Growth Investments (Parallel) Limited, Castle Property Company Limited and Crown Investments Limited respectively.
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Management and Administration
Registered Office Administrator, Secretary, Registrar and Channel 2nd Floor Islands Stock Exchange Sponsor Regency Court Butterfield Fulcrum Group (Guernsey) Limited Glategny Esplanade P.O. Box 211 St Peter Port Regency Court Guernsey Glategny Esplanade Channel Islands GY1 3NQ St Peter Port Guernsey Legal Advisers Channel Islands GY1 3NQ As to Guernsey Law Ogier Custodian Ogier House HSBC Bank, Egypt St Julian's Avenue 3 Abou El Feda Street St Peter Port Zamalek Guernsey Cairo 11211 Channel Islands GY1 1WA Egypt
Investment Manager Auditors Stanhope Overseas Limited Ernst & Young LLP C/O Concord International Investments PO Box 9 725 Fifth Ave Royal Chambers New York St Julian's Avenue NY 10022 St Peter Port USA Guernsey Channel Islands GY1 4AF Placing Agent Concord (BVI) International Limited Sea Meadow House Blackburne Highway Road Town, Tortola British Virgin Islands
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Investment Portfolio as at 31 March 2010
Fair % of net assets Nominal Cost Value attributable to US$ US$ holders of participating redeemable preference shares Listed investments
Equity: Lecico Egypt SAE 3,009,825 17,475,783 12,066,437 12.58%
Bonds: Arab Republic Egypt 8.75% 18.07.2012 9,050,000 1,614,670 1,668,756 1.74%
Unlisted investments
Equity: Coral Growth Holdings* 18,924,610 18,856,021 37,741,349 39.34%
Treasury Notes: Egyptian Treasury Notes 9.5% 13.04.2010 146,000,000 26,347,072 26,431,468 27.55% Egyptian Treasury Notes 9.45% 18.05.2010 91,000,000 16,322,449 16,327,245 17.02% Total Treasury Notes 42,669,521 42,758,713 44.57%
Total investments 80,615,995 94,235,255 98.22%
Cash at bank and other net assets attributable to holders of participating redeemable preference shares 1,711,404 1.78%
Total net assets attributable to holders of participating redeemable preference shares 95,946,659 100.00%
* The Company's holding of 18,924,610 shares in Coral Growth Holdings represents 49.50% of the total issued share capital of that Company as at 31 March 2010 (see note 5 to the financial statements).
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Report of the Investment Manager Overview The fund has reviewed over 70 potential investments from the date of its inception in December 2005 to date. During 2009, the fund called all the remaining committed capital in anticipation of finalizing two additional investments during the year. One of the deals was in the ready mix concrete sector. Extensive study was made on the viability of the project. A strategic partner, who has led the establishment of a similar successful project in the Emirates, was identified. A detailed business plan and financial model was developed. The land for the project was identified and negotiations with its owners were made. A number of drafts of the land sale contract were reviewed and amended. Key management figures were identified and offer letters were sent to them, which they accepted. The shareholders agreement was drafted and reviewed by the parties. After work of almost nine months on that deal, the strategic partner experienced personal problems which hindered him from continuing with the project as agreed. This was a great disappointment to us since we had plans to close this transaction during the first quarter of 2010. Another deal which did not reach a closing was a potential investment in the radiology sector. One of the major Gulf private equity firms has identified an opportunity in that sector and had asked Coral to join in the acquisition to benefit from Concord’s local expertise. The fund reviewed the investment and attended due diligence meetings. However, we decided to decline the investment based on the final financial due diligence report which revealed a major contingent tax liability on the company that resulted from under reporting of revenues to the tax authority. In Egypt, the tax authority is the most senior creditor in the company and has priority in case of distribution of the company’s assets. There is no statute of limitation on these liabilities. A third deal was an opportunity in the pharmaceutical sector. The company is a start up and is specialized in the production of oncology products. We reviewed that investment with Amoun as we thought it would be a good addition to its portfolio and that Coral can co-invest with Amoun in that opportunity. We studied the business plan and visited the site with the management team of Amoun. We did not pursue the investment further because its current shareholders / management did not have a clear vision as to how they will market and sell the products of the company. The local demand for the company’s products is very limited and the company should direct most of sales to the European market. A fourth deal was an investment in a commercial printing group. We thoroughly reviewed the business plan of each of the group members and conducted negotiations with its founders. A deal did not materialize because the selling founders were asking for a high valuation which is not justifiable given this sector’s growth rate, current status and product mix of the group. Regarding the current portfolio, Amoun Pharmaceutical Company had a remarkable year whereby both revenues and profitability witnessed material improvement. As for Lecico Egypt, its performance for the year was relatively good given the financial crises which hit all its exports market. We are hopeful that during 2010, the fund will conclude lucrative investments and that the performance of the current portfolio will further show material improvements.
Update on the performance of the Company's investments Amoun Pharmaceutical Company Financial and Operational update Historical figures below are extracted from the audited consolidated financial statements. Starting 2008 the company issued consolidated statements of Amoun Pharmaceutical Company and Amoun Distribution Company (99.8% owned by Amoun Pharmaceutical). 2009 2008 LE'000 LE'000 % Change Revenues 694,127 559,752 24.0% Net Operating Profit 275,865 205,559 34.2% EBITDA 311,725 236,184 32.0% Net Profit Before Tax (NPBT) 81,932 (625) - Tax (9,408) (1,257) 648.4% Net Profit After Tax (NPAT) 72,524 (1,882) - LE LE Earnings per Share 0.24 (0.01) -
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Report of the Investment Manager (continued) Update on the performance of the Company's (continued) Amoun Pharmaceutical Company (continued) Financial and Operational update (continued) The increase in revenues by 24% in 2009 compared to 2008 is mainly driven by the rise in human revenues. Human revenues for 2009 reached LE 666.1 million, an increase of 25.5% from 2008's level of LE 530.8 million. The rise in human sales is attributed to the following: ● The channel stocking at the distributors finally ended by December 2008, whereby sales started to increase in the local market reflecting real market demand. ● Improved product availability, better utilization of production capacity, marketing and promotional activities directed towards the company’s 60 top-selling products (representing 90% of Amoun’s sales) out of a total of 180 products. ● Increased focus on sales channeled through national distributors after full conversion to the new distribution outsourcing model. The EBITDA margin increased from 42% in 2008 to 45% in 2009, driven by: ● A decrease in Cost of Goods Sold / Sales ratio from 38.2% to 36.5% in 2009. This improvement was mainly due to economies of scale, in addition to a favorable product mix. ● The Selling, General & Administrative Expenses / Sales decreased from 2008’s level of 21.1% to 20.3% in 2009 due to economies of scale achieved as a result of sales expansion and outsourcing distribution. The company achieved a positive Net Profit Before Tax figure of LE 81.9 million in 2009, compared to a Net Loss Before Tax in 2008. The improved performance in 2009 was primarily driven by the aforementioned improvement in revenues, decrease in Cost of Goods Sold / Sales ratio, and a lower interest expense. Interest expense decreased from LE 184 million in 2008 to LE 176 million in 2009, and interest income increased from LE 5 million in 2008 to LE 6 million in 2009. Hence, Net Profit after Tax / Sales recorded a remarkable improvement as it increased from a negative 0.3% in 2008 to 10.4% in 2009. According to the IMS1 2009 annual report, Amoun experienced a growth rate of 18.3% versus the overall market rate of 18.7%. It occupies the third position in the local pharmaceutical market, with a market share of 5.2% for 2009, closely following GlaxoSmithKline and EIPICO with market shares of 7.0% and 5.6% respectively. Amoun had appointed Dr. Mustafa Hassan as the CEO of Amoun in May 2009. Prior to Amoun, Dr. Hassan had 26 years of experience with Bristol-Myer Squibb (BMS). Dr. Hassan led the sale of Bristol-Myers Squibb Egypt to GlaxoSmithKline (GSK) in late 2008, a deal size of approximately USD 210 million. Dr. Hassan holds a Pharmaceutical and Chemistry Science degree from Mansoura University in Egypt. Dr. Hassan had managed to bring talented managers from the market; replacing the Head of Engineering department by a talented engineer from GSK, hiring 3 product managers from GSK, two regional sales managers from BMS and one marketing manager from BMS. The Consortium decided during Q4 2009 to increase the capital of Mercury (Cayman) Holdings by USD 77.5 million over 2 tranches at a subscription price of USD5.4 /share. This will bring the capital of the company to USD 371 million. ● Mercury (Cayman) Holdings will provide the funds to Amoun as a shareholder subordinated interest-free loan which will be used to repay part of the syndicated bank debt to reduce interest and principal payments burden and to finance its future expansion in the local and regional markets. ● The subscription price of USD 5.4 was the price offered a financial investor who had indicated interest to subscribe for USD 50 million contribution in the proposed capital raise at Mercury (Cayman) Holdings. ● Each of the Consortium members subscribed in the capital increase. Crown Investments Limited is the new private equity fund managed by Concord. Crown subscribed for a total of USD 7.5 million in the said capital increase. ● Tranche I of USD 15.5 million has already been paid into Mercury (Cayman) Holding during the last week of December 2009 and the funds were further transferred to Amoun as a subordinated shareholders debt. ● Coral Growth Holding’s ownership in Mercury (Cayman) Holding was diluted after the first tranche to 13.33%. It will witness after this dilution a further dilution to 11.1% after the payment of the second tranche that will bring the total capital increase in Mercury (Cayman) Holding to USD77.5 million. This is expected to take place by 30 April 2010. ● Crown’s ownership stake in Mercury (Cayman) Holdings after the full capital increase of USD 77.5 million will be 2.02%.
