Annual / Quarterly Financial Statement • May 3, 2019
Annual / Quarterly Financial Statement
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Translated copy of the original Financial Statements which are presented in Report and Greek. For any possible discrepancies the Greek version prevails.
financial statements
31 December 2018
| Page | |
|---|---|
| Board of Directors and other officers | 1 |
| Declaration of the members of the Board of Directors | 2 |
| Investment Manager Report | 3 – 11 |
| Report on Corporate Governance | 12 – 24 |
| Management Report | 25 – 31 |
| Independent auditor's report | 32 – 37 |
| Financial Statements: | |
| Statement of comprehensive income | 38 |
| Balance sheet | 39 |
| Statement of changes in equity | 40 |
| Statement of cash flows | 41 |
| Notes to the financial statements | 42 – 77 |
Andreas Hadjikyrou – Chairman – Appointed on 23 October 2018 Michalis Colocassides – Resigned on 23 November 2018 Michalis Polydorides – Resigned on 2 April 2019 Manthos Rodinos – Resigned on 23 October 2018 Pandora Tseriotou Christos Papaellinas – Resigned on 23 October 2018 Giannis Ioannides – Resigned on 23 October 2018 Yiannos Stavrinides – Appointed on 23 October 2018 Giorgos Trypatsas – Appointed on 23 October 2018 Loizos Christou – Resigned on 6 March 2019 Dimiter Martinov Banov – Appointed on 6 March 2019 (subject to approval by the Cyprus Securities & Exchange Commission)
Polydorides & Associates (Corporate Services) Limited (Resigned on 2 April 2019)
24 Constantinou Palaiologou Street ''Flery'' Building 2 nd Floor, Office 202 3095 Limassol Cyprus
Zenonos Kitieos 8 2322 Lakatamia Nicosia Cyprus
24 Constantinou Palaiologou 24 Street "Flery'' Building 2nd Floor, Office 2020 3095 Limassol Cyprus
8, Stasinou Avenue 2nd Floor, Office 202 Photiades Business Centre 1060 Nicosia, Cyprus
According to Article 9 of the Transparency Requirements (Securities Admitted to Trading on a Regulated Market) Law of 2007, we as members of the Board of Directors and responsible party for the financial statements of Interfund Investments Plc (the "Company") for the year ended 31 December 2018 confirm that, as far as we know that:
| Full Name | Signature |
|---|---|
| Andreas Hadjikyrou | ……………………………………………… |
| Pandora Tseriotou | ……………………………………………… |
| Yiannos Stavrinides | ……………………………………………… |
| Giorgos Trypatsas | ……………………………………………… |
Notes:
Nicosia 30 April 2019
The Cypriot economy continued to grow strongly during 2018. There was a remarkable growth for the third consecutive year reaching 3,8% in 2018. The growth is due to the domestic demand and exports of services, especially in the tourism sector, while inflation remained subdued. The domestic demand is expected to continue to be strong during 2019, due to the rapidly decreasing unemployment and the moderate salaries growth. However, the potential of the growth is anticipated to be further reduced, mainly reflecting a lesser favourable external environment.
The fiscal performance continued to be favourable during 2018 due to the increased revenue, even though the surplus of the general government converted to a deficit because of the oneoff support measures related to the sale of the Cyprus Cooperative Bank (COOP). For 2019 and 2020, the budget balance is expected to have a significant surplus. At the same time however, as a result of the above-mentioned support measures for the banking sector, the public debt was significantly increased in 2018, although it is expected to significantly decrease subsequently. The high public debt underlines the importance of continuous prudent expenditure management to balance the downturn of the public debt. There was significant improvement recorded by the labour market as employment increased by 3,7% and wages by 1,9%. The increased employment and higher wages are expected to strengthen the disposable income and to support retail consumption. Inflationary pressures remain very weak. Consumer price inflation rose to 0,8% in 2018, standing marginally higher than it was one year ago. The basic inflation in 2018 fluctuated around zero as the moderately higher prices of the services were offset by falling prices for non-active industrial goods. In the coming quarters, it will be two opposite forces in play: the increase in disposable income, which will fuel prices pressure and reducing oil prices which will limit the inflationary trends. In total, inflation is expected to be reduced to 0,7% in 2019. As the impact of the lowest prices of oil weakens, inflation is expected to be increased moderately in 2020 at 1,2%.
| Indicators | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 |
|---|---|---|---|---|---|---|
| GDP growth (%, yoy) | 1,7 | 2,8 | 3,9 | 3,8 | 3,3 | 2,7 |
| Inflation (%, yoy) | -1,5 | -1,2 | 0,7 | 0,8 | 0,7 | 1,2 |
| Unemployment (%) | 15,0 | 13,3 | 11,3 | 9,5 | 8 | 8,3 |
| General Government balance (% of GDP) | -0,1 | 0,5 | 1 | 2,8 | 3 | 2,7 |
| Gross public debt (% of GDP) | 107,5 | 107,4 | 99,7 | 110,2 | 104 | 98 |
| Current account balance (% of GDP) | -1.5 | -4.9 | -4.9 | -3.1 | -7.1 | -7 |
During 2018 the creditworthiness of Cyprus was upgraded to investment grade by Standard & Poor's and Fitch, as well as Moody's. Moody's upgraded Cyprus's debt instruments to Ba2, Standard & Poor's to BBB- (September 2018) and Fitch to BB+ and BBB- (April 2018 and October 2018 respectively). These upgrades were made despite the large increase in public debt, which resulted from the issuance of government bonds to Hellenic Bank PCL in order for it to integrate the performing assets of the Cyprus Cooperative Bank in its business. This indicates that the rating agencies consider that the dynamics of the Cypriot economy are sound enough to allow the state to meet its debt obligations and that today the Cypriot banks are placing the whole system at a much lower risk than the recent past.
Last year, Cyprus made significant progress in the consolidation of its banking sector and in the reduction of non-performing loans (NPLs) held by banks. In 2018, non-performing loans decreased significantly mainly due to the two major transactions, namely the transfer of nonperforming assets by the Cyprus Cooperative Bank to the state-owned asset management company (KEDIPES), and the sale of a large NPLs portfolio by Bank of Cyprus. This strengthened the balance sheets of the two largest banks being Bank of Cyprus and Hellenic Bank (the latter through the agreement on the absorption of the Cyprus Cooperative Bank's healthy elements).
The chart below represents the large deleveraging achieved in the Cypriot banking system with the size of the largest Cypriot bank's loan portfolio. Bank of Cyprus today has loans of c.ten billion euros, equivalent to the size of the bank's balance sheet fifteen years ago.
The Cypriot economy faces several challenges that are exacerbated by its basic weaknesses, such as:
The risks mainly relate to the budgetary impact of healthcare reform and the outcome of court decisions on previous measures to cover public sector wage costs. In a recent decision, the administrative court ruled it illegal to cut the salaries of civil servants employed by the government since 2011 in response to the financial crisis. In addition, a slowdown in the economy may adversely affect fiscal revenues.
At the same time, while Investments will make a positive contribution in 2019 on the basis of strong construction activity, growth is expected to slow to 3.3% and 2.7% in 2019 and 2020 respectively, due to the less favorable external environment. The slowdown in growth in the euro area and the continuing uncertainties in major trading partners are affecting Cyprus' prospects and raising risks.
Despite the significant decline in NPLs in 2018, the ratio of non-performing loans in the Cypriot banking sector remains the second highest in the euro area. In addition, nonperforming loans transferred to KEDIPES and other credit companies continue to burden the economy.
In a recent report, the institutions overseeing the Cyprus economy (European Commission - EC, European Central Bank - ECB, European Stability Mechanism - ESM, International Monetary Fund - IMF) made the following recommendations:
Global growth for 2018 is estimated at 3.7%, despite weaker performances in some economies, mainly in Europe and Asia.
Global growth forecast for 2019 and 2020 had already been revised downwards, in part due to the negative effects of the tariff increases that came into force by the United States and China in 2018. Factors such as the introduction of new standards for Germany car fuel emissions and concerns in Italy about government policies and financial risks have affected domestic demand in these countries. It will also be adversely affected by the deterioration in the markets and the recession in Turkey which is now projected to be deeper than expected.
The weakness in the second half of 2018 will shift to the next quarters while global growth is projected to drop to 3,5% in 2019, before slightly rising to 3,6% in 2020. This forecast reflects the decline in growth developed economies, along with a temporary decline in growth rates for emerging markets and developing economies in 2019, reflecting the contraction in Argentina and Turkey, as well as the impact of trade disputes on China and other Asian economies. Growth in advanced economies is expected to slow from an estimated 2,3% in 2018 to 2,0% in 2019 and 1,7% in 2020.
In the United States the growth is expected to decrease to 2,5% in 2019 and further to 1,8% in 2020 with the fiscal stimulus easing and as the Federal Reserve's basic interest rate temporarily exceeding the neutral rate. After 4 increases in the interest rates in 2018, it is not expected that there will be more than one increase in 2019. Also, the Federal Reserve has made it clear that the decline in the size of its assets (the Fed's balance sheet had inflated in previous years and peaked at \$ 4,5 trillion in 2015 due to the support given to the economy by quantitative easing (QE)), will happen at a slower pace in the immediate future than it did in 2018. Further, the strong domestic demand growth for imports will be supported by and will help widen the US current account deficit.
Growth in the euro zone is projected to moderate from 1,8% in 2018 to 1,6% in 2019 and 1,7% in 2020. Growth rates have declined in many economies, notably in Germany (affected by private consumption, weak industrial production following the introduction of revised car emission standards and sluggish external demand), Italy (due to limited domestic demand and higher borrowing costs as government yields remain relatively high) and France (due to the negative impact of the protests and labor mobilisations).
There is substantial uncertainty about growth forecast of around 1,5% in the United Kingdom in 2019-20. The negative impact of prolonged uncertainty on the outcome of the Brexit, is partially offset by the positive impact of the fiscal incentives announced on the 2019 budget. This projection, being the basic scenario, is based on a Brexit deal happening in 2019 and that the UK will transit smoothly to the new regime. However, the shape that Brexit will eventually take remains extremely uncertain.
The economy in Japan is projected to grow by 1,1% in 2019. Additional budgetary support to the economy, including measures to mitigate the effects of the increase in the expected rate of consumption tax will help the economy grow. Growth is expected to moderate to 0,5% in 2020.
For emerging markets and the growing financial group, growth is expected to retreat to 4,5% in 2019 (from 4,6% in 2018), before improving to 4,9% in 2020.
The growth of the ever-emerging and developing Asia will decrease from 6,5% in 2018 to 6,3% in 2019 and 6,4% in 2020. Despite fiscal stimulus offsetting some of the effects of higher US tariffs, China's economy will slow down due to the combined influence of the required stricter regulatory framework in the financial sector, and trade tensions with the United States. India's economy is poised to accelerate in 2019, taking advantage of lower oil prices and a slower monetary tightening than expected as inflationary pressures retreat.
Growth in emerging and developing Europe in 2019 is now expected to weaken more than what was projected at 0,7% despite overall strong growth in Central and Eastern Europe, before rebounding to 2,4% in 2020. The projected recession will have a major impact in 2019, amid rising interest rates and the general adjustment to the more difficult external financing conditions.
(Percent change)
| Estimates | Projections | |||
|---|---|---|---|---|
| 2017 | 2018 | 2019 | 2020 | |
| World Output | 3.8 | 3.7 | 3.5 | 3.6 |
| Advanced Economies | 2.4 | 2.3 | 2 | 1.7 |
| United States | 2.2 | 2.9 | 2.5 | 1.8 |
| Euro Area | 2.4 | 1.8 | 1.6 | 1.7 |
| Germany | 2.5 | 1.5 | 1.3 | 1.6 |
| France | 2.3 | 1.5 | 1.5 | 1.6 |
| Italy | 1.6 | 1 | 0.6 | 0.9 |
| Spain | 3 | 2.5 | 2.2 | 1.9 |
| Japan | 1.9 | 0.9 | 1.1 | 0.5 |
| United Kingdom | 1.8 | 1.4 | 1.5 | 1.6 |
| Canada | 3 | 2.1 | 1.9 | 1.9 |
| Emerging Market and Developing Economies | 4.7 | 4.6 | 4.5 | 4.9 |
| Commonwealth of Independent States | 2.1 | 2.4 | 2.2 | 2.3 |
| Russia | 1.5 | 1.7 | 1.6 | 1.7 |
| Emerging and Developing Asia | 6.5 | 6.5 | 6.3 | 6.4 |
| China | 6.9 | 6.6 | 6.2 | 6.2 |
| India | 6.7 | 7.3 | 7.5 | 7.7 |
| ASEAN-5 (Indonesia, Malaysia, Philippines, Thailand, Vietnam) |
5.3 | 5.2 | 5.1 | 5.2 |
| Emerging and Developing Europe | 6 | 3.8 | 0.7 | 2.4 |
| Latin America and the Caribbean | 1.3 | 1.1 | 2 | 2.5 |
| Brazil | 1.1 | 1.3 | 2.5 | 2.2 |
| Mexico | 2.1 | 2.1 | 2.1 | 2.2 |
| Middle East, North Africa, Afghanistan, and Pakistan | 2.2 | 2.4 | 2.4 | 3 |
| Saudi Arabia | –0.9 | 2.3 | 1.8 | 2.1 |
| Sub-Saharan Africa | 2.9 | 2.9 | 3.5 | 3.6 |
| Nigeria | 0.8 | 1.9 | 2 | 2.2 |
| South Africa | 1.3 | 0.8 | 1.4 | 1.7 |
Average oil prices are projected at just under \$ 60 per barrel in 2019 and 2020. Metal prices are expected to fall by 7,4% year-on-year in 2019 and remain virtually unchanged in 2020.
The risks to global growth are presented further below. The escalation of trade tensions beyond those already incorporated in the forecast remains a major source of risk. A number of causes beyond the escalating trade tensions could further aggravate the sense of risk with adverse effects on growth, in particular due to high levels of public and private debt. These likely factors include the United Kingdom's withdrawal from the European Union and the worst of the projected scenarios of slowdown in China.
