HIGHER GROUND SICAV P.L.C

Report and Accounts 2013

and its sub-fund; the

HIGHER GROUND SICAV P.L.C.



HIGHER GROUND SICAV P.L.C

Contents

01 Directors, officer and other information

02 Directors' report

04 Report of the investment advisor

09 Statement of directors' responsibilities

10 Independent auditor's report

12 Statement of comprehensive income

13 Statement of financial position

14 Statement of changes in net assets attributable to holders of investor shares

15 Statement of cash flows

16 Notes to the financial statements

37 Schedule of investments

1


Directors, officer and other information

Directors David Curmi Michael Warrington Richard Wood Secretary Ganado Services Limited Registered office 171, Old Bakery Street Valletta Malta Country of incorporation Malta Company registration number SV98 Investment committee David Curmi Vladimir Jaros Michael Warrington James Woolf (resigned on 31 December 2012) Investment advisor Richard Wood

Administrator and registrar Apex Fund Services (Malta) Ltd. 6th Floor, Airway House Gaiety Lane Sliema Malta Bankers and custodian Deutsche Bank Trust Company Americas 60, Wall Street 32nd Floor, Mail Stop NYC60-3221 New York NY 10005-2836 Legal advisors Ganado Advocates 171, Old Bakery Street Valletta Malta Auditor Deloitte Audit Limited Deloitte Place Mriehel Bypass Mriehel Malta

2


Directors’ report Year ended 30 June 2013

The directors present their report and the audited financial statements of Higher Ground SICAV P.L.C. (hereinafter referred to as “the company”) for the year ended 30 June 2013. Until the end of the year under review, the company had constituted only one sub-fund, being the Core Wealth Fund (hereinafter referred to as the “fund”). The financial results of the company therefore represent also those of the fund.

Principal activities The company and the fund aim to provide steady and sustainable gains to wealthy individuals and family offices from investment in equities, bonds and commodities. The fund was licensed by the Malta Financial Services Authority (“MFSA”) as a Professional Investor Fund available to Qualifying Investors on 17 February 2009. The board of directors is assisted by an investment committee which met 12 times during the current year. In turn, the investment committee is advised by an investment advisor. These are the audited financial statements of the company’s fourth full year of operation. Performance review During the year under review, subscriptions of EUR4,393,686 (2012: EUR1,278,186) were attracted to the fund. Redemptions for the year amounted to EUR4,382,535 (2012: EURNil). The fund reported gains attributable to holders of investor shares* of EUR1,042,754 (2012: Loss of EUR334,520). Net assets attributable to holders of investor shares at the end of the reporting year amounted to EUR14,473,984 (2012: EUR13,420,079).

Results

The result for the year ended 30 June 2013 is shown in the statement of comprehensive income on page 12.

The fund has a Euro share class, a Sterling share class and a US Dollar share class. To the extent possible, they are hedged to perform in parallel. Pricing of hedging instruments may cause slight divergence between the percentage gains or losses of the three classes but such divergence will generally be minimal.

The fund’s Euro denominated shares were first issued on 4 May 2009 at a price of EUR100. Since that date, investor shares increased in value by EUR34.55.

The fund’s GBP denominated shares were first issued on 1 June 2010 at a price of GBP100. Since that date, investor shares increased in value by GBP20.43.

The fund’s USD denominated shares were first issued on 1 April 2013 at a price of USD100. Since that date, investor shares decreased in value by USD1.68.

Close of

offer period 2013 2012

Net asset value per investor share EUR investor share (100) 134.55 123.15 GBP investor share (100) 120.43 109.48 USD investor share (100) 98.32 -

*Investor shares represent non-voting redeemable participating shares of no par value in the capital of the company, which constitute sub-funds of the company and which may be divided into different classes, and may include fractions of shares.

3


Directors’ report (continued) Year ended 30 June 2013

Dividends The directors do not recommend the payment of a dividend.

Directors The directors who served during the period were: David Curmi Michael Warrington Richard Wood

Auditor A resolution to reappoint Deloitte Audit Limited will be proposed at the forthcoming annual general meeting. Approved by the board of directors and signed on its behalf on 13th November 2013 by: David Curmi Michael Warrington Director Director

4


Report of the investment advisor Year ended 30 June 2013

It is my pleasure to report to you on the Core Wealth Fund’s progress over the past year. We advanced 9.07% on the year, which brings us to an annual return of 7.73% over the fund’s 4-year life. Cumulative gains during the year The above chart shows the buildup of returns month by month through the year. Note the nasty little drop in June. At the time of writing, (late September), that has been recouped. A look at trailing 12-month performance says something about control of losses. Although there will be losing months and quarters, we do not readily accept being behind where we were 12 months earlier. That was the case in the first 2 months of the year as seen below. Trailing 12-month performance

15%

12%

9%

6%

3%

0% Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13

4.36 10.87 6.09 3.96 3.54 5.49

9.20 9.08 4.46

12.77 14.26 9.07

12%

10%

8%

6%

4%

2%

0%

-2%

-1.74 -0.33 5.62 3.78 2.47 4.30 7.30 4.71 4.64 6.83 11.45 9.07

Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13

5

6%

4%

2%

0%

-2%


Report of the investment advisor (continued) Year ended 30 June 2013

Where did those gains come from? Attribution of gains* Our best performer was the 16% of the fund invested in US sub-prime residential mortgage-backed bonds. These holdings were bought four years ago. The fund gained 5.18% over the year from these holdings. Clearly the impressive rebound in US house prices, improving employment and bank lending were all strong tailwinds for these bonds. We gained 2.9% from our equity investments in emerging markets. This was composed of:

• 2.05% from our long-standing holding in the Romanian property privatization fund. Further gains after year-end have led us to halve our position down to 6.8% of our fund.

• 0.92% from the Dow Jones emerging markets consumer titans ETF. This fund owns 60 of the largest consumer goods and consumer services companies in emerging markets.

• 0.81% from Pegas, Proctor and Gamble’s preferred supplier of nappy materials for the Czech Republic, Poland and Egypt.

• -0.14% from Baidu, the Chinese internet search engine. • -0.70% from Telefonica, Czech Republic, the Czech mobile and fixed line operator.

During the year, we sold our long-held stake in the Nevsky Fund. I/we had owned this fund for over ten years during which it had mostly performed spectacularly well. However, as managers get older, their style can become more conservative and long-only. We think that we can do conservative and long-only pretty well so are happy to save on the large fees and the illiquidity of investing in an outside fund. * Gains/losses are at the level of our fund, not the gains/losses of the underlying investment. Attribution elements are stated before fees. Annual result of 9.07% is after all fees.