1 IMS is an independent market research firm which publishes data on pharmaceutical companies' sales.
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Report of the Investment Manager (continued) Update on the performance of the Company's (continued) Amoun Pharmaceutical Company (continued) Financial and Operational update (continued) The table below shows the ownership of Coral Growth Investment Limited (CGIL) and Coral Growth Investment Parallel Limited (CGIPL) in Coral Growth Holding and the effective ownership in Amoun before the capital increase in Mercury (Cayman) Holding (MCH) and after Tranche I and Tranche II of the increase. CGIL CGIPL Total Ownership in Coral Growth Holding 49.50% 14.01% 63.51% Indirect ownership in Amoun before MCH's capital increase 6.95% 1.97% 8.92% Indirect ownership in Amoun after Tranche II of MCH's capital increase 6.60% 1.87% 8.47% Indirect ownership in Amoun after Tranche II of MCH's capital increase 5.50% 1.56% 7.06%
Lecico Egypt S.A.E. Financial and Operational update Lecico Egypt acts as an operating and parent company for the Lecico Group of companies which includes manufacturing facilities and trading subsidiaries. Consolidated sales represent sales of manufacturing subsidiaries in Egypt, Lebanon and France. KPMG audits the consolidated financial statements of the Group; the following analysis is based on such consolidated figures. 2009 2008 LE'000 LE'000 % Change Revenues 1,055,262 1,088,653 -3.1% Net Operating Profit 182,556 171,990 6.1% EBITDA 273,726 252,442 8.4% Net Profit Before Tax (NPBT) 139,673 139,756 -0.1% Tax (19,629) (19,811) -0.9% Net Profit After Tax (NPAT) 120,044 119,945 0.1% LE LE Earnings per Share* 2.75 2.72 1.1% *Earnings per share ratio is based on Lecico Egypt's number of shares of 40 million shares for 2008 and 2009.
Lecico Egypt’s performance for 2009 is considered to be remarkable given the worldwide financial crises which affected all its export markets Revenues witnessed a slight drop of 2.3% as it decreased from LE 1.08 billion in 2008 to LE 1.06 billion in 2009 despite the major economic crises that . The revenue drop was driven by lower sanitary ware revenue, with a decline in average selling prices due to the sharp decline in the Sterling and Euro against the Egyptian pound. This was partially offset by better performance in the tiles segment as a result of the increased proportion of higher-priced exports which witnessed price increases in most markets. The product mix continued to shift towards tiles, as tiles revenue recorded 41.1% of 2009 revenues versus 39.7% in 2008. The EBITDA margin increased from 23.4% in 2008 to 25.9% in 2009, driven by decreases in both the Cost of Goods Sold / Sales ratio and Selling, General and Administrative expenses / Sales ratios: ● The Cost of Goods Sold / Sales ratio decreased from 64.9% in 2008 to 63.7% in 2009. This was mainly due to improved efficiencies and cost-cutting measures undertaken by the company in general, in addition to the increase in tile gross profit margins. ● Selling, General and Administrative Expenses / Sales were down by 0.5% year on year to record 17.6% in 2009. In absolute terms, Selling, General and Administrative Expenses decreased by 5% to LE 186 million in 2009. The decrease came from the impact of lower exchange rates on the overheads for Lecico PLC and France in addition to the benefits of the cost saving initiatives implemented by the management during the year. The net profit after tax margin, increased from 11.1% in 2008 to 11.4% in 2009. The annual general assembly meeting of Lecico Egypt that was held on March 31st, 2010, approved a cash dividend distribution to shareholders of LE 60 million (LE 1.5 per share) and a 50% bonus share issue.
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Report of the Investment Manager (continued) Update on the performance of the Company's (continued) Lecico Egypt S.A.E. (continued) Financial and Operational update (continued) The table below represents the new number of shares owned by both Coral Growth Investment Limited (CGIL) and Coral Growth Investment (Parallel) Limited (CGIPL), as well as the value of the cash dividends.
Lecico CGIL CGIPL Total Total Total % Ownership 100.0% 7.5% 2.1% Total number of shares 40,000,000 3,009,825 851,290 Bonus shares 20,000,000 1,504,913 425,645 Net Nb. Of Shares 60,000,000 4,514,738 1,276,935 2009 Dividends (LE) 60,000,000 4,514,738 1,276,935 Lecico launched a new brassware joint venture, Sarrdesign, in partnership with Engineer Raouf Shaarawi, the former Chairman and Managing Director of Jacob Delafon in Egypt: Lecico approved an expansion on its original program to build a new tile plant in Borg El-Arab (Alexandria), Egypt. The expanded investment plan will increase the planned capacity of the plant to 17 million square meters, which represents 70% of the current tile capacity. The tile plant has been operating at full capacity for several years.
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Directors' Report and Statement of Directors' Responsibilities
The Directors of Coral Growth Investments Limited (the"Company") present the Annual Report and Audited Financial Statements for the 15 month period ended 31 March 2010. Incorporation The Company was incorporated in Guernsey on 24 March 2005 and is a closed-ended investment company with limited liability. The Company was authorised by the States of Guernsey Advisory & Finance Committee under the Control of Borrowing (Bailiwick of Guernsey) Ordinances 1959 to 1989. The Company was listed on the Channel Island Stock Exchange ('CISX') on 31 January 2006. During 2008, the Guernsey Financial Services Commission (GFSC) amended the rules in respect of Closed ended Funds formerly authorised under the Control of Borrowing (Bailiwick of Guernsey) Ordinances 1959 to 1989 to bring all such funds under the Protection of Investors (Bailiwick of Guernsey) Law 1987. This amendment required that closed ended funds elect to be either a registered or authorised fund. The Company elected to be classified as an authorised closed ended fund. Term The Company has a fixed initial life of 10 years from the First Closing. This term may be extended once only by two further years by a resolution of the Board of Directors.
Principal Activity The principal activity of the Company is that of a closed-ended investment fund. The investment objective of the Company is to achieve long term capital appreciation by taking advantage of significant opportunities for direct investments in Egypt. The investments will be in equity and equity related securities. The Company will make investments in the modernisation of Egyptian industry and industry related services of the private sector as well as privatised companies in connection with restructurings, recapitalisations and capital injections. The Company may provide capital to entrepreneurs or corporate partners seeking to establish new ventures in Egypt.
Results & Dividends The Directors do not propose a dividend for the year. The results for the year are set out in the Income Statement on Page 13.
Change of accounting year end The Directors agreed to change the Company's accounting year end to 31 March from 31 December in order that regulatory deadlines can be met. Previously the timing of the receipt of 31 December audited financial statements from the investee companies made the 6 month deadline impractical. The new year end provides a further 3 months to ensure all relevant audited information can be supplied to the Company's auditors.
Significant Shareholdings The following shareholdings represent interests of 3 per cent. or more of the total number of participating preference shares of the Company as at the date of this report: Number Number Of Units Of Shares Percentage The Public Institution for Social Security (Kuwait) 500 10,000 55.2% The Saudi National Commercial Bank 250 5,000 27.6% JJ Mack 50 1,000 5.5% Export Development Bank of Egypt 40 800 4.4% 840 16,800 92.7%
The following were the Directors of the Company during the period under review and at the date of this report: Peter Grant, CBE (Chairman)* Fahad Al-Rajaan Richard C. Blum Ove Hoegh* Bertrand P. Viriot* Mohamed S. Younes Tarek ben Halim resigned from the board on 31 October 2009, due to ill health. He passed away on 11 December 2009. *Independent Director The biographical information relating to the Directors is shown on pages 1 to 2.