During 2018 the Company's investment strategy has been maintained as it had been implemented over the past two years, with the Company investing mainly in foreign markets. The use of various strategic and financial tools as well as the large geographical and sectoral spread of investments tend to reduce investment risk. Despite the widespread inevitability, the Company's portfolio remains reasonably exposed to market risk, mainly due to fluctuations in international stock markets, in other words it is affected by systemic fluctuations in international financial markets. As a result, the intrinsic value of the portfolio tends to coexist with international markets.
The global financial markets in 2018 were highly volatile and ended the year with significant losses. The trade war between the US and China, rising dollar interest rates and concerns about slowing China's economy were among the most important reasons for major stock market crashes. Here are some of the odds on some of them:
| ● | Germany | -18% |
|---|---|---|
| ● | Japan | -18% |
| ● | England | -13% |
| ● | Hong Kong | -14% |
| ● | South Korea | -17% |
| ● | Greece | -23% |
The investment character of the Company is such that it makes the returns of the portfolio prone to dramatic changes in the international political and economic scene. It is also a fact that globalization of markets can occasionally create conditions of increased volatility and nervousness leading to violent corrections of international markets.
Based on the significant improvement achieved by the Cypriot economy as well as the great progress in the consolidation of the Cypriot banks, the Company decided to invest up to 30% of its capital in Cypriot companies' shares. This will enable her to take advantage of investment opportunities presented at this stage of the economic recovery as well as use her experience and knowledge of the local market.
With the remaining 70% of its capital, the Company intends to pursue investment policy in international markets, maintaining high risk spread on a geographic / sectoral basis, and taking advantage of any opportunities that may arise.
Despite the problems and challenges facing the global economy, economic activity is expected to accelerate by 3,5% in 2019 and 3,6% in 2020. Low interest rates and low inflation, cheap energy, stabilisation of the banking sector and the application of new technologies are some of the factors that help in this direction. The big fall in stock prices in 2018 has created attractive valuations in most markets.
Central banks around the world appear willing to continue to support their economies. In the US, the FED has virtually suspended or not stopped interest rate hikes and at the same time stopped cutting its balance sheet. In Europe, the ECB has postponed interest rate hikes for an indefinite period while continuing with quantitative easing. These low interest rates support both economies and shares.
Challenges and risks certainly remain, which obliges us to be constantly alert, close to events and markets. Apart from the most current risk of the worsening trade dispute between the US and China, high levels of lending worldwide, both at the level of governments and companies and households, may be the biggest problem facing the global economy. Indicatively, global debt has approached \$ 250 trillion, and exceeds 300% of world's GDP.
Global Capital Securities and Financial Services Ltd Portfolio Management Manager
30 April 2019
After the relevant decision of the Board of Directors, it was resolved the Company adopts the Corporate Governance Code ("Code") as issued by the Cyprus Stock Exchange in September 2002 and as amended in November 2003, in March 2006, in January 2007, in September 2009, in March 2011, in September 2012, and in April 2014. The Code is available at the Company's registered office.
The Company applies all the provisions of the Code but due to the nature of its operations as an Authorised Investment Organization where the Council has no executive powers, it does not apply the provisions of the Code with respect to the provisions arising from the duties of the executive directors.
The degree of compliance by the Company with the principles and provisions of the Code at the date of this report is described below.
By the adoption of the Code, the Board of Directors will meet at regular intervals and at least 6 times a year. The main responsibilities of the Board include the supervision, the formation of the Company's strategy and the Company's development plan. Within these limits, the Board of Directors examines and monitors the Company's objectives and strategic policy, the investment manager's assessment, the annual budget, the significant capital expenditures, the unusual transactions, the substantial transactions with related parties (including subsidiaries or affiliates, in which a Director, Secretary or significant shareholder of the Company i.e. holder of more than 5% of the issued share capital, has a direct or indirect interest), the mergers/acquisition, the adoption and any potential changes in the application of accounting standards and the results of the Company.
The members of the Board of Directors are required to disclose information to the Board of Directors and to the shareholders through the Annual Report and the Company's financial statements in relation to any own substantial interest that may arise from the Company's transactions that fall within their duties.
For the better performance of their duties, the Board of Directors uses the advice of external consultants where and when is considered necessary.
The Company Secretary is appointed by the Board of Directors and ensures that all the procedures of the Board of Directors are followed and that current regulations are complied with. All Directors have access to the Secretary's advice and services.
During 2018 the Board of Directors held 9 meetings. The Board of Directors operates in accordance with the principle of collective responsibility and no category of its members differs in its liability towards the Company and its shareholders.
The Board of Directors consists of non-Executive Directors and therefore the provisions of ordinance A2 of the Corporate Governance Code do not apply. The Company does not employ personnel and the management of its assets and its individual operations has been delegated as a result of the provisions of Approved Investment Organisations and based on agreement with its Investment Managers 'Global Capital Securities and Financial Services Ltd'.
The investment manager shall provide to the Board of Directors management reports on the financial position and prospects of the Company at each regular meeting of the Board of Directors.
The Board of Directors are informed timely and in writing for meetings of the Board of Directors in accordance with the laws and regulations from time to time. The minutes of the meetings are recorded and delivered to all members of the Board of Directors within 15 days.
The Company applies a policy in relation to the diversity of the Board of Directors, mainly regarding aspects related to the age and educational and professional background of Board members. The aim of the Company is to utilise the wide educational and professional background of the members of the Board of Directors through their appointment to the Company's Committees for the best possible fulfilment of the Committees' responsibilities.
The role of the Nominations Committee is to examine and submit to the Board suitable persons for appointment to the Board of Directors, as well as to verify the application of reelection procedures for the members of the Board of Directors.
The Chairman of this Committee is Mrs. Pandora Tseriotou. The Nominations Committee is responsible for assisting the Board of Directors in the selection and appointment process of new directors as well as in planning for the succession of the Company's departing Directors and their smooth replacement. The terms of reference of the Nominations Committee were codified by decision of the Board of Directors on 13 March 2003 when the Commission commenced its operation.
On 23 October 2018 and during the Annual General Meeting on that date when a vote took place for the appointment of Directors to the Board of Directors, Mr. Christos Papaellinas, Giannis Ioannides and Manthos Rodinos have not been re-elected and have been replaced by Messrs. Yiannos Stavrinides, Giorgos Trypatsas and Andreas Hadjikyrou.
On 23 November 2018, Mr. Michalis Colocassides resigned from the Company's Board of Directors.
On 6 March 2019, Mr. Loizos Christou resigned from the Company's Board of Directors, and was replaced by Mr. Dimiter Martinov Banov on the same day. His appointment is subject to ratification by the Securities and Exchange Commission.
On 2 April 2019, Mr. Michalis Polydorides resigned from the Company's Board of Directors.
According to the Company's Articles of Association, one third of the Board of Directors resign and offer themselves for re-election each year.
The Directors who have resigned and have nominated themselves for re-election at the next Annual General Meeting are Mrs. Pandora Tseriotou and Mr. Andreas Hadjikyrou.
The curriculum vitaes of the Directors are presented in the section Board of Directors and Committees of Corporate Governance.
The role of the Investment Committee and the Remuneration Committee is to monitor the implementation of Board of Directors' decisions on investment policy decided and determined to be implemented by the Investment Manager, to make recommendations to the Board on changes in investment policy and to make recommendations. for the remuneration of the Investment Manager. The Committee also recommends the amount of Directors' remuneration to be in line with their occupation time in the Company.
The terms of reference of the Committee were codified by decision of the Board of Directors on 13 March 2003. Despite the fact that the Investment Committee's operating terms were codified at the aforementioned Board meeting, the Company since incorporation had an Investment Committee comprising of members of the Board of Directors with the responsibility to monitor the implementation by the Investment Manager of Board of Directors' decisions regarding the investment policy and to recommend to the Board potential changes to this policy.
The Board of Directors approves the investment strategy of the Investment Manager following the presentation of the Investment Manager's written notes that explain the strategy, and resolves after their detailed analysis.
The Board of Directors submits a balanced, detailed and understandable assessment at all instances of public reports, reports to supervisory bodies as well as in instances where information is required by relevant legislation. The assessment for the year ended 31 December 2018 is presented in the Management Report.
The Board of Directors declares that the Company intends to continue operating as a going concern for the next twelve months.
The Audit Committee is responsible for making recommendations regarding the appointment, termination and remuneration of auditors, the assessment of their independence, the selection of accounting policies for the financial statements, the drafting of the report on corporate governance, the review of the Company's related party transactions as well as the assessment of the effectiveness of the internal control framework.
The responsibilities and powers of the Audit Committee are based on specific written terms of reference. The terms of reference of the Committee were codified by decision of the Board of Directors on 13 March 2003 and the Committee commenced its operation.
To monitor the Company's compliance with the Code, the Board of Directors has appointed Mr. Michalis Polydorides as Compliance Officer with the Corporate Governance Code for the year 2018. Following the resignation of Mr. Polydorides, Mr. Giorgos Trypatsas has been appointed as Compliance Officer.
The Board of Directors is responsible for the Company's internal control framework and for evaluating its adequacy.
Therefore, the Audit Committee examines the effectiveness of the Investment Manager's internal controls.
The Investment Portfolio Manager informs the Board of Directors of those investments in which he has an interest. The shareholders are informed on this through the announcements of the Company regarding the composition of its portfolio.
During the year ended 31 December 2018, no loans were provided to either the Company's Directors or the Directors of the affiliated entities, from the Company or from affiliated entities.
The Company due to the nature and way of performing its operations, does not have an Internal Audit Department, and the internal audit process is carried out by the Audit Committee. The Board of Directors, through the Audit Committee, has inspected the effectiveness of the Investment Manager's control framework, with regards to the Company, and has been satisfied with its application, as well as the accuracy, completeness and validity of the information provided to shareholders.
The Board of Directors also assures that no other breach of the Cyprus Stock Exchange Laws and Regulations has come to its attention.
The shareholders who directly or indirectly held more than 5% of the issued share capital of the Company as at 31 December 2018 and 30 days prior to the date of notice for convening the Annual General Meeting were as follows:
| 31 December 2018 | 30 days before the date of notice for the Annual General Meeting |
|||||||
|---|---|---|---|---|---|---|---|---|
| Direct Participation % |
Indirect Participation % |
Total % |
Direct Participation % |
Indirect Participation % |
Total % |
|||
| 7Q Invest Limited / Multi Opportunities (i) |
28,29 | 0,21 | 28,50 | - | - | - | ||
| Cyprus Development Bank Limited (ii) |
5,85 | 3,97 | 9,82 | 1,95 | - | 1,95 | ||
| Universal Life Insurance Public Company Limited |
6,51 | - | 6,51 | - | - | - | ||
| Voluntary Pension Fund CCB Sila |
- | - | - | 6,10 | - | 6,10 | ||
| Professional Pension Fund CCB Sila |
- | - | - | 6,90 | - | 6,90 | ||
| Universal Pension Fund Saglasie | - | - | - | 6,95 | - | 6,95 | ||
| Universal Pension Fund CCB Sila |
- | - | - | 6,90 | - | 6,90 | ||
| Central Cooperative Bank Plc (Bulgaria) |
- | - | - | 9,90 | - | 9,90 |
The Annual General Meetings are held in accordance with the provisions of the applicable legislation and ensure the equal treatment of all holders of securities, including minority security holders. All shares of the Company have the same voting rights.
At the Annual General Meetings a separate resolution is presented on each substantial issue, including among others the Annual Report and financial statements, the election of Directors as well as the remuneration of Directors. Notices of the Annual General Meetings are dispatched individually to all the Company's shareholders.
At the General Meetings of the Company an effort is made for all the Directors to be present, make themselves available to answer questions of those who are present. The Chairmen of the Audit Committee, the Investment Committee and Remuneration Committee and Nominations Committee are present at the Annual General Meetings to answer any questions regarding the operations of the committees of the Board.
Subject to the provisions of applicable law, shareholders, provided they represent a sufficient number of shares (5%), have the ability to submit matters for discussion at the general meetings of shareholders at least 15 days prior to the date of notice of convening the General Meeting.
At the Annual General Meetings, all shareholders are clearly being informed all material changes affecting the Company, including the financial position, performance, ownership and governance of the Company.
The Board of Directors encourages the attendance of all shareholders at the Annual General Meetings in order to achieve meaningful discussion and effective decision-making that serve the interests of all shareholders.
For the proper communication of the shareholders with the Company, the Board of Directors has appointed Mr. Michalis Polydorides as the Investor Liaison Officer for the year 2018. Following the resignation of Mr. Polydorides, Mr. Haris Raftopoulos was appointed as the Investor Liaison Officer.
By order of the Board of Directors
Andreas Hadjikyrou Chairman
30 April 2019
The members of the Board of Directors receive fees that are determined by the General Meeting of shareholders at the Annual General Meeting.
The remuneration of Directors in their capacity as members of the committees of the Board of Directors are determined by the Board of Directors and are proportional to the time they devote to their role.
The remuneration of the Directors in their capacity as members of the Board of Directors shall be approved by the shareholders at each Annual General Meeting.