Commodity Trend Fund

Global Macro

Em. Mkt. Equities

Developed Mkt. Equities

Mortgage Backed

Securities

Currency

6



Equity investments in developed markets made us 2.25% at the fund level. This was composed of:

• 2.90% from Citibank – a position we have now halved • 0.97% from Perella Weinberg Xerion, a fund we have now sold for the same reasons as for

Nevsky • 1.73% from a holding in Google • -1.54% from Apple • -0.95% from a holding of Athabasca Oil Sands – now sold. • -0.24% from ENI, the Italian oil company • -0.41% from Commerzbank – a position we added to in June and which has done well since. • -0.20% from Big Yellow Group, a new position in June, now at higher levels.

So after disposals of the funds noted above, we are left with two funds, which really do something that we can’t do ourselves. The Mulvaney Fund is a trend-following commodity trading fund. We have owned it throughout the life of Core Wealth and before. It made the fund 1.41% on the year. Meanwhile, Alfred Friedberg, the Toronto-based global macro investor lost us 1.31% at the level of our fund. His negative outlook on US central bank policy, European solvency and Brazilian, Indian and Turkish currencies and stock markets have put him on the wrong side of markets – so far. Value by Asset Class We are left with the above asset split, which we feel pretty good about. So what can we expect from the next year?

Mortgage Backed

Securities 16%

Cash 3%

Developed Mkt. Equities

28%

Global Macro

6%

Commodity Trend Fund

13%

Em. Mkt. Equities

34%

7



There is an interesting debate between those who value stock markets based on average earnings across the last 10 years and those who value them based on current earnings. The two can lead to very different answers for the ‘fair’ level of stock markets†. While US equities look reasonably priced based on this year’s earnings, they look expensive based on the average of the last 10 years’ earnings. Looking at our wider universe of world equities, the white line below shows the earnings yield (annual earnings/price) for the total of all the 1,600 stocks in the MSCI World Index over the past 20 years. As can be seen, it is not terribly volatile with the exception of around the stock market collapse. On average, over those 20 years, those 1600 large companies from around the world produced annual earnings of 5.11% of the price at which they traded. Right now they produce earnings of 5.63% of the price at which they trade – see the right hand number highlighted in white. This doesn’t seem very cheap, nor very expensive.

Yield on Bonds Versus Stocks Over 20 Years Earnings yield on MSCI World Index, (white line). Yield on 10 year US Government bond, (orange line). Lower panel shows difference.

However, what is very different now from at any time in our lives, is the low level of interest rates.

† http://www.ft.com/intl/cms/s/0/23c9f650-10c7-11e3-b5e4-00144feabdc0.html#axzz2fjydE4iT

8



Over the last 20 years, risk free rates have fallen dramatically although yields attainable from owning equities have not. We end up being able to earn 2.93% more, (right hand number in yellow) from world equities this year, than we can earn from lending our money to the US government for 10 years. The spread to short-term interest rates is even greater. Add to that some growth in the world and therefore in the earnings of the average company and we have a rather large yield gap. This trumps the tough arguments about whether to use current earnings or long-term earnings to value stock markets. If we believe that interest rates around the world will remain low for the next few years, we think that equities still look cheap. We might believe that interest rates will remain low because technology and the growing productivity of labour in emerging economies will continue to leave excess capacity in the advanced economies. Central banks in those advanced economies, whose interest rates we care about, would therefore keep interest rates low for a long time. We are persuaded by that argument. Therefore, at year-end we were 62% invested in equities. Our performance in the coming months will be largely shaped by this view. Thanks for your friendly and trusting participation. Richard Wood Advisor to the Investment Committee

9

HIGHER GROUND SICAV P.L.C. Statement of directors’ responsibilities

The directors are required by the Companies Act (Chap. 386) to prepare financial statements in accordance with International Financial Reporting Standards as adopted by the EU which give a true and fair view of the state of affairs of Higher Ground SICAV P.L.C. (the “company”) at the end of each financial year and of the profit or loss for the year then ended. In preparing the financial statements, the directors should: n select suitable accounting policies and apply them consistently; n make judgements and estimates that are reasonable; and n prepare the financial statements on a going concern basis, unless it is inappropriate to presume that

the company will continue in business as a going concern. The directors are responsible for ensuring that proper accounting records are kept which disclose with reasonable accuracy at any time the financial position of the company and which enable the directors to ensure that the financial statements comply with the Companies Act (Chap. 386). This responsibility includes designing, implementing and maintaining such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. The directors are also responsible for safeguarding the assets of the company, and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

10

Independent auditor’s report to the members of Higher Ground SICAV P.L.C.

We have audited the accompanying financial statements of Higher Ground SICAV P.L.C. (the “company”) set out on pages 12 to 36, which comprise the statement of financial position of the company as at 30 June 2013, and the statement of comprehensive income, statement of changes in net assets attributable to holders of investor shares and statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information. Directors’ responsibility for the financial statements

As explained more fully in the statement of directors’ responsibilities on page 9, the directors of the company are responsible for the preparation of financial statements that give a true and fair value in accordance with International Financial Reporting Standards as adopted by the EU and the requirements of the Companies Act (Chap. 386), and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the preparation of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the internal control of the company. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

The firm is registered as a partnership of Accountants in terms of the Accountancy Profession Act. A list of partners and directors of the firm is available at Deloitte Place, Mriehel Bypass, Mriehel, Malta.

Deloitte Audit Limited Certified Public Accountants Assurance, Accounting & Advisory Services Deloitte Place Mriehel Bypass Mriehel BKR 3000 Malta Tel: +356 2134 5000, 2343 2000 Fax: +356 2134 4443, 2133 2606 [email protected] www.deloitte.com/mt VAT Reg No: MT13098006

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Member of Deloitte Touche Tohmatsu Limited

Independent auditor’s report to the members of

Higher Ground SICAV P.L.C. (continued)

Opinion

In our opinion, the financial statements give a true and fair view of the financial position of the company as at 30 June 2013, and of the company’s financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the EU and have been properly prepared in accordance with the requirements of the Companies Act (Chap. 386). Stephen Paris as Director in the name and on behalf of Deloitte Audit Limited Registered auditor 13th November 2013


12

Statement of comprehensive income Year ended 30 June 2013

Notes 2013 2012 EUR EUR Operating income Interest income 5 23,121 35,511 Dividend income 190,370 95,698 Net foreign currency gains 71,918 439,430 Net changes in fair value of financial assets and financial liabilities at fair value through profit and loss 1,172,911 (686,299) ————— ————— Total operating income/(loss) 1,458,320 (115,660) ————— ————— Operating expenses Administration fees 6 15,848 20,023 Audit fee 7,670 7,670 Custody fees 6 3,669 3,784 Performance fees 6 128,094 (32,135) Investment management fees 6 145,436 126,130 Professional fees 11,162 28,821 Transaction costs 19,656 6,067 Director fees 12 16,000 8,000 Investment committee fees 12,000 16,000 Other operating expenses 38,857 22,739 ————— ————— Total operating expenses 398,392 207,099 ————— ————— Profit/(loss) before tax 1,059,928 (322,759) Withholding tax (17,174) (11,761) ————— ————— Movement in net assets attributable to holders of investor shares from operations 1,042,754 (334,520) ================ ===============