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Directors' Report and Statement of Directors' Responsibilities (Continued) The Board acts independently of the Investment Manager and a majority of the Directors are not employees of, or professional advisers to the Investment Manager or any other company in the Concord International Investments Group, LP. The address of each of the Directors for the purposes of the Company is the registered office of the Company. Richard C. Blum is the holder of 400 redeemable participating preference shares of the Company. Fahad Al-Rajaan is the Director General of the Public Institution for Social Security in Kuwait which holds 10,000 redeemable participating preference shares of the Company. Except for Mr Mohamed Younes, who is Chairman of Concord International Investments Group, LP., the parent company of the Investment Manager, no Director of the Company, was or is materially, interested in any contract of significance relating to the Company subsisting during, or at the end of, the financial year. The Chairman is entitled to an annual fee of US$30,000. Each of the other Directors is entitled to an annual fee of US$20,000. These fees are allocated equally between the Company and the Company's parallel fund, Coral Growth Investments (Parallel) Limited. There has been no change in these interests between 31 March 2010 and the date of this report.
Statement of Directors' Responsibilities
The Directors are responsible for preparing financial statements for each financial period which give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period and which are in accordance with applicable laws. In preparing those financial statements the Directors are required to: * select suitable accounting policies and apply them consistently; * make judgements and estimates that are reasonable and prudent; * state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; and * prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business. The Directors confirm that they have complied with the above requirements in preparing the financial statements and that the going concern basis for the preparation of the financial statements is appropriate. The Directors are responsible for keeping proper accounting records which are sufficient to show and explain the Company's transactions and are such as to disclose with reasonable accuracy at any time the financial position of the Company and which enable them to ensure that the financial statements are properly prepared in accordance with The Companies (Guernsey) Law, 2008. They are also responsible for safeguarding the assets of the Company and for taking reasonable steps for the prevention and detection of fraud and other irregularities. So far as the Directors are aware, there is no relevant audit information of which the Company's auditors are unaware, having taken all the steps the Directors ought to have taken to make themselves aware of any relevant audit information and to establish that the Company's auditors are aware of that information.
Corporate Governance The Directors are committed to ensuring that high standards of corporate governance are maintained and have made it Company policy to comply with best practice on corporate governance, insofar as the Directors believe it is relevant and appropriate to the Company, and notwithstanding the fact that as a CISX listed company which is incorporated in Guernsey, the Company has no legal obligation to comply with the “Combined Code” (i.e. the Code of Best Practice published by the Committee on the Financial Aspects of Corporate Governance).
Auditors
A resolution proposing the re-appointment of Ernst & Young LLP as Auditors of the Company is to be proposed at the forthcoming Annual General Meeting.
By Order of the Board
Ove Hoegh - Director Mohamed Younes - Director 30 September 2010
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Independent Auditor's Report to the Members of Coral Growth Investments Limited
We have audited the company's financial statements for the 15 month period ended 31 March 2010 which comprise the Balance Sheet, Income Statement, Reconciliation of Movement in Shareholders' Funds, Cash Flow Statement and the related notes 1 to 18. These financial statements have been prepared on the basis of the accounting policies set out therein. This report is made solely to the company’s members, as a body, in accordance with Section 262 of the Companies (Guernsey) Law, 2008. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of Directors and Auditors As disclosed in the Statement of Directors' Responsibilities the Directors of the company are responsible for the preparation of the financial statements in accordance with applicable Guernsey law. Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland). We report to you our opinion as to whether the financial statements give a true and fair view and are properly prepared in accordance with the Companies (Guernsey) Law, 2008. We also report to you if, in our opinion, the company has not kept proper accounting records, the financial statements are not in agreement with the accounting records, or if we have not received all the information and explanations we require for our audit. We read other information contained in the Annual Report and consider whether it is consistent with the audited financial statements. The other information comprises only the Directors, Management and Administration, Investment Portfolio, Report of the Investment Manager, Directors' Report and Statement of Directors' Responsibilities. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements. Our responsibilities do not extend to any other information.
Basis of audit opinion We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgements made by the Directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the company's circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements.
Opinion In our opinion the financial statements give a true and fair view, in accordance with United Kingdom Accounting Standards, of the state of the company’s affairs as at 31 March 2010 and of its profit for the 15 month period then ended, and have been properly prepared in accordance with the Companies (Guernsey) Law, 2008.
Ernst & Young LLP Guernsey, Channel Islands Date: 30 September 2010
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Balance Sheet as at 31 March 2010
31.03.2010 31.12.2008 Notes US$ US$ Assets Investments: financial assets at fair value through profit or loss 5 94,235,255 25,027,804 Debtors, prepayments and accrued income 7 670,086 163,542 Cash at bank 1,189,671 28,625
Total assets 96,095,012 25,219,971
Equity Management share capital 9 1 1
Total equity 1 1
Liabilities Creditors and accruals 8 148,352 513,640
Net assets attributable to holders of participating redeemable preference shares 11 95,946,659 24,706,330
Total liabilities 96,095,011 25,219,970
Total equity and liabilities 96,095,012 25,219,971
Basic and Diluted Net asset value per fully paid participating redeemable preference share 16 5,300.92 2,729.97
Fully paid participating redeemable preference shares in issue 16 18,100 9,050
Approved by the Board of Directors on 30 September 2010 and signed on its behalf by:
Ove Hoegh - Director Mohamed Younes - Director
The notes on pages 16 to 29 form an integral part of these Financial Statements.
12 CORAL GROWTH INVESTMENTS LIMITED
Income Statement For the 15 month period ended 31 March 2010
01.01.2009 to 01.01.2009 to 01.01.2009 to 01.01.2008 to 01.01.2008 to 01.01.2008 to 31.03.2010 31.03.2010 31.03.2010 31.12.2008 31.12.2008 31.12.2008 Notes US$ US$ US$ US$ US$ US$ Revenue Capital Total* Revenue Capital Total* Net gains/(losses) on financial assets at fair value through profit or loss Realised loss on investments 5 - (305,548) (305,548) - (138,669) (138,669) Unrealised gains/(losses) on investments 5,11 - 27,900,888 27,900,888 - (20,551,402) (20,551,402) Realised and unrealised (loss)/gain on foreign exchange 11 - (189,893) (189,893) - 5,618 5,618 - 27,405,447 27,405,447 - (20,684,453) (20,684,453) Income Investment income 6 1,517,232 - 1,517,232 344,747 - 344,747
Total Income 1,517,232 27,405,447 28,922,679 # - 95,946,660 344,747 (20,684,453) (20,339,706)
Expenses Investment Manager's fees 4(d) 2,262,500 - 2,262,500 1,810,000 - 1,810,000 Administration fees 4(a) 185,228 - 185,228 105,348 - 105,348 Directors' fees 4(c) 91,250 - 91,250 85,000 - 85,000 Sundry expenses 49,569 - 49,569 68,771 - 68,771 Audit fees 46,994 - 46,994 35,261 - 35,261 Custodian's fees 4(b) 41,784 - 41,784 7,913 - 7,913 Consultancy fees 30,354 - 30,354 49,987 - 49,987 Directors' & Officers' insurance premium 18,140 - 18,140 19,886 - 19,886 Professional fees 5,251 - 5,251 52,551 - 52,551 Investment acquisition and disposal costs - 50,754 50,754 - 62,167 62,167 Total expenses 2,731,070 50,754 2,781,824 # 2,234,717 - 62,167 2,296,884
Net (expense)/income before taxation (1,213,838) 27,354,693 26,140,855 (1,889,970) (20,746,620) (22,636,590)
Withholding tax 3 150,436 - 150,436 - - -
Net (expense)/income after taxation (1,364,274) 27,354,693 25,990,419 (1,889,970) (20,746,620) (22,636,590)
Total (loss)/profit for the period/year. (1,364,274) 27,354,693 25,990,419 (1,889,970) (20,746,620) (22,636,590)
Basic and Diluted earnings/(loss) per participating redeemable preference share 15 1,435.93 (1,250.64)
* The total column of this statement represents the Profit and Loss account of the Company. The Directors consider the activities of the Company to be of a continuing nature. The notes on pages 16 to 29 form an integral part of these Financial Statements. 13 CORAL GROWTH INVESTMENTS LIMITED
Reconciliation of Movement in Shareholders' Funds For the 15 month period ended 31 March 2010
01.01.2009 to 01.01.2008 to 31.03.2010 31.12.2008 US$ US$
Total profit/(loss) for the period/year 25,990,419 (22,636,590) Opening shareholders' funds 24,706,331 29,242,957 Calls on issued shares 11 45,249,910 18,099,964 95,946,660 24,706,331
Net assets attributable to holders of fully paid participating preference shares 95,946,659 24,706,239 Net assets attributable to holders of partly paid participating preference shares - 91 Net assets attributable to holders of management shares 1 1
95,946,660 24,706,331
All of the movements relate to fully paid redeemable preference shares The notes on pages 16 to 29 form an integral part of these Financial Statements.