During the year 2018, the Investment Managers' remunerations were as follows:
The remuneration of the Directors for the year ended 31 December 2018 is as follows:
| Total number of Directors | Directors Fees | Committee Fees | Total | |
|---|---|---|---|---|
| during the year | € | € | € | |
| Non-Executive | 10 | 36.062 | 14.216 | 50.278 |
======== ======== ========
| Directors Fees € |
Committee Fees € |
Total € |
|
|---|---|---|---|
| Michalis Colocassides (until 23/11/2018) | 7.624 | 1.375 | 8.999 |
| Manthos Rodinos (until 23/10/2018) | 3.580 | 1.584 | 5.164 |
| Michalis Polydorides (until 02/04/2019) | 6.058 | 4.500 | 10.558 |
| Loizos Christou (until 06/03/2019) | 3.710 | 950 | 4.660 |
| Pandora Tseriotou | 5.471 | 1.865 | 7.336 |
| Christos Papaellinas (until 23/10/2018) | 1.232 | 2.042 | 3.274 |
| Giannis Ioannides (until 23/10/2018) | 1.232 | 1.250 | 2.482 |
| Andreas Hadjikyrou (from 23/10/2018) | 2.786 | 80 | 2.866 |
| Yiannos Stavrinides (from 23/10/2018) | 2.478 | 205 | 2.683 |
| Giorgos Trypatsas (from 23/10/2018) | 1.891 | 365 | 2.256 |
| Dimiter Martinov Banov (from 06/03/2019) | - | - | - |
| ___ | ___ | __ | |
| Total | 36.062 | 14.216 | 50.278 |
| ========= | ========== | ========= |
At the Annual General Meeting it was determined that each member of the Board receives the annual amount of €775 (2017: €775) as remuneration for being a member of the Board, the annual amount of €27.000 (2017: €27.000) to be allocated between the Directors according to their attendance at meetings and the Chairman to receive the additional amount of €3.700 per year (2017: €3.700).
The Board of Directors also determined the remuneration of €1.500 for the Chairman of each Committee and €950 for the attendance of each member of each Committee of Corporate Governance for 2018, as well as a €75 travel allowance for each Board and Corporate Governance Committee meeting held away. The above remunerations were ratified by the General Meeting of Shareholders on 23 October 2018.
Remuneration Committee
Yiannos Stavrinides Chairman
30 April 2019
Michalis Colocassides - non executive (resigned on 23 November 2018) Michalis Polydorides, non executive (resigned on 2 April 2019) Manthos Rodinos - (resigned on 23 October 2018) Loizos Christou - non executive (resigned on 6 March 2019) Pandora Tseriotou - non executive Christos Papapellinas - non executive, independent (resigned on 23 October 2018) Giannis Ioannides - non executive, independent (resigned on 23 October 2018) Andreas Hadjikyrou - Chairman, non executive (appointed on 23 October 2018) Yiannos Stavrinides - non executive, independent (appointed on 23 October 2018) Giorgos Trypatsas - non executive, senior, independent (appointed on 23 October 2018) Dimiter Martinov Banov - non executive (appointed on 6 March 2019) (provided that the appointment is ratified by the Securities Exchange Commission)
He holds a Bachelor of Science (Economics) degree from the University of London School of Economics and Political Science. He was a senior executive of S & G Colocassides Ltd, Governor of the Bank of Cyprus Ltd, Chairman of the Cyprus Development Bank and of Lombard Natwest and Chairman of Alpha Bank Ltd. He served as President of the Cyprus Tourism Organization, the Cyprus Employers and Industrialists Federation and as Minister of Trade and Industry.
He holds a degree in Civil Engineering from the National Technical University of Metsoveio and an MBA from Stern Business School of New York University.
He worked for many years in management positions at major multinational companies, mainly telecommunications in America.
In Cyprus he manages a company of real estate and investment activities and he managed investment funds and tourism services companies, at the same time he serves as a Director in various private and public companies.
He is the Founder and Chief Executive Officer of 7Q Financial Services Ltd. He is the main investment officer, where he manages many portfolios, with investment instructions, organisations and individuals with high financial value, as well as the company's systematic strategies. He was Senior Portfolio Manager at Global Capital Securities and Financial Services Ltd (2005 - 2010) and responsible for the management at Egnatia Financial Services Ltd (2003 - 2005). He holds a Master's Degree in Business Management, MBA in International Banking and Economics from the University of Birmingham. He is a holder of the Higher Certificate issued by the Cyprus Securities and Exchange Commission.
He was a Fellow of the Institute of Chartered Accountants in England and Wales and a member of the Institute of Certified Public Accountants in Cyprus. He is a Director in Polydorides & Associates Consultants Ltd, that provides consulting and administration services to businesses and board members of other private companies. From 1970 to 1987 he was a Partner at the Scottis & Polydorides audit firm and later a Managing Partner at Peat Marwick Mitchell & Co. In 1987, he was appointed Chief Executive Officer of KEO Plc, a position he served until 1996. From 1993 to 1999 he was President of the Limassol Chamber of Commerce and Industry and has since been Honorary President of the Chamber. He has also served as a member of the Executive Board of the Cyprus Chamber of Commerce and Industry from 1993 to 2002. He served as a non-executive member of the Board of Directors of the Central Bank of Cyprus from July 2013 to July 2018.
He holds a Bachelor of Science (Electrical Engineering) degree from Polytechnic of Central London. He has worked for several years in Public Technical Education as a technology professor and in the private sector as a technical manager in large companies. Since 1987 he has been a major shareholder and CEO of EL. & D Christou Electromechanical Services Ltd.
He holds a Bachelor of Science (Business Management) degree of International Business Management School SDA Bocconi University of in Milan, Italy, as well as an eMBA (Finance, Banking and Real Estate). He is a director and former member of the Board of Directors of Central Cooperative Bank PLC of Bulgaria. He has also served as a director of CCB Asset Management and KFT Properties Development.
She holds a Bachelor of Science (Economics) degree from the University of London School of Economics and Political Science. She is Managing Director of Unicars Ltd and Executive Officer at PMT Tseriotis Ltd, PM Tseriotis Ltd, Lever PMT Tseriotis Ltd. She is also a member of the Board of Directors of the University of Cyprus. She served as Chairman of the Association of Vehicle Importers and a member of the boards of directors of Universal Life Insurance Co Ltd and Laiki Asfalistikis Ltd.
Born in Nicosia in 1966. He studied Economics at Leicester University and then earned his Masters Degree in Business Administration (MBA) at Imperial College. Today, he is the Chief Executive Officer of the Group of Companies C.A. Papaellinas. He is also a member of the Board of Directors of the Federation of Employers and Industrialists (OEB) and a member of the Council of the University of Cyprus as a representative of the Senate. He was a member of the Boards of Directors of Eurobank and other public companies.
He holds a Bachelor of Science (Economics) degree from the University of London School of Economics and Political Science. He served for years as the Executive Managing Director of the Cyprus Development Bank. During his term he pioneered the promotion of scientific analysis, evaluation and study of projects and enterprises. He also promoted the globalisation of the Cypriot economy. He has been a pioneer in the creation and delivery of public sector consulting services on matters of development, search of new roles for the government and governmental bodies, as well as the creation of the Cyprus International Institute of Management (CIIM), a pioneering educational institution in management and the Cyprus Institute, the first purely research center in the region.
He has 20 years of experience in financial services in both Cyprus and Greece. He holds a BSc in Public and Business Administration from the University of Cyprus and an MSc in International Business from the University of Manchester Institute of Science and Technology (UMIST). His experience includes working as a head analyst, research and analysis director, portfolio manager, investment advisor and strategy manager. In 2014 he was appointed as a member of the Board of Directors of CYTA and CYTA Hellas, until his resignation in September 2018. He is approved for the provision of (higher-level) investment services by the Cyprus Securities and Exchange Commission and is a licensed Broker at the Cyprus Stock Exchange and Athens Stock Exchange.
He has over 20 years of experience in financial services, having worked as an executive director at various investment organizations such as Landmark Financial Services Ltd and Hellenic Bank Investments Ltd. He is also executive director and founder of Ambelis Winery as well as a member of the Board of Directors of the Cyprus Natural Gas Company (DEFA). He holds a master's degree from Harvard University and a master's degree from Cornell University. He holds the Certificate of Higher Level investment services from the Cyprus Securities and Exchange Commission.
The Audit Committee of the Board of Directors is composed of the Directors mentioned in the Report (Page 20). The main purpose of the Committee is to supervise the conduct of the annual audit and the presentation of the financial statements. The Committee recommends to the Board of Directors, subject to the approval by the shareholders, the selection of independent external auditors.
Management has the responsibility of internal control and the presentation of financial reports. Independent external auditors have the responsibility to conduct an independent audit of the Company's financial statements in accordance with International Standards on Auditing and to publish their report on them. The main purpose of the Committee is to supervise the conduct of the annual audit and the presentation of the financial statements.
Regarding the appointment of the members of the Committee, the Board of Directors has taken into account the requirements that the members of this Committee should be Non-Executive Independent Directors. Messrs. Giorgos Trypatsas and Yiannos Stavrinides are Non-Executive Independent Directors. Until 23 October 2018 Messrs. Giannis Ioannidis and Christos Papaellinas were Non-Executive Independent Directors and Manthos Rodinos was Non-Executive Director.
In this context, the Committee held four meetings in 2018, and was in touch with the management and the independent external auditors. Management reported to the Committee that the Company's financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union and the Committee has examined and discussed the financial statements with management and the independent external auditors. The Committee discussed with the independent external auditors the independence requirements as provided by the Code of Ethics for Professional Accountants of the Institute of Certified Public Accountants of Cyprus. The independent external auditors presented and discussed with the Committee all issues related to their independence as external auditors.
Based on the Committee's discussions with management and the independent external auditors and the Committee's examination of management's views and the report of the independent external auditors to the Committee, the Committee recommended to the Board of Directors the inclusion of the financial statements in its Annual Report for the year ended 31 December 2018. The financial statements were approved by the Board of Directors on 30 April 2019. The Committee further recommended the continuation of services of Messrs. PricewaterhouseCoopers Limited as the Company's independent external auditors for the year 2019.
Audit Committee
30 April 2019
1 The Board of Directors of Interfund Investments Plc (the ''Company'') presents its report together with the audited financial statements of the Company for the year ended 31 December 2018.
2 The principal activity of the Company, which is unchanged from last year, is the investment, as a closed-end investment portfolio company, in equities of public and other companies and in bonds.
3 The Company's loss for the year ended 31 December 2018 was €1.539.766 (2017: profit of €758.837). At 31 December 2018, the Company's total assets were €9.010.303 (2017: €10.409.849) and its net asset position was €8.596.168 (2017: €10.135.934).
4 The financial position, development and performance of the Company depends mainly on the performance of the securities and investments it holds. During the year 2018, overseas stock exchanges and indices, where the Company invests in and had mainly invested in the year 2018, noted significant fluctuations. Potential losses that the Company may suffer in the future cannot be determined at this stage.
5 The Cypriot economy noted positive growth in 2017 and 2018, after overcoming the economic recession of recent years. In general, the economic outlook remains favorable, but there are still risks of recession from the remaining high levels of non-performing loans, from the public debt ratio and the potential deterioration of the external environment of Cyprus.
6 This operating environment may have a significant impact on the Company's operations and its financial position. Management is taking the necessary measures to ensure the viability of the Company's operations, however, the future effects of the current economic situation are difficult to predict, and management's current expectations and estimates could differ from actual results.
7 The Company's portfolio relates to the following risk categories:
(a) Systemic risk
It concerns the risk caused by factors affecting the entire market and therefore the general stock market indices. This risk cannot be avoided by diversifying portfolio investments. This risk consists of the following risks:
It concerns the risk included in the choice of acquiring a particular company's shares, the performance of which is linked to its financial results, the prospects of the sector in which the company operates and other factors. This risk can be mitigated through the diversification of portfolio investments into different equity instruments and different investments. However, the following risks remain:
(i) Credit risk
It concerns the probability that the issuer will not be able to fulfil its obligations, such as the payment of dividends, capital, coupons, etc.
(ii) Liquidity risk
It concerns the ease with which the investor can liquidate securities. An attempt to liquidate a security in a market where there is no corresponding demand, may cause large fluctuations in the price of the security. Highly marketable securities and investments carry a lower liquidity risk.
(iii) Market price risk
The Company is exposed to market price risk as a result of investments held by the Company and are classified in the balance sheet as financial assets at fair value through profit or loss. The Company is not exposed to commodity price risk.
The management of market price risk is mainly achieved through the diversification of the Company's portfolio in a wide range of investments in Cyprus, Greece, other foreign stock exchanges and investment funds.
The Board of Directors is updated bi-weekly on the position and status of the Company's portfolio, which is managed by an external Investment Manager, who acts accordingly.
9 Except as stated in paragraph 21 below, the Company's Board of Directors does not expect any other significant changes or developments in the Company's activities in the foreseeable future.
10 The Company's results for the year are presented on page 38. The net loss for the year is transferred to reserves.
11 The Board of Directors does not recommend the payment of dividend for the year ended 31 December 2018.
15 There were no significant changes in the distribution of responsibilities. The compensation of the Board of Directors remained the same in 2018.
16 Percentage participation in the Company's capital held, directly or indirectly, by members of the Board of Directors pursuant to section 60(4) of the Stock and Cyprus Stock Exchange Laws at 31 December 2018 and 30 days before the notice for convening the Annual General Meeting was as follows:
| 31 December 2018 | 30 days before the date of notice of the Annual General Meeting |
|||||
|---|---|---|---|---|---|---|
| Direct Participation % |
Indirect Participation % |
Total % |
Direct Participation % |
Indirect Participation % |
Total % |
|
| Andreas Hadjikyrou | - | - | - | - | - | - |
| Yiannos Stavrinides | - | - | - | - | - | - |
| Michalis Polydorides (i) | - | 3,66 | 3,66 | - | 3,66 | 3,66 |
| Loizos Christou (ii) | - | 1,33 | 1,33 | - | 1,33 | 1,33 |
| Pandora Tseriotou (iii) | 0,08 | 1,40 | 1,48 | 0,08 | 1,40 | 1,48 |
| Giorgos Trypatsas | - | - | - | - | - | - |
| Dimiter Martinov Banov | - | - | - | - | - | - |
| Manthos Rodinos | - | 0,56 | 0,56 | - | 0,56 | 0,56 |
| Christos Papaellinas | - | - | - | - | - | - |
| Michalis Colocassides | - | 3,55 | 3,55 | - | 3,55 | 3,55 |
17 Except for the remuneration of the Directors presented in Note 19 of the financial statements, as at 31 December 2018 and at the date of this report, there was no other significant contract with the Company in which a Director or his/her affiliates had a material interest. Related parties include the spouse, blood relatives up to first degree of relation, and companies in which the Director holds, directly or indirectly, at least 20% of the voting right in a general meeting.