13

Statement of financial position 30 June 2013

2013 2012 Notes EUR EUR Assets Financial assets at fair value through profit or loss 7 14,100,498 11,779,485 Receivables 8 173,011 87,571 Cash and cash equivalents 11 1,187,924 1,918,106 ————— ————— Total assets 15,461,433 13,785,162 ————— ————— Liabilities Financial liabilities at fair value through profit or loss 7 36,511 3,602 Payables 9 950,938 361,481 ————— ————— Total liabilities (excluding net assets attributable to holders of redeemable shares) 987,449 365,083 ————— ————— Net assets attributable to holders of redeemable investor shares 14,473,984 13,420,079 ================ ================ These financial statements were approved by the board of directors, authorised for issue on 13th November 2013 and signed on its behalf by: David Curmi Michael Warrington Director Director


14

Statement of changes in net assets attributable to holders of investor shares Year ended 30 June 2013

2013 2012 EUR EUR Net assets attributable to holders of redeemable investor shares at the beginning of the year 13,420,079 12,476,413 ————— ————— Proceeds from investor shares issued 4,393,686 1,278,186 Redemption of investor shares (4,382,535) - Movement in net assets attributable to holders of redeemable investor shares 1,042,754 (334,520) ————— ————— Net assets attributable to holders of redeemable investor shares 14,473,984 13,420,079 ================ ===============


15

Statement of cash flows Year ended 30 June 2013

2013 2012 EUR EUR Cash flows from operating activities Movement in net assets attributable to holders of investor shares from operations 1,042,754 (334,520) Adjusted for: - Interest income (23,121) (35,511) - Dividend income (190,370) (95,698) - Withholding tax 17,174 11,761 Net increase in financial assets at fair value through profit or loss (2,321,013) (978,579) Net increase/(decrease) in financial liabilities at fair value through profit or loss 32,909 (78,372) Net increase in amounts due from brokers (54,397) - Net increase in other receivables 916 4,176 Net increase in amounts due to brokers 784,581 - Net increase in other payables (195,124) 7,834 ————— ————— Cash used in operations (905,691) (1,498,909) ————— ————— Interest received 23,811 70,331 Dividend received 125,484 49,014 Withholding tax (17,174) (11,761) ————— ————— Net cash flows used in operating activities (773,570) (1,391,325) ————— ————— Cash flow from financing activities Proceeds from issue of redeemable investor shares 4,425,923 1,245,949 Payments on redemption of redeemable investor shares (4,382,535) - ————— ————— Net cash flows from financing activities 43,388 1,245,949 ————— ————— Net decrease in cash and cash equivalents for the year (730,182) (145,376) Cash and cash equivalents at the beginning of the year 1,918,106 2,063,482 ————— ————— Cash and cash equivalents at the end of the year (note 11) 1,187,924 1,918,106 ================ ===============


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Notes to the financial statements 30 June 2013

1. General

Higher Ground SICAV P.L.C. is a self-managed collective investment scheme established as a multi-fund investment company with variable share capital (SICAV) incorporated with limited liability under the laws of Malta and licensed by the Malta Financial Services Authority (“MFSA”) under the Investment Services Act (Chap.370) as a Professional Investor Fund with license number PIF 98 targeting Qualifying Investors.

Until 30 June 2013, the company has constituted one sub-fund being the Core Wealth Fund (the “fund”) and therefore the financial results of the company represent those of the fund. The fund is a segregated portfolio whose assets and liabilities are to be treated as a patrimony separate from the assets and liabilities of the company and is represented by investor shares, in the EUR class, the GBP class and the USD class which do not constitute segregated classes of shares in the fund.

2. Basis of preparation and significant accounting policies

The financial statements have been prepared on the historical cost basis, except for financial instruments at fair value through profit or loss which are stated at their fair values, and in accordance with International Financial Reporting Standards as adopted by the EU. The accounting policies adopted in these separate financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated. Financial instruments

Financial assets and financial liabilities are recognised when the fund becomes a party to the contractual provisions of the instrument. Financial assets and financial liabilities are initially recognised at their fair value plus directly attributable transaction costs for all financial assets or financial liabilities not classified at fair value through profit or loss.

Financial assets and financial liabilities are offset and the net amount presented in the statement of financial position when the fund has a legally enforceable right to set off the recognised amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

Financial assets are derecognised when the contractual rights to the cash flows from the financial assets expire or when the entity transfers the financial asset and the transfer qualifies for derecognition.

Financial liabilities are derecognised when they are extinguished. This occurs when the obligation specified in the contract is discharged, cancelled or expires.

Income and expenses are presented on a net basis only when permitted under IFRSs, for example, for gains and losses arising from a group of similar transactions, such as gains and losses from financial instruments at fair value through profit or loss.

The fund uses the First-In First-Out (“FIFO”) method to determine realised gains and losses on derecognition. These are included in the statement of comprehensive income.


17


2. Basis of preparation and significant accounting policies (continued)

Financial instruments (continued)

(i) Financial assets/liabilities at fair value through profit or loss

Financial assets at fair value through profit or loss are those that are held for trading purposes or those financial assets that are so designated by the company upon initial recognition. The fund uses this designation when doing so results in more relevant information because:

• it eliminates or significantly reduces a measurement or recognition inconsistency (accounting mismatch) that would otherwise arise from measuring assets or liabilities or recognising the gains and losses on them on different bases;

or

• a group of financial assets or a group of financial liabilities or a group of financial assets and financial liabilities is managed and its performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy, and information about the group is provided internally on that basis to the company’s key management personnel.

After initial recognition, financial assets at fair value through profit or loss are measured at their fair value.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In accordance with IAS 39, pricing is based on quoted bid prices for long securities and quoted offer prices for short securities and if unavailable, by reference to the price appearing to the directors to be the latest available dealing price.

For all financial instruments which are quoted or otherwise traded in an active market, for exchange traded derivatives and for other financial instruments for which quoted prices in an active market are available, fair value is determined directly from those quoted prices, and is based on the current bid prices. Such financial instruments are classified as Level 1 within the fair value hierarchy.

Where the market for financial instrument is not active, fair value is established using valuation techniques. These valuation techniques involve a degree of estimation, the extent of which depends on the instrument’s complexity and the availability of market-based data.