14 CORAL GROWTH INVESTMENTS LIMITED
Cash Flow Statement For the 15 month period ended 31 March 2010
01.01.2009 to 01.01.2008 to 31.03.2010 31.12.2008 Operating activities Notes US$ US$
Net cash outflow from operating activities 13(a) (3,516,750) (1,485,765)
Net cash outflow from Investing activities
Purchase of listed investments 5 (91,604,984) (17,475,783) Purchase of unlisted investments 5 - (1,363,022) Proceeds from maturity of listed investments 5 51,032,870 1,958,595
Net cash outflow from investment activities (40,572,114) (16,880,210)
Financing activities
Issue of shares 11 45,249,910 18,099,964
Net cash inflow from financing activities 45,249,910 18,099,964
Increase/(decrease) in cash 1,161,046 (266,011)
Reconciliation of net cash flow movement
Net cash at the start of the period/year 28,625 294,636 Increase/(decrease) in cash during the period/year 1,161,046 (266,011)
Net cash at the end of the period/year 13(b) 1,189,671 28,625
The notes on pages 16 to 29 form an integral part of these Financial Statements.
15 CORAL GROWTH INVESTMENTS LIMITED Notes to the Financial Statements
1. Establishment Coral Growth Investments Limited (the "Company") was incorporated in Guernsey on 24 March 2005 as a closed - ended investment company with limited liability. The Company received regulatory approval from the Guernsey Financial Services Commission under The Control of Borrowing (Bailiwick of Guernsey) Ordinance, 1959, as amended, on 25 November 2005. The Company was listed on the Channel Island Stock Exchange ('CISX') on 31 January 2006. During the period, the Guernsey Financial Services Commission (GFSC) amended the rules in respect of Closed ended Funds formerly authorised under the Control of Borrowing (Bailiwick of Guernsey) Ordinances 1959 to 1989 to bring all such funds under the Protection of Investors (Bailiwick of Guernsey) Law 1987. This amendment required that closed ended funds elect to be either a registered or authorised fund. The Company elected to be classified as an authorised closed ended fund. The First Closing of the Company was on 21 December 2005. The Directors agreed to change the Company's accounting year end to 31 March from 31 December in order that regulatory deadlines can be met. 2. Principal Accounting Policies The following accounting policies have been applied consistently in dealing with items which are considered to be material in relation to the Company's financial statements. Basis of Accounting The financial statements have been prepared in accordance with Guernsey Law and United Kingdom generally accepted accounting standards and under the historical cost convention as adjusted by the revaluation of investments and in accordance with the Statement Of Recommended Practice for Investment Trust Companies issued by the United Kingdom Association of Investment Companies. Investments Investments are designated at fair value through profit or loss upon initial recognition on the basis that they are part of a group of financial assets which are managed and that have their performance evaluated on a fair value basis in accordance with the risk management and investment strategies of the Company. The financial information about these financial assets is provided internally on that basis to the Investment Manager and to the Board of Directors. Investments are recognised and derecognised on the trade date where a purchase or sale is under a contract whose terms require delivery within the timeframe established by the market concerned, and are initially and subsequently measured at fair value. - Listed investments Listed investments are generally valued at the bid price prevailing at the close of the respective market on the Balance Sheet date, as this is deemed to reflect the fair value of the investments held. - Unlisted investments Given the lack of ascertained market values the unlisted investments are included in the Balance Sheet at fair value as determined by the Directors. In valuing unlisted investments the Directors will take into consideration the following factors: (i) Where a significant recent transaction which establishes an arm's length price for an investment has been effected, the transaction will form the basis of the valuation. (ii) Otherwise, unlisted investments will be valued by reference to their profits and the price/earnings multiples applicable to comparable listed companies less a suitable discount to reflect their lack of marketability. Profits for the purpose of the valuations will be those disclosed in the latest audited financial statements taking into consideration any subsequent financial information. (iii) Unlisted discounted notes that were recently acquired are valued by reference to recent transactions, subsequently, the fair value is estimated using pricing models incorporating discounted cashflow techniques. These pricing models apply assumptions regarding asset-specific factors and economic conditions generally including interest rates. Where such pricing models are used, inputs are based on market related measures at the balance sheet date. No such models were used in deriving fair value of financial assets within these financial statements. Given the lack of readily ascertainable market values for the unlisted investments, the eventual proceeds of realisation of these investments will inevitably differ from the estimated proceeds and the difference could be significant. Adoption of new standards The following standard/amendment has been adopted by the Company during the period. FRS 29: Improving disclosures about Financial Instruments In March 2009, the Accounting Standard Board issued "Amendments to FRS 29 - improving disclosures about Financial Instruments". These amendments require enhanced disclosures of fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The amendment to FRS 29 require fair value measurements to be disclosed by the source of inputs, using a three level hierarchy as follows:
16 CORAL GROWTH INVESTMENTS LIMITED Notes to the Financial Statements
2. Principal Accounting Policies (continued) Adoption of new standards (continued) - Level 1: Inputs reflect unadjusted quoted prices in active markets for identical assets or liabilities at the measurement date; - Level 2: Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly, including inputs in markets that are not considered to be active; and - Level 3: Inputs for the asset or liability that are not based on observable market data. Inputs are used in applying the various valuation techniques and broadly refer to the assumptions that market participants use to make valuation decisions, including assumptions about risk. Inputs may include price information, volatility statistics, specific and broad credit data, liquidity statistics and other factors. A financial instrument's level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes "observable" requires significant judgement by the Investment Manager . The Investment Manager considers observable data to be that market data which is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market. The categorisation of a financial instrument within the hierarchy is based upon the pricing transparency of the instrument and does not necessarily correspond to the Company's perceived risk of the instrument. Investments whose values are based on quoted market prices in active markets are classified within level 1. Investments that trade in markets that are not considered to be active, but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable Inputs are classified within level 2. These include obligations and less liquid listed securities, as level 2 investments include positions that are not traded in active markets and/or are subject to transfer restrictions.Investments classified within level 3 have significant unobservable inputs, as they trade infrequently and are significant to the overall fair value measurement. The fair values of investments valued under Levels 1 to 3 as above as at 31 March 2010 are disclosed in Note 5. Share Capital In accordance with Financial Reporting Standard 25 - Financial Instruments: Disclosure and Presentation, participating redeemable preference Shares have been classified as a financial liability as the Shares are redeemable at a fixed date (being 10 years from first closing and a further 2 years if extended by a resolution passed by shareholders. Income Income arising from investments is accounted for on an ex-dividend basis and is shown gross of withholding taxes. Other investment income is accounted for on an accruals basis. Expenses Expenses are accounted for on an accruals basis. Going Concern A fundamental principle of the preparation of financial statements in accordance with generally accepted accounting policies is the assumption that an entity will continue in existence as a going concern, which contemplates continuity of operations and the realisation of assets and settlement of liabilities occurring in the ordinary course of business. In accordance with this requirement, the Company's policy is to prepare the financial statements on a going concern basis unless the Company is unable to continue as a going concern. The Directors consider that the Company has adequate resources to continue in operational existence for the foreseeable future. For this reason the Directors believe that the business is a going concern and it is appropriate to prepare these financial statements on the going concern basis. Foreign Currencies Foreign currency assets and liabilities, including investments at fair value, are translated into US dollars ("US$") at the rate of exchange ruling at the Balance Sheet date. Investment transactions and income and expenditure items are translated at the rate of exchange ruling at the date of the relevant transaction. Exchange differences are included in the Income Statement as capital movements if they are of a capital nature and recognised as revenue movements if they are of a revenue nature. The EGP:US$ exchange rate as at 31st March 2010 was 5.5051 (2008: 5.5170).