18 The shareholders who held directly or indirectly more than 5% of the issued share capital of the Company as at 31 December 2018 and 30 days prior to the date of notice for convening the Annual General Meeting were as follows:
| 31 December 2018 | 30 days before the date of notice of the Annual General Meeting |
|||||
|---|---|---|---|---|---|---|
| Direct Participation % |
Indirect Participation % |
Total % |
Direct Participation % |
Indirect Participation % |
Total % |
|
| 7Q Invest Limited / Multi Opportunities (i) |
28,29 | 0,21 | 28,50 | - | - | - |
| Cyprus Development Bank Limited(ii) | 5,85 | 3,97 | 9,82 | 5,85 | 3,97 | 9,82 |
| Universal Life Insurance Public Company Limited |
6,51 | - | 6,51 | 6,51 | - | 6,51 |
| Voluntary Pension Fund CCB-Sila | - | - | - | 6,10 | - | 6,10 |
| Professional Pension Fund CCB-Sila | - | - | - | 6,90 | - | 6,90 |
| Universal Pension Fund Saglasie | - | - | - | 6,95 | - | 6,95 |
| Universal Pension Fund CCB-Sila | - | - | - | 6,90 | - | 6,90 |
| Central Cooperative Bank Plc (Bulgaria) |
- | - | - | 9,90 | - | 9,90 |
19 The Company has adopted the Code of Corporate Governance as issued by the Cyprus Stock Exchange.
25 The material post balance sheet events, which have a bearing on the understanding of the financial statements are described in Note 20 to the financial statements.
26 The Company did not operate through any registered branches during the year.
27 The Independent Auditors, PricewaterhouseCoopers Limited, have expressed their willingness to continue in office. A resolution giving authority to the Board of directors to fix their remuneration will be proposed at the Annual General Meeting.
Nicosia 30 April 2019
To the Members of Interfund Investments Plc
In our opinion, the accompanying financial statements of Interfund Investments Plc (the "Company") give a true and fair view of the financial position of the Company as at 31 December 2018, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and the requirements of the Cyprus Companies Law, Cap. 113.
We have audited the financial statements which are presented in pages 38 to 77 and comprise:
The financial reporting framework that has been applied in the preparation of the financial statements is International Financial Reporting Standards as adopted by the European Union and the requirements of the Cyprus Companies Law, Cap. 113.
We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
We remained independent of the Company throughout the period of our appointment in accordance with the International Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants (IESBA Code) together with the ethical requirements that are relevant to our audit of the financial statements in Cyprus and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code.
PricewaterhouseCoopers Ltd, PwC Central, 43 Demostheni Severi Avenue, CY-1080 Nicosia, Cyprus, P O Box 21612, CY-1591 Nicosia, Cyprus
T: +357 - 22 555 000, F:+357 - 22 555 001, www.pwc.com/cy
PricewaterhouseCoopers Ltd is a private company registered in Cyprus (Reg. No.143594). Its registered office is at 3 Themistocles Dervis Street, CY-1066, Nicosia. A list of the company's directors, including for individuals the present and former (if any) name and surname and nationality, if not Cypriot and for legal entities the corporate name, is kept by the Secretary of the company at its registered office. PwC refers to the Cyprus member firm, PricewaterhouseCoopers Ltd and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details.
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
We focused on this matter because the financial assets at fair value through profit or loss comprise the largest percentage of the Company's assets on its balance sheet as at 31 December 2018. On 31 December 2018, the financial assets at fair value through profit or loss amounting to €4.489.046 represented about 49,8% of the Company's total assets.
Further, during the year ended 31 December 2018, the fair value loss from the financial assets at fair value through profit or loss was €1.339.736.
The accounting policy of the Company regarding the above financial assets is disclosed in Note 4 of the financial statements.
The fair value estimation methods in relation to financial assets at fair value through profit or loss are disclosed in Note 6 (iv) and the critical accounting estimates and judgements used are disclosed in Note 7.
In relation to the measurement of investments traded in active markets, we have audited on a sample basis the fair value of the financial assets by comparing to the relevant quoted stock exchange prices in active markets at the balance sheet date.
We confirmed, on a sample basis, the fair value loss from the financial assets at fair value through profit or loss that are traded in active markets for the year 2018 with the corresponding statements from brokers with which the Company cooperates.
In relation to the measurement of investments not traded in active markets and whose fair value is determined by their net asset value, we have agreed the fair value estimate with the redemption confirmation letter of the shares held by the Company. The letter was issued by the fund manager of the relevant investees and confirms the number of units held and the redemption value on the execution date, being 2 January 2019, based on the net asset value on 31 December 2018.
We have audited the significant accounting policies and the relevant disclosures regarding the fair value measurement of financial assets measured at fair value in the balance sheet.
The results of the audit procedures described above were satisfactory for the purpose of our audit.
The Board of Directors is responsible for the other information. The other information comprises the information included in the Declaration of the members of the Board of Directors, Investment Manager Report, the Report on Corporate Governance and the Management Report but does not include the financial statements and our auditor's report thereon.
Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
The Board of Directors is responsible for the preparation of the financial statements that give a true and fair view in accordance with International Financial Reporting Standards as adopted by the European Union and the requirements of the Cyprus Companies Law, Cap. 113, and for such internal control as the Board of Directors determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Board of Directors is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board of Directors either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company's financial reporting process.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters.
Pursuant to the requirements of Article 10(2) of the EU Regulation 537/2014 we provide the following information in our Independent Auditor's Report, which is required in addition to the requirements of International Standards on Auditing.
We were first appointed as auditors of the Company in 2002 by the Board of Directors for the audit of the financial statements for the year ended 31 December 2002. Our appointment was renewed annually, since then, by shareholders' resolution. On 12 May 2005, the Cyprus Stock Exchange was first included in the list of regulated markets prepared by the European Commission and published in the Official Journal of the European Union and as a result, the first financial year in which the Company was designated as a Public Interest Entity (PIE) in the European Union was the year ended 31 December 2006. Since then, the total period of uninterrupted appointment has been 13 years.
We confirm that our audit opinion on the financial statements expressed in this report is consistent with the additional report to the Audit Committee of the Company, which we issued on 30 April 2019 in accordance with Article 11 of the EU Regulation 537/2014.
We declare that no prohibited non-audit services referred to in Article 5 of the EU Regulation 537/2014 and Section 72 of the Auditors Law of 2017 were provided. In addition, there are no non-audit services which were provided by us to the Company and which have not been disclosed in the financial statements or the management report.
Pursuant to the additional requirements of the Auditors Law of 2017, we report the following:
This report, including the opinion, has been prepared for and only for the Company's members as a body in accordance with Article 10(1) of the EU Regulation 537/2014 and Section 69 of the Auditors Law of 2017 and for no other purpose. We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whose knowledge this report may come to.
The engagement partner on the audit resulting in this independent auditor's report is Androulla S. Pittas.
Androulla S Pittas Certified Public Accountant and Registered Auditor for and on behalf of
PricewaterhouseCoopers Limited Certified Public Accountants and Registered Auditors
PwC Central, 43 Demostheni Severi Avenue CY-1080 Nicosia Cyprus
Nicosia, 30 April 2019
| Note | 2018 € |
2017 € |
|
|---|---|---|---|
| Income | |||
| Dividends received Interest income |
12 8 |
242.361 3.840 |
140.157 7.289 |
| Net (loss) / gain from financial assets measured at fair value through profit or loss |
12 | (1.339.736) | 967.197 |
| Total Income | ____ (1.093.535) |
____ 1.114.643 |
|
| Expenses Administrative expenses |
9 | (343.860) | (338.547) |
| (Loss)/profit before tax Tax expense |
10 | ____ (1.437.395) (102.371) |
____ 776.096 (17.259) |
| Total comprehensive (loss)/income for the year | ____ (1.539.766) |
____ 758.837 |
|
| (Loss)/profit per share (in cent) - basic and fully distributed |
11 | ========== (2,72) ========== |
========== 1,34 ========== |
| 2018 | 2017 | ||
|---|---|---|---|
| Note | € | € | |
| Assets | |||
| Current Assets | |||
| Financial assets at fair value through profit and loss | 12(b) | 4.489.046 | 8.518.184 |
| Other receivables | 12(a) | 4.454 | 8.963 |
| Cash and cash equivalents | 13 | 4.516.803 ____ |
1.882.702 ____ |
| Total assets | 9.010.303 ========= |
10.409.849 ========== |
|
| Equity and liabilities | |||
| Capital and reserves | |||
| Share capital | 14 | 7.350.837 | 7.350.837 |
| Share premium | 14 | 2.495.574 | 2.495.574 |
| (Accumulated losses)/retained earnings | (1.250.243) | 289.523 | |
| Total equity | ____ 8.596.168 |
____ 10.135.934 |
|
| Current liabilities | ____ | ____ | |
| Payables and accrued expenses | 15 | 168.162 | 170.584 |
| Payable to investment manager | 16 | 168.430 | 103.331 |
| Current taxation | 10 | 77.543 ____ |
- ____ |
| Total liabilities | 414.135 | 273.915 | |
| Total equity and liabilities | ____ 9.010.303 |
____ 10.409.849 |
|
| ========== | =========== |
On 30 April 2019, the Board of Directors of Interfund Investments Plc approved these financial statements for issue.
Andreas Hadjikyrou, Chairman
Pandora Tseriotou, Director
| Share capital |
Share premium |
(Accumulated losses)/ retained |
Total | |
|---|---|---|---|---|
| € | € | earnings (1) € |
€ | |
| Balance at 1 January 2017 | 7.350.837 | 2.495.574 | (469.314) | 9.377.097 |
| Comprehensive income Profit for the year |
___ - |
___ - |
______ 758.837 |
___ 758.837 |
| Total comprehensive income for the year 2017 |
___ - |
___ - |
______ 758.837 |
___ 788.837 |
| Balance at 31 December 2017/ 1 January 2018 |
___ 7.350.837 |
___ 2.495.574 |
______ 289.523 |
___ 10.135.934 |
| Comprehensive loss Loss for the year |
- | - | (1.539.766) | (1.539.766) |
| Total comprehensive loss for the year 2018 |
_ - _ |
_ - _ |
__ (1.539.766) ____ |
_ (1.539.766) _ |
| Balance at 31 December 2018 | 7.350.837 ========== |
2.495.574 ========= |
(1.250.243) =========== |
8.596.168 ========= |
(1) Companies which do not distribute 70% of their profits after tax, as defined by the Special Contribution for the Defence of the Republic Law, by the end of the two years after the end of the year of assessment to which the profits refer, will be deemed to have distributed this amount as dividend. Special contribution for defence will be payable on such deemed dividend to the extent that the shareholders for deemed dividend distribution purposes at the end of the period of two years from the end of the year of assessment to which the profits refer, are Cyprus tax residents and domiciled. The special contribution for defence rate increased from 15% to 17% in respect of profits of year of assessment 2009 and to 20% in respect of profits of years of assessment 2010 and 2011 and was reduced back to 17% in respect of profits of years of assessment 2012 onwards. The amount of this deemed dividend distribution is reduced by any actual dividend paid out of the profits of the relevant year by the end of the period of two years from the end of the year of assessment to which the profits refer. This special contribution for defence is paid by the Company for the account of the shareholders.
| 2018 | 2017 | ||
|---|---|---|---|
| Note | € | € | |
| Cash flows from operating activities | |||
| (Loss)/profit before income tax | (1.437.395) | 776.096 | |
| Changes in working capital: | ____ (1.437.395) |
__ 776.096 |
|
| Other receivables | 4.509 | 3.277 | |
| Payable and due expenses | (2.422) | 8.653 | |
| Payable to the investment manager | 65.099 | 103.331 | |
| Financial assets at fair value through profit and loss | 4.029.138 | (1.486.344) | |
| Cash generated from/(used in) operations | ___ 2.658.929 |
____ (594.987) |
|
| Income tax paid | (24.828) | (17.259) | |
| Net cash generated from/(used in) operating activities | ___ 2.634.101 |
___ (612.246) |
|
| Net increase/(decrease) in cash and cash equivalents | ___ 2.634.101 |
___ (612.246) |
|
| Cash and cash equivalents at the beginning of the year | 13 | 1.882.702 | 2.494.948 |
| Cash and cash equivalents at end of year | 13 | ___ 4.516.803 |
___ 1.882.702 |
| ========= | ========= |
The Company was incorporated and domiciled in Cyprus, as a private limited liability company, in accordance with the provisions of the Cyprus Companies Law, Cap. 113, on 6 November 1997. The Company converted into a public company on 30 December 1999 in accordance with the provisions of the Cyprus Companies Law, Cap.113. The shares of the Company were listed on the Cyprus Stock Exchange on 25 October 2000. Its registered office until 16 April was at Constantinou Palaiologou 24, Flery Court, 2nd Floor, Office 202, 3095 Limassol, Cyprus and then at Zenonos Kitieos 8, Lakatamia, 2322, Nicosia, Cyprus.
The principal activity of the Company, which is unchanged from last year, is the investment, as a closed-end investment portfolio company, in equities of public and other companies, mutual funds and in bonds.
The Company at an Extraordinary General Meeting held on 11 December 2014, resolved, by a resolution submitted, the initiation procedures for the conversion of the company into an Alternative Investment Fund.
On 19 July 2016 the Cyprus Securities and Exchange Commission informed the Company of the granting of the Company's license to operate as an Alternative Investment Fund pursuant to article 13 of the Alternative Investment Funds Law of 2014, enabling the Company to convert into a Variable Capital Investment Company and operate as an Alternative Investment Fund pursuant to article 50(4) of the Law, provided that the Company meets certain conditions.
The Company has complied with these conditions in 2018 but significant changes in the Company created the obligation for re-approval of the Prospectus by the Cyprus Securities and Exchange Commission.
The revised Prospectus is before the Cyprus Securities and Exchange Commission for approval and once it is approved, an Extraordinary General Meeting will be convened whereby the relevant resolutions will be proposed to the shareholders to complete the conversion of the Company into an Alternative Investment Fund.