A valuation technique might incorporate both observable market data and unobservable inputs. Where inputs are based on market observable data the measurement classification is referred to as Level 2. When unobservable inputs are significant to the fair value measurement, the resulting valuation will be disclosed as Level 3 within the fair value hierarchy.

Gains and losses arising from a change in fair value are recognised in profit or loss in the period in which they arise.


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(i) Financial assets/liabilities at fair value through profit or loss (continued)

Where applicable, dividend and interest income on financial assets as at fair value through profit or loss are recognised within operating income/(losses) in the statement of comprehensive income. Fair value gains and losses are recognised within net gains/(losses) on financial instruments at fair value through profit or loss in the statement of comprehensive income.

• Derivative financial instruments

Derivative financial assets and derivative financial liabilities are classified as held for trading unless they are designated and effective hedging instruments. During the year under review, the fund did not designate any of its derivative financial instruments in a hedging relationship for accounting purposes. After initial recognition, derivative financial instruments are measured at their fair value. The fair value of derivatives is determined using quoted market prices.

Gains and losses arising from a change in fair value are recognised in profit or loss in the period in which they arise.

• Valuation of investments in other funds

The fund’s investments in other funds (hereinafter referred to as “the underlying funds”) are subject to the terms and conditions of the respective underlying fund’s offering documentation.

The investment committee and the board of directors review the fund’s investments in other funds using reported information obtained from the underlying funds’ administrators and consider:

i. the liquidity of the underlying funds; ii. the value date of the net asset value (“NAV”) provided;

iii. any restrictions on redemption; iv. the basis of accounting and, in instances where the basis of accounting is other v. than fair value, fair value information provided by the underlying funds’

advisors.

If necessary, the fund makes adjustments to the NAV of the underlying funds to obtain the best estimate of fair value. No adjustment to the NAV of the underlying funds was deemed necessary.

Given the likelihood that the end of the financial year of the underlying funds is not co-terminous with that of the fund, investments in the underlying funds cannot be valued based on independently audited net asset values and therefore the board of directors bases its valuation on the underlying funds’ net asset value as calculated by their administrators at the end of the reporting period.


19




(i) Financial assets/liabilities at fair value through profit or loss (continued)

• Valuation of investments in other funds (continued)

In determining fair value, the fund’s administrator utilises the valuations of the underlying funds to determine the fair value of the fund’s interest. The underlying funds value securities and other financial instruments on a mark-to-market or fair value basis of accounting. The fair value of certain investments of the underlying funds, which may include private placements and other securities for which prices are not readily available, are determined by their administrator and may not reflect amounts that could be realised upon immediate sale, nor amounts that ultimately may be realised. Accordingly, the fair values may differ significantly from values that would have been used had a ready market existed for these investments.

The change in the fair value of the fund’s investments in other funds is recognised within net changes in fair value of financial assets and financial liabilities at fair value through profit or loss in the statement of comprehensive income.

(ii) Receivables

Amounts due from brokers include margin accounts and holdback amount in respect of redemption of units in underlying funds. Margin accounts represent cash deposits held with brokers as collateral against open futures contracts.

Amount due from broker, accrued income and other receivables are stated at their nominal value unless the effect of discounting is material. Appropriate allowances for estimated irrecoverable amounts are recognised in the statement of comprehensive income when there is objective evidence that the asset is impaired.

(iii) Payables

Amounts due to brokers are payables for securities purchased (in a regular way transaction) that have been contracted for but not yet settled or delivered on the reporting date.

Amounts due to brokers and accrued expenses are stated at their nominal value unless the effect of discounting is material.

(iv) Redeemable shares

The fund issues redeemable shares which are redeemable at the holders’ option and are classified as a financial liability.

Redeemable shares are issued and redeemed at the holder’s option at prices based on the net asset value per share at the time of issue or redemption. The net asset value per share is calculated by dividing the net assets attributable to holders of redeemable shares with the total number amount of outstanding redeemable shares.


20



Impairment

All assets are tested for impairment except for financial assets measured at fair value through profit or loss.

At the end of each reporting period, the carrying amount of assets is reviewed to determine whether there is any indication or objective evidence of impairment, as appropriate, and if any such indication or objective evidence exists, the recoverable amount of the asset is estimated.

An impairment loss is the amount by which the carrying amount of an asset exceeds its recoverable amount.

For loans and receivables, if there is objective evidence that an impairment loss has been incurred, the loss is measured as the difference between the assets carrying amount and the present value of estimated future cash flows discounted at the original effective interest rate. The carrying amount of the asset is reduced directly.

Impairment losses are recognised immediately in profit or loss.

For loans and receivables, 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, the previously recognised impairment loss is reversed directly.

Impairment reversals are recognised immediately in profit or loss. Net assets attributable to holders of redeemable investor shares

The liability to participating shareholders is presented in the statement of financial position as “Net assets attributable to holders of redeemable investor shares” and is determined based on the residual assets of the fund after deducting all other liabilities. Revenue recognition

Revenue is recognised to the extent that it is probable that future economic benefits will flow to the fund and these can be measured reliably.

The following specific recognition criteria must also be met before revenue is recognised:

(i) Interest income

Interest income is accrued on a time basis, by reference to the principal outstanding and at the historical effective interest rate applicable.


21



Revenue recognition (continued)

(ii) Dividend income

Dividend income is recognised when the shareholder’s right to receive payment is established. Dividend income relating to exchange traded equity securities is recognised in the statement of comprehensive income on the ex-dividend date.

Transaction costs and other expenses

Transaction costs are costs incurred to acquire financial assets and financial liabilities at fair value through profit or loss. They include fees and commissions paid to agents, advisers, brokers and dealers. Transaction costs, when incurred, are immediately recognised in profit or loss as an expense.

Expenses related to the set-up of the fund are expensed as incurred.

Other expenses are recognised in profit or loss on an accrual basis. Taxation

The taxation of collective investment schemes is based on the classification of funds into prescribed or non-prescribed funds in accordance with the Collective Investment Schemes (Investment Income) Regulations, 2001. The fund qualifies as a non-prescribed fund in terms of these regulations on the basis that the value of the fund’s assets situated in Malta are less than 85% of the value of its total assets.

Accordingly, the income and capital gains of the company relating to the fund are not subject to Malta income tax pursuant to the provisions of the Income Tax Act (Chap. 123).

Foreign tax withheld on dividend or interest income is accounted for when the company recognises the related dividend or interest in the statement of comprehensive income. Movement in net assets attributable to holders of investor shares from operations

Income not distributed is included in net assets attributable to holders of investor shares. Movement in net assets attributable to holders of non-voting investor shares from operations is recognised in the statement of comprehensive income as a finance cost.