17 CORAL GROWTH INVESTMENTS LIMITED Notes to the Financial Statements
2. Principal Accounting Policies (continued) Functional and Presentational Currency The financial statements of the Company are presented in the currency of the primary economic environment in which it operates (its functional currency). The Directors have considered the primary economic environment of the Company and considered the currency in which the original finance was raised, distributions made, and ultimately what currency would be returned to investors on a break-up basis. The Directors have also considered the currency to which the underlying investments are primarily exposed. On balance, the Directors believe US dollars best represents the functional currency. The books and records are maintained in US dollars and for the purpose of the financial statements the results and financial position of the Company are presented in US dollars which is also the presentation currency of the Company. Investment in associate The Company holds 49.50% of the issued Share capital of Coral Growth Holdings as at 31 March 2010 and therefore exercises significant influence and joint control. This investment is held as part of the Company's investment portfolio and was designated as at fair value through profit or loss on initial recognition. Therefore the Company has taken advantage of the exemption available under Financial Reporting Standard 9 - Associates and Joint Ventures ("FRS9") paragraph 49, not to account for an associate investment under this standard as this investment is measured at fair value in accordance with FRS 26 "Financial Instruments: Measurement" with change in fair value recognised in the Income Statement. 3. Taxation With effect from 1 January 2008, the standard rate of income tax for companies in Guernsey moved from 20% to 0% under the Income Tax (Zero Ten) (Guernsey) Law, 2007 passed by the States of Guernsey on 26 September 2007. Close-ended investment vehicles such as the Company can continue to apply for exempt status for Guernsey tax purposes. Alternatively they may choose to automatically become tax resident, paying the nil rate. The Company continues to elect for exempt status. Withholding tax of $150,436 has been charged on the maturity of treasury bills and is included in the 4. Material Agreements (a) Administration Agreement Under the terms of an Administration, Secretarial and Registrar Agreement dated 19 November 2005, the Company appointed Butterfield Fund Services (Guernsey) Limited as Administrator, Secretary, and Registrar. For valuation, administration, accounting, corporate secretarial and compliance services an administration fee is charged, based on the standard hourly charging rates in force from time to time, subject to a minimum fee of GBP7,500 (approximately US$11,387) per quarter. In addition, a one-off fee was charged for the take on of the Company of GBP5,000 (approximately US$7,591). Fees are charged for corporate and secretarial services in connection with Board meeting attendance at a rate of GBP2,000 (approximately US$3,037) for attendance at meetings in Guernsey and GBP3,000 (approximately US$4,555) for attendance at meetings outside Guernsey. These fees are payable quarterly in arrears. (b) Custodian Agreement Under the terms of a Custodian Agreement dated 19 November 2005, the Company appointed HSBC Egypt as Custodian. The Custodian is paid 0.20 per cent. per annum on the month end portfolio value comprised of physical equity and 0.15 per cent. per annum on the month end portfolio value comprised of scripless equity. Custodian's fees are charged at 0.03 per cent. per annum on floating rate notes. Fees are charged monthly and are subject to a monthly minimum of US$250 for equities and US$100 for floating rate notes. In addition transaction costs of US$60 per physical equity transaction, US$40 per scripless equity transaction and US$50 per floating rate note transaction are charged by the Custodian. (c) Directors' Fees The Chairman is entitled to an annual fee of US$30,000. Each of the other Directors is entitled to an annual fee of US$20,000. These fees are allocated equally between the Company and Coral Growth Investments (Parallel) Limited. (d) Investment Management Agreement Under the terms of the Investment Management Agreement dated 19 November 2005, Stanhope Overseas Limited was appointed with effect from 21 December 2005 as Investment Manager (the "Investment Manager"), and is paid a basic management fee at a rate of 2 per cent. per annum of the total Committed Capital of the Company for the duration of the Commitment Period ending 21 December 2009. Thereafter the basic management fee will be calculated at a rate of 2 per cent. per annum of the total Committed Capital drawn down at the date of calculation of the fee less an amount equal to: (a) the acquistion cost of any investments disposed of; and (b) the acquisition cost of any investments which have been written down or written off permanently. The management fee is calculated and paid quarterly in advance. A fee of US$2,262,500 (31 December 2008: US$1,810,000) in respect of the period/year is included within the Income Statement. A performance fee is payable to the Investment Manager in accordance with the Company's Private Placement Memorandum under Section 3 - "Summary of Terms" - "Distributions and Performance Fee". Disposal proceeds from investments will be applied in making distributions to Shareholders and in payment of a performance fee to the Investment Manager in the following amounts and order of priority:
18 CORAL GROWTH INVESTMENTS LIMITED Notes to the Financial Statements
4. Material Agreements (continued) (d) Investment Management Agreement (continued) ● a) Return of capital: First, 100 per cent. by way of distribution to Shareholders until cumulative distributions of Current Income and Disposal Proceeds are equal to the aggregate of the Committed Capital attributable to: (i) all Fund Investments that have been realised (“Realised Fund Investments”); (ii) any Fund Investments to the extent that such investments have been written off or written down permanently (to the extent not previously distributed); and (iii) the management fee and all other expenses paid or accrued (as such expenses are described above) allocable to Realised Fund Investments; ● b) 6 per cent. preferred return: Second, 100 per cent. by way of distribution to Shareholders until cumulative distributions of Current Income and Disposal Proceeds from Realised Fund Investments represent a 6 per cent. annual internal rate of return on the Committed Capital attributable to Realised Fund Investments and to any Fund Investments to the extent that such investments have been written off or written down permanently (to the extent not previously distributed) from the date or dates on which any part of such capital was drawn down until the date Shareholders are given notice of the relevant distribution; ● c) Investment Manager catch-up: Third, 100 per cent. by way of a performance fee to the Investment Manager of an amount equal to 20 per cent. of the aggregate of the total amounts distributed to Shareholders pursuant to clause (b) above; and . ● d) 80/20 split: Thereafter, 80 per cent. by way of distribution to Shareholders and 20 per cent. by way of performance fee to the Investment Manager. No performance fee provision is included in the financial statements, as the performance of the company did not meet the criteria established in the Private Placement Memorandum. 5. Investments - financial assets at fair value through profit or loss 31.03.2010 31.12.2008 US$ US$ Investment in Lecico Egypt SAE Cost of listed investments at 1 January 17,475,783 - Acquisitions at cost - 17,475,783 Cost of listed investments at 31 March / 31 December 17,475,783 17,475,783 Unrealised gain/(loss) on listed investments at 31 March / 31 December (5,409,346) (10,963,843) Fair value of listed investments at 31 March / 31 December 12,066,437 6,511,940
The Company concluded its second investment in Lecico Egypt S.A.E. ("Lecico") in July 2008. The Company and Coral Growth Investments (Parallel) Limited ("Coral Parallel") an entity under common control, collectively acquired a total of 3,510,105 shares representing 8.78% of Lecico share capital. The Company acquired 2,736,205 shares representing 6.84% of Lecico's capital for US$17,475,783. Lecico is a large sanitaryware producer and a major ceramic tile producer in Egypt and Lebanon.