The Board of Directors takes all necessary actions for the quickest possible completion of the procedures.
The Cypriot economy continued to grow strongly in 2018. For the third consecutive year there was a noteable growth, reaching 3,8% in 2018. The growth is due to the domestic demand and the exports of services, especially in the tourist sector, while the inflation remained subdued. The domestic demand is expected to continue to be solid in 2019, due to unemployment which is decreasing rapidly as well as moderate salaries growth. However, growth momentum is forecasted to reduce further, reflecting mainly the less favourable external environment.
The exposure of the company to the Cypriot economy is limited since most of the Company's investments are abroad. Details regarding bank deposits of the Company held in Cypriot banks are presented in Note 10.
This operating environment noted a significant impact on the Company's operations and its financial position. Management is taking the necessary measures to ensure the viability of the Company's operations, however, the future effects of the current economic situation are difficult to predict, and management's expectations and estimates could differ from actual results.
The Company's management has evaluated:
(1) Whether any impairment provisions are considered necessary for financial assets measured at amortised cost, with the examination of the financial position and the prospects of those financial assets at the end of the reporting period. The impairments of trade receivables are determined using the expected credit losses (ECL) model required by the International Financial Reporting Standard (IFRS) 9 ''Financial instruments - Classification and Measurement''. Until 31 December 2017, impairments of financial assets measured at amortised cost was determined using the 'incurred losses'' model as required by International Accounting Standard (IAS) 39, ''Financial Instruments: Recognition and Measurement''.
The financial statements of the Company have been prepared in accordance with International Financial Reporting Standards (IFRS), as adopted by the European Union (EU), and the requirements of the Cyprus Companies Law, Cap. 113.
As of the date of the authorization of the financial statements, all International Financial Reporting Standards issued by the International Accounting Standards Board (IASB) that are effective as of 1 January 2018 and are relevant to the Company's operations have been adopted by the EU through the endorsement procedure established by the European Commission.
The principal accounting policies applied in the preparation of these financial statements are set out below in Note 4. Apart from the accounting policy changes resulting from the adoption of IFRS 9 effective from 1 January 2018, these policies have been consistently applied to all the years presented, unless otherwise stated (refer to Notes 3, 4 and 21). The principal accounting policies in respect of financial instruments applied till 31 December 2017 are presented in Note 21.
The financial statements have been prepared under the historical cost convention, as modified by the initial recognition of financial instruments based on fair value, and by the revaluation of financial assets at fair value through profit or loss.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates and requires management to exercise its judgement in the process of applying the Company's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 7.
During the current year the Company adopted all the new and revised International Financial Reporting Standards (IFRS) that are relevant to its operations and are effective for accounting periods beginning on 1 January 2018. This adoption did not have a material effect on the accounting policies of the Company with the exception of the following:
● IFRS 9 "Financial Instruments"
As explained below, in accordance with the transition provisions of IFRS 9 the Company has elected the simplified approach for adoption of the standard. Accordingly, IFRS 9 was adopted without restating the comparative information. The comparative information is prepared in accordance with IAS 39.
Based on the table below there were no impacts from the adoption of the new standard.
| 31 December 2017 as previously € |
presented Reclassifications € |
31 December 2017 under IAS 39 € |
Effect of adoption of IFRS 9 € |
1 January 2018 under IFRS 9 € |
|
|---|---|---|---|---|---|
| Other receivables Financial assets at fair value through profit or |
8.963 | - | 8.963 | - | 8.963 |
| loss Cash and cash |
8.518.184 | - | 8.518.184 | - | 8.518.184 |
| equivalents Payables and accrued |
1.882.702 | - | 1.882.702 | - | 1.882.702 |
| expenses Payable to investment |
170.584 | - | 170.584 | - | 170.584 |
| manager | 103.331 | - | 103.331 | - | 103.331 |
IFRS 9 "Financial instruments" replaces the provisions of IAS 39 that relate to recognition and derecognition of financial instruments and classification and measurement of financial assets and financial liabilities. IFRS 9 further introduces new principles for hedge accounting and a new forward-looking impairment model for financial assets.
The new standard requires debt financial assets to be classified into two measurement categories: those to be measured subsequently at fair value (either through other comprehensive income (FVOCI) or through profit or loss (either FVTPL or FVPL) and those to be measured at amortised cost. The determination is made at initial recognition. For debt financial assets the classification depends on the entity's business model for managing its financial instruments and the contractual cash flows characteristics of the instruments. For equity financial assets it depends on the entity's intentions and designation.
Specifically, financial assets held within a business model that seeks to retain financial assets for the purpose of collecting contractual cash flows, and under the contractual terms and conditions governing the financial asset, are created at specific cash flow dates, consist exclusively of repayment of capital and interest on the outstanding balance of the asset is measured at amortised cost. Financial assets held within a business model the objective of which is to achieve both the collection of contractual cash flows and the sale of financial assets, and under the contractual terms governing the financial asset, are created at specific cash flow dates consisting solely of repayment of capital and interest on the outstanding balance of equity are measured at fair value through the other comprehensive income.
Finally, assets that do not qualify for amortised cost or fair value through other comprehensive income are measured at fair value through profit or loss. For equity investments that are not held for trading, the classification depends on whether the entity has irrevocably selected at initial recognition to measure those equity investments at fair value through other comprehensive income.
If no such options have been made or if the equity investments are held for trading, they are required to be measured at fair value through profit or loss.
IFRS 9 also introduces a single impairment model applicable for debt instruments at amortised cost and fair value through other comprehensive income and removes the need for a triggering event to be necessary for recognition of impairment losses. The new impairment model under IFRS 9 requires the recognition of allowances for doubtful debts based on expected credit losses (ECL), rather than incurred credit losses as under IAS 39. The standard further introduces a simplified approach for calculating impairment on trade receivables as well as for calculating impairment on contract assets and lease receivables; which also fall within the scope of the impairment requirements of IFRS 9.
For financial liabilities, the standard retains most of the requirements of IAS 39. The main change is that, in case where the fair value option is taken for financial liabilities, the part of a fair value change due to the entity's own credit risk is recorded in other comprehensive income rather than in profit or loss, unless this creates an accounting mismatch.
With the introduction of IFRS 9 "Financial Instruments", the IASB confirmed that gains or losses that result from modification of financial liabilities that do not result in derecognition shall be recognised in profit or loss.
IFRS 9 relaxes the requirements for hedge effectiveness by replacing the bright line hedge effectiveness tests. It requires an economic relationship between the hedged item and hedging instrument and for the "hedge ratio" to be the same as the one management actually use for risk management purposes. Contemporaneous documentation is still required but is different to that currently prepared under IAS 39.
The Company has adopted IFRS 9 with a date of transition of 1 January 2018, which resulted in changes in accounting policies for recognition, classification and measurement of financial assets and liabilities and impairment of financial assets.
The Company's new accounting policies following adoption of IFRS 9 at 1 January 2018 are set out in Note 4.
In accordance with the transition provisions in IFRS 9, the Company has elected the simplified transition method for adopting the new standard. Accordingly, the effect of transition to IFRS 9 was recognised as at 1 January 2018 as an adjustment to the opening retained earnings (or other components of equity, as appropriate). In accordance with the transition method elected by the Company for implementation of IFRS 9 the comparatives have not been restated but are stated based on the previous policies which comply with IAS 39. Consequently, the revised requirements of IFRS 7 "Financial Instruments: Disclosures" have only been applied to the current period. The comparative period disclosures repeat those disclosures made in the prior year.
The Company assessed its equity securities, bonds and investments to determine whether they are held for trading or not. As a result of both evaluations, the Management classified its equity investments into the appropriate categories according to IFRS 9. On 1 January 2018, the Company classified its equity investments for trading.
As a result of the adoption of IFRS 9 the Company revised its impairment methodology for each class of assets subject to the new impairment requirements. From 1 January 2018, the Company assesses on a forward looking basis the expected credit losses associated with its debt instruments carried at amortised cost and FVOCI, cash and cash equivalents and bank deposits with an original maturity over three months (provided that they are measured at amortised cost and are not held for trading) and loan commitments and financial guarantees. The impairment methodology applied depends on whether there has been a significant increase in credit risk and whether the debt investments qualify as low credit risk.
The Company has the following types of assets that are subject to IFRS 9's new expected credit loss model: other receivables and cash and cash equivalents.
The Company has adopted the general expected credit loss model for financial assets at amortised cost (other receivables) and cash and cash equivalents.
On the basis of the assessment performed by management, the additional credit loss on 1 January 2018 was €Nil. Therefore the impact of the adoption of IFRS 9 on the retained earnings of the Company on 1 January 2018 was €Nil.
The following table reconciles the carrying amounts of financial instruments, from their previous measurement categories in accordance with IAS 39 into their new measurement categories upon transition to IFRS 9 on 1 January 2018:
| Measurement category | Effect of | Carrying | |||
|---|---|---|---|---|---|
| IAS 39 | IFRS 9 | Carrying value per IAS 39 (closing balance at 31 December 2017)* |
IFRS 9* ECL |
value per IFRS 9 (opening balance at 1 January 2018)* |
|
| € | € | € | |||
| Investments in equity securities |
|||||
| Listed equity securities | AFS (available for sale) AFS (available |
FVTPL (mandatorily) FVTPL |
8.029.345 | - | 8.029.345 |
| Unlisted equity securities | for sale) | (mandatorily) | 488.839 | - | 488.839 |
| Total investments in equity securities |
____ 8.518.184 ========== |
____ - ========== |
____ 8.518.184 ========== |
||
| Other financial assets | |||||
| Other receivables Cash and cash equivalents L&R |
L&R (loans & receivables) |
AC (amortised cost) AC |
8.963 1.882.702 ____ |
- - ____ |
8.963 1.882.702 ____ |
| Total other financial assets |
1.891.665 ========== |
- ========== |
1.891.665 ========== |
* Effect on revaluation and reclassification.
Equity securities and bonds - held for trading - are required to be held as FVTPL under IFRS 9. As a result, there was no impact on the amounts recognised in relation to the investments in equity securities held for trading that were previously classified as financial assets at FVTPL from the adoption of IFRS 9. Under IAS 39 equity securities designated as at fair value through profit or loss at inception were those that were managed and their performance was evaluated on a fair value basis, in accordance with the Company's documented investment strategy. Information about these financial assets was provided internally on a fair value basis to the Company's key management personnel. Under IFRS 9 investments in equity instruments are always measured at fair value, so as a result there was no impact from the adoption of IFRS 9.
▪ Other financial instruments:
For all other financial assets management assessed that the company's business model for managing the assets is "hold to collect" and these assets meet SPPI tests. As a result all other financial assets were classified as financial assets at amortised cost and reclassified from the category "loans and receivables" under IAS 39, which was "retired". Previously under IAS 39 these financial assets were also measured at amortised cost. Thus there were no impact of adoption of IFRS 9 as of 1 January 2018.
At 31 December 2017, all of the Company's financial liabilities were carried at amortised cost. Starting from 1 January 2018 the Company's financial liabilities continued to be classified at amortised cost.
Items included in the Company's financial statements are measured using the currency of the primary economic environment in which the entity operates ("the functional currency"). The financial statements are presented in Euro (€), which is the Company's functional and presentation currency.
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss.
Translation differences on non-monetary financial assets, such as equities classified as fair value through profit or loss, are recognised in profit or loss, as part of the "Net (loss)/gain from financial assets at fair value through profit or loss".
The tax expense for the period comprises current and deferred tax. Tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the country in which the Company operates and generates taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. If applicable tax regulation is subject to interpretation, it establishes provision where appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred income tax is recognised using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. However, deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates and laws that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on the Company where there is an intention to settle the balances on a net basis.
Dividend distribution to the Company's shareholders is recognised as a liability in the Company's financial statements in the year in which the dividends are appropriately authorised and are no longer at the discretion of the Company. More specifically, interim dividends are recognised as a liability in the period in which these are authorised by the Board of Directors and in the case of final dividends, these are recognised in the period in which these are approved by the Company's shareholders.
From 1 January 2018, the Company classifies its financial assets in the following measurement categories:
The classification and subsequent measurement of debt financial assets depends on: (i) the Company's business model for managing the related assets portfolio and (ii) the cash flow characteristics of the financial asset. On initial recognition, the Company may irrevocably designate a debt financial asset that otherwise meets the requirements to be measured at amortized cost either at FVOCI or at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.
For investments in equity instruments that are not held for trading, classification will depend on whether the Company has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income (FVOCI). This election is made on an investment‐by‐investment basis.
All other financial assets are classified as measured at FVTPL.
For assets measured at fair value, gains and losses are recognised in profit or loss.
All purchases and sales of financial assets that require delivery within the time frame established by regulation or market convention ("regular way" purchases and sales) are recorded at trade date, which is the date when the Company commits to deliver a financial instrument. All other purchases and sales are recognised when the entity becomes a party to the contractual provisions of the instrument.
Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Company has transferred substantially all the risks and rewards of ownership.
At initial recognition, the Company measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss (FVTPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVTPL are expensed in profit or loss. A gain or loss on initial recognition is only recorded if there is a difference between fair value and transaction price which can be evidenced by other observable current market transactions in the same instrument or by a valuation technique whose inputs include only data from observable markets.
Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of principal and interests.
Subsequent measurement of debt instruments depends on the company's business model for managing the asset and the cash flow characteristics of the asset. There is one measurement category into which the Company classifies its debt instruments:
● Amortised cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost. Interest income from these financial assets is included in 'interest income'. Any gain or loss arising on derecognition is recognised directly in profit or loss. Impairment losses are presented as separate line item in the income statement. Financial assets measured at amortised cost (AC) comprise: cash and cash equivalents, bank deposits with original maturity over three months, trade receivables and financial assets at amortised cost.
The Company subsequently measures all equity investments at fair value.