Currency translation

The financial statements of the company are presented in its functional currency, the Euro, according to its Memorandum and Articles of Association. Transactions denominated in currencies other than the functional currency are translated at the exchange rates ruling on the date of transaction. Monetary assets and liabilities denominated in currencies other than the functional currency are re-translated to the functional currency at the exchange rate ruling at year-end.

Exchange differences arising on the settlement and on the re-translation of monetary items are recognised in the statement of comprehensive income.


22



Currency translation (continued)

Foreign exchange gains and losses on financial assets and financial liabilities at fair value through profit or loss are recognised together with other changes in fair value. Net foreign exchange gains/(losses) on financial assets and liabilities other than those classified as at fair value through profit or loss are included in the line item Net foreign currency gains in the statement of comprehensive income. Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and demand deposits

3. Judgements in applying accounting policies and key sources of estimation uncertainty

The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

The judgements, estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities are outlined below. Fair value of securities not quoted in an active market

The company’s investments in mortgage backed securities and in underlying funds not quoted in an active market have been valued by the directors in good faith based on the information available.

Mortgage backed securities have been valued using reputable pricing sources. Such values may be indicative and not executable or binding and hence directors exercise judgement on the quantity and quality of pricing sources used.

The fair value of investment in underlying funds not quoted in an active market is determined primarily by reference to the latest available redemption price as determined by the administrator of the underlying funds. The carrying values of the underlying funds may be materially different from the values ultimately realised on redemption.

4. International Financial Reporting Standards in issue but not yet effective

At the date of authorisation of these financial statements, a number of new standards, amendments to standards and interpretations applicable to the company are not yet effective for the current period, and have not been applied in preparing these financial statements.


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4. International Financial Reporting Standards in issue but not yet effective (continued)

IFRS 9 Financial Instruments was published on 12 November 2009 (effective 1 January 2015) as part of phase 1 of the IASB’s comprehensive project to replace IAS 39. This standard has not yet been endorsed by the EU and addresses the classification and measurement of certain financial assets and financial liabilities. IFRS 9 requires financial assets to be classified on the basis of the entity’s business model for managing the financial assets and the contractual cash flow characteristics of the assets. The Standard requires financial assets to be subsequently measured at amortised cost or at fair value. The requirements for financial liabilities address the problem of volatility in profit or loss arising from measuring own debt at fair value. Under IFRS 9, any entity choosing to measure a liability at fair value will present the portion of the change in its fair value due to changes in the entity’s own credit risk in other comprehensive income.

IFRS 13 Fair Value Measurements was issued on 12 May 2011, has been endorsed by the EU and will become effective for annual periods beginning on and after 1 January 2013. This Standard defines fair value, sets out in a single IFRS a framework for measuring fair value and requires disclosures about fair value measurements. IFRS 13 does not require fair value measurements in addition to those already required or permitted by other IFRSs.

Amendments to IAS 32 and IFRS 7 Offsetting Financial Assets and Financial Liabilities were issued on 16 December 2011, have been endorsed by the EU and will become effective for annual periods beginning on or after 1 January 2014 and 1 January 2013 respectively. These Amendments are intended to help investors and other financial statement users to better assess the effect or potential effect of offsetting arrangements on a company’s financial position. The disclosure requirements also improve transparency in the reporting of how companies mitigate credit risk, including disclosure of related collateral pledged or received.

Amendment to IAS 1 Presentation of financial statements issued as part of the 'Annual Improvements 2009-2011 cycle' has been endorsed by the EU and will become effective for annual periods beginning on or after 1 January 2013. This amendment clarifies the disclosure requirements that need to be made in an entity’s financial statements in respect of comparative information

The directors are assessing the potential impact, if any, that the adoption of these IFRSs will have on the financial statements. The directors believe that other pronouncements, which are in issue but not yet effective or adopted by the company, will not have a material impact on the financial statements of the company.

5. Interest income 2013 2012 EUR EUR Interest income on: Cash and bank balances 649 3,386 Financial assets at fair value through profit and loss 22,472 32,125 ————— ————— 23,121 35,511

================ ================


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6. Fees

(i) Investment management fees

The company pays to the investment advisor an investment management fee of 1% per annum of the net asset value of the fund, before accruals for any performance fees, which may be due by the company in respect of the fund.

Investment management fees for the current year totalled EUR145,436 (2012: EUR126,130) and are presented in the statement of comprehensive income. The amount outstanding at year end is EUR37,483 (2012: EUR63,918).

(ii) Performance fees

The company pays to the investment advisor a performance fee out of the assets of the fund. Such performance fee is calculated and accrued on each valuation day depending on whether the net asset value before deduction of any performance fee is above the high-water mark; if so the performance fee will be equal to 10% of the difference between the net asset value, before deduction of any performance fee and the high-water mark (where the high-water mark is the higher of the net asset values upon which a performance fee was paid or the initial offer price).

The performance fee is payable within one month from the end of the relevant performance period.

If a shareholder redeems his shares, any performance fee accrued in respect of the shares being redeemed will be paid by the fund within one month from the relevant redemption day.

The performance period shall be of three years with the first performance period ending on 30 June 2012 and the next performance period ending on 30 June 2015.

Performance fees in respect of the current year amount to EUR128,094 (2012: Credit balance amounting to EUR32,135). EUR100,206 (2012: EUR253,765) out of this amount is still outstanding as at year-end.

(iii) Administration fees

As from 1 January 2013, Apex Fund Services (Malta) Ltd. has been appointed to act as administrator for the fund in lieu of HSBC Securities Services (Malta) Limited.

For the first 6 months of the year, the company has paid an administration fee at the rate of 0.1% per annum of the net asset value of the fund calculated at each valuation date as defined in the offering supplement. The fee is subject to a minimum administration fee of EUR20,000 per annum and an additional flat fee of EUR2,500 per annum.

For the second part of the year, the company has paid an administration fee at the rate of 0.08% per annum of the net asset value of the fund calculated at each valuation date. The fee paid is subject to a minimum monthly administration charge of USD1,000.

Administration fees for the current year amount to EUR15,848 (2012: EUR20,023). EUR1,011 (2012: EUR5,027) out of this amount is still outstanding as at year-end.


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6. Fees (continued)

(iv) Custody fees

The company pays the custodian a custody fee of 0.06% per annum of the net asset value of the fund as defined in the offering memorandum. The fee is calculated at each valuation day (before any performance fee accrual).

Custody fees for the year amount to EUR3,669 (2012: EUR3,784). These fees have been fully paid by year-end (2012: EUR330).