Investments in bond and discounted rate notes 31.03.2010 31.12.2008 US$ US$ Cost of investments at 1 January 3,066,820 5,164,084 Purchase of investments 91,604,984 - Proceeds on maturity (51,032,870) (1,958,595) Realised loss on disposal of investments (305,548) (138,669) Discounted rate interest received on maturity 742,626 - Foreign exchange gain on maturity 208,179 - Cost of investments at 31 March / 31 December 44,284,191 3,066,820 Discounted rate note interest accrued at 31 March / 31 December 566,076 - Foreign exchange loss on unrealised interest at 31 March / 31 December (476,885) - Accumulated unrealised gain/(loss) on investments at 31 March / 31 December 54,087 (243,576) Fair value of listed investments at 31 March / 31 December 44,427,469 2,823,244
19 CORAL GROWTH INVESTMENTS LIMITED Notes to the Financial Statements
5. Investments - financial assets at fair value through profit or loss (continued) Unlisted Investments The Company's most significant unquoted investment is a special purpose vehicle "Coral Growth Holdings", a company registered in the Cayman Islands, whose principal underlying investment is in the Egyptian pharmaceutical group "Amoun". *Amoun is defined as the consolidated position of Amoun Pharmaceutical Company and Amoun Distribution Company. The Company held 18,924,610 shares 49.50% (2008: 18,924,610 shares 49.50%) of the share capital of Coral Growth Holdings. Coral Growth Holdings was formed primarily for holding the investment in Mercury (Cayman) Holdings ("MCH"). Coral Growth Holdings held 13.3% (2008:14.03%) of the share capital of MCH. Mercury Pharmaceutical Manufacturing was merged into Amoun in Q1 2009 and Amoun is now directly owned by MCH. MCH now holds 99.53% of the shares of Amoun. Therefore as at 31 March 2010 the Company indirectly held a 6.60% (2008:6.9%) interest in Amoun. 31.03.2010 31.12.2008 US$ US$ Cost of unlisted investments at 1 January 18,856,021 17,492,999 Acquisitions at cost - 1,363,022 Cost of unlisted investments as at 31 March / 31 December 18,856,021 18,856,021 Unrealised (loss)/gain on unlisted investments at 31 March / 31 December 18,885,328 (3,163,401) Fair value of unlisted investments at 31 March / 31 December 37,741,349 15,692,620
Total cost of investments at 31 March / 31 December 80,615,995 39,398,624
Total fair value of investments at 31 March / 31 December 94,235,255 25,027,804 Unrealised gains/(losses) on investments 01.01.2009 to 01.01.2008 to 31.03.2010 31.12.2008 US$ US$ Unrealised loss/(gain) on investments at 1 January 14,370,820 (6,180,582) Unrealised gains/(losses) on investments at 31 March / 31 December 13,530,069 (14,370,820) Total movement in unrealised (losses)/gains on investments during the period/year 27,900,889 (20,551,402) Fair value hierarchy The following tables show financial instruments recognized at fair value, analysed between those whose value is based on: - Investments whose values are based on quoted market prices in active markets, and are therefore classified within level 1. The Investment Manager does not adjust the quoted price for such instruments, even in situations where the Company holds a large position and a sale could reasonably impact the quoted price. - Investments that trade in markets that are not considered to be active, but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs are classified within level 2. These include obligations and less liquid listed equities, as level 2 investments include positions that are not traded in active markets and/or are subject to transfer restrictions. - Investments classified within level 3 have significant unobservable inputs, as they trade infrequently and are significant to the overall fair value measurement. The fair value of investments valued under Levels 1 to 3 as at 31 March 2010 were as follows: Quoted prices in active markets for Significant other Significant identical assets observable unobservable Total (Level 1) inputs (Level 2) inputs (Level 3) US$ US$ US$ US$ Listed equities 12,066,437 12,066,437 - - Listed debt securities 1,668,756 1,668,756 - - Unlisted equities 37,741,349 - - 37,741,349 Unlisted debt securities 42,758,713 - 42,758,713 - 94,235,255 13,735,193 42,758,713 37,741,349
20 CORAL GROWTH INVESTMENTS LIMITED Notes to the Financial Statements
5. Investments - financial assets at fair value through profit or loss (continued) Fair value hierarchy (continued) Transfer between levels There were no transfers of financial assets between levels during the period. Movement in fair value of level 3 investments The following table shows a reconciliation of all movements in the fair value of the investments categorised within Level 3 between the beginning and the end of the reporting period. Unlisted equities
Total US$ At 1 January 2009 15,692,620 Total gains and lossed through profit or loss 22,048,729 At 31 March 2010 37,741,349
6. Investment income 01.01.2009 to 01.01.2008 to 31.03.2010 31.12.2008 US$ US$ Interest on Treasury Bills 1,308,702 - Interest on bonds 160,799 208,487 Call account interest 45,412 68,541 Interest on floating rate note 2,319 67,719 1,517,232 344,747
7. Debtors, prepayments and accrued income 31.03.2010 31.12.2008 US$ US$ Prepayments 564,994 65,787 Due from Affiliate 76,323 - Accrued interest 28,768 97,754 Management share capital 1 1
670,086 163,542
8. Creditors and accruals 31.03.2010 31.12.2008 US$ US$ Administration fees 83,207 19,835 Audit fees 33,403 34,980 Directors' fees 16,250 - Other creditors and accruals 8,388 3,255 Custodian's fees 7,104 3,070 Management fees - 452,500
148,352 513,640
9. Share capital and share premium Nominal Nominal Value Value 31.03.2010 31.12.2008 Authorised US$ US$ 100 Management shares of US$0.01 each 1 1 60,000 Unclassified shares of US$0.01 each 600 600
601 601
Issued share capital Number of Share Number of Share shares capital shares capital 31.03.2010 31.03.2010 31.12.2008 31.12.2008 Equity share capital US$ US$ Management shares of US$0.01 each: 100 1 100 1
21 CORAL GROWTH INVESTMENTS LIMITED Notes to the Financial Statements
9. Share capital and share premium (continued) The management shares have been created in order to comply with Guernsey law under which the participating shares must be issued with preference over an alternate class of capital. The management shares have been issued to the Investment Manager and its nominee but have not been paid for. Each management share carries a right to vote at general meetings of the Company but does not carry the right to receive dividends. In a winding-up, management shares rank only for the return of the nominal paid-up capital after the return of the nominal capital paid-up on participating shares and nominal shares (see below). The unclassified shares are termed as such pending issue. They are issued as participating redeemable preference shares or nominal shares. Participating redeemable preference shares ("Shares"), issued in units of twenty Shares ("Units"), are issued at a price, at such times and on such terms and conditions as determined in accordance with the Company's Private Placement Memorandum and Articles of Association. Participating redeemable preference shares carry the right to vote on limited matters at general meetings of the Company and to receive dividends and in a winding-up rank first for the return of nominal paid-up capital. Participating redeemable preference shares may not be redeemed at the option of the holders of such shares. The Company may, at any time after the end of the commitment period ending 21 December 2009, give to each holder of fully paid participating redeemable preference shares notice of its intention to redeem any of such shares then in issue. The aggregate amounts payable on redemption shall be determined by the Board of Directors on such a basis as the Board may from time to time determine in accordance with the terms of the Private Placement Memorandum. On the redemption or forfeit (for unpaid participating redeemable preference shares) of a participating redeemable preference share by the Company, a nominal share is issued to the Investment Manager for cash at par on the basis of one nominal share for each participating redeemable preference share redeemed. Nominal shares may be converted and reissued as participating redeemable preference shares upon subsequent applications for an equal number of participating redeemable preference shares. Nominal shares carry neither the right to vote at general meetings of the Company nor to receive dividends and in a winding-up rank only for the return of nominal paid-up capital after the return of the nominal capital paid-up on participating redeemable preference shares. 10. Outstanding commitments At the Balance Sheet date the total Committed Capital of the Company amounted to US$90,500,000 (2008: US$ 90,500,000) of which 100.00% (2008:50.00%) had been called. Total commitments still outstanding at the Balance Sheet date amounted to US$nil (2008:US$45,249,909) representing 0% (2008: 50.00%) of the total Committed Capital.
11. Net assets attributable to holders of participating redeemable preference shares Non-equity share capital Number of Share Share shares capital premium 31.03.2010 31.03.2010 31.03.2010 US$ US$ Participating redeemable preference shares of US$0.01 each: Total non-equity shares as at 1 January 2009 18,100 181 44,344,909 Call on issued shares - - 45,249,910 Total non-equity shares as at 31 March 2010 18,100 181 89,594,819 Total non-equity shares at 31 March 2010 comprise 18,100 fully paid participating redeemable preference shares (31 December 2008: 9,050 fully paid and 9,050 partly paid participating redeemable preference shares).
22 CORAL GROWTH INVESTMENTS LIMITED Notes to the Financial Statements
11. Net assets attributable to holders of participating redeemable preference shares (continued)
Participating redeemable preference share capital has been issued in Units each initially comprising 20 Shares of nominal value US$0.01 each. As at 31 March 2010, there were 905 Units comprising 20 Shares in issue, of which all Shares (2008: 10 Shares) per Unit were fully paid as to US$5,000 each. Capital Management The Company’s capital is represented by the participating redeemable preference shares. At the inception of the Company, a significant amount of capital was committed (refer to note 10) to fund the investing activities of the Company. The remaining Committed capital was called when the Company identied opportunities for investment. All committed capital has now been called. The participating redeemable capital is committed to the Company for an initial period of 10 years. In addition the sale of the investment in Coral Growth Holdings would trigger distributions to redeemable preference shareholders, however this is not currently planned. The Company’s objectives for managing capital are: • To invest the capital in investments meeting the description, risk exposure and expected return indicated in its Company’s private placement memorandum. • To achieve consistent returns while safeguarding capital by limiting investing in any one single investment to at least 20% of committed capital. • To maintain sufficient liquidity to meet the expenses of the Company. • To maintain sufficient size to make the operation of the Company cost-efficient. These objectives are consistent with the previous year. Refer to the Risk strategy (Note 12) for the policies and processes applied by the Company in managing its capital.