Changes in the fair value of financial assets at FVTPL are recognised in "Net (loss)/gain from financial assets at fair value through profit or loss" in the statement of comprehensive income as applicable. Impairment losses (and reversal of impairment losses) on equity investments measured at FVOCI are not reported separately from other changes in fair value.
From 1 January 2018, the Company assesses on a forward-looking basis the ECL for debt instruments (including loans) measured at AC and FVOCI and with the exposure arising from loan commitments and financial guarantee contracts. The Company measures ECL and recognises credit loss allowance at each reporting date. The measurement of ECL reflects: (i) an unbiased and probability weighted amount that is determined by evaluating a range of possible outcomes, (ii) time value of money and (iii) all reasonable and supportable information that is available without undue cost and effort at the end of each reporting period about past events, current conditions and forecasts of future conditions.
The carrying amount of the financial assets is reduced through the use of an allowance account, and the amount of the loss is recognised in the statement for comprehensive income.
Expected credit losses are recognized and measured according to one of two approaches: general approach or simplified approach.
For all financial assets that are subject to impairment under IFRS 9, the Company applies general approach – three stage model for impairment. The Company applies a three stage model for impairment, based on changes in credit quality since initial recognition. A financial instrument that is not credit-impaired on initial recognition is classified in Stage 1.
Financial assets in Stage 1 have their ECL measured at an amount equal to the portion of lifetime ECL that results from default events possible within the next 12 months or until contractual maturity, if shorter ("12 Months ECL"). If the Company identifies a significant increase in credit risk ("SICR") since initial recognition, the asset is transferred to Stage 2 and its ECL is measured based on ECL on a lifetime basis, that is, up until contractual maturity but considering expected prepayments, if any ("Lifetime ECL").
If the Company determines that a financial asset is credit impaired, the asset is transferred to Stage 3 and the ECLs are measured as ECLs over the life of the asset.
Financial instruments are reclassified only when the business model for managing those assets changes. The reclassification has a prospective effect and takes place from the start of the first reporting period following the change.
Financial assets are written-off, in whole or in part, when the Company exhausted all practical recovery efforts and has concluded that there is no reasonable expectation of recovery. The write-off represents a derecognition event. The Company may write-off financial assets that are still subject to enforcement activity when the Company seeks to recover amounts that are contractually due, however, there is no reasonable expectation of recovery.
The Company sometimes renegotiates or otherwise modifies the contractual terms of the financial assets. The Company assesses whether the modification of contractual cash flows is substantial considering, among other, the following factors: any new contractual terms that substantially affect the risk profile of the asset (e.g. profit share or equity-based return), significant change in interest rate, change in the currency denomination, new collateral or credit enhancement that significantly affects the credit risk associated with the asset or a significant extension of a loan when the borrower is not in financial difficulties.
If the modified terms are substantially different, the rights to cash flows from the original asset expire and the Company derecognises the original financial asset and recognises a new asset at its fair value. The date of renegotiation is considered to be the date of initial recognition for subsequent impairment calculation purposes, including determining whether a SICR has occurred.
The Company also assesses whether the new loan or debt instrument meets the SPPI criterion. Any difference between the carrying amount of the original asset derecognised and fair value of the new substantially modified asset is recognised in profit or loss, unless the substance of the difference is attributed to a capital transaction with owners.
In a situation where the renegotiation was driven by financial difficulties of the counterparty and inability to make the originally agreed payments, the Company compares the original and revised expected cash flows to assets whether the risks and rewards of the asset are substantially different as a result of the contractual modification. If the risks and rewards do not change, the modified asset is not substantially different from the original asset and the modification does not result in derecognition. The Company recalculates the gross carrying amount by discounting the modified contractual cash flows by the original effective interest rate, and recognises a modification gain or loss in profit or loss.
Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the Company or the counterparty.
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds.
Share premium is the difference between the fair value of the consideration receivable for the issue of shares and the nominal value of the shares. Share premium account can only be resorted to for limited purposes, which do not include the distribution of dividends, and is otherwise subject to the provisions of the Cyprus Companies Law on reduction of share capital.
Provisions are recognised when the Company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and the amount has been reliably estimated. Provisions are not recognised for future operating losses.
Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as interest expense.
Payables are initially recognised at fair value and subsequently carried at amortized cost using the effective interest method. Creditors are classified as current liabilities if the payment is due within one year or less. If not, they are presented in non-current liabilities.
The portfolio management fee for the period is recognised based on an annual percentage on the average value of the funds managed in Cyprus and abroad and is included in administrative expenses.
The Company has only one operating segment that is the closed-end investment portfolio management. This activity is carried out in the following geographical areas: Cyprus, Greece and the United States of America and other countries.
Segmental analyses are presented according to the way they are analysed by the Company's chief operating decision maker.
The chief operating decision maker in charge of decision-making is the Company's Board of Directors, which meets at regular intervals. At the meetings, the Board of Directors reviews the financial information prepared under IFRS and comprise of the statement of comprehensive income, the balance sheet and the analysis of the Company's investments.
In the statement of cash flows, cash and cash equivalents includes deposits held at call with banks with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. In the balance sheet bank overdrafts are shown within borrowings in current liabilities. Cash and cash equivalents are carried at AC because: (i) they are held for collection of contractual cash flows and those cash flows represent SPPI, and (ii) they are not designated at FVTPL.
These amounts generally arise from transactions outside the usual operating activities of the Company. These are held with the objective to collect their contractual cash flows and their cash flows represent solely payments of principal and interest. Accordingly, these are measured at amortised cost using the effective interest method, less provision for impairment. Financial assets at amortised cost are classified as current assets if they are due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current assets.
Interest income from financial assets at FVTPL is included in the Net (loss)/gain from financial assets at fair value through profit or loss. Interest income on financial assets at amortised cost and financial assets at FVOCI calculated using the effective interest method is recognised in the statement of comprehensive income. Interest income is calculated by applying the effective interest rate to the gross carrying amount of a financial asset except for financial assets that subsequently become credit impaired. For credit - impaired financial assets – Stage 3 the effective interest rate is applied to the net carrying amount of the financial asset (after deduction of the loss allowance), for Stage 1 and Stage 2 – gross amount of financial assets.
Dividends are received from financial assets measured at fair value through profit or loss (FVTPL). Dividends are recognised as dividend income in profit or loss when the right to receive payment is established.
Financial liabilities are initially recognised at fair value and classified as subsequently measured at amortised cost, except for (i) financial liabilities at FVTPL: this classification is applied to derivatives, financial liabilities held for trading (e.g. short positions in securities), contingent consideration recognised by an acquirer in a business combination and other financial liabilities designated as such at initial recognition and (ii) financial guarantee contracts and loan commitments.
Derivative financial instruments, which include mainly foreign currency contracts, forward monetary contracts and interest rate options (sold and purchased) foreign exchange and interest rate swaps and other derivative financial instruments, are initially recognized on the balance sheet at fair value on the contract date, and are subsequently revalued to their fair value. Their fair value is considered to be their market value, taking into account recent market transactions and discounted cash flow models and stock options. When their fair value is positive, derivatives are included in assets, whereas when their fair value is negative, they are included in liabilities.
The best evidence of the fair value of a derivative at initial recognition, is the transaction price (i.e. the fair value of the consideration paid or received) unless the fair value of that instrument can be determined by comparison with other current market transactions of the same instrument (i.e. without modifications or changes), or it may be based on valuation techniques where variables include only observable market data.
Changes in the fair value of a derivative financial instrument are recognized directly in the statement of comprehensive income as part of the "Net gain on financial assets at fair value through profit or loss".
At the date of approval of these financial statements a number of new standards and amendments to standards and interpretations are effective for annual periods beginning after 1 January 2018, and have not been applied in preparing these financial statements. None of these is expected to have a significant effect on the financial statements of the Company.
The Company's activities expose it to a variety of financial risks: market risk (including currency risk, cash flow interest rate risk and price risk), credit risk and liquidity risk.
The Company's risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Company's financial performance. Risk management is carried out by the Investment Manager under policies approved by the Board of Directors. The Investment Manager identifies, evaluates and hedges financial risks in close co-operation with the Company's Board of Directors.
The currency risk is the risk the value of financial instruments fluctuate due to changes in exchange rates. Currency risk arises from future commercial transactions and recognized assets and liabilities denominated in currencies other than the Company's functional currency. The Company is exposed to currency risk primarily in relation to the US Dollar arising from cash and cash equivalents and investments denominated in US Dollars.
At 31 December 2018, if the Euro had strengthened/ weakened by 11% (2017: 11%) against the US dollar with all other variables held constant, post-tax profit/(loss) for the year would have been €381.921 (2017: €445.085) lower/higher.
Management monitors the exchange rate fluctuations on a continuous basis and acts accordingly and enters into transactions using derivative financial instruments for hedging.
The Company is exposed to price risk because of investments held by the Company and classified on the balance sheet as at fair value through profit or loss. The Company is not exposed to commodity price risk.
Market price risk management is mainly achieved through the diversification of the company's portfolio in a wide range of investments in the Cyprus, Greece, New York, Tokyo, Hong Kong, London and in investment funds.
The table below summarises the impact of increases/decreases of the Cyprus Stock Exchange, Athens Stock Exchange, New York Stock Exchange and other foreign stock exchanges general indexes on the post-tax (loss)/profit for the year. The analysis is based on the assumption that the equity indices had increased/decreased by 21% (2017: 21%) for the Cyprus and Athens Stock Exchange, by 8% (2017: 8%) for the New York, Tokyo, London, Hong Kong Stock Exchange and all other stock exchanges, and by 20% (2017: 20%) for foreign investment funds with all other variables remaining constant and that the Company's equities are fluctuating in line with their historical correlation with the index.
6 Financial risk management (continued)
The percentage of increase/decrease used for this analysis is based on the percentage change in the indicators mentioned above at the end of the year.
| Impact on post-tax (loss)/profit | |||
|---|---|---|---|
| Year ended | Year ended 31 | ||
| 31 December 2018 | December 2017 | ||
| € | € | ||
| Δείκτης | |||
| New York Stock Exchange – General Index | 31.536 | 47.572 | |
| Tokyo Stock Exchange – General Index | 16.555 | 44.609 | |
| London Stock Exchange – General Index | 30.244 | 25.199 | |
| Hong Kong Stock Exchange – General Index | 19.010 | 67.275 | |
| Cyprus Stock Exchange – General Index | 96.648 | 81.188 | |
| Athens Stock Exchange – General Index | 64.465 | 190.624 | |
| Investment Funds Index – MSCI Global | 298.653 | 800.046 | |
| ___ 557.111 |
___ 1.256.513 |
||
| ========= | ========= |
Based on this assumption, post-tax (loss)/profit for the year would (decrease)/increase as a result of gains/losses on equity securities classified as at fair value through profit or loss.
The management of market price risk is mainly achieved through the diversification of the Company's portfolio to a wide range of investments in the Cyprus, Greece, New York, Tokyo, Hong Kong, London Stock Exchanges and in investment funds.
Interest rate risk is the risk where the value of financial instruments fluctuates due to changes in market interest rates. As the Company has significant interest-bearing assets (at floating and fixed rates), its operating income and cash flows depend on changes in market interest rates.
The Company's interest rate risk arises from bank deposits fixed and variable interest rate as well as cash managed by the Investment Manager with a net interest rate. The effect of any interest rate fluctuation would not be significant.
The Company's Management monitors interest rate fluctuations on an ongoing basis and acts accordingly.
Credit risk arises from cash and cash equivalents by the management of the Investment Manager and outstanding other receivables.
The outstanding other receivables are monitored on an ongoing basis by the Board of Directors. Bank deposits are maintained in the most reputable and reliable financial institutions in Cyprus and abroad.
The cash and cash equivalents are held in financial institutions of Cyprus.
Credit risk is managed on a group basis.
For banks and financial institutions, only independently rated parties with a minimum rating of 'C' are accepted.
The Company has two types of financial assets that are subject to the expected credit loss model:
For the other receivables and cash and cash equivalents, the general credit loss model is applied. All financial assets were classified in Stage 1. The expected credit loss based on IFRS 9 requirements was not significant.
The company considers the probability of default upon initial recognition of asset and whether there has been a significant increase in credit risk on an ongoing basis throughout each reporting period. To assess whether there is a significant increase in credit risk the company compares the risk of a default occurring on the asset as at the reporting date with the risk of default as at the date of initial recognition. It considers available reasonable and supportive forwarding-looking information.
Especially the following indicators are incorporated:
Regardless of the analysis above, a significant increase in credit risk is presumed if a debtor is more than 30 days past due in making a contractual payment.
A default on a financial asset is when the counterparty fails to make contractual payments within 90 days of when they fall due.
Macroeconomic information (such as market interest rates or growth rates) is incorporated as part of the internal rating model. The historical loss rates are adjusted to reflect current and forward-looking information on macroeconomic factors affecting the ability of the customers to settle the receivables.
Financial assets are written off when there is no reasonable expectation of recovery, but the company continues to engage in enforcement activity to attempt to recover the receivable due. Where recoveries are made, these are recognised in profit or loss.
Financial institutions' credit rating based on the latest analyses of Moody's Investors Services Inc. and Standard & Poor's Financial Services LLC are as follows:
| Solvency Level | 2018 € |
2017 € |
|
|---|---|---|---|
| Investment Manager (Note 16) | Caa1 | 550.799 | 1.008.400 |
| Alpha Bank Limited | Caa2 (2017: Caa3) | 4.462 | 4.550 |
| Bank of Cyprus Public Company | Caa1 (2017: Caa1) | ||
| Limited | 500.927 | 1.035 | |
| Nedbank | Baa2 (2017: Baa3) | 2.072.309 | 160.729 |
| Interactive Brokers | BBB+ (2017: BBB+) | 1.337.920 | 649.834 |
| Cyprus Development Bank | Ba2 (2017: Ba3) | 50.386 | 58.154 |
| ____ 4.516.803 |
____ 1.882.702 |
Cash equivalents which are held by the Investment Manager are held by financial institutions with a credit rating of Caa1. There were no guarantees and pledges in relation to financial assets.