7. Financial assets and financial liabilities at fair value through profit or loss

2013 2012 EUR EUR Financial assets at fair value through profit or loss: Financial assets classified as held for trading - equity instruments 7,210,519 2,137,070 - mortgage backed securities 2,343,434 2,042,363 - funds 2,979,297 5,452,290 - exchange traded funds 1,567,248 1,441,296 - derivative financial instruments: warrants - 636,000 forward foreign exchange contracts - 70,466 ————— ————— 14,100,498 11,779,485 ================ ================ 2013 2012 EUR EUR Financial liabilities at fair value through profit or loss: Financial liabilities classified as held for trading - derivative financial instruments: futures (36,511) - forward foreign exchange contracts - (3,602) ————— ————— (36,511) (3,602) ================ ================


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7. Financial assets and financial liabilities at fair value through profit or loss (continued)

In accordance with the fund’s investment objectives and policies, the fund may enter into derivative contracts to hedge against specific foreign currency payments. The fund holds the following derivative instruments as at the reporting date. As at 30 June 2013 Futures Description

Maturity date

Exchange rate

Contract value in foreign

currency

Contract value in

EUR

Fair value in EUR

Long position USD Currency 20/09/2013 0.7686 1,990,275 1,529,804 (28,305) Short position GBP Currency 16/09/2013 1.1690 1,277,805 1,493,754 (8,206) ————— Total futures contracts (36,511) ================

As at 30 June 2012 Forward contracts Maturity date

Amount bought

Bought currency

Amount sold

Sold currency

Fair value in EUR

06/07/2012 1,241,897 EUR 1,000,000 GBP 1,896 05/07/2012 3,063,997 EUR 3,800,000 USD 64,112 06/07/2012 900,000 GBP 1,241,897 EUR (125,896) 06/07/2012 1,000,000 GBP 1,117,707 EUR 122,294 05/07/2012 3,800,000 USD 2,995,428 EUR 4,458

————— Total forward contracts 66,864

================ As at 30 June 2012, the fund also held warrants in SC Fondul Proprietatea S.A. with a notional amount of RON6,151,200 (EUR1,377,869).


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8. Receivables

2013 2012 EUR EUR Amounts due from brokers 54,397 - Accrued income 111,863 47,667 Subscriptions - 32,237 Other receivables 6,751 7,667 ————— ————— 173,011 87,571 ================ ================

9. Payables

2013 2012 EUR EUR Amounts due to brokers 784,581 - Accrued expenses 166,357 361,481 ————— ————— 950,938 361,481 ================ ================

10. Share capital

Share capital of the company shall be equal to the value of its issued share capital. The company may issue up to a maximum of 5,000,000,000 fully-paid up investor shares without any nominal value assigned to them.

The initial share capital of the company is EUR2,000 divided into 2,000 founder shares with no nominal value. Founder shares have all the voting rights with respect to the affairs of the company. These shares are not recognised in the financial statements.

All investor shares in issue participate equally in the net assets of the fund as are represented by the appropriate class on liquidation and in any dividends and other distributions attributable to the fund as may be declared. Except to the extent that they have the right to a return of paid up capital on winding-up, the founder shares do not participate in the assets of the company or in any dividends or other distributions of the company as may be declared.

The holder of each founder share is entitled to one vote per share on all matters which may arise for consideration by the holders of the issued and outstanding voting shares of the company, whereas, subject to the limited rights to vote, the holder of any other class of shares in the company including the holders of the investor shares shall have no voting rights.


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10. Share capital (continued)

The movement in issued investor share capital was as follows:

2013

Class - EUR

2013

Class - GBP

2013

Class - USD Shares at the beginning of the year 90,425 16,915 - Shares issued - - 56,167 Shares redeemed (32,095) - - ———— ———— ———— Shares at the end of the year 58,330 16,915 56,167 ============= ============= ============ NAV per share as per offering documents 134.55 120.43 98.32 ———— ———— ———— 2012 2012 2012 Class - EUR Class - GBP Class - USD Shares at the beginning of the year 90,163 8,012 - Shares issued 262 8,903 - ———— ———— ———— Shares at the end of the year 90,425 16,915 - ============= ============= ============= NAV per share as per offering documents 123.15 109.48 - ———— ———— ————

11. Cash and cash equivalents

Cash and cash equivalents included in the statement of cash flows comprise the following statement of financial position amount: 2013 2012 EUR EUR Cash at bank 1,187,924 1,918,106 =============== =============== Cash at bank earns interest at floating rates based on bank deposit rates.


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12. Related party disclosures

During the course of the year, the company entered into transactions with related parties as set out below. Related party transactions were made on terms equivalent to those that prevail in arm’s length transactions.

Richard Wood is a director of the company, acts as investment advisor to the company and owns shareholding in a company which holds 75.8% of the investor shares in the fund. The investment advisor is paid investment management fees and performance fees, details of which are disclosed in note 6.

David Curmi is a director of the company and sits on the investment committee. Director’s fees payable to him in respect of the current year amount to EUR8,000 (2012: EUR4,000). David Curmi is also a director of Curmi and Partners Limited, a company that manages the investment execution process of the company. The fees charged by Curmi and Partners Limited during the year under review amounted to EUR5,822 (2012: EUR10,500).

Michael Warrington is a director of the company and sits on the investment committee. Director fees payable to him in respect of the current year amount to EUR8,000 (2012: EUR4,000).

13. Fair values of financial assets and financial liabilities

At 30 June 2013 the majority of the fund’s financial assets and financial liabilities are carried at fair value. The fair values of financial assets and financial liabilities which are not measured at fair value are not materially different from their carrying amount.

The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3. - Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active

markets for identical assets or liabilities. - Level 2 fair value measurements are those derived from inputs other than quoted prices

included within Level 1 that are observable, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

For mortgage backed securities, the fair value has been obtained from reputable pricing sources

while the fund’s investments in underlying funds have been fair valued using the NAV as reported by the respective administrator. In both cases, management believes that the fund could have redeemed its investment at the fair value as per financial position date.

- Level 3 fair value measurements are those derived from inputs that are not based on observable

market data (unobservable inputs).