Summary of net assets attributable to holders of participating redeemable preference shares 31.03.2010 31.12.2008 US$ US$
Share capital 181 181 Share premium 89,594,819 44,344,909 Revenue reserve (6,435,722) (5,071,448) Capital reserve 12,787,381 (14,567,312)
Balance at 31 March / 31 December 95,946,659 24,706,330
Revenue reserve 31.03.2010 31.12.2008 US$ US$ Balance at 1 January (5,071,448) (3,181,478) Net loss for the period/year (1,364,274) (1,889,970)
Balance at 31 March / 31 December (6,435,722) (5,071,448)
Capital reserve
Balance at 1 January (14,567,312) 6,179,308 Unrealised investments gains/(losses) 27,900,888 (20,551,402) Realised loss on investments (305,548) (138,669) Realised and unrealised foreign exchange (losses)/gains (189,893) 5,618 Investment acquisition and disposal costs (50,754) (62,167) Balance at 31 March / 31 December 12,787,381 (14,567,312)
23 CORAL GROWTH INVESTMENTS LIMITED Notes to the Financial Statements
12. Risks arising from investments in financial assets and liabilities
Strategy in using financial instruments The Company's activities expose it to a variety of financial risks: market risk (including market price risk, currency risk and interest rate risk), credit risk and liquidity risk. Significant accounting policies Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised in respect of each class of financial asset, financial liability and equity instrument are disclosed in note 2 to the financial statements. Categories of financial instruments Carrying Carrying value value 31.03.2010 31.12.2008 US$ US$ Financial assets Fair value through profit or loss (FVTPL) 94,235,255 25,027,804 Cash at bank 1,189,671 28,625 Accrued interest 28,768 97,754 Total assets 95,453,694 25,154,183
Financial liabilities Redeemable preference shares 95,946,659 24,706,330 Total liabilities 95,946,659 24,706,330
Financial assets classified as FVTPL as at 31 March 2010 include US$37,741,350 (2008:US$15,692,620) in a special purpose vehicle whose primary underlying asset is a listed Egyptian company 'Amoun Pharmaceutical Company and US$12,066,437 in Lecico Egypt SAE' (2008:US$6,511,940). Other investments comprise US$1,668,756 (2008: US$2,123,314) in a bond, and US$42,758,713 (2008:US$699,930) in Treasury Bills and floating rate notes. Cash and receivables presented above represents cash and cash equivalents, and other receivables as detailed in the balance sheet. Financial liabilities measured at amortised cost presented above represent other creditors, and redeemable preference shares as detailed in the balance sheet. Risk strategy The concentration, and therefore lack of diversification, of the Company's investments in a limited number of holdings and sectors may result in the aggregate returns realised by shareholders being materially adversely affected by the unfavourable performance of one or a small number of such investments. The risk due to lack of diversification is mitigated to the extent investments in a single company are restricted to 20 per cent. of the Company's total committed capital. The success of the Company depends in part on the quality, skill and expertise of the individual members of the Investment Manager, the Company's Advisory Board and the Consultants1. The Investment Manager will provide benefit from its strong network developed within the investment and business communities in Egypt and its access to extensive, readily available research on Egyptian companies and the strong analytical resources at its disposal. Since the identification of attractive investment opportunities is difficult and involves a high degree of uncertainty, the expertise available will reduce this risk associated with investment decisions. Market risk Market risk is the risk that future changes in market prices, other than those generated from interest rate or foreign exchange movements, may adversely affect the value of a financial instrument. The market risk is concentrated in the investments. The Company's investments are susceptible to market risk arising from uncertainties about future prices of the instruments.
1 The Company's consultants are the Industrial Modernisation Centre, the implementation agency of the Government of Egypt and the European Union's Industrial Modernisation Programme in Egypt and Concord Corporate Finance and Securities Marketing Company S.A.E.
24 CORAL GROWTH INVESTMENTS LIMITED Notes to the Financial Statements
12. Risks arising from investments in financial assets and liabilities (continued) Market price risk Egypt is an emerging market. Emerging markets, including Egypt, are subject to particular investment risks and considerations. Furthermore, the likelihood of adverse political and economic developments may be magnified in emerging markets. As the Company will invest mainly in private/unlisted securities, when seeking to sell little or no market may exist for the securities. Additionally, when the Company is seeking to sell, enforcement of legal rights may present additional considerations than in more developed jurisdictions. The Company gives preference to investments in companies producing goods under the 2004 Egyptian QIZ (Qualifying Industrial Zones) Protocol. The benefits of Egypt's QIZ are various; ease of access to US markets being the most important, with open, unlimited quotas as well as exemption from tariff and non-tariff barriers. Other benefits include low factory costs as well as a large supply of labour force. Enhanced by the added benefits of trade agreements with other markets, Egypt is ideally-suited to provide many economic benefits to industries located within these zones. All securities investments present a risk of loss of capital. The Investment Manager moderates this risk through a careful selection of securities and other financial instruments within specified limits. At 31 December 2010, should the market price of investments subject to market price risk have increased or decreased by 5 per cent. with all other variables remaining constant, the increase or decrease in net assets attributable to holders of participating redeemable preference shares for the year would amount to approximately US$4,711,763 (2008:US$1,251,390).
Currency risk The Company's significant investment is in a special purpose vehicle ("SPV") denominated in US dollars. The SPV ultimately holds an asset denominated in Egyptian Pounds (EGP) as its underlying investment. The Company also holds an investment in Lecico Egypt SAE and other short term investments which are also denominated in Egyptian Pounds (EGP). Accordingly, a change in the value of the EGP against the US dollar may adversely impact the performance of the Company in US dollar terms. At 31 March 2010 the Company held cash balances in US dollars of $561,720 (2008:US$27,249). The Company does not hedge against adverse currency movements.
The following table sets out the Company's exposure to currency risk: Currency exposure Net current Cash assets Investments Total 31.03.2010 31.03.2010 31.03.2010 31.03.2010 US$ US$ US$ US$ Egyptian Pound 627,951 28,768 94,235,255 94,891,974 Sterling - (92,249) - (92,249) US dollar 561,720 585,215 - 1,146,935 Total net assets 1,189,671 521,734 94,235,255 95,946,660
Currency exposure Net current Cash liabilities Total 31.12.2008 31.12.2008 31.12.2008 31.12.2008 US$ US$ US$ US$ Egyptian Pound 1,376 94,566 24,327,874 24,423,816 Sterling - (55,778) - (55,778) US dollar 27,249 (388,885) 699,930 338,293 Total net assets 28,625 (350,097) 25,027,804 24,706,331
As at 31 March 2010, had the exchange rate between the US dollar increased or decreased compared to the Egyptian pound by 10% with all other variables held constant, the increase or decrease respectively in net assets attributable to holders of participating redeemable preference shares would amount to approximately US$9,489,197 (2008:US$2,444,187).
25 CORAL GROWTH INVESTMENTS LIMITED Notes to the Financial Statements
12. Risks arising from investments in financial assets and liabilities (continued) Interest rate risk Interest rate risk arises from the possibility that changes in interest rates will affect future cash flows or the fair values of financial instruments. It has not been the Company's policy to use derivative instruments to mitigate interest rate risk, as the Directors believe that the effectiveness of such instruments does not justify the costs. The table below summarises the Company's exposure to interest rate risks:
Interest rate exposure Net current assets Cash 31.03.2010 Investments Total 31.03.2010 US$ 31.03.2010 31.03.2010 US$ US$ US$ US$ Fixed rate - 28,768 44,427,469 44,456,237 Floating rate - - - - Non interest bearing 1,189,671 492,966 49,807,786 51,490,423 Total net assets 1,189,671 521,734 94,235,255 95,946,660
Net current Cash liabilities Investments Total 31.12.2008 31.12.2008 31.12.2008 31.12.2008 US$ US$ US$ US$ Fixed rate - 94,566 2,123,314 2,217,880 Floating rate - 3,428 699,930 703,358 Non interest bearing 28,625 (448,092) 22,204,560 21,785,093 Total net assets 28,625 (350,098) 25,027,804 24,706,331
The majority of the Company's interest bearing financial assets are fixed-interest bearing investments in Egyptian government backed securities. As a result, the Income receivable by the Company is not subject to significant amounts of risk due to fluctuations in the prevailing levels of market interest rates. However, whilst the income received from fixed rates securities is unaffected by changes in interest rates, the investments are subject to risk in the movement of fair value and the Company may not be able to secure equivalent rates when securities mature.
At 31 March 2010, should interest rates have increased or decreased by 100 basis points with all other variables remaining constant, the increase or decrease in net assets attributable to holders of participating redeemable preference shares for the year would have amounted to approximately US$nil (2008:US$7,031).