No financial asset presented in the SICR and therefore no ECL was recognized beyond Stage 1 which was not significant. Also, there were no modifications to financial assets and thus had no impact on profit or loss.
No significant changes to estimation techniques or assumptions were made during the reporting period.
Liquidity risk is the risk that arises when the maturity of assets and liabilities does not match. When maturities do not match, profitability can increase but at the same time the risk of losses can increase.
For the Company, the liquidity risk relates to "Payables and accrued expenses" and "Payable to investment manager".
========== ==========
The Company does not bear liquidity risk, since all of its assets, which exceed its liabilities, can be realised to settle financial liabilities.
All financial liabilities of the Company at the balance sheet date are due within 12 months and the impact of discount is not significant.
The Cypriot economy noted a positive growth in 2018 after overcoming the economic recession of recent years. In general, the economic outlook remains favourable in 2018 as well, but there are still risks of recession from the remaining high levels of non-performing loans in the banking sector, the public debt ratio and the potential deterioration of the external environment of Cyprus.
The exposure of the Company to the Cypriot economy is limited since most of the Company's investments are abroad. Details regarding bank deposits of the Company held in Cypriot banks are set out in Note 6 above.
The Company's objectives when managing capital are to safeguard the Company's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets. The Company is not at risk of capital since it has no borrowings.
The capital as determined by the Board of Directors on 31 December 2018 and 2017 was as follows:
| 2018 € |
2017 € |
|
|---|---|---|
| Total equity | 8.596.168 =========== |
10.135.934 ========== |
The table below analyses financial instruments carried at fair value by valuation method. The different levels have been defined as follows:
● Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1).
● Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (Level 2).
● Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (Level 3).
The following table presents the Company's financial assets and liabilities that are measured at fair value at 31 December 2018 and 31 December 2017.
| Level 1 | Level 2 | Level 3 | Total Balance |
|---|---|---|---|
| € | € | € | € |
| 2.415.332 | - | - | 2.415.332 |
| 1.493.263 | - | - | 1.493.263 |
| - | - | 408.404 | 408.404 |
| 172.047 | - | - | 172.047 ____ |
| 4.080.642 | - | 408.404 | 4.489.046 |
| ======== | ======== | ======== | ========= |
| Level 1 | Level 2 | Level 3 | Total Balance |
| € | € | € | € |
| 4.029.113 4.000.232 |
- - |
- - |
4.029.113 4.000.232 488.839 |
| ___ | ___ | ___ | ____ |
| - | 488.839 | 8.518.184 | |
| Equity securities listed in the Stock Exchange of | ___ | ___ | ___ |
| Financial assets at fair value through profit or | - | - | 488.839 |
The Company had no financial liabilities measured at fair value as at 31 December 2018 and 31 December 2017.
There were no transfers between Levels 1 and 2 during the year.
The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm's length basis. The quoted market price used for financial assets held by the Company is the current bid price. These instruments are included in Level 1. Instruments included in Level 1 comprise primarily investments in listed equities and mutual funds.
The fair value of financial instruments that are not traded in an active market (for example, unlisted equity securities) is determined by using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in Level 2. The Company did not hold any investments classified at Level 2.
If one or more of the significant inputs is not based on observable market data, the instrument is included in Level 3 at the end of 2018.
Specific valuation techniques used in estimating the fair value of financial instruments include:
The use of the investment's net assets value (NAV) as specified by the fund administrator and communicated to investors.
The following table presents the changes in Level 3 investments for the year ended 31 December 2017:
| Equity securities € |
Total € |
|
|---|---|---|
| At 1 January 2017 | 476.592 | 476.592 |
| Additions | - | - |
| Disposals Fair value gain recognized in profit or loss |
- 12.247 |
- 12.247 |
| At 31 December 2017 | __ 488.839 |
__ 488.839 |
| Total gain for the period, included in profit or loss on assets | ======== | ======== |
| held at the end of the reporting period | 12.247 | 12.247 |
| ======== | ======== |
The following table presents the changes in Level 3 investments for the year ended 31 December 2018:
| Equity securities € |
Total € |
|
|---|---|---|
| At 1 January 2018 Additions |
488.839 - |
488.839 - |
| Disposals Fair value loss recognized in profit or loss |
- (80.435) __ |
- (80.435) __ |
| At 31 December 2018 | 408.404 ======== |
408.404 ======== |
| Total loss for the period, included in profit or loss on assets held at the end of the reporting period |
(80.435) ======== |
(80.435) ======== |
The Company maintained during 2018 equity securities at Level 3 that the market for these securities was not active and therefore the fair value of the financial instruments was determined using valuation techniques.
If net assets value (NAV) varied by + 5% / -5%, the estimate would be €20.420 (2017: €24.442) higher / lower.
The Company does not have financial assets or financial liabilities that are subject to offsetting, enforceable master netting arrangements or any similar agreements.
The preparation of financial statements requires the use of accounting estimates which, by definition, will seldom equal the actual results. Management also needs to exercise judgement in applying the accounting policies of the Company.
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
The Company makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
At 31 December 2018, investments of the Company amounting to €408.404 are valued at Level 3, as presented in Note 6 (iv).
The fair value of financial instruments that are not quoted in an active market is determined using valuation techniques. The Company makes judgments about the choice of various valuation methods and makes assumptions that are based primarily on the market condition at each balance sheet date. The Company has used the net asset value (NAV) of investments when holding securities in nonlisted investment funds and included in Level 3 categorisation.
For the fair value of the investment held as at 31 December 2018, the Company used the redemption confirmation letter of the units it sold after the end of the year. The letter was issued by the fund manager and the amount of the transaction on 2 January 2019 was based on the net asset value at 31 December 2018.
If this price were 5% different from the management's calculations, the book value of most financial assets in 2018 would be €20.420 (2017: €24.442) higher / lower.
There were no critical judgements in applying the Company's accounting policies.
Accounting estimates and judgements are evaluated on an ongoing basis and are based on historical experience and other factors, including expectations about future events believed to be reasonable in the circumstances.
| 2018 € |
2017 € |
||
|---|---|---|---|
| Interest income | 3.840 | 7.289 | |
| __ 3.840 ======== |
__ 7.289 ======== |
||
| 9 | Expenses by nature | ||
| 2018 € |
2017 € |
||
| Management fees (Note 17) | 123.647 | 129.758 | |
| Legal expenses (Note 18(a)) (1) | 3.570 | 10.020 | |
| Auditor's remuneration | 11.000 | 9.500 | |
| Directors fees (Note 18(b)) | 50.278 | 50.827 | |
| Professional fees (Note 18(a)) (1) | 32.181 | 19.686 | |
| Travelling fees | 525 | 375 | |
| Subscriptions | 5.185 | 6.050 | |
| Accounting and administration fees (Note 17) | 40.000 | 40.000 | |
| Printing and stationery | 1.852 | 1.883 | |
| Transportation costs | 681 | 531 | |
| Bank charges | 268 | 442 | |
| Press charges | 5.950 | 4.617 | |
| Share registry fees and other stock exchange fees | 48.784 | 50.189 | |
| Insurance fees | 8.532 | 8.532 | |
| Other expenses | 11.407 __ |
6.137 __ |
|
| Total administrative expenses | 343.860 | 338.547 | |
| ======= | ======= |
(4) On 18 April 2018, under a letter addressed to the Company's Board of Directors, the Investment Manager waived his right to receive additional compensation of €51.782 regarding the performance of the investment portfolio for the year ended 31 December 2017. The amount has been calculated based on the terms of payment of the Investment Manager as determined by the management agreement dated 1 January 2015, which is effective until the conversion of the Company into an Alternative Investment Fund.
| 2018 € |
2017 € |
|
|---|---|---|
| Current tax: | ||
| Defence contribution on deemed dividend distribution | 77.543 | - |
| Defence contribution on interest income | 646 | 2.184 |
| Foreign withholding taxes | 24.182 | 15.075 |
| Tax charge | _ 102.371 |
_ 17.259 |
| ======= | ======= |
The tax on the Company's (loss)/profit before tax differs from the theoretical amount that would arise using the applicable tax rates as follows:
| 2018 € |
2017 € |
|
|---|---|---|
| (Loss)/profit before tax | (1.437.395) ========== |
776.096 ======== |
| Tax calculated at the applicable corporation tax rate of 12,5% Tax effect of expenses not deductible for tax purposes Tax effect of allowances and income not subject to tax Tax effect of tax losses for which no deferred tax asset was recognised |
(179.674) 230.264 (77.966) 27.376 |
97.012 48.616 (162.553) 16.925 |
| Special contribution for defence Foreign withholding taxes |
78.189 24.182 |
2.184 15.075 |
| Income tax charge | ___ 102.371 ========= |
___ 17.259 ========= |
The Company is subject to income tax on taxable profits, at the rate of 12,5%.
As from tax year 2012 brought forward losses of only five years may be utilised. From 1 January 2009 onwards, under certain conditions, interest may be exempt from income tax and be subject only to special contribution for defence at the rate of 10%; increased to 15% as from 31 August 2011, and to 30% as from 29 April 2013.
In certain cases dividends received from abroad may be subject to special contribution for defence at the rate of 15%; increased to 17% as from 31 August 2011; increased to 20% as from 1 January 2012; reduced to 17% as from 1 January 2014. In certain cases dividends received from 1 January 2012 onwards from other Cyprus tax resident companies may also be subject to special contribution for defence. In relation to this provision of the legislation the Company recognized during the year a provision of €77.543 (2017: €Nil).
Gains on disposal of qualifying titles (including shares, bonds, debentures, rights thereon etc) are exempt from Cyprus income tax.
The (loss)/profit per share is calculated by dividing the (loss)/profit for the year attributable to the shareholders of the Company by the weighted average number of issued shares during the year.
| 2018 € |
2017 € |
|
|---|---|---|
| (Loss)/profit for the year (€) | (1.539.766) ========== |
758.837 ========== |
| Weighted average number of issued shares during the year | 56.544.902 ========== |
56.544.902 ========== |
| (Loss)/profit per share (cents) – basic and diluted (loss)/profit per share (cents) |
(2,72) ========== |
1,34 ========== |
The net assets per share are calculated by dividing the net assets of the Company at 31 December 2018 and 31 December 2017 by the number of issued shares at that date.
| 2018 € |
2017 € |
|
|---|---|---|
| Net assets (€) | 8.596.168 | 10.135.934 |
| Number of issued shares at 31 December | ========= 56.544.902 |
========== 56.544.902 |
| Net assets per share (cents) | ========== 15,20 |
========== 17,93 |
| Fully distributable net assets per share (cents) | ========== 15,20 ========== |
========== 17,93 ========== |
Financial assets at amortised cost include the following:
| 2018 € |
2017 € |
|
|---|---|---|
| Current Other receivables |
4.454 __ |
8.963 __ |
| Total current | 4.454 | 8.963 |
| Less: Loss allowance for financial assets at amortised cost (other receivables) |
- | - |
| Financial assets at amortised cost - net | __ 4.454 ======== |
__ 8.963 ======== |
The fair values of current financial assets at amortised cost are as follows:
| 2018 € |
2017 € |
|
|---|---|---|
| Other receivables | 4.454 | 8.963 |
| _ 4.454 ======= |
_ 8.963 ======= |
Due to the short-term nature of the current financial assets at amortised cost, their carrying amount is considered to be the same as their fair value.
The carrying amounts of the Company's financial assets at amortised cost are denominated in the following currencies:
| 2018 € |
2017 € |
|
|---|---|---|
| Euro - functional and presentation currency | 4.454 _ |
8.963 _ |
| 4.454 ======= |
8.963 ======= |
The maximum exposure to credit risk at the balance sheet date is the carrying value of each class of financial asset at amortised cost mentioned above. The Company does not hold any collateral as security.
The financial assets at fair value through profit or loss include the following:
| 2018 | 2017 | |
|---|---|---|
| € | € | |
| Listed equity securities – mandatorily measured at fair value | ||
| through profit or loss (2017: held for trading) | ||
| Equity securities – Euro - Cyprus Stock Exchange | 460.227 | 386.608 |
| Equity securities – Euro - Athens Stock Exchange | 306.975 | 907.735 |
| Equity securities and mutual funds – Euro – New York and other | ||
| foreign stock exchanges | 3.141.393 | 6.735.002 |
| Foreign bonds – Euro – New York and other foreign stock | ||
| exchanges | 172.047 | - |
| Other Investment Funds – Euro – Non-listed | 408.404 | 488.839 |
| Total listed and non-listed securities | ____ 4.489.046 |
____ 8.518.184 |
| ========== | ========== |
The financial assets at fair value through profit or loss are presented in the cash flows from operating activities as part of the changes in working capital in the statement of cash flows.
Changes in the fair values of the financial assets at fair value through profit or loss are recognised in the statement of comprehensive income and are analysed as follows:
| 2018 € |
2017 € |
|
|---|---|---|
| Financial assets at fair value through profit or loss – mandatorily measured at FVTPL (2017: held for trading) |
||
| Fair value (losses)/gains | (1.339.736) ____ |
967.197 ____ |
| (1.339.736) ========= |
967.197 ========= |
The (loss)/gain for the year of €1.339.736 (2017: gain of €967.197) is derived from the equity investments as follows:
| 2018 | 2017 | |
|---|---|---|
| € | € | |
| (Loss)/gain from: | ||
| Equity securities in the Cyprus Stock Exchange | 5.387 | 30.778 |
| Equity securities in the Athens Stock Exchange | (256.640) | 222.147 |
| Securities in the New York Exchange and other stock exchanges | (673.516) | 475.144 |
| Other Investment Funds – Non-listed | (80.435) | 12.247 |
| Foreign exchange (loss)/gain from: | ||
| Transactions in securities and funds in foreign currencies | (39.656) | (11.002) |
| Derivative financial instruments | (294.876) | 237.883 |
| ____ (1.339.736) |
_ 967.197 |
|
| ========== | ======= |
During 2018, the Company held futures contracts for the purpose of hedging foreign exchange risk. The Company realised a loss of €294.876 (2017: gain of €237.883) that was recognised directly in the statement of comprehensive income as "Net (loss)/gain from financial assets at fair value through profit or loss".