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13. Fair values of financial assets and financial liabilities (continued)

Fair value measurement at the end of the reporting year:

2013

Level 1 EUR

Level 2 EUR

Level 3 EUR

Total EUR

Financial assets and financial liabilities at fair value through profit or loss Financial assets held for trading

- equity instruments 7,210,519 - - 7,210,519 - mortgage backed securities - 2,343,434 - 2,343,434 - exchange traded funds 1,567,248 - - 1,567,248 - other investment funds - 2,979,297 - 2,979,297 - futures (36,511) - - (36,511) -------------------------------------- -------------------------------------- ---------------------------------- ------------------------------------- Total 8,741,256

================ 5,322,731

================ - ================

14,063,987 ================

Fair value measurement at the end of the reporting year:

2012 Financial assets and financial liabilities at fair value through profit or loss

Level 1 EUR

Level 2 EUR

Level 3 EUR

Total EUR

Financial assets/ (liabilities) held for trading

- equity instruments 2,137,070 - - 2,137,070 - mortgage backed securities - 2,042,363 - 2,042,363 - exchange traded funds 1,441,296 - - 1,441,296 - other investment funds - 5,452,290 - 5,452,290 - warrants 636,000 - - 636,000 - derivative financial instruments - 66,864 - 66,864 -------------------------------------- -------------------------------------- ---------------------------------- ------------------------------------- Total 4,214,366

================ 7,561,517

================ - ================

11,775,883 ================

14. Financial risk management

The company is exposed to a number of risks due to the nature of its activities and as set out in its offering memorandum. These risks include market risk (including currency risk, interest rate risk and price risk), credit risk and liquidity risk. The fund’s objective in managing these risks is the protection and enhancement of shareholder value.


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14. Financial risk management (continued)

The company is also exposed to operational risk such as custody risk. Custody risk is the risk of loss of securities held in custody occasioned by the insolvency or negligence of the custodian. Although an appropriate legal framework is in place that eliminates the risk of loss of value of the securities held by the custodian, in the event of failure, the ability of the fund to transfer the securities might be temporarily impaired.

The company’s risk management policies are approved by the board of directors and seek to minimise the potential adverse effects of these risks on the fund’s financial performance. The risk management system is an on-going process of identification, measurement, monitoring and controlling risk. Risk management structure, risk measurement and reporting system

The board of directors is ultimately responsible for the overall risk management within the company but has delegated the responsibility for identifying and controlling risks to the investment committee. The fund uses various methods to measure and manage the various types of risk to which it is exposed, these methods are explained in the paragraphs that follow. Risk mitigation

The company’s offering memorandum details its investment policy and guidelines that encompasses its overall strategy and its general risk management philosophy. Risk concentration

Where possible, the company aims to reduce and control risk concentrations through the maintenance of a diversified portfolio. Concentrations of financial risk arise when financial instruments with similar characteristics are influenced in the same way by changes in economic or other factors. The investment committee is responsible to reduce exposure or to use derivative instruments to manage excessive risk concentrations when they arise.

Market risk

Market risk is the risk that the fair value or future cash flows of financial instruments will fluctuate due to changes in market variables such as market prices, interest rates and foreign exchange rates.

The company trades in financial instruments, taking positions in traded instruments including derivatives. The company moderates this risk through a careful selection of securities and other financial instruments within specified limits. The maximum risk resulting from a long position in financial instruments is the fair value of the financial instruments. For positions sold short, the maximum loss of capital can be unlimited. The maximum loss of capital on forward/futures currency contracts is limited to the notional contract value of those positions.

The company’s exposure to the various types of investments is summarised in note 7.

At the end of the financial year, the company’s market risk is affected by its three main components: changes in actual market prices, interest rates and foreign currency movements. These are covered in the following paragraphs.


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Price risk

Price risk is the risk that the value of the investment will fluctuate as a result of changes in market prices (other than those arising from interest rate risk or currency risk), whether caused by factors specific to an individual investment, its issuer or all factors affecting all instruments traded in the market. The company is exposed to equity price risk which arises from its investments in equities, underlying funds and traded derivatives.

Price risk is mitigated by the fund’s investment committee through the construction of a diversified portfolio of instruments. In addition price risk may be hedged using derivative financial instruments. Interest rate risk

Interest rate risk arises from fluctuations in the prevailing levels of market interest rates on the fair value of financial assets and liabilities and future cash flows. Cash held at the payment bank does not yield material amounts of interest. Amounts due from the broker yield amounts of interest which are not deemed to be material.

The company also holds an amount of USD denominated floating rate investments which expose the company to interest rate risk. The value of these financial instruments at the reporting date amount to EUR2,343,434 (2012: EUR2,042,363).

Interest rate risk is managed by the investment committee on a regular basis. Currency risk

As detailed in the accounting policies, the company’s functional currency is EUR. The base currency of the fund is EUR. Currency fluctuations between the base currency of the company and the currencies of the underlying investments and cash at bank balances may adversely affect the value of investments as measured in the base currency as well as the income derived therefrom.

The company may hedge currency positions with derivative financial instruments. The risk arising from foreign currency transactions is managed by regular monitoring of the relevant exchange rates and management’s reaction to material movements thereto.


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Currency risk (continued)

At the end of the reporting period, the company was exposed to the following foreign currencies from its holding of investments and cash balances. Foreign currency exposure due to other line items is not considered material.

% of net assets 2013 2012 CAD 1.23 2.79 CZK 9.30 4.48 USD 52.19 55.78 GBP 5.36 9.26 RON 11.51 4.74

At the end of the reporting period, the exposure to USD was made up as follows:

% of net assets 2013 2012 Equities 12.88 8.66 Mortgage backed securities 16.19 15.22 Funds 18.04 29.15 Forwards - 0.48 Futures (0.20) - Cash at bank 5.27 2.27

Foreign exchange fluctuations are hedged through forward and futures foreign exchange contracts. The contract amounts at year-end are disclosed in note 7.

Credit risk

Credit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the company. It is the opinion of the board of directors that the carrying amount of financial assets best represents the probability-weighted credit risk exposure at the reporting date.

Financial assets which potentially subject the company to credit risk consist principally of traded derivative instruments, mortgage backed securities, cash at bank as well as margin accounts held with brokers.


34



Credit risk (continued)

Margin accounts are placed with reputable brokers. Margin accounts are not considered to be significant at the end of the reporting period.

The clearing and depository operations of the company for security and cash transactions are carried out with reputable financial institutions.

Derivative assets comprise exchange-traded instruments and over-the-counter instruments. For exchange-traded instruments, the credit risk is mitigated due to control procedures in place by the relevant exchanges. For over-the-counter derivative assets, the company transacted with reputable counterparties.

Mortgage backed securities expose the company to the credit risk of the counterparty. Credit risk of mortgage-backed securities is affected by home owners or borrowers defaulting on their loans. Such securities are acquired after assessing the quality of the relevant investments and are continuously monitored by the company.

As at the end of the reporting period, mortgage backed securities were rated as follows by Standard & Poor’s: Proportion of Mortgage Backed Securities’ portfolio AA+ BBB+ B- CC CCC D 2013 7.01% 79.38% 13.61% 2012 7.63% 13.86% 13.39% 65.12% Liquidity risk

Liquidity risk is the risk that the entity will encounter difficulty in meeting obligations associated with its financial liabilities. To the extent possible, the investment committee attempts to mitigate this risk by attempting to match the timeline of the company’s assets and liabilities, however, no assurance can be given that this will be achieved at all times. The company’s offering document provides for the creation and cancellation of shares and hence the company is exposed to liquidity risk associated with meeting shareholder redemptions at any time.