Credit risk Credit risk represents the risk that the counterparties to a financial instrument fail to discharge their obligation, contractual or otherwise, which causes the Company to suffer a financial loss. Maximum exposure to Credit risk The table below analyses the Company's maximum exposure to credit risk: 31.03.2010 31.12.2008 US$ US$
Cash at bank 1,189,671 28,625 Fixed Income Securities 44,427,468 2,123,314 Accrued Interest 28,768 97,754 45,645,907 2,249,693
All transactions in listed securities are settled/paid for upon delivery using approved brokers. The risk of default is considered minimal, as delivery of securities is only made once the broker has received payment. Payment is made in turn on a purchase only once the securities have been received by the broker. The trade will fail if either party fails to meet its obligation. The fixed income security that the Company has invested in, is a bond issued by the Egyptian government, and Egypt has an outlook classified by Standard and Poors as stable with a strong cedit rating which mitigates the risk of default.
26 CORAL GROWTH INVESTMENTS LIMITED Notes to the Financial Statements
12. Risks arising from investments in financial assets and liabilities (continued) The Directors consider that debtors and creditors balances are not material, thus affording negligible credit risk. Cash and bank balances are placed with HSBC Bank, Egypt. HSBC Holdings plc which owns over 90% of HSBC Egypt's issued share capital has a strong credit rating and has an outlook classified by Moody's, Standard & Poor's and Fitch as AA negative, which mitigates the credit risk identified. Liquidity risk Liquidity risk is defined as the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities. Liquidity risk arises because of the possibility that the Company could be required to pay its liabilities earlier than expected. The significant portion of the Company's Equity investments are in private equity and other unlisted investments. The nature of these investments is generally of a long term and illiquid nature and there may be no readily available market for sale of these investments. The closed-ended nature of the Company enables the Investments Advisor to manage the risk of illiquid investments. In addition, the Company invests in interest bearing securities to generate income to assist in the settlement of the Company's running costs. The Directors review quarterly liquidity reports and consider how best to utilise the income and funds generated to ensure there is enough cash and liquid investments to meet the day to day demands of its Creditors. In addition, the closed-ended nature of the Company means preference shareholders cannot redeem on demand. The Fund has a fixed initial life of 10 years from the First Closing. This term may be extended only once by a further two years if a resolution is passed by shareholders. The Investment Manager and Directors ensure that investments have a clear exit strategy to enable proceeds realised by the investments to be distributed by the Company's winding up date. Investors make a Capital Commitment to the Company. Capital is drawn down at various intervals to meet the investment objectives of the Company. Other than liabilities in respect of redeemable preference shares which cannot be redeemed on demand, until the fixed term of the Company expires, the other financial liabilities held at the year end were not material therefore it is deemed the Company will be able to meet its obligations to its creditors. The table below analyses the Company's financial assets and liabilities into relevant maturity groups based on the remaining period at the Balance Sheet date to the contractual maturity date. The amounts in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances, as the impact of discounting is not significant. 2010 Less than 1 no stated month 1-12 months > 1 Year maturity total US$ US$ US$ US$ US$ Financial assets at fair value through profit or loss - 42,758,713 1,668,756 49,807,786 94,235,255 Other receivables and prepayments - 28,768 - 641,318 670,086 Cash at bank 1,189,671 - - - 1,189,671 Total financial assets 1,189,671 42,787,481 1,668,756 50,449,104 96,095,012 Redeemable preference shares - - 95,946,659 - 95,946,659 Other creditors 148,352 - - - 148,352 Total financial liabilities 148,352 - 95,946,659 - 96,095,011 2008 Less than 1 no stated month 1-12 months > 1 Year maturity total US$ US$ US$ US$ US$ Financial assets at fair value through profit or loss - - 2,823,244 22,204,560 25,027,804 Other receivables and prepayments 671 97,754 - 65,117 163,542 Cash at bank 28,625 - - - 28,625 Total financial assets 29,296 97,754 2,823,244 22,269,677 25,219,971 Redeemable preference shares - - 24,706,330 - 24,706,330 Other creditors 513,640 - - - 513,640 Total financial liabilities 513,640 - 24,706,330 - 25,219,970 At 31 March 2010 the Company held shares in Lecico Egypt SAE with a value of US$12,066,437, there are no selling restrictions on this investment. Fair value In accordance with the Company's accounting policies all financial assets and liabilities are carried at historic cost, as adjusted by the revaluation of investments. In the opinion of the Directors this is not materially different from fair value. The participating redeemable preference shares are shown in the financial statements at net asset value. The fair value of these Shares at 31 March 2010 is considered to be their market value.
27 CORAL GROWTH INVESTMENTS LIMITED Notes to the Financial Statements
13. Cash flow statement 01.01.2009 to 01.01.2008 to 31.03.2010 31.12.2008 (a) Reconciliation of net loss to net cash outflow US$ US$ from operating activities Net loss for the year (1,364,274) (1,889,970) (Increase)/decrease in debtors, prepayments and accrued income during the year (506,544) 40,266 (Decrease)/increase in creditors and accruals during the year (365,288) 420,488 Realised foreign currency gains 82,091 5,618 Unrealised currency loss on revaluation of foreign cash (3,279) - Investment acquisition and disposal costs (50,754) (62,167) Interest received on maturity of notes (742,626) - Increase in discounted bond interest during the year (566,076) - Net cash outflow from operating activities (3,516,750) (1,485,765)
14. Controlling party and related parties disclosure. In the opinion of the Directors there is no ultimate controlling party of the Company as defined by Financial Reporting Standard No. 8 - Related Party Disclosures. Fahad Al-Rajaan is a Director of the Company and Director General of The Public Institution for Social Security (Kuwait) which holds 55.2% of the participating redeemable preference shares of the Company. Mohamed Younes is a Director of Stanhope Overseas Limited, which is the Investment Manager of the Company and of Concord (BVI) International Limited, which is the Structuring Agent to whom management fees and structuring fees respectively are payable (Note 4). Richard Blum is a director of the Company and also holds 400 fully paid participating redeemable preference shares in the Company as at 31 March 2010. An amount of US$76,323 was due from the Investment Manager at the period end and is included within Debtors, Prepayments and Accrued Income (Note 7).
15. Earnings/(loss) per participating redeemable preference shares The earnings/(loss) per participating redeemable preference share has been calculated by dividing the earnings/(loss) for the year of US$25,990,419 (2008:US$(22,636,590)) by the weighted average number of participating redeemable preference shares in issue during the year 18,100 (2008:18,100).
16. Net asset value per participating redeemable preference share The net asset value per participating redeemable preference share calculation has been made by dividing the net assets attributable to holders of participating redeemable preference shares by the total number of these shares in issue at the Balance Sheet date. 31.03.2010 31.12.2008 US$ US$ Net assets attributable to holders of fully paid participating preference shares 95,946,659 24,706,239 Net assets attributable to holders of partly paid participating preference shares - 91
Total net assets attributable to holders of participating redeemable preference shares 95,946,659 24,706,330
Number of fully paid participating redeemable preference shares 18,100 9,050 Number of partly paid participating redeemable preference shares - 9,050 Total number of participating redeemable preference shares 18,100 18,100
Net asset value per fully paid participating redeemable preference shares US$ 5,300.92 US$ 2,729.97
Net asset value per partly paid participating redeemable preference share N/A US$ 0.01
The net asset value per Unit in issue as at 31 March 2010 is US$106,018.41 (31 December 2008:US$27,299.81). This is calculated by dividing the total net assets attributable to participating redeemable preference shares by the number of Units in issue at that date 905 (31 December 2008: 905).
28 CORAL GROWTH INVESTMENTS LIMITED Notes to the Financial Statements
17. Reconciliation of net asset value per fully paid participating redeemable preference share per the financial statements to published net asset value NAV per NAV per Shares Shares NAV In Issue NAV In Issue US$ US$ US$ US$ 31.03.2010 31.03.2010 31.12.2008 31.12.2008 Net asset value reported to Channel Islands Stock Exchange 95,946,660 5,300.92 24,702,380 2,729.54 Accrual adjustment - - 3,950 0.44 Net assets attributable to holders of fully paid participating preference shares 95,946,660 5,300.92 24,706,330 2,729.98
18. Post balance sheet event During April 2010 there was a further increase to the share capital of Mercury Cayman Holding due to the second tranche of a total US$62 million investment. The Company's indirect holding in Amoun was subsequently diluted from 6.6% to 5.5%.
29