In addition, during the year there was a dividend income of €242.361 (2017: €140.157) from financial assets at fair value through profit or loss, that was recognised in the statement of comprehensive income.
The fair value of all equity securities is based on their current bid prices in an active market.
The position of the portfolio was as follows:
| 2018 € |
2017 € |
|
|---|---|---|
| Securities listed in the Cyprus stock exchange Equities |
460.227 | 386.608 |
| ___ 460.227 |
___ 386.608 |
|
| Securities listed in the Athens stock exchange | ___ | ___ |
| Equities | 306.975 ___ |
907.735 ___ |
| 306.975 ___ |
907.735 ___ |
|
| Securities listed in foreign stock exchanges: | ||
| Participations in investment funds | 1.493.263 | 4.000.232 |
| Equities in the New York Stock Exchange - General Index | 394.198 | 594.645 |
| Equities in the Tokyo Stock Exchange - General Index | 206.938 | 557.615 |
| Equities in the London Stock Exchange - General Index | 378.051 | 314.988 |
| Equities in the Hong Kong Stock Exchange - General Index Equities in other foreign stock exchanges |
237.631 431.312 |
840.934 426.588 |
| ___ 3.141.393 |
___ 6.735.002 |
|
| Other investment funds | ___ | ___ |
| Non-listed investments | 408.404 ___ |
488.839 ___ |
| 408.404 | 488.839 | |
| Foreign bonds | ___ 172.047 |
___ - |
| ___ 172.047 |
___ - |
|
| Total financial assets at fair value through profit or loss | ___ 4.489.046 |
___ 8.518.184 |
| ========= | ========= |
Cash and bank balances and bank overdrafts include the following for the purposes of the statement of cash flows:
| 2018 € |
2017 € |
|
|---|---|---|
| Cash at bank Investment Manager (1) |
3.966.004 550.799 |
874.302 1.008.400 |
| ___ 4.516.803 ========= |
___ 1.882.702 ========= |
(1) The amount relates to cash available to the Investment Manager for purchases of securities and are held in a bank account on the name of the Investment Manager on behalf of the Company. These funds carry annual interest of 0% (2017: 0%). The total interest income from cash available to the Investment Manager for investment for the year ended 31 December 2018 was €Nil (2017: €Nil) (Note 16).
Cash and bank balances are denominated in the following currencies:
| 2018 € |
2017 € |
|
|---|---|---|
| Euro - functional and presentation currency US Dollar |
2.886.873 1.629.930 |
1.618.509 264.193 |
| ___ 4.516.803 ========= |
___ 1.882.702 ========= |
| Number of shares |
Share Capital (1) € |
Share premium € |
Total € |
|
|---|---|---|---|---|
| At 1 January 2017/ 31 December 2017/ 1 | 56 544 902 | 7.350.837 | 2.495.574 | 9.846.411 |
| January 2018/ 31 December 2018 | ========== | ========== | ========= | ========== |
(1) The total authorized number of ordinary shares is 980 769 230 shares (2017: 980 769 230 shares) with a par value of €0,13 (2017: €0,13) per share. All issued shares are fully paid and carry the same rights.
| 2018 € |
2017 € |
|
|---|---|---|
| Payables Accrued expenses |
120.858 47.304 |
120.858 49.726 |
| _ 168.162 ======= |
_ 170.584 ======= |
The fair value of payables and accrued expenses which are due within one year approximates their carrying amount at the balance sheet date.
| 2018 € |
2017 € |
|
|---|---|---|
| Amount payable | 168.430 _ |
103.331 _ |
| 168.430 ======= |
103.331 ======= |
The amount is derived from the investment portfolio management and represents a payable amount for the purchase of securities.
The fair value of payable to the investment manager which is due within one year approximates its carrying amount at the balance sheet date.
The management of the Company's portfolio is performed by Global Capital Securities and Financial Services Limited ("Investment Manager") based on the agreement entered into in 2015 that has been renewed to be applicable for 2018 (2017).
The above mentioned agreement, provides for a quarterly remuneration for the Investment Manager at the end of each financial quarter on an annual rate of 1,00% on the average value of the Company's portfolio as calculated on the last trade date of each month of the particular quarter.
The Investment Manager receives additional remuneration based on the performance of the Company's investment portfolio for the period 1 January 2018 to 30 June 2018 (1st Period), and for the period from 1 July 2018 to 31 December 2018 (2nd Period) equal to 10% of the gains arising from foreign investments for each period. The gain is accounted for without taking into account the effect of foreign exchange differences. It is held that for the second period the gain equals to the value of the portfolio at 31 December 2018 or the date of terminating the agreement (whichever comes earlier) less the value of the portfolio at 30 June 2018 as the Investment Manager has not demanded such a remuneration.
For trades in Cyprus Stock Exchange and the Athens Stock Exchange the maximum commission payable was determined at 0,18% on the value of each transaction.
For trades in New York Stock Exchange the maximum commission payable was determined at 0,18% on the value of each transaction with additional transaction costs of executing the orders that do not exceed US\$1,5 cents per transferable security and custody fees equal to 0,015% per annum on the value of the securities that are held on behalf of the Company.
For trades in other stock exchanges apart from those determined above, the brokerage commission will be approved in advance by the Company as long as it does not exceed the commissions stated above.
The total management fees for the year, resulting from the above agreement including VAT, were €101.991 (2017: €107.580). In addition to the above, the Investment Manager receives additional annual compensation of €40.000 (2017: €40.000), (Note 9), for accounting and administration services, as the Company does not have its own employees. The Company was additionally charged investment portfolio management fees of €21.656 (2017: €22.178), by the investment firm namely 3D Global Financial Services Limited ("Investment Manager"), based on the agreement entered into on 30 March 2015 which applies for the year 2018 (2017).
The Company is a public company whose shares are listed in the Cyprus Stock Exchange. The major shareholder of the Company at 31 December 2018 was 7Q Invest Ltd / Multi Opportunities, that held directly 28,29% (2017:0,25%) of the Company's share capital. The major shareholders at the date of approval of the accompanying financial statements were the Voluntary Pension Fund CCB - SILA, the Professional Pension Fund CCB - SILA, the Universal Pension Fund Saglasie, the Universal Pension Fund CCB - SILA and the Central Cooperative Bank Plc (Bulgaria), which held directly 6,10% (2017: 0%), 6,90% (2017: 0%), 6,95% (2017: 0%), 6,90% (2017: 0%), and 9,90% (2017: 0%) respectively of the Company's share capital.
The following transactions were carried out with related parties:
| 2018 € |
2017 € |
|
|---|---|---|
| Polydorides & Associates (Corporate Services) Limited (1): Secretarial fees (Note 9) Share registry fees |
19.686 1.970 |
19.686 1.950 |
| Polydorides & Associates Consultants Limited (2): Fees for the conversion of the Company to an Alternative Investment Fund and other services |
2.000 | - |
| Colocassides Hadjipieris & Co Legal fees (Note 9) |
3.570 | 10.020 |
| _ 27.226 ======= |
_ 31.656 ======= |
The total remuneration of the Directors was as follows:
| 2018 € |
2017 € |
|
|---|---|---|
| Fees (Note 9) | 50.278 _ |
50.827 _ |
| 50.278 ======= |
50.827 ======= |
The Company has only one operating segment which is the management of a closed-type investment portfolio. This operation is performed at the following geographical segments: Cyprus, Greece and United States of America and Other countries.
The chief operating decision-maker (CODM) has been identified as the Board of Directors which calls meetings on regular intervals. At the meetings, the Board of Directors reviews the financial information prepared under IFRS and comprise of the statement of comprehensive income, the balance sheet and analysis of the Company's investments.
The analysis below presents the Company's income and investments per geographical region:
| Income 2018: | Cyprus | Greece | USA and Other countries |
Total |
|---|---|---|---|---|
| € | € | € | € | |
| Dividend income | 17.280 | 23.213 | 201.868 | 242.361 |
| Interest income | 3.840 | - | - | 3.840 |
| Loss from financial assets at fair value | (75.048) | (256.640) | (1.008.048) | (1.339.736) |
| through profit or loss | _ _ | ____ | ____ | |
| (53.928) | (233.427) | (806.180) | (1.093.535) | |
| ========== | ========= | ========== | ========== | |
| Administrative expenses | (343.860) | - | - | (343.860) |
| ========== | ========= | ========== | ========== | |
| Total assets | 1.979.659 | 306.975 | 6.723.669 | 9.010.303 |
| ========== | ========= | ========== | ========== | |
| Total liabilities | 245.705 | - | 168.430 | 414.135 |
| ========== | ========= | ========== | ========== |
| Income 2017: | Cyprus | Greece | USA and Other countries |
Total |
|---|---|---|---|---|
| € | € | € | € | |
| Dividend income | 15.043 | 12.450 | 112.664 | 140.157 |
| Interest income | 7.289 | - | - | 7.289 |
| Gain from financial assets at fair value through profit or loss |
43.024 | 222.148 | 702.025 | 967.197 |
| ____ 65.356 |
___ 234.598 |
____ 814.689 |
____ 1.114.643 |
|
| Administrative expenses | ========== (338.547) |
========= - |
========== - |
========== (338.547) |
| Total assets | ========== 1.956.549 |
========= 907.735 |
========== 7.545.565 |
========== 10.409.849 |
| Total liabilities | ========== 170.584 |
========= - |
========== 103.331 |
========== 273.915 |
| ========== | ========= | ========== | ========== |
There were no material events after the balance sheet date, which have a bearing on the understanding of the financial statements.
On 7/3/2019 the disposal of the Company's shares by the following major shareholders was announced on the Cyprus Stock Exchange:
On 7/3/2019 Mr Loizos Christou resigned from the Board of Directors. On 3/4/2019 the member of the Board Mr Michalis Polydorides and the Company's secretary Polydorides & Associates Ltd resigned from office.
On 9/4/2019, 7Q Financial Services was appointed as the new Investment Manager of the Company and Dema Services Ltd was appointed as the new secretary of the Company.
Accounting policies applicable to the comparative period ended 31 December 2017 that were amended by IFRS 9 are as follows.
The Company's revenue is recognised as follows:
The gain/loss from the sale of investments is calculated based on the book value and the net product for sale which include the brokerage fees of acquisition/disposal respectively.
The gain/loss resulting from the remeasurement of value of the investments to their fair value at the balance sheet date is included in the statement of comprehensive income.
Refer to accounting policy "Financial assets".
Dividend income is recognised when the right to receive payment is established.
Interest income is recognised on an accruals basis using the effective interest method.
The Company classifies its financial assets in the following categories: financial assets at fair value through profit or loss and loans and receivables. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of financial assets at initial recognition.
This category has two sub categories: financial assets held for trading and those designated at fair value through profit or loss at inception. A financial asset is classified as held for trading if acquired principally for the purpose of selling in the short term. Financial assets designated as at fair value through profit or loss at inception are those that are managed and their performance is evaluated on a fair value basis, in accordance with the Company's documented investment strategy. Information about these financial assets is provided internally on a fair value basis to the Company's key management personnel. Assets in this category are classified as current assets if they are either held for trading or are expected to be realised within twelve months of the balance sheet date.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and for which there is no intention of trading the receivable. They are included in current assets, except for maturities greater than twelve months after the balance sheet date. These are classified as non current assets. The Company's loans and receivables comprise "cash and cash equivalents " and "other receivables" in the balance sheet.
Regular way purchases and sales of financial assets are recognised on the trade date which is the date on which the Company commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss are initially recognised at fair value and transaction costs are expensed in profit or loss. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Company has transferred substantially all risks and rewards of ownership.
The "financial assets at fair value through profit or loss" are subsequently carried at fair value. Loans and receivables are carried at amortised cost using the effective interest method.
Gains or losses arising from changes in the fair value of the "financial assets at fair value through profit or loss" category are presented in the statement of comprehensive income in the period in which they arise. Dividend income from financial assets at fair value through profit or loss is recognised in the statement of comprehensive income, when the Company's right to receive payments is established.
The Company assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired.
The criteria that the Company takes into account to determine whether there is an objective indication of impairment in the value of a security are the following:
A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a 'loss event') and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.
Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation, and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.
For loans and receivables category, the amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset's original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in the profit or loss. If a loan or held-to-maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the Company may measure impairment on the basis of an instrument's fair value using an observable market price.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor's credit rating), the reversal of the previously recognised impairment loss is recognised in the profit or loss.
| Loans and | Assets at fair value | Total | |
|---|---|---|---|
| receivables € |
through profit or loss € |
€ | |
| 31 December 2017 Assets as per balance sheet |
|||
| Financial assets at fair value through profit or loss |
- | 8.518.184 | 8.518.184 |
| Cash and cash equivalents Dividends receivable |
1.882.702 8.963 |
- - |
1.882.702 8.963 |
| Total | ___ 1.891.665 ========= |
___ 8.518.184 ========= |
____ 10.409.849 ========== |
| Other financial liabilities at |
Total | ||
| amortised cost € |
€ | ||
| Liabilities as per balance sheet Payables and accrued expenses |
170.584 | 170.584 | |
| Payables to investment manager | 103.331 | 103.331 | |
| Total | _ 273.915 |
_ 273.915 |
|
| ======= | ======= |
Receivables are recognised initially at fair value and subsequently measured at amortised cost, using the effective interest method, less provision for impairment. A provision for impairment of receivables is established when there is objective evidence that the Company will not be able to collect all amounts due according to the original terms of receivables. The amount of the provision is the difference between the carrying amount and the recoverable amount, being the present value of estimated future cash flows, discounted at the effective interest rate. The provision amount is recognised in the statement of comprehensive income. If collection is expected in one year or less, they are classified as current assets. If not, they are presented as non-current assets.
In the statement of cash flows, cash and cash equivalents includes deposits held at call with banks with original maturities of three months or less and bank overdrafts.
Independent auditor's report on pages 32 to 37.
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