The fund’s redemption policy only allows for redemptions on the last calendar day of each month and upon the provision of 3 months’ notice by shareholders.


35



Liquidity risk (continued)

The fund invests in underlying funds. The liquidity risk involved with these investments will be dependent on the redemption policies of the underlying funds. The fund’s investments in the underlying funds may not be readily realisable and their marketability may be restricted, in particular because the underlying funds may have restrictions that allow redemptions only at specific infrequent dates with considerable notice periods, and apply lock-ups and/or redemption fees. The fund’s ability to withdraw monies from or invest monies in the underlying funds with such restrictions will be limited and such restrictions will limit the fund’s flexibility to reallocate such assets among underlying funds. Some of the underlying funds may be or may become illiquid, and the realisation of investments from them may take a considerable time and/or be costly. As a result, the fund may not be able to quickly liquidate its investments in these instruments at an amount close to fair value in order to meet liquidity requirements.

The fund may periodically invest in derivative contracts that are traded over the counter and unlisted investments that are not traded in an active market. As a result the fund may not be able to liquidate quickly its investment in these instruments at an amount close to their fair value.

The fund has the ability to borrow in the short-term to ensure settlement and to manage liquidity by deferring redemptions.

The following table analyses the fund’s non-derivative liabilities into relevant maturity groupings based on the remaining period from the reporting date to the contractual maturity date. Less than 3 months More than 3 months - 1 year 1 year Total EUR EUR EUR EUR 2013 Administration fees 1,011 - - 1,011 Management fees 37,483 - - 37,483 Performance fees - - 100,206 100,206 Due to broker 784,581 - - 784,581 Other accrued expenses 27,657 - - 27,657 Net assets attributable to holders of non-voting redeemable investor shares - 14,473,984 - 14,473,984


36



Liquidity risk (continued) Less than 3 months More than 3 months - 1 year 1 year Total EUR EUR EUR EUR 2012 Administration fees 5,027 - - 5,027 Management fees 63,918 - - 63,918 Performance fees 253,765 - - 253,765 Other accrued expenses 38,771 - - 38,771 Net assets attributable to holders of non-voting redeemable investor shares - 13,420,079 - 13,420,079 The table below analyses the company’s derivative financial instruments in a loss position and shows the year during which the fund will realise such loss, (assuming current market levels prevail). Balances are all due within 12 months and therefore equal their carrying balances here, as the impact of discounting is considered insignificant. Less than 1 month to 7 days 2 months Total EUR EUR EUR 2013 Futures contracts - 36,511 36,511 ================ ================ ================ 2012 Forward contracts 3,602 - 3,602 ================ ================ ================ Capital risk management

The fund is constituted by means of redeemable shares with no par value and with no voting rights. Holders of the participating shares are entitled to a proportionate share based on the fund’s net asset value on redemption date. The fund has no restrictions or specific capital requirements on the redemption of shares. The relevant movements are shown in the statement of changes in net assets attributable to holders of investor shares. The fund endeavors to invest the subscriptions received in appropriate investments while maintaining sufficient liquidity to meet redemptions, such liquidity being augmented by short-term borrowings or disposal of listed securities where necessary. The objective is to safeguard its ability to continue as a going concern in order to provide returns for shareholders and to maintain a strong capital base to support the development of its investment activities.

15. Events after the statement of financial position date

There has been no significant event after the statement of financial position date which in the opinion of the board of directors requires disclosure in the financial statements.


37

Schedule of investments 30 June 2013

Fair value at % of % of 30 June 2013 net gross Details Currency EUR assets assets Equities Apple Inc (US) USD 447,125 3.09% 2.89% Baidu Inc-Spon ADR USD 414,475 2.86% 2.68% Big Yellow Group Plc GBP 899,195 6.21% 5.82% Citigroup Inc USD 460,895 3.18% 2.98% Commerzbank EUR 669,800 4.63% 4.33% ENI SPA EUR 312,444 2.16% 2.02% Nestle SA EUR 453,060 3.13% 2.93% SC Fondul Proprietatea SA/Fund RON 1,665,621 11.51% 10.77% Google Inc – CI A USD 541,350 3.74% 3.50% PEGAS NONWOVENS SA CZK 712,086 4.92% 4.61% TELEFONICA O2 CZECH REPUBLIC CZK 634,468 4.38% 4.10% ———— Total investments in equities 7,210,519 49.81% 46.63% ———— Exchange traded funds EGShares Emerging Markets Consumer ETF USD 1,567,248 10.83% 10.14% ———— Mortgage Backed Securities CBASS 2003-CB6 M1 USD 163,440 1.13% 1.06% CMLTI 2007 – AHLS A3A USD 109,691 0.76% 0.71% CWL 2007-SD1 A1 USD 318,432 2.20% 2.06% GSSA 2006-3 A1 USD 31,440 0.22% 0.20% JPMAC 2007-HE1 AV1 USD 94,424 0.65% 0.61% MSAC 2007-HE1 A2C USD 501,717 3.47% 3.24% MSST 2007-1 A1 USD 310,858 2.15% 2.01% OOMLT 2007-4 2A4 USD 212,212 1.47% 1.37% PFRMS 2006-1 1A2 USD 392,886 2.71% 2.54% SABR 2007-BR1 A2A USD 83,726 0.58% 0.54% SVHE 2007-WMC1 3A1 USD 120,708 0.83% 0.78% WMHE 2007-HE2 2A1 USD 3,900 0.03% 0.03% ————— Total investments in mortgage backed securities 2,343,434 16.20% 15.15% ————— Futures CWF USD Currency 20/09/2013 USD (28,305) -0.20% -0.18% CWF GBP Currency 16/09/2013 GBP (8,206) -0.06% -0.05% ———— Total investments in futures (36,512) -0.26% -0.23% ————— Underlying funds Friedberg Global-Macro Hedge Fund Ltd USD 839,924 5.80% 5.43% Mulvaney Global Markets Fund Ltd EUR 1,934,930 13.37% 12.51% XPI Holding I Ltd USD 204,444 1.41% 1.32% ————— Total investments in underlying funds 2,979,298 20.58% 19.26% ————— Receivables 173,011 1.20% 1.12% Cash and cash equivalents 1,187,924 8.21% 7.68% Payables (950,938) -6.57% -6.15% ———— 409,997 2.83% 2.65% ———— Total net assets 14,473,984 100% 93.6% ==============

Documents

HIGHER GROUND SICAV P.L.C